EXHIBIT 10.54
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made as of August 12, 1998
between FOUNTAIN VIEW, INC., a Delaware corporation (hereinafter the "Company"
and/or "Companies", which includes all subsidiaries and affiliates) and
PAUL RATHBUN (the "Executive").
Introduction
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The Executive presently resides in the State of Tennessee. The Executive
has interviewed with the Company and desires to accept employment with the
Company. The Executive's position with the Company shall be that of Chief
Financial Officer, subject to the terms and conditions set forth herein.
The employment of the Executive, requires that he relocate his principal
residence to Los Angeles County, California. During the term of his employment,
he shall be employed at the Executive Offices of the Company in either Los
Angeles County or Orange County, California. Executive shall be given full
access to information concerning the Company, in his capacity as Chief Financial
Officer. The disclosure of information obtained by the Executive in the
employment of the Company, or the engaging in competitive activities would
cause substantial harm to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Term. The Company shall employ the Executive for a term
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commencing on September 21, 1998, and continuing for a period of five (5)
years, unless earlier terminated pursuant to Section 7 (the "Employment
Period").
Section 2. Duties. The Executive shall be employed as the Chief
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Financial Officer of the Company.
The Executive will report to the President. The Executive has
represented in connection with his being hired by the Company, that he has
specialized experience and knowledge with respect to the duties of a Chief
Financial Officer.
The Company may, in their sole and absolute discretion seek to have a
fidelity bond issued covering the Executive. If the Company decides to do such,
the Executive shall cooperate with the Company and will furnish all information
and take any and all other steps reasonably required to enable the Company to
obtain said fidelity bond.
Section 3. Full Time. During the term of this Agreement, the Executive
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shall use the Executive's best efforts to promote the
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interests of the Company and shall devote substantially all the Executive's full
business time and efforts to its business and affairs.
Section 4. Compensation. The Executive shall be entitled to
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compensation as follows:
a. Base Salary. During the term of the Executive's employment with
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the Company, the Executive will receive a salary at the rate of $250,000.00
annually (the "Base Salary"), payable in equal installments not less than
bi-weekly in arrears. The Company shall withhold from compensation payable to
the Executive all applicable federal, state and local withholding taxes. The
Base Salary will be subject to annual consumer price adjustments and such
increases, if any, that the Board of Directors the Company (hereinafter
the "Board"), in its absolute discretion, may approve.
b. Bonus. In addition to the payment of the Base Salary and the
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other payments and benefits available to the Executive under this Agreement,
while the Executive is employed by the Company, the Company will pay to the
Executive for each fiscal year incentive compensation (the "Bonus") in an amount
up to $125,000.00 determined ratably based on the Company's EBITDA being between
the Base Case, each of the Mid Cases and/or the Target Case, such Bonus payable
within 120 days after the end of such fiscal year, as determined by the Board.
Payments with respect to partial percentages will be prorated. The payment of
Bonus shall be prorated for any partial fiscal year during the term of this
Agreement, except if the Executive resigns or is terminated for cause, before
the fiscal year end in which the Bonus accrues, in which case no Bonus
whatsoever shall be payable to the Executive.
C. Definition of Base Case, Mid Case and Target Cases. As used
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herein, "Base Case", "Mid Case" and "Target Case" shall have the meanings
specified on Exhibit "A" hereto, on the respective dates indicated, and may be
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changed by approval of the Company's Board to reflect acquisitions,
dispositions, start-ups and other transactions not in the ordinary course,
provided that in selecting the new targets the members of the Board approving
such changes believe in good faith that the new targets are broadly consistent
with the valuation methodology applied in determining the initial EBITDA targets
set forth on Exhibit "A" hereto.
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d. Moving Expenses. Immediately following the execution of
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this Agreement, the Company shall pay to Executive the sum of $40,000.00 to
cover the moving expenses to be incurred by the Executive in moving from
Tennessee to Los Angeles County, California. Except for said sum, the Company
shall not be liable to the Executive for any moving expenses and/or relocation
expenses of any nature whatsoever incurred by the Executive on account of said
move.
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e. Stock Option Plan. The Company is presently in the process of
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formulating a non-qualified Stock Option Plan (the "Plan") for management of the
Companies. Said Plan shall be finalized and put into effect within 90 days from
the date of execution of this Agreement. The Executive shall be granted at the
time said Plan is formally adopted by the Board, options to purchase the number
of shares of the Company, as of June 30, 1998 equal to one-half of one percent
of the current equity in the Company. Other than as to the number of shares as
referenced herein, the Executive understands and agrees that he shall be bound
by, and the grant of said options shall be subject to all other terms,
conditions, covenants, and agreements that shall be set forth in said Plan and a
Stock Option Agreement, as adopted by the Board. A draft of the proposed Plan
and Stock Option Agreement are attached as Exhibit "C"; the Plan and Stock
Option Agreement approved by the Board will be substantially the same as Exhibit
"C" in all material respects.
Section 5. Benefits. In addition to salary and Bonus, the Executive
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shall be entitled to receive reasonable and customary fringe benefits in an
amount not less than the greater of those benefits that are generally and
customarily available to the Company's executive and managerial employees. Such
benefits include health insurance and vacation time in accordance with the
Company's policies, consistent with prior practices. The Executive will be
entitled to reimbursement of all reasonable expenses incurred in the ordinary
course of business on behalf of the Company, subject to presentation of
appropriate documentation, in accordance with policies approved by the Board.
Section 6. Confidentiality and Non-Competition. In consideration of,
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and as a condition to, the mutual promises contained herein, and to preserve
the goodwill of the Company and its direct and indirect subsidiaries
(collectively, the "Companies"), the Executive agrees as follows:
a. The Executive will not at any time, directly or indirectly,
disclose or divulge, except as reasonably required in connection with the
performance of the Executive's duties for the Companies, any Confidential
Information (as hereinafter defined) acquired by the Executive during
the Executive's affiliation with or employment by the Companies. As used herein,
"Confidential Information" means all trade secrets and all other proprietary or
non-public information of a business, financial, marketing, technical or other
nature pertaining to the Companies or their affairs and all information of
others that the Companies have agreed not to disclose; provided, that
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Confidential Information shall not include any information which has entered or
enters the public domain through no fault of the Executive or which the
Executive is required to disclose by law or legal process.
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b. The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as reasonably required in
connection with the performance of the Executive's duties for the Companies.
c. Upon the Companies' request at any time and for any reason, the
Executive shall immediately deliver to the Companies all materials (including
all copies) in the Executive's possession which contain or relate to
Confidential Information.
d. All inventions, developments or improvements made by the
Executive, either alone or in conjunction with others, at any time or at any
place during the term of the Executive's employment by the Companies, whether or
not reduced to writing or practice during such term, which relate to the
business in which the Companies are engaged or in which the Companies intend to
engage, or which were developed or made in whole or in part using the Companies'
facilities, shall be the exclusive property of the Companies. The Executive
shall promptly disclose any such invention, development or improvement to the
Companies, and, at the request and expense of the Companies, shall assign all of
the Executive's rights to the same to the Companies. The Executive shall sign
all instruments necessary for the filing and prosecution of any applications for
or extension or renewals of letters patent of the United States or any foreign
country which the Companies desire to file.
e. All copyrightable work by the Executive during the term of the
Executive's employment by the Companies which relate to the businesses in which
the Companies are engaged is intended to be "work made for hire" as defined in
Section 101 of the Copyright Act of 1976, and shall be the property of the
Companies. If the copyright to any such copyrightable work is not the property
of the Companies by operation of law, the Executive will, without further
consideration, assign to the Companies all right, title and interest in such
copyrightable work and will assist the Companies and their nominees in every
way, at the Companies' expense, to secure, maintain and defend for the
Companies' benefit copyrights and any extensions and renewals thereof on any and
all such work including translations thereof in any and all countries, such work
to be and to remain the property of the Companies whether copyrighted or not.
f. Prior to the termination of the Executive's employment with the
Companies, the Executive will not directly or indirectly, individually or as a
consultant to, or executive, officer, director, stockholder, partner or other
owner or participant in any business entity, engage in or assist any other
person to engage in the businesses of skilled nursing facilities, assisted
living facilities, inpatient or outpatient therapy services, pharmacies,
urological supplies, enteral feeding supplies and orthotics anywhere in the
counties of the State of California
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identified on Exhibit "B" hereto or in Arizona, Texas or any other state within
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the United States; provided, however, that the Executive may own not more than a
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5% interest in any publicly-traded company.
g. Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of this Agreement or
two years after such termination, the Executive will not directly or indirectly,
individually or as a consultant to, or as employee, officer, director,
stockholder, partner or other owner or participant in any business entity other
than the Companies, solicit or endeavor to entice away from the Companies, or
otherwise materially interfere with the business relationship of the Companies
with, (i) any person who is or was, within the one-year period immediately prior
to the termination of the Executive's employment by the Companies, employed by,
a consultant to or associated with the Companies, or (ii) any person or entity
who is or was, within the two-year period immediately prior to the termination
of the Executive's employment by the Companies, a customer, client of or
supplier to the Companies.
h. Without limiting the remedies available to the Companies, the
Executive acknowledges that a breach of any of the covenants contained in this
Section 6 could result in irreparable injury to the Companies for which there
might be no adequate remedy at law, and that, in the event of such a breach or
threat thereof, the Companies shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the Executive from engaging in any activities prohibited by this
Section 6 or such other equitable relief as may be required to enforce
specifically any of the covenants of this Section 6. The provisions of this
Section 6 shall survive the termination of this Agreement and shall continue
thereafter indefinitely in full force and effect in accordance with the terms of
this Section 6.
Section 7. Termination.
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a. The Executive's employment with the Company may be terminated
at any time by the Company with cause or without cause or in the event of the
death or Disability (as hereinafter defined) of the Executive. As used herein,
"cause" shall mean the reasonable and good faith determination by a majority
of the Board that the Executive has (i) breached any material term of this
Agreement, or any representation of the Executive set forth in this Agreement
proves to be untrue, (ii) engaged in criminal acts or acts of moral turpitude
causing injury to the Companies or their reputations, or (iii) engaged in
material acts of dishonesty affecting the Companies. As used herein,
"Disability" shall mean illness (mental or physical) or accident which, in the
good faith and reasonable determination of a majority of the Board, based on
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the report of a reputable physician, renders him unable to perform his duties
for ninety days during any 12-month period.
b. If the Executive's employment is terminated hereunder for cause,
by death or disability, or by the Executive for any reason, the Company shall
have no further obligation to make any payments or provide any benefits to the
Executive, except for (i) payments of Base Salary that had accrued but had not
paid prior to the date of termination, and (ii) payments of Bonus that had been
earned by the Executive but not paid prior to the date of termination.
c. The Company shall have the right, in its sole and absolute
discretion to terminate the Executive without cause at any time. If the Company
shall terminate the Executive without cause, so long as the Executive remains in
material compliance with the provisions of Section 6, the Company shall be
obligated to pay to the Executive his Base Salary, health insurance and car
allowance, for six months following the date of said termination, together with
the prorated bonus provided for in Section 4(b).
d. The provisions of Section 6 in any and all events shall survive
the termination of the Executive's employment in accordance with its terms.
Section 8. Enforceability. This Agreement shall be interpreted so as to
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be effective under applicable law, but if any portion hereof is prohibited or
invalid, such portion shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
If any one or more of the provisions contained in this Agreement are for any
reason held to be excessively broad as to duration, geographical scope, activity
or subject, such provisions shall be construed by limiting and reducing them so
as to be enforceable to the maximum extent permitted under applicable law.
Section 9. Notices. Any notice or other communication given pursuant to
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this Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested, as follows:
a. If to the Company:
Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
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b. If to the Executive:
Paul Rathbun
8207 Carriage Crossing
Chattanooga, TN 37421
or to such other address as the parties shall have designated by notice to the
other party.
Section 10. Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California without regard
to the choice of law provisions thereof.
Section 11. Amendments and Waivers. No amendment or waiver of this
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Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a breach
of any provision of this Agreement by the other party shall not operate as a
waiver by that party of the same or any subsequent breach of any provision of
this Agreement by the other party.
Section 12. Binding Effect; Assignment. This Agreement shall be binding on
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and inure to the benefit of the parties hereto and their respective heirs,
executors and administrators, successors and assigns. This Agreement may not be
assigned in whole or in party by either party (whether by operation of law or
otherwise, including by merger or consolidation).
Section 13. Entire Agreement. This Agreement constitutes the final and
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entire agreement of the parties with respect to the matters covered hereby, and
replaces and supersedes all other agreements and understandings relating
thereto.
Section 14. Counterparts. This Agreement may be executed in any number of
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counterparts, and with counterpart signature pages, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 15. Arbitration. Any controversy between the parties regarding the
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construction or application of this Agreement, any claims arising out of this
Agreement or its breach, whether sounding in contract, tort or otherwise, shall
be settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction.
The arbitrator and/or arbitrators hearing said matter shall be retired judge
and/or judges formerly sitting on the bench of the California Superior Court, or
any higher state court, or a retired Federal District
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Court Judge sitting on the bench in any District Court of California.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
"COMPANY"
FOUNTAIN VIEW, INC.
BY: /S/ ROBERT SNUKAL
_________________________
PRINTED NAME: Robert Snukal
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Title: President/C.E.O.
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"EXECUTIVE"
PAUL RATHBUN
/s/ Paul C. Rathbun
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Paul Rathbun
EXHIBIT "A"
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Proposed Base $250,000.00
Proposed Bonus $125,000.00
Base Case Mid Case Target
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Step 1 Step 2
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6/30/99 EBITDA Target $38,000,000 $45,188,000 $47,314,000 N/A
Bonus Paid 40,000 65,000
Total Cash Pay 250,000 290,000 315,000
6/30/00 EBITDA Target $45,500,000 $53,581,000 $57,101,000 $59,320,000
Bonus Paid 62,500 106,250 125,000
Total Cash Pay 250,000 312,500 356,250 375,000
6/30/01 EBITDA Target $48,000,000 $56,499,000 $67,030,000 $71,287,000
Bonus Paid 62,500 106,250 125,000
Total Cash Pay 250,000 312,500 356,250 375,000
6/30/02 EBITDA Target $51,300,000 $60,395,000 $78,196,000 $85,390,000
Bonus Paid 62,500 106,250 125,000
Total Cash Pay 250,000 312,500 356,250 375,000
6/30/03 EBITDA Target $55,320,000 $65,080,000 $87,063,000 $95,621,000
Bonus Paid 62,500 106,250 125,000
Total Cash Pay 250,000 312,500 356,250 375,000
EXHIBIT B
Identified Counties
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Alameda Orange
Alpine Placer
Amador Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Benito
Contra Costa San Bernardino
Del Norte San Diego
El Dorado San Francisco
Fresno San Joaquin
Glenn San Luis Obispo
Humboldt San Mateo
Imperial Santa Barbara
Inyo Santa Clara
Kern Santa Cruz
Kings Shasta
Lake Sierra
Lassen Siskiyou
Los Angeles Solano
Madera Sonoma
Marin Stanislaus
Mariposa Sutter
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
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Exhibit C
FOUNTAIN VIEW, INC.
Non-Qualified Stock Option Agreement
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This Stock Option Agreement (the "Agreement") is entered into as of
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_______, 1998 by and among Fountain View, Inc., a Delaware corporation (the
"Company"), and Paul Rathbun (the "Optionee").
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Introduction
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The Company has adopted its 1998 Stock Option Plan (as amended from time to
time, the "Plan"), pursuant to which the Board of Directors or Stock Option
Committee of the Company has authorized the grant of the stock options described
herein. Capitalized terms used herein and not defined shall have the meanings
given to them in the Plan.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Optionee agree
as follows:
Section 1. Grant of Non-Qualified Stock Option. The Company hereby grants
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to the Optionee an option (the "Option") to purchase an aggregate of up to
6,174 shares of Series C Common Stock, $.01 par value per share (the "Common
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Stock"), of the Company at a price of $104.61 per share, subject to the terms
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and conditions of this Agreement and the Plan. This Option is not intended to
qualify as an incentive stock option within the meaning of Section 422 of
Internal Revenue Code of 1986, as amended.
Section 2. Exercise of Option.
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(a) Vesting. Except as otherwise provided below, this Option will
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vest with respect to one-fifth of the number of shares for which this Option was
originally granted on each ________, commencing on ________, 1999 and continuing
until ________, 2004 or the earlier date, if any, on which the Optionee ceases
to be employed by a Related Company, after which no additional shares will vest
hereunder. If the Optionee is an employee of a Related Company on the date of a
Sale, this Option will vest as to all shares covered hereby on the date of Sale.
If the Optionee's employment is terminated by a Related Company with Cause
(which term is used herein as defined in the Employment Agreement between Paul
Rathbun and a Related Company), or by the Optionee other than as a result of the
Optionee's death or Disability, prior to the date on which this Option first
becomes exercisable under Subsection (b) below, this Option will
not be vest as to any shares covered hereby and will cease to be vested with
respect to any shares previously vested. If the Optionee is an employee of a
Related Company on the date that is one year after the Company's first firm
commitment underwritten public offering of common stock registered under the
Securities Act of 1933, as amended (a "Public Offering"), this Option will vest
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as to any shares as to which it has not previously vested.
(b) Timing of Exercise. This Option may not be exercised prior to
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the first to occur of (i) a Sale, (ii) the termination of the Optionee's
employment by the Company without Cause or as a result of the Optionee's death
or Disability, (iii) one year after a Public Offering and (iv) five years after
the date hereof. In no event may this Option be exercised later than the earlier
of (x) three months after the termination of the Optionee's employment with a
Related Company and (y) the tenth anniversary of the date hereof (the
"Expiration Date").
(c) Number of Shares for Which Exercisable. Subject to the other
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provisions of this Option, this Option may be exercised on one or more occasions
for up to an aggregate number of shares equal to the number of shares that are
vested hereunder.
(d) Exercise Procedure. Subject to the conditions set forth herein,
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this Option may be exercised by the Optionee's delivery of written notice to the
Company specifying the number of shares to be purchased and the purchase price
therefor, and accompanied by payment in full.
Section 3. Payment of Purchase Price.
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(a) Method of Payment. The price for shares purchased hereunder
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shall be paid by delivery to the Company of cash or a check to the order of the
Company or, if acceptable to the Company, by delivery to the Company of shares
of Common Stock having a fair market value equal to the purchase price of the
shares to be purchased (as determined in good faith by the Company), or by any
combination of such methods of payment. If the purchase price is paid with
shares of Common Stock, the certificates representing such shares shall be
accompanied by a stock power executed in blank, and suitable for transferring
the shares to the Company.
(b) Restriction on Use of Certain Shares. Notwithstanding the
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foregoing, without the consent of the Company, shares of stock may not be used
to pay the exercise price of this Option if the shares to be used were issued to
the Optionee upon exercise of a stock option and such shares have not been held
by the Optionee for the applicable minimum statutory
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holding period required to receive the tax benefits afforded under Section
421(a) of the Code.
Section 4. Delivery of Shares. The Company shall, upon receipt of payment
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in full for shares properly purchased hereunder, promptly deliver certificates
representing such shares to the Optionee. Nothwithstanding the foregoing, if
the Company is required by law or by any securities exchange on which the Common
Stock is listed to take any action before the issuance of such shares, the date
of delivery shall be extended for a reasonable period to allow such action to be
completed. The Company's obligation to deliver shares is also subject to the
satisfaction of all applicable tax withholding requirements. These requirements
shall be satisfied by the Optionee remitting the required taxes to the Company
prior to the delivery of the shares or in such other reasonable manner as may be
acceptable to the Company.
Section 5. Non-transferability of Option. This Option is personal and the
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rights granted hereunder may not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise), except that
this Option may be transferred to the Company or to the Optionee's heirs or
estate upon the Optionee's death, and may be exercised in accordance with its
terms by such transferees. Upon any transfer, assignment, pledge or
hypothecation in violation hereof, this Option shall, at the election of the
Company, become null and void.
Section 6. No Employment Rights. Nothing contained in the Plan or this
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Option shall be construed or deemed to require any Related Company to continue
the employment of the Optionee for any period.
Section 7. No Rights as a Shareholder. The Optionee shall have no rights
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as a shareholder with respect to any shares which are subject to this Option
until the Optionee has satisfied all legal and contractual obligations which are
conditions precedent to the Company's obligation to issue and deliver a
certificate to the Optionee for the shares which are subject to this Option.
Section 8. Investment Representations. If the issuance of the shares
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issuable upon exercise of this Option is not exempt from registration under Rule
701 (or any similar subsequently enacted provision) under the Securities Act of
133, as amended (the "Securities Act"), or covered by a registration statement
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under the Securities Act, the Optionee's right to exercise this Option and the
Company's obligation to deliver shares upon exercise of this Option shall be
subject to receipt by the Company of an investment letter in a form reasonably
acceptable
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to the Company and signed by the Optionee (or any other holder of this Option).
Section 9. Stockholders Agreement.
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(a) If the Optionee or other holder of this Option is not already a
party to the Stockholders Agreement dated as of March 27, 1998 by and among the
Company, Robert Snukal, Sheila Snukal, Heritage Fund II, L.P. and certain other
parties, as amended from time to time (the "Stockholders Agreement"), the
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Optionee's right to exercise this Option and the Company's obligation to deliver
shares upon exercise of this Option are subject to the execution by the Optionee
(or other holder of this Option) of a supplemental signature page to the
Stockholders Agreement pursuant to which the Optionee (or other holder of this
Option) becomes a party to the Stockholders Agreement with respect to those
provisions of the Stockholders Agreement designated by the Board.
(b) In addition, the Optionee (and any subsequent holder of this
Option or of any shares issued hereunder) agrees to be bound by Sections 4.02,
4.03, 4.04, 4.05 and 6.01 of the Stockholders Agreement from and after the date
hereof as a "Management Stockholder".
Section 10. Legends. Certificates representing shares issued upon
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exercise of this Option shall bear legends acceptable to the Company as to (a)
restrictions contained in the Stockholders Agreement, (b) the provisions of
Section 9 above, and (c) such other matters as the Board may determine.
Section 12. Miscellaneous.
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(a) This Option shall be subject in all respects to the terms of the
Plan.
(b) Except as provided herein, this Option may not be amended or
modified except in writing and signed by the Company and the Optionee.
(c) All notices under this Option shall be mailed registered mail,
return receipt requested, sent by recognized overnight delivery service, or
delivered by hand (i) if to the Company at Fountain View Management, Inc., 11900
W. Olympic Blvd., Los Angeles, CA 90064, Attn: President, with copies to
Heritage Partners, Inc., 30 Rowes Wharf, Suite 300, Boston, Massachusetts 02110,
Attn: Mark J. Jrolf, and (ii) if to the Optionee, at the Optionee's address set
forth below or at such other address as may be designated in writing by either
of the parties to one another.
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(d) This Option shall be governed by and construed in accordance with
the laws of the State of Delaware.
IN WITNESS WHEREOF, this Option has been executed as of the date set forth
below.
FOUNTAIN VIEW, INC.
By_______________________________
(title)
The undersigned Optionee hereby accepts this Option and agrees to the
terms and conditions thereof as of the date hereof, and acknowledges receipt of
a copy of the Plan.
_________________________________
Paul Rathbun
ADDRESS
_________________________________
_________________________________
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FOUNTAIN VIEW, INC.
1998 Stock Option Plan
----------------------
Section 1. Purpose. The purpose of this Fountain View, Inc. (the "Company")
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1998 Stock Option Plan (the "Plan") is to provide an incentive to certain
----
directors, employees and consultants of the Company and its subsidiaries by
providing an opportunity for them to participate in the ownership of the
Company. The Company and its direct and indirect subsidiaries are sometimes
referred to herein collectively as the "Related Companies."
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This plan provides for the grant of incentive stock options ("Incentive
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Stock Options"), as defined in Section 422 of the Internal Revenue Code of
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1986, as amended (the "Code"), and for the grant of non-qualified stock options
----
("Non-Qualified Options"), to certain directors, employees and consultants of
---------------------
the Related Companies. All such Incentive Stock Options and Non-Qualified
Options are sometimes hereinafter collectively referred to as "Options."
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Section 2. Administration of Plan. This Plan shall be administered by the
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Board of Directors of the Company (the "Board") or by a Stock Option Committee
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(the "Committee") designated by the Board. If administered by the Committee, a
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majority of the Committee shall constitute a quorum and acts of a majority of
the members present at any meeting at which a quorum is present, or acts
approved in writing by all members of the Committee shall be deemed to be valid
acts of the Committee. The Committee shall consist of directors who qualify as
"non-employee directors" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The Board and the Committee are
authorized to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations necessary or
advisable for its administration. If Options are intended to qualify as
Incentive Stock Options, the Board and the Committee shall so specify in the
grant of the Option.
Section 3. Shares Covered by Plan. Options may be granted under the Plan
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and while the Plan is in effect for the purchase of not in excess of 49,388
shares of the Series C Common Stock, $.01 par value per share, of the Company.
Shares covered by unexercised Options which are no longer exercisable for any
reason shall be available for issuance under Options hereunder for purposes of
computing the foregoing limitation, unless the Plan has been terminated. Shares
delivered on exercise of
Options may be from authorized and unissued stock or reacquired stock.
Section 4. Eligibility. The persons who shall be eligible to receive
--------- -----------
Incentive Stock Options pursuant to this Plan shall be such employees of the
Related Companies as the Board or the Committee shall select from time to time.
The persons who shall be eligible to receive Non-Qualified Options pursuant to
this Plan shall be such directors, employees and consultants of the Related
Companies as the Board or the Committee shall select from time to time. An
optionee under this Plan may hold more than one Option hereunder, but only on
the terms and conditions hereinafter set forth. Notwithstanding any of the
other provisions of this Plan, Options intended to qualify as Incentive Stock
Options shall not be granted hereunder to an individual who then owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, such ownership to be determined by application
of the applicable attribution rules under the Code, unless the Option price is
at least one hundred ten percent (110%) of the fair market value (at the time of
grant) of the Common Stock subject to the Option and such Option by its terms is
not exercisable after the expiration of five (5) years after the date the Option
is granted. For the purposes of this Section, stock owned directly or
indirectly, by or for a corporation, partnership, estate, or trust shall be
considered as being owned proportionately by or for its shareholders, partners,
or beneficiaries, and stock owned, directly or indirectly, by or for the
brothers and sisters (whether by whole or half blood), spouse, ancestors, and
lineal descendants of an optionee shall be considered to be owned by the
optionee.
Section 5. Allotment of Options and Number of Shares. The allotment of
--------- -----------------------------------------
Options among the eligible optionees, and the number of shares to be covered by
each Option to be granted, shall be determined by the Board or the Committee;
provided that no Option which is intended to qualify as an Incentive Stock
Option shall be granted to an optionee under this Plan if the grant of such
Option would cause the aggregate fair market value (determined at the time the
Option is granted) of the stock with respect to which Incentive Stock Options
(including such Option) are exercisable for the first time by such optionee
during any calendar year (under all such plans of the optionee's employer
corporation and its parent and subsidiary corporations, if any) to exceed
$100,000.
Section 6. Option Agreements. Each optionee to whom an Option is granted
--------- -----------------
shall enter into a written agreement with the Company, subject to such amendment
and modification from time to time as the Board or the Committee shall deem
necessary to comply with applicable law or regulation, setting forth the terms
and
-2-
conditions of the Option granted to such optionee, which agreement may contain
such terms, conditions and restrictions not inconsistent with the terms of the
Plan as the Board or the Committee shall approve, and specifying, to the extent
applicable, whether the Option granted pursuant hereto is intended to qualify as
an Incentive Stock Option.
Section 7. Option Price. The price to be paid by an optionee who
--------- ------------
exercises an Option shall be determined by the Board or the Committee. In the
case of any Option which is intended to qualify as an Incentive Stock Option,
such price shall in no instance be less than the fair market value of the Common
Stock on the date such Option is granted (or 110% of such fair market value, in
the circumstances described in Section 4). The Board or the Committee shall have
full authority to determine the fair market value of a share of Common Stock.
Section 8. Duration and Rate of Exercise of Options.
--------- ----------------------------------------
(a) The option period shall be fixed by the Board or the
Committee but in any event each Option intended to qualify as an Incentive
Stock Option shall by its terms not be exercisable later than the expiration of
ten (10) years from the date such Option is granted.
(b) The Board or the Committee shall determine the rate at and
conditions upon which each Option shall be exercisable.
(c) The Board or the Committee shall determine the method by
which each Option shall be exercised and the timing and form of the purchase
price to be paid by an optionee upon the exercise of an Option under the Plan.
In the Company's discretion, previously issued shares of Common Stock may be
accepted as payment in an amount equal to the then fair market value of the
surrendered shares. The Board or the Committee shall have full authority to
determine the fair market value of the surrendered shares. If the surrendered
share is traded on an exchange, such fair market value shall be the closing
price of the Common Stock on the exchange on which the Common Stock of the
Company is then listed, on the last day during which the Common Stock traded
prior to the date of exercise of the Options. If the share is traded in the
over-the-counter market such fair market value shall be based on the closing
average of the bid and asked prices of Common Stock as quoted by the National
Association of Securities Dealers.
(d) Unless otherwise provided in the agreement establishing an
Option, the term "Cause" with respect to the holder of an Option granted
-----
hereunder means that, in the good faith determination of the Board, the holder
of such Option has
-3-
(i) breached any of the holder's material fiduciary duties or material legal or
contractual obligations to any Related Company or any stockholder of the
Company, (ii) failed to perform satisfactorily the holder's material duties to
any Related Company (other than as a result of incapacity due to illness or
accident) after demand for performance has been made in writing by the Related
Company, (iii) engaged in misconduct which is injurious to any Related Company,
or (iv) been convicted of or pleaded nolo contendere to (A) any misdemeanor
relating to the affairs of a Related Company or (B) any felony.
(e) Unless otherwise provided in the agreement establishing an Option,
the term "Disability" with respect to the holder of an Option granted hereunder
----------
means illness (mental or physical) or accident which results in the holder being
unable to perform the holder's duties as an employee of a Related Company for
three months during any 12 month period.
Section 9. Nontransferability of Options. Each Option shall by its terms
--------- -----------------------------
not be transferable by the holder unless than by will or the law of descent and
distribution.
Section 10. Rights as Stockholder. An optionee shall have no rights as a
---------- ---------------------
stockholder with respect to any shares covered by such optionee's Options until
such optionee shall have become the holder of record of such shares, except as
otherwise provided in the Option Agreement entered into pursuant to Section 6
hereof.
Section 11. Granting of Options. The granting of any Option pursuant to
---------- -------------------
this Plan shall be entirely in the discretion of the Board or the Committee and
nothing herein contained shall be construed to give any director, employee or
consultant any right to participate under this Plan or to receive any Option
under it. The granting of an Option shall impose no duty upon the optionee to
exercise such Option.
Neither the adoption and maintenance of the plan nor the granting of an
Option pursuant to this Plan shall be deemed to constitute a contract of
employment between any of the Related Companies and any employee or to be a
condition of the employment of any person. Nothing herein contained shall be
deemed to (a) give to any director, employee or consultant the right to be
retained by any of the Related Companies or (b) interfere with the right of any
of the Related Companies to discharge or retire any director, employee or
consultant at any time.
Section 12. Stock Dividends, etc. In the event there is any change in the
---------- --------------------
shares of Common Stock of the Company through the declaration of stock dividends
or through any stock split, combinations, recapitalizations or similar
transactions, the number of shares available for Option and the shares subject
to
-4-
any option shall be appropriately adjusted, and in the Board's or the
Committee's discretion, in such cases, fractional parts of shares may be
disregarded.
Section 13. Sale. Except as otherwise provided in an option agreement
---------- ----
entered into pursuant to Section 6, in the event of a Sale (as hereinafter
defined) while unexercised Options remain outstanding, the Board or the
Committee, as the case may be, may in their discretion cause one or more of the
following provisions to apply:
(a) the Board or the Committee may, subject to the provisions of
Subsections (c) and (d) below, after the effective date of such Sale, permit
each person who is a holder of an outstanding Option immediately prior to such
effective date, upon exercise of such Option, to receive in lieu of shares of
Common Stock, shares of such stock or other securities or consideration as the
holders of shares of Common Stock received pursuant to the terms of the Sale;
(b) the Board or the Committee may waive any discretionary
limitations imposed pursuant to Section 8 hereof so that some or all Options,
from and after a date prior to the effective date of such Sale specified by the
Board or the Committee, are exercisable in full;
(c) the Board or the Committee may cause all outstanding
Options to be canceled as of the effective date of any such Sale, provided that
notice of such cancellation is given to each holder of an Option, and each
holder of an Option has the right to exercise such Option in full prior to or
contemporaneous with the effective date of such Sale; or
(d) the Board or the Committee may cause all outstanding
Options to be canceled as of the effective date of any such Sale, provided that
notice of such cancellation is given to each holder of an Option, and each
holder of an Option has the right to exercise such Option, to the extent then
exercisable in accordance with any discretionary limitations imposed pursuant to
Section 8, prior to or contemporaneous with the effective date of such Sale.
As used herein, "Sale" means (i) a sale of all or substantially all of the
----
consolidated assets of the Company or (ii) a sale or other transfer of Common
Stock of the Company, in one transaction or a series of related transactions,
or a consolidation or merger of the Company, as a result of which the beneficial
holders of a majority of the Company's Common Stock prior to such transaction
do not, directly or indirectly, hold beneficially a majority of the Company's
Common Stock after such transaction.
-5-
Section 14. Withholding. The Company may, upon exercise of a Non-Qualified
---------- -----------
Option or the making of a Disqualifying Disposition (as hereinafter defined),
require the holder of the option to pay additional withholding taxes in respect
of the amount that is considered compensation includable in such person's gross
income. Each person who receives an Incentive Stock Option shall notify the
Company in writing immediately upon such person making a Disqualifying
Disposition. As used herein, "Disqualifying Disposition" means any disposition
-------------------------
(including any sale) of stock received pursuant to the exercise of an Incentive
Stock Option before the later of (a) two years after such person was granted the
Incentive Stock Option under which such stock was acquired, or (b) one year
after such person acquired such stock by exercising the Incentive Stock Option.
Section 15. Use of Proceeds. The proceeds received by the Company from the
---------- ---------------
sale of stock pursuant to the Plan may be used by the Related Companies for
general corporate purposes.
Section 16. Amendment and Discontinuance. The Board of Directors may from
---------- ----------------------------
time to time alter, suspend or discontinue the Plan, provided, however, that no
-------- -------
such action shall materially impair the rights of an optionee without such
optionee's consent, other than as provided by Section 8(d), and provided,
--------
further, that no provision of Section 4, 5, or 7 hereof relating to Incentive
- -------
Stock Options shall be altered or amended without the approval of the
stockholders of the Company.
Section 17. Effective Date and Termination Date. The Plan shall become
---------- -----------------------------------
effective on August , 1998, and shall remain in effect until terminated by the
--
Board of Directors, provided that no Incentive Stock Options may be granted
after the tenth anniversary of such effective date.
The foregoing Plan was adopted by the Board of Directors of the Company on
August , 1998, and by the Company's stockholders on , 1998.
-- -------
-6-
[LETTERHEAD OF CHAPMAN AND CUTLER]
March 18, 1998
Via Overnight Mail
To the parties on the
Attached Distribution List
Re: Fountain View
Ladies and Gentlemen:
Attached please find a draft of the proposed Second Amendment to Credit
Agreement which provides for the amended "EBITDAR" definition described in Bank
of Montreal's summary letter (which is also enclosed). If acceptable, please
execute and return all eleven (11) of your signature pages to me. If you have
any questions, please do not hesitate to call me.
Very truly yours,
CHAPMAN AND CUTLER
/s/ Steven G. Hastings
By ___________________________________________
Steven G. Hastings
SGH:jm
Enclosure
DISTRIBUTION LIST
Ronald A. Launsbach Bill McKinley
Bank of Montreal Heritage Partners Management Company, Inc.
601 South Figueroa Street, Suite 4900 50 Rowes Wharf, Suite 300
Los Angeles, CA 90017 Boston, MA 02440
Tel: (213) 239-0602 Tel: (617) 428-0108
Fax: (213) 239-0609 Fax: (617) 439-0689
Paul Rathbun Sean Conlon
Fountain View, Inc. Paribas
2600 West Magnolia Boulevard 2029 Century Park East, Suite 3900
Burbank, CA 91505 Los Angeles, CA 90067
Tel: (310) 571-0351 Tel: (310) 551-7334
Fax: (310) 571-0365 Fax: (310) 556-3157
Peter Palladino, Esq. L. John Stewart
Choate, Hall & Steward BHF-Bank Aktiengesellschaft
Exchange Place 111 West Ocean Boulevard, Suite 1325
53 State Street Long Beach, CA 90802-4645
Boston, MA 02181 Tel: (562) 983-5006
Tel: (617) 248-5000 Fax: (562) 983-5015
Fax: (617) 248-4000
Lori Rosell Patrick Marsh
Finova Capital Corporation BHF-Bank Aktiengesellschaft
Healthcare Finance Division 5900 Madison Avenue
311 S. Wacker Drive, Suite 4400 New York, NY 10022
Chicago, IL 60606-6618 Tel: (212) 756-5553
Tel: (312) 322-3523 Fax: (212) 756-5536
Fax: (312) 322-3553
Michel Prince Brian Baldwin
Pilgrim America Prime Rate Trust Heller Financial, Inc.
Two Renaissance Square 500 West Monroe
40 North Central Avenue, Suite 1200 Chicago, IL 60661
Phoenix, AZ 85004-3444 Tel: (312) 441-7218
Tel: (602) 417-8212 Fax: (312) 441-7367
Fax: (602) 417-8327
Ron Watterworth Robert Tietjen
Union Bank of California Union Bank of California
44 South Figueroa Street, 10th Floor 5855 Topanga Canyon Blvd., Suite 200
Los Angeles, CA 90071 Woodland Hills, CA 91367
Tel: 213-236-7688 Tel: (818) 595-2096
Fax: 213-236-7635 Fax: (818) 595-2063
[LETTERHEAD OF BANK OF MONTREAL AND HARRIS BANK]
To: Fountain View Bank Group
Date: March 18, 1999
Re: $120MM Fountain View Bank Facility
The following requests your approval to amend the definition of "EBITDAR" in the
Company's $120 million credit agreement to allow for $6.903 million of "special
charges" to 4th quarter earnings. A brief analysis outlining the charges is
enclosed. This package will be followed by documentation, which should be
received by the Bank Group no later than Friday, March 19th.
We have planned a conference call with Fountain View management on Monday, March
22 at 8:30am (PST) to answer detailed questions. Conference call dial in
number: 1-877-322-9654; Access Code: 720436.
We request your response by returning your executed signature page via facsimile
to myself, at facsimile 213-239-0680, no later than Thursday, March 25, 1999.
Original executed signature pages should be returned to Steve Hastings at
Chapman & Cutler the next business day.
Steve Hastings
Chapman and Cutler
111 West Monroe Street
Chicago, IL 60603-4080
Tel: 312-845-3000
Also, we are planning a bank meeting on April 15th in Dallas, Texas. At that
time, the company will present its FY1999 budget. Details of that meeting will
follow shortly.
On behalf of the company we wish to thank you for your consideration. Please
direct questions to myself at 213-239-0602 or Mitsoo Iravani at 213-239-0609.
Sincerely,
Bank of Montreal, as Agent
/s/ Ronald Launsbach
- ------------------------------
Ronald Launsbach, Director
cc: Jeff Titus (w/o enclosures)
Paul Rathbun (w/o enclosures)
Bill McKinley (w/o enclosures)
FOUNTAIN VIEW, INC.
YEAR END SPECIAL CHARGES - 1998
(In $000)
MEDICARE 3,560
- -------- -----
Adjustments represent a revision of estimates previously utilized to record the
Medicare settlements. At this point, filed or pre-filed cost reports were
available to assist in the refinement of these estimates. Although no specific
intermediary issues impacted this number, the Company is recording these amounts
in light of the increased scrutiny by intermediaries of cost report items in
general.
Bad Debts 1,600
- --------- -----
The Company has adopted a more conservative approach in providing allowances for
doubtful accounts. This approach is warranted due to changes within the industry
and should serve as a better model to estimate these items on a go-forward
basis.
Palm Grove 1,733
- ---------- -----
There has been a significant increase in the regulatory focus within the
long-term care industry. The company has recorded a liability to estimate the
cost of the decertification of one of its facilities (Palm Grove) from Medicare
and Medicaid programs. The Company is appealing the decision and working with
HCFA and its representatives to recertify the facility. The Company strongly
feels that it is providing high quality care to its patients and believes that
this case represents an unreasonable reaction to the underlying facts and
circumstances of this case.
MedPartners 300
- ----------- ---
The Company recorded an estimate of the potential loss due to the bankruptcy
filing of MedPartners. The company is working diligently to minimize this
potential risk.
Other (290)
- ----- -----
Represents the net amount of several small adjustment areas.
TOTAL CHARGES 6,903*
*Note: The special charges are added back to EBITDA for QE 12/98 - as recorded
in the covenant calculations shown in the following pages.
FOUNTIAN VIEW, INC.
YEAR END DEBT COVENANTS
1998
Projected Leverage Ratio: Leverage Leverage
TTM Funded Ratio Ratio
EBITDA Rent EBITDAR EBITDAR Debt Projected Required
------ ---- ------- ------- ---- --------- --------
QE 3/98 10,681 1,717 12,398
QE 6/98 10,049 1,705 11,754
QE 9/98 10,138 1,706 11,844
QE 12/98 11,594 1,707 13,301 49,297 307,379 6.24 6.50
QE 3/99 10,500 1,707 12,207 49,106 300,749 6.12 6.25
QE 6/99 11,000 1,707 12,707 50,059 297,852 5.95 6.25
QE 9/99 11,500 1,707 13,207 51,422 292,951 5.70 6.00
QE 12/99 12,000 1,707 13,707 51,828 291,025 5.62 6.00
QE 3/00 12,200 1,707 13,907 53,528 285,795 5.34 5.50
QE 6/00 12,500 1,707 14,207 55,028 282,648 5.14 5.50
QE 9/00 12,700 1,707 14,407 56,228 276,197 4.91 5.00
QE 12/00 12,900 1,707 14,607 57,128 273,950 4.80 5.00
Projected Funded Debt:
QE12/98 QE3/99 QE6/99 QE9/99 QE12/99 QE3/00 QE6/00 QE9/00 QE12/00
------- ------- ------- ------- ------- ------- ------- ------- -------
Revolver 18,661
Term 90,000
Bonds 120,000
Cap leases 20,228
LOCs 500
-------
subtotal 249,389 244,389 242,139 236,889 234,989 229,739 227,239 221,089 218,589
Accrued Interest -beg 7,758 3,366 6,736 3,339 6,688 3,312 6,682 3,285 6,634
Changes in int accrual (4,392) 3,370 (3,397) 3,349 (3,376) 3,370 (3,397) 3,349 (3,397)
------- ------- ------- ------- ------- ------- ------- ------- -------
Accrued Interest -end 3,366 6,736 3,339 6,688 3,312 6,682 3,285 6,634 3,237
Rent(past 4qtrs) 54,624 54,624 54,624 54,624 54,624 54,624 54,624 54,624 54,624
Total funded debt
before paydown 307,379 305,749 300,102 298,201 292,925 291,045 285,148 282,347 276,450
Required debt paydown - - 1,250 1,250 1,250 1,250 2,500 2,500 2,500
Additional debt paydown - 5,000 1,000 4,000 650 4,000 - 3,650 -
------- ------- ------- ------- ------- ------- ------- ------- -------
5,000 2,250 5,250 1,900 5,250 2,500 6,150 2,500
Total funded debt 307,379 300,749 297,852 292,951 291,025 285,795 282,648 276,197 273,950
FOUNTAIN VIEW, INC.
YEAR END DEBT COVENANTS
1998
Projected Senior Leverage Ratios:
Senior Senior
Leverage Leverage
TTM Funded Ratio Ratio
EBITDA Rent EBITDAR EBITDAR Debt Projected Required
------ ---- ------- ------- ---- --------- --------
QE 3/98 10,681 1,717 12,398
QE 6/98 10,049 1,705 11,754
QE 9/98 10,138 1,706 11,844
QE 12/98 11,594 1,707 13,301 49,297 187,379 3.80 4.50
QE 3/99 10,500 1,707 12,207 49,106 180,749 3.68 4.00
QE 6/99 11,000 1,707 12,707 50,059 177,852 3.55 4.00
QE 9/99 11,500 1,707 13,207 51,422 172,951 3.36 3.75
QE 12/99 12,000 1,707 13,707 53,828 171,025 3.30 3.75
QE 3/00 12,200 1,707 13,907 53,528 165,795 3.10 3.50
QE 6/00 12,500 1,707 14,207 55,028 162,648 2.96 3.50
QE 9/00 12,700 1,707 14,407 56,228 156,197 2.78 3.50
QE 12/00 12,900 1,707 14,607 57,128 153,950 2.69 3.50
Projected Funded Debt:
QE 12/98 QE 3/99 QE 6/99 QH 9/99 QE 12/99 QE 3/00 QE 6/00 QE 9/00 QH 12/00
-------- ------- ------- ------- -------- ------- ------- ------- --------
Revolver 18,661
Term 90,000
Bonds 120,000
Cap Indexes 20,228
LOCs 500
-------
subtotal 249,389 244,339 242,139 236,119 234,989 229,739 227,239 221,089 218,589
Accrued Interest-beg 7,758 3,366 6,736 3,339 6,688 3,312 6,682 3,285 6,694
Changes in int accrual (4,392) 3,370 (3,397) 3,349 (3,376) 3,370 (3,397) 3,349 (3,397)
------- ------- ------- ------- ------- ------- ------- ------- -------
Accrued Interest-end 3,366 6,736 3,539 6,688 3,312 6,682 3,285 6,634 3,237
Rent(past 4qtrs) 54,624 54,624 54,624 54,624 54,624 54,624 54,624 54,624 54,624
Total funded debt
before paydown 307,379 305,749 300,102 298,201 292,925 291,045 285,148 282,347 276,450
Required debt paydown - - 1,250 1,250 1,250 1,250 2,500 2,500 2,500
Additional debt paydown - 5,000 1,000 4,000 650 4,000 - 3,650 -
------- ------- ------- ------- ------- ------- ------- ------- -------
5,000 2,250 5,250 1,900 5,250 2,500 4,150 2,500
Total funded debt 307,379 300,749 297,852 292,951 291,025 285,795 282,648 276,197 273,950
Bonds 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000
------- ------- ------- ------- ------- ------- ------- ------- -------
Total senior
funded debt 187,379 180,749 177,852 172,951 171,025 165,795 162,648 156,197 153,950
FOUNTAIN VIEW, INC.
YEAR END DEBT COVENANTS
1998
4QS 4QS
FIXED INCOME
Projected Fund Charge Ratio: TIM ASSED TAXES
EBITDA RENT EBITDAR EBITDAR MAINT PAID
------- ---- ------- ------- ----- ----
QE 3/98 10,681 1,717 12,398
QE 6/98 10,049 1,705 11,754
QE 9/98 10,131 1,706 11,844
QE 12/98 11,594 1,707 13,301 49,297 5,489 -
QE 3/99 10,500 1,707 12,207 49,106 4,158 400
QE 6/99 11,000 1,707 12,707 50,055 3,781 800
QE 9/99 11,500 1,707 13,207 51,422 3,465 1,200
QE 12/99 12,000 1,707 13,707 51,828 3,150 1,600
QE 3/00 12,200 1,707 13,907 53,528 3,038 2,100
QE 6/00 12,500 1,707 14,207 55,028 2,925 2,160
QE 9/00 12,700 1,707 14,407 56,228 2,813 3,100
QE 12/00 12,900 1,707 14,607 57,128 2,700 3,600
Fixed Fixed
4Qs 4Qs 4Qs Charge Charge
Projected Fund Charge Ratio: Principal Interest Rent Ratio Ratio
Payments Expenses Expense Projected Required
-------- -------- --------- --------- ---------
QE 3/98
QE 6/98
QE 9/98
QE 12/98 43,104 - 19,147 6,835 25,982 1.69 1.15
QE 3/99 44,548 - 20,360 6,825 27,185 1.64 1.15
QE 6/99 45,478 1,250 21,573 6,827 29,650 1.53 1.15
QE 9/99 46,757 2,500 22,716 6,828 32,114 1.46 1.15
QE 12/99 47,078 3,758 24,000 6,828 34,578 1.36 1.15
QE 3/00 48,391 5,000 23,750 6,828 35,578 1.36 1.15
QE 6/00 49,503 6,250 23,500 6,828 36,578 1.35 1.15
QE 9/00 50,316 7,500 23,250 6,828 37,578 1.34 1.15
QE 12/00 50,828 8,750 23,008 6,828 38,578 1.32 1.15
Projected Funded Debt:
QE 12/98 QE 3/99 QE 6/99 QE 9/99 QE 12/99
-------- ------- ------- ------- --------
Revolver 18,661
Term 90,000
Bonds 120,000
Cap leases 20,228
LOCs 500
--------
subtotal 249,389 244,589 242,139 236,889 234,989
Accrued Interest-beg 7,751 3,366 6,736 3,339 6,688
Change in int.accrued (4,392) 3,370 (3,397) 3,349 (3,376)
-------- ------- ------- ------- -------
Accrued Interest-end 3,366 6,736 3,339 6,688 3,312
Rent (past 4qts)*R 54,624 54,624 54,624 54,624 54,624
Total funded debt before paydown 307,379 305,749 300,102 298,201 292,925
Required debt paydown - - 1,250 1,250 1,250
Additional debt paydown - 5,000 1,000 4,000 650
------- ------- ------- ------- -------
5,000 2,250 5,250 1,900
Total funded debt 307,379 300,749 297,852 292,951 291,025
Capital Expenditures 2,451 1,750 1,750 1,750 1,750
% Maintenance 0.45 0.45 0.45 0.45 0.45
------- ------- ------- ------- -------
1,103 788 788 788 788
Projected Funded Debt:
QE 3/00 QE 6/00 QE 9/00 QE 12/00
------- ------- ------- --------
subtotal 229,739 227,239 221,089 218,589
Accrued Interest-beg 3,312 6,682 3,285 6,634
Change in int accrued 3,378 (3,397) 3,349 (3,397)
------- ------- ------- -------
Accrued Interest-end 6,682 3,285 6,634 3,237
Rent (past 4 qts)*R 54,624 54,624 54,624 54,624
Total funded debt before paydown 291,045 285,148 282,347 276,490
Required debt paydown 1,250 2,500 2,500 2,500
Additional debt paydown 4,000 - 3,650 -
------- ------- ------- -------
5,250 2,500 6,150 2,500
Total funded debt 285,795 282,619 276,197 273,950
Capital Expenditures 1,500 1,500 1,500 1,500
% Maintenance 0.45 0.45 0.45 0.45
------- ------- ------- -------
675 675 675 675