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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 1-12040
SUN HEALTHCARE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 85-0410612
(State of Incorporation) (I.R.S. Employer Identification No.)
101 Sun Lane, NE
Albuquerque, New Mexico 87109
(505) 821-3355
(Address and telephone number of Registrant)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
------ ------
As of November 7, 1997, there were 49,596,728 shares of the Registrant's $.01
par value Common Stock outstanding, net of treasury shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
INDEX
FORM 10-Q - FOR THE QUARTER ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
Page Numbers
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 3 - 4
Consolidated Statements of Earnings (Loss)
For the three months ended September 30, 1997 and 1996 5
Consolidated Statements of Earnings
For the nine months ended September 30, 1997 and 1996 6
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 and 1996 7 - 8
Notes to Consolidated Financial Statements 9 - 16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17 - 34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 35
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 6. Exhibits and Reports on Form 8-K 35
Signatures 37
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
------------- ------------
(In thousands, except share data)
Current assets:
Cash and cash equivalents $2,418 $14,880
Restricted cash 1,666 2,236
Accounts receivable, net of allowance for
doubtful accounts of $21,091
at September 30, 1997 and $16,877
at December 31, 1996 379,011 282,268
Other receivables 17,844 33,430
Prepaids and other assets 28,984 17,618
Deferred tax asset 331 12,716
------------- ------------
Total current assets 430,254 363,148
------------- ------------
Property and equipment, net 546,456 305,720
Goodwill, net 566,367 432,505
Other assets, net 168,649 115,056
Deferred tax asset 702 12,997
------------- ------------
Total assets $1,712,428 $1,229,426
------------- ------------
------------- ------------
(Continued on next page)
3
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(unaudited)
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------- ------------
(In thousands, except share data)
Current liabilities:
Current portion of long-term debt $42,180 $28,982
Accounts payable 47,578 39,180
Accrued compensation and benefits 54,228 32,612
Workers' compensation accrual 9,901 7,863
Payable to APTA shareholders - 23,545
Other accrued liabilities 37,607 19,384
Income taxes payable 2,716 -
------------- ------------
Total current liabilities 194,210 151,566
------------- ------------
Long-term debt, net of current portion 861,245 483,453
Other long-term liabilities 12,994 14,813
Deferred income taxes 11,799 4,760
------------- ------------
Total liabilities 1,080,248 654,592
------------- ------------
Minority interest 2,328 2,697
------------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock of $.01 par value,
authorized 5,000,000 shares,
none issued - -
Common stock of $.01 par value,
authorized 100,000,000 shares,
51,622,018 and 51,142,729 shares
issued and outstanding at
September 30, 1997 and
December 31, 1996, respectively 516 511
Additional paid-in capital 639,687 611,434
Retained earnings 75,492 22,313
Cumulative translation adjustment (444) 3,718
------------- ------------
715,251 637,976
------------- ------------
Less:
Unearned compensation 14,816 -
Common stock held in treasury, at
cost, 2,053,207 and 2,030,116
shares as of September 30, 1997
and December 31, 1996, respectively 25,574 25,069
Grantor stock trust, at market,
2,188,912 and 3,019,993 shares
as of September 30, 1997 and
December 31, 1996, respectively 45,009 40,770
------------- ------------
Total stockholders' equity 629,852 572,137
------------- ------------
Total liabilities and stockholders'
equity $1,712,428 $1,229,426
------------- ------------
------------- ------------
See accompanying notes to consolidated financial statements.
4
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1996
---------- ----------
(In thousands, except per share data)
<S> <C> <C>
Total net revenues $ 486,172 $ 340,508
---------- ----------
Costs and expenses:
Operating 396,461 279,348
Corporate general and administrative 23,743 16,012
Provision for losses on accounts receivable 3,963 2,503
Depreciation and amortization 12,985 8,338
Interest, net 17,184 6,077
Litigation settlement - 24,000
---------- ----------
Total costs and expenses 454,336 336,278
---------- ----------
Earnings before income taxes 31,836 4,230
Income taxes 12,416 9,792
---------- ----------
Net earnings (loss) $19,420 $(5,562)
---------- ----------
---------- ----------
Net earnings per common and common equivalent share:
Primary $0.41 $(0.12)
---------- ----------
---------- ----------
Fully Diluted $0.39 $(0.12)
---------- ----------
---------- ----------
Weighted average number of common and common
equivalent shares outstanding:
Primary 47,551 46,061
---------- ----------
---------- ----------
Fully Diluted 52,329 46,061
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
---------- ---------
(In thousands, except per share data)
<S> <C> <C>
Total net revenues $1,332,354 $986,251
---------- ---------
Costs and expenses:
Operating 1,091,249 811,210
Corporate general and administrative 63,189 45,189
Provision for losses on accounts receivable 10,736 4,967
Depreciation and amortization 37,332 24,826
Interest, net 42,670 18,987
Litigation settlement - 24,000
---------- ---------
Total costs and expenses 1,245,176 929,179
---------- ---------
Earnings before income taxes 87,178 57,072
Income taxes 33,999 30,929
---------- ---------
---------- ---------
Net earnings $53,179 $26,143
---------- ---------
---------- ---------
Net earnings per common and common equivalent share:
Primary $1.13 $0.56
---------- ---------
---------- ---------
Fully Diluted $1.07 $0.56
---------- ---------
---------- ---------
Weighted average number of common and common
equivalent shares outstanding:
Primary 46,973 46,979
---------- ---------
---------- ---------
Fully Diluted 52,053 51,707
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
6
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
-------- -------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $53,179 $26,143
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities -
Depreciation and amortization 37,332 24,826
Provision for losses on accounts receivable 10,736 4,967
Litigation settlement - 24,000
Other, net 2,076 (1,715)
Changes in operating assets and liabilities:
Accounts receivable (102,115) (33,360)
Other current assets 3,535 (6,397)
Other current liabilities 21,376 (5,793)
Income taxes payable 36,827 22,969
-------- --------
Net cash provided by operating activities 62,946 55,640
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (69,049) (35,201)
Acquisitions, net of cash acquired (225,984) (63,072)
Purchase of minority interest in OmniCell Technologies, Inc. - (25,332)
Net proceeds from sale of SunSurgery Corporation - 24,828
Proceeds from sale and leaseback of property and equipment 80,476 33,794
Other assets expenditures (78,174) (12,824)
-------- --------
Net cash used for investing activities (292,731) (77,807)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings 510,685 49,223
Long-term debt repayments (288,391) (5,007)
Net proceeds from issuance of common stock 5,055 1,356
Purchases of treasury stock (505) (25,069)
Other financing activities (8,926) (100)
-------- --------
Net cash provided by financing activities 217,918 20,403
-------- --------
Effect of exchange rate on cash and cash equivalents (595) 82
-------- --------
Net decrease in cash and cash equivalents (12,462) (1,682)
Cash and cash equivalents at beginning of period 14,880 23,102
-------- --------
Cash and cash equivalents at end of period $2,418 $21,420
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
7
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
-------- -------
(In thousands)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for:
Interest net of $1,424 and $974 capitalized during the nine
months ended September 30, 1997 and 1996, respectively $44,052 $21,971
-------- --------
-------- --------
Income taxes $(2,796) $7,960
-------- --------
-------- --------
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
The Company's acquisitions during the nine months ended
September 30, 1997 and 1996, involved the following:
Fair value of assets acquired $422,903 $69,420
Liabilities assumed (216,029) (5,387)
Cash payments made to former APTA shareholders 19,300 -
Fair value of stock and warrants issued (190) (961)
-------- --------
Cash payments made, net of cash received from others $225,984 $63,072
-------- --------
-------- --------
</TABLE>
8
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management of Sun Healthcare Group, Inc. (the "Company"
or "Sun"), the accompanying interim consolidated financial statements present
fairly the Company's financial position at September 30, 1997 and December 31,
1996, the consolidated results of its operations for the three and nine month
periods ended September 30, 1997 and 1996, and the consolidated statements of
cash flows for the nine month periods ended September 30, 1997 and 1996. All
adjustments are of a normal and recurring nature. These statements are
presented in accordance with the rules and regulations of the United States
Securities and Exchange Commission ("SEC"). Accordingly, they are unaudited,
and certain information and footnote disclosures normally included in the
Company's annual consolidated financial statements have been condensed or
omitted, as permitted under the applicable rules and regulations. Readers of
these statements should refer to the Company's audited consolidated financial
statements and notes thereto for the year ended December 31, 1996, which are
included in the Company's Annual Report on Form 10-K as amended on Form 10-K/A-1
for the year ended December 31, 1996. The results of operations presented in
the accompanying financial statements are not necessarily representative of
operations for an entire year.
NEWLY ISSUED PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share" which is
effective for both interim and annual reporting periods ending after December
15, 1997. This standard requires restatement of prior interim and annual
earnings per share calculations. SFAS No. 128 replaces fully diluted EPS with
diluted EPS and replaces primary EPS with basic EPS. Basic EPS is computed by
dividing reported earnings by weighted average shares outstanding. Diluted EPS
is computed the same way as fully diluted EPS, except that the calculation now
uses the average share price for the reporting period to compute dilution from
options and warrants under the treasury stock method. The Company will adopt
the new standard in its reporting for the quarter and the year ended December
31, 1997. Management does not believe that adoption of this standard will have
a significant impact on earnings per share.
The FASB has also issued SFAS No. 130, "Reporting Comprehensive Income"
which is effective for fiscal years beginning after December 15, 1997 and
requires restatement of earlier financial statements for comparative purposes.
SFAS No. 130 requires that items meeting the criteria of a component of
comprehensive income, including foreign currency items and unrealized gains and
losses on certain investments in debt and equity securities, be shown in the
financial statements. SFAS No. 130 does not require a specific format for
disclosure of comprehensive income and its components in the financial
statements. Management has not yet determined the effect of SFAS No. 130 on the
consolidated financial statements.
The FASB has also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This standard requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS No. 131 also
9
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requires that all public business enterprises report information about the
revenues derived from the enterprise's products or services (or groups of
similar products and services), about the countries in which the enterprise
earns revenues and holds assets, and about major customers regardless of whether
that information is used in making operating decisions. However, this Statement
does not require an enterprise to report information that is not prepared for
internal use if reporting it would be impractical. This Statement is effective
for financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier years is
required to be restated. Comparative information for interim periods is not
required until the second year of application. Management has not yet
determined the effect, if any, of SFAS No. 131 on the consolidated financial
statements.
2. ACQUISITIONS
The Company agreed in February 1997 to acquire Retirement Care
Associates, Inc. ("Retirement Care"), an operator of skilled nursing
facilities and assisted living centers. Retirement Care also owns (and Sun
would acquire) approximately 65% of Contour Medical, Inc. ("Contour"), a
national provider of medical/surgical supplies. The amended terms of the
merger (the "RCA Merger") provide for a purchase price of approximately
$154.3 million in Common Stock (based upon the closing price of Sun's
Common Stock as of November 12, 1997) and the assumption of approximately
$163.1 million of indebtedness (based on Retirement Care's June 30, 1997
balance sheet). Specifically, the agreement, as amended, calls for the
Company to issue 0.52 shares of common stock in exchange for each outstanding
share of Retirement Care common stock (subject to adjustment as provided in
the agreement). The Company expects that the RCA Merger will be accounted for
as a pooling of interests. Sun has also agreed to acquire the remaining 35%
of Contour not presently owned by Retirement Care for approximately $35
million, payable in Common Stock or cash, at the option of Sun (the "Contour
Merger"). The Contour Merger will be accounted for as a purchase.
Costs to be incurred in connection with the mergers of Retirement Care
and Contour are expected to be significant and will be charged against
earnings of the combined company. The charge is currently estimated to be
approximately $21 million for transaction costs and integration expenses,
including elimination of redundant corporate functions, severance costs
related to headcount reductions and write-off of certain intangibles and
property and equipment. Approximately $16 million of these estimated charges
are expected to be charged to operations in the fiscal quarter in which the
merger with Retirement Care is consummated. The remaining approximately $5
million of the estimated charges are expected to be expensed as incurred, as
these costs will benefit future combined operations. These amounts are
preliminary estimates only and are, therefore, subject to change. In
addition, there can be no assurance that the Company will not incur
additional charges in subsequent quarters to reflect costs associated with
the RCA Merger and the Contour Merger.
On January 10, 1997, the Company loaned Retirement Care $9,750,000 in order
to enable Retirement Care to cause the repayment of certain indebtedness
incurred by Contour in connection with Contour's acquisition of Atlantic Medical
Supply Company, Inc. ("Atlantic") on August 6, 1996. On July 10, 1997, the
Company and Retirement Care amended the terms of the loan to: (i) increase the
applicable interest rate by 2.0%; (ii) extend the maturity date to 120 days
after the termination of the Retirement Care Merger Agreement; and (iii) replace
the collateral securing the loan with a second lien on all of Retirement Care's
accounts receivable. Consistent with Retirement Care's bank line of credit, the
loan is unconditionally and irrevocably guaranteed by certain officers of
Retirement Care. On July 10, 1997, the Company also agreed to loan Retirement
Care an additional $5,000,000, which loan is also secured by a second lien on
all of Retirement Care's accounts receivable and is unconditionally and
irrevocably guaranteed by certain officers of Retirement Care.
On January 30, 1997, a wholly owned subsidiary of the Company acquired all
of the capital stock not previously owned by the Company of Ashbourne PLC
("Ashbourne"), which as of the date of acquisition
10
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provided healthcare services to patients through 49 nursing facilities in the
United Kingdom. Pursuant to the acquisition, the Company paid approximately
L67,300,000 ($110,100,000 as of the respective dates of payment) for the
portion of Ashbourne totaling 70.8% not previously owned by the Company. The
acquisition was accounted for as a purchase and the results of operations
have been included in the Company's financial statements from the date of
acquisition on January 30, 1997. The total fair value of 100% of Ashbourne's
assets acquired, including goodwill of approximately $45,800,000, was
approximately $337,500,000 and liabilities assumed totaled approximately
$147,800,000 The allocation of the purchase price is preliminary and will be
finalized upon the completion of asset valuations. In addition, the Company
is still evaluating certain obligations of Ashbourne prior to the merger and
further adjustments may result. The acquisition of Ashbourne is immaterial
to the results of the Company and, therefore, pro forma information is not
provided.
On December 15, 1996 a wholly owned subsidiary of the Company acquired
all of the capital stock of APTA Healthcare PLC ("APTA"), which, as of the
date of acquisitions, provided healthcare services to patients through 32
nursing facilities in the United Kingdom. The Company paid cash totaling
approximately L11,300,000 ($19,300,000 as of the respective dates of payment)
to former stockholders of APTA and issued notes with a maturity not to exceed
five years, totaling approximately L2,500,000 ($4,000,000 as of September 30,
1997) to the remaining stockholders of APTA who elected not to receive cash
as consideration. The acquisition of Apta is immaterial to the results of the
Company and, therefore, pro forma information is not provided.
In July 1997, a wholly owned subsidiary of the Company acquired a
majority interest in Eurosar, S.A., a privately owned operator of eight
nursing homes in Spain.
In August 1997, Sun acquired 38% of the equity of Alpha Healthcare
Limited, a publicly held acute care provider in Australia. In addition, in
November 1997, Sun acquired from Moran Health Care Group Pty Ltd. a majority
interest in six hospitals in Australia.
In addition, during the nine months ended September 30, 1997, the Company
acquired from various third parties the net ownership of, leasehold rights
to or the management contracts of 32 long-term care facilities in the United
States and 22 long-term care facilities in the United Kingdom. Also during
the nine months ended September 30, 1997, the Company acquired 10 pharmacies
in the United States and 12 pharmacies in the United Kingdom. The pro forma
impact of these acquisitions is immaterial.
3. DISPOSITIONS
In May 1997, the Company announced its intent to sell and divest itself
of its outpatient rehabilitation clinics in the United States, as well as
Columbia Health Care Inc., the Company's Canadian outpatient rehabilitation
therapy subsidiary. The sale of the United States operations is expected to
close in the first quarter of 1998, and to result in no material gain or
loss. The Company has restructured its Canadian operations and is reevaluating
its divestiture. The results of operations of these businesses are immaterial.
11
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4. PROPERTY AND EQUIPMENT
During the nine months ended September 30, 1997, the Company sold five of
its long-term and subacute care facilities in the United States for
approximately $30,639,000 in cash and approximately $5,600,000 in assumption of
debt and leased them back under fourteen year leases. Also, during the nine
months ended September 30, 1997, the Company, through its United Kingdom
subsidiary, sold 27 of its long-term care facilities for approximately
$49,837,000 and leased them back under 12-year leases. These transactions
produced no material gain or loss.
5. LONG-TERM DEBT
On July 8, 1997, the Company issued $250,000,000 aggregate principal
amount of 9 1/2% Senior Subordinated Notes due 2007 (the "9 1/2% Notes").
The net proceeds from the sale, approximately $243,000,000, were used to
reduce outstanding borrowings under the Company's old revolving credit
facility, which has subsequently been refinanced. The 9 1/2% Notes, which are
subject to customary terms and covenants, are redeemable by the Company at a
premium, in whole or in part, after July 1, 2002.
6. COMMITMENTS
(A) CONSTRUCTION COMMITMENTS
As of September 30, 1997, the Company had capital commitments of
approximately $33,843,000, including a corporate office building and a
long-term care facility, and various contracts related to improvements to
existing facilities in the United States, and capital commitments of
approximately L3,414,000 ($5,516,000 as of September 30, 1997), including
various contracts related to the development, construction and completion of
five new long-term care facilities in the United Kingdom.
(B) FINANCING COMMITMENTS
The Company has agreed to lend up to $47,000,000 under a revolving
subordinated credit agreement ("Financing Facility") to a developer of
assisted living facilities for the development, construction and operation of
assisted living facilities. Any advances under the Financing Facility are
expected to be funded by borrowings under the Company's revolving credit
facility and will be subject to certain conditions, including the approval of
each project by the Company. The developer has obtained a commitment for
mortgage financing to fund 50% of the cost of each project. The Company's
advances under the Financing Facility are subordinate to the mortgage
financing. The Financing Facility with respect to each facility bears
interest at 9% or 13% depending on the percentage of completion of the
facility under construction. All amounts advanced are due in full on
November 1, 2001. The advances to the developer totaled approximately
$9,000,000 and $31,932,000 at December 31, 1996 and September 30, 1997. As
of September 30, 1997, eight assisted living facilities were under
development. In addition, construction was completed on one facility in the
third quarter of 1997. The Company has entered into a purchase option
agreement with the developer whereby the Company will pay the developer
$50,000 for each option to purchase any of the facilities. The option will
grant the Company the right to purchase the facility, after a specified time
period, at the greater of the estimated fair market value of the property or
the total amount invested by the developer.
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7. STOCK INCENTIVE PLANS
(A) 1997 STOCK INCENTIVE PLAN
In January 1997, the Board of Directors adopted the 1997 Stock Incentive
Plan (the "Plan"). In September 1997, the Plan was approved by the Company's
stockholders. Awards made under the Plan may be in the form of stock
options, stock appreciation rights, stock awards, performance share awards,
or other stock-based awards. The Plan replaced the old stock option plan for
executives; however, awards currently outstanding under the old plan will not
be affected. The Plan reserves 4,500,000 shares for awards. During the nine
months ended September 30, 1997, the Company awarded an aggregate of 783,000
shares of restricted stock to 10 senior executives, which will be expensed
over the vesting period. Approximately 107,000 of the restricted shares
vested immediately. The remaining restricted stock awards vest ratably over
four to five years.
(B) 1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
In April 1997, the Board of Directors adopted the 1997 Non-Employee
Directors' Stock Plan (the "Director Plan"). In September 1997, the Plan was
approved by the Company's stockholders. Awards made under the Director Plan
may be in the form of stock options or stock awards. The Director Plan
replaced the old stock option plan for non-employee directors, and awards
currently outstanding under the old plan will not be affected. The Director
Plan reserves 400,000 shares for awards. In the nine months ended September
30, 1997, the Company awarded an aggregate of 15,080 shares of restricted
stock, which will be expensed over the applicable vesting periods.
8. NET EARNINGS PER SHARE
Net earnings per common and common equivalent share is based upon the
weighted average number of common shares outstanding during the period plus the
effect of incremental shares of common stock contingently issuable upon exercise
of stock options, warrants and restricted stock awards.
Fully diluted net earnings is determined on the assumption that the 6%
Debentures and the 6 1/2% Debentures were converted as of January 1, 1996. Net
earnings is adjusted for the interest on the debentures, net of interest related
to additional assumed borrowings to fund the cash consideration on conversion of
the 6 1/2% Debentures and the related income tax benefits.
9. OTHER EVENTS
(A) GOVERNMENT INVESTIGATION
In January 1995, the Company learned that it was the subject of a pending
Federal investigation. The investigating agencies are the United States
Department of Health and Human Services' Office of Inspector General ("OIG")
and the United States Department of Justice. At this time, the Company does
not know the full scope of the investigation. However, the Company currently
believes that the investigation is focused principally on whether the Company
provided and billed for unnecessary or unordered therapy services to
residents of skilled nursing facilities and whether the Company adequately
documented the therapy services which it provided.
In July 1997, the Criminal Division of the U.S. Department of Justice
informed the Company that it had completed its investigation of the Company,
and that it would not initiate any actions against the Company or any
individuals. The investigation by the Civil Division of the Department of
Justice and the OIG is still proceeding. The government continues to collect
information, and the Company continues to cooperate with the investigators.
The Company and the government have had preliminary discussions regarding a
possible settlement of the investigation.
The Company is unable to determine at this time when the investigation
will be concluded, how large a monetary settlement the government may
seek, the nature of any other remedies that may be sought by the government,
whether or when a settlement will in fact occur or whether any such
settlement or any other outcome of the investigation will have a material
adverse effect on the Company's financial condition or results of operations.
From time to time the negative publicity surrounding the investigation has in
the past adversely affected the private pay enrollment in certain inpatient
facilities and slowed the Company's success in obtaining additional outside
contracts in the rehabilitation therapy business, which resulted in higher
than required therapist staffing levels. Negative publicity in the future
could have a similar effect.
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(B) LITIGATION
In May 1997, the Company received court approval of the $24,000,000
settlement of certain class-action shareholder lawsuits which amount was
previously paid in the fourth quarter of 1996. The Company received $9,000,000
during March 1997, from its director and officer liability insurance carrier for
its claim submitted in connection with the settlement.
On or about January 23, 1996, two former stockholders of SunCare, John
Brennan and Susan Bird, filed a lawsuit (the "SunCare Litigation") against
the Company and certain of its officers and directors in the United States
District Court for the Southern District of Indiana. Plaintiffs allege,
among other things, that the Company did not disclose material facts
concerning the investigation by the OIG and that the Company's financial
results were misstated. The complaints purport to state claims, INTER ALIA,
under Federal and state securities laws and for breach of contract, including
a breach of a registration rights agreement pursuant to which the Company
agreed to register the shares of the Company's common stock issued to such
former stockholders of SunCare in the acquisition. Plaintiffs purport to
seek recission, unspecified compensatory damages, punitive damages and other
relief. By Order dated October 11, 1996, the court granted in part and
denied in part defendants' motion to dismiss.
On September 8, 1995, a derivative action was filed by Brickell Partners
against certain of the Company's current and former directors and officers in
the United States District Court for the District of New Mexico, captioned
BRICKELL PARTNERS V. TURNER, ET AL. The complaint was not served on any
defendant. On June 19, 1996, an amended complaint alleging breach of
fiduciary duty by certain current and former of the Company's directors and
officers was filed and subsequently served on the defendants. On August 5,
1996, the District Court dismissed this action without prejudice for failure
to serve the defendants within the required time period. The plaintiffs
filed a new complaint, alleging the same claims, on August 19, 1996.
Defendants have moved to dismiss the new complaint.
The Company believes the SunCare Litigation and the derivative action will
not have a material adverse impact on its financial condition or results of
operations, although the unfavorable resolution of any of these actions in any
reporting period could have a material adverse impact on the Company's results
of operations for that period.
The Company has recently been notified by a law firm representing several
national insurance companies that these companies believe Sun has engaged in
improper billing and other practices in connection with the Company's
delivery of therapy and related services. In response, the Company has begun
discussions directly with these insurers and hopes to resolve these matters
without litigation; however, the Company is unable at this time to predict
whether it will be able to do so, what the eventual outcome may be or the
extent of its liability, if any, to these insurers.
10. SUMMARIZED FINANCIAL INFORMATION
The Company acquired Mediplex on June 23, 1994 and became a co-obligor with
Mediplex with respect to the 6 1/2% Convertible Subordinated Debentures and the
11 3/4% Senior Subordinated Notes subsequent to the acquisition. Summarized
financial information of Mediplex is provided below (in thousands):
14
<PAGE>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Current assets $93,993 $103,269
Noncurrent assets 398,938 429,555
Current liabilities 25,685 21,904
Noncurrent liabilities 73,730 83,370
Due to parent 139,579 152,447
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Net revenues $129,893 $118,127 $377,841 $351,298
Costs and expenses 122,222 107,628 358,014 320,803
------- ------- ------- -------
Earnings before intercompany
charges and income taxes 7,671 10,499 19,827 30,495
Intercompany charges (1) 20,196 13,933 54,528 39,859
------- ------- ------- -------
Earnings (loss) before income
taxes (12,525) (3,434) (34,701) (9,364)
Income taxes (benefit) (4,885) (702) (13,533) (1,685)
------- ------- ------- -------
Net earnings (loss) $(7,640) $(2,732) $(21,168) $(7,679)
------- ------- ------- -------
------- ------- ------- -------
- --------------
(1) Through various intercompany agreements entered into by Sun and Mediplex,
Sun provides management services, licenses the use of its trademarks and acts on
behalf of Mediplex to make financing available for its operations. Sun charged
Mediplex for management services totaling $8,126,000 and $8,512,000 for the
three months ended September 30, 1997 and 1996, respectively; and $23,552,000
and $24,635,000 for the nine months ended September 30, 1997 and 1996,
respectively. Royalty fees charged to Mediplex for the three months ended
September 30, 1997 and 1996 for the use of Sun trademarks were $1,868,000 and
$1,698,000, respectively; and $5,413,000 and $4,940,000 for the nine months
ended September 30, 1997 and 1996, respectively. Intercompany interest charged
to Mediplex for the three months ended September 30, 1997 and 1996 for advances
from Sun was $10,203,000 and $3,723,000, respectively; and $25,564,000 and
$10,284,000 for the nine months ended September 30, 1997 and 1996, respectively.
11. SUBSEQUENT EVENTS
On October 8, 1997, a wholly-owned subsidiary of the Company, through a
tender offer acquired 98.4% of the capital stock of Regency Health Services,
Inc. ("Regency"), an operator of skilled nursing facilities and a provider of
related specialty healthcare services, including rehabilitation therapy,
institutional pharmacy and home health services in the United States. The
remaining shares were converted into the right to receive $22.00 in cash per
share. Total consideration for the shares acquired in the tender offer was
approximately $345,200,000.
15
<PAGE>
On October 9, 1997, a wholly-owned subsidiary of the Company completed a
tender offer for 100%, or $50,000,000, of Regency's 12.25% Junior
Subordinated Notes due 2003 for approximately $61,000,000, and $109,600,000
of the $110,000,000 of Regency's 9.875% Senior Subordinated Notes due 2002
for approximately $126,700,000. As a result of the repurchase of this debt,
the Company expects to record an extraordinary loss of approximately
$34,500,000 before taxes in the fourth quarter of 1997. In addition, the
Company repaid Regency's revolving credit facility of approximately
$39,000,000.
The acquisition of Regency, including certain transaction costs, and the
tender offer for its debt, described above, were financed by borrowings of
approximately $514,000,000 under the Company's Credit Facility (as described
below) and approximately $83,000,000 of net proceeds received from the sale
and leaseback of 30 facilities owned by Regency prior to its acquisition by
the Company.
On October 8, 1997 the Company entered into a Credit Agreement with
certain lenders, certain co-agents, and NationsBank of Texas, N.A. as
administrative lender to replace the Company's old revolving credit facility.
On November 12, 1997, the Company entered into a First Amendment to Credit
Agreement (the "Credit Facility"). The Credit Facility provides for
borrowings by the Company of up to $1.2 billion consisting of $500,000,000 in
a revolving credit facility which borrowings bear interest at the prevailing
prime rate plus 0% to 1% or the LIBOR rate plus.75% to 2.50%, and
$700,000,000 in term loans which bear interest at the prevailing prime rate
plus 0% to 1.5% or the LIBOR rate plus .75% to 3.0%. The revolving credit
facility matures in November 2003 and the term loans begin amortization in
March 1998 and reach final maturity in November 2005. Annual maturities for
the next five years are as follows: 1998: $5,000,000; 1999: $25,000,000;
2000: $35,000,000; 2001: $45,000,000; 2002: $55,000,000 and thereafter:
$535,000,000. In connection with this refinancing, the Company expects to
record an extraordinary loss of approximately $3,500,000 before taxes in the
fourth quarter of 1997.
16
<PAGE>
ITEM 2.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Sun Healthcare Group, Inc., through its direct and indirect subsidiaries
(hereinafter collectively referred to as the "Company"), is a provider of
long-term, subacute and related specialty healthcare services, including
rehabilitation and respiratory therapy services and pharmaceutical services.
Long-term care and subacute care services and outpatient therapy services are
provided through affiliated facilities. Therapy services and pharmaceutical
services are provided in both affiliated and nonaffiliated facilities located in
the United States. The Company also provides long-term care and pharmaceutical
services in the United Kingdom.
The Company's strategy is to increase profitability through the provision
of ancillary services such as rehabilitation and respiratory therapy services
and pharmaceutical services to both affiliated and nonaffiliated facilities.
These services have significantly higher margins than the margins associated
with routine services provided to residents of facilities. The Company's
earnings growth has historically resulted from its acquisition of long-term and
subacute care facilities ("facilities"), use of its long-term care and subacute
care operations as a base for expansion of ancillary services, provision of
ancillary services to nonaffiliated facilities and expansion of ancillary
services through acquisitions.
The Company's results of operations for the three and nine months ended
September 30, 1997 and 1996 reflect the acquisition of facilities, the growth of
the Company's existing facility operations, the expansion of the Company's
therapy service operations and temporary therapy staffing services, and the
growth of the Company's pharmaceutical service operations.
On October 8, 1997, a wholly-owned subsidiary of the Company, acquired
98.4% of the capital stock of Regency Health Services, Inc. ("Regency"), an
operator of skilled nursing facilities and a diversified provider of
rehabilitation therapy, institutional pharmacy and home health services. At
the date of acquisition, Regency provided healthcare services through 110
long-term care facilities in the United States.
In February 1997, the Company agreed to acquire Retirement Care
Associates, Inc. ("Retirement Care"), an operator of skilled nursing
facilities and assisted living centers, and its approximately 65% owned
subsidiary, Contour Medical, Inc. ("Contour"), a national provider of
medical/surgical supplies. In addition, the Company agreed to acquire the
remaining 35% of Contour not presently owned by Retirement Care. The
acquisition of Retirement Care is expected to be accounted for as a pooling
of interest and the acquisition of the minority interest of Contour is
expected to be accounted for as a purchase.
At September 30, 1997, the Company operated 192 facilities with 22,802
licensed beds in the United States, 138 facilities with 7,965 licensed beds
in the United Kingdom, and 8 facilities with 1,328 licensed beds in
Spain. At December 31, 1996, the Company operated 160 facilities with 19,321
licensed beds in the United States and 75 facilities with 3,420 licensed beds
in the United Kingdom.
Between December 31, 1996 and September 30, 1997, the Company acquired a
net 31 facilities in the United States and 6 facilities in the United Kingdom,
resulting in a net increase of 3,327 and 379 licensed beds in the United States
and United Kingdom, respectively. In addition, in January 1997, the Company
acquired the portion not previously owned by the Company of Ashbourne PLC
("Ashbourne"), an operator of 49
17
<PAGE>
nursing and residential support facilities with 3,613 licensed beds in the
United Kingdom. In addition, between December 31, 1996 and September 30, 1997
the Company developed and opened one and eight facilities with a total of 154
and 553 licensed beds in the United States and United Kingdom, respectively.
In addition, in July 1997, a wholly owned subsidiary of the Company
acquired a majority interest in Eurosar, S.A., a privately owned operator of
eight nursing homes in Spain with 1,328 licensed beds.
In August 1997, Sun acquired 38% of the equity of Alpha Healthcare
Limited, a publicly held acute care provider in Australia. In addition, in
November 1997, Sun acquired from Moran Health Care Group Pty Ltd. a majority
interest in six hospitals in Australia.
The Company's therapy service operations include the provision of
physical, occupational and speech therapy, the provision of respiratory care,
and the distribution of related equipment and supplies. As of September 30,
1997, the Company provided its therapy services to 1,131 nonaffiliated
facilities, an increase of 426 facilities from the 705 nonaffiliated
facilities serviced at September 30, 1996.
The Company's temporary therapy staffing service operations had 25 and 20
division offices at September 30, 1997 and September 30, 1996, respectively.
During the nine months ended September 30, 1997, the Company provided a total of
2,104,000 temporary therapy staffing hours to nonaffiliates, an increase of
330,000 hours from the 1,774,000 nonaffiliated temporary therapy staffing hours
provided during the nine months ended September 30, 1996.
The Company's pharmaceutical service operations include the provision of
pharmaceuticals and the distribution of related supplies. As of September
30, 1997, the Company operated 24 regional pharmacies, four in-house
long-term care pharmacies, and one pharmaceutical billing and consulting
center. As of September 30, 1996, the Company operated 15 regional pharmacies
and 3 in-house long-term care pharmacies.
The Company's foreign operations, in addition to the nursing home
facilities in the United Kingdom and Spain and acute care facilities in
Australia, include the provision of outpatient therapy services in Canada
through the Company's acquisition of Columbia Health Care Inc. ("Columbia")
and pharmaceutical services in the United Kingdom. In May 1997, the Company
announced its intention to sell and divest itself of its outpatient therapy
service operations in Canada, as well as in the United States. The Company
has restructured its Canadian operations and is reevaluating its divestiture.
The Company operated 19 pharmacies and one supply distribution center in the
United Kingdom, and one pharmacy in Spain as of September 30, 1997.
18
<PAGE>
The following table sets forth certain operating data for the Company as of the
dates indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------- YEAR ENDED
1997 1996 DECEMBER 31, 1996
---- ---- -----------------
<S> <C> <C> <C>
Long-term and Subacute Care Facility Operations:
Long-term and subacute care facilities
(including managed facilities):
Domestic operations 192 153 160
Foreign operations 146 41 75
--- --- ---
Total 338 194 235
--- --- ---
--- --- ---
Licensed beds (including managed facilities):
Domestic operations 22,802 18,720 19,321
Foreign operations 9,293 2,032 3,420
------ ------ ------
Total 32,095 20,752 22,741
------ ------ ------
------ ------ ------
Therapy Service Operations:
Nonaffiliated facilities served 1,131 705 759
Affiliated facilities served 175 146 152
----- --- ---
Total 1,306 851 911
----- --- ---
----- --- ---
Temporary Therapy Staffing Service Operations:
Hours billed to nonaffiliates (in thousands)
Three months ended September 30 735 639 -
Nine months ended September 30 2,104 1,774 -
Twelve months ended December 31 - - 2,402
Pharmaceutical Operations:
Nonaffiliated facilities served 422 329 325
Affiliated Facilities served 156 109 112
--- --- ---
Total 578 438 437
--- --- ---
--- --- ---
</TABLE>
19
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the amount and percentages of certain
elements of total net revenues for the periods presented (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------- ----------------------------------------------
1997 1996 1997 1996
-------------------- -------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term and subacute
care services $295,464 61% $215,071 63% $807,321 61% $626,857 64%
Therapy services to
nonaffiliates 72,755 15 56,559 17 204,340 15 162,859 17
Foreign operations 53,029 11 15,987 5 139,119 10 41,830 4
Temporary therapy staffing
services to nonaffiliates 35,965 7 31,360 9 103,202 8 85,795 9
Pharmaceutical services to
nonaffiliates 26,674 5 18,706 5 71,533 5 51,198 5
Ambulatory surgery -- -- -- -- -- -- 11,857 1
Management fees and other 2,285 1 2,825 1 6,839 1 5,855 --
-------- ---- -------- ---- ---------- ---- -------- ----
Total net revenues $486,172 100% $340,508 100% $1,332,354 100% $986,251 100%
-------- ---- -------- ---- ---------- ---- -------- ----
-------- ---- -------- ---- ---------- ---- -------- ----
</TABLE>
Revenues for long-term and subacute care services include revenues billed
to patients for therapy and pharmaceutical services provided by the Company's
affiliated operations. Revenues for therapy services provided to domestic
affiliated facilities were $47,502,000 and $29,201,000 for the three months
ended September 30, 1997 and 1996, respectively; and $116,934,000 and
$83,733,000 for the nine months ended September 30, 1997 and 1996, respectively.
Revenues provided to domestic affiliated facilities for pharmaceutical services
were $9,382,000 and $4,594,000 for the three months ended September 30, 1997
and 1996, respectively; and $20,357,000 and $14,164,000 for the nine months
ended September 30, 1997 and 1996, respectively.
The following table presents the percentage of total net revenues
represented by certain items for the Company for the periods presented:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Total net revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Costs and expenses:
Operating 81.6 82.0 81.9 82.3
Corporate general and
administrative 4.9 4.7 4.8 4.6
Provision for losses on
accounts receivable 0.8 0.7 0.8 0.5
Depreciation and amortization 2.7 2.5 2.8 2.5
Interest, net 3.5 1.8 3.2 1.9
Litigation settlement -- 7.1 -- 2.4
------ ------ ------ ------
Total costs and expenses 93.5 98.8 93.5 94.2
------ ------ ------ ------
Earnings before income taxes 6.5 1.2 6.5 5.8
Income taxes 2.5 2.8 2.5 3.1
------ ------ ------ ------
Net earnings 4.0% (1.6%) 4.0% 2.7%
------ ------ ------ ------
------ ------ ------ ------
The results of the Company's ambulatory surgery operations are immaterial to the
Company's consolidated results and, therefore, this discussion excludes the
Company's ambulatory surgery operations. The Company sold its ambulatory
surgery subsidiary in the second quarter of 1996.
20
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Total net revenues for the three months ended September 30, 1997
increased 43% from $340,508,000 for the three months ended September 30, 1996 to
$486,172,000.
Net revenues from long-term and subacute care services, which
includes revenues generated from therapy and pharmaceutical services provided
at the Company's facilities, increased from $215,071,000 for the three months
ended September 30, 1996 to $295,464,000 for the three months ended September
30, 1997, a 37% increase. Approximately $67,428,000 or 84% of this increase
results from 57 leased or owned facilities acquired or opened since December
31, 1995. The remaining net revenue increase of $15,704,000, after giving
effect to a decrease in net revenues of approximately $2,739,000 relating to
three facilities sold during 1996 and four facilities sold during 1997, is
primarily attributable to an increase in revenue per patient day on a same
facility basis for the 128 leased or owned facilities in operation all of
fiscal year 1996 and the nine months ended September 30, 1997. The increase
in revenue per patient day was a result of payor rate increases and the
expansion of the Company's subacute services.
Net revenues from therapy services to nonaffiliated facilities
increased 29% from $56,559,000 for the three months ended September 30, 1996 to
$72,755,000 for the three months ended September 30, 1997 primarily as a result
of an increase in the number of nonaffiliated facilities served from 705
facilities at September 30, 1996 to 1,131 facilities at September 30, 1997.
Net revenues from foreign operations increased 232% from $15,987,000
for the three months ended September 30, 1996 to $53,029,000 for the three
months ended September 30, 1997. Approximately $32,406,000 or 87% of this
increase was the result of increased net revenues from the nursing home
operations in the United Kingdom. The increase relating to the nursing home
operations in the United Kingdom was primarily the result of the Company's
acquisitions of Ashbourne PLC ("Ashbourne") during January 1997 and APTA
Healthcare PLC ("APTA") during December 1996, which when combined, added
approximately $25,000,000 of net revenues during the three months ended
September 30, 1997.
Net revenues from temporary therapy staffing services to nonaffiliated
facilities increased 15% from $31,360,000 for the three months ended September
30, 1996 to $35,965,000 for the three months ended September 30, 1997 primarily
as a result of an increase in service hours billed to nonaffiliates from 639,000
hours in the three months ended September 30, 1996 to 735,000 hours in the three
months ended September 30, 1997. The increase in service hours billed was
primarily attributable to acquisitions.
Net revenues from pharmaceutical services to nonaffiliated facilities
increased 43% from $18,706,000 for the three months ended September 30, 1996 to
$26,674,000 for the three months ended September 30, 1997. The growth in net
revenues was primarily a result of the increase in the number of nonaffiliated
facilities served from 329 at September 30, 1996 to 422 at September 30, 1997.
The increase in nonaffiliated facilities served was primarily the result of the
acquisitions of pharmacies during 1997 and 1996.
Operating expenses, which includes rent expense of $33,061,000 and
$23,322,000 for the three months ended September 30, 1997 and 1996,
respectively, increased 42% from $279,348,000 for the three months ended
September 30, 1996 to $396,461,000 for three months ended September 30, 1997.
The increase resulted primarily from the net increase of 49 leased or owned
facilities during the year ended December 31, 1996 and 104 leased or owned
facilities during the nine months ended September 30, 1997 and the growth in
therapy and temporary therapy staffing services. Operating expenses as
a percentage of net revenues decreased from 82.0% for the three months ended
September 30, 1996 to 81.6% for the three months ended September
21
<PAGE>
30, 1997. The decrease of operating expenses as a percentage of net revenues
was primarily due to the operations in the United Kingdom including the
acquisitions of Ashbourne and APTA whose facility leases are primarily capital
leases and therefore include interest and depreciation expense instead of rent
expense. In addition, the decrease is partially offset by lower operating
margins in the United Kingdom as occupancy rates in the United Kingdom have been
negatively impacted by 19 newly developed long-term care facilities opened since
December 31, 1995.
Corporate general and administrative expenses, which include
regional costs related to the supervision of operations, increased 48% from
$16,012,000 for the three months ended September 30, 1996 to $23,743,000 for
the three months ended September 30, 1997. As a percentage of net revenues,
corporate general and administrative expenses increased from 4.7% for the
three months ended September 30, 1996 to 4.9% for the three months ended
September 30, 1997. The increase was due to an increase in costs relating to
the expansion of the Company's corporate infrastructure to support the
development of the Company's foreign operations, newly acquired domestic
operations, and implementation of new business strategies.
The provision for losses on accounts receivable increased 58% from
$2,503,000 for the three months ended September 30, 1996 to $3,963,000 for the
three months ended September 30, 1997. As a percentage of net revenues,
provision for losses on accounts receivable increased from 0.7% for the three
months ended September 30, 1996 to 0.8% for the three months ended September 30,
1997.
Depreciation and amortization increased 56% from $8,338,000 for the
three months ended September 30, 1996 to $12,985,000 for the three months ended
September 30, 1997. As a percentage of net revenues, depreciation and
amortization expense increased from 2.5% for the three months ended September
30,1996 to 2.7% for the three months ended September 30, 1997, respectively.
The increase is primarily due to the assets acquired by the Company, including
goodwill, of Ashbourne acquired during the first quarter of 1997 and APTA
acquired during the fourth quarter of 1996.
Net interest expense increased 183% from $6,077,000 for the three
months ended September 30, 1996 to $17,184,000 for the three months ended
September 30, 1997. As a percentage of net revenues, interest expense
increased from 1.8% for the three months ended September 30, 1996 to 3.5% for
the three months ended September 30, 1997. The increase was related to (i)
an increase in borrowing costs resulting from the Company's issuance of
$250,000,000 of 9 1/2% Senior Subordinated Notes due 2007 and (ii) an
increase in borrowings associated with the acquisitions of Ashbourne and
APTA. Each of these acquisitions was financed by borrowings under the
Company's revolving credit facility. The increase was also due to interest
expense related to capital leases assumed by the Company as part of the
Company's acquisitions of Ashbourne and APTA.
In the third quarter of 1996, the Company reached an agreement in
principle to settle certain of the class-action lawsuits brought by shareholders
for $24,000,000. In the fourth quarter of 1996, the Company recognized as a
reduction of the settlement cost, a $9,000,000 claim from its director and
officer liability insurance carrier.
The Company's effective tax rate was 39% for the three months ended
September 30, 1997 and was 40% for the three months ended September 30, 1996.
The decrease in the effective tax rate was due to a more favorable mix of state
income in the United States than in the prior year.
Net earnings were $19,420,000 for the three months ended September 30,
1997 as compared to net losses of $5,562,000 for the three months ended
September 30, 1996. Net earnings increased from a net loss
22
<PAGE>
of 1.6%, as a percentage of net revenues for the three months ended September
30, 1996, to net earnings of 4.0% as a percentage of net revenues for the
three months ended September 30, 1997. Net earnings before the litigation
costs for the three months ended September 30, 1996 was $16,938,000 or 5.0%
as a percentage of net revenues. The margin decrease was primarily due to
the increased costs and lower margins from the Company's nursing home
operations in the United Kingdom, including the borrowing costs associated
with acquisitions in the United Kingdom (discussed above).
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Total net revenues for the nine months ended September 30, 1997
increased 35% from $986,251,000 for the nine months ended September 30, 1996 to
$1,332,354,000.
Net revenues from long-term and subacute care services, which
includes revenues generated from therapy and pharmaceutical services provided
at the Company's facilities, increased from $626,857,000 for the nine months
ended September 30, 1996 to $807,321,000. for the nine months ended September
30, 1997, a 29% increase. Approximately $143,342,000 or 79% of this increase
results from 57 leased or owned facilities acquired or opened since December
31, 1995. The remaining net revenue increase of $46,194,000, after giving
effect to a decrease in net revenues of approximately $9,072,000 relating to
three facilities sold during 1996 and four facilities sold during 1997, is
primarily attributable to an increase in revenue per patient day on a same
facility basis for the 128 leased or owned facilities in operation all fiscal
year 1996 and the nine months ended September 30, 1997. The increase in
revenue per patient day was a result of payor rate increases and the
expansion of the Company's subacute services.
Net revenues from therapy services to nonaffiliated facilities
increased 25% from $162,859,000 for the nine months ended September 30, 1996 to
$204,340,000 for the nine months ended September 30, 1997 primarily as a result
of an increase in the number of nonaffiliated facilities served from 705
facilities at September 30, 1996 to 1,131 facilities at September 30, 1997.
Net revenues from foreign operations increased 233% from
$41,830,000 for the nine months ended September 30, 1996 to $139,119,000 for
the nine months ended September 30, 1997. Approximately $84,581,000 or 87%
of this increase was the result of increased net revenues from the nursing
home operations in the United Kingdom. The increase relating to the nursing
home operations in the United Kingdom was primarily the result of the
Company's acquisitions of Ashbourne during January 1997 and APTA during
December of 1996, which when combined, added approximately $75,300,000 of net
revenues during the nine months ended September 30, 1997.
Net revenues from temporary therapy staffing services to
nonaffiliated facilities increased 20% from $85,795,000 for the nine months
ended September 30, 1996 to $103,202,000 for the nine months ended September
30, 1997 primarily as a result of an increase in service hours billed to
nonaffiliates from 1,774,000 hours in the nine months ended September 30,
1996 to 2,104,000 hours in the nine months ended September 30, 1997. The
increase in service hours billed was primarily attributable to new offices
acquired.
Net revenues from pharmaceutical services to nonaffiliated
facilities increased 40% from $51,198,000 for the nine months ended September
30, 1996 to $71,533,000 for the nine months ended September 30, 1997. The
growth in net revenues was primarily a result of the increase in the number
of nonaffiliated facilities served from 329 at September 30, 1996 to 422 at
September 30, 1997. The increase in nonaffiliated facilities served was the
result of the acquisitions of pharmacies during 1997 and 1996.
23
<PAGE>
Operating expenses, which includes rent expense of $93,734,000 and
$66,616,000 for the nine months ended September 30, 1997 and 1996, respectively,
increased 35% from $811,210,000 for the nine months ended September 30, 1996 to
$1,091,249,000 for the nine months ended September 30, 1997. The increase
resulted primarily from the net increase of 49 leased or owned facilities during
the year ended December 31, 1996 and 104 leased or owned facilities during the
nine months ended September 30, 1997 and the growth in therapy and temporary
therapy staffing services. Operating expenses as a percentage of net revenues
decreased from 82.3% for the nine months ended September 30, 1996 to 81.9% for
the nine months ended September 30, 1997. The decrease in operating expenses as
a percentage of net revenues was primarily due to the acquisitions of Ashbourne
and APTA whose facility leases are primarily capital leases and therefore
include interest and depreciation expense instead of rent expense. In addition,
the decrease is partially offset by lower operating margins in the United
Kingdom as occupancy rates in the United Kingdom have been negatively impacted
by 19 newly developed long-term care facilities opened since December 31, 1995.
Corporate general and administrative expenses, which include regional
costs related to the supervision of operations, increased 40% from $45,189,000
for the nine months ended September 30, 1996 to $63,189,000 for the nine months
ended September 30, 1997. As a percentage of net revenues, corporate general
and administrative expenses increased from 4.6% for the nine months ended
September 30, 1996 to 4.8% for the nine months ended September 30, 1997. The
increase was also due to an increase in costs relating to the expansion of the
Company's corporate infrastructure to support the development of the Company's
foreign operations, newly acquired domestic operations, and implementation of
new business strategies.
The provision for losses on accounts receivable increased 116% from
$4,967,000 for the nine months ended September 30, 1996 to $10,736,000 for the
nine months ended September 30, 1997. As a percentage of net revenues,
provision for losses on accounts receivable increased from 0.5% for the nine
months ended September 30, 1996 to 0.8% for the nine months ended September 30,
1997. In the second half of 1996, the Company increased its accounts receivable
reserve in response to a slowdown in collections from nonaffiliated facilities
for therapy services due to delays in payment by the nonaffiliated facilities'
Medicare fiscal intermediaries (see"Liquidity and Capital Resources").
Depreciation and amortization increased 50% from $24,826,000 for the
nine months ended September 30, 1996 to $37,332,000 for the nine months ended
September 30, 1997. As a percentage of net revenues, depreciation and
amortization expense increased from 2.5% for the nine months ended September 30,
1996 to 2.8% for the nine months ended September 30, 1997, respectively. The
increase is primarily due to the assets acquired by the Company, including
goodwill, of Ashbourne acquired during the first quarter of 1997 and APTA
acquired during the fourth quarter of 1996.
Net interest expense increased 125% from $18,987,000 for the nine
months ended September 30, 1996 to $42,670,000 for the nine months ended
September 30, 1997. As a percentage of net revenues, interest expense
increased from 1.9% for nine months ended September 30, 1996 to 3.2% for the
nine months ended September 30, 1997. The increase was related to (i) an
increase in borrowing costs resulting from the Company's issuance of
$250,000,000 of 9 1/2% Senior Subordinated Notes due 2007 and (ii) an
increase in borrowings associated with the acquisitions of Ashbourne and
APTA. Each of these acquisitions was financed by borrowings under the
Company's revolving credit facility. The increase was also due to interest
expense related to capital leases assumed by the Company as part of the
Company's acquisitions of Ashbourne and APTA.
In the third quarter of 1996, the Company reached an agreement in
principle to settle certain of the class-action lawsuits brought by shareholders
for $24,000,000. In the fourth quarter of 1996, the Company
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recognized as a reduction of the settlement cost, a $9,000,000 claim from its
director and officer liability insurance carrier.
The Company's effective tax rate was 39% for the nine months ended
September 30, 1997 and was 40% for the nine months ended September 30, 1996.
The decrease in the effective tax rate was due to a more favorable mix of state
income in the United States than in the prior year.
Net earnings were $53,179,000 for the nine months ended September
30, 1997 as compared to net earnings of $26,143,000 for the nine months ended
September 30, 1996. As a percentage of net revenues, net earnings were 2.7%
for the nine months ended September 30, 1996 and 4.0% for the nine months
ended September 30, 1997. Net earnings before the litigation costs for the
nine months ended September 30, 1996 were $48,644,000, or 4.9% as a
percentage of net revenues. The margin decrease was primarily due to the
increased costs and lower margins from the Company's nursing home operations
in the United Kingdom, including the borrowing costs associated with
acquisitions in the United Kingdom (discussed above).
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of
$236,044,000, including cash and cash equivalents of $2,418,000, as compared to
working capital of $211,582,000, including cash and cash equivalents of
$14,880,000 at December 31, 1996. For the nine months ended September 30, 1997,
net cash provided by operations was $62,476,000 compared to net cash provided by
operations for the nine months ended September 30, 1996 of $55,640,000. The net
cash provided by operations for the nine months ended September 30, 1997
reflects the Company's growth in net earnings, reduced Federal and state tax
payments due to realization of certain deferred tax assets, and receipt of
$9,000,000 from the Company's director and officer insurance carrier and timing
of certain obligations of the Company. This was offset by the net cash used for
operations to fund an increase in accounts receivable (as discussed below).
The Company's accounts receivable have increased since January 1,
1997. Accounts receivable increased in part because of the growth in the
Company's therapy and pharmaceutical services businesses since January 1, 1997;
however, accounts receivable for the Company's therapy rehabilitation services
to nonaffiliates have increased by $22,867,000 since December 31, 1996 to
$102,767,000 at September 30, 1997, and continue to increase disproportionately
to the growth in net revenues from that line of business. Collections of
rehabilitation therapy services receivables from nonaffiliated facilities have
slowed because payment is primarily dependent upon such facilities' receipt of
payment from fiscal intermediaries which, in some instances, have been delayed
because fiscal intermediaries are conducting reviews of such facilities' therapy
claims. As a result, the Company increased its provision for losses on
accounts receivable in mid-1996 (see "Results of Operations").
Other significant operating uses and receipt of cash for the nine
months ended September 30, 1997 were payments of $45,476,000 for interest and
the receipt of net refunds totaling $2,796,000 for income taxes.
In May 1997, the Company received court approval of the $24,000,000
settlement of certain class-action shareholder lawsuits which amount was
previously paid during the fourth quarter of 1996. The Company received
$9,000,000 during March 1997 from its director and officer liability insurance
carrier for its claims submitted in connection with the settlement. In
addition, the Company accrued additional charges and expenses of $4,250,000 in
1996 and $5,505,000 in 1995 related to monitoring and responding to the
continuing OIG investigation and responding to the shareholder litigation
matters. The charges do not contain any estimated amounts for settlement of the
OIG investigation or remaining shareholder litigation matters (see
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"Effects from Changes in Reimbursement" and "Litigation"). As of September 30,
1997, an accrual of $3,179,000 related to the previously recorded charges and
expenses remained.
The Company incurred $69,049,000 and $35,201,000 in capital
expenditures during the nine months ended September 30, 1997 and 1996,
respectively. Substantially all such expenditures during the nine months
ended September 30, 1997 were for the continued development and construction
of one facility in the United States and nine new facilities in the United
Kingdom, and routine capital expenditures. These expansions were financed
through borrowings under the Company's old revolving credit facility, which
was subsequently refinanced by the Credit Facility. The Company had capital
expenditure commitments, as of September 30, 1997, under various contracts,
including approximately $33,843,000 in the United States and L3,414,000
($5,516,000 as of September 30, 1997) in the United Kingdom. These include
contractual commitments to improve existing facilities and to develop,
construct and complete a corporate office building and a long-term care
facility in the United States and five facilities in the United Kingdom.
The Company paid $225,984,000 and $63,072,000 for acquisitions
during the nine months ended September 30, 1997 and 1996, respectively. This
includes $110,100,000 and $19,300,000 of cash paid by the Company during the
nine months ended September 30, 1997 to former stockholders of Ashbourne and
APTA, respectively. In addition, the Company issued L2,500,000 ($4,000,000
as of September 30, 1997) of notes, with a maturity not to exceed five years,
to former stockholders of APTA who elected not to receive cash as consideration.
During the nine months ended September 30, 1997, the Company acquired the
operations of nine long-term care and assisted living facilities for $12,000,000
in addition to the assumption of all the facilities' leases. In connection
with this acquisition, the Company agreed to provide financing of $5,800,000 to
the owner of the nine facilities for expansion of certain of the facilities.
Both acquisitions were funded by borrowings under the Company's old credit
facility, which was subsequently refinanced by the Credit Facility.
In July 1997, a wholly owned subsidiary of the Company acquired a
majority interest in Eurosar, S.A., a privately owned operator of eight nursing
homes in Spain.
In August 1997, Sun acquired 38% of the equity of Alpha Healthcare
Limited, a publicly held acute care provider in Australia. In addition in
November 1997, Sun acquired from Moran Health Care Pty Ltd. a majority
interest in six hospitals in Australia.
In April 1997, a wholly owned subsidiary of the Company acquired the
operations of 13 long-term care facilities which had previously been managed by
the Company since the third quarter of 1996, for a purchase price of
$12,572,000, including the assumption of $10,722,000 in long-term debt. In
addition, the Company has extended financing of approximately $14,800,000 to the
former operators of these facilities. During the nine months ended September
30, 1997, the Company acquired a total net ownership of, the leasehold rights
to, or the management of 58 long-term care facilities in the United Kingdom,
including 49 facilities acquired in the acquisition of Ashbourne, ten long-term
care facilities in the United States, and nine long-term care facilities in
Spain. The Company also acquired or opened seven pharmacies in the United
States and nine pharmacies in the United Kingdom.
The Company agreed in February 1997 to acquire Retirement Care
Associates, Inc. ("Retirement Care"), an operator of skilled nursing
facilities and assisted living centers. Retirement Care also owns (and Sun
would acquire) approximately 65% of Contour Medical, Inc. ("Contour"), a
national provider of medical/surgical supplies. The amended terms of the
merger (the "RCA Merger") provide for a purchase price of approximately
$154.3 million in Common Stock (based upon the closing price of Sun's
Common Stock as of November 12, 1997) and the assumption of approximately
$163.1 million of indebtedness (based on Retirement Care's June 30, 1997
balance sheet). Specifically, the agreement, as amended, calls for the
Company to issue 0.52 shares of common stock in exchange for each outstanding
share of Retirement Care common stock (subject to adjustment as provided in
the agreement). The Company expects that the RCA Merger will be accounted for
as a pooling of interests. Sun has also agreed to acquire the remaining 35%
of Contour not presently owned by Retirement Care for approximately $35
million, payable in Common Stock or cash, at the option of Sun (the "Contour
Merger"). The Contour Merger will be accounted for as a purchase.
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Costs to be incurred in connection with the mergers of Retirement Care
and Contour are expected to be significant and will be charged against
earnings of the combined company. The charge is currently estimated to be
approximately $21 million for transaction costs and integration expenses,
including elimination of redundant corporate functions, severance costs
related to headcount reductions and write-off of certain intangibles and
property and equipment. Approximately $16 million of these estimated charges
are expected to be charged to operations in the fiscal quarater in which the
RCA Merger is consummated. The remaining approximately $5 million of the
estimated charges are expected to be expensed as incurred, as these costs
will benefit future combined operations. These amounts are preliminary
estimates only and are, therefore, subject to change. In addition, there can
be no assurance that the Company will not incur additional charges in
subsequent quarters to reflect costs associated with the RCA Merger and
Contour Merger.
On January 10, 1997, the Company loaned Retirement Care $9,750,000 in
order to enable Retirement Care to cause the repayment of certain indebtedness
incurred by Contour in connection with Contour's acquisition of Atlantic Medical
Supply Company, Inc. ("Atlantic") on August 6, 1996. On July 10, 1997, the
Company and Retirement Care amended the terms of the loan to: (i) increase the
applicable interest rate by 2.0%; (ii) extend the maturity date to 120 days
after the termination of the Retirement Care Merger Agreement; and (iii) replace
the collateral securing the loan with a second lien on all of Retirement Care's
accounts receivable. Consistent with Retirement Care's bank line of credit, the
loan is unconditionally and irrevocably guaranteed by certain officers of
Retirement Care. On July 10, 1997, the Company also agreed to loan Retirement
Care an additional $5,000,000, which loan is also secured by a second lien on
all of Retirement Care's accounts receivable and is unconditionally and
irrevocably guaranteed by certain officers of Retirement Care.
On October 8, 1997, a wholly-owned subsidiary of the Company,
through a tender offer, acquired 98.4% of the capital stock of Regency Health
Services, Inc. ("Regency"), an operator of skilled nursing facilities and a
provider of related specialty healthcare services, including rehabilitation
therapy, institutional pharmacy and home health services in the United
States. The remaining shares were converted into the right to receive $22.00
in cash per share. Total consideration for the shares acquired in the tender
offer was approximately $345,200,000.
On October 9, 1997, a wholly-owned subsidiary of the Company,
completed a tender offer for 100%, or $50,000,000, of Regency's 12.25% Junior
Subordinated Notes due 2003 for approximately $61,000,000, and $109,600,000
of the $110,000,000 of Regency's 9.875% Senior Subordinated Notes due 2002
for approximately $126,700,000. As a result of the repurchase of the debt,
the Company expects to record an extraordinary loss of approximately
$34,500,000 before taxes in the fourth quarter of 1997. In addition, the
Company repaid Regency's revolving credit facility of approximately
$39,000,000. As of the date of acquisition, and prior to the tender, Regency
had $229,531,000 of outstanding indebtedness.
The acquisition of Regency, including certain transaction costs,
and the tender offer for its debt, desccribed above, were financed by
borrowings of approximately $514,000,000 under the Company's Credit Facility
(as described below) and approximately $83,000,000 of net proceeds
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received from the sale and leaseback of 30 facilities owned by Regency prior to
its acquisition by the Company.
The Company conducts business outside of the United States, in the United
Kingdom, in Spain, in Australia, and in Canada. The foreign operations
accounted for 11% and 4% of the Company's total net revenues during the nine
months ended September 30, 1997 and the year ended December 31, 1996,
respectively, and 30% of the Company's consolidated total assets as of September
30, 1997. The Company's financial condition and results of operations are
subject to foreign exchange risk. Because of the Company's foreign growth
strategies, the Company does not expect to repatriate funds invested overseas
and, therefore, foreign currency transaction exposure is not normally hedged.
Exceptional planned foreign currency cash flow requirements, such as
acquisitions overseas, are hedged selectively to prevent fluctuations in the
anticipated foreign currency value. Changes in the net worth of the Company's
foreign subsidiaries arising from currency fluctuations are accumulated in the
translation adjustments component of stockholders' equity.
During the nine months ended September 30, 1997, the Company sold five of
its long-term and subacute care facilities in the United States for
approximately $30,639,000 in cash and approximately $5,600,000 in assumption of
debt and leased them back under fourteen year leases. Also, during the nine
months ended September 30, 1997, the Company, through its United Kingdom
subsidiary, sold 27 of its long-term care facilities for approximately
$49,837,000 and leased them back under 12-year leases.
The Company expects to lend up to $47,000,000, under a revolving
subordinated credit agreement ("Financing Facility") to a developer of assisted
living facilities for the development, construction and operation of assisted
living facilities. Any advances under the Financing Facility are expected to be
funded by borrowings under the Company's Credit Facility (as defined below) and
will be subject to certain conditions, including the approval of each project by
the Company. The developer has obtained a commitment for mortgage financing to
fund 50% of the cost of each project. The Company's advances under the
Financing Facility are subordinate to the mortgage financing. The Financing
Facility with respect to each facility bears interest at 9% or 13% depending on
the percentage of completion of the facility under construction. All amounts
advanced are due in full on November 1, 2001. The advances to the developer
totalled approximately $9,000,000 and $31,932,000 at December 31, 1996 and
September 30, 1997. As of September 30, 1997, nine assisted living facilities
were under development. In addition, the Company has entered into a purchase
option agreement with the developer whereby the Company will pay the developer
$50,000 for each option to purchase any of the facilities. The option will
grant the Company the right to purchase any of the facilities, after a
specified time period, at the greater of the estimated fair market value of the
property or the total amount invested by the developer.
At September 30, 1997, the Company had, on a consolidated basis,
$903,425,000 of outstanding indebtedness, including $278,600,000 of
indebtedness under its old $490,000,000 credit facility. The Company also
had $27,428,000 of outstanding standby letters of credit under the old credit
facility as of September 30, 1997.
On July 8, 1997, the Company issued $250,000,000 aggregate principal
amount of 9 1/2% Senior Subordinated Notes due 2007 (the "9 1/2% Notes").
The net proceeds from the sale of approximately $243,000,000 were used to
reduce outstanding borrowings under the Company's old revolving credit
facility which has subsequently been refinanced. The 9 1/2% Notes, which are
subject to customary terms and covenants, are redeemable by the Company at a
premium, in whole or in part, after July 1, 2002.
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On October 8, 1997 the Company entered into a Credit Agreement with
certain lenders, certain co-agents, and NationsBank of Texas, N.A. as
administrative lender to replace the Company's old revolving credit facility.
On November 12, 1997, the Company entered into a First Amendment to Credit
Agreement (the "Credit Facility"). The Credit Facility provides for
borrowings by the Company of up to $1.2 billion consisting of $500,000,000 in
a revolving credit facility which borrowings bear interest at the prevailing
prime rate plus 0% to 1% or the LIBOR rate plus .75% to 2.50%, and
$700,000,000 in term loans which bear interest at the prevailing prime rate
plus 0% to 1.5% or the LIBOR rate plus .75% to 3.0%. The revolving credit
facility matures in November 2003 and the term loans begin amortization in
March 1998 and reach final maturity in November 2005. Annual maturities for
the next five years are as follows: 1998: $5,000,000; 1999: $25,000,000;
2000: $35,000,000; 2001: $45,000,000; 2002: $55,000,000 and thereafter:
$535,000,000. In connection with this refinancing, the Company expects to
record an extraordinary loss of approximately $3,500,000 before taxes in the
fourth quarter of 1997.
The Company's ongoing capital requirements relate to, among other
things, the costs associated with its facilities under construction, routine
capital expenditures, advances under the Financing Facility, potential
acquisitions and implementation of growth strategies.
The Company believes that its current borrowing capacity under its
Credit Facility, cash from operations and the cash received from the issuance
of the 9 1/2% Notes in July 1997 will be sufficient to satisfy its working
capital needs, capital commitments related to its facilities under
construction, routine capital expenditures, advances under the Financing
Facility, current debt service obligations and to fund potential conversions
of 6 1/2% Convertible Debentures. The Company is currently evaluating
several financing alternatives, which include the issuance of debt and/or
equity. The Company anticipates that it will fund its construction
commitments as well as its requirements relating to future growth through (i)
the available borrowing capacity under its Credit Facility, (ii) the use of
operating leases and common stock in the future as a means of acquiring
facilities and new operations, (iii) the availability of leaseback financing
through real estate investment trusts and other financing sources and (iv)
the sale of securities in the public or private capital markets. There can be
no assurance that the Company will not seek additional sources of financing
in the next twelve months. Even if the Company does not have an immediate
need for additional financing, it may seek to access the public or private
capital markets if it believes that conditions are favorable. In addition,
such additional financing may be subject to certain restrictions including
mandatory prepayment provisions in the Credit Facility or otherwise require
approval of various lenders under the Company's Credit Facility. On November
11, 1997, the Company amended its shelf registration statement on Form S-3
to, among other things, increase the amount of securities which may be sold
thereunder to $1 billion, which sales are subject to the Registration
Statement being declared effective by the Securities and Exchange Commission.
If such sources of financing are not available, the Company may not be able
to pursue growth opportunities as actively as it has in the past, and may be
required to alter certain of its operating strategies.
EFFECTS FROM CHANGES IN REIMBURSEMENT
The Company derives a substantial percentage of its total revenues from
Medicare, Medicaid and private insurance. The Company's financial condition
and results of operations may be affected by the revenue reimbursement
process, which in the Company's industry is complex and can involve lengthy
delays between the time that revenue is recognized and the time that
reimbursement amounts are settled. Net revenues realizable under third-party
payor agreements are subject to change due to examination and retroactive
adjustment by payors during the settlement process. Payors may disallow in
whole or in part requests for reimbursement based on determinations that
certain costs are not reimbursable or reasonable or because additional
supporting documentation is necessary. The Company recognizes revenues from
third-party payors and accrues estimated settlement amounts in the period in
which the related services are provided. The Company estimates these
settlement balances by making determinations based on its prior settlement
experience and its understanding of the applicable reimbursement rules and
regulations. The majority of third-party payor balances are settled two to
three years following the provision of services. The Company has experienced
differences between the net amounts accrued and subsequent settlements, which
differences are recorded in operations at the time of settlement. The
Company's results of operations would be materially and adversely effected if
the amounts actually received from third-party payors in any reporting period
differs
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materially from the amounts accrued in prior periods. The Company's financial
condition and results of operations may also be affected by the timing of
reimbursement payments and rate adjustments from third-party payors. The
Company has from time to time experienced delays in receiving reimbursement from
intermediaries.
In August 1997, Congress passed the Balanced Budget Act of 1997 (the
"Act"), which includes among other things, changes to the reimbursement
provisions applicable to skilled nursing and therapy services. The Act
provides for a prospective payment system, where the government pays a fixed
fee per patient day to skilled nursing facilities to cover routine service
costs and ancillary and capital related costs for beneficiaries receiving
skilled services. For existing facilities, this prospective payment system
will be phased in over a four year period, starting after July 1998. The
Federal per diem rate will be based on average costs reported in 1995 and
will be updated annually to reflect inflation. The Company is continuing to
review the Act and its impact on the Company.
The Company's growth strategy relies heavily on the acquisition of
long-term and subacute care facilities. Regardless of the legal form of the
acquisition, the Medicare and Medicaid Programs often require that the
Company assume certain obligations relating to the reimbursement paid to the
former operators of the facilities acquired by the Company. For example, the
Company may be responsible for any final cost report settlements or findings
in the examination process which result in the recoupment from the Company of
reimbursement previously paid to the former owner if the former owner is
unable to meet its repayment obligations.
The Company has learned that a fiscal intermediary and a Medicaid agency
in one of the states in which the Company operates may be examining cost
reports filed by a predecessor operator of several facilities acquired in the
Mediplex acquisition. If, as a result of any such examination, it is
concluded that overpayments to the predecessor operator were made, the
Company, as the current operator of such facilities, may be held financially
responsible for any such overpayments. At this time the Company is unable to
predict the outcome of any such examination.
Various cost containment measures adopted by governmental and private
pay sources have begun to restrict the scope and amount of reimbursable
healthcare expenses and limit increases in reimbursement rates for medical
services. Any reductions in reimbursement levels under Medicaid, Medicare or
private payor programs and any changes in applicable government regulations
or interpretations of existing regulations could significantly affect the
Company's profitability. Furthermore, government programs are subject to
statutory and regulatory changes, retroactive rate adjustments,
administrative rulings and government funding restrictions, all of which may
materially affect the rate of payment to the Company's facilities and its
therapy and pharmaceutical businesses. There can be no assurance that
payments under governmental or private payor programs will remain at levels
comparable to present levels or will be adequate to cover the costs of
providing services to patients eligible for assistance under such programs.
Significant decreases in utilization and limits on reimbursement could have a
material adverse effect on the Company's financial condition and results of
operations, including the possible impairment of certain assets.
In March 1997, the Health Care Financing Authority ("HCFA") proposed
revised salary equivalency guidelines for physical therapy and respiratory
therapy, and proposed salary equivalency guidelines for occupational therapy
and speech therapy provided by contract suppliers such as the Company's
rehabilitation therapy subsidiary. Reimbursement for such services is
currently evaluated under Medicare's reasonable cost principles.
Implementation of the proposed guidelines by HCFA could directly or
indirectly limit the reimbursement the Company and its customers receive for
certain therapy services on a prospective basis. Such limitation on
reimbursements could have a material adverse effect on the Company's results
of operations. Additionally, if the proposed guidelines are adopted, it
could have an adverse effect on the cash flow of the facilities to whom the
Company provides services, thereby potentially adversely affecting the
collectibility of amounts owed to the Company.
In 1995, and periodically since then, HCFA has provided information to
intermediaries for use in determining reasonable costs for occupational and
speech therapy. This information, although not intended to impose limits on
such costs, suggests that fiscal intermediaries should carefully review costs
which appear to be in excess of what a "prudent buyer" would pay for those
services. While the effect of these directives is still uncertain, they are
a factor considered by such intermediaries in evaluating the reasonableness of
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amounts paid by providers for the services of the Company's rehabilitation
therapy subsidiary. If salary equivalency guidelines, such as the ones
discussed above are implemented, such guidelines will govern reimbursement rates
and the HCFA directives and reasonable cost guidelines discussed in this
paragraph will become moot. In addition, some intermediaries require facilities
to justify the cost of contract therapists versus employed therapists as an
aspect of the "prudent buyer" analysis. With respect to rehabilitation therapy
services provided to affiliated facilities, a retroactive adjustment of Medicare
reimbursement could be made for some prior periods. With respect to
nonaffiliated facilities, an adjustment of reimbursement rates for therapy
services could result in indemnity claims against the Company, based on the
terms of substantially all of the Company's existing contracts with such
facilities, for payments previously made by such facilities to the Company that
are reduced by Medicare in the audit process. Any change in reimbursement rates
resulting from implementation of the HCFA directives or a reduction in
reimbursement as a result of a change in application of reasonable cost
guidelines could have a material adverse affect on the Company's financial
condition and results of operations (depending on the rates adopted) and
customers' ability to pay for prior and continuing services.
In the Balanced Budget Act of 1997, Congress established a $1,500 per
beneficiary, per discipline, annual cap on Medicare reimbursement of Part B
outpatient therapy. The cap is effective for services rendered on or after
January 1, 1998. Providers will be permitted to bill patients for services
rendered in excess of the cap. In addition, Congress mandated the development
of a fee schedule which will apply to Part B outpatient therapy services
rendered on or after January 1, 1999.
Current Medicare regulations that apply to transactions between related
parties, such as the Company's subsidiaries, are relevant to the amount of
Medicare reimbursement that the Company is entitled to receive for the
rehabilitation and respiratory therapy and pharmaceutical services that it
provides to Company-operated facilities. These related party regulations
require that, among other things, a substantial part of the rehabilitation and
respiratory therapy services or pharmaceutical services, as the case may be, of
the relevant subsidiary be transacted with nonaffiliated entities in order for
the Company to receive reimbursement for services provided to Company-operated
facilities at the rates applicable to services provided to nonaffiliated
entities. The related party regulations do not indicate a specific level of
services that must be provided to nonaffiliated entities in order to satisfy the
"substantial part" requirement of such regulations. In instances where this
issue has been litigated by others, no consistent standard has emerged as to the
appropriate threshold necessary to satisfy the "substantial portion"
requirement.
The Company's net revenues from rehabilitation therapy services, including
net revenues from temporary therapy staffing services, provided to nonaffiliated
facilities represented 71%, 74% and 73% of total rehabilitation and temporary
therapy staffing services net revenues for the nine months ended September 30,
1997 and the years ended December 31, 1996 and 1995, respectively. Respiratory
therapy services provided to nonaffiliated facilities represented 58%, 55% and
64% of total respiratory therapy services net revenues for the nine months ended
September 30, 1997 and the year ended December 31, 1996 and the period from the
date of acquisition of SunCare on May 5, 1995 to December 31, 1995,
respectively. The Company's respiratory therapy operations did not provide
services to affiliated facilities prior to the acquisition of SunCare on May 5,
1995. Net revenues from pharmaceutical services billed to nonaffiliated
facilities represented 78%, 78% and 78% of total pharmaceutical services
revenues for the nine months ended September 30, 1997, and the years ended
December 31, 1996 and 1995. The Company believes that it satisfies the
requirements of these regulations regarding nonaffiliated business.
Consequently, it has claimed and received reimbursement under Medicare for
rehabilitation and respiratory therapy and pharmaceutical services provided to
patients in its own facilities at a higher rate than if it did not satisfy these
requirements. If the Company were deemed to not have satisfied these
regulations, the reimbursement that the Company receives for rehabilitation and
respiratory therapy and pharmaceutical services provided to its own facilities
would be significantly reduced, as a result
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of which the Company's financial condition and results of operations would be
materially and adversely affected. If, upon audit by Federal or state
reimbursement agencies, such agencies find that these regulations have not been
satisfied, and if, after appeal, such findings are sustained, the Company could
be required to refund some or all of the difference between its cost of
providing these services to any entity found to be subject to the related party
regulations and the higher amount actually received. While the Company believes
that it has satisfied and will continue to satisfy these regulations, there can
be no assurance that its position would prevail if contested by relevant
reimbursement agencies. The foregoing statements with respect to the Company's
ability to satisfy these regulations are forward looking and could be affected
by a number of factors, including the interpretation of Medicare regulations by
Federal or state reimbursement agencies and the Company's ability to provide
services to nonaffiliated facilities.
REGULATION
The Company's subsidiaries, including those which provide subacute and
long-term care, rehabilitation and respiratory therapy and pharmaceutical
services, are engaged in industries which are extensively regulated. As such,
in the ordinary course of business, the operations of these subsidiaries are
continuously subject to state and Federal regulatory scrutiny, supervision and
control. Such regulatory scrutiny often includes inquiries, investigations,
examinations, audits, site visits and surveys, some of which may be non-routine.
In addition to being subject to the direct regulatory oversight of state
and Federal regulatory agencies, these industries are frequently subject to
the regulatory supervision of fiscal intermediaries. Fiscal intermediaries
are agents of HCFA who interpret and implement applicable laws and
regulations and make decisions about the appropriate reimbursement to be paid
under Medicare and Medicaid. The Company's subsidiaries are subject to the
oversight of several different intermediaries. Those different
intermediaries have taken varying interpretations of the applicable laws and
regulations. The lack of uniformity in the interpretation and implementation
of such laws and regulations reflects in part the fact that the statutory
standards are subject to interpretation and the manuals which are published
and utilized by HCFA and the intermediaries in performing their regulatory
functions are often not sufficiently specific to provide clear guidance in
the areas which are the subject of regulatory scrutiny.
It is the policy of the Company to comply with all applicable laws and
regulations, and the Company believes that its subsidiaries are in
substantial compliance with all material laws and regulations which are
applicable to their businesses. However, given the extent to which the
interpretation and implementation of applicable laws and regulations vary and
the lack of clear guidance in many of the areas which are the subject of
regulatory scrutiny, there can be no assurance that the business activities
of the Company's subsidiaries will not from time to time become the subject
of regulatory scrutiny, or that such scrutiny will not result in
interpretations of applicable laws or regulations by government regulators or
intermediaries which differ materially from those taken by the Company's
subsidiaries. In addition, if the Company is ever found to have engaged in
improper practices, it could be subject to civil, administrative, or criminal
fines, penalties or restitutionary relief.
In January 1995, the Company learned that it was the subject of a
pending Federal investigation. The investigating agencies are the United
States Department of Health and Human Services' Office of Inspector General
("OIG") and the United States Department of Justice. At this time, the
Company does not know the full scope of the investigation. However, the
Company currently believes that the investigation is focused principally on
whether the Company provided and billed for unnecessary or unordered therapy
services to residents of skilled nursing facilities and whether the Company
adequately documented the therapy services which it provided.
In July 1997, the Criminal Division of the U.S. Department of Justice
informed the Company that it had completed its investigation of the Company,
and that it would not initiate any actions against the Company or any
individuals. The investigation by the Civil Division of the Department of
Justice and the OIG is still proceeding. The government continues to collect
information, and the Company continues to cooperate with the investigators.
The Company and the government have had preliminary discussions regarding a
possible settlement of the investigation.
The Company is unable to determine at this time when the investigation
will be concluded, how large a monetary settlement the government may seek,
the nature of any other remedies that may be sought by the government,
whether or when a settlement will in fact occur or whether any such
settlement or any other outcome of the investigation will have a material
adverse effect on the Company's financial condition or results of operations.
The foregoing statements with respect to the outcome of the investigation are
forward-looking and could be affected by a number of factors, including the
actual scope of the investigation, the government's factual findings and the
interpretation of Federal statutes and regulations by the government and
federal courts and whether any such factual findings could serve as a basis
for proceedings by other governmental authorities. From time to time the
negative publicity surrounding the investigation has in the past adversely
affected the private pay enrollment in certain inpatient facilities and
slowed the Company's success in obtaining additional outside contracts in the
rehabilitation therapy business, which resulted in higher than required
therapist staffing levels. Negative publicity in the future could have a
similar effect.
32
<PAGE>
In 1996, the Connecticut Attorney General's office and the Connecticut
Department of Social Services ("DSS") began an investigation and initiated a
hearing in order to determine whether the Company's long-term care subsidiary
submitted false and misleading fiscal information on its 1993 and 1994
Medicaid cost reports. The Company recently learned that the DSS is also
investigating information submitted for cost reporting periods prior to 1993.
The hearing is still in progress and the Company is unable to determine at
this time when the investigation will be concluded or whether the evidence
will warrant further administrative action or Medicaid reimbursement
sanctions by DSS. However, based on the Company's current understanding of
the investigation, the Company does not believe the investigation will have a
material adverse effect on the Company's financial condition or results of
operations. The foregoing statement with regard to the outcome of this
investigation is forward-looking and could be affected by a number of
factors, including factual findings and the interpretation of applicable laws
and regulations by the Attorney General and the DSS and whether any such
factual findings could serve as a basis for proceedings by other governmental
authorities in Connecticut or elsewhere.
LITIGATION
In May 1997, the Company received court approval of the $24,000,000
settlement of certain class-action shareholder lawsuits which amount was
previously paid in the fourth quarter of 1996. The Company received $9,000,000
during March 1997, from its director and officer liability insurance carrier for
its claim submitted in connection with the settlement.
On or about January 23, 1996, two former stockholders of SunCare, John
Brennan and Susan Bird, filed a lawsuit (the "SunCare Litigation") against the
Company and certain of its officers and directors in the United States District
Court for the Southern District of Indiana. Plaintiffs allege, among other
things, that the Company did not disclose material facts concerning the
investigation by the OIG and that the Company's financial results were
misstated. The complaints purport to state claims, INTER ALIA, under Federal
and state securities laws and for breach of contract, including a breach of a
registration rights agreement pursuant to which the Company agreed to register
the shares of the Company's common stock issued to such former stockholders of
SunCare in the acquisition. Plaintiffs purport to seek recision, unspecified
compensatory damages, punitive damages and other relief. By Order dated October
11, 1996, the court granted in part and denied in part defendants' motion to
dismiss.
33
<PAGE>
On September 8, 1995, a derivative action was filed by Brickell Partners
against certain of the Company's current and former directors and officers in
the United States District Court for the District of New Mexico, captioned
BRICKELL PARTNERS V. TURNER, ET AL. The complaint was not served on any
defendant. On June 19, 1996, an amended complaint alleging breach of
fiduciary duty by certain current and former of the Company's directors and
officers was filed and subsequently served on the defendants. On August 5,
1996, the District Court dismissed this action without prejudice for failure
to serve the defendants within the required time period. The plaintiffs
filed a new complaint, alleging the same claims, on August 19, 1996.
Defendants have moved to dismiss the new complaint.
The Company believes the SunCare Litigation and the derivative action
will not have a material adverse impact on its financial condition or results
of operations, although the unfavorable resolution of any of these actions in
any reporting period could have a material adverse impact on the Company's
results of operations for that period. The foregoing statements with respect
to the possible outcomes of the SunCare Litigation and the derivative action
are forward-looking and could be affected by a number of factors, including
judicial interpretations of applicable law, the uncertainties and risk
inherent in any litigation, particularly a jury trial, the existence, scope
and number of any subsequently filed complaints and the outcome of the OIG
investigation and all factors that could affect the outcome.
The Company has recently been notified by a law firm representing
several national insurance companies that these companies believe Sun has
engaged in improper billing and other practices in connection with the
Company's delivery of therapy and related services. In response, the Company
has begun discussions directly with these insurers and hopes to resolve these
matters without litigation; however, the Company is unable at this time to
predict whether it will be able to do so, what the eventual outcome may be or
the extent of its liability, if any, to these insurers.
34
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information with respect to this item is found in Management's Discussion
and Analysis of Financial Condition and Results of Operations and is hereby
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's Annual Meeting of Stockholders was held on September 18,
1997.
(b) Andrew L. Turner, Robert A. Levin and Robert D. Woltil were reelected to
three year terms on the Board of Directors which will expire at the Annual
Meeting of Stockholders in 1999.
(c) The other matters voted at the meeting and the results were as follows:
(1) Approval of Sun Healthcare Group, Inc. 1997 Stock Incentive Plan
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
23,238,149 7,515,627 277,719 7,623,501
(2) Approval of the Sun Healthcare Group, Inc. 1997 Non-Employee
Directors' Stock Plan
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
26,667,241 4,042,288 321,966 7,623,501
(3) Ratification of the appointment of Arthur Andersen LLP as independent
public accountants of the Company for the fiscal year ending December
31, 1997.
FOR AGAINST ABSTAIN
--- ------- -------
38,389,750 131,336 133,910
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10.1) Credit Agreement among Sun Healthcare Group, Inc., certain
lenders, certain co-agents, and NationsBank of Texas, N.A.,
as Administrative Lender, dated October 8, 1997.
(10.2) Form of First Amendment to Credit Agreement among Sun Healthcare
Group, Inc., certain lenders, certain co-agents and
NationsBank of Texas, N.A., as Administrative Lender, to be dated
as of November 12, 1997.
(10.3) Lease Agreement for Evergreen Nursing and Convalescent
Centre dated as of June 5, 1997, between Effingham
Associates, L.L.C. ("Lessor") and Sunrise Healthcare
Corporation ("Lessee").
(10.4) Unconditional Guaranty of Lease dated as of June 5,
1997, between Effingham Associates, L.L.C. ("Lessor")
and Sun Healthcare Group, Inc. ("Guarantor").
(11.1) Computation of Earnings per Share
35
<PAGE>
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
Report dated July 9, 1997 and filed July 9, 1997 reporting the
completion of a private placement by the Company of $250 million in
Senior Subordinated Notes at an annual rate of 9.5%.
Report dated August 21, 1997 and filed August 26, 1997, reporting on
Amendment to the Agreement and Plan of Merger and Reorganization,
dated as of February 17, 1997, as amended by Amendment No. 1 thereto
dated as of May 27, 1997, by and among Sun Retirement Care Associates,
Inc., and Peach Acquisition Corporation.
Report dated October 8, 1997 and filed October 23, 1997 reporting the
completion of a tender offer to purchase all of the outstanding shares
of common stock of Regency Health Services, Inc. on October 8, 1997.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
Date: November 13, 1997 By: /s/ Robert D. Woltil *
----------------------------
Robert D. Woltil
Principal Financial Officer
*Signing on the behalf of the Registrant and as principal financial officer.
37
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$1,200,000,000
CREDIT AGREEMENT
AMONG
SUN HEALTHCARE GROUP, INC.
CERTAIN LENDERS,
CERTAIN CO-AGENTS,
AND
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT
Dated as of
October 8, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 AMENDMENTS AND RENEWALS. . . . . . . . . . . . . . . . . 25
Section 1.3 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT . . . . . . . . . . 27
Section 2.3 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.4 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.5 PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.6 REDUCTION OF COMMITMENTS . . . . . . . . . . . . . . . . 32
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT . . . . 33
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES . . . . . . . . . . . . 33
Section 2.9 REIMBURSEMENT. . . . . . . . . . . . . . . . . . . . . . 33
Section 2.10 MANNER OF PAYMENT. . . . . . . . . . . . . . . . . . . . 33
Section 2.11 LIBOR LENDING OFFICES. . . . . . . . . . . . . . . . . . 34
Section 2.12 SHARING OF PAYMENTS. . . . . . . . . . . . . . . . . . . 35
Section 2.13 CALCULATION OF LIBOR RATE. . . . . . . . . . . . . . . . 35
Section 2.14 BOOKING LOANS. . . . . . . . . . . . . . . . . . . . . . 35
Section 2.15 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.16 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 39
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE
LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 44
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF
CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 48
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . 54
ARTICLE 5
<PAGE>
GENERAL COVENANTS
Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. . . . . . 54
Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW . . . . . . . . 55
Section 5.3 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . 55
Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS . . . . . . . . 55
Section 5.5 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.6 PAYMENT OF TAXES AND CLAIMS. . . . . . . . . . . . . . . 55
Section 5.7 VISITS AND INSPECTIONS . . . . . . . . . . . . . . . . . 55
Section 5.8 PAYMENT OF INDEBTEDNESS. . . . . . . . . . . . . . . . . 56
Section 5.9 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 56
Section 5.10 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.11 CAREERSTAFF SUBSIDIARIES . . . . . . . . . . . . . . . . 58
Section 5.12 RESTRICTED SUBSIDIARIES. . . . . . . . . . . . . . . . . 58
ARTICLE 6
INFORMATION COVENANTS
Section 6.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION . . . . . 59
Section 6.2 COMPLIANCE CERTIFICATES. . . . . . . . . . . . . . . . . 59
Section 6.3 COPIES OF OTHER REPORTS AND NOTICES. . . . . . . . . . . 59
Section 6.4 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS. . . . . 60
Section 6.5 ERISA REPORTING REQUIREMENTS . . . . . . . . . . . . . . 61
ARTICLE 7
NEGATIVE COVENANTS
Section 7.1 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.2 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.3 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . 64
Section 7.4 LIQUIDATION, DISPOSITION OF ASSETS, MERGER, NEW
SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.5 ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.6 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . 66
Section 7.7 AFFILIATE TRANSACTIONS . . . . . . . . . . . . . . . . . 66
Section 7.8 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . 67
Section 7.9 FIXED CHARGE COVERAGE RATIO. . . . . . . . . . . . . . . 67
Section 7.10 LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . 67
Section 7.11 TOTAL DEBT TO CAPITALIZATION RATIO . . . . . . . . . . . 67
Section 7.12 SALE OR DISCOUNT OF RECEIVABLES. . . . . . . . . . . . . 67
Section 7.13 AMENDMENT AND MODIFICATION OF INSTITUTIONAL DEBT
DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.14 INDEBTEDNESS OF SUN INTERNATIONAL. . . . . . . . . . . . 68
Section 7.15 INTERCOMPANY LINE OF CREDIT. . . . . . . . . . . . . . . 68
Section 7.16 SALE AND LEASEBACK . . . . . . . . . . . . . . . . . . . 68
Section 7.18 CAREERSTAFF SUBSIDIARIES . . . . . . . . . . . . . . . . 68
ARTICLE 8
- ii -
<PAGE>
DEFAULT
Section 8.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 68
Section 8.2 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 9
CHANGES IN CIRCUMSTANCES
Section 9.1 LIBOR BASIS DETERMINATION INADEQUATE . . . . . . . . . . 72
Section 9.2 ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.3 INCREASED COSTS. . . . . . . . . . . . . . . . . . . . . 73
Section 9.4 BASE RATE ADVANCES RATHER THAN LIBOR ADVANCES. . . . . . 74
Section 9.5 CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 AGREEMENT AMONG LENDERS. . . . . . . . . . . . . . . . . 75
Section 10.2 LENDER CREDIT DECISION . . . . . . . . . . . . . . . . . 78
Section 10.3 BENEFITS OF ARTICLE. . . . . . . . . . . . . . . . . . . 78
ARTICLE 11
MISCELLANEOUS
Section 11.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 11.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 11.3 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 11.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING. . . 80
Section 11.5 SET-OFF. . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 11.6 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 81
Section 11.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.8 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.9 INTEREST AND CHARGES . . . . . . . . . . . . . . . . . . 83
Section 11.10 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 11.11 AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . 84
Section 11.12 EXCEPTION TO COVENANTS . . . . . . . . . . . . . . . . . 85
Section 11.13 NO LIABILITY OF ISSUING BANK . . . . . . . . . . . . . . 85
Section 11.14 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . 85
Section 11.15 NO NOVATION. . . . . . . . . . . . . . . . . . . . . . . 86
Section 11.16 NO DUTIES OF CO-AGENTS . . . . . . . . . . . . . . . . . 86
Section 11.17 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . 86
Section 11.18 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . 86
Section 11.19 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . 87
- iii -
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1: Commitments
Schedule 2: LIBOR Lending Offices
Schedule 3: Existing Liens
Schedule 4: Existing Litigation
Schedule 5: Subsidiaries
Schedule 6: Existing Investments
Schedule 7: Existing Indebtedness
Schedule 8: Sale Leaseback Facilities
Schedule 9 Permitted Sales
Schedule 10: Meditrust Loan Agreements
Schedule 11: Permitted Guaranties, Foreign Investments and Foreign
Acquisitions
Schedule 12: Permitted Mortgage Indebtedness and Sale Leaseback Transactions
Schedule 13: Permitted Domestic Investments
Schedule 14: Permitted Domestic Acquisitions
Exhibit A: Revolving Credit Note
Exhibit B: Facility A Term Loan Note
Exhibit C: Facility B Term Loan Note
Exhibit D: Facility C Term Loan Note
Exhibit E: Security Agreement
Exhibit F: Subsidiary Guaranty
Exhibit G: Compliance Certificate
Exhibit H: Assignment Agreement
Exhibit I: Pledge Agreement
Exhibit J: Foreign Subsidiary Pledge Agreement
- iv -
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of October 8, 1997, among SUN HEALTHCARE
GROUP, INC., a Delaware corporation (the "BORROWER"), the Lenders from time to
time party hereto (the "LENDERS"), the Co-Agents from time to time party hereto
(the "CO-AGENTS"), and NATIONSBANK OF TEXAS, N.A., as Administrative Agent for
the Lenders (the "ADMINISTRATIVE AGENT").
BACKGROUND
The Lenders have been requested to provide the Borrower funds required to
(a) refinance existing debt under that certain Fourth Amended and Restated
Credit Agreement, dated as of October 29, 1996, among the Borrower, The Mediplex
Group, Inc., a Delaware corporation, certain financial institutions and co-
agents, and NationsBank of Texas, N.A., as Administrative Agent (the "EXISTING
CREDIT AGREEMENT"), (b) finance a portion of the purchase of the Regency Merger
(as hereinafter defined), (c) refinance certain existing debt of Regency (as
hereinafter defined), and (d) finance the ongoing working capital and general
corporate requirements, including Acquisitions (as hereinafter defined)
permitted hereunder, of the Borrower and its Subsidiaries. The Lenders have
agreed to provide such financing, subject to the terms and conditions set forth
below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS. For purposes of this Agreement:
"ACCOUNT SECURITY AGREEMENT" means a Security Agreement in form and
substance satisfactory to the Administrative Agent relating to the accounts
receivable of any leased facility of the Borrower or any Restricted Subsidiary
which have been pledged under the lease agreement relating thereto to secure the
obligations owing to the lessor thereunder.
"ACQUISITION" means any transaction pursuant to which the Borrower or any
of its Subsidiaries, (a) whether by means of a capital contribution or purchase
or other acquisition of stock or other securities or other equity participation
or interest, (i) acquires more than 50% of the equity interest in any Person
pursuant to a solicitation by the Borrower or such Subsidiary or tenders of
equity securities of such Person, or through one or more negotiated block,
market, private or other transactions not involving a tender offer, or a
combination of any of the foregoing, (ii) makes any corporation a Subsidiary of
the Borrower or such Subsidiary, or causes any corporation, other than a
Subsidiary of the Borrower or such Subsidiary, to be merged into the Borrower or
such Subsidiary (or agrees to be merged into any other corporation other than a
wholly-owned Subsidiary of the Borrower or such Subsidiary), or (iii) agrees to
purchase all or substantially all of the assets of any corporation, pursuant to
a merger, purchase of assets or
<PAGE>
other reorganization providing for the delivery or issuance to the holders of
such corporation's then outstanding securities, in exchange for such securities,
of cash or securities of the Borrower or such Subsidiary, or any combination
thereof, or (b) purchases all or substantially all of the business or assets of
any Person or of any operating division, facility or group of facilities of any
Person; PROVIDED, HOWEVER, an Acquisition shall not include mergers or
consolidations permitted pursuant to SECTION 7.4(b) hereof.
"ACQUISITION CONSIDERATION" means the consideration given by the Borrower
or any of its Subsidiaries for an Acquisition, including but not limited to the
fair market value of any cash, property, stock or services given, the amount of
any Indebtedness and lease expense pursuant to Operating Leases (such lease
expense to be in an amount equal to the product of rental expense for the four
fiscal quarters immediately preceding the date of calculation multiplied by
eight) assumed or incurred by the Borrower or any Subsidiary in connection with
such Acquisition.
"ADJUSTED LIBOR RATE" means, for any LIBOR Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) determined by the Administrative Agent to be equal to the
quotient obtained by dividing (a) the LIBOR Rate for such LIBOR Advance for such
Interest Period by (b) 1 minus the Reserve Requirement for such LIBOR Advance
for such Interest Period.
"ADMINISTRATIVE AGENT" means NationsBank of Texas, N.A., as administrative
agent for Lenders, or such successor administrative agent appointed pursuant to
SECTION 10.1(b) hereof.
"ADMINISTRATIVE AGENT FEE LETTER" has the meaning set forth in
SECTION 2.4(b) hereof.
"ADVANCE" means any amount advanced by the Lenders to the Borrower pursuant
to ARTICLE 2 hereof on the occasion of any borrowing, including without
limitation any Refinancing Advance.
"AFFILIATE" means any Person that directly or indirectly through one or
more Subsidiaries Controls, or is Controlled By or Under Common Control with,
the Borrower, or in the case of any Lender which is an investment fund, the
investment advisor thereof and any investment fund having the same investment
advisor.
"AGREEMENT" means this Credit Agreement, as amended, modified or
supplemented pursuant to the terms hereof.
"AGREEMENT DATE" means the date of this Agreement.
"APPLICABLE BASE RATE MARGIN" means the following per annum percentages
with respect to (a) Revolving Credit Advances and Facility A Term Loan Advances,
1.00%, (b) Facility B Term Loan Advances, 1.25% and (c) Facility C Term Loan
Advances, 1.50%.
"APPLICABLE ENVIRONMENTAL LAWS" means Applicable Laws pertaining to health
or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource
- 2 -
<PAGE>
Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act
of 1980, the Solid Waste Disposal Act amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended from time to time, "RCRA"), and any
and all analogous present or future federal, state or local, statutes, rules,
laws, and all regulations promulgated thereunder.
"APPLICABLE LAW" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "APPLICABLE LAW" shall mean
the laws of the United States of America, including without limitation 12 USC
Sections 85 and 86, as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Article 5069-1.04, Title 79, Revised
Civil Statutes of Texas, 1925, as amended ("ART. 1.04"), and any other statute
of the State of Texas now or at any time hereafter prescribing maximum rates of
interest on loans and extensions of credit; provided that the parties hereto
agree that the provisions of Chapter 15, Title 79, Revised Civil Statutes of
Texas, 1925, as amended, shall not apply to Advances, this Agreement, the Notes
or any other Loan Documents.
"APPLICABLE LIBOR RATE MARGIN" means the following per annum percentages
with respect to (a) Revolving Credit Advances and Facility A Term Loan Advances,
2.50%, (b) Facility B Term Loan Advances, 2.75% and (c) Facility C Term Loan
Advances, 3.00%.
"ART. 1.04" has the meaning ascribed thereto in the definition of
"APPLICABLE LAW."
"ASSIGNMENT AGREEMENT" has the meaning ascribed thereto in SECTION 11.6
hereof.
"ASSISTED LIVING INVESTMENTS" means (a) Investments by the Borrower or any
of its Restricted Subsidiaries in Assisted Living Investments L.L.C., a Delaware
limited liability company, for the purpose of developing and operating assisted
living facilities which provide housing, personal support services and health
care to facility residents, and (b) without duplication of the Investment
described in the foregoing clause (a), the purchase by the Borrower or any of
its Restricted Subsidiaries of an assisted living facility owned by Assisted
Living Investments L.L.C.
"AUTHORIZED SIGNATORY" means such senior personnel of the Borrower as may
be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances and Letters of Credit hereunder.
"BASE RATE ADVANCE" means any Advance bearing interest at the Base Rate
Basis.
"BASE RATE BASIS" means for any day, a per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate on such day, or (b) the higher of (i) the
sum of (A) 0.50% plus (B) the Federal Funds Rate plus (C) the Applicable Base
Rate Margin, or (ii) the sum of (A) the Prime Rate on such day plus (B) the
Applicable Base Rate Margin. The Base Rate Basis shall
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be adjusted automatically as of the opening of business on the effective date of
each change in the Prime Rate or Federal Funds Rate, as the case may be, to
account for such change.
"BONDHOLDERS" means the holders of the Bonds.
"BONDS" means those certain 11-3/4% Senior Subordinated Notes Due 2002
issued in connection with the Indenture.
"BUSINESS DAY" means a day on which banks are open (a) for the transaction
of business in Dallas, Texas, and New York, New York, and, (b) with respect to
any LIBOR Advance, for the transaction of international business (including
dealings in Dollar deposits) in London, England.
"CAPITALIZED LEASE OBLIGATIONS" means that portion of any obligation of any
Person as lessee under a lease which at the time would be required to be
capitalized on a balance sheet prepared in accordance with GAAP.
"CAREERSTAFF SUBSIDIARIES" means any limited partnership Subsidiary of the
Borrower, of which the 1% general partner and the majority interest limited
partner owning not less than 85% of the limited partnership interests of such
Subsidiary, are corporate Subsidiaries of CareerStaff Unlimited, Inc., and which
are solely engaged in the business of providing therapists on a contract basis
to healthcare providers and other third parties.
"CHANGE OF CONTROL" means the occurrence of any of the following events
after the Agreement Date: (a) any Person or any Persons acting together which
would constitute a "group" (a "GROUP") for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any
successor provision thereto, other than the Group whose nominees constituted a
majority of the board of directors of the Borrower as of the close of business
on the Agreement Date, together with any Affiliates or Related Persons (as
defined in Rule 13d-3 of the Securities and Exchange Commission under the
Exchange Act or any successor provision thereto) thereof, shall beneficially own
at least 50% of the aggregate voting power of all classes of capital stock of
the Borrower entitled to vote generally in the election of directors of the
Borrower; (b) any Person or Group, other than any Person or Group whose nominees
constituted a majority of the board of directors of the Borrower as of the close
of business on the Agreement Date, together with any Affiliates or Related
Persons thereof, shall succeed in having sufficient of its or their nominees
elected to the Board of Directors of the Borrower, such that such nominees, when
added to any existing director remaining on the Board of Directors of the
Borrower after such election who is an Affiliate or Related Person of such
Group, shall constitute a majority of the Board of Directors of the Borrower; or
(c) any "change in control" or "change of control" or similar term howsoever
defined or designated in any agreement governing any Institutional Debt of the
Borrower or any of its Subsidiaries.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means any collateral hereafter granted by any Person to the
Administrative Agent for the benefit of the Lenders to secure the Obligations.
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"COLLATERAL DOCUMENT" means any document under which Collateral is granted
and any document related thereto.
"COMMITMENT" means, collectively, the Revolving Credit Commitment, the
Facility A Term Loan Commitment, the Facility B Term Loan Commitment and the
Facility C Term Loan Commitment.
"COMPLIANCE CERTIFICATE" means a certificate, signed by the chief financial
officer of the Borrower in substantially the form of EXHIBIT G hereto,
appropriately completed.
"CONSENSUAL LIEN" means only those Liens described in clauses (f) and (h)
of the definition of Permitted Liens.
"CONTOUR ACQUISITION" means the acquisition, directly or indirectly, by the
Borrower of 100% of the issued and outstanding capital stock of Contour Medical,
Inc., a Nevada corporation ("CONTOUR"), part of which includes the purchase of
shares of Contour which are not owned by RCA at $8.50 per share, payable in cash
or stock of the Borrower.
"CONTROL" or "CONTROLLED BY" or "UNDER COMMON CONTROL" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that in any event any Person which beneficially
owns, directly or indirectly, 5% or more (in number of votes) of the securities
(or in the case of a Person that is not a corporation, 5% or more of the equity
interest) having ordinary voting power shall be conclusively presumed to control
such Person.
"CONTROLLED GROUP" means as of the applicable date, as to any Person, all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) which are under common control with such Person
and which, together with such Person, are treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code; provided, however, that the
Restricted Subsidiaries of the Borrower shall be deemed to be members of the
Borrower's Controlled Group.
"CONVERTIBLE BONDS" means those certain Convertible Subordinated Debentures
issued in connection with the Convertible Indenture.
"CONVERTIBLE BONDHOLDERS" means the holders of the Convertible Bonds.
"CONVERTIBLE INDENTURE" means that certain Indenture dated as of August 6,
1993, between Mediplex, as issuer thereunder, and Fleet Bank of Massachusetts,
N.A., as trustee thereunder as supplemented pursuant to that certain Supplement
dated as of October 1, 1994, among the Borrower, Mediplex and Fleet Bank of
Massachusetts, N.A., as trustee, and as the same may be further amended,
modified, supplemented or restated from time to time.
"DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief laws affecting the rights of creditors generally from time to time
in effect.
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"DEFAULT" means an Event of Default and/or any of the events specified in
SECTION 8.1, regardless of whether there shall have occurred any passage of time
or giving of notice that would be necessary in order to constitute such event an
Event of Default.
"DEFAULT RATE" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, or (b) the sum of the Prime Rate plus three
percent.
"DEPRECIATION" means depreciation expense as determined in accordance with
GAAP.
"DETERMINING LENDERS" means, on any date of determination, any combination
of Lenders whose Total Specified Percentages aggregate at least 51%; PROVIDED,
HOWEVER, in the event that all of the Commitments have been terminated,
"DETERMINING LENDERS" means, on any date of determination, any combination of
Lenders having at least 51% of the Advances then outstanding.
"DISCLOSURE LETTER" means that certain letter dated as of the Agreement
Date, delivered by the Borrower to the Lenders, pursuant to which the Borrower
has disclosed certain items which might have a Material Adverse Effect.
"DIVIDEND" means, as to any Person, any declaration or payment of any
dividend (other than a stock dividend) on, or the making of any distribution,
loan, or advance to any holder of, any shares of capital stock or other equity
interest of such Person (other than salaries and bonuses paid in the ordinary
course of business).
"DOLLAR" or "$" means the lawful currency of the United States of America.
"DOMESTIC EBITDA" means, for any period, determined in accordance with GAAP
on a consolidated basis for the Borrower and its Restricted Subsidiaries, the
sum of (a) pre-tax net income (excluding therefrom (i) any items of
extraordinary gain, including net gains on the sale of assets other than asset
sales in the ordinary course of business, (ii) any items of extraordinary loss,
including net losses on the sale of assets other than asset sales in the
ordinary course of business, (iii) charges related to settlement of the
Shareholder Lawsuits not to exceed in aggregate amount the remainder of
$24,000,000 minus any insurance proceeds received in connection with such
settlement, and (iv) charges related to the RCA Acquisition, the Contour
Acquisition and the Acquisition of Regency not to exceed $35,000,000 in
aggregate amount), plus (b) interest expense, whether or not capitalized
(including interest expense pursuant to Capitalized Lease Obligations),
Depreciation and amortization, in each case for the four fiscal quarters
immediately preceding the date of calculation. For purpose of the calculation
of Domestic EBITDA with respect to assets not owned at all times during the four
fiscal quarters immediately preceding the date of determination, Domestic EBITDA
shall be adjusted, on a pro-forma basis, to (i) include the Domestic EBITDA
attributable to an Acquisition which occurred during any such fiscal quarter for
the twelve month period preceding the date of determination, provided the
Acquisition Consideration for such Acquisition is in excess of $5,000,000 and
(ii) exclude the Domestic EBITDA of any asset or group of related amounts
disposed of in one transaction or a series of related transactions during any
such fiscal quarter for the twelve month period preceding the date of
determination, provided the consideration received from the disposition of such
asset or group of related assets is in excess of $5,000,000.
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"DOMESTIC EBITDAR" means, for any period, determined in accordance with
GAAP on a consolidated basis for the Borrower and its Restricted Subsidiaries,
the sum of (a) Domestic EBITDA, plus (b) lease expense pursuant to Operating
Leases, in each case for the four fiscal quarters immediately preceding the date
of calculation.
"DOMESTIC ENTITIES" means any Person which is organized under the laws of
the United States of America, any state thereof, or the District of Columbia.
"EBITDA" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) pre-tax
net income (excluding therefrom (i) any items of extraordinary gain, including
net gains on the sale of assets other than asset sales in the ordinary course of
business, (ii) any items of extraordinary loss, including net losses on the sale
of assets other than asset sales in the ordinary course of business,
(iii) charges related to settlement of the Shareholder Lawsuits not to exceed in
aggregate amount the remainder of $24,000,000 minus any insurance proceeds
received in connection with such settlement, and (iv) charges related to the RCA
Acquisition, the Contour Acquisition, and the Acquisition of Regency not to
exceed $35,000,000 in aggregate amount), plus (b) interest expense, whether or
not capitalized (including interest expense pursuant to Capitalized Lease
Obligations), Depreciation, amortization, in each case for the four fiscal
quarters immediately preceding the date of calculation. For purpose of the
calculation of EBITDA with respect to assets not owned at all times during the
four fiscal quarters immediately preceding the date of determination, EBITDA
shall be adjusted, on a pro-forma basis, to (i) include the EBITDA attributable
to an Acquisition which occurred during any such fiscal quarter for the twelve
month period preceding the date of determination, provided the Acquisition
Consideration for such Acquisition is in excess of $5,000,000 and (ii) exclude
the EBITDA of any asset or group of related amounts disposed of in one
transaction or a series of related transactions during any such fiscal quarter
for the twelve month period preceding the date of determination, provided the
consideration received from the disposition of such asset or group of related
assets is in excess of $5,000,000.
"EBITDAR" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) EBITDA,
plus (b) lease expense pursuant to Operating Leases, in each case for the four
fiscal quarters immediately preceding the date of calculation.
"ELIGIBLE ASSIGNEE" means (a) any Lender; (b) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $1,000,000,000; (c) a savings and loan association or
savings bank organized under the laws of the United States, or any state
thereof, having total assets in excess of $500,000,000, and not in receivership
or conservatorship; (d) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, provided that such bank is acting through a
branch or agency located in the country in which it is organized or another
country which is described in this clause; and (e) the central bank of any
country which is a member of the Organization for Economic Cooperation and
Development; (f) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other entity)
that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and
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having a combined capital and surplus or total assets of at least $100,000,000,
(g) any other entity (other than a natural person) that is an "accredited
investor" (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, and (h) any other entity
approved by both the Borrower and the Administrative Agent, provided that, no
Affiliate of the Borrower shall qualify as an Eligible Assignee; PROVIDED,
HOWEVER, with respect to any Eligible Assignee described in clauses (f) or (g)
above, for any such Eligible Assignee to have a Revolving Credit Specified
Percentage hereunder its obligation to fund Revolving Credit Advances shall be
irrevocably guaranteed by a Person that otherwise qualifies as an Eligible
Assignee under any of clauses (a), (b), (c) or (d) above.
"EQUITY" means shares of capital stock or partnership, profits, capital or
member interest, or options, warrants or any other right to subscribe for or
otherwise acquire capital stock or a partnership, profits, capital or member
interest of the Borrower or any of its Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any applicable regulation promulgated thereunder.
"ERISA EVENT" means, with respect to the Borrower and its Restricted
Subsidiaries, (a) a Reportable Event with respect to a Pension Plan, (b) the
withdrawal of any such Person or any member of its Controlled Group from a
Pension Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to
terminate a Pension Plan under Section 4041(c) of ERISA, (d) the institution of
proceedings to terminate a Pension Plan by the PBGC, (e) the failure to make
required contributions to a Pension Plan or Multiemployer Plan which could
result in the imposition of a lien under Section 412 of the Code or Section 302
of ERISA, (f) a withdrawal of any such Person or any member of its Controlled
Group from a Multiemployer Plan, (g) a transfer of sponsorship of a Pension Plan
having a material amount of unfunded accrued benefit liabilities to a Person not
a member of a Controlled Group of the Borrower or a Restricted Subsidiary, or
(h) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or the imposition of
any liability under Title IV of ERISA other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"EVENT OF DEFAULT" means any of the events specified in SECTION 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"EXISTING LETTERS OF CREDIT" means any letters of credit issued under the
Existing Credit Agreement or the Regency Credit Agreement and outstanding as of
the Agreement Date.
"FACILITY A TERM LOAN ADVANCE" means an Advance made pursuant to
SECTION 2.1(b) hereof.
"FACILITY A TERM LOAN COMMITMENT" means $200,000,000, as terminated
pursuant to SECTION 2.1(b) hereof.
"FACILITY A TERM LOAN NOTES" means the promissory notes of the Borrower
evidencing Facility A Term Loan Advances hereunder, substantially in the form of
EXHIBIT B hereto, together with any extension, renewal or amendment thereof, or
substitution therefor.
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"FACILITY A TERM LOAN SPECIFIED PERCENTAGE" means, as to any Lender, the
percentage indicated beside its name on SCHEDULE 1 hereto as its Facility A Term
Loan Specified Percentage, or as adjusted or specified in any amendment to this
Agreement or in any Assignment Agreement.
"FACILITY B TERM LOAN ADVANCE" means an Advance made pursuant to
SECTION 2.1(c) hereof.
"FACILITY B TERM LOAN COMMITMENT" means $250,000,000, as terminated
pursuant to SECTION 2.1(c) hereof.
"FACILITY B TERM LOAN NOTES" means the promissory notes of the Borrower
evidencing Facility B Term Loan Advances hereunder, substantially in the form of
EXHIBIT C hereto, together with any extension, renewal or amendment thereof, or
substitution therefor.
"FACILITY B TERM LOAN SPECIFIED PERCENTAGE" means, as to any Lender, the
percentage indicated beside its name on SCHEDULE 1 hereto as its Facility B Term
Loan Specified Percentage, or as adjusted or specified in any amendment to this
Agreement or in any Assignment Agreement.
"FACILITY C TERM LOAN ADVANCE" means an Advance made pursuant to
SECTION 2.1(d) hereof.
"FACILITY C TERM LOAN COMMITMENT" means $250,000,000, as terminated
pursuant to SECTION 2.1(d) hereof.
"FACILITY C TERM LOAN NOTES" means the promissory notes of the Borrower
evidencing Facility C Term Loan Advances hereunder, substantially in the form of
EXHIBIT D hereto, together with any extension, renewal or amendment thereof, or
substitution therefor.
"FACILITY C TERM LOAN SPECIFIED PERCENTAGE" means, as to any Lender, the
percentage indicated beside its name on SCHEDULE 1 hereto as its Facility C Term
Loan Specified Percentage, or as adjusted or specified in any amendment to this
Agreement or any Assignment Agreement.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the rate on such transactions as of
the most recent Business Day when such rate was last published.
"FIXED CHARGES" means, for any date of calculation, calculated for the
Borrower and its Subsidiaries on a consolidated basis (provided that if Foreign
Subsidiary EBITDAR shall ever equal or exceed 15% of EBITDAR, Fixed Charges
shall be calculated for the Borrower and its Restricted Subsidiaries on a
consolidated basis) determined in accordance with GAAP, the sum
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of, without duplication, (a) scheduled principal or residual or similar payments
made on Total Debt (other than (i) lease expense pursuant to Operating Leases,
(ii) principal payments made on the Obligations, and (iii) debt for borrowed
money having (x) a maturity of less than twelve months and (y) no principal
amortization), plus (b) interest paid, whether or not capitalized (including
interest paid pursuant to Capitalized Lease Obligations), plus (c) lease expense
pursuant to Operating Leases, in each case for the four fiscal quarters
immediately preceding the date of calculation. For purpose of the calculation
of Fixed Charges with respect to assets not owned at all times during the four
fiscal quarters immediately preceding the date of determination, Fixed Charges
shall be adjusted, on a pro-forma basis, to (i) include the Fixed Charges
attributable to an Acquisition which occurred during any such fiscal quarter for
the twelve month period preceding the date of determination, provided the
Acquisition Consideration for such Acquisition is in excess of $5,000,000 and
(ii) exclude the Fixed Charges of any asset or group of related amounts disposed
of in one transaction or a series of related transactions during any such fiscal
quarter for the twelve month period preceding the date of determination,
provided the consideration received from the disposition of such asset or group
of related assets is in excess of $5,000,000.
"FIXED CHARGE COVERAGE RATIO" means, for any date of calculation, the ratio
of EBITDAR (provided that if Foreign Subsidiary EBITDAR shall ever equal or
exceed 15% of EBITDAR, the Fixed Charge Coverage Ratio shall be calculated using
Domestic EBITDAR) to Fixed Charges for the four fiscal quarters immediately
preceding such date of calculation.
"FOREIGN ENTITY" means any Person which is organized under the laws of a
jurisdiction other than the United States of America, any state thereof, or the
District of Columbia.
"FOREIGN SUBSIDIARY" means any Subsidiary which is organized under the laws
of a jurisdiction other than the United States of America, any state thereof, or
the District of Columbia.
"FOREIGN SUBSIDIARY EBITDA" means, for any period, determined in accordance
with GAAP on a consolidated basis for the Borrower's Foreign Subsidiaries, the
sum of (a) pre-tax net income (excluding therefrom (i) any items of
extraordinary gain, including net gains on the sale of assets other than asset
sales in the ordinary course of business, and (ii) any items of extraordinary
loss, including net losses on the sale of assets other than asset sales in the
ordinary course of business), plus (b) interest expense, whether or not
capitalized (including interest expense pursuant to Capitalized Lease
Obligations), Depreciation and amortization, in each case for the four fiscal
quarters immediately preceding the date of calculation. For purpose of the
calculation of Foreign Subsidiary EBITDA with respect to assets not owned at all
times during the four fiscal quarters immediately preceding the date of
determination, Foreign Subsidiary EBITDA shall be adjusted, on a pro-forma
basis, to (i) include the Foreign Subsidiary EBITDA attributable to an
Acquisition which occurred during any such fiscal quarter for the twelve month
period preceding the date of determination, provided the Acquisition
Consideration for such Acquisition is in excess of $5,000,000 and (ii) exclude
the Foreign Subsidiary EBITDA of any asset or group of related amounts disposed
of in one transaction or a series of related transactions during any such fiscal
quarter for the twelve month period preceding the date of determination,
provided the consideration received from the disposition of such asset or group
of related assets is in excess of $5,000,000.
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"FOREIGN SUBSIDIARY EBITDAR" means, for any period, determined in
accordance with GAAP on a consolidated basis for the Borrower's Foreign
Subsidiaries, the sum of (a) Foreign Subsidiary EBITDA, plus (b) lease expense
pursuant to Operating Leases.
"FOREIGN SUBSIDIARY PLEDGE AGREEMENT" means one or more Foreign Subsidiary
Pledge Agreements executed by the Borrower and each Restricted Subsidiary
relating to all or a portion of the capital stock of, or other equity interest
in, any Foreign Subsidiary now owned or hereafter acquired by the Borrower or
such Restricted Subsidiary, necessary to cause the Administrative Agent to have
a security interest in, and pledge of, 66% of all of the capital stock of, or
other equity interest in, such Foreign Subsidiary, substantially in the form of
EXHIBIT J hereto, as such agreement may be amended, modified, supplemented or
restated from time to time.
"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period, except as otherwise
required by the adoption of Statement of Financial Accounting Standards No. 109.
"GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United States
of America and any State or other political subdivision thereof or (ii) any
jurisdiction in which the Borrower or any of its Restricted Subsidiaries
conducts all or any part of its business or owns any property or (b) any entity
(including agencies, departments, commissions, boards, bureaus or other
instrumentalities) exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
"GUARANTY" or "GUARANTEED", means (a) as applied to an obligation of
another Person, (i) a guaranty, direct or indirect, in any manner, of any part
or all of such obligation, and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of nonperformance) of any
part or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit and (b) an agreement, direct or
indirect, contingent or otherwise, to maintain the net worth, working capital,
earnings or other financial performance of another Person.
"GUARANTOR" means each Restricted Subsidiary of the Borrower (other than
its Inactive Subsidiaries).
"HIGHEST LAWFUL RATE" means at the particular time in question the maximum
rate of interest which, under Applicable Law, the Lenders are then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of
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Texas, the applicable rate ceiling shall be (a) the indicated rate ceiling
described in and computed in accordance with the provisions of Section (a)(1) of
Art. 1.04, or (b) if the parties subsequently contract as allowed by Applicable
Law, the quarterly ceiling or the annualized ceiling computed pursuant to
Section (d) of Art. 1.04; provided, however, that at any time the indicated rate
ceiling, the quarterly ceiling or the annualized ceiling shall be less than 18%
per annum or more than 24% per annum, the provisions of Sections (b)(1) and (2)
of said Art. 1.04 shall control for purposes of such determination, as
applicable.
"INACTIVE SUBSIDIARY" means any Subsidiary having (a) Total Assets at any
time of less than $1,000,000 in aggregate amount and (b) total gross revenues
during any fiscal year of less than $1,000,000, in aggregate amount.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(a) all items which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person, (b) all obligations secured by any Lien on any property or asset owned
by such Person, whether or not the obligation secured thereby shall have been
assumed, (c) to the extent not otherwise included, all Capitalized Lease
Obligations of such Person, all obligations of such Person with respect to
leases constituting part of a sale and leaseback arrangement, all Guaranties,
all obligations under interest rate swap agreements or similar hedge agreements,
all indebtedness for borrowed money, and all reimbursement obligations with
respect to outstanding letters of credit, (d) any "withdrawal liability" of the
Borrower or any of its Restricted Subsidiaries, as such term is defined under
Part I of Subtitle E of Title IV of ERISA, (e) the principal portion of all
obligations of such Person under any Synthetic Lease, and (f) all preferred
stock issued by such Person and required by the terms thereof to be redeemed, or
for which mandatory sinking fund payments are due, by a fixed date.
"INDEMNIFIED MATTERS" has the meaning ascribed to it in SECTION 5.10(a)
hereof.
"INDEMNITEES" has the meaning ascribed to it in SECTION 5.10(a) hereof.
"INDENTURE" means that certain Indenture dated as of September 1, 1992,
between Mediplex, as issuer thereunder, and NationsBank of Virginia, N.A., as
trustee thereunder, as amended, modified, supplemented or restated from time to
time.
"INSTITUTIONAL DEBT" means unsecured Indebtedness for borrowed money which
may be raised by the Borrower after the Agreement Date in the private placement
or public debt markets pursuant to terms satisfactory to the Determining Lenders
(which shall include the Merger Facility), and which shall include Subordinated
Debt.
"INTERCOMPANY LINE OF CREDIT" means that certain Amended and Restated Line
of Credit Agreement dated as of October 7, 1997, among the Borrower and each of
the Borrower's Restricted Subsidiaries that may become party thereto from time
to time, as the same may from time to time be amended, modified, supplemented or
restated.
"INTEREST HEDGE AGREEMENTS" means any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate
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exchange agreements, forward currency exchange agreements, interest rate cap,
swap or collar protection agreements, and forward rate currency or interest rate
options, as the same may be amended or modified and in effect from time to time,
and any and all cancellations, buy backs, reversals, terminations or assignments
of any of the foregoing.
"INTEREST PERIOD" means, for any LIBOR Advance, the period beginning on the
day the Advance is made and ending seven, fourteen or twenty-one days or one
month thereafter (as the Borrower shall select); PROVIDED, HOWEVER, that all of
the foregoing provisions are subject to the following:
(i) if any one-month Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day, unless, with respect to a LIBOR Advance, the
result of such extension would be to extend such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding Business Day;
(ii) any one-month Interest Period with respect to a LIBOR Advance
that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of a
calendar month;
(iii) the Borrower may not select any Interest Period in respect of
Loans having an aggregate principal amount less than $5,000,000; and
(iv) there shall be outstanding at any one time no more than ten
Interest Periods in the aggregate.
"INVESTMENT" means any direct or indirect purchase or other acquisition of,
or beneficial interest in, capital stock or other securities of any other
Person, or any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution to, or
investment in any other Person, including without limitation the incurrence or
sufferance of Indebtedness or the purchase, other than purchases in connection
with an Acquisition, of accounts receivable of any other Person that are not
current assets or do not arise in the ordinary course of business, which is not
an Acquisition.
"ISSUING BANK" means NationsBank of Texas, N.A. in its capacity as issuer
of the Letters of Credit.
"LENDER" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a Commitment or is owed
any part of the Obligations (including the Administrative Agent in its
individual capacity), and each Eligible Assignee that hereafter becomes party
hereto pursuant to SECTION 11.6 hereof.
"L/C CASH COLLATERAL ACCOUNT" has the meaning specified in SECTION 2.16(g)
hereof.
"L/C RELATED DOCUMENTS" has the meaning specified in SECTION 2.16(e)
hereof.
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"LETTERS OF CREDIT" has the meaning specified in SECTION 2.16(a) hereof and
also shall include the Existing Letters of Credit.
"LETTER OF CREDIT AGREEMENT" has the meaning specified in SECTION 2.16(b)
hereof.
"LETTER OF CREDIT FACILITY" has the amount of Letters of Credit the Issuing
Bank may issue pursuant to SECTION 2.16(a) hereof.
"LEVERAGE RATIO" means, for any date of calculation, calculated for the
Borrower and its Subsidiaries on a consolidated basis (provided that if Foreign
Subsidiary EBITDAR shall ever equal or exceed 15% of EBITDAR, the Leverage Ratio
shall be calculated for (a) the Borrower and its Restricted Subsidiaries on a
consolidated basis and (b) using Domestic EBITDAR), the ratio of Total Debt to
EBITDAR for the four fiscal quarters immediately preceding the date of
calculation.
"LIBERTY LOAN" means a $12,500,000 working capital loan made by the
Borrower to Liberty Healthcare Management Group, Inc., bearing interest at a
rate per annum not to exceed the sum of the rate being offered in the London
interbank market plus 2-1/2% and having a maturity of less than five years.
"LIBERTY NOTE" means a promissory note executed by Liberty Healthcare
Management Group, Inc., made payable to the order of the Borrower, evidencing
the Liberty Loan.
"LITIGATION" means any proceeding, claim, lawsuit, arbitration, and/or
investigation by or before any Governmental Authority, including, without
limitation, proceedings, claims, lawsuits and/or investigations under or
pursuant to any environmental, occupational, safety and health, antitrust,
unfair competition, securities, Tax or other law, rule or regulation or pursuant
to any contract, agreement or other instrument.
"LIBOR ADVANCE" means an Advance which the Borrower request to be made as a
LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with the
provisions of SECTION 2.2 hereof.
"LIBOR BASIS" means a simple per annum interest rate equal to the lesser of
(a) the Highest Lawful Rate, or (b) the sum of the Adjusted LIBOR Rate plus the
Applicable LIBOR Rate Margin. Once determined, the LIBOR Basis shall remain
unchanged during the applicable Interest Period.
"LIBOR LENDING OFFICE" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on SCHEDULE 2 attached hereto, and such
other office of the Lender or any of its affiliates hereafter designated by
notice to the Administrative Agent.
"LIBOR RATE" means, for any LIBOR Advance for any Interest Period (a) of
one month, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR Rate" shall mean, for any LIBOR Advance
for any
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Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior the first day of such Interest Period for
a term comparable to such Interest Period; PROVIDED, HOWEVER, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
1/100th of 1%) and (b) of seven, fourteen, or twenty-one days, the Eurodollar
option rate published by Classer Marshall, Inc. (Telerate page 4833) at
approximately 10:00 a.m. (Dallas, Texas time), two Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of, and for a length of time approximately equal to the
Interest Period for, the LIBOR Advance sought by the Borrower.
"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Pledge Agreements,
the Security Agreements, the Subsidiary Guaranty, the Account Security
Agreement, any Interest Hedge Agreement entered into with any Lender or any
affiliate of any Lender, and any other document or agreement executed or
delivered from time to time by the Borrower, any of the Borrower's Restricted
Subsidiaries or any other Person in connection herewith or therewith or as
security for the Obligations.
"LONG TERM DEBT" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus,
without duplication, amounts equal to the aggregate net rentals payable one year
or more from the date of creation thereof under Capitalized Lease Obligations.
"MATERIAL ADVERSE EFFECT" means any act or circumstance or event that
(a) causes a Default, (b) otherwise could reasonably be expected to be material
and adverse to (i) the business, assets, liabilities, financial condition,
results of operations, business or prospects of the Borrower and its Restricted
Subsidiaries taken as a whole or (ii) the ability of the Borrower or any
Guarantor to perform their obligations under the respective Loan Documents, or
(c) in any manner whatsoever does or could reasonably be expected to materially
and adversely affect the validity or enforceability of any Loan Document or the
rights of the Lenders thereunder.
"MATURITY DATE" means the earliest of (a) closing of the Merger Facility,
(b) the abandonment by the Borrower or Sunreg Acquisition of the Regency Merger,
(c) December 31, 1997 and (d) termination in whole of the Revolving Credit
Commitment pursuant to SECTION 8.2 hereof.
"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"MEDIPLEX" means The Mediplex Group, Inc., a Massachusetts corporation and
a direct, wholly-owned, Subsidiary of the Borrower.
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"MEDITRUST LOAN AGREEMENTS" means the loan agreements described on
SCHEDULE 10 hereto and amendments, modifications, or supplements thereto or
restatements thereof set forth on SCHEDULE 10 hereto without giving effect to
any amendments, modifications or supplements thereto not listed on SCHEDULE 10
unless the same are consented to in writing by the Determining Lenders.
"MERGER FACILITY" means any credit facility entered into simultaneously or
in connection with the Regency Merger, whether or not such credit facility is
with all or any of the Lenders hereunder, the proceeds of which are used to
refinance the Indebtedness under this Agreement in full.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA and to which the Borrower or any member of its
Controlled Group has an obligation to contribute or has liability under Title IV
of ERISA (contingent or otherwise).
"NECESSARY AUTHORIZATION" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with, any
governmental or other regulatory authority necessary or appropriate to enable
the Borrower or any of its Restricted Subsidiaries to maintain and operate its
business and properties.
"NEGATIVE PLEDGE" means any agreement, contract or arrangement whereby any
Person is prohibited from, or would otherwise be in default as a result of,
creating, assuming, incurring or suffering to exist, directly or indirectly, any
Lien on any of its assets.
"NET CASH PROCEEDS" means, with respect to any sale, lease, transfer or
disposition of any asset, Equity or Institutional Debt by or of any Person, the
aggregate amount of cash received by such Person in connection with such
transaction after payment of any Indebtedness secured by any asset being sold,
leased, transferred or disposed of and minus reasonable fees, costs and expenses
and related taxes.
"NET WORTH" means, for the Borrower and its Subsidiaries, on a consolidated
basis (provided that if Foreign Subsidiary EBITDAR shall ever equal or exceed
15% of EBITDAR, Net Worth shall be calculated for the Borrower and its
Restricted Subsidiaries on a consolidated basis), determined in accordance with
GAAP, the sum of: (i) capital stock taken at par value, plus (ii) capital
surplus plus (iii) retained earnings less treasury stock.
"1997 SENIOR SUBORDINATED NOTES" means the $250,000,000 in aggregate
principal amount of Senior Subordinated Notes of the Borrower due 2007 and
issued in July, 1997.
"NOTES" means, collectively, the Revolving Credit Notes, the Facility A
Term Loan Notes, the Facility B Term Loan Notes and the Facility C Term Loan
Notes.
"OBLIGATIONS" means (a) all obligations of any nature (whether matured or
unmatured, fixed or contingent, including the Reimbursement Obligations) of the
Borrower or any of its Restricted Subsidiaries to any Lender or any affiliate of
any Lender under any of the Loan Documents as they may be amended from time to
time, and (b) all obligations of the Borrower or any of its Restricted
Subsidiaries for losses, damages, expenses or any other liabilities of any
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kind that any Lender may suffer by reason of a breach by the Borrower or any of
its Restricted Subsidiaries of any obligation, covenant or undertaking with
respect to any Loan Document.
"OPERATING LEASE" means any Operating Lease, as defined in the Financial
Accounting Standard Board Statement No. 13, dated November, 1976, or otherwise
in accordance with GAAP but shall not include any Synthetic Lease.
"PARTICIPANT" has the meaning ascribed to it in SECTION 11.6(c) hereof.
"PARTICIPATION" has the meaning ascribed to it in SECTION 11.6(c) hereof.
"PAYMENT DATE" means the last day of the Interest Period for any LIBOR
Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a retirement plan (other than a Multiemployer Plan)
subject to Title IV of ERISA or Section 412 of the Code to which the Borrower or
any member of its Controlled Group has liability (contingent or otherwise) under
Title IV of ERISA or Section 412 of the Code.
"PERMITTED LIENS" means, as applied to any Person:
(a) any Lien in favor of the Lenders to secure the Obligations hereunder;
(b) (i) Liens on real estate for real estate taxes not yet delinquent,
(ii) Liens created by lease agreements to secure the payment of rental amounts
and other sums due thereunder provided that such liens are confined to fixtures,
equipment, inventory and other tangible personal property located in or about
the leased premises, (iii) Liens on leasehold interests created by the lessor in
favor of any mortgagee of the leased premises, and (iv) Liens for taxes,
assessments, governmental charges, levies or claims that are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on such Person's books, but only so long as
no foreclosure, restraint, sale or similar proceedings have been commenced with
respect thereto;
(c) Liens of carriers, lessors, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, rights-of-way, restrictions and other similar encumbrances
on the use of real property which do not interfere with the ordinary conduct of
the business of such Person;
(f) Liens created to secure Indebtedness permitted by SECTION 7.1(k)
hereof, which is (i) incurred solely for the purpose of financing the
acquisition of assets or an Acquisition and
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incurred at the time of such acquisition of assets or such Acquisition or
(ii) assumed in connection with an Acquisition, so long as (A) each such Lien
permitted by this subsection (f) shall at all times be confined solely to the
asset or assets so acquired (and proceeds thereof) and refinancings thereof and
(B) the aggregate amount of Indebtedness related thereto does not result in a
violation of SECTION 7.1(k) hereof;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Determining Lenders;
(h) Any Liens which are described on SCHEDULE 3 to the Credit Agreement,
and Liens resulting from the refinancing of the related Indebtedness, provided
that the Indebtedness secured thereby shall not be increased and the Liens shall
not cover additional assets of the Borrower or its Restricted Subsidiaries;
(i) Liens on assets necessary to satisfy SECTION 6 of each of the
Meditrust Loan Agreements; and
(j) Liens to secure Indebtedness permitted by SECTION 7.1(j) hereof, so
long as (A) each such Lien permitted by this subsection (j) shall at all times
be confined to the asset or assets (and proceeds thereof) financed or mortgaged
with such Indebtedness, (B) the amount of Indebtedness secured by such Lien
shall not exceed 100% of the fair market value of such asset or assets and
(C) the aggregate amount of Indebtedness related thereto does not result in a
violation of SECTION 7.1(j) hereof.
"PERMITTED RESTRICTED PAYMENTS" means (a) the declaration and payment of
Dividends to the Borrower or any of its Restricted Subsidiaries, (b) payments
made after the Agreement Date to the Bondholders in connection with a tender of
the Bonds, not to exceed $8,000,000 in aggregate amount, (c) the repurchase of
shares by the Borrower of its shares held by Don A. Karchmer, John E. Bingaman,
Thomas E. Stewart and James W. Campbell pursuant to the terms of that certain
Registration Rights Agreement with the Borrower, dated as of June 29, 1993, as
amended by that certain First Amendment to Registration Rights Agreement, dated
as of May 26, 1994, (d) payments made after the Agreement Date to the
Convertible Bondholders in connection with the redemption or conversion of any
of the Convertible Bonds pursuant to the terms of the Convertible Indenture, not
to exceed $22,500,000 in aggregate amount, and (e) payments made in respect of
the Regency Tender for the Regency Subordinated Notes.
"PERSON" means an individual, corporation, partnership, limited liability
company, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"PLAN" means (a) any employee benefit plan as defined in Section 3(3) and
subject to Title I of ERISA (including a Multiemployer Plan that is covered by
Title IV of ERISA) pursuant to which any employees of the Borrower or its
Restricted Subsidiaries participate and (b) any Pension Plan.
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"PLEDGE AGREEMENT" means one or more Pledge Agreements executed by the
Borrower and each Restricted Subsidiary relating to all of the capital stock of,
or other equity interest in, Restricted Subsidiaries now owned or hereafter
acquired by the Borrower or such Restricted Subsidiary (other than Inactive
Subsidiaries), substantially in the form of EXHIBIT I hereto, as amended,
modified, renewed, supplemented or restated from time to time.
"PLEDGE AGREEMENTS" means the Pledge Agreements and the Foreign Subsidiary
Pledge Agreements.
"PRIME RATE" means, at any time, the prime interest rate announced or
published by the Administrative Agent from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Agent as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Agent.
"RCA ACQUISITION" means the acquisition, directly or indirectly, by the
Borrower of 100% of the issued and outstanding capital stock of Retirement Care
Associates, Inc., a Colorado corporation ("RCA"), for an aggregate consideration
of stock of the Borrower and the assumption of existing debt of RCA.
"REFINANCING ADVANCE" means any LIBOR Advance which is used to pay the
principal amount (or any portion thereof) of a LIBOR Advance at the end of its
Interest Period and which, after giving effect to such application, does not
result in an increase in the aggregate amount of outstanding LIBOR Advances.
"REGENCY" means Regency Health Services, Inc., a Delaware corporation,
which upon completion of the (a) Regency Tender will be a Subsidiary of the
Borrower and (b) Regency Merger will be a wholly-owned Subsidiary of the
Borrower.
"REGENCY CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement, dated as of December 20, 1996, among Regency, the lenders listed
therein, and NationsBank of Texas, N.A., as Agent, as amended.
"REGENCY MERGER" means the merger of Sunreg Acquisition with and into
Regency, with Regency as the surviving corporation.
"REGENCY MERGER AGREEMENT" means that certain Agreement and Plan of Merger,
dated as of July 26, 1997, by and among the Borrower, Sunreg Acquisition and
Regency, as amended, modified and supplemented.
"REGENCY MERGER DOCUMENTS" means the Regency Merger Agreement and all other
contracts, agreements or documents executed or delivered in connection with the
Regency Merger, as amended, modified and supplemented.
"REGENCY SALE LEASEBACK" means those certain sale leaseback financing
transactions related to approximately 31 properties of Regency and its
Subsidiaries to be closed on or about the Agreement Date, the Net Cash Proceeds
of which will be approximately $140,000,000.
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"REGENCY SUBORDINATED NOTES" means, collectively, those certain (a) 9-7/8%
Senior Subordinated Notes of Regency due 2002 and (b) 12-1/4% Subordinated Notes
of Regency due 2003.
"REGENCY TENDER" means the acquisition by the Borrower or Sunreg
Acquisition of (a) more than 50% of the issued and outstanding capital stock of
Regency and (b) more than 50% of the issued and outstanding Regency Subordinated
Notes.
"REGISTER" has the meaning specified in SECTION 11.6(j) hereof.
"REIMBURSEMENT OBLIGATIONS" means, in respect of any Letter of Credit as at
any date of determination, the sum of (a) the maximum aggregate amount which is
then available to be drawn under such Letter of Credit plus (b) the aggregate
amount of all drawings under such Letter of Credit and not theretofore
reimbursed by the Borrower.
"RELEASE DATE" means the date on which the Notes have been paid, all other
Obligations due and owing have been paid and performed in full, and the
Commitments have been terminated.
"REPORTABLE EVENT" means an event set forth in Section 4043(c) of ERISA
other than any event for which the provision for 30 days' notice has been
excused under regulations issued under such Section.
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D. Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any category
of liabilities which includes deposits by reference to which the Adjusted LIBOR
Rate (as the case may be) is to be determined, or (ii) any category of
extensions of credit or other assets which include LIBOR Advances. The Adjusted
LIBOR Rate shall be adjusted automatically on and as of the effective date of
any change in the Reserve Requirement.
"RESTRICTED PAYMENTS" means, collectively, (a) Dividends, (b) Treasury
Stock Purchases, and (c) any payment or prepayment of principal, premium or
penalty on any Subordinated Debt, any prepayment of interest on any Subordinated
Debt or any defeasance, redemption, repurchase or other acquisition or
retirement for value, in whole or in part, of any Subordinated Debt (including,
without limitation, the setting aside of assets or the deposit of funds
therefor).
"RESTRICTED SUBSIDIARY" means any Subsidiary which is not a Foreign
Subsidiary.
"REVOLVING COMMITMENT FEE" has the meaning specified in SECTION 2.4(a)
hereof.
"REVOLVING CREDIT ADVANCE" means an Advance made pursuant to SECTION 2.1(a)
hereof.
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"REVOLVING CREDIT COMMITMENT" means $500,000,000.00, as reduced pursuant to
SECTION 2.6.
"REVOLVING CREDIT NOTES" means the promissory notes of the Borrower
evidencing Revolving Credit Advances hereunder, substantially in the form of
EXHIBIT A hereto, together with any extension, renewal or amendment thereof, or
substitution therefor.
"REVOLVING CREDIT SPECIFIED PERCENTAGE" means, as to any Lender, the
percentage indicated besides its name or SCHEDULE 1 hereto as its Revolving
Credit Specified Percentage, or as adjusted or specified in any amendment to
this Agreement or in any Assignment Agreement.
"SECURITY AGREEMENT" means any Security Agreement executed by the Borrower
or any Restricted Subsidiary relating to, with respect to the Borrower, the
Intercompany Line of Credit and the Liberty Note, with respect to any Restricted
Subsidiary, any intercompany indebtedness owing to such Restricted Subsidiary,
substantially in the form of EXHIBIT E hereto, as amended,modified,renewed,
supplemented or restated from time to time.
"SHAREHOLDER LAWSUITS" means those certain six securities class-action
lawsuits (later consolidated into complaint styled IN RE SUN HEALTHCARE GROUP,
INC. LITIGATION) filed in 1995 relating to the Borrower's disclosure of the
investigation by the United States Department of Health and Human Services'
Office of Inspector General (the "OIG INVESTIGATION") and the operating results
of fiscal years 1994 and 1995 and related issues, but not including any other
lawsuits related to the OIG Investigation.
"SOLVENT" means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"SPECIAL COUNSEL" means the law firm of Donohoe, Jameson & Carroll, P.C.,
or such other legal counsel as the Administrative Agent may select.
"SPECIFIED PERCENTAGE" means, as applicable or as the context requires, the
Revolving Credit Specified Percentage, the Facility A Term Loan Specified
Percentage, the Facility B Term Loan Specified Percentage or the Facility C Term
Loan Specified Percentage.
"SUBORDINATED DEBT" means any Indebtedness of the Borrower or any of its
Restricted Subsidiaries which shall have been and continues to be validly and
effectively subordinated to the prior payment in full of the Obligations on
terms and documentation approved in writing by the Determining Lenders, such
approval not to be unreasonably withheld by the Determining Lenders.
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"SUNREG ACQUISITION" means Sunreg Acquisition Corp., a Delaware corporation
and wholly-owned Subsidiary of the Borrower, which upon the Regency Merger will
be merged with and into Regency, with Regency as the surviving corporation.
"SUBSIDIARY", as such term relates to any Person, means (a) any corporation
of which more than 50% of the outstanding stock (other than directors'
qualifying shares) having ordinary voting power to elect a majority of its board
of directors, regardless of the existence at the time of a right of the holders
of any class of securities of such corporation to exercise such voting power by
reason of the happening of any contingency, is at the time owned by such Person,
directly or through one or more intermediaries, and (b) any other entity which
is Controlled or then capable of being Controlled by such Person, directly or
through one or more intermediaries.
"SUBSIDIARY GUARANTY" means any Subsidiary Guaranty, executed by one or
more Guarantors, guarantying payment and performance of the Obligations,
substantially in the form of EXHIBIT F hereto, as such agreement may be amended,
modified, supplemented or restated from time to time.
"SUN INTERNATIONAL" means Sun Healthcare Group International, Ltd., a
United Kingdom corporation and a direct, wholly-owned, subsidiary of the
Borrower.
"SYNTHETIC LEASES" means any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but which is classified as an Operating Lease pursuant to GAAP.
"TAXES" has the meaning ascribed thereto in SECTION 2.15 hereof.
"TERM LOAN ADVANCE" means, as applicable or as the context requires, a
Facility A Term Loan Advance, a Facility B Term Loan Advance or a Facility C
Term Loan Advance.
"TOTAL ASSETS" means, for any Person, the total assets of such Person,
determined in accordance with GAAP (less capitalized interest amounts included
therein).
"TOTAL DEBT" means, as of any date of determination, determined for the
Borrower and its Subsidiaries on a consolidated basis (provided that if Foreign
Subsidiary EBITDAR shall ever equal or exceed 15% of EBITDAR, Total Debt shall
be calculated for the Borrower and its Restricted Subsidiaries on a consolidated
basis) in accordance with GAAP, the sum (without duplication) of (a) all
principal outstanding under the Loan Documents, plus (b) all obligations
evidenced by a promissory note or otherwise representing borrowed money, plus
(c) all reimbursement obligations for letters of credit (excluding reimbursement
obligations in respect of letters of credit to support indebtedness and other
obligations otherwise included in the calculation of Total Debt), plus (d) all
Capitalized Lease Obligations, plus (e) lease expense pursuant to Operating
Leases other than Synthetic Leases (such lease expense to be in an amount equal
to the product of rental expense for the four fiscal quarters immediately
preceding the date of calculation multiplied by eight and shall be net of any
income being received pursuant to subleases during such period, provided that no
such sublessee is in default under its sublease), plus (f) the principal portion
of all obligations in respect of Synthetic Leases, less (g) an amount equal to
any write-up, to market value, of the Bonds and the Convertible Bonds as
required by
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GAAP. For the purpose of the calculation of lease expense pursuant to Operating
Leases for Subsidiaries not owned at all times during the four fiscal quarters
immediately preceding the date of determination, such lease expense shall be
adjusted, on a pro-forma basis, to (i) include the lease expense pursuant to
Operating Leases attributable to an Acquisition which occurred during any such
fiscal quarter for the four fiscal quarters of the Subsidiary acquired
immediately preceding the date of determination (such lease expense to be
multiplied by eight), provided the Acquisition Consideration for such
Acquisition is in excess of $5,000,000 and (ii) exclude any such lease expense
of any asset or group of related assets disposed of in one transaction or a
series of related transactions during any such fiscal quarter for the four
fiscal quarters immediately preceding the date of determination, provided the
consideration received from the disposition of such asset or group of related
assets is in excess of $5,000,000.
"TOTAL DEBT TO CAPITALIZATION RATIO" means, for any date of calculation,
calculated for the Borrower and its Subsidiaries on a consolidated basis
(provided that if Foreign Subsidiary EBITDAR shall ever equal or exceed 15% of
EBITDAR, the Total Debt to Capitalization Ratio shall be calculated for the
Borrower and its Restricted Subsidiaries on a consolidated basis) in accordance
with GAAP, the ratio of (a) Total Debt to (b) an amount equal to the sum of
(i) Total Debt plus (ii) Net Worth as of the date of calculation.
"TOTAL SPECIFIED PERCENTAGE" means, as to any Lender, the percentage
indicated beside its name on SCHEDULE 1 hereto as its Total Specified
Percentage, or as adjusted or specified in any amendment to this Agreement or in
any Assignment Agreement.
"TREASURY STOCK PURCHASES" means, with respect to any Person, any purchase,
redemption or other acquisition or retirement for value by such Person of any
shares of capital stock of such Person.
"UCC" means the Uniform Commercial Code of Texas, as amended from time to
time.
"UNUSED PORTION" means an amount equal to the result of (a) the Revolving
Credit Commitment minus (b) the sum of the outstanding (i) Revolving Credit
Advances plus (ii) Reimbursement Obligations.
Section 1.2 AMENDMENTS AND RENEWALS. Each definition of an agreement in
this ARTICLE 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms pursuant to the
provisions of SECTION 11.11 hereof.
Section 1.3 CONSTRUCTION. The terms defined in this ARTICLE 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in SECTION 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a consolidated basis for
the Borrower and its Restricted Subsidiaries, unless otherwise expressly stated
herein.
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ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES.
(a) REVOLVING CREDIT ADVANCES. Each Lender severally agrees, upon the
terms and subject to the conditions of this Agreement, to make Revolving Credit
Advances to the Borrower from time to time in an aggregate amount not to exceed
its Revolving Credit Specified Percentage of the Revolving Credit Commitment
less its Revolving Credit Specified Percentage of the aggregate amount of all
Reimbursement Obligations then outstanding (assuming compliance with all
conditions to drawing). Subject to SECTION 2.9 hereof, Revolving Credit
Advances may be repaid and then reborrowed. Notwithstanding any provision in
any Loan Document to the contrary, in no event shall the sum of the principal
amount of all outstanding Revolving Credit Advances and Reimbursement
Obligations exceed the Revolving Credit Commitment.
(b) FACILITY A TERM LOAN ADVANCES. Each Lender severally agrees, upon the
terms and subject to the conditions of this Agreement, to make a Facility A Term
Loan Advance to the Borrower on the Agreement Date in an amount not to exceed
its Facility A Term Loan Specified Percentage of the Facility A Term Loan
Commitment. Notwithstanding any provision in any Loan Document to the contrary,
in no event shall the principal amount of all outstanding Facility A Term Loan
Advances exceed the Facility A Term Loan Commitment. Immediately upon the
making of the Facility A Term Loan Advances, the Facility A Term Loan Commitment
shall be automatically terminated. Facility A Term Loan Advances may not be
repaid and then reborrowed.
(c) FACILITY B TERM LOAN ADVANCES. Each Lender severally agrees, upon the
terms and subject to the conditions of this Agreement, to make a Facility B Term
Loan Advance to the Borrower on the Agreement Date in an amount not to exceed
its Facility B Term Loan Specified Percentage of the Facility B Term Loan
Commitment. Notwithstanding any provision in any Loan Document to the contrary,
in no event shall the principal amount of all outstanding Facility B Term Loan
Advances exceed the Facility B Term Loan Commitment. Immediately upon the
making of the Facility B Term Loan Advances, the Facility B Term Loan Commitment
shall be automatically terminated. Facility B Term Loan Advances may not be
repaid and then reborrowed.
(d) FACILITY C TERM LOAN ADVANCES. Each Lender severally agrees, upon the
terms and subject to the conditions of this Agreement, to make a Facility C Term
Loan Advance to the Borrower on the Agreement Date in an amount not to exceed
its Facility C Term Loan Specified Percentage of the Facility C Term Loan
Commitment. Notwithstanding any provision in any Loan Document to the contrary,
in no event shall the principal amount of all outstanding Facility C Term Loan
Advances exceed the Facility C Term Loan Commitment. Immediately upon the
making of the Facility C Term Loan Advances, the Facility C Term Loan Commitment
shall be automatically terminated. Facility C Term Loan Advances may not be
repaid and then reborrowed.
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(e) TYPE AND NUMBER OF ADVANCES. Any Advance shall, at the option of the
Borrower as provided in SECTION 2.2 hereof (and, in the case of LIBOR Advances,
subject to the provisions of ARTICLE 9 hereof), be made as a Base Rate Advance
or a LIBOR Advance; provided that there shall not be outstanding, at any one
time, more than ten LIBOR Advances.
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT.
(a) BASE RATE ADVANCES. In the case of Base Rate Advances, the Authorized
Signatory shall give the Administrative Agent prior to 11:00 a.m., Dallas, Texas
time, on the date of any proposed Base Rate Advance irrevocable written notice,
or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Authorized Signatory's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), of the
Borrower's intention to borrow a Base Rate Advance hereunder. Such notice of
borrowing shall specify the requested funding date, which shall be a Business
Day, and the amount of the proposed aggregate Base Rate Advances to be made by
Lenders.
(b) LIBOR ADVANCES. In the case of LIBOR Advances, the Authorized
Signatory shall give the Administrative Agent at least three Business Days'
irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Authorized
Signatory's failure to confirm any telephonic notice in writing shall not
invalidate any notice so given), of the Borrower's intention to borrow or
reborrow a LIBOR Advance hereunder. Notice shall be given to the Administrative
Agent prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to
count toward the minimum number of Business Days required. LIBOR Advances shall
in all cases be subject to availability and to ARTICLE 9 hereof. For LIBOR
Advances, the notice of borrowing shall specify the requested funding date,
which shall be a Business Day, the amount of the proposed aggregate LIBOR
Advances to be made by Lenders and the Interest Period selected by the Borrower,
provided that no such Interest Period shall extend past the Maturity Date, or
prohibit or impair the Borrower's ability to comply with SECTION 2.5 or 2.8
hereof.
(c) CONTINUATION/CONVERSION. Subject to SECTIONS 2.1 AND 2.9 hereof, at
least three Business Days prior to each Payment Date for a LIBOR Advance, the
Authorized Signatory shall give the Administrative Agent irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Authorized Signatory's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given),
specifying whether all or a portion of such LIBOR Advance outstanding on the
Payment Date (i) is to be repaid and then reborrowed in whole or in part as a
LIBOR Advance, (ii) is to be repaid and then reborrowed in whole or in part as a
Base Rate Advance, or (iii) is to be repaid and not reborrowed; provided,
however, notwithstanding anything in this Agreement to the contrary, if on any
Payment Date a Default shall exist, such LIBOR Advance may only be reborrowed as
a Base Rate Advance. Upon such Payment Date, such LIBOR Advance shall, subject
to the provisions hereof, be so repaid and may be reborrowed.
(d) MINIMUM AMOUNTS. The aggregate amount of Base Rate Advances to be
made by the Lenders on any day shall be in a principal amount which is at least
$1,000,000 and which is an integral multiple of $500,000; provided, however,
that such amount may equal the unused amount of the applicable Commitment. The
aggregate amount of LIBOR Advances having the same Interest Period and to be
made by the Lenders on any day shall be in a principal amount
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which is at least $5,000,000 and which is an integral multiple of $1,000,000;
provided, however, that such amount may equal the unused amount of the
applicable Commitment.
(e) NOTICE AND DISBURSEMENT. The Administrative Agent shall promptly
notify the Lenders of each notice received from the Authorized Signatory
pursuant to this Section. Failure of the Authorized Signatory to give any
notice in accordance with SECTION 2.2(c) hereof shall result in a repayment of
any such existing LIBOR Advance on the applicable Payment Date by an Advance
which is a Base Rate Advance. Each Lender shall, not later than 12:30 p.m.,
Dallas, Texas time, on the date of any Advance that is not a Refinancing
Advance, deliver to the Administrative Agent, at its address set forth herein,
such Lender's Revolving Credit Specified Percentage, Facility A Term Loan
Specified Percentage, Facility B Term Loan Specified Percentage or Facility C
Term Loan Specified Percentage, as the case may be, of such Advance in
immediately available funds in accordance with the Administrative Agent's
instructions. Prior to 2:00 p.m., Dallas, Texas time, on the date of any
Advance hereunder, the Administrative Agent shall, subject to satisfaction of
the conditions set forth in ARTICLE 3, disburse the amounts made available to
the Administrative Agent by the Lenders by (i) transferring such amounts by wire
transfer pursuant to the Authorized Signatory's instructions, or (ii) in the
absence of such instructions, crediting such amounts to the joint account of the
Borrower maintained with the Administrative Agent. All Revolving Credit
Advances shall be made by each Lender according to its Revolving Credit
Specified Percentage. All Facility A Term Loan Advances shall be made by each
Lender in accordance with its Facility A Term Loan Specified Percentage. All
Facility B Term Loan Advances shall be made by each Lender in accordance with
its Facility B Term Loan Specified Percentage. All Facility C Term Loan
Advances shall be made by each Lender in accordance with its Facility C Term
Loan Specified Percentage.
Section 2.3 INTEREST.
(a) ON BASE RATE ADVANCES.
(i) The Borrower shall pay interest on the outstanding unpaid
principal amount of each Base Rate Advance, from the date such Advance is
made until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) and repaid, which shall be payable as
set forth in SECTION 2.3(a)(ii) hereof, at a simple interest rate per annum
equal to the Base Rate Basis for such Base Rate Advance as in effect from
time to time, provided that interest on such Base Rate Advance shall not
exceed the Maximum Amount.
(ii) Interest on each Base Rate Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on the Maturity Date.
(b) ON LIBOR ADVANCES.
(i) The Borrower shall pay interest on the unpaid principal
amount of each LIBOR Advance, from the date such Advance is made until it
is due (whether at maturity, by reason of acceleration, by scheduled
reduction, or otherwise) and repaid, at a rate per annum equal to the LIBOR
Basis for such Advance. The Administrative
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Agent, whose determination shall be conclusive, shall determine the LIBOR
Basis on the second Business Day prior to the applicable funding date and
shall notify the Borrower and the Lenders of such LIBOR Basis.
(ii) Subject to SECTION 11.9 hereof, accrued and unpaid interest
on each LIBOR Advance shall be computed on the basis of a 360-day year for
the actual number of days elapsed, and shall be payable in arrears on the
applicable Payment Date and on the Maturity Date.
(c) INTEREST IF NO NOTICE OF SELECTION OF LIBOR ADVANCE OR INTEREST RATE
PERIOD. If the Borrower fails to give the Administrative Agent timely notice of
its selection of a LIBOR Advance, or if for any reason a determination of a
LIBOR Basis for any Advance is not timely concluded due to the fault of the
Borrower, the Base Rate Basis shall apply to the applicable Advance. If the
Borrower fails to give the Administrative Agent timely notice of an Interest
Period for a LIBOR Advance, the Interest Period for such LIBOR Advance shall be
deemed to be one month.
(d) INTEREST AFTER AN EVENT OF DEFAULT. (i) After an Event of Default
(other than an Event of Default specified in SECTION 8.1(f) or (g) hereof) and
during any continuance thereof, at the option of Determining Lenders, and
(ii) after an Event of Default specified in SECTION 8.1(f) or (g) hereof and
during any continuance thereof, automatically and without any action by the
Administrative Agent or any Lender, the Obligations shall bear interest at a
rate per annum equal to the Default Rate. Such interest shall be payable on the
earlier of demand or the Maturity Date, and shall accrue until the earlier of
(i) waiver or cure (to the satisfaction of the Determining Lenders) of the
applicable Event of Default, (ii) agreement by the Lenders to rescind the
charging of interest at the Default Rate, or (iii) payment in full of the
Obligations. The Lenders shall not be required to accelerate the maturity of
the Advances, to exercise any other rights or remedies under the Loan Documents,
or to give notice to the Borrower, of the decision to charge interest at the
Default Rate. The Lenders will undertake to notify the Borrower, after the
effective date, of the decision to charge interest at the Default Rate.
Section 2.4 FEES.
(a) COMMITMENT FEE. Subject to SECTION 11.9 hereof, the Borrower agrees
to pay to the Administrative Agent, for the ratable account of the Lenders, a
commitment fee (which shall be payable in arrears on the Maturity Date) based on
the daily average Unused Portion (subject to SECTION 11.9 hereof, computed on
the basis of a year of 360-day year for the actual number of days elapsed) at
the per annum rate of 0.50%.
(b) OTHER FEES. Subject to SECTION 11.9 hereof, the Borrower agrees to
pay to the Administrative Agent, for its account and the account of its
Affiliate and not the account of the Lenders, the fees provided for in the
letter agreement ("ADMINISTRATIVE AGENT FEE LETTER"), dated as of the Agreement
Date, between the Borrower and the Administrative Agent on the date and in the
amounts specified therein.
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Section 2.5 PREPAYMENT.
(a) VOLUNTARY PREPAYMENTS. The principal amount of any Base Rate Advance
may be prepaid in full or in part at any time, without penalty upon two Business
Days' prior telephonic notice followed immediately by written notice (provided,
however, that the Authorized Signatory's failure to confirm any telephonic
notice in writing shall not invalidate any notice so given) by the Authorized
Signatory to the Administrative Agent. LIBOR Advances may be voluntarily
prepaid upon three Business Days' prior telephonic notice followed immediately
by written notice (provided, however, that the Authorized Signatory's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given) by the Authorized Signatory to the Administrative Agent, but only so long
as the Borrower concurrently reimburses the Lenders in accordance with
SECTION 2.9 hereof. Any notice of prepayment shall be irrevocable.
(b) MANDATORY PREPAYMENT AND REPAYMENT. On or before the date of any
reduction of the Revolving Credit Commitment, the Borrower shall prepay or repay
outstanding Revolving Credit Advances in an amount necessary to reduce the sum
of outstanding Advances and Reimbursement Obligations to an amount not greater
than the Revolving Credit Commitment as so reduced pursuant to SECTION 2.6
hereof. The Borrower shall first prepay or repay all Base Rate Advances and
shall thereafter prepay or repay LIBOR Advances. To the extent that any
prepayment requires that a LIBOR Advance be repaid on a date other than the last
day of its Interest Period, the Borrower shall reimburse each Lender in
accordance with SECTION 2.9 hereof.
(c) PREPAYMENTS FROM SALES OF ASSETS. Concurrently with the receipt of
Net Cash Proceeds from the sale or disposition by the Borrower or any Restricted
Subsidiary of the Borrower of any assets, including any Equity of any such
Subsidiary (other than sales or dispositions of assets permitted pursuant to
(A) clauses (i) through (iii) of SECTION 7.4(a) hereof and (B) clause (vii) of
SECTION 7.4(a) hereof, to the extent that the aggregate book value of assets
sold pursuant to such clause (vii) during the term of this Agreement does not
exceed $1,000,000 and (B) the Regency Sale Leaseback), the Borrower shall prepay
Facility A Term Loan Advances, Facility B Term Loan Advances and Facility C Term
Loan Advances (and, thereafter, Revolving Credit Advances when there are no
Facility A Term Loan Advances, Facility B Term Loan Advances and Facility C Term
Loan Advances outstanding) in a principal amount equal to the amount of such Net
Cash Proceeds. Each such prepayment of Facility A Term Loan Advances,
Facility B Term Loan Advances and Facility C Term Loan Advances shall be applied
to all of the unpaid Facility A Term Loan Advances, Facility B Term Loan
Advances and Facility C Term Loan Advances, in each case PRO RATA based upon the
respective principal amounts then unpaid. Any prepayment of Revolving Credit
Advances pursuant to this SECTION 2.5(c) shall permanently reduce the Revolving
Credit Commitment by the amount of such prepayment.
(d) PREPAYMENT FROM SALES OF EQUITY. Concurrently with receipt of Net
Cash Proceeds from the sale or disposition by the Borrower or any Restricted
Subsidiary to any Person (other than the Borrower or a Restricted Subsidiary) of
any Equity in the Borrower or a Restricted Subsidiary (other than Equity issued
as a result of the exercise of options or warrants in respect of such Equity),
the Borrower shall apply 100% of such aggregate Net Cash Proceeds to prepay the
Facility A Term Loan Advances, the Facility B Term Loan Advances
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and the
Facility C Term Loan Advances (and, thereafter, Revolving Credit Advances when
there are no Facility A Term Loan Advances, Facility B Term Loan Advances
and the Facility C Term Loan Advances outstanding. Each such prepayment of the
Facility A Term Loan Advances, the Facility B Term Loan Advances, and the
Facility C Term Loan Advances shall be applied to all of the unpaid Facility A
Term Loan Advances, Facility B Term Loan Advances and Facility C Term Loan
Advances, in each case PRO RATA based upon the respective principal amounts then
unpaid. Any prepayment of Revolving Credit Advances pursuant to this
SECTION 2.5(d) shall permanently reduce the Revolving Credit Commitment by the
amount of such prepayment.
(e) PREPAYMENT FROM ISSUANCE OF INSTITUTIONAL DEBT. Concurrently with the
receipt of Net Cash Proceeds from the issuance of Institutional Debt by the
Borrower or any Restricted Subsidiary of the Borrower, the Borrower shall apply
100% of such aggregate Net Cash Proceeds to prepay the Facility A Term Loan
Advances, the Facility B Term Loan Advances and the Facility C Term Loan
Advances (and, thereafter, Revolving Credit Advances when there are no
Facility A Term Loan Advances, Facility B Term Loan Advances, and Facility C
Term Loan Advances outstanding). Each such prepayment of the Facility A Term
Loan Advances, the Facility B Term Loan Advances, and the Facility C Term Loan
Advances shall be applied PRO RATA to all of the unpaid Facility A Term Loan
Advances, Facility B Term Loan Advances, and Facility C Term Loan Advances, in
each case PRO RATA based upon the respective principal amounts then unpaid. Any
prepayment of Revolving Credit Advances pursuant to this SECTION 2.5(e) shall
permanently reduce the Revolving Credit Commitment by the amount of such
prepayment.
(f) PAYMENTS, GENERALLY. Any prepayment of any Advance shall be
accompanied by interest accrued on the principal amount being prepaid. Any
voluntary partial payment of a Base Rate Advance shall be in a principal amount
which is at least $500,000 and which is an integral multiple of $100,000. Any
voluntary partial payment of a LIBOR Advance shall be in a principal amount
which is at least $1,000,000 and which is an integral multiple of $500,000, and
to the extent that any prepayment of a LIBOR Advance is made on a date other
than the last day of its Interest Period, the Borrower shall reimburse each
Lender in accordance with SECTION 2.9 hereof. Any voluntary prepayment of any
Term Loan Advance shall be applied to all of the unpaid Facility A Term Loan
Advances, Facility B Term Loan Advances and Facility C Term Loan Advances, in
each case PRO RATA based on the respective principal amounts then unpaid.
Section 2.6 REDUCTION OF COMMITMENTS.
(a) VOLUNTARY REDUCTION. The Borrower shall have the right, upon not less
than 5 Business Days' notice (provided no notice shall be required for a
termination in whole of the Revolving Credit Commitment) by the Authorized
Signatory to the Administrative Agent (if telephonic, to be confirmed by telex
or in writing on or before the date of reduction or termination), which shall
promptly notify the Lenders, to terminate or reduce the Revolving Credit
Commitment, in whole or in part. Each voluntary reduction shall be in an
aggregate amount which is at least $5,000,000 and which is an integral multiple
of $100,000, and no voluntary reduction in the Revolving Credit Commitment shall
cause any LIBOR Advance to be repaid prior to the last day of its Interest
Period, unless the Borrower shall reimburse each Lender in accordance with
SECTION 2.9 hereof.
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(b) MANDATORY REDUCTION. On the Maturity Date, the Revolving Credit
Commitment shall automatically reduce to zero. In addition, the Revolving
Credit Commitment shall be permanently reduced by the amount of any prepayment
of Revolving Credit Advances pursuant to SECTIONS 2.5(c), (d) and (e) hereof.
(c) GENERAL REQUIREMENTS. Upon any reduction of the Revolving Credit
Commitment pursuant to this Section, the Borrower shall immediately make a
repayment of Revolving Credit Advances in accordance with SECTION 2.5(b) hereof.
The Borrower shall reimburse each Lender for any loss or out-of-pocket expense
incurred by each Lender in connection with any such payment, as set forth in
SECTION 2.9 hereof to the extent applicable. The Borrower shall not have any
right to rescind any termination or reduction. Once reduced, the Revolving
Credit Commitment may not be increased or reinstated.
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender prior to the date of
any proposed Advance (which notice shall be effective upon receipt) that such
Lender does not intend to make the proceeds of such Advance available to the
Administrative Agent, the Administrative Agent may assume that such Lender has
made such proceeds available to the Administrative Agent on such date, and the
Administrative Agent may in reliance upon such assumption (but shall not be
required to) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Agent
by such Lender, the Administrative Agent shall be entitled to recover such
amount on demand from such Lender (or, if such Lender fails to pay such amount
forthwith upon such demand, from the Borrower) together with interest thereon in
respect of each day during the period commencing on the date such amount was
available to the Borrower and ending on (but excluding) the date the
Administrative Agent receives such amount from the Lender, calculated at a per
annum rate equal to the lesser of (a) the Highest Lawful Rate or (b) the Federal
Funds Rate. No Lender shall be liable for any other Lender's failure to fund an
Advance hereunder.
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES. To the extent not
otherwise required to be paid earlier as provided herein, the principal amount
of the Revolving Credit Advances, the Facility A Term Loan Advances, the
Facility B Term Loan Advances and Facility C Term Loan Advances shall be due and
payable on the Maturity Date.
Section 2.9 REIMBURSEMENT. Whenever any Lender shall sustain or incur
any losses or reasonable out-of-pocket expenses in connection with (a) a failure
by the Borrower to borrow any LIBOR Advance after having given notice of its
intention to borrow in accordance with SECTION 2.2 hereof (whether by reason of
the Borrower's election not to proceed or the non-fulfillment of any of the
conditions set forth in ARTICLE 3 hereof), (b) any prepayment for any reason of
any LIBOR Advance in whole or in part (including, without limitation, a
prepayment pursuant to ARTICLE 9 hereof), on other than the last day of an
Interest Period applicable to such LIBOR Advance, or (c) any prepayment of any
of its LIBOR Advances that is not made on any date specified in a notice of
prepayment given by the Borrower, the Borrower agrees to pay to any such Lender,
upon its demand, an amount sufficient to compensate such Lender for all such
losses and out-of-pocket expenses, subject to SECTION 11.9 hereof. Such
Lender's good faith determination of the amount of such losses or out-of-pocket
expenses, calculated in its usual fashion, absent manifest error, shall be
binding and conclusive. Such losses shall include, without limiting the
generality of the foregoing, lost profits and reasonable expenses incurred
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by such Lender in connection with the re-employment of funds prepaid, repaid,
converted or not borrowed, converted or paid, as the case may be. Upon request
of the Borrower, such Lender shall provide a certificate setting forth the
amount to be paid to it by the Borrower hereunder and calculations therefor.
Section 2.10 MANNER OF PAYMENT.
(a) Each payment (including prepayments) by the Borrower of the principal
of or interest on the Advances, fees, and any other amount owed under this
Agreement or any other Loan Document shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Agent at the Administrative Agent's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Document shall
be specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day, unless such Business Day
falls in another calendar month, in which case payment shall be made on the
preceding Business Day. Any extension of time shall in such case be included in
computing interest and fees, if any, in connection with such payment.
(c) The Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
(d) All payments received by the Administrative Agent pursuant to the Loan
Documents (other than from other Lenders) shall be applied as follows:
(i) Prior to (A) the occurrence and continuance of an Event of
Default and (B) the delivery by the Determining Lenders of the notice to
the Administrative Agent referred to in SECTION 2.10(d)(ii)(B) below, the
Administrative Agent shall apply all such payments as specified by the
Borrower, between the Revolving Credit Advances or the Facility A Term Loan
Advances, the Facility B Term Loan Advances and the Facility C Term Loan
Advances to the applicable Advances ratably in accordance with the
applicable Specified Percentages.
(ii) If (A) there exists an Event of Default that has occurred and
is continuing and (B) the Determining Lenders shall have delivered notice
to the Administrative Agent to apply such payments as provided in this
SECTION 2.10(d)(ii), the Administrative Agent shall apply all such payments
to reduce the Revolving Credit Advances, the Facility A Term Loan Advances,
the Facility B Term Loan Advances, and the Facility C Term Loan Advances
ratably in accordance with each Lender's Total Specified Percentage.
Section 2.11 LIBOR LENDING OFFICES. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in SCHEDULE 2 attached hereto. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Advance to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part
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of the Borrower for increased costs or expenses resulting solely from such
designation or transfer (except any such transfer which is made by a Lender
pursuant to SECTION 9.2 OR 9.3 hereof, or otherwise for the purpose of complying
with Applicable Law). Increased costs for expenses resulting from a change in
law occurring subsequent to any such designation or transfer shall be deemed not
to result solely from such designation or transfer.
Section 2.12 SHARING OF PAYMENTS. If any Lender shall obtain a payment
(whether voluntary or involuntary, due to the exercise of any right of set-off,
or otherwise) on account of its Advances (other than pursuant to
SECTIONS 2.4(b), 2.15, 2.16(d), 2.16(f)(ii), 9.3 or 9.5) in excess of its share
of payments received by the Administrative Agent and the other Lenders according
to (a) before the Determining Lenders have delivered the notice to the
Administrative Agent referred to in SECTION 2.10(d)(ii)(B) above, its applicable
Specified Percentage, and (b) after the occurrence and during the continuance of
an Event of Default and provided that the Determining Lenders have delivered the
notice to the Administrative Agent referred to in SECTION 2.10(d)(ii)(B) above,
its Total Specified Percentage, then in each case, such Lender shall purchase
from each other Lender such participation in the Advances made by such other
Lender as shall be necessary to cause such purchasing Lender to share the excess
payment with each other Lender (based on its applicable Specified Percentage so
long as there does not exist an Event of Default, and based on its Total
Specified Percentage if there exists an Event of Default); provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section, to the fullest extent permitted by law, may exercise
all its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.13 CALCULATION OF LIBOR RATE. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 BOOKING LOANS. Any Lender may make, carry or transfer
Advances at, to or for the account of any of its branch offices or the office of
any Affiliate.
Section 2.15 TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with SECTION 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Lender and the Administrative Agent, taxes imposed on, based upon or
measured by its overall net income, net worth or capital, and franchise taxes,
doing business taxes or minimum taxes imposed on it, (i) by the jurisdiction
under the laws of which such Lender or the Administrative Agent (as the case may
be) is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (A) an asserted
relation of such jurisdiction to the transactions contemplated by this
Agreement, (B) the
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activities of the Borrower in such jurisdiction, or (C) the activities in
connection with the transactions contemplated by this Agreement of a Lender or
the Administrative Agent; (iii) by reason of failure by the Lender or the
Administrative Agent to comply with the requirements of paragraph (e) of this
SECTION 2.15; and (iv) in the case of any Lender, any Taxes in the nature of
transfer, stamp, recording or documentary taxes resulting from a transfer (other
than as a result of foreclosure) by such Lender of all or any portion of its
interest in this Agreement, the Notes or any other Loan Documents (all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Agent, (x) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
SECTION 2.15) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (y) the Borrower shall make such deductions and (z) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iv) of the first sentence
of SECTION 2.15(a)) that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "OTHER TAXES").
(c) The Borrower will indemnify each Lender and the Administrative Agent
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
SECTION 2.15) paid by such Lender or the Administrative Agent (as the case may
be) and all liabilities (including penalties, additions to tax, interest and
reasonable expenses) arising therefrom or with respect thereto whether or not
such Taxes or Other Taxes were correctly or legally asserted, other than
penalties, additions to tax, interest and expenses arising as a result of gross
negligence on the part of such Lender or the Administrative Agent, PROVIDED,
HOWEVER, that the Borrower shall have no obligation to indemnify such Lender or
the Administrative Agent unless and until such Lender or the Administrative
Agent shall have delivered to the Borrower a certificate setting forth in
reasonable detail the basis of the Borrower's obligation to indemnify such
Lender or the Administrative Agent pursuant to this SECTION 2.15. This
indemnification shall be made within 30 days from the date such Lender or the
Administrative Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes are payable in respect of any
payment hereunder, the Borrower will furnish to the Administrative Agent a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Administrative Agent, in either case stating that such payment
is exempt from or not subject to Taxes, PROVIDED, HOWEVER, that such certificate
or opinion need only be given if: (i) the Borrower makes any payment from any
account located outside the United States, or (ii) the payment is made by a
payor that is not a United States Person. For purposes of this SECTION 2.15 the
terms "UNITED STATES" and "UNITED STATES PERSON" shall have the meanings set
forth in Section 7701 of the Code.
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(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case
of a Lender which becomes a party hereto pursuant to SECTION 11.6 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower, through the Administrative Agent who shall deliver
the same to the Borrower:
(A) if any lending office is located in the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("FORM 4224"),
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("FORM 1001").
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or
lending offices or selects an additional lending office it shall, at the
same time or reasonably promptly thereafter but only to the extent the
forms previously delivered by it hereunder are no longer effective, deliver
to the Borrower, through the Administrative Agent who shall deliver the
same to the Borrower, in replacement for the forms previously delivered by
it hereunder:
(A) if such changed or additional lending office is located in
the United States of America, two (2) accurate and complete
signed originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of
Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any
event (including the passing of time but excluding any event mentioned in
clause (ii) above) requiring a change in the most recent Form 4224 or
Form 1001 previously delivered by such Lender and if the delivery of the
same be lawful, deliver to the Borrower, through the Administrative Agent
who shall deliver the same to the Borrower, two (2) accurate and complete
original signed copies of Form 4224 or Form 1001 in replacement for the
forms previously delivered by such Lender;
(iv) it shall, promptly upon the request of the Borrower, deliver
to the Borrower such other forms or similar documentation as may be
required from time to
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time by any applicable law, treaty, rule or regulation in order to
establish such Lender's tax status for withholding purposes;
(v) it shall notify the Borrower within 30 days after any event
(including an amendment to, or a change in any applicable law or regulation
or in the written interpretation thereof by any regulatory authority or any
judicial authority, or by ruling applicable to such Lender of any
governmental authority charged with the interpretation or administration of
any law) shall occur that results in such Lender no longer being capable of
receiving payments without any deduction or withholding of United States
federal income tax; and
(vi) if such Lender is not a "bank" or other person described in
Section 881(c)(3) of the Code and cannot deliver either Form 4224 or
Form 1001, a statement that such Lender is not a "bank" under
Section 881(c)(3)(A) of the Code and two original copies of Internal
Revenue Service Form W-8 (or my successor form), properly completed and
duly executed by such Lender.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
SECTION 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be materially
disadvantageous to such Lender.
(h) Each Lender (and the Administrative Agent with respect to payments to
the Administrative Agent for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrower to
minimize amounts payable by the Borrower under this SECTION 2.15; PROVIDED,
HOWEVER, the Lenders and the Administrative Agent shall not be obligated by
reason of this SECTION 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrower pays sums pursuant to this
SECTION 2.15 and the Lender or the Administrative Agent receives a refund of any
or all of such sums, such refund shall be applied to reduce any amounts then due
and owing under this Agreement or, to the extent that no amounts are due and
owing under this Agreement at the time such refunds are received, the party
receiving such refund shall promptly pay over all such refunded sums to the
Borrower, provided that no Default or Event of Default is in existence at such
time.
Section 2.16 LETTERS OF CREDIT.
(a) THE LETTER OF CREDIT FACILITY. The Borrower may request the Issuing
Bank, on the terms and conditions hereinafter set forth, to issue, and the
Issuing Bank shall, if so
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requested, issue, letters of credit (the "LETTERS OF CREDIT") for the account of
the Borrower or the joint account of the Borrower and any of its Restricted
Subsidiaries, from time to time on any Business Day from the date of the initial
Advance until the Maturity Date in an aggregate maximum amount (assuming
compliance with all conditions to drawing) not to exceed at any time outstanding
the lesser of (i) $75,000,000 (the "LETTER OF CREDIT FACILITY"), and (ii) the
sum of (A) the Commitment MINUS (B) the aggregate principal amount of Advances
then outstanding. No Letter of Credit shall have an expiration date (including
all rights of renewal) later than one year after the date of issuance thereof
(provided, however, if on the Maturity Date there are any Letters of Credit
outstanding, the Borrower shall deposit on such date in the L/C Cash Collateral
Account immediately available funds in an amount to cash collateralize in full
the total outstanding Letters of Credit). The Borrower, together with any of
its Restricted Subsidiaries which may be an account party, shall be jointly and
severally liable for the repayment of any Reimbursement Obligation. Immediately
upon the issuance of each Letter of Credit (or on the Agreement Date, with
respect to Existing Letters of Credit), the Issuing Bank shall be deemed to have
sold and transferred to each Lender, and each Lender shall be deemed to have
purchased and received from the Issuing Bank, in each case irrevocably and
without any further action by any party, an undivided interest and participation
in such Letter of Credit, each drawing thereunder and the obligations of the
Borrower under this Agreement in respect thereof in an amount equal to the
product of (x) such Lender's Revolving Credit Specified Percentage times (y) the
maximum amount available to be drawn under such Letter of Credit (assuming
compliance with all conditions to drawing). Within the limits of the Letter of
Credit Facility, and subject to the limits referred to above, the Borrower may
request the issuance of Letters of Credit under this SECTION 2.16(a), repay any
Advances resulting from drawings thereunder pursuant to SECTION 2.16(c) and
request the issuance of additional Letters of Credit under this SECTION 2.16(a).
(b) REQUEST FOR ISSUANCE. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Borrower to the Issuing Bank, which shall give to the Administrative Agent and
each Lender prompt notice thereof by telex, telecopier or cable. Each Letter of
Credit shall be issued upon notice given in accordance with the terms of any
separate agreement between the Borrower and the Issuing Bank in form and
substance reasonably satisfactory to the Borrower and the Issuing Bank providing
for the issuance of Letters of Credit pursuant to this Agreement and containing
terms and conditions not inconsistent with this Agreement (a "LETTER OF CREDIT
AGREEMENT"), PROVIDED that if any such terms and conditions are inconsistent
with this Agreement, this Agreement shall control. Each such notice of issuance
of a Letter of Credit (a "NOTICE OF ISSUANCE") shall be by telex, telecopier or
cable, specifying therein, in the case of a Letter of Credit, the requested
(A) date of such issuance (which shall be a Business Day), (B) maximum amount of
such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name
and address of the beneficiary of such Letter of Credit, (E) form of such Letter
of Credit and (F) such other information as shall be required pursuant to the
relevant Letter of Credit Agreement. If the requested terms of such Letter of
Credit are acceptable to the Issuing Bank in its reasonable discretion, the
Issuing Bank will, upon fulfillment of the applicable conditions set forth in
ARTICLE 3 hereof, make such Letter of Credit available to the Borrower at its
office referred to in SECTION 11.1 or as otherwise agreed with the Borrower in
connection with such issuance.
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(c) PAYMENT AND REIMBURSEMENT. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of an Advance, which shall bear
interest at the Base Rate Basis, in the amount of such draft (but without any
requirement for compliance with the conditions set forth in ARTICLE 3 hereof).
In the event that a payment under any Letter of Credit is not reimbursed by the
Borrower by 11:00 a.m. (Dallas time) on the first Business Day after notice of
such drawing has been given by the Issuing Bank to the Borrower, the Issuing
Bank shall promptly notify Administrative Agent and each other Lender which has
a Revolving Credit Specified Percentage. Each such Lender shall, on the first
Business Day following such notification, make an Advance, which shall bear
interest at the Base Rate Basis, and shall be used to repay the applicable
portion of the Issuing Bank's Advance with respect to such Letter of Credit, in
an amount equal to the amount of its participation in such drawing for
application to reimburse the Issuing Bank (but without any requirement for
compliance with the applicable conditions set forth in ARTICLE 3 hereof) and
shall make available to the Administrative Agent for the account of the Issuing
Bank, by deposit at the Administrative Agent's office, in same day funds, the
amount of such Advance. In the event that any Lender fails to make available to
the Administrative Agent for the account of the Issuing Bank the amount of such
Advance on the date specified in the notice from the Issuing Bank to such
Lender, the Issuing Bank shall be entitled to recover such amount on demand from
such Lender together with interest thereon from such date until paid at a rate
per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal
Funds Rate.
(d) INCREASED COSTS. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or (ii) impose on the Issuing Bank or
any Lender any other condition regarding this Agreement or such Lender or any
Letter of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Issuing Bank of issuing
or maintaining any Letter of Credit or to any Lender of purchasing any
participation therein or making any Advance pursuant to SECTION 2.16(c), then,
upon demand by the Issuing Bank or such Lender, the Borrower shall, subject to
SECTION 11.9 hereof, pay to the Issuing Bank or such Lender, from time to time
as specified by the Issuing Bank or such Lender, additional amounts that shall
be sufficient to compensate the Issuing Bank or such Lender for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrower by the Issuing Bank or such Lender, shall include in reasonable detail
the basis for the demand for additional compensation and shall be conclusive and
binding for all purposes, absent manifest error. The obligations of the
Borrower under this SECTION 2.16(d) shall survive termination of this Agreement.
The Issuing Bank or any Lender claiming any additional compensation under this
SECTION 2.16(d) shall use reasonable efforts (consistent with legal and
regulatory restrictions) to reduce or eliminate any such additional compensation
which may thereafter accrue and which efforts would not, in the sole discretion
of the Issuing Bank or such Lender, be otherwise disadvantageous.
(e) OBLIGATIONS ABSOLUTE. The obligations of the Borrower under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Advance pursuant to SECTION 2.16(c) shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this
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Agreement, such Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C RELATED DOCUMENTS");
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in respect
of the Letters of Credit or any Advance pursuant to SECTION 2.16(c) or any
other amendment or waiver of or any consent to departure from all or any of
the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(iv) any statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect,
except to the extent that any payment by the Issuing Bank against any such
statement or other document shall be as a result of the Issuing Bank's
gross negligence or willful misconduct;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of the Letter of Credit, except for any payment made upon the Issuing
Bank's gross negligence or willful misconduct;
(vi) any exchange, release or non-perfection of any Collateral, or
any release or amendment or waiver of or consent to departure from any
Subsidiary Guaranty or any other guarantee, for all or any of the
Obligations of the Borrower in respect of the Letters of Credit or any
Advance pursuant to SECTION 2.16(c); or
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available to,
or a discharge of, the Borrower or a guarantor, other than the Issuing's
Bank gross negligence or wilful misconduct.
(f) COMPENSATION FOR LETTERS OF CREDIT.
(i) CREDIT FEES. Subject to SECTION 11.9 hereof, the Borrower
shall pay to the Administrative Agent for the account of each Lender a
credit fee (which shall be payable in arrears on the Maturity Date) equal
to 2.50% per annum on the average daily amount available for drawing under
all outstanding Letters of Credit, computed, subject to SECTION 11.9
hereof, on the basis of a 360-day year for the actual number of days
elapsed.
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(ii) FRONTING FEE. Subject to SECTION 11.9 hereof, the Borrower
shall pay to the Administrative Agent for the sole account of the Issuing
Bank a fronting fee (which fee shall be payable in arrears on the Maturity
Date) equal to 0.125% per annum on the average daily amount available for
drawing under all outstanding Letters of Credit, and computed, subject to
SECTION 11.9 hereof, on the basis of a 360-day year for the actual number
of days elapsed.
(g) L/C CASH COLLATERAL ACCOUNT.
(i) Upon the occurrence of an Event of Default and demand by the
Administrative Agent pursuant to SECTION 8.2(c) (but in the case of an
Event of Default specified in SECTION 8.1(f) and (g) hereof, without any
demand or taking of any other action by the Administrative Agent or any
other Lender), the Borrower will promptly pay to the Administrative Agent
in immediately available funds an amount equal to 100% of the maximum
amount then available to be drawn under the Letters of Credit then
outstanding. Any amounts so received by the Administrative Agent shall be
deposited by the Administrative Agent in a deposit account maintained by
the Issuing Bank (the "L/C CASH COLLATERAL ACCOUNT"). In addition, as
provided in SECTION 2.16(a), the Borrower shall deposit in the L/C Cash
Collateral Account immediately available funds in an amount equal to the
aggregate amount of Letters of Credit outstanding on the Maturity Date.
(ii) As security for the payment of all Reimbursement Obligations
and for any other Obligations, the Borrower hereby grants, conveys,
assigns, pledges, sets over and transfers to the Administrative Agent (for
the benefit of the Issuing Bank and Lenders), and creates in the
Administrative Agent's favor (for the benefit of the Issuing Bank and
Lenders) a Lien in, all money, instruments and securities at any time held
in or acquired in connection with the L/C Cash Collateral Account, together
with all proceeds thereof. The L/C Cash Collateral Account shall be under
the sole dominion and control of the Administrative Agent and the Borrower
shall have no right to withdraw or to cause the Administrative Agent to
withdraw any funds deposited in the L/C Cash Collateral Account except as
otherwise provided in SECTION 2.16(g)(iii). At any time and from time to
time, upon the Administrative Agent's request delivered to the Borrower,
the Borrower promptly shall execute and deliver any and all such further
instruments and documents, including UCC financing statements, as may be
necessary, appropriate or desirable in the Administrative Agent's judgment
to obtain the full benefits (including perfection and priority) of the
security interest created or intended to be created by this paragraph (ii)
and of the rights and powers herein granted. The Borrower shall not create
or suffer to exist any Lien on any amounts or investments held in the L/C
Cash Collateral Account other than the Lien granted under this
paragraph (ii) and Liens arising by operation of Law and not by contract
which secure amounts not yet due and payable.
(iii) The Administrative Agent shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Borrower shall
fail directly to pay such Reimbursement Obligations, (B) after the Maturity
Date, apply any proceeds remaining in the L/C Cash Collateral Account FIRST
to pay any unpaid Obligations then outstanding hereunder and THEN to refund
any remaining amount to the Borrower, and (C) provided
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no Default or Event of Default shall be in existence, upon demand by the
Borrower, return any funds in the L/C Cash Collateral Account to the
Borrower.
(iv) The Borrower, no more than once in any calendar month, may
direct the Administrative Agent to invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (A) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof and (B) one or more other types of
investments permitted by the Determining Lenders, in each case with such
maturities as the Borrower, with the consent of the Determining Lenders,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. In the
absence of any such direction from the Borrower, the Administrative Agent
shall invest the funds held in the L/C Cash Collateral Account (so long as
the aggregate amount of such funds exceeds any relevant minimum investment
requirement) in one or more types of investments with the consent of the
Determining Lenders with such maturities as the Borrower, with the consent
of the Determining Lenders, may specify, pending application of such funds
on account of Reimbursement Obligations or on account of other Obligations,
as the case may be. All such investments shall be made in the
Administrative Agent's name for the account of the Lenders. The Borrower
recognizes that any losses or taxes with respect to such investments shall
be borne solely by the Borrower, and the Borrower agrees to hold the
Administrative Agent and the Lenders harmless from any and all such losses
and taxes. Administrative Agent may liquidate any investment held in the
L/C Cash Collateral Account in order to apply the proceeds of such
investment on account of the Reimbursement Obligations (or on account of
any other Obligation then due and payable, as the case may be) without
regard to whether such investment has matured and without liability for any
penalty or other fee incurred (with respect to which the Borrower hereby
agrees to reimburse the Administrative Agent) as a result of such
application.
(v) The Borrower shall pay to the Administrative Agent the fees
customarily charged by the Issuing Bank with respect to the maintenance of
accounts similar to the L/C Cash Collateral Account.
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE LETTERS
OF CREDIT. The obligation of each Lender to make the initial Advance and the
obligation of the Issuing Bank to issue the initial Letter of Credit is subject
to (i) receipt by the Administrative Agent of each of the following, in form and
substance satisfactory to each Lender, with a copy (except for the Notes) for
each Lender and (ii) satisfaction of the following conditions, except as
otherwise waived by each Lender:
(a) a loan certificate of the Borrower certifying as to the accuracy of
its representations and warranties in the Loan Documents, certifying that no
Default has occurred, and including a certificate of incumbency with respect to
each Authorized Signatory, and
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including (i) a copy of the Articles of Incorporation of the Borrower, certified
to be true, complete and correct by the secretary of state of its state of
incorporation, (ii) a copy of the By-Laws of the Borrower, as in effect on the
Agreement Date, (iii) a copy of the resolutions of the Borrower authorizing it
to execute, deliver and perform this Agreement, the Notes and the other Loan
Documents to which it is a party, and (iv) a current copy of a certificate of
good standing and a certificate of existence for its state of incorporation;
(b) a certificate of an officer acceptable to the Lenders of each
Restricted Subsidiary of the Borrower (other than Inactive Subsidiaries),
certifying as to the incumbency of the officers signing the Loan Documents to
which it is a party, and including (i) a copy of its Articles of Incorporation
(or other organizational document), certified as true, complete and correct by
the secretary of state of its state of organization, (ii) a copy of its By-Laws
(or similar governance document), certified to be true, complete and correct by
its secretary or general partner, (iii) a copy of the resolutions (or similar
authorization) authorizing it to execute, deliver and perform the Loan Documents
to which it is a party, and (iv) a correct copy of a certificate of good
standing and a certificate of existence for its state of organization;
(c) a duly executed Revolving Credit Note, Facility A Term Loan Note,
Facility B Term Loan Note and Facility C Term Loan Note payable to the order of
each Lender equal to its Specified Percentage of each Commitment, respectively;
(d) opinions of counsel to the Borrower and their Subsidiaries addressed
to the Lenders and in form and substance satisfactory to the Lenders, dated the
Agreement Date;
(e) reimbursement for the Administrative Agent for Special Counsel's
reasonable fees and expenses rendered as of the date set forth in the invoice of
Special Counsel;
(f) the fees as required pursuant to SECTION 2.4(b) hereof, a portion of
which the Administrative Agent shall pay to the Lenders as agreed between the
Administrative Agent and the Lenders;
(g) a Subsidiary Guaranty, duly executed and completed by each Restricted
Subsidiary, dated as of the Agreement Date;
(h) duly executed and completed Pledge Agreements, together with all stock
certificates of any Subsidiaries to the extent pledged, owned by the Borrower
and the Borrower's Restricted Subsidiaries (other than Inactive Subsidiaries),
together with blank, undated stock powers;
(i) duly executed and completed Security Agreements of the Borrower and
CareerStaff Management, Inc., together with original notes evidencing the
indebtedness pledged thereby, duly endorsed in favor of the Administrative
Agent;
(j) a duly executed and completed Account Security Agreement of the
Borrower and each Restricted Subsidiary party to any lease agreement granting a
contractual landlord's lien to the lessor of such leased facility in accounts
receivable generated by such leased facility;
(k) the items set forth in the Disclosure Letter shall be satisfactory to
the Lenders;
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(l) UCC-1 Financing Statements as the Administrative Agent may request
relating to the Collateral subject to the Pledge Agreements and the Security
Agreements and the proceeds thereof;
(m) simultaneously with the initial Advance, executed UCC-3 Termination
Statements to be filed in appropriate jurisdictions to terminate all Liens
against the assets of Regency and its Subsidiaries other than Permitted Liens
(or written agreements from each holder of such Liens to promptly execute such
Termination Statements);
(n) all Regency Merger Documents, which shall be in substance and form
satisfactory to the Administrative Agent;
(o) consummation of the Regency Tender shall simultaneously occur on terms
and conditions satisfactory to the Administrative Agent;
(p) after giving effect to the Regency Tender, except as set forth in the
Disclosure Letter, there shall have occurred no material adverse change in the
business, assets, operations, condition (financial or otherwise) or the
prospects of the Borrower and its Subsidiaries (including Regency and its
Subsidiaries), taken as a whole, since December 31, 1996;
(q) a pro forma balance sheet of the Borrower and its Subsidiaries as of
June 30, 1997, taking into account the Regency Tender and reflecting estimated
purchase price accounting adjustments and such other information relating to the
Regency Tender as the Determining Lenders may require;
(r) audited financial statements, including balance sheets, income
statements, cash flow statements and statements of changes in stockholders'
equity of Regency and its Subsidiaries for the years ended December 31, 1995 and
December 31, 1996, prepared in accordance with GAAP and certified by independent
certified public accountants acceptable to the Lenders;
(s) the Administrative Agent shall have received and been satisfied with
the form and substance of all environmental reports, material contracts, tax,
pension and contingent liabilities, Litigation and other business matters
related to the Borrower and its Subsidiaries (including Regency and its
Subsidiaries);
(t) all Indebtedness of the Borrower and Mediplex under the Existing
Credit Agreement (other than in respect of the Existing Letters of Credit) shall
have been (or shall simultaneously therewith be) refinanced in full pursuant to
the terms hereof;
(u) the Regency Credit Agreement and all collateral related thereto shall
be terminated and released in form and substance satisfactory to the
Administrative Agent; and
(v) all consents of third parties necessary for Regency Tender and the
transactions contemplated by this Agreement shall have been obtained; and
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(w) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments, reports and certificates as the
Administrative Agent or any Lender may reasonably require prior to execution of
this Agreement.
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT.
The obligation of each Lender to make each Advance hereunder (including the
initial Advance) and the obligation of the Issuing Bank to issue each Letter of
Credit (including the initial Letter of Credit) is subject to fulfillment of the
following conditions immediately prior to or contemporaneously with each such
Advance or issuance:
(a) With respect to Advances (other than Refinancing Advances) and each
issuance of a Letter of Credit, all of the representations and warranties of the
Borrower under this Agreement, which, pursuant to SECTION 4.2 hereof, are made
at and as of the time of such Advance or issuance, shall be true and correct at
such time in all material respects, both before and after giving effect to the
application of the proceeds of the Advance or issuance;
(b) The incumbency of the Authorized Signatories shall be as stated in the
certificate of incumbency delivered in the Borrower's loan certificates pursuant
to SECTION 3.1(a) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Administrative Agent. The Lenders may, without
waiving this condition, consider it fulfilled and a representation by the
Borrower made to such effect if no written notice to the contrary, dated on or
before the date of such Advance or issuance, is received by the Administrative
Agent from the Borrower prior to the making of such Advance or issuance;
(c) There shall not exist a Default hereunder, with respect to Advances
(other than Refinancing Advances) and with respect to issuance of each Letter of
Credit, or an Event of Default, with respect to any Refinancing Advance, and,
with respect to each Advance (other than a Refinancing Advance) and with respect
to issuance of each Letter of Credit, the Administrative Agent shall have
received written or telephonic certification thereof by an Authorized Signatory
on the behalf of the Borrower (which certification, if telephonic, shall be
followed promptly by written certification);
(d) The aggregate Revolving Credit Advances and amount available for draws
under Letters of Credit, after giving effect to such proposed Advance or Letter
of Credit, shall not exceed the Revolving Credit Commitment;
(e) No order, judgment, injunction or decree of any Governmental Authority
shall purport to enjoin or restrain any Lender or the Issuing Bank from making
any Advance or issuing any Letter of Credit;
(f) Except as set forth in the Disclosure Letter, there shall be no
Litigation pending against, or, to the Borrower's knowledge, threatened against
the Borrower or any of its Subsidiaries, or in any other manner relating
directly and adversely to the Borrower or any of its Subsidiaries, or any of
their respective properties, in any court or before any arbitrator of any kind
or before or by any governmental body which could reasonably be expected to have
a Material Adverse Effect; and
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(g) The Administrative Agent shall have received all such other
certificates, reports, statements, opinions of counsel or other documents as the
Administrative Agent or any Lender may reasonably request.
Each request by the Borrower to the Administrative Agent or the Issuing
Bank, as appropriate, for an Advance or the issuance of a Letter of Credit shall
constitute a representation and warranty by the Borrower as of the date of the
making of such Advance or the issuance of such Letter of Credit that all the
conditions contained in this SECTION 3.2 have been satisfied.
Notwithstanding the above, the obligation of each Lender to make a
Revolving Credit Advance pursuant to SECTION 2.16(c) shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, (i) the occurrence of any Default or Event of Default, (ii) the
failure of the Borrower to satisfy any condition set forth in this SECTION 3.2,
or (iii) any other circumstance, happening or event whatsoever.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to each Lender as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. As of the Agreement Date and
after giving effect to the Regency Tender, the respective jurisdiction of
incorporation or organization and percentage ownership by the Borrower or
another of the Borrower's Subsidiaries of the Subsidiaries listed on SCHEDULE 5
are true and correct. Each of the Borrower and its Subsidiaries is a
corporation or other legal Person duly organized, validly existing and in good
standing under the laws of its state of organization. Each of the Borrower and
its Restricted Subsidiaries has the legal power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted. Each of the Borrower and its Restricted Subsidiaries is duly
qualified, in good standing and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its business requires
such qualification or authorization except where the failure to be so qualified
or authorized would not have a Material Adverse Effect.
(b) AUTHORIZATION. The Borrower has corporate power and has taken all
necessary legal action to authorize it to borrow hereunder. Each of the
Borrower and its Restricted Subsidiaries has the legal power and has taken all
necessary legal action to execute, deliver and perform the Loan Documents to
which it is party in accordance with the terms thereof, and to consummate the
transactions contemplated thereby. Each Loan Document has been duly executed
and delivered by the Borrower or the Restricted Subsidiary executing it. Each
of the Loan Documents to which the Borrower and its Restricted Subsidiaries are
a party is a legal, valid and binding respective obligation of the Borrower or
such Restricted Subsidiary, as applicable, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to the following qualifications:
(i) equitable principles generally, and (ii) Debtor Relief Laws (insofar as any
such law relates to the bankruptcy, insolvency or similar event of the Borrower
or any of its Restricted Subsidiaries).
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(c) COMPLIANCE WITH OTHER LOAN DOCUMENTS AND CONTEMPLATED TRANSACTIONS.
The execution, delivery and performance by the Borrower and its Restricted
Subsidiaries of the Loan Documents to which they are respectively a party, and
the consummation of the transactions contemplated thereby, do not and will not
(i) require any consent or approval not already obtained, (ii) violate any
Applicable Law, (iii) conflict with, result in a breach of, or constitute a
default under the articles of incorporation, by-laws or similar organizational
and governance documents of the Borrower or any of its Restricted Subsidiaries,
or under any Necessary Authorization, indenture, agreement or other instrument,
to which the Borrower or any of its Restricted Subsidiaries is a party or by
which they or their respective properties may be bound, or (iv) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower or any of its
Restricted Subsidiaries, except Permitted Liens.
(d) BUSINESS. The Borrower and its Restricted Subsidiaries are engaged
solely in the business of providing health care services, including nursing
care, rehabilitation therapy and other specialized health care services, and
pharmaceutical products and services.
(e) LICENSES, ETC. All Necessary Authorizations, which if not obtained
could be reasonably expected to have a Material Adverse Effect, have been duly
obtained, and are in full force and effect without any known conflict with the
rights of others and free from any unduly burdensome restrictions. The Borrower
and its Restricted Subsidiaries are and will continue to be in compliance in all
material respects with all provisions thereof. No circumstance exists which
might impair the utility of the Necessary Authorization or the right to renew
such Necessary Authorization the effect of which would have a Material Adverse
Effect. No Necessary Authorization, which if suspended, canceled or revoked
could reasonably be expected to have a Material Adverse Effect, is the subject
of any pending or, to the best of the Borrower's knowledge, threatened
challenge, suspension, cancellation or revocation.
(f) COMPLIANCE WITH LAW. The Borrower and its Restricted Subsidiaries are
in compliance in all respects with all Applicable Laws, except (i) as set forth
in the Disclosure Letter and (ii) where the failure to so comply would not have
a Material Adverse Effect. Except as set forth in the Disclosure Letter, the
Borrower and its Restricted Subsidiaries have duly and timely filed all reports,
statements and filings that are required to be filed by any of them with any
Governmental Authority, and are in all material respects in compliance
therewith, including without limitation the rules and regulations of any
Governmental Authority relating to the operation of the Borrower's and each of
its Restricted Subsidiary's business. The Borrower and its Restricted
Subsidiaries have obtained all appropriate approvals and consents of, and have
made all filings with, the Governmental Authorities in connection with the
operation of the Borrower's and each of its Restricted Subsidiary's business
where the failure to obtain such consents and approvals could have a Material
Adverse Effect.
(g) TITLE TO PROPERTIES. The Borrower and its Restricted Subsidiaries
have good and indefeasible title to, or a valid leasehold interest in, all of
their material assets. None of their assets are subject to any Liens, except
Permitted Liens. No financing statement or other Lien filing (except relating
to Permitted Liens) is on file in any state or jurisdiction that names the
Borrower or any of its Restricted Subsidiaries as debtor or covers (or purports
to cover) any assets of the Borrower or any of its Restricted Subsidiaries. The
Borrower and its Restricted
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Subsidiaries have not signed any such financing statement or filing, nor any
security agreement authorizing any Person to file any such financing statement
or filing.
(h) LITIGATION. Except as (i) reflected on SCHEDULE 4 hereto and (ii) set
forth in the Disclosure Letter, there is no action, suit or proceeding pending
against, or, to the best of the Borrower's knowledge, threatened against the
Borrower, or in any other manner relating directly and adversely to the Borrower
or any of its Restricted Subsidiaries, or any of their properties, in any court
or before any arbitrator of any kind or before or by any governmental body,
which, if adversely determined, could have a Material Adverse Effect.
(i) TAXES. All federal, state and other tax returns of the Borrower and
its Restricted Subsidiaries required by law to be filed have been duly filed and
all federal, state and other taxes, assessments and other governmental charges
or levies upon the Borrower, its Restricted Subsidiaries or any of their
respective properties, income, profits and assets, which are due and payable,
have been paid, unless the same are being diligently contested in good faith by
appropriate proceedings, with adequate reserves established therefor, and no
Lien (other than a Permitted Lien) has attached and no foreclosure, distraint,
sale or similar proceedings have been commenced. The charges, accruals and
reserves on the books of the Borrower and its Restricted Subsidiaries in respect
of their respective taxes are, in the judgment of the Borrower, adequate.
(j) FINANCIAL STATEMENTS; MATERIAL LIABILITIES. The Borrower has
furnished or caused to be furnished to the Lenders copies of its December 31,
1996 financial statements and the December 31, 1996 financial statements of
Regency and its Subsidiaries, which were prepared in good faith and complete in
all material respects and which present fairly in accordance with GAAP the
financial position of the Borrower and its Subsidiaries and Regency and its
Subsidiaries as at such dates and the results of operations for the periods then
ended. The Borrower and its Restricted Subsidiaries (including Regency and its
Subsidiaries) taken as a whole have no material liabilities, contingent or
otherwise, nor material losses, except as set forth in (i) said December 31,
1996, financial statements and (ii) the Disclosure Letter.
(k) NO ADVERSE CHANGE. Since December 31, 1996, no event or
circumstances has occurred or arisen that could have a Material Adverse Effect
except for those set forth in the Disclosure Letter.
(l) ERISA. None of the Borrower or its Controlled Group maintains or
contributes to any Plan other than those disclosed to the Administrative Agent
in writing. Each Plan (other than any Multiemployer Plan) has been administered
in all material respects in accordance with the terms of the documents pursuant
to which it has been established and is maintained, and is in compliance in all
material respects with the applicable provisions of ERISA, the Code, and any
applicable Federal law, rule or regulation. With respect to each Plan (other
than any Multiemployer Plan) of the Borrower and each member of its Controlled
Group, all reports required under ERISA or any other Applicable Law to be filed
with any governmental authority, the failure of which to file could reasonably
result in liability of the Borrower or any member of its Controlled Group in
excess of $500,000, have been duly filed. All such reports are true and correct
in all material respects as of the date given. No Pension Plan has been
terminated under Section 4041(c) of ERISA, no accumulated funding deficiency (as
defined in Section 412(a) of the Code) has been incurred (without regard to any
waiver granted under
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Section 412 of the Code), no funding waiver from the Internal Revenue Service
has been received or requested and no ERISA Event has occurred which could
reasonably be expected to have a Material Adverse Effect. The present value of
the benefit liabilities, as defined in Title IV of ERISA, of each Pension Plan
(other than a Multiemployer Plan) does not exceed by more than $3,000,000 the
present value of the assets of each such Pension Plan as of the most recent
valuation date using each such Plan's actuarial assumptions at such date. There
are no pending, or to the best of the Borrower's knowledge threatened, claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted with respect to any Plan or its related trust or
against any fiduciary of a Plan with respect to the operation of such Plan the
result of which could reasonably be expected to have a Material Adverse Effect.
None of the Borrower or any member of its Controlled Group has withdrawn from
any Multiemployer Plan except as described in writing to the Administrative
Agent prior to the Agreement Date, nor has incurred or reasonably expects to
incur (A) any liability under Title IV of ERISA (other than premiums due under
Section 4007 of ERISA to the PBGC), (B) any withdrawal liability (and no event
has occurred which with the giving of notice under Section 4219 of ERISA would
result in such liability) under Section 4201 of ERISA as a result of a complete
or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from
a Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the
PBGC or to a trustee appointed under Section 4042 of ERISA. None of the
Borrower or any member of its Controlled Group maintains or has established any
Plan, which is a material welfare benefit plan within the meaning of
Section 3(1) of ERISA and which provides for continuing benefits or coverage for
any participant or any beneficiary of any participant after such participant's
termination of employment, except (i) as may be required by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the
regulations thereunder, (ii) for a Plan under which the liabilities are fully
funded through one or more insurance contracts with an independent third party
insurance company, or (iii) for a Plan under which the unfunded liabilities do
not exceed $3,000,000. Each of the Borrower and its Controlled Group which
maintains a Plan which is a welfare benefit plan within the meaning of
Section 3(1) of ERISA has complied in all material respects with any applicable
notice and continuation requirements of COBRA and the regulations thereunder.
None of the Borrower or any member of its Controlled Group maintains, or to the
knowledge of the Borrower and each member of its Controlled Group, has
established, or has ever participated in a multiple employer welfare benefit
arrangement within the meaning of Section 3(40)(A) of ERISA.
(m) COMPLIANCE WITH REGULATIONS G, T, U AND X. The Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System. No more than 25% of the assets of the Borrower and its
Restricted Subsidiaries are margin stock. None of the Borrower and its
Restricted Subsidiaries nor any agent acting on their behalf, have taken or will
knowingly take any action which might cause this Agreement or any other Loan
Documents to violate any regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of 1934, in each case
as in effect now or as the same may hereafter be in effect. Neither the making
of the Advances nor the use of the proceeds thereof will violate, or be
inconsistent with, the provisions of Regulation G, T, U or X of said Board of
Governors.
(n) GOVERNMENTAL REGULATION. The Borrower and its Restricted Subsidiaries
are not required to obtain any Necessary Authorization that has not already been
obtained from, or effect
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any material filing or registration that has not already been effected with,
any Governmental Authority in connection with the execution and delivery of this
Agreement or any other Loan Document, or the performance thereof (other than
(a) any enforcement of remedies by the Administrative Agent on behalf of the
Lenders and (b) filings of certain Collateral Documents under the UCC), in
accordance with their respective terms, including any borrowings hereunder.
(o) ABSENCE OF DEFAULT. The Borrower and its Restricted Subsidiaries are
in compliance in all material respects with all of the provisions of their
articles of incorporation and by-laws or other applicable organizational
documents, and no event has occurred or failed to occur, which has not been
remedied or waived, the occurrence or non-occurrence of which constitutes, or
which with the passage of time or giving of notice or both would constitute,
(i) a Default or an Event of Default or (ii) a default by the Borrower or any of
its Restricted Subsidiaries under any material indenture, agreement or other
instrument, or any judgment, decree or order to which the Borrower or any of its
Restricted Subsidiaries or by which they or any of their material properties is
bound.
(p) INVESTMENT COMPANY ACT. The Borrower is not required to register
under the provisions of the Investment Company Act of 1940, as amended. Neither
the entering into or performance by the Borrower of this Agreement nor the
issuance of the Notes violates any provision of such act or requires any
consent, approval, or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
(q) ENVIRONMENTAL MATTERS. Each of the Borrower and its Restricted
Subsidiaries is in compliance with all Applicable Environmental Laws in effect
in each jurisdiction where it is presently doing business or has done business,
and in which the failure so to comply could have a Material Adverse Effect.
Neither the Borrower nor any of its Restricted Subsidiaries is subject to any
liability under any Applicable Environmental Laws that, in the aggregate, could
have a Material Adverse Effect. Neither the Borrower nor any of its Restricted
Subsidiaries has received any (a) notice from any Governmental Authority by
which any of its present or previously-owned or leased real properties has been
designated, listed, or identified in any manner by any Governmental Authority
charged with administering or enforcing any Applicable Environmental Law as a
hazardous substance disposal or removal site, "Super Fund" clean-up site, or
candidate for removal or closure pursuant to any Applicable Environmental Law,
(b) notice of any Lien arising under or in connection with any Applicable
Environmental Law that has attached to any revenues of, or to, any of its owned
or leased real properties, or (c) summons, citation, notice, directive, letter,
or other communication, written or oral, from any Governmental Authority
concerning any intentional or unintentional action or omission by the Borrower
or such Restricted Subsidiary in connection with its ownership or leasing of any
real property resulting in the releasing, spilling, leaking, pumping, pouring,
emitting, emptying, dumping, or otherwise disposing of any hazardous substance
into the environment resulting in any material violation of an Applicable
Environmental Law, in each case in (a), (b) and (c) immediately preceding where
the effect of which could have a Material Adverse Effect.
(r) CERTAIN FEES. No broker's, finder's or other fee or commission will
be payable by the Borrower (other than to the Lenders or their Affiliates
hereunder) with respect to the making of the Commitments or the Advances
hereunder or the issuance of any Letters of Credit. The Borrower agrees to
indemnify and hold harmless the Administrative Agent and each Lender
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from and against any claims, demand, liability, proceedings, costs or expenses
asserted with respect to or arising in connection with any such fees or
commissions.
(s) NECESSARY AUTHORIZATIONS. Except as set forth in the Disclosure
Letter, no event has occurred which permits (or with the passage of time would
permit) the revocation or termination of any Necessary Authorization, or which
could result in the imposition of any restriction thereon of such a nature that
could reasonably be expected to have a Material Adverse Effect.
(t) DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement which has been furnished to any Lender by or on behalf
of the Borrower or any of its Restricted Subsidiaries in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statement contained herein and therein not
misleading at the time it was furnished. There is no fact or omission known to
the Borrower and not known to the public generally that could reasonably be
expected to materially adversely affect the assets or business of the Borrower
and its Restricted Subsidiaries, or in the future could reasonably be expected
(so far as the Borrower can now foresee) to have a Material Adverse Effect, that
has not been disclosed in writing pursuant to this Agreement, the Disclosure
Letter, or in the documents, certificates and statements furnished to the
Lenders by or on behalf of the Borrower prior to the date hereof in connection
with the transaction contemplated hereby.
(u) SOLVENCY. The Borrower is, and the Borrower and its Subsidiaries on a
consolidated basis are, Solvent.
(v) INACTIVE SUBSIDIARIES. The Inactive Subsidiaries do not have Total
Assets equal to or greater than $1,000,000 in aggregate amount or total gross
revenues per fiscal year equal to or greater than $1,000,000 in aggregate
amount.
(w) CONSOLIDATED BUSINESS ENTITY. The Borrower and its Restricted
Subsidiaries are engaged in the business set forth in SECTION 4.1(d) hereof.
These operations require financing on a basis such that the credit supplied can
be made available from time to time to the Borrower and various of its
Restricted Subsidiaries, as required for the continued successful operation of
the Borrower and its Restricted Subsidiaries as a whole. The Borrower has
requested the Lenders to make credit available hereunder primarily for the
purpose of financing the operations of the Borrower and its Restricted
Subsidiaries. The Borrower and its Restricted Subsidiaries expect to derive
benefit (and the boards of directors of the Borrower and its Restricted
Subsidiaries have determined that its Restricted Subsidiaries may reasonably
expect to derive benefit), directly or indirectly, from the credit extended by
the Lenders hereunder, both in their separate capacities and as members of the
group of companies, since the successful operation and condition of the Borrower
and its Restricted Subsidiaries is dependent on the continued successful
performance of the functions of the group as a whole.
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at and
as of the date of each Advance and each Letter of Credit, and each shall be true
and correct when made, except to the extent (a) previously fulfilled in
accordance with the terms hereof, (b) applicable to a specific date or otherwise
subsequently inapplicable, or (c) previously waived in writing by the
Determining Lenders with
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respect to any particular factual circumstance. All such representations and
warranties shall survive, and not be waived by, the execution hereof by any
Lender, any investigation or inquiry by any Lender, or by the making of any
Advance or the issuance of any Letter of Credit under this Agreement.
ARTICLE 5
GENERAL COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. The Borrower
shall, and shall cause each of its Restricted Subsidiaries to:
(a) except as otherwise permitted by SECTION 7.4 hereof, preserve and
maintain, or timely obtain and thereafter preserve and maintain, its existence,
rights, franchises, licenses, authorizations, consents, privileges and all other
Necessary Authorizations from federal, state and local governmental bodies and
any tribunal (regulatory or otherwise), the loss of which could have a Material
Adverse Effect; and
(b) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, unless the failure to do
so could not have a Material Adverse Effect.
Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW. The Borrower and
its Restricted Subsidiaries shall (a) engage solely in the businesses set forth
in SECTION 4.1(d) hereof, and (b) comply in all material respects with the
requirements of all Applicable Law, including, without limitation, all
Applicable Environmental Laws.
Section 5.3 MAINTENANCE OF PROPERTIES. The Borrower shall, and shall
cause each of its Restricted Subsidiaries to, maintain or cause to be maintained
all its properties (whether owned or held under lease) in reasonably good
repair, working order and condition, ordinary wear and tear excepted, taken as a
whole, and from time to time make or cause to be made all appropriate repairs,
renewals, replacements, additions, betterments and improvements thereto.
Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. The Borrower
shall, with respect to its consolidated financial statements, maintain a system
of accounting established and administered in accordance with GAAP, keep
adequate records and books of account in which complete entries will be made and
all transactions reflected in accordance with GAAP, and keep accurate and
complete records of its respective assets. The Borrower and each of its
Restricted Subsidiaries shall maintain a fiscal year ending on December 31.
Section 5.5 INSURANCE. The Borrower shall, and shall cause each of its
Restricted Subsidiaries to, maintain insurance from responsible companies in
such amounts and against such risks as shall be customary and usual in the
industry for companies of similar size and capability or as the Lenders may
reasonably request from time to time. The Borrower shall maintain key-
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person life insurance in amounts and with respect to executives of the Borrower
as the Lenders shall require.
Section 5.6 PAYMENT OF TAXES AND CLAIMS. The Borrower shall, and shall
cause each of its Restricted Subsidiaries to, pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or its income or
properties prior to the date on which penalties attach thereto, and all lawful
material claims for labor, materials and supplies which, if unpaid, might become
a Lien upon any of its properties; except that no such tax, assessment, charge,
levy or claim need be paid which is being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on the books and records of such Person in accordance with GAAP, but only
so long as no Lien (other than a Permitted Lien) shall attach with respect
thereto and no foreclosure, distraint, sale or similar proceedings shall have
been commenced. The Borrower shall, and shall cause each of its Restricted
Subsidiaries to, timely file all information returns required by federal, state
or local tax authorities.
Section 5.7 VISITS AND INSPECTIONS. Subject to Applicable Law dealing
with patient confidentiality, the Borrower shall, and shall cause each of its
Restricted Subsidiaries to, promptly permit representatives of the
Administrative Agent or any Lender from time to time to (a) visit and inspect
the properties of the Borrower and each of its Restricted Subsidiaries as often
as the Administrative Agent or any Lender shall reasonably deem advisable,
(b) inspect and make extracts from and copies of the Borrower's and each of its
Restricted Subsidiaries' books and records, and (c) discuss with the Borrower's
and each of its Restricted Subsidiaries' directors, officers, employees and
auditors its business, assets, liabilities, financial positions, results of
operations and business prospects; provided, however, any information obtained
by the Administrative Agent or any Lender shall be handled pursuant to the
confidentiality provisions of SECTION 11.14 hereof. Prior to the occurrence of
an Event of Default, all such visits and inspections shall be conducted during
normal business hours after reasonable notice. Following the occurrence and
during the continuance of an Event of Default, such visits and inspections shall
be conducted at any time requested by the Administrative Agent or any Lender.
Section 5.8 PAYMENT OF INDEBTEDNESS. Subject to SECTION 5.6 hereof, the
Borrower shall, and shall cause each of its Restricted Subsidiaries to, pay its
Indebtedness when and as the same becomes due, other than amounts (other than
the Obligations) duly and diligently disputed in good faith.
Section 5.9 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances and Letters of Credit for the Regency Tender, other acquisitions
permitted hereunder, working capital, capital expenditures, and for other
general corporate purposes, to repay the Indebtedness outstanding under the
Existing Credit Agreement, and to repay other Indebtedness to the extent not
prohibited hereby.
SECTION 5.10 INDEMNITY.
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE AGENT, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS, DIRECTORS,
TRUSTEES,
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EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING
(COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL (INCLUDING
REASONABLE ALLOCATED COSTS AND EXPENSES OF IN-HOUSE COUNSEL) FOR SUCH
INDEMNITEES IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL
PROCEEDING, WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY
THERETO), IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER
DIRECT, INDIRECT OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE, OR
LOCAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITY, OR ON CONTRACT, TORT
OR OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT OR FUTURE
OPERATIONS OF THE BORROWER OR ANY OF ITS SUBSIDIARIES OR THEIR RESPECTIVE
PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE ENVIRONMENTAL CONDITION
OF PROPERTY OF THE BORROWER OR ANY OF ITS SUBSIDIARIES OR THE VIOLATION OR
ASSERTED VIOLATION BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF ANY APPLICABLE
LAW, INCLUDING ANY APPLICABLE ENVIRONMENTAL LAW), IN ANY MANNER RELATING TO OR
ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY ACT, EVENT OR
TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO,
THE MAKING OF OR ANY PARTICIPATIONS IN THE ADVANCES OR THE LETTER OF CREDIT AND
THE MANAGEMENT OF THE ADVANCES, INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN
WHOLE OR IN PART, OF ANY NEGLIGENCE OF ADMINISTRATIVE AGENT OR ANY LENDER (OTHER
THAN THOSE MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT AGAINST THE
ADMINISTRATIVE AGENT OR ANY LENDER AND NOT THE BORROWER), OR THE USE OR INTENDED
USE OF THE PROCEEDS OF THE ADVANCES OR THE LETTER OF CREDIT HEREUNDER, OR IN
CONNECTION WITH ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT
EXCLUDING (i) ANY CLAIM OR LIABILITY FROM AN INDEMNITEE THAT ARISES AS THE
RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SUCH INDEMNITEE, AS
FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, AND
(ii) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER LENDER OR BY ANY SHAREHOLDERS
OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT (COLLECTIVELY, "INDEMNIFIED
MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED MATTER INVOLVES ONE OR MORE
INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME LEGAL COUNSEL UNLESS ANY
INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES THAT CONFLICTS EXIST OR MAY
ARISE IN CONNECTION WITH SUCH REPRESENTATION.
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(b) IN ADDITION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST, REIMBURSE
EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL EXPENSES (INCLUDING
THE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION WITH ANY
INDEMNIFIED MATTER. IF FOR ANY REASON THE FOREGOING INDEMNIFICATION IS
UNAVAILABLE TO ANY INDEMNITEE OR INSUFFICIENT TO HOLD ANY INDEMNITEE HARMLESS
WITH RESPECT TO INDEMNIFIED MATTERS, THEN THE BORROWER SHALL CONTRIBUTE TO THE
AMOUNT PAID OR PAYABLE BY SUCH INDEMNITEE AS A RESULT OF SUCH LOSS, CLAIM,
DAMAGE OR LIABILITY IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE
RELATIVE BENEFITS RECEIVED BY THE BORROWER AND THE BORROWER'S STOCKHOLDERS ON
THE ONE HAND AND SUCH INDEMNITEE ON THE OTHER HAND BUT ALSO THE RELATIVE FAULT
OF THE BORROWER AND SUCH INDEMNITEE, AS WELL AS ANY OTHER RELEVANT EQUITABLE
CONSIDERATIONS. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER
THIS SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY
OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH
INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY
SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF THE BORROWER, THE
ADMINISTRATIVE AGENT, THE LENDERS AND ALL OTHER INDEMNITEES. THIS SECTION 5.10
SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE OBLIGATIONS.
Section 5.11 CAREERSTAFF SUBSIDIARIES. Within 15 days following any event
causing the Borrower or any Restricted Subsidiary to own 100% of the capital
stock of, or other equity interest in, any CareerStaff Subsidiary, the Borrower
or Restricted Subsidiary, as applicable, shall cause the capital stock of, or
other equity interest in, such CareerStaff Subsidiary to be pledged to the
Administrative Agent pursuant to a Pledge Agreement and take such other steps as
may be necessary or reasonably requested by Administrative Agent in order to
cause Administrative Agent to have a perfected, first priority security interest
in such capital stock or equity interest.
Section 5.12 RESTRICTED SUBSIDIARIES. Within 15 days following the
Acquisition or formation of any Restricted Subsidiary (other than Inactive
Subsidiaries), the Borrower shall cause (a) the capital stock of, or other
equity interest in, such Restricted Subsidiary to be pledged to the
Administrative Agent pursuant to a Pledge Agreement and take such other steps as
may be necessary or reasonably requested by Administrative Agent in order to
cause Administrative Agent to have a perfected, first priority security interest
in such capital stock or equity interest and (b) such Restricted Subsidiary to
become party to a Subsidiary Guaranty and deliver such evidence of corporate
authority as may be reasonably requested by Administrative Agent in connection
therewith.
Section 5.13 LANDLORD LIENS. The Borrower shall seek to obtain a landlord
lien waiver or subordination, in form and substance satisfactory to the
Administrative Agent, from the lessor of any facility leased to a Restricted
Subsidiary which has been granted a security interest in the accounts receivable
relating to such leased facility and which security interest is not, by its
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terms, subordinated to the lien of the Administrative Agent granted by the
Account Security Agreement.
ARTICLE 6
INFORMATION COVENANTS
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrower shall furnish or cause to be furnished to
each Lender:
Section 6.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION. Within 60
days after the end of each fiscal quarter, consolidated and consolidating
balance sheets of the Borrower and its Restricted Subsidiaries as at the end of
such quarter and the related consolidated and consolidating statements of income
and consolidated and consolidating statements of changes in cash for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter and all of which shall be certified by the chief financial officer of
the Borrower, to be, in his or her opinion, complete and correct in all material
respects and to present fairly, in accordance with GAAP, the financial position
and results of operations of the Borrower and its Restricted Subsidiaries as at
the end of and for such period, and for the elapsed portion of the year ended
with the last day of such period, subject only to normal year-end adjustments.
Section 6.2 COMPLIANCE CERTIFICATES. At the time financial statements
are furnished pursuant to SECTION 6.1 hereof, a Compliance Certificate:
(a) setting forth at the end of such period, certifications and
arithmetical calculations required to establish whether the Borrower and its
Restricted Subsidiaries were in compliance with the requirements of
SECTIONS 7.1(i), 7.1(j), 7.1(k), 7.3(i), 7.3(j), 7.5, 7.9, 7.10, 7.11 and 7.12
hereof, which shall be substantially in the form of EXHIBIT G hereto;
(b) setting forth the aggregate amount of outstanding Advances and
Reimbursement Obligations; and
(c) stating that, to the best of his or her knowledge after due inquiry,
no Default has occurred as at the end of such period, or if a Default has
occurred, disclosing each such Default and its nature, when it occurred, whether
it is continuing and the steps being taken with respect to such Default.
Section 6.3 COPIES OF OTHER REPORTS AND NOTICES.
(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Borrower or any of its Restricted
Subsidiaries by accountants in connection with any annual, interim or special
audit, including without limitation any report prepared in connection with the
annual audit referred to in SECTION 6.2 hereof, and, if requested by the
Administrative Agent, any other comment letter submitted to management in
connection with any such audit, (ii) each financial statement, report, notice or
proxy statement sent by the Borrower or any of its Restricted Subsidiaries to
stockholders generally, (iii) each regular,
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periodic or other report and any registration statement (other than statements
on Form S-8) or prospectus (or material written communication in respect of any
thereof) filed by the Borrower or any of its Restricted Subsidiaries with any
securities exchange, with the Securities and Exchange Commission or any
successor agency, and (iv) all press releases concerning material financial
aspects of the Borrower or any of its Restricted Subsidiaries;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of Indebtedness or other security of the Borrower or any of its
Restricted Subsidiaries in excess of $3,000,000 in the aggregate has given
notice or taken any action with respect to a breach, failure to perform, claimed
default or event of default thereunder, (ii) any party to any Operating Lease
has given notice or taken any action with respect to a breach, failure to
perform, claimed default or event of default thereunder, (iii) any party to any
Capitalized Lease Obligations has given notice or taken any action with respect
to a breach, failure to perform, claimed default or event of default thereunder,
(iv) any occurrence or non-occurrence of any event which constitutes or which
with the passage of time or giving of notice or both could constitute a material
breach by the Borrower or any of its Restricted Subsidiaries under any material
agreement or instrument other than this Agreement to which the Borrower or any
of its Restricted Subsidiaries is a party or by which any of their properties
may be bound, or (v) any event, circumstance or condition which could reasonably
be expected to have a Material Adverse Effect, a written notice specifying the
details thereof (or the nature of any claimed default or event of default) and
what action is being taken or is proposed to be taken with respect thereto;
(c) Promptly upon receipt thereof, copies of any notices received from any
Governmental Authority relating to any order, ruling, law, information or policy
that relates to a breach of or noncompliance with Applicable Laws and which is
reasonably likely to (i) result in the payment of money by the Borrower or any
of its Restricted Subsidiaries in an amount of $3,000,000 or more in the
aggregate, (ii) otherwise have a Material Adverse Effect, or (iii) result in the
loss or suspension of any material Necessary Authorization;
(d) Promptly upon receipt from any governmental agency, or any government,
political subdivision or other entity, any material notice, correspondence,
hearing, proceeding or order regarding or affecting the Borrower, any of its
Restricted Subsidiaries, or any of their respective properties or businesses;
and
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the assets, business, liabilities, financial position,
projections, results of operations or business prospects of the Borrower and its
Restricted Subsidiaries, as the Administrative Agent or any Lender may
reasonably request.
Section 6.4 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS. Prompt
notice of the following events after the Borrower has knowledge or notice
thereof:
(a) The commencement of all proceedings and investigations by or before
any Governmental Authority, and all actions and proceedings in any court or
before any arbitrator involving claims for damages (including punitive damages)
in excess of $3,000,000 in the aggregate (after deducting the amount with
respect to which the Borrower or any of its
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Restricted Subsidiaries is insured), against or in any other way relating
directly to the Borrower, any of its Restricted Subsidiaries, or any of their
properties or businesses;
(b) Promptly upon the happening of any condition or event which
constitutes a Default, a written notice specifying the nature and period of
existence thereof and what action is being taken or is proposed to be taken with
respect thereto; and
(c) Any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations or prospective business
of the Borrower or any of its Restricted Subsidiaries, other than changes in the
ordinary course of business which have not had and are not likely to have a
Material Adverse Effect.
Section 6.5 ERISA REPORTING REQUIREMENTS.
(a) Promptly and in any event (i) within 30 days after the Borrower or any
member of its Controlled Group knows or has reason to know that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of the Borrower or any
member of its Controlled Group has occurred, and (ii) within 10 days after the
Borrower or any member of its Controlled Group knows or has reason to know that
any other ERISA Event with respect to any Plan of the Borrower or any member of
its Controlled Group has occurred or a request for a minimum funding waiver
under Section 412 of the Code with respect to any Plan of the Borrower or any
member of its Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) If requested by the Administrative Agent, promptly and in any event
within 30 days after the filing thereof by the Borrower or any member of its
Controlled Group with the United States Department of Labor or the Internal
Revenue Service, copies of each annual report (including Schedule B thereto, if
applicable) with respect to each Plan of which the Borrower or any member of its
Controlled Group is the "plan sponsor";
(c) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by
Section 4001(a)(10) of ERISA) of any Multiemployer Plan concerning the
assessment of withdrawal liability pursuant to Section 4219 or 4202 of ERISA,
and a statement from the chief financial officer of the Borrower or such member
of its Controlled Group setting forth details as to the events giving rise to
such potential withdrawal liability and the action which the Borrower or such
member of its Controlled Group is taking or proposes to take with respect
thereto;
(d) Notification within 30 days of any material increases in the benefits
of any existing Plan which is not a Multiemployer Plan, or the establishment of
any new Plans, or the commencement of contributions to any Plan to which the
Borrower or any member of its Controlled Group was not previously contributing
which would in either case, result in a liability to the Borrower or to any
member of its Controlled Group in excess of $3,000,000;
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(e) Notification within three Business Days after the Borrower or any
member of its Controlled Group knows or has reason to know that the Borrower or
any such member of its Controlled Group has filed or intends to file a notice of
intent to terminate any Pension Plan under a distress termination within the
meaning of Section 4041(c) of ERISA or that the PBGC intends to terminate any
Pension Plan or to have a trustee appointed to administer any Pension Plan, and
a copy of any such notice received from or filed with the PBGC; and
(f) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any member of its Controlled Group with
respect to any Plan or foreign employee benefit plan, except those which, in the
aggregate, if adversely determined could not have a Material Adverse Effect.
ARTICLE 7
NEGATIVE COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 7.1 INDEBTEDNESS. The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, create, assume, incur or otherwise become
or remain obligated in respect of, or permit to be outstanding, or suffer to
exist any Indebtedness, except:
(a) Indebtedness under the Loan Documents;
(b) Accounts payable incurred in the ordinary course of business;
(c) Endorsement in the ordinary course of business of negotiable
instruments for deposit or collection;
(d) Indebtedness which is described on SCHEDULE 7 hereto (but no increases
in the principal amount permitted to be borrowed thereunder), including renewals
or refinancings (but no increases except with respect to accounts payable,
accrued compensation, accrued property and payroll taxes, accrued workers'
compensation, other accrued liabilities, income taxes payable, and deferred
current and long-term taxes) thereof; provided, that no such renewal or
refinancing shall result in any change to the terms of the Indebtedness being
renewed or refinanced which the Lenders deem materially adverse to them
(including, without limitation, relating to events of default, acceleration
rights, interest rates, maturity date, amortization, subordination, covenants,
prohibition against amending any Loan Document and definitions with respect
thereto);
(e) Subordinated Debt which has been approved in writing by the
Determining Lenders, provided no Default or Event of Default shall exist prior
to and after giving effect to the issuance thereof;
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(f) Guaranties by the Borrower of any of its Restricted Subsidiaries'
obligations (i) as lessee under lease agreements and (ii) in respect of
Indebtedness otherwise permitted pursuant to this SECTION 7.1;
(g) the Guaranty by any of the Borrower's Restricted Subsidiaries (other
than Mediplex) of Mediplex's obligations under the Convertible Indenture,
provided, that such Guaranty shall be validly and effectively subordinated to
the prior payment in full of the Obligations on terms and pursuant to
documentation approved in writing by the Determining Lenders;
(h) Indebtedness evidenced by the Intercompany Line of Credit;
(i) Guaranties by the Borrower and Indebtedness pursuant to letters of
credit in respect of obligations of Foreign Subsidiaries as lessees under
Operating Leases (such Guaranty obligation to be calculated as an amount equal
to the product of rental expense for the four fiscal quarters immediately
preceding the date of calculation subject to the terms of the Guaranty
multiplied by eight), (i) set forth on SCHEDULE 11 hereto and (ii) other such
Guaranties and Indebtedness pursuant to such letters of credit, together with
Investments made pursuant to SECTION 7.3(j) which are in Foreign Entities and
Acquisition Consideration for all Foreign Subsidiaries pursuant to
SECTION 7.5(c), not to exceed $5,000,000 in aggregate principal amount;
(j) mortgage Indebtedness and sale and leaseback transactions in respect
of real property, improvements and related personal property owned or leased by
the Borrower and its Restricted Subsidiaries (i) set forth on SCHEDULE 12 hereto
and (ii) other mortgage Indebtedness and such sale and leaseback transactions in
an aggregate principal amount not in excess of $5,000,000;
(k) other Indebtedness (i) not to exceed $5,000,000 in aggregate principal
amount outstanding at any time and (ii) provided such Indebtedness is related to
an Acquisition permitted by SECTION 7.5, not to exceed $15,000,000 in aggregate
principal amount outstanding at any time.
Section 7.2 LIENS. The Borrower shall not, and shall not permit any of
(a) its Restricted Subsidiaries to, create, assume, incur, permit or suffer to
exist, directly or indirectly, any Lien on any of its assets, whether now owned
or hereafter acquired, except Permitted Liens, or (b) its Subsidiaries to,
create, assume, incur, permit or suffer to exist, directly or indirectly, any
Lien on any of the capital stock of, or other equity interest in, any Subsidiary
of such Subsidiary. Except with respect to this Agreement, the Borrower shall
not, and shall not permit any of (a) its Restricted Subsidiaries to, enter into,
or be subject to, a Negative Pledge (except for Negative Pledges covering assets
subject to Permitted Liens, or (b) its Subsidiaries to, enter into, or be
subject to, a Negative Pledge with respect to any of the capital stock of, or
other equity interest in, any Subsidiary of such Subsidiary.
Section 7.3 INVESTMENTS. The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, make any Investment, except that the
Borrower may purchase or otherwise acquire and own:
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(a) Marketable, direct obligations of, or guaranteed by, the United States
of America or any agency thereof and maturing in three years or less of the date
of purchase;
(b) Commercial paper maturing not more than 1 year from the date of
creation and having a rating of P-1/A-1 or equivalent by Moody's Investors
Service or Standard & Poor's Ratings Services, a Division of McGraw-Hill, Inc.,
a New York corporation, respectively;
(c) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms or which have been converted to a note receivable;
(d) Investments in demand deposit accounts, certificates of deposit and
time deposits maturing within 1 year from the date of acquisition, in each case
issued by a bank organized or licensed under the laws of the United States of
America or any state thereof and having capital and surplus of at least
$500,000,000;
(e) Investments in existence on the Agreement Date which are described on
SCHEDULE 6 hereto;
(f) the Liberty Loan, provided that the Liberty Note is pledged in favor
of the Administrative Agent pursuant to a Security Agreement;
(g) Investments by Borrower in one or more Restricted Subsidiaries (other
than Inactive Subsidiaries); PROVIDED THAT, (i) any such Restricted Subsidiary
is subject to the provisions hereof, (ii) any such Restricted Subsidiary is or
immediately becomes party to a Subsidiary Guaranty and the Intercompany Line of
Credit, (iii) all of the capital stock of, or other equity interest in, such
Restricted Subsidiary (other than CareerStaff Subsidiaries unless otherwise
required by SECTION 5.11) is pledged pursuant to a Pledge Agreement, as
applicable, and (iv) to the extent such Investment is in the form of a loan or
advance, the obligation to repay such loan or advance is recorded on the books
and records of such Restricted Subsidiary in form and with detail satisfactory
to the Lenders;
(h) Investments by CareerStaff Management, Inc. in one or more CareerStaff
Subsidiaries; PROVIDED THAT, (i) such CareerStaff Subsidiary is subject to the
provisions hereof, (ii) such CareerStaff Subsidiary is or immediately becomes
party to a Subsidiary Guaranty, (iii) the indebtedness owing to CareerStaff
Management, Inc. by such CareerStaff Subsidiary is evidenced by a promissory
note which has been delivered to, and endorsed in favor of, Administrative Agent
and (iv) to the extent required by SECTION 5.11, all of the capital stock of, or
other equity interest in, such CareerStaff Subsidiary is pledged pursuant to a
Pledge Agreement;
(i) Assisted Living Investments not to exceed $50,000,000 in aggregate
amount; and
(j) other Investments primarily related to the business of providing
healthcare services, including nursing care, rehabilitation therapy and other
specialized healthcare services (i) in Domestic Entities after the Agreement
Date (A) set forth on SCHEDULE 13 hereto and (B) other such Investments not to
exceed $5,000,000 in aggregate principal amount, and (ii) in Foreign Entities
(A) set forth on SCHEDULE 11 hereto and (B) such other Investments, together
with the aggregate Acquisition Consideration for all Foreign Subsidiaries
acquired pursuant to
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SECTION 7.5(c) hereof and obligations incurred in respect of Guaranties and
letters of credit pursuant to SECTION 7.1(i) hereof which are not set forth on
SCHEDULE 11 hereto, not to exceed $5,000,000 in aggregate principal amount.
Section 7.4 LIQUIDATION, DISPOSITION OF ASSETS, MERGER, NEW SUBSIDIARIES.
The Borrower shall not, and shall not permit any of its Restricted Subsidiaries
to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, or sell, lease, abandon, transfer or
otherwise dispose of all or any part of its assets, properties or business,
other than (i) immaterial assets sold or otherwise disposed of in the ordinary
course of business, (ii) sales by the Borrower or any of its Restricted
Subsidiaries of assets to the Borrower or any other of its Restricted
Subsidiaries, (iii) liquidations or dissolutions of Foreign Subsidiaries or
Inactive Subsidiaries, (iv) sales of the facilities set forth on SCHEDULES 8 and
9 hereto, (v) sales of assets permitted by Section 7.16 hereof, (vi) voluntary
dissolutions or liquidations of CareerStaff Subsidiaries, or (vii) other sales,
leases, transfers or other dispositions of assets for full and fair
consideration pursuant to arm's-length transactions, except that to the extent
that the aggregate book value of assets sold during the term of this Agreement
exceeds $1,000,000, the Net Cash Proceeds of such excess sales are applied as
required pursuant to SECTION 2.5(c) hereof.
(b) enter into any merger or consolidation except that (i) any of the
Borrower's Restricted Subsidiaries may merge with the Borrower (provided that
the Borrower shall be the continuing or surviving corporation), (ii) any of the
Borrower's Restricted Subsidiaries may merge with one or more of the Borrower's
other Restricted Subsidiaries, (iii) any of the Borrower's Restricted
Subsidiaries may merge or consolidate with any other corporation, provided that,
immediately after giving effect to such merger or consolidation (A) the
continuing or surviving corporation shall constitute a Restricted Subsidiary and
(B) no Default or Event of Default shall exist hereunder, and (iv) the Borrower
may merge or consolidate with any other corporation, provided that immediately
after giving effect to such merger or consolidation (A) the Borrower shall be
the continuing or surviving corporation and (B) no Default or Event of Default
shall exist hereunder; or
(c) create or acquire any Restricted Subsidiary, except for Acquisitions
by the Borrower and its Restricted Subsidiaries permitted by SECTION 7.5 hereof.
Section 7.5 ACQUISITIONS. The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, make, in one or more transactions, any
(a) Acquisition during the fiscal year ending on December 31, 1997 (excluding
the Regency Tender and the Regency Merger), unless (i) the Acquisition is of a
Restricted Subsidiary or of the assets of a Domestic Entity, (ii) the
Acquisition (A) is set forth on SCHEDULE 14 hereto or (B) the aggregate
Acquisition Consideration for all Acquisitions not set forth on SCHEDULE 14
hereto does not exceed $5,000,000 in principal amount, and (iii) such Restricted
Subsidiary becomes a party to a Subsidiary Guaranty and the Intercompany Line of
Credit and all the capital stock of, or other equity interest in, such
Restricted Subsidiary (other than CareerStaff Subsidiaries unless otherwise
required by SECTION 5.11) and its Restricted Subsidiaries (other than
CareerStaff Subsidiaries unless otherwise required by SECTION 5.11) shall be
pledged pursuant to a Pledge Agreement; or (b) Acquisition of a Foreign
Subsidiary, unless (i) the Acquisition is set forth on SCHEDULE 11 hereto or
(ii) if the Acquisition Consideration for all Acquisitions not set forth on
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SCHEDULE 11 hereto, together with the aggregate amount of obligations incurred
in respect of Guaranties and letters of credit pursuant to SECTION 7.1(i) hereof
and Investments made pursuant to SECTION 7.3(j) which are in Foreign Entities,
does not exceed $5,000,000, and (iii) to the extent such Foreign Subsidiary is
not a Subsidiary of a Foreign Subsidiary, an amount of the capital stock of such
Foreign Subsidiary necessary to cause the Administrative Agent to have a
security interest in, and pledge of, all of the capital stock of, or other
equity interest in, such Foreign Subsidiary owned by the pledgor or such lesser
amount such that in any case not more than 66% of all of the capital stock of,
or other equity interest in, such Foreign Subsidiary, shall be pledged pursuant
to a Foreign Subsidiary Pledge Agreement.
Section 7.6 RESTRICTED PAYMENTS. The Borrower shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment other than Permitted Restricted Payments; provided, however,
that no Permitted Restricted Payments set forth in clause (d) of the definition
thereof shall be made if, immediately after giving effect to any such payments,
a Default or Event of Default would exist hereunder.
Section 7.7 AFFILIATE TRANSACTIONS. The Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, at any time engage in any
transaction with any of its Affiliates, nor make an assignment or other transfer
of any of its assets or properties to any such Affiliate, on terms materially
less advantageous to the Borrower or such Restricted Subsidiary than would be
the case if such transaction had been effected with a non-Affiliate (other than
advances to employees in the ordinary course of business).
Section 7.8 COMPLIANCE WITH ERISA. The Borrower shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, or permit
any member of its Controlled Group to directly or indirectly, (a) terminate any
Plan so as to result in any material (in the opinion of the Determining Lenders)
liability to the Borrower or any member of its Controlled Group taken as a
whole, (b) permit to exist any ERISA Event, or any other event or condition
which presents the risk of a material (in the opinion of the Determining
Lenders) liability of the Borrower or any member of its Controlled Group taken
as a whole, (c) make a complete or partial withdrawal (within the meaning of
Section 4201 of ERISA) from any Multiemployer Plan so as to result in any
material (in the opinion of the Determining Lenders) liability to the Borrower
or any member of its Controlled Group taken as a whole, (d) enter into any new
Plan or modify any existing Plan so as to increase its obligations thereunder
except in the ordinary course of business consistent with past practice which
could result in any material (in the opinion of the Determining Lenders)
liability to the Borrower or any member of its Controlled Group taken as a
whole, or (e) permit the present value of all benefit liabilities, as defined in
Title IV of ERISA, under each Pension Plan (using the actuarial assumptions
utilized by each such Plan) to exceed the fair market value of Pension Plan
assets allocable to such benefits, all determined as of the most recent
valuation date for each such Plan, by $3,000,000.
Section 7.9 FIXED CHARGE COVERAGE RATIO. The Borrower shall not permit
the Fixed Charge Coverage Ratio to be less than 1.50 to 1 on the last day of the
fiscal quarter ending September 30, 1997.
Section 7.10 LEVERAGE RATIO. The Borrower shall not permit the Leverage
Ratio to be greater than 6.25 to 1 on the last day of the fiscal quarter ending
September 30, 1997.
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Section 7.11 TOTAL DEBT TO CAPITALIZATION RATIO. The Borrower shall not
permit the Total Debt to Capitalization Ratio to be greater than 0.75 to 1 on
the last day of the fiscal quarter ending September 30, 1997.
Section 7.12 SALE OR DISCOUNT OF RECEIVABLES. The Borrower shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or indirectly
sell, with or without recourse, for discount or otherwise, any notes or accounts
receivable.
Section 7.13 AMENDMENT AND MODIFICATION OF INSTITUTIONAL DEBT DOCUMENTS.
The Borrower shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, amend, modify, supplement, waive compliance with, or
assent to noncompliance with, any term, provision or condition of any of the
documents governing or evidencing any Institutional Debt, which (i) the
Determining Lenders deem material (including, without limitation, relating to
events of default, acceleration rights, interest rates, maturity date,
amortization, subordination, covenants, prohibition against amending any Loan
Document and definitions with respect thereto) or (ii) places any further
restrictions on the Borrower or any of its Restricted Subsidiaries or increases
the obligations of the Borrower or any of its Restricted Subsidiaries thereunder
or confers on the holders thereof any additional rights.
Section 7.14 INDEBTEDNESS OF SUN INTERNATIONAL. Until the Borrower shall
cease to own, as a result of an initial public offering of the capital stock of
Sun International, a number of shares of the capital stock of Sun International
having ordinary voting power to elect a majority of Sun International's board of
directors, the Borrower shall not permit Sun International to, create, assume,
incur or otherwise become or remain obligated in respect of, or permit to be
outstanding, or suffer to exist, any Indebtedness except Indebtedness to the
Borrower.
Section 7.15 INTERCOMPANY LINE OF CREDIT. The Borrower shall not reduce
the aggregate principal amount available to Restricted Subsidiaries under the
Intercompany Line of Credit below $500,000,000.
Section 7.16 SALE AND LEASEBACK. Except for (a) the sale and leaseback of
those facilities set forth on SCHEDULE 8 hereto and (b) sale and leaseback
transactions entered into in connection with Assisted Living Investments
permitted pursuant to SECTION 7.3(i) hereof and subject to the limitations
thereof, the Borrower shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any arrangement whereby it sells or transfers any of
its assets, and thereafter rents or leases such assets except (i) as set forth
on SCHEDULE 8 hereto and (ii) other sale and leaseback transactions and mortgage
Indebtedness incurred pursuant to SECTION 7.1(j) hereof not to exceed $5,000,000
in aggregate amount.
Section 7.18 CAREERSTAFF SUBSIDIARIES. Notwithstanding anything contained
to the contrary in SECTION 7.5 hereof, the Borrower shall not permit any
CareerStaff Subsidiary to have Subsidiaries.
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ARTICLE 8
DEFAULT
Section 8.1 EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or non-
governmental body:
(a) Any representation or warranty made under any Loan Document shall
prove to have been incorrect or misleading in any material respect when made or
deemed to have been made;
(b) The Borrower shall default in the payment of (i) any interest under
any Note or any fees payable hereunder or any other costs, fees, expenses or
other amounts payable hereunder or under the Loan Documents, when due, which
Default is not cured within one Business Day from the date such payment became
due by payment of such late amount, or (ii) any principal under any of the Notes
when due;
(c) The Borrower or any of its Restricted Subsidiaries shall default in
the performance or observance of any agreement or covenant contained in
SECTION 5.1, 5.9, 6.4(b) or ARTICLE 7 hereof;
(d) The Borrower or any of its Restricted Subsidiaries shall default in
the performance or observance of any other agreement or covenant contained in
this Agreement not specifically referred to elsewhere in this SECTION 8.1, and
such default shall not be cured within a period of 30 days after the earlier of
notice from the Administrative Agent thereof or actual notice thereof by the
Borrower or such Restricted Subsidiary;
(e) There shall occur any default or breach in the performance or
observance of any agreement or covenant (after the expiration of any applicable
grace period) in any of the Loan Documents (other than this Agreement);
(f) There shall be commenced an involuntary proceeding or an involuntary
petition shall be filed in a court having competent jurisdiction seeking
(i) relief in respect of the Borrower or any of its Restricted Subsidiaries, or
a substantial part of the property or the assets of the Borrower or any of its
Restricted Subsidiaries, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy law or other similar law, (ii) the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar official of
the Borrower or any of its Restricted Subsidiaries, or of any substantial part
of their respective properties, or (iii) the winding up or liquidation of the
affairs of the Borrower or any of its Restricted Subsidiaries, and any such
proceeding or petition shall continue unstayed and in effect for a period of
thirty consecutive days;
(g) The Borrower or any of its Restricted Subsidiaries shall (i) file a
petition, answer or consent seeking relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other applicable Federal,
state or foreign bankruptcy law or other
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similar law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking of possession of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Borrower or any of its Restricted Subsidiaries or of
substantially all of its properties, (iii) file an answer admitting the material
allegations filed against it in any such proceeding, (iv) make a general
assignment for the benefit of creditors, (v) become unable, admit in writing its
inability or fail generally, to pay its debts as they become due, or (vi) take
any action in furtherance of any such action;
(h) A final judgment or judgments shall be entered by any court against
the Borrower or any of its Restricted Subsidiaries for the payment of money
which exceeds $3,000,000 in the aggregate, or a warrant of attachment or
execution or similar process shall be issued or levied against property of the
Borrower or any of its Restricted Subsidiaries which, together with all other
such property of the Borrower and its Restricted Subsidiaries subject to other
such process, exceeds in value $3,000,000 in the aggregate, and if such judgment
or award is not insured or, within 30 days after the entry, issue or levy
thereof, such judgment, warrant or process shall not have been paid or
discharged or stayed pending appeal, or if, after the expiration of any such
stay, such judgment, warrant or process shall not have been paid or discharged;
(i) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other party-in-
interest or disqualified person shall engage in transactions which in the
aggregate would reasonably result in a direct or indirect liability to the
Borrower or any member of its Controlled Group in excess of $3,000,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower or
any member of its Controlled Group shall incur any accumulated funding
deficiency, as defined in Section 412 of the Code, in the aggregate in excess of
$3,000,000, or request a funding waiver from the Internal Revenue Service for
contributions in the aggregate in excess of $3,000,000; (iii) the Borrower or
any member of its Controlled Group shall incur any withdrawal liability in the
aggregate in excess of $1,000,000 as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA, or any other
liability with respect to a Plan in excess of $3,000,000 without the prior
written consent of the Determining Lenders, unless the amount of such liability
has been funded within the Plan or pursuant to one or more insurance contracts;
(iv) the Borrower or any member of its Controlled Group shall fail to make a
required contribution by the due date under Section 412 of the Code or
Section 302 of ERISA which would result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA; or (v) any ERISA Event with
respect to a Plan subject to Title IV of ERISA shall have occurred, and 30 days
thereafter (A) such ERISA Event, other than such event described in clause (h)
of the definition of ERISA Event herein, (if correctable) shall not have been
corrected and (B) the then present value of such Plan's benefit liabilities, as
defined in Title IV of ERISA, shall exceed the then current value of assets
accumulated in such Plan; provided, however, that the events listed in
subsections (iv) through (v) shall constitute Events of Default only if, as of
the date thereof or any subsequent date, the amount of liability that the
Borrower or any member of its Controlled Group reasonably is likely to incur in
the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any other
provision of law with respect to all such Plans, computed, with respect to any
Pension Plan, by the actuary of the Pension Plan taking into account any
applicable rules and regulations of the PBGC at such time, and based on the
actuarial assumptions used by the Pension Plan, resulting from or otherwise
associated with such event exceeds $3,000,000;
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(j) All or any material portion of the Collateral or the Loan Documents
shall be the subject of any proceeding instituted by any Person other than a
Lender (except in connection with any Lender's exercise of any remedies under
the Loan Documents), or there shall exist any litigation or threatened
litigation with respect to all or any material portion of the Collateral or the
Loan Documents, or any Person shall challenge in any manner whatsoever the
validity or enforceability of all or any material portion of the Loan Documents;
(k) The Borrower or any of its Restricted Subsidiaries shall default in
the payment of any Indebtedness in an aggregate amount of $3,000,000 or more
beyond any grace period provided with respect thereto, or shall default in the
performance of any agreement or instrument under which such Indebtedness is
created or evidenced beyond any applicable grace period (or any event thereunder
shall occur and be continuing), if the effect of such default or event is to
permit or cause the holder of such Indebtedness (or a trustee on behalf of any
such holder) to (i) cause such Indebtedness to become due or prepaid prior to
its date of maturity or (ii) require the Borrower or any of its Restricted
Subsidiaries to purchase or redeem such Indebtedness;
(l) A Change of Control shall occur;
(m) Any Necessary Authorization shall be revoked, the revocation of which
could result in a Material Adverse Effect; or there shall occur a default under
any Necessary Authorization by the Borrower or any of its Restricted
Subsidiaries beyond any applicable grace period, which default could result in a
Material Adverse Effect; or any proceedings shall in any way be brought by any
Person to challenge the validity or enforceability of any Necessary
Authorization or seeking the revocation, suspension or cancellation of such
Necessary Authorization and such proceeding is not contested in good faith by
appropriate proceedings and an adverse determination in such proceeding could
result in a Material Adverse Effect;
(n) Any provision of any Loan Document shall for any reason cease to be
valid and binding on or enforceable against any party to it (other than the
Administrative Agent or any Lender) in all material respects, or any such party
shall so state in writing;
(o) Any Collateral Document shall for any reason (other than pursuant to
the terms thereof) cease to create a valid and perfected first priority Lien
(other than Permitted Liens which are not Consensual Liens) in any Collateral;
(p) The Borrower or any of its Restricted Subsidiaries shall, at any time,
be in default in the payment of any obligations under one or more Operating
Leases beyond any grace period provided with respect thereto and the aggregate
amount of payments in default shall equal or exceed $500,000;
(q) Except for Permitted Restricted Payments, any event shall occur in
respect of any Subordinated Debt, the result of which would obligate the
Borrower or any of its Restricted Subsidiaries to purchase, prepay or redeem all
or any portion of such Subordinated Debt; or
(r) In a bankruptcy or insolvency proceeding or in other proceedings under
similar law now or hereafter in effect involving a Foreign Subsidiary of the
Borrower, (i) any claim is made by any Person against the Borrower or any of its
Restricted Subsidiaries or any asset owned by the Borrower or any of its
Restricted Subsidiaries and such claim or claims, in the
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aggregate, could result in a Material Adverse Effect, or (ii) any claim is made
to consolidate such proceeding of the Foreign Subsidiary with the Borrower or
any of its Restricted Subsidiaries.
Section 8.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in SECTION 8.1(f)
OR (g) hereof, the Administrative Agent shall (i) upon the direction of the
Lenders whose Revolving Credit Specified Percentages aggregate at least 51%,
terminate the Revolving Credit Commitment, and/or (ii) upon direction of the
Determining Lenders, declare the principal of and interest on the Advances and
all Obligations and other amounts owed under the Loan Documents to be forthwith
due and payable without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived, anything in the Loan Documents to the
contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in SECTION 8.1(f)
OR (g) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Revolving Credit
Commitment shall forthwith terminate, all without any action by the
Administrative Agent, any Lender or any holders of the Notes and without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the Administrative
Agent may (or, upon the direction of the Determining Lenders, shall) demand upon
the Borrower, and forthwith upon such demand (but in the case of an Event of
Default specified in SECTION 8.1(f) or (g) hereof, without any demand or taking
of any other action by the Administrative Agent or any other Lender), the
Borrower shall pay to the Administrative Agent in same day funds at the office
of the Administrative Agent in such demand for deposit in the L/C Cash
Collateral Account, an amount equal to the maximum amount available to be drawn
under the Letters of Credit then outstanding.
(d) Subject to the terms and provisions of the Loan Documents, the
Administrative Agent and the Lenders may exercise all of the post-default rights
granted to them under the Loan Documents or under Applicable Law.
(e) The rights and remedies of the Administrative Agent and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 9
CHANGES IN CIRCUMSTANCES
Section 9.1 LIBOR BASIS DETERMINATION INADEQUATE. If with respect to any
proposed LIBOR Advance for any Interest Period, any Lender determines that
(i) deposits in dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis
for such proposed LIBOR Advance does not adequately
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cover the cost to such Lender of making and maintaining such proposed LIBOR
Advance for such Interest Period, such Lender shall forthwith give notice
thereof to the Borrower, whereupon until such Lender notifies the Borrower that
the circumstances giving rise to such situation no longer exist, the obligation
of such Lender to make LIBOR Advances shall be suspended.
Section 9.2 ILLEGALITY. If any applicable law, rule or regulation, or
any change therein or adoption thereof, or interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for such Lender (or its LIBOR
Lending Office) to make, maintain or fund its LIBOR Advances, such Lender shall
so notify the Borrower, and the Administrative Agent. Before giving any notice
to the Borrower pursuant to this Section, the notifying Lender shall designate a
different LIBOR Lending Office or other lending office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of the
Lender, be materially disadvantageous to the Lender or contrary to its policies.
Upon receipt of such notice by the Borrower, notwithstanding anything contained
in ARTICLE 2 hereof, the Borrower shall repay in full the then outstanding
principal amount of each LIBOR Advance owing to the notifying Lender, together
with accrued interest thereon, on either (a) the last day of the Interest Period
applicable to such Advance, if the Lender may lawfully continue to maintain and
fund such Advance to such day, or (b) immediately, if the Lender may not
lawfully continue to fund and maintain such Advance to such day. Concurrently
with repaying each affected LIBOR Advance owing to such Lender, notwithstanding
anything contained in ARTICLE 2 hereof, the Borrower may borrow a Base Rate
Advance from such Lender, and such Lender shall make such Base Rate Advance, in
an amount such that the outstanding principal amount of the Advances owing to
such Lender shall equal the outstanding principal amount of the Advances owing
immediately prior to such repayment, and such Base Rate Advance shall be payable
on the same date or dates as the affected LIBOR Advances of such Lender would
have otherwise been due and payable but for this SECTION 9.2.
Section 9.3 INCREASED COSTS.
(a) If any applicable law, rule or regulation, or any change in or
adoption of any law, rule or regulation, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or compatible
agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any
Tax (net of any tax benefit engendered thereby) with respect to its LIBOR
Advances or its obligation to make such Advances, or shall change the basis
of taxation of payments to a Lender (or to its LIBOR Lending Office) of the
principal of or interest on its LIBOR Advances or in respect of any other
amounts due under this Agreement, as the case may be, or its obligation to
make such Advances (except for changes in the rate of tax on the overall
net income, net worth or capital of the Lender and franchise taxes, doing
business taxes or minimum taxes imposed upon such Lender); or
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(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, a
Lender's LIBOR Lending Office or shall impose on the Lender (or its LIBOR
Lending Office) or on the United States market for certificates of deposit
or the London interbank market any other condition affecting its LIBOR
Advances or its obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material, then, within 15 days after demand by a Lender, the Borrower agrees to
pay to such Lender such additional amount as will compensate such Lender for
such increased costs or reduced amounts, subject to SECTION 11.9 hereof. The
affected Lender will as soon as practicable notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a different
LIBOR Lending Office or other lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the sole
judgment of the affected Lender made in good faith, be disadvantageous to such
Lender.
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be conclusive in the absence of manifest error. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods. If a Lender demands compensation under this Section, the
Borrower may at any time, upon at least five Business Days' prior notice to the
Lender given by the Borrower, after reimbursement to the Lender by the Borrower
in accordance with this Section of all costs incurred, prepay in full the then
outstanding LIBOR Advances of the Lender, together with accrued interest thereon
to the date of prepayment, along with any reimbursement required under
SECTION 2.9 hereof. Concurrently with prepaying such LIBOR Advances, the
Borrower shall borrow a Base Rate Advance from the Lender, and the Lender shall
make such Base Rate Advance, in an amount such that the outstanding principal
amount of the Advances owing to such Lender shall equal the outstanding
principal amount of the Advances owing immediately prior to such prepayment, and
such Base Rate Advance shall be payable on the same date or dates as the LIBOR
Advances of such Lender would have otherwise been due and payable but for this
SECTION 9.3.
Section 9.4 BASE RATE ADVANCES RATHER THAN LIBOR ADVANCES. If notice has
been given pursuant to SECTION 9.1, 9.2 OR 9.3 hereof suspending the obligation
of a Lender to make LIBOR Advances, or requiring LIBOR Advances of a Lender to
be repaid or prepaid, then, unless and until the Lender notifies the Borrower
that the circumstances giving rise to such repayment no longer apply, all
Advances which would otherwise be made by such Lender as LIBOR Advances shall be
made instead as Base Rate Advances.
Section 9.5 CAPITAL ADEQUACY. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or
(b) compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital
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required or expected to be maintained by a Lender or any corporation controlling
such Lender, and such Lender determines that the amount of such capital is
increased by or based upon the existence of such Lender's Commitments or
Advances hereunder and other commitments or advances of such Lender of this
type, then, upon demand by such Lender upon the Borrower, subject to
SECTION 11.9, the Borrower shall immediately pay to such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender with respect to such circumstances, to the extent that such Lender
reasonably determines in good faith such increase in capital to be allocable to
the existence of such Lender's Commitments hereunder. A certificate as to such
amounts submitted to the Borrower by a Lender hereunder, shall, in the absence
of manifest error, be conclusive and binding for all purposes.
ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 AGREEMENT AMONG LENDERS. The Lenders agree among themselves
that:
(a) ADMINISTRATIVE AGENT. Each Lender hereby appoints the Administrative
Agent as its nominee in its name and on its behalf, to receive all documents and
items to be furnished hereunder; to act as nominee for and on behalf of all
Lenders under the Loan Documents; to, except as otherwise expressly set forth
herein, take such action as may be requested by the Determining Lenders,
provided that, unless and until the Administrative Agent shall have received
such requests, the Administrative Agent may take such administrative action, or
refrain from taking such administrative action, as it may deem advisable and in
the best interests of the Lenders; to arrange the means whereby the proceeds of
the Advances of the Lenders are to be made available to the Borrower; to
distribute promptly to each Lender information, requests and documents received
from the Borrower, and each payment (in like funds received) with respect to any
of such Lender's Advances, fee or other amount; and to deliver to the Borrower
requests, demands, approvals and consents received from the Lenders.
Administrative Agent agrees to promptly distribute to each Lender, at such
Lender's address set forth below information, requests, documents and payments
received from the Borrower. Neither the Administrative Agent nor any Co-Agent
shall have any fiduciary relationship in respect of any Lender by reason of this
Agreement or any other Loan Document. The Administrative Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
The duties of the Administrative Agent under the Loan Documents are merely
mechanical and administrative in nature.
(b) REPLACEMENT OF ADMINISTRATIVE AGENT. Should the Administrative Agent
or any successor Administrative Agent ever cease to be a Lender hereunder, or
should the Administrative Agent or any successor Administrative Agent ever
resign as Administrative Agent, or should the Administrative Agent or any
successor Administrative Agent ever be removed with cause or without cause by
the action of all Lenders (other than the Administrative Agent), then the Lender
appointed by the other Lenders (with the consent of the Borrower, which consent
shall not be unreasonably withheld) shall forthwith become the Administrative
Agent, and the Borrower and the Lenders shall execute such documents as any
Lender may reasonably request to reflect such change. If the Administrative
Agent also then serves in the capacity of the Issuing Bank, such resignation or
removal shall constitute resignation or removal
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of the Issuing Bank and the successor Administrative Agent shall serve in the
capacity of the Issuing Bank; provided, however, if the Administrative Agent
also serves in the capacity of the Issuing Bank and no successor Administrative
Agent is appointed, the retiring Administrative Agent shall remain as the
Issuing Bank. Any resignation or removal of the Administrative Agent or any
successor Administrative Agent shall become effective upon the appointment by
the Lenders of a successor Administrative Agent; provided, however, if no
successor Administrative Agent shall have been so appointed and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent's giving of notice of resignation or the Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the Laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as the Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
the Loan Documents, provided that if the retiring or removed Administrative
Agent is unable to appoint a successor Administrative Agent, the Administrative
Agent shall, after the expiration of a 60 day period from the date of notice, be
relieved of all obligations as Administrative Agent hereunder. Notwithstanding
any Administrative Agent's resignation or removal hereunder, the provisions of
this Article shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Administrative Agent under this
Agreement.
(c) EXPENSES. Each Lender shall pay its pro rata share, based on its
Total Specified Percentage, of any expenses paid by the Administrative Agent
directly and solely in connection with any of the Loan Documents if
Administrative Agent does not receive reimbursement therefor from other sources
within 60 days after the date incurred, unless payment of such fees is being
diligently disputed by such Lender or the Borrower in good faith. Any amount so
paid by the Lenders to the Administrative Agent shall be returned by the
Administrative Agent pro rata to each paying Lender to the extent later paid by
the Borrower or any other Person on the Borrower's behalf to the Administrative
Agent.
(d) DELEGATION OF DUTIES. The Administrative Agent may execute any of its
duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.
(e) RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent and its
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Agent. The Administrative Agent may, in its
reasonable judgment, deem and treat the payee of any Note as the owner thereof
for all purposes hereof.
(f) LIMITATION OF ADMINISTRATIVE AGENT'S LIABILITY. Neither the
Administrative Agent nor any of its officers, directors, employees, attorneys or
agents shall be liable for any action
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taken or omitted to be taken by it or them hereunder in good faith and
reasonably believed by it or them to be within the discretion or power conferred
to it or them by the Loan Documents or be responsible for the consequences of
any error of judgment, except for its or their own gross negligence or wilful
misconduct. Except as aforesaid, the Administrative Agent shall be under no
duty to enforce any rights with respect to any of the Advances, or any security
therefor. The Administrative Agent shall not be compelled to do any act
hereunder or to take any action towards the execution or enforcement of the
powers hereby created or to prosecute or defend any suit in respect hereof,
unless indemnified to its satisfaction against loss, cost, liability and
expense. The Administrative Agent shall not be responsible in any manner to any
Lender for the effectiveness, enforceability, genuineness, validity or due
execution (other than its own due execution) of any of the Loan Documents by any
other Person, or for any representation, warranty, document, certificate, report
or statement made herein or furnished in connection with any Loan Documents by
any other Person, or be under any obligation to any Lender to ascertain or to
inquire as to the performance or observation of any of the terms, covenants or
conditions of any Loan Documents on the part of the Borrower. TO THE EXTENT NOT
REIMBURSED BY THE BORROWER, EACH LENDER HEREBY INDEMNIFIES AND HOLDS HARMLESS
THE ADMINISTRATIVE AGENT AND EACH CO-AGENT, PRO RATA ACCORDING TO ITS TOTAL
SPECIFIED PERCENTAGE, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND/OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, ASSERTED
AGAINST, OR INCURRED BY THE ADMINISTRATIVE AGENT (IN ITS CAPACITY AS
ADMINISTRATIVE AGENT AND NOT AS A LENDER) OR ANY CO-AGENT (IN ITS CAPACITY AS A
CO-AGENT AND NOT AS A LENDER) IN ANY WAY WITH RESPECT TO ANY LOAN DOCUMENTS OR
ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT (IN ITS CAPACITY AS
ADMINISTRATIVE AGENT AND NOT AS A LENDER) OR ANY CO-AGENT (IN ITS CAPACITY AS A
CO-AGENT AND NOT AS A LENDER) UNDER THE LOAN DOCUMENTS (INCLUDING ANY NEGLIGENT
ACTION OF THE ADMINISTRATIVE AGENT OR ANY CO-AGENT), EXCEPT TO THE EXTENT THE
SAME RESULT FROM GROSS NEGLIGENCE OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE
AGENT OR ANY CO-AGENT.
(g) LIABILITY AMONG LENDERS. No Lender shall incur any liability (other
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.
(h) RIGHTS AS LENDER. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the Administrative Agent shall have
the same rights as a Lender and may exercise the same as though it were not the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower and any of their Affiliates, and any Person who may do
business with or own securities of the Borrower or any of their Affiliates, all
as if the Administrative Agent were not the Administrative Agent hereunder and
without any duty to account therefor to the Lenders.
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Section 10.2 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based upon the financial statements referred to in
SECTIONS 4.1(j), 6.1 AND 6.2 hereof, and such other documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Administrative Agent or any other Lender and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
Section 10.3 BENEFITS OF ARTICLE. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders; consequently, no
Person shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Agent or any Lender to comply with
such provisions.
ARTICLE 11
MISCELLANEOUS
Section 11.1 NOTICES.
(a) All notices and other communications under this Agreement shall be in
writing and shall be deemed to have been given on the date personally delivered
or sent by telecopy (answerback received), or three days after deposit in the
mail, designated as certified mail, return receipt requested, postage-prepaid,
or one day after being entrusted to a reputable commercial overnight delivery
service, or one day after being delivered to the telegraph office or sent out by
telex addressed to the party to which such notice is directed at its address
determined as provided in this Section. All notices and other communications
under this Agreement shall be given to the parties hereto at the following
addresses:
(i) If to the Borrower, at:
Sun Healthcare Group, Inc.
101 Sun Lane, N.E.
Albuquerque, New Mexico 87109
Attn: Chief Financial Officer
(ii) If to the Administrative Agent, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Steven A. Deily, Senior Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
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(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 EXPENSES. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative Agent in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of Advances and the issuance of Letters of Credit
hereunder, including without limitation the reasonable fees and disbursements of
Special Counsel;
(b) all reasonable out-of-pocket expenses and attorneys' fees of the
Administrative Agent in connection with the administration of the transactions
contemplated in this Agreement and the other Loan Documents and the preparation,
negotiation, execution and delivery of any waiver, amendment or consent by the
Lenders relating to this Agreement or the other Loan Documents; and
(c) all costs, out-of-pocket expenses and attorneys' fees (including the
reasonable allocated costs of in-house counsel) of the Administrative Agent and
each Lender incurred for enforcement, collection, restructuring, refinancing and
"work-out", or otherwise incurred in obtaining performance under the Loan
Documents, and all costs and out-of-pocket expenses of collection if default is
made in the payment of the Notes, which in each case shall include without
limitation fees and expenses of consultants, counsel for the Administrative
Agent and any Lender, and administrative fees for the Administrative Agent.
Section 11.3 WAIVERS. The rights and remedies of the Lenders under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Agent or any Lender in exercising any right shall operate as
a waiver of such right. The Lenders expressly reserve the right to require
strict compliance with the terms of this Agreement in connection with any
funding of a request for an Advance and the Issuing Bank expressly reserves the
right to require strict compliance with the terms of this Agreement in
connection with any issuance of a Letter of Credit. In the event that any
Lender decides to fund an Advance or the Issuing Bank decides to issue a Letter
of Credit at a time when the Borrower is not in strict compliance with the terms
of this Agreement, such decision by such Lender shall not be deemed to
constitute an undertaking by the Lender to fund any further requests for
Advances or by the Issuing Bank to issue any additional Letters of Credit or
preclude the Lenders from exercising any rights available under the Loan
Documents or at law or equity. Any waiver or indulgence granted by the Lenders
shall not constitute a modification of this Agreement, except to the extent
expressly provided in such waiver or indulgence, or constitute a course of
dealing by the Lenders at variance with the terms of the Agreement such as to
require further notice by the Lenders of the Lenders' intent to require strict
adherence to the terms of the Agreement in the future. Any such actions shall
not in any way affect the ability of the Administrative Agent or the Lenders, in
their discretion, to exercise any rights available to them under this Agreement
or under any other agreement, whether or not the Administrative Agent or any of
the Lenders are a party thereto, relating to the Borrower.
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Section 11.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING. Any
material determination required or expressly permitted to be made by the
Administrative Agent or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be conclusive and binding on all parties.
Section 11.5 SET-OFF. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Indebtedness evidenced
by certificates of deposit, in each case whether matured or unmatured) and any
other Indebtedness at any time held or owing by such Lender or holder to or for
the credit or the account of the Borrower, against and on account of the
Obligations and other liabilities of the Borrower to such Lender or holder,
irrespective of whether or not (a) the Lender or holder shall have made any
demand hereunder, or (b) the Lender or holder shall have declared the principal
of and interest on the Advances and other amounts due hereunder to be due and
payable as permitted by SECTION 8.2 and although such obligations and
liabilities, or any of them, shall be contingent or unmatured. Any sums
obtained by any Lender or by any assignee, participant or subsequent holder of
any Note shall be subject to pro rata treatment according to its Total Specified
Percentage of all Obligations and other liabilities hereunder.
Section 11.6 ASSIGNMENT.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.
(b) No Lender shall be entitled to assign its interest in this Agreement,
its Notes or its Advances, except as hereinafter set forth.
(c) A Lender may at any time sell participations in all or any part of its
Advances (collectively, "PARTICIPATIONS") to any banks or other financial
institutions ("PARTICIPANTS") provided that (i) each such sale of a
Participation in any bank or other financial institution not an affiliate of the
selling Lender shall be subject to the prior written consent of the Borrower,
which consent shall not be unreasonably withheld, (ii) any Lender selling a
Participation to any bank or other financial institution not an Affiliate of the
selling Lender shall give the Administration Agent and the Borrower notice of
any such proposed sale no later than 10 days prior to any such sale, and
(iii) such Participation shall not confer on any Person (other than the parties
hereto) any right to vote on, approve or sign amendments or waivers, or any
other independent benefit or any legal or equitable right, remedy or other claim
under this Agreement or any other Loan Documents, other than the right to vote
on, approve, or sign amendments or waivers or consents with respect to items
that would result in (A) any increase in the commitment of any Participant; or
(B)(1) the extension of the date of maturity of, or (2) the extension of the due
date for any payment of principal, interest or fees respecting, or (3) the
reduction of the amount of any installment of principal or interest on or the
change or reduction of any mandatory reduction required hereunder, or (4) a
reduction of the rate of interest on, the Advances, the Letters of Credit, or
the Reimbursement Obligations, or change in Applicable
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Base Rate Margin or the Applicable LIBOR Rate Margin; or (C) the release of
security for the Obligations, including without limitation any guarantee; or
(D) the reduction of any fees payable hereunder. Notwithstanding the foregoing,
the Borrower agree that the Participants shall be entitled to the benefits of
ARTICLE 9 and SECTION 11.5 hereof as though they were Lenders and the Lenders
may provide copies of all financial information received from the Borrower to
such Participants. To the fullest extent it may effectively do so under
Applicable Law, the Borrower agree that any Participant may exercise any and all
rights of banker's lien, set-off and counterclaim with respect to this
Participation as fully as if such Participant were the holder of the Advances in
the amount of its Participation. Any Lender selling a Participation to an
Affiliate hereunder shall give prompt notice thereof to the Borrower and the
Administrative Agent.
(d) Each Lender may assign to one or more Eligible Assignees its rights
and obligations under this Agreement and the other Loan Documents; PROVIDED,
HOWEVER, that (i) each such assignment shall be subject to the prior written
consent of NationsBank of Texas, N.A. (which consent shall not be unreasonably
withheld), (ii) each such assignment shall be subject to the prior written
consent of the Administrative Agent and Borrower, which consent shall not be
unreasonably withheld (provided, however, notwithstanding anything herein to the
contrary, no consent of the Borrower shall be required for any assignment
(A) during any time that an Event of Default has occurred and is continuing,
(B) to an Affiliate of a Lender, or (C) to an existing Lender hereunder),
(iii) no such assignment shall be in an amount of Commitments less than
$10,000,000, unless the Commitments of the assigning Lender are less than
$10,000,000, in which case such assignment may be in an aggregate amount of such
Lender's Commitments, (iv) the assigning Lender, Administrative Agent and the
Eligible Assignee shall execute and deliver to the Administrative Agent an
Assignment and Acceptance Agreement (an "ASSIGNMENT AGREEMENT") in substantially
the form of EXHIBIT H hereto, together with the Notes subject to such
assignment, (v) the Eligible Assignee or the assigning Lender, as the case may
be, shall deliver to the Administrative Agent a processing fee of $3,500, and
(vi) except as otherwise waived by the Borrower, the Administrative Agent shall
give the Borrower notice of any proposed assignment no later than 10 days prior
to any assignment. Upon such execution, delivery and acceptance from and after
the effective date specified in each Assignment, which effective date shall be
at least three Business Days after the execution thereof, (A) the Eligible
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment, have
the rights and obligations of a Lender hereunder and (B) the Administrative
Agent shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment, relinquish such rights and be
released from such obligations under this Agreement.
(e) Notwithstanding anything in clause (d) above to the contrary, (i) any
Lender may assign and pledge all or any portion of its Advances and Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; and (ii) any Lender that is a fund may at
any time assign or pledge all or any portion of its rights under this Agreement
to secure such Lender's indebtedness; provided, however, that no such assignment
under this clause (e) shall release the assignor Lender from its obligations
hereunder.
(f) Upon the Borrower's receipt of an Assignment Agreement executed by
NationsBank and an Eligible Assignee, and any Note or Notes subject to such
assignment, the
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Borrower shall, within three Business Days after the Borrower's receipt of such
Assignment Agreement, at its own expense, execute and deliver to the
Administrative Agent in exchange for the surrendered Notes new Notes to the
order of such Eligible Assignee in an amount equal to the portion of the
Advances, Reimbursement Obligations and Commitments assigned to it pursuant to
such Assignment Agreement and new Notes to the order of the Administrative Agent
in an amount equal to the portion of the Advances and Commitment retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Notes, shall be dated the
effective date of such Assignment Agreement and shall otherwise be in
substantially the form of EXHIBIT A, B, C, or D hereto, as applicable.
(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this SECTION 11.6, disclose to
the Eligible Assignee or Participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower.
(h) Except as specifically set forth in this SECTION 11.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan documents.
(i) Notwithstanding anything in this SECTION 11.6 to the contrary, no
Eligible Assignee or Participant shall be entitled to receive any greater
payment under SECTION 2.15 or SECTION 9.3 than such assigning or participating
Lender or any other Lender would have been entitled to receive with respect to
the interest assigned or participated to such Eligible Assignee or Participant.
(j) THE REGISTER. The Administrative Agent shall maintain at its address
referred to in SECTION 11.1 a copy of each Assignment Agreement delivered to and
accepted by it and a register (the "REGISTER") for the recordation of the names
and addresses of the Lenders, the Specified Percentages of the Lenders, whether
such Lender is an original Lender or the assignee of another Lender pursuant to
an Assignment Agreement and the effective date and amount of each Assignment
Agreement delivered to and accepted by it and the parties thereto. The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes hereof. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
Section 11.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 SEVERABILITY. Any provision of this Agreement which is for
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without
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invalidating the remaining provisions hereof in such jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.
Section 11.9 INTEREST AND CHARGES. It is not the intention of any parties
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum Amount. If
any Lender or participant ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and if principal
is paid in full, any remaining excess shall be paid to the Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrower and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread in equal parts, the total amount of interest
throughout the entire contemplated term of the Obligations so that the interest
rate is uniform throughout the entire term of the Obligations; provided,
however, that if the Obligations are paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Amount, the Lenders shall
refund to the Borrower the amount of such excess or credit the amount of such
excess against the total principal amount of the Obligations owing, and, in such
event, to the extent permitted by Applicable Law, the Lenders shall not be
subject to any penalties provided by any laws for contracting for, charging or
receiving interest in excess of the Maximum Amount. This Section shall control
every other provision of all agreements pertaining to the transactions
contemplated by or contained in the Loan Documents.
Section 11.10 HEADINGS. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 11.11 AMENDMENT AND WAIVER. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrower and the Determining Lenders; provided, however, that no such amendment,
modification or waiver shall be made (a) without the consent of all Lenders, if
it would (i) increase the Specified Percentage or commitment of any Lender, or
(ii) extend the date of maturity of, extend the due date for any payment of
principal or interest on, reduce the amount of any installment of principal or
interest on, or reduce the rate of interest on, any Advance, the Reimbursement
Obligations or reduce the rate of or extend the due date of any fee payable
hereunder or extend the due date of any other amount owing under any Loan
Documents, or (iii) release any security for or guaranty of the Obligations
(except pursuant to this Agreement) or otherwise amend any Collateral Documents
in a manner which would adversely affect the rights of the Lenders , or
(iv) reduce the fees payable hereunder, or (v) revise this SECTION 11.11, or
(vi) waive the date for payment of any of the Obligations, or (vii) amend the
definition of "Determining Lenders", "Revolving Credit Specified Percentage",
"Facility A Term Loan Specified Percentage", "Facility B Term Loan Specified
Percentage" or "Facility C Term Loan Specified Percentage" or "Total Specified
Percentage"; or (viii) amend the definition of "Maturity Date" or otherwise
extend the Maturity Date; (b) without the consent of the Administrative Agent,
if it would alter the rights, duties or obligations of the Administrative Agent;
or (c) without the consent of the Issuing Bank, if it
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would alter the rights, duties or obligations of the Issuing Bank.
Notwithstanding anything in this Agreement to the contrary, no amendment, waiver
or consent (a) that changes the allocations of payments between the Facility A
Term Loan Advances, the Facility B Term Loan Advances and the Facility C Term
Loan Advances may be made without the express written consent of the following:
the Lenders holding more than 50% of all outstanding Facility A Term Loan
Advances, the Lenders holding at least 50% of all outstanding Facility B Term
Loan Advances, and the Lenders holding at least 50% of all outstanding
Facility C Term Loan Advances, or (b) with respect to SECTION 2.5(c), 2.5(d), or
2.5(e) shall be made without the consent of any combination of Lenders whose
Total Specified Percentages aggregate at least 66-2/3%. Neither this Agreement
nor any term hereof may be amended orally, nor may any provision hereof be
waived orally but only by an instrument in writing signed by the Administrative
Agent and, in the case of an amendment, by the Borrower.
Section 11.12 EXCEPTION TO COVENANTS. Neither the Borrower nor any of its
Subsidiaries shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
Section 11.13 NO LIABILITY OF ISSUING BANK. The Borrower assumes all risks
of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for any payment made upon the
Issuing Bank's gross negligence or willful misconduct; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, EXCEPT that the Borrower shall have a claim against the Issuing Bank,
and the Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the
Borrower proves were caused by (i) the Issuing Bank's willful misconduct or
gross negligence or (ii) the Issuing Bank's willful failure to make lawful
payment under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
Section 11.14 CONFIDENTIALITY. Each Lender and the Administrative Agent
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrower pursuant to
this Agreement which is identified by the Borrower as being confidential at the
time the same is delivered to the Lenders or the Administrative Agent, provided
that nothing herein shall limit the disclosure of any such information (a) to
the extent required by statute, rule, regulation or judicial process,
- 78 -
<PAGE>
(b) to counsel for any Lender or the Administrative Agent, (c) to bank
examiners, regulatory bodies, auditors or accountants of any Lender, (d) to the
Administrative Agent or any Lender or any affiliate of any Lender, (e) in
connection with any litigation to which any one or more of the Lenders is a
party, (f) to the extent necessary in connection with the exercise of any rights
or remedies under this Agreement or any other Loan Document, provided, further,
that, unless specifically prohibited by Applicable Law or court order, each
Lender shall, prior to disclosure thereof, notify the Borrower of any request
for disclosure of any such non-public information (i) by any governmental agency
or representative thereof (other than any such request in connection with an
examination of such Lender's financial condition by such governmental agency) or
(ii) pursuant to legal process, or (g) to any Eligible Assignee or Participant
(or prospective Eligible Assignee or Participant) or to any direct or indirect
contractual counterparties in swap agreements or to the professional advisors of
such swap counterparties so long as such Eligible Assignee or Participant (or
prospective Eligible Assignee or Participant) or direct or indirect contractual
counterparties in swap agreements or such swap counterparties' professional
advisors agree to handle such information confidentially.
Section 11.15 NO NOVATION. This Agreement is not a novation of the
"Obligations" (as defined in the Existing Credit Agreement). All terms and
provisions of this Agreement supersede in their entirety the Existing Credit
Agreement. All Liens covering the Collateral, or any part thereof, under the
collateral documents executed in connection with the Existing Credit Agreement
shall remain valid, binding and enforceable Liens against the Persons which
granted such Liens.
Section 11.16 NO DUTIES OF CO-AGENTS. The Borrower and the Lenders
acknowledge that the Co-Agents have no duties, responsibilities or liabilities
in their capacities as Co-Agents hereunder.
SECTION 11.17 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO ARTICLE 5069-15.10(b), TITLE 79,
REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, IT IS AGREED THAT THE
PROVISIONS OF CHAPTER 15, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER AGREES THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE PERFORMABLE IN
DALLAS COUNTY, TEXAS.
SECTION 11.18 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
- 79 -
<PAGE>
THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO
THIS AGREEMENT AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.19 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- 80 -
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
SUN HEALTHCARE GROUP, INC.
By:
-----------------------------------------------
Robert Woltil
Senior Vice President/Chief Financial Officer
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent, a Lender and as Issuing Bank
By:
-----------------------------------------------
Steven A. Deily
Senior Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Steven A. Deily
Senior Vice President
BANK OF AMERICA NT&SA, as a Co-Agent and as a
Lender
By:
-----------------------------------------------
Anthony L. Trunzo
Vice President
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Lucy B. Nixon
- 81 -
<PAGE>
SCOTIABANC INC., as a Co-Agent and as a Lender
By:
-----------------------------------------------
Dana Maloney
Relationship Manager
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308-2214
Attn: Dana Maloney
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as a Co-Agent and as a Lender
By:
-----------------------------------------------
John E. Beckwith
Vice President
US Corporate Banking Division
1251 Avenue of the Americas, 12th Floor
New York, New York 10020-1104
CREDIT LYONNAIS NEW YORK BRANCH, as a Co-Agent and
as a Lender
By:
-----------------------------------------------
Farboud Tavangar
First Vice President
1301 Avenue of the Americas, 18th Floor
New York, New York 10019-6022
Attn: Evan S. Wasser
Vice President
- 82 -
<PAGE>
CREDIT SUISSE FIRST BOSTON, as a Co-Agent and as a
Lender
By:
-----------------------------------------------
Robert B. Potter
Vice President
By:
-----------------------------------------------
Christian Bourqui
Associate
11 Madison Avenue, 20th Floor
New York, New York 10010
Attn: Robert B. Potter
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS
ANGELES AGENCY, as a Co-Agent and as a Lender
By:
-----------------------------------------------
Koh Takemoto
General Manager
350 South Grand Avenue, Suite 3000
Los Angeles, California 90071
Attn: Koji Toriumi
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
Co-Agent and as a Lender
By:
-----------------------------------------------
James F. Condon
60 Wall Street, 22nd Floor
New York, New York 10260
Attn: James F. Condon
PNC BANK, NATIONAL ASSOCIATION,
as a Co-Agent and as a Lender
- 83 -
<PAGE>
By:
-----------------------------------------------
Karen M. George
Vice President
2 PNC Plaza - 2nd Floor
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Attn: Karen George
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH,
as a Co-Agent and as a Lender
By:
-----------------------------------------------
Robert M. Mandula
Vice President
By:
-----------------------------------------------
W. Jeffrey Vollack
Senior Credit Officer, Vice President
245 Park Avenue
New York, New York 10167-0062
Attn: Corporate Services Department
with a copy to:
13355 Noel Road
One Galleria Tower, Suite 1000
Dallas, Texas 75240
Attn: Karl F. Propst
- 84 -
<PAGE>
THE SUMITOMO BANK, LIMITED, as a Co-Agent and as a
Lender
By:
-----------------------------------------------
Goro Hirai
Joint General Manager
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attn: Gary Perkins
LEHMAN COMMERCIAL PAPER, INC.
By:
-----------------------------------------------
Michele Swanson
Authorized Signatory
3 World Financial Center, 8th Floor
New York, New York 10285
Attn: Joseph McHugh
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
-----------------------------------------------
Kathleen Lynch
Managing Director
1295 State Street, 1st Floor
Springfield, Massachusetts 01111
Attn: Steven J. Katz
- 85 -
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
By:
-----------------------------------------------
James R. Dingler
Assistant Vice President
334 Madison Avenue
Convent Station, New Jersey 07961-0633
Attn: Frank Monfalcone
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase Manhattan Bank)
By:
-----------------------------------------------
James P. Ferguson
Managing Director
380 Madison Avenue, 12th Floor
New York, New York 10017
Attn: James P. Ferguson
KZH HOLDING CORPORATION III
By:
-----------------------------------------------
Virginia R. Conway
Authorized Agent
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
- 86 -
<PAGE>
PARIBAS CAPITAL FUNDING LLC
By:
-----------------------------------------------
Jeffrey Yale
Director
787 7th Avenue, 32nd Floor
New York, New York 10019
Attn: Francois Gauvin
with a copy to:
Richard Wagman
State Street Bank & Trust Co.
Two International Place
Boston, Massachusetts 02110
Telephone: (617) 664-5410
Fax: (617) 664-5366/67/68
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: PPM America, Inc., as Attorney-in-Fact, on
behalf of Jackson National Life Insurance
Company
By:
-----------------------------------------------
Bruce D. Gorchow
Executive Vice President
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attn: Michael DiRe or Guy Petrelli
Private Placements
- 87 -
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME
TRUST
By:
-----------------------------------------------
Jeffrey W. Maillet
Senior Vice President and Director
One Parkview Plaza
Oakbrook Terrace, Illinois 60602
Attn: Jeffrey W. Maillet
PFL LIFE INSURANCE COMPANY
By:
-----------------------------------------------
Gregory W. Theobald
Vice President and Assistant Secretary
c/o AEGON USA Investment Management, Inc.
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-5335
Attn: John Bailey
PEOPLES SECURITY LIFE INSURANCE
COMPANY
By:
-----------------------------------------------
Frederick B. Howard
Second Vice President-Investments
Peoples Security Life Insurance Company
c/o AEGON USA Investment Management, Inc.
400 West Market Street
Louisville, Kentucky 40202
Attn: Securities Department - 10th Floor
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
- 88 -
<PAGE>
By:
-----------------------------------------------
Richard A. Strait
Vice President
720 East Wisconsin Avenue
Milwaukee, Wisconsin
Attn: Securities Department
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P., its General
Partner
By: Oak Hill Securities MGP, Inc., its General
Partner
By:
-----------------------------------------------
Scott Krase
Vice President
c/o Oak Hill Advisors
Park Avenue Tower
65 East 55th Street, 32nd Floor
New York, New York 10022
Attn: Scott Krase
- 89 -
<PAGE>
ROYALTON COMPANY
By: Pacific Investment Management Company, as its
Investment Advisor
By:
-----------------------------------------------
Benjamin Trosky
Managing Director
840 Newport Center Drive
Newport Beach, California 92656
Attn: Jason Rosiak
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:
-----------------------------------------------
Gilles Marchand, CFA
Authorized Signatory
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
SENIOR HIGH INCOME PORTFOLIO, INC.
By:
-----------------------------------------------
Gilles Marchand, CFA
Authorized Signatory
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
DEBT STRATEGIES FUND, INC.
- 90 -
<PAGE>
By:
-----------------------------------------------
Gilles Marchand, CFA
Authorized Signatory
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
CANADIAN IMPERIAL BANK OF COMMERCE
By:
-----------------------------------------------
William Swenson
Managing Director
51 JFK Parkway
Short Hills, New Jersey 07078
BANKBOSTON, N.A.
By:
-----------------------------------------------
Alexander Aikens
Managing Director
100 Federal Street, Mail Stop: 01-08-05
Boston, Massachusetts 02110
- 91 -
<PAGE>
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.,
as Attorney-In-Fact and on behalf of FAFLIC
By:
-----------------------------------------------
Philip Robbins
Assistant Vice President
125 High Street, 14th Floor
Boston, Massachusetts 02110
Attn: Philip Robbins
with a copy to:
State Street Bank & Trust
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
Attn: John Tavares, for the account of FAFLIC
PRIME INCOME TRUST
By:
-----------------------------------------------
Rafael Scolari
c/o Dean Witter InterCapital, Inc.
Two World Trade Center, 72nd Floor
New York, New York 10048
Attn: Louis A. Pistecchia
- 92 -
<PAGE>
DEEPROCK & CO.
By: Eaton Vance Management, as Investment
Advisor
By:
-----------------------------------------------
Scott H. Page
Vice President
24 Federal Street
Boston, Massachusetts 02110
FRANKLIN FLOATING RATE TRUST
By:
-----------------------------------------------
Chauncey Lufkin
Vice President and Portfolio Manager
777 Mariners Island Boulevard, 7th Floor
San Mateo, California 94404
ORIX USA CORPORATION
By:
-----------------------------------------------
Hiroyuki Miyauchi
Executive Vice President
780 Third Avenue, 48th Floor
New York, New York 10017-7088
Attn: Kiyomi Kosaka
Vice President
- 93 -
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By:
-----------------------------------------------
Daniel A. Norman
Senior Vice President
c/o Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4424
NORTHERN LIFE INSURANCE COMPANY
By:
-----------------------------------------------
James V. Wittich
Assistant Treasurer
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401
Attn: Tim Warrick
MORGAN STANLEY SENIOR FUNDING, INC.
By:
-----------------------------------------------
Christopher A. Pucillo
Vice President
1585 Broadway, 10th Floor
New York, New York 10036
Attn: James Morgan
- 94 -
<PAGE>
ING HIGH INCOME PRINCIPAL
PRESERVATION OFFERING, L.P.
By: ING Capital Advisors, Inc., as Investment
Advisor
By:
-----------------------------------------------
Kathleen Lenarcic
Vice President and Portfolio Manager
c/o ING Capital Advisors, Inc.
333 South Grand Avenue, Suite 4250
Los Angeles, California 90071
- 95 -
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
Dallas, Texas $_______________ October 8, 1997
SUN HEALTHCARE GROUP, INC., a Delaware corporation (the "Borrower"), for
value received, promises to pay to the order of ____________________________
("Lender"), or its registered assigns, at the principal office of NationsBank of
Texas, N.A., in lawful money of the United States of America, the principal sum
of _____________________________ ($_______________), or such lesser sum as shall
be due and payable from time to time hereunder, as hereinafter provided,
together with interest, as hereinafter provided. All terms used but not defined
herein shall have the meanings set forth in the Credit Agreement described
below.
Principal of and interest on the unpaid principal balance of Revolving
Credit Advances under this Revolving Credit Note from time to time outstanding
shall be due and payable as set forth in the Credit Agreement.
This Revolving Credit Note is issued pursuant to and evidences Revolving
Credit Advances under a Credit Agreement, dated as of October 8, 1997, among the
Borrower, NationsBank of Texas, N.A., as Administrative Agent, and the lenders
parties thereto (as amended, restated, supplemented, renewed, extended or
otherwise modified from time to time, "Credit Agreement"), to which reference is
made for a statement of the rights and obligations of the Lender and the duties
and obligations of the Borrower in relation thereto; but neither this reference
to the Credit Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the Borrower to pay the principal sum
of and interest on this Revolving Credit Note when due.
The Borrower and all endorsers, sureties and guarantors of this Revolving
Credit Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of intention to accelerate the maturity of this
Revolving Credit Note, diligence in collecting, the bringing of any suit against
any party and any notice of or defense on account of any extensions, renewals,
partial payments or changes in any manner of or in this Revolving Credit Note or
in any of its terms, provisions and covenants, or any releases or substitutions
of any security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.
THIS REVOLVING CREDIT NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES
<PAGE>
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SUN HEALTHCARE GROUP, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
-2-
<PAGE>
EXHIBIT B
FACILITY A TERM LOAN NOTE
Dallas, Texas $_______________ October 8, 1997
SUN HEALTHCARE GROUP, INC., a Delaware corporation (the "Borrower"), for
value received, promises to pay to the order of _______________________________
("Lender"), or its registered assigns, at the principal office of NationsBank of
Texas, N.A., in lawful money of the United States of America, the principal sum
of _____________________________ ($_______________), or such lesser sum as shall
be due and payable from time to time hereunder, as hereinafter provided,
together with interest, as hereinafter provided. All terms used but not defined
herein shall have the meanings set forth in the Credit Agreement described
below.
Principal of and interest on the unpaid principal balance of Facility A
Term Loan Advances under this Facility A Term Loan Note from time to time
outstanding shall be due and payable as set forth in the Credit Agreement.
This Facility A Term Loan Note is issued pursuant to and evidences
Facility A Term Loan Advances under a Credit Agreement, dated as of October 8,
1997, among the Borrower, NationsBank of Texas, N.A., as Administrative Agent,
and the lenders parties thereto (as amended, restated, supplemented, renewed,
extended or otherwise modified from time to time, "Credit Agreement"), to which
reference is made for a statement of the rights and obligations of the Lender
and the duties and obligations of the Borrower in relation thereto; but neither
this reference to the Credit Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrower to pay the
principal sum of and interest on this Facility A Term Loan Note when due.
The Borrower and all endorsers, sureties and guarantors of this Facility A
Term Loan Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of intention to accelerate the maturity of this
Facility A Term Loan Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Facility A
Term Loan Note or in any of its terms, provisions and covenants, or any releases
or substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
THIS FACILITY A TERM LOAN NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES
<PAGE>
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SUN HEALTHCARE GROUP, INC.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
-2-
<PAGE>
EXHIBIT C
FACILITY B TERM LOAN NOTE
Dallas, Texas $_______________ October 8, 1997
SUN HEALTHCARE GROUP, INC., a Delaware corporation (the "Borrower"), for
value received, promises to pay to the order of ____________________________
("Lender"), or its registered assigns, at the principal office of NationsBank of
Texas, N.A., in lawful money of the United States of America, the principal sum
of _____________________________ ($_______________), or such lesser sum as shall
be due and payable from time to time hereunder, as hereinafter provided,
together with interest, as hereinafter provided. All terms used but not defined
herein shall have the meanings set forth in the Credit Agreement described
below.
Principal of and interest on the unpaid principal balance of Facility B
Term Loan Advances under this Facility B Term Loan Note from time to time
outstanding shall be due and payable as set forth in the Credit Agreement.
This Facility B Term Loan Note is issued pursuant to and evidences
Facility B Term Loan Advances under a Credit Agreement, dated as of October 8,
1997, among the Borrower, NationsBank of Texas, N.A., as Administrative Agent,
and the lenders parties thereto (as amended, restated, supplemented, renewed,
extended or otherwise modified from time to time, "Credit Agreement"), to which
reference is made for a statement of the rights and obligations of the Lender
and the duties and obligations of the Borrower in relation thereto; but neither
this reference to the Credit Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrower to pay the
principal sum of and interest on this Facility B Term Loan Note when due.
The Borrower and all endorsers, sureties and guarantors of this Facility B
Term Loan Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of intention to accelerate the maturity of this
Facility B Term Loan Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Facility B
Term Loan Note or in any of its terms, provisions and covenants, or any releases
or substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
THIS FACILITY B TERM LOAN NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES
<PAGE>
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SUN HEALTHCARE GROUP, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
-2-
<PAGE>
EXHIBIT D
FACILITY C TERM LOAN NOTE
Dallas, Texas $_______________ October 8, 1997
SUN HEALTHCARE GROUP, INC., a Delaware corporation (the "Borrower"), for
value received, promises to pay to the order of _____________________________
("Lender"), or its registered assigns, at the principal office of NationsBank of
Texas, N.A., in lawful money of the United States of America, the principal sum
of _____________________________ ($_______________), or such lesser sum as shall
be due and payable from time to time hereunder, as hereinafter provided,
together with interest, as hereinafter provided. All terms used but not defined
herein shall have the meanings set forth in the Credit Agreement described
below.
Principal of and interest on the unpaid principal balance of Facility C
Term Loan Advances under this Facility C Term Loan Note from time to time
outstanding shall be due and payable as set forth in the Credit Agreement.
This Facility C Term Loan Note is issued pursuant to and evidences
Facility C Term Loan Advances under a Credit Agreement, dated as of October 8,
1997, among the Borrower, NationsBank of Texas, N.A., as Administrative Agent,
and the lenders parties thereto (as amended, restated, supplemented, renewed,
extended or otherwise modified from time to time, "Credit Agreement"), to which
reference is made for a statement of the rights and obligations of the Lender
and the duties and obligations of the Borrower in relation thereto; but neither
this reference to the Credit Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrower to pay the
principal sum of and interest on this Facility C Term Loan Note when due.
The Borrower and all endorsers, sureties and guarantors of this Facility C
Term Loan Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of intention to accelerate the maturity of this
Facility C Term Loan Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Facility C
Term Loan Note or in any of its terms, provisions and covenants, or any releases
or substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
THIS FACILITY C TERM LOAN NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES
<PAGE>
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SUN HEALTHCARE GROUP, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
-2-
<PAGE>
EXHIBIT E
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of October 8, 1997 (this "AGREEMENT"), is
made by Sun Healthcare Group, Inc., a Delaware corporation ("DEBTOR"), in favor
of NationsBank of Texas, N.A., as Administrative Agent ("ADMINISTRATIVE AGENT")
for NationsBank of Texas, N.A. and each other lender a party to the Credit
Agreement described below (singly, a "SECURED PARTY" and collectively, the
"SECURED PARTIES").
RECITALS:
(1) Debtor, Secured Parties, and Administrative Agent have entered into a
Credit Agreement, dated as of October 8, 1997 (as the same may be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT"); the capitalized terms used herein and not otherwise defined herein
shall have the meaning given to them in the Credit Agreement.
(2) It is the intention of the parties hereto that this Agreement create a
first priority security interest in the Collateral (subject only to Permitted
Liens) securing the payment of the obligations set forth in SECTION 2 hereof.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and under the terms of the Credit Agreement, Debtor hereby
agrees with Administrative Agent for its benefit and the ratable benefit of
Secured Parties as follows:
1. ASSIGNMENT AND GRANT OF SECURITY. Debtor hereby assigns and pledges
to Administrative Agent for its benefit and for the ratable benefit of Secured
Parties, and hereby grants to Administrative Agent for its benefit and the
ratable benefit of Secured Parties a security interest in, all the entire right,
title and interest of Debtor, in and to the following, whether now owned or
hereafter acquired ("COLLATERAL"):
(a) any and all (i) agreements and notes and intercompany notes
representing indebtedness owing by any Subsidiary to Debtor (including, without
limitation, that certain Amended and Restated Line of Credit Agreement dated as
of October 8, 1997, among the Borrower and each of the Borrower's Restricted
Subsidiaries that may become party thereto form time to time, as the same may
from time to time be amended, modified, supplemented or restated), and (ii) that
certain promissory note dated as of September 30, 1995, in the principal
<PAGE>
amount of $12,500,000, executed by Liberty Healthcare Management Group, Inc.,
made payable to the order of Debtor (any and all such intercompany notes and
notes being the "NOTES"); and
(b) all cash and non-cash proceeds and products of any and all of the
foregoing Collateral (including, without limitation, proceeds which constitute
property of the types described in this SECTION 1) and, to the extent not
otherwise included, all payments under any indemnity, warranty or guaranty,
payable by reason of loss with respect to any of the foregoing Collateral.
2. SECURITY FOR OBLIGATIONS. This Agreement creates with respect to the
Notes, a first priority security interest securing the payment and performance
of (a) all present and future obligations, indebtedness and liabilities, and all
renewals and extensions of all or any part thereof of Debtor to Administrative
Agent, Lenders or any Lender (or any affiliate of any Lender) arising from, by
virtue of, or pursuant to the Credit Agreement, the Notes, and the other Loan
Documents, including any extensions, modifications, substitutions, amendments
and renewals of any thereof, including, without limitation, interest, fees and
other charges that would accrue or become owing both prior to and subsequent to
and but for the commencement of any proceeding against or with respect to any
Debtor or any other Person liable for, or whose property secures the performance
of, any of the indebtedness and obligations referred to in this SECTION 2 under
any chapter of the Bankruptcy Code of 1978, 11 U.S.C. Section 101 ET SEQ.
whether or not a claim is allowed for the same in any such proceeding, and (b)
all indebtedness and obligations incurred or arising pursuant to the provisions
of this Agreement. The indebtedness referred to in this SECTION 2 is
hereinafter sometimes called the "OBLIGATIONS".
Notwithstanding any contrary provision herein or in any other Loan
Document, Debtor's maximum liability hereunder shall not exceed the Maximum
Secured Indebtedness. Debtor agrees that the Obligations may at any time exceed
the aggregate Maximum Secured Indebtedness of all obligors on all or any part of
the Obligations, without affecting or impairing the obligation of Debtor.
"MAXIMUM SECURED INDEBTEDNESS" means, with respect to Debtor as of the date of
determination, the lesser of (a) the Obligations or (b) the maximum amount for
which Debtor may be liable under this Agreement without such amount and Debtor's
obligations under this Agreement with respect to such amount being deemed a
fraudulent transfer, as determined by a bankruptcy or similar court.
3. DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Administrative Agent of any
of the rights hereunder shall not release Debtor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) neither Administrative Agent nor any Secured Party shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Administrative Agent or any Secured Party be
obligated to perform any of the obligations or duties of Debtor thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.
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4. DELIVERY OF SECURITY COLLATERAL. All certificates or instruments
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of Administrative Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
Administrative Agent. In addition, Administrative Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants, with
respect to itself and the Collateral, as follows:
(a) The Notes have been delivered and pledged to Administrative Agent,
duly endorsed and accompanied by such duly executed instruments of transfer or
assignment as are necessary for such pledge, to be held as pledged collateral.
(b) Debtor is the legal and beneficial owner of its Collateral pledged by
it free and clear of any Lien, security interest, option or other charge or
encumbrance except for the security interest created by this Agreement. No
effective financing statement or other similar document used to perfect and
preserve a security interest under the Laws of any jurisdiction (a "FINANCING
STATEMENT") covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of Administrative
Agent relating to this Agreement.
(c) This Agreement and the pledge of the Collateral pursuant hereto
creates a valid and perfected security interest in the Collateral, securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interests have been duly taken
(or will be taken).
(d) No consent of any other Person and no authorization, approval or other
action by, and no notice to or filing (other than filing of financing statements
pursuant to the UCC) with, any governmental authority or regulatory body is
required (i) for the pledge by Debtor of the Collateral pledged by it hereunder,
for the grant by Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by Debtor, (ii) for the
perfection or maintenance of the pledge, assignment and security interest
created hereby (including the first priority nature of such pledge, assignment
and security interest) or (iii) for the exercise by Administrative Agent of the
rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement.
6. FURTHER ASSURANCES.
(a) Debtor agrees that it will, from time to time, at the expense of
Debtor, execute and deliver all further instruments and documents, and take all
further action, that may be reasonably necessary or reasonably desirable, or
that Administrative Agent may reasonably request, in order to perfect and
protect any pledge, assignment or security interest granted or
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purported to be granted hereby, and the priority thereof, or to enable
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral.
(b) Debtor hereby authorizes Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of Debtor where permitted by
Law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by Law.
(c) Debtor will furnish to Administrative Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Administrative Agent may
reasonably request, all in reasonable detail.
(d) In addition to such other information as shall be specifically
provided for herein, Debtor shall furnish to Administrative Agent such other
information with respect to the Collateral as Administrative Agent may
reasonably request from time to time in connection with the Collateral, or the
protection, preservation, maintenance or enforcement of the security interest or
the Collateral.
7. NOTES AND THE RESTRICTED ACCOUNTS. If any Event of Default shall have
occurred and be continuing, upon demand by Administrative Agent, until the
Obligations are paid in full and the Commitment has terminated:
(a) Debtor will maintain the accounts listed as restricted accounts on
SCHEDULE I (the "RESTRICTED ACCOUNTS") with Administrative Agent into which all
proceeds of the Notes shall be deposited, in the name of Debtor, but such
Restricted Accounts shall be owned by Administrative Agent and shall be under
the sole control and dominion of Administrative Agent.
(b) It shall be a term and condition of each Restricted Account,
notwithstanding any term or condition to the contrary in any other agreement
relating to such Restricted Account, that no amount (including interest and
other proceeds of the cash and other property in the Restricted Account) shall
be paid or released to or for the account of, or withdrawn by or for the account
of, the Debtor or any other Person from such Restricted Account.
(c) Debtor will promptly instruct each debtor in respect of the Notes to
make all payments to the Restricted Accounts.
(d) Debtor shall not adjust, settle or compromise the amount or payment of
any Note, release wholly or partly any account debtor or obligor thereof, or
allow any credit or discount thereon.
Debtor understands and acknowledges that Administrative Agent may and permits
Administrative Agent to remove amounts from the Restricted Accounts from time to
time and use the amounts to reduce the Obligations. Notwithstanding the
foregoing, upon Debtor's cure of an Event of
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Default giving rise to the Restricted Accounts and upon demand by Debtor,
Administrative Agent will terminate the Restricted Accounts of Debtor and return
the amounts deposited therein to Debtor.
8. TRANSFERS AND OTHER LIENS. (a) Debtor shall not (i) sell, assign or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, or (ii) create or permit to exist any Lien, security interest,
option or other charge or encumbrance upon or with respect to any of the
Collateral, except for the security interest under this Agreement.
9. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. Debtor hereby
irrevocably appoints Administrative Agent attorney-in-fact, with full authority
in the place and stead of Debtor and in the name of Debtor or otherwise, only
after an Event of Default which is continuing and thereafter from time to time
in Administrative Agent's discretion, to take any action and to execute any
instrument which Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral,
(b) to receive, indorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with the Collateral,
(c) to contact and instruct each debtor in respect of the Notes to make
all payments to the Restricted Accounts, and
(d) to file any claims or take any action or institute any proceedings
which Administrative Agent may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce compliance with the terms and
conditions of any Collateral or the rights of Administrative Agent with respect
to any of the Collateral. The appointment of Administrative Agent as
attorney-in-fact is coupled with an interest and is irrevocable prior to the
final payment in full of the Obligations and the expiration or termination of
the obligations of all Secured Parties to extend credit to Debtor under the
Credit Agreement.
10. ADMINISTRATIVE AGENT MAY PERFORM. If Debtor fails to perform any
agreement contained herein, Administrative Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of Administrative
Agent incurred in connection therewith shall be payable by Debtor under SECTION
12(b).
11. ADMINISTRATIVE AGENT'S DUTIES. The Secured Parties hereby appoint
NationsBank of Texas, N.A. as Administrative Agent hereunder to act as their
agent as provided herein and in the Credit Agreement, which actions hereunder,
including without limitation, the administration of the Collateral, enforcement
of the rights hereunder and collection of amounts secured hereby, are on behalf
of, and for the ratable benefit of, the Lenders. The powers
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conferred on Administrative Agent hereunder are solely to protect Secured
Parties' interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Administrative Agent shall have no duty as to any Collateral, as to ascertaining
or taking action with respect to exchanges, maturities or other matters relative
to any Collateral, whether or not Administrative Agent or any Secured Party has
or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Administrative Agent accords its own property.
Except as provided in this SECTION 11, Administrative Agent shall not have any
duty or liability to protect or preserve any Collateral or to preserve rights
pertaining thereto. Nothing contained in this Agreement shall be construed as
requiring or obligating Administrative Agent, and Administrative Agent shall not
be required or obligated, to (i) present or file any claim or notice or take any
action, with respect to any Collateral or in connection therewith or (ii) notify
Debtor of any decline in the value of any Collateral.
12. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of Texas at that time (the
"UCC"), and also may (i) require Debtor to, and Debtor hereby agrees that it
will at its expense and upon request of Administrative Agent forthwith, assemble
all records with respect to all or part of the Collateral as directed by
Administrative Agent and make it available to Administrative Agent at a place to
be designated by Administrative Agent which is reasonably convenient to both
parties and (ii) without notice, except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
Administrative Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as Administrative Agent may deem
commercially reasonable. Debtor agrees that, to the extent notice of sale shall
be required by Law, at least ten days' notice to Debtor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Administrative Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Administrative Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(b) All cash proceeds received by Administrative Agent or any Secured
Party upon any sale of, collection of, or other realization upon, all or any
part of the Collateral shall be applied, as follows:
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FIRST: To the payment of all reasonable out-of-pocket costs and reasonable
expenses incurred in connection with the sale of, collection of or other
realization upon Collateral, including reasonable attorneys' fees and
reasonable disbursements;
SECOND: To the payment of the Obligations to be distributed pro rata to
each Secured Party based upon the percentage that the amount of the
Obligations owing to each Secured Party bears to the total unpaid amount of
the Obligations (with Debtor remaining liable for any deficiency); and
THIRD: To the extent of the balance (if any) of such proceeds, to Debtor
or other Person legally entitled thereto.
(c) All payments received by Debtor under or in connection with any
Collateral shall be received in trust for the benefit of Administrative Agent,
and on demand by Administrative Agent shall be segregated from other funds of
Debtor and shall be forthwith paid over to Administrative Agent in the same form
as so received (with any necessary indorsement).
13. AMENDMENTS; ETC. No amendment or waiver of any provision of this
Agreement, and no consent to any departure by Debtor herefrom, shall in any
event be effective unless the same shall be in writing and signed by
Administrative Agent and Debtor, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
14. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the later of (x) the final payment in full of the
Obligations and all amounts payable under this Agreement and (y) the expiration
or termination of the obligations of all Secured Parties to extend credit to
Debtor under the Credit Agreement, (ii) be binding upon Debtor, its successors
and assigns, and (iii) inure to the benefit of, and be enforceable by,
Administrative Agent, Secured Parties and their respective successors,
transferrees and assigns. Upon the later of the payment in full of the
Obligations and all other amounts payable under this Agreement and the
expiration or termination of the obligations of all Secured Parties to extend
credit to Debtor under the Credit Agreement, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to Debtor.
Upon any such termination, Administrative Agent will, at Debtor's expense,
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence such termination.
15. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS. WITHOUT EXCLUDING ANY
OTHER JURISDICTION, DEBTOR AGREES THAT THE
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STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS, SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH. UNLESS OTHERWISE DEFINED
HEREIN OR IN THE CREDIT AGREEMENT, TERMS USED IN ARTICLE 9 OF THE UCC ARE USED
HEREIN AS THEREIN DEFINED.
16. WAIVER OF JURY TRIAL. EACH OF THE ADMINISTRATIVE AGENT, THE SECURED
PARTIES AND DEBTOR HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY
WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO EACH SECURED PARTY ENTERING INTO THE CREDIT
AGREEMENT.
17. ADMINISTRATIVE AGENT'S RIGHT TO USE AGENTS. Administrative Agent may
exercise its rights under this Agreement through an agent or other designee.
18. NO INTERFERENCE, COMPENSATION OR EXPENSE. Administrative Agent may
exercise its rights under this Agreement without payment of any rent, license
fee or compensation of any kind to Debtor.
19. NOTICES AND DELIVERIES. All notices, communications and materials to
be given or delivered pursuant to this Agreement shall be given and shall be
effective as provided in SECTION 11.1 of the Credit Agreement but to Debtor at
the address shown opposite its name on the signature page hereto.
20. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER
LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
21. SUCCESSORS AND ASSIGNS. All of the provisions of this Agreement shall
be binding and inure to the benefit of the parties hereto and their respective
successors and assigns.
22. LOAN DOCUMENT. This Agreement is a Loan Document executed pursuant to
the Credit Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and provisions
thereof.
23. DEFINITIONS. Capitalized terms not otherwise defined herein have the
meaning specified in the Credit Agreement, and, to the extent of any conflict,
terms as defined in the
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Credit Agreement shall control (provided, that a more expansive or explanatory
definition shall not be deemed a conflict).
24. OBLIGATIONS NOT AFFECTED. To the fullest extent permitted by
Applicable Law, the obligations of Debtor under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
(a) any amendment or modification or addition or supplement to any Loan
Document, any instrument delivered in connection therewith or any assignment or
transfer thereof;
(b) any exercise, non-exercise, or waiver by Administrative Agent or any
Secured Party of any right, remedy, power or privilege under or in respect of,
or any release of any guaranty, any collateral or the Collateral or any part
thereof provided pursuant to, this Agreement or any Loan Document;
(c) any waiver, consent, extension, indulgence or other action or inaction
in respect of this Agreement or any Loan Document or any assignment or transfer
of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of Debtor or any other Person, whether or
not Debtor shall have notice or knowledge of any of the foregoing.
25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
26. SUBROGATION. Debtor shall not assert, enforce, or otherwise exercise
(i) any right of subrogation to any of the rights or liens of any Lender or
Administrative Agent or any other beneficiary against Debtor or any other
obligor on the Obligations or any collateral or other security or (ii) any right
of recourse, reimbursement, contribution, indemnification, or similar right
against Debtor or any other obligor on all or any part of the Obligations or any
guarantor thereof, and Debtor hereby waives any and all of the foregoing rights
and the benefit of, and any right to participate in, any collateral or other
security given to any Lender or Administrative Agent or any other beneficiary to
secure payment of the Obligations. The provisions of this SECTION 26 shall
survive the termination of this Agreement and any satisfaction and discharge of
Debtor by virtue of any payment, court order, or Law.
27. NO NOVATION. The execution, delivery and effectiveness of this
Agreement shall not discharge or release the Lien or priority of that certain
Amended and Restated Security Agreement dated as of October 29, 1996, executed
by Debtor in favor of Administrative Agent, securing the Companies' obligations
under that certain Fourth Amended and Restated Credit Agreement dated as of
October 29, 1996, among the Debtor, The Mediplex Group, Inc., certain Co-Agents,
Administrative Agent and the lenders party thereto (the "Existing Credit
Agreement"). Nothing herein contained shall be construed as a substitution or
novation of any
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Collateral Documents (as such term is defined in the Existing Credit Agreement)
or the Liens granted thereby, all of which shall continue and remain in full
force and effect, except as modified hereby, or by instruments executed
concurrently herewith.
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IN WITNESS WHEREOF, Debtor has caused this Agreement to be duly executed
and delivered by its officer thereunto duly authorized as of the date first
above written.
DEBTOR:
SUN HEALTHCARE GROUP, INC.
Address:
101 Sun Lane, N.E.
Albuquerque, New Mexico 87109 By:
-----------------------------------
Name: Robert D. Woltil
Attn: Chief Financial Officer Title: Senior Vice President and
Chief Financial Officer
Administrative Agent:
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
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Schedule I
Debtor Bank Accounts
- ------ -------------
NONE
Restricted Account
Account No.
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EXHIBIT F
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY, dated as of October 8, 1997 (this "Guaranty"),
made by each of the undersigned (collectively, the "Guarantors"), of the
obligations of Sun Healthcare Group, Inc., a Delaware corporation (the
"Company"), under the Credit Agreement (defined below) among the Company,
NationsBank of Texas, N.A., as Administrative Agent ("Administrative Agent"),
and the lenders parties to the Credit Agreement (singly, a "Lender" and
collectively, the "Lenders").
BACKGROUND
1. The Company, Administrative Agent, and the Lenders have entered into a
Credit Agreement, dated as of October 8, 1997 (as it may be amended or otherwise
modified from time to time, being the "Credit Agreement"). The capitalized
terms not otherwise defined herein have the meanings specified in the Credit
Agreement.
2. Pursuant to the Credit Agreement, the Company may, subject to the
terms of the Credit Agreement and the other Loan Documents, request that the
Lenders make Advances and issue, or participate in the issuance of, Letters of
Credit.
3. It is a condition precedent to the obligation of the Lenders to make
such Advances and issue, or participate in the issuance of, Letters of Credit
that each Guarantor guaranty repayment thereof upon the terms and conditions set
forth herein.
4. The Board of Directors of each Guarantor has determined that the
execution, delivery, and performance of this Guaranty is necessary and
convenient to the conduct, promotion, and attainment of each Guarantor's
business.
5. The Guarantors desire to induce the Lenders to make such Advances and
issue, or participate in the issuance of, Letters of Credit, which may
reasonably be expected to benefit, directly or indirectly, each Guarantor.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Advances and issue, or participate in the issuance of, Letters
of Credit under the Credit Agreement, the Guarantors hereby agree as follows:
<PAGE>
1. GUARANTY.
(a) Each Guarantor, jointly and severally, hereby unconditionally
guarantees the punctual payment of, and promises to pay, when due, whether
at stated maturity, by mandatory prepayment, by acceleration or otherwise,
all obligations, indebtedness and liabilities, and all rearrangements,
renewals and extensions of all or any part thereof, of the Company or any
Subsidiary now or hereafter arising from, by virtue of or pursuant to the
Credit Agreement, the Notes, any other Loan Document, and any and all
renewals and extensions thereof, or any part thereof, or future amendments
thereto, whether for principal, interest (including, without limitation,
interest, fees and other charges that would accrue or become owing both
prior to and subsequent to and but for the commencement of any proceeding
against or with respect to the Company under any chapter of the Bankruptcy
Code of 1978, 11 U.S.C. Section 101 ET SEQ. whether or not a claim is
allowed for the same in any such proceeding), premium, fees, commissions,
expenses or otherwise (such obligations being the "Obligation"), and agrees
to pay any and all reasonable expenses (including reasonable counsel fees
and expenses) incurred in enforcement or collection of all or any part
thereof, whether such obligations, indebtedness and liabilities are direct,
indirect, fixed, contingent, joint, several or joint and several, and of
any rights under this Guaranty.
(b) Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving
effect to all other liabilities of such Guarantor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, any liabilities of such Guarantor in respect of
intercompany indebtedness to the Company or other Affiliates of the Company
to the extent that such indebtedness would be discharged in an amount equal
to the amount paid by such Guarantor hereunder) and after giving effect as
assets, subject to Paragraph 4(a) hereof, to the value (as determined under
the applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation or contribution of such Guarantor pursuant to (i) Applicable
Law or (ii) any agreement providing for an equitable allocation among such
Guarantor and other Affiliates of the Company of obligations arising under
guaranties by such parties.
2. GUARANTY ABSOLUTE. The Guarantors guarantee that the Obligation will
be paid strictly in accordance with the terms of the Credit Agreement, the
Notes, and the other Loan Documents, regardless of any Applicable Law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Lender with respect thereto; provided,
however, nothing contained in this Guaranty shall require the Guarantors to make
any payment under this Guaranty in violation of any Applicable Law, regulation
or order now or hereafter in effect. The obligations and liabilities of each
Guarantor hereunder are independent
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of the obligations of the Company under the Credit Agreement and any Applicable
Law. The liability of each Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(a) the taking or accepting of any other security or guaranty for any
or all of the Obligations;
(b) any increase, reduction or payment in full at any time or from
time to time of any part of the Obligation, including any reduction or
termination of the Commitments;
(c) any lack of validity or enforceability of the Credit Agreement,
the Notes, or any other Loan Document or other agreement or instrument
relating thereto, including but not limited by the unenforceability of all
or any part of the Obligation by reason of the fact that (i) the
Obligation, and/or the interest paid or payable with respect thereto,
exceeds the amount permitted by Applicable Law, (ii) the act of creating
the Obligation, or any part thereof, is ULTRA VIRES, (iii) the officers
creating same acted in excess of their authority, or (iv) for any other
reason;
(d) any lack of corporate power of the Company or any other Person at
any time liable for the payment of any or all of the Obligation;
(e) any Debtor Relief Law affecting the rights of creditors generally
involving the Company, any Guarantor or any other Person obligated on any
of the Obligation;
(f) any renewal, compromise, extension, acceleration or other change
in the time, manner or place of payment of, or in any other term of, all or
any of the Obligation; any adjustment, indulgence, forbearance, or
compromise that may be granted or given by any Lender or the Administrative
Agent to the Company, any Guarantor, or any Person at any time liable for
the payment of any or all of the Obligation; or any other modification,
amendment, or waiver of or any consent to departure from the Credit
Agreement, the Notes, or any other Loan Document and other agreement or
instrument relating thereto without notification of any Guarantor (the
right to such notification being herein specifically waived by Guarantors);
(g) any exchange, release, sale, subordination, or non-perfection of
any collateral or Lien thereon or any lack of validity or enforceability or
change in priority, destruction, reduction, or loss or impairment of value
of any collateral or Lien thereon;
(h) any release or amendment or waiver of or consent to departure
from any other guaranty for all or any of the Obligation;
(i) the failure by any Lender or the Administrative Agent to make any
demand upon or to bring any legal, equitable, or other action against the
Company or any other
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Person (including without limitation any other Guarantor), or the failure
or delay by any Lender or the Administrative Agent to, or the manner in
which any Lender or the Administrative Agent shall, proceed to exhaust
rights against any direct or indirect security for the Obligation;
(j) the existence of any claim, defense, set-off, or other rights
which the Company or any Guarantor may have at any time against the
Company, the Lenders, or any Guarantor, or any other Person, whether in
connection with this Guaranty, the Loan Documents, the transactions
contemplated thereby, or any other transaction;
(k) any failure of any Lender or the Administrative Agent to notify
any Guarantor of any renewal, extension, or assignment of the Obligation or
any part thereof, or the release of any security, or of any other action
taken or refrained from being taken by any Lender or the Administrative
Agent, it being understood that the Lenders and the Administrative Agent
shall not be required to give any Guarantor any notice of any kind under
any circumstances whatsoever with respect to or in connection with the
Obligation;
(l) any payment by the Company to the Lenders or the Administrative
Agent is held to constitute a preference under any Debtor Relief Law or if
for any other reason the Lenders or the Administrative Agent is required to
refund such payment or pay the amount thereof to another Person; or
(m) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Company, any Guarantor, any other
guarantor or other Person liable on the Obligation, including without
limitation any defense by reason of any disability or other defense of the
Company, or the cessation from any cause whatsoever of the liability of the
Company, or any claim that the Guarantors' obligations hereunder exceed or
are more burdensome than those of the Company.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligation is rescinded or must
otherwise be returned by any Lender or any other Person upon the insolvency,
bankruptcy or reorganization of the Company, any Guarantor or otherwise, all as
though such payment had not been made.
3. WAIVER. To the extent not prohibited by Applicable Law, each
Guarantor hereby waives: (a) promptness, protests, diligence, presentments,
acceptance, performance, demands for performance, notices of nonperformance,
notices of protests, notices of dishonor, notices of acceptance of this Guaranty
and of the existence, creation or incurrence of new or additional indebtedness,
and any of the events described in SECTION 2 and of any other occurrence or
matter with respect to any of the Obligation, this Guaranty or any of the other
Loan Documents; (b) any requirement that the Administrative Agent or any Lender
protect, secure, perfect, or insure any Lien or security interest or any
property subject thereto or exhaust any right or take any action against the
Company or any other Person or any collateral or pursue any other remedy in the
Administrative Agent's or any Lender's power whatsoever; (c) any right to assert
- 4 -
<PAGE>
against the Administrative Agent or any Lender as a counterclaim, set-off or
cross-claim, any counterclaim, set-off or claim which it may now or hereafter
have against the Company or other Person liable on the Obligation; (d) any right
to seek or enforce any remedy or right that the Administrative Agent or any
Lender now has or may hereafter have against the Company (to the extent
permitted by Applicable Law); (e) any right to participate in any collateral or
any right benefiting the Administrative Agent or the Lenders in respect of the
Obligation; and (f) any right by which it might be entitled to require suit on
an accrued right of action in respect of any of the Obligation or require suit
against the Company or any other Person, whether arising pursuant to
Section 34.02 of the Texas Business and Commerce Code, as amended,
Section 17.001 of the Texas Civil Practice and Remedies Code, as amended,
Rule 31 of the Texas Rules of Civil Procedure, as amended, or otherwise.
4. SUBROGATION AND SUBORDINATION.
(a) Notwithstanding any reference to subrogation contained herein to the
contrary, each Guarantor hereby irrevocably waives any claim or other rights
which it may have or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under this Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of any Lender against the Company or any
collateral which any Lender now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statutes or common
law, including without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Obligations shall not have been paid in full, such amount shall
be deemed to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, the Lenders, and shall forthwith be paid to the
Administrative Agent to be credited and applied upon the Obligations, whether
matured or unmatured, in accordance with the terms of the Credit Agreement.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by the Credit Agreement and that
the waiver set forth in this Paragraph 4(a) is knowingly made in contemplation
of such benefits.
(b) If any Guarantor becomes the holder of any indebtedness payable by the
Company, each Guarantor hereby subordinates all indebtedness owing to it from
the Company to all indebtedness of the Company to the Lenders, and agrees that
upon the occurrence and continuance of a Default or an Event of Default, it
shall not accept any payment on the same until payment in full of the
obligations of the Company under the Credit Agreement, the Notes and all other
Loan Documents, and shall in no circumstance whatsoever attempt to set-off or
reduce any obligations hereunder because of such indebtedness. If any amount
shall nevertheless be paid to a Guarantor by the Company or another Guarantor on
behalf of the Company prior to payment in full of the Obligation, such amount
shall be held in trust for the benefit of the Lenders and shall forthwith be
paid to the Administrative Agent to be credited and applied to the Obligation,
whether matured or unmatured.
- 5 -
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents and
warrants that all representations and warranties as they apply to such Guarantor
only set forth in Article 4 of the Credit Agreement (each of which is hereby
incorporated by reference) are true and correct.
6. COVENANTS. Each Guarantor hereby expressly assumes, confirms, and
agrees to perform, observe, and be bound by all conditions and covenants set
forth in the Credit Agreement, to the extent applicable to it, as if it were a
signatory thereto. Each Guarantor further covenants and agrees (a) punctually
and properly to perform all of such Guarantor's covenants and duties under any
other Loan Documents; (b) from time to time promptly to furnish the
Administrative Agent with any information or writings which the Administrative
Agent may request concerning this Guaranty; and (c) promptly to notify the
Administrative Agent of any claim, action, or proceeding affecting this
Guaranty.
7. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by any Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by each
Guarantor, the Lenders, the Administrative Agent, or the Determining Lenders, if
applicable, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
8. ADDRESSES FOR NOTICES. Unless otherwise provided herein, all notices,
requests, consents and demands shall be in writing and shall be delivered by
hand or overnight courier service, mailed or sent by telecopy to the respective
addresses specified herein, or, as to any party, to such other addresses as may
be designated by it in written notice to all other parties. All notices,
requests, consents and demands hereunder shall be deemed to have been given on
the date of receipt if delivered by hand or overnight courier service or sent by
telecopy, or if mailed, effective on the earlier of actual receipt or three (3)
days after being mailed by certified mail, return receipt requested, postage
prepaid, addressed as aforesaid.
9. NO WAIVER; REMEDIES. No failure on the part of the Administrative
Agent or any Lender to exercise, and no delay in exercising, any right hereunder
or under any of the Loan Documents shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder or under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right. Neither the Administrative Agent nor any Lender shall be required
to (a) prosecute collection or seek to enforce or resort to any remedies against
the Company or any other Person liable on any of the Obligation, (b) join the
Company or any other Person liable on any of the Obligation in any action in
which Lender prosecutes collection or seeks to enforce or resort to any remedies
against the Company or other Person liable on any of the Obligation, or (c) seek
to enforce or resort to any remedies with respect to any Liens granted to (or
benefiting, directly or indirectly) the Administrative Agent or any Lender by
the Company or any other Person liable on any of the Obligation. Neither the
Administrative Agent nor any Lender shall have any obligation to protect, secure
or insure any of the Liens or the properties or interests in properties subject
thereto. The remedies herein provided are cumulative and not exclusive of any
remedies provided by Applicable Law.
- 6 -
<PAGE>
10. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of any Guarantor against any and all of the obligations of
any Guarantor now or hereafter existing under this Guaranty, irrespective of
whether or not such Lender shall have made any demand under this Guaranty. Each
Lender agrees promptly to notify such Guarantor after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
SECTION 10 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
11. LIENS. To the extent not prohibited by Applicable Law, each Guarantor
agrees that the Administrative Agent or any Lender, in its discretion, without
notice or demand to or upon any Guarantor and without affecting either the
liability of such Guarantor, the Company or any other Person liable on any of
the Obligation under, or the Liens and security interests created by, this
Guaranty, or any security interest or other Lien, may foreclose any deed of
trust or mortgage or similar Lien covering interests in real or personal
property, and the interests in real or personal property secured thereby, by
nonjudicial sale; and, to the extent not prohibited by Applicable Law, such
Guarantor hereby waives any defense to the recovery by the Administrative Agent
or any Lender hereunder against the Company, such Guarantor or any collateral of
any deficiency after a nonjudicial sale and such Guarantor expressly waives any
defense or benefits that may be derived from Chapter 34 of the Texas Business
and Commerce Code, Section 51.003 of the Texas Property Code, or any similar
statute in effect in any other jurisdiction. Without limiting the foregoing,
each Guarantor waives, to the extent not prohibited by Applicable Law, any
defense arising out of any such nonjudicial sale even though such sale operates
to impair or extinguish any right of reimbursement or subrogation or any other
right or remedy of such Guarantor against the Company or any other Person or any
Collateral or any other collateral. Each Guarantor hereby agrees that such
Guarantor shall be liable, subject to the limitations of SECTION 1 hereof, for
any part of the Obligation remaining unpaid after any foreclosure.
12. CONTINUING GUARANTY; TRANSFER OF NOTES. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) remain in full force
and effect until final payment in full (after the Maturity Date) of the
Obligation and all other amounts payable under this Guaranty, (b) be binding
upon each Guarantor, its successors and assigns, and (c) inure to the benefit of
and be enforceable by each Lender and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), to the extent
permitted by the Credit Agreement, each Lender may assign or otherwise transfer
its rights under the Credit Agreement, the Notes or any of the Loan Documents or
any interest therein to any other Person, and such other Person shall thereupon
become vested with all the rights or any interest therein, as appropriate, in
respect thereof granted to the Lender herein or otherwise.
- 7 -
<PAGE>
13. INFORMATION. Each Guarantor acknowledges and agrees that it shall
have the sole responsibility for obtaining from the Company such information
concerning the Company's financial condition or business operations as such
Guarantor may require, and that neither the Administrative Agent nor any Lender
has any duty at any time to disclose to any Guarantor any information relating
to the business operations or financial conditions of the Company.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, EACH GUARANTOR AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS
LOCATED IN DALLAS, TEXAS, SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION
HEREWITH.
15. WAIVER OF JURY TRIAL. EACH GUARANTOR, THE ADMINISTRATIVE AGENT, AND
THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE,
TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THE CREDIT
AGREEMENT.
16. RATABLE BENEFIT. This Guaranty is for the ratable benefit of the
Lenders, each of which shall share any proceeds of this Guaranty pursuant to the
terms of the Credit Agreement.
17. GUARANTOR INSOLVENCY. Should any Guarantor become insolvent, fail to
pay its debts generally as they become due, voluntarily seek, consent to, or
acquiesce in the benefits of any Debtor Relief Law or become a party to or be
made the subject of any proceeding provided for by any Debtor Relief Law (other
than as a creditor or claimant) that could suspend or otherwise adversely affect
the rights of any Lender granted hereunder, then, the obligations of such
Guarantor under this Guaranty shall be, as between such Guarantor and such
Lender, a fully-matured, due, and payable obligation of such Guarantor to such
Lender (without regard to whether the Company is then in default under the
Credit Agreement or whether any part of the Obligation is then due and owing by
the Company to such Lender), payable in full by such Guarantor to such Lender
upon demand, which shall be the estimated amount owing in respect of the
contingent claim created hereunder.
18. ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES
- 8 -
<PAGE>
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- 9 -
<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
Sundance Rehabilitation Corporation, a Connecticut
corporation
SunQuest Consulting, Inc., a New Mexico
corporation
Sunrise Healthcare Corporation, a New Mexico
corporation
SunScript Pharmacy Corporation, a New Mexico
corporation
Sunrise Rehab of Colorado, Inc., a Colorado
corporation
Sunrise Healthcare of Colorado, Inc., a Colorado
corporation
Sunrise Healthcare of Florida, Inc., a Florida
corporation
LTC Staffinders, Inc., a Connecticut corporation
SunSpectrum Outpatient Rehabilitation-Concord,
Inc., a Massachusetts corporation
Nursing Home Inc., a Washington corporation
Living Services, Inc., a Washington corporation
Bay Colony Health Service, Inc., a Massachusetts
corporation
Bergen Eldercare, Inc., a New Jersey corporation
Community Re-Entry Services of Cortland, Inc., a
Delaware corporation
G-WZ of Stamford, Inc., a Connecticut corporation
Manatee Springs Nursing Center, Inc., a Florida
corporation
Mediplex Management, Inc., a Massachusetts
corporation
Mediplex Management of Palm Beach County, Inc., a
Florida corporation
Mediplex Management of Texas, Inc., a Texas
corporation
Mediplex of Colorado, Inc., a Colorado corporation
Mediplex of Concord, Inc., a Massachusetts
corporation
Mediplex of Connecticut, Inc., a Connecticut
corporation
Mediplex of Kentucky, Inc., a Kentucky corporation
- 10 -
<PAGE>
Mediplex of Maryland, Inc., a Maryland corporation
Mediplex of Massachusetts, Inc., a Massachusetts
corporation
Mediplex of New Hampshire, Inc., a New Hampshire
corporation
Mediplex of New Jersey, Inc., a New Jersey
corporation
Mediplex of New York, Inc., a New York corporation
Mediplex of Ohio, Inc., an Ohio corporation
Mediplex of Tennessee, Inc., a Tennessee
corporation
Mediplex Atlanta Rehabilitation Institute, Inc., a
Georgia corporation
Mediplex Rehabilitation of Massachusetts, Inc., a
Massachusetts corporation
P.M.N.F. Management, Inc., a New Jersey
corporation
Quality Care Holding Corp., a Massachusetts
corporation
Quality Nursing Care of Massachusetts, Inc., a
Massachusetts corporation
Spofford Land, Inc., a New Hampshire corporation
Sun Care Corp., a Delaware corporation
Valley View Psychiatric Services, Inc., a Colorado
corporation
HSR Management, Inc., a Delaware corporation
CareerStaff Management, Inc., a Delaware
corporation
PRI, Inc., a Texas corporation
CareerStaff Unlimited, Inc., a Delaware
corporation
CareerStaff HSR, Inc., a Delaware corporation
Healthcare Staff Resources, Inc., a Texas
corporation
SunBridge, Inc., a New Mexico corporation
SunMark of New Mexico, a New Mexico corporation
SunChoice Medical Supply, Inc., a New Mexico
corporation
HTA of New Jersey, Inc., a New Jersey corporation
New Bedford Acquisition Corp., a Massachusetts
corporation
- 11 -
<PAGE>
New Bedford Nursing Center, Inc., a Massachusetts
corporation
Worcester Nursing Center, Inc., a Massachusetts
corporation.
Cal-Med, Inc., a California corporation
Clipper Home Affiliates, Inc., a New Hampshire
corporation
Clipper Home of North Conway, Inc., a New
Hampshire corporation
Clipper Home of Portsmouth, Inc., a New Hampshire
corporation
Clipper Home of Rochester, Inc., a New Hampshire
corporation
Clipper Home of Wolfeboro, Inc., a New Hampshire
corporation
Golan Healthcare Group, Inc., a Massachusetts
corporation
Goodwin Nursing Home, Inc., a New Hampshire
corporation
HC, Inc., a Kansas corporation
Langdon Place of Dover, Inc., a New Hampshire
corporation
Langdon Place of Exeter, Inc., a New Hampshire
corporation
Langdon Place of Nashua, Inc., a New Hampshire
corporation
Masthead Corporation, a New Mexico corporation
Mediplex of Virginia, Inc., a Virginia corporation
Oakview Treatment Centers of Kansas, Inc., a
Kansas corporation
Pharmacy Factors of California, Inc., a California
corporation
Pharmacy Factors of Florida, Inc., a Florida
corporation
Pharmacy Factors of Texas, Inc., a Texas
corporation
PHS Continuing Education, Inc., a Texas
corporation
Premier Health Staff, Inc., a Texas corporation
SHG International Holdings, Inc., a Delaware
corporation
Special Medical Services, Inc., a Texas
corporation
SunAlliance, Inc., a Delaware corporation
- 12 -
<PAGE>
SunCare Respiratory Services, Inc., an Indiana
corporation
SunFactors, Inc., a Florida corporation
Sun Lane Purchase Corporation, a New Mexico
corporation
SunSolution, Inc., a Delaware corporation
The Mediplex Group, Inc., a Massachusetts
corporation
Hospital Therapy Service of Texas, Inc., a Texas
corporation
Regency Health Services, Inc, a Delaware
corporation
Braswell Enterprises, Inc., a California
corporation
Brittany Rehabilitation Center, Inc., a California
corporation
Carmichael Rehabilitation Center, a California
corporation
Coalinga Rehabilitation Center, a California
corporation
Covina Rehabilitation Center, a California
corporation
Evergreen Rehabilitation Center, a California
corporation
Fairfield Rehabilitation Center, a California
corporation
Fullerton Rehabilitation Center, a California
corporation
Glendora Rehabilitation Center, a California
corporation
Grand Terrace Rehabilitation, a California
corporation
Hallmark Health Services, Inc., a California
corporation
Harbor View Rehabilitation Center, a California
corporation
Hawthorne Rehabilitation Center, a California
corporation
Heritage Rehabilitation Center, a California
corporation
Huntington Beach Convalescent Hospital, a
California corporation
Jackson Rehabilitation Center, Inc., a California
corporation
- 13 -
<PAGE>
Linda-Mar Rehabilitation Center, a California
corporation
Meadowbrook Rehabilitation Center, a California
corporation
Newport Beach Rehabilitation Center, a California
corporation
North State Home Health Care, Inc., a California
corporation
Paradise Rehabilitation Center, Inc., a California
corporation
Paso Robles Rehabilitation Center, a California
corporation
Regency-North Carolina, Inc., a North Carolina
corporation
Regency Rehab Properties, Inc., a California
corporation
Regency-Tennessee, Inc., a Tennessee corporation
RHS Management Corporation, a California
corporation
Rosewood Rehabilitation Center, Inc., a California
corporation
Shandin Hills Rehabilitation Center, a California
corporation
Stockton Rehabilitation Center, Inc., a California
corporation
Vista Knoll Rehabilitation Center, Inc., a
California corporation
Willowview Rehabilitation Center, a California
corporation
First Class Pharmacy, Inc., a California
corporation
Care Enterprises, Inc., a Delaware corporation
Americare Homecare, Inc., an Ohio corporation
Care Finance, Inc., a California corporation
Circleville Health Care Corp., an Ohio corporation
Glenville Health Care Corp., a West Virginia
corporation
Healthcare Network, a California corporation
Marion Health Care Corp., an Ohio corporation
New Lexington Health Care Corp., an Ohio
corporation
Americare of West Virginia, Inc., a West Virginia
corporation
Dunbar Health Care Corp., a West Virginia
corporation
- 14 -
<PAGE>
Beckley Health Care Corp., a West Virginia
corporation
Putnam Health Care Corp., a West Virginia
corporation
Salem Health Care Corp., a West Virginia
corporation
Care Enterprises West, a Utah corporation
Brel, Inc., a California corporation
Care Home Health Services, a California
corporation
SCRS & Communicology Inc., of Ohio, an Ohio
corporation
Regency Rehab Hospitals, Inc., a California
corporation
Orange Rehabilitation Hospital, Inc., a Delaware
corporation
San Bernadino Rehabilitation Hospital, Inc., a
Delaware corporation
Regency Outpatient Services, Inc., a California
corporation
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
Accelerated Care Plus, LLC, a Delaware limited
liability company
By: Cal-Med, Inc., a California corporation and
HC, Inc., a Kansas corporation, members
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
- 15 -
<PAGE>
Hospital Therapy Service of Michigan, LLC, a
_____ limited liability company
By: SunCare Respiratory Services, Inc., an
Indiana corporation, member
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
Therapists Unlimited-Baltimore/Washington, D.C.,
L.P., a Texas limited partnership
Therapists Unlimited-Chicago II, L.P., a Texas
limited partnership
Therapists Unlimited-Detroit II, L.P., a Texas
limited partnership
Therapists Unlimited-Fresno, L.P., a Texas limited
partnership
Therapists Unlimited-Indianapolis, L.P., a Texas
limited partnership
Therapists Unlimited-New Orleans, L.P., a Texas
limited partnership
Therapists Unlimited-Philadelphia, L.P., a Texas
limited partnership
Therapists Unlimited-San Francisco, L.P., a Texas
limited partnership
Therapists Unlimited-Seattle, L.P., a Texas
limited partnership
- 16 -
<PAGE>
Therapists Unlimited-Travelers, L.P., a Texas
limited partnership
By: CareerStaff Management, Inc., a Delaware
corporation and the general partner of the
above-listed limited partnership Guarantors
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
HSR Partners, L.P.
By: HSR Management, Inc., a Delaware corporation
and its general partner
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
West Jersey/Mediplex Rehabilitation, L.P.
By: Mediplex of New Jersey, Inc., a New Jersey
corporation and its general partner
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
- 17 -
<PAGE>
Savannas Hospital Limited Partnership
By: Mediplex Management of Port St. Lucie, Inc.,
a Florida corporation and its general partner
By:
-----------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief
Financial Officer
Address for all Guarantors:
101 Sun Lane, N.E.
Albuquerque, New Mexico 87109
Attn: Chief Financial Officer
- 18 -
<PAGE>
EXHIBIT G
COMPLIANCE CERTIFICATE
To: NationsBank of Texas, N.A., as Administrative Agent
From: Sun Healthcare Group, Inc.
Date: _________________, 19___
Re: Credit Agreement, dated as of October 8, 1997 ("Credit Agreement") among
Sun Healthcare Group, Inc., certain Lenders, and NationsBank of Texas,
N.A., as Administrative Agent
This Compliance Certificate is delivered pursuant to Section 6.2 of the
Credit Agreement. All capitalized terms used herein and defined in the Credit
Agreement shall be used herein as so defined. For purposes hereof, section
references herein related to sections of the Credit Agreement, and bracketed
amounts or ratios refer to the maximum or minimum amounts or ratios required
under the relevant sections of the Credit Agreement.
1. COVENANT CALCULATIONS. [To be completed quarterly] Demonstration of
compliance with certain covenants contained in Article 7 of the Credit Agreement
for the period ended __________________.
A. SECTION 7.1(i). Guaranties and Indebtedness
pursuant to letters of credit in respect of
obligations of Foreign Subsidiaries as lessees
under Operating Leases (excluding that already set
forth on Schedule 11 to the Credit Agreement)
1. Maximum when aggregated with SECTIONS 7.3(j) $5,000,000
and 7.5(c)
2. Actual $
--------------
3. Difference [(1) - (2)] $
--------------
B. SECTION 7.1(j). Mortgage Indebtedness and sale
and leaseback transactions (excluding that already
set forth on Schedule 12 to the Credit Agreement)
1. Maximum in aggregate principal amount $5,000,000
2. Actual $
--------------
3. Difference [(1) - (2)] $
--------------
C. SECTION 7.1(k). Other Indebtedness
1. Maximum in aggregate principal amount $5,000,000
outstanding at any time
2. Actual $
--------------
<PAGE>
3. Difference [(1) - (2)] $
--------------
4. Indebtedness related to an Acquisition
permitted by SECTION 7.5
a. Maximum in aggregate principal amount $15,000,000
outstanding at any time
b. Actual $
--------------
c. Difference [(a) - (b)] $
--------------
D. SECTION 7.3(i). Assisted Living Investments
1. Maximum in aggregate amount $50,000,000
2. Actual $
--------------
3. Difference $
--------------
E. SECTION 7.3(j). Other Investments primarily
related to the business of providing healthcare
services
1. Maximum in aggregate principal amount in $5,000,000
Domestic Entities after the Agreement Date
(not already set forth on Schedule 13 to the
Credit Agreement)
2. Actual $
--------------
3. Difference [(1) - (2)] $
--------------
4. Maximum in Foreign Entities (not already set $5,000,000
forth on Schedule 11 to the Credit
Agreement), when aggregated with
SECTIONS 7.1(i) and 7.5(c)
5. Actual $
--------------
6. Difference [(4) - (5)] $
--------------
F. SECTION 7.5. Acquisitions
1. During the fiscal year ending on December 31,
1997 (excluding the Regency Tender and the
Regency Merger, the Acquisition of a
Restricted Subsidiary or of the assets of a
Domestic Entity, and Acquisitions already set
forth on Schedule 14 to the Credit
Agreement))
a. Maximum aggregate Acquisition $5,000,000
Consideration
b. Actual $
--------------
c. Difference [(a) - (b)] $
--------------
2
<PAGE>
2. For an Acquisition of a Foreign Subsidiary
(excluding those listed on Schedule 11 to the
Credit Agreement)
a. Maximum Acquisition Consideration when $5,000,000
aggregated with SECTIONS 7.1(i) and
7.3(j)
b. Actual $
--------------
c. Difference [(a) - (b)] $
--------------
G. SECTION 7.9. Fixed Charge Coverage Ratio
1. Minimum
a. On the last day of the fiscal quarter 1.50 to 1
ending September 30, 1997
2. Actual
a. EBITDAR (if Foreign Subsidiary EBITDAR
equals or exceeds 15% of EBITDAR,
calculate Fixed Charge Coverage Ratio
using Domestic EBITDAR)
(1) Pre-tax net income (excluding $
therefrom (i) any items of ------
extraordinary gain, including net
gains on the sale of assets other
than asset sales in the ordinary
course of business, (ii) any items
of extraordinary loss, including
net losses on the sale of assets
other than asset sales in the
ordinary course of business,
(iii) charges related to settlement
of the Shareholder Lawsuits not to
exceed in aggregate amount the
remainder of $24,000,000 minus any
insurance proceeds received in
connection with such settlement,
and (iv) charges related to the RCA
Acquisition, the Contour
Acquisition, and the Acquisition of
Regency not to exceed $35,000,000
in aggregate amount)
(2) Interest expense, whether or not $
capitalized (including interest ------
expense pursuant to Capitalized
Lease Obligations)
3
<PAGE>
(3) Depreciation (for the four fiscal $
quarters immediately preceding the ------
date of calculation)
(4) Amortization (for the four fiscal $
quarters immediately preceding the ------
date of calculation)
(5) Lease expense pursuant to Operating $
Leases (for the four fiscal ------
quarters immediately preceding the
date of calculation)
(6) EBITDAR [(1) + (2) + (3) + (4) + $
(5)] --------------
b. Fixed Charges for the four fiscal
quarters immediately preceding the date
of calculation, calculated for the
Borrower and its Subsidiaries on a
consolidated basis (if Foreign
Subsidiary EBITDAR equals or exceeds 15%
of EBITDAR, calculate Fixed Charges for
the Borrower and its Restricted
Subsidiaries on a consolidated basis)
(1) Scheduled principal or residual or $
similar payments made on Total Debt ------
for the four fiscal quarters
immediately preceding the date of
calculation (other than (i) lease
expense pursuant to Operating
Leases, (ii) principal payments
made on the Obligations, and
(iii) debt for borrowed money
having (x) a maturity of less than
twelve months and (y) no principal
amortization)
(2) Interest paid, whether or not $
capitalized, for the four fiscal ------
quarters immediately preceding the
date of calculation (including
interest paid pursuant to
Capitalized Lease Obligations)
(3) Lease expense pursuant to Operating $
Leases, for the four fiscal ------
quarters immediately preceding the
date of calculation
(4) Fixed Charges [(1) + (2) + (3)] $
--------------
4
<PAGE>
c. Fixed Charge Coverage Ratio [(a) to (b)] to 1
----------
H. SECTION 7.10. Leverage Ratio, calculated for the
Borrower and its Restricted Subsidiaries on a
consolidated basis (if Foreign Subsidiary EBITDAR
equals or exceeds 15% of EBITDAR, calculate
Leverage Ratio for (a) the Borrower and its
Restricted Subsidiaries on a consolidated basis
and (b) using Domestic EBITDAR)
1. Maximum
a. On the last day of the fiscal quarter 6.25 to 1
ending September 30, 1997
2. Actual
a. Total Debt, for the Borrower and its
Subsidiaries on a consolidated basis (if
Foreign Subsidiary EBITDAR equals or
exceeds 15% of EBITDAR, calculate Total
Debt for the Borrower and its Restricted
Subsidiaries on a consolidated basis)
(1) All principal outstanding under the $
Loan Documents ------
(2) All obligations evidenced by a $
promissory note or otherwise ------
representing borrowed money
(3) All reimbursement obligations for $
letters of credit (excluding ------
reimbursement obligations in
respect of letters of credit to
support indebtedness and other
obligations otherwise included in
the calculation of Total Debt)
(4) All Capitalized Lease Obligations $
------
5
<PAGE>
(5) Lease expense pursuant to Operating $
Leases other than Synthetic Leases ------
(such lease expense to be in an
amount equal to the product of
rental expense for the four fiscal
quarters immediately preceding the
date of calculation multiplied by
eight and shall be net of any
income being received pursuant to
subleases during such period,
provided that no such sublessee is
in default under its sublease)
(6) The principal portion of all $
obligations in respect of Synthetic ------
Leases
(7) An amount equal to any write-up, to $
market value, of the bonds and the ------
Convertible Bonds as required by
GAAP
(8) Total Debt [(1) + (2) + (3) + (4) $
+ (5) + (6) - (7)] --------------
b. EBITDAR (G.2.a.(6) above) $
--------------
c. Actual [(a) to (b)] to 1
-----------
I. SECTION 7.11. Total Debt to Capitalization Ratio
1. Maximum
a. On the last day of the fiscal quarter 0.75 to 1
ending September 30, 1997
2. Actual, calculated for the Borrower and its
Subsidiaries on a consolidated basis (if
Foreign Subsidiary EBITDAR equals or exceeds
15% of EBITDAR, calculate the Total Debt to
Capitalization Ratio for the Borrower and its
Restricted Subsidiaries on a consolidated
basis)
a. Total Debt (H.2.a.(8) above) $
------
b. Net Worth $
------
c. Total Debt to Capitalization Ratio {(a) to 1
to [(a) + (b)]} -----------
2. COMPLIANCE CERTIFICATE. [To be completed quarterly] The undersigned
hereby certifies to you as follows:
6
<PAGE>
(a) I am the duly elected qualified and acting chief financial officer [or
chief accounting officer] of Borrower.
(b) I have reviewed the provisions of the Credit Agreement and the other
Loan Documents, and a review of the activities of Borrower during the
period from ______________, 19___ to ___________, 19___ (the
"Reporting Period") has been made under my supervision with a view
toward determining whether, during the Reporting Period, Borrower has
kept, observed, performed and fulfilled all its obligations under the
Credit Agreement and such other Loan Documents.
(c) The representations and warranties made in the Loan Documents are true
and correct in all material respects as of the date hereof as though
made at and as of the date hereof, except for such representations and
warranties which relate to a particular date or which fail to be true
and correct as a result of events or occurrences permitted under the
Loan Documents, and no Default or Event of Default has occurred or is
continuing or is imminent.
This Compliance Certificate is executed and delivered on the ______________
day of _______________, 19___.
SUN HEALTHCARE GROUP, INC.
By:
------------------------------
Name:
------------------------
Title:
------------------------
7
<PAGE>
EXHIBIT H
ASSIGNMENT AND ACCEPTANCE
Dated _______________, 1997
Reference is made to the Credit Agreement dated as of October 8, 1997 (the
"Credit Agreement") among Sun Healthcare Group, Inc., a Delaware corporation
("Borrower"), NationsBank of Texas, N.A. as Administrative Agent
("Administrative Agent"), and the lenders parties thereto. Terms defined in the
Credit Agreement are used herein with the same meaning.
____________________________ ("Assignor") and ________________________
("Assignee") agree as follows:
1. Subject to the terms and conditions of this Assignment and Acceptance,
Assignor hereby sells and assigns to Assignee, and Assignee hereby purchases and
assumes from Assignor, the following:
a. $_____ in aggregate amount of the Revolving Credit Commitment in
effect on the Effective Date (as defined below), and the related pro rata
share in the principal amount of Revolving Credit Advances owing to
Assignor on the Effective Date, the Revolving Credit Note held by Assignor,
and Assignor's participation in any Letters of Credit and Reimbursement
Obligations outstanding on the Effective Date;
b. $_____ in aggregate principal amount of the Facility A Term Loan
Advances outstanding on the Effective Date and the related pro rata share
in the Facility A Term Loan Note held by Assignor;
c. $_____ in aggregate principal amount of the Facility B Term Loan
Advances outstanding on the Effective Date and the related pro rata share
in the Facility B Term Loan Note held by Assignor;
d. $_____ in aggregate principal amount of the Facility C Term Loan
Advances outstanding on the Effective Date and the related pro rata share
in the Facility C Term Loan Note held by Assignor.
2. Assignor (a) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (b) makes no representation or
warranty and assumes no responsibility with respect to (i) any statements,
warranties, or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency, or value of the Credit Agreement or any other instrument or
document
<PAGE>
furnished pursuant thereto or (ii) the financial condition of the Borrower or
the performance or observance by the Borrower of any of its obligations under
the Credit Agreement or any other instrument or document furnished pursuant
thereto; and (c) attaches the Promissory Notes referred to in Paragraph 1 above
to exchange such Promissory Notes for new Promissory Notes as provided in
Section 11.6(f) of the Credit Agreement.
3. Assignee (a) confirms that it has received a copy of the Credit
Agreement and the other Loan Documents, together with copies of the financial
statements referred to in Sections 4.1(j), 6.1 and 6.2 of the Credit Agreement
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance; (b) agrees that it will, independently and without reliance upon the
Administrative Agent, Assignor, or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement
and the other Loan Documents; (c) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement, the other Loan Documents, and this Assignment and
Acceptance as are delegated to the Administrative Agent by the terms thereof and
hereof, together with such powers as are reasonably incidental thereto and
hereto; (d) agrees that it will perform in accordance with its terms all of the
obligations which by the terms of the Credit Agreement, the other Loan
Documents, and this Assignment and Acceptance are required to be performed by it
as a Lender; and (e) specifies the addresses set forth in Schedule I attached
hereto as its address for the receipt of notices and as its initial LIBOR Lender
Office, respectively[; and (f) attaches the forms prescribed by the IRS
certifying as to Assignee's status for purposes of determining exemption from
United States withholding taxes with respect to all payments to be made to
Assignee under the Credit Agreement, the other Loan Documents, and this
Assignment and Acceptance].
4. The effective date for this Assignment and Acceptance shall be
___________________, 199___ (the "Effective Date").
5. Upon such acceptance as of the Effective Date and upon the remittance
of a $3,500 processing fee to the Administrative Agent, (a) Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and
(b) Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
6. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Texas. Without excluding any other
jurisdiction, Assignee agrees that the courts of Texas will have jurisdiction
over proceedings in connection herewith.
7. After giving effect to this Assignment and Acceptance (and all other
assignments by the Assignor to be effective as of the Effective Date):
a. Assignee's Revolving Credit Specified Percentage shall be _____%.
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<PAGE>
b. Assignee's Facility A Term Loan Specified Percentage shall be
_____%.
c. Assignee's Facility B Term Loan Specified Percentage shall be
_____%.
d. Assignee's Facility C Term Loan Specified Percentage shall be
_____%.
e. Assignee's Total Specified Percentage shall be _____%.
f. Assignor's Revolving Credit Specified Percentage shall be _____%.
g. Assignor's Facility A Term Loan Specified Percentage shall be
_____%.
h. Assignor's Facility B Term Loan Specified Percentage shall be
_____%.
i. Assignor's Facility C Term Loan Specified Percentage shall be
_____%.
j. Assignor's Total Specified Percentage shall be _____%.
8. This Assignment and Acceptance may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
[NAME OF ASSIGNOR]
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
[NAME OF ASSIGNEE]
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
- 3 -
<PAGE>
Accepted this ___ day of ____________, 1997
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent
By:
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
SUN HEALTHCARE GROUP, INC.
By:
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
- 4 -
<PAGE>
Schedule I
ASSIGNEE'S ADDRESS
1. ADDRESS FOR THE ADVANCES AND RECEIPT OF NOTICES
2. INITIAL LIBOR LENDING OFFICE
<PAGE>
EXHIBIT I
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of __________________________, 1997, by
_____________________, a ______________ corporation ("Pledgor"), in favor of
NationsBank of Texas, N.A., as Administrative Agent ("Administrative Agent") for
NationsBank of Texas, N.A., and each other lender a party to the Credit
Agreement described below (singly, a "Secured Party" and collectively, the
"Secured Parties").
A. AGREEMENT
1. PLEDGE. Upon the terms hereof, for value received, the Pledgor hereby
irrevocably and unconditionally pledges, assigns, hypothecates and transfers to
the Administrative Agent, for the ratable benefit of the Administrative Agent
and Secured Parties, a first and prior pledge and security interest in (a) all
shares of capital stock of each Restricted Subsidiary (other than Inactive
Subsidiaries) of Pledgor (collectively, the "Subsidiaries" and individually a
"Subsidiary"), now or hereafter owned beneficially or of record by the Pledgor,
including the stock of each Subsidiary described on Exhibit A attached hereto,
and (b) all proceeds thereof, and any increase and profits received therefrom
(collectively, "Collateral"). Unless otherwise defined in this agreement, terms
used herein shall have the meanings set forth in the Credit Agreement, dated as
of October 8, 1997, among Sun Healthcare Group, Inc., (the "Company"), the
Administrative Agent, and the Secured Parties (as the same may be amended,
modified, supplemented, renewed or extended from time to time, "Credit
Agreement").
B. OBLIGATION
1. DESCRIPTION OF OBLIGATION. The following obligations (collectively,
"Obligation") are secured by this agreement:
a. All debt, obligations, liabilities and agreements of any nature
of the Company to the Secured Parties or any Secured Party or any affiliate
of any Secured Party, whether matured or unmatured, fixed or contingent,
including all future advances, now or hereafter existing, arising pursuant
to or in connection with (i) this agreement; (ii) the Credit Agreement;
(iii) all other Loan Documents; and (iv) all amendments, modifications,
renewals, extensions, increases, substitutions or rearrangements of any of
the foregoing.
b. All costs incurred by the Administrative Agent or any Secured
Party to obtain, preserve, perfect and enforce this agreement, the other
Loan Documents, and the pledge and security interest granted hereby,
collect the Obligation, and maintain, preserve, collect and enforce the
Collateral, including, without limitation, taxes, assessments, reasonable
attorneys' fees and legal expenses, and expenses of sale.
<PAGE>
c. Interest on the above amounts as agreed between the Company and
the Secured Parties, including, without limitation, interest, fees and
other charges that would accrue or become owing both prior to and
subsequent to and but for the commencement of any proceeding against or
with respect to the Company under any chapter of the Bankruptcy Code of
1978, 11 U.S.C. Section 101 ET SEQ. whether or not a claim is allowed for
the same in any such proceeding.
Notwithstanding any contrary provision herein or in any other Loan
Document, the Pledgor's maximum liability hereunder shall not exceed the Maximum
Secured Indebtedness. The Pledgor agrees that the Obligation may at any time
exceed the aggregate Maximum Secured Indebtedness of all obligors on all or any
part of the Obligation, without affecting or improving the obligation of the
Pledgor. "MAXIMUM SECURED INDEBTEDNESS" means, with respect to the Pledgor as
of the date of determination, the lesser of (a) the Obligation or (b) the
maximum amount for which the Pledgor may be liable under this agreement without
such amount and the Pledgor's obligations under this agreement with respect to
such amount being deemed a fraudulent transfer, as determined by a bankruptcy or
similar court.
C. COVENANTS, REPRESENTATIONS AND WARRANTIES
1. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants
that (a) it has full power, authority and legal right to execute, deliver and
perform this agreement; (b) the capital stock described on Exhibit A constitutes
100% of each Subsidiary's issued and outstanding capital stock; (c) the shares
of stock pledged hereunder are duly authorized, validly issued, fully paid and
nonassessable; (d) the pledge, assignment and delivery of the Collateral create
a valid perfected security interest in the Collateral and no other security
agreement covering the Collateral, or any part thereof, has been made, and no
pledge or security interest, other than the one herein created, has attached or
been perfected in the Collateral or in any part thereof; and (e) no dispute,
right of setoff, counterclaim or defense exists with respect to any part of the
Collateral. The delivery at any time by the Pledgor to the Administrative Agent
of Collateral shall constitute a representation and warranty by the Pledgor
under this agreement that, with respect to such Collateral, and each item
thereof, the Pledgor is the sole legal and beneficial owner of, with good title
to, the Collateral; and the matters warranted in this paragraph are true and
correct.
2. COVENANTS.
a. AFFIRMATIVE COVENANTS. The Pledgor covenants and agrees
(i) promptly to deliver to the Administrative Agent all instruments,
certificates, documents or agreements evidencing any of the Collateral;
(ii) from time to time promptly to execute and deliver to the Administrative
Agent all such other assignments, certificates, supplemental writings and
financing statements, and do all other acts or things, as the Administrative
Agent or any Secured Party may request in order more fully to evidence and
perfect the security interest and pledge herein created or to effect the
purposes of this agreement; (iii) promptly to furnish the Administrative Agent
with any information or writings which the Administrative Agent or any
- 2 -
<PAGE>
Secured Party may request concerning the Collateral; (iv) to allow the
Administrative Agent or any Secured Party to inspect all records of the Pledgor
relating to the Collateral, and to make and take away copies of such records, at
the Pledgor's expense, at such reasonable times and as often as may be
reasonably requested by the Administrative Agent or such Secured Party;
(v) promptly to notify the Administrative Agent of any change in any fact or
circumstances warranted or represented by the Pledgor in this agreement or in
any other writings furnished by or on behalf of the Pledgor to the
Administrative Agent or any Secured Party in connection with the Collateral;
(vi) promptly to notify the Administrative Agent of any claim, action or
proceeding affecting title to the Collateral, or any part thereof, or the
security interest therein, and, at the request of the Administrative Agent,
appear in and defend, at the Pledgor's expense, any such action or proceeding;
and (vii) promptly to pay to the Administrative Agent the amount of all
reasonable costs and attorneys' fees incurred by the Administrative Agent and
each Secured Party hereunder or in connection with the enforcement hereof.
b. NEGATIVE COVENANTS. The Pledgor covenants and agrees that the
Pledgor will not except to the extent permitted by the Credit Agreement, (i)
sell, assign or transfer any of the Pledgor's rights in the Collateral;
(ii) create any other security interest or pledge in, mortgage or otherwise
encumber the Collateral or any part thereof, or permit the same to be or become
subject to any Lien, attachment, execution, sequestration, other legal or
equitable process, or any encumbrance of any kind or character [other than in
respect of the Regency Credit Agreement]; or (iii) cause, permit, or suffer
either Subsidiary to issue any capital stock to the Pledgor that is not
concurrently delivered to the Administrative Agent; or (iv) cause, permit or
suffer either Subsidiary to take any action that would cause the Collateral to
represent less than 100% of the issued and outstanding capital stock of such
Subsidiary.
D. RIGHTS OF SECURED PARTIES
1. RIGHTS TO DIVIDENDS, DISTRIBUTIONS, AND PAYMENTS. With respect to
such instruments which are stock certificates, bonds or other securities, the
Administrative Agent may demand of the corporate obligor issuing the same, and
may receive and receipt for, any and all stock dividends and other distributions
(other than cash dividends) payable in respect thereof, whether ordinary or
extraordinary. If, while this agreement is in effect, the Pledgor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital, or
issued in connection with any reorganization), option or rights, whether as an
addition to, in substitution of, as a conversion of or in exchange for any of
the Collateral, or otherwise, the Pledgor agrees to accept the same as the
Administrative Agent's agent and to hold the same in trust on behalf of and for
the benefit of the Administrative Agent, and to deliver the same forthwith to
the Administrative Agent in the exact form received, with appropriate undated
stock powers, duly executed in blank, to be held by the Administrative Agent,
subject to the terms hereof, as additional collateral security for the
Obligation. Until an Event of Default shall have occurred and during the
continuance thereof, the Pledgor shall be entitled to receive all cash
dividends, principal, and interest paid in respect of the Collateral. After the
occurrence and during the continuance of an Event of
- 3 -
<PAGE>
Default, the Administrative Agent shall be entitled to all cash dividends and to
any sums paid upon or in respect of the Collateral upon the liquidation,
dissolution or reorganization of the issuer thereof which shall be paid to the
Administrative Agent to be held by it as additional collateral security for the
Obligation. In case any distribution shall be made on or in respect of the
Collateral pursuant to the reorganization, liquidation or dissolution of the
issuer thereof, the property so distributed shall be delivered to the
Administrative Agent to be held by it as additional collateral security for the
Obligation. After an Event of Default, all sums of money and property so paid
or distributed in respect of the Collateral (other than proceeds of any
liquidation or similar proceeding) which are received by the Pledgor shall,
until paid or delivered to the Administrative Agent, be held by the Pledgor in
trust as additional Collateral for the Obligation.
2. PRESERVATION OF COLLATERAL. Neither the Administrative Agent nor any
Secured Party shall have any duty to fix or preserve rights against prior
parties to the Collateral, nor be liable for any delay in the collection of, or
failure to use diligence to collect on, the Obligation or any amount payable in
respect of the Collateral.
3. PERFORMANCE BY THE ADMINISTRATIVE AGENT. Should any covenant, duty or
agreement of the Pledgor fail to be performed in accordance with its terms
hereunder, the Administrative Agent may, but shall never be obligated to,
perform or attempt to perform such covenant, duty or agreement on behalf of the
Pledgor, and any amount expended by the Administrative Agent in such performance
or attempted performance shall become a part of the Obligation, shall be payable
upon demand and shall bear interest at a per annum rate equal to the lesser of
the Highest Lawful Rate and the sum of the Prime Rate Basis plus three percent.
4. VOTING RIGHTS. It is expressly understood and agreed that the Pledgor
shall retain all voting rights to the Collateral until the occurrence of an
Event of Default, at which time such voting rights shall transfer to the
Administrative Agent, at its sole discretion; provided, however, that no voting
or corporate rights shall be exercised or vote cast or consent, waiver or
ratification given or action taken by the Pledgor that would impair the
Collateral or be inconsistent with or violate any provision of this agreement or
any other Loan Documents.
5. POWER OF ATTORNEY. PLEDGOR HEREBY IRREVOCABLY GRANTS TO THE
ADMINISTRATIVE AGENT PLEDGOR'S PROXY (EXERCISABLE FROM AND AFTER THE OCCURRENCE
OF AN EVENT OF DEFAULT WHICH IS CONTINUING) AND APPOINTS THE ADMINISTRATIVE
AGENT PLEDGOR'S ATTORNEY-IN-FACT TO PERFORM ALL OBLIGATIONS OF PLEDGOR UNDER
THIS AGREEMENT AND TO EXERCISE ALL OF THE ADMINISTRATIVE AGENT'S RIGHTS
HEREUNDER. THE PROXY AND POWER OF ATTORNEY HEREIN GRANTED, AND EACH STOCK POWER
AND SIMILAR POWER NOW OR HEREAFTER GRANTED (INCLUDING ANY EVIDENCED BY A
SEPARATE WRITING) ARE COUPLED WITH AN INTEREST AND ARE IRREVOCABLE PRIOR TO
FINAL PAYMENT IN FULL OF THE OBLIGATIONS.
- 4 -
<PAGE>
E. DEFAULT
1. RIGHTS AND REMEDIES. Upon the occurrence of an Event of Default, in
addition to any and all other rights and remedies which the Administrative Agent
or any Secured Party may then have hereunder, under any other Loan Documents,
under Applicable Law or otherwise, the Administrative Agent at its option may,
subject to any limitation or restriction imposed by any applicable bankruptcy,
insolvency or other law relating to the relief of debtors, (a) obtain from any
Person information regarding the Pledgor, any issuer of the Collateral, or any
of their businesses, which information any such Person may furnish without
liability to the Pledgor; (b) require the Pledgor to give possession or control
of any of the Collateral to the Administrative Agent; (c) unless earlier
permitted hereunder, take control of funds generated by the Collateral and any
other proceeds and exercise all other Rights which an owner of such Collateral
may exercise; (d) declare the entire unpaid balance of principal and interest on
the Obligation immediately due and payable, without notice, demand or
presentment, which are hereby expressly waived; (e) reduce its claim to
judgment, foreclose or otherwise enforce its security interest in all or any
part of the Collateral by any available judicial procedure; (f) after
notification, if any, provided for in this agreement or any other Loan
Documents, sell or otherwise dispose of, at the office of the Administrative
Agent, all or any part of the Collateral, and any such sale or other disposition
shall be in accordance with Applicable Law, and may be as a unit or in parcels,
by public or private proceedings, and by way of one or more contracts (it being
agreed that the sale of any part of the Collateral shall not exhaust the
Administrative Agent's power of sale, but sales may be made from time to time
until all of the Collateral has been sold or until the Obligation has been paid
in full), and at any such sale it shall not be necessary to exhibit the
Collateral; (g) at its discretion, retain the Collateral in satisfaction of the
Obligation whenever the circumstances are such that the Administrative Agent is
entitled to do so under Applicable Law; (h) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
hereof, and the Pledgor hereby consents to any appointment; (i) buy the
Collateral at any public sale; and (j) buy the Collateral at any private sale,
subject to any restrictions imposed by Applicable Law. Any Secured Party may
buy the Collateral at any public sale and buy the Collateral at any private
sale, subject to the restrictions imposed by Applicable Law. Pledgor agrees
that, if notice is required to be given by Applicable Law, five (5) days'
advance notice shall constitute reasonable notice. The Administrative Agent
shall apply the proceeds of any collection, sale, disposition or other
realization upon any Collateral as follows:
FIRST, to the payment of the costs and expenses of such collection,
sale, disposition, or other realization, including reasonable out-of-pocket
costs and expenses of the Administrative Agent and the reasonable fees and
expenses of its agents and counsel;
NEXT, to the payment of the Obligation, equally and ratably to each
Secured Party in accordance with the respective amounts thereof due and
owing to each Secured Party; and
- 5 -
<PAGE>
FINALLY, to the payment to the Pledgor, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
If the proceeds of collection, sale, disposition, or other realization are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligation, the Company shall remain liable for any deficiency.
2. SECURITIES LAWS; TRANSFER
a. Immediately upon the occurrence of an Event of Default, the
Pledgor hereby grants to the Administrative Agent the right to have the
Collateral, or any portion thereof, registered and sold under the Securities Act
of 1933, as amended ("Securities Act"), or under any applicable state blue sky
laws. If the Administrative Agent shall determine to exercise its right to sell
any or all of the Collateral pursuant to the terms hereof, and if in the opinion
of the Administrative Agent it is necessary or advisable to have the Collateral
(or that portion thereof to be sold) registered under the provisions of the
Securities Act, the Pledgor will cause the issuer of the Collateral to execute
and deliver, and cause the directors and officers thereof to execute and
deliver, all at the Pledgor's expense, all such instruments and documents, and
to do or cause to be done all such other acts and things as may be necessary or,
in the opinion of the Administrative Agent, advisable to register such
Collateral under the provisions of the Securities Act and to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Collateral, or that portion thereof to be sold, and to make all amendments
thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of Applicable Law. The Pledgor agrees to cause the issuer of the
Collateral to comply with the provisions of the securities or "blue sky" laws of
any jurisdiction which the Administrative Agent shall designate and to cause the
issuer of the Collateral to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section
11(a) of the Securities Act.
b. The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account for investment
and not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale conducted in the manner
described herein may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any private sale shall be deemed in that instance to
have been made in a commercially reasonable manner. The Administrative Agent
shall be under no obligation to delay a sale of any of the Collateral for the
period of time necessary to permit the issuer of the Collateral to register such
Collateral for public sale under the Securities Act, or under applicable state
securities laws, even if the issuer of the Collateral would agree to do so.
- 6 -
<PAGE>
c. The Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make any sales of any portion or
all of the Collateral pursuant to paragraphs (a) and (b) of this Section valid
and binding and in compliance with any and all applicable laws (including,
without limitation, the Securities Exchange Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission applicable
thereto), regulations, orders, writs, injunctions, decrees or awards of any and
all courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Pledgor's expense.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
Secured Parties and that the Administrative Agent and Secured Parties may not
have an adequate remedy at law in respect of such breach. As a consequence, the
Pledgor agrees that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgor. The Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants.
d. The Pledgor agrees (i) that in the event the Administrative Agent
shall, upon any Event of Default, sell the Collateral or any portion thereof, at
a private sale or sales, the Administrative Agent shall have the right to rely
upon the advice and opinion of a member of a nationally recognized investment
banking firm acceptable to the Administrative Agent, as to the best price
reasonably obtainable upon such a private sale thereof, and (ii) in the absence
of fraud, wilful misconduct and gross negligence, that such reliance shall be
conclusive evidence that the Administrative Agent handled such matter in a
commercially reasonable manner under the Uniform Commercial Code.
3. NOTICE. Notification of the time and place of any public sale of the
Collateral, or reasonable notification of the time after which any private sale
or other intended disposition of the Collateral is to be made, shall be sent to
the Pledgor and to any other Person entitled under Applicable Law to notice.
F. GENERAL
1. ADMINISTRATIVE AGENT'S DUTIES. The Secured Parties hereby appoint
NationsBank of Texas, N.A. as Administrative Agent to act as their agent as
provided herein and in the Credit Agreement, which actions hereunder, including
without limitation, the administration of the Collateral, enforcement of the
rights hereunder and collection of amounts secured hereby, are on behalf of, and
for the ratable benefit of, the Lenders. In the event the Administrative Agent
is replaced pursuant to Section 10.1(b) of the Credit Agreement, the successor
Administrative Agent appointed in accordance with Section 10.1(b) of the Credit
Agreement shall be the Administrative Agent hereunder. The powers conferred on
the Administrative Agent hereunder are solely to protect the Secured Parties'
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral, as to ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders, or other matters relative to
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any Collateral, whether or not the Administrative Agent or any Secured Party has
or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property. Except as provided in this Section F.1., the Administrative Agent
shall not have any duty or liability to protect or preserve any Collateral or to
preserve rights pertaining thereto. Nothing contained in this agreement shall
be construed as requiring or obligating the Administrative Agent, and the
Administrative Agent shall not be required or obligated, (a) to present or file
any claim or notice or take any action, with respect to any Collateral or in
connection therewith or (b) to notify Pledgor of any decline in the value of any
Collateral.
2. CUMULATIVE RIGHTS. All rights and remedies of the Administrative
Agent and the Secured Parties hereunder are cumulative of each other and of
every other right or remedy which the Administrative Agent or the Secured
Parties may otherwise have at law or in equity or under any other contract or
other writing for the enforcement of the security interest herein or the
collection of the Obligation, and the exercise of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of other
rights or remedies.
3. WAIVER. No delay or omission by the Administrative Agent or any
Secured Party in exercising any right or power hereunder, or under any other
Loan Documents, shall impair any such right or power or be construed as a waiver
thereof or an acquiescence therein, nor shall any single or partial exercise of
any such right or power preclude other or further exercise thereof, or the
exercise of any other right or power of the Administrative Agent or any Secured
Party hereunder or under such other writings.
4. INTEREST; LIMITATION OF LAW. No provision herein or in any Loan
Documents shall require the payment or permit the collection of interest in
excess of the maximum permitted by Applicable Law. If, in any contingency
whatsoever, the Administrative Agent or any Secured Party shall receive anything
of value from the Pledgor deemed interest under Applicable Law which would
exceed the maximum amount of interest permissible under Applicable Law, the
provisions of the Credit Agreement shall govern.
5. PARTIES BOUND. This agreement shall be binding on the Pledgor and its
successors, assigns and legal representatives, and shall inure to the benefit of
the Administrative Agent and the Secured Parties, and their successors, assigns
and legal representatives; provided, however, that the Pledgor may not assign
its rights or obligations hereunder without the prior written consent of the
Administrative Agent. The rights, powers and interests held by the
Administrative Agent hereunder may be transferred and assigned by the
Administrative Agent, in whole or in part, at such time and upon such terms as
permitted by the Credit Agreement.
6. NOTICE; WAIVERS BY PLEDGOR. All notices, communications and materials
to be given or delivered pursuant to this agreement shall be given and shall be
effective as provided in SECTION 11.1 of the Credit Agreement but to Pledgor at
the address shown opposite its name
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<PAGE>
on the signature page hereto. The Pledgor waives notices of the creation,
advance, increase, existence, extension or renewal of, and of any indulgence
with respect to, the Obligation; waives presentment, demand, notice of dishonor
and protest; waives notice of the amount of the Obligation outstanding at any
time, notice of any change in financial condition of any Person liable for the
Obligation or any part thereof, notice of any Event of Default and all other
notices respecting the Obligation; waives all rights of redemption, appraisal,
or valuation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, increased, extended or renewed one or more times by the
Secured Parties in their discretion, without notice to the Pledgor.
7. MODIFICATIONS. No provision hereof shall be modified or limited
except by a written agreement expressly referring hereto and to the provisions
so modified or limited and signed by the Pledgor and the Administrative Agent.
8. CONTROL. Notwithstanding anything herein to the contrary, this
agreement and the transactions contemplated hereby do not and will not
constitute, create, or have the effect of constituting or creating, directly or
indirectly, actual or practical ownership of the Pledgor or the issuer of the
Collateral by the Administrative Agent, or control, affirmative or negative,
direct or indirect, by the Administrative Agent or the Secured Parties, over the
management or any aspect of the day-to-day operation of the Pledgor or the
issuer of the Collateral, which control remains in the Pledgor, the issuer of
the Collateral, and their respective shareholders and boards of directors.
9. OBLIGATIONS NOT AFFECTED. To the fullest extent permitted by
Applicable Law, the obligations of Pledgor under this agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
a. any amendment or modification or addition or supplement to any
Loan Document, any instrument delivered in connection therewith or any
assignment or transfer thereof;
b. any exercise, non-exercise, or waiver by Administrative Agent or
any Secured Party of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty, any collateral or the
Collateral or any part thereof provided pursuant to, this agreement or any
Loan Document;
c. any waiver, consent, extension, indulgence or other action or
inaction with respect of this agreement or any Loan Document or any
assignment or transfer of any thereof; or
d. any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Company, Pledgor
or any other Person, whether or not Pledgor shall have notice or knowledge
of any of the foregoing.
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<PAGE>
10. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
11. SUBROGATION. Pledgor shall not assert, enforce, or otherwise exercise
(i) any right of subrogation to any of the rights or liens of any Lender or
Administrative Agent or any other beneficiary against the Company or any other
obligor on the Obligation or any collateral or other security or (ii) any right
of recourse, reimbursement, contribution, indemnification, or similar right
against the Company or any other obligor on all or any part of the Obligation or
any guarantor thereof, and Pledgor hereby waives any and all of the foregoing
right and the benefit of, and any right to participate in, any collateral or
other security given to any Lender or Administrative Agent or any other
beneficiary to secure payment of the Obligation. The provisions of this
SECTION F.11 shall survive the termination of this agreement and satisfaction
and discharge of the Company by virtue of any payment, court order, or Law.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE PLEDGOR AGREES THAT THE STATE AND
FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE JURISDICTION OVER
PROCEEDINGS IN CONNECTION HEREWITH.
13. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR, THE ADMINISTRATIVE AGENT
AND THE SECURED PARTIES HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND
INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THE CREDIT
AGREEMENT.
14. ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[15. NO NOVATION. THE EXECUTION, DELIVERY AND EFFECTIVENESS OF THIS
AGREEMENT SHALL NOT DISCHARGE OR RELEASE THE LIEN OR PRIORITY OF THAT CERTAIN
AMENDED AND RESTATED PLEDGE AGREEMENT OR THAT CERTAIN PLEDGE AGREEMENT EXECUTED
BY PLEDGOR IN FAVOR OF ADMINISTRATIVE AGENT, SECURING THE COMPANY'S OBLIGATIONS
UNDER THAT CERTAIN FOURTH AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF
OCTOBER 29, 1996, AMONG THE COMPANY, THE MEDIPLEX GROUP, INC., CERTAIN CO-
AGENTS, ADMINISTRATIVE AGENT AND THE
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<PAGE>
LENDERS PARTY THERETO (THE "PRIOR CREDIT AGREEMENT"). NOTHING HEREIN CONTAINED
SHALL BE CONSTRUED AS A SUBSTITUTION OR NOVATION OF ANY COLLATERAL DOCUMENTS (AS
SUCH TERM IS DEFINED IN THE PRIOR CREDIT AGREEMENT) OR THE LIENS GRANTED
THEREBY, ALL OF WHICH SHALL CONTINUE AND REMAIN IN FULL FORCE AND EFFECT, EXCEPT
AS MODIFIED HEREBY, OR BY INSTRUMENTS EXECUTED CONCURRENTLY HEREWITH.]
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<PAGE>
IN WITNESS WHEREOF, the Pledgor has executed this Pledge Agreement as of
this ____________________ day of _____________________, 199___.
_______________________________________
By: _________________________________________________
Name: Robert D. Woltil
Title: Senior Vice President and Chief Financial
Officer
Address:
101 Sun Lane N.E.
Albuquerque, New Mexico 87109
Attn:_________________________
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent
By: _______________________________________
Name:__________________________________
Title:_________________________________
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<PAGE>
EXHIBIT A
Subsidiary Certificate No. Record Owner Class and Number of Shares
- ---------- --------------- ------------ --------------------------
<PAGE>
EXHIBIT J
FOREIGN SUBSIDIARY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of ______________________, 199__, by
__________________________________ ("Pledgor"), in favor of NationsBank of
Texas, N.A., as Administrative Agent ("Administrative Agent") for NationsBank of
Texas, N.A., and each other lender a party to the Credit Agreement described
below (singly, a "Secured Party" and collectively, the "Secured Parties").
A. AGREEMENT
1. PLEDGE. Upon the terms hereof, for value received, the Pledgor hereby
irrevocably and unconditionally pledges, assigns, hypothecates and transfers to
the Administrative Agent, for the ratable benefit of the Administrative Agent
and Secured Parties, a first and prior pledge and security interest in (a) the
lesser of (i) all of the capital stock of each Foreign Subsidiary of Pledgor and
(ii) 66% of all of the issued and outstanding capital stock of any such Foreign
Subsidiary of Pledgor (collectively, the "Subsidiaries and individually, a
"Subsidiary"), now or hereafter owned beneficially or of record by the Pledgor,
including the stock of each Subsidiary described on Exhibit A attached hereto,
and (b) all proceeds thereof, and any increase and profits received therefrom
(collectively, "Collateral"). Unless otherwise defined in this agreement, terms
used herein shall have the meanings set forth in the Credit Agreement, dated as
of October 8, 1997, among Sun Healthcare Group, Inc., (the "Company"), the
Administrative Agent, and the Secured Parties (as the same may be amended,
modified, supplemented, renewed or extended from time to time, "Credit
Agreement").
B. OBLIGATION
1. DESCRIPTION OF OBLIGATION. The following obligations (collectively,
"Obligation") are secured by this agreement:
a. All debt, obligations, liabilities and agreements of any nature
of the Company to the Secured Parties or any Secured Party, whether matured
or unmatured, fixed or contingent, including all future advances, now or
hereafter existing, arising pursuant to or in connection with (i) this
agreement; (ii) the Credit Agreement; (iii) all other Loan Documents; and
(iv) all amendments, modifications, renewals, extensions, increases,
substitutions or rearrangements of any of the foregoing.
b. All costs incurred by the Administrative Agent or any Secured
Party to obtain, preserve, perfect and enforce this agreement, the other
Loan Documents, and the pledge and security interest granted hereby,
collect the Obligation, and maintain,
<PAGE>
preserve, collect and enforce the Collateral, including without limitation
taxes, assessments, reasonable attorneys' fees and legal expenses, and
expenses of sale.
c. Interest on the above amounts as agreed between the Company and
the Secured Parties, including, without limitation, interest, fees and
other charges that would accrue or become owing both prior to and
subsequent to and but for the commencement of any proceeding against or
with respect to any Company under any chapter of the Bankruptcy Code of
1978, 11 U.S.C. Section 101 ET SEQ. whether or not a claim is allowed for
the same in any such proceeding.
C. COVENANTS, REPRESENTATIONS AND WARRANTIES
1. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants
that (a) it has full power, authority and legal right to execute, deliver and
perform this agreement; (b) the capital stock described on Exhibit A constitutes
all of each Subsidiary's issued and outstanding capital stock owned by Pledgor
up to but not exceeding 66% (or such greater percentage as may be permitted
under the Code without resulting in the pledge hereunder being characterized as
a dividend for tax purposes) of all of the issued and outstanding capital stock
of each such Subsidiary; (c) the shares of stock pledged hereunder are duly
authorized, validly issued, fully paid and nonassessable; (d) the pledge,
assignment and delivery of the Collateral create a valid first and prior
perfected security interest in the Collateral and no other security agreement
covering the Collateral, or any part thereof, has been made, and no pledge or
security interest, other than the one herein created, has attached or been
perfected in the Collateral or in any part thereof; and (e) no dispute, right of
setoff, counterclaim or defense exists with respect to any part of the
Collateral. The delivery at any time by the Pledgor to the Administrative Agent
of Collateral shall constitute a representation and warranty by the Pledgor
under this agreement that, with respect to such Collateral, and each item
thereof, the Pledgor is the sole legal and beneficial owner of, with good title
to, the Collateral; and the matters warranted in this paragraph are true and
correct.
2. COVENANTS.
a. AFFIRMATIVE COVENANTS. The Pledgor covenants and agrees
(i) promptly to deliver to the Administrative Agent all instruments,
certificates, documents or agreements evidencing any of the Collateral;
(ii) from time to time promptly to execute and deliver to the Administrative
Agent all such other assignments, certificates, supplemental writings and
financing statements, and do all other acts or things, as the Administrative
Agent or any Secured Party may request in order more fully to evidence and
perfect the security interest and pledge herein created or to effect the
purposes of this agreement; (iii) promptly to furnish the Administrative Agent
with any information or writings which the Administrative Agent or any Secured
Party may request concerning the Collateral; (iv) to allow the Administrative
Agent or any Secured Party to inspect all records of the Pledgor relating to the
Collateral, and to make and take away copies of such records, at the Pledgor's
expense, at such reasonable times and as often as may be reasonably requested by
the Administrative Agent or such Secured Party;
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<PAGE>
(v) promptly to notify the Administrative Agent of any change in any fact or
circumstances warranted or represented by the Pledgor in this agreement or in
any other writings furnished by or on behalf of the Pledgor to the
Administrative Agent or any Secured Party in connection with the Collateral;
(vi) promptly to notify the Administrative Agent of any claim, action or
proceeding affecting title to the Collateral, or any part thereof, or the
security interest therein, and, at the request of the Administrative Agent,
appear in and defend, at the Pledgor's expense, any such action or proceeding;
and (vii) promptly to pay to the Administrative Agent the amount of all
reasonable costs and attorneys' fees incurred by the Administrative Agent and
each Secured Party hereunder or in connection with the enforcement hereof.
b. NEGATIVE COVENANTS. The Pledgor covenants and agrees that the
Pledgor will not (i) except to the extent permitted by the Credit Agreement,
sell, assign or transfer any of the Pledgor's rights in the Collateral;
(ii) create any other security interest or pledge in, mortgage or otherwise
encumber the Collateral or any part thereof, or permit the same to be or become
subject to any Lien, attachment, execution, sequestration, other legal or
equitable process, or any encumbrance of any kind or character; or (iii) cause,
permit, or suffer any Subsidiary to issue any capital stock to the Pledgor which
would cause the Administrative Agent to have a pledge of capital stock
representing a lesser percentage of the issued and outstanding capital stock of
each Subsidiary than the Administrative Agent has as of the date hereof; or
(iv) cause, permit or suffer any Subsidiary to take any action that would cause
the Pledgor to own a lesser percentage of the issued and outstanding capital
stock of each Subsidiary than the Pledgor owns as of the date hereof.
D. RIGHTS OF SECURED PARTIES
1. RIGHTS TO DIVIDENDS, DISTRIBUTIONS, AND PAYMENTS. With respect to
such instruments which are stock certificates, bonds or other securities, the
Administrative Agent may demand of the corporate obligor issuing the same, and
may receive and receipt for, any and all stock dividends and other distributions
(other than cash dividends) payable in respect thereof, whether ordinary or
extraordinary. If, while this agreement is in effect, the Pledgor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital, or
issued in connection with any reorganization), option or rights, whether as an
addition to, in substitution of, as a conversion of or in exchange for any of
the Collateral, or otherwise, the Pledgor agrees to accept the same as the
Administrative Agent's agent and to hold the same in trust on behalf of and for
the benefit of the Administrative Agent, and to deliver the same forthwith to
the Administrative Agent in the exact form received, with appropriate undated
stock powers, duly executed in blank, to be held by the Administrative Agent,
subject to the terms hereof, as additional collateral security for the
Obligation. Until an Event of Default shall have occurred and during the
continuance thereof, the Pledgor shall be entitled to receive all cash
dividends, principal, and interest paid in respect of the Collateral. After the
occurrence and during the continuance of an Event of Default, the Administrative
Agent shall be entitled to all cash dividends and to any sums paid upon or in
respect of the Collateral upon the liquidation, dissolution or reorganization of
the
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<PAGE>
issuer thereof which shall be paid to the Administrative Agent to be held by it
as additional collateral security for the Obligation. In case any distribution
shall be made on or in respect of the Collateral pursuant to the reorganization,
liquidation or dissolution of the issuer thereof, the property so distributed
shall be delivered to the Administrative Agent to be held by it as additional
collateral security for the Obligation. After an Event of Default, all sums of
money and property so paid or distributed in respect of the Collateral (other
than proceeds of any liquidation or similar proceeding) which are received by
the Pledgor shall, until paid or delivered to the Administrative Agent, be held
by the Pledgor in trust as additional Collateral for the Obligation.
2. PRESERVATION OF COLLATERAL. Neither the Administrative Agent nor any
Secured Party shall have any duty to fix or preserve rights against prior
parties to the Collateral, nor be liable for any delay in the collection of, or
failure to use diligence to collect on, the Obligation or any amount payable in
respect of the Collateral.
3. PERFORMANCE BY THE ADMINISTRATIVE AGENT. Should any covenant, duty or
agreement of the Pledgor fail to be performed in accordance with its terms
hereunder, the Administrative Agent may, but shall never be obligated to,
perform or attempt to perform such covenant, duty or agreement on behalf of the
Pledgor, and any amount expended by the Administrative Agent in such performance
or attempted performance shall become a part of the Obligation, shall be payable
upon demand and shall bear interest at a per annum rate equal to the lesser of
the Highest Lawful Rate and the sum of the Prime Rate Basis plus three percent.
4. VOTING RIGHTS. It is expressly understood and agreed that the Pledgor
shall retain all voting rights to the Collateral until the occurrence of an
Event of Default, at which time such voting rights shall transfer to the
Administrative Agent, at its sole discretion; provided, however, that no voting
or corporate rights shall be exercised or vote cast or consent, waiver or
ratification given or action taken by the Pledgor that would impair the
Collateral or be inconsistent with or violate any provision of this agreement or
any other Loan Documents.
5. POWER OF ATTORNEY. PLEDGOR HEREBY IRREVOCABLY GRANTS TO THE
ADMINISTRATIVE AGENT PLEDGOR'S PROXY (EXERCISABLE FROM AND AFTER THE OCCURRENCE
OF AN EVENT OF DEFAULT WHICH IS CONTINUING) AND APPOINTS THE ADMINISTRATIVE
AGENT PLEDGOR'S ATTORNEY-IN-FACT TO PERFORM ALL OBLIGATIONS OF PLEDGOR UNDER
THIS AGREEMENT AND TO EXERCISE ALL OF THE ADMINISTRATIVE AGENT'S RIGHTS
HEREUNDER. THE PROXY AND POWER OF ATTORNEY HEREIN GRANTED, AND EACH STOCK POWER
AND SIMILAR POWER NOW OR HEREAFTER GRANTED (INCLUDING ANY EVIDENCED BY A
SEPARATE WRITING) ARE COUPLED WITH AN INTEREST AND ARE IRREVOCABLE PRIOR TO
FINAL PAYMENT IN FULL OF THE OBLIGATIONS.
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<PAGE>
E. DEFAULT
1. RIGHTS AND REMEDIES. Upon the occurrence of an Event of Default, in
addition to any and all other rights and remedies which the Administrative Agent
or any Secured Party may then have hereunder, under any other Loan Documents,
under Applicable Law or otherwise, the Administrative Agent at its option may,
subject to any limitation or restriction imposed by any applicable bankruptcy,
insolvency or other law relating to the relief of debtors, (a) obtain from any
Person information regarding the Pledgor, any issuer of the Collateral, or any
of their businesses, which information any such Person may furnish without
liability to the Pledgor; (b) require the Pledgor to give possession or control
of any of the Collateral to the Administrative Agent; (c) unless earlier
permitted hereunder, take control of funds generated by the Collateral and any
other proceeds and exercise all other Rights which an owner of such Collateral
may exercise; (d) declare the entire unpaid balance of principal and interest on
the Obligation immediately due and payable, without notice, demand or
presentment, which are hereby expressly waived; (e) reduce its claim to
judgment, foreclose or otherwise enforce its security interest in all or any
part of the Collateral by any available judicial procedure; (f) after
notification, if any, provided for in this agreement or any other Loan
Documents, sell or otherwise dispose of, at the office of the Administrative
Agent, all or any part of the Collateral, and any such sale or other disposition
shall be in accordance with Applicable Law, and may be as a unit or in parcels,
by public or private proceedings, and by way of one or more contracts (it being
agreed that the sale of any part of the Collateral shall not exhaust the
Administrative Agent's power of sale, but sales may be made from time to time
until all of the Collateral has been sold or until the Obligation has been paid
in full), and at any such sale it shall not be necessary to exhibit the
Collateral; (g) at its discretion, retain the Collateral in satisfaction of the
Obligation whenever the circumstances are such that the Administrative Agent is
entitled to do so under Applicable Law; (h) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
hereof, and the Pledgor hereby consents to any appointment; (i) buy the
Collateral at any public sale; and (j) buy the Collateral at any private sale,
subject to any restrictions imposed by Applicable Law. Any Secured Party may
buy the Collateral at any public sale and buy the Collateral at any private
sale, subject to the restrictions imposed by Applicable Law. Pledgor agrees
that, if notice is required to be given by Applicable Law, five (5) days'
advance notice shall constitute reasonable notice. The Administrative Agent
shall apply the proceeds of any collection, sale, disposition or other
realization upon any Collateral as follows:
FIRST, to the payment of the costs and expenses of such collection,
sale, disposition, or other realization, including reasonable out-of-pocket
costs and expenses of the Administrative Agent and the reasonable fees and
expenses of its agents and counsel;
NEXT, to the payment of the Obligation, equally and ratably to each
Secured Party in accordance with the respective amounts thereof due and
owing to each Secured Party; and
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<PAGE>
FINALLY, to the payment to the Pledgor, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
If the proceeds of collection, sale, disposition, or other realization are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligation, the Company shall remain liable for any deficiency.
2. SECURITIES LAWS; TRANSFER
a. Immediately upon the occurrence of an Event of Default, the
Pledgor hereby grants to the Administrative Agent the right to have the
Collateral, or any portion thereof, registered and sold under the Securities Act
of 1933, as amended ("Securities Act"), or under any applicable state blue sky
laws. If the Administrative Agent shall determine to exercise its right to sell
any or all of the Collateral pursuant to the terms hereof, and if in the opinion
of the Administrative Agent it is necessary or advisable to have the Collateral
(or that portion thereof to be sold) registered under the provisions of the
Securities Act, the Pledgor will cause the issuer of the Collateral to execute
and deliver, and cause the directors and officers thereof to execute and
deliver, all at the Pledgor's expense, all such instruments and documents, and
to do or cause to be done all such other acts and things as may be necessary or,
in the opinion of the Administrative Agent, advisable to register such
Collateral under the provisions of the Securities Act and to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Collateral, or that portion thereof to be sold, and to make all amendments
thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of Applicable Law. The Pledgor agrees to cause the issuer of the
Collateral to comply with the provisions of the securities or "blue sky" laws of
any jurisdiction which the Administrative Agent shall designate and to cause the
issuer of the Collateral to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of
Section 11(a) of the Securities Act.
b. The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account for investment
and not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale conducted in the manner
described herein may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any private sale shall be deemed in that instance to
have been made in a commercially reasonable manner. The Administrative Agent
shall be under no obligation to delay a sale of any of the Collateral for the
period of time necessary to permit the issuer of the Collateral to register such
Collateral for public sale under the Securities Act, or under applicable state
securities laws, even if the issuer of the Collateral would agree to do so.
- 6 -
<PAGE>
c. The Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make any sales of any portion or
all of the Collateral pursuant to paragraphs (a) and (b) of this Section valid
and binding and in compliance with any and all applicable laws (including,
without limitation, the Securities Exchange Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission applicable
thereto), regulations, orders, writs, injunctions, decrees or awards of any and
all courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Pledgor's expense.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
Secured Parties and that the Administrative Agent and Secured Parties may not
have an adequate remedy at law in respect of such breach. As a consequence, the
Pledgor agrees that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgor. The Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants.
d. The Pledgor agrees (i) that in the event the Administrative Agent
shall, upon any Event of Default, sell the Collateral or any portion thereof, at
a private sale or sales, the Administrative Agent shall have the right to rely
upon the advice and opinion of a member of a nationally recognized investment
banking firm acceptable to the Administrative Agent, as to the best price
reasonably obtainable upon such a private sale thereof, and (ii) in the absence
of fraud, wilful misconduct and gross negligence, that such reliance shall be
conclusive evidence that the Administrative Agent handled such matter in a
commercially reasonable manner under the Uniform Commercial Code.
3. NOTICE. Notification of the time and place of any public sale of the
Collateral, or reasonable notification of the time after which any private sale
or other intended disposition of the Collateral is to be made, shall be sent to
the Pledgor and to any other Person entitled under Applicable Law to notice.
F. GENERAL
1. ADMINISTRATIVE AGENT'S DUTIES. The Secured Parties hereby appoint
NationsBank of Texas, N.A. as Administrative Agent to act as their agent as
provided herein and in the Credit Agreement, which actions hereunder, including
without limitation, the administration of the Collateral, enforcement of the
rights hereunder and collection of amounts secured hereby, are on behalf of, and
for the ratable benefit of, the Lenders. In the event the Administrative Agent
is replaced pursuant to Section 10.1(b) of the Credit Agreement, the successor
Administrative Agent appointed in accordance with Section 10.1(b) of the Credit
Agreement shall be the Administrative Agent hereunder. The powers conferred on
the Administrative Agent hereunder are solely to protect the Secured Parties'
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral, as to ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders, or other matters relative to
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<PAGE>
any Collateral, whether or not the Administrative Agent or any Secured Party has
or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property. Except as provided in this SECTION F.1., the Administrative Agent
shall not have any duty or liability to protect or preserve any Collateral or to
preserve rights pertaining thereto. Nothing contained in this agreement shall
be construed as requiring or obligating the Administrative Agent, and the
Administrative Agent shall not be required or obligated, (a) to present or file
any claim or notice or take any action, with respect to any Collateral or in
connection therewith or (b) to notify Pledgor of any decline in the value of any
Collateral.
2. CUMULATIVE RIGHTS. All rights and remedies of the Administrative
Agent and the Secured Parties hereunder are cumulative of each other and of
every other right or remedy which the Administrative Agent or the Secured
Parties may otherwise have at law or in equity or under any other contract or
other writing for the enforcement of the security interest herein or the
collection of the Obligation, and the exercise of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of other
rights or remedies.
3. WAIVER. No delay or omission by the Administrative Agent or any
Secured Party in exercising any right or power hereunder, or under any other
Loan Documents, shall impair any such right or power or be construed as a waiver
thereof or an acquiescence therein, nor shall any single or partial exercise of
any such right or power preclude other or further exercise thereof, or the
exercise of any other right or power of the Administrative Agent or any Secured
Party hereunder or under such other writings.
4. INTEREST; LIMITATION OF LAW. No provision herein or in any Loan
Documents shall require the payment or permit the collection of interest in
excess of the maximum permitted by Applicable Law. If, in any contingency
whatsoever, the Administrative Agent or any Secured Party shall receive anything
of value from the Pledgor deemed interest under Applicable Law which would
exceed the maximum amount of interest permissible under Applicable Law, the
provisions of the Credit Agreement shall govern.
5. PARTIES BOUND. This agreement shall be binding on the Pledgor and its
successors, assigns and legal representatives, and shall inure to the benefit of
the Administrative Agent and the Secured Parties, and their successors, assigns
and legal representatives; provided, however, that the Pledgor may not assign
its rights or obligations hereunder without the prior written consent of the
Administrative Agent. The rights, powers and interests held by the
Administrative Agent hereunder may be transferred and assigned by the
Administrative Agent, in whole or in part, at such time and upon such terms as
permitted by the Credit Agreement.
6. NOTICE; WAIVERS BY PLEDGOR. All notices, communications and materials
to be given or delivered pursuant to this agreement shall be given and shall be
effective as provided in SECTION 11.1 of the Credit Agreement but to Pledgor at
the address shown opposite its name
- 8 -
<PAGE>
on the signature page hereto. The Pledgor waives notices of the creation,
advance, increase, existence, extension or renewal of, and of any indulgence
with respect to, the Obligation; waives presentment, demand, notice of dishonor
and protest; waives notice of the amount of the Obligation outstanding at any
time, notice of any change in financial condition of any Person liable for the
Obligation or any part thereof, notice of any Event of Default and all other
notices respecting the Obligation; waives all rights of redemption, appraisal,
or valuation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, increased, extended or renewed one or more times by the
Secured Parties in their discretion, without notice to the Pledgor.
7. MODIFICATIONS. No provision hereof shall be modified or limited
except by a written agreement expressly referring hereto and to the provisions
so modified or limited and signed by the Pledgor and the Administrative Agent.
8. CONTROL. Notwithstanding anything herein to the contrary, this
agreement and the transactions contemplated hereby do not and will not
constitute, create, or have the effect of constituting or creating, directly or
indirectly, actual or practical ownership of the Pledgor or the issuer of the
Collateral by the Administrative Agent, or control, affirmative or negative,
direct or indirect, by the Administrative Agent or the Secured Parties, over the
management or any aspect of the day-to-day operation of the Pledgor or the
issuer of the Collateral, which control remains in the Pledgor, the issuer of
the Collateral, and their respective shareholders and boards of directors.
9. OBLIGATIONS NOT AFFECTED. To the fullest extent permitted by
Applicable Law, the obligations of Pledgor under this agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
a. any amendment or modification or addition or supplement to any
Loan Document, any instrument delivered in connection therewith or any
assignment or transfer thereof;
b. any exercise, non-exercise, or waiver by Administrative Agent or
any Secured Party of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty, any collateral or the
Collateral or any part thereof provided pursuant to, this agreement or any
Loan Document;
c. any waiver, consent, extension, indulgence or other action or
inaction with respect of this agreement or any Loan Document or any
assignment or transfer of any thereof; or
d. any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Company, Pledgor
or any other Person, whether or not Pledgor shall have notice or knowledge
of any of the foregoing.
- 9 -
<PAGE>
10. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
11. SUBROGATION. Pledgor shall not assert, enforce, or otherwise exercise
(i) any right of subrogation to any of the rights or liens of any Lender or
Administrative Agent or any other beneficiary against the Company or any other
obligor on the Obligation or any collateral or other security or (ii) any right
of recourse, reimbursement, contribution, indemnification, or similar right
against the Company or any other obligor on all or any part of the Obligation or
any guarantor thereof, and Pledgor hereby waives any and all of the foregoing
right and the benefit of, and any right to participate in, any collateral or
other security given to any Lender or Administrative Agent or any other
beneficiary to secure payment of the Obligation. The provisions of this
SECTION F.11 shall survive the termination of this agreement and satisfaction
and discharge of the Company by virtue of any payment, court order, or Law.
12. LIMITATION OF SHARES PLEDGED Notwithstanding anything herein to the
contrary, in no event shall this agreement cause the Administrative Agent to
have, at any time, a security interest in capital stock exceeding 66% of the
total combined voting power of all classes of stock of each Subsidiary entitled
to vote.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE PLEDGOR AGREES THAT THE STATE AND
FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE JURISDICTION OVER
PROCEEDINGS IN CONNECTION HEREWITH.
14. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR, THE ADMINISTRATIVE AGENT
AND THE SECURED PARTIES HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND
INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THE CREDIT
AGREEMENT.
15. ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
- 10 -
<PAGE>
[16. NO NOVATION. THE EXECUTION, DELIVERY AND EFFECTIVENESS OF THIS
AGREEMENT SHALL NOT DISCHARGE OR RELEASE THE LIEN OR PRIORITY OF THAT CERTAIN
AMENDED AND RESTATED FOREIGN SUBSIDIARY PLEDGE AGREEMENT EXECUTED BY PLEDGOR IN
FAVOR OF ADMINISTRATIVE AGENT, SECURING THE COMPANY'S OBLIGATIONS UNDER THAT
CERTAIN FOURTH AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF OCTOBER 29,
1996, AMONG THE COMPANY, THE MEDIPLEX GROUP, INC., CERTAIN CO-AGENTS,
ADMINISTRATIVE AGENT AND THE LENDERS PARTY THERETO (THE "EXISTING CREDIT
AGREEMENT"). NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS A SUBSTITUTION OR
NOVATION OF ANY COLLATERAL DOCUMENTS (AS SUCH TERM IS DEFINED IN THE EXISTING
CREDIT AGREEMENT) OR THE LIENS GRANTED THEREBY, ALL OF WHICH SHALL CONTINUE AND
REMAIN IN FULL FORCE AND EFFECT, EXCEPT AS MODIFIED HEREBY, OR BY INSTRUMENTS
EXECUTED CONCURRENTLY HEREWITH.]
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- 11 -
<PAGE>
IN WITNESS WHEREOF, the Pledgor has executed this Pledge Agreement as of
this ______day of __________, 199___.
SUN HEALTHCARE GROUP, INC.
SHG INTERNATIONAL HOLDINGS, INC.
By:
---------------------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and Chief Financial
Officer
Address:
101 Sun Lane N.E.
Albuquerque, New Mexico 87109
Attn:
--------------------
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
- 12 -
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Subsidiary Certificate No. Record Owner Class and Number of Shares
- ---------- --------------- ------------ --------------------------
<S> <C> <C> <C>
Sun Healthcare Group International Ltd. Sun Healthcare Group, Inc. 1,000,000
Columbia Health Care, Inc. 76 Sun Healthcare Group, Inc. 688,772
Columbia Health Care, Inc. 3 Sun Healthcare Group, Inc. 81,281
</TABLE>
<PAGE>
FORM OF
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as
of November 12, 1997, is entered into among Sun Healthcare Group, Inc., a
Delaware corporation ("Borrower"), the entities listed on the signature pages
hereto as Lenders (collectively, "Lenders"), the co-agents listed on the
signature pages hereto as Co-Agents (collectively, the "Co-Agents"), and
NationsBank of Texas, N.A., as Administrative Agent (in said capacity, "the
Administrative Agent").
BACKGROUND
The Borrower, certain of the Lenders (herein, the "Existing Lenders"), the
Co-Agents and the Administrative Agent heretofore entered into that certain
Credit Agreement, dated as of October 8, 1997 (the "Credit Agreement"; the terms
defined in the Credit Agreement and not otherwise defined herein shall be used
herein as defined in the Credit Agreement).
The Borrower, the Lenders, the Co-Agents and the Administrative Agent
desire to amend the Credit Agreement to, among other things, (a) add certain of
the Lenders as Lenders thereto (herein, the "New Lenders"), (b) extend the
Maturity Date and (c) make certain other changes thereto.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders, the Co-Agents and the Administrative Agent covenant and agree as
follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) The definition of "APPLICABLE BASE RATE MARGIN" set forth in
Section 1.1 of the Credit Agreement is hereby amended in its entirety to read as
follows:
"APPLICABLE BASE RATE MARGIN" means the following per annum
percentages, applicable in the following situations:
<TABLE>
<CAPTION>
Facility A Term
Loan Advances Facility B Facility C
and Revolving Term Loan Term Loan
Applicability Credit Advances Advances Advances
------------- ---------------- ---------- ----------
<S> <C> <C> <C>
(a) INITIAL PRICING PERIOD 1.00% 1.25% 1.50%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Facility A Term
Loan Advances Facility B Facility C
and Revolving Term Loan Term Loan
Applicability Credit Advances Advances Advances
------------- ---------------- ---------- ----------
<S> <C> <C> <C>
(b) SUBSEQUENT PRICING PERIOD
(i) The Leverage Ratio is equal 1.00% 1.25% 1.50%
to or greater than 6.00 to 1
(ii) The Leverage Ratio is less 0.75% 1.25% 1.50%
than 6.00 to 1 but is equal
to or greater than 5.50 to 1
(iii) The Leverage Ratio is 0.50% 1.25% 1.50%
less than 5.50 to 1 but
is equal to or greater
than 5.00 to 1
(iv) The Leverage Ratio is less 0.25% 1.25% 1.50%
than 5.00 to 1 but is equal
to or greater than 4.50 to 1
(v) The Leverage Ratio is less 0.00% 1.00% 1.25%
than 4.50 to 1 but is equal
to or greater than 4.00 to 1
(vi) The Leverage Ratio is less 0.00% 0.75% 1.00%
than 4.00 to 1
</TABLE>
During the Subsequent Pricing Period, the Applicable Base Rate Margin
payable by the Borrower on the Base Rate Advances outstanding hereunder
shall be subject to reduction or increase, as applicable and as set forth
in the table above, on a quarterly basis according to the Leverage Ratio;
PROVIDED, that each adjustment in the Applicable Base Rate Margin shall be
effective as of the fifth day following the date of receipt by the
Administrative Agent of the financial statements required pursuant to
SECTION 6.1 or 6.2 hereof (and corresponding Compliance Certificate), as
appropriate. If financial statements of the Borrower (and corresponding
Compliance Certificate setting forth the Leverage Ratio) are not received
by the Administrative Agent by the fifth day following the date required
pursuant to SECTION 6.1 or 6.2 hereof, as appropriate, the Applicable Base
Rate Margin shall be determined as if the Leverage Ratio is equal to or
greater than 6.00 to 1 until such time as such financial statements and
Compliance Certificate are received.
(b) The definition of "APPLICABLE LIBOR RATE MARGIN" set forth in
Section 1.1 of the Credit Agreement is hereby amended in its entirety to read as
follows:
"APPLICABLE LIBOR RATE MARGIN" means the following per annum
percentages, applicable in the following situations:
- 2 -
<PAGE>
<TABLE>
<CAPTION>
Facility A Term
Loan Advances Facility B Facility C
and Revolving Term Loan Term Loan
Applicability Credit Advances Advances Advances
------------- ---------------- ---------- ----------
<S> <C> <C> <C>
(a) INITIAL PRICING PERIOD 2.50% 2.75% 3.00%
(b) SUBSEQUENT PRICING PERIOD
(i) The Leverage Ratio is equal 2.50% 2.75% 3.00%
to or greater than 6.00 to 1
(ii) The Leverage Ratio is less 2.25% 2.75% 3.00%
than 6.00 to 1 but is equal
to or greater than 5.50 to 1
(iii) The Leverage Ratio is 2.00% 2.75% 3.00%
less than 5.50 to 1 but
is equal to or greater
than 5.00 to 1
(iv) The Leverage Ratio is less 1.75% 2.75% 3.00%
than 5.00 to 1 but is equal
to or greater than 4.50 to 1
(v) The Leverage Ratio is less 1.50% 2.50% 2.75%
than 4.50 to 1 but is equal
to or greater than 4.00 to 1
(vi) The Leverage Ratio is less 1.25% 2.25% 2.50%
than 4.00 to 1 but is equal
to or greater than 3.50 to 1
(vii) The Leverage Ratio is 1.00% 2.25% 2.50%
less than 3.50 to 1 but
is equal to or greater
than 3.00 to 1
(viii) The Leverage Ratio is 0.75% 2.25% 2.50%
less than 3.00 to 1
</TABLE>
During the Subsequent Pricing Period, the Applicable LIBOR Rate Margin
payable by the Borrower on the LIBOR Advances outstanding hereunder shall
be subject to reduction or increase, as applicable and as set forth in the
table above, on a quarterly basis according to the Leverage Ratio;
PROVIDED, that each adjustment in the Applicable LIBOR Rate Margin shall be
effective as of the fifth day following the date of receipt by the
Administrative Agent of the financial statements required pursuant to
SECTION 6.1 or 6.2 hereof (and corresponding Compliance Certificate), as
appropriate. If financial statements (and corresponding Compliance
Certificate setting forth the Leverage Ratio) are not received by the
Administrative Agent by the fifth day following the date required pursuant
to SECTION 6.1 or 6.2 hereof, as appropriate, the Applicable LIBOR Rate
Margin shall be determined as if the Leverage Ratio is equal to or greater
than 6.00 to 1 until such time as such financial statements and Compliance
Certificate are received.
- 3 -
<PAGE>
(c) The definition of "DOMESTIC EBITDA" set forth in Section 1.1 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"DOMESTIC EBITDA" means, for any period, determined in accordance with
GAAP on a consolidated basis for the Borrower and its Restricted
Subsidiaries, the sum of (a) pre-tax net income (excluding therefrom
(i) any items of extraordinary gain, including net gains on the sale of
assets other than asset sales in the ordinary course of business, (ii) any
items of extraordinary loss, including net losses on the sale of assets
other than asset sales in the ordinary course of business, and charges and
expenses related to this Agreement, (iii) charges related to settlement of
the Shareholder Lawsuits and the Golden Care or SunCare Litigation as
described in the Borrower's Form 10-K filed immediately prior to the
Agreement Date not to exceed in aggregate amount the remainder of
$31,000,000 minus any insurance proceeds received in connection with any
such settlement, (iv) charges related to the RCA Acquisition, the Contour
Acquisition, the Acquisition of Regency and non-recurring items recognized
by RCA which would have qualified as purchase accounting adjustments had
the RCA Acquisition been accounted for as a purchase rather than a pooling
not to exceed $65,000,000 in aggregate amount and (v) charges taken by RCA
not to exceed $20,000,000 in aggregate amount related to impairment loss,
as determined by Statement of Financial Accounting Standards No. 121,
provided that items, charges and expenses set forth above (including,
without limitation, the charges set forth in clauses (iii), (iv) and (v)
immediately preceding) shall apply to the period in which such items,
charges and expenses are set forth in the financial statements delivered to
the Lenders pursuant to SECTION 6.1 or 6.2 hereof, as appropriate), plus
(b) interest expense, whether or not capitalized (including interest
expense pursuant to Capitalized Lease Obligations), Depreciation and
amortization, in each case for the four fiscal quarters immediately
preceding the date of calculation. For purpose of the calculation of
Domestic EBITDA with respect to assets not owned at all times during the
four fiscal quarters immediately preceding the date of determination,
Domestic EBITDA shall be adjusted, on a pro-forma basis, to (i) include the
Domestic EBITDA attributable to an Acquisition which occurred during any
such fiscal quarter for the twelve month period preceding the date of
determination, provided the Acquisition Consideration for such Acquisition
is in excess of $5,000,000 and (ii) exclude the Domestic EBITDA of any
asset or group of related amounts disposed of in one transaction or a
series of related transactions during any such fiscal quarter for the
twelve month period preceding the date of determination, provided the
consideration received from the disposition of such asset or group of
related assets is in excess of $5,000,000.
(d) The definition of "EBITDA" set forth in Section 1.1 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
"EBITDA" means, for any period, determined in accordance with GAAP on
a consolidated basis for the Borrower and its Subsidiaries, the sum of
(a) pre-tax net income (excluding therefrom (i) any items of extraordinary
gain, including net gains on the sale
- 4-
<PAGE>
of assets other than asset sales in the ordinary course of business,
(ii) any items of extraordinary loss, including net losses on the sale of
assets other than asset sales in the ordinary course of business, and
charges and expenses related to this Agreement, (iii) charges related to
settlement of the Shareholder Lawsuits and the Golden Care or SunCare
Litigation as described in the Borrower's Form 10-K filed immediately
prior to the Agreement Date not to exceed in aggregate amount the remainder
of $31,000,000 minus any insurance proceeds received in connection with any
such settlement, (iv) charges related to the RCA Acquisition, the Contour
Acquisition, the Acquisition of Regency and non-recurring items recognized
by RCA which would have qualified as purchase accounting adjustments had the
RCA Acquisition been accounted for as a purchase rather than a pooling not
to exceed $65,000,000 in aggregate amount, and (v) charges taken by RCA not
to exceed $20,000,000 in aggregate amount related to impairment loss, as
determined by Statement of Financial Accounting Standards No. 121, provided
that items, charges and expenses set forth above (including, without
limitation, the charges set forth in clauses (iii), (iv) and (v) immediately
preceding) shall apply to the period in which such items, charges and
expenses are set forth in the financial statements delivered to the Lenders
pursuant to SECTION 6.1 or 6.2 hereof, as appropriate), plus (b) interest
expense, whether or not capitalized (including interest expense pursuant to
Capitalized Lease Obligations), Depreciation, amortization, in each case for
the four fiscal quarters immediately preceding the date of calculation. For
purpose of the calculation of EBITDA with respect to assets not owned at all
times during the four fiscal quarters immediately preceding the date of
determination, EBITDA shall be adjusted, on a pro-forma basis, to (i)
include the EBITDA attributable to an Acquisition which occurred during any
such fiscal quarter for the twelve month period preceding the date of
determination, provided the Acquisition Consideration for such Acquisition
is in excess of $5,000,000 and (ii) exclude the EBITDA of any asset or group
of related assets disposed of in one transaction or a series of related
transactions during any such fiscal quarter for the twelve month period
preceding the date of determination, provided the consideration received
from the disposition of such asset or group of related assets is in excess
of $5,000,000.
(e) The definition of "INTEREST PERIOD" set forth in Section 1.1 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"INTEREST PERIOD" means, for any LIBOR Advance, the period beginning
on the day the Advance is made and ending one, two, three or six months
thereafter (as the Borrower shall select); PROVIDED, HOWEVER, that all of
the foregoing provisions are subject to the following:
(i) if any Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless, with respect to a LIBOR Advance, the
result of such extension would be to extend such Interest Period into
another calendar month, in
- 5-
<PAGE>
which event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period with respect to a LIBOR Advance that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month;
(iii) the Borrower may not select any Interest Period in
respect of Advances having an aggregate principal amount less than
$5,000,000; and
(iv) there shall be outstanding at any one time no more than ten
Interest Periods in the aggregate.
(f) The definition of "LETTER OF CREDIT FACILITY" is hereby amended in its
entirety to read as follows:
"LETTER OF CREDIT FACILITY" has the meaning specified in
SECTION 2.16(a) hereof.
(g) The definition of "LIBOR RATE" set forth in Section 1.1 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"LIBOR RATE" means, for any LIBOR Advance for any Interest Period, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100th of
1%) appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason
such rate is not available, the term "LIBOR Rate" shall mean, for any LIBOR
Advance for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time), two Business Days prior
to the first day of such Interest Period for a term comparable to such
Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean
of all such rates (rounded upwards, if necessary, to the nearest 1/100th of
1%).
(h) The definition of "NET CASH PROCEEDS" is hereby amended by adding "and
cash equivalents" after the word "cash" appearing in the second line thereof.
(i) The definition of "PERMITTED LIENS" set forth in Section 1.1 of the
Credit Agreement is hereby amended by amending clause (f) thereof in its
entirety to read as follows:
- 6 -
<PAGE>
(f) Liens created to secure Indebtedness permitted by SECTION 7.1(k)
hereof, which is (i) incurred solely for the purpose of financing the
acquisition of assets or an Acquisition and incurred at the time of such
acquisition of assets or such Acquisition or (ii) assumed in connection
with an Acquisition, so long as (A) each such Lien permitted by this
subsection (f) shall at all times be confined solely to the asset or assets
so acquired (and proceeds thereof) and refinancings thereof, (B) the
aggregate amount of Indebtedness related thereto does not result in a
violation of SECTION 7.1(k) hereof, and (C) the aggregate amount of
inventory and accounts receivable (and any proceeds thereof) secured by
such Liens does not exceed at any time 5% of the aggregate amount of
inventory and accounts receivable of the Borrower and its Restricted
Subsidiaries;
(j) SECTION 1.1 of the Credit Agreement is hereby amended by adding the
following defined terms thereto in proper alphabetical order:
"EXCESS CASH FLOW" means, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the remainder of (a) Net Operating
Cash Flow minus (b) voluntary prepayments of Indebtedness which cannot be
reborrowed, in each case for the four fiscal quarters immediately preceding
the date of calculation.
"FACILITY A TERM LOAN MATURITY DATE" means November 12, 2003, or the
earlier date of acceleration of Facility A Term Loan Advances pursuant to
SECTION 8.2 hereof.
"FACILITY B TERM LOAN MATURITY DATE" means November 12, 2004, or the
earlier date of acceleration of Facility B Term Loan Advances pursuant to
SECTION 8.2 hereof.
"FACILITY C TERM LOAN MATURITY DATE" means November 12, 2005, or the
earlier date of acceleration of Facility C Term Loan Advances pursuant to
SECTION 8.2 hereof.
"INITIAL PRICING PERIOD" means the period from and including the
Agreement Date to and including the Rate Adjustment Date.
"NET INCOME" means net earnings (or deficit) after taxes of the
Borrower and its Restricted Subsidiaries, on a consolidated basis,
determined in accordance with GAAP.
"NET OPERATING CASH FLOW" means, for the Borrower and its Restricted
Subsidiaries determined in accordance with GAAP on a consolidated basis,
the remainder of (a)(i) Net Income, plus (ii) any portion of interest
expense or tax expense not actually paid in cash, plus (iii) Depreciation,
amortization and other non-cash charges (to the extent used in determining
Net Income), plus (iv) net losses on sale of assets and non-cash write down
of assets (to the extent used in determining Net Income), minus
(b)(i) capital expenditures, plus (ii) scheduled principal payments on
Indebtedness actually paid, plus (iii) net gains on sale of assets (to the
extent included in determining Net Income), plus (iv) cash paid for
acquisitions (including Acquisitions) and investments (including
Investments), plus or
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minus, as the case may be, (v) any increase or decrease, as the case may
be, in working capital.
"QUARTERLY DATE" means the last day of each March, June, September and
December, beginning December 31, 1997.
"RATE ADJUSTMENT DATE" means the date which is five days following the
date that the Lenders receive the financial statements of the Borrower and
its Subsidiaries for March 31, 1998 required to be delivered pursuant to
SECTION 6.1 hereof.
"REVOLVING COMMITMENT MATURITY DATE" means November 12, 2003, or the
earlier date of termination in whole of the Revolving Credit Commitment
pursuant to SECTION 2.6 or 8.2 hereof.
"SENIOR DEBT" means, as of any date of determination, determined for
the Borrower and its Subsidiaries, an amount equal to the remainder of
(a) Total Debt minus (b) Subordinated Debt.
"SENIOR DEBT TO EBITDAR RATIO" means, for any date of calculation,
calculated for the Borrower and its Subsidiaries on a consolidated basis
(provided that if Foreign Subsidiary EBITDAR shall ever equal or exceed 15%
of EBITDAR, the Senior Debt to EBITDAR Ratio shall be calculated (a) for
the Borrower and its Restricted Subsidiaries on a consolidated basis and
(b) using Domestic EBITDAR), the ratio of (i) Senior Debt as of the date of
calculation to (ii) EBITDAR for the four fiscal quarters immediately
preceding the date of calculation.
"SUBSEQUENT PRICING PERIOD" means the period from and including the
date which is the first day following the end of the Initial Pricing Period
to and including the Release Date.
(k) SECTION 1.1 of the Credit Agreement is hereby amended by deleting the
definition of "MATURITY DATE" therefrom.
(l) SECTION 2.2(b) of the Credit Agreement is hereby amended by amending
the last sentence thereof in its entirety to read as follows:
For LIBOR Advances, the notice of borrowing shall specify the requested
funding date, which shall be a Business Day, the amount of the proposed
aggregate LIBOR Advances to be made by the Lenders and the Interest Period
selected by the Borrower, provided that no such Interest Period shall
extend past the Revolving Commitment Maturity Date, the Facility A Term
Loan Maturity Date, the Facility B Term Loan Maturity Date, or the
Facility C Term Loan Maturity Date, as appropriate, or prohibit or impair
the Borrower's ability to comply with SECTION 2.5 or 2.8 hereof.
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(m) SECTION 2.3(a)(ii) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(ii) Interest on each Base Rate Advance shall be computed on the basis
of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Revolving Commitment Maturity Date, the Facility A Term Loan
Maturity Date, the Facility B Term Loan Maturity Date, or the Facility C
Term Loan Maturity Date, as appropriate.
(n) SECTION 2.3(b)(ii) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(ii) Subject to SECTION 11.9 hereof, accrued and unpaid interest on
each LIBOR Advance shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be payable in arrears on the
applicable Payment Date and on the Revolving Commitment Maturity Date, the
Facility A Term Loan Maturity Date, the Facility B Term Loan Maturity Date,
or the Facility C Term Loan Maturity Date, as appropriate; provided,
however, that if the Interest Period for such LIBOR Advance exceeds three
months, interest shall also be due and payable in arrears on each three-
month anniversary of the commencement of such Interest Period during such
Interest Period.
(o) SECTION 2.3(d) of the Credit Agreement is hereby amended by amending
the second sentence thereof in its entirety to read as follows:
Such interest shall be payable on the earlier of demand or the Revolving
Commitment Maturity Date, the Facility A Term Loan Maturity Date, the
Facility B Term Loan Maturity Date, or the Facility C Term Loan Maturity
Date, as appropriate, and shall accrue until the earlier of (i) waiver or
cure (to the satisfaction of the Determining Lenders) of the applicable
Event of Default, or (ii) payment in full of the Obligations.
(p) SECTION 2.4(a) of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
(a) COMMITMENT FEE. Subject to SECTION 11.9 hereof, the Borrower
agrees to pay to the Administrative Agent, for the ratable account of the
Lenders, a commitment fee (which shall be payable in arrears on each
Quarterly Date and on the Revolving Commitment Maturity Date) based on the
daily average Unused Portion (subject to SECTION 11.9 hereof, computed on
the basis of a 360-day year for the actual number of days elapsed) at the
per annum percentages, applicable in the following situations:
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Applicability Percentage
------------- ----------
(i) INITIAL PRICING PERIOD 0.500%
(ii) SUBSEQUENT PRICING PERIOD
(A) The Leverage Ratio is greater than or equal to 0.500%
5.00 to 1
(B) The Leverage Ratio is less than 5.00 to 1 but is 0.375%
equal to or greater than 4.00 to 1
(C) The Leverage Ratio is less than 4.00 to 1 but is 0.300%
equal to or greater than 3.50 to 1
(D) The Leverage Ratio is less than 3.50 to 1 0.250%
During the Subsequent Pricing Period, the commitment fee shall be subject
to reduction or increase, as applicable and as set forth above, on a
quarterly basis according to the performance of the Borrower as tested by
the Leverage Ratio. Any such increase or decrease in such fee shall be
effective on the fifth day following the date of receipt by the
Administrative Agent of the financial statements required pursuant to
SECTION 6.1 or 6.2 hereof (and corresponding Compliance Certificate), as
appropriate. If such financial statements (and corresponding Compliance
Certificate) are not received by the fifth day following the date required,
the commitment fee shall be determined as if the Leverage Ratio is greater
than or equal to 5.00 to 1 until such time as such financial statements
(and corresponding Compliance Certificate) are received.
(q) SECTION 2.5(c) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(c) PREPAYMENTS FROM SALES OF ASSETS. Concurrently with the receipt
of Net Cash Proceeds from the sale or disposition by the Borrower or any
Restricted Subsidiary of the Borrower of any assets, including any Equity
of any such Subsidiary (other than sales or dispositions of assets
permitted pursuant to (A) clauses (i) through (iii) of SECTION 7.4(a)
hereof, (B) clause (viii) of SECTION 7.4(a) hereof, to the extent that the
aggregate book value of assets sold pursuant to such clause (vii) during
any fiscal year does not exceed $1,000,000, (C) SECTION 7.16 hereof and
(D) the Regency Sale Leaseback), the Borrower shall apply (i) an amount
equal to 100% of such aggregate Net Cash Proceeds at any time that the
Leverage Ratio for the fiscal quarter immediately preceding such sale or
disposition (but computed after giving effect on a pro forma basis to the
application of Net Cash Proceeds thereof as provided herein) is equal to or
greater than 5.50 to 1 or (ii) an amount equal to 50% of such aggregate Net
Cash Proceeds (excluding, however, any amount of such Net Cash Proceeds
which are used within 180 days of such sale or disposition to purchase
assets to be used in the business of the
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Borrower and its Restricted Subsidiaries described in SECTION 4.1(d)
hereof) at any time that the Leverage Ratio for the fiscal quarter
immediately preceding such sale or disposition (but computed after giving
effect on a pro forma basis to the application of Net Cash Proceeds
thereof as provided herein) is less than 5.50 to 1 to prepay Facility A
Term Loan Advances, Facility B Term Loan Advances and Facility C Term
Loan Advances (and, thereafter, Revolving Credit Advances (or provide
cash collateral in the amount of such Net Cash Proceeds for the
outstanding Reimbursement Obligations to the extent that Revolving Credit
Advances are not outstanding) when there are no Facility A Term Loan
Advances, Facility B Term Loan Advances and Facility C Term Loan Advances
outstanding). Each such prepayment of Facility A Term Loan Advances,
Facility B Term Loan Advances and Facility C Term Loan Advances shall be
applied PRO RATA to all of the unpaid scheduled installment payments of
the Facility A Term Loan Advances, Facility B Term Loan Advances and
Facility C Term Loan Advances, in each case PRO RATA based upon the
respective principal amounts of such installment payments then unpaid.
Any prepayment of Revolving Credit Advances pursuant to this SECTION
2.5(c) shall permanently reduce the Revolving Credit Commitment by the
amount of such prepayment.
(r) SECTION 2.5(d) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(d) PREPAYMENT FROM SALES OF EQUITY. Concurrently with receipt of
Net Cash Proceeds from the sale or issuance by the Borrower or any
Restricted Subsidiary to any Person (other than the Borrower or a
Restricted Subsidiary) of any Equity of the Borrower or Indebtedness
convertible into any Equity in the Borrower (other than Equity issued as a
result of the exercise of options or warrants in respect of such Equity),
the Borrower shall apply (i)(A) an amount equal to 100% of the first
$300,000,000 of aggregate Net Cash Proceeds received after the Agreement
Date at any time that the Leverage Ratio for the fiscal quarter immediately
preceding such sale or issuance (but computed after giving effect on a pro
forma basis to the application of the Net Cash Proceeds thereof as provided
herein) is equal to or greater than 5.50 to 1 or (B) an amount equal to 50%
of the first $300,000,000 of aggregate Net Cash Proceeds received after the
Agreement Date at any time that the Leverage Ratio for the fiscal quarter
immediately preceding such sale or issuance (but computed after giving
effect on a pro forma basis to the application of the Net Cash Proceeds
thereof as provided herein) is less than 5.50 to 1, to prepay the
Facility A Term Loan Advances, the Facility B Term Loan Advances and the
Facility C Term Loan Advances (and, thereafter Revolving Credit Advances
(or provide cash collateral in the amount of such Net Cash Proceeds for the
outstanding Reimbursement Obligations to the extent that Revolving Credit
Advances are not outstanding) when there are no Facility A Term Loan
Advances, Facility B Term Loan Advances and Facility C Term Loan Advances
then outstanding), (ii)(A) an amount equal to 100% of such aggregate Net
Cash Proceeds received in excess of $300,000,000 within six months after
the Agreement Date (but not to exceed $250,000,000) at any time that the
Leverage Ratio for the fiscal quarter immediately preceding such sale or
issuance (but computed after
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<PAGE>
giving effect on a pro forma basis to the application of the Net Cash
Proceeds thereof as provided herein) is equal to or greater than 5.50 to
1 or (B) an amount equal to 50% of such aggregate Net Cash Proceeds
received in excess of $300,000,000 within six months after the Agreement
Date (but not to exceed $250,000,000) at any time that the Leverage Ratio
for the fiscal quarter immediately preceding such sale or issuance (but
computed after giving effect on a pro forma basis to the application of
the Net Cash Proceeds thereof as provided herein) is less than 5.50 to 1
to prepay, at the Borrower's option, Revolving Credit Advances or the
Facility A Term Loan Advances, the Facility B Term Loan Advances or the
Facility C Term Loan Advances, and (iii)(A) an amount equal to 100% of
all other such Net Cash Proceeds received at any time that the Leverage
Ratio for the fiscal quarter immediately preceding such sale or issuance
(but computed after giving effect on a pro forma basis to the application
of the Net Cash Proceeds thereof as provided herein) is equal to or
greater than 5.50 to 1 or (B) an amount equal to 50% of all other such
Net Cash Proceeds (excluding, however, any amount of such Net Cash
Proceeds which are used within 180 days of such sale or issuance to
purchase assets to be used in the business of the Borrower and its
Restricted Subsidiaries described in SECTION 4.1(d) hereof) received at
any time that the Leverage Ratio for the fiscal quarter immediately
preceding such sale or issuance (but computed after giving effect on a
pro forma basis to the application of the Net Cash Proceeds thereof as
provided herein) is less than 5.50 to 1 to prepay, at the Borrower's
option, the Revolving Credit Advances or the Facility A Term Loan
Advances, the Facility B Term Loan Advances and the Facility C Term Loan
Advances. Each such prepayment of the Facility A Term Loan Advances, the
Facility B Term Loan Advances, and the Facility C Term Loan Advances
shall be applied PRO RATA to all of the unpaid scheduled installment
payments of the Facility A Term Loan Advances, Facility B Term Loan
Advances and Facility C Term Loan Advances, in each case PRO RATA based
upon the respective principal amounts of such installment payments then
unpaid. Any prepayment of Revolving Credit Advances pursuant to SECTION
2.5(d)(i)(A) above shall permanently reduce the Revolving Credit
Commitment by the amount of such prepayment.
(s) SECTION 2.5(e) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(e) PREPAYMENT FROM ISSUANCE OF INSTITUTIONAL DEBT. Concurrently
with the receipt of Net Cash Proceeds from the issuance of Institutional
Debt by the Borrower or any Restricted Subsidiary of the Borrower, the
Borrower shall apply (i) an amount equal to 100% of such aggregate Net Cash
Proceeds at any time that the Leverage Ratio for the fiscal quarter
immediately preceding such issuance (but computed after giving effect on a
pro forma basis to the application of the Net Cash Proceeds thereof as
provided herein) is equal to or greater than 5.50 to 1 or (ii) an amount
equal to 50% of such aggregate Net Cash Proceeds (excluding, however, any
amount of such Net Cash Proceeds which are used within 180 days of such
issuance to purchase assets to be used in the business of the Borrower and
its Restricted Subsidiaries described in SECTION 4.1(d) hereof) at any time
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that the Leverage Ratio for the fiscal quarter immediately preceding such
issuance (but computed after giving effect on a pro forma basis to the
application of the Net Cash Proceeds thereof as provided herein) is less
than 5.50 to 1 to prepay the Facility A Term Loan Advances, the Facility B
Term Loan Advances and the Facility C Term Loan Advances (and, thereafter,
Revolving Credit Advances (or provide cash collateral in the amount of such
Net Cash Proceeds for the outstanding Reimbursement Obligations to the
extent that Revolving Credit Advances are not outstanding) when there are
no Facility A Term Loan Advances, Facility B Term Loan Advances, and
Facility C Term Loan Advances outstanding). Each such prepayment of the
Facility A Term Loan Advances, the Facility B Term Loan Advances, and the
Facility C Term Loan Advances shall be applied PRO RATA to all of the
unpaid scheduled installment payments of the Facility A Term Loan Advances,
Facility B Term Loan Advances, and Facility C Term Loan Advances, in each
case PRO RATA based upon the respective principal amounts of such
installment payments then unpaid. Any prepayment of Revolving Credit
Advances pursuant to this SECTION 2.5(e) shall permanently reduce the
Revolving Credit Commitment by the amount of such prepayment.
(t) SECTION 2.5(f) of the Credit Agreement is hereby amended by amending
the last sentence thereof in its entirety to read as follows:
Any voluntary prepayment of any Term Loan Advance shall be applied PRO RATA
to all of the unpaid scheduled installment payments of the Facility A Term
Loan Advances, Facility B Term Loan Advances and Facility C Term Loan
Advances, in each case PRO RATA based upon the respective principal amounts
of such installment payments then unpaid.
(u) Section 2.5 of the Credit Agreement is hereby amended by adding a new
SECTION 2.5(g) thereto to read as follows:
(g) PREPAYMENTS FROM EXCESS CASH FLOW. Commencing on April 15, 1999
and on each April 15 thereafter in which the Leverage Ratio as of the
immediately preceding December 31 is equal to or greater than 5.50 to 1,
the Borrower shall prepay the Facility A Term Loan Advances, the Facility B
Term Loan Advances, and the Facility C Term Loan Advances (and, thereafter,
Revolving Credit Advances (or provide cash collateral in the amount of such
Net Cash Proceeds for the outstanding Reimbursement Obligations to the
extent that Revolving Credit Advances are not outstanding) when there are
no Facility A Term Loan Advances, Facility B Term Loan Advances, and
Facility C Term Loan Advances outstanding) in an aggregate principal amount
equal to 75% of Excess Cash Flow, if any, for the fiscal year ending
immediately preceding each such April 15. Each such prepayment of
Facility A Term Loan Advances, Facility B Term Loan Advances, and
Facility C Term Loan Advances shall be applied PRO RATA to all of the
unpaid scheduled installment payments of the Facility A Term Loan Advances,
the Facility B Term Loan Advances, and Facility C Term Loan Advances, in
each case PRO RATA based upon the respective principal amounts of such
installment payments then unpaid.
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<PAGE>
Any prepayment of Revolving Credit Advances pursuant to this SECTION 2.5(g)
shall permanently reduce the Revolving Credit Commitment by the amount of
such prepayment.
(v) SECTION 2.6(b) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(b) MANDATORY REDUCTION. On the Revolving Commitment Maturity Date,
the Revolving Credit Commitment shall automatically reduce to zero. In
addition, the Revolving Credit Commitment shall be permanently reduced by
the amount of any prepayment of the Revolving Credit Advances (or cash
collateral provided in respect of Reimbursement Obligations) pursuant to
SECTIONS 2.5(c), 2.5(d)(i)(A) 2.5(e) and 2.5(g) hereof.
(w) SECTION 2.8 of the Credit Agreement is hereby amended in its entirety
to read as follows:
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES.
(a) REVOLVING CREDIT ADVANCES. To the extent not otherwise required
to be paid earlier as provided herein, the principal amount of the
Revolving Credit Advances shall be due and payable on the Revolving
Commitment Maturity Date.
(b) FACILITY A TERM LOAN ADVANCES. To the extent not otherwise
required to be paid earlier as provided herein, the principal amount of the
Facility A Term Loan Advances shall be repaid on each Quarterly Date and on
the Facility A Term Loan Maturity Date in such amounts as set forth next to
each such date below:
Amount of Reduction of Facility A
Quarterly Date Term Loan Advances as of each Date
-------------- ----------------------------------
March 31, 1999 $5,000,000
June 30, 1999 $5,000,000
September 30, 1999 $5,000,000
December 31, 1999 $5,000,000
March 31, 2000 $7,500,000
June 30, 2000 $7,500,000
September 30, 2000 $7,500,000
December 31, 2000 $7,500,000
March 31, 2001 $10,000,000
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<PAGE>
June 30, 2001 $10,000,000
September 30, 2001 $10,000,000
December 31, 2001 $10,000,000
March 31, 2002 $12,500,000
June 30, 2002 $12,500,000
September 30, 2002 $12,500,000
December 31, 2002 $12,500,000
March 31, 2003 $15,000,000
June 30, 2003 $15,000,000
September 30, 2003 $15,000,000
November 12, 2003 $15,000,000
(c) FACILITY B TERM LOAN ADVANCES. To the extent not otherwise
required to be paid earlier as provided herein, the principal amount of the
Facility B Term Loan Advances shall be repaid on each Quarterly Date and on
the Facility B Term Loan Maturity Date in such amounts as set forth next to
each such date below:
Amount of Reduction of Facility B
Quarterly Date Term Loan Advances as of each Date
-------------- -----------------------------------
March 31, 1998 $625,000
June 30, 1998 $625,000
September 30, 1998 $625,000
December 31, 1998 $625,000
March 31, 1999 $625,000
June 30, 1999 $625,000
September 30, 1999 $625,000
December 31, 1999 $625,000
March 31, 2000 $625,000
June 30, 2000 $625,000
September 30, 2000 $625,000
December 31, 2000 $625,000
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<PAGE>
March 31, 2001 $625,000
June 30, 2001 $625,000
September 30, 2001 $625,000
December 31, 2001 $625,000
March 31, 2002 $625,000
June 30, 2002 $625,000
September 30, 2002 $625,000
December 31, 2002 $625,000
March 31, 2003 $625,000
June 30, 2003 $625,000
September 30, 2003 $625,000
December 31, 2003 $625,000
March 31, 2004 $625,000
June 30, 2004 $625,000
September 30, 2004 $625,000
November 12, 2004 $233,125,000
(d) FACILITY C TERM LOAN ADVANCES. To the extent not otherwise
required to be paid earlier as provided herein, the principal amount of the
Facility C Term Loan Advances shall be repaid on each Quarterly Date and on
the Facility C Term Loan Maturity Date in such amounts as set forth next to
each such date below:
Amount of Reduction of Facility C
Quarterly Date Term Loan Advances as of each Date
-------------- ----------------------------------
March 31, 1998 $625,000
June 30, 1998 $625,000
September 30, 1998 $625,000
December 31, 1998 $625,000
March 31, 1999 $625,000
June 30, 1999 $625,000
September 30, 1999 $625,000
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<PAGE>
December 31, 1999 $625,000
March 31, 2000 $625,000
June 30, 2000 $625,000
September 30, 2000 $625,000
December 31, 2000 $625,000
March 31, 2001 $625,000
June 30, 2001 $625,000
September 30, 2001 $625,000
December 31, 2001 $625,000
March 31, 2002 $625,000
June 30, 2002 $625,000
September 30, 2002 $625,000
December 31, 2002 $625,000
March 31, 2003 $625,000
June 30, 2003 $625,000
September 30, 2003 $625,000
December 31, 2003 $625,000
March 31, 2004 $625,000
June 30, 2004 $625,000
September 30, 2004 $625,000
December 31, 2004 $625,000
March 31, 2005 $625,000
June 30, 2005 $625,000
September 30, 2005 $625,000
November 12, 2005 $230,625,000
(x) SECTION 2.16(a) of the Credit Agreement is hereby amended by amending
the first two sentences thereof in their entirety to read as follows:
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The Borrower may request the Issuing Bank, on the terms and conditions
hereinafter set forth, to issue, and the Issuing Bank shall, if so
requested, issue, letters of credit (the "LETTERS OF CREDIT") for the
account of the Borrower or the joint account of the Borrower and any of its
Restricted Subsidiaries, from time to time on any Business Day from the
date of the initial Advance until the Revolving Commitment Maturity Date in
an aggregate maximum amount (assuming compliance with all conditions to
drawing) not to exceed at any time outstanding the lesser of
(i) $75,000,000, and (ii) the sum of (A) the Revolving Credit Commitment
MINUS (B) the aggregate principal amount of Revolving Credit Advances then
outstanding (the "LETTER OF CREDIT FACILITY"). No Letter of Credit shall
have an expiration date (including all rights of renewal) later than the
earlier of (i) the date which is five Business Days immediately preceding
the Revolving Commitment Maturity Date or (ii) one year after the date of
issuance thereof.
(y) SECTION 2.16(f)(i) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(f)(i) CREDIT FEES. Subject to SECTION 11.9 hereof, the Borrower
shall pay to the Administrative Agent for the account of each Lender a
credit fee (which shall be payable in arrears on the Revolving Commitment
Maturity Date) equal to the product of the Applicable LIBOR Rate Margin in
effect from time to time for Revolving Credit Advances multiplied by the
average daily amount available for drawing under all outstanding Letters of
Credit, computed, subject to SECTION 11.9 hereof, on the basis of a 360-day
year for the actual number of days elapsed.
(z) SECTION 2.16(g) of the Credit Agreement is hereby amended by deleting
the reference to "Maturity Date" in subsections (i) and (iii) thereof and
inserting "Revolving Commitment Maturity Date" in lieu thereof.
(aa) SECTION 4.1(m) of the Credit Agreement is hereby amended by amending
the first sentence thereof in its entirety to read as follows:
None of the Borrower and its Restricted Subsidiaries is engaged principally
or as one of its important activities in the business of extending credit
for the purpose of purchasing or carrying any margin stock within the
meaning of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System.
(bb) SECTION 4.1(p) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(p) INVESTMENT COMPANY ACT. None of the Borrower and its Restricted
Subsidiaries is required to register under the provisions of the Investment
Company Act of 1940, as amended. Neither the entering into or performance
by the Borrower or any of its Restricted Subsidiaries of any of the Loan
Documents nor the issuance of the Notes
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<PAGE>
violate any provision of such act or requires any consent, approval, or
authorization of, or registration with, the Securities and Exchange
Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
(cc) Article 6 of the Credit Agreement is hereby amended by (i) renumbering
existing SECTIONS 6.2, 6.3, 6.4, 6.5 and all references to such Sections in the
Credit Agreement and the other Loan Documents to SECTIONS 6.3, 6.4, 6.5 and 6.6,
respectively, and (ii) adding "or SECTION 6.2" after the reference to
SECTION 6.1 on the second line of renumbered SECTION 6.3.
(dd) The Credit Agreement is hereby amended by adding a new SECTION 6.2
thereto to read as follows:
Section 6.2 ANNUAL FINANCIAL STATEMENTS AND INFORMATION; CERTIFICATE OF
NO DEFAULT.
(a) Within 105 days after the end of each fiscal year, a copy of
(i) the consolidated and consolidating balance sheets of the Borrower and
its Restricted Subsidiaries, as of the end of the current and prior fiscal
years and (ii) consolidated and consolidating statements of earnings,
consolidated statements of changes in shareholders' equity, and
consolidated and consolidating statements of changes in cash as of and
through the end of such fiscal year, all of which (A) consolidated and
consolidating statements are prepared in accordance with GAAP and
(B) consolidated statements are certified by independent certified public
accountants acceptable to the Lenders (the Lenders agree that Arthur
Andersen & Co. is acceptable to the Lenders), whose opinion shall be in
scope and substance in accordance with generally accepted auditing
standards and shall be unqualified.
(b) Simultaneously with the delivery of the statements required by
this SECTION 6.2, a letter from the Borrower's public accountants
certifying that no Default was detected during the examination of the
Borrower and its Restricted Subsidiaries, and authorizing the Borrower to
deliver such financial statements and opinion thereon to the Administrative
Agent and Lenders pursuant to this Agreement.
(c) As soon as available, but in any event within 105 days following
the end of each fiscal year, a copy of an annual consolidated and
consolidating operating budget of the Borrower and its Restricted
Subsidiaries for the succeeding fiscal year.
(ee) SECTION 6.3(a) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(a) setting forth at the end of such period, certifications and
arithmetical calculations required to establish whether the Borrower and
its Restricted Subsidiaries were in compliance with the requirements of
SECTIONS 7.1(i), 7.1(j), 7.1(k), 7.3(j), 7.5,
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7.9, 7.10, 7.11, 7.12 and 7.18 hereof, which shall be substantially in
the form of EXHIBIT G hereto;
(ff) Section 7.1(i) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(i) Guaranties by the Borrower and Indebtedness pursuant to letters
of credit in respect of obligations of Foreign Subsidiaries as lessees
under Operating Leases (such Guaranty obligation to be calculated as an
amount of equal to the product of rental expense for the four fiscal
quarters immediately preceding the date of calculation subject to the terms
of the Guaranty multiplied by eight) (i) prior to and including
December 31, 1997, (A) as set forth on SCHEDULE 11 hereto, and (B) such
other Guaranties and Indebtedness pursuant to such letters of credit,
together with Investments made pursuant to SECTION 7.3(j) which are in
Foreign Entities and Acquisition Consideration for all Foreign Subsidiaries
pursuant to SECTION 7.5(b)(ii), not to exceed $5,000,000 in aggregate
principal amount, and (ii) for each fiscal year thereafter, such other
Guaranties and Indebtedness pursuant to such letters of credit, together
with net Investments pursuant to SECTION 7.3(j) which are in Foreign
Entities and Acquisition Consideration for all Foreign Subsidiaries
pursuant to SECTION 7.5(b)(ii) hereof, not to exceed (A) $60,000,000 or
(B) $75,000,000 if the Leverage Ratio as of the end of any fiscal quarter
during such fiscal year is less than 5.50 to 1; PROVIDED, HOWEVER, the
aggregate amount of any such Individual Guaranty shall not exceed
$30,000,000;
(gg) SECTION 7.1(j) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(j) mortgage Indebtedness and sale and leaseback transactions in
respect of real property, improvements and related personal property owned
or leased by the Borrower and its Restricted Subsidiaries (i) prior to and
including December 31, 1997, (A) as set forth on SCHEDULE 12 hereto and
(B) other mortgage Indebtedness and such sale and leaseback transactions in
an aggregate principal amount not in excess of $5,000,000 and (ii) during
each fiscal year thereafter, together with the book value of assets sold
and leased back by the Borrower and its Restricted Subsidiaries during such
fiscal year other than pursuant to clauses (a) and (b) of SECTION 7.16
hereof, not to exceed $60,000,000 in aggregate amount; and
(hh) SECTION 7.1(k) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(k) other Indebtedness not to exceed in aggregate principal amount
outstanding at any time (i) prior to and including December 31, 1997,
(A) $5,000,000 and (B) provided such Indebtedness is related to an
Acquisition permitted by SECTION 7.5, $15,000,000, and (ii) at any time
thereafter, (A) 3% of the Total Assets of the Borrower
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and its Restricted Subsidiaries on a consolidated basis, or (B) if the
Leverage Ratio at the end of any fiscal quarter is less than 5.50 to 1,
5% of the Total Assets of the Borrower and its Restricted Subsidiaries on
a consolidated basis.
(ii) SECTION 7.3(i) of Credit Agreement is hereby amended in its entirety
to read as follows:
(i) Assisted Living Investments made after November 12, 1997 not to
exceed $50,000,000 in aggregate amount; and
(jj) SECTION 7.3(j) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(j) other Investments primarily related to the business of providing
healthcare services, including nursing care, rehabilitation therapy and
other specialized healthcare services (i) in Domestic Entities (A) prior to
and including December 31, 1997, (1) as set forth on SCHEDULE 13 hereto,
and (2) such other Investments not to exceed $5,000,000 in aggregate
principal amount, and (B) thereafter, not to exceed $50,000,000 in
aggregate principal amount, and (ii) in Foreign Entities (A) prior to and
including December 31, 1997, (1) as set forth on SCHEDULE 11 hereto and
(2) such other Investments, together with the aggregate Acquisition
Consideration for all Foreign Subsidiaries acquired pursuant to
SECTION 7.5(b)(ii) hereof and obligations incurred in respect of Guaranties
and letters of credit pursuant to SECTION 7.1(i) hereof which are not set
forth on SCHEDULE 11 hereto, not to exceed $5,000,000 in aggregate
principal amount, and (B) for each fiscal year thereafter, such other
Investments (calculated net of any repayment of loans and advances by
Foreign Entities) together with the Aggregate Consideration for all Foreign
Subsidiaries acquired pursuant to SECTION 7.5(b)(ii) hereof and obligations
in request of Guaranties and letters of credit pursuant to SECTION 7.1(i)
hereof, not to exceed in aggregate amount (1) $60,000,000 or
(2) $75,000,000 if the Leverage Ratio as of the end of any fiscal quarter
during such fiscal year is less than 5.50 to 1; PROVIDED, HOWEVER, that no
individual Investment in any Foreign Entity shall exceed $30,000,000.
(kk) SECTION 7.4(a) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, or sell, lease, abandon, transfer or
otherwise dispose of all or any part of its assets, properties or business,
other than (i) immaterial assets sold or otherwise disposed of in the
ordinary course of business, (ii) sales by the Borrower or any of its
Restricted Subsidiaries of assets to the Borrower or any other of its
Restricted Subsidiaries, (iii) liquidations or dissolutions of Foreign
Subsidiaries or Inactive Subsidiaries, (iv) sales of assets occurring
during any fiscal quarter that the Leverage Ratio for the fiscal quarter
immediately preceding such sale is less than 5.50 to 1 and in which
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the Net Cash Proceeds thereof are used within 180 days of such sale to
purchase assets to be used in the business of the Borrower and its
Restricted Subsidiaries described in SECTION 4.1(d) hereof, (v) sales
of the facilities set forth on SCHEDULES 8 and 9 hereto, (vi) sales of
assets permitted by SECTION 7.16 hereof, (vii) voluntary dissolutions or
liquidations of CareerStaff Subsidiaries, or (viii) other sales, leases,
transfers or other dispositions of assets for full and fair consideration
pursuant to arm's-length transactions, except that to the extent that the
aggregate book value of assets sold during any fiscal year exceeds
$1,000,000, the Net Cash Proceeds of such excess sales are applied as
required pursuant to SECTION 2.5(c) hereof.
(ll) SECTION 7.5 of the Credit Agreement is hereby amended in its entirety
to read as follows:
SECTION 7.5 ACQUISITIONS. The Borrower shall not, and shall not
permit any of its Restricted Subsidiaries to, make, in one or more
transactions, any (a) Acquisition (i) during the fiscal year ending on
December 31, 1997 (excluding the Regency Tender and the Regency Merger),
unless (A) the Acquisition is of a Restricted Subsidiary or of the assets
of a Domestic Entity, (B) the Acquisition (1) is set forth on SCHEDULE 14
hereto or (2) the aggregate Acquisition Consideration for all Acquisitions
not set forth on SCHEDULE 14 hereto does not exceed $5,000,000 in principal
amount, and (C) such Restricted Subsidiary and its Restricted Subsidiaries,
if any, becomes a party to a Subsidiary Guaranty and the Intercompany Line
of Credit and all the capital stock of, or other equity interest in, such
Restricted Subsidiary (other than CareerStaff Subsidiaries unless otherwise
required by SECTION 5.11) and its Restricted Subsidiaries, if any, (other
than CareerStaff Subsidiaries unless otherwise required by SECTION 5.11)
shall be pledged pursuant to a Pledge Agreement, or (ii) during any fiscal
year thereafter, unless (A) the Acquisition is set forth on SCHEDULE 14
hereto or (B)(1) the Acquisition is of a Restricted Subsidiary or of the
assets of a Domestic Entity, (2) the Acquisition Consideration therefor is
less than (y) $75,000,000 or (z) $100,000,000 if the Leverage Ratio as of
the end of any fiscal quarter during such fiscal year is less than 5.50 to
1, (3) the sum of the Acquisition Consideration therefor, together with the
Acquisition Consideration given for all other such Acquisitions during such
fiscal year, is less than (y) $125,000,000 or (z) $200,000,000 if the
Leverage Ratio as of the end of any fiscal quarter during such fiscal year
is less than 5.50 to 1 and (4) such Restricted Subsidiary and its
Restricted Subsidiaries, if any, becomes a party to a Subsidiary Guaranty
and the Intercompany Line of Credit and all the capital stock of, or equity
interest in, such Restricted Subsidiary (other than CareerStaff
Subsidiaries unless otherwise required by SECTION 5.11) and its Restricted
Subsidiaries, if any (other than CareerStaff Subsidiaries unless otherwise
required by SECTION 5.11) shall be pledged pursuant to a Pledge Agreement;
or (b) Acquisition of a Foreign Subsidiary, during (i) the fiscal year
ending December 31, 1997, unless (A) the Acquisition is set forth on
SCHEDULE 11 hereto or (B) if the Acquisition Consideration for all
Acquisitions not set forth on SCHEDULE 11 hereto, together with the
aggregate amount of obligations incurred in respect of Guaranties and
letters of
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credit pursuant to SECTION 7.1(i) hereof and Investments made pursuant to
SECTION 7.3(j) which are in Foreign Entities, does not exceed $5,000,000,
and (C) to the extent such Foreign Subsidiary is not a Subsidiary of a
Foreign Subsidiary, an amount of the capital stock of such Foreign
Subsidiary necessary to cause the Administrative Agent to have a security
interest in, and pledge of, all of the capital stock of, or other equity
interest in, such Foreign Subsidiary owned by the pledgor or such lesser
amount such that in any case not more than 66% of all of the capital stock
of, or other equity interest in, such Foreign Subsidiary, shall be pledged
pursuant to a Foreign Subsidiary Pledge Agreement, or (ii) any fiscal year
thereafter, unless (A) the Acquisition Consideration for all such
Acquisitions, together with the aggregate amount of obligations incurred in
respect of Guaranties and letters of credit pursuant to SECTION 7.1(i) and
Investments made pursuant to SECTION 7.3(j) which are in Foreign Entities,
does not exceed (1) $60,000,000 or (2) $75,000,000 if the Leverage Ratio as
of the end of any fiscal quarter during such fiscal year is less than 5.50
to 1, (B) the Acquisition Consideration for any single Acquisition or series
of related Acquisitions does not exceed $30,000,000 and (C) to the extent
such Foreign Subsidiary is not a Subsidiary of a Foreign Subsidiary, an
amount of the capital stock of such Foreign Subsidiary necessary to cause
the Administrative Agent to have a security interest in, and pledge of, all
of the capital stock of, or other equity interest in, such Foreign
Subsidiary owned by the pledgor or such lesser amount such that in any
case not more than 66% of all of the capital stock of, or other equity
interest in, such Foreign Subsidiary, shall be pledged pursuant to a
Foreign Subsidiary Pledge Agreement.
(mm) SECTION 7.9 of the Credit Agreement is hereby amended in its entirety
to read as follows:
SECTION 7.9 FIXED CHARGE COVERAGE RATIO. The Borrower shall not
permit the Fixed Charge Coverage Ratio to be less than (a) 1.50 to 1 at the
end of the fiscal quarter ending September 30, 1997, (b) 1.40 to 1 at the
end of any fiscal quarter thereafter through and including September 30,
1998, (c) 1.50 to 1 at the end of any fiscal quarter thereafter through and
including September 30, 2001, and (d) 1.60 to 1 at the end of any fiscal
quarter thereafter.
(nn) SECTION 7.10 of the Credit Agreement is hereby amended in its entirety
to read as follows:
SECTION 7.10 LEVERAGE RATIO. The Borrower shall not permit the
Leverage Ratio to be greater than (a) 6.25 to 1 at the end of the fiscal
quarter ending September 30, 1997, (b) 6.75 to 1 at the end of the fiscal
quarters ending December 31, 1997, and March 31, 1998, respectively,
(c) 6.50 to 1 at the end of the fiscal quarters ending June 30, 1998 and
September 30, 1998, respectively, (d) 6.00 to 1 at the end of any fiscal
quarter thereafter through and including September 30, 1999, (e) 5.75 to 1
at the end of any fiscal quarter thereafter through and including
September 30, 2000, (f) 5.50 to 1 at the end of any fiscal quarter
thereafter through and including September 30, 2001, (g) 5.25 to 1 at the
end of
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any fiscal quarter thereafter through and including September 30,
2002, and (h) 5.00 to 1 at the end of any fiscal quarter thereafter;
PROVIDED, HOWEVER, to the extent that at any time prior to and including
September 30, 1998 the Borrower or any Restricted Subsidiary receives
aggregate Net Cash Proceeds from the issuance of Equity in an aggregate
amount equal to or greater than $300,000,000, the ratio(s) set forth in
clause (b) and/or (c) above shall be reduced by 0.25 commencing with the
fiscal quarter immediately succeeding the date on which the aggregate
amount of such Net Cash Proceeds equals or exceeds $300,000,000.
(oo) SECTION 7.11 of the Credit Agreement is hereby amended in its entirety
to read as follows:
SECTION 7.11 TOTAL DEBT TO CAPITALIZATION RATIO. The Borrower shall
not permit the Total Debt to Capitalization Ratio to be greater than
(a) 0.75 to 1 at the end of the fiscal quarter ending September 30, 1997,
(b) 0.85 to 1 at the end of any fiscal quarter thereafter through and
including September 30, 1998, (c) 0.83 to 1 at the end of any fiscal
quarter thereafter through and including September 30, 1999, (d) 0.82 to 1
at the end of any fiscal quarter thereafter through and including
September 30, 2000, (e) 0.80 to 1 at the end of any fiscal quarter
thereafter through and including September 30, 2001, (f) 0.78 to 1 at the
end of any fiscal quarter thereafter through and including September 30,
2002, and (g) 0.75 to 1 at the end of any fiscal quarter thereafter.
(pp) SECTION 7.16 of the Credit Agreement is hereby amended in its entirety
to read as follows:
SECTION 7.16 SALE AND LEASEBACK. Except for (a) the sale and
leaseback of those facilities set forth on SCHEDULE 8 hereto and (b) sale
and leaseback transactions entered into in connection with Assisted Living
Investments permitted pursuant to SECTION 7.3(i) hereof and subject to the
limitations thereof, the Borrower shall not, and shall not permit any of
its Restricted Subsidiaries to, enter into any arrangement whereby it sells
or transfers any of its assets, and thereafter rents or leases such assets
except (i) prior to and including December 31, 1997, (A) as set forth on
SCHEDULE 8 hereto, and (B) other sale and leaseback transactions and
mortgage Indebtedness incurred pursuant to SECTION 7.1(j) hereof not to
exceed $5,000,000 in aggregate amount, and (ii) during each fiscal year
thereafter, together with the aggregate principal amount of Indebtedness in
respect of mortgage Indebtedness incurred during such year and permitted
pursuant to SECTION 7.1(j) hereof, not to exceed $60,000,000 in aggregate
amount.
(qq) ARTICLE 7 of the Credit Agreement is further amended by renumbering
existing SECTION 7.18 thereto as SECTION 7.17.
(rr) ARTICLE 7 of the Credit Agreement is further amended by adding
SECTION 7.18 thereto to read as follows:
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SECTION 7.18 SENIOR DEBT TO EBITDAR RATIO. The Borrower shall not
permit the Senior Debt to EBITDAR Ratio to be greater than (a) 6.00 to 1 at
the end of the fiscal quarters ending December 31, 1997 and March 31, 1998,
respectively, (b) 5.75 to 1 at the end of the fiscal quarters ending
June 30, 1998 and September 30, 1998, respectively, (c) 5.50 to 1 at the
end of any fiscal quarter thereafter through and including September 30,
1999, (d) 5.25 to 1 at the end of any fiscal quarter thereafter through and
including September 30, 2000, (e) 5.00 to 1 at the end of any fiscal
quarter thereafter through and including September 30, 2001, (f) 4.75 to 1
at the end of any fiscal quarter thereafter through and including
September 30, 2002, and (g) 4.50 to 1 at the end of any fiscal quarter
thereafter; PROVIDED, HOWEVER, to the extent that at any time prior to and
including September 30, 1998 the Borrower or any Restricted Subsidiary
receives aggregate Net Cash Proceeds from the issuance of Equity in an
aggregate amount equal to or greater than $300,000,000, the ratio(s) set
forth in clause (a) and/or (b) above shall be reduced by 0.25 commencing
with the fiscal quarter immediately succeeding the date on which the
aggregate amount of such Net Cash Proceeds equals or exceeds $300,000,000.
(ss) SECTION 8.1(d) of the Credit Agreement is hereby amended by deleting
the second "notice" appearing on the fourth line thereof and inserting
"knowledge" in lieu thereof.
(tt) SECTION 8.1(k) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(k) The Borrower or any of its Restricted Subsidiaries shall fail to
make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) with respect to any
Indebtedness which is outstanding in a principal amount of at least
$3,000,000 in the aggregate beyond any grace period with respect thereto,
or shall default in the performance of any agreement or instrument under
which such Indebtedness is created or evidenced beyond any applicable grace
period (or any event thereunder shall occur and be continuing), if the
effect of such default or event is to permit or cause the holder of such
Indebtedness (or a trustee on behalf of any such holder) to (i) cause such
Indebtedness to become due or prepaid prior to its date of maturity or
(ii) require the Borrower or any of its Restricted Subsidiaries to purchase
or redeem such Indebtedness;
(uu) SECTION 10.1(b) of the Credit Agreement is hereby amended by amending
the parenthetical clause that begins on the fourth line of page 76 of the Credit
Agreement in its entirety to read as follows:
(provided that no Event of Default has occurred and is continuing, with the
consent of the Borrower, which consent shall not be unreasonably withheld)
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(vv) SECTION 11.6(D) of the Credit Agreement is hereby amended in its
entirety to read as follows:
Each Lender may assign to one or more Eligible Assignees its rights
and obligations under this Agreement and the other Loan Documents;
PROVIDED, HOWEVER, that (i) each such assignment shall be subject to the
prior written consent of the Administrative Agent and the Borrower, which
consent shall not be unreasonably withheld (provided, however,
notwithstanding anything herein to the contrary, no consent of the
(A) Borrower shall be required for any assignment (1) during any time that
an Event of Default has occurred and is continuing, (2) to an Affiliate of
a Lender, or (3) to an existing Lender hereunder and (B) Administrative
Agent shall be required for any assignment to an existing Lender
hereunder), (ii) no such assignment shall be in an amount of Commitments
less than $10,000,000, unless (A) the portion of the Commitments of the
assigning Lender are less than $10,000,000, in which case such assignment
may be in an aggregate amount of such Lender's portion of the Commitments
or (B) the assignment is to an Affiliate of a Lender or to an existing
Lender hereunder, in which case such assignment may be in an amount of
Commitments not less than $5,000,000, (iii) the assigning Lender,
Administrative Agent and the Eligible Assignee shall execute and deliver to
the Administrative Agent an Assignment and Acceptance Agreement (an
"ASSIGNMENT AGREEMENT") in substantially the form of EXHIBIT H hereto
together with the Notes subject to such assignment, (iv) the Eligible
Assignee or the assigning Lender, as the case may be, shall deliver to the
Administrative Agent a processing fee of $3,500, and (v) except as
otherwise waived by the Borrower, the Administrative Agent shall give the
Borrower notice of any proposed assignment no later than 10 days prior to
any assignment. Upon such execution, delivery and acceptance from and
after the effective date specified in each Assignment, which effective date
shall be at least three Business Days after the execution thereof and the
recordation of the information therein in the Register pursuant to
SECTION 11.6(j) hereof, (A) the Eligible Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment, have the rights and
obligations of a Lender hereunder and (B) the Administrative Agent shall,
to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment, relinquish such rights and be released from
such obligations under this Agreement.
(ww) SECTION 11.6(j) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(j) THE REGISTER. The Administrative Agent shall maintain at its
address referred to in SECTION 11.1 a copy of each Assignment Agreement
delivered to and accepted by it and a register (the "Register") for the
recordation of the names and addresses of the Lenders, any U.S. taxpayer
identification number, the Specified Percentages of the Lenders (the
"Ownership Information") whether such Lender is an original Lender or the
assignee of another Lender pursuant to an Assignment Agreement
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and the effective date and amount of each Assignment Agreement delivered to
and accepted by it and the parties thereto. Any transfer of an ownership
interest in any Advance, including any right to principal or interest
payable with respect to the Advance, shall be subject to and conditioned
upon the due recordation of such transfer and the Ownership Information
with respect to the transferee in the Register and such transfer shall be
effective only upon such recordation (and not prior thereto). The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes hereof. The Register shall be
available for inspection by the Borrower or any lender at any reasonable
time and from time to time upon reasonable prior notice.
(xx) SECTION 11.11 of the Credit Agreement is hereby amended by amending
clauses (b)(viii) thereof in its entirety to read as follows:
(viii) amend the definition of "Revolving Commitment Maturity
Date", "Facility A Term Loan Maturity Date", "Facility B Term Loan Maturity
Date" or "Facility C Term Loan Maturity Date" or otherwise extend the
"Revolving Commitment Maturity Date", the "Facility A Term Loan Maturity
Date", the "Facility B Term Loan Maturity Date" or the "Facility C Term
Loan Maturity Date";
(yy) SECTION 11.11 of the Credit Agreement is hereby further amended by
amending clause (b) of the penultimate sentence thereof in its entirety to read
as follows:
(b) with respect to SECTION 2.5(c), 2.5(d), 2.5(e) or 2.5(g), shall be
made without the consent of any combination of Lenders whose Total
Specified Percentages aggregate at least 66-2/3%.
(zz) SCHEDULE 1 to the Credit Agreement is hereby amended to be in the form
of SCHEDULE 1 hereto, and the applicable Specified Percentages of the New
Lenders are established and the applicable Specified Percentages of certain of
the Existing Lenders are amended as provided therein.
(aaa) SCHEDULES 2, 3, 5, 6, 7, 8, 9, 11, 13 and 14 to the Credit
Agreement are hereby amended to be in the form of SCHEDULES 2, 3, 5, 6, 7, 8, 9,
11, 13 and 14 hereto.
(bbb) The Compliance Certificate is hereby amended to be in the form of
EXHIBIT G hereto.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
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(a) the representations and warranties contained in the Credit Agreement
and the other Loan Documents are true and correct on and as of the date hereof
as if made on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default or
an Event of Default;
(c) the Borrower has full power and authority to execute and deliver this
First Amendment, the Notes referred to in SECTION 3(c) of this First Amendment
(the "REPLACEMENT NOTES"), and the Credit Agreement, as amended hereby, the
execution, delivery and performance of this First Amendment, the Replacement
Notes and the Credit Agreement, as amended hereby, has been duly authorized by
all corporate action of the Borrower, and this First Amendment, the Replacement
Notes, and the Credit Agreement, as amended hereby, constitute the legal, valid
and binding obligations of the Borrower, enforceable in accordance with their
respective terms, except as enforceability may be limited by applicable Debtor
Relief Laws and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and except as rights
to indemnity may be limited by federal or state securities laws;
(d) neither the execution, delivery and performance of this First
Amendment, the Replacement Notes or the Credit Agreement, as amended hereby, nor
the consummation of any transactions contemplated herein or therein, will
contravene or conflict with any law, rule or regulation to which the Borrower or
any of its Subsidiaries is subject, or any indenture, agreement or other
instrument to which the Borrower or any of its Subsidiaries or any of their
respective property is subject; and
(e) no authorization, approval, consent, or other action by, notice to, or
filing with, any governmental authority or other Person (including the Board of
Directors of the Borrower or any Guarantor), is required for the (i) execution,
delivery or performance by the Borrower of this First Amendment, the Replacement
Notes, and the Credit Agreement, as amended hereby, or (ii) acknowledgement of
this First Amendment by each Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be effective
as of November 13, 1997, subject to the following:
(a) the Administrative Agent shall have received counterparts of this
First Amendment executed by each Co-Agent and each Lender;
(b) the Administrative Agent shall have received counterparts of this
First Amendment executed by the Borrower and acknowledged by each Guarantor;
(c) the Administrative Agent shall have received, for each New Lender and
each Existing Lender whose Revolving Credit Specified Percentage, Facility A
Term Loan Specified Percentage, Facility B Term Loan Specified Percentage,
and/or Facility C Term Loan Specified
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Percentage is being revised pursuant to this First Amendment, a Revolving Credit
Note, a Facility A Term Loan Note, a Facility B Term Loan Note, and/or a
Facility C Term Loan Note, as appropriate, in the amount of its applicable
Specified Percentage, as established or amended by this First Amendment;
(d) the representations and warranties set forth in Section 2 of this
First Amendment shall be true and correct; and
(e) the Administrative Agent shall have received, in form and substance
satisfactory to the Administrative Agent and its counsel, such other documents,
certificates and instruments as Administrative Agent shall require.
4. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this First Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", or words of like import shall
mean and be a reference to the Credit Agreement, as amended by this First
Amendment.
(b) The Credit Agreement, as amended by this First Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
5. ADVANCES. Upon the effectiveness of this Agreement, each of the New
Lenders and each of the Existing Lenders whose Revolving Credit Specified
Percentage, Facility A Term Loan Specified Percentage, Facility B Term Loan
Specified Percentage and/or Facility C Term Loan Specified Percentage is amended
by this First Amendment, through the Administrative Agent, by assignments,
purchases and adjustments (which shall occur and shall be deemed to occur
automatically upon such effectiveness), shall have purchased or sold such
Advances so that after giving effect to such assignments, purchases and
adjustments, each Lender shall hold, as appropriate, (a) Revolving Credit
Advances and Reimbursement Obligations ratably in accordance with its Revolving
Credit Specified Percentage, as established or amended hereby, (b) Facility A
Term Loan Advances ratably in accordance with its Facility A Term Loan Specified
Percentage, as established or amended hereby, (c) Facility B Term Loan Advances
ratably in accordance with its Facility B Term Loan Specified Percentage, as
established or amended hereby, and/or (d) Facility C Term Loan Advances ratably
in accordance with its Facility C Term Loan Specified Percentage, as established
or amended hereby. The parties hereto agree that the requirements of
SECTION 11.6 of the Credit Agreement with respect to the Assignments are hereby
waived for purposes of this First Amendment only. Each Lender selling and
assigning all or any portion of an Advance as a result of this First Amendment
hereby represents and warrants that such interest being sold and assigned is
free and clear of any Lien or advance claim. Each Lender purchasing all or any
portion of an Advance as a result of this First Amendment assumes no obligations
of any Lender incurred or as a result of action or inaction by any Lender prior
to the effectiveness of this First Amendment other than in respect of
Reimbursement Obligations outstanding as of the effectiveness of this First
Amendment.
- 29 -
<PAGE>
6. GUARANTOR'S ACKNOWLEDGEMENT. By signing below, each of the Guarantors
(a) acknowledges, consents and agrees to the execution, delivery and performance
by the Borrower of this First Amendment and the Replacement Notes, and
(b) acknowledges and agrees that its obligations in respect of its Subsidiary
Guaranty or any other Loan Documents executed by it are (i) not released,
diminished, waived, modified, impaired or affected in any manner by this First
Amendment, (ii) hereby ratified and confirmed and (iii) not subject to any
claims, offsets, defenses or counterclaims.
7. CONDITIONS SATISFIED. The Administrative Agent hereby represents and
warrants that each of the conditions to the initial Advance set forth in
SECTION 3.1 of the Credit Agreement were satisfied prior to or simultaneously
with the initial Advance under the Credit Agreement.
8. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this First Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Credit Agreement, as amended by
this First Amendment).
9. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
10. GOVERNING LAW; BINDING EFFECT. This First Amendment shall be governed
by and construed in accordance with the laws of the State of Texas and shall be
binding upon the Borrower, the Co-Agents, the Administrative Agent and each
Lender and their respective successors and assigns.
11. HEADINGS. Section headings in this First Amendment are included
herein for convenience of reference only and shall not constitute a part of this
First Amendment for any other purpose.
12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
- 30 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as the date first above written.
SUN HEALTHCARE GROUP, INC.
By:
-----------------------------------
Robert D. Woltil
Chief Financial Officer
NATIONSBANK OF TEXAS, N.A., as Administrative
Agent and as a Lender
By:
-----------------------------------
Steven A. Deily
Senior Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Steven A. Deily
Senior Vice President
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION, as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Lucy B. Nixon
SCOTIABANC INC., as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308-2214
Attn: Dana Maloney
- 31 -
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
US Corporate Banking Division
1251 Avenue of the Americas, 12th Floor
New York, New York 10020-1104
Attn: Douglas Weir
CREDIT LYONNAIS NEW YORK BRANCH,
as a Co-Agent and as a Lender
By:
-----------------------------------
Farboud Tavangar
First Vice President
1301 Avenue of the Americas, 18th Floor
New York, New York 10019-6022
Attn: Evan S. Wasser
Vice President
CREDIT SUISSE FIRST BOSTON,
as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
11 Madison Avenue, 20th Floor
New York, New York 10010
Attn: Robert B. Potter
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS
ANGELES AGENCY, as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
350 South Grand Avenue, Suite 3000
Los Angeles, California 90071
Attn: Koji Toriumi
- 32 -
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as a Co-Agent and as a Lender
By:
-----------------------------------
James E. Condon
Vice President
60 Wall Street, 22nd Floor
New York, New York 10260
Attn: James E. Condon
PNC BANK, NATIONAL ASSOCIATION,
as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
2 PNC Plaza - 2nd Floor
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Attn: Karen George
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a
Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
245 Park Avenue
New York, New York 10167-0062
Attn: Corporate Services Department
with a copy to:
13355 Noel Road
One Galleria Tower, Suite 1000
Dallas, Texas 75240
Attn: Karl F. Propst
THE SUMITOMO BANK, LIMITED,
as a Co-Agent and as a Lender
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attn: Gary Perkins
- 33 -
<PAGE>
BANQUE PARIBAS
By:
-----------------------------------
Glenn Mealey
Director
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
1200 Smith, Suite 3100
Houston, Texas 77002
Attn: Glenn Mealey
Director
BHF-BANK AKTIENGESELLSCHAFT
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
111 West Ocean Boulevard, Suite 1325
Long Beach, California 90802
Attn: L. John Stewart
Vice President
with a copy to:
590 Madison Avenue
New York, New York 10022-2540
Attn: Dan Dobrjanskyj
Assistant Vice President
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
75 Wall Street, 25th Floor
New York, New York 10005
Attn:
----------------------------------
- 34 -
<PAGE>
FINOVA
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attn:
----------------------------------
THE FUJI BANK LIMITED, LOS ANGELES AGENCY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
333 South Hope Street, Suite 3900
Los Angeles, California 90071
Attn: Richard G. Bushman
Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
1251 Avenue of the Americas
New York, New York 10020-1104
Attn:
----------------------------------
THE MITSUBISHI TRUST AND BANKING CORPORATION,
LOS ANGELES AGENCY
By:
----------------------------------------
Yasushi Satomi
Senior Vice President and Chief Manager
801 South Figueroa Street, Suite 500
Los Angeles, California 90071
Attn: Dean Kawai
Vice President
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
505 Main Street, Suite 300
Fort Worth, Texas 76102
Attn: Susan Sheffield
Vice President
- 35 -
<PAGE>
AMSOUTH BANK
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
1900 Fifth Avenue North, AST7FL
Birmingham, Alabama 35203
Attn:
-----------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
3379 Peachtree Road N.E., Suite 560
Atlanta, Georgia 90326
Attn:
----------------------------------
NATEXIS BANQUE BFCE
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
333 Clay Street, Suite 4340
Houston, Texas 77002
Attn:
----------------------------------
with a copy to:
Natexis Banque BFCE, New York Branch
645 Fifth Avenue, 20th Floor
New York, New York 10022
Attn: Joan Rankine
THE ROYAL BANK OF SCOTLAND, plc
By:
-----------------------------------
David Dougan
Vice President
Wall Street Plaza, 26th Floor
88 Pine Street
New York, New York 10005-1801
Attn: David Dougan
- 36 -
<PAGE>
THE SANWA BANK, LIMITED, DALLAS AGENCY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
2200 Ross Avenue, 4100 West
Dallas, Texas 75201
Attn: Matthew G. Patrick
Vice President
SUMMIT BANK
By:
-----------------------------------
Christina M. Clausen
Vice President
250 Moore Street, 2nd Floor
Hackensack, New Jersey 07601
Attn: Healthcare Financial Services
TORONTO DOMINION (TEXAS), INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
909 Fannin Street, Suite 1700
Houston, Texas 77010
Attn: Frederic B. Hawley
Manager, Credit Administration
with a copy to:
31 West 52nd Street, 18th Floor
New York, New York 10019
Attn: David Perlman
Senior Associate
LEHMAN COMMERCIAL PAPER, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
3 World Financial Center, 8th Floor
New York, New York 10285
Attn: Joseph McHugh
- 37 -
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
1295 State Street, 1st Floor
Springfield, Massachusetts 01111
Attn: Steven J. Katz
METROPOLITAN LIFE INSURANCE COMPANY
By:
-----------------------------------
James Dingler
Director
334 Madison Avenue
Convent Station, New Jersey 07961-0633
Attn: Frank Monfalcone
with a copy to:
Metropolitan Life Insurance Company
1 Madison Avenue, Area 7H
New York, New York 10010
Attn: Bill Ding, Esq.
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(a unit of The Chase Manhattan Bank)
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
380 Madison Avenue, 12th Floor
New York, New York 10017
Attn: James P. Ferguson
KZH HOLDING CORPORATION III
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
- 38 -
<PAGE>
PARIBAS CAPITAL FUNDING LLC
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
787 7th Avenue, 32nd Floor
New York, New York 10019
Attn: Francois Gauvin
with a copy to:
Richard Wagman
State Street Bank & Trust Co.
Two International Place
Boston, Massachusetts 02110
Telephone: (617) 664-5410
Fax: (617) 664-5366/67/68
JACKSON NATIONAL LIFE INSURANCE COMPANY
By: PPM America, Inc., as Attorney-in-Fact, on
behalf of Jackson National Life Insurance
Company
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attn: Michael DiRe or Guy Petrelli
Private Placements
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
One Parkview Plaza
Oakbrook Terrace, Illinois 60602
Attn: Jeffrey W. Maillet
PFL LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o AEGON USA Investment Management, Inc.
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-5335
Attn: John Bailey
- 39 -
<PAGE>
PEOPLES SECURITY LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Peoples Security Life Insurance Company
c/o AEGON USA Investment Management, Inc.
400 West Market Street
Louisville, Kentucky 40202
Attn: Securities Department - 10th Floor
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Securities Department
ROYALTON COMPANY
By: Pacific Investment Management Company, as its
Investment Advisor
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
840 Newport Center Drive
Newport Beach, California 92656
Attn: Jason Rosiak
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
- 40 -
<PAGE>
SENIOR HIGH INCOME PORTFOLIO, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
DEBT STRATEGIES FUND, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
CANADIAN IMPERIAL BANK OF COMMERCE
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
51 JFK Parkway
Short Hills, New Jersey 07078
Attn:
-----------------------------------
BANKBOSTON, N.A.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
100 Federal Street, Mail Stop: 01-08-05
Boston, Massachusetts 02110
Attn:
----------------------------------
- 41 -
<PAGE>
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.,
as Attorney-In-Fact and on behalf of FAFLIC
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
125 High Street, 14th Floor
Boston, Massachusetts 02110
Attn: Philip Robbins
with a copy to:
State Street Bank & Trust
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
Attn: John Tavares, for the account of FAFLIC
PRIME INCOME TRUST
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Dean Witter InterCapital, Inc.
Two World Trade Center, 72nd Floor
New York, New York 10048
Attn: Louis A. Pistecchia
DEEPROCK & CO.
By: Eaton Vance Management, as Investment Advisor
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
24 Federal Street
Boston, Massachusetts 02110
Attn:
-----------------------------------
FRANKLIN FLOATING RATE TRUST
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
777 Mariners Island Boulevard, 7th Floor
San Mateo, California 94404
Attn:
-----------------------------------
- 42 -
<PAGE>
ORIX USA CORPORATION
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
780 Third Avenue, 48th Floor
New York, New York 10017-7088
Attn: Kiyomi Kosaka
Vice President
PILGRIM AMERICA PRIME RATE TRUST
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4424
Attn:
----------------------------------
NORTHERN LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401
Attn: Tim Warrick
MORGAN STANLEY SENIOR FUNDING, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
1585 Broadway, 10th Floor
New York, New York 10036
Attn: James Morgan
- 43 -
<PAGE>
ING HIGH INCOME PRINCIPAL PRESERVATION OFFERING,
L.P.
By: ING Capital Advisors, Inc., as Investment
Advisor
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o ING Capital Advisors, Inc.
333 South Grand Avenue, Suite 4250
Los Angeles, California 90071
Attn:
----------------------------------
PARAMOUNT COMPANY
By: Pilgrim America Investments, Inc., as its
Investment Manager
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-3444
with a faxed copy to:
State Street Bank and Trust Company
Corporate Trust Department
Attn: Ray Welliver
Ref: Paramount Company
Fax: (617) 664-5366/5367/5368
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment
Advisor
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o Boston Management and Research, as Investment
Advisor
24 Federal Street
Boston, Massachusetts 02110
- 44 -
<PAGE>
CYPRESSTREE INVESTMENT PARTNERS I, LTD.
By: CypressTree Investment Management Company,
Inc., as Portfolio Manager
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
CypressTree Investment Management Company, Inc.
125 High Street, 14th Floor
Boston, Massachusetts 02110
ML CBO IV (CAYMAN) LTD.
By: Protective Asset Management Company, as
Collateral Manager
By:
-----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Protective Asset Management, L.L.C.
1150 Two Galleria Tower
13455 Noel Road, LB #45
Dallas, Texas 75240
Attn: Mark Okada
PAMCO CAYMAN LTD.
By: Protective Asset Management Company, as
Collateral Manager
By:
-----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Protective Asset Management, L.L.C.
1150 Two Galleria Tower
13455 Noel Road, LB #45
Dallas, Texas 75240
Attn: Mark Okada
MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:
---------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Debt Strategies Fund, Inc.
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Jill Montanye
- 45 -
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:
----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Merrill Lynch Prime Rate Portfolio
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Jill Montanye
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
World Financial Center
16th Floor, North Tower
New York, New York 10281
Attn: Janet Hansen
INDOSUEZ CAPITAL FUNDING II, LIMITED
By: Indosuez Capital Luxembourg, as Collateral
Manager
By:
-----------------------------------
Philippe Debin
Authorized Signatory
P.O. Box 309
Ugland House
George Town
Grand Cayman, Cayman Islands
British West Indies
with a copy to:
Indosuez Capital Funding II, Limited
c/o Texas Commerce Bank N.A.
Attn: Joe Elston, Asset Backed Group
A/C 17499
600 Travis Street, 8th Floor
Houston, Texas 77002-8039
and
Indosuez Capital
1211 Avenue of the Americas, 7th Floor
New York, New York 10036-8701
Attn: Francoise Berthelot
- 46 -
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisers (Bermuda), Ltd., as General
Partner
By:
-----------------------------------
Mark L. Gold
Managing Director
By: TCW Investment Management Company, as
Investment Adviser
By:
-----------------------------------
Justin E. Driscoll
Senior Vice President
TCW Leveraged Income Trust, L.P.
c/o State Street Bank & Trust Company
Two International Place
Boston, Massachusetts 02110
Attn: Jackie Kilroy
and
Trust Company of the West
865 South Figueroa Street, Suite 1800
Los Angeles, California 90017
Attn: Elaine Nagos
with a copy to:
TCW Asset Management Company
200 Park Avenue, Suite 2200
New York, New York 10166-0228
Attn: Mark L. Gold/Justin Driscoll/Jonathan Insull
- 47 -
<PAGE>
ARES LEVERAGED INVESTMENT FUND, L.P.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attn: Jeff Moore
Principal
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc., as Collateral
Manager
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
c/o ING Capital Advisors, Inc.
333 South Grand Avenue, Suite 4250
Los Angeles, California 90071
Attn:
----------------------------------
- 48 -
<PAGE>
ACKNOWLEDGED AND AGREED:
Sundance Rehabilitation Corporation, a Connecticut corporation
SunQuest Consulting, Inc., a New Mexico corporation
Sunrise Healthcare Corporation, a New Mexico corporation
SunScript Pharmacy Corporation, a New Mexico corporation
Sunrise Rehab of Colorado, Inc., a Colorado corporation
Sunrise Healthcare of Colorado, Inc., a Colorado corporation
Sunrise Healthcare of Florida, Inc., a Florida corporation
LTC Staffinders, Inc., a Connecticut corporation
SunSpectrum Outpatient Rehabilitation-Concord, Inc., a Massachusetts corporation
Nursing Home Inc., a Washington corporation
Living Services, Inc., a Washington corporation
Bay Colony Health Service, Inc., a Massachusetts corporation
Bergen Eldercare, Inc., a New Jersey corporation
Community Re-Entry Services of Cortland, Inc., a Delaware corporation
G-WZ of Stamford, Inc., a Connecticut corporation
Manatee Springs Nursing Center, Inc., a Florida corporation
Mediplex Management, Inc., a Massachusetts corporation
Mediplex Management of Palm Beach County, Inc., a Florida corporation
Mediplex Management of Texas, Inc., a Texas corporation
Sun Healthcare Inc., a Colorado corporation
Mediplex of Concord, Inc., a Massachusetts corporation
Mediplex of Connecticut, Inc., a Connecticut corporation
Mediplex of Kentucky, Inc., a Kentucky corporation
Mediplex of Maryland, Inc., a Maryland corporation
Mediplex of Massachusetts, Inc., a Massachusetts corporation
Mediplex of New Hampshire, Inc., a New Hampshire corporation
Mediplex of New Jersey, Inc., a New Jersey corporation
Mediplex of New York, Inc., a New York corporation
Mediplex of Ohio, Inc., an Ohio corporation
Mediplex of Tennessee, Inc., a Tennessee corporation
Mediplex Atlanta Rehabilitation Institute, Inc., a Georgia corporation
Mediplex Rehabilitation of Massachusetts, Inc., a Massachusetts corporation
P.M.N.F. Management, Inc., a New Jersey corporation
Quality Care Holding Corp., a Massachusetts corporation
Quality Nursing Care of Massachusetts, Inc., a Massachusetts corporation
Spofford Land, Inc., a New Hampshire corporation
Sun Care Corp., a Delaware corporation
HSR Management, Inc., a Delaware corporation
CareerStaff Management, Inc., a Delaware corporation
- 49 -
<PAGE>
PRI, Inc., a Texas corporation
CareerStaff Unlimited, Inc., a Delaware corporation
CareerStaff HSR, Inc., a Delaware corporation
Healthcare Staff Resources, Inc., a Texas corporation
SunBridge, Inc., a New Mexico corporation
SunMark of New Mexico, a New Mexico corporation
SunChoice Medical Supply, Inc., a New Mexico corporation
HTA of New Jersey, Inc., a New Jersey corporation
New Bedford Acquisition Corp., a Massachusetts corporation
New Bedford Nursing Center, Inc., a Massachusetts corporation
Worcester Nursing Center, Inc., a Massachusetts corporation.
Cal-Med, Inc., a California corporation
Clipper Home Affiliates, Inc., a New Hampshire corporation
Clipper Home of North Conway, Inc., a New Hampshire corporation
Clipper Home of Portsmouth, Inc., a New Hampshire corporation
Clipper Home of Rochester, Inc., a New Hampshire corporation
Clipper Home of Wolfeboro, Inc., a New Hampshire corporation
Golan Healthcare Group, Inc., a Massachusetts corporation
Goodwin Nursing Home, Inc., a New Hampshire corporation
HC, Inc., a Kansas corporation
Langdon Place of Dover, Inc., a New Hampshire corporation
Langdon Place of Exeter, Inc., a New Hampshire corporation
Langdon Place of Nashua, Inc., a New Hampshire corporation
Masthead Corporation, a New Mexico corporation
Mediplex of Virginia, Inc., a Virginia corporation
Oakview Treatment Centers of Kansas, Inc., a Kansas corporation
Pharmacy Factors of California, Inc., a California corporation
Pharmacy Factors of Florida, Inc., a Florida corporation
Pharmacy Factors of Texas, Inc., a Texas corporation
PHS Continuing Education, Inc., a Texas corporation
Premier Health Staff, Inc., a Texas corporation
SHG International Holdings, Inc., a Delaware corporation
Special Medical Services, Inc., a Texas corporation
SunAlliance Health care Services, Inc., a Delaware corporation
SunCare Respiratory Services, Inc., an Indiana corporation
SunFactors, Inc., a Florida corporation
Sun Lane Purchase Corporation, a New Mexico corporation
SunSolution, Inc., a Delaware corporation
The Mediplex Group, Inc., a Massachusetts corporation
Hospital Therapy Service of Texas, Inc., a Texas corporation
Regency Health Services, Inc, a Delaware corporation
Braswell Enterprises, Inc., a California corporation
Brittany Rehabilitation Center, Inc., a California corporation
Carmichael Rehabilitation Center, a California corporation
- 50 -
<PAGE>
Coalinga Rehabilitation Center, a California corporation
Covina Rehabilitation Center, a California corporation
Evergreen Rehabilitation Center, a California corporation
Fairfield Rehabilitation Center, a California corporation
Fullerton Rehabilitation Center, a California corporation
Glendora Rehabilitation Center, a California corporation
Grand Terrace Rehabilitation, a California corporation
Hallmark Health Services, Inc., a California corporation
Harbor View Rehabilitation Center, a California corporation
Hawthorne Rehabilitation Center, a California corporation
Heritage Rehabilitation Center, a California corporation
Huntington Beach Convalescent Hospital, a California corporation
Jackson Rehabilitation Center, Inc., a California corporation
Linda-Mar Rehabilitation Center, a California corporation
Meadowbrook Rehabilitation Center, a California corporation
Newport Beach Rehabilitation Center, a California corporation
North State Home Health Care, Inc., a California corporation
Paradise Rehabilitation Center, Inc., a California corporation
Paso Robles Rehabilitation Center, a California corporation
Regency-North Carolina, Inc., a North Carolina corporation
Regency Rehab Properties, Inc., a California corporation
Regency-Tennessee, Inc., a Tennessee corporation
RHS Management Corporation, a California corporation
Rosewood Rehabilitation Center, Inc., a California corporation
Shandin Hills Rehabilitation Center, a California corporation
Stockton Rehabilitation Center, Inc., a California corporation
Vista Knoll Rehabilitation Center, Inc., a California corporation
Willowview Rehabilitation Center, a California corporation
First Class Pharmacy, Inc., a California corporation
Care Enterprises, Inc., a Delaware corporation
Americare Homecare, Inc., an Ohio corporation
Care Finance, Inc., a California corporation
Circleville Health Care Corp., an Ohio corporation
Glenville Health Care Corp., a West Virginia corporation
Marion Health Care Corp., an Ohio corporation
New Lexington Health Care Corp., an Ohio corporation
Americare of West Virginia, Inc., a West Virginia corporation
Dunbar Health Care Corp., a West Virginia corporation
Beckley Health Care Corp., a West Virginia corporation
Putnam Health Care Corp., a West Virginia corporation
Salem Health Care Corp., a West Virginia corporation
Care Enterprises West, a Utah corporation
Care Home Health Services, a California corporation
SCRS & Communicology Inc., of Ohio, an Ohio corporation
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<PAGE>
Regency Rehab Hospitals, Inc., a California corporation
Orange Rehabilitation Hospital, Inc., a Delaware corporation
San Bernadino Rehabilitation Hospital, Inc., a Delaware corporation
Regency Outpatient Services, Inc., a California corporation
Heritage-Torrance Rehabilitation Center
Oasis Mental Health Treatment Center, Inc.
Regency High School, Inc.
Pacific Beach Physical Therapy, Inc.
Peachwood Physical Therapy, Inc.
Regency Rehabilitation Management and Consulting Services, Inc.
By:
-------------------------------------
Robert D. Woltil
Chief Financial Officer
Accelerated Care Plus, LLC, a Delaware limited liability company
By: Cal-Med, Inc., a California corporation and HC, Inc., a Kansas corporation,
members
By:
----------------------------------
Robert D. Woltil
Chief Financial Officer
Hospital Therapy Service of Michigan, LLC, a Michigan limited liability company
By: SunCare Respiratory Services, Inc., an Indiana corporation, member
By:
----------------------------------
Robert D. Woltil
Chief Financial Officer
Therapists Unlimited-Baltimore/Washington, D.C., L.P., a Texas limited
partnership
Therapists Unlimited-Chicago II, L.P., a Texas limited partnership
Therapists Unlimited-Detroit II, L.P., a Texas limited partnership
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<PAGE>
Therapists Unlimited-Fresno, L.P., a Texas limited partnership
Therapists Unlimited-Indianapolis, L.P., a Texas limited partnership
Therapists Unlimited-New Orleans, L.P., a Texas limited partnership
Therapists Unlimited-Philadelphia, L.P., a Texas limited partnership
Therapists Unlimited-San Francisco, L.P., a Texas limited partnership
Therapists Unlimited-Seattle, L.P., a Texas limited partnership
Therapists Unlimited-Travelers, L.P., a Texas limited partnership
HSR Partners, L.P.
By: CareerStaff Management, Inc., a Delaware corporation and the general
partner of the above-listed limited partnership Guarantors
By:
----------------------------------------
Robert D. Woltil
Chief Financial Officer
West Jersey/Mediplex Rehabilitation, L.P.
By: Mediplex of New Jersey, Inc., a New Jersey corporation and its general
partner
By:
----------------------------------------
Robert D. Woltil
Chief Financial Officer
Address for all Guarantors:
101 Sun Lane, N.E.
Albuquerque, New Mexico 87109
Attn: Chief Financial Officer
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<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into as of June 5, 1997, by and
between EFFINGHAM ASSOCIATES, L.L.C., an Illinois limited liability company
(hereinafter referred to as "Lessor"), and SUNRISE HEALTHCARE CORPORATION, a New
Mexico Corporation ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor is the owner of a certain tract of land located in the
State of Illinois and more particularly described in EXHIBIT A attached hereto
and made a part hereof, which tract of land is improved with a one hundred
twenty (120) bed nursing facility commonly known as Evergreen Nursing and
Convalescent Centre located at 1115 Wenthe Street, Effingham, Illinois
62401(which tract and nursing home facility, together with any other
improvements now or hereafter located on the tract and all easements, tenements,
hereditaments and appurtenances thereto are hereinafter collectively referred to
as the "Demised Premises"); and
WHEREAS, the Demised Premises is licensed for 120 beds and, as of the date
hereof, 102 beds are presently in operation; and
WHEREAS, Sun Healthcare Group, Inc., a Delaware corporation (the
"Guarantor") will execute and deliver to Lessor that certain Unconditional
Guaranty of Lease (the "Lease Guaranty") dated of even date herewith,
guarantying the performance of all of the obligations of Lessee under this
Lease; and
WHEREAS, the parties hereto have agreed to the terms and conditions of this
Lease.
NOW THEREFORE, it is agreed that the use and occupancy of the Demised
Premises, and the use of the Personal Property shall be subject to and in
accordance with the terms, conditions and provisions of this Lease.
ARTICLE I - DEFINITIONS
1.1 The terms defined in this Article, for all purposes this Lease and all
agreements supplemental hereto, have the meaning herein specified.
(a) "Demised Premises" shall mean the real estate described in
EXHIBIT A and all improvements located thereon.
(b) "Personal Property" shall mean all furniture, fixtures and
equipment located on the Demised Premises (including, without limitation,
those items set forth on EXHIBIT B attached hereto and made a part hereof),
other than such furniture, fixtures, equipment and supplies that persons
other than the Lessor may own or that the Lessee may lease from persons
other than the Lessor or that are purchased by Lessee other than as
replacements for Personal Property.
(c) "Leased Property" shall mean the Demised Premises and the
Personal Property.
(d) "Lease Year" shall mean a twelve (12) month period commencing on
the Commencement Date as hereafter defined, and on each anniversary of the
Commencement
<PAGE>
Date thereafter, except that if the Commencement Date is other than the
first day of a calendar month, then the first Lease Year shall be the
period from the Commencement Date through the date twelve (12) months after
the last day of the calendar month in which the Commencement Date occurs,
and each subsequent Lease Year shall be the period of twelve (12) months
following the last day of the prior Lease Year.
(e) All other terms shall be as defined in other sections of this
Lease.
ARTICLE II - DEMISED PREMISES AND PERSONAL PROPERTY
2.1 Lessor, for and in consideration of the rents, covenants and
agreements hereinafter reserved, mentioned and contained on the part of the
Lessee, its successors and assigns, to be paid, kept and performed, does hereby
lease unto Lessee the Demised Premises together with the Personal Property to be
used in and upon the Demised Premises for the Term hereinafter specified, for
use and operation therein and thereon of a skilled and/or intermediate care
nursing home, in full compliance with all the rules and regulations and minimum
standards applicable thereto, as prescribed by the State of Illinois and such
other governmental authorities having jurisdiction thereof and having no less
than one hundred twenty (120) beds and for any other purpose authorized by
Lessor in writing and for no other purpose.
ARTICLE III - TERM OF LEASE
3.1 Except as expressly provided below, the term of this Lease shall be
for a period of ten (10) years commencing on June 5, 1997 (the "Commencement
Date"), and expiring on June 30, 2007, unless sooner terminated or extended as
hereinafter provided (the "Initial Term"). The "Commencement Date" shall mean
the date the last of the following has occurred:
(i) Lessee has received a commitment from Effingham Title
Company, agent for Chicago Title Insurance Company for issuance of a
leasehold owner's title policy in the amount of One Million Six
Hundred Thousand and 00/100 Dollars ($1,600,000.00) free of all liens
and encumbrances other than (i) standard exceptions, (ii) non-
delinquent taxes and assessments, and (iii) easements, restrictions
and rights of way that will not adversely affect Lessee's operation of
the Demised Premises as a nursing home in accordance with Article II,
above.
(ii) Lessee obtains all appropriate state or other
governmental licenses and certifications required to operate the
Demised Premises, including, without limitation, as a Medicare and
Medicaid certified skilled nursing home and the approval of the Health
Facilities Planning Board; and
(iii) Lessee shall have been given possession of the Demised
Premises.
Once the Commencement Date has been established for each of the Demised
Premises, the parties shall sign a commencement date memorandum setting forth
that date.
3.2 Lessee shall have and is hereby granted the right and option to extend
the Initial Term of this Lease for an extended term (the "First Extended Term")
of five (5) Lease Years upon and subject to all the terms, provisions and
conditions hereof, except that Rent, as hereinafter defined, payable with
respect to each Lease Year of the First Extended Term shall be the amount set
forth in Section 4.1. The first Lease Year of the
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<PAGE>
First Extended Term shall commence upon the day next following the expiration of
the Initial Term.
The option granted pursuant to this Section 3.2 may be exercised only
if Lessee is not in default under this Lease at the time of exercise and at the
time of expiration of the Initial Term, and, further, only if there is not at
either time an event or occurrence which with the passage of time or giving of
notice, or both, would constitute a default hereunder, and said option shall be
exercised by Lessee giving to Lessor written notice of Lessee's election so to
do not less than twelve (12) full calendar months prior to the date of
expiration of the Initial Term.
3.3 Provided Lessee shall have exercised the option contained in Section
3.2 above, Lessee shall and Lessee is hereby granted the right and option to
extend this Lease for an additional Extended Term (the "Second Extended Term")
of five (5) Lease Years upon and subject to all the terms, provisions and
conditions hereof, except that Rent, as hereinafter defined, payable with
respect to each Lease Year of the Second Extended Term shall be the amount set
forth in Section 4.1 hereof. The first Lease Year of the Second Extended Term
shall commence on the day next following the expiration of the First Extended
Term.
The option granted pursuant to this Section 3.3 may be exercised only
if Lessee is not in default under the Lease at the time of exercise and at the
time of the expiration of the First Extended Term, and, further, only if there
is not then an event or occurrence which with the passage of time or giving of
notice, or both, would constitute a default hereunder, and said option shall be
exercised by Lessee giving to Lessor written notice of Lessee's election so to
do not less than twelve (12) full calendar months prior to the expiration of the
First Extended Term.
Notwithstanding the foregoing, Lessor acknowledges and agrees that the
Rent for the First Extended Term and the Second Extended Term may not be known
by Lessor at the time that Lessee is required to exercise its respective renewal
options. Accordingly, in the event Lessor has not advised Lessee of the First
Extended Term Rent at least thirteen (13) months prior to the date of the
expiration of the Initial Term or the Second Extended Term Rent at least
thirteen (13) months prior to the expiration of the First Extended Term, Lessee
shall have the right to exercise the renewal right provided for herein subject
to the right to rescind the same on written notice to Lessor delivered within
thirty (30) days after Lessor advises Lessee in writing as to the First Extended
Term Rent or the Second Extended Term Rent, as the case may be (the "Rent
Notice"), which Rent Notice shall be delivered by Lessor to Lessee as soon as
practicable after the debt service for the First Extended Term or the Second
Extended Term, as the case may be, has been determined but in no event less than
one hundred and eighty (180) days prior to the commencement of the First
Extended Term or the Second Extended Term, as the case may be.
The Initial Term, as it may be extended by the First Extended Term and
the Second Extended Term, is hereinafter collectively known as the "Term".
As used in this ARTICLE 3, the term default shall mean an "Event of
Default" as defined in ARTICLE 19 of this Lease.
ARTICLE IV - RENT
4.1 Throughout the Term of this Lease, Lessee shall pay to Lessor, or
as Lessor shall direct, as fixed annual rental ("Base Rent") for the Demised
Premises and the Personal Property over and above all other and additional
payments to be made by Lessee as provided in this Lease the following amounts:
(i) For the first Lease Year, an annual Rent of
$409,530.00, payable in equal monthly installments of $34,127.50;
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(ii) For the second Lease Year and each subsequent Lease
Year (of the Initial Term or any Extended Lease Term) an amount equal
to the prior Lease Year's Rent multiplied by 1.5 times the increase,
if any, in the Cost of Living Index (as hereinafter defined) in effect
on February 1st of the current Lease Year over the Cost of Living
Index in effect on February 1st of the preceding Lease Year; provided,
however, that in no event will the increase in Rent from one Lease
Year to the next be greater than two and one-half percent (2.5%) of
the sum of the prior Lease Year's Rent nor shall such Rent decrease
from the prior Lease Year; and
(iii) The Cost of Living Index is defined as the Consumer
Price Index for All Urban Consumers, U.S. City Average (1982-1984 =
100), published by the BLS, or such other renamed index. If the BLS
changes the publication frequency of the Cost of Living Index so that
a Cost of Living Index is not available to make a cost-of-living
adjustment as specified herein, the cost-of-living adjustment shall be
based on the percentage difference between the Cost of Living Index
for the closest preceding month for which a Cost of Living Index is
available and Cost of Living Index for the comparison month is
required by this Lease. If the BLS changes the base reference period
for the Cost of Living Index from 1982-84 = 100, the cost-of-living
adjustment shall be determined with the use of such conversion formula
or table as may be published by the BLS. If the BLS otherwise
substantially revises, or ceases publication of the Cost of Living
Index, then a substitute index for determining cost-of-living
adjustments, issued by the BLS or by a reliable governmental or other
nonpartisan publication, shall be reasonably selected by Lessor and
Lessee.
In the event the Commencement Date shall be other than the first day
of the month, Lessee shall pay to Lessor a pro rata portion of the Base Rent for
the month and a pro rata portion of all tax, insurance and other deposits
provided for in this Lease. All fixed annual rental payments shall be made in
equal monthly installments and shall be paid in advance on the first (1st) day
of each month (together with all tax and insurance deposits as well as
Supplemental Rent (as defined below) required in this Lease). Unless otherwise
notified in writing, all checks shall be made payable to Lessor and shall be
sent c/o Effingham Associates, L.L.C., Two North LaSalle Street, Suite 1901,
Chicago, Illinois 60602.
The Base Rent set forth in this ARTICLE 4 is based, in part, upon the
debt service of the permanent first mortgage financing on the Demised Premises
("Initial Financing"). In the event that the debt service payable on Lessor's
mortgage financing in effect on the date that the First Extended Term commences
is more or less that the debt service on the Initial Financing, the Base Rent
due during the First Extended Term shall be adjusted according to the following
formula: The annual Base Rent due during the first year of the First Extended
Term shall be increased or decreased in an amount equal to the difference
between (i) the annual debt service on the indebtedness secured by the first
mortgage encumbering the Demised Premises in effect on the first day of the
First Extended Term, and (ii) the annual debt service on the indebtedness
secured by the first mortgage encumbering the Demised Premises in effect on the
day of the Initial Financing; provided, however, that the amount of principal to
be used in making the calculations shall not exceed the original principal
amount of the loan encumbering the Demised Premises concurrent with Lessor's
acquisition of the Demised Premises. The subsequent annual increases as
provided in ARTICLE 4.1 above for the remainder of the First Extended Term shall
be calculated on the Annual Base Rent payable during the first year of the First
Extended Term as so adjusted.
In the event that the debt service payable on Lessor's mortgage
financing in effect on the date that the Second Extended Term commences is more
or less than the debt service on Lessor's mortgage financing
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<PAGE>
in effect on the date the First Extended Term commences, the Base Rent due
during the Second Extended Term shall be adjusted according to the following
formula: the annual Base Rent due during the first year of the Second Extended
Term shall be increased or decreased in an amount equal to the difference
between (i) the annual debt service on the indebtedness secured by the first
mortgage encumbering the Demised Premises in effect on the first day of the
Second Extended Term, and (ii) the annual debt service on the indebtedness
secured by the first mortgage encumbering the Demised Premises on the date that
the First Extended Term commences; provided, however, that the amount of
principal to be used in making the calculation shall not exceed the original
principal amount of the loan encumbering the Demised Premises concurrent with
Lessor's acquisition of the Demised Premises. The subsequent annual increases
as provided in ARTICLE 4.1 above for the remainder of the Second Extended Term
shall be calculated on the annual rent payable during the first year of the
Second Extended Term as so adjusted.
4.2 The parties hereto acknowledge that as of the Commencement Date, the
nursing home facility is licensed for 120 beds but only 102 are operational. If
at any time during the Term of this Lease, one or more beds become operational
in excess of 102 (but in no event more than 120 beds) (collectively, the
"Operational Beds"), in addition to all other and additional payments to be made
by Lessee as provided in this Lease, Lessee shall pay to Lessor, or to such
party as Lessor shall direct, on a monthly basis to the extent the number of
operational beds exceed 102, an amount equal to: (i) the average daily number
of Operational Beds in the Facility for such calendar month in excess of one
hundred two (102), multiplied by (ii) Three Hundred Thirty Four and 58/100
Dollars ($334.58) (the "Supplemental Rent"). The Supplemental Rent shall be
determined by Lessee delivering written notice to Lessor within ten (10) days
after the addition of Operational Bed(s) for the applicable calendar month (the
"Report"). The Report shall disclose the number of Operational Beds in the
Facility on each day of such month. For purposes of this Lease, Base Rent,
Supplemental Rent, Additional Rent (as hereinafter defined) and any and all
costs, expenses and obligations which become due during the Term of this Lease
are collectively referred to as "Rent".
4.3 This Lease is and shall be deemed and construed to be a "pure net" or
"triple-net" lease and the Rent specified herein shall be net to the Lessor in
each year during the Term of this Lease. The Lessee shall pay all costs,
expenses and obligations of every kind whatsoever relating to the Demised
Premises which may arise or become due during the Term of this Lease, except for
any principal and interest payments and other costs owed by Lessor relating to
any Mortgage (defined below) and Landlord's general overhead and administrative
expenses (collectively, "Additional Rent"). Lessee does hereby indemnify the
Lessor against any and all such costs, expenses and obligations.
ARTICLE V - LATE CHARGES
5.1 If payment of any sums required to be paid or deposited by Lessee
to Lessor under this Lease, and payments made by Lessor under any provision
hereof for which Lessor is entitled to reimbursement by Lessee, shall become
overdue for a period of ten (10) days beyond the date on which they are due and
payable as in this Lease provided, a late charge of 3% per month on the sums so
overdue shall become immediately due and payable to Lessor as liquidated damages
for Lessee's failure to make prompt payment and said late charges shall be
payable on the first day of the month next succeeding the month during which
such late charges become payable. If non-payment of any late charges shall
occur, Lessor shall have, in addition to all other rights and remedies, all the
rights and remedies provided for herein and by law in the case of non-payment of
Rent. No failure by Lessor to insist upon the strict performance by Lessee of
Lessee's obligations to pay late charges shall constitute a waiver by Lessor of
its rights to enforce the provisions of this Article in any instance thereafter
occurring.
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<PAGE>
ARTICLE VI- PAYMENT OF TAXES AND ASSESSMENTS
6.1 Lessee will pay or cause to be paid, as provided herein, as
additional Rent, before any fine, penalty, interest or cost may be added thereto
for the non-payment thereof, all taxes, assessments, licenses and permit fees,
charges for public utilities, and all governmental charges, general and special,
ordinary and extraordinary, foreseen and unforeseen, of any kind and nature
whatsoever which during the Term of this Lease may have been, or may be
assessed, levied, confirmed, imposed upon or become due and payable out of or in
respect of, or become a lien on the Demised Premises and/or Personal Property or
any part thereof (hereinafter collectively referred to as "Taxes and
Assessments").
6.2 Any Taxes and Assessments relating to a fiscal period of any
authority, a part of which is included within the Term of this Lease and a part
of which is included in a period of time before or after the Term of this Lease,
shall be adjusted pro rata between Lessor and Lessee and each party shall be
responsible for its pro rata share of any such Taxes and Assessments.
6.3 Nothing herein contained shall require Lessee to pay income taxes
assessed against Lessor, or capital levy, franchise, business license, estate,
succession or inheritance taxes of Lessor.
6.4 Lessee shall have the right to contest the amount or validity, in
whole or in part, of any Taxes and Assessments by appropriate proceedings
diligently conducted in good faith, but only after payment of such Taxes and
Assessments, unless such payment would operate as a bar to such contest or
interfere materially with the prosecution thereof, in which event, Lessee may
postpone or defer such payment only if:
(1) Neither the Demised Premises nor any part thereof would by
reason of such postponement or deferment be in danger of being
forfeited or lost; and
(2) Lessee shall have deposited with Lessor, to be held in
trust, cash or other security satisfactory to Lessor in an amount
equal to not less than the amount of such Taxes and Assessments which
at such time shall be actually due and payable, and such additional
amounts reasonably required by Lessor and any Mortgagee (as
hereinbelow defined) of Lessor from time to time, together with all
interest and penalties in connection therewith and all charges that
may or might be assessed against or become a charge on the Demised
Premises or any part thereof in such proceedings, or, if required by
the taxing authority, an amount deposited in trust with the taxing
authority during the pendency of any contest in lieu of any additional
charge against the Demised Premises until resolution of the contest.
Unless Lessor agrees otherwise, the cash so deposited with Lessor
shall not bear interest and the cash or securities so deposited shall be held by
Lessor until the Demised Premises or any part thereof shall have been released
and discharged and shall thereupon be returned to the Lessee, less the amount of
any loss, cost, damage and reasonable expense that Lessor or any Mortgagee has
sustained in connection with the Taxes and Assessments so contested.
6.5 Upon the termination of any such proceedings, Lessee shall pay
the amount of such Taxes and Assessments or part thereof as finally determined
in such proceedings, the payment of which may have been deferred during the
prosecution of such proceedings, together with any costs, fees, interest,
penalties or other liabilities in connection therewith, and such payment, at
Lessee's request, shall be made by Lessor out of the amount deposited with
respect to such Taxes and Assessments as aforesaid. In the event such amount is
insufficient, then the balance due shall be paid by Lessee.
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<PAGE>
6.6 Lessor shall not be required to join in any proceedings referred
to in this Article, unless the provisions of any law, rule or regulation at the
time in effect shall require that such proceedings be brought by and/or in the
name of Lessor, in which event Lessor shall join in such proceedings or permit
the same to be brought in its name. Lessor shall not ultimately be subjected to
any liability for the payment of any costs or expenses in connection with any
such proceedings, and Lessee will indemnify and save harmless Lessor from any
such costs and expenses. Lessee shall be entitled to any refund of any Taxes
and Assessments and penalties or interest thereon received by Lessor but
previously reimbursed in full by Lessee.
6.7 If any income, profits or revenue tax shall be levied, assessed
or imposed upon the income, profits or revenue arising from rents payable
hereunder, whether partially or totally in lieu of or as a substitute for real
estate or personal property taxes imposed upon the Demised Premises or Personal
Property or otherwise, then Lessee shall be responsible for the payment of such
tax.
ARTICLE VII - TAX DEPOSITS
7.1 Lessee shall be required to make deposits for annual Taxes and
Assessments and, will make monthly deposits with Lessor, of an amount equal to
one twelfth (1/12) of the annual Taxes and Assessments or such greater amount as
may be required by any Mortgagee. Said deposits shall be due and payable on the
first day of each month as additional Rent, shall not bear interest and shall be
held by Lessor and/or a mortgagee of the Lessor to pay the real estate taxes as
they become due and payable. If the total of the monthly payments as made under
this Article shall be insufficient to pay the Taxes and Assessments when due,
then Lessee shall on demand pay Lessor the amount necessary to make up the
deficiency, and if appropriate, Lessee shall receive a credit against the next
monthly tax escrow payment coming due in an amount equal to said deficiency
payment.
ARTICLE VIII - OCCUPANCY
8.1 During the Term of this Lease, the Demised Premises shall be used
and occupied by Lessee for and as a Medicare and Medicaid certified skilled care
and/or intermediate care nursing home and for no other purpose. Lessee shall at
all times maintain in good standing and full force all the licenses,
certifications and provider agreements issued by the State of Illinois and any
other applicable state or federal governmental agencies, permitting the
operation on the Demised Premises of a Medicare and Medicaid certified skilled
and/or intermediate care nursing home facility with no less than one hundred
twenty (120) licensed, and Medicaid certified beds.
8.2 Lessee will not suffer any act to be done or any condition to
exist on the Demised Premises which may be dangerous or which may, in law,
constitute a public or private nuisance or which may void or make voidable any
insurance then in force on the Demised Premises.
8.3 Except as otherwise specifically provided in this Lease, upon
termination of this Lease for any reason, Lessee will return to Lessor the
Demised Premises qualified and sufficient for licensing and certification by all
governmental agencies having jurisdiction over the Demised Premises as a
Medicare and Medicaid certified skilled and/or intermediate care nursing home
having no less than one hundred twenty (120) licensed, and Medicaid certified
beds with licenses, certifications, and provider agreements in full force and
good standing. All the Demised Premises, with the improvements located thereon,
and all the Personal Property shall be surrendered in good order, condition and
repair, ordinary wear and tear excepted.
ARTICLE IX - INSURANCE
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9.1 Lessee shall, at its sole cost and expense, during the Term of
this Lease, maintain property insurance provided by a Causes of Loss-Special
Form or similar form. Such insurance shall include an endorsement for increased
cost of construction. Such insurance shall be obtained from a responsible
company or companies approved by Lessor, not to be unreasonably withheld. Such
insurance shall, at all times, be maintained in an amount equal to the full
replacement cost of the Demised Premises and the Personal Property or in such
lesser amount as may be required by Lessor and any Mortgagee of the Demised
Premises but at all times, in an amount sufficient to prevent Lessor and Lessee
from becoming co-insurers under applicable provisions of the insurance policies.
As used herein, the term "full replacement cost" shall mean coverage for the
actual replacement cost of the Demised Premises and the Personal Property
requiring replacement from time to time which, if not agreed upon by Lessor and
Lessee, shall be determined by an appraiser, engineer, architect or contractor
reasonably selected by Lessor. Upon request by Lessee, Lessor will provide
Lessee with information in its possession which is reasonably necessary to
establish the value of the Demised Premises. Such insurance shall at all times
be payable to Lessor and Lessee as their interests may appear, and shall contain
a loss-payable clause to the holder of any Mortgage to which this Lease shall be
subject and subordinate (in accordance with ARTICLE 26 herein) , as said
Mortgagee's interest may appear. All such policies of insurance shall provide
that:
(a) They are carried in favor of the Lessor, Lessee and any
Mortgagee, as their respective interests may appear, and any loss shall be
payable as therein provided, notwithstanding any act or negligence of
Lessor or Lessee, which might otherwise result in forfeiture of insurance;
and
(b) A standard Mortgagee clause in favor of any Mortgagee, and shall
contain, if obtainable, a waiver of the insurer's right of subrogation
against funds paid under the standard Mortgagee endorsement which are to be
used to pay the cost of any repairing, rebuilding, restoring or replacing.
9.2 Lessee shall also, at Lessee's sole cost and expense, cause to be
issued and shall maintain during the Term of this Lease:
(a) Commercial general liability insurance, including the Lessor and
any Mortgagee as additional insureds, insuring against claims for bodily
injury or property damage occurring upon, in or about the Demised Premises.
Such insurance to have limits of not less than $1,000,000 each occurrence
and $3,000,000 general aggregate and an excess or umbrella liability policy
of not less than $5,000,000 each occurrence and $5,000,000 aggregate; and
(b) Hospital Professional Liability insurance in the amount of
$1,000,000 each occurrence and $3,000,000 aggregate.
Lessor may, from time to time, or any Mortgagee may reasonably require Lessee to
change the amount or type of insurance, or to add or substitute additional
coverages, required to be maintained by Lessee hereunder. Notwithstanding the
foregoing, Lessee shall not be required to add coverage for damage to the
Demised Premises resulting from earthquake or flood as covered losses unless the
Demised Premises is classified as an earthquake or flood prone area by an
authority having jurisdiction over the Demised Premises and such authority
recommends such insurance.
9.3 All policies of insurance shall provide that they shall not be
canceled, terminated, reduced or materially modified without at least twenty
(20) days prior written notice to Lessor and any Mortgagee.
9.4 An original certificate of insurance for all insurance policies
required by this Article shall be delivered to Lessor at least five (5) days
prior to the Commencement Date at any time and from time to time
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within ten (10) days after Lessor's request therefore, Lessee shall deliver to
Lessor copies of all insurance policies then being carried by Lessee pursuant to
this ARTICLE 9.
9.5 Lessee shall at all times keep in effect business interruption
insurance with a loss of rents endorsement naming Lessor as an insured in an
amount at least sufficient to cover:
(a) The aggregate of the cost of all Taxes and Assessments due during
the period of the business interruption at the Facility (the "Business
Interruption Period");
(b) The cost of all insurance premiums for insurance required to be
carried by Lessee, with respect to the Demised Premises, for the Business
Interruption Period; and
(c) The aggregate of the amount of the fixed monthly rental for the
Business Interruption Period.
All proceeds of any business interruption insurance shall be applied,
first, to the payment of any and all fixed rental payments for the Business
Interruption Period; second, to the payment of any Taxes and Assessments and
insurance deposits required to be deposited for the Business Interruption
Period; and, thereafter, after all necessary repairing, rebuilding, restoring or
replacing has been completed as required by the pertinent Articles of this Lease
and the pertinent sections of any mortgage, any remaining balance of such
proceeds shall be paid over to the Lessee.
In lieu of the foregoing but subject to the terms and conditions of
this ARTICLE 9, Lessee may, at its option, obtain and maintain a blanket
insurance policy in an amount sufficient to provide all or part of the coverage
described in this ARTICLE 9.
ARTICLE X - LESSOR'S RIGHT TO PERFORM
10.1 Should Lessee fail to perform any of its covenants herein agreed
to be performed, subject to applicable cure periods, if any, set forth in
Section 19.1 herein with respect to any such failure to perform, Lessor may
elect, but shall not be required, to make such payment or perform such
covenants, and all sums so expended by Lessor thereon shall immediately be
payable by Lessee to Lessor, with interest thereon at a rate which is the lesser
of fifteen percent (15%) per annum or the maximum rate permitted by law from
date thereof until paid, and in addition, Lessee shall reimburse Lessor for
Lessor's reasonable expenses in enforcing or performing such covenants,
including reasonable attorney's fees. Any such costs or expenses incurred or
payments made by the Lessor shall be deemed to be Additional Rent payable by
Lessee and collectible as such by Lessor.
10.2 Performance of and/or payment to discharge said Lessee's
obligations shall be optional with Lessor and such performance and payment shall
in no way constitute a waiver of, or a limitation upon, Lessor's other rights
hereunder.
10.3 Lessee hereby acknowledges and agrees that any Mortgagee shall have
the right but not the obligation to perform any covenants and pay any amounts
which Lessee has failed to so perform or pay as required under the terms of this
Lease but only to the extent such Mortgagee is entitled under the terms of its
Mortgage and the provisions of any subordination, nondisturbance and attornment
agreement which may be in effect for such Mortgage.
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ARTICLE XI - REPAIRS AND MAINTENANCE
11.1 Throughout the Term of this Lease, Lessee, at its sole cost and
expense, will keep and maintain, or cause to be kept and maintained, the Demised
Premises (including the grounds, sidewalks and curbs abutting the same) and the
Personal Property in good order and condition without waste and in suitable
state of repair at least comparable to that which existed immediately prior to
the Commencement Date (ordinary wear and tear excepted, subject to Lessee's
obligation to repair and replace the same in accordance with the terms of this
Lease), and will make or cause to be made, as and when the same shall become
necessary, all structural and nonstructural, exterior and interior, replacing,
repairing and restoring necessary to that end. All replacing, repairing and
restoring required of Lessee shall be (in the reasonable opinion of Lessor) of
quality at least equal to the original work and shall be in compliance with all
standards and requirements of law, licenses and municipal ordinances necessary
to operate the Demised Premises as a Medicare and Medicaid certified skilled
and/or intermediate care nursing home having no less than one hundred twenty
(120) licensed, and Medicaid certified beds.
11.2 Any items of Personal Property that are uneconomical to repair shall
be replaced by new items of like kind and all replacement items shall become
part of the Personal Property. No items of Personal Property shall be removed
from the Demised Premises except in connection with repair or replacement of
such items. Lessee may place additional property on the Demised Premises (not
required for the replacement of the Personal Property) and such additional
property shall be and remain the property of Lessee. Lessee shall remove such
additional property upon termination or expiration of this Lease provided that
Lessee shall make such necessary repairs or replacements as may be required in
order to return the Demised Premises to the condition which existed prior to the
removal of the additional property.
11.3 Provided there is not an Event of Default by Lessee under this
Lease, Lessee shall have the right, at any time and from time to time, to remove
and dispose of any Personal Property which may have become obsolete or unfit for
use, or which is no longer useful in the operation of the Demised Premises,
provided Lessee promptly replaces any such Personal Property so removed or
disposed of with other personal property free of any security interest, lien or
encumbrance. Said personal property shall be of the same character and shall be
at least equal in usefulness and quality as any such Personal Property so
removed or disposed of, and such replacement property shall automatically become
the property of and shall belong to the Lessor, and Lessee shall execute such
bills of sale or other documents reasonably requested by Lessor to vest the
ownership of such personal property in Lessor. Notwithstanding the foregoing,
Lessee shall have the right to place leased Personal Property on the Demised
Premises provided that the payments due under such leases do not exceed Four
Thousand and 00/100 Dollars ($4,000.00) per year. In the event Lessee desires
to place leased personal property on the Demised Premises having annual payments
in excess of the amount provided for herein, Lessee shall advise Lessor in
writing and Lessor shall use its reasonable best efforts to seek the approval of
the Mortgagee or an amendment of the Mortgage with respect thereto.
ARTICLE XIA - DAMAGE AND DESTRUCTION
11A.1 In the event that any part of the improvements located on the
Demised Premises or the Personal Property shall be damaged or destroyed by fire
or other casualty (any such event being called a "Casualty"), Lessee shall
promptly replace, repair and restore the same as nearly as possible to its
condition immediately prior to such Casualty, in accordance with all of the
terms, covenants and conditions and other requirements of this Lease and any
applicable Mortgage and in accordance with any subordination, nondisturbance and
attornment agreement which may be in effect for such Mortgage; provided,
however, that in the event of a Casualty occurring during the last six (6)
months of the Term or a Casualty resulting from an earthquake, flood, nuclear
accident or war which is not covered by insurance maintained by Lessee and which
renders the Demised Premises unsuitable for use as a nursing home, in the
reasonable opinion of Lessor and Lessee, then Lessee shall have the right to
terminate this Lease upon forty-five (45) days written notice to Lessor.
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If applicable, the Demised Premises and the Personal Property shall be so
replaced, repaired and restored as to be of at least equal value and
substantially the same character as prior to such Casualty. If the estimated
cost of any such restoring, replacing or repairing is Fifty Thousand Dollars and
no/100 ($50,000.00) or more, the plans and specifications for same shall be
first submitted to and approved in writing by Lessor, which approval shall not
be unreasonably withheld, and, if reasonably required by Lessor, Lessee shall
immediately select an independent architect, approved by Lessor who shall be in
charge of such repairing, restoring or replacing. Lessee covenants that it will
give to Lessor prompt written notice of any Casualty affecting the Demised
Premises or the personal property or any portion thereof.
11A.2 Within thirty (30) days after a casualty or within thirty (30)
days after approval of the final plans and specifications (including by
Mortgagee and any governmental or quasi-governmental agency or entity exercising
jurisdiction), issuance of a building permit and any other necessary permits and
licenses for commencement of construction, whichever is later, Lessee shall
commence to restore the Demised Premises and Lessee shall complete the same
within 180 days thereafter, provided, however, that in the case of damage or
destruction which cannot with due diligence be repaired within said 180 day
period, Lessee shall have an additional period of time, not to exceed 180
additional days, to complete the reconstruction, provided Lessee is proceeding
promptly and with due diligence to complete the restoration. Lessee may utilize
all insurance proceeds available for any such repair or restoration, subject to
the terms of Section 11A.3 hereof and any required approval of any Mortgagee.
Lessee's obligation to make Rent payments and to pay all other charges required
by this Lease shall not be abated during the period of the repair or
restoration.
11A.3 No sums shall be disbursed by Lessor toward such repairing,
rebuilding, restoring or replacing unless it shall be first made to appear to
the reasonable satisfaction of Lessor that either (i) the amount received from
such insurance proceeds is sufficient to complete such work or (ii) if there is
an amount required in excess of the amount received from such insurance
proceeds, either said excess amount has been expended by Lessee or that Lessee
has deposited such excess funds with Lessor or has satisfied Lessor that it has
such funds available to it so that, in either case, the total amount available
will be sufficient to complete such repairing, rebuilding, restoring or
replacing in accordance with the provisions of any Mortgage and any plans and
specifications submitted in connection therewith, free from any liens or
encumbrances of any kind whatsoever and the funds held by Lessor shall be
disbursed periodically during construction, but not more than once every thirty
(30) days after the presentment of architect's or general contractor's
certificates, waivers of lien, contractor's sworn statements, and other evidence
of cost and payments as may be reasonably required by Lessor or any Mortgagee.
ARTICLE XII - ALTERATIONS AND DEMOLITION
12.1 Lessee will not remove or demolish any improvement or building
which is part of the Demised Premises or any portion thereof or allow it to be
removed or demolished, without the prior written consent of the Lessor, which
consent shall not be unreasonably withheld. Except as required by law, Lessee
further agrees that it will not make, authorize or permit to be made any changes
or alterations in or to the Demised Premises without first obtaining Lessor's
written consent thereto, which consent shall not be unreasonably withheld. All
alterations, improvements and additions to the Demised Premises shall be in
quality and class at least equal to the original work and shall become the
property of the Lessor and shall meet all building and fire codes, and all other
applicable codes, rules, regulations, laws and ordinances. Nothing herein shall
be deemed or construed to require Lessee to obtain Lessor's consent to
non-structural changes or alterations such as painting, the replacement of
wallcoverings or the replacement of floor coverings.
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ARTICLE XIII - COMPLIANCE WITH LAWS
AND ORDINANCES/ENVIRONMENTAL COMPLIANCE
13.1 Throughout the Term of this Lease, Lessee, at its sole cost and
expense, will obey, observe and promptly comply with all present and future
laws, ordinances, orders, rules, regulations and requirements of any federal,
state and municipal governmental agency or authority having jurisdiction over
the Demised Premises and the operation thereof as a Medicare and Medicaid
certified skilled and/or intermediate care nursing home having no less than one
hundred twenty (120) licensed, and Medicaid certified beds, which may be
applicable to the Personal Property and the Demised Premises and including, but
not limited to, the sidewalks, alleyways, passageways, vacant land, parking
spaces, curb cuts, curbs adjoining the Demised Premises, which are under
Lessee's control, whether or not such law, ordinance, order, rules, regulation
or requirement shall necessitate structural changes or improvements.
13.2 Lessee shall likewise observe and comply with the requirements of all
policies of public liability and fire insurance and all other policies of
insurance at any time in force with respect to the Demised Premises.
13.3 Lessee shall promptly apply for and procure and keep in good
standing and in full force and effect all necessary licenses, permits and
certifications required by any governmental authority for the purpose of
maintaining and operating on the Demised Premises a Medicare and Medicaid
certified skilled and/or intermediate care nursing home having no less than one
hundred twenty (120) licensed, and Medicaid certified beds, and the Demised
Premises shall be qualified to participate in the Medicare and Medicaid
reimbursement programs.
13.4 Upon request, Lessee will deliver or mail to Lessor wherever Rent
is then paid, in form required for notices, copies of all exit interviews,
inspection reports and surveys, administrative proceedings and/or court actions
from all state, federal and local governmental bodies regarding the Demised
Premises or the nursing home operated thereon. Lessee shall notify Lessor
within twenty-four (24) hours after receipt thereof of any notice from any
governmental agency terminating or suspending or threatening termination or
suspension of any license, permit, provider agreement or certification relating
to the Demised Premises or the nursing home operated thereon.
13.5 Lessee shall have the right upon written notice thereof to the
Lessor, to contest by appropriate legal proceedings, diligently conducted in
good faith, the validity or application of any law, regulation or rule mentioned
herein, and to delay compliance therewith pending the prosecution of such
proceedings; provided, however, that no civil or criminal liability would
thereby be incurred by Lessor and no lien or charge would thereby be imposed
upon or satisfied out of the Demised Premises and further provided that the
effectiveness and good standing of any license, certificate or permit affecting
the Demised Premises or the nursing home operated thereon would continue in full
force and effect during the period of such contest.
13.6 Lessee shall not generate, dispose of, release, use, handle,
possess or store any hazardous substances upon the Demised Premises except in
accordance with applicable laws, rules and regulations. Lessee shall at its
sole cost and expense promptly remove or clean up any hazardous substances
introduced onto the Demised Premises by Lessee or with its permission or at its
sufferance. Such removal or cleanup shall be in compliance with all applicable
laws and regulations. Lessee hereby agrees to indemnify and hold Lessor
harmless and agrees to defend Lessor from all losses, damages, claims,
liabilities and fines, including costs and reasonable attorneys' fees, of any
nature whatsoever in connection with the actual or alleged presence upon the
Demised Premises of any hazardous substances introduced by Lessee or with its
permission or at its sufferance.
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ARTICLE XIV - DISCHARGE OF LIENS
14.1 Lessee will not create or permit to be created or to remain, and
Lessee will discharge, any lien, encumbrance or charge levied on account of any
mechanic's, laborer's or materialman's lien or, except as provided for in
Section 11.3 any conditional sale, security agreement or chattel mortgage, or
otherwise, which might be or become a lien, encumbrance or charge upon the
Demised Premises or any part thereof or the income therefrom or the Personal
Property, for work or materials or personal property furnished or supplied to,
or claimed to have been supplied to or at the request of Lessee.
14.2 If any mechanic's, laborer's or materialman's lien caused or
charged to Lessee shall at any time be filed against the Demised Premises or
Personal Property, Lessee shall have the right to contest such lien or charge,
provided, Lessee within thirty (30) days after notice of the filing thereof,
will cause the same to be discharged of record or in lieu thereof to secure
Lessor against said lien by either (i) deposit with Lessor of such security as
may be reasonably demanded by Lessor to protect against such lien, or (ii) post
a release bond in form and amount as required by applicable law and as otherwise
satisfactory to Lessor. If Lessee shall fail to cause such lien to be
discharged within the period aforesaid, or to otherwise secure Lessor as
aforesaid, then in addition to any other right or remedy, Lessor may, upon ten
(10) days notice, but shall not be obligated to, discharge the same either by
paying the amount claimed to be due or by processing the discharge of such lien
by deposit or by bonding proceedings. Any amount so paid by Lessor and all
costs and expenses incurred by Lessor in connection therewith, together with
interest thereon at a rate which is the lesser of fifteen percent (15%) per
annum or the maximum rate permitted by law, shall constitute Additional Rent
payable by Lessee under this Lease and shall be paid by Lessee to Lessor on
demand. Except as herein provided, nothing contained herein shall in any way
empower Lessee to do or suffer any act which can, may or shall cloud or encumber
Lessor's or any Mortgagee's interest in the Demised Premises.
ARTICLE XV - INSPECTION OF PREMISES BY LESSOR
15.1 At any time, during reasonable business hours and upon reasonable
notice, Lessor and/or its authorized representatives shall have the right to
enter and inspect the Demised Premises and Personal Property.
15.2 Lessor agrees that the person or persons entering and inspecting
the Demised Premises and Personal Property will cause as little inconvenience to
the Lessee and to the residents of the Facility as may reasonably be possible
under the circumstances.
15.3 Lessee hereby acknowledges and agrees that any Mortgagee shall
have the right but not the obligation to enter and inspect the Demised
Premises to the extent such Mortgagee is entitled to do so under the terms of
its Mortgage and to the extent consistent with any subordination,
nondisturbance and attornment agreement then in effect for such Mortgage.
ARTICLE XVI - CONDEMNATION
16.1 In case all or substantially all of the Demised Premises leased
hereunder shall be taken or sold under the threat of such taking for any public
use by act of any public authorities, then this Lease shall terminate as of the
date possession is taken by the condemnor. If all or substantially all of the
Demised Premises shall be taken, the net proceeds of any condemnation award,
settlement or compromise for the Demised Premises taken shall belong to Lessor;
provided, however, Lessee shall have the right to pursue a separate award for
the value of Lessee's interest in the Demised Premises as long as such separate
award does not diminish the award, settlement or compromise paid to Lessor; and
provided, further, that Lessee shall be solely entitled to any amount awarded
for the value of Lessee's property located on the Demised Premises in
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accordance with Section 11.1 and any amount for relocation and loss of business
as long as such separate award does not diminish the award. For the purposes of
this paragraph "substantially all of the Demised Premises leased hereunder"
shall be deemed to have been taken if upon the taking of less than the whole of
the Demised Premises that portion of the Demised Premises not so taken shall not
by itself be adequate for the conduct therein of Lessee's business, in the
reasonable judgment of Lessor and Lessee, subject further to the rights of
Lessor's Mortgagee.
In the event of a partial condemnation the result of which shall be a
reduction in the number of licensed beds on the Demised Premises to eighty-five
(85) or less, Lessee shall have the right to terminate this Lease by written
notice to Lessor within thirty (30) days following the issuance of the
condemnation order or conveyance of the property, whichever is earlier. If
Lessee does not elect to terminate this Lease, Lessor shall hold in trust that
portion, if any, of such award, settlement or compromise which shall be
allocable to consequential damage to buildings and improvements not taken, and
Lessor shall pay out such portion to Lessee to reimburse Lessee for the cost of
restoring the Demised Premises as a complete structural unit, as such
restoration work progresses in accordance with the procedure for making
insurance proceeds available for restoration, repair or rebuilding as set forth
in ARTICLE 11A hereof. In the event of a partial condemnation which does not
result in a termination of this Lease, the annual Rent rate payable under
paragraph 4.1 hereof shall be reduced to such amount as Lessor and Lessee agree
is fair and equitable taking into consideration the number of operational beds
remaining after such taking as compared to the number of operational beds on the
Commencement Date.
ARTICLE XVII - RENT ABSOLUTE
17.1 The Personal Property and the Demised Premises are let and leased
subject to the rights, if any of patients currently residing in the Demised
Premises and the state of the title thereof as of the date the Lessor acquires
title from its seller, to any state of facts which an accurate survey or
physical inspection thereof might show, and to all zoning regulations,
restrictions, rules and ordinances, building restrictions and other laws and
regulations now in effect or hereafter adopted by any governmental authority
having jurisdiction thereover. Lessee has examined the Personal Property and
the Demised Premises and has found the same satisfactory. Lessee acknowledges
that the Personal Property and the Demised Premises are the property of Lessor
and that Lessee has the leasehold rights as set forth in the terms and
conditions of this Lease.
As a material inducement to Lessor in the making of and entry into
this Lease, Lessee hereby expressly agrees as follows:
(a) It is the responsibility of the Lessee to be fully acquainted
with the nature, in all respects, of the Demised Premises, including (but
not by way of limitation); the soil and geology thereof, the waters thereof
and thereunder; the drainage thereof; the manner of construction and the
condition and state of repair and lack of repair of all improvements of
every nature; the nature, provisions and effect of all health, fire,
zoning, building, subdivision and all other use and occupancy laws,
ordinances, and regulations applicable thereto; and the nature and extent
of the rights of others with respect thereto, whether by way of reversion,
easement, right of way, prescription, adverse possession, profit,
servitude, lease, tenancy, lien, encumbrance, license, contract,
reservation, condition, right of re-entry, possibility of reverter,
sufferance or otherwise. Lessor makes no representation as to, and has no
duty to be informed with respect to, any of the matters set forth in the
preceding sentence. Lessee hereby accepts the Demised Premises as suitable
and adequate in all respects for the conduct of the business and the uses
of the Demised Premises contemplated under the provisions of the Lease.
Notwithstanding the foregoing, Lessor represents that it has no actual
knowledge of anything related to the foregoing which would cause the
Demised Premises to be materially inadequate for its permitted use
hereunder.
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(b) Lessee expressly covenants and agrees that it hereby takes this
Lease and the leasehold estate hereby established upon and subject to
Lessor's title as it was acquired from its seller, including all rights,
rights of way, easements, profits, servitudes, reservations, restrictions,
conditions, exceptions, reversions, possibilities of reverter, liens,
encumbrances, occupancies, tenancies, licenses, clouds, claims and defects,
known and unknown and whether of record or not. In the event of any defect
in Lessor's title to the Demised Premises by which a third party's
paramount fee ownership of the Demised Premises requires that Lessee vacate
the Demised Premises, then in such event this Lease shall be terminated.
(c) Lessee hereby expressly waives any and all rights which it might
otherwise have against Lessor by reason of any of the foregoing, including
(but not limited to) the requirements of any inspection or examination by
Lessee of the Demised Premises.
Except as otherwise expressly provided in this Lease, this Lease shall
continue in full force and effect, and the obligations of Lessee hereunder
shall not be released, discharged or otherwise affected, by reason of: (i) any
damage to or destruction of the Demised Premises or any part thereof or the
taking of the Demised Premises or any part thereof by condemnation, requisition
or otherwise for any reason; (ii) any restriction or prevention of or
interference with any use of the Demised Premises or any part thereof including
any restriction or interference with or circumstance which prevents the use of
the Demised Premises as contemplated by Paragraph 8.1; (iii) any frustration of
Lessee's purposes hereunder, for any claim which Lessee has or might have
against Lessor; or (iv) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing. However, nothing shall preclude Lessee from
bringing a separate action and Lessee is not waiving other rights and remedies
not waived herein.
ARTICLE XVIII - ASSIGNMENT AND SUBLETTING
18.1 During the Term of the Lease, Lessee shall not assign this Lease
or in any manner whatsoever sublet, assign or transfer all or any part of the
Demised Premises or in any manner whatsoever transfer or assign an interest in
the Demised Premises or any interest in the Lessee or sell or assign a
controlling number of the outstanding shares in Lessee (other than to Andrew L.
Turner or an entity controlled by Andrew L. Turner or a wholly owned subsidiary
of Lessee or of Lessee's parent corporation Sun Healthcare Group, Inc.) without
the prior written consent of the Lessor, which consent shall not be unreasonably
withheld. Any violation or breach or attempted violation or breach of the
provisions of this Article by Lessee, or any acts inconsistent herewith shall
vest no right, title or interest herein or hereunder or in the Demised Premises,
in any such transferee or assignee; and Lessor may, at its exclusive option,
terminate this Lease and invoke the provisions of this Lease relating to
default. Lessor acknowledges and agrees that the sale of equity or debt
securities in Lessee or Lessee's parent corporation shall in no event constitute
an assignment or transfer of this Lease or of an interest hereunder provided
Lessee remains a wholly owed subsidiary of Sun Healthcare Group, Inc.
ARTICLE XIX - ACTS OF DEFAULT
19.1 The following acts or events shall be deemed to be an Event of
Default (herein an "Event of Default") on the part of the Lessee:
(1) The failure of Lessee to pay when due any Rent, or any part
thereof, or any other sum or sums of money due or payable to the
Lessor under the provisions of this Lease, when such failure shall
continue for a period of ten (10) days following written notice to
Lessee;
(2) The failure of Lessee to perform, or the violation by Lessee
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of, any of the other covenants, terms, conditions or provisions of
this Lease (other than as set forth in Sections 19.1(3) and 19.1(4),
if such failure or violation shall not be cured within thirty (30)
days after notice thereof by Lessor to Lessee;
(3) The removal by any local, state or federal agency having
jurisdiction over the operation of the nursing home located on the
Demised Premises of fifty percent (50%) or more of the patients
located in the nursing home;
(4) The failure of Lessee to comply, or the violation by Lessee
of, any of the terms, conditions or provisions of any Mortgage
relating to the Demised Premises of which Lessee has been made aware
and with which Lessee has agreed to comply if such failure or
violation shall not be cured within twenty (20) days (or such lesser
period as may be provided in the Mortgage) after notice thereof by
Lessor to Lessee;
(5) The voluntary transfer by Lessee of ten percent (10%) or
more of the patients located in the Demised Premises if such transfer
is not for reasons relating to the health and well being of the
patients that were transferred or such other reasons as may be
permitted by state or federal law, such as nonpayment of stay or the
welfare of other residents of the Facility;
(6) The failure of Lessee to replace, within thirty (30) days
after notice by Lessor to Lessee, a substantial portion of the
Personal Property previously removed by Lessee;
(7) The making by Lessee of an assignment for the benefit of
creditors;
(8) The levying of a writ of execution or attachment on or
against the property of Lessee which is not discharged or stayed by
action of Lessee contesting same, within ninety (90) days after such
levy or attachment (provided if the stay is vacated or ended, this
paragraph shall again apply);
(9) If proceedings are instituted in a court of competent
jurisdiction for the reorganization, liquidation or involuntary
dissolution of the Lessee or for its adjudication as a bankrupt or
insolvent, or for the appointment of a receiver of the property of
Lessee, and said proceedings are not dismissed and any receiver,
trustee or liquidator appointed therein is not discharged within
ninety (90) days after the institution of said proceedings;
(10) The sale of the interest of Lessee in the Demised Premises
or any portion thereof under execution or other legal process;
(11) The failure of Lessee to give notice to Lessor not less than
ten (10) days after receipt by Lessee of any notice, claim or demand
from any governmental authority, or any officer acting on behalf
thereof, of any violation of any law, order, ordinance, rule or
regulation with respect to the operation of the nursing home located
on the Demised Premises;
(12) The failure on the part of Lessee during the Term of this
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Lease to cure or abate any violation claimed by any governmental
authority, or any officer acting on behalf thereof, of any law, order,
ordinance, rule or regulation pertaining to the operation of the
nursing home located on Demised Premises, and within ten (10) days
prior to the expiration of any time permitted by such authority for
such cure or abatement;
(13) institution of any proceedings against Lessee by any
governmental authority either (i) to revoke any license granted to
Lessee for the operation of a skilled and/or intermediate care nursing
home within the Demised Premises, having no less than one hundred
twenty (120) licensed beds, or (ii) decertify the nursing home
operated in the Demised Premises from participation in the Medicare or
Medicaid reimbursement program, which is not either appealed by Lessee
and stayed while Lessee's appeal thereof is pending, or revoked or
rescinded by the applicable governmental authority;
(14) The abandonment of the Demised Premises by Lessee, other
than as a result of the damage or destruction or taking thereof; or
(15) The failure of the Guarantor to perform, or the violation by
the Guarantor of, any of the covenants set forth in the Lease
Guaranty.
19.2 Except for default by Lessee in the payment of Rent or any
additional payment required hereunder, in any case where Lessor shall have given
to Lessee a written notice specifying a situation which, as hereinbefore
provided, must be remedied by Lessee within a certain time period, and, if for
causes beyond Lessee's control, it would not reasonably be possible for Lessee
to remedy such situation within such period, then, provided Lessee immediately
upon receipt of such notice shall advise Lessor in writing of Lessee's intention
to institute, and shall, as soon as reasonably possible thereafter, duly
institute, and thereafter diligently prosecute to completion, all steps
necessary to remedy such situation and shall remedy the same, and provided that
any license or certification necessary for the operation of the Demised
Premises, as a nursing facility is not affected thereby, this Lease and the Term
and estate hereby granted shall not expire and terminate at the expiration of
such time period as otherwise hereinbefore provided, except that in no event
shall Lessee have more than ninety (90) additional days to remedy any such
situation in the manner set forth herein, or such longer period of time granted
by any governmental agency having jurisdiction over the Facility.
ARTICLE XX - (INTENTIONALLY OMITTED)
ARTICLE XXI - LESSOR'S REMEDIES UPON DEFAULT
21.1 In the event of any Event of Default on the part of Lessee,
Lessor may, if it so elects, upon written notice to Lessee of such election,
forthwith terminate this Lease and Lessee's right to possession of the Demised
Premises, or, at the option of the Lessor, terminate Lessee's right to
possession of the Demised Premises without terminating this Lease. Upon any
such termination of this Lease, or upon any such termination of Lessee's right
to possession without termination of this Lease, Lessee shall vacate the Demised
Premises immediately, and shall quietly and peaceably deliver possession thereof
to the Lessor, and Lessee hereby grants to the Lessor full and free license to
enter into and upon the Demised Premises in such event with or without process
of law and to repossess the Demised Premises and Personal Property as the
Lessor's former estate. In the event of any such termination of this Lease, the
Lessor shall again have possession and enjoyment of the Demised Premises and
Personal Property to the extent as if this Lease had not been made, and
thereupon this Lease and everything herein contained on the part of Lessee to be
done and performed shall
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cease and terminate, all, however, without prejudice to and without
relinquishing the rights of the Lessor to Rent (which, upon such termination of
this Lease and entry of Lessor upon the Demised Premises, shall, in any event,
be the right to receive Rent due up to the time of such entry) or any other
right given to the Lessor hereunder or by operation of law.
21.2 In the event of any Event of Default and Lessor's election either
to terminate this Lease or to terminate Lessee's right to possession of the
Demised Premises, then all licenses, certifications, permits and authorizations
issued by any governmental agency, body or authority in connection with or
relating to the Demised Premises and the nursing home operated thereon shall be
deemed to be assigned to Lessor, to the extent permitted by law. Lessor shall
also have the right to continue to utilize the telephone number and name (other
than the name "Sunrise Healthcare" or similar name) used by Lessee in connection
with the operation of the nursing home located on the Demised Premises. This
Lease shall be deemed and construed as an assignment for purposes of vesting in
Lessor, all right, title and interest in and to: (i) all licenses,
certifications, permits and authorizations obtained in connection with the
operation of the nursing home located on the Demised Premises; and (ii) the name
and telephone number used in connection with the operation of the nursing home
located on the Demised Premises (other than the name "Sunrise Healthcare" or
similar name). Lessee hereby agrees to take such other action and execute such
other documents as may be necessary in order to vest in Lessor all right, title
and interest to the items specified herein, to the extent permitted by law.
21.3 If Lessee abandons the Demised Premises or otherwise entitles
Lessor so to elect, and the Lessor elects to terminate Lessee's right to
possession only, without terminating this Lease, Lessor may, at its option,
enter into the Demised Premises, remove Lessee's signs and other evidences of
tenancy and take and hold possession thereof as in the foregoing paragraph 21.2
of this Article provided, without such entry and possession terminating this
Lease or releasing Lessee, in whole or in part, from Lessee's obligation to pay
the Rent hereunder for the full remaining Term of this Lease, and in any such
case, Lessee shall pay to Lessor a sum equal to the entire amount of the Rent
reserved hereunder and required to be paid by Lessee up to the time of such
termination of the right of possession plus any other sums then due hereunder.
Upon and after entry into possession without termination of this Lease, Lessor
may attempt to relet the Demised Premises or any part thereof for the account of
Lessee for such Rent, or shall operate the nursing home located on the Demised
Premises for such time and upon such terms as Lessor in its sole discretion
shall determine. In any such case, Lessor may make repairs, alterations and
additions in or to the Demised Premises, and redecorate the same to the extent
deemed desirable by Lessor, and Lessee shall, upon demand, pay the reasonable
cost thereof, together with Lessor's reasonable expenses of reletting. If the
consideration collected by Lessor upon any such reletting is not sufficient to
pay monthly the full amount of Rent reserved in this Lease, together with the
reasonable costs of repairs, alterations, additions, redecorating and Lessor's
expenses, Lessee shall pay to the Lessor the amount of each monthly deficiency
upon demand.
21.4 Lessee's liability to Lessor for damages for default in payment
of Rent or otherwise hereunder shall in all events survive the termination by
Lessor of the Lease or the termination by Lessor of Lessee's right to possession
only, as hereinabove provided. Upon such termination of the Lease or at any time
after such termination of Lessee's right to possession, Lessor may recover from
Lessee and Lessee shall pay to Lessor as damages, whether or not Lessor shall
have collected any current monthly deficiencies under the foregoing paragraph,
and in lieu of such current deficiencies after the date of demand for such
damages, the amount thereof found to be due by a court of competent
jurisdiction, which amount thus found may be equal to:
(a) the remainder, if any, of Rent and charges due from Lessee for
the period up to and including the date of the termination of the Lease or
Lessee's right to possession;
(b) the amount of any current monthly deficiencies accruing and
unpaid by Lessee up to and including the date of Lessor's demand for final
damages hereunder; and
(c) the excess, if any, of:
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(i) the present value, discounted at the rate of 10% per
annum, of the Rent reserved for what would have been the remainder of
the Term of this Lease together with charges to be paid by Lessee
under the Lease; over
(ii) the present value, discounted at the rate of 10% per
annum of the then fair rental value of the Demised Premises and the
Personal Property.
If any statute or rule governing a proceeding in which such damages
are to be proved shall validly limit the amount thereof to an amount less than
the amount above agreed upon, Lessor shall be entitled to the maximum amount
allowable under such statute or rule of law.
ARTICLE XXII - LIABILITY OF LESSOR
22.1 It is expressly agreed by the parties that in no case shall
Lessor, any shareholders, officers, directors, managers, members, agents or
employees of Lessor be liable under any express or implied covenant,
agreement or provisions of this Lease, for any damages whatsoever to Lessee
beyond Lessor's interest in the Demised Premises.
ARTICLE XXIII - CUMULATIVE REMEDIES OF LESSOR
23.1 The specific remedies to which Lessor may resort under the terms
of this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which Lessor may be lawfully entitled in case of
any breach or threatened breach by Lessee of any provision or provisions of this
Lease. The failure of Lessor to insist, in any one or more cases, upon the
strict performance of any of the terms, covenants, conditions, provisions or
agreements of this Lease, or to exercise any option herein contained, shall not
be construed as a waiver or relinquishment for the future of any such term,
covenant, condition, provisions, agreement or option.
ARTICLE XXIV - SECURITY FOR RENT
24.1 Lessor shall have a first lien paramount to all others on every
right and interest of Lessee in and to this Lease, and on any furnishings,
equipment, fixtures or other tangible property of any kind belonging to Lessee
and located in or about the Demised Premises. Such lien is granted for the
purpose of securing the payments of rents, charges, penalties, and damages
herein covenanted to be paid by Lessee, and for the purpose of securing the
performance of all of Lessee's obligations under this Lease. Such lien shall be
in addition to all rights to Lessor given and provided by law but shall only be
exercised by Lessor after the occurrence of an Event of Default which is not
cured within any applicable cure period. This Lease shall constitute a security
agreement under the Uniform Commercial Code granting Lessor a security interest
in any furnishings, equipment, fixtures, or other tangible personal property
(subject to the terms of ARTICLE 11 herein) of any kind belonging to Lessee and
located in or about the Demised Premises. If required by Lessor, Lessee shall
execute financing statements for filing under the Uniform Commercial Code
reflecting the security interest granted under this section.
Notwithstanding anything to the contrary contained in this Section
24.1, in the event all or substantially all of the Demised Premises or the Lease
is sublet, assigned or transferred, or a controlling number of the outstanding
shares in Lessee is sold, assigned or otherwise transferred (other than to
Andrew L. Turner or an entity controlled by Andrew L. Turner or a wholly owned
subsidiary of Lessee or of Lessee's parent
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corporation Sun Healthcare Group, Inc.) with the prior written consent of the
Lessor in accordance with Section 18.1 of this Lease, this Lease shall at such
time only constitute a security agreement under the Uniform Commercial Code
granting Lessor a security interest in any accounts receivable of Lessee's
successor related to the Demised Premises and at such time, Lessee's successor
shall execute a security agreement and financing statements for filing under
the Uniform Commercial Code reflecting a security interest in said accounts
receivable.
ARTICLE XXV - INDEMNIFICATION
25.1 To the extent insurance proceeds do not cover same, Lessee.
agrees to protect, indemnify, defend and save harmless the Lessor from and
against any and all claims, demands and causes of action of any nature
whatsoever for injury to or death of persons or loss of or damage to property,
occurring during the Term on the Demised Premises or, to the extent the same are
under Lessee's control, any adjoining sidewalks, streets or ways, or in any
manner growing out of or connected with the use and occupation of the Demised
Premises by Lessee, its officers, agents, employees or invitees, or Lessee's
maintenance of the condition thereof, or the use of any existing or future sewer
system, or the use of any adjoining sidewalks, streets or ways which are under
Lessee's control during the Term of this Lease, and Lessee further agrees to pay
any reasonable attorneys' fees and expenses incident to the defense by Lessor of
any such claims, demands or causes of action.
ARTICLE XXVI - SUBORDINATION PROVISIONS
26.1 This Lease (and Lessee's interest in the Demised Premises and
Personal Property) shall be subject and subordinate to any and all mortgages or
deeds of trust now or hereafter in force and affecting the Demised Premises (or
any portion thereof) and/or the Personal Property, and to all renewals,
modifications, consolidations, replacements and extensions thereof (any such
Mortgage or deed of trust, as it may be renewed, modified, consolidated,
replaced or extended is hereinafter referred to as a "Mortgage", and the holder
or beneficiary of a Mortgage is hereinafter referred to as a "Mortgagee"),
provided that, for other than Existing Mortgages (as defined below), Lessee
receives a subordination, nondisturbance and attornment agreement in a
commercially reasonable form satisfactory to such Mortgagee. Lessee agrees to
execute, acknowledge and deliver upon demand such further instruments
subordinating this Lease to any such Mortgage, or other liens or encumbrances as
shall be desired by Lessor; provided, that Lessee receives a subordination,
nondisturbance and attornment agreement, in a commercially reasonable form
satisfactory to such Mortgagee. Furthermore, in connection with any mortgage
loan pertaining to the Demised Premises existing as of the date of this Lease
(an "Existing Mortgage"), Lessor agrees to use all commercially reasonable
efforts to deliver to Lessee a nondisturbance agreement from the current
Mortgagee in a form reasonably satisfactory to such Mortgagee on the
Commencement Date or as soon as possible thereafter. Lessee further agrees that
promptly after receipt of a request from any Mortgagee made at any time prior to
foreclosure of its Mortgage, Lessee shall execute, acknowledge and deliver to
such Mortgagee any instrument as such Mortgagee may reasonably request whereby
Lessee agrees to subordinate and attorn to such Mortgagee, at such Mortgagee's
election, after the foreclosure of its Mortgage or its acceptance of a deed in
lieu of foreclosure, provided that Lessee concurrently receives a nondisturbance
agreement in commercially reasonable form satisfactory to such Mortgagee.
Lessee agrees further that any Mortgagee shall have the right to subordinate its
Mortgage and its rights thereunder to this Lease, except that such Mortgagee
shall be entitled to expressly exclude from such subordination the Mortgagee's
rights, if any, to insurance proceeds and eminent domain awards in the event of
a loss or casualty or eminent domain taking of the Demised Premises or any
portion thereof. If such Mortgagee executes and records an instrument which
purports to effect a partial or complete subordination of its Mortgage to this
Lease, any rights of such Mortgagee to insurance proceeds or eminent domain
awards which are expressly excluded from such subordination shall remain
superior to the rights of Lessee.
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ARTICLE XXVII - LESSEE'S FAITHFUL COMPLIANCE WITH MORTGAGES
27.1 Subject to the terms of any subordination, nondisturbance and
attornment agreement which may be in effect, and anything in this Lease
contained to the contrary notwithstanding, Lessee shall at all times and in all
respects fully, timely and faithfully comply with and observe each and all of
the conditions, covenants, and provisions required on the part of the Lessor and
of which Lessee has received notice under any Mortgage (and to any renewals,
modifications, extensions, replacements and/or consolidations thereof) to which
this Lease is subordinate or to which it later may become subordinate,
including, without limitation, such conditions, covenants and provisions thereof
as relate to the care, maintenance, repair, insurance, restoration, preservation
and condemnation of the Demised Premises, notwithstanding that such conditions,
covenants and provisions may require compliance and observance to a standard or
degree in excess of that required by the provisions of this Lease, or may
require performance not required by the provisions of this Lease, and shall not
do or permit to be done anything which would constitute a breach of or default
under any obligation of the Lessor under any such mortgage, it being the
intention hereof that Lessee shall so comply with and observe each and all of
such covenants, conditions and provisions of any such Mortgage affecting the
Demised Premises so that it will at all times be in good standing and there will
not be any default on the part of the Lessor thereunder. However, nothing in
this Article contained shall be construed to obligate Lessee to pay any part of
the principal or interest secured by any Mortgage or to perform any obligation
imposed on Lessor thereunder which is not delegable by Lessor by the terms
thereof. Lessee further covenants and agrees that Lessee shall give any
Mortgagee notice of any Lessor default under this Lease, and if Lessor fails to
cure such default, such Mortgagee shall have an additional reasonable time to
cure any such default on Lessor's behalf.
ARTICLE XXVIII - MORTGAGE RESERVES
28.1 Any tax, insurance or other reserve required by the holder of any
Mortgage against the Demised Premises during the Term of this Lease (except for
any payments resulting from Lessor's failure to comply with the terms of the
Mortgage), and not otherwise paid by Lessee to Lessor pursuant to Section 7.1,
shall be paid by the Lessee or as directed by Lessor.
ARTICLE XXIX - LESSEE'S ATTORNMENT
29.1 Lessee covenants and agrees that, if by reason of a default upon
the part of the Lessor herein in the performance of any of the terms and
conditions of any Mortgage which results in the estate of the Lessor thereunder
being terminated by summary dispossession proceedings or otherwise, Lessee will
attorn to the then holder of such Mortgage or the purchaser in such foreclosure
proceedings, as the case may be, and will recognize such holder of the Mortgage
or such purchaser as the Lessor under this Lease. Lessee covenants and agrees to
execute and deliver, at any time and from time to time, upon the request of
Lessor or of the holder of such Mortgage or the purchaser in foreclosure
proceedings, any instrument which may be necessary or appropriate to evidence
such attornment. Lessee further waives the provisions of any statute or rule of
law now or hereafter in effect which may terminate this Lease or give or purport
to give Lessee any right of election to terminate this Lease or to surrender
possession of the Demised Premises in the event any such proceedings are brought
against the Lessor under such Mortgage or the holder of any such Mortgage, and
agrees that this Lease shall not be affected in any way whatsoever by any such
proceedings.
29.2 If Lessor shall default in the performance of any of the terms,
provisions, covenants or conditions under any Mortgage, or fails to pay the
amounts due thereunder when due, then immediately upon notice of such default or
failure on the part of Lessor, Lessee shall have the right to cure such
defaults, and to make such payments as are due from Lessor, directly to the
holder of the Mortgage, as the case may be, and to the extent such payments are
accepted by the holder of the Mortgage, to deduct the amounts expended by Lessee
to cure such defaults, together with interest thereon from the date of payment
by Lessee at a rate which
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is the lesser of fifteen percent (15%) per annum or the maximum rate permitted
by law, from the next succeeding rental payment or payments due under this
Lease, and such deductions shall not constitute a default under this Lease.
ARTICLE XXX - REPRESENTATIONS AND WARRANTIES
30.1 Lessee represents, warrants and covenants to Lessor as follows:
(a) Lessee is a corporation organized and validly existing under the
laws of the State of New Mexico, and is authorized to transact business in
the State of Illinois; and
(b) Lessee has full corporate right and power to enter into, or
perform its obligations under this Lease and has taken all requisite
corporate action to authorize the execution, delivery and performance of
this Lease.
30.2 Lessor represents, warrants and covenants to Lessee as follows:
(a) Lessor is a limited partnership duly organized and validly
existing under the laws of the State of Illinois; and
(b) Lessor has full power and authority to enter into this Lease and
to carry out the transactions contemplated herein.
ARTICLE XXXI - SECURITY DEPOSIT
31.1 As additional security for the faithful and prompt performance of
its obligations hereunder, Lessee shall concurrently with the execution of this
Lease pay to Lessor, as a security deposit the sum of One Hundred Two Thousand
Three Hundred Eighty Two and 50/100 Dollars ($102,382.50), payable on the first
day of the Term. Said security deposit may be applied by Lessor for the purpose
of curing any default or defaults of Lessee hereunder, in which event Lessee
shall replenish said deposit in full by promptly paying to Lessor the amount so
applied. Lessor shall not pay any interest on said deposit, except as required
by law. If Lessee has not defaulted hereunder and Lessor has not applied said
deposit to cure a default, then said deposit, or such applicable portion
thereof, shall be paid to Lessee within thirty (30) days after the termination
of this Lease. Said deposit shall not be deemed an advance payment of Rent or a
measure of Lessor's damages for any default hereunder by Lessee.
ARTICLE XXXII - FINANCIAL STATEMENTS
32.1 Within 120 days after the end of each of its fiscal years, Lessee
shall furnish to Lessor full and complete financial statements of the operations
of the Demised Premises and nursing home operated thereon for such annual fiscal
period which shall be prepared by or on behalf of Lessee, and which shall
contain a balance sheet and detailed income and expense statement (collectively
called "Financial Statements"), and copies of all Medicaid and Medicare cost
reports as filed with the governmental authority, as of the end of the fiscal
year. In addition, Lessee shall furnish Lessor, within 10 days following
filing, a copy of its or its parent corporation's federal income tax return if
it does not file separate returns for the preceding year. Each such statement
shall be certified as being true and correct by an officer of Lessee.
32.2 Within thirty (30) days after each calendar quarter, Lessee shall
furnish to Lessor copies of all Financial Statements for the Demised Premises
prepared by Lessee for the preceding calendar quarter, which
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statements shall include the number of Operational Beds at the Facility on a
calendar month basis.
32.3 At all times, Lessee shall keep and maintain full and correct
records and books of account of the operations of Lessee in the Demised Premises
and records and books of account of the entire business operations of Lessee in
accordance with sound accounting practices. Upon request by Lessor, Lessee shall
make available for inspection by Lessor or its designee, during reasonable
business hours, the said records and books of account covering the entire
business operations of Lessee on the Demised Premises.
ARTICLE XXXIII -
TRANSFER OF OPERATIONS UPON TERMINATION OF LEASE
33.1 The date on which this Lease either terminates pursuant to its
Terms or is terminated by either party whether pursuant to a right granted to it
hereunder or otherwise shall be referred to as the "Closing Date" in this
Article. On the Closing Date, this Lease shall be deemed and construed as an
absolute assignment for purposes of vesting in Lessor or Lessor's designee all
of Lessee's right, title and interest in and to the following intangible
property which is now or hereafter used in connection with the operation of the
Demised Premises (the "Intangibles") and an assumption by Lessor of Lessee's
obligations under the Intangibles other Intangibles from and after the Closing
Date; provided that from and after the Closing Date, Lessee shall indemnify,
defend and hold harmless Lessor against any claims, losses, costs or damages,
including reasonable attorneys' fees incurred or arising by reason of Lessee's
obligations under the Intangibles prior to the Closing Date:
(a) service contracts for the benefit of the Demised Premises to
which Lessee is a party, and which can be terminated without penalty
within sixty (60) or fewer days' notice or which Lessor requests be
assigned to Lessor or its designee pursuant to this ARTICLE 33;
(b) any provider agreements with Medicare, Medicaid or any other
third-party payor programs (excluding the right to any reimbursement for
periods on or prior to the Closing Date) entered in connection with the
Demised Premises to the extent assignable by Lessee;
(c) all licenses, permits, accreditations, and certificates of
occupancy issued by any federal, state, municipal or quasi-governmental
authority for the use, maintenance or operation of the Demised Premises,
running to or in favor of Lessee, to the extent assignable by Lessee;
(d) all documents, charts, personnel records, property manuals,
resident/patient records and lists maintained with respect to the Demised
Premises (subject to the resident's rights to access to his/her medical
records as provided by law and confidentiality requirements), books,
records, files and other business records attributable to the business or
operations of the Demised Premises to the extent assignable by Lessee;
(e) all existing agreements with residents and any guarantors thereof
of the Demised Premises, to the extent assignable by Lessee (excluding the
right to any payments for periods prior to the Closing Date) any and all
patient trust fund accounts;
(f) all assignable guaranties and warranties in favor of Lessee with
respect to the Demised Premises and/or the Personal Property;
(g) all other assignable intangible property not enumerated herein
which is now or hereafter used in connection with the operation of the
Demised Premises as a long-term care facility; and
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(h) At Lessors option, the business of the Lessee as conducted at the
Demised Premises as a going concern, including but not limited to the name
of the business conducted thereon and all telephone numbers presently in
use therein but specifically excluding the name "Sunrise Healthcare" or
similar name, or any Sunrise policy or procedure manuals, forms or systems,
or other confidential or proprietary information.
33.2 Lessee shall be responsible for, and pay all accrued expenses
with respect to the Demised Premises and Personal Property accruing before 12:00
a.m. on the Closing Date and shall be entitled to all revenues from the Demised
Premises for the period through 12:00 a.m. on the Closing Date. Lessor shall be
responsible for and pay all accrued expenses with respect to the Demised
Premises accruing on or after 12:01 a.m. on the day after the Closing Date and
shall be entitled to receive and retain all revenues from the Demised Premises
accruing on or after the Closing Date. Within fifteen (15) business days after
the Closing Date, the following adjustments and prorations shall be determined
as of the Closing Date and the party to whom payment is owed shall receive said
payment within said fifteen (15) day period:
(a) Real estate taxes, ad valorem taxes, school taxes, assessments
and personal property, intangible and use taxes, if any. If the actual ad
valorem taxes are not available on the Closing Date for the tax year in
which the Closing Date occurs, the proration of such taxes shall be
estimated at the Closing Date based upon reasonable information available
to the parties, including information disclosed by the local tax office or
other public information, and an adjustment shall be made when actual
figures are published or otherwise become available.
(b) Lessee will terminate the employment of all employees on the
Closing Date. The obligation for wages and the obligation, if any, to pay
to employees of the Demised Premises accrued vacation and sick leave pay or
employee severance pay or other accrued benefits which may be payable as
the result of any termination of any employee on or prior to the Closing
Date for the period prior to the Closing Date shall remain the Lessee's
obligation after the Closing Date.
(c) Lessor shall receive a credit equal to any advance payments
received by Lessee from patients of the Demised Premises to the extent
attributable to periods following the Closing Date.
(d) The present insurance coverage on the Demised Premises shall be
terminated as of the Closing Date and there shall be no proration of
insurance premiums.
(e) All other income from, and expenses of, the Demised Premises
(other than Mortgage interest and principal), including but not limited to
public utility charges and deposits, maintenance charges and service
charges shall be prorated between Lessee and Lessor as of the Closing Date.
Lessee shall, if possible, obtain final utility meter readings as of the
Closing Date. To the extent that information for any such proration is not
available on the Closing Date, Lessee and Lessor shall effect such
proration within ninety (90) days after the Closing Date or as soon
thereafter as such information becomes available.
(f) Lessee shall receive a credit equal to (i) any sums held in
escrow by Lessor or the holder of any Mortgage for taxes or insurance
premiums; and (ii) any other sums being held by Lessor for the benefit of
Lessee provided that any such sums are not needed to pay costs and expenses
which relate to the period prior to the Closing Date, in accordance with
the applicable provisions of this Lease.
(g) Subject to the terms of ARTICLE 31 hereof, Lessee shall receive a
credit for any
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security deposit made pursuant to this Lease.
(h) Lessor shall receive a credit for any amounts due from Lessee
pursuant to the terms of this Lease, including payments due to third party
vendors, which are paid by Lessor on behalf of Lessee.
(i) Lessee shall be and will remain responsible for any employee's
severance pay and accrued benefits which may be payable as a result of any
termination of an employee's employment on or prior to the Closing Date.
33.3 All necessary arrangements shall be made to provide possession of
the Demised Premises to Lessor on the Closing Date, at which time of possession
Lessee shall, to the extent permitted by law, deliver to Lessor all medical
records, patient records and other personal information concerning all patients
residing at the Demised Premises as of the Closing Date and other relevant
records used or developed in connection with the business conducted at the
Demised Premises other than Lessee's corporate business records, manuals, forms
and systems documentation or other confidential or proprietary information.
Such transfer and delivery shall be in accordance with all applicable laws,
rules and regulations concerning the transfer of medical records and other types
of patient records.
33.4 Within fifteen (15) days following the Closing Date, Lessee shall
provide Lessor with an accounting of all funds belonging to patients at the
Demised Premises which are held by Lessee in a custodial capacity. Such
accounting shall set forth the names of the patients for whom such funds are
held, the amounts held on behalf of each such patient and the Lessee's warranty
that, to the actual current knowledge of Lessee, the accounting is true, correct
and complete. Additionally, Lessee, in accordance with all applicable rules and
regulations, shall make all necessary arrangements to transfer such funds to a
bank account designated by Lessor, and Lessor shall in writing acknowledge
receipt of and expressly assume all the Lessee's financial and custodial
obligations with respect thereto. Notwithstanding the foregoing, Lessee will
indemnify and hold Lessor harmless from all liabilities, claims and demands,
including reasonable attorney's fees, in the event the amount of funds, if any,
transferred to Lessor's bank account as provided above, did not represent the
full amount of the funds then or thereafter shown to have been delivered to
Lessee as custodian that remain undisbursed for the benefit of the patient for
whom such funds were deposited, or with respect to any matters relating to
patient funds which accrue during the Term of this Lease.
33.5 For the period commencing upon an Event of Default hereunder and
Lessor's election to terminate this Lease as provided in ARTICLE 21 and ending
on the date Lessor or its designee obtains all appropriate state or other
governmental licenses and certifications required to operate the Demised
Premises as a Medicare and Medicaid certified nursing home, Lessee shall enter
into a management agreement with Lessor or Lessor's designee whereby Lessor or
its designee shall have the right to operate the Demised Premises, on a triple
net basis, and shall be entitled to all revenues of the Demised Premises during
such period, and to use any and all licenses, certifications and provider
agreements issued to Lessee by any federal, state or other governmental
authority for such operation of the Demised Premises, if permitted by such
governmental authorities.
33.6 All cash, checks and cash equivalents at the Demised Premises and
deposits in bank accounts (other than patient trust accounts) relating to the
Demised Premises on the Closing Date shall remain Lessee's property after the
Closing Date. All accounts receivable, loans receivable and other receivables
of Lessee, whether derived from operation of the Demised Premises or otherwise,
shall remain the property of Lessee after the Closing Date. Lessee shall retain
full responsibility for the collection thereof. Lessor shall assume
responsibility for the billing and collection of payment on account of services
rendered by it on and after the Closing Date. In order to facilitate Lessee's
collection efforts, Lessee agrees to deliver to Lessor, within a reasonable time
after the Closing Date, a schedule identifying all of those private pay balances
owing for the month prior to the Closing Date and Lessor agrees to apply any
payments received which are specifically
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designated as being applicable to services rendered prior to the Closing Date to
reduce the pre-Closing balances of said patients by promptly remitting said
payments to Lessee. In the event payments specifically indicate that they
relate to services rendered post-Closing, such payments shall be retained by
Lessor. In the event no designation is made, such payments shall be applied
one-half to Lessee's accounts receivable and one-half to Lessor's accounts
receivable. Lessor shall cooperate with Lessee in Lessee's collection of its
pre-Closing accounts receivable. Lessor shall have no liability for
uncollectible receivables and shall not be obligated to bear any expense as a
result of such activities on behalf of Lessee. Subject to the provisions of
ARTICLE 24 hereof, Lessor shall remit to Lessee or its assignee those portions
of any payments received by Lessor which are specifically designated as
repayment or reimbursement received by Lessor arising out of cost reports filed
for the cost reporting periods ending prior to the Closing Date.
33.7 With respect to residents in the Demised Premises on the Closing
Date, Lessor and Lessee agree as follows:
(a) With respect to Medicare and Medicaid residents, Lessor and
Lessee agree that payment for in-house residents covered by Medicare or
Medicaid on the Closing Date will, under current regulations, be paid by
Medicare or Medicaid directly to Lessee for services rendered at the
Demised Premises prior to the Closing Date allocated on the per diem basis.
Said payments shall be the sole responsibility of Lessee and, except as
provided in Section 33.7(b) below, Lessor shall in no way be liable
therefor. After the Closing Date, Lessor and Lessee shall each have the
right to review supporting books, records and documentation that are in the
possession of the other relating to Medicaid or Medicare payments.
(b) If, following the Closing Date, Lessor receives payment from any
state or federal agency or third-party payor which represents
reimbursement with respect to services provided at the Demised Premises
prior to the Closing Date, Lessor agrees that it shall remit such payments
to Lessee. Payments by Lessor to Lessee shall be accompanied by a copy of
the appropriate remittance advice.
33.8 In addition to the obligations required to be performed hereunder
by Lessee and Lessor at the Closing Date, Lessee and Lessor agree to perform
such other acts, and to execute, acknowledge, and/or deliver subsequent to the
Closing Date such other instruments, documents and materials, as the other may
reasonably request in order to effectuate the consummation of the transaction
contemplated herein. The obligations hereunder shall survive termination or
expiration of the Lease.
33.9 Lessee and Lessor each, for itself, its successors and assigns
hereby indemnifies and agrees to defend and hold the other and its successors
and assigns harmless from any and all claims, demands, obligations, losses,
liabilities, damages, recoveries and deficiencies (including interest, penalties
and reasonable attorney's fees, costs and expenses) (hereinafter collectively
"the Claims") which any of them may suffer as a result of the breach by the
other party in the performance of any of its commitments, covenants, or
obligations under this ARTICLE 33. Lessee does further agree to indemnify,
defend and hold harmless Lessor from any such Claims or with respect to any
suits, arbitration proceedings, administrative actions or investigations which
relate to the use by Lessee of the Demised Premises prior to the Closing Date or
any liability which may arise from operation by Lessee of the Demised Premises
as a nursing home prior to the Closing Date or any amounts recaptured under
Title XIX based upon applicable Medicare/Medicaid Recapture Regulations. Lessor
does further agree to indemnify, defend and hold harmless Lessee from any such
Claims or with respect to any suits, arbitration proceedings, administrative
actions or investigations which relate to the ownership of the Demised Premises
by Lessor or the use of the Demised Premises by Lessor or the operation by
Lessor of the nursing home located thereon after the Closing Date. The rights
of the parties under this paragraph are without prejudice to any other remedies
not inconsistent herewith which the parties may have pursuant to the terms of
this Lease, provided the rights of Lessee hereunder are subject to Section 22.1
hereof.
- 26 -
<PAGE>
33.10 Anything to the contrary contained in this ARTICLE 33
notwithstanding, in the event the termination of this Lease is due to a default
by Lessee, none of the provisions of this ARTICLE 33 shall in any way limit,
reduce, restrict or modify the rights granted to Lessor pursuant to ARTICLES 21,
23, and 24 of this Lease. If the termination of this Lease is a result of an
Event of Default, then to the extent any monies are due to Lessee pursuant to
this ARTICLE 33, such sums shall be applied by Lessor to any damages suffered by
Lessor as a result of Lessee's Event of Default.
ARTICLE XXXIV - MISCELLANEOUS
34.1 Lessee, upon paying the fixed Rent, Additional Rent including
Taxes and Assessments and all other charges herein provided, and upon observing
and keeping the covenants, agreements, terms and conditions of this Lease on its
part to be performed, shall lawfully and quietly hold, occupy and enjoy the
Demised Premises during the Term of this Lease, and subject to its terms,
without hindrance by Lessor or by any other person or persons claiming under
Lessor.
34.2 All payments to be made by the Lessee hereunder, whether or not
designated as Rent, shall be deemed Additional Rent, so that in the event of a
default of payment when due, the Lessor shall be entitled to all of the remedies
available at law or equity, or under this Lease, for the nonpayment of Rent.
34.3 It is understood and agreed that the granting of any consent by
Lessor to Lessee to perform any act of Lessee requiring Lessor's consent under
the terms of this Lease, or the failure on the part of Lessor to object to any
such action taken by Lessee without Lessor's consent, shall not be deemed a
waiver by Lessor of its rights to require such consent for any further similar
act by Lessee, and Lessee hereby expressly covenants and warrants that as to all
matters requiring Lessor's consent under the terms of this Lease, Lessee shall
secure such consent for each and every happening of the event requiring such
consent, and shall not claim any waiver on the part of Lessor of the requirement
to secure such consent.
34.4 Lessee and Lessor each represent to the other party that it did
not deal with any broker in connection with this Lease, and hereby indemnifies
the other party against the claims or demands of any broker claimed through a
relationship with it.
34.5 If an action shall be brought to recover any rental under this
Lease, or for or on account of any breach of or to enforce or interpret any of
the terms, covenants or conditions of this Lease, or for the recovery of
possession of the Demised Premises, the prevailing party shall be entitled to
recover from the other party, as part of the prevailing party's costs,
reasonable attorney's fees, the amount of which shall be fixed by the court and
shall be made a part of any judgment rendered.
34.6 Should Lessee hold possession hereunder after the expiration of
the Term this Lease with the consent of Lessor, Lessee shall become a tenant on
a month-to-month basis upon all the terms, covenants and conditions herein
specified, excepting however that Lessee shall pay Lessor a monthly rental, for
the period of such month-to-month tenancy, in an amount equal to one hundred
fifty percent (150%) the last rental specified.
34.7 Any notice, or demand required to be given by either party to the
other shall be in writing and shall be sent by (a) personal delivery, (b)
expedited delivery service with proof of delivery, (c) United States
registered/certified mail, return receipt requested or (d) prepaid telecopy,
telegram, telex or fax, addressed to the other party hereto at the address set
forth below:
- 27 -
<PAGE>
If to Lessor: Effingham Associates, L.L.C.
c/o Karell Capital Ventures, Inc.
Suite 1901
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Mr. Craig Bernfield
Telephone No.: (312) 855-0930
Fax No.: (312) 855-1684
If to Lessee: Sunrise Healthcare Corporation
101 Sun Lane N.E.
Albuquerque, New Mexico 87109
Attention: Mr. Andrew Turner
Telephone No.: (505) 821-3355
Fax No.: (505) 822-0747
or if written notification of a change of address has been sent, to such other
party and/or to such other address as may be designated in that written
notification. Any such notice or demand shall be deemed to have been given
either at the time of personal delivery or in the case of service by mail, as of
the date of first attempted delivery at the address and in the manner provided
herein, or in the case of telecopy, telegram or telex, upon receipt.
34.8 Upon demand by either party, Lessor and Lessee agree to execute
and deliver a Memorandum of Lease in recordable form so that the same may be
recorded by either party and the costs thereof shall be borne by the party
requesting recordation of the Memorandum.
34.9 Each party agrees any time, and from time to time, upon not less
than ten (10) days prior written request from the other party, to execute,
acknowledge and deliver to the other party a statement in writing, certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified, and
stating the modifications), the dates to which Rent has been paid, the amount of
the Security Deposit held by Lessor, and whether the Lease is then in default or
whether any events have occurred which, with the giving of notice or the passage
of time, or both, could constitute a default hereunder, it being intended that
any such statement delivered pursuant to this paragraph may be relied upon by
any prospective assignee, Mortgagee or purchaser of the fee interest in the
Demised Premises or of this Lease.
34.10 All of the provisions of this Lease shall be deemed and construed
to be "conditions" and "covenants" as though the words specifically expressing
or importing covenants and conditions were used in each separate provision
hereof.
34.11 Any reference herein to the termination of this Lease shall be
deemed to include any termination thereof by expiration or pursuant to Articles
referring to earlier termination.
34.12 The headings and titles in this Lease are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope or intent of this Lease, nor in any way affect this Lease.
34.13 This Lease contains the entire agreement between the parties and
any executory agreement hereafter made shall be ineffective to change, modify or
discharge it in whole or in part unless such executory agreement is in writing
and signed by the party against whom enforcement of the change, modification or
discharge is sought. This Lease cannot be changed orally or terminated orally.
- 28 -
<PAGE>
34.14 Except as otherwise herein expressly provided, the covenants,
conditions and agreements in this Lease shall bind and inure to the benefit of
the Lessor and Lessee and their respective successors and assigns.
34.15 All nouns and pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the person or persons, firm or firms, corporation or corporations, entity or
entities or any other thing or things may require.
34.16 If any term or provision of this Lease shall to any extent be
held invalid or unenforceable, the remaining terms and provisions of this Lease
shall not be affected thereby, but each term and provision shall be valid and be
enforceable to the fullest extent permitted by law.
34.17 In the event of any conveyance or other divestiture of title to
the Demised Premises, the grantor or the person who is divested of title shall
be entirely freed and relieved of all covenants and obligations thereafter
accruing hereunder, and the grantee or the person who otherwise succeeds to
title shall be deemed to have assumed the covenants and obligations of the
grantor or the person who is divested of title thereafter accruing hereunder and
shall then be the Lessor under this Lease. Notwithstanding anything to the
contrary provided in this Lease, if Lessor or any successor in interest of
Lessor shall be an individual, partnership, corporation, trust, tenant in common
or Mortgagee, there shall be absolutely no personal liability on the part of any
individual or member of Lessor or any stockholder, director, officer, employee,
partner or trustee of Lessor with respect to the terms, covenants or conditions
of this Lease, and Lessee shall look solely to the interest of Lessor in the
Demised Premises for the satisfaction of each and every remedy which Lessee may
have for the breach of this Lease; such exculpation from personal liability to
be absolute and without any exception, whatsoever.
34.18 The failure of either party to insist on strict performance of
any of the covenants, agreements, terms, and conditions of this Lease or to
exercise any option conferred herein in any one or more instances shall not be
construed to be a waiver or relinquishment of any such covenant, agreement,
term, condition or option and the same shall be and remain in full force and
effect.
34.19 This Lease may be executed in counterparts, each of which shall
be deemed to be an original but all of which taken together shall constitute but
one and the same instrument.
34.20 This Lease shall be governed by and construed in accordance with
the laws of the State of Illinois.
[Signature Page to Follow]
- 29 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be signed
by persons authorized so to do on behalf of each of them respectively the day
and year just above written.
LESSOR: LESSEE:
EFFINGHAM ASSOCIATES, L.L.C., SUNRISE HEALTHCARE CORPORATION,
an Illinois limited liability company a New Mexico corporation
By: /s/ Zev Karkomi By: /s/ Warren McInteer
------------------------------- ---------------------------
Its: Manager Its: Vice-President
------------------------------- --------------------------
- 30 -
<PAGE>
UNCONDITIONAL GUARANTY OF LEASE
THIS UNCONDITIONAL GUARANTY OF LEASE (this "Guaranty") dated as of this
____________ day of May, 1997, is given by SUN HEALTHCARE GROUP, INC., a
Delaware corporation ("Guarantor") to EFFINGHAM ASSOCIATES, L.L.C., an Illinois
limited liability company ("Lessor").
I
RECITALS
1.1 DESCRIPTION OF LEASE. Lessor and Sunrise Healthcare Corporation, a
New Mexico corporation ("Lessee"), having entered into that certain Lease of
even date herewith (the "Lease") of the nursing home facility commonly known as
Effingham Manor Nursing Center located at 1115 Wenthe Street, Effingham,
Illinois.
1.2 INDUCEMENT. Guarantor is the sole shareholder of Lessee, and
accordingly, Guarantor hereby acknowledges that the Lease will economically
benefit Guarantor.
II
THE GUARANTY
2.1 GUARANTY. Guarantor hereby absolutely and unconditionally guarantees:
(a) The prompt payment of each installment of fixed annual rent and
Additional Rent (as defined in the Lease) when and as the same become due under
the terms of the Lease;
(b) The prompt payment of all other sums payable by Lessee to Lessor
or any other person under the terms of the Lease, including, without limitation,
tax and any other deposits required under the terms of the Lease and damages due
to default by Lessee under the Lease; and
(c) The full and timely performance of each and every other
obligation of Lessee under the Lease;
for which Guarantor shall be jointly and severally liable with Lessee (the items
described in clauses (a), (b) and (c) above are hereinafter referred to as the
"Guarantor's Obligations").
2.2 Guarantor absolutely and unconditionally covenants and agrees that, in
the event that Lessee is unable to, or does not, pay, perform or satisfy any of
the obligations or liabilities of Lessee under the Lease (the "Lessee's
Liabilities") in a full and timely manner, for any reason, including, without
limitation, the liquidation, dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition, or readjustment of, or other similar proceedings affecting, the
status, composition, identity, existence, assets or obligations of Lessee, or
the disaffirmance or termination of any of the Lessee's Liabilities in or as a
result of any such proceedings, Guarantor shall pay, perform or satisfy the
Lessee's Liabilities and that no such occurrence shall in any way reduce or
affect the Guarantor's Obligations hereunder. Upon the occurrence of a default
in the prompt payment, timely performance and satisfaction in full of Lessee's
Liabilities, all of the Guarantor's Obligations shall, at the election of
Lessor, become immediately due and payable, provided, however, that nothing
herein shall be construed as granting Lessor any greater rights or remedies
against Guarantor as a result of a breach by Lessee of its obligations under the
Lease than
<PAGE>
Lessor has against Lessee as a result thereof under the terms of the Lease.
2.3 Guarantor shall be directly and primarily liable, jointly and
severally with Lessee, for all of the foregoing. Lessor's rights under this
Guaranty shall be exercisable by action against Guarantor or joined with any
action against Lessee. Lessor need not proceed against Lessee as security for
Lessee's Liabilities or exhaust its remedies against Lessee or exercise any of
the other remedies available to Lessor under the Lease, prior to, concurrently
with or after proceeding against Guarantor to collect the full amount of the
Guarantor's Obligations hereunder. In the event that Lessor may have collected
all or any part of Lessee's Liabilities and a claim for repayment of all or any
part thereof is made against Lessor, the liability of Guarantor hereunder as to
the amount so collected but subject to such claim shall not be discharged or
affected.
III
OTHER PROVISIONS
3.1 ACTIONS BY LESSOR NOT TO AFFECT LIABILITY. The liability of Guarantor
hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Lease by lapse of time or otherwise (all of which are hereby authorized by
Guarantor) or a release or limitation of the liability of Lessee or Lessee's
estate under the Lease in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment due under
the Lease or acceptance of partial payment or performance from Lessee;
(c) The acceptance or release by Lessor of any additional
security for the performance of Lessee's obligations under the Lease;
(d) The failure during any period of time whatsoever of Lessor
to attempt to collect any amount due under the Lease from Lessee or to exercise
any remedy available under such Lease or any other security instrument given as
security for performance of the same, in the event of a default in the
performance by Lessee of the terms of the Lease;
(e) Lessor's consent to any assignment or successive assignments of
the Lease, or any subletting or successive subletting of the Demised Premises
(as defined in the Lease);
(f) Any assignment or successive assignments of Lessor's interest
under the Lease (whether absolute or as collateral);
(g) Lessor's consent to any changed, expanded or different use
of any or all of the Demised Premises;
(h) The assertion by Lessor against Lessee of any rights or
remedies reserved or granted to Lessor under the Lease, including the
commencement by Lessor of any proceedings against Lessee; or
(i) Any dealings, transactions or other matter occurring between
Lessor and Lessee;
whether or not Guarantor shall have knowledge or have been notified of or agreed
to any of the foregoing.
3.2 WAIVERS. Guarantor hereby expressly waives:
- 2 -
<PAGE>
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and notice
of protest, and all other notices whatsoever, including, without limitation,
notice of any event or matter described in Section 3.1 hereof;
(c) Any and all claims or defenses based upon lack of diligence
in:
(i) collection of any amount the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for the
Lease;
(iii) realization upon any other security given for the
Lease; or
(iv) the discharge, liquidation or reorganization of Lessee
in bankruptcy or the rejection of the Lease by Lessee or a trustee in
bankruptcy.
(d) Any and all defenses of suretyship;
3.3 NATURE OF REMEDIES. No delay or omission on the part of Lessor
in the exercise of any right or remedy hereunder shall operate as a waiver
thereof. All remedies of Lessor hereunder shall be in addition to, and
exercisable consecutively or concurrently in any combination with, any and all
remedies available to Lessor by operation of law or under the Lease, and Lessor
may exercise its remedies hereunder without the necessity of any notice to
Lessee or Guarantor of nonpayment, nonobservance, nonperformance or other
default by Lessee under the Lease.
3.4 COSTS OF COLLECTION. Notwithstanding any provision of this
Guaranty to the contrary, in the event of the enforcement of this Guaranty by
Lessor, Lessor shall be entitled to collect from Guarantor, Lessor's costs of
collection, including, without limitation, reasonable attorneys' fees.
3.5 MECHANIC'S LIENS OR OTHER LIENS. Notwithstanding any provision
of this Guaranty to the contrary, in the event that any mechanic's liens,
laborer's and/or materialman's claims (collectively, the "Mechanic's Liens") are
filed against the Leased Property (as defined in the Lease), or any part
thereof, and not paid or discharged by Lessee in accordance with the terms of
the Lease, Lessor shall be entitled pursuant to this Guaranty to collect from
Guarantor from and after the expiration or earlier termination of the Lease, the
total aggregate amount of such unpaid or undischarged Mechanic's Liens.
3.6 NO SUBROGATION. Guarantor shall not be subrogated to any of the
rights of Lessor under the Lease, or in or to the Demised Premises or to any
other rights of Lessor by reason of any of the provisions of this Guaranty or by
reason of the performance by Guarantor of any of its obligations hereunder and
Guarantor shall look solely to Lessee for recoupment of any costs or expenses
incurred by Guarantor in performing its obligations hereunder.
3.7 ASSIGNMENT. This Guaranty shall not be assignable by Guarantor
but shall be binding upon the successors to and legal representatives of
Guarantor. This Guaranty shall be assignable by Lessor and shall inure to the
benefit of its successors and assigns.
3.8 GOVERNING LAW. Consent to Jurisdiction. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of
Illinois. To induce Lessor to accept this Guaranty, Guarantor irrevocably
agrees that, subject to Lessor's sole and absolute election, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO
THIS GUARANTY, SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF
CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR
- 3 -
<PAGE>
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND AGREES THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO GUARANTOR AT THE
ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED
TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
3.9 SEVERABILITY. If any term, restriction or covenant of this
Guaranty is deemed illegal or unenforceable, all other terms, restrictions and
circumstances subject hereto shall remain unaffected to the extent permitted by
law; and if any application of any term, restriction or covenant to any person
or circumstances is deemed illegal, the application of such term, restriction or
covenant to other persons and circumstances shall remain unaffected to the
extent permitted by law.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the
day and year first above written.
SUN HEALTHCARE GROUP, INC., a Delaware corporation
By:
----------------------------------------------
Name: /s/ Warren McInteer
--------------------------------------------
Title: Vice-President
-------------------------------------------
Address:
101 Sun Lane N.E.
Albuquerque, NM 87109
- 4 -
<PAGE>
Exhibit 11.1
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
(In thousands, except per share data)
PRIMARY:
<S> <C> <C> <C> <C>
Shares outstanding at beginning of period 46,244 46,023 46,093 47,916
Weighted average shares issued pursuant to:
Acquisition agreements -- -- -- 63
Employee benefit plans 159 38 127 61
Weighted average shares repurchased -- -- -- (1,592)
Dilutive effect of outstanding stock options, warrants
and restricted stock awards 1,148 -- 753 531
---------- ---------- ---------- ----------
Weighted average number of common and
common equivalent shares outstanding 47,551 46,061 46,973 46,979
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) (1) $19,420 ($5,562) $53,179 $26,143
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) per common and
common equivalent share (1) $0.41 ($0.12) $1.13 $0.56
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED:
Weighted average number of common and common
equivalent shares used in primary calculation 47,551 46,061 46,973 46,979
Additional dilutive effect of stock options, warrants
and restricted stock awards 64 -- 366 14
Assumed conversion of dilutive convertible debentures 4,714 -- 4,714 4,714
---------- ---------- ---------- ----------
Fully diluted weighted average number of common
and common equivalent shares outstanding 52,329 46,061 52,053 51,707
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) used in primary calculation $19,420 ($5,562) $53,179 $26,143
Adjustment for reduced interest expense, net of interest
expense related to additional borrowings to fund
cash portion of merger consideration assumed paid
on conversion of dilutive convertible debentures and
net of related income tax benefits 855 -- 2,568 2,568
---------- ---------- ---------- ----------
Net earnings (loss) (1) $20,275 ($5,562) $55,747 $28,711
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted net earnings (loss) per common and
common equivalent share (1) $0.39 ($0.12) $1.07 $0.56
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SUN
HEALTHCARE GROUP, INC. SEPTEMBER 30, 1997 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,418
<SECURITIES> 0
<RECEIVABLES> 379,011
<ALLOWANCES> 21,091
<INVENTORY> 0
<CURRENT-ASSETS> 430,254
<PP&E> 546,456
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,712,428
<CURRENT-LIABILITIES> 192,189
<BONDS> 863,266
0
0
<COMMON> 516
<OTHER-SE> 629,336
<TOTAL-LIABILITY-AND-EQUITY> 1,712,428
<SALES> 0
<TOTAL-REVENUES> 1,332,354
<CGS> 0
<TOTAL-COSTS> 1,245,176
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,736
<INTEREST-EXPENSE> 42,670
<INCOME-PRETAX> 87,178
<INCOME-TAX> 33,999
<INCOME-CONTINUING> 53,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,179
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.07
</TABLE>
