EXHIBIT 10.35
RESTRUCTURE AND ASSET EXCHANGE AGREEMENT
AGREEMENT dated as of October 31, 1997 among HEALTH AND RETIREMENT
PROPERTIES TRUST (f/k/a "Health and Rehabilitation Properties Trust") (known in
Wisconsin as "Health and Retirement Properties REIT"), a real estate investment
trust formed under the laws of the State of Maryland ("HRP"), GRANCARE, INC.
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(▇/▇/▇ "▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇."), a Delaware corporation ("GranCare"), AMS
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PROPERTIES, INC., a Delaware corporation ("AMS Properties"), and GCI HEALTH CARE
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CENTERS, INC., a Delaware corporation ("GCIHCC;" and together with GranCare and
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AMS Properties, collectively, the "GranCare Parties")
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W I T N E S S E T H
WHEREAS, HRP, HostMasters, Inc., a California corporation ("HMI"),
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GranCare, Inc., a California corporation ("Old GranCare"), American Medical
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Services, Inc., a Wisconsin corporation ("AMS") and AMS Properties have entered
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into an Acquisition Agreement, Agreement to Lease and Mortgage Loan Agreement
dated as of December 28, 1990, as amended (as so amended, the "Acquisition
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Agreement"), under which, inter alia, (A) HRP has leased 18 nursing properties
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located in Wisconsin, California, Colorado and Illinois to AMS Properties
pursuant to the several Facility Leases (as amended, the "AMS Properties
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Facility Leases"), each incorporating a Master Lease Document General Terms and
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Conditions dated as of December 28, 1990 (as amended, the "AMS Properties Master
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Lease") between HRP, as landlord, and AMS Properties, as tenant, and (B) HRP has
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made a mortgage loan to AMS Properties in the original principal amount of
$11,500,000, the payment of which is currently evidenced by a Promissory Note
dated as of October 1, 1994 by AMS Properties to HRP (the "Mortgage Note") and
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is secured, inter alia by Mortgage and Security Agreements dated as of March 31,
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1995 (collectively, the "Mortgages") by AMS Properties in favor of HRP
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encumbering the GranCare Wisconsin Properties (as hereinafter defined);
WHEREAS, (a) in May 1991, the AMSHC Exchange (as defined in the Acquisition
Agreement) took place, whereby Old GranCare, which previously had been a wholly-
owned subsidiary of HMI, became the sole stockholder of HMI and AMS; and (b) in
December 1993, AMS, which previously had owned all the outstanding common stock
of AMS Properties, and AMS Rehab, Inc., a Delaware corporation and a wholly-
owned subsidiary of Old GranCare, each merged into AMS Properties, with AMS
Properties as the surviving corporation;
WHEREAS, HRP has leased 7 nursing and/or residential living properties
located in Arizona, California and South Dakota to GCIHCC pursuant to the
several Facility Leases (as amended, the "GCIHCC Facility Leases"), each
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incorporating a Master Lease Document General Terms and Conditions dated as of
June 30, 1992 (as amended, the "GCIHCC Master Lease") between HRP, as landlord,
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and GCIHCC, as tenant;
WHEREAS, Old GranCare transferred all of its skilled nursing, home health
care, assisted living and contract management businesses (including, without
limitation, such capital stock), and related assets, to GranCare, with Old
GranCare thereafter distributing GranCare
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common stock to Old GranCare shareholders (collectively, the "Distribution"),
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pursuant to an Agreement and Plan of Distribution dated as of September 3, 1996
between Old GranCare and GranCare;
WHEREAS, immediately following the Distribution, Old GranCare merged with
and into Vitalink Pharmacy Services, Inc., a Delaware corporation ("Vitalink"),
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with Vitalink as the surviving corporation, pursuant to an Amended and Restated
Agreement and Plan of Merger dated as of September 3, 1996 between Vitalink and
Old GranCare; and
WHEREAS, GranCare proposes to merge with LCA Acquisition Sub, Inc., a
Delaware corporation ("Acquisition Sub"), and a wholly-owned Subsidiary of
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Paragon Health Network, Inc., a Delaware corporation (f/k/a Living Centers of
America, Inc.) ("Paragon"), with GranCare as the surviving corporation (the
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"GranCare Merger"), pursuant to an Amended and Restated Agreement and Plan of
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Merger dated as of September 17, 1997 among GranCare, Paragon, Acquisition Sub
and Apollo Management, L.P. on behalf of one of more of its managed investment
funds (the "Merger Agreement"); and
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WHEREAS, GranCare has requested that HRP agree to (a) restructure certain
terms of the AMS Properties Facility Leases and the GCIHCC Facility Leases, (b)
permit the otherwise prohibited prepayment of the Mortgage Note, (c) waive the
provisions of (i) Section 9.15A of the Acquisition Agreement and (ii) any other
agreement or document entered into by GranCare, Old GranCare, GCIHCC or AMS
Properties in favor of HRP or any Affiliate (collectively, the "HRP Parties")
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which either requires consent or approval of one or more of the HRP Parties in
order to permit the consummation of Transactions (as hereinafter defined), (d)
cure any default arising as a result of the consummation of the Transactions
without the consent of any of the HRP Parties, and (e) release Vitalink from its
obligations under a Limited Guaranty dated as of February 12, 1997 (the "Limited
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Guaranty") in favor of HRP; and HRP is, subject to the terms and provisions
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hereof, willing to so agree;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
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Capitalized terms used in this Agreement shall have the meanings set forth
in the preambles or the caption hereto, or as set forth below or in the Section
referenced below. Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa, and the reference to any gender shall
be deemed to include all genders. References to "hereof", "herein" or similar
terms are intended to refer to this Agreement as a whole and not a particular
section, and references to "this Section" are intended to refer to the entire
section and not a particular subsection thereof.
1.1 "Affiliate", "Affiliated" shall mean, with respect to any Person, any
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other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person.
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1.2 "Agreement" shall mean this Restructure and Asset Exchange Agreement,
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together with the Exhibits and Schedules attached hereto, as it and they may be
amended from time to time as herein provided.
1.3 "Applicable Laws" shall mean and include all applicable Federal, state
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or local statutes, laws, ordinances, rules and regulations, licensing
requirements or conditions, whether now existing or hereafter arising, relating
to Hazardous Substances.
1.4 "Authority" shall mean any governmental or quasi-governmental
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authority, whether administrative, executive, judicial, legislative or other, or
any combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau, central
bank or comparable agency or entity, commission, corporation, court, department,
instrumentality, master, mediator, panel, referee, system or other political
unit or subdivision or other Entity of any of the foregoing, whether domestic or
foreign.
1.5 "Business Day" shall mean any day other than a Saturday, Sunday or any
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other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.
1.6 "Cash Collateral Pledge" shall have the meaning given such term in
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Section 5.2.
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1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended, and
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the rules and regulations thereunder.
1.8 "Continuing Properties" shall mean the properties listed on Schedule
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1.8.
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1.9 "Contracts" shall mean, with respect to any GranCare Exchange
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Property, all service contracts, equipment leases and other arrangements or
agreements to which AMS Properties or any predecessor is a party affecting the
ownership, repair, maintenance or operation of such GranCare Exchange Property,
to the extent AMS Properties' interest therein is assignable or transferable.
1.10 "Contractual Obligation" shall have the meaning given such term in
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Section 6.4.
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1.11 "Documents" shall mean, with respect to any GranCare Exchange
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Property, all books, records and files relating to the leasing, maintenance,
management or operation of such GranCare Exchange Property.
1.12 "Entity" shall mean any corporation, firm, unincorporated
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organization, association, partnership, limited liability company, trust (inter
vivos or testamentary), estate of a deceased, insane or incompetent individual,
business trust, joint stock company, joint venture or other organization, entity
or business, whether acting in an individual, fiduciary or other capacity, or
any Authority.
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1.13 "Exchange Closing" shall have the meaning given such term in Section
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3.1.
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1.14 "Exchange Closing Date" shall have the meaning given such term in
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Section 3.1.
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1.15 "Exchange Properties" shall mean, collectively, the GranCare
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Exchange Properties and the HRP Exchange Properties.
1.16 "Exchange Properties Escrow Agreement" shall have the meaning given
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such term in Section 5.6.
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1.17 "Exchange Transaction" shall have the meaning given such term in
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Section 3.1.
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1.18 "GranCare Exchange Properties" shall mean the GranCare North
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Carolina Properties and the GranCare Wisconsin Properties.
1.19 "GranCare Guaranty" shall have the meaning given such term in
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Section 5.4.
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1.20 "GranCare North Carolina Properties" shall mean the real property
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and related improvements and personal property, located in ▇▇▇▇▇▇, Concord and
Winston-Salem, North Carolina, and as otherwise described on Schedule 1.20
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hereto.
1.21 "GranCare Wisconsin Properties" shall mean the real property and
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related improvements and personal property, located in Milwaukee and Pewaukee,
Wisconsin, and as otherwise described on Schedule 1.21 hereto.
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1.22 "Hazardous Substances" shall mean hazardous substances (as defined
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by the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as now in effect or as hereafter from time to time amended),
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hazardous wastes (as defined by the Resource Conservation and Recovery Act
("RCRA"), as now in effect or as hereafter from time to time amended), any
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hazardous waste, hazardous substance, pollutant or contaminant, oils,
radioactive materials, asbestos in any form or condition, or any pollutant or
contaminant or hazardous, dangerous or toxic chemicals, materials or substances
within the meaning of any other applicable Federal, state or local law,
regulation, ordinance or requirements relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or materials, all as now in effect or hereafter from time to time
amended.
1.23 "Healthcare Facilities" shall have the meaning given such term in
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Section 6.8.
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1.24 "HRP Exchange Properties" shall mean the real property and related
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improvements and personal property, located in Milwaukee, Wisconsin, San Diego
and Palm Springs, California, and Nashville, Illinois, and as otherwise
described on Schedule 1.24 hereto.
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1.25 "Intangible Property" shall mean, with respect to any GranCare
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Exchange Property, all transferable or assignable permits, certificates of
occupancy, operating permits, sign
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permits, development rights and approvals, certificates, licenses, warranties
and guarantees, rights to deposits, the Contracts, and all other transferable
intangible property, miscellaneous rights, benefits and privileges of any kind
or character with respect to such GranCare Exchange Property held by the
parties.
1.26 "Lease Amendment" shall have the meaning given such term in Section
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5.5.
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1.27 "Legal Restriction" shall have the meaning given such term in Section
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6.4.
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1.28 "Lien" shall mean any mortgage, pledge, hypothecation, assignment,
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deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any lease that should be capitalized in accordance with generally
accepted accounting principles, and the filing of a financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
1.29 "New Facility Leases" shall have the meaning given such term in
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Section 5.6.
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1.30 "Notices and Applications" shall have the meaning given such term in
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Section 6.10.
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1.31 "Paragon Guaranty" shall have the meaning given such term in Section
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5.2.
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1.32 "Permitted Encumbrances" (a) with respect to any GranCare Exchange
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Property, shall mean those Liens disclosed on Schedule 1.32 hereto, and (b) with
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respect to the HRP Exchange Properties, shall mean those Liens disclosed on
Schedule 1.32 hereto and any Lien created after the date hereof other than
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through the act or omission of HRP.
1.33 "Person" shall mean any natural individual or any Entity.
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1.34 "Personal Property" shall mean, with respect to any GranCare Exchange
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Property, all appliances, machinery, devices, fixtures, appurtenances,
equipment, furniture, furnishings and articles of tangible personal property of
every kind and nature whatsoever owned by the parties and located in or at, or
used in connection with the ownership, operation or maintenance of such GranCare
Exchange Property.
1.35 "Post Closing Consents" shall have the meaning given such term in
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Section 6.5.
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1.36 "Real Property" shall mean the real property described in Schedules
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1.20, 1.21 and 1.24.
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1.37 "Restructure Documents" shall mean, collectively, this Agreement and
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each document, agreement and instrument delivered pursuant to Section 5 hereof.
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1.38 "Restructuring Closing" shall have the meaning given such term in
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Section 4.
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1.39 "Restructuring Closing Date" shall have the meaning given such term
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in Section 4.
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1.40 "Subordination Agreement" shall have the meaning given such term in
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Section 5.3.
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1.41 "Tax" (and "Taxable", which shall mean subject to Tax), shall mean,
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with respect to any Person, (a) all taxes (domestic or foreign), including
without limitation any income (net, gross or other including recapture of any
tax items such as investment tax credits), alternative or add-on minimum tax,
gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by
such Person, payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, premium, environmental or windfall profit tax,
custom, duty or other tax, or other like assessment or charge of any kind
whatsoever, together with any interest, levies, assessments, charges, penalties,
addition to tax or additional amount imposed by any Taxing Authority, (b) any
joint or several liability of such Person with any other Person for the payment
of any amounts of the type described in (a), and (c) any liability of such
Person for the payment of any amounts of the type described in (a) as a result
of any express or implied obligation to indemnify any other Person.
1.42 "Taxing Authority" shall mean any Authority responsible for the
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imposition of any Tax.
1.43 "Title Company" shall mean First American Title Insurance Company.
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1.44 "Transaction Documents" shall mean, collectively, this Agreement, each
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other Restructure Document, and all documents, instruments and agreement listed
on Schedule 1.44 hereto as in effect from time to time.
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1.45 "Transactions" shall have the meaning given that term in the
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Preliminary Prospectus for Living Centers of America, Inc. and GranCare, Inc.
included in their Joint Proxy Statement dated September 26, 1997
SECTION 2. MODIFICATIONS TO TRANSACTION DOCUMENTS
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Effective as of the date first set forth above, subject to the satisfaction
of the conditions to effectiveness set forth in Section 5 hereof:
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1.46 Termination of Acquisition Agreement. The Acquisition Agreement is
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hereby terminated in its entirety and GranCare and its Affiliates shall have no
further or continuing obligations thereunder. Wherever any Transaction Document
refers to the Acquisition Agreement for a definition of any term, such reference
shall be deemed to be a reference to such term as defined in the AMS Properties
Master Lease, as in effect from time to time.
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1.47 Amendment of AMS Properties Master Lease. The AMS Properties Master
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Lease is hereby amended as follows:
1.47.1 Article 1 of the AMS Properties Master Lease is amended by
amending the definitions "Guarantor" and "Transaction Documents" in full to read
as follows:
Guarantor: GranCare, GCIHCC and Paragon, in each case together with
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their respective successors and assigns, and any other Person that becomes
a guarantor of Tenant's obligations under the applicable Lease after
October 31, 1997.
Transaction Documents: collectively, any agreement, note, lease,
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master lease, mortgage, security agreement, pledge agreement, assignment,
guaranty or other agreement or instrument now or hereafter executed by any
or all of Tenant or any Guarantor in favor of, for the benefit of, or with,
Landlord (including, without limitation, the GCIHCC Transaction Documents),
and any agreement, note, mortgage, security agreement, pledge agreement,
assignment, guaranty or other agreement or instrument hereafter executed in
connection with any extension, renewal, refunding or refinancing thereof,
as any of the same may hereafter from time to time be amended, amended and
restated, modified or supplemented.
1.47.2 Article 1 of the AMS Properties Master Lease is further
amended by adding the following definitions thereto to read as follows:
Cash Collateral Pledge: The Cash Collateral Pledge Agreement dated as
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of October 31, 1997, between Paragon and Landlord, as amended, amended and
restated, modified or supplemented from time to time.
GCIHCC: GCI Health Care Centers, Inc., a Delaware corporation.
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GCIHCC Leased Properties: collectively, the "Collective Leased
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Properties" as such term is defined in the GCIHCC Master Lease.
GCIHCC Lease: any "Lease" as such term is defined in the GCIHCC Master
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Lease.
GCIHCC Master Lease: the Master Lease Document dated as of June 30,
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1992 between HRP, as Landlord, and GCIHCC, as Tenant, as amended, amended
and restated, modified or supplemented from time to time.
GCIHCC Transaction Documents: the "Transaction Documents" as such term
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is defined in the GCIHCC Master Lease.
Guaranty: any guaranty in favor of Landlord of Tenant's obligations
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under the applicable Lease, including, without limitation, (a) the Amended
and Restated Guaranty
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dated as of October 31, 1997 by GranCare in favor of Landlord, (b) the
Guaranty dated as of October 31, 1997 by Paragon in favor of Landlord, and
(c) the Guaranty, Cross Default and Cross Collateralization Agreement,
dated as of June 30, 1992, from Tenant and GCIHCC in favor of Landlord, in
each case as amended and as the same may be may hereafter be amended,
amended and restated, modified or supplemented from time to time.
Paragon: Paragon Health Network, Inc., a Delaware corporation (f/k/a
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Living Centers of America, Inc.)
Voting Trust Agreement: The Amended and Restated Voting Trust
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Agreement dated as of June 30, 1992 from Tenant to HRPT Advisors, Inc., as
voting trustee, as amended, modified or supplemented from time to time.
1.47.3 Section 12.1 of the AMS Properties Master Lease is amended by
amending paragraphs (d), (h) and (p) thereof in full to read as follows:
(d) Tenant shall default in due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to
Section 7.1, 9.1 or any of Sections 24.10 through 24.18; or
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(h)(A) any obligation of Tenant or any Guarantor (other than GranCare
or Paragon), or of any Subsidiary thereof, in respect of any indebtedness
for borrowed money or for the deferred purchase price of any material
property or services (excluding (1) trade accounts payable in the ordinary
course of business on customary trade terms and (2) indebtedness or
obligations under the Transaction Documents) (hereinafter, "Indebtedness
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for Borrowed Money") or any guaranty relating thereto shall be declared to
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be or shall become due and payable prior to the stated maturity thereof, or
such Indebtedness for Borrowed Money shall not be paid as and when the same
becomes due and payable, or there shall occur and be continuing any default
under any instrument, agreement or evidence of indebtedness relating to any
such Indebtedness for Borrowed Money the effect of which is to permit the
holder or holders of such instrument, agreement or evidence of
indebtedness, or a trustee, agent or other representative on behalf of such
holder or holders, to cause such Indebtedness for Borrowed Money to become
due prior to its stated maturity; or (B) any obligation of GranCare or
Paragon, or of any Subsidiary thereof (other than Tenant or GCIHCC), in
respect of any Indebtedness for Borrowed Money exceeding $1,000,000 in
aggregate principal amount, or any guaranty relating thereto, shall be
declared to be or shall become due and payable prior to the stated maturity
thereof, or the holder or holders of any instrument, agreement or evidence
of indebtedness relating to any such Indebtedness for Borrowed Money, or a
trustee, agent or other representative on behalf of such holder or holders,
shall accelerate prior to the stated maturity date or, if no stated
maturity date, demand payment of such Indebtedness for Borrowed Money, and
such declaration, acceleration or demand shall not have been rescinded
within thirty (30) days of the date such declaration, acceleration or
demand was made; or
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(p) Paragon shall cease at any time to be, either directly or
indirectly through one or more wholly-owned Subsidiaries that are each
Guarantors, the beneficial and record owner of less than all of the shares
of the outstanding capital stock of Tenant and GCIHCC; or
1.47.4 Section 12.1 of the AMS Properties Master Lease is further
amended by adding new paragraph (q) thereto to read as follows:
(q) Tenant shall have failed to extend the term of the Voting Trust
Agreement in accordance with the applicable provisions thereof prior to the
thirtieth day prior to the end of the then term of the Voting Trust
Agreement;
1.47.5 Section 21.4 of the AMS Properties Master Lease is amended in
full to read as follows:
21.4 Tenant's Option to Purchase the Collective Leased Properties.
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Provided,
(a) no Default involving the nonpayment of Rent shall have occurred
and be continuing, the Leases for each of the Collective Leased Properties
shall be in full force and effect (other than Leases that have been
terminated in accordance with the provisions hereof, other than after the
occurrence of an Event of Default), and other than as expressly permitted
by Article 17, Tenant shall not have assigned the Leases for any of the
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Collective Leased Properties or subleased all or any portion of the
Collective Leased Properties; and
(b) no default involving the nonpayment of "Rent" under and as
defined in the GCIHCC Master Lease shall have occurred and be continuing,
the GCIHCC Leases for each of the GCIHCC Leased Properties shall be in full
force and effect (other than GCIHCC Leases that have been terminated in
accordance with the provisions hereof, other than after the occurrence of
an Event of Default under the GCIHCC Master Lease), and other than as
expressly permitted by Article 17 thereof, GCIHCC shall not have assigned
the GCIHCC Leases for any of the GCIHCC Leased Properties or subleased all
or any portion of the GCIHCC Leased Properties;
Tenant shall have the option, exercisable on not less than twelve (12)
months prior Notice to Landlord, to purchase all, but not less than all,
the Collective Leased Properties (other than those Collective Leased
Properties whose Leases have been terminated in accordance with the
provisions of Article 10 or Article 11) upon the expiration of the Fixed
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Term or any Extended Term, each for a purchase price equal to the greater
of (i) ninety percent (90%) of the Fair Market Value Purchase Price of such
Collective Leased Property as of the expiration of the Fixed Term or such
Extended Term, as the case may be, or (ii)(1) if such option is exercised
at the end of the Fixed Term, one hundred fifty percent (150%) of the
Adjusted Purchase Price, (2) if such option is exercised at the end
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of the first Extended Term, two hundred percent (200%) of the Adjusted
Purchase Price or (3) if such option is exercised at the end of the second
Extended Term, three hundred percent (300%) of the Adjusted Purchase Price;
provided however that in each case GCIHCC shall simultaneously exercise its
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option to purchase all, but not less than all of the GCIHCC Leased
Properties (other than those GCIHCC Leased Properties whose GCIHCC Leases
have been terminated in accordance with the provisions of Article 10 or
Article 11 of the GCIHCC Master Lease) in accordance with Section 21.4 of
the GCIHCC Master Lease. Such purchase by Tenant shall be made in
accordance with the provisions of Article 15.
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1.47.6 The AMS Properties Master Lease is further amended by adding
an new Article 24 thereto to read as follows:
ARTICLE 24.
ADDITIONAL COVENANTS OF TENANT
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Tenant agrees that during the Term of the Lease (as defined therein)
and for as long thereafter as any amount payable hereunder or under any
Transaction Document remains unpaid:
1.48 Business of Tenant.
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Tenant shall engage in no business, trade or activity other than the
operation of the Leased Properties, the leasing and operation of the
Collective Leased Properties.
1.49 Maintenance of Existence and Licenses.
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(1) Tenant will maintain its existence and comply with all
applicable statutes, rules and regulations as to which the failure to
comply may have a material adverse effect upon the operation,
business, prospects, property or assets of, or in the condition
(financial or otherwise), of Tenant, and Tenant will maintain its
properties in good operating condition, and continue to conduct its
business as presently conducted.
(2) Tenant will obtain and maintain in full force and effect all
permissions, consents, approvals, licenses, authorizations, and
permits necessary for it to use and operate in accordance with all
applicable laws each Property or Facility owned, leased or operated by
it for the purposes for which such Facility or Property was used
immediately prior to October 31, 1997.
1.50 Taxes and Other Liens.
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Tenant will pay all taxes, assessments, governmental charges or
levies, or claims for labor, supplies, rent and other obligations made
against it which, if unpaid, might become a lien or charge against Tenant,
or on its property, except liabilities being
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contested in good faith and by proper proceedings as to which appropriate
reserves have been established in accordance with GAAP.
1.51 Estoppel Certificates
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At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that the applicable Lease is unmodified and in full
force and effect (or that the applicable Lease is in full force and effect
as modified and setting forth the modifications), the date to which the
Rent has been paid, that Tenant is not in default in the performance or
observance of any of the terms of the applicable Lease and that no event
exists which with the giving of notice, lapse of time, or both, would
constitute a Default or an Event of Default, or if a Default or an Event of
Default shall exist, specifying in reasonable detail such Default or an
Event of Default, and the steps being taken to remedy the same, and such
additional information as Landlord may reasonably request. Any such
certificate furnished pursuant to this Section 24.4 may be relied upon by
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Landlord and any prospective purchaser or mortgagee of the applicable
Leased Property.
1.52 Financial Statements, Etc.
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Tenant shall furnish the following statements to Landlord:
(1) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, year-to-date income statements of Tenant,
on a property by property basis, accompanied by the Financial
Officer's Certificate;
(2) within ninety (90) days after the end of each Fiscal Year,
the most recent Consolidated Financials of Tenant for such year,
accompanied by the Financial Officer's Certificate;
(3) at any time and from time to time upon not less than twenty
(20) days Notice from Landlord, Tenant will furnish to Landlord any
Consolidated Financials or any other financial reporting information
required to be filed by Landlord with any securities and exchange
commission, the SEC or any successor agency, or any other governmental
authority, or required pursuant to any order issued by any court
governmental authority or arbitrator in any litigation to which
Landlord is a party, for purposes of compliance therewith; and
(4) promptly upon notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant as
Landlord may reasonably request from time to time.
Landlord may at any time, and from time to time, provide any Facility
Mortgagee with copies of any of the foregoing statements.
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1.53 Notice of Default.
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Within three (3) Business Days of becoming aware of the existence of
any condition or event which constitutes a Default, Tenant will provide
Landlord with written notice specifying the nature and period of existence
thereof and what action Tenant is taking or proposes to take with respect
thereto.
1.54 General Operations.
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Tenant covenants and agrees to furnish to Landlord, promptly after
Landlord's request therefor, copies of
(1) all reports of surveys, statements of deficiencies, plans of
correction, and all material correspondence relating thereto,
including, without limitation, all reports and correspondence
concerning compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including physical
environment and Life Safety Code survey reports; and
(2) such other confirmation as to the licensure and Medicare and
Medicaid participation of Tenant as Landlord may reasonably request
from time to time.
1.542 Annual Budgets.
--------------
Not less than thirty (30) days prior to commencement of any Fiscal
Year, proposed annual income and ordinary expense and capital improvement
budgets setting forth projected income and costs and expenses projected to
be incurred by Tenant in managing, owning, maintaining and operating the
Facility during the next succeeding Fiscal Year.
1.55 Inspection.
----------
Tenant will, upon three (3) Business Days' request of Landlord, permit
a representative of Landlord to inspect the Properties and Facilities and
make copies of its direct or indirect Subsidiaries' books and records, and
to discuss its affairs, finances and accounts with its officers and
accountants, all at such reasonable times and as often as Landlord may
reasonably request and, in each case, cause each of its direct and indirect
Subsidiaries to do so; provided that any inspection by Landlord or its
representatives will not unreasonably interfere with its or such
Subsidiary's use and operation of its Properties and Facilities.
1.56 Further Assurances.
------------------
-13-
Tenant will, and will cause each of its direct or indirect
Subsidiaries to, execute and deliver to Landlord any writings and do all
things necessary, effectual or reasonably requested by Landlord to carry
into effect the provisions and intent of this Agreement.
1.57 Consolidation, Merger or Acquisition Involving Tenant.
-----------------------------------------------------
Tenant shall not at any time merge or consolidate with or into any
other Person, or make any acquisition of the business of any other Person.
1.59 Disposition of Assets by Tenant.
-------------------------------
Tenant shall not at any time sell, lease or otherwise dispose of any
of its assets to any Person, except that Tenant may (a) sell its inventory,
------
and obsolete or worn-out equipment, in the ordinary course of its business
and (b) sell or otherwise dispose of the HRP Exchange Properties.
1.59 Indebtedness.
------------
Tenant shall not at any time create, incur, assume or guarantee, or
permit to exist, or become or remain liable directly or indirectly upon,
any Indebtedness except the following:
(1) Indebtedness payable to Landlord;
(2) unsecured Indebtedness consisting of accounts payable,
accruals and similar items incurred in the ordinary course of business
in accordance with reasonable and customary trade practices, that are
neither owed to a Guarantor or a Subsidiary of a Guarantor nor
constitute Indebtedness for money borrowed or a Guarantee thereof;
(3) Indebtedness for taxes, assessments, governmental charges or
levies to the extent that payment thereof shall not at the time be
required to be made in accordance with the provisions of Article 8
---------
hereof or of the other applicable provisions of the Transaction
Documents;
(4) Indebtedness in respect of judgments or awards which have
been in force for less than the applicable appeal period, so long as
execution is not levied or in respect of which Tenant shall at the
time in good faith be prosecuting an appeal or proceedings for review,
and in respect of which execution thereof shall have been stayed
pending such appeal or review; provided that in each instance the
--------
applicable requirements of each Transaction Document are complied
with;
(5) Indebtedness for taxes, assessments, governmental charges or
levies, and claims for labor, materials and supplies, to the extent
that payment
-14-
thereof shall not at the time be required to be made in accordance
with the provisions of Article 8 hereof or of the other applicable
provisions of the Transaction Documents;
(6) unsecured Indebtedness (including without limitation,
accrued and unpaid management fees and Indebtedness for Borrowed
Money) of Tenant (i) owed to a Guarantor or a Subsidiary of a
Guarantor (provided that the payment of such Indebtedness shall be
subject to the terms of a subordination agreement in form and
substance satisfactory to Landlord among Tenant as debtor, such
Guarantor or such Subsidiary as subordinate creditor and Landlord as
senior creditor); and
(7) Indebtedness of Tenant, (i) as guarantor of or co-borrower
with Paragon or any Subsidiary thereof, in respect of an $890 million
credit facility provided to Paragon by The Chase Manhattan Bank, as
agent bank (and successor or replacement indebtedness), (ii) as
guarantor of senior subordinated notes and senior subordinated
discount notes of Paragon (and/or its successors and subsidiaries)
yielding proceeds of approximately $500 million (and successor or
replacement indebtedness), and (iii) as guarantor of a residual
guaranty by Paragon in respect of a master lease arrangement providing
for the acquisition, development and construction of skilled nursing
and assisted living facilities for a total amount of not to exceed
$100,000,000 (and successor or replacement indebtedness); provided
--------
that (A) the enforcement of such Indebtedness against Tenant shall at
all times be subject to the terms of an intercreditor agreement in
substantially the form (to the extent applicable) of the Intercreditor
Agreement dated as of February 12, 1997 among Tenant, GCIHCC,
GranCare, First Union National Bank of North Carolina, as agent, and
Landlord, (B) the enforcement of security interests or liens securing
such Indebtedness are permitted by paragraph (g) of Section 24.13, and
------------- -------------
(C) giving effect thereto and to the application of the proceeds
thereof, no Event of Default would be created.
1.60 Encumbrances.
------------
Tenant shall not at any time create or suffer to exist any Lien on any
of its properties or assets, except:
(1) Permitted Encumbrances;
(2) Liens in favor of Landlord;
(3) Liens for taxes or assessments or governmental charges or
levies, if payment shall not at the time be required to be made in
accordance with Article 8 hereof and the other applicable provisions
---------
of the Transaction Documents;
-15-
(4) Liens in respect of judgments or awards and liens of appeal
and similar bonds incident to the conduct of litigation, so long as
and to the extent that such judgments or awards, or the judgments or
awards secured by such bonds, are permitted as Indebtedness by Section
-------
24.12(d) or are otherwise permitted under the Transaction Documents;
--------
(5) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and similar liens incurred in the ordinary course of
business for sums not yet due or being contested in good faith in
accordance with the applicable provisions of this Agreement and the
other Transaction Documents;
(6) Liens (other than liens created by Section 302(f) or Section
4068 of ERISA or Section 412(n) of the Code) incurred on pledges or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance, social security laws or
similar legislation, and other liens incidental to the conduct of the
business of Tenant which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and do not
in the aggregate materially detract from the value of any material
property of Tenant or materially impair the use thereof in the
operation of its business; and
(7) Security interests in its capital stock and in its personal
property (excluding collateral under the HRP Shares Pledge Agreement
and the Cash Collateral Pledge) securing the Indebtedness incurred in
compliance with clauses (i) and (ii) of Section 24.12(g); provided,
----------- ---- ---------------- --------
however, that (i) such security interest shall at all times be junior
-------
to the liens and security interests in favor of Landlord, and confined
solely to such assets, and (ii) that the enforcement of such junior
liens and security interests, and all claims secured thereby, shall at
all times be subject to the terms of an intercreditor agreement in
substantially the form (to the extent applicable) of the Intercreditor
Agreement dated as of February 12, 1997 among Tenant, GCIHCC,
GranCare, First Union National Bank of North Carolina, as agent, and
Landlord.
1.61 Dividends.
---------
Tenant will not declare, order, pay or make, directly or
indirectly, any Restricted Payment or set apart any sum or property
therefor, or agree to do so; provided, however, that Tenant may
-------- -------
declare and pay dividends on its common stock, so long as
(1) at the time of such proposed action, or immediately after
giving effect thereto, no Default shall have occurred and be
continuing; and
(2) giving effect to such proposed action, the capital surplus
of Tenant will at least equal the capital surplus of Tenant on
December 31, 1990, and the
-16-
sum of all dividends paid or made by Tenant after December 8, 1990
will not exceed the Net Income of Tenant accumulated for the period,
considered as a single accounting period, from December 28, 1990 to
the end of the quarterly accounting period next preceding the date of
such proposed action for which Landlord has received financial
statements under Section 24.5(b) hereof.
1.62 Investments.
-----------
Tenant shall not at any time make, maintain or acquire any Investment
in any Person other than:
(1) Marketable direct full faith and credit obligations of, and
marketable obligations guaranteed by, the United States of America, or
any State thereof, which have a remaining maturity at the time of
purchase of no more than one year;
(2) Commercial paper maturing no more than 270 days from its
date of issue; provided, that such paper is accorded a rating in the
highest category by each of ▇▇▇▇▇'▇ Investors Service, Inc. and
Standard & Poor's Corporation;
(3) Certificates of deposit which have a remaining term to
maturity at the time of purchase of no more than one year (or which
are subject to a repurchase agreement with one of the banks or trust
companies described in this paragraph (c) exercisable within one year
from the time of purchase) issued by banks or trust companies
organized under the laws of the United States of America or a State
thereof and which are member banks of the Federal Reserve System, and
have aggregate capital, surplus and undivided profits of at least
$100,000,000 and the long term obligations of which carry a rating of
"A" or better by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
Corporation;
(4) Bonds or debentures which have a remaining term to maturity
at the time of purchase of no more than one year, issued by a
corporation, other than an AMS Company or an Affiliate thereof,
organized under the laws of a State of the United States or the
District of Columbia; provided, that such obligations carry a rating
of "A" or better by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard &
Poor's Corporation; and
(5) any intercompany loans or advances by Tenant to any
Guarantor or any wholly-owned Subsidiary thereof that are incurred and
remain outstanding without violating the provisions of Section 24.17
-------------
hereof; provided that, (1) such intercompany loan shall not be
subordinated to any other Indebtedness of such Guarantor or such
debtor Subsidiary, as the case may be, and (2) no Default shall exist
giving effect to the creation of such intercompany loan.
-17-
1.63 Transactions with Affiliates.
----------------------------
Tenant will not, directly or indirectly, pay any funds to or for the
account of, make any Investment in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, or engage in any other
transaction of any kind with any of its Affiliates, except (i) as permitted
by Sections 24.12 through 24.15 hereof or (ii) in connection with
transactions the terms of which are at least as favorable to Tenant as
those that could be obtained at that time from Persons that are not
Affiliates of Tenant.
1.64 Current Ratio.
-------------
Tenant will not permit its Current Ratio to be less than 1 to 1 at any
time.
1.65 Net Income.
----------
Tenant will not permit the sum of (i) its Net Income accumulated for
the period, considered as a single accounting period, from January 1, 1991
to the end of last fiscal quarter for which financial statements were, or
should have been, delivered pursuant to Section 24.5(b), and (ii) the cash
---------------
proceeds of any issuance by Tenant of its common stock to any Guarantor
(other than GCIHCC) during the period from January 1, 1991 to the end of
such fiscal quarter, to be less than $1.00 as of the end of such fiscal
quarter.
1.66 Definitions.
-----------
When used in this Article 24 the following terms shall have the
----------
respective meanings provided therefor and, unless otherwise specifically
indicated, shall be deemed to relate to Tenant:
(1) Consolidated Financials shall mean, for any Fiscal Year or
-----------------------
other accounting period of Tenant, annual and quarterly unaudited
financial statements prepared on a consolidated basis, including
Tenant's consolidated balance sheet, the related statements of income
and cash flows, all in reasonable detail, and setting forth in
comparative form the corresponding figures for the corresponding
period in the preceding Fiscal Year, and prepared in accordance with
generally accepted accounting principles, consistently applied
throughout the periods reflected.
(2) Current Ratio of any Person, at any time, shall mean all
-------------
current assets of such Person and its Subsidiaries at such time,
divided by the aggregate of all current liabilities of such Person and
its Subsidiaries at such time, in each case as determined in
accordance with GAAP.
(3) Financial Officer's Certificate shall mean a certificate of
-------------------------------
the financial officer of Tenant, duly authorized, accompanying the
financial statements required to be delivered by Tenant pursuant to
Section 24.5, in which
------------
-18-
such officer shall (i) certify that such statements have been properly
prepared consistent with GAAP (without accompanying footnotes), and
are true, correct and complete in all material respects and fairly
present the consolidated financial condition of Tenant at and as of
the dates thereof and the results of its and their operations for the
periods covered thereby, (ii) certify that such officer has reviewed
the Leases and has no knowledge of any default by Tenant in the
performance or observance of any of the provisions of the Leases or
any other Transaction Document or of any condition or event which
constitutes an Event of Default under the Leases or any of the
Transaction Documents or which with the passage of time or the giving
of notice or both would become such an Event of Default, and (iii)
provide computations and schedules showing in reasonable detail
compliance, as at the date of each such financial statement, with
Sections 24.17 and 24.18 of the Master Lease Document.
-------------- -----
(4) Fiscal Year shall mean the twelve (12) month period from
-----------
October 1 to September 30, or such other fiscal year as may be adopted
from time to time by Paragon.
(5) GAAP shall mean generally accepted accounting principles
----
consistently applied.
(6) Guarantee shall mean any obligation, contingent or
---------
otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness (whether
arising by virtue of partnership arrangements, by agreement to keep-
well, to purchase assets, goods, securities or services, to take-or-
pay, or to maintain or support financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof
or to protect such obligee against loss in respect thereof (in whole
or in part); provided that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding
meaning.
(7) Indebtedness shall mean all obligations of a Person,
------------
contingent or otherwise, which in accordance with GAAP should be
reflected on such Person's balance sheet as liabilities, specifically
including liabilities secured by any mortgage, pledge or lien existing
on property owned or acquired subject to such mortgage, pledge or
lien, whether or not the liability secured thereby shall have been
assumed, all obligations of lessees under capitalized leases, all
obligations under agreements, contingent or otherwise, to advance or
supply funds for investment purposes, all obligations created or
arising under any conditional sale or other title retention agreement,
device or arrangement, even though the rights
-19-
and remedies of the seller or lender thereunder in the event of
default are limited to repossession of property, all non-competition
agreements, and all Guarantees
(8) Investments shall mean with respect to any Person (the
-----------
"investor") (i) any investment by the investor in any other Person,
--------
whether by means of share purchase, capital contribution, purchase or
other acquisition of a partnership or joint venture interest, loan,
time deposit, demand deposit or otherwise and (ii) any Guarantee by
the investor of any Indebtedness or other obligation of any other
Person.
(9) Net Income shall mean, for any period during which the
----------
amount thereof is to be determined for a specified Person, the net
income (or net deficit, if a negative figure) of such Person for such
period (taken as a cumulative whole, if such period shall include more
than one fiscal period, with deficits netted against net income)
determined in accordance with GAAP, exclusive of the write-up of any
assets.
(10) Restricted Payment shall mean, as to any Person (a) any
------------------
dividend or other distribution (including dividends payable solely in
shares of capital stock or rights to acquire capital stock) on any
shares of capital stock of such Person or (b) any payment on account
of the purchase, redemption, retirement or acquisition of (i) any
shares of the capital stock of such Person or (ii) any option,
warrant, convertible security or other right to acquire shares of the
capital stock of such Person.
1.66.2 Effective as of the Exchange Closing Date, each reference in
the AMS Properties Master Lease to the "Collective Leased Properties" shall be
deemed to be a reference to the Continuing Properties leased by AMS Properties.
1.67 Amendment of GCIHCC Master Lease. The GCIHCC Master Lease is hereby
--------------------------------
amended as follows:
1.67.1 Article 1 of the GCIHCC Master Lease is amended by amending
the definitions "Guarantor" and "Transaction Documents" in full to read as
follows:
Guarantor: GranCare, AMS Properties and Paragon, in each case
---------
together with their respective successors and assigns, and any other Person
that becomes a Guarantor of Tenant's obligations under the applicable Lease
after October 31, 1997.
Transaction Documents: collectively, any agreement, note, lease,
---------------------
master lease, mortgage, security agreement, pledge agreement, assignment,
guaranty or other agreement or instrument now or hereafter executed by any
or all of Tenant or any Guarantor in favor of, for the benefit of, or with,
Landlord (including, without limitation, the AMS Properties Transaction
Documents), and any agreement, note, mortgage, security agreement, pledge
agreement, assignment, guaranty or other agreement or
-20-
instrument hereafter executed in connection with any extension, renewal,
refunding or refinancing thereof, as any of the same may hereafter from
time to time be amended, amended and restated, modified or supplemented.
1.67.2 Article 1 of the GCIHCC Master Lease is further amended by
adding the following definitions thereto to read as follows:
AMS Properties: AMS Properties, Inc., a Delaware corporation.
--------------
AMS Properties Lease: any "Lease" as such term is defined in the AMS
--------------------
Properties Master Lease.
AMS Properties Leased Properties: collectively, the "Collective Leased
--------------------------------
Properties" as such term is defined in the AMS Properties Master Lease.
AMS Properties Master Lease: the Master Lease Document dated as of
---------------------------
December 28, 1990 between HRP, as Landlord, and AMS Properties, as Tenant,
as amended, amended and restated, modified or supplemented from time to
time.
AMS Properties Transaction Documents: the "Transaction Documents" as
------------------------------------
such term is defined in the AMS Properties Master Lease.
Cash Collateral Pledge: The Cash Collateral Pledge dated as of
----------------------
October 31, 1997, between Paragon and Landlord, as amended, modified or
supplemented from time to time.
Paragon: Paragon Health Network, Inc., a Delaware corporation (f/k/a
-------
Living Centers of America, Inc.)
Voting Trust Agreement: The Amended and Restated Voting Trust
----------------------
Agreement dated as of June 30, 1992 from AMS Properties to HRPT Advisors,
Inc., as voting trustee, as amended, modified or supplemented from time to
time.
1.67.3 Section 3.1.1 of the GCIHCC Master Lease is amended by
amending paragraphs (b) and (c) thereof in full to read as follows:
(b) Computation of Minimum Rent for each Extended Term. The Minimum
--------------------------------------------------
Rent payable with respect to the Extended Term(s) for the applicable Lease
shall equal an annual sum (determined at the commencement of each Extended
Term for such Lease and subject to adjustment as set forth herein) equal to
the greatest of (a) the Minimum Rent payable for the immediately preceding
twelve (12) months for such Lease, (b) the product of (i) the Adjusted
Purchase Price for the applicable Leased Property, and (ii) a percentage
equal to 525 basis points above the yield (calculated on the basis of a
monthly equivalent yield) on 5-year United States Treasury securities at
the close of the Business Day which immediately precedes the commencement
of the Extended Term for which the
-21-
Minimum Rent is being calculated, or (c) the Fair Market Rental for such
Lease, payable in advance in equal, consecutive monthly installments on the
first day of each calendar month of each Extended Term. The computation of
the yield referenced in the preceding sentence shall be made using the
information shown for such date quoted in The Wall Street Journal published
-----------------------
on the following day. If there is no such quotation, the next preceding day
for which there is a quotation shall be used. If The Wall Street Journal
-----------------------
shall not be available, Landlord shall choose the quotation from another
recognized source.
(c) Mid-Term Adjustments of Minimum Rent. During the Term of the
------------------------------------
applicable Lease, on the 5th, 15th, 25th and 35th anniversary of the
Commencement Date therefor, the Minimum Rent under such Lease shall be
adjusted to the annual sum equal to the greater of (a) the Minimum Rent
under such Lease for the immediately preceding twelve (12) months or (b)
the product of (i) the sum of the Adjusted Purchase Price for the
applicable Leased Property, and (ii) a percentage equal to 525 basis points
above the yield (calculated on the basis of a monthly equivalent yield) on
5-year United States Treasury securities at the close of the Business Day
immediately preceding such anniversary. The computation of the yield
referenced in the preceding sentence shall be made using the information
shown for such date quoted in The Wall Street Journal published on the
-----------------------
following day. If there is no such quotation, the next preceding day for
which there is a quotation shall be used. If The Wall Street Journal shall
-------------------
not be available, Landlord shall choose the quotation from another
recognized source.
1.67.4 Section 12.1 of the GCIHCC Master Lease is amended by amending
paragraphs (h) and (p) thereof in full to read as follows:
(h)(A) any obligation of Tenant or any Guarantor (other than GranCare
or Paragon), or of any Subsidiary thereof, in respect of any Indebtedness
for Borrowed Money or for the deferred purchase price of any material
property or services (excluding (1) trade accounts payable in the ordinary
course of business on customary trade terms and (2) indebtedness or
obligations under the Transaction Documents) (hereinafter, "Indebtedness
------------
for Borrowed Money") or any guaranty relating thereto shall be declared to
------------------
be or shall become due and payable prior to the stated maturity thereof, or
such Indebtedness for Borrowed Money shall not be paid as and when the same
becomes due and payable, or there shall occur and be continuing any default
under any instrument, agreement or evidence of indebtedness relating to any
such Indebtedness for Borrowed Money the effect of which is to permit the
holder or holders of such instrument, agreement or evidence of
indebtedness, or a trustee, agent or other representative on behalf of such
holder or holders, to cause such Indebtedness for Borrowed Money to become
due prior to its stated maturity; or (B) any obligation of GranCare or
Paragon, or of any Subsidiary thereof (other than Tenant or GCIHCC), in
respect of any Indebtedness for Borrowed Money exceeding $1,000,000 in
aggregate principal amount, or any guaranty relating thereto, shall be
declared to be or shall become due and payable prior to the stated maturity
thereof, or the holder or holders of any instrument, agreement or evidence
of indebtedness relating to any such Indebtedness for Borrowed Money, or a
-22-
trustee, agent or other representative on behalf of such holder or holders,
shall accelerate prior to the stated maturity date or, if no stated
maturity date, demand payment of such Indebtedness for Borrowed Money, and
such declaration, acceleration or demand shall not have been rescinded
within thirty (30) days of the date such declaration, acceleration or
demand was made; or
(p) Paragon shall cease at any time to be, either directly or
indirectly through one or more wholly-owned Subsidiaries that are each
Guarantors, the beneficial and record owner of less than all of the shares
of the outstanding capital stock of Tenant and AMS Properties; or
1.67.5 Section 12.1 of the GCIHCC Master Lease is further amended by
adding new paragraph (q) thereto to read as follows:
(q) Tenant shall have failed to extend the term of the Voting Trust
Agreement in accordance with the applicable provisions thereof prior to the
thirtieth day prior to the end of the then term of the Voting Trust
Agreement;
1.67.6 Section 21.4 of the GCIHCC Master Lease is amended in full to
read as follows:
21.4 Tenant's Option to Purchase the Collective Leased Properties.
------------------------------------------------------------
Provided,
(a) no Default involving the nonpayment of Rent shall have
occurred and be continuing, the Leases for each of the Collective
Leased Properties shall be in full force and effect (other than Leases
that have been terminated in accordance with the provisions hereof,
other than after the occurrence of an Event of Default), and other
than as expressly permitted by Article 17, Tenant shall not have
----------
assigned the Leases for any of the Collective Leased Properties or
subleased all or any portion of the Collective Leased Properties; and
(b) no default involving the nonpayment of "Rent" under and as
defined in the AMS Properties Master Lease shall have occurred and be
continuing, the AMS Properties Leases for each of the AMS Properties
Leased Properties shall be in full force and effect (other than AMS
Properties Leases that have been terminated in accordance with the
provisions hereof, other than after the occurrence of an Event of
Default under the AMS Properties Master Lease), and other than as
expressly permitted by Article 17 of AMS Properties Master Lease, AMS
Properties shall not have assigned the AMS Properties Leases for any
of the AMS Properties Leased Properties or subleased all or any
portion of the AMS Properties Leased Properties;
-23-
Tenant shall have the option, exercisable on not less than twelve (12)
months prior Notice to Landlord, to purchase all, but not less than all,
the Collective Leased Properties (other than those Collective Leased
Properties whose Leases have been terminated in accordance with the
provisions of Article 10 or Article 11) upon the expiration of the Fixed
---------- ----------
Term or any Extended Term, each for a purchase price equal to the greater
of (i) ninety percent (90%) of the Fair Market Value Purchase Price of such
Collective Leased Property as of the expiration of the Fixed Term or such
Extended Term, as the case may be, or (ii)(1) if such option is exercised
at the end of the Fixed Term, one hundred fifty percent (150%) of the
Adjusted Purchase Price, (2) if such option is exercised at the end of the
first Extended Term, two hundred percent (200%) of the Adjusted Purchase
Price or (3) if such option is exercised at the end of the second Extended
Term, three hundred percent (300%) of the Adjusted Purchase Price; provided
--------
however that in each case AMS Properties shall simultaneously exercise its
option to purchase all, but not less than all of the AMS Properties Leased
Properties (other than those AMS Properties Leased Properties whose AMS
Properties Leases have been terminated in accordance with the provisions of
Article 10 or Article 11 of the AMS Properties Master Lease) in accordance
with Section 21.4 of the AMS Properties Master Lease. Such purchase by
Tenant shall be made in accordance with the provisions of Article 15.
----------
1.67.7 Section 23.7(h) of the GCIHCC Master Lease is amended in full
to read as follows:
(h) Indebtedness of Tenant, (i) as guarantor of or co-borrower with
Paragon or any Subsidiary thereof, in respect of an $890 million credit
facility provided to Paragon by The Chase Manhattan Bank, as agent bank
(and successor or replacement indebtedness), (ii) as guarantor of senior
subordinated notes and senior subordinated discount notes of Paragon
(and/or its successors and subsidiaries) yielding proceeds of approximately
$500 million (and successor or replacement indebtedness) and (iii) as
guarantor of a residual guaranty by Paragon in respect of a master lease
arrangement providing for the acquisition, development and construction of
skilled nursing and assisted living facilities for a total amount of not to
exceed $100,000,000 (and successor or replacement indebtedness); provided
--------
that (A) the enforcement of such Indebtedness against Tenant, and of any
security interests or liens on the property or the capital stock of Tenant
securing such Indebtedness, shall at all times be subject to the terms of
an intercreditor agreement in substantially the form (to the extent
applicable) of the Intercreditor Agreement dated as of February 12, 1997
among Tenant, GCIHCC, GranCare, First Union National Bank of North
Carolina, as agent, and Landlord, and (B) giving effect thereto and to the
application of the proceeds thereof, no Event of Default would be created;
and
1.67.8 Section 23.5 of the GCIHCC Master Lease is amended in full to
read as follows:
23.5 General Operations.
------------------
-24-
Tenant covenants and agrees to furnish to Landlord, promptly after
Landlord's request therefor, copies of
(a) all written reports of surveys, statements of deficiencies,
plans of correction, and all material correspondence relating thereto,
including, without limitation, all written reports and correspondence
concerning compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including physical
environment and Life Safety Code survey reports; and
(b) such other confirmation as to the licensure and Medicare and
Medicaid participation of Tenant as Landlord may reasonably request
from time to time.
1.67.9 Section 23.13 of the GCIHCC Master Lease is amended by adding
new paragraph (e) thereto to read as follows:
(e) Guarantee shall mean any obligation, contingent or otherwise, of
---------
any Person directly or indirectly guaranteeing any Indebtedness of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain or support financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the
payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
1.68 Amendment of HRPT Shares Pledge Agreement. The HRPT Shares Pledge
-----------------------------------------
Agreement dated as of December 28, 1990, as amended and restated by an amendment
and restatement thereof dated as of June 30, 1992 (the "HRP Shares Pledge
-----------------
Agreement"), is hereby amended by deleting Section 14 (captioned "Partial
---------
Release; Re-Pledge") in its entirety.
1.69 Amendment of Guaranty, Cross Default and Cross Collateralization
----------------------------------------------------------------
Agreement. Clause (i)(B) of the definition of "Guaranteed Obligations" in
---------
Section 1 of the Guaranty, Cross Default and Cross Collateralization Agreement
dated as of June 30, 1992 among AMS Properties, GCIHCC and HRP, is amended in
full to read as follows:
; and (B) the leases dated as of December 28, 1990 and March 27, 1992, and
all other leases that incorporate by reference a master lease document
dated as of December 28, 1990, as amended, between HRP, as lessor, and AMS,
as lessee, relating to the real and personal property subject thereto and
being described more particularly therein, as each of such leases and the
master lease document may be amended, modified or supplemented
-25-
from time to time (collectively, the "AMS Lease", and together with the GCI
---------
Lease, the "Leases");
------
1.70 Agreements of HRP. HRP hereby:
-----------------
(1) irrevocably and unconditionally releases Vitalink from its
obligations under the Vitalink Guaranty, and agrees to return to GranCare,
or its order, at the Restructuring Closing, all original counterparts of
the Vitalink Guaranty in its possession;
(2) consents to the reduction in the number of licensed beds in the
amount and at the facilities described on Schedule 2.6(b) hereto;
---------------
(3) consents to the creation of junior liens and security interests
in the personal property and capital stock of AMS Properties and GCIHCC
(excluding, however, all collateral under the HRP Shares Pledge Agreement
or the Cash Collateral Pledge) to secure guaranties by AMS Properties and
GCIHCC of (i) an $890 million credit facility to be provided to Paragon by
The Chase Manhattan Bank (and successor or replacement indebtedness) and
(ii) senior subordinated notes and senior subordinated discount notes of
Paragon (and/or its successors and subsidiaries) yielding proceeds of
approximately $500 million (and successor or replacement indebtedness);
provided that the enforcement of such junior liens and security interests,
--------
and all claims secured thereby, shall at all times be subject to the terms
of an intercreditor agreement in substantially the form (to the extent
applicable) of the Intercreditor Agreement dated as of February 12, 1997
among the GranCare Parties, First Union National Bank of North Carolina, as
administrative agent, and HRP;
(4) cancels (i) the obligations of GranCare to complete net
$25,000,000 in new mortgage and lease transactions ("Additional
----------
Financings") with HRP pursuant to Section 9.27 of the Acquisition Agreement
----------
or any similar provision of any Transaction Document, and (ii) the
obligations of GranCare to make any payments (or any portion of any
payment) in connection with the failure to complete any of the Additional
Financings;
(5) waives for all time any existing rights of first refusal (or any
similar right) with respect to any sale, purchase, lease, sale/leaseback or
other financing transaction by GranCare or any of its Affiliates (or
successors) with any real estate investment trust;
(6) consents to the consummation of the Transactions, and waives any
resulting default under Section 9.15A of the Acquisition Agreement or any
other Transaction Document or otherwise;
(7) consents to the prepayment of the Mortgage Note (without
additional premium or penalty other than the total consideration called for
herein) and agrees to release its mortgage and security interest in the
property securing the Mortgage Note on the Exchange Closing Date in
accordance with Section 3.1 below; and
-----------
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(8) agrees that Paragon and any of its Affiliates (specifically
excluding AMS Properties and GCIHCC), or any successors of any of the
foregoing, may, without any consent or approval of HRP, enter into mergers,
consolidations, acquisitions, asset sales, sales of minority or majority
interests in Paragon or such Affiliate or any other transactions
(including, without limitation, any change of control, recapitalization or
other restructuring of Paragon or any of such Affiliates or successors);
provided, however, that Paragon (i) shall not liquidate, wind-up or
-------- -------
dissolve itself (or suffer any liquidation or dissolution) and (ii) may not
merge or consolidate with any Person, or convey, transfer or lease
substantially all of its assets unless:
(1) giving effect to such transaction, no Event of Default (as
defined in any Transaction Document), or an event or condition
that with the giving of notice or lapse of time or both would
become an Event of Default, would occur under and as defined in
any Transaction Document; and
(2) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer
or lease substantially all of the assets of Paragon, as the case
may be, shall be a corporation organized and existing under the
laws of the United States or any State thereof (including the
District of Columbia), and, if Paragon is not such corporation,
(i) such corporation shall have executed and delivered to HRP its
assumption of the due and punctual performance and observance of
each covenant and condition of the Paragon Guaranty to the same
extent and with the same effect as though such corporation was a
party hereto and was named and defined as the "Guarantor" therein
and (ii) shall have caused to be delivered to HRP an opinion of
outside counsel to such corporation to the effect that all
agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the
terms hereof and of the Paragon Guaranty.
(9) waives any Default or Event of Default arising under the
Transaction Documents as the result of the ownership and/or operation of
the Southpointe nursing facility located in Milwaukee, Wisconsin by AMS
Properties, and, notwithstanding any provision to the contrary in any
Transaction Document, hereby consents to the sale, transfer or other
disposition of such facility by AMS Properties (including the transfer to
an Affiliate without consideration); provided that, following such
transfer, AMS Properties does not remain liable for any material
liabilities associated with such facility.
SECTION 25. LIKE-KIND EXCHANGE
------------------
1.71 Effective the day (the "Exchange Closing Date") that all the
---------------------
conditions to the occurrence of the Exchange Closing set forth in Section 3.2
-----------
below have been satisfied: (a) AMS Properties shall prepay in full the principal
amount of the Mortgage Note, together with all accrued and unpaid interest
thereon (but without prepayment premium) and (b) AMS Properties
-27-
and HRP will exchange the GranCare Exchange Properties for the HRP Exchange
Properties (the "Exchange Transaction"), free and clear of any Liens of any
--------------------
nature whatsoever except Permitted Encumbrances. Upon the occurrence of the
Exchange Closing, the documents delivered to the Title Company in escrow
pursuant to Sections 5.6 and 5.7 hereto shall be released for recordation or to
------------ ---
the appropriate party pursuant to the terms of the Exchange Escrow Agreement
(the "Exchange Closing").
----------------
1.72 The Exchange Closing shall be subject to the satisfaction (or the
waiver by HRP) of the following conditions:
(1) The prior occurrence of the Restructuring Closing;
(2) Evidence of the receipt of all Post Closing Consents, and the
continued licensure of each GranCare Exchange Property in accordance with
the provisions hereof;
(3) Giving effect to the Exchange Closing, no Default or Event of
Default shall have occurred and be continuing, and, the representations
contained in each Restructure Document (modified to reflect the obtaining
of the Post Closing Consents) shall be true and correct at and giving
effect to the Exchange Closing as if made on and as of the Exchange
Closing;
(4) HRP shall have received a certificate of a senior executive
officer of GranCare and Paragon confirming satisfaction of the conditions
described in paragraph (b) and (c) above;
--------- - -
(5) Evidence satisfactory to HRP that (i) the hazardous waste
contamination with respect to the generator spill at the Wilson, North
Carolina property has been remediated in accordance with Applicable Law and
(ii) that the underground storage tank at the Winston-Salem, North Carolina
property has been registered in accordance with Applicable Law;
(6) Confirmation by the Title Company that it is prepared to issue a
title policy to HRP and AMS Properties insuring title to the Exchange
Properties free from Liens other than Permitted Encumbrances;
(7) HRP shall have received such opinions of healthcare counsel to
Paragon and GranCare as HRP shall have reasonably requested, each of which
opinions shall be in form and substance reasonably satisfactory to HRP; and
(8) The GranCare Parties shall have paid all costs, expenses and
taxes provided for in Section 7.3 hereof in connection with the Exchange
-----------
Closing.
1.73 Within ninety (90) days after the consummation of the Exchange
Transaction, HRP shall prepare a schedule (the "Section 1031 Schedule") that
---------------------
sets forth the "exchange groups" and "residual group" (each within the meaning
of Treas. Reg. Section 1.1031(j)-1),
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together with each asset included in the GranCare Exchange Properties and the
HRP Exchange Properties that belongs to the relevant exchange group or residual
group, and AMS Properties will provide HRP with such information as is necessary
for the preparation of such Section 1031 Schedule. Such Section 1031 Schedule
shall be prepared on the basis that, for purposes of Treas. Reg. Section
1.1031(j)-1, the Mortgage Note retired prior to the Exchange Closing pursuant
Section 3.1 hereof is not assumed by HRP as part of the Like-Kind Exchange under
-----------
this Agreement, and further, the GranCare Exchange Properties are not conveyed
subject to the Mortgages. The Purchase Price to be set forth in each New
Facility Lease shall be allocated between the GranCare Exchange Properties as
mutually agreed between HRP and AMS Properties; however, to the extent no such
agreement is reached before the Exchange Closing Date, the Purchase Prices shall
based upon the aggregate purchase prices for the HRP Exchange Properties and
allocated among the GranCare Exchange Properties by HRP based upon the Section
1031 Schedule.
1.74 Each of AMS Properties and HRP shall report the transactions
contemplated hereby as a Like-Kind Exchange under Section 1031 of the Code,
consistent with the Section 1031 Schedule, and shall not take, and shall cause
their respective Affiliates, representatives, successors and assigns not to
take, any position on any federal, state or local Tax return or report,
inconsistent with such reporting position or the Section 1031 Schedule. Each of
AMS Properties and HRP shall promptly give the other notice of any disallowance
of or challenge to such reporting by any Taxing Authority.
1.75 Each of AMS Properties and HRP shall cooperate with the other,
including without limitation in preparing the Section 1031 Schedule and
executing all necessary agreements and documents, to the extent necessary for
HRP to treat the exchange of the GranCare Exchange Properties for the HRP
Exchange Properties as a Like-Kind Exchange pursuant to Section 1031 of the
Code.
1.76 Notwithstanding the provisions of this Section, the parties to this
Agreement will rely solely on their own advisors in determining the tax
consequences of the transactions contemplated by this Agreement and each party
is not relying, and will not rely, on any representations or assurances of any
other party regarding such consequences other than the representations,
warranties, covenants and agreements set forth in writing in this Agreement or
furnished pursuant to the provisions hereof.
1.77 The GranCare Parties shall use all reasonable efforts to obtain the
Post Closing Consents as soon as possible after the date hereof, and HRP agrees
to cooperate with all reasonable requests of the GranCare Parties in connection
with obtaining the Post Closing Consents. In the event that, for any reason
(other than the failure of HRP to cooperate as provided in the preceding
sentence), the Exchange Closing Date does not occur prior to April 29, 1998 (as
it may be extended as provided below, the "Post Closing Consent Date"), and for
-------------------------
as long thereafter as the Exchange Closing Date shall fail to occur (and without
limiting any other remedies that may be available to HRP; it being understood,
however, that the failure to obtain the Post Closing Consents by the Post
Closing Consent Date shall not, in and of itself, constitute an Event of Default
under the Transaction Documents), AMS Properties shall pay, as an
-29-
Additional Charge under the AMS Properties Master Lease, an amount equal to
$20,000 per month, payable in arrears on the one month anniversary of the Post
Closing Consent Date and on the same day of each following month and on the
Exchange Closing Date (provided that the last monthly installment shall be
prorated as to any partial month). Notwithstanding the foregoing, however, if,
despite the GranCare Parties' reasonable efforts, the Post Closing Consents
applicable to any GranCare Exchange Property (the "Affected GranCare Exchange
--------------------------
Property") cannot be obtained prior to the Post Closing Consent Date, AMS
--------
Properties may offer to substitute for the Affected GranCare Exchange Property
another skilled or intermediate care nursing facility of equal or greater value
and otherwise satisfactory to HRP. If HRP so approves such substitute facility
(the "Substitute Exchange Property"), (i) the parties hereto shall amend the
----------------------------
Restructure Documents and the Transaction Documents to reflect the substitution
of Substitute Exchange Property for the Affected GranCare Exchange Property,
(ii) AMS Properties shall use all reasonable efforts to obtain, as soon as
possible, all consents necessary to permit the exchange of the Substitute
Exchange Property and (iii) the Post Closing Consent Date shall be extended for
an additional period of ninety (90) days.
1.78 AMS Properties' obligation to pay Minimum Rent and Additional Rent
under the New Facility Leases during the period from November 1, 1997 to the
Exchange Closing Date shall be net of Minimum Rent and Additional Rent paid to
HRP under the AMS Properties Facility Leases of the HRP Exchange Properties for
such period.
SECTION 26. CLOSING.
-------
Section 2 of this Agreement shall become effective as of the date first set
---------
forth above, upon the satisfaction of the conditions set forth below at a
closing (the "Restructuring Closing") to be held at the offices of ▇▇▇▇▇▇▇▇ &
---------------------
Worcester LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, or at such other
location as the GranCare Parties and HRP may agree, at 10:00 a.m. local time, on
a date (the "Restructuring Closing Date") which is the earlier to occur of (i)
--------------------------
November 30, 1997, and (ii) the date as of which all conditions precedent to the
Restructuring Closing herein set forth have either been satisfied or waived by
the party in whose favor such conditions run. In the event that the
Restructuring Closing shall not have occurred on or before December 15, 1997,
provided that no action for specific performance shall have been commenced by
HRP to enforce this Agreement, either party shall have the right, by the giving
of written notice, to terminate this Agreement.
SECTION 27. CONDITIONS TO CLOSING
---------------------
The occurrence of the Restructuring Closing is subject to the satisfaction
of the following conditions:
1.79 Restructure Payment. GranCare shall have paid HRP a non-refundable
-------------------
$10,000,000 restructure payment in immediately available funds.
1.80 Paragon Documents and Payment of Deposit. Paragon shall have: (a)
----------------------------------------
executed and delivered to HRP a Guaranty in the form of Exhibit A hereto (the
---------
"Paragon Guaranty") and a
----------------
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Cash Deposit Security Agreement in the form of Exhibit B hereto (the "Cash
--------- ----
Collateral Pledge"), and (b) paid HRP $15,000,000 in immediately available
-----------------
funds, representing the Cash Collateral Deposit referenced in the Cash
Collateral Pledge.
1.81 Subordination Agreement. Paragon and GranCare, as subordinate
-----------------------
creditors, and AMS Properties and GCIHCC, as debtors, shall have entered into a
Subordination Agreement in the form of Exhibit C hereto (the "Subordination
--------- -------------
Agreement").
---------
1.82 GranCare Guaranty. GranCare shall have executed and delivered to HRP
-----------------
an Amended and Restated Guaranty in the form of Exhibit D hereto (the "GranCare
--------- --------
Guaranty").
--------
1.83 Amendment to Facility Leases. AMS Properties and GCIHCC shall have
----------------------------
executed and delivered to HRP an Amendment to Facility Leases in the form of
Exhibit E hereto (the "Lease Amendment").
1.84 Exchange Transaction Documents--GranCare Exchange Properties. AMS
------------------------------------------------------------
Properties and GCIHCC shall have executed and delivered to HRP an Amendment to
Facility Leases in the form of Exhibit E hereto (the "Lease Amendment").
Exchange Transaction Documents--GranCare Exchange Properties. AMS Properties
shall have (i) executed and delivered an Exchange Properties Escrow Agreement
among AMS Properties, HRP and the Title Company, as escrow agent, in the form
furnished by HRP (the "Exchange Properties Escrow Agreement") to HRP, and (ii)
------------------------------------
delivered the following to the Title Company in escrow (pending the occurrence
of the Exchange Closing), in each case in form and substance reasonably
satisfactory to HRP:
(1) A good and sufficient statutory warranty deed, with respect to
each of the GranCare Exchange Properties, in proper statutory form for
recording, duly executed and acknowledged by AMS Properties, conveying good
and marketable title to such properties, free from all liens and
encumbrances other than the Permitted Encumbrances;
(2) A ▇▇▇▇ of sale and assignment agreement, in form and substance
reasonably satisfactory to HRP, duly executed and acknowledged by AMS
Properties, with respect to all of AMS Properties' right, title and
interest in, to and under the Personal Property, the Contracts, the
Documents and the Intangible Property with respect to the GranCare Exchange
Properties (excluding, however, all accounts receivable, inventory and
computers (including related hardware and software), and prepaid items);
(3) Transfer tax forms with respect to each of the GranCare Exchange
Properties;
(4) An owner's affidavit for each of the GranCare Exchange Properties
executed by AMS Properties;
(5) A FIRPTA affidavit, executed by AMS Properties;
(6) Copies of all title exception documents for each of the GranCare
Exchange Properties;
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(7) Counterparts of each New Facility Lease, duly executed by AMS
Properties;
(8) Title survey certificates for each of the GranCare Exchange
Properties; and
(9) Such other conveyance documents, certificates, deeds, affidavits
and other instruments as HRP may reasonably require.
1.85 Exchange Transaction Documents--HRP Exchange Properties. HRP shall
-------------------------------------------------------
have (i) executed and delivered the Exchange Properties Escrow Agreement to AMS
Properties and (ii) delivered the following to the Title Company, in escrow
(pending the occurrence of the Exchange Closing), in each case in form and
substance reasonably satisfactory to AMS Properties:
(1) A good and sufficient grant or special warranty deed, with
respect to each of the HRP Exchange Properties (other than the Palm
Springs, California property), in proper statutory form for recording, duly
executed and acknowledged by HRP, conveying HRP's title to such properties,
free from all liens and encumbrances created by or through HRP;
(2) An assignment of ground lease with respect to the HRP Exchange
Property at Palm Springs, California, in proper statutory form for
recording, duly executed and acknowledged by HRP, conveying HRP's interest
as ground lessee to such property, free from all liens and encumbrances
created by or through HRP;
(3) A ▇▇▇▇ of sale and assignment agreement, in form and substance
reasonably satisfactory to AMS Properties, duly executed and acknowledged
by HRP, with respect to any personal property with respect to the HRP
Exchange Properties in which HRP has an interest;
(4) Transfer Tax form with respect to each of the HRP Exchange
Properties;
(5) A FIRPTA affidavit, executed by HRP; and
(6) The New Facility Leases, duly executed by HRP.
1.86 The Transactions. The Transactions shall have been consummated
----------------
concurrently with Restructuring Closing.
1.87 No Default; Representations and Warranties. Giving effect to the
------------------------------------------
Transactions and the occurrence of the Restructuring Closing, no Default or
Event of Default shall have occurred and be continuing, and the representations
contained in each Restructure Document shall be true and correct at the
Restructuring Closing as if made on and as of such date;
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1.88 Officer's Certificates. HRP shall have received a certificate of a
----------------------
senior executive officer of GranCare and Paragon confirming satisfaction of the
conditions described in Sections 5.8 and 5.9 above.
------------ ---
1.89 Other Documents. HRP shall have received such other documents,
---------------
opinions and certificates (including without limitation, evidence of continued
licensure of each Facility leased or operated by AMS Properties or GCIHCC, an
opinion of counsel to Paragon and GranCare, and certificates of public officials
and of officers of Paragon, GranCare, AMS Properties and GCIHCC) as HRP shall
have reasonably requested, each of which shall be in form and substance
reasonably satisfactory to HRP.
1.90 Fees and Expenses. GranCare shall have paid all costs, expenses and
-----------------
taxes provided for in Section 7.3 hereof, as well as all fees and expenses
-----------
currently payable by GranCare, AMS Properties and GCIHCC under any Transaction
Document.
SECTION 28. REPRESENTATIONS AND WARRANTIES
Each of the GranCare Parties hereby jointly and severally represents and
warrants to HRP as follows:
1.91 Status of GranCare Parties. Each GranCare Party is a corporation duly
--------------------------
organized, and validly existing and in good standing under the laws of its
respective state of its incorporation and has all requisite power and authority
under the laws of such state and under its charter and by-laws to own the
properties owned by it, to lease the properties leased by it, to operate the
nursing or other facilities located thereon as heretofore operated, to enter
into and perform its obligations under the Transaction Documents to which it is
a party, and to transact the business in which it is engaged or proposes to
engage. Each GranCare Party has duly qualified and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or to be conducted by it requires such qualification (except where the
failure to so qualify could not reasonably be expected to have a material
adverse effect on the financial condition and operations, or on the assets or
business of such GranCare Party).
1.92 Authorization. Each GranCare Party has taken all necessary corporate
-------------
and other action to authorize the execution, delivery and performance of each
Restructure Document to which it is a party.
1.93 Enforceability.
--------------
(1) This Agreement constitutes, and each other Restructure Document
when executed and delivered by each GranCare Party party thereto shall
constitute, the legal, valid and binding obligation and agreement of such
GranCare Party, in each case enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting
the rights and remedies of creditors.
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(2) Upon the due execution and delivery of the Restructure Documents
pursuant hereto, the Transaction Documents, as modified by the Restructure
Documents, shall constitute the legal, valid and binding obligation and
agreement of each GranCare Party party thereto, in each case enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors.
1.94 No Violations of Agreements, Etc. Neither the execution, delivery or
--------------------------------
performance of any Restructure Document by any GranCare Party, nor the
consummation of the Transactions and the other transactions contemplated hereby
(other than the Exchange Closing), nor compliance with the terms and provisions
thereof will result in any breach of the terms, conditions or provisions of, or
conflict with or constitute a default under, or result in the creation of any
lien, charge or encumbrance (other than Liens permitted by the Transaction
Documents) upon any property or assets of any GranCare Party pursuant to, the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument to which any GranCare Party may be a party
or by which such GranCare Party or any of its property may be bound
("Contractual Obligations"), or its charter and by-laws, or violate any
-----------------------
provisions of law or any order or regulation of any governmental commission,
bureau or administrative agency or any applicable order, writ, injunction,
judgment or decree of any court (collectively, "Legal Restrictions").
------------------
1.95 Governmental and Other Approvals. No order, permission, consent,
--------------------------------
approval, license, authorization, registration or validation of, or filing with,
or exemption by, any governmental agency, commission, board or public authority
is required to authorize, or is required in connection with the execution,
delivery and performance of any Restructure Document by any GranCare Party, or
the consummation of the Transactions and the Restructuring Closing other
transactions contemplated hereby, which has not been duly obtained or made on or
prior to the Restructuring Closing Date, except (i) those which are customarily
and routinely obtained after the closing of a transaction and that are
reasonably expected to be obtained in due course and (ii) the orders,
permissions, consents, approvals, licenses, authorizations, registrations and
filings described in Schedule 6.5 hereto (collectively, the "Post Closing
------------ ------------
Consents").
--------
1.96 Compliance With Agreements, Etc. Upon the consummation of the
-------------------------------
Transactions and the other transactions contemplated hereby, each GranCare Party
will be in compliance in all material respects with the terms and provisions of
each Contractual Obligation to which it is or will be a party at such time or by
which it or its property is or will then be bound that is material to the
operations, business, prospects, property or assets of, liabilities (including,
without limitation, tax, ERISA and environmental liabilities) or the condition
(financial or otherwise) of Paragon or of the GranCare Parties taken as a whole,
and will not be in default under or with respect to any such Contractual
Obligation. Each GranCare Party will be in compliance with, and no default shall
have occurred under, each Legal Restriction that shall be applicable to it or
its respective properties upon the consummation of the Transactions and the
other transactions contemplated hereby, where the effect of such noncompliance
would be material to the operations, business, prospects, property or assets of,
liabilities (including, without limitation,
-34-
tax, ERISA and environmental liabilities) or the condition (financial or
otherwise) of Paragon or of the GranCare Parties taken as a whole. No Event of
Default exists or will occur giving effect to the consummation of the
Transactions and the other transactions contemplated hereby.
1.97 Licenses, Permits, Etc. Giving effect to the consummation of the
----------------------
Transactions and the other transactions contemplated hereby, all licenses,
permits, consents, permissions, certifications and other approvals from all
federal, state and local governmental agencies necessary to provide the services
and the number of available beds provided by the Continuing Properties owned
and/or operated by the GranCare Parties immediately before consummation of the
Transactions and the other transactions contemplated hereby contemplated hereby,
shall continue to be in full force and effect, and shall not be subject to
revocation as a result of the consummation of the Transactions or any of the
other transactions contemplated hereby.
1.98 Licensed Beds.
-------------
(1) Schedule 1.8 hereto is a complete and accurate statement of the
------------
bed categories for which each healthcare facility (collectively, the
"Healthcare Facilities" individually, a "Healthcare Facility") located at a
--------------------- -------------------
Continuing Property that is not a GranCare Exchange Property will be
licensed as of the Restructuring Closing Date, the number of beds in each
category for which such Healthcare Facility will be licensed as of the
Restructuring Closing Date, and the number of Licensed Beds in each
category that will be available for use in such Healthcare Facility as of
the Restructuring Closing Date. Upon the Restructuring Closing, no beds
will be in use or available at such Healthcare Facility for use in any
category for which such Healthcare Facility is not licensed. No GranCare
Party has any reason to believe that the number of Licensed Beds in any
category may be reduced by any governmental agency.
(2) Schedule 1.8 hereto is a complete and accurate statement of the
------------
bed categories for which each Healthcare Facility located at a GranCare
Exchange Property will be licensed as of the Exchange Closing Date, the
number of beds in each category for which such Healthcare Facility will be
licensed as of the Exchange Closing Date, and the number of Licensed Beds
in each category that will be available for use in such Healthcare Facility
as of the Exchange Closing Date. Upon the Exchange Closing, no beds will be
in use or available at such Healthcare Facility for use in any category for
which such Healthcare Facility is not licensed. No GranCare Party has any
reason to believe that the number of Licensed Beds in any category may be
reduced by any governmental agency.
1.99 Licenses and Permits. Schedule 6.9 hereto, designated "Licenses and
-------------------- ------------
Permits", is a complete and accurate list of all licenses, permits, consents,
permissions, certifications and other approvals from all federal, state and
local governmental agencies issued to each Healthcare Facility with respect to
its operations that will be effective immediately prior to the Restructuring
Closing (with respect to each Continuing Property other than a GranCare Exchange
Property) and the Exchange Closing (with respect to each GranCare Exchange
Property), and no GranCare Party has any reason to believe that any such
license, permit or approval will not be in effect or
-35-
will be conditioned or restricted upon the consummation of the Restructuring
Closing (with respect to each Continuing Property other than a GranCare Exchange
Property) or the Exchange Closing (with respect to each GranCare Exchange
Property), except such restrictions as are customary and reasonably expected to
be satisfied promptly following the Restructuring Closing or the Exchange
Closing, as the case may be.
1.100 Notices and Applications.
------------------------
(1) Except for the Post Closing Consents:
(1) all notices required to be given by the GranCare Parties to
consummate the Restructuring Closing and the Exchange Closing have
been given to the federal, state and local governmental agencies and
accrediting and certifying agencies having jurisdiction over each
Continuing Property ("Notices and Applications"); and
------------------------
(2) each GranCare Party has received all licenses, permits,
certifications, accreditations, approvals, permissions and consents
that are required to be received by it in order to consummate the
Transactions and the other transactions contemplated hereby and,
following the Restructuring Closing and the Exchange Closing, to allow
it to maintain the number of beds set forth in Schedule 1.8 and to
------------
maintain in good standing the licenses and permits set forth on
Schedule 6.9 (except for those licenses, permits, certifications,
------------
accreditations, approvals, permissions and consents that are
customarily and routinely received after the closing of a transaction,
and that are reasonably expected to be satisfied promptly after the
Restructuring Closing Date or the Exchange Closing Date, as the case
may be).
(2) To the best of the knowledge of each GranCare Party, no Person
with an "ownership or control interest" in any GranCare Party and no "agent
or managing employee" of any GranCare Party, each as defined by 42 C.F.R.
(S)(S) 420.201 and 455.101, has been convicted of a criminal offense
related to the involvement of such Person in the Medicare, Medicaid, or
Title XX services program under the Social Security Act, or has been
excluded from participation in the Medicare program, the Medicaid program,
or other state health care program.
(3) Each of AMS Properties and GCIHCC is and will be, following
consummation of the Transactions and the Restructuring Closing and Exchange
Closing, in substantial compliance with all Medicare (if applicable) and
Medicaid Conditions and Standards of Participation, and is and will be,
following consummation of the Transactions and the other transactions
contemplated hereby, in substantial compliance with the requirements for
licensure for each of the facilities to be operated by it.
1.101 Judgments; Litigation. There are no judgments presently outstanding
---------------------
and unsatisfied against any GranCare Party or its properties, and, except as set
forth in the Joint
-36-
Proxy Statement dated September 26, 1997, no GranCare Party or any of its
properties is involved in any litigation at law or in equity, or in any
proceeding before any court, or by or before any governmental or administrative
agency, which litigation or proceeding could reasonably be expected to have a
materially adverse effect on the operations, business, prospects, property or
assets of, liabilities (including, without limitation, tax, ERISA and
environmental liabilities), or the condition (financial or otherwise) of Paragon
or of the GranCare Parties taken as a whole, or ownership by any GranCare Party
or HRP of, or any security interest or lien in HRP's favor in, any Continuing
Property and, to each GranCare Party's knowledge, no such material litigation or
proceeding is threatened against any GranCare Party or against its properties
(including any Continuing Property) and no investigation looking toward such a
material proceeding has begun or is contemplated.
1.102 Affiliates and Subsidiaries. The names of all Subsidiaries and
---------------------------
Affiliates of any GranCare Party or Paragon expected to derive revenue from any
Continuing Property (whether by way of management fees, the lending of money or
otherwise), other than the GranCare Party party to the Lease for such Continuing
Property, are set forth on Schedule 6.12 hereto.
-------------
1.103 Environmental Laws.
------------------
(1) Each GranCare Party has obtained all governmental approvals that
are required for the operation of its business under any Applicable Law,
except when the failure to so obtain a governmental approval would not have
a material adverse effect.
(2) Each GranCare Party is in compliance with all terms and
conditions of all required governmental approvals and is also in compliance
with all terms and conditions of all Applicable Laws, noncompliance with
which would have a material adverse effect.
(3) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter pending or, to the best knowledge of any GranCare
Party, threatened against any GranCare Party relating in any way to any
Applicable Laws, and there is no lien of any private entity or governmental
authority against any Continuing Property relating in any way to the
Applicable Laws.
(4) There has been no claim, complaint, notice, or request for
information received by any GranCare Party with respect to any site listed
on the National Priority List promulgated pursuant to CERCLA or any state
list of sites requiring investigation or cleanup with respect to
contamination by hazardous substances.
(5) To the best of any GranCare Party's knowledge, there has been no
release or threat of release of any hazardous substance at any Continuing
Property which would likely result in liability being imposed upon any
GranCare Party, which liability would have a material adverse effect.
-37-
1.104 Disclosure. Neither this Agreement, any other Restructure Document
----------
nor any other document, certificate or written statement furnished to HRP by or
on behalf of any GranCare Party in connection with the Transactions or the
Restructuring Closing or Exchange Closing contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary in order to make the
statements contained herein or therein not misleading. To the best of the
knowledge of each GranCare Party, there is no fact or condition which materially
and adversely affects the operations, business, prospects, property or assets
of, liabilities (including, without limitation, tax, ERISA and environmental
liabilities), or the condition (financial or otherwise) of the GranCare Parties
that has not been set forth herein or in the Joint Proxy Statement dated
September 26, 1997.
SECTION 29. MISCELLANEOUS
-------------
1.105 Confirmation of Transaction Documents, Etc. Each of the Transaction
------------------------------------------
Documents, as amended hereby, remain in full force and effect and is hereby
ratified and confirmed, except as specifically set forth herein. The amendments
of the Transaction Documents set forth herein (a) do not constitute an
amendment, waiver or modification of any term, condition or covenant of any
Transaction Document, or any of the instruments or documents referred to
therein, other than as specifically set forth herein, and (ii) shall not
prejudice any rights which HRP or its successors and assigns may now or
hereafter have under or in connection with any Transaction Document, as amended
hereby or any of the instruments or documents referred to therein.
1.106 Claims. Without limiting any indemnification provision contained in
------
any Restructure Document or Transaction Document, the GranCare Parties hereby
jointly and severally agree to and do hereby indemnify, protect, defend and hold
harmless HRP, any shareholder of HRP, any lender to HRP and their respective
officers, directors, trustees, shareholders, managers and affiliates, any of
their respective successors or assigns, and each of them (individually an
"Indemnitee") from and against any and all liabilities, losses, damages, costs
----------
and expenses of any kind (including, without limitation, the reasonable fees and
disbursements of counsel for HRP in connection with any investigative,
administrative or judicial proceeding, whether or not HRP shall be designated a
party thereto) which may be incurred or suffered by any Indemnitee, relating to
or arising out of any Restructure Document or Transaction Document, or the
existence of any hazardous substance on, in, or under any Continuing Property,
or any violation or alleged violation of any Applicable Law, or in connection
with any Continuing Property, or in connection with the Southpointe nursing
facility in Milwaukee, Wisconsin (including, without limitation, any disposition
thereof) or involving the imposition of any lien under any Applicable Law;
provided that HRP shall not have the right to be indemnified hereunder for its
--------
own gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction. The covenants in this Section 7.2 shall survive the
-----------
termination of the Transaction Documents.
1.107 Costs and Expenses. GranCare, AMS Properties and GCIHCC hereby
------------------
jointly and severally agrees to pay all costs and expenses of HRP in connection
with the preparation,
-38-
reproduction, execution and delivery, and administration, of this Agreement,
including the reasonable fees and expenses of ▇▇▇▇▇▇▇▇ & Worcester LLP, special
counsel to HRP with respect thereto, and the payment of all recording fees, real
estate transfer taxes, title insurance premiums and other expenses related to
the satisfaction of the conditions to the Restructuring Closing and the Exchange
Closing.
1.108 No Counterclaims, Etc.; Release. Each GranCare Party acknowledges
-------------------------------
that immediately prior to its acceptance of this letter, it is obligated to pay
all indebtedness and obligations arising under the Transaction Documents without
a right of set-off, counterclaim or defense with respect thereto. In
consideration of HRP's agreements contained herein, GranCare does hereby release
and forever discharge HRP and its affiliates, officers, directors, agents,
attorneys, employees, successors and assigns, of and from all manner of actions,
causes of action, suits, judgments, claims and demands whatsoever, in law or in
equity, which have arisen from the beginning of time up and including the date
hereof, whether arising in connection with the transactions contemplated hereby
or by the Restructure Documents or the Transaction Documents, or otherwise.
1.109 Survival. The representations, warranties and indemnities contained
--------
in this Agreement shall survive the consummation of the Transactions and the
other transactions contemplated hereby, and any investigation by HRP of any
matters described in or related to the transactions contemplated by this
Agreement or any Transaction Document. Although HRP or its representatives may
have undertaken certain investigations with respect to the consummation of the
Transactions and the other transactions contemplated hereby, each GranCare Party
acknowledges that HRP is relying upon such representations, warranties,
covenants and indemnities in connection therewith.
1.110 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of each party hereto and to their respective successors,
assigns, transferees, executors and administrators.
1.111 CONSENT TO JURISDICTION. ANY ACTION TO ENFORCE, ARISING OUT OF, OR
-----------------------
RELATING IN ANY WAY TO, ANY OF THE PROVISIONS OF THIS AGREEMENT OR ANY
RESTRUCTURE DOCUMENT OR TRANSACTION DOCUMENT MAY BE BROUGHT AND PROSECUTED IN
SUCH COURT OR COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS AS IS PROVIDED
BY LAW; AND EACH OF THE ENTITIES CONSENTS TO THE JURISDICTION OF SAID COURT OR
COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS AND TO SERVICE OF PROCESS BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR IN ANY MANNER
PROVIDED BY LAW.
1.112 WAIVER OF JURY TRIAL. EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH
--------------------
CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN CONNECTION
WITH ANY ACTION OR PROCEEDING OF ANY NATURE WHATSOEVER ARISING UNDER, OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RESTRUCTURE DOCUMENT OR
TRANSACTION
-39-
DOCUMENT AND IN CONNECTION WITH SUCH ACTION OR PROCEEDING, WHETHER ARISING UNDER
STATUTE (INCLUDING ANY FEDERAL OR STATE CONSTITUTION) OR UNDER THE LAW OF
CONTRACT, TORT OR OTHERWISE AND INCLUDING, WITHOUT LIMITATION, ANY CHALLENGE TO
THE LEGALITY, VALIDITY, BINDING EFFECT OR ENFORCEABILITY OF THIS PARAGRAPH OR
THIS AGREEMENT OR ANY OTHER RESTRUCTURE DOCUMENT OR TRANSACTION DOCUMENT.
1.113 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS.
1.114 NO LIABILITY OF TRUSTEES THE DECLARATION OF TRUST OF HRP, DATED
------------------------
OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY,
JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS
DEALING WITH HRP, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
-40-
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
HEALTH AND RETIREMENT
PROPERTIES TRUST (f/k/a "Health and
Rehabilitation Properties Trust")
(known in Wisconsin as "Health and
Retirement Properties REIT")
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Its: President
GRANCARE, INC.
(f/k/a New GranCare, Inc.)
By:/s/ ▇. ▇▇▇▇▇ Day, Jr.
-----------------------------
Its: Assistant Secretary
AMS PROPERTIES, INC.
By: /s/ ▇. ▇▇▇▇▇ Day, Jr.
-----------------------------
Its: Assistant Secretary
GCI HEALTH CARE CENTERS, INC.
By:/s/ ▇. ▇▇▇▇▇ Day, Jr.
-----------------------------
Title Assistant Secretary
SCHEDULE 1.8
CONTINUING PROPERTIES
---------------------
-----------------------------------------------------------------------------------------
Facility Name Location Type of No. of No. of
Licensed Service Licensed Available
Beds Beds
-----------------------------------------------------------------------------------------
AMS Properties Facilities:
-------------------------
-----------------------------------------------------------------------------------------
Flagship Newport Beach, Skilled Care 167 151
CA
-----------------------------------------------------------------------------------------
Lancaster Lancaster, Skilled Care 99 99
CA
-----------------------------------------------------------------------------------------
Pacific Gardens Fresno, CA Skilled Care 180 180
-----------------------------------------------------------------------------------------
Tarzana Los Angeles, CA Skilled Care 173 173
-----------------------------------------------------------------------------------------
Thousand Oaks Thousand Oaks, Skilled Care 124 124
CA
-----------------------------------------------------------------------------------------
Van Nuys Los Angeles, CA Skilled Care 58 58
-----------------------------------------------------------------------------------------
Cedars HealthCare Center Lakewood, CO Skilled and 175 175
Intermediate Care
-----------------------------------------------------------------------------------------
Cherrelyn HealthCare Center Littleton, CO Skilled and 230 230
Intermediate Care
-----------------------------------------------------------------------------------------
Greentree Health and Clintonville, WI Skilled Care 66 66
Rehabilitation Center
-----------------------------------------------------------------------------------------
Pine Manor Health Care Embarrass, WI Skilled Care 101 101
Center
-----------------------------------------------------------------------------------------
Sunny Hill Health Care Madison, WI Skilled Care 73 73
-----------------------------------------------------------------------------------------
The Virginia Waukesha, WI Skilled Care 102 102
-----------------------------------------------------------------------------------------
Woodland Brookfield, WI Skilled Care 226 226
-----------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ East Health Milwaukee, WI Skilled Care 215 215
and Rehabilitation Center
-----------------------------------------------------------------------------------------
Northwest Health Care Milwaukee, WI Skilled Care 93 93
Center
-----------------------------------------------------------------------------------------
River Hills West Pewaukee, WI Skilled Care 248 237
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Facility Name Location Type of No. of No. of
Licensed Service Licensed Available
Beds Beds
-----------------------------------------------------------------------------------------
▇▇▇▇▇ Centers - Wilson Wilson, NC Skilled Care; 119 119
Intermediate Care
-----------------------------------------------------------------------------------------
▇▇▇▇▇ Centers - Cabarrus Concord, NC Skilled Care;
Intermediate Care 110 110
-----------------------------------------------------------------------------------------
▇▇▇▇▇ Centers - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-Salem, Skilled Care; 80 80
Salem NC Intermediate Care
-----------------------------------------------------------------------------------------
GCI Health Care Centers, Inc. Facilities:
----------------------------------------
-----------------------------------------------------------------------------------------
Village Green Nursing Phoenix, Arizona Skilled Care 127 125
Home
-----------------------------------------------------------------------------------------
La Mesa Care Center Yuma, Arizona Skilled Care; 84; 44 81; 44
Intermediate Care
-----------------------------------------------------------------------------------------
SunQuest Village of Yuma Yuma, Arizona supervisory care 80 80
-----------------------------------------------------------------------------------------
▇▇ ▇▇▇▇▇▇▇▇ Health and Stockton, CA Skilled Care 120 116
Rehabilitation Center
-----------------------------------------------------------------------------------------
Huron Nursing Home Huron, SD Skilled Care; 125; 38 125; 38
Intermediate Care
-----------------------------------------------------------------------------------------
SunQuest Village of Huron, SD retirement 59 59
Huron apartments
-----------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ Skilled Care; 109; 50 109; 50
Center Intermediate Care
-----------------------------------------------------------------------------------------
___________________
/1/ Not a licensed health care facility
SCHEDULE 1.20
GRANCARE NORTH CAROLINA PROPERTIES
----------------------------------
SCHEDULE 1.21
GRANCARE WISCONSIN PROPERTIES
-----------------------------
SCHEDULE 1.24
HRP EXCHANGE PROPERTIES
-----------------------
SCHEDULE 1.32
PERMITTED ENCUMBRANCES
----------------------
SCHEDULE 1.44
CONTINUING TRANSACTION DOCUMENTS
--------------------------------
2. The Facility Leases dated as of December 28, 1990 or March 27, 1992 between
HRP, as landlord, and AMS Properties, as tenant;
3. A Master Lease Document General Terms and Conditions dated as of December
28, 1990 between HRP, as landlord, and AMS Properties, as tenant;
4. A Guaranty, dated as of December 28, 1990, from Old GranCare in favor of
HRP pursuant to which all obligations of AMS Properties are guaranteed; the
obligations and liabilities under such Guaranty having been assumed by New
GranCare pursuant to the Assumption Agreement;
5. A Guaranty, Cross Default and Cross Collateralization Agreement, dated as
of June 30, 1992, from AMS Properties and GCIHCC in favor of HRP;
6. Memoranda of Lease, each dated as of December 28, 1990 or March 27, 1992
recorded with the Registry of Deeds of the appropriate county with respect
to each Leased Property;
7. Precautionary UCC Financing Statements by AMS Properties, showing AMS
Properties, as lessee, and HRP, as lessor, filed with the appropriate State
and County UCC filing office with respect to each Leased Property;
8. Amended and Restated HRP Shares Pledge Agreement, dated as of June 30,
1992, between HRP and AMS Properties, pursuant to which AMS Properties has
pledged the HRP Shares to HRP to secure its obligations to HRP;
9. Amended and Restated Voting Trust Agreement, dated as of June 30, 1992 from
AMS Properties to HRPT Advisors, Inc., as voting trustee;
9.1 Voting Trust Certificate;
9.2 Stock Power;
10. A Security Agreement, dated as of December 28, 1990 from AMS Properties to
HRP, granting HRP a security interest in all now owned and hereafter
acquired tangible personal property and all accounts receivable, contract
rights and general intangibles of AMS Properties;
11. A Collateral Assignment of Contracts and Permits, dated as of December 28,
1990 from AMS Properties to HRP, assigning to HRP all contracts and permits
of AMS Properties;
12. UCC Financing Statements/Fixture Filings by AMS Properties, showing AMS
Properties, as debtor, and HRP, as secured party, filed with the
appropriate UCC filing office and
-2-
registries of deeds to perfect the interests of HRP as a secured creditor
under the security instruments referred to above;
13. An Amended and Restated Renovation Funding Agreement dated as of January
13, 1992, between AMS Properties and HRP;
14. Renovation Loan Agreement, dated as of March 28, 1992, by and between AMS
Properties and HRP relating to certain renovations to be made at the
▇▇▇▇▇▇▇▇▇▇▇ East Health Care Center, Milwaukee, Wisconsin;
15. Promissory Note, dated as of March 28, 1992, in the original principal
amount of $1,250,000, executed by AMS Properties and accepted by HRP;
16. Security Agreement, dated as of March 28, 1992, made by AMS Properties in
favor of HRP;
17. A Pledge Agreement dated as of December 28, 1990, as supplemented by a
Pledge Agreement Supplement dated as of December 29, 1993, from Old
GranCare (as successor to AMS) to HRP pursuant to which all shares of
capital stock of AMS Properties are pledged to HRP, together with
certificates relating to the AMS Properties shares and stock powers
relating to such shares; the obligations and liabilities under such Pledge
Agreement and Pledge Agreement Supplement having been assumed by New
GranCare pursuant to the Assumption Agreement;
18. A Subordination Agreement dated as of December 28, 1990 among GranCare as
subordinate creditor, AMS Properties as debtor, and HRP as senior creditor;
the obligations and liabilities under such Subordination Agreement having
been assumed by New GranCare pursuant to the Assumption Agreement;
19. A Subordination Agreement dated as of December 28, 1990 among HMI as
subordinate creditor, AMS Properties as debtor and HRP as senior creditor;
20. A Subordination Agreement dated as of December 28, 1990 among AMS Green
Tree as subordinate creditor, AMS Properties as debtor and HRP as senior
creditor;
21. A Subordination Agreement dated as of December 28, 1990 among Am-Cal as
subordinate creditor, AMS Properties as debtor and HRP as senior creditor;
22. Consent Letter dated March 31, 1995 by HRP and consented to by GranCare,
AMS Properties and GCIHCC re: Subleases;
23. Assignment of Sublease Documents dated March 31, 1995 between AMS
Properties and HRP;
24. Assignment of Leases and Rents dated March 31, 1995 by AMS Properties re:
Subleases;
-3-
25. A Rescission Agreement and Amendment to Transaction Documents dated as of
October 1, 1994 among Old GranCare, AMS Properties, GCIHCC and HRP; and
26. The Assumption Agreement by New GranCare, Inc. in favor of HRP.
27. Letter Agreement dated April 25, 1992, from HRP to GranCare, accepted by
GranCare;
28. Closing Escrow Agreement, dated May 29, 1992, among HRP, Samaritan,
Samaritan Arizona, Samaritan California, Samaritan South Dakota and GCI and
the Title Company, as escrow agent, delivering various closing documents
and providing information and instructions regarding delivery and recording
of such documents;
29. Master Lease Document, dated as of June 30, 1992, between HRP as Landlord
and GCI as Tenant;
30. Facility Leases, each dated as of June 30, 1992, between HRP as Landlord
and GCI as Tenant, for each Facility;
31. Amended and Restated HRP Shares Pledge Agreement, dated as of June 30,
1992, between HRP and AMS, pursuant to which AMS has pledged the HRP Shares
to HRP to secure its obligations to HRP;
32. Amended and Restated Voting Trust Agreement, dated as of June 30, 1992 from
AMS to HRPT Advisors, Inc., as voting trustee;
32.1 Voting Trust Certificate
32.2 Stock Power;
33. Guaranty, Cross Default and Cross Collateralization Agreement, dated as of
June 30, 1992, from AMS and GCI, in favor of HRP;
34. A Guaranty, dated as of June 30, 1992 from GranCare in favor of HRP
pursuant to which all obligations of AMS are guaranteed; the obligations
and liabilities under such Guaranty having been assumed by New GranCare,
Inc. pursuant to the Assumption Agreement referenced below;
35. Security Agreement, dated as of June 30, 1992, from GCI to HRP, granting
HRP a security interest in all tangible and intangible personal property
and including all accounts receivable, contract rights and general
intangibles;
36. Assignment of Contracts, Licenses and Permits, dated as of June 30, 1992,
from GCI to HRP, assigning to HRP, all contracts, licences and permits used
in connection with the operation of the Facilities;
-4-
37. Pledge Agreement, dated as of June 30, 1992 Date, from GranCare pursuant to
which all of the capital stock of GCI is pledged to HRP to secure the
obligations of GCI;
38. Stock power relating to pledged shares;
39. A Subordination Agreement dated as of June 30, 1992 among GranCare as
subordinate creditor, GCI as debtor, and HRP as senior creditor; the
obligations and liabilities under such Subordination Agreement having been
assumed by New GranCare pursuant to the Assumption Agreement;
40. Subordination Agreement, dated as of June 30, 1992, among AMS as
subordinated creditor, GCI, as debtor and HRP as senior creditor, pursuant
to which all obligations of GCI to the subordinated creditor are
subordinated;
41. Representation Letter and Indemnification Agreement, dated June 30, 1992,
from GranCare, AMS and GCI, with respect to, inter alia, the continued
----- ----
effectiveness of the representations and warranties made by GranCare and
GCI in, and the absence of any Defaults under, the Transaction Documents;
42. Consent Letter dated March 31, 1995 by HRP and consented to by GCI,
GranCare and AMS re: HealthQuest Subleases;
43. Assignment of Sublease Documents dated March 31, 1995 between GCI and HRP
re: HealthQuest Subleases;
44. Assignment of Leases and Rents dated March 31, 1995 by GCI re: HealthQuest
Subleases;
45. Rescission Agreement and Amendment to Transaction Documents dated as of
October 1, 1994 among GranCare, AMS, GCI and HRP;
46. Assumption Agreement by New GranCare, Inc. in favor of HRP (the "Assumption
----------
Agreement").
---------
SCHEDULE 2.6(b)
PERMITTED REDUCTION IN NO. OF LICENSED BEDS
-------------------------------------------
----------------------------------------------------------------------------------
Facility Name Location Reduction in No. of Total Beds,
Beds as Reduced
----------------------------------------------------------------------------------
AMS Properties, Inc. Facilities:
--------------------------------
----------------------------------------------------------------------------------
Tarzana Los Angeles, CA 19 173
----------------------------------------------------------------------------------
Cedars HealthCare Center Lakewood, CO 25 175
----------------------------------------------------------------------------------
Cherrelyn HealthCare Center Littleton, CO 15 230
----------------------------------------------------------------------------------
Greentree Health and Clintonville, WI 12 66
Rehabilitation Center
----------------------------------------------------------------------------------
Pine Manor Health Care Embarrass, WI 20 101
Center
----------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ East Health and Milwaukee, WI 93 215
Rehabilitation Center
----------------------------------------------------------------------------------
Northwest Health Care Milwaukee, WI 25 93
Center
----------------------------------------------------------------------------------
River Hills West Pewaukee, WI 8 248
----------------------------------------------------------------------------------
GCI Health Care Centers, Inc. Facilities:
-----------------------------------------
----------------------------------------------------------------------------------
▇▇ ▇▇▇▇▇▇▇▇ Health and Stockton, CA 2 120
Rehabilitation Center
----------------------------------------------------------------------------------
SCHEDULE 6.5
POST CLOSING CONSENTS
---------------------
Palm Springs Health Care Center
. Change of Ownership application to the California Department of
Healthcare Services
. Medicaid notification
. Medicare notification, including Civil Rights Compliance package
Park Manor HealthCare Center
. Change of Ownership application to the Division of Health and Social
Services
. Certificate of Need transfer notification
. Medicaid notification
. Medicare notification, including Civil Rights Compliance package
▇▇▇▇▇ Centers - ▇▇▇▇▇▇
. Change of Ownership application to the Department of Human Resources,
Division of Licensing and Certification
. Request for a Certificate of Need exemption to the Department of Human
Resources, Division of Facility Services
. Medicaid notification
. Medicare notification, including Civil Rights Compliance package
▇▇▇▇▇ Centers - Cabarrus
. Change of Ownership application to the Department of Human Resources,
Division of Licensing and Certification
. Request for a Certificate of Need exemption to the Department of Human
Resources, Division of Facility Services
. Medicaid notification
. Medicare notification, including Civil Rights Compliance package
▇▇▇▇▇ Centers - Winston-Salem
. Change of Ownership application to the Department of Human Resources,
Division of Licensing and Certification
. Request for a Certificate of Need exemption to the Department of Human
Resources, Division of Facility Services
. Medicaid notification
. Medicare notification, including Civil Rights Compliance package
SCHEDULE 6.9
LICENSES AND PERMITS
--------------------
------------------------------------------------------------------------------------------------------------------
Facility Name Location Licenses, Permits
------------------------------------------------------------------------------------------------------------------
AMS Properties Facilities:
-------------------------
------------------------------------------------------------------------------------------------------------------
Flagship Newport Beach, CA . Department of Health Services Skilled Nursing
Facility license
. Medicare certification
. Medi-Cal certification
------------------------------------------------------------------------------------------------------------------
Lancaster Lancaster, CA . Department of Health Services Skilled Nursing
Facility license
. Medicare certification
. Medi-Cal certification__
------------------------------------------------------------------------------------------------------------------
Pacific Gardens Fresno, CA . Department of Health Services Skilled Nursing
Facility license
. Medicare certification
. Medi-Cal certification
------------------------------------------------------------------------------------------------------------------
Tarzana Los Angeles, CA . Department of Health Services Skilled Nursing
Facility license
. Medicare certification
. Medi-Cal certification
------------------------------------------------------------------------------------------------------------------
Thousand Oaks Thousand Oaks, CA . Department of Health Services Skilled Nursing
Facility license
. Medicare certification
. Medi-Cal certification
------------------------------------------------------------------------------------------------------------------
Van Nuys Los Angeles, CA . Department of Health Services Skilled Nursing
Facility license
. Medi-Cal certification
------------------------------------------------------------------------------------------------------------------
Cedars HealthCare Center Lakewood, CO . Department of Health Nursing Care Facility
. Medicare certification
. Medicaid certification
------------------------------------------------------------------------------------------------------------------
Cherrelyn HealthCare Center Littleton, CO . Department of Health Nursing Care Facility
license
. Medicare certification
. Medicaid certification
------------------------------------------------------------------------------------------------------------------
Greentree Health and Clintonville, WI . Division of Health and Social Services Home
Rehabilitation Center for Skilled Care license
. Medicare certification
------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Facility Name Location Licenses, Permits
-------------------------------------------------------------------------------------------------------------------
. Medicaid certification
-------------------------------------------------------------------------------------------------------------------
Pine Manor Health Care Center Embarrass, WI . Division of Health and Social Services
Home for Skilled Care license
. Medicaid certification
. Division of Health and Social Service
. Facility for the Developmentally
Disabled license
-------------------------------------------------------------------------------------------------------------------
Sunny Hill Health Care Madison, WI . Division of Health and Social Services
Home for Skilled Care license
. Medicare certification
. Medicaid certification
-------------------------------------------------------------------------------------------------------------------
The Virginia Waukesha, WI . Division of Health and Social Services
Home for Skilled Care license
. Medicare certification
. Medicaid certification
-------------------------------------------------------------------------------------------------------------------
Woodland Brookfield, WI . Division of Health and Social Services
Home for Skilled Care license
. Medicare certification
. Medicaid certification
-------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ East Health and Milwaukee, WI . Division of Health and Social Services
Rehabilitation Center Home for Skilled Care license
. Medicare certification
. Medicaid certification
-------------------------------------------------------------------------------------------------------------------
Northwest Health Care Center Milwaukee, WI . Division of Health and Social Services
license
. Medicare certification
. Medicaid certification
-------------------------------------------------------------------------------------------------------------------
River Hills West Pewaukee, WI . Division of Health and Social Services
license
. Medicare certification
. Medicaid certification
. Division of Community Services day care
license
. CBRF license
-------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Centers - Wilson Wilson, NC . Department of Human Resources Nursing
Facility license
. Medicare certification
. Medicaid Certification
-------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Centers - Cabarrus Concord, NC . Department of Human Resources Nursing
Facility license
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Facility Name Location Licenses, Permits
-------------------------------------------------------------------------------------------------------------------
. Medicare certification
. Medicaid Certification
-------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Centers - Winston Salem Winston-Salem, NC . Department of Human Resources Nursing
Facility license
. Medicare certification
. Medicaid Certification
-------------------------------------------------------------------------------------------------------------------
GCI Health Care Centers, Inc. Facilities:
-----------------------------------------
-------------------------------------------------------------------------------------------------------------------
Village Green Nursing Home Phoenix, Arizona . Department of Health Services Nursing
Care Institution license
. Medicare certifications
. AHCCCS (ALTCS) (Medical) certification
--------------------------------------------------------------------------------------------------------------------
La Mesa Care Center Yuma, Arizona . Department of Health Services Nursing
Care Institution license
. Medicare certification
. AHCCCS (ALTCS) Medicaid) certification
--------------------------------------------------------------------------------------------------------------------
SunQuest Village of Yuma Yuma, Arizona Department of Health Services Supervisory
Care Home license
--------------------------------------------------------------------------------------------------------------------
▇▇ ▇▇▇▇▇▇▇▇ Health and Stockton, CA . Department of Health Services Skilled
Rehabilitation Center Nursing Facility license
. Medicare certification
. Medi-Cal certification
--------------------------------------------------------------------------------------------------------------------
Huron Nursing Home Huron, SD . Department of Public Health Nursing
Home license
. Medicare certification
. Medicaid certification
--------------------------------------------------------------------------------------------------------------------
SunQuest Village of Huron Huron, SD None
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ . Department of Public Health Nursing
home license
. Medicare certification
. Medicaid certification
--------------------------------------------------------------------------------------------------------------------
SCHEDULE 6.12
SUBSIDIARIES AND AFFILIATES
---------------------------
GranCare, Inc. (DE)
American Pharmaceutical Services, Inc. (DE)
American Rehability Management, Inc. (TN)
American Rehability Services, Inc. (UT)
American Senior Health Services, Inc. (DE)
APS Holding Company, Inc. (NV)
APS Pharmacy Management, Inc. (DE)
Hospice Associates of America, Inc. (DE)
Hospice Management Partners, Inc. (DE)
Therapy Management Innovations, Inc. (NV)
EXHIBIT A
---------
FORM OF THE PARAGON GUARANTY
----------------------------
EXHIBIT B
---------
FORM OF THE CASH COLLATERAL PLEDGE
----------------------------------
EXHIBIT C
---------
FORM OF THE SUBORDINATION AGREEMENT
-----------------------------------
EXHIBIT D
---------
FORM OF THE GRANCARE GUARANTY
-----------------------------
EXHIBIT E
---------
FORM OF THE LEASE AMENDMENT
---------------------------