EXHIBIT 4.6
PARAGON HEALTH NETWORK, INC.
$275,000,000
9 1/2% Senior Subordinated Notes due 2007
$294,000,000
10 1/2% Senior Subordinated Discount Notes due 2007
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
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November 4, 1997
CHASE SECURITIES INC.
XXXXX XXXXXX INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
c/o Chase Securities Inc.
000 Xxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
PARAGON HEALTH NETWORK, INC., a Delaware corporation (after giving
effect to the Mergers, the "Company"), proposes to issue and sell to Chase
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Securities Inc. ("CSI"), Xxxxx Xxxxxx Inc. ("Xxxxx Xxxxxx") and Credit Suisse
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First Boston Corporation ("CFSB," and together with CSI and Xxxxx Xxxxxx, the
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"Initial Purchasers"), upon the terms and subject to the conditions set forth in
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a purchase agreement dated October 28, 1997 (the "Purchase Agreement"),
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$275,000,000 aggregate principal amount of its 9 1/2% Senior Subordinated Notes
due 2007 (the "Senior Subordinated Notes") and $294,000,000 aggregate principal
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amount of its 10 1/2% Senior Subordinated Discount Notes due 2007 (the "Senior
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Subordinated Discount Notes," and together with the Senior Subordinated Notes,
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the "Securities." Capitalized terms used but not defined herein shall have the
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meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the holders (including the Initial Purchasers) of the Securities, the
Exchange Securities (as defined herein) and the Private Exchange Securities (as
defined herein) (collectively, the "Holders"), as follows:
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1. Registered Exchange Offer. The Company shall (i) use its
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commercially reasonable efforts to prepare and, not later than 60 days following
the date of original issuance of the Securities (the "Issue Date"), to file with
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the Commission a registration statement (the "Exchange Offer Registration
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Statement") on an appropriate form under the Securities Act with respect to a
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proposed offer to the Holders of the Securities (the "Registered Exchange
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Offer") to issue and deliver to such Holders, in exchange for the Securities, a
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like aggregate principal amount of debt securities of the Company (the "Exchange
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Securities") that are identical in all material respects to the Securities
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(except that the Exchange Securities will not contain terms with respect to
transfer restrictions or additional interest upon certain failures to comply
with this Agreement), (ii) use its commercially reasonable efforts to cause the
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Exchange Offer Registration Statement to become effective under the Securities
Act no later than 180 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 180 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Exchange Securities will
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be issued under the Indenture or an indenture (the "Exchange Securities
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Indenture") between the Company and the Trustee or such other bank or trust
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company that is reasonably satisfactory to the Initial Purchasers, as trustee
(the "Exchange Securities Trustee"), such indenture to be identical in all
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material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not an Initial
Purchaser holding Securities that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Securities in the ordinary course of such Holder's business and (d) has
no arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Initial Purchasers
and each Exchanging Dealer acknowledge that, pursuant to current interpretations
by the Commission's staff of Section 5 of the Securities Act, each Holder that
is a broker-dealer electing to exchange Securities, acquired for its own account
as a result of market-making activities or other trading activities, for
Exchange Securities (an "Exchanging Dealer"), is required to deliver a
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prospectus containing substantially the information set forth in Annex A hereto
on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan
of Distribution" section of such prospectus in connection with a sale of any
such Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
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principal amount of debt securities of the Company (the "Private Exchange
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Securities") that are identical in all material respects to the Exchange
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Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
commercially reasonable efforts to cause the Private Exchange Securities to bear
the same CUSIP numbers as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is first mailed to the Holders;
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(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to 5:00 p.m., New York City time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Company shall use its commercially reasonable efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
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such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days after the
commencement of the Exchange Offer and the date on which all Exchanging Dealers
have sold all Exchange Securities held by them and (ii) the Company shall make
such prospectus and any amendment or supplement thereto available to any broker-
dealer for use in connection with any resale of any Exchange Securities for a
period of 90 days after the consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understandings with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
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Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies as to
form in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and (iii) any
prospectus forming part of any Exchange Offer Registration Statement, and any
supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
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applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 180 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, or (vi) the Company so elects, then the following
provisions shall apply:
(a) The Company shall use its commercially reasonable efforts to file
as promptly as practicable (but in no event more than 60 days after so required
or requested pursuant to this Section 2) with the Commission, and thereafter
shall use its commercially reasonable efforts to cause to be declared effective,
a shelf registration statement on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as defined
below) by the Holders thereof from time to time in accordance with the methods
of distribution set forth in such registration statement (hereafter, a "Shelf
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Registration Statement" and, together with any Exchange Offer Registration
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Statement, a "Registration Statement").
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(b) The Company shall use its commercially reasonable efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Securities for a period ending on the earlier of (i) two years from the Issue
Date or such shorter period that will terminate when all the Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
thereto and (ii) the date on which the Securities become eligible for resale
without volume restrictions pursuant to Rule 144(k) under the Securities Act (in
any such case, such period being called the "Shelf Registration Period"). The
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Company shall be deemed not to have used its commercially reasonable efforts to
keep the Shelf Registration Statement effective during the requisite period if
it voluntarily takes any action that would result in Holders of Transfer
Restricted Securities covered thereby not being able to offer and sell such
Transfer Restricted Securities during that period, unless such action is
required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies as to
form in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration Statement
and any amendment thereto (in either case, other than with respect to
information included therein in reliance upon or in conformity with written
information furnished to the Company by or on behalf of any Holder specifically
for use therein (the "Holders' Information")) does not contain an untrue
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statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and
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(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. Liquidated Damages. (a) The parties hereto agree that the
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Holders of Transfer Restricted Securities will suffer damages if the Company
fails to fulfill its obligations under Section 1 or Section 2, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
Commission on or prior to 60 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 150 days after the Issue Date (or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or the applicable interpretations of Commission's staff, if later, within
45 days after publication of the change in law or interpretation), (iii) the
Registered Exchange Offer is not consummated on or prior to 180 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 150 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation) but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 45 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
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obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $ 0.192 per week per $1,000 principal amount (or Accreted Value,
as the case may be) of Transfer Restricted Securities held by such Holder until
(i) the applicable Registration Statement is filed, (ii) the Exchange Offer
Registration Statement is declared effective and the Registered Exchange Offer
is consummated, (iii) the Shelf Registration Statement is declared effective or
(iv) the Shelf Registration Statement again becomes effective, as the case may
be. Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. As used herein, the term "Transfer Restricted Securities"
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means (i) each Security until the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Registered Exchange Offer,
(ii) each Security or Private Exchange Security until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Security or
Private Exchange Security until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant to
Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary
in this Section 3(a), the Company shall not be required to pay liquidated
damages to a Holder of Transfer Restricted Securities if such Holder failed to
comply with its obligations to make the representations set forth in the second
to last paragraph of Section 1 or failed to provide the information required to
be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent (as
defined in the Indenture) immediately upon the happening of each and every
Registration Default. The Company shall pay the liquidated damages due on the
Transfer Restricted Securities by depositing with the Paying Agent (which may
not be the Company for these purposes), in trust, for the benefit of the Holders
thereof, prior to 10:00 a.m., New York City time, on the next interest payment
dates specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable semi-
annually on dates which correspond to interest payment dates specified by the
Indenture and the Securities to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay liquidated
damages shall be deemed to accrue from and including the date of the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
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Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
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Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use its commercially reasonable efforts to reflect in each
such document, when so filed with the Commission, such comments as any Initial
Purchaser may reasonably propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of the prospectus forming a part
of the Exchange Offer Registration Statement, and include the information set
forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by any Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K, as
applicable, in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and each of the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses (ii)-
(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or necessary to
make the statements therein in the light of the circumstances under which
they were made, not misleading.
(c) The Company will use its commercially reasonable efforts to
obtain the withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
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(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement or the Shelf Registration Statement and any
amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its commercially reasonable efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in connection
with the registration or qualification of, such Securities, Exchange Securities
or Private Exchange Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities, Exchange Securities or
Private Exchange Securities covered by such Registration Statement; provided
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that the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as the Holders thereof may request in writing prior
to sales of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an effective
Registration Statement, the Company will use its commercially reasonable efforts
to promptly prepare and file with the Commission a post-effective amendment to
the Registration Statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Securities, Exchange Securities or Private Exchange Securities from a Holder,
the prospectus will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
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(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide CUSIP numbers for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be, and
provide the applicable trustee with printed certificates for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders as
soon as practicable after the effective date of the applicable Registration
Statement an earning statement satisfying the provisions of Section 11(a) of the
Securities Act; provided that in no event shall such earning statement be
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delivered later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the applicable
Registration Statement, which statement shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may from time
to time reasonably require for inclusion in such Shelf Registration Statement,
and the Company may exclude from such registration the Transfer Restricted
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder
will discontinue disposition of such Transfer Restricted Securities until such
Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by the
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Company that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(ii) through (v) during the
period that the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
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extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have received
(x) the copies of the supplemental or amended prospectus contemplated by Section
4(j) (if an amended or supplemental prospectus is required) or (y) the Advice
(if no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate any
disposition of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Securities, Exchange Securities and Private Exchange
Securities being sold and any underwriter participating in any disposition of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Shelf Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
and (ii) use its commercially reasonable efforts to have its officers,
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directors, employees, accountants and counsel supply all relevant information
reasonably requested by such representative, Special Counsel or any such
underwriter (an "Inspector") in connection with such Shelf Registration
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Statement.
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection with
such Shelf Registration Statement, use its commercially reasonable efforts to
cause (i) its counsel to deliver an opinion relating to the Shelf Registration
Statement and the Securities, Exchange Securities or Private Exchange
Securities, as applicable, in customary form, (ii) its officers to execute and
deliver all customary documents and certificates requested by Holders of a
majority in aggregate principal amount of the Securities, Exchange Securities
and Private Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) and (iii) its independent public accountants to
provide a comfort letter or letters in customary form, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
5. Registration Expenses. Except as provided in Section 9 hereof,
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the Company will bear all expenses incurred in connection with the performance
of its obligations under Sections 1, 2, 3 and 4, and the Company will reimburse
the Initial Purchasers and the Holders for the reasonable fees and disbursements
of one firm of attorneys (in addition to any local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Securities, the
Exchange Securities and the Private Exchange Securities to be sold pursuant to
each Registration Statement (the "Special Counsel") acting for the Initial
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Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
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Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities, Exchange
Securities or Private Exchange Securities), to which that Holder may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and shall
reimburse each Holder promptly upon demand for any reasonable legal or other
expenses reasonably incurred by that Holder in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
-------- -------
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and provided,
--------
further, that with respect to any such untrue statement in or omission from any
-------
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Securities,
Exchange Securities or Private Exchange Securities to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
from the fact that both (A) a copy of the final prospectus was not sent or given
to such person at or prior to the written confirmation
10
of the sale of such Securities, Exchange Securities or Private Exchange
Securities to such person and (B) the untrue statement in or omission from the
related preliminary prospectus was corrected in the final prospectus unless such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
-------- -------
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
--------
however, that the failure to notify the indemnifying party shall not relieve the
-------
indemnifying party from any liability which it may have under this Section 6
except to the extent that it has been materially prejudiced (through the
forfeiture of substantive rights or defenses) by such failure; and provided,
--------
further, that the failure to notify the indemnifying party shall not relieve it
-------
from any liability which it may have to an indemnified party otherwise than
under this Section 6. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than the
reasonable costs of investigation; provided, however, that an indemnified party
-------- -------
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon written advice of
counsel to the indemnified party, a copy of which has been provided to the
indemnifying party) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based upon
written advice of counsel to the indemnified party, a copy of which has been
provided to the indemnifying party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or (4)
the
11
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
------------
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and such Holder on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and a Holder on the other with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) received by or on behalf of the
Company as set forth in the table on the cover of the Offering Memorandum, on
the one hand, bear to the total proceeds received by such Holder with respect to
its sale of Securities, Exchange Securities or Private Exchange Securities, on
the other. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Company or
information supplied by the Company on the one hand or to any Holders'
Information supplied by such Holder on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 7 shall be deemed to include, for purposes of this Section 7, any
reasonable legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder of Securities, Exchange Securities or
Private Exchange Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities, Exchange
Securities or Private Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable
12
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rules 144 and 144A. The Company shall use its commercially
------------------
reasonable efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the written request
of any Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company covenants that it will take such
further action as any Holder of Transfer Restricted Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)). Upon the
written request of any Holder of Transfer Restricted Securities, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, nothing in this Section 8
shall be deemed to require the Company to register any of its securities
pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
--------------------------
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
------------- ----------------------
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to the Initial Purchasers;
13
(2) if to an Initial Purchaser, initially at its address set forth in
the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
-------------------
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company or by any
--------
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3 hereof,
the sole and exclusive remedy for any such breach), will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
(other than a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages shall have been paid pursuant to Section 3
hereof) and hereby further agree that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(i) No Inconsistent Agreements. The Company represents, warrants and
--------------------------
agrees that (i) it has not entered into and shall not, on or after the date of
this Agreement, enter into any agreement that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Securities, it
shall not grant to any person the right to request the Company to register any
debt securities of the Company under the
14
Securities Act unless the rights so granted are not in conflict or inconsistent
with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any of its
-----------------------------
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and not
------------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
PARAGON HEALTH NETWORK, INC.
By /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President
and Chief Financial Officer
Accepted:
CHASE SECURITIES INC.
By /s/ Xxxxx Xxxx
-----------------------
Authorized Signatory
XXXXX XXXXXX INC.
By /s/ Xxxx X. Xxxxxx
------------------------
Authorized Signatory
CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ Xxxxxx X. Xxxxxxx
-------------------------
Authorized Signatory
Xxxxxx X. Xxxxxxx
Director
ANNEX C
[Form of Initial Comfort Letter]
The Company and GranCare shall have furnished to the Initial
Purchasers a letter of Xxxxx & Young LLP, addressed to the Initial Purchasers
and dated the date of the Purchase Agreement, in form and substance satisfactory
to the Initial Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with respect
to the Company and GranCare within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings;
(ii) in their opinion, the audited financial statements and pro forma
financial information included in the Offering Memorandum and reported on
by them comply in form in all material respects with the accounting
requirements of the Exchange Act and the related published rules and
regulations of the Commission thereunder that would apply to the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 under the Securities Act (except that
certain supporting schedules are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by the Company and GranCare, the procedures of
the AICPA for a review of interim financial information as described in
Statement of Auditing Standards No. 71, reading of minutes and inquiries of
certain officials of the Company and GranCare who have responsibility for
financial and accounting matters and certain other limited procedures
requested by the Initial Purchasers and described in detail in such letter,
nothing has come to their attention that causes them to believe that (A)
any unaudited financial statements included in the Offering Memorandum do
not comply as to form in all material respects with applicable accounting
requirements, (B) any material modifications should be made to the
unaudited financial statements included in the Offering Memorandum for them
to be in conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited financial
statements included in the Offering Memorandum or (C) the information
included under the headings "Summary--Summary Unaudited Pro Forma Financial
and Other Data", "Summary--Summary Historical Consolidated Financial and
Other Data--Living Centers of America, Inc.", "Summary Historical
Consolidated Financial and Other Data--GranCare, Inc.", "Capitalization",
"Unaudited Pro Forma Condensed Consolidated Financial Statements",
"Selected Historical Consolidated Financial and Other Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is not in conformity with the disclosure requirements of
Regulation S-K that would apply to the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on Form
S-1 under the Securities Act;
(iv) based upon the procedures detailed in such letter with respect
to the period subsequent to the date of the last available balance sheet,
including reading of minutes and inquiries of certain officials of the
Company and GranCare who have responsibility for financial and accounting
matters, nothing has come to their attention that causes them to believe
that (A) at a specified date not more than three business days prior to the
date of such letter, there was any change in capital stock, increase in
long-term debt or decrease in net current assets as compared with the
amounts shown in the June 30, 1997 unaudited balance sheet included in the
Offering Memorandum or (B) for the period from July 1, 1997 to a specified
date not more than three business days prior to the date of such letter,
there were any decreases, as compared with the corresponding period in the
preceding year, in net sales, income from operations, EBITDA or net income,
except in all instances for changes, increases or decreases that the
Offering Memorandum discloses have occurred or which are set forth in such
letter, in which case the letter shall be accompanied by an explanation by
the Company or GranCare as to the significance thereof unless said
explanation is not deemed necessary by the Initial Purchasers;
2
(v) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company) set forth in the Offering Memorandum agrees with the
accounting records of the Company and GranCare, excluding any questions of
legal interpretation; and
(vi) on the basis of a reading of the unaudited pro forma financial
information included in the Offering Memorandum, carrying out certain
specified procedures, reading of minutes and inquiries of certain officials
of the Company and GranCare who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the application
of the pro forma adjustments to the historical amounts in the pro forma
financial information, nothing came to their attention which caused them to
believe that the pro forma financial information does not comply in form in
all material respects with the applicable accounting requirements of Rule
11-02 of Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of such
information.
