[Governing rights between
Senior Lender and Junior
Lenders]
Exhibit 10.19
INTERCREDITOR AGREEMENT
-----------------------
THIS INTERCREDITOR AGREEMENT (this "Agreement") is made and
entered into as of January 30, 1998, among (i) Genesis Health Ventures, Inc.,
a Pennsylvania corporation ("Genesis"), in its capacity as a senior lender
(together with its successors and assigns, the "Senior Lender"), (ii) ET
Capital Corp., a Delaware corporation ("ET Capital"), (iii) Genesis, in its
capacity as a junior lender (together with ET Capital and their successors and
assigns, the "Junior Lenders"), (iv) ET Capital, in its capacity as agent for
the Junior Lenders (the "Junior Agent"), (v) Genesis, in its capacity as
collateral agent for the Senior Lender and the Junior Lenders (the "Master
Collateral Agent"), (vi) Age Institute of Florida, Inc., a Florida non-profit
corporation (the "Borrower") and (vii) Genesis Eldercare Network Services,
Inc., a Pennsylvania corporation (the "Manager") (with respect to Section 31
hereof).
WHEREAS, Genesis, as Senior Lender, and the Borrower entered
into that certain Acquisition Loan and Security Agreement, dated as of August
31, 1996, as amended (the "Acquisition Loan Agreement"), pursuant to which the
Senior Lender agreed to make a loan to the Borrower in the original principal
amount of $45,000,000 (the "Acquisition Loan") and the Borrower granted the
Senior Lender a first priority security interest in the Facilities Collateral
(as hereinafter defined) and a second priority security interest in the
Accounts Receivable Collateral (as hereinafter defined) to secure its
obligations in connection with the Acquisition Loan;
WHEREAS, the Acquisition Loan was evidenced by a Promissory
Note dated August 31, 1996 by Borrower payable to the order of the Senior
Lender in the principal amount of $45,000,000;
WHEREAS, Genesis, as Junior Lender, and the Borrower also
entered into that certain Working Capital Loan and Security Agreement, dated
as of August 31, 1996, as amended (the "Working Capital Loan Agreement"),
pursuant to which Genesis agreed to make loans to the Borrower in the
aggregate principal amount of $10,000,000 (the "Working Capital Loan") and the
Borrower granted Genesis a first priority security interest in the Accounts
Receivable Collateral to secure its obligations in connection with the Working
Capital Loan;
WHEREAS, the Working Capital Loan was evidenced by a
Promissory Note, dated August 31, 1996, made by Borrower payable to the order
of Genesis in the principal amount of $10,000,000 (the "Working Capital
Note");
WHEREAS, simultaneously with the execution and delivery of
the Acquisition Loan Agreement and the Working Capital Loan Agreement, the
Borrower and Genesis also entered into a separate Security Agreement, dated as
of August 31, 1996, as amended (the "Security Agreement"), whereby the
Borrower granted Genesis a security interest in all of its accounts,
inventory, equipment and general intangibles to secure the obligations of the
Borrower under both the Acquisition Loan and the Working Capital Loan
(collectively, the "Working Capital Loan Documents");
WHEREAS, the Borrower also entered into that certain
Mortgage, Assignment of Rents and Security Agreement, dated as of August 31,
1996, as amended (the "Senior Mortgage"), whereby the Borrower granted the
Senior Lender a mortgage and security interest in the Facilities (as
hereinafter defined) and in certain other property to secure the obligations
of the Borrower in connection with the Acquisition Loan;
WHEREAS, the Manager performs management services to the
Facilities (as hereinafter defined) pursuant to that certain Management
Agreement, dated as of August 31, 1996 (as amended, modified, renewed,
restated or substituted from time to time, the "Management Agreement"), among
Genesis, the Borrower and the Manager;
WHEREAS, pursuant to an Assignment and Assumption Agreement,
dated as of the date hereof (the "Assignment"), among the Junior Lenders, the
Junior Agent and the Borrower, ET Capital agreed to purchase, and Genesis
agreed to sell, an interest in the Working Capital Note in the amount of
$7,500,000, and ET Capital was appointed as agent for the Junior Lenders;
WHEREAS, in connection with the Assignment, the Borrower is
amending and restating the Working Capital Note so that it is evidenced by (i)
an Amended and Restated Promissory Note payable to the order of Genesis in the
principal amount of $2,500,000 (the "$2.5 Million Note") and (ii) an Amended
and Restated Promissory Note payable to the order of ET Capital in the
principal amount of $7,500,000 (the "$7.5 Million Note"), each of which
continues to be secured as set forth in the Working Capital Loan Documents and
in the Assignment;
WHEREAS, the Borrower and the Junior Lenders have also
entered into an Amendment to Working Capital Loan and Security Agreement,
dated as of the date hereof, pursuant to which the Junior Lenders have agreed
to extend the maturity date of the Working Capital Loan;
WHEREAS, in consideration thereof and for other good and
valuable consideration, the Borrower has entered into that certain Second
Mortgage, Assignment of Rents and Security Agreement, dated as of the date
hereof (the "Junior Mortgage"), whereby the Borrower granted the Junior Agent
for the benefit of the Junior Lenders a second priority mortgage and security
interest in the Facilities and certain other property to secure the
obligations of the Borrower in connection with the Working Capital Loan;
2
WHEREAS, on the date hereof, the Borrower and the Senior
Lender entered into an Amendment to Acquisition Loan and Security Agreement,
which, among other things, reduced the principal amount of the Acquisition
Loan to $40,000,000, and Borrower executed and delivered an Amended and
Restated Promissory Note, dated the date hereof, payable to the order of the
Senior Lender in the principal amount of $40,000,000 (the "Acquisition Note");
WHEREAS, Genesis, the Borrower and the Master Collateral
Agent have entered into an Assignment and Amendment to the Security Agreement,
dated as of the date hereof (the "Amendment to Security Agreement") pursuant
to which Genesis has assigned all of its rights and obligations as a secured
party under the Security Agreement to the Master Collateral Agent for the
benefit of the Senior Lender and the Junior Lenders, subject to the terms and
provisions of this Agreement;
WHEREAS, the parties are entering into this Agreement in
order to define the existing relative rights and security interest priorities
between the Senior Lender and the Junior Lenders and to appoint Genesis as the
Master Collateral Agent to act on behalf of the Senior Lender, the Junior
Lenders, and the Junior Agent; and
WHEREAS, in connection with all of the foregoing, the
Manager has agreed to subordinate its rights to the payment of a portion of
its management fees upon a default of any of the Borrowers' obligations under
the Senior Note or the Subordinated Notes.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms have the
following meanings:
"Accounts Receivable Collateral" means all of Borrower's
Gross Patients Accounts Receivable and other personal property utilized in the
Facilities or in connection with the operation thereof, tangible or
intangible, whether now or hereafter acquired, and all proceeds and products
thereof, together with all documents, contracts, guarantees, books and
records, processing cards, tapes, tabulating runs, programs and similar
material related thereto.
"Acquisition Loan Documents" means the Acquisition Loan
Agreement, the Senior Note, the Security Agreement, the Senior Mortgage and
all other agreements, instruments and documents executed and/or delivered in
connection therewith, as such documents may be amended, renewed, modified,
extended, assigned, refinanced or replaced from time to time.
3
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Collateral" means, collectively, the Accounts Receivable
Collateral, the Facilities Collateral, the "Collateral" as defined in the
Security Agreement, which includes all of the Borrower's existing or hereafter
acquired Accounts, Inventory, Equipment and General Intangibles (all as
defined in the Security Agreement) and proceeds thereof and all of the
"Property" as defined in the Senior Mortgage and the Junior Mortgage, and any
and all proceeds of the foregoing.
"Facilities" means the eleven health care facilities located
in the Counties of Pinellas, Polk, Volusia, Bay and Okaloosa in the State of
Florida owned by Borrower and as described in the Acquisition Loan Agreement.
"Facilities Collateral" means the Facilities and all
proceeds and products thereof, together with all documents, contracts,
guarantees, books and records, processing cards, tapes, tabulating runs,
programs and similar material related thereto.
"Gross Patients Accounts Receivable" means all accounts
receivable of Borrower, including all rights of Borrower, if any, arising from
the payment for goods sold or leased or for services rendered with respect to
the Facilities, including, without limitation, (i) all accounts arising from
the operation of the Facilities and (ii) all rights to payment from the
Medicare program, Medicaid program or similar state or federal programs,
boards, bureaus or agencies and rights to payments from patients or private
insurers and others arising from the operation of their businesses, including
rights to payment from Reimbursement Contracts. Gross Patients Accounts
Receivable shall include the proceeds of the foregoing (whether cash or
noncash, movable or immovable, tangible or intangible) received from the sale,
exchange, transfer, collection or other disposition or substitution thereof
but, shall not include, (i) gifts, grants, bequests, donations and/or
contributions made to Borrower and (ii) with respect to reimbursements from
Medicare or Medicaid or like programs, not those accounts receivable in excess
of allowable reimbursement amounts.
"Person" means any individual, corporation, association,
partnership, limited liability company, joint venture, cooperative,
foundation, trust or other organization, any individual, and any government,
any political subdivision thereof, and any agency of any such government or
political subdivision.
4
"Senior Indebtedness" means all present and future
obligations, liabilities and indebtedness of the Borrower of every type and
nature, currently or hereafter due, incurred or created, arising under or in
connection with the Acquisition Loan Documents, including, without limitation,
all principal and interest provided for in the Acquisition Loan Documents
(including, without limitation, interest arising prior to and after the
commencement of any bankruptcy or similar proceeding in which the Borrower is
the debtor, whether or not such interest is an allowed claim in such
proceeding) and all fees, premiums, charges, expenses, indemnities and other
amounts payable under or incidental to the Acquisition Loan Documents,
including as such obligations, liabilities and indebtedness may be amended,
renewed, modified, extended, assigned, refinanced or replaced from time to
time.
"Senior Note" means the Acquisition Note and any amendments,
renewals, replacements, extensions, modifications, refinancings or assignments
thereof.
"Senior Noteholder" means the Senior Lender, in its capacity
as holder of the Senior Note and the Senior Indebtedness, and any other Person
acquiring all or any part of the Senior Note or the Senior Indebtedness;
provided, however, that neither the Borrower nor any Affiliate of the Borrower
or their successors or assigns shall have any rights otherwise available to
the Senior Noteholder under this Agreement in the event that any such party
acquires all or any part of the Senior Note or the Senior Indebtedness.
"Subordinated Indebtedness" means all present and future
obligations, liabilities and indebtedness of the Borrower of every type and
nature, currently or hereafter due, incurred or created, arising under or in
connection with the Working Capital Loan Documents, including, without
limitation, all principal and interest provided for in the Working Capital
Loan Documents and all fees, premiums, charges, expenses, indemnities and
other amounts arising under or incidental to the Working Capital Loan
Documents, as such obligations, liabilities and indebtedness may be amended,
renewed, modified, extended, assigned, refinanced or replaced from time to
time, subject to the provisions of this Agreement.
"Subordinated Noteholders" means the Junior Lenders, in
their capacity as holders of the Subordinated Notes and the Subordinated
Indebtedness, and any other Person acquiring all or any part of the
Subordinated Notes or the Subordinated Indebtedness; provided, however, that
neither the Borrower nor any Affiliate of the Borrower or their successors or
assigns shall have any rights otherwise available to the Subordinated
Noteholders under this Agreement in the event that any such party acquires all
or any part of the Subordinated Notes or the Subordinated Indebtedness.
5
"Subordinated Notes" means, collectively, the $2.5 Million
Note and the $7.5 Million Note, and any amendments, renewals, replacements,
extensions, modifications or assignments thereof.
"Working Capital Loan Documents" means the Working Capital
Loan Agreement, the Subordinated Notes, the Security Agreement, the Junior
Mortgage and all other agreements, instruments and documents executed in
connection therewith, as such documents may be amended, renewed, modified,
extended, assigned, refinanced or replaced from time to time.
2. CONSENTS OF HOLDERS.
Notwithstanding any of the terms or provisions of the
Working Capital Loan Documents, each Subordinated Noteholder, by its
acceptance of a Subordinated Note, does hereby ratify and acknowledge the
existence of the Senior Indebtedness and the liens securing the Senior
Indebtedness and the obligations of the Borrower in connection with the
Acquisition Loan Documents. Each Subordinated Noteholder further agrees that
(i) such Subordinated Noteholder will not challenge the liens and security
interests securing payment of the Senior Indebtedness, (ii) as between the
Senior Noteholders and such Subordinated Noteholder, the terms of this
Agreement shall govern, even if part or all of the Senior Indebtedness or any
liens or security interest securing payment thereof are avoided, disallowed,
set aside or otherwise invalidated, and (iii) to the extent that any of the
terms and provisions of this Agreement may be inconsistent with any of the
terms or provisions of the Acquisition Loan Documents or the Working Capital
Loan Documents, such terms and provisions shall be deemed to be superseded,
and the terms of this Agreement shall govern.
3. PRIORITY OF LIENS.
As long as all or any portion of the Senior Indebtedness
remains outstanding, unpaid, defeasible or unsatisfied, each of the
Subordinated Noteholders agrees that, notwithstanding any provision to the
contrary in any of the Acquisition Loan Documents or the Working Capital Loan
Documents and irrespective of the time, order or method of perfection,
creation or attachment of any security interests or liens in the Collateral,
(i) the interests and liens of the Senior Noteholders in all of the Collateral
are, and shall be deemed to be, prior and senior to any interests or liens the
Subordinated Noteholders or the Junior Agent may have in the Collateral, (ii)
the interests and liens of the Subordinated Noteholders and the Junior Agent
in the Collateral are, and shall be deemed to be, junior, subject and
subordinate in all respects to the interests and liens of the Senior
Noteholders in the Senior Note and (iii) the Subordinated Noteholders shall
refrain from exercising any remedy under the Working Capital Loan Documents,
including acceleration of the indebtedness under said Notes, and shall refrain
from taking any action to foreclose upon, acquire title to (by bidding at
foreclosure or otherwise), take possession of, liquidate or proceed against
any of the Collateral.
6
4. SUBORDINATION OF PAYMENT AND OTHER RIGHTS.
Each of the Borrower and the Subordinated Noteholders
covenants and agrees (and each such Subordinated Noteholder by its acceptance
of a Subordinated Note confirms) that all rights of each present and future
Subordinated Noteholder to payments or distributions of any kind or character
under or in respect of the Subordinated Indebtedness are hereby expressly
subordinated, to the extent and in the manner set forth in this Agreement, to
the prior indefeasible payment in full in cash or cash equivalents of all
Senior Indebtedness in accordance with the terms thereof. Each of the Borrower
and Subordinated Noteholders confirm all of the Senior Noteholder's rights
under the Acquisition Loan Documents, and specifically, the right to control
the application of any insurance and condemnation proceeds as set forth more
fully therein, and acknowledge that, to the extent Borrower is required to
obtain Senior Lender's consent to any act under the Acquisition Loan
Documents, the decision of the Senior Lender with respect thereto shall be
binding on the Junior Lenders.
5. LIQUIDATION, ETC.
(a) Upon any payment or distribution of any assets of the
Borrower of any kind or character, whether in cash, property or securities
(including, without limitation, payments or distributions payable to the
Subordinated Noteholders by virtue of the terms of any indebtedness which is
subordinated in right of payment to Subordinated Indebtedness (a "Junior
Subordinated Payment")), by set-off or otherwise, to creditors upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Borrower, as the case may be, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other similar proceedings or upon an
assignment for the benefit of creditors, or any other marshaling of its assets
and liabilities (referred to herein as a "Proceeding"), the holders of Senior
Indebtedness shall first be entitled to receive payment in full in cash or
cash equivalents, in accordance with the terms of the Senior Indebtedness, of
all amounts payable under or in respect of the Senior Indebtedness, before any
payment or distribution is made on, or in respect of, any Subordinated
Indebtedness; and, upon any such Proceeding, any distribution or payment to
which the Subordinated Noteholders would be entitled except for the provisions
hereof, shall be paid by the Borrower, or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution directly to the Master Collateral Agent for the benefit of the
Senior Noteholders to the extent necessary to pay all such Senior Indebtedness
in full, after giving effect to any concurrent payment or distribution to the
Senior Noteholders, and notwithstanding whether all or any portion of the
Senior Indebtedness is deemed to be unsecured in any such proceeding.
7
(b) If, notwithstanding the foregoing, in any Proceeding any
Junior Subordinated Payment or other payment or distribution of any assets of
the Borrower, as the case may be, of any kind or character, whether in cash,
property or securities, by set-off or otherwise, shall be received by any
Subordinated Noteholder before all Senior Indebtedness is indefeasibly paid in
full in cash or cash equivalents, such payment or distribution shall be
received (whether or not such payment or distribution shall have been made in
accordance with a plan of reorganization or arrangement approved in bankruptcy
or other proceedings) in trust on behalf of the Senior Noteholders and shall
be paid over to the Master Collateral Agent on behalf of the Senior
Noteholders for application to the payment of all Senior Indebtedness
remaining unpaid until such Senior Indebtedness shall have been indefeasibly
paid in full in cash or cash equivalents, after giving effect to any
concurrent payment or distribution to the Senior Noteholders. In the event of
the failure of any Subordinated Noteholder to endorse or assign to the Master
Collateral Agent any such payment or distribution, the Master Collateral Agent
is hereby irrevocably authorized to endorse or assign the same on behalf of
such holder.
(c) For purposes of this Section 5 only, the words "any
payment or distribution of any assets of the Borrower of any kind or
character, whether in cash, property or securities" shall not be deemed to
include a distribution of securities of the Borrower provided for by a plan of
reorganization or readjustment authorized by an order or decree of a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or of any other corporation provided for by such plan of
reorganization or readjustment authorized by an order or decree of a court of
competent jurisdiction which securities are subordinate in right of payment to
all then outstanding Senior Indebtedness at least to the same extent as the
Subordinated Indebtedness is so subordinate as provided in this Agreement.
(d) Notwithstanding any statute, including, without
limitation, the United States Bankruptcy Code and any state bankruptcy law,
any rule of law or any bankruptcy procedure to the contrary, to the extent
permitted by applicable usury limitations, the right of the holders of Senior
Indebtedness to have all of the Senior Indebtedness indefeasibly paid and
satisfied in full prior to the payment of any of the Subordinated Indebtedness
shall include, without limitation, the right of Senior Noteholders to be paid
in full all interest accruing (or that would have accrued in the absence of
such statute, rule, law or procedure at any time) on such obligations prior to
any payment or distribution to the Subordinated Noteholders by or out of the
assets of the Borrower. To the extent that the Senior Noteholders would not be
entitled to the interest referenced in the preceding sentence under such
statute, rule or procedure, then the difference between the amount to which
they are entitled under this paragraph and the amount to which they otherwise
would be entitled under such statute, rule or procedure, shall be paid from
amounts otherwise due to the Subordinated Noteholders, and the total amounts
to be paid to the Subordinated Noteholders shall be reduced accordingly.
8
(e) To enable the Master Collateral Agent to enforce the
rights of the Senior Noteholders hereunder in any Proceeding, the Master
Collateral Agent is hereby irrevocably authorized and empowered, in its
discretion (i) to make and present such proofs of claim against the Borrower
on account of the Subordinated Indebtedness as it may deem expedient or
proper, and (ii) to receive and collect on behalf of the Senior Noteholders
any and all dividends and other payments or distributions made thereon in
whatever form the same may be paid; and upon the request of the Master
Collateral Agent, each Subordinated Noteholder shall execute and deliver to
the Master Collateral Agent, Senior Noteholders or their authorized
representatives such powers of attorney, assignments and other documents and
instruments as such holders or representatives may request, consistent with
this Agreement. Nothing contained in this Section 5(e) or elsewhere in this
Agreement shall be construed to give the Master Collateral Agent or the Senior
Noteholders any right to vote with respect to the treatment of the
Subordinated Indebtedness or any claim thereunder, or any portion of such
Subordinated Indebtedness or such claim, in any Proceeding, whether in
connection with any resolution, arrangement, plan of reorganization,
compromise, settlement, election of a trustee or otherwise.
6. DEFAULT.
(a) In the event that any Senior Payment Default (as defined
below) shall have occurred and shall be continuing, then, effective at such
time as the Borrower first receives notice or acquires actual knowledge of the
occurrence of such Senior Payment Default, no payment or distribution of any
kind, whether in cash, property or securities (including, without limitation,
any Junior Subordinated Payment), by set-off or otherwise, shall be made on,
or in respect of, any Subordinated Indebtedness or for the acquisition,
retirement, repurchase, redemption or defeasance thereof unless and until the
Senior Noteholder provides written notice to the Junior Noteholders that such
Senior Payment Default shall have been cured or waived in accordance with the
terms of the Senior Indebtedness, or that all amounts then due and payable in
respect of Senior Indebtedness shall have been paid in full, or provision
shall have been made for such payment in cash or cash equivalents in a manner
satisfactory to the Senior Noteholders. "Senior Payment Default" means any
default in the payment when due of any Senior Indebtedness, whether at its
stated maturity, upon acceleration or otherwise.
(b) In the event that any Senior Nonmonetary Default (as
defined below) shall have occurred and shall be continuing, then, upon receipt
by the Borrower of written notice (a "Nonmonetary Default Notice") of such
Senior Nonmonetary Default from any Senior Noteholder or any representative of
such a holder, no Junior Subordinated Payment or other payment or distribution
9
of any kind, whether in cash, property or securities, by set-off or otherwise,
shall be made on, or in respect of, any Subordinated Indebtedness or for the
acquisition, retirement, repurchase, redemption or defeasance of any
Subordinated Indebtedness during the period (the "Payment Blockage Period")
commencing on the date such Nonmonetary Default Notice is given and ending on
the earlier of (i) the date on which the Senior Noteholders that issued such
Nonmonetary Default Notice provide written notice to the Borrower that such
Senior Nonmonetary Default has been cured or waived in accordance with the
terms of the Senior Indebtedness or has been rescinded or annulled or the
Senior Indebtedness to which such Senior Nonmonetary Default relates has been
fully discharged in a manner satisfactory to the Senior Noteholders (which
notice shall be provided promptly by the applicable Senior Noteholders), or
(ii) the 179th day after the date such Nonmonetary Default Notice is given,
after which date ordinary, periodic payments to the Junior Noteholders as
provided for in the Working Capital Loan Documents may resume in accordance
with the terms thereof. "Senior Nonmonetary Default" means the occurrence or
existence and continuance of any event of default, other than a Senior Payment
Default, permitting one or more Senior Noteholder to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise
become due and payable.
(c) If, notwithstanding the foregoing, any Subordinated
Noteholder shall receive any payment or distribution of any assets of the
Borrower of any kind or character, whether in cash, property or securities
(including, without limitation, any Junior Subordinated Payment), by set-off
or otherwise, in violation of this Section 6, then such cash, property or
securities shall be held in trust by the recipient thereof on behalf of the
Senior Noteholders and shall be paid over to the Master Collateral Agent
acting for the benefit of the Senior Noteholders for application to the
payment of all Senior Indebtedness until all Senior Indebtedness shall have
been indefeasibly paid in full in cash or cash equivalents, after giving
effect to any concurrent payment or distribution to the Senior Noteholders. In
the event of the failure of any Subordinated Noteholders to endorse or assign
to the Master Collateral Agent any such payment or distribution, the Master
Collateral Agent is hereby irrevocably authorized to endorse or assign the
same on behalf of any Subordinated Noteholder.
(d) The provisions of this Section 6 shall not apply to any
payment or distribution by the Borrower in any Proceeding (such amounts and
distributions being subject to Section 5).
7. PERMITTED PAYMENTS; LIMITS ON RECOURSE FOR PAYMENT
OF SUBORDINATED INDEBTEDNESS.
Until and unless a Senior Payment Default has occurred or a
Payment Blockage Period is in effect, the Borrower may make and the
Subordinated Noteholders may receive Interest Payments (as hereinafter
defined) as the same become due and payable. For purposes of this Section 7,
10
"Interest Payments" means the payments of interest which are due on the
outstanding principal amount of the Working Capital Loan, and shall in no
event be deemed to refer to any late charges or default interest or any other
premium, fees, costs or other payments. Until such time as all Senior
Indebtedness is indefeasibly paid in full in cash or cash equivalents, and
regardless of whether all or any portion of the Subordinate Debt is due and
payable by maturity, acceleration or otherwise, neither the Borrower nor any
Affiliate of the Borrower shall pay, and no Subordinated Noteholder shall ask,
demand, claim, take or receive from the Borrower, any Affiliate of the
Borrower or any other Person, any payment of the principal of the Subordinated
Indebtedness or any other payment of the Subordinated Indebtedness or any
other premium, fee or cost other than Interest Payments as permitted by this
Section 7.
8. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Agreement are and are intended solely
for the purpose of defining the relative rights of the Subordinated
Noteholders, on the one hand, and the Senior Noteholders, on the other hand.
Nothing contained in this Agreement is intended to or shall (a) impair the
obligation of the Borrower, which is absolute and unconditional, to pay to the
Subordinated Noteholders the principal of and interest on the Subordinated
Indebtedness and all other amounts payable thereunder as and with the terms
hereof and of the Subordinated Indebtedness, (b) affect the relative rights
against the Borrower of creditors of the Borrower other than the Senior
Noteholders and the Subordinated Noteholders, or (c) increase the total
obligations of the Borrower under the Senior Indebtedness or the Subordinated
Indebtedness.
9. APPOINTMENT OF MASTER COLLATERAL AGENT.
(a) Each of the Senior Noteholders, the Subordinated
Noteholders and the Junior Agent hereby irrevocably appoints and authorizes
Genesis as the Master Collateral Agent to act on behalf of such person
hereunder and under the Acquisition Loan Documents and the Working Capital
Loan Documents with respect to the Collateral and Genesis hereby accepts such
appointment and authorization. The Master Collateral Agent is hereby
specifically authorized to enter into the Amendment to Security Agreement as
the secured party thereunder, it being understood and agreed that the security
interests granted under the Security Agreement to the Master Collateral Agent
are held by the Master Collateral Agent for the benefit of the Senior
Noteholders and Subordinated Noteholders. It is further understood and agreed
that, with respect to any Collateral as to which perfection is accomplished by
possession, the Master Collateral Agent is holding such Collateral for the
benefit of the Senior Noteholders and the Subordinated Noteholders, thereby
perfecting the security interests in such Collateral on behalf of each of
them. However, each of Subordinated Noteholders and the Junior Agent also
11
understand and agree that, so long as any Senior Indebtedness shall not have
been fully and indefeasibly paid, the Master Collateral Agent shall accept
directions only from the Senior Noteholders with respect to any matter
relating to the Collateral and shall have no duty to the Subordinated
Noteholders or the Junior Agent other than (i) the safekeeping of Collateral
or (ii) the perfection of liens on behalf of the Subordinated Noteholder and
the Junior Agent, and the Subordinated Noteholders and the Junior Agent shall
not have any rights to require the Master Collateral Agent to take or omit to
take any other action with respect to the Collateral. Upon the indefeasible
payment in full of the Senior Indebtedness, if the Master Collateral Agent
shall then be in possession of any Collateral at any time any Subordinated
Indebtedness shall be outstanding, then the Master Collateral Agent's sole
responsibility or obligation shall be, upon notice to the Junior Agent, to
turn over same to the Junior Agent or to whomever a court of competent
jurisdiction directs.
(b) Each Senior Noteholder and each Subordinated Noteholder
agrees (which agreement shall survive the termination of this Agreement) to
indemnify the Master Collateral Agent, pro rata, according to such Senior
Noteholder's or such Subordinated Noteholder's ratable percentage of the
aggregate principal amount of the aggregate Senior Indebtedness and the
Subordinated Indebtedness, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the Master
Collateral Agent or any of its directors, officers, employees or agents in any
way relating to or arising out of the Acquisition Loan Documents or the
Working Capital Loan Documents or any action taken or omitted by the Master
Collateral Agent or any of its directors, officers, employees or agents under
the Acquisition Loan Documents or the Working Capital Loan Documents, to the
extent not reimbursed by the Borrower; provided, however, that the Senior
Noteholders and the Subordinated Noteholders shall not be liable to the Master
Collateral Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgment, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Master
Collateral Agent, or any of its directors, officers, employees or agents.
(c) Neither the Master Collateral Agent nor any of its
officers, directors, employees or agents will be liable to the Senior
Noteholders or the Subordinated Noteholders for any action taken or omitted
hereunder or in connection herewith or in connection with any document or
instrument now or hereafter executed in connection herewith unless caused by
its gross negligence or willful misconduct. The Master Collateral Agent will
not be responsible for any recitals, warranties or representations in the
Acquisition Loan Documents or the Working Capital Loan Documents. The Master
Collateral Agent may execute any of its duties by or through agents or
employees and will be entitled to advice of counsel, accountants or other
professionals of its selection concerning all matters pertaining to its duties
hereunder and thereunder. The Master Collateral Agent will be entitled to rely
12
upon any writing or other document, telegram or telephone conversation
believed by it to have been signed, sent or made by the proper person or
persons and, in respect of legal matters, upon the advice of counsel selected
by the Master Collateral Agent. The Master Collateral Agent shall be fully
justified in failing or refusing to take any action under the Acquisition Loan
Documents or the Working Capital Loan Documents unless it shall first receive
such advice or concurrence of all the Senior Noteholders or the Subordinated
Noteholders, as it deems appropriate, or it shall first be indemnified to its
satisfaction by the Senior Noteholders and the Subordinated Noteholders
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action except for its own
gross negligence or willful misconduct.
(d) Each of the Senior Noteholders and the Subordinated
Noteholders acknowledges that the Master Collateral Agent has not made any
representation or warranty to it and that no act taken by the Master
Collateral Agent will be deemed to constitute a representation or warranty by
the Master Collateral Agent to any of the Senior Noteholders or the
Subordinated Noteholders. Each Senior Noteholder and Subordinated Noteholder
further acknowledges that it has taken and will continue to take such action
and to make such investigation as it deems necessary to inform itself of the
affairs of the Borrower and that it has made and will continue to make its own
independent investigation of the creditworthiness and the business and
operations of the Borrower. In making an advance hereunder, each Senior
Noteholder and Subordinated Noteholder represents that it has not relied and
will not rely upon any information or representations furnished or given by
the Master Collateral Agent. The Master Collateral Agent will be under no duty
or responsibility to any Senior Noteholder or Subordinated Noteholder to
ascertain or to inquire into the performance or observance by the Borrower of
any of the provisions of this Agreement or any document or instrument now or
hereafter executed in connection herewith. The Master Collateral Agent will
not have any duty or responsibility to provide any Senior Noteholder or
Subordinated Noteholder with any credit or other information concerning the
affairs, financial condition or business of the Borrower or any affiliate
thereof which may come into the possession of the Master Collateral Agent. The
Senior Noteholders and Subordinated Noteholders understand and agree that the
Master Collateral Agent will not be deemed to have knowledge of the existence,
occurrence or continuance of any event of default under any of the Acquisition
Loan Documents or the Working Capital Loan Documents, unless the officers of
the Master Collateral Agent immediately responsible for matters concerning
this Agreement will have actual knowledge of such occurrence or will have been
notified in writing by any Senior Noteholder or Subordinated Noteholder or
Borrower that such person or the Borrower, as applicable, considers that such
event of default has occurred and is continuing and specifying the nature
thereof.
13
(e) Subject to the appointment and acceptance of a successor
Master Collateral Agent as provided below, the Master Collateral Agent may
resign at any time by notifying the Senior Noteholders, the Subordinated
Noteholders and the Borrower. Upon any such resignation, the Senior
Noteholders and the Subordinated Noteholders will have the right to appoint a
successor Master Collateral Agent. If no successor Master Collateral Agent
will have been so appointed by the Senior Noteholders and the Subordinated
Noteholders and will have accepted such appointment within thirty (30) days
after the retiring Master Collateral Agent gives notice of its resignation,
then the retiring Master Collateral Agent may, on behalf of the Senior
Noteholders and Subordinated Noteholders, appoint a successor Master
Collateral Agent. Upon the acceptance of any appointment as Master Collateral
Agent hereunder by a successor, such successor will thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Master Collateral Agent and the retiring Master Collateral Agent will
be discharged from its duties and obligations hereunder and under the
Acquisition Loan Documents and the Working Capital Loan Documents. After any
Master Collateral Agent's resignation hereunder, the provisions of this
Section 9 will continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
10. SUPPLEMENTAL ASSIGNMENTS, POWER OF ATTORNEY.
(a) Each Subordinated Noteholder agrees to execute and
deliver to the Master Collateral Agent such assignments or other instruments
as may be reasonably requested by the Master Collateral Agent in order to
enable it to enforce their rights hereunder and to collect, to the extent
entitled thereto under this Agreement, any and all dividends or other payments
or disbursements which may be made at any time on account of all or any of the
Subordinated Indebtedness so long as any Senior Indebtedness remains unpaid.
(b) Each Subordinated Noteholder hereby irrevocably
constitutes and appoints the Master Collateral Agent, and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in its place and
stead, in its own name or otherwise, from time to time (i) to receive, endorse
or assign payments and distributions made with respect to such Subordinated
Noteholder's Subordinated Indebtedness to the extent that such payments and
distributions are required to be made or turned over to the Senior Noteholders
and (ii) to execute and deliver such documents and instruments necessary to
enable the Senior Noteholders to enforce their rights under this Agreement.
Each Subordinated Noteholder hereby ratifies any and all lawful actions taken
pursuant to the foregoing power of attorney and confirms and agrees that such
power of attorney is coupled with an interest and is irrevocable.
14
11. NO OBLIGATIONS OF SENIOR NOTEHOLDERS; BENEFIT OF
SUBORDINATION PROVISIONS.
(a) Each Subordinated Noteholder agrees that the Senior
Noteholder shall not be liable for any action or failure to act under or in
connection with any of the Acquisition Loan Documents, it being understood
that the decisions as to whether or not to act and the manner of proceeding
under such instruments and documents are within the sole discretion of the
Senior Noteholder and shall not be affected in any manner by the existence of
the Subordinated Indebtedness. It is further agreed that such obligations as
may be imposed under the Acquisition Loan Documents shall run exclusively to
the benefit of the Senior Noteholder and may be enforced or waived only by the
Senior Noteholder.
(b) The powers conferred on Genesis as Senior Lender and
Senior Noteholder under this Agreement are solely to protect its interests
under this Agreement and shall not impose any duty upon Genesis or any other
holders to exercise any such powers. In particular, neither Genesis nor any
other Senior Noteholder shall be required to make any demand or to make any
inquiry as to the nature of sufficiency of any payment received by it. Genesis
and such other holders shall be accountable only for amounts actually received
as a result of the exercise of such powers, and neither Genesis nor any other
Senior Noteholder, nor any of their respective officers, directors, employees,
agents or participants shall be responsible to the Borrower or any
Subordinated Noteholder, for any act or failure to act by it or them under
this Agreement, except for its or their own gross negligence or willful
misconduct. Genesis and each such other holder shall be entitled to rely upon
any paper, instrument or document which it in good faith believes to be
genuine and correct and to have been signed or sent by the proper person or
persons.
12. NO PAYMENTS IN VIOLATION OF AGREEMENT.
The Borrower agrees that no payments or distributions, by
set-off or otherwise, will be made by or on behalf of the Borrower in
violation of the terms of this Agreement; and each Subordinated Noteholder
agrees that it will not receive or accept any such payment or distribution.
13. AVOIDED PAYMENTS.
Without limiting any other provision of this Agreement,
Senior Indebtedness shall not be deemed to have been paid for purposes of this
Agreement if any payment in respect thereof (i) shall have been avoided or
recovered by the payor or its trustee or other representative or successor in
accordance with the order of any court of competent jurisdiction in any
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
payor, or as required upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with respect to the payor or any
substantial part of its property or otherwise, or (ii) is the subject of a
pending or threatened proceeding in which such avoidance or recovery is (or
would be) sought. For purposes of this Section 13, a payment in respect of
Senior Indebtedness shall be deemed to be the subject of a "threatened
proceeding" only if the payor or a trustee for or other authorized
representative of the payor or its estate has expressly informed the Senior
Noteholders that such payment will be sought to be avoided or recovered in
whole or in part.
15
14. NOTICE OF DEFAULT.
Each Subordinated Noteholder agrees to notify the Master
Collateral Agent and the Senior Noteholder in writing promptly upon any
default under any of the Working Capital Loan Documents and shall notify the
Master Collateral Agent and the Senior Noteholder in writing at least two (2)
business days prior to taking any action to accelerate such Subordinated
Indebtedness, subject to the standstill and subordination provisions of this
Agreement.
15. CERTAIN POWERS OF SENIOR NOTEHOLDERS.
Each Subordinated Noteholder agrees that, without notice to
or further consent by it, (a) the liability of the Borrower in respect of the
Senior Indebtedness, the Acquisition Loan and the liens of the Senior
Noteholders may, in whole or in part, be amended, supplemented, renewed,
extended, modified, released, replaced, refinanced or refunded by the Senior
Noteholders, as the Senior Noteholders may deem advisable, (b) any Collateral
and/or security interests in respect of the Senior Indebtedness may, from time
to time, in whole or in part, be exchanged, sold or surrendered by the Master
Collateral Agent, (c) the amount of the Senior Indebtedness may, from time to
time, be increased through further loans, or otherwise, (d) any deposit
balance or balances to the credit of the Borrower may, from time to time, in
whole or in part, be surrendered or released by the Master Collateral Agent or
the Senior Noteholders to the Borrower and (e) any of the provisions hereof
may be waived partially or entirely by the Master Collateral Agent or the
Senior Noteholders as to some Subordinated Indebtedness but not other
Subordinated Indebtedness, all without impairing or in any way affecting the
subordination contained in this Agreement; nor shall the subordination herein
contained be impaired or affected in any way by any other action, inaction or
omission in respect of the Senior Indebtedness or the liens of the Senior
Noteholder.
16. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future Master Collateral Agent or
Senior Noteholder to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Borrower or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Borrower with the terms,
provisions and covenants of this Agreement, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
16
17. SUBROGATION TO RIGHTS OF THE SENIOR NOTEHOLDERS.
If, in any Proceeding or otherwise, the Senior Noteholder
receives distributions or payments which, but for this Agreement, would have
been made to the Subordinated Noteholders, then, subject to the indefeasible
payment in full of all amounts due or to become due on or in respect of Senior
Indebtedness, or the provision for such payment in cash or cash equivalents in
a manner satisfactory to the Senior Noteholder, the Subordinated Noteholders
shall be subrogated to the rights of the Senior Noteholder to receive payments
and distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of and any interest on the Subordinated
Indebtedness and all other amounts payable in respect of Subordinated
Indebtedness shall be paid in full. For purposes of such subrogation, no
payments or distributions to the Senior Noteholder of any cash, property or
securities to which the Subordinated Noteholders would be entitled except for
the provisions of this Agreement, and no payment over pursuant to the
provisions of this Agreement to the Senior Noteholder by the Subordinated
Noteholders, shall, as among the Borrower and their creditors (other than
Senior Noteholder and Subordinated Noteholders), be deemed to be a payment or
distribution by the Borrower to or on account of the Senior Indebtedness. At
such time as the Subordinated Noteholders become subrogated to the rights of
the Senior Noteholder to receive payments and distributions of cash, property
and securities applicable to Senior Indebtedness as set forth in this Section
17, the Senior Noteholder shall execute and deliver to the Subordinated
Noteholders such assignments of the Acquisition Loan Documents (without
recourse and without representation or warranty of any kind, other than the
ability of such holders to execute and deliver such assignments) to the
Subordinated Noteholders, as such Subordinated Noteholders may reasonably
request.
18. RELIANCE BY MASTER COLLATERAL AGENT.
Upon any payment or distribution of assets of the Borrower
referred to in this Agreement (whether such payment or distribution is made in
a Proceeding or otherwise), the Master Collateral Agent shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction
in which such Proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Subordinated Noteholders for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the Senior
Noteholder and holders of other indebtedness of the Borrower, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Agreement.
17
19. NO CHANGES TO SUBORDINATED INDEBTEDNESS.
None of the Subordinated Noteholders shall, without the
prior written consent of the Senior Noteholder, (a) make or agree to make any
loans or any advances of money or property to the Borrower other than the
Working Capital Loan, (b) amend, supplement, renew, extend, modify, replace or
refinance in any respect any of the Working Capital Loan Documents or any
documents or instruments creating, evidencing, securing or exchangeable for or
convertible into the Subordinated Indebtedness, (c) sell, assign or transfer
all or any portion of its interest in the Subordinated Indebtedness unless the
buyer, assignee or transferee thereof shall agree in writing to become bound
by the provisions of this Agreement and the Senior Noteholder shall have been
furnished with original counterparts of such agreements, together with
opinions of counsel or other appropriate confirmation of the validity and
binding effect of such agreements, all in form and substance reasonably
satisfactory to the Senior Noteholder, or (d) subordinate any Subordinated
Indebtedness to any existing or future indebtedness other than the Senior
Indebtedness.
20. NO OFFSET.
Each Subordinated Noteholder hereby covenants and agrees
that as long as any Senior Indebtedness remains outstanding, unpaid or
unsatisfied, if such Subordinated Noteholder at any time incurs any obligation
to pay money to the Borrower, such Subordinated Noteholder shall not set off
or credit or otherwise apply such obligation against any amount owed (or
claimed to be owed) to such Subordinated Noteholder with respect to
Subordinated Indebtedness.
21. BINDING NATURE.
This Agreement shall be binding and inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
successors and assigns.
22. SEVERABILITY.
If any of the provisions or terms of this Agreement shall
for any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any of the other terms hereof, and this
Agreement shall be construed as if such unenforceable term has never been
contained herein.
18
23. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall constitute an original Agreement but all of which together
shall constitute one and the same instrument.
24. HEADINGS.
The descriptive headings herein are for convenience only and
shall not affect the meaning or construction of any of the provisions hereof.
Words used herein, regardless of the number and gender specifically used shall
be deemed and construed to include any other number, singular, or plural, and
any other gender, masculine, feminine or neuter, as the context requires.
25. NOTICES.
All notices, requests, consents, demands, approvals and
other communications hereunder shall be deemed to have been duly given, made
or served if in writing and when delivered personally (including without
limitation by means of telex, telecopies or telefax systems), or the day
following delivery to a nationally recognized, reputable overnight courier
service which guarantees delivery within twenty-four hours, charges prepaid,
to the respective parties to this Agreement as follows:
(a) If to the Borrower, to:
Age Institute of Florida, Inc.
Professional Arts Building
25 Penncraft Avenue
Chambersburg, Pennsylvania 17201
Attention: Carol A. Tschop, President
19
With a copy (which shall not constitute notice) to:
Blank, Rome, Comisky & McCauley
1 Logan Square
Philadelphia, Pennsylvania 19103
Attention: Harry D. Madonna, Esq.
(b) If to the Senior Noteholders, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Chief Financial Officer
With a copy (which shall not constitute notice) to:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention:
(c) If to the Junior Agent or the Subordinated
Noteholders, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Chief Financial Officer
and
ET Capital Corporation
415 McFarlan Road
Suite 202
Kennett Square, Pennsylvania 19348
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention:
20
(d) If to the Master Collateral Agent, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention:
with a copy (which shall not constitute notice) to:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention:
The designation of the person to be so notified or the
address of such person for the purposes of such notice may be changed from
time to time by similar notice in writing, except that any communication with
respect to a change of address shall be deemed to be given and made when
received by the party to whom such communication was sent.
26. GOVERNING LAW.
The validity, meaning and effect of this Agreement shall be
determined in accordance with the substantive laws of the State of Florida
without regard to conflicts of laws principles thereof.
27. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION, ETC.
EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE
VALIDITY, PROTECTION, INTERPRETATION, OR ENFORCEMENT HEREOF. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF FLORIDA AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, OF ANY FEDERAL COURT LOCATED IN THE STATE OF FLORIDA IN CONNECTION WITH
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
VALIDITY, PROTECTION INTERPRETATION OR ENFORCEMENT HEREOF. Each Subordinated
Noteholder irrevocably consents to the service of process on such Subordinated
Noteholder in any such proceeding by certified mail or overnight courier,
postage prepaid, to such Subordinated Noteholder at the address referred to in
Section 25. Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may effectively do so, any objection to the
venue of any such action or proceeding brought in any such court and any
defense that any such court is an inconvenient forum for any such action or
proceeding.
21
28. ENTIRE AGREEMENT.
This Agreement represents the entire agreement among the
parties hereto with respect to the subject matter hereof and, except as
expressly provided herein, shall not be affected by reference to any other
documents.
29. AMENDMENT.
No provision of this Agreement may be amended, modified,
terminated or waived except by a writing duly executed by each party sought to
be bound by such amendment, modification, termination or waiver.
30. NO BENEFIT TO THE BORROWER.
The Borrower is not a beneficiary of any portion of this
Agreement and shall not have any rights arising under this Agreement or the
right to enforce any provision hereof.
31. MANAGER'S AGREEMENTS.
(a) The Manager hereby acknowledges the existence of the
Senior Indebtedness, the Subordinated Indebtedness and the liens securing such
obligations. The Manager agrees that, upon notice from the Master Collateral
Agent, upon the occurrence and during the continuance of an Event of Default
under any of the Subordinated Notes or the Senior Note, the Manager shall not
accept or receive, or take any action to collect or enforce, the payment of
41.67% of the management fee owed to it under the Management Agreement, and
hereby agrees that any amount received in excess of 58.33% of such fee
subsequent to such notice shall be held in trust for the Senior and
Subordinated Noteholders. The foregoing subordination shall not constitute a
release of the obligations of the Borrower to the Manager under the Management
Agreement and shall not affect the Manager's rights and remedies under the
Management Agreement against Borrower for non-payment of fees at such times as
such Event of Default has not occurred or is not continuing or at any time the
Senior Indebtedness and Subordinated Indebtedness is indefeasbly paid in full;
22
provided, however, that, notwithstanding any provision to the contrary
contained herein, the Manager shall not take any action which causes the
filing of a petition in bankruptcy against Borrower unless and until the
Senior Indebtedness and the Subordinated Indebtedness is indefeasibly paid in
full.
(b) The Manager agrees that for so long as at least 58.33%
of its management fees is being paid on a current basis, the Manager shall not
terminate the Management Agreement without the prior written consent of the
Master Collateral Agent. In the event the Management Agreement is terminated,
the Manager shall promptly assign and transfer all accounts, permits,
licenses, approvals and consent (to the extent assignable) with respect to the
Facilities to the Person designated by the Master Collateral Agent in its sole
discretion, and shall use its best efforts to cooperate with the Master
Collateral Agent.
23
IN WITNESS WHEREOF, each party hereto has duly executed or
caused this Intercreditor Agreement to be duly executed on such party's behalf
as of the date first above written.
GENESIS HEALTH VENTURES, INC.,
as Senior Lender
By: /s/ Ira C. Gubernick
---------------------------------------------
Name: Ira C. Gubernick
------------------------------------------
Title: General Counsel - Corporate and Secretary
------------------------------------------
GENESIS HEALTH VENTURES, INC.,
as Junior Lender
By: /s/ Ira C. Gubernick
---------------------------------------------
Name: Ira C. Gubernick
------------------------------------------
Title: General Counsel - Corporate and Secretary
------------------------------------------
ET CAPITAL CORP.,
as Junior Lender and as Junior Agent
By: /s/ Edward B. Romanov, Jr.
---------------------------------------------
Name: Edward B. Romanov, Jr.
------------------------------------------
Title: President & CEO
------------------------------------------
AGE INSTITUTE OF FLORIDA, INC.
as Borrower
By: /s/ Carol A. Tschop
---------------------------------------------
Name: Carol A. Tschop
------------------------------------------
Title: President
------------------------------------------
24
GENESIS HEALTH VENTURES, INC.,
as Master Collateral Agent
By: /s/ Ira C. Gubernick
---------------------------------------------
Name: Ira C. Gubernick
-------------------------------------------
Title: General Counsel - Corporate and Secretary
------------------------------------------
With respect to Section 31:
GENESIS ELDERCARE NETWORK
SERVICES, INC.,
as Manager
By: /s/ Ira C. Gubernick
---------------------------------------------
Name: Ira C. Gubernick
-------------------------------------------
Title: General Counsel - Corporate and Secretary
------------------------------------------
25