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Exhibit 10.6
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") made and entered
into this 16th day of December, 1988, by and among the National Health
Corporation Leveraged Employee Stock Ownership Trust (the "Borrower") and Third
National Bank in Nashville, a national banking association with its principal
place of business in Nashville, Tennessee ("TNB") Irving Trust Company, a New
York banking corporation with its principal place of business in New York, New
York ("IT"), Sovran Bank/Central South, a Tennessee corporation with its
principal place of business in Nashville, Tennessee ("SCS"), SouthTrust Bank of
Alabama, National Association with its principal place of business in
Birmingham, Alabama ("ST") (TNB, IT, SCS and ST are sometimes hereinafter
referred to collectively as the "Banks" or individually as a "Bank"), Third
National Bank in Nashville as agent for the Banks (in such capacity, the
"Agent"), National HealthCorp L.P., a Delaware limited partnership ("NHLP"), and
National Health Corporation, a Tennessee corporation ("National").
W I T N E S S E T H:
WHEREAS, Banks have agreed to loan Borrower the amount of Fifty
Million and No/100 Dollars ($50,000,000.00) (the "Indebtedness" or the "Loan");
and
WHEREAS, the Loan shall be evidenced by a note or notes in form
satisfactory to Agent, which note(s) shall bear interest at the rate agreed to
by the parties hereto,
NOW, THEREFORE, for and in consideration of the foregoing premises,
and the covenants and agreements contained herein, and other valuable
consideration, the receipt and sufficiency of which are acknowledged hereby,
the Agent, Banks, Borrower, NHLP and National hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1.1. or in other
provisions of this Agreement in the singular shall have the same meanings when
used in the plural and vice versa):
"Additional Interest" means Additional Interest as defined in Section
6.1. of this Agreement.
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"Additions to Tax" means any penalties, additions to tax, and/or
additional amounts referred to in Chapters 67 or 68 of the Code or any
successor law or section, including without limitation any interest amounts due
or owing by any one or more of the Banks as a result of any tax deficiency
resulting from an Event of Taxability.
"Adjusted Tangible Net Worth" means Adjusted Tangible Net Worth as
defined in Section 9.1(c) of this Agreement.
"Adjusted Rate" means Adjusted Rate as defined in Section 5.1.(a) of
this Agreement.
"Affiliate" means:
(a) NHLP; and
(b) Any corporation that is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the
Code) as is National; and
(c) Any other trade or business (whether or not incorporated)
controlling, controlled by, or under common control (within the
meaning of Sections 414(c) and 414(o) of the Code) with National; and
(d) Any other corporation, partnership, or other organization
that is a member of an affiliated service group (within the meaning of
Sections 414(m) and 414(o) of the Code) with National.
"Agent" means Third National Bank in Nashville.
"Available Collateral" means Available Collateral as defined in
Section 2.4.(a) of this Agreement.
"Bank(s)" means Bank(s) as defined in the introductory paragraph to
this Agreement.
"Borrower" means Borrower as defined in the introductory paragraph to
this Agreement.
"Closing" means Closing as defined in Section 6.1. of this Agreement.
"Closing Date" means the date of funding of the Loan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means the Collateral as defined in Article II of this
Agreement.
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"Commitment" means the obligation of the Banks, which is several and
not joint, to extend credit to the Borrower pursuant to this Agreement in the
aggregate principal amount of up to Fifty Million and No/100 Dollars
($50,000,000.00) as set forth in Section 2.1. of this Agreement.
"Compliance Date" means Compliance Date as defined in Section 2.4(a)
of this Agreement.
"Contributions" means Contributions as defined in Section 2.2.(b) of
this Agreement.
"Current Ratio" means Current Ratio as defined in Section 9.1.(a) of
the Agreement.
"Debt Service Coverage" means Debt Service Coverage as defined in
Section 9.1.(e) of this Agreement.
"Determination of Taxability" means establishing the existence of an
Event of Taxability in one of the following ways:
(a) The delivery of written notification to Borrower by the
Agent declaring that an Event of Taxability has occurred on a
specified date by reason of a change of legislation, the issuance of a
Revenue Ruling (including a private letter ruling relating to the Loan
and addressed to the Agent or any one of the Banks (or their
counsel)), proposed deficiency letter ("30-day letter") or other order
or directive by the IRS, Department of the Treasury, or any other
governmental agency with the required jurisdiction, with respect to
any one or more of the Notes, the effect of which (in the opinion of
the Majority Banks) is to establish an Event of Taxability. The
notification shall become effective when sent, but the effective date
of said notice shall not be construed as a waiver of the Banks' right
to receive the increased (or decreased) rate of interest and
penalties, if applicable, set forth in the Notes from the Taxable
Date; or
(b) The delivery of written notification after the date
hereof ("Notice") to Borrower by the Agent declaring that an Event of
Taxability has occurred on a specified date (other than by reason of
the events described in the foregoing subparagraph (a)), which Notice
shall describe the Event of Taxability and which shall be based on an
opinion of counsel acceptable to Agent (based on the consent of the
Majority Banks) that, in light of information received by the Banks
after the date of this Agreement from any source whatsoever, an event
of Taxability has occurred and there is no substantial authority (as
defined in the Code and the regulations promulgated thereunder) for
the Banks not adjusting the
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Adjusted Rate in accordance with Section 5.1. of this Agreement. Any Notice
shall become effective ten (10) days after such Notice is sent, unless,
prior to the effective date of the Notice, Borrower, on behalf of the Banks:
(1) agrees to seek a private letter ruling or other written
determination ("Letter Ruling") on behalf of the Banks from the IRS
affirming that the interest on the Notes will remain unaffected under
Section 5.1. hereof by the Event of Taxability described in the
Notice; and
(2) procures an opinion from counsel wholly satisfactory to
the Banks, in Banks' sole opinion, to the effect that (i) there is a
substantial and valid legal basis for the position that the Adjusted
Rate should not be adjusted, (ii) counsel has no reason to believe the
IRS will decline to consider the ruling request for procedural or
technical reasons, and (iii) counsel has no knowledge or reason to
believe that the IRS has indicated a position not to rule favorably on
similar questions or would not rule favorably; and
(3) agrees to reimburse and fully indemnify and hold harmless
the Banks and the Agent from and against any and all liability,
damage, loss, cost, or expense (including attorneys' fees) that the
Banks or the Agent may incur as the result of seeking the Letter
Ruling, and further agrees to pay on demand all reasonable costs and
expenses that the Banks or the Agent may incur in seeking the Letter
Ruling, and to furnish such bond, letter of credit, or other form of
security as the Banks or the Agent may reasonably request from time to
time to secure Borrower's additional obligations under the Loan
Documents, including without limitation any potential increases in
interest, whether prospective or retroactive, and any potential taxes,
penalties, or related interest.
Provided Borrower promptly initiates and continues to diligently pursue the
Letter Ruling, compliance with the foregoing requirements shall suspend the
effective date of the Notice. The issuance of a Letter Ruling clearly
concluding that the Adjusted Rate should not be adjusted will suspend the Event
of Taxability described in the Notice. The issuance of a Letter Ruling
concluding that the Adjusted Rate should be adjusted, or failure to obtain any
Letter Ruling that is conclusive with respect to whether the Adjusted Rate
should be adjusted within twelve (12) months from the date of the delivery of
the Notice, whichever shall first occur, shall constitute a final disposition
of the matter (any appeal rights notwithstanding) and a Determination of
Taxability shall be deemed to have occurred as of the Taxable Date. The above
procedure and the
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effective date of said Notice shall in no event be construed as a waiver of the
Banks' right to receive the increased rate of interest and penalties set forth
in the Loan Documents from the Taxable Date.
"Disqualified Security" means disqualified security as defined in the
definition of Temporary Investments of this Agreement.
"Eligible Accounts" means NHLP's Accounts, excluding accounts (a)
overdue by more than one hundred twenty (120) days, (b) owed by insolvent
obligors, (c) in which the Banks do not have a fully perfected security
interest, or (d) customarily deemed ineligible for any other reason by
commercial financial lenders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP" means an employee stock ownership plan, as defined in Section
4975(e)(7) of the Code and the regulations thereunder, qualified under Section
401(a) of the Code.
"Event of Default" means any Event of Default as such term is defined
in Article XI herein.
"Event of Taxability" means a change in law or fact, or the
interpretation thereof, or the occurrence or recognition of a fact,
circumstance, or situation, or any change in the Code, or the application
thereof by the IRS or other governmental authority having jurisdiction, or any
other event or circumstance of whatever kind or nature, the effect of which is
to cause a Bank to include in its Gross Income for purposes of taxation under
the Code more (or less) of the interest earned on its respective Note than
prior to such change, or to increase (or decrease) the highest marginal federal
corporate tax rate to which a Bank is subject, either as a result of a change
in the general corporate income tax structure or corporate income tax rates.
However, in no event shall the inclusion of more than 50% of any amounts
payable pursuant to Section 6.1 hereof in the Gross Income of any Bank for
purposes of taxation under the Code be construed as an Event of Taxability
hereunder.
"Funded Debt" means Funded Debt as defined in Section 9.1.(c) of this
Agreement.
"GAAP" means generally accepted accounting principles at any date of
determination in respect of a company or entity conducting a business the same
as or similar to that of the company or entity being studied, including,
without limitation, those set forth in applicable bulletins, opinions,
pronouncements, statements and interpretations issued by the
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Accounting Principles Board, the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board, consistently applied.
"Gross Income" means gross income as defined in Section 61 of the Code
and the regulations thereunder.
"Guarantee and Contingent Purchase Agreement" means the Guarantee and
Contingent Purchase Agreement as defined in Section 3.2.(b) of this Agreement.
"Guarantors" means collectively, NHLP and National.
"Indebtedness" means all amounts owing under this Agreement and all
indebtedness evidenced by the Notes, including accrued interest thereon, and
any and all costs and expenses incurred by Agent and/or the Banks in enforcing
or protecting their rights with respect to the Notes, the Collateral or the
indebtedness secured by the Collateral, including, but not limited to,
reasonable attorneys' fees.
"IRS" means the Internal Revenue Service.
"IT" means Irving Trust Company.
"Letter Ruling" means Letter Ruling as defined under the definition of
"Determination of Taxability" in this Agreement.
"Line of Credit Note" means Line of Credit Note as defined in Section
2.2.(d) of this Agreement.
"Loan" means Loan as defined in the first whereas clause of this
Agreement.
"Loan Documents" means Loan Documents as defined in Section 3.2. of
this Agreement.
"Majority Banks" means Banks holding at least sixty-six and two-thirds
percent (66-2/3%) of the then aggregate unpaid principal amount of the Notes
held by the Banks, or if no such principal amounts are then outstanding, Banks
having at least sixty-six and two-thirds percent (66-2/3%) of the Commitment.
"Member" means a participant of the Plan.
"National" means National Health Corporation, a Tennessee corporation
serving as Borrower's Plan sponsor.
"Net Income" means Net Income as defined in Section 7.1. (dd) of this
Agreement.
"NHLP" means National HealthCorp L.P., a Delaware limited partnership.
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"NHLP Deeds of Trust and Mortgages" means NHLP Deeds of Trust and
Mortgages as defined in Section 3.2.(c) of this Agreement.
"NHLP's Accounts" means all of the accounts of NHLP net of contractual
adjustments without regard for NHLP's bad debt reserve determined in accordance
with GAAP, including without limitation, all accounts, accounts receivable,
chattel paper, other choses in action related to accounts, and any right to
payment for goods sold or leased or for services rendered, whether or not
evidenced by an instrument or chattel paper, and whether or not earned by
performance, all of NHLP's rights as an unpaid vendor or lienor including
stoppage in transit, replevin or reclamation, and any other of NHLP's
property held by Agent or Banks or by others for Agent's or Banks' account,
including balances standing to NHLP's credit on the Agent's or any Bank's
books, and the proceeds of any and all of the foregoing.
"Note Purchase Date" means Note Purchase Date as defined in Section
3.2.(b) of this Agreement.
"Notes" means those non-recourse promissory notes executed by Borrower
referenced in Section 3.2.(a) hereof, together with any and all extensions,
amendments, restatements, renewals and modifications thereof.
"Notice of Revision" means Notice of Revision as defined in Section
5.4. of this Agreement.
"Participant" means any bank other than the Banks who purchases an
interest in the Commitment from any of the Banks.
"Participation Agreement" means any participation agreement to be
entered into between any Bank and a Participant.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form of
entity.
"Plan" means the National Health Corporation Leveraged Employee Stock
Ownership Plan, as adopted by National, effective January 20, 1988, and as
amended and/or restated or merged from time to time.
"Plan Administrator" means Plan Administrator as defined in Section
10.1.(c) of this Agreement.
"Pledge of Line of Credit Note Agreement" means pledge of Line of
Credit Note Agreement as defined in Section 3.2.(g) of this Agreement.
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"Pledge of NHLP's Accounts Agreement" means Pledge of NHLP's Accounts
Agreement as defined in Section 3.2.(d) of this Agreement.
"Pledge of Stock Agreement" means Pledge of Stock Agreement as defined
in Section 3.2.(f) of this Agreement.
"Pledge of Temporary Investments Agreement" means Pledge of Temporary
Investments Agreement as defined in Section 3.2.(e) of this Agreement.
"Pledged Nursing Homes" means the fifteen (15) nursing home properties
mortgaged, assigned and pledged by NHLP to secure payment of and performance
under the Guarantee and Contingent Purchase Agreement, which nursing home
properties are more particularly described on Exhibit A attached hereto and
made a part hereof, and any additions, substitutions or replacements thereto,
subject to the approval of the Majority Banks. With respect to the Pledged
Nursing Homes listed on Exhibit A hereto and/or any additions, substitutions or
replacements thereto, a survey of the property upon which such Pledged Nursing
Home is located shall be provided to Agent promptly upon request of Agent, at
the expense of NHLP which survey shall be sufficient to remove the survey
exception from any title policy issued with respect to such property.
"Quarter", "Quarterly" or "Fiscal Quarter" means a three month period
(or portion thereof) ending on March 31, June 30, September 30 or December 31.
"Qualified Lender" means any lender who is eligible for the interest
income exclusion with respect to a Securities Acquisition Loan as set forth in
Section 133 of the Code and the regulations thereunder.
"SCS" means Sovran Bank/Central South.
"Securities Acquisition Loan" means a securities acquisition loan as
defined in Section 133(b) of the Code and the regulations thereunder.
"ST" means SouthTrust Bank of Alabama.
"Stated Rate" means that variable rate of interest equal at all times
during the term of the Loan to eighty-five percent (85%) of the highest prime
rate of interest as published in the Wall Street Journal or such successor
rate of interest as is published in a generally available financial
publication, as such rate may change from time to time during the term of the
Loan.
"Stock" means Stock as defined in Section 2.2.(a) of this Agreement.
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"Sovran Loan" means that certain loan in the original principal amount
of $38,500,000 from Sovran Bank/Central South to the National Health
Corporation Leveraged Employee Stock Ownership Trust as evidenced by that
certain Loan and security Agreement dated January 20, 1988 by and between
Marine Midland Bank, N.A., not individually or in its corporate capacity, but
solely as Trustee of the National Health Corporation Leveraged Employee Stock
Ownership Trust and Sovran Bank/Central South.
"Subordinated Debt" means any indebtedness that, to the satisfaction
of the Majority Banks as evidenced by a writing signed by the Majority Banks,
is by its terms expressly subject and subordinate in all respects to all
payments of Funded Debt, including without limitation all payments at any time
due or owing under the Guarantee and Contingent Purchase Agreement.
"Tangible Net Worth" means Tangible Net Worth as defined in Section
9.1.(d) of this Agreement.
"Taxable Date" means the first date on which an Event of Taxability
affects the taxable equivalent yield of the Banks.
"Taxable Rate" means Taxable Rate as defined in the Notes.
"Tendering Banks" means Tendering Banks as defined in Section 3.2.(b)
of this Agreement.
"Temporary Investments" means temporary investments pledged by
National and/or NHLP that are generated in connection with the purchase of
National stock by the Borrower or the execution of the Revolving Credit
Agreement dated December 16, 1988 between NHLP and National or in connection
with the sale of any Pledged Nursing Home by NHLP, which shall consist only of
cash or cash equivalents (including certificates of deposit at financial
institutions with capital in excess of One Hundred Million and No/100 Dollars
($100,000,000.00)), obligations of the United States Government, or obligations
of U.S. corporations with a published rating of no less than "A", provided that
in no event shall any of the foregoing have a maturity of greater than one (1)
year. In the event any of the foregoing held by Agent on behalf of Banks as
security for the Loan should fail to qualify as Temporary Investments
("Disqualified Security"), Borrower agrees to replace the Disqualified Security
with Temporary Investments within the thirty (30) day period following
Borrower's receipt of notice from Agent of the existence of the Disqualified
Security.
"TNB" means Third National Bank in Nashville.
"Trust" means the National Health Corporation Leveraged Employee Stock
Ownership Trust established by National, effective January 20, 1988, and
appointing Marine Midland Bank, N.A. as Trustee, as amended and/or restated
from time to time.
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"Trustee" means Trustee as defined in Section 8.1 of this Agreement.
"Uniform Commercial Code" means the Uniform Commercial Code as adopted
by the State of Tennessee.
"Working Capital" means Working Capital as defined in Section 9.1.(b)
of this Agreement.
ARTICLE II
COLLATERAL
Section 2.1. The Commitment. Subject to the terms and conditions of
and relying on the representations, warranties and covenants contained in this
Agreement, the Banks, for a period ending December 16, 1993, agree to fund
severally but not jointly to the Borrower the aggregate maximum principal
amount of up to Fifty Million and No/100 Dollars ($50,000,000.00) (the
"Commitment"). The maximum Commitment of each of the Banks is as follows:
TNB $16,000,000
IT $15,000,000
SCS $ 9,000,000
ST $10,000,000
The Loan shall be evidenced by (i) the Sixteen Million Dollar ($16,000,000)
Note of TNB, (ii) the Fifteen Million Dollar ($15,000,000) Note of IT, (iii)
the Nine Million Dollar ($9,000,000) Note of SCS, and (iv) the Ten Million
Dollar ($10,000,000) Note of ST, which Notes are substantially in the form of
Exhibits B, C, D and E, respectively, with each Note payable in accordance with
its terms. The Loan is not a revolving loan so that amounts repaid on the Loan
after the Loan is funded cannot be reborrowed by Borrower.
Section 2.2. Description of Collateral. The Indebtedness shall be
secured by the following collateral ("Collateral"):
(a) The number of shares of common stock of National as are
actually purchased by Borrower with the Loan proceeds (the "Stock"),
together with all proceeds, monies, income, and benefits arising by
virtue of Borrower's ownership of the Stock, both now and in the
future, including without limitation all dividends, redemption
proceeds, and other distributions on or with respect to the Stock,
whether payable in cash, in stock, or in other property, and all
subscription and other rights in connection therewith; provided,
however, that the Stock shall not include Stock that the Banks have
released pursuant to Section 2.10. of this Agreement; and
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(b) Contributions made to Borrower by national to enable Borrower to
meet its obligations under the Loan Documents (the "Contributions"); and
(c) Earnings attributable to the stock and the investment of the
Contributions; and
(d) NHLP and National's joint and several guarantees of payment of the
Loan, which guarantees shall be secured by the following (which shall be
included in the definition of Collateral):
(i) NHLP Deeds of Trust and Mortgages; or assignments of same;
(ii) A prior perfected security interest in NHLP'S Accounts
and furniture, fixtures and equipment located on or used in connection
with the Pledged Nursing Homes;
(iii) Temporary Investments pledged by National or NHLP, which
Temporary Investments shall on the Closing Date be in an amount equal
to Sixteen Million Four Hundred Fifty Eight Thousand Four Hundred
Thirty and No/100 Dollars ($16,458,430.00), shall decrease dollar for
dollar with NHLP's draws under the Line of Credit Note and shall
increase to the extent of proceeds resulting either from a sale of any
Pledged Nursing Home or payment on the Line of Credit Note by NHLP and
pledged to the Banks pursuant to Section 2.5 hereof; and
(iv) A pledge of the revolving credit note (the "Line of
Credit Note") in the principal amount of Fifty Million and No/100
Dollars ($50,000,000.00) executed of even date herewith by NHLP in
favor of National.
Section 2.3. Purpose. The security interests hereby granted by
Borrower to the Banks are security for the payment of an indebtedness in the
amount of Fifty Million and No/100 Dollars ($50,000,000.00) that is being
advanced by Banks to Borrower on the date of this Agreement evidenced by the
Notes, together with any and all extensions, renewals, amendments,
restatements, and/or modifications thereof. The mortgage liens and security
interests hereby granted by National and NHLP to the Banks are security for the
payment of and performance under the Guarantee and Contingent Purchase
Agreement.
Section 2.4. Valuation.
(a) At all times, "Available Collateral" must be maintained
in an amount equal to one hundred thirty percent (130%) of the
outstanding principal amount of the Loan that is not secured by
Temporary Investments. "Available
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Collateral" is defined as the sum of the value of the Collateral described in
paragraphs (d)(i) and (d)(ii) of Section 2.2. hereof. NHLP's Accounts will be
assigned a value of seventy percent (70%) of the book value of Eligible
Accounts for purposes of this paragraph (a). NHLP Deeds of Trust and Mortgages
will be assigned a value pursuant to Section 2.4.(b) below. Determination of
compliance with this requirement shall be on a Quarterly basis, commencing
December 31, 1988 and continuing on a Quarterly basis thereafter (the
"Compliance Date"). Notwithstanding the foregoing, in the event Borrower fails
to comply with the requirement set forth in the first sentence of this
paragraph (a) because Available Collateral fails to equal one hundred thirty
percent (130%) of the outstanding principal under the Loan by the amount of
Five Million and No/100 Dollars ($5,000,000.00) or less, the Borrower will be
deemed to have complied with such requirement; provided, (i) such deficiency
shall only exist for a maximum of two (2) consecutive Compliance Dates, (ii)
such deficiency shall be remedied on or before the end of the thirty (30) day
period following the second consecutive Compliance Date during which the
deficiency exists, and (iii) in no event shall a deficiency occur during the
quarter coinciding with the Borrower's year end.
(b) Deeds of trust and mortgages and/or expenditures of Loan proceeds
on nursing home properties listed on Exhibit F attached hereto and incorporated
herein by this reference can be added to the Collateral available to the Banks
and/or expended, as applicable, and replace the Temporary Investments described
in Section 2.2.(d) hereof as those funds are utilized. Temporary Investments
can be used only at the times and for the purposes approved by the Majority
Banks regardless of whether Available Collateral exceeds One Hundred Thirty
Percent (130%) of the outstanding principal amount of the Loan that is not
secured by Temporary Investments. Temporary Investments shall be released by
the Agent upon its determination of compliance with the terms of this Section
2.4 and the Security and Pledge Agreement (Temporary Investments) by NHLP
National and/or Borrower, as applicable. Deeds of trust and mortgages on
nursing home properties not listed on Exhibit F can be added at the request of
Borrower to the Collateral available to the Banks only with the approval of the
Majority Banks. For purposes of determining the Collateral value with respect
to each property (including those listed on Exhibit A), each nursing home
property will be assigned a value by Borrower of either (i) seven (7) times
cash flow based on quarterly financial statements for each nursing home
property supplied by NHLP to Agent or (ii) seventy-five percent (75%) of
appraised value of such nursing home property; provided, Majority Banks, at
their
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sole option, can request new appraisals in addition to those appraisals
furnished by Borrower or updates of appraisals furnished by Borrower at NHLP's
expense. Notwithstanding the provisions of subparagraph (i) of this paragraph
(b), with respect to any nursing home property acquired by NHLP that has a
negative cash flow resulting from operations at the time of such acquisition,
for a period of twelve (12) months from the date of any such acquisition, the
Collateral value with respect to such nursing home property shall be a value
equal to the acquisition price paid for such nursing home property; provided,
however, that after the expiration of any such twelve (12) month period, the
Collateral value with respect to such nursing home property shall be based on
the tests set forth in subparagraphs (i) and (ii) of this paragraph (b), but in
any event not less than zero. Development nursing home properties will be
assigned a value equal to actual project costs for a period of eighteen (18)
months from the completion date of the project. Thereafter, value will be
assigned based on the tests set forth in subparagraph (i) or (ii) of this
subparagraph (b). Existing nursing home facilities to which improvements are
made will be assigned a value by Borrower based on (I) the test set forth in
subparagraph (i) of this paragraph, plus the dollar amount expended on such
improvements, provided said expenditures equal or exceed Five Hundred Thousand
and No/100 Dollars ($500,000.00), or (II) the test set forth in subparagraph
(ii) of this paragraph for a period of eighteen (18) months from the completion
date of such improvements. Thereafter, value will be assigned based on the
tests set forth in subparagraph (i) or (ii) of this subparagraph (b).
(c) Notwithstanding any UCC-1 financing statements or other security
documents relating to accounts, general intangibles, chattel paper or
otherwise executed or filed in connection with the Sovran Loan, SCS
acknowledges and agrees that the Agent, on behalf of the Banks, shall have a
first priority and perfected security interest in Temporary Investments and all
proceeds, substitutions and replacements thereof.
Section 2.5. Amounts Paid With Respect to Collateral.
(a) During the term of the Loan, all dividends (including, without
limitation, cash dividends) and other amounts paid with regard to the
Collateral may be applied at the option of Majority Banks to the payment of
principal and interest on any portion of the Indebtedness secured hereby, in
inverse order of maturity. In addition, if NHLP sells a Pledged Nursing Home
and the Majority Banks do not elect to apply the proceeds of such sale to the
payment of principal and interest on the Indebtedness (which
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application shall be in inverse order of maturity), the proceeds of such
sale shall be pledged to the Banks as Temporary Investments. If no
Event of Default exists (or with notice and/or the passage of time would
exist), at the option of NHLP and upon the approval of Majority Banks, the
amount of such proceeds resulting from any such sale may be used by NHLP to
purchase, renovate or construct an additional nursing home, or additions to
other NHLP nursing homes, which shall be collateral for the Guarantee and
Contingent Purchase Agreement and shall be deemed to be a Pledged Nursing
Home hereunder.
(b) During the term of the Loan, all amounts, awards or payments
received by NHLP, Agent or any of the Banks in connection with any
payments made for loss or damage under insurance policies insuring the
property described in the NHLP Deeds of Trust and Mortgages or in
connection with any condemnation or other taking of any part of any of the
property described in the NHLP Deeds of Trust and Mortgages may, at the
option of NHLP (which option shall exist as long as no Event of Default has
occurred or exists), be (i) paid and applied to the payment of principal
and interest on any portion of the Indebtedness in inverse order of
maturity or (ii) be paid over, wholly or in part, to NHLP for the purpose
of (A) pledging such amounts, awards or payments to the Banks as Temporary
Investments and subsequent disbursement, with the approval of the Majority
Banks, to NHLP in accordance with and subject to the provisions of Sections
2.4(b) and 2.5(a) above, or (B) using such proceeds to acquire substitute
Pledged Nursing Homes, acceptable to Majority Banks pursuant to the terms
of this Agreement or (C) for any other purpose or object satisfactory to
the Majority Banks; provided, however, that in no event shall the Banks or
Agent be obligated to assure or see to the proper application of any
amounts paid over to NHLP. In addition, in no event shall the application
of any such amounts, awards, or payments described herein to the
Indebtedness relieve Borrower of its obligations to continue to make
payments required under the Notes or change or alter in any way whatsoever
the obligations of NHLP and/or National under the Guarantee and Contingent
Purchase Agreement. If an Event of Default exists or has occurred, all such
amounts, awards and payments shall be paid over to the Agent and applied as
determined by the Majority Banks.
Section 2.6. Voting Rights. During the term of this Agreement, and so
long as an Event of Default under this Agreement or a default or Event of
Default (as such term is defined in each Loan Document) under the Loan
Documents has not occurred and continues to exist, Borrower shall have the
right to vote all unreleased, pledged shares of Stock. Consistent with the
applicable provisions of the Plan and ERISA, Borrower shall
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vote such pledged shares of Stock in accordance with sound business practices,
and shall not consent to any action with respect to, or of, such pledged shares
of Stock that would imperil the assets of the Plan, would result in a failure
to obtain full value for all sales or transfers of National's assets, or would
dissipate all or any part of the property of National; provided, however, if
the requirements of this Section 2.6. shall conflict with Borrower's or
Trustee's fiduciary responsibilities and duties towards Plan participants and
their beneficiaries, specifically including the "exclusive benefit rule," then
Borrower or Trustee shall vote in accordance with said fiduciary
responsibilities and duties and shall not violate the provisions of this
Section 2.6 by doing so.
Section 2.7. Change in Capital Structure. In the event that, during
the term of this Agreement, any share dividend, reclassification, readjustment,
merger, or other change is declared or made in the capital structure of
National, all new, substituted, and additional shares or other securities
issued in exchange for or on account of the Collateral by reason of any such
change shall be held by Agent under the terms of this Agreement in the same
manner as the shares originally pledged hereunder. All such securities
delivered to Borrower shall be delivered to Agent immediately.
Section 2.8. Warrants, Options, etc. In the event that during the term
of this Agreement subscription warrants or any other rights or options shall be
issued in connection with the Collateral, so long as Borrower, National and/or
NHLP are not in default hereunder, such warrants, rights, and options
immediately shall be assigned by the Agent and Banks to Borrower, if necessary
to allow Borrower to exercise such warrants, rights or options. If any such
option is exercised by Borrower, all new shares or other securities thereby
acquired by Borrower immediately shall be pledged and assigned to Agent and
Banks to be held under the terms of this Agreement in the same manner as the
Stock originally pledged hereunder.
Section 2.9. Additional Stock. Agent, on behalf of the Banks, shall be
entitled to receive and have delivered to it (a) all stock dividends, (b) stock
issued as a result of stock splits, and (c) amounts paid in cash or other
property as liquidating dividends or returns of capital on any Stock pledged
and not released hereunder, to be held by Agent under the terms of this
Agreement as additional Collateral. Borrower immediately shall pledge and
deposit with Agent all such stock or amounts that may have come into Borrower's
possession or control.
Section 2.10. Release of Stock. Agent, on behalf of the Banks, in
consultation with the Trustee as to the number of shares, shall hold the Stock
and shall release in accordance
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with Treas. Reg. 54.4975-7(b)(8)(i) a portion of the Stock as the Indebtedness
is repaid within thirty (30) days after the annual valuation date of the Plan.
That portion of the Stock that shall be released from encumbrance annually
during the term of the Loan shall equal the number of shares of Stock held as
Collateral immediately before the release multiplied by a fraction, the
numerator of which is the amount of principal and interest paid for the year,
and the denominator of which is the sum of the numerator plus the principal and
interest to be paid for all future years. The interest to be paid in future
years shall be computed by using the interest rate applicable as of the end of
the Plan's then current plan year. If the Stock consists of more than one
class of securities, the fraction above is applied to each class to determine
the pro rata portion of that class that shall be released.
ARTICLE III
LOAN PURPOSE AND
DOCUMENTATION
Section 3.1. Purpose. The purpose of the Loan will be solely for the
purchase by the Borrower of the stock pledged as Collateral and described in
2.2(a) above, followed by National's extension of a Fifty Million and No/100
Dollar ($50,000,000.00) line of credit to NHLP evidenced by the Revolving Credit
Note of even date herewith. NHLP represents and warrants that proceeds of such
line of credit will be used by NHLP solely for (i) the refinancing of existing
debt, (ii) subject to Majority Bank approval, the acquisition, renovation and
development of nursing home properties, and (iii) with Majority Bank approval,
for working capital uses.
Section 3.2. List of Documents. Agent shall receive the following
documents, satisfactory in all respects to Agent, each of which shall be duly
authorized, executed, and delivered to Agent by the appropriate entity or
entities, (together with this Agreement and all other documents and
certificates executed in connection with this Agreement, collectively, the
"Loan Documents"):
(a) Notes. Four (4) non-recourse promissory notes
executed by Borrower of even date herewith in the aggregate principal
amount of Fifty Million and No/100 Dollars ($50,000,000.00), together
with any extensions, renewals and modifications thereof (the
"Notes"). The Notes shall be payable to the order of and in such
amounts as follows:
TNB $16,000,000
IT $15,000,000
SCS $ 9,000,000
ST $10,000,000
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The Note for each of TNB, IT, SCS, and ST is in substantially the
form of Exhibit B, C, D and E, respectively. Repayment of the Notes
shall be based on a twenty (20) year amortization schedule with a
five (5) year put and automatic tender option (followed by subsequent
options as may be negotiated by NHLP and the Banks thereafter) to
NHLP in favor of Banks as set forth in Section 3.2.(b) below. The
amortization schedule for principal payments on the Loan is attached
hereto as Exhibit G.
(b) Guarantee and Contingent Purchase Agreement. A
Guarantee and Contingent Purchase Agreement executed by and among
NHLP, National and Banks of even date herewith, together with any
amendments and modifications thereto (the "Guarantee and Contingent
Purchase Agreement"), in which NHLP and National guarantee payment of
the Indebtedness. Pursuant to the terms of the Guarantee and
Contingent Purchase Agreement, NHLP shall on December 16, 1993 and,
if negotiated by NHLP and the Banks thereafter, (each of which dates
is referred to as a or the "Note Purchase Date") purchase, upon
tender by all of the Banks to NHLP of all of the Notes with an
instrument of assignment attached thereto, the Loan evidenced by the
Notes (and the Notes evidencing the same) by payment to the Banks of
an amount (representing the purchase price therefor) in immediately
available funds equal to the sum of the principal of and accrued and
unpaid interest on the Notes at the time of such purchase together
with any amounts that would be owing under the Loan and Security
Agreement in the event the Notes were being paid in full at the time
of such purchase. Such tender shall be deemed automatically to be
made, and title to the Notes shall be deemed automatically to have
passed to NHLP on each Note Purchase Date, whereupon NHLP shall
become obligated forthwith to pay the purchase price to the Banks,
unless (a) Agent shall have notified NHLP no less than sixty (60)
days prior to the applicable Note Purchase Date that all of the Banks
elect not to so tender, or (b) NHLP requests the Banks through the
Agent no less than ninety (90) days prior to the applicable Note
Purchase Date that all of the Banks not so tender, and Agent shall
have given the notice referred to in clause (a) above within the time
period provided therein, whereupon, in either such case, NHLP shall
not be obligated on such Note Purchase Date to pay the purchase price
to the Banks. The giving of notice by Agent under clause (a) above
shall not affect in any way the rights of the Banks to tender all of
the Notes to NHLP with respect to any subsequent Note Purchase Date.
(c) NHLP Deeds of Trust, Mortgages and Security
Agreements. Deeds of Trust, Leasehold Deeds of Trust, Mortgages, and
Security Agreements and, in certain cases, assignments of same
(collectively, the "NHLP Deeds of Trust and Mortgages") (i) securing
payment of and performance
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under the Guarantee and Contingent Payment Agreement, (ii)
encumbering the real property on which the Pledged Nursing Homes are
located, and (iii) assigning NHLP's personal property (including,
without limitation, accounts receivable, furniture, fixtures and
equipment) located on or used in connection with the Pledged Nursing
Homes.
(d) Pledge of NHLP'S Accounts Agreement. A Pledge
Agreement executed by NHLP of even date herewith pledging NHLP's
Accounts as security for the Guarantee and Contingent Purchase
Agreement ("Pledge of NHLP's Accounts Agreement").
(e) Pledge of Temporary Investments Agreement. A Pledge
Agreement executed by National and NHLP of even date herewith
pledging Temporary Investments as security for the Guarantee and
Contingent Purchase Agreement ("Pledge of Temporary Investments
Agreement").
(f) Pledge of Stock Agreement. A Pledge Agreement
executed by Borrower of even date herewith pledging the Stock
("Pledge of Stock Agreement").
(g) Pledge of Line of Credit Note Agreement. A Security
and Pledge Agreement (Note) executed by National of even date
herewith pledging the Line of Credit Note ("Pledge of Line of Credit
Note Agreement").
Section 3.3. Non-Recourse Liability of Trustee and Borrower. The
Banks shall have no recourse against the Trustee on account of the Loan, and
the Trustee shall have no personal liability with respect to any obligation
hereunder or with respect to the representations, covenants and warranties
contained herein. The Banks shall have no recourse against the Borrower and the
Borrower shall have no obligation to make any payment hereunder or under the
Notes except to the extent of (x) the difference between (i) the sum of all
Contributions received by the Borrower from National for payments hereunder and
under the Notes and any earnings, income or dividends attributable to the
investment of such Contributions, and (ii) all payments on account of the
Borrower's obligations hereunder and under the Notes made by or on behalf of
the Borrower to the Banks and (y) the Banks' rights under the Pledge of Stock
Agreement.
Section 3.4. Participation. Each Bank shall have the right to enter
into one or more Participation Agreements with one or more banks on such terms
and conditions as such Bank shall deem advisable, provided that no Participant
shall have any rights under this Agreement.
Section 3.5. Purchase by NHLP. In the event that an Event of
Taxability occurs because (i) one or more of the Banks ceases to be a qualified
lender as defined in Section 133 of
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the Code or (ii) the Borrower or Trustee enters into a prohibited transaction
as defined in the Code and the regulations thereunder, NHLP shall have the
right to purchase the Notes of the Bank or Banks involved, by the payment to
the Banks of an amount in immediately available funds equal to the sum of the
principal of and accrued and unpaid interest on the Notes at the time of such
purchase together with any amounts that would be owing under the Loan and
Security Agreement in the event the notes were being paid in full at the time
of such purchase. NHLP shall have the right to purchase such notes upon five
(5) days written notice to the Bank or Banks involved. Such purchase shall be
deemed automatically to be made, and title to the Notes shall be deemed
automatically to have passed to NHLP on the day when NHLP tenders the purchase
price to the Bank or Banks involved.
ARTICLE IV
PREPAYMENT TERMS AND USURY
Section 4.1. Prepayment. Borrower may prepay all or part of the
Indebtedness evidenced by the Notes at any time before the Notes mature without
penalty. The Banks shall apply any such payment first to accrued interest and
then to principal.
Section 4.2. Usury. Notwithstanding any provision of this Agreement
or the Notes or any other Loan Documents to the contrary, it is the intent of
the Agent, the Banks, the Borrower, and all parties liable on the Notes, that
the Banks or any subsequent holder shall never be entitled to receive, collect,
reserve or apply, as interest, any amount in excess of the maximum rate of
interest permitted to be charged by applicable law or regulations, as amended
or enacted from time to time. In the event any of the Banks, or any subsequent
holder, ever receive, collect, reserve or apply, as interest, any such excess,
such amount that would be excessive interest shall be deemed a partial
prepayment of principal and treated as such, or, if the principal Indebtedness
is paid in full, any remaining excess funds shall immediately be paid to the
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds the highest lawful rate, the Borrower, the Agent
and Banks shall, to the maximum extent permitted under applicable law, (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate, and spread, in equal parts, the total amount of interest
throughout the entire term of the Indebtedness; provided that if the
Indebtedness is paid and performed in full prior to the end of the full
contemplated term hereof, and if the interest received for the actual period of
existence hereof exceeds the maximum lawful rate, the holder of the Notes shall
refund to the Borrower the amount of such excess or credit the amount of such
excess against the principal portion of the Indebtedness, as of the date it was
received, and, in such event, neither the Agent nor the Banks
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shall be subject to any penalties provided by any laws for contracting for,
charging, reserving or receiving interest in excess of the maximum lawful rate.
ARTICLE V
EVENT OF TAXABILITY
Section 5.1. Rate Adjustment.
(a) The amount, terms, and conditions of Indebtedness
evidenced by the Notes, this Agreement, and the other Loan Documents
have been agreed upon by Banks and Borrower based on (i) each Bank
being able to exclude fifty percent (50%) of the interest income from
the Loan from its Gross Income pursuant to Section 133 of the Code
for Securities Acquisition Loans made by Qualified Lenders, and (ii)
each Bank's highest marginal federal corporate tax rates remaining at
their present levels. The tax rates currently applicable to the
Banks, and circumstances (not now contemplated or anticipated) may
hereafter result in a determination (that may be disputed) that the
information contained in subparagraphs (i) through (ii) of this
Section 5.1.(a) has changed. Upon a Determination of Taxability,
effective on the applicable Taxable Date, the Stated Rate shall
automatically be adjusted (the "Adjusted Rate") to maintain for each
of the Banks the same taxable equivalent yield on the Loan that would
have been applicable but for the occurrence of the related Event of
Taxability. Each subsequent Event of Taxability shall necessitate an
adjustment to the Adjusted Rate, which rate shall be effective until
the next Event of Taxability or upon the total payment of the
Indebtedness, whether by prepayment or at or after the maturity of
the Notes. Notwithstanding the foregoing, in the event that one
hundred percent (100%) of the interest on the Notes shall be included
in the Gross Income of any of the Banks, the interest due and payable
on all principal amounts advanced pursuant to the terms of the Loan
shall automatically be adjusted to the Taxable Rate.
(b) The Borrower shall pay to Banks any and all Additions
to Tax imposed on Banks in connection with any Event of Taxability.
National shall make Contributions to Borrower to enable Borrower to
pay such Additions to Tax.
(c) The obligations of the Borrower under this Section
5.1. shall survive the payment in full of all amounts due under the
Notes and shall continue in effect until all amounts due hereunder
shall have been paid and in any event until the later of the date
that such amounts due have been paid or thirty (30) days after all
applicable statutes of limitations have run (after taking into
account all extensions and suspensions thereof) in respect of any
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taxable year during which any payment of interest on the Notes or any
payment pursuant to this Section 5.1. was received or accrued.
(d) Although the Banks shall have no obligation to
contest any Event of Taxability, the Agent shall notify the Borrower
thereof as soon as reasonably possible. The Banks will permit
Borrower to supply the IRS with any documentation or legal argument
against any Event of Taxability, but the Banks will be under no
obligation to delay or withhold any action of acquiescence in order
to permit the Borrower to do so. If the Borrower and/or the Banks
should decide to contest an Event of Taxability, and if by settlement
or negotiation, court determinations, or otherwise, the amount of
interest payable on any of the Notes includable under the Code in the
Gross Income of the Banks is ultimately determined to be less than
the amount initially asserted, the Borrower shall be entitled to a
prompt refund of any such excess amount actually paid by the Borrower
to the Banks on account of such Event of Taxability plus interest
thereon at the rate of five percent (5%) per annum. Nothing referred
to herein shall be construed to require the Banks to join in any
actions, proceeding, or appeal with respect to protesting or
contesting an Event of Taxability.
Section 5.2. Records. Notwithstanding Borrower's right to supply the
IRS with any documentation or legal argument against any Determination of
Taxability or Event of Taxability, nothing in this Article V shall under any
circumstances give Borrower any right to inspect the tax returns or other
records of the Agent or any of the Banks. The Banks will cooperate with the
Borrower, at NHLP's expense, in supplying appropriate information available to
the Banks in the event of any contest of an Event of Taxability.
Section 5.3. Notice. For purposes of the written notification of
Determination of Taxability, such notification by Agent to Borrower shall be in
writing, signed by the appropriate officers of Agent, and shall:
(a) briefly describe the Event of Taxability that has
occurred, setting forth the Taxable Date; and
(b) specify (to the extent determinable) that portion of
the Loan to which such Event of Taxability relates (it being
understood that in the event Agent does not specify a portion of the
Loan to which such Event of Taxability relates, such Event of
Taxability shall relate to the entire Loan); and
(C) set forth the new Adjusted Rate and the period of
time for which such rate relates (including information
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showing the calculations used in computing the new Adjusted Rate); and
(d) be accompanied by a description of the legislation
relied upon or a copy of either the Revenue Ruling, 30-day letter, or
other order or directive received by Agent or an opinion of counsel
acceptable to Agent (based on the consent of the Majority Banks) on
which such Event of Taxability is based.
Section 5.4. Revised Notice. If Agent has given Borrower written
notification of the occurrence of an Event of Taxability, Agent may at any time
and from time to time revise such notice of the occurrence of an Event
of Taxability to increase or decrease the amount payable under Section 5.1.
hereof by giving Borrower a written notice of such revision ("Notice of
Revision"), in which case Borrower and Agent shall make such adjustments
between themselves of amounts previously paid and to be paid as shall be
appropriate to reflect such revision as if the Notice of Revision had
constituted a part of the original notice of the occurrence of an Event of
Taxability, and any payments as a result of such adjustments for any period
prior to the date of the Notice of Revision shall be made within five (5) days
after Borrower has received such Notice of Revision. In addition, if Agent has
given Borrower notice of the occurrence of an Event of Taxability and Agent
subsequently determines for any period that the conclusions expressed in the
opinion of counsel acceptable to Agent (based on the consent of the Majority
Banks) on which such Determination of Taxability was based are not correct,
then (without limiting the right of the Agent to assert later that an Event of
Taxability has occurred with respect to such period), Borrower shall not be
obligated to pay the amounts set forth in Section 5.1. hereof for such period,
and Agent shall return any such payment or payments theretofore made with
respect to such period.
Section 5.5. Indemnification For Prohibited Transactions. NHLP and
National shall indemnify and hold Banks harmless from and against any taxes,
penalties and/or interest imposed on any of the Banks under the provisions of
Section 4975(a) and/or 4975(b) of the Code.
ARTICLE VI
ADDITIONAL INTEREST AND FEES
Section 6.1. Additional Interest. Borrower shall pay an amount equal
to one-half of one percent (.50%) (computed on the total commitment of Fifty
Million and No/100 Dollars ($50,000,000.00)) as additional interest on the Loan
("Additional Interest"), payable as follows:
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(a) twenty-five percent (25%) of the Additional Interest
within five (5) days of the Closing;
(b) eighteen and three-quarters percent (18.75%) of the
Additional Interest ninety (90) days after the Closing;
(c) eighteen and three-quarters percent (18.75%) of the
Additional Interest one hundred eighty (180) days after the Closing;
(d) eighteen and three-quarters percent (18.75%) of the
Additional Interest two hundred seventy (270) days after the Closing;
and
(e) eighteen and three-quarters percent (18.75%) of the
Additional Interest three hundred sixty (360) days after the Closing.
All amounts due under this Section 6.1. shall be deemed to have been earned at
the closing of the Loan (the "Closing") and shall be due and payable as set
forth in this Section 6.1. irrespective of any events occurring after the
Closing, including but not limited to (i) Borrower's, National's and/or NHLP's
default under the Loan Documents, (ii) Borrower's failure to draw down or
utilize the full amount of the Loan, or (iii) Borrower's refinancing of the
Loan.
Section 6.2. Agent Fee. NHLP shall pay an agent's fee of Twenty One
Thousand and No/100 Dollars ($21,000.00) per year, payable quarterly in advance
to TNB as Agent.
ARTICLE VII
COVENANTS AND WARRANTIES OF BORROWER, NHLP AND NATIONAL
Section 7.1. All covenants and warranties made by the Borrower in
this Article VII shall be deemed to be covenants and warranties relating only
to the Borrower, and shall not relate to any covenants or warranties made with
respect to National and/or NHLP. In no event shall any covenants or warranties
made in this Article VII with respect to NHLP or National be deemed to have
been made by Borrower. In no event shall any covenants or warranties made in
this Article VII with respect to NHLP be deemed to have been made by National.
Borrower, NHLP and National, as appropriate, hereby severally and not jointly
covenant and warrant that:
(a) Organization, Powers, etc. (i) The Borrower, NHLP and
National have full power and authority to execute this Agreement and
the documents required hereunder, as applicable, and to carry out the
transactions contemplated hereby; (ii) an application has been filed
for a determination letter from the IRS that the Borrower qualifies
as an exempt trust under Section 501(a) of the
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Code, National is validly existing and duly formed under the laws of
the State of Tennessee, and NHLP is validly existing and duly formed
under the laws of the State of Delaware; (iii) the Borrower, NHLP and
National have filed all papers with all governmental authorities
required as a pre-condition to own property and transact business;
(iv) the Borrower, NHLP and National have all the necessary power and
authority to own their properties and assets and to carry on their
businesses; and (v) the Borrower, NHLP and National have all
necessary power to enter into, execute and perform the Loan
Documents, as applicable.
(b) Authorization of Borrowing, etc. The execution,
delivery and performance of this Agreement, the borrowings hereunder
and the execution and delivery of the Notes and other Loan Documents
required hereunder have been duly authorized by all requisite trust,
limited partnership, or corporate action, as applicable, of the
Borrower, NHLP and National, and will not violate any provision of
law, any order of any court or other agency of government, any
provision of any indenture, agreement or other instrument to which
either the Borrower, NHLP or National is a party (with due notice
and/or lapse of time), or by which the Borrower, NHLP or National or
any of their properties or assets are bound, or be in conflict with,
result in a breach of or constitute (with due notice and/or lapse of
time) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Borrower, NHLP or National, except as
contemplated by this Agreement.
(c) Validity and Binding Nature. This Agreement, the
Notes and all other Loan Documents, when duly executed and delivered,
are and will be, legal, valid and binding obligations of the
Borrower, NHLP and National, as applicable, enforceable in accordance
with their respective terms.
(d) Title to Properties. The Borrower has good and
marketable title to all of the Borrower's properties and assets, and,
except for the liens provided herein and except for the lien
resulting from the pledge by Borrower of National stock to SCS under
the Sovran Loan, all such properties and assets are free and clear
of mortgages, pledges, liens, charges and other encumbrances.
(e) Litigation. There is no action, suit or proceeding at
law or in equity or by or before any governmental instrumentality,
arbitration board or other agency now pending, or, to the knowledge
of the Borrower, NHLP or National, threatened against or affecting
the Borrower,
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NHLP or National, or any properties or rights of the Borrower, NHLP
or National, which, if determined adversely, would materially impair
the rights of the Borrower, NHLP or National to carry on business
substantially as now conducted or would materially adversely affect
the financial condition of either the Borrower, NHLP or National, or
would impair the ability of the Borrower, NHLP or National to perform
their respective obligations under the Loan Documents. Neither the
Borrower, NHLP nor National is in default with respect to any order,
decree or judgment of any court, arbitrator or governmental body.
(f) Payment of Taxes. The Borrower, NHLP and National, as
applicable, have respectively filed or caused to be filed all
Federal, state and local tax and information returns that are
required to be filed, and have paid or caused to be paid all taxes as
shown on said returns or on any assessment received by them, to the
extent that such taxes have become due, except for taxes that are
being contested in good faith and for which NHLP and/or National, as
the case may be, have provided additional security to the Banks
satisfactory in all respects to the Banks.
(g) Agreements. Neither the Borrower, NHLP nor National
is a party to any restriction materially adversely affecting its
business, properties or assets, operations or conditions (financial
or otherwise). Neither the Borrower, NHLP nor National is in default
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument to which it is a party.
(h) Purpose of Loan. Proceeds of the Loan will be used
exclusively for the purchase of the Stock.
(i) Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940,
as amended.
(j) Regulation U. The Borrower 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).
(k) Trust Transactions. The sale by National of the
Stock to the Borrower, the purchase by the Borrower of the Stock,
and the distribution, if any, of the Stock pursuant to the Plan, do
not require registration under either the Securities Act of 1933 or
the Investment Company Act of 1940 or any applicable state securities
laws or regulations.
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(l) Situs. Borrower's chief place of business is at the
address appearing after Borrower's signature hereto. Borrower will
notify Agent promptly in writing of any change in the location of any
such chief place of business or the establishment of any new place of
business.
(m) Protection of Collateral. Borrower, National and NHLP
are the owners of the assets titled respectively to each of them
constituting the Collateral free from any adverse lien, security
interest, or encumbrance other than those included herein as
described in Exhibit H. Borrower, National and NHLP will defend such
Collateral against all claims and demands of all persons at any
time claiming the same or any interest therein. Subject to the terms
of the Trust, no restrictions exist with respect to the transfer of
any of the pledged shares of Stock. Subject to the terms of the
Trust, Borrower has the right to transfer the shares of Stock free of
any encumbrances and without obtaining the consents of other
shareholders. Until the obligations under this Agreement, the Notes
and the Guarantee and Contingent Purchase Agreement have been paid in
full, Borrower, National and NHLP will keep such Collateral free from
any lien, security interest, or encumbrance, except for the security
interest described herein and the liens granted pursuant to the NHLP
Deeds of Trust and Mortgages.
(n) Records. Borrower, National and NHLP at all times
will keep accurate and complete records of their respective affairs
and (in the case of National and NHLP) the Collateral, and Borrower
(in the case of the Stock only), National and NHLP will not comingle
all or any portion of the Collateral with their other assets. Agent
or any of its agents shall have the right to call at Borrower's,
National's and NHLP's places of business upon notice and
during-normal business hours at intervals to be determined by Agent,
and without hindrance or delay, to inspect, audit, check, and make
extracts from the books, records, journals, orders, receipts,
correspondence, and other data of Borrower, National and NHLP
(o) Use of Collateral. Neither Borrower, National nor
NHLP will use the Collateral in violation of any statute or
ordinance.
(p) Sell or Transfer. Neither Borrower, National nor NHLP
shall sell or transfer all or any portion of the Collateral to a
third party without the Agent's prior written consent, which consent
shall be conditioned on approval of all of the Banks, which consent
shall not be unreasonably withheld; provided, however, that personal
property of Borrower, National or NHLP may be sold in the ordinary
course of business.
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(q) Notice upon Event of Default. In the event of the
occurrence of an Event of Default of which Borrower, National or NHLP
has knowledge, Borrower, National or NHLP shall notify Agent
immediately in writing, setting forth the nature of the default and
the action Borrower, National or NHLP proposes to take to cure the
default.
(r) Qualification of Plan and Trust. National has filed
for a determination that the Plan is an ESOP, and that the Trust is
a trust exempt from tax under Section 501(a) of the Code. Both the
Plan and the Trust are duly organized and existing under the laws of
the United States of America and are authorized to transact all
business that is now being transacted by them.
(s) Violation of Law. Borrower, NHLP and National will
materially comply with all applicable statutes and government
regulations.
(t) Costs, Expenses, etc. NHLP shall pay all costs
incurred by Banks and Agent in connection with the preparation,
recording, and filing of all documents evidencing or incident to this
transaction, including any legal fees incurred by Banks and Agent and
NHLP shall pay on behalf of Borrower on demand of Agent all costs,
fees, expenses, appraisals and any other expenses of any nature
whatsoever required to be paid in order for Borrower to comply with
all covenants, provisions and terms of this Agreement and the other
Loan Documents, whether now existing or hereafter arising; provided,
however, such costs shall not be paid from the Loan proceeds.
(u) Form 5500. Borrower or National shall furnish to
Agent annually a copy of the Plan's Annual Report, Form 5500, within
thirty, (30) days from the filing with the IRS, but in no event later
than nine (9) months after the end of the Plan's tax year.
(v) Determination Letter. Borrower or National shall
provide to Agent a copy of the favorable determination letter issued
by the IRS, indicating that the Plan is an ESOP qualified under
Section 401(a) of the Code, immediately after receipt of such
favorable determination letter.
(w) Contributions. Until such time as the Indebtedness
has been repaid in full, all cash Contributions made by National to
Borrower shall be used solely for the purposes of repaying the
Indebtedness and for paying administrative expenses and distributions
to Plan members and their beneficiaries in accordance with the terms
and provisions of the Plan and the Trust, unless the Majority Banks
agree otherwise in writing.
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(x) ESOP Opinion. Borrower shall, at its own expense, upon
Agent's request, furnish to Agent not more often than annually,
within thirty (30) days of each request, and shall furnish to Agent
on the Closing Date an opinion of Xxxx, Xxxxx & Xxxx, special ESOP
counsel to the Borrower, or other special ESOP counsel satisfactory
to the Agent, satisfactory in all respects to Agent assuring Agent
that the Plan is an ESOP and that the Loan is a Securities
Acquisition Loan.
(y) Interest Income Exclusion. Borrower shall provide to
Agent such information as Agent shall reasonably request from time to
time in order to ascertain whether the interest received by Banks
on the Notes has qualified, is qualified, and will continue to be
qualified as a Securities Acquisition Loan under Section 133 of the
Code.
(z) Consent. No consent of any party, not already
obtained, including the shareholders of National and the limited and
general partners of NHLP, and no license, approval, authorization,
registration, or declaration with any governmental or regulatory
authority or agency is required in connection with the execution,
delivery, performance, validity, or enforceability of the Loan
Documents.
(aa) Trust's Quarterly Financials. Borrower or National
shall furnish to Agent and all Banks within forty-five (45) days
after the close of each Quarter, including the last fiscal Quarter, a
balance sheet and income statement of the Trust, which need not be
certified but which shall accurately reflect the financial condition
of the Trust, together with a statement signed by the Trustee showing
the calculation of the financial covenants required in Section 7.1
(dd) of this Agreement.
(bb) Quarterly Financials. National and/or NHLP, as
appropriate, shall furnish to Agent and all Banks within forty-five
(45) days after the close of each Quarter, including with respect to
(ii) and (iii) of this Section 7.1(bb) the last fiscal Quarter, (i)
unaudited financial statements of National and NHLP using GAAP
consistently applied by a certified public accounting firm acceptable
to Agent, (ii) unaudited financial statements with respect to the
Pledged Nursing Homes, and (iii) a quarterly aging of NHLP's
Accounts.
(cc) Annual Financials. National and/or NHLP, as
appropriate, shall furnish to Agent and all Banks within sixty (60)
days after the close of each calendar year (i) audited financial
statements of National and NHLP using GAAP consistently applied by a
certified public accounting firm acceptable to Agent, which
statements shall express an
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unqualified opinion as to the soundness of each entity's respective
financial position, and (ii) audited financial statements of the Plan
compiled by a certified public accounting firm. The audited financial
statements shall be accompanied by a statement from the chief
financial officers and general partner of National and NHLP,
respectively, that no Events of Default have occurred (or with notice
and/or the passage of time would occur) under the Loan Documents.
(dd) Net Income. All income statements of the Trust
provided to Agent shall reflect a Net Income in excess of zero (o)
annually. For purposes of this subparagraph, the term, "Net Income,"
for any calendar year means the difference between the value of:
(A) the sum of annual cash contributions made
by National and any Affiliates to Borrower, plus earnings
from investments and net realized gain from the sale or
exchange of assets, if any, and other income of the Plan
and Trust for such year, and
(B) the sum of net realized loss from the
sale or exchange of assets plus distributions to former
Plan members and/or their beneficiaries for such year
plus interest expense plus annual administrative expenses
of the Plan and Trust, including without limitation,
amounts paid for office supplies, data processing,
service charges, and other expenses, plus principal and
interest payments for such year.
(ee) Quarterly Compliance. Borrower, NHLP and National
shall each furnish to Agent within forty-five (45) days after the
close of each Quarter a statement confirming that no Event of Default
exists under this Agreement with respect to the party furnishing the
statement, and NHLP shall furnish to Agent within forty-five (45)
days after the close of each quarter calculations showing compliance
with Section 9.1. hereof.
(ff) Contributions. National shall make Contributions to
Borrower sufficient in amount to enable Borrower to make payments due
under the Loan as and when such payments are due.
(gg) Records. Upon receipt of any contribution from
National, Borrower shall promptly note on its appropriate books and
records the amount of such contribution designated to be applied to
the Sovran Loan and the amount designated to be applied to this Loan.
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Section 7.2. Negative Covenants - Borrower and National. So long as
any Indebtedness secured hereby is outstanding, Borrower and/or National, as
stated below, each covenant that, without the prior written consent of the
Majority Banks:
(a) The Borrower shall not become liable, directly or
indirectly, with respect to any obligation for money borrowed, or the
equivalent, except (i) the Indebtedness, (ii) the loan evidenced by
that certain Loan and Security Agreement dated as of January 20, 1988
by and between Marine Midland Bank, N.A., not in its individual or
corporate capacity, but solely as Trustee of National Health
Corporation Leveraged Employee Stock Ownership Trust and SCS, and
(iii) any indebtedness fully guaranteed by NHLP.
(b) The Borrower shall not make investments, other than
in qualified employer securities of National, except for investments
in Temporary Investments.
(c) Neither the Borrower (in the case of the Stock only)
nor National shall suffer or permit any of the Collateral to become
subject to any security interest, lien, or other encumbrance, except
for any lien in connection with the Loan in favor of Agent or the
Banks.
(d) The Borrower shall not create, incur or suffer to
exist any pledge, mortgage, assignment or other encumbrance of or
upon any of the Stock (other than as pledged to the Banks as provided
herein), or of or upon the income or profits thereof.
(e) National covenants that it will not permit its
tangible net worth at any time to be less than Fifteen Million
Dollars ($15,000,000). For purposes of this subparagraph, "tangible
net worth" shall have the meaning set forth in the Guarantee and
Contingent Purchase Agreement dated January 20, 1988 between NHESOP,
Inc. and SCS (the "SCS Guaranty"), as amended by paragraph 2 of the
First Amendment to Guarantee and Contingent Purchase Agreement, dated
as of December 16, 1988.
Section 7.3. Negative Covenants - NHLP. So long as any Indebtedness
secured hereby is outstanding, NHLP covenants that, without the prior written
consent of the Majority Banks, it will not suffer or permit any of the
Collateral to become subject to any security interest, lien, or other
encumbrance, except for any lien in favor of Agent or the Banks.
Section 7.4. Prohibited Transactions. So long as any indebtedness
evidenced by any of the Notes is outstanding, Borrower shall give notice to
Agent of any notice Borrower receives from the Department of Labor alleging
that a "prohibited transaction" as defined in the Code and the regulations
thereunder has occurred.
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ARTICLE VIII
COVENANTS AND WARRANTIES OF THE TRUSTEE
Section 8.1. Trustee hereby covenants and warrants
that:
(a) Authority. As of the date hereof, Marine Midland Bank,
N.A. (the "Trustee") is the sole trustee of the Plan and the Trust
and has full authority to bind the Plan, the Trust, and/or Borrower
and to execute this Agreement and any note or notes evidencing the
Indebtedness secured hereby. Borrower and Trustee shall notify Agent
promptly in writing of any change of Trustee. For purposes of the
Loan, Banks and Borrower acknowledge that only Marine Midland Bank,
N.A. shall be executing the Loan Documents on behalf of the Plan and
the Trust solely in its capacity as independent trustee and not in
its individual or corporate capacity.
(b) Organization, Powers, etc. (i) The Trustee has full
power and authority to execute this Agreement, the Notes, Pledge of
Stock Agreement and all other documents to be executed by the Trustee
on behalf of the Borrower in connection with the Loan and to carry
out the transactions contemplated hereby; (ii) the Trustee is validly
existing and duly formed as a national banking association; and (iii)
the Trustee has filed all papers with all governmental authorities,
if any, that are required as a pre-condition to acting as Trustee of
the Borrower.
(c) Litigation. There is no action, suit or proceeding at
law or in equity or by or before any governmental instrumentality,
arbitration board or other agency now pending, or to the knowledge of
the Trustee, threatened against or affecting the Trustee that would
adversely affect the Trustee's power, authority or ability to act as
Trustee of the Borrower.
ARTICLE IX
COVENANTS AND CONDITIONS IMPOSED ON NHLP
Section 9.1. NHLP shall comply with the following financial
covenants, with determination of compliance being made Quarterly unless more
frequently requested by Agent:
(a) Current Ratio. NHLP shall at all times maintain a
"Current Ratio" of at least 1.5 to 1. "Current Ratio" shall be
defined as the ratio of current assets to current liabilities.
(b) Working Capital. NHLP shall at all times maintain a
minimum "Working Capital" level of Ten Million and No/100 Dollars
($10,000,000.00). "Working Capital" shall be defined as current
assets less current liabilities.
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(c) Funded Debt to Adjusted Tangible Net Worth Ratio. NHLP shall at
all times maintain a "Funded Debt" to "Adjusted Tangible Net Worth" ratio
of no more than 3.5:1. "Funded Debt" is defined as long term debt,
but excluding Subordinated Debt, notes payable, current maturities of long
term debt, plus capitalized and operating leases, plus all guaranties; and
"Adjusted Tangible Net Worth" is defined as total equity of NHLP, plus
approximately Fifteen Million Seven Hundred Forty-Five 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
in accordance with NHLP's books and records that comply with GAAP), plus
Subordinated Debt, minus good will and unamortized loan costs in excess of
One Million Four Hundred Thousand and No/100 Dollars ($1,400,000.00).
(d) Tangible Net Worth. NHLP shall at all times maintain the following
minimum Tangible Net Worth requirements for the following periods:
(A) From the date of closing through March 30, 1989 - Thirty
Four Million Dollars ($34,000,000).
(B) From March 31, 1989 through June 29, 1989 - Thirty Five
Million Two Hundred Thousand Dollars ($35,200,000).
(C) From June 30, 1989 through September 29, 1989 - Thirty
Six Million Four Hundred Thousand Dollars ($36,400,000).
(D) From September 30, 1989 through December 30, 1989 -
Thirty Seven Million Six Hundred Thousand Dollars ($37,600,000).
(E) From December 31, 1989 through March 30, 1990 - Forty
Million Dollars ($40,000,000).
(F) On March 31, 1990 and on subsequent calendar quarter
endings, the minimum Tangible Net Worth requirements will increase by
One Million Four Hundred Thousand Dollars ($1,400,000) per quarter on
a cumulative basis.
"Tangible Net Worth" is defined as total equity of NHLP, plus Subordinated
Debt, minus good will and unamortized loan costs in excess of One Million Four
Hundred Thousand Dollars ($1,400,000).
(e) Debt Service Coverage. NHLP shall at all times maintain a minimum
"Debt Service Coverage" of 1.3 to 1. The Debt Service Coverage is defined
as the ratio of (i) the
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annualized sum of net income, plus depreciation/amortization, plus interest
expense, minus distributions paid to holders of units of NHLP for the
fiscal year as projected by NHLP and evidenced by written financial
projections furnished to Agent, or as actually paid, whichever is greater,
to (ii) interest expense, plus current maturities of long term debt, plus
any payments required to fund any guaranty obligations of NHLP.
(f) Notes Receivable. NHLP shall at all times limit the balance of
notes receivable as set forth on its financials to no more than NHLP's
Adjusted Tangible Net Worth; provided, however, that the notes receivable
listed on Exhibit I attached hereto shall be excluded from the balance of
notes receivable as set forth on NHLP's financials in determining
compliance with this subparagraph (f). The listing of notes receivable on
Exhibit I attached hereto may be modified, amended, increased and/or
reduced from time to time by the Majority Banks; provided, however, that
any nursing home project or use of Loan proceeds approved by Majority Banks
which results in a note receivable to NHLP automatically shall be excluded
from the balance of notes receivables and shall be listed on Exhibit I.
ARTICLE X
CONDITIONS PRECEDENT TO LOAN
Section 10.1. The following shall be conditions precedent to Banks'
obligation to make the Loan contemplated hereby:
(a) ESOP Opinion. Borrower shall provide Agent on behalf of Banks an
opinion of Xxxx, Xxxxx & Xxxx, special ESOP counsel to Borrower,
substantially in the form attached hereto as Exhibit J, attached hereto and
made a part hereof.
(b) Opinion of Counsel. NHLP shall provide Agent on behalf of Banks
with an opinion of outside counsel that is acceptable to Agent and Agent's
counsel, which opinion shall be substantially in the form attached hereto
as Exhibit K and made a part hereof. NHLP shall provide Agent with opinions
of local counsel concerning the NHLP Deeds of Trust and Mortgages, which
opinions shall be acceptable to Agent and Agent's counsel and substantially
in the form attached hereto as Exhibit K and made a part hereof.
(c) Plan and Trust. National shall provide Agent executed or adopted
copies, satisfactory in all respects to Agent, of the Plan document, Trust
agreement, and all amendments thereto, together with a certified copy,
satisfactory in all respects to Agent, of the direction of
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the "Plan Administrator" (as that term is defined in Borrower's Plan document)
to Borrower and/or Trustee to authorize the execution, delivery, and
performance of the Loan Documents and the purchase of Twenty Nine Million Five
Hundred Eighty Five Thousand Seven Hundred Ninety Eight (29,585,798) shares of
common stock of National.
(d) Trustee Certificate. Borrower shall provide Agent a certificate,
satisfactory to Agent in all respects, stating that the Trustee has accepted
all duties, obligations, liabilities, and responsibilities of that position and
has agreed to act as such.
(e) Charter and Limited Partnership Certificate. National and NHLP
shall provide Agent certified copies of the charter and by-laws of National and
the limited partnership agreement and certificate of limited partnership of
NHLP, respectively, together with certified copies, satisfactory in all respects
to Agent, of all corporate and partnership resolutions and/or actions taken by
National and NHLP respectively, authorizing the execution, delivery, and
performance of the Guarantee and Contingent Purchase Agreement, the NHLP Deeds
of Trust and Mortgages, Pledge of Line of Credit Note Agreement, Pledge of
NHLP's Accounts Agreement and Pledge of Temporary Investments Agreement, and
the other agreements and transactions contemplated herein.
(f) Signature Information - Borrower. Borrower shall provide Agent a
certificate, satisfactory in all respects to Agent, setting forth the name,
title, and specimen signature of (i) the individual or individuals who have
executed the Plan document and Trust agreement, (ii) the Trustee or Trustees
who will, until replaced by a successor trustee or trustees, act as Borrower's
representative or representatives for the purpose of executing documents and
delivering and accepting notices and other communications in connection with
the Loan Documents. Agent may conclusively rely on such certificate until Agent
receives notice in writing from Borrower to the contrary.
(g) Signature Information - NHC and NHLP. National and NHLP shall
provide Agent with a certificate, satisfactory in all respects to Agent, of
each entity, setting forth the name, title, and specimen signatures of the
officer or officers (i) who are authorized to sign the Guarantee and Contingent
Purchase Agreement, the NHLP Deeds of Trust and Mortgages, Pledge of Line of
Credit Note Agreement, Pledge of NHLP's Accounts Agreement and Pledge of
Temporary Investments Agreement, and other documents contemplated by the
transactions described herein on behalf of National or NHLP, as the case may be,
and (ii) who will, until replaced by another officer or officers duly
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authorized for that purpose, act as their representatives for the purposes of
executing documents and delivering and receiving notices and other
communications in connection with the Loan Documents. Agent may conclusively
rely on such certificate until Agent receive notice in writing from Borrower to
the contrary.
(h) Documents-Borrower. Borrower shall deliver to Agent the Notes and
Pledge of Stock Agreement, duly completed and executed by Borrower, together
with certificates for Twenty Nine Million Five Hundred Eighty Five Thousand
Seven Hundred Ninety Eight (29,585,798) shares of stock of National, with duly
executed stock powers in blank.
(i) Documents-NHC and NHLP. National and NHLP shall deliver to Agent
the Guarantee and Contingent Purchase Agreement, duly completed and executed by
National and NHLP.
(j) Documents-NHLP. NHLP shall deliver to Agent the NHLP Deeds of Trust
and Mortgages, all title insurance policies and coverages required by the NHLP
Deeds of Trust and Mortgages and such consent and estoppel certificates
requested by the Agent executed by all parties holding prior liens on the
Pledged Nursing Homes. Such estoppel certificates shall be in form and
substance satisfactory to Agent and its counsel. In the event NHLP does not
deliver all of the required documents in connection with the NHLP Deeds of
Trust and Mortgages delivered and executed at the Closing, NHLP shall have
thirty (30) days from the Closing Date to deliver such required documentation
or, in the event that NHLP is unable to deliver and/or record all such
documentation, NHLP shall have the right to substitute additional Pledged
Nursing Homes acceptable to the Majority Lenders and shall have sixty (60) days
from the Closing Date to deliver and execute additional NHLP Deeds of Trust and
Mortgages and deliver the documentation required by Agent described above with
respect to such substitute Pledged Nursing Homes. NHLP shall also deliver to
Agent the Pledge of NHLP's Accounts Agreement and financing statements as
required by Agent, duly completed and executed by NHLP.
(k) Documents-NHC. National shall deliver to Agent the Security and
Pledge Agreement (Temporary Investments), the Security and Pledge Agreement
(Note), and financing statements as required by Agent, duly completed and
executed by National.
(l) Determination Letter. NHLP shall provide Agent with evidence of
the filing of an application for a determination letter from the IRS stating
that the Plan meets the requirements for qualification under section 401(a) of
the Code and the regulations thereunder, that the Plan meets the requirements
of sections 4975(e)(7) and 409
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of the Code and constitutes an ESOP, and that the Trust qualifies as an
exempt trust under section 501(a) of the Code. In addition, such
application shall contain no exceptions to qualification, except that
continued qualification of the Plan will depend on its effect in operation,
which may be reviewed periodically. However, reference may be made to the
fact that the determination letter, when issued, may be subject to adoption
of proposed amendments requested by the IRS. Borrower or NHLP shall also
provide Agent with copies of all the documents or amendments filed with the
IRS to obtain the determination letter.
(m) Value of Stock. Borrower shall provide Agent with a certificate of
Valuemetrics, Inc. that is in all respects satisfactory to Agent stating
that a "qualified independent appraiser," as defined in Section
401(a)(28)(C) and Section 170 of the Code and the regulations thereunder,
has valued the Stock to be worth no less than Fifty Million and No/100
Dollars ($50,000,000.00) using the factors set forth in applicable IRS
Revenue Rulings and judicial decisions, including Department of Labor
proposed regulation Section 2510.3(18).
(n) Event of Taxability. No Event of Taxability shall have occurred.
(o) Event of Default. No Event of Default shall have occurred and be
continuing.
(p) Representations and Warranties. The representations and
warranties in the Loan Documents shall be true and correct on and as of the
Closing Date, and the Trustee and the chief financial officer of National
and NHLP shall have delivered to Agent a duly executed certificate with
respect to their respective representations and warranties satisfactory in
all respects to Agent as to the foregoing.
(q) Additional Documents or Information. Borrower shall provide Agent
with any other documents or information that Agent or Agent's counsel,
Messrs. Xxxxxx, Xxxxxxxx & Xxxxxxx, may reasonably require.
Section 10.2. Waiver. No advance of the proceeds of the Loan shall
constitute a waiver of any of the conditions of Banks' obligation to make the
Loan, and the failure of Borrower to satisfy any condition not satisfied at
Closing within ten (10) days after receipt of written notice from the Majority
Banks shall constitute an Event of Default hereunder.
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ARTICLE XI
DEFAULT
Section 11.1. Definition. The term "Event of Default," whenever used
in this Agreement and in any instrument referred to herein, shall mean any one
or more of the following events or conditions:
(a) Principal or Interest Payment. Failure by Borrower to
make payment of any installment of principal or interest on any of the
obligations contained herein or in the Notes within five (5) business
days of when the same shall be due and payable under the terms hereof
or thereof.
(b) Covenant or Agreement. Any breach by Borrower, NHLP
and/or National of any covenant, agreement, condition precedent, or
undertaking of Borrower, NBLP and/or National contained in this
Agreement, if such breach shall continue without being cured to
Majority Banks' satisfaction for thirty (30) days after notice thereof
to Borrower from Agent by certified mail.
(c) Representations or Warranties. Any breach of Borrower's,
NHLP's and/or National's representations or warranties contained
herein or any misstatement or omission of fact or failure to state
facts necessary to make such representations and warranties in this
Agreement not misleading.
(d) Guarantee. Any breach of any agreement, undertaking, or
covenant contained in the Guarantee and Contingent Purchase Agreement
or the occurrence of any event of default as described in the other
Loan Documents or in any other agreement now or hereafter executed by
Borrower or Guarantors that evidences or secures the Indebtedness if
such breach or default shall continue without being cured to Majority
Banks' satisfaction for thirty (30) days after notice thereof to
Borrower from Agent by certified mail.
(e) Misleading Report. Any report, certificate, financial
statement or other instrument furnished in connection with this
Agreement or the borrowings hereunder shall prove to be false or
misleading in any material respect.
(f) Compliance with Plan and Trust. Except as required by
ERISA, failure by the Borrower or the Trustee to comply with the terms
of the Plan document or the Trust agreement.
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(g) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, custodian, liquidator or trustee of NHLP or National, or of
any of their property, is appointed by the order or decree of any
court or agency or supervisory authority having jurisdiction, and such
decree or order remains in effect for more than sixty (60) days; or
Borrower, NHLP or National is adjudicated bankrupt or insolvent; or
any of the property of Borrower, NHLP or National is sequestered by
court order and such order remains in effect for more than sixty (60)
days; or a petition is filed against Borrower, NHLP or National under
any state or federal bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or
receivership law of any jurisdiction, whether now or hereafter in
effect, and not dismissed within sixty (60) days of filing.
(h) Voluntary Petitions. Borrower, NHLP or National takes
affirmative steps to prepare to file or files a petition in voluntary
bankruptcy or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any petition against
it under any such law.
(i) Monetary Judgment. Final judgment for the payment of
money exceeding valid, applicable, collectible insurance coverage by
more than One Hundred Thousand and No/100 Dollars (S100,000.00) shall
be rendered against the Borrower, NHLP or National and such judgment
is not discharged or satisfied within one hundred twenty (120) days of
the date such judgment becomes final.
(j) Existence. "The Borrower, NHLP or National shall cease to
exist.
(k) Plan Termination. The complete termination of the Plan,
which shall include, without limitation, the complete cessation of
contributions by National and its Affiliates to Borrower or the
termination of the Plan by appropriate corporate resolution(s).
(1) Tax Lien. The filing of any tax lien whatsoever with
respect to any of the Plan's or the Guarantors' property, except for a
tax lien that is being contested in good faith and for which Borrower
or Guarantors, as the case may be, provide additional security to
Banks satisfactory in all respects to Banks.
(m) Plan Failure. The failure of the Plan to qualify as an
ESOP under Section 401(a), and the failure of the Trust to qualify as
a tax exempt trust under Section
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501(a), respectively, of the Code after a final determination by the
IRS of such disqualification at the appeals level of the IRS.
(n) Injunctive Relief under ERISA. The commencement of any
proceeding under ERISA by or against Borrower, any of the Banks, the
Agent, the Plan, the Trust, or either of the Guarantors seeking
injunctive relief with respect to any of the terms, conditions, and
provisions of the Loan Documents, which proceeding is not dismissed
within thirty (30) days of its filing.
(o) Cross Default. The occurrence of any Event of Default as
defined under that certain Loan and Security Agreement dated as of
January 20, 1988 by and between Marine Midland Bank, N.A., not
individually but as Trustee of the National Health Corporation
Leveraged Employee Stock Ownership Trust and SCS or under any document
executed in connection therewith, including but not limited to that
certain Guarantee and Contingent Purchase Agreement dated as of
January 20, 1988 by and between National and SCS.
Section 11.2. Remedies.
(a) Due and Payable. Upon the occurrence of any Event of
Default, at the option of the Majority Banks, all obligations of
Borrower contained herein or in the Notes shall become due and payable
immediately without presentment, demand, or notice to Borrower or any
other person obligated hereon or thereon, except as otherwise provided
in Section 11.1.(b) and Section 11.1.(d) above. Notwithstanding
anything in this Agreement or the Notes to the contrary, upon the
occurrence of an Event of Default, Banks shall be entitled to payment
from Borrower only from (i) the unreleased Shares of Stock of
National, (ii) the Contributions, and (iii) earnings attributable to
the unreleased shares of Stock of National and the investment of the
Contributions.
(b) Uniform Commercial Code. Agent on behalf of the Banks
shall have and may exercise any or all of the rights and remedies of a
secured party (i) under the Uniform Commercial Code, and (ii) as
otherwise granted herein or under any other law or under any other
agreement now or hereafter executed by Borrower and/or Guarantors,
within the limitations of Treas. Reg. 54.4975-7 or any applicable
successor regulation, including without limitation the right and power
to sell at public or private sale or sales, or otherwise dispose of or
utilize, any such portion of the Collateral pledged hereby or by the
Loan Documents and any part or parts thereof in any manner authorized
or permitted under the Uniform Commercial Code after default by a
debtor. Agent on behalf of Banks may apply the proceeds
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thereof toward the payment of any costs and expenses and attorneys' fees
and legal expenses thereby incurred by Agent on behalf of Banks and toward
payment of the obligations secured hereby in such order or manner as Agent
may elect.
(c) Disposition. To the extent permitted by ERISA and
other relevant law, Borrower expressly waives any notice of sale or other
disposition of the Collateral and all other rights or remedies of Borrower
or formalities prescribed by law relative to sale or disposition of the
Collateral or exercise of any other right or remedy of Agent or Banks
existing after default hereunder. To the extent any such notice cannot be
waived, Borrower agrees that if such notice is mailed, postage prepaid, or
sent by telegram, charges prepaid, to Borrower at Borrower's address herein
stated at least five (5) days before the time of the sale or disposition
such notice shall be deemed reasonable and shall satisfy fully any
requirement of giving notice. All recitals in any instrument of assignment
or any other instrument executed by Agent or Banks incidental to sale,
transfer, assignment, or other disposition or utilization of the Collateral
or any proceeds thereof, or any part thereof shall be full proof of the
matters stated therein. No other proof shall be required to establish full
legal propriety of the sale or other action taken by Agent or Banks or of
any fact, condition, or thing incident thereto, and all prerequisites of
such sale or other action or of any fact, condition, or thing incident
thereto shall be presumed conclusively to have been performed or to have
occurred.
ARTICLE XII
BANKS' AGREEMENT
Except as provided in Section 12.8. below, this Article XII is between
and among the Agent and the Banks only. Neither the Borrower, NHLP, nor
National, nor any other creditor of the Borrower, NHLP or National nor any
other Person shall have any rights, duties or obligations under this Article
XII, whether as a third party beneficiary or otherwise.
Section 12.1. Authorization. With respect to all funds advanced
hereunder or under the Notes, TNB, IT, SCS and ST shall be obligated to advance
thirty two percent (32%), thirty percent (30%), eighteen percent (18%), and
twenty percent (20%), respectively, and each such Bank shall own a
corresponding undivided interest in the Collateral and Loan Documents. Each
Bank authorizes the Agent to act on behalf of such Bank or holder to the extent
provided herein or in any document or instrument delivered hereunder or in
connection herewith and signed by such Bank, and to take such other action
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as may be reasonably incidental thereto. The Agent shall be considered as
acting solely in an administrative and ministerial capacity, not as trustee or
other fiduciary of the Banks. The Agent shall not be construed as having any
agency or fiduciary relationship with the Borrower, National or NHLP
whatsoever. The Agent shall not have any duties or obligations to the Banks
other than those expressly provided for in the Loan Documents. As to any
matters provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes, the Guarantee and Contingent Purchase
Agreement, or any of the other Loan Documents), the Agent shall not be required
to exercise any discretion or take any action, but shall be fully protected in
so acting or in refraining from acting, upon the instructions of the Majority
Banks (except as otherwise provided in Section 13.7. for matters which require
the consent of all Banks), and such instructions shall be binding upon all
Banks and holders of the Notes, and the Agent shall not be liable to any party
hereto for any consequence of any such action or refraining from action.
Notwithstanding any instructions of the Majority Banks, the Agent shall not be
required to take any action that exposes the Agent to personal liability or
that is contrary to any Loan Document or applicable law.
Section 12.2. Standard of Care. Neither the Agent nor any of its
officers, directors, agents, employees or representatives shall be liable for
any action taken or omitted to be taken by it or any of them under or in
connection with any Loan Document, except for its or their own gross negligence
or wilful misconduct. Without limitation of the generality of the foregoing,
the Agent: (a) may treat the payee of any Notes as the holder thereof and as a
Bank hereunder until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent
(which notice shall be binding on all parties hereto); (b) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants and other experts and advisors selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, experts or other
advisors; (c) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations made
in or in connection with any Loan Document or for any failure or delay in
performance by the Borrower or any Bank under the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance OF
any of the terms, covenants or conditions of any Loan Document or to inspect
the assets (including, without limitation, the books and records) of the
Borrower, NHLP or National or to inspect any Collateral; (e) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, perfection, collectability, genuineness, sufficiency or value
of any Loan Document or
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Collateral or any other instrument or document furnished pursuant thereto or
for the accuracy or completeness of any credit or other information provided to
the Banks; (f) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram, cable or telex) believed by it
to be genuine and signed or sent by the proper party or parties; and (g) shall
incur no liability for relying on any matters of fact that might reasonably be
expected to be within the knowledge of the Borrower, NHLP or National or upon a
certificate or other writing signed by Borrower, NHLP or National.
Section 12.3. No Waiver of Rights. With respect to the Notes, the
Agent shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though it were not the Agent. The Agent may accept
deposits from, and generally engage in any kind of business with, the Borrower,
NHLP and National.
Section 12.4. Payments. All payments (including prepayments) by the
Borrower, NHLP or National on account of the Notes shall be made at the main
office of the Agent prior to 10:00 a.m., Nashville time, on the date of payment
in immediately available funds and, when due or upon instructions from the
Borrower, NHLP or National, may be made by debit to the Borrower's, NHLP's or
National's general account with Agent, as appropriate. The Agent shall use its
best efforts to deliver to each Bank on the same day as received by Agent in
immediately available funds such Bank's ratable share of all payments received
by the Agent for the benefit of the Banks but in the event Agent is unable to
deliver such payments to any Bank on the same day of receipt, Agent agrees to
pay such Bank interest on the payment for each day the Agent is unable to
deliver the payments after the date of its receipt based on the overnight
federal funds rate of interest. Any payment due for any reason under this
Agreement that is required to be made on a date on which the Agent is not open
for business shall be extended until the next day on which the Agent is open
for the transaction of business.
Section 12.5. Indemnification. The Agent shall not be required to do
any act hereunder or under any other document or instrument delivered hereunder
or in connection herewith or take any action toward the execution or
enforcement of the agency hereby created, or to prosecute or defend any suit in
respect of this Agreement or the Notes or the Guarantee and Contingent Purchase
Agreement or the Collateral or to advance funds hereunder upon the failure by
any Bank to fund its pro rata share of the Commitment hereunder, unless ratably
indemnified to its satisfaction (to the extent not reimbursed by Borrower) by
the holders of the Notes against loss, cost, liability and expense (including
reasonable fees and
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out-of-pocket expenses of counsel), claim, demand, action, loss or liability
(except such as result from Agent's gross negligence or willful misconduct)
that Agent may suffer or incur in connection with this Agreement or any action
taken or omitted by Agent hereunder. If any indemnity furnished to the Agent
for or against any loss, cost, liability, and expense or for any purpose shall,
in the opinion of the Agent, be insufficient or become impaired, the Agent may
call for additional indemnity and not commence or cease to do the acts
indemnified against until such additional indemnity is furnished. Each Bank
agrees to reimburse the Agent promptly upon demand for such Bank's pro rata
share of any expenses referred to in Section 13.13. incurred by the Agent to
the extent that the Agent is not reimbursed for such expenses by the Borrower.
Each Bank agrees to, in accordance with its pro rata share of the
Commitment hereunder, indemnify Agent (to the extent not reimbursed by
Borrower) against any cost, expense (including reasonable fees and
out-of-pocket expenses of counsel), claim, demand, action, loss or liability
(except such as result from Agent's gross negligence or willful misconduct)
that Agent may suffer or incur in connection with this Agreement or any Loan
Document or any action taken or omitted by Agent hereunder or under any Loan
Document.
Section 12.6 Exculpation. Neither Agent nor any of its directors,
officers, employees or agents shall be liable for any action taken or not taken
by it in connection herewith (a) with the consent or at the request of the
Banks or Majority Banks, as appropriate, or (b) in the absence of its own gross
negligence or willful misconduct. Neither Agent nor any of its directors,
officers, employees or agents shall (i) be responsible for any recitals,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of this Agreement, any Note or any
other instrument or document delivered hereunder or in connection herewith,
(iii) be responsible for the validity, genuineness, perfection, effectiveness,
enforceability, existence, value or enforcement of any Collateral or security,
or (iii) be under any duty to inquire into or pass upon any of the foregoing
matters, or to make any inquiry concerning the performance by Borrower or any
other obligor of its obligations.
Section 12.7. Credit Investigation. Each Bank acknowledges that it has
made such inquiries and taken such care on its own behalf as would have been
the case had the Commitment been granted and the Loan made directly by such
Bank to the Borrower. Each Bank agrees and acknowledges that the Agent makes no
representations or warranties about the creditworthiness of the Borrower or any
other party to this Agreement or with respect to the legality, validity,
sufficiency or enforceability of this Agreement, the Notes or
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the value of any security therefor and that each Bank has not entered into this
Agreement in reliance upon any action, statement, representation, or warranty
of any other Bank or Agent. Each Bank agrees that it will, independently and
without reliance upon the Agent or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other loan Documents. Neither the Agent nor any other Bank shall have any
obligation whatsoever to make any such credit analysis or decisions for a Bank
or to provide any credit or other information with respect to the Borrower now
or in the future in the possession of the Agent or such other Bank, except that
the Agent shall promptly forward to the Banks a copy of any notice received by
the Agent from the Borrower of the occurrence of an Event of Default hereunder
and copies of all material documents delivered to it by the Borrower, NHLP or
National pursuant to the Loan Documents.
Section 12.8. Resignation and Replacement. Agent may resign at any
time as Agent under the Loan Documents by giving written notice thereof to
Banks and Borrower, which resignation shall be effective upon a successor
Agent's acceptance of its appointment. Borrower or the Majority Banks may
replace Agent at any time following sixty (60) days' prior written notice to
Agent and Banks; provided, however, that Borrower shall have such right only in
the absence of an Event of Default. Upon any such resignation or replacement,
the Majority Banks shall have the right to appoint a successor Agent hereunder,
which successor Agent shall also be reasonably acceptable to Borrower. If no
such successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof having
assets of at least One Billion and No/100 Dollars ($1,000,000,000.00) and which
shall be reasonably acceptable to Borrower. Upon the acceptance of any
appointment as Agent under the Loan Documents by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under the Loan
Documents. After any retiring Agent's resignation or replacement as an Agent
under the Loan Documents, the provisions of this Section 12.8. shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
an Agent under the Loan Documents.
Section 12.9. Proration of Payments. Except as may be provided in
other sections of this Agreement, all funds received by Banks, or any of them,
shall be allocated pro rata among all
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Banks in proportion to the then outstanding balances due on the Notes. If any
Bank or other holder of any Notes shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of offset or otherwise) on
account of principal of or interest on the Note then held by it in excess of
its pro rata share of payments and other recoveries obtained by all Banks or
other holders on account of principal of and interest on the Note then held by
them, such Bank or other holder shall purchase from the other Banks or holders
such participation in the Note held by them as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery
ratably with each of them; provided, however, if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. Notwithstanding the foregoing,
no Bank shall, except as provided in Section 12.11 below, have any obligation
to account for or share any amount, property or profit of any kind received by
it for its own account arising out of a banking or other relationship with the
Borrower, NHLP or National apart from the obligations under the Loan Documents.
Section 12.10. No Liability for Errors. The Agent shall not be liable
for any error in computing the amounts payable to any Bank in respect of any
amounts due to the Banks under the Loan Documents or in making payment of such
amounts. In the event of an error in computing any amount payable to any Bank
or in the making of a payment, the Agent, the Borrower and such Bank shall,
forthwith upon discovery of such error, make such adjustment as shall be
required to correct such error, including the payment of interest on any
amounts that were incorrectly paid or not paid from the date paid or of the
date due to the date returned or paid, all as the case may be, at the average
daily rate for the overnight sale of federal funds by the Agent in effect for
such period.
Section 12.11. Offset. In addition to and not in limitation of all
rights of offset that any Bank or other holder of any Note may have under
applicable law, each Bank or other holder of a Note shall, upon the occurrence
of any Event of Default described in this Agreement or in the Note in question,
have the right to appropriate and apply to the payment of such Notes any and
all balances, credits, deposits, accounts or moneys of the Borrower, National
and/or NHLP then or thereafter with such Bank or other holder; provided,
however, all funds received as a result of such offsets shall be applied pro
rata among the Banks in proportion to the then outstanding balances of the
Notes. Each Bank agrees to notify the other Banks immediately upon the exercise
by it of this right of offset. SCS agrees that any such funds of Borrower or
NHLP received as a result of any such offset by SCS shall be applied to the
Notes pro rata as set forth in this section and shall not be
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applied to satisfy any portion of the Sovran Loan. The Banks agree that any
funds of National received as a result of any such offset by SCS may be applied
to satisfy the Sovran Loan; provided, however, that any such funds of National
derived from payments by NHLP on the Line of Credit Note or from transfers made
to National by NHLP without consideration (excluding, however, distributions
made with respect to NHLP limited partnership units owned by National) shall be
applied to the Notes pro rata as set forth in this section and shall not be
applied to satisfy any portion of the Sovran Loan.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Survival. All agreements, representations, and
warranties contained herein or made in writing by or on behalf of Borrower,
National and NHLP in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, any investigation at any
time made by Banks or on their behalf, and the acquisition and disposition of
the term note or notes evidencing the Indebtedness secured hereby. All
statements contained in any certificate or other instrument delivered by or on
behalf of Borrower pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by Borrower,
National and NHLP hereunder.
Section 13.2. Selection of Remedies. This Agreement shall
not prejudice the right of Agent and/or Banks at their option to enforce
collection of the Notes evidencing the Indebtedness secured hereby by suit or
in any other lawful manner, or to resort to any other security for the payment
of the Notes, this Agreement and the other Loan Documents being additional,
cumulative, and concurrent security for the payment of such obligations.
Section 13.3. Cumulative Remedies. No right or remedy in this Loan and
Security Agreement, the Notes, or the other Loan Documents referred to herein
is intended to be exclusive of any other right or remedy, but every such right
or remedy shall be cumulative and shall be in addition to every other right or
remedy herein or in such notes conferred, now or hereafter existing, at law, in
equity, or by statute.
Section 13.4. Delay or Omission. No delay or omission by Banks to
exercise any right or remedy shall impair any other right or remedy or be
construed to be a waiver of any default or an acquiescence therein. Every right
and remedy herein conferred or now or hereafter existing at law, in equity, or
by statute may be exercised separately or concurrently and in such order and as
often as may be deemed reasonable by Agent or Banks.
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Section 13.5. Invalidity. The invalidity or unenforceability of any of
the rights or remedies herein provided in any jurisdiction shall not in any way
affect the right to the enforcement in such jurisdiction or elsewhere of any of
the other rights or remedies herein provided.
Section 13.6. Time. Time is of the essence with regard to each and
every provision of this Agreement.
Section 13.7. Entire Agreement. This Agreement, and the documents
executed and delivered pursuant hereto, constitute the entire agreement between
the parties and no amendment or waiver of any provision of any Loan Document,
nor any consent thereunder, shall in any event be effective without the written
concurrence of the Agent acting in each case at the direction of the Majority
Banks and, then such waiver or consent shall be effective only in the specific
instance and for the specific purposes for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) increase or extend the Commitment of the
Banks, (b) reduce the principal of, or interest on, the Notes or any fees
thereunder, (c) postpone any date fixed for any payment of principal, of or
interest on, the Notes or any fees thereunder, (d) release any Collateral
except as shall be otherwise provided in any Loan Document, (e) take any action
that requires the signing or consent of all the Banks pursuant to the terms of
any Loan Document, (f) change the definition of Majority Banks, (g) modify or
amend Article V hereunder, or (h) amend or waive Section 3.1. or this Section
13.7. and provided, further, that no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Banks required
hereinabove to take such action, affect the rights or duties of the Agent under
any Loan Document.
Section 13.8. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto; provided, however, in no event shall Borrower or any Guarantor
assign its rights under the Loan Documents without the prior written consent of
Agent. Any such assignment without such prior written consent shall be void.
Section 13.9. Exempt Loan. The Loan is intended to be a loan exempt
from the "prohibited transaction" provisions of Sections 406(a) of ERISA and
Section 4975(c)(1)(A) through (c)(1)(E) of the Code by virtue of the provisions
of Section 408(b)(3) of ERISA, Section 408(e) of ERISA, Sections 4975(d)(3) and
(13) of the Code and the applicable regulations thereunder. The terms of this
Agreement, the Notes and the other Loan Documents, and the rights and
obligations of the parties hereunder and thereunder, shall be construed and
interpreted so as to comply with such provisions and regulations and with
rulings thereunder.
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Section 13.10. Counterparts. This Agreement may be executed in two
(2) or more counterparts, and it shall not be necessary that the signatures of
all parties be contained on any one counterpart; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 13.11. Waiver of Jury Trial. NATIONAL, NHLP, AGENT AND THE
BANKS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS COMTEMPLATED HEREIN. FURTHER, NHLP AND NATIONAL
HEREBY CERTIFY THAT NO REPRESENTATIVE OF AGENT OR OF ANY OF THE BANKS OR ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY OF THE BANKS OR
OTHER HOLDER OF THIS AGREEMENT WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NHLP AND NATIONAL
ACKNOWLEDGE THAT THE BANKS HAVE BEEN INDUCED TO MAKE THE LOAN EVIDENCED BY THE
NOTES BY, INTER ALIA, THE PROVISIONS OF THIS SECTION 13.11.
Section 13.12. Closing. The closing shall occur at the offices of
Messrs. Xxxxxx, Xxxxxxxx & Xxxxxxx on December 21, 1988 at 10:00 a.m. Nashville
time or at such other location and time as the parties hereto shall mutually
agree.
Section 13.13. Costs, Expenses, and Taxes. NHLP agrees to pay on
demand all out-of-pocket costs and expenses of Agent and the Banks (including
the reasonable fees and out-of-pocket expenses of counsel for Agent and the
Banks and of local counsel, if any, whom Agent and the Banks' counsel may
retain) in connection with the preparation, execution, delivery, administration,
enforcement and/or protection of Agent's and the Banks' rights under the Loan
Documents. In addition, National and NHLP shall indemnify Agent and the Banks
from and against any and all costs, expenses (including reasonable legal fees),
claims, demands, actions, losses or liabilities (except such as are a direct
result of the gross negligence or willful misconduct of Agent and/or the Banks)
that Agent and/or the Banks may suffer or incur in connection with this
Agreement or any of the Loan Documents. In addition, NHLP agrees to pay and to
hold Agent and the Banks harmless from all liability for any stamp or other
taxes (including taxes under Tennessee Code Annotated Section 67-4-409 due upon
the recordation of mortgages and financing statements) that may be payable in
connection with the execution or delivery of this Agreement and the Collateral
under this Agreement, or the issuance of the Notes or any other Loan Documents
delivered or to be delivered under or in connection with this Agreement. NHLP,
upon request, promptly will reimburse Agent and the Banks for all amounts
expended, advanced, or incurred by Agent and the Banks
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to satisfy any obligation of Borrower under this Agreement or any other Loan
Documents, or to perfect a lien in favor of the Banks, or to protect the Pledged
Nursing Homes or the businesses of Borrower, National and NHLP, or to collect
the Indebtedness, or to enforce the rights of Agent and Banks under this
Agreement or any other Loan Document, which amounts will include without
limitation all court costs, attorneys' fees, fees of auditors and accountants,
costs of insurance, and investigation expenses reasonably incurred by Agent and
the Banks in connection with any such matters, together with interest thereon at
the rate applicable to past due principal and interest as set forth in the Loan
Documents but in no event in excess of the maximum lawful rate of interest
permitted by applicable law on each such amount. All obligations for which this
Section provides shall survive any termination of this Agreement.
Section 13.14. Conflicts. In the event of any conflict between or
among any provision of the Guarantee and Contingent Purchase Agreement and this
Agreement, the provisions of the Guarantee and Contingent Purchase Agreement
shall control and prevail over this Agreement; provided, however, as to the
rights and obligations of the Borrower only, this Agreement shall control and
prevail. In the event of any conflict between or among any provision of this
Agreement and any other Loan Document other than the Guarantee and Contingent
Purchase Agreement, the provisions of this Agreement shall control and prevail
over the other Loan Documents other than the Guarantee and Contingent Purchase
Agreement.
ARTICLE XIV
CHOICE OF LAW
Section 14.1. Tennessee. This Agreement is being delivered and is
intended to be performed in the State of Tennessee and, to the extent not
governed by the laws of the United States of America, shall be construed and
enforced in accordance with and governed by the laws of such State.
Section 14.2. Jurisdiction. THE BORROWER, NHLP, NATIONAL AND EACH
BANK HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY TENNESSEE STATE OR
FEDERAL COURT SITTING IN THE CITY OF NASHVILLE OVER ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE BORROWER, NHLP,
NATIONAL AND EACH BANK HEREBY IRREVOCABLY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER, NHLP AND NATIONAL AND EACH BANK
HEREBY AGREE THAT A FINAL JUDGMENT IN
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ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER ALL
APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON EACH OF THEM.
Section 14.3. Process. PROCESS MAY BE SERVED IN ANY SUIT, ACTION
COUNTERCLAIM OR PROCEEDING OF THE NATURE REFERRED TO IN SECTION 14.2. HEREOF
BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
RETURN RECEIPT REQUESTED, TO THE ADDRESS OF THE BORROWER, NHLP, NATIONAL AND
EACH BANK, AS APPLICABLE, AS SET FORTH IN SECTION 15.1. HEREOF OR TO ANY OTHER
ADDRESSES OF WHICH THE BORROWER, NHLP, NATIONAL AND EACH BANK HAVE GIVEN
WRITTEN NOTICE TO THE AGENT. THE BORROWER, NHLP, NATIONAL AND EACH BANK HEREBY
AGREE THAT SUCH SERVICE (A) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
OF PROCESS UPON EACH OF THEM IN ANY SUCH SUIT, ACTION, COUNTERCLAIM OR
PROCEEDING, AND (B) SHALL TO THE FULLEST EXTENT ENFORCEABLE BY LAW, BE TAKEN
AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO EACH OF
THEM.
ARTICLE XV
NOTICE
Section 15.1. Notice. Any communications between the parties hereto
or notices provided herein shall be deemed given upon the mailing of same by
certified mail, return receipt requested, to Banks c/o Agent, at Third National
Bank, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 Attention: Xxxxxxx X.
Xxxx, to each of the Banks directly at the addresses set forth on Exhibit L
attached hereto and incorporated herein by reference, and to Borrower at 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, Attention: Xxxxxxx X. Xxxxxxx, Xx. or to such
other addresses as the parties may indicate hereafter in writing.
Section 15.2. Notice to SCS. Upon the occurrence and continuance of
an Event of Default, Agent promptly shall give written notice of such Event of
Default to SCS as lender under the Sovran Loan. SCS shall also, upon the
occurrence and continuance of a default or an Event of Default (as such term is
defined in the loan agreement governing the Sovran Loan), promptly give written
notice of such default or Event of Default to Agent.
ARTICLE XVI
SEVERABILITY
Section 16.1. Severability. If any provision of this Agreement shall
be held invalid under any applicable law, SUCH invalidity shall not affect any
other provision of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the day and date first above written.
BORROWER
NATIONAL HEALTH CORPORATION
LEVERAGED EMPLOYEE STOCK
OWNERSHIP TRUST
By: MARINE MIDLAND BANK, N.A.
solely as trustee and not
in its individual or
corporate capacity
By: /s/
-------------------------------
Title: MGR-EBTS
---------------------------
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
BANKS
THIRD NATIONAL BANK IN NASHVILLE
By: /s/
-------------------------------
Title: Senior Vice President
----------------------------
Third National Bank Building
000 Xxxxxx Xxxxxx, Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
SOVRAN BANK/CENTRAL SOUTH
By: /s/
-------------------------------
Title: Vice President
----------------------------
Xxx Xxxxxxxx Xxxxx X-0
Xxxxxxxxx, Xxxxxxxxx 00000
----------------------------
AGENT
THIRD NATIONAL BANK IN
NASHVILLE, AS AGENT
By: /s/
-------------------------------
Title: Senior Vice President
----------------------------
Third National Bank Building
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
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The undersigned hereby enter into this Loan and security Agreement as parties
hereto in order to be bound by any and all applicable representations,
warranties, covenants and agreements contained herein:
NATIONAL HEALTHCORP L.P.
By:/s/ NHC, Inc.
-----------------------------------
Managing General Partner
By:/s/
-------------------------
Title: President
----------------------
1400 City Center
000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
NATIONAL HEALTH CORPORATION
By:/s/
------------------------------------
Title: Senior Vice President
1400 City Center
000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
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IRVING TRUST COMPANY
By:/s/
------------------------------
Title:Vice President
1290 Avenue of the Americas
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By:/s/
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Title: Vice President
000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
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