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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-22178
ARBOR HEALTH CARE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 34-1469604
(State of incorporation) (IRS Employer
Identification No.)
1100 SHAWNEE ROAD, P. O. BOX 840, LIMA, OHIO 45802-0840
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 227-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ------
Shares of Registrant's Common Stock, $.03 par value, outstanding as of the close
of business on July 31, 1997 -- 6,932,987.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
Number
------
PART I -- FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets .................................................................. 3
Consolidated Statements of Income ............................................................ 4
Consolidated Statements of Cash Flows......................................................... 5
Notes to Interim Consolidated Financial Statements............................................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................. 7
Forward-Looking Statements.................................................................... 11
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings............................................................................. 11
Item 2. Changes in Securities......................................................................... 11
Item 3. Defaults Upon Senior Securities............................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........................................... 12
Item 5. Other Information............................................................................. 12
Item 6. Exhibits and Reports on Form 8-K.............................................................. 12
</TABLE>
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<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except for share data)
December 31 June 30
1996 1997
-------- --------
ASSETS (Note 1)
<S> <C> <C>
Current assets
Cash and cash equivalents .............................................. $ 5,761 $ 5,131
Accounts receivable, less allowances of $1,948 and
$2,924, respectively ............................................... 44,019 49,463
Supply inventories ..................................................... 2,963 3,192
Other current assets ................................................... 3,503 3,457
Deferred income taxes .................................................. 1,972 2,613
-------- --------
Total current assets ....................................................... 58,218 63,856
Property and equipment
Land and improvements .................................................. 25,337 25,355
Buildings and improvements ............................................. 95,017 95,567
Equipment and furnishings .............................................. 40,477 42,799
Leasehold improvements ................................................. 5,970 7,442
Construction in process ................................................ 2,599 6,541
-------- --------
169,400 177,704
Less allowances for depreciation and amortization ...................... 33,564 37,746
-------- --------
Total property and equipment ............................................... 135,836 139,958
Other assets
Goodwill, less amortization of $926 and $1,340, respectively ........... 13,034 15,210
Deferred costs, less amortization of $3,475 and
$3,163, respectively ............................................... 2,205 1,710
Sundry ................................................................. 181 339
-------- --------
Total other assets ......................................................... 15,420 17,259
-------- --------
$209,474 $221,073
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable .......................................................... $ 4,526 $ 6,046
Accounts payable ....................................................... 11,121 9,530
Accrued payroll and related items ...................................... 11,522 11,980
Other liabilities ...................................................... 13,465 14,702
Current maturities of long-term obligations ............................ 3,162 3,717
-------- --------
Total current liabilities .................................................. 43,796 45,975
Long-term obligations, less current maturities ............................. 94,643 97,453
Deferred income taxes ...................................................... 5,019 5,882
Stockholders' equity
Preferred stock, $.01 par value, Authorized - 2,000,000 shares
None issued or outstanding _ _
Series A Junior Participating Cumulative Preferred stock, $.01 par value,
Authorized - 10,000 shares, None issued or outstanding _ _
Common stock, $.03 par value, Authorized - 20,000,000 shares
Issued and outstanding -- 6,904,054 and 6,932,987 shares ........... 207 208
Additional paid-in capital ............................................. 30,300 30,736
Retained earnings ...................................................... 35,509 40,819
-------- --------
Total stockholders' equity ................................................. 66,016 71,763
-------- --------
$209,474 $221,073
======== ========
</TABLE>
See accompanying notes
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<TABLE>
<CAPTION>
ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
----------------------- -------------------------
1996 1997 1996 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues
Subacute care ................... $ 26,415 $ 31,361 $ 53,806 $ 62,479
Basic care ...................... 21,216 21,547 41,612 42,788
Pharmacy and other .............. 5,010 7,397 9,699 14,562
-------- -------- --------- ---------
Total net revenues ................ 52,641 60,305 105,117 119,829
Expenses
Operating ....................... 41,752 47,437 83,433 93,990
General corporate ............... 2,150 2,487 4,693 5,508
Operating lease rental .......... 1,127 1,057 2,253 2,142
Net interest .................... 1,657 2,069 3,277 4,084
Depreciation and amortization ... 2,167 2,625 4,282 5,218
-------- -------- --------- ---------
Total expenses .................... 48,853 55,675 97,938 110,942
Other expense (income).............
Loss on disposal of property .... 128 158 183 244
Interest and sundry ............. (66) (139) (98) (111)
-------- -------- --------- ---------
Total other expense ............... 62 19 85 133
-------- -------- --------- ---------
Income before income taxes ........ 3,726 4,611 7,094 8,754
Income taxes ...................... 1,483 1,828 2,828 3,444
-------- -------- --------- ---------
Net income ........................ $ 2,243 $ 2,783 $ 4,266 $ 5,310
======== ======== ========= =========
Net income per share .............. $ 0.32 $ 0.40 $ 0.61 $ 0.76
======== ======== ========= =========
Weighted average shares
outstanding...................... 6,987 7,027 6,979 7,006
======== ======== ========= =========
</TABLE>
See accompanying notes
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<TABLE>
<CAPTION>
ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30
--------------------
1996 1997
-------- -------
<S> <C> <C>
Operating activities
Net income ........................................... $ 4,266 $ 5,310
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for depreciation ....................... 3,585 4,386
Amortization ..................................... 828 949
Provision for deferred income taxes .............. 307 222
Provision for losses on accounts receivable ...... 874 1,456
Loss on disposal of property ..................... 183 244
Changes in operating assets and liabilities
Accounts receivable ............................ (1,669) (6,356)
Supply inventories ............................. (93) (229)
Other current assets ........................... (450) (587)
Deferred costs ................................. (351) (10)
Accounts payable ............................... (3,659) (1,617)
Accrued payroll and related items .............. 692 384
Other liabilities (income tax payments of $2,987
and $2,811, respectively) .................... 3,932 1,232
-------- -------
Net cash provided by operating activities ............... 8,445 5,384
Investing activities
Expenditures for property and equipment .............. (14,880) (7,703)
Cash paid to acquire businessess, net of cash received (981) (1,373)
Sundry and other ..................................... 38 (130)
-------- -------
Net cash used in investing activities ................... (15,823) (9,206)
Financing activities
Net repayments under line of credit agreements
to finance development projects and acquisitions ... (14,613) (3,925)
Net borrowings (repayments) of working capital
under line of credit agreements .................... (4,496) 1,521
Borrowings on long-term obligations .................. 27,000 7,250
Repayments of long-term obligations .................. (1,416) (2,023)
Deferred financing costs ............................. (751) (68)
Issuance of stock .................................... 54 437
-------- -------
Net cash provided by financing activities ............... 5,778 3,192
-------- -------
Net decrease in cash and cash equivalents ............... (1,600) (630)
Cash and cash equivalents at beginning of period ........ 6,394 5,761
-------- -------
Cash and cash equivalents at end of period .............. $ 4,794 $ 5,131
======== =======
</TABLE>
See accompanying notes
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ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet of Arbor Health Care Company and subsidiaries
(the "Company") at December 31, 1996 has been derived from the audited
consolidated financial statements at that date. The consolidated balance sheet
of the Company as of June 30, 1997, and the consolidated statements of income
and cash flows for the periods ended June 30, 1997 and 1996, have been prepared
by the Company, without audit, in accordance with the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the financial position, results of operations and cash flows at
June 30, 1997 and for all periods presented have been made. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996. The results of operations and cash flows for the period ended June 30,
1997 are not necessarily indicative of the operating results or cash flows for
the full year.
2. NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statement No. 128, Earnings
per Share, which is required to be adopted for financial statements issued for
periods ending after December 15, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be excluded. The
impact of Statement No. 128 on the calculation of earnings per share is not
expected to be material.
3. ACQUISITIONS
Effective January 1, 1997, the Company acquired substantially all of the assets
and assumed certain liabilities of Adult Services Unlimited, Inc. ("ASUI") and
Health Poconos, Inc. ("HPI") for approximately $3.2 million, including $1.7
million in seller financing. ASUI and HPI are Comprehensive Outpatient
Rehabilitation Facilities ("CORFs") that provide general, job-related injury and
geriatric rehabilitation to the northeastern Pennsylvania market.
On September 19, 1996, the Company acquired Arbors at Waterville, a 100-bed
Center that it has operated under an operating lease agreement since 1989. The
Company financed a portion of the $5.8 million purchase with $4.6 million from
its acquisition/development lines of credit. Raymond James Financial, Inc.
("RJFI") owns two subsidiaries that are the controlling partners in a
partnership that is the general partner in a partnership that owned the Center.
A director of the Company is an officer, director and major stockholder of RJFI.
Effective June 30, 1996, the Company acquired all of the outstanding stock of
Poly-Stat Supply Corporation and Poly-Stat Computer Applications, Inc. The
Poly-Stat businesses provide medical supplies and Medicare billing services to
nursing homes. The purchase price of approximately $1.2 million for the
Poly-Stat businesses included $1.0 million in cash and $0.2 million in
promissory notes. In addition, the Company must make a $1.0 million contingent
payment if certain earnings targets are attained through December 31, 2000.
Effective July 15, 1997, the Company acquired all of the assets of a
CORF located in northeastern Florida, and effective August 1, 1997, the Company
acquired all of the outstanding stock of an institutional pharmacy in the
Detroit, Michigan area. The combined purchase price of the two acquisitions was
$2.4 million, including $.4 million in seller financing. Additional
consideration of up to $.5 million may be required for the Detroit, Michigan
area pharmacy if certain earnings targets are attained through December 31,
2001. On July 23, 1997, the Company entered into an operating lease agreement,
which becomes effective September 1, 1997, for a 116-bed facility in
southeastern Ohio. These two acquisitions and the leased facility generated
approximately $7.1 million in combined 1996 revenues.
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These acquisitions have been treated as purchases for accounting and financial
reporting purposes. Results of operations of companies purchased are included
from the dates of acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in 1985 and first offered its Common Stock to
public investors in August, 1993. As more fully described in the Annual Report
on Form 10-K for the year ended December 31, 1996, the Company provides subacute
and basic health care services to patients at its licensed nursing centers
("Centers"), operates three institutional pharmacies and provides rehabilitative
services at two Comprehensive Outpatient Rehabilitation Facilities ("CORFs").
The Company's growth strategy includes the development of new Centers with
subacute units, identification and admission of appropriate high acuity
patients, and the pursuit of strategic acquisition opportunities in selected
markets. During 1996, the Company opened a 36-bed addition to an existing Center
in the first quarter, a 79-bed Center in April, a 116-bed Center in August and a
120-bed Center in late December. The Company acquired two businesses that
provide medical supplies and Medicare billing services and purchased a 100-bed
Center previously operated under a lease agreement effective June, 1996 and
September, 1996, respectively. Effective January 1, 1997, the Company acquired
two CORFs that provide general, job-related injury and geriatric rehabilitation
to the northeastern Pennsylvania market. As of June 30, 1997, the Company
operated 3,580 beds in its 30 Centers located in five states. The Company's
institutional pharmacies, located in Ohio and Florida, service 201
non-affiliated facilities and 29 of the Company's Centers. The Company's two
CORFs service over 1,600 patients annually. Refer to Note 3 of the Notes to
Interim Consolidated Financial Statements.
Ongoing efforts by third party payors to contain health care costs by
limiting reimbursement rates, increasing case management review and negotiating
reduced contract pricing affect the Company's revenues and profitability. During
1996, the Company introduced a plan to improve operating margins, reduce
operating costs and increase referrals from managed care organizations.
RESULTS OF OPERATIONS
The following tables set forth elements of net revenue for the periods
presented:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- ------------------
1996 1997 1996 1997
------ -------- ------- -------
<S> <C> <C> <C> <C>
Services Provided as Percentage of
Total Net Revenue:
Subacute Care (1) 50.2% 52.0% 51.2% 52.1%
Basic Care 40.3 35.7 39.6 35.7
Pharmacy and Other (2) 9.5 12.3 9.2 12.2
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Payor Type as Percentage of
Total Net Revenue:
Private (3) 32.5% 35.9% 32.6% 36.1%
Medicare 35.6 32.9 36.2 33.1
Medicaid 31.9 31.2 31.2 30.8
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
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<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------- -----------------
1996 1997 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Payor Type as Percentage of
Subacute Care Net Revenue:
Private (3) 23.7% 28.8% 23.7% 28.8%
Medicare 66.9 59.0 66.8 59.3
Medicaid 9.4 12.2 9.5 11.9
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Payor Type as Percentage of
Basic Care Net Revenue:
Private (3) 41.3% 40.0% 42.1% 41.0%
Medicaid 58.7 60.0 57.9 59.0
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Payor Type as Percentage of
Pharmacy and Other Net Revenue:
Private (3) 41.7% 54.3% 40.9% 52.6%
Medicare 21.3 17.7 22.0 18.0
Medicaid 37.0 28.0 37.1 29.4
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
The following tables set forth certain operating data for the periods
presented:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------- -------------------
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Number Of Licensed Beds (End Of Period):
Subacute Care 979 1,193 979 1,193
Basic Care 2,363 2,387 2,363 2,387
------- ------- ------- -------
Total 3,342 3,580 3,342 3,580
======= ======= ======= =======
Average Number Of Licensed Beds:
Subacute Care 964 1,204 974 1,217
Basic Care 2,378 2,376 2,326 2,363
------- ------- ------- -------
Total 3,342 3,580 3,300 3,580
======= ======= ======= =======
Average Occupancy (4):
Subacute Care 82.9% 81.8% 82.7% 81.5%
Basic Care 92.1 94.3 92.2 94.4
Total Occupancy 89.4 90.1 89.4 90.0
Subacute Census Mix Percentage:
Private (3) 21.2% 28.2% 20.7% 27.9%
Medicare 69.3 58.0 69.4 59.0
Medicaid 9.5 13.8 9.9 13.1
------- ------- ------- -------
Total 100.0% 100.0% 100.0% 100.0%
======= ======= ======= =======
<FN>
- ------------------------------------
(1) Subacute care revenue includes all room and board, nursing, therapies
and medical supplies provided to patients in the Company's subacute
units and pharmacy charges for all Arbor patients.
</TABLE>
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(2) Pharmacy and other revenues includes institutional pharmacy sales made
to non-related facilities and their residents and outpatient
rehabilitation clinic revenue.
(3) Private includes reimbursement and patient days applicable to
individuals, HMOs, PPOs, indemnity insurers and other charge-based
sources.
(4) Represents total billed patient days divided by total available days.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Total net revenues increased $7.7 million, or 14.6%. Approximately 80%
of the increase was derived from internal growth and the balance from
acquisitions made in 1996 and 1997. Revenues from Start-Up Centers (developed
centers which have been in operation for less than 24 months as of the period
reported upon) provided 74.4% of the internal growth. Total occupancy increased
to 90.1% from 89.4% in the comparable period of the prior year due to improved
occupancy in both Mature Centers (centers in operation for 24 months or more as
of the period reported upon) and Start-Up Centers. Subacute care revenues
increased $5.0 million or 18.7%, due to more beds ($5.9 million), partially
offset by lower average rates ($.9 million). The decrease in subacute rates was
primarily due to a shift in the census mix. Managed care patients accounted for
a higher percentage of the total subacute patients serviced, 19.2% in the
current period compared to 11.7% for the quarter ended June 30, 1996. Managed
care patients have lower per diem rates than traditional indemnity insurance
patients; therefore, combined managed care and insurance rates for subacute
services have decreased. Basic care revenues increased $.3 million, or 1.6%,
due to improved occupancy. Pharmacy and other, primarily outpatient, revenues
increased $2.4 million, or 47.6%, due to the 1996 and 1997 acquisitions ($1.5
million), new pharmacy contracts and increased sales ($.9 million).
Operating expenses increased $5.7 million, or 13.6%. As a percent of
revenue, operating costs decreased to 78.7% from 79.3% for the comparable period
in the prior year. Approximately 86% of the increase was due to Start-Up Centers
and the 1996 and 1997 acquisitions. The remainder of the increase was
attributable to an increase in pharmacy and Mature Centers operating costs.
Compensation expenses for Center staff of $21.8 million, which are included in
operating expenses, increased by $2.4 million, or 12.5%. Start-Up Centers
accounted for $1.9 million of the increase and the remainder was attributed to
increased nursing and administrative costs at Mature Centers. The cost of
providing ancillaries (therapies, pharmaceuticals and medical supplies)
increased operating expenses by $2.1 million. The increase was due to Start-Up
Centers, the 1996 and 1997 acquisitions and costs associated with increased
pharmacy sales offset in part by reduced costs at Mature Centers. Mature Center
ancillary costs decreased 10.1% when compared to the same period in the prior
year due to Company efforts in converting therapy to in-house programs rather
than purchasing from contract therapy providers. All other costs in Mature and
Start-Up Centers increased $1.2 million.
General corporate expenses increased $.3 million or 15.7%. The increase
is due to additional administrative costs incurred to support internal growth
and pursue strategic acquisitions.
Ownership costs increased $.8 million, or 16.2%, primarily due to
Start-Up Centers and the 1997 acquisitions.
Net income increased by $.5 million, or 24.1%, primarily as a result of
the foregoing factors.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Total net revenues increased $14.7 million, or 14.0%. Approximately 81%
of the increase was derived from internal growth and the balance from
acquisitions made in 1996 and 1997. Revenues from Start-Up Centers provided
84.7% of the internal growth. Total occupancy increased to 90.0% from 89.4% in
the comparable period of the prior year due to improved occupancy in both Mature
and Start-Up Centers. Subacute care revenues increased $8.7 million, or 16.1%,
due to more beds ($12.1 million) partially offset by lower average rates ($3.4
million). The decrease in subacute rates was primarily due to a census mix
change to more managed care patients, as described above. Basic care revenues
increased $1.1 million, or 2.8%, due to more beds and improved occupancy.
Pharmacy and other, primarily outpatient, revenues increased $4.9 million, or
50.1%, due to the 1996 and 1997 acquisitions ($2.8 million) and new pharmacy
contracts and increased sales ($2.1 million).
Operating expenses increased $10.6 million, or 12.7%. As a percent of
revenue, operating costs decreased to 78.4% from 79.4% for the comparable period
in the prior year. Approximately 97% of the increase was due to Start-Up Centers
and the 1996 and 1997 acquisitions. The remaining increase was
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attributable to increased costs to support growth of pharmacy operations offset
by a 1.5% decrease in Mature Center operating costs when compared to the six
months ended June 30,1996. The decrease in Mature Center costs was due to the
Company's efforts in standardizing staffing models and converting therapy to
in-house programs rather than purchasing from contract therapy providers.
Compensation expenses for Center staff of $43.0 million, which are included in
operating expenses, increased by $3.9 million, or 10.0%. Start-Up Centers
accounted for $4.0 million of the increase offset by a decrease in Mature
Centers compensation expense of $.1 million. The cost of providing ancillaries
increased operating expenses by $4.5 million due to Start-Up Centers, the 1996
and 1997 acquisitions and cost associated with increased pharmacy sales offset
in part by reduced costs at Mature Centers. Mature Center ancillary costs
decreased 8.2% when compared to the same period in the prior year as a result of
Company efforts in converting therapy to in-house programs rather than
purchasing from contract therapy providers. All other costs in Mature and
Start-Up Centers increased $2.2 million.
General corporate expenses increased $.8 million, or 17.4%. The
increase is due to additional administrative costs incurred to support internal
growth and pursue strategic acquisitions.
Ownership costs increased $1.6 million, or 16.6%, primarily due to
Start-Up Centers and the 1997 acquisitions.
Net income increased by $1.0 million, or 24.5%, primarily as a result
of the foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
During the last two years, the Company's growth has been financed with cash
from operating and financing activities. Cash from operating activities
primarily has been provided by net income from operations. Non-cash expense
items included in net income and increases in other current liabilities offset
increased accounts receivable primarily associated with Start-Up Centers,
acquisitions and increased managed care revenues. Also, in the comparable
period in 1996, payments of accounts payable accounted for the use of operating
cash. Net borrowings on long-term obligations have been the source of cash from
financing activities for the six month period ended June 30, 1997 and 1996.
Expenditures for investing activities primarily have been for the development
of new Centers and renovations to the existing Centers. Additionally, in 1997,
expenditures were made for the acquisition of two CORFs.
At June 30, 1997, the Company had working capital of $17.9 million
compared to $14.4 million at December 31, 1996. An increase in accounts
receivable accounted for the majority of the working capital increase. The
number of days of net revenues in net receivables for the quarter increased to
75 days at June 30, 1997 compared to 70 days at December 31, 1996.
Approximately 60% of the increase is due to increased managed care revenues and
receivables with the remainder due to Start-Up Centers and the 1997
acquisitions. The Company has focused additional staffing on collections in
conjunction with the new divisional operations structure announced during the
current period.
The Company has revolving credit facilities ("Credit Facilities") with
four banks that are renewable annually. These Credit Facilities provide working
capital, letters of credit, and acquisition and development financing of $9.0
million, $4.4 million and $51.4 million, respectively. As of June 30, 1997, $6.0
million of working capital had been borrowed, $2.7 million of letters of credit
were outstanding, and $35.2 million of acquisition and development lines had
been committed. The annual rates charged by the banks vary. Interest rates on
the working capital lines range from London Interbank Offered Rates ("LIBOR")
plus 1.5% to prime and on the acquisition/development facilities from LIBOR plus
1.75% to LIBOR plus 2.0%. Annual fees of 1.0% to 1.5% are charged by the banks
issuing letters of credit under these facilities.
Long term obligations, including current maturities, which provide
funds for financing Centers and acquisitions, totaled approximately $101.2
million at June 30, 1997. These obligations are for varying amounts and for
terms that expire at varying times over the next 20 years. Interest rates on
outstanding obligations ranged from 4.025% to 10.75% at June 30, 1997. The
Company has been successful in obtaining permanent financing but uses its Credit
Facilities as interim sources of financing when appropriate.
The Company has various ongoing needs for capital, including (i)
working capital for operations; (ii) capital expenditures for its Centers or
other facilities; and (iii) capital expenditures for the development of new
Centers and potential acquisitions. During the remainder of 1997, the Company
expects to utilize approximately $15.4 million for the development of four
Centers and an addition to an existing Center; $1.3 million for Center
renovations; $5.5 million for other routine capital expenditures; and at least
$2.0 million for acquisitions. The Company currently holds eight Certificate of
Need ("CON") approvals for 791 beds, which will be utilized to open the above
mentioned
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Centers and addition in 1998 and three centers in 1999. The Company anticipates
1998 revenues from the new facility development to be approximately $18.0 to
$20.0 million based upon historical fill-up rates and the current construction
schedule. The cost of these projects ranges from $6.0 to $7.5 million per
120-bed Center. Two of the CON approvals for 240 beds, which are scheduled to
open in 1999, have been appealed by other providers and, therefore, are not yet
final. Management believes when all sources of capital are considered,
including cash to be generated by operating activities, Credit Facilities
likely to be available, and other financing activities to be undertaken, that
sufficient capital resources will be available to carry out anticipated
undertakings during the next 12 to 24 months.
FORWARD-LOOKING STATEMENTS
Certain oral statements made by management from time to time and
certain statements contained herein that are not historical facts are
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Forward-looking statements,
including those in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are statements regarding the intent, belief or
current expectations, estimates or projections of the Company, its Directors or
its Officers about the Company and the industry in which it operates, and
assumptions made by management, and include among other items, (i) the Company's
strategies regarding growth, including its intention to develop additional
Centers and to make acquisitions of Centers, pharmacies and other related
businesses; (ii) the Company's ability to continue to control costs and to meet
its liquidity and other financing needs; (iii) the Company's ability to respond
to changes in regulations; and (iv) the Company's ability to earn additional
revenues from managed care organizations and other payors and its implementation
of a business strategy in furtherance of achieving such additional revenues.
Although the Company believes that its expectations are based on reasonable
assumptions, it can give no assurance that the anticipated results will occur.
Important factors that could cause the actual results to differ
materially from those in the forward- looking statements include, among other
items, (i) conditions in the capital markets, including the interest rate
environment and the availability of capital; (ii) changes in or failure to
comply with government regulations; (iii) changes in the competitive marketplace
that could affect the Company's revenue and/or cost bases, such as increased
competition, lack of qualified nursing, management or other personnel and
increased labor costs; and (iv) enactment of health care reform measures by
Congress and/or state legislatures, particularly in Ohio or Florida where most
of the Company's Centers are located.
Budget legislation recently passed by Congress has targeted the
Medicare program for reductions in spending growth of approximately $9.5
billion for skilled nursing facilities over the next five years, primarily
through the implementation of a Medicare prospective payment program for
skilled and subacute services. The Medicare prospective rate, which reimburses
for routine, ancillary and capital costs, will be a blended rate based on 1995
facility costs adjusted by an inflation factor and a national rate. The
national rate is subject to adjustment for case mix (acuity) and variation in
geographical labor costs. In January 1999, the initial year of a four year
phase-in period, the prospective rate will be based on 75% facility costs and
25% national rate. In 2000, the prospective rate will be based on 50% facility
costs and 50% national rate and so on until year 2002 when the prospective rate
will be 100% national rate. Currently, the Company derives approximately 33% of
its revenue from Medicare. Additionally, the Congressional Budget Office has
revised economic projections which include Medicaid cuts of $2.4 billion to
Medicaid long term care providers over the next five years. Currently, the
Company derives approximately 31% of its revenues from Medicaid. Management
believes that in the initial year of the phase-in period of Medicare
prospective payment, the Company's reimbursement rates should not be lower than
current rates and could possibly be higher. However, until the rates are
ultimately determined under the prospective payment system, the Company will
not be able to determine the exact nature or long term financial impact of the
legislative changes. The Company can give no assurance that payments under such
programs in the future will remain at a level comparable to the present level
or be sufficient to cover the costs allocable to serving its Medicare and
Medicaid patients. Concern about the potential effects of the budget
legislation has contributed to the volatility of prices of securities of
companies in health care and related industries, including the Company, and may
similarly affect the price of the Company's securities in the future. See
"Item 1. Business - Sources of Revenue" and "-Government Regulation -
Government Reimbursement Programs" included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
None
Item 2. Changes in Securities.
----------------------
None
11
<PAGE> 12
Item 3. Defaults Upon Senior Securities
--------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
----------------------------------------------------
The Annual Meeting of Stockholders of the Company was held on
May 22, 1997. At the meeting, the following actions were taken
by the stockholders:
1. Carl R. Adkins, M.D. and James F. White, Jr. were
elected as Directors to serve until the Annual Meeting in 2000
and until their successors are elected and qualified or until
their earlier resignation, removal from office or death. The
voting on proposal was as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Carl R. Adkins, M.D. 5,489,103 342,182
James F. White, Jr. 5,489,103 342,182
</TABLE>
2. An amendment to the Company's 1995 Stock Option
Plan to increase the number of shares of Common Stock
authorized for issuance was approved. The voting on the
proposal was as follows:
FOR 4,570,079
AGAINST 617,911
ABSTAIN 44,340
BROKER NON VOTE 598,955
3. The Company's Employee Stock Purchase Plan was
approved. The voting on the proposal was as
follows:
FOR 4,925,802
AGAINST 297,202
ABSTAIN 9,326
BROKER NON VOTE 598,955
4. The appointment of Ernst & Young LLP as the
Company's independent auditors for the year 1997
was ratified and approved. The voting on the
proposal was as follows:
FOR 5,822,879
AGAINST 4,900
ABSTAIN 3,506
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K.
----------------------------------
(a) Exhibits
12
<PAGE> 13
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-3 (File No. 33-93470) filed June 14, 1995 under the Securities
Act of 1933).
3.2 Restated bylaws of the Company (incorporated by reference to Exhibit
3.2 of the Company's Registration Statement on Form S-3 (File No.
33-93470) filed June 14, 1995 under the Securities Act of 1933).
4.1 Demand Note dated June 2, 1997 between The Druggist, Inc. and National
City Bank, Columbus.
4.2 Promissory Note dated June 2, 1997 between The Druggist, Inc. and
National City Bank of Columbus.
4.3 Third Amendment to Amended and Restated Loan Agreement dated March 28,
1997 between the Company and Bank One, Lima, NA. (incorporated by
reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended
March 31, 1997).
4.4 Revolving Credit Note dated March 28, 1997 between the Company and Bank
One, Lima, NA (incorporated by reference to Exhibit 4.2 of the
Company's 10-Q for the quarter ended March 31, 1997).
4.5 Time Note dated March 10, 1997 between the Company and Capital Bank, NA
(incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended March 31, 1997).
4.6 Term Loan Agreement dated January 15, 1997 between the Company and
Capital Bank, NA (incorporated by reference to Exhibit 4.4 of the
Company's 10-Q for the quarter ended March 31, 1997).
4.7 Open End Mortgage dated January 15, 1997 between the Company and
Capital Bank, NA (incorporated by reference to Exhibit 4.5 of the
Company's 10-Q for the quarter ended March 31, 1997).
4.8 Second Amendment to Amended and Restated Loan Agreement dated December
30, 1996 between the Company and Bank One, Lima, NA (incorporated by
reference to Exhibit 4.1 of the Company's 10-K for the year ended
December 31, 1996).
4.9 Loan Agreement dated August 9, 1996 between the Company and The
Provident Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-K for the year ended December 31, 1996).
4.10 Second Amended and Restated Revolving Credit and Term Loan Agreement
dated June 28, 1996 between the Company and KeyBank National
Association, fka Society National Bank (incorporated by reference to
Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1996).
4.11 Loan Agreement extension letter dated April 11, 1996 between the
Company and The Fifth Third Bank (incorporated by reference to Exhibit
4.2 of the Company's 10-Q for the quarter ended June 30, 1996).
4.12 Promissory Note dated February 15, 1996 between the Company and Capital
One Funding Corporation (incorporated by reference to Exhibit 4.1 of
the Company's 10-Q for the quarter ended March 31, 1996).
4.13 Reimbursement Agreement dated February 12, 1996 between the Company and
Bank One, Kentucky, N.A. (incorporated by reference to Exhibit 4.2 of
the Company's 10-Q for the quarter ended March 31, 1996).
4.14 Open-End Mortgage and Security Agreement dated February 12, 1996
between the Company and Bank One, Kentucky, N.A. (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.15 Mortgage and Security Agreements (5) dated February 12, 1996 between
the Company and Bank One, Kentucky, N.A. (incorporated by reference to
Exhibit 4.4 of the Company's 10-Q for the quarter ended March 31,
1996).
4.16 Assignments of Leases and Rents (6) dated February 12, 1996 between the
Company and Bank One, Kentucky, N.A. (incorporated by reference to
Exhibit 4.5 of the Company's 10-Q for the quarter ended March 31,
1996).
4.17 Guaranty Agreement dated February 12, 1996 between the Company and Bank
One, Kentucky, N.A. (incorporated by reference to Exhibit 4.6 of the
Company's 10-Q for the quarter ended March 31, 1996).
4.18 Contingent Guaranty Agreement dated February 12, 1996 between the
Company and Bank One, Kentucky, N.A. (incorporated by reference to
Exhibit 4.7 of the Company's 10-Q for the quarter ended March 31,
1996).
4.19 Working Capital Line of Credit extension letter dated March 31, 1996
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.8 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.20 Letter of Credit extension letter dated March 31, 1996 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.9 of the Company's 10-Q for the quarter ended March 31, 1996).
4.21 Acquisition and Development Revolving Credit Facility extension letter
dated March 31, 1996 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.10 of the Company's 10- Q for
the quarter ended March 31, 1996).
13
<PAGE> 14
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.22 Second Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement dated February 9, 1996 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.11 of the
Company's 10-Q for the quarter ended March 31, 1996).
4.23 Amendment to Amended and Restated Loan Agreement dated February 1, 1996
between the Company and Bank One, Lima, N.A. (incorporated by reference
to Exhibit 4.12 of the Company's 10-Q for the quarter ended March 31,
1996).
4.24 Acquisition and Development Revolving Credit Facility extension letter
dated March 31, 1996 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.1 of the Company's 10-K for the
year ended December 31, 1995).
4.25 Working Capital Line of Credit extension letter dated December 21, 1995
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.2 of the Company's 10-K for the year ended
December 31, 1995).
4.26 Letter of Credit extension letter dated December 21, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.3 of the Company's 10-K for the year ended December 31, 1995).
4.27 Second Amended and Restated Demand Promissory Note dated December 28,
1995 between the Company and Society National Bank (incorporated by
reference to Exhibit 4.4 of the Company's 10-K for the year ended
December 31, 1995).
4.28 Amended and Restated Revolving Credit and Term Loan Agreement dated
June 1, 1995 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.5 of the Company's 10-K for the
year ended December 31, 1995).
4.29 Amendment to Loan Agreement dated September 14, 1995 between the
Company and The Provident Bank (incorporated by reference to Exhibit
4.1 of the Company's 10-Q for the quarter ended September 30, 1995).
4.30 Acquisition and Development Revolving Credit Facility extension letter
dated August 31, 1995 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the
quarter ended September 30, 1995).
4.31 Working Capital Line of Credit extension letter dated August 31, 1995
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
September 30, 1995).
4.32 Letter of Credit extension letter dated August 31, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.4 of the Company's 10-Q for the quarter ended September 30, 1995).
4.33 Loan Agreement dated August 1, 1995 between the Company and The
Provident Bank (incorporated by reference to Exhibit 4.5 of the
Company's 10-Q for the quarter ended September 30, 1995).
4.34 Amended and Restated Loan Agreement dated August 1, 1995 between the
Company and Bank One, Lima, NA (incorporated by reference to Exhibit
4.6 of the Company's 10-Q for the quarter ended September 30, 1995).
4.35 Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement dated June 30, 1995 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q
for the quarter ended June 30, 1995).
4.36 Amendment to Loan Agreement dated June 30, 1995 between the Company and
The Provident Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.37 Amendment to Loan Agreement dated June 29, 1995 between the Company and
Bank One (incorporated by reference to Exhibit 4.3 of the Company's
10-Q for the quarter ended June 30, 1995).
4.38 Amendment to Loan Agreement dated June 30, 1995 between the Company and
The Fifth Third Bank (incorporated by reference to Exhibit 4.4 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.39 Acquisition and Development Revolving Credit Facility extension letter
dated June 1, 1995 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the
quarter ended June 30, 1995).
4.40 Working Capital Line of Credit extension letter dated June 1, 1995
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended
June 30, 1995).
4.41 Letter of Credit extension letter dated June 1, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.7 of the Company's 10-Q for the quarter ended June 30, 1995).
14
<PAGE> 15
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.42 Loan Agreement amendment dated May 31, 1995 between the Company and
Bank One (incorporated by reference to Exhibit 4.8 of the Company's
10-Q for the quarter ended June 30, 1995).
4.43 Loan Agreement extension letter dated May 29, 1995 between the Company
and The Provident Bank (incorporated by reference to Exhibit 4.9 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.44 Loan Agreement extension letter dated March 22, 1995 between the
Company and The Provident Bank (incorporated by reference to Exhibit
4.1 of the Company's 10-Q for the quarter ended March 31, 1995).
4.45 Line of Credit for Letters of Credit Agreement dated November 10, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.1 of the Company's 10-K for the year ended
December 31, 1994).
4.46 Loan Agreement extension letter dated September 16, 1994 between the
Company and The Provident Bank (incorporated by reference to Exhibit
4.1 of the Company's 10-Q for the quarter ended September 30, 1994).
4.47 Acquisition and Development Revolving Credit Facility extension letter
dated August 31, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10- Q for
the quarter ended September 30, 1994).
4.48 Working Capital Line of Credit extension letter dated August 31, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
September 30, 1994).
4.49 Letter of Credit extension letter dated August 31, 1994 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.4 of the Company's 10-Q for the quarter ended September 30, 1994).
4.50 Loan Agreement amendment dated September 15, 1994 between the Company
and Bank One (incorporated by reference to Exhibit 4.5 of the Company's
10-Q for the quarter ended September 30, 1994).
4.51 Revolving Credit and Term Loan Agreement dated April 11, 1994 between
the Company and The Fifth Third Bank (incorporated by reference to
Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1994).
4.52 Loan Agreement extension letter dated May 25, 1994 between the Company
and The Provident Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-Q for the quarter ended June 30, 1994).
4.53 Acquisition and Development Revolving Credit Facility extension letter
dated May 18, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.3 of the Company's 10- Q for
the quarter ended June 30, 1994).
4.54 Acquisition and Development Revolving Credit Facility extension letter
dated July 31, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.4 of the Company's 10- Q for
the quarter ended June 30, 1994).
4.55 Working Capital Line of Credit extension letter dated May 16, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended
June 30, 1994).
4.56 Working Capital Line of Credit extension letter dated July 31, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended
June 30, 1994).
4.57 Letter of Credit extension dated May 18, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.7 of the
Company's 10-Q for the quarter ended June 30, 1994).
4.58 Letter of Credit extension letter dated July 31, 1994 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.8 of the Company's 10-Q for the quarter ended June 30, 1994).
4.59 Loan Agreement dated December 21, 1993 between the Company and Bank
One, Lima, NA (incorporated by reference to Exhibit 4.1 of the
Company's 10-K for the year ended December 31, 1993).
4.60 Revolving Credit and Term Loan Agreement dated August 11, 1993 between
the Company and The Provident Bank (incorporated by reference to
Exhibit 4.1 of the Company's 10-Q for the quarter ended September 30,
1993).
4.61 Revolving Credit and Term Loan Agreement dated September 30, 1993
between the Company and Society Bank & Trust (incorporated by reference
to Exhibit 4.2 of the Company's 10-Q for the quarter ended September
30, 1993).
15
<PAGE> 16
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.62 Revolving Credit and Term Loan Agreement dated June 30, 1992 between
the Company and Society Bank & Trust (incorporated by reference to
Exhibit 4.3 of the Company's Registration Statement on Form S-1 (File
No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.63 Line of Credit Agreement dated June 22, 1993 between the Company and
Society Bank & Trust (incorporated by reference to Exhibit 4.4 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
4.64 Loan Agreement between the Company and The Provident Bank dated
September 9, 1992 (incorporated by reference to Exhibit 4.5 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
4.65 Loan Agreement between the Company and Bank One, Lima, NA dated
December 7, 1992 (incorporated by reference to Exhibit 4.6 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1933 under the Securities Act of 1933).
4.66 Commitment Letter dated May 28, 1993 from Bank One, Lima, NA, accepted
by the Company June 7, 1993 (incorporated by reference to Exhibit 4.7
of the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed June 25, 1993 under the Securities Act of 1933).
4.67 Mortgage and Security Agreement between the Company and Southtrust Bank
of Alabama, National Association, dated September 29, 1992
(incorporated by reference to Exhibit 4.8 of the Company's Registration
Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
4.68 Commitment Letter dated as of May 30, 1993, from Society Bank & Trust
for revolving credit facility, accepted by the Company June 22, 1993
(incorporated by reference to Exhibit 4.9 of the Company's Registration
Statement on Form S-1 (File No. 33-65080) filed July 9, 1993 under the
Securities Act of 1933).
4.69 Commitment Letter dated as of July 1, 1993, from The Provident Bank,
informing the Company of reaffirmation of line of credit (incorporated
by reference to Exhibit 4.10 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities
Act of 1933). (The Company is not filing any instrument with respect to
long-term debt that does not exceed 10 percent of the total assets of
the Company, and the Company agrees to furnish a copy of any such
instrument to the Commission upon request).
10.1+ Amendment No. 1 to Arbor Health Care Company 1995 Stock Option Plan.
10.2+ Arbor Health Care Company Employee Stock Purchase Plan (incorporated by
reference to the Company's Proxy Statement dated April 18, 1997).
10.3 Share Purchase Agreement dated December 16, 1996 between the Company
and Diane S. Bartoli, sole shareholder of Adult Services Unlimited,
Inc. and Health Poconos, Inc. (incorporated by reference to Exhibit
10.1 of the Company's 10-K for the year ended December 31, 1996).
10.4+ Key Executive Termination Payment Plan dated June 1, 1996 (incorporated
by reference to Exhibit 10.2 of the Company's 10-K for the year ended
December 31, 1996)
10.5+ Description of 1996 Bonus Plans for Named Executive Officers
(incorporated by reference to Exhibit 10.3 of the
Company's 10-K for the year ended December 31, 1996).
10.6 Purchase and Sale Agreement dated September 19, 1996 between the
Company and Cumberland Healthcare, L.P. I-C. (incorporated by reference
to Exhibit 10.1 of the Company's 10-Q for the quarter ended September
30, 1996).
10.7 Share Purchase Agreement dated June 30, 1996 between the Company and
Robert Q. Baker, sole shareholder of Poly-Stat Supply
Corporation(incorporated by reference to Exhibit 10.1 of the Company's
10-Q for the quarter ended June 30, 1996).
10.8 Share Purchase Agreement dated June 30, 1996 between the Company and
Robert Q. Baker and Richard E. Moon, shareholders of Poly-Stat Computer
Applications, Inc (incorporated by reference to Exhibit 10.2 of the
Company's 10-Q for the quarter ended June 30, 1996).
10.9 Second Amendment to Lease Agreement dated March 18, 1996 between the
Company and V & V Properties (incorporated by reference to Exhibit 10.1
of the Company's 10-Q for the quarter ended March 31, 1996).
10.10+ Arbor Health Care Company 1996 Stock Option Plan for Non-Employee
Directors (incorporated by reference to the Company's Proxy Statement
dated April 8, 1996).
10.11+ Description of 1995 Bonus Plans for Named Executive Officers
(incorporated by reference to Exhibit 10.1 of the Company's 10-K for
the year ended December 31, 1995).
16
<PAGE> 17
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.12 Asset Purchase Agreement dated April 28, 1995 between the Company and
Fairlawn Associates Limited Partnership (incorporated by reference to
Exhibit 10.1 of the Company's 10-Q for the quarter ended June 30,
1995).
10.13 Amendment to Asset Purchase Agreement dated June 1, 1995 between the
Company and Fairlawn Associates Limited Partnership (incorporated by
reference to Exhibit 10.2 of the Company's 10-Q for the quarter ended
June 30, 1995).
10.14 Agreement of Merger dated June 30, 1995 between the Company, Green Tree
Pharmacy, Inc., Allan K. Vrable and The Druggist, Inc. (incorporated by
reference to Exhibit 10.3 of the Company's 10-Q for the quarter ended
June 30, 1995).
10.15 Addendum to Agreement of Merger dated June 30, 1995 between the
Company, Green Tree Pharmacy, Inc., Allan K. Vrable and The Druggist,
Inc. (incorporated by reference to Exhibit 10.4 of the Company's 10-Q
for the quarter ended June 30, 1995).
10.16 Share Purchase Agreement dated June 30, 1995 between the Company and
Allan K. Vrable, sole shareholder of Alternacare Plus Enterprises, Inc.
(incorporated by reference to Exhibit 10.5 of the Company's 10-Q for
the quarter ended June 30, 1995).
10.17+ Employment Agreement dated June 30, 1995 between the Company and Allan
K. Vrable (incorporated by reference to Exhibit 10.6 of the Company's
10-Q for the quarter ended June 30, 1995).
10.18+ Arbor Health Care Company 1995 Stock Option Plan (incorporated by
reference to the Company's Proxy Statement dated April 24, 1995)
10.19 Share Purchase Agreement dated June 30, 1994 between the Company and
the Stockholders of Bay Geriatric Pharmacy, Inc. and Home Care
Pharmacy, Inc. of Florida (incorporated by reference to Exhibit 10.1 of
the Company's 10-K for the year ended December 31, 1994).
10.20 Lease Agreement between Highland Oaks Associates, LTD., and Bay
Geriatric Pharmacy, dated May 23, 1991 (incorporated by reference to
Exhibit 10.2 of the Company's 10-K for the year ended December 31,
1994).
10.21 Lease Agreement between FGHP Properties, Limited Partnership and Home
Care Pharmacy, Inc. of Florida, dated March 24, 1993 (incorporated by
reference to Exhibit 10.3 of the Company's 10-K for the year ended
December 31, 1994).
10.22 First Amendment to lease between the Company and Semi Cane Investments,
Inc., as Successor in Interest to Great Western Bank dated June 17,
1994 (incorporated by reference to Exhibit 10.4 of the Company's 10-K
for the year ended December 31, 1994).
10.23 First Amendment to Lease Agreement dated March 11, 1994 between the
Company and V & V Properties (incorporated by reference to Exhibit 10.5
of the Company's 10-K for the year ended December 31, 1994).
10.24 Management Agreement between the Company and Fairlawn Nursing Home and
Assisted Living, Inc. dated June 9, 1986, and amendments thereto dated
June 13, 1986, October 1, 1990, and January 1, 1993 (incorporated by
reference to Exhibit 10.1 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities
Act of 1933).
10.25 Lease Agreement between the Company and V & V Properties, dated June 2,
1988 (incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.26 Operating Lease between the Company and Health Care Property Investors,
Inc., dated January 31, 1986, as amended September 11, 1991
(incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.27 Business Property Lease between the Company and Office World, Inc.
dated July 1, 1992 (incorporated by reference to Exhibit 10.4 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
10.28 Lease Agreement between the Company and Great Western Bank, dated July
1, 1992 (incorporated by reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.29 Operating Lease between the Company and Health Care Property Investors,
Inc., dated January 31, 1986, as amended September 11, 1991
(incorporated by reference to Exhibit 10.6 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
17
<PAGE> 18
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.30 Office Lease between the Company and NFI MetroCenter II Associates
dated November 15, 1992 (incorporated by reference to Exhibit 10.7 of
the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed June 25, 1993 under the Securities Act of 1933).
10.31 Lease Agreement between the Company and Marie Antoinette Partners,
dated April 2, 1986 (incorporated by reference to Exhibit 10.8 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
10.32 Facility Lease by and between the Company and Cumberland Healthcare,
L.P., I-C, dated February 1, 1989, as amended November 15, 1991
(incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.33 Lease and Security Agreement between BIP SUB I, INC. and Arbors East,
Inc. dated April 1, 1991 (incorporated by reference to Exhibit 10.10 of
the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed June 25, 1993 under the Securities Act of 1933).
10.34 Operating Lease between the Company and Health Care Properties
Investors, Inc. dated December 30, 1986 and Addendum dated March 23,
1987 (incorporated by reference to Exhibit 10.11 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.35+ First Amended and Restated Incentive Stock Option Plan dated November
26, 1991 (incorporated by reference to Exhibit 10.12 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.36 Management Agreement dated September 28, 1989 between the Company and
The Druggist, Inc., as amended June 30, 1991 (incorporated by reference
to Exhibit 10.14 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of
1933).
10.37 Assignment and Assumption of Management Agreement dated January 4, 1989
among the Company, Fairlawn Nursing Home and Assisted Living, Inc., and
Fairlawn Associates Limited Partnership, relating to Management
Agreement previously filed as Exhibit 10.1 of the Company's
Registration Statement on Form S-1 filed on June 25, 1993 (File No.
33-65080) and incorporated by reference herein (incorporated by
reference to Exhibit 10.16 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities
Act of 1933).
10.38+ Certificate of Amendment dated July 7, 1993, to First Amended and
Restated Incentive Stock Option Plan previously filed as Exhibit 10.12
of the Company's Registration Statement on Form S-1 (File No. 33-
65080) and incorporated by reference herein (incorporated by reference
to Exhibit 10.17 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed July 9, 1993 under the Securities Act of
1933).
10.39 Land Lease Agreement between the Company and the Chesapeake and Potomac
Telephone Company of West Virginia dated June 24, 1993 (incorporated by
reference to Exhibit 10.18 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 29, 1993 under the Securities
Act of 1933).
10.40+ Form of Indemnification Agreement between the Company and its Directors
and Executive Officers (incorporated by reference to Exhibit 10.19 of
the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed July 29, 1993 under the Securities Act of 1933).
11.1 Statement Re Computation of Net Income Per Share.
27.1 Financial Data Schedule.
+Executive management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARBOR HEALTH CARE COMPANY
(Registrant)
Date 8/5/97 By: /s/ DENNIS R. SMITH
---------------- ------------------------------------------
Dennis R. Smith, Senior Vice President -
Finance and Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1* Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-3 (File No. 33-93470) filed June 14, 1995 under the Securities
Act of 1933).
3.2* Restated bylaws of the Company (incorporated by reference to Exhibit
3.2 of the Company's Registration Statement on Form S-3 (File No.
33-93470) filed June 14, 1995 under the Securities Act of 1933).
4.1 Demand Note dated June 2, 1997 between The Druggist, Inc. and National
City Bank, Columbus.
4.2 Promissory Note dated June 2, 1997 between The Druggist, Inc. and
National City Bank of Columbus.
4.3* Third Amendment to Amended and Restated Loan Agreement dated March 28,
1997 between the Company and Bank One, Lima, NA (incorporated by
reference to Exhibit 4.1 of the Company 10-Q for the quarter ended
March 31, 1997).
4.4* Revolving Credit Note dated March 28, 1997 between the Company and Bank
One, Lima, NA (incorporated by reference to Exhibit 4.2 of the Company
10-Q for the quarter ended March 31, 1997).
4.5* Time Note dated March 10, 1997 between the Company and Capital Bank, NA
(incorporated by reference to Exhibit 4.3 of the Company 10-Q for the
quarter ended March 31, 1997).
4.6* Term Loan Agreement dated January 15, 1997 between the Company and
Capital Bank, NA (incorporated by reference to Exhibit 4.4 of the
Company 10-Q for the quarter ended March 31, 1997).
4.7* Open End Mortgage dated January 15, 1997 between the Company and
Capital Bank, NA (incorporated by reference to Exhibit 4.5 of the
Company 10-Q for the quarter ended March 31, 1997).
4.8* Second Amendment to Amended and Restated Loan Agreement dated December
30, 1996 between the Company and Bank One, Lima, NA (incorporated by
reference to Exhibit 4.1 of the Company's 10-K for the year ended
December 31, 1996).
4.9* Loan Agreement dated August 9, 1996 between the Company and The
Provident Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-K for the year ended December 31, 1996).
4.10* Second Amended and Restated Revolving Credit and Term Loan Agreement
dated June 28, 1996 between the Company and KeyBank National
Association, fka Society National Bank (incorporated by reference to
Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1996).
4.11* Loan Agreement extension letter dated April 11, 1996 between the
Company and The Fifth Third Bank (incorporated by reference to Exhibit
4.2 of the Company's 10-Q for the quarter ended June 30, 1996).
4.12* Promissory Note dated February 15, 1996 between the Company and Capital
One Funding Corporation (incorporated by reference to Exhibit 4.1 of
the Company's 10-Q for the quarter ended March 31, 1996).
4.13* Reimbursement Agreement dated February 12, 1996 between the Company and
Bank One, Kentucky, N.A. (incorporated by reference to Exhibit 4.2 of
the Company's 10-Q for the quarter ended March 31, 1996).
19
<PAGE> 20
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.14* Open-End Mortgage and Security Agreement dated February 12, 1996
between the Company and Bank One, Kentucky, N.A. (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.15* Mortgage and Security Agreements (5) dated February 12, 1996 between
the Company and Bank One, Kentucky, N.A. (incorporated by reference to
Exhibit 4.4 of the Company's 10-Q for the quarter ended March 31,
1996).
4.16* Assignments of Leases and Rents (6) dated February 12, 1996 between the
Company and Bank One, Kentucky, N.A. (incorporated by reference to
Exhibit 4.5 of the Company's 10-Q for the quarter ended March 31,
1996).
4.17* Guaranty Agreement dated February 12, 1996 between the Company and Bank
One, Kentucky, N.A. (incorporated by reference to Exhibit 4.6 of the
Company's 10-Q for the quarter ended March 31, 1996).
4.18* Contingent Guaranty Agreement dated February 12, 1996 between the
Company and Bank One, Kentucky, N.A. (incorporated by reference to
Exhibit 4.7 of the Company's 10-Q for the quarter ended March 31,
1996).
4.19* Working Capital Line of Credit extension letter dated March 31, 1996
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.8 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.20* Letter of Credit extension letter dated March 31, 1996 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.9 of the Company's 10-Q for the quarter ended March 31, 1996).
4.21* Acquisition and Development Revolving Credit Facility extension letter
dated March 31, 1996 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.10 of the Company's 10- Q for
the quarter ended March 31, 1996).
4.22* Second Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement dated February 9, 1996 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.11 of the
Company's 10-Q for the quarter ended March 31, 1996).
4.23* Amendment to Amended and Restated Loan Agreement dated February 1, 1996
between the Company and Bank One, Lima, N.A. (incorporated by reference
to Exhibit 4.12 of the Company's 10-Q for the quarter ended March 31,
1996).
4.24* Acquisition and Development Revolving Credit Facility extension letter
dated March 31, 1996 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.1 of the Company's 10-K for the
year ended December 31, 1995).
4.25* Working Capital Line of Credit extension letter dated December 21, 1995
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.2 of the Company's 10-K for the year ended
December 31, 1995).
4.26* Letter of Credit extension letter dated December 21, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.3 of the Company's 10-K for the year ended December 31, 1995).
4.27* Second Amended and Restated Demand Promissory Note dated December 28,
1995 between the Company and Society National Bank (incorporated by
reference to Exhibit 4.4 of the Company's 10-K for the year ended
December 31, 1995).
4.28* Amended and Restated Revolving Credit and Term Loan Agreement dated
June 1, 1995 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.5 of the Company's 10-K for the
year ended December 31, 1995).
4.29* Amendment to Loan Agreement dated September 14, 1995 between the
Company and The Provident Bank (incorporated by reference to Exhibit
4.1 of the Company's 10-Q for the quarter ended September 30, 1995).
4.30* Acquisition and Development Revolving Credit Facility extension letter
dated August 31, 1995 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the
quarter ended September 30, 1995).
4.31* Working Capital Line of Credit extension letter dated August 31, 1995
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
September 30, 1995).
4.32* Letter of Credit extension letter dated August 31, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.4 of the Company's 10-Q for the quarter ended September 30, 1995).
20
<PAGE> 21
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.33* Loan Agreement dated August 1, 1995 between the Company and The
Provident Bank (incorporated by reference to Exhibit 4.5 of the
Company's 10-Q for the quarter ended September 30, 1995).
4.34* Amended and Restated Loan Agreement dated August 1, 1995 between the
Company and Bank One, Lima, NA (incorporated by reference to Exhibit
4.6 of the Company's 10-Q for the quarter ended September 30, 1995).
4.35* Amendment to Amended and Restated Revolving Credit and Term Loan
Agreement dated June 30, 1995 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q
for the quarter ended June 30, 1995).
4.36* Amendment to Loan Agreement dated June 30, 1995 between the Company and
The Provident Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.37* Amendment to Loan Agreement dated June 29, 1995 between the Company and
Bank One (incorporated by reference to Exhibit 4.3 of the Company's
10-Q for the quarter ended June 30, 1995).
4.38* Amendment to Loan Agreement dated June 30, 1995 between the Company and
The Fifth Third Bank (incorporated by reference to Exhibit 4.4 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.39* Acquisition and Development Revolving Credit Facility extension letter
dated June 1, 1995 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the
quarter ended June 30, 1995).
4.40* Working Capital Line of Credit extension letter dated June 1, 1995
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended
June 30, 1995).
4.41* Letter of Credit extension letter dated June 1, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.7 of the Company's 10-Q for the quarter ended June 30, 1995).
4.42* Loan Agreement amendment dated May 31, 1995 between the Company and
Bank One (incorporated by reference to Exhibit 4.8 of the Company's
10-Q for the quarter ended June 30, 1995).
4.43* Loan Agreement extension letter dated May 29, 1995 between the Company
and The Provident Bank (incorporated by reference to Exhibit 4.9 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.44* Loan Agreement extension letter dated March 22, 1995 between the
Company and The Provident Bank (incorporated by reference to Exhibit
4.1 of the Company's 10-Q for the quarter ended March 31, 1995).
4.45* Line of Credit for Letters of Credit Agreement dated November 10, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.1 of the Company's 10-K for the year ended
December 31, 1994).
4.46* Loan Agreement extension letter dated September 16, 1994 between the
Company and The Provident Bank (incorporated by reference to Exhibit
4.1 of the Company's 10-Q for the quarter ended September 30, 1994).
4.47* Acquisition and Development Revolving Credit Facility extension letter
dated August 31, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10- Q for
the quarter ended September 30, 1994).
4.48* Working Capital Line of Credit extension letter dated August 31, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
September 30, 1994).
4.49* Letter of Credit extension letter dated August 31, 1994 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.4 of the Company's 10-Q for the quarter ended September 30, 1994).
4.50* Loan Agreement amendment dated September 15, 1994 between the Company
and Bank One (incorporated by reference to Exhibit 4.5 of the Company's
10-Q for the quarter ended September 30, 1994).
4.51* Revolving Credit and Term Loan Agreement dated April 11, 1994 between
the Company and The Fifth Third Bank (incorporated by reference to
Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1994).
4.52* Loan Agreement extension letter dated May 25, 1994 between the Company
and The Provident Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-Q for the quarter ended June 30, 1994).
4.53* Acquisition and Development Revolving Credit Facility extension letter
dated May 18, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.3 of the Company's 10- Q for
the quarter ended June 30, 1994).
21
<PAGE> 22
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.54* Acquisition and Development Revolving Credit Facility extension letter
dated July 31, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.4 of the Company's 10- Q for
the quarter ended June 30, 1994).
4.55* Working Capital Line of Credit extension letter dated May 16, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended
June 30, 1994).
4.56* Working Capital Line of Credit extension letter dated July 31, 1994
between the Company and Society National Bank (incorporated by
reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended
June 30, 1994).
4.57* Letter of Credit extension dated May 18, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.7 of the
Company's 10-Q for the quarter ended June 30, 1994).
4.58* Letter of Credit extension letter dated July 31, 1994 between the
Company and Society National Bank (incorporated by reference to Exhibit
4.8 of the Company's 10-Q for the quarter ended June 30, 1994).
4.59* Loan Agreement dated December 21, 1993 between the Company and Bank
One, Lima, NA (incorporated by reference to Exhibit 4.1 of the
Company's 10-K for the year ended December 31, 1993).
4.60* Revolving Credit and Term Loan Agreement dated August 11, 1993 between
the Company and The Provident Bank (incorporated by reference to
Exhibit 4.1 of the Company's 10-Q for the quarter ended September 30,
1993).
4.61* Revolving Credit and Term Loan Agreement dated September 30, 1993
between the Company and Society Bank & Trust (incorporated by reference
to Exhibit 4.2 of the Company's 10-Q for the quarter ended September
30, 1993).
4.62* Revolving Credit and Term Loan Agreement dated June 30, 1992 between
the Company and Society Bank & Trust (incorporated by reference to
Exhibit 4.3 of the Company's Registration Statement on Form S-1 (File
No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.63* Line of Credit Agreement dated June 22, 1993 between the Company and
Society Bank & Trust (incorporated by reference to Exhibit 4.4 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
4.64* Loan Agreement between the Company and The Provident Bank dated
September 9, 1992 (incorporated by reference to Exhibit 4.5 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
4.65* Loan Agreement between the Company and Bank One, Lima, NA dated
December 7, 1992 (incorporated by reference to Exhibit 4.6 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1933 under the Securities Act of 1933).
4.66* Commitment Letter dated May 28, 1993 from Bank One, Lima, NA, accepted
by the Company June 7, 1993 (incorporated by reference to Exhibit 4.7
of the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed June 25, 1993 under the Securities Act of 1933).
4.67* Mortgage and Security Agreement between the Company and Southtrust Bank
of Alabama, National Association, dated September 29, 1992
(incorporated by reference to Exhibit 4.8 of the Company's Registration
Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
4.68* Commitment Letter dated as of May 30, 1993, from Society Bank & Trust
for revolving credit facility, accepted by the Company June 22, 1993
(incorporated by reference to Exhibit 4.9 of the Company's Registration
Statement on Form S-1 (File No. 33-65080) filed July 9, 1993 under the
Securities Act of 1933).
4.69* Commitment Letter dated as of July 1, 1993, from The Provident Bank,
informing the Company of reaffirmation of line of credit (incorporated
by reference to Exhibit 4.10 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities
Act of 1933). (The Company is not filing any instrument with respect to
long-term debt that does not exceed 10 percent of the total assets of
the Company, and the Company agrees to furnish a copy of any such
instrument to the Commission upon request).
10.1+ Amendment No. 1 to Arbor Health Care Company 1995 Stock Option Plan.
10.2+* Arbor Health Care Company Employee Stock Purchase Plan (incorporated by
reference to the Company's Proxy Statement dated April 18, 1997).
22
<PAGE> 23
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.3* Share Purchase Agreement dated December 16, 1996 between the Company
and Diane S. Bartoli, sole shareholder of Adult Services Unlimited,
Inc. and Health Poconos, Inc. (incorporated by reference to Exhibit
10.1 of the Company's 10-K for the year ended December 31, 1996).
10.4+* Key Executive Termination Payment Plan dated June 1, 1996 (incorporated
by reference to Exhibit 10.2 of the Company's 10-K for the year ended
December 31, 1996)
10.5+* Description of 1996 Bonus Plans for Named Executive Officers
(incorporated by reference to Exhibit 10.3 of the Company's 10-K for
the year ended December 31, 1996).
10.6* Purchase and Sale Agreement dated September 19, 1996 between the
Company and Cumberland Healthcare, L.P. I-C. (incorporated by reference
to Exhibit 10.1 of the Company's 10-Q for the quarter ended September
30, 1996).
10.7* Share Purchase Agreement dated June 30, 1996 between the Company and
Robert Q. Baker, sole shareholder of Poly-Stat Supply
Corporation(incorporated by reference to Exhibit 10.1 of the Company's
10-Q for the quarter ended June 30, 1996).
10.8* Share Purchase Agreement dated June 30, 1996 between the Company and
Robert Q. Baker and Richard E. Moon, shareholders of Poly-Stat Computer
Applications, Inc (incorporated by reference to Exhibit 10.2 of the
Company's 10-Q for the quarter ended June 30, 1996).
10.9* Second Amendment to Lease Agreement dated March 18, 1996 between the
Company and V & V Properties (incorporated by reference to Exhibit 10.1
of the Company's 10-Q for the quarter ended March 31, 1996).
10.10+* Arbor Health Care Company 1996 Stock Option Plan for Non-Employee
Directors (incorporated by reference to the Company's Proxy Statement
dated April 8, 1996).
10.11+* Description of 1995 Bonus Plans for Named Executive Officers
(incorporated by reference to Exhibit 10.1 of the Company's 10-K for
the year ended December 31, 1995).
10.12* Asset Purchase Agreement dated April 28, 1995 between the Company and
Fairlawn Associates Limited Partnership (incorporated by reference to
Exhibit 10.1 of the Company's 10-Q for the quarter ended June 30,
1995).
10.13* Amendment to Asset Purchase Agreement dated June 1, 1995 between the
Company and Fairlawn Associates Limited Partnership (incorporated by
reference to Exhibit 10.2 of the Company's 10-Q for the quarter ended
June 30, 1995).
10.14* Agreement of Merger dated June 30, 1995 between the Company, Green Tree
Pharmacy, Inc., Allan K. Vrable and The Druggist, Inc. (incorporated by
reference to Exhibit 10.3 of the Company's 10-Q for the quarter ended
June 30, 1995).
10.15* Addendum to Agreement of Merger dated June 30, 1995 between the
Company, Green Tree Pharmacy, Inc., Allan K. Vrable and The Druggist,
Inc. (incorporated by reference to Exhibit 10.4 of the Company's 10-Q
for the quarter ended June 30, 1995).
10.16* Share Purchase Agreement dated June 30, 1995 between the Company and
Allan K. Vrable, sole shareholder of Alternacare Plus Enterprises, Inc.
(incorporated by reference to Exhibit 10.5 of the Company's 10-Q for
the quarter ended June 30, 1995).
10.17+* Employment Agreement dated June 30, 1995 between the Company and Allan
K. Vrable (incorporated by reference to Exhibit 10.6 of the Company's
10-Q for the quarter ended June 30, 1995).
10.18+* Arbor Health Care Company 1995 Stock Option Plan (incorporated by
reference to the Company's Proxy Statement dated April 24, 1995)
10.19* Share Purchase Agreement dated June 30, 1994 between the Company and
the Stockholders of Bay Geriatric Pharmacy, Inc. and Home Care
Pharmacy, Inc. of Florida (incorporated by reference to Exhibit 10.1 of
the Company's 10-K for the year ended December 31, 1994).
10.20* Lease Agreement between Highland Oaks Associates, LTD., and Bay
Geriatric Pharmacy, dated May 23, 1991 (incorporated by reference to
Exhibit 10.2 of the Company's 10-K for the year ended December 31,
1994).
10.21* Lease Agreement between FGHP Properties, Limited Partnership and Home
Care Pharmacy, Inc. of Florida, dated March 24, 1993 (incorporated by
reference to Exhibit 10.3 of the Company's 10-K for the year ended
December 31, 1994).
10.22* First Amendment to lease between the Company and Semi Cane Investments,
Inc., as Successor in Interest to Great Western Bank dated June 17,
1994 (incorporated by reference to Exhibit 10.4 of the Company's 10-K
for the year ended December 31, 1994).
23
<PAGE> 24
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.23* First Amendment to Lease Agreement dated March 11, 1994 between the
Company and V & V Properties (incorporated by reference to Exhibit 10.5
of the Company's 10-K for the year ended December 31, 1994).
10.24* Management Agreement between the Company and Fairlawn Nursing Home and
Assisted Living, Inc. dated June 9, 1986, and amendments thereto dated
June 13, 1986, October 1, 1990, and January 1, 1993 (incorporated by
reference to Exhibit 10.1 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities
Act of 1933).
10.25* Lease Agreement between the Company and V & V Properties, dated June 2,
1988 (incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.26* Operating Lease between the Company and Health Care Property Investors,
Inc., dated January 31, 1986, as amended September 11, 1991
(incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.27* Business Property Lease between the Company and Office World, Inc.
dated July 1, 1992 (incorporated by reference to Exhibit 10.4 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
10.28* Lease Agreement between the Company and Great Western Bank, dated July
1, 1992 (incorporated by reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.29* Operating Lease between the Company and Health Care Property Investors,
Inc., dated January 31, 1986, as amended September 11, 1991
(incorporated by reference to Exhibit 10.6 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.30* Office Lease between the Company and NFI MetroCenter II Associates
dated November 15, 1992 (incorporated by reference to Exhibit 10.7 of
the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed June 25, 1993 under the Securities Act of 1933).
10.31* Lease Agreement between the Company and Marie Antoinette Partners,
dated April 2, 1986 (incorporated by reference to Exhibit 10.8 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed
June 25, 1993 under the Securities Act of 1933).
10.32* Facility Lease by and between the Company and Cumberland Healthcare,
L.P., I-C, dated February 1, 1989, as amended November 15, 1991
(incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.33* Lease and Security Agreement between BIP SUB I, INC. and Arbors East,
Inc. dated April 1, 1991 (incorporated by reference to Exhibit 10.10 of
the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed June 25, 1993 under the Securities Act of 1933).
10.34* Operating Lease between the Company and Health Care Properties
Investors, Inc. dated December 30, 1986 and Addendum dated March 23,
1987 (incorporated by reference to Exhibit 10.11 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.35+* First Amended and Restated Incentive Stock Option Plan dated November
26, 1991 (incorporated by reference to Exhibit 10.12 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25,
1993 under the Securities Act of 1933).
10.36* Management Agreement dated September 28, 1989 between the Company and
The Druggist, Inc., as amended June 30, 1991 (incorporated by reference
to Exhibit 10.14 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of
1933).
10.37* Assignment and Assumption of Management Agreement dated January 4, 1989
among the Company, Fairlawn Nursing Home and Assisted Living, Inc., and
Fairlawn Associates Limited Partnership, relating to Management
Agreement previously filed as Exhibit 10.1 of the Company's
Registration Statement on Form S-1 filed on June 25, 1993 (File No.
33-65080) and incorporated by reference herein (incorporated by
reference to Exhibit 10.16 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities
Act of 1933).
24
<PAGE> 25
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.38+* Certificate of Amendment dated July 7, 1993, to First Amended and
Restated Incentive Stock Option Plan previously filed as Exhibit 10.12
of the Company's Registration Statement on Form S-1 (File No. 33-
65080) and incorporated by reference herein (incorporated by reference
to Exhibit 10.17 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed July 9, 1993 under the Securities Act of
1933).
10.39* Land Lease Agreement between the Company and the Chesapeake and Potomac
Telephone Company of West Virginia dated June 24, 1993 (incorporated by
reference to Exhibit 10.18 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 29, 1993 under the Securities
Act of 1933).
10.40+* Form of Indemnification Agreement between the Company and its Directors
and Executive Officers (incorporated by reference to Exhibit 10.19 of
the Company's Registration Statement on Form S-1 (File No. 33-65080)
filed July 29, 1993 under the Securities Act of 1933).
11.1 Statement Re Computation of Net Income Per Share.
27.1 Financial Data Schedule.
+Executive management contract or compensatory plan or arrangement.
25
<PAGE> 1
Exhibit 4.1
PROMISSORY NOTE
COMMERCIAL LOAN
NOTE NO. ___________
Cincinnati, Ohio
$ 5,000,000.00 June 30, 1997
------------------ ---------------------
The undersigned, for value received, promises to pay to the order of The
Provident Bank, at any of its offices, the sum of FIVE MILLION AND NO/100
Dollars ($5,000,000.00), (the "Maximum Credit") or so much thereof as is loaned
by the holder pursuant to the provisions hereof, together with interest until
demand or maturity at the rate of TO VARY WITH THE PROVIDENT BANK PRIME RATE per
year computed on the basis of a year of 360 days for the actual number of days
elapses, and after default hereunder, demand or maturity, whether at stated
maturity or by acceleration, at a rate four (4) percentage points greater than
the stated rate (the "Default Rate"). Interest shall be due and payable MONTHLY
ON THE 15TH DAY OF EACH MONTH BEGINNING AUGUST 15, 1997, and at maturity.
Principal shall be due and payable AT MATURITY, JUNE 15, 1998. The undersigned
hereby state(s) that the purpose of the loan evidenced by this Note is WORKING
CAPITAL.
X REVOLVING CREDIT: If this box is checked, this Note is a revolving
credit subject to terms of this paragraph. Subject to the conditions hereof and
of any other agreements between the parties relating hereto and until demand, if
the principal is payable on demand, or maturity (whether at scheduled or
accelerated maturity), if the principal is payable other than on demand, the
undersigned may borrow and reborrow from the holder and the holder may, in its
sole discretion, lend and relend to the undersigned such amounts not to exceed
the Maximum Credit as the undersigned may at any time and from time to time
request upon satisfactory notice to the holder.
Notwithstanding anything to the contrary contained herein or in any
other agreement between the undersigned and the holder, if this Note provides
that the principal hereof is payable on demand, then this Note is a demand Note
due and owing immediately, without prior demand of the holder and immediate
action to enforce its payment may be taken at any time, without notice and
without reason. If any payment of principal or interest is not paid when due, or
if the holder deems itself insecure for any reason, including but not limited
to, the insolvency, bankruptcy, business failure, death, default in the payment
of other obligations or receivership of or concerning any maker, guarantor or
indorser hereof, this Note shall, if payable other than on demand, at the option
of its holder, become immediately due and payable, without demand or notice. The
undersigned shall promptly provide such financial information as the holder
shall reasonably request from time to time.
As collateral security for the payment of the amounts from time to time
owing hereunder, Borrower and all indorsers hereby grants to the holder a
security interest in (i) all property in which the holder now or hereafter holds
a security interest pursuant to any and all assignments, pledges and security
agreements between the undersigned and the holder and (ii) all accounts,
securities and properties now or hereafter in the possession of the holder and
in which the undersigned or any
1
<PAGE> 2
indorsers have any interest. Upon this Note becoming due under any of its terms
and provisions, and not being fully paid and satisfied, the total sum then due
hereunder may, at any time and from time to time, be charged against any account
or accounts maintained with the holder hereof by any of the undersigned or any
indorser, without notice to or further consent from any of them, and the
undersigned and all indorsers agree to be and remain jointly and severally
liable for all remaining indebtedness represented by this Note in excess of the
amount or amounts so applied. The undersigned and the holder intend that this
indebtedness shall be secured by any and all mortgages heretofore or hereafter
granted by the undersigned in favor of the holder.
There will be a minimum finance charge of $50.00 for each billing
period. Prime rate is that annual percentage rate of interest which is
established by The Provident Bank from time to time as its prime rate, whether
or not such rate is publicly announced, and which provides a base to which loan
rates may be referenced. Prime rate is not necessarily the lowest lending rate
of The Provident Bank. A rate based on the prime rate will change each time and
as of the date that the prime rate changes. If any payment of principal or
interest is not paid when due or if the undersigned shall otherwise default in
the performance of its obligations hereunder or under any other note or
agreement with the holder, the holder at its option, may charge and collect, or
add to the unpaid balance hereof, a late charge up to the greater of $250 or .1%
of the unpaid balance of this Note at the time of such delinquency for each such
delinquency to cover the extra expense incident to handling delinquent accounts,
and/or increase the interest rate on the unpaid balance to the Default Rate. The
holder may charge interest at the rate provided herein on all interest and other
amounts owing hereunder which are not paid when due.
The undersigned, all indorsers hereof, any other party hereto, and any
guarantor hereof (collectively "Obligors") each (i) waive(s) presentment,
demand, notice of demand, protest, notice of protest and notice of dishonor and
any other notice required to be given by law in connection with the delivery,
acceptance, performance, default or enforcement of this Note, of any indorsement
or guaranty of this Note or of any document or instrument evidencing any
security for payment of this Note; and (ii) consent(s) to any and all delays,
extensions, renewals or other modifications of this Note or waivers of any term
hereof or release or discharge by the holder of any of Obligors or release,
substitution or exchange of any security for the payment hereof or the failure
to act on the part of the holder or any indulgence shown by the holder, from
time to time and in one or more instances, (without notice to or further assent
from any of Obligors) and agree(s) that no such action, failure to act or
failure to exercise any right or remedy, on the part of the holder shall in any
way affect or impair the obligations of any Obligors or be construed as a waiver
by the holder of, or otherwise affect, any of the holder's rights under this
Note, under any indorsement or guaranty of this Note or under any document or
instrument evidencing any security for payment of this Note. The undersigned and
all indorsers further agree to reimburse the holder for all advances, charges,
costs and expenses, including reasonable attorneys' fees, incurred or paid in
exercising any right, power or remedy conferred by this Note, or in the
enforcement thereof. If the undersigned are more than one (1), the liability of
the undersigned hereon is joint and several, and the term "undersigned", as used
herein, means any one or more of them.
2
<PAGE> 3
The undersigned and all indorsers authorize any attorney at law,
including an attorney engaged by the holder, to appear in any court of record in
the State of Ohio or any other State or Territory of the United States, after
the indebtedness evidenced hereby, or any part thereof, becomes due and waive
the issuance and service of progress and confess judgment against any one or
more than one of the undersigned and all indorsers in favor of the holder, for
the amount then appearing due, together with costs of suit and, thereupon, to
release all errors and waive all rights of appeal and stay of execution, but no
such judgment or judgments against any one of the undersigned shall be a bar to
a subsequent judgment or judgments against any one or more than one of such
persons against whom judgment has not been obtained hereon. This warrant of
attorney to confess judgment is a joint and several warrant of attorney. The
foregoing warrant of attorney shall survive any judgment; and if any judgment be
vacated for any reason, the holder hereof nevertheless may hereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the undersigned and all indorsers or any one or more of them. The
undersigned and all indorsers hereby expressly waive any conflict of interest
that the holder's attorney may have in confessing such judgment against such
parties and expressly consent to the confessing attorney receiving a legal fee
from the holder for confessing such judgment against such parties.
If the undersigned or any indorser or guarantor hereof would have the
right to rescind the loan evidenced by this Note pursuant to a right so to do
under the Truth-in-Lending Act because one or more mortgages now exist in favor
of the holder hereof covering the principal home or homes of the undersigned or
any indorser or guarantor hereof, the holder's acceptance of this Note shall
constitute a waiver of its right under any such mortgage to treat such principal
home or homes as security for the repayment or guaranty of this Note except for
the principal home or homes described in the mortgage dated N/A .
THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF OHIO. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE
HOLDER TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE OPPORTUNITY TO CONSULT
COUNSEL, THE UNDERSIGNED AND ALL INDORSERS HEREBY EXPRESSLY WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS NOTE OR ARISING IN
ANY WAY FROM ANY INDEBTEDNESS OR OTHER TRANSACTIONS INVOLVING THE HOLDER AND THE
UNDERSIGNED. THE UNDERSIGNED HEREBY DESIGNATE(S) ALL COURTS OF RECORD SITTING IN
CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT MATTER, STATE AND
FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING
FROM OR OUT OF THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED
AS TO ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING
DESIGNATION THE UNDERSIGNED CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH
COURTS.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE
3
<PAGE> 4
POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
ARBOR HEALTH CARE COMPANY
- -----------------------------------
By: /s/ W. W. Wondolowski
- ----------------------------------- -----------------------------
William W. Wondolowski
- ----------------------------------- Vice President & Treasurer
- -----------------------------------
4
<PAGE> 1
Exhibit 4.2
DEMAND NOTE
$1,000,000.00 Executed at LIMA , Ohio
---------
June 2 , 1997
-------------------------
ON DEMAND, for value received, the undersigned, THE DRUGGIST, INC., AN OHIO
CORPORATION ("Debtor"), promises to pay to the order of NATIONAL CITY BANK,
COLUMBUS, A NATIONAL BANKING ASSOCIATION ("Bank"), which has its principal place
of business in Columbus, Ohio, at any office of Bank, ONE MILLION AND 00/100
DOLLARS (or, if less, the unpaid principal balance shown on an attachment to
this note or on Bank's loan account records) in lawful money of the United
States, together with interest, as provided below, payable monthly commencing
JULY 1 , 1997, and on demand.
This note represents an arrangement that allows Debtor to obtain advances
without giving Bank a separate note for each advance. However, THIS NOTE DOES
NOT OF ITSELF CONSTITUTE A COMMITMENT BY BANK TO MAKE ANY ADVANCES TO DEBTOR.
Bank will record the date and amount of each advance on an attachment to this
note or on Bank's loan account records. Debtor agrees that each advance so
recorded shall be prima facie evidence that an advance was made on the date and
in the amount indicated. The number of advances and the amount of each advance
are not limited; provided, however, that the maximum unpaid principal balance
outstanding at any time shall not exceed the face amount of this note.
Prior to demand, principal and any overdue interest shall bear interest,
computed daily (on the basis of a 360-day year and actual days elapsed), at
rates determined according to the following options, to be elected by Debtor
from time to time for all or parts of the outstanding principal balance of this
note and, with regard to Option 2, for various periods of time (each being an
"Interest Period"):
OPTION 1: Computed at a fluctuating rate equal to the Prime Rate.
OPTION 2: Computed at a rate equal to the sum of: (i) two percent (2.0%)
PLUS (ii) the rate, as determined by Bank's Investment Department at
approximately 10:00 A.M. (Columbus, Ohio, time) on the date a quote is requested
by Debtor, at which deposits in U. S. Dollars are offered to Bank in the London
Interbank Market for maturities comparable to such Interest Period and in effect
as of the first day of the relevant Interest Period. Advances under this Option
2 shall be available only for Interest Periods of thirty (30), sixty (60),
ninety (90) or one hundred eighty (180) days and in minimum amounts of Five
Hundred Thousand and 00/100 Dollars ($500,000.00).
-1-
<PAGE> 2
Exhibit 4.2
If, for any amount upon which interest is accruing under Option 2, Debtor fails
to elect a subsequent option at the end of any Interest Period, Debtor shall be
deemed to have elected Option 1 for such amount until such time as Debtor
thereafter makes another election.
If interest is accruing under Option 1 for all or any portion of the outstanding
principal balance of this note, Debtor may prepay such principal amount, in
whole or in part, at any time without premium or penalty. If interest is
accruing under Option 2, Debtor may prepay such principal amount, in whole or in
part: (a) on the last day of the relevant Interest Period for such amount
without premium or penalty or (b) at any other time upon one (1) Business Day's
prior written notice if, concurrently with the prepayment, Debtor pays to Bank a
premium based upon the principal amount prepaid and computed (on the basis of a
360-day year and actual days elapsed) at a rate per annum equal to the excess,
if any, of the applicable interest rate over the Reinvestment Rate, for the
period from the date of prepayment to the last day of the relevant Interest
Period.
Concurrently with any prepayment of the principal of this note, Debtor shall pay
the unpaid interest accrued on the principal being prepaid.
If Debtor fails to pay any amount due hereunder, or any fee in connection
herewith, in full within ten (10) days after its due date, Debtor, in each case,
will incur and shall pay a late charge equal to the greater of Twenty and 00/100
Dollars ($20.00) or five percent (5.0%) of the unpaid amount. The payment of a
late charge will not impair any holder's right to demand repayment of this note.
Except as otherwise agreed in writing, payments will be applied first to accrued
but unpaid interest and fees, in that order, on an invoice by invoice basis in
the order of their respective due dates, until paid in full, then to late
charges and then to principal.
If this note is not paid in full on demand (whether by lapse of time,
acceleration of maturity or otherwise), the interest rate otherwise in effect
hereunder shall be increased by three percent (3.0%) per annum, provided that in
no event shall the principal of and interest on this note bear interest after
maturity at a rate less than the interest rate actually in effect hereunder
immediately after demand.
In this note, (a) DEBT means, collectively, all monetary liabilities, and any
charges or expenses incurred in connection therewith, now or hereafter owing by
the Person or Persons in question, including, without limitation, every such
liability whether owing by such Person or one (1) of such Persons alone or
jointly, severally or jointly and severally, whether owing absolutely or
contingently, or directly or indirectly, and whether created by loan, overdraft,
guaranty or other contract or by quasi-contract, tort, statute or other
operation of law; (b) BANK DEBT means Debt payable to Bank, whether initially
payable to Bank or acquired by Bank by purchase, pledge or
-2-
<PAGE> 3
Exhibit 4.2
otherwise and whether assigned or participated to or from Bank in whole or in
part; (c) PRIME RATE means the fluctuating rate of interest which is publicly
announced from time to time by Bank at its principal place of business as being
its "prime rate" or "base rate" thereafter in effect, with each change in the
Prime Rate automatically, immediately and without notice changing the
fluctuating interest rate thereafter applicable hereunder, it being agreed that
the Prime Rate is not necessarily the lowest rate of interest then available
from Bank on fluctuating rate loans; (d) OBLIGOR means any Person who is or
shall become obligated or whose property is or shall serve as collateral for the
payment of Debtor's Bank Debt or any part thereof in any manner and, in addition
to Debtor, includes, without limitation, any maker, endorser or guarantor; (e)
REINVESTMENT RATE means a rate of interest equal to the "bond equivalent yield"
for the most actively traded issues of U. S. Treasury Bills, U. S. Treasury
Notes or U. S. Treasury Bonds for a term similar to the period from the date of
prepayment to the last day of the relevant Interest Period and in a principal
amount comparable to the principal amount being prepaid, all as reasonably
determined by Bank; (f) RELATED WRITING means a writing of any form or substance
signed by any Obligor (whether as principal or agent) or by any attorney,
accountant or other representative of any Obligor and received by Bank in
respect of Debtor's Bank Debt or any part thereof, including, without
limitation, any credit application, credit agreement, reimbursement agreement,
financial statement, promissory note, guaranty, indenture, mortgage, security
agreement, authorization, subordination agreement, certificate, opinion or any
similar writing; (g) PERSON means a natural person or entity of any kind,
including, without limitation, any corporation, partnership, trust, governmental
body, or any other form or kind of entity; and (h) BUSINESS DAY means a day on
which Bank's main office is open to the public for carrying on substantially all
of its banking functions, but shall not include Saturdays, Sundays or legal
holidays. All accounting terms used in this note and not otherwise defined shall
be defined in accordance with generally accepted accounting principals.
Debtor certifies to Bank that all funds disbursed under this note will be used
for business or commercial purposes.
Debtor and the undersigned guarantor hereby authorize Bank to share all credit
and financial information relating to Debtor and the undersigned guarantor with
Bank's parent company, and with any subsidiary or affiliate company of Bank or
of Bank's parent company.
In no event shall the interest rate in effect on this note exceed the maximum
rate permissible under the law governing this note.
Any holder's delay or omission in the exercise of any right under this note
shall not operate as a waiver of that right or of any other right under this
note.
If any provision of this note is determined by a court of competent jurisdiction
to be invalid, illegal or unenforceable, that determination shall not affect any
other provision of this note, and each
-3-
<PAGE> 4
Exhibit 4.2
such other provision shall be construed and enforced as if the invalid, illegal
or unenforceable provision were not contained herein.
This note and the Related Writings set forth the entire agreement between the
parties regarding the transactions contemplated hereby, and supersede all prior
agreements, commitments, discussions, representations and understandings,
whether written or oral, and any and all contemporaneous oral agreements,
commitments, discussions, representations and understandings between the parties
relating to the subject matter hereof.
No amendment, modification or supplement to this note or any Related Writings
shall be binding unless executed in writing by all parties thereto, and this
provision shall not be subject to waiver by any party and shall be strictly
enforced.
This note shall be governed by the law of the state in which Bank has its
principal place of business.
Debtor and the undersigned guarantor jointly and severally authorize any
attorney-at-law to appear in any state or federal court of record in the United
States after this note matures (whether by lapse of time, acceleration of
maturity or otherwise); to waive the issuance and service of process; to confess
judgment against Debtor and/or the undersigned guarantor in favor of the holder
of this note for the amount then appearing due, together with interest and costs
of suit; and to release all errors and waive all rights of appeal and stay of
execution. If any judgment against Debtor and/or the undersigned guarantor is
vacated for any reason, this warrant of attorney may be used to obtain
additional judgments.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH AGREEMENT, OR ANY OTHER
CAUSE.
-4-
<PAGE> 5
Exhibit 4.2
3248 Henderson Road THE DRUGGIST, INC.,
Columbus, Ohio 43220-2377 AN OHIO CORPORATION
(614) 459-6364
By: /s/ Brad C. Roush
-------------------------
Its: Secretary
-------------------------
FOR VALUE RECEIVED, the undersigned guarantor (a) consents to the provisions of
the note, including, without limitation, the warrant of attorney; (b)
guarantees, absolutely and unconditionally, and jointly and severally with the
other undersigned guarantors, if any, the prompt payment in full of the note
(and any extensions thereof in whole or in part) when due (whether by lapse of
time, acceleration of maturity or otherwise) and whether or not the holder of
the note shall resort or shall have resorted to any other Obligor or to
security, if any; (c) waives presentment, demand for payment, notice of dishonor
and every other kind of notice to which the undersigned guarantor might be
entitled but for this waiver; (d) waives any and all claims, rights or remedies
the undersigned guarantor may now have or hereafter acquire against Debtor that
arises from the undersigned guarantor's performance hereunder or is in any way
related hereto, including, without limitation, subrogation, reimbursement,
contribution or indemnification, whether direct or indirect or arising by
contract, law, equity or otherwise; and (e) agrees that the liability of the
undersigned guarantors shall not be affected by any act, omission or course of
dealing on the part of the holder including, without limitation, any extension
of time, any waiver of an Event of Default, any release or exchange of security
(irrespective of the consideration, if any, received therefor) or any other
indulgence granted to any Obligor, in each case whether with or without notice
to the undersigned guarantor.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
-5-
<PAGE> 6
Exhibit 4.2
1100 Shawnee Road - Box 840 ARBOR HEALTH CARE COMPANY,
Lima, Ohio 45802-0840 A DELAWARE CORPORATION
(419) 227-3000
By: /s/ W. W. Wondolowski
----------------------------
Its: VP & Treasurer
----------------------------
-6-
<PAGE> 1
Exhibit 4.3
PROMISSORY NOTE
$3,250,000.00 Executed at Lima , Ohio
--------
June 2 , 1997
------------
FOR VALUE RECEIVED, the undersigned, THE DRUGGIST, INC., AN OHIO CORPORATION
("Debtor"), promises to pay to the order of NATIONAL CITY BANK OF COLUMBUS, A
NATIONAL BANKING ASSOCIATION ("Bank"), which has its principal place of business
in Columbus, Ohio, at any office of Bank, THREE MILLION TWO HUNDRED FIFTY
THOUSAND AND 00/100 DOLLARS (or, if less, the unpaid principal balance shown on
an attachment to this note or on Bank's loan account records) in lawful money of
the United States together with interest as provided below.
Prior to maturity, principal and any overdue interest shall bear interest
computed daily (on the basis of a 360-day year and actual days elapsed) at a
rate equal to the sum of: (i) two percent (2.0%) PLUS (ii) the rate, as
determined by Bank's Investment Department at approximately 10:00 A.M.
(Columbus, Ohio, time) on the date a quote is requested by Debtor, at which
deposits in U. S. Dollars are offered to Bank in the London Interbank Market for
maturities comparable to a designated time period of either ninety (90) or one
hundred eighty (180) days (each period being an "Interest Period") and in effect
as of the first day of such Interest Period (each such rate being a "Fixed
Rate").
If, at the end of any Interest Period, Debtor fails to select a subsequent
Interest Period, Debtor shall be deemed to have selected an Interest Period of
ninety (90) days. In no event shall Debtor select an Interest Period which would
extend beyond the maturity date of this note.
This note shall be payable in forty (40) consecutive monthly installments
commencing on JULY 1 , 1997. Each installment shall consist of principal in the
amount of Thirty-eight Thousand Six Hundred Ninety and 48/100 Dollars
($38,690.48) plus the unpaid interest accrued on this note except that the final
installment shall be such other amount, including unpaid principal and accrued
and unpaid interest, as will pay this note in full. Debtor may prepay this note,
in whole or in part, on the last day of an Interest Period without premium or
penalty. Otherwise, Debtor may prepay the principal of this note in whole or in
part at any time upon one (1) Business Day's prior written notice to Bank if,
concurrently with the prepayment, Debtor pays to Bank a premium based upon the
principal amount prepaid and computed (on the basis of a 360-day year and actual
days elapsed) at a rate per annum equal to the excess, if any, of the relevant
Fixed Rate over the Reinvestment Rate, for the period from the date of
prepayment to the last day of the relevant Interest Period.
Concurrently with any prepayment of the principal of this note, Debtor shall pay
the unpaid interest accrued on the principal being prepaid, and each prepayment
shall be applied to the outstanding installments of this note in the inverse
order of their respective due dates.
-1-
<PAGE> 2
If Debtor fails to pay an installment in full within ten (10) days after its due
date, Debtor, in each case, will incur and shall pay a late charge equal to the
greater of Twenty and 00/100 Dollars ($20.00) or five percent (5.0%) of the
unpaid amount. The payment of a late charge will not cure or constitute a waiver
of any Event of Default under this note.
Except as otherwise provided in writing, payments will be applied first to
installments in the order of their respective due dates and then to late charges
in the order of their respective due dates; provided, however, that if a payment
so applied would pay the principal of this note in full, but leave late charges
outstanding, such payment will instead be applied to late charges prior to being
applied to the principal portion of the final installment. Each payment of an
installment shall be applied first to accrued but unpaid interest and then to
principal.
In its discretion, Bank may, from time to time, unilaterally change any
provision for the application of payments and installments by mailing a written
notice to Debtor of the change. The notice shall be mailed to the address
indicated herein or such other address that Debtor may furnish in writing to an
appropriate officer of Bank and shall be mailed not less than fifteen (15) days
prior to the effective date of such change.
If this note is not paid in full at maturity (whether by lapse of time,
acceleration of maturity or otherwise), the interest rate otherwise in effect
hereunder shall be increased by three percent (3.0%) per annum, provided that in
no event shall the principal of and interest on this note bear interest after
maturity at a rate less than the interest rate actually in effect hereunder
immediately after maturity.
The occurrence of any of the following shall constitute an EVENT OF DEFAULT
hereunder:
(a) any Obligor's Bank Debt or any part thereof shall not be paid in
full promptly when due (whether by lapse of time, acceleration of
maturity or otherwise) and shall remain unpaid for a period of ten (10)
days after written notice of such nonpayment has been mailed by Bank to
such Obligor;
(b) any Obligor's Debt owed to any person other than Bank or any part
thereof shall not be paid in full promptly when due (whether by lapse
of time, acceleration of maturity or otherwise) and shall remain unpaid
beyond any applicable cure period;
(c) any Obligor shall be dissolved;
(d) any representation or warranty made by any Obligor in this note or
any Related Writing shall be false or erroneous in any material respect
and shall remain so for a period of thirty (30) days after written
notice thereof has been mailed by Bank to such Obligor;
-2-
<PAGE> 3
(e) any Obligor shall fail or omit to perform or observe any agreement
made by that Obligor in this note or in any Related Writing and such
failure or omission shall continue for a period of thirty (30) days
after written notice thereof has been mailed by Bank to such Obligor;
(f) Debtor's Cash Flow Coverage Ratio is less than 1.5 to 1.0 at the
end of any of its fiscal years;
(g) Guarantor's Consolidated Net Worth is less than Thirty Million and
00/100 Dollars ($30,000,000.00) at the end of any of its fiscal
quarters;
(h) the ratio of Guarantor's Consolidated Liabilities to its
Consolidated Net Worth is greater than 4.5 to 1.0 at the end of any of
its fiscal quarters;
(i) Guarantor's Interest Coverage Ratio is less than 1.1 to 1.0 at the
end of any of its fiscal years;
(j) Guarantor's Debt Service Coverage Ratio is less than 1.15 to 1.0 at
the end of any of its fiscal years;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) shall be rendered against Debtor or Guarantor, or both,
and shall not have been either released or bonded off within thirty
(30) days after the same was rendered; PROVIDED, HOWEVER, that an Event
of Default shall not be deemed to have occurred under this section if,
with regard to each such judgment, both of the following conditions
have been met: (i) the party or parties against which the judgment was
rendered have timely appealed such judgment; AND (ii) such judgment
would not reasonably be expected to have a Material Adverse Effect;
(l) one or more attachments or levies in an aggregate amount in excess
of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) shall be
issued against any deposit accounts of Debtor or Guarantor, or both,
and shall not have been either released or stayed within thirty (30)
days after the same was issued; PROVIDED, HOWEVER, that an Event of
Default shall not be deemed to have occurred under this section if,
with regard to each such attachment or levy, both of the following
conditions have been met: (i) the owner or owners of the deposit
accounts against which the attachment or levy was issued have timely
appealed such attachment or levy; AND (ii) such attachment or levy
would not reasonably be expected to have a Material Adverse Effect;
(m) any voluntary petition by or involuntary petition against any
Obligor shall be filed pursuant to any chapter of any bankruptcy code
or any Obligor shall make an assignment for the benefit of creditors,
or there shall be any other marshalling of the assets and liabilities
of any Obligor for the benefit of that Obligor's creditors; or
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<PAGE> 4
(n) any Obligor enters into any merger or consolidation or sells,
leases or otherwise disposes of all or substantially all of such
Obligor's assets in any manner other than in the ordinary course of
business.
Upon the occurrence of an Event of Default, the holder of this note may, in its
sole discretion, declare this note to be due and payable and, if applicable,
that Debtor no longer be permitted to obtain advances; and the principal of and
interest on this note shall thereupon become immediately payable in full,
without any presentment, demand or notice of any kind, which Debtor hereby
waives. Debtor will pay to Bank all costs and expenses of collection of this
note, including, without limitation, reasonable attorneys' fees.
In addition to the words and terms elsewhere defined in this note, any
accounting term used herein shall have the meanings ascribed thereto by GAAP,
and the following words and terms shall have the following meanings:
BANK DEBT means Debt payable to Bank, whether initially payable to Bank
or acquired by Bank by purchase, pledge or otherwise and whether
assigned or participated to or from Bank in whole or in part;
BUSINESS DAY means a day on which Bank's main office is open to the
public for carrying on substantially all of its banking functions, but
shall not include Saturdays, Sundays or legal holidays;
CASH FLOW COVERAGE RATIO means the ratio, determined according to GAAP,
of (i) the sum of earnings before interest, taxes, depreciation and
amortization to (ii) the sum of the current portion of long term debt
PLUS interest expense;
CONSOLIDATED NET WORTH means the Consolidated net worth of Guarantor
(after eliminating all inter-company accounts). Net worth shall be
determined in accordance with GAAP; provided, however, that
Consolidated Net Worth shall include no appraisal surplus of any type
or description;
CONSOLIDATING, CONSOLIDATED and CONSOLIDATED AND CONSOLIDATING shall
include Guarantor and all Subsidiaries and mean, in reference to
financial statements and reports, any covenants, representations,
warranties or agreements of Guarantor or definitions under this note,
that the same are prepared or determined in accordance with GAAP, but
eliminating all inter-company transactions on any consolidated
statements or reports;
CURRENT ASSETS and CURRENT LIABILITIES mean the Consolidated current
assets and current liabilities of Guarantor, both current assets and
current liabilities to be determined in accordance with GAAP;
-4-
<PAGE> 5
CURRENT DEBT means any obligation for borrowed money (and any
negotiable instruments and drafts accepted representing, extensions of
credit whether or not representing obligations for borrowed money)
payable on demand or within a period of one (1) year from the date of
the creation thereof;
CURRENT MATURITIES means the aggregate principal amount of Guarantor's
Consolidated Long Term Debt due within one (1) year from the date of
determination thereof;
DEBT means, collectively, all monetary liabilities, and any charges or
expenses incurred in connection therewith, now or hereafter owing by
the Person or Persons in question, including, without limitation, every
such liability whether owing by such Person or one (1) of such Persons
alone or jointly, severally or jointly and severally, whether owing
absolutely or contingently, or directly or indirectly, and whether
created by loan, overdraft, guaranty or other contract or by
quasi-contract, tort, statute or other operation of law;
DEBT SERVICE COVERAGE RATIO means a ratio in which the numerator is the
sum of Consolidated net income of Guarantor calculated for the twelve
(12) month period preceding the date of calculation of such coverage
plus the sum of noncash expenses or allowances for such period,
including, without limitation, amortization or write down of intangible
assets, depreciation, depletion, and deferred taxes and expenses, less
any dividends paid by Guarantor, and less an assumed capital
expenditure of Three Hundred and 00/100 Dollars ($300.00) per bed for
all nursing home beds owned/leased by Guarantor or one of its
Subsidiaries for the applicable period, and the denominator is the sum
of the current portion of the Consolidated Long Term Debt of Guarantor
at the end of such period. In calculating "net income", federal and
state taxes on Guarantor's Consolidated income shall be deducted, and
any extraordinary income shall be deducted. For purposes of determining
the Debt Service Coverage Ratio for Guarantor, any principal "balloon"
or "bullet" payments due at maturity of indebtedness will not be
included in such computation;
GAAP means generally accepted accounting principles, consistently
applied;
GUARANTOR means Arbor Health Care Company;
INTEREST COVERAGE RATIO means a ratio in which the numerator is the sum
of Consolidated net income of Guarantor calculated for the twelve (12)
month period preceding the date of calculation of such coverage plus
federal and state taxes owed or paid by Guarantor plus interest expense
PLUS the sum of noncash expenses or allowances for such period,
including, without limitation, amortization or write down of intangible
assets, depreciation, depletion, and deferred taxes and expenses, LESS
an assumed capital expenditure of Three Hundred and 00/100 Dollars
($300.00) per bed for all nursing home beds owned/leased by Guarantor
or any Subsidiary for the applicable period, and the denominator is the
interest expense of
-5-
<PAGE> 6
Guarantor for such period. In calculating "net income", federal and
state taxes on such income shall be deducted, and any extraordinary
income shall be deducted;
LONG TERM DEBT means all obligations (including capital lease
obligations) which are due more than one (1) year from the date as of
which the computation thereof is made;
MATERIAL ADVERSE EFFECT means a material adverse effect on the
financial condition, operations, assets, business, properties or
prospects of Debtor or Guarantor, on the ability of Debtor or Guarantor
to perform any of their obligations under this note or any Related
Writing, on the ability of Bank to enforce any of such obligations or
on the status or priority of any liens granted to Bank on any of the
assets of Debtor or Guarantor;
OBLIGOR means any Person who is or shall become obligated or whose
property is or shall serve as collateral for the payment of Debtor's
Bank Debt or any part thereof in any manner and, in addition to Debtor,
includes, without limitation, Guarantor or any other guarantor;
PERSON means a natural person or entity of any kind, including, without
limitation, any corporation, partnership, trust, governmental body, or
any other form or kind of entity;
REINVESTMENT RATE means a rate of interest equal to the "bond
equivalent yield" for the most actively traded issues of U. S. Treasury
Bills, U. S. Treasury Notes or U. S. Treasury Bonds for a term similar
to the period from the date of prepayment to the last day of the
relevant Interest Period and in a principal amount comparable to the
principal amount being prepaid, all as reasonably determined by Bank;
RELATED WRITING means a writing of any form or substance signed by any
Obligor (whether as principal or agent) or by any attorney, accountant
or other representative of any Obligor and received by Bank in respect
of Debtor's Bank Debt or any part thereof, including, without
limitation, any credit application, credit agreement, reimbursement
agreement, financial statement, promissory note, guaranty, indenture,
mortgage, security agreement, authorization, subordination agreement,
certificate, opinion or any similar writing, but shall not include any
commitment letter issued by Bank, without regard to whether Debtor or
any other Person signed or acknowledged receipt thereof;
SUBSIDIARY means any corporation fifty-one percent (51%) or more of the
voting stock of which is controlled by Guarantor; and
TOTAL CONSOLIDATED LIABILITIES means all Consolidated liabilities of
Guarantor (after eliminating all inter-company accounts), except any
non-current provision for deferred federal income taxes, all determined
in accordance with GAAP.
-6-
<PAGE> 7
Debtor certifies to Bank that all funds disbursed under this note will be used
for business or commercial purposes.
Debtor and Guarantor hereby authorize Bank to share all credit and financial
information relating to Debtor and Guarantor with Bank's parent company, and
with any subsidiary or affiliate company of Bank or of Bank's parent company.
In no event shall the interest rate in effect on this note exceed the maximum
rate permissible under the law governing this note.
Any holder's delay or omission in the exercise of any right under this note
shall not operate as a waiver of that right or of any other right under this
note.
If any provision of this note is determined by a court of competent jurisdiction
to be invalid, illegal or unenforceable, that determination shall not affect any
other provision of this note, and each such other provision shall be construed
and enforced as if the invalid, illegal or unenforceable provision were not
contained herein.
This note and the Related Writings set forth the entire agreement between the
parties regarding the transactions contemplated hereby, and supersede all prior
agreements, commitments, discussions, representations and understandings,
whether written or oral, and any and all contemporaneous oral agreements,
commitments, discussions, representations and understandings between the parties
relating to the subject matter hereof.
No amendment, modification or supplement to this note or any Related Writings
shall be binding unless executed in writing by all parties thereto, and this
provision shall not be subject to waiver by any party and shall be strictly
enforced.
This note shall be governed by the law of the state in which Bank has its
principal place of business.
Debtor and Guarantor jointly and severally authorize any attorney-at-law to
appear in any state or federal court of record in the United States after this
note matures (whether by lapse of time, acceleration of maturity or otherwise);
to waive the issuance and service of process; to confess judgment against Debtor
and/or Guarantor in favor of the holder of this note for the amount then
appearing due, together with interest and costs of suit; and to release all
errors and waive all rights of appeal and stay of execution. If any judgment
against Debtor and/or Guarantor is vacated for any reason, this warrant of
attorney may be used to obtain additional judgments.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS
-7-
<PAGE> 8
YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS,
FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH AGREEMENT, OR ANY
OTHER CAUSE.
3248 Henderson Road THE DRUGGIST, INC.,
Columbus, Ohio 43220-2377 AN OHIO CORPORATION
(614) 459-6364
By: /s/ Brad C. Roush
-----------------------------
Its: Secretary
-----------------------------
FOR VALUE RECEIVED, the undersigned Guarantor (a) consents to the provisions of
the note, including, without limitation, the warrant of attorney; (b)
guarantees, absolutely and unconditionally, the prompt payment in full of the
note (and any extensions thereof in whole or in part) when due (whether by lapse
of time, acceleration of maturity or otherwise) and whether or not the holder of
the note shall resort or shall have resorted to any other Obligor or to
security, if any; (c) waives presentment, demand for payment, notice of dishonor
and every other kind of notice to which the undersigned Guarantor might be
entitled but for this waiver; (d) waives any and all claims, rights or remedies
the undersigned Guarantor may now have or hereafter acquire against Debtor that
arises from the undersigned Guarantor's performance hereunder or is in any way
related hereto, including, without limitation, subrogation, reimbursement,
contribution or indemnification, whether direct or indirect or arising by
contract, law, equity or otherwise; and (e) agrees that the liability of the
undersigned Guarantor shall not be affected by any act, omission or course of
dealing on the part of the holder including, without limitation, any extension
of time, any waiver of an Event of Default, any release or exchange of security
(irrespective of the consideration, if any, received therefor) or any other
indulgence granted to any Obligor, in each case whether with or without notice
to the undersigned Guarantor.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
-8-
<PAGE> 9
1100 Shawnee Road - Box 840 ARBOR HEALTH CARE COMPANY,
Lima, Ohio 45802-0840 A DELAWARE CORPORATION
(419) 227-3000
By: /s/ W. W. Wondolowski
-----------------------------
Its: VP & Treasurer
-----------------------------
-9-
<PAGE> 1
Exhibit 10.1
ARBOR HEALTH CARE COMPANY
AMENDMENT NO. 1 TO
1995 STOCK OPTION PLAN
WHEREAS, ARBOR HEALTH CARE COMPANY, a Delaware corporation (the
"Company"), sponsors the Arbor Health Care Company 1995 Stock Option Plan (the
"Plan"); and
WHEREAS, Section 18 of the Plan provides that the Plan may be amended
by the Board of Directors (the "Board") of the Company; and
WHEREAS, the Board has determined that it is in the best interest of
the Company and its stockholders to amend the Plan, effective as of April 1,
1997, in the manner contemplated below, subject to the approval of the amendment
by the stockholders of the Company at the 1997 Annual Meeting of the
Stockholders of the Company;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 4 of the Plan is amended by deleting the number "332,197"
and replacing it with the following:
"632,197"
2. This Amendment shall be effective as of April 1, 1997, subject to
the approval of this Amendment by the stockholders of the Company at the 1997
Annual Meeting of the Stockholders of the Company. Except as otherwise amended
hereby, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned, being the duly elected and
authorized Secretary of the Company, hereby certifies that this Amendment No. 1
to 1995 Stock Option Plan was legally and validly approved by the Board of
Directors of the Company on February 21, 1997.
ARBOR HEALTH CARE COMPANY
By: /s/ BRAD C. ROUSH
-------------------------------
Brad C. Roush, Secretary
<PAGE> 1
Exhibit 11.1
ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------- ----------------
1996 1997 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (1) $2,243 $2,783 $4,266 $5,310
====== ====== ====== ======
Weighted average shares outstanding
Common Stock 6,895 6,921 6,894 6,914
Common Stock equivalents based upon the
treasury stock method 92 106 85 92
------ ------ ------ ------
Total(2) 6,987 7,027 6,979 7,006
====== ====== ====== ======
Net income per share (1) / (2) $ 0.32 $ 0.40 $ 0.61 $ 0.76
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,131
<SECURITIES> 0
<RECEIVABLES> 52,387
<ALLOWANCES> 2,924
<INVENTORY> 3,192
<CURRENT-ASSETS> 63,856
<PP&E> 177,704
<DEPRECIATION> 37,746
<TOTAL-ASSETS> 221,073
<CURRENT-LIABILITIES> 45,975
<BONDS> 97,453
<COMMON> 208
0
0
<OTHER-SE> 71,555
<TOTAL-LIABILITY-AND-EQUITY> 221,073
<SALES> 0
<TOTAL-REVENUES> 119,829
<CGS> 0
<TOTAL-COSTS> 92,534
<OTHER-EXPENSES> 13,001
<LOSS-PROVISION> 1,456
<INTEREST-EXPENSE> 4,084
<INCOME-PRETAX> 8,754
<INCOME-TAX> 3,444
<INCOME-CONTINUING> 5,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,310
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
