0000909518-01-500295.txt : 20011008
0000909518-01-500295.hdr.sgml : 20011008
ACCESSION NUMBER: 0000909518-01-500295
CONFORMED SUBMISSION TYPE: T-3
PUBLIC DOCUMENT COUNT: 11
FILED AS OF DATE: 20010918
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GENESIS HEALTH VENTURES INC /PA
CENTRAL INDEX KEY: 0000874265
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051]
IRS NUMBER: 061132947
STATE OF INCORPORATION: PA
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: T-3
SEC ACT: 1939 Act
SEC FILE NUMBER: 022-22559
FILM NUMBER: 1739923
BUSINESS ADDRESS:
STREET 1: 101 EAST STATE STREET
CITY: KENNETT SQUARE
STATE: PA
ZIP: 19348
BUSINESS PHONE: 6104446350
MAIL ADDRESS:
STREET 1: 101 EAST STATE STREET
CITY: KENNETT SQUARE
STATE: PA
ZIP: 19348
T-3
1
a9-5_t3.txt
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM T-3
APPLICATION FOR QUALIFICATION OF INDENTURE
UNDER THE TRUST INDENTURE ACT OF 1939
--------------------------------
GENESIS HEALTH VENTURES, INC.
(Name of Applicant)
101 East State Street
Kennett Square, Pennsylvania 19348
(Address of Principal Executive Offices)
Securities to be Issued Under the Indenture to be Qualified:
Title of Class Amount
-------------- ------
Second Priority Secured Notes due 2007 Aggregate principal amount of
$242,605,000
--------------------------------
Approximate date of proposed public offering: Upon the Effective Date under the
Plan (as defined herein), presently anticipated to be on or about September 28,
2001.
--------------------------------
George V. Hager, Jr.
Executive Vice president and Chief Financial Officer
Genesis Health Ventures Inc.
101 East State Street
Kennett Square, Pennsylvania 19348
(Name and Address of Agent for Service)
With copies to:
Michael F. Walsh, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
--------------------------------------------------------------------------------
The Applicant hereby amends this Application for Qualification on such date or
dates as may be necessary to delay its effectiveness until (i) the 20th day
after the filing of an amendment that specifically states that it shall
supersede this Application for Qualification or (ii) such date as the Securities
and Exchange Commission, acting pursuant to Section 307(c) of the Trust
Indenture Act of 1939, may determine upon the written request of the Applicant.
FORM T-3
GENERAL
ITEM 1. GENERAL INFORMATION.
(a) The Applicant, Genesis Health Ventures, Inc., is a corporation.
Certain subsidiaries of the Applicant will guarantee the New Senior Notes
(defined below).
(b) The Applicant is a Pennsylvania corporation.
ITEM 2. SECURITIES ACT EXEMPTION APPLICABLE.
The Applicant intends to offer, under the terms and subject to the
conditions set forth in the Disclosure Statement (the "Disclosure Statement")
and an accompanying Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code of Applicant, Genesis ElderCare Corp. ("Multicare") and certain
of each of their respective subsidiaries (the "Plan") copies of which are
included as exhibits T3E-1 and T3E-2 to this application, Second Priority
Secured Notes due 2007 bearing interest at LIBOR plus 5.0% due 2007 (the "New
Senior Notes"), in an aggregate principal amount equal to $242,605,000. The New
Senior Notes will be issued pursuant to the indenture to be qualified under this
Form T-3 (the "Indenture"), a copy of which is included as Exhibit T3C to this
application.
The New Senior Notes are being offered by the Applicant in reliance on
an exemption from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act"), afforded by Section 1145 of Title 11 of the
United States Code, as amended (the "Bankruptcy Code"). Generally, section
1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under
a bankruptcy plan of reorganization from registration under the Securities Act
and under equivalent state securities and "blue sky" laws if the following
requirements are satisfied: (i) the securities are issued by the debtor (or its
successor) under a plan of reorganization; (ii) the recipients of the securities
hold a claim against the debtor, an interest in the debtor or a claim for an
administrative expense against the debtor; and (iii) the securities are issued
entirely in exchange for the recipient's clam against or interest in the debtor
or are issued "principally" in such exchange and "partly" for cash or property.
The Applicant believes that the offer and exchange of the New Senior Notes under
the Plan will satisfy such requirements of section 1145(a)(1) of the Bankruptcy
Code and, therefore, such offer and exchange is exempt from the registration
requirements referred to above. Pursuant to the Plan, Multicare will consummate
a merger (the "Merger") with a subsidiary of the Applicant and, as a result,
become a wholly-owned subsidiary of the Applicant. Currently, Applicant owns
43.6% of Multicare. The Plan contemplates, among other things, the restructuring
of the outstanding debt of the Applicant, The Multicare Companies, Inc., a
Delaware corporation, and the entities listed on exhibits "A" and "B" to the
Plan (collectively the "Debtors"), in part through the issuance by the Applicant
of an aggregate principal amount of New Senior Notes equal to $242,605,000. The
New Senior Notes will bear interest at a floating rate of LIBOR plus 5.0%. The
New Senior Notes will mature 6 months after the term note portion of the exit
financing, which is expected to be 5-1/2 years after the effective date of the
Plan (the "Effective Date"). The New Senior Notes will be secured by a junior
lien on real property and related fixtures of substantially all of the Debtors,
subject to the liens granted to the lenders providing exit financing and any
other pre-existing liens on such property. The liens granted to secure the New
Senior Notes will also secure, on an equal and ratable basis, the claims in
Subclass G1-17 (as designated by the Plan) and the liens of the property
securing such claims will secure the New Senior Notes, on a junior and
subordinate basis. For more complete description of the New Senior Notes,
reference is made in the Indenture.
2
AFFILIATIONS
ITEM 3. AFFILIATES.
(a) Set forth below are all direct and indirect subsidiaries of the
Applicant (except for Multicare and its direct and indirect subsidiaries, which
are listed in Section (b) to this Item 3), all of which are wholly owned by the
Applicant or its subsidiaries unless otherwise indicated. The names of
indirectly owned entities are indented and listed under their direct parent
entities:
Concord Healthcare Corporation (DE)
Brinton Manor, Inc. (DE)
Govemor's House Nursing Home, Inc. (DE)
Hilltop Health Care Center, Inc. (DE)
Keystone Nursing Home, Inc. (DE)
Knollwood Nursing Home, Inc. (DE)
Lincoln Nursing Home, Inc. (DE)
Quakertown Manor Convalescent & Rehabilitation, Inc. (DE)
Wayside Nursing Home, Inc. (DE)
Edella Street Associates (PA) 98%(2)
Genesis - Georgetown SNF/JV, Limited Liability Company (DE)
Genesis Holdings, Inc. (DE)
Crystal City Nursing Center, Inc. (MD)
Dover Healthcare Associates, Inc. (DE)
Genesis Health Services Corporation (DE)
ASCO Healthcare, Inc. (MD)
Accumed, Inc. (NH)
ASCO Healthcare of New England, Inc. (MD) 55%
ASCO Heathcare of New England. L.P. (MD) 1%(1)
ASCO Healthcare of New England L.P. (MD) 54.5%(2)
CareCard, Inc. (MD)
Care 4, L.P. (DE) 99.5%(2)
Compass Health Services, Inc. (NH)
Concord Pharmacy Services, Inc. (PA)
National Pharmacy Services, Inc. (PA)
Delco Apothecary, Inc. (PA)
Eastern Medical Supplies, Inc. (MD)
Eastern Rehab Services, Inc. (MD)
Encare of Massachusetts, Inc. (DE)
Health Concepts and Services, Inc. (MD)
Horizon Medical Equipment and Supply, Inc. (WV)
Institutional Health Care Services, Inc. (NJ)
Care4, L.P. (DE) 0.5%(1)
Medical Services Group, Inc. (MD)
NeighborCare Pharmacies, Inc. (MD)
ASCO Healthcare of New England, Inc. (MD) 45%
ASCO Healthcare of New England, L.P. (MD) 44.5%(2)
Main Street Pharmacy, LLC (MD) 1%
Respiratory Health Services, L.L.C. (MD) 70%
Suburban Medical Services, Inc. (PA)
Transport Services, Inc. (MD)
Genesis Eldercare Adult Day Health Services, Inc. (PA)
Genesis Eldercare Home Care Services, Inc. (PA)
Genesis Eldercare Home Health Services-Southern, Inc. (PA)
Genesis/VNA Partnership Holding Company, Inc. (PA)
Genesis Eldercare Network Services, Inc. (PA)
Genesis Eldercare Management Services, Inc. (DE)
3
Genesis ElderCare Employment Services, LLC (DE)
Genesis Eldercare Network Services of Massachusetts, Inc. (PA)
Genesis Health Ventures of West Virginia, L.P. (PA) 1%(1)
Genesis Eldercare Physician Services, Inc. (PA)
Genesis Eldercare Rehabilitation Services, Inc. (PA)
Diane Morgan and Associates, Inc. (PA)
Genesis Eldercare Rehabilitation Management Services, Inc. (PA)
Genesis Health Ventures of West Virginia, L.P. (PA) 1%(1)
Therapy Care, Inc. (PA) 98%
Genesis Eldercare Staffing Services, Inc. (PA)
Genesis Immediate Med Center, Inc. (PA)
Genesis Select Care Corp. (PA)
Pharmacy Equities, Inc. (PA)
Hallmark Healthcare Limited Partnership (MD) 1%(1)
The Tidewater Healthcare Shared Services Group, Inc. (PA) 86%
Therapy Care, Inc. (PA) 2%
Therapy Care Systems, L.P. (PA) 2%(2)
Genesis Health Ventures of Arlington, Inc. (PA)
Genesis Properties Limited Partnership (PA) 1%(1)
Genesis Health Ventures of Bloomfield, Inc. (PA)
Genesis Health Ventures of Clarks Summit, Inc. (PA)
Edella Street Associates (PA) 2%(1)
Genesis Health Ventures of Lanham, Inc. (PA)
Genesis Health Ventures of Massachusetts, Inc. (PA)
Genesis Health Ventures of Naugatuck, Inc. (PA)
Genesis Health Ventures of New Garden, Inc. (PA)
Genesis Health Ventures of Point Pleasant, Inc. (PA)
Genesis Health Ventures of Salisbury, Inc. (PA)
Genesis Properties of Delaware Ltd. Partnership, L.P. (DE) 97%(2)
GHV at Salisbury Center, Inc. (PA)
Genesis Health Ventures of Wayne, Inc. (PA)
Genesis Health Ventures of Wilkes-Barre, Inc. (PA)
Genesis Properties Limited Partnership (PA) 99%(2)
River Street Associates (PA) 2%(1)
Genesis Health Ventures of Windsor, Inc. (PA)
Genesis Healthcare Centers Holdings, Inc. (DE)
Derby Nursing Center Corporation (CT)
EIDOS, Inc. (FL)
Genesis ElderCare Centers I, Inc. (DE)
Genesis ElderCare Centers I, L.P. (DE) 91%(2)
Genesis ElderCare Centers II, Inc. (DE)
Genesis ElderCare Centers II, L.P. (DE) 91%(2)
Genesis ElderCare Centers III, Inc. (DE)
Genesis ElderCare Centers III, L.P. (DE) 91%(2)
Genesis ElderCare Living Facilities, Inc. (PA)
Genesis Eldercare National Centers, Inc. (FL)
Genesis ElderCare Partnership Centers, Inc. (DE)
Genesis ElderCare Centers I, L.P. (DE) 9%(1)
Genesis ElderCare Centers II, L.P. (DE) 9%(1)
Genesis ElderCare Centers III, L.P. (DE) 9%(1)
Genesis Eldercare Properties, Inc. (PA)
Genesis Health Ventures of Indiana, Inc. (PA)
Genesis-Health Ventures of West Virginia, Inc. (PA)
Genesis Health Ventures of West Virginia L.P. (PA) 98%(2)
Knollwood Manor, Inc. (PA)
McKerley Health Care Center - Concord, Inc. (NH)
4
McKerley Health Care Center-Concord Limited Partnership (NH) 1%(1)
McKerley Health Care Centers, Inc. (NH)
McKerley Health Care Center-Concord Limited Partnership (NH) 99%(2)
Meridian Health, Inc. (PA)
Brevard Meridian Limited Partnership (MD) 99%(2)
Catonsville Meridian Limited Partnership (MD) 1%(1) / 98%(2)
Easton Meridain Limited Partnership (MD) 1%(1) / 98%(2)
Greenspring Meridian Limited Partnership (MD) 99%(2)
Hallmark Healthcare Limited Partnership (MD) 99%(2)
Hammonds Lane Meridian Limited Partnership (MD) 1%(1) / 98%(2)
McKerley Health Facilities (NH) 50%(1)
Meridan/Constellation Limited Partnership (MD) 70.7%(2)
Millville Meridian Limited Partnership (MD) 99%(2)
Seminole Meridian Limited Partnership(MD) 1%(1)
Volusia Meridian Limited Partnership (MD) 1%(1)
Meridian Healthcare Investments, Inc. (MD)
Meridian Healthcare, Inc. (PA)
Brevard Meridian Limited Partnership (MD) 1%(1)
Catonsville Meridian Limited Partnership (MD) 1%(1)
Easton Meridian Limited Partnership (MD) 1%(1)
Greenspring Meridian Limited Partnership (MD) 1%(1)
Hammonds Lane Meridian Limited Partnership (MD) 1%(1)
Lake Manor, Inc. (PA)
Lake Washington, Ltd. (FL) 1%(1)
Lake Washington, Ltd.(FL) 99%(1)
McKerley Health Facilities (NH) 50%(1)
Meridian Edgewood Limited Partnership (MD) 1%(1)
Meridian Perring Limited Partnership (MD) 1%(1)
Meridian Valley Limited Partnership (MD) 1%(1)
Meridian Valley View Limited Partnership (MD) 1%(1)
Meridian/Constellation Limited Partnership (MD) 1%(1) / 28.3%(2)
Meridian Edgewood Limited Partnership (MD) 99%(2)
Meridian Perring Limited Partnership (MD) 99%(2)
Meridian Valley Limited Partnership (MD) 99%(1)
Meridian Valley View Limited Partnership (MD) 99%(2)
Millville Meridian Limited Partnership (MD) 1%(1)
Seminole Meridian Limited Partnership (MD) 99%(2)
Volusia Meridian Limited Partnership (MD) 99%(2)
Oak Hill Health Care Center, Inc. (VA)
Versalink, Inc. (DE)
Genesis Properties of Delaware Corporation (DE)
Genesis Properties of Delaware Ltd. Partnership, L.P. (DE) 3%(1)
H.O. Subsidiary, Inc. (MD)
Healthcare Resources Corp. (PA)
Crozer-Genesis Partnership Holding Company, Inc. (PA)
Philadelphia Avenue Corporation (PA)
Philadelphia Avenue Associates (PA) 2%(1)
State Street Associates, Inc. (PA)
Manor Management Corp. of Georgian Manor, Inc. (PA)
State Street Associates, L.P. (PA) 1%(1)
Wyncote Healthcare Corp. (PA)
Geriatric and Medical Companies, Inc. (DE)
Geriatric and Medical Investments Corporation (DE)
Geriatric and Medical Services, Inc. (NJ)
Burlington Woods Convalescent Center, Inc. (NJ)
Cheltenham LTC Management Inc. (PA)
5
Crestview Convalescent Home, Inc. (PA)
Crestview North, Inc. (PA)
GeriMed Corporation (PA)
GMS Insurance Services, Inc. (PA)
GMC Leasing Corporation (DE)
GMC LTC Management, Inc. (PA)
Norristown Nursing & Rehabilitation Center Associates, L.P. (PA) 1%(1)
Innovative Health Care Marketing, Inc. (PA)
Norristown Nursing & Rehabilitation Center Associates, L.P. (PA) 99%(2)
North Cape Convalescent Center Associates, L.P. (PA) 1%(1)
Northwest Total Care Center Associates, L.P. (NJ) 1%(1)
Prospect Park LTC Management, Inc. (PA)
Villas Realty and Investments, Inc. (PA)
North Cape Convalescent Center Associates, L.P. (PA) 99%(2)
Northwest Total Care Center Associates, L.P. (NJ) 99%(2)
Walnut LTC Management, Inc. (PA)
West Philadelphia LTC Management, Inc. (PA)
York LTC Management, Inc. (PA)
GMC Financial Services, Inc. (PA)
GMS Management - Tucker, Inc. (PA)
GMS Management, Inc. (PA)
Life Support Medical, Inc. (PA)
Carefleet, Inc. (PA)
Genesis Eldercare Diagnostic Services, Inc. (PA)
Genesis Eldercare Hospitality Services, Inc. (PA)
GMC Medical Consulting Services, Inc. (PA)
Innovative Pharmacy Services, Inc. (NJ)
Life Support Medical Equipment, Inc. (PA)
Metro Pharmaceutical, Inc. (PA)
Network Ambulance Services, Inc. (PA)
Genesis Eldercare Transportation Services, Inc. (PA)
United Health Care Services, Inc. (PA)
Valley Medical Services, Inc. (PA)
Valley Transport Ambulance Service, Inc. (PA)
Weisenfluh Ambulance Service, Inc. (PA)
Health Objects Corporation (MD)
Automated HomeCare Systems, LLC (MD)
NeighborCare Pharmacy Services, Inc. (DE)
NeighborCare Infusion Services, Inc. (DE)
NeighborCare Medisco, Inc. (CA)
NeighborCare of Oklahoma, Inc. (OK)
NeighborCare-ORCA, Inc. (OR)
NeighborCare-TCI, Inc. (DE)
NeighborCare of Indiana, Inc. (IN)
NeighborCare of Northern California, Inc. (CA)
NeighborCare of Virginia, Inc. (VA)
NeighborCare of Wisconsin, Inc. (WI)
Philadelphia Avenue Associates (PA)
Professional Pharmacy Services, Inc. (MD)
Main Street Pharmacy, LLC (MD) 99%
Respiratory Health Services, L.L.C. (MD) 30%(1)
River Street Associates (PA) 98%(2)
State Street Associates, L.P. (PA) 99%(2)
---------------------------------------------
(1) Interest held as a general partner.
(2) Interest held as a limited partner.
6
(b) As of September 18, 2001, the Applicant is holding 43.6% of
Multicare. Set forth below are all direct and indirect subsidiaries of
Multicare, all of which are wholly owned by the Multicare or its subsidiaries
unless otherwise indicated. The names of indirectly owned entities are indented
and listed under their direct parent entities:
The Multicare Companies Inc. (DE)
ADS/Multicare, Inc. (DE)
Academy Nursing Home, Inc. (MA)
ADS Apple Valley, Inc. (MA)
ADS Apple Valley Limited Partnership (MA) 1%(1)
ADS Apple Valley Limited Partnership (MA) 99%(2)
ADS Consulting, Inc. (MA)
ADS Danvers ALF, Inc. (DE)
ADS Dartmouth ALF, Inc. (DE)
ADS Dartmouth General Partnership (MA) 20%(1)
The ADS Group, Inc. (MA)
ADS Hingham ALF, Inc. (DE)
ADS Hingham Limited Partnership (MA) 99%(2)
ADS Hingham Nursing Facility, Inc. (MA)
ADS Hingham Limited Partnership (MA) 1%(1)
ADS Home Health, Inc. (DE)
ADS Management, Inc. (MA)
ADS Palm Chelmsford, Inc. (MA)
ADS Recuperative Center, Inc. (MA)
ADS Recuperative Center Limited Partnership (MA) 1%(1)
ADS Recuperative Center Limited Partnership (MA) 99%(2)
ADS Reservoir Waltham, Inc. (MA)
ADS Senior Housing, Inc. (MA)
ADS Dartmouth General Partnership (MA) 80%(1)
ADS Village Manor, Inc. (MA)
The Apple Valley Partnership Holding Company, Inc. (PA)
Arcadia Associates (MA) 87.5%(1)
ASL, Inc. (MA)
Health Resources of Academy Manor, Inc. (DE)
Health Resources of Gardner, Inc. (DE)
Health Resources of North Andover, Inc. (DE)
Health Resources of Solomont/Brookline, Inc. (DE)
Nursing and Retirement Center of the Andovers, Inc. (MA)
Prescott Nursing Home, Inc. (MA)
Senior Source, Inc. (MA)
Solomont Family Fall River Venture, Inc. (MA)
Solomont Family Medford Venture, Inc. (MA)
Westford Nursing and Retirement Center, Inc. (MA)
Westford Nursing & Retirement Center, Limited Partnership (MA) 1%(1)
Westford Nursing & Retirement Center, Limited Partnership (MA) 99%(2)
Willow Manor Nursing Home, Inc. (MA)
ANR, Inc. (DE)
Applewood Health Resources, Inc. (DE)
The Assisted Living Associates of Wall, Inc. (WV)
Bethel Health Resources, Inc. (DE)
Breyut Convalescent Center, Inc. (NJ)
Breyut Convalescent Center, L.L.C. (NJ) 99%
Mercerville Associates of New Jersey, L.P. (DE) 1%(1)
Century Care Construction, Inc. (NJ)
Century Care Management, Inc. (DE)
Chateau Village Health Resources, Inc. (DE)
7
CHNR-1, Inc. (DE)
Colonial Hall Health Resources, Inc. (DE)
Colonial House Health Resources, Inc. (DE)
Concord Health Group, Inc. (DE)
The Assisted Living Associates of Berkshire, Inc. (PA)
The Assisted Living Associates of Lehigh, Inc. (PA)
The Assisted Living Associates of Sanatoga, Inc. (PA)
Berks Nursing Homes, Inc. (PA)
CHG Investment Corp. (DE)
Concord Companion Care, Inc. (PA)
Concord Healthcare Services, Inc. (PA)
Concord Home Health, Inc. (PA)
Concord Rehab, Inc. (PA)
Concord Service Corporation (PA)
Delm Nursing, Inc. (PA)
HNCA, Inc. (PA)
Lehigh Nursing Homes, Inc. (PA)
Montgomery Nursing Homes, Inc. (PA)
Rose View Manor, Inc. (PA)
Roxborough Nursing Home, Inc. (PA)
Schuylkill Nursing Homes, Inc. (PA)
Schuylkill Partnership Acquisition Corp. (PA)
Senior Living Ventures, Inc. (PA)
Cumberland Associates of Rhode Island, L.P. (DE) 99%(2)
CVNR, Inc. (DE)
ElderCare Resources Corp. (DE)
Elmwood Health Resources, Inc. (DE)
Encare of Mendham, Inc. (NJ)
Encare of Mendham, L.L.C. (NJ) 99%
Holly Manor Associates of New Jersey, L.P. (DE) 1%(1)
Encare of Pennypack, Inc. (PA)
Encare of Quakertown, Inc. (PA)
The Straus Group-Quakertown Manor, L.P. (NJ) 1%(1)
Encare of Wyncote, Inc. (PA)
The Straus Group-Hopkins House, L.P. (NJ) 1%(1)
ENR, Inc. (DE)
Glenmark Associates, Inc. (WV)
Brightwood Property, Inc. (WV)
Care Haven Associates Limited Partnership (WV) 7.69%(1)/58.69%(2)
Dawn View Manor, Inc. (WV)
Glenmark Associates - Dawn View Manor, Inc. (WV)
Glenmark Limited Liability Company I (WV) 99%
Glenmark Properties I, Limited Partnership (WV) 29.99%(1)/45.0%(2)
Glenmark Properties Inc. (WV)
GMA - Brightwood, Inc. (WV)
GMA - Madison, Inc. (WV)
GMA - Uniontown, Inc. (PA)
GMA Construction, Inc. (WV)
GMA Partnership Holding Company, Inc. (WV)
Care Haven Associates Limited Partnership (WV) 2.31%(1)
Glenmark Properties I, Limited Partnership (WV) 1.1%(1)
Point Pleasant Haven Limited Partnership (WV) 0.2 %(2)
Raleigh Manor Limited Partnership (WV) 2%(2)
Romney Health Care Center Limited Partnership (WV) 0.2%(2)
Sisterville Haven Limited Partnership (WV) 0.2%(2)
Teays Valley Haven Limited Partnership (WV) 0.2%(2)
8
Helstat, Inc. (WV)
House of Campbell, Inc. (WV)
Horizon Associates, Inc. (WV)
Automated Professional Accounts, Inc. (WV)
Compass Health Services, Inc. (WV)
Glenmark Limited Liability Company I (WV) 1%
Horizon Mobile, Inc. (WV)
Tri State Mobile Medical Services, Inc. (WV)
Horizon Rehabilitation, Inc. (WV)
HR of Charleston, Inc. (WV)
HRWV Huntington, Inc. (WV)
Marlinton Associates, Inc. (WV)
Marlinton Partnership Holding Company, Inc. (WV)
North Madison, Inc. (WV)
Pochahontas Continuous Care Center, Inc. (WV)
Point Pleasant Haven Limited Partnership (WV) 98.8%(1) /1%(2)
Raleigh Manor Limited Partnership (WV) 98%(1)
Rest Haven Nursing Home, Inc. (WV)
Romney Health Care Center Limited Partnership (WV) 50%(1) /49%(2)
Sisterville Haven Limited Partnership (WV) 99.8%(1)
Teays Valley Haven Limited Partnership (WV) 99.8%(1)
Groton Associates of Connecticut, L.P. (DE) 99%(2)
Health Resources of Arcadia, Inc. (DE)
Arcadia Associates (MA) 12.5%(2)
Health Resources of Bridgeton, Inc. (NJ) 99%
Health Resources of Bridgeton, L.L.C. (NJ) 99%
Health Resources of Brooklyn, Inc. (DE)
Health Resources of Cedar Grove, Inc. (NJ)
Health Resources of Cinnaminson, Inc. (NJ)
Health Resources of Cinnaminson, L.L.C. (NJ) 99%
Health Resources of Colchester, Inc. (CT)
Health Resources of Columbus, Inc. (DE)
Health Resources of Cranbury, L.L.C. (NJ) 99%
Health Resources of Cumberland, Inc. (DE)
Cumberland Associates of Rhode Island, L.P. (DE) 1%(1)
Health Resources of Eatontown, Inc. (NJ)
Health Resources of Eatontown, L.L.C. (NJ) 99%
Health Resources of Emery, L.L.C. (NJ) 99%
The Straus Group-Old Bridge, L.P. (NJ) 1%(1)
Health Resources of Englewood, Inc. (NJ)
Health Resources of Englewood, L.L.C. (NJ) 99%
Health Resources of Ewing, Inc. (NJ)
Health Resources of Ewing, L.L.C. (NJ) 99%
Health Resources of Fair Lawn, L.L.C. (NJ) 99%
Health Resources of Farmington, Inc. (DE)
Health Resources of Glastonbury, Inc. (CT)
Health Resources of Groton, Inc. (DE)
Groton Associates of Connecticut, L.P. (DE) 1%(1)
Health Resources of Jackson, Inc. (NJ)
Health Resources of Jackson, L.L.C. (NJ) 99%
Health Resources of Karmenta and Madison, Inc. (DE)
Health Resources of Lakeview, Inc. (NJ)
Health Resources of Lakeview, L.L.C. (NJ) 99%
Health Resources of Lemont, Inc. (DE)
Health Resources of Lynn, Inc. (NJ)
Health Resources of Marcella, Inc. (DE)
9
Health Resources of Middletown (R.I.), Inc. (DE)
Middletown (RI) Associates of Rhode Island, L.P. (DE) 1%(1)
Health Resources of Montclair, Inc. (NJ)
Health Resources of Morristown, Inc. (NJ)
Health Resources of Norfolk, Inc. (DE)
Health Resources of Norwalk, Inc. (CT)
Health Resources of Pennington, Inc. (NJ)
Health Resources of Ridgewood, Inc. (NJ)
Health Resources of Ridgewood, L.L.C. (NJ) 99%
The Straus Group-Ridgewood, L.P. (NJ) 1%(1)
Health Resources of Rockville, Inc. (DE)
Health Resources of South Brunswick, Inc. (DE)
Health Resources of South Brunswick, Inc. (NJ)
Health Resources of South Brunswick L.L.C. (NJ) 99%
Health Resources of Troy Hills, Inc. (NJ)
Health Resources of Voorhees, Inc. (NJ)
Health Resources of Wallingford, Inc. (DE)
Wallingford Associates of Connecticut, L.P. (DE) 1%(1)
Health Resources of Warwick, Inc. (DE)
Warwick Associates of Rhode Island, L.P. (DE) 1%(1)
Health Resources of West Orange, L.L.C. (NJ) 99%
Health Resources of Westwood, Inc. (DE)
Healthcare Rehab Systems, Inc. (PA)
HMNH Realty, Inc. (DE)
Holly Manor Associates of New Jersey, L.P. (DE) 99%(2)
Lakewood Health Resources, Inc. (DE)
Laurel Health Resources, Inc. (DE)
LRC Holding Company (DE)
LWNR, Inc. (DE)
Mabri Convalescent Center, Inc. (CT)
Madison Avenue Assisted Living, Inc. (NJ)
Marshfield Health Resources, Inc. (DE)
Mercerville Associates of New Jersey, L.P. (DE) 99%(2)
MHNR, Inc. (DE)
Middletown (RI) Associates of New Jersey, L.P. (DE) 99%(2)
MNR, Inc. (DE)
Multicare AMC, Inc. (DE)
Multicare Home Health of Illinois, Inc. (DE)
Multicare Member Holding Corp. (NJ)
Multicare Payroll Corp. (NJ)
Pompton Associates, L.P. (NJ) 99%(2)
Pompton Care, Inc. (NJ)
Pompton Care, L.L.C. (NJ) 99%
Pompton Associates, L.P. (NJ) 1%(1)
Progressive Rehabilitation Centers, Inc. (DE)
Providence Health Care, Inc. (DE)
Northwestern Management Services, Inc. (DE)
PHC Operating Corp. (DE)
Health Resources of Boardman, Inc. (DE)
Providence Funding Corp. (DE)
Providence Medical, Inc. (DE)
Ridgeland Health Resources, Inc. (DE)
River Pines Health Resources, Inc. (DE)
Rivershores Health Resources, Inc. (DE)
RLNR, Inc. (DE)
Roephel Convalescent Center, Inc. (NJ)
10
Roephel Convalescent Center, L.L.C. (NJ) 99%
Rose Healthcare, Inc. (NJ)
RSNR, Inc. (DE)
RVNR, Inc. (DE)
The Straus Group-Hopkins House, L.P. (NJ) 99%(2)
The Straus Group-Quakertown Manor, L.P. (NJ) 99%(2)
Scotchwood Institutional Services, Inc. (NJ)
Scotchwood Mass. Holding Co., Inc. (DE)
Snow Valley Health Resources, Inc. (DE)
Stafford Convalescent Center, Inc. (DE)
Breyut Convalescent Center, L.L.C. (NJ) 1%
Encare of Mendham, L.L.C. (NJ) 1%
Health Resources of Bridgeton, Inc. (NJ) 1%
Health Resources of Bridgeton, L.L.C. (NJ) 1%
Health Resources of Cinnaminson, L.L.C. (NJ) 1%
Health Resources of Cranbury, L.L.C. (NJ) 1%
Health Resources of Eatontown, L.L.C. (NJ) 1%
Health Resources of Emery, L.L.C. (NJ) 1%
Health Resources of Englewood, L.L.C. (NJ) 1%
Health Resources of Ewing, L.L.C. (NJ) 1%
Health Resources of Fair Lawn, L.L.C. (NJ) 1%
Health Resources of Jackson, L.L.C. (NJ) 1%
Health Resources of Lakeview, L.L.C. (NJ) 1%
Health Resources of Ridgewood, L.L.C. (NJ) 1%
Health Resources of South Brunswick L.L.C. (NJ) 1%
Health Resources of West Orange, L.L.C. (NJ) 1%
Pompton Care, L.L.C. (NJ) 1%
Roephel Convalescent Center, L.L.C. (NJ) 1%
Total Rehabilitation Center, L.L.C. (NJ) 1%
The Straus Group-Old Bridge, L.P. (NJ) 99%(2)
The Straus Group-Ridgewood, L.P. (NJ) 99%(2)
SVNR, Inc. (DE)
TMC Acquisition Corp. (NJ)
Total Rehabilitation Center, L.L.C. (NJ) 99%
Wallingford Associates of Connecticut, L.P. (DE) 99%(2)
Warwick Associates of Rhode Island, L.P. (DE) 99%(2)
---------------------------------------
(1) Interest held as a general partner.
(2) Interest held as a limited partner.
11
(c) On the Effective Date, Multicare will merge with and into a newly
formed direct subsidiary of Applicant and, as a result, Multicare will become a
wholly owned subsidiary of the Applicant and all of the subsidiaries of
Multicare will become indirect subsidiaries of the Applicant.
(d) See Item 4 for "Directors and Executive Officers" of the Applicant,
some of whom may be deemed to be "affiliates" of the Applicant by virtue of
their positions.
(e) Except as set forth above and in Items 4 and 5 of this application,
the Applicant's affiliates, including the bases of control with respect thereto,
will be unchanged upon the Effective Date.
MANAGEMENT AND CONTROL
ITEM 4. DIRECTORS AND EXECUTIVE OFFICERS.
(a) The following table sets forth the names of and all offices held by
all current directors and executive officers of the Applicant. Except as
otherwise noted below, the address for each director and officer listed below is
c/o Genesis Health Ventures, Inc., 101 East State Street, Kennett Square,
Pennsylvania 19348.
Name Office
---- ------
Michael R. Walker Chairman and Chief Executive Officer
Richard R. Howard Vice Chairman and Director
David C. Barr Vice Chairman
George V. Hager, Jr. Executive Vice President and Chief Financial Officer
Barbara J. Hauswald Senior Vice President and Treasurer
James V. McKeon Senior Vice President and Corporate Controller
Richard Pell, Jr. Senior Vice President , Administration and Chief Compliance Officer
Marc D. Rubinger Senior Vice President, Business Services
James W. Tabak Senior Vice President, Human Resources
James J. Wankmiller, Esq. Senior Vice President, General Counsel and Corporate Secretary
Richard Castor Senior Vice President and Chief Information Officer
Joseph R. Buckley Director
James G. Coulter Director
Dr. Philip P. Gerbino Director
Samuel H. Howard Director
Roger C. Lipitz Director
John C. McMeekin Director
James L. Singleton Director
James B. Williams Director
(b) The following table sets forth the names of those persons chosen to
serve as directors of the Applicant's reorganized Board of Directors and
executive officers, as of the Effective Date.
12
Name Office Address
---- ------ -------
Michael R. Walker Chairman and Chief Executive c/o Genesis Health Ventures, Inc. 101
Officer; Director East State Street
Kennett Square, Pennsylvania 19348
Richard R. Howard Vice Chairman c/o Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, Pennsylvania 19348
David C. Barr Vice Chairman c/o Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, Pennsylvania 19348
George V. Hager, Jr. Executive Vice President and Chief c/o Genesis Health Ventures, Inc.
Financial Officer 101 East State Street
Kennett Square, Pennsylvania 19348
Barbara J. Hauswald Senior Vice President and Treasurer c/o Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, Pennsylvania 19348
James V. McKeon Senior Vice President and Corporate c/o Genesis Health Ventures, Inc.
Controller 101 East State Street
Kennett Square, Pennsylvania 19348
Richard Pell, Jr. Senior Vice President , c/o Genesis Health Ventures, Inc.
Administration and Chief Compliance 101 East State Street
Officer Kennett Square, Pennsylvania 19348
Marc D. Rubinger Senior Vice President, Business c/o Genesis Health Ventures, Inc.
Services 101 East State Street
Kennett Square, Pennsylvania 19348
James W. Tabak Senior Vice President, Human c/o Genesis Health Ventures, Inc.
Resources 101 East State Street
Kennett Square, Pennsylvania 19348
James J. Wankmiller, Esq. Senior Vice President, General c/o Genesis Health Ventures, Inc.
Counsel and Corporate Secretary 101 East State Street
Kennett Square, Pennsylvania 19348
Richard Castor Senior Vice President and Chief c/o Genesis Health Ventures, Inc.
Information Officer 101 East State Street
Kennett Square, Pennsylvania 19348
Dr. Philip P. Gerbino Director c/o University of the Sciences in
Philadelphia
600 South 43rd Street
Philadelphia, Pennsylvania 19104-4495
Edwin McCall Crawford Director c/o Caremark Rx
3000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244
James E. Dalton, Jr. Director 6505 Edinburgh Drive
Nashville, Tennessee 37221
James H. Bloem Director c/o Humana Inc.
500 West Main Street
Louisville, Kentucky 40202
Joseph A. LaNasa III Director c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
James Dondero Director c/o Highland Capital Management, LP
13455 Noel Road
Galleria Tower Two, Suite 1300
Dallas, Texas 75240
Robert H. Fish Director c/o Sonoma-Seacrest, LLC
4121 Alta Vista Avenue
Santa Rosa, California 95404
13
Principal Owners of Voting Securities.
(a) Presented below is certain information regarding each person owning
10% or more of the Applicant voting Securities as of September 18, 2001.
Name and Percentage of Voting
-------- --------------------
Complete Mailing Address Title of Class Owned Amount Owned Securities Owned
------------------------ -------------------- ------------ ----------------
The Cypress Group L.L.C. (1) Common Stock 21,175,714 33.3%
65 East 55th Street
19 Floor
New York, NY 10022
TPG Partners II, L.P. (2) Common Stock 20,478,605 32.6%
201 Main Street
Suite 2420
Fort Worth, TX 76102
HCR Manor Care, Inc. (3) Common Stock 7,879,570 13.9%
One Seagate
Toledo, OH 43604-2616
James G. Coulter (4) Common Stock 20,483,105 32.6%
James L. Singleton (5) Common Stock 21,186,339 33.3%
James B. Williams (6) Common Stock 20,478,605 32.6%
--------------------------------------------
(1) Consist of (a) 5,942,063 shares of Common Stock, 950,730 shares of which may be acquired upon the exercise of
warrants and 11,585 shares of Series H Preferred Stock which are convertible into 13,240,000 shares of Common Stock,
beneficially owned by Cypress Merchant Banking Partners L.P. and (b) 307,937 shares of Common Stock, 49,270 shares of
which may be acquired upon the exercise of warrants and 600 shares of Series H Preferred Stock which are convertible
into 685,714 shares of Common Stock, beneficially owed by Cypress Offshore Partners L.P., The Cypress Group L.L.C.,
as well as Cypress Associates L.P., James A. Stern, Jeffery P. Hughes, James L. Singleton and David P. Spalding, may
be deemed to beneficially own these shares. However, all of these persons disclaim beneficial ownership. Does not
includes 8,851 shares of Series I Preferred Stock convertible to 10,115,429 shares of non-voting Common Stock
beneficially owned by the Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
(2) Consists of (a) 6,250,000 shares of Common Stock, 1,000,000 shares of Common Stock which may be converted upon
the exercise of warrants and (b) 11,575 shares of Series H Preferred Stock which are convertible into 13,228,604
shares of Common Stock. These shares are beneficially owned by TPG Partners II, L.P. and the following affiliates:
TPG Parallel, L.P., TPG Investors II, L.P. and TPG MC Coinvestment, L.P. However, all of these groups disclaim
beneficial ownership. Does not include 8,375 shares of Series I Preferred Stock convertible into 9,571,429 shares of
non-voting common stock beneficially owned by TPG Investors II L.P., TPG Parallel II L.P., TPG MC Coinvestment L.P.
and TPG Partners II L.P.
(3) Consists of 586,240 shares of Series G Preferred Stock which are convertible into 7,879,550 shares of Common
Stock.
(4) Includes 20,478,605 shares held by TPG Partners, II L.P. and certain of its affiliates. See Note (2). James G.
Coulter disclaims beneficial ownership of such shares. Mr. Coulter is one of The Cypress Group L.L.C. and TPG
Partners II, L.P.'s designees to the board of directors. Includes 4,500 shares of Common Stock which may be
acquired upon the exercise of stock options.
(5) Includes 21,175,714 shares held by affiliates of The Cypress Group L.L.C. See Note (1). James L. Singleton
disclaims beneficial ownership of such shares. Mr. Singleton is one of he Cypress Group L.L.C. and TPG Partners II,
L.P. designees to the board of directors.
(6) Consists of 20,478,605 shares held by TPG Partners, II L.P. and certain of its affiliates. See Note (2). James
B Williams disclaims beneficial ownership of such shares. James B, Williams is one of The Cypress Group L.L.C. and
TPG Partners II, L.P.'s designees to the board of directors.
14
(b) Presented below is certain information regarding each person
expected, on the basis of present holdings, commitments and information, to own
10% or more of the Applicant voting securities to be outstanding as of the
Effective Date.
Name and Percentage of Voting
-------- --------------------
Complete Mailing Address Title of Class Owned Amount Owned Securities Owned
------------------------ -------------------- ------------ ----------------
Goldman Sachs & Co. Common Stock 6,250,000 15.2%
UNDERWRITERS
ITEM 6. UNDERWRITERS.
(a) Except for the persons listed below in Section (b) to this Item 6,
within the three years prior to the date of the filing of this application, no
person acted as an underwriter of any securities of the Applicant which were
outstanding on the date of this application.
(b) The following persons acted as underwriters in connection with the
Applicant's issuance of 9-7/8% Senior Subordinated Notes due 2009:
NationsBanc Mortgage Securities, LLC
100 N. Tryon Street, 8th Floor
Charlotte, NC 28255
Merrill Lynch & Co.
World Financial Center,
N. Tower, 28th FL
NY, NY 10281
First Union Capital Markets
301 S. College Street, TW-5
Charlotte, NC 28288-0537
(c) No person is acting as principal underwriter of the securities
proposed to be offered pursuant to the Indenture.
CAPITAL SECURITIES
ITEM 7. CAPITALIZATION.
(a) (1) The following table sets forth certain information with respect
to each authorized class of securities of the Applicant as of September 18,
2001.
Title of Class Amount Authorized Amount Outstanding
-------------- ----------------- ------------------
Common Stock, par value $0.02 per share............................ 200,000,000 shares 48,641,456 shares
Non-Voting Common Stock, par value $0.02 per share................. 45,000,000 shares 0 shares
Series G Preferred Stock........................................... 5,000,000 shares(1) 589,714 shares
Series H Preferred Stock........................................... 5,000,000 shares(1) 24,369 shares
15
Series I Preferred Stock........................................... 5,000,000 shares(1) 17,631 shares
9-3/4% Senior Subordinated Notes due 2005 (Indenture, dated as of
June 15, 1995, between Applicant and State Street Bank and Trust
Company, as trustee)............................................... $120,000,000 $120,000,000
9-1/4% Senior Subordinated Notes due 2006 (Indenture, dated as of
October 7, 1996 between Applicant and State Street Bank and Trust
Company, as successor trustee)..................................... $125,000,000 $125,000,000
9-7/8% Senior Subordinated Notes due 2009 (Indenture, dated as of
December 23, 1998 between Applicant and The Bank of New York, as
trustee)........................................................... $120,920,000 (2) $120,920,000 (2)
9-3/8% Senior Subordinated Notes due 2005 (Indenture, dated as of
September 15, 1995 between Grancare, Inc. and Marine Midland Bank, as
trustee)........................................................... $1,590,000 $ 1,590,000
------------------------------------------------
(1) Includes the amount authorized for all shares of Preferred Stock of any
series.
(2) $125,000,000 face amount less $4,080,000 of original issue discount.
(2) The following table sets forth certain information with
respect to authorized class of securities of the Applicant, to be authorized, as
of the Effective Date.
Title of Class Amount Authorized Amount Outstanding
-------------- ----------------- ------------------
New Common Stock, par value $0.02 per share(1)..................... 150,000,000 shares 41,000,000 shares
New Convertible Preferred Stock.................................... 426,000 shares 426,000 shares
Other Preferred Stock.............................................. 49,574,000 shares 0 shares
New Senior Notes................................................... $242,605,000 $242,605,000
------------------------------------------------
(1)On the Effective Date, Applicant will issue warrants to purchase 4,559,475
shares of New Common Stock. This represents approximately 11.12% of the New
Common Stock to be issued on the Effective Date, before dilution for stock
issuances or the exercise of options under the New Management Incentive Plan (as
defined in the Plan) for key employees. The New Warrants will expire on the
first anniversary of the Effective Date and will have an exercise price of
$20.33 per share of New Common Stock.
(b) (1) Each share of the Applicant's Common Stock entitles the holder
thereof to one vote on each matter submitted to a vote at all meetings of the
Applicant's common stockholders.
(2) The holders of the Series G Preferred Stock are entitled
to such number of votes for each share held as equals the number of shares of
Common Stock into which such shares are convertible on the record date set for
determining who is entitled to vote a particular matter and vote together with
the holders of Common Stock as a single class, on all matters to be voted on by
holders of Common Stock, of the Applicant. In addition to such voting rights,
holders of the Series G Preferred Stock are entitled to vote as a separate class
on matters as to which the Pennsylvania Law requires a separate class vote of
the Series G Preferred Stock. In addition, whenever dividends payable on shares
of Series G Preferred Stock are in arrears and unpaid for four consecutive
dividend periods, the number of directors of the Applicant shall be increased by
two and the holders of the Series G Preferred Stock shall have the right, voting
separately as a class, by a vote of holders of a majority of the number of
outstanding shares of Series G Preferred Stock, to elect two directors of the
Applicant. In addition, so long as any shares of Series G Preferred Stock are
outstanding, subject to the applicable provisions of the Pennsylvania Law, the
Applicant shall not, without consent of the holders of at least two-thirds of
the number of shares of Series G Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at a special meeting called
16
for the purpose, (i) increase the number of shares of authorized Series G
Preferred Stock or issue any additional shares of Series G Preferred Stock other
than dividend shares; (ii) amend or modify the powers, preferences or rights of
the Series G Preferred Stork or amend, alter or repeal any of the provisions of
the Applicant's articles or by-laws so as to eliminate the Series G Preferred
Stock or otherwise affect adversely the powers, preferences or rights of the
holders of Series G Preferred Stock; provided, however, that the Applicant may
authorize and issue classes or series of stock ranking senior to, or on a parity
with the Series G Preferred Stock either in the payment of dividends or in the
distribution of assets upon any liquidation, dissolution or winding-up of the
affairs of the Applicant, or that the Applicant may be required to redeem or
repurchase before all of the Series G Preferred Stock has been redeemed without
the consent of the holders of the Series G Preferred Stock; or (iii) enter into
any plan of complete liquidation or dissolution or otherwise effect the
voluntary liquidation, dissolution or winding-up of the Applicant unless, as a
result of such liquidation, dissolution or winding-up, the liquidation
preference on the Series G Preferred Stock is satisfied in full.
(3) The holders of the Series H Preferred Stock are entitled
to such number of votes for each share held as equals the number of shares of
voting Common Stock into which such shares are convertible on the record date
set for determining who is entitled to vote a particular matter and shall vote
together with the holders of the Applicant's Common Stock as a single class, on
all matters to be voted on by holders of the Applicant's Common Stock. In
addition to such voting rights, holders of the Series H Preferred Stock shall be
entitled to vote as a separate class on matters as to which the Pennsylvania Law
requires a separate class vote of the Series H Preferred Stock. In addition,
whenever the Applicant is in default of any of its obligations to redeem any
outstanding shares of Series H Preferred Stock or dividends payable in cash on
shares of Series H Preferred Stock have not been paid in full in cash for four
consecutive fiscal quarters, the number of directors of the Applicant shall be
increased by two and the holders of shares of Series H Preferred Stock and, to
the extent that the Series I Preferred Stock is entitled to participate in the
election of additional directors, Series I Preferred Stock, voting as a single
class, shall be entitled to elect the two additional directors by majority vote.
In addition, so long as any shares of Series H Preferred Stock are outstanding,
subject to the applicable provisions of the Pennsylvania Law, the Applicant
shall not, without consent of the holders of at least a majority of the number
of shares of Series H Preferred Stock and Series I Preferred Stock at the time
outstanding, voting as a class given in person or by proxy, either in writing or
by vote at a special meeting called for the purpose, (i) increase the number of
shares of authorized Series H Preferred Stock or Series I Preferred Stock or
issue any additional shares of Series H Preferred Stock or Series I Preferred
Stock, other than as contemplated by the terms of the Series H Preferred Stock
or the Series I Preferred Stock; (ii) amend or modify the relative rights,
preferences and limitations of the Series H Preferred Stock or Series I
Preferred Stock or amend, alter or repeal any of the provisions of the
Applicant's articles or by-laws so as to eliminate the Series H Preferred Stock
or Series I Preferred Stock or otherwise affect adversely the relative rights,
preferences and limitations of the Series H Preferred Stock or Series I
Preferred Stock; (iii) other then the Series I Preferred Stock and the Series H
Preferred Stock, create, authorize, issue or permit to exist any class or
capital stock or series of preferred stock that ranks senior to or on a parity
with the Series H Preferred Stock (other than preferred stock with an aggregate
liquidation preference and accumulated and unpaid dividends not exceeding $75
million at any time outstanding ranking on a parity with the Series H Preferred
Stock with respect to dividend rights and rights on liquidation, winding-up and
dissolution) with respect to dividend rights and/or rights on liquidation,
winding-up or dissolution, or reclassify any class or series of any junior
securities into, or authorize any securities exchangeable for, convertible into
or evidencing the right to purchase any such class or series; or (iv) enter into
any transaction or series of transactions which would constitute a change of
control or engage in any transaction pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, except in a transaction in which each share of
Series H Preferred Stock is converted into or exchanged for the right to receive
cash consideration in an amount that is at least equal to the greater of (x)
101% of the then effective liquidation preference plus accumulated and unpaid
dividends from and including the most recent dividend payment date and (y) the
fair market value of the consideration the holder of such share of Series H
Preferred Stock would be entitled to receive in respect of such share if such
holder were to convert such share into the Applicant's Common Stock immediately
prior to the effective time of the transaction.
(4) The holders of the Series I Preferred Stock are entitled
to vote as a separate class on matters as to which the Pennsylvania law requires
a separate class vote of the Series I Preferred Stock. In addition, whenever the
Applicant is in default of any of its obligations to redeem any outstanding
shares of Series I Preferred Stock or dividends on shares of Series I Preferred
Stock have not been paid in full in cash for four consecutive fiscal quarters,
the number of directors of the Applicant shall be increased by two and the
holders of shares of Series I Preferred Stock and, to the extent that the Series
H Preferred Stock is entitled to participate in the election of additional
17
directors, Series H Preferred Stock, voting as a single class, shall be entitled
to elect the two additional directors by majority vote. In addition, so long as
any shares of Series I Preferred Stock are outstanding, subject to the
applicable provisions of the Pennsylvania Law, the Applicant shall not, without
consent of the holders of at least a majority of the number of shares of Series
I Preferred Stock and Series H Preferred Stock at the time outstanding, voting
as a class given in person or by proxy, either in writing or by vote at a
special meeting called for the purpose, (i) increase the number of shares of
authorized Series I Preferred Stock or Series H Preferred Stock or issue any
additional shares of Series I Preferred Stock or Series H Preferred Stock, other
than as contemplated by the terms of the Series I Preferred Stock or the Series
H Preferred Stock; (ii) amend or modify the relative rights, preference and
limitations of the Series I Preferred Stock or Series H Preferred Stock or
amend, alter or repeal any of the provisions of the Applicant's articles or
by-laws so as to eliminate the Series I Preferred Stock or Series H Preferred
Stock or otherwise affect adversely the relative rights, preferences and
limitations of the Series I Preferred Stock or Series H Preferred Stock; (iii)
other than the Series I Preferred Stock and the Series H Preferred Stock,
create, authorize, issue or permit to exist any class of capital stock or series
of preferred stock that ranks senior to or on a parity with the Series I
Preferred Stock (other than preferred stock with an aggregate liquidation
preference and accumulated and unpaid dividends not exceeding $75 million at any
time outstanding ranking on a parity with the Series I Preferred Stock with
respect to dividends rights and rights on liquidation, winding-up and
dissolution) with respect to dividend rights and/or rights on liquidation,
winding-up or dissolution, or reclassify any class or series of any junior
securities into, or authorize any securities exchangeable for convertible into
or evidencing the right to purchase any such class or series, or (iv) enter into
any transaction or series of transactions which would constitute a change of
control or engage in any transaction pursuant to Rule 13e 3 under the Securities
Exchange Act of 1934, as amended, except in transaction in which each share of
Series I Preferred Stock is converted into or exchanged for the right to receive
cash consideration in an amount that is at least equal to the greater of (x)
101% of the then effective liquidation preference plus accumulated and unpaid
dividends from and including the most recent dividend payment date and (y) the
fair market value of the consideration the holder of such share of Series I
Preferred Stock would be entitled to receive in respect of such share if such
holder were to convert such share into the Applicant's non voting Common Stock
immediately prior to the effective time of the transaction.
(5) As of the Effective Date, each share of New Common Stock
will entitle the holder thereof to one vote on each matter submitted to a vote
at all meetings of holders of Applicant's New Common Stock.
(6) As of the Effective Date, the holders of the New
Convertible Preferred Stock will be entitled to such number of votes for each
share held as equals the number of shares of New Common Stock into which such
shares are convertible on the record date set for determining who is entitled to
vote a particular matter and vote together with the holders of the New Common
Stock as a single class, on all matters to be voted on by the holders of the New
Common Stock.
INDENTURE SECURITIES
ITEM 8. ANALYSIS OF INDENTURE PROVISIONS.
The following is a general description of certain provisions of the
Indenture to be qualified. The description is qualified in its entirety by
reference to the form of Indenture filed as an exhibit hereto. Capitalized terms
used below and not defined herein have the same meanings as in the Indenture.
Events of Default; Withholding of Notice.
Events of Default under the Indenture occurs if: (1) there is a default
in the payment of any principal of, or premium, if any, on the New Senior Notes
when the same becomes due and payable; (2) default for 30 days in the payment of
any interest on the New Senior Notes after such interest becomes due and
payable; (3) the Applicant or any Guarantor fails to comply with the
restrictions concerning merger, consolidation or transfer of assets contained in
the Indenture; (4) the Applicant or any Guarantor defaults in the observance or
performance of any other provision, covenant or agreement contained in the New
Senior Notes, the Indenture or the Collateral Documents for 30 days after
written notice from the Trustee or the holders of not less than 25% in aggregate
principal amount of the New Senior Notes then outstanding; (5) there is a
failure to pay when due principal, interest or premium in an aggregate amount of
$10 million or more with respect to any Indebtedness of the Applicant or any
Subsidiary thereof, or the acceleration prior to its express maturity of any
such Indebtedness aggregating $10 million or more; (6) a court of competent
18
jurisdiction renders a final judgment or judgments which can no longer be
appealed for the payment of money in excess of $10 million (which are not paid
or covered by third party insurance by financially sound insurers) against the
Applicant or any Subsidiary thereof and such judgment remains undischarged for a
period of 60 consecutive days during which a stay of enforcement of such
judgment shall not be in effect; (7) the Applicant or any Subsidiary pursuant to
or within the meaning of any bankruptcy law, other than the Plan and the
proceedings related thereto: (A) commences a voluntary case or proceeding, (B)
consents to the entry of an order for relief against it in an involuntary case
or proceeding, (C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, (D) makes a general assignment for the
benefit of its creditors or shall admit in writing its inability to pay its
debt, or (E) generally is not paying its debts as they become due; (8) a court
of competent jurisdiction enters an order or decree under any bankruptcy law
that: (A) is for relief against the Applicant or any Subsidiary in an
involuntary case or proceeding, (B) appoints a Custodian of the Applicant or any
Subsidiary or for all or substantially all of the property of the Applicant or
any Subsidiary, or (C) orders the liquidation of the Applicant or any
Subsidiary, and, in each case, the order or decree remains unstated and in
effect for 60 consecutive days; (9) At any time after the execution and delivery
thereof, (i) any Guarantee for any reason, other than the satisfaction in full
of all Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void, or (ii) a
material Collateral Document shall cease to be in full force and effect (other
than by reason of a release of Collateral thereunder in accordance with the
terms hereof or thereof, the satisfaction in full of the Obligations or any
other termination of such Collateral Document in accordance with their terms
hereof or thereof) or shall be declared null and void, or the Trustee, the
Collateral Agent or the Mortgage Indenture Trustee shall not have or shall cease
to have a valid and perfected second priority Lien on any Collateral purported
to be covered thereby having a fair market value, individually or in the
aggregate, exceeding $2,500,000, in each case for any reason other than the
failure of the Trustee, the Collateral Agent or the Mortgage Indenture Trustee
to take any action within its control; and (10) Holders of Senior Indebtedness
holding a Lien on the stock or assets of the Applicant take any judicial action
to enforce such Lien.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Noteholder notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal or premium, if any, or
interest on the New Senior Notes, or that resulted from the failure of the
Applicant to comply with the restrictions concerning merger, consolidation or
transfer of assets contained in the Indenture, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines it to be in the best interests of the holders of the New Senior Notes
to do so.
Authentication and Delivery of New Secured Notes; Application of
Proceeds.
The New Senior Notes shall be executed on behalf of the Applicant by
two Officers (as this term is defined in the Indenture) of the Applicant or an
Officer and an Assistant Secretary of the Applicant. Such signatures may be
either manual or facsimile. If an Officer whose signature is on a New Senior
Note no longer holds that office at the time the Trustee authenticates the New
Senior Note or at any time thereafter, the New Senior Note shall be valid
nevertheless.
A New Senior Note shall not be valid until the Trustee manually signs
the certificate of authentication on the New Senior Note. Such signature shall
be conclusive evidence that the Senior Note has been authenticated under this
Indenture. The New Senior Notes shall be issuable only in registered form
without coupons and only in denominations of $100 and integral multiples
thereof. The Trustee shall issue Senior Notes upon a Company Request. The
Trustee may appoint an authenticating agent acceptable to the Company to
authenticate New Senior Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate New Senior Notes whenever the Trustee
may do so.
There will be no proceeds (and therefore no application of proceeds)
from the issuance of the New Senior Notes because the New Senior Notes will be
issued as part of an exchange for currently outstanding indebtedness, as
provided in the Plan.
Release or Release and Substitution of Property.
(i)Subject to next three paragraphs, Collateral may be
released from the Lien and security interest created by this Indenture and the
Collateral Documents at any time or from time to time upon the request of the
19
Applicant pursuant to an Officers' Certificate certifying that all terms for
release and conditions precedent hereunder and under the applicable Collateral
Document have been met and specifying (A) the identity of the Collateral to be
released and (B) the provision of this Indenture which authorizes such release.
The Trustee shall release, and shall give any necessary consent, waiver or
instruction to the Collateral Agent or the Mortgage Trustee, as the case may be,
to release (at the sole cost and expense of the Applicant) (i) all Collateral
that is contributed, sold, leased, conveyed, transferred or otherwise disposed
of; provided, such contribution, sale, lease, conveyance, transfer or other
distribution is or will be in accordance with the provisions of this Indenture,
including, without limitation, the requirement that the net proceeds, if any,
from such contribution, sale, lease, conveyance, transfer or other distribution
are or will be applied in accordance with this Indenture and that no Default or
Event of Default has occurred and is continuing or would occur immediately
following such release; (ii) Collateral which may be released with the consent
of Holders pursuant to Article 8 of the Indenture (Amendments, Supplements and
Waivers); (iii) all Collateral (except as provided in Article 9 of the Indenture
(Discharge of Indenture, Defeasance) upon discharge or defeasance of this
Indenture in accordance with Article 9 of the Indenture; (iv) all Collateral
upon the payment in full of all obligations of the Applicant with respect to the
New Senior Notes; and (v) Collateral of a Guarantor whose Guarantee is released
pursuant to Section 11.4 of the Indenture (Release of Guarantor). Upon receipt
of such Officers' Certificate, an Opinion of Counsel and any other opinions or
certificates required by the Indenture and the TIA, the Trustee shall execute,
deliver or acknowledge any necessary or proper instruments of termination,
satisfaction or release to evidence the release of any Collateral permitted to
be released pursuant to the Indenture and the Collateral Documents.
(ii) No Collateral shall be released from the Lien and
security interest created by the Collateral Documents pursuant to the provisions
of the Collateral Documents unless there shall have been delivered to the
Trustee the certificates required above.
(iii) The Trustee may release Collateral from the Lien and
security interest created by the Indenture and the Collateral Documents upon the
sale or disposition of Collateral pursuant to the Trustee's powers, rights and
duties with respect to remedies provided under any of the Collateral Documents.
(iv) The release of any Collateral from the terms of the
Indenture and the Collateral Documents shall not be deemed to impair the
security under the Indenture in contravention of the provisions [of the
Indenture] if and to the extent the Collateral is released pursuant to the terms
of the Indenture. To the extent applicable, the Applicant shall cause TIA
Section 313(b), relating to reports, and TIA Section 314(d), relating to the
release of property or securities from the Lien and security interest of the
Collateral Documents and relating to the substitution therefor of any property
or securities to be subjected to the Lien and security interest of the
Collateral Documents to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of the company except in cases
where TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care.
Satisfaction and Discharge of the Indenture.
(i) The Applicant and the Guarantors, if any, may terminate
their obligations under the New Senior Notes, the Guarantees, if any, and the
Indenture, except the obligations referred to in paragraph (3) hereof, if there
shall have been cancelled by the Trustee or delivered to the Trustee for
cancellation all New Senior Notes theretofore authenticated and delivered (other
than any New Senior Notes that are asserted to have been destroyed, lost or
stolen and that shall have been replaced as provided in Section 2.7 of the
Indenture (Replacement Senior Notes)) and the Applicant has paid all sums
payable by it under the Indenture or deposited all required sums with the
Trustee.
(ii) After such delivery the Trustee upon request shall
acknowledge in writing the discharge of the Applicant's and the Guarantors'
obligations under the New Senior Notes, the Guarantees and the Indenture except
for those surviving obligations specified below.
(iii) Notwithstanding the satisfaction and discharge of the
Indenture, the obligations of the Applicant in Sections 2.7 (Replacement Senior
Notes), 7.7 (Compensation and Indemnity), 9.5 (Deposited Money and U.S.
20
Government Obligations to be Held in Trust; Other Miscellaneous Provisions), 9.6
(Reinstatement) and 9.8 (Moneys Held by Trustee) of the Indenture shall survive.
Statement as to Compliance.
The Applicant and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within 120
days after the end of each fiscal year, an Officers' Certificate (one of the
signers of which shall be the principal executive officer, principal financial
officer or principal accounting officer of the Applicant or such Guarantor, as
the case may be) complying with Section 314(a)(4) of the TIA stating that a
review of the activities of the Applicant or such Guarantor, as the case may be,
during such fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Applicant or such Guarantor, as
the case may be, has kept, observed, performed and fulfilled its obligations
under the Collateral Documents and this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his knowledge
the Applicant or such Guarantor, as the case may be, has kept, observed,
performed and fulfilled each and every covenant contained in the Collateral
Documents and the Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions thereof or under the
Indenture (determined without regard to any period of grace or requirement of
notice provided in the Indenture), or, if a Default or Event of Default shall
have occurred, describing all or such Defaults or Events of Default of which he
may have knowledge and what action the Applicant or such Guarantor, as the case
may be, is taking or proposes to take with respect thereto.
The Applicant will, so long as any of the New Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer's becoming aware
of any Default or Event of Default, an Officers' Certificate specifying the
nature and extent of the same in reasonable detail and what action the Applicant
or such Guarantor, as the case may be, is taking or proposes to take with
respect thereto.
ITEM 9. OTHER OBLIGORS.
The Applicant's obligations with respect to the New Senior Notes will
be guaranteed by the Applicant's Subsidiaries (as defined in the Indenture) on
the issue date.
Contents of Application for Qualification. This Application for Qualification
comprises--
(a) Pages numbered 1 to 23, consecutively (and an attached Exhibit
Index).
(b) The statement of eligibility and qualification of the trustee
under the indenture to be qualified.
(c) The following exhibits in addition to those filed as a part of
the statement of eligibility and qualification of the trustee:
Exhibit T3A-1 Amended and Restated Articles of
Incorporation of Applicant (incorporated by
reference to the Applicant's Registration
Statement of Form S-1 (Registration No.
33-40007)).
Exhibit T3A-2* Amendment to the Applicant's Articles of
Incorporation, as filed on March 11, 1994,
with the Secretary of the Commonwealth of
Pennsylvania.
Exhibit T3A-3 Amendment to the Applicant's Articles
of Incorporation, as filed on August 26,
1998, with the Secretary of the Commonwealth
of Pennsylvania (incorporated by reference
to the Applicant's Annual Report on Form
10-K for the fiscal year ending September
30, 1998).
Exhibit T3A-4 Amendment to the Applicant's Amended
and Restated Articles of Incorporation, as
filed with the Secretary of the Commonwealth
of Pennsylvania (incorporated by reference
to the Applicant's Report on Form 8-K dated
November 15, 1999).
21
Exhibit T3A-5* Form of Amended and Restated Articles of
Incorporation of Applicant, to become
effective as of the Effective Date.
Exhibit T3B-1 Amended and Restated Bylaws of Applicant
(incorporated by reference to the
Applicant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998).
Exhibit T3B-2* Form of Amended and Restated Bylaws of
Applicant, to become effective as of the
Effective Date.
Exhibit T3C* Form of Indenture between Applicant, the
Guarantors and the Trustee.
Exhibit T3D Not Applicable.
Exhibit T3E-1* Disclosure Statement for Debtors' Joint Plan
of Reorganization, dated July 6, 2001.
Exhibit T3E-2* Debtors' Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code, dated
July 6, 2001.
Exhibit T3E-3* Technical Amendments to Debtors' Joint Plan
of Reorganization, dated August 27, 2001.
Exhibit T3E-4* Amendments to Debtors' Joint Plan of
Reorganization to Comply with Opinion on
Confirmation, dated September 13, 2001.
Exhibit T3E-5* Erratum to Disclosure Statement for Debtors'
Joint Plan of Reorganization.
Exhibit T3F* Cross reference sheet showing the location
in the Indenture of the provisions inserted
therein pursuant to Sections 310 through
318(a), inclusive, of the Trust Indenture
Act of 1939 (included as part of Exhibit
T3C).
Exhibit T3G* Statement of eligibility and qualification
of the Trustee on Form T-1.
--------------------------------
* Filed herewith.
22
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Applicant, Genesis Health Ventures, Inc., a Pennsylvania corporation, has duly
caused this Application for Qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in Kennett Square, and State of Pennsylvania, on the 18th day of
September, 2001.
(Seal) GENESIS HEALTH VENTURES, INC.
By:/s/ James J. Wankmiller
-------------------------------------
Name: James J. Wankmiller
Title: Senior Vice President,
General Counsel and Corporate
Secretary
Attest: /s/ Michael S. Sherman
----------------------
Name: Michael S. Sherman
Title: Vice President and Assistant Secretary
23
Exhibit Index
-------------
Exhibit No. Description
----------- -----------
Exhibit T3A-1 Amended and Restated Articles of Incorporation of
Applicant (incorporated by reference to the
Applicant's Registration Statement on Form S-1
(Registration No. 33-40007)).
Exhibit T3A-2* Amendment to the Applicant's Articles of
Incorporation, as filed on March 11, 1994, with the
Secretary of the Commonwealth of Pennsylvania.
Exhibit T3A-3 Amendment to the Applicant's Articles of
Incorporation, as filed on August 26, 1998, with the
Secretary of the Commonwealth of Pennsylvania
(incorporated by reference to the Applicant's Annual
Report on Form 10-K for the fiscal year ending
September 30, 1998).
Exhibit T3A-4 Amendment to the Applicant's Amended and Restated
Articles of Incorporation, as filed with the
Secretary of the Commonwealth of Pennsylvania
(incorporated by reference to the Applicant's Report
on Form 8-K dated November 15, 1999).
Exhibit T3A-5* Form of Amended and Restated Articles of
Incorporation of Applicant, to become effective as of
the Effective Date.
Exhibit T3B-1 Amended and Restated Bylaws of Applicant
(incorporated by reference to the Applicant's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
Exhibit T3B-2* Form of Amended and Restated Bylaws of Applicant, to
become effective as of the Effective Date.
Exhibit T3C* Form of Indenture between Applicant, the Guarantors
and the Trustee.
Exhibit T3D Not applicable.
Exhibit T3E-1* Disclosure Statement for Debtors' Joint Plan of
Reorganization, dated July 6, 2001.
Exhibit T3E-2* Debtors' Joint Plan of Reorganization Under Chapter
11 of the Bankruptcy Code, dated July 6, 2001.
Exhibit T3E-3* Technical Amendments to Debtors' Joint Plan of
Reorganization, dated August 27, 2001.
Exhibit T3E-4* Amendments to Debtors' Joint Plan of Reorganization
to Comply with Opinion on Confirmation, dated
September 13, 2001.
Exhibit T3E-5* Erratum to Disclosure Statement for Debtors' Joint
Plan of Reorganization.
Exhibit T3F* Cross reference sheet showing the location in the
Indenture of the provisions inserted therein pursuant
to Sections 310 through 318(a), inclusive, of the
Trust Indenture Act of 1939 (included as part of
Exhibit T3C).
Exhibit T3G* Statement of eligibility and qualification of the
Trustee on Form T-1.
--------------------------------
* Filed herewith.
24
EX-99
3
a_op-a.txt
EXHIBIT T3A-2
EXHIBIT T3A-2
Microfilm Number ________________ Filed with the Department
of State on March 11, 1994
--------------
Entity Number 869683
---------- /s/
-------------------------------
SECRETARY OF THE COMMONWEALTH
GENESIS HEALTH VENTURES, INC.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB: 15-1915 (REV 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating
to articles of amendment), the undersigned businesS corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: GENESIS HEALTH VENTURES, INC.
-----------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 148 West State Street, Kennett Square, PA 19348 Chester
-----------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
-----------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law of 1988
--------------------------------------------------------------------------
4. The date of its incorporation is: May 16, 1985
----------------------------------------
5. (Check, and if appropriate complete, one of the following):
[x] The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
[ ] The amendment shall be effective on: at
--------------- --------------
Date Hour
6. (Check one of the following):
[x] The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S.ss. 1914(a) and (b).
[ ] The amendment was adopted by the board of directors pursuant to 15
Pa.C.S.ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
[x] The amendment adopted by the corporation, set forth in full, is as
follows:
*RESOLVED, that Article 5 of the Articles of Incorporation of
Genesis Health Ventures, Inc. should be amended and restated to read
in full as follows:
5. The aggregate number of shares which the corporation
shall have authority to issue is Thirty million (30,000,000) shares,
consisting of (a) Twenty-five million (25,000,000) shares of common
stock, par value $.02 per share, and (b) Five million (5,000,000)
shares of preferred stock, as more fully described in Article 6 below
("Preferred Stock").*
8. (Check if the amendment restates the Articles):
[ ] The restated Articles of Incorporation supersede the original Articles and
all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer this 8th day of
---
March, 1994
----- --
GENESIS HEALTH VENTURES, INC.
By: /s/ Lewis J. Hoch
---------------------------------------------
Lewis J. Hoch
Vice President, General Counsel & Secretary
2
EX-99
4
a_o-i.txt
EXHIBIT T3A-5
EXHIBIT T3A-5
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
GENESIS HEALTH VENTURES, INC.
First: Name. The name of the corporation is Genesis Health Ventures,
Inc.
Second: Registered Office. The location and address of the registered
office of the corporation is 101 East State Street, Kennett Square, Pennsylvania
19348.
Third: Purpose. The corporation is incorporated under the Business
Corporation Law of the Commonwealth of Pennsylvania for the following purposes:
To have unlimited power to engage in or to do any lawful act
concerning any or all lawful businesses for which corporations
may be incorporated under the Pennsylvania Business
Corporation Law, as amended, and to own, operate and manage
businesses engaged in healthcare services.
Fourth: Term. The term for which the corporation is to exist is
perpetual.
Fifth: A. Capital Stock.
1. Authorized Shares. The aggregate number of shares which the
corporation shall have authority to issue is two hundred ten million
(210,000,000) shares, consisting of (a) two hundred million (200,000,000) shares
of common stock, par value $.02 per share, and (b) ten million (10,000,000)
shares of preferred stock, one million (1,000,000) of which are designated as
Series A Convertible Preferred Stock as described in Article 5(B), and the
remainder of which may be divided and issued from time to time in one or more
series as may be designated by the Board of Directors of the corporation, as
more fully described in Article 5(A)(2) below ("Preferred Stock").
2. Preferred Stock. The shares of Preferred Stock may be divided and
issued from time to time in one or more series as may be designated by the Board
of Directors of the corporation, each such series to be distinctly titled and to
consist of the number of shares designated by the Board of Directors. All shares
of any one series of Preferred Stock so designated by the Board of Directors
shall be alike in every particular, except that shares of any one series issued
at different times may differ as to the dates from which dividends thereon (if
any) shall accrue or be cumulative (or both). The designations, preferences,
qualifications, limitations, restrictions, and special or relative rights (if
any) of any series of Preferred Stock may differ from those of any and all other
series at any time outstanding. The Board of Directors of the Corporation is
hereby expressly vested with authority to fix by resolution the designations,
preferences, qualifications, limitations, restrictions and special or relative
rights (if any) of the Preferred Stock and each series thereof which may be
designated by the Board of Directors, including, but without limiting the
generality of the foregoing, the following:
(a) the voting rights and powers (if any) of the
Preferred Stock and each series thereof;
(b) the rates and times at which, and the terms and
conditions on which, dividends (if any) on Preferred Stock, and each series
thereof, will be paid and any dividend preferences or rights of cumulation;
(c) the rights (if any) of holders of Preferred Stock,
and each series thereof, to convert the same into, or exchange the name for,
shares of other classes (or series of classes) of capital stock of the
corporation and the terms and conditions for such conversion or exchange,
including provisions for adjustment of conversion or exchange prices or rates in
such events as the Board of Directors shall determine;
(d) the redemption rights (if any) of the corporation
and the holders of the Preferred Stock and each series thereof and the times at
which, and the terms and conditions on which, Preferred Stock, and each series
thereof, may be redeemed; and
(e) the rights and preferences (if any) of the holders
of Preferred Stock, and each series thereof, upon the voluntary liquidation,
dissolution or winding up of the corporation.
B. Series A Convertible Preferred Stock.
1. Definitions. The following definitions shall apply in this Article
5(B):
"AGE Institute" shall mean individually and collectively the
following corporations: AGE Institute of Pennsylvania, Inc., AGE Institute of
Massachusetts, Inc., AGE Institute of Florida, Inc., Delaware Valley
Convalescent Homes, Inc., and AGE Holdings, Inc.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock, par value $0.02 per
share, of the Company.
"Company" shall mean Genesis Health Ventures, Inc., a Pennsylvania
corporation.
"Conversion Price" shall mean $20.33, as adjusted pursuant to Section
7 of this Article 5(B).
"Conversion Ratio" shall mean the ratio computed by dividing the
Liquidation Preference by the Conversion Price.
"Convertible Preferred Stock" shall refer to shares of Series A
Convertible Preferred Stock, $0.01 par value per share, of the Company.
2
"Dividend Rate" shall mean 6% per annum, calculated on a 365 (or 366
in the case of leap year) day per year basis, based on the actual number of days
elapsed.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934, as amended, shall include reference to the comparable section, if
any, of any such similar Federal statute.
"Fair Value" shall mean (i) the Market Price or (ii) if the Common
Stock or Other Security, as the case may be, is not so listed or quoted but is
traded in the over-the-counter market (other than the NASDAQ Market), the
average of the closing bid and asked prices of a share of such Common Stock or
Other Security, in each case quoted for the 30 Business Days (or such lesser
number of Business Days as such Common Stock (or Other Security) shall have been
so listed, quoted or traded) next preceding the date of measurement; provided,
however, that if no such sales price or bid and asked prices have been quoted
during the preceding 30-day period or there is otherwise no established trading
market for such security, then "Fair Value" shall mean the value of such Common
Stock or Other Security as determined reasonably and in good faith by the Board
of Directors of the Company; and provided, further, however, that in the event
the current market price of a share of such Common Stock or of the minimum
traded denomination of such Other Security is determined during a period
following the announcement by the Company of (x) a dividend or distribution on
the Common Stock or Other Security payable in shares of Common Stock or in such
Other Security, or (y) any subdivision, combination or reclassification of the
Common Stock or Other Security, and prior to the expiration of 30 Business Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the "Fair Value" shall be appropriately adjusted to take into account
ex-dividend trading. Anything herein to the contrary notwithstanding, in case
the Company shall issue any shares of Common Stock, rights, options, or Other
Securities in connection with the acquisition by the Company of the stock or
assets of any other Person or the merger of any other Person into the Company,
the Fair Value of the Common Stock or Other Securities so issued shall be
determined as of the date the number of shares of Common Stock, rights, options
or Other Securities was determined (as set forth in a written agreement between
the Company and the other party to the transaction) rather than on the date of
issuance of such shares of Common Stock, rights, options or Other Securities.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Liquidation Preference" shall mean $100 per share.
"Market Price" shall mean, with respect to Common Stock or any Other
Security, in each case, if such security is listed on one or more stock
exchanges or quoted on the National Market System or Small Cap Market of NASDAQ
(the "NASDAQ Market"), the average of the closing or last reported sales
3
prices of a share of Common Stock or, if an Other Security in the minimum
denomination in which such security is traded, on the primary national or
regional stock exchange on which such security is listed or on the NASDAQ Market
if quoted thereon.
"Net Cash Proceeds" shall mean all cash and cash equivalents received
by the Company from any of the Specified Transactions net of (i) all expenses,
commissions, and other fees incurred and all taxes required to be paid or
accrued as a liability as a consequence of such Specified Transaction, (ii) all
payments made by the Company or its Subsidiaries on debt which is secured by
assets subject of such Specified Transaction or which debt is required to be
repaid as a result or from proceeds from such Specified Transaction or in order
to obtain a necessary consent to such Specified Transactions or, by applicable
law, be repaid from such Specified Transaction and (iii) appropriate amounts to
be provided by the Company or any of its Subsidiaries as a reserve in accordance
with generally accepted accounting principles against liabilities of the Company
or its Subsidiaries associated with such Specified Transaction, including,
without limitation, claims for indemnification.
"New Warrants" shall mean the warrants to purchase up to 4,559,475
shares of Common Stock of the Company for an exercise price of $20.33 issued on
or about ________, 2001.
"Organic Change" shall mean (A) any sale, lease, exchange or other
transfer of all or substantially all of the property and assets of the Company,
(B) any liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, (C) any merger or consolidation to which the Company is a party
and which the holders of the voting securities of the Company immediately prior
thereto own less than a majority of the outstanding voting securities of the
surviving entity immediately following such transaction, or (D) any Person or
group of Persons (as such term is used in Section 13(d) of the Exchange Act),
shall beneficially own (as defined in Rule 13d-3 under the Exchange Act)
securities of the Company representing 50% or more of the voting securities of
the Company then outstanding. For purposes of the preceding sentence, "voting
securities" shall mean securities, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect the corporate directors (or Persons
performing similar functions).
"Other Securities" shall mean any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
that the holders of the Convertible Preferred Stock at any time shall be
entitled to receive or shall have received, upon the conversion of the
Convertible Preferred Stock, in lieu of or in addition to Common Stock, or that
at any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities.
"Other Shares" has the meaning specified in Section 7(h)(ii) of this
Article 5(B).
4
"Original Issue Date" shall mean the date of the original issuance of
shares of Convertible Preferred Stock.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Redemption Date" shall mean the date on which any shares of
Convertible Preferred Stock are redeemed by the Company.
"Redemption Price" has the meaning set forth in Section 6(a)(i) of
this Article 5(B).
"Required Holders" shall mean the holders of at least of a majority
of the outstanding shares of Convertible Preferred Stock.
"Specified Transactions" shall mean (i) the sale of certain real and
personal property, as identified on Schedule 1 hereto; (ii) the exercise of the
New Warrants; (iii) any settlement with the federal government in connection
with certain administrative appeals identified on Schedule 2 hereto; (iv) the
settlement or other resolution of the claims of the Company and/or its
subsidiaries Debtors against the AGE Institute and its related entities, and (v)
the issuance of any of the Common Stock of the Company (other than in respect of
the New Warrants) for cash, which shall not include issuances of Common Stock
upon conversion of the New Warrants or this Preferred Stock, any issuances of
Common Stock in connection any acquisition or merger by the Company or issuances
of Common Stock, the proceeds of which are required to be paid to creditors of
the Company in accordance with the agreements related thereto.
"Trading Day" shall mean a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange or NASDAQ
market, a day on which such exchange or market is open for the transaction of
business.
2. Designation. The designation of the preferred stock shall be
"Series A Convertible Preferred Stock."
3. Dividends.
(a) So long as any shares of Convertible Preferred Stock shall be
outstanding, the holders of such Convertible Preferred Stock shall be entitled
to receive out of any funds legally available therefore, when, as and if
declared by the Board of Directors of the Company, preferential dividends at the
Dividend Rate on the Liquidation Preference hereunder, payable quarterly on the
first Business Day of each calendar quarter either (i) in cash or (ii) in the
issuance of additional shares of Convertible Preferred Stock with a Liquidation
Preference equal to the amount of such dividend. Such dividends shall be
cumulative and begin to accrue from the Original Issue Date, whether or not
declared and whether or not there shall be net profits or net assets of the
Company legally available for the payment of those dividends.
5
(b) Dividends not paid on the applicable payment date shall be added
to the then effective Liquidation Preference on the relevant dividend payment
date. Any amounts so added to the then effective Liquidation Preference shall be
subject to reduction as provided for in Section 3(c) below.
(c) An amount equal to the accumulated and unpaid dividends for any
past dividend period may be declared and paid as a dividend in shares of
Convertible Preferred Stock as provided for in Section 3(a) above on any
subsequent dividend payment date to all holders of record on the record date
relating to such subsequent dividend payment date. Each such payment shall
automatically reduce the then effective Liquidation Preference per share by an
amount equal to the aggregate amount of such payment divided by the number of
shares of Convertible Preferred Stock outstanding on the record date relating to
such subsequent dividend payment date; provided however, that the Liquidation
Preference shall not be reduced below $100 per share.
4. Liquidation Rights of Convertible Preferred Stock.
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of Convertible Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Company available for distribution to its stockholders, whether such assets are
capital, surplus or earnings, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of any shares of Common
Stock or any share of any other class or series of the Company's preferred stock
ranking junior to the Convertible Preferred Stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution or winding up of
the Company, an amount equal to the Liquidation Preference plus all declared or
accrued and unpaid dividends in respect of any liquidation, dissolution or
winding up consummated.
(b) If upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the assets to be distributed among
the holders of Convertible Preferred Stock shall be insufficient to permit the
payment to such stockholders of the full preferential amounts aforesaid, then
the entire assets of the Company to be distributed shall be distributed ratably
among the holders of Convertible Preferred Stock, based on the full preferential
amounts for the number of shares of Convertible Preferred Stock held by each
holder.
(c) After payment to the holders of Convertible Preferred Stock of
the amounts set forth in Section 4(a) of this Article 5(B), the entire remaining
assets and funds of the Company legally available for distribution, if any,
shall be distributed among the holders of any Company stock entitled to a
preference over the Common Stock in accordance with the terms thereof and,
thereafter, to the holders of Common Stock.
5. Voting Rights. In addition to any voting rights provided by law,
the holders of shares of Convertible Preferred Stock shall have the following
voting rights:
(a) So long as any of the Convertible Preferred Stock is outstanding,
each share of Convertible Preferred Stock shall entitle the holder thereof to
vote on all matters voted on by the holders of Common Stock, voting together as
6
a single class with other shares entitled to vote at all meetings of the
stockholders of the Company. With respect to any such vote, each share of
Convertible Preferred Stock shall entitle the holder thereof to cast the number
of votes equal to the number of votes which could be cast in such vote by a
holder of the number of shares of Common Stock of the Company into which such
share of Convertible Preferred Stock is convertible on the record date for such
vote.
(b) The affirmative vote of the Required Holders, voting together as
a class, in person or by proxy, at a special or annual meeting of stockholders
called for the purpose, or pursuant to a written consent of stockholders shall
be necessary to
(i) authorize, adopt or approve an amendment to the Amended and
Restated Articles of Incorporation of the Company which would alter or
change in any manner the terms, powers, preferences or special rights
of the shares of Convertible Preferred Stock or grant waivers thereof,
or which would otherwise adversely affect the rights of the Convertible
Preferred Stock, provided that no such modification or amendment may,
without the consent of each holder of Convertible Preferred Stock
affected thereby, (A) change the redemption date of the Convertible
Preferred Stock; (B) raise the Conversion Price or reduce the
Liquidation Preference, Dividend Rate or Redemption Price of the
Convertible Preferred Stock; (C) adversely affect any of the conversion
features of the Convertible Preferred Stock set forth in Section 7 of
this Article 5(B); or (D) reduce the percentage of outstanding
Convertible Preferred Stock necessary to modify or amend the terms
thereof or to grant waivers thereof;
(ii) issue any shares of the capital stock of the Company ranking
senior to, or pari passu with (either as to dividends or upon voluntary
or involuntary liquidation, dissolution or winding up) the Convertible
Preferred Stock, or issue any securities convertible into or
exchangeable for such shares; or
(iii) enter into any transaction or series of transactions which would
constitute an Organic Change if the terms thereof do not comply with
Section 6(d) of this Article 5(B), if applicable.
6. Redemption of Convertible Preferred Stock.
(a) (i) Optional Redemption. (A) If any Organic Change occurs, at the
option of any holder of outstanding Convertible Preferred Stock (as exercised
pursuant to subparagraph (B) below), the Company shall redeem, at the redemption
price equal to the sum of the Liquidation Preference per share plus an amount
equal to all accrued and unpaid dividends per share (the "Redemption Price"),
those outstanding shares of Convertible Preferred Stock which the holders of
such Convertible Preferred Stock have elected to redeem, such redemption to
occur immediately prior to or simultaneously with the consummation of such
Organic Change.
(B) The Company will give written notice of any Organic
Change, stating the substance and intended date of consummation thereof, not
more than sixty (60) Business Days nor less than twenty (20) Business Days prior
to the date of consummation thereof, to each holder of Convertible Preferred
7
Stock. The holders of the Convertible Preferred Stock shall have fifteen (15)
Business Days (the "Notice Period") from the date of the receipt of such notice
to demand (by written notice mailed to the Company) redemption of all or any
portion of the shares of Convertible Preferred Stock held by such holder.
(ii) Mandatory Redemption. (A) The Company shall redeem, and the
holders of the outstanding Convertible Preferred Stock shall sell to the
Company, at the Redemption Price, (1) all of the outstanding Convertible
Preferred Stock on the ninth anniversary of the Original Issue Date and (2)
outstanding Convertible Preferred Stock on a pro rata basis from Net Cash
Proceeds from Specified Transactions actually received by the Company (which has
not been previously used to redeem the Convertible Preferred Stock) provided
that (x) the Company shall not be obligated to make any such redemption pursuant
to this clause (2) in an amount less than $10 million and (y) such redemption
pursuant to this clause (2) shall be made within 90 days after the receipt of
such Net Cash Proceeds which would require a redemption hereunder. Any optional
redemption made pursuant to Section 6(a)(iii) shall reduce the Company's
obligation to make a mandatory redemption pursuant to clause (2) of this Article
5(B) on a dollar-for-dollar basis.
(B) At least twenty (20) Business Days and not more than
sixty (60) Business Days prior to the date fixed for the redemption of the
Convertible Preferred Stock, written notice (the "Redemption Notice") shall be
mailed, postage prepaid, to each holder of record of the Convertible Preferred
Stock at its post office address last shown on the records of the Company. The
Redemption Notice shall state:
(1) the total number of shares of Convertible Preferred
Stock the Company intends to redeem from all holders;
(2) the number of shares of Convertible Preferred Stock
held by the holder that the Company intends to redeem;
(3) the date fixed for redemption and the Redemption Price;
and
(4) that the holder is to surrender to the Company, in the
manner and at the place designated, its certificate or certificates representing
the shares of Convertible Preferred Stock to be redeemed.
(iii) Company's Optional Redemption. (A) The Company, at any time and
from time to time, may at its option, elect to redeem, and the holders of the
outstanding Convertible Preferred Stock shall sell to the Company, shares of
Convertible Preferred Stock provided such redemption is made on pro rata basis
from all holders of Convertible Preferred Stock.
8
(B) At least twenty (20) Business Days and not more than
sixty (60) Business Days prior to the date fixed for the redemption of the
Convertible Preferred Stock, written notice (the "Redemption Notice") shall be
mailed, postage prepaid, to each holder of record of the Convertible Preferred
Stock at its post office address last shown on the records of the Company. The
Redemption Notice shall state:
(1) the total number of shares of Convertible Preferred
Stock the Company intends to redeem from all holders;
(2) the number of shares of Convertible Preferred Stock
held by the holder that the Company intends to redeem;
(3) the date fixed for redemption and the Redemption Price;
and
(4) that the holder is to surrender to the Company, in the
manner and at the place designated, its certificate or certificates representing
the shares of Convertible Preferred Stock to be redeemed.
(b) On or before the Redemption Date, each holder of Convertible
Preferred Stock shall surrender the certificate or certificates representing
such shares of Convertible Preferred Stock to the Company, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price for such shares shall be payable in cash on the Redemption Date to the
person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be cancelled and retired. In the
event that less than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
(c) Unless the Company defaults in the payment in full of the
Redemption Price, dividends on the Convertible Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and the holders of
such shares redeemed shall cease to have any further rights with respect thereto
on the Redemption Date, other than to receive the Redemption Price without
interest.
(d) If, at the time of any redemption pursuant to this Section 6, the
funds of the Company legally available for redemption of Convertible Preferred
Stock are insufficient to redeem the number of shares required to be redeemed,
those funds which are legally available shall be used to redeem the maximum
possible number of such shares, pro rata based upon the number of shares to be
redeemed. At any time thereafter when additional funds of the Company become
legally available for the redemption of Convertible Preferred Stock, such funds
shall immediately be used to redeem the balance of the shares of Convertible
Preferred Stock which the Company has become obligated to redeem
9
pursuant to this subparagraph, but which it has not redeemed; or, in the case of
a redemption pursuant to Section 6(a)(i) if a Person other than the Company is
the surviving or resulting corporation in any Organic Change, such Person shall,
at the consummation of such Organic Change, redeem such balance of the shares of
Convertible Preferred Stock (and the Company shall so provide in its agreements
with such person relating to such Organic Change).
(e) The Company may not otherwise redeem or repurchase the
Convertible Preferred Stock.
7. Conversion. (a) Subject to the provisions for adjustment
hereinafter set forth, (i) each share of Convertible Preferred Stock shall be
convertible at any time after the Original Issue Date and from time to time, at
the option of the holder thereof (such conversion, an "Optional Conversion") and
(ii) all shares of Convertible Preferred Stock shall be converted at any time
after the first anniversary of the Original Issue Date if, at any time, the
average Market Price for a share of New Common Stock for 20 consecutive Trading
Days exceeds $30.00 (as adjusted from time to time to reflect stock splits,
dividends, recapitalizations, combinations or the like) (the "Price Condition"),
at the option of the Company (such conversion, a "Mandatory Conversion"), in
each case into fully paid and nonassessable shares of Common Stock.
(b) Each share of Convertible Preferred Stock shall be convertible
into the number of shares of Common Stock which results from dividing (x) the
Liquidation Preference of each such share plus all accrued and unpaid dividends
thereon by (y) the Conversion Price per share in effect at the time of
conversion, provided, however, that upon any conversion of shares of Convertible
Preferred Stock the Company shall have the right exercisable as provided in
Section 7(c) below, to pay to the converting holder in cash the accrued and
unpaid dividends on the Convertible Preferred Stock to be converted.
(c) No fractional shares shall be issued upon the conversion of any
shares of Convertible Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of
Convertible Preferred Stock by a holder thereof shall be aggregated for purposes
of determining whether conversion would result in the issuance of any fractional
share. If, after the aforementioned aggregation, the conversion would result in
the issuance of a fraction of a share of Common Stock, the Company shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the Fair Value of such fraction on the date of
conversion.
(d) (i) An Optional Conversion of the Convertible Preferred Stock may
be effected by any such holder upon the surrender to the Company at the
principal office of the Company of the certificate for such Convertible
Preferred Stock to be converted accompanied by a written notice stating that
such holder elects to convert all or a specified number of such shares (which
may be fractional shares) in accordance with the provisions of this Section 7
and specifying the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. A Mandatory Conversion of
the Convertible Preferred Stock shall be immediately effective on the date on
which the Company sends a written notice to all holders of Convertible Preferred
Stock and shall be deemed to be made as of the date of the Price Condition has
been met; provided such notice is sent by the Company within 30 days thereof.
Any holder may surrender to the Company the certificate for such Convertible
Preferred Stock converted pursuant to a Mandatory Conversion accompanied by a
written notice specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. Until such
10
time as the holder surrenders its certificate pursuant to a Mandatory
Conversion, the certificates representing the Convertible Preferred Stock shall
represent the number of shares of Common Stock issuable upon conversion of such
certificate. Upon any conversion of any shares of Convertible Preferred Stock,
the Company shall pay the holder thereof all accrued and unpaid dividends owing
in respect of such shares so converted.
(ii) In case the written notice specifying the name or name in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued shall specify a name or names other than that of
such holder, such notice shall be accompanied by payment of all
transfer taxes payable upon the issuance of shares of Common Stock in
such name or names. Other than such taxes, the Company will pay any and
all issue and other taxes (other than taxes based on income) that may
be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Convertible Preferred Stock pursuant hereto. As
promptly as practicable, and in any event within five Business Days
after the surrender of such certificate or certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Company
that such taxes have been paid), the Company shall deliver or cause to
be delivered (i) certificates representing the number of validly
issued, fully paid and nonassessable full shares of Common Stock to
which the holder of shares of Convertible Preferred Stock being
converted shall be entitled and (ii) if less than the full number of
shares of Convertible Preferred Stock evidenced by the surrendered
certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares of Convertible
Preferred Stock evidenced by such surrendered certificate or
certificates less the number of shares of Convertible Preferred Stock
being converted.
(iii) Such conversion shall be deemed to have been made at the close of
business on the date of giving the written notice referred to in the
first sentence of (b)(i) above and of such surrender of the certificate
or certificates representing the shares of Convertible Preferred Stock
to be converted so that the rights of the holder thereof as to the
shares of Convertible Preferred Stock being converted shall cease
except for the right to receive shares of Common Stock in accordance
herewith, and the person entitled to receive the shares of Common Stock
shall be treated for all purposes as having become the record holder of
such shares of Common Stock at such time.
(e) In case any shares of Convertible Preferred Stock are to be
redeemed pursuant to Section 6, all rights of conversion shall cease and
terminate as to the shares of Convertible Preferred Stock to be redeemed at the
close of business on the Business Day next preceding the date fixed for
redemption unless the Company shall default in the payment of the Redemption
Price.
(f) The Conversion Price shall be subject to adjustment from time to
time in certain instances as hereinafter provided.
11
(g) The Company shall at all times reserve, and keep available for
issuance upon the conversion of the Convertible Preferred Stock, such number of
its authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Convertible
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if necessary to permit the conversion of all
outstanding shares of Convertible Preferred Stock.
(h) The Conversion Price will be subject to adjustment from time to
time as follows:
(i) Adjustment for Stock Splits and Combinations. If the Company shall
declare or pay a dividend on its outstanding shares of Common Stock or
make a distribution to holders of its Common Stock, in either case in
shares of Common Stock or subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock, the Conversion
Price then in effect immediately before the subdivision shall be
proportionately decreased, and conversely, if the Company shall combine
its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment
under this subsection (i) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(ii) Distributions. If, after the effective date of these Amended and
Restated Articles of Incorporation, the Company shall distribute to all
holders of its shares of Common Stock evidences of its indebtedness,
shares of another class of capital stock ("Other Shares"), assets
(excluding cash distributions made as a dividend payable out of
earnings or out of surplus legally available for dividends under the
laws of the jurisdiction of incorporation of the Company) or rights to
subscribe to shares of Common Stock, then in each such case, unless the
Company elects to reserve such indebtedness, assets, rights or shares
for distribution to each holder of Convertible Preferred Stock upon the
conversion of the Convertible Preferred Stock so that such holder will
receive upon such conversion, in addition to the shares of Common Stock
to which such holder is entitled, the amount and kind of such
indebtedness, assets, rights or shares which such holder would have
received if such holder had, immediately prior to the record date for
the distribution of such indebtedness, assets, rights or shares,
converted the Convertible Preferred Stock and received Common Stock,
the Conversion Price in effect immediately prior to such distribution
shall be decreased to an amount determined by multiplying such
Conversion Price by a fraction, the numerator of which is the Fair
Value of a share of the Common Stock at the date of such distribution
less the fair value of the evidences of indebtedness, Other Shares,
assets or subscription rights as the case may be, so distributed (as
determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive) and the denominator of which
is the Fair Value of a share of Common Stock at such date. Such
adjustment shall be made whenever any such distribution is made, and
shall become effectively retroactively on the date immediately after
the record date for the determination of stockholders entitled to
receive such distribution.
12
(iii) Adjustments for Reclassification, Exchange and Substitution. In
the event the Common Stock issuable upon the conversion or redemption
of the Convertible Preferred Stock is changed into the same or a
different number of shares of stock of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than
a subdivision or combination of stock or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section
7), then and in any such event each holder of Convertible Preferred
Stock shall have the right thereafter to receive, upon the conversion
or the redemption in exchange for Common Stock of such Convertible
Preferred Stock, the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or
other change by holders of the number of shares of Common Stock into
which such Convertible Preferred Stock shall be convertible or
redeemable, all subject to further adjustment as provided herein.
(iv) Reorganizations, Mergers, Consolidations or Sales of Assets. If
there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification or
exchange of stock provided for elsewhere in this Section 7) or a merger
or consolidation of the Company with or into another corporation, or
the sale of all or substantially all of the Corporation's properties
and assets to any other person, then, as a part of such reorganization,
merger, consolidation or sale, provision shall be made so that the
holders of the Convertible Preferred Stock shall thereafter be entitled
to receive, upon the conversion or the redemption in exchange for
Common Stock of such Convertible Preferred Stock, the number of shares
of stock or other securities or property to which a holder of the
number of shares of Common Stock issuable upon such conversion or
redemption would have been entitled on such capital reorganization,
merger, consolidation or sale. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 7
with respect to the rights of the holders of such Convertible Preferred
Stock after the reorganization, merger, consolidation or sale to the
end that the provisions of this Section 7 (including adjustment of the
Conversion Price then in effect and the number of shares of stock
issuable upon conversion or redemption of such Convertible Preferred
Stock) shall be applicable after that event and be as nearly equivalent
as may be practicable.
(v) For purposes of this paragraph (h), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company or any of
its subsidiaries.
(vi) If the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number
of shares of Common Stock issuable upon exercise of the right of
conversion granted by this paragraph (h) or in the Conversion Price
then in effect shall be required by reason of the taking of such
record.
(vii) Anything in this paragraph (h) to the contrary notwithstanding,
the Company shall not be required to give effect to any adjustment in
the Conversion Price unless and until the net effect of one or more
13
adjustments (each of which shall be carried forward), determined as
above provided, shall have resulted in a change of the Conversion Price
by at least $0.01 and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion Price by at
least $0.01, such change in Conversion Price shall thereupon be given
effect.
(i) In case of any Organic Change (or any other merger or
consolidation to which the Company is a party, which for purposes of this
paragraph (i) shall be deemed an Organic Change), each share of Convertible
Preferred Stock then outstanding, other than those shares to be redeemed
pursuant to Section 6 of this Article 5(B), shall thereafter be convertible
into, in lieu of the Common Stock issuable upon such conversion prior to
consummation of such Organic Change, the kind and amount of shares of stock and
other securities and property receivable (including cash) upon the consummation
of such Organic Change by a holder of that number of shares of Common Stock into
which one share of Convertible Preferred Stock was convertible immediately prior
to such Organic Change (including, on a pro rata basis, the cash, securities or
property received by holders of Common Stock in any tender or exchange offer
that is a step in such Organic Change). In case securities or property other
than Common Stock shall be issuable or deliverable upon conversion as aforesaid,
then all references in this Section 7 shall be deemed to apply, so far as
appropriate and nearly as may be, to such other securities or property.
(j) In case at any time or from time to time the Company shall pay
any stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Company or consolidation or merger of the Company with or into
another corporation, or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company, then, in any one or more of said cases, the Company shall give at
least 20 days' prior written notice to the registered holders of the Convertible
Preferred Stock at the addresses of each as shown on the books of the Company as
of the date on which (i) the books of the Company shall close or a record shall
be taken for such stock dividend, distribution or subscription rights or (ii)
such reorganization, reclassification, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding up shall take place, as the case
may be, provided that in the case of any Organic Change to which paragraph (g)
applies the Company shall give at least 30 days' prior written notice as
aforesaid. Such notice shall also specify the date as of which the holders of
the Common Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or conveyance or participate in
such dissolution, liquidation or winding up, as the case may be. Failure to give
such notice shall not invalidate any action so taken.
(k) Section 305 Issues. Anything in this Section 7 of Article 5(B) to
the contrary notwithstanding, the Company shall be entitled, but not required,
to make such reductions in the Conversion Price, in addition to those required
by Section 7(h), as it in its discretion shall determine to be advisable in
order that any dividend in or distribution of shares of Common Stock or shares
14
of capital stock or any class other than Common Stock, subdivision,
reclassification or combination of shares of Common Stock, issuance of rights or
warrants, or any other transaction having similar effect, shall not be treated
as a distribution of property by the Company to its shareholders under Section
305 of the Internal Revenue Code of 1986, as amended, or any successor provision
and shall not be taxable to them.
8. Reports as to Adjustments. Upon any adjustment of the Conversion
Ratio then in effect and any increase or decrease in the number of shares of
Common Stock issuable upon the operation of the conversion set forth in Section
7, then, and in each such case, the Company shall promptly deliver to each
holder of the Convertible Preferred Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the Conversion Ratio then in effect
following such adjustment and the increased or decreased number of shares
issuable upon the conversion granted by Section 7, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of the
facts requiring such adjustment. Where appropriate, such notice to holders of
the Convertible Preferred Stock may be given in advance.
9. No Reissuance of Preferred Stock. No Convertible Preferred Stock
acquired by the Company by reason of redemption, purchase, or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Company shall be authorized to issue.
10. Notices. All notices to the Company permitted hereunder shall be
personally delivered or sent by first class mail, postage prepaid, addressed to
its principal office located at 101 East State Street, Kennett Square,
Pennsylvania 19348 or to such other address at which its principal office is
located and as to which notice thereof is similarly given to the holders of the
Convertible Preferred Stock at their addresses appearing on the books of the
Company.
Sixth: No Cumulative Voting. Shareholders of the corporation are not
entitled to cumulate their votes in the election of directors.
Seventh: Board of Directors.
A. The Board of Directors appointed through and upon the Plan of
Reorganization of the corporation dated ______________, 2001 becoming effective
shall serve for a term of one year. At the first meeting of shareholders for the
election of directors following the effective date of these Amended and Restated
Articles of Incorporation, the Board of Directors shall be divided into three
classes, Class I, Class II and Class III, which shall be as nearly equal in
number as possible. Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected; provided, however, that each director in Class I shall hold office
until the first annual meeting of shareholders following the meeting at which
such director was elected (or until the action of shareholders in lieu thereof);
15
each director in Class II shall hold office until the second annual meeting of
shareholders following the meeting at which such director was elected (or until
the action of shareholders in lieu thereof); and each director in Class III
shall hold office until the third annual meeting of shareholders following the
meeting at which such director was elected (or until the action of shareholders
in lieu thereof).
B. The number of directors which shall constitute the whole Board of
Directors of the corporation shall be the number from time to time fixed by the
bylaws of the corporation (which number shall not be less than three), and such
number of directors so fixed in such bylaws may be changed only by receiving the
affirmative vote of (i) the holders of at least eighty percent (80%) of all the
shares of the corporation then entitled to vote on such change, or (ii)
seventy-five percent (75%) of the directors in office at the time of vote. When
the number of directors is changed, any increase or decrease in the number of
directorships shall be apportioned among the classes so as to make all classes
as nearly equal in number as possible. The directors of this corporation need
not be shareholders.
C. Each director shall serve until his successor is elected and
qualified or until his death, retirement, resignation or removal. Should a
vacancy occur or be created, whether arising through death, resignation,
retirement or removal of a director, such vacancy shall be filled by a majority
vote of the remaining directors. A director so elected to fill a vacancy shall
serve for the remainder of the then present term of office of the class to which
he was elected.
D. Any director, or the entire Board of Directors, may be removed
from office at any time, with or without cause, but only by the affirmative vote
of the holders of at least eighty percent (80%) of all of the outstanding shares
of capital stock of the corporation entitled to vote for that purpose, except
that if the Board of Directors, by an affirmative vote of at least seventy-five
percent (75%) of the entire Board of Directors, recommends removal of a director
to the shareholders, such removal may be effected by the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of the
corporation entitled to vote on the election of directors at a meeting of
shareholders called for that purpose.
Eighth: Special Meetings of Shareholders. Special meetings of the
shareholders, for any purpose or purposes, may be called by the Chairman of the
Board and shall be called by the Secretary at the request in writing of a
majority of the Board of Directors or shareholders entitled to cast thirty
percent (30%) of the votes which all shareholders are entitled to cast at the
particular meeting. Any such request of directors or shareholders shall state
the purpose or purposes of the proposed meeting.
Ninth: Business Combinations. Except for a "Business Combination" (as
defined below) which as been approved by the affirmative vote of at least
seventy-five percent (75%) of the entire Board of Directors of the corporation,
any Business Combination, in addition to any affirmative vote required by law,
shall require the affirmative vote of the holders of at least eight percent
(80%) of the voting power of the then outstanding shares of capital stock of the
corporation entitled to vote generally in the election of directors (the "Voting
Stock"), voting together as a single class (it being understood that for
purposes of this Article 9, each share of the Voting Stock shall have the number
of votes granted to it pursuant to Article 5(A) of these Amended and Restated
16
Articles of Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise. The term "Business Combination" as used in
this Article 9 shall mean:
A. any merger or consolidation of the corporation or any corporation
of which the shares of stock having a majority of the general voting power in
electing the Board of Directors are, at the time as of which any determination
is being made, owned by the corporation, either directly or indirectly
("Subsidiary"); or
B. any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of transactions of all or substantially all of the
assets of the corporation and its Subsidiaries; provided that transactions which
are financing transactions (such as sale-leaseback transactions) shall not be
deemed to be Business Combinations for purposes of this Article 9; or
C. the adoption of any plan or proposal for the liquidation or
dissolution of the corporation; or
D. any reclassification of securities (including any reverse stock
split) or recapitalization of the corporation, or any merger or consolidation of
the corporation with any Subsidiary.
Tenth: Amendment. Notwithstanding any other provisions of these
Amended and Restated Articles of Incorporation or the bylaws of the corporation
(and notwithstanding the fact that a lesser percentage may be specified by law,
these Amended and Restated Articles of Incorporation or the bylaws of the
corporation), the affirmative vote of the holders of eighty percent (80%) or
more of the outstanding Voting Stock, voting together as a single class, shall
be required to amend or repeal, or adopt any provisions inconsistent with
(collectively, "Amend") Articles 7, 8, 9, 10, 11 or 12 of these Amended and
Restated Articles of Incorporation, unless such Amendment has been approved by
the affirmative vote of at least seventy-five percent (75%) of the entire Board
of Directors of the corporation in which event such Amendment may be approved by
the affirmative vote of the holders of a majority of the outstanding Voting
Stock, voting together as a single class.
Eleventh: Provisions Not Applicable. As provided in the corporation's
Amended and Restated Articles of Incorporation filed on March 29, 1991 with the
Department of State of the Commonwealth of Pennsylvania, the corporation
reaffirms that the provisions contained in Subchapters E, G, H, I and J of
Chapter 25 of the Pennsylvania Business Corporation Law, as it may be amended
from time to time, shall not be applicable to the corporation.
Twelfth: Tender Offers.
A. The Board of Directors may, if it deems it advisable, oppose a
tender or other offer for the corporation's securities, whether the offer is in
cash or in securities of a corporation or otherwise. When considering whether to
oppose an offer, the Board of Directors may, but it is not legally obligated to,
17
consider any pertinent issues. By way of illustration, but not of limitation,
the Board of Directors may, but shall not be legally obligated to consider any
and all of the following:
1. whether the offer price is acceptable based on the
historical and present operating results or financial conditions of the
corporation;
2. whether a more favorable price could be obtained for the
corporation's securities in the future;
3. the impact which an acquisition of the corporation would
have on the employees, suppliers and customers of the corporation and its
Subsidiaries and on the communities served by the corporation and its
Subsidiaries;
4. the reputation and business practice of the offeror and
its management and affiliates as they would affect the employees, suppliers and
customers of the corporation and its Subsidiaries and the future value of the
corporation's stock;
5. the value of the securities, if any, which the offeror
is offering in exchange for the corporation's securities, based on an analysis
of the worth of the corporation as compared to the entity whose securities are
being offered; and
6. any antitrust or other legal and regulatory issues that
are raised by the offer.
B. If the Board of Directors determines that an offer should be
rejected, it may take any lawful action to accomplish its purpose including, but
not limited to, any and all of the following: (i) advising shareholders not to
accept the offer, (ii) commencing litigation against the offeror; (iii) filing
complaints with all governmental and regulatory authorities; (iv) acquiring the
corporation's securities; (v) selling or otherwise issuing authorized but
unissued securities or treasury stock or granting options with respect thereto;
(vi) acquiring a company to create an antitrust or other regulatory problem for
the offeror; and (vii) obtaining a more favorable offer from another individual
or entity.
Thirteenth: Non-Voting Capital Stock. The Corporation shall not be
authorized to issue non-voting capital stock to the extent prohibited by Section
1123(a)(6) of Title 11 of the United States Code (the "Bankruptcy Code");
provided however that this Article 13 will have no further force and effect
beyond that required by Section 1123 of the Bankruptcy Code.
Fourteenth: Severability. In the event that all, some or any part of
any provision contained in these Amended and Restated Articles of Incorporation
shall be found by any court of competent jurisdiction to be illegal, invalid or
unenforceable (as against public policy or otherwise), such provision shall be
enforced to the fullest extent permitted by law and shall be construed as if it
had been narrowed only to the extent necessary so as not to be invalid, illegal
or unenforceable; the validity, legality and enforceability of the remaining
18
provisions of these Amended and Restated Articles of Incorporation shall
continue in full force and effect and shall not be affected or impaired by such
illegality, invalidity or unenforceability of any other provision (or any part
or parts thereof) of these Amended and Restated Articles of Incorporation. If
and to the extent that any provision contained in these Amended and Restated
Articles of Incorporation violates any rule of a securities exchange or
automated quotation system on which securities of the Corporation are traded,
the Board of Directors is authorized, in its sole discretion, to suspend or
terminate such provision for such time or periods of time and subject to such
conditions as the Board of Directors shall determine in its sole discretion.
19
EX-99
5
bylaws.txt
EXHIBIT T3B-2
EXHIBIT T3B-2
AMENDED AND RESTATED
BYLAWS
OF
GENESIS HEALTH VENTURES, INC.
These Bylaws are adopted by the Corporation and are
supplemental to the Pennsylvania Business Corporation Law
as the name shall from time to time be in effect.
ARTICLE I. SHAREHOLDERS AND DIRECTORS
Section 101.1 Place of Shareholders' Meetings. All meetings of the
shareholders shall be held at such place or places, inside or outside the
Commonwealth of Pennsylvania, as determined by the Board of Directors from time
to time.
Section 101.2 Annual Shareholders' Meeting. The annual meeting of the
shareholders, for the election of directors and the transaction of other
business which is properly brought before such meeting, shall be held in each
calendar year, at a time and place determined by the Board of Directors.
Section 101.3 Special Meetings of Shareholders. Special meetings of the
shareholders may be called at any time by the Board of Directors or the Chairman
of the Board and Chief Executive Officer.
Section 101.4 Conduct of Shareholders' Meetings. The Chairman of the
Board shall preside at all Shareholders' meetings. In the absence of the
Chairman of the Board, the President shall preside or, in his or her absence,
any officer designated by the Board of Directors. The officer presiding over the
shareholders' meeting may establish such rules and regulations for the conduct
of the meeting as he or she may deem to be reasonably necessary or desirable for
the orderly and expeditious conduct of the meeting. Unless the officer presiding
over the shareholders' meeting otherwise requires, shareholders need not vote by
ballot on any questions.
Section 102.1 Management by Board of Directors. The business and
affairs of the Corporation shall be managed by its Board of Directors. The Board
of Directors may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute, regulation, the Amended and
Restated Articles of Incorporation or these Amended and Restated Bylaws directed
or required to be exercised or done by the shareholders.
Section 102.2. Nomination for Directors. Beginning with the annual
meeting of the shareholders to be held in 2002, nominations by shareholders for
directors to be elected at a meeting of shareholders and which have not been
previously approved by the Board of Directors must be submitted to the Secretary
of the Corporation in writing, either by personal delivery, nationally
recognized express mail or United States mail, postage prepaid, not later than
(i) with respect to an election to be held at an annual meeting of shareholders,
the latest date upon which shareholder proposals must be submitted to the
Corporation for inclusion in the Corporation's proxy statement relating to such
meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, or other applicable rules or regulations under the federal securities
laws or, if no such rules apply, at least ninety (90) days prior to the date one
year from the date of the immediately preceding annual meeting of shareholders,
and (ii) with respect to an election to be held at a special meeting of
shareholders, the close of business on the tenth day following the date on which
notice of such meeting is first given to shareholders. Each such nomination
shall set forth: (i) the name and address of the shareholder making the
nomination and of the person or persons nominated; (ii) a representation that
the shareholder is a holder of record of capital stock of the Corporation
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to vote for the person or persons nominated; (iii) a description of
all arrangements and understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations were made by the shareholder; (iv) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had the nominee been nominated by the
Board of Directors; and (v) the consent of each nominee to serve as a director
of the Corporation if so elected. All late nominations shall be rejected.
Notwithstanding the foregoing, at any time prior to the election of directors at
a meeting of shareholders, the Board of Directors may designate a substitute
nominee to replace any bona fide nominee who was nominated as set forth above
and who, for any reason, becomes unavailable for election as a director.
Section 102.3. Number of Directors. The Board of Directors shall
consist of initially eight (8) directors and, after an initial one year term
following the effectiveness of the Corporation's Plan of Reorganization dated
____________, 2001, (i) the Board of Directors shall consist of not less than 8
nor more than 13 directors as shall be established from time to time by majority
vote of the members in office of the Board of Directors, and (ii) the Board
shall be divided into three classes in accordance with the Corporation's Amended
and Restated Articles of Incorporation.
Section 102.4. Term of Directors. Each director shall serve until his
successor is elected and qualifies, even though his term of office has otherwise
expired, except in the event of his earlier resignation, removal or
disqualification.
Section 102.5. Resignations of Directors. Any director may resign at
any time. Such resignation shall be in writing, but the acceptance thereof shall
not be necessary to make it effective.
Section 102.6. Vacancies in the Board of Directors. Should a vacancy in
the Board of Directors occur or be created, whether arising through death,
resignation, retirement or removal of a Director, such vacancy shall be filled
by a majority vote of the remaining Directors. A Director so elected to fill a
vacancy shall serve for the remainder of the then present term of office of the
class to which he was elected.
Section 102.7. Compensation of Directors. Unless the Board of Directors
otherwise determines, directors shall not be entitled to any compensation for
their services as directors; provided that directors who are not also employees
of the Corporation shall be reimbursed by the Corporation for all out-of-pocket
2
expenses actually incurred by such directors in attending meetings of the Board
of Directors or any committees thereof. Any director may serve the Corporation
in other capacities and be entitled to such compensation therefor as is
determined by the Board of Directors.
Section 102.8. Annual Meeting of Directors. An annual meeting of the
Board of Directors shall be held each year immediately following the annual
meeting of the shareholders and at such other times as the Board shall from time
to time designate or as may be designated in any notice from the Secretary
calling the meeting.
Section 102.9. Meetings of the Directors. Meetings of the Board of
Directors may be called by the Chairman or any three members of the Board of
Directors. Any one member of the Board of Directors may request that the
Chairman of the Board of Directors call a meeting of the Board of Directors.
Upon the request of the Chairman or such three directors, it shall be the duty
of the Secretary of the Corporation to fix the date of such meeting to be held
at such time, not less than three (3) business days after the receipt of such
request as the Secretary may determine and to give due notice thereof for any
such meeting to be held at the principal office of the Corporation or at any
other place designated in the notice of the meeting; or, in the alternative, not
less than twenty-four (24) hours after the receipt of such request as the
Secretary may determine and to give due notice thereof for any such meeting
where any director may participate by using a conference telephone or similar
communications equipment, by means of which all such persons participating in
the meeting can hear each other.
Section 102.10. Notice of Directors' Meetings. Whenever notice of a
meeting of the Board of Directors is required, it shall be in writing and shall
be made to each director to his or her address appearing on the books of the
Corporation by hand delivery, first class or express mail (postage prepaid),
courier service (charges prepaid) or by facsimile transmission. Unless otherwise
required by law or these Bylaws, neither the business to be transacted at, nor
the purpose of, any regular meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
Section 102.11. Reports and Records. The reports of officers and
committees and the records of the proceedings of all committees shall be filed
with the Secretary of the Corporation and presented to the Board of Directors,
if practicable, at its next regular meeting. The Board of Directors shall keep
complete records of its proceedings in a minute book kept for that purpose. When
a director shall request it, the vote of each director upon a particular
question shall be recorded in the minutes.
Section 102.12. Committees. The following committees of the Board of
Directors shall be established by the Board of Directors in addition to any
other committee the Board of Directors may in its discretion establish: (a)
Executive Committee; (b) Audit and Compliance Committee; and (c) Compensation
Committee.
Section 102.13. Executive Committee. The Executive Committee shall
consist of at least three (3) directors. Meetings of the Committee may be called
whenever two or more members of the Committee so request in writing. The
Executive Committee shall have and exercise the authority of the Board of
3
Directors in the management of the business of the Corporation between the dates
of regular meetings of the Board.
Section 102.14. Audit and Compliance Committee. The Audit and
Compliance Committee shall consist of at least three (3) directors, a majority
of which shall be independent. Meetings of the Audit and Compliance Committee
may be called at any time by the Chairman or Secretary of the Audit and
Compliance Committee, and shall be called whenever two or more members of the
Committee so request in writing. The Audit and Compliance Committee shall have
the following authority, powers and responsibilities:
(a) To recommend each year to the Board the independent
accountants to audit the annual financial statements of the Corporation and its
consolidated subsidiaries and to review the fees charged for such audits or for
special engagements given to such accountants;
(b) To meet with the independent accountants, Chief Executive
Officer, Chief Financial Officer and any other Corporation executives as the
Audit and Compliance Committee deems appropriate at such times as the Audit and
Compliance Committee shall determine to review: (i) the scope of the audit plan;
(ii) the Corporation's financial statements; (iii) the results of external and
internal audits; (iv) the effectiveness of the Corporation's system of internal
controls; (v) any limitations imposed by Corporation personnel on the
independent public accountants; and (vi) such other matters as the Audit and
Compliance Committee shall deem appropriate;
(c) To report to the entire Board at such time as the Audit
and Compliance Committee shall determine;
(d) To take such other action as the Audit and Compliance
Committee shall deem necessary or appropriate to assure that the interests of
the Company are adequately protected.
Section 102.15. Compensation Committee. The Compensation Committee
shall consist of at least two (2) directors. Meetings of the Committee may be
called at any time by the Chairman or Secretary of the Committee, and shall be
called whenever two or more members of the Committee so request in writing. The
Committee shall review compensation of executive officers and make
recommendations to the Board of Directors regarding executive compensation and
shall have such other duties as the Board of Directors prescribes.
Section 102.16. Appointment of Committee Members. The Board of
Directors shall appoint or shall establish a method of appointing the members of
the Executive, Audit and Compliance Committee and Compensation Committees and of
any other committees established by the Board of Directors, and the Chairman of
each such committee, to serve until the next annual meeting of shareholders.
Section 102.17. Organization and Proceedings. Each committee of the
Board of Directors shall effect its own organization by the appointment of a
Secretary and such other officers, except the Chairman, as it may deem
necessary. The Secretary of the Executive Committee shall be the Secretary of
the Corporation, but the Secretary of the Audit and Compliance and Compensation
Committees and of any other committee need not be the Secretary of the
Corporation. A record of the proceedings of all committees shall be kept by the
Secretary of such committee and filed and presented as provided in Section
102.12 of these Bylaws.
4
Section 102.18. Committees. In the absence or disqualification of any
member of any committee established by the Board Directors, the members thereof
who are present at any meeting such committee and are not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
director to act at such meeting in the place of such absent or disqualified
member.
Section 103. Absentee Participation in Meetings. A director or
shareholder (as the case may be) may participate in a meeting of the Board of
Directors, a meeting of a committee established by the Board of Directors, or a
meeting of the shareholders, by use of a conference telephone or similar
communications equipment, by means of which all persons participating in the
meeting can hear each other.
ARTICLE II. OFFICERS
Section 201. Officers. The Corporation shall have a Chairman, a
President, a Secretary and a Treasurer, and may have one or more Vice Chairmen,
one or more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers and other officers and assistant officers as the Board of
Directors may from time to time deem advisable.
Section 202. Election and Term of Officers. The Chairman and Chief
Executive Officer, President and Chief Operating Officer, Secretary, and
Treasurer of the Corporation shall be elected annually by the Board of Directors
at the annual meetings of the Board of Directors. All other officers and
assistant officers shall be elected by the Board of Directors at the time, in
the manner, and for such term as the Board of Directors from time to time
determines. Each officer and assistant officer shall serve until his successor
is duly elected and qualifies, or until he resigns or is removed from office.
Section 203. Compensation. Unless otherwise provided by the Board of
Directors, the compensation of officers and assistant officers shall be fixed by
the Chairman.
Section 204. Chairman and Chief Executive Officer. The Chairman shall
be the chief executive officer of the Corporation, and, subject to the direction
and control of the Board of Directors, shall in general supervise and control
all of the business and affairs of the Corporation. Unless a designation to the
contrary is made at a meeting, the Chairman, when present, shall preside at all
meetings of the shareholders and of the Board of Directors. As authorized by the
Board of Directors, the Chairman may execute and seal, or cause to be sealed,
all instruments requiring such execution. Upon request of the Board of
Directors, the Chairman shall report to it all matters which the interests of
the Corporation may require to be brought to the attention of the Board of
Directors.
Section 205. President and Chief Operating Officer. The president shall
be the chief operating officer of the Corporation. As authorized by the Board of
Directors, the President may execute and seal, or cause to be sealed, all
instruments requiring such execution, except to the extent that signing and
execution thereof is expressly delegated by the Board of Directors to some other
officer or agent of the Corporation. In the absence or disability of the
Chairman, the President, unless otherwise determined by the Board of Directors,
shall perform the duties and exercise the powers of the Chairman.
5
Section 206. Vice President, Secretary, Treasurer, and Assistant
Officers. In the absence or disability of the President, the Vice President or
Vice Presidents, in the order of their seniority, unless otherwise determined by
the Board of Directors or the Chairman shall perform the duties and exercise the
powers of the President.
The Vice President or Vice Presidents, the Secretary, the
Treasurer, the Assistant Secretary or Secretaries, and the Assistant Treasurer
or Treasurers, shall act under the direction of the Chairman and shall perform
all duties which are prescribed by the Chairman or the Board of Directors.
ARTICLE III. PERSONAL LIABILITY AND INDEMNIFICATION
Section 301.1.1. Personal Liability of Directors.
(a) A director of this Corporation shall not be personally
liable for monetary damages as such for any action taken, or any failure to take
any action, unless:
(1) the director has breached or failed to perform the
duties of his office under Subchapter B of Chapter 17 of the Pennsylvania
Business Corporation of 1988 (which, as amended from time to time, is hereafter
called the "Business Corporation Law"); and
(2) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
(b) This Section 301.1.1 shall not limit a director's
liability for monetary damages to the extent prohibited by the Business
Corporation Law.
Section 301.1.2. Mandatory Indemnification. The Corporation shall, to
the fullest extent permitted by applicable law, indemnify its directors and
officers who were or are a party or are threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (whether or not such action, suit or
proceeding arises or arose by or in the right of the Corporation or other
entity) by reason of the fact that such director or officer is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, general partner, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit plans), against
expenses (including, but not limited to, attorneys' fees and costs), judgments,
fines (including excise taxes assessed on a person with respect to any employee
benefit plan) and amounts paid in settlement actually and reasonably incurred by
such director or officer in connection with such action, suit or proceeding,
except as otherwise provided in Section 301.1.4 hereof. Persons who were
members, directors or officers of the Corporation prior to the date this Section
is approved by shareholders of the Corporation, but who do not hold such office
on or after such date, shall not be covered by this Section 301.1. A director or
officer of the Corporation entitled to indemnification under this Section
301.1.2 is hereafter called a "person covered by Section 301.1.2 hereof".
Section 301.1.3. Expenses. Expenses incurred by a person covered by
Section 301.1.2 hereof in defending a threatened, pending or completed civil or
criminal action, suit or proceeding shall be paid by the Corporation in advance
6
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation, except as otherwise provided in Section 301.1.4.
Section 301.1.4. Exceptions. No indemnification under Section 301.1.2
or advancement or reimbursement of expenses under Section 301.1.3 shall be
provided to a person covered by Section 301.1.2 hereof (a) with respect to
expenses or the payment of profits arising from the purchase or sale of
securities of the Corporation in violation of Section 16(b) of the Securities
Exchange Act of 1934; (b) if a final unappealable judgment or award establishes
that such director or officer engaged in self-dealing, willful misconduct or
recklessness; (c) for expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, and amounts paid in settlement) which have
been paid directly to such person by an insurance carrier under a policy of
officers' and directors' liability insurance whose premiums are paid for by the
Corporation or by an individual or entity other than such director or officer;
and (d) for amounts paid in settlement of any threatened, pending or completed
action, suit or proceeding without the written consent of the Corporation, which
written consent shall not be unreasonably withheld. The Board of Directors of
the Corporation is hereby authorized, at any time by resolution, to add to the
above list of exceptions from the right of indemnification under Section 301.1.2
or advancement or reimbursement of expenses under Section 301.1.3, but any such
additional exception shall not apply with respect to any event, act or omission
which has occurred prior to the date that the Board of Directors in fact adopts
such resolution. Any such additional exception may, at any time after its
adoption, be amended, supplemented, waived or terminated by further resolution
of the Board of Directors of the Corporation.
Section 301.1.5. Continuation of Rights. The indemnification and
advancement or reimbursement of expenses provided by, or granted pursuant to,
this Section 301.1 shall continue as to a person who has ceased to be a director
or officer of the Corporation, and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 301.1.6. General Provisions.
(a) The term "to the fullest extent permitted by applicable
law", as used in this Section 301.1, shall mean the maximum extent permitted by
public policy, common law or statute. Any person covered by Section 301.1.2
hereof may, to the fullest extent permitted by applicable law, elect to have the
right to indemnification or to advancement or reimbursement of expenses,
interpreted, at such person's option, (i) on the basis of the applicable law on
the date this Section was approved by the shareholders, or (ii) on the basis of
the applicable law in effect at the time of the occurrence of the event or
events giving rise to the action, suit or proceeding, or (iii) on the basis of
the applicable law in effect at the time indemnification is sought.
(b) The right of a person covered by Section 301.1.2 hereof to
be indemnified or to receive an advancement or reimbursement of expenses
pursuant to Section 301.1.3 (i) may also be enforced as a contract right
pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
Corporation and such person, (ii) to the fullest extent permitted by applicable
7
law, is intended to be retroactive and shall be available with respect to events
occurring prior to the adoption hereof, and (iii) shall continue to exist after
the rescission or restrictive modification (as determined by such person) of
this Section with respect to events, acts or omissions occurring before such
rescission or restrictive modification is adopted.
(c) If a request for indemnification or for the advancement or
reimbursement of expenses pursuant hereto is not paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation
together with all supporting information reasonably requested by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim (plus interest at the
prime rate announced from time to time by the Corporation's primary banker) and,
if successful in whole or in part, the claimant shall be entitled also to be
paid the expenses (including, but not limited to, attorneys' fees and costs) of
prosecuting such claim. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel or its shareholders) to have made
a determination prior to the commencement of such action that indemnification of
or the advancement or reimbursement of expenses to the claimant is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
(d) The indemnification and advancement or reimbursement of
expenses provided by, or granted pursuant to, this Section 301.1 shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement or reimbursement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or directors or otherwise, both as to action in
such director or officer's official capacity and as to action in another
capacity while holding that office.
(e) Nothing contained in this Section 301.1 shall be construed
to limit the rights and powers the Corporation possesses under the Business
Corporation Law, or otherwise, including, but not limited to, the powers to
purchase and maintain insurance, create funds to secure or insure its
indemnification obligations, and any other rights or powers the Corporation may
otherwise have under applicable law.
(f) The provisions of this Section 301.1 may, at any time (and
whether before or after there is any basis for a claim for indemnification or
for the advancement or reimbursement of expenses pursuant hereto), be amended,
supplemented, waived, or terminated, in whole or in part, with respect to any
person covered by Section 301.1.2 hereof by a written agreement signed by the
Corporation and such person.
(g) The Corporation shall have the right to appoint the
attorney for a person covered by Section 301.1.2 hereof, provided such
appointment is not unreasonable under the circumstances.
Section 301.1.7. Optional Indemnification. The Corporation may, to the
fullest extent permitted by applicable law, indemnify, and advance or reimburse
expenses for, persons in all situations other than that covered by this Section
301.1.
8
ARTICLE IV. SHARES OF CAPITAL STOCK
Section 401. Authority to Sign Share Certificate. Every share
certificate of the Corporation shall be signed by the Chairman and Chief
Executive Officer and by the Secretary or one of the Assistant Secretaries. If
the certificate is signed by a transfer agent or registrar, the signature of any
officer of the Corporation on the certificate may be facsimile, engraved or
printed.
Section 402. Lost or Destroyed Certificates. Any person claiming a
share certificate to be lost, destroyed or wrongfully taken shall receive a
replacement certificate if such shareholder: (a) requests such replacement
certificate before the Corporation has notice that the shares have been acquired
by a bona fide purchaser; (b) files with the Corporation an indemnity bond
deemed sufficient by the Board of Directors; and (c) satisfies any other
reasonable requirements fixed by the Board of Directors.
ARTICLE V. GENERAL
Section 501. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 502. Record Date. The Board of Directors may fix any time prior
to the date of any meeting of shareholders as a record date for the
determination of shareholders entitled to notice of, or to vote at, the meeting,
which time, except in the case of an adjourned meeting, shall be not more than
ninety (90) days prior to the date of the meeting of shareholders. The Board of
Directors may fix any time whatsoever (whether or not the same is more than
ninety (90) days) prior to the date for the payment of any dividend or
distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of shares will be made or will go into effect,
as a record date for the determination of the shareholders entitled to receive
payment of any such dividend or distribution, or to receive any such allotment
of rights, or to exercise the rights in respect to any such change, conversion
or exchange of shares.
Section 503. Emergency Bylaws. In the event of any emergency resulting
from an attack on the United States, a nuclear disaster or another catastrophe
as a result of which a quorum cannot be readily assembled and during the
continuance of such emergency, the following Bylaw provisions shall be in
effect, notwithstanding any other provisions of these Bylaws.
(a) A meeting of the Board of Directors or of any committee
thereof may be called by any officer or director upon one hour's notice to all
persons entitled to notice whom, in the sole judgment of the notifier, it is
feasible to notify;
(b) The director or directors in attendance at the meeting of
the Board of Directors or of any committee thereof shall constitute a quorum;
and
(c) These Bylaws may be amended or repealed, in whole or in
part, by a majority vote of the directors attending any meeting of the Board of
Directors, provided such amendment or repeal shall only be effective for the
duration of such emergency.
9
Section 504. Severability. If any provision of these Bylaws is illegal
or unenforceable as such, such illegality or unenforceability shall not affect
any other provision of these Bylaws and such other provisions shall continue in
full force and effect.
ARTICLE VI. AMENDMENTS
Section 601. Amendment or Repeal by the Board of Directors. Except as
provided by applicable law, these Bylaws may be amended or repealed, in whole or
in part, by a majority vote of the members of the Board of Directors present and
voting at any duly convened regular or special meeting of the Board.
Section 602. Amendment or Repeal by Shareholders. These Bylaws may be
amended or repealed, in whole or in part, by shareholders as follows: (i) in the
case of an amendment or repeal that has previously received the approval of the
Board of Directors, by a majority of the votes cast by shareholders at any duly
convened annual or special meeting of the shareholders; and (ii) in the case of
an amendment or repeal that has not previously received the approval of the
Board of Directors, by a vote of shareholders entitled to cast at least 75
percent of the votes which all shareholders are entitled to cast thereon at any
annual or special meeting of the shareholders. This Section 602 may be amended
or repealed, in whole or in part, only by a vote of shareholders entitled to
cast at least 75 percent of the votes which all shareholders are entitled to
cast thereon at any duly convened annual or special meeting of shareholders.
Section 602. Recording Amendments. The text of all amendments to these
Bylaws shall be attached hereto, and a notation of the date of its adoption and
a notation of whether it was adopted by the directors or the shareholders shall
be made in Section 702 hereof.
ARTICLE VII. ADOPTION OF BYLAWS AND RECORD OF AMENDMENTS THERETO
Section 701. Adoption and Effective Date. These Bylaws have been
adopted as the Bylaws of the Corporation this _______ day of _________, 2001,
and shall be effective as of said date.
10
EX-99
6
indent.txt
EXHIBIT T3C
EXHIBIT T3C
GENESIS HEALTH VENTURES, INC., as Issuer,
THE GUARANTORS (as defined herein), as Guarantors,
________________________, as Trustee
INDENTURE
Dated as of September __, 2001
$242,605,000
Second Priority Secured Notes due 2007.
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE...........................................................1
Section 1.1. Definitions................................................................................1
Section 1.2. Other Definitions.........................................................................20
Section 1.3. Incorporation by Reference of Trust Indenture Act.........................................20
Section 1.4. Rules of Construction.....................................................................21
ARTICLE 2 THE SENIOR NOTES....................................................................................21
Section 2.1. Dating; Incorporation of Form in Indenture................................................21
Section 2.2. Execution and Authentication..............................................................22
Section 2.3. Agents....................................................................................22
Section 2.4. Paying Agent to Hold Money in Trust.......................................................23
Section 2.5. Noteholder Lists..........................................................................23
Section 2.6. Transfer and Exchange.....................................................................23
Section 2.7. Replacement Senior Notes..................................................................24
Section 2.8. Outstanding Senior Notes..................................................................24
Section 2.9. Temporary Senior Notes....................................................................25
Section 2.10. Cancellation..............................................................................25
Section 2.11. Defaulted Interest........................................................................25
Section 2.12. Deposit of Moneys.........................................................................26
Section 2.13. CUSIP Number..............................................................................26
Section 2.14. Payments to Holders.......................................................................26
Section 2.15. Book-Entry Provisions for Global Notes....................................................27
Section 2.16. Record Date...............................................................................28
ARTICLE 3 REDEMPTION..........................................................................................28
Section 3.1. Notices to Trustee........................................................................28
Section 3.2. Selection by Trustee of Senior Notes to Be Redeemed.......................................28
Section 3.3. Notice of Redemption......................................................................29
Section 3.4. Effect of Notice of Redemption............................................................29
Section 3.5. Deposit of Redemption Price...............................................................30
Section 3.6. Senior Notes Redeemed in Part.............................................................30
Section 3.7. Optional Redemption.......................................................................30
i
TABLE OF CONTENTS
(continued)
ARTICLE 4 COVENANTS...........................................................................................30
Section 4.1. Payment of Senior Notes...................................................................30
Section 4.2. Reports...................................................................................31
Section 4.3. Waiver of Stay, Extension or Usury Laws...................................................31
Section 4.4. Compliance Certificate....................................................................31
Section 4.5. Taxes.....................................................................................32
Section 4.6. Limitation on Additional Indebtedness.....................................................32
Section 4.7. Limitation on Restricted Payments.........................................................32
Section 4.8. Limitation on Certain Asset Sales.........................................................34
Section 4.9. Limitation on Transactions with Affiliates................................................36
Section 4.10. Limitations on Liens......................................................................37
Section 4.11. Limitations on Investments................................................................37
Section 4.12. Limitation on Creation of Subsidiaries....................................................37
Section 4.13. Limitation on Subsidiaries and Unrestricted Subsidiaries..................................37
Section 4.14. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries............38
Section 4.15. Restriction on Sale and Issuance of Subsidiary Equity Interest............................39
Section 4.16. Limitation on Sale and Lease-Back Transactions............................................39
Section 4.17. Line of Business..........................................................................40
Section 4.18. Limitation on Status as Investment Company................................................40
Section 4.19. Corporate Existence.......................................................................40
Section 4.20. Maintenance of Office or Agency...........................................................40
Section 4.21. Maintenance of Insurance; Books and Records; Compliance with Laws.......................41
Section 4.22. Further Assurances to the Trustee.........................................................41
Section 4.23. Collateral Documents......................................................................41
ARTICLE 5 SUCCESSOR CORPORATION...............................................................................42
Section 5.1. Merger, Consolidation or Sale of Assets...................................................42
Section 5.2. Successor Person Substituted..............................................................42
ARTICLE 6 DEFAULTS AND REMEDIES...............................................................................43
Section 6.1. Events of Default.........................................................................43
ii
TABLE OF CONTENTS
(continued)
Section 6.2. Acceleration..............................................................................44
Section 6.3. Other Remedies............................................................................45
Section 6.4. Waiver of Defaults and Events of Default..................................................45
Section 6.5. Control by Majority.......................................................................45
Section 6.6. Limitation on Suits.......................................................................46
Section 6.7. Rights of Holders to Receive Payment......................................................46
Section 6.8. Collection Suit by Trustee................................................................46
Section 6.9. Trustee May File Proofs of Claim..........................................................47
Section 6.10. Priorities................................................................................47
Section 6.11. Undertaking for Costs.....................................................................48
Section 6.12. Restoration of Rights and Remedies........................................................48
Section 6.13. Delay or Omission Not Waiver..............................................................48
ARTICLE 7 TRUSTEE.............................................................................................48
Section 7.1. Duties of Trustee.........................................................................48
Section 7.2. Rights of Trustee.........................................................................49
Section 7.3. Individual Rights of Trustee..............................................................50
Section 7.4. Trustee's Disclaimer......................................................................50
Section 7.5. Notice of Defaults........................................................................50
Section 7.6. Reports by Trustee to Holders.............................................................50
Section 7.7. Compensation and Indemnity................................................................51
Section 7.8. Replacement of Trustee....................................................................52
Section 7.9. Successor Trustee by Consolidation, Merger or Conversion..................................52
Section 7.10. Eligibility; Disqualification.............................................................53
Section 7.11. Preferential Collection of Claims Against Company.........................................53
Section 7.12. Paying Agents.............................................................................53
Section 7.13. Co-Trustee and Separate Trustees..........................................................53
ARTICLE 8 AMENDMENTS, SUPPLEMENTS AND WAIVERS.................................................................55
Section 8.1. Without Consent of Holders................................................................55
Section 8.2. With Consent of Holders...................................................................56
Section 8.3. Compliance with Trust Indenture Act.......................................................57
iii
TABLE OF CONTENTS
(continued)
Section 8.4. Revocation and Effect of Consents.........................................................57
Section 8.5. Notation on or Exchange of Senior Notes...................................................57
Section 8.6. Trustee to Sign Amendments, etc...........................................................58
ARTICLE 9 DISCHARGE OF INDENTURE; DEFEASANCE..................................................................58
Section 9.1. Discharge of Indenture....................................................................58
Section 9.2. Legal Defeasance..........................................................................58
Section 9.3. Covenant Defeasance.......................................................................59
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance.....................................59
Section 9.5. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions..................................................................61
Section 9.6. Reinstatement.............................................................................61
Section 9.7. Moneys Held by Paying Agent...............................................................61
Section 9.8. Moneys Held by Trustee....................................................................62
Section 9.9. Senior Note Collateral....................................................................62
ARTICLE 10 COLLATERAL AND SECURITY.............................................................................62
Section 10.1. Security..................................................................................62
Section 10.2. Recording and Opinions....................................................................63
Section 10.3. Release of Collateral.....................................................................64
Section 10.4. Protection of the Trust Estate............................................................65
Section 10.5. Certificates of the Company...............................................................65
Section 10.6. Certificates of the Trustee...............................................................66
Section 10.7. Authorization of Actions to be Taken by the Trustee Under the Collateral Documents.......66
Section 10.8. Authorization of Receipt of Funds by the Trustee Under the Collateral Documents..........66
Section 10.9. Termination of Security Interest..........................................................67
Section 10.10. Cooperation of Trustee....................................................................67
Section 10.11. Collateral Agent and Mortgage Indenture Trustee...........................................67
Section 10.12. Collateral Trust Agreement and Mortgage Indenture.........................................68
ARTICLE 11 GUARANTEE OF SENIOR NOTES...........................................................................68
Section 11.1. Guarantee.................................................................................68
iv
TABLE OF CONTENTS
(continued)
Section 11.2. Execution and Delivery of Guarantees......................................................69
Section 11.3. Limitation of Guarantee...................................................................70
Section 11.4. Release of Guarantor......................................................................70
Section 11.5. Additional Guarantors.....................................................................71
ARTICLE 12 MISCELLANEOUS.......................................................................................71
Section 12.1. Trust Indenture Act Controls..............................................................71
Section 12.2. Notices...................................................................................71
Section 12.3. Communications by Holders with Other Holders..............................................72
Section 12.4. Certificate and Opinion as to Conditions Precedent........................................72
Section 12.5. Statements Required in Certificate and Opinion............................................72
Section 12.6. When Treasury Senior Notes Disregarded....................................................73
Section 12.7. Rules by Trustee and Agents...............................................................73
Section 12.8. Business Days; Legal Holidays.............................................................73
Section 12.9. Governing Law.............................................................................73
Section 12.10. No Adverse Interpretation of Other Agreements.............................................74
Section 12.11. No Recourse Against Others................................................................74
Section 12.12. Successors................................................................................74
Section 12.13. Multiple Counterparts.....................................................................74
Section 12.14. Table of Contents, Headings, etc..........................................................74
Section 12.15. Separability..............................................................................75
EXHIBITS
Exhibit A Form of Guarantee Notation
Exhibit B Form of Senior Note
Exhibit C Global Notes Legend
SCHEDULE 1
v
Reconciliation and Tie between Trust
Indenture Act of 1939 and Indenture, dated
as of September , 2001
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
Section 310(a)(1)................................ 7.10
(a)(2)................................ 7.10
(a)(3)................................ 7.13
(a)(4)................................ N.A.
(b)................................... 7.8; 7.10
(b)(1)................................ 7.10
(c)................................... N.A.
Section 311(a)................................... 7.11
(b)................................... 7.11
(c)................................... N.A.
Section 312(a)................................... 2.5
(b)................................... 12.3
(c)................................... 12.3
Section 313(a)................................... 7.6
(b)(1)................................ 10.2
(b)(2)................................ 10.2; 7.6
(c)................................... 7.6
(d)................................... 7.6
Section 314(a)................................... 4.2; 4.4; 12.5
(b)................................... 10.2
(c)(1)................................ 12.4; 12.5
(c)(2)................................ 12.4; 12.5
(c)(3)................................ 12.4;12.5
(d)................................... 10.2
(e)................................... 10.2; 12.5
(f)................................... N.A.
Section 315(a)................................... 7.1; 7.2
(b)................................... 7.5
(c)................................... 7.1
(d)................................... 6.5; 7.1; 7.2
(e)................................... 6.11
Section 316(a) (last sentence)................... 12.6
(a)(1)(A)............................. 6.5
(a)(1)(B)............................. 6.4
(a)(2)................................ N.A.
(b)................................... 6.7
(c)................................... 8.4
Section 317(a)(1)................................ 6.8
(a)(2)................................ 6.9
(b)................................... 7.12
Section 318(a)................................... 12.1
vi
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be part of the Indenture.
Attention should also be directed to TIA Section 318(c), which
provides that the provisions of TIA Sections 310 to and including 317 of the TIA
are a part of and govern every qualified indenture, whether or not physically
contained therein.
vii
THIS INDENTURE is dated as of September ___, 2001, among GENESIS
HEALTH VENTURES, INC., a Pennsylvania corporation, as Issuer (the "Company"),
the GUARANTORS listed on Schedule 1 hereto and ___________, a _________________,
as trustee (the "Trustee").
The Company and the Guarantors have duly authorized the execution and
delivery of this Indenture to provide for the issuance of the Second Priority
Secured Notes due 2007 to be issued as provided for in this Indenture.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as hereinafter defined) of the
Second Priority Secured Notes due 2007, which are unconditionally guaranteed by
the Guarantors.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 DEFINITIONS.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary or assumed in connection with an Asset
Acquisition from such Person.
"Acquisition Indebtedness" means Indebtedness incurred by the Company
or by a Subsidiary after the Issue Date the proceeds of which are used for an
Asset Acquisition.
"Adjusted Net Assets" of a Guarantor at any date shall mean the
lesser of (x) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (after giving effect to all
fixed and contingent liabilities (including, without limitation, any guarantees
of Indebtedness)), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the amount by which the present fair salable
value of the assets of such Guarantor at such date exceeds the total amount of
its debts (after giving effect to all fixed and contingent liabilities
(including, without limitation, any guarantees of Indebtedness)), and after
giving effect to any collection from any Subsidiary of such Guarantor in respect
of the obligations of such Subsidiary under the Guarantee), but excluding
liabilities under the Guarantee.
"Affiliate" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
service of notices and demands.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any Person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such Person or (c) the acquisition by the Company or any Subsidiary of
the Company of any division or line of business of any Person (other than a
Subsidiary of the Company).
"Asset Sale" means the direct or indirect sale, transfer, issuance,
conveyance, lease (other than operating leases entered into in the ordinary
course of business pursuant to ordinary business terms, it being understood that
the lease of a healthcare facility shall not be considered to be in the ordinary
course but that leases of portions of a healthcare facility to service providers
shall be considered to be in the ordinary course), assignment or other
disposition (including, without limitation, by eminent domain, condemnation or
similar governmental proceeding) and any merger or consolidation of any
Subsidiary of the Company with or into another Person (other than the Company or
any Wholly-Owned Subsidiary of the Company) in any single transaction or series
of related transactions (separate eminent domain, Condemnation or similar
governmental proceedings to each be considered a single transaction but not to
be considered together as a series of related transactions) involving property
or assets with a fair market value in excess of $500,000 of (a) any Equity
Interest in any Subsidiary, (b) real property owned by the Company or any
Subsidiary thereof, or a division, line of business or healthcare facility or
comparable business segment of the Company or any Subsidiary thereof or (c)
other property, assets or rights (including, without limitation, leasehold
rights) of the Company, any Subsidiary thereof or any division, line of business
or healthcare facility of the Company or any Subsidiary thereof, provided,
however, that Asset Sales shall not include (i) sales, leases, conveyances,
transfers or other dispositions to the Company or to a Subsidiary thereof or to
any other Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Wholly-Owned
Subsidiary of the Company, (ii) transactions complying with Section 5.1, (iii)
sales, transfers, issuances, conveyances, leases, assignments or other
dispositions to the Company or any Wholly-Owned Subsidiary of the Company, and
(iv) sales, leases, conveyances, transfers or other dispositions in any 12 month
period (A) the fair market value of which does not, in the aggregate, exceed
2.5% of the Company's Consolidated Total Assets and (B) the Consolidated Cash
Flow Available for Fixed Changes related to such properties or assets does not,
in the aggregate, exceed 2.5% of the Company's Consolidated Cash Flow Available
for Fixed Charges.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Subsidiary thereof from such Asset Sale, after
(a) provision for all income or other taxes measured by or resulting from such
Asset Sale, (b) payment of all brokerage commissions, underwriting and other
fees and expenses related to such Asset Sale, (c) provision for minority
interest holders in any Subsidiary as a result of such Asset Sale, (d) payments
made to retire Indebtedness secured by the assets subject to such Asset Sale,
(e) payments made to the Trustee, the Collateral Agent, the agent of the holders
of the Senior Indebtedness under the Collateral Trust Agreement and the Mortgage
Indenture Trustee and (f) deduction of appropriate amounts to be provided by the
Company or a Subsidiary thereof as a reserve, in accordance with GAAP, against
any liabilities associated with the assets sold or disposed of in such Asset
Sale and retained by the Company or a Subsidiary thereof after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale, and (ii) promissory notes and other non-cash consideration
2
received by the Company or any Subsidiary thereof from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Attributable Indebtedness" when used with respect to any
Sale-Lease-Back Transaction or an operating lease with respect to a long-term
care facility means, as at the time of determination, the present value
(discounted at a rate equivalent to the interest rate implicit in the lease,
compounded on a semi-annual basis) of the total obligations of the lessee for
rental payments (after excluding all amounts required to be paid on account of
maintenance and repairs, insurance, taxes, utilities and other similar expenses
payable by the lessee pursuant to the terms of the lease) during the remaining
term of the lease included in any such Sale and Lease-Back Transaction or such
operating lease or until the earliest date on which the lessee may terminate
such lease without penalty or upon payment of a penalty (in which case the
rental payments shall include such penalty); provided, that the Attributable
Indebtedness with respect to a Sale and Lease-Back Transaction shall be no less
than the fair market value (as determined reasonably and in good faith by the
Board of Directors of the Person incurring the Attributable Indebtedness) of the
property subject to such Sale and Lease-Back Transaction.
"Board of Directors" means, as to any Person, the board of directors
or any duly authorized committee thereof of such Person or, if such Person is a
partnership (or other non-corporate Person), of the managing general partner or
partners (or Persons serving an analogous function) of such Person.
"Board Resolution" means, as to any Person, a copy of a resolution
certified pursuant to an Officers' Certificate to have been duly adopted by the
Board of Directors of such Person, and to be in full force and effect, and, if
required hereunder, delivered to the Trustee.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Casualty" with respect to any Collateral, means loss of, damage to
or destruction of all or any part of such Collateral.
"Collateral" means all the assets of the Company and its Subsidiaries
defined as "Collateral" in the Collateral Documents.
"Collateral Agent" means ______________ as collateral agent under the
Collateral Trust Agreement, and its successors.
"Collateral Documents" means the Collateral Trust Agreement, the
Mortgage Indenture, the UCC-1s, together with all related filings, assignments
and instruments, as such agreements, filings, assignments and instruments may
from time to time be amended, supplemented or otherwise modified in accordance
with the terms of this Indenture and such other agreements.
"Collateral Trust Agreement" means the Collateral Trust Agreement
executed by the Company, the Trustee and the agent for the benefit of the
holders of the Senior Indebtedness under the Collateral Trust Agreement and
their successors.
3
"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor.
"Company Request" means any written request signed in the name of the
Company by any two of the following: the Chief Executive Officer; the President;
any Vice President; the Chief Financial Officer; the Treasurer; or the Secretary
or any Assistant Secretary (but not both the Secretary and any Assistant
Secretary) of the Company.
"Condemnation" means any taking of the Collateral or any part
thereof, in or by Condemnation, expropriation or similar proceeding, eminent
domain proceedings, seizure or forfeiture, pursuant to any law, general or
special, or by reason of the temporary requisition of the use or occupancy of
the Collateral, or any part thereof, by a governmental authority.
"Condemnation Proceeds" means any awards, proceeds, payment or other
compensation arising out of a Condemnation less any and all payments made to the
Trustee, the Collateral Agent, the agent of the holders of the Senior
Indebtedness under the Collateral Trust Agreement and the Mortgage Indenture
Trustee.
"Consolidated Cash Flow Available for Fixed Charges" means, with
respect to any Person for any period, on a consolidated basis in accordance with
GAAP, the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (A) (i) Consolidated Net Income, (ii) Consolidated
Non-cash Charges, (iii) Consolidated Interest Expense, (iv) Consolidated Income
Tax Expense, and (v) one-third of Consolidated Rental Payments, less (B) any
non-cash items increasing Consolidated Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means with respect to any
Person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such Person for the four full fiscal quarters immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four
full fiscal quarter period being referred to herein as the "Four Quarter
Period") to the aggregate amount of Consolidated Fixed Charges of such Person
for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Cash Flow Available
for Fixed Charges" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness of such Person or
any of its Subsidiaries (and the application of the net proceeds thereof) during
the period commencing on the first day of the Four Quarter Period to and
including the Transaction Date (the "Reference Period"), including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Four Quarter
Period (it being understood that with respect to Indebtedness incurred under a
revolving facility used primarily to finance working capital, the average daily
principal amount outstanding during the Reference Period shall be deemed to be
the amount incurred during the Reference Period), and (b) any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one of
its Subsidiaries (including any Person who becomes a Subsidiary as a result of
the Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness) occurring during the Four Quarter Period, as if such
4
Asset Sale or Asset Acquisition occurred on the first day of the Four Quarter
Period. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (i) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; and (ii) if interest on Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period. In calculating the Consolidated
Fixed Charge Coverage Ratio and giving pro forma effect to the incurrence of
Indebtedness during a Reference Period, pro forma effect shall be given to use
of proceeds thereof to permanently repay or retire Indebtedness. If such Person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, for purposes of determining the "Consolidated Fixed Charge
Coverage Ratio," effect shall be given to the incurrence of such guaranteed
Indebtedness as if such Person or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense, (ii) the product of (a) the aggregate amount of
dividends and other distributions paid in cash during such period in respect of
Disqualified Equity Interests of such Person and its Subsidiaries on a
consolidated basis and (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory income tax rate of such Person, expressed as a decimal, (iii)
one-third of Consolidated Rental Payments, [and (iv) the aggregate of all
mandatory scheduled payments, prepayments and sinking fund payments with respect
to principal paid or accrued by such Person in respect of Indebtedness,
including payments in the nature of principal under Capitalized Leases
Obligations].
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for federal, state, local and foreign income taxes
of such Person and its Subsidiaries for each period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person, on
a consolidated basis in accordance with GAAP, for any period, the sum of,
without duplication, (a) the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on a
consolidated basis, (b) imputed interest included in Capitalized Lease
Obligations, (c) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (d) the net
costs associated with Interest Rate Agreements, (e) amortization of other
financing fees and expenses, (f) the interest portion of any deferred payment
obligation, (g) amortization of discount or premium, if any, (h) all other
non-cash interest expense (other than interest amortized to cost of sales), (i)
the interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP and (j) all
interest incurred or paid under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any Person.
5
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP, plus
the amount of any dividends or distributions received by such Person from
Unrestricted Subsidiaries; provided, however, that (a) the Net Income of any
Person (the "other Person") in which the Person in question or any of its
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the extent
of the amount of dividends or distributions paid to the Person in question or
its Subsidiaries, (b) the Net Income of any Subsidiary, incorporated in a
jurisdiction other than the United States, or a state or territory thereof, of
the Person in question shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or its Subsidiaries
(c) the Net Income of any Subsidiary of the Person in question that is subject
to any restriction or limitation (whether by terms of its charter, agreement or
applicable law) on the payment of dividends or the making of other distributions
shall be excluded to the extent such restriction or limitation would prevent
such Subsidiary from being able to pay dividends or make other distributions out
of its Net Income, (d)(i) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition and
(ii) any net gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded, (e) extraordinary gains and losses (including any
related tax effects) shall be excluded and (f) the cumulative effect of changes
in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any
date, the consolidated stockholders' equity of such Person less the amount of
such stockholders' equity attributable to Disqualified Equity Interests of such
Person and its Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Subsidiaries reducing Consolidated Net Income of such
Person and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which required an accrual of or a
reserve for cash charges for any future period).
"Consolidated Rental Payments" of any Person means, for any period,
the aggregate rental obligations of such Person and its consolidated
Subsidiaries (not including taxes, utilities, insurance, maintenance and repairs
and other similar expenses that the lessee is obligated to pay under the terms
of the relevant leases), determined on a consolidated basis in accordance with
GAAP, payable in respect of such period (net of income from subleases thereof,
not including taxes, utilities, insurance, maintenance and repairs and other
similar expenses that the sublessee is obligated to pay under the terms of such
sublease), whether or not such obligations are reflected as liabilities or
commitments on a consolidated balance sheet of such Person and its Subsidiaries
or in the notes thereto, excluding, however, in any event, (i) that portion of
Consolidated Interest Expense of such Person representing payments by such
Person or any of its consolidated Subsidiaries in respect of Capitalized Lease
Obligations (net of payments to such Person or any of its consolidated
Subsidiaries under subleases qualifying as capitalized lease subleases to the
extent that such payments would be deducted in determining Consolidated Interest
Expense) and (ii) the aggregate amount of amortization of obligations of such
6
Person and its consolidated Subsidiaries in respect of such Capitalized Lease
Obligations for such period (net of payments to such Person or any of its
consolidated Subsidiaries and subleases qualifying as capitalized lease
subleases to the extent that such payments could be deducted in determining such
amortization amount).
"Consolidated Total Assets" of any person means the consolidated
total assets of such Person and its consolidated Subsidiaries, as set forth on
the most recent consolidated balance sheet of such Person and its consolidated
Subsidiaries determined in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at [_________________].
"Credit Facility" means (i) any and all credit agreements (whether of
the Company or any Subsidiary of Company) contemplated by the Commitment Letter
dated as of July 13, 2001 between the Company, First Union Capital Markets and
Goldman Sachs; (ii) any agreements, instruments and documents executed or
delivered pursuant to or in connection with such credit agreement; and (iii) any
credit agreement, loan agreement, note purchase agreement, indenture or other
agreement, document or instrument refinancing, refunding or otherwise replacing
the credit agreement or any other agreement deemed a Credit Facility under
clause (i), (ii) or (iii) hereof, whether or not with the same agent, trustee,
representative, lenders or holders, regardless of whether the Credit Facility or
any portion thereof was outstanding or in effect at the time of such
restatement, renewal, extension, restructuring, supplement or modification.
Without limiting the generality of the foregoing, the term "Credit Facility"
shall include any amendment, restatement, renewal, extension, restructuring,
supplement or modification to any Credit Facility and all refundings,
refinancings and replacements of any Credit Facility, including any agreement
(a) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (b) adding or deleting borrowers or guarantors thereunder,
provided that the addition of such borrower or guarantor would not be prohibited
by this Indenture, (c) increasing the amount for Indebtedness incurred
thereunder or available to be borrowed thereunder, provided such increase is
permitted to be incurred under this Indenture or (d) otherwise altering the
terms and conditions thereof in a manner not prohibited by this Indenture.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such person against fluctuations in currency values and not for the
purpose of speculation.
"Default" means any event that is, or after notice or passage of time
of notice or both would be, an Event of Default.
"Depository" means, with respect to the Senior Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Facility" means any nursing facility, assisted and
independent living center or other asset of the Company designated as a
Designated Facility pursuant to an Officers' Certificate certifying that such
7
facility had negative operating income based on the financial statements of such
facility for the previous fiscal year.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by the Company or one of its Subsidiaries in
connection with an Asset Sale, including the cancellation of any Indebtedness,
that is so designated as Designated Noncash Consideration pursuant to an
Officers' Certificate, setting forth the basis of such valuation, or, in the
case of the cancellation of any Indebtedness, the principal amount of such
cancelled Indebtedness, executed by an Officer of the Company, less the amount
of cash or Temporary Cash Investments received in connection with a subsequent
sale of such Designated Noncash Consideration.
"Disqualified Equity Interests" means any Equity Interest which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder), or upon the happening of
any event, matures or is mandatory redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the Maturity Date of the Senior Notes, for
cash or securities constituting Indebtedness. Without limitation of the
foregoing, Disqualified Equity Interests shall be deemed to include (i) any
Preferred Equity Interests of a Subsidiary of the Company and (ii) any Preferred
Equity Interests of the Company, with respect to either of which, under the
terms of such Preferred Equity Interests, by agreement or otherwise, such
Subsidiary or the Company is obligated to pay current dividends or distributions
in cash during the period prior to the Maturity Date.
"Equity Interests" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interests in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into or exchangeable for any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
["Existing Collateral" means the property or assets of the Company or
its Subsidiaries that are, or after the Issue Date, subject to one or more
Permitted Liens.]
"Fair market value" or "fair value" means, with respect to any assets
or property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a fully informed, willing
and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction, all as reasonably determined by a majority of the
Board of Directors acting in good faith, such determination to be evidenced by a
Board Resolution delivered to the Trustee. No such determination need be
supported by an appraisal or expert opinion.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"Global Note" means a Senior Note evidencing all or a part of the
Senior Notes issued to and registered in the name of the Depository and bearing
the legend prescribed in Exhibit C.
"Guarantee" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
8
Company with respect to the Senior Notes by each Guarantor pursuant to the terms
of Article 11 hereof, substantially in the form set forth as part of Exhibit A.
"Guarantor" means each of the Subsidiaries of the Company on the
Issue Date.
"Healthcare Related Business" means any business conducted by the
Company and its Subsidiaries as of the Issue Date and any and all healthcare
service businesses that are related thereto including all healthcare, pharmacy,
long-term and specialty care, managed care, skilled nursing care, subacute care,
rehabilitation programs, geriatric care, home healthcare related businesses,
services or facilities, businesses which provide insurance relating to the costs
of any of the foregoing and consulting and administrative services and
businesses relating to any of the foregoing.
"Holder" or "Noteholder" means the Person in whose name a Senior Note
is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become, directly or indirectly, liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "incurrence," "incurred," "incurable," and
"incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in GAAP that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an incurrence of
such Indebtedness. Any Indebtedness or Equity Interests of a Person existing at
the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be incurred by such Person at the
time it becomes a Subsidiary. Indebtedness consisting of reimbursement
obligations in respect of a letter of credit will be deemed to be incurred when
the letter of credit is issued or renewed.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other liabilities arising in
the ordinary course of business) and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) all Indebtedness of others of the type described in the
other clauses of this definition (including all dividends of other Persons) the
payment of which is guaranteed, directly or indirectly, by such Person or that
is otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to supply
or advance funds (whether or not such items would appear upon the balance sheet
of the guarantor), (iv) all obligations for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction, (v)
Disqualified Equity Interests, (vi) obligations of any such Person under any
Interest Rate Agreement applicable to any of the foregoing, and (vii)
Attributable Indebtedness. The amount of Indebtedness of any Person at any date
9
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided, however, that (i) the amount outstanding at any time of any
Indebtedness issued with original issue discount is the principal amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP, and (ii) Indebtedness shall not include any liability for federal, state,
local or other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Company or any Subsidiaries for purposes of this
definition. Furthermore, guarantees of obligations with respect to letters of
credit supporting) Indebtedness otherwise included in the determination of such
amount shall not also be included.
"Indenture" means this Indenture as amended, restated or supplemented
from time to time.
"Insurance Proceeds" means any payment, proceeds or other amounts
received at any time under any insurance policy as compensation in respect of a
Casualty, less any and all payments made to the Trustee, the Collateral Agent,
the agent of the holders of the Senior Indebtedness under the Collateral Trust
Agreement and the Mortgage Indenture Trustee, provided, that, business
interruption insurance proceeds shall not constitute Insurance Proceeds.
"interest" when used with respect to any Senior Note, means the
amount of all interest accruing on such Senior Note, including all interest
accruing subsequent to the occurrence of any events specified in Sections 6.1(7)
and (8) or which would have accrued but for any such event.
"Interest Payment Date" means each March 15, June 15, September 15,
December 15 of each year, commencing December 15, 2001.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business, including accounts receivable arising in the ordinary course of
business and acquired as part of the assets acquired by the Company in
connection with an acquisition of assets which is otherwise permitted by the
terms of this Indenture), loan or capital contribution to (by means of transfers
of property to others, payments for property or services for the account or use
of others or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the acquisition,
by purchase or otherwise, of all or substantially all of the business or stock
or other evidence of beneficial ownership of, any Person, the guarantee or
assumption of the Indebtedness of any other Person (except for an assumption of
Indebtedness for which the assuming Person receives consideration with a fair
market value at least equal to the principal amount of the Indebtedness
assumed), the designation of a Subsidiary as an Unrestricted Subsidiary or the
making of any investment in any Person and all other items that would be
classified as investments on a balance sheet of such Person prepared in
accordance with GAAP. Investments shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
10
"Issue Date" means the Effective Date of the Plan of Reorganization.
"Lien" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Loss Event" means a Condemnation or Casualty involving an actual or
constructive total loss or agreed or compromised actual or constructive total
loss of all or substantially all of any Property constituting Collateral, except
where the Company reasonably concludes that Restoration of such Property can be
made in accordance with this Indenture and elects to do so in an Officers'
Certificate delivered to the Trustee within 90 days of the relevant Condemnation
or Casualty.
"Maturity Date" means ___________, 200_.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Mortgage Indenture" means (i) the mortgage indenture dated as of
________ __, 2001 between the Company or any of its Subsidiaries and the
Mortgage Indenture Trustee; (ii) any agreements, instruments and documents
executed or delivered pursuant to or in connection with such mortgage indenture
(including any participation agreement signed by the Trustee); and (iii) any
indenture or other agreement, document or instrument refinancing, refunding or
otherwise replacing the Mortgage Indenture under clause (i), (ii) or (iii)
hereof, whether or not with the same agent, trustee, representative, lenders or
holders, regardless of whether the Mortgage Indenture or any portion thereof was
outstanding or in effect at the time of such restatement, renewal, extension,
restructuring, supplement or modification. Without limiting the generality of
the foregoing, the term "Mortgage Indenture" shall include any amendment,
restatement, renewal, extension, restructuring, supplement or modification to
any Mortgage Indenture and all refundings, refinancings and replacements of any
Mortgage Indenture, including any agreement (a) extending the maturity of any
Indebtedness incurred thereunder or contemplated thereby, (b) adding or deleting
borrowers or guarantors thereunder, provided that the addition of such borrower
or guarantor would not be prohibited by this Indenture, (c) increasing the
amount for Indebtedness incurred thereunder or available to be borrowed
thereunder, provided such increase is permitted to be incurred under this
Indenture or (d) otherwise altering the terms and conditions thereof in a manner
not prohibited by this Indenture.
"Mortgage Indenture Trustee" means the party named as such in the
Mortgage Indenture until a successor replaces it.
"Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"Net Investments" means the excess of (i) the aggregate of all
Investments made by the Company or a Subsidiary thereof on or after the Issue
Date (in the case of an Investment made other than in cash, the amount shall be
the fair market value of such Investment) over (ii) the sum of (A) the aggregate
amount returned in cash on such Investments whether through interest payments,
11
principal payments, dividends or other distributions and (B) the net cash
proceeds received by the Company or such Subsidiary from the disposition of all
or any portion of such Investments (other than to a Subsidiary of the Company),
provided, however, that with respect to all Investments made in Unrestricted
Subsidiaries the sum of clauses (A) and (B) above with to such Investments shall
not exceed the aggregate amount of all Investments made in all Unrestricted
Subsidiaries.
"Net Proceeds" means (a) in the case of any sale of Equity Interests
by the Company, the aggregate net proceeds received by the Company, less payment
of expenses, commissions and the like incurred in connection therewith and any
and all payments made to the Trustee, the Collateral Agent, the agent of the
holders of the Senior Indebtedness under the Collateral Trust Agreement and the
Mortgage Indenture Trustee, whether such proceeds are in cash or in property
(valued at the fair market value thereof at the time of receipt), and (b) in the
case of any exchange, exercise, conversion or surrender of outstanding
securities of any kind for or into Equity Interests of the Company which are not
Disqualified Equity Interests, the net book value of such outstanding securities
on the date of such exchange, exercise, conversion or surrender plus any
additional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender (e.g., on account of fractional
shares and less all expenses incurred by the Company in connection therewith).
"Obligations" means, with respect to any Indebtedness, any principal,
premium, interest, penalties, fees, indemnifications, reimbursements, damages
and other expenses payable under the documentation governing such Indebtedness.
"Officer" means, with respect to any Person, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer or the
Treasurer of such Person, the Controller or the Secretary of the Company or a
Guarantor, or any other officer designated by the Board of Directors of such
Person, as the case may be (or, in the case of a Person that is a partnership
(or other non-corporate Person), of a general partner (or analogous individuals)
of such Person in such capacity).
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person (or,
in the case of a Person that is a partnership (or other non-corporate Person),
of a general partner (or analogous individuals) of such Person in such capacity)
that shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel which
counsel is reasonably acceptable to the Trustee.
"Permitted Indebtedness" means:
(i) Indebtedness (plus interest, premium, fees and
other obligations associated therewith) of the Company or any
Subsidiary thereof arising under or in connection with Permitted
Secured Indebtedness;
(ii) Indebtedness (plus interest, premium, fees and
other obligations associated therewith) of the Company or any
Subsidiary thereof arising under or in connection with Senior
Indebtedness;
12
(iii) Indebtedness under the Senior Notes;
(iv) Additional Indebtedness of the Company, including
Indebtedness incurred in connection with or arising out of
Capitalized Lease Obligations in an aggregate principal amount
outstanding at any time not to exceed $50 million;
(v) Indebtedness of a Subsidiary issued to and held by
the Company or a Subsidiary or Indebtedness of the Company to a
Subsidiary in respect of intercompany advances or transactions;
(vi) Indebtedness outstanding on the Issue Date;
(vii) Indebtedness evidenced by letters of credit
issued in the ordinary course of business to support the Company's
or any Subsidiary's insurance or self-insurance obligations
(including, without limitation, to secure workers' compensation and
other similar insurance coverages);
(viii) Indebtedness in respect of Interest Rate
Agreements; provided that the notional principal amount related to
such Interest Rate Agreement does not exceed the principal amount
of the Indebtedness to which such Interest Rate Agreement relates;
(ix) Indebtedness represented by performance bonds,
warranty or contractual service obligations, standby letters of
credit or appeal bonds, in each case to the extent incurred in the
ordinary course of business of the Company and its Subsidiaries;
(x) Refinancing Indebtedness;
(xi) Any Indebtedness provided for in the Plan of
Reorganization; and
(xii) Indebtedness not otherwise permitted to be
incurred pursuant to clauses (i) through (xi) above, which,
together with any other Indebtedness incurred pursuant to this
clause (xii), has an aggregate principal amount not in excess of
$10 million at any time outstanding.
"Permitted Investments" means, for any Person, Investments made on or
after the date of this Indenture consisting of:
(i) Temporary Cash Investments;
(ii) (A) Investments in the Company or a Subsidiary of
the Company, (B) Investments in any Person, if (1) as a result of
such Investment (y) such Person becomes a Wholly-Owned Subsidiary
of the Company or (z) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all
of its assets to, or is liquidated into, the Company or a
13
Wholly-Owned Subsidiary thereof and (2) after giving effect to such
Investment the Company is in compliance with Sections 4.17 and 5.1
hereof and (C) Net Investments in any Person, provided, however,
that the aggregate amount of all such Net Investments made pursuant
to this clause (C) shall not exceed $10 million at any one time
outstanding;
(iii) Investments represented by accounts receivable
created or acquired in the ordinary course of business;
(iv) Advances to employees in the ordinary course of
business;
(v) Investments under or pursuant to Interest Rate
Agreements;
(vi) An investment that is made by the Company or a
Subsidiary thereof in the form of any Equity Interests,
Indebtedness or securities that are issued by any Person solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted under Section 4.8 hereof;
(vii) Investments in the Senior Notes;
(viii) Investments existing on the Issue Date;
(ix) Investments in connection with a Permitted
Mortgage Financing;
(x) Investments provided for in the Plan of
Reorganization; and
(xi) Investments in Permitted Joint Ventures or any
Healthcare Related Business, provided that the Company is able, at
the time of such Investment and immediately after giving pro forma
effect thereto, to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.6.
"Permitted Joint Venture" means any Person which owns, operates or
services Healthcare Related Business.
"Permitted Liens" means, without duplication, (i) Liens existing on
the date of this Indenture, (ii) Liens in favor of the Company or any Subsidiary
thereof; provided that (a) if such liens are on any Collateral as defined in the
Collateral Trust Agreement, that such liens are either collaterally assigned to
the Collateral Agent or the Trustee or subordinated to the lien in favor of the
Trustee securing the Senior Notes and (b) if such liens are on any Collateral as
defined in the Mortgage Indenture, that such liens are collaterally assigned to
the Mortgage Indenture Trustee or subordinated to the lien in favor of the
Trustee securing the Senior Notes, (iii) Liens on property of a Person existing
at the time such Person becomes a Subsidiary of, or is acquired by, merged into
or consolidated with the Company or any Subsidiary thereof, provided, however,
that such Liens (a) were not created in connection with or in anticipation of
such acquisition, merger or consolidation or such Person becoming a Subsidiary
and (b) are not applicable to any other property of the Company or any of the
other Subsidiaries of the Company, (iv) Liens for taxes, assessments or
14
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, provided, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor, (v) landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
with respect to amounts which are not yet delinquent or are being contested in
good faith by appropriate proceedings, (vi) pledges or deposits made in the
ordinary course of business in connection with (a) leases, performance bonds and
similar obligations, (b) workers' compensation, unemployment insurance and other
social security legislation, or (c) securing the performance of surety bonds and
appeal bonds required in connection with judgments that do not give rise to an
Event of Default and are not paid by an unaffiliated insurance carrier pursuant
to any insurance policy maintained by the Company, (vii) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar encumbrances which, in the aggregate, do not materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Company or any Subsidiary in connection
therewith, (viii) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under this Indenture, provided, however, that (a) any such Lien is
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including sales and excise taxes,
installation and delivery charges and other direct costs of, and other direct
expenses paid or charged in connection with, such a purchase or construction) of
such Property, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such costs, (c) the principal amount of all Purchase
Money Indebtedness secured by such Liens does not exceed $100 million at any
time, (d) such Lien does not extend to or cover any Property other than such
item of Property and any improvements on such item and (e) such Lien is granted
within 180 days of the incurrence of such Purchase Money Indebtedness, (ix)
Liens securing Capitalized Lease Obligations permitted to be incurred under
clause (iv) of the definition of "Permitted Indebtedness," provided, however,
that such Lien does not extend to any property other than that subject to the
underlying lease, (x) Liens pursuant to leases and subleases of real property
which do not interfere with the ordinary conduct of the business of the Company
or any of its Subsidiaries and which are made on customary and usual terms
applicable to similar properties and in the case of any lease of a healthcare
facility do not extend to any property of the Company or a Subsidiary other than
the personal property located at such facility, (xi) Liens securing
reimbursement obligations under commercial letters of credit, but only in or
upon the goods the purchase of which were financed by such letters of credit,
(xii) Liens securing Acquisition Indebtedness, provided that such Liens do not
extend to or cover any property other than the property directly or indirectly
acquired with the proceeds of such Acquisition Indebtedness and any improvements
thereto (unless such Liens are otherwise Permitted Liens), (xiii) Liens securing
Refinancing Indebtedness, provided, however, that such Liens extend only to the
assets securing the Indebtedness being extended, refinanced, renewed or
replaced, and such Indebtedness was previously secured by such asset and
provided, further, the terms of such Liens are no less favorable to the holders
of the Senior Notes than the Liens being extended, refinanced, renewed or
replaced, (xiv) Liens securing a Permitted Mortgage Financing, (xv) Liens in
favor of the Trustee, (xvi) any Lien provided for in the Plan of Reorganization,
(xvii) Liens on accounts receivable or inventory of the Company or any
Subsidiary; (xviii) Liens on Existing Collateral; and (xix) other Liens on
assets of the Company or its Subsidiaries securing Indebtedness having an
aggregate principal amount at any one time outstanding not to exceed $15
million.
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"Permitted Mortgage Financing" means a transaction in which (i) the
Company and/or certain of its Subsidiaries would transfer certain assets to one
or more Unrestricted Subsidiaries, (ii) in consideration for such transfer of
assets, the Company would retain, directly or indirectly, 100% of the Equity
Interests in such Unrestricted Subsidiary or Subsidiaries (iii) such
Unrestricted Subsidiary or Subsidiaries would use the assets contributed by the
Company and/or its Subsidiaries as security for a mortgage refinancing and (iv)
all net proceeds received by such Unrestricted Subsidiary or Subsidiaries in
such mortgage refinancing would be dividended or otherwise transferred to the
Company.
"Permitted Secured Indebtedness" means any Indebtedness (plus
interest, premium, fees and other obligations associated therewith), and any
refinancing, refunding, replacement, renewal or extension of, under agreements
evidencing any Indebtedness which is secured by assets of the Company or its
Subsidiaries, provided, however, that the aggregate amount of all such
Indebtedness outstanding (or committed to be advanced under the agreements to
which such Indebtedness relates) at any time, other than Indebtedness
outstanding on the Issue Date, shall not exceed $100 million.
"Person" means any individual, corporation, partnership, limited
liability company or partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government (including any agency
or political subdivision thereof).
"Plan of Reorganization" means that certain Debtors' Plan of
Reorganization, dated July 6, 2001.
"Preferred Equity Interest" means any Equity Interest of a Person,
however designated, which entitles the holder thereof to a preference with
respect to dividends, distributions or liquidation proceeds of such Person over
the holders of any other Equity Interest issued by such Person.
"principal" of a debt security means the principal amount of the
security plus, when appropriate, the premium, if any, on the security.
"Proceeding" means a liquidation, dissolution, bankruptcy, insolvency
reorganization, receivership or similar proceeding under Bankruptcy Law, an
assignment for the benefit of creditors, any marshalling of assets or
liabilities or winding up or dissolution, but shall not include any transaction
permitted by and made in compliance with Article 5 hereof.
"Property" or "property" of any Person means all types of real,
personal, tangible, intangible or mixed property owned by such Person whether or
not included in the most recent consolidated balance sheet of such Person and
its Subsidiaries under GAAP.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redemption Date" when used with respect to any Senior Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
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"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, renews, replaces or extends any Indebtedness of the Company or its
Subsidiaries outstanding on the Issue Date or other Indebtedness permitted to be
incurred by the Company or its Subsidiaries pursuant to the terms of this
Indenture, whether involving the same or any other lender or creditor or group
of lenders or creditors, but only to the extent that (i) the Refinancing
Indebtedness is subordinated to the Senior Notes to at least the same extent as
the Indebtedness being refunded, refinanced or extended, if at all, (ii) the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Senior Notes, (iii) such Refinancing Indebtedness has a weighted
average life to maturity at the time such Refinancing Indebtedness is incurred
that is equal to or greater than the weighted average life to maturity of the
Indebtedness being refunded, refinanced or extended, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is less than or equal to
the aggregate principal then outstanding under the Indebtedness being refunded,
refinanced or extended and (v) such Refinancing Indebtedness is incurred by the
same Person that initially incurred the Indebtedness being refunded, refinanced
or extended, except that the Company may incur Refinancing Indebtedness to
refund, refinance or extend Indebtedness of any Wholly-Owned Subsidiary of the
Company.
"Restoration" means the restoration of all or any portion of the
Collateral in connection with any destruction or Condemnation thereof.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Equity
Interests of the Company or any Subsidiary thereof or any payment made to the
direct or indirect holders (in their capacities as such) of Equity Interests of
the Company or any Subsidiary thereof (other than (a) dividends or distributions
payable solely in Equity Interests (other than Disqualified Equity Interests) or
in options, warrants or other rights to purchase Equity Interests (other than
Disqualified Equity Interests) or (b) in the case of Subsidiaries of the
Company, dividends or distributions payable to the Company or to a Wholly-Owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Equity Interest of the Company or any Subsidiary
thereof (other than Equity Interests owned by the Company or a Wholly-Owned
Subsidiary, excluding Disqualified Equity Interests), (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase, redemption or
other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Subordinated
Indebtedness, (iv) the making of any Investment or guarantee of any Investment
in any Person other than a Permitted Investment. For purposes of determining the
amount expended for Restricted Payments, cash distributed or invested shall be
valued at the face amount thereof and property other than cash shall be valued
at its fair market value.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Subsidiary of the Company
of any real or tangible personal Property, which Property (i) has been or is to
be sold, conveyed or transferred by the Company or such Subsidiary to such
Person in contemplation of such leasing and (ii) would constitute an Asset Sale
if such Property had been sold in an outright sale thereof.
17
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means the Second Priority Secured Notes due 200_,
being the securities that are issued under this Indenture, as amended or
supplemented from time to time pursuant to this Indenture, including, without
limitation, any notes issued in accordance with Section 2.2 hereof.
"Senior Indebtedness" means the following obligations, whether
outstanding on the Closing Date or thereafter incurred: all Indebtedness and
other monetary obligations of the Company or any Subsidiary of the Company under
or in respect of the Credit Facility (including obligations in respect of any
lease financing facility of the Credit Facility), the Mortgage Indenture or any
Interest Rate Agreement or Currency Agreement related to Indebtedness under the
Credit Facility or the Mortgage Indenture, whether for principal, interest
(including interest accruing after the filing of a petition by or against the
Company or any Subsidiary of the Company under any state or federal Bankruptcy
Laws, whether or not such interest is allowed as a claim after such filing in
any proceeding under such law), fees, expenses, indemnification or otherwise.
"Subordinated Indebtedness" means Indebtedness of any Person which is
expressly subordinated in right of payment to any other Indebtedness of such
Person.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Equity Interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, officers or trustees thereof is held by such first-named
Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint
venture, association or other business entity, with respect to which such
first-named Person or any of its Subsidiaries has the power to direct or cause
the direction of the management and policies of such entity by contract or
otherwise or if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the
Company other than for purposes of the definition of Unrestricted Subsidiary,
unless the Company shall have designated such Unrestricted Subsidiary as a
"Subsidiary" by written notice to the Trustee.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.3 hereof).
"Temporary Cash Investments" means (i) Investments in marketable,
direct obligations issued or fully guaranteed by the United States of America,
or of any governmental agency or political subdivision thereof, backed by the
full faith and credit of the United States and maturing within one year of the
date of purchase; (ii) Investments in time deposits, certificates of deposit,
bankers acceptances or commercial paper issued by a bank (or any parent company
of such bank) organized under the laws of the United States of America or any
State thereof or the District of Columbia, in each case having capital, surplus
and undivided profits totaling more than $500 million and rated at least A by
S&P and A-2 by Moody's, maturing within one year of purchase; (iii) commercial
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paper that is rated at least A- by S&P or P-1 by Moody's, issued by a company
that is incorporated under the laws of the United States or of any State and
directly issues its own commercial paper, and has a remaining term to maturity
of not more than one year; (iv) a repurchase agreement with (A) any commercial
bank that is organized under the laws of any State or any national banking
association and that has total assets of at least $500 million, or (B) any
investment bank that is organized under the laws of any State and that has total
assets of at least $500 million, which agreement is secured by any one or more
of the securities and obligations described in clauses (i), (ii) or (iii) of
this definition of Temporary Cash Investments, which shall have a market value
(exclusive of accrued interest and valued at least monthly) at least equal to
the principal amount of such investments; or (v) Investments in money market
funds that invest substantially all of such funds' assets in the Investments
described in the preceding clauses (i), (ii), (iii) and (iv).
"Trust Officer" when used with respect to the Trustee, means any
officer or assistant officer of the Trustee assigned to the Corporate Trust
Administration department or similar department performing corporate trust work
of the Trustee or any successor to such department or, in the case of a
successor Trustee, any officer of such successor Trustee performing corporate
trust functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"UCC-1s" means those UCC financing statements and fixture filings
filed by the Company or any Guarantor in connection with any of the Collateral
Documents.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary and (ii) any Subsidiary of the Company which shall have been
designated after the Issue Date as an Unrestricted Subsidiary by a resolution
adopted by the Board of Directors of the Company; provided that a Subsidiary
organized or acquired after the Issue Date may be so classified as an
Unrestricted Subsidiary only if such classification is in compliance with
Section 4.13 hereof and an Unrestricted Subsidiary may be designated as a
Subsidiary (but only if such classification is in compliance with the definition
of "Subsidiary" contained in this Section 1.1). The Trustee shall be given
prompt written notice by the Company of each resolution adopted by the Board of
Directors of the Company under this provision, together with a copy of each such
resolution adopted.
"U.S. Government Obligations" means (i) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
19
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Wholly-Owned Subsidiary" means any Subsidiary all of the outstanding
Equity Interests (other than directors' qualifying shares) of which are owned,
directly or indirectly, by the Company.
Section 1.2 OTHER DEFINITIONS.
The definitions of the following terms may be found in the Sections
indicated as follows:
Term Defined in Section
---- ------------------
"Agent Members" 2.15
"Bankruptcy Law" 6.1
"Business Day" 12.8
"Covenant Defeasance" 9.3
"Custodian" 6.1
"Event of Default" 6.1
"Legal Defeasance" 9.2
"Legal Holiday" 12.8
"Paying Agent" 2.3
"Physical Notes" 2.1
"Registrar" 2.3
"Required Filing Date" 4.2
"transfer" 5.1
Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Senior Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Company, the
Guarantors or any other obligor on the Senior Notes.
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All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) words used herein implying any gender shall apply to every
gender;
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
Subdivision, unless expressly stated otherwise; and
(7) provisions apply to successive events and transactions.
ARTICLE 2
THE SENIOR NOTES
Section 2.1 DATING; INCORPORATION OF FORM IN INDENTURE.
The Senior Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit B which is incorporated in and
made part of this Indenture. The Senior Notes may have notations, legends or
endorsements required by law, stock exchange rule, usage, or agreements to which
the Company or any Guarantor is subject. The Company may use "CUSIP" numbers in
issuing the Senior Notes. Each Senior Note shall be dated the date of its
authentication.
One or more permanent Global Notes issued and delivered hereunder may
be in registered form, substantially in the form set forth in Exhibit B, having
the legend set forth in Exhibit C, may be issued to the Depository, to the
extent such Depository is the Registered Holder of the applicable Senior Notes.
Otherwise, Senior Notes hereunder may be issued in the form of certificated
Senior Notes in registered form in substantially the form set forth in Exhibit B
(the "Physical Notes").
The terms and provisions contained in the Senior Notes and the
Guarantees shall constitute, and are hereby expressly made, a part of this
Indenture and the Company, the Guarantors and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
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Section 2.2 EXECUTION AND AUTHENTICATION.
The Senior Notes shall be executed on behalf of the Company by two
Officers of the Company or an Officer and an Assistant Secretary of the Company.
Such signatures may be either manual or facsimile. If an Officer whose signature
is on a Senior Note no longer holds that office at the time the Trustee
authenticates the Senior Note or at any time thereafter, the Senior Note shall
be valid nevertheless.
A Senior Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Senior Note. Such signature shall be
conclusive evidence that the Senior Note has been authenticated under this
Indenture.
The Trustee or an authenticating agent shall authenticate Senior
Notes for original issue in the aggregate principal amount of up to
$242,605,000, subject to adjustment pursuant to Section 8.1(7). The aggregate
principal amount of Senior Notes outstanding at any time may not exceed such
amount except as provided in Section 2.7 hereof. The Senior Notes shall be
issuable only in registered form without coupons and only in denominations of
$100 and integral multiples thereof. The Trustee shall issue Senior Notes upon a
Company Request.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Senior Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same right as the Trustee in dealing with the Company or an Affiliate.
Section 2.3 AGENTS.
The Company shall maintain an office or agency in the Borough of
Manhattan, City of New York, State of New York where Senior Notes may be
presented for registration of transfer or for exchange ("Registrar") and where
Senior Notes may be presented for payment ("Paying Agent") and where notices and
demands to or upon the Company in respect of the Senior Notes and this Indenture
may be served. The Registrar shall keep a register of the Senior Notes and of
their transfer and exchange. The Company may appoint one or more co-Registrars
and one or more additional Paying Agents. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent which is not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such and shall be entitled to appropriate compensation pursuant to
Section 7.7. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Senior
Notes.
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Section 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
On or before each due date of the principal of, premium if any, and
interest on any Senior Notes, the Company shall deposit with the Paying Agent a
sum sufficient to pay such principal, premium if any, and interest so becoming
due. Each Paying Agent shall hold in trust for the benefit of Noteholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Senior Notes (whether such money has been paid to it by the
Company or any other obligor on the Senior Notes), and the Company and the
Paying Agent shall notify the Trustee of any default by the Company or any
Guarantor (or any other obligor on the Senior Notes) in making any such payment.
Money held in trust by the Paying Agent need not be segregated except as
required by law and in no event shall the Paying Agent be liable for any
interest on any money received by it hereunder. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee, and the
Trustee may at any time during the continuance of any Event of Default specified
in Section 6.1(1) or (2), upon written request to a Paying Agent, require such
Paying Agent to forthwith pay to the Trustee all sums so held in trust by such
Paying Agent together with a complete accounting of such sums. Upon doing so,
the Paying Agent shall have no further liability for the money delivered to the
Trustee.
Section 2.5 NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee on or prior to the tenth Business Day before each Interest Payment
Date, and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Noteholders, including the aggregate principal amount of Senior
Notes held by each such Noteholder.
Section 2.6 TRANSFER AND EXCHANGE.
Subject to Section 2.16, when a Senior Note is presented to the
Registrar with a request to register the transfer thereof, the Registrar shall
register the transfer as requested if the requirements of applicable law are met
and, when Senior Notes are presented to the Registrar with a request to exchange
them for an equal principal amount of Senior Notes of other authorized
denominations, the Registrar shall make the exchange as requested, provided that
every Senior Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar duly executed by
the Holder thereof or his attorney, duly authorized in writing. To permit
registration of transfers and exchanges, upon surrender of any Senior Note for
registration of transfer at the office or agency maintained pursuant to Section
2.3 hereof, the Company shall issue and execute and the Trustee shall
authenticate Senior Notes at the Registrar's request. Any exchange or transfer
shall be without any service charge to the Noteholder, except that the Company
may require payment by the Noteholder of a sum sufficient to cover any tax or
the governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to this
Indenture. The Trustee shall not be required to register transfers of Senior
Notes or to exchange Senior Notes for a period of 15 days before selection of
any Senior Notes to be redeemed. The Trustee shall not be required to exchange
23
or register transfers of any Senior Notes called or being called for redemption
in whole or in part, except the unredeemed portion of any Senior Note being
redeemed in part.
All Senior Notes issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Senior Notes surrendered upon such
transfer or exchange.
Any Holder of a Global Note shall, by acceptance of such Global Note,
agree that transfers of the beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Each Holder of a Senior Note agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Senior Note in violation of any provision of this
Indenture and/or applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Company's compliance with or have
any responsibility with respect to the Company's compliance with any Federal or
state securities laws.
Section 2.7 REPLACEMENT SENIOR NOTES.
If a mutilated Senior Note is surrendered to the Registrar or Trustee
or if the Holder of a Senior Note presents evidence to the satisfaction of the
Company and the Trustee that the Senior Note has been lost, destroyed or
wrongfully taken and of the ownership thereof, the Company shall issue and the
Trustee shall authenticate a replacement Senior Note if the Holder of such
Senior Note furnishes to the Company and the Trustee evidence reasonably
acceptable to them of the ownership and destruction, loss or theft of such
Senior Note. An indemnity bond may be required by the Company or the Trustee
that is sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Senior Note is replaced. The Company or the Trustee each may charge for its
expenses (including reasonable attorneys' fees and expenses) in replacing a
Senior Note.
Every replacement Senior Note is an additional obligation of the
Company.
Section 2.8 OUTSTANDING SENIOR NOTES.
Senior Notes outstanding at any time are all Senior Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, and those described in this Section 2.8 as not
outstanding.
If a Senior Note is replaced pursuant to Section 2.7, it ceases to be
outstanding until the Company and the Trustee receive proof satisfactory to each
of them that the replaced Senior Note is held by a bona fide purchaser in whose
hands such obligation is a legal, valid and binding obligation of the Company.
If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and all accrued interest
with respect to Senior Notes payable on that date and is not prohibited from
24
paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Senior Notes shall cease to be
outstanding and interest on them shall cease to accrue.
Subject to Section 13.6, a Senior Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Senior Note.
Section 2.9 TEMPORARY SENIOR NOTES.
Until definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes. Temporary
Senior Notes shall be substantially in the form, and shall carry all rights,
benefits and privileges, of definitive Senior Notes but may have variations that
the Company considers appropriate for temporary Senior Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Senior Notes in exchange for temporary Senior Notes presented to it.
Section 2.10 CANCELLATION.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Senior Notes surrendered to them for transfer, exchange or payment. The
Trustee shall cancel and retain or may destroy (subject to the record-retention
requirements of the Exchange Act) or return to the Company, in accordance with
its normal practice, all Senior Notes surrendered for transfer, exchange,
payment or cancellation and if such Senior Notes are destroyed, deliver a
certificate of destruction to the Company. Subject to Section 2.7 hereof, the
Company may not issue new Senior Notes to replace Senior Notes in respect of
which it has previously paid all principal, premium and interest accrued
thereon, or delivered to the Trustee for cancellation.
Section 2.11 DEFAULTED INTEREST.
If the Company defaults in a payment of any interest on the Senior
Notes, it shall pay the defaulted amounts, plus (to the extent permitted by law)
any interest payable on defaulted amounts pursuant to Section 4.1 hereof, to the
persons who are Noteholders on a subsequent special record date.
The Company shall fix the special record date and payment date for
payment of such defaulted amounts in a manner satisfactory to the Trustee and
provide the Trustee at least 20 days notice of the proposed amount of default
interest to be paid and the special payment date. At least 15 days before the
special record date, the Company shall mail or cause to be mailed to each
Noteholder at his address as it appears on the Senior Notes register maintained
by the Registrar a notice that states the special record date, the payment date
(which shall be not less than five nor more than ten days after the special
record date), and the amount to be paid. In lieu of the foregoing procedures,
the Company may pay defaulted interest in any other lawful manner satisfactory
to the Trustee.
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Section 2.12 DEPOSIT OF MONEYS.
Prior to 10:00 a.m., New York City time, as required, on (i) each
Interest Payment Date and (ii) the Maturity Date, the Company shall have
deposited with the Paying Agent in immediately available funds money sufficient
to make cash payments, if any, due on such Interest Payment Date or Maturity
Date, as the case may be, in a timely manner which permits the Trustee to remit
payment to the Holders at such times. The principal and interest on Global Notes
shall be payable to the Depository or its nominee, as the case may be, as the
sole registered owner and the sole holder of the Global Notes represented
thereby. The principal and interest on Physical Notes shall be payable at the
office of the Paying Agent.
Section 2.13 CUSIP NUMBER.
The Company in issuing the Senior Notes may use a "CUSIP" number (or
numbers), and if so, the Trustee may use the CUSIP number(s) in notices of
redemption or exchange as a convenience to Holders, provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Senior Notes,
and that reliance may be placed only on the other identification numbers printed
on the Senior Notes. The Company will promptly notify in writing the Trustee of
any such CUSIP number used by the Company in connection with the Senior Notes
and any change in such CUSIP number.
Section 2.14 PAYMENTS TO HOLDERS.
Notwithstanding any provisions of this Indenture and the Senior Notes
to the contrary:
(a) Except for any payments to be made on a Redemption Date or the
Maturity Date, payments with respect to any of the Senior Notes may be made by
the Paying Agent upon receipt from the Company of immediately available funds,
by check mailed to the Holder, at the address shown in the registrar of the
Senior Notes maintained by the Registrar pursuant to Section 2.3 hereof; or
(b) At the request of a Holder of 10% or more in aggregate principal
amounts of Senior Notes outstanding all payments with respect to any of the
Senior Notes, may be made by the Paying Agent upon receipt from the Company of
immediately available funds prior to 10:00 a.m., New York City time, directly to
the Holder of such Senior Note (whether by federal funds, wire transfer or
otherwise), provided, however, that no such federal funds, wire transfer or
other such direct payment shall be made to any Holder under this Section 2.14(b)
unless such Holder has delivered written instructions to the Trustee prior to
the relevant record date for such payment requesting that such payment will be
so made and designating the bank account to which such payments shall be so made
and, in the case of payments of principal, surrenders the Senior Note to the
Trustee in exchange for a Senior Note or Senior Notes aggregating the same
principal amount as the unredeemed principal amount of the Senior Notes
surrendered. The Trustee shall be entitled to rely on the last instruction
delivered by the Holder pursuant to this Section 2.14(b) unless a new
instruction is delivered prior to the relevant record date for a payment date.
The Company will indemnify and hold the Trustee harmless against any loss,
liability or expense (including attorneys' fees and expenses) resulting from any
act or omission to act on the part of the Company or any such Holder in
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connection with any such agreement or which the Paying Agent may incur as a
result of making any payment in accordance with any such agreement.
All payments made on a Redemption Date are subject to Section 2.8 and
Article 3 hereof. No later than fifteen (15) days prior to the Maturity Date,
the Trustee shall notify the Holder, at the address shown in the registrar of
the Senior Notes maintained by the Registrar pursuant to Section 2.3 hereof,
that the Company expects that the final installment of principal of and interest
on the Senior Notes will be paid on the Maturity Date. Such notice shall specify
that such final installment will be payable only upon presentation and surrender
of such Senior Note and shall specify the place where such Senior Notes may be
presented and surrendered for payment of such installment. Additionally, in
accordance with Section 2.8, such Senior Notes shall cease to be outstanding.
Section 2.15 BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit C.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Senior Note.
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository. In addition, Physical Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in Global Notes if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Note and a successor depositary is not appointed by
the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a written request from
the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
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(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in writing in exchange for its beneficial interest
in the Global Notes, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) The Holder of any Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture, the Senior Notes or the Guarantees.
Section 2.16 RECORD DATE.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided in TIA Section
316(c).
ARTICLE 3
REDEMPTION
Section 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to Section 3.7
hereof, (i) at least 30 days prior to the Redemption Date in the case of a
partial redemption, (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to in writing, the Company shall notify the Trustee in writing of the
Redemption Date, the principal amount of Senior Notes to be redeemed and the
redemption price, and deliver to the Trustee an Officers' Certificate stating
that such redemption will comply with the conditions contained in Section 3.7
hereof.
Section 3.2 SELECTION BY TRUSTEE OF SENIOR NOTES TO BE REDEEMED.
In the event that fewer than all of the Senior Notes are to be
redeemed, the Trustee shall select the Senior Notes to be redeemed, if the
Senior Notes are listed on a national securities exchange, in accordance with
the rules of such exchange or, if the Senior Notes are not so listed, on either
a pro rata basis or by lot, or such other method as it shall deem fair and
equitable. The Trustee shall promptly notify the Company of the Senior Notes
selected for redemption and, in the case of any Senior Notes selected for
partial redemption, the principal amount thereof to be redeemed. The Trustee may
select for redemption portions of the principal of the Senior Notes that have
denominations larger than $100. Senior Notes and portions thereof the Trustee
selects shall be redeemed in amounts of $100 or whole multiples of $100. For all
purposes of this Indenture unless the context otherwise requires, provisions of
this Indenture that apply to Senior Notes called for redemption also apply to
portions of Senior Notes called for redemption.
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Section 3.3 NOTICE OF REDEMPTION.
At least 15 days, but no more than 30 days, before a Redemption Date,
the Company shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder of Senior Notes to be redeemed at his last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.3 hereof.
The notice shall identify the Senior Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest, if any,
to be paid (or the method by which any such amount of accrued interest to be
paid is to be calculated);
(3) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
Redemption Date and upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Senior Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption
payment, interest on Senior Notes called for redemption ceases to accrue on and
after the Redemption Date and that the only remaining right of the Holders of
such Senior Notes is to receive payment of the Senior Notes redemption price
upon surrender to the Paying Agent of the Senior Notes redeemed;
(7) the aggregate principal amount of Senior Notes that are being
redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
Section 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once the notice of redemption described in Section 3.3 is mailed,
Senior Notes called for redemption become due and payable on the Redemption Date
and at the redemption price, including any premium, plus interest accrued to the
Redemption Date. Upon surrender to the Paying Agent, such Senior Notes shall be
paid at the redemption price, including any premium, plus interest accrued to
the Redemption Date, provided that if the Redemption Date is after a regular
interest payment record date and on or prior to the Interest Payment Date, the
accrued interest shall be payable to the Holder of the redeemed Senior Notes
registered on the relevant record date, and provided, further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from such Redemption
Date to such succeeding Business Day.
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Sectionv 3.5 DEPOSIT OF REDEMPTION PRICE.
On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Company shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the redemption price of and accrued interest on
all Senior Notes to be redeemed on that date other than Senior Notes or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Senior Notes called for redemption
shall have been made available in accordance with the preceding paragraph and
payment thereof is not prohibited pursuant to the terms of this Indenture, the
Senior Notes called for redemption will cease to accrue interest and the only
right of the Holders of such Senior Notes will be to receive payment of the
redemption price of and, subject to the first proviso in Section 3.4, accrued
and unpaid interest on such Senior Notes to the Redemption Date. If any Senior
Note called for redemption shall not be so paid, interest will be paid, from the
Redemption Date until such redemption payment is made, on the unpaid principal
of the Senior Note and any interest not paid on such unpaid principal, in each
case, at the rate and in the manner provided in the Senior Notes.
Section 3.6 SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Senior Note equal in principal amount to
the unredeemed portion of the Senior Note surrendered.
Section 3.7 OPTIONAL REDEMPTION
The Company may redeem the Senior Notes, in whole or in part, at any
time at a redemption price equal to 100% of the principal amount thereof, plus
any accrued and unpaid interest to the Redemption Date.
ARTICLE 4
COVENANTS
Section 4.1 PAYMENT OF SENIOR NOTES.
The Company shall pay the principal of, premium, if any, and interest
on the Senior Notes from the Issue Date, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, quarterly in
arrears on each Interest Payment Date and in the manner provided in the Senior
Notes at the rate per annum, reset quarterly, equal to 3-month LIBOR (as defined
in the Senior Notes) plus 500 basis points until the principal hereof shall have
become due and payable, and on any overdue principal and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum
compounded quarterly. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of the actual number of days elapsed and a
360-day year.
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Section 4.2 REPORTS.
The Company will file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is subject to such filing requirements, so long
as the SEC will accept such filings on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been or is required to
so file such documents. The Company (at its own expense) shall also in any event
within 15 days after each Required Filing Date (i) transmit by mail to all
Holders, at their addresses appearing in the register of Senior Notes maintained
by the Registrar and (ii) file with the Trustee within 15 days after the
Required Filing Date, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company files with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act or would be required
to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange
Act. Upon qualification of this Indenture under the TIA, the Company shall
comply with the provisions of TIA Section 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
Section 4.3 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead (as a defense
or otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company or such Guarantor, as the case may be, from paying all or
any portion of the principal of, premium, if any, and/or interest on the Senior
Notes as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this Indenture;
and (to the extent that it may lawfully do so) the Company and each Guarantor
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 4.4 COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within 120
days after the end of each fiscal year, an Officers' Certificate (one of the
signers of which shall be the principal executive officer, principal financial
officer or principal accounting officer of the Company or such Guarantor, as the
case may be) complying with Section 314(a)(4) of the TIA stating that a review
of the activities of the Company or such Guarantor, as the case may be, during
such fiscal year has been made under the supervision of the signing Officers
with a view to determining whether the Company or such Guarantor, as the case
may be, has kept, observed, performed and fulfilled its obligations under the
Collateral
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Documents and this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge the Company or such
Guarantor, as the case may be, has kept, observed, performed and fulfilled each
and every covenant contained in the Collateral Documents and this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions thereof or hereof (determined without regard to any
period of grace or requirement of notice provided herein), or, if a Default or
Event of Default shall have occurred, describing all or such Defaults or Events
of Default of which he may have knowledge and what action the Company or such
Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
(b) The Company will, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer's becoming aware
of any Default or Event of Default, an Officers' Certificate specifying the
nature and extent of the same in reasonable detail and what action the Company
or such Guarantor, as the case may be, is taking or proposes to take with
respect thereto.
Section 4.5 TAXES.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon it or its Subsidiaries' income,
profits or property and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon their property; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim (1) whose
amount, applicability or validity is being contested in good faith by
appropriate negotiations or proceedings or (2) the failure to pay or discharge
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
Section 4.6 LIMITATION ON ADDITIONAL INDEBTEDNESS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur (as defined herein) any Indebtedness (including
Acquired Indebtedness) other than Permitted Indebtedness; provided, however,
that the Company or its Subsidiaries may incur Indebtedness (including Acquired
Indebtedness) (a) if (i) after giving effect on a pro forma basis to the
incurrence of such Indebtedness and to the extent set forth in the definition of
Consolidated Fixed Charge Coverage Ratio the receipt and application of the
proceeds thereof, the Company's Consolidated Fixed Charge Coverage Ratio would
be greater than 2.0 to 1; and (ii) no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness and (b) in connection with a Permitted Mortgage Financing.
Section 4.7 LIMITATION ON RESTRICTED PAYMENTS.
The Company and the Guarantors will not, and will not permit any of
their Subsidiaries to, directly or indirectly, make, any Restricted Payment,
unless (a) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted Payment, the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 4.6 hereof; and (c) immediately after giving effect
to such Restricted Payment, the aggregate of all Restricted Payments declared or
made after the Issue Date through and including the date of such Restricted
Payment (the "Base Period") does not exceed the sum of (1) 50% of the Company's
Consolidated Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) during the Base Period, and (2) 100% of the
32
aggregate Net Proceeds, including the fair market value of securities or other
property received by the Company from the issue or sale during the Base Period,
of Equity Interests (other than Disqualified Equity Interests or equity
interests of the Company issued to any Subsidiary of the Company) of the Company
or any Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Equity Interests (other than Disqualified Equity
Interests) of the Company which has been so converted or exercised or exchanged,
as the case may be. For purposes of determining under clause (c) the amount
expended for Restricted Payments, cash distributed shall be valued at the face
amount thereof and property other than cash will be valued at its fair market
value.
The provisions of this Section 4.7 shall not prohibit (i) the
agreement or commitment to make any payment or distribution permitted under this
Indenture or the payment or distribution so agreed or committed to be made as
long as such payment or distribution is made on the date of such agreement or
commitment or within 60 days thereof, provided, however, that on the date of
such agreement or commitment such payment would comply with the foregoing
provisions, it being understood that the agreement or commitment to make such
payment or distribution shall constitute Permitted Indebtedness, (ii) the
retirement of any Equity Interests of the Company or Subordinated Indebtedness
of the Company by conversion into or by an exchange for Equity Interests (other
than Disqualified Equity Interests), or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than Disqualified Equity
Interests); provided that Net Proceeds of such Equity Interests so used shall
not be included under clause (c)(2) above, (iii) the redemption or retirement of
Subordinated Indebtedness of the Company that is subordinated to the Senior
Notes in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale or incurrence of Indebtedness (other than any
Indebtedness owed to a Subsidiary) of the Company that is contractually
subordinated in right of payment to the Senior Notes to at least the same extent
as the Subordinated Indebtedness being redeemed or retired, (iv) the retirement
of any Disqualified Equity Interests by conversion into, or by exchange for,
shares of Disqualified Equity Interests, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Disqualified Equity Interests, (v) any Restricted Payment made in
connection with the Asset Acquisition of substantially all the assets of
American Pharmaceutical Services, Inc. and its Subsidiaries and Compass Pharmacy
Services, Inc. and related entities, Pinnacle Pharmaceutical Services, Inc.,
Compass Pharmacy Services of Texas, Inc. and Compass Pharmacy Services of
Maryland, Inc. (vi) the retirement of the Company's Series A Convertible
Preferred Stock pursuant to the mandatory redemption provisions thereof as in
effect on the Issue Date, (vii) any purchase, redemption or other acquisition of
Equity Interests of a Permitted Joint Venture from a physician or healthcare
provider which is required to be purchased, redeemed or otherwise acquired by
applicable law, (viii) any purchase, redemption or other acquisition of Equity
Interests of a Permitted Joint Venture, or (ix) the making of any payment
pursuant to any guarantee of Indebtedness of a Permitted Joint Venture;
provided, however, that in the case of the immediately preceding clauses (ii)
and (iii), no Default or Event of Default shall have occurred and be continuing
at the time of such Restricted Payment or would occur as a result thereof.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (c) above, amounts expended
pursuant to clauses (i) and (ii) of the immediately preceding paragraph shall be
included, but without duplication, in such calculation.
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For purposes of calculating the Net Proceeds received by the Company
from the issuance or sale of its Equity Interests either upon the conversion of,
or in exchange for, Indebtedness of the Company or any Subsidiary, such amount
will be deemed to be an amount equal to the difference of (a) the sum of (i) the
principal amount or accreted value (whichever is less) of such Indebtedness on
the date of such conversion or exchange and (ii) the additional cash
consideration, if any, received by the Company upon such conversion or exchange,
plus any payment on account of fractional shares, minus (b) all expenses
incurred in connection with such issuance or sale. In addition, for purposes of
calculating the Net Proceeds received by the Company from the issuance or sale
of its Equity Interests upon the exercise of any options or warrants of the
Company, such amount shall be deemed to be an amount equal to the difference of
(a) the additional cash consideration, if any, received by the Company upon such
exercise, minus (b) all fees, commissions, discounts and expenses incurred by
the Company in connection with such issuance or sale.
Section 4.8 LIMITATION ON CERTAIN ASSET SALES.
(a) Neither the Company nor any of its Subsidiaries will consummate
or permit, directly or indirectly, any Asset Sale, unless (i) the Company or
such Subsidiary, as the case may be, receives consideration at the time of each
such Asset Sale at least equal to the fair market value of the Property subject
to such Asset Sale, (ii) (x) in the case of an Asset Sale of Property
constituting Collateral (other than a Designated Facility), at least 50% of the
consideration received by the Company or such Subsidiary is in the form of cash
or Temporary Cash Investments, and (y) in the case of all other Asset Sales, at
least 33% of the consideration is in the form of cash or Temporary Cash
Investments (provided that in the case of an Asset Sale of a Designated
Facility, there is no requirement that the consideration be in the form of cash
or Temporary Cash Investments), (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such proposed Asset Sale or would
result as a consequence of such Asset Sale and (iv) such Asset Sale will not
materially adversely affect or materially impair the value of the remaining
Collateral or materially interfere with the Trustee's ability to realize such
value and will not materially impair the maintenance and operation of the
remaining Collateral; provided that the amount of (a) any notes or other
obligations received by the Company or such Subsidiary from such transferee that
are converted by the Company or such Subsidiary into cash (to the extent of the
cash received) within 90 days following the closing of such Asset Sale, and (b)
any Designated Noncash Consideration received by the Company or any of its
Subsidiaries in such Asset Sale having an aggregate fair market value, taken
together with all other Designated Noncash Consideration received pursuant to
this clause (b) that is at that time outstanding, not to exceed $50 million at
the time of the receipt of such Designated Noncash Consideration being measured
at the time received and without giving effect to subsequent changes in value
shall be deemed to be cash for purposes of clause (ii) of this provision.
(b) With respect to any Asset Sale Proceeds in the form of cash or
Temporary Cash Investments (including cash collected on any notes), Insurance
Proceeds or Condemnation Proceeds related to Collateral (the "Collateral
Proceeds Amount"), the Company shall (i) first, to the extent the Company elects
(or is required by the terms of any Indebtedness), prepay, repay, redeem or
purchase Senior Indebtedness of the Company or Senior Indebtedness of a Wholly
Owned Subsidiary (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within 365 days from the later of the date of such
Asset Sale or the receipt of such Collateral Proceeds Amount, (ii) second, to
the extent the Company elects, apply the Collateral Proceeds to acquire Property
34
(provided that, in the case of an Asset Sale of Property constituting Collateral
under the Collateral Trust Agreement, the Company shall cause such Property to
become Collateral under the Collateral Trust Agreement and in the case of an
Asset Sale of Property constituting Collateral under the Mortgage Indenture, the
Company shall cause such Property to become Collateral under the Mortgage
Indenture, in each case, as and when received by the Company or by any of its
Subsidiaries), that is useful in any business in which the Company is permitted
to be engaged within 365 days from the later of the date of such Asset Sale or
the receipt of such Collateral Proceeds Amount and (iii) third, make an offer (a
"Collateral Proceeds Offer") for up to a maximum principal amount (expressed as
an integral multiple of $100) of Senior Notes equal to the Collateral Proceeds
Amount to the extent of the balance of such Collateral Proceeds Amount after
application in accordance with clauses (i) and (ii) at a purchase price equal to
100% of the principal amount thereof plus accrued and unpaid interest thereon,
if any, to the date of purchase in accordance with the procedures set forth in
this Indenture. To the extent that the aggregate amount of Senior Notes tendered
pursuant to such Collateral Proceeds Offer is less than the amount of Collateral
Proceeds, the Company may use such portion of the Collateral Proceeds that is
not used to purchase Senior Notes tendered for general corporate purposes not
inconsistent with the Senior Notes or this Indenture. If the aggregate principal
amount of the Senior Notes tendered pursuant to such Collateral Proceeds Offer
is more than the amount of the Collateral Proceeds, the Senior Notes tendered
will be repurchased on a pro rata basis or by such other method as the Trustee
shall deem fair and appropriate. Upon the completion of any Collateral Proceeds
Offer and the closing of any repurchase of Senior Notes tendered pursuant to
such Collateral Proceeds Offer, the amount of Collateral Proceeds Amount shall
be deemed to be zero.
All Asset Sale Proceeds from Asset Sales of Property constituting
Collateral, Insurance Proceeds and Condemnation Proceeds from Loss Events and
non-cash consideration from Asset Sales of Property constituting Collateral,
including all Collateral Proceeds Amounts, shall be (i) subject to the perfected
second priority Lien in favor of the Trustee subject to Liens permitted under
the Collateral Documents in respect of the relevant item of Collateral, and (ii)
held in trust for the benefit of the holders of the Senior Notes and the
Trustee.
If the Company is required to make a Collateral Proceeds Offer, the
Company shall mail, within 30 days following the date on which the Company
receives any Collateral Proceeds Amounts, notice to the holders of the Senior
Notes stating, among other things: (1) that such holders have the right to
require the Company to apply the Collateral Proceeds Amount to repurchase such
Senior Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than 60
days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each holder of Senior Notes must follow in order to have such
Senior Notes repurchased; and (4) the calculations used in determining the
amount of Collateral Proceeds Amount to be applied to the repurchase of such
Senior Notes.
In the event of the transfer of substantially all (but not all) of
the assets of the Company or any Subsidiary of the Company or substantially all
(but not all) of the assets of any division or line of business of the Company
or any Subsidiary of the Company as an entirety to a Person in a transaction or
series of related transactions permitted under Section 5.1 hereof, the successor
corporation shall be deemed to have sold the assets of the Company, the
Subsidiary or the division or line of business, as the case may be, not so
transferred for purposes of this covenant, and shall comply with the provisions
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of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such assets of the Company, the Subsidiary
or the division or line of business, as the case may be, deemed to be sold shall
be deemed to be Asset Sale Proceeds for purposes of this covenant.
The provisions of this Section 4.8 shall not prohibit the application
by the Company of all, or substantially all, proceeds arising from Specified
Transactions (as defined in the Certificate of Designations for the Series A
Convertible Preferred Stock as in effect on the Issue Date) for the retirement
of the Company's Series A Convertible Preferred Stock pursuant to the mandatory
redemption provisions thereof as in effect on the Issue Date.
Section 4.9 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any Affiliate
of the Company (including any Affiliate in which the Company or any Subsidiary
thereof owns a minority interest) or holder of 10% or more of the Company's
Equity Interests (each such transaction, an "Affiliate Transaction") or extend,
renew, waive or otherwise modify the terms of any Affiliate Transaction entered
into prior to the Issue Date unless (i) such Affiliate Transaction is solely
between or among the Company and its Wholly-Owned Subsidiaries; (ii) such
Affiliate Transaction is solely between or among Wholly-Owned Subsidiaries of
the Company; (iii) such Affiliate Transaction is for reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary thereof as reasonably
determined in good faith by the Board of Directors (when required as described
below) or senior management of the Company or of such Subsidiary having no
interest in such Affiliate Transaction; or (iv) the terms of such Affiliate
Transaction are fair and reasonable to the Company or such Subsidiary, as the
case may be, and the terms of such Affiliate Transaction are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $5 million in any one year
which is not permitted under clause (i) or (ii) above, the Company or such
Subsidiary, as the case may be, must obtain a resolution of an independent
committee of its Board of Directors certifying that such Affiliate Transaction
complies with clause (iii) or (iv) above, as the case may be.
(b) The foregoing provisions will not apply to (i) the payment of
reasonable annual compensation to directors or executive officers of the
Company, (ii) the purchase in the ordinary course of business of, supplies,
services and the like from the Company or any Subsidiary; and (iii) the
continued performance of transactions with Affiliates disclosed in the Plan of
Reorganization.
The provisions of this Section 4.9 shall not prohibit the application
by the Company of all, or substantially all, proceeds arising from Specified
Transactions (as defined in the Certificate of Designations for the Series A
Convertible Preferred Stock as in effect on the Issue Date) for the retirement
of the Company's Series A Convertible Preferred Stock pursuant to the mandatory
redemption provisions thereof as in effect on the Issue Date.
36
Section 4.10 LIMITATIONS ON LIENS.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of the
Company or any Subsidiary or any shares of stock or debt of any Subsidiary which
owns property or assets, now owned or hereafter acquired, or any income or
profits therefrom, unless (i) if such Lien secures Indebtedness which is pari
passu with the Senior Notes, then the Senior Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien or (ii) if such Lien secures
Subordinated Indebtedness, any such Lien shall be subordinated to a Lien on such
property or asset or shares of stock or debt granted to the Holders of the
Senior Notes to the same extent as such Subordinated Indebtedness is
subordinated to the Senior Notes.
Section 4.11 LIMITATIONS ON INVESTMENTS.
The Company will not, and will not permit any of its Subsidiaries to,
make any Investment other than (i) a Permitted Investment or (ii) an Investment
that is made as a Restricted Payment in compliance with Section 4.7 hereof.
Section 4.12 LIMITATION ON CREATION OF SUBSIDIARIES.
The Company shall not create or acquire, nor permit any of its
Subsidiaries to create or acquire, any Subsidiary other than (i) an Unrestricted
Subsidiary, or (ii) a Subsidiary that, at the time it has either assets or
shareholders' equity in excess of $10,000, executes a Guarantee in the form
included as part of Exhibit A to this Indenture and reasonably satisfactory in
form and substance to the Trustee (and with documentation relating thereto as
the Trustee shall require, including, without limitation, a supplement or
amendment to this Indenture and an Opinion of Counsel as to the enforceability
of such Guarantee); provided that such Subsidiary shall not be required to
execute such a Guarantee if such Subsidiary is prohibited by law or by the terms
of any agreement from making such a Guarantee, such Subsidiary would have been
released from its guarantee by virtue of events set forth in Section 11.4
hereof, or such Subsidiary is a Subsidiary of a Person which has been released
as a guarantor pursuant to Section 11.4 hereof.
Section 4.13 LIMITATION ON SUBSIDIARIES AND UNRESTRICTED
SUBSIDIARIES.
(a) The Company may by written notice to the Trustee designate any
Subsidiary (including a newly acquired or newly formed Subsidiary (including any
such Subsidiary formed in connection with a Permitted Mortgage Financing)) to be
an Unrestricted Subsidiary, provided, however, that other than with respect to a
Subsidiary formed in connection with a Permitted Mortgage Financing (i) no
Default or Event of Default shall have occurred and be continuing or would arise
therefrom, (ii) such designation is at that time permitted under Section 4.7
hereof and (iii) immediately after giving effect to such designation, the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.6 hereof:
(i) an "Investment" shall be deemed to have been made at the time any
Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's percentage Equity Interest in such Subsidiary)
equal to the net worth of such Subsidiary at the time that such Subsidiary is
designated as an Unrestricted Subsidiary;
37
(ii) at any date the aggregate of all Restricted Payments made as
Investments since the Issue Date shall exclude and be reduced by an amount
(proportionate to the Company's percentage Equity Interest in such Subsidiary)
equal to the net worth of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Subsidiary, not to exceed, in the case
of any such redesignation of an Unrestricted Subsidiary as a Subsidiary, the
amount of Investments previously made by the Company and its Subsidiaries in
such Unrestricted Subsidiary (for purposes of clauses (a)(i) and (a)(ii) hereof,
"net worth" shall be calculated based upon the fair market value of the assets
of such Subsidiary as of any such date of designation); and
(iii) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer.
(b) Notwithstanding clause (a) above, the Board of Directors of the
Company may not designate any Subsidiary of the Company to be an Unrestricted
Subsidiary if, after such designation:
(i) the Company or any Subsidiary provides credit support for, or a
guarantee of, any Indebtedness or other obligation (contingent or otherwise) of
such Subsidiary (including any understanding, agreement or instrument evidencing
such Indebtedness or obligation) or is otherwise subject to recourse or
obligated thereunder or therefor, unless such credit support or guarantee is
permitted by the terms of this Indenture;
(ii) a default with respect to any Indebtedness of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Indebtedness of the Company or any Subsidiary of
the Company to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity;
(iii) such Subsidiary owns any Equity Interests in, or owns or holds
any Lien on any property of, any Subsidiary which is not a Subsidiary of the
Subsidiary to be so designated;
(iv) such Subsidiary has any contract, arrangement, agreement or
understanding with the Company, or any Subsidiary of the Company, whether
written or oral, other than a transaction having terms no less favorable to the
Company or such Subsidiary of the Company than those which might be obtained at
the time from persons who are not Affiliates of the Company; or
(v) the Company or any Subsidiary of the Company has any obligation
to subscribe for any Equity Interest in such Subsidiary or to maintain or
preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve specified levels of operating results, unless such obligation is
permitted by the terms of this Indenture.
Section 4.14 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
38
of any of its Subsidiaries to (a) pay dividends or make any other distributions
in cash or otherwise on its Equity Interests to the Company or any Subsidiary,
(b) pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans
or advances to the Company or any Subsidiary thereof, (d) transfer any of its
properties or assets to the Company or any Subsidiary thereof (other than
customary restrictions on transfer of property subject to a Permitted Lien under
the term of the agreements creating such Permitted Lien (other than a Lien on
cash not constituting proceeds of non-cash property subject to a Permitted Lien)
which would not materially adversely affect the Company's ability to satisfy its
obligations under the Senior Notes), or (e) guarantee any Indebtedness of the
Company or any Subsidiary of the Company, except, in each case, for such
encumbrances or restrictions existing under or contemplated by reason of (i) the
Senior Notes or this Indenture, (ii) any restrictions existing under or
contemplated by agreements evidencing any Senior Indebtedness or Permitted
Secured Indebtedness, (iii) any restrictions which are in existence on the Issue
Date or which exist with respect to a Person that becomes a Subsidiary on or
after the Issue Date, which are in existence at the time such Person becomes a
Subsidiary of the Company (but not created in connection with or contemplation
of such Person becoming a Subsidiary of the Company and which encumbrance or
restriction is not applicable to any Person or the property or assets of any
Person other than such Person or the property or assets of such Person so
acquired) and any agreement that refinances or replaces the same, provided,
however, that the terms and conditions of any such restrictions are not
materially less favorable in the aggregate to the holders of the Senior Notes
than those under or pursuant to the agreement being replaced or the agreement
evidencing the Indebtedness refinanced or replaced (iv) customary non-assignment
provisions in any contract or licensing agreement entered into by the Company or
any Subsidiary of the Company in the ordinary course of business or in any lease
governing any leasehold interest of the Company or a Subsidiary, (v) any
restrictions existing under or contemplated by agreements evidencing any
Purchase Money Obligations that impose restrictions on the ability of any of the
Company or its Subsidiaries to transfer the property so acquired to the Company
or its Subsidiaries, (vi) any restrictions existing under or contemplated by
agreements evidencing any Refinancing Indebtedness, providing that the
restrictions contained in the agreements governing such Refinancing Indebtedness
are no more restrictive in whole than those contained in the agreements
governing the Indebtedness being refinanced and (vii) any matter provided for in
the Plan of Reorganization.
Section 4.15 RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY EQUITY
INTEREST.
The Company and its Subsidiaries will not issue or sell, and will not
permit any other Subsidiaries to issue or sell, any Equity Interests of any
Subsidiary to any person other than the Company or a Wholly-Owned Subsidiary of
the Company, except for Common Equity Interests with no preferences or special
rights or privileges and with no redemption or prepayment provisions.
Section 4.16 LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.
The Company will not, and will not permit any of its Subsidiaries to,
enter into any Sale and Lease-Back Transaction (other than a Permitted Mortgage
Financing) unless (i) the consideration received in such Sale and Lease-Back
Transaction is at least equal to the fair market value of the property sold and
(ii) immediately prior to and after giving effect to the Attributable
39
Indebtedness in respect of such Sale and Lease-Back Transaction, the Company
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.6 hereof.
Section 4.17 LINE OF BUSINESS.
The Company will not, and will not permit any of its Subsidiaries to,
engage in any business other than any Healthcare Related Business or any other
business determined by the Company's Board of Directors, in good faith, to be
reasonably related to the foregoing.
Section 4.18 LIMITATION ON STATUS AS INVESTMENT COMPANY.
Neither the Company nor any of its Subsidiaries will take any action
or suffer to exist any condition that would require the Company or any of its
Subsidiaries to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended), or otherwise become subject to
regulation as an investment company.
Section 4.19 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, and the corporate, partnership or other existence of each Subsidiary,
in accordance with the respective organizational documents (as the same may be
amended from time to time) of each Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any of its Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole.
Section 4.20 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York an office or agency where Senior Notes may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Senior Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee as set forth in Section 12.2.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency; provided, however, that no such designation or rescission shall relieve
the Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes.
40
The Company initially appoints the Trustee as Registrar, Paying Agent
and Agent for service of notices and demands in connection with the Senior Notes
and this Indenture.
Section 4.21 MAINTENANCE OF INSURANCE; BOOKS AND RECORDS; COMPLIANCE
WITH LAWS.
(a) The Company and each of its Subsidiaries shall provide or cause
to be provided, for itself and each of their respective Subsidiaries, insurance
(including appropriate self-insurance) that is adequate and appropriate for the
conduct of the business of the Company and such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary for businesses similarly
situated in the industry.
(b) The Company shall and shall cause each of its subsidiaries to
keep proper books of record and account, in which full and correct entries shall
be made of all financial transactions and the assets and business of the Company
and each Subsidiary of the Company, in accordance with GAAP consistently applied
to the Company and its Subsidiaries taken as a whole.
(c) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which they are subject, non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
Section 4.22 FURTHER ASSURANCES TO THE TRUSTEE.
The Company shall (and shall cause each of its Subsidiaries to do)
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments as may be required
from time to time in order (i) to carry out more effectively the purposes of the
Collateral Documents, (ii) to subject to the Liens created by any of the
Collateral Documents any of the properties, rights or interest required to be
encumbered thereby, (iii) to perfect and maintain the validity, effectiveness
and priority of any of the Collateral Documents and the Liens intended to be
created thereby, and (iv) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to the Trustee any of the rights granted or now or
hereafter intended by the parties thereto to be granted to the Trustee or under
any other instrument executed in connection therewith or granted to the Company
under the Collateral Documents or under any other instrument executed in
connection therewith.
Section 4.23 COLLATERAL DOCUMENTS.
None of the Company or any of its Subsidiaries will amend, waive or
modify, or take or refrain from taking any action that has the effect of
amending, waiving or modifying, any provision of the Collateral Documents or
engaging in any transfer of assets from a company whose capital stock and assets
constitute Collateral or any restructuring of the affairs of such a company and
its subsidiaries to the extent that such amendment, waiver, modification, action
or restructuring could have an adverse effect on the rights of the Trustee or
the Holders, provided, that (i) the Collateral may be released or modified in an
41
Asset Sale as expressly authorized in this Indenture or in the Collateral
Documents; (ii) any Guarantee and pledges may be released in an Asset Sale as
expressly provided in this Indenture or in the Collateral Documents; and (iii)
this Indenture and any of the Collateral Documents may be otherwise amended,
waived or modified as set forth under Article 9 hereof.
ARTICLE 5
SUCCESSOR CORPORATION
5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS.
(a) The Company will not consolidate with, merge with or into, or
sell, assign, lease, convey, transfer or otherwise dispose of (a "transfer") all
or substantially all of its assets (as an entirety or substantially as an
entirety in one transaction or a series of related transactions), to any Person
unless: (i) the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or to which the properties and assets of the Company are transferred
shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all of the obligations of the Company under
the Senior Notes, this Indenture and the Collateral Documents, and the
obligations under this Indenture shall remain in full force and effect; and (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.6 hereof; and (iv)
immediately thereafter, the Company or the other surviving entity, as the case
may be, shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction.
(b) In connection with any consolidation, merger or transfer of
assets contemplated by this Section 5.1, the Company shall deliver or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.1 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
(c) This Section 5.1 shall not apply to the sale of the stock or
assets of the Company or any Subsidiary of the Company in accordance with
Section 4.8 hereof.
Section 5.2 SUCCESSOR PERSON SUBSTITUTED.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Subsidiary in accordance
with Section 5.1 above, the successor corporation formed by such consolidation
or into which the Company or any Subsidiary is merged or to which such transfer
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company or such Subsidiary under this Indenture with the same
effect as if such successor corporation had been named as the Company or such
42
Subsidiary herein, and thereafter the predecessor corporation shall be relieved
of all obligations and covenants under this Indenture and the Senior Notes,
except, in the case of a transfer, for the obligation to pay the principal of,
and interest on, the Senior Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) there is a default in the payment of any principal of, or
premium, if any, on the Senior Notes when the same becomes due and payable;
(2) default for 30 days in the payment of any interest on the Senior
Notes after such interest becomes due and payable;
(3) the Company or any Guarantor fails to comply with any of the
terms or provisions of Section 5.1 hereof;
(4) the Company or any Guarantor defaults in the observance or
performance of any other provision, covenant or agreement contained in the
Senior Notes, this Indenture or the Collateral Documents for 30 days after
written notice from the Trustee or the holders of not less than 25% in aggregate
principal amount of the Senior Notes then outstanding;
(5) there is a failure to pay when due principal, interest or premium
in an aggregate amount of $10 million or more with respect to any Indebtedness
of the Company or any Subsidiary thereof, or the acceleration prior to its
express maturity of any such Indebtedness aggregating $10 million or more;
(6) a court of competent jurisdiction renders a final judgment or
judgments which can no longer be appealed for the payment of money in excess of
$10 million (which are not paid or covered by third party insurance by
financially sound insurers) against the Company or any Subsidiary thereof and
such judgment remains undischarged for a period of 60 consecutive days during
which a stay of enforcement of such judgment shall not be in effect;
(7) the Company or any Subsidiary pursuant to or within the meaning
of any Bankruptcy Law; other than the Plan of Reorganization and the proceedings
related thereto:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
43
(D) makes a general assignment for the benefit of its
creditors or shall admit in writing its inability to
pay its debt, or
(E) generally is not paying its debts as they become
due;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any
Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of the
property of the Company or any Subsidiary, or
(C) orders the liquidation of the Company or any
Subsidiary, and, in each case, the order or decree
remains unstayed and in effect for 60 consecutive
days.
The term "Bankruptcy law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors as in effect from time to time.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
(9) At any time after the execution and delivery thereof, (i) any
Guarantee for any reason, other than the satisfaction in full of all
Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void, or (ii) a
material Collateral Document shall cease to be in full force and effect (other
than by reason of a release of Collateral thereunder in accordance with the
terms hereof or thereof, the satisfaction in full of the Obligations or any
other termination of such Collateral Document in accordance with their terms
hereof or thereof) or shall be declared null and void, or the Trustee, the
Collateral Agent or the Mortgage Indenture Trustee shall not have or shall cease
to have a valid and perfected second priority Lien on any Collateral purported
to be covered thereby having a fair market value, individually or in the
aggregate, exceeding $2,500,000, in each case for any reason other than the
failure of the Trustee, the Collateral Agent or the Mortgage Indenture Trustee
to take any action within its control.
(10) Holders of Senior Indebtedness holding a Lien on the stock or
assets of the Company take any judicial action to enforce such Lien.
Subject to the provisions of Sections 7.1 and 7.2, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless written
notice thereof shall have been given to a Trust Officer at the Corporate Trust
Office by the Company or any other Person.
Section 6.2 ACCELERATION.
If an Event of Default (other than an Event of Default arising under
Section 6.1(7) or (8) occurs and is continuing, the Trustee by notice to the
Company or the Holders of not less than 25% in aggregate principal amount of the
Senior Notes then outstanding by written notice to the Company and the Trustee
may declare to be immediately due and payable the entire principal amount of all
44
the Senior Notes then outstanding plus premium, if any, and accrued interest to
the date of acceleration; provided, however, that after such acceleration but
before a judgment or decree based on such acceleration is obtained by the
Trustee, the Holders of 51% in aggregate principal amount of the outstanding
Senior Notes may rescind and annul such acceleration if all existing Events of
Default, other than nonpayment of accelerated principal, premium, if any, or
interest, have been cured or waived as provided in this Indenture and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
In case an Event of Default specified in Section 6.1(7) or (8)
occurs, the principal, premium, if any, and interest amount with respect to all
of the Senior Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or the Holders
of the Senior Notes.
Section 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Senior Notes or
to enforce the performance of any provision of the Senior Notes or this
Indenture and may take any necessary action requested of it as Trustee to
settle, compromise, adjust or otherwise conclude any proceedings to which it is
a party.
The Trustee may maintain a proceeding even if it does not possess any
of the Senior Notes or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.4 WAIVER OF DEFAULTS AND EVENTS OF DEFAULT.
Subject to Sections 6.2, 6.7 and 8.2 hereof, the Holders of a
majority in principal amount of the Senior Notes then outstanding have the right
to waive any existing or future Default or Event of Default or compliance with
any provision of this Indenture or the Senior Notes. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto except as specifically set forth therein.
Section 6.6 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Senior Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law, this Indenture or the
Collateral Documents or that the Trustee determines may be unduly prejudicial to
the rights of another Noteholder not taking part in such direction, and the
Trustee shall have the right to decline to follow any such direction if the
Trustee, being advised by counsel, determines that the action so directed may
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not lawfully be taken or if the Trustee in good faith shall determine that the
proceedings so directed may involve it in personal liability unless the Trustee
has asked for and received indemnification reasonably satisfactory to it against
any loss, liability or expense caused by its following such direction; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
Section 6.6 LIMITATION ON SUITS.
Subject to Section 6.7 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Senior
Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 51% in aggregate principal amount of the
Senior Notes then outstanding make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer, and if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, but subject to
the Collateral Documents, the right of any Holder of a Senior Note to receive
payment of principal of, or premium, if any, and interest on the Senior Note on
or after the respective due dates expressed in the Senior Note, or to bring suit
for the enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of the Holder.
Section 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.1(1) or (2) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company or the Guarantors (or any other obligor on the Senior Notes) for the
whole amount of unpaid principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate then borne by the Senior Notes (after giving effect to Section 4.1),
and such further amounts as shall be sufficient to cover the costs and expenses
46
of collection, including the compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, including all sums due and owing to the
Trustee pursuant to the Indenture including Section 7.7.
Section 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and the Noteholders allowed in
any judicial proceedings relative to the Company or the Guarantors (or any other
obligor upon the Senior Notes), their respective creditors or property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its reasonable charges and expenses to the extent that any such
charges and expenses are not paid out of the estate in any such proceedings and
any custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under the Indenture, including without
limitation Section 7.7 hereof. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Noteholder any plan or reorganization, arrangement, adjustment or
composition affecting the Senior Notes or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Noteholder in
any such proceedings.
Section 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
FIRST: to the Trustee, its agents and counsel for amounts due under
the Indenture, including without limitation, Section 7.7 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Senior Notes
for principal, premium, if any, and interest as to each, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Senior Notes; and
THIRD: to the Company or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10. The Trustee shall give the Company
prior notice of any such record date and payment date; provided, however, that
the failure to give any such notice shall not affect the establishment of such
record date or payment date or any payment to Noteholders pursuant to this
Section 6.10.
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Section 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7 hereof or a suit by Holders of more than 10% in
principal amount of the Senior Notes then outstanding.
Section 6.12 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 6.13 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article Six or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE 7
TRUSTEE
Section 7.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default known to the
Trustee:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and the Collateral Documents and no others and no
implied covenants or obligations shall be read into this Indenture or the
Collateral Documents against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture but, in the case of
48
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture and the Collateral Documents (but need not confirm or investigate
the accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.1.
(2) In the absence of bad faith on its part, the Trustee
shall not be liable for any error of judgment made in good faith by a Trust
Officer, unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.2 and 6.5 hereof.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity satisfactory to
it against such risk or liability is not reasonably assured to it.
(e) Whether or not therein expressly so provided, paragraphs (a),
(b), (c), (d), (f) and (g) of this Section 7.1 shall govern every provision of
this Indenture that in any way relates to the Trustee or any Agent.
(f) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity reasonably satisfactory to it against any
loss, liability, expense or fee.
(g) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
Section 7.2 RIGHTS OF TRUSTEE.
Subject to Section 7.1 hereof:
(1) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document reasonably believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(2) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent (other than the negligence or
willful misconduct of an agent who is an employee of the Trustee) appointed by
it with due care.
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(3) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers; provided that the Trustee's conduct does not constitute
negligence or bad faith.
(4) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(5) Before the Trustee acts or refrains from acting, it may require
an Officer's Certificate or an Opinion of Counsel, or both.
Section 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company or any Guarantor, or any
Affiliates thereof, with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, shall be
subject to Sections 7.10 and 7.11 hereof.
Section 7.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Collateral Documents, the Senior Notes or any Guarantee, it
shall not be accountable for the Company's use of the proceeds from the sale of
Senior Notes or any money paid to the Company pursuant to the terms of this
Indenture or the Collateral Documents, and it shall not be responsible for any
statement in the Senior Notes or any document used in connection with the sale
of the Senior Notes other than its certificate of authentication.
Section 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Noteholder notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal or premium, if any, or
interest on the Senior Notes, or that resulted from the failure of the Company
to comply with Section 5.1, the Trustee may withhold the notice if and so long
as a committee of its Trust Officers in good faith determines it to be in the
best interests of the holders of the Senior Notes to do so.
Section 7.6 REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA Section 313(a), within 60 days after June 15 of
any year, commencing the June 15 following the date of this Indenture, the
Trustee shall mail to each Noteholder a brief report dated as of such June 15
that complies with TIA Section 313(a); provided that no such report need be
transmitted if no such events listed in TIA Section 313(a) have occurred within
such period. The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c) and TIA Section 313(d).
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A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Senior Notes are
listed. The Company shall promptly notify the Trustee when the Senior Notes are
listed on any stock exchange and the Trustee shall comply with TIA Section
313(d).
Section 7.7 COMPENSATION AND INDEMNITY.
The Company and the Guarantors (on a joint and several basis) shall
pay to the Trustee from time to time such compensation as shall be agreed in
writing between the Company and the Trustee (or in the absence of such an
agreement, reasonable compensation) for its services hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Company and the Guarantors
(on a joint and several basis) shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances incurred or made by it in
connection with its duties under this Indenture, including the compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company and the Guarantors (on a joint and several basis) shall
indemnify each of the Trustee and any predecessor Trustee for, and hold them
harmless against, any and all loss, damage, claim, liability, expense (including
but not limited to attorneys' fees and expenses) or taxes (other than taxes
based on the income of the Trustee) incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder
(including, without limitation, settlement costs). The Trustee shall notify the
Company and the Guarantors in writing promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the failure by the Trustee to
so notify the Company and the Guarantors shall not relieve the Company or the
Guarantors of their obligations hereunder.
Notwithstanding the foregoing, the Company and the Guarantors need
not reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To secure
the payment obligations of the Company and the Guarantors in this Indenture,
including without limitation, Sections 7.7 and 9.5, the Trustee and any
predecessor Trustee shall have a lien prior to the Senior Notes and the Senior
Indebtedness on all money or property held or collected by the Trustee in its
capacity as such, except such money or property held in trust to pay principal
of and interest on particular Senior Notes. The obligations of the Company and
the Guarantors under this Section 7.7 to compensate and indemnify the Trustee
and each predecessor Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for expenses, disbursements and advances shall be joint and
several liabilities of the Company and each of the Guarantors and shall survive
the satisfaction and discharge of this Indenture, including the termination or
rejection hereof in any bankruptcy proceeding to the extent permitted by law.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(7) or (8) hereof occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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Section 7.8 REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company and the Guarantors
in writing, such resignation to become effective upon the appointment of a
successor Trustee. The Holders of a majority in principal amount of the
outstanding Senior Notes may remove the Trustee by notifying the removed Trustee
in writing and may appoint a successor Trustee with the Company's written
consent which consent shall not be unreasonably withheld. The Company may remove
the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 25% in principal amount of the outstanding Senior Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.7 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.8, the Company's obligations under Section
7.7 hereof shall continue for the benefit of the retiring Trustee.
Section 7.9 SUCCESSOR TRUSTEE BY CONSOLIDATION, MERGER OR CONVERSION.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation or national banking association, subject to Section 7.10 hereof, the
successor corporation or national banking association without any further act
shall be the successor Trustee.
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Section 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1);
provided that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities, or conflicts
of interest or participation in other securities, of the Company or the
Guarantors are outstanding if the requirements for exclusion set forth in TIA
Section 310(b)(1) are met.
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311 (a) to the extent indicated
therein.
Section 7.12 PAYING AGENTS.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as
agent for the payment of principal of, or premium, if any,
or interest on, the Senior Notes (whether such sums have
been paid to it by the Company or by any obligor on the
Senior Notes) in trust for the benefit of Holders of the
Senior Notes or the Trustee;
(B) that it will at any time during the
continuance of any Event of Default, upon written request
from the Trustee, deliver to the Trustee all sums so held
in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice
within three (3) Business Days of any failure of the
Company (or by any obligor on the Senior Notes) in the
payment of any installment of the principal of, premium, if
any, or interest on, the Senior Notes when the same shall
be due and payable.
Section 7.13 CO-TRUSTEE AND SEPARATE TRUSTEES.
At any time or times, for the purpose of meeting the legal
requirements of any applicable jurisdiction, the Company and the Trustee shall
have power to appoint, and, upon the written request of the Trustee or of the
Holders of at least 33% in principal amount of the Securities then outstanding,
the Company shall for such purpose join with the Trustee in the execution and
delivery of all instruments and agreements necessary or proper to appoint, one
or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, or to act as separate trustee, in either case with such powers
as may be provided in the instrument of appointment, and to vest in such Person
or Persons, in the capacity aforesaid, and for the benefit of the Holders, any
property, title, right or power deemed necessary or desirable, subject to the
other provisions of this Section. If the Company does not join in such
53
appointment within 15 days after the receipt by it of a request so to do, or if
an Event of Default shall have occurred and be continuing, the Trustee alone
shall have power to make such appointment.
Should any written instrument or instruments from the Company be
required by any co-trustee or separate trustee to more fully confirm to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Company.
Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following
conditions:
(a) the Securities shall be authenticated and delivered, and all
rights, powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised solely, by
the Trustee;
(b) the rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed either by the
Trustee or by the Trustee and such co-trustee or separate trustee jointly, as
shall be provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in which
any particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed singly by such co-trustee or
separate trustee.
(c) the Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company, may accept the resignation of or remove
any co-trustee or separate trustee appointed under this Section, and, it an
Event of Default shall have occurred and be continuing, the Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Company. Upon the written request of the
Trustee, the Company shall join with the Trustee in the execution and delivery
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section;
(d) no co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee, or any other such
trustee hereunder, and the Trustee shall not be personally liable by reason of
any act or omission of any such co-trustee or separate trustee;
(e) any act of Holders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee;
(f) any separate trustee or co-trustee may at any time appoint the
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name; and
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(g) if any separate trustee or co-trustee shall die, become incapable
of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new successor trustee.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.1 WITHOUT CONSENT OF HOLDERS.
The Company and/or one or more Guarantors and the Trustee may modify,
waive, amend or supplement this Indenture, the Senior Notes, the Guarantees or
the Collateral Documents without notice to or consent of any Noteholder:
(1) to comply with Section 5.1 hereof;
(2) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not materially and adversely affect the rights of any
Noteholder;
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Senior Notes; or
(6) to enter into additional or supplemental Collateral Documents
consistent with the terms hereof;
(7) to adjust the aggregate principal amount of Senior Notes
permitted to be issued pursuant to this Indenture so that the aggregate
principal amount of Senior Notes permitted to be issued pursuant to this
Indenture are as provided in the Plan of Reorganization;
(8) to otherwise comply with the terms of the Plan of Reorganization;
(9) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; or
(10) to add any additional Events of Default.
The Trustee is hereby authorized to join with the Company and the
Guarantors, if any, in the execution of any modification, waiver, amendment or
supplement to this Indenture, the Senior Notes, the Guarantees or the Collateral
Documents authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations which may be therein contained,
but the Trustee shall not be obligated to enter into any such modification,
55
waiver, amendment or supplement to this Indenture, the Senior Notes, the
Guarantees or the Collateral Documents which adversely affects its own rights,
duties or immunities under this Indenture.
Section 8.2 WITH CONSENT OF HOLDERS.
The Company and/or one or more Guarantors and the Trustee may modify,
amend, waive or supplement this Indenture, the Senior Notes, the Guarantees or
the Collateral Documents with the written consent of the Holders of not less
than a majority in aggregate principal amount of outstanding Senior Notes. The
Holders of not less than a majority in aggregate principal amount of outstanding
Senior Notes may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Senior Notes. Subject to Section 8.4,
without the consent of each Noteholder affected, however, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.4, may not:
(1) reduce the amount of Senior Notes whose Holders must consent to
an amendment, modification, supplement or waiver to this Indenture or the Senior
Notes;
(2) reduce the rate of or change the time for payment of interest on
any Senior Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Senior Note;
(4) make any Senior Note payable in money other than that stated in
the Senior Note or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the Senior
Notes or reduce the premium payable upon any redemption of the Senior Notes;
(6) waive a default in the payment of the principal of, or interest
on, or redemption payment with respect to any Senior Note;
(7) subordinate in right of payment, or otherwise subordinate, the
Senior Notes or the Guarantees to another Indebtedness or obligation of the
Company or the Guarantors;
(8) take any other action otherwise prohibited by this indenture to
be taken without the consent of each Holder affected thereby;
(9) release all or substantially all of the Collateral from the Lien
of this Indenture and the Collateral Documents (other than pursuant to an Asset
Sale in compliance with Section 4.8 hereto); or
(10) modify this Section 8.2, Section 6.4 or 6.7.
After a modification, amendment, supplement or waiver under this
Section 8.2 becomes effective, the Company shall mail to the Holders a notice
briefly describing the modification, amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
56
however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, modification,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the Senior
Notes shall comply with the TIA as then in effect.
Section 8.4 REVOCATION AND EFFECT OF CONSENTS.
Until a modification, amendment, supplement, waiver or other action
becomes effective, a consent to it by a Holder of a Senior Note is a continuing
consent conclusive and binding upon such Holder and every subsequent Holder of
the same Senior Note or portion thereof, and of any Senior Note issued upon the
transfer thereof or in exchange therefor or in place thereof, even if notation
of the consent is not made on any such Senior Note. Any such Holder or
subsequent Holder, however, may revoke the consent as to his Senior Note or
portion of a Senior Note, if the Trustee receives the notice of revocation
before the date the modification, amendment, supplement, waiver or other action
becomes effective. Notwithstanding the foregoing, nothing in this paragraph
shall impair the right of any Holder under TIA Section 316(b).
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any modification,
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such modification, amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date unless the consent of the requisite
number of Holders has been obtained.
After a modification, amendment, supplement, waiver or other action
becomes effective, it shall bind every Holder and every subsequent Holder.
Section 8.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES.
If a modification, amendment, supplement or waiver changes the terms
of a Senior Note, the Trustee may request the Holder of the Senior Note to
deliver it to the Trustee. In such case, the Trustee shall place an appropriate
notation on the Senior Note about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Senior Note shall issue and the Trustee shall authenticate a
new security that reflects the changed terms. Failure to make the appropriate
notation or issue a new Senior Note shall not affect the validity and effect of
such modification, amendment, supplement or waiver.
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Section 8.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any modification, amendment, supplement or
waiver authorized pursuant to this Article 8 if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such modification, amendment, supplement or
waiver, the Trustee shall be entitled to receive and, subject to Section 7.1
hereof, shall be fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that such modification, amendment, supplement or
waiver is authorized or permitted by this Indenture and such supplemental
indenture constitutes the legal, valid and binding obligation of the Company and
the Guarantors enforceable against each of them in accordance with its terms
(subject to customary exceptions). The Company or any Guarantor may not sign a
modification, amendment or supplement until the Board of Directors of the
Company or such Guarantor, as appropriate, approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.1 DISCHARGE OF INDENTURE.
The Company and the Guarantors, if any, may terminate their
obligations under the Senior Notes, the Guarantees, if any, and this Indenture,
except the obligations referred to in the last paragraph of this Section 9.1, if
there shall have been cancelled by the Trustee or delivered to the Trustee for
cancellation all Senior Notes theretofore authenticated and delivered (other
than any Senior Notes that are asserted to have been destroyed, lost or stolen
and that shall have been replaced as provided in Section 2.7 hereof) and the
Company has paid all sums payable by it hereunder or deposited all required sums
with the Trustee.
After such delivery the Trustee upon request shall acknowledge in
writing the discharge of the Company's and the Guarantors' obligations under the
Senior Notes, the Guarantees and this Indenture except for those surviving
obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company in Sections 2.7, 7.7, 9.5, 9.6 and 9.8 hereof shall
survive.
Section 9.2 LEGAL DEFEASANCE.
The Company may at its option, by Board Resolution, be discharged
from its obligations with respect to the Senior Notes and the Guarantors, if
any, discharged from their obligations under the Guarantees, if any, on the date
the conditions set forth in Section 9.4 below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Senior Notes and to have satisfied all its other obligations under such
Senior Notes and this Indenture insofar as such Senior Notes are concerned (and
the Trustee, at the expense of the Company, shall, subject to Section 9.6
hereof, execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Senior Notes to receive
solely from the trust funds described in Section 9.4 hereof and as more fully
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set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Senior Notes when such payments are due, (B) the
Company's obligations with respect to such Senior Notes under Sections 2.3, 2.4,
2.5, 2.6, 2.7, 2.8 and 4.20 hereof, (C) the rights, powers, trusts, duties, and
immunities of the Trustee hereunder (including claims of, or payments to, the
Trustee under or pursuant to Section 7.7 hereof) and (D) this Article 9. Subject
to compliance with this Article 9, the Company may exercise its option under
this Section 9.2 with respect to the Senior Notes notwithstanding the prior
exercise of its option under Section 9.3 below with respect to the Senior Notes.
Section 9.3 COVENANT DEFEASANCE.
At the option of the Company, pursuant to a Board Resolution, the
Company and the Guarantors, if any, shall be released from their respective
obligations under Sections 4.2 through 4.4 hereof, inclusive, Sections 4.6
through 4.17 hereof, inclusive, Section 4.23 and clause (a)(iii) of Section 5.1
hereof with respect to the outstanding Senior Notes on and after the date the
conditions set forth in Section 9.4 hereof are satisfied (hereinafter, "Covenant
Defeasance") and the Senior Notes shall thereafter be deemed to not be
outstanding for purposes of any direction, waiver, consent, declaration or act
of the Holders (and the consequences thereof) in connection with such covenants
but shall continue to be outstanding for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that the Company and the Guarantors, if
any, may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such specified Section or portion
thereof, whether directly or indirectly by reason of any reference elsewhere
herein to any such specified Section or portion thereof or by reason of any
reference in any such specified Section or portion thereof to any other
provision herein or in any other document, but the remainder of this Indenture
and the Senior Notes shall be unaffected thereby.
Section 9.4 CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of Section 9.2
or Section 9.3 hereof to the outstanding Senior Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7. 10 hereof who shall agree to comply with the provisions of this
Article 9 applicable to it) as funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Senior Notes, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the principal
of, premium, if any, and accrued interest on the outstanding Senior Notes at the
maturity date of such principal, premium, if any, or interest, or on dates for
payment and redemption of such principal, premium, if any, and interest selected
in accordance with the terms of this Indenture and of the Senior Notes;
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(2) no Event of Default or Default with respect to the Senior Notes
shall have occurred and be continuing on the date of such deposit, or shall have
occurred and be continuing at any time during the period ending on the 91st day
after the date of such deposit or, if longer, ending on the day following the
expiration of the longest preference period under any Bankruptcy Law applicable
to the Company in respect of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute default under any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register as an
investment company under the Investment Company Act of 1940, as amended;
(5) in the case of an election under Section 9.2 above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling to the effect that or (ii) there has been a change in any
applicable Federal income tax law with the effect that, and such opinion shall
confirm that, the Holders of the outstanding Senior Notes or persons in their
positions will not recognize income, gain or loss for Federal income tax
purposes solely as a result of such Legal Defeasance and will be subject to
Federal income tax on the same amounts, in the same manner, including as a
result of prepayment, and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(6) in the case of an election under Section 9.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Senior Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such Covenant Defeasance and will
be subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not
occurred;
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (a) all conditions
precedent provided for relating to either the Legal Defeasance under Section 9.2
above or the Covenant Defeasance under Section 9.3 hereof (as the case may be)
have been complied with and (b) if any other Indebtedness of the Company shall
then be outstanding, such legal defeasance or covenant defeasance will not
violate the provisions of the agreements or instruments evidencing such
Indebtedness; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others.
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Section 9.5 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.4 hereof in respect of
the outstanding Senior Notes shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Senior Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Senior Notes, of all sums due and to become
due thereon in respect of principal, premium, if any, and accrued interest, but
such money need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no duty to invest such money or U.S.
Government Obligations.
The Company and the Guarantors shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 9.4 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Senior Notes.
Subject to Sections 7.1 and 7.2 hereof, anything in this Article 9 to
the contrary notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon Company Request any money or U.S. Government Obligations
held by it as provided in Section 9.4 hereof which, in the opinion of a
nationally-recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
Section 9.6 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.1, 9.2 or 9.3 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Company and any Guarantor under this
Indenture, the Senior Notes and the Guarantees, if any, shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 9 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 9.1 hereof; provided,
however, that if the Company or any Guarantors have made any payment of
principal of, premium, if any, or accrued interest on any Senior Notes because
of the reinstatement of their obligations, the Company or such Guarantors, as
the case may be, shall be subrogated to the rights of the Holders of such Senior
Notes to receive such payment from the money or U.S. Government Obligations held
by the Trustee or Paying Agent.
Section 9.7 MONEYS HELD BY PAYING AGENT.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.4 hereof, to the Company (or,
if such moneys had been deposited by any Guarantors, to such Guarantors), and
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thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
Section 9.8 MONEYS HELD BY TRUSTEE.
Any moneys deposited with the Trustee or any Paying Agent or then
held by the Company or any Guarantors in trust for the payment of the principal
of, premium, if any, or interest on any Senior Note that are not applied but
remain unclaimed by the Holder of such Senior Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Senior Note
shall have respectively become due and payable shall be repaid to the Company
(or, if appropriate, the Guarantors) upon Company Request, or if such moneys are
then held by the Company or any Guarantors in trust, such moneys shall be
released from such trust; and the Holder of such Senior Note entitled to receive
such payment shall thereafter, as an unsecured general creditor, look only to
the Company and the Guarantors, if any, for the payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; provided, however, that the Trustee or any such Paying
Agent, before being required to make any such repayment, may, at the expense of
the Company and the Guarantors, if any, either mail to each Noteholder affected,
at the address shown in the register of the Senior Notes maintained by the
Registrar pursuant to Section 2.3 hereof, or cause to be published once a week
for two successive weeks, in a newspaper published in the English language,
customarily published each Business Day and of general circulation in the city
of New York, New York, a notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such mailing or publication, any unclaimed balance of such moneys then
remaining will be repaid to the Company. After payment to the Company or the
Guarantors, if any, or the release of any money held in trust by the Company or
any Guarantors, as the case may be, Noteholders entitled to the money must look
only to the Company and any Guarantors for payment as general creditors unless
applicable abandoned property law designates another person.
Section 9.9 SENIOR NOTE COLLATERAL.
Upon the Company's exercise under Section 9.1 hereof of the option
applicable under either Section 9.2 or 9.3, the Collateral shall be released
pursuant to Section 10.3 hereof.
ARTICLE 10
COLLATERAL AND SECURITY
Section 10.1 SECURITY.
The due and punctual payment of the principal of, premium, if any,
and interest on the Senior Notes when and as the same shall be due and payable,
whether on an Interest Payment Date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of, premium, if
any, and interest on the Senior Notes and performance of all other obligations
of the Company and the Guarantors to the Holders of Senior Notes or the Trustee
under this Indenture, the Senior Notes and the Guarantees, according to the
terms hereunder or thereunder, shall be secured by the Collateral, as provided
in the Collateral Documents which the Company and the applicable parties have
entered into simultaneously with the execution of this Indenture for the benefit
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of the Holders of Senior Notes. Each Holder of Senior Notes, by its acceptance
thereof, consents and agrees to the terms of the Collateral Documents
(including, without limitation, the provisions providing for foreclosure and
release of Collateral) as the same may be in effect or may be amended from time
to time in accordance with its terms and authorizes and directs the Trustee to
enter into the Collateral Documents and to perform its obligations and exercise
its rights thereunder in accordance therewith. The Company and the Guarantors
shall deliver to the Trustee copies of all documents executed pursuant to this
Indenture and the Collateral Documents and shall do or cause to be done all such
acts and things as may be necessary or proper, or as may be required by the
provisions of the Collateral Documents to assure and confirm to the Trustee the
security interest in the Collateral contemplated hereby, by the Collateral
Documents or any part thereof, as from time to time constituted, so as to render
the same available for the security and benefit of this Indenture and of the
Senior Notes and the Guarantees secured hereby, according to the intent and
purposes herein expressed. The Company shall take, or shall cause its
Subsidiaries to take any and all actions reasonably required to cause the
Collateral Documents to create and maintain, as security for the obligations of
the Company hereunder, a valid and enforceable perfected priority Lien in and on
all the Collateral in accordance with the terms of the Collateral Documents.
Section 10.2 RECORDING AND OPINIONS.
The Company and the Guarantors will cause this Indenture, if
necessary, the applicable Collateral Documents, including any financing
statements, all amendments or supplements to each of the foregoing and any other
similar security documents as necessary, to be registered, recorded and filed
and/or re-recorded, re-filed and renewed in such manner and in such place or
places, if any, as may be required by law in order fully to preserve and protect
(a) the Lien securing the obligations under the Senior Notes and the Guarantees
of those Guarantors that are parties to the Collateral Documents pursuant to the
Collateral Documents and (b) the Lien of the Guarantors that are parties to the
Collateral Documents securing (for the ratable benefit of the Holders of Senior
Notes) the Senior Notes and the Guarantees and to effectuate and preserve the
security of the Holders of Senior Notes and all rights of the Trustee.
The Company, the Guarantors and any other obligor shall furnish to
the Trustee:
(a) Promptly after the execution and delivery of this Indenture, and
promptly after the execution and delivery of any other instrument of further
assurance or amendment, an Opinion of Counsel in the United States (a) stating
that this Indenture, the Senior Notes and the Collateral Documents and such
instruments of further assurance or amendment, if any, are valid, binding and
enforceable obligations of the Company and its Subsidiaries which are
signatories to those agreements, subject to customary qualifications and
exceptions reasonably acceptable to the Trustee, and (b) either (i) stating
that, subject to customary assumptions and exclusions, in the opinion of such
counsel, this Indenture and other applicable Collateral Documents and all other
instruments of further assurance or amendment have been properly recorded,
registered and filed to the extent necessary to make effective the Lien intended
to be created by such Indenture and Collateral Documents and reciting the
details of such action or referring to prior Opinions of Counsel in which such
details are given, and stating that, subject to customary assumptions and
exclusions, as to such Indenture and Collateral Documents and such other
instruments such recording, registering and filing are the only recordings,
registerings and filings necessary to give notice thereof and that no
re-recordings, re-registerings or re-filings are necessary to maintain such
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notice, and further stating that all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the rights of the Holders of Senior Notes and the Trustee hereunder and
under the Collateral Documents or (ii) stating that, subject to customary
assumptions and exclusions, in the opinion of such counsel, no such action is
necessary to make any Lien created under any of the Collateral Documents
effective as intended by this Indenture and such Collateral Documents; and
(b) Within 30 days after February 1, in each year beginning with the
year 2002, an Opinion of Counsel, dated as of such date, either (i) stating
that, subject to customary assumptions and exclusions, in the opinion of such
counsel, such action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and re-filing of this Indenture and all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of this
Indenture and the Collateral Documents until the next Opinion of Counsel is
required to be rendered pursuant to this paragraph and reciting the details of
such action or referring to prior Opinions of Counsel in which such details are
given, and stating that all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the rights of the Holders and the Trustee hereunder and under the Collateral
Documents or (ii) stating that, subject to customary assumptions and exclusions,
in the opinion of such counsel, no such action is necessary to maintain such
Lien, until the next Opinion of Counsel is required to be rendered pursuant to
this paragraph.
(c) The Company shall furnish to the Trustee the certificate or
opinions, as the case may be, required by TIA Section 314(d). Such certificates
or opinions will be subject to the terms of TIA Section 314(e).
Section 10.3 RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section 10.3,
Collateral may be released from the Lien and security interest created by this
Indenture and the Collateral Documents at any time or from time to time upon the
request of the Company pursuant to an Officers' Certificate certifying that all
terms for release and conditions precedent hereunder and under the applicable
Collateral Document have been met and specifying (A) the identity of the
Collateral to be released and (B) the provision of this Indenture which
authorizes such release. The Trustee shall release, and shall give any necessary
consent, waiver or instruction to the Collateral Agent or the Mortgage Trustee,
as the case may be, to release (at the sole cost and expense of the Company) (i)
all Collateral that is contributed, sold, leased, conveyed, transferred or
otherwise disposed of; provided, such contribution, sale, lease, conveyance,
transfer or other distribution is or will be in accordance with the provisions
of this Indenture, including, without limitation, the requirement that the net
proceeds, if any, from such contribution, sale, lease, conveyance, transfer or
other distribution are or will be applied in accordance with this Indenture and
that no Default or Event of Default has occurred and is continuing or would
occur immediately following such release; (ii) Collateral which may be released
with the consent of Holders pursuant to Article 8 hereof; (iii) all Collateral
(except as provided in Article 9 hereof) upon discharge or defeasance of this
Indenture in accordance with Article 9 hereof; (iv) all Collateral upon the
payment in full of all obligations of the Company with respect to the Senior
Notes; and (v) Collateral of a Guarantor whose Guarantee is released pursuant to
Section 11.4 hereof. Upon receipt of such Officers' Certificate, an Opinion of
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Counsel and any other opinions or certificates required by this Indenture and
the TIA, the Trustee shall execute, deliver or acknowledge any necessary or
proper instruments of termination, satisfaction or release to evidence the
release of any Collateral permitted to be released pursuant to this Indenture
and the Collateral Documents.
(b) No Collateral shall be released from the Lien and security
interest created by the Collateral Documents pursuant to the provisions of the
Collateral Documents unless there shall have been delivered to the Trustee the
certificates required by this Section 10.3.
(c) The Trustee may release Collateral from the Lien and security
interest created by this Indenture and the Collateral Documents upon the sale or
disposition of Collateral pursuant to the Trustee's powers, rights and duties
with respect to remedies provided under any of the Collateral Documents.
(d) The release of any Collateral from the terms of this Indenture
and the Collateral Documents shall not be deemed to impair the security under
this Indenture in contravention of the provisions hereof if and to the extent
the Collateral is released pursuant to the terms hereof. To the extent
applicable, the Company shall cause TIA Section 313(b), relating to reports, and
TIA Section 314(d), relating to the release of property or securities from the
Lien and security interest of the Collateral Documents and relating to the
substitution therefor of any property or securities to be subjected to the Lien
and security interest of the Collateral Documents to be complied with. Any
certificate or opinion required by TIA Section 314(d) may be made by an Officer
of the company except in cases where TIA Section 314(d) requires that such
certificate or opinion be made by an independent Person, which Person shall be
an independent engineer, appraiser or other expert selected or approved by the
Trustee in the exercise of reasonable care.
Section 10.4 PROTECTION OF THE TRUST ESTATE.
Upon prior written notice to the Company and the Guarantors, the
Trustee shall have the power (i) to institute and maintain such suits and
proceedings as it may deem expedient, to prevent any impairment of the
Collateral under any of the Collateral Documents; and (ii) to enforce the
obligations of the Company, the Guarantors or any Restricted Subsidiary under
this Indenture or the Collateral Documents, to institute and maintain such suits
and proceedings as may be expedient to prevent any impairment of the Collateral
under the Collateral Documents and in the profits, rents, revenues and other
income arising therefrom; including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair any Collateral or be prejudicial to the interests of
the Holders of Senior Notes or the Trustee, to the extent permitted thereunder.
Section 10.5 CERTIFICATES OF THE COMPANY.
The Company shall furnish to the Trustee, prior to each proposed
release of Collateral pursuant to the Collateral Documents (i) all documents
required by TIA Section 314(d) and (ii) an Opinion of Counsel in the United
States, which opinion shall be subject to customary assumptions and exclusions,
to the effect that such accompanying documents constitute all documents required
by TIA Section314(d). The Trustee may, to the extent permitted by Sections 7.1
and 7.2 hereof, accept as conclusive evidence of compliance with the foregoing
65
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
Section 10.6 CERTIFICATES OF THE TRUSTEE.
In the event that the Company wishes to release Collateral in
accordance with the Collateral Documents and has delivered the certificates and
documents required by the Collateral Documents and Sections 10.3 and 10.5
hereof, the Trustee shall determine whether it has received all documents
required by TIA Section 314(d) in connection with such release and, based on
such determination and the Opinion of Counsel delivered pursuant to Section
10.5(ii), shall deliver a certificate to the Collateral Agent or the Mortgage
Indenture Trustee, as the case may be, setting forth such determination.
Section 10.7 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE
UNDER THE COLLATERAL DOCUMENTS.
Subject to the provisions of Sections 7.1 and 7.2 hereof, the
Collateral Trust Agreement and the Mortgage Indenture, the Trustee may, in its
sole discretion and without the consent of the Holders of Senior Notes, direct,
on behalf of the Holders of Senior Notes, the Collateral Agent or the Mortgage
Indenture Trustee, as the case may be, to take all actions it deems necessary or
appropriate in order to (a) enforce any of the terms of the Collateral Documents
and (b) collect and receive any and all amounts payable in respect of the
Obligations of the Company hereunder. Subject to the Collateral Trust Agreement
and the Mortgage Indenture, the Trustee shall have power to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation of
the Collateral Documents or this Indenture, and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders of Senior Notes in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders of Senior
Notes or of the Trustee).
Section 10.8 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER
THE COLLATERAL DOCUMENTS.
Subject to the Collateral Trust Agreement and the Mortgage Indenture,
upon an Event of Default and so long as such Event of Default continues, the
Trustee may exercise in respect of the Collateral, in addition to the other
rights and remedies provided for herein, in the Collateral Documents or
otherwise available to it, all of the rights and remedies of a secured party
under the Uniform Commercial Code or other applicable law, and the Trustee may
also upon obtaining possession of the Collateral as set forth herein, without
notice to the Company, except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Trustee may deem
commercially reasonable. The Company acknowledges and agrees that any such
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private sale may result in prices and other terms less favorable to the seller
than if such a sale were a public sale. The Company agrees that, to the extent
notice of sale shall be required by law, at least 10 days' notice to the Company
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Trustee shall
not be obligated to make any sale regardless of notice of sale having been
given. The Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Any cash that is Collateral held by the Trustee and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied (unless
otherwise provided for in the Collateral Documents) in accordance with Section
6.10 hereof, or as the Holders of the Senior Notes shall direct pursuant to
Section 6.5 hereof. Any surplus of such cash or cash proceeds held by the
Trustee and remaining after payment in full of all the obligations shall be paid
over to the Company or to whomsoever may be lawfully entitled to receive such
surplus or as a court of competent jurisdiction may direct.
Section 10.9 TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all Obligations of the Company under this
Indenture and the Senior Notes, or upon Legal Defeasance or Covenant Defeasance,
the Trustee shall, at the request of the Company, deliver a certificate to the
Collateral Agent and the Mortgage Indenture Trustee stating that such
Obligations have been paid in full, and instruct the Collateral Agent and the
Mortgage Indenture Trustee to release the Liens pursuant to this Indenture and
the Collateral Documents.
Section 10.10 COOPERATION OF TRUSTEE.
In the event the Company or any Guarantor pledges or grants to the
Trustee a security interest in additional Collateral, the Trustee shall
cooperate with the Company or such Guarantor in reasonably and promptly agreeing
to the form of, and executing as required, any instruments or documents
necessary to make effective the security interest in the Collateral to be so
pledged. To the extent practicable, the terms of any security agreement or other
instrument or document necessitated by any such pledge shall be comparable to
the provisions of the existing relevant Collateral Documents. Subject to, and in
accordance with the requirements of this Article 10 and the terms of the
Collateral Documents, in the event that the Company or any Guarantor engages in
any transaction pursuant to Section 10.3, the Trustee, subject to the provisions
of Sections 10.3 and 10.5, shall cooperate with the Company or such Guarantor in
order to facilitate such transaction in accordance with any reasonable time
schedule proposed by the Company, including by delivering and releasing the
Collateral in a prompt and reasonable manner.
Section 10.11 COLLATERAL AGENT AND MORTGAGE INDENTURE TRUSTEE.
The Collateral Agent or the Mortgage Indenture Trustee may be
delegated any one or more of the duties or rights of the Trustee hereunder or
under the Collateral Documents or which are specified in any Collateral
Documents, including without limitation, the right to hold any Collateral in the
name of, registered to, or in the physical possession of, such Collateral Agent
or Mortgage Indenture Trustee, as the case may be, for the ratable benefit of
the Holders of the Senior Notes and the holders from time to time of Senior
Indebtedness. Each such Collateral Agent or Mortgage Indenture Trustee shall
67
have such rights and duties as may be specified in the Collateral Trust
Agreement or Mortgage Indenture, as the case may be.
Section 10.12 COLLATERAL TRUST AGREEMENT AND MORTGAGE INDENTURE.
The Company, the Trustee and the Collateral Agent are entering into
the Collateral Trust Agreement and the Company and the Mortgage Indenture
Trustee are entering into the Mortgage Indenture each of which sets forth the
relative rights of the Trustee and the Holders, on the one hand, and the holders
of the Senior Indebtedness, on the other hand, as to the priority of payment of
the Senior Indebtedness over the Senior Notes and related obligations in certain
circumstances. As among the Holders, the Collateral shall be held for the equal
and ratable benefit of such Holders without preference, priority or distinction
of any thereof over any other. The terms of this Indenture and the Collateral
Documents will be subject to the terms of such Collateral Trust Agreement and
Mortgage Indenture and each Holder, by accepting a Senior Note, agrees to all of
the terms and provisions of such Collateral Trust Agreement and Mortgage
Indenture, as the same may be amended from time to time pursuant to the
provisions thereof and this Indenture. Without limiting the foregoing, each
Holder, by accepting a Senior Note, acknowledges and agrees that its rights to
payment of the obligations evidenced by the Senior Notes and the Guarantees may
be subject to the terms of any such Collateral Trust Agreement and Mortgage
Indenture and agrees that the Trustee is hereby irrevocably authorized and
directed to execute, deliver and perform such Collateral Trust Agreement and
Mortgage Indenture, in accordance with their respective terms. The Trustee
agrees that in the event of any conflict between this Indenture and the
Collateral Trust Agreement or the Mortgage Indenture, the provisions of such
Collateral Trust Agreement or Mortgage Indenture shall control; provided, that
no provision of such Collateral Trust Agreement or Mortgage Indenture shall be
deemed to limit or subordinate the Trustee's right to compensation, fees,
expenses or indemnities under this Indenture, or the Trustee's right to require
Officers' Certificates or Opinions of Counsel in accordance with the provisions
of this Indenture. The provisions of this Section shall be expressly for the
benefit of the holders of the Senior Indebtedness and may not be amended without
the consent of the holders of a majority in principal amount thereof (without
thereby limiting any other provisions of this Indenture or elsewhere provided
for their benefit).
ARTICLE 11
GUARANTEE OF SENIOR NOTES
Section 11.1 GUARANTEE.
Subject to the provisions of this Article 11, each Guarantor hereby
jointly and severally unconditionally and irrevocably guarantees to each Holder
and to the Trustee, on behalf of the Holders, (i) the due and punctual payment
of the principal of, premium, if any, and interest (including Additional
Interest) on each Senior Note, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest on the overdue principal of, and premium, if any, and
interest on the Senior Notes, to the extent lawful, and the due and punctual
performance of all other Obligations of the Company to the Holders or the
Trustee all in accordance with the terms of such Senior Note and this Indenture,
and (ii) in the case of any extension of time of payment or renewal of any
Senior Notes or any of such other Obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
68
or renewal, at stated maturity, by acceleration or otherwise. Each Guarantor, by
execution of the Guarantee, agrees that its obligations thereunder and hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, any invalidity, irregularity or unenforceability of any such Senior Note or
this Indenture, any failure to enforce the provisions of any such Senior Note or
this Indenture, any waiver, modification or indulgence granted to the Company
with respect thereto by the Holder of such Senior Note or the Trustee, or any
other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or such Guarantor.
Each Guarantor, by execution of the Guarantee, waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to any such Senior Note or
the Indebtedness evidenced thereby and all demands whatsoever, and covenants
that the Guarantee will not be discharged as to any such Senior Note except by
payment in full of the principal thereof, premium if any, and interest thereon
and as provided in Section 9.1 hereof. If any Holder or the Trustee is required
by any court or otherwise to return to the Company or any Guarantor or any
Custodian, trustee, liquidator or other similar official acting in relation to
either the Company or any Guarantor, any amount paid by either the Company or
any Guarantor to the Holder or Trustee, each Guarantor's Guarantee, to the
extent therefor discharged, shall be reinstated in full force and effect. Each
Guarantor, by execution of the Guarantee, further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the Obligations guaranteed by the Guarantee may be
accelerated as provided in Article 6 hereof for the purposes of the Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed thereby, and (ii) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by each Guarantor for the purpose of the
Guarantee. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article 6 hereof, the Trustee shall
promptly make a demand for payment on the Senior Notes under any Guarantee
provided for in this Article 11 and not discharged. Failure to make such demand
shall not affect the validity or enforceability of the Guarantee upon any
Guarantor.
A Guarantee shall not be valid or become obligatory for any purpose
with respect to a Senior Note unless the certificate of authentication on such
Senior Note shall have been signed by or on behalf of the Trustee.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorney's fees) incurred by the Trustee as a
representative of any Holder in enforcing any rights under this section.
Section 11.2 EXECUTION AND DELIVERY OF GUARANTEES.
To further evidence the Guarantee set forth in this Article 11, each
Guarantor shall execute a Guarantee in the form included as part of Exhibit A
hereto and hereby agrees that a notation of such Guarantee shall be placed on
each Senior Note authenticated and made available for delivery by the Trustee
and that this Guarantee shall be executed on behalf of each Guarantor by the
manual or facsimile signature of an Officer of each Guarantor.
69
Each Guarantor hereby agrees that the Guarantee set forth in Section
11.1 shall remain in full force and effect notwithstanding any failure to
endorse on each Senior Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on the Guarantee no
longer holds that office at the time the Trustee authenticates the Senior Note
on which the Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of each Guarantor.
Section 11.3 LIMITATION OF GUARANTEE.
The obligations of each Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Indenture, result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under Federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the Adjusted Net Assets
of each Guarantor.
Section 11.4 RELEASE OF GUARANTOR.
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor has sold all or substantially
all of its assets or the Company and its Subsidiaries have
sold all of the Equity Interests of the Guarantor owned by
them, in each case in a transaction in compliance with
Sections 4.8 and 5.1 hereof to the extent applicable; or
(ii) the Guarantor merges with or into or
consolidates with, or transfers all or substantially all of
its assets to, the Company or another Guarantor in a
transaction in compliance with Section 5.1 hereof;
and in each such case, the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein
provided for relating to such transactions have been
complied with. At the written request of the Company, the
Trustee will promptly execute and deliver appropriate
instruments in forms reasonably acceptable to the Company
evidencing and further implementing any releases or
discharges pursuant to the foregoing provisions.
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11.5 ADDITIONAL GUARANTORS.
The Company covenants and agrees that it will cause any Person which
becomes obligated to guarantee the Senior Notes pursuant to the terms of Section
4.12 hereof, to execute a Guarantee satisfactory in form and substance to the
Trustee pursuant to which such Person shall guarantee the obligations of the
Company under the Senior Notes and this Indenture in accordance with this
Article 11 with the same effect and to the same extent as if such Person had
been named herein as a Guarantor. Notwithstanding the foregoing, if such Person
is a Subsidiary incorporated in a jurisdiction other than the United States, and
if and to the extent that the execution of a Guarantee by such Person would have
adverse tax consequences for the Company or any of its Subsidiaries, the Company
shall not be obligated to cause such Person to execute a Guarantee, provided
that the Company shall cause 65% (or such other greater or lesser percentage
which as a result of a change of law may be pledged without resulting in adverse
tax consequences) of the issued and outstanding shares of stock of such Person
to become Collateral as and when received by the Company or by any of its
Subsidiaries.
ARTICLE 12
MISCELLANEOUS
Section 12.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 12.2 NOTICES.
Any notice or communication shall be given in writing and delivered
in person, sent by facsimile, delivered by commercial courier service or mailed
by first-class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor:
Genesis Health Venture, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker,
Chairman and Chief Executive Officer
If to the Trustee:
[--------------------]
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
71
The Company, any Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to him
by first-class mail, postage prepaid, at his address shown on the register kept
by the Registrar. If a notice or communication to a Holder is mailed in the
manner provided above, it shall be deemed duly given on the date so deposited in
the mail, whether or not the addressee receives it.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
In case, by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Guarantors, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
Section 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company shall furnish
to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.5 below) in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with;
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.5 below) in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant satisfactory to the Trustee that complies with TIA
Section 314(c).
Section 12.5 STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.
Each certificate and opinion with respect to compliance with a
condition or covenant Provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
72
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 12.6 WHEN TREASURY SENIOR NOTES DISREGARDED.
In determining whether the Holders of the required aggregate
principal amount of Senior Notes have concurred in any direction, waiver or
consent, Senior Notes owned by the Company, any Guarantor or any other obligor
on the Senior Notes or by any Affiliate of any of them shall be disregarded as
though they were not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Senior Notes which the Trustee actually knows are so owned
shall be so disregarded. Senior Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Senior Notes and
that the pledgee is not the Company, a Guarantor or any other obligor upon the
Senior Notes or any Affiliate of any of them.
Section 12.7 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or meetings of
Holders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 12.8 BUSINESS DAYS; LEGAL HOLIDAYS.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 12.9 GOVERNING LAW.
THIS INDENTURE AND THE SENIOR NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SENIOR NOTES.
73
Section 12.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.11 NO RECOURSE AGAINST OTHERS.
No recourse for the payment of the principal of or premium, if any,
or interest on any of the Senior Notes, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company or any Guarantor in this Indenture or in
any supplemental indenture, or in any of the Senior Notes, or because of the
creation of any Indebtedness represented thereby, shall be had against any
stockholder, officer, director, partner, affiliate, beneficiary or employee, as
such, past, present or future, of the Company or of any successor corporation or
against the property or assets of any such stockholder, officer, employee,
partner, affiliate, beneficiary or director, either directly or through the
Company or any Guarantor, or any successor corporation thereof, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Senior Notes are solely obligations of the Company and the
Guarantors, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, any stockholder, officer, employee, partner, affiliate,
beneficiary or director, as such, of the Company or any Guarantor, or any
successor corporation thereof, because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or the Senior Notes or implied therefrom,
and that any and all such personal liability of, and any and all claims against
every stockholder, officer, employee, partner, affiliate, beneficiary and
director, as such, are hereby expressly waived and released as a condition of,
and as a consideration for, the execution of this Indenture and the issuance of
the Senior Notes. It is understood that this limitation on recourse is made
expressly for the benefit of any such shareholder, employee, officer, partner,
affiliate, beneficiary or director and may be enforced by any one or all of
them.
Section 12.12 SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture
and the Senior Notes shall bind their respective successors. All agreements of
the Trustee, any additional trustee and any Paying Agents in this Indenture
shall bind their respective successors.
Section 12.13 MULTIPLE COUNTERPARTS.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.14 TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
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12.15 SEPARABILITY.
Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Senior Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SIGNATURE PAGE TO FOLLOW
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed, and the Company's corporate seal to be hereunto affixed and attested,
all as of the date and year first written above.
GENESIS HEALTH VENTURES, INC.
By:
------------------------------------------
Name:
Title:
[SUB 1]
By:
------------------------------------------
Name:
Title:
[SUB 2]
By:
------------------------------------------
Name:
Title:
[SUB 3]
By:
------------------------------------------
Name:
Title:
[SUB 4]
By:
------------------------------------------
Name:
Title:
[SUB 5]
By:
------------------------------------------
Name:
Title:
76
EXHIBIT A
FORM OF NOTATION ON SENIOR NOTE RELATING TO GUARANTEE
GUARANTEE
Each guarantor (each a "Guarantor" and collectively the "Guarantors"
including any successor Person under the Indenture) has unconditionally
guaranteed, jointly and severally, to the extent set forth in the Indenture and
subject to the provisions of the Indenture, (a) the due and punctual payment of
the principal of, premium, if any and interest on the Senior Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other obligations of the Company to the
Noteholders or the Trustee all in accordance with the terms set forth in Article
11 of the Indenture, and (b) in case of any extension of time of payment or
renewal of any Senior Notes or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
11 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
[LIST OF SUBSIDIARIES]
A-1
EXHIBIT B
FORM OF NOTE
(FACE OF NOTE)
NUMBER __________ AMOUNT __________
CUSIP NUMBER
-------------
GENESIS HEALTH VENTURES, INC.
SECOND PRIORITY SECURED NOTES DUE 2007
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN PART OR IN WHOLE PRIOR TO MATURITY AS
SET FORTH BELOW. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
Genesis Health Ventures Inc., a Pennsylvania corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to __________________or registered assigns, the principal sum of
____ Million Dollars ($_______), on ________.
Interest Payment Dates: March 15, June 15, September 15 and December
15, commencing December 15, 2001.
Record Dates: March 1, June 1, September 1, December 1.
Reference is made to the further provisions of this Senior Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Senior Note to be
signed manually or by facsimile by its duly authorized officers.
GENESIS HEALTH VENTURES INC.
By:
-------------------------------------
Name:
Title:
B-1
Certificate of Authentication:
This is one of the Second Priority Secured Notes due
2007 referred to in the within-mentioned Indenture
Dated: __________________
as Trustee
By: ____________________________
Authorized Signatory
B-2
(REVERSE SIDE)
GENESIS HEALTH VENTURES, INC.
SECOND PRIORITY SECURED NOTES DUE 2007
INTEREST.
(a) Genesis Health Ventures, Inc., a Pennsylvania
corporation (the "Company"), promises to pay interest on the principal amount of
the Senior Notes at the rate per annum, reset quarterly, equal to 3-month LIBOR
(as defined below), plus 500 basis points, from the most recent date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for, from the Issue Date, until the principal thereof becomes due
and payable, and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same interest rate per annum, compounded
quarterly, payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing December 15, 2001 (each, an "Interest
Payment Date"), to the person in whose name the Senior Notes are registered at
the close of business on the regular record date for such interest installment,
which shall be the first day of the month in which the relevant Interest Payment
Date falls.
(b) The interest rate on the Senior Notes for each quarter
(or other period for which interest is payable) will be determined on the
Determination Date (as defined below) for such quarter (or other period for
which interest is payable) and will be a per annum rate reset quarterly equal to
3-month LIBOR (determined as set forth below) plus 500 basis points, and will be
effective as of the first day of such quarter (or other period for which
interest is payable).
(c) On each Determination Date, the Calculation Agent will
calculate the interest rate, based on 3-month LIBOR, for each interest period
commencing on the second London Banking Day immediately following such
Determination Date.
"3-month LIBOR" means, with respect to an interest period relating to
a Distribution Date, the London interbank offered rate for three-month,
Eurodollar deposits determined in the following order of priority:
(i) the rate (expressed as a percentage per annum) for
Eurodollar deposits having a three-month maturity that appears on Telerate Page
3750 as of 11:00 a.m. (London time) on the related Determination Date);
(ii) if such rate does not appear on Telerate Page 3750 as
of 11:00 a.m. (London time) on the related Determination Date, 3-month LIBOR
will be the arithmetic mean of the rates (expressed as percentages per annum)
for Eurodollar deposits having a three-month maturity that appear on Reuters
Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m. (London
time) on such Determination Date;
(iii) if such rate does not appear on Reuters Page LIBO as
of 11:00 a.m. (London time) on the related Determination Date, the Calculation
Agent will request the principal London offices of four leading banks in the
B-3
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for
Eurodollar deposits having a three-month maturity as of 11:00 a.m. (London time)
on such Determination Date. If at least two quotations are provided, 3-month
LIBOR will be the arithmetic mean of such quotations;
(iv) if fewer than two such quotations are provided as
requested in clause (iii) above, the Calculation Agent will request four major
New York City banks to provide such banks' offered quotations (expressed as
percentages per annum) to leading European banks for loans in Eurodollars as of
11:00 a.m. (London time) on such Determination Date. If at least two such
quotations are provided, 3-month LIBOR will be the arithmetic mean of such
quotations; and
(v) if fewer than two such quotations are provided as
requested in clause (iv) above, 3-month LIBOR will be 3-month LIBOR determined
with respect to the interest period immediately preceding such current interest
period.
If the rate for Eurodollar deposits having a three-month maturity
that initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case
may be, as of 11:00 a.m. (London time) on the related Determination Date is
superceded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by a
corrected rate before 12:00 noon (London time) on such Determination Date, the
corrected rate as so substituted on the applicable page will be the applicable
3-month LIBOR for such Determination Date.
As used herein:
"Calculation Agent" means _________________.
"Determination Date" means the date that is two London Banking Days
preceding the first day of any quarter or other period for which an interest
payment will be payable.
"London Banking Day" means a day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page 3750 on
that service or such other service or services as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits).
(d) All percentages resulting from any calculations on the
Senior Notes will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to
9.87655% (or .09876555)), and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest cent (with one-half cent being
rounded upward).
(e) On the Determination Date, the Calculation Agent shall
notify the Company and the Paying Agent of the applicable interest rate in
effect for the related interest rate period. The Calculation Agent shall, upon
the request of a holder of Senior Notes, provide the interest rate then in
effect. All calculations made by the Calculation Agent in the absence of
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manifest error shall be conclusive for all purposes and binding on the Company
and the holders of the Senior Notes.
(f) The amount of interest payable on any Interest Payment
Date shall be computed on the basis of the actual number of days elapsed and a
360-day year.
2. METHOD OF PAYMENT.
The Company will pay interest on this Senior Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the first day of the
month in which the relevant Interest Payment date falls (whether or not such day
is a Business Day). The Holder must surrender this Note to a Paying Agent to
collect principal payments due on the Maturity Date. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts;
provided, however, that the Company may pay principal, premium, if any, and
interest by check payable in such money. It may mail an interest check to the
Holder's registered address. Notwithstanding the foregoing, all payments with
respect to the Senior Notes, the Holders of which have given wire transfer
instructions to the Paying Agent on or before the relevant record date, shall be
made by wire transfer of immediately available funds to the accounts specified
by such Holders.
3. PAYING AGENT AND REGISTRAR.
Initially, _________________ (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders of the Senior Notes. Neither the Company nor any
of its Subsidiaries or Affiliates may act as Paying Agent but may act as
registrar or co-registrar.
4. INDENTURE AND COLLATERAL DOCUMENTS.
The Company issued this Senior Note under an Indenture dated as of
____________, 2001 (as such may be amended, supplemented, waived and modified
from time to time, the "Indenture") by and among the Company, the Guarantors
party thereto and the Trustee. The terms of this Senior Note include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 as in effect on the date of the Indenture. This
Senior Note is subject to all such terms, and the Holder of this Senior Note is
referred to the Indenture and said Trust Indenture Act for a statement of them.
The terms of the Indenture shall govern any inconsistencies between the
Indenture and the Senior Notes or the Guarantee. The Senior Notes are secured by
certain collateral pursuant to the Collateral Documents and may be released
pursuant to the terms thereof, subject to the terms of this Indenture. The
Collateral Documents govern the rights in and to the Collateral of the holders
from time to time of Senior Indebtedness and of the Trustee and the Holders. All
capitalized terms in this Senior Note, unless otherwise defined, have the
meanings assigned to them by the Indenture.
The Senior Notes are secured obligations of the Company of up to
$242,605,000 in aggregate principal amount, subject to adjustment as provided in
the Indenture. The Indenture imposes certain restrictions on, among other
things, the Company's ability to consolidate or merge with or into, or to
transfer all or substantially all of its assets to, another person.
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5. OPTIONAL REDEMPTION.
Subject to the terms of Section 3.7 of the Indenture, the Company may
redeem the Senior Notes, in whole or in part, at a redemption price equal to
100% of the principal amount thereof, together with accrued and unpaid interest
to the Redemption Date.
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 15
days but not more than 30 days prior to the Redemption Date to each Holder of
Senior Notes to be redeemed at its registered address as it shall appear on the
register of the Senior Notes maintained by the Registrar. On and after any
Redemption Date, interest will cease to accrue on the Senior Notes or portions
thereof called for redemption unless the Company shall default in making the
redemption payment thereon.
7. GUARANTEE.
Payment of principal of, premium, if any, and interest (including
interest on overdue principal and overdue interest (if lawful)) on the Senior
Notes and all other obligations of the Company to the Holders will be
unconditionally guaranteed by the Guarantors pursuant to, and subject to the
terms of, Article 11 of the Indenture.
8. COLLATERAL TRUST AGREEMENT AND MORTGAGE INDENTURE.
Each of the Collateral Trust Agreement and the Mortgage Indenture
sets forth the relative rights of the Trustee and the Holders, on the one hand,
and the holders of the Senior Indebtedness, on the other hand, as to the
priority of payment of the Senior Indebtedness over the Senior Notes and related
obligations in certain circumstances. The terms of the Senior Notes are subject
to the terms of the Collateral Trust Agreement and the Mortgage Indenture and
each Holder, by accepting this Senior Note, agrees to all of the terms and
provisions of the Collateral Trust Agreement and the Mortgage Indenture, as the
same may be amended from time to time pursuant to the provisions thereof and
this Indenture. Without limiting the foregoing, each Holder, by accepting this
Senior Note, acknowledges and agrees that its rights to payment of the
obligations evidenced by the Senior Notes and the Guarantees are subject to the
terms of the Collateral Trust Agreement and the Mortgage Indenture, and
authorizes the Trustee to give effect thereto and appoints the Trustee as
attorney in fact for such purpose.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Senior Notes are in registered form without coupons in
denominations of $100 and integral multiples thereof. A Holder may register the
transfer or exchange of Senior Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Senior Note selected for redemption or register the transfer
of or exchange any Senior Note for a period of 15 days before a selection of
Senior Notes to be redeemed or any Senior Note after it is called for redemption
in whole or in part, except the unredeemed portion of any Senior Note being
redeemed in part.
B-6
10. PERSONS DEEMED OWNERS.
The registered Holder of this Senior Note may be treated as the owner
of it for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Senior Note remains unclaimed for two years, the Trustee or Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture, the Senior Notes, the
Guarantees or the Collateral Documents may be modified, amended or supplemented
by the Company, the Guarantors and the Trustee with the consent of the Holders
of at least a majority in principal amount of the Senior Notes then outstanding
and any existing default or compliance with any provision may be waived in a
particular instance with the consent of the Holders of a majority in principal
amount of the Senior Notes then outstanding. Without the consent of Holders, the
Company, the Guarantors and the Trustee may amend the Indenture, the Senior
Notes, the Guarantees or the Collateral Documents or supplement the Indenture
for certain specified purposes, including providing for uncertificated Senior
Notes in addition to certificated Senior Notes, and curing any ambiguity, defect
or inconsistency, or making any other change that does not materially and
adversely affect the rights of any Holder, or to comply with the requirements of
the SEC in order to effect or maintain the qualification of the Indenture under
the Trust Indenture Act to enter into additional or supplemental Collateral
Documents, to adjust the principal amount of the Senior Notes issued pursuant to
the Indenture and to otherwise comply with the terms of the Plan of
Reorganization (as defined in the Indenture).
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Senior Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.1(7) or (8) of the
Indenture) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of not less than 25% in aggregate principal amount of the Senior
Notes then outstanding by written notice to the Company and the Trustee, may
declare to be immediately due and payable the entire principal amount of all the
Senior Notes then outstanding plus accrued but unpaid interest to the date of
acceleration and such amounts shall become immediately due and payable. In case
an Event of Default specified in Section 6.1(7) or (8) of the Indenture occurs,
such principal amount, together with premium, if any, and interest with respect
to all of the Senior Notes, shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the Holders of the Notes.
B-7
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal, premium, if any, or interest) if it determines
that withholding notice is in their interests.
15. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company, any Guarantor or their Affiliates, and may otherwise deal with the
Company, any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee, partner, affiliate, beneficiary or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company or any Guarantor under the Senior Notes or the Indenture or for any
claim based on, in respect or by reason of, such obligations or their creation.
The Holder of this Senior Note by accepting this Senior Note waives and releases
all such liability. The waiver and release are part of the consideration for the
issuance of this Senior Note.
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Senior Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Senior Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Senior Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. GOVERNING LAW.
THE INDENTURE AND THE SENIOR NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
B-8
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SENIOR NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A SENIOR NOTE
UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE
MADE TO:________________________________________; ATTENTION: __________________.
21. AUTHENTICATION.
This Senior Note shall not be valid until the Trustee manually signs
the Certificate of Authentication on the other side of this Senior Note.
B-9
ASSIGNMENT
I or we assign and transfer this Senior Note to:
(Insert assignee's social security or tax I.D. number)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee) and
irrevocably appoint:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Agent to transfer this Senior Note on the books of the Company. The
Agent may substitute another to act for him.
Date:
-------------------------------------------------------------
Your Signature:
---------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------------------------
B-10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Senior Note
purchased by the Company pursuant to Section 4.9 of the Indenture, check the
box: [ ]
If you want to have only part of the Senior Note purchased by the
Company pursuant to Section 4.9 of the Indenture, state the amount you elect to
have purchased: $________ (multiple of $100)
Date: _____________________.
Your Signature: ________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guaranteed
----------------------------------------------
B-11
EXHIBIT C
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
LOAD-DATE:
C-1
EX-99
7
disclosurestatement.txt
EXHIBIT T3E-1
EXHIBIT T3E-1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
---------------------------------------------------- x
:
In re : Chapter 11 Cases No.
:
GENESIS HEALTH VENTURES INC., et al., : 00-2692 (JHW)
:
Debtors. :
: (Jointly Administered)
---------------------------------------------------- x
:
In re : Chapter 11 Cases No.
:
MULTICARE AMC, INC., et al., : 00-2494 (JHW)
:
Debtors. :
: (Jointly Administered)
---------------------------------------------------- x
DISCLOSURE STATEMENT FOR
DEBTORS' JOINT PLAN OF REORGANIZATION
-------------------------------------
WEIL, GOTSHAL & MANGES LLP RICHARDS, LAYTON & FINGER P.A.
767 Fifth Avenue One Rodney Square
New York, New York 10153 P.O. Box 551
(212) 310-8000 Wilmington, Delaware 19899
(302) 658-6541
Co-Attorneys for the Genesis Debtors Co-Attorneys for the Genesis Debtors
as Debtors and Debtors in Possession as Debtors and Debtors in Possession
================================================================================
WILLKIE FARR & GALLAGHER YOUNG CONAWAY STARGATT & TAYLOR LLP
787 Seventh Avenue 11th Floor, Wilmington Trust Company
New York, New York 10019 P.O. Box 391
(212) 728-8000 Wilmington, Delaware 19899-0391
(302) 571-6600
Co-Attorneys for the Multicare Debtors Co-Attorneys for the Multicare Debtors
as Debtors and Debtors in Possession as Debtors and Debtors in Possession
Dated: July 6, 2001
TABLE OF CONTENTS
Page
I. Introduction.................................................................3
II. Treatment of Creditors and Shareholders Under the Plan of Reorganization.....5
A. Merger of Genesis and Multicare.......................................5
B. Summary of New Capital Structure of Reorganized Genesis...............6
C. Summary of Classification and Treatment...............................7
D. Allocation of Value Under the Plan of Reorganization..................9
1. Senior Lender Deficiencies....................................10
2. Compromise and Settlement with Unsecured Classes..............11
3. Exceptions to the Liens of the Senior Lenders.................11
E. Description of the Genesis Classes...................................12
1. Genesis Other Secured Claims (Class G1).......................12
2. Genesis Senior Lender Claims (Class G2).......................16
3. Genesis Priority Non-Tax Claims (Class G3)....................19
4. Genesis General Unsecured Claims (Class G4)...................19
5. Genesis Senior Subordinated Note Claims (Class G5)............20
6. Genesis Intercompany Claims (Class G6)........................21
7. Genesis Punitive Damage Claims (Class G7).....................21
8. Genesis Series G Preferred Stock Interests (Class G8).........22
9. Genesis Series H Preferred Stock Interests (Class G9).........22
10. Genesis Series I Preferred Stock Interests (Class G10)........22
11. Genesis Common Stock Interests (Class G11)....................22
F. Description of the Multicare Classes.................................23
1. Multicare Other Secured Claims (Class M1).....................23
2. Multicare Senior Bank Claims (Class M2).......................24
3. Multicare Priority Non-Tax Claims (Class M3)..................25
4. Multicare General Unsecured Claims (Class M4).................25
5. Multicare Senior Subordinated Note Claims (Class M5)..........26
6. Multicare Intercompany Claims (Class M6)......................26
7. Multicare Punitive Damage Claims (Class M7)...................27
8. Multicare Common Stock Equity Interests (Class M8)............27
G. Administrative Expenses for the Genesis Debtors and the
Multicare Debtors ...................................................27
i
TABLE OF CONTENTS
(continued)
Page
1. Debtor in Possession Financing................................28
2. Federal Medicare Claims.......................................28
3. State Medicaid Claims.........................................29
4. Fees and Expenses of Professionals............................29
5. Payments to Employees.........................................29
6. Fees and Expenses of Indenture Trustees.......................29
H. Securities to be Issued Under the Plan of Reorganization.............29
1. New Senior Notes..............................................29
2. New Convertible Preferred Stock...............................30
3. New Common Stock..............................................31
4. New Warrants..................................................31
5. New Multicare Common Stock....................................31
I. Deemed Consolidation of Certain Debtors for Purposes of the Plan.....32
1. Genesis Debtors...............................................32
2. Multicare Debtors.............................................33
3. Proviso.......................................................34
J. Securities Law Matters...............................................34
1. Issuance and Resale of New Securities Under the
Plan of Reorganization .......................................35
2. Listing.......................................................37
3. Secondary Stock Offering......................................37
4. Registration Rights...........................................37
K. Settlement and Compromise............................................37
1. Settlement with the Federal Government........................37
2. Settlement Between the Genesis Debtors and
the Multicare Debtors ........................................38
L. Reservation of "Cram Down" Rights....................................39
III. Voting Procedures And Requirements..........................................39
A. Vote Required for Acceptance by a Class..............................40
B. Classes Not Entitled to Vote.........................................40
C. Voting...............................................................40
IV. Financial Information, Projections, And Valuation Analyses..................41
A. Introduction.........................................................41
ii
TABLE OF CONTENTS
(continued)
Page
B. The Genesis Debtors..................................................42
1. Operating Performance.........................................42
2. Five Year Projections.........................................44
3. Going Concern Valuation.......................................45
C. The Multicare Debtors................................................47
1. Operating Performance.........................................47
2. Five Year Projections.........................................47
3. Going Concern Valuation.......................................48
D. Reorganized Genesis (Merger of Genesis and Multicare)................50
1. Operating Performance.........................................50
2. Five Year Projections.........................................50
V. Business Description and Reasons for Chapter 11.............................51
A. The Debtors' Businesses..............................................51
1. Relationship Between the Genesis Debtors and
the Multicare Debtors ........................................51
2. Pharmacy and Medical Supply Services (Genesis Debtors)........52
3. Inpatient Services (Genesis Debtors and Multicare Debtors)....53
4. Other Services (Genesis Debtors and Multicare Debtors)........53
5. Revenue Sources...............................................54
6. Personnel.....................................................54
B. Events Leading to the Commencement of the Chapter 11 Cases...........55
1. Medicare Reimbursement........................................55
2. Medicaid Reimbursement........................................57
3. Debt Burden...................................................57
C. Prepetition Negotiations.............................................58
D. Pending Litigation and Other Proceedings.............................58
1. The Genesis and Vitalink Actions Against the
Manor Care Entities ..........................................58
2. The Vitalink Action Against Omnicare and Heartland............60
3. The Manor Care Action Against Genesis in Delaware.............60
4. The Manor Care Action Against Genesis in Ohio.................60
5. Age Institute.................................................61
6. Qui Tam Suits.................................................61
iii
TABLE OF CONTENTS
(continued)
Page
7. Personal Injury and Employment Law Litigation.................62
8. Multicare Litigation..........................................63
9. Ordinary Course Litigation....................................63
VI. Significant Events During the Reorganization Cases..........................64
A. Filing and First Day Orders..........................................64
B. Appointment of the Creditors' Committee..............................65
1. Genesis Creditors' Committee..................................65
2. Multicare Creditors' Committee................................66
C. DIP Credit Agreements................................................66
1. Genesis Debtors...............................................66
2. Multicare Debtors.............................................67
D. Cash Collateral Protection...........................................67
1. Genesis Debtors...............................................67
2. Multicare Debtors.............................................68
E. Key Employee and Executive Retention Programs........................68
1. First Retention Program.......................................69
2. Second Retention Program......................................69
F. Claims Process and Bar Date..........................................69
1. Schedules and Statements......................................69
2. Bar Date......................................................70
G. ElderTrust Transactions..............................................70
H. CareFirst Transactions...............................................70
I. Swap Settlement......................................................71
J. Alternative Dispute Resolution Procedures............................71
K. Settlement with the Multicare Debtors................................72
L. Appointment of Fee Auditor...........................................73
M. Motion for Appointment of Trustee in the Multicare
Reorganization Cases ................................................73
N. Potential Purchase of Pharmacy Business of Mariner
Post-Acute Networks and Mariner Health Group.........................73
VII. Governance of the Reorganized Debtors.......................................74
A. Board of Directors of Reorganized Genesis............................74
B. Senior Management of Reorganized Genesis.............................74
iv
TABLE OF CONTENTS
(continued)
Page
VIII. Other Aspects of the Plan of Reorganization.................................75
A. Analysis of the Proposed Merger of Genesis and Multicare.............75
B. Mechanics of the Merger..............................................76
C. Exit Facility -- Condition Precedent to Effective Date...............76
D. Distributions Under the Plan of Reorganization.......................77
1. Timing and Conditions of Distributions........................77
2. Certain Claims Allowed........................................78
3. Procedures for Treating Disputed Claims Under
the Plan of Reorganization ...................................78
E. Treatment of Executory Contracts and Unexpired Leases................79
1. Contracts and Leases Not Expressly Rejected are Assumed.......79
2. Cure of Defaults..............................................80
3. Rejection Claims..............................................80
F. Management Incentive Plan............................................80
G. Releases.............................................................80
H. Effect of Confirmation...............................................81
1. Discharge of Claims and Termination of Equity Interests.......81
2. Indemnification...............................................82
3. Exculpation...................................................82
I. Preservation of Certain Avoidance Actions............................82
J. Miscellaneous Provisions.............................................82
IX. Certain Factors To Be Considered............................................82
A. Certain Bankruptcy Considerations....................................82
B. Risks Relating to the Plan Securities................................83
1. Variances from Projections....................................83
2. Substantial Leverage; Ability to Service Debt.................83
3. Significant Holders...........................................83
4. Lack of Trading Market........................................84
5. Dividend Policies.............................................84
6. Restrictions on Transfer......................................84
C. Risks Associated with the Business...................................84
X. Confirmation of the Plan of Reorganization..................................85
v
TABLE OF CONTENTS
(continued)
Page
A. Confirmation Hearing.................................................85
B. General Requirements of Section 1129.................................86
C. Best Interests Tests.................................................87
D. Liquidation Analyses.................................................88
1. The Genesis Debtors...........................................89
2. Multicare Debtors.............................................94
E. Feasibility..........................................................99
F. Section 1129(b)......................................................99
1. No Unfair Discrimination......................................99
2. Fair and Equitable Test.......................................99
XI. Alternatives to Confirmation and Consummation of the Plan
of Reorganization .........................................................101
A. Liquidation Under Chapter 7.........................................101
B. Alternative Plan of Reorganization..................................102
XII. Certain Federal Income Tax Consequences of the Plan of Reorganization......102
A. Consequences to the Debtors.........................................103
1. Cancellation of Debt.........................................103
2. Limitations on Loss Carryforwards and Other Tax Benefits.....104
3. Alternative Minimum Tax......................................107
4. Issuance of the New Senior Notes.............................107
B. Consequences to Holders of Certain Claims...........................108
1. Consequences to All Holders (Including Holders Whose
Claims Are Against Any of the Multicare Debtors) Who
Receive Cash, New Senior Notes, New Convertible
Preferred Stock, New Common Stock, or New Warrants,
Other Than Holders of Claims Against Genesis That
Constitute "Securities"......................................108
2. Consequences to Holders of Genesis Senior
Subordinated Note Claims and Genesis General
Unsecured Claims That Constitute
"Securities".................................................110
3. Consequences to Holders of Genesis Senior Lender
Claims That Constitute
"Securities".................................................110
4. Distributions in Discharge of Accrued Interest...............111
5. Market Discount..............................................111
6. Treatment of Distributions on New Convertible
Preferred Stock and New Common
Stock........................................................112
vi
TABLE OF CONTENTS
(continued)
Page
7. Subsequent Sale of New Common Stock or New
Convertible Preferred Stock .................................114
8. Conversion of New Convertible Preferred Stock................114
9. Redemption of New Convertible Preferred Stock................115
10. Ownership and Disposition of New Warrants....................115
11. Interest and Original Issue Discount on the
New Senior Notes.............................................116
12. Information Reporting and Withholding........................116
XIII. Conclusion.................................................................117
vii
GLOSSARY
The terms in the following table are used in the Disclosure Statement and Plan
of Reorganization. These definitions are summaries. Please refer to the Plan of
Reorganization for the complete definitions of these terms.
--------------------------------------------------------------------------------
Administrative Any expense relating to the administration of the chapter
Expense Claim 11 cases, including actual and necessary costs and
expenses of preserving the Debtors' estates and operating
the Debtors' businesses, any indebtedness or obligations
incurred or assumed during the chapter 11 cases,
allowances for compensation and reimbursement of expenses
to the extent allowed by the Bankruptcy Court, claims
arising under (i) that certain Revolving Credit and
Guaranty Agreement, dated as of June 22, 2000, as
amended, among Genesis, certain subsidiary Genesis
Debtors named therein, Mellon Bank N.A., as
administrative agent, and the lenders party thereto, or
(ii) that certain Revolving Credit and Guaranty
Agreement, dated as of June 22, 2000, as amended, among
The Multicare Companies, Inc., certain subsidiary
Multicare Debtors named therein, Mellon Bank N.A., as
administrative agent, and the lenders party thereto, and
certain statutory fees chargeable against the Debtors'
estates.
Bankruptcy Code Title 11 of the United States Code.
Bankruptcy Court The United States Bankruptcy Court for the District of
Delaware.
Commencement Date The date the Debtors' chapter 11 cases were commenced
(June 22, 2000, for all the Debtors other than Healthcare
Resources Corp., whose Commencement Date is July 31,
2000).
Debtors The Genesis Debtors and the Multicare Debtors.
Disclosure Statement This document together with the annexed exhibit.
Effective Date A business day selected by the Debtors on or after the
date of confirmation of the Plan of Reorganization, on
which any conditions to the effectiveness of the Plan
have been satisfied or waived and there is no stay of the
order confirming the Plan of Reorganization.
Genesis Genesis Health Ventures, Inc.
Genesis Debtors Genesis and the entities listed on Exhibit "A" to the
Plan of Reorganization.
Genesis General Any general unsecured claim against any of the Genesis
Unsecured Claim Debtors.
Genesis Senior Lender Any claim against any of the Genesis Debtors based on the
Claim Genesis Senior Lender Agreements (as defined in the Plan
of Reorganization) net of all postpetition cash payments
made by the Genesis Debtors.
Multicare Genesis ElderCare Corp. (the corporate parent of The
Multicare Companies, Inc.).
Multicare Debtors Multicare and the entities listed on Exhibit "B" to the
Plan of Reorganization.
Multicare General Any general unsecured claim against any of the Multicare
Unsecured Claim Debtors.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Multicare Senior Any claim against any of the Multicare Debtors based on
Lender Claim the Multicare Senior Lender Agreements (as defined in the
Plan of Reorganization).
New Common Stock New common stock of Reorganized Genesis to be issued
under the Plan of Reorganization as described in section
II.H.3 of this Disclosure Statement.
New Convertible New convertible 6% PIK preferred stock of Reorganized
Preferred Stock Genesis to be issued under the Plan of Reorganization as
described in section II.H.2 of this Disclosure Statement.
New Multicare Stock New common stock of Reorganized Multicare to be issued
under the Plan of Reorganization as described in section
II.H.5 of this Disclosure Statement.
New Senior Notes New senior notes in the aggregate principal amount of
$242.6 million to be issued under the Plan of
Reorganization as described in section II.H.1 of this
Disclosure Statement.
New Warrants New warrants to purchase 11.1% of the New Common
Stock to be issued under the Plan of Reorganization, as
described in section II.H.4 of this Disclosure Statement.
Plan of Merger The Plan of Merger among Genesis, Multicare
Acquisition Corporation, and Multicare, as set forth in
the Plan Supplement. The proposed merger is described in
section II.A of this Disclosure Statement.
Plan or Plan of The Debtors' Joint Plan of Reorganization Under Chapter
Reorganization 11 of the Bankruptcy Code annexed as Exhibit A to this
Disclosure Statement.
Plan Securities The New Senior Notes, the New Convertible Preferred
Stock, the New Common Stock, and the New Warrants.
Plan Supplement A supplemental appendix to the Plan of Reorganization.
The Plan Supplement will be filed with the Bankruptcy
Court within 10 days before the hearing to confirm the
Plan, but no later than 5 days before the last day to
vote to accept or reject the Plan. Documents to be
included in the Plan Supplement will be posted at
www.ghv.com as they become available, but no later than 5
days before the last day to vote to accept or reject the
Plan. After the Plan Supplement is filed, copies may be
requested from the Voting Agent.
Reorganized Genesis Genesis as reorganized as of the Effective Date in
accordance with the Plan of Reorganization and after
giving effect to the merger described in section II.A of
this Disclosure Statement.
Voting Agent See section I of this Disclosure Statement for contact
information.
--------------------------------------------------------------------------------
2
I.
Introduction
The Genesis Debtors and the Multicare Debtors are soliciting
votes to accept or reject their joint plan of reorganization. A copy of the Plan
is attached as Exhibit A to this Disclosure Statement. Please refer to the
Glossary and the Plan for definitions of terms used in this Disclosure
Statement.
The purpose of the Disclosure Statement is to provide sufficient
information to enable the creditors of the Debtors who are entitled to vote to
make an informed decision on whether to accept or reject the Plan of
Reorganization. The Disclosure Statement describes:
o the proposed merger of Genesis and Multicare, the new capital
structure for the combined companies, how creditors and
shareholders of the Debtors are treated, and the terms of the
securities to be issued under the Plan (section II)
o how to vote on the Plan and who is entitled to vote (section
III)
o certain financial information about the Debtors, including
their 5-year cash flow projections, and a range of potential
enterprise valuations (section IV)
o the businesses of the Debtors and the reasons why they
commenced their chapter 11 cases (section V)
o significant events that have occurred in the Debtors' chapter
11 cases (section VI)
o how the Debtors will be governed when the Plan becomes
effective (section VII)
o how distributions under the Plan will be made and the manner
in which disputed claims are resolved (section VIII)
o certain factors creditors should consider before voting
(section IX)
o the procedure and requirements for confirming the Plan,
including a liquidation analysis (section X)
o alternatives to the Plan (section XI) and
o certain federal tax considerations (section XII)
Additional financial information about the Genesis Debtors can be
found in the annual report on Form 10-K for the fiscal year ended September 30,
2000, which was filed by Genesis with the Securities and Exchange Commission on
February 21, 2001, and the quarterly report on Form 10-Q for the fiscal quarter
ended March 31, 2001, which was filed by Genesis on May 17, 2001. Copies of
these SEC filings are included in the Plan Supplement and may be obtained over
the internet at www.sec.gov or www.freeedgar.com.
3
Additional financial information about the Multicare Debtors can
be found in the annual report on Form 10-K for the fiscal year ended September
30, 2000, which was filed by The Multicare Companies, Inc. (the wholly-owned
subsidiary of Multicare) with the Securities and Exchange Commission on February
21, 2001, and that company's quarterly report on Form 10-Q for the fiscal
quarter ended March 31, 2001, which was filed on May 17, 2001. Copies of these
SEC filings are included in the Plan Supplement and may be obtained over the
internet at www.sec.gov or www.freeedgar.com.
This Disclosure Statement and the attached Plan of Reorganization
are the only materials creditors should use to determine whether to vote to
accept or reject the Plan of Reorganization.
------------------------------------------------------------------
| |
| The last day to vote to accept or reject the Plan of |
| Reorganization is August 17, 2001. |
| |
| |
| The record date for determining which creditors may vote |
| on the Plan of Reorganization is July 6, 2001. |
| |
------------------------------------------------------------------
The Plan of Reorganization is based on extensive negotiations
with the holders of the largest claims against the Genesis Debtors and the
Multicare Debtors. The Debtors believe that approval of the Plan is their best
chance for emerging from chapter 11 and returning their businesses to
profitability. The agent and the informal steering committee for the holders of
the Genesis Senior Lender Claims and the Multicare Senior Lender Claims and the
respective official committees of unsecured creditors in the Genesis Debtors'
and the Multicare Debtors' reorganization cases fully support the Plan of
Reorganization.
------------------------------------------------------------------
| |
| Recommendations: The Debtors believe that confirmation of |
| the Plan is the best chance for creditors to maximize |
| their recoveries and for the business operations of the |
| Debtors to succeed. The Debtors encourage creditors to |
| vote in favor of the Plan. |
| |
| The respective official unsecured creditors' committees in |
| the Genesis Debtors' and the Multicare Debtors' |
| reorganization cases have participated fully in the |
| reorganization process and also urge creditors of the |
| Genesis Debtors and Multicare Debtors to vote to accept |
| the Plan. Please review the letter from the Genesis |
| unsecured creditors' committee which is included with this |
| Disclosure Statement. |
| |
------------------------------------------------------------------
Additional copies of this Disclosure Statement or copies of the
Plan Supplement are available upon request made to the Voting Agent, at the
following address:
------------------------------------------------------------------
| If by overnight or hand delivery: If by standard mailing: |
| Poorman-Douglas Corporation Poorman-Douglas Corporation |
| 10300 S.W. Allen Boulevard P.O. Box 4390 |
| Beaverton, Oregon 97005 Portland, Oregon 97208-4390 |
| Attn: Genesis-Multicare Balloting Attn: Genesis-Multicare |
| Ctr. Balloting Center |
------------------------------------------------------------------
4
The summaries of the Plan and other documents related to the
restructuring of the Debtors are qualified in their entirety by the Plan, its
exhibits, and the documents and exhibits contained in the Plan Supplement. The
Plan Supplement will be filed with the Bankruptcy Court within 10 days prior to
the hearing to confirm the Plan, but no later than 5 days before the last day to
vote to accept or reject the Plan. Documents to be included in the Plan
Supplement will also be posted at www.ghv.com as they become available, but no
later than 5 days before the last day to vote to accept or reject the Plan. The
financial and other information included in this Disclosure Statement is for
purposes of soliciting acceptances of the Plan and are being communicated for
settlement purposes only.
The Bankruptcy Code provides that only creditors who vote on the
Plan will be counted for purposes of determining whether the requisite
acceptances have been attained. Failure to timely deliver a properly completed
ballot by the voting deadline will constitute an abstention and any improperly
completed or late ballot will not be counted.
II.
Treatment of Creditors and Shareholders
Under the Plan of Reorganization
The Plan of Reorganization governs the treatment of claims
against and interests in the Genesis Debtors and the Multicare Debtors. This
section describes the proposed merger of Genesis and Multicare, summarizes the
new capital structure of the combined companies, summarizes the treatment of
each of the classes, describes which claims and interests are in each class, and
discusses certain legal issues affecting the trading of Plan Securities.
A. Merger of Genesis and Multicare
Genesis and Multicare are proposing a merger as part of the Plan
of Reorganization. Both Debtors believe that the merger of the two companies
will be beneficial to all creditors receiving distributions under the Plan due
primarily to the preservation of the benefits created by the significant
synergies each company already realizes under the current relationship, enhanced
by the incremental savings which may be achieved. Today, Multicare is a
significant subsidiary of Genesis which, while not wholly-owned, is consolidated
from an operational perspective as well as for public financial reporting
purposes. Multicare is managed by Genesis subject to a comprehensive management
agreement which includes all operational as well as financial and administrative
responsibilities and accordingly, has no management or administrative
infrastructure of its own. Together, the two companies create significant
critical mass which benefits both entities in numerous ways, including: a)
revenue enhancements through the marketing and provision of services under a
common "ElderCare" brand name and strategy, b) purchasing leverage, which both
reduces operating costs and expands access to services which are more difficult
to obtain, such as professional liability insurance, c) the ability to attract
and effectively utilize human resources, and d) providing better access to
capital markets in which size and diversification are critical factors. The
merger of the two companies would eliminate risks created by continuing
uncertainty regarding the permanence of these operating and administrative
efficiencies, as well as create additional administrative cost savings through
the reduction of duplicative staffing and other costs required to maintain
segregated accounts and financial reporting and separate governance structures.
For a more complete discussion of the benefits of the merger and the effects of
a separation of the companies, see section VIII.A, below.
5
At the present time, Genesis owns 43.6% of the common stock of
Multicare. The balance of that common stock presently is owned by persons who
have no affiliation with Genesis. Under the Plan of Reorganization, the common
stock of Multicare will be cancelled and new common stock of Reorganized
Multicare will be deemed to be allocated to certain of the creditors of the
Multicare Debtors. By voting for the Plan of Reorganization, such creditors, as
persons otherwise entitled to the new common stock of Multicare, will also be
deemed to have voted to adopt the Plan of Merger. The Plan of Merger provides
that such creditors will receive cash, New Senior Notes, New Convertible
Preferred Stock, New Common Stock, and/or New Warrants of Reorganized Genesis in
exchange for the new common stock of Reorganized Multicare allocated to them and
that a newly created indirect subsidiary of Genesis will be merged into
Multicare. The creditors who will participate in this exchange are described
below. The Plan of Merger will be effective on the Effective Date and will
result in Multicare and all its interests in the other Multicare Debtors
becoming owned by Reorganized Genesis. It is important to note that the merger
of Genesis and Multicare is not based on Genesis's present 43.6% ownership
interest in Multicare. Reorganized Genesis will be providing Plan Securities to
the future owners of the Multicare Debtors as consideration for agreeing to the
proposed merger. By voting to accept the Plan of Reorganization, the creditors
of the Genesis Debtors will also be approving the transaction, including the
issuance of shares of the New Common Stock of Reorganized Genesis to accomplish
the merger.
B. Summary of New Capital Structure of Reorganized Genesis
The following table summarizes the proposed capital structure for
Reorganized Genesis, including the post-Effective Date financing arrangements
Genesis expects to execute to fund Administrative Expense Claims and the working
capital needs of the ongoing business operations of the restructured companies.
The post-Effective Date financing arrangements are anticipated to include a
revolving credit facility in the amount of at least $100,000,000. The Debtors'
administrative expenses will be paid through the incurrence of senior secured
debt of approximately $235,000,000. In the alternative, it may be desirable for
Reorganized Genesis to raise funds in the public debt markets. The Debtors will
determine the best form of such exit financing as the projected Confirmation
Date approaches. Possible terms of the exit financing are described in section
VIII.C, below. Except as otherwise provided in the Plan and described herein,
unless the underlying property is sold or surrendered, the Genesis Debtor or
Multicare Debtor that is the current obligor on a mortgage will continue as the
mortgagee. The securities to be issued to creditors are described in section
II.H, below.
Instrument Description Comments
-------------------------------------------------------------------------------------------
Revolver up to $150.0 million (exit financing)
Senior Secured Term Loans or
New Public Debt $235.0 to $245.0 million (exit financing)
Mortgages $146.4 million (reinstated or amended)
New Senior Notes $242.6 million (restructuring securities)
New Convertible Preferred
Stock $42.6 million (restructuring securities)
New Common Stock 41,000,000 shares (restructuring securities)
New Warrants To purchase up to 11.1% of the (restructuring securities)
New Common Stock
6
C. Summary of Classification and Treatment
The following tables divide the claims against, and equity
interests in, the Genesis Debtors and the Multicare Debtors into separate
classes and summarize the treatment for each class. The tables also identify
which classes are entitled to vote on the Plan of Reorganization based on rules
set forth in the Bankruptcy Code and an order of the Bankruptcy Court
establishing voting procedures. Finally, the tables indicate an estimated
recovery for each class. Important Note: As described in section IX, below, the
long-term care industry is affected by numerous uncertainties, including changes
in Medicare and Medicaid reimbursement, labor costs, professional liability
exposure and the ability to insure those risks, and regulatory enforcement.
Those uncertainties and other risks related to the Genesis Debtors and the
Multicare Debtors make it difficult to determine a precise value for the Debtors
and the equity interests to be distributed under the Plan of Reorganization. The
recoveries described in the following tables represent the Debtors' best
estimates of those values given the information available at this time. Unless
otherwise specified, the information in the following tables and in the sections
below are based on calculations as of June 30, 2001. The estimation of
recoveries makes the following assumptions:
o The new debt instruments to be issued under the Plan of
Reorganization have a value equal to their face amounts.
o The enterprise value for the Debtors is $1,525,000,000
(including cash on hand). This amount, less cash on hand of
$25,000,000, is the mid-point of the range of valuations for
the Genesis Debtors and the Multicare Debtors described in
section IV, below.
o The aggregate amount of allowed secured claims against the
Genesis Debtors (excluding the Genesis Senior Lender Claims)
is $120,077,000 and against the Multicare Debtors (excluding
the Multicare Senior Lender Claims) is $26,318,000.
o The aggregate amount of Genesis Senior Lender Claims is
$1,193,460,000 (excluding postpetition interest and before
giving effect to postpetition payments) and the aggregate
amount of Multicare Senior Lender Claims is $443,400,000
(excluding postpetition interest).
o The aggregate amount of general unsecured claims against the
Genesis Debtors is $467,494,000 (Classes G4 and G5 described
below, but excluding the claims of the Multicare Debtors
against the Genesis Debtors) and the aggregate amount of
general unsecured claims against the Multicare Debtors is
$284,256,000 (Classes M4 and M5 described below, but excluding
the claims of the Genesis Debtors against the Multicare
Debtors).
o For purposes of the recovery estimate in the table below, no
current value is included for the New Warrants because they
are priced at the approximate projected value of the New
Common Stock. However, under a Black-Scholes analysis, the New
Warrants would have a value between $16,000,000 and
$23,000,000.
7
Treatment of Genesis Creditors and Shareholders
----------------------------------------------------------------------------------------------------
Class Description Treatment Entitled Estimated
to Vote Recovery
----------------------------------------------------------------------------------------------------
-- Debtor in Possession Payment of all amounts outstanding, No 100%
Credit Agreement Claims and cash collateralization or
replacement of outstanding letters
of credit by letters of credit
issued under the exit facility.
----------------------------------------------------------------------------------------------------
-- Other Administrative Paid in full. No 100%
Expense Claims
----------------------------------------------------------------------------------------------------
-- Priority Tax Claims Paid in full or with interest over No 100%
a period not to exceed six (6)
years from the date of assessment
of the tax.
----------------------------------------------------------------------------------------------------
G1 Genesis Other Secured See separate descriptions in See See below
Claims section II.E, below. below
----------------------------------------------------------------------------------------------------
G2 Genesis Senior Lender $195,979,000 in cash* Yes 78.89%
Claims $94,923,000 in New Senior Notes
$31,000,000 in New Conv. Preferred
Stock
74.35% of the New Common Stock.
*cash payments through June 30, 2001
----------------------------------------------------------------------------------------------------
G3 Genesis Priority Non-Tax Paid in full. No 100%
Claims
----------------------------------------------------------------------------------------------------
G4 Genesis General Unsecured Uninsured Claims: Yes 7.34%
Claims 0.71% of the New Common Stock (exclusive
10.65% of the New Warrants. of the
Insured Claims: Paid in ordinary value of
course of business from insurance the New
proceeds to the extent of such Warrants)
insurance; any portion of such
claims which are not covered by
insurance will be treated in same
manner as uninsured claims.
----------------------------------------------------------------------------------------------------
G5 Genesis Senior 3.41% of the New Common Stock Yes 7.34%
Subordinated Note Claims 51.54% of the New Warrants. (exclusive
of the
value of
the New
Warrants)
----------------------------------------------------------------------------------------------------
G6 Genesis Intercompany Claims Unimpaired. No 100%
----------------------------------------------------------------------------------------------------
G7 Genesis Punitive Damage No distribution (except to the No None
Claims extent covered by insurance).
----------------------------------------------------------------------------------------------------
G8 Genesis Series G Preferred No distribution. No None
Stock Interests
----------------------------------------------------------------------------------------------------
G9 Genesis Series H Preferred No distribution. No None
Stock Interests
----------------------------------------------------------------------------------------------------
G10 Genesis Series I Preferred No distribution. No None
Stock Interests
----------------------------------------------------------------------------------------------------
G11 Genesis Common Stock No distribution. No None
Interests
----------------------------------------------------------------------------------------------------
8
Treatment of Multicare Creditors and Shareholders
----------------------------------------------------------------------------------------------------
Class Description Treatment Entitled Estimated
to Vote Recovery
----------------------------------------------------------------------------------------------------
-- Debtor in Possession Payment of all amounts outstanding, No 100%
Credit Agreement Claims and cash collateralization or
replacement of outstanding letters
of credit by letters of credit
issued under the exit facility.
----------------------------------------------------------------------------------------------------
-- Other Administrative Paid in full. No 100%
Expense Claims
----------------------------------------------------------------------------------------------------
-- Priority Tax Claims Paid in full or with interest over No 100%
a period not to exceed six (6)
years from the date of assessment
of the tax.
----------------------------------------------------------------------------------------------------
M1 Multicare Other Secured See separate descriptions in See See below
Claims section II.F, below. below
----------------------------------------------------------------------------------------------------
M2 Multicare Senior Lender $25,000,000 in cash Yes 77.31%
Claims $147,682,000 in New Senior Notes
$11,600,000 in New Conv. Preferred
Stock 19.02% of the New Common Stock.
----------------------------------------------------------------------------------------------------
M3 Multicare Priority Non-Tax Paid in full. No 100%
Claims
----------------------------------------------------------------------------------------------------
M4 Multicare General Uninsured Claims: Yes 7.34%
Unsecured Claims 0.23% of the New Common Stock (exclusive
3.52% of the New Warrants. of the
Insured Claims: value of
Paid in ordinary course of business the New
from insurance proceeds to the Warrants)
extent of such insurance; any
portion of such claims which are
not covered by insurance will be
treated in same manner as uninsured
claims.
----------------------------------------------------------------------------------------------------
M5 Multicare Senior 2.27% of the New Common Stock Yes 7.34%
Subordinated Note Claims 34.29% of the New Warrants. (exclusive
of the
value of
the New
Warrants)
----------------------------------------------------------------------------------------------------
M6 Multicare Intercompany Unimpaired. No 100%
Claims
----------------------------------------------------------------------------------------------------
M7 Multicare Punitive Damage No distribution (except to the No None
Claims extent covered by insurance).
----------------------------------------------------------------------------------------------------
M8 Multicare Common Stock No distribution. No None
Interests
----------------------------------------------------------------------------------------------------
D. Allocation of Value Under the Plan of Reorganization
The largest claims against the Genesis Debtors and the Multicare
Debtors consist of the Genesis Senior Lender Claims (Class G2) and the Multicare
Senior Lender Claims (Class M2). With minor exceptions discussed below, the
claims in these classes are secured by first priority liens on substantially all
the property of the Genesis Debtors and the Multicare Debtors, subject to the
liens of the lenders under the debtor in possession credit agreements and the
liens of pre-existing mortgagees and other secured creditors described in
Classes G1 and M1.
9
1. Senior Lender Deficiencies
After setting aside the value of the properties that are
collateral for the pre-existing secured claims (Classes G1 and M1), there is not
enough enterprise value remaining to provide a full recovery to the holders of
the Genesis Senior Lender Claims and the Multicare Senior Lender Claims, even if
those classes received 100% of the New Senior Notes, the New Convertible
Preferred Stock, the New Common Stock, and the New Warrants. In the absence of a
consensual restructuring and except as described in section II.D.3, below, the
absolute priority rule in section 1129(b) of the Bankruptcy Code would preclude
the distribution of any value to junior classes, including to holders of
unsecured claims in Classes G4, G5, M4, and M5. The following table, which draws
information from later sections of the Disclosure Statement, illustrates the
deficiencies of the Genesis Senior Lender Claims and the Multicare Senior Lender
Claims.
Value or Claim Section
--------------------------------------------------------------------------
Genesis Enterprise Value $1,125,000,000 IV.B.3
less: Debtor in Possession financing 200,000,000 II.E
Administrative Expenses 25,000,000
Other Secured Claims (Class G1) 120,077,000
---------------
Value Remaining $779,923,000
Amount of Genesis Senior Lender Claims (Class G2) $1,193,460,000 II.E.2
less: Adequate Protection Payments Received 195,979,000 II.E.2
---------------
Remaining Genesis Senior Lender Claims (Class G2) $997,481,000
Deficiency for Class G2 ($217,558,000)
--------------------------------------------------------------------------
Multicare Enterprise Value (including cash on hand) $400,000,000 IV.C.3
less: Administrative Expenses 10,000,000 II.F
Other Secured Claims (Class M1) 26,318,000
---------------
Value Remaining $363,682,000
Amount of Multicare Senior Lender Claims (Class M2) $443,400,000 II.F.2
---------------
Deficiency for Class M2 ($79,718,000)
In the case of the Genesis Debtors, the holders of the Genesis Senior Lender
Claims have a deficiency of over $217 million. As to the claims of holders of
the Genesis senior subordinated note claims (Class G5), the deficiency would
include postpetition interest on the Genesis Senior Lender Claims, for a total
deficiency, calculated as of June 30, 2001, of approximately $330 million. In
the case of the Multicare Debtors, the holders of the Multicare Senior Lender
Claims have a deficiency of over $79 million. As to the claims of holders of the
Multicare senior subordinated note claims (Class M5), the deficiency would
include postpetition interest on the Multicare Senior Lender Claims, for a total
deficiency, calculated as of June 30, 2001, of approximately $120 million.
10
2. Compromise and Settlement with Unsecured Classes
The Genesis Debtors, the Genesis unsecured creditors'
committee, and the holders of the Genesis Senior Lender Claims have had
extensive negotiations concerning a consensual restructuring and the advantages
of facilitating a rapid conclusion to these chapter 11 cases. Based on those
discussions and notwithstanding the deficiencies specified above, the holders of
the Genesis Senior Lender Claims have agreed to provide a portion of the value
to which they would otherwise be entitled to holders of unsecured claims in
Classes G4 and G5. The Multicare Debtors, the Multicare unsecured creditors'
committee, and the holders of the Multicare Senior Lender Claims have also
engaged in negotiations concerning a consensual restructuring. Those discussions
have also resulted in an agreement which is reflected in the terms of the Plan
and is based on the agreement of the holders of the Multicare Senior Lender
Claims to provide a portion of the value to which they would otherwise be
entitled to holders of unsecured claims in Classes M4 and M5. The treatment of
those classes in the Plan reflects this settlement and is not an admission by
the holders of the Genesis Senior Lender Claims and the Multicare Senior Lender
Claims that such classes would otherwise be entitled to any recovery.
Conversely, the support of the Plan by the Genesis unsecured creditors'
committee and the Multicare unsecured creditors' committee is not an agreement
as to the enterprise value of the Genesis Debtors or the Multicare Debtors
described in the Disclosure Statement, the validity of the liens of the holders
of the Genesis Senior Lender Claims or the Multicare Senior Lender Claims, or,
as to the Multicare unsecured creditors' committee, the representations made
herein concerning the business relationship described below between the Genesis
Debtors and the Multicare Debtors.
3. Exceptions to the Liens of the Senior Lenders
As to Classes G4 and M4, the absolute priority rule would not
apply to any properties of the Debtors that are not encumbered. As the following
analysis indicates, Classes G4 and M4 would receive small recoveries in a
nonconsensual restructuring.
Recovery for Class G4 Under the Absolute Priority Rule. The
aggregate value of the properties owned by the Genesis Debtors that are
unencumbered or likely would become unencumbered through the exercise of the
Genesis Debtors' avoidance powers is approximately $4,290,000. In a
nonconsensual restructuring, the value of these two properties would be
available to the holders of unsecured claims, including the deficiency claims of
the holders of the Genesis Senior Lender Claims. The following table shows how
the value of those properties would be allocated, giving effect to the
contractual subordination provisions of the holders of claims in Class G5 in
favor of the Genesis Senior Lender Claims in Class G2.
Recovery
Claim % Distribution %
-------------------------- ------------- --------- ------------ ----------
Genesis Sr Lender Deficit $221,848,000* 32.18% $3,792,000 1.71%**
G4 (Gen Unsecured Claims) 80,069,000 11.62% 498,000 0.62%
G5 (Gen Subord Claims) 387,425,000 56.20% 0 0.00%**
-------------------------- ------------- --------- ------------ ----------
total unsecured claims $689,342,000 100.00% $4,290,000
* This amount is greater than the deficiency calculated in section
II.D.1, above because it includes the value of the property on which the
liens securing the Genesis Senior Lender Claims may be avoidable.
11
**All value otherwise allocable to Class G5 would be distributed to
Class G2 until the deficiency in Class G2 is paid in full, in accordance
with the subordination provisions in the indentures governing the senior
subordinated notes in Class G5.
As the table illustrates, the recovery under the Plan is superior to the
application of the absolute priority rule for Class G4 (7.34% compared to 0.62%)
and Class G5 (7.34% compared to 0.00%).
Recovery for Class M4 Under the Absolute Priority Rule. The
aggregate value of the properties owned by the Multicare Debtors that are
unencumbered or likely would become unencumbered through the exercise of the
Multicare Debtors' avoidance powers is approximately $19,300,000. In a
nonconsensual restructuring, the value of these properties would be available to
the holders of unsecured claims, including the deficiency claims of the holders
of the Multicare Senior Lender Claims. The following table shows how such value
would be allocated, giving effect to the contractual subordination provisions of
the holders of claims in Class M5 in favor of the Multicare Senior Lender Claims
in Class M2.
Recovery
Claim % Distribution %
--------------------------- ------------ --------- ------------ ----------
Multicare Sr Lender Deficit $ 99,018,000* 25.83% $17,969,000 18.15%**
M4 (Mul Unsecured Claims) 26,439,000 6.90% 1,331,000 5.04%
M5 (Mul Subord Claims) 257,817,000 67.27% 0 0.00%**
--------------------------- ------------ --------- ------------ ----------
total unsecured claims $383,247,000 100.00% $19,300,000
* This amount is greater than the deficiency calculated in section
II.D.1, above because it includes the value of the property on which the
liens securing the Multicare Senior Lender Claims may be avoidable.
**All value otherwise allocable to Class M5 would be distributed to
Class M2 until the deficiency in Class M2 is paid in full, in accordance
with the subordination provisions in the indentures governing the senior
subordinated notes in Class M5.
As the table illustrates, the recovery under the Plan is superior to the
application of the absolute priority rule for Class M4 (7.34% compared to 5.04%)
and Class M5 (7.34% compared to 0.00%).
E. Description of the Genesis Classes
Unless otherwise indicated, the characteristics and amount of
the claims or equity interests in the following classes are based on the books
and records of the Genesis Debtors. Each subclass is treated as a separate class
for purposes of the Plan of Reorganization and the Bankruptcy Code. However, the
following discussion may refer to a group of subclasses as a single class for
ease of reference.
1. Genesis Other Secured Claims (Class G1)
Description. Class G1 is a group of subclasses, including
aggregate allowed mortgage secured claims of approximately $120,077,000 as of
the date of this Disclosure Statement (exclusive of interest and net of
reinstatement payments). For the most part, claims in these subclasses are
mortgage financings of various properties owned and/or operated by the
12
Genesis Debtors and equipment financings of various types. Each subclass
represents a separate mortgage or collateral pool. The following table describes
the material subclasses in Class G1.
The Plan of Reorganization reinstates the claims in Subclasses
G1-1 through G1-12. The aggregate cost to cure defaults and reinstate the debt
in these subclasses is projected to be $6,604,000 as of June 30, 2001. These
claims are not impaired, and the holders of the debt are not entitled to vote to
accept or reject the Plan of Reorganization. Subclasses G1-13 through G1-17 are
impaired and are entitled to vote. The following table identifies and summarizes
the treatment for each of the material subclasses in Class G1. The interest
rates for the new notes proposed for certain of the impaired classes will be as
specified below, unless modified by the Bankruptcy Court at the time of
confirmation of the Plan of Reorganization. The proposed notes will be secured
by the same collateral securing the existing obligations. In the event any of
those impaired classes rejects the Plan of Reorganization, the Genesis Debtors
reserve the right to return the collateral in full satisfaction of the claims
secured by such property or adjust the principal amount of the proposed note to
the value of the collateral as determined by the Bankruptcy Court. The
percentage recovery indicated in the following table is based on the value of
the collateral securing these obligations.
Treatment of Subclasses
--------------------------------------------------------------------------------------------
Description Entitled Estimated
Sub-Class Collateral (lender or guantor) Treatment to Vote Recovery
--------------------------------------------------------------------------------------------
G1-1 Broad Street Office Building $1,600,000 mortgage No 100%
148 West State Street, reinstated
Kennett Square, Pa. (Pa.
IDA)
--------------------------------------------------------------------------------------------
G1-2 Broad Street Office Building $985,039 mortgage reinstated No 100%
148 West State Street,
Kennett Square, Pa. (Pa.
IDA)
--------------------------------------------------------------------------------------------
G1-3 Pleasant View Center (HUD) $8,864,446 mortgage No 100%
reinstated
--------------------------------------------------------------------------------------------
G1-4 Country Village Center (HUD) $1,810,259 mortgage No 100%
reinstated
--------------------------------------------------------------------------------------------
G1-5 Abington Manor (Lackawanna $3,475,000 mortgage No 100%
County IDA) reinstated
--------------------------------------------------------------------------------------------
G1-6 Silver Lake Center (Del. $2,155,000 mortgage No 100%
EDA Bonds) reinstated
--------------------------------------------------------------------------------------------
G1-7 River Street Center $2,430,000 mortgage No 100%
(Luzerne County IDA) reinstated
--------------------------------------------------------------------------------------------
G1-8 Kresson View Center (NJEDA $5,535,000 mortgage No 100%
Refunding Bonds) reinstated See description
See description below. below.
--------------------------------------------------------------------------------------------
G1-9 Mifflin Court (ElderTrust) $2,474,000 mortgage No 100%
reinstated (as previously
reduced and approved by the
Bankruptcy Court)
--------------------------------------------------------------------------------------------
G1-10 Oaks Center (ElderTrust) $3,500,086 mortgage No 100%
reinstated (as previously
reduced and approved by the
Bankruptcy Court)
--------------------------------------------------------------------------------------------
G1-11 Coquina Assisted Living $1,400,000 mortgage No 100%
(ElderTrust) reinstated (as previously
reduced and approved by the
Bankruptcy Court)
--------------------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------------------
Description Entitled Estimated
Sub-Class Collateral (lender or guantor) Treatment to Vote Recovery
--------------------------------------------------------------------------------------------
G1-12 Homestead Center $19,337,000 mortgage No 100%
Kimberly Hall South Center reinstated
Kimberly Hall North Center
Seaford Center
Milford Center
Windsor Center
(U.S. Bank, N.A., as
trustee for the "Bradford
Bonds")
--------------------------------------------------------------------------------------------
G1-13 Brakeley Park Center (HUD) New secured note maturing Yes 100%*
Outstanding Mortgage: on January 1, 2033, in
$7,985,079 $7,985,079 principal amount
Interest Rate: 10.35% with annual interest at
Value of Collateral: 8.5% and level monthly
approximately equal to payments of principal and
amount of claim interest
--------------------------------------------------------------------------------------------
G1-14 North Cape Center (HUD) New secured note maturing Yes 100%*
Outstanding Mortgage: on March 1, 2036, in
$5,573,020 $5,573,020 principal amount
Interest Rate: 9.5% with annual interest at
Value of Collateral: 8.0% and level monthly
approximately equal to payments of principal and
amount of claim interest
--------------------------------------------------------------------------------------------
G1-15 Oak Hill Center (HUD) Return the collateral Yes 100%*
Outstanding Mortgage:
$7,805,061
Interest Rate: 8.75%
--------------------------------------------------------------------------------------------
G1-16 Rittenhouse Pine Center New secured 10 year note in Yes 100%*
(Meditrust) $5,000,000 principal amount
Outstanding Mortgage: with annual interest at 8%
$6,690,441 and level monthly payments
Interest Rate: 10.75% of principal and interest
based on a 25-year
amortization schedule
(unsecured deficiency of
$1,690,441)
--------------------------------------------------------------------------------------------
G1-17 Atlantis Center New secured 6 year note in Yes 100%*
Bowmans Center $50,000,000 principal
Fairway Center amount with annual interest
Oakwood Center at LIBOR plus 5% and no
Riverwood Center amortization before
Tierra Center maturity (secured
Willimsburg Center deficiency of $28,236,000,
Windham Center but see discussion in
Woodmont Center section II.E.2, below)
(synthetic lease lenders)
Outstanding Liability:
$78,235,000
--------------------------------------------------------------------------------------------
* Based on a valuation of the collateral securing these claims. Section
506(a) of the Bankruptcy Code provides that a claim is secured only to
the extent of the value of the underlying collateral. Any deficiency
claims of the holders of claims in Subclasses G1-13 through G1-16 are
part of Class G4 (Genesis General Unsecured Claims). The obligations of
the Genesis Debtors under the
14
synthetic lease (Subclass G1-17) are secured by the property identified
above and by all the property of the Genesis Debtors that secures the
claims in Class G2. Therefore the deficiency claims of the holders of
claims in Subclass G1-17 are part of Class G2 (Genesis Senior Lender
Claims). To the extent the Bankruptcy Court determines that any of the
proposed interest rates do not meet the standards set forth in section
1129 of the Bankruptcy Code, the Debtors will adjust such rates
accordingly.
Subclass G1-8. Subclass G1-8 consists of the secured claim of
SunTrust Bank, as successor indenture trustee ("SunTrust") under that certain
Trust Indenture, dated as of May 1, 1990 (the "SunTrust Indenture"), between the
New Jersey Economic Development Authority ("NJEDA") and SunTrust, pursuant to
which NJEDA issued (a) those certain $1,175,000 New Jersey Economic Development
Authority Economic Development Refunding Bonds (Geriatric and Medical Services,
Inc.--Care Inn of Voorhees Project) 1990 Series A; and (b) those certain
$5,000,000 New Jersey Economic Development Authority Economic Development
Refunding Bonds (Geriatric and Medical Services, Inc.--Care Inn of Voorhees
Project) 1990 Series B (collectively, the "Kresson View Center Bonds"). The
secured claim of SunTrust in Subclass G1-8 is (i) allowed in the principal
amount of $5,535,000, plus accrued and unpaid interest, and reasonable costs and
expenses, as more fully provided in the SunTrust Indenture and all other
documents and agreements executed in connection with the Kresson View Center
Bonds, and (ii) secured by a duly perfected, first priority mortgage and lien on
certain real and personal property (whether now owned or hereafter acquired) of
Geriatric and Medical Services, Inc. relating to a project known as the "Kresson
View Center" f/k/a "Care Inn of Voorhees" located in the Township of Voorhees,
New Jersey, including without limitation, all revenues and accounts arising
therefrom, among other collateral. In addition, the secured claim of SunTrust in
Subclass G1-8 is guaranteed pursuant to a Guaranty Agreement (the "Kresson View
Center Guaranty") by and between Geriatric & Medical Companies, Inc. (as
successor to Geriatric & Medical Centers, Inc.) and SunTrust.
As of the Effective Date, the Genesis Debtors' obligations in
connection with the Kresson View Center Bonds shall be reinstated and each and
every indenture, loan agreement, mortgage, security agreement, guaranty,
subordination agreement, and other document executed in connection with the
Kresson View Center Bonds, including, without limitation, the Kresson View
Center Guaranty and the Subordination Agreement dated May 1, 1990 executed by
Mellon Bank N.A., as agent, in favor of NJEDA (all of the foregoing, together
with the Kresson View Center Bonds, the "Kresson View Center Bond Documents"),
shall be reinstated. All legal, equitable, and contractual rights under the
Kresson View Center Bond Documents and the Kresson View Center Bonds shall
remain unaltered after confirmation of the Plan. To the extent necessary to
reinstate all such obligations, rights, agreements, and documents, the Genesis
Debtors shall execute and obtain such replacement agreements and documents,
including, without limitation, a guaranty, subordination agreements, and UCC
financing statements, each in form and substance materially identical to
existing agreements and documents, as SunTrust may require. As of the Effective
Date, the maturity date of the Kresson View Center Bonds shall be reinstated. On
the Effective Date, the Genesis Debtors shall cure any default under the Kresson
View Center Bonds and the Kresson View Center Bond Documents (including, without
limitation, past due payments of principal), and shall reimburse SunTrust for
all reasonable fees, costs, and expenses, including legal fees and expenses,
which have accrued and are required to be paid under the relevant Kresson View
Center Bond Documents.
Subclass G1-12. Upon confirmation of the Plan, the claim of
U.S. Bank Trust National Association ("U.S. Bank"), as successor indenture
trustee pursuant to the Indenture of Mortgage and Deed of Trust, dated as of
September 1, 1992 (the "U.S. Bank Indenture"), shall be
15
deemed an allowed Genesis Other Secured Claim in the principal amount of
$19,337,000, plus accrued and unpaid interest, fees, and other costs. The Plan
shall leave unaltered the legal, equitable, and contractual rights to which the
holders of claims in Subclass G1-12 are entitled, and the allowed Claim of U.S.
Bank in Subclass G1-12 shall be unimpaired under the Plan. In satisfaction of
their allowed Subclass G1-12 claim, members of Subclass G1-12 shall receive, on
or before the Effective Date, (i) all accrued and unpaid interest due under the
9 1/4% First Mortgage Bonds (Series A) due 2007 in the original principal amount
of $25,000,000 (the "Bradford Bonds"), whether incurred prior to or after the
Commencement Date, together with interest on interest, pursuant to the terms of
the U.S. Bank Indenture, and (ii) all indenture trustee fees and expenses due
under the U.S. Bank Indenture, including reasonable attorneys' fees, whether
incurred prior to or after the Commencement Date. U.S. Bank shall submit to the
Genesis Debtors an itemization of the amounts due and owing under the U.S. Bank
Indenture ten (10) days prior to the Effective Date. From and after the
Effective Date, all documents relating to the Bradford Bonds, including, but not
limited to, the U.S. Bank Indenture, the mortgages securing repayment of the
Bradford Bonds, and the bond instruments shall be deemed reinstated in their
entirety. In connection with such reinstatement and as a result of the Genesis
Debtors' failure to redeem the Bradford Bonds in April 2001, any holder of a
Bradford Bond shall have the right for sixty (60) days following the Effective
Date to present such Bradford Bonds for redemption in accordance with Article 9
of the U.S. Bank Indenture. Thereafter, the deadline to present the Bradford
Bonds for redemption shall be governed by the applicable provisions of the
Indenture. All rights and liens of U.S. Bank, as indenture trustee, shall
survive to the same extent, validity, and priority as existed prior to the
Commencement Date. Among other things, all of the mortgages securing repayment
of the Bradford Bonds shall continue to be valid and perfected, and no further
notice, filing, or other act shall be required to effect such perfection.
Subclass G1-17. Subclass G1-17 consists of the claims under the
Amended and Restated Synthetic Lease Financing Facility, dated as of October 7,
1996, among Genesis, Genesis Eldercare Properties, Inc., Mellon Bank N.A., as
administrative agent, certain co-agents named therein, and the lender parties
thereto. These claims are secured by the properties identified in the chart
above (the "G1-17 Properties"). Under the Plan, the holders of these claims will
receive a mortgage note in the principal amount of $50,000,000. The mortgage
note will bear interest at LIBOR plus 5% and will mature on the sixth
anniversary of the Effective Date. The mortgage note will be secured by (i) the
G1-17 Properties and (ii) a lien of equal priority with the New Senior Notes on
the property securing such notes. The mortgage documents will permit a junior
lien on the G1-17 property in favor of the New Senior Notes.
Other Subclasses. In addition to Subclasses G1-1 through G1-17,
there are other subclasses of miscellaneous secured claims of approximately
$3,536,000 against the Genesis Debtors, each of which will be treated as a
separate class. This class also includes certain contingent claims of Bank of
America, N.A. in connection with a guaranty by Genesis of the obligations of the
Age Institute. Under the Plan of Reorganization, either these claims will be
reinstated or the Reorganized Debtors will return the property securing such
claim. The reinstated claims are not impaired and the holders are not entitled
to vote to accept or reject the Plan of Reorganization.
2. Genesis Senior Lender Claims (Class G2)
Description. The prepetition claims in this class aggregate
approximately $1.2 billion and are the largest claims against the Genesis
Debtors. This class consists of the following prepetition claims:
16
Instrument Amount
--------------------------------------- ---------------
Revolver $650,000,000
Term Loan A 110,445,000
Term Loan B 152,131,000
Term Loan C 151,378,000
Tranche II 40,000,000*
Swap termination claims 17,291,000
Synthetic Lease deficiency claims 28,236,000
--------------
Subtotal $1,149,481,000
Prepetition interest 43,979,000*
---------------
Total prepetition claims $1,193,460,000
* Paid as part of adequate protection payments pursuant to the
cash collateral order described in sections VI.C and VI.D, below.
The claims under the Revolver, Term Loan A, Term Loan B, Term
Loan C, and Tranche II arise under Genesis's Fourth Amended and Restated Credit
Agreement, dated as of August 20, 1999, among Genesis, certain subsidiary
Genesis Debtors named therein, Mellon Bank N.A., as administrative agent,
certain co-agents named therein, and the lenders participating in such
agreement. To secure those claims, the Genesis Debtors granted first priority
security interests in substantially all their assets and junior security
interests in certain properties already subject to liens.
The swap termination claims arise from the prepetition
termination of certain interest rate hedging agreements between Citibank, N.A.
and Genesis. Prior to the commencement of these chapter 11 cases, Genesis hedged
a portion of the floating interest rate risk associated with the obligations
under the credit agreement identified above. In accordance with that credit
agreement, Genesis's obligations under those hedging agreements were entitled to
share in the collateral securing the other Genesis Senior Lender Claims.
Citibank, N.A. asserted $28,548,000 of claims against Genesis due to the
termination of the hedging agreements. Genesis and Citibank, N.A. have agreed
that $17,290,962 of those claims share the same collateral as the other Genesis
Senior Lender Claims. The balance of the claims of Citibank, N.A. are part of
Class G4. That agreement was approved by the Bankruptcy Court on May 11, 2001.
Certain properties owned by the Genesis Debtors were financed
through a "synthetic lease." The claims of the lenders under that financing
arise under the Amended and Restated Synthetic Lease Financing Facility, dated
as of October 7, 1996, among Genesis, Genesis Eldercare Properties, Inc., Mellon
Bank N.A., as administrative agent, certain co-agents named therein, and the
lender parties thereto. For purposes of bankruptcy law, the "synthetic lease" is
treated as a loan rather than a true lease. The synthetic lease claims, which
total $78,236,000, are secured by the properties leased under the Synthetic
Lease Financing Facility referred to above, as well as by the same collateral
securing the other Genesis Senior Lender Claims. Accordingly, a portion of such
claims ($50,000,000) is classified in Subclass G1-17 (based on a negotiated
valuation of the properties securing such claims - see the discussion for Class
G1, above). The remaining portion of the claims (deficiency claims of
$28,236,000) are part of this Class G2. However, for purposes of the pro rata
distribution of property to this class,
17
the deficiency claims of the synthetic lease lenders shall be deemed to be
$35,154,762.47. This amount reflects a negotiated settlement among the holders
of claims in Class G2.
At the commencement of these chapter 11 cases, the Bankruptcy
Court entered a cash collateral order which permitted the Genesis Debtors to
grant senior postpetition liens on their properties to the lenders under their
debtor in possession financing. The debtor in possession financing and the cash
collateral order are described in sections VI.C and VI.D, below. Under the cash
collateral order, the Genesis Debtors will have made approximately $195,979,000
of payments as of June 30, 2001, with respect to the Genesis Senior Lender
Claims. Based on the valuation of the Genesis Debtors presented in section IV,
below, these postpetition payments are assumed to apply against the prepetition
Genesis Senior Lender Claims described above, resulting in an outstanding
Genesis Senior Lender Claim of approximately $997,481,000. However, in the event
the Bankruptcy Court determines that the value of the Genesis Debtors is higher,
the Genesis Senior Lender Claims would include postpetition interest. In that
case, the postpetition payments would be allocated to repay the Tranche II
facility ($40,000,000), prepetition interest ($43,979,000), and approximately
$112,000,000 of postpetition interest at contractual nondefault rates. Other
than interest that accrued prior to the Commencement Date on overdue payments of
interest as of that date, no portion of the postpetition payments would be
allocated to compound interest.
The claims in Class G2 have the benefit of subordination
provisions in the various instruments representing the claims in Class G5
(Genesis Senior Subordinated Note Claims). The effect of these subordination
provisions is to require that distributions that would otherwise be made to
Class G5 be made to the holders of Genesis Senior Lender Claims. The Plan of
Reorganization does not give effect to those provisions, and the distribution of
New Common Stock and New Warrants to the holders of claims in Class G5 (Genesis
Senior Subordinated Note Claims) represents a negotiated settlement between the
official committee of unsecured creditors in the Genesis reorganization cases
and the holders of the Genesis Senior Lender Claims.
Treatment. Class G2 will receive
o cash in an amount equal to the interest on the Genesis
Senior Lender Claims at contractual, nondefault rates, as
paid pursuant to certain cash collateral and adequate
protection stipulations described in section VI.D.1, below
(as of June 30, 2001, such amount is $195,979,000)
o New Senior Notes in the principal amount of $94,923,000
o shares of New Convertible Preferred Stock with an aggregate
liquidation preference of $31,000,000
o approximately 74.35% of the New Common Stock
The allocation of New Common Stock is also subject to dilution based on future
issuances of additional shares of New Common Stock, including in connection with
the conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees. Distributions to
Class G2 will be made to the individual holders of the Genesis Senior Lender
Claims in such denominations and registered in the names of the holders as
Mellon Bank, N.A. shall have directed in writing.
18
3. Genesis Priority Non-Tax Claims (Class G3)
Description. The claims in Class G3 are the types of claims
identified in section 507(a) of the Bankruptcy Code that are entitled to
priority in payment (other than administrative expense claims and priority tax
claims). For the Genesis Debtors, these claims relate primarily to prepetition
wages and employee benefit plan contributions that had not yet been paid as of
the Commencement Date. The Genesis Debtors believe that all of these claims have
already been paid pursuant to an order entered by the Bankruptcy Court on the
Commencement Date.
Treatment. Claims in Class G3 that have not already been paid
will be paid on the later of (i) the Effective Date, (ii) the date such claim
becomes allowed, and (iii) the date for payment provided by any agreement or
understanding between the parties, except to the extent the holders of such
claims agree to a different treatment.
4. Genesis General Unsecured Claims (Class G4)
Description. The aggregate amount of general unsecured claims
filed against the Genesis Debtors on or before the December 19, 2000 bar date
was approximately $1,131,655,000. However, the Genesis Debtors estimate that the
aggregate amount of allowed claims in Class G4 will be approximately
$80,069,000, after deducting duplicate claims, claims not supported by the
Genesis Debtors' books and records, claims that are covered by insurance, and
claims that are subject to other objections. The claims in Class G4 consist of
the claims of suppliers and other vendors, landlords with prepetition rent
claims and/or claims based on rejection of leases, personal injury and other
litigation claimants to the extent not covered by insurance, parties to
contracts with the Genesis Debtors that are being rejected, deficiency claims of
mortgage lenders, the unsecured portion of the claims arising from the
prepetition termination of certain interest rate hedging agreements, claims (if
any) arising from the remaining qui tam suit identified in section V.D.6, below,
contingent (as of the date hereof) claims relating to bonds executed on behalf
of the Debtors by Liberty Bond Services, and other general unsecured claims. The
following table lists the types of claims and the estimated amount in these
groups to the extent material.
Type of claim Amount
--------------------------------------------------------------
Suppliers and vendors (estimated amount) $ 51,329,000
Mortgage deficiency claims 7,483,000
Swap deficiency claims 11,257,000
Other (including estimate of rejection damages) 10,000,000
--------------
Total $ 80,069,000
For purposes of the initial distribution, and as part of the distribution
mechanism under the Plan for holders of claims in Classes G4 and G5, the Debtors
will be required to estimate the total amount of claims that will be allowed.
See section V.D.5, below.
For completeness, this class also includes claims covered by
insurance in whole or in part maintained by the Genesis Debtors. However, such
claims will be entitled to share in the treatment of this class only to the
extent they are not covered by such insurance. See section V.D.7, below. The
Genesis Debtors believe that their professional liability insurance is
sufficient to cover all allowed claims for personal injury or wrongful death.
19
Treatment. The holders of claims in Class G4 which are uninsured
in whole or in part will share 4.12% of the New Common Stock and 62.19% of the
New Warrants with the holders of claims in Class G5. Based on the books and
records of the Genesis Debtors, the holders of claims in Class G4 will receive
o approximately 0.71% of the New Common Stock
o 10.65% of the New Warrants
Holders of claims in this class that are covered by insurance in whole or in
part will be paid in the ordinary course of the business of the Reorganized
Debtors to the extent of such insurance, and to the extent that these claims are
not covered by insurance will be treated in the same manner as the holders of
uninsured claims in this class. All shares of New Common Stock are subject to
dilution based on future issuances of additional shares of New Common Stock,
including in connection with the conversion of the New Convertible Preferred
Stock, the exercise of the New Warrants, and the issuance of restricted shares
of New Common Stock and options under the New Management Incentive Plan for key
employees.
5. Genesis Senior Subordinated Note Claims (Class G5)
Description. The claims in this class total $387,425,000 and
consist of the principal and interest accrued and unpaid through the
Commencement Date under four separate series of senior subordinated notes issued
by Genesis. The following table describes the notes:
Subordinated Note Amount
-------------------------------------------- ---------------
9-3/4% Senior Subordinated Notes due 2005 $120,000,000
Indenture, dated as of June 15, 1995,
between Genesis and State Street Bank
and Trust Company, as trustee
9-1/4% Senior Subordinated Notes due 2006
125,000,000 Indenture, dated as of
October 7, 1996, between Genesis and
State Street Bank and Trust Company,
as successor trustee
9-7/8% Senior Subordinated Notes due 2009 120,920,000*
Indenture, dated as of
December 23, 1998, between Genesis
and The Bank of New York, as
trustee
9-3/8% Senior Subordinated Notes due 2005 1,590,000
Indenture, dated as of
September 15, 1995, between
Grancare, Inc. and Marine Midland
Bank, as trustee
Plus prepetition interest 19,915,000
--------------
Total $387,425,000
*$125,000,000 face amount less $4,080,000 of original
issue discount
The claims in Class G5 are contractually subordinated to the Genesis Senior
Lender Claims in Class G2.
20
Treatment. The holders of claims in Class G5 will share 4.12%
of the New Common Stock and 62.19% of the New Warrants with the holders of
claims in Class G4. Based on the books and records of the Genesis Debtors, Class
G5 will receive
o approximately 3.41% of the New Common Stock
o 51.54% of the New Warrants
All shares of New Common Stock are subject to dilution based on future issuances
of additional shares of New Common Stock, including in connection with the
conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees.
6. Genesis Intercompany Claims (Class G6)
Description. The Genesis Debtors record transfers of funds
among themselves as intercompany claims. For example, funds raised by Genesis
through the issuance of securities to the public (both stock and debt), as well
as amounts borrowed under its prepetition credit agreement, have been used to
fund and build the operations of many of the other Genesis Debtors. In addition,
funds earned by the subsidiaries of Genesis have been transferred to Genesis as
partial repayment of such advances.
Treatment. For purposes of the Plan, these claims are
unimpaired.
7. Genesis Punitive Damage Claims (Class G7)
Description. Class G7 consists of any claim against any of the
Genesis Debtors for any fine, penalty, forfeiture, or attorneys' fees (but only
to the extent such attorneys' fees are punitive in nature), or for multiple,
exemplary, or punitive damages, to the extent that such fine, penalty,
forfeiture, attorneys' fees, or damages is not compensation for actual pecuniary
loss suffered by the holder of such claim and not statutorily prescribed. In
general, punitive or exemplary damage claims are intended to punish or make an
example of a wrongdoer. However, in the context of an insolvent entity, such as
the Genesis Debtors, the enforcement of punitive claims would have the effect of
punishing unsecured creditors by diluting the ultimate recovery to all unsecured
creditors. Moreover, punitive and exemplary damage claims differ significantly
from other general unsecured claims which are based upon pecuniary losses. For
these reasons, such claims have been classified separately from other unsecured
claims. The Genesis Debtors do not believe that there will be any allowed claims
in this class. However, several proofs of claim have been filed concerning
personal injury or wrongful death claims that include punitive or exemplary
damage amounts and this class has been included in the Plan for completeness. In
addition, the AGE Institute has asserted unspecified punitive and exemplary
damages in connection with certain counterclaims it has asserted against certain
Genesis Debtors in response to the commencement of an adversary proceeding
commenced against it.
Treatment. To the extent there are any allowed claims in this
class, they are subordinated to the claims in other classes. No property will be
distributed to the holders of any allowed claims in this class from the Genesis
Debtors' estates. Solely, to the extent these claims are covered by applicable
insurance policies, and such insurance is permitted under state law, holders of
allowed claims in this class shall receive insurance proceeds.
21
8. Genesis Series G Preferred Stock Interests (Class G8)
Description. Class G8 consists of the equity interests
represented by the outstanding shares of Genesis's Series G Cumulative
Convertible Preferred Stock. This issue consists of 586,240 shares of preferred
stock issued to HCR Manor Care, Inc. in connection with Genesis's 1998
acquisition of the pharmacy business of that company. This class also includes
any claims that HCR Manor Care, Inc. has or may assert against Genesis in
connection with the issuance of this preferred stock, whether based on state or
federal securities laws or otherwise (although no proof of claim for such
amounts has been filed).
Treatment. Holders of equity interests in Class G8 will receive
no property under the Plan, and these equity interests will be cancelled on the
Effective Date.
9. Genesis Series H Preferred Stock Interests (Class G9)
Description. Class G9 consists of the equity interests
represented by the outstanding shares of Genesis's Series H Senior Convertible
Participating Cumulative Preferred Stock. This issue consists of 24,369 shares
of preferred stock issued to The Cypress Group and certain of its affiliates,
TPG Partners II, L.P., and Nazem, Inc. in connection with a 1999 restructuring
of Genesis's obligations. That restructuring is described in detail in Genesis's
Form 10-K for the fiscal year ended September 30, 2000.
Treatment. Holders of equity interests in Class G9 will receive
no property under the Plan and these equity interests will be cancelled on the
Effective Date.
10. Genesis Series I Preferred Stock Interests (Class G10)
Description. Class G10 consists of the equity interests
represented by the outstanding shares of Genesis's Series I Senior Convertible
Exchangeable Participating Cumulative Preferred Stock. This issue consists of
17,631 shares of preferred stock issued to The Cypress Group and certain of its
affiliates, TPG Partners II, L.P., and Nazem, Inc. in connection with a 1999
restructuring of Genesis's obligations. That restructuring is described in
detail in Genesis's Form 10-K for the fiscal year ended September 30, 2000.
Treatment. Holders of equity interests in Class G10 will
receive no property under the Plan, and these equity interests will be cancelled
on the Effective Date.
11. Genesis Common Stock Interests (Class G11)
Description. This class consists of the common equity interests
in Genesis represented by Genesis's outstanding 48,641,456 shares of common
stock, $0.02 par value. The class includes all shares owned by affiliates or
members of the management of the Genesis Debtors and any outstanding options,
warrants, or rights to purchase such stock, including conversion or exchange
rights under the Series G Cumulative Convertible Preferred Stock, the Series H
Senior Convertible Participating Cumulative Preferred Stock, and the Series I
Senior Convertible Exchangeable Participating Cumulative Preferred Stock.
Treatment. Holders of equity interests in Class G11 will
receive no property under the Plan, and these equity interests will be cancelled
on the Effective Date.
22
F. Description of the Multicare Classes
Unless otherwise indicated, the characteristics and amount of
the claims or equity interests in the following classes are based on the books
and records of the Multicare Debtors. Each subclass is treated as a separate
class for purposes of the Plan of Reorganization and the Bankruptcy Code.
However, the following discussion may refer to a group of subclasses as a single
class for ease of reference.
1. Multicare Other Secured Claims (Class M1)
Description. Class M1 is a group of subclasses, with aggregate
allowed secured claims of approximately $26,318,000 as of the date of this
Disclosure Statement (exclusive of interest and net of reinstatement payments).
For the most part, claims in these subclasses are mortgage financings of various
properties owned and/or operated by the Multicare Debtors and equipment
financings of various types. Each subclass represents a separate mortgage or
collateral pool. The following table describes the material subclasses in Class
M1.
The Plan of Reorganization reinstates the claims in Subclasses
M1-1 through M1-6. The aggregate cost to cure defaults and reinstate the debt in
these subclasses is projected to be $3,522,000 as of June 30, 2001. These claims
are not impaired, and the holders of the debt are not entitled to vote to accept
or reject the Plan. Subclass M1-7 is impaired and is entitled to vote. The
following table identifies and summarizes the treatment for each of the material
subclasses in Class M1. The percentage recovery indicated in the following table
is based on the value of the collateral securing these obligations.
Treatment of Subclasses
--------------------------------------------------------------------------------------------------
Subclass Description Entitled Estimated
Collateral (lender or guarantor) Treatment to Vote Recovery
--------------------------------------------------------------------------------------------------
M1-1 Rosewood Center (Tyler $825,000 mortgage reinstated No 100%
County, WV)
--------------------------------------------------------------------------------------------------
M1-2 Sisterville Center (Care $1,960,000 mortgage reinstated No 100%
Haven) (Tyler County, WV)
--------------------------------------------------------------------------------------------------
M1-3 Raleigh Center (WV Hospital $1,840,000 mortgage bonds No 100%
Authority) reinstated
--------------------------------------------------------------------------------------------------
M1-4 Westford Center (HUD) $6,637,992 mortgage reinstated No 100%
--------------------------------------------------------------------------------------------------
M1-5 Willows Center $11,900,815 mortgage No 100%
Cedar Ridge Center reinstated
Dawn View Center
(MediTrust)
--------------------------------------------------------------------------------------------------
M1-6 Teays Valley (West Virginia $3,665,000 mortgage reinstated No 100%
Hospital Authority)
--------------------------------------------------------------------------------------------------
M1-7 Point Pleasant (Mason County Return of collateral Yes 100%*
WV) Outstanding Mortgage:
$1,535,000
--------------------------------------------------------------------------------------------------
* Based on a valuation of the collateral securing these claims. Section
506(a) of the Bankruptcy Code provides that a claim is secured only to
the extent of the value of the underlying collateral.
In addition to Subclasses M1-1 through M1-7, there are other
subclasses of miscellaneous secured claims of approximately $71,000 against the
Multicare Debtors, each of
23
which will be treated as a separate class. Under the Plan of Reorganization,
either these claims will be reinstated or the Reorganized Debtors will return
the property securing such claim. The reinstated claims are not impaired, and
the holders are not entitled to vote to accept or reject the Plan of
Reorganization.
2. Multicare Senior Bank Claims (Class M2)
Description. The prepetition claims in this class aggregate
approximately $443,400,000 and are the largest claims against the Multicare
Debtors. This class consists of the following prepetition claims:
Instrument Amount
--------------------------------------------------------
Revolver $112,700,000
Term Loan A 116,400,000
Term Loan B 145,800,000
Term Loan C 49,100,000
----------------
Subtotal $424,000,000
Prepetition interest 19,400,000
----------------
Total prepetition claims $443,400,000
The claims under the Revolver, Term Loan A, Term Loan B, and
Term Loan C arise under Multicare's Fourth Amended and Restated Credit
Agreement, dated as of August 20, 1999, among The Multicare Companies, Inc.,
certain subsidiary Multicare Debtors named therein, Mellon Bank N.A., as
administrative agent, certain co-agents named therein, and the lenders
participating in such agreement. To secure those claims, the Multicare Debtors
granted first priority security interests in substantially all their assets and
junior security interests in certain properties already subject to liens.
The claims in Class M2 have the benefit of subordination
provisions in the instruments representing the claims in Class M5 (Multicare
Senior Subordinated Note Claims). The effect of these subordination provisions
is to require that distributions that would otherwise be made to Class M5 be
made to the holders of Multicare Senior Lender Claims. The Plan of
Reorganization does not give effect to those provisions, and the distribution of
New Common Stock and New Warrants to the holders of claims in Class M5
(Multicare Senior Subordinated Note Claims) represents a negotiated settlement
between the official committee of unsecured creditors in the Multicare
reorganization cases and the holders of the Multicare Senior Lender Claims.
Treatment. Class M2 will be entitled to receive 88.37% of the
shares of the New Multicare Stock. However, approval of the Plan will implement
the Plan of Merger, under which all such stock will be deemed to be immediately
exchanged for
o $25,000,000 in cash
o New Senior Notes in the principal amount of $147,682,000
o shares of New Convertible Preferred Stock with an
aggregate liquidation preference of $11,600,000
24
o approximately 19.02% of the New Common Stock
The allocation of New Common Stock is also subject to dilution based on future
issuances of additional shares of New Common Stock, including in connection with
the conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees. Distributions to
Class M2 will be made to the individual holders of the Multicare Senior Lender
Claims in such denominations and registered in the names of the holders as
Mellon Bank, N.A. shall have directed in writing.
3. Multicare Priority Non-Tax Claims (Class M3)
Description. The claims in Class M3 are the types of claims
identified in section 507(a) of the Bankruptcy Code that are entitled to
priority in payment (other than administrative expense claims and priority tax
claims). For the Multicare Debtors, these claims relate primarily to prepetition
wages and employee benefit plan contributions that had not yet been paid as of
the Commencement Date. The Multicare Debtors believe that all of these claims
have already been paid pursuant to an order entered by the Bankruptcy Court on
the Commencement Date.
Treatment. Claims in Class M3 that have not already been paid
will be paid on the later of (i) the Effective Date, (ii) the date such claim
becomes allowed, and (iii) the date for payment provided by any agreement or
understanding between the parties, except to the extent the holders of such
claims agree to a different treatment.
4. Multicare General Unsecured Claims (Class M4)
Description. The aggregate amount of general unsecured claims
filed against the Multicare Debtors on or before the December 19, 2000 bar date
was approximately $1,702,490,000. However, the Multicare Debtors estimate that
the aggregate amount of allowed claims in Class M4 will be approximately
$26,439,000, after deducting duplicate claims, claims not supported by the
Multicare Debtors' books and records, claims covered by insurance, and claims
that are subject to other objections. The claims in Class M4 consist of the
claims of suppliers and other vendors, landlords with prepetition rent claims
and/or claims based on rejection of leases, personal injury and other litigation
claimants to the extent not covered by insurance, parties to contracts with the
Multicare Debtors that are being rejected, deficiency claims of mortgage
lenders, contingent (as of the date hereof) claims relating to bonds executed on
behalf of the Debtors by Liberty Bond Services, and other general unsecured
claims. For completeness, this class also includes claims covered by insurance
in whole or in part maintained by or on behalf of the Multicare Debtors.
However, such claims will be entitled to share in the treatment of this class
only to the extent they are not covered by such insurance. The Multicare Debtors
believe that their professional liability insurance is sufficient to cover all
allowed claims for personal injury or wrongful death. See section V.D.7, below.
For purposes of the initial distribution, and as part of the distribution
mechanism under the Plan for holders of claims in Classes M4 and M5, the Debtors
will be required to estimate the total amount of claims that will be allowed.
See section V.D.5, below.
Treatment. The holders of claims in Class M4 which are
uninsured in whole or in part will share 11.63% of the shares of New Multicare
Stock with the holders of claims in Class M5. Approval of the Plan will
implement the Plan of Merger, under which all such stock will be deemed to be
immediately exchanged for 2.50% of the New Common Stock and 37.81%
25
of the New Warrants, which will be shared with the holders of claims in Class M5
on a pro rata basis. Based on the books and records of the Multicare Debtors,
Class M4 will receive
o approximately 0.23% of the New Common Stock
o 3.52% of the New Warrants
Holders of claims in this class that are covered by insurance will be paid in
the ordinary course of the business of the Reorganized Debtors to the extent of
such insurance, and to the extent that these claims are not covered by insurance
will be treated in the same manner as the holders of uninsured claims in this
class. All shares of New Common Stock are subject to dilution based on future
issuances of additional shares of New Common Stock, including in connection with
the conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees.
5. Multicare Senior Subordinated Note Claims (Class M5)
Description. The claims in this class total $257,817,000 and
consist of the principal and interest accrued and unpaid through the
Commencement Date, less unamortized original issue discount, under Multicare's
9% Senior Subordinated Notes due 2007, issued and governed by the Indenture,
dated as of August 11, 1997, between Multicare and PNC Bank, National
Association, as trustee. The claims in Class M5 are contractually subordinated
to the Multicare Senior Lender Claims in Class M2.
Treatment. The holders of claims in Class M5 will share 11.63%
of the shares of New Multicare Stock with the holders of claims in Class M4.
Approval of the Plan will implement the Plan of Merger, under which all such
stock will be deemed to be immediately exchanged for 2.50% of the New Common
Stock and 37.81% of the New Warrants, which will be shared with the holders of
claims in Class M4 on a pro rata basis. Based on the books and records of the
Multicare Debtors, Class M5 will receive
o approximately 2.27% of the New Common Stock
o 34.29% of the New Warrants
All shares of New Common Stock are subject to dilution based on future issuances
of additional shares of New Common Stock, including in connection with the
conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees.
6. Multicare Intercompany Claims (Class M6)
Description. The Multicare Debtors record transfers of funds
among themselves as intercompany claims. For example, funds borrowed by
Multicare under its prepetition credit agreement have been used to fund and
build the operations of many of the other Multicare Debtors. In addition, funds
earned by the subsidiaries of Multicare have been transferred to Multicare as
partial repayment of such advances.
Treatment. For purposes of the Plan, these claims are
unimpaired.
26
7. Multicare Punitive Damage Claims (Class M7)
Description. Class M7 consists of any claim against any of the
Multicare Debtors for any fine, penalty, forfeiture, or attorneys' fees (but
only to the extent such attorneys' fees are punitive in nature), or for
multiple, exemplary, or punitive damages, to the extent that such fine, penalty,
forfeiture, attorneys' fees, or damages is not compensation for actual pecuniary
loss suffered by the holder of such claim and not statutorily prescribed. In
general, punitive or exemplary damage claims are intended to punish or make an
example of a wrongdoer. However, in the context of an insolvent entity, such as
the Multicare Debtors, the enforcement of punitive claims would have the effect
of punishing unsecured creditors by diluting the ultimate recovery to all
unsecured creditors. Moreover, punitive or exemplary damage claims differ
significantly from other general unsecured claims which are based upon pecuniary
losses. For these reasons, such claims have been classified separately from
other unsecured claims. The Multicare Debtors do not believe that there will be
any allowed claims in this class. However, several proofs of claim have been
filed concerning personal injury or wrongful death claims that include punitive
or exemplary damage amounts and this class has been included in the Plan for
completeness.
Treatment. To the extent there are any allowed claims in this
class, they are subordinated to the claims in other classes. No property will be
distributed to the holders of any allowed claims in this class from the
Multicare Debtors' estates. Solely, to the extent these claims are covered by
applicable insurance policies, and such insurance is permitted under state law,
holders of allowed claims in this class shall receive insurance proceeds.
8. Multicare Common Stock Equity Interests (Class M8)
Description. This class consists of all the common equity
interests in Genesis ElderCare Corp., including any outstanding options,
warrants, or rights to acquire such equity interests, represented by that
company's 745,000 outstanding shares of common stock, $0.01 par value, of which
approximately 43.6% is currently owned by Genesis.
Treatment. Holders of equity interests in Class M8 will receive
no property under the Plan, and these equity interests will be cancelled on the
Effective Date.
G. Administrative Expenses for the Genesis Debtors and the Multicare
Debtors
In order to confirm the Plan of Reorganization, Administrative
Expense Claims and Priority Tax Claims must be paid in full or in a manner
otherwise agreeable to the holders of those claims. Administrative expenses are
the actual and necessary costs and expenses of the chapter 11 cases of the
Genesis Debtors and the Multicare Debtors. Those expenses include, but are not
limited to, postpetition salaries and other benefits for employees, postpetition
rent for facilities and offices, amounts owed to vendors providing goods and
services during the chapter 11 cases, tax obligations incurred after the
commencement of the chapter 11 cases, and certain statutory fees and expenses.
Other administrative expenses include the actual, reasonable, and necessary
professional fees and expenses of the professionals retained by the Genesis
Debtors, the Multicare Debtors, and their respective creditors' committees, as
well as the obligations outstanding under the separate debtor in possession
financing agreements for the Genesis Debtors and the Multicare Debtors.
Consistent with the requirements of the Bankruptcy Code, the
Plan of Reorganization generally provides for allowed Administrative Expense
Claims to be paid in full
27
on the later of the Effective Date and the first business day after the date
that is thirty (30) days after the date such Administrative Expense Claim
becomes allowed, except for Administrative Expense Claims relating to ordinary
course of business transactions or for money borrowed, both of which will be
paid in accordance with the past practice of the Debtors and the terms of the
agreements governing such obligations. Administrative Expense Claims relating to
compensation of the professionals retained by the Genesis Debtors, the Multicare
Debtors, their respective creditors' committees, or for the reimbursement of
expenses for certain members of their respective creditors' committees will,
unless otherwise agreed by the claimant, be paid on the later of the Effective
Date and the date on which an order allowing such Administrative Expense Claim
is entered.
Allowed tax claims entitled to priority under the Bankruptcy
Code will be paid either in full on the later of the Effective Date and the
first business day after the date that is thirty (30) days after the date such
claim becomes allowed or with interest at a fixed annual rate equal to eight
percent (8%) over a period not exceeding six (6) years from the date of
assessment of the tax.
1. Debtor in Possession Financing
The Genesis Debtors estimate that there will be approximately
$200,000,000 outstanding under their debtor in possession financing agreements
on the Effective Date. Of that amount, approximately $2,500,000 will relate to
outstanding letters of credit. With the exception of those letters of credit,
obligations under the debtor in possession financing agreements will be paid on
the Effective Date. On the Effective Date, outstanding letters of credit will
either be replaced or will remain outstanding and will be backed up with new
letters of credit or cash collateralized on the Effective Date. The Multicare
Debtors do not expect that any amounts will be outstanding under their debtor in
possession financing agreements on the Effective Date, other than approximately
$500,000 of letters of credit, which will either be replaced or will remain
outstanding and will be backed up with new letters of credit or cash
collateralized on the Effective Date.
2. Federal Medicare Claims
The Medicare fiscal intermediaries for the Genesis Debtors and
the Multicare Debtors have determined that the Debtors have received Medicare
overpayments. The Medicare statute, regulations, and procedures require the
fiscal intermediaries to adjust Medicare payments to recover such overpayments
upon determining those overpayments. However, because of the bankruptcy, many of
these determined overpayments remain outstanding. In addition, the Centers for
Medicare and Medicaid Services (CMS) f/k/a the Health Care Financing
Administration (HCFA) has imposed civil money penalties (CMPs) on certain of the
Debtors that remain unpaid to date. CMS asserts no other claims against the
Debtors.
CMS and the Debtors agree that total determined overpayments
have not taken into account underpayments that Genesis and Multicare believe are
due under the Medicare program. The Debtors expect that these determined
overpayments, and CMPs, will be reduced to zero, as of the effective date of the
confirmation of the Plan of Reorganization, by application of underpayments.
After the effective date, the Debtors will pay all Medicare determined
overpayments and CMPs, and receive all determined underpayments, in the ordinary
course of their businesses, in accordance with the Medicare statute,
regulations, and procedures.
28
Separately, the Genesis Debtors have entered into an agreement
to resolve four pending civil qui tam suits filed by private citizens under the
federal False Claims Act, 31 U.S.C. ss. 3729 et seq. relating to alleged
overbilling to the federal Medicare program. The terms of that settlement, which
involve a payment of approximately $2.1 million to the federal government, are
described in section II.K.1, below.
3. State Medicaid Claims
Certain of the Genesis Debtors have accrued credits or
overpayments due to various state Medicaid programs. The aggregate amount of
such credits and overpayments is approximately $8,000,000. As part of the
assumption of certain agreements and/or programs related to participation in the
Medicaid programs in those states, the Genesis Debtors expect to make such
payments in the ordinary course of their businesses.
4. Fees and Expenses of Professionals
The Genesis Debtors estimate that the fees and expenses of the
various professionals in their chapter 11 cases will be approximately
$8,000,000, including amounts paid on an interim basis during the chapter 11
cases. The Multicare Debtors estimate that the fees and expenses of the various
professionals in their chapter 11 cases will be approximately $10,000,000,
including amounts paid on an interim basis during the chapter 11 cases.
5. Payments to Employees
The Bankruptcy Court has approved retention programs for key
employees of the Genesis Debtors and has approved the reimbursement of a portion
of those expenses from the estates of the Multicare Debtors. Under those
programs, approximately $4.4 million in retention payments has not yet been made
and approximately $2.1 million in plan of reorganization incentive payments will
be made (assuming an Effective Date of August 31, 2001).
6. Fees and Expenses of Indenture Trustees
The Debtors estimate that the fees and expenses of the trustees
under the indentures described in sections II.E.5 and II.F.5, above, including
the fees and expenses of any professionals retained by such indenture trustees,
assuming an Effective Date of August 31, 2001, will be approximately $280,000.
H. Securities to be Issued Under the Plan of Reorganization
1. New Senior Notes
Reorganized Genesis will issue $242,605,000 of New Senior Notes
as part of the Plan. The New Senior Notes will bear interest at LIBOR plus 5.0%.
The New Senior Notes will mature 6 months after the term note portion of the
exit financing, which is expected to be 5-1/2 years after the Effective Date.
The New Senior Notes will amortize 1% each year and will be secured by a junior
lien on real property and related fixtures of substantially all the Debtors,
subject to the liens granted to the lenders providing exit financing and any
other pre-existing liens on such property. The liens granted to secure the New
Senior Notes will also secure, on an equal and ratable basis, the claims in
Subclass G1-17 and the liens of the property securing the claims in Subclass
G1-17 will secure the New Senior Notes, on a junior and subordinate basis. The
New Senior Notes will be governed by an Indenture, a copy of which is part of
the Plan Supplement.
29
The Indenture will include covenants that are standard for public debt.
Reorganized Genesis may prepay all or a portion of the New Senior Notes at any
time without penalty (although such prepayment may be restricted by the terms of
the exit financing). The New Senior Notes will be guarantied by substantially
all the Debtors. The only Debtors excluded from the liens and guaranties are
ones that have obligations which are being reinstated under the Plan if the
terms of those obligations would prohibit such liens and/or guaranties. See
sections II.E.1 and II.F.1, above, for a discussion of reinstated classes, and
section VIII.C, below, for a discussion of the exit financing.
The Debtors used the following methodology to allocate the New
Senior Notes between the holders of the Genesis Senior Lender Claims and the
holders of the Multicare Senior Lender Claims. After consultation with their
respective advisors and with prospective exit financing lenders, the Debtors
determined that the overall debt capacity of the combined companies should not
exceed $624,000,000. The Debtors allocated this debt capacity pro rata, based on
the respective adjusted year 2001 EBITDA projections for the Genesis Debtors and
the Multicare Debtors, to determine an overall debt capacity of $440,000,000 for
the Genesis Debtors and $184,000,000 for the Multicare Debtors. The Genesis
Debtors then deducted their aggregate miscellaneous secured claims (Class G1)
and the amount of exit financing needed to pay their administrative expenses
from their overall debt capacity allocation. After those calculations, the
Genesis Debtors would have a remaining debt capacity of $94,923,000. The
Multicare Debtors performed a similar calculation, resulting in a remaining debt
capacity of $147,682,000. These amounts were used to allocate the New Senior
Notes.
2. New Convertible Preferred Stock
On the Effective Date, Reorganized Genesis will issue
convertible preferred stock with a liquidation preference of $42,600,000. The
New Convertible Preferred Stock will accrue dividends at the annual rate of 6%,
payable by Reorganized Genesis in additional shares of New Convertible Preferred
Stock. The New Convertible Preferred Stock is convertible at any time, at the
option of the holders, into shares of New Common Stock. Reorganized Genesis will
have the right to convert all the shares of New Convertible Preferred Stock to
shares of New Common Stock at any time after the first anniversary of the
Effective Date when the average trading price for a share of New Common Stock
over the immediately preceding 30 calendar days is $30.00 or more. In either
case, the conversion rate will be $20.33 of liquidation preference for each
share of New Common Stock. Reorganized Genesis will have the right to redeem the
New Convertible Preferred Stock at any time by giving 30 days notice to the
holders (although such redemptions may be restricted by the terms of the exit
financing). The holders may convert their shares prior to the expiration of that
30-day period. The New Convertible Preferred Stock is also subject to mandatory
redemption on the 9th anniversary of the Effective Date. It will also be subject
to mandatory redemption from the actual cash received by Reorganized Genesis
from the following: (i) the sale of certain real and personal property, as
identified in the Plan Supplement; (ii) the exercise of the New Warrants; (iii)
any settlement with the federal government in connection with certain
administrative appeals identified in the Plan Supplement; (iv) the settlement or
other resolution of the claims of the Genesis Debtors against the AGE Institute
and its related entities; and (v) the issuance of any equity (other than
exercise of the New Warrants) to the extent that such proceeds are not required
to be a mandatory prepayment pursuant to the terms of the exit financing
required by the Plan. Although the recovery of any cash from the AGE Institute
is uncertain (the AGE Institute has asserted that there will be no recovery),
the receipt of such amounts is not needed to meet the redemption requirements
for the New Convertible Preferred Stock. See section V.D.5, below. Reorganized
Genesis will give 30 days notice to the
30
holders of any mandatory redemption, and holders of the New Convertible
Preferred Stock may convert their shares prior to the expiration of that period.
3. New Common Stock
On the Effective Date, Reorganized Genesis will issue
41,000,000 shares of its New Common Stock, par value $0.01. The shares will be
issued to the holders of claims in Classes G2, G4, G5, M2, M4, and M5. The
following table shows the allocation among these classes:
Shares of New % of New
Class Common Stock Common Stock
-------------------------------------------------------------------------
G2 (Genesis Senior Lender Claims) 30,485,079 74.35%
G4 (Genesis General Unsecured Claims) 289,305 0.71%
G5 (Genesis Senior Subordinated Claims) 1,399,842 3.41%
-------------------------------
Subtotal 32,174,226 78.47%
M2 (Multicare Senior Lender Claims) 7,798,917 19.02%
M4 (Multicare General Unsecured Claims) 95,509 0.23%
M5 (Multicare Senior Subordinated Claims) 931,348 2.27%
-------------------------------
Subtotal 8,825,774 21.53%
-------------------------------
Total 41,000,000 100.00%
The New Common Stock will vote as a single class for the
election of directors and on other matters that require shareholder approval and
will be subject to dilution for the issuance of additional shares of New Common
Stock, including in connection with the conversion of the New Convertible
Preferred Stock, the exercise of the New Warrants, and the issuance of
restricted shares of New Common Stock and options under the New Management
Incentive Plan for key employees. The Management Incentive Plan is described in
section VIII.F, below. The Plan of Reorganization will provide for authorization
of sufficient shares of New Common Stock to accomplish the purposes described
hereunder.
4. New Warrants
On the Effective Date, Reorganized Genesis will issue warrants
to purchase 4,559,475 shares of New Common Stock. This represents approximately
11.12% of the New Common Stock issued on the Effective Date, before dilution for
stock issuances or the exercise of options under the New Management Incentive
Plan for key employees described in section VIII.F, below. The New Warrants will
expire on the first anniversary of the Effective Date and will have an exercise
price of $20.33 per share of New Common Stock. The current valuation of the New
Warrants of between $16,000,000 and $23,000,000 is based on (i) a volatility of
40% - 60%, (ii) a market price of $20.33 per share for the New Common Stock,
(iii) the exercise price of $20.33 for the New Warrants, (iv) a one-year
expiration for the New Warrants, and (v) a risk free rate of 3.6%.
5. New Multicare Common Stock
On the Effective Date, Multicare will issue shares of its new
common stock to the holders of claims in Classes M2, M4, and M5. This stock will
not be distributed. Instead, it
31
will be exchanged for New Senior Notes, New Convertible Preferred Stock, New
Common Stock, and New Warrants in accordance with the Plan and the terms of the
Plan of Merger.
I. Deemed Consolidation of Certain Debtors for Purposes of the Plan
For purposes of distributions to Classes G2, G4, and G5, the
Genesis Debtors will be considered to be a single legal entity. Similarly, for
purposes of distributions to Classes M2, M4, and M5, the Multicare Debtors will
be considered to be a single legal entity (although separate from the Genesis
Debtors). This "deemed" consolidation has three major effects. First, it
eliminates intercompany claims from the treatment scheme. Second, it eliminates
guaranties of the obligations of one Genesis Debtor by another Genesis Debtor
and one Multicare Debtor by another Multicare Debtor. Finally, each claim filed
in Classes G2, G4, and G5 against any of the Genesis Debtors will be considered
to be a single claim against the consolidated Genesis Debtors and each claim
filed in Classes M2, M4, and M5 against any of the Multicare Debtors will be
considered to be a single claim against the consolidated Multicare Debtors.
The deemed consolidation will not affect the legal and
organizational structure of the Reorganized Debtors, the modification or
reinstatement of claims in Classes G1 and M1 (with the legal, equitable, and
contractual rights to which the holder of any such claim in Glass G1 or M1 being
reinstated and unimpaired under the Plan being left unaltered), guaranties or
the grants of collateral in connection with any financing entered into, or New
Senior Notes issued, on the Effective Date or pursuant to any contract or lease
that is assumed under the Plan, or distributions out of any insurance policies
or proceeds of policies. The foregoing deemed consolidation of the Genesis
Debtors will result in the deemed elimination of multiple and duplicative
claims, joint and several liability claims and guaranties, and the payment of
allowed claims against each of the Genesis Debtors from a common fund. The
deemed consolidation of the Multicare Debtors will have the same effect in their
respective chapter 11 cases.
Subject to the proviso contained at the end of this section,
the Genesis Debtors and the Multicare Debtors believe that the foregoing deemed
consolidation of their respective estates is warranted in light of the criteria
established by the courts in ruling on the propriety of substantive
consolidation in other cases. The two critical factors considered in assessing
the entitlement to substantive consolidation are (i) whether creditors dealt
with the Genesis Debtors or the Multicare Debtors as a single economic unit and
did not rely on their separate identity in extending credit or (ii) whether the
affairs of the Genesis Debtors or the Multicare Debtors are so entangled that
consolidation will benefit all creditors. With respect to the first factor,
creditors who make loans on the basis of the financial status of a separate
entity expect to be able to look to the assets of their particular borrower for
satisfaction of that loan. The second factor involves whether there has been a
commingling of the assets and business functions and considers whether all
creditors will benefit because untangling is either impossible or so costly as
to consume the assets. The following is a discussion of these factors as they
relate to the Genesis Debtors and the Multicare Debtors.
1. Genesis Debtors
There is an ample factual basis for the deemed consolidation of
the Genesis Debtors. First, the holders of the Genesis Senior Lender Claims
dealt with substantially all the Genesis Debtors as a single economic unit and
did not rely on their separate identity in extending credit. Specifically,
almost all the Genesis Debtors are obligors under the credit agreement governing
the Genesis Senior Lender Claims. In addition, almost all the Genesis Debtors
granted first priority security interests in substantially all their assets and
junior security interests
32
in certain properties already subject to liens to secure the Genesis Senior
Lender Claims. This course of dealing and the expectations of the holders of the
Genesis Senior Lender Claims together justify consolidation.
Second, the affairs of the Genesis Debtors are entangled to the
extent that consolidation will benefit all creditors. The Genesis Debtors
consist of Genesis and 152 of its direct and indirect subsidiaries. Genesis's
integrated healthcare networks provide inpatient, pharmacy, medical supply, and
other healthcare services through eldercare centers, long-term care pharmacies,
medical supply distribution centers serving over 1,000 eldercare centers, and
community-based pharmacies in over 40 states. There is little correlation
between the names of the centers and the names of the legal entities that
technically own such facilities. This fact alone will make it very difficult for
creditors to ascertain which Genesis Debtors they have a claim against. In fact,
due to the organization of their books and records, the Genesis Debtors filed
with the Bankruptcy Court their statement of financial affairs, schedules of
assets and liabilities, and schedules of executory contracts and unexpired
leases on a partially consolidated basis.
Third, the books and records of the Genesis Debtors reflect a
large amount of intercompany claims reflecting, among other things, advances
from Genesis to fund and build its operations, upstreamed funds from the other
Genesis Debtors to enable Genesis to make payments to creditors, the allocation
of corporate overhead, and the transfer of other property from one Genesis
Debtor to another. In view of the complexity of such transactions and the
adjustments that have been made over time, it would be difficult to reconcile
intercompany claims without embarking on an enormous effort that would diminish
the return for all creditors.
Finally, for the most part, the business units of the Genesis
Debtors operate as integrated units, without all the formalities of separate
corporate entities. As such, the Genesis Debtors participate in a unified cash
management system (which includes non-Debtor subsidiaries) which would make it
extremely difficult to confirm a plan of reorganization for individual Genesis
Debtors.
In view of the foregoing, the Genesis Debtors believe that
creditors would not be prejudiced to any significant degree by the deemed
consolidation proposed in the Plan of Reorganization, which is consistent with
creditors' having dealt with the Genesis Debtors as a single economic entity,
and further believe that such deemed consolidation would best utilize the
Genesis Debtors' assets and potential of all of the Genesis Debtors to pay to
the creditors of each entity the distributions proposed in the Plan of
Reorganization.
2. Multicare Debtors
There is an ample factual basis for the deemed consolidation of
the Multicare Debtors. First, the Multicare Debtors all share a single manager
-- Genesis -- which, as a general matter, operates each of the Multicare Debtors
under the "Genesis" trade name.
Second, holders of the Multicare Senior Lender Claims dealt
with substantially all the Multicare Debtors as a single economic unit and did
not rely on their separate identity in extending credit. Specifically, almost
all the Multicare Debtors are obligors under the credit agreement governing the
Multicare Senior Lender Claims. In addition, almost all the Multicare Debtors
granted first priority security interests in substantially all their assets and
junior security interests in certain properties already subject to liens to
secure the Multicare Senior Lender Claims. This course of dealing and the
expectations of the holders of the Multicare Senior Lender Claims together
justify consolidation.
33
Third, the affairs of the Multicare Debtors are entangled to
the extent that consolidation will benefit all creditors. The Multicare Debtors
operate as a single enterprise, and have a single line of business -- the
operation of assisted living and skilled nursing care facilities. There is not
always a correlation between the names of the centers and the names of the legal
entities that technically own such facilities. This fact alone will make it very
difficult for some creditors to ascertain which Multicare Debtors they have a
claim against. In fact, due to the organization of their books and records, the
Multicare Debtors filed with the Bankruptcy Court their statement of financial
affairs, schedules of assets and liabilities, and schedules of executory
contracts and unexpired leases on a partially consolidated basis.
Fourth, the books and records of the Multicare Debtors reflect
a large amount of intercompany claims reflecting, among other things, advances
from Multicare to fund and build its operations, upstreamed funds from the other
Multicare Debtors to enable Multicare to make payments to creditors, the
allocation of corporate overhead, and the transfer of other property from one
Multicare Debtor to another. In view of the complexity of such transactions and
the adjustments that have been made over time, it would be difficult to
reconcile intercompany claims without embarking on an enormous effort that would
diminish the return for all creditors.
Finally, for the most part, the Multicare Debtors operate as a
single integrated unit, without all the formalities of separate corporate
entities. As such, the Multicare Debtors participate in a unified cash
management system (which includes non-Debtor subsidiaries) which would make it
extremely difficult to confirm a plan of reorganization for individual Multicare
Debtors.
In view of the foregoing, the Multicare Debtors believe that
creditors would not be prejudiced to any significant degree by the deemed
consolidation proposed in the Plan of Reorganization, which is consistent with
creditors' having dealt with the Multicare Debtors as a single economic entity,
and further believe that such deemed consolidation would best utilize the
Multicare Debtors' assets and potential of all of the Multicare Debtors to pay
to the creditors of each entity the distributions proposed in the Plan of
Reorganization.
3. Proviso
In the event the Plan of Reorganization is not confirmed, any
and all statements made in section II.I, above and any and all evidence
presented with respect to the appropriateness of the substantive consolidation
of (i) each of the Genesis Debtors into a single legal entity for purposes of
distributions under the Plan and (ii) each of the Multicare Debtors into a
single legal entity for purposes of distributions under the Plan, shall be
deemed withdrawn by the Debtors and shall not constitute admissions with respect
to the appropriateness of substantive consolidation of such entities. The Plan
represents a negotiated settlement among the holders of the Genesis Senior
Lender Claims, the Multicare Senior Lender Claims, and the respective official
committees of unsecured creditors appointed in the Genesis Debtors' and
Multicare Debtors' reorganization cases concerning the distribution of property
to unsecured creditors despite the deficiency claims of the holders of the
Genesis Senior Lender Claims and the Multicare Senior Lender Claims. Because the
Plan is a settlement, the statements contained herein and in the Plan are
entitled to the protection of Rule 408 of the Federal Rules of Evidence.
J. Securities Law Matters
Holders of allowed claims in Classes G2, G4, G5, M2, M4, and M5
will receive Plan Securities pursuant to the Plan of Reorganization. Section
1145 of the Bankruptcy Code
34
provides certain exemptions from the securities registration requirements of
federal and state securities laws with respect to the distribution of securities
under a plan of reorganization.
1. Issuance and Resale of New Securities Under the Plan of
Reorganization
Section 1145 of the Bankruptcy Code provides that the
securities registration requirements of federal and state securities laws do not
apply to the offer or sale of stock, warrants, or other securities by a debtor
if (i) the offer or sale occurs under a plan of reorganization, (ii) the
recipients of securities hold a claim against, an interest in, or claim for
administrative expense against the debtor, and (iii) the securities are issued
in exchange for a claim against or interest in a debtor or are issued
principally in such exchange and partly for cash and property. In reliance upon
this exemption, the issuance of the New Senior Notes, the New Convertible
Preferred Stock, the New Common Stock, and the New Warrants on the Effective
Date as provided in the Plan of Reorganization generally will be exempt from the
registration requirements of the Securities Act. Accordingly, such securities
may be resold without registration under the Securities Act or other federal
securities laws pursuant to an exemption provided by section 4(1) of the
Securities Act, unless the holder is an "underwriter" (see discussion below)
with respect to such securities, as that term is defined in the Bankruptcy Code.
In addition, such securities generally may be resold without registration under
state securities or "blue sky" laws pursuant to various exemptions provided by
the respective laws of the several states. However, recipients of securities
issued under the Plan of Reorganization are advised to consult with their own
legal advisors as to the availability of any such exemption from registration
under state law in any given instance and as to any applicable requirements or
conditions to such availability.
Section 1145(b)(1) of the Bankruptcy Code defines "underwriter"
for purposes of the Securities Act as one who, except with respect to "ordinary
trading transactions" of an entity that is not an "issuer," (A) purchases a
claim against, interest in, or claim for an administrative expense, with a view
to distribution of any security to be received in exchange for the claim or
interest, or (B) offers to sell securities issued under a plan to the holders of
such securities, or (C) offers to buy securities issued under a plan from the
holders of such securities, if the offer to buy is made with a view to
distribution of such securities and under an agreement made in connection with
the plan, the consummation of the plan, or the offer or sale of securities under
the plan, or (D) is an issuer of the securities within the meaning of section
2(11) of the Securities Act.
The term "issuer" is defined in section 2(4) of the Securities
Act; however, the reference contained in section 1145(b)(1)(D) of the Bankruptcy
Code to section 2(11) of the Securities Act purports to include as statutory
underwriters all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with, an
issuer of securities. "Control" (as defined in Rule 405 under the Securities
Act) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise. Accordingly, an
officer or director of a reorganized debtor or its successor under a plan of
reorganization may be deemed to be a "control person" of such debtor or
successor, particularly if the management position or directorship is coupled
with ownership of a significant percentage of the reorganized debtor's or its
successor's voting securities. Moreover, the legislative history of section 1145
of the Bankruptcy Code suggests that a creditor who owns ten percent (10%) or
more of the securities of a reorganized debtor may be presumed to be a "control
person."
35
To the extent that persons deemed to be "underwriters" receive
Plan Securities pursuant to the Plan, resales by such persons would not be
exempted by section 1145 of the Bankruptcy Code from registration under the
Securities Act or other applicable law. Entities deemed to be statutory
underwriters for purposes of section 1145 of the Bankruptcy Code may, however,
be able, at a future time and under certain conditions described below, to sell
securities without registration pursuant to the resale provisions of Rule 144
and Rule 144A under the Securities Act.
Under certain circumstances, holders of Plan Securities deemed
to be "underwriters" may be entitled to resell their securities pursuant to the
limited safe harbor resale provisions of Rule 144. Generally, Rule 144 provides
that if certain conditions are met (e.g., the availability of current public
information with respect to the issuer, volume limitations, and notice and
manner of sale requirements), specified persons who resell "restricted
securities" or who resell securities which are not restricted but who are
"affiliates" of the issuer of the securities sought to be resold, will not be
deemed to be "underwriters" as defined in section 2(11) of the Securities Act.
Pursuant to the Plan, certificates evidencing Plan Securities
received by a holder of ten percent (10%) or more of the outstanding New Common
Stock will bear a legend substantially in the form below in the event the
Debtors reasonably believe such holder is an underwriter:
The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended,
or under the securities laws of any state or other
jurisdiction and may not be sold, offered for sale, or
otherwise transferred unless registered or qualified under
said act and applicable state securities laws or unless
the company receives an opinion of counsel reasonably
satisfactory to it that such registration or qualification
is not required.
Any person or entity that would receive legended securities as
provided above may instead receive certificates evidencing Plan Securities
without such legend if, prior to the Effective Date, such person or entity
delivers to Reorganized Genesis (i) an opinion of counsel reasonably
satisfactory to Reorganized Genesis to the effect that the Plan Securities to be
received by such person or entity are not subject to the restrictions applicable
to "underwriters" under section 1145 of the Bankruptcy Code and may be sold
without registration under the Securities Act and (ii) a certification that such
person or entity is not an "underwriter" within the meaning of section 1145 of
the Bankruptcy Code.
Any holder of a certificate evidencing Plan Securities bearing
such legend may present such certificate to the transfer agent for the shares of
Reorganized Genesis for exchange for one or more new certificates not bearing
such legend or for transfer to a new holder without such legend at such time as
(i) such shares are sold pursuant to an effective registration statement under
the Securities Act, or (ii) such holder delivers to Reorganized Genesis an
opinion of counsel reasonably satisfactory to Reorganized Genesis to the effect
that such shares are no longer subject to the restrictions applicable to
"underwriters" under section 1145 of the Bankruptcy Code and may be sold without
registration under the Securities Act or to the effect that such transfer is
exempt from registration under the Securities Act, in which event the
certificate issued to the transferee shall not bear such legend, unless
otherwise specified in such opinion.
36
Whether or not any particular person would be deemed to be an
"underwriter" of Plan Securities to be issued pursuant to the Plan, or an
"affiliate" of Reorganized Genesis, would depend upon various facts and
circumstances applicable to that person. Accordingly, the Debtors express no
view as to whether any such person would be such an "underwriter" or an
"affiliate."
In view of the complex, subjective nature of the question of
whether a particular person may be an underwriter or an affiliate of Reorganized
Genesis, the Debtors make no representations concerning the right of any person
to trade in Plan Securities. Accordingly, the Debtors recommend that potential
recipients of Plan Securities consult their own counsel concerning whether they
may freely trade such securities.
2. Listing
Reorganized Genesis will use reasonable commercial efforts to
continue to be a reporting company under the Securities Exchange Act of 1934 and
will continue to file periodic and current reports as required by that statute.
Reorganized Genesis will also list the New Common Stock on a nationally
recognized market or exchange or a qualifying interdealer quotation system.
Listing criteria initially may not be satisfied.
3. Secondary Stock Offering
Reorganized Genesis will undertake a secondary stock offering
for up to 30% of the shares of New Common Stock received by holders of Genesis
Senior Lender Claims and Multicare Senior Lender Claims. Reorganized Genesis
will retain an underwriter and holders of the New Common Stock may enter into
underwriter agreements with such entity. The secondary stock offering will take
place as soon as reasonably practical after the Effective Date, but no sooner
than the time when Reorganized Genesis has filed financial reports with the
Securities and Exchange Commission for two full financial quarters after the
Effective Date.
4. Registration Rights
The Plan of Reorganization provides for the execution of a
registration rights agreement, under which Reorganized Genesis will have the
obligation to register the Plan Securities. A copy of the registration rights
agreement will be part of the Plan Supplement.
K. Settlement and Compromise
The Plan incorporates two significant settlements under
Bankruptcy Rule 9019. The settlement with the federal government is being
submitted for approval to the Bankruptcy Court. Approval for the settlement
between the Genesis Debtors and the Multicare Debtors will be sought at the time
of the hearing on confirmation of the Plan. On the Effective Date, the
settlement between the Genesis Debtors and the Multicare Debtors will be binding
on the Debtors and all holders of claims or interests in these chapter 11 cases.
Entry of the order confirming the Plan will constitute a finding that this
compromise and settlement is in the best interests of the Genesis Debtors and
the Multicare Debtors, are fair, equitable, and reasonable, and are made in good
faith in accordance with Bankruptcy Rule 9019.
1. Settlement with the Federal Government
The Genesis Debtors have entered into a settlement agreement to
resolve four pending civil qui tam suits filed by private citizens under the
federal False Claims Act, 31 U.S.C.
37
3729 et seq. Each action will be dismissed and a release executed, consistent
with the settlement agreement, for a total payment of $2,095,000, plus statutory
attorneys' fees in the amount of approximately $80,000. The Genesis Debtors
dispute the allegations asserted in these actions, and the agreement contains no
admission of liability. The settlement agreement will resolve all claims against
the Debtors in connection with these suits.
The parties to the settlement agreement are Genesis and certain
affiliates, the private citizens who brought the suits, the Department of
Justice, and the Office of Inspector General for the Department of Health and
Human Services. The Department of Justice will provide a release of all
administrative and civil monetary claims under the False Claims Act, Civil
Monetary Penalties Law, Program Fraud Civil Remedies, common law theories of
payment by mistake, unjust enrichment, breach of contract, and fraud for the
covered conduct in the agreement. The Office of Inspector General will provide a
release of its permissive exclusion remedies for the covered conduct in the
agreement.
The Debtors are in negotiation with CMS over claims asserted by
that agency, as well as claims asserted by Genesis and Multicare regarding
reimbursement issues. The parties are working towards a global negotiation of
the pending claims.
2. Settlement Between the Genesis Debtors and the Multicare
Debtors
Genesis has managed the Multicare Debtors pursuant to certain
management services agreements since 1997. Those agreements were negotiated with
the majority owners of Multicare at that time. As of the date the Multicare
Debtors commenced their chapter 11 cases, approximately $36 million in deferred
fees under these management services agreement and approximately $57 million on
account of pharmacy, rehabilitation, and other ancillary services provided by
Genesis to the Multicare Debtors remained outstanding.
In April 2000, the Multicare Debtors retained Beverly Anderson
as their independent restructuring officer and as a director. Shortly
thereafter, the Multicare Debtors retained Ernst & Young and E&Y Capital
Advisers to assist Ms. Anderson in undertaking an investigation and evaluation
of all the relationships between the Genesis Debtors and the Multicare Debtors,
including the management services agreements. The Multicare Debtors, with the
assistance of their legal and financial advisors, also evaluated potential
claims that they may have against the Genesis Debtors. The Genesis Debtors
engaged in a similar evaluation with respect to claims they held against the
Multicare Debtors and claims held by the Multicare Debtors against the Genesis
Debtors. These evaluations were not completed before the December 19, 2000 bar
date, and the Multicare Debtors and the Genesis Debtors therefore agreed to
extend the bar date to give them additional time to complete their analyses.
Pursuant to a series of stipulations and orders, the bar date for the Multicare
Debtors to assert claims against the Genesis Debtors, and for the Genesis
Debtors to assert claims against the Multicare Debtors, presently is June 30,
2001, which the parties have agreed to extend to September 15, 2001.
After consideration of the merits of the claims between the
Multicare Debtors and the Genesis Debtors, and after a series of settlement
discussions and negotiations between the parties, the Genesis Debtors and the
Multicare Debtors have determined to enter into a Settlement and Release
Agreement (the "Genesis/Multicare Settlement"), a copy of which will be part of
the Plan Supplement. Pursuant to the Genesis/Multicare Settlement, the Genesis
Debtors and the Multicare Debtors shall set off their claims against one another
and waive and release any and all claims against one another that they may have
as of the date of the Settlement Agreement in excess of such setoff. Under the
Settlement Agreement, the Genesis Debtors also will
38
acknowledge and agree that they will not seek to recover from the Multicare
Debtors any deferred or unpaid management fees that might accrue or have accrued
under the Management Agreement on and after the Commencement Date. The Debtors
believe that the Genesis/Multicare Settlement represents a fair and equitable
settlement of the claims between the parties and satisfies the standards for
approval of settlements under Bankruptcy Rule 9019 and applicable law. In
addition, the net results of the litigation of these counterclaims would not
provide meaningful benefit to the creditors of the winning side. This results
from the fact that such claims would share pro rata with hundreds of millions of
dollars of other prepetition unsecured claims against the losing debtor and the
recoveries under the Plan provide for a relatively small stock and warrant
distribution. Moreover, sharing recoveries with the unsecured creditors on the
losing side of this litigation could significantly dilute the recoveries of that
group.
The Debtors will seek approval of the Genesis/Multicare
Settlement in connection with confirmation of the Plan.
L. Reservation of "Cram Down" Rights
The Bankruptcy Code permits the Bankruptcy Court to confirm a
chapter 11 plan of reorganization over the dissent of any class of claims or
equity interests as long as the standards in section 1129(b) are met. This power
to confirm a plan over dissenting classes -- often referred to as "cram down" --
is an important part of the reorganization process. It assures that no single
group (or multiple groups) of claims or interests can block a restructuring that
otherwise meets the requirements of the Bankruptcy Code and is in the interests
of the other constituents in the case.
The Genesis Debtors and the Multicare Debtors each reserve the
right to seek confirmation of the Plan, notwithstanding the rejection of the
Plan by any class entitled to vote. In the event a class votes to reject the
Plan, the Debtors will request the Bankruptcy Court to rule that the Plan meets
the requirements specified in section 1129(b) of the Bankruptcy Code with
respect to such class. The Debtors will also seek such a ruling with respect to
each class that is deemed to reject the Plan.
III.
Voting Procedures And Requirements
Detailed voting instructions are provided with the ballot
accompanying this Disclosure Statement. The following classes are the only ones
entitled to vote to accept or reject the Plan.
Subclass Description
------------- --------------------------------------------
G1-13 Brakeley Park Center
G1-14 North Cape Center
G1-15 Oak Hill Center
G1-16 Rittenhouse Pine Center
G1-17 Synthetic Lease Claims
G2 Genesis Senior Lender Claims
G4 Genesis General Unsecured Claims
G5 Genesis Senior Subordinated Note Claims
39
Subclass Description
------------- --------------------------------------------
M1-7 Point Pleasant
M2 Multicare Senior Lender Claims
M4 Multicare General Unsecured Claims
M5 Multicare Senior Subordinated Note Claims
If your claim is not in one of these classes, you are not entitled to vote and
you will not receive a ballot with this Disclosure Statement. If your claim is
in one of these classes, you should read your ballot and follow the listed
instructions carefully. Please use only the ballot that accompanies this
Disclosure Statement.
--------------------------------------------------------------------------------
Ballot information number: For creditors of the
Genesis Debtors: (800) 510-0923
For creditors of the
Multicare Debtors: (800) 473-1419
--------------------------------------------------------------------------------
A. Vote Required for Acceptance by a Class
Under the Bankruptcy Code, acceptance of a plan of
reorganization by a class of claims is determined by calculating the number and
the amount of claims voting to accept, based on the actual total claims voting.
Acceptance requires an affirmative vote of a majority of the total claims voting
and two-thirds in amount of the total claims voting.
B. Classes Not Entitled to Vote
Under the Bankruptcy Code, creditors are not entitled to vote
if their contractual rights are unimpaired by the Plan or if they will receive
no property under the Plan. Based on this standard, for example, the holders of
claims in Classes G3 and M3 and certain miscellaneous secured claims are not
being affected by the Plan. In addition, the holders of claims in Classes G7 and
M7 and holders of equity interests in Classes G8, G9, G10, G11, and M8 are not
receiving any property and are therefore deemed to reject the Plan. For a
summary of the classes entitled to vote, see the charts in section II.C, above.
C. Voting
In order for your vote to be counted, your vote must be
received by the voting agent at the following address before the voting deadline
of 5:00 p.m., Pacific time, on August 17, 2001:
-------------------------------------------------------------------
| If by overnight or hand delivery: If by standard mailing: |
| Poorman-Douglas Corporation Poorman-Douglas Corporation |
| 10300 S.W. Allen Boulevard P.O. Box 4390 |
| Beaverton, Oregon 97005 Portland, Oregon 97208-4390 |
| Attn: Genesis-Multicare Attn: Genesis-Multicare |
| Balloting Ctr. Balloting Center |
-------------------------------------------------------------------
If the instructions on your ballot require you to return the
ballot to your bank, broker, or other nominee, or to their agent, you must
deliver your ballot to them in sufficient time
40
for them to process it and return it to the voting agent before the voting
deadline. If a ballot is damaged or lost, you may contact the Debtors' voting
agent at the number set forth above. Any ballot that is executed and returned
but which does not indicate an acceptance or rejection of the Plan of
Reorganization will not be counted.
IV.
Financial Information, Projections, and Valuation Analyses
A. Introduction
This section provides summary information concerning the recent
financial performance of the Genesis Debtors and the Multicare Debtors. They
also provide a summary of five year projections and financial statements for
each group of Debtors. Finally, the following discusses an estimate of a going
concern valuation for the Genesis Debtors and the Multicare Debtors, based on
information available at the time of the preparation of this Disclosure
Statement. For purposes of these valuations, the Genesis Debtors and an
independent Restructuring Officer for the Multicare Debtors renegotiated the
terms of the management and service agreements between the Debtors to reflect
current market conditions. The effects of those changes have been included in
the projections and valuations described below.
The financial projections assume that the Plan will be
confirmed and consummated in accordance with its terms and that there will be no
material change in the legislation or negotiation that will have an unexpected
impact on the Debtors' operations. The Projections assume an Effective Date of
September 30, 2001, with allowed claims treated in accordance with those
provided for in the Plan. Expenses incurred as a result of the reorganization
cases are assumed to be paid upon confirmation of the Plan of Reorganization. If
the Debtors do not emerge from chapter 11 by September 30, 2001, additional
bankruptcy expenses will be incurred until such time as a plan of reorganization
is confirmed. These expenses could significantly impact the Debtors' results of
operations and cash flows. The financial projections of both Genesis and
Multicare were prepared individually and on an unlevered basis. Pursuant to the
Plan, the Debtors are to be merged, and accordingly, the impact of the new Plan
Securities is reflected on a pro forma consolidated basis.
It is important to note that the projections and estimates of
values described below may differ from actual performance and are highly
dependent on significant assumptions concerning the future operations of these
businesses. These assumptions include reimbursement levels under the Medicare
and state Medicaid programs, professional liability insurance costs, growth of
certain lines of business, labor, and other operating costs, inflation, and the
level of investment required for capital expenditures and working capital.
Please refer to section IX, below, for a discussion of many of the factors that
could have a material effect on the information provided in this section.
The estimates of value are not intended to reflect the values
that may be attainable in public or private markets. They also are not intended
to be appraisals or reflect the value that may be realized if assets are sold.
41
B. The Genesis Debtors
1. Operating Performance
For a recent description of the operating performance of the
Genesis Debtors and the Multicare Debtors on a consolidated basis, see the Form
10-K for the fiscal year ended September 30, 2000, which was filed by Genesis
with the Securities and Exchange Commission on February 21, 2001, and the Form
10-Q for the period ended March 31, 2001, which was filed by Genesis on May 17,
2001. The following is a consolidating balance sheet and income statement
indicating the relative contribution of Genesis and Multicare, individually, to
the consolidated totals for the same periods.
Balance Sheet for the Year Ended December 31, 2000 ($000)
Genesis Multicare Eliminations Consolidated
----------- ----------- ------------ ------------
Cash and equivalents $ 3,312 $ 19,636 $ - $ 22,948
Restricted investments in marketable
securities 27,899 - - 27,899
Accounts receivable, net 396,473 101,953 (51,812) 446,614
Other current assets 102,931 16,929 - 119,860
----------- ----------- ----------- -----------
Current Assets 530,615 138,518 (51,812) 617,321
Property and equipment, net 543,901 563,445 - 1,107,346
Goodwill and other intangibles, net 897,500 337,806 - 1,235,306
Other long-term assets 207,401 61,924 (101,399) 167,926
----------- ----------- ----------- -----------
Total Assets $ 2,179,417 $ 1,101,693 $ (153,211) $ 3,127,899
=========== =========== =========== ===========
Current installments of long-term debt $ 133,000 $ - $ - $ 133,000
Other current liabilities
127,440 69,694 (17,054) 180,080
----------- ----------- ----------- -----------
Current Liabilities 260,440 69,694 (17,054) 313,080
Liabilities subject to compromise 1,665,921 875,111 (94,359) 2,446,673
Deferred income taxes - 54,082 - 54,082
Other long term liabilities 51,113 14,141 (3,140) 62,114
Minority interest 6,052 - 50,007 56,059
Redeemable preferred stock (subject to
compromise) 442,820 - - 442,820
Shareholders' equity (deficit)
(246,929) 88,665 (88,665) (246,929)
----------- ----------- ----------- -----------
Total Liabilities and shareholders' deficit $ 2,179,417 $ 1,101,693 $ (153,211) $ 3,127,899
=========== =========== =========== ===========
Income Statement for the Year Ended September 30, 2000 ($000)
Genesis Multicare Eliminations Consolidated
----------- ----------- ------------ ------------
Pharmacy and medical supply services $ 993,215 $ - $ (40,865) $ 952,350
Inpatient services 688,073 632,078 - 1,320,151
243,126 13,501 (95,270) 161,357
----------- ----------- ----------- -----------
Revenues, net 1,924,414 645,579 (136,135) 2,433,858
42
Income Statement for the Year Ended September 30, 2000 ($000) (Continued)
Genesis Multicare Eliminations Consolidated
----------- ----------- ------------ ------------
Operating expenses
Operating expenses 1,740,701 592,865 (136,135) 2,197,431
Debt restructuring,
reorganization and other 250,999 186,503 - 437,502
charges
Loss on sale of eldercare centers - 7,922 - 7,922
Multicare joint venture restructuring charge 420,000 - - 420,000
----------- ----------- ----------- -----------
EBITDAR (487,286) (141,711) - (628,997)
Lease expense
25,159 12,965 - 38,124
----------- ----------- ----------- -----------
EBITDA (512,445) (154,676) - (667,121)
Depreciation and amortization 78,897 38,064 - 116,961
Interest expense (Note A) 145,627 57,943 - 203,570
----------- ----------- ----------- -----------
Pretax loss before income tax
(benefit), minority interest,
equity in net income (loss) of
unconsolidated affiliates and
cumulative effect of accounting change $ (736,969) $ (250,683) $ - $ (987,652)
=========== =========== =========== ===========
Note A - Genesis and Multicare contractual interest expense for the period
presented was $155,345 and $76,154, respectively.
Balance Sheet as of March 31, 2001 ($000)
Genesis Multicare Eliminations Consolidated
----------- ----------- ------------ ------------
Cash and equivalents $ - $ 23,867 $ - $ 23,867
Restricted investments in marketable
securities 34,493 - - 34,493
Accounts receivable, net 390,086 99,221 (50,912) 438,395
Other current assets 118,747 15,046 - 133,793
----------- ----------- ----------- -----------
Current Assets 543,326 138,134 (50,912) 630,548
Property and equipment, net 542,938 539,093 - 1,082,031
Goodwill and other intangibles, net 884,055 332,489 - 1,216,544
Other long-term assets 194,883 59,485 (99,689) 154,679
----------- ----------- ----------- -----------
Total Assets $ 2,165,202 $ 1,069,201 $ (150,601) $ 3,083,802
=========== =========== =========== ===========
Current installments of long-term debt $ 165,000 $ - $ - $ 165,000
Other current liabilities 145,879 59,684 (14,396) 191,167
----------- ----------- ----------- -----------
Current Liabilities 310,879 59,684 (14,396) 356,167
Liabilities subject to compromise 1,657,661 855,372 (92,909) 2,420,124
Deferred income taxes - 54,082 - 54,082
Other long term liabilities 50,335 22,567 (9,508) 63,394
Minority interest 5,652 - 43,708 49,360
Redeemable preferred stock (subject to
compromise) 455,735 - - 455,735
Shareholders' equity (deficit) (315,060) 77,496 (77,496) (315,060)
----------- ----------- ----------- -----------
Total Liabilities and
shareholders' deficit $ 2,165,202 $ 1,069,201 $ (150,601) $ 3,083,802
=========== =========== =========== ===========
43
Income Statement for the Six Months Ended March 31, 2001 ($000)
Genesis Multicare Eliminations Consolidated
----------- ----------- ------------ ------------
Pharmacy and medical supply services $ 529,543 $ - $ (18,368) $ 511,175
Inpatient services 354,084 313,890 - 667,974
Other revenues 129,443 5,384 (54,875) 79,952
----------- ----------- ----------- -----------
Revenues, net 1,013,070 319,274 (73,243) 1,259,101
Operating expenses
Operating expenses 922,881 295,015 (73,243) 1,144,653
Debt restructuring, reorganization 20,305 7,901 - 28,206
and other charges
(Gain)/loss on sale of eldercare center (1,770) 2,310 - 540
----------- ----------- ----------- -----------
EBITDAR 71,654 14,048 - 85,702
Lease expense 12,301 6,200 - 18,501
----------- ----------- ----------- -----------
EBITDA 59,353 7,848 - 67,201
Depreciation and amortization 36,466 16,921 - 53,387
Interest expense (Note A) 63,469 2,298 - 65,767
----------- ----------- ----------- -----------
Pretax loss before income tax
(benefit), minority interest and
equity in net income (loss) of
unconsolidated affiliates $ (40,582) $ (11,371) $ - $ (51,953)
=========== =========== =========== ===========
Note A - Genesis and Multicare contractual interest expense for the period
presented was $41,798 and $19,954, respectively.
2. Five Year Projections
General Operating Assumptions. Genesis will continue to operate
its healthcare service businesses through its five lines of business: ElderCare,
NeighborCare Pharmacies, Rehabilitation Services, Other Services, and Management
Services & Overhead. ElderCare operates long-term care nursing facilities,
NeighborCare is Genesis's institutional pharmacy business and medical supply
business, and Rehabilitation Services is the rehabilitation therapy business.
Other Services includes hospitality services, group purchasing services,
diagnostic services, consulting services, and physician services. Management
Services & Overhead includes third party management contracts and administrative
costs.
The operation of Genesis's business will not change materially
from that described in Genesis's Form 10-K as of and for the year ended
September 30, 2000. The financial projections generally assume inflationary rate
increases and relatively stable occupancy and pharmacy beds served. The
financial projections do not assume that Genesis acquires additional nursing
facilities or new institutional pharmacies. For purposes of calculating the
financial projections of Reorganized Genesis it has been assumed that no
consolidated NOLs or NOL carryforwards of the Genesis Group or the Multicare
Group will survive the reorganization and that any reduction in the tax basis in
depreciable or amortizable assets of the Debtors would be insignificant.
44
Fiscal year 2001 reflects the Genesis Business Plan developed
through a detailed bottom-up budgeting approach. Fiscal years 2002-2006 have
been projected using fiscal year 2001 as a basis and adjusted for anticipated
changes in government reimbursement, patient mix, occupancy rates, and industry
trends. The following represents the highlights of the financial projections:
o No growth assumed from acquisitions
o Revenue CAGR 2001-2006 of 5.6%
o EBITDA CAGR 2001-2006 of 4.5%
o EBITDA Margin % at 7.7% in 2001, increasing to 8.0% in
2002 and declining to 7.5% in 2006
o Capital expenditures at $40 million in 2001 and growing at
a CAGR from 2001 to 2006 of 4.5%
Projections. The following table presents summary projected
financial information for Genesis:
Fiscal Years ($ in 000's)
-------------------------------------------------------------------
2001 2002 2003 2004 2005 2006
-------------------------------------------------------------------
Revenue $2,039,000 2,126,000 2,229,000 2,349,000 2,476,000 2,610,000
EBITDA 158,000 170,000 174,000 182,000 190,000 197,000
EBITDA % 7.7% 8.0% 7.8% 7.7% 7.7% 7.5%
Capital Expenditures 40,000 42,000 44,000 46,000 48,000 50,000
More detailed information on the financial projections is
included in the Plan Supplement.
3. Going Concern Valuation
UBS Warburg has acted as financial advisor for the Genesis
Debtors in their chapter 11 cases. In connection with UBS Warburg's engagement,
Genesis requested that UBS Warburg analyze the enterprise value of Genesis. The
valuation analyses did not address other aspects of the proposed restructuring
or any related transaction. The valuation analyses were prepared for the
information of the Board of Directors of Genesis in connection with its
consideration of the Plan of Reorganization and for the purpose of determining
the value available to distribute to creditors pursuant the Plan and the
relative recoveries to creditors thereunder. These analyses do not constitute a
recommendation to any holder of claims against Genesis as to how to vote on the
Plan. UBS Warburg's estimate of a range of enterprise value does not constitute
an opinion as to the fairness from a financial point of view of the
consideration to be received under the Plan or of the terms and provisions of
the Plan.
45
In arriving at its views on valuation, UBS Warburg reviewed the
Plan and certain related documents, as well as publicly available business and
financial information relating to Genesis. UBS Warburg also reviewed other
information relating to Genesis, including the 2001 to 2006 financial
projections (the "Genesis Projections") (which are included in the Plan
Supplement), which Genesis provided to or discussed with UBSW, and met with the
management of Genesis to discuss the business and prospects of Genesis. A
summary of the Genesis Projections are included above. UBS Warburg also
considered financial data of Genesis and compared that data with similar data
for other publicly held companies in businesses similar to Genesis and
considered, to the extent publicly available, the financial terms of
restructurings and other similar transactions that have recently been effected.
UBS Warburg also considered other information, financial studies, analyses and
investigations, and financial, economic, and market criteria that it deemed
relevant.
The analysis of comparable companies involved identifying a
group of publicly traded companies comparable, in whole or in part, to Genesis
and then calculating ratios of the enterprise values and equity values (based on
publicly traded stock prices) for such companies to certain operating and
financing data estimates for such companies (i.e., EBITDAR and EBITDA). The
ranges of ratios indicated by such analysis were then applied to corresponding
operating and financial data and estimates for Genesis based on the Genesis
Projections to derive an implied enterprise value. UBS Warburg also conducted a
discounted cash flow analysis applied on the unlevered free cash flows that
Genesis would generate assuming the Genesis Projections were realized. Based on
discussions with management, UBS Warburg then applied a range of perpetual
growth rates and discount rates based upon the weighted average cost of capital
("WACC") for Genesis after the restructuring. Genesis's WACC was determined by
analyzing the WACC of comparable companies and applying the comparable
companies' unlevered betas to Genesis's reorganized capital structure.
In connection with its review, UBS Warburg did not assume any
responsibility for independent verification of any of the information that was
provided to, or otherwise reviewed by, it and relied on that information being
complete and accurate in all material respects. With respect to financial
forecasts, UBS Warburg was advised, and assumed, that the Genesis Projections
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of Genesis's management as to the future financial
performance of Genesis after giving effect to the proposed restructuring. No
representation or warranty, express or implied, can be or is made by UBS Warburg
as to the accuracy or achievability of any such valuations, estimates, and/or
forecasts, and UBS Warburg expressly disclaims any and all liability relating to
or resulting from the use of this material. In addition, UBS Warburg assumed
that the restructuring would be completed in accordance with the terms of the
Plan without any amendments, modifications, or waivers and also assumed that in
the course of obtaining the necessary judicial, regulatory, and third party
consents for the proposed restructuring and related transactions, there will be
no delays, modifications, or restrictions imposed that will have a material,
adverse effect on the contemplated benefits of the proposed restructuring to
Genesis. UBS Warburg was not requested to, and did not, make an independent
evaluation or appraisal of the individual assets or liabilities, contingent or
otherwise, of Genesis, and was not furnished with any such evaluations or
appraisals. UBS Warburg's valuation analyses were based on information available
to, and financial, economic, market, and other conditions as they existed and
could be evaluated by, UBS Warburg on April 6, 2001. Actual results may vary
from such estimates, valuation, or forecasts and such variations may be
material.
The preparation of valuation analyses is a complex analytical
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and
46
the application of those methods to particular facts and circumstances, many of
which are beyond the control of Genesis and UBS Warburg. The valuation range
indicated by UBS Warburg's analyses is not necessarily indicative of the prices
at which the common stock or other securities of Genesis may be bought or sold
or predictive of future financial results or values, which may be significantly
more or less favorable than those indicated by the analyses. Accordingly, UBS
Warburg's analyses and estimates are inherently subject to substantial
uncertainty.
In arriving at its enterprise valuation, UBSW reviewed the
current trading performance of Beverly Enterprises, HCR Manor Care, and
Omnicare. This comparable company analysis indicated a range of multiples of
enterprise to 2001 projected EBITDA multiples of 6.3x - 7.5x, and adjusted
enterprise value (which capitalizes Genesis's rent expense as a long-term
liability and accounts for other off balance sheet liabilities) to 2001
projected EBITDAR multiples of 6.5x - 7.7x. These ranges were based on the
multiples indicated by the comparable companies identified above, adjusted to
take into account, among other things, the relative size of the enterprise,
payor mix, quality of assets, and business plan risk. The ranges were applied to
Genesis's comparably projected 2001 EBITDA and EBITDAR.
UBS Warburg has advised Genesis that, based upon and subject to
the foregoing, as of April 6, 2001, their analyses indicated that the enterprise
value of Genesis would be between $1.0 billion and $1.25 billion.
C. The Multicare Debtors
1. Operating Performance
For a recent description of the operating performance of the
Multicare Debtors, see the Form 10-K for the fiscal year ended September 30,
2000, which was filed by The Multicare Companies, Inc. (the wholly-owned
subsidiary of Multicare) with the Securities and Exchange Commission on February
21, 2001, and the Form 10-Q for the period ended March 31, 2001, which was filed
on May 17, 2001.
2. Five Year Projections
General Operating Assumptions. The Multicare only projections
are exclusive of capital structure (100% equity) and fresh-start accounting is
not applied. The projections assume no taxes are paid and no interest is either
paid or accrued. These assumptions are made since a capital structure is not
relevant in determining a total enterprise value for Multicare and the
postbankruptcy capital structure is relevant to feasibility and other issues as
applied against only the pro forma consolidated Genesis and Multicare.
Accordingly, these issues are discussed in the consolidated assumption section
of the Disclosure Statement.
Multicare will continue to operate in its primary line of
business of ElderCare which operates nursing facilities.
The operations of Multicare's business will not change
materially from that described in Multicare's Form 10-K as of and for the year
ended September 30, 2000. The financial projections generally assume
inflationary rate increases and relatively stable occupancy. The financial
projections do not assume that Multicare will acquire additional nursing
facilities. For purposes of calculating the financial projections of Reorganized
Genesis it has been assumed that no consolidated NOLs or NOL carryforwards of
the Genesis Group or the Multicare Group
47
will survive the reorganization and that any reduction in the tax basis in
depreciable or amortizable assets of the Debtors would be insignificant.
Fiscal year 2001 reflects the Multicare Business Plan developed
through a detailed bottom-up budgeting approach. Fiscal years 2002-2006 have
been projected using fiscal year 2001 as a basis and adjusted for anticipated
changes in government reimbursement, patient mix, occupancy rates, and industry
trends. The following represents the highlights of the financial projections:
o No growth assumed from acquisitions
o Revenue CAGR 2001-2006 of 3.3%
o EBITDA CAGR 2001-2006 of 4.4%
o EBITDA Margin % at 8.7% in 2001, increasing to 9.2% in
2003, and remaining constant through 2006
o Capital expenditures at $10 million in 2001 and growing at
a CAGR from 2001 to 2006 of 4.2%
Projections. The following table presents summary projected
financial information for Multicare:
Fiscal Years ($ in 000's)
-------------------------------------------------------------------
2001 2002 2003 2004 2005 2006
-------------------------------------------------------------------
Revenue $641,800 670,100 690,500 711,500 733,100 755,300
EBITDA 56,000 59,400 63,300 65,200 67,300 69,500
EBITDA % 8.7% 8.9% 9.2% 9.2% 9.2% 9.2%
Capital Expenditures 10,000 10,400 10,800 11,200 11,700 12,200
More detailed information on the financial projections is
included in the Plan Supplement.
3. Going Concern Valuation
Credit Suisse First Boston Corporation ("CSFB") has acted as
financial advisor for the Multicare Debtors in their chapter 11 cases. In
connection with CSFB's engagement, Multicare requested that CSFB analyze the
enterprise value of Multicare. The valuation analyses did not address other
aspects of the proposed restructuring or any related transaction. The valuation
analyses were prepared for the information of the Board of Directors of
Multicare in connection with its consideration of the Plan of Reorganization and
for the purpose of determining the value available to distribute to creditors
pursuant to the Plan and the relative recoveries to creditors thereunder. These
analyses do not constitute a recommendation to any holder of claims against
Multicare as to how to vote on the Plan. CSFB's estimate of a range of
48
enterprise value does not constitute an opinion as to the fairness from a
financial point of view of the consideration to be received under the Plan or of
the terms and provisions of the Plan.
In arriving at its views on valuation, CSFB reviewed the Plan
and certain related documents, as well as publicly available business and
financial information relating to Multicare. CSFB also reviewed other
information relating to Multicare, including the 2001 to 2006 financial
projections (the "Multicare Projections") (which are included in the Plan
Supplement), which Multicare provided to or discussed with CSFB, and met with
the management of Multicare to discuss the business and prospects of Multicare.
A summary of the Multicare Projections is included above. CSFB also considered
financial data of Multicare and compared that data with similar data for other
publicly held companies in businesses similar to Multicare and considered, to
the extent publicly available, the financial terms of restructurings and other
similar transactions that have recently been effected. CSFB also considered
other information, financial studies, analyses and investigations, and
financial, economic, and market criteria that it deemed relevant.
The analysis of comparable companies involved identifying a
group of publicly traded companies comparable, in whole or in part, to Multicare
and then calculating ratios of the enterprise values and equity values (based on
publicly traded stock prices) for such companies to certain operating and
financing data estimates for such companies (i.e., EBITDAR and EBITDA). The
ranges of ratios indicated by such analysis were then applied to corresponding
operating and financial data and estimates for Multicare based on the Multicare
Projections to derive an implied enterprise value. CSFB also conducted a
discounted cash flow analysis applied on the unlevered free cash flows that
Multicare would generate assuming the Multicare Projections were realized. Based
on discussions with management, CSFB then applied a range of perpetual growth
rates and discount rates based upon the weighted average cost of capital
("WACC") for Multicare after the restructuring. Multicare's WACC was determined
by analyzing the WACC of comparable companies and applying the comparable
companies' unlevered betas to Multicare's reorganized capital structure.
In connection with its review, CSFB did not assume any
responsibility for independent verification of any of the information that was
provided to, or otherwise reviewed by, it and relied on that information being
complete and accurate in all material respects. With respect to financial
forecasts, CSFB was advised, and assumed, that the Multicare Projections were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of Multicare's management as to the future financial performance
of Multicare after giving effect to the proposed restructuring. In addition,
CSFB assumed that the restructuring would be completed in accordance with the
terms of the Plan without any amendments, modifications, or waivers and also
assumed that in the course of obtaining the necessary judicial, regulatory, and
third party consents for the proposed restructuring and related transactions,
there will be no delays, modifications, or restrictions imposed that will have a
material, adverse effect on the contemplated benefits of the proposed
restructuring to Multicare. CSFB was not requested to, and did not, make an
independent evaluation or appraisal of the individual assets or liabilities,
contingent or otherwise, of Multicare, and was not furnished with any such
evaluations or appraisals. CSFB's valuation analyses were based on information
available to, and financial, economic, market, and other conditions as they
existed and could be evaluated by, CSFB on March 19, 2001.
The preparation of valuation analyses is a complex analytical
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to particular
facts and circumstances, many of which are beyond the control of Multicare and
CSFB. The valuation range indicated by CSFB's analyses is not
49
necessarily indicative of the prices at which the common stock or other
securities of Multicare may be bought or sold or predictive of future financial
results or values, which may be significantly more or less favorable than those
indicated by the analyses. Accordingly, CSFB's analyses and estimates are
inherently subject to substantial uncertainty.
In arriving at its enterprise valuation though the comparable
company analysis, CSFB reviewed the enterprise values of Beverly Enterprises and
HCR Manor Care and the reorganization value of Vencor (now known as Kindred
Healthcare, Inc.) reflected in the company's disclosure statement. This
comparable company analysis indicated a range of multiples of enterprise value
to 2001 projected EBITDA in the range of 5.0x - 7.0x and of adjusted enterprise
value (which capitalizes Multicare's rent expense as a long-term liability and
accounts for other off balance sheet liabilities) to 2001 projected EBITDAR in
the range of 6.0x - 8.0x. These ranges were based on the multiples indicated by
the comparable companies identified above adjusted to take into account, among
other things, the relative size of the enterprise, payor mix, quality of assets,
and business plan risk. These ranges were then applied to Multicare's projected
2001 EBITDA and EBITDAR.
CSFB has advised Multicare that, based upon and subject to the
foregoing, as of March 20, 2001, their analyses indicated that the enterprise
value of Multicare would be between $350 million and $400 million.
D. Reorganized Genesis (Merger of Genesis and Multicare)
1. Operating Performance
Genesis currently reports its financial results on a
consolidated basis with Multicare. The most recent results can be found in the
Form 10-K for the fiscal year ended September 30, 2000, which was filed with the
Securities and Exchange Commission on February 21, 2001, and the Form 10-Q for
the fiscal quarter ended March 31, 2001, which was filed on May 17, 2001.
2. Five Year Projections
The following table presents summary projected financial
information for the combined companies of Genesis and Multicare:
Fiscal Years ($ in 000's)
-------------------------------------------------------------------
2001 2002 2003 2004 2005 2006
-------------------------------------------------------------------
Revenue $2,545,443 2,660,686 2,783,726 2,924,518 3,073,072 3,229,942
EBITDA 214,457 229,743 238,163 247,495 257,094 266,917
EBITDA % 8.4% 8.6% 8.6% 8.5% 8.4% 8.3%
Capital Expenditures 50,000 52,400 54,800 57,200 59,700 62,200
More detailed information on the financial projections is
included in the Plan Supplement.
50
V.
Business Description and Reasons for Chapter 11
A. The Debtors' Businesses
The Genesis Debtors and the Multicare Debtors are leading
providers of healthcare and support services to the elderly. They operate
inpatient facilities in five regional areas of the United States and a national
pharmacy and medical supply business. The Genesis Debtors also provide an
extensive range of rehabilitation therapy services, including speech pathology
and physical and occupational therapy, through six certified rehabilitation
agencies. Other related healthcare services provided by the Genesis Debtors
include management of elder care centers, group purchasing and shared services
programs, portable x-ray, diagnostic, home healthcare, physician, adult day
care, staffing, transportation, and consulting services.
1. Relationship Between the Genesis Debtors and the Multicare
Debtors
Prior to October 1997, The Multicare Companies, Inc. was
publicly-owned and not affiliated with the Genesis Debtors. Genesis, The Cypress
Group, L.L.C., TPG Partners II, L.P., and Nazem, Inc. formed Genesis ElderCare
Corp. for the purpose of acquiring The Multicare Companies, Inc. Through a
tender offer and merger transaction, Genesis ElderCare Corp. (a Multicare
Debtor) acquired 100% of the outstanding stock of The Multicare Companies, Inc.
Genesis owns 43.6% of the common stock of Genesis ElderCare Corp. Genesis
ElderCare Network Services, Inc., one of the Genesis Debtors, manages Genesis
ElderCare Corp. pursuant to a management services agreement, dated as of October
7, 1997.
At the time the management services agreement and other
agreements were entered into, Multicare was controlled by parties unrelated to
Genesis or the Genesis Debtors. The terms of these agreements were the product
of arm's-length negotiations between Genesis and the parties controlling
Multicare and the agreements were approved by Multicare's independent board of
directors. In addition, the terms were disclosed at the time of the issuance of
Multicare's senior subordinated notes (Class M5).
Services provided by Genesis to Multicare under the management
services and other agreements between the parties include operational oversight
and management of Multicare's inpatient facilities, rehabilitation, pharmacy,
medical supply, and other operational services, as well as accounting, financial
services, and corporate administrative services. (In addition to the management
services agreement, Genesis (through Genesis ElderCare Rehabilitation Services,
Inc., a Genesis Debtor) is the predominant provider of inpatient and outpatient
rehabilitation services for Multicare's facilities, and Genesis also is
currently the predominant provider of institutional pharmacy services for
Multicare's facilities.) In accordance with the understandings between Genesis
and Multicare's independent board, the prices under the ancillary agreements
were adjusted each year to reflect changes in the marketplace and the market
median rate charged by Genesis for similar goods and services provided to other
parties.
In November 1999, as part of an overall restructuring of the
financial obligations of Genesis and Multicare, Genesis became the effective
controlling shareholder of Multicare. At that time, the independent members of
the board of directors of Multicare resigned. At no time since that change in
control were any changes made to the management services and other agreements
that were beneficial to Genesis. Within seven months after the change in
control, both Genesis and Multicare filed these chapter 11 cases.
51
Multicare's board of directors now consists of two members of
Genesis's board of directors, one Genesis officer, and one independent director
and officer unaffiliated with Genesis (the "Independent Director"). Each of
Multicare's officers (other than the Independent Director) is also an officer of
or affiliated with Genesis. As Multicare has no corporate infrastructure and
relies upon Genesis to provide operational oversight and accounting, financial,
and corporate administrative services, the Independent Director was hired in
April 2000 to review and evaluate Multicare's relationships with Genesis.
To assist the Independent Officer in performing its duties,
Multicare retained Ernst & Young and E&Y Capital Advisers (together, "E&Y") to
conduct a comprehensive review and analysis of the related party transactions
between Genesis and Multicare. In this regard, E&Y reviewed the following broad
lines of contractual and/or business relationships between Genesis and
Multicare: (a) Genesis's management of Multicare; (b) Genesis's provision of
rehabilitation services to Multicare; (c) Genesis's provision of hospitality
services to Multicare; and (d) Genesis's provision of pharmacy services to
Multicare. More specifically, E&Y evaluated, among other matters, (i) whether
the rehabilitation therapy rates being charged by Genesis were the same or
better than those Genesis charged to third parties, (ii) the expected costs and
required management structure if Multicare were to provide these services
directly, (iii) the costs, benefits, and structure of the hospitality services
(such as food, dietary, housekeeping, linen, and laundry services) being
provided by Genesis to Multicare, (iv) the cost and structure of the management
services agreement, and (v) the cost and structure of the pharmacy services
being provided by Genesis to Multicare.
The Independent Director, utilizing the findings and
recommendations of E&Y, thereafter engaged in negotiations with Genesis
management regarding the terms of the related party relationships to reflect
current market conditions. Ultimately, Multicare and Genesis agreed to
modifications of the related party business and contractual relationships that
resulted in an annualized cost savings to the Multicare Debtors of approximately
$12 million. The effects of these changes have been included in the budgets,
projections, and valuations described in section IV, above. Thus, the effects
have been included in the materials needed for valuation of the separate estates
of the Genesis Debtors and the Multicare Debtors. However, the effects of the
changes have not been reflected in Multicare's historical financial statements
and new contracts have not actually been entered into due to the proposed merger
of Genesis and Multicare.
2. Pharmacy and Medical Supply Services (Genesis Debtors)
The Genesis Debtors provide pharmacy and medical supply
services through their NeighborCare pharmacy subsidiaries. Included in pharmacy
and medical supply service revenues are institutional pharmacy revenues, which
include the provision of prescription and nonprescription pharmaceuticals,
infusion therapy, medical supplies, and equipment provided to eldercare centers
operated by the Genesis Debtors, as well as to independent healthcare providers
by contract. The pharmacy services provided in these settings are tailored to
meet the needs of the institutional customer. These services include highly
specialized packaging and dispensing systems, computerized medical records
processing, and 24-hour emergency services. NeighborCare provides institutional
pharmacy products and services to the elderly, chronically ill, and disabled in
long-term care and alternate sites settings, including skilled nursing
facilities, assisted living facilities, residential and independent living
communities, and the home. The Genesis Debtors also provide pharmacy consulting
services to assure proper and effective drug therapy. The Genesis Debtors
provided these services through institutional pharmacies (one is jointly-owned)
and medical supply distribution centers located in their various market areas.
In addition, the Genesis Debtors operated community-based pharmacies which are
located in or near
52
medical centers, hospitals, and physician office complexes. The community-based
pharmacies provide prescription and over-the-counter medications and certain
medical supplies as well as personal service and consultation by licensed
professional pharmacists. Approximately 91% of the sales attributable to all
pharmacy operations in the twelve months ended September 30, 2000 were generated
through external contracts with independent healthcare providers, with the
balance attributable to centers owned or leased by the Genesis Debtors,
including centers jointly owned with the Multicare Debtors.
3. Inpatient Services (Genesis Debtors and Multicare Debtors)
The Genesis Debtors own, lease, or manage eldercare centers,
standalone assisted living facilities, and transitional care units located in 15
states. These include eldercare centers owned or leased by the Multicare
Debtors. The skilled nursing centers of the Genesis Debtors and the Multicare
Debtors offer three levels of care for their customers: skilled, intermediate,
and personal. Skilled care provides 24-hour per day professional services of a
registered nurse; intermediate care provides less intensive nursing care; and
personal care provides for the needs of customers requiring minimal supervision
and assistance. Each eldercare center is supervised by a licensed healthcare
administrator and engages the services of a Medical Director to supervise the
delivery of healthcare services to residents and a Director of Nursing to
supervise the nursing staff. The Genesis Debtors maintain a corporate quality
assurance program to monitor regulatory compliance and to enhance the standard
of care provided in each center.
The Genesis Debtors have established and actively market
programs for elderly and other customers who require subacute levels of medical
care. These programs include ventilator care, intravenous therapy, postsurgical
recovery, respiratory management, orthopedic or neurological rehabilitation,
terminal care, and various forms of coma, pain, and wound management. Private
insurance companies and other third party payors, including certain state
Medicaid programs, have recognized that treating customers requiring subacute
medical care in centers such as those operated by the Genesis Debtors and the
Multicare Debtors is a cost-effective alternative to treatment in an acute care
hospital. The Genesis Debtors and the Multicare Debtors provide such care at
rates that they believe are substantially below the rates typically charged by
acute care hospitals for comparable services.
4. Other Services (Genesis Debtors and Multicare Debtors)
Rehabilitation Therapy. The Genesis Debtors provide an
extensive range of rehabilitation therapy services, including speech pathology,
physical therapy, and occupational therapy, through six certified rehabilitation
agencies in all five of their regional market concentrations. These services are
provided by approximately 3,200 licensed rehabilitation therapists and
assistants employed or contracted by Genesis to substantially all of the
eldercare centers it operates, as well as by contract to healthcare facilities
operated by others.
Management Services. The Genesis Debtors provided management
services to 190 eldercare centers (including those owned or leased by the
Multicare Debtors) pursuant to management agreements that provide generally for
the day-to-day responsibility for the operation and management of the centers.
In turn, the Genesis Debtors receive management fees, depending on the
agreement, computed as either an overall fixed fee, a fixed fee per customer, a
percentage of net revenues of the center plus an incentive fee, or a percentage
of gross revenues of the center with some incentive clauses. The various
management agreements, including option periods, are scheduled to terminate
between 2001 and 2015. The Genesis Debtors have arranged for the extension of
various mortgage and other loans to certain facilities under management
53
contract. The Multicare Debtors also provided management services to eldercare
centers pursuant to similar management agreements in return for management fees
specified in the relevant agreement.
Group Purchasing. The Genesis Debtors jointly own and operate
The Tidewater Healthcare Shared Services Group, Inc. ("Tidewater"), one of the
largest group purchasing companies in the MidAtlantic region. Tidewater provides
purchasing and shared service programs specially designed to meet the needs of
eldercare centers and other long-term care facilities. Tidewater's services are
contracted to approximately 3,100 members with over 308,000 beds in 45 states
and the District of Columbia.
Other Services. The Genesis Debtors employ or have consulting
arrangements with approximately 81 physicians, physician assistants, and nurse
practitioners who are primarily involved in designing and administering clinical
programs and directing patient care. The Genesis Debtors also provide an array
of other specialty medical services in certain parts of their eldercare network,
including portable x-ray and other diagnostic services, home healthcare
services, adult day care services, consulting services, respiratory health
services and hospitality services such as dietary, housekeeping, laundry, plant
operations, and facilities management services.
5. Revenue Sources
The Genesis Debtors and the Multicare Debtors receive revenues
from Medicare, Medicaid, private insurance, self-pay residents, other third
party payors, and long term care facilities which utilize their specialty
medical services. The health care industry is experiencing the effects of the
federal and state governments' trend toward cost containment, as government and
other third party payors seek to impose lower reimbursement and utilization
rates and negotiate reduced payment schedules with providers. These cost
containment measures, combined with the increasing influence of managed care
payors and competition for patients, generally have resulted in reduced rates of
reimbursement for services provided by the Genesis Debtors and the Multicare
Debtors.
The sources and amounts of the patient revenues for the Genesis
Debtors and the Multicare Debtors are determined by a number of factors,
including licensed bed capacity and occupancy rates of the nursing centers, the
mix of patients, and the rates of reimbursement among payors. Changes in the
case mix of the patients as well as payor mix among private pay, Medicare, and
Medicaid significantly affect the profitability of the Genesis Debtors and the
Multicare Debtors.
Additional detail on the operations and business segments of
the Genesis Debtors and the Multicare Debtors can be found in Genesis's annual
report on Form 10-K for the fiscal year ended September 30, 2000 and quarterly
report on Form 10-Q for the fiscal quarter ended March 31, 2001, and in
Multicare's annual report on Form 10-K for the fiscal year ended September 30,
2000, and its quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2001.
6. Personnel
At December 31, 2000, the Debtors employed over 46,000 people,
including approximately 33,000 full-time and 13,000 part-time employees.
Approximately 19% of these
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employees are physicians, nurses, and professional staff. Approximately 13,000
of these employees are employed by the Multicare Debtors.
Including Multicare, the Debtors currently have 81 facilities
that are covered by, or are negotiating, collective bargaining agreements. The
agreements expire at various dates from 2001 through 2005 and cover
approximately 5,100 employees. The Debtors believe that their relationship with
their employees is generally good.
The Debtors and the industry continue to experience significant
shortages in qualified professional clinical staff. They compete with other
healthcare providers and with nonhealthcare providers for both professional and
nonprofessional employees. As the demand for these services continually exceeds
the supply of available and qualified staff, the Debtors and their competitors
have been forced to offer more attractive wage and benefit packages to these
professionals and to utilize outside contractors for these services at premium
rates. Furthermore, the competitive arena for this shrinking labor market has
created high turnover among clinical professional staff as many seek to take
advantage of the supply of available positions, each offering new and more
attractive wage and benefit packages. In addition to the wage pressures inherent
in this environment, the cost of training new employees amid the high turnover
rates has caused added pressure on the Debtors' operating margins. While the
Debtors have been able to retain the services of an adequate number of qualified
personnel to staff their facilities appropriately and maintain their standards
of quality care, there can be no assurance that continued shortages will not in
the future affect their ability to attract and maintain an adequate staff of
qualified healthcare personnel. A lack of qualified personnel at a facility
could result in significant increases in labor costs at such facility or
otherwise adversely affect operations at such facility. Any of these
developments could adversely affect the Debtors' operating results or business
strategy.
B. Events Leading to the Commencement of the Chapter 11 Cases
The Genesis Debtors and the Multicare Debtors believe that
their financial difficulties are attributable to a number of factors. First, the
federal government has made fundamental changes to the reimbursement for medical
services provided to eligible individuals. The changes have had a significantly
negative impact on the healthcare industry as a whole and on the Debtors' cash
flows. Second, the federal reimbursement changes have exacerbated a
long-standing problem of less than fair reimbursement by the states for medical
services provided to indigent persons. Third, numerous other factors have
adversely affected the Debtors' cash flows, including increased labor costs,
increased professional liability costs and insurance, and increased interest
rates. Finally, as a result of declining governmental reimbursement rates and in
the face of rising inflationary costs, the Debtors were too highly leveraged to
service their indebtedness.
1. Medicare Reimbursement
The Health Insurance for Aged and Disabled Act (Title XVIII of
the Social Security Act), known as "Medicare," has made available to nearly
every American 65 years of age and older a broad program of health insurance
designed to help the nation's elderly meet hospital and other health care costs.
Health insurance coverage has been extended to certain persons under age 65
qualifying as disabled and those having end-stage renal disease. Medicare
includes three related health insurance programs: (i) hospital insurance ("Part
A"); (ii) supplementary medical insurance ("Part B"); and (iii) a managed care
option for beneficiaries who are entitled to Part A and enrolled in Part B
("Medicare+Choice" or "Medicare Part C").
55
The Medicare program is currently administered by fiscal intermediaries (for
Part A and some Part B services) and carriers (for Part B) under the direction
of CMS of the Department of Health and Human Services ("HHS").
Pursuant to the Balanced Budget Act of 1997 and regulations
promulgated by HHS, reimbursement under the Medicare program has changed from a
cost-based retrospective reimbursement system to what is known as a
prospective-payment system ("PPS") for Medicare Part A services. The changes
also resulted in the adoption of fee screen schedules which limit and "cap"
reimbursement for Medicare Part B therapy services. The reimbursement rates
under PPS were not published until May 12, 1998, less than two months prior to
the implementation of PPS, and were significantly lower than anticipated within
the industry.
The magnitude of the reduction in rates took the industry by
surprise. During the mid-1990's, CMS funded the development of the Multi-State
Nursing Home Care-Mix and Quality Demonstration. The purpose of that project was
to design, implement, and evaluate Medicare nursing home prospective payment and
quality monitoring system across several states. A number of facilities
participated in the demonstration and helped to perfect the case mix
classification system (RUG-III) developed to capture resource use of nursing
home patients. Under the demonstration project, most nontherapy ancillary costs
were passed through and Medicare Part B expenditures incurred during the
beneficiary's inpatient (Part A) stay were not considered. The industry was led
to believe that CMS would adjust its payment "grouper" to compensate for these
variable costs. That did not happen. First, the expected adjustments for
nontherapy ancillary costs were not made. Second, the Medicare Part B
expenditures during inpatient stays were undercalculated. Third, adjustments
were made that reduced the aggregate base year to the 1995 spending level.
Fourth, the market basket used by CMS to trend forward the 1995 expenditures to
1998 was defective. Fifth, the RUG-III case-mix classification system, as
implemented, was insensitive to patients requiring multiple services, e.g.,
rehabilitation and extensive medical care.
Since Medicare patients account for a substantial portion of
the Debtors' revenues, this change has materially and adversely affected the
financial condition of both the Genesis Debtors and the Multicare Debtors. Among
other effects, and despite efforts to reduce costs and otherwise adjust
operations, the Debtors' revenues fell short of the levels needed to service the
debt under their respective debt instruments.
In November of 1999, Congress passed the Medicare Balanced
Budget Refinement Act (the "Refinement Act"), which repealed the cap on Medicare
Part B services and provided for modest increases in the per diem rates paid to
skilled nursing facilities for their sickest patients. In spite of the
Refinement Act, the substantial reduction in reimbursement under the Medicare
system has materially impaired many of the lines of business of the Genesis
Debtors and the Multicare Debtors. Long-term care facilities now receive
significantly less compensation for any given level of care. In many cases,
reimbursement does not cover even the direct cost of care, let alone overhead
and capital costs. The Genesis Debtors' eldercare centers began implementation
of PPS on October 1, 1998, and the majority of the Multicare Debtors' eldercare
centers began implementation of PPS on January 1, 1999.
On December 15, 2000, Congress passed the Benefit Improvement
and Protection Act of 2000 which, among other provisions, increases the nursing
component of Federal PPS rates by approximately 16.7% for the period April 1,
2001 through September 30, 2002. The legislation will also change the 20% add-on
to 3 of the 14 rehabilitation RUG categories to a 6.7% add-on to all 14
rehabilitation RUG categories beginning April 1, 2001. The
56
Part B consolidated billing provision of BBRA will be repealed except for
Medicare Part B therapy services and the moratorium on the $1,500 therapy caps
will be extended through calendar year 2002.
The implementation of PPS has been identified as a significant
factor affecting the commencement of chapter 11 cases by five other national
nursing home chains (Vencor, Sun Healthcare Group, Inc., Integrated Health
Services, Inc., Mariner Post-Acute Network, Inc., and Mariner Health Group,
Inc.), and the bankruptcy of numerous smaller nursing home companies.
2. Medicaid Reimbursement
Medicaid (Title XIX of the Social Security Act) is a
federal-state cooperative program in which the federal government supplements
funds provided by the participating states for medical assistance to "medically
indigent" persons. The programs are administered by the applicable state welfare
or social service agencies. Although Medicaid programs vary from state to state,
traditionally they have provided for the payment of certain expenses, up to
established limits, at rates determined in accordance with each state's
regulations. Most states pay prospective rates and have some form of acuity
adjustment.
Although the amount of reimbursement varies significantly from
state to state, in general, Medicaid payments are lower than the costs
associated with treating those patients. Moreover, the Balanced Budget Act of
1997 repealed the "Boren Amendment" federal payment standard for Medicaid
payments to nursing facilities effective October 1, 1997. The Boren Amendment
required that Medicaid payments to certain health care providers be reasonable
and adequate in order to cover the costs of efficiently and economically
operated healthcare facilities.
This imbalance between Medicaid rates and the costs of
providing Medicaid patient care has been a chronic problem which, until the
implementation of PPS, was partially offset by Medicare reimbursement rates.
With the unanticipated and excessive reductions in Medicare reimbursement under
PPS, the Genesis Debtors and the Multicare Debtors no longer had the ability to
subsidize the treatment of their Medicaid patients while meeting their debt
service obligations.
3. Debt Burden
The most significant portion of the growth of the Genesis
Debtors and the Multicare Debtors has been through acquisitions. Those
acquisitions were financed through the sale of stock and the incurrence of a
significant amount of senior and junior debt obligations. The amount of debt
(leverage) incurred was based on revenue projections. Revenue projections were
driven, for the most part, by expected reimbursement from the Medicare and
Medicaid programs. The negative impact from the implementation of PPS changed
the level of debt of the Debtors from "moderate" to "far too high."
Following the completion of the Multicare acquisition, the
Genesis Debtors' obligations under their senior lender credit facility and
Genesis's senior subordinated notes alone aggregated in excess of $1.5 billion.
Similarly, the senior lender credit facility for the Multicare Debtors and
Multicare's senior subordinated notes aggregated over $700 million. Despite
substantial reductions in corporate overhead and operational changes, the
Genesis Debtors and the Multicare Debtors simply were unable to repay such
indebtedness in accordance with its terms.
57
C. Prepetition Negotiations
In 1999, the Debtors developed a restructuring strategy based
on an infusion of additional equity, an increase in availability under existing
bank credit lines, and the sale of certain assets. These restructuring efforts
are described in detail in the most recent Form 10-K filed by Genesis. In early
2000, it became apparent that the Debtors would not be able to sell sufficient
assets to meet the repayment obligations under their existing debt obligations.
At that time they began discussions with the holders of their senior lender
claims. Those lenders agreed to forbear from exercising remedies due to certain
types of default through May 19, 2000, which was further extended through June
30, 2000. In addition, Genesis and The Multicare Companies, Inc. began
discussions with certain holders of their respective public senior subordinated
notes. Genesis and Multicare continued discussions with these creditor groups
until it became apparent that the businesses would require additional liquidity.
In addition, certain creditors threatened to commence involuntary bankruptcy
cases against Genesis and Multicare. During this process, Genesis and Multicare
determined to commence voluntary cases under chapter 11 of the Bankruptcy Code,
which, except for Healthcare Resources Corp., ultimately occurred on June 22,
2000.
D. Pending Litigation and Other Proceedings
1. The Genesis and Vitalink Actions Against the Manor Care
Entities
On May 7, 1999, Genesis and Vitalink Pharmacy Services (d/b/a
NeighborCare(R)), a subsidiary of Genesis, filed multiple lawsuits requesting
injunctive relief and compensatory damages against HCR Manor Care, Inc. ("HCR
Manor Care"), Manor Care, Inc. ("Manor Care"), ManorCare Health Services, Inc.
("MCHS," and collectively, the "Manor Care Entities") and two principals of such
entities. The lawsuits arise from MCHS's threatened termination of long-term
pharmacy services contracts effective June 1, 1999. Vitalink filed a complaint
against HCR Manor Care, Manor Care, and MCHS in Baltimore City, Maryland circuit
court (the "Maryland State Court Action"). Genesis filed a complaint against HCR
Manor Care, Manor Care, and two of their principals in federal district court in
Delaware including, among other counts, securities fraud (the "Delaware Federal
Action"). Vitalink has also instituted an arbitration action before the American
Arbitration Association (the "Arbitration"). In these actions, Vitalink is
seeking a declaration that it has a right to provide pharmacy, infusion therapy,
and related services to all of HCR Manor Care's facilities and a declaration
that MCHS's termination of the long-term pharmacy service contracts was
unlawful. Genesis, certain of its subsidiaries, and Vitalink also seek over
$100,000,000 in compensatory damages and enforcement of a 10-year noncompetition
clause.
Genesis acquired Vitalink from Manor Care in August 1998. In
1991, Vitalink and MCHS (then known as Manor Healthcare Corp.) had entered into
long-term master pharmacy, infusion therapy, and related agreements which gave
Vitalink the right to provide pharmacy services to all facilities owned or
licensed by MCHS and its affiliates. In 1998, the terms of the pharmacy service
agreements were extended to September 2004. Under the master service agreements,
Genesis and Vitalink receive revenues at the rate of approximately $107,000,000
per year. The projections upon which the valuation of the Genesis Debtors is
based assumes that the Manor Care Entities will not be allowed to terminate the
master service agreements and includes the amounts the Genesis Debtors expect to
receive in connection with these master service agreements over their remaining
3-1/2 year term. The termination of these agreements, if allowed, would decrease
the value of the New Common Stock, although it would not affect the Plan's
feasibility.
58
By agreement dated May 13, 1999, the parties agreed to
consolidate the Maryland State Court Action relating to the master service
agreements with the Arbitration matter. Accordingly, on May 25, 1999, the
Maryland State Court Action was dismissed voluntarily. It is the position of the
Genesis Debtors that until such time as a final decision is rendered in such
Arbitration, the parties have agreed to maintain the master service agreements
in full force and effect. However, the Manor Care Entities take the position
that the master service agreements were properly terminated prior to the
commencement of these chapter 11 cases and that upon a favorable ruling in the
Arbitration they intend to implement such termination.
The Manor Care Entities have asserted counterclaims in the
Arbitration seeking damages for Vitalink's alleged overbilling for products and
services provided to MCHS, a declaration that MCHS had the right to terminate
the master service agreements, and a declaration that Vitalink does not have the
right to provide pharmacy, infusion therapy, and related services to facilities
owned by HCR Manor Care (then known as Health Care and Retirement Corporation)
prior to its merger with Manor Care. According to an expert report submitted by
the Manor Care Entities on May 8, 2000, the Manor Care Entities are seeking
$17,800,000 in compensatory damages for alleged overbilling by Vitalink between
September 1, 1998 and March 31, 2000.
On January 14, 2000, the Manor Care Entities moved to dismiss
Vitalink's claims in the Arbitration that it has a right to provide pharmacy and
related services to the HCR Manor Care facilities not previously under the
control of Manor Care. On May 17, 2000, the Arbitrator ordered the dismissal of
Vitalink's claims seeking a declaratory judgment and injunctive relief for
denial of Vitalink's right to service the additional HCR Manor Care facilities,
but sustained for trial Vitalink's claim seeking compensatory damages against
the Manor Care Entities for denial of that right.
Trial in the Arbitration was originally scheduled to begin on
June 12, 2000. On May 23, 2000, however, the Arbitrator postponed the trial
indefinitely due to Vitalink's potential bankruptcy filing. In connection with
this stay, the parties agreed that MCHS may pay NeighborCare 90% of the face
amount of all invoices for pharmaceutical and infusion therapy goods and
services that NeighborCare renders to MCHS under the Master Service Agreements.
After Genesis and its affiliates, including Vitalink, commenced their chapter 11
cases on June 22, 2000, the Arbitration was automatically stayed pursuant to
section 362(a) of the Bankruptcy Code.
On August 1, 2000, the Manor Care Entities moved to lift the
automatic stay and compel arbitration. On September 5, 2000, the Bankruptcy
Court denied that motion, with leave to refile its request in 90 days. On
December 8, 2000, the Manor Care Entities filed a similar motion for relief from
the stay. The Genesis Debtors opposed the motion and filed their own motion to
assume the contracts between the parties. On February 6, 2000, the Bankruptcy
Court ruled in favor of the Manor Care Entities' renewed motion and deferred
consideration of the motion to assume until completion of the Arbitration. As a
result, the parties are proceeding forward in the Arbitration. The trial in the
Arbitration is now scheduled to commence during the week of July 30, 2001.
The Manor Care Entities have not filed proofs of claim in these
chapter 11 cases. Accordingly, their claims for prepetition overcharges under
the contracts will not be a claim against the Genesis Debtors unless they
successfully assume those agreements. However, to the extent that the Manor Care
Entities have valid setoff or recoupment rights against any of the Debtors, they
will be entitled to reduce any recovery by such Debtors against any of the Manor
59
Care Entities by such amounts. Any such valid setoff or recoupment rights are
not being affected by the Plan.
2. The Vitalink Action Against Omnicare and Heartland
On July 26, 1999, NeighborCare, through its Maryland counsel,
filed an additional complaint against Omnicare, Inc. ("Omnicare") and Heartland
Healthcare Services (a joint venture between Omnicare and HCR Manor Care)
seeking injunctive relief and compensatory and punitive damages. The complaint
includes counts for tortious interference with Vitalink's contractual rights
under its exclusive long-term service contracts with the Manor Care Entities. On
November 12, 1999, in response to a motion filed by the defendants, that action
was stayed pending a decision in the Arbitration.
3. The Manor Care Action Against Genesis in Delaware
On August 27, 1999, Manor Care, a wholly-owned subsidiary of
HCR Manor Care, filed a lawsuit against Genesis in federal district court in
Delaware based upon Section 11 and Section 12 of the Securities Act of 1933, as
amended. Manor Care alleges that in connection with the sale of the Genesis
Series G Cumulative Convertible Preferred Stock as part of the purchase price to
acquire Vitalink, Genesis failed to disclose or made misrepresentations related
to the effects of the conversion to PPS on Genesis's earnings, the restructuring
of Genesis's ElderCare Joint Venture, the impact of the operations of Genesis's
Multicare affiliate on Genesis's earnings, the status of Genesis's labor
relations, Genesis's ability to declare dividends on the Series G Preferred
Stock, the value of the conversion right attached to the Series G Preferred
Stock, and information relating to the ratio of combined fixed charges and
preference dividends to earnings. Manor Care seeks, among other things,
compensatory damages and rescission of the purchase of the Series G Preferred
Stock.
On November 23, 1999, Genesis moved to dismiss this action on
the ground, among others, that Manor Care's complaint failed to plead fraud with
particularity. On September 29, 2000, the court granted that motion in part and
denied it in part. Specifically, the court dismissed all of defendants'
allegations except those concerning the company's labor relations and the ratio
of combined fixed charges and preference dividends to earnings.
On January 18, 2000, Genesis moved to consolidate this action
with the Delaware Federal Action. That motion has been fully submitted and is
awaiting decision. As a result of the commencement of Genesis's chapter 11
cases, this action is also automatically stayed pursuant to section 362(a) of
the Bankruptcy Code. However, as noted above, Manor Care has not filed a proof
of claim in these chapter 11 cases. Therefore, it will not be entitled to any
affirmative relief against the Genesis Debtors based on these claims.
Notwithstanding the fact that no proofs of claim have been filed, to the extent
that Manor Care has valid setoff or recoupment rights against any of the
Debtors, it will be entitled to reduce any recovery by such Debtors against
Manor Care by such amounts. Any such valid setoff or recoupment rights are not
being affected by the Plan.
4. The Manor Care Action Against Genesis in Ohio
On December 22, 1999, Manor Care filed a lawsuit against
Genesis and others in the United States District Court for the Northern District
of Ohio. Manor Care alleges, among other things, that the Series H Senior
Convertible Participating Cumulative Preferred Stock and Series I Senior
Convertible Exchangeable Participating Cumulative Preferred Stock were issued
60
in violation of the terms of the Series G Preferred Stock and the Rights
Agreement dated as of April 26, 1998 between Genesis and Manor Care. Manor Care
seeks, among other things, damages and rescission or cancellation of the Series
H and Series I Preferred Stock. On February 29, 2000, Genesis moved to dismiss
this action on the ground, among others, that Manor Care's complaint failed to
state a cause of action. This motion has been fully submitted, including
supplemental briefing by both parties, and is awaiting decision. As a result of
the commencement of Genesis's chapter 11 cases, this action is also
automatically stayed pursuant to section 362(a) of the Bankruptcy Code. However,
as noted above, Manor Care has not filed a proof of claim in these chapter 11
cases. Therefore, it will not be entitled to any affirmative relief against the
Genesis Debtors based on these claims. Notwithstanding the fact that no proofs
of claim have been filed, to the extent that Manor Care has valid setoff or
recoupment rights against any of the Debtors, it will be entitled to reduce any
recovery by such Debtors against Manor Care by such amounts. Any such valid
setoff or recoupment rights are not being affected by the Plan.
5. Age Institute
On November 27, 2000, Genesis, along with several other Genesis
Debtors, filed an adversary proceeding in their chapter 11 cases against four
related nursing home owners affiliated with AGE Holdings, Inc. (the "AGE
Entities") to collect unpaid receivables, among other things. In response, the
AGE Entities filed counterclaims against the Genesis Debtors alleging violations
of RICO, fraud, lender liability, breach of fiduciary duty, breach of management
agreements, breach of professional standards/professional negligence,
conversion, interference with business relations, and conspiracy. The
counterclaims seek punitive, compensatory, statutory, and/or exemplary damages,
as well as claims to invalidate certain working capital and subordinated loan
obligations of the AGE Entities to the Genesis Debtors. The counterclaims
further seek administrative expense treatment of any amount found due to the AGE
Entities for postpetition damages. While the Genesis Debtors believe that the
counterclaims have no merit, in the event the AGE Entities were to prevail on
their counterclaims, such counterclaims could exceed the claims of the Genesis
Debtors against the AGE Entities. The AGE Entities have filed proofs of claim
(in unliquidated amounts) in the Genesis Reorganization Cases in connection with
their counterclaims. It is anticipated that the adversary proceeding will not be
tried until the summer of 2002. It should be noted that any recovery against the
AGE Entities is uncertain. As part of the mechanics of distribution under the
Plan, the Genesis Debtors will estimate the amount that the AGE Entities may
establish as an allowed claim against the Genesis Debtors. This amount will
result in a holdback from the distribution to unsecured creditors in Classes G4
and G5 until the claims of the AGE Entities are resolved. Based upon the
information the Genesis Debtors have at this time, the Genesis Debtors believe
that such holdback, if any, will be minimal with respect to this dispute.
Inasmuch as the adversary proceeding will not be tried until the summer of 2002,
the AGE Entities and the Genesis Debtors have agreed that the AGE Entities will
retain the ability to (i) set off or recoup any allowed claims they may have
against the Genesis Debtors against the claims the Genesis Debtors have against
the AGE Entities and assert any counterclaims against the Genesis Debtors even
if said counterclaims exceed the Genesis Debtors' claims, and (ii) participate
in any recovery for holders of claims in Class G4 notwithstanding that the Plan
will become effective before the claims of the AGE Entities are resolved.
6. Qui Tam Suits
Currently pending against Genesis or its affiliates, divisions,
or subsidiaries are five private citizen suits filed under the federal False
Claims Act, 31 U.S.C.ss. 3729 et seq. Genesis has reached an agreement to
resolve four of the pending suits. For a description of that
61
settlement, see section II.K, above. The remaining private citizen suit, styled
U.S. ex rel Scherfel v. Genesis Health Ventures et al. (D.N.J.), is the subject
of a proof of claim in the Genesis reorganization case.
In the Scherfel suit, the plaintiff alleges that a pharmacy
owned by NeighborCare, Inc. failed to process Medicaid credits for returned
medications. The allegations are vaguely alleged for other jurisdictions. While
the action was under seal in United States District Court, Genesis fully
cooperated with the Department of Justice's evaluation of the allegations. On or
about March 2001, the Department of Justice declined to intervene in the suit
and prosecute the allegations. The plaintiff filed a proof of claim in the
bankruptcy proceeding initially for approximately $650 million and more recently
has submitted an amended claim in the amount of approximately $325 million. The
Debtors believe that the allegations have no merit and intend to object to the
proof of claim and defend the suit. In the event the Debtors are incorrect, any
claims ultimately allowed in connection with this suit will be treated as part
of Class G4 (Genesis General Unsecured Claims) and thus would dilute the
recovery for holders of claims in Class G4 on a pro rata basis. Inasmuch as the
claims in Classes G4 and G5 share recoveries on a pro rata basis, any recovery
against the Genesis Debtors in connection with the Scherfel suit will dilute the
recoveries for the holders of other claims in those classes (which aggregate
$467,494,000).
7. Personal Injury and Employment Law Litigation
Prior to the Commencement Date, the Debtors and/or persons or
entities which the Debtors indemnify, were defendants in approximately 375
prepetition lawsuits alleging personal injury, employment disputes, and similar
allegations, and/or potential lawsuits where a statutory notice of intent to sue
was timely served. These lawsuits allege a variety of personal injury
allegations arising from patient care, automobile accidents, and other personal
injury incidents, as well as employment discrimination, wrongful termination,
and related employment law claims. The lawsuits are pending in state and federal
courts nationwide.
The majority of the claims asserted in the personal injury
lawsuits are covered by insurance. Until June 1, 2000, the Debtors' various
insurance policies on personal injury claims contained neither a self-insured
retention nor a deductible. Between June 1, 2000 and the Commencement Date, the
relevant insurance policies contained a self-insured retention of $500,000 per
claim, subject to a $5 million aggregate, except in the state of Florida where
the relevant insurance policies contained a self-insured retention of $2.5
million per claim, subject to a $9 million aggregate. Thus, insurance coverage
for claims arising in the 22-day period from June 1, 2000 until the Commencement
Date are subject to such limitations. However, the Debtors believe that these
amounts are fully covered by assets in the Debtors' captive insurance company,
which is a non-Debtor subsidiary of Genesis. As of June 10, 2001, the Debtors
are aware of 15 claims for which counsel for the claimant has requested
insurance information from the Debtors where at least a portion of such claims
might be attributed to the period June 1, 2000 through the Commencement Date.
Certain claims asserted in the personal injury lawsuits, such as claims for
punitive damages, may be uninsured or uninsurable in certain states. With
respect to employment law claims, the Debtors purchased an insurance policy in
1999 with a $500,000 self-insured retention per claim. The Debtors vigorously
dispute the allegations contained in the personal injury and employment
lawsuits. The Debtors are not aware of any general denials of, or challenges to,
coverage by any of the Debtors' insurance carriers other than the possibility of
the existence of individual reservation of rights letters received in the
ordinary course.
62
To the extent these claims are not covered by insurance, they
will be treated as part of Class G4 or M4, as applicable. The following table
sets forth certain information about the Debtors' personal injury insurance
coverage:
# of Open # of Opt-
Policy Coverage Period Claims Aggregate Coverage Paid Losses* Outs**
----------------------------------------------------------------------------------------------------------------
June '95 - May '96 (Genesis) 13 $50 million*** $ 5,005,369 4
Mar. '95 - Feb. '96 (Multicare) 3 $52 million 358,419 2
Mar. '96 - Apr. 12, 1996 (Multicare) 1 $52 million 137,527 1
June '96 - May '97 (Genesis) 31 $50 million*** 10,809,194 7
Apr. 12, 1996 - Apr. '97 (Multicare) 14 $52 million 1,537,846 7
June '97 - May '98 (Genesis) 34 $50 million*** 7,413,521 4
May '97 - June '98 (Multicare) 20 $52 million 1,098,903 5
June '98 - May '99 (Genesis & Multicare) 102 $125 million*** 4,146,320 27
June '99 - May '00 (Genesis & Multicare) 76 $128 million 476,235 3
June '00 - May '01 (Genesis & Multicare) 52**** $110 million 10,715 0
*These numbers are based upon information provided to the Debtors by their
insurance carriers AIG, CAN, and Zurich as of April 5, 2001, January 15, 2001,
and March 31, 2001, respectively. There can be no guarantee that other claims
did not settle prior to the date such numbers were compiled by the respective
insurance carrier.
**Number of plaintiffs who have stipulated to relief from the automatic stay and
agreed to proceed against insurance coverage only.
***The coverage specified is in addition to $1 million per occurrence/$3 million
aggregate per location coverage.
****As set forth in the text above, as of June 10, 2001, the Debtors are aware
of 15 claims in which counsel for the claimant has requested insurance
information from the Debtors where at least a portion of such claims might be
attributed to the period June 1, 2000 through June 22, 2000. The aggregate
coverage for this policy is in excess of the self-insured retention (in the
amounts described above) under this policy. However, the Debtors believe that
these amounts are fully covered by the Debtors' captive insurance company.
8. Multicare Litigation
The Multicare Debtors are not party to any significant
litigation, other than litigation arising from the ordinary course of their
businesses.
9. Ordinary Course Litigation
The Debtors are parties to various other legal actions and
administrative proceedings and are subject to various claims arising in the
ordinary course of business.
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VI.
Significant Events During the Reorganization Cases
A. Filing and First Day Orders
On June 22, 2000, the Genesis Debtors (other than Healthcare
Resources Corp.) and the Multicare Debtors filed their petitions under chapter
11 of the Bankruptcy Code. On June 23, 2000, the Bankruptcy Court entered
certain orders designed to minimize the disruption of the Debtors' business
operations and to facilitate their reorganization.
o Case Administration Orders. These orders (i) authorized
separate joint administration of the Genesis Debtors'
chapter 11 cases and Multicare Debtors' chapter 11 cases,
(ii) established interim compensation procedures for
professionals, (iii) granted an extension of the time to
file the Debtors' schedules and statements, and (iv)
authorized the mailing of initial notices and all other
mailings directly to parties in interest and the filing of a
list of creditors without claim amounts in lieu of a matrix.
o Payments on Account of Certain Prepetition Claims. The
Bankruptcy Court authorized the payment of prepetition (i)
wages, compensation, and employee benefits, (ii) sales and
use taxes, (iii) claims of common carriers and warehousemen,
(iv) claims of critical trade vendors, and (v) refunds to
patients.
o Business Operations. The Bankruptcy Court authorized the
Genesis Debtors and the Multicare Debtors to (i) comply with
certain license and regulatory agency fee requirements, (ii)
continue customer service programs, (iii) continue
prepetition premium obligations under workers' compensation
insurance and all other insurance policies, and bonds
relating thereto, (iv) maintain existing bank accounts and
business forms, (v) continue their existing cash management
system, (vi) employ certain investment guidelines, (vii)
provide adequate assurance to utility companies including
the payment of certain prepetition claims, (viii) grant
administrative expense status to undisputed obligations
arising from the postpetition delivery of goods ordered in
the prepetition period and make payment of such claims in
the ordinary course of business, and (ix) maintain patient
trust accounts.
o Other Stipulations. The Bankruptcy Court authorized a
stipulation between one of the Genesis Debtors and Cardinal
Distribution which provided for a long-term commitment by
Cardinal Distribution to continue to ship inventory on
credit terms in exchange for the payment over time of
certain secured prepetition amounts owed to that company.
That stipulation has been amended to provide additional
postpetition credit to the Genesis Debtors. The Bankruptcy
Court also authorized separate stipulations between the
Genesis Debtors and certain agencies of the federal
government and between the Multicare Debtors and those
entities. These stipulations provided adequate protection to
the federal government in the form of payment over time of
certain prepetition overpayments alleged to have been made
under the Medicare program. The stipulation with the Genesis
Debtors was amended to reduce the amounts to be paid and
provide the federal
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government with an administrative expense claim to the
extent of additional amounts discovered.
o Bankruptcy Matters. The Bankruptcy Court authorized the
Genesis Debtors and the Multicare Debtors to (i) establish
notice procedures and (ii) obtain interim postpetition
financing under debtor in possession credit agreements on a
superpriority basis for $250 million (for the Genesis
Debtors) and $50 million (for the Multicare Debtors),
pending further interim and final hearings.
On July 31, 2000, Healthcare Resources Corp. ("HRC"), one of
the Genesis Debtors, filed a petition under chapter 11 of the Bankruptcy Code.
On August 1, 2000, the Bankruptcy Court entered orders in HRC's reorganization
case substantially similar to the orders entered on June 23, 2000 for the other
Genesis Debtors. HRC is a party to the Genesis debtor in possession credit
facility.
B. Appointment of the Creditors' Committee
On July 12, 2000, the United States Trustee for the District of
Delaware, pursuant to its authority under section 1102 of the Bankruptcy Code,
appointed a statutory committee of unsecured creditors in the Genesis
reorganization cases and a separate committee in the Multicare reorganization
cases.
1. Genesis Creditors' Committee
The Genesis creditors' committee currently consists of the
following six members:
American General Investment Management, L.P.
2929 Allen Parkway
Houston, Texas 77019
Abbot Laboratories
625 Cleveland Avenue
Columbus, Ohio 43215
GMS Group, LLC
c/o LeBouf, Lamb, Greene & MacRae
125 West 55th Street
New York, New York 10019
Service Employees International Union, AFL-CIO
c/o Cohen, Weiss and Simon, LLP
3030 W. 42nd Street
25th Floor
New York, New York 10036
State Street Bank and Trust Company
2 Avenue de Lafayette
6th Floor
Boston, Massachusetts 02111
65
The Bank of New York
101 Barclay Street
Floor 21W
New York, New York 10286
The Genesis creditors' committee has retained Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, and
Pachulski Stang Ziehl Young & Jones PC, 919 N. Market Street, 16th Floor, P.O.
Box 8075, Wilmington, Delaware 19899-8705, as its attorneys, and Houlihan Lokey
Howard & Zukin, 2 First National Plaza, 20 South Clark Street, 21st Floor,
Chicago, Illinois 60603-1881, as its financial advisors. The Genesis creditors'
committee has actively participated in all aspects of the Genesis reorganization
cases.
2. Multicare Creditors' Committee
The Multicare creditors' committee currently consists of the
following three members:
Mackay-Shields Financial Corp.
9 West 57th Street
New York, NY 10019
HSBC Bank USA, as Indenture Trustee
452 Fifth Avenue
New York, NY 10018-2706
Gulf South Medical Supply, Inc.
4345 Southpoint Blvd
Jacksonville, FL 3216
The Multicare creditors' committee has retained Kasowitz,
Benson, Torres & Friedman LLP, 1633 Broadway, New York, New York 10019, and
Saul, Ewing, Remick & Saul LLP, 222 Delaware Avenue, Suite 1200, P.O. Box 1266,
Wilmington, Delaware 19899-1266, as its attorneys, and Chanin Capital Partners,
11100 Santa Monica Blvd, Suite 830, Los Angeles, California 90025, as its
financial advisors. The Multicare creditors' committee has actively participated
in all aspects of the Multicare reorganization cases.
C. DIP Credit Agreements
1. Genesis Debtors
On July 18, 2000, the Bankruptcy Court entered a final order
(i) authorizing the Genesis Debtors to (a) obtain postpetition financing and (b)
utilize cash collateral, and (ii) granting adequate protection to certain
prepetition secured parties. In particular, the Bankruptcy Court approved that
certain Revolving Credit and Guaranty Agreement, dated as of June 22, 2000,
among Genesis, as borrower, the other Genesis Debtors, as guarantors, Mellon
Bank, N.A., as agent, and the lender parties thereto. This agreement provided
for maximum borrowings of $250 million and terminates on December 21, 2001. The
obligations of the Genesis Debtors under this agreement are secured by
substantially all the assets of the Genesis Debtors, subject to certain existing
mortgages and inventory liens. The liens granted to the postpetition lenders are
senior to the liens securing the Genesis Senior Lender Claims. As of the date
hereof, the Debtors have drawn approximately $180,000,000 under their debtor in
possession credit facility. The
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borrowings under this facility have been used to make payments to the holders of
the Genesis Senior Lender Claims, to issue letters of credit, to make payments
to Cardinal Distribution, and to make other miscellaneous payments. See section
II.E.2, above, for a description of those claims and the payments made. The
Genesis Debtors amended certain covenants under their debtor in possession
credit facility as of February 14, 2001, to bring those covenants into line with
current performance and projections.
2. Multicare Debtors
On July 18, 2000, the Bankruptcy Court entered a final order
(i) authorizing the Multicare Debtors to (a) obtain postpetition financing and
(b) utilize cash collateral, and (ii) granting adequate protection to certain
prepetition secured parties. In particular, the Bankruptcy Court approved that
certain Revolving Credit and Guaranty Agreement, dated as of June 22, 2000,
among Multicare, as borrower, the other Multicare Debtors, as guarantors, Mellon
Bank, N.A., as agent, and the lender parties thereto. This agreement provided
for maximum borrowings of $50 million and terminates on December 21, 2001. The
obligations of the Multicare Debtors under this agreement are secured by
substantially all the assets of the Multicare Debtors, subject to certain
existing mortgages and inventory liens. The liens granted to the postpetition
lenders are senior to the liens securing the Multicare Senior Lender Claims. As
of the date hereof, the Debtors have not drawn any funds under this debtor in
possession credit facility, although letters of credit for approximately $2
million issued under the facility are outstanding. The Multicare Debtors have
been paying the Genesis Debtors under the various service agreements on a
current basis postpetition. The Multicare Debtors amended certain covenants
under their debtor in possession credit facility as of February 14, 2001, to
bring those covenants into line with current performance and projections.
D. Cash Collateral Protection
1. Genesis Debtors
At the commencement of these chapter 11 cases, a number of
third-party lenders, including the holders of the Genesis Senior Lender Claims,
had an interest in the Genesis Debtors' receivables or other cash collateral. In
order to provide for the continued use of such cash collateral, the Genesis
Debtors agreed to provide certain protections to those third-party lenders. For
the holders of the Genesis Senior Lender Claims, the protections consisted of
the following:
o a superpriority administrative claim against the Genesis
Debtors, immediately junior to the claims of the lenders
under the debtor in possession credit facility
o liens on substantially all the property of the Genesis
Debtors immediately junior to the claims of the lenders
under the debtor in possession credit facility and existing
third party liens
o payment of an amount equal to interest on the Genesis
Senior Lender Claims at the contractual nondefault rate
o reimbursement for the reasonable fees and disbursements of
counsel and consultants to the holders of the Genesis
Senior Lender Claims and payment of certain administrative
fees
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In addition, the Bankruptcy Court entered a generic order
protecting all other third party lenders for the use of cash collateral that
they had an interest in by providing a postpetition interest in certain accounts
and inventory. Since entry of that order, the Genesis Debtors have agreed to
provide more specific adequate protection to certain third party lenders, based
on the extent to which the claims of such lenders are secured. For Subclasses
G1-5, G1-6, and G1-7, the Genesis Debtors agreed to pay amounts equal to
postpetition interest at contractual nondefault rates and to pay real estate
taxes and insurance on the underlying real property collateral. For Subclass
G1-8, the Genesis Debtors agreed to pay amounts equal to postpetition interest
at contractual nondefault rates and to maintain insurance on the underlying real
property collateral. Finally, for Subclass G1-12, the Genesis Debtors agreed to
pay postpetition real estate taxes and maintain insurance on the underlying real
property collateral.
2. Multicare Debtors
As of the Commencement Date, the Multicare Debtors also
required the continued use of cash collateral of certain third parties holding
security interests in specified accounts receivable, inventory, or other rights
to payments, or cash proceeds thereof. The Multicare Debtors therefore requested
and received authority from the Bankruptcy Court to use cash collateral as is
necessary to continue the Multicare Debtors' business operations. The
protections granted to the holders of the Multicare Senior Lender Claims in
return for permitting the Multicare Debtors' continued use of cash collateral
consisted of the following:
o a superpriority administrative claim against the Multicare
Debtors, immediately junior to the claims of the lenders
under the debtor in possession credit facility
o liens on substantially all the property of the Multicare
Debtors immediately junior to the claims of the lenders
under the debtor in possession credit facility and existing
third party liens
o reimbursement for the reasonable fees and disbursements of
counsel and consultants to the holders of the Multicare
Senior Lender Claims and payment of certain administrative
fees
To date, the Multicare Debtors have not been required to
provide more specific adequate protection to any third party lenders (except for
Subclass M1-4), although the Multicare Debtors presently are engaged in
discussions with a number of such lenders regarding more specific adequate
protection. For Subclass M1-4, the Multicare Debtors agreed to bring current
their prepetition and postpetition obligations on the underlying loan and to
remain current on a go-forward basis.
E. Key Employee and Executive Retention Programs
The Genesis Debtors have established two separate retention
programs for key employees. The first program covers all key employees, other
than the top four executives of Genesis and was approved by the Bankruptcy Court
on September 5, 2000. The second program covers the top four executives of
Genesis and was approved by the Bankruptcy Court on February 23, 2001. Both
retention programs are designed to encourage key employees to remain with the
Debtors by providing them with additional incentives, including cash payments.
Inasmuch as the Multicare Debtors do not have any management employees, no
retention programs have been implemented for those Debtors (although the
Multicare Debtors did request
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and receive authority from the Bankruptcy Court to reimburse Genesis for
retention bonuses made by it to administrators and directors of nursing at those
of Multicare's facilities managed by Genesis).
1. First Retention Program
Pursuant to the first retention program, a maximum aggregate of
$11.5 million in retention bonus payments are available for all qualifying key
employees. The retention payments, paid out over a course of four payments
beginning September 30, 2000 and ending on May 31, 2001, are available to middle
managers, senior officers, directors, or officers (other than the top four
executives of Genesis) who were employed by the Genesis Debtors on or before
April 1, 2000, and continue to be employed on the date of payment. As part of
this program, the Genesis Debtors also assumed 24 employment agreements of
certain key employees.
2. Second Retention Program
The second retention program, which was not submitted to the
Bankruptcy Court until several months after the initial program was implemented,
is designed to retain the top four executives through the restructuring process
and beyond. The program does not include any guarantied retention payments.
Instead, it provides for incentive or restructuring payments to be made on the
Effective Date. The aggregate amount of such payments will be approximately $2.1
million if the Effective Date is August 31, 2001. Such amounts increase or
decrease if the Effective Date is earlier or later than that date. An earlier
Effective Date results in an increase of 5% (up to a maximum increase of 15%)
for each month. A later Effective Date results in a decrease of 7.5% (up to a
maximum decrease of 15%) for each month.
The program also provides severance protection in an amount
equal to two times the base salary of the executive. This protection is in place
of existing severance arrangements in the prepetition employment agreements for
those individuals. In exchange for such protection, each executive will agree to
a two-year noncompete arrangement.
Finally, the program provides for the assumption of certain
deferred compensation arrangements and the forgiveness of certain loans that
three of the executives incurred in order to comply with a prepetition
requirement by the Board of Directors that they purchase shares of the stock of
Genesis. The forgiveness will occur on the earlier of the first anniversary of
the Effective Date or the termination of the employment of the executive. The
forgiveness includes an agreement to pay any taxes due from the executives due
to such forgiveness. The aggregate amount of such loans is approximately $2.5
million.
F. Claims Process and Bar Date
1. Schedules and Statements
On October 19, 2000, the Genesis Debtors filed with the
Bankruptcy Court their statement of financial affairs, schedules of assets and
liabilities, schedules of executory contracts and unexpired leases, and schedule
of equity security holders. The Genesis Debtors' schedules and statements were
filed on a partially consolidated basis.
On October 19, 2000, the Multicare Debtors filed with the
Bankruptcy Court their statement of financial affairs, schedules of assets and
liabilities, schedules of executory
69
contracts and unexpired leases, and schedule of equity security holders. The
Multicare Debtors' schedules and statements were filed on a partially
consolidated basis.
2. Bar Date
By separate orders dated November 6, 2000, the Bankruptcy Court
fixed December 19, 2000, at 4:00 p.m. (Eastern Time) as the date and time by
which proofs of claim were required to be filed in the Genesis and Multicare
reorganization cases, except that governmental entities have until June 25,
2001, at 4:00 p.m. (Eastern Time) to file proofs of claim against the Genesis
Debtors and the Multicare Debtors. In accordance with the orders fixing the bar
date, on or about November 6, 2000, notices informing creditors of the last date
to timely file proofs of claims, and a "customized" proof of claim form,
reflecting the nature, amount, and status of each creditor's claim as reflected
in the schedules of assets and liabilities, were mailed to all creditors listed
on the schedules of assets and liabilities. In addition, consistent with that
order, the Debtors caused to be published in the national editions of the Wall
Street Journal, New York Times, and USA Today a notice of the last date to
timely file proofs of claim.
G. ElderTrust Transactions
In November 2000, the Genesis Debtors and the Multicare Debtors
reached agreements to restructure their relationship with ElderTrust, a Maryland
healthcare real estate investment trust, and certain of its affiliates
(collectively, "ElderTrust"). On January 4, 2001, the Bankruptcy Court approved
those agreements. The following transactions were consummated on January 31,
2001. The agreements with ElderTrust cover leases and mortgages for 33
properties operated by the Genesis Debtors and the Multicare Debtors, either
directly or through joint ventures. Under its agreement with ElderTrust, Genesis
has (i) assumed its leases with ElderTrust, subject to certain modifications,
including a reduction in annual lease expenses of $745,000, (ii) extended the
maturity and reduced the principal balances for three assisted living properties
by $8,500,000 through the satisfaction of an ElderTrust obligation of like
amount, and (iii) acquired a building currently leased from ElderTrust, which is
located on the campus of a Genesis skilled nursing facility, for $1,250,000.
Pursuant to its agreement with ElderTrust, the Multicare
Debtors sold three owned assisted living properties that were mortgaged to
ElderTrust in exchange for a release of principal amounts owed totaling
$19,500,000. ElderTrust has leased the properties back to the Multicare Debtors
under a new ten-year lease with annual rents of $791,561.
H. CareFirst Transactions
On January 4, 2001, the Bankruptcy Court approved the Genesis
Debtors' settlement agreement with CareFirst of Maryland, Inc., a health
insurance corporation, and its affiliates (collectively, "CareFirst"). This
agreement settles certain disputes among the Genesis Debtors and CareFirst, and
provides a basis from which the Genesis Debtors are able to maintain their
integral business relationship with CareFirst and its 2.9 million members. More
specifically, the agreement authorizes the Genesis Debtors to (i) assume certain
contracts with CareFirst, including (a) home care provider contracts under which
the Debtors receive payments in exchange for arranging for or providing certain
home care services to CareFirst, and (b) preferred provider agreements which
formalize the Genesis Debtors' status as the preferred healthcare provider to
CareFirst, (ii) continue to hold as deposit without any impact resulting from
the Genesis reorganization cases, the aggregate $4 million in service deposits
previously provided by CareFirst, and provide the terms under which such service
deposits will be allocated, (iii) pay
70
$4,673,398 to CareFirst as settlement for amounts owed under that certain
Transition Agreement between certain of the Genesis Debtors and CareFirst, dated
October 20, 1999, and (iv) enter into new business agreements with CareFirst.
These agreements were consummated on January 19, 2001.
I. Swap Settlement
Genesis and Citibank, N.A. ("Citibank") are parties to certain
interest rate hedging agreements ("swap agreements"). Certain of those
agreements allowed Genesis to fulfill its obligation under its prepetition
credit agreement to hedge against a portion of the risk of the floating rate of
interest in such facility. The obligations of Genesis under swap agreements that
met certain requirements are entitled to share in the collateral securing the
Genesis Senior Lender Claims. On March 24, 2000, Citibank terminated all its
swap agreements with Genesis. Based on the underlying documents and information
obtained from other financial institutions engaged in interest rate hedging
agreements, Citibank asserted a claim against Genesis of approximately $28.5
million to unwind the swap agreement. Citibank also asserted that such claims
constituted Genesis Senior Lender Claims. After negotiations between the
parties, they agreed to treat approximately 61% of the claim as a Genesis Senior
Lender Claim and the balance as a Genesis General Unsecured Claim in Class G4.
The Bankruptcy Court approved this settlement on May 11, 2001.
J. Alternative Dispute Resolution Procedures
The Genesis Debtors and the Multicare Debtors identified
approximately 375 prepetition claims (not including claims in which a lawsuit
has yet to be commenced or a statutory pre-suit demand has yet to be served)
(the "Pending Actions") against the Debtors based on personal injury, employment
litigation, and similar claims by various entities (the "Claimants"). Certain
Pending Actions related or relate to claims against persons or entities for whom
the Debtors retain ultimate liability, including non-Debtor defendants in
Pending Actions who are current or former employees, officers, and directors of
the Debtors, and any person or entity indemnified by any of the Debtors or
listed as additional insureds under the Debtors' liability policies
(collectively, the "Indemnitees").
By motions dated March 19, 2001, the Genesis Debtors and the
Multicare Debtors respectively sought Bankruptcy Court approval of the
implementation of alternative dispute resolution procedures (the "ADR
Procedures") to assist in expediting the resolution of the Pending Actions. The
ADR Procedures in the Genesis Debtors' and the Multicare Debtors' reorganization
cases are governed by substantially similar "ADR Term Sheets." By orders dated
June 8, 2001 and July 10, 2001, the Bankruptcy Court approved the Genesis
Debtors' and the Multicare Debtors' revised ADR Term Sheets, respectively (the
"ADR Orders"). The ADR Procedures are implemented as follows:
o The Debtors compiled lists of all the Pending Actions of
which the Debtors were aware (the "Preliminary ADR Claims
Lists"). The Debtors will serve upon the Claimant (or such
Claimant's counsel, if known) in each Pending Action a
Bankruptcy Court approved notice (the "ADR Notice")
indicating that such Claimant's Pending Action shall be
deemed an "ADR Claim" and shall be subject to the ADR
Procedures.
o Additional Pending Actions, which are omitted from the
Preliminary ADR Claims Lists, will be added to the ADR
Procedures by serving upon such
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Claimants (i) the appropriate ADR Orders; (ii) the
appropriate ADR Term Sheet; (iii) an ADR Notice; and (iv) an
Opt-Out Stipulation (as defined below) (the "Additional ADR
Claims"). If the holder of an Additional ADR Claim does not
timely object to inclusion in the ADR Procedures, or if the
Bankruptcy Court overrules such objection, such holder's
Additional ADR Claim will become subject to the ADR
Procedures.
o The ADR Term Sheets provide for an injunction, which enjoins
until one year from the date of entry of the ADR Orders,
holders of ADR Claims and Additional ADR Claims from, among
other things, commencing or continuing any action or
proceeding in any manner or any place to collect or
otherwise enforce such claims against the Debtors or their
property other than through the ADR Procedures (the "ADR
Injunction"). In addition, the ADR Injunction enjoins
proceedings against any Indemnitee and any direct action
against a third party payer (which includes insurance
companies).
o The ADR Procedures establish a four stage process for the
orderly and efficient resolution of the ADR Claims and
Additional ADR Claims. The first stage is a formal
demand/counteroffer stage, where limited discovery is
available to the parties. The second stage is mediation. The
third stage is binding arbitration for those Claimants who
have previously consented to such arbitration and whose ADR
and Additional ADR Claims are not resolved through the first
two stages of the ADR Procedures. The fourth stage, which
shall commence only after all mediations have been
completed, is relief from the automatic stay for those
Claimants whose ADR Claims and Additional ADR Claims are not
settled or submitted to binding arbitration.
o At any time, a Claimant has the option to opt out of the ADR
Procedures by entering into a stipulation with the Debtors
(the "Opt-Out Stipulation"), which requires the Claimant to
(i) waive any and all claims for punitive damages,
attorneys' fees, and any similar enhanced remedies; (ii)
dismiss, with prejudice, any and all claims against any
Indemnitee; (iii) agree not to name any Indemnitee as a
defendant in the Pending Action; and (iv) agree to limit his
or her recovery, if any, solely to available insurance
proceeds and waive any and all rights to seek recovery from
the assets of the Debtors or their estates. Relief from the
automatic stay granted pursuant to an Opt-Out Stipulation
shall commence no earlier than four (4) months after the
entry of the ADR Orders.
Because the ADR Notices were recently sent out in the Genesis reorganization
cases, and have not yet been sent out in the Multicare reorganization cases, the
Debtors are not aware of any Claimants who have elected to opt out of the ADR
Procedures to date.
K. Settlement with the Multicare Debtors
As described in section II.K, above, the Genesis Debtors and
the Multicare Debtors have entered into a settlement of the claims between them.
The Debtors intend to seek approval of that settlement at the hearing on
confirmation of the Plan.
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L. Appointment of Fee Auditor
On April 26, 2001, the Bankruptcy Court ordered the appointment
of the legal auditing firm Stuart, Maue, Mitchell & James, Ltd. as the fee
auditor in the reorganization cases to act as a special consultant to the
Bankruptcy Court for professional fee review and analysis.
M. Motion for Appointment of Trustee in the Multicare Reorganization Cases
On May 14, 2001, the statutory committee of unsecured creditors
in the Multicare reorganization cases filed a motion seeking, in the
alternative, (i) the appointment of a trustee to renegotiate the management
services and other agreements between Genesis and Multicare, evaluate and
prosecute alleged claims of Multicare against Genesis, and propose a competing
plan of reorganization for Multicare, or (ii) to force Multicare to bid out its
agreements with Genesis. Based on the distribution of property to Classes M4 and
M5 under the Plan, the Multicare committee has agreed to withdraw the motion,
without prejudice. The Multicare committee has also agreed that it will not
refile the motion as long as the Debtors are prosecuting the Plan or any other
plan of reorganization that provides the same economic benefit to Classes M4 and
M5.
N. Potential Purchase of Pharmacy Business of Mariner Post-Acute Networks
and Mariner Health Group
Genesis and NeighborCare Pharmacy Services, Inc.
("NeighborCare" and one of the Genesis Debtors) are considering entering into an
asset purchase agreement (the "APS Agreement") with Mariner Post-Acute Networks,
Inc., Mariner Health Group, Inc., and certain of their affiliates (collectively,
the "Mariner Debtors"). Under the APS Agreement, Genesis and NeighborCare
propose to purchase the pharmacy businesses of the Mariner Debtors and certain
assets related to those businesses (the "APS Pharmacy Business"). Genesis and
NeighborCare will also assume certain of the obligations of the Mariner Debtors
in connection with the performance of certain contractual employee-related
obligations and the payment of a portion of certain personal property and ad
valorem taxes. According to the Mariner Debtors, the APS Pharmacy Business
provides pharmacy and related services to a significant number of nursing care
facilities.
The APS Agreement, which will be submitted for approval to the
Bankruptcy Court by separate motion, will require an initial cash payment of at
least $40 million, with additional earnout payments over time. Due to the fact
that the Mariner Debtors have also commenced chapter 11 cases under the
Bankruptcy Code, the sale of the APS Pharmacy Business is subject to an auction
procedure and approval by the Bankruptcy Court in their chapter 11 cases. The
APS Agreement will provide certain bidding protections for Genesis and
NeighborCare, including a breakup fee of $1.2 million. The Mariner Debtors will
seek court approval for the auction procedures, including the payment of the
breakup fee to Genesis and NeighborCare in the event the APS Pharmacy Business
is sold to a higher bidder. In addition, Genesis and NeighborCare will seek
approval from the Bankruptcy Court in their chapter 11 cases to purchase the APS
Pharmacy Business and obtain any necessary financing for that transaction.
Genesis and NeighborCare believe that the acquisition of the
APS Pharmacy Business will enhance NeighborCare's operations and increase the
value of their estates. However, it is not possible at this time to quantify
those benefits. In addition, it is not possible to predict whether Genesis and
NeighborCare ultimately will be the successful bidders for these
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assets. Accordingly, the projections described in section IV, above, do not
include any adjustments for this potential acquisition.
VII.
Governance of the Reorganized Debtors
A. Board of Directors of Reorganized Genesis
The initial Board of Directors of Reorganized Genesis will
consist of seven members, whose names, qualifications, and compensation will be
available upon request to the Genesis Debtors and will be posted on www.ghv.com
no later than seven days before the last date to vote to accept or reject the
Plan. Six members will be selected by the holders of the Genesis Senior Lender
Claims and the Multicare Senior Lender Claims. The Chief Executive Officer of
Reorganized Genesis will be the remaining director and Chairman of the Board.
Each member of the initial Board of Directors will serve on the Board of
Directors in accordance with Reorganized Genesis's Amended Certificate of
Incorporation and Bylaws, as the same may be amended from time to time. The
Debtors expect that the compensation for directors will include (i) $25,000 and
options to purchase 2,500 shares of New Common Stock each year, (ii) $1,500 for
attendance at each board meeting, (iii) $1,000 for attendance at each meeting of
a committee of the board of directors, and (iv) a one-time grant of options to
purchase 25,000 shares of New Common Stock. The final compensation will also be
posted on www.ghv.com no later than seven days before the last date to vote.
B. Senior Management of Reorganized Genesis
As of the Effective Date, Reorganized Genesis will enter into
long term employment agreements with its top four senior executives. In general,
the contracts provide for three year employment terms which are automatically
renewed unless either Reorganized Genesis or the employee provides advance
notice. The following table summarizes the base salary for the top four
executives of Reorganized Genesis:
Name Title Base Salary
Michael R. Walker Chief Executive Officer and $850,000
Chairman of the Board
Richard R. Howard Vice Chairman $500,000
David C. Barr Vice Chairman $500,000
George V. Hager, Jr. Executive Vice President $400,000
and Chief Financial Officer
These executives will also be entitled to incentive compensation, based on a
determination by the new board of directors of Reorganized Genesis. The maximum
amount of incentive compensation for these employees under the current incentive
plan is 50% of their respective base salaries.
Reorganized Genesis will also adopt a new long term Management
Incentive Plan under which stock grants and options will be allocated to 129
management employees, including the senior executives. See section VIII.F,
below, for a description of the New Management Incentive Plan. Copies of the new
employment agreements and the New Management Incentive Plan will be part of the
Plan Supplement. The executives named above
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are also entitled to certain rights under an executive retention plan approved
by the Bankruptcy Court. That plan is described in section VI.E, above.
The Plan of Reorganization will be deemed a solicitation of the
holders of New Common Stock for approval of the New Management Incentive Plan.
The Debtors believe that the order confirming the Plan of Reorganization should
constitute such approval of the New Management Incentive Plan for purposes of
sections 422 and 162(m) of the Internal Revenue Code. There can be no assurance,
however, that the Internal Revenue Service will agree with such position.
VIII.
Other Aspects of the Plan of Reorganization
A. Analysis of the Proposed Merger of Genesis and Multicare
At the present time, Genesis manages the Multicare Debtors
pursuant to a management contract that was negotiated with the independent
majority shareholders of Multicare in 1997 which is comprehensive and
encompasses all management and administrative functions. For the reasons
described in the followings sections, both the Genesis Debtors and the Multicare
Debtors have concluded that a merger will result in the best outcome for the
creditors who will receive distributions under the Plan of Reorganization for
the following reasons:
At the present time, Genesis and Multicare employ a management
structure which serves the combined assets of both companies. Significant
efficiencies are realized through the maintenance of a single infrastructure,
particularly in an environment where qualified managerial personnel are
difficult to recruit and retain. The creation and execution of a common
operating strategy implemented using common practices enhances revenues for both
companies in the most efficient manner. For instance, Genesis and Multicare are
marketed using a common "ElderCare" branding strategy which promotes better name
recognition, increasing referrals, and enhances the options for referral sources
and third-party payers in geographically concentrated markets. Likewise, the
companies are able to leverage off of common resources, such as discharge
planning functions and care coordinators and the ElderCare telephone line, to
increase the admissions for both companies' centers. The utilization of common
systems and a single uniform set of policies and procedures improves internal
controls and compliance to standards which result in greater operating cost
efficiencies. The merger of Genesis and Multicare creates incentive for
additional investment of time and resources to enhance the companies' abilities
to realize efficiencies and capitalize on revenue opportunities across the wider
group of operating entities.
Together, Genesis and Multicare enjoy considerable purchasing
power, which is utilized to achieve favorable pricing for nearly all goods and
services needed for the operation of their businesses. Additionally, the size
and clout of the combined organization provides access to certain goods and
services which are more difficult to obtain, for various reasons. For instance,
both Genesis and Multicare are able to contract for adequate professional
liability insurance, which due to the recent exit of insurers has become
significantly more difficult to obtain.
Similarly, the availability of debt and equity capital, which
has become scarce for the long-term care industry and is essential to the
long-term viability and success of each company, is greatly enhanced through the
merger of the two companies. Capital markets favor larger and more diverse
companies. For instance, the proposed exit financing is possible due, in
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part, to the size of the combined credit facility, which promotes greater
liquidity and the more diversified business operation financed, which mitigates
credit risk. Access to capital is important for three reasons. First, the long
term care industry is real estate based and accordingly, capital intensive.
Eldercare centers require regular maintenance in order to remain competitive and
meet regulatory standards. Second, capital is necessary in order for either
company to realize new business opportunities or to provide necessary working
capital for internal growth. Finally, changes in the regulatory landscape,
whether state or federal, can result in a significant cash drain, which may be
temporary or more permanent, which effects can be mitigated through stronger
liquidity. The larger capital base and greater float for the new equity
securities than either company would have or enjoy individually enhances the
market value for both Genesis and Multicare.
While today Genesis and Multicare realize certain savings and
efficiencies from contracting with common accounting professionals for financial
auditing and consulting services, the merger of Genesis and Multicare into a
single corporate entity will eliminate the duplicative costs associated with
preparing separate audits and filing separate financial statements and other
documents as required by the federal securities laws.
In summary, the security the creditors are entitled to receive
under the proposed scenario incorporates the value of the combined Multicare and
Genesis estates. It is the position of both Debtors that through the
preservation of the common infrastructure, purchasing power, access to capital,
and opportunities for administrative cost reductions, value is created which
exceeds the value that each company would be able to realize independently.
B. Mechanics of the Merger
The merger will be implemented through the Plan of Merger, a
copy of which is part of the Plan Supplement. A subsidiary of Genesis will
create a new subsidiary -- Multicare Acquisition Corporation -- to effectuate
the merger. Genesis, Multicare Acquisition Corporation, and Multicare will be
parties to the Plan of Merger. Authorization for the merger will be pursuant to
the Plan of Reorganization and the approval of the shareholders of Multicare
Acquisition Corporation and the deemed shareholders of Reorganized Multicare. As
part of the merger process, Multicare Acquisition Corporation will be merged
into Multicare. Note that the shareholders of Multicare will consist of the
holders of the Multicare Senior Lender Claims, the Multicare General Unsecured
Claims, and the Multicare Senior Subordinated Note Claims in accordance with the
distribution provisions of the Plan. The Plan of Merger will provide for the
exchange of the stock of Reorganized Multicare received by (i) the holders of
the Multicare Senior Lender Claims for New Senior Notes, New Convertible
Preferred Stock, and New Common Stock, (ii) the holders of the Multicare General
Unsecured Claims for New Common Stock and New Warrants, and (iii) the holders of
the Multicare Senior Subordinated Note Claims for New Common Stock and New
Warrants.
C. Exit Facility -- Condition Precedent to Effective Date
The Effective Date cannot occur unless the Debtors arrange for
sufficient financing to pay the administrative expenses of their respective
chapter 11 cases (an "Exit Facility") and all the conditions precedent to the
initial extensions of credit thereunder shall be satisfied. The Genesis Debtors
estimate that their administrative expenses will total approximately $225
million, including repayment of their debtor in possession financing. The
Multicare Debtors estimate their administrative expenses at approximately $10
million. The Debtors expect to arrange for a revolving line of credit for
working capital purposes with
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availability of up to $150 million. In addition, to fund the administrative
expenses of the reorganization cases, the Debtors expect to issue senior secured
debt of between $235 million and $245 million, repayable at the end of 5-1/2
years. The Exit Facility will permit the New Senior Notes to be outstanding. It
is anticipated that the obligations under the Exit Facility will be guarantied
by all the Debtors and will be secured by all their assets.
Several lending institutions have expressed an interest in
providing an Exit Facility in the amounts needed. In the alternative, it may be
desirable for Reorganized Genesis to raise funds in the public debt markets. The
exact form and terms of the Exit Facility selected by the Debtors will be
finalized as the Debtors prepare for confirmation of the Plan.
D. Distributions Under the Plan of Reorganization
One of the key concepts under the Bankruptcy Code is that only
claims and equity interests that are "allowed" may receive distributions under a
chapter 11 plan. This term is used throughout the Plan of Reorganization and the
descriptions below. In general, an "allowed" claim or "allowed" equity interest
simply means that the debtor agrees, or in the event of a dispute, that the
Bankruptcy Court determines, that the claim or interest, and the amount thereof,
is in fact a valid obligation of the debtor.
1. Timing and Conditions of Distributions
(a) Date of Distribution
Except as otherwise provided for in the Plan of Reorganization,
distribution on account of allowed claims will be made on or as soon as
practicable after the later of the Effective Date and the date an order allowing
a disputed claim becomes a Final Order. Disputed claims will be treated as set
forth below. All distributions to the holders of the Genesis Senior Lender
Claims and the Multicare Senior Lender Claims will be made to the individual
holders of the Genesis Senior Lender Claims and Multicare Senior Lender Claims
in such denominations and registered in the names of the holders as Mellon Bank,
N.A. shall have directed in writing.
(b) Surrender of Certain Securities Necessary for
Distribution
Plans of reorganization generally require a holder of an
instrument or security of a debtor to surrender such instrument or security
prior to receiving a new instrument or security in exchange therefor under a
plan of reorganization. This rule avoids disputes regarding who is the proper
recipient of instruments or securities under a plan of reorganization.
As a condition to participating in the distribution under the
Plan, a holder of a certificated instrument or note must surrender such
instrument or note prior to the first anniversary of the Effective Date or
provide the Disbursing Agent with a satisfactory affidavit of loss and/or
indemnity and bond. Failure to do so will result in the forfeiture of such
holder's right to receive any distribution relating to such instrument or note.
This requirement does not apply to certificated instruments or notes that are
being reinstated under the Plan.
Holders of the Debtors' preferred or common equity interests
shall not be required to surrender such securities because they are not
receiving a distribution under the Plan of Reorganization on account of such
securities.
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(c) Fractional Shares
No fractional shares of New Convertible Preferred Stock, New
Common Stock, or fractional New Warrants or cash in lieu thereof will be
distributed. For purposes of distribution, fractional shares of New Convertible
Preferred Stock or New Common Stock, and fractional New Warrants shall be
rounded down to the next whole number or zero, as appropriate.
(d) Final Distribution of New Common Stock and New
Warrants
Upon the resolution or determination of all disputed claims,
the Disbursing Agent shall distribute to all holders of allowed claims entitled
to receive New Common Stock and New Warrants the amount of such securities that
such holders would have received if the resolution of all disputed claims had
been known on the Effective Date. In the event that dividend distributions have
been made with respect to the New Common Stock, such holder shall be entitled to
receive the allocable portion of such dividends without any interest with
respect thereto.
2. Certain Claims Allowed
Claims in the following classes are allowed in the following
amounts (exclusive of postpetition interest, if applicable):
Class Description Allowed Claim
------------------------------------------------------------------------
G2 Genesis Senior Lender Claims $1,193,460,000
G5 Genesis Senior Subordinated Note Claims 387,425,000
M2 Multicare Senior Lender Claims 443,400,000
M5 Multicare Senior Subordinated Note Claims 257,817,000
3. Procedures for Treating Disputed Claims Under the Plan of
Reorganization
For purposes of the following discussion, the term "allowed"
when it applies to a claim means that the claim has been recognized as a valid
claim against the Debtors and is entitled to participate in the class to which
such claim belongs.
(a) Disputed Claims
Disputed claims include those claims (i) listed by any Debtor
in such Debtors' schedules of assets and liabilities, as may be amended from
time to time, as not liquidated in amount or contingent or disputed, (ii) to
which an objection or request for estimation has been filed and not withdrawn or
determined, (iii) for which a proof of claim has been filed and with respect to
which no corresponding claim is listed in the schedules or the corresponding
claim is listed as other than contingent, disputed, or unliquidated but for
which the nature or amount of the claim as filed differs from that listed in the
schedules, or (iv) asserting tort claims.
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(b) Objections to Claims
The Debtors shall be entitled to object to all claims. Any
objections to claims shall be served and filed on or before one hundred and
twenty (120) days after the Effective Date or such later date as may be fixed by
the Bankruptcy Court.
(c) No Distributions Pending Allowance
If any portion of a claim is a disputed claim, no payment or
distribution shall be made on account of the claim until the disputed portion of
the claim becomes an allowed claim or is otherwise resolved. Pending the
allowance or disallowance of the disputed claims, the Debtors shall withhold
from the payments and distributions made pursuant to the Plan of Reorganization
to the holders of allowed claims the payments and distributions allocable to the
disputed claims as if the disputed claims had been allowed claims.
(d) Distributions After Allowance
Once a disputed claim becomes an allowed claim, the holder of
such allowed claim shall receive a distribution in accordance with the
provisions of the Plan of Reorganization. If the holder is entitled to a cash
distribution under the Plan, the cash distribution shall include interest,
calculated at the average rate received by the Debtors in their deposit
accounts, from the Effective Date until the date of distributions. Cash
distributions shall be made as soon as practicable after the order allowing the
disputed claim becomes a Final Order. If the holder of a disputed claim which
becomes allowed after the Effective Date is entitled to New Common Stock or New
Warrants, the Disbursing Agent may distribute to such holder the amount of
shares of such securities as such holder would have received had such holder's
claim been allowed in such amount on the Effective Date. In the event dividend
distributions have been made with respect to the New Common Stock, such holder
shall be entitled to receive such previously distributed dividends without any
interest with respect thereto.
To the extent that a disputed claim is disallowed, the amount
of property withheld by the Debtors on account of such claim shall be retained
by the Debtors.
E. Treatment of Executory Contracts and Unexpired Leases
1. Contracts and Leases Not Expressly Rejected Are Assumed
All executory contracts and unexpired leases, except for those
expressly rejected by the Plan of Reorganization or by separate motion, are
assumed pursuant to the Plan of Reorganization, including the bonds executed by
Liberty Bond Services on behalf of the Debtors. The Plan of Reorganization
provides for the Debtors to reject those executory contracts and unexpired
leases specifically designated as a contract or lease to be rejected as
specified in the Schedule of Rejected Contracts attached to the Plan. Any time
prior to the first Business Day prior to the commencement of the hearing on
confirmation of the Plan of Reorganization, the Debtors may modify that list.
The Debtors will provide notice to the parties affected by any such amendment.
The Debtors expressly reserve the right to reject any contract in the event
there is a dispute concerning the amount necessary to cure defaults,
notwithstanding the fact that such dispute may arise after the confirmation of
the Plan.
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2. Cure of Defaults
Generally, if there has been a default (other than a default
specified in section 365(b)(2) of the Bankruptcy Code) under an executory
contract or unexpired lease, the debtor can assume the contract or lease only if
the debtor cures the default. Accordingly, a condition to the assumption of an
executory contract or unexpired lease is that any default under an executory
contract or unexpired lease that is to be assumed pursuant to the Plan of
Reorganization will be cured in a manner consistent with the Bankruptcy Code and
as set forth in the Plan of Reorganization.
3. Rejection Claims
If an entity with a claim for damages arising from the
rejection of an executory contract or unexpired lease under the Plan of
Reorganization has not filed a proof of claim for such damages, that claim shall
be barred and shall not be enforceable against the Debtors and the Reorganized
Debtors unless a proof of claim is filed with the Bankruptcy Court and served
upon counsel for the Debtors within thirty (30) days after the Confirmation
Date.
F. Management Incentive Plan
Reorganized Genesis will adopt a New Management Incentive Plan,
which will provide for grants of shares of New Common Stock and options to
purchase additional shares of New Common Stock to the senior managers of
Reorganized Genesis. The New Management Incentive Plan will include grants of
750,000 shares of New Common Stock which shall be allocated among 43 management
employees. Although all shares shall be allocated to this group, the exact
amount of shares allocated to each employee, as well as the establishment of the
vesting period (within the range of 3-5 years), will be determined by the new
board of directors for Reorganized Genesis or pursuant to agreement with the
steering committee for the holders of the Genesis Senior Lenders Claims and the
Multicare Senior Lender Claims.
The New Management Incentive Plan will also include options to
purchase 3,480,000 shares of New Common Stock, which shall be allocated among
129 management employees. As with the stock grants, the exact amount of shares
allocated to each employee, as well as the establishment of the vesting period
(within the range of 3-5 years), will be determined by the new board of
directors for Reorganized Genesis or pursuant to agreement with the steering
committee for the holders of the Genesis Senior Lenders Claims and the Multicare
Senior Lender Claims. The option exercise price will be $20.33 per share and is
based on the enterprise valuations described in this Disclosure Statement.
A copy of the New Management Incentive Plan is part of the Plan
Supplement.
G. Releases
The Plan of Reorganization includes two types of releases.
First, certain affiliates of the Genesis Debtors and the Multicare Debtors, that
are not Debtors in these reorganization cases, are obligors on the Debtors'
prepetition credit agreements. As part of the Plan, the holders of the Genesis
Senior Lender Claims and the Multicare Senior Lender Claims will release those
non-Debtors, provided that such entities become guarantors of the New Senior
Notes and assuming that the net worth of such entities is not significant.
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Second, the Plan provides for a release of all claims by the
Debtors against the officers, directors, employees, financial advisors,
professionals, accountants, and attorneys of the Debtors, the Genesis unsecured
creditors' committee, the Multicare unsecured creditors' committee, and Mellon
Bank, N.A., as agent for the holders of the Genesis Senior Lender Claims, the
Multicare Senior Lender Claims, and the lenders under the Debtors' postpetition
financing. This provision is intended to release all claims of the Debtors,
whether arising prepetition or postpetition, and based on any theory (whether
negligence, gross negligence, or willful misconduct) against these individuals.
The release is limited to claims that could be asserted by the Debtors and only
applies to claims against such parties in their representative capacity. The
Plan also provides that the releases may be further limited by the provisions of
the order of the Bankruptcy Court confirming the Plan and does not release
certain loan obligations of certain of the senior officers, except as provided
in a prior order of the Bankruptcy Court, dated February 23, 2001 (see section
VI.E.2, above).
The purpose of the release of the Genesis and Multicare
personnel is to prevent a collateral attack against those individuals based on
derivative actions. It is the intent of the Plan to bring finality to the
disruption caused by the reorganization of these companies. Because of the
extraordinary regulatory scrutiny which currently exists in the healthcare
industry, it is generally very difficult to retain qualified management. This
difficulty is compounded when the healthcare company is operating as a debtor in
possession under chapter 11 of the Bankruptcy Code. Despite these daunting
obstacles, management of the Debtors has not only continued to stay with the
company, but also made enormous contributions to the reorganization efforts and
the compromises set forth in the Plan. The Debtors are not aware of any pending
or threatened actions, whether civil or criminal, against the management of the
Debtors. However, in order to continue to retain the Debtors' management, it is
important that they be relieved of the threat of any derivative actions against
them personally by parties in these reorganization cases that may be
dissatisfied with the treatment provided in the Plan.
The purpose of the release of the representatives of the other
major constituencies in these cases, such as the creditors' committees, is to
protect the chapter 11 process for individuals who have contributed to the
restructuring process. The Debtors are not aware of any pending or threatened
actions against these representatives.
H. Effect of Confirmation
1. Discharge of Claims and Termination of Equity Interests
Except as otherwise provided in the Plan, confirmation of the
Plan of Reorganization will discharge all existing debts and claims and
terminate all equity interests, of any kind, nature, or description whatsoever,
against or in the Debtors or any of their assets or properties. All holders of
existing claims against and equity interests in the Debtors will be enjoined
from asserting against the Reorganized Debtors, or any of their assets or
properties, any other or further claim or equity interest based upon any act or
omission, transaction, or other activity that occurred prior to the Effective
Date, whether or not such holder has filed a proof of claim or proof of equity
interest. In addition, upon the Effective Date, each holder of a claim against
or equity interest in the Debtors shall be forever precluded and enjoined from
prosecuting or asserting any discharged claim against or terminated equity
interest in the Debtors or the Reorganized Debtors.
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2. Indemnification
The Plan provides for the assumption and continuation of normal
corporate indemnification provisions related to the protection of officers and
directors.
3. Exculpation
The Plan of Reorganization exculpates the Debtors, the
Disbursing Agent, the statutory committees of unsecured creditors appointed in
these reorganization cases, Mellon Bank, N.A., as administrative agent under,
and any lender under, the Genesis Senior Lender Agreements, the Multicare Senior
Lender Agreements, and the Revolving Credit and Guaranty Agreements described in
sections II.E.2, II.F.2, and VI.C, above, and their respective agents for
conduct relating to the prosecution of the reorganization cases. Specifically,
the Plan of Reorganization provides that neither the Debtors, the Disbursing
Agent, the statutory committees of unsecured creditors appointed in these
reorganization cases, nor their respective members, officers, directors,
employees, agents, or professionals shall have or incur any liability to any
holder of any claim or equity interest for any act or omission in connection
with, or arising out of, the reorganization cases, the confirmation of the Plan
of Reorganization, the consummation of the Plan of Reorganization, or the
administration of the Plan of Reorganization or property to be distributed under
the Plan of Reorganization, except for willful misconduct or gross negligence.
I. Preservation of Certain Avoidance Actions
The Debtors and the Reorganized Debtors are waiving all
avoidance actions except as set forth in the Plan Supplement.
J. Miscellaneous Provisions
The Plan of Reorganization contains provisions relating to the
cancellation of existing securities, corporate actions, the Disbursing Agent,
delivery of distributions, manner of payment, vesting of assets, binding effect,
term of injunctions or stays, injunction against interference with the Plan of
Reorganization, payment of statutory fees, retiree benefits, dissolution of the
statutory committees of unsecured creditors appointed in the reorganization
cases, recognition of guaranty rights, substantial consummation, compliance with
tax requirements, severablity, revocation, and amendment of the Plan of
Reorganization, governing law, and timing. For more information regarding these
items, see the Plan of Reorganization attached hereto as Exhibit A.
IX.
Certain Factors To Be Considered
A. Certain Bankruptcy Considerations
Although the Debtors believe that the Plan of Reorganization
will satisfy all requirements necessary for confirmation by the Bankruptcy
Court, there can be no assurance that the Bankruptcy Court will reach the same
conclusion. Moreover, there can be no assurance that modifications of the Plan
of Reorganization will not be required for confirmation or that such
modifications would not necessitate the resolicitation of votes. In addition,
although the Debtors believe that the Effective Date will occur soon after the
Confirmation Date, there can be no assurance as to such timing.
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The Plan of Reorganization provides for no distribution to
Classes G7 (Genesis Punitive Damage Claims), M7 (Multicare Punitive Damage
Claims), and equity interests in the Debtors. The Bankruptcy Code conclusively
deems these classes to have rejected the Plan of Reorganization. Notwithstanding
the fact that these classes are deemed to have rejected the Plan of
Reorganization, the Bankruptcy Court may confirm the Plan of Reorganization if
at least one impaired class with respect to the Genesis Debtors and one impaired
class with respect to the Multicare Debtors votes to accept the Plan of
Reorganization (with such acceptance being determined without including the vote
of any "insider" in such class). Thus, for the Plan of Reorganization to be
confirmed, (i) one of the impaired subclasses in Class G1 or one of Classes G2
(Genesis Senior Lender Claims), G4 (Genesis General Unsecured Claims), or G5
(Genesis Senior Subordinated Note Claims), and (ii) one of the impaired
subclasses in Class M1 or one of Classes M2 (Multicare Senior Lender Claims), M4
(Multicare General Unsecured Claims), or M5 (Multicare Senior Subordinated Note
Claims) must vote to accept the Plan of Reorganization. As to each impaired
class that has not accepted the Plan of Reorganization, the Plan of
Reorganization may be confirmed if the Bankruptcy Court determines that the Plan
of Reorganization "does not discriminate unfairly" and is "fair and equitable"
with respect to these classes. The Debtors believe that the Plan of
Reorganization satisfies these requirements. For more information, see section
XI.F, below.
B. Risks Relating to the Plan Securities
1. Variances from Projections
The projections included in this Disclosure Statement reflect
numerous assumptions concerning the anticipated future performance of the
Debtors and with respect to the prevailing market and economic conditions which
are beyond the control of the Debtors and which may not materialize. The
projections include assumptions concerning reimbursement rates with respect to
third party payors and patient mix, occupancy, the collectability of accounts
receivable, operating costs, and rent expense. The Debtors believe that the
assumptions underlying the projections are reasonable. However, unanticipated
events and circumstances occurring subsequent to the preparation of the
projections may affect the actual financial results of the Debtors. Therefore,
the actual results achieved throughout the periods covered by the projections
necessarily will vary from the projected results, which variations may be
material and adverse.
2. Substantial Leverage; Ability to Service Debt
The Reorganized Debtors will have substantial indebtedness. On
the Effective Date, after giving effect to the transactions contemplated by the
Plan of Reorganization, the Reorganized Debtors will have approximately $624
million in secured indebtedness. Although this level of debt represents
significantly less leverage than many of the Debtors' competitors, significant
amounts of cash flows will be necessary to make payments of interest and repay
the principal amount of this indebtedness.
3. Significant Holders
Under the Plan of Reorganization, certain holders of allowed
claims may receive distributions of shares in Reorganized Genesis representing
in excess of five percent (5%) of the outstanding shares of New Common Stock. If
holders of a significant number of shares of Reorganized Genesis were to act as
a group, such holders may be in a position to control the outcome of actions
requiring shareholder approval, including the election of directors. Further,
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the possibility that one or more of the holders of a number of shares of
Reorganized Genesis may determine to sell all or a large portion of their shares
in a short period of time may adversely affect the market price of the stock of
Reorganized Genesis.
4. Lack of Trading Market
Reorganized Genesis will use reasonable commercial efforts to
cause the shares of New Common Stock to be listed on a national securities
exchange or a qualifying interdealer quotation system as soon as practicable
following the Effective Date. There can be no assurance, however, that the New
Common Stock will be listed on such exchange or system. Accordingly, there can
be no assurance that a holder of such securities will be able to sell such
shares in the future or as to the price at which such shares might trade.
5. Dividend Policies
Because all of the Debtors' cash flows will be used in the
foreseeable future to make payments under the exit facility that will be entered
into in connection with the emergence from chapter 11 and under certain of the
Plan Securities, Reorganized Genesis does not anticipate paying dividends on the
New Common Stock in the near future.
6. Restrictions on Transfer
Holders of Plan Securities who are deemed to be "underwriters"
as defined in section 1145(b) of the Bankruptcy Code, including holders who are
deemed to be "affiliates" or "control persons" within the meaning of the
Securities Act, will be unable freely to transfer or to sell their securities
except pursuant to (i) "ordinary trading transactions" by a holder that is not
an "issuer" within the meaning of section 1145(b), (ii) an effective
registration of such securities under the Securities Act and under equivalent
state securities or "blue sky" laws, or (iii) pursuant to the provisions of Rule
144 under the Securities Act or another available exemption from registration
requirements. For a more detailed description of these matters, see section
II.J, above.
C. Risks Associated with the Business
The following categories of risks associated with the Debtors'
businesses are set forth in their respective Form 10-Ks, which have been filed
with the Securities and Exchange Commission: Risk Associated with Reimbursement
Process; Reduced Revenues Resulting from Prospective Payment System; Self-Funded
Insurance; Competitive Conditions; Collectability of Certain Accounts
Receivable; Risks Related to Investigations and Legal Proceedings; Risk Of
Adverse Effect Of Future Healthcare Reform; Potential Adverse Effect of Change
in Revenue Sources; Potential Adverse Impact from Extensive Regulation; Risk of
International Operations; Foreign Exchange Risk; and Increased Labor Costs.
Please refer to those SEC filings for a further discussion on this topic.
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X.
Confirmation of the Plan of Reorganization
A. Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy
Court, after appropriate notice, to hold a hearing on confirmation of a plan of
reorganization. The confirmation hearing is scheduled for August 28, 2001 (and
August 29, 2001 if necessary), at 9:30 a.m., Eastern Time, before the Honorable
Judith H. Wizmur, United States Bankruptcy Court for the District of New Jersey,
Mitchell H. Cohen Courthouse, Courtroom 4B, 4th and Cooper Street, Camden, New
Jersey 08101. The confirmation hearing may be adjourned from time to time by the
Debtors or the Bankruptcy Court without further notice except for an
announcement of the adjourned date made at the confirmation hearing or any
subsequent adjourned confirmation hearing.
Section 1128(b) of the Bankruptcy Code provides that any party
in interest may object to confirmation of a plan of reorganization. Any
objection to confirmation of the Plan of Reorganization must be in writing, must
conform to the Federal Rules of Bankruptcy Procedure, must set forth the name of
the objector, the nature and amount of claims or interests held or asserted by
the objector against the particular Debtor or Debtors, the basis for the
objection and the specific grounds therefor, and must be filed with the
Bankruptcy Court, with a copy to Chambers, together with proof of service
thereof, and served upon (i) Weil, Gotshal & Manges LLP, Co-Attorneys for the
Genesis Debtors and Debtors in Possession, 767 Fifth Avenue, New York, New York
10153, Attention: Michael F. Walsh, Esq.; (ii) Richards, Layton & Finger PA,
Co-Attorneys for the Genesis Debtors and Debtors in Possession, One Rodney
Square, P.O. Box 551, Wilmington, Delaware 19899, Attention: Mark D. Collins,
Esq.; (iii) Willkie, Farr & Gallagher, Co-Attorneys for the Multicare Debtors
and Debtors in Possession, 787 Seventh Avenue, New York, New York 10019,
Attention: Marc Abrams, Esq.; (iv) Young, Conaway, Stargatt & Taylor,
Co-Attorneys for the Multicare Debtors and Debtors in Possession, 11th Floor,
Wilmington Trust Company, P.O. Box 391, Wilmington, Delaware 19899-0391,
Attention: James J. Patton, Esq.; (v) The United States Trustee for the District
of Delaware, Attention: Joseph McMahon, Esq., 601 Walnut Street, Suite 950 West,
Philadelphia, Pennsylvania 19106; (vi) Akin, Gump, Strauss, Hauer & Feld,
L.L.P., Co-Attorneys for the Official Committee of Unsecured Creditors for the
Genesis Debtors, 590 Madison Avenue, New York, New York 10022, Attention: Lisa
Beckerman, Esq.; (vii) Pachulski Stang Ziehl Young & Jones PC, Co-Attorneys for
the Official Committee of Unsecured Creditors for the Genesis Debtors, 919 N.
Market Street, 16th Floor, P.O. Box 8075, Wilmington, Delaware 19899-8705,
Attention: Laura Davis Jones, Esq., (viii) Kasowitz, Benson, Torres & Friedman
LLP, Co-Attorneys for the Official Committee of Unsecured Creditors for the
Multicare Debtors, 1633 Broadway, New York, New York 10019, Attention: David
Rosner, Esq.; (ix) Saul, Ewing, Remick & Saul LLP, Co-Attorneys for the Official
Committee of Unsecured Creditors for the Multicare Debtors, 222 Delaware Avenue,
Suite 1200, P.O. Box 1266, Wilmington, Delaware 19899-1266, Attention: Norman
Pernick, Esq., (x) Morgan, Lewis & Bockius LLP, Co-Attorneys for Agent for the
Prepetition Senior Secured Lenders and Postpetition Lenders, 101 Park Avenue,
New York, New York 10178-0060, Attention: Richard S. Toder, Esq., and (xi) Klett
Rooney Lieber & Schorling, Co-Attorneys for Agent for the Prepetition Senior
Secured Lenders and Postpetition Lenders, 1000 West Street, Suite 1410,
Wilmington, Delaware 19801, Attention: Teresa Currier, Esq.
Objections to confirmation of the Plan of Reorganization are
governed by Rule 9014 of the Federal Rules of Bankruptcy Procedure. UNLESS AN
OBJECTION TO
85
CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE
BANKRUPTCY COURT.
B. General Requirements of Section 1129
At the confirmation hearing, the Bankruptcy Court will
determine whether the following confirmation requirements specified in section
1129 of the Bankruptcy Code have been satisfied:
1. The Plan complies with the applicable provisions of the
Bankruptcy Code.
2. The Debtors have complied with the applicable provisions of the
Bankruptcy Code.
3. The Plan has been proposed in good faith and not by any means
proscribed by law.
4. Any payment made or promised by the Debtors or by a person
issuing securities or acquiring property under the Plan for
services or for costs and expenses in, or in connection with,
the chapter 11 cases, or in connection with the Plan and
incident to the chapter 11 cases, has been disclosed to the
Bankruptcy Court, and any such payment made before the
confirmation of the Plan is reasonable or if such payment is to
be fixed after confirmation of the Plan, such payment is
subject to the approval of the Bankruptcy Court as reasonable.
5. The Debtors have disclosed the identity and affiliations of
any individual proposed to serve, after confirmation of the
Plan, as a director, officer, or voting trustee of the Debtors,
affiliates of the Debtors participating in the Plan with the
Debtors, or a successor to the Debtors under the Plan, and the
appointment to, or continuance in, such office of such
individual is consistent with the interests of creditors and
equity holders and with public policy, and the Debtors have
disclosed the identity of any insider that will be employed or
retained by the Debtors, and the nature of any compensation for
such insider.
6. With respect to each class of claims or equity interests, each
holder of an impaired claim or impaired equity interest either
has accepted the Plan or will receive or retain under the Plan
on account of such holder's claim or equity interest, property
of a value, as of the Effective Date, that is not less than
the amount such holder would receive or retain if the Debtors
were liquidated on the Effective Date under chapter 7 of the
Bankruptcy Code. See discussion of "Best Interests Test,"
below.
7. Except to the extent the Plan meets the requirements of section
1129(b) of the Bankruptcy Code (discussed below), each class of
claims or equity interests has either accepted the Plan or is
not impaired under the Plan. Classes G7 (Genesis Punitive
Damage Claims), G8 (Genesis Series G Preferred Stock
Interests), G9 (Genesis Series H Preferred Stock Interests),
G10 (Genesis Series I Preferred Stock Interests), G11 (Genesis
Common Stock Interests), M7 (Multicare Punitive Damage Claims),
and M8 (Multicare Common Stock Interests) are deemed to have
rejected the Plan and thus the Plan can be confirmed only if
the requirements of section 1129(b) of the Bankruptcy Code are
met.
86
8. Except to the extent that the holder of a particular claim has
agreed to a different treatment of such claim, the Plan
provides that Administrative Expense Claims and Priority
Non-Tax Claims will be paid in full on the Effective Date and
that Priority Tax Claims will receive on account of such claims
deferred cash payments, over a period not exceeding six (6)
years after the date of assessment of such claims, of a value,
as of the Effective Date, equal to the allowed amount of such
claims.
9. At least one class of impaired claims has accepted the Plan,
determined without including any acceptance of the Plan by any
insider holding a claim in such class.
10. Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further financial reorganization of
the Debtors or any successor to the Debtors under the Plan,
unless such liquidation or reorganization is proposed in the
Plan. See discussion of "Feasibility," below.
11. The Plan provides for the continuation after the Effective Date
of payment of all retiree benefits (as defined in section 1114
of the Bankruptcy Code), at the level established pursuant to
section 1114(e)(1)(B) or 1114(g) of the Bankruptcy Code at any
time prior to confirmation of the Plan, for the duration of the
period the Debtors have obligated themselves to provide such
benefits.
C. Best Interests Tests
As described above, the Bankruptcy Code requires that each
holder of an impaired claim or equity interest either (i) accept the Plan or
(ii) receive or retain under the Plan property of a value, as of the Effective
Date, that is not less than the value such holder would receive if the Debtors
were liquidated under chapter 7 of the Bankruptcy Code.
The first step in determining whether this test has been
satisfied is to determine the dollar amount that would be generated from the
liquidation of the Debtors' assets and properties in the context of a chapter 7
liquidation case. The gross amount of cash that would be available for
satisfaction of claims and equity interests would be the sum consisting of the
proceeds resulting from the disposition of the unencumbered assets and
properties of the Debtors, augmented by the unencumbered cash held by the
Debtors at the time of the commencement of the liquidation case.
The next step is to reduce that gross amount by the costs and
expenses of liquidation and by such additional administrative and priority
claims that might result from the termination of the Debtors' business and the
use of chapter 7 for the purposes of liquidation. Any remaining net cash would
be allocated to creditors and shareholders in strict priority in accordance with
section 726 of the Bankruptcy Code. Finally, the present value of such
allocations (taking into account the time necessary to accomplish the
liquidation) are compared to the value of the property that is proposed to be
distributed under the Plan on the Effective Date.
The Debtors' costs of liquidation under chapter 7 would include
the fees payable to a trustee in bankruptcy, as well as those fees that might be
payable to attorneys and other professionals that such a trustee might engage.
Other liquidation costs include the expenses incurred during the chapter 11
cases allowed in the chapter 7 case, such as compensation for attorneys,
financial advisors, appraisers, accountants, and other professionals for the
Debtors and statutory committees of unsecured creditors appointed in the chapter
11 cases, and costs and
87
expenses of members of the statutory committee of unsecured creditors, as well
as other compensation claims. In addition, claims would arise by reason of the
breach or rejection of obligations incurred and leases and executory contracts
assumed or entered into by the Debtors during the pendency of the chapter 11
cases.
The foregoing types of claims, costs, expenses, fees, and such
other claims that may arise in a liquidation case would be paid in full from the
liquidation proceeds before the balance of those proceeds would be made
available to pay prepetition priority and unsecured claims. The Debtors believe
that in a chapter 7 case, Classes G4 (other than insured claims to the extent of
such insurance), G5, G6, G7, G8, G9, G10, G11, M4 (other than insured claims to
the extent of such insurance), M5, M6, M7, and M8 would receive no distribution
of property.
After consideration of the effects that a chapter 7 liquidation
would have on the ultimate proceeds available for distribution to creditors in
the chapter 11 cases, including (i) the increased costs and expenses of a
liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy
and professional advisors to such trustee, (ii) additional costs associated with
the rapid transfer or cessation of operations at the facilities and the erosion
in value of assets in a chapter 7 case in the context of the expeditious
liquidation required under chapter 7 and the "forced sale" atmosphere that would
prevail, and (iii) the substantial increases in claims that would be satisfied
on a priority basis, the Debtors have determined that confirmation of the Plan
will provide each holder of an allowed claim with a recovery that is not less
than such holder would receive pursuant to liquidation of the Debtors under
chapter 7.
The Debtors also believe that the value of any distributions to
each class of allowed claims in a chapter 7 case, including all secured claims,
would be less than the value of distributions under the Plan because such
distributions in a chapter 7 case would not occur for a substantial period of
time. In this regard, it is possible that distribution of the proceeds of the
liquidation could be delayed for one or more years or more after the completion
of such liquidation in order to resolve claims and prepare for distributions. In
the event litigation was necessary to resolve claims asserted in a chapter 7
case, the delay could be prolonged and administrative expenses increased.
The Debtors' liquidation analysis is an estimate of the
proceeds that may be generated as a result of a hypothetical chapter 7
liquidation of the Debtors. The analysis is based on a number of significant
assumptions which are described. The liquidation analysis does not purport to be
a valuation of the Debtors' assets and is not necessarily indicative of the
values that may be realized in an actual liquidation.
D. Liquidation Analyses
The liquidation analyses has been prepared in consultation with
the auditors of Genesis and Multicare. The full reports, including assumptions
for each company, are included in the Plan Supplement.
88
1. The Genesis Debtors
Notes Unaudited Asset Realization Liquidation Values
Ref Book Value Scenario I Scenario II Scenario I Scenario II
----- ---------- ---------- ----------- ---------- -----------
Statement of Assets ($000)
Cash & equivalents A $ 806 100% 100% $ 806 $ 806
Restricted investments in marketable securities B 31,697 0% 0% - -
Accounts receivable (net) C 404,770 39% 53% 157,860 214,528
Inventory D 65,011 0% 0% - -
Prepaid expenses and other current assets E 45,884 21% 36% 9,636 16,518
Proceeds from the sale of operating entities F N/A N/A 273,635 478,557
Property, plant and equipment G 537,215 N/A N/A 11,893 22,436
Notes receivable and other investments H 38,881 48% 63% 18,663 24,495
Other long term assets I 114,222 16% 24% 18,276 27,413
Investments in unconsolidated affiliates J 56,801 0% 0% - -
Goodwill and other intangibles K 890,888 0% 0% - -
Avoidance & contingency claims L Unknown Unknown
---------- ---------- ----------
Total liquidated proceeds 2,186,175 22.45% 35.90% 490,769 784,753
---------- ---------- ----------
Estimated Recovery
Scenario I Scenario II
---------- -----------
CHAPTER 7 ADMINISTRATIVE CLAIMS - Section 503(b)
Trustee & Receiver fees M 14,747 23,599
Counsel for Trustee N 7,374 11,800
Other professional fees O 13,200 13,200
Estimated liquidation costs P 39,262 62,780
---------- ----------
TOTAL CHAPTER 7 ADMINISTRATIVE CLAIMS 74,583 111,379
---------- ----------
Net Estimated Recovery - Chapter 7 Admin Claims 100% 100%
Net Estimated Proceeds Available for Distribution $ 416,186 $ 673,374
Estimated
Balance
---------
SECURED CLAIMS
DIP Financing Q 180,000 100% 100% 180,000 180,000
G1 miscellaneous mortgage claims R 120,385 28% 45% 33,765 54,631
G2 senior lender claims R 1,198,460 17% 37% 202,421 438,743
---------- ---------- ----------
TOTAL SECURED CLAIMS 1,498,845 416,186 673,374
---------- ---------- ----------
Net Estimated Proceeds Available for Distribution After Secured Claims $ 0 $ 0
ADMINISTRATIVE CLAIMS
Post petition trade creditor claims S 47,655 0% 0% - -
Accrued salaries, wages, and other compensation T 51,753 0% 0% - -
---------- ---------- ----------
TOTAL ADMINISTRATIVE CLAIMS 99,408 - -
---------- ---------- ----------
Balance available for distribution to priority creditors $ 0 $ 0
PRIORITY CLAIMS (G3)
Accrued salaries, wages, and other compensation U 17 0% 0% - -
89
Notes Unaudited Asset Realization Liquidation Values
Ref Book Value Scenario I Scenario II Scenario I Scenario II
----- ---------- ---------- ----------- ---------- -----------
Taxes U 11,508 0% 0% - -
Other claims U 2,056 0% 0% - -
---------- ---------- ----------
TOTAL PRIORITY CLAIMS 13,581 - -
---------- ---------- ----------
Balance available for distribution to unsecured creditors $ 0 $ 0
GENERAL UNSECURED CLAIMS
G4 general unsecured claims V 80,761 0% 0% - -
G5 senior subordinated note claims W 387,425 0% 0% - -
---------- ---------- ----------
TOTAL GENERAL UNSECURED CLAIMS 468,186 - -
---------- ---------- ----------
Notes to Genesis Liquidation Analysis
GENERAL ASSUMPTIONS
1 This Liquidation Analysis was prepared in accordance with section
1129(a)(7)(A)(ii) of the Bankruptcy Code to determine that the Plan of
Reorganization is in the best interest of each holder of a claim or
interest.
2 The Liquidation Analysis is based upon a number of estimates and
assumptions that, although developed and considered reasonable by the
management of Genesis, are inherently subject to significant economic,
business, governmental regulation, competitive uncertainties, and
contingencies beyond the control of Genesis or its management. The
Liquidation Analysis is also based on assumptions with regard to
liquidation decisions that are subject to change. Accordingly, there can be
no assurance that the values reflected in this Liquidation Analysis would
be realized if Genesis were, in fact, to undergo such a liquidation and
actual results could vary materially and adversely from those contained
herein.
3 This analysis assumes the conversion of the current chapter 11 cases to
chapter 7 cases with the liquidation of the company's assets being
finalized over a six-month period. A chapter 7 trustee would be either
elected by creditors or appointed by the Bankruptcy Court to administer the
estates. The chapter 7 trustee is independent and would be entitled to make
all of his or her own decisions regarding the liquidation of the estates,
the hiring of professionals, the pursuit of claims or litigation, the
payment of or objection to claims, and the distribution of any ultimate
dividend. The chapter 7 trustee would be compensated in accordance with
section 326 of the Bankruptcy Code.
4 The Liquidation Analysis assumes that Genesis's captive insurance business
would be liquidated separately, and accordingly, that business is excluded
from this analysis. It is assumed that this Liquidation Analysis includes
all other assets of Genesis, including investments in subsidiaries not
currently in bankruptcy. It is assumed that all operating assets would be
disposed of through sale, liquidation, and/or termination as appropriate.
5 The Liquidation Analysis uses Genesis's unaudited financial statements as
of December 31, 2000, and other figures estimated by Genesis's management.
6 Genesis operates skilled nursing and assisted living eldercare facilities
("centers"). The skilled nursing centers offer three levels of care to
their customers: skilled, intermediate, and personal. This analysis assumes
that the majority of these centers will be sold as a going-concern over the
six-month liquidation period. Genesis believes a six-month liquidation
period is sufficient to allow for an orderly transfer of operations to
acquirers. During this time, certain personnel would be retained as
necessary to support the completion of the sale and liquidation process.
90
7 Management has assumed that those centers generating negative earnings will
be either closed within the six month liquidation period or involuntarily
placed into receivership by various state authorities as a result of
Genesis's conversion to a chapter 7 case.
8 Genesis operates pharmacy and medical supply services that provide
prescription and nonprescription pharmaceuticals, infusion therapy, medical
supplies, and equipment to elderly, chronically ill, and disabled patients
in long-term care and alternative site settings. Genesis also operates
community-based pharmacies which are located in or near medical centers,
hospitals, and physician office complexes. This analysis assumes that
Genesis's pharmacy services will be sold as a going-concern over the
six-month liquidation period. Genesis believes a six-month liquidation
period is sufficient to allow for an orderly transfer of operations to
acquirers. During this time, certain personnel would be retained as
necessary to support the completion of the sale and liquidation process.
9 Genesis provides physical, speech, and occupational rehabilitation
services. This analysis assumes that Genesis's rehabilitation services will
be sold as a going-concern over the six-month liquidation period. Genesis
believes a six-month liquidation period is sufficient to allow for an
orderly transfer of operations to acquirers. During this time, certain
personnel would be retained as necessary to support the completion of the
sale and liquidation process.
10 Genesis provides other ancillary services including group purchasing,
hospitality services, respiratory health services, diagnostic services,
home healthcare, and other miscellaneous healthcare, management, and
consulting services. This analysis assumes that Genesis's other ancillary
services will be sold as a going-concern over the six-month liquidation
period. Genesis believes a six-month liquidation period is sufficient to
allow for an orderly transfer of operations to acquirers. During this time,
certain personnel would be retained as necessary to support the completion
of the sale and liquidation process.
11 This liquidation analysis assumes that all assets of the Genesis Debtors
will be liquidated during the six-month liquidation period. There can be no
assurances made that all assets will be completely liquidated during this
time period.
12 For purposes of this analysis, management has assumed a high and low range
of liquidation scenarios entitled Scenario I and II.
NOTES TO ASSET ACCOUNTS
A Cash & equivalents. The Liquidation Analysis assumes no further cash would
be generated during the chapter 7 cases for distribution, except for net
proceeds from the disposition of noncash assets. It is assumed that the
cash at the date of the actual liquidation would be equal to the cash
balance as of December 31, 2000. That cash would be fully available for
distribution to creditors.
B Restricted investments in marketable securities. This amount represents
investments in marketable securities held by Genesis's captive insurance
subsidiary which did not file for bankruptcy. Restricted investments in
marketable securities would not be available in Genesis's chapter 7
liquidation. All outstanding liabilities (potential claims) in connection
with Genesis's captive insurance subsidiary are omitted from this analysis.
C Accounts receivable. Genesis will retain ownership of the accounts
receivable for all entities. The chapter 7 trustee will bill and collect
these receivables. For purposes of this analysis, management anticipates
recovering between 39% and 53% of net accounts receivable. These
percentages are based upon a review of the detailed aging balance for the
various payers. Management has assessed the potential recoverability for
these receivables based on payer-mix and the days outstanding of these
receivables.
91
Below are the recovery percentages applied for the nursing centers:
Medicare/Medicaid Managed Care/Private
----------------- --------------------
Scenario I Scenario II Scenario I Scenario II
---------- ----------- ---------- -----------
Current 80% 95% 75% 90%
-------
31 - 60 65% 85% 55% 75%
-------
61 - 90 55% 80% 45% 65%
-------
91 - 120 30% 60% 25% 55%
--------
121 - 365 15% 35% 10% 30%
---------
Over 365 0% 0% 0% 0%
--------
Below are the recovery percentages applied for the pharmacy and medical
supply division:
Medicare/Medicaid Managed Care/Private
----------------- --------------------
Scenario I Scenario II Scenario I Scenario II
---------- ----------- ---------- -----------
Current 75% 90% 70% 85%
-------
31 - 60 60% 80% 50% 70%
-------
61 - 90 50% 75% 40% 60%
-------
91 - 120 25% 55% 20% 50%
--------
121 - 365 10% 30% 5% 25%
---------
Over 365 0% 0% 0% 0%
--------
Certain trade receivables are due from a related entity - Multicare - for
prepetition services rendered. It is estimated that no recovery will be made
from these receivables.
All other receivables from rehabilitation and other ancillary services represent
approximately 5% of net receivables. The cash recovery value for these other
receivables was estimated by applying the aggregate recovery percentage average
for nursing and pharmacy receivables.
The estimate herein reflects management's approximation of the recoverable value
of these receivables during the six-month liquidation period.
D Inventory. For purposes of this analysis, it is assumed that inventory will
be included in the sale of going-concern entities and is therefore not
projected.
E Prepaid expenses and other current assets. This asset account consists
primarily of miscellaneous receivables, prepaid rents, prepaid property
taxes, and prepaid insurance. Management has reviewed the individual
account balances for this account and has estimated that in aggregate
approximately $9 million and $17 million will be recovered under a
liquidation scenario.
F Proceeds from the sale of operating entities. The proceeds from the
distressed sale of going-concern operations is estimated to be in the range
of $274 million to $479 million. The entities sold include Genesis's
inpatient nursing centers, pharmacy business, rehabilitation services, and
other ancillary businesses. The values estimated for those businesses are
based upon various earnings multiples for distressed going concern
operations which management considers reasonable.
The enterprise value for these entities was determined by applying these
multiples to a normalized earnings for Genesis. The 2001 projected earnings
(EBITDA) were adjusted to reflect the following:
- current operations through January 31, 2001;
- the elimination of negative earnings for underperforming entities
likely to be closed;
- allocation of corporate overhead to the operating businesses
92
A range of multiple of earnings was then applied to this "normalized
EBITDA" to estimate enterprise value for these entities. The calculated
enterprise value was then further reduced by the secured debt and current
liabilities from nonbankrupt subsidiaries of Genesis. It is assumed that
any secured debt and current liabilities of the nonbankrupt entities would
be paid upon sale of the business units.
G Property, plant & equipment.
i. Centers, Pharmacy, Rehabilitation, and Other Ancillary Services:
Property, plant, and equipment will be included in the sale as a going
concern.
ii. Corporate Division: Property, plant, and equipment net of accumulated
depreciation is approximately $70 million. The liquidation recovery as
a percentage of cost is assumed to be the following: Buildings & Land
(25% - 50%), Equipment (10% - 20%), Computer Equipment (10% - 15%),
and construction in progress (10% - 21%).
H Notes receivable and other investments. This asset account is comprised of
loans made to various third parties, including managed and jointly-owned
properties. Management has reviewed the various notes receivables and
investments to determine potential recoveries under a liquidation scenario.
It is estimated that Genesis would be able to recover approximately $19
million and $24 million from these receivables and investments.
I Other long-term assets. This asset account is primarily comprised of real
estate deposits, deferred financing costs, a deferred management fee due
from Multicare, net receivables from CMS and other third-party payors.
Management estimates that approximately $18 million and $27 million will be
recovered under a liquidation scenario.
J Investments in unconsolidated affiliates. The majority of the investments
in unconsolidated affiliates is with Multicare. Management of Genesis
assigns no recoverability for this asset.
K Goodwill and other intangibles. Goodwill and other intangible assets are
estimated to have no liquidation recovery value.
L Avoidance & contingency claims. The Genesis Debtors may have certain rights
for avoidance actions and other contingency claims that may benefit the
estate. It is unknown at this time the total benefit that these claims may
generate for the estates if the Genesis Debtors were successful in
litigating these matters.
NOTES TO CHAPTER 7 ADMINISTRATIVE CLAIMS
M Trustee & Receiver fees. Compensation for the chapter 7 trustee will be
limited to fee guidelines in section 326 of the Bankruptcy Code.
N Counsel for Trustee. Compensation for trustee's counsel is estimated at 50%
of estimated trustee fees.
O Other professional fees. Management estimates that professional fees for
legal, financial, and other advice relating to the bankruptcy proceedings
will be $1.7 million per month for the first three months of the
liquidation process. It is anticipated that professional fees would reduce
to $1 million per month for the subsequent three months. In addition, there
was approximately $5.1 million owing in relation to fees outstanding from
the Commencement Date to December 31, 2000.
P Liquidation costs. For purposes of this analysis, liquidation costs are
estimated as 8% of total liquidated proceeds.
93
NOTES TO SECURED CLAIMS
Q DIP financing. The administrative claim owing in relation to DIP Financing
has been estimated as the amount outstanding as disclosed in the Debtors'
borrowing base certificate as of May 31, 2001.
R Secured Claims. Amount of liability represented herein is based on proof of
claims filed by the various claimants.
NOTES TO ADMINISTRATIVE CLAIMS
S Postpetition trade creditor claims. This amount represents the trade
creditor debt incurred during the Genesis reorganization cases payable as
an administrative claim.
T Accrued salaries, wages, and other compensation. Amount represents
salaries, wages, and other compensation incurred pre- and postpetition
subject to Bankruptcy Court order.
NOTES TO PRIORITY CLAIMS
U Priority Claims. Amount represents section 507 claims.
NOTES TO UNSECURED CLAIMS
V General unsecured - Class G4 claims. Amount represents trade creditor debt
outstanding as of the Commencement Date. Although not specifically shown,
technically, this class would also include deficiency claims from Classes
G1 and G2.
W Unsecured debt - Class G5 claims. Amount represents claims under certain
prepetition senior subordinated notes.
Best Interest Comparison
Liquidation Recovery Chapter 11
Class Low High Recovery
G1 (Misc Secured Claims) 28% 45% 100.00%
G2 (Genesis Senior Lender Claims 17% 37% 78.89%
G3 (Priority Claims) 0% 0% 100.00%
G4 (Genesis General Unsecured Claims) 0% 0% 7.34%
G5 (Genesis Sr Subordinated Note Claims) 0% 0% 7.34%
G7 (Genesis Punitive Damage Claims) 0% 0% 0.00%
2. Multicare Debtors
Asset Realization Liquidation Values
Notes Unaudited
Ref Book Value Scenario I Scenario II Scenario I Scenario II
----- ---------- ---------- ----------- ---------- -----------
Statement of Assets ($000)
Cash and equivalents A $ 19,070 100% 100% $ 19,070 $ 19,070
Accounts receivable, net B 104,581 46% 63% 48,107 65,886
Prepaid expenses and other current assets C 15,876 15% 29% 2,381 4,604
Proceeds from the sale of operating entities D N/A N/A 83,672 148,731
Property, plant and equipment, net E 559,963 0% 0% - -
94
Asset Realization Liquidation Values
Notes Unaudited
Ref Book Value Scenario I Scenario II Scenario I Scenario II
----- ---------- ---------- ----------- ---------- -----------
Other long-term assets F 62,052 N/A N/A 5,000 10,000
Goodwill and other intangibles, net G 335,147 0% 0% - -
Avoidance & contingency claims H Unknown Unknown
---------- ---------- ----------
Total $1,096,689 14.4% 22.6% $ 158,230 $ 248,291
========== ========== ==========
CHAPTER 7 ADMINS - Section 503(b)
Trustee & Receiver fees I 4,771 7,473
Counsel for Trustee J 2,386 3,737
Other professional fees K 8,252 8,252
Estimated liquidation costs L 12,658 19,863
---------- ----------
TOTAL CHAPTER 7 ADMIN CLAIMS 28,067 39,325
---------- ----------
Net Estimated Recovery - Chapter 7 Admin Claims 100% 100%
Net Estimated Proceeds Available for Distribution $ 130,163 $ 208,966
SECURED CLAIMS
DIP financing M - - -
M1 miscellaneous mortgage claims N 27,854 28% 44% 7,693 12,351
M2 senior lender claims N 443,400 28% 44% 122,470 196,615
---------- ---------- ----------
TOTAL SECURED CLAIMS 471,254 130,163 208,966
---------- ---------- ----------
Net Estimated Proceeds available for distribution $ 0 $ 0
ADMINISTRATIVE CLAIMS
Postpetition trade creditor claims O 23,755 0% 0% - -
Accrued salaries, wages, and other compensation P 13,594 0% 0% - -
---------- ---------- ----------
TOTAL ADMINISTRATIVE CLAIMS 37,349 - -
---------- ---------- ----------
Balance available for distribution to priority
creditors $ 0 $ 0
PRIORITY CLAIMS (M3)
Accrued salaries, wages, and other compensation Q 50 0% 0% - -
Taxes Q 5,570 0% 0% - -
Other claims Q 405 0% 0% - -
---------- ---------- ----------
TOTAL PRIORITY CLAIMS 6,025 - -
---------- ---------- ----------
Balance available for distribution to general
unsecured creditors $ 0 $ 0
GENERAL UNSECURED CLAIMS
M4 General Unsecured Claims R 26,439 0% 0%
M5 Unsecured Debt S 257,817 0% 0% - -
---------- ---------- ----------
TOTAL GENERAL UNSECURED CLAIMS 284,256 - -
---------- ---------- ----------
95
Notes to Multicare Liquidation Analysis
GENERAL ASSUMPTIONS
1 This Liquidation Analysis was prepared in accordance with section
1129(a)(7)(A)(ii) of the Bankruptcy Code to determine that the Plan of
Reorganization is in the best interest of each holder of a claim or
interest.
2 The Liquidation Analysis is based upon a number of estimates and
assumptions that, although developed and considered reasonable by
Multicare's management, are inherently subject to significant economic,
business, governmental regulation, competitive uncertainties, and
contingencies beyond the control of Multicare or its management. The
Liquidation Analysis is also based upon assumptions with regard to
liquidation decisions that are subject to change. Accordingly, there can be
no assurance that the values reflected in this Liquidation Analysis would
be realized if Multicare were, in fact, to undergo such a liquidation and
actual results could vary materially and adversely from those contained
herein.
3 This analysis assumes the conversion of the current chapter 11 cases to
chapter 7 cases with the liquidation of the company's assets being
finalized over a six-month period. A chapter 7 trustee would be appointed
to administer the estates. The chapter 7 trustee is independent and would
be entitled to make all of his or her own decisions regarding the
liquidation of the estates, the hiring of professionals, the pursuit of
claims or litigation, the payment of or objection to claims, and the
distribution of any ultimate dividends. The chapter 7 trustee would be
compensated in accordance with section 326 of the Bankruptcy Code.
4 It is assumed that this Liquidation Analysis includes all assets of the
parent company, including investments in subsidiaries not currently in
bankruptcy. It is assumed that all operating assets would be disposed of
through sale, liquidation, and/or termination as appropriate.
5 The Liquidation Analysis utilizes Multicare's unaudited financial
statements as of December 31, 2000, and other figures estimated by
management.
6 This analysis assumes that the majority of inpatient services assets will
be sold as a going-concern over the six-month liquidation period. Multicare
believes a six-month liquidation period is sufficient to allow for an
orderly transfer of operations to acquirers. During this time, certain
personnel would be retained as necessary to support the completion of the
sale and liquidation process.
7 Management has assumed that those centers generating negative earnings will
be either closed within the six month liquidation period or involuntarily
placed into receivership by various state authorities as a result of
Multicare's conversion to a chapter 7 case.
8 This Liquidation Analysis assumes that all assets of the Multicare Debtors
will be liquidated during the six-month liquidation period. There can be no
assurances made that all assets will be completely liquidated during this
time period.
9 For purposes of this analysis, management has assumed a high and low range
of liquidation scenarios entitled Scenario I and II.
NOTES TO ASSET ACCOUNTS
A Cash & equivalents. The Liquidation Analysis assumes no further cash would
be generated during the chapter 7 case for distribution, except for net
proceeds from the disposition of noncash assets. It is assumed that the
available cash at the date of liquidation would be equal to the cash
balance as of December 31, 2000. That cash would be fully available for
distribution to creditors.
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B Accounts receivable. Multicare will retain ownership of the accounts
receivable for all entities. The trustee will bill and collect these
receivables. For purposes of this analysis, management anticipates
recovering between 46% and 63% of net accounts receivable. These
percentages are based upon a review of the detailed aging balance for the
various payors. Management has assessed the potential recoverability for
these receivables based on payor-mix and the days outstanding for these
receivables. Listed below are the recovery percentages applied:
Medicare/Medicaid Managed Care/Private
----------------- --------------------
Scenario I Scenario II Scenario I Scenario II
---------- ----------- ---------- -----------
Current 80% 95% 75% 90%
-------
31 - 60 65% 85% 55% 75%
-------
61 - 90 55% 80% 45% 65%
-------
91 - 120 30% 60% 25% 55%
--------
121 - 365 15% 35% 10% 30%
---------
Over 365 0% 0% 0% 0%
--------
The estimate herein reflects management's estimate of the recoverable value
of these trade receivables during the six-month liquidation period.
C Prepaid expenses and other current assets. This asset account is comprised
of the following assets: prepaid insurance, patient trust accounts,
miscellaneous inventory, and miscellaneous receivables. For purposes of
this analysis, management estimates that approximately $2.3 to $4.6 million
will be recoverable under a liquidation scenario.
D Proceeds from sale of going-concern operations. The proceeds from the
distressed sale of going-concern operations is estimated to be in the range
of $83 million to $148 million. The values estimated for those businesses
sold are based upon various earnings multiples for distressed going-concern
operations which management considers reasonable.
The enterprise value for these entities was determined by applying these
multiples to a normalized earnings for Multicare. The 2001 projected
earnings (EBITDA) were adjusted to reflect the following:
- current operations through January 31, 2001;
- elimination of negative earnings for underperforming entities
likely to be closed;
- potential management fee savings upon termination with
Multicare's relationship with Genesis;
- loss of revenues from management contracts due to liquidation of
Multicare
A range of multiple of earnings was then applied to this "normalized
EBITDA" to estimate enterprise value for these entities. The calculated
enterprise value was then further reduced by the secured debt and current
liabilities from nonbankrupt subsidiaries of Multicare. It is assumed that
any secured debt and current liabilities of the nonbankrupt entities would
be paid upon sale of the business units.
E Property, plant & equipment. Property, plant, and equipment will be
included in the sale of centers as a going concern and therefore no value
is contained herein.
F Other long-term assets. Other long term assets are comprised of deferred
financing costs, deposits to a related company, investments in
joint-ventures, and potential settlement with CMS. Management estimates to
receive approximately $5 to $10 million from CMS. Other long term costs are
estimated to have no liquidation recovery value.
G Goodwill and other intangibles. Goodwill and other intangible assets are
estimated to have no liquidation recovery value.
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H Avoidance & contingency claims. The Multicare Debtors may have certain
rights for avoidance actions and other contingency claims that may benefit
the estates. It is unknown at this time the total benefit that these claims
may generate for the estates if the Multicare Debtors were successful in
litigating these matters.
NOTES TO CHAPTER 7 ADMINISTRATIVE CLAIMS
I Trustee & Receiver fees. Compensation for the chapter 7 trustee will be
limited to fee guidelines in section 326 of the Bankruptcy Code.
J Counsel for Trustee. Compensation for trustee's counsel is estimated at 50%
of estimated trustee fees.
K Professional fees. As of December 31, 2000, approximately $3.7 million in
professional fees was outstanding. Management estimates that combined
professional fees will be $1,000,000 per month for the first three months
of the liquidation process. It is anticipated that professional fees would
reduce to $500,000 per month for the subsequent three months.
L Liquidation costs. For purposes of this analysis, liquidation costs are
estimated as 8% of total liquidated proceeds.
NOTES TO SECURED CLAIMS
M DIP Financing. As of May 31, 2001, Multicare did not have an outstanding
balance on its debtor in possession lending facility.
N Secured claims. Amount of liability represented herein is based on proofs
of claim filed by the various claimants.
NOTES TO ADMINISTRATIVE CLAIMS
O Postpetition trade creditor claims. Amount represents trade creditor debt
incurred during the Multicare reorganization cases. Management has reduced
the trade payable by $23 million for intercompany debt payable to Genesis
related to certain deposits that have been made. Management does not
anticipate paying this obligation upon liquidation.
P Accrued salaries, wages and other compensation. Amount represents salaries,
wages, and other compensation incurred postpetition. For purposes of this
analysis, this amount is estimated as one-half of payroll and benefits
expense for the month of December 2000.
NOTES TO PRIORITY CLAIMS
Q Priority claims. Amount represents management estimates for priority
claims.
NOTES TO GENERAL UNSECURED CLAIMS
R Other unsecured creditor claims. This balance is exclusive of a $93 million
intercompany claim filed by Genesis.
S Unsecured Debt. Amount represents claims under certain prepetition senior
subordinated notes.
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Best Interest Comparison
Liquidation Recovery Chapter 11
Class Low High Recovery
M1 (Misc Secured Claims) 28% 44% 100.00%
M2 (Multicare Senior Lender Claims 28% 44% 77.31%
M3 (Priority Claims) 0% 0% 100.00%
M4 (Multicare General Unsecured Claims) 0% 0% 7.34%
M5 (Multicare Sr Sub Note Claims) 0% 0% 7.34%
M7 (Multicare Punitive Damage Claims) 0% 0% 0.00%
E. Feasibility
The Bankruptcy Code requires that a debtor demonstrate that
confirmation of a plan is not likely to be followed by liquidation or the need
for further financial reorganization. For purposes of determining whether the
Plan meets this requirement, the Debtors have analyzed their ability to meet
their obligations under the Plan. As part of this analysis, the Debtors have
prepared projections contained in section IV, above. Based upon such
projections, the Debtors believe that they will be able to make all payments
required pursuant to the Plan and, therefore, that confirmation of the Plan is
not likely to be followed by liquidation or the need for further reorganization.
F. Section 1129(b)
The Bankruptcy Court may confirm a plan of reorganization over
the rejection or deemed rejection of the plan of reorganization by a class of
claims or equity interests if the plan of reorganization "does not discriminate
unfairly" and is "fair and equitable" with respect to such class.
1. No Unfair Discrimination
This test applies to classes of claims or equity interests that
are of equal priority and are receiving different treatment under the Plan of
Reorganization. The test does not require that the treatment be the same or
equivalent, but that such treatment be "fair."
2. Fair and Equitable Test
This test applies to classes of different priority and status
(e.g., secured versus unsecured) and includes the general requirement that no
class of claims receive more than 100% of the allowed amount of the claims in
such class. As to the dissenting class, the test sets different standards,
depending on the type of claims or interests in such class:
o Secured Creditors. Each holder of an impaired secured claim
either (i) retains its liens on the property, to the extent
of the allowed amount of its secured claim and receives
deferred cash payments having a value, as of the effective
date, of at least the allowed amount of such claim, or (ii)
has the right to credit bid the amount of its claim if its
property is sold and retains its
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liens on the proceeds of the sale (or if sold, on the
proceeds thereof) or (iii) receives the "indubitable
equivalent" of its allowed secured claim.
o Unsecured Creditors. Either (i) each holder of an impaired
unsecured creditor receives or retains under the plan
property of a value equal to the amount of its allowed
claim, or (ii) the holders of claims and interests that are
junior to the claims of the dissenting class will not
receive any property under the plan.
o Equity Interests. Either (i) each equity interest holder
will receive or retain under the plan property of a value
equal to the greater of (a) the fixed liquidation preference
or redemption price, if any, of such stock and (b) the value
of the stock, or (ii) the holders of interests that are
junior to the equity interests of the dissenting class will
not receive or retain any property under the plan of
reorganization.
These requirement are in addition to other requirements established by case law
interpreting the statutory requirement.
The Debtors believe the Plan of Reorganization will satisfy the
"fair and equitable" requirement notwithstanding that Classes G7 (Genesis
Punitive Damage Claims), G8 (Genesis Series G Preferred Stock Interests), G9
(Genesis Series H Preferred Stock Interests), G10 (Genesis Series I Preferred
Stock Interests), G11 (Genesis Common Stock Interests), M7 (Multicare Punitive
Damage Claims), and M8 (Multicare Common Stock Interests) are deemed to reject
the Plan of Reorganization because no class that is junior to such classes will
receive or retain any property on account of the claims or equity interests in
such class.
The Genesis Senior Subordinated Note Claims (Class G5) are
unsecured claims that are contractually subordinated to the Genesis Senior
Lender Claims (Class G2). Pursuant to the terms of the respective indentures
under which these senior subordinated notes were issued, holders of these senior
subordinated notes are not entitled to receive a distribution unless the Genesis
Senior Lender Claims are paid in full. The Plan of Reorganization does not give
effect to these subordination provisions as to the Genesis Senior Subordinated
Note Claims. The distribution provided to the holders of claims in Class G5
(Genesis Senior Subordinated Note Claims) under the Plan of Reorganization
represents a negotiated settlement between the unsecured creditors' committee in
the Genesis reorganization cases on behalf of the holders of claims in Class G5
and the holders of the Genesis Senior Lender Claims. Accordingly, the
distributions to the holders of the Genesis Senior Subordinated Note Claims
shall not be subject to levy, garnishment, attachment, or other legal process by
any senior holder of indebtedness by reason of claimed contractual subordination
rights. On the Effective Date, all holders of claims against the Genesis Debtors
shall be deemed to have waived any and all contractual subordination rights
which they may have with respect to such distribution, and the Confirmation
Order shall permanently enjoin, effective as of the Effective Date, all holders
of senior indebtedness from enforcing or attempting to enforce any such rights
with respect to the distributions under the Plan of Reorganization to the
holders of the Genesis Senior Subordinated Note Claims.
The Multicare Senior Subordinated Note Claims (Class M5) are
unsecured claims that are contractually subordinated to the Multicare Senior
Lender Claims (Class M2). Pursuant to the terms of the indenture under which
these senior subordinated notes were issued, holders of these senior
subordinated notes are not entitled to receive a distribution unless the
Multicare Senior Lender Claims are paid in full. The Plan of Reorganization does
not give effect
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to these subordination provisions as to the Multicare Senior Subordinated Note
Claims. The distribution provided to the holders of claims in Class M5
(Multicare Senior Subordinated Note Claims) under the Plan of Reorganization
represents a negotiated settlement between the unsecured creditors' committee in
the Multicare reorganization cases on behalf of the holders of claims in Class
M5 and the holders of the Multicare Senior Lender Claims. Accordingly, the
distributions to the holders of the Multicare Senior Subordinated Note Claims
shall not be subject to levy, garnishment, attachment, or other legal process by
any senior holder of indebtedness by reason of claimed contractual subordination
rights. On the Effective Date, all holders of claims against the Multicare
Debtors shall be deemed to have waived any and all contractual subordination
rights which they may have with respect to such distribution, and the
Confirmation Order shall permanently enjoin, effective as of the Effective Date,
all holders of senior indebtedness from enforcing or attempting to enforce any
such rights with respect to the distributions under the Plan of Reorganization
to the holders of the Multicare Senior Subordinated Note Claims.
Because several classes of claims are not being paid in full,
the existing equity interests in the Debtors are being extinguished.
XI.
Alternatives to Confirmation and Consummation of the Plan of Reorganization
A. Liquidation Under Chapter 7
If no chapter 11 plan can be confirmed, the chapter 11 cases
may be converted to cases under chapter 7 of the Bankruptcy Code in which a
trustee would be elected or appointed to liquidate the assets of the Debtors for
distribution in accordance with the priorities established by the Bankruptcy
Code. A discussion of the effect that a chapter 7 liquidation would have on the
recoveries of holders of claims is set forth in sections X.C and X.D, above. The
Debtors believe that liquidation under chapter 7 would result in smaller
distributions being made to creditors than those provided for in the Plan of
Reorganization because of (i) the likelihood that other assets of the Debtors
would have to be sold or otherwise disposed of in a less orderly fashion, (ii)
additional administrative expenses attendant to the appointment of a trustee and
the trustee's employment of attorneys and other professionals, and (iii)
additional expenses and claims, some of which would be entitled to priority,
which would be generated during the liquidation and from the rejection of leases
and other executory contracts in connection with a cessation of the Debtors'
operations. In a chapter 7 liquidation, the Debtors believe that there would be
no distribution to holders of claims in Classes G4 (other than insured claims to
the extent of such insurance) through G11 and Classes M4 (other than insured
claims to the extent of such insurance) through M8.
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B. Alternative Plan of Reorganization
If the Plan of Reorganization is not confirmed, the Debtors or
any other party in interest (if the Debtors' exclusive period in which to file a
plan of reorganization has expired) could attempt to formulate a different plan
of reorganization. Such a plan might involve either a reorganization and
continuation of the Debtors' business or an orderly liquidation of the Debtors'
assets under chapter 11. The Debtors have concluded that the Plan of
Reorganization enables creditors and equity holders to realize the most value
under the circumstances. In a liquidation under chapter 11, the Debtors would
still incur the expenses associated with closing or transferring to new
operators numerous facilities. The process would be carried out in a more
orderly fashion over a greater period of time. Further, if a trustee were not
appointed, because such appointment is not required in a chapter 11 case, the
expenses for professional fees would most likely be lower than those incurred in
a chapter 7 case. Although preferable to a chapter 7 liquidation, the Debtors
believe that liquidation under chapter 11 is a much less attractive alternative
to creditors and equity holders than the Plan of Reorganization because of the
greater return provided by the Plan of Reorganization.
XII.
Certain Federal Income Tax Consequences of the Plan of Reorganization
The following discussion summarizes certain federal income tax
consequences of the implementation of the Plan to the Debtors and certain
holders of claims. The following summary does not address the federal income tax
consequences to (i) holders whose claims are entitled to reinstatement or
payment in full in cash, or are otherwise unimpaired under the Plan (e.g.,
holders of certain Genesis Other Secured Claims, Genesis Priority Non-Tax
Claims, Multicare Priority Non-Tax Claims, and certain Multicare Other Secured
Claims) and (ii) holders of equity interests or claims which are extinguished
without a distribution in exchange therefor (e.g., holders of Genesis Punitive
Damage Claims and Multicare Punitive Damage Claims).
The following summary is based on the Internal Revenue Code of
1986, as amended (the "Tax Code"), Treasury Regulations promulgated thereunder,
judicial decisions, and published administrative rules and pronouncements of the
Internal Revenue Service ("IRS") as in effect on the date hereof. Changes in
such rules or new interpretations thereof may have retroactive effect and could
significantly affect the federal income tax consequences described below.
The federal income tax consequences of the Plan are complex and
are subject to significant uncertainties. The Debtors have not requested a
ruling from the IRS or an opinion of counsel with respect to any of the tax
aspects of the Plan. Thus, no assurance can be given as to the interpretation
that the IRS will adopt. In addition, this summary does not address foreign,
state, or local tax consequences of the Plan, nor does it purport to address the
federal income tax consequences of the Plan to special classes of taxpayers
(such as foreign taxpayers, broker-dealers, mutual funds, insurance companies,
financial institutions, small business investment companies, regulated
investment companies, tax-exempt organizations, and investors in pass-through
entities).
This discussion assumes that the various debt and other
arrangements to which the Debtors are currently a party and any consideration
issued to the Debtors under the Plan of Reorganization will be respected for
federal income tax purposes in accordance with their form.
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Accordingly, the following summary of certain federal income
tax consequences is for informational purposes only and is not a substitute for
careful tax planning and advice based upon the individual circumstances
pertaining to a holder of a claim. All holders of claims are urged to consult
their own tax advisors for the federal, state, local, and other tax consequences
to them of the implementation of the Plan.
A. Consequences to the Debtors
The Genesis Debtors, on the one hand (the "Genesis Group"), and
the Multicare Debtors, on the other hand (the "Multicare Group"), each file a
separate consolidated federal income tax return, excluding those Debtors that
are treated as partnerships for federal income tax purposes.
Genesis estimates that, for federal income tax purposes, the
Genesis Group will have consolidated net operating losses ("NOLs") and/or NOL
carryforwards and consolidated capital loss carryforwards of roughly $300
million and $740 million, respectively, through the Effective Date of the Plan,
which is anticipated to occur on or about September 30, 2001. Of this amount,
only a minor portion of the NOL carryforwards, but all of the capital loss
carryforwards, was incurred by Genesis. Multicare estimates that, for federal
income tax purposes, the Multicare Group will have consolidated NOLs and/or NOL
carryforwards of roughly $60 million through the Effective Date of the Plan (of
which only a minor portion was incurred by Multicare). The amount of such losses
of the Genesis Group and the Multicare Group may be adjusted during the course
of the preparation of the actual tax returns and remain subject to examination
by the IRS.
Moreover, at or about the end of 1999, the Genesis Group and
the Multicare Group each underwent an "ownership change" within the meaning of
Section 382 of the Tax Code. As a result, approximately $110 million of NOL
carryforwards and a substantial portion of the capital loss carryforwards of the
Genesis Group, and only approximately $1 million of NOL carryforwards of the
Multicare Group, cannot be used to offset future taxable income to any
significant extent. However, such loss carryforwards remain an available tax
attribute for purposes of the cancellation of debt ("COD") rules discussed
below.
The Genesis Group and the Multicare Group each has a
substantial tax basis in its assets. Both Genesis and Multicare believe that the
aggregate tax basis of the business assets (including goodwill) of the Genesis
Group and the Multicare Group, respectively, approximates the fair market value
of such assets.
As discussed below, the current year losses and loss
carryforwards of the Genesis Group and the Multicare Group may be substantially
reduced or eliminated, or subject to additional limitations upon implementation
of the Plan. In addition, certain other tax benefits (such as the tax basis of
Genesis and Multicare in the stock of certain subsidiaries) may be reduced, or
subject to limitation, upon implementation of the Plan.
1. Cancellation of Debt
In general, the discharge of a debt obligation by a debtor for
an amount less than the remaining balance of the debt obligation (as determined
for federal income tax purposes) gives rise to COD income which must be included
in the debtor's income, subject to certain statutory or judicial exceptions that
can apply to limit the amount of COD income in a title 11 bankruptcy case (such
as where the payment of the cancelled debt would have given rise to a tax
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deduction). A statutory exception applies to corporate and certain other debtors
if the discharge is granted in a title 11 bankruptcy case or pursuant to a plan
approved by a bankruptcy court.
In general, for debtors in bankruptcy, no portion of the COD is
includable in income; however, the debtor must still reduce certain of its tax
attributes -- such as NOL carryforwards, current year NOLs, capital loss
carryforwards, current year capital losses, tax credits, and tax basis in assets
-- by the amount of any COD. To the extent the amount of COD exceeds the tax
attributes available for reduction, the remaining excludable COD income is
simply forgiven. It is unclear whether the reduction in tax attributes will
occur on a separate company basis, even though the Debtors file consolidated
federal income tax returns with the other members of their respective groups.
The Debtors are aware that the IRS has, in certain cases, asserted that such
reduction generally should occur on a consolidated basis. Any reduction in tax
attributes does not effectively occur until the first day of the taxable year
following the year the COD occurs. If advantageous, a debtor could elect to
reduce the basis of depreciable property prior to any reduction in their loss
carryforwards.
In the case of a partnership (or a limited liability company
treated as a partnership for federal income tax purposes), the above bankruptcy
exception to COD income applies at the partner level, rather than the
partnership level, and is determined by the financial status of the partner.
Thus, a corporate partner that is itself in bankruptcy should be able to apply
the above bankruptcy exception to its allocable share of the COD income of the
partnership.
As a result of the discharge of claims pursuant to the Plan,
the Debtors will incur COD, resulting in a reduction of their respective current
year NOLs, loss carryforwards, and, possibly, the tax basis in their respective
assets, effective as of the beginning of the taxable year following the taxable
year in which the Effective Date occurs. The extent of such COD and resulting
tax attribute reduction will depend, in part, on the fair market value of the
New Common Stock, New Convertible Preferred Stock, New Warrants, New Senior
Notes, and cash distributed and the dollar amount of claims ultimately allowed.
Based on the estimated enterprise value of Reorganized Genesis (see section IV,
above), it is anticipated that the Genesis Debtors will incur approximately $800
million of COD (almost all of which is attributable to debt of Genesis), and
that the Multicare Debtors will incur approximately $375 million of COD (almost
all of which is attributable to debt of Multicare). Due to the magnitude of the
loss carryforwards of the Multicare Group and the Genesis Group and the fact
that substantially all of the COD is attributable to debt of Genesis and
Multicare, both of which are holding companies with little or no operating
assets, it is not anticipated that the Debtors' tax basis in depreciable or
amortizable assets will be significantly reduced, if at all. Accordingly, for
purposes of calculating the financial projections of Reorganized Genesis (see
section IV, above), it has been assumed that no consolidated NOLs or NOL
carryforwards of the Genesis Group or the Multicare Group will survive the
reorganization and that any reduction in the tax basis in depreciable or
amortizable assets of the Debtors would be insignificant.
2. Limitations on Loss Carryforwards and Other Tax Benefits
Following the implementation of the Plan, any NOLs and capital
losses (and carryforwards thereof) and certain other tax attributes of the
corporate Debtors allocable to the period prior to the Effective Date of the
Plan will be subject to the limitations imposed by Section 382 of the Tax Code.
Under Section 382, if a corporation undergoes an "ownership
change," the amount of its pre-change losses that may be utilized to offset
future taxable income is, in general,
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subject to an annual limitation. Such limitation also may apply to certain
losses or deductions that are "built-in" (i.e., economically accrued but
unrecognized) as of the date of the ownership change that are subsequently
recognized. The Debtors anticipate that an ownership change of the Genesis Group
and the Multicare Group will occur upon implementation of the Plan.
a. General Section 382 Limitation. The amount of the
annual limitation to which a loss corporation may be subject (i) depends, in
part, on whether the corporation is in bankruptcy and the ownership change
occurs pursuant to a plan of reorganization confirmed by the bankruptcy court,
and (ii) within the context of an affiliated group of corporations that file a
consolidated federal income tax return, generally applies on a consolidated
basis. As discussed below, a corporation in bankruptcy may also be able to avoid
any annual limitation.
In general, the amount of the annual limitation to which a
corporation (or consolidated group) would be subject would be equal to the
product of (i) the fair market value of the stock of the corporation (or, in the
case of a consolidated group, the common parent) immediately before the
ownership change (with certain adjustments) multiplied by (ii) the "long-term
tax-exempt rate" in effect for the month in which the ownership change occurs
(5.01% for ownership changes occurring in July 2001). For a corporation in
bankruptcy and, presumably, where, as in the case of the Genesis Group and the
Multicare Group, the common parent is in bankruptcy and undergoes the ownership
change pursuant to a confirmed plan, the stock value generally is determined
immediately after (rather than before) the ownership change, and some of the
adjustments that ordinarily would apply do not apply.
For example, the annual limitation applicable to a corporation
not in bankruptcy generally would be determined after reduction of its stock
value for any capital infusions within the two year period ending on the date of
the ownership change, whereas the stock value of Genesis and Multicare for
purposes of computing the annual limitation generally would not. However,
regardless of whether the ownership change occurs pursuant to a confirmed plan,
certain "anti-duplication" rules apply. These rules principally are intended to
prevent the value of a nonconsolidated, more than 50% owned subsidiary from
being taken into account both in the determination of such subsidiary's own
annual limitation and, as a result of being an asset of the controlling
corporation, indirectly in the determination of the annual limitation of the
controlling corporation (or group). Similar rules or principles can apply within
a consolidated group in those cases where the consolidated return regulations
continue to require separate company (or subgroup) annual limitations. As a
result, the stock value of Reorganized Genesis attributable to its ownership of
Reorganized Multicare will not be able to be taken into account in determining
the annual limitation applicable to the Genesis Group to the extent that the
value of Reorganized Multicare is taken into account in determining the annual
limitation applicable to the Multicare Group (and possibly will only be useable
by Genesis if an affirmative election is made by Multicare permitting it to do
so).
Any unused limitation may be carried forward, thereby
increasing the annual limitation in the subsequent taxable year. However, if the
corporation (or consolidated group) does not continue its historic business or
use a significant portion of its assets in a new business for two years after
the ownership change, the annual limitation resulting from the ownership change
is zero.
b. Built-In Gains and Losses. If a loss corporation (or
consolidated group) has a net unrealized built-in gain at the time of an
ownership change (determined taking into account most assets and all items of
"built-in" income and deductions), any built-in gains recognized during the
following five years (up to the amount of the original net built-in gain)
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generally will increase the annual limitation in the year recognized, such that
the loss corporation (or consolidated group) would be permitted to use its
pre-change losses against such built-in gain income in addition to its regular
annual allowance.
On the other hand, if the loss corporation (or consolidated
group) has a net unrealized built-in loss at the time of an ownership change,
then any built-in losses recognized during the following five years (up to the
amount of the original net built-in loss) generally will be treated as a
pre-change loss and will be subject to the annual limitation in the same fashion
as a pre-change NOL carryforward. In addition, although this net built-in loss
rule generally applies to consolidated groups on a consolidated basis, any
corporation that joins the consolidated group within the preceding five years
may have to be excluded from the group computation and tested for a net built-in
loss on a separate company basis. Accordingly, even though a consolidated group
of corporations may not have a net unrealized built-in loss on an overall group
basis, the group may have a net unrealized built-in loss if certain members of
the group are required to be excluded. Additionally, if the excluded member has
a net built-in loss when tested on a separate company basis, any subsequently
recognized built-in losses of such corporation may be subject to a more
restrictive annual limitation based on the separate value of such member.
A loss corporation's (or consolidated group's) net unrealized
built-in gain or loss generally will be deemed to be zero unless it is greater
than the lesser of (i) $10 million or (ii) 15% of the fair market value of its
gross assets (with certain adjustments) immediately before the ownership change.
It is currently unclear whether the Genesis Group or the
Multicare Group will be in a net unrealized built-in loss position and/or a net
unrealized built-in gain position as of the Effective Date. However, neither
Genesis nor Multicare believes that deductibility of future depreciation or
amortization deductions of the Genesis Debtors or the Multicare Debtors,
respectively, would be significantly impaired, even if the Genesis or Multicare
Group (as the case may be) were determined to be in a net unrealized built-in
loss position.
c. Special Bankruptcy Exception. An exception to the
general annual limitation (including the described built-in gain and loss rules)
applies where the stockholders and/or qualified creditors of the debtor retain
or receive (other than for new value) at least 50% of the vote and value of the
stock of the reorganized debtor pursuant to a confirmed bankruptcy plan. Under
this exception, a debtor's pre-change losses are not limited on an annual basis,
but are required to be reduced by the amount of any interest deductions claimed
during the three taxable years preceding the date of the reorganization, and
during the part of the taxable year prior to and including the reorganization,
in respect of the debt converted into stock in the reorganization. Moreover, if
this exception applies, any further ownership change of the debtor within a
two-year period will preclude the debtor's utilization of any pre-change losses
at the time of the subsequent ownership change against future taxable income.
Because the creditors of the Multicare Debtors (even though
partially overlapping with those of the Genesis Debtors) will not receive 50% or
more of the stock of Reorganized Genesis in exchange for their claims against
the Multicare Debtors, this exception will not apply to the Multicare Group. It
is possible, however, that the receipt of New Common Stock by the holders of
Genesis Senior Lender Claims solely in exchange for such interests would qualify
for this exception with respect to the Genesis Group. Even if the Genesis Group
so qualifies, Genesis may, if it so desires, elect not to have the exception
apply and instead remain subject to the annual limitation and built-in gain and
loss rules described above. Such election
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would have to be made in the Genesis Group's federal income tax return for the
taxable year in which the reorganization occurs.
The statute does not address whether this exception can be
applied on a consolidated basis or only on a separate company basis.
Accordingly, it is possible that only any pre-change losses attributable to
Genesis itself (rather than to the other members of the Genesis Group)--all of
which would likely be eliminated in any event due to the attribute reduction
resulting from the COD under the Plan--may be able to benefit from this
exception. If the exception were applicable only to Genesis itself, it appears
that the pre-change losses attributable to the other members of the Genesis
Group would be subject to the annual limitation rules described above determined
as if Genesis had not qualified for this exception.
3. Alternative Minimum Tax
In general, an alternative minimum tax ("AMT") is imposed on a
corporation's "alternative minimum taxable income" ("AMTI") at a 20% rate to the
extent such tax exceeds the corporation's regular federal income tax for the
year. AMTI is generally equal to regular taxable income with certain
adjustments. For purposes of computing AMTI, certain tax deductions and other
beneficial allowances are modified or eliminated. In particular, even though a
corporation otherwise might be able to offset all of its taxable income for
regular tax purposes by available NOL carryforwards, a corporation (or
consolidated group) is entitled to offset no more than 90% of its AMTI with NOLs
(as recomputed for AMT purposes).
In addition, if a corporation (or consolidated group) undergoes
an "ownership change" within the meaning of Section 382 and is in a net
unrealized built-in loss position on the date of the ownership change, the
corporation's (or group's) aggregate tax basis in its assets would be reduced
for certain AMT purposes to reflect the fair market value of such assets as of
the change date. The application of this provision is unaffected by whether the
special bankruptcy exception to the annual limitation (and built-in gain and
loss) rules of Section 382 applies.
Any AMT that the corporation pays generally will be allowed as
a nonrefundable credit against its regular federal income tax liability in
future taxable years when the corporation is no longer subject to AMT.
4. Issuance of the New Senior Notes
It is possible, although not anticipated, that the New Senior
Notes will be issued at original issue discount ("OID"). See section XII.B.11,
below. Any such OID generally would be amortizable by Genesis utilizing the
constant interest method, and deductible as interest, unless the New Senior
Notes are treated as applicable high-yield discount obligations ("AHYDO") within
the meaning of Section 163(e)(5) of the Tax Code. The New Senior Notes would be
treated as AHYDOs if, among other requirements, their yield to maturity is at
least five percentage points over the applicable federal rate in effect for the
calendar month in which such notes are issued (approximately 5.01% compounded
annually for the month of June 2001) and the notes have significant OID (in
general, where there is unamortized OID as of the end of the fifth year after
issuance that exceeds the amount of one year's interest, both actual and
imputed).
If the New Senior Notes are treated as AHYDOs, a portion of the
accrued discount attributable to the "disqualified portion," if any, of the
interest deduction otherwise allowable as OID would be disallowed, and the
balance of such deduction would be deferred until
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actually paid in cash. The "disqualified portion" of any interest deduction
otherwise allowable as OID on an AHYDO is that portion, if any, of the total OID
multiplied by a fraction, the numerator of which is equal to the "disqualified
yield" (i.e., the excess of the yield to maturity of the notes over the sum of
the applicable federal rate for the calendar month in which the notes are issued
plus six percentage points) and the denominator of which is equal to the total
yield to maturity of the notes.
B. Consequences to Holders of Certain Claims
Pursuant to, and in accordance with, the Plan, holders of
allowed claims in Class G2 (Genesis Senior Lender Claims) and holders of allowed
claims in Class M2 (Multicare Senior Lender Claims) will be entitled to receive
in satisfaction of their claims cash, New Senior Notes, New Common Stock, and
New Convertible Preferred Stock. Holders of allowed claims in Class G4 (Genesis
General Unsecured Claims), except to the extent such a claim constitutes an
Insured Claim, and holders of allowed claims in Class G5 (Genesis Senior
Subordinated Note Claims) will receive in satisfaction of their Claims New
Common Stock and New Warrants. Holders of allowed claims in Class M4 (Multicare
General Unsecured Claims), except to the extent such a claim constitutes an
Insured Claim, will receive in satisfaction of their claims New Common Stock,
and holders of allowed claims in Class M5 (Multicare Senior Subordinated Note
Claims) will receive in satisfaction of their claims New Common Stock and New
Warrants.
The federal income tax consequences of the Plan to holders of
allowed claims against Genesis depend, in part, on whether such claims, and in
the case of Genesis Senior Lender Claims, whether the New Senior Notes,
constitute "securities" for federal income tax purposes. The term "security" is
not defined in the Tax Code or in the regulations issued thereunder and has not
been clearly defined by judicial decisions. The determination of whether a
particular debt constitutes a "security" depends on an overall evaluation of the
nature of the debt. One of the most significant factors considered in
determining whether a particular debt is a security is its original term. In
general, debt obligations issued with a weighted average maturity at issuance of
five years or less (e.g., trade debt and revolving credit obligations) do not
constitute securities, whereas debt obligations with a weighted average maturity
at issuance of ten years or more constitute securities. For purposes of the
following discussion it has been assumed that Genesis Senior Subordinated Note
Claims constitute "securities." Each holder of a Genesis Senior Lender Claim,
Genesis General Unsecured Claim, and Genesis Senior Subordinated Note Claim is
urged to consult its tax advisor regarding the status of its claim, or any
portion thereof, as a "security."
The following discussion does not necessarily apply to holders
who have claims in more than one class relating to the same underlying
obligation (such as where the underlying obligation is classified as partially
secured and partially unsecured). Such holders should consult their tax advisor
regarding the effect of such dual status obligations on the federal income tax
consequences of the Plan to them.
1. Consequences to All Holders (Including Holders Whose Claims Are
Against Any of the Multicare Debtors) Who Receive Cash, New
Senior Notes, New Convertible Preferred Stock, New Common
Stock, or New Warrants, Other Than Holders of Claims Against
Genesis That Constitute "Securities"
In general, holders of claims who receive Cash, New Senior
Notes, New Common Stock, New Convertible Preferred Stock, and/or New Warrants
(other than holders of claims against Genesis that constitute "securities") will
recognize gain or loss in an amount equal
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to the difference between (i) the "amount realized" by the holder in
satisfaction of its claim (other than any claim for accrued but unpaid interest)
and (ii) the holder's adjusted tax basis in its claim (other than any claim for
accrued but unpaid interest). For a discussion of the tax consequences of any
claims for accrued interest, see section XII.B.4, below.
For these purposes, the "amount realized" by a holder will
equal the sum of the aggregate of (i) cash, (ii) the "issue price" of any New
Senior Notes (see section XII.B.11, below), (iii) the fair market value of any
New Convertible Preferred Stock, (iv) the fair market value of any New Common
Stock, and (iv) the fair market value of any New Warrants received by the holder
(less any portion of such distribution required to be treated as imputed
interest as a result of any such distribution being made after the Effective
Date).
Due to the possibility that a holder of a Genesis General
Unsecured Claim and Multicare General Unsecured Claim may receive a distribution
of New Common Stock and/or New Warrants subsequent to the Effective Date in
respect of any subsequently disallowed disputed claims, the imputed interest
provisions of the Tax Code may apply to treat a portion of the distribution to
such holders as imputed interest. Such imputed interest may (with respect to
certain holders) accrue over time using the constant interest method, in which
event the holder may be required to include such imputed interest in income
prior to the actual distribution.
In addition, because distributions of New Common Stock and/or
New Warrants to such holders may be made after the Effective Date, any loss, and
a portion of any gain, realized by a holder in satisfaction of its claim may be
deferred until all such subsequent distributions are made. Such holders are
urged to consult their tax advisors regarding the possible application of (or
ability to elect out of) the "installment method" of reporting any gain that may
be recognized by such holder in respect of its claim.
Where gain or loss is recognized by a holder, the character of
such gain or loss as long-term or short-term capital gain or loss or as ordinary
income or loss will be determined by a number of factors, including the tax
status of the holder, whether the claim constitutes a capital asset in the hands
of the holder and how long it has been held, whether the claim was acquired at a
market discount, and whether and to what extent the holder had previously
claimed a bad debt deduction.
A holder's aggregate tax basis in any New Convertible Preferred
Stock, New Common Stock, and any New Warrants received will equal the fair
market value of such preferred stock, common stock, and warrants. A holder's tax
basis in any New Senior Notes received will equal the "issue price" of such
notes. The holding period for any New Convertible Preferred Stock, New Common
Stock, New Senior Notes, and New Warrants generally will begin the day following
the issuance of such preferred stock, common stock, notes, or warrants.
Notwithstanding the foregoing, it is possible the IRS may
attempt to treat the receipt of New Common Stock, New Convertible Preferred
Stock, New Senior Notes, and/or New Warrants in satisfaction of claims against
Multicare or any subsidiary of Genesis as part of a non-recognition transaction.
So treated, such a holder would not be permitted to recognize any loss, but to
the extent that the holder receives New Senior Notes, New Warrants, and possibly
New Convertible Preferred Stock, such holder would still be required to
recognize a portion of its gain. In the case of a holder that does not recognize
loss, the holder's tax basis in its New Common Stock would reflect the
unrecognized loss. In addition, the holder's holding period in the New Common
Stock would, in whole or in part, include its holding period in its claim.
However, Genesis believes, and the discussion herein assumes, that the
satisfaction of claims
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described in this paragraph should be treated as a fully taxable transaction, in
which both gain and loss may be recognized.
For a discussion of the tax treatment of New Warrants, New
Common Stock, New Convertible Preferred Stock, and New Senior Notes, see
sections XII.B.5, XII.B.6, XII.B.7, XII.B.8, XII.B.9, XII.B.10, XII.B.11, below.
2. Consequences to Holders of Genesis Senior Subordinated Note
Claims and Genesis General Unsecured Claims That Constitute
"Securities"
The receipt of New Common Stock and New Warrants in
satisfaction of a Genesis Senior Subordinated Note Claim or a Genesis General
Unsecured Claim against Genesis that constitutes a "security" will be a
"recapitalization" for federal income tax purposes. Accordingly, in general, the
holder of such a claim will not recognize loss upon such exchange, but will
recognize gain (computed as described in the preceding section), if any, to the
extent of any consideration received other than the New Common Stock and New
Warrants (such as proceeds from insurance), excluding the portion of any
consideration allocable to a claim for accrued but unpaid interest or required
to be treated as imputed interest due to the distribution of such consideration
after the Effective Date. The character and timing of such gain would also be
determined in accordance with the principles discussed in the preceding section.
For a discussion of the tax consequences of any claims for accrued interest, see
section XII.B.4, below.
In the case of a recapitalization, a holder's aggregate tax
basis in any New Common Stock and New Warrants received in satisfaction of its
claim will equal the holder's aggregate adjusted tax basis in its claim
(including any claim for accrued but unpaid interest) increased by any gain or
interest income recognized in respect of its claim and decreased by any
consideration received other than New Common Stock and New Warrants and any
deductions claimed in respect of any previously accrued interest. Such tax basis
would be allocated between the New Common Stock and the New Warrants based on
relative fair market value. In general, the holder's holding period for the New
Common Stock and the New Warrants received will include the holder's holding
period for the claim except to the extent that the New Common Stock and the New
Warrants were issued in respect of a claim for accrued but unpaid interest or
treated as imputed interest.
For a discussion of the tax treatment of New Warrants, see
sections XII.B.5 and XII.B.10, below.
3. Consequences to Holders of Genesis Senior Lender Claims That
Constitute "Securities"
The receipt of New Common Stock or New Convertible Preferred
Stock, and the receipt of New Senior Notes if such notes constitute
"securities," in partial satisfaction of a Genesis Senior Lender Claim (to the
extent such claim constitutes a "security") will be a "recapitalization" for
federal income tax purposes. Accordingly, in general, the holder of such claim
will not recognize loss upon such exchange with respect to the portion of its
claim constituting a "security," but will recognize gain (computed as described
above in the case of non-securities), if any, to the extent of any consideration
received other than stock or securities (such as cash and the New Senior Notes
if such notes do not constitute "securities"), excluding the portion of any
consideration allocable to a claim for accrued but unpaid interest. The
character and timing of such gain would also be determined in accordance with
the principles
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discussed above with respect to claims that are not securities. See section
XII.B.1, above. For a discussion of the tax consequences of any claims for
accrued interest, see section XII.B.4, below.
If the New Senior Notes do not constitute "securities," the
holder's aggregate tax basis in any New Common Stock and New Convertible
Preferred Stock received in satisfaction of the portion of its claim
constituting a "security" will equal the holder's aggregate tax basis in such
portion (including any claim for accrued but unpaid interest), increased by any
gain or interest income recognized in respect of such portion and decreased by
any consideration received other than stock or securities (such as any cash or
New Senior Notes received) and any deductions claimed in respect of any
previously accrued interest. Such basis would be allocated between the New
Common Stock and the New Convertible Preferred Stock based on relative fair
market value. In general, the holder's holding period for any New Common Stock
and the New Convertible Preferred Stock received will include the holder's
holding period for the claim, except to the extent that the New Common Stock or
New Convertible Preferred Stock was issued in respect of a claim for accrued but
unpaid interest. A holder's tax basis in any New Senior Notes received would
equal the "issue price" of such notes, and the holding period for any New Senior
Notes generally would begin the day following the issuance of such notes.
If the New Senior Notes do constitute "securities," a holder
will have an aggregate tax basis in any New Common Stock, New Convertible
Preferred Stock, and New Senior Notes received in satisfaction of the portion of
its claim constituting a "security" equal to the holder's adjusted tax basis in
such portion (including any claim for accrued but unpaid interest) increased by
any gain or interest income recognized in respect of such portion and decreased
by any consideration received other than stock or securities (such as any cash
received) and any deductions claimed in respect of any previously accrued
interest. Such tax basis would then be allocated between the New Common Stock,
New Convertible Preferred Stock, and New Senior Notes based on relative fair
market value. A holder's holding period for any New Common Stock, New
Convertible Preferred Stock, and New Senior Notes in this instance will include
that holder's holding period for the claim, except to the extent that the New
Common Stock, New Convertible Preferred Stock, or New Senior Notes were issued
in respect of a claim for accrued but unpaid interest.
4. Distributions in Discharge of Accrued Interest
Pursuant to the Plan, all distributions in respect of an
allowed claim will be allocated first to the principal amount of the claim, with
any excess allocated to the remaining portion of the claim. However, there is no
assurance that such allocation would be respected by the IRS for federal income
tax purposes. In general, to the extent that any amount received (whether stock,
cash, or other property) by a holder of a debt is received in satisfaction of
accrued interest during its holding period, such amount will be taxable to the
holder as interest income (if not previously included in the holder's gross
income). Conversely, a holder generally recognizes a deductible loss to the
extent any accrued interest claimed was previously included in its gross income
and is not paid in full. Each holder of a claim is urged to consult its tax
advisor regarding the allocation of consideration and the deductibility of
unpaid interest for tax purposes.
5. Market Discount
A holder which purchased its claim from a prior holder at a
market discount may be subject to the market discount rules of the Tax Code.
Under those rules, assuming that the holder has made no election to amortize the
market discount into income on a current basis with respect to any market
discount instrument, any gain recognized on the exchange of its claim
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(subject to a de minimis rule) generally would be characterized as ordinary
income to the extent of the accrued market discount on such claim as of the date
of the exchange.
To the extent that a holder's claim constitutes a "security"
and is exchanged in a "recapitalization" for federal income tax purposes, the
Treasury Department is expected to promulgate regulations that will provide that
any accrued "market discount" not treated as ordinary income upon such exchange
would carry over to the nonrecognition property received in the exchange. If
such regulations are promulgated and applicable to the Plan (and arguably even
without issuance of regulations), any holder of a claim that is exchanged in a
"recapitalization" would carry over any accrued market discount incurred in
respect of such claim, on an allocable basis, to any New Common Stock, New
Convertible Preferred Stock, New Senior Notes (if such notes constitute
"securities"), and/or New Warrants received, such that any gain recognized by
the holder upon a subsequent disposition of such New Common Stock, New
Convertible Preferred Stock, New Senior Notes, or New Warrants would be treated
as ordinary income to the extent of any accrued market discount not previously
included in income. In addition, any accrued market discount that carries over
to the New Convertible Preferred Stock would, in turn, carry over to any New
Common Stock received upon conversion of such preferred stock, and it is
possible that any accrued market discount that carries over to the New Warrants
would, in turn, carryover to any New Common Stock received upon the exercise of
such warrants.
6. Treatment of Distributions on New Convertible Preferred Stock
and New Common Stock
Distributions - In General. The amount of distributions, if
any, by Reorganized Genesis in respect of the New Common Stock and the New
Convertible Preferred Stock will be equal to the amount of cash and the fair
market value as of the date of distribution of any property distributed, other
than possibly in the case of distributions of the New Convertible Preferred
Stock which are payable in kind with additional shares (so called "PIK"
distributions). Subject to the discussion below regarding redemption of New
Convertible Preferred Stock (see section XII.B.9, below), distributions
generally will be treated for federal income tax purposes first as a taxable
dividend to the extent of Reorganized Genesis's current and accumulated earnings
and profits (as determined for federal income tax purposes) and then as a
tax-free return of capital to the extent of the holder's tax basis in its stock,
with any excess treated as capital gain from the sale or exchange of the stock.
PIK /Constructive Distributions. The New Convertible Preferred
Stock provides for annual distributions payable in kind with additional shares
of New Convertible Preferred Stock, which will accumulate if not paid.
Reorganized Genesis intends to declare and pay such distributions annually.
Accordingly, Reorganized Genesis intends to treat the distributions of
additional shares of New Convertible Preferred Stock under the normal
distribution rules described above. Under the normal distribution rules, the
amount of any such distribution will equal the fair market value of the New
Convertible Preferred Stock on the distribution date, a holder's tax basis in
the New Convertible Preferred Stock so received will equal the fair market value
of such stock on the distribution date, and such holder's holding period for
such stock will commence on the day following the distribution date.
Additionally, the constructive distribution rules will apply to
the New Convertible Preferred Stock acquired pursuant to the Plan if the
"redemption price" of the New Convertible Preferred Stock ($20.33) exceeds its
issue price (generally fair market value at issue). A holder would be required
to accrue such excess -- regardless of the holder's regular method of accounting
-- over the term of the New Convertible Preferred Stock. The stated term of the
New
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Convertible Preferred Stock is nine years, but for purposes of calculating
constructive distributions the term may be regarded as being less than nine
years if an earlier date upon which a redemption may occur is the date that a
redemption is most likely to occur based upon all the facts and circumstances at
the time of issuance. Under the applicable Treasury Regulations, each holder
will be bound by Reorganized Genesis's determination as to the presence or
absence of constructive distributions, unless the holder explicitly discloses in
its timely filed tax return for the taxable year in which it acquires the New
Convertible Preferred Stock that it is taking a contrary position.
The constructive distributions would be treated in the same
manner as an ordinary distribution (discussed above). To the extent a
constructive distribution results in a taxable dividend to the holder, the
holder's aggregate tax basis in the New Convertible Preferred Stock (including
any additional shares actually distributed in respect of the stated dividend)
would be increased by the amount of the constructive distribution. To the extent
a constructive distribution does not result in a taxable dividend to the holder,
the aggregate tax basis of the holder's New Convertible Preferred Stock will
remain unchanged but will be spread over a greater number of shares (assuming
actual payment of the stated dividend).
Aside from the treatment of any excess redemption premium, the
presence or absence of an adjustment to the conversion price of the New
Convertible Preferred Stock under anti-dilution provisions may, under certain
circumstances, result in constructive distributions to the holder. Conversely,
the absence of an adjustment to the conversion price of the New Convertible
Preferred Stock may result in a constructive distribution to the holders of the
New Common Stock or the holder of the New Warrants.
Any additional shares of New Convertible Preferred Stock
distributed to the holders of the New Convertible Preferred Stock will be
subject to the same tax treatment as the underlying New Convertible Preferred
Stock. Accordingly, the rules discussed above relating to distributions and
constructive distributions would apply to any New Convertible Preferred Stock
received as a distribution. However, for purposes of applying the constructive
distribution rules, the issue price of such New Convertible Preferred Stock
would be determined at the time of the distribution, and the term of such stock
would be determined based upon the date such stock is distributed. Thus, it is
possible that the tax treatment of the additional shares received may not be
identical to that of the underlying New Convertible Preferred Stock, and that
the additional shares may, therefore, not be fungible with the underlying New
Convertible Preferred Stock.
There is no assurance that the Internal Revenue Service will
not take a contrary position. Because all stated dividends on the New
Convertible Preferred Stock are required to be paid annually in additional
shares of such stock, with the result that holders will not be entitled to the
receipt of cash until the redemption of the New Convertible Preferred Stock, it
is possible that for purposes of applying the constructive distribution rules,
the Internal Revenue Service may take the position that "redemption price" of
the New Convertible Preferred Stock is equal to the sum of the instrument's
stated redemption price ($20.33) and the aggregate stated dividends provided for
over the term of the instrument. Under such treatment, the right to
distributions of additional shares of New Convertible Preferred Stock would be
taxable solely under the constructive distribution rules, and the actual
distribution of such stock in respect of a stated dividend would not be
considered a separate taxable event.
Distributions to Corporate Shareholders. In general, a
distribution to a corporate shareholder which is treated as a dividend for
federal income tax purposes will qualify for the 70% dividends received
deduction that is available to corporate shareholders that own less than
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20% of the voting power or value of the outstanding stock of the distributing
corporation (other than certain preferred stock not applicable here). A
corporate shareholder holding 20% or more of the distributing corporation (other
than certain preferred stock not applicable here) may be eligible for an 80%
dividends received deduction. No assurance can be given that Reorganized Genesis
will have sufficient earnings and profits (as determined for federal income tax
purposes) to cause distributions to be eligible for a dividends received
deduction. Dividend income that is not subject to regular federal income tax as
a consequence of the dividends received deduction may be subject to the federal
alternative minimum tax.
The dividends received deduction is only available if certain
holding periods and taxable income requirements are satisfied. The length of
time that a shareholder has held stock is reduced for any period during which
the shareholder's risk of loss with respect to the stock is diminished by reason
of the existence of certain options, contracts to sell, short sales, or similar
transactions. The law is unclear whether there would also be excluded any period
during which a holder can require, pursuant to the terms of the stock itself,
the redemption of the stock, as in the case of New Convertible Preferred Stock.
Also, to the extent that a corporation incurs indebtedness that is directly
attributable to an investment in the stock on which the dividend is paid, all or
a portion of the dividends received deduction may be disallowed. In addition,
any dividend received by a corporation is also subject to the "extraordinary
distribution" provisions of the Tax Code.
7. Subsequent Sale of New Common Stock or New Convertible
Preferred Stock
Any gain recognized by a holder upon a subsequent taxable
disposition of New Convertible Preferred Stock or New Common Stock (including
any New Common Stock received upon conversion) received pursuant to the Plan (or
any stock or property received for it in a later tax-free exchange) will be
treated as ordinary income to the extent of (i) any bad debt deductions (or
additions to a bad debt reserve) claimed with respect to its claim and any
ordinary loss deductions incurred upon satisfaction of its claim, less any
income (other than interest income) recognized by the holder upon satisfaction
of its claim, and (ii) with respect to a cash-basis holder, also any amounts
which would have been included in its gross income if the holder's claim had
been satisfied in full but which was not included by reason of the cash method
of accounting.
In addition, a portion of any gain may be treated as ordinary
income under the "market discount" rules of the Tax Code. See section XII.B.5,
above.
8. Conversion of New Convertible Preferred Stock
Except for cash received in lieu of a fractional share, a
holder of New Convertible Preferred Stock generally will not recognize gain or
loss upon conversion of the New Convertible Preferred Stock for New Common
Stock. A holder who receives cash in lieu of a fractional share should recognize
capital gain or loss equal to the difference between the amount of cash received
and the holder's tax basis exchanged allocable to the fractional share.
Generally, a holder's tax basis in the New Common Stock
received upon conversion of shares of New Convertible Preferred Stock will equal
the tax basis of the shares of New Convertible Preferred Stock exchanged
therefor (less the portion of the holder's basis allocable to any fractional
share, as to which the holder receives cash), and the holding period of the New
Common Stock received upon conversion will include the holding period of the
shares of the New Convertible Preferred Stock exchanged therefor.
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9. Redemption of New Convertible Preferred Stock
The federal income tax treatment of a redemption to a holder of
New Convertible Preferred Stock will depend on the particular facts relating to
such holder at the time of the redemption. If the redemption of such stock (i)
is "not essentially equivalent to a dividend" with respect to the holder (taking
into account any ownership of common stock), (ii) is "substantially
disproportionate" with respect to the holder (defined generally as a greater
than 20% reduction in a holder's voting stock interest in a corporation), or
(iii) results in a "complete termination" of all such holder's equity interest
in the corporation, then the receipt of cash or property by such holder will be
treated as an exchange on which gain or loss will be recognized. Such exchange
will be treated as a taxable disposition in which gain or loss will be
recognized. See section X.B.7, above. In applying these tests, certain
constructive ownership rules apply to determine stock ownership.
If none of the above tests giving rise to taxable disposition
treatment is satisfied in respect of a redemption of New Convertible Preferred
Stock, the holder will be treated as having received an ordinary distribution
with respect to such stock. The amount of such distribution generally will be
equal to the amount of cash and the fair market value of property received in
the redemption, and will be treated first as a taxable dividend to the extent of
Reorganized Genesis's current and accumulated earnings and profits, if any, and
then as a tax-free return of capital to the extent of the holder's tax basis in
the stock redeemed, with any excess treated as capital gain from the sale or
exchange of such stock. See section X.B.6, above, for discussion of
distributions to corporate shareholders.
10. Ownership and Disposition of New Warrants
A holder of a New Warrant will not recognize gain or loss upon
the exercise of such warrant (except possibly in respect of any cash received in
lieu of fractional shares). A holder's tax basis in the New Common Stock
received upon exercise of a New Warrant will be equal to the sum of the holder's
tax basis in the New Warrant and the exercise price (less the sum of the portion
of the holder's tax basis allocable to any fractional share, as to which the
holder receives cash, as discussed below). The holding period of the New Common
Stock received upon exercise of a New Warrant will commence on the day following
the exercise of such warrant.
A holder who receives cash in lieu of a fractional share upon
exercise of a New Warrant should recognize capital gain or loss equal to the
difference between the amount of cash received and the portion of the holder's
tax basis in the New Warrant allocable to such fractional share.
The presence of an adjustment to the exercise price of the New
Warrants under anti-dilution provisions may, under certain circumstances, result
in constructive distributions to the holder. Conversely, the absence of an
adjustment to the exercise price of the New Warrants may result in a
constructive distribution to the holders of the New Common Stock or the holders
of the New Convertible Preferred Stock.
Upon the lapse or disposition of a New Warrant, the holder
generally should recognize gain or loss equal to the difference between the
amount received (nothing in the case of a lapse) and its tax basis in the
warrant. In general, such gain or loss should be a capital gain or loss,
long-term or short-term, depending on whether the requisite holding period was
satisfied.
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11. Interest and Original Issue Discount on the New Senior Notes
Pursuant to the Plan, interest on the New Senior Notes
generally will be payable at least annually at a rate of interest equal to the
LIBOR plus 5%. Stated interest on the New Senior Notes should be includable in
income by a holder in accordance with such holder's method of accounting.
In addition, under certain circumstances, holders of the New
Senior Notes may be required to recognize imputed interest to the extent that
such New Senior Notes are issued with OID. In general, a debt instrument is
treated as having OID to the extent its "stated redemption price at maturity"
(in this case, the stated principal amount of the New Senior Notes) exceeds its
"issue price." The "issue price" of the New Senior Notes will depend upon
whether they are traded on an "established securities market" during the sixty
day period ending thirty days after the Effective Date. Pursuant to Treasury
Regulations, an "established securities market" includes a system of general
circulation (including a computer listing disseminated to subscribing brokers,
dealers, or traders) that provides a reasonable basis to determine fair market
value by disseminating either recent price quotations or actual prices of recent
sales transactions. If the New Senior Notes are traded on an established
securities market, the "issue price" will be their fair market value. If they
are not so traded, the issue price of the New Senior Notes will be their stated
principal amount.
In general, if the New Senior Notes are treated as issued with
OID, each holder will be required to accrue the OID in respect of its New Senior
Notes, and include such amount in gross income as interest, over the term of
such notes based on the constant interest method. Accordingly, each holder
generally will be required to include amounts in gross income in advance of the
payment of cash in respect of such income. A holder's tax basis in a New Senior
Note will be increased by the amount of any OID included in income and reduced
by any cash payments (other than payment of stated interest) made with respect
to such New Senior Note.
In addition, as discussed in section XII.A.4, above, certain
debt obligations that are issued with substantial OID and have a maturity of
over five years are treated as applicable high yield discount obligations
(AHYDOs) within the meaning of the Tax Code. With respect to such obligations, a
portion of a corporate holder's income with respect to such accrued OID may be
treated as a dividend for purposes of the dividend-received-deduction to the
extent such amount would be so treated if it had been a distribution made by the
issuer with respect to its stock (that is, to the extent the issuer has
sufficient earnings and profits such that a distribution in respect of stock
would constitute a dividend for federal income tax purposes and, presumably,
subject to certain holding period and taxable income requirements and other
limitations on the dividend-received-deduction). The AHYDO rules will have no
applicability to the New Senior Notes unless the New Senior Notes are considered
to be traded on an established securities market and are issued with sufficient
OID such that there would be unamortized OID as of the end of the fifth year
after issuance in excess of one year's interest, both actual and imputed.
12. Information Reporting and Withholding
All distributions to holders of allowed claims under the Plan
are subject to any applicable withholding (including employment tax
withholding). Under federal income tax law, interest, dividends, and other
reportable payments may, under certain circumstances, be subject to "backup
withholding" at a rate of 31%, subject to adjustment under recent legislation.
Backup withholding generally applies if the holder (i) fails to furnish its
social security number or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) fails properly to
116
report interest or dividends, or (iv) under certain circumstances, fails to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that it is not subject to backup withholding.
Backup withholding is not an additional tax but merely an advance payment, which
may be refunded to the extent it results in an overpayment of tax. Certain
persons are exempt from backup withholding, including, in certain circumstances,
corporations and financial institutions.
THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL
HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.
XIII.
Conclusion
The Debtors believe the Plan of Reorganization is in the best
interests of all creditors and equity holders and urges the holders of impaired
claims in Subclasses G1-13 through G1-17 (Genesis Other Secured Claims), Class
G2 (Genesis Senior Lender Claims), Class G4 (Genesis General Unsecured Claims),
Class G5 (Genesis Senior Subordinated Note Claims), Subclass M1-7 (Multicare
Other Secured Claims), Class M2 (Multicare Senior Lender Claims), Class M4
(Multicare General Unsecured Claims), and Class M5 (Multicare Senior
Subordinated
117
Note Claims) to vote to accept the Plan of Reorganization and to evidence such
acceptance by returning their Ballots so that they will be received not later
than August 17, 2001.
Dated: July 6, 2001
Respectfully submitted,
GENESIS HEALTH SERVICES CORPORATION
GENESIS HEALTH VENTURES, INC.
ACCUMED, INC.
ASCO HEALTHCARE, INC.
ASCO HEALTHCARE OF NEW ENGLAND, INC.
BRINTON MANOR, INC.
BURLINGTON WOODS CONVALESCENT CENTER, INC.
CARECARD, INC.
CAREFLEET, INC.
CHELTENHAM LTC MANAGEMENT, INC.
COMPASS HEALTH SERVICES, INC.
CONCORD HEALTHCARE CORPORATION
CONCORD PHARMACY SERVICES, INC.
CRESTVIEW CONVALESCENT HOME, INC.
CRESTVIEW NORTH, INC.
CRYSTAL CITY NURSING CENTER, INC.
DELCO APOTHECARY, INC.
DERBY NURSING CENTER CORPORATION
DIANE MORGAN AND ASSOCIATES, INC.
DOVER HEALTHCARE ASSOCIATES, INC.
EASTERN MEDICAL SUPPLIES, INC.
EASTERN REHAB SERVICES, INC.
EIDOS, INC.
ENCARE OF MASSACHUSETTS, INC.
GENESIS ELDERCARE ADULT DAY HEALTH SERVICES, INC.
GENESIS ELDERCARE DIAGNOSTIC SERVICES, INC.
GENESIS ELDERCARE HOME CARE SERVICES, INC.
GENESIS ELDERCARE HOME HEALTH SERVICES-SOUTHERN,
INC.
GENESIS ELDERCARE HOSPITALITY SERVICES, INC.
GENESIS ELDERCARE MANAGEMENT SERVICES, INC.
GENESIS ELDERCARE NETWORK SERVICES, INC.
GENESIS ELDERCARE NATIONAL CENTERS, INC.
GENESIS ELDERCARE NETWORK SERVICES OF
MASSACHUSETTS, INC.
GENESIS ELDERCARE PHYSICIAN SERVICES, INC.
GENESIS ELDERCARE PROPERTIES, INC.
GENESIS ELDERCARE REHABILITATION MANAGEMENT
SERVICES, INC.
GENESIS ELDERCARE REHABILITATION SERVICES, INC.
GENESIS ELDERCARE STAFFING SERVICES, INC.
GENESIS ELDERCARE TRANSPORTATION SERVICES, INC.
GENESIS HEALTH VENTURES OF ARLINGTON, INC.
GENESIS HEALTH VENTURES OF BLOOMFIELD, INC.
118
GENESIS HEALTH VENTURES OF CLARKS SUMMIT, INC.
GENESIS HEALTH VENTURES OF INDIANA, INC.
GENESIS HEALTH VENTURES OF LANHAM, INC.
GENESIS HEALTH VENTURES OF MASSACHUSETTS, INC.
GENESIS HEALTH VENTURES OF NAUGATUCK, INC.
GENESIS HEALTH VENTURES OF NEW GARDEN, INC.
GENESIS HEALTH VENTURES OF POINT PLEASANT, INC.
GENESIS HEALTH VENTURES OF WAYNE, INC.
GENESIS HEALTH VENTURES OF WEST VIRGINIA, INC.
GENESIS HEALTH VENTURES OF WILKES-BARRE, INC.
GENESIS HEALTH VENTURES OF WINDSOR, INC.
GENESIS HEALTHCARE CENTERS HOLDINGS, INC.
GENESIS HOLDINGS, INC.
GENESIS IMMEDIATE MED CENTER, INC.
GENESIS PROPERTIES OF DELAWARE CORPORATION
GENESIS SELECTCARE CORP.
GERIATRIC & MEDICAL COMPANIES, INC.
GERIATRIC AND MEDICAL SERVICES, INC.
GERIATRIC AND MEDICAL INVESTMENTS CORPORATION
GERIMED CORP.
GMC LEASING CORPORATION
GMC MEDICAL CONSULTING SERVICES, INC.
GMS MANAGEMENT-TUCKER, INC.
GMS MANAGEMENT, INC.
GOVERNOR'S HOUSE NURSING HOME, INC.
HEALTHCARE RESOURCES CORP.
HEALTH CONCEPTS AND SERVICES, INC.
HEALTHOBJECTS CORPORATION
HILLTOP HEALTH CARE CENTER, INC.
HORIZON MEDICAL EQUIPMENT AND SUPPLY, INC.
INNOVATIVE HEALTH CARE MARKETING, INC.
INNOVATIVE PHARMACY SERVICES, INC.
INSTITUTIONAL HEALTH CARE SERVICES, INC.
KEYSTONE NURSING HOME, INC.
KNOLLWOOD MANOR, INC.
KNOLLWOOD NURSING HOME, INC.
LIFE SUPPORT MEDICAL EQUIPMENT, INC.
LIFE SUPPORT MEDICAL, INC.
LINCOLN NURSING HOME, INC.
MANOR MANAGEMENT CORP. OF GEORGIAN MANOR, INC.
MCKERLEY HEALTH CARE CENTERS, INC.
MEDICAL SERVICES GROUP, INC.
MERIDIAN HEALTH, INC.
MERIDIAN HEALTHCARE, INC.
METRO PHARMACEUTICALS, INC.
NATIONAL PHARMACY SERVICE, INC.
NEIGHBORCARE INFUSION SERVICES, INC.
NEIGHBORCARE-MEDISCO, INC.
NEIGHBORCARE OF NORTHERN CALIFORNIA, INC.
NEIGHBORCARE OF OKLAHOMA, INC.
NEIGHBORCARE OF VIRGINIA, INC.
119
NEIGHBORCARE OF WISCONSIN, INC.
NEIGHBORCARE PHARMACIES, INC.
NEIGHBORCARE PHARMACY SERVICES, INC.
NEIGHBORCARE-ORCA, INC.
NEIGHBORCARE-TCI, INC.
NETWORK AMBULANCE SERVICES, INC.
OAK HILL HEALTH CARE CENTER, INC.
PHARMACY EQUITIES, INC.
PHILADELPHIA AVENUE CORPORATION
PROFESSIONAL PHARMACY SERVICES, INC.
PROSPECT PARK LTC MANAGEMENT, INC.
STATE STREET ASSOCIATES, INC.
SUBURBAN MEDICAL SERVICES, INC.
THE TIDEWATER HEALTHCARE SHARED SERVICES GROUP,
INC.
THERAPY CARE, INC.
TRANSPORT SERVICES, INC.
UNITED HEALTH CARE SERVICES, INC.
VALLEY MEDICAL SERVICES, INC.
VALLEY TRANSPORT AMBULANCE SERVICE, INC.
VERSALINK, INC.
VILLAS REALTY & INVESTMENTS, INC.
WALNUT LTC MANAGEMENT, INC.
WAYSIDE NURSING HOME, INC.
WEISENFLUH AMBULANCE SERVICE, INC.
WEST PHILA. LTC MANAGEMENT, INC.
WYNCOTE HEALTHCARE CORP.
YORK LTC MANAGEMENT, INC.
BY: GENESIS HEALTH VENTURES, INC., as agent and
attorney-in-fact for each of the foregoing entities
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
ASCO HEALTHCARE OF NEW ENGLAND, LIMITED PARTNERSHIP
BY: ASCO HEALTHCARE OF NEW ENGLAND, INC., its
General partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
120
BREVARD MERIDIAN LIMITED PARTNERSHIP
CATONSVILLE MERIDIAN LIMITED PARTNERSHIP
EASTON MERIDIAN LIMITED PARTNERSHIP
GREENSPRING MERIDIAN LIMITED PARTNERSHIP
HAMMONDS LANE MERIDIAN LIMITED PARTNERSHIP
MERIDIAN EDGEWOOD LIMITED PARTNERSHIP
MERIDIAN PERRING LIMITED PARTNERSHIP
MERIDIAN VALLEY LIMITED PARTNERSHIP
MERIDIAN VALLEY VIEW LIMITED PARTNERSHIP
MERIDIAN/CONSTELLATION LIMITED PARTNERSHIP
MILLVILLE MERIDIAN LIMITED PARTNERSHIP
BY: MERIDIAN HEALTHCARE, INC., as General Partner
of each of the foregoing limited
partnerships
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
CARE4, L.P.
BY: INSTITUTIONAL HEALTH CARE SERVICES, INC., its
general partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
EDELLA STREET ASSOCIATES
BY: GENESIS HEALTH VENTURES OF CLARK SUMMIT,
INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
121
GENESIS-GEORGETOWN SNF/JV, LIMITED LIABILITY
COMPANY
RESPIRATORY HEALTH SERVICES, L.L.C.
BY: GENESIS HEALTH VENTURES, INC., its Member
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
GENESIS ELDERCARE EMPLOYMENT SERVICES, LLC
BY: GENESIS ELDERCARE MANAGEMENT SERVICES,
INC., its Member
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
GENESIS HEALTH VENTURES OF WEST VIRGINIA,
LIMITED PARTNERSHIP
BY: GENESIS HEALTH VENTURES OF WEST VIRGINIA,
INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
GENESIS PROPERTIES LIMITED PARTNERSHIP
BY: GENESIS HEALTH VENTURES OF ARLINGTON,
INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
122
GENESIS PROPERTIES OF DELAWARE LTD.
PARTNERSHIP, L.P.
BY: GENESIS PROPERTIES OF DELAWARE
CORPORATION, its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
HALLMARK HEALTHCARE LIMITED PARTNERSHIP
BY: PHARMACY EQUITIES, INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
MAIN STREET PHARMACY, L.L.C.
BY: PROFESSIONAL PHARMACY SERVICES, INC., its
Member
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
MCKERLEY HEALTH CARE CENTER-CONCORD LIMITED
PARTNERSHIP
BY: MCKERLEY HEALTH CARE CENTER-CONCORD,
INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
123
MCKERLEY HEALTH FACILITIES
SEMINOLE MERIDIAN LIMITED PARTNERSHIP
VOLUSIA MERIDIAN LIMITED PARTNERSHIP
BY: MERIDIAN HEALTH, INC., as General Partner of
each of the foregoing Limited Partnerships
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
NORRISTOWN NURSING AND REHABILITATION CENTER
ASSOCIATES, LIMITED PARTNERSHIP
BY: GMC-LTC MANAGEMENT, INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
NORTH CAPE CONVALESCENT CENTER ASSOCIATES, L.P.
NORTHWEST TOTAL CARE CENTER ASSOCIATES, L.P.
BY: GERIATRIC AND MEDICAL SERVICES, INC., as
General Partner for each of the foregoing
Limited Partnerships
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
PHILADELPHIA AVENUE ASSOCIATES
BY: PHILADELPHIA AVENUE CORPORATION, its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
124
RIVER RIDGE PARTNERSHIP
RIVER STREET ASSOCIATES
BY: GENESIS HEALTH VENTURES OF WILKES-BARRE, INC.,
as General Partner for each of the foregoing
Limited Partnerships
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
STATE STREET ASSOCIATES, L.P.
BY: STATE STREET ASSOCIATES, INC., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
THERAPY CARE SYSTEMS, LP
BY: GENESIS ELDERCARE REHABILITATION
SERVICES, INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
MULTICARE AMC, INC.
ADS PALM CHELMSFORD, INC.
ADS RESERVOIR WALTHAM, INC.
MARKGLEN, INC.
ACADEMY NURSING HOME, INC.
ADS CONSULTING, INC.
ADS HINGHAM ALF, INC.
ADS HOME HEALTH, INC.
ADS VILLAGE MANOR, INC.
ANR, INC.
APPLEWOOD HEALTH RESOURCES, INC.
ASL, INC.
AUTOMATED PROFESSIONAL ACCOUNTS, INC.
BERKS NURSING HOME, INC.
BETHEL HEALTH RESOURCES, INC.
125
BREYUT CONVALESCENT CENTER, INC.
BRIGHTWOOD PROPERTY, INC.
CENTURY CARE CONSTRUCTION, INC.
CENTURY CARE MANAGEMENT, INC.
CHEATEAU VILLAGE HEALTH RESOURCES, INC.
CHG INVESTMENT CORP., INC.
CHNR - 1, INC.
COLONIAL HALL HEALTH RESOURCES, INC.
COLONIAL HOUSE HEALTH RESOURCES, INC.
CONCORD CAMPANION CARE, INC.
CONCORD HEALTHCARE SERVICES, INC.
CONCORD HEALTH GROUP, INC.
CONCORD HOME HEALTH, INC.
CONCORD REHAB, INC.
CONCORD SERVICE CORPORATION
CVNR, INC.
DAWN VIEW MANOR, INC.
DELM NURSING, INC.
ELDERCARE RESOURCES CORP.
ELMWOOD HEALTH RESOURCES, INC.
ENCARE OF MENDHAM, INC.
ENCARE OF PENNYPACK, INC.
ENR, INC.
GENESIS ELDERCARE CORP.
GLENMARK ASSOCIATES - DAWN VIEW MANOR, INC.
GLENMARK PROPERTIES, INC.
GMA - BRIGHTWOOD, INC.
GMA - MADISON, INC.
GMA - CONSTRUCTION, INC.
GMA UNIONTOWN, INC.
HEALTH RESOURCES OF ACADEMY MANOR, INC.
HEALTH RESOURCES OF BOARDMAN, INC.
HEALTH RESOURCES OF BRIDGETON, INC.
HEALTH RESOURCES OF BROOKLYN, INC.
HEALTH RESOURCES OF CEDAR GROVE, INC.
HEALTH RESOURCES OF CINNAMINSON, INC.
HEALTH RESOURCES OF COLCHESTER, INC.
HEALTH RESOURCES OF COLUMBUS, INC.
HEALTH RESOURCES OF CRANBURY, INC.
HEALTH RESOURCES OF ENGLEWOOD, INC.
HEALTH RESOURCES OF EATONTOWN, INC.
HEALTH RESOURCES OF EWING, INC.
HEALTH RESOURCES OF FARMINGTON, INC.
HEALTH RESOURCES OF GARDNER, INC.
HEALTH RESOURCES OF GLASTONBURY, INC.
HEALTH RESOURCES OF JACKSON, INC.
HEALTH RESOURCES OF KARAMENTA AND MADISON, INC.
HEALTH RESOURCES OF LAKEVIEW, INC.
HEALTH RESOURCES OF LEMONT, INC.
HEALTH RESOURCES OF LYNN, INC.
HEALTH RESOURCES OF MARCELLA, INC.
126
HEALTH RESOURCES OF MONTCLAIR, INC.
HEALTH RESOURCES OF MORRISTOWN, INC.
HEALTH RESOURCES OF NORFOLK, INC
HEALTH RESOURCES OF NORTH ANDOVER, INC.
HEALTH RESOURCES OF NORWALK, INC.
HEALTH RESOURCES OF PENNINGTON, INC.
HEALTH RESOURCES OF RIDGEWOOD, INC.
HEALTH RESOURCES OF ROCKVILLE, INC.
HEALTH RESOURCES OF SOLOMONT/BROOKLINE, INC.
HEALTH RESOURCES OF SOUTH BRUNSWICK, INC.
HEALTH RESOURCES OF TROY HILL, INC.
HEALTH RESOURCES OF VOORHEES, INC.
HEALTH RESOURCES OF WESTWOOD, INC.
HEALTHCARE REHAB SYSTEMS, INC.
HELSTAT, INC.
HMNR REALTY, INC.
HNCA, INC.
HORIZON MOBILE, INC.
HORIZON REHABILITATION, INC.
SCHUYLKILL NURSING HOMES, INC.
SCHUYLKILL PARTNERSHIP ACQUISITION CORPORATION
SCOTCHWOOD MASS. HOLDING CO., INC.
SENIOR LIVING VENTURES, INC.
SENIOR SOURCE, INC.
SNOW VALLEY HEALTH RESOURCES, INC.
SVNR, INC.
THE ADS GROUP, INC.
RIDGELAND HEALTH RESOURCES, INC.
RIVER PINES HEALTH RESOURCES, INC.
RIVERSHORES HEALTH RESOURCES, INC.
RLNR, INC.
ROPHEL CONVALESCENT CENTER, INC.
ROSE HEALTHCARE, INC.
ROSE VIEW MANOR, INC.
ROXBOROUGH NURSING HOME, INC.
RSNR, INC.
LWNR, INC.
MABRI CONVALESCENT CENTER, INC.
MARSHFIELD HEALTH RESOURCES, INC.
MHNR, INC.
MNR, INC.
MONTGOMERY NURSING HOMES, INC.
MULTICARE HOME HEALTH OF ILLINOIS, INC.
NORTHWESTERN MANAGEMENT SERVICES, INC.
NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC.
ARACADIA ASSOCIATES
PHC OPERATING CORP.
POCOHANTAS CONTINUOUS CARE CENTER, INC.
POMPTON CARE, INC.
PRESCOTT NURSING HOME, INC.
PROGRESSIVE REHABILITATION CENTERS, INC.
127
PROVIDENCE FUNDING CORPORATION
PROVIDENCE HEALTH CARE, INC.
PROVIDENCE MEDICAL, INC.
REST HAVEN NURSING HOME, INC.
HR OF CHARLESTON, INC.
HRWV HUNTINGTON, INC.
LAKEWOOD HEALTH RESOURCES, INC.
LAUREL HEALTH RESOURCES, INC.
LEHIGH NURSING HOMES, INC.
LRC HOLDING COMPANY
S.T.B. INVESTORS, LTD.
THE ASSISTED LIVING ASSOCIATES OF BERKSHIRE, INC.
THE ASSISTED LIVING ASSOCIATES OF LEHIGH, INC.
THE ASSISTED LIVING ASSOCIATES OF SANATOGA, INC.
THE ASSISTED LIVING ASSOCIATES OF WALL, INC.
THE HOUSE OF CAMPBELL, INC.
TM ACQUISITION CORP.
TRI-STATE MOBILE MEDICAL SERVICES, INC.
WILLOW MANOR NURSING HOME, INC.
WESTFORD NURSING AND RETIREMENT CENTER, INC.
RVNR, INC.
HORIZON ASSOCIATES, INC.
HEALTH RESOURCES OF WARWICK, INC.
HEALTH RESOURCES OF WALLINGFORD, INC.
HEALTH RESOURCES OF MIDDLETOWN (RI), INC.
HEALTH RESOURCES OF GROTON, INC.
HEALTH RESOURCES OF CUMBERLAND, INC.
HEALTH RESOURCES OF ARCADIA, INC.
ENCARE OF WYNCOTE, INC.
ENCARE OF QUAKERTOWN, INC.
ADS SENIOR HOUSING, INC.
ADS RECUPERATIVE CENTER, INC.
ADS HINGHAM NURSING FACILITY, INC.
ADS APPLE VALLEY, INC.
ADS/MULTICARE, INC.
GLENMARK ASSOCIATES, INC.
GMA PARTNERSHIP HOLDING COMPANY, INC.
STAFFORD CONVALESCENT CENTER, INC.
THE MULTICARE COMPANIES, INC.
NORTH MADISON, INC.
BY: Genesis Eldercare Corporation, as agent and
attorney-in-fact for each of the foregoing
entities
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
128
CARE HAVEN ASSOCIATES LIMITED PARTNERSHIP
GLENMARK PROPERTIES I, LIMITED PARTNERSHIP
POINT PLEASANT HAVEN LIMITED PARTNERSHIP
RALEIGH MANOR LIMITED PARTNERSHIP
ROMNEY HEALTH CARE CENTER LTD. LIMITED PARTNERSHIP
SISTERVILLE HAVEN LIMITED PARTNERSHIP
TEAYS VALLEY HAVEN LIMITED PARTNERSHIP
BY: GLENMARK ASSOCIATES, INC., as General Partner
of each of the foregoing limited partnerships
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
ADS HINGHAM LIMITED PARTNERSHIP
BY: ADS HINGHAM NURSING FACILITY, INC., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
ADS RECUPERATIVE CENTER LIMITED PARTNERSHIP
BY: ADS RECUPERATIVE CENTER, INC., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
WESTFORD NURSING AND RETIREMENT CENTER, LIMITED
PARTNERSHIP
BY: WESTFORD NURSING AND RETIREMENT CENTER, INC.,
its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
129
ADS APPLE VALLEY LIMITED PARTNERSHIP
BY: ADS APPLE VALLEY, INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P.
BY: ENCARE OF MENDHAM, L.L.C., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P.
BY: BREYUT CONVALESCENT CENTER, L.L.C., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
MIDDLETOWN (RI) ASSOCIATE OF RHODE ISLAND, L.P.
BY: HEALTH RESOURCES OF MIDDLETOWN (RI), INC., its
General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
130
POMPTON ASSOCIATES, L.P.
BY: POMPTON CARE, L.L.C., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
THE STRAUS GROUP - OLD BRIDGE, L.P.
BY: HEALTH RESOURCES OF EMERY, L.L.C., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
THE STRAUS GROUP - RIDGEWOOD, L.P.
BY: HEALTH RESOURCES OF RIDGEWOOD, L.L.C., its
General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
WALLINGFORD ASSOCIATES OF CONNECTICUT, L.P.
BY: HEALTH RESOURCES OF WALLINGFORD, INC., its
General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
131
WARWICK ASSOCIATES OF RHODE ISLAND, L.P.
BY: HEALTH RESOURCES OF WARWICK, INC., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
THE STRAUS GROUP - HOPKINS HOUSE, L.P.
BY: ENCARE OF WYNCOTE, INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
THE STRAUS GROUP - QUAKERTOWN MANOR, L.P.
BY: ENCARE OF QUAKERTOWN, INC., its General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
CUMBERLAND ASSOCIATES OF RHODE ISLAND, L.P.
BY: HEALTH RESOURCES OF CUMBERLAND, INC., its
General Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
GROTON ASSOCIATES OF CONNECTICUT, L.P.
BY: HEALTH RESOURCES OF GROTON INC., its General
Partner
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
132
HEALTH RESOURCES OF BRIDGETON, L.L.C.
HEALTH RESOURCES OF CINNAMINSON, L.L.C.
HEALTH RESOURCES OF CRANBURY, L.L.C.
HEALTH RESOURCES OF ENGLEWOOD, L.L.C.
HEALTH RESOURCES OF EWING, L.L.C.
HEALTH RESOURCES OF FAIRLAWN, L.L.C.
HEALTH RESOURCES OF JACKSON, L.L.C.
HEALTH RESOURCES OF WEST ORANGE, L.L.C.
ROEPHEL CONVALESCENT CENTER, L.L.C.
TOTAL REHABILITATION CENTER, L.L.C.
POMPTON CARE, L.L.C.
HEALTH RESOURCES OF LAKEVIEW, L.L.C.
HEALTH RESOURCES OF RIDGEWOOD, L.L.C.
HEALTH RESOURCES OF EMERY, L.L.C.
ENCARE OF MENDHAM. L.L.C.
BREYUT CONVALESCENT CENTER, L.L.C.
BY: THE MULTICARE COMPANIES, INC., as Member of the
foregoing Limited Liability Companies
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
GLENMARK LIMITED LIABILITY COMPANY I
BY: GLENMARK ASSOCIATES, INC., its Member
By: /s/ GEORGE V. HAGER, JR.
----------------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer
133
EXHIBIT A TO
DISCLOSURE STATEMENT
EX-99
8
planofreorganization.txt
EXHIBIT T3E-2
EXHIBIT T3E-2
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------x
:
In re : Chapter 11 Cases No.
:
GENESIS HEALTH VENTURES INC., et al., : 00-2692 (JHW)
:
Debtors. :
: (Jointly Administered)
------------------------------------------x
:
In re : Chapter 11 Cases No.
:
MULTICARE AMC, INC., et al., : 00-2494 (JHW)
:
Debtors. :
: (Jointly Administered)
------------------------------------------x
DEBTORS' JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------
WEIL, GOTSHAL & MANGES LLP RICHARDS, LAYTON & FINGER P.A.
767 Fifth Avenue One Rodney Square
New York, New York 10153 P.O. Box 551
(212) 310-8000 Wilmington, Delaware 19899
(302) 658-6541
Co-Attorneys for the Genesis Debtors Co-Attorneys for the Genesis
as Debtors and Debtors in Possession Debtors as Debtors and Debtors
in Possession
================================================================================
WILLKIE FARR & GALLAGHER YOUNG CONAWAY STARGATT &
787 Seventh Avenue TAYLOR LLP
New York, New York 10019 11th Floor, Wilmington Trust
(212) 728-8000 Company
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
Co-Attorneys for the Multicare Debtors Co-Attorneys for the Multicare
as Debtors and Debtors in Possession Debtors as Debtors and Debtors
in Possession
Dated: July 6, 2001
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS AND INTERPRETATION.................................1
A. Definitions..................................................1
1.1. Administrative Expense Claim........................1
1.2. Allowed.............................................1
1.3. Amended Bylaws......................................2
1.4. Amended Certificate of Incorporation................2
1.5. Bankruptcy Code.....................................2
1.6. Bankruptcy Court....................................2
1.7. Bankruptcy Rules....................................2
1.8. Business Day........................................2
1.9. Cash................................................2
1.10. Catch-up Distribution...............................2
1.11. Claim...............................................2
1.12. Class...............................................2
1.13. Collateral..........................................2
1.14. Commencement Date...................................2
1.15. Confirmation Date...................................2
1.16. Confirmation Hearing................................2
1.17. Confirmation Order..................................3
1.18. Debtors.............................................3
1.19. Disbursing Agent....................................3
1.20. Disputed Claim......................................3
1.21. Distribution Record Date............................3
1.22. Effective Date......................................3
1.23. Equity Interest.....................................3
1.24. Final Distribution Date.............................3
1.25. Final Order.........................................3
1.26. Genesis.............................................4
1.27. Genesis Common Stock Interest.......................4
1.28. Genesis Debtors.....................................4
1.29. Genesis General Unsecured Claim.....................4
1.30. Genesis Intercompany Claim..........................4
i
TABLE OF CONTENTS
(continued)
Page
1.31. Genesis Other Secured Claim.........................4
1.32. Genesis Priority Non-Tax Claim......................4
1.33. Genesis Punitive Damage Claim.......................4
1.34. Genesis Reorganization Cases........................4
1.35. Genesis Senior Lender Agreements....................4
1.36. Genesis Senior Lender Claim.........................5
1.37. Genesis Senior Subordinated Note Claim..............5
1.38. Insured Claim.......................................5
1.39. Multicare...........................................5
1.40. Multicare Common Stock Interest.....................5
1.41. Multicare Debtors...................................5
1.42. Multicare General Unsecured Claim...................5
1.43. Multicare Intercompany Claim........................5
1.44. Multicare Other Secured Claim.......................5
1.45. Multicare Priority Non-Tax Claim....................6
1.46. Multicare Punitive Damage Claim.....................6
1.47. Multicare Reorganization Cases......................6
1.48. Multicare Senior Lender Agreements..................6
1.49. Multicare Senior Lender Claim.......................6
1.50. Multicare Senior Subordinated Note Claim............6
1.51. New Common Stock....................................6
1.52. New Convertible Preferred Stock.....................6
1.53. New Management Incentive Plan.......................6
1.54. New Multicare Stock.................................6
1.55. New Senior Notes....................................6
1.56. New Warrants........................................7
1.57. Plan Documents......................................7
1.58. Plan of Merger......................................7
1.59. Plan of Reorganization..............................7
1.60. Plan Securities.....................................7
1.61. Plan Supplement.....................................7
1.62. Priority Non-Tax Claim..............................7
ii
TABLE OF CONTENTS
(continued)
Page
1.63. Priority Tax Claim..................................7
1.64. Ratable Proportion..................................8
1.65. Reorganization Cases................................8
1.66. Reorganized Debtors.................................8
1.67. Reorganized Genesis.................................8
1.68. Reorganized Multicare...............................8
1.69. Schedules...........................................8
1.70. Secured Claim.......................................8
1.71. Senior Lender Claim.................................8
1.72. Tort Claim..........................................8
B. Interpretation; Application of Definitions and Rules of
Construction.................................................8
Section 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS..........9
2.1. Administrative Expense Claims.......................9
2.2. Compensation and Reimbursement Claims...............9
2.3. Priority Tax Claims.................................9
2.4. DIP Credit Agreement Claims.........................9
2.5. Special Provisions Regarding the Indenture
Trustees' Fees and Expenses........................10
Section 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.................11
3.1. Genesis Classes....................................11
3.2. Multicare Classes..................................12
3.3. Subclasses for Class G1............................12
3.4. Subclasses for Class M1............................14
Section 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS......................14
4.1. Genesis Other Secured Claims (Class G1)............14
4.2. Genesis Senior Lender Claims (Class G2)............16
4.3. Genesis Priority Non-Tax Claims (Class G3).........16
4.4. Genesis General Unsecured Claims (Class G4)........16
4.5. Genesis Senior Subordinated Note Claims
(Class G5).........................................16
4.6. Genesis Intercompany Claims (Class G6).............17
4.7. Genesis Punitive Damage Claims (Class G7)..........17
4.8. Genesis Series G Preferred Stock Interests
(Class G8).........................................17
4.9. Genesis Series H Preferred Stock Interests
(Class G9).........................................17
iii
Page
4.10. Genesis Series I Preferred Stock Interests
(Class G10)........................................17
4.11. Genesis Common Stock Interests (Class G11).........17
4.12. Multicare Other Secured Claims (Class M1)..........17
4.13. Multicare Senior Lender Claims (Class M2)..........18
4.14. Multicare Priority Non-Tax Claims (Class M3).......18
4.15. Multicare General Unsecured Claims (Class M4)......18
4.16. Multicare Senior Subordinated Note Claims
(Class M5).........................................19
4.17. Multicare Intercompany Claims (Class M6)...........19
4.18. Multicare Punitive Damage Claims (Class M7)........19
4.19. Multicare Common Stock Interests (Class M8)........19
Section 5. MEANS FOR IMPLEMENTATION......................................19
5.1. Deemed Consolidation of Debtors for Plan
Purposes Only......................................19
5.2. Merger of Corporate Entities.......................20
5.3. Authorization of Plan Securities...................21
5.4. Exit Facility......................................21
5.5. Waiver of Subordination............................21
5.6. Registration Rights Agreement......................21
5.7. Listing of New Common Stock........................21
5.8. Management Incentive Plan..........................22
5.9. Release of Non-Debtor Affiliates...................22
5.10. Release of Representatives.........................22
5.11. Cancellation of Existing Securities and
Agreements.........................................22
5.12. Board of Directors.................................22
5.13. Corporate Action...................................23
5.14. Subsidiary Guaranties..............................23
5.15. Settlement with the Federal Government.............23
5.16. Settlement Between the Genesis Debtors and
the Multicare Debtors..............................23
Section 6. DISTRIBUTIONS..................................... ...........23
6.1. Distribution Record Date...........................23
6.2. Date of Distributions..............................24
6.3. Distributions to Classes G2, G4, G5, M2,
M4, and M5.........................................24
6.4. Disbursing Agent........... .......................24
iv
TABLE OF CONTENTS
(continued)
Page
6.5. Rights and Powers of Disbursing Agent..............25
6.6. Surrender of Instruments...........................25
6.7. Delivery of Distributions..........................25
6.8. Manner of Payment Under Plan of
Reorganization.....................................26
6.9. Fractional Shares and Fractional Warrants..........27
6.10. Setoffs............................................27
6.11. Allocation of Plan Distribution Between
Principal and Interest.............................27
6.12. Allowance of Claims in Classes G2, G5,
M2, and M5.........................................27
Section 7. PROCEDURES FOR DISPUTED CLAIMS................................27
7.1. Objections to Claims...............................27
7.2. Payments and Distributions with Respect
to Disputed Claims.................................27
7.3. Distributions After Allowance......................28
7.4. Estimation of Claims...............................28
7.5. Interest and Dividends.............................28
Section 8. EXECUTORY CONTRACTS AND UNEXPIRED LEASES......................29
8.1. General Treatment..................................29
8.2. Cure of Defaults...................................29
8.3. Rejection Claims...................................29
8.4. Senior Executives of Reorganized Genesis...........29
8.5. Survival of the Debtors' Corporate Indemnities.....29
Section 9. CONDITION PRECEDENT TO THE EFFECTIVE DATE.....................30
Section 10. EFFECT OF CONFIRMATION........................................30
10.1. Vesting of Assets..................................30
10.2. Discharge of Claims and Termination of
Equity Interests...................................30
10.3. Discharge of Debtors...............................30
10.4. Term of Injunctions or Stays.......................31
10.5. Injunction Against Interference With Plan..........31
10.6. Exculpation........................................31
10.7. Retention of Causes of Action/Reservation
of Rights..........................................31
Section 11. RETENTION OF JURISDICTION.....................................32
Section 12. MISCELLANEOUS PROVISIONS......................................33
12.1. Payment of Statutory Fees..........................33
v
TABLE OF CONTENTS
(continued)
Page
12.2. Retiree Benefits...................................33
12.3. Dissolution of Statutory Committees of
Unsecured Creditors................................33
12.4. Substantial Consummation...........................33
12.5. Amendments.........................................34
12.6. Revocation or Withdrawal of the Plan...............34
12.7. Severability.......................................34
12.8. Governing Law......................................34
12.9. Time...............................................35
12.10. Notices............................................35
vi
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------x
In re : Chapter 11 Case No.
:
GENESIS HEALTH VENTURES, INC., et al., : 00-2692 (JHW)
:
Debtors. : (Jointly Administered)
------------------------------------------x
In re : Chapter 11 Case No.
:
MULTICARE AMC, INC., et al., : 00-2494 (JHW)
:
Debtors. : (Jointly Administered)
------------------------------------------x
DEBTORS' JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Genesis Health Ventures, Inc., The Multicare Companies, Inc.,
and the other above-captioned debtors and debtors in possession propose the
following joint chapter 11 Plan of Reorganization, pursuant to section 1121(a)
of title 11 of the United States Code:
SECTION 1. DEFINITIONS AND INTERPRETATION
A. Definitions.
The following terms used herein shall have the respective
meanings defined below (such meanings to be equally applicable to both the
singular and plural):
1.1. Administrative Expense Claim means any right to
payment constituting a cost or expense of administration of any of the
Reorganization Cases allowed under sections 503(b), 507(a)(1), and 1114(e) of
the Bankruptcy Code, including, without limitation, any actual and necessary
costs and expenses of preserving the Debtors' estates, any actual and necessary
costs and expenses of operating the Debtors' businesses, any indebtedness or
obligations incurred or assumed by the Debtors, as debtors in possession, during
the Reorganization Cases, including, without limitation, for the acquisition or
lease of property or an interest in property or the rendition of services, any
allowances of compensation and reimbursement of expenses to the extent allowed
by Final Order under sections 330 or 503 of the Bankruptcy Code, and any fees or
charges assessed against the estates of the Debtors under section 1930 of
chapter 123 of title 28 of the United States Code.
1.2. Allowed means, with reference to any Claim, (i) any
Claim against any Debtor which has been listed by such Debtor in the Schedules,
as such Schedules may be amended by the Debtors from time to time in accordance
with Bankruptcy Rule 1009, as liquidated in amount and not disputed or
contingent and for which no contrary proof of claim has been filed, (ii) any
timely filed Claim as to which no objection to allowance has been interposed in
accordance with Section 7.1 hereof or such other applicable period of limitation
fixed by the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or
as to which any objection has been determined by a Final Order to the extent
such objection is determined in favor of the respective holder, or (iii) any
Claim expressly allowed by a Final Order or hereunder.
1
1.3 Amended Bylaws means the Bylaws of Reorganized
Genesis, as restated, and which shall be substantially in the form set forth in
the Plan Supplement.
1.4. Amended Certificate of Incorporation means the
Certificate of Incorporation of Reorganized Genesis, as restated, and which
shall be substantially in the form set forth in the Plan Supplement.
1.5. Bankruptcy Code means title 11 of the United States
Code, as amended from time to time, as applicable to the Reorganization Cases.
1.6. Bankruptcy Court means the United States District
Court for the District of Delaware having jurisdiction over the Reorganization
Cases and, to the extent of any reference made under section 157 of title 28 of
the United States Code, the unit of such District Court having jurisdiction over
the Reorganization Cases under section 151 of title 28 of the United States
Code.
1.7. Bankruptcy Rules means the Federal Rules of
Bankruptcy Procedure as promulgated by the United States Supreme Court under
section 2075 of title 28 of the United States Code, as amended from time to
time, applicable to the Reorganization Cases, and any Local Rules of the
Bankruptcy Court.
1.8. Business Day means any day other than a Saturday, a
Sunday, or any other day on which banking institutions in New York, New York are
required or authorized to close by law or executive order.
1.9. Cash means legal tender of the United States of
America.
1.10. Catch-up Distribution means with respect to each
holder of an Allowed Claim in Classes G4, G5, M4, and M5, the difference between
(i) the number of shares of New Common Stock or New Warrants such holder would
have received if the resolution of all Disputed Claims in such Classes had been
known on the Effective Date, and (ii) the aggregate number of shares of New
Common Stock or New Warrants previously received by such holder.
1.11. Claim has the meaning set forth in section 101 of
the Bankruptcy Code.
1.12. Class means any group of Claims or Equity Interests
classified by the Plan of Reorganization pursuant to section 1122(a)(1) of the
Bankruptcy Code.
1.13. Collateral means any property or interest in property
of the estate of any Debtor subject to a lien, charge, or other encumbrance to
secure the payment or performance of a Claim, which lien, charge, or other
encumbrance is not subject to avoidance under the Bankruptcy Code.
1.14. Commencement Date means (i) June 22, 2000 with
respect to the Genesis Debtors (other than Healthcare Resources Corp.) and the
Multicare Debtors, and (ii) July 31, 2000 with respect to Healthcare Resources
Corp.
1.15. Confirmation Date means the date on which the Clerk
of the Bankruptcy Court enters the Confirmation Order.
1.16. Confirmation Hearing means the hearing to be held by
the Bankruptcy Court regarding confirmation of the Plan of Reorganization, as
such hearing may be adjourned or continued from time to time.
2
1.17. Confirmation Order means the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
1.18. Debtors means the Genesis Debtors and the Multicare
Debtors.
1.19. Disbursing Agent means any entity (including any
applicable Debtor if it acts in such capacity) in its capacity as a disbursing
agent under Section 6.4 hereof.
1.20. Disputed Claim means any Claim which has not been
Allowed pursuant to the Plan of Reorganization or a Final Order, and
(a) if no proof of claim has been filed by the applicable
deadline: (i) a Claim that has been or hereafter is listed on the Schedules as
disputed, contingent, or unliquidated; or (ii) a Claim that has been or
hereafter is listed on the Schedules as other than disputed, contingent, or
unliquidated, but as to which the Debtors or Reorganized Debtors or any other
party in interest has interposed an objection or request for estimation which
has not been withdrawn or determined by a Final Order; or
(b) if a proof of claim or request for payment of an
Administrative Claim has been filed by the applicable deadline: (i) a Claim for
which no corresponding Claim has been or hereafter is listed on the Schedules;
(ii) a Claim for which a corresponding Claim has been or hereafter is listed on
the Schedules as other than disputed, contingent, or unliquidated, but the
nature or amount of the Claim as asserted in the proof of claim varies from the
nature and amount of such Claim as listed on the Schedules; (iii) a Claim for
which a corresponding Claim has been or hereafter is listed on the Schedules as
disputed, contingent, or unliquidated; (iv) a Claim for which a timely objection
or request for estimation is interposed by the Debtors or the Reorganized
Debtors which has not been withdrawn or determined by a Final Order; or (v) any
Tort Claim.
1.21. Distribution Record Date means the Confirmation Date.
1.22. Effective Date means a Business Day on or after the
Confirmation Date specified by Genesis and Multicare on which (i) no stay of the
Confirmation Order is in effect, and (ii) the condition to the effectiveness of
the Plan of Reorganization specified in Section 9 hereof has been satisfied or
waived.
1.23. Equity Interest means the interest of any holder of
an equity security of any of the Debtors represented by any issued and
outstanding shares of common or preferred stock or other instrument evidencing a
present ownership interest in any of the Debtors, whether or not transferable,
or any option, warrant, or right, contractual or otherwise, to acquire any such
interest.
1.24. Final Distribution Date means, in the event there
exist on the Effective Date any Disputed Claims classified in Classes G4, G5,
M4, or M5, a date selected by the Reorganized Debtors, in their sole discretion,
on which all such Disputed Claims have been resolved by Final Order.
1.25. Final Order means an order or judgment of the
Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in
the Reorganization Cases, which has not been reversed, vacated, or stayed and as
to which (i) the time to appeal, petition for certiorari, or move for a new
trial, reargument, or rehearing has expired and as to which no appeal, petition
for certiorari, or other proceedings for a new trial, reargument, or rehearing
shall then be pending, or (ii) if an appeal, writ of certiorari, new trial,
reargument, or rehearing thereof has been sought, such order or judgment of the
Bankruptcy Court shall have been affirmed by the highest court to which such
order was appealed, or certiorari shall have been denied, or a new trial,
reargument, or rehearing shall have been denied or
3
resulted in no modification of such order, and the time to take any further
appeal, petition for certiorari or move for a new trial, reargument, or
rehearing shall have expired; provided, however, that the possibility that a
motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous
rule under the Bankruptcy Rules, may be filed relating to such order shall not
cause such order to not be a Final Order.
1.26. Genesis means Genesis Health Ventures, Inc., a
Pennsylvania corporation, the parent debtor or debtor in possession, as the
context requires.
1.27. Genesis Common Stock Interest means the Equity
Interest of any holder of the authorized common stock issued by Genesis or any
option, warrant, or right, contractual or otherwise, to acquire any such Equity
Interest.
1.28. Genesis Debtors means Genesis and the entities listed
on Exhibit A hereto.
1.29. Genesis General Unsecured Claim means any Claim
against any of the Genesis Debtors that (a) is not a Genesis Other Secured
Claim, Genesis Senior Lender Claim, Administrative Expense Claim, Priority Tax
Claim, Genesis Priority Non-Tax Claim, Genesis Senior Subordinated Note Claim,
Genesis Intercompany Claim, or Genesis Punitive Damage Claim, or (b) is
otherwise determined by the Bankruptcy Court to be a Genesis General Unsecured
Claim.
1.30. Genesis Intercompany Claim means a Claim held by a
wholly-owned Genesis Debtor against another wholly-owned Genesis Debtor.
1.31. Genesis Other Secured Claim means any Secured Claim
against any of the Genesis Debtors not constituting a secured Genesis Senior
Lender Claim.
1.32. Genesis Priority Non-Tax Claim means any Claim
against any of the Genesis Debtors other than an Administrative Expense Claim or
a Priority Tax Claim, entitled to priority in payment as specified in section
507(a)(3), (4), (5), (6), (7), or (9) of the Bankruptcy Code.
1.33. Genesis Punitive Damage Claim means any Claim against
any of the Genesis Debtors, whether secured or unsecured, for any fine, penalty,
forfeiture, attorneys' fees (to the extent such attorneys' fees are punitive in
nature), or for multiple, exemplary, or punitive damages, to the extent that
such fine, penalty, forfeiture, attorneys' fees, or damages is not compensation
for actual pecuniary loss suffered by the holder of such Claim and not
statutorily prescribed.
1.34. Genesis Reorganization Cases means the jointly
administered cases under chapter 11 of the Bankruptcy Code commenced by the
Genesis Debtors on June 22, 2000, and July 31, 2000 in the United States
District Court for the District of Delaware and styled In re Genesis Health
Ventures, Inc., et al., 00-2692 (JHW).
1.35. Genesis Senior Lender Agreements means (i) that
certain Fourth Amended and Restated Credit Agreement, dated as of August 20,
1999, among Genesis, certain other Genesis Debtors named therein , Mellon Bank
N.A., as administrative agent, certain co-agents named therein, and the lender
parties thereto, and any of the documents and instruments relating thereto or
referred to therein, (ii) that certain Amended and Restated Synthetic Lease
Financing Facility, dated as of October 7, 1996, among Genesis, Genesis
Eldercare Properties, Inc., Mellon Bank N.A., as administrative agent, certain
co-agents named therein, and the lender parties thereto, and any of the
documents and instruments relating thereto, and (iii) any Swap Agreement (as
defined in that certain Fourth Amended and Restated Collateral Agency Agreement,
dated as of August 20, 1999, among Genesis, Mellon Bank, N.A., as agent for the
lenders party to the Fourth Amended and Restated Credit Agreement, as agent for
the lenders party
4
to the Amended and Restated Synthetic Lease Financing Facility, and as
collateral agent for the secured parties thereto), among Genesis and the
counterparties to such Swap Agreement.
1.36. Genesis Senior Lender Claim means any Claim against
any of the Genesis Debtors based on the Genesis Senior Lender Agreements
(inclusive of postpetition interest) net of all Cash payments made by the
Genesis Debtors to the holders of such Claims on or after the Commencement Date;
provided, however, that the Claims of Citibank, N.A. in connection with the
prepetition termination of interest rate hedging agreements are Genesis Senior
Lender Claims to the extent of $17,290,962.
1.37. Genesis Senior Subordinated Note Claim means a Claim
against Genesis arising under or in connection with (i) the Indenture, dated as
of June 15, 1995, between Genesis and State Street Bank and Trust Company, as
trustee, as such Indenture may have been amended or modified, and the
$120,000,000 of 9-3/4% Senior Subordinated Notes due 2005 issued thereunder,
(ii) the Indenture, dated as of October 7, 1996, between Genesis and State
Street Bank and Trust Company, as successor trustee, as such Indenture may have
been amended or modified, and the $125,000,000 of 9-1/4% Senior Subordinated
Notes due 2006 issued thereunder, (iii) the Indenture, dated as of December 23,
1998, between Genesis and The Bank of New York, as trustee, as such Indenture
may have been amended or modified, and the $125,000,000 of 9-7/8% Senior
Subordinated Notes due 2009 issued thereunder, or (iv) the Indenture, dated as
of September 15, 1995, between Grancare, Inc. and Marine Midland Bank, as
trustee, as such Indenture may have been amended or modified, and the
$100,000,000 of 9-3/8% Senior Subordinated Notes due 2005 issued thereunder, of
which $1,590,000 remains outstanding, excluding the fees and expenses of the
trustees under these Indentures, which shall be paid pursuant to Section 2.5
hereof.
1.38. Insured Claim means any Claim arising from an
incident or occurrence that is covered under any of the Debtors' insurance
policies.
1.39. Multicare means Genesis ElderCare Corp., a Delaware
corporation, the parent debtor or debtor in possession, as the context requires,
and the owner of all the common stock of The Multicare Companies, Inc., a
Delaware corporation.
1.40. Multicare Common Stock Interest means the Equity
Interest of any holder of the authorized common stock issued by Multicare or any
option, warrant, or right, contractual or otherwise, to acquire any such Equity
Interest.
1.41. Multicare Debtors means Multicare, a Delaware
corporation, and the entities listed on Exhibit B hereto.
1.42. Multicare General Unsecured Claim means any Claim
against any of the Multicare Debtors that (i) is not a Multicare Other Secured
Claim, Multicare Senior Lender Claim, Administrative Expense Claim, Priority Tax
Claim, Multicare Priority Non-Tax Claim, Multicare Senior Subordinated Note
Claim, Multicare Intercompany Claim, or Multicare Punitive Damage Claim, or (ii)
is otherwise determined by the Bankruptcy Court to be a Multicare General
Unsecured Claim.
1.43. Multicare Intercompany Claim means a Claim held by a
wholly-owned Multicare Debtor against another wholly-owned Multicare Debtor.
1.44. Multicare Other Secured Claim means any Secured Claim
against any of the Multicare Debtors not constituting a secured Multicare Senior
Lender Claim.
5
1.45. Multicare Priority Non-Tax Claim means any Claim
against any of the Multicare Debtors, other than an Administrative Expense Claim
or a Priority Tax Claim, entitled to priority in payment as specified in section
507(a)(3), (4), (5), (6), (7), or (9) of the Bankruptcy Code.
1.46. Multicare Punitive Damage Claim means any Claim
against any of the Multicare Debtors, whether secured or unsecured, for any
fine, penalty, forfeiture, or attorneys' fees (to the extent such attorneys'
fees are punitive in nature), or for multiple, exemplary, or punitive damages,
to the extent that such fine, penalty, forfeiture, attorneys' fees, or damages
is not compensation for actual pecuniary loss suffered by the holder of such
Claim and not statutorily prescribed.
1.47. Multicare Reorganization Cases means the jointly
administered cases under chapter 11 of the Bankruptcy Code commenced by the
Multicare Debtors on June 22, 2000 in the United States District Court for the
District of Delaware and styled In re Multicare AMC, Inc., et al., 00-2494
(JHW).
1.48. Multicare Senior Lender Agreements means that certain
Credit Agreement dated as of October 9, 1997, as amended, among Multicare,
certain other Multicare Debtors named therein, Mellon Bank N.A., as
administrative agent, certain co-agents named therein, and the lender parties
thereto, and any of the documents and instruments relating thereto.
1.49. Multicare Senior Lender Claim means any Claim against
any of the Multicare Debtors based on the Multicare Senior Lender Agreements net
of all Cash payments made by the Multicare Debtors to the holders of such Claims
on or after the Commencement Date.
1.50. Multicare Senior Subordinated Note Claim means a
Claim against The Multicare Companies, Inc. arising under or in connection with
the Indenture, dated as of August 11, 1997, between Genesis ElderCare
Acquisition Corp. (now known as The Multicare Companies, Inc.) and PNC Bank,
National Association, as trustee, and the $250,000,000 of 9% Senior Subordinated
Notes due 2007 issued thereunder.
1.51. New Common Stock means the 41,000,000 shares of
common stock of Reorganized Genesis authorized and issued hereunder on the
Effective Date and any additional shares authorized for the purposes specified
herein or in the Plan Securities.
1.52. New Convertible Preferred Stock means the shares of
convertible 6% PIK preferred stock of Reorganized Genesis with a liquidation
preference of $42,600,000 authorized and issued hereunder on the Effective Date.
The conversion rate for this preferred stock is $20.33 of liquidation value for
each share of New Common Stock.
1.53. New Management Incentive Plan means the management
incentive plan for certain employees of Reorganized Genesis, as set forth in the
Plan Supplement.
1.54. New Multicare Stock means the common stock of
Reorganized Multicare authorized and issued hereunder on the Effective Date.
1.55. New Senior Notes means the Term B Notes in the
aggregate principal amount of $242,605,000, authorized and issued hereunder by
Reorganized Genesis on the Effective Date, the terms of which are governed by
the Note Indenture, dated as of the Effective Date, between Reorganized Genesis
and an indenture trustee acceptable to Reorganized Genesis and the steering
group for the holders of the Senior Lender Claims, in the form set forth in the
Plan Supplement and the security agreements, mortgages, and guaranties, dated as
of the Effective Date, in the form set forth in the Plan Supplement.
6
The New Senior Notes are guarantied by all of the subsidiaries of Reorganized
Genesis and are secured by the real estate and related fixtures of the
Reorganized Debtors and each other subsidiary of Reorganized Genesis in
accordance with the Security Agreement, in the form set forth in the Plan
Supplement, subject to (i) any existing validly perfected and unavoidable
security interests in Class G1 or Class M1, and (ii) any security interests
granted to lenders providing financing under Section 5.4 hereof (and to lenders
providing a replacement for or refinancing of such financing); provided, that a
subsidiary of Reorganized Genesis shall not guaranty the New Senior Notes and/or
grant a security interest in its assets to secure the New Senior Notes to the
extent the existing debt instruments of such subsidiary or, in the case of
Classes G1 and M1, the reinstated debt instruments of such Debtor, would
prohibit such a guaranty or grant of a security interest. The New Senior Notes
are also secured by a junior lien on the property securing the claims in
Subclass G1-17.
1.56. New Warrants means warrants to purchase 4,559,475
shares of New Common Stock. The New Warrants shall expire on the first
anniversary of the Effective Date and shall have an exercise price of $20.33 per
share of New Common Stock. The New Warrants will be in the form set forth in the
Plan Supplement.
1.57. Plan Documents means the documents to be executed,
delivered, assumed, and/or performed in conjunction with the consummation of the
Plan of Reorganization on the Effective Date, including but not limited to (i)
the Amended Bylaws, (ii) the Amended Certificate of Incorporation, (iii) the
Term B Note Indenture, (iv) the security agreements, mortgages, and guaranties,
(v) the Certificate of Designation for the New Convertible Preferred Stock, (vi)
the Plan of Merger, (vii) the Registration Rights Agreement, (viii) the
settlement agreement referred to in Section 5.15 hereof, (ix) the settlement
agreement referred to in Section 5.16 hereof, and (x) the New Management
Incentive Plan. Each of the Plan Documents to be entered into as of the
Effective Date will be filed in draft form in the Plan Supplement.
1.58. Plan of Merger means that certain Plan of Merger
among Genesis, Multicare Acquisition Corporation, a wholly-owned, indirect
subsidiary of Genesis, and Multicare, in the form set forth in the Plan
Supplement.
1.59. Plan of Reorganization means this joint chapter 11 plan
of reorganization, including the exhibits hereto, as the same may be amended or
modified from time to time in accordance with the provisions of the Bankruptcy
Code and the terms hereof.
1.60. Plan Securities means, collectively, the New Senior
Notes, the New Convertible Preferred Stock, the New Common Stock, and the New
Warrants.
1.61. Plan Supplement means a supplemental appendix to the
Plan of Reorganization that will contain the draft form of the Plan Documents to
be entered into as of the Effective Date, to be filed 10 days before the date of
the Confirmation Hearing, and in any event no later than 5 days prior to the
last date by which votes to accept or reject the Plan of Reorganization must be
submitted. Documents to be included in the Plan Supplement will be posted at
www.ghv.com as they become available, but no later than 5 days prior to the last
date by which votes to accept or reject the Plan must be submitted.
1.62. Priority Non-Tax Claim means any Claim, other than an
Administrative Expense Claim or a Priority Tax Claim, entitled to priority in
payment as specified in section 507(a)(3), (4), (5), (6), (7), or (9) of the
Bankruptcy Code.
1.63. Priority Tax Claim means any Claim of a governmental
unit of the kind entitled to priority in payment as specified in sections 502(i)
and 507(a)(8) of the Bankruptcy Code.
7
1.64. Ratable Proportion means the ratio (expressed as a
percentage) of the amount of an Allowed Claim in a Class to the aggregate amount
of all Allowed Claims in the same Class.
1.65. Reorganization Cases means the Genesis Reorganization
Cases and the Multicare Reorganization Cases.
1.66. Reorganized Debtors means Reorganized Genesis and
each of the Debtors listed on Exhibits A and B hereto.
1.67. Reorganized Genesis means Genesis, as reorganized as
of the Effective Date in accordance with the Plan of Reorganization and after
giving effect to the merger described in Section 5.2 hereof.
1.68. Reorganized Multicare means Multicare, as reorganized
as of the Effective Date in accordance with the Plan of Reorganization before
giving effect to the merger described in Section 5.2 hereof.
1.69. Schedules means the schedules of assets and
liabilities and the statement of financial affairs filed by the Genesis Debtors
or the Multicare Debtors under section 521 of the Bankruptcy Code, Bankruptcy
Rule 1007, and the Official Bankruptcy Forms of the Bankruptcy Rules as such
schedules and statements have been or may be supplemented or amended through the
Confirmation Date.
1.70. Secured Claim means a Claim to the extent (i) secured
by Collateral, the amount of which is equal to or less than the value of such
Collateral (A) as set forth in the Plan of Reorganization, (B) as agreed to by
the holder of such Claim and the Debtors, or (C) as determined by a Final Order
in accordance with section 506(a) of the Bankruptcy Code, or (ii) secured by the
amount of any rights of setoff of the holder thereof under section 553 of the
Bankruptcy Code.
1.71. Senior Lender Claim means the Genesis Senior Lender
Claims and the Multicare Senior Lender Claims.
1.72. Tort Claim means any Claim related to personal
injury, property damage, products liability, wrongful death, employment
litigation, or other similar Claims against any of the Debtors which arise out
of events which occurred, in whole or in part, prior to the Commencement Date.
B. Interpretation; Application of Definitions and Rules of
Construction.
Unless otherwise specified, all section or exhibit references
in the Plan of Reorganization are to the respective section in, or exhibit to,
the Plan of Reorganization, as the same may be amended, waived, or modified from
time to time. The words "herein," "hereof," "hereto," "hereunder," and other
words of similar import refer to the Plan of Reorganization as a whole and not
to any particular section, subsection, or clause contained therein. A term used
herein that is not defined herein shall have the meaning assigned to that term
in the Bankruptcy Code. The rules of construction contained in section 102 of
the Bankruptcy Code shall apply to the Plan of Reorganization. The headings in
the Plan of Reorganization are for convenience of reference only and shall not
limit or otherwise affect the provisions hereof.
8
SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
2.1. Administrative Expense Claims.
Except to the extent that a holder of an Allowed
Administrative Expense Claim agrees to a different treatment, the Debtors shall
pay to each holder of an Allowed Administrative Expense Claim Cash in an amount
equal to such Claim on, or as soon thereafter as is reasonably practicable, the
later of the Effective Date and the first Business Day after the date that is
thirty (30) calendar days after the date such Administrative Expense Claim
becomes an Allowed Administrative Expense Claim; provided, however, that Allowed
Administrative Expense Claims representing liabilities incurred in the ordinary
course of business by the Debtors, as debtors in possession, or liabilities
arising under loans or advances to or other obligations incurred by the Debtors,
as debtors in possession, whether or not incurred in the ordinary course of
business, shall be paid by the Debtors in the ordinary course of business,
consistent with past practice and in accordance with the terms and subject to
the conditions of any agreements governing, instruments evidencing, or other
documents relating to such transactions; and provided further, however, that the
liabilities of Genesis and Multicare under the Revolving Credit and Guaranty
Agreement referred to in Section 2.4 hereof shall be paid as set forth in such
Section.
2.2. Compensation and Reimbursement Claims.
All entities seeking an award by the Bankruptcy Court of
compensation for services rendered or reimbursement of expenses incurred through
and including the Confirmation Date under section 503(b)(2), 503(b)(3),
503(b)(4), or 503(b)(5) of the Bankruptcy Code (i) shall file their respective
final applications for allowance of compensation for services rendered and
reimbursement of expenses incurred by the date that is forty-five (45) days
after the Effective Date, and (ii) shall be paid in full in such amounts as are
allowed by the Bankruptcy Court (A) upon the later of (i) the Effective Date,
and (ii) the date upon which the order relating to any such Administrative
Expense Claim is entered, or (B) upon such other terms as may be mutually agreed
upon between the holder of such an Administrative Expense Claim and the Debtors
or, on and after the Effective Date, the Reorganized Debtors. The Reorganized
Debtors are authorized to pay compensation for services rendered or
reimbursement of expenses incurred after the Confirmation Date and until the
Effective Date in the ordinary course and without the need for Bankruptcy Court
approval.
2.3. Priority Tax Claims.
Except to the extent that a holder of an Allowed Priority Tax
Claim agrees to a different treatment, each holder of an Allowed Priority Tax
Claim shall receive, at the sole option of the Debtors, (i) Cash in an amount
equal to such Allowed Priority Tax Claim on, or as soon thereafter as is
reasonably practicable, the later of the Effective Date and the first Business
Day after the date that is thirty (30) calendar days after the date such
Priority Tax Claim becomes an Allowed Priority Tax Claim, or (ii) equal annual
Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim,
together with interest at a fixed annual rate equal to eight percent (8%), over
a period not exceeding six (6) years after the date of assessment of such
Allowed Priority Tax Claim. All Allowed Priority Tax Claims that are not due and
payable on or before the Effective Date shall be paid in the ordinary course of
business as such obligations become due.
2.4. DIP Credit Agreement Claims.
On the Effective Date, (i) Genesis shall pay or arrange for
the payment of all amounts outstanding under that certain Revolving Credit and
Guaranty Agreement, dated as of June 22, 2000, as amended, among Genesis,
certain other Genesis Debtors named therein, Mellon Bank N.A., as
9
administrative agent, certain co-agents named therein, and the lenders party
thereto, and (ii) Multicare shall pay or arrange for payment of all amounts
outstanding under that certain Revolving Credit and Guaranty Agreement, dated as
of June 22, 2000, as amended, among Multicare, certain other Multicare Debtors
named therein, Mellon Bank N.A., as administrative agent, certain co-agents
named therein, and the lenders party thereto. Once such payments have been made,
these agreements and any agreements or instruments related thereto shall be
deemed terminated (subject in all respects to any carve-out approved by the
Bankruptcy Court in the Bankruptcy Court orders approving the Revolving Credit
and Guaranty Agreements on a final basis), and Mellon Bank, N.A., as
administrative agent, and the lenders thereunder shall take all reasonable
action to confirm the removal of any liens on the properties of the Genesis
Debtors and the Multicare Debtors securing such Revolving Credit and Guaranty
Agreements. On the Effective Date, any outstanding letters of credit issued
under such agreements shall be either replaced or secured by letters of credit
issued under the exit facility described in Section 5.4 hereof.
2.5. Special Provisions Regarding the Indenture Trustees'
Fees and Expenses.
(a) The reasonable fees and expenses of each trustee
under an Indenture described in Sections 1.37 and 1.50 hereof (an "Indenture
Trustee") (which includes the reasonable fees and expenses of any professionals
retained by the Indenture Trustees), shall be paid in accordance with the
procedures established in this Section 2.5. Provided that such fees and expenses
are paid in Cash in full by Genesis or Reorganized Genesis, distributions
received by holders of Allowed Genesis Senior Subordinated Note Claims and
Allowed Multicare Senior Subordinated Note Claims pursuant to this Plan will not
be reduced on account of the payment of any Indenture Trustee's fees and
expenses.
(b) Ten (10) days prior to the Effective Date, each
Indenture Trustee will submit to Genesis appropriate documentation in support of
the fees and expenses incurred by such Indenture Trustee through that date
(including any estimated fees and expenses through the Effective Date), whether
incurred prior to or subsequent to the Commencement Date, together with a
detailed, reasonable estimate of any fees and expenses to be incurred
thereafter. Such estimate may include, without limitation, projected fees and
expenses relating to surrender and cancellation of notes, distribution of
securities, and fees and expenses to be incurred in respect of any challenge to
the claims asserted by the Indenture Trustee, whether based on the notes or the
claimed amount of such fees and expenses. On or prior to the Effective Date,
Genesis will pay the undisputed amount of each Indenture Trustee's fees and
expenses.
(c) No later than thirty (30) days after the Effective
Date, or as soon thereafter as may be practical, each Indenture Trustee will
deliver to Reorganized Genesis a final invoice for its reasonable fees and
expenses incurred through the Effective Date. Reorganized Genesis will have a
period of thirty (30) days after receipt to review the final invoice and provide
the Indenture Trustee with any objection to the final invoice, stating with
specificity its objections to particular charges. If no objection is received by
the Indenture Trustee within thirty (30) days after the Indenture Trustee
provided Reorganized Genesis with its final invoice, then the Indenture Trustee
shall be paid such amount without the need for any further approval of the
Bankruptcy Court. If Reorganized Genesis timely advises the Indenture Trustee in
writing that it objects to all or a portion of such fees, which objection states
with specificity its objection to particular charges, (i) Reorganized Genesis
shall pay the undisputed portion of the fees and expenses, and (ii) such
Indenture Trustee, at its option, may either submit the disputed portion to the
Bankruptcy Court for resolution or exercise its rights under its respective
indenture. The Indenture Trustee will not be required to file a fee application
or to comply with guidelines and rules applicable to a fee application, and will
not be subject to section 330 or 503(b) of the Bankruptcy Code.
(d) Subject to Section 5.11 hereof, each Indenture
Trustee's charging lien will be discharged solely upon payment in full of such
fees and expenses and termination of the Indenture Trustee's duties.
Accordingly, nothing herein shall be deemed to impair, waive, or discharge the
10
Indenture Trustee charging lien for any fees and expenses not paid by
Reorganized Genesis. Pursuant to Section 6.5(b) hereof, each Indenture Trustee
shall be entitled to its fees and expenses incurred after the Effective Date as
a Disbursing Agent.
SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
The following tables designate the Classes of Claims against
and Equity Interests in the Genesis Debtors and the Multicare Debtors,
respectively, and specify which of those Classes are (i) impaired or unimpaired
by the Plan of Reorganization, (ii) entitled to vote to accept or reject the
Plan of Reorganization in accordance with section 1126 of the Bankruptcy Code,
and (iii) deemed to reject the Plan of Reorganization.
3.1. Genesis Classes.
----------------------------------------------------------------------------------------------------------------
Entitled
Class Designation Impairment to Vote
----- ----------- ---------- -------
Subclasses Genesis Other Secured Claims Unimpaired No
G1-1 through
G1-12
Subclasses Genesis Other Secured Claims Impaired Yes
G1-13 through
G1-17
Class G2 Genesis Senior Lender Claims Impaired Yes
Class G3 Genesis Priority Non-Tax Claims Unimpaired No
Class G4 Genesis General Unsecured Claims Impaired Yes
Class G5 Genesis Senior Subordinated Note Claims Impaired Yes
Class G6 Genesis Intercompany Claims Unimpaired No
Class G7 Genesis Punitive Damage Claims Impaired No (deemed to reject)
Class G8 Genesis Series G Preferred Stock Interests Impaired No (deemed to reject)
Class G9 Genesis Series H Preferred Stock Interests Impaired No (deemed to reject)
Class G10 Genesis Series I Preferred Stock Interests Impaired No (deemed to reject)
Class G11 Genesis Common Stock Interests Impaired No (deemed to reject)
----------------------------------------------------------------------------------------------------------------
11
3.2 Multicare Classes.
----------------------------------------------------------------------------------------------------------------
Entitled
Class Designation Impairment to Vote
----- ----------- ---------- -------
Subclasses Multicare Other Secured Claims Unimpaired No
M1-1 through
M1-6
Subclass M1-7 Multicare Other Secured Claims Impaired Yes
Class M2 Multicare Senior Lender Claims Impaired Yes
Class M3 Multicare Priority Non-Tax Claims Unimpaired No
Class M4 Multicare General Unsecured Claims Impaired Yes
Class M5 Multicare Senior Subordinated Note Claims Impaired Yes
Class M6 Multicare Intercompany Claims Unimpaired No
Class M7 Multicare Punitive Damage Claims Impaired No (deemed to reject)
Class M8 Multicare Common Stock Interests Impaired No (deemed to reject)
----------------------------------------------------------------------------------------------------------------
3.3. Subclasses for Class G1.
For convenience of identification, the Plan of Reorganization
classifies the Allowed Claims in Class G1 as a single Class. This Class is
actually a group of subclasses, depending on the underlying property securing
such Allowed Claims, and each subclass is treated hereunder as a distinct Class
for voting and distribution purposes. The following table identifies the
material subclasses for Class G1.
12
----------------------------------------------------------------------------------------------------------------
Entitled
Subclass Designation Impairment to Vote
-------- ----------- ---------- -------
G1-1 Broad Street Office Building Unimpaired No
148 West State Street, Kennett Square, Pa. (Pa.
IDA)
G1-2 Broad Street Office Building Unimpaired No
148 West State Street, Kennett Square, Pa. (Pa.
IDA)
G1-3 Pleasant View Center (HUD) Unimpaired No
G1-4 Country Village Center (HUD) Unimpaired No
G1-5 Abington Manor (Lackawanna County IDA) Unimpaired No
G1-6 Silver Lake Center (Del. EDA Bonds) Unimpaired No
G1-7 River Street Center (Luzerne County IDA) Unimpaired No
G1-8 Kresson View Center (NJEDA Refunding Bonds) Unimpaired No
G1-9 Mifflin Court (ElderTrust) Unimpaired No
G1-10 Oaks Center (ElderTrust) Unimpaired No
G1-11 Coquina Assisted Living (ElderTrust) Unimpaired No
G1-12 Homestead Center Unimpaired No
Kimberly Hall South Center
Kimberly Hall North Center
Seaford Center
Milford Center
Windsor Center
(U.S. Bank, N.A., as trustee for the "Bradford
Bonds")
G1-13 Brakely Park Center (HUD) Impaired Yes
G1-14 North Cape Center (HUD) Impaired Yes
G1-15 Oak Hill Center (HUD) Impaired Yes
G1-16 Rittenhouse Pine Center (Meditrust) Impaired Yes
G1-17 Atlantis Center Impaired Yes
Bowmans Center
Fairway Center
Oakwood Center
Riverwood Center
Tierra Center
Williamsburg Center
Windham Center
Woodmont Center
(synthetic lease lenders)
----------------------------------------------------------------------------------------------------------------
Subclass G1-8 consists of the secured Claim of SunTrust Bank,
as successor indenture trustee ("SunTrust") under that certain Trust Indenture,
dated as of May 1, 1990 (the "SunTrust Indenture"), between the New Jersey
Economic Development Authority ("NJEDA") and SunTrust, pursuant to which NJEDA
issued (i) those certain $1,175,000 New Jersey Economic Development Authority
Economic Development Refunding Bonds (Geriatric and Medical Services, Inc. --
Care Inn of Voorhees Project) 1990 Series A; and (ii) those certain $5,000,000
New Jersey Economic Development Authority Economic Development Refunding Bonds
(Geriatric and Medical Services, Inc. -- Care Inn of Voorhees Project) 1990
Series B (collectively, the "Kresson View Center Bonds"). The secured Claim of
SunTrust in Subclass G1-8 is (i) allowed in the principal amount of $5,535,000,
plus accrued and unpaid
13
interest, and reasonable costs and expenses, as more fully provided in the
SunTrust Indenture and all other documents and agreements executed in connection
with the Kresson View Center Bonds, and (ii) secured by a duly perfected, first
priority mortgage and lien on certain real and personal property (whether now
owned or hereafter acquired) of Geriatric and Medical Services, Inc. relating to
a project known as the "Kresson View Center" f/k/a "Care Inn of Voorhees"
located in the Township of Voorhees, New Jersey, including without limitation,
all revenues and accounts arising therefrom, among other collateral. In
addition, the secured Claim of SunTrust in Subclass G1-8 is guarantied pursuant
to a Guaranty Agreement (the "Kresson View Center Guaranty") by and between
Geriatric & Medical Companies, Inc. (as successor to Geriatric & Medical
Centers, Inc.) and SunTrust.
3.4. Subclasses for Class M1.
For convenience of identification, the Plan of Reorganization
classifies the Allowed Claims in Class M1 as a single Class. This Class is
actually a group of subclasses, depending on the underlying property securing
such Allowed Claims, and each subclass is treated hereunder as a distinct Class
for voting and distribution purposes. The following table identifies the
material subclasses for Class M1.
----------------------------------------------------------------------------------------------------------------
Entitled
Class Designation Impairment to Vote
----- ----------- ---------- -------
M1-1 Rosewood Center (Tyler County, WV) Unimpaired No
M1-2 Sisterville Center (Care Haven) (Tyler County, WV) Unimpaired No
M1-3 Raleigh Center (WV Hospital Authority) Unimpaired No
M1-4 Westford Center (HUD) Unimpaired No
M1-5 Willows Center Unimpaired No
Cedar Ridge Center
Dawn View Center
(MediTrust)
M1-6 Teays Valley (West Virginia Hospital Authority) Unimpaired No
M1-7 Point Pleasant (Mason County WV) Impaired Yes
----------------------------------------------------------------------------------------------------------------
SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS
4.1. Genesis Other Secured Claims (Class G1).
Except for the Genesis Other Secured Claims in Subclasses G1-8
and G1-12, the treatment of which is set forth below, on or as soon as
reasonably practicable after the later of the Effective Date and the first
Business Day after the date that is thirty (30) calendar days after the date a
Genesis Other Secured Claim becomes Allowed, each holder of an Allowed Genesis
Other Secured Claim shall receive, at the option of the Reorganized Debtors,
either (i) Cash in an amount equal to one hundred percent (100%) of the unpaid
amount of such Allowed Genesis Other Secured Claim, (ii) the proceeds of the
sale or disposition of the Collateral securing such Allowed Genesis Other
Secured Claim to the extent of the value of the holder's secured interest in the
Allowed Genesis Other Secured Claim, (iii) the Collateral securing such Allowed
Genesis Other Secured Claim, (iv) a note with periodic Cash payments having a
present value equal to the amount of the Allowed Genesis Other Secured Claim,
(v) such treatment that leaves unaltered the legal, equitable, and contractual
rights to which the holder of such Allowed Genesis Other Secured Claim is
entitled, or (vi) such other distribution as necessary to satisfy the
requirements of the Bankruptcy Code. In the event the Reorganized Debtors treat
a Claim under
14
clause (i) or (ii) of this Section, the liens securing such Genesis Other
Secured Claim shall be deemed released. In particular, the following subclasses
shall receive the treatment described below.
(a) Subclass G1-8. As of the Effective Date, the Genesis
Debtors' obligations in connection with the Kresson View Center Bonds shall be
reinstated and each and every indenture, loan agreement, mortgage, security
agreement, guaranty, subordination agreement, and other document executed in
connection with the Kresson View Center Bonds, including, without limitation,
the Kresson View Center Guaranty and the Subordination Agreement dated May 1,
1990 executed by Mellon Bank N.A., as agent, in favor of NJEDA (all of the
foregoing, together with the Kresson View Center Bonds, the "Kresson View Center
Bond Documents"), shall be reinstated. All legal, equitable, and contractual
rights under the Kresson View Center Bond Documents and the Kresson View Center
Bonds shall remain unaltered after confirmation of the Plan. To the extent
necessary to reinstate all such obligations, rights, agreements, and documents,
the Genesis Debtors shall execute and obtain such replacement agreements and
documents, including, without limitation, a guaranty, subordination agreements,
and UCC financing statements, each in form and substance materially identical to
existing agreements and documents, as SunTrust may require. As of the Effective
Date, the maturity date of the Kresson View Center Bonds shall be reinstated. On
the Effective Date, the Genesis Debtors shall cure any default under the Kresson
View Center Bonds and the Kresson View Center Bond Documents (including, without
limitation, past due payments of principal), and shall reimburse SunTrust for
all reasonable fees, costs, and expenses, including legal fees and expenses,
which have accrued and are required to be paid under the relevant Kresson View
Center Bond Documents.
(b) Subclass G1-12. Upon confirmation of the Plan, the
claim of U.S. Bank Trust National Association ("U.S. Bank"), as successor
indenture trustee pursuant to the Indenture of Mortgage and Deed of Trust, dated
as of September 1, 1992 (the "U.S. Bank Indenture"), shall be deemed an Allowed
Genesis Other Secured Claim in the principal amount of $19,337,000, plus accrued
and unpaid interest, fees, and other costs. The Plan shall leave unaltered the
legal, equitable, and contractual rights to which the holders of Claims in
Subclass G1-12 are entitled, and the Allowed Claim of U.S. Bank in Subclass
G1-12 shall be unimpaired under the Plan. In satisfaction of their Allowed
Subclass G1-12 Claim, members of Subclass G1-12 shall receive, on or before the
Effective Date, (i) all accrued and unpaid interest due under the 9 1/4% First
Mortgage Bonds (Series A) due 2007 in the original principal amount of
$25,000,000 (the "Bradford Bonds"), whether incurred prior to or after the
Commencement Date, together with interest on interest, pursuant to the terms of
the U.S. Bank Indenture, and (ii) all indenture trustee fees and expenses due
under the U.S. Bank Indenture, including reasonable attorneys' fees, whether
incurred prior to or after the Commencement Date. U.S. Bank shall submit to the
Genesis Debtors an itemization of the amounts due and owing under the U.S. Bank
Indenture ten (10) days prior to the Effective Date. From and after the
Effective Date, all documents relating to the Bradford Bonds, including, but not
limited to, the U.S. Bank Indenture, the mortgages securing repayment of the
Bradford Bonds, and the bond instruments shall be deemed reinstated in their
entirety. In connection with such reinstatement and as a result of the Genesis
Debtors' failure to redeem the Bradford Bonds in April 2001, any holder of a
Bradford Bond shall have the right for sixty (60) days following the Effective
Date to present such Bradford Bonds for redemption in accordance with Article 9
of the U.S. Bank Indenture. Thereafter, the deadline to present the Bradford
Bonds for redemption shall be governed by the applicable provisions of the
Indenture. All rights and liens of U.S. Bank, as indenture trustee, shall
survive to the same extent, validity, and priority as existed prior to the
Commencement Date. Among other things, all of the mortgages securing repayment
of the Bradford Bonds shall continue to be valid and perfected, and no further
notice, filing, or other act shall be required to effect such perfection.
(c) Subclass G1-17. The holders of claims in Subclass
G1-17 shall receive a mortgage note in the principal amount of $50,000,000. The
mortgage note will bear interest at LIBOR plus 5% and will mature on the sixth
anniversary of the Effective Date. The mortgage note will be
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secured by (i) the Collateral presently securing the Claims in this subclass and
(ii) a lien of equal priority with the New Senior Notes on the property securing
such notes. The mortgage documents will permit a junior lien on the property
securing the Claims in this subclass in favor of the New Senior Notes.
4.2. Genesis Senior Lender Claims (Class G2).
Holders of the Genesis Senior Lender Claims shall receive an
aggregate of (i) Cash in an amount equal to interest on the Genesis Senior
Lender Claims at contractual, nondefault rates, from the Commencement Date to
the Effective Date (approximately $195,979,000 of which will have already been
paid by the Genesis Debtors by June 30, 2001, in connection with certain cash
collateral stipulations), (ii) $94,923,000 in New Senior Notes, (iii) New
Convertible Preferred Stock with an aggregate liquidation preference of
$31,000,000, and (iv) 30,485,079 shares of New Common Stock, representing
approximately 74.35% of the total shares of New Common Stock to be issued and
outstanding as of the Effective Date, subject to dilution from stock issuances
occurring after the Effective Date, including, without limitation, in connection
with the conversion of the New Convertible Preferred Stock, the exercise of the
New Warrants, or options granted under the New Management Incentive Plan.
4.3. Genesis Priority Non-Tax Claims (Class G3).
Except to the extent that a holder of an Allowed Genesis
Priority Non-Tax Claim against any of the Genesis Debtors has agreed to a
different treatment of such Claim, each such holder shall receive, in full
satisfaction of such Claim, Cash in an amount equal to such Claim, on or as soon
as reasonably practicable after the later of (i) the Effective Date, (ii) the
date such Claim becomes Allowed, and (iii) the date for payment provided by any
agreement or understanding between the parties.
4.4. Genesis General Unsecured Claims (Class G4).
Except to the extent that an Allowed Genesis General Unsecured
Claim is an Insured Claim, the holders of Allowed Genesis General Unsecured
Claims shall receive a proportionate allocation of (i) 1,689,147 shares of New
Common Stock and (ii) New Warrants to purchase 2,835,645 shares of New Common
Stock, based on the aggregate amount of Allowed Claims in Classes G4 and G5. The
shares of New Common Stock allocated to Classes G4 and G5 represent
approximately 4.12% of the total shares of New Common Stock to be issued and
outstanding on the Effective Date, subject to dilution from stock issuances
occurring after the Effective Date, including, without limitation, in connection
with the conversion of the New Convertible Preferred Stock, the exercise of the
New Warrants, or options granted under the New Management Incentive Plan. Each
holder of an Allowed Genesis General Unsecured Claim shall receive its Ratable
Proportion of shares of New Common Stock allocated to this Class based on the
aggregate amount of the Allowed Claims in Classes G4 and G5. A holder of an
Allowed Genesis General Unsecured Claim that is an Insured Claim shall be paid
in the ordinary course of the business of the Reorganized Debtors to the extent
that Claim is insured and shall have an Allowed Genesis General Unsecured Claim
to the extent the applicable insurance policy does not provide coverage with
respect to any portion of the Insured Claim.
4.5. Genesis Senior Subordinated Note Claims (Class G5).
The holders of Allowed Genesis Senior Subordinated Note Claims
shall receive a proportionate allocation of (i) 1,689,147 shares of New Common
Stock and (ii) New Warrants to purchase 2,835,645 shares of New Common Stock,
based on the aggregate amount of Allowed Claims in Classes G4 and G5. The shares
of New Common Stock allocated to Classes G4 and G5 represent approximately 4.12%
of the total shares of New Common Stock to be issued and outstanding on the
Effective Date and are subject to dilution from stock issuances occurring after
the Effective Date,
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including, without limitation, in connection with the conversion of the New
Convertible Preferred Stock, the exercise of the New Warrants, or options
granted under the New Management Incentive Plan. Each holder of an Allowed
Genesis Senior Subordinated Note Claim shall receive its Ratable Proportion of
the shares of New Common Stock allocated to this Class, based on the aggregate
amount of the Allowed Claims in Classes G4 and G5.
4.6. Genesis Intercompany Claims (Class G6).
Each holder of a Genesis Intercompany Claim shall be
unimpaired.
4.7. Genesis Punitive Damage Claims (Class G7).
Each holder of a Genesis Punitive Damage Claim shall receive
no distribution under the Plan of Reorganization, but shall be paid in the
ordinary course of the business of the Reorganized Debtors solely to the extent
such claims are covered by applicable insurance policies and such insurance is
permitted under governing state law.
4.8. Genesis Series G Preferred Stock Interests
(Class G8).
All Equity Interests represented by the Series G Cumulative
Convertible Preferred Stock issued by Genesis, and any Claims for dividends or a
preference on liquidation or other rights in connection therewith, shall be
deemed canceled as of the Effective Date, and each holder of such Equity
Interest shall neither receive nor retain any property or interest in property
on account of such Equity Interest.
4.9. Genesis Series H Preferred Stock Interests (Class G9).
All Equity Interests represented by the Series H Senior
Convertible Participating Cumulative Preferred Stock issued by Genesis, and any
Claims for dividends or a preference on liquidation or other rights in
connection therewith, shall be deemed canceled as of the Effective Date, and
each holder of such Equity Interest shall neither receive nor retain any
property or interest in property on account of such Equity Interest.
4.10. Genesis Series I Preferred Stock Interests (Class
G10).
All Equity Interests represented by the Series I Senior
Convertible Exchangeable Participating Cumulative Preferred Stock issued by
Genesis, and any Claims for dividends or a preference on liquidation or other
rights in connection therewith, shall be deemed canceled as of the Effective
Date, and each holder of such Equity Interest shall neither receive nor retain
any property or interest in property on account of such Equity Interest.
4.11. Genesis Common Stock Interests (Class G11).
All Genesis Common Stock Interests shall be deemed canceled as
of the Effective Date, and each holder of a Genesis Common Stock Interest shall
neither receive nor retain any property or interest in property on account of
such Genesis Common Stock Interest.
4.12. Multicare Other Secured Claims (Class M1).
On or as soon as reasonably practicable after the later of the
Effective Date and the first Business Day after the date that is thirty (30)
calendar days after the date a Multicare Other Secured
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Claim becomes Allowed, each holder of an Allowed Multicare Other Secured Claim
shall receive, at the option of the Reorganized Debtors, either (i) Cash in an
amount equal to one hundred percent (100%) of the unpaid amount of such Allowed
Multicare Other Secured Claim, (ii) the proceeds of the sale or disposition of
the Collateral securing such Allowed Multicare Other Secured Claim to the extent
of the value of the holder's secured interest in the Allowed Multicare Other
Secured Claim, (iii) the Collateral securing such Allowed Multicare Other
Secured Claim, (iv) a note with periodic Cash payments having a present value
equal to the amount of the Allowed Multicare Other Secured Claim, (v) such
treatment that leaves unaltered the legal, equitable, and contractual rights to
which the holder of such Allowed Multicare Other Secured Claim is entitled, or
(vi) such other distribution as necessary to satisfy the requirements of the
Bankruptcy Code. In the event the Reorganized Debtors treat a Claim under clause
(i) or (ii) of this Section, the liens securing such Multicare Other Secured
Claims shall be deemed released; provided, however, that Subclasses M1-2 and
M1-4 shall receive the treatment set forth in this Section 4.12(v), and Subclass
M1-7 shall receive the treatment set forth in this Section 4.12(iii).
4.13. Multicare Senior Lender Claims (Class M2).
Holders of the Multicare Senior Lender Claims shall be
entitled to receive 88.37% of the shares of New Multicare Stock. Pursuant to the
Plan of Merger, such holders shall be deemed to immediately exchange such common
stock for (i) $25,000,000 in Cash, (ii) $147,682,000 in New Senior Notes, (iii)
shares of New Convertible Preferred Stock with a liquidation preference of
$11,600,000, and (iv) 7,798,917 shares of New Common Stock, representing
approximately 19.02% of the total shares of New Common Stock to be issued and
outstanding as of the Effective Date, subject to dilution from stock issuances
occurring after the Effective Date, including, without limitation, in connection
with the conversion of the New Convertible Preferred Stock, the exercise of the
New Warrants, or options granted under the New Management Incentive Plan.
4.14. Multicare Priority Non-Tax Claims (Class M3).
Except to the extent that a holder of an Allowed Multicare
Priority Non-Tax Claim against any of the Multicare Debtors has agreed to a
different treatment of such Claim, each such holder shall receive, in full
satisfaction of such Claim, Cash in an amount equal to such Claim, on or as soon
as reasonably practicable after the later of (i) the Effective Date, (ii) the
date such Claim becomes Allowed, and (iii) the date for payment provided by any
agreement or understanding between the parties.
4.15. Multicare General Unsecured Claims (Class M4).
Except to the extent that an Allowed Multicare General
Unsecured Claim is an Insured Claim, the holders of Allowed Multicare General
Unsecured Claims shall receive a proportionate allocation of 11.63% of the
shares of New Multicare Stock, based on the aggregate amount of Allowed Claims
in Classes M4 and M5. Pursuant to the merger described in Section 5.2 hereof,
the shares of New Multicare Stock allocated to Classes M4 and M5 will be
exchanged for (i) 1,026,857 shares of New Common Stock and (ii) New Warrants to
purchase 1,723,830 shares of New Common Stock. The shares of New Common Stock
allocated to Classes M4 and M5 represent approximately 2.50% of the total shares
of New Common Stock to be issued and outstanding as of the Effective Date,
subject to dilution from stock issuances occurring after the Effective Date,
including, without limitation, in connection with the conversion of the New
Convertible Preferred Stock, the exercise of the New Warrants, or options
granted under the New Management Incentive Plan. Each holder of an Allowed
Multicare General Unsecured Claim shall receive its Ratable Proportion of the
shares of New Common Stock and New Warrants allocated to this Class, based on
the aggregate amount of Allowed Claims in Classes M4 and M5. The holder of an
Allowed Multicare General Unsecured Claim that is an Insured Claim shall be paid
in the ordinary course of the business of the Reorganized Debtors to the extent
that Claim is insured, and
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shall have an Allowed Multicare General Unsecured Claim to the extent the
applicable insurance policy does not provide coverage with respect to any
portion of the Insured Claim.
4.16. Multicare Senior Subordinated Note Claims (Class M5).
The holders of Allowed Multicare Senior Subordinated Claims
shall receive a proportionate allocation of 11.63% of the shares of New
Multicare Stock, based on the aggregate amount of Allowed Claims in Classes M4
and M5. Pursuant to the merger described in Section 5.2 hereof, the shares of
New Multicare Stock allocated to Classes M4 and M5 will be exchanged for (i)
1,026,857 shares of New Common Stock and (ii) New Warrants to purchase 1,723,830
shares of New Common Stock. The shares of New Common Stock allocated to Classes
M4 and M5 represent approximately 2.50% of the total shares of New Common Stock
to be issued and outstanding as of the Effective Date, subject to dilution from
stock issuances occurring after the Effective Date, including, without
limitation, in connection with the conversion of the New Convertible Preferred
Stock, the exercise of the New Warrants, or options granted under the New
Management Incentive Plan. Each holder of an Allowed Multicare Senior
Subordinated Claim shall receive its Ratable Proportion of shares of New Common
Stock and New Warrants allocated to this Class, based on the aggregate amount of
Allowed Claims in Classes M4 and M5.
4.17. Multicare Intercompany Claims (Class M6).
Each holder of a Multicare Intercompany Claim shall be
unimpaired.
4.18. Multicare Punitive Damage Claims (Class M7).
Each holder of a Multicare Punitive Damage Claim shall receive
no distribution under the Plan of Reorganization, but shall be paid in the
ordinary course of the business of the Reorganized Debtors solely to the extent
such claims are covered by applicable insurance policies and such insurance is
permitted under governing state law.
4.19. Multicare Common Stock Interests (Class M8).
All Multicare Common Stock Interests shall be deemed canceled
as of the Effective Date, and each holder of a Multicare Common Stock Interest
shall neither receive nor retain any property or interest in property on account
of such Multicare Common Stock Interests.
SECTION 5. MEANS FOR IMPLEMENTATION
5.1. Deemed Consolidation of Debtors for Plan Purposes
Only.
(a) Subject to the occurrence of the Effective Date, the
Genesis Debtors shall be deemed consolidated for the following purposes under
the Plan of Reorganization: (i) no distributions shall be made under the Plan of
Reorganization on account of the Genesis Intercompany Claims; (ii) all
guaranties by any of the Genesis Debtors of the obligations of any other Genesis
Debtor arising prior to the Effective Date shall be deemed eliminated so that
any Claim against any Genesis Debtor and any guaranty thereof executed by any
other Genesis Debtor and any joint and several liability of any of the Genesis
Debtors shall be deemed to be one obligation of the deemed consolidated Genesis
Debtors; and (iii) each and every Claim filed or to be filed in the
Reorganization Case of any of the Genesis Debtors shall be deemed filed against
the deemed consolidated Genesis Debtors and shall be deemed one Claim against
and obligation of the deemed consolidated Genesis Debtors.
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Such deemed consolidation, however, shall not (other than for
purposes related to funding distributions under the Plan of Reorganization and
as set forth above in this Section) affect: (i) the legal and organizational
structure of the Reorganized Debtors; (ii) intercompany Claims by and among the
Genesis Debtors or Reorganized Debtors; (iii) pre- and post-Commencement Date
guaranties, liens, and security interests that are required to be maintained (A)
in connection with executory contracts or unexpired leases that were entered
into during the Genesis Reorganization Cases or that have been or will be
assumed, (B) pursuant to the Plan of Reorganization, or (C) in connection with
any financing entered into, or New Senior Notes issued, by the Reorganized
Debtors on the Effective Date; and (iv) distributions out of any insurance
policies or proceeds of such policies.
Notwithstanding anything contained in the Plan to the
contrary, the deemed consolidation of the Genesis Debtors shall not have any
effect on the Claims being reinstated and unimpaired in Class G1 of the Plan,
and the legal, equitable, and contractual rights to which the holders of any
such Claims is entitled shall be left unaltered by the Plan.
(b) Subject to the occurrence of the Effective Date, the
Multicare Debtors shall be deemed consolidated for the following purposes under
the Plan of Reorganization: (i) no distributions shall be made under the Plan of
Reorganization on account of Multicare Intercompany Claims; (ii) all guaranties
by any of the Multicare Debtors of the obligations of any other Multicare Debtor
arising prior to the Effective Date shall be deemed eliminated so that any Claim
against any Multicare Debtor and any guaranty thereof executed by any other
Multicare Debtor and any joint and several liability of any of the Multicare
Debtors shall be deemed to be one obligation of the deemed consolidated
Multicare Debtors; and (iii) each and every Claim filed or to be filed in the
Reorganization Case of any of the Multicare Debtors shall be deemed filed
against the deemed consolidated Multicare Debtors and shall be deemed one Claim
against and obligation of the deemed consolidated Multicare Debtors.
Such deemed consolidation, however, shall not (other than for
purposes related to funding distributions under the Plan of Reorganization and
as set forth above in this Section) affect: (i) the legal and organizational
structure of the Reorganized Debtors; (ii) intercompany Claims by and among the
Multicare Debtors or Reorganized Debtors; (iii) pre- and post-Commencement Date
guaranties, liens, and security interests that are required to be maintained (A)
in connection with executory contracts or unexpired leases that were entered
into during the Multicare Reorganization Cases or that have been or will be
assumed, (B) pursuant to the Plan of Reorganization, or (C) in connection with
any financing entered into by the Reorganized Debtors on the Effective Date; and
(iv) distributions out of any insurance policies or proceeds of policies.
Notwithstanding anything contained in the Plan to the
contrary, the deemed consolidation of the Multicare Debtors shall not have any
effect on the Claims being reinstated and unimpaired in Class M1 of the Plan,
and the legal, equitable, and contractual rights to which the holders of any
such Claims is entitled shall be left unaltered by the Plan.
5.2. Merger of Corporate Entities.
In accordance with the terms of the Plan of Merger and the
votes of Genesis, as the sole shareholder of Multicare Acquisition Corporation,
and the holders of the Multicare Senior Lender Claims, Multicare General
Unsecured Claims, and Multicare Senior Subordinated Note Claims, Multicare
Acquisition Corporation shall merge into Multicare, with Multicare being the
surviving entity. On such merger, (i) the New Multicare Stock shall be exchanged
for $147,682,000 of New Senior Notes and shares of New Convertible Preferred
Stock with an aggregate liquidation preference of $11,600,000, to be distributed
to holders of Allowed Claims in Class M2, 8,825,774 shares of New Common Stock,
to be distributed to holders of Allowed Claims in Classes M2, M4, and M5, and
37.81% of New Warrants, to
20
be distributed to holders of Allowed Claims in Classes M4 and M5, (ii) Multicare
Acquisition Corporation shall cease to exist as a separate legal entity, and
(iii) Reorganized Multicare shall become a wholly-owned, indirect subsidiary of
Reorganized Genesis.
5.3. Authorization of Plan Securities.
Reorganized Genesis is authorized to issue the Plan Securities
in accordance with Sections 4 and 5.2 hereof, without the need for any further
corporate action.
5.4. Exit Facility.
The Debtors are authorized to enter into new financing
arrangements for purposes of funding obligations under the Plan of
Reorganization, including the payment of Administrative Expense Claims and the
repayment of obligations under the Debtors' respective Revolving Credit and
Guaranty Agreements described in Section 2.4 hereof, and providing for working
capital requirements. The new financing arrangements may be in any form
acceptable to Reorganized Genesis, including, without limitation, a new
revolving credit agreement and new Term A Notes, with priority in payment and
collateral senior to the New Senior Notes.
5.5. Waiver of Subordination.
The distributions under the Plan of Reorganization do not take
into account the relative priority of the Claims in each Class in connection
with any contractual subordination provisions relating to the Genesis Senior
Subordinated Note Claims and the Multicare Senior Subordinated Note Claims.
Accordingly, the distributions to the holders of Claims in Classes G5 and M5
shall not be subject to levy, garnishment, attachment, or other legal process by
any holder of indebtedness senior to the indebtedness of the holders of the
Claims in Classes G5 and M5, in each case by reason of claimed contractual
subordination rights. On the Effective Date, all creditors shall be deemed to
have waived any and all contractual subordination rights which they may have
with respect to such distribution, and the Confirmation Order shall permanently
enjoin, effective as of the Effective Date, all holders of senior indebtedness
from enforcing or attempting to enforce any such rights with respect to the
distributions under the Plan of Reorganization to the holders of Claims in
Classes G5 and M5.
5.6. Registration Rights Agreement.
On the Effective Date, Reorganized Genesis shall execute and
deliver a registration rights agreement in the form set forth in the Plan
Supplement, obligating Reorganized Genesis to register the Plan Securities under
the Securities Exchange Act of 1933, as amended, upon the demand of any holder
of 10% or more of the Plan Securities or the holders of 20% or more of the Plan
Securities in the aggregate, and pursuant to customary "piggyback" provisions,
all at the times and in accordance with the terms set forth in such registration
rights agreement.
5.7. Listing of New Common Stock.
Reorganized Genesis shall use commercially reasonable efforts
to cause the shares of New Common Stock to be listed on a national securities
exchange or a qualifying interdealer quotation system. Reorganized Genesis will
be a public reporting company under the Securities Exchange Act of 1934 and will
file periodic and current reports as required thereunder.
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5.8. Management Incentive Plan.
Reorganized Genesis shall adopt the New Management Incentive
Plan. The solicitation of votes on this Plan of Reorganization shall be deemed a
solicitation of the holders of New Common Stock for approval of the New
Management Incentive Plan. Entry of the order confirming the Plan of
Reorganization shall constitute such approval, and the order confirming the Plan
of Reorganization shall so provide.
5.9. Release of Non-Debtor Affiliates.
As of the Effective Date, the non-Debtor corporate,
partnership, and joint venture subsidiaries or affiliates of the Debtors who are
obligors under any of the Genesis Senior Lender Agreements or the Multicare
Senior Lender Agreements shall be released from all such obligations provided
that such entities become guarantors of the New Senior Notes and assuming that
the net worth of such entities is not greater than an amount acceptable to the
agent for the holders of the Genesis Senior Lender Claims and the Multicare
Senior Lender Claims.
5.10. Release of Representatives.
As of the Effective Date, the respective officers, directors,
employees, financial advisors, professionals, accountants, and attorneys of the
Genesis Debtors, the Multicare Debtors, the respective statutory committees of
unsecured creditors appointed pursuant to section 1102 of the Bankruptcy Code in
the Genesis Reorganization Cases and the Multicare Reorganization Cases, and
Mellon Bank, N.A., as administrative agent under the Genesis Senior Lender
Agreements, the Multicare Senior Lender Agreements, and the Revolving Credit and
Guaranty Agreements described in Section 2.4 hereof shall be released from any
and all Claims against them by the Debtors in their capacity as representatives
of the Genesis Debtors, the Multicare Debtors, the statutory committees, or
Mellon Bank, N.A., as applicable, except as otherwise expressly provided in the
Plan of Reorganization, the Confirmation Order, or the order of the Bankruptcy
Court, dated February 23, 2001, approving a senior executive retention plan for
certain employees of Genesis.
5.11. Cancellation of Existing Securities and Agreements.
Except for purposes of evidencing a right to distributions
under the Plan of Reorganization or otherwise provided hereunder, on the
Effective Date all the agreements and other documents evidencing the Claims or
rights of any holder of a Claim against the Debtors, including all indentures
and notes evidencing such Claims and any options or warrants to purchase Equity
Interests, obligating the Debtors to issue, transfer, or sell Equity Interests
or any other capital stock of the Debtors, shall be canceled; provided, however,
that the indentures relating to the Genesis Senior Subordinated Note Claims and
the Multicare Senior Subordinated Note Claims shall continue in effect solely
for the purposes of (i) allowing the indenture trustees to make any
distributions on account of Classes G5 and M5 pursuant to the Plan and to
perform such other necessary administrative functions with respect thereto, and
(ii) permitting the indenture trustees to maintain any rights or liens they may
have for fees, costs, and expenses under the indentures.
5.12. Board of Directors.
The initial Board of Directors of Reorganized Genesis shall
consist of seven members whose names shall be disclosed at or prior to the
Confirmation Hearing. Six members will be selected by the holders of the Genesis
Senior Lender Claims and the Multicare Senior Lender Claims. The seventh member
shall be the Chief Executive Officer of Reorganized Genesis. Each of the members
of such
22
initial Board of Directors shall serve a one-year term. After selection of the
initial Board of Directors, the holders of the New Common Stock will elect
members of the Board of Directors of Reorganized Genesis in accordance with the
Amended Certificate of Incorporation and Amended Bylaws and applicable
nonbankruptcy law.
5.13. Corporate Action.
Reorganized Genesis shall file the Amended Certificate of
Incorporation and an amended certificate of incorporation for each of the
Reorganized Debtors that are corporations, other than Reorganized Genesis, with
the Secretary of State of the State of Delaware on the Effective Date. The
Amended Certificate of Incorporation and the certificates of incorporation for
each of the Reorganized Debtors that are corporations, other than Reorganized
Genesis, shall prohibit the issuance of nonvoting equity securities, subject to
further amendment of such certificates of incorporation as permitted by
applicable law. The Amended Bylaws shall be deemed adopted by the board of
directors of Reorganized Genesis as of the Effective Date. All partnership and
limited liability company agreements to which any of the Debtors are parties
shall be treated in accordance with Section 8.1 hereof.
5.14. Subsidiary Guaranties.
Claims based upon guaranties of collection, payment, or
performance of any obligation of the Debtors made by any direct or indirect
subsidiary of Genesis or Multicare which is not a Debtor and all Claims against
any such subsidiary for which any of the Debtors are jointly or severally
liable, in each case which arise at any time prior to the Confirmation Date,
shall be discharged, released, extinguished, and of no further force and effect,
unless the appropriate Debtor otherwise agrees in writing to the beneficiary of
such guaranties.
5.15. Settlement with the Federal Government.
The Settlement Agreement among the Genesis Debtors and the
United States of America acting through the United States Department of Health
and Human Services, the Centers for Medicare and Medicaid Services f/k/a the
Health Care Financing Administration, the Office of Inspector General, the
Department of Justice, and other agencies or departments of the United States
concerning the resolution of certain Claims asserted by such agencies against
the Genesis Debtors, in the form set forth in the Plan Supplement, is hereby
made a part of the Plan of Reorganization.
5.16. Settlement Between the Genesis Debtors and the
Multicare Debtors.
The settlement between Genesis and its direct and indirect
subsidiaries, on the one hand, and Multicare and its direct and indirect
subsidiaries, on the other hand, regarding any and all Claims against each other
shall be effectuated pursuant to the terms of that certain Settlement Agreement
among Genesis, Multicare, and their direct and indirect subsidiaries or
affiliates, in the form set forth in the Plan Supplement. The effect of the
settlement is that neither the Genesis Debtors nor the Multicare Debtors will
have claims against each other.
SECTION 6. DISTRIBUTIONS
6.1. Distribution Record Date.
As of the close of business on the Distribution Record Date,
the various transfer registers for each of the Classes of Claims or Equity
Interests as maintained by the Debtors, or their respective agents, shall be
deemed closed, and there shall be no further changes in the record holders of
any of the
23
Claims or Interests. The Debtors shall have no obligation to recognize any
transfer of the Claims or Equity Interests occurring on or after the
Distribution Record Date. The Debtors shall be entitled to recognize and deal
for all purposes hereunder only with those record holders stated on the transfer
ledgers as of the close of business on the Distribution Record Date, to the
extent applicable.
6.2. Date of Distributions.
Unless otherwise provided herein, any distributions and
deliveries to be made hereunder shall be made on the Effective Date or as soon
thereafter as is practicable. In the event that any payment or act under the
Plan of Reorganization is required to be made or performed on a date that is not
a Business Day, then the making of such payment or the performance of such act
may be completed on or as soon as reasonably practicable after the next
succeeding Business Day, but shall be deemed to have been completed as of the
required date.
6.3. Distributions to Classes G2, G4, G5, M2, M4, and M5.
On the Effective Date, the Disbursing Agent shall distribute
the New Senior Notes, the New Convertible Preferred Stock, the New Common Stock,
and any Cash allocable to Classes G2 and M2 to the individual holders of the
Genesis Senior Lender Claims and Multicare Senior Lender Claims in such
denominations and registered in the names of the holders as Mellon Bank, N.A.
shall have directed in writing. On the Effective Date, the Disbursing Agent
shall distribute the New Common Stock and the New Warrants to holders of Allowed
Claims in Classes G4, G5, M4, and M5. For the purpose of calculating the amount
of New Common Stock and New Warrants to be distributed to holders of Allowed
Claims in Classes G4, G5, M4, and M5 on the Effective Date, all Disputed Claims
in such Classes will be treated as though such Claims will be Allowed Claims in
the amounts asserted, Allowed pursuant to Section 6.12 hereof, or as estimated
by the Bankruptcy Court, as applicable. On the Final Distribution Date, each
holder of an Allowed Claim in Classes G4, G5, M4, and M5 shall receive a
Catch-up Distribution of New Common Stock and/or New Warrants, as applicable.
After the Effective Date but prior to the Final Distribution Date, the
Reorganized Debtors, in their sole discretion, may direct the Disbursing Agent
to distribute shares of New Common Stock and/or New Warrants, as applicable, to
a holder of a Disputed Claim in Class G4 or M4 which becomes an Allowed Claim
after the Effective Date such that the holder of such Claim receives the same
shares of New Common Stock and/or New Warrants, as applicable, that such holder
would have received had its Claim been an Allowed Claim in such amount on the
Effective Date.
6.4. Disbursing Agent.
All distributions under the Plan of Reorganization (other than
distributions described in the next sentences) shall be made by the applicable
Debtor as Disbursing Agent or such other entity designated by the applicable
Debtor as a Disbursing Agent on or after the Effective Date. Each Indenture
Trustee shall be the Disbursing Agent for its respective noteholders in Classes
G5 and M5, and The Bank of New York, as indenture trustee in relation to Tyler
County West Virginia Taxable Refunding Revenue Bonds (Care Haven Associates
Limited Partnership Project) Series 1994B and Series 1995 (the "Care Haven
Indenture Trustee") for its respective bondholders in Subclass M1-2. All
distributions to the creditors of each of the Multicare Debtors under the Plan
of Merger shall be made by Multicare Acquisition Corporation as Disbursing Agent
or such other entity designated by Multicare Acquisition Corporation as a
Disbursing Agent on or after the Effective Date. A Disbursing Agent shall not be
required to give any bond or surety or other security for the performance of its
duties unless otherwise ordered by the Bankruptcy Court, and, in the event that
a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring
any such bond or surety shall be borne by the applicable Debtor.
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6.5. Rights and Powers of Disbursing Agent.
(a) Powers of the Disbursing Agent. The Disbursing Agent
shall be empowered to (i) effect all actions and execute all agreements,
instruments, and other documents necessary to perform its duties under the Plan
of Reorganization, (ii) make all distributions contemplated hereby, (iii) employ
professionals to represent it with respect to its responsibilities, and (iv)
exercise such other powers as may be vested in the Disbursing Agent by order of
the Bankruptcy Court, pursuant to the Plan of Reorganization, or as deemed by
the Disbursing Agent to be necessary and proper to implement the provisions
hereof.
(b) Expenses Incurred on or After the Effective Date.
Except as otherwise ordered by the Bankruptcy Court, the amount of any
reasonable fees and expenses incurred by the Disbursing Agent on or after the
Effective Date (including, without limitation, taxes) and any reasonable
compensation and expense reimbursement claims (including, without limitation,
reasonable attorneys' fees and expenses) made by the Disbursing Agent shall be
paid in Cash by the Reorganized Debtors.
6.6. Surrender of Instruments.
As a condition to receiving any distribution under the Plan of
Reorganization, each holder of a certificated instrument or note must surrender
such instrument or note held by it to the Disbursing Agent or its designee,
unless such certificated instrument or note is being reinstated or being left
unimpaired under the Plan of Reorganization. Any holder of such instrument or
note that fails to (i) surrender such instrument or note, or (ii) execute and
deliver an affidavit of loss and/or indemnity reasonably satisfactory to the
Disbursing Agent and furnish a bond in form, substance, and amount reasonably
satisfactory to the Disbursing Agent before the first anniversary of the
Effective Date shall be deemed to have forfeited all rights and Claims and may
not participate in any distribution under the Plan of Reorganization. Any
distribution so forfeited shall become property of Reorganized Genesis.
6.7. Delivery of Distributions.
Subject to Bankruptcy Rule 9010, all distributions to any
holder of an Allowed Claim except the holders of an Allowed Senior Lender Claim,
shall be made at the address of such holder as set forth on the Schedules filed
with the Bankruptcy Court or on the books and records of the Debtors or their
agents or in a letter of transmittal unless the Debtors have been notified in
writing of a change of address, including, without limitation, by the filing of
a proof of claim or interest by such holder that contains an address for such
holder different from the address reflected on such Schedules for such holder.
All distributions to any holder of an Allowed Senior Lender Claim shall be made
to Mellon Bank N.A., as administrative agent under the Genesis Senior Lender
Agreements and the Multicare Senior Lender Agreements. Any distribution of New
Common Stock or New Warrants to any of the Indenture Trustees shall be deemed a
distribution to the respective holder of a Genesis Senior Subordinated Note
Claim or Multicare Senior Subordinated Note Claim. In the event that any
distribution to any holder is returned as undeliverable, the Disbursing Agent
shall use reasonable efforts to determine the current address of such holder,
but no distribution to such holder shall be made unless and until the Disbursing
Agent has determined the then current address of such holder, at which time such
distribution shall be made to such holder without interest; provided that such
distributions shall be deemed unclaimed property under section 347(b) of the
Bankruptcy Code at the expiration of one year from the Effective Date. After
such date, all unclaimed property or interest in property shall revert to
Reorganized Genesis, and the Claim of any other holder to such property or
interest in property shall be discharged and forever barred.
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6.8. Manner of Payment Under Plan of Reorganization.
(a) All distributions of Cash, New Senior Notes, New
Convertible Preferred Stock, New Common Stock, and New Warrants to the creditors
of each of the Genesis Debtors under the Plan of Reorganization shall be made
by, or on behalf of, the applicable Reorganized Debtor. Where the applicable
Reorganized Debtor is a subsidiary of Reorganized Genesis, Reorganized Genesis
shall make a capital contribution, either directly or indirectly, to the
applicable Reorganized Debtor equal to the amount distributed, but only at such
time as, and to the extent, the amounts are actually distributed to holders of
Allowed Claims. All distributions under the Plan of Reorganization of New Senior
Notes to the creditors of the Genesis Debtors shall be made by, or on behalf of,
Reorganized Genesis. To the extent that New Senior Notes are issued by
Reorganized Genesis to creditors of a Reorganized Debtor that is a subsidiary of
Reorganized Genesis, the portion of the Claims for which such New Senior Notes
are issued shall be treated as acquired by Reorganized Genesis. Immediately
thereafter, and pursuant hereto, Reorganized Genesis shall make a capital
contribution, either directly or indirectly, to any applicable Reorganized
Debtor, and such Claim shall be immediately cancelled and discharged. Any
distributions that revert to any of the Reorganized Debtors or are otherwise
canceled (such as to the extent any distributions have not been claimed within
one year or are canceled pursuant to Section 6.6 hereof) shall revest solely in
Reorganized Genesis, and any applicable Reorganized Debtor (other than
Reorganized Genesis) shall not have (nor shall it be considered to ever have
had) any ownership interest in the amounts distributed.
(b) Subject to Section 4.13 hereof, the distribution of
New Multicare Stock to the creditors of each of the Multicare Debtors
immediately prior to the merger of Multicare Acquisition Corporation (a
newly-formed, second tier subsidiary of Genesis) into Multicare shall be made
by, or on behalf of, the applicable Multicare Debtor. Where the applicable
Multicare Debtor is a subsidiary of Multicare, Multicare shall make a capital
contribution, either directly or indirectly, to the applicable Multicare Debtor
equal to the amount of New Multicare Stock distributed to the creditors of the
Multicare Debtors.
(c) All distributions of Cash, New Senior Notes, New
Convertible Preferred Stock, New Common Stock, and New Warrants to the creditors
of each of the Multicare Debtors under the Plan of Merger shall be made by, or
on behalf of, Multicare Acquisition Corporation. Reorganized Genesis shall make
a capital contribution to the intermediate corporate parent of Multicare
Acquisition Corporation, which in turn shall make a capital contribution to
Multicare Acquisition Corporation, equal to the amount distributed, with such
contributions occurring only at such time as, and to the extent, the amounts are
actually distributed to holders of Allowed Claims. All distributions under the
Plan of New Senior Notes to the creditors of the Multicare Debtors shall be made
by, or on behalf of, Reorganized Genesis. To the extent that the acquisition of
the New Multicare Stock pursuant to the Plan of Reorganization and the Plan of
Merger is in exchange for the New Senior Notes, such stock shall be treated as
acquired by Reorganized Genesis. Immediately thereafter, and pursuant hereto,
Reorganized Genesis shall contribute such stock to the intermediate corporate
parent of Multicare Acquisition Corporation. Any distributions that revert to
the Reorganized Debtors or are otherwise canceled (such as to the extent any
distributions have not been claimed within one year or are canceled pursuant to
Section 6.6 hereof) shall revest solely in Reorganized Genesis, and no
Reorganized Debtor (other than Reorganized Genesis) shall have (or shall be
considered to ever have had) any ownership interest in the amounts distributed.
(d) At the option of the Debtors, any Cash payment to be
made hereunder may be made by a check or wire transfer or as otherwise required
or provided in applicable agreements.
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6.9. Fractional Shares and Fractional Warrants.
No fractional shares of New Common Stock or New Convertible
Preferred Stock, or fractional New Warrants or Cash in lieu thereof, shall be
distributed. For purposes of distribution, fractional shares of New Common Stock
or New Convertible Preferred Stock, or fractional New Warrants, shall be rounded
down to the next whole number or zero, as applicable.
6.10. Setoffs.
Except with respect to the Genesis Senior Lender Claims and
the Multicare Senior Lender Claims, the Debtors may, but shall not be required
to, set off against any Claim (for purposes of determining the Allowed amount of
such Claim on which distribution shall be made), any claims of any nature
whatsoever that the Debtors may have against the holder of such Claim, but
neither the failure to do so nor the allowance of any Claim hereunder shall
constitute a waiver or release by the Debtors of any such claim the Debtors may
have against the holder of such Claim.
6.11. Allocation of Plan Distribution Between Principal and
Interest.
All distributions in respect of any Claim shall be allocated
first to the principal amount of such Claim, as determined for federal income
tax purposes, and thereafter, to the remaining portion of such Claim, if any.
6.12. Allowance of Claims in Classes G2, G5, M2, and M5.
The aggregate Claims in Classes G2, G5, M2, and M5 shall be
deemed Allowed in the amounts of $1,193,460,000 (excluding postpetition interest
and before giving effect to postpetition payments), $387,425,000, $443,400,000
(excluding postpetition interest), and $257,817,000, respectively. The Claims in
Class G5 shall be deemed Allowed in the following amounts for each issue of
senior subordinated notes: (i) 9-3/4% Senior Subordinated Notes due 2005:
$126,077,500; (ii) 9-1/4% Senior Subordinated Notes due 2006: $133,414,931;
(iii) 9-7/8% Senior Subordinated Notes due 2009: $126,303,247; and (iv) 9-3/8
Senior Subordinated Notes due 2005: $1,629,313.
SECTION 6. PROCEDURES FOR DISPUTED CLAIMS
7.1. Objections to Claims.
The Reorganized Debtors shall be entitled to object to Claims.
Any objections to Claims shall be served and filed on or before the later of (i)
one hundred twenty (120) days after the Effective Date, and (ii) such date as
may be fixed by the Bankruptcy Court, whether fixed before or after the date
specified in clause (i) above.
7.2. Payments and Distributions with Respect to Disputed
Claims.
(a) General. Notwithstanding any other provision hereof,
if any portion of a Claim is a Disputed Claim, no payment or distribution
provided hereunder shall be made on account of such Claim unless and until such
Disputed Claim becomes an Allowed Claim.
(b) Tort Claims. All Tort Claims shall be deemed Disputed
Claims unless and until they are liquidated. Any Tort Claim which has not been
liquidated prior to the date of this Plan and as to which a proof of claim was
timely filed in the Reorganization Cases shall be determined and liquidated in
accordance with an alternative dispute resolution procedure or if the claimant
pursuing the Tort Claim has
27
received relief from the automatic stay (through such alternative dispute
resolution procedure or otherwise), the Tort Claim shall be determined and
liquidated in the administrative or judicial tribunal in which it is pending on
the Confirmation Date or in any administrative or judicial tribunal of
appropriate jurisdiction. Any Tort Claim determined and liquidated (i) pursuant
to a judgment obtained in accordance with this Section and applicable
nonbankruptcy law which is no longer appealable or subject to review, or (ii) in
the alternative dispute resolution or similar proceeding approved by order of
the Bankruptcy Court shall be deemed, to the extent applicable, an Allowed Claim
in Class G4 or Class M4, as applicable, in such liquidated amount (provided that
for Insured Claims, such amount shall not exceed the liquidated amount of the
Claim less the amount paid by the insurer) and treated in accordance with
Sections 4.4 and 4.15 hereof. Nothing contained in this Section shall constitute
or be deemed a waiver of any Claim, right, or cause of action that the Debtors
may have against any person in connection with or arising out of any Tort Claim,
including, without limitation, any rights under section 157(b) of title 28 of
the United States Code.
7.3. Distributions After Allowance.
After such time as a Disputed Claim becomes, in whole or in
part, an Allowed Claim, the Reorganized Debtors shall distribute to the holder
thereof the distributions, if any, to which such holder is then entitled under
the Plan of Reorganization. Such Cash distributions shall be made as soon as
practicable after the date that the order or judgment of the Bankruptcy Court
allowing such Disputed Claim (or portion thereof) becomes a Final Order, but in
no event more than thirty (30) days thereafter. Shares of New Common Stock or
New Warrants distributable to the holder of a Disputed Claim which becomes an
Allowed Claim (in whole or in part) as a result of the entry of an order or
judgment of the Bankruptcy Court allowing such Disputed Claim (or portion
thereof) shall be made in accordance with Section 6.3 hereof.
7.4. Estimation of Claims.
The Reorganized Debtors may at any time request that the
Bankruptcy Court estimate any contingent, unliquidated, or Disputed Claim
pursuant to section 502(c) of the Bankruptcy Code regardless of whether the
Debtor previously objected to such Claim or whether the Bankruptcy Court has
ruled on any such objection, and the Bankruptcy Court will retain jurisdiction
to estimate any Claim at any time during litigation concerning any objection to
any Claim, including, without limitation, during the pendency of any appeal
relating to any such objection. In the event that the Bankruptcy Court estimates
any contingent, unliquidated, or Disputed Claim, the amount so estimated shall
constitute either the allowed amount of such Claim or a maximum limitation on
such Claim, as determined by the Bankruptcy Court. If the estimated amount
constitutes a maximum limitation on the amount of such Claim, the Reorganized
Debtors may pursue supplementary proceedings to object to the allowance of such
Claim. All of the aforementioned objection, estimation, and resolution
procedures are intended to be cumulative and not exclusive of one another.
Claims may be estimated and subsequently compromised, settled, withdrawn, or
resolved by any mechanism approved by the Bankruptcy Court.
7.5. Interest and Dividends.
To the extent that a Disputed Claim becomes an Allowed Claim
after the Effective Date and is entitled to a Cash distribution under the Plan
of Reorganization, the holder of such Claim shall be entitled to a Cash
distribution plus interest thereon, calculated at the average rate received by
the Debtors in their deposit accounts, from the Effective Date to the date of
distribution. In the event that dividend distributions have been made with
respect to the New Common Stock distributable to a holder of a Disputed Claim
that later becomes Allowed, such holder shall be entitled to receive such
previously distributed dividends without any interest with respect thereto.
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SECTION 8. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1. General Treatment.
All executory contracts and unexpired leases to which any of
the Debtors are parties are hereby assumed, including the bonds executed by
Liberty Bond Services on behalf of the Debtors, except for an executory contract
or unexpired lease that (i) has been assumed or rejected pursuant to Final Order
of the Bankruptcy Court, (ii) is specifically designated as a contract or lease
to be rejected on the Schedule of Rejected Contracts attached hereto, (iii) is
the subject of a separate motion to assume or reject filed under section 365 of
the Bankruptcy Code by the Genesis Debtors or Multicare Debtors prior to the
Confirmation Date, or (iv) is an option or warrant to purchase common stock of
any of the Debtors or right to convert any Equity Interest into common stock of
any of the Debtors to the extent such option, warrant, or conversion right is
determined not to be an Equity Interest.
8.2. Cure of Defaults.
Except to the extent that different treatment has been agreed
to by the nondebtor party or parties to any executory contract or unexpired
lease to be assumed pursuant to Section 8.1 hereof, the Debtors shall, pursuant
to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy
Code and consistent with the requirements of section 365 of the Bankruptcy Code,
within thirty (30) days of the Confirmation Date, file and serve a pleading with
the Bankruptcy Court listing the cure amounts of all executory contracts or
unexpired leases to be assumed. The parties to such executory contracts or
unexpired leases to be assumed by the Debtors shall have fifteen (15) days from
service to object to the cure amounts listed by the Debtors. If there are any
objections filed, the Bankruptcy Court shall hold a hearing. The Debtors shall
retain their right to reject any of their executory contracts or unexpired
leases, including contracts or leases that are subject to a dispute concerning
amounts necessary to cure any defaults.
8.3. Rejection Claims.
In the event that the rejection of an executory contract or
unexpired lease by any of the Debtors pursuant to the Plan of Reorganization
results in damages to the other party or parties to such contract or lease, a
Claim for such damages, if not heretofore evidenced by a filed proof of claim,
shall be forever barred and shall not be enforceable against the Debtors, or
their respective properties or interests in property as agents, successors, or
assigns, unless a proof of claim is filed with the Bankruptcy Court and served
upon counsel for the Debtors on or before the date that is thirty (30) days
after the Confirmation Date or such later rejection date that occurs as a result
of a dispute concerning amounts necessary to cure any defaults.
8.4. Senior Executives of Reorganized Genesis.
Reorganized Genesis shall enter into long-term employment
agreements with Michael R. Walker, Richard R. Howard, David C. Barr, and George
V. Hager, Jr. in the form set forth in the Plan Supplement.
8.5. Survival of the Debtors' Corporate Indemnities.
Any obligations of the Debtors pursuant to their corporate
charters and bylaws or agreements entered into any time prior to the Effective
Date, to indemnify current directors, officers, agents, and/or employees with
respect to all present and future actions, suits, and proceedings against the
Debtors or such directors, officers, agents, and/or employees, based upon any
act or omission for or on
29
behalf of the Debtors shall not be discharged or impaired by confirmation of the
Plan of Reorganization. Such obligations shall be deemed and treated as
executory contracts to be assumed by the Debtors pursuant to the Plan of
Reorganization, and shall continue as obligations of the Reorganized Debtors.
SECTION 9. CONDITION PRECEDENT TO THE EFFECTIVE DATE
The occurrence of the Effective Date of the Plan of
Reorganization is subject to satisfaction of the condition precedent that the
Reorganized Debtors shall enter into the new financing arrangements referred to
in Section 5.4 hereof for purposes of funding obligations under the Plan of
Reorganization and providing for working capital requirements and all of the
conditions precedent to the initial extensions of credit thereunder shall be
satisfied.
SECTION 10. EFFECT OF CONFIRMATION
10.1. Vesting of Assets.
Upon the Effective Date, pursuant to sections 1141(b) and (c)
of the Bankruptcy Code, all property of the Debtors' bankruptcy estates shall
vest in the Reorganized Debtors free and clear of all Claims, liens,
encumbrances, charges, and other interests, except as provided herein. The
Reorganized Debtors may operate their businesses and may use, acquire, and
dispose of property free of any restrictions of the Bankruptcy Code or the
Bankruptcy Rules and in all respects as if there were no pending cases under any
chapter or provision of the Bankruptcy Code, except as provided herein.
10.2. Discharge of Claims and Termination of Equity
Interests.
Except as otherwise provided herein or in the Confirmation
Order, the rights afforded in the Plan of Reorganization and the payments and
distributions to be made hereunder shall discharge all existing debts and
Claims, and terminate all Equity Interests, of any kind, nature, or description
whatsoever against or in the Debtors or any of their assets or properties to the
fullest extent permitted by section 1141 of the Bankruptcy Code. Except as
provided in the Plan of Reorganization, upon the Effective Date, all existing
Claims against the Debtors and Equity Interests in the Debtors, shall be, and
shall be deemed to be, discharged and terminated, and all holders of Claims and
Equity Interests shall be precluded and enjoined from asserting against the
Reorganized Debtors, or any of their assets or properties, any other or further
Claim or Equity Interest based upon any act or omission, transaction, or other
activity of any kind or nature that occurred prior to the Effective Date,
whether or not such holder has filed a proof of claim or proof of equity
interest. Notwithstanding any provision of the Plan to the contrary, any valid
setoff or recoupment rights held against any of the Debtors, including any such
rights that HCR Manor Care, Inc., Manor Care, Inc., and/or ManorCare Health
Services, Inc. may have in connection with the pending prepetition litigation
actions described in section V.D of the disclosure statement for the Plan, shall
not be affected by the Plan and shall be expressly preserved in the Confirmation
Order.
10.3. Discharge of Debtors.
Upon the Effective Date and in consideration of the
distributions to be made hereunder, except as otherwise expressly provided
herein, each holder (as well as any trustees and agents on behalf of each
holder) of a Claim or Equity Interest and any affiliate of such holder shall be
deemed to have forever waived, released, and discharged the Debtors, to the
fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any
and all Claims, Equity Interests, rights, and liabilities that arose prior to
the Effective Date. Upon the Effective Date, all such persons shall be forever
precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from
prosecuting or asserting any such
30
discharged Claim against or terminated Equity Interest in the Debtors.
Notwithstanding any provision of the Plan to the contrary, any valid setoff or
recoupment rights held against any of the Debtors, including any such rights
that HCR Manor Care, Inc., Manor Care, Inc., and/or ManorCare Health Services,
Inc. may have in connection with the pending prepetition litigation actions
described in section V.D of the disclosure statement for the Plan, shall not be
affected by the Plan and shall be expressly preserved in the Confirmation Order.
10.4. Term of Injunctions or Stays.
Unless otherwise provided, all injunctions or stays arising
under or entered during the Reorganization Cases under section 105 or 362 of the
Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall
remain in full force and effect until the later of the Effective Date and the
date indicated in such order.
10.5. Injunction Against Interference With Plan.
Upon the entry of a Confirmation Order with respect to the
Plan of Reorganization, all holders of Claims and Equity Interests and other
parties in interest, along with their respective present or former employees,
agents, officers, directors, or principals, shall be enjoined from taking any
actions to interfere with the implementation or consummation of the Plan of
Reorganization.
10.6. Exculpation.
Neither the Debtors, any Disbursing Agent, the respective
statutory committees of unsecured creditors appointed pursuant to section 1102
of the Bankruptcy Code in the Genesis Reorganization Cases and the Multicare
Reorganization Cases, Mellon Bank, N.A., as administrative agent under, and any
lender under, the Genesis Senior Lender Agreements, the Multicare Senior Lender
Agreements, and the Revolving Credit and Guaranty Agreements described in
Section 2.4 hereof, nor any of their respective members, officers, directors,
employees, agents, or professionals shall have or incur any liability to any
holder of any Claim or Equity Interest for any act or omission in connection
with, or arising out of, the Reorganization Cases, the confirmation of the Plan
of Reorganization, the consummation of the Plan of Reorganization, or the
administration of the Plan of Reorganization or property to be distributed under
the Plan of Reorganization, except for willful misconduct or gross negligence.
10.7. Retention of Causes of Action/Reservation of Rights.
(a) Nothing contained in the Plan of Reorganization or
the Confirmation Order shall be deemed to be a waiver or the relinquishment of
any rights or causes of action that the Debtors or the Reorganized Debtors may
have or which the Reorganized Debtors may choose to assert on behalf of their
respective estates under any provision of the Bankruptcy Code or any applicable
nonbankruptcy law, including, without limitation, (i) any and all Claims against
any person or entity, to the extent such person or entity asserts a crossclaim,
counterclaim, and/or Claim for setoff which seeks affirmative relief against the
Debtors, the Reorganized Debtors, their officers, directors, or representatives,
and (ii) the turnover of any property of the Debtors' estates; provided,
however, that this Section does not apply with respect to the settlement
agreements described in Sections 5.15 and 5.16 hereof. Notwithstanding the
foregoing, the Debtors and the Reorganized Debtors waive all avoidance actions,
except as set forth in the Plan Supplement.
(b) Nothing contained in the Plan of Reorganization or
the Confirmation Order shall be deemed to be a waiver or relinquishment of any
claim, cause of action, right of setoff, or other legal or
31
equitable defense which the Debtors had immediately prior to the Commencement
Date, against or with respect to any Claim left unimpaired by the Plan of
Reorganization. The Reorganized Debtors shall have, retain, reserve, and be
entitled to assert all such claims, causes of action, rights of setoff, and
other legal or equitable defenses which they had immediately prior to the
Commencement Date fully as if the Reorganization Cases had not been commenced,
and all of the Reorganized Debtors' legal and equitable rights respecting any
Claim left unimpaired by the Plan of Reorganization may be asserted after the
Confirmation Date to the same extent as if the Reorganization Cases had not been
commenced.
SECTION 11. RETENTION OF JURISDICTION
On and after the Effective Date, the Bankruptcy Court shall
retain jurisdiction over all matters arising in, arising under, and related to
the Reorganization Cases for, among other things, the following purposes:
(a) To hear and determine applications for the
assumption or rejection of executory contracts or unexpired
leases and the allowance of Claims resulting therefrom.
(b) To determine any motion, adversary
proceeding, application, contested matter, and other litigated
matter pending on or commenced after the Confirmation Date.
(c) To ensure that distributions to holders of
Allowed Claims are accomplished as provided herein.
(d) To consider Claims or the allowance,
classification, priority, compromise, estimation, or payment
of any Claim, Administrative Claim, or Equity Interest.
(e) To enter, implement, or enforce such orders
as may be appropriate in the event the Confirmation Order is
for any reason stayed, reversed, revoked, modified, or
vacated.
(f) To issue injunctions, enter and implement
other orders, and take such other actions as may be necessary
or appropriate to restrain interference by any person with the
consummation, implementation, or enforcement of the Plan of
Reorganization, the Confirmation Order, or any other order of
the Bankruptcy Court.
(g) To hear and determine any application to
modify the Plan of Reorganization in accordance with section
1127 of the Bankruptcy Code, to remedy any defect or omission
or reconcile any inconsistency in the Plan of Reorganization,
the disclosure statement for the Plan or Reorganization, or
any order of the Bankruptcy Court, including the Confirmation
Order, in such a manner as may be necessary to carry out the
purposes and effects thereof.
(h) To hear and determine all applications under
sections 330, 331, and 503(b) of the Bankruptcy Code for
awards of compensation for services rendered and reimbursement
of expenses incurred prior to the Confirmation Date.
(i) To hear and determine disputes arising in
connection with the interpretation, implementation, or
enforcement of the Plan of Reorganization, the Confirmation
Order, any transactions or payments contemplated hereby, or
any agreement, instrument, or other document governing or
relating to any of the foregoing.
32
(j) To take any action and issue such orders as
may be necessary to construe, enforce, implement, execute, and
consummate the Plan of Reorganization or to maintain the
integrity of the Plan of Reorganization following
consummation.
(k) To hear any disputes arising out of, and to
enforce, the order approving alternative dispute resolution
procedures to resolve personal injury, employment litigation,
and similar claims pursuant to section 105(a) of the
Bankruptcy Code.
(l) To determine such other matters and for such
other purposes as may be provided in the Confirmation Order.
(m) To hear and determine matters concerning
state, local, and federal taxes in accordance with sections
346, 505, and 1146 of the Bankruptcy Code.
(n) To hear and determine any other matters
related hereto and not inconsistent with the Bankruptcy Code
and title 28 of the United States Code.
(o) To enter a final decree closing the
Reorganization Cases.
(p) To recover all assets of the Debtors and
property of the Debtors' estates, wherever located.
SECTION 12. MISCELLANEOUS PROVISIONS
12.1. Payment of Statutory Fees.
On the Effective Date, and thereafter as may be required, the
Debtors shall pay all fees payable pursuant to section 1930 of chapter 123 of
title 28 of the United States Code.
12.2. Retiree Benefits.
On and after the Effective Date, pursuant to section
1129(a)(13) of the Bankruptcy Code, the Reorganized Debtors shall continue to
pay all retiree benefits of the Debtors (within the meaning of section 1114 of
the Bankruptcy Code), at the level established in accordance with section 1114
of the Bankruptcy Code, at any time prior to the Confirmation Date, for the
duration of the period for which the Debtors had obligated themselves to provide
such benefits.
12.3. Dissolution of Statutory Committees of Unsecured
Creditors.
The respective statutory committees of unsecured creditors
appointed pursuant to section 1102 of the Bankruptcy Code in the Genesis
Reorganization Cases and the Multicare Reorganization Cases shall dissolve on
the Effective Date, except that such statutory committees shall have the right
to review and object to any applications for compensation and reimbursement of
expenses filed in accordance with Section 2.2 hereof.
12.4. Substantial Consummation.
On the Effective Date, the Plan of Reorganization shall be
deemed to be substantially consummated under sections 1101 and 1127(b) of the
Bankruptcy Code.
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12.5. Amendments.
(a) Plan of Reorganization Modifications. The Plan of
Reorganization may be amended, modified, or supplemented by the Debtors or the
Reorganized Debtors in the manner provided for by section 1127 of the Bankruptcy
Code or as otherwise permitted by law without additional disclosure pursuant to
section 1125 of the Bankruptcy Code, with the prior written consent of Mellon
Bank, N.A., as administrative agent under the Genesis Senior Lender Agreements,
the Multicare Senior Lender Agreements, and the Revolving Credit and Guaranty
Agreements described in Section 2.4 hereof and the respective statutory
committee of unsecured creditors appointed in the Genesis Reorganization Cases
and Multicare Reorganization Cases, to the extent that such amendment,
modification, or supplement would adversely and materially affect the treatment
of the Senior Lender Claims, the Genesis General Unsecured Claims, and the
Multicare General Unsecured Claims, respectively, except as the Bankruptcy Court
may otherwise direct. In addition, after the Confirmation Date, so long as such
action does not materially adversely affect the treatment of holders of Claims
or Equity Interests under the Plan of Reorganization, the Debtors may institute
proceedings in the Bankruptcy Court to remedy any defect or omission or
reconcile any inconsistencies in the Plan of Reorganization or the Confirmation
Order, with respect to such matters as may be necessary to carry out the
purposes and effects of the Plan of Reorganization.
(b) Other Amendments. Prior to the Effective Date the
Debtors may make appropriate technical adjustments and modifications to the Plan
of Reorganization without further order or approval of the Bankruptcy Court,
provided that such technical adjustments and modifications do not adversely
affect in a material way the treatment of holders of Claims or Equity Interests.
12.6. Revocation or Withdrawal of the Plan.
The Debtors reserve the right to revoke or withdraw the Plan
prior to the Effective Date. If the Debtors take such action, the Plan of
Reorganization shall be deemed null and void.
12.7. Severability.
If, prior to the entry of the Confirmation Order, any term or
provision of the Plan of Reorganization is held by the Bankruptcy Court to be
invalid, void, or unenforceable, the Bankruptcy Court, at the request of the
Debtors, shall have the power to alter and interpret such term or provision to
make it valid or enforceable to the maximum extent practicable, consistent with
the original purpose of the term or provision held to be invalid, void, or
unenforceable, and such term or provision shall then be applicable as altered or
interpreted. Notwithstanding any such holding, alteration, or interpretation,
the remainder of the terms and provisions of the Plan of Reorganization will
remain in full force and effect and will in no way be affected, impaired, or
invalidated by such holding, alteration, or interpretation. The Confirmation
Order shall constitute a judicial determination and shall provide that each term
and provision of the Plan or Reorganization, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable pursuant
to its terms.
12.8. Governing Law.
Except to the extent that the Bankruptcy Code or other federal
law is applicable, or to the extent an Exhibit hereto or a schedule in the Plan
Supplement provides otherwise, the rights, duties, and obligations arising under
the Plan of Reorganization shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
34
12.9. Time.
In computing any period of time prescribed or allowed by the
Plan of Reorganization, unless otherwise set forth herein or determined by the
Bankruptcy Court, the provisions of Bankruptcy Rule 9006 shall apply.
12.10. Notices.
All notices, requests, and demands to or upon the Debtors to
be effective shall be in writing (including by facsimile transmission) and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when actually delivered or, in the case of notice by facsimile
transmission, when received and telephonically confirmed, addressed as follows:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, Pennsylvania 19348
Attn: James J. Wankmiller, Esq.
Corporate Secretary and General Counsel
Telephone: (610) 444-6350
Telecopier: (610) 444-3365
- and -
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Michael F. Walsh, Esq.
Gary T. Holtzer, Esq.
Telephone: (212) 310-8000
Telecopier: (212) 310-8007
- and -
Richards, Layton & Finger P.A.
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attn: Mark D. Collins, Esq.
Telephone: (302) 658-6541
Telecopier: (302) 658-6548
- and -
The Multicare Companies, Inc.
101 East State Street
Kennett Square, Pennsylvania 19348
Attn: James J. Wankmiller, Esq.
Corporate Secretary and General Counsel
Telephone: (610) 444-6350
Telecopier: (610) 444-3365
35
- and -
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attn: Marc Abrams, Esq.
Paul V. Shalhoub, Esq.
Telephone: (212) 728-8000
Telecopier: (212) 728-8111
- and -
Young Conaway Stargatt & Taylor
11th Floor, Wilmington Trust Company
P.O. Box 391
Wilmington, Delaware 19899-0391
Attn: James J. Patton, Esq.
Robert S. Brady, Esq.
Telephone: (302) 571-6600
Telecopier: (302) 571-1253
Dated: Wilmington, Delaware
July 6, 2001
Respectfully submitted,
GENESIS HEALTH SERVICES CORPORATION
GENESIS HEALTH VENTURES, INC.
ACCUMED, INC.
ASCO HEALTHCARE, INC.
ASCO HEALTHCARE OF NEW ENGLAND, INC.
BRINTON MANOR, INC.
BURLINGTON WOODS CONVALESCENT CENTER, INC.
CARECARD, INC.
CAREFLEET, INC.
CHELTENHAM LTC MANAGEMENT, INC.
COMPASS HEALTH SERVICES, INC.
CONCORD HEALTHCARE CORPORATION
CONCORD PHARMACY SERVICES, INC.
CRESTVIEW CONVALESCENT HOME, INC.
CRESTVIEW NORTH, INC.
CRYSTAL CITY NURSING CENTER, INC.
DELCO APOTHECARY, INC.
DERBY NURSING CENTER CORPORATION
DIANE MORGAN AND ASSOCIATES, INC.
DOVER HEALTHCARE ASSOCIATES, INC.
EASTERN MEDICAL SUPPLIES, INC.
EASTERN REHAB SERVICES, INC.
EIDOS, INC.
36
ENCARE OF MASSACHUSETTS, INC.
GENESIS ELDERCARE ADULT DAY HEALTH SERVICES,
INC.
GENESIS ELDERCARE DIAGNOSTIC SERVICES, INC.
GENESIS ELDERCARE HOME CARE SERVICES, INC.
GENESIS ELDERCARE HOME HEALTH SERVICES-
SOUTHERN, INC.
GENESIS ELDERCARE HOSPITALITY SERVICES, INC.
GENESIS ELDERCARE MANAGEMENT SERVICES, INC.
GENESIS ELDERCARE NETWORK SERVICES, INC.
GENESIS ELDERCARE NATIONAL CENTERS, INC.
GENESIS ELDERCARE NETWORK SERVICES OF
MASSACHUSETTS, INC.
GENESIS ELDERCARE PHYSICIAN SERVICES, INC.
GENESIS ELDERCARE PROPERTIES, INC.
GENESIS ELDERCARE REHABILITATION
MANAGEMENT SERVICES, INC.
GENESIS ELDERCARE REHABILITATION SERVICES,
INC.
GENESIS ELDERCARE STAFFING SERVICES, INC.
GENESIS ELDERCARE TRANSPORTATION SERVICES,
INC.
GENESIS HEALTH VENTURES OF ARLINGTON, INC.
GENESIS HEALTH VENTURES OF BLOOMFIELD, INC.
GENESIS HEALTH VENTURES OF CLARKS SUMMIT,
INC.
GENESIS HEALTH VENTURES OF INDIANA, INC.
GENESIS HEALTH VENTURES OF LANHAM, INC.
GENESIS HEALTH VENTURES OF MASSACHUSETTS,
INC.
GENESIS HEALTH VENTURES OF NAUGATUCK, INC.
GENESIS HEALTH VENTURES OF NEW GARDEN, INC.
GENESIS HEALTH VENTURES OF POINT PLEASANT,
INC.
GENESIS HEALTH VENTURES OF WAYNE, INC.
GENESIS HEALTH VENTURES OF WEST VIRGINIA,
INC.
GENESIS HEALTH VENTURES OF WILKES-BARRE,
INC.
GENESIS HEALTH VENTURES OF WINDSOR, INC.
GENESIS HEALTHCARE CENTERS HOLDINGS, INC.
GENESIS HOLDINGS, INC.
GENESIS IMMEDIATE MED CENTER, INC.
GENESIS PROPERTIES OF DELAWARE CORPORATION
GENESIS SELECTCARE CORP.
GERIATRIC & MEDICAL COMPANIES, INC.
GERIATRIC AND MEDICAL SERVICES, INC.
GERIATRIC AND MEDICAL INVESTMENTS
CORPORATION
GERIMED CORP.
GMC LEASING CORPORATION
GMC MEDICAL CONSULTING SERVICES, INC.
GMS MANAGEMENT-TUCKER, INC.
GMS MANAGEMENT, INC.
37
GOVERNOR'S HOUSE NURSING HOME, INC.
HEALTH CONCEPTS AND SERVICES, INC
HEALTHCARE RESOURCES CORP.
HEALTHOBJECTS CORPORATION
HILLTOP HEALTH CARE CENTER, INC.
HORIZON MEDICAL EQUIPMENT AND SUPPLY, INC.
INNOVATIVE HEALTH CARE MARKETING, INC.
INNOVATIVE PHARMACY SERVICES, INC.
INSTITUTIONAL HEALTH CARE SERVICES, INC.
KEYSTONE NURSING HOME, INC.
KNOLLWOOD MANOR, INC.
KNOLLWOOD NURSING HOME, INC.
LIFE SUPPORT MEDICAL EQUIPMENT, INC.
LIFE SUPPORT MEDICAL, INC.
LINCOLN NURSING HOME, INC.
MANOR MANAGEMENT CORP. OF GEORGIAN MANOR,
INC.
MCKERLEY HEALTH CARE CENTERS, INC.
MEDICAL SERVICES GROUP, INC.
MERIDIAN HEALTH, INC.
MERIDIAN HEALTHCARE, INC.
METRO PHARMACEUTICALS, INC.
NATIONAL PHARMACY SERVICE, INC.
NEIGHBORCARE INFUSION SERVICES, INC.
NEIGHBORCARE-MEDISCO, INC.
NEIGHBORCARE OF NORTHERN CALIFORNIA, INC.
NEIGHBORCARE OF OKLAHOMA, INC.
NEIGHBORCARE OF VIRGINIA, INC.
NEIGHBORCARE OF WISCONSIN, INC.
NEIGHBORCARE PHARMACIES, INC.
NEIGHBORCARE PHARMACY SERVICES, INC.
NEIGHBORCARE-ORCA, INC.
NEIGHBORCARE-TCI, INC.
NETWORK AMBULANCE SERVICES, INC.
OAK HILL HEALTH CARE CENTER, INC.
PHARMACY EQUITIES, INC.
PHILADELPHIA AVENUE CORPORATION
PROFESSIONAL PHARMACY SERVICES, INC.
PROSPECT PARK LTC MANAGEMENT, INC.
STATE STREET ASSOCIATES, INC.
SUBURBAN MEDICAL SERVICES, INC.
THE TIDEWATER HEALTHCARE SHARED SERVICES
GROUP, INC.
THERAPY CARE, INC.
TRANSPORT SERVICES, INC.
UNITED HEALTH CARE SERVICES, INC.
VALLEY MEDICAL SERVICES, INC.
VALLEY TRANSPORT AMBULANCE SERVICE, INC.
VERSALINK, INC.
VILLAS REALTY & INVESTMENTS, INC.
WALNUT LTC MANAGEMENT, INC.
38
WAYSIDE NURSING HOME, INC.
WEISENFLUH AMBULANCE SERVICE, INC.
WEST PHILA. LTC MANAGEMENT, INC.
WYNCOTE HEALTHCARE CORP.
YORK LTC MANAGEMENT, INC.
BY: GENESIS HEALTH VENTURES, INC., as agent
and attorney-in-fact for
each of the foregoing entities
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
ASCO HEALTHCARE OF NEW ENGLAND, LIMITED
PARTNERSHIP
BY: ASCO HEALTHCARE OF NEW ENGLAND, INC.,
its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
BREVARD MERIDIAN LIMITED PARTNERSHIP
CATONSVILLE MERIDIAN LIMITED PARTNERSHIP
EASTON MERIDIAN LIMITED PARTNERSHIP
GREENSPRING MERIDIAN LIMITED PARTNERSHIP
HAMMONDS LANE MERIDIAN LIMITED PARTNERSHIP
MERIDIAN EDGEWOOD LIMITED PARTNERSHIP
MERIDIAN PERRING LIMITED PARTNERSHIP
MERIDIAN VALLEY LIMITED PARTNERSHIP MERIDIAN
VALLEY VIEW LIMITED PARTNERSHIP
MERIDIAN/CONSTELLATION LIMITED PARTNERSHIP
MILLVILLE MERIDIAN LIMITED PARTNERSHIP
BY: MERIDIAN HEALTHCARE, INC., as General
Partner of each of the foregoing
limited partnerships
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
39
CARE4, L.P.
BY: INSTITUTIONAL HEALTH CARE SERVICES,
INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
EDELLA STREET ASSOCIATES
BY: GENESIS HEALTH VENTURES OF CLARK
SUMMIT, INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
GENESIS-GEORGETOWN SNF/JV, LIMITED LIABILITY
COMPANY
RESPIRATORY HEALTH SERVICES, L.L.C.
BY: GENESIS HEALTH VENTURES, INC.,
its Member
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
GENESIS ELDERCARE EMPLOYMENT SERVICES, LLC
BY: GENESIS ELDERCARE MANAGEMENT SERVICES,
INC., its Member
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
40
GENESIS HEALTH VENTURES OF WEST VIRGINIA,
LIMITED PARTNERSHIP
BY: GENESIS HEALTH VENTURES OF WEST
VIRGINIA, INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
GENESIS PROPERTIES LIMITED PARTNERSHIP
BY: GENESIS HEALTH VENTURES OF ARLINGTON,
INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
GENESIS PROPERTIES OF DELAWARE LTD.
PARTNERSHIP, L.P.
BY: GENESIS PROPERTIES OF DELAWARE
CORPORATION, its General Partner
By: /s/ GEORGE V. HAGER, Jr.
-------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
HALLMARK HEALTHCARE LIMITED PARTNERSHIP
BY: PHARMACY EQUITIES, INC., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
MAIN STREET PHARMACY, L.L.C.
BY: PROFESSIONAL PHARMACY SERVICES, INC.,
its Member
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
41
MCKERLEY HEALTH CARE CENTER-CONCORD LIMITED
PARTNERSHIP
BY: MCKERLEY HEALTH CARE CENTER-CONCORD,
INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
MCKERLEY HEALTH FACILITIES
SEMINOLE MERIDIAN LIMITED PARTNERSHIP
VOLUSIA MERIDIAN LIMITED PARTNERSHIP
BY: MERIDIAN HEALTH, INC., as General
Partner of each of the foregoing
Limited Partnerships
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
NORRISTOWN NURSING AND REHABILITATION CENTER
ASSOCIATES, LIMITED PARTNERSHIP
BY: GMC-LTC MANAGEMENT, INC., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
NORTH CAPE CONVALESCENT CENTER ASSOCIATES,
L. P.
NORTHWEST TOTAL CARE CENTER ASSOCIATES, L.P.
BY: GERIATRIC AND MEDICAL SERVICES, INC.,
as General Partner for each of the
foregoing Limited Partnerships
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
42
PHILADELPHIA AVENUE ASSOCIATES
BY: PHILADELPHIA AVENUE CORPORATION, its
General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
RIVER RIDGE PARTNERSHIP
RIVER STREET ASSOCIATES
BY: GENESIS HEALTH VENTURES OF
WILKES-BARRE, INC., as General
Partner for each of the foregoing
Limited Partnerships
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
STATE STREET ASSOCIATES, L.P.
BY: STATE STREET ASSOCIATES, INC., its
General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
THERAPY CARE SYSTEMS, LP
BY: GENESIS ELDERCARE REHABILITATION
SERVICES, INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
MULTICARE AMC, INC.
ADS PALM CHELMSFORD, INC.
ADS RESERVOIR WALTHAM, INC.
MARKGLEN, INC.
ACADEMY NURSING HOME, INC.
ADS CONSULTING, INC.
ADS HINGHAM ALF, INC.
ADS HOME HEALTH, INC.
ADS VILLAGE MANOR, INC.
43
ANR, INC.
APPLEWOOD HEALTH RESOURCES, INC.
ASL, INC.
AUTOMATED PROFESSIONAL ACCOUNTS, INC.
BERKS NURSING HOME, INC.
BETHEL HEALTH RESOURCES, INC.
BREYUT CONVALESCENT CENTER, INC.
BRIGHTWOOD PROPERTY, INC.
CENTURY CARE CONSTRUCTION, INC.
CENTURY CARE MANAGEMENT, INC.
CHEATEAU VILLAGE HEALTH RESOURCES, INC.
CHG INVESTMENT CORP., INC.
CHNR - 1, INC.
COLONIAL HALL HEALTH RESOURCES, INC.
COLONIAL HOUSE HEALTH RESOURCES, INC.
CONCORD CAMPANION CARE, INC.
CONCORD HEALTHCARE SERVICES, INC.
CONCORD HEALTH GROUP, INC.
CONCORD HOME HEALTH, INC.
CONCORD REHAB, INC.
CONCORD SERVICE CORPORATION
CVNR, INC.
DAWN VIEW MANOR, INC.
DELM NURSING, INC.
ELDERCARE RESOURCES CORP.
ELMWOOD HEALTH RESOURCES, INC.
ENCARE OF MENDHAM, INC.
ENCARE OF PENNYPACK, INC.
ENR, INC.
GENESIS ELDERCARE CORP.
GLENMARK ASSOCIATES - DAWN VIEW MANOR, INC.
GLENMARK PROPERTIES, INC.
GMA - BRIGHTWOOD, INC.
GMA - MADISON, INC.
GMA - CONSTRUCTION, INC.
GMA UNIONTOWN, INC.
HEALTH RESOURCES OF ACADEMY MANOR, INC.
HEALTH RESOURCES OF BOARDMAN, INC.
HEALTH RESOURCES OF BRIDGETON, INC.
HEALTH RESOURCES OF BROOKLYN, INC.
HEALTH RESOURCES OF CEDAR GROVE, INC.
HEALTH RESOURCES OF CINNAMINSON, INC.
HEALTH RESOURCES OF COLCHESTER, INC.
HEALTH RESOURCES OF COLUMBUS, INC.
HEALTH RESOURCES OF CRANBURY, INC.
HEALTH RESOURCES OF ENGLEWOOD, INC.
HEALTH RESOURCES OF EATONTOWN, INC.
HEALTH RESOURCES OF EWING, INC.
HEALTH RESOURCES OF FARMINGTON, INC.
HEALTH RESOURCES OF GARDNER, INC.
HEALTH RESOURCES OF GLASTONBURY, INC.
44
HEALTH RESOURCES OF JACKSON, INC.
HEALTH RESOURCES OF KARAMENTA AND MADISON,
INC.
HEALTH RESOURCES OF LAKEVIEW, INC.
HEALTH RESOURCES OF LEMONT, INC.
HEALTH RESOURCES OF LYNN, INC.
HEALTH RESOURCES OF MARCELLA, INC.
HEALTH RESOURCES OF MONTCLAIR, INC.
HEALTH RESOURCES OF MORRISTOWN, INC.
HEALTH RESOURCES OF NORFOLK, INC
HEALTH RESOURCES OF NORTH ANDOVER, INC.
HEALTH RESOURCES OF NORWALK, INC.
HEALTH RESOURCES OF PENNINGTON, INC.
HEALTH RESOURCES OF RIDGEWOOD, INC.
HEALTH RESOURCES OF ROCKVILLE, INC.
HEALTH RESOURCES OF SOLOMONT/BROOKLINE, INC.
HEALTH RESOURCES OF SOUTH BRUNSWICK, INC.
HEALTH RESOURCES OF TROY HILL, INC.
HEALTH RESOURCES OF VOORHEES, INC.
HEALTH RESOURCES OF WESTWOOD, INC.
HEALTHCARE REHAB SYSTEMS, INC.
HELSTAT, INC.
HMNR REALTY, INC.
HNCA, INC.
HORIZON MOBILE, INC.
HORIZON REHABILITATION, INC.
SCHUYLKILL NURSING HOMES, INC.
SCHUYLKILL PARTNERSHIP ACQUISITION
CORPORATION
SCOTCHWOOD MASS. HOLDING CO., INC.
SENIOR LIVING VENTURES, INC.
SENIOR SOURCE, INC.
SNOW VALLEY HEALTH RESOURCES, INC.
SVNR, INC.
THE ADS GROUP, INC.
RIDGELAND HEALTH RESOURCES, INC.
RIVER PINES HEALTH RESOURCES, INC.
RIVERSHORES HEALTH RESOURCES, INC.
RLNR, INC.
ROPHEL CONVALESCENT CENTER, INC.
ROSE HEALTHCARE, INC.
ROSE VIEW MANOR, INC.
ROXBOROUGH NURSING HOME, INC.
RSNR, INC.
LWNR, INC.
MABRI CONVALESCENT CENTER, INC.
MARSHFIELD HEALTH RESOURCES, INC.
MHNR, INC.
MNR, INC.
MONTGOMERY NURSING HOMES, INC.
MULTICARE HOME HEALTH OF ILLINOIS, INC.
NORTHWESTERN MANAGEMENT SERVICES, INC.
NURSING AND RETIREMENT CENTER OF THE
ANDOVERS, INC.
45
ARACADIA ASSOCIATES
PHC OPERATING CORP.
POCOHANTAS CONTINUOUS CARE CENTER, INC.
POMPTON CARE, INC.
PRESCOTT NURSING HOME, INC.
PROGRESSIVE REHABILITATION CENTERS, INC.
PROVIDENCE FUNDING CORPORATION
PROVIDENCE HEALTH CARE, INC.
PROVIDENCE MEDICAL, INC.
REST HAVEN NURSING HOME, INC.
HR OF CHARLESTON, INC.
HRWV HUNTINGTON, INC.
LAKEWOOD HEALTH RESOURCES, INC.
LAUREL HEALTH RESOURCES, INC.
LEHIGH NURSING HOMES, INC.
LRC HOLDING COMPANY
S.T.B. INVESTORS, LTD.
THE ASSISTED LIVING ASSOCIATES OF BERKSHIRE,
INC.
THE ASSISTED LIVING ASSOCIATES OF LEHIGH,
INC.
THE ASSISTED LIVING ASSOCIATES OF SANATOGA,
INC.
THE ASSISTED LIVING ASSOCIATES OF WALL, INC.
THE HOUSE OF CAMPBELL, INC.
TM ACQUISITION CORP.
TRI-STATE MOBILE MEDICAL SERVICES, INC.
WILLOW MANOR NURSING HOME, INC.
WESTFORD NURSING AND RETIREMENT CENTER, INC.
RVNR, INC.
HORIZON ASSOCIATES, INC.
HEALTH RESOURCES OF WARWICK, INC.
HEALTH RESOURCES OF WALLINGFORD, INC.
HEALTH RESOURCES OF MIDDLETOWN (RI), INC.
HEALTH RESOURCES OF GROTON, INC.
HEALTH RESOURCES OF CUMBERLAND, INC.
HEALTH RESOURCES OF ARCADIA, INC.
ENCARE OF WYNCOTE, INC.
ENCARE OF QUAKERTOWN, INC.
ADS SENIOR HOUSING, INC.
ADS RECUPERATIVE CENTER, INC.
ADS HINGHAM NURSING FACILITY, INC.
ADS APPLE VALLEY, INC.
ADS/MULTICARE, INC.
GLENMARK ASSOCIATES, INC.
GMA PARTNERSHIP HOLDING COMPANY, INC.
STAFFORD CONVALESCENT CENTER, INC.
46
THE MULTICARE COMPANIES, INC.
NORTH MADISON, INC.
BY: GENESIS ELDERCARE CORPORATION, as agent
and attorney-in-fact for each
of the foregoing entities
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
CARE HAVEN ASSOCIATES LIMITED PARTNERSHIP
GLENMARK PROPERTIES I, LIMITED PARTNERSHIP
POINT PLEASANT HAVEN LIMITED PARTNERSHIP
RALEIGH MANOR LIMITED PARTNERSHIP
ROMNEY HEALTH CARE CENTER LTD. LIMITED
PARTNERSHIP
SISTERVILLE HAVEN LIMITED PARTNERSHIP
TEAYS VALLEY HAVEN LIMITED PARTNERSHIP
BY: GLENMARK ASSOCIATES, INC., as General
Partner of each of the foregoing
limited partnerships
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
ADS HINGHAM LIMITED PARTNERSHIP
BY: ADS HINGHAM NURSING FACILITY, INC.,
its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
ADS RECUPERATIVE CENTER LIMITED PARTNERSHIP
BY: ADS RECUPERATIVE CENTER, INC., its
General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
47
WESTFORD NURSING AND RETIREMENT CENTER,
LIMITED PARTNERSHIP
BY: WESTFORD NURSING AND RETIREMENT CENTER,
INC., its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
ADS APPLE VALLEY LIMITED PARTNERSHIP
BY: ADS APPLE VALLEY, INC., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P.
BY: ENCARE OF MENDHAM, L.L.C., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
of The Multicare
Companies, Inc. for and
as the Majority Member of
Encare of Mendham, L.L.C.
MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P.
BY: BREYUT CONVALESCENT CENTER, L.L.C., its
General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
MIDDLETOWN (RI) ASSOCIATE OF RHODE ISLAND,
L.P.
BY: HEALTH RESOURCES OF MIDDLETOWN (RI),
INC., its General zartner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
48
POMPTON ASSOCIATES, L.P.
BY: POMPTON CARE, L.L.C., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
of The Multicare
Companies, Inc. for and
as Majority Member of
Pompton Care, L.L.C.
THE STRAUS GROUP - OLD BRIDGE, L.P.
BY: HEALTH RESOURCES OF EMERY, L.L.C., its
General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
of The Multicare
Companies, Inc. for and
as Majority Member of
Health Resources of
Emery, L.L.C.
THE STRAUS GROUP - RIDGEWOOD, L.P.
BY: HEALTH RESOURCES OF RIDGEWOOD, L.L.C.,
its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
of The Multicare
Companies, Inc. for and
as Majority Member of
Health Resources of
Ridgewood, L.L.C.
WALLINGFORD ASSOCIATES OF CONNECTICUT, L.P.
BY: HEALTH RESOURCES OF WALLINGFORD, INC.,
its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
49
WARWICK ASSOCIATES OF RHODE ISLAND, L.P.
BY: HEALTH RESOURCES OF WARWICK, INC.,
its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
THE STRAUS GROUP - HOPKINS HOUSE, L.P.
BY: ENCARE OF WYNCOTE, INC., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
THE STRAUS GROUP - QUAKERTOWN MANOR, L.P.
BY: ENCARE OF QUAKERTOWN, INC., its General
Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
CUMBERLAND ASSOCIATES OF RHODE ISLAND, L.P
BY: HEALTH RESOURCES OF CUMBERLAND, INC.,
its General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
GROTON ASSOCIATES OF CONNECTICUT, L.P.
BY: HEALTH RESOURCES OF GROTON INC., its
General Partner
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
HEALTH RESOURCES OF BRIDGETON, L.L.C.
HEALTH RESOURCES OF CINNAMINSON, L.L.C.
50
HEALTH RESOURCES OF CRANBURY, L.L.C.
HEALTH RESOURCES OF ENGLEWOOD, L.L.C.
HEALTH RESOURCES OF EWING, L.L.C.
HEALTH RESOURCES OF FAIRLAWN, L.L.C.
HEALTH RESOURCES OF JACKSON, L.L.C.
HEALTH RESOURCES OF WEST ORANGE, L.L.C.
ROEPHEL CONVALESCENT CENTER, L.L.C.
TOTAL REHABILITATION CENTER, L.L.C.
POMPTON CARE, L.L.C.
HEALTH RESOURCES OF LAKEVIEW, L.L.C.
HEALTH RESOURCES OF RIDGEWOOD, L.L.C.
HEALTH RESOURCES OF EMERY, L.L.C.
ENCARE OF MENDHAM. L.L.C.
BREYUT CONVALESCENT CENTER, L.L.C.
BY: THE MULTICARE COMPANIES, INC., as Member
of the foregoing Limited Liability
Companies
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
GLENMARK LIMITED LIABILITY COMPANY I
BY: GLENMARK ASSOCIATES, INC., its Member
By: /s/ GEORGE V. HAGER, Jr.
--------------------------------
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer
51
EXHIBITS AND SCHEDULE
TO THE PLAN OF REORGANIZATION
EXHIBIT A
GENESIS DEBTORS
1. Genesis Health Services Corporation.
2. Genesis Health Ventures, Inc.
3. Asco Healthcare of New England, Limited Partnership
4. Brevard Meridian Limited Partnership
5. Care4, L.P.
6. Catonsville Meridian Limited Partnership
7. Easton Meridian Limited Partnership
8. Edella Street Associates
9. Genesis-Georgetown SNF/JV, Limited Liability Company
10. Genesis Eldercare Employment Services, LLC
11. Genesis Health Ventures of West Virginia, Limited Partnership
12. Genesis Properties Limited Partnership
13. Genesis Properties of Delaware Ltd. Partnership, LP
14. Greenspring Meridian Limited Partnership
15. Hallmark Healthcare Limited Partnership
16. Hammonds Lane Meridian Limited Partnership
17. Main Street Pharmacy, L.L.C.
18. McKerley Health Care Center-Concord Limited Partners
19. McKerley Health Facilities
20. Meridian Edgewood Limited Partnership
21. Meridian Perring Limited Partnership
22. Meridian Valley Limited Partnership
23. Meridian Valley View Limited Partnership
24. Meridian/Constellation Limited Partnership
25. Millville Meridian Limited Partnership
26. Norristown Nursing and Rehabilitation Center Associates,
Limited Partnership
27. North Cape Convalescent Center Associates, L.P.
28. Northwest Total Care Center Associates, L.P.
29. Philadelphia Avenue Associates
30. Respiratory Health Services, LLC
31. River Ridge Partnership
32. River Street Associates
33. Seminole Meridian Limited Partnership
34. State Street Associates, L.P.
35. Therapy Care Systems, LP
36. Volusia Meridian Limited Partnership
37. Accumed, Inc.
38. Asco Healthcare, Inc.
39. Asco Healthcare of New England, Inc.
40. Brinton Manor, Inc.
41. Burlington Woods Convalescent Center, Inc.
42. Carecard, Inc.
43. Carefleet, Inc.
44. Cheltenham LTC Management, Inc.
45. Compass Health Services, Inc.
46. Concord Healthcare Corporation
47. Concord Pharmacy Services, Inc.
48. Crestview Convalescent Home, Inc.
49. Crestview North, Inc.
50. Crystal City Nursing Center, Inc.
51. Delco Apothecary, Inc.
52. Derby Nursing Center Corporation
53. Diane Morgan and Associates, Inc.
54. Dover Healthcare Associates, Inc.
55. Eastern Medical Supplies, Inc.
56. Eastern Rehab Services, Inc.
57. Eidos, Inc.
58. Encare of Massachusetts, Inc.
59. Genesis Eldercare Adult Day Health Services, Inc.
60. Genesis Eldercare Diagnostic Services, Inc.
61. Genesis Eldercare Home Care Services, Inc.
62. Genesis Eldercare Home Health Services-Southern, Inc.
63. Genesis Eldercare Hospitality Services, Inc.
64. Genesis Eldercare Management Services, Inc.
65. Genesis Eldercare Network Services, Inc.
66. Genesis Eldercare National Centers, Inc.
67. Genesis Eldercare Network Services of Massachusetts, Inc.
68. Genesis Eldercare Physician Services, Inc.
69. Genesis Eldercare Properties, Inc.
70. Genesis Eldercare Rehabilitation Management Services, Inc.
71. Genesis Eldercare Rehabilitation Services, Inc.
72. Genesis Eldercare Staffing Services, Inc.
73. Genesis Eldercare Transportation Services, Inc.
i
74. Genesis Health Ventures of Arlington, Inc.
75. Genesis Health Ventures of Bloomfield, Inc.
76. Genesis Health Ventures of Clarks Summit, Inc.
77. Genesis Health Ventures of Indiana, Inc.
78. Genesis Health Ventures of Lanham, Inc.
79. Genesis Health Ventures of Massachusetts, Inc.
80. Genesis Health Ventures of Naugatuck, Inc.
81. Genesis Health Ventures of New Garden, Inc.
82. Genesis Health Ventures of Point Pleasant, Inc.
83. Genesis Health Ventures of Wayne, Inc.
84. Genesis Health Ventures of West Virginia, Inc.
85. Genesis Health Ventures of Wilkes-Barre, Inc.
86. Genesis Health Ventures of Windsor, Inc.
87. Genesis Healthcare Centers Holdings, Inc.
88. Genesis Holdings, Inc.
89. Genesis Immediate Med Center, Inc.
90. Genesis Properties of Delaware Corporation
91. Genesis Selectcare Corp.
92. Geriatric & Medical Companies, Inc.
93. Geriatric and Medical Services, Inc.
94. Geriatric and Medical Investments Corporation
95. Gerimed Corp.
96. GMC Leasing Corporation
97. GMC Medical Consulting Services, Inc.
98. GMS Management-Tucker, Inc.
99. GMS Management, Inc.
100. Governor's House Nursing Home, Inc.
101. Health Concepts and Services, Inc.
102. Healthobjects Corporation
103. Hilltop Health Care Center, Inc.
104. Horizon Medical Equipment and Supply, Inc.
105. Innovative Health Care Marketing, Inc.
106. Innovative Pharmacy Services, Inc.
107. Institutional Health Care Services, Inc.
108. Keystone Nursing Home, Inc.
109. Knollwood Manor, Inc.
110. Knollwood Nursing Home, Inc.
111. Life Support Medical Equipment, Inc.
112. Life Support Medical, Inc.
113. Lincoln Nursing Home, Inc.
114. Manor Management Corp. of Georgian Manor, Inc.
115. McKerley Health Care Centers, Inc.
116. Medical Services Group, Inc.
117. Meridian Health, Inc.
118. Meridian Healthcare, Inc.
119. Metro Pharmaceuticals, Inc.
120. National Pharmacy Service, Inc.
121. Neighborcare Infusion Services, Inc.
122. Neighborcare-Medisco, Inc.
123. Neighborcare of Northern California, Inc.
124. Neighborcare of Oklahoma, Inc.
125. Neighborcare of Virginia, Inc.
126. Neighborcare of Wisconsin, Inc.
127. Neighborcare Pharmacies, Inc.
128. Neighborcare Pharmacy Services, Inc.
129. Neighborcare-Orca, Inc.
130. Neighborcare-TCI, Inc.
131. Network Ambulance Services, Inc.
132. Oak Hill Health Care Center, Inc.
133. Pharmacy Equities, Inc.
134. Philadelphia Avenue Corporation
135. Professional Pharmacy Services, Inc.
136. Prospect Park LTC Management, Inc.
137. State Street Associates, Inc.
138. Suburban Medical Services, Inc.
139. The Tidewater Healthcare Shared Services Group, Inc.
140. Therapy Care, Inc.
141. Transport Services, Inc.
142. United Health Care Services, Inc.
143. Valley Medical Services, Inc.
144. Valley Transport Ambulance Service, Inc.
145. Versalink, Inc.
146. Villas Realty & Investments, Inc.
147. Walnut LTC Management, Inc.
148. Wayside Nursing Home, Inc.
149. Weisenfluh Ambulance Service, Inc.
150. West Phila. LTC Management, Inc.
151. Wyncote Healthcare Corp.
152. York LTC Management, Inc.
153. Healthcare Resources Corp.
ii
EXHIBIT B
MULTICARE DEBTORS
1. Multicare AMC, Inc.
2. ADS Hingham Limited Partnership
3. ADS Palm Chelmsford, Inc.
4. ADS Reservoir Waltham, Inc.
5. Arcadia Associates
6. Health Resources of Lakeview, L.L.C.
7. Care Haven Associates Limited Partnership
8. Cumberland Associates of Rhode Island, L.P.
9. Glenmark Limited Liability Company I
10. Glenmark Properties I, Limited Partnership
11. Groton Associates of Connecticut, L.P.
12. Health Resources of Bridgeton, L.L.C.
13. Health Resources of Cinnaminson, L.L.C.
14. Health Resources of Cranbury, L.L.C.
15. Health Resources of Englewood, L.L.C.
16. Health Resources of Ewing, L.L.C.
17. Health Resources of Fairlawn, L.L.C.
18. Health Resources of Jackson, L.L.C.
19. Health Resources of West Orange, L.L.C.
20. Holly Manor Associates of New Jersey, L.P.
21. Markglen, Inc.
22. Mercerville Associates of New Jersey, L.P.
23. Middletown (RI) Associate of Rhode Island, L.P.
24. Point Pleasant Haven Limited Partnership
25. Raleigh Manor Limited Partnership
26. Roephel Convalescent Center, L.L.C.
27. Romney Health Care Center Ltd. Limited
Partnership
28. Sisterville Haven Limited Partnership
29. Teays Valley Haven Limited Partnership
30. The Straus Group - Hopkins House, L.P.
31. The Straus Group - Old Bridge, L.P.
32. The Straus Group - Quakertown Manor, L.P.
33. The Straus Group - Ridgewood, L.P.
34. Total Rehabilitation Center, L.L.C.
35. Wallingford Associates of Connecticut, L.P.
36. Warwick Associates of Rhode Island, L.P.
37. Academy Nursing Home, Inc.
38. ADS Consulting, Inc.
39. ADS Hingham ALF, Inc.
40. ADS Home Health, Inc.
41. ADS Village Manor, Inc.
42. ANR, Inc.
43. Applewood Health Resources, Inc.
44. ASL, Inc.
45. Automated Professional Accounts, Inc.
46. Berks Nursing Home, Inc.
47. Bethel Health Resources, Inc.
48. Breyut Convalescent Center, Inc.
49. Brightwood Property, Inc.
50. Century Care Construction, Inc.
51. Century Care Management, Inc.
52. Cheateau Village Health Resources, Inc.
53. CHG Investment Corp., Inc.
54. CHNR - 1, Inc.
55. Colonial Hall Health Resources, Inc.
56. Colonial House Health Resources, Inc.
57. Concord Campanion Care, Inc.
58. Concord Healthcare Services, Inc.
59. Concord Health Group, Inc.
60. Concord Home Health, Inc.
61. Concord Rehab, Inc.
62. Concord Service Corporation
63. CVNR, Inc.
64. Dawn View Manor, Inc.
65. DELM Nursing, Inc.
66. Eldercare Resources Corp.
67. Elmwood Health Resources, Inc.
68. Encare of Mendham, Inc.
69. Encare of Pennypack, Inc.
70. ENR, Inc.
71. Genesis Eldercare Corp.
72. Glenmark Associates - Dawn View Manor, Inc.
73. Glenmark Properties, Inc.
74. GMA - Brightwood, Inc.
75. GMA - Madison, Inc.
76. GMA - Construction, Inc.
77. GMA Uniontown, Inc.
78. Health Resources of Academy Manor, Inc.
79. Health Resources of Boardman, Inc.
80. Health Resources of Bridgeton, Inc.
81. Health Resources of Brooklyn, Inc.
82. Health Resources of Cedar Grove, Inc.
83. Health Resources of Cinnaminson, Inc.
84. Health Resources of Colchester, Inc.
85. Health Resources of Columbus, Inc.
86. Health Resources of Cranbury, Inc.
87. Health Resources of Englewood, Inc.
88. Health Resources of Eatontown, Inc.
89. Health Resources of Ewing, Inc.
i
90. Health Resources of Farmington, Inc.
91. Health Resources of Gardner, Inc.
92. Health Resources of Glastonbury, Inc.
93. Health Resources of Jackson, Inc.
94. Health Resources of Karamenta and Madison, Inc.
95. Health Resources of Lakeview, Inc.
96. Health Resources of Lemont, Inc.
97. Health Resources of Lynn, Inc.
98. Health Resources of Marcella, Inc.
99. Health Resources of Montclair, Inc.
100. Health Resources of Morristown, Inc.
101. Health Resources of Norfolk, Inc.
102. Health Resources of North Andover, Inc.
103. Health Resources of Norwalk, Inc.
104. Health Resources of Pennington, Inc.
105. Health Resources of Ridgewood, Inc.
106. Health Resources of Rockville, Inc.
107. Health Resources of Solomont/Brookline, Inc.
108. Health Resources of South Brunswick, Inc.
109. Health Resources of Troy Hill, Inc.
110. Health Resources of Voorhees, Inc.
111. Health Resources of Westwood, Inc.
112. Healthcare Rehab Systems, Inc.
113. Helstat, Inc.
114. HMNR Realty, Inc.
115. HNCA, Inc.
116. Horizon Mobile, Inc.
117. Horizon Rehabilitation, Inc.
118. HR of Charleston, Inc.
119. HRWV Huntington, Inc.
120. Lakewood Health Resources, Inc.
121. Laurel Health Resources, Inc.
122. Lehigh Nursing Homes, Inc.
123. LRC Holding Company
124. LWNR, Inc.
125. Mabri Convalescent Center, Inc.
126. Marshfield Health Resources, Inc.
127. MHNR, Inc.
128. MNR, Inc.
129. Montgomery Nursing Homes, Inc.
130. Multicare Home Health of Illinois, Inc.
131. Northwestern Management Services, Inc.
132. Nursing and Retirement Center of the Andovers, Inc.
133. PHC Operating Corp.
134. Pocohantas Continuous Care Center, Inc.
135. Pompton Care, Inc.
136. Prescott Nursing Home, Inc.
137. Progressive Rehabilitation Centers, Inc.
138. Providence Funding Corporation
139. Providence Health Care, Inc.
140. Providence Medical, Inc.
141. Rest Haven Nursing Home, Inc.
142. Ridgeland Health Resources, Inc.
143. River Pines Health Resources, Inc.
144. Rivershores Health Resources, Inc.
145. RLNR, Inc.
146. Rophel Convalescent Center, Inc.
147. Rose Healthcare, Inc.
148. Rose View Manor, Inc.
149. Roxborough Nursing Home, Inc.
150. RSNR, Inc.
151. S.T.B. Investors, LTD.
152. Schuylkill Nursing Homes, Inc.
153. Schuylkill Partnership Acquisition Corporation
154. Scotchwood Mass. Holding Co., Inc.
155. Senior Living Ventures, Inc.
156. Senior Source, Inc.
157. Snow Valley Health Resources, Inc.
158. SVNR, Inc.
159. The ADS Group, Inc.
160. The Assisted Living Associates of Berkshire, Inc.
161. The Assisted Living Associates of Lehigh, Inc.
162. The Assisted Living Associates of Sanatoga, Inc.
163. The Assisted Living Associates of Wall, Inc.
164. The House of Campbell, Inc.
165. TM Acquisition Corp.
166. Tri-State Mobile Medical Services, Inc.
167. Westford Nursing and Retirement Center, Limited Partnership
168. Willow Manor Nursing Home, Inc.
169. Pompton Associates, L.P.
170. Pompton Care, L.L.C.
171. Health Resources of Ridgewood, L.L.C.
172. Health Resources of Emery, L.L.C.
173. Encare of Mendham. L.L.C.
174. Breyut Convalescent Center, L.L.C.
175. ADS Recuperative Center Limited Partnership
176. Westford Nursing and Retirement Center, Inc.
177. RVNR, Inc.
178. Horizon Associates, Inc.
179. Health Resources of Warwick, Inc.
180. Health Resources of Wallingford, Inc.
ii
181. Health Resources of Middletown (RI), Inc.
182. Health Resources of Groton, Inc.
183. Health Resources of Cumberland, Inc.
184. Health Resources of Arcadia, Inc.
185. Encare of Wyncote, Inc.
186. Encare of Quakertown, Inc.
187. ADS Senior Housing, Inc.
188. ADS Recuperative Center, Inc.
189. ADS Hingham Nursing Facility, Inc.
190. ADS Apple Valley, Inc.
191. ADS/Multicare, Inc.
192. Glenmark Associates, Inc.
193. GMA Partnership Holding Company, Inc.
194. Stafford Convalescent Center, Inc.
195. The Multicare Companies, Inc.
196. North Madison, inc.
197. ADS Apple Valley Limited Partnership
iii
SCHEDULE 8.1
SCHEDULE OF REJECTED CONTRACTS
GENESIS DEBTORS
1. Vending services agreement, dated as of March 21, 1998, between Genesis
Health Ventures, Inc. and Take-A-Break
2. Postage meter lease agreement, dated as of January 10, 2000, between
NeighborCare of Oklahoma, Inc. and Pitney Bowes Credit Corporation
3. Computer lease agreement, dated as of November 3, 1999, between Geriatric
& Medical Services, Inc. and Dell Financial Services
4. Radiology agreement, dated as of July 2, 1997, between Meridian
Healthcare, Inc. and Radiation Physics
5. Dental agreement, dated as of July 23, 1997, between Meridian Healthcare,
Inc. and Anthony Gregorio DDS
6. Elevator maintenance agreement, dated as of July 8, 1997, between Meridian
Healthcare, Inc. and General Elevator
7. Exterminator service agreement, dated as of December 28, 1998, between
Meridian Healthcare, Inc. and Western Pest
8. Generator agreement, dated as of September 17, 1998, between Meridian
Healthcare, Inc. and Advanced Equipment
9. Lawn exterminator agreement, dated as of November 1, 1999, between
Meridian Healthcare, Inc. and TruGreen ChemLawn
10. Diagnostic lab agreement, dated as of January 1, 1999, between Meridian
Healthcare, Inc. and Quest Laboratories
11. Medical record consulting agreement, dated as of November 28, 1997,
between Meridian Healthcare, Inc. and Clinical Record Consulting
12. Social services agreement, dated as of December 8, 1998, between Meridian
Healthcare, Inc. and Laurie Trusty, MSW, ACSW, and LCSW-C
13. Vending machine agreement, dated as of July 6, 1997, between Meridian
Healthcare, Inc. and Black Tie Service
14. Hazardous waste removal agreement, dated as of June 1, 1997, between
Meridian Healthcare, Inc. and Waste Management of Montgomery County
15. Sprinkler system agreement, dated as of February 17, 1997, between
Meridian Healthcare, Inc. and Livingston Fire Protection, Inc.
16. Transfer agreement, dated as of February 1, 1998, between Meridian
Healthcare, Inc. and Montgomery General Hospital
i
MULTICARE DEBTORS
1. Cable television agreement, dated as of September 27, 1999, between Health
Resources of Kamenta & Madison, Inc. and SkyCable TV of Madison, LLC
2. Medical staffing agreement, dated as of June 1, 2000, between Health
Resources of Kamenta & Madison, Inc. and Healthcare Specialists, Inc.
3. Staffing agreement, dated as of June 20, 2000, between Health Resources of
Kamenta & Madison, Inc. and Country Nurses, Inc.
4. HCFA information review agreement, dated as of January 7, 2000, between
Health Resources of Kamenta & Madison, Inc. and MetaStar, Inc.
5. Medical director agreement, dated as of December 1, 1998, between Health
Resources of Kamenta & Madison, Inc. and Dr. Leroy Walsh
6. Health care consulting agreement, dated as of November 8, 1999, between
Health Resources of Kamenta & Madison, Inc. and Dorothy Anderson ART/
Anderson Consulting Services
7. Insurance provider agreement, dated as of February 15, 1999, between
Health Resources of Kamenta & Madison, Inc. and Premier/Dean Health
Plan, Inc.
8. Security agreement, dated as of September 14, 1995, between Health
Resources of Kamenta & Madison, Inc. and ADT Security Systems West,
Inc.
9. Bird watching agreement, dated as of October 6, 1994, between Health
Resources of Kamenta & Madison, Inc. and Living Design, Inc.
10. Hair care agreement, dated as of February 26, 1999, between Health
Resources of Kamenta & Madison, Inc. and Classic Hair Care, LLC
11. Medicaid electronic data system billing agreement, dated as of October 2,
1995, between Health Resources of Kamenta & Madison, Inc. and State of
Wisconsin, Department of Heath Services
12. Fire protection agreement, dated as of February 12, 1999, between Health
Resources of Kamenta & Madison, Inc. and Grinnell
13. Optometry agreement, dated as of March 2, 1999, between Health Resources
of Kamenta & Madison, Inc. and Health Drive Medical & Dental Practices
14. Podiatry agreement, dated as of April 2, 1999, between Health Resources of
Kamenta & Madison, Inc. and Health Drive Medical & Dental Practices
15. Pay Phone agreement, dated as of August 1, 1996, between Health Resources
of Kamenta & Madison, Inc. and Ameritech
16. Bio-Med waste agreement, dated as of March 29, 1999, between Health
Resources of Kamenta & Madison, Inc. and Stericycle, Inc.
17. Medical infectious waste disposal agreement, dated as of August 17, 1998,
between Health Resources of Kamenta & Madison, Inc. and Madison Energy
Recovery, Inc.
18. Respite Care agreement, dated as of October 1, 1999, between Health
Resources of Kamenta & Madison, Inc. and Community Living Alliance
19. Staffing agreement, dated as of May 2, 2000, between Health Resources of
Columbus, Inc. and Healthcare Staffing
20. Service agreement, dated as of April 26, 2000, between Health Resources of
Columbus, Inc. and Heartline Medix, Inc.
ii
21. Service agreement, dated as of November 3, 1993, between Health Resources
of Columbus, Inc. and Divine Savior Hospital/Audiology
22. Service agreement, dated as of February 15, 1995, between Health Resources
of Columbus, Inc. and Muzak-Advertising On Hold
23. Service agreement, dated as of December 6, 1993, between Health Resources
of Columbus, Inc. and Living Design
24. Service agreement, dated as of April 1, 1998, between Health Resources of
Columbus, Inc. and Shelia Niggemeier
25. Equipment agreement, dated as of January 18, 1989, between Health
Resources of Columbus, Inc. and Ecolab
26. Service agreement, dated as of March 12, 1999, between Health Resources of
Columbus, Inc. and Stericycle
27. Equipment agreement, dated as of February 8, 1999, between Health
Resources of Columbus, Inc. and Grinnell Fire Protection
28. Vehicle lease agreement, dated as of December 12, 1998, between Health
Resources of Columbus, Inc. and PNC
29. Consulting agreement, dated as of January 20, 1998, between Health
Resources of Columbus, Inc. and Healthdrive Medical
30. Hospitalization service agreement, dated as of October 6, 1998, between
Health Resources of Columbus, Inc. and Columbus Community Hospital
31. Laboratory service agreement, dated as of October 6, 1998, between Health
Resources of Columbus, Inc. and Columbus Community Hospital
32. Medical director agreement, dated as of September 30, 1996, between Health
Resources of Columbus, Inc. and Dr. Bruce A. Kraus
33. Service agreement, dated as of October 1, 1998, between Health Resources
of Columbus, Inc. and Sandy Roof
34. Service agreement, dated as of May 1, 2000, between Health Resources of
Columbus, Inc. and Preferred Podiatry
35. Service agreement, dated as of February 26, 1998, between Health Resources
of Columbus, Inc. and Marla Davis Psychotherapy
36. Equipment agreement, dated as of January 9, 1997, between Health Resources
of Columbus, Inc. and Storage Plus
37. Service agreement, dated as of January, 2000, between Health Resources of
Columbus, Inc. and Safeco
38. Equipment agreement, dated as of December, 1994, between Health Resources
of Columbus, Inc. and Lake City Vending
39. Service agreement, dated as of July 22, 1999, between Health Resources of
Columbus, Inc. and Wil-Kil Pest
40. Participation agreement, dated as of November 1, 1999, between Health
Resources of Columbus, Inc. and Department of Health & Social Services
iii
41. Participation agreement, dated as of September 1, 1992, between Health
Resources of Columbus, Inc. and State of Wisconsin
42. Participation agreement, dated as of March 11, 1998, between Health
Resources of Columbus, Inc. and Dean Health Plan
43. Participation agreement, dated as of March 8, 1996, between Health
Resources of Columbus, Inc. and Group Health Cooperative
44. Service agreement, dated as of June 21, 2000, between Health Resources of
Columbus, Inc. and Country Nurses
45. Service agreement, dated as of November 8, 1999, between Health Resources
of Columbus, Inc. and 1 Health Plan
iv
EX-99
9
tech.txt
EXHIBIT T3E-3
EXHIBIT T3E-3
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------- X
:
IN RE : CHAPTER 11 CASE NO.
:
GENESIS HEALTH VENTURES, INC., ET AL., : 00-2692 (JHW)
:
DEBTORS. :
: (JOINTLY ADMINISTERED)
------------------------------------------- X
:
IN RE : CHAPTER 11 CASE NO.
:
MULTICARE AMC, INC., ET AL., : 00-2494 (JHW)
:
DEBTORS. :
: (JOINTLY ADMINISTERED)
------------------------------------------- X
TECHNICAL AMENDMENTS TO
DEBTORS' JOINT PLAN OF REORGANIZATION
-------------------------------------
Genesis Health Ventures, Inc. ("Genesis"), The Multicare
Companies, Inc. ("Multicare"), and the other above-captioned debtors and debtors
in possession (collectively with Genesis and Multicare, the "Debtors") hereby
file these Technical Amendments to the Debtors' Joint Plan of Reorganization,
dated July 6, 2001 (the "Plan").(1)
1. Section 1.31 of the Plan (Definitions/Genesis Other
Secured Claim) is amended as follows: at the end of the second line after the
words "Genesis Senior Lender Claim", insert the words ", but including Secured
--------------
(1) Unless otherwise defined, capitalized terms used herein shall have the
meanings ascribed thereto in the Plan.
Claims in the amount of $50,000,000 of the lender parties to the documents
described in clause (ii) of the definition of Genesis Senior Lender Agreements."
2. Section 1.36 of the Plan (Definitions/Genesis Senior
Lender Claim) is amended as follows: at the end of the sixth line after the
number "$17,290,962", insert the words ", and the Claims of the lender parties
to the documents described in clause (ii) of the definition of Genesis Senior
Lender Agreements are Genesis Senior Lender Claims to the extent of
$28,236,000."
3. Section 1.57 of the Plan (Definitions/Plan Documents) is
amended as follows:
a. in the sixth line after the designation (viii), delete
the words "the settlement agreement referred to in Section 5.15 hereof, (ix)"
b. in the seventh line, replace the designation "(x)" with
the designation "(ix)".
4. Section 2.3 of the Plan (Administrative Expense Claims
and Priority Tax Claims/Priority Tax Claims) is amended as follows: in the
eighth line after the words "Allowed Priority Tax Claim" insert the words ";
provided, however, that any Allowed Priority Tax Claim belonging to the Internal
Revenue Service shall receive quarterly, rather than annual, Cash payments".
5. Section 3.3 of the Plan (Classification of Claims and
Equity Interests/Subclasses for Class G1) is amended as follows: insert the
words "101 E. State Street, Kennett Square, Pa." in the second to last line of
the second column of the table underneath the words "Woodmont Center."
2
6.Section 4.1 of the Plan (Treatment of Claims and Equity
Interests/Genesis Other Secured Claims (Class G1)) is amended as follows:
a. insert the words "G1-5, G1-6, G1-7," in the first line
after the words "Except for the Genesis Other Secured Claims in Subclasses."
b. add the following subparagraphs (d), (e), and (f) after
subparagraph (c):
(d) Subclass G1-5. As of the Effective Date, all
of the Genesis Debtors' obligations under, pursuant to, and
in connection with (i) the 8.875% First Mortgage Revenue
Refunding Bonds (Edella Street Associates Project), Series
1992, due September 1, 2014 (the "Lackawanna Bonds"),
issued pursuant to that certain Trust Indenture, dated as
of June 1, 1992 (the "Lackawanna Indenture"), between the
Lackawanna County Industrial Development Authority and
Fidelity Bank, National Association ("Fidelity",
predecessor to Allfirst Bank ("Allfirst")), as indenture
trustee, and (ii) any and all documents, agreements, and
instruments executed in connection with the Lackawanna
Bonds, including, without limitation, the Lackawanna
Indenture and that certain Mortgage And Security Agreement
dated as of June 1, 1992 (collectively, the "Lackawanna
Bond Documents"), shall be reinstated and shall be the
obligations of the Reorganized Debtors. As of the Effective
Date, the Lackawanna Bond Documents shall be deemed
reinstated in their entirety, and all legal, equitable, and
contractual rights under the Lackawanna Bond Documents and
the Lackawanna Bonds shall be and remain unaltered by
confirmation and consummation of the Plan, including,
without limitation, the extent, validity, priority, and
perfection of all liens and security interests granted
thereunder. No further filing, notice, or other action
shall be required to effect the reinstatement of the
Lackawanna Bond Documents and the Lackawanna Bonds,
including, without limitation, the perfection of liens
granted in respect thereof; provided, that the Genesis
Debtors and/or the Reorganized Debtors shall obtain and
execute, or cause to be obtained and executed, such
replacement documents, agreements, and instruments as
reasonably requested in writing by either Allfirst, as
3
indenture trustee, or by holders of the Lackawanna Bonds.
On or as soon as reasonably practicable after the Effective
Date, the Genesis Debtors and/or the Reorganized Debtors
shall (y) cure any and all defaults under the Lackawanna
Bonds and the Lackawanna Bond Documents (including, without
limitation, any past due payments of principal and interest
(at the nondefault rate), whether incurred prior to or
after the Commencement Date), and (z) reimburse Allfirst,
as indenture trustee, for all fees, expenses, and costs
(including reasonable attorneys' fees and expenses) which
have accrued and are required to be paid under the
Lackawanna Bonds and the Lackawanna Bond Documents.
(e) Subclass G1-6. As of the Effective Date, all
of the Genesis Debtors' obligations under, pursuant to, and
in connection with (i) The Delaware Economic Development
Authority First Mortgage Revenue Refunding Bonds Series of
1993 (Dover Health Care Associates Inc. Project) (the
"Delaware Bonds"), issued pursuant to that certain Trust
Indenture dated as of February 1, 1993 (the "Delaware
Indenture"), between The Delaware Economic Development
Authority and Fidelity Bank, National Association
("Fidelity," as predecessor to Allfirst, as indenture
trustee, and (ii) any and all documents, agreements and
instruments executed in connection with the Delaware Bonds,
including, without limitation, the Delaware Indenture, that
certain Mortgage and Security Agreement dated as of
February 1, 1993, and that certain Guaranty Agreement dated
as of February 1, 1993, the provisions of Section 5.1
herein notwithstanding (collectively, the "Delaware Bond
Documents"), shall be reinstated and shall be the
obligations of the Reorganized Debtors. As of the Effective
Date, the Delaware Bond Documents shall be deemed
reinstated in their entirety, and all legal, equitable, and
contractual rights under the Delaware Bond Documents and
the Delaware Bonds shall be and remain unaltered by
confirmation and consummation of the Plan, including,
without limitation, the extent, validity, priority, and
perfection of all liens and security interests granted
thereunder. No further filing, notice, or other action
shall be required to effect the reinstatement of the
Delaware Bond Documents and the Delaware Bonds, including,
without limitation, the perfection of liens granted in
respect thereof; provided, that the Genesis Debtors and/or
4
the Reorganized Debtors shall obtain and execute, or cause
to be obtained and executed, such replacement documents,
agreements, and instruments as reasonably requested in
writing by either Allfirst, as indenture trustee, or by
holders of the Delaware Bonds. On or as soon as reasonably
practicable after the Effective Date, the Genesis Debtors
and/or the Reorganized Debtors shall (y) cure any and all
defaults under the Delaware Bonds and the Delaware Bond
Documents (including, without limitation, any past due
payments of principal and interest (at the nondefault
rate), whether incurred prior to or after the Commencement
Date), and (z) reimburse Allfirst as indenture trustee, for
all expenses and costs (including reasonable attorneys'
fees and expenses) which have accrued and are required to
be paid under the Delaware Bonds and the Delaware Bond
Documents.
(f) Subclass G1-7. As of the Effective Date, all
of the Genesis Debtors' obligations under, pursuant to, and
in connection with (i) the 8.75% First Mortgage Revenue
Refunding Bonds (River Street Associates Project), Series
1992, due June 15, 2007 (the "Luzerne Bonds"), issued
pursuant to that certain Trust Indenture, dated as of June
1, 1992 (the "Luzerne Indenture"), between the Luzerne
County Industrial Development Authority and Fidelity
(predecessor to Allfirst), as indenture trustee, and (ii)
any and all documents, agreements, and instruments executed
in connection with the Luzerne Bonds, including, without
limitation, the Luzerne Indenture and that certain Mortgage
And Security Agreement dated as of June 1, 1992
(collectively, the "Luzerne Bond Documents"), shall be
reinstated and shall be the obligations of the Reorganized
Debtors. As of the Effective Date, the Luzerne Bond
Documents shall be deemed reinstated in their entirety, and
all legal, equitable, and contractual rights under the
Luzerne Bond Documents and the Luzerne Bonds shall be and
remain unaltered by confirmation and consummation of the
Plan, including, without limitation, the extent, validity,
priority, and perfection of all liens and security
interests granted thereunder. No further filing, notice, or
other action shall be required to effect the reinstatement
of the Luzerne Bond Documents and the Luzerne Bonds,
including, without limitation, the perfection of liens
granted in respect thereof; provided, that the Genesis
Debtors and/or the Reorganized Debtors shall obtain and
5
execute, or cause to be obtained and executed, such
replacement documents, agreements, and instruments as
reasonably requested in writing by either Allfirst, as
indenture trustee, or by holders of the Luzerne Bonds. On
or as soon as reasonably practicable after the Effective
Date, the Genesis Debtors and/or the Reorganized Debtors
shall (y) cure any and all defaults under the Luzerne Bonds
and the Luzerne Bond Documents (including, without
limitation, any past due payments of principal and interest
(at the nondefault rate)), whether incurred prior to or
after the Commencement Date), and (z) reimburse Allfirst,
as indenture trustee, for all fees, expenses, and costs
(including reasonable attorneys' fees and expenses) which
have accrued and are required to be paid under the Luzerne
Bonds and the Luzerne Bond Documents..
7. Section 5.11 of the Plan (Means for
Implementation/Cancellation of Existing Securities and Agreements) is amended as
follows: in the last line after the word "indentures", add the words ";
provided, further, however, that the relevant indentures, notes, and other
instruments relating to Allowed Claims being reinstated and unimpaired in Class
M1 shall not be canceled by this Section 5.11.
8. Section 5.12 of the Plan (Means for Implementation/Board
of Directors) is amended as follows:
a. Replace the word "seven" in the first line with the word
"eight".
b. In the fourth line after the sentence ending with the
words "of Reorganized Genesis." add the following sentence: "The eighth member
will be selected by the Chief Executive Officer of Reorganized Genesis."
9. Section 5.15 of the Plan (Means for
Implementation/Settlement with the Federal Government) is amended as follows:
6
a. delete the words ", in the form set forth in the Plan
Supplement," in the fifth and sixth lines.
b. add the words ", subject to obtaining Bankruptcy Court
approval" in the sixth line after the words "Plan of Reorganization".
10. Section 6.10 of the Plan (Distributions/Setoffs) is
amended as follows: at the end of the sixth line after the word "Claim" insert
the words "provided, that in the event the Debtors seek to exercise such setoff
rights against the holder of a Claim that is a debtor in a case under the
Bankruptcy Code, the Debtors shall comply with the requirements of the
Bankruptcy Code, including seeking relief from the automatic stay."
11. Section 8.1 of the Plan (Executory Contracts and
Unexpired Leases/General Treatment) is amended as follows: insert the words "and
Leases" after the words "Schedule of Rejected Contracts" in the fifth line.
12. Schedule 8.1 to the Plan (Schedule of Rejected
Contracts/Genesis Debtors) is amended as follows:
a. insert the words "and Leases" after "Schedule of
Rejected Contracts" in the title.
b. add the following contracts after "16. Transfer
agreement, dated as of February 1, 1998, between Meridian Healthcare, Inc. and
Montgomery General Hospital":
7
17. Contract for the Sale of Anthony Wayne School, dated
December 8, 2000, between Walnut LTC Management, Inc. and
Altman General Corporation(2)
18. Vehicle lease #93080, dated as of February 21, 1996,
between NeighborCare - TCI, Inc. and Mike Albert Leasing, Inc.
19. Vehicle lease #93082, dated as of February 21, 1996,
between NeighborCare - TCI, Inc. and Mike Albert Leasing, Inc.
20. Vehicle lease #93083, dated as of February 21, 1996,
between NeighborCare - TCI, Inc. and Mike Albert Leasing, Inc.
21. Vehicle lease #93084, dated as of February 21, 1996,
between NeighborCare - TCI, Inc. and Mike Albert Leasing, Inc.
22. Printer lease, dated as of April 1998, between Network
Ambulance Services and Pitney Bowes
23. Pumps lease, dated January 17, 1994, between ASCO
Healthcare, Inc. and Medela, Inc.
13. Section 10.6 of the Plan (Effect of
Confirmation/Exculpation) is amended as follows: delete the words "any
Disbursing Agent," in the first line.
14. Except as expressly amended hereby, all other
provisions of the Plan shall remain unaffected and in full force and effect.
Dated: August 27, 2001
Wilmington, Delaware
WEIL, GOTSHAL & MANGES LLP Willkie Farr & Gallagher
767 Fifth Avenue 787 Seventh Avenue
New York, New York 10153 New York, New York 10019-6099
(212) 310-8000 (212) 728-8000
Michael F. Walsh Marc Abrams
Gary T. Holtzer Paul V. Shalhoub
-and- -and-
--------------
(2) This is a postpetition agreement which the Genesis Debtors are terminating.
8
RICHARDS, LAYTON & FINGER, P.A. Young Conaway Stargatt & Taylor
One Rodney Square 11th Floor, Wilmington Trust Company
P.O. Box 551 P.O. Box 391
Wilmington, Delaware 19899 Wilmington, Delaware 19899-0391
(302) 658-6541 (302) 571-6600
By: /s/ Mark D. Collins By: /s/ Robert S. Brady
------------------------------ -----------------------------------
Mark D. Collins (No. 2981) Robert S. Brady (No. 2847)
ATTORNEYS FOR THE GENESIS DEBTORS ATTORNEYS FOR THE MULTICARE DEBTORS
AND DEBTORS IN POSSESSION AND DEBTORS IN POSSESSION
9
EX-99
10
adjp.txt
EXHIBIT T3E-4
EXHIBIT T3E-4
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
------------------------------------------ X
:
IN RE : CHAPTER 11 CASE NO.
:
GENESIS HEALTH VENTURES, INC., ET AL., : 00-2692 (JHW)
:
DEBTORS. :
: (JOINTLY ADMINISTERED)
------------------------------------------ X
:
IN RE : CHAPTER 11 CASE NO.
:
MULTICARE AMC, INC., ET AL., : 00-2494 (JHW)
:
DEBTORS. :
: (JOINTLY ADMINISTERED)
------------------------------------------ X
AMENDMENTS TO DEBTORS' JOINT PLAN OF REORGANIZATION
TO COMPLY WITH OPINION ON CONFIRMATION
Genesis Health Ventures, Inc. ("Genesis"), The Multicare Companies,
Inc. ("Multicare"), and the other above-captioned debtors and debtors in
possession (collectively with Genesis and Multicare, the "Debtors"), hereby file
these Amendments to the Debtors' Joint Plan of Reorganization, dated July 6,
2001 (the "Plan"),(1) to Comply with the Court's Opinion on Confirmation.
1. Section 5.10 of the Plan (Release of Representatives) is amended
by replacing the entire paragraph with the following paragraphs:
(a) As of the Effective Date, the respective officers, directors,
employees, financial advisors, professionals, accountants, and
attorneys of the Genesis Debtors, the Multicare Debtors, and the
respective statutory committees of unsecured creditors appointed
pursuant to section 1102 of the Bankruptcy Code in the Genesis
------------
(1) Unless otherwise defined, capitalized terms used herein shall have the
meanings ascribed thereto in the Plan.
Reorganization Cases and the Multicare Reorganization Cases shall be
released by the Debtors from any and all Claims arising on or after
the Commencement Date against them in their capacity as
representatives of the Genesis Debtors, the Multicare Debtors, or
the statutory committees, as applicable, except (i) for willful
misconduct or gross negligence and (ii) as otherwise expressly
provided in the order of the Bankruptcy Court, dated February 23,
2001, approving a senior executive retention plan for certain
employees of Genesis.
(b) As of the Effective Date, the respective officers, directors,
employees, financial advisors, professionals, accountants, and
attorneys of Mellon Bank, N.A., as administrative agent under the
Genesis Senior Lender Agreements, the Multicare Senior Lender
Agreements, and the Revolving Credit and Guaranty Agreements
described in Section 2.4 hereof shall be released by the Debtors
from any and all Claims against them in their capacity as
representatives of Mellon Bank, N.A.
2. Section 10.6 of the Plan (Exculpation) is amended as follows:
in the fourth line after the words "agent under" delete the words ", and any
lender under".
2
Except as expressly amended hereby, all other provisions of the Plan,
as modified by the Technical Amendments to the Plan, dated August 27, 2001,
shall remain unaffected and in full force and effect.
Dated: September 13, 2001
Wilmington, Delaware
WEIL, GOTSHAL & MANGES LLP Willkie Farr & Gallagher
767 Fifth Avenue 787 Seventh Avenue
New York, New York 10153 New York, New York 10019-6099
(212) 310-8000 (212) 728-8000
Michael F. Walsh Marc Abrams
Gary T. Holtzer Paul V. Shalhoub
-and- -and-
RICHARDS, LAYTON & FINGER, P.A. Young Conaway Stargatt & Taylor
One Rodney Square 11th Floor, Wilmington Trust Company
P.O. Box 551 P.O. Box 391
Wilmington, Delaware 19899 Wilmington, Delaware 19899-0391
(302) 658-6541 (302) 571-6600
By:/s/ Mark D. Collins By:/s/ Robert S. Brady
------------------------------ --------------------------------
Mark D. Collins (No. 2981) Robert S. Brady (No. 2847)
ATTORNEYS FOR THE GENESIS DEBTORS ATTORNEYS FOR THE MULTICARE DEBTORS
AND DEBTORS IN POSSESSION AND DEBTORS IN POSSESSION
3
EX-99
11
erratum.txt
EXHIBIT T3E-5
EXHIBIT T3E-5
ERRATUM TO DISCLOSURE STATEMENT FOR
DEBTORS' JOINT PLAN OF REORGANIZATION
-------------------------------------
Replace the last sentence in section V.D.5 on page 61 of the Disclosure
Statement for Debtors' Joint Plan of Reorganization with the following sentence:
Inasmuch as the adversary proceeding will not be tried until the summer of 2002,
the AGE Entities and the Genesis Debtors have agreed that the AGE Entities will
retain the ability to (i) set off or recoup any allowed claims they may have
against the Genesis Debtors against the claims the Genesis Debtors have against
the AGE Entities and assert any counterclaims against the Genesis Debtors even
if said counterclaims exceed the Genesis Debtors' claims, and (ii) participate
in any recovery for holders of claims in Class G4 notwithstanding that the Plan
will become effective before the claims of the AGE Entities are resolved.
EX-99
12
t-1.txt
EXHIBIT T3G
EXHIBIT T3G
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-------------
GENESIS HEALTH VENTURES, INC.
(Exact name of obligor as specified in its charter)
Pennsylvania 06-1132947
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
101 East State Street
Kennett Square, Pennsylvania 19348
(Address of principal executive offices) (Zip code)
-------------
Second Priority Secured Notes due 2007
(Title of the indenture securities)
================================================================================
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
--------------------------------------------------------------------------------
Name Address
--------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
2
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 10th day of September, 2001.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
------------------------------
Name: VAN K. BROWN
Title: VICE PRESIDENT
3
EXHIBIT 7
--------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 2001,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS In Thousands
------------
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............ $2,811,275
Interest-bearing balances..................................... 3,133,222
Securities:
Held-to-maturity securities................................... 147,185
Available-for-sale securities................................. 5,403,923
Federal funds sold and Securities purchased under agreements to
resell........................................................ 3,378,526
Loans and lease financing receivables:
Loans and leases held for sale................................ 74,702
Loans and leases, net of unearned
income...........................................37,471,621
LESS: Allowance for loan and
lease losses........................................599,061
Loans and leases, net of unearned
income and allowance....................................... 36,872,560
Trading Assets................................................... 11,757,036
Premises and fixed assets (including capitalized leases)......... 768,795
Other real estate owned.......................................... 1,078
Investments in unconsolidated subsidiaries and associated
companies..................................................... 193,126
Customers' liability to this bank on acceptances outstanding..... 592,118
Intangible assets................................................
Goodwill...................................................... 1,300,295
Other intangible assets....................................... 122,143
Other assets..................................................... 3,676,375
-------------
Total assets..................................................... $70,232,359
=============
LIABILITIES
Deposits:
In domestic offices........................................... $25,962,242
Noninterest-bearing.................................10,586,346
Interest-bearing....................................15,395,896
In foreign offices, Edge and Agreement subsidiaries, and IBFs. 24,862,377
Noninterest-bearing....................................373,085
Interest-bearing....................................24,489,292
Federal funds purchased and securities sold under agreements to
repurchase.................................................... 1,446,874
Trading liabilities.............................................. 2,373,361
Other borrowed money:
(includes mortgage indebtedness and obligations under
capitalized leases)........................................... 1,381,512
Bank's liability on acceptances executed and outstanding......... 592,804
Subordinated notes and debentures................................ 1,646,000
Other liabilities................................................ 5,373,065
-------------
Total liabilities................................................ $63,658,235
=============
EQUITY CAPITAL
Common stock..................................................... 1,135,284
Surplus.......................................................... 1,008,773
Retained earnings................................................ 4,426,033
Accumulated other comprehensive income........................... 4,034
Other equity capital components.................................. 0
---------------------------------------------------------------------------------
Total equity capital............................................. 6,574,124
-------------
Total liabilities and equity capital............................. $70,232,359
=============
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro,
Senior Vice President and Comptroller
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to the best
2
of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true and correct.
Thomas A. Renyi
Gerald L. Hassell Directors
Alan R. Griffith
--------------------------------------------------------------------------------