1
EXHIBIT 10.40
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY (this "Subsidiary Guaranty") dated as of
July 10, 1997 made by West Tennessee, Inc., Lake Forest Healthcare Center, Inc.,
Statesboro HealthCare, Inc., Lake Health Care Center, Inc., Xxxxxxx Health Care
Center, Inc., Gardendale Health Care Center, Inc., Southside Health Care Center,
Inc., Gainesville Health Care Center, Inc., Charlton City Healthcare, Inc., Xxxx
Xxxxx Healthcare, Inc., Seaside Retirement, Inc., Mid-Florida, Inc., Xxxx Health
& Rehabilitation, Inc., Xxxxx-Lox Xxxx Nursing Home, Inc., Xxxxxx Rehabilitation
Center, Inc., Phoenix Associates, Inc., Summer's Landing, Inc., Xxxxxxx
Retirement, Inc., Pine Manor Healthcare, Inc., Suncoast Retirement, Inc., Atrium
of Jacksonville and The Atrium Nursing Home, Inc. (each, a "Subsidiary
Guarantor," and collectively, the "Subsidiary Guarantors") in favor of Sun
Healthcare Group, Inc., a Delaware corporation (the "Lender").
PRELIMINARY STATEMENTS:
WHEREAS, the Lender has agreed to make a loan to Retirement
Care Associates, Inc., a Colorado corporation ("RCA"), in the principal amount
of $9,750,000 (the "Original Loan") pursuant to the terms and conditions of that
certain Promissory Note made by RCA (as Maker) to the Lender (as Payee) dated of
January 10, 1997 (the "Original Note");
WHEREAS, RCA and the Lender have agreed to amend and restate
the Original Note pursuant to the terms and conditions of that certain Amended
and Restated Promissory Note made by RCA, Retirement Management Corporation, a
Georgia corporation ("RMC"), and Capitol Care Management Company, Inc., a
Georgia corporation ("CCMC") (hereinafter, whether one or more, referred to as
the "Borrower"), (as Maker) to the Lender (as Payee) dated of even date herewith
(the "Restated Note"); and
WHEREAS, each Subsidiary Guarantor is a direct or indirect
wholly owned subsidiary of RCA, and thus each Subsidiary Guarantor will derive
substantial direct and indirect benefit from the transactions contemplated by
the Restated Note; and
WHEREAS, as a condition to the amendment and restatement of
the Original Note pursuant to the Restated Note, each Subsidiary Guarantor has
agreed to execute and deliver this Subsidiary Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender to amend and restate the Original Note pursuant to the
Restated Note, each Subsidiary Guarantor hereby agrees as follows:
SECTION 1. Guaranty. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all obligations of
the Borrower now or hereafter existing under the
1.
2
Restated Note, whether for principal, interest, fees, expenses or otherwise
(such obligations being the "Obligations"), and agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by the Lender
in enforcing any rights under this Subsidiary Guaranty. Without limiting the
generality of the foregoing, each Subsidiary Guarantor's liability shall extend
to all amounts which constitute part of the Obligations and would be owed by the
Borrower under the Restated Note but for the fact that they are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Borrower.
SECTION 2. Guaranty Absolute. Each Subsidiary Guarantor
guarantees that the Obligations will be paid strictly in accordance with the
terms of the Restated Note, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The obligations of each Subsidiary
Guarantor under this Subsidiary Guaranty are absolute, unconditional and
independent of the Obligations, and a separate action or actions may be brought
and prosecuted against each Subsidiary Guarantor to enforce this Subsidiary
Guaranty, irrespective of whether any action is brought against the Borrower or
any other Subsidiary Guarantor or whether the Borrower or any other Subsidiary
Guarantor is joined in any such action or actions. The liability of each
Subsidiary Guarantor under this Subsidiary Guaranty shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of the Restated
Note, that certain Amended and Restated Pledge Agreement dated as of
even date herewith executed by RCA to the Lender (the "Pledge
Agreement"), those certain Pledge Agreements dated as of even date
herewith executed by each of RMC and CCMC to the Lender (collectively,
the "Additional Pledge Agreements"), or that certain Subsidiary Pledge
Agreement dated as of even date herewith executed by each of the
Subsidiary Guarantors to the Lender (the "Subsidiary Pledge Agreement"
and, together with the Restated Pledge Agreement and the Additional
Pledge Agreements, the "Pledge Agreements," which Pledge Agreements,
together with the Restated Note, and any and all modifications,
amendments or substitutions thereto being referred to herein as the
"Loan Documents");
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from the Restated
Note, the Pledge Agreements or Loan Documents, including, without
limitation, any increase in the Obligations resulting from the
extension of additional credit to the Borrower or any of its affiliates
or otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the
Obligations;
2.
3
(iv) any manner of application of collateral, or proceeds
thereof, to all or any of the Obligations, or any manner of sale or
other disposition of any collateral for all or any of the Obligations
or any other assets of the Borrower or any of its affiliates;
(v) any change, restructuring or termination of the
corporate structure or existence of the Borrower or any of its
affiliates; or
(vi) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Borrower or any other
guarantor or Subsidiary Guarantor.
This Subsidiary Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by the Lender upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
SECTION 3. Waivers. Each Subsidiary Guarantor hereby waives
(and consents in advance to the taking, or the failure to take, any action
specified below), to the fullest extent permitted by applicable law:
(i) any requirement that the Lender secure or insure any
security interest or lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other person
(including any other guarantor or Subsidiary Guarantor) or any
collateral;
(ii) any defense arising by reason of any claim or defense
based upon an election of remedies by the Lender (including, without
limitation, an election to non-judicially foreclose on any collateral)
which in any manner impairs, reduces, releases or otherwise adversely
affects such Subsidiary Guarantor's subrogation, reimbursement or
contribution rights or other rights to proceed against the Borrower,
any other guarantor or Subsidiary Guarantor or any other person or any
collateral;
(iii) any defense arising by reason of the failure of any
other person (including any Subsidiary Guarantor) to execute this
Subsidiary Guaranty or any other guaranty or agreement;
(iv) any defense arising by reason of the failure of any
person (including any Subsidiary Guarantor) to execute properly any
Loan Document or otherwise comply with applicable legal formalities;
(v) any defense in the context of nonjudicial foreclosure
under any provision of the law of any jurisdiction, and all other
suretyship and other similar defenses such Subsidiary Guarantor would
otherwise have under the laws of any jurisdiction;
3.
4
(vi) any duty on the part of the Lender to disclose to such
Subsidiary Guarantor any matter, fact or thing relating to the
business, operation or condition of the Borrower or any of its
affiliates and their respective assets now known or hereafter known by
the Lender;
(vii) all benefits of any statute of limitations affecting
such Subsidiary Guarantor's liability under this Subsidiary Guaranty or
affecting the enforcement of this Subsidiary Guaranty or any of the
Obligations or realization on any collateral for the Obligations;
(viii) all setoffs and counterclaims;
(ix) promptness, diligence, presentment, demand for
performance and protest;
(x) notice of non-performance, default, acceleration,
protest or dishonor;
(xi) except for any notice otherwise required by applicable
laws that may not be effectively waived by such Subsidiary Guarantor
(all of which are hereby waived to the fullest extent permitted by
law), notice of sale or other disposition of any collateral for the
Obligations; and
(xii) notice of acceptance of this Subsidiary Guaranty and of
the existence, creation or incurring of new or additional Obligations.
SECTION 4. Waiver of Subrogation. Each Subsidiary Guarantor
hereby irrevocably waives any claim or other rights that such Subsidiary
Guarantor may now or hereafter acquire against the Borrower or any other
guarantor or Subsidiary Guarantor that arise from the existence, payment,
performance or enforcement of such Subsidiary Guarantor's obligations under this
Subsidiary Guaranty or any of the Loan Documents, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification by or from the Borrower or any other guarantor or Subsidiary
Guarantor and any right to participate in any claim or remedy of the Lender
against the Borrower or any other guarantor or Subsidiary Guarantor or any
collateral for the Obligations, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Borrower or any other
guarantor or Subsidiary Guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right. If any amount shall be paid to such Subsidiary
Guarantor in violation of the preceding sentence at any time prior to the
indefeasible payment in full in cash of the Obligations and all other amounts
payable under this Subsidiary Guaranty, such amount shall be held in trust for
the benefit of the Lender and shall forthwith be paid to the Lender to be
credited and applied to the Obligations and all other amounts payable under this
Subsidiary Guaranty, whether matured or unmatured, or to be held as collateral
for any Obligations or other amounts payable under this Subsidiary Guaranty
thereafter arising. Each Subsidiary Guarantor acknowledges that it will receive
direct and indirect benefits from
4.
5
the transactions provided for in the Restated Note, and that the waiver set
forth in this Section 4 is knowingly made in contemplation of such benefits.
SECTION 5. Taxes. Each Subsidiary Guarantor agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery, registration, filing, recording or enforcement of,
or otherwise with respect to, this Subsidiary Guaranty.
SECTION 6. Representations and Warranties. Each Subsidiary
Guarantor hereby represents and warrants as follows:
(i) This Subsidiary Guaranty is executed at the request of
the Borrower and no oral promises, assurances, representations or
warranties have been made by or on behalf of the Lender to induce such
Subsidiary Guarantor to execute and deliver this Subsidiary Guaranty.
(ii) This Subsidiary Guaranty is the legal, valid and binding
obligation of such Subsidiary Guarantor enforceable against such
Subsidiary Guarantor in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally.
(iii) Such Subsidiary Guarantor has established adequate means
of obtaining from the Borrower on a continuing basis information
pertaining to, and is now and on a continuing basis will be completely
familiar with, the financial condition, operations, properties and
prospects of the Borrower.
(iv) Such Subsidiary Guarantor has received and approved
copies of the Restated Note and the Pledge Agreements.
(v) Such Subsidiary Guarantor is, and after the due
execution and delivery of this Subsidiary Guaranty and giving effect to
the transactions contemplated by the Restated Note will be, solvent.
SECTION 7. Amendments, Etc. No amendment or waiver of any
provision of this Subsidiary Guaranty, and no consent to any departure by any
Subsidiary Guarantor herefrom, shall in any event be effective unless the same
shall be in writing and signed by the Lender, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 8. Addresses for Notices. All notices, demands and
requests hereunder shall be in writing, shall be delivered personally against
receipt, or sent by recognized overnight courier service, or mailed by
registered or certified mail, return receipt requested, postage prepaid, and if
by telecopy, shall be followed forthwith by letter. Any such notice,
5.
6
demand, or request shall be deemed given when sent. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
If to the Lender:
Sun Healthcare Group, Inc.
000 Xxx Xxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: General Counsel
If to any Subsidiary Guarantor, care of such Subsidiary
Guarantor at:
Retirement Care Associates
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: President
Any party hereto may change the address to which notices shall
be directed under this Section by giving written notice of such change to the
other party.
SECTION 9. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law or under the Restated Note.
SECTION 10. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default (as defined in the Restated Note) the
Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all cash or other property
at any time held and other indebtedness at any time owing by the Lender to or
for the credit or the account of any Subsidiary Guarantor against any and all of
the Obligations, whether or not the Lender shall have made any demand under this
Subsidiary Guaranty. The Lender agrees promptly to notify any such Subsidiary
Guarantor after any such setoff and application made by the Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Lender under this Section 10 are
in addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Lender may have.
SECTION 11. Continuing Guaranty. This Subsidiary Guaranty is a
continuing guaranty and shall (i) remain in full force and effect until the
indefeasible payment in full in cash of the Obligations and all other amounts
payable under the Restated Note, the Pledge Agreements and this Subsidiary
Guaranty, (ii) be binding upon each Subsidiary Guarantor, its
6.
7
successors and assigns and (iii) inure to the benefit of, and be enforceable by
the Lender and its successors, transferees and assigns.
SECTION 12. Severability. The provisions of this Subsidiary
Guaranty are severable, and if any clause or provision hereof shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or
part thereof, in such jurisdiction, and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
of this Subsidiary Guaranty in any jurisdiction.
SECTION 13. GOVERNING LAW. THIS SUBSIDIARY GUARANTY SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF SUCH STATE, EXCEPT THAT NO DOCTRINE
OF CHOICE OF LAW SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR
JURISDICTION. EACH SUBSIDIARY GUARANTOR AGREES THAT, IN ADDITION TO ANY OTHER
COURTS THAT MAY HAVE JURISDICTION UNDER APPLICABLE LAWS OR RULES, ANY ACTION OR
PROCEEDING TO ENFORCE OR ARISING OUT OF THIS SUBSIDIARY GUARANTY OR ANY LOAN
DOCUMENT MAY BE COMMENCED IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK, NEW
YORK, AND EACH SUBSIDIARY GUARANTOR CONSENTS AND SUBMITS IN ADVANCE TO SUCH
JURISDICTION AND AGREES THAT VENUE WILL BE PROPER IN SUCH COURTS OR ANY SUCH
MATTER. SHOULD ANY SUBSIDIARY GUARANTOR FAIL TO APPEAR OR ANSWER ANY SUMMONS,
COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING
OR OTHER SERVICE THEREOF, SUCH SUBSIDIARY GUARANTOR SHALL BE DEEMED IN DEFAULT
AND AN ORDER OR JUDGMENT MAY BE ENTERED AGAINST SUCH SUBSIDIARY GUARANTOR AS
DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE CHOICE
OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM, OR THE TAKING OF ANY ACTION
UNDER THIS SUBSIDIARY GUARANTY OR THE ANY LOAN DOCUMENT TO ENFORCE THE SAME, IN
ANY APPROPRIATE JURISDICTION.
SECTION 14. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR
HEREBY WAIVES TRIAL BY JURY, RIGHTS OF SETOFF, AND ANY RIGHT TO PUNITIVE DAMAGES
OR CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SUBSIDIARY GUARANTY,
ANY LOAN DOCUMENT, THE OBLIGATIONS OF SUCH SUBSIDIARY GUARANTOR OR ANY
COLLATERAL FOR SUCH OBLIGATIONS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED
PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING,
BETWEEN SUCH SUBSIDIARY
7.
8
GUARANTOR AND THE LENDER. SUCH SUBSIDIARY GUARANTOR CONFIRMS THAT THE FOREGOING
WAIVERS ARE INFORMED AND FREELY MADE.
SECTION 15. Each Subsidiary Guarantor acknowledges and agrees
that this Subsidiary Guaranty and the other Loan Documents shall be treated as
"Proprietary Information" under the Confidentiality Agreement, dated December
23, 1996, between Lender and RCA, and each Subsidiary Guarantor agrees to so
treat this Subsidiary Guaranty and the Loan Documents to be bound thereby.
IN WITNESS WHEREOF, the Subsidiary Guarantors have duly
executed and delivered this Subsidiary Guaranty as of the date first above
written.
-----------------------------------
West Tennessee, Inc.
-----------------------------------
Lake Forest Healthcare Center, Inc.
-----------------------------------
Statesboro HealthCare, Inc.
-----------------------------------
Lake Health Care Center, Inc.
-----------------------------------
Xxxxxxx Health Care Center, Inc.
8.
9
-----------------------------------
Gardendale Health Care Center, Inc.
-----------------------------------
Southside Health Care Center, Inc.
-----------------------------------
Gainesville Health Care Center,
Inc.
-----------------------------------
Charlton City Healthcare, Inc.
-----------------------------------
Xxxx Xxxxx Healthcare, Inc.
-----------------------------------
Seaside Retirement, Inc.
-----------------------------------
Mid-Florida, Inc.
-----------------------------------
Xxxx Health & Rehabilitation, Inc.
-----------------------------------
Xxxxx-Lox Xxxx Nursing Home, Inc.
-----------------------------------
Xxxxxx Rehabilitation Center, Inc.
-----------------------------------
Phoenix Associates, Inc.
9.
10
-----------------------------------
Summer's Landing, Inc.
-----------------------------------
Xxxxxxx Retirement, Inc.
-----------------------------------
Pine Manor Healthcare, Inc.
-----------------------------------
Suncoast Retirement, Inc.
-----------------------------------
Atrium of Jacksonville
-----------------------------------
The Atrium Nursing Home, Inc.
10.
