EXHIBIT 10.55
EXHIBIT A TO CONSENT AND AMENDMENT TO TRANSACTION DOCUMENTS
LIMITED GUARANTY
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LIMITED GUARANTY (this "Guaranty") dated as of , 1997, made by
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VITALINK PHARMACY SERVICES, INC., a Delaware corporation (the "Guarantor"), in
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favor of HEALTH AND RETIREMENT PROPERTIES TRUST, a real estate investment trust
formed under the laws of the State of Maryland (together with its successors and
assigns, "HRP").
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WITNESSETH
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WHEREAS, HRP, HostMasters, Inc., a California corporation ("HMI"),
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GranCare, Inc. (f/k/a AMS Holding Co.), a California corporation ("GranCare") ,
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American Medical Services, Inc., a Wisconsin corporation ("AMSI") and AMS
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Properties, Inc., a Delaware corporation ("AMS") have entered into an
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Acquisition Agreement, Agreement to Lease and Mortgage Loan Agreement dated as
of December 28, 1990, as amended (as so amended, the "Acquisition Agreement"),
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under which, inter alia, (A) HRP has leased 18 nursing properties located in
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Wisconsin, California, Colorado and Illinois to AMS pursuant to the several
Facility Leases (as amended, the "AMS Facility Leases"), each incorporating a
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Master Lease Document General Terms and Conditions dated as of December 28, 1990
(as amended, the "AMS Master Lease") between HRP, as landlord, and AMS, as
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tenant, and (B) HRP has made a mortgage loan to AMS in the original principal
amount of $11,500,000, the payment of which is currently evidenced by a
Promissory Note dated as of October 1, 1994 by AMS to HRP (the "AMS Note") and
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is secured, inter alia by Mortgage and Security Agreements dated as of March 31,
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1995 (collectively, the "AMS Mortgages") by AMS in favor of HRP encumbering the
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two nursing facilities in Wisconsin;
WHEREAS, the terms defined in the Acquisition Agreement are used herein as
therein defined, unless otherwise defined herein;
WHEREAS, (a) in May 1991, the AMSHC Exchange (as defined in the Acquisition
Agreement) took place, whereby GranCare, which previously had been a wholly-
owned subsidiary of HMI, became the sole stockholder of HMI and AMSI; and (b) in
December 1993, AMSI, which previously had owned all the outstanding common stock
of AMS, and AMS Rehab, Inc., a Delaware corporation and a wholly-owned
subsidiary of GranCare, each merged into AMS, with AMS as the surviving
corporation;
WHEREAS, HRP has leased 7 nursing and/or residential living properties
located in Arizona, California and South Dakota to GCI Health Care Centers,
Inc., a Delaware corporation ("GCI") pursuant to the several Facility Leases (as
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amended, the "GCI Facility Leases"), each incorporating a Master Lease Document
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General Terms and Conditions dated as of June 30, 1992 (as amended, the "GCI
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Master Lease") between HRP, as landlord, and GCI, as tenant;
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WHEREAS, GranCare, which holds beneficially and of record all of the
outstanding capital stock of AMS and GCI, proposes to transfer all of its
skilled nursing, home health care, assisted living and contract management
business (including, without limitation, such capital stock), and related
assets, to New GranCare, Inc., a Delaware corporation and a wholly-owned
subsidiary of GranCare ("New GranCare"), with GranCare thereafter distributing
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New GranCare common stock to GranCare shareholders (collectively, the
"Distribution");
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WHEREAS, immediately following the Distribution, GranCare shall merge with
and into the Guarantor, with the Guarantor as the surviving corporation (the
"Merger");
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WHEREAS, GranCare has requested that HRP agree to (a) waive the provisions
of Section 9.15A of the Acquisition Agreement to permit the Distribution and
Merger and (b) release the Guarantor and its subsidiaries (including any
remaining Subsidiary of GranCare that becomes a subsidiary of the Guarantor as a
result of the Merger) and their respective successors and assigns from and
against any and all claims, liabilities and obligations, as successor by merger
to GranCare, under (A) the Acquisition Agreement, (B) the Representation Letter
and Indemnification Agreement dated June 30, 1992 by GCI, AMS and GranCare to
HRP (the "GCI Indemnity Agreement"), (C) the Guaranty, dated as of December 28,
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1990, as amended, by GranCare in favor of HRP in respect of the obligations of
AMS (the "AMS Guaranty"), (D) the Guaranty dated as of June 30, 1992, as
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amended, by GranCare in favor of HRP in respect of the obligations of GCI (the
"GCI Guaranty"), (E) the Pledge Agreement, dated as of December 28, 1990, as
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amended, by GranCare in favor of HRP (the "AMS Pledge Agreement"), (F) the
Pledge Agreement, dated as of June 30, 1992 as amended, by GranCare in favor of
HRP (the "GCI Pledge Agreement"), (G) the Subordination Agreement, dated as of
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December 28, 1990, as amended, among GranCare, as subordinate creditor, AMS, as
debtor and HRP, as senior creditor (the "AMS Subordination Agreement"), (H) the
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Subordination Agreement, dated as of June 30, 1992, as amended, among GranCare,
as subordinate creditor, GCI, as debtor and HRP, as senior creditor (the "GCI
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Subordination Agreement"), and (I) any other agreements, instruments or
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understandings, written or oral, of GranCare with HRP or any of its affiliates
relating to or arising out of the transactions contemplated by the agreements
described in clauses (A) through (H) above; and HRP is, subject to the terms and
provisions of the Consent and Amendment to Transaction Documents dated as of
December 31, 1996 among GranCare, New GranCare, AMS, GCI and HRP (the
"Amendment"), willing to so agree, subject to, inter alia, the execution and
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delivery of this Guaranty by the Guarantor;
NOW, THEREFORE, in consideration of the premises contained herein and to
induce HRP to consent to the Distribution and Merger, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Guarantor hereby agrees with HRP as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are defined
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in the AMS Master Lease and used herein are so used as so defined. In addition,
the following terms shall have the meanings set forth below:
"Applicable Law" shall mean shall mean any law of any governmental
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authority, whether domestic or foreign, including without limitation all
federal and state laws, to which the Person in question is subject or by
which it or any of its property is bound, and including without limitation
any: (a) administrative, executive, judicial, legislative or other action,
code, consent decree, constitution, decree, directive, enactment, finding,
guideline, injunction, interpretation, judgment, law, order, ordinance,
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policy statement, proclamation, promulgation, regulation, requirement,
rule, rule of law, rule of public policy, settlement agreement, statute, or
writ, of any governmental authority, domestic or foreign, whether or not
having the force of law; (b) common law or other legal or quasi-legal
precedent; or (c) arbitrator's, mediator's or referee's award, decision,
finding or recommendation, or, in any case, any particular section, part or
provision thereof.
"Assumption Agreement" shall mean the Assumption Agreement dated as of
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even date herewith by New GranCare in favor of HRP, as the same may be
amended, amended and restated, supplemented or modified from time to time,
pursuant to which New GranCare has agreed to assume the obligations of
GranCare under, inter alia, the Acquisition Agreement, the GCI Indemnity
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Agreement, the AMS Guaranty, the GCI Guaranty, the AMS Pledge Agreement.
the GCI Pledge Agreement, the AMS Subordination Agreement and the GCI
Subordination Agreement.
"Bankruptcy Code" means Title 11 of the United States Code.
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"Consolidated Net Worth" of any Person shall mean, at any date as of
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which the amount thereof shall be determined, the consolidated total assets
of such Person and its Subsidiaries, minus all obligations that should, in
accordance with GAAP, be classified as liabilities on the consolidated
balance sheet of such Person and its Subsidiaries, including in any event
all Indebtedness.
"Contingent Obligation" shall mean, as applied to any Person, any
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direct or indirect liability, contingent or otherwise, of that Person (i)
with respect to any Indebtedness, lease, dividend or other obligation of
another if the primary purpose or intent thereof by the Person incurring
the Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, or (ii) with respect to any letter
of credit issued for the account of that Person or as to which that Person
is otherwise liable for reimbursement of drawings. Contingent Obligations
shall include, without limitation (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to
make take-or-pay or similar payments if required regardless of non-
performance by any other party or parties to an agreement and (c) any
liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described
under subclauses (X) or (Y) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
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"Default Amount" shall mean $15,000,000 or such lesser amount to which
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the Guarantor's maximum liability hereunder has been reduced pursuant to
the second paragraph of Section 2 hereof.
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"Default Rate" shall mean 18% per annum.
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"GAAP" shall mean generally accepted accounting principles, consistently
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applied.
"GranCare Companies" shall mean, collectively, New GranCare, AMS, GCI
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and all Subsidiaries of any thereof (after giving effect to the Merger and
the Distribution), whether now existing or hereafter created, and any
successors of any thereof (individually, a "GranCare Company").
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"GranCare Default" shall mean any GranCare Event of Default and any
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event or condition which with the passage of time or giving of notice, or
both, would become a GranCare Event of Default.
"GranCare Documents" shall mean, collectively,
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(i) the Acquisition Agreement, the GCI Indemnity Agreement, the AMS
Leases, the AMS Master Lease, the AMS Note, the GCI Leases, the GCI
Master Lease, all Security Documents (as such term is defined in
the Acquisition Agreement, and including, without limitation, the
AMS Guaranty, the GCI Guaranty, the AMS Pledge Agreement and the
GCI Pledge Agreement, in each case as modified by the Assumption
Agreement) and the Assumption Agreement, in each case as from time
to time in effect; and
(ii) any other present or future undertaking, agreement or instrument of
any kind whatsoever from time to time entered into by one or more
GranCare Companies with HRP (and any applicable third parties), or
to or for the benefit of HRP (and any applicable third parties),
each as from time to time in effect (and, in each case, whether or
not related to any transaction contemplated by any documents,
instruments or agreements listed in subparagraph (i) above).
"GranCare Event of Default" shall mean an "Event of Default" under and
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as defined in any GranCare Document.
"Guarantor Default" shall mean any Guarantor Event of Default and any
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event or condition which with the passage of time or giving of notice, or
both, would become a Guarantor Event of Default.
"Guarantor Event of Default" shall mean an Event of Default under and as
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defined in Section 15 hereof.
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"Indebtedness" of any Person at any date shall mean, (a) all
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indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (excluding current trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices, but including any class of capital stock of such Person with
fixed payment obligations or with redemption at the option of the holder),
or which is evidenced by a note, bond, debenture or similar instrument, (b)
all obligations of such Person under leases that should be treated as
capitalized leases in accordance with GAAP, (c) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person, and all reimbursement obligations (contingent or otherwise) of such
Person in respect of any letters of credit issued for the account of such
Person, and (d) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
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charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing.
"Material Adverse Effect" means a material adverse effect on (a) the
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business, operations, property, condition (financial or otherwise) or
prospects of the Guarantor, or of the Guarantor and its Subsidiaries taken
as a whole, (b) the ability of the Guarantor to perform its obligations
under this Guaranty, or (c) the validity or enforceability of this
Guaranty, or the rights of HRP hereunder.
"Obligations" shall mean the payment and performance of each and every
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obligation and liability of any GranCare Company to HRP under any GranCare
Document, whether now existing or hereafter arising or created, joint or
several, direct or indirect, absolute or contingent, due or to become due,
matured or unmatured, liquidated or unliquidated, arising by contract,
operation of law or otherwise, and including, without limitation, payment
of the principal, premium or prepayment fee and interest (including,
without limitation, Minimum Interest and Additional Interest, as such terms
are defined in the AMS Note) under any promissory note payable to HRP, and
the payment of rent under any lease with HRP as landlord (including,
without limitation, any Minimum Rent, Additional Rent and Additional
Charges, as such terms are defined in the AMS Leases or the GCI Leases).
"Person" shall mean any individual, corporation, firm, unincorporated
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organization, association, partnership, trust, business trust, joint stock
company, joint venture or other organization, entity or business, or any
governmental organization or authority.
"Subsidiary" shall mean any Person of which any specified Person shall
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at the time, directly or indirectly through one or more of its
Subsidiaries, (a) own at least 50% of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally, (b) hold
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at least 50% of the partnership, joint venture or similar interests or (c)
be a general partner or joint venturer.
2. Guaranty. The Guarantor hereby unconditionally and irrevocably
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guarantees to HRP the prompt and complete payment and performance by the
GranCare Companies (and each of them), when due (whether at stated maturity, by
acceleration or otherwise), of the Obligations. The Guarantor further agrees to
pay any and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel to HRP) which may be paid or incurred by HRP in
enforcing, or obtaining advice of counsel in respect of, any of its rights under
this Guaranty. This Guaranty is a guaranty of payment and not of collectibility
and is absolute and in no way conditional or contingent. The Guarantor's
liability hereunder is direct and unconditional and may be enforced after
nonpayment or nonperformance by any GranCare Company of any Obligation without
requiring HRP to resort to any other Person (including without limitation such
GranCare Company) or any other right, remedy or collateral. This Guaranty shall
remain in full force and effect until the Obligations are paid in full.
Notwithstanding the aggregate amount of the Obligations at any time or from
time to time payable or to be payable by the GranCare Companies to HRP, the
liability of the Guarantor to HRP under this Section 2 shall not exceed the
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principal sum of Fifteen Million Dollars ($15,000,000) in the aggregate less
amounts paid by the Guarantor hereunder in respect of such principal sum;
provided that whenever, at any time, or from time to time, Guarantor shall make
any payment to HRP on account of its liability hereunder, it will notify HRP in
writing that such payment is made under this Guaranty for such purpose. The
Guarantor agrees that the Obligations may at any time and from time to time
exceed the amount of the liability of the Guarantor hereunder without impairing
this Guaranty or affecting the rights and remedies of HRP hereunder. No payment
or payments made by any GranCare Company or any other Person or received or
collected by HRP from any GranCare Company or any other Person by virtue of any
action or proceeding or any set-off or appropriation or application, at any time
or from time to time, in reduction of or in payment of the Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder which shall, notwithstanding any such payment or payments,
remain liable for the amount of the Obligations until the Obligations are paid
in full (but subject as provided in this paragraph).
3. Costs and Expenses of Collection. The Guarantor agrees, as principal
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obligor and not as a guarantor only, to pay to HRP forthwith upon demand, in
immediately available funds, all costs and expenses (including, without
limitation, all court costs and all fees and disbursements of counsel to HRP)
incurred or expended by HRP in connection with the enforcement of this Guaranty,
together with interest on amounts recoverable under this Guaranty from the time
such amounts become due until payment at the Default Rate. The Guarantor's
covenants and agreements set forth in this Section 3 shall survive the
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termination of this Guaranty.
4. Right of Setoff. Regardless of the adequacy of any collateral or other
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means of obtaining repayment of the Obligations, HRP is hereby authorized,
without notice to the Guarantor or compliance with any other condition precedent
now or hereafter imposed by Applicable Law (all of which are hereby expressly
waived to the extent permitted by Applicable Law) and to the fullest extent
permitted by Applicable Law, to set off and apply the Deposit Balance (as
hereinafter defined), interest thereon, and any other monies, securities,
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deposits or other property now or hereafter delivered to HRP as collateral
pursuant hereto, and all proceeds of any thereof, against the obligations of the
Guarantor under this Guaranty, whether or not HRP shall have made any demand
under this Guaranty, at any time and from time to time after the occurrence of a
Guarantor Event of Default, in such manner as HRP in its sole discretion may
determine, and the Guarantor hereby grants HRP a continuing security interest in
such Deposit Balance, interest, monies, securities, deposits and property as
collateral for the payment and performance of such obligations.
5. Subrogation and Contribution. Until the Obligations shall have been
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paid and performed in full, the Guarantor irrevocably and unconditionally waives
any and all rights to which it may be entitled, by operation of law or
otherwise, to be subrogated, with respect to any payment made by the Guarantor
hereunder, to the rights of HRP against any GranCare Company, or otherwise to be
reimbursed, indemnified or exonerated by any GranCare Company in respect thereof
or to receive any payment, in the nature of contribution or for any other
reason, from any other guarantor of the Obligations with respect to any payment
made by the Guarantor hereunder (provided that the foregoing shall not prevent
the Guarantor from drawing (and retaining any amounts so drawn) under any letter
of credit issued by a bank for the account of any Person). Until the Obligations
shall have been paid and performed in full, the Guarantor waives any defense it
may have based upon any election of remedies by HRP which impairs the
Guarantor's subrogation rights or the Guarantor's rights to proceed against any
GranCare Company for reimbursement (including without limitation any loss of
rights the Guarantor may suffer by reason of any rights, powers or remedies of
such GranCare Company in connection with any anti-deficiency laws or any other
laws limiting, qualifying or discharging any indebtedness to HRP). Until the
Obligations shall have been paid, performed and satisfied in full, the Guarantor
further waives any right to enforce any remedy which HRP now has or may in the
future have against any GranCare Company, any other guarantor or any other
Person and any benefit of, or any right to participate in, any security
whatsoever now or in the future held by HRP.
6. Effect of Bankruptcy Stay. If acceleration of the time for payment or
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performance of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of any GranCare Company or any other Person or otherwise, all
such amounts otherwise subject to acceleration shall nonetheless be payable by
the Guarantor under this Guaranty forthwith upon demand.
7. Receipt of GranCare Documents, etc. The Guarantor confirms, represents
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and warrants to HRP that (i) it has received true and complete copies of all
existing GranCare Documents from the GranCare Companies, has read the contents
thereof and reviewed the same with legal counsel of its choice; (ii) no
representations or agreements of any kind have been made to the Guarantor which
would limit or qualify in any way the terms of this Guaranty; (iii) HRP has made
no representation to the Guarantor as to the creditworthiness of any GranCare
Company; and (iv) the Guarantor has established adequate means of obtaining from
each GranCare Company on a continuing basis information regarding such GranCare
Company's financial condition. The Guarantor agrees to keep adequately informed
from such means of any facts, events, or circumstances which might in any way
affect the Guarantor's risks under this Guaranty, and the Guarantor further
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agrees that HRP shall have no obligation to disclose to the Guarantor any
information or documents acquired by HRP in the course of its relationship with
the GranCare Companies.
8. Amendments, etc. with Respect to the Obligations. The obligations of
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the Guarantor under this Guaranty shall remain in full force and effect without
regard to, and shall not be released, altered, exhausted, discharged or in any
way affected by any circumstance or condition (whether or not any GranCare
Company shall have any knowledge or notice thereof), including without
limitation (a) any amendment or modification of or supplement to any GranCare
Document, or any obligation, duty or agreement of the GranCare Companies or any
other Person thereunder or in respect thereof; (b) any assignment or transfer in
whole or in part of any of the Obligations; any furnishing, acceptance, release,
nonperfection or invalidity of any direct or indirect security or guaranty for
any of the Obligations; (c) any waiver, consent, extension, renewal, indulgence,
settlement, compromise or other action or inaction under or in respect of any
GranCare Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise); (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to any
GranCare Company or any other Person or any of their respective properties or
creditors or any resulting release or discharge of any Obligation (including
without limitation any rejection of any lease pursuant to Section 365 of the
Federal Bankruptcy Code); (e) any new or additional financing arrangements
entered into by any GranCare Company or by any other Person on behalf of or for
the benefit of any GranCare Company; (f) the merger or consolidation of any
GranCare Company with or into any other Person or of any other Person with or
into any GranCare Company; (g) the voluntary or involuntary sale or other
disposition of all or substantially all the assets of any GranCare Company or
any other Person; (h) the voluntary or involuntary liquidation, dissolution or
termination of any GranCare Company or any other Person; (i) any invalidity or
unenforceability, in whole or in part, of any term hereof or of any GranCare
Document, or any obligation, duty or agreement of any GranCare Company or any
other Person thereunder or in respect thereof; (j) any provision of any
applicable law or regulation purporting to prohibit the payment or performance
by any GranCare Company or any other Person of any Obligation; (k) any failure
on the part of any GranCare Company or any other Person for any reason to
perform or comply with any term of any GranCare Document or any other agreement;
or (l) any other act, omission or occurrence whatsoever, whether similar or
dissimilar to the foregoing. The Guarantor authorizes each GranCare Company,
each other guarantor in respect of the Obligations and HRP at any time in its
discretion, as the case may be, to alter any of the terms of any of the
Obligations.
9. Guarantor as Principal. If for any reason the GranCare Companies, or
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any of them, or any other Person is under no legal obligation to discharge any
Obligation, or if any other moneys included in the Obligations have become
unrecoverable from the GranCare Companies, or any of them, or any other Person
by operation of law or for any other reason, including, without limitation, the
invalidity or irregularity in whole or in part of any Obligation or of any
GranCare Document, the legal disability of any GranCare Company or any other
obligor in respect of Obligations, any discharge of or limitation on the
liability of any GranCare Company or any other Person or any limitation on the
method or terms of payment under any Obligation, or of any GranCare Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guaranty
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shall nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations (subject as provided in Section 2 hereof).
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10. Waiver of Demand, Notice, Etc. The Guarantor hereby waives, to the
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extent not prohibited by applicable law, all presentments, demands for
performance, notice of nonperformance, protests, notices of protests and notices
of dishonor in connection with the Obligations or any GranCare Document,
including but not limited to (a) notice of the existence, creation or incurring
of any new or additional obligation or of any action or failure to act on the
part of any GranCare Company, HRP, any endorser or creditor of any GranCare
Company or any other Person; (b) any notice of any indulgence, extensions or
renewals granted to any obligor with respect to the Obligations; (c) any
requirement of diligence or promptness in the enforcement of rights under any
GranCare Document, or any other agreement or instrument directly or indirectly
relating thereto or to the Obligations; (d) any enforcement of any present or
future agreement or instrument relating directly or indirectly thereto or to the
Obligations; (e) notice of any of the matters referred to in Section 9 above;
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(f) any defense of any kind which the Guarantor may now have with respect to his
liability under this Guaranty; (g) any right to require HRP, as a condition of
enforcement of this Guaranty, to proceed against any GranCare Company or any
other Person or to proceed against or exhaust any security held by HRP at any
time or to pursue any other right or remedy in HRP's power before proceeding
against the Guarantor; (h) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of HRP to file or enforce a claim against the estate (in
administration, bankruptcy, or any other proceeding) of any other Person or
Persons; (i) any defense based upon an election of remedies by HRP; (j) any
defense arising by reason of any "one action" or "anti-deficiency" law or any
other law which may prevent HRP from bringing any action, including a claim for
deficiency, against the Guarantor, before or after HRP's commencement of
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (k) any defense based upon any lack of diligence by HRP in the
collection of any Obligation; (l) any duty on the part of HRP to disclose to the
Guarantor any facts HRP may now or hereafter know about any GranCare Company or
any other obligor in respect of Obligations; (m) any defense arising because of
an election made by HRP under Section 1111(b)(2) of the Federal Bankruptcy Code;
(n) any defense based on any borrowing or grant of a security interest under
Section 364 of the Federal Bankruptcy Code; (o) and any defense based upon or
arising out of any defense which any GranCare Company or any other Person may
have to the payment or performance of the Obligations (including but not limited
to failure of consideration, breach of warranty, fraud, payment, accord and
satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability and usury). Guarantor acknowledges and
agrees that each of the waivers set forth herein on the part of the Guarantor is
made with Guarantor's full knowledge of the significance and consequences
thereof and that, under the circumstances, the waivers are reasonable. If any
such waiver is determined to be contrary to Applicable Law such waiver shall be
effective only to the extent not prohibited by such Applicable Law.
11. Reinstatement. This Guaranty shall continue to be effective, or be
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reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations or the payment of the Deposit Amount (as hereinafter
defined) is rescinded or must otherwise be restored or returned by HRP upon the
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insolvency, bankruptcy, dissolution, liquidation or reorganization of any
GranCare Company or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, any GranCare
Company or any substantial part of its property, or otherwise, all as though
such payments had not been made.
12. Payments. The Guarantor hereby agrees that the Obligations, and all
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amounts payable hereunder, will be paid to HRP without set-off or counterclaim
in U.S. Dollars at the office of HRP located at 000 Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, or to such other location as HRP shall notify the
Guarantor.
13. Representations and Warranties. The Guarantor represents and warrants
------------------------------
that:
(A) Corporate Existence. The Guarantor is a corporation duly
-------------------
incorporated and validly existing under the laws of the jurisdiction of its
incorporation, and is duly licensed or qualified as a foreign corporation in
all states wherein the nature of its property owned or business transacted
by it makes such licensing or qualification necessary, except where the
failure to be licensed or to so qualify could not have a Material Adverse
Effect.
(B) No Violation. The execution, delivery and performance of this
------------
Guaranty will not contravene any provision of law, statute, rule or
regulation to which the Guarantor or any of its Subsidiaries is subject or
any judgment, decree, franchise, order or permit applicable to the Guarantor
or any of its Subsidiaries, or conflict or be inconsistent with or result in
any breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien upon any of the property or
assets of the Guarantor or any of its Subsidiaries pursuant to the terms of
any agreement or instrument to which the Guarantor or any of its
Subsidiaries is party, or violate any provision of the respective corporate
charters or bylaws of the Guarantor or any of its Subsidiaries.
(C) Corporate Authority and Power. The execution, delivery and
-----------------------------
performance of this Guaranty is within the corporate powers of the Guarantor
and has been duly authorized by all necessary corporate action.
(D) Enforceability. This Guaranty has been duly executed and
--------------
delivered by the Guarantor, and this Guaranty constitutes the valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and except as
enforceability may be subject to general principles of equity, whether such
principles are applied in a court of equity or at law.
(E) Governmental Approvals. No order, permission, consent, approval,
----------------------
license, authorization, registration or validation of, or filing with, or
exemption by, any governmental authority is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Guaranty, or the taking of any action contemplated hereby or thereby.
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(F) Financial Statements. The financial statements of the Guarantor
--------------------
contained in the Guarantor's Registration Statement on Form S-4 filed in
connection with the Merger, fairly present the consolidated financial
condition of the Guarantor and its Subsidiaries as of their date of
presentation, and the consolidated results of their operations and their
consolidated cash flows for the respective fiscal period then ended. The
Financial Statements (including in each case the related schedules and
notes) (i) have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as disclosed therein), (ii) are
true, complete and correct, and (iii) do not omit any material fact
necessary to make them not misleading.
(G) No Adverse Change. Other than as set forth in or contemplated by
-----------------
the Guarantor's Registration Statement on Form S-4 filed in connection with
the Merger, since May 31, 1996, there has been no change in the business
operations, management or properties, or in the condition, financial or
other, of the Guarantor and its Subsidiaries taken as a whole that has had
or could have a Material Adverse Effect.
(H) Litigation. The Guarantor has no notice or knowledge of any action,
----------
suit or proceeding pending or threatened against or affecting it at law or
in equity or before or by any governmental department, court, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind that would, to the best of its knowledge, information
or belief, materially and adversely affect its ability to perform its
obligations under this Guaranty.
(I) No Restrictions. Neither the Guarantor nor any of its Subsidiaries
---------------
has entered into any agreement or arrangement, written or oral, direct or
indirect, with any GranCare Company that either now or in the future would
have the effect of restricting the ability of any GranCare Company, or would
conflict with the right of any GranCare Company, to (a) enter into any new
or additional mortgage or lease financing, or any other transaction, with
HRP (including, without limitation, any transaction contemplated by Section
9.27 of the Acquisition Agreement), (b) extend or renew the term of any
mortgage or lease financing with HRP, (c) exercise any option to purchase
property from HRP or (d) take any other action permitted or required to be
taken by any GranCare Company pursuant to the terms of any GranCare
Document.
14. Covenants. The Guarantor hereby covenants and agrees with HRP that,
---------
from and after the date of this Guaranty until the Obligations are paid in full
or until the Release Date (as defined in Section 16 hereof):
----------
(a) the Guarantor shall not enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of in one transaction or a series of transactions, all or
substantially all of its business, property or fixed assets, whether now owned
or hereafter acquired, except that the Guarantor may merge or consolidate with
any Person, or convey, transfer or lease substantially all of its assets so long
as
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(A) no condition or event shall exist, either before or immediately
after giving effect to such merger or consolidation, or such conveyance,
transfer or lease, that constitutes a Guarantor Default;
(B) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Guarantor, as the case may be, shall
be a corporation organized and existing under the laws of the United States
or any State thereof (including the District of Columbia), and, if the
Guarantor is not such corporation, (i) such corporation shall have executed
and delivered to HRP its assumption of the due and punctual performance and
observance of each covenant and condition of this Guaranty to the same
extent and with the same effect as though such corporation was a party
hereto and was named and defined as the "Guarantor" herein and (ii) shall
have caused to be delivered to HRP an opinion of nationally recognized
independent counsel, or other independent counsel reasonably satisfactory to
HRP, to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and comply with
the terms hereof; and
(i) if the survivor of any such merger is the Guarantor, the
Consolidated Net Worth of the Guarantor giving effect to such
merger shall not be less than $100,000,000; or
(ii) if the successor formed by such consolidation or the survivor of
such merger, if other than the Guarantor, or the Person that
acquires by conveyance, transfer or lease substantially all of the
assets of the Guarantor as an entirety, as the case may be, giving
effect to such consolidation or merger, or such conveyance,
transfer or lease, has either (x) a Consolidated Net Worth of not
less than $100,000,000 or (y) (A) paid HRP an amount in immediately
available funds equal to the Default Amount, free and clear of
claims of third parties, to be held by HRP as cash collateral for
the payment of the Guarantor's obligations hereunder (such amounts
to be applied by HRP to the payment and performance of the
obligations of the Guarantor (and its successors) hereunder as and
when the same become due and payable in accordance with the
provisions of this Guaranty) and (B) executed and delivered a cash
collateral pledge agreement in favor of HRP in respect of such cash
collateral (together with UCC-1 financing statements or similar
instruments if requested by HRP, and in form satisfactory to HRP),
which cash collateral pledge agreement shall be in form and
substance satisfactory to HRP in its sole discretion.
(b) The Guarantor shall not, and shall not permit any of its Subsidiaries
to, enter into any agreement or arrangement, written or oral, direct or
indirect, with any GranCare Company that would have the effect of restricting
the ability of any GranCare Company, or would conflict with the right of any
GranCare Company, to (a) enter into any new or additional mortgage or lease
financing, or any other transaction, with HRP (including, without limitation,
any transaction contemplated by Section 9.27 of the Acquisition Agreement), (b)
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extend or renew the term of any mortgage or lease financing with HRP, (c)
exercise any option to purchase property from HRP or (d) take any other action
permitted or required to be taken by any GranCare Company pursuant to the terms
of any GranCare Document.
15. Guarantor Events of Default. If one or more of the following events (a
---------------------------
"Guarantor Event of Default") shall have occurred:
--------------------------
(A) the Guarantor shall fail to make punctual payment of any amount
payable hereunder as the same shall become due and payable; or
(B) any representation or warranty of the Guarantor contained in this
Guaranty, or any statement or certificate furnished pursuant to any
provision of this Guaranty or the Amendment, shall have been false,
incorrect or misleading in any material respect when made or so certified
to; or
(C) the Guarantor shall breach any of the provisions of, or fail duly to
observe or perform any covenant, agreement or provision contained in, this
Guaranty; or
(D) any obligation of the Guarantor in respect of any Indebtedness or
any Contingent Obligation with an aggregate amount of principal outstanding
(whether or not due) exceeding $10,000,000 (but excluding, in any event, the
obligations of the Guarantor hereunder) shall be declared to be or shall
become due and payable prior to the stated maturity thereof, or such
Indebtedness or Contingent Obligation shall not be paid as and when the same
becomes due and payable, or there shall occur and be continuing any default
under any instrument, agreement or evidence of indebtedness relating to any
such Indebtedness the effect of which is to permit the holder or holders of
such instrument, agreement or evidence of indebtedness, or a trustee, agent
or other representative on behalf of such holder or holders, to cause such
Indebtedness to become due prior to its stated maturity; or
(E) the Guarantor shall apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, make a general
assignment for the benefit of its creditors, commence a voluntary case under
the Bankruptcy Code, file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against
it in an involuntary case under the Bankruptcy Code, or take any corporate
action for the purpose of effecting any of the foregoing; or
(F) a proceeding or case shall be commenced, without the application or
consent of the Guarantor thereof in any court of competent jurisdiction,
seeking its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, the appointment of a trustee,
receiver, custodian, liquidator or the like of the Guarantor or of all or
any substantial part of its assets, or similar relief in respect of the
Guarantor under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or
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case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed and
in effect, for a period of 60 days; or an order for relief against the
Guarantor shall be entered in an involuntary case under the Bankruptcy Code;
or
(G) A judgment or judgments for the payment of money in excess of
$[10,000,000] (net of insurance proceeds) in the aggregate shall be rendered
against the Guarantor and any such judgment or judgments shall not have been
vacated, discharged, stayed or bonded pending appeal within thirty (30) days
from the entry thereof;
THEN, notwithstanding that no GranCare Event of Default may then have occurred
----
and be continuing, (a) in the event of a Guarantor Event of Default described in
paragraph (E) or (F) above, there shall become due and payable to HRP, and the
------------- ---
Guarantor shall immediately pay HRP, without notice or demand of any kind
whatsoever, an amount in immediately available funds equal to the Default
Amount, and (b) in the event of any other Guarantor Event of Default, upon
notice from HRP specifying such Guarantor Event of Default, there shall become
due and payable to HRP, and the Guarantor shall immediately pay HRP, an amount
in immediately available funds equal to Default Amount. The amounts so paid to
HRP shall be held as collateral for the payment of the Guarantor's obligations
hereunder. Such amounts shall be applied by HRP to the payment and performance
of the obligations of the Guarantor hereunder as and when the same become due
and payable in accordance with the provisions of this Guaranty.
16. Payment of Default Amount. Notwithstanding anything herein to the
-------------------------
contrary, upon the Guarantor's (i) payment to HRP of an amount in immediately
available funds equal to the Default Amount, free and clear of claims of third
parties, to be held by HRP as cash collateral for the payment of the Guarantor's
obligations hereunder (such amounts to be applied by HRP to the payment and
performance of the obligations of the Guarantor (and its successors) hereunder
as and when the same become due and payable in accordance with the provisions of
this Guaranty) and (ii) execution and delivery of a cash collateral pledge
agreement in favor of HRP in respect of such cash collateral (together with
executed UCC-1 financing statements or similar instruments if requested by HRP,
and in form satisfactory to HRP), which cash collateral pledge agreement shall
be in form and substance satisfactory to HRP in its sole discretion (the date
upon which the conditions in clauses (i) and (ii) have been satisfied, the
"Release Date"), Sections 14 and 15 hereof shall have no further force and
------------- ----------- --
effect, and (subject to Section 11 hereof) HRP shall look solely to such cash
----------
collateral for payment of the Guarantor's obligations hereunder (so long as such
cash collateral shall not thereafter become subject to any Lien or other claim
of any Person, other than the rights of the Guarantor hereunder). Without
limiting the foregoing, such cash collateral pledge agreement shall provide that
(A) the amount paid to HRP pursuant to this Section 16 , less amounts applied by
----------
HRP from time to time to the payment of the Obligations (the "Deposit Balance"),
---------------
shall bear interest at a per annum rate equal to the lesser of eight percent
(8%) per annum or the T-Bill Rate (as hereinafter defined), which interest shall
be payable to the Guarantor or to its order on each anniversary of the date of
the payment of such amount to HRP (the "Deposit Payment Date") so long as no
--------------------
GranCare Event of Default shall have occurred and be continuing on such interest
payment date, (B) the Deposit Balance, together with accrued but unpaid interest
thereon, shall be released to the Guarantor or to its order upon the payment in
full of the Obligations, and (C) the Deposit Balance and accrued interest
thereon may be commingled with the general assets of HRP. The term "T-Bill
Rate" means, with respect to the Deposit Balance, the yield to maturity implied
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by (i) the yields reported as of 10:00 A.M. (New York City time) on the Deposit
Payment Date on the display designated as "Page 678" on the Telerate Access
Service (or such other display as may replace Page 678 on Telerate Access
Service) for 30-year U.S. Treasury securities, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of the Deposit Payment
Date in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for 30-year U.S. Treasury securities. Such implied yield
will be determined, if necessary, by converting U.S. Treasury bill quotations to
per annum bond-equivalent yields in accordance with accepted financial practice.
17. Supply Contracts. The Guarantor agrees that all agreements or
----------------
arrangements between the Guarantor and its Subsidiaries or representative or
agents on the one hand, and AMS or GCI on the other, providing for
pharmaceuticals or other supplies or services to be furnished to any facility
operated by AMS or GCI, shall provide that each such agreement or arrangement
shall be terminated and of no further force and effect, and all obligations and
liabilities thereunder released and terminated (other than obligations to pay
for services or supplies previously rendered or furnished), at any time upon
notice to the Guarantor by HRP after either (i) HRP terminates such lease with
AMS or GCI, accelerates the maturity of any promissory note of AMS or GCI, or
forecloses upon or exercises remedies of like effect in respect of the stock of
GCI or AMS pledged to HRP or (ii) the occurrence of an Event of Default
hereunder or under any other GranCare Document involving the bankruptcy or
insolvency of New GranCare, AMS, GCI or the Guarantor.
18. Severability. Any provision of this Guaranty which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
19. Additional Guaranties. This Guaranty shall be in addition to any other
---------------------
guaranty or other security for the Obligations, and it shall not be prejudiced
or rendered unenforceable by the invalidity of any such other guaranty or
security.
20. Paragraph Headings. The paragraph headings used in this Guaranty are
------------------
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
21. No Waiver, Cumulative Remedies. HRP shall not by any act (except by a
------------------------------
written instrument pursuant to Paragraph 22 hereof), delay, indulgence, omission
------------
or otherwise, be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of
HRP, any right, power or privilege hereunder shall operate as a waiver thereof.
No single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by HRP of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
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HRP would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
22. Waivers and Amendments; Successors and Assigns. None of the terms or
-----------------------------------------------
provisions of this Guaranty may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Guarantor and HRP,
provided that any provision of this Guaranty may be waived by HRP in a letter or
agreement executed by HRP or by telecopy from HRP. This Guaranty shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of HRP and its successors and assigns.
23. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING LAW. THE
------------------------------------------------------------
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A
JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY REASON OF
THIS GUARANTY, ANY GRANCARE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR (1) ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY GRANCARE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH ACTION, SUIT OR PROCEEDING
MAY BE BROUGHT; (2) IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED BY
ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT SHALL HAVE
BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED; (3) TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION,
AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY
IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER; AND (4) AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION,
SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF
MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF
THE FEDERAL RULES OF CIVIL PROCEDURE.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
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24. Notices. All notices under this Guaranty shall be in writing, and shall
-------
be delivered by hand, by a nationally recognized commercial overnight delivery
service, by first class mail or by telecopy, delivered, addressed or
transmitted, if to HRP, at 000 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Attention: President (telecopy no. 617-332-2261), with a copy to Xxxxxxxx &
Worcester LLP, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention:
Xxxxxxxxx X. Xxxxxxxxxx, Esq. (telecopy no. 617-338-2880), and if to the
Guarantor, at its address or telecopy number set out below its signature in this
Guaranty. Such notices shall be effective: in the case of hand deliveries,
when received; in the case of an overnight delivery service, on the next
business day after being placed in the possession of such delivery service, with
delivery charges prepaid; in the case of mail, three days after deposit in the
postal system, first class postage prepaid; and in the case of telecopy notices,
when electronic indication of receipt is received. Either party may change its
address and telecopy number by written notice to the other delivered in
accordance with the provisions of this Section.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed and delivered as of the date first above written.
VITALINK PHARMACY SERVICES, INC.
By:
-------------------------------------
Title:
Address for Notices:
Vitalink Pharmacy Services, Inc.
0000 Xxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: President
Telecopy: (000) 000-0000
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