1
Exhibit 10.14
GUARANTY AGREEMENT
between
NATIONAL HEALTHCORP L.P.,
the Guarantor
and
SOCIETE GENERALE,
the Bank
Dated
as of
May 1, 1993
2
ARTICLE I
Definitions
Section 1.1 Definitions ........................................... 2
Section 1.2 Financial Terms........................................ 8
Section 1.3 Terms Not Defined Herein............................... 9
ARTICLE II
Guaranty
Section 2.1 Guaranty .............................................. 9
Section 2.3 Obligations Absolute and Unconditional................. 10
Section 2.4 No Set-off ............................................ 12
Section 2.5 Right to Proceed against Guarantor First............... 12
Section 2.6 Waiver of Notice ...................................... 12
Section 2.7 Attorneys Fees and Expenses............................ 13
Section 2.8 Assignment of Guaranteed Obligations by Bank........... 13
ARTICLE III
Representations and Warranties
Section 3.1............................................................... 13
(a) Organization: Power: Qualification.................................... 13
(b) Authorization......................................................... 14
(c) Subsidiaries.......................................................... 14
(d) Compliance with Laws, etc. of Guaranty Agreement and
Contemplated Transactions............................................. 14
(e) Necessary Authorizations.............................................. 14
(f) Title to Properties................................................... 15
-i-
3
Section 4.9 Audited Annual Financial Statements and Information;
Certificate of No Default.............................. 22
Section 4.10 Quarterly Financial Statements and Information......... 22
Section 4.11 Quarterly Performance Certificates..................... 23
Section 4.12 Copies of Other Reports................................ 23
Section 4.13 Notice of Litigation and Other Matters................. 24
Section 4.14 Financial Covenants.................................... 24
Section 4.15 Amendment of Bond Documents............................ 25
Section 4.16 No Merger, Consolidation or Sale of Assets............. 25
Section 4.17 Insurance.............................................. 26
Section 4.18 [Reserved]............................................. 26
Section 4.19 No More Favorable Terms for Other Lenders.............. 26
Section 4.20 Liens on and Dispositions of Certain Property
Interests.............................................. 27
Section 4.21 Indemnification........................................ 27
ARTICLE V
Subordination
Section 5.1 Subordination.......................................... 28
ARTICLE VI
EVENTS OF DEFAULTS; REMEDIES
Section 6.1 Events of Default............................................. 28
Section 6.2 Remedies...................................................... 30
ARTICLE VII
Miscellaneous
Section 7.1 When Obligations Arise................................. 31
Section 7.2 Nature of Guarantor' Obligations....................... 31
-iii-
4
Section 7.3 Notices................................................ 31
Section 7.4 Bank's Right of Set-Off................................ 32
Section 7.5 Jurisdiction: Service of Process....................... 32
Section 7.6 Amendments............................................. 33
Section 7.7 Sole Judgment of the Bank.............................. 34
Section 7.8 Severability........................................... 34
Section 7.9 Headings............................................... 34
Section 7.10 Governing Law.......................................... 34
Section 7.11 Exhibits............................................... 34
Section 7.12 Entire Agreement; Multiple Counterparts................ 34
Section 7.13 Time of the Essence.................................... 34
-iv-
5
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty Agreement"), made and entered into
as of the 1st day of May, 1993, by and between NATIONAL HEALTHCORP L.P., a
Delaware limited partnership (the "Guarantor"), and SOCIETE GENERALE, acting
through its New York Branch (the "Bank");
W I T N E S S E T H:
WHEREAS, the Issuer has issued the Bonds pursuant to the Indenture; and
WHEREAS, the proceeds of the Bonds have been loaned by the Issuer to
Richland Place, Inc., a Tennessee non-profit corporation (together with its
successors and permitted assigns, the "Borrower"), pursuant to the Loan
Agreement (as hereinafter defined), for the purpose of refinancing the Prior
Debt; and
WHEREAS, subject to the terms and conditions of that certain
Reimbursement Agreement of even date herewith (as the same may be amended from
time to time, the "Reimbursement Agreement") between the Borrower and the Bank,
and acknowledged by the Guarantor, the Bank has agreed to issue for the account
of the Borrower a Letter of Credit to assure the timely payment of the principal
of and interest on the Bonds, and the purchase price of Bonds tendered for
purchase pursuant to the Indenture; and
WHEREAS, it is a condition to the issuance of the Letter of Credit that
the Guarantor unconditionally guarantee to the Bank the payment of all amounts
owing by the Borrower from time to time under the Reimbursement Agreement and
certain other amounts and obligations; and
WHEREAS, the Guarantor has heretofore entered into one or more
agreements with the Borrower whereby the Guarantor has provided construction
financing and working capital to the Borrower with respect to the Project; and
WHEREAS, the Guarantor is desirous that the Bank issue the Letter of
Credit and is willing to enter into this Guaranty Agreement in order to induce
the Bank to issue the Letter of Credit so as to enhance the marketability of the
Bonds and thereby achieve interest cost and other savings;
-1-
6
NOW, THEREFORE, in consideration of the premises and in order to
enhance the marketability of the Bonds and thereby achieve interest cost and
other savings, the Guarantor hereby, subject to the terms hereof, covenants and
agrees with the Bank follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For purposes of this Guaranty Agreement, the
following terms shall have the following meanings:
"Accumulated Funding Deficiency" has the meaning assigned to that term
in Section 302 of ERISA
"Adjusted Tangible Net Worth" means, with respect to the Guarantor,
Equity plus Fifteen Million Seven Hundred Forty-five Thousand Dollars
($15,745,000) in deferred income resulting from the profit on the sale of
nursing home properties to National as equity (which amount shall decrease over
time in accordance with the Guarantor's books and records that comply with
GAAP), plus Subordinated Debt, minus goodwill and unamortized loan costs in
excess of One Million Four Hundred Thousand and No/100 Dollars ($1,400,000).
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Guarantor.
"Applicable Law" means in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person, and all orders and decrees to all
courts and arbitrators in proceedings or actions to which the Person in question
is a party.
"Authorized Signatory" means such personnel of the Guarantor or its
managing general partner as may be designated in writing by the Guarantor to the
Bank as having authority to sign documents, certificates and other instruments
to be signed on behalf of the Guarantor.
-2-
7
"Current Assets" means, with respect to any Person, the aggregate
amount of all assets which would, in accordance with GAAP, properly be
classified as current assets; provided, however, such method of determination
shall be modified where in conflict with the following: Current Assets will
include only those assets which may, in the ordinary course of business, be
reasonably converted into cash within a period of one (1) year from the date as
of which such computation is being made, and Current Assets will exclude (i)
uncollateralized loans and advances to or receivables due from employees,
partners or officers of such Person, (ii) all deferred assets, other than
prepaid items such as insurance, taxes, interest, commissions, rents, royalties
and similar items, and (iii) any properties or assets located outside the
continental United States.
"Current Ratio" means the ratio of Consolidated Current Assets to
Consolidated Current Liabilities.
"Debt Service Coverage Ratio" means, with respect to the Guarantor for
any period, the ratio of (i) the annualized sum of Net Income and operating
lease obligations, depreciation, amortization and interest expense for such
period, minus distributions paid to holders of units of the Guarantor during
such period, or projected by the Guarantor in written financial projections
furnished to the Bank to be paid with respect to such period, whichever is
greater, to (ii) the sum of current maturities of Funded Debt and interest
expense, operating lease obligations and payments required to fund any
obligations guaranteed by the Guarantor, including, without limitation, the
Guaranteed Obligations, all as determined in accordance with GAAP."
"Equity" means the total partners' equity of the Guarantor (including
the par value of the issued and outstanding capital stock, capital surplus and
retained earnings of all of the Guarantor's Subsidiaries).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means any of the events specified in Section 6.1
hereof; provided that any requirement for notice or lapse of time has been
satisfied.
"Facility" means any nursing home or healthcare facility or part
thereof (including without limitation, related medical office buildings, parking
lots or other related real property) owned, operated or managed by the Guarantor
or any of its Subsidiaries; together with any other nursing home or health care
facility or part thereof which is
-3-
8
hereafter acquired by the Guarantor or any of its Subsidiaries, in each case,
including, without limitation, the land on which such facility is located, all
buildings and other improvements thereon, all fixtures, equipment, inventory and
other tangible personal property located in or used in connection with such
facility and all accounts receivable and other intangible personal property
related to the operations of such facility, all whether now or hereafter
existing.
"Facility Guaranty Agreements" means the Agreements to Guarantee
between the Borrower and the Guarantor, pursuant to which the Guarantor has
agreed to guarantee certain obligations of the Borrower with respect to the
financing of the Project, together with any amendments or supplements thereto,
any replacements thereof and any new, similar agreements which the Borrower and
the Guarantor may hereafter enter into with respect to Facilities other than the
Project, as the latter agreements may be amended or supplemented from time to
time.
"Fixed Charge Coverage Ratio" means, with respect to the Guarantor for
any period, (a) the annualized sum of Net Income, plus depreciation,
amortization, interest expense, and capitalized lease obligations and operating
lease obligations (excluding any components included in interest expense and
amortization), minus distributions paid to holders of units of the Guarantor
during such period, or projected by the Guarantor in written financial
projections furnished to the Bank to be paid with respect to such period,
whichever is greater, divided by (b) the sum of interest expense, current
maturities of Funded Debt, and capitalized lease obligations and operating lease
obligations (excluding any components included in interest expense and current
maturities of Funded Debt), and any payments required to fund any obligations
guaranteed by the Guarantor, including, without limitation, the Guaranteed
Obligations, all as determined in accordance with GAAP.
"Funded Debt" means, with respect to any Person, all obligations and
indebtedness issued, incurred, assumed or guaranteed by such Person or for the
payment of which such Person is otherwise liable, directly or indirectly,
whether or not such obligations and indebtedness now exist or shall hereafter be
created, which mature or become due more than one (1) year after the date on
which a calculation of Funded Debt is being made (excluding Subordinated Debt),
plus notes payable, current maturities of Funded Debt, capitalized lease
obligations, operating lease obligations and all Guarantees.
"GAAP" means, as in effect from time to time, generally accepted
accounting principles consistently applied.
-4-
9
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Guaranty" or "guarantee," as applied to an obligation, means and
includes (a) any guaranty or other agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of any part
or all of such obligation, including, without limiting the foregoing, the
payment or reimbursement of amounts drawn down by beneficiaries of letters of
credit.
"Indebtedness" means, with respect to any Person, (i) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves, which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person,
(ii) to the extent not otherwise included, all obligations secured by any Lien
to which any property or assets owned by such Person is subject, whether or not
the obligation secured thereby shall have been assumed, and (iii) to the extent
not otherwise included, all Capitalized Lease Obligations of such Person and all
obligations of such Person with respect to leases constituting part of a sale
and lease arrangement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
security interest or encumbrance of any kind in respect of such asset. For the
purpose of this Guaranty Agreement, the Guarantor shall be deemed to own,
subject to a Lien, any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset."
"Loan and Security Agreement" means that certain Loan and Security
Agreement dated as of December 16, 1988, by and among National Health
Corporation Leveraged Employee Stock Ownership Trust, the Banks named
therein,Third National Bank in Nashville as agent for said banks, the Guarantor
and National, as amended from time to time.
-5-
10
"Management Agreement" means the management agreement between the
Guarantor and the Borrower pursuant to which the Guarantor manages the Project,
as said management agreement may be amended or supplemented from time to time.
Master Lease" means that certain Master Agreement to Lease dated as of
October 17, 1991, between NHI, as landlord, and the Guarantor, as tenant, as the
same may be amended from time to time.
"Materially Adverse Effect" means any act, omission or undertaking
which would, singly or in the aggregate, have a materially adverse effect upon
the business, assets, liabilities, financial condition, results of operations or
business prospects of the Guarantor or any of the Guarantor's Subsidiaries or
upon the ability of the Guarantor to perform any material obligations under this
Guaranty Agreement.
"Multiemployer Plan" has the meaning set forth in Section 4001(a)(3) of
ERISA.
"National" means National Health Corporation, a Tennessee corporation,
and its successors and assigns.
"NHI" means National Health Investors, Inc., a Maryland corporation
intending to qualify as a real estate investment trust under the applicable
provisions of the Internal Revenue Code, and its successors and permitted
assigns.
"Necessary Authorizations" means with respect to any Person, all
authorizations, consents, approvals, permits, licenses and exemptions of,
filings and registrations with, and reports to, all governmental and other
regulatory authorities, whether federal, state or local, and all agencies
thereof, required for the operation of the business of such Person and the
consummation of the transactions contemplated herein.
"Net Income" means, as applied to any Person for any fiscal period, the
aggregate amount of net income (or net loss) of such Person, after taxes, for
such period as determined in accordance with GAAP.
"Partner Agreement" means the limited partnership agreement pursuant to
which the Guarantor is organized and existing, as the same may be amended and
supplemented from time to time.
-6-
11
"Permitted liens" means, as applied to any Person,
(a) Liens securing taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA)
or the claims of materialmen, mechanics, carriers, warehousemen or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of
business, but in all cases only if payment shall not at the time be required to
be made;
(b) Liens consisting of deposits or pledges made in the ordinary course
of business in connection with, or to secure payment of, obligations under
worker's compensation unemployment insurance or similar legislation;
(c) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on use of real
property, which in the sole judgment of the Bank, do not materially detract from
the value of such property or impair the use thereof in the business of the
Guarantor;
(d) Liens of record as of the date of delivery of this Guaranty
Agreement acceptable to the Bank;
(e) Liens in favor of the Bank; and
(f) Purchase money security interests which arise by operation of law
for a period of twenty-one (21) days after the inception thereof.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means an employee benefit plan or other plan maintained for
employees of any Person.
"Prohibited Transaction" means a transaction which is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA.
"Reportable Event" shall have the meaning set forth in Title IV of
ERISA.
-7-
12
"Single Employer Plan" means any Plan which is not a Multiemployer
Plan.
"Subordinated Debt" means the Indebtedness of the Guarantor which is
subordinated in right of payment to the obligations of the Guarantor under this
Guaranty Agreement pursuant to subordination provisions satisfactory to the
Bank. The subordination provisions in the Guarantor's convertible subordinate
debt which is outstanding as of the date hereof, are satisfactory to the Bank.
"Subsidiary" shall mean, as applied to any Person, (a) any corporation
of which more than 50% of the outstanding stock (other than directors'
qualifying shares) having ordinary voting power to elect a majority of its board
of directors (or other governing body), regardless of the existence at the time
of a right of the holders of any class or classes (however designated) of
securities of such corporation to exercise such voting power by reason of the
happening of any contingency, or any partnership of which more than 50% of the
outstanding partnership interests is, at the time, owned by such Person or by
one or more Subsidiaries of such Person, or by such Person and one or more
Subsidiaries of such Person, and (b) any other entity which is controlled or
capable of being controlled by such Person, or by one or more Subsidiaries of
such Person, or by such Person and one or more Subsidiaries of such Person.
"Tangible Net Worth" means, with respect to the Guarantor, Equity plus
Subordinated Debt, plus deferred income minus the general intangibles of the
Guarantor, including, without limitation, goodwill and unamortized loan costs in
excess of One Million Four Hundred Thousand Dollars ($1,400,000)."
"Termination Event" means (i) a Reportable Event, (ii) the termination
of a Single Employer Plan, or the treatment of a Single Employer Plan amendment
as a termination of the Plan under Section 4041 of ERISA, or the filing of a
notice of intent to terminated a Single Employer Plan, (iii) the institution of
proceedings to terminate a Single Employer Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (iv) the appointment of a trustee to
administer any Single Employer Plan.
"Working Capital shall mean, with respect to any Person, the excess of
Current Assets over Current Liabilities.
Section 1.2 Financial Terms. Except as hereinabove provided, all
financial terms used in this Guaranty Agreement shall be interpreted in
accordance with GAAP.
-8-
13
Section 1.3 Terms Not Defined Herein. Capitalized terms not defined
herein shall, unless otherwise indicated herein, have the meanings ascribed to
such terms in the Reimbursement Agreement.
ARTICLE II
Guaranty
Section 2.1 Guaranty. (a) The Guarantor hereby absolutely,
unconditionally and irrevocably guarantee to the Bank the full and prompt
payment of all amounts now or hereafter owing to the Bank by the Borrower under
the provisions of the Reimbursement Agreement, under the Mortgage (including,
without limitation, indemnification amounts pursuant thereto, under the Pledge
Agreement, under the Security Agreement and under any of the other Financing
Documents when and as the same shall become due, whether at the stated maturity
thereof, by acceleration or call for prepayment or otherwise, and agree to pay
all reasonable expenses and charges (including court costs and attorney's fees
and expenses) paid or incurred by the Bank in realizing upon any of the payments
hereby guaranteed or in enforcing this Guaranty Agreement.
[(b) The Guarantor hereby absolutely, unconditionally and irrevocably
guarantee to the Bank the full and faithful performance all of the Borrower's
obligations under the Loan Agreement to be kept and performed with respect to
the completion of the construction, renovation, installation and equipping of
the Projects, in accordance with the plans and specifications referred to in the
Loan Agreement, free from any liens or claims of any or all persons performing
services or labor on the Projects, or any of them, or furnishing materials
thereto. If for any reason or under any contingency, the Borrower shall abandon
the construction, renovation, installation of equipping of the Projects, or any
of them, in accordance with the terms of the applicable Loan Agreement, or shall
fail to pay the costs thereof, then, in any such event, the Bank shall have the
option to require the Guarantor to assume all responsibility therefor, and the
Guarantor hereby agrees to assume all responsibility therefor and, at its own
costs and expense, cause the Project to be fully completed in accordance with
the above-mentioned plans and specifications and the Loan Agreement, and shall
pay and discharge all liens and claims of all persons performing services or
labor in connection therewith or furnishing materials hereto which the Borrower
shall have failed to pay, whether or not such services, labor or materials shall
have been provided for in said plans and specifications.
-9-
14
(c) The obligations guaranteed by the Guarantor under this Section 2.1
are sometimes hereinafter collectively referred to as the "Guaranteed
Obligations."
Section 2.2 Payments. All payments by the Guarantor shall be paid in
lawful money of the United States of America, by wire transfer in immediately
available funds to Citibank, N.A., ABA No. ▇▇▇▇▇▇▇▇▇ for the account of Societe
Generale, New York Branch, Account No. ▇▇▇▇▇▇▇▇, Reference: Richland Place, Inc.
or at such other account as the Bank may designate to the Guarantor in writing.
Each and every default in payment of sums due and payable under the provisions
of this Guaranty Agreement shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder as each cause of action
arises.
Section 2.3 Obligations Absolute and Unconditional. The obligations of
the Guarantor under this Guaranty Agreement shall be absolute and unconditional
and shall remain in full force and effect until there shall be no Letter of
Credit outstanding and all amounts owing to the Bank under the provisions of the
Reimbursement Agreement and the other Financing Documents and the obligation of
the Guarantor under Section 2.1 hereof shall have been paid in full,
irrespective of the validity, regularity or enforceability of the Bond
Documents, the Letter of Credit or the Reimbursement Agreement or any other
Financing Document, and until such payment, shall not be affected, modified or
impaired upon the happening from time to time of any event, including, without
limitation, any of the following, whether or not with notice to or the consent
of the Guarantor, or either of them:
(a) the compromise, settlement, release or termination of any or all of
the obligations, covenants or agreements of the Borrower under the Reimbursement
Agreement, the Pledge Agreement, any Mortgage, the Loan Agreement or any other
Financing Documents;
(b) the failure to give notice to the Guarantor, or either of them, of
the occurrence of a default or an event of default under the terms and
provisions of this Guaranty Agreement, the Reimbursement Agreement, the
Pledge Agreement, the Indenture, any Mortgage, the Loan Agreement or any other
Financing Documents;
(c) the waiver of the payment, performance or observance by the
Issuer, the Trustee, the Borrower or the Guarantor of any of the obligations,
covenants, or agreements of any of them contained in the Reimbursement
Agreement, the Pledge
-10-
15
Agreement, the Indenture, any Loan Agreement, Mortgage or any of the other
Financing Documents, or this Guaranty Agreement;
(d) the extension of the time for payment of any principal of or
interest on the Bonds or of the time for performance of any other obligations,
covenants or agreements under or arising out of the Reimbursement Agreement, the
Indenture, the Loan Agreement, the Pledge Agreement, the Mortgage or any of the
other Financing Documents, or under or arising out of this Guaranty Agreement,
or the extension or the renewal of any thereof;
(e) the modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in the Reimbursement Agreement,
the Pledge Agreement, the Indenture, the Loan Agreement, the Mortgage or any
other Financing Document;
(f) the taking or the omission of any of the actions referred to in the
Reimbursement Agreement, the Pledge Agreement, the Indenture, any Loan
Agreement, any Mortgage or any other Financing Document or this Guaranty
Agreement;
(g) any failure, omission, delay or lack on the part of the Issuer, the
Trustee or the Bank to enforce, assert or exercise any right, power or remedy
conferred on the Issuer, the Trustee or the Bank in this Guaranty Agreement, the
Reimbursement Agreement, the Pledge Agreement, the Indenture, the Loan
Agreement, any Mortgage or any other Financing Document, or any other act or
acts on the part of the Issuer, the Trustee, the Bank or any holder at any time
or from time to time of the Bonds;
(h) the voluntary or involuntary liquidation, dissolution, marshalling
of assets and liabilities, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings affecting the
Guarantor, the Borrower or the Issuer or any of the Assets of them, or any
allegation or contest of the validity of this Guaranty Agreement in any such
proceeding or the sale or other disposition of all or substantially all the
assets of the Issuer, the Borrower or the Guarantor; and this Guaranty Agreement
shall continue to be effective or be reinstated, as the case may be, if, at any
time, payment, or any part thereof, pursuant to Section 2.1. hereof, is
rescinded or must otherwise be restored or returned by the Bank upon any of the
events listed in this subsection (h) or otherwise, as though such payment has
not been made;
-11-
16
(i) to the extent permitted by applicable law, the release or discharge
of the Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty Agreement by operation of law,
(j) the default or failure of the Guarantor fully to perform any of the
obligations thereof set forth in this Guaranty Agreement;
(k) the failure of the Bank to comply with the terms of this Guaranty
Agreement, the Reimbursement Agreement, the Pledge Agreement, the Mortgage or
any other Financing Documents;
(1) the invalidity or unenforceability of the Reimbursement Agreement,
the Pledge Agreement, the Indenture, the Loan Agreement, the Mortgage or any
other Financing Documents;
(m) the sale, assignment or mortgaging or the purported sale,
assignment or mortgaging of all or any part of the Project; or
(n) any other cause, whether similar or dissimilar to the foregoing.
Section 2.4 No Set-off. No set-off, counterclaim, reduction, or
diminution of any obligation, or, to the extent permitted by applicable law, any
defense of any kind or nature which the Guarantor or the Borrower, or either of
the foregoing, has or may have against the Issuer, the Trustee or the Bank shall
be available hereunder to the Guarantor;
Section 2.5 Right to Proceed against Guarantor First. In the event of a
default in payment of any amount owing to the Bank from time to time under the
provisions of the Reimbursement Agreement, the Pledge Agreement, the Mortgage or
any other Financing Document, whether at the stated maturity thereof, by
acceleration or call for prepayment or otherwise, and in each instance the
expiration of any applicable cure period provided for in the Reimbursement
Agreement, the Pledge Agreement, Mortgage or any other Financing Document, the
Bank may proceed hereunder, and the Bank, in its sole discretion, shall have
the right to proceed first and directly against the Guarantor under this
Guaranty Agreement without proceeding against the Borrower or exhausting any
other remedies which it may have and without resorting to any other security
held by the Bank.
Section 2.6 Waiver of Notice. The Guarantor hereby expressly waives:
(a) notice of acceptance of this Guaranty Agreement, (b) notice of the existence
or creation of all
-12-
17
or any of the Guaranteed Obligations, (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever, (d) all diligence in
collection or protection of or realization upon the Guaranteed Obligations or
any part thereof, any obligation hereunder, or any security for any of the
foregoing, except as provided by law, and (e) all rights of subrogation, all
rights to enforce any remedy the Bank may have against the Borrower and all
rights to participate in any security held by the Bank for the Guaranteed
Obligations until the Guaranteed Obligations have been paid or performed in
full.
Section 2.7 Attorneys Fees and Expenses. The Guarantor agrees to pay
all costs, expenses and fees, including all reasonable attorney's fees, which
may be incurred by the Bank in amending this Guaranty, in enforcing or
attempting to enforce this Guaranty Agreement following any default on the part
of the Guarantor hereunder, whether the same shall be enforced by suit or
otherwise, or in consenting to any action not otherwise permitted hereunder.
Section 2.8 Assignment of Guaranteed Obligations by Bank. The Bank may,
without notice of any kind, sell, assign or transfer all or any of the
Guaranteed Obligations, and in such event each and every immediate and
successive assignee, transferee, or holder of all or any of the Guaranteed
Obligations, shall have the right to enforce this Guaranty Agreement, by suit or
otherwise, for the benefit of such assignee, transferee or holder as fully as if
such assignee, transferee or holder were herein by name specifically given such
rights, powers and benefits, but the Bank shall have an unimpaired right, prior
and superior to that of any such assignee, transferee or holder, to enforce this
Guaranty Agreement for the Bank's benefit, as to so much of the Guaranteed
Obligations as the Bank has not sold, assigned or transferred.
ARTICLE III
Representations and Warranties
Section 3.1 The Guarantor represents and warrants that:
(a) Organization; Power; Qualification. The Guarantor is a limited
partnership duly organized, validly existing under the laws of the state of its
organization, each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and the Guarantor and each of its Subsidiaries has the power and authority,
corporate, partnership and otherwise, to own or lease and operate their
respective properties and to carry on their respective businesses as now being
-13-
18
and hereafter proposed to be conducted and are duly qualified and in good
standing as a foreign partnership or corporation, as the case may be, and
authorized to do business, in each jurisdiction in which the character of their
respective properties or the nature of their respective businesses requires such
qualification or authorization, and in which failure to so qualify would have a
Materially Adverse Effect.
(b) Authorization. The Guarantor has the power and has taken all
necessary action to authorize it to execute, deliver and perform this Guaranty
Agreement in accordance with its terms and to consummate the transactions
contemplated hereby. This Guaranty Agreement has been duly executed and
delivered by the Guarantor and is a legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to the following qualifications: (i) an order of specific
performance and an injunction are discretionary remedies and, in particular, may
not be available where damages are considered an adequate remedy at law, and
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Guarantor).
(c) Subsidiaries. Except as listed on Exhibit "A" attached hereto, the
Guarantor has no Subsidiaries. With respect to each Subsidiary of the Guarantor,
Exhibit "A" also sets forth (i) the state of its incorporation; (ii) all
jurisdictions in which such Subsidiary is qualified to do business as a foreign
corporation; (iii) the address of the principal place of business and chief
executive office of such Subsidiary; and (iv) the name and registered office of
the registered agent appointed by such Subsidiary.
(d) Compliance with Laws, etc. of Guaranty Agreement and Contemplated
Transactions. The execution, delivery and performance of this Guaranty Agreement
in accordance with its terms and the consummation of the transactions
contemplated hereby do not and will not (i) violate any Applicable Law, (ii)
conflict with, result in a breach of, or constitute a default under the
Agreement of the Guarantor or under any material indenture, agreement, or other
instrument to which the Guarantor is a party or by which it or any of its
properties may be bound, or, (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Guarantor except Permitted Liens.
(e) Necessary Authorizations. The Guarantor and each of its
Subsidiaries has secured all Necessary Authorizations, and all such Necessary
Authorizations are in full
-14-
19
force and effect. None of said Necessary Authorizations are the subject of any
pending or, to the best of the Guarantor's knowledge, threatened attack or
revocation, by the grantor of the Necessary Authorization. The Guarantor is not
required to obtain any additional Necessary Authorizations in connection with
the execution, delivery and performance of this Guaranty Agreement.
(f) Title to Properties. The Guarantor and each of its Subsidiaries has
good, marketable and legal title to, or a valid leasehold interest in, all of
their respective material properties and assets, and none of such properties or
assets is subject to any Liens which materially detract from the value of such
properties or assets or materially detract from the value of such properties or
assets or materially interferes with the business or operations of the Guarantor
or any of its Subsidiaries as presently conducted or proposed to be conducted.
All improvements on the real estate owned by, leased to or used by the Guarantor
and its Subsidiaries conform in all material respects to all applicable state
and local laws, zoning and building ordinances and health and safety ordinances,
and such real estate is zoned for the various purposes for which such real
estate and improvements thereon are presently being used.
(g) Collective Bargaining. There are no material grievances, disputes
or controversies with any union or any other organization of the employees of
the Guarantor or any of its Subsidiaries or threats of strikes, work stoppages
or any asserted pending demands for collective bargaining by any union or
organization.
(h) Taxes. All federal, state and other tax returns of the Guarantor
and each of its Subsidiaries required by law to be filed have been duly filed,
and all federal, stated and other taxes, assessments and other governmental
charges or levies any of their respective properties, income, profits and
assets, which are due and payable, have been paid, except any such the payment
of which the Guarantor or any of its Subsidiaries, as applicable, is contesting
in good faith by appropriate proceedings and for which adequate reserves have
been provided on the books of the Guarantor or any of its Subsidiaries, as
applicable, and as to which neither any Lien other than a Permitted Lien has
attached nor any foreclosure, distraint, sale or similar proceedings have
been commenced. The charges, accruals and reserves on the books of the
Guarantor and each of its Subsidiaries in respect of taxes are, in the
reasonable judgment of the Guarantor, adequate.
(i) Financial Statements. The Guarantor has furnished, or caused to be
furnished, to the Bank financial statements for the Guarantor and its
Subsidiaries on a consolidated basis which are complete and correct in all
material respects and present
-15-
20
fairly in accordance with GAAP financial position of the Guarantor and its
Subsidiaries on a consolidated basis as of December 31, 1992, and the results of
operations for the periods then ended. Except as disclosed in such financial
statements, neither the Guarantor nor any of its Subsidiaries had any material
liabilities, contingent or otherwise, and there are no material unrealized or
anticipated losses of the Guarantor or any of its Subsidiaries, which have not
heretofore been disclosed in writing to the Bank.
(i) No Adverse Change. Since December 31,1992, there has occurred no
event which would have a Materially Adverse Effect.
(k) Investments and Guaranties. The Guarantor has not made investments
in, advances to, or guaranties of, the obligations of any Person, except as
reflected in the financial statements referred to in Section 3.1(i) above or as
otherwise disclosed to the Bank in writing.
(l) Liabilities Litigation etc. Except for liabilities incurred in the
normal course of business, neither the Guarantor nor any of its Subsidiaries has
any material (individually or in the aggregate) liabilities, direct or
contingent, except as disclosed or referred to in the financial statements
referred to in Section 3.1(i) above. Except as described in such financial
statements or on Exhibit "B" attached hereto, there is no litigation, legal or
administrative proceeding, investigation or other action of any nature pending
or, to the knowledge of the Guarantor, threatened against or affecting the
Guarantor or any of its Subsidiaries or any of their respective properties which
involves the possibility of any judgment or liability not fully covered by
insurance, and which may have a Materially Adverse Effect. The Guarantor knows
of no unusual or unduly burdensome restriction, restraint or hazard relative to
the business or properties of the Guarantor or any of its Subsidiaries except as
previously disclosed to the Bank in writing.
(m) ERISA. No Reportable Event has occurred and is continuing with
respect to any Plan of the Guarantor or any of its Subsidiaries and neither the
Guarantor nor any of its Subsidiaries has any material unfunded liability for
vested benefits. Neither the Guarantor nor any of its Subsidiaries has incurred
any material Accumulated Funding Deficiency or incurred any material liability
to the Pension Benefit Guaranty Corporation established under ERISA (or any
successor thereto under ERISA) in connection with any Plan.
(n) Patents, Trademarks, Franchises, etc. The Guarantor and each of its
Subsidiaries owns, possesses or has the right to use all necessary patents,
trademarks,
-16-
21
trademark rights, trade names, trade name rights, service marks, copyrights,
franchises and licenses, and rights with respect thereof, necessary to conduct
its business as now conducted, without known conflict with any patent,
trademark, tradename, servicemark, franchise, license or copyright of any other
Person, and in each case, subject to no mortgage, pledge, lien, lease,
encumbrance, charge, security interest, title retention agreement or option. All
such patents, trademarks, trademark rights, tradenames, tradename rights,
servicemarks, copyrights, franchises and licenses are in full force and effect,
the holder thereof is in full compliance in all material respects with all of
the provisions thereof, and no such asset or agreement is subject to any pending
or, to the best of the Guarantor's knowledge, threatened attack or revocation.
(o) Compliance with Law; Absence of Default. The Guarantor and each of
its Subsidiaries is in compliance with all Applicable Laws non-compliance with
which would have a Materially Adverse Effect and with all of the provisions of
their respective partnership agreements, articles of incorporation and by-laws,
as the case may be, and no event has occurred or failed to occur, which has not
been remedied or waived, the occurrence or non-occurrence of which constitutes,
(i) an Event of Default or (ii) a default by the Guarantor or any of its
Subsidiaries under any other indenture, agreement or other instrument, or any
judgment, decree or order to which the Guarantor or any of its Subsidiaries is a
party or by which the Guarantor or any of its Subsidiaries or any of their
respective properties may be bound, which default could have a Materially
Adverse Effect.
(p) Casualties; Taking of Properties etc. Neither the business nor the
properties of the Guarantor or any of its Subsidiaries has been materially and
adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of property or cancellation of contracts, permits or
concessions by any domestic or foreign government or any agency thereof, riot,
activities of armed forces or acts of God or of any public enemy.
(q) Accuracy and Completeness of Information. All information, reports
and other papers and data relating to the Guarantor or any of its Subsidiaries
furnished to the Bank were, at the time the same were so furnished, complete and
correct in all material respects to the extent necessary to give the Bank a
true and accurate knowledge of the subject matter. No fact is currently known to
the Guarantor which has or could reasonably be expected to have a Materially
Adverse Effect. No information, exhibit or report furnished or to be furnished
by the Guarantor to the Bank in connection with this Guaranty Agreement,
including all financial statements of the Guarantor previously delivered to the
Bank contain as of the date thereof, or will contain as of the Date of
-17-
22
Issuance of any Letter of Credit, any material misstatement of fact or fail or
will fail to state any material fact, the omission of which would render the
statements therein materially false or misleading.
(r) Business. The Guarantor is engaged in the business of owning and
operating licensed nursing homes and other health care facilities.
(s) Investments, Advances, and Guaranties. The Guarantor has not made
investments in advances to, or guaranties of, the obligations of any Person, or
committed or agreed to do any of these things, except as reflected in the
Financial Statements or as previously disclosed to the Bank in writing.
(t) Regulation U. The Guarantor is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System.
(u) Personal Holding Company. The Guarantor is not a "personal holding
company" as defined in Section 542 of the Code.
(v) Tax Shelter. The Guarantor is not a "tax shelter" as defined in
Section 6111 of the Code.
(w) Filings. To the date hereof, the Guarantor has filed all reports
and statements required to be filed with the Securities and Exchange
Commission, if any, and any stock exchange which lists securities issued by the
Guarantor. As of their respective dates, such reports and statements complied in
all material respects with all rules and regulations promulgated by the
Securities and Exchange Commission and such stock exchanges and did not contain
any 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
light of the circumstances under which they were made, not misleading.
(x) Solvency. The Guarantor and its "Subsidiaries are now and at all
times hereafter shall be solvent and able to pay their respective debts as they
mature, and the Guarantor and its Subsidiaries now own and shall at all times
hereafter own property whose fair salable value is greater than the amount
required to pay their respective debts.
-18-
23
(y) Capital. The Guarantor and its Subsidiaries now have and shall have
at all times hereafter capital sufficient to carry on their respective
businesses and transactions and all businesses and transactions in which they
are about to engage.
(z) Healthcare Compliance. The Guarantor and each of its Subsidiaries
have all permits, licenses, authorizations and approvals materials to the lawful
ownership (or lease) and operation of each Facility, and each such Facility is
in substantial compliance with all zoning laws, building codes, environmental
protection laws and other laws material to the use, occupancy and ownership
thereof, and each such Facility may be expanded and/or rebuilt in the event of a
casualty without violation of applicable zoning laws and has access to utilities
sufficient to satisfy its needs. Each Facility, except as provided in Exhibit
"C" hereto, is eligible upon application to participate in, or is a party to,
the Medicare, Medicaid and, to the best of the Guarantor's knowledge after due
inquiry, all other public and private reimbursement programs applicable to
facilities of the same type as such facility. All certifications and contracts
allowing participation in such reimbursement programs are in full force and
effect and have not been amended or otherwise modified, rescinded, revoked or
assigned as of the date hereof. Each Facility, except as provided in Exhibit "C"
hereto, is in such material compliance with the requirements of Medicare,
Medicaid and all other public and private reimbursement programs applicable
thereto that reimbursement thereunder will not be affected or impaired by any
noncompliance therewith.
(aa) Tax Exempt Status of Bonds. The Guarantor has not taken any action
which would cause interest on the Bonds and the Refunded Bonds, or any of them,
to be subject to federal income taxation.
(bb) Management Agreements; Facility Guaranty Agreements. The Guarantor
has heretofore furnished the Bank with true, correct and complete copies of the
Management Agreement and the Facility Guaranty Agreements and all amendments
thereto. Except as so amended, none of the Management Agreements or the Facility
Guaranty Agreements has been modified, amended or terminated, and each of the
Management Agreement and the Facility Guaranty Agreements is in full force and
effect.
Section 3.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Guaranty Agreement shall be
deemed to be made, and shall be true and correct, at and as of the date of
delivery of this Guaranty Agreement and at and as of the date of each Drawing,
except to the extent previously fulfilled in accordance with the terms hereof
and to the extent subsequently inapplicable. All
-19-
24
representations and warranties made under this Guaranty Agreement shall survive,
and not be waived by, the honoring of any Drawing by the Bank or by any
investigation or inquiry by the Bank.
ARTICLE P IV
Special Covenants
Until this Guaranty Agreement is terminated, the Guarantor covenants
and agrees as follows:
Section 4.1 Preservation of Existence and Similar Matters. The
Guarantor and each of its Subsidiaries will, subject to the provisions of
Section 4.16 hereof, (i) preserve and maintain their respective existence,
rights, franchise, licenses and privileges in their respective states of
incorporation organization, as the case may be, including, without limitation,
all Necessary Authorizations and (ii) qualify and remain qualified and
authorized to do business in each jurisdiction in which the character of
properties or the nature of businesses requires such qualification or
authorization.
Section 4.2 Compliance with Applicable Law. The Guarantor will comply
with the requirements of all Applicable Law.
Section 4.3 Maintenance of Properties. The Guarantor will maintain and
will cause each of its Subsidiaries to maintain or cause to be maintained in the
ordinary course of business in good repair, working order and condition
all properties used or useful in their respective businesses (whether owned or
held under lease), and from time to time to make or cause to be made all needed
and appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
Section 4.4 Accounting Methods and Financial Records. The Guarantor
will maintain and will cause each of its Subsidiaries to maintain a system of
accounting established and administered in accordance with GAAP, keep adequate
records and books of account in which complete entries will be made in
accordance with such accounting principles consistently applied and reflecting
all transactions required to be reflected by such accounting principles.
Section 4.5 Payment of Taxes and Claims. The Guarantor and each of the
Guarantor's Subsidiaries will pay and discharge all taxes, assessments and
governmental
-20-
25
charges or levies imposed upon them or upon their income or profits or upon any
properties belonging to them prior to the dates on which penalties attach
thereto, and all lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien or charge upon any of its properties; except that,
no such tax, assessment, charge, levy or claim need be paid which is being
contested in good faith by appropriate proceedings and, in the case of the
Guarantor, for which adequate reserves shall have been set aside on the
appropriate books, but only so long as such tax, assessment, charge, levy or
claim does not become a Lien or charge other than a Permitted Lien and no
foreclosure, distraint, sale or similar proceedings shall have been commenced
and remain unstayed for a period of thirty (30) days after such commencement.
The Guarantor and each of the Guarantor's Subsidiaries shall timely file all
information returns required by federal, state or local tax authorities.
Section 4.6 Visits and Inspections. The Guarantor will permit and will
cause each of its Subsidiaries to permit representatives of the Bank to (i)
visit and inspect the properties of the Guarantor and each of its Subsidiaries
during normal business hours, (ii) inspect and make extracts from copies of its
books and records, and (iii) discuss with its principal officers its businesses,
assets, liabilities, financial positions, results of operations and business
prospects relating to the Guarantor and each of its Subsidiaries.
Section 4.7 Payment of Indebtedness. The Guarantor and each of its
Subsidiaries will, subject to any provisions therein regarding subordination,
pay any and all of its Indebtedness when and as the same becomes due, other than
amounts duly disputed in good faith the non-payment of which would not have a
Materially Adverse Effect.
Section 4.8 ERISA. The Guarantor will at all times make, or cause to be
made, prompt payment of contributions required to meet the minimum funding
standards set forth in ERISA with respect to its and its Affiliates' employee
benefit plans; promptly after the filing thereof, furnish to the Bank copies of
any annual report required to be filed pursuant to ERISA in connection with each
such plan of it and its Affiliates; notify the Bank as soon as practicable of
any Reportable Event and of any additional act or condition arising in
connection with any such plan which the Guarantor believes might constitute
grounds for the termination thereof by the Pension Benefit Guaranty Corporation
or for the appointment by the appropriate United States District Court of a
trustee to administer such plan; and furnish to the Bank promptly upon the
Bank's request therefor, such additional information concerning any such
employee benefit plan as may be reasonably requested by the Bank.
-21-
26
Section 4.9 Audited Annual Financial Statements and Information;
Certificate of No Default. The Guarantor will furnish to the Bank, within ninety
(90) days after the end of each fiscal year of the Guarantor, the balance sheets
of the Guarantor as at the end of such fiscal year and the related statements of
income, retained earnings and changes in financial position of the Guarantor for
such fiscal year, on a consolidated and a consolidating basis with the
Guarantor's Subsidiaries, setting forth in comparative form the figures as at
the end of and (except for the first year after the date hereof) for the
previous fiscal year and certified without qualifications or with only such
qualifications as shall be acceptable to the Bank by independent certified
public accountants of recognized standing reasonably satisfactory to the Bank,
whose opinion shall be in scope and substance satisfactory to the Bank, and who
shall have authorized the Guarantor to deliver such financial statements and
opinion thereon to the Bank pursuant to this Guaranty Agreement. In the event
that any such financial statements are qualified by the independent certified
public accountants preparing such financial statements, such accountants shall
submit to the Bank, with such financial statements, their certificate to the
effect that in making the examination necessary for their audit they have
obtained no knowledge of the occurrence of an Event of Default or any fact or
circumstance which, with notice or lapse of time, or both, would constitute an
Event of Default, or if they have obtained knowledge of any such Event of
Default or any such fact or circumstance, disclosing the nature and period of
existence of such Event of Default or of such fact or circumstance.
Section 4.10 Quarterly Financial Statements and Information. The
Guarantor will furnish to the Bank, within forty-five (45) days after the last
day of each of the first three quarters in each fiscal year of the Guarantor,
the balance sheets of the Guarantor as at the end of such quarter and the
related statements of income and retained earnings of the Guarantor for such
quarter and for the elapsed portion of the fiscal year ended with the last day
of such quarter, all of which shall be on a consolidated basis with the
Guarantor's Subsidiaries, setting forth in comparative form the figures as at
the end of and (except for the first fiscal year after the date hereof) for the
corresponding quarter of the previous fiscal year, and certified by a person
authorized to make such certification on behalf of the Guarantor, as the case
may be, to be, in his opinion, complete and correct in all material respects
and to present fairly, in accordance with GAAP, the statements of financial
position of the Guarantor as at the end of each period and the results
of operations for such period, and for the elapsed portion of the year ended
with the last day of such period, subject only to normal year-end adjustments.
-22-
27
Section 4.11. Quarterly Performance Certificates. The Guarantor shall
furnish the Bank, within forty-five (45) days after the last day of each of the
first three quarters in each fiscal year of the Guarantor, and within ninety
(90) days after the last day of the fourth quarter of each fiscal year, a
certificate of an Authorized Signatory:
(a) setting forth as at the end of such quarterly period or fiscal
year, as the case may be, the arithmetical calculations required to establish
whether or not the Guarantor, on a consolidated basis, was in compliance with
the requirements of Section 4.14 hereof; and
(b) stating that, to the best of his knowledge, no Event of Default,
and no fact or circumstance which with notice or the passage of time or both
would constitute an Event of Default, has occurred as at the end of such
quarterly period or year, as the case may be, or, if an Event of Default or any
such fact or circumstance has occurred, disclosing each such Event of Default,
fact and circumstance and its nature, when it occurred, whether it is continuing
and the steps being taken by the Guarantor with respect to such default or Event
of Default.
Section 4.12 Copies of Other Reports. The Guarantor shall furnish the
following documents and information to the Bank:
(a) promptly upon receipt thereof, copies of all reports, if any,
submitted to the Guarantor by the Guarantor's independent public accountants
regarding the Guarantor or any of its Subsidiaries, including, without
limitation, any management report prepared in connection with the annual audit
referred to in Section 4.9 hereof.
(b) within forty-five (45) days after the end of each calendar year,
annual projections of operating income and expenses for the Guarantor, and all
material amendments and changes thereafter to the same.
(c) from time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial position,
projections, results of operations or business prospects of the Guarantor or any
of its Subsidiaries as the Bank reasonably may request.
(d) promptly after the preparation of the same, copies of all reports
or financial information filed with the Securities and Exchange Commission.
-23-
28
Section 4.13 Notice of Litigation and Other Matters. The Guarantor will
give the Bank prompt notice of the following events after Guarantor has, or in
the exercise of reasonable diligence should have, received notice thereof:
(a) the commencement of all proceedings and investigations by or before
any governmental body and all actions and proceedings in any court or before any
arbitrator (1) against, or (2) (to the extent known to the Guarantor) in any
other way relating adversely to, the Guarantor, or any of the Guarantor's
Subsidiaries or any of their respective assets or businesses which, if adversely
determined, would singly or when aggregated with all other such proceedings,
investigations and actions, if adversely determined, have a Materially Adverse
Effect;
(b) any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations or business prospects of
the Guarantor, or any of the Guarantor's Subsidiaries other than changes in the
ordinary course of business the effects of which have not had a Materially
Adverse Effect;
(c) any event of default or the occurrence or non-occurrence of any
event which constitutes, or which with the passage of time or giving of notice,
or both, would constitute, an event of default by the Guarantor, or any of the
Guarantor's Subsidiaries under any material agreement other than this Guaranty
Agreement to which the Guarantor or any of the Guarantor's Subsidiaries is a
party or by which their respective properties may be bound, giving in each case
the details thereof and specifying the action proposed to be taken with respect
thereto; and
(d) copies of all notices of actual suspension or revocation of
participation or qualification with respect to (A) the Medicare or Medicaid
programs, (B) any private health insurance program issued by any Governmental
Authority having jurisdiction over the licensing or operation of any of the
Projects or any other health care related assets or operations of the Guarantor
and any of its Subsidiaries, or (C) any private insurance company.
Section 4.14 Financial Covenants. The Guarantor shall comply with the
following financial covenants, with determination of compliance being made
quarterly unless more frequently requested by the Bank:
(a) Current Ratio. The Guarantor shall at all times maintain a
Current Ratio of at least 1.5 to 1.0.
-24-
29
(b) Working Capital. The Guarantor shall at all times maintain
minimum Working Capital of at least Ten Million and No/100 Dollars
$10,000,000).
(c) Funded Debt to Adjusted Tangible Net Worth Ratio. The
Guarantor shall at all times maintain a ratio of Funded Debt to
Adjusted Tangible Net Worth of no more than 3.5:1.0.
(d) Tangible Net Worth. The Guarantor shall at all times
maintain a Tangible Net Worth of not less than $56,800,000; provided,
however, that beginning on June 30, 1993, and on subsequent calendar
quarter endings, the minimum Tangible Net Worth requirement set forth
herein will increase by One Million Four Hundred Thousand Dollars
($1,400,000) per quarter on a cumulative basis.
(e) Debt Service Coverage. The Guarantor shall at all times
maintain a minimum Debt Service Coverage Ratio of at least 1.3 to 1.0.
(f) Fixed Charge Coverage. The Guarantor shall at all times
maintain a Fixed Charge Coverage Ratio of at least 1.10 to 1.0."
(g) Liquidity. The Guarantor's Consolidated Balance Sheet for
the Guarantor's Fiscal Years ending between the date hereof and the
Expiration Date (as defined in the Reimbursement Agreement) and for the
Guarantor's fiscal quarter ending immediately prior to the Expiration
Date, shall reflect at least $7,500,000 in cash and cash equivalents.
Section 4.15 Amendment of Bond Documents. The Guarantor will not amend,
modify, supplement or terminate the Bond Documents, or any of them, or permit or
consent to any such amendment, modification, supplementation or termination,
without the Bank's prior written consent.
Section 4.16 No Merger, Consolidation or Sale of Assets. The Guarantor
will not dissolve or otherwise dispose of all or substantially all of its assets
and will not consolidate with or merge into another partnership or corporation
or permit one or more other partnerships or corporations to consolidate with or
merge into it without the prior written consent of the Bank. Notwithstanding the
immediately preceding sentence, so long as no
-25-
30
Event of Default shall exist and be continuing hereunder, the Guarantor may
incorporate itself (whether by consolidation with or merger into a corporation,
or otherwise), provided that (i) the surviving or resulting entity (as the case
may be) is a corporation incorporated under the laws of one of the states of the
United States of America and, if not incorporated under the laws of the State of
Tennessee is duly qualified to transact business in the State of Tennessee, (ii)
such surviving or resulting corporation assumes in writing the obligations of
the Guarantor under this Guaranty, (iii) immediately following the consummation
of such consolidation, merger or other incorporation transaction, such surviving
or resulting corporation is in compliance with each and every covenant set forth
in Section 4.14 hereof, as evidenced to the Bank by an opinion of independent
certified public accountants of recognized standing satisfactory to the Bank,
and (iv) such surviving or resulting corporation furnishes to the Bank such
additional agreements, certificates and legal opinions as the Bank may require.
Section 4.17 Insurance. The Guarantor shall use its best efforts to
maintain adequate medical malpractice liability insurance at a minimum of
$1,000,000 per occurrence and $1,000,000 in the aggregate; and the Guarantor
shall maintain, and cause each of the Guarantor's operating Subsidiaries to
maintain, with responsible and reputable insurance companies or associations (a)
insurance (including, without limitation, comprehensive general liability and
hazard insurance insuring replacement value with respect to all of its
properties) with respect to its properties and business, in such amounts,
covering such risks and having deductibles, as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated or as otherwise is deemed acceptable by the Bank and (b)
workmen's compensation and other insurance as may be required by law.
Section 4.18 [Reserved].
Section 4.19 No More Favorable Terms for Other Lenders. The Guarantor
covenants and agrees that, with respect to its lending and credit relationships
with Persons other than the Bank, the Guarantor will not agree or consent in
writing to 'covenants, events of default and terms of repayment (including,
without limitation, any obligations to purchase or repurchase evidences of
Indebtedness) which are more favorable to such Person than the covenants, events
of default and terms of repayment set forth herein; provided, however, that
this covenant shall apply only to such lending and credit relationships in
which the Guarantor is indebted, or has guaranteed or otherwise assured
payment of Indebtedness of a third party, to such Person in an amount greater
than $1,000,000, and shall not apply to either the refinancing of the interests
of The Bank of
-26-
31
New York and C&S/Sovran Bank in the financing made pursuant to the Loan and
Security Agreement or to the pledge by the Guarantor of one or more certificates
of deposit to Third National Bank in Nashville in connection with such
refinancing.
Section 4.20 Liens on and Dispositions of Certain Property Interests.
(a) Liens. The Guarantor covenants and agrees that it
will not create, assume or suffer to exist any Lien (other
than those in existence on the date hereof and consented to by
the Bank) upon its right, title or interest in and to any of
the Facilities, including, but not limited to, its rights,
title or interest in, to and under the Master Lease or any of
the separate Leases referred to in Section 1.01 of the Master
Lease, or its leasehold interest in property created thereby,
without the prior written consent of Bank, except for Liens
for taxes or other governmental charges not yet due or that
are being actively contested in good faith by appropriate
proceedings, and Liens in favor of the agent and the lenders
under the Loan and Security Agreement.
(b) Disposition of Certain Property Interests.
Notwithstanding the covenant set forth in Section 4.16 above,
the Guarantor covenants and agrees that it will not sell,
assign, convey, sublease or otherwise dispose of any of its
interest in any of the Facilities, including, but not limited
to, its rights, title or interest in, to and under the Master
Lease or in any of the separate Leases referred to in Section
1.01 of the Master Lease, without the prior written consent of
the Bank.
Section 4.21 Indemnification. The Guarantor shall (to the fullest
extent permitted by Applicable Law) indemnify the Bank and each affiliate
thereof and their respective directors, officers, employees and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from this Guaranty
Agreement from any breach by the Guarantor of this Guaranty Agreement or from
any investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Guarantor shall
reimburse the Bank and each affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any reasonable expenses
(including, without limitation, legal fees and expenses) incurred in connection
with any such investigation or proceeding; but
-27-
32
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified.
ARTICLE V
Subordination
Section 5.1 Subordination. The Guarantor hereby agrees that all amounts
owing from time to time to the Guarantor under the Management Agreements [and
guaranty fees and other payments owing from time to time to the Guarantor under
the Facility Guaranty Agreements], are subordinated in right of payment to the
prior payment in full of all amounts now or hereafter owing under the
Reimbursement Agreement, the Pledge Agreement, the Security Agreement, the
Mortgage and the other Financing Documents, and under this Guaranty Agreement.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) any representation or warranty made by the Guarantor herein or in
any certificate or financial or other written statement furnished by the
Guarantor pursuant to this Guaranty Agreement shall prove to have been untrue or
incomplete in any material respect when made; or
(b) The Guarantor shall fail to perform or observe any term, covenant
or agreement contained in Sections 2.1, 4.9, 4.10, 4.11, 4.14, 4.15, 4.16, 4.19
or 4.20; or
(c) The Guarantor shall fail to perform or observe any term, covenant
or agreement contained in this Guaranty Agreement other than those referred
to in paragraph (b) of this Section 6.1, and any such failure shall remain
unremedied for thirty (30) days after written notice thereof shall have been
given to the Guarantor by the Bank; or
-28-
33
(d) any material provision of this Guaranty Agreement shall at any time
for any reason cease to be valid and binding on the Guarantor or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by the guarantor or any Governmental Authority having jurisdiction in
the premises, or the Guarantor shall deny that it has any or further liability
or obligation under this Guaranty Agreement; or
(e) the Guarantor shall fail to pay when due and payable, after giving
effect to any applicable grace period, the principal of or interest on any
Indebtedness in an aggregate amount over $100,000 (excluding Indebtedness
guaranteed under this Guaranty Agreement) or the maturity of any such
Indebtedness shall have been accelerated or been required to be prepaid prior to
the stated maturity thereof or any event shall have occurred and be continuing
which with the passage of time or the giving of notice or both, would permit any
holder or holders of such Indebtedness, any trustee or agent acting on behalf of
such holder or holders or any other Person so to accelerate such maturity,
unless the Guarantor's obligation to pay, or the acceleration or required
prepayment of, such Indebtedness is being contested or any right of set-off is
being asserted by the Guarantor in good faith by appropriate proceedings and
reserves in respect thereof deemed adequate by the Guarantor have been
established on the books of the Guarantor in accordance with GAAP; or
(f) a judgment or order for the payment of money shall be entered
against the Guarantor by any court or a warrant of attachment or execution or
similar process shall be issued or levied against property of the Guarantor,
which in the aggregate exceeds $100,000 in value over any applicable issuance
coverage or reserve previously established on the books of the Guarantor and
such judgment, order, warrant or process shall continue undischarged or
unstayed for thirty (30) consecutive days; or
(g) (1) the Guarantor shall (A) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian or the like of itself or of its
property, (B) admit in writing its inability to pay its debts generally as they
become due, (C) make a general assignment for the benefit of creditors, (D) be
adjudicated a bankrupt or insolvent, or (E) commence a voluntary case under the
Federal bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or an
order for relief or seeking to take advantage of any insolvency law or file
against it in any bankruptcy, reorganization or insolvency proceeding, or
corporate action shall be taken by it for the purpose of effecting any of the
foregoing; or (2) if without the application, approval or consent of the
Guarantor a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, reorganization,
-29-
34
dissolution, winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or the like of the Guarantor or of all or any
substantial part of its assets, or other like relief in respect thereof under
any bankruptcy or insolvency law, and, if such proceeding is being contested by
the Guarantor in good faith, the same shall (A) result in the entry of an order
for relief or any such adjudication or appointment or (B) continue undismissed,
or pending and unstayed, for any period of sixty (60) days; or
(h) an "event of default" shall occur under the provisions of the
Revolver Agreement; or
(i) (A) a Termination Event with respect to a Plan shall occur, (B) any
Person shall engage in any Prohibited Transaction involving any Plan of the
Guarantor or any Affiliate of the Guarantor, (C) an Accumulated Funding
Deficiency, whether or not waived, shall exist with respect to any Plan of the
Guarantor or any Affiliate of the Guarantor (D) the Guarantor or any Affiliate
of the Guarantor shall be in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments due to a Multiemployer Plan resulting from the
Guarantor's or such the Guarantor Affiliate's complete or partial withdrawal (as
described in Section 4203 and 4205 of ERISA) from such Plan, or (E) any other
event or condition shall occur or exist with respect to a Single Employer Plan
of the Guarantor or any Affiliate of the Guarantor except that no such event or
condition shall constitute an Event of Default if it, together with all other
events or conditions at the time existing, would not subject the Guarantor to
any tax, penalty, debt or liability which, alone or in the aggregate, would have
a Materially Adverse Effect on the Guarantor.
Section 6.2 Remedies. (a) Upon the occurrence of an Event of Default,
the Bank may thereupon exercise such rights and remedies as may be provided in
the Reimbursement Agreement, the Pledge Agreement, this Guaranty, the Mortgage
and any other Financing Document by reason of such Event of Default in order to
enforce the provisions of this Guaranty, with or without the simultaneous
exercise of any other such right or remedy under said documents.
(b) No remedy herein conferred upon or reserved to the Bank is
intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall shall be cumulative and shall be in addition to every
other remedy given under this Guaranty Agreement or now or hereafter existing
at law or in equity or by statute. No delay or omission to exercise any right
or power accruing upon any default, omission or failure of performance
hereunder shall impair any such right of power or shall be construed to be
-30-
35
a waiver thereof, but any such right and power may be exercised from time to
time as often as may be deemed expedient. In order to entitle the Bank to
exercise any remedy reserved to it in this Guaranty Agreement, it shall not be
necessary to give any notice, other than such notice as may be herein expressly
required. In the event any provision contained in this Guaranty Agreement should
be breached by any party and thereafter duly waived by the other party so
empowered to act, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder. No wavier,
amendment, release or modification of this Guaranty Agreement shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the parties thereunto duly authorized by this
Guaranty Agreement.
ARTICLE VII
Miscellaneous
Section 7.1 When Obligations Arise. The obligations of the Guarantor
hereunder shall arise absolutely and unconditionally upon the issuance by the
Bank of the Letter of Credit to be issued pursuant to the Reimbursement
Agreement.
Section 7.2 Nature of Guarantor' Obligations. This Guaranty Agreement
is a continuing obligation of the Guarantor and shall (i) be binding upon the
Guarantor, its heirs, executors, personal representatives, successors and
permitted assigns, and (ii) inure to the benefit of and be enforceable by the
Bank and its successors, transferees and assigns; provided that the Guarantor
may not assign all or any part of this Guaranty Agreement or the rights or
obligations of the Guarantor hereunder without the prior written consent of the
Bank; and, provided further, that unless the Bank shall agree in writing to
release the Guarantor from its rights or obligations hereunder, no such
assignment (whether or not consented to by the Bank) shall in itself relieve or
release the Guarantor from its obligations hereunder.
Section 7.3 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be given to the party to whom sent,
addressed to it as follows:
If directed to the Bank:
Societe Generale, New York Branch
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
-31-
36
If directed to the Guarantor:
National HealthCorp L.P.
City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Senior Vice President and General Counsel
The Bank and the Guarantor may designate a different address to which such
notices should be sent by giving the other written notice thereof. Each such
notice, request or communication shall be effective (i) if given by mail, three
(3) Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means, when delivered at the address of the party to whom such notice is being
delivered.
Section 7.4 Bank's Right of Set-Off.
(a) To the fullest extent permitted by law, upon the occurrence and
during the continuance of any Event of Default, the Bank is hereby authorized at
any time and from time to time, without notice to the Guarantor (any such notice
being expressly waived by the Guarantor), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Guarantor, or either of them, against any of the
obligations of the Guarantor now or hereafter existing under this Guaranty
Agreement, irrespective of whether the Bank shall have made any demand hereunder
or thereunder and although such obligations may be unmatured.
(b) The Bank agrees promptly to notify the Guarantor after any set-off
and application, provided that the failure to give such notice shall not effect
the validity of such set-off and application. Subject to the provisions of
subsection (a), the rights of the Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
Section 7.5 Jurisdiction; Service of Process. The Guarantor agrees that
any legal action or proceeding with respect to this Guaranty Agreement or to
enforce any judgment
-32-
37
obtained against the Guarantor, or against either of them, in connection with
this Guaranty Agreement may be brought by the Bank in the courts of the State or
in the United States District Courts which are located in the City of New York,
or any other court to the jurisdiction of which the Guarantor or any of their
respective properties is or may be subject. The Guarantor irrevocably submits to
the jurisdiction of the courts of the State and of the United States District
Courts located in the city of New York, and irrevocably waive any present or
future objection to venue in any such court, and any present or future claim
that any such court is an inconvenient forum, in connection with any action or
proceeding relating to this Guaranty Agreement. Nothing herein shall effect the
right of the Bank to serve process in any manner permitted by law or to bring
any civil suit, action or proceeding against the Guarantor or their respective
property in the courts of any jurisdiction in which venue may be granted.
(b) For the purposes of any legal action or proceeding brought by the
Bank with respect to this Guaranty, the Guarantor hereby irrevocably designates
and appoints CT Corporation System, currently located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, as its authorized agent for service of process in the
State of New York. The Bank shall for all purposes be entitled to treat such
designee of the Guarantor as the authorized agent to receive for and on its
behalf service of writs or summons or other legal process in the State of New
York; delivery of such service to its authorized agent shall be deemed to be
made when personally delivered to the agent or three (3) days after mailing by
registered or certified mail addressed to such authorized agent. In the event
that, for any reason, such agent or his successor shall no longer serve as agent
of the Guarantor to receive Service or process in the State of Illinois, the
Guarantor shall appoint a person in the State of New York as a successor so to
serve and advise the Bank thereof so that at all times the partnership Guarantor
will maintain an agent to receive service of process in the State of New York on
its behalf with respect to this Guaranty Agreement. In the event that, for any
reason, service of legal process cannot be made in the manner described above,
such service may be made in such other manner as permitted by law.
Section 7.6 Amendments. This Guaranty Agreement may be amended, and the
Guarantor may take any action herein prohibited, or omit to perform any act
herein required to be performed, only if the Guarantor shall first obtain the
written consent of the Bank thereto. No course of dealing between the Guarantor
and the Bank nor any delay in exercising any rights hereunder, shall operate as
a waiver of any rights of the Bank hereunder.
-33-
38
Section 7.7 Sole Judgment of the Bank. Unless otherwise specifically
indicated, if any agreement, certificate or other writing, or any action taken
or to be taken, is by the terms of this Guaranty Agreement required to be
satisfactory to the Bank, the determination of such satisfaction shall be made
by the Bank in its sole and exclusive judgment exercised in good faith.
Section 7.8 Severability. Any provision of this Guaranty Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization as to the remaining provisions hereof and
shall not affect the validity, enforceability or legality of such provision in
any other jurisdiction.
Section 7.9 Headings. Section headings are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
Agreement for any other purpose.
Section 7.10 Governing Law. This Guaranty Agreement is intended to be
performed in the State of New York, and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
Section 7.11 Exhibits. All Exhibits referred to herein are by this
reference incorporated herein and made a part hereof.
Section 7.12 Entire Agreement; Multiple Counterparts. This Guaranty
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.13 Time of the Essence. Time is of the essence of this
contract.
Section 7.14 Financing Documents. Guarantor has participated in the
negotiation and preparation of the Financing Documents and has received
execution copies of each.
-34-
39
IN WITNESS WHEREOF, the Guarantor and the Bank have duly executed and
delivered this Guaranty Agreement, or caused same to be duly exercised and
delivered as of the date first above written.
NATIONAL HEALTHCORP L.P., a
Delaware limited partnership
By: NHC, Inc., a Tennessee
corporation, as Managing General
Partner
By: /s/
------------------------
Title:
Attest: /s/
---------------------
Title:
SOCIETE GENERALE,
acting through its
New York Branch
By: /s/
---------------------------------
Title: VP
-35-
