<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission file number 001-14057
VENCOR, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1323993
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Vencor Place
680 South Fourth Street
Louisville, KY 40202-2412
(Address of principal executive offices) (Zip Code)
(502) 596-7300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Outstanding at October 31, 1999
----------------------------- -------------------------------
Common stock, $0.25 par value 70,500,223 shares
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1 of 44
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Statement of Operations -- for the quarter and nine months
ended September 30, 1999 and 1998.................................................... 3
Condensed Consolidated Balance Sheet -- September 30, 1999 and December 31, 1998..... 4
Condensed Consolidated Statement of Cash Flows -- for the nine months ended
September 30, 1999 and 1998.......................................................... 5
Notes to Condensed Consolidated Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................... 40
Item 3. Defaults Upon Senior Securities...................................................... 42
Item 6. Exhibits and Reports on Form 8-K..................................................... 43
</TABLE>
2
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the quarter and nine months ended September 30, 1999 and 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Nine Months
--------------------- ------------------------
1999 1998 1999 1998
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.................................................... $681,924 $718,115 $2,071,048 $2,320,137
-------- -------- ---------- ----------
Salaries, wages and benefits................................ 393,535 415,365 1,190,177 1,355,537
Supplies.................................................... 67,317 69,069 206,398 222,953
Rent........................................................ 77,423 75,063 228,963 158,274
Other operating expenses.................................... 131,115 108,097 399,026 399,755
Depreciation and amortization............................... 24,126 25,425 68,023 89,466
Interest expense............................................ 26,030 22,294 65,598 87,883
Investment income........................................... (673) (990) (1,946) (3,300)
-------- -------- ---------- ----------
718,873 714,323 2,156,239 2,310,568
-------- -------- ---------- ----------
Income (loss) before reorganization costs and income taxes.. (36,949) 3,792 (85,191) 9,569
Reorganization costs........................................ 5,443 - 12,302 -
-------- -------- ---------- ----------
Income (loss) before income taxes........................... (42,392) 3,792 (97,493) 9,569
Provision for income taxes.................................. 50 (33,790) 150 (23,442)
-------- -------- ---------- ----------
Income (loss) from operations............................... (42,442) 37,582 (97,643) 33,011
Cumulative effect of change in accounting
for start-up costs....................................... - - (8,923) -
Extraordinary loss on extinguishment of debt, net
of income tax benefit.................................... - - - (77,937)
-------- -------- ---------- ----------
Net income (loss)................................ (42,442) 37,582 (106,566) (44,926)
Preferred stock dividend requirements....................... (261) (266) (784) (443)
-------- -------- ---------- ----------
Income (loss) available to common stockholders... $(42,703) $ 37,316 $ (107,350) $ (45,369)
======== ======== ========== ==========
Earnings (loss) per common share:
Basic:
Income (loss) from operations......................... $ (0.61) $ 0.55 $ (1.40) $ 0.48
Cumulative effect of change in accounting
for start-up costs................................. - - (0.13) -
Extraordinary loss on extinguishment of debt.......... - - - (1.15)
-------- -------- ---------- ----------
Net income (loss)................................ $ (0.61) $ 0.55 $ (1.53) $ (0.67)
======== ======== ========== ==========
Diluted:
Income (loss) from operations......................... $ (0.61) $ 0.54 $ (1.40) $ 0.48
Cumulative effect of change in accounting
for start-up costs................................. - - (0.13) -
Extraordinary loss on extinguishment of debt.......... - - - (1.15)
-------- -------- ---------- ----------
Net income (loss)................................ $ (0.61) $ 0.54 $ (1.53) $ (0.67)
======== ======== ========== ==========
Shares used in computing earnings (loss) per
common share:
Basic.................................................... 70,438 68,389 70,386 67,833
Diluted.................................................. 70,438 68,554 70,386 68,103
</TABLE>
See accompanying notes.
3
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 101,345 $ 34,551
Accounts and notes receivable less allowance for loss................... 511,364 528,183
Inventories............................................................. 28,938 28,594
Income taxes............................................................ 11,497 15,315
Other................................................................... 74,649 78,317
---------- ----------
727,793 684,960
Property and equipment, at cost.......................................... 814,857 749,867
Accumulated depreciation................................................. (317,879) (262,551)
---------- ----------
496,978 487,316
Goodwill less accumulated amortization................................... 439,145 456,644
Investments in affiliates................................................ 15,697 35,707
Assets held for sale..................................................... 23,225 28,524
Other.................................................................... 64,345 81,221
---------- ----------
$1,767,183 $1,774,372
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 94,359 $ 152,103
Salaries, wages and other compensation.................................. 152,198 150,906
Due to third party payors............................................... - 155,333
Other accrued liabilities............................................... 77,585 139,254
Long-term debt due within one year...................................... - 9,048
Long-term debt in default classified as current......................... - 760,885
---------- ----------
324,142 1,367,529
Long-term debt........................................................... - 6,600
Deferred credits and other liabilities................................... 59,469 85,255
Liabilities subject to compromise........................................ 1,177,862 -
Series A preferred stock (subject to compromise for 1999)................ 1,743 1,743
Stockholders' equity:
Common stock, $0.25 par value; authorized 180,000 shares;
issued 70,501 shares -- September 30 and 70,146 shares -- December 31.. 17,625 17,537
Capital in excess of par value.......................................... 663,431 665,447
Accumulated deficit..................................................... (477,089) (369,739)
---------- ----------
203,967 313,245
---------- ----------
$1,767,183 $1,774,372
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 1999 and 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................................... $(106,566) $ (44,926)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................. 68,023 89,466
Provision for doubtful accounts............................................... 23,515 19,221
Deferred income taxes......................................................... - (19,810)
Extraordinary loss on extinguishment of debt.................................. - 126,726
Unusual transactions.......................................................... 20,827 101,285
Reorganization costs.......................................................... 12,302 -
Gain on sale of investment in Atria Communities, Inc.......................... - (98,461)
Cumulative effect of change in accounting for start-up costs.................. 8,923 -
Other......................................................................... 1,926 (4,026)
Changes in operating assets and liabilities:
Accounts and notes receivable.............................................. 15,940 108,230
Inventories and other assets............................................... 11,517 (1,782)
Accounts payable........................................................... (24,562) 16,237
Income taxes............................................................... 3,818 (37,380)
Due to third party payors.................................................. 54,648 -
Other accrued liabilities.................................................. 39,252 23,367
--------- ---------
Net cash provided by operating activities before reorganization costs... 129,563 278,147
Payment of reorganization costs.................................................. (12,267) -
--------- ---------
Net cash provided by operating activities............................... 117,296 278,147
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment............................................... (72,629) (191,536)
Acquisition of healthcare businesses and previously leased facilities............ - (16,006)
Sale of investment in Atria Communities, Inc..................................... - 177,500
Sale of assets................................................................... 9,400 32,834
Surety bond deposits............................................................. (16,763) -
Series A preferred stock loans................................................... - (15,930)
Net change in investments........................................................ 6,377 13,427
Other............................................................................ (3,688) (4,901)
--------- ---------
Net cash used in investing activities................................... (77,303) (4,612)
--------- ---------
Cash flows from financing activities:
Net change in borrowings under revolving lines of credit......................... 55,000 (251,146)
Issuance of long-term debt....................................................... - 700,000
Net proceeds from senior subordinated notes offering............................. - 294,000
Payment of senior subordinated notes............................................. - (732,547)
Repayment of long-term debt...................................................... (22,446) (254,218)
Payment of debtor-in-possession deferred financing costs......................... (3,688) -
Payment of other deferred financing costs........................................ (2,068) (8,872)
Issuances of common stock........................................................ 3 227
--------- ---------
Net cash provided by (used in) financing activities..................... 26,801 (252,556)
--------- ---------
Change in cash and cash equivalents................................................. 66,794 20,979
Cash and cash equivalents at beginning of period.................................... 34,551 55,627
--------- ---------
Cash and cash equivalents at end of period.......................................... $ 101,345 $ 76,606
========= =========
Supplemental information:
Interest payments................................................................ $ 34,193 $ 104,347
Income tax refunds............................................................... 3,668 14,519
</TABLE>
See accompanying notes.
5
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -- BASIS OF PRESENTATION
Vencor, Inc. ("Vencor" or the "Company") operates an integrated network of
healthcare services in 46 states primarily focused on the needs of the elderly.
At September 30, 1999, the Company operated 293 nursing centers (38,336 licensed
beds), 56 long-term acute care hospitals (4,907 licensed beds), and a contract
services business ("Vencare") which primarily provided respiratory and
rehabilitation therapies, medical services and pharmacy management services to
both Company-operated and non-affiliated nursing centers.
The Company and substantially all of its subsidiaries filed voluntary
petitions for protection under Chapter 11 of Title 11 of the United States Code
(the "Bankruptcy Code") on September 13, 1999. The Company currently is
operating its business as a debtor-in-possession subject to the jurisdiction of
the United States Bankruptcy Court in Delaware (the "Bankruptcy Court").
Accordingly, the condensed consolidated financial statements of the Company have
been prepared in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7") and generally accepted
accounting principles applicable to a going concern, which assumes that assets
will be realized and liabilities will be discharged in the normal course of
business. The financial statements do not include further adjustments, if any,
reflecting the possible future effects on the recoverability and classification
of assets or the amount and classification of liabilities that may result from
the outcome of uncertainties discussed herein. The Company's recent operating
losses, liquidity issues and the Chapter 11 Cases (as defined) raise substantial
doubt about the Company's ability to continue as a going concern. The ability
of the Company to continue as a going concern and the appropriateness of using
the going concern basis of accounting is dependent upon, among other things, (i)
the Company's ability to comply with the terms of the DIP Financing (as
defined), (ii) confirmation of a Plan of Reorganization (as defined) under the
Bankruptcy Code, (iii) the Company's ability to achieve profitable operations
after such confirmation, and (iv) the Company's ability to generate sufficient
cash from operations to meet its obligations. The Plan of Reorganization and
other actions during the Chapter 11 Cases could change materially the amounts
currently recorded in the consolidated financial statements. See Note 3.
In January 1998, the Board of Directors of Ventas, Inc. ("Ventas") (formerly
known as Vencor, Inc.) authorized its management to proceed with a plan to
separate Ventas into two publicly held corporations, one to operate the nursing
center, hospital and ancillary services businesses and the other to own
substantially all of the real property of Ventas and to lease such real property
to a new operating company (the "Spin-off Transactions"). In anticipation of
the Spin-off Transactions, the Company was incorporated on March 27, 1998 to be
the new operating company. On April 30, 1998, Ventas completed the spin-off of
its healthcare operations from its real estate holdings through the distribution
of the common stock of Vencor on a one-for-one basis to stockholders of record
of Ventas as of April 27, 1998 (the "Distribution"). The Distribution was
consummated on May 1, 1998 (the "Distribution Date"). For accounting purposes,
the consolidated historical financial statements of Ventas became the historical
financial statements of the Company after the Distribution Date. Any discussion
concerning events prior to the Distribution Date refers to the Company's
business as it was conducted prior to the Spin-off Transactions.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," which was required to be
adopted in fiscal years beginning after June 15, 1999. In June 1999, FASB
delayed the effective date of SFAS 133 for one year. Management has not
determined the effect, if any, of SFAS 133 on the Company's consolidated
financial statements.
6
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 1 -- BASIS OF PRESENTATION (Continued)
The accompanying unaudited condensed consolidated financial statements do not
include all of the disclosures normally required by generally accepted
accounting principles or those normally required in annual reports on Form 10-K.
Accordingly, these statements should be read in conjunction with the audited
consolidated financial statements of the Company for the year ended December 31,
1998 filed with the Securities and Exchange Commission on Form 10-K.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the Company's customary accounting practices
and SOP 90-7. Management believes that the financial information included
herein reflects all adjustments necessary for a fair presentation of interim
results and, except for the costs described in Notes 2, 5 and 6, all such
adjustments are of a normal and recurring nature.
Certain prior period amounts have been reclassified to conform with the
current period presentation.
NOTE 2 -- ACCOUNTING CHANGE
Effective January 1, 1999, the Company adopted the provisions of the American
Institute of Certified Public Accountants Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" ("SOP 98-5"), which requires the Company to
expense start-up costs, including organizational costs, as incurred. In
accordance with the provisions of SOP 98-5, the Company wrote off $8.9 million
of such unamortized costs as a cumulative effect of change in accounting
principle in the first quarter of 1999. The pro forma effect of the change in
accounting for start-up costs, assuming the change occurred on January 1, 1998,
was not significant.
NOTE 3 -- PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
On September 13, 1999, the Company and substantially all of its subsidiaries
filed voluntary petitions for protection under Chapter 11 of the Bankruptcy
Code. The Chapter 11 cases have been consolidated for purposes of joint
administration under Case Nos. 99-3199 (MFW) through 99-3327 (MFW)
(collectively, the "Chapter 11 Cases"). The Company currently is operating its
business as a debtor-in-possession subject to the jurisdiction of the Bankruptcy
Court.
On September 14, 1999, the Company received approval from the Bankruptcy Court
to pay pre-petition and post-petition employee wages, salaries, benefits and
other employee obligations. The Bankruptcy Court also approved orders granting
authority, among other things, to pay pre-petition claims of certain critical
vendors, utilities and patient obligations. All other pre-petition liabilities
are classified in the condensed consolidated balance sheet as liabilities
subject to compromise. The Company intends to pay post-petition claims of all
vendors and providers in the ordinary course of business.
In connection with the Chapter 11 Cases, the Company entered into a $100
million debtor-in-possession financing agreement (the "DIP Financing") with a
bank group led by Morgan Guaranty Trust Company of New York. The Bankruptcy
Court granted final approval of the DIP Financing on October 1, 1999. The DIP
Financing, which matures on March 13, 2000, is comprised of a $75 million
tranche A revolving loan (the "Tranche A Loan") and a $25 million tranche B
revolving loan (the "Tranche B Loan"). Interest is payable at prime rate plus
2.5% on the Tranche A Loan and prime rate plus 4.5% on the Tranche B Loan.
7
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 3 -- PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (Continued)
Available borrowings under the Tranche A Loan were limited to $45 million in
September and increase to $65 million in October, $70 million in November and
$75 million thereafter. Borrowings under the Tranche B Loan require the approval
of lenders holding at least 75% of the credit exposure under the DIP Financing.
The DIP Financing is secured by substantially all of the assets of the Company
and its subsidiaries, including certain owned real property. The DIP Financing
contains standard representations and warranties and other affirmative and
restrictive covenants. As of November 11, there were no outstanding borrowings
under the DIP Financing.
On November 4, 1999, the Company received approval (subject to certain
conditions) to implement a management retention plan (the "Retention Plan") to
enhance the ability of the Company to retain key management employees during the
restructuring period. Under the Retention Plan, bonuses aggregating $7.3 million
will be awarded to certain key management employees based upon various
percentages of their annual salary. The Retention Plan provides that the
retention bonuses will be awarded in three equal amounts upon: (i) Bankruptcy
Court approval of the Retention Plan, (ii) the effective date of the Plan of
Reorganization and (iii) three months following the effective date of the Plan
of Reorganization.
Under the Bankruptcy Code, actions to collect pre-petition indebtedness
against the Company are subject to an automatic stay and other contractual
obligations against the Company may not be enforced. The automatic stay does
not necessarily apply to certain actions against Ventas for which the Company
has agreed to indemnify Ventas. In addition, the Company may assume or reject
executory contracts, including lease obligations, under the Bankruptcy Code.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the reorganization process.
As previously disclosed, the Company is developing a plan of reorganization
(the "Plan of Reorganization") through negotiations with key parties including
its senior bank lenders (the "Senior Lenders"), the holders of the Company's
$300 million 9 7/8% Guaranteed Senior Subordinated Notes due 2005 (the "1998
Notes"), Ventas and the Department of Justice (the "DOJ"), acting on behalf of
the Health Care Financing Administration ("HCFA") and the Department of Health
and Human Services' Office of the Inspector General ("HHS"). A substantial
portion of pre-petition liabilities are subject to settlement under the Plan of
Reorganization to be submitted by the Company.
The Plan of Reorganization must be voted upon by the impaired creditors of the
Company and approved by the Bankruptcy Court. There can be no assurance that the
Plan of Reorganization to be proposed by the Company will be approved by the
requisite holders of claims, confirmed by the Bankruptcy Court or that it will
be consummated. If the Plan of Reorganization is not accepted by the required
number of impaired creditors and equity holders and the Company's exclusive
right to file and solicit acceptance of a plan of reorganization ends, any party
in interest may subsequently file its own plan of reorganization for the
Company. A plan of reorganization must be confirmed by the Bankruptcy Court
after certain findings required by the Bankruptcy Code are made by the
Bankruptcy Court. The Bankruptcy Court may confirm a plan of reorganization
notwithstanding the non-acceptance of the plan by an impaired class of creditors
or equity holders if certain requirements of the Bankruptcy Code are met.
8
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 3 -- PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (Continued)
Events Leading to Reorganization
The Company reported a net loss from operations in 1998 aggregating $573
million, resulting in certain financial covenant violations under the Company's
$1.0 billion bank credit facility (the "Credit Agreement"). Namely, the
covenants regarding minimum net worth, total leverage ratio, senior leverage
ratio and fixed charge coverage ratio were not satisfied at December 31, 1998.
Prior to the commencement of the Chapter 11 Cases, the Company received a series
of temporary waivers of these covenant violations. The waivers generally
included certain borrowing limitations under the $300 million revolving credit
portion of the Credit Agreement. The final waiver was scheduled to expire on
September 24, 1999.
The Company was informed on April 9, 1999 by HCFA that the Medicare program
had made a demand for repayment of approximately $90 million of reimbursement
overpayments by April 23, 1999. On April 21, 1999, the Company reached an
agreement with HCFA to extend the repayment of such amounts over 60 monthly
installments. Under the agreement, monthly payments of approximately $1.5
million commenced in May 1999. After November 1999, the remaining balance of
the overpayments will bear interest at a statutory rate approximating 13.4%,
thereby increasing the monthly payment amount to approximately $2.0 million
through March 2004. Amounts due to HCFA under this agreement aggregate $84
million and have been classified as liabilities subject to compromise in the
Company's condensed consolidated balance sheet at September 30, 1999.
On May 3, 1999, the Company elected not to make the interest payment of
approximately $14.8 million due on the 1998 Notes. The failure to pay interest
resulted in an event of default under the 1998 Notes.
In accordance with SOP 90-7, outstanding borrowings under the Credit Agreement
($506 million) and the principal amount of the 1998 Notes ($300 million) are
presented as liabilities subject to compromise in the Company's condensed
consolidated balance sheet at September 30, 1999. If the Chapter 11 Cases had
not been filed, the Company would have reported a working capital deficit
approximating $673 million at September 30, 1999. The financial statements do
not include further adjustments, if any, reflecting the possible future effects
on the recoverability and classification of assets or the amount and
classification of liabilities that may result from the outcome of the
uncertainties associated with the Chapter 11 Cases. During the pendency of the
Chapter 11 Cases, the Company is recording the contractual amount of interest
expense related to the Credit Agreement and the 1998 Notes.
As previously reported, the Company has been informed by the DOJ that it is
the subject of ongoing investigations into various Medicare reimbursement
issues, including various hospital cost reporting issues, Vencare billing
practices and various quality of care issues in its hospitals and nursing
centers. See Note 11.
Agreements with Ventas
On March 18, 1999, the Company served Ventas with a demand for mediation
pursuant to the Agreement and Plan of Reorganization governing the Spin-off
Transactions (the "Spin-off Agreement"). The Company was seeking a reduction
in rent and other concessions under its four master lease agreements with
Ventas (the "Master Lease Agreements"). On March 31, 1999, the Company and
Ventas entered into a standstill agreement (the "Standstill Agreement") which
provided that both companies would postpone through April 12, 1999 any claims
either may have against the other. On April 12, 1999, the Company and Ventas
entered into a second standstill agreement (the "Second Standstill") which
provided that neither party would pursue any claims against the other or
9
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 3 -- PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (Continued)
Agreements with Ventas (Continued)
any other third party related to the Spin-off Transactions as long as the
Company complied with certain rent payment terms. The Second Standstill was
scheduled to terminate on May 5, 1999. The Company and Ventas also agreed that
any statutes of limitations or other time-related constraints in a bankruptcy or
other proceeding that might be asserted by one party against the other would be
extended and tolled from April 12, 1999 until May 5, 1999 or until the
termination of the Second Standstill (the "Tolling Agreement").
As a result of the Company's failure to pay rent, Ventas served the Company
with notices of nonpayment under the Master Lease Agreements. Subsequently, the
Company and Ventas entered into further amendments to the Second Standstill and
the Tolling Agreement to extend the time during which no remedies may be pursued
by either party and to extend the date by which the Company may cure its failure
to pay rent.
In connection with the Chapter 11 Cases, the Company and Ventas entered into a
stipulation (the "Stipulation") which provides for the payment by the Company of
a reduced monthly rent of approximately $15.1 million beginning in September
1999. The Stipulation has been approved by the Bankruptcy Court. The difference
between the $18.9 million base rent under the existing Master Lease Agreements
and the reduced monthly rent will be accrued as an administrative expense,
subject to compromise in the Chapter 11 Cases. Unpaid August rent of
approximately $18.9 million will constitute a claim by Ventas in the Chapter 11
Cases. During the pendency of the Chapter 11 Cases, the Company is recording
the contractual amount of the $18.9 million base rent.
The Stipulation also continues to toll any statutes of limitations or other
time constraints in a bankruptcy proceeding for claims that might be asserted by
the Company against Ventas. The Stipulation will expire on November 30, 1999,
but automatically renews for one-month periods unless either party provides a
14-day notice of termination. The Stipulation also may be terminated prior to
its expiration upon a payment default by the Company, the consummation of the
Plan of Reorganization or the occurrence of certain defaults under the DIP
Financing.
The Stipulation also provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off Transactions.
If the Company and Ventas are unable to resolve their disputes or maintain an
interim resolution, the Company may seek to pursue claims against Ventas arising
out of the Spin-off Transactions and seek judicial relief barring Ventas from
exercising any remedies based on the Company's failure to pay some or all of the
rent to Ventas. The Company's failure to pay rent or comply with the
Stipulation, in the absence of judicial relief, would result in an "Event of
Default" under the Master Lease Agreements. Upon an Event of Default under the
Master Lease Agreements, the remedies available to Ventas include terminating
the Master Lease Agreements, repossessing and reletting the leased properties
and requiring the Company to (i) remain liable for all obligations under the
Master Lease Agreements, including the difference between the rent under the
Master Lease Agreements and the rent payable as a result of reletting the leased
properties or (ii) pay the net present value of the rent due for the balance of
the terms of the Master Lease Agreements. Such remedies, however, would be
subject to the supervision of the Bankruptcy Court.
10
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 3 -- PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (Continued)
Liabilities Subject to Compromise
"Liabilities subject to compromise" refers to liabilities incurred prior to
the commencement of the Chapter 11 Cases. These liabilities, consisting
primarily of long-term debt, amounts due to third party payors and certain
accounts payable and accrued liabilities, represent the Company's estimate of
known or potential claims to be resolved in connection with the Chapter 11
Cases. Such claims remain subject to future adjustments based on negotiations,
actions of the Bankruptcy Court, further developments with respect to disputed
claims, future rejection of executory contracts or unexpired leases,
determination as to the value of any collateral securing claims, treatment under
the Plan of Reorganization and other events. Payment terms for these amounts
will be established in connection with the Plan of Reorganization.
The Company has received approval from the Bankruptcy Court to pay pre-
petition and post-petition employee wages, salaries, benefits and other employee
obligations. The Bankruptcy Court also approved orders granting authority,
among other things, to pay pre-petition claims of certain critical vendors,
utilities and patient obligations. All other pre-petition liabilities are
classified in the condensed consolidated balance sheet as liabilities subject to
compromise.
A summary of the principal categories of claims classified as liabilities
subject to compromise under the Chapter 11 Cases follows (in thousands):
Long-term debt:
Credit Agreement................... $ 506,114
1998 Notes......................... 300,000
Amounts due to HCFA................ 83,988
8 5/8% Senior Subordinated Notes... 2,391
Other.............................. 5,231
----------
897,724
----------
Due to third party payors............. 120,177
Accounts payable...................... 33,385
Accrued liabilities:
Interest........................... 34,923
Ventas rent........................ 22,634
Other.............................. 69,019
----------
126,576
----------
$1,177,862
==========
Approximately $1.1 billion of liabilities subject to compromise would have
been classified as current liabilities if the Chapter 11 Cases had not been
filed.
11
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4 -- REVENUES
Revenues are recorded based upon estimated amounts due from patients and third
party payors for the provision of healthcare services, including anticipated
settlements under reimbursement agreements with Medicare, Medicaid and other
third party payors.
A summary of revenues by payor type follows (in thousands):
Quarter Nine Months
-------------------- ------------------------
1999 1998 1999 1998
--------- --------- ----------- -----------
Medicare........... $221,481 $245,058 $ 705,618 $ 816,683
Medicaid........... 230,886 212,949 659,679 634,234
Private and other.. 261,327 296,374 806,290 958,271
-------- -------- ---------- ----------
713,694 754,381 2,171,587 2,409,188
Elimination........ (31,770) (36,266) (100,539) (89,051)
-------- -------- ---------- ----------
$681,924 $718,115 $2,071,048 $2,320,137
======== ======== ========== ==========
NOTE 5 -- UNUSUAL TRANSACTIONS
Operating results for certain periods presented include unusual transactions.
These transactions are included in other operating expenses in the condensed
consolidated statement of operations for the respective periods in which they
were recorded.
Unusual transactions for the nine months ended September 30, 1999 included
$20.8 million of costs recorded in the second quarter of 1999 related to the
write-down of the Company's remaining investment in Behavioral Healthcare
Corporation ("BHC") ($15.2 million) and the cancellation of a nursing center
software development project ($5.6 million).
In the third quarter of 1998, the Company sold its investment in Atria
Communities, Inc. ("Atria") for $177.5 million in cash and an equity interest in
the surviving corporation, resulting in a gain of $98.5 million. During the
third quarter of 1998, as a result of substantial reductions in Medicare
reimbursement received by the Company's nursing center and hospital divisions
related to the provisions of the Balanced Budget Act of 1997 (the "Budget Act"),
management determined to suspend all acquisition and development activities,
terminate the construction of substantially all of its development properties,
and close two recently acquired hospitals. Accordingly, the Company recorded
pretax charges aggregating $56.8 million related to the cancellation of
construction projects and $17.4 million for the planned closure of the two
hospitals. In September 1998, the Company also recorded pretax charges of $9.6
million for uncollectible accounts receivable from previously sold or closed
nursing center, home health and hospice operations and $8.5 million in
connection with the write-down of its investment in BHC to its net realizable
value. Unusual transactions for the nine months ended September 30, 1998 also
included $33.4 million of professional fees related to the Spin-off
Transactions, losses related to the disposal of certain non-strategic
businesses, and the write-off of capitalized amounts related to a cancelled
construction project, all of which were recorded in the first and second
quarters of 1998.
In connection with the third quarter 1998 construction termination charge, the
Company decided that it would not replace certain facilities that previously
were accounted for as assets intended for disposal. Accordingly, the $56.8
million charge discussed above included a $10.0 million reversal of a valuation
allowance (the amount necessary to reduce the carrying value to fair value less
costs of disposal) related so such facilities.
NOTE 6 -- REORGANIZATION COSTS
Reorganization costs included professional fees incurred in connection with
the Company's restructuring activities of $5.4 million for the third quarter of
1999 and $12.3 million for the nine months ended September 30, 1999.
12
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 7 -- EARNINGS PER SHARE
A computation of earnings or loss per common share for the quarter and nine
months ended September 30 follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Quarter Nine Months
------------------- ---------------------
1999 1998 1999 1998
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Income (loss) from operations........................... $(42,442) $37,582 $ (97,643) $ 33,011
Cumulative effect of change in accounting
for start-up costs.................................... - - (8,923) -
Extraordinary loss on extinguishment of debt............ - - - (77,937)
-------- ------- --------- --------
Net income (loss)............................... (42,442) 37,582 (106,566) (44,926)
Preferred stock dividend requirements................... (261) (266) (784) (443)
-------- ------- --------- --------
Income (loss) available to common stockholders.. $(42,703) $37,316 $(107,350) $(45,369)
======== ======= ========= ========
Shares used in the computation:
Weighted average shares outstanding - basic
computation......................................... 70,438 68,389 70,386 67,833
Dilutive effect of outstanding stock options.......... - 165 - 270
-------- ------- --------- --------
Adjusted weighted average shares
outstanding - diluted computation............. 70,438 68,554 70,386 68,103
======== ======= ========= ========
Earnings (loss) per common share:
Basic:
Income (loss) from operations....................... $ (0.61) $ 0.55 $ (1.40) $ 0.48
Cumulative effect of change in accounting
for start-up costs................................ - - (0.13) -
Extraordinary loss on extinguishment of debt........ - - - (1.15)
-------- ------- --------- --------
Net income (loss)............................... $ (0.61) $ 0.55 $ (1.53) $ (0.67)
======== ======= ========= ========
Diluted:
Income (loss) from operations....................... $ (0.61) $ 0.54 $ (1.40) $ 0.48
Cumulative effect of change in accounting
for start-up costs................................ - - (0.13) -
Extraordinary loss on extinguishment of debt........ - - - (1.15)
-------- ------- --------- --------
Net income (loss)............................... $ (0.61) $ 0.54 $ (1.53) $ (0.67)
======== ======= ========= ========
</TABLE>
No incremental shares are included in the 1999 computation of diluted loss per
common share since the result would be antidilutive.
NOTE 8 -- SERIES A PREFERRED STOCK
As part of the Spin-off Transactions, the Company issued $17.7 million of its
6% Series A Non-Voting Convertible Preferred Stock (the "Preferred Stock") to
Ventas. Simultaneous with the Spin-off Transactions, Ventas sold the Preferred
Stock to certain employees of the Company. The Company loaned these employees
approximately 90% of the funds required ($15.9 million) to purchase the
Preferred Stock from Ventas (the "Promissory Notes"). For accounting purposes,
the amount of the Promissory Notes has been recorded as a reduction in the
carrying value of the Preferred Stock in the condensed consolidated
balance sheet.
13
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 8 -- SERIES A PREFERRED STOCK (Continued)
In August 1999, certain key employees of the Company entered into agreements
with the Company (the "Put Agreements") providing a put option in connection
with such employees' ownership of the Preferred Stock. The Put Agreement
permits the employee to put the Preferred Stock owned by such employee to the
Company on or after January 1, 2000 for a sales price equal to the outstanding
principal and accrued interest on the Promissory Notes. The Company may satisfy
its obligations under the Put Agreement by delivering the cancelled Promissory
Note to the employee. Approximately $7.9 million of the Preferred Stock and
$7.1 million of the Promissory Notes are subject to the Put Agreements. To the
extent that the Preferred Stock is cancelled as a result of the Put Agreements,
the appropriate reductions in preferred stock and corresponding increases in
common stockholders' equity will be recorded.
NOTE 9 -- BUSINESS SEGMENT DATA
The Company operates three business segments: nursing centers, hospitals and
ancillary services (Vencare). The Company defines operating income as earnings
before interest, income taxes, depreciation, amortization and rent. Operating
income reported for each of the Company's three business segments excludes
allocations of corporate overhead. Summary business segment data follows (in
thousands):
<TABLE>
<CAPTION>
Quarter Nine Months
-------------------- ---------------------------------------
1999 1998 1999 1998
--------- --------- ------------------- ------------------
<S> <C> <C> <C> <C>
Revenues:
Nursing centers...................... $385,740 $389,414 $1,150,329 $1,237,204
Hospitals............................ 230,682 226,846 704,072 712,523
Vencare.............................. 97,272 138,121 317,186 459,461
-------- -------- ---------- ----------
713,694 754,381 2,171,587 2,409,188
Elimination.......................... (31,770) (36,266) (100,539) (89,051)
-------- -------- ---------- ----------
$681,924 $718,115 $2,071,048 $2,320,137
======== ======== ========== ==========
Income (loss) from operations:
Operating income:
Nursing centers.................. $ 55,881 $ 61,189 $ 174,189 $ 173,600
Hospitals........................ 54,084 63,774 172,151 208,752
Vencare.......................... 7,289 20,840 34,678 70,857
Corporate overhead............... (27,297) (26,399) (84,744) (84,061)
Unusual transactions............. - 6,180 (20,827) (27,256)
Reorganization costs............. (5,443) - (12,302) -
-------- -------- ---------- ----------
Operating income............. 84,514 125,584 263,145 341,892
Rent............................... 77,423 75,063 228,963 158,274
Depreciation and amortization...... 24,126 25,425 68,023 89,466
Interest, net...................... 25,357 21,304 63,652 84,583
-------- -------- ---------- ----------
Income (loss) before income taxes.. (42,392) 3,792 (97,493) 9,569
Provision for income taxes......... 50 (33,790) 150 (23,442)
-------- -------- ---------- ----------
$(42,442) $ 37,582 $ (97,643) $ 33,011
======== ======== ========== ==========
September 30, 1999 December 31, 1998
------------------ -----------------
Assets:
Nursing centers.................... $ 513,152 $ 520,412
Hospitals and Vencare.............. 860,587 904,538
Corporate.......................... 393,444 349,422
---------- ----------
$1,767,183 $1,774,372
========== ==========
</TABLE>
14
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 10 -- INCOME TAXES
The provision for income taxes in the third quarter of 1999 is based upon
management's estimate of taxable income or loss for the year and includes the
effect of certain non-deductible items such as goodwill amortization and the
recording of additional deferred tax valuation allowances.
During the fourth quarter of 1998, the Company recorded a deferred tax
valuation allowance aggregating $203 million. The allowance was recorded based
upon management's belief that the Company was unlikely to generate sufficient
taxable income to realize the net deferred tax assets recorded at December 31,
1998. The provision for income taxes in 1999 includes a deferred tax valuation
loss of $15.0 million for the third quarter and $26.4 million for the nine
months ended September 30, 1999. In addition, the Company recorded a valuation
allowance of $3.4 million related to the change in accounting for start-up costs
in the first quarter of 1999. The deferred tax valuation allowance included in
the condensed consolidated balance sheet at September 30, 1999 totaled $233
million.
At the time of the Spin-off Transactions, the Company recorded both a deferred
tax asset and a valuation allowance for identical amounts in connection with the
difference in book and tax basis, which resulted from the Spin-off Transactions,
of the Company's investment in Atria. The valuation allowance was recorded due
to the litigation and other uncertainties associated with the realization of the
deferred tax asset, based upon the available evidence at the time of the Spin-
off Transactions. During the third quarter, upon favorable resolution of such
litigation and completion of the Atria sale, the Company adjusted the valuation
allowance that had been recorded in the second quarter of 1998. Accordingly,
the provision for income taxes for the third quarter of 1998 includes a benefit
of approximately $38 million to reflect the realization of the deferred tax
asset.
NOTE 11 -- LITIGATION
Summary descriptions of various significant legal and regulatory activities
follow:
On September 13, 1999, the Company and substantially all of its subsidiaries
filed voluntary petitions for protection under Chapter 11 of the Bankruptcy
Code. The Chapter 11 cases have been styled In re: Vencor, Inc., et al.,
Debtors and Debtors in Possession, Case Nos. 99-3199 (MFW) through 99-3327
(MFW), Chapter 11, Jointly Administered. See Note 3 for further discussion of
the Chapter 11 Cases.
On March 18, 1999, the Company served Ventas with a demand for mediation
pursuant to the Spin-off Agreement. The Company was seeking a reduction in rent
and other concessions under its Master Lease Agreements with Ventas. On March
31, 1999, the Company and Ventas entered into the Standstill Agreement which
provided that both companies would postpone through April 12, 1999 any claims
either may have against the other. On April 12, 1999, the Company and Ventas
entered into the Second Standstill which provided that neither party would
pursue any claims against the other or any other third party related to the
Spin-off Transactions as long as the Company complied with certain rent payment
terms. The Second Standstill was scheduled to terminate on May 5, 1999.
Pursuant to the Tolling Agreement, the Company and Ventas also agreed that any
statutes of limitations or other time-related constraints in a bankruptcy or
other proceeding that might be asserted by one party against the other would
be extended and tolled from April 12, 1999 until May 5, 1999 or until the
termination of the Second Standstill. As a result of the Company's failure to
pay rent, Ventas served the Company with notices of nonpayment under the Master
Lease Agreements. Subsequently, the Company and Ventas entered into further
amendments to the Second Standstill and the Tolling Agreement to extend the time
during which no remedies may be pursued by either party and to extend the date
by which the Company may cure its failure to pay rent.
15
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 11 -- LITIGATION (Continued)
In connection with the Chapter 11 Cases, the Company and Ventas entered into
the Stipulation which provides for the payment by the Company of a reduced
monthly rent of approximately $15.1 million beginning in September 1999. The
Stipulation has been approved by the Bankruptcy Court. The Stipulation also
continues to toll any statutes of limitations or other time constraints in a
bankruptcy proceeding for claims that might be asserted by the Company against
Ventas. The Stipulation will expire on November 30, 1999, but automatically
renews for one-month periods unless either party provides a 14-day notice of
termination. The Stipulation also may be terminated prior to its expiration
upon a payment default by the Company, the consummation of the Plan of
Reorganization or the occurrence of certain defaults under the DIP Financing.
The Stipulation also provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off Transactions.
If the Company and Ventas are unable to resolve their disputes or maintain an
interim resolution, the Company may seek to pursue claims against Ventas arising
out of the Spin-off Transactions and seek judicial relief barring Ventas from
exercising any remedies based on the Company's failure to pay some or all of the
rent to Ventas. The Company's failure to pay rent or comply with the
Stipulation, in the absence of judicial relief, would result in an "Event of
Default" under the Master Lease Agreements. Upon an Event of Default under the
Master Lease Agreements, the remedies available to Ventas include terminating
the Master Lease Agreements, repossessing and reletting the leased properties
and requiring the Company to (i) remain liable for all obligations under the
Master Lease Agreements, including the difference between the rent under the
Master Lease Agreements and the rent payable as a result of reletting the leased
properties or (ii) pay the net present value of the rent due for the balance of
the terms of the Master Lease Agreements. Such remedies, however, would be
subject to the supervision of the Bankruptcy Court.
The Company's subsidiary, TheraTx, Incorporated ("TheraTx"), is a plaintiff in
a declaratory judgment action entitled TheraTx, Incorporated v. James W. Duncan,
Jr., et al. currently pending in the United States District Court for the
Northern District of Georgia. The defendants have asserted counterclaims
against TheraTx under breach of contract, securities fraud, negligent
misrepresentation and fraud theories for allegedly not performing as promised
under a merger agreement related to TheraTx's purchase of a company called
PersonaCare, Inc. and for allegedly failing to inform the
defendants/counterclaimants prior to the merger that TheraTx's possible
acquisition of Southern Management Services, Inc. might cause the suspension of
TheraTx's shelf registration under relevant rules of the Securities and Exchange
Commission. The court granted summary judgment for the
defendants/counterclaimants and ruled that TheraTx breached the shelf
registration provision in the merger agreement, but dismissed the defendants'
remaining counterclaims. Additionally, the court ruled after trial that
defendants/counterclaimants were entitled to damages and prejudgment interest in
the amount of approximately $1.3 million and attorneys' fees and other
litigation expenses of approximately $700,000. The Company and the
defendants/counterclaimants both have appealed the court's rulings.
The Company is pursuing various claims against private insurance companies who
issued Medicare supplement insurance policies to individuals who became patients
of the Company's hospitals. After the patients' Medicare benefits are
exhausted, the insurance companies become liable to pay the insureds' bills
pursuant to the terms of these policies. The Company has filed numerous
collection actions against various of these insurers to collect the difference
between what Medicare would have paid and the hospitals' usual and customary
charges. These disputes arise from differences in interpretation of the policy
provisions and certain Federal and state regulations governing such policies.
Various courts have issued various rulings on the different issues, most of
which have been appealed. Management believes that disputed amounts under these
Medicare supplement insurance policies will ultimately be collected and,
accordingly, no provision for loss has been recorded in the accompanying
condensed consolidated
16
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 11 -- LITIGATION (Continued)
financial statements. Accounts receivable related to these disputes
approximated $15 million at September 30, 1999. The Company intends to continue
to pursue these claims vigorously. If the Company does not prevail on these
issues, future results of operations and liquidity would be materially adversely
affected.
The Company received notice in June 1998 that the State of Georgia found
regulatory violations with respect to patient discharges, among other things, at
one of the Company's nursing centers in Savannah, Georgia. The state
recommended a Federal fine of $543,000 for these violations, which HCFA has
imposed. The Company has appealed this fine.
On April 9, 1998, a class action lawsuit captioned Mongiovi et al. v. Vencor,
Inc., et al., Case No. 98-769-CIV-T24E, was filed in the United States District
Court for the Middle District of Florida on behalf of a purported class
consisting of certain residents of a Tampa nursing center operated by the
Company and other residents in the Company's nursing centers nationwide. The
complaint alleges various breaches of contract, and statutory and regulatory
violations including violations of Federal and state RICO statutes. The
original complaint has been amended to delineate several purported subclasses.
The plaintiffs seek class certification, unspecified damages, attorneys' fees
and costs. The action was dismissed without prejudice on July 5, 1999.
A class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., was
filed on December 24, 1997 in the United States District Court for the Western
District of Kentucky (Civil Action No. 3-97CV-8354). The class action claims
were brought by an alleged stockholder of the Company against the Company and
certain executive officers and directors of the Company. The complaint alleges
that the Company and certain current and former executive officers of the
Company during a specified time frame violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (the "Exchange Act"), by, among other things,
issuing to the investing public a series of false and misleading statements
concerning the Company's current operations and the inherent value of the
Company's common stock. The complaint further alleges that as a result of these
purported false and misleading statements concerning the Company's revenues and
successful acquisitions, the price of the Company's common stock was
artificially inflated. In particular, the complaint alleges that the Company
issued false and misleading financial statements during the first, second and
third calendar quarters of 1997 which misrepresented and understated the impact
that changes in Medicare reimbursement policies would have on the Company's core
services and profitability. The complaint further alleges that the Company
issued a series of materially false statements concerning the purportedly
successful integration of its recent acquisitions and prospective earnings per
share for 1997 and 1998 which the Company knew lacked any reasonable basis and
were not being achieved. The suit seeks damages in an amount to be proven at
trial, pre-judgment and post-judgment interest, reasonable attorneys' fees,
expert witness fees and other costs, and any extraordinary equitable and/or
injunctive relief permitted by law or equity to assure that the plaintiff has an
effective remedy. In December 1998, the Company filed a motion to dismiss the
case. The court converted the Company's motion to dismiss into a motion for
summary judgment and granted summary judgment as to all defendants. The
plaintiff has appealed the ruling to the United States Court of Appeals for the
Sixth Circuit (the "Sixth Circuit"). The Company is defending this action
vigorously.
A shareholder derivative suit entitled Thomas G. White on behalf of Vencor,
Inc. and Ventas, Inc. v. W. Bruce Lunsford, et al., Case No. 98CI03669, was
filed in June 1998 in the Jefferson County, Kentucky, Circuit Court. The suit
was brought on behalf of the Company and Ventas against certain current and
former executive officers and directors of the Company and Ventas. The complaint
alleges that the defendants damaged the Company and Ventas by engaging in
violations of the securities laws, engaging in insider trading, fraud and
securities fraud and damaging the reputation of the Company and Ventas. The
plaintiff asserts that such actions were taken deliberately, in bad
17
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 11 -- LITIGATION (Continued)
faith and constitute breaches of the defendants' duties of loyalty and due care.
The complaint is based on substantially similar assertions to those made in the
class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., discussed
above. The suit seeks unspecified damages, interest, punitive damages,
reasonable attorneys' fees, expert witness fees and other costs, and any
extraordinary equitable and/or injunctive relief permitted by law or equity to
assure that the Company and Ventas have an effective remedy. The parties have
entered into a series of stipulations to stay all proceedings in the action. The
current stipulation will expire on December 13, 1999. The Company believes that
the allegations in the complaint are without merit and intends to defend this
action vigorously.
A class action lawsuit entitled Jules Brody v. Transitional Hospitals
Corporation, et al., Case No. CV-S-97-00747-PMP, was filed on June 19, 1997 in
the United States District Court for the District of Nevada on behalf of a class
consisting of all persons who sold shares of Transitional Hospitals Corporation
("Transitional") common stock during the period from February 26, 1997 through
May 4, 1997, inclusive. The complaint alleges that Transitional purchased
shares of its common stock from members of the investing public after it had
received a written offer to acquire all of Transitional's common stock and
without making the required disclosure that such an offer had been made. The
complaint further alleges that defendants disclosed that there were "expressions
of interest" in acquiring Transitional when, in fact, at that time, the
negotiations had reached an advanced stage with actual firm offers at
substantial premiums to the trading price of Transitional's stock having been
made which were actively being considered by Transitional's Board of Directors.
The complaint asserts claims pursuant to Sections 10(b), 14(e) and 20(a) of the
Exchange Act, and common law principles of negligent misrepresentation and names
as defendants Transitional as well as certain former senior executives and
directors of Transitional. The plaintiff seeks class certification, unspecified
damages, attorneys' fees and costs. In June 1998, the court granted the
Company's motion to dismiss with leave to amend the Section 10(b) claim and the
state law claims for misrepresentation. The court denied the Company's motion
to dismiss the Section 14(e) and Section 20(a) claims, after which the Company
filed a motion for reconsideration. On March 23, 1999, the court granted the
Company's motion to dismiss all remaining claims and the case has been
dismissed. The plaintiff has appealed this ruling. The Company is defending
this action vigorously.
The Company's subsidiary, American X-Rays, Inc. ("AXR"), is the defendant in a
civil qui tam lawsuit which was filed in the United States District Court for
the Eastern District of Arkansas and served on the Company on July 7, 1997. The
DOJ has intervened in the suit which was brought under the Federal Civil False
Claims Act. AXR provided portable X-ray services to nursing facilities
(including those operated by the Company) and other healthcare providers. The
Company acquired an interest in AXR when The Hillhaven Corporation ("Hillhaven")
was merged into the Company in September 1995 and purchased the remaining
interest in AXR in February 1996. The civil suit alleges that AXR submitted
false claims to the Medicare and Medicaid programs. The suit seeks damages in an
amount of not less than $1,000,000, treble damages and civil penalties. In a
related criminal investigation, the United States Attorney's Office for the
Eastern District of Arkansas indicted four former employees of AXR; those
individuals were convicted of various fraud related counts in January 1999. AXR
had been informed previously that it was not a target of the criminal
investigation, and AXR was not indicted. The Company cooperated fully in the
criminal investigation. The Company is defending vigorously the qui tam action.
On June 6, 1997, Transitional announced that it had been advised that it was
the target of a Federal grand jury investigation being conducted by the United
States Attorney's Office for the District of Massachusetts arising from
activities of Transitional's formerly owned dialysis business. The investigation
involves an alleged illegal arrangement in the form of a partnership which
existed from June 1987 to June 1992 between Damon Corporation
18
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 11 -- LITIGATION (Continued)
and Transitional. Transitional spun off its dialysis business, now called Vivra,
Incorporated, on September 1, 1989. In January 1998, the Company was informed
that no criminal charges would be filed against the Company. In March 1998, the
Company was added as a defendant to a previously pending qui tam lawsuit against
the other partners related to the partnership's former Medicare billing
practices. The Company has moved to dismiss the action. The Company intends to
defend vigorously the action.
On April 14, 1999, a lawsuit entitled Lenox Healthcare, Inc., et al. v.
Vencor, Inc., et al., Case No. BC 208750, was filed in the Superior Court of Los
Angeles, California by Lenox Healthcare, Inc. ("Lenox") asserting various causes
of action arising out of the Company's sale and lease of several nursing centers
to Lenox in 1997. Lenox subsequently removed certain of its causes of action
and refiled these claims before the United States District Court for the Western
District of Kentucky in a case entitled Lenox Healthcare, Inc. v. Vencor, Inc.,
et al., Case No. 3:99 CV-348-H. The Company has asserted counterclaims,
including RICO claims, against Lenox in the Kentucky action. The Company
believes that the allegations made by Lenox in both complaints are without merit
and intends to defend these actions vigorously. Lenox and its subsidiaries
filed for protection under Chapter 11 of the Bankruptcy Code on November 3,
1999. The Company has not determined the effect, if any, such filing will have
on the Company's financial condition, results of operations or liquidity.
The Company has been informed by the DOJ that it is the subject of ongoing
investigations into various Medicare reimbursement issues, including various
hospital cost reporting issues, Vencare billing practices and various quality of
care issues in its hospitals and nursing centers. The Company is cooperating
fully in the investigations. The Company is engaged in active discussions with
the DOJ which may result in a resolution of some or all of the DOJ
investigations as part of its Plan of Reorganization. Such a resolution could
include a payment to the government which could have a material effect on the
Company's liquidity and financial position.
In connection with the Spin-off Transactions, liabilities arising from various
legal proceedings and other actions were assumed by the Company and the Company
agreed to indemnify Ventas against any losses, including any costs or expenses,
it may incur arising out of or in connection with such legal proceedings and
other actions. The indemnification provided by the Company also covers losses,
including costs and expenses, which may arise from any future claims asserted
against Ventas based on the former healthcare operations of Ventas. In
connection with its indemnification obligation, the Company has assumed the
defense of various legal proceedings and other actions. The Stipulation entered
into with Ventas provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off Transactions.
The Company is a party to certain legal actions and regulatory investigations
arising in the normal course of its business. The Company is unable to predict
the ultimate outcome of pending litigation and regulatory investigations. In
addition, there can be no assurance that HCFA or other regulatory agencies will
not initiate additional investigations related to the Company's business in the
future, nor can there be any assurance that the resolution of any litigation or
investigations, either individually or in the aggregate, would not have a
material adverse effect on the Company's results of operations, liquidity or
financial position. In addition, the above litigation and investigations (as
well as future litigation and investigations) are expected to consume the time
and attention of senior management and may have a disruptive effect upon the
Company's operations.
19
<PAGE>
VENCOR, INC.
(Debtor-in-Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 12 -- VENCARE RESTRUCTURING PLAN
As a result of significant declines in demand for ancillary services,
management is developing a formal plan to restructure the Vencare division. It
is expected that the plan will be completed in the fourth quarter of 1999.
Under the plan, it is expected that Vencare's rehabilitation, speech and
occupational therapies will be integrated into the Company's nursing center
division and the pharmacy business will report to the hospital division. The
Company's respiratory therapy business and certain other ancillary businesses
are expected to be discontinued. Management believes that costs and expenses
associated with these activities may have a material adverse effect on fourth
quarter operating results.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cautionary Statement
Certain statements made in this Form 10-Q, including, but not limited to,
statements containing the words "anticipates," "believes," "expects," "intends,"
"will," "may" and similar words constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements are based on management's current expectations and include
known and unknown risks, uncertainties and other factors, many of which the
Company is unable to predict or control, that may cause the Company's actual
results or performance to differ materially from any future results or
performance expressed or implied by such forward-looking statements. These
statements involve risks, uncertainties and other factors detailed from time to
time in the Company's filings with the Securities and Exchange Commission. Such
factors may include, without limitation, the delays or the inability to complete
the Plan of Reorganization; the availability and terms of financing in light of
recent losses, liquidity issues and the Company's Chapter 11 Cases; adverse
actions which may be taken by creditors and the outcome of various proceedings
in the Chapter 11 Cases; the Company's ability to attract patients under its
current financial position; and the effects of healthcare reform and legislation
on the Company's business strategy and operations. In addition, the Company's
current financial difficulties may disrupt its operations and may result in a
number of other operational difficulties, including the following: (i) the
Company will have little, if any, ability to access capital markets, (ii) the
Company's senior management may be required to spend an excessive amount of time
and effort dealing with the Company's financial difficulties instead of focusing
on the operations of its businesses, (iii) the Company may be unable to retain
top management and other key personnel, (iv) the Company may experience a
reduction in the census at its nursing centers and hospitals if patients and
referral sources become concerned about the Company's ability to provide quality
care and (v) suppliers to the Company may stop providing supplies or services to
the Company or provide such supplies or services only on shortened payment or
cash terms. The Company cautions investors that any forward-looking statements
made by the Company are not guarantees of the future performance. The Company
disclaims any obligation to update any such factors or to announce publicly the
results of any revisions to any of the forward-looking statements included
herein to reflect future events or developments.
Background Information
The business segment data in Note 9 of the Notes to Condensed Consolidated
Financial Statements should be read in conjunction with the following discussion
and analysis.
The accompanying condensed consolidated financial statements have been
prepared in accordance with SOP 90-7 and generally accepted accounting
principles applicable to going concerns, which assumes assets will be realized
and liabilities will be discharged in the normal course of business. The
financial statements do not include further adjustments, if any, reflecting the
possible future effects on the recoverability and classification of assets or
the amount and classification of liabilities that may result from the outcome of
uncertainties discussed herein.
General
The Company is one of largest providers of long-term healthcare services in
the United States. At September 30, 1999, the Company operated 293 nursing
centers (38,336 licensed beds), 56 long-term acute care hospitals (4,907
licensed beds), and its Vencare ancillary services business which primarily
provided respiratory and rehabilitation therapies, medical services and pharmacy
management services to both Company-operated and non-affiliated nursing centers.
On September 13, 1999, the Company and substantially all of its subsidiaries
filed voluntary petitions for protection under Chapter 11 of the Bankruptcy
Code. The Company currently is operating its business as a debtor-in-possession
subject to the jurisdiction of the Bankruptcy Court. The Company's recent
operating losses, liquidity issues and the Chapter 11 Cases raise substantial
doubt about the Company's ability to continue as a going concern.
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
General (Continued)
The ability of the Company to continue as a going concern and the
appropriateness of using the going concern basis of accounting is dependent
upon, among other things, (i) the Company's ability to comply with the terms of
the DIP Financing, (ii) confirmation of the Plan of Reorganization under the
Bankruptcy Code, (iii) the Company's ability to achieve profitable operations
after such confirmation, and (iv) the Company's ability to generate sufficient
cash from operations to meet its obligations. The Plan of Reorganization and
other actions during the Chapter 11 Cases could change materially the amounts
currently recorded in the consolidated financial statements. See Note 3 of the
Notes to Condensed Consolidated Financial Statements.
On April 30, 1998, Ventas completed the spin-off of its healthcare operations
through the Spin-off Transactions. For accounting purposes, the consolidated
historical financial statements of Ventas became the historical financial
statements of the Company after the Distribution Date. Any discussion
concerning events prior to the Distribution Date refers to the Company's
business as it was conducted prior to the Spin-off Transactions. See Note 1 of
the Notes to Condensed Consolidated Financial Statements.
Results of Operations
Nursing Center Division
Revenues declined 1% to $386 million in the third quarter of 1999 from $389
million in the same period last year primarily as a result of a 1% decline in
patient days. Same-store patient days were relatively unchanged compared to the
third quarter of 1998. Operating income declined 9% to $56 million in the third
quarter of 1999 compared to $61 million in the same period of 1998. The decline
in operating income was primarily attributable to a $3 million charge related to
a professional liability settlement and a $3 million increase in the provision
for doubtful accounts due to deteriorating accounts receivable collections. The
Company's nursing centers were operated under the new Medicare reimbursement
system discussed below during both periods.
For the nine months ended September 30, 1999, nursing center revenues declined
7% to $1.15 billion from $1.24 billion a year ago primarily as a result of
reductions in Medicare reimbursement in connection with the Budget Act and a
decline in the number of facilities operated by the Company. Same-store patient
days were relatively unchanged from the first nine months of 1998.
The Budget Act established a new prospective payment system ("PPS") which
became effective July 1, 1998 for the Company's nursing centers. Under PPS,
Medicare revenues are substantially less than those earned under the former
cost-based reimbursement system. Medicare revenues per patient day declined 17%
to $276 during the first nine months of 1999 from $331 for the same period of
1998.
Operating income for the first nine months of 1999 totaled $174 million,
approximately the same as the comparable period in 1998. Despite a decline in
revenues in 1999, primarily resulting from PPS, operating margins improved to
15.1% in 1999 from 14.0% last year as a result of increased operating
efficiencies.
Hospital Division
Revenues increased 2% to $231 million in the third quarter of 1999 from $227
million last year and declined 1% to $704 million from $713 million for the nine
month periods. Same-store patient days increased 5% and 4%, respectively, for
the third quarter of 1999 and for the nine months ended September 30, 1999.
Despite increases in same-store patient days, revenues in the third quarter and
nine month period ended September 30, 1999 were affected negatively by
reductions in the level of Medicare reimbursement.
22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Hospital Division (Continued)
The Budget Act reduced Medicare reimbursement to the Company's hospitals
related to certain incentive payments, allowable bad debts and capital costs,
and payments for services to patients transferred from general acute care
hospitals. These reimbursement changes became effective at various dates
beginning in the fourth quarter of 1997 and became effective fully in September
1998. Management believes that hospital revenues in 1999 could be reduced by
approximately $40 million from 1997 levels due to the provisions of the Budget
Act.
Medicare revenues recorded by the Company's hospitals include reimbursement
for expenses related to certain costs associated with hospital-based ancillary
services provided by Vencare to its nursing center customers. As part of its
ongoing investigations, the DOJ has objected to including such costs on the
Medicare cost reports filed by the Company's hospitals. Medicare revenues
related to the reimbursement of such costs aggregated $4 million and $12 million
for the three months ended September 30, 1999 and 1998, respectively, and $18
million and $37 million for the respective nine month periods. In connection
with the continuing discussions with the DOJ, the Company has agreed to
discontinue the recording of such revenues and will exclude such costs from its
Medicare cost reports beginning September 1, 1999. See Note 11 of the Notes to
Condensed Consolidated Financial Statements.
Operating income declined 15% to $54 million in the third quarter of 1999 from
$64 million last year and declined 18% to $172 million from $209 million for the
first nine months of the year primarily as a result of reductions in Medicare
reimbursement. Operating costs per patient day increased 4% in the third quarter
of 1999 and 2% for the nine month period compared to the same periods last year.
Operating income in the hospital division included the Company's equity in the
operations of BHC, of which the Company owns a 44% voting interest. In the
third quarter of 1999, the Company recorded no income or loss in connection with
the operations of BHC, compared to a loss of $1.2 million for the same period a
year ago. For the nine months ended September 30, 1999, the Company recorded a
loss of $4.8 million compared to income of $500,000 in 1998. During the second
quarter of 1999, the Company wrote-off the remaining book value of its
investment in BHC. See Note 5 of the Notes to Condensed Consolidated Financial
Statements.
Vencare Ancillary Services Division
Revenues declined 30% to $97 million in the third quarter of 1999 from $138
million in the same quarter of 1998 and declined 31% to $317 million from $459
million for the first nine months of the year due primarily to declines in
demand for ancillary services.
Vencare provides ancillary services to both Company-operated and non-
affiliated nursing centers. While all of the Company's nursing centers were
subject to PPS on July 1, 1998, most of its non-affiliated customers became
subject to PPS in January 1999. Under PPS, Medicare reimbursement to nursing
centers was changed from a system based upon reasonable direct and indirect
cost of providing care to patients to one in which nursing centers receive a
fixed per diem payment to cover substantially all services provided to patients,
including ancillary services such as respiratory, rehabilitation, speech and
occupational therapies and certain covered pharmaceuticals. Management believes
that the significant decline in demand for its Vencare services, particularly
respiratory and rehabilitation therapies, is attributable mostly to efforts by
nursing center customers to reduce operating costs under PPS. In addition, as a
result of these regulatory changes, many nursing centers have elected to provide
ancillary services to their patients through internal staff and no longer
contract with outside parties for ancillary services.
23
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Vencare Ancillary Services Division (Continued)
Operating income declined 65% to $7 million in the third quarter of 1999 from
$21 million last year and declined 51% to $35 million for the first nine months
of the year from $71 million last year. Operating results for both the third
quarter and nine month periods of 1999 were affected adversely by a significant
decline in demand for ancillary services. In addition, the provision for
doubtful accounts for the third quarter of 1999 increased by $4 million from the
same quarter a year ago due to deteriorating accounts receivable collections.
As a result of significant declines in demand for ancillary services,
management is developing a formal plan to restructure the Vencare division. It
is expected that the plan will be completed in the fourth quarter of 1999.
Under the plan, it is expected that Vencare's rehabilitation, speech and
occupational therapies will be integrated into the Company's nursing center
division and the pharmacy business will report to the hospital division. The
Company's respiratory therapy business and certain other ancillary businesses
are expected to be discontinued. Management believes that costs and expenses
associated with these activities may have a material adverse effect on fourth
quarter operating results.
Corporate Overhead
Operating income for the Company's three operating divisions excludes
allocations of corporate overhead. These costs aggregated $27 million and $26
million for the third quarters of 1999 and 1998, respectively. For the first
nine months of the year, these costs aggregated $85 million in 1999 and $84
million in 1998. As a percentage of revenues (before eliminations), corporate
overhead totaled 3.8% and 3.5% for the third quarter of 1999 and 1998,
respectively. For the nine months ended September 30, 1999 and 1998, corporate
overhead as a percentage of revenues totaled 3.9% and 3.5%, respectively.
Unusual Transactions
Operating results for certain periods presented include unusual transactions.
These transactions are included in other operating expenses in the condensed
consolidated statement of operations for the respective periods in which they
were recorded.
Unusual transactions for the nine months ended September 30, 1999 included
$20.8 million of costs recorded in the second quarter of 1999 related to the
write-down of the Company's remaining investment in BHC ($15.2 million) and the
cancellation of a nursing center software development project ($5.6 million).
In the third quarter of 1998, the Company sold its investment in Atria for
$177.5 million in cash and an equity interest in the surviving corporation,
resulting in a gain of $98.5 million. During the third quarter of 1998, as a
result of substantial reductions in Medicare reimbursement received by the
Company's nursing center and hospital divisions related to the provisions of the
Budget Act, management determined to suspend all acquisition and development
activities, terminate the construction of substantially all of its development
properties, and close two recently acquired hospitals. Accordingly, the Company
recorded pretax charges aggregating $56.8 million related to the cancellation of
construction projects and $17.4 million for the planned closure of the two
hospitals. In September 1998, the Company also recorded pretax charges of $9.6
million for uncollectible accounts receivable from previously sold or closed
nursing center, home health and hospice operations and $8.5 million in
connection with the write-down of its investment in BHC to its net realizable
value. Unusual transactions for the nine months ended September 30, 1998 also
included $33.4 million of professional fees related to the Spin-off
Transactions, losses related to the disposal of certain non-strategic
businesses, and the write-off of capitalized amounts related to a cancelled
construction project, all of which were recorded in the first and second
quarters of 1998.
24
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Capital Costs
As a result of the Spin-off Transactions, the Company leases substantially all
of its facilities. Prior thereto, the Company owned 271 facilities and leased
80 facilities from third parties. Depreciation and amortization, rent and net
interest costs aggregated $361 million for the first nine months of 1999
compared to $332 million last year.
As a result of the Spin-off Transactions, the overall leverage of the Company
was increased substantially. Capital costs for the nine months ended September
30, 1999, including the impact of reduced depreciation and interest costs, were
increased by approximately $39 million as a result of the Spin-off Transactions.
In connection with the Spin-off Transactions in 1998, approximately $992
million of long-term debt was retained by Ventas.
Income Taxes
The provision for income taxes in the third quarter of 1999 is based upon
management's estimate of taxable income or loss for the year and includes the
effect of certain non-deductible items such as goodwill amortization and the
recording of additional deferred tax valuation allowances.
During the fourth quarter of 1998, the Company recorded a deferred tax
valuation allowance aggregating $203 million. The allowance was recorded based
upon management's belief that the Company was unlikely to generate sufficient
taxable income to realize the net deferred tax assets recorded at December 31,
1998. The provision for income taxes in 1999 included a deferred tax valuation
loss of $15.0 million for the third quarter and $26.4 million for the nine
months ended September 30, 1999. In addition, the Company recorded a valuation
allowance of $3.4 million related to the change in accounting for start-up costs
in the first quarter of 1999. The deferred tax valuation allowance included in
the condensed consolidated balance sheet at September 30, 1999 totaled $233
million.
Consolidated Results
The Company reported a pretax loss from operations before reorganization costs
of $37 million in the third quarter of 1999 compared to pretax income of $4
million in the third quarter of 1998. For the nine months ended September 30,
1999, the Company recorded a pretax loss from operations before restructuring
costs of $85 million compared to pretax income of $10 million for the same
period last year.
Reorganization costs included professional fees incurred in connection with
the Company's restructuring activities of $5.4 million for the third quarter of
1999 and $12.3 million for the nine months ended September 30, 1999.
The net loss from operations in the third quarter of 1999, including the
impact of reorganization costs and the deferred tax valuation allowance,
aggregated $42 million. Net income from operations in the third quarter a year
ago aggregated $38 million. For the nine months ended September 30, 1999, the
Company's net loss from operations totaled $98 million compared to net income of
$33 million a year ago.
25
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Consolidated Results (Continued)
Effective January 1, 1999, the Company adopted the provisions of SOP 98-5,
"Reporting on the Costs of Start-Up Activities," which requires the Company to
expense start-up costs, including organizational costs, as incurred. In
accordance with the provisions of SOP 98-5, the Company wrote off $8.9 million
of such unamortized costs as a cumulative effect of change in accounting
principle in the first quarter of 1999. The pro forma effect of the change in
accounting for start-up costs, assuming the change occurred on January 1, 1998,
was not significant.
The net loss for the nine months ended September 30, 1998 included an
extraordinary loss of $77.9 million incurred in connection with the
extinguishment of debt in the Spin-off Transactions.
Liquidity
On September 13, 1999, the Company and substantially all of its subsidiaries
filed voluntary petitions for protection under Chapter 11 of the Bankruptcy
Code. The Company currently is operating its business as a debtor-in-possession
subject to the jurisdiction of the Bankruptcy Court.
On September 14, 1999, the Company received approval from the Bankruptcy Court
to pay pre-petition and post-petition employee wages, salaries, benefits and
other employee obligations. The Bankruptcy Court also approved orders granting
authority, among other things, to pay pre-petition claims of certain critical
vendors, utilities and patient obligations. All other pre-petition liabilities
are classified in the condensed consolidated balance sheet as liabilities
subject to compromise. The Company intends to pay post-petition claims of all
vendors and providers in the ordinary course of business.
In connection with the Chapter 11 Cases, the Company entered into the DIP
Financing with a bank group led by Morgan Guaranty Trust Company of New York.
The Bankruptcy Court granted final approval of the DIP Financing on October 1,
1999. The DIP Financing, which matures on March 13, 2000, is comprised of the
Tranche A Loan and the Tranche B Loan. Interest is payable at prime rate plus
2.5% on the Tranche A Loan and prime rate plus 4.5% on the Tranche B Loan.
Available borrowings under the Tranche A Loan were limited to $45 million in
September and increase to $65 million in October, $70 million in November
and $75 million thereafter. Borrowings under the Tranche B Loan require the
approval of lenders holding at least 75% of the credit exposure under the DIP
Financing. The DIP Financing is secured by substantially all of the assets of
the Company and its subsidiaries, including certain owned real property. The
DIP Financing contains standard representations and warranties and other
affirmative and restrictive covenants. As of November 11, there were no
outstanding borrowings under the DIP Financing.
On November 4, 1999, the Company received approval (subject to certain
conditions) to implement the Retention Plan to enhance the ability of the
Company to retain key management employees during the restructuring period.
Under the Retention Plan, bonuses aggregating $7.3 million will be awarded to
certain key management employees based upon various percentages of their annual
salary. The Retention Plan provides that the retention bonuses will be awarded
in three equal amounts upon: (i) Bankruptcy Court approval of the Retention
Plan, (ii) the effective date of the Plan of Reorganization and (iii) three
months following the effective date of the Plan of Reorganization.
26
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Liquidity (Continued)
Under the Bankruptcy Code, actions to collect pre-petition indebtedness
against the Company are subject to an automatic stay and other contractual
obligations against the Company may not be enforced. The automatic stay does
not necessarily apply to certain actions against Ventas for which the Company
has agreed to indemnify Ventas. In addition, the Company may assume or reject
executory contracts, including lease obligations, under the Bankruptcy Code.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the reorganization process.
As previously disclosed, the Company is developing the Plan of Reorganization
through negotiations with key parties including its Senior Lenders, the holders
of the 1998 Notes, Ventas and the DOJ, acting on behalf of HCFA and HHS. A
substantial portion of pre-petition liabilities are subject to settlement under
the Plan of Reorganization to be submitted by the Company.
The Plan of Reorganization must be voted upon by the impaired creditors of the
Company and approved by the Bankruptcy Court. There can be no assurance that
the Plan of Reorganization to be proposed by the Company will be approved by the
requisite holders of claims, confirmed by the Bankruptcy Court or that it will
be consummated. If the Plan of Reorganization is not accepted by the required
number of impaired creditors and equity holders and the Company's exclusive
right to file and solicit acceptance of a plan of reorganization ends, any party
in interest may subsequently file its own plan of reorganization for the
Company. A plan of reorganization must be confirmed by the Bankruptcy Court
after certain findings required by the Bankruptcy Code are made by the
Bankruptcy Court. The Bankruptcy Court may confirm a plan of reorganization
notwithstanding the non-acceptance of the plan by an impaired class of creditors
or equity holders if certain requirements of the Bankruptcy Code are met.
Events Leading to Reorganization
The Company reported a net loss from operations in 1998 aggregating $573
million, resulting in certain financial covenant violations under the Credit
Agreement. Namely, the covenants regarding minimum net worth, total leverage
ratio, senior leverage ratio and fixed charge coverage ratio were not satisfied
at December 31, 1998. Prior to the commencement of the Chapter 11 Cases, the
Company received a series of temporary waivers of these covenant violations.
The waivers generally included certain borrowing limitations under the $300
million revolving credit portion of the Credit Agreement. The final waiver was
scheduled to expire on September 24, 1999.
The Company was informed on April 9, 1999 by HCFA that the Medicare program
had made a demand for repayment of approximately $90 million of reimbursement
overpayments by April 23, 1999. On April 21, 1999, the Company reached an
agreement with HCFA to extend the repayment of such amounts over 60 monthly
installments. Under the agreement, monthly payments of approximately $1.5
million commenced in May 1999. After November 1999, the remaining balance of
the overpayments will bear interest at a statutory rate approximating 13.4%,
thereby increasing the monthly payment amount to approximately $2.0 million
through March 2004. Amounts due to HCFA under this agreement aggregate $84
million and have been classified as liabilities subject to compromise in the
Company's condensed consolidated balance sheet at September 30, 1999.
On May 3, 1999, the Company elected not to make the interest payment of
approximately $14.8 million due on the 1998 Notes. The failure to pay interest
resulted in an event of default under the 1998 Notes.
In accordance with SOP 90-7, outstanding borrowings under the Credit Agreement
($506 million) and the principal amount of the 1998 Notes ($300 million) are
presented as liabilities subject to compromise in the Company's condensed
consolidated balance sheet at September 30, 1999. If the Chapter 11 Cases had
not been filed, the Company would have reported a working capital deficit
approximating $673 million at September 30, 1999.
27
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Liquidity (Continued)
Events Leading to Reorganization (Continued)
The financial statements do not include further adjustments, if any, reflecting
the possible future effects on the recoverability and classification of assets
or the amount and classification of liabilities that may result from the outcome
of the uncertainties associated with the Chapter 11 Cases. During the pendency
of the Chapter 11 Cases, the Company is recording the contractual amount of
interest expense related to the Credit Agreement and the 1998 Notes.
As previously reported, the Company has been informed by the DOJ that it is
the subject of ongoing investigations into various Medicare reimbursement
issues, including various hospital cost reporting issues, Vencare billing
practices and various quality of care issues in its hospitals and nursing
centers. See Note 11 of the Notes to Condensed Consolidated Financial
Statements.
Agreements with Ventas
On March 18, 1999, the Company served Ventas with a demand for mediation
pursuant to the Spin-off Agreement. The Company was seeking a reduction in rent
and other concessions under the Master Lease Agreements. On March 31, 1999, the
Company and Ventas entered into the Standstill Agreement which provided that
both companies would postpone through April 12, 1999 any claims either may have
against the other. On April 12, 1999, the Company and Ventas entered into the
Second Standstill which provided that neither party would pursue any claims
against the other or any other third party related to the Spin-off Transactions
as long as the Company complied with certain rent payment terms. The Second
Standstill was scheduled to terminate on May 5, 1999. The Company and Ventas
also agreed that any statutes of limitations or other time-related constraints
in a bankruptcy or other proceeding that might be asserted by one party against
the other would be extended and tolled from April 12, 1999 until May 5, 1999 or
until the termination of the Tolling Agreement.
As a result of the Company's failure to pay rent, Ventas served the Company
with notices of nonpayment under the Master Lease Agreements. Subsequently, the
Company and Ventas entered into further amendments to the Second Standstill and
the Tolling Agreement to extend the time during which no remedies may be pursued
by either party and to extend the date by which the Company may cure its failure
to pay rent.
In connection with the Chapter 11 Cases, the Company and Ventas entered into
the Stipulation which provides for the payment by the Company of a reduced
monthly rent of approximately $15.1 million beginning in September 1999. The
Stipulation has been approved by the Bankruptcy Court. The difference between
the $18.9 million base rent under the existing Master Lease Agreements and the
reduced monthly rent will be accrued as an administrative expense, subject to
compromise in the Chapter 11 Cases. Unpaid August rent of approximately $18.9
million will constitute a claim by Ventas in the Chapter 11 Cases. During the
pendency of the Chapter 11 Cases, the Company is recording the contractual
amount of the $18.9 million base rent.
The Stipulation also continues to toll any statutes of limitations or other
time constraints in a bankruptcy proceeding for claims that might be asserted by
the Company against Ventas. The Stipulation will expire on November 30, 1999,
but automatically renews for one-month periods unless either party provides a
14-day notice of termination. The Stipulation also may be terminated prior to
its expiration upon a payment default by the Company, the consummation of the
Plan of Reorganization or the occurrence of certain defaults under the DIP
Financing.
The Stipulation also provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off Transactions.
28
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Liquidity (Continued)
Agreements with Ventas (Continued)
If the Company and Ventas are unable to resolve their disputes or maintain an
interim resolution, the Company may seek to pursue claims against Ventas arising
out of the Spin-off Transactions and seek judicial relief barring Ventas from
exercising any remedies based on the Company's failure to pay some or all of the
rent to Ventas. The Company's failure to pay rent or comply with the
Stipulation, in the absence of judicial relief, would result in an "Event of
Default" under the Master Lease Agreements. Upon an Event of Default under the
Master Lease Agreements, the remedies available to Ventas include terminating
the Master Lease Agreements, repossessing and reletting the leased properties
and requiring the Company to (i) remain liable for all obligations under the
Master Lease Agreements, including the difference between the rent under the
Master Lease Agreements and the rent payable as a result of reletting the leased
properties or (ii) pay the net present value of the rent due for the balance of
the terms of the Master Lease Agreements. Such remedies, however, would be
subject to the supervision of the Bankruptcy Court.
Liabilities Subject to Compromise
"Liabilities subject to compromise" refers to liabilities incurred prior to
the commencement of the Chapter 11 Cases. These liabilities, consisting
primarily of long-term debt, amounts due to third party payors and certain
accounts payable and accrued liabilities, represent the Company's estimate of
known or potential claims to be resolved in connection with the Chapter 11
Cases. Such claims remain subject to future adjustments based on negotiations,
actions of the Bankruptcy Court, further developments with respect to disputed
claims, future rejection of executory contracts or unexpired leases,
determination as to the value of any collateral securing claims, treatment under
the Plan of Reorganization and other events. Payment terms for these amounts
will be established in connection with the Plan of Reorganization.
Approximately $1.1 billion of liabilities subject to compromise would have
been classified as current liabilities if the Chapter 11 Cases had not been
filed.
Cash provided by operations (excluding reorganization costs) for the first
nine months of the year aggregated $130 million compared to $278 million in the
same period of 1998. The decline was attributable primarily to the 1999
operating loss and certain working capital requirements associated with the
Company's financial difficulties in 1999.
Capital Resources
Capital expenditures (excluding acquisitions) for the first nine months of
1999 aggregated $73 million compared to $192 million a year ago. Planned
capital expenditures in 1999 are expected to approximate $100 million to $110
million and include significant expenditures related to information systems and
completion of nursing center improvement projects. Management believes that its
capital expenditure program is adequate to expand, improve and equip existing
facilities.
Capital expenditures in both periods were financed primarily through
internally generated funds. At September 30, 1999, the estimated cost to
complete and equip construction in progress approximated $11 million.
In the first nine months of 1998, the Company expended $16 million to acquire
its former information systems outsourcer and three previously leased nursing
centers. The Company does not intend to acquire any nursing centers, hospitals
or ancillary service businesses during the remainder of 1999.
29
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Healthcare Reform
The Budget Act, enacted in August 1997, contains extensive changes to the
Medicare and Medicaid programs intended to reduce the projected amount of
increase in payments under those programs over the next five years. Virtually
all spending reductions will come from providers and changes in program
components. The Budget Act has affected adversely the revenues in each of the
Company's operating divisions.
The Budget Act established a prospective payment system for nursing centers
for cost reporting periods beginning on or after July 1, 1998. While most
nursing centers in the United States became subject to this new payment system
during the first quarter of 1999, all of the Company's nursing centers adopted
PPS on July 1, 1998. During the first three years, the per diem rates for
nursing centers are based on a blend of facility-specific costs and Federal
costs. Thereafter, the per diem rates will be based solely on Federal costs. The
rates for such services were made available by HCFA in May 1998. The payments
received under PPS cover all services for Medicare patients including all
ancillary services, such as respiratory therapy, physical therapy, occupational
therapy, speech therapy and certain covered pharmaceuticals.
The revenues recorded by the Company under PPS in its nursing centers are
substantially less than the cost-based reimbursement it received before the
enactment of the Budget Act. Moreover, since the Company treats a greater
percentage of higher acuity patients than many nursing centers, the Company has
been affected adversely since the Federal per diem rates for higher acuity
patients do not, in the Company's opinion, adequately compensate for the
additional expense and risks associated with caring for such patients.
The Budget Act also reduced payments made to the Company's hospitals by
reducing incentive payments pursuant to the Tax Equity and Fiscal Responsibility
Act of 1982 ("TEFRA"), allowable costs for capital expenditures and bad debts,
and payments for services to patients transferred from a general acute care
hospital. The reductions in allowable costs for capital expenditures became
effective October 1, 1997. The reductions in the TEFRA incentive payments and
allowable costs for bad debts became effective between May 1, 1998 and September
1, 1998 with respect to the Company's hospitals. The reductions for payments for
services to patients transferred from a general acute care hospital became
effective October 1, 1998. These reductions are expected to have a material
adverse impact on hospital revenues in 1999 and may affect adversely the
Company's ability to develop additional long-term care hospitals in the future.
Under PPS, the volume of ancillary services provided per patient day to
nursing center patients has declined and continues to decline. As previously
discussed, Medicare reimbursements to nursing centers under PPS include
substantially all services provided to patients, including ancillary services.
Management believes that the decline in demand for its Vencare services,
particularly respiratory therapy and rehabilitation therapy, is mostly
attributable to efforts by nursing center customers to reduce operating costs.
In addition, as a result of these changes, many nursing centers are electing to
provide ancillary services to their patients through internal staff and may no
longer contract with outside parties for ancillary services.
There also continues to be state legislative proposals that would impose more
limitations on government and private payments to providers of healthcare
services such as the Company. Many states have enacted or are considering
enacting measures that are designed to reduce their Medicaid expenditures and to
make certain changes to private healthcare insurance. Some states also are
considering regulatory changes that include a moratorium on the designation of
additional long-term care hospitals and changes in the Medicaid reimbursement
system applicable to the Company's hospitals. There are also a number of
legislative proposals including cost caps and the establishment of Medicaid
prospective payment systems for nursing centers. Moreover, by repealing the
Boren Amendment, the Budget Act eases existing impediments on the states'
ability to reduce their Medicaid reimbursement levels.
30
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Healthcare Reform (Continued)
Congress is currently considering legislation which, if enacted, could
increase Medicare payments to nursing centers under PPS. The Company is unable
to assess the effect, if any, such legislation would have on its business.
There can be no assurance that payments under governmental and private third-
party payor programs will remain at levels comparable to present levels or will
be sufficient to cover the costs allocable to patients eligible for
reimbursement pursuant to such programs. In addition, there can be no assurance
that facilities leased by the Company, or the provision of services and supplies
by the Company, will meet the requirements for participation in such programs.
The Company could be affected adversely by the continuing efforts of
governmental and private third-party payors to contain the amount of
reimbursement for healthcare services. There can be no assurance that future
healthcare legislation or other changes in the administration or interpretation
of governmental healthcare programs will not have a material adverse effect on
the Company's results of operations, liquidity and financial position.
Medicare revenues as a percentage of total revenues were approximately 33% and
34% for the nine months ended September 30, 1999 and 1998, respectively, while
Medicaid percentages of total revenues were approximately 30% and 26% for the
respective periods.
Year 2000
The year 2000 ("Y2K") issue is a result of computer programs and embedded
computer chips using two digits rather than four digits to define the applicable
year. Without corrective action, computer programs and embedded chips could
potentially recognize the date ending in "00" as the year 1900 rather than 2000,
causing many computer applications to fail or to create erroneous results.
Certain of the Company's information technology systems ("IT") and non-IT
systems such as building infrastructure components (e.g. alarm systems, HVAC,
equipment and phone systems) and medical devices are affected by the Y2K issue.
The Company has developed a comprehensive compliance program to manage the Y2K
issue.
In response to the Y2K issue, the Company established five teams to address
Y2K issues in the following specific areas: (i) IT software and hardware; (ii)
third party relationships; (iii) facility components; (iv) medical equipment;
and (v) telephone systems. Each team is responsible for all phases of the
Company's Y2K compliance program for both IT and non-IT systems in its
designated area.
The Company's Y2K compliance program consists of five phases: (i) business
assessment; (ii) inventory and assessment; (iii) remediation and testing; (iv)
implementation and rollout; and (v) post-implementation. The business assessment
phase identified potential Y2K issues confronting the Company. The inventory and
assessment phase consisted of a Company-wide assessment of all facility systems
and components, medical devices, and IT software and hardware. During the
remediation and testing phase, the Company repaired, upgraded or replaced any
non-compliant IT and non-IT systems. Additionally, the Company performed
verification and validation testing of IT and non-IT systems that have been
remediated and those the Company believed were Y2K compliant. For IT and non-IT
systems that are developed internally, the Company verified compliance status
directly with the development staff and performed validation testing to confirm
its status. For IT and non-IT systems that are purchased from outside vendors,
the Company requested written assurances of compliance directly from the
vendors. For non-compliant systems, the Company either replaced, upgraded or
remediated the system. The implementation and rollout phase involves the
installation of the new financial information system Company-wide and a new
patient accounting system for the hospital division. Additionally, it includes
any IT or non-IT systems that have been remediated and tested to the Company's
corporate office and its facilities. The final phase, post
31
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Year 2000 (Continued)
implementation, involves finalizing the documentation of the Y2K program and any
corrective efforts surrounding date issues associated with the year 2000 being a
leap year. The Company has employed and will continue to employ external
consultants to assist it through each of the phases.
All remaining phases of the compliance program are on schedule to meet target
completion dates. The progress of each phase is being monitored by management
and periodically reported to the Audit and Compliance Committee of the Board of
Directors. The following chart depicts the Company's target completion dates
and the status of each phase as of September 30, 1999:
Approximate Percentage
Phase Target Completion Date Completed
- --------------------------------------------------------------------------------
Business assessment May 1998 100%
- --------------------------------------------------------------------------------
Inventory and assessment December 1998 100%
- --------------------------------------------------------------------------------
Remediation and testing June 1999 100%
- --------------------------------------------------------------------------------
Implementation and rollout November 1999 92%
- --------------------------------------------------------------------------------
Post-implementation April 2000 0%
- --------------------------------------------------------------------------------
Initially, the Company planned to install the new patient accounting system
Company-wide. During the second quarter, management determined that the new
patient accounting system did not meet adequately the needs of the nursing
center division. Accordingly, the Company chose to remediate rather than
replace its existing patient accounting system for the nursing center division.
A project team has completed the remediation and testing of the existing patient
accounting system for the nursing center division. The Company intends to
complete the installation of the remediated system by November 30, 1999.
The following chart depicts, by designated area, the percentage of the
Company's IT and non-IT systems that have been tested and verified Y2K compliant
as of September 30, 1999:
Approximate Percentage
Designated Area Tested Y2K Compliant
---------------------------------------------------------------------
IT software and hardware 100%
---------------------------------------------------------------------
Facility components 100%
---------------------------------------------------------------------
Medical equipment 100%
---------------------------------------------------------------------
Telephone systems 100%
---------------------------------------------------------------------
For Y2K issues involving third parties, the Company separated these issues
between significant business partners (e.g. financial intermediaries and
insurance companies) and the Company's significant suppliers and vendors (e.g.
medical supplies, utilities, food, etc.). The Company has completed its
assessment of material third party relationships. The Company used the
information from these assessments to develop and refine guidelines for
facilities to address the Y2K compliance status of local business partners and
suppliers. The Company has provided these guidelines to its facilities and
continues to monitor compliance and assist facilities with their preparations.
The Company has identified three critical risks caused by the Y2K issue: (i)
unanticipated delays in the implementation and rollout of the new financial
information and patient accounting systems; (ii) unanticipated system failures
by third party reimbursement sources including government payors and
intermediaries; and (iii) unanticipated system failures by third party suppliers
and vendors which could affect patient care.
32
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Year 2000 (Continued)
The failure by the Company to achieve the target completion dates of its
compliance program could cause a business interruption in its financial
information and other systems. As previously discussed, the Company instituted
a plan to replace substantially all of the Company's financial information and
patient accounting systems before the year 2000. This effort was initiated to
consolidate the Company's current systems and to respond to the changes created
by the Budget Act. The new systems configuration and development efforts have
been completed. The Company began installing the new systems in its facilities
during the first quarter of 1999. During the second quarter, management
determined to remediate rather than replace its existing patient accounting
system in the nursing center division. The Company plans to complete the
installation of the new financial information system and the new patient
accounting system for the hospital division by November 30, 1999. Additionally,
the Company has completed the remediation of the patient accounting system for
the nursing center division and intends to complete the installation of the
remediated system by November 30, 1999. In the unlikely event that these
efforts experience unanticipated delays, the Company would deploy additional
teams to accelerate the process through the use of internal and, if necessary
and available, external personnel.
The Company derives a substantial portion of its revenues from the Medicare
and Medicaid programs. The Company relies on these entities for accurate and
timely reimbursement of claims, often through the use of electronic data
interfaces. The Company believes that while many commercial insurance carriers
will be Y2K compliant, Federal and state agencies are more likely to have system
failures caused by Y2K issues. The Company has contacted all of its significant
reimbursement sources to determine their Y2K compliance status in order to make
a determination of this potential risk. The Company has been notified by HCFA
that its mission-critical internal systems have been certified as Y2K compliant.
The Company has not received assurance that systems used by Medicaid will be Y2K
compliant and does not expect to receive such assurance before the end of 1999.
The failure of information systems of Federal and state governmental agencies
and other third party payors could have a material adverse effect on the
Company's liquidity and financial position.
The Company also has initiated communications with its critical suppliers and
vendors. The Company is evaluating information provided by third party vendors
and is conducting limited independent testing of critical systems and
applications. In most cases, the Company is relying on information being
provided to it by such third parties. While the Company is attempting to
evaluate the information provided, there can be no assurance that in all
instances accurate information is being provided. If third party suppliers and
vendors fail to respond to the Company's request for information, the Company
may seek to procure other sources of supplies.
The Company has developed contingency plans to address the most critical risks
raised by the Y2K issue. These contingency plans cover all IT and non-IT
systems for each of the five designated areas. The implementation of the
Company's new financial information and patient accounting systems and the
remediated system for nursing centers is proceeding as planned. If the rollout
of the new financial information and patient accounting systems experiences
unanticipated delays, the Company plans to deploy additional implementation
teams to accelerate the process through the use of internal and, if necessary
and available, external personnel. In the event that the Medicare and Medicaid
systems are not Y2K compliant, the Company intends to arrange for interim
payments from Medicare and submit written requests for payment from state
Medicaid agencies.
The Company's contingency plans also cover failures by suppliers and vendors.
The Company's data network employs a variety of techniques such as alternative
routing, redundant equipment and dual backup to avoid system failures. Each of
the Company's facilities has a facility-specific emergency preparedness manual
to handle emergency situations such as a loss of utility services or supplies.
Local emergency plans also have been updated as Y2K related risks associated
with the facility are identified. In addition, the Company's facilities have
been provided with a comprehensive Y2K guideline to address and prepare for Y2K
compliance issues of local business partners and suppliers.
33
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Year 2000 (Continued)
Management is implementing a plan to replace or remediate substantially all of
the Company's financial information and patient accounting systems before the
year 2000 at a cost of approximately $45 million. A substantial portion of these
costs will be capitalized and amortized over seven years. Including the costs of
the new financial information and patient accounting systems, the total Y2K
program costs are currently estimated to be approximately $66 million, of which
the Company has expended approximately $54 million through September 30, 1999. A
majority of the costs related solely to Y2K compliance will be expensed as
incurred. As previously discussed, management determined during the second
quarter to remediate rather than replace its existing patient accounting system
in the nursing center division. Accordingly, the Company recorded a loss of
approximately $5.6 million in the second quarter of 1999 associated with the
costs incurred in implementing the new system prior to determining to remediate
the existing system. The costs of the new financial information and patient
accounting systems and the additional Y2K costs are expected to be funded
through operating cash flows. The Company does not expect to incur any material
information system costs other than the new financial information and patient
accounting systems and Y2K compliance program during 1999.
Management's analysis of the Y2K issues affecting the Company is based on
information currently available and information provided from third party
vendors and suppliers. Due to the inherent uncertainties related to Y2K
compliance, there can be no assurance that the Company has accurately or timely
assessed all Y2K issues or that the estimated costs to remediate the Y2K issues
will not be exceeded. While the Company believes it has substantially completed
its assessment of all Y2K issues, its estimate of the costs to address such
issues may change as it proceeds with the implementation of its financial
information and patient accounting systems. The Company's ability to identify
and remediate critical Y2K issues and the availability and cost of external
resources will impact the Company's total Y2K costs and the impact of Y2K on the
Company's results of operations.
Although the Company is assessing the readiness of the Medicare and Medicaid
programs and other third party payors and preparing contingency plans, there can
be no guarantee that the failure of these third parties to remediate their
systems to be Y2K compliant will not have a material adverse effect on the
Company.
Other Information
Various lawsuits and claims arising in the ordinary course of business are
pending against the Company. See Note 11 of the Notes to Condensed Consolidated
Financial Statements for a description of material litigation and regulatory
actions.
34
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 Quarters
------------------------------------
First Second Third Nine Months
--------- -------------- --------- ------------
<S> <C> <C> <C> <C>
Revenues........................................... $700,232 $688,892 $681,924 $2,071,048
-------- -------- -------- ----------
Salaries, wages and benefits....................... 403,894 392,748 393,535 1,190,177
Supplies........................................... 68,664 70,417 67,317 206,398
Rent............................................... 75,452 76,088 77,423 228,963
Other operating expenses........................... 123,340 144,571 131,115 399,026
Depreciation and amortization...................... 22,285 21,612 24,126 68,023
Interest expense................................... 19,536 20,032 26,030 65,598
Investment income.................................. (631) (642) (673) (1,946)
-------- -------- -------- ----------
712,540 724,826 718,873 2,156,239
-------- -------- -------- ----------
Loss before reorganization costs and income taxes.. (12,308) (35,934) (36,949) (85,191)
Reorganization costs............................... 2,312 4,547 5,443 12,302
-------- -------- -------- ----------
Loss before income taxes........................... (14,620) (40,481) (42,392) (97,493)
Provision for income taxes......................... 50 50 50 150
-------- -------- -------- ----------
Loss from operations............................... (14,670) (40,531) (42,442) (97,643)
Cumulative effect of change in accounting
for start-up costs.............................. (8,923) - - (8,923)
-------- -------- -------- ----------
Net loss.................................. (23,593) (40,531) (42,442) (106,566)
Preferred stock dividend requirements.............. (261) (262) (261) (784)
-------- -------- -------- ----------
Loss to common stockholders............... $(23,854) $(40,793) $(42,703) $ (107,350)
======== ======== ======== ==========
Loss per common share:
Basic:
Loss from operations......................... $ (0.21) $ (0.58) $ (0.61) $ (1.40)
Cumulative effect of change in accounting
for start-up costs......................... (0.13) - - (0.13)
-------- -------- -------- ----------
Net loss.................................. $ (0.34) $ (0.58) $ (0.61) $ (1.53)
======== ======== ======== ==========
Diluted:
Loss from operations......................... $ (0.21) $ (0.58) $ (0.61) $ (1.40)
Cumulative effect of change in accounting
for start-up costs......................... (0.13) - - (0.13)
-------- -------- -------- ----------
Net loss.................................. $ (0.34) $ (0.58) $ (0.61) $ (1.53)
======== ======== ======== ==========
Shares used in computing loss per common share:
Basic........................................... 70,326 70,395 70,438 70,386
Diluted......................................... 70,326 70,395 70,438 70,386
</TABLE>
35
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1998 Quarters
---------------------------------------------
First Second Third Fourth Year
--------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................................. $823,316 $ 778,706 $718,115 $ 679,602 $2,999,739
-------- --------- -------- ---------- ----------
Salaries, wages and benefits............. 480,364 459,808 415,365 397,486 1,753,023
Supplies................................. 76,052 77,832 69,069 71,419 294,372
Rent..................................... 24,135 59,076 75,063 75,870 234,144
Other operating expenses................. 134,922 156,736 108,097 588,317 988,072
Depreciation and amortization............ 35,470 28,571 25,425 35,151 124,617
Interest expense......................... 37,195 28,394 22,294 19,125 107,008
Investment income........................ (1,180) (1,130) (990) (1,388) (4,688)
-------- --------- -------- ---------- ----------
786,958 809,287 714,323 1,185,980 3,496,548
-------- --------- -------- ---------- ----------
Income (loss) before income taxes........ 36,358 (30,581) 3,792 (506,378) (496,809)
Provision for income taxes............... 17,477 (7,129) (33,790) 99,541 76,099
-------- --------- -------- ---------- ----------
Income (loss) from operations............ 18,881 (23,452) 37,582 (605,919) (572,908)
Extraordinary loss on extinguishment of
debt, net of income tax benefit....... - (77,937) - - (77,937)
-------- --------- -------- ---------- ----------
Net income (loss)............... 18,881 (101,389) 37,582 (605,919) (650,845)
Preferred stock dividend requirements.... - (177) (266) (254) (697)
-------- --------- -------- ---------- ----------
Income (loss) available to
common stockholders.......... $ 18,881 $(101,566) $ 37,316 $ (606,173) $ (651,542)
======== ========= ======== ========== ==========
Earnings (loss) per common share:
Basic:
Income (loss) from operations...... $ 0.28 $ (0.35) $ 0.55 $ (8.68) $ (8.39)
Extraordinary loss on
extinguishment of debt.......... - (1.15) - - (1.14)
-------- --------- -------- ---------- ----------
Net income (loss)............... $ 0.28 $ (1.50) $ 0.55 $ (8.68) $ (9.53)
======== ========= ======== ========== ==========
Diluted:
Income (loss) from operations...... $ 0.28 $ (0.35) $ 0.54 $ (8.68) $ (8.39)
Extraordinary loss on
extinguishment of debt.......... - (1.15) - - (1.14)
-------- --------- -------- ---------- ----------
Net income (loss)............... $ 0.28 $ (1.50) $ 0.54 $ (8.68) $ (9.53)
======== ========= ======== ========== ==========
Shares used in computing earnings
(loss) per common share:
Basic.............................. 67,448 67,651 68,389 69,859 68,343
Diluted............................ 67,857 67,651 68,554 69,859 68,343
</TABLE>
36
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating Data
(Unaudited)
(In thousands, except statistics)
<TABLE>
<CAPTION>
1999 Quarters
---------------------------------------------------
First Second Third Nine Months
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Nursing centers.................. $ 382,041 $ 382,548 $ 385,740 $1,150,329
Hospitals........................ 238,522 234,868 230,682 704,072
Vencare.......................... 113,874 106,040 97,272 317,186
---------- ---------- ---------- ----------
734,437 723,456 713,694 2,171,587
Elimination...................... (34,205) (34,564) (31,770) (100,539)
---------- ---------- ---------- ----------
$ 700,232 $ 688,892 $ 681,924 $2,071,048
========== ========== ========== ==========
Income (loss) from operations:
Operating income:
Nursing centers............. $ 59,122 $ 59,186 $ 55,881 $ 174,189
Hospitals................... 58,411 59,656 54,084 172,151
Vencare..................... 14,574 12,815 7,289 34,678
Corporate overhead.......... (27,773) (29,674) (27,297) (84,744)
Unusual transactions........ - (20,827) - (20,827)
Reorganization costs........ (2,312) (4,547) (5,443) (12,302)
---------- ---------- ---------- ----------
Operating income......... 102,022 76,609 84,514 263,145
Rent........................... 75,452 76,088 77,423 228,963
Depreciation and amortization.. 22,285 21,612 24,126 68,023
Interest, net.................. 18,905 19,390 25,357 63,652
---------- ---------- ---------- ----------
Loss before income taxes....... (14,620) (40,481) (42,392) (97,493)
Provision for income taxes..... 50 50 50 150
---------- ---------- ---------- ----------
$ (14,670) $ (40,531) $ (42,442) $ (97,643)
========== ========== ========== ==========
Nursing Center Data:
End of period data:
Number of nursing centers..... 293 293 293
Number of licensed beds....... 38,585 38,387 38,336
Revenue mix %:
Medicare...................... 28 26 24 26
Medicaid...................... 47 48 51 49
Private and other............. 25 26 25 25
Patient days:
Medicare...................... 380,748 366,272 339,303 1,086,323
Medicaid...................... 1,867,554 1,911,111 1,967,721 5,746,386
Private and other............. 633,137 623,665 626,903 1,883,705
---------- ---------- ---------- ----------
2,881,439 2,901,048 2,933,927 8,716,414
========== ========== ========== ==========
Hospital Data:
End of period data:
Number of hospitals........... 57 56 56
Number of licensed beds....... 4,937 4,935 4,907
Revenue mix %:
Medicare...................... 59 56 55 57
Medicaid...................... 10 10 11 10
Private and other............. 31 34 34 33
Patient days:
Medicare...................... 175,953 171,011 159,739 506,703
Medicaid...................... 29,939 29,675 30,674 90,288
Private and other............. 49,924 49,165 47,756 146,845
---------- ---------- ---------- ----------
255,816 249,851 238,169 743,836
========== ========== ========== ==========
Ancillary Services Data:
Revenues:
Rehabilitation therapy........ $ 49,997 $ 45,860 $ 41,750 $ 137,607
Pharmacy...................... 46,080 45,168 43,193 134,441
Respiratory therapy........... 12,604 11,014 8,193 31,811
Other......................... 5,193 3,998 4,136 13,327
---------- ---------- ---------- ----------
$ 113,874 $ 106,040 $ 97,272 $ 317,186
========== ========== ========== ==========
</TABLE>
37
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating Data
(Unaudited)
(In thousands, except statistics)
<TABLE>
<CAPTION>
1998 Quarters
--------------------------------------------------
First Second Third Fourth Year
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Nursing centers...................... $ 434,190 $ 413,600 $ 389,414 $ 384,458 $ 1,621,662
Hospitals............................ 246,365 239,312 226,846 207,324 919,847
Vencare.............................. 169,773 151,567 138,121 123,269 582,730
---------- ---------- ---------- ---------- -----------
850,328 804,479 754,381 715,051 3,124,239
Elimination.......................... (27,012) (25,773) (36,266) (35,449) (124,500)
---------- ---------- ---------- ---------- -----------
$ 823,316 $ 778,706 $ 718,115 $ 679,602 $ 2,999,739
========== ========== ========== ========== ===========
Income (loss) from operations:
Operating income (loss):
Nursing centers................. $ 62,447 $ 49,964 $ 61,189 $ 42,975 $ 216,575
Hospitals....................... 77,650 67,328 63,774 40,231 248,983
Vencare......................... 26,892 23,125 20,840 (6,753) 64,104
Corporate overhead.............. (27,347) (30,315) (26,399) (42,204) (126,265)
Unusual transactions............ (7,664) (25,772) 6,180 (411,869) (439,125)
---------- ---------- ---------- ---------- -----------
Operating income (loss)...... 131,978 84,330 125,584 (377,620) (35,728)
Rent............................... 24,135 59,076 75,063 75,870 234,144
Depreciation and amortization...... 35,470 28,571 25,425 35,151 124,617
Interest, net...................... 36,015 27,264 21,304 17,737 102,320
---------- ---------- ---------- ---------- -----------
Income (loss) before income taxes.. 36,358 (30,581) 3,792 (506,378) (496,809)
Provision for income taxes......... 17,477 (7,129) (33,790) 99,541 76,099
---------- ---------- ---------- ---------- -----------
$ 18,881 $ (23,452) $ 37,582 $ (605,919) $ (572,908)
========== ========== ========== ========== ===========
Nursing Center Data:
End of period data:
Number of nursing centers......... 305 296 292 291
Number of licensed beds........... 39,960 39,094 38,578 38,362
Revenue mix %:
Medicare.......................... 34 31 26 26 29
Medicaid.......................... 41 43 47 48 45
Private and other................. 25 26 27 26 26
Patient days:
Medicare.......................... 408,002 374,244 354,285 362,437 1,498,968
Medicaid.......................... 1,949,544 1,939,521 1,935,464 1,921,872 7,746,401
Private and other................. 692,932 677,607 666,407 656,951 2,693,897
---------- ---------- ---------- ---------- -----------
3,050,478 2,991,372 2,956,156 2,941,260 11,939,266
========== ========== ========== ========== ===========
Hospital Data:
End of period data:
Number of hospitals............... 62 61 58 57
Number of licensed beds........... 5,313 5,301 5,051 4,979
Revenue mix %:
Medicare.......................... 60 59 62 52 59
Medicaid.......................... 8 10 10 11 10
Private and other................. 32 31 28 37 31
Patient days:
Medicare.......................... 173,967 162,991 154,483 155,842 647,283
Medicaid.......................... 28,535 31,422 30,618 30,963 121,538
Private and other................. 45,747 43,974 43,100 45,846 178,667
---------- ---------- ---------- ---------- -----------
248,249 238,387 228,201 232,651 947,488
========== ========== ========== ========== ===========
Ancillary Services Data:
Revenues:
Rehabilitation therapy............ $ 70,597 $ 60,161 $ 68,533 $ 50,719 $ 250,010
Pharmacy.......................... 40,058 40,248 36,394 42,923 159,623
Respiratory therapy............... 44,135 39,803 30,161 27,069 141,168
Other............................. 14,983 11,355 3,033 2,558 31,929
---------- ---------- ---------- ---------- -----------
$ 169,773 $ 151,567 $ 138,121 $ 123,269 $ 582,730
========== ========== ========== ========== ===========
</TABLE>
38
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's only significant exposure to market risk is changes in the
levels of various interest rates. In this regard, changes in LIBOR interest
rates affect the interest paid on its outstanding borrowings. In addition, the
interest rates on the DIP Financing are affected by changes in the Federal Funds
rate and the prime rate of Morgan Guaranty Trust Company of New York. To
mitigate the impact of fluctuations in these interest rates, the Company
generally maintains a significant portion of its borrowings as fixed rate in
nature either by borrowing on a fixed rate long-term basis or entering into
interest rate swap transactions.
Under the Bankruptcy Code, actions to collect pre-petition indebtedness
against the Company are subject to an automatic stay and other contractual
obligations against the Company may not be enforced. In addition, the Company
may assume or reject executory contracts, including its interest rate swap
agreements, under the Bankruptcy Code.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. The table
constitutes a forward-looking statement. For long-term debt, the table presents
principal cash flows and related weighted average interest rates by expected
maturity dates. For interest rate swap agreements, the table presents notional
amounts and weighted average interest rates by contractual maturity dates.
Notional amounts are used to calculate the contractual cash flows to be
exchanged under the contract.
<TABLE>
<CAPTION>
Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
(Dollars in thousands)
Expected Maturities Fair
---------------------------------------------------------------------------- Value
1999 2000 2001 2002 2003 Thereafter Total 9/30/99
-------- -------- ------- -------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Long-term debt, including
amounts due within one year:
Fixed rate..................... $ 4,724 $ 16,748 $17,574 $ 19,441 $21,449 $311,674 $391,610 $165,388
Average interest rate.......... 10.75% 10.75% 10.75% 10.75% 10.75% 9.00%
Variable rate.................. $ 3,487 $ 19,474 $61,974 $128,640 $24,632 $267,907 $506,114 $349,218
Average interest rate (a)
Interest rate derivative
financial instruments related
to debt:
Interest rate swaps:
Pay fixed/receive variable..... $100,000 $100,000 $200,000 $771
Average pay rate............... 6.4% 6.4%
Average receive rate (b)
</TABLE>
(a) Interest is payable, depending on certain leverage ratios and other
factors, at a rate of LIBOR plus 3/4% to 3 1/2%.
(b) The variable rate portion of the interest rate swap is 3-month LIBOR.
39
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Summary descriptions of various significant legal and regulatory activities
follow:
On September 13, 1999, the Company and substantially all of its subsidiaries
filed voluntary petitions for protection under Chapter 11 of the Bankruptcy
Code. The Chapter 11 cases have been styled In re: Vencor, Inc., et al., Debtors
and Debtors in Possession, Case Nos. 99-3199 (MFW) through 99-3327 (MFW),
Chapter 11, Jointly Administered. See Note 3 of the Notes to Condensed
Consolidated Financial Statement for further discussion of the Chapter 11
Cases.
On March 18, 1999, the Company served Ventas with a demand for mediation
pursuant to the Spin-off Agreement. The Company was seeking a reduction in rent
and other concessions under its Master Lease Agreements with Ventas. On March
31, 1999, the Company and Ventas entered into the Standstill Agreement which
provided that both companies would postpone through April 12, 1999 any claims
either may have against the other. On April 12, 1999, the Company and Ventas
entered into the Second Standstill which provided that neither party would
pursue any claims against the other or any other third party related to the
Spin-off Transactions as long as the Company complied with certain rent payment
terms. The Second Standstill was scheduled to terminate on May 5, 1999.
Pursuant to the Tolling Agreement, the Company and Ventas also agreed that any
statutes of limitations or other time-related constraints in a bankruptcy or
other proceeding that might be asserted by one party against the other would be
extended and tolled from April 12, 1999 until May 5, 1999 or until the
termination of the Second Standstill. As a result of the Company's failure to
pay rent, Ventas served the Company with notices of nonpayment under the Master
Lease Agreements. Subsequently, the Company and Ventas entered into further
amendments to the Second Standstill and the Tolling Agreement to extend the time
during which no remedies may be pursued by either party and to extend the date
by which the Company may cure its failure to pay rent.
In connection with the Chapter 11 Cases, the Company and Ventas entered into
the Stipulation which provides for the payment by the Company of a reduced
monthly rent of approximately $15.1 million beginning in September 1999. The
Stipulation has been approved by the Bankruptcy Court. The Stipulation also
continues to toll any statutes of limitations or other time constraints in a
bankruptcy proceeding for claims that might be asserted by the Company against
Ventas. The Stipulation will expire on November 30, 1999, but automatically
renews for one-month periods unless either party provides a 14-day notice of
termination. The Stipulation also may be terminated prior to its expiration
upon a payment default by the Company, the consummation of the Plan of
Reorganization or the occurrence of certain defaults under the DIP Financing.
The Stipulation also provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off Transactions.
If the Company and Ventas are unable to resolve their disputes or maintain an
interim resolution, the Company may seek to pursue claims against Ventas arising
out of the Spin-off Transactions and seek judicial relief barring Ventas from
exercising any remedies based on the Company's failure to pay some or all of the
rent to Ventas. The Company's failure to pay rent or comply with the
Stipulation, in the absence judicial relief, would result in an "Event of
Default" under the Master Lease Agreements. Upon an Event of Default under the
Master Lease Agreements, the remedies available to Ventas include terminating
the Master Lease Agreements, repossessing and reletting the leased properties
and requiring the Company to (i) remain liable for all obligations under the
Master Lease Agreements, including the difference between the rent under the
Master Lease Agreements and the rent payable as a result of reletting the leased
properties or (ii) pay the net present value of the rent due for the balance of
the terms of the Master Lease Agreements. Such remedies, however, would be
subject to the supervision of the Bankruptcy Court.
40
<PAGE>
Part II. OTHER INFORMATION (Continued)
Item 1. Legal Proceedings (Continued)
The Company is pursuing various claims against private insurance companies who
issued Medicare supplement insurance policies to individuals who became patients
of the Company's hospitals. After the patients' Medicare benefits are exhausted,
the insurance companies become liable to pay the insureds' bills pursuant to the
terms of these policies. The Company has filed numerous collection actions
against various of these insurers to collect the difference between what
Medicare would have paid and the hospitals' usual and customary charges. These
disputes arise from differences in interpretation of the policy provisions and
certain Federal and state regulations governing such policies. Various courts
have issued various rulings on the different issues, most of which have been
appealed. Management believes that amounts under these Medicare supplement
insurance policies will ultimately be collected and, accordingly, no provision
for loss has been recorded in the accompanying condensed consolidated financial
statements. Accounts receivable related to these disputes approximated $15
million at September 30, 1999. The Company intends to continue to pursue these
claims vigorously. If the Company does not prevail on these issues, future
results of operations and liquidity would be materially adversely affected.
A class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., was
filed on December 24, 1997 in the United States District Court for the Western
District of Kentucky (Civil Action No. 3-97CV-8354). The class action claims
were brought by an alleged stockholder of the Company against the Company and
certain executive officers and directors of the Company. The complaint alleges
that the Company and certain current and former executive officers of the
Company during a specified time frame violated Sections 10(b) and 20(a) of the
Exchange Act, by, among other things, issuing to the investing public a series
of false and misleading statements concerning the Company's current operations
and the inherent value of the Company's common stock. The complaint further
alleges that as a result of these purported false and misleading statements
concerning the Company's revenues and successful acquisitions, the price of the
Company's common stock was artificially inflated. In particular, the complaint
alleges that the Company issued false and misleading financial statements during
the first, second and third calendar quarters of 1997 which misrepresented and
understated the impact that changes in Medicare reimbursement policies would
have on the Company's core services and profitability. The complaint further
alleges that the Company issued a series of materially false statements
concerning the purportedly successful integration of its recent acquisitions and
prospective earnings per share for 1997 and 1998 which the Company knew lacked
any reasonable basis and were not being achieved. The suit seeks damages in an
amount to be proven at trial, pre-judgment and post-judgment interest,
reasonable attorneys' fees, expert witness fees and other costs, and any
extraordinary equitable and/or injunctive relief permitted by law or equity to
assure that the plaintiff has an effective remedy. In December 1998, the
Company filed a motion to dismiss the case. The court converted the Company's
motion to dismiss into a motion for summary judgment and granted summary
judgment as to all defendants. The plaintiff has appealed the ruling to the
Sixth Circuit. The Company is defending this action vigorously.
A shareholder derivative suit entitled Thomas G. White on behalf of Vencor,
Inc. and Ventas, Inc. v. W. Bruce Lunsford, et al., Case No. 98CI03669, was
filed in June 1998 in the Jefferson County, Kentucky, Circuit Court. The suit
was brought on behalf of the Company and Ventas against certain current and
former executive officers and directors of the Company and Ventas. The
complaint alleges that the defendants damaged the Company and Ventas by engaging
in violations of the securities laws, engaging in insider trading, fraud and
securities fraud and damaging the reputation of the Company and Ventas. The
plaintiff asserts that such actions were taken deliberately, in bad faith and
constitute breaches of the defendants' duties of loyalty and due care. The
complaint is based on substantially similar assertions to those made in the
class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., discussed
above. The suit seeks unspecified damages, interest, punitive damages,
reasonable attorneys' fees, expert witness fees and other costs, and any
extraordinary equitable and/or injunctive relief permitted by law or equity to
assure that the Company and Ventas have an effective remedy. The parties have
entered into a series of stipulations to stay all proceedings in the action.
The current stipulation will expire on December 13, 1999. The Company believes
that the allegations in the complaint are without merit and intends to defend
this action vigorously.
41
<PAGE>
Part II. OTHER INFORMATION (Continued)
Item 1. Legal Proceedings (Continued)
On April 14, 1999, a lawsuit entitled Lenox Healthcare, Inc., et al. v.
Vencor, Inc., et al., Case No. BC 208750, was filed in the Superior Court of Los
Angeles, California by Lenox asserting various causes of action arising out of
the Company's sale and lease of several nursing centers to Lenox in 1997. Lenox
subsequently removed certain of its causes of action and refiled these claims
before the United States District Court for the Western District of Kentucky in
a case entitled Lenox Healthcare, Inc. v. Vencor, Inc., et al., Case No. 3:99
CV-348-H. The Company has asserted counterclaims, including RICO claims,
against Lenox in the Kentucky action. The Company believes that the allegations
made by Lenox in both complaints are without merit and intends to defend these
actions vigorously. Lenox and its subsidiaries filed for protection under
Chapter 11 of the Bankruptcy Code on November 3, 1999. The Company has not yet
determined the effect, if any, such filing will have on the Company's financial
condition, results of operations or liquidity.
The Company has been informed by the DOJ that it is the subject of ongoing
investigations into various Medicare reimbursement issues, including various
hospital cost reporting issues, Vencare billing practices and various quality of
care issues in its hospitals and nursing centers. The Company is cooperating
fully in the investigations. The Company is engaged in active discussions with
the DOJ which may result in a resolution of some or all of the DOJ
investigations as part of its Plan of Reorganization. Such a resolution could
include a payment to the government which could have a material effect on the
Company's liquidity and financial position.
In connection with the Spin-off Transactions, liabilities arising from various
legal proceedings and other actions were assumed by the Company and the Company
agreed to indemnify Ventas against any losses, including any costs or expenses,
it may incur arising out of or in connection with such legal proceedings and
other actions. The indemnification provided by the Company also covers losses,
including costs and expenses, which may arise from any future claims asserted
against Ventas based on the former healthcare operations of Ventas. In
connection with its indemnification obligation, the Company has assumed the
defense of various legal proceedings and other actions. The Stipulation entered
into with Ventas provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off Transactions.
The Company is a party to certain legal actions and regulatory investigations
arising in the normal course of its business. The Company is unable to predict
the ultimate outcome of pending litigation and regulatory investigations. In
addition, there can be no assurance that HCFA or other regulatory agencies will
not initiate additional investigations related to the Company's business in the
future, nor can there be any assurance that the resolution of any litigation or
investigations, either individually or in the aggregate, would not have a
material adverse effect on the Company's results of operations, liquidity or
financial position. In addition, the above litigation and investigations (as
well as future litigation and investigations) are expected to consume the time
and attention of senior management and may have a disruptive effect upon the
Company's operations.
Item 3. Defaults Upon Senior Securities
The Company commenced the Chapter 11 Cases on September 13, 1999. As a result
of filing the Chapter 11 Cases, no principal or interest payments will be made
on certain indebtedness incurred by the Company prior to September 13, 1999,
including the Credit Agreement and the 1998 Notes, until a Plan of
Reorganization defining the payment terms has been approved by the Bankruptcy
Court. Additional information regarding the Chapter 11 Cases is set forth
elsewhere in this Form 10-Q, including Notes 1 and 3 of the Notes to Condensed
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
42
<PAGE>
PART II. OTHER INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Waiver No. 4 dated as of July 30, 1999, under the $1,000,000,000
Credit Agreement dated as of April 29, 1998 among Vencor
Operating, Inc., Vencor, Inc., the Lenders, Swingline Bank and LC
Issuing Banks party thereto, the Senior Managing Agents, Managing
Agents and Co-Agents party thereto and Morgan Guaranty Trust
Company of New York, as Documentation Agent and Collateral Agent,
and NationsBank, N.A., as Administrative Agent. Exhibit 10.2 to
the Company's Form 10-Q for the quarterly period ended June 30,
1999 (Comm. File No. 001-14057) is hereby incorporated by
reference.
10.2 Waiver No. 5 dated as of August 27, 1999, under the
$1,000,000,000 Credit Agreement dated as of April 29, 1998 among
Vencor Operating, Inc., Vencor, Inc., the Lenders, Swingline Bank
and LC Issuing Banks party thereto, the Senior Managing Agents,
Managing Agents and Co-Agents party thereto and Morgan Guaranty
Trust Company of New York, as Documentation Agent and Collateral
Agent, and NationsBank, N.A., as Administrative Agent.
10.3 Debtor-in-Possession Credit Agreement dated as of September 13,
1999, among Vencor, Inc., Vencor Operating, Inc. and each of the
subsidiaries of Vencor, Inc. party thereto, the Lenders party
thereto, the LC Issuing Banks party thereto and Morgan Guaranty
Trust Company of New York as Arranger, Collateral Agent and
Administrative Agent.
10.4 Amendment Number 5 to the Second Standstill Agreement dated April
12, 1999 and Amendment Number 4 to the Tolling Agreement dated
April 12, 1999. Exhibit 99.2 to the Current Report on Form 8-K of
the Company dated July 7, 1999 (Comm. File No. 001-14057) is
hereby incorporated by reference.
10.5 Amendment Number 6 to the Second Standstill Agreement dated April
12, 1999 and Amendment Number 5 to the Tolling Agreement dated
April 12, 1999. Exhibit 10.15 to the Company's Form 10-Q for the
quarterly period ended June 30, 1999 (Comm. File No. 001-14057)
is hereby incorporated by reference.
10.6 Amendment Number 7 to the Second Standstill Agreement dated April
12, 1999 and Amendment Number 6 to the Tolling Agreement dated
April 12, 1999.
10.7 Stipulation Agreement by and among Ventas, Inc., Ventas Realty,
Limited Partnership, Vencor Operating, Inc. and Vencor, Inc.
10.8 Separation Agreement and Release of Claims entered into by Jill
L. Force and Vencor, Inc.
10.9 Form of Agreement regarding Preferred Stock dated as of August
17, 1999 between Vencor Operating, Inc., Vencor, Inc. and certain
officers of the Company.
27 Financial Data Schedule (included only in filings submitted under
the Electronic Data Gathering, Analysis, and Retrieval system).
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on July 8, 1999 announcing
that it and Ventas had entered into further interim arrangements regarding the
payment of June rent under the Master Lease Agreements and the extension of the
Second Standstill and the Tolling Agreement. The Company filed a Current Report
on Form 8-K on September 15, 1999 reporting that the Company and substantially
all of its subsidiaries filed voluntary petitions for protection under Chapter
11 of the Bankruptcy Code.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENCOR, INC.
Date: November 12, 1999 /s/ EDWARD L. KUNTZ
- ------------------------ -----------------------------------------------
Edward L. Kuntz
Chairman of the Board, Chief
Executive Officer and President
Date: November 12, 1999 /s/ RICHARD A. SCHWEINHART
- ------------------------ -----------------------------------------------
Richard A. Schweinhart
Senior Vice President and Chief
Financial Officer (Principal
Financial Officer)
44
<PAGE>
Exhibit 10.2
WAIVER NO. 5
Waiver No. 5 (this Waiver No. 5) dated as of August 27, 1999, under the
$1,000,000,000 Credit Agreement dated as of April 29, 1998 (as heretofore
amended, the Credit Agreement) among VENCOR OPERATING, INC., VENCOR, INC.
(formerly named Vencor Healthcare, Inc.), the LENDERS, SWINGLINE BANK AND LC
ISSUING BANKS party thereto, the SENIOR MANAGING AGENTS, MANAGING AGENTS AND CO-
AGENTS party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent and Collateral Agent, and NATIONSBANK, N.A., as
Administrative Agent.
W I T N E S S E T H:
WHEREAS, Vencor has advised the Lender Parties that due to its recent
results of operations and current financial condition it needs an extension of
certain waivers under the Credit Agreement granted in (a) the Waiver dated
January 29, 1999 by the Lenders party thereto (hereinafter Waiver No. 1), (b)
the Waiver dated as of March 31, 1999 by the Lenders party thereto (hereinafter
Waiver No. 2), (c) the Waiver dated as of May 28, 1999 by the Lenders party
thereto (hereinafter Waiver No. 3) and (d) the Waiver dated as of July 30, 1999
by the Lenders party thereto (hereinafter Waiver No. 4 and together with Waiver
No. 1, Waiver No. 2 and Waiver No. 3, the Prior Waivers), and, subject to the
terms and conditions hereof, the Lenders party hereto are willing to extend such
waivers under the Credit Agreement under the terms more fully set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise specifically defined herein,
each term used herein that is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. As used herein, the
following additional terms have the following meanings:
"Disclosure Materials" means (a) the March 10 Meeting Materials, (b) the
May 20 Meeting Materials, (c) the July 20 Meeting Materials, (d) Vencor's Annual
Report on Form 10-K for 1998 (the 1998 10-K), (e) Vencor's Quarterly Report on
Form 10-Q for the first quarter of
<PAGE>
1999 (the 1st Quarter 10-Q), and (f) Vencor's Quarterly Report on Form 10-Q for
the second quarter of 1999 (the 2nd Quarter 10-Q).
"Freeze Period" means any period during which:
(a) any Vencor Company has failed to pay any rent or other sum
payable to a Ventas Company under any Master Lease Agreement when the same
became due and payable and any Ventas Company has given any Vencor Company a
notice pursuant to Section 16.1(b) of such Master Lease Agreement demanding
payment thereof, and by 11:30 A.M. on the fifth day after such notice none of
the following circumstances exists: (i) such rent or other sum has been paid in
full, (ii) a stay of any termination or notice of termination of such Master
Lease Agreement is in effect by order of a court or arbitral authority or (iii)
the relevant Ventas Company has agreed in writing to withdraw its demand for
payment or to a standstill, tolling or other suspension of its rights to give a
notice of termination of such Master Lease Agreement, provided that if a Freeze
--------
Period does not exist on account of either clause (ii) or (iii), a Freeze Period
shall nonetheless subsequently and immediately exist if (A) any such stay
expires or is withdrawn or (B) any such withdrawal, standstill or other
suspension by its terms ceases to be in effect or otherwise terminates, as the
case may be; or
(b) any Ventas Company has given a notice to any Vencor Company
pursuant to the penultimate sentence of Section 16.1 of any Master Lease
Agreement terminating such Master Lease Agreement, for so long as none of the
following circumstances exists: (i) each event of default under such Master
Lease Agreement upon the basis of which such notice was given has been cured and
the relevant Ventas Company has confirmed in writing that such notice is no
longer effective and that such Master Lease Agreement will not be terminated on
account of such notice, (ii) a stay of any termination of such Master Lease
Agreement is in effect by order of a court or arbitral authority or (iii) the
relevant Ventas Company has agreed in writing to withdraw such notice or to a
standstill, tolling or other suspension of the period of time fixed in such
notice, provided that if a Freeze Period does not exist on account of either
--------
clause (ii) or (iii), a Freeze Period shall nonetheless subsequently and
immediately exist if (A) any such stay expires or is withdrawn or (B) any such
withdrawal, standstill, tolling or other suspension by its terms ceases to be in
effect or otherwise terminates; or
(c) the obligor of any Medicaid Receivable, Medicare Receivable or VA
Receivable (or any agent thereof) collects a payment of any PPS Overpayment
Amount by
2
<PAGE>
exercising a right of set-off or recoupment (or any similar right) against its
obligations on account of any such Receivable or, on account of any demand by
such an obligor or agent for payment by a date certain of any PPS Overpayment
Amount (after giving effect to any negotiations with such obligor or agent prior
to such date certain), any Vencor Company pays or will be, on the day following
any date of determination, obligated to pay any PPS Overpayment Amount, and the
cumulative amount of all PPS Overpayment Amounts so collected by exercise of the
right of set-off, recoupment or similar right from or paid by the Vencor
Companies, in the aggregate, or that the Vencor Companies, in the aggregate, are
obligated to pay during the period from March 10, 1999 to the date of
determination (without duplication but including in all cases any amounts paid
or payable pursuant to the April 21, 1999 letter from Mutual of Omaha Insurance
Company (the MOIC Letter)) exceeds $10,000,000; or
(d) the trustee under the 1998 Subordinated Note Indenture or Persons
purporting to constitute the holders of at least 25% of the outstanding 1998
Subordinated Notes give notice accelerating the maturity of the 1998
Subordinated Notes or such trustee or Persons purporting to be the holders of
10% or more of the principal amount of the 1998 Subordinated Notes commence
legal proceedings to collect any unpaid amount of principal of or interest on
the 1998 Subordinated Notes and in any such case the Required Basic Lenders
determine (which they may do in their sole and absolute discretion) that a
Freeze Period is to exist, provided that any such determination may be
--------
successively rescinded or re-instated by a subsequent determination of the
Required Basic Lenders (who need not be the same Basic Lenders and who may do so
in their sole and absolute discretion).
"Lease Accounting Issue" means the circumstance that, in the absence of
an amendment to the Master Lease Agreements of the nature described in the last
sentence of Section 2(a), under generally accepted accounting principles, the
Master Lease Agreements should have been treated as capital leases in the
preparation of Vencor's financial statements as a consequence of the provisions
in Section 16.4 thereof.
"March 10 Meeting Materials" means the written materials prepared by
or on behalf of Vencor and distributed to the Persons attending the lender
meeting held by Vencor on March 10, 1999 at such meeting.
3
<PAGE>
"May 20 Meeting Materials" means the written materials prepared by or
on behalf of Vencor and distributed to the Persons attending the lender meeting
held by Vencor on May 20, 1999 at such meeting.
"July 20 Meeting Materials" means the written materials prepared by or
on behalf of Vencor and distributed to the Persons attending the lender meeting
held by Vencor on July 20, 1999 at such meeting.
"PPS Overpayment Amount" means any amount that constitutes a liability
of a Vencor Company to a federal or state governmental authority on account of
hospital and skilled nursing facility PIP overpayments made to it, as described
in the March 10 Meeting Materials (but including amounts accrued after December
31, 1998).
Section 2. Certain Waivers. (a) The Lenders hereby waive (including for
purposes of Section 9.02 of the Credit Agreement but, in the case of clauses
(iv) and (v), subject to Section 9) any Default that:
(i) may have occurred or occurs as a result of Vencor failing to be in
compliance with the provisions of Article 6 of the Credit Agreement;
(ii) occurs as a result of any Vencor Company failing to pay any rent or
other sum payable to any Ventas Company under or pursuant to the terms of
any Master Lease Agreement when the same becomes due and payable;
(iii) occurred as a result of the Borrower's failure to make the interest
payment on the 1998 Subordinated Notes due on May 1,1999 (including by way
of an Event of Default described in clause (h) of Section 9.03 of the
Credit Agreement, but not including an Event of Default arising under
clause (p) of Section 9.02 of the Credit Agreement on account of the
Facility B Loans having been declared immediately due and payable, even if
such acceleration is based solely or in part on such failure to pay);
(iv) may have occurred as a result of the Borrower at any time prior to
the date hereof having made or been deemed to have made the representation
and warranty set forth in Section 4.05(d) of the Credit Agreement without
qualification by reference to the circumstances described in any of the
Disclosure Materials and the Lease Accounting Issue;
(v) may have occurred as a result of the Borrower at any time prior to
the date hereof having made or been deemed to have made the representations
and warranties set
4
<PAGE>
forth in Sections 4.05(b), 4.05(c), 4.06, 4.09 and 4.14 and such
representations and warranties, in light of the circumstances described in
any of the Disclosure Materials or the Lease Accounting Issue, having been
incorrect in material respects when made or deemed made; and
(vi) occurs by reason of Vencor failing timely to deliver any financial
statements or related certificates pursuant to Section 5.01 of the Credit
Agreement.
The Lenders also agree that any amendment of any Master Lease Agreement to
delete Section 16.4 thereof would not constitute a violation of Section 7.11(b)
of the Credit Agreement.
(b) The foregoing waivers shall be effective solely during the period
ending 5:00 P.M. (Eastern time) on September 24, 1999 (the Waiver Period).
Section 3. Revolving Credit Facility (a) The Revolving Credit Commitments
were permanently ratably reduced to an aggregate amount of $125,000,000 pursuant
to Waiver No. 2 and were further permanently ratably reduced to an aggregate
amount of $80,000,000 pursuant to Waiver No. 3.
(b) The maximum Aggregate LC Exposure set forth in Section 2.07(b)(i) of
the Credit Agreement was permanently reduced to $30,000,000 pursuant to Waiver
No. 2. In addition to the limit on expiry dates set forth in Section 2.07(c) of
the Credit Agreement, no Letter of Credit issued or extended during the Waiver
Period shall have an expiry date when issued or so extended later than one year
from the date of issuance or the expiry date in effect immediately prior to such
extension, as the case may be.
(c) The requirements of clause (d) of Section 3.02 of the Credit Agreement
are hereby waived during the Waiver Period to the limited extent that (i) the
representation and warranty set forth in Section 4.05(d) is not true solely on
account of the circumstances described in any of the Disclosure Materials or the
Lease Accounting Issue or (ii) the representations and warranties set forth in
Sections 4.05(b), 4.05(c), 4.06, 4.09 and 4.14, in light of the circumstances
described in any of the Disclosure Materials or the Lease Accounting Issue, are
incorrect in material respects, and any representation or warranty made or
deemed made by the Borrower on or after the date hereof during the Waiver Period
pursuant to Section 3.02 of the Credit Agreement shall be deemed qualified to
such extent.
Section 4. Borrowings. (a) The Borrower agrees that during the period
from the date hereof until 5:30 P.M. (New York City time) on September 24, 1999,
it will not give any Notice
5
<PAGE>
of Borrowing for Swingline Loans or Revolving Credit Loans in an amount in
excess of its actual cash needs in the ordinary course of business (net of other
sources of funds available or expected to be available to it, including previous
Borrowings) during the three-day period beginning with the related date of
Borrowing, for amounts it actually intends to pay and determined consistent with
the Borrowers historical cash management practices (it being agreed that such
practices may need to take into account any changes in funds availability made
by the Vencor Companies cash management banks as a result of Vencor's current
financial condition), as certified in reasonable detail (including a breakdown
by category of the expenses or other amounts to be paid during such periods) by
the Borrower's Chief Financial Officer or Treasurer in a certificate
accompanying such Notice of Borrowing, provided that:
(i) if the amount so determined is less than $1,000,000, such Borrowing
may be in the amount of $1,000,000;
(ii) the Borrower will not make any Borrowing for the purpose of making
payment of any rent or other sum payable to any Ventas Company under a
Master Lease Agreement except on the date a Vencor Company is actually
going to make such payment (as certified by the Borrower's Chief Financial
Officer or Treasurer in the certificate accompanying the related Notice of
Borrowing), and the requirement to make any such payment shall be
disregarded when determining the Borrower's actual cash needs on any day
prior to such day;
(iii) the maximum amount of Swingline Borrowings and Revolving Credit
Borrowings and Aggregate LC Exposure that may be outstanding during the
Waiver Period may not exceed $55,000,000 (determined without including the
Aggregate LC Exposure on account of Letters of Credit outstanding on the
date of Waiver No. 1 (and any extensions or concurrent replacements thereof
that do not increase the amount thereof)); and
(iv) during any Freeze Period, the Borrower will not give any Notice of
Borrowing or request the issuance of any Additional Letter of Credit other
than for purposes of extending or concurrently replacing, without any
increase in the amount thereof, any Letter of Credit that was outstanding
on the date of Waiver No. 1 (or any previous extension or concurrent
replacement thereof), and during any Freeze Period neither the Revolving
Credit Lenders nor the Swingline Bank nor any LC Issuing Bank
6
<PAGE>
shall have any obligation to fund any Borrowing or issue any Additional
Letter of Credit (other than as so qualified) (whether or not the related
Notice of Borrowing or notice of issuance was given before or during such
Freeze Period), provided that the foregoing does not affect the rights of
--------
the Swingline Bank and the obligations of the Revolving Credit Lenders
under Section 2.08(i) of the Credit Agreement.
(b) The Borrower further agrees that:
(i) all Borrowings made pursuant to this Section 4 shall be made
and remain outstanding solely as Base Rate Borrowings;
(ii) any Notice of Borrowing for a Borrowing of Revolving Credit
Loans during the Waiver Period shall be given not later than Noon (Eastern
time) on the date of such Borrowing and any Notice of Swingline Borrowing
during the Wavier Period shall be given not later than 1:00 P.M. (Eastern
time) on the date of the related Swingline Borrowing;
(iii) during the Waiver Period and at any time thereafter when any
Default has occurred and is continuing, the Applicable Margin, LC Fee Rate
and Commitment Fee Rate shall always be determined as if Level IX were
applicable, regardless of the actual Leverage Ratio;
(iv) during the Waiver Period and at any time thereafter when any
Default has occurred and is continuing, interest on all Base Rate Loans
shall be payable on the 22nd day of each month rather than quarterly and
letter of credit fees payable pursuant to Section 2.07(h) of the Credit
Agreement and commitment fees payable pursuant to Section 2.09 of the
Credit Agreement shall be payable on the 22nd day of each month instead of
quarterly (and on each other date specified in the applicable section); and
(v) during the Waiver Period and at any time thereafter when any
Default has occurred and is continuing, the Borrower may not elect any
Interest Period for a Fixed Rate Loan pursuant to Section 2.06 other than
one month or 30 days, as the case may be.
(c) The provisions of Section 4(a) (and for purposes thereof, of any
defined term used therein) may not be amended, waived, supplemented or modified
in any respect without the written consent of Lenders having outstanding
Revolving Credit Exposures and/or outstanding Facility A Loans in an aggregate
amount (excluding accrued interest) equal to at
7
<PAGE>
least 75% of the sum of (x) the aggregate amount of the Revolving Credit
Exposures at such time and (y) the aggregate outstanding principal amount of
Facility A Loans at such time.
SECTION 5. Additional Convenants. Each of Vencor and the Borrower agrees
that, so long as any Lender has any Credit Exposure under the Credit Agreement
or any interest or fee accrued thereunder remains unpaid:
(a) Vencor will deliver the following information to the
Administrative Agent:
(i) notice by facsimile immediately, and in any event on the same
day, if any Vencor Company either pays or fails to pay any rent or
other amount payable to any Ventas Company under any Master Lease
Agreement when due (without regard for any grace period);
(ii) notice by facsimile immediately, and in any event on the same
day, if the Borrower either makes or fails to make any payment of
principal of or interest on the 1998 Subordinated Notes when due
(without regard for any grace period);
(iii) notice by facsimile promptly, and in any event on the same day,
of receipt from any Ventas Company of (1) a notice pursuant to Section
16.1(b) of any Master Lease Agreement demanding payment of any rent or
other sum payable under such Master Lease Agreement that was not paid
when due, or (2) a notice pursuant to the penultimate sentence of
Section 16.1 of any Master Lease Agreement terminating such Master
Lease Agreement, in each case together with a copy of such notice;
(iv) notice by facsimile promptly, and in any event on the same day,
of receipt from the trustee under the 1998 Subordinated Note Indenture
or Persons purporting to constitute the holders of at least 25% of the
outstanding 1998 Subordinated Notes of notice accelerating the maturity
of the 1998 Subordinated Notes, together with a copy of such notice, or
of knowledge that such trustee or Persons purporting to be the holders
of 10% or more of the principal amount of the 1998 Notes have commenced
legal proceedings to collect any unpaid amount of principal of or
interest on the 1998 Subordinated Notes;
(v) notice by facsimile promptly, and in any event on the same day,
of (1) receiving notice or otherwise becoming aware that the obligor of
any Medicaid Receivable, Medicare Receivable or VA Receivable (or any
agent thereof) has
8
<PAGE>
collected a payment of any PPS Overpayment Amount by exercising a
right of set-off or recoupment (or any similar right) against its
obligations on account of such Receivable, (2) receipt of a demand by
such an obligor or agent for payment by a date certain of any PPS
Overpayment Amount or (3) making of a payment pursuant to the MOIC
Letter, specifying the amount of such payment so collected or made or
amount demanded and the cumulative amount (without duplication) of all
such payments made by, or so demanded or so collected from, the Vencor
Companies, in the aggregate, during the period from March 10, 1999 to
the date of such notice and, in any event, of determining that a
Freeze Period exists pursuant to clause (c) of the definition thereof;
(vi) by facsimile no later than 5:00 P.M. (Eastern time) on each
Tuesday (or, if such day is not a Domestic Business Day, the next
succeeding Domestic Business Day), a report setting forth for each day
(a Census Measurement Day) during the seven-day period ending on the
day preceding such report the 10-day moving average of the daily
census in (1) its hospitals (the Hospital Daily Census) and (2) its
nursing homes (the Nursing Homes Daily Census) (all such calculations
to be made in a manner consistent with Vencor's historical practices
in compiling and reporting such data); and
(vii) for each month (with sufficient copies for each Lender) a copy
of Vencor's monthly management operating report (including financial
statements) for such month, to be in substantially the same format and
level of detail as the prior period report delivered to the Agents in
connection with the negotiation of Waiver No. 2 (with such exclusions
and variations as the Agents may approve) and to be delivered within
45 days after the end of such month if it is the last month of a
fiscal quarter and in all other cases within 30 days after the end of
such month.
(b) For each Census Measurement Day, the Hospital Daily Census shall be no
less than 2,450 and the Nursing Home Daily Census shall be no less than 29,000.
SECTION 6. Miscellaneous Other Provisions. (a) The rights of each Lender
Party pursuant to clause (ii) of Section 12.03(a) of the Credit Agreement shall
be determined without giving effect to this Waiver No. 5 or the Prior Waivers.
Without limiting the generality of
9
<PAGE>
Section 12.03(a), the Borrower agrees that it will pay on demand all statements
for fees and expenses (which may include amounts on account) of any financial,
accounting or valuation advisers or special counsel retained by the Agents or
the steering committee for the Lenders, as well as all out-of-pocket expenses
incurred by either Agent or any member of the steering committee in connection
with it acting as such.
(b) The right of the Borrower pursuant to Section 12.06(c) to consent to
any Assignee and the related assignment shall be determined without giving
effect to this Waiver No. 5, and any Assignee and the related assignment shall
always (including any time after expiration of the Waiver Period) be subject to
the consent of the Administrative Agent regardless of whether any Event of
Default has occurred and is continuing.
(c) The amount specified in Section 9.02(k) of the Credit Agreement was
permanently reduced from $20,000,000 to $1,000,000 pursuant to Waiver No. 2.
(d) The Documentation Agent, in its capacity as Leasehold Mortgagee with
respect to the Master Lease Agreements, was authorized and directed by Waiver
No. 3 to confirm that the provisions of the May 8 Amendment No. 2 to the Second
Standstill Agreement between Vencor and Ventas, bearing on certain cure rights
of the Vencor Companies under the Master Lease Agreements, shall neither shorten
nor extend the cure period for the Leasehold Mortgagee pursuant to Section 22.4
of the Master Lease Agreements. The Documentation Agent, in such capacity, is
authorized and directed to deliver similar confirmations with respect to
successive similarly structured amendments to such Second Standstill Agreement.
SECTION 7. Lapse of Waiver. Vencor agrees that its failure to comply with
any provision of this Waiver No. 5 (which shall include the failure, for
whatever reason, of the Hospital Daily Census or the Nursing Home Daily Census
to be at or above the applicable level specified in Section 5(b)) shall cause
the waivers granted hereby to cease to be in effect (i) in the case of clauses
(i) through (v) of Section 5(a), if such failure continues for one Domestic
Business Day (without the requirement of any notice from the Administrative
Agent or any Lenders), (ii) in the case of clause (vii) of Section 5(a), if such
failure continues for more than five days after notice from the Administrative
Agent given at the direction of the Required Basic Lenders and (iii) in all
other cases, immediately and without the requirement of any prior notice from or
further action on the part of any Lender or the Agents.
10
<PAGE>
SECTION 8. Representations Correct; No Default. Vencor represents and
warrants that, except as expressly waived hereby, on and as of the date hereof
(i) the representations and warranties contained in the Credit Agreement are
true as though made on and as of the date hereof and (ii) no Default has
occurred and is continuing. Vencor further represents and warrants that:
(a) the financial statements in the 1998 10-K fairly present in all
material respects, in conformity with generally accepted accounting principles,
the consolidated financial position of Vencor and its consolidated subsidiaries
at the end of such year and their consolidated results of operations and cash
flows for such year;
(b) the financial statements in the 2nd Quarter 10-Q fairly present in all
material respects, in conformity with generally accepted accounting principles
(subject to normal year-end adjustments and the absence of footnotes), the
consolidated financial position of Vencor and its consolidated subsidiaries at
the end of such quarter and their consolidated results of operations for such
quarter; and
(c) the information (other than projections and forecasts) included in the
July 20 Meeting Materials, when taken as a whole together with the other
Disclosure Materials, is true and accurate in all material respects or based on
reasonable estimates, and not incomplete by omitting to state any fact necessary
to make such information, when taken as a whole together with the other
Disclosure Materials, not misleading in any material respect in light of the
circumstances under which such information was provided. The projections and
forecasts included in the July 20 Meeting Materials were based on reasonable
assumptions and, when prepared, represented a reasonable estimate of the future
performance of the Vencor Companies (subject to any express disclaimers set
forth in the July 20 Meeting Materials).
SECTION 9. Counterparts; Effectiveness. (a) This waiver may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
(b) This Waiver No. 5 shall become effective as of the date hereof when
the Documentation Agent shall have received duly executed counterparts hereof
signed by Vencor, the Borrower and the Required Basic Lenders (or, in the case
of any Lender as to which an executed counterpart shall not have been received,
the Documentation Agent shall have received
11
<PAGE>
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such Lender).
(c) Promptly after this Waiver No. 5 has become effective, the Borrower
shall pay to the Administrative Agent, in immediately available funds, for the
account of each Basic Lender that has evidenced its agreement hereto as provided
in Section 9(b) by 5:00 P.M. (Eastern time) on the later of (i)August 26, 1999
and (ii) the date the Documentation Agent issues a notice to the Basic Lenders
saying that this Waiver No. 5 has become effective, a waiver fee in an amount
equal to 0.10% of the sum of (A) the Revolving Credit Commitment of such Lender
and (B) the aggregate outstanding principal amount of the Facility A Loans of
such Lender (as at the opening of business on the date hereof).
(d) Except as expressly set forth herein, the waivers contained herein
shall not constitute a waiver or amendment of any term or condition of the
Credit Agreement or any other Financing Document, and all such terms and
conditions shall remain in full force and effect and are hereby ratified and
confirmed in all respects. Each of Vencor and the Borrower understands and
accepts the interim nature of the waivers provided hereby, and agrees that no
failure or delay by the Lender Parties, or any of them, in exercising any right,
power or privilege under this Waiver No. 5, any Prior Waiver or any Financing
Document, or any other action taken or not taken or statement made during the
period that any Prior Waiver was in effect or this Waiver No. 5 is in effect
shall operate as a waiver thereof or obligate any Lender Party to agree to an
extension of the waivers granted hereby or any other waivers, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise of thereof or of any other right, power or privilege.
The waivers set forth in clauses (iv) and (v) of Section 2(a) are solely for the
purpose of clarifying the ability of the Borrower during the Waiver Period,
subject to the terms hereof, to continue to have available to it Revolving
Credit Loans, Swingline Loans and Additional Letters of Credit, and do not
constitute a waiver, release or other diminution of any claim, cause of action
or other right that any Lender Party may have against any Person on account of
or in any way based on any representation and warranty made under any Financing
Document having been incorrect in any respect when made or deemed made, all of
which claims, causes of action and other rights are expressly preserved.
12
<PAGE>
SECTION 10. Governing Law. THIS WAIVER NO. 5 SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 4 to be
duly executed by their respective authorized officers as of the day and year
first above written.
VENCOR OPERATING, INC.
By /s/ Richard A. Schweinhart
---------------------------------
Name: Richard A. Schweinhart
Title: Senior Vice President &
Chief Financial Officer
VENCOR, INC.
By /s/ Richard A. Schweinhart
---------------------------------
Name: Richard A. Schweinhart
Title: Senior Vice President &
Chief Financial Officer
LENDERS
-------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/
---------------------------------
Name:
Title:
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: /s/ Donald M. Golden
---------------------------------
Name: Donald M. Golden
Title: Chief Financial Officer
13
<PAGE>
BANK OF AMERICA NT & SA
By: /s/ Charles A. Kerr
---------------------------------
Name: Charles A. Kerr
Title: Senior Vice President
BANK OF AMERICA, NA
By: /s/ Charles A. Kerr
---------------------------------
Name: Charles A. Kerr
Title: Senior Vice President
BANK OF NEW YORK
By: /s/ Peter D. Helt
---------------------------------
Name: Peter D. Helt
Title: Vice President
BANKERS TRUST
By: /s/
---------------------------------
Name:
Title:
BANQUE PARIBAS
By: /s/ Albert A. Young, Jr.
---------------------------------
Name: Albert A. Young, Jr.
Title: Director
By: /s/
---------------------------------
Name:
Title:
14
<PAGE>
BEAR, STEARNS & CO INC
By: /s/
---------------------------------
Name:
Title:
CERBERUS PARTNERS LP
By: /s/ Mark A. Neporent
---------------------------------
Name: Mark A. Neporent
Title: Managing Director
CHASE SECURITIES INC. as agent for The Chase
Manhattan Bank
By: /s/ Howard J. Golden
---------------------------------
Name: Howard J. Golden
Title: Authorized Signatory
CREDIT LYONNAIS NY BRANCH
By: /s/ John-Charles Van Essche
---------------------------------
Name: John-Charles Van Essche
Title: Vice President
CREDITANSTALT
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
15
<PAGE>
FERNWOOD ASSOCIATES LP
By: /s/ David B. Forer
---------------------------------
Name: David B. Forer
Title: General Partner
FIRST UNION NATIONAL BANK
By: /s/ Caryn M. Chittenden
---------------------------------
Name: Caryn M. Chittenden
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Robert J. Rilzy
---------------------------------
Name: Robert J. Rilzy
Title: Vice President
FRANKLIN MUTUAL ADVISERS LLC
By: /s/ Jeff Altman
---------------------------------
Name: Jeff Altman
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL
By: /s/ William E. Magee
---------------------------------
Name: William E. Magee
Title: Duly Authorized Signatory
16
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS LP
By: /s/
---------------------------------
Name:
Title:
HALCYON DISTRESSED SECURITIES LP
By: /s/
---------------------------------
Name:
Title:
INDUSTRIAL BANK OF JAPAN
By: /s/ Takuya Honjo
---------------------------------
Name: Takuya Honjo
Title: Senior Vice President
PENSLER CAPITAL CORP.
By: /s/ Noam Sammon
---------------------------------
Name: Noam Sammon
Title: Associate
PNC BANK NA
By:_________________________________
Name:
Title:
17
<PAGE>
SUMITOMO BANK
By:_________________________________
Name:
Title:
T ROWE PRICE RECOVERY FUND II LP
By:_________________________________
Name:
Title:
VAN KAMPEN
SENIOR INCOME TRUST
By: /s/ Douglas J. Smith
---------------------------------
Name: Douglas J. Smith
Title: Vice President
18
<PAGE>
Exhibit 10.3
EXECUTION
DEBTOR-IN-POSSESSION CREDIT AGREEMENT
dated as of
September 13, 1999
among
VENCOR, INC.,
VENCOR OPERATING, INC.
and
EACH OF THE SUBSIDIARIES OF VENCOR, INC. PARTY HERETO,
each as debtor and debtor-in-possession,
THE LENDERS PARTY HERETO,
THE LC ISSUING BANKS PARTY HERETO,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Arranger, Collateral Agent and Administrative Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. Definitions...................................................................... 2
Section 1.01 Defined Terms............................................................... 2
Section 1.02 Accounting Terms and Determinations......................................... 24
Section 1.03 Other Definitional Provisions............................................... 25
ARTICLE 2. The Credit Facilities............................................................ 25
Section 2.01 Commitments to Lend......................................................... 25
Section 2.02 Notice of Borrowing......................................................... 26
Section 2.03 Notice to Lenders; Funding of Loans......................................... 26
Section 2.04 Interest Rate; Default Rate................................................. 27
Section 2.05 Letters of Credit........................................................... 28
Section 2.06 Fees........................................................................ 34
Section 2.07 Final Maturity of Loans..................................................... 35
Section 2.08 Unscheduled Mandatory Prepayments of Loans; Reduction of Commitments........ 35
Section 2.09 Optional Prepayments........................................................ 37
Section 2.10 Termination or Reduction of Commitments..................................... 37
Section 2.11 General Provisions as to Payments........................................... 38
Section 2.12 Computation of Interest and Fees............................................ 38
Section 2.13 Release of Security Interests in Assets Being Sold.......................... 39
Section 2.14 Superpriority Nature of Obligations......................................... 39
Section 2.15 Joint and Several Liability; Payment Indemnifications....................... 40
Section 2.16 Defaulting Lenders.......................................................... 40
Section 2.17 Removal or Replacement of a Lender.......................................... 42
ARTICLE 3. Conditions....................................................................... 43
Section 3.01 Effectiveness of this Agreement; Closing.................................... 43
Section 3.02 Credit Events............................................................... 46
ARTICLE 4. Representations and Warranties................................................... 47
Section 4.01 Corporate Existence and Power............................................... 47
Section 4.02 Corporate and Governmental Authorization; No Contravention.................. 47
Section 4.03 Binding Effect.............................................................. 47
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
Section 4.04 Security Interests................................................................ 48
Section 4.05 Financial Information............................................................. 48
Section 4.06 Litigation........................................................................ 48
Section 4.07 Compliance with ERISA............................................................. 48
Section 4.08 Taxes............................................................................. 49
Section 4.09 Compliance with Laws.............................................................. 49
Section 4.10 No Regulatory Restrictions on Borrowing........................................... 49
Section 4.11 Environmental Matters............................................................. 49
Section 4.12 Full Disclosure................................................................... 49
Section 4.13 Information as to Equity Interests and Instruments Owned by Vencor Companies...... 50
Section 4.14 Representations in Other Financing Documents...................................... 50
Section 4.15 Year 2000 Compliance.............................................................. 50
Section 4.16 Margin Stock...................................................................... 50
Section 4.17 Representations Concerning Cash Management System................................. 50
Section 4.18 Prepetition Indebtedness.......................................................... 51
Section 4.19 Chapter 11 Cases.................................................................. 51
Section 4.20 Cash Plan......................................................................... 51
ARTICLE 5. Affirmative Covenants.................................................................. 51
Section 5.01 Information....................................................................... 51
Section 5.02 Maintenance of Property........................................................... 56
Section 5.03 Insurance......................................................................... 56
Section 5.04 Compliance with Law............................................................... 56
Section 5.05 Maintenance of Existence, Rights, Etc............................................. 57
Section 5.06 Use of Proceeds and Letters of Credit............................................. 57
Section 5.07 Future Assets to be Added to Collateral........................................... 57
Section 5.08 Casualty Events................................................................... 59
Section 5.09 Cash Management System............................................................ 60
Section 5.10 Certain Orders.................................................................... 60
Section 5.11 Dissolution of Shell Subsidiaries................................................. 60
Section 5.12 Post Closing Deliveries........................................................... 61
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
Section 5.13 Government Settlement............................................................. 61
ARTICLE 6. Financial Covenants.................................................................... 61
Section 6.01 Consolidated EBITDAR.............................................................. 61
Section 6.02 Nursing Home Census............................................................... 61
Section 6.03 Hospital Census................................................................... 62
Section 6.04 Receivables....................................................................... 62
Section 6.05 Compliance with Cash Plan......................................................... 62
Section 6.06 Capital Expenditures.............................................................. 62
ARTICLE 7. Negative Covenants..................................................................... 63
Section 7.01 Limitation on Debt................................................................ 63
Section 7.02 Negative Pledge................................................................... 64
Section 7.03 Consolidations, Mergers and Asset Sales........................................... 64
Section 7.04 Limitations on Investments........................................................ 65
Section 7.05 Limitations on Transactions with Affiliates....................................... 65
Section 7.06 Limitation on Restrictions Affecting Subsidiaries................................. 65
Section 7.07 Restricted Payments............................................................... 66
Section 7.08 No Modification of Certain Documents Without Consent.............................. 66
Section 7.09 No Change of Fiscal Periods....................................................... 66
Section 7.10 Margin Stock...................................................................... 66
Section 7.11 Limitation on Business............................................................ 66
Section 7.12 Leases............................................................................ 67
Section 7.13 Limitation on Cash Not Held in Collateral Accounts or Concentration Accounts...... 67
Section 7.14 Chapter 11 Claims................................................................. 67
Section 7.15 Limitation on Repayments; Prepetition Obligations................................. 67
Section 7.16 Agreements........................................................................ 68
ARTICLE 8. Defaults............................................................................... 68
Section 8.01 Events of Default................................................................. 68
Section 8.02 Notice of Default................................................................. 72
Section 8.03 Enforcement Notice................................................................ 72
Section 8.04 Cash Cover........................................................................ 73
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
ARTICLE 9. The Agents............................................................................. 73
Section 9.01 Appointment and Authorization..................................................... 73
Section 9.02 Agents and Affiliates............................................................. 74
Section 9.03 Action by Agents.................................................................. 74
Section 9.04 Consultation with Experts......................................................... 74
Section 9.05 Liability of Agents............................................................... 74
Section 9.06 Indemnification................................................................... 75
Section 9.07 Credit Decision................................................................... 75
Section 9.08 Successor Agents.................................................................. 75
Section 9.09 Collateral Agent.................................................................. 75
ARTICLE 10. Changes In Circumstances............................................................... 76
Section 10.01 Increased Cost and Reduced Return................................................. 76
Section 10.02 Taxes............................................................................. 77
ARTICLE 11. Miscellaneous.......................................................................... 79
Section 11.01 Notices........................................................................... 79
Section 11.02 No Waiver......................................................................... 79
Section 11.03 Expenses; Indemnification......................................................... 79
Section 11.04 Sharing of Set-offs............................................................... 82
Section 11.05 Amendments and Waivers............................................................ 83
Section 11.06 Successors and Assigns............................................................ 85
Section 11.07 Margin Stock...................................................................... 87
Section 11.08 Governing Law; Submission to Jurisdiction......................................... 87
Section 11.09 Counterparts; Integration......................................................... 87
Section 11.10 WAIVER OF JURY TRIAL.............................................................. 88
Section 11.11 Confidentiality................................................................... 88
Section 11.12 Parties Including Trustees; Court Proceedings..................................... 89
</TABLE>
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(continued)
<TABLE>
<S> <C>
SCHEDULES
- ---------
Commitment Schedule
Schedule 1 __ Cash Plan
Schedule 2 __ Prepetition Reorganization Agreements
Schedule 3 __ Appraised Properties, Properties Held for Sale
Schedule 4 __ Subsidiaries and Insurance Subsidiaries; Excluded
Partnerships
Schedule 5 __ Hospital Facilities and Nursing Home Facilities
Schedule 6 __ Existing Affiliate Agreements
Schedule 7 __ Management Contracts
Schedule 8 __ Litigation
Schedule 9 __ Prepetition Indebtedness
Schedule 10 __ Existing Liens
Schedule 11 __ Existing Investments
Schedule 12 __ Uncertified Facilities
Schedule 13 __ Post-Closing Deliveries
</TABLE>
-v-
<PAGE>
TABLE OF CONTENTS
(continued)
EXHIBITS
--------
<TABLE>
<S> <C>
Exhibit A-1 __ Form of Tranche A Note
Exhibit A-2 __ Form of Tranche B Note
Exhibit B __ Form of Security Agreement
Exhibit C __ Form of Subsidiary Guaranty Agreement
Exhibit D __ Financial Officer's Certificate
Exhibit E-1 __ Form of Opinion of Special Delaware Counsel for the
Borrowers and Subsidiary Guarantors
Exhibit E-2 __ Form of Opinion of Special Counsel for the Borrowers and
Subsidiary Guarantors
Exhibit F-1 __ Form of Notice of Borrowing
Exhibit F-2 __ Form of LC Request
Exhibit G __ Form of Prepayment Notice
Exhibit H __ Form of Assignment Agreement
Exhibit I __ Form of Interim Borrowing Order
Exhibit J __ Form of Borrowing Order
Exhibit K __ Form of Healthcare Status Report
</TABLE>
-vi-
<PAGE>
DEBTOR-IN-POSSESSION CREDIT AGREEMENT
This DEBTOR-IN-POSSESSION CREDIT AGREEMENT is dated as of September
13, 1999 and entered into by and among VENCOR, INC., a Delaware corporation
("Vencor"), and VENCOR OPERATING, INC., a Delaware corporation ("Vencor Opco"),
each as debtor and debtor-in-possession, and EACH OF VENCOR'S SUBSIDIARIES
LISTED ON THE SIGNATURE PAGES HEREOF, each as debtor and debtor-in-possession
(each such subsidiary, Vencor and Vencor Opco individually referred to herein as
a "Borrower" and, collectively, on a joint and several basis, as "Borrowers");
THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "Lender" and collectively as "Lenders"); MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as arranger (in such capacity, "Arranger"), collateral
agent and administrative agent for the Lenders, and as an issuing bank for
Letters of Credit hereunder.
RECITALS
WHEREAS, on September 13, 1999 (the "Petition Date"), each Borrower
filed a voluntary petition for relief under the Bankruptcy Code (such term and
other capitalized terms used in these Recitals without definition have the
meanings set forth in Section 1.1 of this Agreement) with the United States
Bankruptcy Court for the District of Delaware (the "Court") (such proceedings
being jointly administered under Case Nos. 99-03199 (MFW) through 99-03327 (MFW)
are hereinafter referred to as the "Chapter 11 Cases"). Each Borrower continues
to operate its businesses and manage its properties as a debtor-in-possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code; and
WHEREAS, the Borrowers have requested Lenders to provide revolving
credit facilities in an aggregate amount of up to $100,000,000 on a post-
petition basis on the terms and conditions set forth herein; and
WHEREAS, Lenders are willing to provide such financing only if all
Obligations (i) shall constitute allowed administrative expense claims in the
Chapter 11 Cases as set forth herein, (ii) are secured by a first priority Lien
on substantially all of the Borrowers' real, personal and mixed property,
including a pledge of all of the capital stock of each of the Subsidiaries of
the Borrowers and (iii) are guaranteed by the non-Debtor Subsidiaries of Vencor
(other than Shell Subsidiaries, Excluded Partnerships and Insurance
Subsidiaries) pursuant to the Subsidiary Guaranty Agreement, which guaranty
shall be secured by a first priority Lien (subject to existing Liens) on
substantially all of the real, personal and mixed property of the Subsidiary
Guarantors pursuant to the Security Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers, Lenders and Agents
hereby agree as follows:
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<PAGE>
ARTICLE 1. Definitions
SECTION 1.01 Defined Terms. The following terms, as used herein, have
-------------
the following meanings:
"Account Party" means the party identified as the Account Party for a
Letter of Credit pursuant to Section 2.05(c).
"Adjusted Consolidated Net Income" means, for any period, Consolidated Net
Income for such period, adjusted to exclude therefrom, without duplication, (i)
gains or losses from Asset Sales net of related tax effects and (ii) any net
income (or loss) of any Person (other than a Consolidated Subsidiary) in which a
Vencor Company has an ownership interest, except that such Person's net income
shall not be excluded if (and to the extent that) such Person pays dividends or
distributions in cash to a Vencor Company during such period.
"Administrative Agent" means Morgan, in its capacity as administrative
agent for the Lenders under the Financing Documents, and its successors in such
capacity.
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent,
duly completed by such Lender and submitted to the Administrative Agent (with a
copy to the Borrowers).
"Affiliate" means any Person (other than a Subsidiary) directly or
indirectly controlling, controlled by or under common control with Vencor. As
used in this definition, the term "control" means possession, directly or
indirectly, of the power to vote 10% or more of any class of voting securities
of a Person or to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise. The fact that Ventas and Vencor have many stockholders in common will
not be deemed to constitute "common control" for purposes of this definition
unless stockholders possessing, directly or indirectly, the power to vote more
than 10% of Vencor's outstanding common stock attempt to influence its
management or policies in a manner which is, or could reasonably be expected to
be, favorable to any Ventas Company. Notwithstanding anything to the contrary in
this definition, no individual shall be deemed an Affiliate of any Person solely
by reason of his or her being an employee, officer or director of such Person.
"Agents" means the Collateral Agent and the Administrative Agent.
"Aggregate LC Exposure" means, at any time, the sum, without duplication,
of (i) the aggregate amount that is (or may thereafter become) available for
drawing under all Letters of Credit outstanding at such time and (ii) the
aggregate unpaid principal amount of all LC Reimbursement Obligations
outstanding at such time.
2
<PAGE>
"Agreement" means this Debtor-In-Possession Credit Agreement dated as of
September 13, 1999, as it may hereafter be amended, supplemented or otherwise
modified from time to time.
"Applicable Laws" means all applicable provisions of constitutions,
statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all applicable orders, rules and decrees of courts and
arbitrators.
"Appraised Properties" means the real property interests of Borrowers
identified as the "Appraised Properties" on Schedule 3 hereto.
----------
"Arranger" has the meaning set forth in the introduction to this Agreement.
"Asset Sale" means any sale, lease or other transfer (including any such
transaction effected by way of merger or consolidation) of any asset by any
Vencor Company, including without limitation any sale-leaseback transaction,
whether or not involving a capital lease, but excluding (i) any sale of
inventory, cash, cash equivalents and other cash management investments and
obsolete, unused or unnecessary equipment, in each case in the ordinary course
of business and (ii) any transfer of assets by any Borrower to another Borrower
or by any Subsidiary Guarantor to another Subsidiary Guarantor.
"Assignee" has the meaning set forth in Section 11.06(c).
"Assignment Agreement" means an Assignment Agreement in substantially the
form of Exhibit H annexed hereto.
---------
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Borrower" has the meaning set forth in the introduction to this Agreement.
"Borrowing" means an aggregation of Tranche A Loans or of Tranche B Loans,
as the case may be, made or to be made to the Borrowers by the Lenders pursuant
to Section 2.01(a) or 2.01(b), respectively, on the same day.
"Borrowing Base" means, as of any date of determination during any calendar
month set forth below, the aggregate amount set forth below for such calendar
month:
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<PAGE>
Calendar Borrowing
Month Base
---------------- ----------------
September 1999 $45,000,000
October 1999 $65,000,000
November 1999 $70,000,000
December 1999 $75,000,000
January 2000 $75,000,000
February 2000 $75,000,000
"Borrowing Order" means an order of the Court entered in the Chapter 11
Cases after a final hearing under Bankruptcy Rule 4001(c)(2) in the form
attached hereto as Exhibit J with any modifications thereto on or prior to the
---------
entry thereof as are approved by Administrative Agent in its sole discretion, as
the same may thereafter be amended, supplemented or otherwise modified from time
to time with the express written consent or joinder of Required Lenders.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized by law to close.
"Capital Lease" means a lease that would be capitalized on a balance sheet
of the lessee prepared in accordance with GAAP.
"Caribbean" means Caribbean Behavioral Health Services, Inc., a Nevada
corporation.
"Carve-Out Notice" has the meaning set forth in Section 2.14.
"Cash Balance" means, as at any time of determination, the sum of the
dollar amount of all money, currency, Temporary Cash Investments and credit
balances held or carried in the Concentration Accounts.
"Cash Plan" means the consolidated cash forecast for the Borrowers for the
period from the Closing Date through October 31, 1999, delivered by the
Borrowers to the Administrative Agent pursuant to Section 3.01 and annexed
hereto as Schedule 1, as it may be supplemented pursuant to Section 5.01(m).
----------
"Casualty Event" means (i) any Condemnation Event with respect to any
property owned by or leased to any Vencor Company or (ii) any damage to, or
destruction of, any property owned by or leased to any Vencor Company.
"Casualty Proceeds" means (i) with respect to any Condemnation Event, all
awards or payments received by any Vencor Company or the Collateral Agent by
reason of such Condemnation Event, including all amounts received with respect
to any transfer in lieu or anticipation of such Condemnation Event or in
settlement of any proceeding relating to such
4
<PAGE>
Condemnation Event and (ii) with respect to any other Casualty Event, all
insurance proceeds or payments (excluding payments with respect to business
interruption) which any Vencor Company or the Collateral Agent receives by
reason of such other Casualty Event.
"Census Measurement Day" has the meaning set forth in Section 5.01(a).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time, and the regulations
promulgated thereunder.
"Cessna Plane" has the meaning set forth in Section 6.06.
"Chapter 11 Cases" has the meaning set forth in the recitals to this
Agreement.
"Closing" means the closing hereunder on the Closing Date.
"Closing Date" means the date on which the Administrative Agent shall have
received the documents specified in or pursuant to Section 3.01 and the other
conditions specified in Section 3.01 shall have been satisfied.
"Collateral" means all property, real and personal, tangible and
intangible, with respect to which Liens are created or purportedly created for
the benefit of Lenders pursuant to the Collateral Documents.
"Collateral Agent" means Morgan, in its capacity as collateral agent for
the holders of the Secured Obligations under the Collateral Documents, and its
successors in such capacity.
"Collateral Documents" means the Security Agreement, the Security Agreement
Supplements, the Mortgages and all other supplemental or additional security
agreements, mortgages or similar instruments delivered pursuant hereto or
thereto or pursuant to an applicable order of the Court.
"Commitment" means, as to any Lender, the aggregate amount of such Lender's
Tranche A Commitment and Tranche B Commitment, and "Commitments" means all such
Commitments of all Lenders, in the aggregate.
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Commitment Termination Date" means the earliest of (i) the Stated Maturity
Date, (ii) the effective date of a joint plan of reorganization in the Chapter
11 Cases, as specified in such plan, (iii) the date distributions commence to
any class of creditors, equity holders or other claimants under any such plan of
reorganization in the Chapter 11 Cases, (iv) the date of substantial
consummation of any such plan of reorganization in the Chapter 11 Cases, (v) the
date of termination
5
<PAGE>
of exclusivity as to the proposal of any reorganization plan by any Borrower in
any of the Chapter 11 Cases without the prior written approval of Required
Lenders, (vi) the date of termination in whole of the Commitments pursuant to
Article 8, (vii) the date of filing with the Court of any plan of reorganization
or any modification to any previously filed plan of reorganization, in any case
which has not been approved in writing by Required Lenders prior to such filing,
(viii) the date that is fifteen (15) days after the Petition Date, if neither
the Interim Borrowing Order nor the Borrowing Order has been entered by the
Court by such date; (ix) the date that is twenty-five (25) days after the
Petition Date if the Borrowing Order has not been entered by the Court by such
date; and (x) the date of any sale, transfer or other disposition of all or
substantially all of the assets or stock of the Borrowers and their
Subsidiaries.
"Concentration Accounts" has the meaning set forth in Section 6(a) of the
Security Agreement.
"Condemnation Event" means any condemnation or other taking or temporary or
permanent requisition of any property, any interest therein or right appurtenant
thereto, or any change of grade affecting any property, as the result of the
exercise of any right of condemnation or eminent domain. A transfer to a
governmental authority in lieu or anticipation of condemnation shall be deemed
to be a Condemnation Event.
"Consolidated Capital Expenditures" means, for any period, the gross
additions to property, plant and equipment and other capital expenditures of
Vencor and its Consolidated Subsidiaries for such period, as the same are or
would be reflected in a consolidated statement of cash flows of Vencor and its
Consolidated Subsidiaries for such period.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent deducted in determining Adjusted
Consolidated Net Income for such period, the sum of (i) Consolidated Interest
Expense, (ii) income tax expense and (iii) depreciation, amortization and other
similar non-cash charges.
"Consolidated EBITDAR" means, for any period, Consolidated EBITDA for such
period plus, to the extent deducted in determining Consolidated EBITDA for such
period, the sum of (i) Consolidated Rental Expense and (ii) non-cash
compensation expense and minus (iii) any cash paid during such period in respect
of non-cash compensation expense accrued during any prior period; provided that
Consolidated EBITDAR shall be calculated so as to exclude the effect of any
income or expense that (A) is classified as extraordinary, (B) is reported
separately as an unusual or non-recurring item, (C) is attributable to
discontinued operations or (D) represents the effect of an accounting change on
prior periods, in each case in accordance with GAAP, and, if any Subsidiary of
any Borrower is subject to a limitation in any period binding on such Subsidiary
which limits such Subsidiary's ability to pay dividends or make other
distributions or pay any Debt owed to any Vencor Company, to make loans or
advances to any Vencor Company or to create incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues to secure the obligations of
any
6
<PAGE>
Vencor Company under any Financing Document, Consolidated EBITDAR for such
period shall be adjusted to exclude any portion thereof that is attributable to
such Subsidiary and that, as a result of such limitation, it would be prohibited
from paying, directly or indirectly, to the Vencor Companies at the end of such
period.
"Consolidated Interest Expense" means, for any period, the interest expense
of Vencor and its Consolidated Subsidiaries, determined on a consolidated basis
for such period; provided that Consolidated Interest Expense shall not (i)
include interest capitalized in accordance with GAAP or (ii) be reduced by any
interest income.
"Consolidated Net Income" means, for any period, the net income of Vencor
and its Consolidated Subsidiaries, determined on a consolidated basis for such
period.
"Consolidated Rental Expense" means, for any period, the total rental
expense for operating leases of Vencor and its Consolidated Subsidiaries,
determined on a consolidated basis for such period; provided that Consolidated
Rental Expense shall not be reduced by any rental income.
"Consolidated Subsidiary" means, as to any Person at any date, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date. Unless otherwise specified, "Consolidated
Subsidiary" means a Consolidated Subsidiary of Vencor.
"Cornerstone" means Cornerstone Insurance Company, a Cayman Islands
corporation.
"Court" has the meaning set forth in the recitals to this Agreement.
"Credit Event" means (i) the making of a Loan, (ii) the issuance of a
Letter of Credit or (iii) the extension of the expiry date of a Letter of
Credit.
"Credit Exposure" means, as to any Lender, (i) at any time before the
termination of its Commitment in its entirety, the amount of its Commitment at
such time; or (ii) at any time thereafter, if the Commitments have terminated in
their entirety, its Outstanding Credit Amount, all determined at such time after
giving effect to any prior assignments by or to such Lender pursuant to Section
11.06(c).
"Credit Facilities" means the credit facilities provided to the Borrowers
under Sections 2.01(a), 2.01(b) and 2.05 and the other provisions hereof
relating to Loans and Letters of Credit.
"Credit Parties" means the Borrowers and the Subsidiary Guarantors,
collectively.
7
<PAGE>
"Debt" of any Person means, without duplication, (i) all obligations of
such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or services, (iv) all
obligations of such Person as lessee under Capital Leases, (v) all obligations
of such Person to purchase securities which arise out of or in connection with
the sale of the same or substantially similar securities, (vi) all obligations
of such Person (whether contingent or non-contingent) to reimburse any Lender or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance or similar instrument, (vii) all obligations secured by a Lien on any
asset of such Person, whether or not such Debt is otherwise an obligation of
such Person, and (viii) all Guarantees by such Person of obligations of another
Person (each such Guarantee to constitute Debt in an amount equal to the maximum
amount of such other Person's obligations Guaranteed thereby); provided that
neither trade accounts payable nor amounts owed to patients or residents arising
after the Petition Date in the ordinary course of business nor obligations
arising after the Petition Date in respect of insurance policies or performance
or surety bonds which are not themselves Guarantees of Debt (nor drafts,
acceptances or similar instruments evidencing the same nor obligations in
respect of letters of credit supporting the payment of the same) shall
constitute Debt.
"Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Determining Lenders" means Lenders having outstanding Credit Exposures in
an aggregate amount (excluding accrued interest) equal to at least 70% of the
aggregate amount of the Credit Exposures of all Lenders.
"Eastern Time" means local time in the Eastern time zone of the United
States.
"EBITDA" means, when used with respect to any Healthcare Facility for any
period, the net income attributable to the operations of such Healthcare
Facility during such period plus, to the extent deducted in determining such net
income, the sum of (i) interest expense, (ii) income tax expense and (iii)
depreciation, amortization and other similar non-cash charges.
"Eligible Assignee" means any Person which is a holder of Prepetition
Indebtedness at the time of the relevant assignment and which is either (A) (i)
a commercial bank organized under the laws of the United States or any state
thereof having unimpaired capital and surplus of not less than $500,000,000;
(ii) a savings and loan association or savings bank organized under the laws of
the United States or any state thereof having unimpaired capital and surplus of
not less than $500,000,000; (iii) a commercial bank organized under the laws of
any other country or a political subdivision thereof having unimpaired capital
and surplus of not less than $500,000,000; provided that (x) such bank is acting
--------
through a branch or agency located in the United States or (y) such bank
8
<PAGE>
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; or (iv) an "accredited investor" (as defined in Regulation D under the
Securities act) which extends credit as one of its businesses including, but not
limited to, insurance companies, mutual funds and lease financing companies and
having unimpaired capital and surplus of not less than $100,000,000; or (B) a
Lender or an Affiliate of a Lender; provided that no Vencor Company, no Ventas
Company and no Affiliate of any of them shall be an Eligible Assignee; and
provided further that Eligible Assignee shall mean and include any other Person
- -------- -------
designated as such pursuant to the prior written consent of (y) Administrative
Agent (such consent not to be unreasonably withheld or delayed) and (z) as long
as no Event of Default has occurred or is continuing, the Borrowers (such
consent not to be unreasonably withheld or delayed).
"Enforceable Judgment" means a judgment or order of a court or arbitral or
regulatory authority as to which the period, if any, during which the
enforcement of such judgment or order is stayed shall have expired. A judgment
or order which is under appeal or as to which the time in which to perfect an
appeal has not expired shall not be deemed an Enforceable Judgment so long as
enforcement thereof is effectively stayed pending the outcome of such appeal or
the expiration of such period, as the case may be.
"Enforcement Notice" means a notice delivered by the Administrative Agent
to the Collateral Agent pursuant to Section 8.03 directing the Collateral Agent
to exercise one or more specific rights or remedies under the Collateral
Documents.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions relating to the
environment or to the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including ambient air, surface water, ground water
or land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" means any and all liabilities of or relating to
any of the Vencor Companies (including any entity which is, in whole or in part,
a predecessor of any of the Vencor Companies), whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws.
"Equity Interest" means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof or
(v) any warrant,
9
<PAGE>
option or other right to acquire any Equity Interest described in the foregoing
clauses (i), (ii), (iii) and (iv).
"Equity Issuance" means any issuance or sale by any Vencor Company of any
Equity Interest in such Vencor Company, other than any issuance or sale of such
Equity Interests to any other Vencor Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Vencor Companies and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Vencor Company, are treated as a
single employer under Section 414 of the Internal Revenue Code.
"Event of Default" means any event defined as an "Event of Default" in
Section 8.01.
"Excess Cash Amount" has the meaning set forth in Section 2.08(f).
"Excess Casualty Proceeds" has the meaning set forth in Section 5.08(a).
"Excluded Partnership" means each of the general and limited partnerships
and each of the limited liability companies identified on Schedule 4 hereto as
----------
an Excluded Partnership; provided that any such partnership or limited liability
company shall cease to be an Excluded Partnership at such time as (i) the grant
of a security interest in the partnership interests or limited liability company
interests thereof and a guaranty of the Obligations by such entity shall no
longer constitute a material violation of a valid and enforceable restriction in
favor of a third party or (ii) the required consents to such grant and such
guaranty shall have been obtained.
"Executive Officer" means any "executive officer" (within the meaning of
Rule 3b-7 under the Securities Exchange Act) of any of the Borrowers.
"Existing Affiliate Agreements" means the agreements listed in Schedule 6
----------
hereto.
"Existing Credit Facilities" means, collectively, (i) the Credit Agreement
dated as of April 29, 1998, as amended through the Closing Date, among certain
of the Borrowers and the lenders and agents named therein, (ii) all agreements,
documents and instruments pursuant to which any interest in collateral is
granted or purported to be granted, created, evidenced or perfected in
connection with such Credit Agreement, including without limitation, all deeds
of trust, mortgages, security agreements, pledge agreements, assignments,
licenses, landlord consents and releases, financing statements, fixture filings,
registrations or similar documents and (iii) all ancillary agreements as to
which any holder of any of the obligations evidenced by any of the foregoing is
a party or a beneficiary and all other agreements, instruments, documents and
certificates including
10
<PAGE>
promissory notes, consents, assignments, contracts, and notices delivered in
connection with any of the foregoing or the transactions contemplated thereby,
in each case as any of the foregoing may be in effect as of the Closing Date and
as the same may be amended, supplemented or otherwise modified from time to time
to the extent permitted hereunder.
"Existing Lender" means each of (i) the "Lenders" party to the Existing
Credit Facilities and (ii) the counterparties to the Designated Interest Rate
Agreements (as defined under the Existing Credit Facilities).
"Existing Lender Lien" means the adequate protection lien provided to the
Existing Lenders as set forth in the Interim Borrowing Order and Borrowing
Order.
"Existing Note Indentures" means, collectively, (i) the indenture dated as
of April 30, 1998 and (ii) the indenture dated as of July 21, 1997, as amended
by the first supplemental indenture dated as of April 7, 1998 and the second
supplemental indenture dated as of April 30, 1998, pursuant to which indentures
the Existing Notes were issued.
"Existing Notes" means the 9-7/8% subordinated notes of Vencor Opco in the
aggregate outstanding principal amount of $300,000,000 and the 8-5/8%
subordinated notes of Vencor in the aggregate outstanding principal amount of
$2,391,000, in each case issued pursuant to the Existing Note Indentures, and
any "exchange securities" issued in exchange for such subordinated notes
pursuant to the Existing Note Indentures.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as determined by the
Administrative Agent.
"Fee Mortgages" means fee mortgages substantially in the form of Exhibit G
to the Security Agreement relating to (i) the Appraised Properties and (ii) any
other real property (other than Properties Held For Sale) owned in fee by any
Borrower or any Subsidiary Guarantor which is required to be so encumbered to
secure the Obligations pursuant to Section 5.7.
"Final Order" means an order, judgment or other decree of the Court or any
other court or judicial body with proper jurisdiction, as the case may be, which
(i) in the case of any order, judgment or decree other than the Interim
Borrowing Order and the Borrowing Order, is in full force and effect and has not
been reversed, stayed, modified or amended and as to which (a) any right to
11
<PAGE>
appeal or seek certiorari, review or rehearing has been waived or (b) the time
to appeal or seek certiorari, review or rehearing has expired and as to which no
appeal or petition for certiorari, review or rehearing is pending, and (ii) in
the case of the Interim Borrowing Order and the Borrowing Order, is in full
force and effect and has not been reversed, stayed, modified or amended.
"Financial Accommodations" means arrangements for the extension of credit
or other financial accommodation to one or more of the Vencor Companies,
including committed or uncommitted lines of credit for advances or other
financial accommodation, letters of credit, performance and surety bonds and the
like, committed or uncommitted agreements for the purchase of accounts
receivable or other financial assets, with or without recourse or repurchase
obligation, forward and future contracts for purchase of bullion or foreign
currencies and other similar arrangements and interest rate swaps and other
similar arrangements, but excluding (i) trade accounts payable and amounts owed
to patients or residents arising after the Petition Date, in each case arising
in the ordinary course of business nor obligations arising after the Petition
Date in respect of insurance policies or performance or surety bonds which are
not themselves Guarantees of Debt (nor drafts, acceptances or similar
instruments evidencing the same nor obligations in respect of letters of credit
supporting the payment of the same) shall constitute Financial Accommodations
and (ii) Debt, Letters of Credit and Commitments under this Agreement.
"Financial Officer" means the principal financial officer, principal
accounting officer or treasurer of Vencor Opco.
"Financing Documents" means this Agreement (including the Schedules and
Exhibits hereto), the Notes, the Subsidiary Guaranty Agreement and the
Collateral Documents.
"First Day Orders" means those orders entered by the Court as a result of
motions and applications filed by Borrowers with the Court on the Petition Date,
in each case in form and substance as approved by the Administrative Agent
pursuant to Section 3.01.
"Fiscal Quarter" means a fiscal quarter of Vencor.
"Fiscal Year" means a fiscal year of Vencor.
"GAAP" means at any time generally accepted accounting principles as then
in effect in the United States, applied on a basis consistent (except for
changes concurred in by Vencor's independent public accountants) with the Most
Recent Audited Financial Statements.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or
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administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise), (ii) to reimburse a bank for
drawings under a letter of credit for the purpose of paying such Debt or (iii)
entered into for the purpose of assuring in any other manner the holder of such
Debt of the payment thereof or to protect such holder against loss in respect
thereof (in whole or in part); provided that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee", when used as a verb, has a corresponding
meaning.
"Hazardous Substances" means any toxic, radioactive, corrosive or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, whether or not regulated under Environmental
Laws.
"Healthcare Event" means, with respect to any Hospital Facility or Nursing
Home Facility, either (i) the termination of the Medicare or Medicaid contract
for such Healthcare Facility or (ii) the involuntary receivership or involuntary
management of such Healthcare Facility by any applicable Governmental Authority.
"Healthcare Facility" means (i) a hospital, outpatient clinic, nursing
center, assisted or independent living community, long-term care facility or any
other facility that is used or useful in the provision of healthcare or
custodial care services, (ii) any healthcare business affiliated or associated
with a Healthcare Facility (as defined in clause (i)) or (iii) any business
related or ancillary to the provision of healthcare services or the operation of
a Healthcare Facility (as defined in clause (i)) including, but not limited to,
contract therapy services, as well as hospice and home care services.
"Healthcare Status Report" has the meaning set forth in Section 5.01(n).
"Hospital Daily Census" has the meaning set forth in Section 5.01(a).
"Hospital Facility" means any Healthcare Facility owned or leased by a
Vencor Company which is licensed as a hospital or outpatient clinic as set forth
and identified as a "Hospital Facility" in Schedule 5 hereto.
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"Indemnitee" has the meaning set forth in Section 11.03(b).
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<PAGE>
"Insurance Subsidiary" means each Subsidiary of Vencor identified as an
Insurance Subsidiary on Schedule 4 hereto and any other insurance company that
----------
becomes a Subsidiary of Vencor after the Closing Date.
"Interim Borrowing Order" means an order of the Court entered in the
Chapter 11 Cases after a hearing under Bankruptcy Rule 4001(c)(2) in the form
attached hereto as Exhibit I, with any modifications thereto on or prior to the
---------
Closing Date or entry thereof as are approved by the Administrative Agent in its
sole discretion, as the same may thereafter be amended, supplemented or
otherwise modified from time to time with the express written consent or joinder
of Required Lenders.
"Interim Order Date" means the date that the Court signs the Interim
Borrowing Order.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"Investment" means, with respect to any Person (the "Investor"), any
investment by the Investor in any other Person, whether by means of share
purchase, capital contribution, loan, advance, purchase of Debt, payment in
respect of a Guarantee of Debt, time deposit or otherwise.
"LC Exposure" means, with respect to any Lender at any time, its Percentage
of the Aggregate LC Exposure at such time.
"LC Fee Rate" means a per annum rate equal to 2.50% or, upon the occurrence
and during the continuation of any Event of Default, 4.50%.
"LC Indemnitees" has the meaning set forth in Section 2.05(n).
"LC Issuing Bank" means (i) Morgan and (ii) any other Lender designated as
an "LC Issuing Bank" for purposes hereof in a notice to the Administrative Agent
signed by Vencor Opco (acting on its own behalf and on behalf of all other
Borrowers) and such Lender, acting in each case in the capacity of an LC Issuing
Bank under the letter of credit facility described in Section 2.05, and their
respective successors.
"LC Office" means, with respect to any LC Issuing Bank, the office at which
it books any Letter of Credit issued by it.
"LC Payment Date" has the meaning set forth in Section 2.05(h).
"LC Reimbursement Obligations" means, at any time, all obligations of the
Borrowers to reimburse the LC Issuing Banks pursuant to Section 2.05 for amounts
paid by the LC Issuing Banks
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<PAGE>
in respect of drawings under Letters of Credit, including any portion of any
such obligation to which a Lender has become subrogated pursuant to Section
2.05(j)(i).
"LC Request" has the meaning set forth in Section 2.05(c).
"Leasehold Mortgages" means leasehold mortgages, substantially in the form
of Exhibit F to the Security Agreement, relating to the leases of any real
properties leased by any Vencor Company which are required to be so encumbered
to secure the Obligations pursuant to Section 5.7.
"Lender" means each bank or other financial institution listed on the
Commitment Schedule, each Assignee which becomes a "Lender" for purposes hereof
pursuant to Section 11.06, and their respective successors.
"Lender Parties" means the Lenders, each LC Issuing Bank and the Agents.
"Lending Office" means, as to each Lender, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Lending Office) or such other office as such
Lender may hereafter designate as its Lending Office by notice to the Borrowers
and the Administrative Agent.
"Letter of Credit" means any letter of credit issued hereunder by an LC
Issuing Bank.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset or
any other arrangement (other than a right of set-off, recoupment, counterclaim
or similar right) the economic effect of which is to give a creditor
preferential access to such asset to satisfy its claim. For purposes of this
Agreement, any Vencor Company shall be deemed to own subject to a Lien any asset
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement or other title retention agreement relating
to such asset or any Capital Lease.
"Lien Grantor" means a Vencor Company that grants a Lien on any of its
property pursuant to the Collateral Documents.
"Loan" or "Loans" means one or more of the Tranche A Loans or Tranche B
Loans or any combination thereof.
"Management Contracts" means the management contracts pursuant to which the
Vencor Companies manage Healthcare Facilities as set forth in Schedule 7 hereto.
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"Management Preferred Stock" means the $17,433,000 (or approximately 17,433
shares) of Vencor's Series A Preferred Stock issued to Ventas on the closing
date of the Existing Credit
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<PAGE>
Facilities and sold by it to officers of the Borrowers pursuant to a Management
Equity Ownership Program.
"Margin Stock" has the meaning set forth in Regulation U.
"Master Lease Agreements" means the master lease agreements described on
Schedule 2 hereto.
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"Master Lease Property" means the properties described and identified as
"Master Lease Properties" on Schedule 5 hereto and any additional properties
----------
leased by any Vencor Company under any Master Lease Agreement.
"Material Adverse Effect" means (i) any material adverse effect upon the
condition (financial or otherwise), results of operations, business or prospects
of Vencor and its Consolidated Subsidiaries, taken as a whole, (ii) a material
adverse effect on the validity, binding effect or enforceability of any
Financing Document or (iii) a material adverse effect on the validity,
perfection or priority of any Lien on any of the Collateral created or
purportedly created under the Collateral Documents; provided that a Material
--------
Adverse Effect shall not be deemed to have occurred solely on account of (a) the
events, occurrences and circumstances disclosed prior to the date hereof in
writing to the lenders under the Existing Credit Facilities, and (b) the
commencement of the Chapter 11 Cases.
"Material Contract" means any contract or other arrangement to which any
Vencor Company is a party (other than the Financing Documents) for which breach,
nonperformance, cancellation or failure to renew could reasonably be expected to
have a Material Adverse Effect.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $1,000,000.
"Medicaid" means the medical assistance program established by Title XIX of
the Social Security Act (42 U.S.C. (S)(S) 1396 et seq.) and any statutes
-- ---
succeeding thereto.
"Medicaid Regulations" means, collectively, (a) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting Medicaid, (b) all applicable provisions of all federal rules,
regulations, manuals and orders all of Governmental Authorities promulgated
pursuant to or in connection with the statutes described in clause (a) above and
all federal administrative, reimbursement and other guidelines of all
Governmental Authorities having the force of law promulgated pursuant to or in
connection with the statutes described in clause (a) above, (c) all state
statutes and plans for medical assistance enacted in connection with the
statutes and provisions described in clauses (a) and (b) above, and (d) all
applicable provisions of all rules, regulations, manuals and orders of all
Governmental Authorities promulgated pursuant to or in connection with the
statutes described in clause (c) above and all state administrative,
reimbursement and other guidelines of all Governmental Authorities having the
force of law promulgated pursuant
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<PAGE>
to or in connection with the statutes described in clause (c) above, in each
case as may be amended or supplemented.
"Medicare" means the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 U.S.C. (S)(S) 1995 et
--
seq.) and any statutes succeeding thereto.
- ---
"Medicare Regulations" means, collectively, all federal statutes (whether
set forth in Title XVIII of the Social Security Act or elsewhere) affecting
Medicare, together with all applicable provisions of all rules, regulations,
manuals and orders and administrative, reimbursement and other guidelines having
the force of law of all Governmental Authorities (including without limitation,
Health and Human Services ("HHS"), Health Care Finance Administration, the
Office of the Inspector General for HHS, or any Person succeeding to the
functions of any of the foregoing) promulgated pursuant to or in connection with
any of the foregoing having the force of law, as each may be amended or
supplemented.
"Moody's" means Moody's Investors Service, Inc.
"Morgan" means Morgan Guaranty Trust Company of New York and its
successors.
"Mortgages" means the Leasehold Mortgages and Fee Mortgages, collectively.
"Most Recent Audited Financial Statements" means the audited consolidated
financial statements of Vencor as of December 31, 1998.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Amount of Eligible Accounts" means, at any time, the total outstanding
balance, determined in accordance with GAAP, including without limitation
reserves required by GAAP, and stated on a basis consistent with historical
practices of Vencor and the Consolidated Subsidiaries as of the date hereof, of
accounts receivable of each of Vencor and the Consolidated Subsidiaries;
provided that the Net Amount of Eligible Accounts shall not include the amount
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of any such accounts receivable which would otherwise be included solely as a
result of Vencor employing a methodology for charging-off accounts receivable
which is less restrictive on Vencor than the methodology employed by Vencor on
the Closing Date.
"Net Cash Proceeds" means, with respect to any Asset Sale, Equity Issuance
or incurrence of Debt, an amount equal to the cash proceeds received by the
Vencor Companies in respect of such Asset Sale, Equity Issuance or incurrence of
Debt (including any cash proceeds received as income
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<PAGE>
or other cash proceeds of any noncash proceeds of such Asset Sale), less any
expenses reasonably incurred by the Vencor Companies in respect of such Asset
Sale, Equity Issuance or incurrence of Debt (including reasonable attorneys'
fees and expenses and including any payment with respect to taxes actually paid
or to become payable by the Vencor Companies (as reasonably estimated by the
Financial Officer) in respect of such Asset Sale, Equity Issuance or incurrence
of Debt) and approved by the Court, if such approval is necessary pursuant to
the Bankruptcy Code or any applicable order of the Court.
"Note" means one or more of the Tranche A Notes or Tranche B Notes or any
combination thereof.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Nursing Home Daily Census" has the meaning set forth in Section 5.01(a).
"Nursing Home Facility" means any Healthcare Facility owned or leased by a
Vencor Company constituting a licensed nursing home center as set forth and
identified as a "Nursing Home Facility" in Schedule 5 hereto.
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"Obligations" means all obligations of every nature of each of the
Borrowers under the Financing Documents, including, without limitation, any
liability of any such Borrower on any claim, whether or not the right to payment
in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed
or contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any bankruptcy, insolvency, reorganization or other similar
proceeding. Without limiting the generality of the foregoing, the Obligations
of the Borrowers under the Financing Documents include (a) the obligation to pay
principal, interest, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by any Borrower under any Financing
Document and (b) the obligation to reimburse any amount in respect of any of the
foregoing that any Agent or any Lender, in its sole discretion, may elect to pay
or advance on behalf of any Borrower.
"Organizational Documents" means (i) with respect to any corporation, its
certificate or articles of incorporation, by-laws and other constitutional
documents, including the certificate of designation for any series of its
preferred stock, (ii) with respect to any limited liability company, its
articles of organization and operating agreement, or other comparable documents
however named, and (iii) with respect to any partnership, its partnership
agreement.
"Outstanding Credit Amount" means, with respect to any Lender at any time,
the sum of (i) the Outstanding Tranche A Amount of such Lender and (ii) the
Outstanding Tranche B Amount of such Lender.
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<PAGE>
"Outstanding Tranche A Amount" means, with respect to any Lender at any
time, the sum of (i) the aggregate outstanding principal amount of its Tranche A
Loans and (ii) its LC Exposure, all determined at such time after giving effect
to any prior assignments by or to such Lender pursuant to Section 11.06(c).
"Outstanding Tranche B Amount" means, with respect to any Lender at any
time, the aggregate outstanding principal amount of its Tranche B Loans,
determined at such time after giving effect to any prior assignments by or to
such Lender pursuant to Section 11.06(c).
"Parent" means, with respect to any Lender, any Person controlling such
Lender.
"Participant" has the meaning set forth in Section 11.06(b).
"Patient Trust Accounts" means the accounts of the Borrowers holding solely
funds that residents of Nursing Home Facilities receive as income (whether from
government or private sources) which are required to be held in such accounts
pursuant to the Omnibus Budget and Reconciliation Act of 1987, 28 U.S.C.
(S)483.10(c) and the regulations of the Health Care Financing Administration.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Percentage" means, with respect to any Lender at any time, the percentage
which the amount of its Commitment at such time represents of the aggregate
amount of all the Commitments at such time. At any time after the Commitments
shall have terminated, the term "Percentage" shall refer to a Lender's
Percentage immediately before such termination, adjusted to reflect any
subsequent assignments pursuant to Section 11.06(c).
"Permitted Encumbrances" means, with respect to any property (including any
leasehold interest) owned by any Vencor Company:
(a) Liens for taxes, assessments or other governmental charges not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of such Vencor Company in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmens', repairmens'
or other like Liens arising by operation of law in the ordinary course of
business so long as (A) the underlying obligations are not overdue for a
period of more than 60 days or (B) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect
thereto are maintained on the books of such Vencor Company in accordance
with GAAP; and
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<PAGE>
(c) other Liens or title defects (including matters which an accurate
survey might disclose and exceptions to title set forth in title insurance
with respect to the Fee Mortgages) which (x) do not secure Debt and (y) do
not materially detract from the value of such property or materially impair
the use thereof by such Vencor Company in the operation of its business.
"Permitted Intercompany Debt" means Debt owed by any Borrower to any other
Borrower; provided that such Debt is either evidenced by a promissory note or
maintained in the form of open account balances in which, in either case, the
Collateral Agent has a first priority, perfected security interest under the
Interim Borrowing Order, the Borrowing Order or the Security Agreement at all
times until such security interest is released pursuant to Section 18 thereof.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Petition Date" has the meaning set forth in the recitals to this
Agreement.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prepayment Account" has the meaning set forth in Section 1 of the Security
Agreement.
"Prepayment Notice" means a properly completed Prepayment Notice,
substantially in the form of Exhibit G hereto.
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"Prepetition Indebtedness" means Debt of any Credit Party outstanding on
the Petition Date, including Debt under the Existing Credit Facilities and the
Existing Notes.
"Prepetition Reorganization Agreements" means the material agreements
pursuant to which the spin-off of the Vencor Companies from the Ventas Companies
was consummated and their respective intercompany operations are currently
conducted as set forth in Schedule 2 hereto, including without limitation the
----------
Master Lease Agreements.
"Prime Rate" means the rate of interest established by the Administrative
Agent from time to time as its Prime Rate.
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<PAGE>
"Properties Held For Sale" means the real and personal property interests
identified as "Properties Held For Sale" on Schedule 3 hereto; provided that any
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such property interest shall cease to be a Property Held For Sale at such time
as (i) any agreement to sell such property entered into by the Borrowers is
terminated and the sale of such property by the relevant Borrowers is abandoned
or (ii) the contemplated sale of such property interest is otherwise abandoned
by the relevant Borrowers.
"Register" has the meaning set forth in Section 11.06(e).
"Regulated Activity" means any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Substance.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Related Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed by the same investment advisor as such Lender or by an affiliate of
such investment advisor.
"Release" means any discharge, emission or release, including a Release as
defined in CERCLA at 42 U.S.C. Section 9601(22). The term "Release", when used
as a verb, has a corresponding meaning.
"Reporting Event" has the meaning set forth in Section 5.01(n).
"Required Lenders" means Lenders having outstanding Credit Exposures in an
aggregate amount (excluding accrued interest) equal to more than 66-2/3% of the
aggregate amount of the Credit Exposures of all Lenders at such time.
"Restricted Payment" means (i) any dividend or other distribution on any
Equity Interests of Vencor (except dividends payable solely in Equity Interests
of the same class), (ii) any payment on account of the purchase, redemption,
retirement or acquisition of any Equity Interests of Vencor, and (iii) any
payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Prepetition
Indebtedness or under or in respect of any of the Prepetition Reorganization
Agreements.
"S&P" means Standard and Poor's Rating Services, a division of The McGraw-
Hill Companies, Inc.
"SEC" means the United States Securities and Exchange Commission.
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<PAGE>
"Secured Obligations" has the meaning set forth in Section 1 of the
Security Agreement.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Security Agreement" means the Security Agreement dated as of the Closing
Date among the Borrowers, the Subsidiary Guarantors party thereto and the
Collateral Agent, substantially in the form of Exhibit B hereto, as amended from
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time to time.
"Security Agreement Supplement" means a Security Agreement Supplement,
substantially in the form of Exhibit A to the Security Agreement, whereby the
Borrowers or a Subsidiary Guarantor grants (or confirms its grant of) a security
interest in additional Collateral to the Collateral Agent and, if the grantor of
such security interest is a Subsidiary Guarantor that is not already a party to
the Security Agreement, such Subsidiary Guarantor becomes a party thereto.
"Security Interests" has the meaning set forth in Section 1 of the Security
Agreement.
"Shell Subsidiaries" means, collectively, Gorgas International Medical
Center, L.L.C., a Delaware limited liability company, and InteHgro Holdings,
Ltd., a Cayman Islands corporation.
"Stated Maturity Date" means March 13, 2000.
"Subsidiary" means, as to any Person, (i) any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person or (ii)
any limited liability company or partnership that, in accordance with GAAP, is a
Consolidated Subsidiary of such Person. Unless otherwise specified,
"Subsidiary" means a Subsidiary of Vencor.
"Subsidiary Guarantor" means each Subsidiary of Vencor (other than any
Insurance Subsidiary, Shell Subsidiary and any Excluded Partnership) which is
not a Borrower, all of which Subsidiaries shall (i) guarantee the obligations of
the Borrowers under the Financing Documents pursuant to a Subsidiary Guaranty
Agreement and (ii) grant a security interest in their assets to the Collateral
Agent under the Security Agreement to secure their Subsidiary Guaranty
Agreement.
"Subsidiary Guaranty Agreement" means the Subsidiary Guaranty Agreement,
substantially in the form of Exhibit C hereto, setting forth the Guarantees of
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the Obligations by the Subsidiary Guarantors.
"Supermajority Lenders" means Lenders having outstanding Credit Exposures
in an aggregate amount (excluding accrued interest) equal to more than 75% of
the aggregate amount of the Credit Exposures of all Lenders at such time.
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<PAGE>
"Temporary Cash Investment" means any Investment in (i) securities issued,
or directly and fully guaranteed or insured, by the United States or any agency
or instrumentality thereof; provided that the full faith and credit of the
United States is pledged in support thereof, (ii) time deposit accounts,
bankers' acceptances, certificates of deposit and money market deposits maturing
within thirty days of the date of acquisition thereof issued by any office
located in the United States of a bank or trust company which is organized or
licensed under the laws of the United States or any State thereof and which bank
or trust company has capital, surplus and undivided profits aggregating more
than $1,000,000,000 and has outstanding debt which is rated "P-1" (or higher) by
Moody's or "A-1" (or higher) by S&P or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with an office located in
the United States of a bank or trust company meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more than 30
days after the date of acquisition, issued by a corporation (other than any
Ventas Company, any Vencor Company or any Affiliate) organized under the laws of
the United States or any State thereof with a rating, at the date of
acquisition, of "P-1" (or higher) by Moody's or "A-1" (or higher) by S&P, (v)
securities with maturities of thirty days or less from the date of acquisition
issued or fully and unconditionally guaranteed by any State, commonwealth or
territory of the United States, or by a political subdivision or taxing
authority thereof, and rated at least "P-1" (or higher) by Moody's or "A-1" (or
higher) by S&P and (vi) money market funds which invest substantially all of
their assets in securities described in the preceding clauses (i) through (v).
"Third Party Leases" means the leases by a Vencor Company listed and
identified as "Third Party Leases" in Schedule 5 hereto.
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"Total Utilization of Commitments" means, as at any date of determination,
the aggregate Outstanding Credit Amounts of all Lenders.
"Tranche A Commitment Fee Rate" means 0.75% per annum.
"Tranche A Commitments" means (i) with respect to any Lender listed on the
Commitment Schedule, the amount (if any) set forth therein opposite the name of
such Lender under the heading "Tranche A Commitment" and (ii) with respect to
any Assignee of a Tranche A Commitment, the amount of the transferor Lender's
Tranche A Commitment assigned to such Assignee pursuant to Section 11.06(c), in
each case as such amount may be reduced from time to time pursuant to Section
2.08 or 2.10 or changed as a result of an assignment pursuant to Section
11.06(c).
"Tranche A Default Rate" has the meaning set forth in Section 2.04.
"Tranche A Exposure" means, as to any Lender, (i) at any time before the
termination of its Tranche A Commitment in its entirety, the amount of its
Tranche A Commitment at such time; or (ii) at any time thereafter, if its
Tranche A Commitment has terminated in its entirety, its
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<PAGE>
Outstanding Tranche A Amount, all determined at such time after giving effect to
any prior assignments by or to such Lender pursuant to Section 11.06(c).
"Tranche A Interest Rate" has the meaning set forth in Section 2.04.
"Tranche A Loan" means a loan made by a Lender pursuant to Section 2.01(a).
"Tranche A Note" means a promissory note of the Borrowers payable to the
order of a Lender evidencing the Borrowers' obligation to repay the Tranche A
Loans made by such Lender. Each Tranche A Note shall be substantially in the
form of Exhibit A-1 hereto. "Tranche A Notes" means any or all of such
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promissory notes, as the context may require.
"Tranche B Commencement Date" has the meaning set forth in Section 2.01(b).
"Tranche B Commitment Fee Rate" means (i) until the Tranche B Commencement
Date, 0.25% per annum and (ii) on and after the Tranche B Commencement Date,
0.75% per annum.
"Tranche B Commitments" means (i) with respect to any Lender listed on the
Commitment Schedule, the amount (if any) set forth therein opposite the name of
such Lender under the heading "Tranche B Commitment" and (ii) with respect to
any Assignee of a Tranche B Commitment, the amount of the transferor Lender's
Tranche B Commitment assigned to such Assignee pursuant to Section 11.06(c), in
each case as such amount may be reduced from time to time pursuant to Section
2.08 or 2.10 or changed as a result of an assignment pursuant to Section
11.06(c).
"Tranche B Default Rate" has the meaning set forth in Section 2.04.
"Tranche B Exposure" means, as to any Lender, (i) at any time before the
termination of its Tranche B Commitment in its entirety, the amount of its
Tranche B Commitment at such time; or (ii) at any time thereafter, if its
Tranche B Commitment has terminated in its entirety, its Outstanding Tranche B
Amount, all determined at such time after giving effect to any prior assignments
by or to such Lender pursuant to Section 11.06(c).
"Tranche B Interest Rate" has the meaning set forth in Section 2.04.
"Tranche B Loan" means a loan made by a Lender pursuant to Section 2.01(b).
"Tranche B Note" means a promissory note of the Borrowers payable to the
order of a Lender evidencing the Borrowers' obligation to repay the Tranche B
Loans made by such Lender. Each Tranche B Note shall be substantially in the
form of Exhibit A-2 hereto. "Tranche B Notes" means any or all of such
-----------
promissory notes, as the context may require.
"UCC" has the meaning set forth in Section 1 of the Security Agreement.
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"UCP" means the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, or any
successor publication governing the rights and obligations of the parties in
connection with Letters of Credit.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title I of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"Unscheduled Mandatory Prepayment" has the meaning set forth in Section
2.08(g).
"Vencor" has the meaning set forth in the introduction to this Agreement.
"Vencor Company" means Vencor or any Subsidiary of Vencor.
"Vencor Opco" has the meaning set forth in the introduction to this
Agreement.
"Ventas" means Ventas, Inc., a Delaware corporation.
"Ventas Company" means Ventas or any Subsidiary of Ventas.
"Ventas Stipulation" means that certain Stipulation and Order pursuant to
Section 365 of the Bankruptcy Code regarding Vencor's performance of obligations
under, and extending the time within which Vencor may accept or reject, certain
agreements among Vencor, Vencor Opco and Ventas and reserving certain rights of
the parties thereto.
SECTION 1.02 Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
provided that, if the Borrowers notify the Administrative Agent that the
Borrowers wish to amend any provision hereof to eliminate the effect of any
change in GAAP on the operation of such provision (or if the Administrative
Agent notifies the Borrowers that the Required Lenders wish to amend any
provision hereof for such purpose), then such provision shall be applied on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such provision is amended in
a manner satisfactory to the Borrowers and the Required Lenders.
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SECTION 1.03 Other Definitional Provisions. References in this
-----------------------------
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" are to Articles,
Sections, Schedules or Exhibits of or to this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1.01 may, unless the
context otherwise requires, be used in the singular or plural depending on the
reference. "Include", "includes" and "including" are deemed to be followed by
"without limitation" whether or not they are in fact followed by such words or
words of like import. "Writing", "written" and comparable terms refer to
printing, typing, facsimile and other means of reproducing words on paper.
References to any agreement or contract are to such agreement or contract as
amended, modified or supplemented from time to time (whether before, on or after
the Closing Date) in accordance with the terms hereof and thereof. "Hereto",
"herein" and "hereof" refer to this Agreement as amended from time to time.
ARTICLE 2. The Credit Facilities
SECTION 2.01 Commitments to Lend
-------------------
(a) Tranche A Loans. Subject to the terms and conditions set forth in
this Agreement, each Lender severally agrees to make Tranche A Loans to the
Borrowers from time to time during the period from and including the Closing
Date to but excluding the Commitment Termination Date; provided that,
immediately after each such Tranche A Loan is made, such Lender's Outstanding
Tranche A Amount shall not exceed its Tranche A Commitment. Each Borrowing of
Tranche A Loans shall be borrowed from the several Lenders ratably in proportion
to their respective Tranche A Commitments. Within the limits specified herein,
the Borrowers may borrow Tranche A Loans, repay such borrowing and reborrow
Tranche A Loans pursuant to the terms of this Agreement.
(b) Tranche B Loans. Subject to the terms and conditions set forth in
this Agreement, each Lender severally agrees to make Tranche B Loans to the
Borrowers from time to time during the period from and including the Tranche B
Commencement Date to but excluding the Commitment Termination Date; provided
that, immediately after each such Tranche B Loan is made, such Lender's
Outstanding Tranche B Amount shall not exceed its Tranche B Commitment. Each
Borrowing of Tranche B Loans shall be borrowed from the several Lenders ratably
in proportion to their respective Tranche B Commitments. Within the limits
specified herein, the Borrowers may borrow Tranche B Loans, repay such borrowing
and reborrow Tranche B Loans pursuant to the terms of this Agreement. As used in
this Section 2.01(b), "Tranche B Commencement Date" means the later of (i) the
date, if any, on which Supermajority Lenders in their sole discretion shall have
consented in writing to a request by the Borrowers (delivered to the
Administrative Agent and the Lenders) that Lenders permit Tranche B Loans to be
borrowed hereunder, and (ii) the date specified as the proposed initial date of
borrowing of Tranche B Loans in a Notice of Borrowing delivered to the
Administrative Agent pursuant to Section 2.02. Notwithstanding anything to the
contrary contained herein, Supermajority Lenders may in their sole discretion,
together with any consent described in the preceding sentence, prescribe
additional limitations on the aggregate amount of Tranche B Loans permitted to
be borrowed from time to time, the increments for borrowing
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Tranche B Loans and the times such Borrowings may be made hereunder and other
terms and conditions relating to the availability of the Tranche B Loans.
(c) Borrowing Limitations. Anything contained in this Agreement to
the contrary notwithstanding, (A) in no event shall the Total Utilization of
Commitments at any time outstanding exceed the lesser of (x) the Commitments and
(y) the amount permitted to be outstanding hereunder pursuant to the Interim
Borrowing Order or Borrowing Order, as applicable, in each case as the foregoing
limits may be in effect from time to time; (B) in no event shall the Outstanding
Tranche A Amount of all Lenders exceed the lesser of (x) the Tranche A
Commitments and (y) the Borrowing Base, in each case as the foregoing limits may
be in effect from time to time; (C) in no event shall the Outstanding Tranche B
Amounts of all Lenders exceed the Tranche B Commitments in effect from time to
time; (D) the Borrowers shall comply with any additional limitations on Tranche
B Loan Borrowings prescribed by Supermajority Lenders pursuant to the last
sentence of Section 2.01(b); and (E) the Borrowers agree to immediately prepay
the Loans in the amounts and at the times as may be necessary to comply with the
foregoing clauses (A), (B), (C) and (D).
(d) Amount of Each Borrowing. Each Borrowing under this Section 2.01
shall be in an aggregate principal amount of $1,000,000 or any larger multiple
of $500,000; provided that any Borrowing of Tranche A Loans or Tranche B Loans
may be in an aggregate amount equal to the aggregate unused amount of the
Tranche A Commitments or Tranche B Commitments, respectively.
SECTION 2.02 Notice of Borrowing. The Borrowers shall give the
-------------------
Administrative Agent notice, substantially in the form of Exhibit F-1 hereto (a
-----------
"Notice of Borrowing"), not later than 1:00 P.M. (Eastern Time) on the date
which is one Business Day immediately preceding the date of the proposed
borrowing (provided that no such Notice of Borrowing for Tranche B Loans shall
be given to the Administrative Agent prior to obtaining the consent of
Supermajority Lenders described in clause (i) of the definition of Tranche B
Commencement Date) specifying:
(i) the proposed date of such borrowing, which shall be a Business
Day; and
(ii) the amount of Tranche A Loans and/or the amount of Tranche B
Loans requested.
SECTION 2.03 Notice to Lenders; Funding of Loans.
-----------------------------------
(a) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Lender of the contents thereof and of such Lender's
ratable share of such Borrowing. Such Notice of Borrowing shall not thereafter
be revocable by the Borrowers.
(b) Not later than 12:00 Noon (Eastern Time) on the date of each
Borrowing, each Lender shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York, New York, to the
Administrative Agent at its address for payments specified in or pursuant to
Section 11.01. Unless the Administrative Agent determines that any applicable
condition specified in Article 3 has not been satisfied, the Administrative
Agent
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shall promptly make such funds received from Lenders available to the Borrowers
on such date at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received, prior to the
date of any Borrowing, notice from a Lender that such Lender will not make
available to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
to the Administrative Agent on the date of such Borrowing in accordance with
Section 2.03(b) and, in reliance upon such assumption, Administrative Agent may
(but shall not be obligated to) make available to the Borrowers on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such share available to the Administrative Agent, such Lender and the
Borrowers severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the day such amount is made available to the Borrowers until the day such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrowers, a rate per annum equal to the Interest Rate, and (ii) in the case of
such Lender, a rate per annum equal to (x) for each day from the day such amount
is made available to the Borrowers to the third succeeding Business Day,
inclusive, the Federal Funds Rate for such day as determined by the
Administrative Agent and (y) for each day thereafter until the day such amount
is repaid to the Administrative Agent, the Base Rate for such day. If such
Lender shall repay such corresponding amount to the Administrative Agent, the
amount so repaid shall constitute such Lender's Loan included in such Borrowing
for purposes of this Agreement.
(d) Each Lender's Tranche A Loans shall be evidenced by a single
Tranche A Note, and each Lender's Tranche B Loans (if any) shall be evidenced by
a single Tranche B Note, in each case payable to the order of such Lender for
the account of its Lending Office.
(e) Upon receipt of each Lender's Tranche A Note and Tranche B Note
pursuant to Section 3.01(b), the Administrative Agent shall forward such Notes
to such Lender. Each Lender shall record the date and amount of each Loan made
by it and the date and amount of each payment of principal made by the Borrowers
with respect thereto, and may, in connection with any transfer or enforcement of
either of its Notes, endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to the then
outstanding Loans evidenced by such Note; provided that neither the failure of
any Lender to make any such recordation or endorsement nor any error therein
shall affect the obligations of the Borrowers under any Financing Document. Each
Lender is hereby irrevocably authorized by the Borrowers so to endorse each of
its Notes and to attach to and make a part of such Note a continuation of any
such schedule as and when required.
SECTION 2.04 Interest Rate; Default Rate. Each Loan shall bear
---------------------------
interest on the outstanding principal amount thereof, for each day from and
including the day such Loan is made to but excluding the day it becomes due, (i)
in the case of Tranche A Loans, at a rate per annum equal to the sum of 2.50%
plus the Base Rate for such day (the "Tranche A Interest Rate"), and (ii) in the
case of Tranche B Loans, at a rate per annum equal to the sum of 4.50% plus the
Base Rate for such day (the "Tranche B Interest Rate"). Such interest shall be
payable monthly in arrears on
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the last Business Day of each month. Upon the occurrence and during the
continuation of any Event of Default, the outstanding principal amount of all
Loans and, to the extent permitted by applicable law, any interest payments
thereon not paid when due and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest payable upon demand at a rate that is
(a) in the case of Tranche A Loans and such amounts related thereto, 2.00% per
annum in excess of the Tranche A Interest Rate (the "Tranche A Default Rate"),
and (b) in the case of Tranche B Loans and such amounts related thereto, 2.00%
per annum in excess of the Tranche B Interest Rate (the "Tranche B Default
Rate"). Payment or acceptance of the increased rates of interest provided for
herein is not a permitted alternative to timely payment and shall not constitute
a waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of any Agent or any Lender.
SECTION 2.05 Letters of Credit.
-----------------
(a) Issuance of Letters of Credit. Any LC Issuing Bank may, but shall
not be obligated to, issue a letter of credit (other than a trade letter of
credit) at the request of the Borrowers pursuant to this subsection, from time
to time during the period from and including the Closing Date to but excluding
the earlier of (x) the Commitment Termination Date and (y) January 13, 2000;
provided that, immediately after each such letter of credit is issued and
participations therein are sold to the Lenders as provided in this subsection:
(i) the Aggregate LC Exposure shall not exceed $15,000,000; and
(ii) in the case of each Lender, its Outstanding Tranche A Amount
shall not exceed its Tranche A Commitment.
Upon the issuance by any LC Issuing Bank of a Letter of Credit pursuant to this
subsection, such LC Issuing Bank shall be deemed, without further action by any
party hereto, to have sold to each other Lender, and each such Lender shall be
deemed, without further action by any party hereto, to have purchased from such
LC Issuing Bank, a participation in such Letter of Credit, on the terms
specified in this Section 2.05, equal to such Lender's Percentage thereof.
(b) Expiry Dates. No Letter of Credit shall have an expiry date
later than the fifth Business Day before the Stated Maturity Date.
(c) Notice of Proposed Issuance. With respect to each Letter of
Credit, the Borrowers shall give the relevant LC Issuing Bank and the
Administrative Agent at least five Business Days' prior notice, substantially in
the form of Exhibit F-2 hereto (a "LC Request") (i) specifying the date such
-----------
Letter of Credit is to be issued, (ii) describing the proposed terms
of such Letter of Credit and the nature of the transactions proposed to be
supported thereby and (iii) specifying the Account Party for such Letter of
Credit, which may be any Borrower. Upon receipt of an LC Request, the
Administrative Agent shall promptly notify each Lender of the contents thereof.
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(d) Conditions to Issuance. No LC Issuing Bank shall issue any
Letter of Credit unless:
(i) such Letter of Credit shall be satisfactory in form and
substance to such LC Issuing Bank in its sole discretion;
(ii) the Borrowers shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as such LC
Issuing Bank shall have reasonably requested;
(iii) such LC Issuing Bank shall have confirmed with the
Administrative Agent on the date of such issuance that the limitations
specified in clauses (i) and (ii) of subsection (a) of this Section 2.05
will not be exceeded immediately after such Letter of Credit is issued; and
(iv) such LC Issuing Bank shall not have been notified in
writing by any Vencor Company, any Agent or the Required Lenders expressly
to the effect that any condition specified in Section 3.02 is not satisfied
at the time such Letter of Credit is to be issued.
(e) Notice of Proposed Extensions of Expiry Dates. The relevant LC
Issuing Bank or the Borrowers shall give the Administrative Agent at least five
Business Days' notice before such LC Issuing Bank extends the expiry date of any
Letter of Credit issued by it. Such notice shall (i) identify such Letter of
Credit, (ii) specify the date on which such extension is to be made (or the last
day on which such LC Issuing Bank can give notice to prevent such extension from
occurring) and (iii) specify the date to which such expiry date is to be so
extended. Upon receipt of such notice, the Administrative Agent shall promptly
notify each Lender of the contents thereof. No LC Issuing Bank shall extend (or
allow the extension of) the expiry date of any Letter of Credit if (x) the
extended expiry date would be after the fifth Business Day before the Stated
Maturity Date or (y) such LC Issuing Bank shall have been notified by any Vencor
Company, any Agent or the Required Lenders expressly to the effect that any
condition specified in Section 3.02 is not satisfied at the time such Letter of
Credit is to be extended.
(f) Notice of Actual Issuances and Extensions. Promptly upon issuing
any Letter of Credit or extending any Letter of Credit, the relevant LC Issuing
Bank will notify the Administrative Agent of the date of such Letter of Credit,
the amount thereof, the beneficiary or beneficiaries thereof and the expiry date
or extended expiry date thereof. Upon receipt of such notice the Administrative
Agent shall promptly notify each Lender of the contents thereof and the amount
of such Lender's participation in the relevant Letter of Credit. Promptly upon
issuing any Letter of Credit, the relevant LC Issuing Bank will send a copy of
such Letter of Credit to the Administrative Agent.
(g) Fees. The Borrowers shall pay to the Administrative Agent, for
the account of the Lenders ratably in accordance with their respective
Percentages, a letter of credit fee, calculated for each day at the LC Fee Rate
for such day, on the aggregate amount available for
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drawings (whether or not conditions for drawing thereunder have been satisfied)
under all Letters of Credit outstanding at the close of business on such day.
Such letter of credit fee shall be payable with respect to each Letter of Credit
in arrears on the last Business Day of each month for so long as such Letter of
Credit is outstanding and on the final expiry date thereof. The Borrowers shall
pay to each LC Issuing Bank additional fronting fees, monthly in arrears, and
reasonable expenses in the amounts and at the times agreed between the Borrowers
and such LC Issuing Bank.
(h) Drawings. Upon receiving a demand for payment under any Letter
of Credit from the beneficiary thereof, the relevant LC Issuing Bank shall
determine in accordance with the terms of such Letter of Credit whether such
demand for payment should be honored. If such LC Issuing Bank determines that
any such demand for payment should be honored, such LC Issuing Bank shall (i)
promptly notify the Borrowers and the Administrative Agent as to the amount to
be paid by such LC Issuing Bank as a result of such demand and the date on which
such amount is to be paid (an "LC Payment Date") and (ii) on such LC Payment
Date make available to such beneficiary in accordance with the terms of such
Letter of Credit the amount of the drawing under such Letter of Credit.
(i) Reimbursement and Other Payments by the Borrowers. If any amount
is drawn under any Letter of Credit:
(i) the Borrowers irrevocably and unconditionally agree to
reimburse the relevant LC Issuing Bank for all amounts paid by such LC
Issuing Bank upon such drawing, together with any and all reasonable
charges and expenses which such LC Issuing Bank may pay or incur relative
to such drawing and interest on the amount drawn at the Federal Funds Rate
for each day from and including the date such amount is drawn to but
excluding the date such reimbursement payment is due and payable. Such
reimbursement payment shall be due and payable at or before 3:00 P.M.
(Eastern Time) (x) on the relevant LC Payment Date if such LC Issuing Bank
notifies the Borrowers of such drawing before 11:00 A.M. (Eastern Time) on
such date or (y) on the date such notice is given, if such notice is given
after the LC Payment Date; provided that any notice given to the Borrowers
after 11:00 A.M. (Eastern Time) on any day shall be deemed for purposes of
the foregoing clause (y) to have been given on the next succeeding Business
Day; and
(ii) in addition, the Borrowers agree to pay to the relevant LC
Issuing Bank interest on any and all amounts not paid by the Borrowers when
due hereunder with respect to a Letter of Credit, for each day from and
including the date when such amount becomes due to but excluding the date
such amount is paid in full, payable on demand, at a rate per annum equal
to the Default Rate for such day.
Each payment to be made by the Borrowers pursuant to this subsection
(i) shall be made to the relevant LC Issuing Bank in Federal or other funds
immediately available to it at its address specified in or pursuant to Section
11.01.
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(j) Payments by Lenders with Respect to Letters of Credit. If the
Borrowers fail to reimburse the relevant LC Issuing Bank as and when required by
subsection (i) above for all or any portion of any amount drawn under a Letter
of Credit issued by it:
(i) such LC Issuing Bank may notify the Administrative Agent of
such unreimbursed amount and request that the Lenders reimburse such LC
Issuing Bank for their respective Percentages thereof. Upon receiving any
such notice from an LC Issuing Bank, the Administrative Agent shall
promptly notify each Lender of the unreimbursed amount and such Lender's
Percentage thereof. Upon receiving such notice from the Administrative
Agent, each Lender shall make available to such LC Issuing Bank, at its
address specified in or pursuant to Section 11.01, an amount equal to such
Lender's Percentage of such unreimbursed amount as set forth in such
notice, in Federal or other funds immediately available to such LC Issuing
Bank, by 3:00 P.M. (Eastern Time) (A) on the day such Lender receives such
notice if it is received at or before 12:00 Noon (Eastern Time) on such day
or (B) on the first Business Day following such Lender's receipt of such
notice if it is received after 12:00 Noon (Eastern Time) on the date of
receipt (provided that failure of a Lender to make such amount available to
such LC Issuing Bank shall not be deemed, for purposes of Section 2.16, a
failure to fund its obligations under this Section 2.05(j)(i) unless such
failure continues after 3:00 P.M. (Eastern Time) on the date which is one
Business Day after the date such amount is due under this Section
2.05(j)(i)). Upon payment in full thereof, such Lender shall be subrogated
to the rights of such LC Issuing Bank against the Borrowers to the extent
of such Lender's Percentage of the related LC Reimbursement Obligation
(including interest accrued thereon). Nothing in this subsection (j) shall
affect any rights any Lender may have against any LC Issuing Bank for any
action or omission for which such LC Issuing Bank is not indemnified under
subsection (n) of this Section 2.05; and
(ii) if any Lender fails to pay any amount required to be paid by
it pursuant to clause (i) of this subsection (j) on the date on which such
payment is due, interest shall accrue on such Lender's obligation to make
such payment, for each day from and including the date such payment became
due to but excluding the date such Lender makes such payment, at a rate per
annum equal to (x) for each day from the day such payment is due to the
third succeeding Business Day, inclusive, the Federal Funds Rate for such
day as determined by the relevant LC Issuing Bank and (y) for each day
thereafter the Base Rate for such day. Any payment made by any Lender
after 3:00 P.M. (Eastern Time) on any Business Day shall be deemed for
purposes of the preceding sentence to have been made on the next succeeding
Business Day.
If the Borrowers shall reimburse any LC Issuing Bank for any drawing
with respect to which any Lender shall have made funds available to such LC
Issuing Bank in accordance with clause (i) of this subsection (j), such LC
Issuing Bank shall promptly upon receipt of such reimbursement distribute to
such Lender its pro rata share thereof, including interest, to the extent
received by such LC Issuing Bank.
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(k) Increased Cost and Reduced Return. If, on or after the date
hereof, the adoption of any applicable law, rule or regulation, or any change in
any applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender or LC Issuing Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall impose, modify or deem applicable any tax, reserve, special
deposit or similar requirement against or with respect to or measured by
reference to letters of credit or participations therein, and the result of any
of the foregoing is to increase the cost to such Lender or LC Issuing Bank of
issuing or maintaining any Letter of Credit or any participation therein, or to
reduce any amount receivable by any Lender or LC Issuing Bank under this Section
2.05 in respect of any Letter of Credit or any participation therein (which
increase in cost, or reduction in amount receivable, shall be the result of such
Lender's or LC Issuing Bank's reasonable allocation of the aggregate of such
increases or reductions resulting from such event), then, within 15 days after
demand by such Lender or LC Issuing Bank (with a copy to the Administrative
Agent), the Borrowers agree to pay to such Lender or LC Issuing Bank, from time
to time as specified by such Lender or LC Issuing Bank, such additional amounts
as shall be sufficient to compensate such Lender or LC Issuing Bank for such
increased cost or reduction. A certificate of such Lender or LC Issuing Bank
submitted to the Borrowers pursuant to this subsection (k) and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error.
(l) Exculpatory Provisions. The Borrowers' obligations under this
Section 2.05 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which any
Vencor Company or any Account Party may have or have had against any LC Issuing
Bank, any Lender, the beneficiary of any Letter of Credit or any other Person.
The Borrowers assume all risks of the acts or omissions of any beneficiary of
any Letter of Credit with respect to the use of such Letter of Credit by such
beneficiary. None of the LC Issuing Banks, the Lenders and their respective
officers, directors, employees and agents shall be responsible for, and the
obligations of each Lender to make payments to each LC Issuing Bank and of the
Borrowers to reimburse each LC Issuing Bank for drawings pursuant to this
Section 2.05 (except to the extent such obligations result from the gross
negligence or willful misconduct of the relevant LC Issuing Bank) shall not be
excused or affected by, among other things, (i) the use which may be made of any
Letter of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of documents
presented under any Letter of Credit or of any endorsements thereon, even if
such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (iii) payment by any LC Issuing Bank against
presentation of documents to it which do not comply with the terms of the
relevant Letter of Credit or (iv) any dispute between or among any of the Vencor
Companies or their Affiliates, the beneficiary of any Letter of Credit or any
other Person or any claims or defenses whatsoever of any of the Vencor Companies
or their Affiliates or any other Person against the beneficiary of any Letter of
Credit. No LC Issuing Bank shall be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. Any action taken or
omitted by any LC Issuing Bank or any Lender under or in connection with any
Letter of Credit and the related drafts and
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documents, if done without willful misconduct or gross negligence, shall be
binding upon the Borrowers and shall not place any LC Issuing Bank or any Lender
under any liability to any Vencor Company.
(m) Reliance, Etc. Subject to Section 2.05(d), each LC Issuing Bank
shall be entitled (but not obligated) to rely, and shall be fully protected in
relying, on the representation and warranty by the Borrowers set forth in the
last sentence of Section 3.02 to establish whether the conditions specified in
Section 3.02 are met in connection with any issuance or extension of a Letter of
Credit. The rights and obligations of each LC Issuing Bank under each Letter of
Credit issued by it shall be governed by the provisions thereof and the
provisions of the UCP and/or UCC referred to therein or otherwise applicable
thereto.
(n) Indemnification by the Borrowers. The Borrowers agree to
indemnify and hold harmless each Lender, each LC Issuing Bank and the
Administrative Agent and their respective directors, officers, agents and
employees (collectively, the "LC Indemnitees") from and against any and all
claims, damages, losses, liabilities, costs or expenses (including, without
limitation, the reasonable fees and disbursements of counsel) which such LC
Indemnitee may reasonably incur (or which may be claimed against any such LC
Indemnitee by any Person) by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter of Credit
or any actual or proposed use of any Letter of Credit, including any claims,
damages, losses, liabilities, costs or expenses which any LC Issuing Bank may
incur by reason of or in connection with the failure of any Lender to fulfill or
comply with its obligations to such LC Issuing Bank hereunder in connection with
any Letter of Credit (but nothing herein contained shall affect any rights the
Borrowers may have against any such defaulting Lender); provided that the
Borrowers shall not be required to indemnify any LC Indemnitee for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by (i) the willful misconduct or gross negligence of any LC
Issuing Bank in determining whether a request presented under any Letter of
Credit issued by it complied with the terms of such Letter of Credit or (ii) any
LC Issuing Bank's failure to pay under any Letter of Credit issued by it after
the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit. Nothing in this subsection (n) is intended
to limit the obligations of the Borrowers under any other provision of this
Section 2.05.
(o) Indemnification by Lenders. Each Lender shall, ratably in
accordance with its Percentage, indemnify each LC Issuing Bank, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Vencor Companies) against any cost, expense (including
reasonable fees and disbursements of counsel), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct or such LC Issuing Bank's failure to pay under any Letter of
Credit issued by it after the presentation to it of a request strictly complying
with the terms and conditions of such Letter of Credit) that any such indemnitee
may suffer or incur in connection with this Section 2.05 or any action taken or
omitted by such indemnitee under this Section 2.05 .
(p) Liability for Damages. Nothing in this Section 2.05 shall
preclude the Borrowers or any Lender from asserting against any LC Issuing Bank
any claim for direct (but not
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consequential) damages suffered by the Borrowers or such Lender to the extent,
but only to the extent, caused by (i) the willful misconduct or gross negligence
of such LC Issuing Bank in determining whether a request presented under any
Letter of Credit issued by it complied with the terms thereof or (ii) such LC
Issuing Bank's failure to pay under any such Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
thereof.
(q) Dual Capacities. In its capacity as a Lender, each LC Issuing
Bank shall have the same rights and obligations under this Section 2.05 as any
other Lender.
(r) Information to be Provided to Administrative Agent. The LC
Issuing Banks shall furnish to the Administrative Agent upon request such
information as the Administrative Agent shall reasonably request in order to
calculate (i) the Aggregate LC Exposure existing from time to time and (ii) the
amount of any fee payable for the account of the Lenders under Section 2.05(g).
SECTION 2.06 Fees.
----
(a) Closing Date Facility Fee. The Borrowers shall pay to the
Administrative Agent for distribution to each Lender on the date of initial
Borrowing facility fees in an amount equal to 2.00% of the aggregate
Commitments.
(b) Arrangement Fee. The Borrowers shall pay on the date of initial
Borrowing to the Arranger an arrangement fee in an aggregate amount equal to
1.00% of the aggregate Commitments.
(c) Administrative Agent Fee. The Borrowers shall pay to the
Administrative Agent, for its own account, a monthly administrative agent's fee
of $15,000, payable in advance on the date of initial Borrowing (for the
remainder of the month in which such date falls) and on the last Business Day of
each month thereafter (for the next succeeding month).
(d) Commitment Fee. The Borrowers shall pay to the Administrative
Agent for the account of each Lender a commitment fee, calculated for each day
and equal to the sum of (i) the Tranche A Commitment Fee Rate for such day
(expressed as a daily rate), multiplied by the amount by which such Lender's
Tranche A Commitment on such day exceeds its Outstanding Tranche A Amount on
such day, plus (ii) the Tranche B Commitment Fee Rate for such day (expressed as
a daily rate), multiplied by the amount by which such Lender's Tranche B
Commitment on such day exceeds its Outstanding Tranche B Amount on such day,
regardless of whether the Tranche B Commencement Date shall have occurred. Such
commitment fees shall accrue from and including the Interim Order Date to but
excluding the Commitment Termination Date and shall be payable monthly in
arrears on the last Business Day of each month after the Closing Date, and on
the Commitment Termination Date.
(e) Tranche B Commencement Fee. If the Tranche B Commencement Date
shall have occurred, the Borrowers shall pay to the Administrative Agent for
distribution to each Lender on the Commitment Termination Date a fee equal to
0.50% of the entire amount of the Commitments as determined on the Tranche B
Commencement Date. Such fee shall be earned and
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non-refundable on and as of the Tranche B Commencement Date but shall be payable
on the Commitment Termination Date to the Administrative Agent for distribution
to Lenders as of the Commitment Termination Date.
SECTION 2.07 Final Maturity of Loans. The Loans shall mature, and
-----------------------
the outstanding principal amount thereof shall be due and payable (together with
interest accrued thereon), on the Commitment Termination Date.
SECTION 2.08 Unscheduled Mandatory Prepayments of Loans; Reduction
-----------------------------------------------------
of Commitments.
- --------------
(a) Asset Sales. If after the Closing Date any Vencor Company (other
than an Excluded Partnership) receives any Net Cash Proceeds of any Asset Sale,
the Borrowers shall prepay (subject to subsection (g) below) an aggregate
principal amount of Loans and permanently reduce the Commitments in an amount
equal to 100% of such Net Cash Proceeds of such Asset Sale; provided, however,
that (i) if such Net Cash Proceeds are proceeds of an Asset Sale of any of the
Appraised Properties, the Borrowers shall, notwithstanding the foregoing, be
required to prepay (subject to subsection (g) below) an aggregate principal
amount of Loans and permanently reduce the Commitments in an amount equal to
only 90% of such Net Cash Proceeds, and (ii) if such Net Cash Proceeds are
proceeds of an Asset Sale of any of the Properties Held For Sale, the Borrowers
shall, notwithstanding the foregoing, be required to reduce the Commitments in
an amount equal to 100% of such Net Cash Proceeds but shall not be required to
make any prepayment of the Loans with such Net Cash Proceeds other than any
prepayment required so that the Borrowers are in compliance, after giving effect
to such reduction of the Commitments, with the limitations set forth in Section
2.01(c). Concurrently with the closing of any Asset Sale, the Net Cash Proceeds
received at such closing shall be deposited in the Prepayment Account until that
portion of such Net Cash Proceeds (or an amount equal thereto) which is required
to be applied to prepay Loans is so applied.
(b) Incurrence of Debt. If after the Closing Date any Vencor Company
(other than an Excluded Partnership) receives any Net Cash Proceeds from the
issuance or other incurrence of any Debt, the Borrowers shall prepay (subject to
subsection (g) below) an aggregate principal amount of Loans and permanently
reduce the Commitments in an amount equal to 100% of such Net Cash Proceeds;
provided that this subsection (b) shall not apply to any Net Cash Proceeds of
(i) Debt under this Agreement or (ii) Permitted Intercompany Debt.
(c) Equity Issuances. If after the Closing Date any Vencor Company
(other than an Excluded Partnership) receives any Net Cash Proceeds from any
Equity Issuance, the Borrowers shall prepay (subject to subsection (g) below) an
aggregate principal amount of Loans and permanently reduce the Commitments in an
amount equal to 100% of such Net Cash Proceeds.
(d) Tax Refunds. If after the Closing Date any Vencor Company (other
than an Excluded Partnership) receives any cash refund or rebate of any federal,
state or other tax, the Borrowers shall prepay (subject to subsection (g) below)
an aggregate principal amount of Loans and permanently reduce the Commitments in
an amount equal to 100% of such tax refund or rebate.
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<PAGE>
(e) Excess Casualty Proceeds. The Borrowers (or the Collateral Agent on
its behalf) shall apply any Excess Casualty Proceeds to prepay (subject to
subsection (g) below) an aggregate principal amount of Loans and permanently
reduce the Commitments in an amount equal to 100% of such Excess Casualty
Proceeds.
(f) Prepayments from Cash Balances. The Borrowers shall from time to time
prepay (subject to subsection (g) below) an aggregate principal amount of Loans
in an amount equal to the excess (such excess, as of any date of determination,
being the "Excess Cash Amount"), if any, of (x) the amount of the Cash Balances
of the Borrowers outstanding over (y) the sum of (a) the aggregate anticipated
cash funding needs of the Borrowers on such date of determination and the
succeeding Business Day and (b) the aggregate amount of cash required to be
maintained on deposit as a minimum balance by the applicable financial
institutions for the disbursement accounts, payroll accounts, depository
accounts, concentration accounts and sub-concentration accounts described in
Exhibit A to the Verified Motion for an Order Authorizing Debtors to Maintain
- ---------
Current Bank Accounts and Use Existing Business Forms and set forth in the
reports delivered pursuant to Section 5.01(a)(iii).
(g) Timing of Prepayment. Each prepayment required by subsection (a),
(b), (c), (d) or (e) of this Section 2.08 shall be made within two Business Days
after any Vencor Company receives the relevant Net Cash Proceeds, and each
prepayment required by subsection (f) of this Section 2.08 shall be made on the
Business Day on which any excess Cash Balance which is required to be prepaid
under such subsection is outstanding. Notwithstanding the foregoing, if the
aggregate principal amount of the Loans required to be prepaid on any date
pursuant to this Section 2.08 is less than $1,000,000, such prepayment shall be
deferred until the aggregate principal amount of the Loans required to be
prepaid pursuant to this Section 2.08 (including such deferred amounts) is not
less than $1,000,000.
(h) Allocation of Prepayments; Ratable Application. Each prepayment of
the Loans required under Section 2.08(a) through (e) above (an "Unscheduled
Mandatory Prepayment") shall be applied (i) prior to the Tranche B Commencement
Date, first, to prepay the outstanding Tranche A Loans to the full extent
-----
thereof and permanently reduce the Tranche A Commitments by the amount of such
prepayments, second, to permanently reduce the Tranche A Commitments to the full
------
extent thereof, and third, to permanently reduce the Tranche B Commitments to
-----
the full extent thereof; and (ii) on and after the Tranche B Commencement Date,
first, to prepay the outstanding Tranche B Loans to the full extent thereof and
- -----
permanently reduce the Tranche B Commitments by the amount of such prepayments,
second, to prepay the outstanding Tranche A Loans to the full extent thereof and
- ------
permanently reduce the Tranche A Commitments by the amount of such prepayments,
third, to the extent of any remaining amount of such prepayment, to further
- -----
permanently reduce the Tranche B Commitments to the full extent thereof, and
fourth, to further permanently reduce the Tranche A Commitments to the full
- ------
extent thereof. Each prepayment of the Loans required under Section 2.08(f)
shall be applied, without reducing the Commitments, (i) prior to the Tranche B
Commencement Date, to prepay the outstanding Tranche A Loans to the full extent
thereof; and (ii) on and after the Tranche B Commencement Date, first, to prepay
-----
the outstanding Tranche B Loans to the full extent thereof, and second, to
------
prepay the outstanding
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Tranche A Loans to the full extent thereof. Each prepayment of Loans or
reduction of Commitments pursuant to this Section 2.08 shall be applied in
accordance with this Agreement ratably to the applicable Loans and Commitments,
respectively, of the several Lenders. The Borrowers shall give the
Administrative Agent notice of any such prepayment as if it were an optional
prepayment made pursuant to Section 2.09. Any amounts required to be applied to
reduce Tranche A Commitments under this Section 2.08 to an amount below the
aggregate LC Exposure of all Lenders shall be applied to cash collateralize
Letters of Credit in accordance with the Security Agreement.
Anything herein to the contrary notwithstanding, an Unscheduled
Mandatory Prepayment pursuant to Section 2.08(d) may be applied to reduce the
Tranche A Commitments or the Tranche B Commitments only to the extent that the
application thereof would not cause the amount of unfunded Tranche A Commitments
and the amount of unfunded Tranche B Commitments, in each case as in effect
immediately prior to the application of such Unscheduled Mandatory Prepayment,
to exceed the amount of unfunded Tranche A Commitments and the amount of
unfunded Tranche B Commitments, respectively, in each case as in effect
immediately after the application of such Unscheduled Mandatory Prepayment (and
giving effect to any prepayment of the Loans required from such Unscheduled
Mandatory Prepayment).
(i) Interest. Each prepayment of principal of the Loans under this
Section 2.08 shall be made together with interest accrued on the amount prepaid
to the date of payment.
SECTION 2.09 Optional Prepayments
--------------------
(a) Notice to Administrative Agent. The Borrowers may, upon giving a
Prepayment Notice to the Administrative Agent before 12:00 Noon (Eastern Time)
on the date of prepayment, prepay the Tranche A Loans or Tranche B Loans (as
specified in such Prepayment Notice) outstanding on any Business Day in whole or
in part in amounts aggregating $1,000,000 or any larger multiple of $100,000.
(b) Notice to Lenders. Upon receiving a Prepayment Notice pursuant
to this Section 2.09, the Administrative Agent shall promptly notify each Lender
of the contents thereof and of such Lender's share of such prepayment and such
Prepayment Notice shall not thereafter be revocable by the Borrowers.
(c) Ratable Application. Each prepayment of Tranche A Loans or
Tranche B Loans pursuant to this Section 2.09 shall be applied ratably to the
Tranche A Loans or Tranche B Loans, respectively, of the several Lenders.
(d) Payment of Accrued Interest. Each prepayment of principal of the
Loans under this Section 2.09 shall be made together with interest accrued on
the amount prepaid to the date of payment.
SECTION 2.10 Termination or Reduction of Commitments The Borrowers
---------------------------------------
may, upon at least three Business Days' notice to the Administrative Agent, (i)
terminate the Commitments at any time, if no Lender has any Outstanding Tranche
A Amount or Outstanding
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<PAGE>
Tranche B Amount, respectively, after such termination, or (ii) ratably reduce
the Tranche A Commitments or Tranche B Commitments from time to time by an
aggregate amount of $10,000,000 or any larger multiple of $1,000,000; provided
that immediately after such reduction no Lender's Outstanding Tranche A Amount
or Outstanding Tranche B Amount shall exceed its Tranche A Commitment or Tranche
B Commitment, respectively, as so reduced. Unless previously terminated, the
Commitments shall terminate in their entirety on the Commitment Termination
Date. Once reduced or terminated the Commitments may not be reinstated. The
Borrowers' notice to the Administrative Agent shall designate the date (which
shall be a Business Day) of such termination or reduction, whether the Tranche A
Commitments or the Tranche B Commitments are to be terminated or reduced, and
the amount of any partial reduction of the Tranche A Commitments or the Tranche
B Commitments, and such termination or reduction of the Tranche A Commitments or
Tranche B Commitments shall be effective on the date specified in the Borrowers'
notice and shall be applied ratably to the Tranche A Commitments or Tranche B
Commitments (as specified by the Borrowers in such notice), respectively, of the
several Lenders.
SECTION 2.11 General Provisions as to Payments
---------------------------------
(a) The Borrowers shall make each payment of principal of, and
interest on, the Loans and the LC Reimbursement Obligations and each payment of
facility fees, commitment fees and letter of credit fees (other than fees
payable directly to the LC Issuing Banks) hereunder not later than 1:00 P.M.
(Eastern Time) on the date when due, in Federal or other funds immediately
available in New York, New York, to the Administrative Agent at its address for
payments specified in or pursuant to Section 11.01. Upon receiving a payment for
the account of the Lenders, the Administrative Agent will promptly distribute to
each such Lender its ratable share of such payment. Whenever any payment of
principal of, or interest on, Loans or LC Reimbursement Obligations or any
payment of commitment fees or letter of credit fees shall be due on a day which
is not a Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrowers before the date on which any payment is due to any of the Lenders
hereunder that the Borrowers will not make such payment in full, the
Administrative Agent may assume that the Borrowers have made such payment in
full to the Administrative Agent on such date and, in reliance upon such
assumption, the Administrative Agent may (but shall not be obligated to) cause
to be distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent that the Borrowers shall not have so
made such payment, each such Lender shall repay to the Administrative Agent
forthwith on demand any such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
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SECTION 2.12 Computation of Interest and Fees.
--------------------------------
(a) Interest and fees hereunder shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and paid for the actual number of
days elapsed (including the first day but excluding the last day).
(b) The Administrative Agent shall determine the Tranche A Interest
Rate, the Tranche B Interest Rate, the Tranche A Default Rate, the Tranche B
Default Rate and the LC Fee Rate applicable hereunder and the amount of accrued
interest and fees. The Administrative Agent shall give prompt notice to the
Borrowers and the Lenders of each Tranche A Interest Rate, Tranche B Interest
Rate, Tranche A Default Rate, Tranche B Default Rate and LC Fee Rate and the
amount of accrued interest and fees so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
SECTION 2.13 Release of Security Interests in Assets Being Sold.
--------------------------------------------------
The Administrative Agent shall from time to time instruct the Collateral Agent
to release specific assets (but not all or substantially all the Collateral)
from the Security Interests pursuant to Section 18 of the Security Agreement if:
(i) the Administrative Agent shall have received a written
request for such release signed by an Executive Officer or the Financial
Officer stating that (x) the assets to be released are being sold and (y)
the sale thereof does not violate Section 7.03(b) hereof;
(ii) arrangements satisfactory to the Administrative Agent have
been made so that such release will become effective no earlier than the
closing of such sale;
(iii) in the case of an Asset Sale, arrangements satisfactory to
the Administrative Agent have been made to deposit an amount equal to the
Net Cash Proceeds payable at the closing of such Asset Sale, if any, in the
Prepayment Account and apply it to prepay Loans to the extent required by
Section 2.08;
(iv) no Default or Enforcement Notice is in effect when such
instructions are given; and
(v) the prior written consent of Required Lenders (except in
the case of Asset Sales of Properties Held For Sale permitted under Section
7.03(b)) and the approval of the Court (to the extent such Court approval
is required pursuant to the Bankruptcy Code or an order of the Court) with
respect to such Asset Sale shall have been obtained.
SECTION 2.14 Superpriority Nature of Obligations. All Obligations
-----------------------------------
under the Financing Documents shall constitute allowed administrative expense
claims in the Chapter 11 Cases against Borrowers with priority under Section
364(c)(1) of the Bankruptcy Code over any and all other administrative expenses
of the kind specified or ordered pursuant to any provision of the Bankruptcy
Code, including, but not limited to, Sections 105, 326, 328, 503(b), 506(c),
507(a), 507(b) and 726 of the Bankruptcy Code; provided that, the superpriority
--------
administrative claim status
40
<PAGE>
of the Obligations, Liens and security interests securing the same shall be
subject only to: (i) unpaid professional fees and expenses incurred (x) prior
to the date of the delivery of a notice from the Administrative Agent or
Required Lenders to the Borrowers of the occurrence of an Event of Default and
specifying that the limitation on professional fees and expenses referred to
in the following clause (ii) is in effect (such notice being the "Carve-Out
Notice") or (y) after the earlier of (1) such time as no Event of Default shall
be continuing or (2) such time as such Carve-Out Notice shall be rescinded by
the Administrative Agent at the direction of Required Lenders in their sole
discretion, and which are allowed by the Court in the Chapter 11 Cases (either
on an interim or final basis), (ii) after and from the date of the delivery of a
Carve-Out Notice, professional fees and expenses allowed by the Court in the
Chapter 11 Cases in an aggregate amount (determined without regard to fees and
expenses incurred prior to the date of the delivery of such Carve-Out Notice and
which are at any time allowed by the Court either on an interim or final basis)
not to exceed $2,000,000 (for any period commencing at the time a Carve-Out
Notice shall have been so delivered and ending at the earlier of (1) such
subsequent time as no Event of Default shall be continuing and (2) such time as
such Carve-Out Notice shall be rescinded by the Administrative Agent at the
direction of Required Lenders in their sole discretion), and (iii) fees payable
to the Clerk of the Court and to the United States Trustee pursuant to 28 U.S.C.
(S)1930(a)(6).
SECTION 2.15 Joint and Several Liability; Payment Indemnifications.
-----------------------------------------------------
(a) All Obligations of Borrowers under the Financing Documents shall
be the joint and several Obligations of the Borrowers. The Obligations of and
the Liens granted by any such Borrower under the Financing Documents shall not
be impaired or released by any action or inaction on the part of Agent or any
Lender with respect to any Credit Party, including any action or inaction which
would otherwise release a surety.
(b) In order to provide for just and equitable contribution between
the Borrowers if any payment is made by a Borrower (a "Funding Borrower") in
discharging any of the Obligations, each of the Funding Borrowers shall be
entitled to a contribution from the other Borrowers for all payments, damages
and expenses incurred by such Funding Borrower in discharging the Obligations,
in the manner and to the extent required to allocate liabilities in an equitable
manner among the Borrowers on the basis of the relative benefits received by the
Borrowers. If and to the extent that a Funding Borrower makes any payment to any
Lender or any other Person in respect of the Obligations, any claim which said
Funding Borrower may have against the other Borrowers by reason thereof shall be
subject and subordinate to the prior Cash payment in full of the Obligations.
The parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset of the party to which such contribution is owing.
Notwithstanding any of the foregoing to the contrary, such contribution
arrangements shall not limit in any manner the joint and several nature of the
Obligations, limit, release or otherwise impair any rights of any Agent or any
Lender under the Financing Documents, or alter, limit or impair the obligation
of each Borrower, which is absolute and unconditional and joint and several with
the other Borrowers, to repay the Obligations. The obligation of any Borrower to
make any contribution to another Borrower under this Section 2.15 shall be
deemed an expense of administration of such Borrower arising under
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<PAGE>
Section 503(b) of the Bankruptcy Code and shall be junior in priority to all
Obligations of such Borrower and of the Borrowers under the Financing Documents.
SECTION 2.16 Defaulting Lenders.
------------------
Anything contained herein to the contrary notwithstanding, in the
event that any Lender (a "Defaulting Lender") defaults (a "Funding Default") (x)
more than once in its obligation to fund a Loan in accordance with Section 2.01
or to fund its reimbursement obligation under and in accordance with Section
2.05(j)(i), or (y) in its obligation to fund any Loan in accordance with Section
2.01 or to fund its reimbursement obligation under and in accordance with
Section 2.05(j)(i) and such failure continues after 5:00 P.M. on the date such
funding is required hereunder, in either case whether as a result of the
appointment of a receiver or conservator with respect to such Lender at the
direction or request of any regulatory agency or authority or for any other
reason (any such Loan or amount which such Lender fails to fund as described in
clause (x) or (y) being a "Defaulted Loan"), then (i) during any Default Period
(as defined below) with respect to such Defaulting Lender, such Defaulting
Lender shall be deemed not to be a "Lender" for purposes of voting on any
matters (including the granting of any consents or waivers) with respect to any
of the Financing Documents, (ii) to the extent permitted by applicable law,
until such time as the Default Excess (as defined below) with respect to such
Defaulting Lender shall have been reduced to zero, (a) any voluntary prepayment
of the Loans pursuant to Section 2.09 shall, if the Borrowers so direct at the
time of making such voluntary prepayment, be applied to the Loans of other
Lenders as if such Defaulting Lender had no Loans outstanding and the Credit
Exposure of such Defaulting Lender were zero, and (b) any mandatory prepayment
of the Loans pursuant to Section 2.08 shall, if the Borrowers so direct at the
time of making such mandatory prepayment, be applied to the Loans of other
Lenders (but not to the Loans of such Defaulting Lender) as if such Defaulting
Lender had funded all Defaulted Loans of such Defaulting Lender, it being
understood and agreed that Borrowers shall be entitled to retain any portion of
any mandatory prepayment of the Loans that is not paid to such Defaulting Lender
solely as a result of the operation of the provisions of this clause (b)
provided, however, that the Administrative Agent may, notwithstanding anything
- -------- -------
in this clause (ii) to the contrary, elect that any such prepayment of Loans and
any interest thereon be applied to cash collateralize such Defaulting Lender's
unfunded Commitments pursuant to any arrangements entered into by the Defaulting
Lender and the Administrative Agent pursuant to clause (B)(2) of the following
paragraph, (iii) such Defaulting Lender's Commitments and outstanding Loans and
such Defaulting Lender's LC Exposure shall be excluded for purposes of
calculating the commitment fees payable to Lenders pursuant to Section 2.06 in
respect of any day during any Default Period with respect to such Defaulting
Lender, and such Defaulting Lender shall not be entitled to receive any
commitment fees pursuant to Section 2.06 with respect to such Defaulting
Lender's Commitments in respect of any Default Period with respect to such
Defaulting Lender, and (iv) the Total Utilization of Commitments as at any date
of determination shall be calculated as if such Defaulting Lender had funded all
Defaulted Loans of such Defaulting Lender.
For purposes of this Agreement, (I) "Default Period" means, with
respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(A) the date on which all Commitments are cancelled or
42
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terminated and/or the Obligations are declared or become immediately due and
payable, (B) the date on which (1) the Default Excess with respect to such
Defaulting Lender shall have been reduced to zero (whether by the funding by
such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by
the non-pro rata application of any voluntary or mandatory prepayments of the
Loans in accordance with the terms of this Section 2.16 or by a combination
thereof) and (2) such Defaulting Lender shall have delivered to the Borrowers
and the Administrative Agent a written reaffirmation of its intention to honor
its obligations under this Agreement with respect to its Commitments and, if
such Defaulting Lender is a Defaulting Lender pursuant to clause (y) of the
preceding paragraph, shall have made arrangements and provided further
assurances satisfactory to the Administrative Agent and the Borrowers (in their
sole discretion) regarding such Lender's honoring of such future obligations
under this Agreement, and (C) the date on which the Borrowers, the
Administrative Agent and Required Lenders waive all Funding Defaults of such
Defaulting Lender in writing, and (II) "Default Excess" means, with respect to
any Defaulting Lender, the excess, if any, of such Defaulting Lender's
Percentage of the aggregate outstanding principal amount of Loans and funding
obligations under Section 2.05(j)(i) of all Lenders (calculated as if all
Defaulting Lenders (other than such Defaulting Lender) had funded all of their
respective Defaulted Loans) over the aggregate outstanding principal amount of
Loans and funded obligations under Section 2.05(j)(i) of such Defaulting Lender.
No Commitment of any Lender shall be increased or otherwise affected,
and, except as otherwise expressly provided in this Section 2.16, performance by
the Borrowers of their obligations under this Agreement and the other Loan
Documents shall not be excused or otherwise modified, as a result of any Funding
Default or the operation of this Section 2.16. The rights and remedies against
a Defaulting Lender under this Section 2.16 are in addition to other rights and
remedies which the Borrowers may have against such Defaulting Lender with
respect to any Funding Default and which the Administrative Agent or any Lender
may have against such Defaulting Lender with respect to any Funding Default.
SECTION 2.17 Removal or Replacement of a Lender.
----------------------------------
(a) Anything contained in this Agreement to the contrary
notwithstanding, in the event that (i) any Lender shall become a Defaulting
Lender, (ii) the Default Period for such Defaulting Lender shall remain in
effect, and (iii) such Defaulting Lender shall fail to cure the default as a
result of which it has become a Defaulting Lender within five Business Days
after the Borrowers' request that it cure such default, then, and in each such
case, the Borrowers shall have the right, at their option, to remove or replace
the Defaulting Lender (the "Terminated Lender") to the extent permitted by
Section 2.17(b).
(b) The Borrowers may, by giving written notice to the
Administrative Agent and any Terminated Lender of their election to do so:
(i) elect to (A) terminate the Commitments, if any, of such
Terminated Lender upon receipt by such Terminated Lender of such notice and (B)
prepay on the date of such termination any outstanding Loans made by such
Terminated Lender, together with accrued and unpaid interest thereon and any
fees (subject to clause (iii) of the first paragraph of Section 2.16)
43
<PAGE>
payable to such Terminated Lender and any other amounts payable to such
Terminated Lender hereunder pursuant to Section 2.05 or Article 10 or otherwise;
provided that,in the event such Terminated Lender has any Loans outstanding at
- --------
the time of such termination, the written consent of the Administrative Agent
and the LC Issuing Banks (each in their sole discretion) shall be required in
order for the Borrowers to make the election set forth in this clause (i); or
(ii) elect to cause such Terminated Lender (and such Terminated
Lender hereby irrevocably agrees) to assign its outstanding Loans and its
Commitments, if any, in full to one or more Persons who would otherwise be
eligible to take such assignment under Section 11.06 (each a "Replacement
Lender"), in accordance with the provisions of Section 11.06; provided that on
--------
the date of such assignment, the Borrowers shall pay any accrued and unpaid
interest on the Loans so assigned and any fees (subject to clause (iii) of the
first paragraph of Section 2.16) payable to such Terminated Lender and any other
amounts payable to such Terminated Lender pursuant to Section 2.05 or Article
10;
provided that the Borrowers may not make either of such elections with respect
- --------
to any Terminated Lender that is an LC Issuing Bank unless, prior to the
effectiveness of such election, the Borrowers shall have caused each outstanding
Letter of Credit issued by such LC Issuing Bank to be cancelled.
(c) Upon the prepayment of all amounts owing to any Terminated
Lender and the termination of such Terminated Lender's Commitments, if any,
pursuant to clause (i) of Section 2.17, such Terminated Lender shall no longer
constitute a "Lender" for purposes of this Agreement; provided that any rights
--------
of such Terminated Lender to indemnification under this Agreement
(including under Sections 2.05 and 11.03 and Article 10) shall survive as to
such Terminated Lender.
ARTICLE 3. Conditions
SECTION 3.01 Effectiveness of this Agreement; Closing. This
----------------------------------------
Agreement will become effective, and the Closing will occur, when (i) the
Administrative Agent shall have received the following documents, each dated the
Closing Date unless otherwise indicated, and (ii) the other conditions specified
below shall have been satisfied:
(a) with respect to each party listed on the signature pages
hereof, either a counterpart of this Agreement signed by such party or
facsimile or other written confirmation satisfactory to the Administrative
Agent that such party has signed a counterpart hereof;
(b) a duly executed Tranche A Note and a duly executed Tranche
B Note complying with the provisions of Section 2.03 payable to each
Lender;
(c) a counterpart of the Subsidiary Guaranty Agreement signed
by each Subsidiary Guarantor;
44
<PAGE>
(d) a counterpart of the Security Agreement, signed by each of
the Borrowers and each Subsidiary Guarantor, together with (to the extent
not previously delivered to Morgan in its capacity as agent under the
Existing Credit Facilities) certificates evidencing all the certificated
Equity Interests listed in Schedule 4 hereto (except the Equity Interests
----------
of any Insurance Subsidiaries held by another Insurance Subsidiary) and
signed stock powers or other appropriate instruments of transfer relating
thereto;
(e) a signed counterpart of a Mortgage with respect to each
Appraised Property in proper form for recording in the relevant
jurisdictions, together with evidence reasonably satisfactory to Collateral
Agent that any related intangibles, mortgage recording or similar taxes
will be paid in connection with such recording;
(f) all signed UCC financing statements reasonably requested by
the Collateral Agent to perfect its security interests in the Collateral;
(g) written wire transfer instructions signed by Vencor Opco on
behalf of the Borrowers and in form and substance reasonably satisfactory
to the Administrative Agent for application of the proceeds of the initial
Borrowing hereunder on the date of initial Borrowing, including providing
for the payment on the date of initial Borrowing of (1) all fees, expenses
and other amounts payable by the Borrowers on or before such date to the
Agents and the Lenders in connection with this Agreement, and (2) all fees
and expenses of each counsel and financial advisor to the Agents and the
Lenders in connection with this Agreement, the Existing Credit Facilities,
the Existing Notes and the transactions contemplated thereby, through the
Petition Date;
(h) an opinion of Morris, Nichols, Arsht & Tunnell, special
Delaware counsel for the Borrowers and the Subsidiary Guarantors,
substantially in the form of Exhibit E-1 hereto (and Borrowers hereby
-----------
request such counsel to deliver such opinions to Lenders);
(i) an opinion of Cleary, Gottlieb, Steen & Hamilton, special
counsel for the Borrowers and the Subsidiary Guarantors, substantially in
the form of Exhibit E-2 hereto, together with evidence satisfactory to the
-----------
Administrative Agent (and Borrowers hereby request such counsel to deliver
such opinions to Lenders);
(j) all approvals, consents and other actions by or in respect
of, or filings with, any governmental body, agency, official, authority or
other Person (including stockholders) required in connection with the
transactions contemplated by the Financing Documents shall have been
obtained, taken or made (except for any such approvals, consents, actions
or filings with any Person (other than any governmental body, agency,
official or authority) as to which the failure to have obtained, taken or
made them is not, in the aggregate, material);
(k) the Interim Borrowing Order (or if there is no Interim
Borrowing Order, the Borrowing Order) shall have been entered by the Court;
45
<PAGE>
(l) no pleading, application or objection sought by any party in
interest (including any Existing Lender) shall have been granted by the
Court which has not been withdrawn, stayed, dismissed or denied seeking (i)
to dismiss or convert any of the Chapter 11 Cases to a Chapter 7 Case, (ii)
the appointment of a Chapter 11 trustee in any of the Chapter 11 Cases or
of a trustee in bankruptcy of any Borrower, (iii) the appointment of an
examiner (with expanded powers) for any Borrower under Section 1106(b) of
the Bankruptcy Code, (iv) the granting of an administrative expense or
priority claim or a Lien in either case pari passu or senior to that of the
Collateral Agent granted pursuant to the Collateral Documents, the Interim
Borrowing Order and the Borrowing Order, (v) to stay, reverse, vacate, or
otherwise modify the Interim Borrowing Order or the Borrowing Order without
the prior written consent of the Agents and Required Lenders, or (vi)
relief from the automatic stay (or any other injunction having similar
effect) so as to allow a third party to proceed against any material
property or assets of Borrowers;
(m) all First Day Orders shall be in form and substance
satisfactory to the Administrative Agent; provided that all First Day
--------
Orders the forms of which were delivered to the Administrative Agent on
September 10, 1999 shall be deemed satisfactory for purposes of this
Section 3.01(m);
(n) since December 31, 1998, no Material Adverse Effect (in the
sole opinion of Required Lenders) shall have occurred;
(o) the Ventas Stipulation shall be in form and substance
satisfactory to the Administrative Agent and shall be in full force and
effect;
(p) the Administrative Agent shall have received, in form and
substance reasonably satisfactory to the Administrative Agent, a
certificate from an appropriate officer of each of the Credit Parties (i)
attaching copies of the Organizational Documents of such Credit Party and
copies of resolutions or consents of the board of directors of such Credit
Party or of its applicable partner or member authorizing the applicable
Financing Documents, the Chapter 11 Cases and the other transactions
contemplated hereby, and (ii) certifying (A) that such copies are true,
correct and complete copies thereof and that such resolutions and
Organizational Documents are in full force and effect as of the Closing
Date and have been duly adopted in accordance with the Organizational
Documents of such Credit Party, and (B) as to the signatures and incumbency
of the Persons executing Financing Documents on behalf of such Credit
Party;
(q) the Administrative Agent shall have received copies of any
personal property Lien and tax and judgment Lien searches with respect to
personal, real and mixed properties of the Borrowers and the Subsidiary
Guarantors received by the Borrowers prior to the Closing Date; and the
results of such searches, and the items disclosed on Schedule 10 hereto,
-----------
shall be reasonably satisfactory to the Administrative Agent; and
(r) all other documents that the Administrative Agent may
reasonably request relating to the existence of the Vencor Companies, the
corporate or other authority
46
<PAGE>
for and the validity of the Financing Documents, the creation and
perfection of the Liens contemplated by the Collateral Documents and any
other matters relevant thereto, all in form and substance satisfactory to
the Administrative Agent.
Promptly after the Closing occurs, the Administrative Agent shall notify the
Borrowers and the Lenders thereof, and such notice shall be conclusive and
binding on all parties hereto.
Notwithstanding anything herein to the contrary, it is understood and agreed
that the documents and items set forth on Schedule 13 hereto shall be delivered
-----------
after the Closing Date in accordance with Section 5.12. Each Lender, by
delivering its signature page to this Agreement and funding its initial Loans,
if any, on the date of initial Borrowing, shall be deemed to have acknowledged
receipt of, and consented to and approved (as long as substantially in the form
delivered to the Lenders, including any changed pages thereto delivered to the
Lenders), each Financing Document and each other document required to be
approved or consented to by the Required Lenders or the Lenders, as applicable,
under this Section 3.01.
SECTION 3.02 Credit Events. The obligations (i) of each Lender to
-------------
make a Loan on the occasion of each Borrowing, (ii) of an LC Issuing Bank to
sell and of each Lender to purchase each participation in a Letter of Credit as
and when provided in Section 2.05, and (iii) of each LC Issuing Bank to extend
(or allow the extension of) the expiry date of a Letter of Credit issued by it
hereunder as and when provided in Section 2.05 are each subject to the
satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred;
(b) receipt by the Administrative Agent of notice of the relevant
Credit Event as required by Section 2.02 or 2.05(c), as the case may be;
(c) the fact that, immediately before and after such Credit Event, no
Default shall have occurred and be continuing;
(d) the fact that each of the representations and warranties made by
any of the Borrowers or the Subsidiary Guarantors in or pursuant to any
Financing Document to which it is a party shall be true on and as of the
date of such Credit Event as if made on and as of such date;
(e) no order, judgment or decree of any court (including, without
limitation, the Court), arbitrator or governmental authority shall purport
to enjoin or restrain such Lender from making any such Loan or extending or
issuing any such Letter of Credit on the date of such Credit Event;
(f) immediately after giving effect to such Credit Event, the
limitations on borrowing set forth in Section 2.01(c) shall have been
complied with;
47
<PAGE>
(g) the making of the Loans requested in connection with any such
Borrowing shall not violate any law including Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System;
(h) there shall not be pending or, to the knowledge of the Borrowers,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting any Vencor Company that has not been
disclosed by the Borrowers in writing pursuant to Section 4.06 or 5.01(i)
prior to the making of the last preceding Loans (or, in the case of the
initial Loans, prior to the execution of this Agreement), and there shall
have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that,
in either event, in the opinion of Required Lenders, in any manner
questions the validity of any Financing Document or could reasonably be
expected to have a Material Adverse Effect or in which there is a
reasonable possibility of an adverse decision that could reasonably be
expected to have a Material Adverse Effect seeking to enjoin or otherwise
prevent the consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated by this Agreement or the making
of Loans hereunder; and
(i) The Interim Borrowing Order and/or the Borrowing Order, as the
case may be, shall be Final Orders.
Each Credit Event under this Agreement shall be deemed to be a
representation and warranty by the Borrowers on the date of such Credit Event
that all of the conditions set forth in this Section 3.02 have been satisfied
and that each certification contained in the relevant Notice of Borrowing or LC
Request, as the case may be, is true, correct and complete on the date of such
Credit Event.
ARTICLE 4. Representations and Warranties
Each of the Borrowers represents and warrants to the Lender Parties that:
SECTION 4.01 Corporate Existence and Power. Each Vencor Company is
-----------------------------
a corporation, limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and, subject to compliance with
any applicable provisions of the Bankruptcy Code, has all corporate or other
powers and all material Governmental Approvals (including without limitation
those required by Medicaid Regulations and Medicare Regulations) required to
carry on its business as now conducted and as proposed to be conducted, except
for such Governmental Approvals the failure of which to have in the aggregate
could not be reasonably expected to have a Material Adverse Effect. Each
Borrower is in compliance with its Organizational Documents and all orders of
the Court.
SECTION 4.02 Corporate and Governmental Authorization; No
--------------------------------------------
Contravention. The execution and delivery by each Vencor Company of the
- -------------
Financing Documents to which it is
48
<PAGE>
a party, its performance of its obligations thereunder and, with respect to the
Borrowers, the issuance and payment of the Notes are within its corporate or
other powers, have been duly authorized by all necessary corporate or other
action, require no action by or in respect of, or filing with, any governmental
body, agency or official (except for the Court and such as shall have been made
at or before the time required by the Financing Documents and shall be in full
force and effect on and after the date when made to the extent required by the
Financing Documents) and do not contravene, or constitute a default under, any
Applicable Laws (including an applicable order of the Court) or any provision of
its Organizational Documents, or of any agreement or other instrument binding
upon it (which contravention or default, in the case of such instruments or
agreements, would give rise to rights enforceable on a post-Petition Date basis)
or result in or require the imposition of any Lien (other than the Liens created
by the Collateral Documents) on any of its assets.
Section 4.03 Binding Effect. This Agreement constitutes a valid and
--------------
binding agreement of the Borrowers, and the other Financing Documents, when
executed and delivered as contemplated by this Agreement, will constitute valid
and binding obligations of each Vencor Company that is a party thereto, in each
case enforceable in accordance with its terms, except as limited by general
principles of equity and, in the case of any Subsidiary Guarantor, by
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
creditor's rights generally.
Section 4.04 Security Interests. On the Closing Date, the
------------------
Collateral Documents will create valid Security Interests in the Collateral to
the extent set forth therein. At all times after the Closing, the Collateral
Documents, in conjunction with the entry of the Interim Borrowing Order and/or
the Borrowing Order, will create valid and perfected Security Interests in the
Collateral of the Borrowers from time to time covered or purportedly covered
thereby. Such Security Interests will be prior to all other Liens (except as
set forth in the Interim Borrowing Order and the Borrowing Order) on such
Collateral until the applicable Security Interest is released pursuant to
Section 18 of the Security Agreement.
Section 4.05 Financial Information.
---------------------
(a) The consolidated balance sheet of Vencor and its Consolidated
Subsidiaries as of December 31, 1998 and the related consolidated statements of
operations, cash flows and shareholders' equity for the Fiscal Year then ended,
reported on by Ernst & Young LLP, fairly present in all material respects, in
conformity with GAAP, the consolidated financial position of Vencor and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) Since December 31, 1998, no event has occurred and no condition
has come into existence which has had, or is reasonably likely to have, a
Material Adverse Effect .
Section 4.06 Litigation. Except as disclosed in Schedule 8 hereto
---------- ----------
or pursuant to Section 5.01(i), there is no action, suit or proceeding pending
against, or to the knowledge of the Borrowers threatened against or affecting,
any Vencor Company before any court or arbitrator or any governmental body,
agency or official (i) in which there is a reasonable possibility of an adverse
49
<PAGE>
decision that could reasonably be expected to have a Material Adverse Effect or
(ii) which in any manner questions the validity of any Financing Document.
Section 4.07 Compliance with ERISA. Each member of the ERISA Group
---------------------
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or made any amendment
to any Plan, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii) incurred any liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.
Section 4.08 Taxes. The Vencor Companies have filed all United
-----
States Federal income tax returns that are required to be filed by them (or have
filed appropriate extensions for filing such tax returns) and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by any
of them, except such taxes, if any, as are being contested in good faith and as
to which reserves have been provided. The charges, accruals and reserves on the
books of the Vencor Companies in respect of taxes or other similar governmental
charges are, in the opinion of Vencor, adequate.
Section 4.09 Compliance with Laws. The Vencor Companies are in
--------------------
compliance in all material respects with all Applicable Laws (including without
limitation Medicaid Regulations and Medicare Regulations), other than such laws,
rules or regulations (i) the validity or applicability of which the relevant
Vencor Company is contesting in good faith or (ii) the failure to comply with
which could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as disclosed on Schedule 12 or pursuant to Section
-----------
5.01(n) or (o), each Hospital Facility and each Nursing Home Facility operated
by a Vencor Company is certified for participation in the Medicare program and
the Medicaid program and the Veteran's Administration program for the state in
which it is located, and has a current and valid Medicare Provider Agreement and
Medicaid Provider Agreement.
Section 4.10 No Regulatory Restrictions on Borrowing. None of the
---------------------------------------
Borrowers nor any Subsidiary Guarantor is (i) an "investment company", within
the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended or (iii) otherwise subject to any regulatory scheme
(other than the Bankruptcy Code) which restricts its ability to incur Debt
hereunder.
Section 4.11 Environmental Matters.
---------------------
(a) From time to time after the Closing, Vencor will review the effect
of Environmental Laws on the business, operations and properties of the Vencor
Companies, in the course of which reviews it will identify and evaluate
associated liabilities and costs. On the basis of
50
<PAGE>
such reviews, Vencor has reasonably concluded that the foregoing associated
liabilities and costs are unlikely to have a Material Adverse Effect.
(b) Except to the extent that the Environmental Liabilities of the
Vencor Companies that relate to or could result from the matters referred to in
this Section 4.11(b) would not exceed $1,000,000 for any one occurrence, no
material notice, notification, demand, request for information, citation,
summons, complaint or order with respect to Hazardous Substances or any
violation of Environmental Laws is in existence or, to the knowledge of Vencor,
proposed, threatened or anticipated with respect to or in connection with the
operation of any properties to be owned, leased or operated after the Closing
Date by any Vencor Company.
Section 4.12 Full Disclosure. All information heretofore furnished
---------------
in writing by any Vencor Company to any Agent or any Lender for purposes of or
in connection with this Agreement or any transaction contemplated hereby was,
and all such information hereafter furnished in writing by the Vencor Companies
to any Agent or Lender will be, true and accurate in every material respect or
based on reasonable estimates on the date as of which such information is or was
stated or certified. Vencor has disclosed to the Lenders in writing any and all
facts which are known to it and which have had or could reasonably be expected
to have a Material Adverse Effect.
Section 4.13 Information as to Equity Interests and Instruments
--------------------------------------------------
Owned by Vencor Companies. Schedule 4 hereto sets forth a correct and complete
- ------------------------- ----------
list of each Subsidiary of Vencor and each Insurance Subsidiary, its outstanding
Equity Interests, the owner thereof and the percentage thereof owned by such
owner. Neither Vencor nor any of its Subsidiaries owns any interest in any
Subsidiary which is neither a Borrower nor a Subsidiary Guarantor (other than
Insurance Subsidiaries, the Shell Subsidiaries and the Excluded Partnerships).
Except for the notes specified on Schedule 1 to the Security Agreement, no Debt
(including Permitted Intercompany Debt) owed to any Lien Grantor is evidenced by
an instrument (as such term is defined in the UCC) that is not held in a
Concentration Account or pledged to the Collateral Agent as part of the
Collateral.
Section 4.14 Representations in Other Financing Documents. The
--------------------------------------------
representations of each Subsidiary Guarantor in Section 2 of the Subsidiary
Guaranty Agreement and the representations of each Lien Grantor in Section 2 of
the Security Agreement and Section 5 of each Security Agreement Supplement (if
any) signed by it are true.
Section 4.15 Year 2000 Compliance. From time to time after the
--------------------
Closing, Vencor will continue a review and assessment of all areas within its
and its Subsidiaries' businesses and operations (including those affected by
suppliers and vendors) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by it or any of its
Subsidiaries (or their respective suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999). Vencor will continue to develop
a plan and timeline for addressing the Year 2000 Problem on a timely basis and
from time to time implement that plan in accordance with that timetable. The
Borrowers reasonably believe that all computer applications (including those of
its suppliers and vendors) that are material to its or any of its Subsidiaries'
businesses and operations will on a timely
51
<PAGE>
basis be able to perform properly date-sensative functions for all dates before
and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.
Section 4.16 Margin Stock. The Borrowers do not, as of the date
------------
hereof, expect that the Vencor Companies will acquire any Margin Stock in the
future. Even if they do, Margin Stock will not at any time represent more than
25% of the value (as determined by any reasonable method) of the assets subject
to any provision of the Financing Documents that restricts the right or ability
of the Vencor Companies to sell, pledge or otherwise dispose of Margin Stock
owned by them or requires a prepayment of Loans upon the exercise of any such
right.
Section 4.17 Representations Concerning Cash Management System The
-------------------------------------------------
summary of Borrowers' cash management system set forth in the First Day Orders
is accurate and complete in all material respects as of the Closing Date and
does not omit to state any material fact necessary to make the statements set
forth therein not misleading. No Borrower owns any Deposit Account (other than
Patient Trust Accounts) which is not subject to the liens granted under the
Security Agreement. There has been no material change to the cash management
system since the Closing Date except such changes as have been disclosed to the
Collateral Agent in writing and approved by Required Lenders.
Section 4.18 Prepetition Indebtedness. As of the Petition Date, the
------------------------
aggregate principal amount of Debt and letter of credit exposure outstanding and
owed under the Existing Credit Facilities (exclusive of any accrued interest,
fees or other charges thereunder) is $520,176,612.89, and the aggregate amount
outstanding and owed under the Existing Notes (exclusive of any accrued
interest, fees or other charges thereunder) is $302,391,000. The aggregate
amount of all Prepetition Indebtedness as of the Petition Date, other than the
Debt under the Existing Credit Facilities and the Existing Notes, Permitted
Intercompany Debt and the other Prepetition Indebtedness set forth on Schedule 9
----------
hereto, does not exceed $1,000,000.
Section 4.19 Chapter 11 Cases. The Chapter 11 Cases were commenced
----------------
on the Petition Date in accordance with Applicable Law and proper notice thereof
has been given to third-party health insurers and creditors to the extent
required by Applicable Law. The Borrowers constitute all debtors and debtors-
in-possession subject to the Chapter 11 Cases.
Section 4.20 Cash Plan. The Borrowers have, in connection with the
---------
preparation of each supplement to the Cash Plan required to be delivered to the
Administrative Agent pursuant to Section 5.01(m), made all investigations and
inquiries as the Borrowers deem necessary and prudent therefor. A summary of
the significant assumptions upon which each such supplement is based are stated
therein. Although any assumptions and any projections by necessity involve
uncertainties and approximations, the Borrowers believe that the assumptions on
which each such supplement to the Cash Plan is based are reasonable. The
projections for the Borrowers set forth in each such supplement to the Cash
Plan, taken as a whole, provide reasonable estimations of future performance,
subject, as stated above, to the uncertainties and approximations inherent in
any projections.
52
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ARTICLE 5. Affirmative Covenants
Each of the Borrowers agrees that, so long as any Lender has any
Credit Exposure hereunder or any Obligation remains unpaid:
Section 5.01 Information. Vencor will deliver the following
------------
information to the Administrative Agent (with copies thereof for each Lender)
and, promptly upon receipt thereof, the Administrative Agent will deliver a copy
thereof to each Lender (provided that the items described in Sections 5.01(a),
--------
(b), (c), (f), (g) and (m) shall be delivered by Vencor directly to the
Administrative Agent and each Lender, and not solely to the Administrative
Agent):
(a) as soon as available and in any event not later than 5:00 p.m.
(Eastern Time) on the second Business Day of each week after the Closing Date,
(i) consolidated cash flow reports, consistent with the Cash Plan and otherwise
substantially in the form and scope of the Cash Plan reflecting on a line-item
basis cash receipts and disbursements for the Borrowers, (ii) a report setting
forth for each day (each a "Census Measurement Day") during the seven-day period
ending on (x) with respect to the Hospital Facilities, the second day preceding
such report and (y) with respect to the Nursing Home Facilities, the day
preceding such report, the 10-day moving average of the daily census in (A) the
Hospital Facilities (the "Hospital Daily Census") and (B) the Nursing Home
Facilities (the "Nursing Home Daily Census") (all such calculations to be made
in a manner consistent with Vencor's historical practices in compiling and
reporting such data), and (iii) a calculation, in reasonable detail, of the
Excess Cash Amount for each Business Day of the preceding week, all of the
foregoing to be in form and substance satisfactory to Administrative Agent;
(b) as soon as available and in any event no later than the due dates
set forth in the table below, (i) an unaudited condensed consolidated balance
sheet of Vencor and its Consolidated Subsidiaries and the related condensed
consolidated statements of operations for such Fiscal Quarter or month, as the
case may be, and for the portion of the Fiscal Year or month, as the case may
be, ended at the end of such Fiscal Quarter or month, as the case may be, and of
cash flows for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter or month, as the case may be, setting forth in each case in comparative
form the unaudited consolidated statements of operations and cash flows (to the
extent available) for the corresponding Fiscal Quarter or month, as the case may
be, and the corresponding portion of the previous Fiscal Year, all prepared in
accordance GAAP and, with respect to any such financial statements for any
Fiscal Quarter or Fiscal Year, in accordance with Rule 10-01 of Regulation S-X
of the General Rules and Regulations under the Securities Act of 1933, or any
successor rule that sets forth the manner in which interim financial statements
shall be prepared, (ii) solely in the case of the deliveries due on January 31,
2000, a preliminary statement of profit and loss for the Fiscal Year ending
December 31, 1999 (with a preliminary balance sheet as of December 31, 1999
delivered no later than February 15, 2000 and final year-end information to be
delivered no later than March 31, 2000), (iii) solely with respect to deliveries
on March 15, 2000, a preliminary statement of profit and loss for the month
ended January 31, 2000 (with final month-end information to be delivered no
later than March 31, 2000), (iv) a calculation of the Net Amount of Eligible
Accounts as of the end of the preceding month, and
53
<PAGE>
(v) a certificate (subject to normal year-end adjustments) of the Financial
Officer as to the fairness of presentation and consistency of such financial
statements;
<TABLE>
<CAPTION>
Reported Period Due Date
--------------- --------
<S> <C>
August 1999 September 30, 1999
-----------------------------------------------------------------------
Fiscal Quarter ending November 15, 1999
September 30, 1999
-----------------------------------------------------------------------
October 1999 November 30, 1999
-----------------------------------------------------------------------
November 1999 December 31, 1999
-----------------------------------------------------------------------
Fiscal Year ending January 31, 2000
December 31, 1999
-----------------------------------------------------------------------
January 2000 March 15, 2000
-----------------------------------------------------------------------
</TABLE>
(c) simultaneously with the delivery of each set of financial
statements referred to in Section 5.01(b), a certificate of the Financial
Officer, substantially in the form of Exhibit D hereto, (i) setting forth in
---------
reasonable detail such calculations as are required to establish whether the
Borrowers were in compliance with the requirements of Article 6 on the date of
such financial statements, (ii) stating whether any Default exists on the date
of such certificate and, if any Default then exists, setting forth the details
thereof and the action that Vencor is taking or proposes to take with respect
thereto, (iii) stating whether, since the date of the Most Recent Audited
Financial Statements, an event has occurred or condition arisen which has had a
Material Adverse Effect which is not reflected in the financial statements
delivered simultaneously therewith and, if so, the nature of such Material
Adverse Effect, and (iv) stating whether, since the date of the Most Recent
Audited Financial Statements, there has been a change in the GAAP applied in
preparing the financial statements then being delivered from those applied in
preparing the Most Recent Audited Financial Statements which is material to the
financial statements then being delivered;
(d) within three Business Days after any Executive Officer or
Financial Officer obtains knowledge of any Default, if such Default is then
continuing, a certificate of the Financial Officer setting forth the details
thereof and the action that the Borrowers are taking or propose to take with
respect thereto;
(e) within three Business Days after any Executive Officer or
Financial Officer obtains knowledge of any failure by a Vencor Company to comply
with the provisions (enforceable or actionable on a post-Petition Date basis) of
any Master Lease Agreement, Third Party Lease or Management Contract and such
failure could reasonably be expected to result in an Event of Default or
Material Adverse Effect, if such failure is then continuing, a certificate of
the Financial Officer
54
<PAGE>
setting forth the details thereof and the action that such Vencor Company is
taking or proposes to take with respect thereto;
(f) promptly after the mailing thereof to Vencor's shareholders
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or current reports that any
Vencor Company shall have filed with the SEC;
(h) promptly after any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the Financial Officer setting forth details as to
such occurrence and the action, if any, which the Borrowers or the applicable
member of the ERISA Group is required or proposes to take;
(i) as soon as reasonably practicable after any Executive Officer
obtains knowledge of the commencement of an action, suit or proceeding against
any Vencor Company before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could have a Material Adverse Effect or which in any manner
questions the validity of any Financing Document, a certificate of the Financial
Officer setting forth the nature of such action, suit or proceeding and such
additional information as may be reasonably requested by any Lender through the
Administrative Agent;
(j) promptly upon Vencor's receipt from its independent public
accountants of any management letter which indicates a material weakness in the
reporting practices of any Vencor Company, a description of such material
weakness and any action being taken with respect thereto;
(k) promptly upon their becoming available, copies of all press
releases and other statements made available generally by any Vencor Company to
the public concerning material developments in its business;
55
<PAGE>
(l) promptly after the same is available, all pleadings, motions,
applications, judicial information, financial information and other documents
(with a copy to counsel to the Administrative Agent) filed by or on behalf of
the Borrowers with the Court or the United States Trustee in the Chapter 11
Cases or distributed by or on behalf of Borrowers to any official committee
appointed in the Chapter 11 Cases; and without limiting the generality of the
foregoing, the Borrowers shall promptly deliver to, and discuss with, the
Administrative Agent and its counsel any and all information and developments in
connection with any event or condition which is reasonably likely to have a
material effect on the Borrowers or the Chapter 11 Cases, including, without
limitation, the progress of any disclosure statement or any proposed Chapter 11
plan of reorganization, except where such information is protected as attorney
work product or is attorney-client privileged;
(m) promptly after the same is available but in any event no later
than October 15, 1999 and the 15th day of each second month thereafter, a
supplement to the Cash Plan setting forth, for the two calendar months
immediately following the month in which such supplement is required to be
delivered, a consolidated cash forecast for the Borrowers in substantially the
form of the Cash Plan attached hereto as Schedule 1 and in substance
----------
satisfactory to Required Lenders;
(n) no later than the 15th day of each month following the Closing
Date, (i) a status report indicating (x) any Hospital Facilities which are
subject to terminated Medicare or Medicaid contracts, conditional accreditation,
"fast track" 23-day termination of Medicare or Medicaid contracts or denial of
payment for new Medicare or Medicaid admissions or are operating under
involuntary receivership or involuntary management and (y) any Nursing Home
Facilities which are subject to terminated Medicare or Medicaid contracts, an
admissions hold or current civil money penalties in excess of $2,000 per day or
are operating under involuntary receivership or involuntary management, in
substantially the form of Exhibit K hereto (a "Healthcare Status Report", and
---------
any of the foregoing events required to be disclosed thereon being a "Reporting
Event") and (ii) a report indicating (x) which Properties Held For Sale have
been sold, the dates of such sales, the gross proceeds and Net Cash Proceeds
received from each such sale and any sales of other Properties Held For Sale
which are being negotiated or are otherwise pending on the date of such report
and (y) any properties subject to a Casualty Event or a Condemnation Event, the
amount of any Casualty Proceeds from any Casualty Event received by the
Borrowers, and the date of receipt thereof;
(o) within 5 Business Days after any Executive Officer or the
Financial Officer obtains knowledge of a change in status with respect to any
Reporting Event (other than current civil money penalties) or any Healthcare
Facility becoming subject to an additional Reporting Event (other than a current
civil money penalty), written notice thereof setting forth the nature of such
Reporting Event and what action the Borrowers have taken, are taking or propose
to take with respect thereto;
(p) with reasonable notice and upon the reasonable request of any
Lender from time to time, each Vencor Company shall make available for
inspection by such Lender at the chief executive office of Vencor, promptly
after the same is available or received, (a) copies of each cost
56
<PAGE>
report or interim cost report filed by any Borrower with Medicare, Medicaid or
any other third party payor or any summaries thereof prepared by any Borrower
and a copy, when received, of any response to such reports by the recipient
thereof; (b) copies of any and all statements, audits, studies or reports
submitted by or on behalf of any Borrower to any Governmental Authority or any
nationally-recognized accreditation association or commission; and (c) copies of
any and all audits, studies, or reports prepared by any Governmental Authority
or nationally recognized accreditation association or commission relating
specifically to the business or operations of any Borrower, in each case except
to the extent that making such items or information available for such
inspection is prohibited by Applicable Laws (notwithstanding the above, no
Lender shall be given access to any attorney work product, any attorney-client
privileged communication or any confidential or privileged peer review and like
confidential or privileged materials);
(q) promptly upon any Person becoming or ceasing to be a Subsidiary of
Vencor, an update to Schedule 4 hereto setting forth the information described
----------
in Section 4.13 with respect to each Subsidiary of Vencor (it being understood
that nothing in this Section 5.01(q) shall be deemed to permit or authorize the
creation, dissolution, liquidation or acquisition of a Subsidiary of Vencor not
otherwise permitted under this Agreement); and
(r) from time to time such additional information regarding the
financial position, results of operations or business of any Vencor Company or
the Chapter 11 Cases or such other matters relating to any Vencor Company as any
Lender may reasonably request through the Administrative Agent.
Section 5.02 Maintenance of Property. Each Vencor Company will keep
-----------------------
all property useful and necessary in its business in good working order and
condition, ordinary wear and tear and casualty excepted. Each Vencor Company
will maintain all property leased to it and all property operated by it under a
management contract as required by the provisions of the applicable lease or
management contract.
Section 5.03 Insurance.
---------
(a) Each Vencor Company will maintain insurance with responsible
companies in such amounts and against such risks as is usually carried by owners
of similar businesses and properties in the same general areas in which it
operates. In addition, each Vencor Company will insure all property leased to it
and all property operated by it under a management contract as required by the
provisions of the applicable lease or management contract.
(b) If any Vencor Company fails to maintain any insurance policy
required to be maintained under this Section 5.03, the Collateral Agent shall
have the right to maintain such policy or obtain a comparable policy, and in
either case pay the premiums therefor. If the Collateral Agent maintains or
obtains any such policy and pays the premiums therefor, Borrowers will reimburse
the Collateral Agent upon demand for its expenses in connection therewith,
including interest thereon for each day at a rate per annum equal to the Default
Rate.
57
<PAGE>
Section 5.04 Compliance with Law. Each Vencor Company will comply
-------------------
in all material respects with all Applicable Laws (including Medicare
Regulations, Medicaid Regulations, Environmental Laws and ERISA and the rules
and regulations thereunder), except where (i) the necessity of compliance
therewith is contested in good faith by appropriate measures or proceedings, in
which case adequate and reasonable reserves will be established in accordance
with GAAP and notice of each such contest (other than contests in the ordinary
course of business set forth in the form of footnotes to cost reports) shall be
given to the Administrative Agent, or (ii) failures to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 5.05 Maintenance of Existence, Rights, Etc.. Each Vencor
--------------------------------------
Company will preserve, renew and keep in full force and effect its existence and
its rights, privileges, licenses and franchises necessary or desirable in the
normal conduct of business; provided, however, that Vencor Companies may
consolidate or merge to the extent permitted under Section 7.03.
Section 5.06 Use of Proceeds and Letters of Credit. Subject to the
-------------------------------------
provisions of this Section 5.06, the proceeds of all Loans shall be applied in
accordance with this Agreement and the Cash Plan. The proceeds of the Loans and
the benefits of the Letters of Credit shall be applied to fund working capital
requirements and general corporate purposes relating to Borrowers' post-Petition
Date operations, all in accordance with, and limited by, those items set forth
in the Cash Plan; provided that no portion of the Loans or the benefits of the
--------
Letters of Credit shall be used, directly or indirectly, to (i) finance or make
or support any Restricted Payment except as permitted under Section 7.15; (ii)
make or support any payment or prepayment that is prohibited under this
Agreement, including any payment or prepayment in respect of Prepetition
Indebtedness to the extent prohibited hereunder; or (iii) make or support any
payment in settlement of any pre-Petition Date claim, action or proceeding,
before any court, arbitrator or other governmental body other than as permitted
by a First Day Order or Required Lenders; and provided further, however, that
-------- -------- -------
general corporate purposes shall not, in any event, include the making of
intercompany loans to Subsidiary Guarantors.
Section 5.07 Future Assets to be Added to Collateral.
---------------------------------------
(a) Concurrently with any Person becoming a Subsidiary or an Insurance
Subsidiary or ceasing to be an Excluded Partnership after the date hereof, the
Borrowers shall cause all Equity Interests in such Person owned by the Vencor
Companies to be pledged under the Security Agreement; provided that, if
regulatory consent is required to permit any such pledge of Equity Interests in
an Insurance Subsidiary, (i) such pledge shall not be required unless such
regulatory consent is reasonably obtainable and (ii) if such regulatory consent
is reasonably obtainable, the Borrowers shall exercise all reasonable efforts to
obtain it and shall not be required to pledge such Equity Interests until it is
obtained.
(b) No later than 10 days after the Closing Date, Borrowers shall
deliver to the Collateral Agent title insurance policies for the Appraised
Properties in scope, form and substance reasonably satisfactory to the
Collateral Agent. Upon the reasonable request of the Collateral Agent delivered
from time to time after the Closing Date, the Borrowers shall as soon as
reasonably
58
<PAGE>
practicable thereafter deliver to the Collateral Agent a Mortgage or Leasehold
Mortgage with respect to any real property interest (whether owned or leased) of
Vencor and its Subsidiaries that the Collateral Agent shall so request that was
not made subject to a Mortgage on the Closing Date in accordance with Section
3.01 (other than Properties Held For Sale), and the appropriate UCC form for the
related fixture filing, all in form and substance reasonably satisfactory to the
Collateral Agent, together with title insurance for all such owned real property
in scope, form and substance reasonably satisfactory to Collateral Agent.
(c) Concurrently with any Person becoming a Subsidiary or ceasing to
be an Excluded Partnership and such entity does not become a Borrower after the
date hereof, the Borrowers will (i) cause such Subsidiary to sign and deliver a
Subsidiary Guaranty Agreement and Security Agreement Supplement granting a Lien
or Liens on substantially all the personal property included in its assets (with
the exceptions set forth in the proviso at the end of Section 3 of the Security
Agreement and such other exceptions as the Collateral Agent shall have approved
in writing) to the Collateral Agent to secure its Secured Obligations and (ii)
cause such Subsidiary to comply with the provisions thereof and of the Security
Agreement and Subsidiary Guaranty Agreement. In the event that after the Closing
Date the Borrowers shall cause any of the Subsidiary Guarantors or Shell
Subsidiaries to be liquidated, dissolved or (in the case of the Subsidiary
Guarantors and Excluded Partnerships) joined as debtors in the Chapter 11 Cases,
the Subsidiary Guarantors or such Shell Subsidiaries (as the case may be) and
the Borrowers shall take all actions and execute all documents necessary or
reasonably requested by the Collateral Agent (i) to preserve and protect the
Collateral Agent's Lien (and the perfection and priority thereof) in the
Collateral, and no such liquidation or dissolution shall adversely affect the
Collateral Agent's Lien or the value thereof and (ii) to cause any such
Subsidiary Guarantor joining the Chapter 11 Cases to become bound as a Borrower
hereunder.
(d) Without expense or cost to any Agent or Lenders, each Borrower
shall from time to time hereafter execute, acknowledge, file, record, do and
deliver all and any further acts, deeds, conveyances, mortgages, deeds of trust,
deeds to secure debt, security agreements, hypothecations, pledges, charges,
assignments, financing statements and continuations thereof, notices of
assignment, transfers, certificates, assurances and other instruments as the
Administrative Agent or Collateral Agent may from time to time reasonably
request and that do not involve a material expansion of the Borrowers'
obligations or liabilities hereunder in order to carry out more effectively the
purposes of this Agreement, the other Financing Documents, the Interim Borrowing
Order or the Borrowing Order, including to subject any Collateral, intended to
now or hereafter be covered, to the Liens created by the Collateral Documents,
to perfect and maintain such Liens, and to assure, convey, assign, transfer and
confirm unto the Collateral Agent the property and rights thereby conveyed and
assigned or intended to now or hereafter be conveyed or assigned or that any
Borrower may be or may hereafter become bound to convey or to assign to the
Collateral Agent or for carrying out the intention of or facilitating the
performance of the terms of this Agreement, any other Financing Documents, the
Interim Borrowing Order or the Borrowing Order, registering or recording this
Agreement or any other Financing Document. Without limiting the generality of
the foregoing, the Borrowers shall deliver to the Collateral Agent, promptly
upon receipt thereof, all instruments received by the Borrowers after the
Closing Date and take all actions and execute all
59
<PAGE>
documents necessary or reasonably requested by the Collateral Agent to perfect
the Collateral Agent's Liens in any such instrument or any other Investment
acquired by any Borrower.
(e) The Borrowers shall jointly and severally pay all filing,
registration and recording fees and all expenses incident to the execution and
acknowledgement of any Mortgage or other Financing Document, including any
instrument of further assurance described in Section 5.07(d), and shall pay all
title insurance premiums, fees and expenses, mortgage recording taxes, transfer
taxes, general intangibles taxes and governmental stamp and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution, delivery, filing, recording or registration of any Mortgage or other
Financing Document, including any instrument of further assurance described in
Section 5.07(d), or by reason of its interest in, or measured by amounts payable
under, the Notes, the Mortgages or any other Financing Document, including any
instrument of further assurance described in Section 5.07(d), (excluding income,
franchise and doing business Taxes), and shall pay all stamp Taxes and other
Taxes required to be paid on the Notes or any other Financing Document;
provided, however, that such Borrower may contest in good faith and through
- --------
appropriate proceedings, any such Taxes, duties, imposts, assessments and
charges; provided further, however, that such Borrower shall pay all such Taxes,
--------
duties, imposts and charges when due to the appropriate taxing authority during
the pendency of any such proceedings if required to do so to stay enforcement
thereof. If any Borrower fails to make any of the payments described in the
preceding sentence within 10 days after notice thereof from the Collateral Agent
(or such shorter period as is necessary to protect the loss of or diminution in
value of any Collateral by reason of tax foreclosure or otherwise, as determined
by the Collateral Agent) accompanied by documentation verifying the nature and
amount of such payments, the Collateral Agent may (but shall not be obligated
to) pay the amount due and Borrowers shall jointly and severally reimburse all
amounts in accordance with the terms hereof.
(f) The Collateral Agent may, upon at least five days' prior notice to
the Borrowers, (i) appear in and defend any action or proceeding, in the name
and on behalf of the Agents, Lenders or any Borrower, in which any Agent or any
Lender is named or which the Collateral Agent in its sole discretion determines
is reasonably likely to materially adversely affect any Collateral, any
Collateral Document, the Lien thereof or any other Financing Document and (ii)
institute any action or proceeding which the Collateral Agent reasonably
determines should be instituted to protect the interest or rights of the Agents
and Lenders in any Collateral or under this Agreement or any other Financing
Document. The Borrowers, jointly and severally, agree that all reasonable costs
and expenses expended or otherwise incurred pursuant to this subsection
(including reasonable attorneys' fees and disbursements) by Agent shall be paid
pursuant to Section 11.03 hereof.
(g) Whenever any asset is added to the Collateral pursuant to this
Section 5.07, the Borrowers shall deliver to the Administrative Agent and
Collateral Agent such legal opinions and other documents as the Administrative
Agent or Collateral Agent may reasonably request relating to the existence of
the relevant Lien Grantor, the corporate or other authority for and validity of
the Collateral Documents applicable thereto, the creation and perfection (or due
recordation) of
60
<PAGE>
the Lien purportedly created thereby and any other matters
relevant thereto, all in form and substance satisfactory to the Administrative
Agent and Collateral Agent.
SECTION 5.08 Casualty Events
---------------
(a) All Casualty Proceeds received by the Collateral Agent or any Vencor
Company shall be deposited in the appropriate Casualty Proceeds Account (as
defined in the Security Agreement) established pursuant to Section 7(b) of the
Security Agreement and applied as follows:
(i) such Casualty Proceeds will be released by the Collateral
Agent from time to time, in accordance with Section 18(e) of the Security
Agreement, to restore, repair, replace or rebuild the asset in respect of
which such Casualty Proceeds were received; and
(ii) if within 120 days after such Casualty Proceeds are
received, the relevant Vencor Company shall not have expended or committed
to expend the full amount of such Casualty Proceeds to restore, repair,
replace or rebuild the asset in respect of which such Casualty Proceeds
were received (the excess of the amount of such Casualty Proceeds over the
amount of such expenditures and commitments, being "Excess Casualty
Proceeds"), then such Excess Casualty Proceeds shall be applied to prepay
Loans pursuant to Section 2.08(e) within two Business Days after the end of
such 120-day period.
(b) If any Condemnation Event occurs with respect to property owned or
leased by any Vencor Company, or if any negotiation or proceeding is commenced
which might result in such a Condemnation Event, or if any such Condemnation
Event is proposed or threatened, such Vencor Company (i) will, promptly after
receiving notice or obtaining knowledge thereof, do all things deemed necessary
or appropriate by it to preserve its interest in such property and promptly make
claim for awards payable with respect thereto and diligently pursue to
conclusion such claim and any suit, action or other proceeding necessary or
appropriate to obtain payment thereof and (ii) will not settle any such claim,
negotiation or proceeding without the consent of the Collateral Agent if an
Enforcement Notice is in effect.
SECTION 5.09 Cash Management System. Borrowers shall maintain the
----------------------
cash management system described in the First Day Orders.
SECTION 5.10 Certain Orders. On or before the date which is three
--------------
months after the Petition Date, the Borrowers shall file with the Court a joint
plan of reorganization and disclosure statement for the Borrowers and an
appropriate motion, application or other pleading and other material documents
requesting (i) the confirmation and consummation of a joint plan of
reorganization for the Borrowers, all of the foregoing (including without
limitation the terms and conditions of such plan of reorganization and all
payments and distributions to be made in connection therewith) to be in form and
substance satisfactory to Required Lenders or (ii) definitive agreements for the
sale of all, substantially all, or a material portion of their assets, all in
form and substance satisfactory to Required Lenders.
61
<PAGE>
SECTION 5.11 Dissolution of Shell Subsidiaries. As soon as
---------------------------------
practicable after the Closing Date, the Borrowers shall cause each of the Shell
Subsidiaries to be liquidated or dissolved and shall, in connection with the
foregoing, take all actions and execute all documents necessary or reasonably
requested by the Collateral Agent to grant to the Collateral Agent, on behalf of
Lenders, a valid and perfected first priority security interest in and to all
personal, real and mixed property, if any, of such Shell Subsidiaries.
SECTION 5.12 Post Closing Deliveries. The Borrowers shall deliver
-----------------------
to the Administrative Agent as soon as possible after receipt by the Borrowers
and in any event within 30 days after the Closing Date, personal property Lien
and tax and judgement Lien searches with respect to all personal, mixed and real
properties of the Borrowers and the Subsidiary Guarantors in the jurisdictions
specified by the Administrative Agent to the Borrowers on or prior to the
Closing Date, the results of which shall be reasonably satisfactory to the
Administrative Agent. The Borrowers shall also cause each document, certificate
or other item set forth on Schedule 13 hereto to be delivered within the time
-----------
period specified on such Schedule 13 and in form and substance reasonably
-----------
satisfactory to the Administrative Agent.
SECTION 5.13 Government Settlement. The Borrowers shall cause all
---------------------
existing disputes with the United States with respect to Medicare and/or under
the False Claims Act to be settled in a manner satisfactory to Determining
Lenders by the date which is 45 days after the Closing Date or such later date
that Determining Lenders may otherwise consent to (such date, in any event,
being the "Default Date"). Notwithstanding anything to the contrary herein,
failure to cause such disputes to be so settled by the Default Date shall be
deemed a Material Adverse Effect and an immediate Event of Default on such
Default Date for all purposes hereunder and under the other Financing Documents.
ARTICLE 6. Financial Covenants
Each of the Borrowers agrees that, so long as any Lender has any Credit Exposure
hereunder or any interest or fee accrued hereunder remains unpaid:
SECTION 6.01 Consolidated EBITDAR.
--------------------
Consolidated EBITDAR, calculated on a cumulative basis from September 1,
1999 as of the last day of each month set forth below, shall not be less than
the amount set forth below opposite such month:
62
<PAGE>
<TABLE>
<CAPTION>
Month Amount
----- ------
<S> <C>
September 1999 $ 19,000,000
October 1999 $ 45,000,000
November 1999 $ 74,000,000
December 1999 $106,000,000
January 2000 $140,000,000
February 2000 $175,000,000
</TABLE>
SECTION 6.02 Nursing Home Census. The Borrowers shall not permit the
-------------------
Nursing Home Daily Census as of any Census Measurement Day to be less than
30,000.
SECTION 6.03 Hospital Census. The Borrowers shall not permit the
---------------
Hospital Daily Census as of any Census Measurement Day during any month set
forth below to be less than the minimum Hospital Daily Census amount
corresponding to such month as set forth below:
<TABLE>
<CAPTION>
Minimum Hospital Daily Census
-----------------------------
Month Amount
----- ------
<S> <C>
September 1999 2,400
October 1999 2,450
November 1999 2,500
December 1999 2,500
January 2000 2,550
February 2000 2,650
</TABLE>
SECTION 6.04 Receivables. The Borrowers shall not permit the Net Amount of
-----------
Eligible Accounts at any time to be less than $400,000,000.
SECTION 6.05 Compliance with Cash Plan. Each Borrower agrees that if the
-------------------------
cumulative net cash flow set forth in the report for any two consecutive weeks
delivered pursuant to Section 5.01(a)(i) varies adversely from the amount of the
corresponding cumulative net cash flow set forth in the Cash Plan for each of
the corresponding weeks by an amount exceeding the "permitted variance" (as such
applicable "permitted variance" is set forth in the Cash Plan) for each of the
corresponding weeks, such variance shall constitute an immediate Event of
Default under this Agreement.
63
<PAGE>
SECTION 6.06 Capital Expenditures. The Borrowers shall not make any
--------------------
Consolidated Capital Expenditures, calculated on a cumulative basis from
September 1, 1999 through the last day of each month set forth below, in excess
of the correlative maximum amount set forth below:
<TABLE>
<CAPTION>
Maximum Consolidated
--------------------
Capital Expenditures
--------------------
Month Amount
----- ------
<S> <C>
September 1999 $15,000,000
October 1999 $30,000,000
November 1999 $45,000,000
December 1999 $60,000,000
January 2000 $65,000,000
February 2000 $70,500,000
</TABLE>
; provided, however, that Consolidated Capital Expenditures for any period in
which the purchase of the Cessna Citation Excel 560XL airplane (the "Cessna
Plane") which Vencor proposes to purchase and sell following the Closing Date
occurs shall not include any Consolidated Capital Expenditures expended to
purchase such plane as long as such plane is simultaneously sold for cash
consideration equal to or greater than such amount expended.
ARTICLE 7. Negative Covenants
Each of the Borrowers agrees that, so long as any Lender has any Credit
Exposure hereunder or any Obligation remains unpaid:
SECTION 7.01 Limitation on Debt. The Borrowers and their
------------------
Subsidiaries (other than the Insurance Subsidiaries and the Excluded
Partnerships) will not incur or be liable with respect to (i) any Debt of a type
described in clause (i), (ii) or (iv) of the definition of "Debt" in Section
1.01 or (ii) any Guarantee of any such Debt, except:
(a) Debt outstanding under the Financing Documents;
64
<PAGE>
(b) Permitted Intercompany Debt;
(c) Debt consisting of loans from Caribbean made prior to the Petition Date
in an aggregate amount not in excess of $400,000;
(d) Prepetition Indebtedness without giving effect to any extensions,
renewals, refinancings, supplemental borrowings or other incurrences thereof;
(e) Debt consisting of trade obligations arising in the ordinary course of
business after the Petition Date; and
(f) Debt incurred in connection with the rejection of unexpired leases and
executory contracts in the Chapter 11 Cases; provided, that the obligation of
--------
any Borrower in respect of such Debt shall qualify as a general, unsecured, non-
priority claim pursuant to appropriate order of the Court.
SECTION 7.02 Negative Pledge. No Vencor Company (other than the
---------------
Insurance Subsidiaries and the Excluded Partnerships) will create, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired by it (or
any income therefrom or any right to receive income therefrom), or apply to the
Court for authority to do any of the foregoing, except:
(a) Liens existing as of the Petition Date which (i) were created in favor
of Morgan as collateral agent for the benefit of the Existing Lenders under the
Existing Credit Facilities, or (ii) are set forth on Schedule 10 hereto, or
-----------
(iii) are not described in clause (i) or (ii) and secure obligations and
liabilities in an aggregate amount outstanding at any time not in excess of
$1,000,000;
(b) Permitted Encumbrances;
(c) Liens (i) created in favor of the Collateral Agent (for the benefit of
Lenders) pursuant to the Collateral Documents or (ii) authorized by the Interim
Borrowing Order or the Borrowing Order; and
(d) the Existing Lender Lien.
SECTION 7.03 Consolidations, Mergers and Asset Sales.
---------------------------------------
(a) No Vencor Company will consolidate or merge with or into, or sell,
lease or otherwise dispose of all or substantially all of its assets to any
other Person without (i) prior written approval of Required Lenders and (ii) an
appropriate approval of the Court, to the extent such Court approval is required
pursuant to the Bankruptcy Code or any order of the Court; provided that (A) the
--------
foregoing shall not prohibit transactions permitted by Section 7.03(b) or
Section 7.12 and (B) any Borrower or any Subsidiary Guarantor may merge or
consolidate with and into any other Borrower (in the case of a Borrower) or any
other Subsidiary Guarantor or any Borrower (in the case of a Subsidiary
Guarantor), or be liquidated, wound up or dissolved, or all or substantially all
of any
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Borrower's business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, to any Borrower, so long as (x) in any
such merger involving a Borrower, such Borrower shall be the continuing or
surviving entity, and (y) such Subsidiary Guarantor and the Borrowers shall have
taken all actions and executed all documents necessary or reasonably requested
by the Collateral Agent to preserve and protect the Collateral Agent's Lien (and
the perfection and priority thereof) in the assets of such Borrower and
Subsidiary Guarantor after giving effect to such transaction, and such
transaction shall not adversely affect the Collateral Agent's Lien in the assets
of the Vencor Companies involved in such transaction or the value thereof.
(b) No Vencor Company (other than an Excluded Partnership) will make any
Asset Sale without (i) prior written approval of Required Lenders and (ii) an
appropriate approval of the Court, to the extent such Court approval is required
pursuant to the Bankruptcy Code or any order of the Court; provided that (x) the
--------
foregoing shall not prohibit transactions permitted by Section 7.12 and (y)
clause (i) above shall not apply to any Asset Sale of any Properties Held For
Sale so long as (A) the consideration received from such Asset Sale shall be in
an amount at least equal to the fair market value thereof (or, in the case of
the Cessna Plane, in an amount in excess of the amount expended for the purchase
thereof), (B) the sole consideration received shall be cash, and (C) the Net
Cash Proceeds of such Asset Sale shall be applied as required by Section
2.08(a)(ii).
SECTION 7.04 Limitations on Investments. After the Closing, neither
--------------------------
the Borrowers nor any of their Subsidiaries (other than the Insurance
Subsidiaries and the Excluded Partnerships) will make, acquire or hold any
Investment, except:
(a) Investments existing on the Closing Date and set forth in Schedule 11
-----------
hereto;
(b) Investments by the Borrowers in any of the Borrowers or any of the
Subsidiaries of Borrowers and Investments by any Subsidiary of the Borrowers in
the Borrowers or any other Subsidiary of the Borrowers; provided that the
aggregate unrecovered amount of all such Investments made by the Borrowers and
their Subsidiaries in any Vencor Company which is not a Borrower or a Subsidiary
Guarantor after the Petition Date shall not exceed $1,000,000; and
(c) Temporary Cash Investments.
SECTION 7.05 Limitations on Transactions with Affiliates. No Venco
-------------------------------------------
Company will, directly or indirectly, pay any funds to or for the account of,
make any Investment in, lease, sell, transfer or otherwise dispose of any
assets, tangible or intangible, to, or participate in, or effect any transaction
in connection with any joint enterprise or other joint arrangement with, any
Affiliate; provided that the foregoing shall not prohibit any Vencor Company
from making sales to or purchases from any Affiliate and, in connection
therewith, extending credit or making payments, or from making payments for
services rendered by any Affiliate, including without limitation pursuant to the
Existing Affiliate Agreements, if such sales or purchases are made or such
services are (i) rendered in the ordinary course of business and on terms and
conditions at least as favorable to such Vencor Company as the terms and
conditions which would apply in a similar transaction with a Person not an
Affiliate; (ii) except with respect to the Existing Affiliate Agreements,
approved in
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writing by Required Lenders; and (iii) are approved by the Court to
the extent such approval is required pursuant to the Bankruptcy Code or an order
of the Court.
SECTION 7.06 Limitation on Restrictions Affecting Subsidiaries. No
-------------------------------------------------
Vencor Company will enter into, or suffer to exist, any agreement (other than
the Financing Documents) which is binding or enforceable after the Petition
Date, which prohibits or limits the ability of any Subsidiary of the Borrowers
(except an Insurance Subsidiary or an Excluded Partnership) to (i) pay dividends
or make other distributions or pay any Debt owed to any Vencor Company, (ii)
make loans or advances to any Vencor Company or (iii) create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, to secure the obligations of any Vencor Company
under any Financing Document.
SECTION 7.07 Restricted Payments. No Vencor Company will declare or
-------------------
make any Restricted Payment on or after the Closing Date other than as permitted
by Section 7.15.
SECTION 7.08 No Modification of Certain Documents Without Consent.
----------------------------------------------------
(a) No Vencor Company will consent to or solicit any amendment or
supplement to, or any waiver or other modification of, any Existing Affiliate
Agreement if the effect thereof would be to materially increase the amount, or
materially accelerate the date of payment, of any obligation of any of the
Vencor Companies thereunder.
(b) No Vencor Company will consent to or solicit any amendment or
supplement to, or any waiver or other modification of, any Prepetition
Reorganization Agreement, Master Lease Agreement, Third Party Lease or
Management Contract if the effect thereof could reasonably be expected to be
adverse in any material respect to the Vencor Companies, taken as a whole, or to
the Lenders.
(c) Without the prior written consent of the Required Lenders, the
Borrowers will not modify or amend, or waive or solicit any waiver of, any
provision of the Existing Note Indentures or the Existing Credit Facilities in
any manner that could reasonably be expected to be adverse in any material
respect to the interests of the Lenders under the Financing Documents.
SECTION 7.09 No Change of Fiscal Periods. Vencor will not change
---------------------------
the date on which any of its Fiscal Years or Fiscal Quarters ends, unless the
Required Lenders shall have consented to such change (which consent may be
conditioned on the amendment of any covenant herein that would be affected by
such change to eliminate the effect thereof).
SECTION 7.10 Margin Stock. None of the proceeds of the Loans or the
------------
Letters of Credit will be used in violation of any applicable law or regulation
and, without limiting the generality of the foregoing, no use of any such
proceeds or Letters of Credit will include any use thereof, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any Margin Stock.
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SECTION 7.11 Limitation on Business
----------------------
(a) Vencor will at all times own, directly or indirectly, 100% of the
outstanding Equity Interests of the Borrowers and will not engage in any
activities other than owning such Equity Interests and Equity Interests in other
Vencor Subsidiaries and financing activities and other activities reasonably
related to such ownership.
(b) Not more than 10% of the consolidated assets of the Vencor Companies
shall be used in any business or businesses other than the business of owning,
operating or managing Healthcare Facilities (including accepting risk for the
cost of long term care) and not more than 10% of their consolidated revenues in
any Fiscal Quarter shall be attributable to such other businesses.
(c) The Borrowers shall not permit Cornerstone or the Excluded Partnerships
to, and Cornerstone and the Excluded Partnerships shall not, engage in any
activities other than in the ordinary course of their respective businesses
consistent with their respective past practices, and the Borrowers shall in any
event not permit Cornerstone to, and Cornerstone shall not, (i) incur or
otherwise be liable with respect to Debt except Debt arising in connection with
unpaid insurance claims against Cornerstone in the ordinary course of business
or (ii) create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it other than Permitted Encumbrances.
SECTION 7.12 Leases. No Vencor Company shall lease or sublease any
------
facility pursuant to any lease agreement entered into after the Closing Date
except on arm's length terms; provided that this Section 7.12 shall not apply to
(i) any lease or sublease from the Borrowers to any Borrower or (iii) any lease
or sublease from any Subsidiary Guarantor to the Borrowers or to another
Subsidiary Guarantor. Without limiting the foregoing, the aggregate base rental
(as such term is used in the Master Lease Agreements) payments by all Vencor
Companies to all Ventas Companies in respect of Master Lease Properties shall
not exceed, in any month, $15,150,000.
SECTION 7.13 Limitation on Cash Not Held in Collateral Accounts or
-----------------------------------------------------
Concentration Accounts. The Borrowers will not permit the aggregate amount of
- ----------------------
all collected funds and Temporary Cash Investments held by the Vencor Companies
(other than the Insurance Subsidiaries) in accounts, other than the Collateral
Accounts (as defined in the Security Agreement) and the Concentration Accounts,
to exceed $2,000,000 at the close of business on any two consecutive Business
Days.
SECTION 7.14 Chapter 11 Claims. Without limiting the provisions of
-----------------
Section 7.02 hereof, no Borrower shall incur, create, assume, suffer or permit
any claim or Lien or encumbrance against it or any of its property or assets in
any Chapter 11 Case (other than the claims specifically referred to in Section
2.14, the Interim Borrowing Order and the Borrowing Order but only to the extent
therein described) to be pari passu with or senior to the claims of the Agents
---- -----
and Lenders against any Borrower in respect of the Obligations hereunder, or
apply to the Courts for authority to do so, except to the extent permitted
herein.
SECTION 7.15 Limitation on Repayments; Prepetition Obligations. The
-------------------------------------------------
Borrowers shall not, except as otherwise allowed pursuant to the Interim
Borrowing Order or the
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Borrowing Order, (i) make any payment or prepayment on or
redemption or acquisition for value (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities before due
for the purpose of paying when due) of any Prepetition Indebtedness or other
pre-Petition Date obligations of any Borrower, (ii) pay any interest on any
Prepetition Indebtedness of any Borrower (whether in cash, in kind securities or
otherwise), or (iii) except as provided in the Interim Borrowing Order or the
Borrowing Order, make any payment or create or permit any Lien pursuant to
Section 361 of the Bankruptcy Code (or pursuant to any other provision of the
Bankruptcy Code authorizing adequate protection), or apply to the Court for the
authority to do any of the foregoing; provided that (a) the Borrowers may make
--------
payments permitted under Section 2.14, (b) the Borrowers may make payments for
administrative expenses that are allowed and payable under Sections 330 and 331
of the Bankruptcy Code, (c) the Borrowers may make payments permitted by the
First Day Orders, (d) the Borrowers may make rental payments with respect to
leased properties to the extent permitted under Section 7.12, and (e) the
Borrowers may make payments to such other claimants and in such amounts as may
be consented to by the Administrative Agent and Required Lenders and approved by
the Court.
SECTION 7.16 Agreements. Without the consent of Required Lenders,
----------
the Borrowers shall not assume, reject, cancel, terminate or modify (whether
pursuant to Section 365 of the Bankruptcy Code, or any other applicable law),
(i) any Prepetition Indebtedness or (ii) any Prepetition Reorganization
Agreement or other Material Contract.
ARTICLE 8. Defaults
SECTION 8.01 Events of Default. If one or more of the following
-----------------
events (each, an "Event of Default") shall have occurred and be continuing:
(a) any principal of any Loan or LC Reimbursement Obligation shall not be
paid when due, or any interest thereon or any fee or other amount payable
hereunder to or for the account of any Agent or any Lenders shall not be paid
within three Business Days after the due date thereof; or
(b) the Borrowers shall fail to observe or perform any covenant contained
in Section 5.01(d), Article 6 or Article 7; or
(c) any Vencor Company shall fail to observe or perform any of its
covenants or agreements contained in the Financing Documents (other than those
covered by clause (a) or (b) above) for 30 days after written notice thereof has
been given to the Borrowers by the Administrative Agent at the request of any
Lender; or
(d) any representation, warranty, certification or statement made by any
Vencor Company in any Financing Document or in any certificate, financial
statement or other document delivered pursuant thereto shall prove to have been
incorrect in any material respect when made; or
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(e) any event or condition shall occur that (i) results in the
acceleration of the maturity of any Financial Accommodation which is binding or
enforceable on a post-Petition Date basis or (ii) enables (or, with the giving
of notice or lapse of time or both, would enable) the holder or holders of such
Financial Accommodation or any Person acting on behalf of such holder or holders
to accelerate the maturity thereof (where such acceleration would be binding or
enforceable on a post-Petition Date basis), and the aggregate amount that would
be payable by the Vencor Companies upon the acceleration of all Financial
Accommodations referred to in clauses (i) and (ii) above equals or exceeds
$1,000,000; or
(f) any Leased Property (as defined in any Master Lease Agreement) is
surrendered to or repossessed by the lessor; or the Court shall grant any
application, motion or pleading seeking to repossess or cause the surrender of
any such Leased Property; or any event of default under any Master Lease
Agreement occurs and as a result, the lessor under any Master Lease Agreement
shall have the right on a post-Petition Date basis to terminate any such Master
Lease Agreement or repossess or cause the surrender of any leased property
subject thereto; or
(g) one or more events or conditions shall occur that result (or, with the
giving of notice or lapse of time or both could result) in (i) the termination
of one or more Third Party Leases, or the surrender or repossession of the
property leased thereunder, prior to the scheduled termination thereof or (ii)
the termination of one or more Management Contracts prior to the scheduled
termination thereof; provided that (x) this subsection (g) shall not apply to
any voluntary termination of a Third Party Lease or Management Contract by a
Vencor Company at a time when no default by it thereunder exists or is
reasonably likely to occur and (y) no Event of Default shall exist under this
subsection (g) at any time, unless the EBITDA attributable to all Healthcare
Facilities then subject to a termination, surrender or repossession (or
potential termination, surrender or repossession) covered by this subsection (g)
and the EBITDA attributable to all Healthcare Facilities with respect to which
such a termination, surrender or repossession occurred during the preceding 12
months exceed, in the aggregate, 12% of Consolidated EBITDA (the EBITDA
attributable to each such Healthcare Facility to be calculated for the most
recent 12 months of full operation thereof for which the necessary financial
information is available and Consolidated EBITDA to be calculated for the most
recently ended period of four consecutive Fiscal Quarters for which the
necessary financial information is available, in each case annualized if such
financial information is not available for a full 12 months or a full four
Fiscal Quarters, as the case may be); or
(h) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $1,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of
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Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $1,000,000; or
(i) one or more Enforceable Judgments for the payment of money aggregating
in excess of $5,000,000 shall be rendered against one or more of the Vencor
Companies and shall not have been satisfied; or
(j) any Lien created by any of the Collateral Documents shall at any time
fail to constitute a valid and (except, in the case of the Subsidiary
Guarantors, if perfection of Liens is not otherwise required hereunder)
perfected Lien on all of the Collateral purported to be subject to such Lien,
subject to no prior or equal Lien (except as set forth in the Interim Borrowing
Order and the Borrowing Order and other than, in the case of the Subsidiary
Guarantors, Liens permitted hereunder and in existence on the Closing Date), or
any Vencor Company shall so assert in writing; or
(k) any provision of the Subsidiary Guaranty Agreement shall cease to be in
full force and effect or any Subsidiary Guarantor, or any Person acting on
behalf of any Subsidiary Guarantor, shall so assert in writing; or
(l) the Existing Notes shall, for any reason, not be or cease to be validly
subordinated as provided in the Existing Note Indentures to the monetary
obligations of the Borrowers under the Existing Credit Facility or Vencor's
guaranty of the Existing Notes shall, for any reason, not be or cease to be
validly subordinated to the Vencor Guaranty (as defined in the Existing Credit
Facilities) as provided in the Existing Note Indentures; or
(m) With respect to the Chapter 11 Cases, (i) the entry of an order which
has not been withdrawn, dismissed or reversed (a) authorizing any Borrower in
any of the Chapter 11 Cases to obtain additional financing under Section 364(c)
or (d) of the Bankruptcy Code, or authorizing any Person to recover from any
portion of the Collateral any costs or expenses of preserving or disposing of
such Collateral under Section 506(c) of the Bankruptcy Code, or (except as
provided in the Interim Borrowing Order or the Borrowing Order) authorizing the
use of cash collateral without Required Lenders prior written consent under
Section 363(c) of the Bankruptcy Code; (b) appointing an interim or permanent
trustee in any of the Chapter 11 Cases or the appointment of an examiner with
expanded powers in any of the Chapter 11 Cases; (c) without the prior written
consent of Lenders, dismissing any of the Chapter 11 Cases or converting any of
the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code; (d) the
entry of an order granting relief from or modifying the automatic stay of
Section 362 of the Bankruptcy Code (x) to allow any creditor to execute upon or
enforce a Lien on any Collateral or on any other property or assets of any
Borrower the aggregate value of which, together with the value of any other
property or assets subject to such executed or enforced Liens, exceeds
$1,000,000 or (y) with respect to any Lien of, or the granting of any Lien on
any Collateral or any other property or assets of any Borrower to, any State or
local environmental or regulatory agency or authority, where the aggregate value
of such property or assets, together with the value of any other property or
assets subject to such a Lien, exceeds $1,000,000; (e) amending, supplementing,
staying, reversing, vacating or otherwise modifying any of the Interim Borrowing
Order, the Borrowing Order or this Agreement or any other
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Financing Document or any of Agent's or Lenders' rights, benefits, privileges or
remedies under the Interim Borrowing Order, the Borrowing Order, this Agreement
or any other Financing Document; (f) consolidating or combining any Borrower
with any other Person (other than a Borrower or, so long as the Borrower is the
surviving entity, a Subsidiary Guarantor) except pursuant to a confirmed plan of
reorganization as contemplated in the plan of reorganization; or (g) approving,
or there shall arise, any other administrative expense claim (other than those
specifically referred to in Section 2.14 having any priority over, or being pari
----
passu with the administrative expense priority of the Obligations in respect of
- -----
any of the Chapter 11 Cases; or (ii) the filing by any Borrower of a motion,
application or other petition to effect or consent to any order referred to in
the foregoing clause (i) of this subsection (m); or
(n) (i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of any Subsidiary Guarantor in an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is not stayed;
or any other similar relief shall be granted under any applicable federal or
state law; or (ii) an involuntary case shall be commenced against any Subsidiary
Guarantor under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over any Subsidiary Guarantor, or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of any Subsidiary
Guarantor for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of any Subsidiary Guarantor, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or (iii) any Subsidiary Guarantor shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of any involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (iv) any Subsidiary Guarantor shall make
any assignment for the benefit of creditors; or (v) any Subsidiary Guarantor
shall be unable, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of Directors
of any Subsidiary Guarantor (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in this Section 8.01(n); provided, however, that none of the
foregoing events shall constitute an Event of Default if concurrently therewith,
with the consent of Required Lenders, (x) appropriate orders joining the
relevant Subsidiary Guarantor in the Chapter 11 Cases shall have been issued by
the Court, and such Subsidiary Guarantor and the Borrowers shall have executed
appropriate joinder agreements in form and substance satisfactory to the
Administrative Agent and Required Lenders joining such Subsidiary Guarantor as a
Borrower hereunder, and (y) (1) such Subsidiary Guarantor and the Borrowers
shall have taken all actions and executed all documents necessary or reasonably
requested by the Collateral Agent and (2) the Court shall have taken all actions
deemed necessary by the Collateral Agent, in each case to preserve and
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protect the Collateral Agent's Lien (and the perfection and priority thereof) in
the assets of such Subsidiary Guarantor; or
(o) (i)a Healthcare Event shall have occurred with respect to (x) three
(3) or more different Hospital Facilities or (y) fifteen (15) or more different
Nursing Home Facilities; or (ii) ten (10) or more different Hospital Facilities
or forty (40) or more different Nursing Home Facilities shall be subject to any
Reporting Event (including without limitation Reporting Events which are
Healthcare Events); or
(p) the Ventas Stipulation shall terminate in accordance with its terms
or expire or otherwise cease to be in full force and effect; or Vencor shall
fail to make payment of the Monthly Rent (as defined in the Ventas Stipulation)
in accordance with the terms of the Ventas Stipulation; or any Party (as defined
in the Ventas Stipulation) shall deliver to any other Party written notice of
its intent to terminate the Ventas Stipulation;
then, and in every such event:
(i) if requested by the Required Lenders, the Administrative Agent shall
(notwithstanding the provisions of Section 362 of the Bankruptcy Code and
without application or motion to, or order from, the Court) by notice to the
Borrowers terminate the Commitments and they shall thereupon terminate;
(ii) if requested by the Required Lenders, the Administrative Agent shall
(notwithstanding the provisions of Section 362 of the Bankruptcy Code and
without application or motion to, or order from, the Court) by notice to each LC
Issuing Bank instruct such LC Issuing Bank not to extend the expiry date of any
outstanding Letter of Credit, whereupon such LC Issuing Bank shall deliver
notice to that effect promptly (or as soon thereafter as is permitted by the
provisions of the relevant Letter of Credit) to the beneficiary of each such
Letter of Credit and the Borrowers; and
(iii) if requested by the Required Lenders, the Administrative Agent shall
(notwithstanding the provisions of Section 362 of the Bankruptcy Code and
without application or motion to, or order from, the Court) by notice to the
Borrowers declare the Loans, all amounts in respect of the Letters of Credit and
all other amounts in respect of the Obligations (in each case together with
accrued interest thereon) to be, and they shall thereupon become, immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrowers;
; provided that if any event specified above in Section 8.01(m) occurs, then
--------
without notice to any Borrower or any other act by any Agent or any Lender, the
Commitments shall thereupon terminate and all Loans and amounts in respect of
Letters of Credit and all other amounts in respect of the Obligations (in each
case together with accrued interest) shall become immediately due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrowers.
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SECTION 8.02 Notice of Default. The Administrative Agent shall give
-----------------
notice to the Borrowers under Section 8.01 promptly upon being requested to do
so by the Required Lenders and shall thereupon notify all the Lenders thereof.
SECTION 8.03 Enforcement Notice. If the Administrative Agent is (i)
------------------
instructed to do so by the Required Lenders at any time after the Loans become
immediately due and payable pursuant to Section 8.01, or (ii) instructed to do
so by the Required Lenders at any time after the Loans have been declared due
and payable pursuant to Section 8.01, the Administrative Agent shall deliver to
the Collateral Agent an Enforcement Notice directing the Collateral Agent to
exercise one or more specific remedies under the Collateral Documents, the
Interim Borrowing Order, the Borrowing Order, or any other right or remedy
available at law or in equity; provided that, any other provision of this
--------
Agreement or any other Financing Document to the contrary notwithstanding, with
respect to the foregoing, the Collateral Agent shall give the Borrowers and
counsel to any official committees in respect of the Chapter 11 Cases and the
office of the United States Trustee five Business Days' prior written notice
(which notice shall be delivered by facsimile or overnight courier) of the
exercise of its rights and remedies with respect to the Collateral (other than
the acceleration of the Loans or other Obligations or the exercise of any rights
of set-off or counterclaim hereunder or under any other Financing Document) and
file a copy of such notice with the Clerk of the Court. Neither the Collateral
Agent nor Lenders shall have any obligation of any kind to make a motion or
application to the Court to exercise their rights and remedies set forth or
referred to in this Agreement or in the other Financing Documents. Concurrently
with the delivery of any such Enforcement Notice to the Collateral Agent, all
outstanding Loans and other amounts in respect of the Obligations not
theretofore declared due and payable shall (notwithstanding the provisions of
Section 362 of the Bankruptcy Code and without application or motion to, or
order from, the Court) automatically become immediately due and payable.
Other than the notice to the Borrowers described in the preceding
paragraph, Borrowers waive (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties or other property at any
time held by Agent or Lenders on which Credit Parties may in any way be liable
and hereby ratify and confirm whatever Agent and Lenders may lawfully do in this
regard, (ii) subject to the notice provisions of the preceding paragraph, all
rights to notice and hearing prior to Agent's taking possession or control of,
or to Agent or Lenders reply, attachment or levy upon, the Collateral, or any
bond or security which might be required by any court prior to allowing Agent or
Lenders to exercise any of their remedies, and (iii) the benefit of all
valuation, appraisal and exemption laws. Borrowers acknowledge they have been
advised by counsel of their choice with respect to the effect of the foregoing
waivers and this Agreement, the other Financing Documents and the transactions
evidenced by this Agreement and the other Financing Documents.
SECTION 8.04 Cash Cover. The Borrowers agree that, if any Event of
----------
Default shall have occurred and be continuing, the Borrowers shall, if requested
by the Administrative Agent upon instruction from the Required Lenders, pay to
the Collateral Agent an amount in immediately
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available funds equal to the then aggregate amount available for subsequent
drawings under all outstanding Letters of Credit to be held for the benefit of
the Lenders and the LC Issuing Banks in accordance with the Collateral Documents
to secure the payment of all LC Reimbursement Obligations arising from
subsequent drawings under such Letters of Credit.
ARTICLE 9. The Agents
SECTION 9.01 Appointment and Authorization
-----------------------------
(a) Each Lender irrevocably appoints the Administrative Agent to
act as its agent in connection herewith and authorizes the Administrative Agent
to take such action as agent on such Lender's behalf and to exercise such powers
under the Financing Documents as are delegated to the Administrative Agent by
the terms thereof, together with all such powers as are reasonably incidental
thereto. Notwithstanding anything contained herein to the contrary, the Arranger
shall not have any rights (other than the right to receive and retain the fees
described in Section 2.06 payable to it), duties or obligations hereunder or
under the other Financing Documents solely in such capacity.
(b) Each of the Lenders, the LC Issuing Banks and the Administrative
Agent authorizes the Collateral Agent to execute the Collateral Documents and
irrevocably appoints and authorizes the Collateral Agent to take such action as
agent on its behalf and to exercise such powers under the Collateral Documents
as are delegated to the Collateral Agent by the terms thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 9.02 Agents and Affiliates. Morgan shall have the same
---------------------
rights and powers under the Financing Documents as any other Lender and may
exercise or refrain from exercising the same as though it were not one of the
Agents. Morgan and its affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with any of the Vencor Companies or
their Affiliates as if it were not one of the Agents.
SECTION 9.03 Action by Agents. The obligations of each of the
----------------
Agents under the Financing Documents are only those expressly set forth therein
with respect to it. Without limiting the generality of the foregoing, none of
the Agents shall be required to take any action with respect to any Default,
except as expressly provided in Article 8 hereof and in the Collateral
Documents.
SECTION 9.04 Consultation with Experts. Each of the Agents may
-------------------------
consult with legal counsel (who may be counsel for any Vencor Company),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 9.05 Liability of Agents. None of the Agents or their
-------------------
respective affiliates or their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
with the Financing Documents (A) with the consent or at the request of the
Required Lenders or (B) in the absence of its own gross negligence or willful
misconduct. None of the Agents or their respective affiliates or their
respective directors, officers, agents or employees
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shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with any
Financing Document or any Credit Event; (ii) the performance or observance of
any of the covenants or agreements of any Vencor Company under any Financing
Document; (iii) the satisfaction of any condition specified in Article 3 except,
in the case of the Administrative Agent, receipt of items required to be
delivered to it; (iv) the validity, effectiveness or genuineness of any
Financing Document or any other instrument or writing furnished in connection
therewith; or (v) the existence, genuineness or value of any of the Collateral
or the validity, perfection, recordation, priority or enforceability of any Lien
on any of the Collateral. None of the Agents shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile copy or similar writing) believed by
it to be genuine or to be signed by the proper party or parties.
SECTION 9.06 Indemnification. The Lenders shall, ratably in
---------------
accordance with their respective Credit Exposures, indemnify each Agent, their
respective affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Vencor Companies) against any
cost, expense (including reasonable counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from such indemnitee's
gross negligence or willful misconduct) that such indemnitee may suffer or incur
in connection with the Financing Documents or any action taken or omitted by
such indemnitees thereunder.
SECTION 9.07 Credit Decision. Each Lender acknowledges that it has,
---------------
independently and without reliance on the Agents or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agents or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.
SECTION 9.08 Successor Agents. Any Agent may resign at any time (a
----------------
"Retiring Agent") by giving notice thereof to the Lenders, the other Agents and
the Borrowers. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor for the Retiring Agent (a "Successor Agent"). If
no Successor Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the Retiring Agent
gives notice of resignation, then the Retiring Agent may, on behalf of the
Lenders, appoint a Successor Agent, which shall be a Lender or any other
commercial bank organized or licensed under the laws of the United States or any
State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of its appointment as a Successor Agent, such
Successor Agent shall thereupon, without order of the Court, succeed to and
become vested with all the rights and duties of the Retiring Agent, and the
Retiring Agent shall be discharged from its duties and obligations hereunder.
After any Retiring Agent resigns as an Agent hereunder, the provisions of this
Article 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was one of the Agents.
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SECTION 9.09 Collateral Agent
----------------
(a) As to any matters not expressly provided for in the Collateral
Documents (including the timing and methods of realization upon the Collateral),
the Collateral Agent shall act or refrain from acting in accordance with written
instructions from the Required Lenders or, in the absence of such instructions,
in accordance with its discretion; provided that the Collateral Agent shall not
be obligated to take any action if the Collateral Agent believes that such
action is or may be contrary to any applicable law or might cause the Collateral
Agent to incur any loss or liability for which it has not been indemnified to
its satisfaction.
(b) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of any Lien on any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part under the Collateral Documents. The Collateral Agent shall have no duty
to ascertain or inquire as to the performance or observance of any of the terms
of the Collateral Documents by the Vencor Companies.
ARTICLE 10. Changes In Circumstances
SECTION 10.01 Increased Cost and Reduced Return
---------------------------------
(a) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender Party
(other than the Agents) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency, shall
impose, modify or deem applicable any reserve, special deposit, insurance
assessment or similar requirement (including any such requirement imposed by the
Board of Governors of the Federal Reserve System) against assets of, deposits
with or for the account of, or credit extended by, any Lender Party (other than
the Agents) or shall impose on any Lender Party (other than the Agents) any
other condition affecting its Notes or its obligation to participate in any
Letter of Credit, and the result of any of the foregoing is to increase the cost
to such Lender Party of participating in any Letter of Credit or to reduce the
amount of any sum received or receivable by such Lender Party under this
Agreement or under its Notes with respect thereto, by an amount deemed by such
Lender Party to be material, then, within 15 days after demand by such Lender
Party (with a copy to the Administrative Agent), the Borrowers shall pay to such
Lender Party such additional amount or amounts as will compensate such Lender
Party for such increased cost or reduction; provided that the Borrowers shall
not be liable to any Lender Party in respect of any such increased cost or
reduction with respect to any period of time more than three months before the
Borrowers receive the notice required by the first sentence of Section 10.01(c)
or more than six months before the Borrowers receive the relevant certificate
referred to in the second sentence of Section 10.01(c).
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(b) If any Lender Party (other than the Agents) shall have determined
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any such law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Lender Party (or its Parent) as a consequence
of such Lender Party's obligations hereunder to a level below that which such
Lender Party (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Lender Party to be material, then
from time to time, within 15 days after demand by such Lender Party (with a copy
to the Administrative Agent), the Borrowers shall pay to such Lender Party such
additional amount or amounts as will compensate it for such reduction; provided
that the Borrowers shall not be liable to any Lender Party in respect of any
such reduction with respect to any period of time more than three months prior
to the date of the notice required by the first sentence of Section 10.01(c).
(c) Each Lender Party (other than the Agents) will promptly notify
the Borrowers and the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle it to
compensation pursuant to this Section and will designate a different Lending
Office or LC Office if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the judgment of such Lender Party,
be otherwise disadvantageous to it. A certificate of any such Lender Party
claiming compensation under this Section 10.01 and setting forth the additional
amount or amounts to be paid to it hereunder, showing the calculation thereof in
reasonable detail, shall be conclusive in the absence of manifest error. In
determining such amount, such Lender Party may use any reasonable averaging and
attribution methods.
SECTION 10.02 Taxes.
-----
(a) Any and all payments by the Vencor Companies to or for the
account of any Lender Party under any Financing Document shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender Party, taxes imposed on its net
income, and franchise or similar taxes imposed on it, by (i) the jurisdiction
under the laws of which it is organized or any political subdivision thereof,
(ii) in the case of each Lender, the jurisdiction of its Lending Office or any
political subdivision thereof and (iii) in the case of each LC Issuing Bank, the
jurisdiction of its LC Office or any political subdivision thereof
(all such non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If any
Vencor Company shall be required by law to deduct any Taxes from or in respect
of any sum payable under any Financing Document to any Lender Party, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 10.02) such Lender Party receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the relevant Vencor
Company shall make such deductions, (iii) such Vencor Company
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shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law, and (iv) such Vencor Company shall
furnish to the Administrative Agent, at its address specified in or pursuant to
Section 11.01, the original or a certified copy of a receipt evidencing payment
thereof.
(b) In addition, the Borrowers agree to pay any present or future
stamp or documentary taxes or any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any other
Financing Document or from the execution or delivery of, or otherwise with
respect to, any Financing Document (hereinafter referred to as "Other Taxes").
(c) The Borrowers agree to indemnify each Lender Party for the full
amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 10.02) paid
by such Lender Party and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 15 days from the date such Lender Party makes demand therefor.
(d) Each Lender Party organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Lender Party listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender Party in the
case of each other Lender Party, and from time to time thereafter if requested
in writing by the Borrowers (but only so long as such Lender Party remains
lawfully able to do so), shall provide the Borrowers and the Administrative
Agent with (i) Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Lender Party is entitled to benefits under an income tax treaty to which
the United States is a party which reduces the rate of withholding tax on
payments of interest under the Financing Documents or certifying that the income
receivable pursuant to the Financing Documents is effectively connected with the
conduct of a trade or business in the United States or (ii) if such Lender is
not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue
Code, Internal Revenue Service form W-8 or any successor form prescribed by the
Internal Revenue Service claiming complete exemption from, or a reduced rate of,
withholding tax on payments of interest under the Financing Documents. If the
form provided by a Lender Party at the time such Lender Party first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be excluded from "Taxes"
as defined in Section 10.02(a).
(e) For any period with respect to which a Lender Party has failed to
provide the Borrowers and the Administrative Agent with the appropriate form
pursuant to Section 10.02(d) (unless such failure is due to a change in treaty,
law or regulation occurring subsequent to the date on which a form originally
was required to be provided), such Lender Party shall not be entitled to
indemnification under Section 10.02(a) with respect to Taxes imposed by the
United States; provided that should a Lender Party, which is otherwise exempt
from or subject to a reduced rate of withholding tax, become subject to Taxes
because of its failure to deliver a form required hereunder,
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the relevant Vencor Company shall take such steps as such Lender Party shall
reasonably request to assist such Lender Party to recover such Taxes.
(f) If any Vencor Company is required to pay additional amounts to or
for the account of any Lender Party pursuant to this Section 10.02, then such
Lender Party will change the jurisdiction of its Lending Office or LC Office, as
the case may be, so as to eliminate or reduce any such additional payment which
may thereafter accrue if such change, in the sole judgment of such Lender Party,
is not otherwise disadvantageous to such Lender Party.
(g) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Vencor Companies
contained in this Section 10.02 (as set forth herein and incorporated by
reference in the Subsidiary Guaranty Agreement) shall survive the payment in
full of the principal of and interest on the Loans and the LC Reimbursement
Obligations.
ARTICLE 11. Miscellaneous
SECTION 11.01 Notices. Unless otherwise specified herein, all
-------
notices, requests and other communications to any party under any Financing
Document shall be in writing (including bank wire, facsimile copy or similar
writing) and shall be given to such party at its address or facsimile number set
forth on the signature pages hereof (or, in the case of any Lender, in its
Administrative Questionnaire) or such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Agents and the
Borrowers. Each such notice, request or other communication shall be effective
(i) if given by facsimile transmission, when transmitted to the facsimile number
specified in or pursuant to this Section 11.01 and confirmation of receipt is
received, (ii) if given by mail, ten days after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid, or (iii)
if given by any other means, when delivered at the address specified in or
pursuant to this Section 11.01, provided that notices and requests to the
Administrative Agent under Article 2, 8 or 10 shall not be effective until
received. NOTICE TO VENCOR OPCO UNDER THIS AGREEMENT OR UNDER ANY OTHER
FINANCING DOCUMENT SHALL CONSTITUTE NOTICE TO ALL BORROWERS AND ALL SUBSIDIARY
GUARANTORS FOR ALL PURPOSES HEREUNDER AND THEREUNDER, AND NOTICE FROM VENCOR
OPCO UNDER THIS AGREEMENT OR UNDER ANY OTHER FINANCING DOCUMENT PURPORTING TO BE
NOTICE FROM ALL BORROWERS SHALL CONSTITUTE NOTICE FROM ALL BORROWERS FOR ALL
PURPOSES HEREUNDER AND THEREUNDER. Each Borrower other than Vencor Opco hereby
irrevocably appoints Vencor Opco as such Borrower's agent and attorney-in-fact,
with full authority in the place and stead of such Borrower and in the name of
such Borrower, the Borrowers, Vencor Opco or otherwise, from time to time in
Vencor Opco's discretion to execute and deliver (and receive, where applicable)
Notices of Borrowing, LC Requests, Prepayment Notices and other written notices
and communications hereunder on behalf of the Borrowers to the Agents and the
Lenders, and to deliver unwritten notices and communications to the foregoing
effect, and each Lender Party shall be entitled to rely upon any such Notice of
Borrowing, LC Request, Prepayment Notice, notice or communication as a notice,
communication or consent, as the case may be, of the
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Borrowers, and shall incur no liability to any Borrower or the Borrowers in
acting upon any such notice or communication, that such Lender Party believes in
good faith to have been given by a duly authorized officer or other person
authorized by Vencor Opco.
SECTION 11.02 No Waiver. No failure or delay by the Lender Parties,
---------
or any of them, in exercising any right, power or privilege under any Financing
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies provided in the
Financing Documents shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 11.03 Expenses; Indemnification.
-------------------------
(a) In addition to any expenses set forth in and required to be paid
to any Persons pursuant to the Interim Borrowing Order or the Borrowing Order or
any other applicable order of the Court, the Borrowers shall pay on demand all
the actual and reasonable costs, fees and expenses of (i) preparation of the
Financing Documents and any consents, amendments, waivers or other modifications
thereto; (ii) furnishing all opinions by counsel for Vencor and its Subsidiaries
(including any opinions reasonably requested by the Administrative Agent or
Required Lenders as to any legal matters arising hereunder) and of Vencor's and
its Subsidiaries' performance of and compliance with all agreements and
conditions on its part to be performed or complied with under this Agreement and
the other Financing Documents, including with respect to confirming compliance
with environmental, insurance and solvency requirements; (iii) counsel to the
Agents (including allocated costs of internal counsel and fees and expenses of
O'Melveny & Myers LLP and Davis, Polk & Wardwell, special counsel to the Agents)
in connection with the negotiation, preparation, execution and administration of
the Financing Documents and any consents, amendments, waivers or other
modifications thereto and any other documents or matters requested by Vencor or
its Subsidiaries; (iv) creating and perfecting Liens in favor of Collateral
Agent on behalf of Lenders pursuant to any Collateral Document, including filing
and recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums, and reasonable fees, expenses and disbursements of
counsel to any Agent and of counsel providing any opinions that any Agent or
Required Lenders may request in respect of the Collateral Documents or the Liens
created pursuant thereto; (v) any advisors, auditors, accountants or appraisers
or other consultants or agents employed or retained by any Agent or the Lenders
or their counsel including, without limitation, any financial, accounting or
valuation advisors; (vi) the Agents in connection with the custody or
preservation of any of the Collateral; (vii) the Agents in connection with the
syndication of the Commitments and the negotiation, preparation and execution of
the Financing Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby, and (viii) if
any Event of Default occurs, any Lender Party, including actual and reasonable
costs, fees and expenses of counsel, in connection with such Event of Default
and collection, bankruptcy, insolvency (including pursuant to the Chapter 11
Cases) and other enforcement proceedings resulting therefrom, including the
negotiation of any restructuring or "workout" of the Borrowers' obligations
under the Financing Documents. Without limiting the generality of the foregoing,
if, at any time or times, regardless of the existence of an Event of Default,
any Agent or
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any Lender shall incur actual and reasonable fees, costs and expenses itself or
employ counsel or other professional advisors, including, but not limited to,
environmental, financial and management consultants, for advice or other
representation or shall incur legal, appraisal, accounting, consulting or other
actual and reasonable fees, costs and expenses in connection with:
(i) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by any Agent, any Lender, any Borrower or any other
Person) in any way relating to the Collateral, any of the Financing
Documents, or any other agreements to be executed or delivered in
connection therewith or herewith, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case or proceeding commenced by or against
any Borrower or any other Person that may be obligated to any Agent or any
Lender by virtue of the Financing Documents, under the Bankruptcy Code, or
any other applicable Federal, state, or foreign bankruptcy or other similar
law;
(ii) any attempt to enforce any rights or remedies of any Agent or any
Lender against any Borrower, or any other Person that may be obligated to
Agent or any Lender by virtue of being a party to any of the Financing
Documents;
(iii)any attempt to appraise, inspect, verify, protect, collect,
sell, liquidate or otherwise dispose of the Collateral; or
(iv) any Chapter 11 Case (including, without limitation, the on-going
monitoring by any Agent of any Chapter 11 Case, including attendance by any
Agent and its counsel at hearings or other proceedings and the on-going
review of documents filed with a Court in respect thereof) and Agents' and
Lenders' interests with respect to any Borrower (including, without
limitation, the on-going review of any Borrower's business, assets,
operations, prospects or financial condition as any Agent shall deem
necessary), the Collateral or the Obligations;
then, and in any such event, the reasonable fees and expenses incurred by any
Agent, such Lender and such attorneys and other professional advisors and
consultants arising from such services, including those of any appellate
proceedings, and all reasonable expenses, costs, charges and other fees incurred
by such counsel or other professionals in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section 11.03 shall be payable, on demand, by the Borrowers to any Agent and
such Lender and shall be additional Obligations secured under the Collateral
Documents and the other Financing Documents. Without limiting the generality of
the foregoing, such expenses, costs, charges and fees may include: paralegal
fees, costs and expenses; accountants' and experts' fees, costs and expenses;
appraisers' fees, costs and expenses; management and other consultants' fees,
costs and expenses; court costs and expenses; photocopying and duplicating
expenses; court reporter fees, costs and expenses; long distance telephone
charges; communication charges, air express charges; telegram charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other professional
services.
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(b) In addition to the payment of expenses pursuant to Section
11.03(a), whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to defend (subject to Indemnitee's selection of
counsel), indemnify, pay and hold harmless Agents and Lenders, and the officers,
directors, employees, agents and affiliates of the Agents and Lenders
(collectively called the "Indemnitees"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided, that the Borrowers
--------
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as determined
by a final judgment of a court of competent jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively, any and
all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including environmental
claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, clean-up, removal, remediation or other response action
necessary to remove, remediate, clean up or abate any hazardous materials
activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statues, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and environmental laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Financing Documents or the
transactions contemplated hereby or thereby (including Lenders' agreement to
make the Loans hereunder or the use or intended use of the proceeds thereof or
the issuance of letters of credit hereunder or the use or intended use of any
thereof, or any enforcement of any of the Financing Documents (including any
sale of, collection from, or other realization upon any of the Collateral or the
enforcement of the Subsidiary Guaranty Agreement, or (ii) any environmental
claim or any hazardous materials activity relating to or arising from, directly
or indirectly, any past or present activity, operation, land ownership, or
practice of Borrowers and their Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this Section 11.03(b) may be unenforceable in whole or in
part because they are violative of any law or public policy, the Borrowers shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them. Without prejudice to the survival of
any other agreement of the Borrowers hereunder, the agreements and obligations
of the Borrowers contained in this Section 11.03 (as set forth herein and
incorporated by reference in the Subsidiary Guaranty Agreement) shall survive
the payment in full of the principal of and interest on the Loans and the LC
Reimbursement Obligations.
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SECTION 11.04 Sharing of Set-offs.
-------------------
(a) Each Lender agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, or as adequate protection of a deposit
treated as cash collateral under the Bankruptcy Code, receive payment of a
proportion of the aggregate amount of principal and interest then due (or
overdue) with respect to the Loans and participations in LC Reimbursement
Obligations (if any) held by it which is greater than the proportion received by
any other Lender in respect of the aggregate amount of principal and interest
then due (or overdue) with respect to the Loans and participations in LC
Reimbursement Obligations (if any) held by such other Lender, the Lender
receiving such proportionately greater payment shall purchase such
participations in the Loans and participations in LC Reimbursement Obligations
(if any) held by the other Lenders, and such other adjustments shall be made, as
may be required so that all such payments of principal and interest with respect
to the Loans and participations in LC Reimbursement Obligations held by the
Lenders shall be shared by the Lenders pro rata, subject to Section 2.16.
(b) Nothing in this Section 11.04 shall impair the right of any
Lender, and notwithstanding the provisions of Section 362 of the Bankruptcy Code
and without application or motion to, or order from, the Court, to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the relevant Vencor Company
other than its indebtedness in respect of the Loans and LC Reimbursement
Obligations.
(c) The Borrowers agree, to the fullest extent they may effectively do
so under applicable law, that any holder of a participation in a Loan or LC
Reimbursement Obligation, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrowers in the amount of such participation.
SECTION 11.05 Amendments and Waivers.
----------------------
(a) Neither this Agreement nor any other Financing Document, nor any
terms hereof or thereof, may be amended, supplemented or modified except in
accordance with the provisions of this Section 11.05.
(b) Except as set forth in subsections (c) through (j) of this Section
11.05, the Required Lenders (or the Administrative Agent with their written
consent) may from time to time (i) enter into written amendments, supplements or
modifications of any Financing Document (which shall not be effective unless
signed by each Vencor Company party thereto) for the purpose of adding any
provisions to such Financing Document or changing in any manner the rights of
the parties hereunder or thereunder or (ii) waive, on such terms and conditions
as the Required Lenders (or the Administrative Agent with their written consent)
may specify in such instrument, any of the requirements of any Financing
Document or any Default or Event of Default and its consequences (any such
amendment, supplement, modification or waiver, a "Specified Change"); provided
that
(1) without the written consent of the relevant LC Issuing Bank,
no Specified Change shall amend, supplement or otherwise modify any
Letter of Credit
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or any provision of this Agreement governing the rights or obligations
of such LC Issuing Bank;
(2) without the written consent of the then Agents, no Specified
Change shall amend, modify or waive any provision of Article 9 or any
other provision of this Agreement governing the rights or obligations
of the Agents; and
(3) without the written consent of all the Lenders, no Specified
Change shall reduce the percentage specified in the definitions of
"Required Lenders", "Determining Lenders" and "Supermajority Lenders".
(c) Without the written consent of the Required Lenders, no Specified
Change shall (i) waive any of the conditions precedent set forth in Section 3.01
(except that the making of a Loan by any Lender on the date of initial Borrowing
shall be deemed to constitute a waiver of such conditions precedent by such
Lender), (ii) waive any Default or Event of Default and its consequences or
(iii) amend, supplement or otherwise modify any provision of Section 8.01.
(d) Without the written consent of the all Lenders, no Specified
Change shall take any action which has the effect of releasing all or
substantially all of the Collateral or releasing all or substantially all of the
Subsidiary Guarantors from their obligations under the Subsidiary Guaranty
Agreement, except in each case as expressly provided in this Agreement or any
Collateral Document.
(e) Without the written consent of all the Lenders, no Specified
Change shall (i) consent to the assignment or transfer by any Borrower of any of
its rights and obligations under the Financing Documents, (ii) increase the
aggregate amount of the Credit Exposure of all Lenders or include, as
indebtedness under this Agreement, any indebtedness of the Vencor Companies
other than the Borrowers' indebtedness under the Credit Facilities, (iii) permit
the Tranche A Loans and Tranche A Commitment of any Lender, on the one hand, and
the Tranche B Loans and Tranche B Commitment of such Lender, on the other hand,
to be assigned on a non-pro rata basis, (iv) change the definition of "Tranche B
Commencement Date", or (v) change the priority claim status of the Obligations.
(f) Without the written consent of each Lender directly affected
thereby, no Specified Change shall reduce the amount or extend the scheduled
date of maturity of any Loan, or reduce the stated rate of any interest or fee
payable hereunder or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Commitment (it being
understood that no amendment, modification or waiver of any condition precedent,
covenant or Default shall constitute an increase in any Commitment of any
Lender, and that no increase in the available portion of any Commitment of any
Lender shall constitute an increase in such Commitment of such Lender) or amend,
modify or waive any provision of this subsection (f).
(g) Without the written consent of each Lender directly affected
thereby, no Specified Change shall change (i) any provision hereof requiring
payments with respect to the Tranche A Commitments and the Tranche A Loans to be
allocated on a pro rata basis among the
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Lenders having Tranche A Exposure or (ii) any provision hereof requiring
payments with respect to the Tranche B Commitments and the Tranche B Loans to be
allocated on a pro rata basis among the Lenders having Tranche B Exposure.
(h) Without the written consent of Supermajority Lenders, no Specified
Change shall (i) waive, reduce or postpone any Unscheduled Mandatory Prepayment
or unscheduled mandatory reduction of the Tranche A Commitments or the Tranche B
Commitments pursuant to Section 2.08, (ii) change the definition of "Commitment
Termination Date" if the effect of such change would be to extend the date of
termination of the Commitments beyond the date on which the Commitments would
terminate in the absence of such change, or (iii) increase the amount set forth
in the definition of "Borrowing Base" for any period.
(i) Without the written consent of Determining Lenders, no Specified
Change shall amend, modify or waive any provision of Section 5.13.
(j) Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Lenders, the Agents, all future holders of the Loans, the Borrowers, Vencor and
the Subsidiary Guarantors.
SECTION 11.06 Successors and Assigns
----------------------
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrowers may not assign or otherwise transfer any of
its rights under this Agreement without the prior written consent of all the
Lenders and the LC Issuing Banks. Any attempted assignment or transfer in
contravention of the foregoing shall be null and void.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any or all of its
Loans and/or its Tranche A Commitment and its Tranche B Commitment (on a pro
rata basis) or its LC Exposure. If any Lender grants a participating interest
to a Participant, whether or not upon notice to the Vencor Companies and the
Agents, such Lender shall remain responsible for the performance of its
obligations hereunder, and the Borrowers and the Agents shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Financing Documents. Any agreement pursuant to which any
Lender may grant such a participating interest shall provide that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Vencor Companies or any other party under the Financing Documents, including the
right to approve any amendment, modification or waiver of any provision of the
Financing Documents; provided that such participation agreement may provide that
(A) such Lender will not agree to any modification, amendment or waiver of this
Agreement described in Section 11.05(f) without the consent of the Participant
and (B) such Lender will agree to vote the Participant's participating interest
with respect to any matter requiring a vote of all Lenders under the Security
Agreement as the Participant may direct. Each of the Borrowers agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Section 2.05(k) and Article 10 with respect to its
participating interest. An assignment or other transfer which is not permitted
by Section 11.06(c)
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or (d) shall be given effect for purposes of this Agreement only to the extent
of a participating interest granted in accordance with this subsection (b).
(c) Any Lender may at any time on or after the Closing Date assign to
one or more (x) Eligible Assignees or (y) affiliates or Related Funds of such
transferor Lender (each such Eligible Assignee, affiliate or Related Fund being
an "Assignee") all, or a ratable portion (i.e., a pro rata assignment (based on
the respective principal amounts thereof then outstanding or in effect) of both
the Tranche A Commitment and the Tranche A Loans of the assigning Lender, on the
one hand, and the Tranche B Commitment and the Tranche B Loans of such assigning
Lender, on the other hand) of all, of its rights and obligations under the
Credit Facilities, and such Assignee shall assume such rights and obligations,
with notice to the Borrowers and with (and subject to) the consent of the
Administrative Agent and each LC Issuing Bank (each such consent to be given or
withheld in the sole discretion of the Administrative Agent or such LC Issuing
Bank, as the case may be); provided that:
(i) any assignment of only a ratable portion of the transferor
Lender's rights and obligations shall be equivalent, in the case of each
Assignee, to an initial Tranche A Commitment and Tranche B Commitment of not
less than $5,000,000 in the aggregate;
(ii) no such consent shall be required if (x) the Assignee is an
affiliate or Related Fund of such transferor Lender, (y) the Assignee is already
a Lender immediately prior to such assignment or (z) an Event of Default shall
have occurred and be continuing when such assignment is made; provided that in
each of the foregoing cases written notice of such assignment shall be given to
the Administrative Agent and the Borrowers;
(iii) such assignment may be made to an Assignee that is already a
Lender, or made by a Lender to one of its Related Funds, without regard to the
foregoing minimum assignment amount;
(iv) the parties to each such assignment shall execute and deliver to
the Administrative Agent an Assignment Agreement for its acceptance and
recording in the Register at least two Business Days prior to the proposed
effective date of such assignment; and
(v) the Assignee under each such assignment (unless it is already a
Lender) shall deliver to the Administrative Agent a completed Administrative
Questionnaire.
When (A) such an Assignment Agreement (together with an Administrative
Questionnaire, if required) has been delivered to the Administrative Agent, (B)
such assignment has been recorded in the Register, and (C) such Assignee has
paid to such transferor Lender an amount equal to the purchase price agreed
between them, such Assignee shall be a Lender party to this Agreement and shall
have all the rights and obligations of a Lender with outstanding Loans and/or
Commitments as set forth in such instrument of assignment, and the transferor
Lender shall be released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be required. Upon
the consummation of any assignment pursuant to this subsection (c), (x) the
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Administrative Agent shall notify the Collateral Agent thereof and (y) the
transferor Lender, the Administrative Agent and the Borrowers shall make
appropriate arrangements so that, if required, a new Tranche A Note and a new
Tranche B Note complying with the provisions of Section 2.03 is issued to the
Assignee. In connection with any such assignment, the transferor Lender shall
pay to the Administrative Agent an administrative fee for processing such
assignment in the amount of $3,500. If the Assignee is organized under the laws
of a jurisdiction outside the United States, it shall deliver to the Borrowers
and the Administrative Agent certification as to exemption from deduction or
withholding of United States federal income taxes in accordance with Section
10.02. Anything contained herein to the contrary notwithstanding, the
Administrative Agent shall not be required to accept and record assignments
hereunder on more than one day during each week, and each assigning Lender shall
coordinate each assignment with the Administrative Agent so that the proposed
effective date of such assignment shall be the same date as the effective date
of each other assignment during the relevant week by each other assigning
Lender.
(d) Any Lender may at any time assign all or any portion of its Loans
or its Notes as security to a Federal Reserve Bank. No such assignment or pledge
shall release the transferor Lender from its obligations hereunder.
(e) The Administrative Agent (acting, for this purpose only, as agent
for the Borrowers) shall maintain at its address at which notices are to be
given to it pursuant to Section 11.01 a copy of each instrument of assignment
delivered to it pursuant to subsection (c) of this Section 11.06 and a register
for the recordation of the names and addresses of the Lenders, their respective
Tranche A Commitments and Tranche B Commitments and the principal amounts of
their respective Tranche A Loans and Tranche B Loans outstanding from time to
time (the "Register"). The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Subsidiary Guarantors, the
Agents and the Lenders may treat each Person whose name is recorded in the
Register as a Lender for all purposes of this Agreement. The Register shall be
available for inspection by the Borrowers or any Lender Party at any reasonable
time and from time to time upon reasonable prior notice.
(f) No Assignee, Participant or other transferee of any Lender's
rights shall be entitled to receive any greater payment under Section 2.05(k),
10.01 or 10.02 than such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with the Borrowers'
prior written consent or by reason of the provisions of Section 10.01, or 10.02
requiring such Lender to designate a different Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 11.07 Margin Stock. Each of the Lenders represents to the
------------
Agents and each of the other Lenders that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 11.08 Governing Law; Submission to Jurisdiction. THIS
-----------------------------------------
AGREEMENT, THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
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CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. SUBJECT TO THE
JURISDICTION OF THE COURT, EACH OF THE BORROWERS HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO ANY OF THE
FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. EACH OF THE
BORROWERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 11.09 Counterparts; Integration. This Agreement and any
-------------------------
amendment to this Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
were upon the same instrument. This Agreement (together with the other
Financing Documents) constitutes the entire agreement and understanding among
the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 11.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
--------------------
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 11.10.
SECTION 11.11 Confidentiality. Each Lender Party agrees to keep any
---------------
non-public information delivered or made available by any Vencor Company to it
confidential and to use such information only for the purpose of evaluating,
approving, structuring and administering the Loans and Letters of Credit;
provided that nothing herein shall prevent any Lender Party from disclosing such
information (i) to Persons employed or retained by such Lender Party who are
engaged or expected to be engaged in evaluating, approving, structuring or
administering the Loans and Letters of Credit, (ii) to any other Person if
reasonably incidental to the administration of the Loans or Letters of Credit,
(iii) to any other Lender Party, (iv) pursuant to any subpoena or express
direction
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of any court or other authorized government agency or as otherwise required by
law, (v) upon the request or demand of any bank regulatory agency, bank examiner
or comparable authority, (vi) which has theretofore been publicly disclosed or
is otherwise available to such Lender Party on a non-confidential basis from a
source that is not, to its knowledge, subject to a confidentiality agreement
with Ventas or any Vencor Company, (vii) in connection with any litigation to
which any Lender Party or its subsidiaries or Parent may be a party, (viii) to
the extent necessary in connection with the exercise of any remedy hereunder,
(ix) to such Lender Party's affiliates, legal counsel and independent auditors,
(x) to any actual or proposed Participant or Assignee that has signed a written
agreement containing provisions substantially similar to this Section 11.11 or
(xi) any other Person approved by the Borrowers in writing. Any Lender Party
that discloses confidential information to other Persons as contemplated by
clause (i), (ii) or (ix) of the foregoing proviso shall inform such other
Persons of the confidential nature of such information and shall instruct them
to keep such information confidential (except for disclosures permitted by the
foregoing proviso). Before any Lender Party discloses confidential information
pursuant to clause (iv) or (vii) of the foregoing proviso, such Lender Party
shall, to the extent permitted by law, use its best efforts to advise Vencor of
such proposed disclosure so that Vencor may, in its discretion, seek an
appropriate protective order. If and to the extent requested to do so by the
Borrowers, the Administrative Agent may deliver copies of information supplied
to it pursuant to Section 5.01 to any Person referred to in clause (x) or (xi)
of the foregoing proviso. Anything herein to the contrary notwithstanding, no
Lender Party shall have any liability with respect to disclosure of confidential
information by electronic transmission, including, without limitation,
facsimile, e-mail and internet communication, as long as such Lender Party
exercises reasonable care in effecting such transmission.
SECTION 11.12 Parties Including Trustees; Court Proceedings.
---------------------------------------------
This Agreement and the other Financing Documents shall be binding
upon, and inure to the benefit of, the successors of Agent and each Lender, and
the assigns, transferees and endorsees of Agent and each Lender. The security
interests and Liens created in this Agreement, the Collateral Documents and the
other Financing Documents shall be and remain valid and perfected, and the
claims of Agent and Lenders hereunder valid and enforceable in accordance with
the terms hereof, notwithstanding the discharge of any Borrower pursuant to 11
U.S.C. (S) 1141, the conversion of any Chapter 11 Case or any other bankruptcy
case of any Credit Party to a case under Chapter 7 of the Bankruptcy Code, the
dismissal of any Chapter 11 Case or any subsequent Chapter 7 case or the release
of any Collateral from the property of any Credit Party. The security interests
and Liens created in this Agreement, the Collateral Documents and the other
Financing Documents shall be and remain valid and perfected without the
necessity that Agent file financing statements or otherwise perfect its security
interests or Liens under applicable law. This Agreement, the claims of Agent
and Lenders hereunder, and all security interests or Liens created hereby or
pursuant hereto or by or pursuant to the Collateral Documents or any other
Financing Document shall at all times be binding upon Credit Parties, the
estates of Credit Parties and any trustee appointed in any Chapter 11 Case or
any Chapter 7 case, or any other successor in interest to Borrowers. This
Agreement shall not be subject to Section 365 of the Bankruptcy Code.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
BORROWERS:
Advanced Infusion Systems, Inc.
American X-Rays, Inc.
C.P.C. of Louisiana, Inc.
Community Behavioral Health System, Inc.
Community Psychiatric Centers of Arkansas, Inc.
Community Psychiatric Centers of California
Community Psychiatric Centers of Florida, Inc.
Community Psychiatric Centers of Idaho, Inc.
Community Psychiatric Centers of Indiana, Inc.
Community Psychiatric Centers of Kansas, Inc.
Community Psychiatric Centers of Mississippi,
Inc.
Community Psychiatric Centers of Missouri, Inc.
Community Psychiatric Centers of North Carolina,
Inc.
Community Psychiatric Centers of Oklahoma, Inc.
Community Psychiatric Centers of Utah, Inc.
Community Psychiatric Centers Properties
Incorporated
Community Psychiatric Centers Properties of
Oklahoma, Inc.
Community Psychiatric Centers Properties of
Texas, Inc.
Community Psychiatric Centers Properties of Utah,
Inc.
Courtland Gardens Health Center, Inc.
CPC Investment Corp.
CPC Managed Care Health Services, Inc.
CPC of Georgia, Inc.
CPC Properties of Arkansas, Inc.
CPC Properties of Illinois, Inc.
CPC Properties of Indiana, Inc.
CPC Properties of Kansas, Inc.
CPC Properties of Louisiana, Inc.
CPC Properties of Mississippi, Inc.
CPC Properties of Missouri, Inc.
CPC Properties of North Carolina, Inc.
First Rehab, Inc.
Florida Hospital Properties, Inc.
Health Care Holdings, Inc.
Health Care Technology, Inc.
Helian ASC of Northridge, Inc.
Helian Health Group, Inc.
Helian Recovery Corporation
Homestead Health Center, Inc.
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Horizon Healthcare Services, Inc.
Interamericana Health Care Group
J.B. Thomas Hospital, Inc.
Lafayette Health Care Center, Inc.
MedEquities, Inc.
Medisave of Tennessee, Inc.
Medisave Pharmacies, Inc.
Old Orchard Hospital, Inc.
Palo Alto Surgecenter Corporation
Peachtree-Parkwood Hospital, Inc.
PersonaCare, Inc.
PersonaCare Living Center of Clearwater, Inc.
PersonaCare of Bradenton, Inc.
PersonaCare of Clearwater, Inc.
PersonaCare of Connecticut, Inc.
PersonaCare of Georgia, Inc.
PersonaCare of Huntsville, Inc.
PersonaCare of Little Rock, Inc.
PersonaCare of Ohio, Inc.
PersonaCare of Owensboro, Inc.
PersonaCare of Pennsylvania, Inc.
PersonaCare of Pompano East, Inc.
PersonaCare of Pompano West, Inc.
PersonaCare of Reading, Inc.
PersonaCare of San Antonio, Inc.
PersonaCare of San Pedro, Inc.
PersonaCare of Shreveport, Inc.
PersonaCare of St. Petersburg, Inc.
PersonaCare of Warner Robbins, Inc.
PersonaCare of Wisconsin, Inc.
PersonaCare Properties, Inc.
ProData Systems, Inc.
Recovery Inns of America, Inc.
Respiratory Care Services, Inc.
Stamford Health Facilities, Inc.
THC-Chicago, Inc.
THC-Hollywood, Inc.
THC-Houston, Inc.
THC-Minneapolis, Inc.
THC-North Shore, Inc.
THC-Orange County, Inc.
THC-San Diego, Inc.
THC-Seattle, Inc.
TheraTx Healthcare Management, Inc.
TheraTx Health Services, Inc.
TheraTx Management Services, Inc.
TheraTx Medical Supplies, Inc.
TheraTx Rehabilitation Services, Inc.
TheraTx Staffing, Inc.
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Transitional Hospitals Corporation, a Delaware
Corporation
Transitional Hospitals Corporation, a Nevada
Corporation
Transitional Hospitals Corporation of Indiana,
Inc.
Transitional Hospitals Corporation of Louisiana,
Inc.
Transitional Hospitals Corporation of Michigan,
Inc.
Transitional Hospitals Corporation of Nevada, Inc.
Transitional Hospitals Corporation of New Mexico,
Inc.
Transitional Hospitals Corporation of Tampa, Inc.
Transitional Hospitals Corporation of Texas, Inc.
Transitional Hospitals Corporation of Wisconsin,
Inc.
Tucker Nursing Center, Inc.
Tunstall Enterprises, Inc.
VC-OIA, Inc.
VC-TOHC, Inc.
VC-WM, Inc.
Vencare, Inc.
Vencare Rehab Services, Inc.
Vencor Facility Services, Inc.
Vencor Holdings, L.L.C.
Vencor Home Care Services, Inc.
Vencor Hospice, Inc.
Vencor Hospitals East, L.L.C.
Vencor Hospitals West, L.L.C.
Vencor, Inc.
Vencor Insurance Holdings, Inc.
Vencor Investment Company
Vencor Nevada, L.L.C.
Vencor Nursing Centers East, L.L.C.
Vencor Nursing Centers Central L.L.C.
Vencor Nursing Centers North, L.L.C.
Vencor Nursing Centers South, L.L.C.
Vencor Nursing Centers West, L.L.C.
Vencor Operating, Inc.
Vencor Pediatric Care, Inc.
Vencor Provider Network, Inc.
Ventech Systems, Inc.
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By: Vencor Operating, Inc., as agent and
attorney-in-fact for each of the foregoing
entities
By: ____________________________
Name:
Title:
Stamford Health Associates, L.P.
By: Stamford Health Facilities, Inc., Its General
Partner
By: ____________________________
Name:
Title:
Vencor Home Care and Hospice Indiana Partnership
By: Vencor Home Care Services, Inc., Its General
Partner
By: ____________________________
Name:
Title:
By: Vencor Hospice, Inc., Its General Partner
By: ____________________________
Name:
Title:
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Vencor Hospitals Limited Partnership
By: Vencor Operating, Inc., Its General Partner
By: ____________________________
Name:
Title:
By: Vencor Nursing Centers Limited Partnership,
Its General Partner
By: Vencor Operating, Inc., Its General
Partner
By: ____________________________
Name:
Title:
Vencor Nursing Centers Central Limited Partnership
By: Vencor Operating, Inc., Its General Partner
By: ____________________________
Name:
Title:
By: Vencor Nursing Centers Limited Partnership,
Its General Partner
By: Vencor Operating, Inc., Its General
Partner
By: ________________________________
Name:
Title:
Vencor Nursing Centers Limited Partnership
By: Vencor Operating, Inc., Its General Partner
By: ________________________________
Name:
Title:
By: Vencor Hospitals Limited Partnership, Its
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General Partner
By: Vencor Operating, Inc., Its General
Partner
By: ________________________________
Name:
Title:
Notice Address for all Borrowers:
Vencor, Inc.
One Vencor Place
680 South Fourth Street
Louisville, KY 40202
Attention: General Counsel
Facsimile: 502-596-4075
with a copy to:
Address: Vencor, Inc.
One Vencor Place
680 South Fourth Street
Louisville, KY 40202
Attention: Director of Finance
Facsimile: 502-596-4170
with a copy to:
Address: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006-1470
Attention: Thomas J. Moloney
Facsimile: 212-225-3999
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AGENTS AND LENDERS:
- ------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Arranger,
Collateral Agent and Administrative Agent and as a
Lender
By:________________________________________________
Name:
Title:
For Wire Transfers:
ABA: 021000238
For credit to Loan Unit 8
Account No.: 99999090
Ref.: Vencor, Inc.
Notices Relating to
Borrowing, Operations, etc.:
J.P. Morgan Services
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Kira Hindsley
Telephone: (302) 634-4264
Facsimile: (302) 634-4300
All Other Communications:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Houston Stebbins
Telephone: (212) 648-7875
Facsimile: (212) 648-5005
and
---
J.P. Morgan Services
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Renee Richmond
Telephone: (302) 634-3316
Facsimile: (302) 634-4300
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ABLECO FINANCE LLC, as a Lender
By: __________________________________
Name:
Title:
Notice Address:
450 Park Avenue, 28th Floor
New York, New York 10022
Attention: Kevin Genda
Telephone: (212) 891-2117
Facsimile: (212) 902-3757
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APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I, as a Lender
By: __________________________________
Name:
Title:
Notice Address:
26 Main Street
Chatham, New Jersey 07928
Attention: Ken Maiman
Telephone: (973) 701-8401
Facsimile: (973) 701-7309
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BANKERS TRUST COMPANY, as a Lender
By: __________________________________
Name:
Title:
Notice Address:
31 West 52nd Street
New York, New York 10019
Attention: Tom Fitzgerald
Telephone: (212) 469-2578
Facsimile: (212) 469-2884
S-11
<PAGE>
CHASE SECURITIES INC, AS AGENT FOR THE
CHASE MANHATTAN BANK, as a Lender
By: __________________________________
Name:
Title:
Notice Address:
270 Park Avenue, 4th Floor
New York, New York 10017
Attention: Jay Lifton
Telephone: (212) 270-4790
Facsimile: (212) 270-7968
S-12
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P., as a
Lender
By: __________________________________
Name:
Title:
Notice Address:
85 Broad Street, 27th Floor
New York, New York 10004
Attention: Jason Colodne
Telephone: (212) 357-7869
Facsimile: (212) 902-3757
S-13
<PAGE>
PARIBAS, as a Lender
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
Notice Address:
787 Seventh Avenue
New York, New York 10019
Attention: Albert A. Young, Jr.
Telephone: (212) 841-2329
Facsimile: (212) 841-3565
S-14
<PAGE>
VAN KAMPEN PRIME RATE INCOME TRUST, as a
Lender
By: VAN KAMPEN INVESTMENT ADVISORY
CORP.
By: ______________________________
Name:
Title:
Notice Address:
1 Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Darvin Pierce
Telephone: (630) 684-6423
Facsimile: (630) 684-6740
S-15
<PAGE>
EXHIBIT A-1
TRANCHE A NOTE
New York, New York
[Date of Issuance]
For value received, each of VENCOR, INC., a Delaware corporation
("Vencor"), AND EACH OF VENCOR'S SUBSIDIARIES PARTY HERETO (collectively, with
Vencor, the "Borrowers"), jointly and severally, promise to pay to [name of
Lender] or its registered assigns (the "Lender"), for the account of its
Applicable Lending Office, the unpaid principal amount of each Tranche A Loan
made by the Lender to the Borrowers pursuant to the Credit Agreement (as defined
below) on the maturity date provided for in the Credit Agreement. Borrowers
promise to pay, jointly and severally, interest on the unpaid principal amount
of each such Tranche A Loan on the dates and at the rate or rates provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of the Administrative Agent as set forth in the
Credit Agreement.
All Tranche A Loans made by the Lender, the respective date and amount
thereof and all repayments of the principal with respect thereto shall be
recorded by the Lender and, if the Lender so elects in connection with any
transfer or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each such Tranche A Loan then outstanding may be
endorsed by the Lender on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof; provided that neither the
failure of the Lender to make any such recordation or endorsement shall affect
the obligations of the Borrowers hereunder or under any other Financing
Document.
This note is one of the Tranche A Notes referred to in the Debtor-In-
Possession Credit Agreement dated as of September 13, 1999 among the Borrowers,
the Lenders, the LC Issuing Banks and Morgan Guaranty Trust Company of New York,
as Arranger, Collateral Agent and Administrative Agent (as amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
[signature pages follow]
A-1-1
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Note to be executed as
of the date first above written.
Advanced Infusion Systems, Inc.
American X-Rays, Inc.
C.P.C. of Louisiana, Inc.
Community Behavioral Health System, Inc.
Community Psychiatric Centers of Arkansas, Inc.
Community Psychiatric Centers of California
Community Psychiatric Centers of Florida, Inc.
Community Psychiatric Centers of Idaho, Inc.
Community Psychiatric Centers of Indiana, Inc.
Community Psychiatric Centers of Kansas, Inc.
Community Psychiatric Centers of Mississippi, Inc.
Community Psychiatric Centers of Missouri, Inc.
Community Psychiatric Centers of North Carolina,
Inc.
Community Psychiatric Centers of Oklahoma, Inc.
Community Psychiatric Centers of Utah, Inc.
Community Psychiatric Centers Properties
Incorporated
Community Psychiatric Centers Properties of
Oklahoma, Inc.
Community Psychiatric Centers Properties of Texas,
Inc.
Community Psychiatric Centers Properties of Utah,
Inc.
Courtland Gardens Health Center, Inc.
CPC Investment Corp.
CPC Managed Care Health Services, Inc.
CPC of Georgia, Inc.
CPC Properties of Arkansas, Inc.
CPC Properties of Illinois, Inc.
CPC Properties of Indiana, Inc.
CPC Properties of Kansas, Inc.
CPC Properties of Louisiana, Inc.
CPC Properties of Mississippi, Inc.
CPC Properties of Missouri, Inc.
CPC Properties of North Carolina, Inc.
First Rehab, Inc.
Florida Hospital Properties, Inc.
Health Care Holdings, Inc.
Health Care Technology, Inc.
Helian ASC of Northridge, Inc.
Helian Health Group, Inc.
Helian Recovery Corporation
A-1-2
<PAGE>
Homestead Health Center, Inc.
Horizon Healthcare Services, Inc.
Interamericana Health Care Group
J.B. Thomas Hospital, Inc.
Lafayette Health Care Center, Inc.
MedEquities, Inc.
Medisave of Tennessee, Inc.
Medisave Pharmacies, Inc.
Old Orchard Hospital, Inc.
Palo Alto Surgecenter Corporation
Peachtree-Parkwood Hospital, Inc.
PersonaCare, Inc.
PersonaCare Living Center of Clearwater, Inc.
PersonaCare of Bradenton, Inc.
PersonaCare of Clearwater, Inc.
PersonaCare of Connecticut, Inc.
PersonaCare of Georgia, Inc.
PersonaCare of Huntsville, Inc.
PersonaCare of Little Rock, Inc.
PersonaCare of Ohio, Inc.
PersonaCare of Owensboro, Inc.
PersonaCare of Pennsylvania, Inc.
PersonaCare of Pompano East, Inc.
PersonaCare of Pompano West, Inc.
PersonaCare of Reading, Inc.
PersonaCare of San Antonio, Inc.
PersonaCare of San Pedro, Inc.
PersonaCare of Shreveport, Inc.
PersonaCare of St. Petersburg, Inc.
PersonaCare of Warner Robbins, Inc.
PersonaCare of Wisconsin, Inc.
PersonaCare Properties, Inc.
ProData Systems, Inc.
Recovery Inns of America, Inc.
Respiratory Care Services, Inc.
Stamford Health Facilities, Inc.
THC-Chicago, Inc.
THC-Hollywood, Inc.
THC-Houston, Inc.
THC-Minneapolis, Inc.
THC-North Shore, Inc.
THC-Orange County, Inc.
THC-San Diego, Inc.
THC-Seattle, Inc.
TheraTx Healthcare Management, Inc.
TheraTx Health Services, Inc.
A-1-3
<PAGE>
TheraTx Management Services, Inc.
TheraTx Medical Supplies, Inc.
TheraTx Rehabilitation Services, Inc.
TheraTx Staffing, Inc.
Transitional Hospitals Corporation, a Delaware
Corporation
Transitional Hospitals Corporation, a Nevada
Corporation
Transitional Hospitals Corporation of Indiana, Inc.
Transitional Hospitals Corporation of Louisiana,
Inc.
Transitional Hospitals Corporation of Michigan,
Inc.
Transitional Hospitals Corporation of Nevada, Inc.
Transitional Hospitals Corporation of New Mexico,
Inc.
Transitional Hospitals Corporation of Tampa, Inc.
Transitional Hospitals Corporation of Texas, Inc.
Transitional Hospitals Corporation of Wisconsin,
Inc.
Tucker Nursing Center, Inc.
Tunstall Enterprises, Inc.
VC-OIA, Inc.
VC-TOHC, Inc.
VC-WM, Inc.
Vencare, Inc.
Vencare Rehab Services, Inc.
Vencor Facility Services, Inc.
Vencor Holdings, L.L.C.
Vencor Home Care Services, Inc.
Vencor Hospice, Inc.
Vencor Hospitals East, L.L.C.
Vencor Hospitals West, L.L.C.
Vencor, Inc.
Vencor Insurance Holdings, Inc.
Vencor Investment Company
Vencor Nevada, L.L.C.
Vencor Nursing Centers East, L.L.C.
Vencor Nursing Centers Central L.L.C.
Vencor Nursing Centers North, L.L.C.
Vencor Nursing Centers South, L.L.C.
Vencor Nursing Centers West, L.L.C.
Vencor Operating, Inc.
Vencor Pediatric Care, Inc.
Vencor Provider Network, Inc.
Ventech Systems, Inc.
A-1-4
<PAGE>
BY: Vencor Operating, Inc., as agent and
attorney-in-fact for each of the foregoing
entities
By: ___________________________________
Name:
Title:
Stamford Health Associates, L.P.
BY: Stamford Health Facilities, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
Vencor Home Care and Hospice Indiana Partnership
BY: Vencor Home Care Services, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
BY: Vencor Hospice, Inc., Its General Partner
By: ___________________________________
Name:
Title:
Vencor Hospitals Limited Partnership
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
BY: Vencor Nursing Centers Limited Partnership,
Its General Partner
A-1-5
<PAGE>
BY: Vencor Operating, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
Vencor Nursing Centers Central Limited Partnership
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
BY: Vencor Nursing Centers Limited Partnership,
Its General Partner
BY: Vencor Operating, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
Vencor Nursing Centers Limited Partnership
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
BY: Vencor Hospitals Limited Partnership, Its
General Partner
BY: Vencor Operating, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
A-1-6
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Date Amount of Loan Amount of Principal Repaid Notation Made By
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
A-1-7
<PAGE>
EXHIBIT A-2
TRANCHE B NOTE
New York, New York
[Date of Issuance]
For value received, each of VENCOR, INC., a Delaware corporation
("Vencor"), AND EACH OF VENCOR'S SUBSIDIARIES PARTY HERETO (collectively, with
Vencor, the "Borrowers"), jointly and severally, promise to pay to [name of
Lender] or its registered assigns (the "Lender"), for the account of its
Applicable Lending Office, the unpaid principal amount of each Tranche B Loan
made by the Lender to the Borrowers pursuant to the Credit Agreement (as defined
below) on the maturity date provided for in the Credit Agreement. Borrowers
promise to pay, jointly and severally, interest on the unpaid principal amount
of each such Tranche B Loan on the dates and at the rate or rates provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of the Administrative Agent as set forth in the
Credit Agreement.
All Tranche B Loans made by the Lender, the respective date and amount
thereof and all repayments of the principal with respect thereto shall be
recorded by the Lender and, if the Lender so elects in connection with any
transfer or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each such Tranche B Loan then outstanding may be
endorsed by the Lender on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof; provided that neither the
failure of the Lender to make any such recordation or endorsement shall affect
the obligations of the Borrowers hereunder or under any other Financing
Document.
This note is one of the Tranche B Notes referred to in the Debtor-In-
Possession Credit Agreement dated as of September 13, 1999 among the Borrowers,
the Lenders, the LC Issuing Banks and Morgan Guaranty Trust Company of New York,
as Arranger, Collateral Agent and Administrative Agent (as amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
[signature pages follow]
A-2-1
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Note to be executed as
of the date first above written.
BORROWERS:
---------
Advanced Infusion Systems, Inc.
American X-Rays, Inc.
C.P.C. of Louisiana, Inc.
Community Behavioral Health System, Inc.
Community Psychiatric Centers of Arkansas, Inc.
Community Psychiatric Centers of California
Community Psychiatric Centers of Florida, Inc.
Community Psychiatric Centers of Idaho, Inc.
Community Psychiatric Centers of Indiana, Inc.
Community Psychiatric Centers of Kansas, Inc.
Community Psychiatric Centers of Mississippi, Inc.
Community Psychiatric Centers of Missouri, Inc.
Community Psychiatric Centers of North Carolina,
Inc.
Community Psychiatric Centers of Oklahoma, Inc.
Community Psychiatric Centers of Utah, Inc.
Community Psychiatric Centers Properties
Incorporated
Community Psychiatric Centers Properties of
Oklahoma, Inc.
Community Psychiatric Centers Properties of Texas,
Inc.
Community Psychiatric Centers Properties of Utah,
Inc.
Courtland Gardens Health Center, Inc.
CPC Investment Corp.
CPC Managed Care Health Services, Inc.
CPC of Georgia, Inc.
CPC Properties of Arkansas, Inc.
CPC Properties of Illinois, Inc.
CPC Properties of Indiana, Inc.
CPC Properties of Kansas, Inc.
CPC Properties of Louisiana, Inc.
CPC Properties of Mississippi, Inc.
CPC Properties of Missouri, Inc.
CPC Properties of North Carolina, Inc.
First Rehab, Inc.
Florida Hospital Properties, Inc.
Health Care Holdings, Inc.
Health Care Technology, Inc.
Helian ASC of Northridge, Inc.
A-2-2
<PAGE>
Helian Health Group, Inc.
Helian Recovery Corporation
Homestead Health Center, Inc.
Horizon Healthcare Services, Inc.
Interamericana Health Care Group
J.B. Thomas Hospital, Inc.
Lafayette Health Care Center, Inc.
MedEquities, Inc.
Medisave of Tennessee, Inc.
Medisave Pharmacies, Inc.
Old Orchard Hospital, Inc.
Palo Alto Surgecenter Corporation
Peachtree-Parkwood Hospital, Inc.
PersonaCare, Inc.
PersonaCare Living Center of Clearwater, Inc.
PersonaCare of Bradenton, Inc.
PersonaCare of Clearwater, Inc.
PersonaCare of Connecticut, Inc.
PersonaCare of Georgia, Inc.
PersonaCare of Huntsville, Inc.
PersonaCare of Little Rock, Inc.
PersonaCare of Ohio, Inc.
PersonaCare of Owensboro, Inc.
PersonaCare of Pennsylvania, Inc.
PersonaCare of Pompano East, Inc.
PersonaCare of Pompano West, Inc.
PersonaCare of Reading, Inc.
PersonaCare of San Antonio, Inc.
PersonaCare of San Pedro, Inc.
PersonaCare of Shreveport, Inc.
PersonaCare of St. Petersburg, Inc.
PersonaCare of Warner Robbins, Inc.
PersonaCare of Wisconsin, Inc.
PersonaCare Properties, Inc.
ProData Systems, Inc.
Recovery Inns of America, Inc.
Respiratory Care Services, Inc.
Stamford Health Facilities, Inc.
THC-Chicago, Inc.
THC-Hollywood, Inc.
THC-Houston, Inc.
THC-Minneapolis, Inc.
THC-North Shore, Inc.
THC-Orange County, Inc.
THC-San Diego, Inc.
THC-Seattle, Inc.
A-2-3
<PAGE>
TheraTx Healthcare Management, Inc.
TheraTx Health Services, Inc.
TheraTx Management Services, Inc.
TheraTx Medical Supplies, Inc.
TheraTx Rehabilitation Services, Inc.
TheraTx Staffing, Inc.
Transitional Hospitals Corporation, a Delaware
Corporation
Transitional Hospitals Corporation, a Nevada
Corporation
Transitional Hospitals Corporation of Indiana, Inc.
Transitional Hospitals Corporation of Louisiana,
Inc.
Transitional Hospitals Corporation of Michigan,
Inc.
Transitional Hospitals Corporation of Nevada, Inc.
Transitional Hospitals Corporation of New Mexico,
Inc.
Transitional Hospitals Corporation of Tampa, Inc.
Transitional Hospitals Corporation of Texas, Inc.
Transitional Hospitals Corporation of Wisconsin,
Inc.
Tucker Nursing Center, Inc.
Tunstall Enterprises, Inc.
VC-OIA, Inc.
VC-TOHC, Inc.
VC-WM, Inc.
Vencare, Inc.
Vencare Rehab Services, Inc.
Vencor Facility Services, Inc.
Vencor Holdings, L.L.C.
Vencor Home Care Services, Inc.
Vencor Hospice, Inc.
Vencor Hospitals East, L.L.C.
Vencor Hospitals West, L.L.C.
Vencor, Inc.
Vencor Insurance Holdings, Inc.
Vencor Investment Company
Vencor Nevada, L.L.C.
Vencor Nursing Centers East, L.L.C.
Vencor Nursing Centers Central L.L.C.
Vencor Nursing Centers North, L.L.C.
Vencor Nursing Centers South, L.L.C.
Vencor Nursing Centers West, L.L.C.
Vencor Operating, Inc.
Vencor Pediatric Care, Inc.
Vencor Provider Network, Inc.
A-2-4
<PAGE>
Ventech Systems, Inc.
BY: Vencor Operating, Inc., as agent and
attorney-in-fact for each of the foregoing
entities
By: ___________________________________
Name:
Title:
Stamford Health Associates, L.P.
BY: Stamford Health Facilities, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
Vencor Home Care and Hospice Indiana Partnership
BY: Vencor Home Care Services, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
BY: Vencor Hospice, Inc., Its General Partner
By: ___________________________________
Name:
Title:
Vencor Hospitals Limited Partnership
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
BY: Vencor Nursing Centers Limited Partnership,
Its General Partner
A-2-5
<PAGE>
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
Vencor Nursing Centers Central Limited Partnership
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
BY: Vencor Nursing Centers Limited Partnership,
Its General Partner
By: Vencor Operating, Inc., Its General
Partner
By: ______________________________
Name:
Title:
Vencor Nursing Centers Limited Partnership
BY: Vencor Operating, Inc., Its General Partner
By: ___________________________________
Name:
Title:
BY: Vencor Hospitals Limited Partnership, Its
General Partner
BY: Vencor Operating, Inc., Its General
Partner
By: ___________________________________
Name:
Title:
A-2-6
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Date Amount of Loan Amount of Principal Repaid Notation Made By
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
A-2-7
<PAGE>
EXHIBIT B
SECURITY AGREEMENT
AGREEMENT dated as of September 13, 1999 among VENCOR, INC. ("Vencor")
and the OTHER BORROWERS (this and other capitalized terms used in this
introduction and the recitals below are defined in Section 1 hereof), each as
debtor and debtor-in-possession, the SUBSIDIARY GUARANTORS PARTY HERETO and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Collateral Agent.
WHEREAS, the Borrowers are entering into the Credit Agreement
described in Section 1 below, pursuant to which the Borrowers intend to borrow
funds and obtain letters of credit, all on the terms and conditions set forth
therein;
WHEREAS, the Borrowers are willing to secure their obligations under
the Credit Agreement and the other Financing Documents by granting Liens on
their assets to the Collateral Agent as provided in this Agreement and the other
Collateral Documents;
WHEREAS, Vencor is willing to cause each of its Subsidiaries (other
than the Insurance Subsidiaries, the Shell Subsidiaries and the Excluded
Partnerships) which is not a Borrower to guarantee the foregoing obligations of
the Borrowers as provided in a Subsidiary Guaranty Agreement and to secure their
guarantees thereof by granting Liens on their assets in favor of the Collateral
Agent as provided in this Agreement and the other Collateral Documents;
WHEREAS, the Lenders and the LC Issuing Banks are not willing to make
loans or maintain, issue or participate in letters of credit under the Credit
Agreement unless (i) the foregoing obligations of the Borrowers are secured by
Liens on their assets as provided in the Collateral Documents, (ii) the
foregoing obligations of the Borrowers are guaranteed by the Subsidiary
Guarantors and (iii) such guarantees are secured by Liens on the assets of the
Subsidiary Guarantors as provided in this Agreement and in the other Collateral
Documents; and
WHEREAS, upon any foreclosure or other enforcement of the Collateral
Documents, the net proceeds of the relevant Collateral are to be received by or
paid over to the Collateral Agent and applied as provided in Section 15 of this
Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
meanings:
"Accounts" means, with respect to any Lien Grantor, all "accounts" (as
defined in the UCC) now owned or hereafter acquired by such Lien Grantor, and
also means and includes all Medicare Receivables, Medicaid Receivables, VA
Receivables, accounts receivable, contract
B-1
<PAGE>
rights, book debts, notes, drafts and other obligations or indebtedness owing to
such Lien Grantor arising from the performance of services by it and/or the
sale, lease or exchange of goods or other property by it (including, without
limitation, any such obligation or indebtedness which might be characterized as
an account, contract right or general intangible under the Uniform Commercial
Code in effect in any applicable jurisdiction) and all of such Lien Grantor's
rights in, to and under all contracts or purchase orders for goods, services or
other property, and all of such Lien Grantor's rights to any goods, services or
other property represented by any of the foregoing and all monies due to or to
become due to such Lien Grantor under all contracts for the performance of
services by it and/or the sale, lease or exchange of goods or other property by
it (whether or not yet earned by performance on the part of such Lien Grantor),
in each case whether now existing or hereafter arising or acquired, including,
without limitation, the right to receive the proceeds of said contracts and
purchase orders and all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.
"Borrowers" means Vencor, Inc. and each of its Subsidiaries party as a
"Borrower" to the Credit Agreement, including any Person that shall, at any time
after the date hereof, become party to the Credit Agreement as a "Borrower" and
party hereto as a "Borrower" as provided in Section 19.
"Cash Distributions" means dividends, interest and other payments and
distributions made in cash upon or with respect to the Collateral.
"Cash Management System" means the cash management system of the
Borrowers described in the First Day Orders.
"Cash Proceeds Account" has the meaning set forth in Section 7(d).
"Casualty Proceeds Account" has the meaning set forth in Section 7(b).
"Collateral" means all property, whether now owned or hereafter
acquired, in which a security interest or other Lien is granted or purported to
be granted to the Collateral Agent pursuant to the Collateral Documents. When
used with respect to a specific Lien Grantor, the term "Collateral" means all
such property in which such a security interest or other Lien is granted or
purported to be granted to the Collateral Agent by such Lien Grantor.
"Collateral Accounts" means the Prepayment Account, the Casualty
Proceeds Accounts, the Cash Proceeds Accounts and the LC Collateral Account.
"Collateral Agent" means Morgan Guaranty Trust Company of New York, in
its capacity as Collateral Agent for the holders of the Secured Obligations
under the Collateral Documents, and its successors in such capacity.
"Collateral Documents" means this Agreement, the Security Agreement
Supplements, the Mortgages, the Intellectual Property Security Agreements and
all other supplemental or additional security agreements, mortgages or similar
instruments delivered pursuant hereto or thereto.
B-2
<PAGE>
"Concentration Account Bank" has the meaning set forth in
Section 6(a).
"Concentration Accounts" has the meaning set forth in Section 6(a).
"Contingent Secured Obligation" means, at any time, any Secured
Obligation (or portion thereof) that is contingent in nature at such time,
including (without limiting the generality of the foregoing):
(i) any obligation to reimburse a bank for drawings not yet made
under a letter of credit issued by such bank, or any Guarantee of any such
obligation;
(ii) any obligation to provide collateral to or for the benefit of a
bank to secure reimbursement obligations arising from drawings not yet made
under a letter of credit issued by such bank, or any Guarantee of any such
obligation; and
(iii) any other Secured Obligation which is contingent in nature at
the time of determination.
"Copyright License" means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor has granted
to any other Person, any right to use, copy, reproduce, distribute, prepare
derivative works, display or publish any records or other materials on which a
Copyright is in existence or may come into existence, including, without
limitation, any agreement identified in Schedule 1 to a Copyright Security
Agreement.
"Copyrights" means all the following: (i) all copyrights under the
laws of the United States or any other country (whether or not the underlying
works of authorship have been published), all registrations and recordings
thereof, all copyrightable works of authorship (whether or not published), and
all applications for copyrights under the laws of the United States or any other
country, including, without limitation, registrations, recordings and
applications in the United States Copyright Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof, including, without limitation, those described in
Schedule 1 to any Copyright Security Agreement, (ii) all renewals thereof, (iii)
all claims for, and rights to sue for, past or future infringements of any of
the foregoing, and (iv) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including,
without limitation, damages and payments for past or future infringements
thereof.
"Copyright Security Agreement" means a Copyright Security Agreement,
substantially in the form of Exhibit B hereto, executed and delivered by a Lien
Grantor in favor of the Collateral Agent, for the benefit of the Secured
Parties, as amended from time to time.
"Credit Agreement" means the Debtor-In-Possession Credit Agreement
dated as of September 13, 1999 among the Borrowers, the Lenders, the LC Issuing
Banks and Morgan Guaranty Trust Company of New York, as Arranger, Collateral
Agent and Administrative Agent, as amended from time to time.
B-3
<PAGE>
"Documents" means, with respect to any Lien Grantor, all "documents"
(as defined in the UCC) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by such Lien Grantor.
"Enforcement Notice" means a notice delivered to the Collateral Agent
by the Administrative Agent pursuant to Section 8.03 of the Credit Agreement
directing the Collateral Agent to exercise one or more specific rights or
remedies under the Collateral Documents.
"Equipment" means, with respect to any Lien Grantor, all "equipment"
(as defined in the UCC) now owned or hereafter acquired by it, wherever located.
"Equity Interest" means (i) in the case of a corporation, any shares
of its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof or (v) any warrant, option or other right to acquire any Equity Interest
described in the foregoing clauses (i), (ii), (iii) and (iv).
"Existing Intellectual Property" means, with respect to any Original
Lien Grantor, all Intellectual Property owned by or licensed to such Lien
Grantor as of the Closing Date.
"Future Intellectual Property" means, with respect to any Lien Grantor
at any time after the Closing Date, any Intellectual Property owned by or
licensed to such Lien Grantor at such time, other than its Existing Intellectual
Property.
"General Intangibles" means, with respect to any Lien Grantor, all
"general intangibles" (as defined in the UCC) now owned or hereafter acquired by
such Lien Grantor, including, without limitation, (i) all obligations or
indebtedness owing to such Lien Grantor (other than Accounts) from whatever
source arising, (ii) all Intellectual Property, goodwill, trade names, service
marks, trade secrets, permits and licenses, (iii) all rights or claims in
respect of refunds for taxes paid and (iv) all rights in respect of any pension
plan or similar arrangement maintained for employees of any member of the ERISA
Group.
"Goods" means, with respect to any Lien Grantor, all "goods" (as
defined in the UCC) now owned or hereafter acquired by it, wherever located.
"Instruments" means, with respect to any Lien Grantor, all
"instruments", "chattel paper" or "letters of credit" (each as defined in the
UCC) evidencing, representing, arising from or existing in respect of, relating
to, securing or otherwise supporting the payment of, any Account or other
obligation or indebtedness owing to such Lien Grantor, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now owned or hereafter acquired by such Lien Grantor.
"Intellectual Property" means (i) Patents, (ii) Patent Licenses, (iii)
Trademarks, (iv) Trademark Licenses, (v) Copyrights and (vi) Copyright Licenses,
and all rights in or under any of the foregoing.
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"Intellectual Property Filing" means (i) with respect to any Patent,
Patent License, Trademark or Trademark License, the filing of the applicable
Patent Security Agreement or Trademark Security Agreement with the United States
Patent and Trademark Office, together with an appropriately completed
recordation form, and (ii) with respect to any Copyright or Copyright License,
the filing of the applicable Copyright Security Agreement with the United States
Copyright Office, together with an appropriately completed recordation form, in
each case sufficient to record the Security Interest granted to the Collateral
Agent in such Intellectual Property.
"Intellectual Property Security Agreement" means a Copyright Security
Agreement, a Patent Security Agreement or a Trademark Security Agreement.
"Inventory" means, with respect to any Lien Grantor, all "inventory"
(as defined in the UCC), now owned or hereafter acquired by it, wherever
located.
"LC Collateral Account" has the meaning set forth in Section 7(f).
"Lien Grantor" means any Borrower and any Subsidiary Guarantor and
"Lien Grantors" means all of the foregoing.
"Liquid Investments" has the meaning set forth in Section 7(h).
"Medicaid Receivable" means any Account with respect to which the
obligor is a state governmental authority (or agent thereof) obligated to pay,
pursuant to federal or state Medicaid program statutes or regulations, for
services rendered to eligible beneficiaries thereunder.
"Medicare Receivable" means any Account with respect to which the
obligor is a federal governmental authority (or agent thereof) obligated to pay,
pursuant to federal Medicare program statutes or regulations, for services
rendered to eligible beneficiaries thereunder.
"Non-Contingent Secured Obligation" means at any time any Secured
Obligation (or portion thereof) that is not a Contingent Secured Obligation at
such time.
"Original Lien Grantor" means any of the Borrowers or any Subsidiary
Guarantor that grants a Lien on any of its assets hereunder on the Closing Date,
and "Original Lien Grantors" means all of the foregoing.
"Patent License" means any agreement now or hereafter in existence
granting any Lien Grantor, or pursuant to which any Lien Grantor has granted to
any other Person, any right with respect to any Patent or any invention now or
hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether a
patent or application for patent on such invention may come into existence or
not, including, without limitation, any agreement identified in Schedule 1 to a
Patent Security Agreement.
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<PAGE>
"Patents" means (i) all letters patent and design letters patent of
the United States or any other country and all applications for letters patent
and design letters patent of the United States or any other country, including,
without limitation, applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, (ii) all
reissues, divisions, continuations, continuations-in-part, revisions and
extensions thereof, (iii) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (iv) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including, without limitation, damages and payments for past or
future infringements thereof.
"Patent Security Agreement" means a Patent Security Agreement,
substantially in the form of Exhibit C hereto, executed and delivered by a Lien
Grantor in favor of the Collateral Agent, for the benefit of the Secured
Parties, as amended from time to time.
"Perfection Certificate" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit E hereto, completed and
supplemented with the schedules and attachments contemplated thereby to the
satisfaction of the Collateral Agent, and duly executed by a duly authorized
officer of such Lien Grantor.
"Permitted Liens" means (i) the Security Interests and (ii) the other
Liens on the Collateral permitted to be created or assumed or to exist pursuant
to Section 7.02 of the Credit Agreement.
"Personal Property Collateral" means at any time, with respect to any
Lien Grantor, all its property included in the Collateral at such time, other
than its Real Property Collateral.
"Personal Property Security Interests" means the security interests in
Personal Property Collateral granted by the Lien Grantors under the Collateral
Documents.
"Pledged Equity Interests" means at any time all Equity Interests
included in the Collateral at such time.
"Pledged Equity Securities" means at any time all "certificated
securities" (as such term is defined in Article 8 of the UCC) that evidence or
represent Pledged Equity Interests at such time.
"Pledged Instruments" means at any time all Instruments included in
the Collateral at such time.
"Pledged LLC Interest" means at any time any membership interest or
similar interest in a limited liability company that is included in the Pledged
Equity Interests at such time.
"Pledged Partnership Interest" means at any time any partnership
interest (whether general or limited) that is included in the Pledged Equity
Interests at such time.
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"Post-Petition Interest" means any interest which accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Borrowers, whether or not such interest is
allowed or allowable as a claim in any such proceeding.
"Prepayment Account" has the meaning set forth in Section 7(a).
"Proceeds" means, with respect to any Lien Grantor, all proceeds of,
and all other profits, products, rents or receipts, in whatever form, arising
from the collection, sale, lease, exchange, assignment, licensing or other
disposition of, or other realization upon, its Collateral, including without
limitation all claims of such Lien Grantor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any of its Collateral, and
any condemnation or requisition payments with respect to any of its Collateral,
in each case whether now existing or hereafter arising.
"Real Property Collateral" means at any time, with respect to any Lien
Grantor, all its real property (including leasehold interests in real property)
included in the Collateral at such time.
"Real Property Security Interests" means the security interests in
Real Property Collateral granted by the Lien Grantors under the Leasehold
Mortgages and the other Collateral Documents.
"Secured Obligations" means:
(a) with respect to the Borrowers, the Obligations; and
(A) with respect to any Subsidiary Guarantor, (i) all obligations of
such Subsidiary Guarantor under the Subsidiary Guaranty Agreement and (ii) all
other obligations of such Subsidiary Guarantor under or in respect of the
Financing Documents.
"Secured Parties" means the holders from time to time of the Secured
Obligations.
"Secured Parties Requesting Notice" means, at any time, each Secured
Party which has, at least five Business Days prior thereto, delivered to the
Collateral Agent a written notice (a) stating that it holds one or more Secured
Obligations and wishes to receive copies of the notices referred to in Section
16(i) and (b) setting forth its address or facsimile number to which copies of
such notices should be sent.
"Security Agreement Supplement" means a Security Agreement Supplement,
substantially in the form of Exhibit A hereto, executed and delivered to the
Collateral Agent pursuant to Section 19 for the purpose of adding a new
Subsidiary Guarantor as a party hereto and/or adding additional property to the
Collateral.
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<PAGE>
"Security Interests" means the Personal Property Security Interests
and the Real Property Security Interests.
"Subsidiary Guarantors" means each Person listed on the signature
pages hereof under the caption "Subsidiary Guarantors" and each Person that
shall, at any time after the date hereof, become a party hereto and a
"Subsidiary Guarantor" as provided in Section 19.
"Trademark License" means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor has granted
to any other Person, any right to use any Trademark, including, without
limitation, any agreement identified in Schedule 1 to any Trademark Security
Agreement.
"Trademarks" means: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and any other
source or business identifiers, and general intangibles of like nature, and the
rights in any of the foregoing which arise under applicable law, (ii) the
goodwill of the business symbolized thereby or associated with each of them,
(iii) all registrations and applications in connection therewith, including,
without limitation, registrations and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof,
including, without limitation, those described in Schedule 1 to any Lien
Grantor's Trademark Security Agreement, (iv) all renewals thereof, (v) all
claims for, and rights to sue for, past or future infringements of any of the
foregoing and (vi) all income, royalties, damages and payments now or hereafter
due or payable with respect to any of the foregoing, including, without
limitation, damages and payments for past or future infringements thereof.
"Trademark Security Agreement" means a Trademark Security Agreement,
substantially in the form of Exhibit D hereto, executed and delivered by a Lien
Grantor in favor of the Collateral Agent, for the benefit of the Secured
Parties, as amended from time to time.
"VA Receivable" means any Account with respect to which the obligor is
the Veterans' Administration or any successor thereto (or any agent thereof).
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York; provided that if, by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of any Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or non-
perfection.
SECTION 2. Representations and Warranties. Each Original Lien Grantor
represents and warrants that:
(a) As of the Closing Date, such Original Lien Grantor owns the
Equity Interests listed as being owned by it in Schedule 4 to the Credit
Agreement, free and clear of any Lien other than Permitted Liens. All shares of
capital stock identified in such Schedule as being beneficially
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<PAGE>
owned by such Original Lien Grantor have been duly authorized and validly
issued, are fully paid and non-assessable, and are subject to no option to
purchase or similar right of any Person. Such Original Lien Grantor is not and
will not become a party to or otherwise bound by any agreement, other than the
Financing Documents, which restricts in any manner the rights of any present or
future holder of any Pledged Equity Interest with respect thereto.
(b) Such Original Lien Grantor has good and marketable title to all
of its Collateral (except Intellectual Property), free and clear of any Liens
other than Permitted Liens. To the best of its knowledge, such Original Lien
Grantor has good title or other rights in and to its Existing Intellectual
Property, free and clear of any Liens other than Permitted Liens. Such Original
Lien Grantor has taken all actions necessary under the UCC to perfect its
interest in any Accounts purchased or otherwise acquired by it, as against its
assignors and creditors of its assignors.
(c) Other than granting Permitted Liens, such Original Lien Grantor
has not performed any acts that might prevent the Collateral Agent from
enforcing any of the provisions of the Collateral Documents or that would limit
the Collateral Agent in any such enforcement. No financing statement, security
agreement, mortgage or similar or equivalent document or instrument covering all
or any part of the Collateral owned by it is on file or of record in any
jurisdiction in which such filing or recording would be effective to perfect or
record a Lien on such Collateral, except financing statements, mortgages or
other similar or equivalent documents with respect to Permitted Liens. After the
Closing, no Collateral owned by it will be in the possession of any Person
(other than such Original Lien Grantor) asserting any claim thereto or security
interest therein (except Permitted Liens), except that (i) the Collateral Agent
or its designee may have possession of Collateral as contemplated hereby and
(ii) cash and Temporary Cash Investments may be held in the Concentration
Accounts.
(d) Such Original Lien Grantor has delivered a Perfection Certificate
to the Collateral Agent. The information set forth therein is correct and
complete as of the Closing Date.
(e) The Personal Property Security Interests constitute valid
security interests in all Personal Property Collateral owned by such Original
Lien Grantor, thereby securing its Secured Obligations, and, if such Original
Lien Grantor is a Borrower, upon entry of the Interim Borrowing Order or the
Borrowing Order, constitute security interests therein prior to all other Liens
other than Liens permitted under the Credit Agreement to be senior in priority
to the liens of the Lenders.
(f) If such Original Lien Grantor is a Subsidiary Guarantor, when UCC
financing statements shall have been filed in the appropriate offices, the
Personal Property Security Interests will constitute perfected security
interests in the Personal Property Collateral owned by such Original Lien
Grantor which is a Subsidiary Guarantor to the extent that a security interest
therein may be perfected by filing pursuant to the UCC, prior (except in the
case of Intellectual Property) to all Liens and rights of others therein except
Permitted Liens. When, in addition to the filing of such UCC financing
statements, the applicable Intellectual Property Filings have been made with
respect to Intellectual Properties of such Original Lien Grantor which is a
Subsidiary Guarantor (including any future filings required pursuant Section
5(c) and 5(d)), the Personal Property Security Interests will constitute
perfected security interests in all right, title and interest of such Original
Lien Grantor which is a Subsidiary Guarantor in its Intellectual Property to the
extent that security interests therein may be perfected by such filings and, to
the best of knowledge of such Original Lien
B-9
<PAGE>
Grantor which is a Subsidiary Guarantor (including any future filings required
pursuant Section 5(c) and 5(d)), the Personal Property Security Interests will
constitute perfected security interests in all right, title and interest of such
Original Lien Grantor which is a Subsidiary Guarantor in its Intellectual
Property to the extent that security interests therein may be perfected by such
filings and, to the best of knowledge of such Original Lien Grantor which is a
Subsidiary Guarantor, such security interests will be prior to all other Liens
and rights of others therein except Permitted Liens. Except for (i) the filing
of such UCC financing statements, (ii) such Intellectual Property Filings and
(iii) the due recordation of the Fee Mortgages and Leasehold Mortgages, no
registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of the
Collateral Documents or is necessary for the validity or enforceability thereof
or for the perfection or due recordation of the Security Interests or (except
with respect to the capital stock of any Insurance Subsidiary) for the
enforcement of the Security Interests.
(g) Such Original Lien Grantor's Collateral is insured in
accordance with the requirements of the Credit Agreement.
SECTION 3. The Security Interests.
(a) In order to secure the full and punctual payment of its Secured
Obligations in accordance with the terms thereof, each Lien Grantor hereby
grants to the Collateral Agent for the benefit of the Secured Parties a
continuing security interest in and to all of the following property of such
Lien Grantor, whether now owned or existing or hereafter acquired or arising and
regardless of where located:
(i) all Accounts;
(ii) all Documents;
(iii) all Equipment;
(iv) all General Intangibles;
(v) all Goods;
(vi) all Instruments;
(vii) all Inventory;
(viii) all Equity Interests in other Persons now or hereafter
beneficially owned by such Lien Grantor, all rights and privileges of such
Lien Grantor with respect to such Equity Interests, and all dividends,
distributions and other payments with respect thereto;
(ix) all Real Property;
(x) all books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of such Lien Grantor pertaining to any of its
Collateral;
(xi) such Lien Grantor's ownership interest in all Deposit Accounts
in the Cash Management System including, without limitation, the Collateral
Accounts, all cash deposited therein from time to time, all Liquid
Investments made with amounts on deposit
B-10
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therein and all of such Lien Grantor's other monies and property of any
kind in the possession or under the control of the Collateral Agent; and
(xii) all Proceeds of the collateral described in the foregoing
clauses (i) through (xi).
Notwithstanding the foregoing, the Collateral shall not include (a)
any contract or agreement set forth on Schedule 1 annexed hereto to the extent
----------
such contract or agreement by its terms expressly prohibits the pledge,
transfer, assignment or hypothecation by the applicable Lien Grantor of such
contract or agreement or any rights of such Lien Grantor thereunder (including
without limitation any Equity Interests) , in each case in the manner
contemplated hereby, unless a consent shall have been obtained, and (b) any of
the promissory notes described on Schedule 1 annexed hereto; provided that the
---------- --------
Collateral shall include all contracts and agreements and rights to Accounts and
General Intangibles for money due or to become due under such contracts or
agreements as to which any prohibition on such transfer, pledge, assignment or
hypothecation in such contract or agreement is ineffective, whether under
Article 9 of the Code or otherwise, and shall also include all Proceeds of any
such contract or agreement; and provided further, that at such time as the grant
-------- -------
of a security interest in such contract or agreement would no longer result in
the forfeiture thereof, or default thereunder, then such security interest shall
automatically and without any further action attach and become fully effective
at that time.
(b) The Security Interests are granted as security only and shall
not subject the Collateral Agent or any other Secured Party to, or transfer or
in any way affect or modify, any obligation or liability of any Lien Grantor
with respect to any of the Collateral or any transaction in connection
therewith.
(c) If the superintendent of insurance or other similar official
having jurisdiction over any Insurance Subsidiary determines that the pledge of
the shares of capital stock of such Insurance Subsidiary hereunder constitutes
the acquisition of or a change of control with respect to such Insurance
Subsidiary as to which the prior approval of such superintendent or similar
official was required, then, immediately upon the relevant Lien Grantor's (1)
written memorialization of oral notice or (2) receipt of written notice from
such official of such determination and without any action on the part of the
Collateral Agent or any other Person, such pledge shall be rendered void ab
initio and of no effect. Upon any such occurrence, (i) the Collateral Agent
shall, at such Lien Grantor's written request and expense, return the
certificates representing such capital stock to such Lien Grantor and execute
and deliver such documents as such Lien Grantor shall reasonably request to
evidence such Lien Grantor's retention of all rights in such capital stock and
(ii) such Lien Grantor shall promptly submit a request to the superintendent of
insurance or other appropriate official for approval of the pledge of such
shares to the Collateral Agent hereunder and, upon receipt of such approval,
shall forthwith pledge and deposit with the Collateral Agent certificates
representing all of the outstanding shares of capital stock of such Insurance
Subsidiary to be held as Pledged Equity Securities subject to all relevant
provisions of this Agreement.
SECTION 4. Delivery of Certain Collateral. (a) On the Closing Date, each
Original Lien Grantor is delivering to the Collateral Agent as Collateral
hereunder all stock certificates or other
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<PAGE>
certificates representing Equity Interests in other Persons then owned by it and
not previously delivered.
(b) On the date it signs and delivers its Security Agreement
Supplement, each Lien Grantor (other than an Original Lien Grantor) will deliver
to the Collateral Agent as Collateral hereunder all stock certificates or other
certificates representing Equity Interests in other Persons then owned by it.
(c) After the Closing Date (in the case of an Original Lien
Grantor) or the date of its Security Agreement Supplement (in the case of any
other Lien Grantor), if any Lien Grantor receives (i) any stock certificate or
other certificate representing Equity Interests in another Person then owned by
it or (ii) any Instrument, in which a security interest is granted pursuant to
Section 3 hereof or pursuant to the Security Agreement Supplement signed by it,
such Lien Grantor will immediately deliver such certificate or Instrument to the
Collateral Agent to be held by it as Collateral hereunder.
(d) Notwithstanding the foregoing, so long as no Event of Default
shall have occurred and be continuing, each Lien Grantor may retain for
collection in the ordinary course any Instruments received by it in the ordinary
course of business, and the Collateral Agent shall, promptly upon request by
such Lien Grantor, make appropriate arrangements for making any other Instrument
pledged by such Lien Grantor hereunder available to it for purposes of
presentation, collection or renewal (any such arrangement to be effected, to the
extent deemed appropriate by the Collateral Agent, against trust receipt or like
document).
(e) All Pledged Equity Securities delivered to the Collateral Agent
hereunder will be delivered in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Collateral Agent. All Pledged
Instruments delivered to the Collateral Agent hereunder will be endorsed to the
order of the Collateral Agent, or accompanied by duly executed instruments of
assignment, all in form and substance satisfactory to the Collateral Agent.
SECTION 5. Further Assurances; Covenants. Each Lien Grantor covenants
as follows:
(a) It will not change its name, identity or corporate structure in
any manner unless permitted by Section 7.03 of the Credit Agreement and unless
such Lien Grantor shall have given the Collateral Agent prior notice thereof and
delivered an updated Perfection Certificate.
(b) It will not change the location of (i) its chief executive
office or chief place of business or (ii) the locations where it keeps or holds
any Collateral or any records relating thereto from the applicable locations
described in its Perfection Certificate (after the delivery of such Perfection
Certificate), unless such Lien Grantor shall have given the Collateral Agent
prior notice thereof. It will not in any event change the location of any
Collateral owned by it if such change would cause the Security Interests in such
Collateral to lapse or, if perfected prior to such change of location, cease to
be perfected.
(c) It will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action
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(including, without limitation, any Intellectual Property Filings and any
filings of financing or continuation statements under the UCC) that from time to
time may be necessary or desirable, or that the Collateral Agent may request, in
order to create, preserve, perfect, confirm or validate the Security Interests
in such Lien Grantor's Collateral or to enable the Collateral Agent and the
other Secured Parties to obtain the full benefits of the Collateral Documents,
or to enable the Collateral Agent to exercise and enforce any of its rights,
powers and remedies thereunder with respect to any of such Lien Grantor's
Collateral. To the extent permitted by applicable law, such Lien Grantor
authorizes the Collateral Agent to execute and file such financing statements or
continuation statements without such Lien Grantor's signature appearing thereon.
Such Lien Grantor agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Such Lien Grantor shall pay the costs of, or incidental to,
any recording or filing of any such financing or continuation statements in
which it is named as the debtor. Such Lien Grantor hereby constitutes the
Collateral Agent its attorney-in-fact to execute and file all Intellectual
Property Filings required or so requested for the foregoing purposes, all acts
of such attorney being hereby ratified and confirmed; and such power, being
coupled with an interest, shall be irrevocable until such Lien Grantor's
Collateral is released pursuant to Section 18.
(d) Within 30 days after the Closing Date, it will (i) sign and
deliver to the Collateral Agent any Intellectual Property Security Agreement
necessary to grant Security Interests in any Intellectual Properties owned by it
that are not covered by the Security Interests granted in any previous
Intellectual Property Security Agreements so signed and delivered by it and (ii)
make all Intellectual Property Filings reasonably necessary to record the
Security Interests in such Intellectual Properties.
(e) At least 30 days before it takes any action contemplated by
Section 5(a) or 5(b), such Lien Grantor will, at its expense, cause to be
delivered to the Collateral Agent an officer's certificate, in form and
substance satisfactory to the Collateral Agent, to the effect that all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be recorded or filed in order to perfect and protect
the Security Interests against all creditors of and purchasers from such Lien
Grantor (except any continuation statements specified in such officer's
certificate that are to be filed more than six months after the date thereof)
have been filed in each filing office necessary for such purpose and that all
filing fees and taxes, if any, payable in connection with such filings have been
paid in full.
(f) If any of its Collateral is at any time in the possession or
control of any warehouseman, bailee or agent, such Lien Grantor will notify such
warehouseman, bailee or agent of the Security Interests and instruct it to hold
all such Collateral for the Collateral Agent's account subject to the Collateral
Agent's instructions.
(g) It shall keep full and accurate books and records relating to
its Collateral, and stamp or otherwise mark such books and records in such
manner as the Collateral Agent may reasonably request in order to reflect the
Security Interests.
(h) It shall use its best efforts to cause to be collected from its
account debtors, as and when due, any and all amounts owing under or on account
of each of its Accounts (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with
B-13
<PAGE>
lawful collection procedures) and shall apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such Accounts.
Subject to the rights of the Collateral Agent and the other Secured Parties
hereunder if an Event of Default shall have occurred and be continuing, such
Lien Grantor may allow in the ordinary course of business as adjustments to
amounts owing under its Accounts (i) an extension or renewal of the time or
times of payment, or settlement for less than the total unpaid balance, which
such Lien Grantor finds appropriate in accordance with sound business judgment
and (ii) refunds or credits, all in accordance with such Lien Grantor's ordinary
course of business consistent with its historical collection practices. The
costs and expenses (including, without limitation, attorney's fees) of
collection, whether incurred by such Lien Grantor or the Collateral Agent, shall
be borne by such Lien Grantor.
(i) If an Enforcement Notice is in effect, such Lien Grantor will,
consistent with the terms of the Credit Agreement, the Interim Borrowing Order
and the Borrowing Order, if requested to do so by the Collateral Agent, promptly
notify (and such Lien Grantor hereby authorizes the Collateral Agent so to
notify) each account debtor in respect of any of its Accounts or Instruments
that such Collateral has been assigned to the Collateral Agent hereunder, and
that any payments due or to become due in respect of such Collateral are to be
made directly to the Collateral Agent or its designee.
(j) Such Lien Grantor will not sell, lease, exchange, assign or
otherwise dispose of, or grant any option with respect to, any of its
Collateral; provided that, unless an Enforcement Notice is in effect, ? such
Lien Grantor may sell, lease or exchange its Inventory and surplus or worn-out
Equipment in the ordinary course of business and ? such Lien Grantor may sell
any of its Collateral if (x) the sale thereof does not violate any covenant in
the Credit Agreement and (y) in the case of an Asset Sale, the Net Cash Proceeds
thereof are applied to prepay Loans if required by and as provided in Section
2.08 of the Credit Agreement. Concurrently with any sale or exchange permitted
by the foregoing proviso, the Security Interests in the assets sold or exchanged
(but not in any Proceeds arising from such sale or exchange) shall cease
immediately without any further action on the part of the Collateral Agent or
any other Secured Party.
(k) Such Lien Grantor will, promptly upon request, provide to the
Collateral Agent all information and evidence it may reasonably request
concerning its Collateral to enable the Collateral Agent to enforce the
provisions of the Collateral Documents.
(l) Such Lien Grantor shall notify the Collateral Agent promptly if
it knows that any application or registration relating to any material
Intellectual Property owned or licensed by it may become abandoned or dedicated,
or of any adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any proceeding
in the United States Copyright Office, the United States Patent and Trademark
Office or any court) regarding such Lien Grantor's ownership of such material
Intellectual Property, its right to register or patent the same, or its right to
keep and maintain the same. If any of such Lien Grantor's rights to any material
Intellectual Property are infringed, misappropriated or diluted by a third
party, such Lien Grantor shall notify the Collateral Agent within 30 days after
it learns thereof and shall, unless such Lien Grantor shall reasonably determine
that any such action would be of negligible value, economic or otherwise,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions
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as such Lien Grantor shall reasonably deem appropriate under the circumstances
to protect such Intellectual Property.
SECTION 6. Concentration Accounts. (a) The Borrower shall establish (or
transfer into the name of the Collateral Agent) one or more accounts
(collectively, the "Concentration Accounts") which shall be maintained in the
name of and under the exclusive control of the Collateral Agent and into which
collected cash owned by the Borrower and the other Lien Grantors shall be
deposited from time to time. Each Concentration Account shall be maintained with
a bank (a "Concentration Account Bank") that is a Lender under the Credit
Agreement. The Collateral Agent shall instruct each Concentration Account Bank
to transfer, from time to time, amounts on deposit in each Concentration Account
maintained with it to such other account or accounts as the Borrower may
request, unless and until the Collateral Agent rescinds such instructions. The
Collateral Agent shall not rescind such instructions unless requested to do so
by the Required Lenders at a time when an Event of Default shall have occurred
and be continuing.
(b) Amounts on deposit in the Concentration Accounts may be
invested and re-invested from time to time in such Temporary Cash Investments as
the Borrowers shall determine and the Court shall approve from time to time;
provided that, in order to provide the Collateral Agent, for the benefit of the
Secured Parties, with a perfected security interest therein, (x) the books and
records of the relevant Concentration Account Bank shall reflect the fact that
such Temporary Cash Investments are held for the account of the Collateral Agent
and (y) each such Temporary Cash Investment either:
(i) is issued in the name of the relevant Concentration Account
Bank or evidenced by a negotiable certificate or instrument which (together
with any appropriate instrument of transfer) is delivered to, and held by,
such Concentration Account Bank or an agent thereof (which shall not be any
Lien Grantor or any of its Affiliates) in a State where possession thereof
perfects the Security Interest therein; or
(ii) if not so issued or evidenced, is subject to pledge under
applicable law and regulations and as to which (in the opinion of counsel
to the Collateral Agent) appropriate measures shall have been taken to
perfect the relevant Security Interest.
All right, title and interest in and to the cash amounts on deposit from time to
time in the Concentration Accounts together with any Temporary Cash Investments
from time to time made pursuant to this subsection (b) shall vest in the
Collateral Agent, shall constitute part of the relevant Lien Grantor's
Collateral hereunder and shall not constitute payment of the Secured Obligations
unless and until applied thereto as provided in Section 15. If an Enforcement
Notice is in effect, the Collateral Agent may, consistent with the terms of the
Interim Borrowing Order and the Borrowing Order, (i) instruct any Concentration
Account Bank to retain, in any Concentration Account maintained by it, all cash
and Temporary Cash Investments then held by it in such Concentration Account,
(ii) instruct such Concentration Account Bank to liquidate any or all Temporary
Cash Investments held by it in such Concentration Account and/or (iii) withdraw
any amounts held in any Concentration Account and apply such amounts in the
manner specified in Section 15.
SECTION 7. Collateral Accounts. (a) Promptly after the Closing, the
Collateral Agent shall establish an account (the "Prepayment Account") with the
Administrative Agent, in the name and
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under the exclusive control of the Collateral Agent, into which all amounts to
be deposited therein pursuant to Section 2.08(a), (b), (c), (d) and (f) of the
Credit Agreement shall be deposited from time to time. So long as no Enforcement
Notice is in effect, the Collateral Agent shall distribute to the Administrative
Agent, at its request from time to time, the amounts on deposit in the
Prepayment Account which are required to be applied to prepay the Loans in
accordance with said Section 2.08(a), (b), (c), (d) and (f). If immediately
available cash on deposit in the Prepayment Account is not sufficient to make
any such distribution, the Collateral Agent shall cause to be liquidated, as
promptly as practicable, such Liquid Investments in the Prepayment Account as
shall be required to obtain sufficient cash to make such distribution and,
notwithstanding any other provision of this Section 7, such distribution shall
not be made until such liquidation has taken place.
(b) Promptly after the Collateral Agent determines that any
Casualty Proceeds are to be deposited pursuant to Section 5.08 of the Credit
Agreement with respect to property of any Lien Grantor, the Collateral Agent
shall establish an account (such Lien Grantor's "Casualty Proceeds Account")
with the Administrative Agent, in the name and under the exclusive control of
the Collateral Agent, into which all Casualty Proceeds to be deposited with
respect to property of such Lien Grantor shall be deposited from time to time.
(c) So long as no Enforcement Notice is in effect, Casualty
Proceeds to be released from a Casualty Proceeds Account pursuant to Section
5.08(a)(i) of the Credit Agreement shall be distributed by the Collateral Agent
to the relevant Lien Grantor at such times and in such amounts as such Lien
Grantor shall request for the purpose of restoring, repairing, replacing or
rebuilding the asset in respect of which such Casualty Proceeds were received.
Any such request shall be accompanied by a certificate of a Financial Officer
describing in detail the restoration, repair, replacement or rebuilding for
which such funds have been or will be expended and the date (which shall not be
later than 30 days after the date of such certificate) by which such Lien
Grantor is obligated to make such payment, provided that no such certificate
shall be required if the aggregate Casualty Proceeds requested for the
restoration, repair, replacement or rebuilding of the relevant asset is less
than $100,000 with respect to any Casualty Event. If immediately available cash
on deposit in any Lien Grantor's Casualty Proceeds Account is not sufficient to
make any such distribution to it, the Collateral Agent shall cause to be
liquidated, as promptly as practicable, such Liquid Investments in such Casualty
Proceeds Account as shall be required to obtain sufficient cash to make such
distribution and, notwithstanding any other provision of this Section 7, such
distribution shall not be made until such liquidation has taken place.
(d) So long as no Enforcement Notice is in effect, the Collateral
Agent shall distribute to the Administrative Agent, at its request from time to
time, the amounts on deposit in the Casualty Proceeds Account which are required
to be applied to prepay Loans in accordance with Section 2.08(e) of the Credit
Agreement.
(e) Promptly after the Collateral Agent determines that any cash
proceeds of any Lien Grantor's Collateral are to be realized upon any exercise
of remedies pursuant to the Collateral Documents, the Collateral Agent shall
establish an account with respect to such Lien Grantor (such Lien Grantor's
"Cash Proceeds Account") with the Administrative Agent, in the name and under
the exclusive control of the Collateral Agent, into which all such cash proceeds
of such Lien Grantor's Collateral shall be deposited from time to time (unless
required to be deposited in another
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<PAGE>
Collateral Account). This subsection (e) shall not apply to any cash proceeds
that are deposited in a Concentration Account and are not required to be
deposited in any Collateral Account.
(f) Promptly after the Collateral Agent determines that any cash
collateral is to be deposited to secure LC Reimbursement Obligations pursuant to
Section 8.04 of the Credit Agreement or in the event any prepayment amounts are
applied pursuant to Section 2.08 of the Credit Agreement to reduce the Tranche A
Commitments below the aggregate amount of the LC Exposure, the Collateral Agent
shall establish a cash collateral account (the "LC Collateral Account") with the
Administrative Agent, in the name and under the exclusive control of the
Collateral Agent, into which all cash collateral deposited pursuant to said
Section 2.08(h) or 8.04 shall be deposited. If and when any LC Issuing Bank pays
a draft drawn under any outstanding Letter of Credit on which any deposit in the
LC Collateral Account was based, the amount so paid by it (but not more than the
amount in the LC Collateral Account at the time) shall, promptly after such LC
Issuing Bank notifies the Collateral Agent of such payment, be withdrawn by the
Collateral Agent from the LC Collateral Account and paid to the relevant LC
Issuing Bank or the Lenders, as appropriate. If at any time the amount in the LC
Collateral Account exceeds the aggregate amount then required to pay all
unreimbursed drawings under, and to cover all possible subsequent drawings
under, all outstanding Letters of Credit on which any deposits in the LC
Collateral Account were based, the excess amount shall, so long as no
Enforcement Notice is in effect, be withdrawn by the Collateral Agent and paid
to the Borrower. If immediately available cash on deposit in the LC Collateral
Account is not sufficient to make any distribution referred to in this
subsection (f), the Collateral Agent shall cause to be liquidated, as promptly
as practicable, such Liquid Investments in the LC Collateral Account as shall be
required to obtain sufficient cash to make such distribution and,
notwithstanding any other provision of this Section 7, such distribution shall
not be made until such liquidation has taken place.
(g) Amounts on deposit in any Collateral Account shall be invested
and re-invested from time to time in such Liquid Investments as the relevant
Lien Grantor shall determine. Any income received with respect to the balance
from time to time standing to the credit of any Collateral Account, including
any interest or capital gains on Liquid Investments, shall remain, or be
deposited, in such Collateral Account. All right, title and interest in and to
the cash amounts on deposit from time to time in any Collateral Account together
with any Liquid Investments from time to time made pursuant to this subsection
(g) shall vest in the Collateral Agent, shall constitute part of the relevant
Lien Grantor's Collateral hereunder and shall not constitute payment of its
Secured Obligations until applied thereto as provided in Section 15. If an
Enforcement Notice is in effect, any amounts held in any Collateral Account
shall be retained in such Collateral Account and, if and when requested by the
Administrative Agent, shall be withdrawn by the Collateral Agent and applied in
the manner specified in Section 15.
(h) For purposes hereof, "Liquid Investments" means any Temporary
Cash Investment that (i) matures within 30 days after it is acquired by or for
the account of the Collateral Agent and (ii) in order to provide the Collateral
Agent, for the benefit of the Secured Parties, with a perfected security
interest therein, either:
(i) is issued in the name of the Collateral Agent or a financial
intermediary acting for its account or is evidenced by a negotiable
certificate or instrument which
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(together with any appropriate instrument of transfer) is delivered to, and
held by, the Collateral Agent or an agent thereof (which shall not be any
Lien Grantor or any of its Affiliates) in a State where possession thereof
perfects the Security Interest therein; or
(ii) if not so issued or evidenced, is a Temporary Cash Investment
which is subject to pledge under applicable law and regulations and as to
which (in the opinion of counsel to the Collateral Agent) appropriate
measures shall have been taken to perfect the relevant Security Interest.
(i) For the purposes hereof, any accounts presently existing
pursuant to the Existing Credit Facilities that correspond to accounts which are
required to be created pursuant to the provisions of this Section 7 shall be
deemed to be the same accounts as are required to be created for the purposes of
this Section 7; provided, that the terms of such accounts shall be deemed to be
governed exclusively by the provisions of the Financing Documents and all
amounts therein shall be applied as set forth herein until ? all the Commitments
shall have expired or been terminated, ? all Letters of Credit shall have
expired or been canceled or been secured with cash collateral in an amount and
on terms satisfactory to the relevant LC Issuing Bank, and ? all outstanding
Secured Obligations shall have been paid in full, whereupon any amounts
remaining in such accounts shall be governed by and distributed in accordance
with the provisions of the Existing Credit Facilities.
SECTION 8. Record Ownership of Pledged Equity Securities. If directed to
do so by the Required Lenders at any time when an Event of Default has occurred
and is continuing, the Collateral Agent shall cause the Pledged Equity
Securities (or any portion thereof specified in such directions) to be
transferred of record into the name of the Collateral Agent or its nominee;
provided that no such transfer shall be made with respect to any capital stock
of any Insurance Subsidiary unless any required regulatory approvals under
applicable state law shall have been obtained. Promptly upon receiving any such
directions, the Collateral Agent will notify each relevant Lien Grantor thereof.
Each Lien Grantor will promptly give to the Collateral Agent copies of any
notices and other communications received by it with respect to Pledged Equity
Securities registered in its name, and the Collateral Agent will promptly give
to such Lien Grantor copies of any notices and other communications received by
the Collateral Agent with respect to such Lien Grantor's Pledged Equity
Securities registered in the name of the Collateral Agent or its nominee. So
long as no Enforcement Notice is in effect, the Collateral Agent shall pay over
to each relevant Lien Grantor all Cash Distributions received by the Collateral
Agent upon or with respect to any Pledged Equity Securities held of record in
the name of the Collateral Agent or its nominee.
SECTION 9. Right to Vote Pledged Equity Securities. (a) Unless an
Enforcement Notice directing the Collateral Agent to vote the Pledged Equity
Securities is in effect, each Lien Grantor shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect to
the Pledged Equity Securities owned by it, and the Collateral Agent shall, upon
receiving a written request from such Lien Grantor, deliver to such Lien Grantor
or as specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of such Pledged Equity Securities
which are registered in the name of the Collateral Agent or its nominee as shall
be specified in such request and be in form and substance satisfactory to the
Collateral Agent. Unless an Enforcement Notice directing the Collateral Agent to
do so is in effect, the Collateral Agent shall have no right to take any action
which the owner of a Pledged Partnership
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Interest or Pledged LLC Interest is entitled to take with respect thereto,
except the right to receive and retain payments and other distributions to the
extent provided in Section 10.
(b) If an Enforcement Notice directing the Collateral Agent to do
so is in effect, the Collateral Agent shall have the right to the extent
permitted by law (and, in the case of a Pledged Partnership Interest or Pledged
LLC Interest, by the relevant partnership agreement, operating agreement or
other governing document) and each Lien Grantor shall take all such action as
may be necessary or appropriate to give effect to such right, to vote and to
give consents, ratifications and waivers, and take any other action with respect
to any or all of the Pledged Equity Interests with the same force and effect as
if the Collateral Agent were the absolute and sole owner thereof; provided that
the Collateral Agent shall not have the right to vote or to give consents,
ratifications or waivers with respect to the capital stock of any Insurance
Subsidiary to the extent that such action would require prior regulatory
approval under applicable state law unless such approval shall have been
granted.
SECTION 10. Right to Receive Distributions on Collateral. Subject to
Section 18, the Collateral Agent shall have the right to receive and to retain
as Collateral hereunder all dividends, interest and other payments and
distributions made upon or with respect to the Pledged Equity Interests and each
Lien Grantor shall take all such action as the Collateral Agent may deem
necessary or appropriate to give effect to such right; provided that, unless an
Enforcement Notice is in effect, this sentence shall not apply to Cash
Distributions. All such dividends, interest and other payments and distributions
which are received by any Lien Grantor (except Cash Distributions received when
no Enforcement Notice is in effect) shall be received in trust for the benefit
of the Secured Parties and shall be segregated from other assets of such Lien
Grantor and shall, promptly upon such Lien Grantor's receipt thereof, be
delivered or paid over to the Collateral Agent in the same form as received
(with any necessary endorsements or executed assignments in blank), together
with a statement identifying the source of such Collateral and stating that it
is being delivered to the Collateral Agent to be held as Collateral under this
Agreement. If an Enforcement Notice is withdrawn pursuant to Section 21 (and no
other Enforcement Notice is then in effect), the Collateral Agent's right to
retain Cash Distributions under this Section 10 shall cease and the Collateral
Agent shall pay over to the relevant Lien Grantor(s) any Cash Distributions
retained by it during the continuance of such Enforcement Notice.
SECTION 11. General Authority. Each Lien Grantor hereby irrevocably
appoints the Collateral Agent its true and lawful attorney, with full power of
substitution, in the name of such Lien Grantor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the expense of such
Lien Grantor, to the extent permitted by law to exercise, at any time and from
time to time while an Enforcement Notice directing it to do so is in effect, all
or any of the following powers with respect to all or any of such Lien Grantor's
Collateral:
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
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<PAGE>
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the
Collateral Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Collateral Agent shall give such Lien Grantor not less than
ten days' prior written notice of the time and place of any sale or other
intended disposition of any Personal Property Collateral owned by such Lien
Grantor and such other notices as may be required by the Credit Agreement, the
Interim Borrowing Order and the Borrowing Order, except any such Personal
Property Collateral which threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Collateral Agent and each Lien
Grantor agree that such notice constitutes "reasonable notification" within the
meaning of Section 9-504(3) of the UCC.
SECTION 12. Remedies Upon Enforcement Notice. (a) Upon being instructed to
do so in an Enforcement Notice or in written instructions given by the Required
Lenders at any time while an Enforcement Notice is in effect, the Collateral
Agent may exercise (or cause its co-agents and co-trustees, if any, to exercise)
any or all of the remedies available to it (or to such co-agents or co-trustees)
under the Collateral Documents.
(b) Upon being instructed to do so in an Enforcement Notice or in
written instructions given by the Required Lenders at any time while an
Enforcement Notice is in effect, the Collateral Agent may exercise on behalf of
the Secured Parties all the rights of a secured party under the UCC (whether or
not in effect in the jurisdiction where such rights are exercised) with respect
to any Personal Property Collateral and, in addition, the Collateral Agent may,
without being required to give any notice, except as provided in the Credit
Agreement, the Interim Borrowing order and the Borrowing Order or herein or as
may be required by mandatory provisions of law, withdraw all cash and Temporary
Cash Investments held in any of the Collateral Accounts or Concentration
Accounts and apply such cash and Temporary Cash Investments and other cash, if
any, then held by it as Collateral as specified in Section 15 and, if there
shall be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at public
or private sale or at any broker's board or on any securities exchange, for
cash, upon credit or for future delivery, and at such price or prices as the
Required Lenders shall have advised the Collateral Agent are satisfactory;
provided that the right of the Collateral Agent to sell or otherwise realize
upon the capital stock of any Insurance Subsidiary shall be subject to the
Collateral Agent's or the relevant Lien Grantor's obtaining, to the extent
necessary under applicable law, the prior approval of such sale or other
realization by the superintendent of insurance or other similar official having
jurisdiction with respect to such Insurance Subsidiary. Any Secured Party may be
the purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard price quotations, at
any private sale). The Collateral Agent is authorized, in connection with any
such sale, if it deems it advisable so to do, to restrict the prospective
bidders on or purchasers of any of the securities included in the Collateral to
a limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or sale of any of such securities, to cause to be placed on any
security
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<PAGE>
included in the Collateral a legend to the effect that such security has not
been registered under the Securities Act of 1933 and may not be disposed of in
violation of the provisions of said Act, and to impose such other limitations or
conditions in connection with any such sale as the Collateral Agent deems
necessary or advisable in order to comply with said Act or any other law. Each
Lien Grantor agrees that it will execute and deliver such documents and take
such other action as the Collateral Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Collateral Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale shall
hold the Collateral so sold absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of any Lien Grantor
which may be waived, and each Lien Grantor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. Notice of any
such sale shall be given to the relevant Lien Grantor(s) as required by Section
11 (including as required by the Credit Agreement, the Interim Borrowing order
and the Borrowing Order) and shall in case of a public sale, state the time and
place fixed for such sale, in case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being sold,
will first be offered for sale at such board or exchange, and in case of a
private sale, state the day after which such sale may be consummated. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix in the notice of
such sale. At any such sale the Collateral may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may determine. The Collateral
Agent shall not be obligated to make any such sale pursuant to any such notice.
The Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Collateral Agent until the selling price is paid by
the purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. Upon being instructed to do so by the Required Lenders in an
Enforcement Notice or in written instructions given at any time while an
Enforcement Notice is in effect, the Collateral Agent, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction. The foregoing provisions of this subsection shall apply to Real
Property Collateral only to the extent permitted by applicable law and the
provisions of any applicable Mortgage or other document.
(c) For the purpose of enforcing any and all rights and remedies under this
Agreement, the Collateral Agent may (i) require each Lien Grantor to, and each
Lien Grantor agrees that it will, at its expense and upon the request of the
Collateral Agent, forthwith assemble all or any part of its Personal Property
Collateral as directed by the Collateral Agent and make it available at a place
designated by the Collateral Agent which is, in its opinion, reasonably
convenient to the Collateral Agent and such Lien Grantor, whether at the
premises of such Lien Grantor or otherwise, (ii) to the extent permitted by
applicable law, enter, with or without process of law and without breach of the
peace, any premises where any of the Personal Property Collateral is or may be
located, and without charge or liability to it seize and remove such Personal
Property Collateral from such
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premises, (iii) have access to and use such Lien Grantor's books and records
relating to its Collateral and (iv) prior to the disposition of its Personal
Property Collateral, store or transfer it without charge in or by means of any
storage or transportation facility owned or leased by such Lien Grantor,
process, repair or recondition it or otherwise prepare it for disposition in any
manner and to the extent the Collateral Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
trademark, trade name, copyright, patent or technical process used by such Lien
Grantor. The Collateral Agent may also render any or all of such Personal
Property Collateral unusable at such Lien Grantor's premises and may dispose of
such Personal Property Collateral on such premises without liability for rent or
costs. The foregoing provisions of this subsection shall apply to Real Property
Collateral only to the extent permitted by applicable law and the provisions of
any applicable Mortgage or other document.
(d) Without limiting the generality of the foregoing, if an Enforcement
Notice is in effect,
(i) the Collateral Agent may, upon proper notice as provided in Section 11
hereof, license, or sublicense, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any Intellectual Property
included in the Collateral throughout the world for such term or terms, on
such conditions and in such manner as the Collateral Agent shall in its sole
discretion determine; provided that such licenses do not conflict with any
existing licenses;
(ii) the Collateral Agent may, upon proper notice as provided in Section 11
hereof (without assuming any obligations or liability thereunder), at any time
and from time to time, in its sole and reasonable discretion, enforce (and
shall have the exclusive right to enforce) against any licensee or sublicensee
all rights and remedies of any Lien Grantor in, to and under any of its
Intellectual Property and take or refrain from taking any action under any
thereof, and each Lien Grantor hereby releases the Collateral Agent and each
of the other Secured Parties from, and agrees to hold the Collateral Agent and
each of the other Secured Parties free and harmless from and against any
claims and expenses arising out of, any lawful action so taken or omitted to
be taken with respect thereto, except for claims and expenses arising from the
Collateral Agent's or such Secured Party's gross negligence or willful
misconduct; and
(iii) upon request by the Collateral Agent (which shall not be construed as
implying any limitation on the rights or powers of the Collateral Agent), each
Lien Grantor will execute and deliver to the Collateral Agent a power of
attorney, in form and substance satisfactory to the Collateral Agent, for the
implementation of any lease, assignment, license, sublicense, grant of option,
sale or other disposition of an Intellectual Property owned by such Lien
Grantor or any action related thereto. In the event of any such disposition
pursuant to this Section, subject to confidentiality restrictions imposed on
such Lien Grantor in any license or similar agreement, such Lien Grantor shall
supply its know-how and expertise relating to or the products or services made
or rendered in connection with Patents, and its customer lists and other
records relating to such Intellectual Property and to the distribution of said
products or services, to the Collateral Agent.
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SECTION 13. Fees and Expenses; Indemnification. The Borrower agrees that it
will forthwith upon demand pay to the Collateral Agent:
(i) the amount of any taxes which the Collateral Agent may have been
required to pay by reason of the Security Interests or to free any of the
Collateral from any Lien thereon;
(ii) the amount of any and all reasonable out-of-pocket expenses,
including transfer taxes and reasonable fees and disbursements of counsel and
of any other experts, which the Collateral Agent may incur in connection with
(w) the administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and the
validity, perfection, rank and value of any Security Interest, and all
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining and shipping any Collateral, (x)
the collection, sale or other disposition of any Collateral, (y) the exercise
by the Collateral Agent of any of the rights or powers conferred upon it
hereunder or (z) any Enforcement Notice;
(iii) the amount of any fees that the Borrower shall have agreed in
writing to pay to the Collateral Agent and that shall have become due and
payable in accordance with such written agreement; and
(iv) the amount required to indemnify the Collateral Agent for, or
hold it harmless and defend it against, any loss, liability or expense
(including the reasonable fees and expenses of its counsel and any experts or
co-agents appointed hereunder) incurred or suffered by the Collateral Agent in
connection with this Agreement, except to the extent that such loss, liability
or expense arises from the Collateral Agent's gross negligence or willful
misconduct or a breach of any duty that the Collateral Agent has under this
Agreement (after giving effect to Sections 14 and 16).
Any such amount not paid to the Collateral Agent on demand shall bear interest
for each day until paid at a rate per annum equal to the Tranche A Default Rate.
SECTION 14. Limitation on Duty of Collateral Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody and preservation thereof,
the Collateral Agent shall have no duty as to any Personal Property Collateral
in its possession or control or in the possession or control of any agent or
bailee or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Personal Property Collateral in its possession if such Personal Property
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Personal Property Collateral, or for any diminution in the value
thereof, by reason of any act or omission of any agent or bailee selected by the
Collateral Agent in good faith or by reason of any act or omission by the
Collateral Agent pursuant to instructions from the Required Lenders (including,
without limitation, any voting instruction pursuant to Section 9), except to the
extent that such liability arises from the Collateral Agent's gross negligence
or willful misconduct.
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<PAGE>
SECTION 15. Application Of Proceeds. (a) Upon being instructed to do so in
an Enforcement Notice or in written instructions given by the Required Lenders
at any time while an Enforcement Notice is in effect, the Collateral Agent shall
apply (i) the proceeds of any sale of, or other realization upon, all or any
part of the Collateral, (ii) any cash held in the Cash Proceeds Accounts and
(iii) any cash withdrawn by it from the Concentration Accounts in the following
order of priorities:
first, to pay the expenses of such sale or other realization, including
reasonable compensation to agents of and counsel for the Collateral Agent,
and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection with the Collateral Documents, and any
other amounts then due and payable to the Collateral Agent pursuant to
Section 13 hereof and to the other Agents pursuant to Section 11.03 of the
Credit Agreement;
second, to pay the unpaid principal of the Secured Obligations ratably (or
provide for the payment thereof pursuant to subsection (b) of this
Section), until payment in full of the principal of all Secured Obligations
shall have been made (or so provided for);
third, to pay all interest (including Post-Petition Interest) on the
Secured Obligations and all letter of credit fees and commitment fees
payable under the Credit Agreement ratably, until payment in full of all
such interest and fees shall have been made;
fourth, to pay all other Secured Obligations ratably (or provide for the
payment thereof pursuant to subsection (b) of this Section), until payment
in full of all such other Secured Obligations shall have been made (or so
provided for); and
finally, to pay to the relevant Lien Grantor or its successors or assigns,
or as a court of competent jurisdiction may direct, any surplus then
remaining from the proceeds of the Collateral owned by it;
provided that Collateral owned by a Subsidiary Guarantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses first, second, third
and fourth only to the extent that the Secured Obligations referred to therein
are guaranteed by such Subsidiary Guarantor, subject to the limitation in
Section 9 of the Subsidiary Guaranty Agreement. The Collateral Agent may make
such distributions hereunder in cash or in kind or, on a ratable basis, in any
combination thereof.
(b) If at any time any portion of any monies collected or received by
the Collateral Agent would, but for the provisions of this subsection (b), be
payable pursuant to subsection (a) of this Section in respect of a Contingent
Secured Obligation, the Collateral Agent shall not apply any monies to pay such
Contingent Secured Obligation but instead shall request the holder thereof, at
least 10 days before each proposed distribution hereunder, to notify the
Collateral Agent as to the maximum amount of such Contingent Secured Obligation
if then ascertainable (e.g., in the case of a letter of credit, the maximum
amount available for subsequent drawings thereunder). If the holder of such
Contingent Secured Obligation does not notify the Collateral Agent of the
maximum ascertainable amount thereof at least two Business Days before such
distribution, such holder shall not be entitled to share in such distribution.
If such holder does so notify the Collateral Agent as to the maximum
ascertainable amount thereof, the Collateral Agent will allocate to such holder
a portion of the monies to be distributed in such distribution, calculated as if
such Contingent
B-24
<PAGE>
Secured Obligation were outstanding in such maximum ascertainable amount.
However, the Collateral Agent shall not apply such portion of such monies to pay
such Contingent Secured Obligation, but instead shall hold such monies or invest
such monies in Liquid Investments at the direction of the relevant Lien Grantor.
The Collateral Agent shall hold all such monies and all such Liquid Investments
and the net proceeds thereof in trust until such time as all or part of such
Contingent Secured Obligation becomes a Non-Contingent Secured Obligation,
whereupon the Collateral Agent at the request of the relevant Secured Party
shall apply the amount so held in trust to pay such Non-Contingent Secured
Obligation; provided that, if the other Secured Obligations theretofore paid
pursuant to the same clause of subsection (a) (i.e., clause second or fourth)
were not paid in full, the Collateral Agent shall apply the amount so held in
trust to pay the same percentage of such Non-Contingent Secured Obligation as
the percentage of such other Secured Obligations theretofore paid pursuant to
the same clause of subsection (a). If (i) the holder of such Contingent Secured
Obligation shall advise the Collateral Agent that no portion thereof remains in
the category of a Contingent Secured Obligation and (ii) the Collateral Agent
still holds any amount held in trust pursuant to this subsection (b) in respect
of such Contingent Secured Obligation (after paying all amounts payable pursuant
to the preceding sentence with respect to any portions thereof that became Non-
Contingent Secured Obligations), such remaining amount shall be applied by the
Collateral Agent in the order of priorities set forth in subsection (a) of this
Section.
(c) In making the payments and allocations required by this Section,
the Collateral Agent may rely upon information supplied to it pursuant to
Section 16(f). All distributions made by the Collateral Agent pursuant to this
Section shall be final (except in the event of manifest error) and the
Collateral Agent shall have no duty to inquire as to the application by the
Secured Parties of any amount distributed to them.
SECTION 16. Concerning The Collateral Agent. (a) The Collateral Agent is
authorized to take all such action as is provided or permitted to be taken by it
as Collateral Agent under the Collateral Documents and all other action
reasonably incidental thereto. As to any matters not expressly provided for
herein or in an Enforcement Notice or in written requests, directions or
instructions given as expressly provided in Section 6, 7, 9, 12 or 15,
including, without limitation, the timing and methods of realization upon the
Collateral, the Collateral Agent shall act or refrain from acting in accordance
with written instructions from the Required Lenders or, in the absence of such
instructions, in accordance with its discretion (subject to Section 16(c));
provided that the Collateral Agent shall not be obligated to comply with any
such instructions that are inconsistent with the provisions of the Collateral
Documents.
(b) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any Collateral or for the validity, perfection, priority
or enforceability of the Security Interests in any Collateral, whether impaired
by operation of law or by reason of any action or omission to act on its part
under the Collateral Documents. The Collateral Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement, the Credit Agreement or any other agreement relating to the
Secured Obligations.
(c) The obligations of the Collateral Agent under the Collateral
Documents are only those expressly set forth therein. In any case in which the
Collateral Agent is authorized to exercise any power or discretion, the
Collateral Agent may refrain from such exercise unless directed
B-25
<PAGE>
in writing by the Required Lenders to act in the manner specified in such
direction. Without limiting the generality of the foregoing, the Collateral
Agent shall not be required to take any action with respect to any Enforcement
Notice, except as expressly provided in Sections 12 and 15.
(d) The Collateral Agent may:
(i) consult with legal counsel (who may be counsel for any Vencor
Company) and
(ii) to the extent that the Collateral Agent in good faith deems it
appropriate in connection with its duties hereunder to do so, consult with
independent public accountants and other experts selected by it in
connection with any matter arising under the Collateral Documents and shall
not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or
experts.
(e) Neither the Collateral Agent nor any of its directors,
officers, agents, or employees shall be liable for any action taken or not taken
by it in connection with any Collateral Document (1) in accordance with
directions set forth in an Enforcement Notice or (2) with the consent or at the
request of the Required Lenders or (4) in the absence of its own gross
negligence or willful misconduct. However, nothing in this subsection (e) shall
affect any rights any Lien Grantor may have (x) against the Required Lenders for
requesting the Administrative Agent to give the directions set forth in an
Enforcement Notice or (y) against the Required Lenders for giving any other
consent, request, notice or instruction. Neither the Collateral Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Collateral Document, (ii) the
performance or observance of any of the covenants or agreements of any Lien
Grantor or (iii) the validity, effectiveness or genuineness of any Collateral
Document or any other instrument or writing furnished in connection therewith.
The Collateral Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement or other writing (which may be a
bank wire, telex, facsimile or similar writing) believed by it to be genuine or
to be signed by the proper party or parties.
(f) For all purposes of the Collateral Documents, including without
limitation determining from time to time the amounts of the Secured Obligations,
whether a Secured Obligation is a Contingent Secured Obligation or not, or
whether any notice, direction or instruction has been given by the Required
Lenders or any other Secured Party or Secured Parties entitled to give the same
under any provision of the Collateral Documents, the Collateral Agent shall be
entitled to rely upon information from the following sources (and may refrain
from acting on the basis of such information until two Business Days after it
receives all such information required to enable it to take such action):
(i) the Administrative Agent for information as to the Lender
Parties and their respective Secured Obligations outstanding under the
Credit Agreement (including whether any action has been taken or
instruction given by the Required Lenders);
B-26
<PAGE>
(ii) any Secured Party for information as to itself and its Secured
Obligations, to the extent that the Collateral Agent has not received such
information from the Administrative Agent; and
(iii) any Lien Grantor for information as to any Secured Party and
its Secured Obligations, to the extent that the Collateral Agent has not
received such information from the sources referred to in clauses (i) and
(ii) above.
(g) The Collateral Agent shall have no liability to any Lien
Grantor or any Secured Party for actions taken in reliance on such information,
except to the extent that such liability arises from the Collateral Agent's
gross negligence or willful misconduct.
(h) The Collateral Agent may resign at any time (effective upon
acceptance by a successor Collateral Agent of its appointment hereunder) by
giving written notice thereof to the Administrative Agent, each of the Secured
Parties Requesting Notice and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Collateral Agent.
If no successor Collateral Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Collateral Agent gives notice of resignation, the retiring Collateral
Agent may, on behalf of the Secured Parties, appoint a successor Collateral
Agent, which shall be a commercial bank organized or licensed under the laws of
the United States or of any State thereof and having a combined capital and
surplus of at least $100,000,000. Upon the acceptance of its appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Collateral Agent, and the retiring Collateral
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Collateral Agent's resignation hereunder as Collateral Agent, the
provisions of this Section and Sections 13 and 14 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was the Collateral
Agent.
(i) Within two Business Days after it receives or sends any notice
referred to in this subsection (i), the Collateral Agent shall send to the
Administrative Agent and each of the Secured Parties Requesting Notice, copies
of any Enforcement Notice received by the Collateral Agent, any notice
withdrawing an Enforcement Notice received by the Collateral Agent pursuant to
Section 21 and any other notice given by the Collateral Agent to any Lien
Grantor, or received by it from any Lien Grantor, pursuant to Section 11, 12, 15
or 18. The Collateral Agent shall also send to the Lien Grantors copies of any
Enforcement Notice or any notice withdrawing an Enforcement Notice received by
the Collateral Agent.
(j) The Collateral Agent may refuse to act on any notice, direction
or instruction from the Administrative Agent, the Required Lenders or any
Secured Party, or any agent, trustee or similar representative thereof which, in
the Collateral Agent's opinion, is contrary to law or the provisions of any
Collateral Document, is unduly prejudicial to Secured Parties not joining in
such notice, direction or instruction or may expose the Collateral Agent to
liability (unless the Collateral Agent shall have been adequately indemnified
for such liability by the Secured Parties that gave, or instructed the
Administrative Agent to give, such notice, direction or instruction).
B-27
<PAGE>
SECTION 17. Appointment of Co-Collateral Agents. At any time or times, in
order to comply with any legal requirement in any jurisdiction, the Collateral
Agent may appoint another bank or trust company or one or more other persons,
either to act as co-agent or co-agents, jointly with the Collateral Agent, or to
act as separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the provisions
of any Collateral Document and may be specified in the instrument of appointment
(which may, in the discretion of the Collateral Agent, include provisions for
the protection of such co-agent or separate agent similar to the provisions of
Section 16).
SECTION 18. Termination of Security Interests; Release of Collateral. (a)
When (i) all the Commitments shall have expired or been terminated, (ii) all
Letters of Credit shall have expired or been canceled or been secured with cash
collateral in an amount and on terms satisfactory to the relevant LC Issuing
Bank, and (iii) all outstanding Secured Obligations shall have been paid in
full, the Security Interests shall terminate and all rights to each item of
Collateral shall revert to the Lien Grantor that owns such item of Collateral.
(b) At any time before the Security Interests terminate pursuant to
subsection (a) of this Section, so long as an Enforcement Notice is not in
effect, the Collateral Agent shall, upon the written request of the Borrowers
and the approval of the Court (to the extent such Court approval is required
pursuant to an order of the Court or the Bankruptcy Code), release any of the
Collateral (but not all or substantially all of the Collateral) (i) with the
prior written consent of the Required Lenders or (ii) if such Collateral
constitutes Properties Held For Sale which is being sold in an Asset Sale
permitted under the Credit Agreement.
(c) At any time before the Security Interests terminate pursuant to
subsection (a) of this Section, unless an Enforcement Notice is in effect, the
Collateral Agent shall release Collateral (but not all or substantially all the
Collateral) upon receiving from the Administrative Agent written instructions
(1) directing the Collateral Agent to release such Collateral, (2) stating that
the Borrowers have requested such release pursuant to Section 2.13 of the Credit
Agreement and (3) stating that the Administrative Agent believes that the
Borrowers are entitled to such release pursuant to said Section 2.13. No such
release shall require the consent of any Secured Party, and the Collateral Agent
shall be fully protected in relying on such instructions from the Administrative
Agent.
(d) Upon any such termination of the Security Interests or release
of Collateral, the Collateral Agent will, at the expense of the relevant Lien
Grantor, execute and deliver to such Lien Grantor such documents as such Lien
Grantor shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 19. Additional Subsidiary Guarantors and Borrowers. Any Subsidiary
of Vencor which is not a party hereto and any Subsidiary Guarantor which becomes
a "Borrower" under the Credit Agreement may become a party hereto as a
Subsidiary Guarantor or as a Borrower, respectively, by executing and delivering
to the Collateral Agent a Security Agreement Supplement, whereupon such
Subsidiary shall become (i) in the case of a Subsidiary which is not a party
hereto, a "Lien Grantor" and a party hereto and (ii) in the case of a Subsidiary
Guarantor which becomes a Borrower under the Credit Agreement, a Lien Grantor
with the obligations and liabilities of a Borrower hereunder.
B-28
<PAGE>
SECTION 20. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party:
(i) in the case of any Lien Grantor listed on the signature pages
hereof, to it at:
Vencor Operating, Inc.
One Vencor Place
680 South Fourth Avenue
Louisville, KY 40202
Attn: General Counsel
Facsimile: (502) 596-4075
with copies to:
Vencor Operating, Inc.
One Vencor Place
680 South Fourth Avenue
Louisville, KY 40202
Attn: Director of Finance
Facsimile: (502) 596-4170
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: Thomas J. Moloney, Esq.
Lindsee Granfield, Esq.
(ii) in the case of the Collateral Agent, to it at:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Houston Stebbins
Telephone: (212) 648-7875
Facsimile: (212) 648-5005
with a copy to:
J.P. Morgan Services
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Renee Richmond
Telephone: (302) 634-3316
Facsimile: (302) 634-4300
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<PAGE>
(iii) in the case of any Lender Party, to the Administrative Agent to
be forwarded to such Lender Party at its address or facsimile number
specified in or pursuant to Section 11.01 of the Credit Agreement;
(iv) in the case of any Secured Party Requesting Notice, to it at
such address or facsimile number as such party may hereafter specify for
the purpose by notice to the Collateral Agent; or
(v) in the case of any party, to it at such other address or
facsimile number as such party may hereafter specify for the purpose by
notice to the Collateral Agent and the Lien Grantors.
Each such notice, request or other communication shall be effective (x) if given
by facsimile transmission, when transmitted to the facsimile number referred to
in this Section and confirmation of receipt is received, (y) if given by mail,
ten days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (z) if given by any other means, when
delivered at the address referred to in this Section. NOTICE TO VENCOR
OPERATING , INC. UNDER THIS AGREEMENT OR UNDER ANY OTHER FINANCING DOCUMENT
SHALL CONSTITUTE NOTICE TO ALL LIEN GRANTORS FOR ALL PURPOSES HEREUNDER AND
THEREUNDER, AND NOTICE FROM VENCOR OPERATING, INC. UNDER THIS AGREEMENT OR UNDER
ANY OTHER FINANCING DOCUMENT PURPORTING TO BE NOTICE FROM ALL LIEN GRANTORS
SHALL CONSTITUTE NOTICE FROM ALL LIEN GRANTORS FOR ALL PURPOSES HEREUNDER AND
THEREUNDER. Each Lien Grantor other than Vencor Operating, Inc. hereby
irrevocably appoints Vencor Operating, Inc. as such Lien Grantor's agent and
attorney-in-fact, with full authority in the place and stead of such Lien
Grantor and in the name of such Lien Grantor, Vencor Operating, Inc. or
otherwise, from time to time in Vencor Operating Inc.'s discretion, to execute
and deliver (and receive, where applicable) any and all written notices and
communications hereunder on behalf of the Lien Grantors to the Agents and the
Lenders, and to deliver unwritten notices and communications to the foregoing
effect, and each Lender Party shall be entitled to rely upon any such notice or
communication as a notice, communication or consent, as the case may be, of the
Lien Grantors, and shall incur no liability to Vencor or any Lien Grantor in
acting upon any such notice or communication that such Lender Party believes in
good faith to have been given by a duly authorized officer or other person
authorized by Vencor.
SECTION 21. Withdrawal of Enforcement Notice. An Enforcement Notice, once
given, shall remain in effect unless and until (i) the Required Lenders notify
the Collateral Agent that they wish to withdraw such Enforcement Notice, (ii) no
monies have been applied to pay any Secured Obligations pursuant to Section 15
(except pursuant to clause first thereof) as a result of such Enforcement Notice
and (iii) the Collateral Agent determines that the withdrawal of such
Enforcement Notice will not result in any liability or unreimbursed loss to the
Collateral Agent by reason of actions taken by it in reliance thereon.
SECTION 22. Waivers, Remedies Not Exclusive. No failure on the part of the
Collateral Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right or remedy under any Collateral Document shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Collateral Agent of any right or remedy under the Credit Agreement or any
B-30
<PAGE>
Collateral Agreement preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies specified in the
Collateral Documents and the Credit Agreement are cumulative and are not
exclusive of any other rights or remedies provided by law.
SECTION 23. Successors And Assigns. This Agreement is for the benefit of
the Collateral Agent and the Secured Parties and their respective successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights of the holder thereof hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness. This Agreement shall be binding on the Lien Grantors and their
respective successors and assigns.
SECTION 24. Changes In Writing. Neither this Agreement nor any provision
hereof may be amended, waived, discharged or terminated except in accordance
with Section 11.05 of the Credit Agreement.
SECTION 25. NEW YORK LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY
THE LAWS OF SUCH JURISDICTION.
SECTION 26. Severability. If any provision of any Collateral Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, the other provisions of the Collateral Documents shall remain
in full force and effect in such jurisdiction and shall be liberally construed
in favor of the Collateral Agent and the Secured Parties in order to carry out
the intentions of the parties thereto as nearly as may be possible; and the
invalidity or unenforceability of any provision thereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.
B-31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWERS:
---------
Advanced Infusion Systems, Inc.
American X-Rays, Inc.
C.P.C. of Louisiana, Inc.
Community Behavioral Health System, Inc.
Community Psychiatric Centers of Arkansas, Inc.
Community Psychiatric Centers of California
Community Psychiatric Centers of Florida, Inc.
Community Psychiatric Centers of Idaho, Inc.
Community Psychiatric Centers of Indiana, Inc.
Community Psychiatric Centers of Kansas, Inc.
Community Psychiatric Centers of Mississippi, Inc.
Community Psychiatric Centers of Missouri, Inc.
Community Psychiatric Centers of North Carolina,
Inc.
Community Psychiatric Centers of Oklahoma, Inc.
Community Psychiatric Centers of Utah, Inc.
Community Psychiatric Centers Properties
Incorporated
Community Psychiatric Centers Properties of
Oklahoma, Inc.
Community Psychiatric Centers Properties of Texas,
Inc.
Community Psychiatric Centers Properties of Utah,
Inc.
Courtland Gardens Health Center, Inc.
CPC Investment Corp.
CPC Managed Care Health Services, Inc.
CPC of Georgia, Inc.
CPC Properties of Arkansas, Inc.
CPC Properties of Illinois, Inc.
CPC Properties of Indiana, Inc.
CPC Properties of Kansas, Inc.
CPC Properties of Louisiana, Inc.
CPC Properties of Mississippi, Inc.
CPC Properties of Missouri, Inc.
CPC Properties of North Carolina, Inc.
First Rehab, Inc.
Florida Hospital Properties, Inc.
Health Care Holdings, Inc.
B-32
<PAGE>
Health Care Technology, Inc.
Helian ASC of Northridge, Inc.
Helian Health Group, Inc.
Helian Recovery Corporation
Homestead Health Center, Inc.
Horizon Healthcare Services, Inc.
Interamericana Health Care Group
J.B. Thomas Hospital, Inc.
Lafayette Health Care Center, Inc.
MedEquities, Inc.
Medisave of Tennessee, Inc.
Medisave Pharmacies, Inc.
Old Orchard Hospital, Inc.
Palo Alto Surgecenter Corporation
Peachtree-Parkwood Hospital, Inc.
PersonaCare, Inc.
PersonaCare Living Center of Clearwater, Inc.
PersonaCare of Bradenton, Inc.
PersonaCare of Clearwater, Inc.
PersonaCare of Connecticut, Inc.
PersonaCare of Georgia, Inc.
PersonaCare of Huntsville, Inc.
PersonaCare of Little Rock, Inc.
PersonaCare of Ohio, Inc.
PersonaCare of Owensboro, Inc.
PersonaCare of Pennsylvania, Inc.
PersonaCare of Pompano East, Inc.
PersonaCare of Pompano West, Inc.
PersonaCare of Reading, Inc.
PersonaCare of San Antonio, Inc.
PersonaCare of San Pedro, Inc.
PersonaCare of Shreveport, Inc.
PersonaCare of St. Petersburg, Inc.
PersonaCare of Warner Robbins, Inc.
PersonaCare of Wisconsin, Inc.
PersonaCare Properties, Inc.
ProData Systems, Inc.
Recovery Inns of America, Inc.
Respiratory Care Services, Inc.
Stamford Health Facilities, Inc.
THC-Chicago, Inc.
THC-Hollywood, Inc.
THC-Houston, Inc.
THC-Minneapolis, Inc.
THC-North Shore, Inc.
THC-Orange County, Inc.
B-33
<PAGE>
THC-San Diego, Inc.
THC-Seattle, Inc.
TheraTx Healthcare Management, Inc.
TheraTx Health Services, Inc.
TheraTx Management Services, Inc.
TheraTx Medical Supplies, Inc.
TheraTx Rehabilitation Services, Inc.
TheraTx Staffing, Inc.
Transitional Hospitals Corporation, a Delaware
Corporation
Transitional Hospitals Corporation, a Nevada Corporation
Transitional Hospitals Corporation of Indiana, Inc.
Transitional Hospitals Corporation of Louisiana,
Inc.
Transitional Hospitals Corporation of Michigan,
Inc.
Transitional Hospitals Corporation of Nevada, Inc.
Transitional Hospitals Corporation of New Mexico,
Inc.
Transitional Hospitals Corporation of Tampa, Inc.
Transitional Hospitals Corporation of Texas, Inc.
Transitional Hospitals Corporation of Wisconsin,
Inc.
Tucker Nursing Center, Inc.
Tunstall Enterprises, Inc.
VC-OIA, Inc.
VC-TOHC, Inc.
VC-WM, Inc.
Vencare, Inc.
Vencare Rehab Services, Inc.
Vencor Facility Services, Inc.
Vencor Holdings, L.L.C.
Vencor Home Care Services, Inc.
Vencor Hospice, Inc.
Vencor Hospitals East, L.L.C.
Vencor Hospitals West, L.L.C.
Vencor, Inc.
Vencor Insurance Holdings, Inc.
Vencor Investment Company
Vencor Nevada, L.L.C.
Vencor Nursing Centers East, L.L.C.
Vencor Nursing Centers Central L.L.C.
Vencor Nursing Centers North, L.L.C.
Vencor Nursing Centers South, L.L.C.
Vencor Nursing Centers West, L.L.C.
Vencor Operating, Inc.
B-34
<PAGE>
Vencor Pediatric Care, Inc.
Vencor Provider Network, Inc.
Ventech Systems, Inc.
By: Vencor Operating, Inc., as agent and
attorney-in-fact
for each of the foregoing entities
By: _____________________________________
Name:
Title:
Stamford Health Associates, L.P.
By: Stamford Health Facilities, Inc., Its General
Partner
By: _____________________________________
Name:
Title:
Vencor Home Care and Hospice Indiana Partnership
By: Vencor Home Care Services, Inc., Its General
Partner
By: _____________________________________
Name:
Title:
By: Vencor Hospice, Inc., Its General Partner
By: _____________________________________
Name:
Title:
Vencor Hospitals Limited Partnership
By: Vencor Operating, Inc., Its General Partner
By: _____________________________________
Name:
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<PAGE>
Title:
By: Vencor Nursing Centers Limited Partnership,
Its General Partner
By: Vencor Operating, Inc., Its General
Partner
By: _____________________________________
Name:
Title:
Vencor Nursing Centers Central Limited
Partnership
By: Vencor Operating, Inc., Its General Partner
By: __________________________________________
Name:
Title:
By: Vencor Nursing Centers Limited Partnership,
Its General Partner
By: Vencor Operating, Inc., Its General
Partner
By: ________________________________
Name:
Title:
Vencor Nursing Centers Limited Partnership
By: Vencor Operating, Inc., Its General Partner
By: __________________________________________
Name:
Title:
By: Vencor Hospitals Limited Partnership, Its
General Partner
By: Vencor Operating, Inc., Its General
B-36
<PAGE>
Partner
By: _____________________________________
Name:
Title:
B-37
<PAGE>
SUBSIDIARY GUARANTORS
---------------------
Caribbean Behavioral Health Systems, Inc.
By: _____________________________________
Name:
Title:
B-38
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
as Collateral Agent
By: _____________________________________
Name:
Title:
B-39
<PAGE>
EXHIBIT A
to Security Agreement
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of _______, ____, between [name
of Subsidiary Guarantor/Borrower] (the "Subsidiary [Guarantor/Borrower]") and
Morgan Guaranty Trust Company of New York, as Collateral Agent.
WHEREAS, Vencor, Inc., the other Lien Grantors party thereto and
Morgan Guaranty Trust Company of New York, as Collateral Agent are parties to a
Security Agreement dated as of September 13, 1999 (as heretofore amended and/or
supplemented, the "Security Agreement");
WHEREAS, terms defined in the Security Agreement (or whose definitions
are incorporated by reference in Section 1 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein; and
WHEREAS, [name of Subsidiary Guarantor/Borrower] desires to become a
party to the Security Agreement as a[n] [additional] Lien Grantor thereunder
with the obligations and liabilities of a ["Subsidiary Guarantor"/"Borrower"]
thereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
[** Paragraphs 1 - 4 for new Subsidiary Guarantors only**]
1. Grant of Security Interest. In order to secure the full and punctual
payment of the Secured Obligations in accordance with the terms thereof,
the Subsidiary Guarantor grants to the Collateral Agent for the benefit of
the Secured Parties a continuing security interest in all of the following
assets of the Subsidiary Guarantor (the "New Collateral"):
[describe assets being added to the Collateral]
2. Delivery of Collateral. Concurrently with delivering this Security
Agreement Supplement to the Collateral Agent, the Subsidiary Guarantor is
complying with the provisions of Section 4 of the Security Agreement with
respect to all stock certificates and other certificates representing
Equity Interests (if any) included in the New Collateral and all
Instruments (if any) included in the New Collateral.
3. Party to Security Agreement. Upon delivery of this Security Agreement
Supplement to the Collateral Agent, the Subsidiary Guarantor will become a
party to the Security Agreement and will thereafter have all of the rights
and obligations of a Subsidiary Guarantor thereunder and be bound by all of
the provisions thereof as fully as if the Subsidiary Guarantor were one of
the original parties thereto.
4. Address of Subsidiary Guarantor. The address and facsimile number of
the Subsidiary
B-40
<PAGE>
Guarantor to which all notices, requests and other communications shall be
sent pursuant to Section 20 of the Security Agreement is:
[address and facsimile number of Subsidiary Guarantor]
[** Paragraph 5 for Subsidiary Guarantors which become Borrowers
only**]
5. Party to Security Agreement as a Borrower. Upon delivery of this
Security Agreement Supplement to the Collateral Agent, the Subsidiary Guarantor
will become a party to the Security Agreement as a Borrower and will thereafter
have all of the rights and obligations of a Borrower thereunder.
[**Include only the following clauses (c) and (d) for a Subsidiary
Guarantor which becomes a Borrower**]
6. Representations and Warranties./1/ (a) The Subsidiary Guarantor is a
corporation duly incorporated, validly existing and in good standing under
the laws of [jurisdiction of incorporation].
(b) The Subsidiary Guarantor has delivered a Perfection Certificate to the
Collateral Agent. The information set forth therein is correct and
complete as of the date hereof.
(c) The execution and delivery of this Security Agreement Supplement by
the [Subsidiary Guarantor/Borrower] and the performance by it of its
obligations under the Security Agreement as supplemented hereby are within
its corporate or other powers, have been duly authorized by all necessary
corporate or other action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation
or of its Organizational Documents, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it or result in
the creation or imposition of any Lien (other than the Liens created by the
Collateral Documents) on any of its assets.
(d) The Security Agreement as supplemented hereby constitutes a valid and
binding agreement of the [Subsidiary Guarantor/Borrower], enforceable in
accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency, fraudulent conveyance or other similar laws affecting
creditors' rights generally and (ii) general principles of equity.
(e) As of the date hereof, the Subsidiary Guarantor owns the Equity
Interests listed as being owned by it in Schedule 1 to this Security
Agreement Supplement, free and clear of any Lien other than Permitted
Liens. All shares of capital stock identified in such Schedule as being
beneficially owned by the Subsidiary Guarantor have been duly authorized
and validly issued, are fully paid and non-assessable, and are subject to
no option to purchase or similar right of any Person. The Subsidiary
Guarantor is not and will not become a party to or otherwise bound by any
agreement, other than the Financing Documents, which restricts in any
manner the rights of any present or future holder of any Pledged Equity
Interest with respect thereto.
(f) The Subsidiary Guarantor has good and marketable title to all of its
Collateral (except
- ----------------
/1/ Modify as needed for any Subsidiary Guarantor that is not a corporation.
B-41
<PAGE>
Intellectual Property), free and clear of any Lien other than Permitted
Liens. To the best of its knowledge, the Subsidiary Guarantor has good
title or other rights in and to its Existing Intellectual Property, free
and clear of any Liens other than Permitted Liens. The Subsidiary Guarantor
has taken all actions necessary under the UCC to perfect its interest in
any Accounts purchased or otherwise acquired by it, as against its
assignors and creditors of its assignors.
(g) Other than granting Permitted Liens, the Subsidiary Guarantor has not
performed any acts that might prevent the Collateral Agent from enforcing
any of the provisions of the Collateral Documents or that would limit the
Collateral Agent in any such enforcement. No financing statement, security
agreement, mortgage or similar or equivalent document or instrument
covering all or any part of the Collateral owned by it is on file or of
record in any jurisdiction in which such filing or recording would be
effective to perfect or record a Lien on such Collateral, except financing
statements, mortgages or other similar or equivalent documents with respect
to Permitted Liens. After the date hereof, no Collateral owned by it will
be in the possession of any Person (other than the Subsidiary Guarantor)
asserting any claim thereto or security interest therein (except Permitted
Liens), except that (i) the Collateral Agent or its designee may have
possession of Collateral as contemplated hereby and (ii) cash and Temporary
Cash Investments may be held in the Concentration Accounts.
(h) The Personal Property Security Interests constitute valid security
interests in all Personal Property Collateral owned by the Subsidiary
Guarantor, thereby securing its Secured Obligations.
(i) When UCC financing statements shall have been filed in the appropriate
offices, the Personal Property Security Interests will constitute perfected
security interests in the Personal Property Collateral owned by the
Subsidiary Guarantor to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior (except in the case of
Intellectual Property) to all Liens and rights of others therein except
Permitted Liens. When, in addition to the filing of such UCC financing
statements, the applicable Intellectual Property Filings have been made
with respect to Intellectual Properties of the Subsidiary Guarantor
(including any future filings required pursuant Section 5(c) and 5(d) of
the Security Agreement), the Personal Property Security Interests will
constitute perfected security interests in all right, title and interest of
the Subsidiary Guarantor in its Intellectual Property to the extent that
security interests therein may be perfected by such filings and, to the
best of knowledge of the Subsidiary Guarantor, such security interests will
be prior to all other Liens and rights of others therein except Permitted
Liens. Except for (i) the filing of such UCC financing statements, (ii)
such Intellectual Property Filings and (iii) the due recordation of the Fee
Mortgages and Leasehold Mortgages, no registration, recordation or filing
with any governmental body, agency or official is required in connection
with the execution or delivery of the Collateral Documents or is necessary
for the validity or enforceability thereof or for the perfection or due
recordation of the Security Interests or (except with respect to the
capital stock of any Insurance Subsidiary) for the enforcement of the
Security Interests.
(j) The Subsidiary Guarantor's Collateral is insured in accordance with
the requirements of the Credit Agreement.
7. Governing Law. This Security Agreement Supplement shall be construed
in accordance with and governed by the laws of the State of New York.
B-42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Security
Agreement Supplement to be duly executed by their respective authorized officers
as of the day and year first above written.
[Name of Subsidiary Guarantor/Borrower]
By:__________________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Collateral Agent
By:__________________________________________
Name:
Title:
B-43
<PAGE>
SCHEDULE 1
to Security Agreement
Supplement
EQUITY INTERESTS OWNED BY
SUBSIDIARY GUARANTOR
<TABLE>
<CAPTION>
Number of Shares or
Name State of Organization Percentage Owned Units (if certificated)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
B-44
<PAGE>
EXHIBIT B
to Security Agreement
COPYRIGHT SECURITY AGREEMENT
(Copyrights, Copyright Registrations, Copyright
Applications and Copyright Licenses)
WHEREAS, [Name of Lien Grantor], a _____________ corporation/1/
(herein referred to as the "Lien Grantor") owns, or in the case of licenses, is
a party to, the Copyright Collateral (as defined below);
WHEREAS, Vencor, Inc., each of its Subsidiaries party thereto, the
Lenders, the LC Issuing Banks and Morgan Guaranty Trust Company of New York, as
Arranger, Collateral Agent and Administrative Agent, are parties to a Debtor-In-
Possession Credit Agreement dated as of September 13, 1999 (as amended from time
to time, the "Credit Agreement");
[WHEREAS, pursuant to the terms of the Subsidiary Guaranty Agreement
dated as of September 13, 1999, the Lien Grantor has guaranteed, subject to
certain limitations, certain obligations of the Borrowers (such guarantee being
herein referred to as the "Guaranty"); and]
WHEREAS, pursuant to the terms of the Security Agreement dated as of
September 13, 1999 (as such agreement may be amended from time to time, the
"Security Agreement") among Vencor, Inc., the other Lien Grantors party thereto
and Morgan Guaranty Trust Company of New York, as Collateral Agent for the
Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the "Grantee"), the Lien Grantor has granted to the
Grantee for the benefit of such Secured Parties a continuing security interest
in or other Lien on substantially all the assets of the Lien Grantor (except
certain excluded assets), including all right, title and interest of the Lien
Grantor in, to and under the Copyright Collateral (as defined below), whether
now owned or existing or hereafter acquired or arising, to secure the Secured
Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations, a continuing security
interest in all of the Lien Grantor's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Copyright Collateral"), whether now owned or
existing or hereafter acquired or arising:
(i) each Copyright (as defined in the Security Agreement) owned by the
Lien Grantor,
_________________
/1/ Modify as needed for any Lien Grantor that is not a corporation.
B-45
<PAGE>
including, without limitation, each Copyright registration or
application therefor referred to in Schedule 1 hereto;
(ii) each Copyright License (as defined in the Security Agreement) to
which the Lien Grantor is a party, including, without limitation, each
Copyright License identified in Schedule 1 hereto; and
(iii) all proceeds of and revenues from, accounts and general intangibles
arising out of, the foregoing, including, without limitation, all proceeds
of and revenues from any claim by the Lien Grantor against third parties
for past, present or future infringement of any Copyright, including,
without limitation, any Copyright owned by the Lien Grantor referred to in
Schedule 1, and all rights and benefits of the Lien Grantor under any
Copyright License, including, without limitation, any Copyright License
identified in Schedule 1 hereto.
The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Enforcement Notice is in effect, to take with respect
to the Copyright Collateral any and all appropriate action which the Lien
Grantor might take with respect to the Copyright Collateral and to execute any
and all documents and instruments which may be necessary or desirable to carry
out the terms of this Copyright Security Agreement and to accomplish the
purposes hereof.
Except to the extent permitted in the Security Agreement or the Credit
Agreement, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the foregoing Copyright Collateral.
The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Copyright Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
B-46
<PAGE>
IN WITNESS WHEREOF, the Lien Grantor has caused this Copyright
Security Agreement to be duly executed by its officer thereunto duly authorized
as of the ____ day of _______, ____.
[NAME OF LIEN GRANTOR]
By:______________________________
Name:
Title:
Acknowledged:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Collateral Agent
By:____________________________
Name:
Title:
B-47
<PAGE>
STATE OF ________ )
) ss.:
COUNTY OF ________ )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of _______________,
____.
[Seal]
_______________________________
Signature of notary public
My Commission expires _________
B-48
<PAGE>
Schedule 1
to Copyright
Security Agreement
------------------
[NAME OF LIEN GRANTOR]
COPYRIGHT REGISTRATIONS
<TABLE>
<CAPTION>
Registration No. Registration Date Title Expiration Date
- ---------------- ----------------- ----- ---------------
<S> <C> <C> <C>
</TABLE>
B-49
<PAGE>
EXHIBIT C
to Security Agreement
PATENT SECURITY AGREEMENT
(Patents, Patent Applications and Patent Licenses)
WHEREAS, [Name of Lien Grantor], a _____________ corporation/1/
(herein referred to as the "Lien Grantor") owns, or in the case of licenses, is
a party to, the Patent Collateral (as defined below);
WHEREAS, Vencor, Inc., each of its Subsidiaries party thereto, the
Lenders, the LC Issuing Banks, and Morgan Guaranty Trust Company of New York, as
Arranger, Collateral Agent and Administrative Agent, are parties to a Debtor-In-
Possession Credit Agreement dated as of September 13, 1999 (as amended from time
to time, the "Credit Agreement");
[WHEREAS, pursuant to the terms of the Subsidiary Guaranty Agreement
dated as of September 13, 1999, the Lien Grantor has guaranteed, subject to
certain limitations, certain obligations of the Borrowers (such guarantee being
herein referred to as the "Guaranty"); and]
WHEREAS, pursuant to the terms of the Security Agreement dated as of
September 13, 1999 (as such agreement may be amended from time to time, the
"Security Agreement") among Vencor, Inc., the other Lien Grantors party thereto
and Morgan Guaranty Trust Company of New York, as Collateral Agent for the
Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the "Grantee"), the Lien Grantor has granted to the
Grantee for the benefit of such Secured Parties a continuing security interest
in or other Lien on substantially all the assets (with certain exceptions) of
Lien Grantor (except certain excluded assets), including all right, title and
interest of the Lien Grantor in, to and under the Patent Collateral (as defined
below), whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations, a continuing security
interest in all of the Lien Grantor's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Patent Collateral"), whether now owned or
existing or hereafter acquired or arising:
(i) each Patent (as defined in the Security Agreement) owned by the Lien
Grantor, including, without limitation, each Patent referred to in Schedule
1 hereto;
(ii) each Patent License (as defined in the Security Agreement) to which
the Lien Grantor is a party, including, without limitation, each Patent
License identified in Schedule 1 hereto; and
____________________
/1/ Modify as needed for any Lien Grantor that is not a corporation.
B-50
<PAGE>
(iii) all proceeds of and revenues from the foregoing, including, without
limitation, all proceeds of and revenues from any claim by the Lien Grantor
against third parties for past, present or future infringement of any
Patent owned by the Lien Grantor, including, without limitation, any Patent
referred to in Schedule 1 hereto, and all rights and benefits of the Lien
Grantor under any Patent License, including, without limitation, any Patent
License identified in Schedule 1 hereto.
The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Enforcement Notice is in effect, to take with respect
to the Patent Collateral any and all appropriate action which the Lien Grantor
might take with respect to the Patent Collateral and to execute any and all
documents and instruments which may be necessary or desirable to carry out the
terms of this Patent Security Agreement and to accomplish the purposes hereof.
Except to the extent permitted in the Security Agreement or the Credit
Agreement, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the Patent Collateral.
The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Patent Collateral granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
B-51
<PAGE>
IN WITNESS WHEREOF, the Lien Grantor has caused this Patent Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of ____________, ____.
[NAME OF LIEN GRANTOR]
By:_____________________________
Name:
Title:
Acknowledged:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Collateral Agent
By:________________________
Name:
Title:
B-52
<PAGE>
STATE OF ________ )
) ss.:
COUNTY OF ________ )
I, ______________________, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of _______________,
____.
[Seal]
__________________________________
Signature of notary public
My Commission expires ____________
B-53
<PAGE>
EXHIBIT D
to Security Agreement
TRADEMARK SECURITY AGREEMENT
(Trademarks, Trademark Registrations, Trademark
Applications and Trademark Licenses)
WHEREAS, [Name of Lien Grantor], a _____________ corporation/1/
(herein referred to as the "Lien Grantor") owns, or in the case of licenses, is
a party to, the Trademark Collateral (as defined below);
WHEREAS, Vencor, Inc., each of its Subsidiaries party thereto, the
Lenders, the LC Issuing Banks and Morgan Guaranty Trust Company of New York, as
Arranger, Collateral Agent and Administrative Agent, are parties to a Debtor-In-
Possession Credit Agreement dated as of September 13, 1999 (as amended from time
to time, the "Credit Agreement");
[WHEREAS, pursuant to the terms of the Subsidiary Guaranty Agreement
dated as of September 13, 1999 the Lien Grantor has guaranteed, subject to
certain limitations, certain obligations of the Borrowers (such guarantee being
herein referred to as the Lien Grantor's "Guaranty"); and]
WHEREAS, pursuant to the terms of the Security Agreement dated as of
September 13, 1999 (as such agreement may be amended from time to time, the
"Security Agreement") among Vencor, Inc., the other Lien Grantors party thereto
and Morgan Guaranty Trust Company of New York, as Collateral Agent for the
Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the "Grantee"), the Lien Grantor has granted to the
Grantee for the benefit of such Secured Parties a continuing security interest
in or other Lien on substantially all the assets (except certain excluded
assets) of the Lien Grantor, including all right, title and interest of Lien
Grantor in, to and under the Trademark Collateral (as defined below), whether
now owned or existing or hereafter acquired or arising, to secure the Secured
Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations, a continuing security
interest in all of the Lien Grantor's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Trademark Collateral"), whether now owned or
existing or hereafter acquired or arising:
(i) each Trademark (as defined in the Security Agreement) owned by Lien
Grantor, including, without limitation, each Trademark registration and
application referred to in
____________________________
/1/ Modify as needed for any Lien Grantor that is not a corporation.
B-54
<PAGE>
Schedule 1 hereto, and all of the goodwill of the business connected with
the use of, or symbolized by, each Trademark;
(ii) each Trademark License (as defined in the Security Agreement) to which
the Lien Grantor is a party, including, without limitation, each Trademark
License identified in Schedule 1 hereto, and all of the goodwill of the
business connected with the use of, or symbolized by, each Trademark
licensed pursuant thereto; and
(iii) all proceeds of and revenues from the foregoing, including, without
limitation, all proceeds of and revenues from any claim by the Lien Grantor
against third parties for past, present or future unfair competition with,
or violation of intellectual property rights in connection with or injury
to, or infringement or dilution of, any Trademark owned by the Lien
Grantor, including, without limitation, any Trademark referred to in
Schedule 1 hereto, and all rights and benefits of the Lien Grantor under
any Trademark License, including, without limitation, any Trademark License
identified in Schedule 1 hereto, or for injury to the goodwill associated
with any of the foregoing.
The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Enforcement Notice is in effect, to take with respect
to the Trademark Collateral any and all appropriate action which the Lien
Grantor might take with respect to the Trademark Collateral and to execute any
and all documents and instruments which may be necessary or desirable to carry
out the terms of this Trademark Security Agreement and to accomplish the
purposes hereof.
Except to the extent permitted in the Security Agreement or the Credit
Agreement, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the foregoing Trademark Collateral.
The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Trademark Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
B-55
<PAGE>
IN WITNESS WHEREOF, the Lien Grantor has caused this Trademark
Security Agreement to be duly executed by its officer thereunto duly authorized
as of the ____ day of __________, ____.
[NAME OF LIEN GRANTOR]
By:________________________________
Name:
Title:
Acknowledged:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Collateral Agent
By: ____________________________
Name:
Title:
B-56
<PAGE>
STATE OF _________ )
) ss.:
COUNTY OF _________ )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of _______________,
____.
[Seal]
________________________________
Signature of notary public
My Commission expires __________
B-57
<PAGE>
Schedule 1
to Trademark
Security Agreement
[NAME OF LIEN GRANTOR]
U.S. TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Trademark Registration No. Registration Date
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
B-58
<PAGE>
U.S. TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Trademark Registration No. Registration Date
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
B-59
<PAGE>
EXCLUSIVE TRADEMARK LICENSES
<TABLE>
<CAPTION>
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
- --------- ----------------- --------- ------
<S> <C> <C> <C>
</TABLE>
B-60
<PAGE>
EXHIBIT E
to Security Agreement
PERFECTION CERTIFICATE
The undersigned, an authorized officer of [NAME OF LIEN GRANTOR], a
[jurisdiction of incorporation] corporation/1/ (the "Company"), hereby certifies
with reference to the Security Agreement dated as of September 13, 1999 among
the Company, the other Lien Grantors and Morgan Guaranty Trust Company of New
York, as Collateral Agent (terms defined therein being used herein as therein
defined), to the Collateral Agent and each other Lender Party as follows:
1. Names./1/ (a) The exact corporate name of the Company as it
appears in its certificate of incorporation is as follows:
(b) Set forth below is each other corporate name the Company has
had since its organization, together with the date of the relevant change.
(c) Except as set forth in Schedule 1, the Company has not
changed its identity or corporate structure in any way within the past five
years.
[Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature
or jurisdiction of corporate organization. If any such change has occurred,
include in Schedule 1 the information required by paragraphs 1, 2 and 3 of
this certificate as to each acquiree or constituent party to a merger or
consolidation.]
(d) The following is a list of all other names (including trade
names or similar appellations) used by the Company or any of its divisions
or other business units at any time during the past five years:
2. Current Locations. (a) The chief executive office of the Company
is located at the following address:
_____________________
/1/Modify as needed for any Lien Grantor that is not a corporation.
B-61
<PAGE>
(b) The following are all the locations where the Company
maintains any books or records relating to any Accounts:
(c) The following are all the places of business of the Company
not identified above:
(d) The following are all the locations where the Company
maintains any Inventory not identified above:
(e) The following are the names and addresses of all Persons
other than the Company which have possession of any of the Company's
Inventory:
3. Prior Locations. (a) Set forth below is the information required
by subparagraphs 2(a), 2(b) and 2(c) above with respect to each location or
place of business maintained by the Company at any time during the past five
years:
(b) Set forth below is the information required by subparagraphs
2(d) and 2(e) above with respect to each location or bailee where or with
whom Inventory has been lodged at any time during the past four months:
4. Unusual Transactions. Except as set forth in Schedule 4, all
Accounts have been originated by the Company and all Inventory and Equipment has
been acquired by the Company in the ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true
copy of a file search report from the Uniform Commercial Code filing officer in
each jurisdiction identified in paragraph 2 or 3 above with respect to each name
set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy
of each financing statement or other filing identified in such file search
reports.
6. UCC Filings. A duly signed financing statement on Form UCC-1 in
the form required by Collateral Agent pursuant to the Security Agreement has
been provided to the Collateral Agent for due filing in the Uniform Commercial
Code filing office in each jurisdiction identified in paragraph 2 hereof.
B-62
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Perfection
Certificate this __ day of __________, 1999.
____________________________
Name:
Title:
B-63
<PAGE>
EXHIBIT F
to Security Agreement
FORM OF LEASEHOLD MORTGAGE
Prepared by and when recorded return to:
Jennifer Grenert, Esq.
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
By: _________________________
Name of Attorney
================================================================================
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT
dated as of September ____, 1999
by
VENCOR OPERATING, INC.,
a Delaware corporation,
the Mortgagor,
to
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent,
the Mortgagee
Property:
3535 Bardstown Road
Louisville
County of Jefferson
State of Kentucky
================================================================================
This Instrument Contains After-Acquired Property Provisions and Secures
Obligations Containing Provisions For Changes in Interest Rates. This Instrument
Also Secures Future Advances.
<PAGE>
TABLE OF CONTENTS/1/
<TABLE>
<CAPTION>
Page
<S> <C>
PREAMBLE AND RECITALS..................................................... 1
GRANTING CLAUSES.......................................................... 2
GRANTING CLAUSE I. Leasehold Estate....................................... 2
GRANTING CLAUSE II. Improvements.......................................... 2
GRANTING CLAUSE III. Appurtenant Rights................................... 3
GRANTING CLAUSE IV. Agreements............................................ 4
GRANTING CLAUSE V. Leases................................................. 4
GRANTING CLAUSE VI. Rents, Issues and Profits............................. 4
GRANTING CLAUSE VII. Proceeds............................................. 4
GRANTING CLAUSE VIII. Additional Property................................. 5
ARTICLE 1 DEFINITIONS AND INTERPRETATION.................................. 5
Section 1.01 Definitions............................................ 5
Section 1.02 Interpretation......................................... 9
ARTICLE 2 CERTAIN WARRANTIES AND COVENANTS OF
THE MORTGAGOR........................................................ 9
Section 2.01 Title.................................................. 9
Section 2.02 Secured Obligations.................................... 10
Section 2.03 Impositions............................................ 10
Section 2.04 Legal and Insurance Requirements....................... 10
Section 2.05 Status and Care of the Property........................ 11
Section 2.06 Liens.................................................. 11
Section 2.07 Transfer............................................... 12
Section 2.08 Ground Lease........................................... 12
ARTICLE 3 INSURANCE, CASUALTY AND CONDEMNATION............................ 15
Section 3.01 Insurance.............................................. 15
Section 3.02 Casualty and Condemnation.............................. 15
ARTICLE 4 CERTAIN SECURED OBLIGATIONS..................................... 15
Section 4.01 Interest after Default................................. 15
Section 4.02 Changes in the Laws Regarding Taxation................. 16
Section 4.03 Indemnification........................................ 16
</TABLE>
______________________
/1/ The Table of Contents is not part of this Mortgage.
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 5 DEFAULTS, REMEDIES AND RIGHTS................................... 16
Section 5.01 Events of Default...................................... 16
Section 5.02 Remedies............................................... 16
Section 5.03 Waivers by the Mortgagor............................... 20
Section 5.04 Jurisdiction and Process............................... 20
Section 5.05 Sales.................................................. 20
Section 5.06 Proceeds............................................... 22
Section 5.07 Assignment of Leases................................... 23
Section 5.08 Dealing with the Mortgaged Property.................... 24
Section 5.09 Right of Entry......................................... 24
Section 5.10 Right to Perform Obligations........................... 24
Section 5.11 Concerning the Mortgagee............................... 25
Section 5.12 Expenses............................................... 25
ARTICLE 6 SECURITY AGREEMENT AND FIXTURE FILING........................... 26
Section 6.01 Security Agreement..................................... 26
Section 6.02 Fixture Filing......................................... 26
ARTICLE 7 MISCELLANEOUS................................................... 27
Section 7.01 Revolving Credit Loans................................. 27
Section 7.02 Release of Mortgaged Property.......................... 27
Section 7.03 Notices................................................ 28
Section 7.04 Amendments in Writing.................................. 28
Section 7.05 Severability........................................... 28
Section 7.06 Binding Effect......................................... 29
Section 7.07 Governing Law.......................................... 29
Section 7.08 Counterparts........................................... 29
Section 7.09 Last Dollars Secured................................... 29
</TABLE>
<PAGE>
THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FINANCING STATEMENT (this "Mortgage") dated as of September __,
1999 by VENCOR OPERATING, INC., a Delaware corporation, having an address at One
Vencor Place, 680 South Fourth Avenue, Louisville, Kentucky 40202 (the
"Mortgagor"), to MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Collateral Agent
for the Secured Parties (hereinafter defined), having an address at 500 Stanton
Christiana Road, Newark, Delaware 19713-2107 (the "Mortgagee").
WITNESSETH:/3/
Recitals
A. Credit Agreement. Reference is hereby made to the Debtor-In-Possession
Credit Agreement (as amended from time to time, the "Credit Agreement"), dated
as of September ___, 1999 among Vencor, Inc., and each of its Subsidiaries party
thereto, and Mortgagor, each as debtor and debtor-in-possession (each a
"Borrower" and collectively, on a joint and several basis, the "Borrowers"), the
Lenders party thereto, the LC Issuing Banks party thereto, and Morgan Guaranty
Trust Company of New York, as Arranger, Administrative Agent and Collateral
Agent (together with its successors and assigns under the Credit Agreement, the
"Agent").
B. Secured Obligations. The Lien of this Mortgage is being granted to
secure payment, performance and observance of the following indebtedness,
liabilities and obligations, whether now or hereafter owed or owing, hereinafter
referred to collectively as the "Secured Obligations":
(i) all principal of all Loans and LC Reimbursement Obligations
outstanding from time to time under the Credit Agreement;
(ii) all interest (including any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Mortgagor or would accrue
but for the operation of applicable bankruptcy or insolvency laws, whether
or not allowed or allowable as a claim in such proceeding) on the Secured
Obligations referred to above;
(iii) all other amounts hereafter payable by the Mortgagor under
any Financing Document; and
(iv) any amendments, restatements, renewals, extensions or
modifications of any of the foregoing.
C. Principal Amount. Pursuant to Kentucky Revised Statutes ("KRS")
382.520, this Mortgage shall secure the payment of (a) all renewals and
extensions of the Secured Obligations described herein; and (b) any additional
indebtedness, whether direct, indirect, existing, future contingent, or
otherwise, of Mortgagor to Mortgagee; provided that the aggregate amount of all
--------
_________________
/3/ Capitalized terms are defined in, or by reference in, Section 1.01.
<PAGE>
such Secured Obligations and additional indebtedness secured hereby shall in no
event exceed $500,000,000. The final maturity date of the Secured Obligations is
February ___, 2000.
Granting Clauses
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, for the purpose of securing the due and punctual payment,
performance and observance of the Secured Obligations and intending to be bound
hereby, the Mortgagor does hereby GRANT, BARGAIN, SELL, CONVEY, MORTGAGE,
ASSIGN, TRANSFER and WARRANT to the Mortgagee and its successors as Collateral
Agent under the Collateral Documents, with power of sale and right of entry as
hereinafter provided, all of the following property and rights (all of which
property and rights are collectively called the "Mortgaged Property"), and (to
the extent covered by the Local UCC) does hereby GRANT AND WARRANT to the
Mortgagee and its successors as Collateral Agent under the Collateral Documents,
a continuing first security interest in and to all of the Mortgaged Property and
rights described in the following Granting Clauses, to wit:
Granting Clause I.
Leasehold Estate. All estate, right, title and interest of the Mortgagor in, to,
under or derived from the lease described in Exhibit A (the "Ground Lease")
affecting the parcel or parcels of land located in Jefferson County, Kentucky,
more particularly described in Exhibit A (the "Land"), including all amendments,
supplements, consolidations, substitutions, extensions, renewals and other
modifications of the Ground Lease now or hereafter entered into in accordance
with the provisions thereof or otherwise; together with all other, further,
additional or greater estate, right, title or interest of the Mortgagor in, to,
under or derived from the Land and the Improvements now or hereafter located
thereon which may at any time be acquired by the Mortgagor by the terms of the
Ground Lease, by reason of the exercise of any option thereunder or otherwise,
including the right of the Mortgagor to possession under Section 365 of the
Bankruptcy Code in the event of the rejection of the Ground Lease by the
landlord thereunder or its trustee pursuant to said Section; and together with
all rights and benefits of whatsoever nature derived or to be derived by the
Mortgagor under the Ground Lease, including (subject to the terms hereof) the
rights to exercise options, to give consents, to modify, extend or terminate the
Ground Lease, to surrender the Ground Lease, to elect to treat the Ground Lease
as rejected or to remain in possession under Section 365(h) of the Bankruptcy
Code, and to receive all deposits and other amounts payable to the Mortgagor
under the Ground Lease.
Granting Clause II.
Improvements. All estate, right, title and interest of the Mortgagor
under the Ground Lease in, to, under or derived from all buildings, structures,
facilities and other improvements of every kind and description now or hereafter
located on the Land, including all parking areas, roads, driveways, walks,
fences, walls and berms; all estate, right, title and interest of the Mortgagor
in, to, under or derived from all items of fixtures, equipment and personal
property of every kind and description, in each case now or hereafter located on
the Land or affixed (actually or constructively) to the Improvements which by
the nature of their location thereon or affixation thereto, or otherwise, are
real property under applicable law or an interest in them arises under real
estate law including: all drainage and lighting facilities and other site
improvements; all water, sanitary and storm sewer, drainage, electricity, steam,
gas, telephone,
<PAGE>
telecommunications and other utility equipment and facilities; all plumbing,
lighting, heating, ventilating, air-conditioning, refrigerating, incinerating,
compacting, fire protection and sprinkler, surveillance and security, vacuum
cleaning, public address and communications equipment and systems; all pipes,
elevators, escalators, motors, electrical, computer and other wiring, machinery,
fittings and racking and shelving; all walls, screens and partitions; and
including all materials intended for the construction, reconstruction, repair,
replacement, alteration, addition or improvement of or to such buildings,
equipment, fixtures, structures and improvements, all of which materials shall
be deemed to be part of the Mortgaged Property immediately upon delivery thereof
on the Land and to be part of the Improvements immediately upon their
incorporation therein (the foregoing being collectively called the
"Improvements").
Equipment. All estate, right, title and interest of the Mortgagor in,
to, under or derived from all component parts of the Improvements, fixtures,
chattels and articles of personal property owned by the Mortgagor or in which
the Mortgagor has or shall acquire an interest, wherever situated, and now or
hereafter located on, attached to or contained in the Land and the Improvements,
whether or not attached thereto and which are not real property under applicable
law, including all partitions, screens, awnings, shades, blinds, curtains,
draperies, carpets, rugs, furniture and furnishings, heating, lighting,
plumbing, ventilating, air conditioning, refrigerating, gas, steam, electrical,
incinerating and compacting plants, systems, fixtures and equipment, elevators,
stoves, ranges, vacuum and other cleaning systems, call systems, switchboards,
sprinkler systems and other fire prevention, alarm and extinguishing apparatus
and materials, motors, machinery, pipes, conduits, dynamos, engines,
compressors, generators, boilers, stokers, furnaces, pumps, trunks, ducts,
appliances, equipment, utensils, tools, implements, fittings and fixtures (all
of the foregoing being hereinafter collectively called the "Equipment"; the Land
with the Improvements thereon and the Equipment therein being collectively
called the "Property"). If the Lien of this Mortgage is subject to a security
interest covering any property described in this GRANTING CLAUSE II, then all of
the right, title and interest of the Mortgagor in and to any and all such
property is hereby assigned to the Mortgagee, together with the benefits of all
deposits and payments now or hereafter made thereon by or on behalf of the
Mortgagor, and subject to all of the liens of, and terms and conditions
applicable to, such security interest.
Granting Clause III.
Appurtenant Rights. All estate, right, title and interest of the
Mortgagor in, to, under or derived from all tenements, hereditaments and
appurtenances now or hereafter relating to the Property; the streets, roads,
sidewalks and alleys abutting the Land; all strips and gores within or adjoining
the Land; all land in the bed of any body of water adjacent to the Land; all
land adjoining the Land created by artificial means or by accretion; all air
space and rights to use air space above the Land; all development or similar
rights now or hereafter appurtenant to the Land; all rights of ingress and
egress now or hereafter appertaining to the Property; all easements and rights
of way now or hereafter appertaining to the Property; and all royalties and
other rights now or hereafter appertaining to the use and enjoyment of the
Property, including alley, party walls, support, drainage, crop, timber,
agricultural, horticultural, oil, gas and other mineral, water stock, riparian
and other water rights.
<PAGE>
Granting Clause IV.
Agreements. All estate, right, title and interest of the Mortgagor in,
to, under or derived from all Insurance Policies (including all unearned
premiums and dividends thereunder), all guarantees and warranties relating to
the Property, all supply and service contracts for water, sanitary and storm
sewer, drainage, electricity, steam, gas, telephone and other utilities now or
hereafter relating to the Property and all other contract rights, now or
hereafter relating to the use or operation of the Property.
Granting Clause V.
Leases. All estate, right, title and interest of the Mortgagor in, to,
under or derived from all Leases now or hereafter in effect, whether or not of
record, for the use or occupancy of all or any part of the Property.
Granting Clause VI.
Rents, Issues and Profits. All estate, right, title and interest of
the Mortgagor in, to, under or derived from all rents, royalties, issues and
profits, including during any period of redemption, now or hereafter accruing
with respect to the Property, including all rents and other sums now or
hereafter, including during any period of redemption, payable pursuant to the
Leases; all other sums now or hereafter, including during any period of
redemption, payable with respect to the use, occupancy, management, operation or
control of the Property; and all other claims, rights and remedies now or
hereafter, including during any period of redemption, belonging or accruing with
respect to the Property, including deficiency rents and liquidated damages
following default or cancellation (the foregoing rents and other sums described
in this Granting Clause being collectively called the "Rents").
Granting Clause VII.
Proceeds. All estate, right, title and interest of the Mortgagor in,
to, under or derived from all proceeds of any Transfer, financing, refinancing
or conversion into cash or liquidated claims, whether voluntary or involuntary,
of any of the Mortgaged Property, including all Casualty Proceeds and title
insurance proceeds under any title insurance policy now or hereafter held by the
Mortgagor, and all rights, dividends and other claims of any kind whatsoever
(including damage, secured, unsecured, priority and bankruptcy claims) now or
hereafter relating to any of the Mortgaged Property, all of which the Mortgagor
hereby irrevocably directs be paid to the Mortgagee to the extent provided
herein, and in each of the Credit Agreement and the Security Agreement, to be
held, applied and disbursed as provided in the Credit Agreement and the Security
Agreement.
Granting Clause VIII.
Additional Property. All greater, additional or other estate, right,
title and interest of the Mortgagor in, to, under or derived from the Mortgaged
Property hereafter acquired by the Mortgagor, including all right, title and
interest of the Mortgagor in, to, under or derived from all extensions,
improvements, betterments, renewals, substitutions and replacements of, and
additions and appurtenances to, any of the Mortgaged Property hereafter acquired
by or released to the Mortgagor or constructed or located on, or affixed to, the
Property, in each case, immediately upon such acquisition, release,
construction, location or affixation; all estate, right, title and interest of
the Mortgagor in, to, under or derived from any other property and rights which
are, by the provisions of the Financing Documents, required to be subjected to
the Lien
<PAGE>
hereof; all estate, right, title and interest of the Mortgagor in, to, under or
derived from any other property and rights which are necessary to maintain the
Property and the Mortgagor's business or operations conducted therein as a going
concern, in each case, to the fullest extent permitted by law, without any
further conveyance, mortgage, assignment or other act by the Mortgagor; and all
estate, right, title and interest of the Mortgagor in, to, under or derived from
all other property and rights which are by any instrument or otherwise subjected
to the Lien hereof by the Mortgagor or anyone acting on its behalf.
TO HAVE AND TO HOLD the Mortgaged Property, together with all estate,
right, title and interest of the Mortgagor and anyone claiming by, through or
under the Mortgagor in, to, under or derived from the Mortgaged Property and all
rights and appurtenances relating thereto, to the Mortgagee, forever.
PROVIDED ALWAYS that this Mortgage is upon the express condition that
the Mortgaged Property shall be released from the Lien of this Mortgage in full
or in part in the manner and at the time provided in Section 7.02.
THE MORTGAGOR ADDITIONALLY COVENANTS AND AGREES WITH THE MORTGAGEE AS
FOLLOWS:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.01 Definitions. (a) Capitalized terms used in this Mortgage, but not
otherwise defined herein, are defined in, or are defined by reference to, the
Credit Agreement and have the same meanings herein as therein.
(b) In addition, as used herein, the following terms have the following
meanings:
"Agent" is defined in the Recitals.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor
statute.
"Cash Proceeds Account" is defined in Section 7(e) of the
Security Agreement.
"Casualty Event" means any damage to, or destruction of, any real
or personal property or improvements.
"Casualty Proceeds" means (i) with respect to any Condemnation
Event, all awards or payments received by the Mortgagor by reason of such
Condemnation Event, including all amounts received with respect to any
transfer in lieu or anticipation of such Condemnation Event or in
settlement of any proceeding relating to such Condemnation Event and (ii)
with respect to any Casualty Event, all insurance proceeds
<PAGE>
or payments (other than payments with respect to business interruption
insurance) which the Mortgagor receives under any insurance policy by
reason of such Casualty Event.
"Condemnation Event" means any condemnation or other taking or
temporary or permanent requisition of any property, any interest therein or
right appurtenant thereto, or any change of grade affecting any property,
as the result of the exercise of any right of condemnation or eminent
domain. A transfer to a governmental authority in lieu or anticipation of
condemnation shall be deemed to be a Condemnation Event.
"Credit Agreement" is defined in the Recitals.
"Equipment" is defined in Granting Clause II.
"Impositions" means all real estate taxes, transfer taxes and
sales and use taxes, assessments (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof), and water, sewer or other rents, rates and charges,
excises, levies, license fees, permit fees, inspection fees and other
authorization fees and other charges, in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every
character (including all interest and penalties thereon), which at any time
may be assessed, levied, confirmed or imposed on or in respect of, or be a
Lien upon, (i) the Property, any other Mortgaged Property or any interest
therein, (ii) any occupancy, use or possession of, or activity conducted
on, the Property or (iii) the Rents, but excluding income, excess profits,
franchise, capital stock, estate, inheritance, succession, gift or similar
taxes of the Mortgagor or the Mortgagee or any Lender, except to the extent
that such taxes of the Mortgagor or the Mortgagee or any Lender are imposed
in whole or in part in lieu of, or as a substitute for, any taxes which are
or would otherwise be Impositions.
"Improvements" is defined in Granting Clause II.
"Insurance Policies" means the insurance policies and coverages
required to be maintained by the Mortgagor with respect to the Property
pursuant to the Credit Agreement.
"Insurance Premiums" means all premiums payable under the
Insurance Policies.
"Insurance Requirements" means all provisions of the Insurance
Policies, all requirements of the issuer of any of the Insurance Policies
and all orders, rules, regulations and any other requirements of the
National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon the Mortgagor and applicable to the Property, any
adjoining vaults, sidewalks, parking areas or driveways, or any use or
condition thereof.
"Land" is defined in Granting Clause I.
<PAGE>
"Lease" means each lease, sublease, tenancy, subtenancy, license,
franchise, concession or other occupancy agreement relating to the Property
other than the Ground Lease, together with any guarantee of the obligations
of the tenant or occupant thereunder or any right to possession under any
federal or state bankruptcy code in the event of the rejection of any
sublease by the sublandlord thereof or its trustee pursuant to said code.
"Legal Requirements" means all provisions of all applicable laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, directions and requirements of, permits from and
agreements with, all governmental authorities, now or hereafter applicable
to the Property, any adjoining vaults, sidewalks, streets or ways, or any
use or condition thereof.
"Local UCC" means the Uniform Commercial Code as in effect in the
State in which the Property is located.
"Mortgage" is defined in the Preamble.
"Mortgaged Property" is defined in the Granting Clauses.
"Mortgagee" is defined in the Preamble.
"Mortgagor" is defined in the Preamble.
"National Flood Insurance Program" means the National Flood
Insurance Act of 1968 and the Flood Disaster Protection Act of 1973 (42
U.S.C. Sections 4001 et seq.).
-- ---
"Permitted Disposition" means any (i) Transfer in connection with
a Condemnation Event, (ii) easement or similar encumbrance with respect to
the Property granted by the Mortgagor to any adjoining landowner or any
railroad, telephone, cable television, water, sewer, utility or similar
company, municipality or other governmental subdivision in the ordinary
course of business, (iii) other Transfer permitted under Section 7.03 of
the Credit Agreement; or (iv) assignment or sublease to any wholly-owned
Vencor Company permitted under the Credit Agreement.
"Permitted Encumbrances" is defined in the Credit Agreement.
"Permitted Liens" means any Liens permitted under Section 7.02 of
the Credit Agreement.
"Property" is defined in Granting Clause II.
"Receiver" is defined in Section 5.02(a)(iv).
"Rents" is defined in Granting Clause VI.
<PAGE>
"Restoration" means the restoration, repair, replacement or
rebuilding of the Property after a Casualty Event or Condemnation Event,
and "Restore" means to restore, repair, replace or rebuild the Property
after a Casualty Event or Condemnation Event, in each case to a value and
condition substantially the same as the value and condition immediately
prior to the Casualty Event or Condemnation Event.
"Secured Obligations" is defined in the Recitals.
"Secured Parties" means the holders from time to time of the
Secured Obligations.
"Security Agreement" means the Security Agreement dated as of the
Closing Date among the Borrowers, the Subsidiary Guarantors party thereto
and the Collateral Agent.
"Transfer" means, when used as a noun, any sale, conveyance,
assignment, lease, sublease of all or any substantial portion of the
Property, or other transfer and, when used as a verb, to sell, convey,
assign, lease, so sublease, or otherwise transfer, in each case (i) whether
voluntary or involuntary, (ii) whether direct or indirect and (iii)
including any agreement providing for a Transfer or granting any right or
option providing for a Transfer.
"Unavoidable Delays" means delays due to acts of God, fire,
flood, earthquake, explosion or other Casualty Event, inability to procure
or shortage of labor, equipment, facilities, sources of energy (including
electricity, steam, gas or gasoline), materials or supplies, failure of
transportation, strikes, lockouts, action of labor unions, Condemnation
Event, litigation relating to Legal Requirements, inability to obtain
permits or other causes beyond the reasonable control of the Mortgagor,
provided that lack of funds shall not be deemed to be a cause beyond the
control of the Mortgagor.
(c) In this Mortgage, unless otherwise specified, references to this Mortgage or
to Leases, the Ground Lease, the Credit Agreement, Notes, Letters of Credit, the
Security Agreement, Financing Documents and Collateral Documents include all
amendments, supplements, consolidations, replacements, restatements, extensions,
renewals and other modifications thereof, in whole or in part.
Section 1.02 Interpretation. In this Mortgage, unless otherwise specified, (i)
singular words include the plural and plural words include the singular; (ii)
words which include a number of constituent parts, things or elements, including
the terms Leases, Improvements, Land, Secured Obligations, Property and
Mortgaged Property, shall be construed as referring separately to each
constituent part, thing or element thereof, as well as to all of such
constituent parts, things or elements as a whole; (iii) words importing any
gender include the other gender; (iv) references to any Person include such
Person's successors and assigns and in the case of an individual, the word
"successors" includes such Person's heirs, devisees, legatees, executors,
administrators and personal representatives; (v) references to any statute or
other law include all applicable rules, regulations and orders adopted or made
thereunder and all statutes or other laws amending, consolidating or replacing
the statute or law referred to; (vi) the words "consent", "approve", "agree" and
"re-
<PAGE>
quest", and derivations thereof or words of similar import, mean the prior
written consent, approval, agreement or request of the Person in question; (vii)
the words "include" and "including", and words of similar import, shall be
deemed to be followed by the words "without limitation"; (viii) the words
"hereto", "herein", "hereof" and "hereunder", and words of similar import, refer
to this Mortgage in its entirety; (ix) references to Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles,
Sections, Schedules, Exhibits, subsections, paragraphs and clauses of this
Mortgage; (x) the Schedules and Exhibits to this Mortgage are incorporated
herein by reference; (xi) the titles and headings of Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a
matter of convenience and shall not affect the construction of this Mortgage;
(xii) all obligations of the Mortgagor hereunder shall be satisfied by the
Mortgagor at the Mortgagor's sole cost and expense; and (xiii) all rights and
powers granted to the Mortgagee hereunder shall be deemed to be coupled with an
interest and be irrevocable.
ARTICLE 2
CERTAIN WARRANTIES AND COVENANTS OF THE MORTGAGOR
Section 2.01 Title. (a) The Mortgagor warrants that, as of the date hereof,
(i)(x) the Mortgagor has a valid and subsisting leasehold interest in the Land
and the Improvements thereon, subject to the provisions of the Ground Lease,
free and clear of all Liens other than the Permitted Liens, (y) the Mortgagor is
the owner of, or has a valid leasehold interest in, the Equipment and all other
items constituting the Mortgaged Property, and (z) this Mortgage constitutes a
valid, binding and enforceable Lien on the Mortgaged Property, in each case
subject only to the terms of the Ground Lease and to Permitted Liens; (ii) the
Ground Lease creates and constitutes in the Mortgagor a valid and subsisting
leasehold interest in the Land and the Improvements located thereon, (iii) the
Ground Lease has not been modified, amended or assigned except as set forth in
Exhibit A, and (iv) to the best of the Mortgagor's knowledge, there is no
default under the Ground Lease, all rents due have been paid in full, and no
action has commenced and is pending to terminate the Ground Lease.
(b) The Mortgagor shall forever preserve, protect, warrant and defend (A) the
estate, right, title and interest of the Mortgagor in and to the Mortgaged
Property; (B) the validity, enforceability and priority of the Lien of this
Mortgage on the Mortgaged Property; and (C) the right, title and interest of the
Mortgagee and any purchaser at any sale of the Mortgaged Property hereunder or
relating hereto, in each case against all other Liens and claims whatsoever,
subject only to Permitted Liens.
(c) The Mortgagor, at its sole cost and expense, shall (i) promptly correct any
defect or error which may be discovered in this Mortgage or any financing
statement or other document relating hereto; and (ii) promptly execute,
acknowledge, deliver, record and re-record, register and re-register, and file
and re-file this Mortgage and any financing statements or other documents which
the Mortgagee may reasonably require from time to time (all in form and
substance reasonably satisfactory to the Mortgagee) in order (A) to effectuate,
complete, perfect, continue or preserve the Lien of this Mortgage as a Lien on
the Mortgaged Property, whether now owned or hereafter acquired, subject only to
the Permitted Liens, or (B) to effectuate, complete, perfect,
<PAGE>
continue or preserve any right, power or privilege granted or intended to be
granted to the Mortgagee hereunder or otherwise accomplish the purposes of this
Mortgage. To the extent permitted by law, the Mortgagor hereby authorizes the
Mortgagee to execute and file financing statements or continuation statements
without the Mortgagor's signature appearing thereon if the Mortgagor has failed
to do so within a reasonable period of time after demand therefor. The Mortgagor
shall pay on demand the costs of, or incidental to, any recording or filing of
any financing or continuation statement, or amendment thereto, concerning the
Mortgaged Property.
(d) Nothing herein shall be construed to subordinate the Lien of this Mortgage
to any Permitted Lien to which the Lien of this Mortgage is not otherwise
subordinate.
Section 2.02 Secured Obligations. The Mortgagor shall duly and punctually pay,
perform and observe the Secured Obligations.
Section 2.03 Impositions. The Mortgagor shall (i) duly and punctually pay all
Impositions prior to the delinquency date thereof; (ii) duly and punctually file
all returns and other statements required to be filed with respect to any
Imposition prior to the delinquency date thereof; (iii) promptly notify the
Mortgagee of the receipt by the Mortgagor of any notice of default in the
payment of any Imposition or in the filing of any return or other statement
relating to any Imposition and simultaneously furnish to the Mortgagee a copy of
such notice of default; and (iv) not make deduction from or claim any credit on
any Secured Obligation by reason of any Imposition and, to the extent permitted
under applicable law, hereby irrevocably waives any right to do so.
Section 2.04 Legal and Insurance Requirements. (a) The Mortgagor represents
and warrants that as of the date hereof, (i) to the Mortgagor's knowledge, the
Property and the use and operation thereof comply in all material respects with
all Legal Requirements and Insurance Requirements, (ii) to the Mortgagor's
knowledge, there is no default under any material Legal Requirement or Insurance
Requirement and (iii) the execution, delivery and performance of this Mortgage
will not contravene any provision of or constitute a default under any material
Legal Requirement or Insurance Requirement.
(b) The Mortgagor shall (i) duly and punctually comply in all material respects
with all Legal Requirements and Insurance Requirements; (ii) procure, maintain
and duly and punctually comply in all material respects with all permits
required for any construction, reconstruction, repair, alteration, addition,
improvement, maintenance, management, use and operation of the Property as
conducted from time to time; (iii) promptly notify the Mortgagee of the receipt
by the Mortgagor of any notice of default regarding any Legal Requirement,
Insurance Requirement or permit or any possible or actual termination of any
permit or Insurance Policy and furnish to the Mortgagee a copy of such notice of
default or termination; and (iv) promptly after obtaining knowledge thereof,
notify the Mortgagee of any condition which, with or without the giving of
notice or the passage of time or both, would constitute a default regarding any
Legal Requirement or Insurance Requirement or a termination of any permit or
Insurance Policy and the action being taken to remedy such condition.
Section 2.05 Status and Care of the Property. (a) The Mortgagor represents
and warrants that (i) the Property is served by all necessary water, sanitary
and storm sewer, drainage, electric, steam, gas, telephone and other utility
facilities to serve the current use and operation of the Property;
<PAGE>
(ii) the Property has legal access to all streets or roads necessary to serve
the current use and operation of the Property; and (iii) the Improvements are
not located in an area designated as Flood Zone A, (as defined under the
regulations adopted under the National Flood Insurance Program), or to the
extent the Improvements are located in an area designated as Flood Zone A, the
Mortgagor maintains in full force and effect flood insurance under the National
Flood Insurance Program to the extent and in the amounts required by applicable
law.
(b) The Mortgagor (i) shall not (A) initiate, consent to or affirmatively
support any change in the applicable zoning which would materially and adversely
affect the value of the Lien created by this Mortgage, (B) seek any variance (or
any change in any variance) under the zoning adversely affecting the value of
the Lien created by this Mortgage, or (C) execute or file any subdivision or
other plat or map adversely affecting the value of the Lien created by this
Mortgage; and (ii) shall, promptly after receiving notice or obtaining knowledge
of any proposed change in the zoning materially and adversely affecting the
value of the Lien created by this Mortgage or which would result in the current
use of the Property being a non-conforming use for which a variance has not been
obtained, notify the Mortgagee thereof and diligently contest the same by any
action or proceeding deemed appropriate by the Mortgagor in its reasonable
judgment or reasonably requested by the Mortgagee provided, however, that the
Mortgagor shall not hereby be obligated to commence or prosecute any legal
action.
Section 2.06 Liens. The Mortgagor shall not create or permit to be created or
to remain, and shall immediately discharge or cause to be discharged, any Lien
on the Mortgaged Property or any interest therein, in each case (i) whether
voluntarily or involuntarily created, (ii) whether directly or indirectly a Lien
thereon and (iii) whether subordinated hereto, except Permitted Liens. The
provisions of this Section shall apply to each and every Lien (other than
Permitted Liens) on the Mortgaged Property or any interest therein, regardless
of whether a consent to, or waiver of a right to consent to, any other Lien
thereon has been previously obtained in accordance with the terms of the
Financing Documents.
Section 2.07 Transfer. The Mortgagor shall not Transfer, or suffer any
Transfer of, the Mortgaged Property or any part thereof or interest therein,
except, subject to the rights of the Mortgagee hereunder if an Event of Default
has occurred and is continuing, in connection with Permitted Dispositions.
Section 2.08 Ground Lease. (a) The Mortgagor represents and warrants that (i)
Exhibit A contains a correct and complete description of the Ground Lease; (ii)
the Mortgagor has furnished to the Mortgagee a copy of the Ground Lease
certified as true and correct by the Mortgagor; (iii) except as described in
Exhibit A, the Ground Lease has not been modified or assigned by the Mortgagor
or, to the knowledge of the Mortgagor, assigned by the landlord thereunder; (iv)
the Ground Lease is in full force and effect and, to the knowledge of the
Mortgagor, there is no default under the Ground Lease and there is existing no
condition which with the giving of notice or passage of time or both would cause
a default under the Ground Lease; and (v) the execution, delivery and
performance of this Mortgage do not require any consent (other than those
consents which have been obtained and are in full force and effect) under, and
will not contravene any provision of or cause a default under, the Ground Lease.
<PAGE>
(b) The Mortgagor shall (i) duly and punctually pay, perform and observe all of
its obligations under the Ground Lease; (ii) shall do all things necessary or
appropriate to enforce, preserve and keep unimpaired the rights of the Mortgagor
and the obligations of each of the other parties under the Ground Lease; (iii)
shall not terminate or surrender the Ground Lease; (iv) shall not modify or
amend the Ground Lease except as permitted by Section 7.08 of the Credit
Agreement; (v) shall notify the Mortgagee in writing not later than 120 days
prior to the last date on which the Mortgagor can exercise (A) any right to
extend the term of the Ground Lease or (B) any option to purchase or otherwise
acquire the interest of the landlord under the Ground Lease; (vi) unless the
Required Lenders shall otherwise approve, shall exercise (not later than 60 days
prior to the last date on which the Mortgagor may timely do so) each right or
option of the Mortgagor under the Ground Lease (A) to extend the term thereof,
or (B) to purchase or otherwise acquire the interest of the landlord under the
Ground Lease and contemporaneously furnish to the Mortgagee a copy of the notice
exercising such right or option; and (vii) shall notify the Mortgagee (A)
promptly after receipt or contemporaneously when given, as the case may be, of
the receipt or giving by the Mortgagor of any notice of default under the Ground
Lease or of any notice of the possible or actual termination thereof, any
material right of the Mortgagor thereunder or any material obligation of any
other party thereunder, accompanied by a copy of such notice; (B) promptly after
learning about any such condition, of the existence of any condition which, with
or without the giving of notice or the passage of time or both, would constitute
a default under the Ground Lease or any termination thereof; (C) promptly after
receiving or learning of the existence of any such assignment, or the existence
of any assignment of the interest of the landlord under the Ground Lease,
accompanied by a copy of any such assignment received by the Mortgagee; and (D)
promptly after receipt or contemporaneously when given, as the case may be, of
the receipt or giving of any notice relating to any option to purchase or right
of first refusal under the Ground Lease, accompanied by a copy of such notice.
(c) The provisions of subsection (b) of this Section shall also apply to any
right of the Mortgagor to possession under Section 365 of the Bankruptcy Code in
the event the Ground Lease is rejected by any other party thereunder or its
trustee pursuant to said Section.
(d) In the event the Mortgagor acquires the fee simple title or any other
greater estate or interest in the Land, such acquisition will not merge with the
leasehold estate created by the Ground Lease, but such other title, estate or
interest will remain discrete, shall immediately and automatically become
subject to the Lien hereof and such title, estate or interest shall be part of
the Mortgaged Property and included within the term and definition of "Land".
The Mortgagor shall execute, acknowledge and deliver any instruments requested
by the Mortgagee to confirm the coverage of the Lien hereof upon such other
greater estate or interest. The Mortgagor shall pay any and all conveyance or
mortgage taxes, and filing or similar fees in connection with the execution,
delivery, filing or recording of any such instrument.
(e) The Mortgagor hereby unconditionally assigns, transfers and sets over to
the Mortgagee all of the Mortgagor's claims and rights to the payment of damages
arising from any rejection by the landlord under the Ground Lease pursuant to
the Bankruptcy Code. The Mortgagee shall have the right to proceed in its own
name or in the name of the Mortgagor in respect of any claim, suit, action or
proceeding relating to the rejection of the Ground Lease, including, the right
to file and prosecute, to the exclusion of the Mortgagor, any proofs of claim,
complaints, motions, applications, notices and other documents, in any case in
respect of such landlord under the
<PAGE>
Bankruptcy Code. This assignment constitutes a present, irrevocable and
unconditional assignment of the foregoing claims, rights and remedies, and shall
continue in effect until the termination of this Mortgage in the manner and at
the time provided in Section 7.02. Any amounts received by the Mortgagee as
damages arising out of the rejection of the Ground Lease as aforesaid shall be
applied and paid as set forth in Section 5.06.
(f) The Mortgagor shall not, without the Mortgagee's prior consent, elect to
treat the Ground Lease as terminated under Section 365(h)(1) of the Bankruptcy
Code. Any such election made without the Mortgagee's prior consent shall be
void.
(g) If pursuant to Section 365(h)(1) of the Bankruptcy Code, the Mortgagor
seeks to offset against the rent or other charges reserved in the Ground Lease
the amount of any damages caused by the non-performance by the landlord of any
of the landlord's obligations under the Ground Lease after the rejection by the
landlord of the Ground Lease under the Bankruptcy Code, the Mortgagor shall,
prior to effecting such offset, notify the Mortgagee of its intention to do so,
setting forth the amounts proposed to be so offset and the basis therefor. The
Mortgagee shall have the right, within ten (10) days after receipt of such
notice from the Mortgagor, to reasonably object to all or any part of such
offset, and, in the event of such reasonable objection, the Mortgagor shall not
effect any offset of the amounts so objected to by the Mortgagee for a period of
thirty days after the Mortgagee has delivered its objection notice to the
Mortgagor during which time the Mortgagee shall have the right to bring its
objections to the attention of any court supervising the bankruptcy of the owner
of the Ground Lease and both the Mortgagee and the Mortgagor agree to abide by
the decision of any such court. If the Mortgagee has failed to object as
aforesaid within the (10) days after notice from the Mortgagee or the court
fails to render its decision within the above-mentioned thirty day period, the
Mortgagor may proceed to effect such offset in the amounts set forth in the
Mortgagor's notice. Neither the Mortgagee's failure to object as aforesaid nor
any objection or other communication between the Mortgagee and the Mortgagor
relating to such offset shall constitute an approval of any such offset by the
Mortgagee.
(h) If any action, proceeding, motion or notice shall be commenced or filed in
respect of the Mortgaged Property in connection with any case under the
Bankruptcy Code (other than a case under the Bankruptcy Code commenced with
respect to the Mortgagor), the Mortgagee shall have the option, to the exclusion
of the Mortgagor, exercisable upon notice to the Mortgagor, to conduct and
control any such litigation with counsel of the Mortgagee's choice. The
Mortgagee may proceed in its own name or in the name of the Mortgagor in
connection with any such litigation, and the Mortgagor agrees to execute any and
all powers, authorizations, consents and other documents required by the
Mortgagee in connection therewith. The Mortgagor shall pay to the Mortgagee all
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) paid or incurred by the Mortgagee in connection with the
prosecution or conduct of any such proceedings within five (5) days after notice
from the Mortgagee setting forth such costs and expenses in reasonable detail.
Any such costs or expenses not paid by the Mortgagor as aforesaid shall be a
part of the Secured Obligations and shall be secured by this Mortgage. The
Mortgagor shall not commence any action, suit, proceeding or case, or file any
application or make any motion, in respect of the Ground Lease in any such case
under the Bankruptcy Code (other than a case under the Bankruptcy Code commenced
with respect to the
<PAGE>
Mortgagor) without the prior consent of the Required Lenders, which consent
shall not be unreasonably withheld.
(i) The Mortgagor shall promptly, after obtaining knowledge thereof, notify the
Mortgagee orally of any filing by or against the landlord under the Ground Lease
of a petition under the Bankruptcy Code. The Mortgagor shall thereafter
forthwith give notice of such filing to the Mortgagee, setting forth any
information available to the Mortgagor as to the date of such filing, the court
in which such petition was filed, and the relief sought therein. The Mortgagor
shall promptly deliver to the Mortgagee following receipt any and all notices,
summonses, pleadings, applications and other documents received by the Mortgagor
in connection with any such petition and any proceedings relating thereto.
(j) If there shall be filed by or against the Mortgagor a petition under the
Bankruptcy Code, and the Mortgagor, as the tenant under the Ground Lease, shall
determine to reject the Ground Lease pursuant to Section 365(a) of the
Bankruptcy Code, then the Mortgagor shall give the Mortgagee not less than ten
(10) days' prior notice of the date on which the Mortgagor shall apply to the
bankruptcy court for authority to reject the Ground Lease. The Mortgagee shall
have the right, but not the obligation, to serve upon the Mortgagor within such
10-day period a notice stating that the Mortgagee demands that the Mortgagor
assume and assign the Ground Lease to the Mortgagee pursuant to Section 365 of
the Bankruptcy Code and the Mortgagee covenants to cure or provide adequate
assurance of prompt cure of all defaults and provide adequate assurance of
future performance of the Mortgagor's obligations under the Ground Lease. If the
Mortgagee serves upon the Mortgagor the notice described in the preceding
sentence, the Mortgagor shall not seek to reject the Ground Lease and shall seek
court approval to comply with the demand provided for in clause (i) of the
preceding sentence within thirty (30) days after the notice shall have been
given, subject to the performance by the Mortgagee of the covenant provided for
in clause (ii) of the preceding sentence.
(k) Effective upon the entry of an order for relief in respect of the Mortgagor
under the Bankruptcy Code, the Mortgagor hereby assigns and transfers to the
Mortgagee a non-exclusive right to apply to the bankruptcy court under Section
365(d)(4) of the Bankruptcy Code for an order extending the period during which
the Ground Lease may be rejected or assumed.
ARTICLE 3
INSURANCE, CASUALTY AND CONDEMNATION
Section 3.01 Insurance. The Mortgagor shall maintain in full force and effect
Insurance Policies with respect to the Property as required by Section 5.03 of
the Credit Agreement.
Section 3.02 Casualty and Condemnation
(a) The Mortgagor represents and warrants that, as of the date hereof, (i)
there is no Casualty Event or Condemnation Event, (ii) there are no negotiations
or proceedings which might result in a Condemnation Event and (iii) to the
knowledge of the Mortgagor, no Condemnation Event is proposed or threatened.
<PAGE>
(b) If any Casualty Event or Condemnation Event occurs, the Mortgagor shall
immediately take such action as is required by Section 5.08 of the Credit
Agreement and the other Financing Documents and any Casualty Proceeds shall be
held, applied and disbursed as provided in or permitted by the Credit Agreement
and the Security Agreement.
ARTICLE 4
CERTAIN SECURED OBLIGATIONS
Section 4.01 Interest after Default. If, pursuant to the terms of this
Mortgage, the Mortgagee shall make any payment on behalf of the Mortgagor
(including any payment made by the Mortgagee pursuant to Section 5.10), or shall
incur hereunder any expense for which the Mortgagee is entitled to reimbursement
pursuant to the terms of the Financing Documents, such Secured Obligation shall
be payable on demand and any amounts not paid on demand shall bear interest,
payable on demand, for each day until paid at the Tranche A Default Rate for
such day. Such interest, and any other interest on the Secured Obligations
payable at the Tranche A Default Rate pursuant to the terms of the Financing
Documents, shall accrue through the date paid notwithstanding any intervening
judgment of foreclosure or sale. All such interest shall be part of the Secured
Obligations and shall be secured by this Mortgage.
Section 4.02 Changes in the Laws Regarding Taxation. If, after the date
hereof, there shall be enacted any applicable law changing in any way the
taxation of mortgages, deeds of trust or other Liens or obligations secured
thereby, or the manner of collection of such taxes, so as to adversely affect
this Mortgage, the Secured Obligations, the Mortgagee or any Secured Party,
promptly after demand by the Mortgagee or any affected Secured Party, the
Mortgagor shall pay all taxes, assessments or other charges resulting therefrom
or shall reimburse such affected Person for all such taxes, assessments or other
charges which such Person is obligated to pay as a result thereof.
Section 4.03 Indemnification. The Mortgagor shall protect, indemnify and
defend each of the Mortgagee and the Secured Parties (each, an "Indemnified
Party") from and against all claims, damages, losses, liabilities, costs or
expenses of any kind and nature whatsoever (including reasonable attorneys' fees
and expenses) which may be imposed on, incurred by or asserted against any
Indemnified Party by reason or on account of, or in connection with (a) this
Mortgage (b) the Mortgagee's good faith exercise of any of its rights and
remedies hereunder; (c) any accident, injury to or death of persons or loss of
or damage to property occurring in, on or about the Property or any part thereof
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, street or ways; (d) any use, misuse, non-use, condition, maintenance or
repair by the Mortgagor or anyone claiming by, through or under the Mortgagor;
and (e) any failure by the Mortgagor or anyone claiming by, through or under the
Mortgagor to perform under the Ground Lease; provided, that any claims caused by
the willful misconduct or gross negligence of any Indemnified Party as
determined by a court of competent jurisdiction shall be excluded from the
foregoing indemnification of such Indemnified Party. Any amount payable under
this Section will be deemed a demand obligation and will bear interest pursuant
to Section 4.01. The obligations of the Mortgagor under this Section shall
survive the termination of this Mortgage.
<PAGE>
ARTICLE 5
DEFAULTS, REMEDIES AND RIGHTS
Section 5.01 Events of Default. Any Event of Default under the Credit
Agreement shall constitute an Event of Default hereunder. All notice and cure
periods provided in the Credit Agreement and the other Financing Documents shall
run concurrently with any notice or cure periods provided under applicable law.
Section 5.02 Remedies. (a) When an Event of Default has occurred and is
continuing, the Mortgagee shall have the right and power to exercise any of the
following remedies and rights, subject to mandatory provisions of applicable law
and to the fullest extent available under applicable law, to wit:
(i) to institute a proceeding or proceedings, by advertisement, judicial
process or otherwise as provided under applicable law, for the complete or
partial foreclosure of this Mortgage or the complete or partial sale of the
Mortgaged Property under the power of sale hereunder or under any applicable
provision of law; or
(ii) to sell the Mortgaged Property, and all estate, right, title, interest,
claim and demand of the Mortgagor therein and thereto, and all rights of
redemption thereof, at one or more sales, as an entirety or in parcels, with
such elements of real or personal property, at such time and place and upon such
terms as the Mortgagee may deem expedient or as may be required under applicable
law, and in the event of a sale hereunder or under any applicable provision of
law of less than all of the Mortgaged Property, this Mortgage shall continue as
a Lien on the remaining Mortgaged Property; or
(iii) to institute a suit, action or proceeding for the specific performance of
any of the provisions of this Mortgage; or
(iv) to be entitled to the appointment of a receiver, supervisor, trustee,
liquidator, conservator or other custodian (a "Receiver") of the Mortgaged
Property, without notice to the Mortgagor, to the fullest extent permitted by
law, as a matter of right and without regard to, or the necessity to disprove,
the adequacy of the security for the Secured Obligations or the solvency of the
Mortgagor or any other obligor, and the Mortgagor hereby, to the fullest extent
permitted by applicable law, irrevocably waives such necessity and consents to
such appointment, without notice, said appointee to be vested with the fullest
powers permitted under applicable law, including to the extent permitted under
applicable law those under clause (v) of this subsection (a); or
(v) to enter upon the Property, by the Mortgagee or a Receiver (whichever is the
Person exercising the rights under this clause), and, to the extent permitted by
applicable law, exclude the Mortgagor and its managers, employees, contractors,
agents and other representatives therefrom in accordance with applicable law,
without liability for trespass, damages or otherwise, and take possession of all
other Mortgaged Property and all books, records and accounts relating thereto,
and upon demand the Mortgagor shall surrender possession of the Property, the
other Mortgaged Property and such books, records and accounts to the Person
<PAGE>
exercising the rights under this clause; and having and holding the same, the
Person exercising the rights under this clause may use, operate, manage,
preserve, control and otherwise deal therewith and conduct the business thereof,
either personally or by its managers, employees, contractors, agents or other
representatives, without interference from the Mortgagor or its managers,
employees, contractors, agents and other representatives; and, upon each such
entry and from time to time thereafter, at the expense of the Mortgagor and the
Mortgaged Property, without interference by the Mortgagor or its managers,
employees, contractors, agents and other representatives, the Person exercising
the rights under this clause may, as such Person deems expedient, (A) insure or
reinsure the Property, (B) make all necessary or proper repairs, renewals,
replacements, alterations, additions, Restorations, betterments and improvements
to the Property and (C) in such Person's own name or, at the option of such
Person, in the Mortgagor's name, exercise all rights, powers and privileges of
the Mortgagor with respect to the Mortgaged Property, including the right to
enter into Leases with respect to the Property, including Leases extending
beyond the time of possession by the Person exercising the rights under this
clause; and the Person exercising the rights under this clause shall not be
liable to account for any action taken hereunder, other than for Rents actually
received by such Person, and shall not be liable for any loss sustained by the
Mortgagor resulting from any failure to let the Property or from any other act
or omission of such Person, except to the extent such loss is caused by such
Person's own willful misconduct or gross negligence; or
(vi) with or, to the fullest extent permitted by applicable law, without entry
upon the Property, in the name of the Mortgagee or a Receiver as required by law
(whichever is the Person exercising the rights under this clause) or, at such
Person's option, in the name of the Mortgagor, to collect, receive, sue for and
recover all Rents and proceeds of or derived from the Mortgaged Property, and
after deducting therefrom all costs, expenses and liabilities of every character
incurred by the Person exercising the rights under this clause in collecting the
same and in using, operating, managing, preserving and controlling the Mortgaged
Property and otherwise in exercising the rights under clause (v) of this
subsection (a) or any other rights hereunder, including all amounts necessary to
pay Impositions, Rents, Insurance Premiums and other costs, expenses and
liabilities relating to the Property, as well as reasonable compensation for the
services of such Person and its managers, employees, contractors, agents or
other representatives, to apply the remainder as provided in Section 5.06; or
(vii) to take any action with respect to any Mortgaged Property permitted under
the Local UCC; or
(viii) to take any other action, or pursue any other remedy or right, as the
Mortgagee may have under applicable law, including the right to foreclosure
through court action, and the Mortgagor does hereby grant the same to the
Mortgagee.
(b) To the fullest extent permitted by applicable law,
(i) each remedy or right hereunder shall be in addition to, and not exclusive or
in limitation of, any other remedy or right hereunder, under any other Financing
Document or under applicable law;
<PAGE>
(ii) every remedy or right hereunder, under any other Financing Document or
under applicable law may be exercised concurrently or independently and whenever
and as often as deemed appropriate by the Mortgagee;
(iii) no failure to exercise or delay in exercising any remedy or right
hereunder, under any other Financing Document or under applicable law shall be
construed as a waiver of any Default or other occurrence hereunder or under any
other Financing Document;
(iv) no waiver of, failure to exercise or delay in exercising any remedy or
right hereunder, under any other Financing Document or under applicable law upon
any Default or other occurrence hereunder or under any other Financing Document
shall be construed as a waiver of, or otherwise limit the exercise of, such
remedy or right upon any other or subsequent Default or other or subsequent
occurrence hereunder or under any other Financing Document;
(v) no single or partial exercise of any remedy or right hereunder, under any
other Financing Document or under applicable law upon any Default or other
occurrence hereunder or under any other Financing Document shall preclude or
otherwise limit the exercise of any other remedy or right hereunder, under any
other Financing Document or under applicable law upon such Default or occurrence
or upon any other or subsequent Default or other or subsequent occurrence
hereunder or under any other Financing Document;
(vi) the acceptance by the Mortgagee, the Agent or any Secured Party of any
payment less than the amount of the Secured Obligation in question shall be
deemed to be an acceptance on account only and shall not be construed as a
waiver of any Default hereunder or under any other Financing Document with
respect thereto; and
(vii) the acceptance by the Mortgagee, the Agent or any Secured Party of any
payment of, or on account of, any Secured Obligation shall not be deemed to be a
waiver of any Default or other occurrence hereunder or under any other Financing
Document with respect to any other Secured Obligation.
(c) If the Mortgagee has proceeded to enforce any remedy or right hereunder or
with respect hereto by foreclosure, sale, entry or otherwise, it may compromise,
discontinue or abandon such proceeding for any reason without notice to the
Mortgagor or any other Person (except the Agent, the Lenders or the other
Secured Parties to the extent required by the other Financing Documents); and,
if any such proceeding shall be discontinued, abandoned or determined adversely
for any reason, the Mortgagor and the Mortgagee shall retain and be restored to
their former positions and rights hereunder with respect to the Mortgaged
Property, subject to the Lien hereof except to the extent any such adverse
determination specifically provides to the contrary.
(d) For the purpose of carrying out any provisions of Section 5.02(a)(v),
5.02(a)(vi), 5.05, 5.07, 5.10 or 6.01 or any other provision hereunder
authorizing the Mortgagee or any other Person to perform any action on behalf of
the Mortgagor, the Mortgagor hereby irrevocably appoints the Mortgagee or a
Receiver appointed pursuant to Section 5.02(a)(iv) or such other Person as the
attorney-in-fact of the Mortgagor (with a power to substitute any other Person
in its place as such attorney-in-fact) to act in the name of the Mortgagor or,
at the option of the Person appointed to act under this subsection, in such
Person's own name, to take the action authorized under Section
<PAGE>
5.02(a)(v), 5.02(a)(vi), 5.05, 5.07, 5.10 or 6.01 or such other provision, and
to execute, acknowledge and deliver any document in connection therewith or to
take any other action incidental thereto as the Person appointed to act under
this subsection shall deem appropriate in its discretion; and the Mortgagor
hereby irrevocably authorizes and directs any other Person to rely and act on
behalf of the foregoing appointment and a certificate of the Person appointed to
act under this subsection that such Person is authorized to act under this
subsection.
Section 5.03 Waivers by the Mortgagor. To the fullest extent permitted under
applicable law, the Mortgagor shall not assert, and hereby irrevocably waives,
any right or defense the Mortgagor may have under any statute or rule of law or
equity now or hereafter in effect relating to (a) appraisement, valuation,
homestead exemption, extension, moratorium, stay, statute of limitations,
redemption, marshaling of the Mortgaged Property or the other assets of the
Mortgagor, sale of the Mortgaged Property in any order or notice of deficiency
or intention to accelerate any Secured Obligation; (b) impairment of any right
of subrogation or reimbursement; (c) any requirement that at any time any action
must be taken against any other Person, any portion of the Mortgaged Property or
any other asset of the Mortgagor or any other Person; (d) any provision barring
or limiting the right of the Mortgagee to sell any Mortgaged Property after any
other sale of any other Mortgaged Property or any other action against the
Mortgagor or any other Person; (e) any provision barring or limiting the
recovery by the Mortgagee of a deficiency after any sale of the Mortgaged
Property; (f) any other provision of applicable law which shall defeat, limit or
adversely affect any right or remedy of the Mortgagee or any Secured Party under
or with respect to this Mortgage or any other Collateral Document as it relates
to any Mortgaged Property; or (g) the right of the Mortgagee as Agent to
foreclose this Mortgage in its own name on behalf of all of the Secured Parties
by judicial action as the real party in interest without the necessity of
joining any Secured Party.
Section 5.04 Jurisdiction and Process. (a) To the extent permitted under
applicable law, in any suit, action or proceeding arising out of or relating to
this Mortgage or any other Collateral Document as it relates to any Mortgaged
Property, the Mortgagor irrevocably consents to the non-exclusive jurisdiction
of any state or federal court sitting in the State in which the Property is
located and irrevocably waives any defense or objection which it may now or
hereafter have to the jurisdiction of such court or the venue of such court or
the convenience of such court as the forum for any such suit, action or
proceeding; and irrevocably consents to the service of any process in accordance
with applicable law in any such suit, action or proceeding, or any notice
relating to any sale, or the exercise of any other remedy by the Mortgagee
hereunder by mailing a copy of such process or notice by United States
registered or certified mail, postage prepaid, return receipt requested to the
Mortgagor at its address specified in or pursuant to Section 7.03; such service
to be effective in accordance with applicable law.
(b) Nothing in this Section shall affect the right of the Mortgagee to bring
any suit, action or proceeding arising out of or relating to this Mortgage or
any other Collateral Document in any court having jurisdiction under the
provisions of any other Collateral Document or applicable law or to serve any
process, notice of sale or other notice in any manner permitted by any other
Collateral Document or applicable law.
Section 5.05 Sales. Except as otherwise provided herein, to the fullest extent
permitted under applicable law, at the election of the Mortgagee, the following
provisions shall apply to any sale of the
<PAGE>
Mortgaged Property hereunder, whether made pursuant to the power of sale under
Section 5.02 or under any applicable provision of law, any judicial proceeding
or any judgment or decree of foreclosure or sale or otherwise:
(a) The Mortgagee or the court officer (whichever is the Person conducting any
sale) may conduct any number of sales from time to time. The power of sale
hereunder or with respect hereto shall not be exhausted by any sale as to any
part or parcel of the Mortgaged Property which is not sold, unless and until the
Secured Obligations shall have been paid in full, and shall not be exhausted or
impaired by any sale which is not completed or is defective. Any sale may be as
a whole or in part or parcels and, as provided in Section 5.03, the Mortgagor
has waived its right to direct the order in which the Mortgaged Property or any
part or parcel thereof is sold.
(b) Any sale may be postponed or adjourned by public announcement at the time
and place appointed for such sale or for such postponed or adjourned sale
without further notice.
(c) After each sale, the Person conducting such sale shall execute and deliver
to the purchaser or purchasers at such sale a good and sufficient instrument or
instruments granting, conveying, assigning, transferring and delivering all
right, title and interest of the Mortgagor in and to the Mortgaged Property sold
and shall receive the proceeds of such sale and apply the same as provided in
Section 5.06. The Mortgagor hereby irrevocably appoints the Person conducting
such sale as the attorney-in-fact of the Mortgagor (with full power to
substitute any other Person in its place as such attorney-in-fact) to act in the
name of the Mortgagor or, at the option of the Person conducting such sale, in
such Person's own name, to make without warranty by such Person any conveyance,
assignment, transfer or delivery of the Mortgaged Property sold, and to execute,
acknowledge and deliver any instrument of conveyance, assignment, transfer or
delivery or other document in connection therewith or to take any other action
incidental thereto, as the Person conducting such sale shall deem appropriate in
its discretion; and the Mortgagor hereby irrevocably authorizes and directs any
other Person to rely and act upon the foregoing appointment and a certificate of
the Person conducting such sale that such Person is authorized to act hereunder.
Nevertheless, upon the request of such attorney-in-fact the Mortgagor shall
promptly execute, acknowledge and deliver any documentation which such attorney-
in-fact may require for the purpose of ratifying, confirming or effectuating the
powers granted hereby or any such conveyance, assignment, transfer or delivery
by such attorney-in-fact.
(d) Any statement of fact or other recital made in any instrument referred to
in Section 5.05(c) given by the Person conducting any sale as to the nonpayment
of any Secured Obligation, the occurrence of any Event of Default, the amount of
the Secured Obligations due and payable, the request to the Mortgagee to sell,
the notice of the time, place and terms of sale and of the Mortgaged Property to
be sold having been duly given, the refusal, failure or inability of the
Mortgagee to act, the appointment of any substitute or successor agent, any
other act or thing having been duly done by the Mortgagor, the Mortgagee or any
other such Person, shall be taken as conclusive and binding against all other
Persons as evidence of the truth of the facts so stated or recited.
(e) The receipt by the Person conducting any sale of the purchase money paid at
such sale shall be sufficient discharge therefor to any purchaser of any
Mortgaged Property sold, and no such purchaser, or its representatives, grantees
or assigns, after paying such purchase price and
<PAGE>
receiving such receipt, shall be bound to see to the application of such
purchase price or any part thereof upon or for any trust or purpose of this
Mortgage or the other Financing Documents, or, in any manner whatsoever, be
answerable for any loss, misapplication or nonapplication of any such purchase
money or be bound to inquire as to the authorization, necessity, expediency or
regularity of such sale.
(f) Subject to mandatory provisions of applicable law, any sale shall operate
to divest all of the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of the Mortgagor in and to the
Mortgaged Property sold, and shall be a perpetual bar both at law and in equity
against the Mortgagor and any and all Persons claiming such Mortgaged Property
or any interest therein by, through or under the Mortgagor.
(g) At any sale, the Mortgagee may bid for and acquire the Mortgaged Property
sold and, in lieu of paying cash therefor, may make settlement for the purchase
price by crediting or causing the Secured Parties to credit against the Secured
Obligations, including the expenses of the sale and the cost of any enforcement
proceeding hereunder, the amount of the bid made therefor to the extent
necessary to satisfy such bid.
(h) If the Mortgagor or any Person claiming by, through or under the Mortgagor
shall transfer or fail to surrender possession of the Mortgaged Property, after
the exercise by the Mortgagee of the Mortgagee's remedies under Section
5.02(a)(v) or after any sale of the Mortgaged Property pursuant hereto, then the
Mortgagor or such Person shall be deemed a tenant at sufferance of the purchaser
at such sale, subject to eviction by means of summary process for possession of
land, or subject to any other right or remedy available hereunder or under
applicable law.
(i) Upon any sale, it shall not be necessary for the Person conducting such
sale to have any Mortgaged Property being sold present or constructively in its
possession.
(j) If a sale hereunder shall be commenced by the Mortgagee, the Mortgagee may
at any time before the sale abandon the sale, and may institute suit for the
collection of the Secured Obligations or for the foreclosure of this Mortgage;
or if the Mortgagee shall institute a suit for collection of the Secured
Obligations or the foreclosure of this Mortgage, the Mortgagee may at any time
before the entry of final judgment in said suit dismiss the same and sell the
Mortgaged Property in accordance with the provisions of this Mortgage.
(k) Following any judicial sale of the real property covered by the Mortgage,
the redemption period shall be limited to one (1) month from and after the date
of such judicial sale.
Section 5.06 Proceeds. Except as otherwise provided herein or required under
applicable law, when an Event of Default has occurred and is continuing, the
proceeds of any sale of, or other realization upon, the Mortgaged Property
hereunder, whether made pursuant to the power of sale hereunder or under any
applicable provision of law, any judicial proceeding or any judgment or decree
of foreclosure or sale or otherwise, shall be applied and paid as follows:
(a) First: to pay the expenses of such sale or other realization, including
-----
compensation for the Person conducting such sale (which may include the
Mortgagee), the cost of title searches, foreclosure certificates and attorneys'
fees and expenses incurred by such Person, together with
<PAGE>
interest on any such expenses paid by such Person at the Tranche A Default Rate
from the date of demand through the date repaid to such Person;
(b) Second: to pay the expenses and other amounts payable under Sections 4.02
------
and 5.10, if any; and
(c) Third: to pay the other Secured Obligations in the order and priority set
-----
forth in Section 15 of the Security Agreement.
Section 5.07 Assignment of Leases. (a) Subject to paragraph (d) below, the
assignments of the Leases and the Rents thereunder pursuant to Granting Clauses
V and VI are and shall be present, absolute and irrevocable assignments by the
Mortgagor to the Mortgagee and, subject to the license to the Mortgagor under
Section 5.07(b), the Mortgagee or a Receiver appointed pursuant to Section
5.02(a)(iv) (whichever is the Person exercising the rights under this Section)
shall have the absolute, immediate and continuing right to collect and receive
all such Rents now or hereafter, including during any period of redemption,
accruing with respect to the Property. At the request of the Mortgagee or such
Receiver, the Mortgagor shall promptly execute, acknowledge, deliver, record,
register and file any additional general assignment of the Leases or specific
assignment of any Lease which the Mortgagee or such Receiver may require from
time to time (all in form and substance satisfactory to the Mortgagee or such
Receiver) to effectuate, complete, perfect, continue or preserve the assignments
of the Leases and the Rents thereunder pursuant to Granting Clauses V and VI.
(b) The Mortgagor shall have a license granted hereby to collect and receive
all Rents under the Leases and apply the same subject to the provisions of the
Financing Documents, such license to be terminable by the Mortgagee as provided
in Section 5.07(c).
(c) When an Event of Default has occurred and is continuing, the Mortgagee or a
Receiver appointed pursuant to Section 5.02(a)(iv) (whichever is the Person
exercising the rights under this Section) shall have the right, exercisable upon
notice to the Mortgagor, to terminate the license granted under Section 5.07(b)
by notice to the Mortgagor and to exercise the rights and remedies provided
under Section 5.07(a), under Sections 5.02(a)(v) and (vi) or under applicable
law. Upon demand by the Person exercising the rights under this Section, the
Mortgagor shall promptly pay to such Person all security deposits under the
Leases and all Rents thereunder allocable to any period after such demand.
Subject to Sections 5.02(a)(v) and (vi) and any applicable requirement of law,
any Rents received hereunder by such Person shall be promptly paid to the
Mortgagee, and any Rents received hereunder by the Mortgagee shall be deposited
in the Cash Proceeds Account, to be held, applied and disbursed as provided in
Section 15 of the Security Agreement, provided that, subject to Sections
5.02(a)(v) and (vi) and any applicable requirement of law, any security deposits
actually received by such Person shall be promptly paid to the Mortgagee, and
any security deposits actually received by the Mortgagee shall be held, applied
and disbursed as provided in the applicable Leases and applicable law.
(d) Nothing herein shall be construed to be an assumption by the Person
exercising the rights under this Section, or otherwise to make such Person
liable for the performance, of any of the obligations of the Mortgagor under the
Leases, provided that such Person shall be accountable as provided in Section
5.07(c) for any Rents or security deposits actually received by such Person.
<PAGE>
Section 5.08 Dealing with the Mortgaged Property. Subject to Section 7.02, the
Mortgagee shall have the right to release any portion of the Mortgaged Property,
or grant or consent to the granting of any Lien affecting any portion of the
Mortgaged Property, to or at the request of the Mortgagor, for such
consideration as the Mortgagee may require without, as to the remainder of the
Mortgaged Property, in any way impairing or affecting the Lien or priority of
this Mortgage, or improving the position of any subordinate lienholder with
respect thereto, or the position of any guarantor, endorser, co-maker or other
obligor of the Secured Obligations, except to the extent that the Secured
Obligations shall have been reduced by any actual monetary consideration
received for such release and applied to the Secured Obligations, and may accept
by assignment, pledge or otherwise any other property in place thereof as the
Mortgagee may require without being accountable therefor to any other
lienholder.
Section 5.09 Right of Entry. The Mortgagee and the representatives of the
Mortgagee shall have the right, upon being instructed to do so by the Required
Lenders (a) without notice, when an Event of Default has occurred and is
continuing, (b) with simultaneous notice, if any payment or performance is
necessary in the opinion of the Mortgagee to preserve the Mortgagee's rights
under this Mortgage or with respect to the Mortgaged Property, or (c) after
reasonable notice, in all other cases, to enter upon the Property at reasonable
times, and with reasonable frequency, to inspect the Mortgaged Property or,
subject to the provisions hereof, to exercise any right, power or remedy of the
Mortgagee hereunder, provided that any Person so entering the Property shall not
unreasonably interfere with the ordinary conduct of the Mortgagor's business,
and provided further that no such entry on the Property, for the purpose of
performing obligations under Section 5.10 or for any other purpose, shall be
construed to be (i) possession of the Property by such Person or to constitute
such Person as a mortgagee in possession, unless such Person exercises its right
to take possession of the Property under Section 5.02(a)(v), or (ii) a cure of
any Default or waiver of any Default or Secured Obligation. The expense of any
inspection pursuant to clause (c) above shall be borne by the Mortgagee unless
an Event of Default shall have occurred and be continuing at the time of such
inspection, in which case the Mortgagor shall pay, or reimburse the Mortgagee
for, such expense.
Section 5.10 Right to Perform Obligations. If the Mortgagor fails to pay or
perform any obligation of the Mortgagor hereunder, after the expiration of any
applicable grace period the Mortgagee and the representatives of the Mortgagee
shall have the right, upon being instructed to do so by the Required Lenders at
any time, to pay or perform such obligation (a) without notice, when an Event of
Default has occurred and is continuing, (b) with simultaneous notice, if such
payment or performance is necessary in the opinion of the Mortgagee to preserve
the Mortgagee's rights under this Mortgage or with respect to the Mortgaged
Property, or (c) after notice given reasonably in advance to allow the Mortgagor
an opportunity to pay or perform such obligation, provided that the Mortgagor is
not contesting payment or performance in accordance with the terms hereof and
further provided that no such payment or performance shall be construed to be a
cure of any Default or waiver of any Default or Secured Obligation. The
Mortgagor shall reimburse the Mortgagee on demand for the reasonable costs of
performing any such obligations and any amounts not paid on demand shall bear
interest, payable on demand, for each day until paid at the Tranche A Default
Rate for such day.
Section 5.11 Concerning the Mortgagee. (a) The provisions of Section 16 of
the Security Agreement shall inure to the benefit of the Mortgagee in respect of
this Mortgage and shall be binding upon
<PAGE>
the parties to the Credit Agreement and the other Financing Documents in such
respect. In furtherance and not in derogation of the rights, privileges and
immunities of the Mortgagee therein set forth:
(i) The Mortgagee is authorized to take all such action as is provided to be
taken by it as Mortgagee hereunder and all other action incidental thereto. As
to any matters not expressly provided for herein (including the timing and
methods of realization upon the Mortgaged Property) the Mortgagee shall act or
refrain from acting in accordance with written instructions from the Required
Lenders or, in the absence of such instructions, in accordance with its
discretion.
(ii) The Mortgagee shall not be responsible for the existence, genuineness or
value of any of the Mortgaged Property or for the validity, perfection, priority
or enforceability of the Lien of this Mortgage on any of the Mortgaged Property,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder. The Mortgagee shall have no duty to ascertain or
inquire as to the performance or observance of any of the terms of this Mortgage
by the Mortgagor.
(b) At any time or times, in order to comply with any legal requirement in any
jurisdiction, the Mortgagee may appoint another bank or trust company or one or
more other Persons, either to act as co-agent or co-agents, jointly with the
Mortgagee, or to act as separate agent or agents on behalf of the Lenders or the
other Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Mortgagee,
include provisions for the protection of such co-agent or separate agent similar
to the provisions of this Section 5.11). References to the Mortgagee in Section
5.12 shall be deemed to include any co-agent or separate agent appointed
pursuant to this Section 5.11.
Section 5.12 Expenses. The Mortgagor agrees that it will forthwith on demand
pay to the Mortgagee the amount of any taxes which the Mortgagee may have been
required to pay in order to free any of the Mortgaged Property from any Lien
thereon (other than Permitted Liens), the amount of any and all out-of-pocket
expenses, including the fees and disbursements of counsel and of any other
experts, which the Mortgagee may reasonably incur in connection with preserving
the value of the Mortgaged Property and the validity, perfection, rank or value
of the Lien of this Mortgage and the amount of any and all out-of-pocket
expenses, including the fees and disbursements of counsel and of any other
experts, which the Mortgagee may reasonably incur in connection with the
collection, sale or other disposition of any of the Mortgaged Property.
ARTICLE 6
SECURITY AGREEMENT AND FIXTURE FILING
Section 6.01 Security Agreement. To the extent that the Mortgaged Property
constitutes or includes tangible or intangible personal property, including
goods or items of personal property which are or are to become fixtures under
applicable law, the Mortgagor hereby grants to the Mortgagee a security interest
therein and this Mortgage shall also be construed as a pledge and a security
agreement under the Local UCC; and, when an Event of Default has occurred and is
continuing,
<PAGE>
the Mortgagee shall be entitled to exercise with respect to such tangible or
intangible personal property all remedies available under the Local UCC and all
other remedies available under applicable law. Without limiting the foregoing,
any personal property may, at the Mortgagee's option and, except as otherwise
required by applicable law, without the giving of notice, (i) be sold hereunder,
(ii) be sold pursuant to the Local UCC or (iii) be dealt with by the Mortgagee
in any other manner permitted under applicable law. The Mortgagee may require
the Mortgagor, after an Event of Default has occurred and is continuing, to
assemble the personal property and make it available to the Mortgagee at a place
to be designated by the Mortgagee. At any time and from time to time when an
Event of Default has occurred and is continuing, the Mortgagee shall be the
attorney-in-fact of the Mortgagor with respect to any and all matters pertaining
to the personal property with full power and authority to give instructions with
respect to the collection and remittance of payments, to endorse checks, to
enforce the rights and remedies of the Mortgagor and to execute on behalf of the
Mortgagor and in Mortgagor's name any instruction, agreement or other writing
required therefor. The Mortgagor acknowledges and agrees that a disposition of
the personal property in accordance with the Mortgagee's rights and remedies in
respect of the Property as heretofore provided is a commercially reasonable
disposition thereof. Notwithstanding the foregoing, to the extent that the
Mortgaged Property includes personal property covered by the Security Agreement
the provisions of the Security Agreement shall govern with respect to such
personal property.
Section 6.02 Fixture Filing. To the extent that the Mortgaged Property
includes goods or items of personal property which are or are to become fixtures
under applicable law, and to the extent permitted under applicable law, the
filing of this Mortgage in the real estate records of the county in which the
Mortgaged Property is located shall also operate from the time of filing as a
fixture filing with respect to such Mortgaged Property, and the following
information is applicable for the purpose of such fixture filing, to wit:
(a) Name and address of the debtor:
Vencor Operating, Inc.
One Vencor Place
680 South Fourth Avenue
Louisville, Kentucky 40202
Attention: ____________________
(b) Name and address of the secured party:
Morgan Guaranty Trust Company of New York, as Collateral Agent
500 Stanton Christiana Road
Newark, Delaware 19713-2107
(c) This instrument covers goods or items of personal property which are or are
to become fixtures upon the Property.
(d) The Mortgagor is the record owner of the real estate on which such fixtures
are or are to be located.
<PAGE>
ARTICLE 7
MISCELLANEOUS
Section 7.01 Revolving Credit Loans. The Secured Obligations secured by this
Mortgage include revolving credit Loans made, and LC Reimbursement Obligations
relating to Letters of Credit issued or extended, under the Credit Agreement
which are advanced, paid and readvanced from time to time. Notwithstanding the
amount outstanding at any particular time, this Mortgage secures the total
amount of Secured Obligations. The unpaid balance of the revolving credit Loans
and the outstanding LC Reimbursement Obligations relating to Letters of Credit
issued or extended under the Credit Agreement may at certain times be, or be
reduced to, zero. A zero balance, by itself, does not affect any LC Issuing
Bank's obligation to issue or extend Letters of Credit or to make payments upon
draws under Letters of Credit or any Lender's obligation to advance revolving
credit Loans subject to the conditions stated in the Credit Agreement. Each of
the security interest of the Mortgagee hereunder and the priority of the Lien of
this Mortgage will remain in full force and effect with respect to all of the
Secured Obligations notwithstanding such a zero balance of the revolving credit
Loans and LC Reimbursement Obligations and the Lien of this Mortgage will not be
extinguished until this Mortgage has been terminated pursuant to Section
7.02(a). To the extent that the Secured Obligations are deemed to be a
"revolving credit plan" or "line of credit" pursuant to KRS 382.385,
$500,000,000 is the maximum principal amount of credit that may be extended
under the line of credit or the maximum credit limit of the revolving credit
plan which, in each case, may be outstanding at any time under the line of
credit or revolving credit plan, and which is to be secured by this Mortgage. It
shall be an Event of Default under this Mortgage if Mortgagor requests a
release, in the manner provided by KRS 382.385 or 382.520, of any portion of the
Secured Obligations prior to the date that all of the indebtedness secured by
this Mortgage has been paid and this Mortgage has been terminated in writing,
and Mortgagor hereby waives any and all right to request such a release to the
maximum extent permitted by law.
Section 7.02 Release of Mortgaged Property. (a) This Mortgage shall cease,
terminate and thereafter be of no further force or effect (except as provided in
Section 4.03) upon (i) payment in full of all Secured Obligations described in
clause (i) in the definition thereof, (ii) the termination of all Letters of
Credit issued under the Credit Agreement, (iii) the termination of all
Commitments under the Credit Agreement and (iv) payment in full of all other
Secured Obligations known to the Mortgagee to be then due and payable.
(b) Upon direction from the Administrative Agent pursuant to Section 2.13 of
the Credit Agreement and upon the Mortgagor's compliance with Section 18 of the
Security Agreement, the Mortgagee shall release all or a portion of the
Mortgaged Property (but not any proceeds of any sale giving rise to such
release). In addition, at any time and from time to time prior to such
termination of this Mortgage, the Mortgagee may release any of the Mortgaged
Property with the consent of the Required Lenders, provided that if such release
is in connection with the release of all or substantially all of the collateral
granted to secure the Secured Obligations, such release shall require the
consent of all Lenders.
<PAGE>
(c) Any termination or release under this Section 7.02 shall be at the
Mortgagor's request and expense and either in the statutory form or in a form
reasonably satisfactory to the Mortgagee.
Section 7.03 Notices. All notices, approvals, requests, demands and other
communications hereunder shall be given (i) if to the Mortgagor, in accordance
with Section 11.01 of the Credit Agreement at the "Address for Notices"
specified below the intended recipient's name on the signature pages thereof, or
at such other address as shall be designated by such party in a Notice to the
other parties in accordance with such Section 11.01 of the Credit Agreement; and
(ii) if to the Mortgagee, in accordance with Section 11.01 of the Credit
Agreement.
Section 7.04 Amendments in Writing. No provision of this Mortgage shall be
modified, waived or terminated, and no consent to any departure by the Mortgagor
from any provision of this Mortgage shall be effective, unless the same shall be
by an instrument in writing, signed by the Mortgagor and the Mortgagee in
accordance with Section 11.05 of the Credit Agreement with the consent of the
Required Lenders (except that any change, waiver, discharge or termination of
Section 7.02 shall require the consent of all the Lenders). Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 7.05 Severability. All rights, powers and remedies provided in this
Mortgage may be exercised only to the extent that the exercise thereof does not
violate applicable law, and all the provisions of this Mortgage are intended to
be subject to all mandatory provisions of applicable law and to be limited to
the extent necessary so that they will not render this Mortgage illegal,
invalid, unenforceable or not entitled to be recorded, registered or filed under
applicable law. If any provision of this Mortgage or the application thereof to
any Person or circumstance shall, to any extent, be illegal, invalid or
unenforceable, or cause this Mortgage not to be entitled to be recorded,
registered or filed, the remaining provisions of this Mortgage or the
application of such provision to other Persons or circumstances shall not be
affected thereby, and each provision of this Mortgage shall be valid and be
enforced to the fullest extent permitted under applicable law.
Section 7.06 Binding Effect. (a) The provisions of this Mortgage shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
(b) To the fullest extent permitted under applicable law, the provisions of
this Mortgage binding upon the Mortgagor shall be deemed to be covenants which
run with the land.
(c) Nothing in this Section shall be construed to permit the Mortgagor to
Transfer or grant a Lien upon the Mortgaged Property contrary to the provisions
of the Credit Agreement.
Section 7.07 Governing Law. THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
Section 7.08 Counterparts. This Agreement may be signed in any number of
counterparts each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 7.09 Last Dollars Secured. This Mortgage secures only a portion of the
Secured Obligations owing or which may become owing by the Mortgagor.
Notwithstanding anything to the contrary
<PAGE>
contained in the Financing Documents, the parties agree that any payments or
repayments of such Secured Obligations by the Mortgagor shall be deemed to apply
first to the portion of the Secured Obligations that is not secured hereby, it
being the parties' intent that the portion of the Secured Obligations last
remaining unpaid shall be deemed secured hereby.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has executed this Mortgage as of the
day and year first above written.
MORTGAGOR:
VENCOR OPERATING, INC.
By: _______________________
Name:
Title:
<PAGE>
STATE OF ______________ )
)
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this ___ day of September,
1999 by ____________________, as ________________ of VENCOR OPERATING, INC., a
Delaware corporation, on behalf of the corporation.
WITNESS my hand, at office.
[Notarial Seal] ______________________________________
Notary Public
My Commission Expires:
______________________
<PAGE>
EXHIBIT A
DESCRIPTION OF THE LEASE
Lease evidenced by Short Form Lease dated February 13, 1962 between
Cesare Bertoli and Kathleen H. Bertoli, lessor, and Wendav, Inc., lessee,
recorded in Deed Book 3736, page 557;
and Short Form Lease dated August 23, 1972 between Cesare Bertoli and Kathleen
H. Bertoli, lessor, and Extendicare of Kentucky, Inc., tenant, recorded in Deed
book 4547, page 558 (Extendicare of Kentucky, Inc. being successor by merger to
Wendav, Inc.);
as assigned to NHE/Kentucky, Inc. by Assignment of Lease dated August 28, 1972,
recorded in Deed Book 4550, page 343;
as assigned to by NME Property Holding Co., (successor by merger to
NHE/Kentucky, Inc.) to First Healthcare Corporation by Assignment and Assumption
of Lease dated November 4, 1992 recorded in Deed Book 6245, page 41;
as further assigned to Vencor Operating, Inc. by Assignment of Lease from
Ventas, Inc. (successor by merger and/or name change to First Healthcare
Corporation) dated April 30, 1998, recorded in Deed Book ______, page ______,
all of record in the Office of the Clerk of Jefferson County, Kentucky.
DESCRIPTION OF THE LAND
[SEE ATTACHED PAGE(S) FOR DESCRIPTION OF THE LAND]
<PAGE>
EXHIBIT G
to Security Agreement
FORM OF FEE MORTGAGE
When recorded return to:
Jennifer Grenert, Esq.
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
- --------------------------------------------------------------------------------
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT
dated as of September ___, 1999
by
[VENCOR ENTITY]
a Delaware corporation,
the Mortgagor,
to
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Collateral Agent,
the Mortgagee
Property:
____________________
County of __________
State of __________
- --------------------------------------------------------------------------------
This Instrument Contains After-Acquired Property Provisions and Secures
Obligations Containing Provisions For Changes in Interest Rates. This Instrument
Also Secures Future Advances.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PREAMBLE AND
RECITALS
GRANTING CLAUSES...................................................... 2
GRANTING CLAUSE I. Land.............................................. 2
GRANTING CLAUSE II. Improvements..................................... 2
GRANTING CLAUSE III. Appurtenant Rights.............................. 3
GRANTING CLAUSE IV. Agreements....................................... 3
GRANTING CLAUSE V. Leases............................................ 3
GRANTING CLAUSE VI. RENTS, ISSUES AND PROFITS........................ 4
GRANTING CLAUSE VII. Proceeds........................................ 4
GRANTING CLAUSE VIII. Additional Property............................ 4
ARTICLE 1 DEFINITIONS AND INTERPRETATION............................. 5
Section 1.01 Definitions........................................ 5
Section 1.02 Interpretation..................................... 8
ARTICLE 2 CERTAIN WARRANTIES AND COVENANTS OF THE MORTGAGOR.......... 9
Section 2.01 Title.............................................. 9
Section 2.02 Secured Obligations................................ 10
Section 2.03 Impositions........................................ 10
Section 2.04 Legal and Insurance Requirements................... 10
Section 2.05 Status and Care of the Property.................... 10
Section 2.06 Liens.............................................. 11
Section 2.07 Transfer........................................... 11
Section 2.08 [Intentionally Omitted]............................ 11
ARTICLE 3 INSURANCE, CASUALTY AND CONDEMNATION....................... 11
Section 3.01 Insurance.......................................... 11
Section 3.02 Casualty and Condemnation.......................... 11
ARTICLE 4 CERTAIN SECURED OBLIGATIONS................................ 12
Section 4.01 Interest after Default............................. 12
Section 4.02 Changes in the Laws Regarding Taxation............. 12
Section 4.03 Indemnification.................................... 12
ARTICLE 5 DEFAULTS, REMEDIES AND RIGHTS.............................. 12
Section 5.01 Events of Default.................................. 12
Section 5.02 Remedies........................................... 13
Section 5.03 Waivers by the Mortgagor........................... 16
Section 5.04 Jurisdiction and Process........................... 16
Section 5.05 Sales.............................................. 17
Section 5.06 Proceeds........................................... 19
Section 5.07 Assignment of Leases............................... 19
Section 5.08 Dealing with the Mortgaged Property................ 20
</TABLE>
_______________________
1 The Table of Contents is not part of this Mortgage.
<PAGE>
Section 5.09 Right of Entry..................................... 20
Section 5.10 Right to Perform Obligations....................... 20
Section 5.11 Concerning the Mortgagee........................... 21
Section 5.12 Expenses........................................... 21
ARTICLE 6 SECURITY AGREEMENT AND FIXTURE FILING...................... 22
Section 6.01 Security Agreement................................. 22
Section 6.02 Fixture Filing..................................... 22
ARTICLE 7 MISCELLANEOUS.............................................. 23
Section 7.01 Revolving Credit Loans............................. 23
Section 7.02 Release of Mortgaged Property...................... 23
Section 7.03 Notices............................................ 24
Section 7.04 Amendments in Writing.............................. 24
Section 7.05 Severability....................................... 24
Section 7.06 Binding Effect..................................... 24
Section 7.07 Governing Law...................................... 25
Section 7.08 Counterparts....................................... 25
Section 7.09 Last Dollars Secured............................... 25
<PAGE>
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FINANCING STATEMENT (this "Mortgage") dated as of September __, 1999 by [VENCOR
ENTITY], having an address at 3300 Aegon Center, Louisville, Kentucky 40202 (the
"Mortgagor"), to MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Collateral Agent
for the Secured Parties (hereinafter defined), having an address at [500 Stanton
Christiana Road, Newark, Delaware 19713-2107] (the "Mortgagee").
WITNESSETH:/2/
RECITALS
A. Credit Agreement. Reference is hereby made to the Debtor-In-
Possession Credit Agreement (as amended from time to time, the "Credit
Agreement"), dated as of September ___, 1999 among Vencor, Inc., and each of its
Subsidiaries party thereto, and Vencor Operating, Inc., each as debtor and
debtor-in-possession (each a "Borrower" and collectively, on a joint and several
basis, the "Borrowers"), the Lenders party thereto, the LC Issuing Banks party
thereto, and Morgan Guaranty Trust Company of New York, as Arranger,
Administrative Agent and Collateral Agent (together with its successors and
assigns under the Credit Agreement, the "Agent").
B. Secured Obligations. The Lien of this Mortgage is being granted to
secure payment, performance and observance of the following indebtedness,
liabilities and obligations, whether now or hereafter owed or owing, hereinafter
referred to collectively as the "Secured Obligations":
(i) all principal of all Loans and LC Reimbursement Obligations
outstanding from time to time under the Credit Agreement;
(ii) all interest (including any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Mortgagor or would accrue
but for the operation of applicable bankruptcy or insolvency laws, whether
or not allowed or allowable as a claim in such proceeding) on the Secured
Obligations referred to above;
(iii) all other amounts hereafter payable by the Mortgagor under any
Financing Document; and
(iv) any amendments, restatements, renewals, extensions or
modifications of any of the foregoing.
[C. Principal Amount. This Mortgage secures a maximum principal amount of
$__________ plus accrued unpaid interest and costs.]
____________________
2 Capitalized terms are defined in, or by reference in, Section 1.01.
<PAGE>
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, for the purpose of securing the due and punctual payment,
performance and observance of the Secured Obligations and intending to be bound
hereby, the Mortgagor does hereby GRANT, BARGAIN, SELL, CONVEY, MORTGAGE,
ASSIGN, TRANSFER and WARRANT to the Mortgagee and its successors as Collateral
Agent under the Collateral Documents, with power of sale and right of entry as
hereinafter provided, all of the following property and rights (all of which
property and rights are collectively called the "Mortgaged Property"), and (to
the extent covered by the Local UCC) does hereby GRANT AND WARRANT to the
Mortgagee and its successors as Collateral Agent under the Collateral Documents,
a continuing first security interest in and to all of the Mortgaged Property and
rights described in the following Granting Clauses, to wit:
GRANTING CLAUSE I.
LAND. ALL ESTATE, RIGHT, TITLE AND INTEREST OF THE MORTGAGOR IN, TO, UNDER
OR DERIVED FROM THE PARCEL OR PARCELS OF LAND LOCATED IN __________ COUNTY,
__________, MORE PARTICULARLY DESCRIBED IN EXHIBIT A (THE "LAND").
GRANTING CLAUSE II.
Improvements. All estate, right, title and interest of the Mortgagor
in, to, under or derived from all buildings, structures, facilities and other
improvements of every kind and description now or hereafter located on the Land,
including all parking areas, roads, driveways, walks, fences, walls and berms;
all estate, right, title and interest of the Mortgagor in, to, under or derived
from all items of fixtures, equipment and personal property of every kind and
description, in each case now or hereafter located on the Land or affixed
(actually or constructively) to the Improvements which by the nature of their
location thereon or affixation thereto, or otherwise, are real property under
applicable law or an interest in them arises under real estate law including:
all drainage and lighting facilities and other site improvements; all water,
sanitary and storm sewer, drainage, electricity, steam, gas, telephone,
telecommunications and other utility equipment and facilities; all plumbing,
lighting, heating, ventilating, air-conditioning, refrigerating, incinerating,
compacting, fire protection and sprinkler, surveillance and security, vacuum
cleaning, public address and communications equipment and systems; all pipes,
elevators, escalators, motors, electrical, computer and other wiring, machinery,
fittings and racking and shelving; all walls, screens and partitions; and
including all materials intended for the construction, reconstruction, repair,
replacement, alteration, addition or improvement of or to such buildings,
equipment, fixtures, structures and improvements, all of which materials shall
be deemed to be part of the Mortgaged Property immediately upon delivery thereof
on the Land and to be part of the Improvements immediately upon their
incorporation therein (the foregoing being collectively called the
"Improvements").
Equipment. All estate, right, title and interest of the Mortgagor in,
to, under or derived from all component parts of the Improvements, fixtures,
chattels and articles of personal property owned by the Mortgagor or in which
the Mortgagor has or shall acquire an interest, wherever situated, and now or
hereafter located on, attached to or contained in the Land and the Improvements,
whether or not attached thereto and which are not real property under applicable
law, including all partitions, screens, awnings, shades, blinds, curtains,
draperies, carpets, rugs,
<PAGE>
furniture and furnishings, heating, lighting, plumbing, ventilating, air
conditioning, refrigerating, gas, steam, electrical, incinerating and compacting
plants, systems, fixtures and equipment, elevators, stoves, ranges, vacuum and
other cleaning systems, call systems, switchboards, sprinkler systems and other
fire prevention, alarm and extinguishing apparatus and materials, motors,
machinery, pipes, conduits, dynamos, engines, compressors, generators, boilers,
stokers, furnaces, pumps, trunks, ducts, appliances, equipment, utensils, tools,
implements, fittings and fixtures (all of the foregoing being hereinafter
collectively called the "Equipment"; the Land with the Improvements thereon and
the Equipment therein being collectively called the "Property"). If the Lien of
this Mortgage is subject to a security interest covering any property described
in this GRANTING CLAUSE II, then all of the right, title and interest of the
Mortgagor in and to any and all such property is hereby assigned to the
Mortgagee, together with the benefits of all deposits and payments now or
hereafter made thereon by or on behalf of the Mortgagor, and subject to all of
the liens of, and terms and conditions applicable to, such security interest.
GRANTING CLAUSE III.
Appurtenant Rights. All estate, right, title and interest of the
Mortgagor in, to, under or derived from all tenements, hereditaments and
appurtenances now or hereafter relating to the Property; the streets, roads,
sidewalks and alleys abutting the Land; all strips and gores within or adjoining
the Land; all land in the bed of any body of water adjacent to the Land; all
land adjoining the Land created by artificial means or by accretion; all air
space and rights to use air space above the Land; all development or similar
rights now or hereafter appurtenant to the Land; all rights of ingress and
egress now or hereafter appertaining to the Property; all easements and rights
of way now or hereafter appertaining to the Property; and all royalties and
other rights now or hereafter appertaining to the use and enjoyment of the
Property, including alley, party walls, support, drainage, crop, timber,
agricultural, horticultural, oil, gas and other mineral, water stock, riparian
and other water rights.
GRANTING CLAUSE IV.
Agreements. All estate, right, title and interest of the Mortgagor
in, to, under or derived from all Insurance Policies (including all unearned
premiums and dividends thereunder), all guarantees and warranties relating to
the Property, all supply and service contracts for water, sanitary and storm
sewer, drainage, electricity, steam, gas, telephone and other utilities now or
hereafter relating to the Property and all other contract rights, now or
hereafter relating to the use or operation of the Property.
GRANTING CLAUSE V.
Leases. All estate, right, title and interest of the Mortgagor in,
to, under or derived from all Leases now or hereafter in effect, whether or not
of record, for the use or occupancy of all or any part of the Property.
GRANTING CLAUSE VI.
Rents, Issues and Profits. All estate, right, title and interest of
the Mortgagor in, to, under or derived from all rents, royalties, issues and
profits, including during any period of redemption, now or hereafter accruing
with respect to the Property, including all rents and other sums now or
hereafter, including during any period of redemption, payable pursuant to the
Leases; all other sums now or hereafter, including during any period of
redemption, payable with
<PAGE>
respect to the use, occupancy, management, operation or control of the Property;
and all other claims, rights and remedies now or hereafter, including during any
period of redemption, belonging or accruing with respect to the Property,
including deficiency rents and liquidated damages following default or
cancellation (the foregoing rents and other sums described in this Granting
Clause being collectively called the "Rents").
GRANTING CLAUSE VII.
Proceeds. All estate, right, title and interest of the Mortgagor in,
to, under or derived from all proceeds of any Transfer, financing, refinancing
or conversion into cash or liquidated claims, whether voluntary or involuntary,
of any of the Mortgaged Property, including all Casualty Proceeds and title
insurance proceeds under any title insurance policy now or hereafter held by the
Mortgagor, and all rights, dividends and other claims of any kind whatsoever
(including damage, secured, unsecured, priority and bankruptcy claims) now or
hereafter relating to any of the Mortgaged Property, all of which the Mortgagor
hereby irrevocably directs be paid to the Mortgagee to the extent provided
herein, and in each of the Credit Agreement and the Security Agreement, to be
held, applied and disbursed as provided in the Credit Agreement and the Security
Agreement.
GRANTING CLAUSE VIII.
Additional Property. All greater, additional or other estate, right,
title and interest of the Mortgagor in, to, under or derived from the Mortgaged
Property hereafter acquired by the Mortgagor, including all right, title and
interest of the Mortgagor in, to, under or derived from all extensions,
improvements, betterments, renewals, substitutions and replacements of, and
additions and appurtenances to, any of the Mortgaged Property hereafter acquired
by or released to the Mortgagor or constructed or located on, or affixed to, the
Property, in each case, immediately upon such acquisition, release,
construction, location or affixation; all estate, right, title and interest of
the Mortgagor in, to, under or derived from any other property and rights which
are, by the provisions of the Financing Documents, required to be subjected to
the Lien hereof; all estate, right, title and interest of the Mortgagor in, to,
under or derived from any other property and rights which are necessary to
maintain the Property and the Mortgagor's business or operations conducted
therein as a going concern, in each case, to the fullest extent permitted by
law, without any further conveyance, mortgage, assignment or other act by the
Mortgagor; and all estate, right, title and interest of the Mortgagor in, to,
under or derived from all other property and rights which are by any instrument
or otherwise subjected to the Lien hereof by the Mortgagor or anyone acting on
its behalf.
TO HAVE AND TO HOLD the Mortgaged Property, together with all estate,
right, title and interest of the Mortgagor and anyone claiming by, through or
under the Mortgagor in, to, under or derived from the Mortgaged Property and all
rights and appurtenances relating thereto, to the Mortgagee, forever.
PROVIDED ALWAYS that this Mortgage is upon the express condition that
the Mortgaged Property shall be released from the Lien of this Mortgage in full
or in part in the manner and at the time provided in Section 7.02.
THE MORTGAGOR ADDITIONALLY COVENANTS AND AGREES WITH THE MORTGAGEE AS
FOLLOWS:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.01 Definitions. (a) Capitalized terms used in this Mortgage, but not
otherwise defined herein, are defined in, or are defined by reference to, the
Credit Agreement and have the same meanings herein as therein.
(b) In addition, as used herein, the following terms have the following
meanings:
"Agent" is defined in the Recitals.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor
statute.
"Cash Proceeds Account" is defined in Section 7(e) of the
Security Agreement.
"Casualty Event" means any damage to, or destruction of, any real
or personal property or improvements.
"Casualty Proceeds" means (i) with respect to any Condemnation
Event, all awards or payments received by the Mortgagor by reason of such
Condemnation Event, including all amounts received with respect to any
transfer in lieu or anticipation of such Condemnation Event or in
settlement of any proceeding relating to such Condemnation Event and (ii)
with respect to any Casualty Event, all insurance proceeds or payments
(other than payments with respect to business interruption insurance) which
the Mortgagor receives under any insurance policy by reason of such
Casualty Event.
"Condemnation Event" means any condemnation or other taking or
temporary or permanent requisition of any property, any interest therein or
right appurtenant thereto, or any change of grade affecting any property,
as the result of the exercise of any right of condemnation or eminent
domain. A transfer to a governmental authority in lieu or anticipation of
condemnation shall be deemed to be a Condemnation Event.
"Credit Agreement" is defined in the Recitals.
"Impositions" means all real estate taxes, transfer taxes and
sales and use taxes, assessments (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof), and water, sewer or other rents, rates and charges,
excises, levies, license fees, permit fees, inspection fees and other
authorization fees and other charges, in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every
character (including all interest and penalties thereon), which at any time
may be assessed, levied, confirmed or imposed on or in respect of, or be a
Lien upon, (i) the Property, any other Mortgaged Property or any interest
therein, (ii) any occupancy, use or possession of, or activity
<PAGE>
conducted on, the Property or (iii) the Rents, but excluding income, excess
profits, franchise, capital stock, estate, inheritance, succession, gift or
similar taxes of the Mortgagor or the Mortgagee or any Lender, except to
the extent that such taxes of the Mortgagor or the Mortgagee or any Lender
are imposed in whole or in part in lieu of, or as a substitute for, any
taxes which are or would otherwise be Impositions.
"Improvements" is defined in Granting Clause II.
"Insurance Policies" means the insurance policies and coverages
required to be maintained by the Mortgagor with respect to the Property
pursuant to the Credit Agreement.
"Insurance Premiums" means all premiums payable under the
Insurance Policies.
"Insurance Requirements" means all provisions of the Insurance
Policies, all requirements of the issuer of any of the Insurance Policies
and all orders, rules, regulations and any other requirements of the
National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon the Mortgagor and applicable to the Property, any
adjoining vaults, sidewalks, parking areas or driveways, or any use or
condition thereof.
"Land" is defined in Granting Clause I.
"Lease" means each lease, sublease, tenancy, subtenancy, license,
franchise, concession or other occupancy agreement relating to the
Property, together with any guarantee of the obligations of the tenant or
occupant thereunder or any right to possession under any federal or state
bankruptcy code in the event of the rejection of any sublease by the
sublandlord thereof or its trustee pursuant to said code.
"Legal Requirements" means all provisions of all applicable laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, directions and requirements of, permits from and
agreements with, all governmental authorities, now or hereafter applicable
to the Property, any adjoining vaults, sidewalks, streets or ways, or any
use or condition thereof.
"Local UCC" means the Uniform Commercial Code as in effect in the
State in which the Property is located.
"Mortgage" is defined in the Preamble.
"Mortgaged Property" is defined in the Granting Clauses.
"Mortgagee" is defined in the Preamble.
"Mortgagor" is defined in the Preamble.
<PAGE>
"National Flood Insurance Program" means the National Flood
Insurance Act of 1968 and the Flood Disaster Protection Act of 1973 (42
U.S.C. Sections 4001 et seq.).
-- ---
"Permitted Disposition" means any (i) Transfer in connection with
a Condemnation Event, (ii) easement or similar encumbrance with respect to
the Property granted by the Mortgagor to any adjoining landowner or any
railroad, telephone, cable television, water, sewer, utility or similar
company, municipality or other governmental subdivision in the ordinary
course of business, (iii) other Transfer permitted under Section 7.03 of
the Credit Agreement; or (iv) assignment or sublease to any wholly-owned
Vencor Company permitted under the Credit Agreement.
"Permitted Encumbrances" is defined in the Credit Agreement.
"Permitted Liens" means any Liens permitted under Section 7.02 of
the Credit Agreement.
"Property" is defined in Granting Clause II.
"Receiver" is defined in Section 5.02(a)(iv).
"Rents" is defined in Granting Clause VI.
"Restoration" means the restoration, repair, replacement or
rebuilding of the Property after a Casualty Event or Condemnation Event,
and "Restore" means to restore, repair, replace or rebuild the Property
after a Casualty Event or Condemnation Event, in each case to a value and
condition substantially the same as the value and condition immediately
prior to the Casualty Event or Condemnation Event.
"Secured Obligations" is defined in the Recitals.
"Secured Parties" means the holders from time to time of the
Secured Obligations.
"Security Agreement" means the Security Agreement dated as of the
Closing Date among the Borrowers, the Subsidiary Guarantors party thereto
and the Collateral Agent.
"Transfer" means, when used as a noun, any sale, conveyance,
assignment, lease, sublease of all or any substantial portion of the
Property, or other transfer and, when used as a verb, to sell, convey,
assign, lease, so sublease, or otherwise transfer, in each case (i) whether
voluntary or involuntary, (ii) whether direct or indirect and (iii)
including any agreement providing for a Transfer or granting any right or
option providing for a Transfer.
"Unavoidable Delays" means delays due to acts of God, fire,
flood, earthquake, explosion or other Casualty Event, inability to procure
or shortage of labor, equipment, facilities, sources of energy (including
electricity, steam, gas or gasoline), materials
<PAGE>
or supplies, failure of transportation, strikes, lockouts, action of labor
unions, Condemnation Event, litigation relating to Legal Requirements,
inability to obtain permits or other causes beyond the reasonable control
of the Mortgagor, provided that lack of funds shall not be deemed to be a
cause beyond the control of the Mortgagor.
(c) In this Mortgage, unless otherwise specified, references to this Mortgage
or to Leases, the Credit Agreement, Notes, Letters of Credit, the Security
Agreement, Financing Documents and Collateral Documents include all amendments,
supplements, consolidations, replacements, restatements, extensions, renewals
and other modifications thereof, in whole or in part.
Section 1.02 Interpretation. In this Mortgage, unless otherwise specified, (i)
singular words include the plural and plural words include the singular; (ii)
words which include a number of constituent parts, things or elements, including
the terms Leases, Improvements, Land, Secured Obligations, Property and
Mortgaged Property, shall be construed as referring separately to each
constituent part, thing or element thereof, as well as to all of such
constituent parts, things or elements as a whole; (iii) words importing any
gender include the other gender; (iv) references to any Person include such
Person's successors and assigns and in the case of an individual, the word
"successors" includes such Person's heirs, devisees, legatees, executors,
administrators and personal representatives; (v) references to any statute or
other law include all applicable rules, regulations and orders adopted or made
thereunder and all statutes or other laws amending, consolidating or replacing
the statute or law referred to; (vi) the words "consent", "approve", "agree" and
"request", and derivations thereof or words of similar import, mean the prior
written consent, approval, agreement or request of the Person in question; (vii)
the words "include" and "including", and words of similar import, shall be
deemed to be followed by the words "without limitation"; (viii) the words
"hereto", "herein", "hereof" and "hereunder", and words of similar import, refer
to this Mortgage in its entirety; (ix) references to Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles,
Sections, Schedules, Exhibits, subsections, paragraphs and clauses of this
Mortgage; (x) the Schedules and Exhibits to this Mortgage are incorporated
herein by reference; (xi) the titles and headings of Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a
matter of convenience and shall not affect the construction of this Mortgage;
(xii) all obligations of the Mortgagor hereunder shall be satisfied by the
Mortgagor at the Mortgagor's sole cost and expense; and (xiii) all rights and
powers granted to the Mortgagee hereunder shall be deemed to be coupled with an
interest and be irrevocable.
ARTICLE 2
CERTAIN WARRANTIES AND COVENANTS OF THE MORTGAGOR
Section 2.01 Title. (a) The Mortgagor warrants that, as of the date hereof, (i)
the Mortgagor has a good and marketable title to the Land and the Improvements
thereon, free and clear of all Liens other than the Permitted Liens, (ii) the
Mortgagor is the owner of, or has a valid leasehold interest in, the Equipment
and all other items constituting the Mortgaged Property, and (iii) this Mortgage
constitutes a valid, binding and enforceable first Lien on the Mortgaged
Property, in each case subject only to Permitted Liens.
<PAGE>
(b) The Mortgagor shall forever preserve, protect, warrant and defend (i) the
estate, right, title and interest of the Mortgagor in and to the Mortgaged
Property; (ii) the validity, enforceability and priority of the Lien of this
Mortgage on the Mortgaged Property; and (iii) the right, title and interest of
the Mortgagee and any purchaser at any sale of the Mortgaged Property hereunder
or relating hereto, in each case against all other Liens and claims whatsoever,
subject only to Permitted Liens.
(c) The Mortgagor, at its sole cost and expense, shall (i) promptly correct any
defect or error which may be discovered in this Mortgage or any financing
statement or other document relating hereto; and (ii) promptly execute,
acknowledge, deliver, record and re-record, register and re-register, and file
and re-file this Mortgage and any financing statements or other documents which
the Mortgagee may reasonably require from time to time (all in form and
substance reasonably satisfactory to the Mortgagee) in order (A) to effectuate,
complete, perfect, continue or preserve the Lien of this Mortgage as a first
Lien on the Mortgaged Property, whether now owned or hereafter acquired, subject
only to the Permitted Liens, or (B) to effectuate, complete, perfect, continue
or preserve any right, power or privilege granted or intended to be granted to
the Mortgagee hereunder or otherwise accomplish the purposes of this Mortgage.
To the extent permitted by law, the Mortgagor hereby authorizes the Mortgagee to
execute and file financing statements or continuation statements without the
Mortgagor's signature appearing thereon if the Mortgagor has failed to do so
within a reasonable period of time after demand therefor. The Mortgagor shall
pay on demand the costs of, or incidental to, any recording or filing of any
financing or continuation statement, or amendment thereto, concerning the
Mortgaged Property.
(d) Nothing herein shall be construed to subordinate the Lien of this Mortgage
to any Permitted Lien to which the Lien of this Mortgage is not otherwise
subordinate.
Section 2.02 Secured Obligations. The Mortgagor shall duly and punctually pay,
perform and observe the Secured Obligations.
Section 2.03 Impositions. The Mortgagor shall (i) duly and punctually pay all
Impositions prior to the delinquency date thereof; (ii) duly and punctually file
all returns and other statements required to be filed with respect to any
Imposition prior to the delinquency date thereof; (iii) promptly notify the
Mortgagee of the receipt by the Mortgagor of any notice of default in the
payment of any Imposition or in the filing of any return or other statement
relating to any Imposition and simultaneously furnish to the Mortgagee a copy of
such notice of default; and (iv) not make deduction from or claim any credit on
any Secured Obligation by reason of any Imposition and, to the extent permitted
under applicable law, hereby irrevocably waives any right to do so.
Section 2.04 Legal and Insurance Requirements. (a) The Mortgagor represents and
warrants that as of the date hereof, (i) to the Mortgagor's knowledge, the
Property and the use and operation thereof comply in all material respects with
all Legal Requirements and Insurance Requirements, (ii) to the Mortgagor's
knowledge, there is no default under any material Legal Requirement or Insurance
Requirement and (iii) the execution, delivery and performance of this Mortgage
will not contravene any provision of or constitute a default under any material
Legal Requirement or Insurance Requirement.
<PAGE>
(b) The Mortgagor shall (i) duly and punctually comply in all material respects
with all Legal Requirements and Insurance Requirements; (ii) procure, maintain
and duly and punctually comply in all material respects with all permits
required for any construction, reconstruction, repair, alteration, addition,
improvement, maintenance, management, use and operation of the Property as
conducted from time to time; (iii) promptly notify the Mortgagee of the receipt
by the Mortgagor of any notice of default regarding any Legal Requirement,
Insurance Requirement or permit or any possible or actual termination of any
permit or Insurance Policy and furnish to the Mortgagee a copy of such notice of
default or termination; and (iv) promptly after obtaining knowledge thereof,
notify the Mortgagee of any condition which, with or without the giving of
notice or the passage of time or both, would constitute a default regarding any
Legal Requirement or Insurance Requirement or a termination of any permit or
Insurance Policy and the action being taken to remedy such condition.
Section 2.05 Status and Care of the Property. (a) The Mortgagor represents and
warrants that (i) the Property is served by all necessary water, sanitary and
storm sewer, drainage, electric, steam, gas, telephone and other utility
facilities to serve the current use and operation of the Property; (ii) the
Property has legal access to all streets or roads necessary to serve the current
use and operation of the Property; and (iii) the Improvements are not located in
an area designated as Flood Zone A, (as defined under the regulations adopted
under the National Flood Insurance Program), or to the extent the Improvements
are located in an area designated as Flood Zone A, the Mortgagor maintains in
full force and effect flood insurance under the National Flood Insurance Program
to the extent and in the amounts required by applicable law.
(b) The Mortgagor (i) shall not (A) initiate, consent to or affirmatively
support any change in the applicable zoning which would materially and adversely
affect the value of the Lien created by this Mortgage, (B) seek any variance (or
any change in any variance) under the zoning adversely affecting the value of
the Lien created by this Mortgage, or (C) execute or file any subdivision or
other plat or map adversely affecting the value of the Lien created by this
Mortgage; and (ii) shall, promptly after receiving notice or obtaining knowledge
of any proposed change in the zoning materially and adversely affecting the
value of the Lien created by this Mortgage or which would result in the current
use of the Property being a non-conforming use for which a variance has not been
obtained, notify the Mortgagee thereof and diligently contest the same by any
action or proceeding deemed appropriate by the Mortgagor in its reasonable
judgment or reasonably requested by the Mortgagee provided, however, that the
Mortgagor shall not hereby be obligated to commence or prosecute any legal
action.
Section 2.06 Liens. The Mortgagor shall not create or permit to be created or
to remain, and shall immediately discharge or cause to be discharged, any Lien
on the Mortgaged Property or any interest therein, in each case (i) whether
voluntarily or involuntarily created, (ii) whether directly or indirectly a Lien
thereon and (iii) whether subordinated hereto, except Permitted Liens. The
provisions of this Section shall apply to each and every Lien (other than
Permitted Liens) on the Mortgaged Property or any interest therein, regardless
of whether a consent to, or waiver of a right to consent to, any other Lien
thereon has been previously obtained in accordance with the terms of the
Financing Documents.
Section 2.07 Transfer. The Mortgagor shall not Transfer, or suffer any Transfer
of, the Mortgaged Property or any part thereof or interest therein, except,
subject to the rights of the Mortgagee
<PAGE>
hereunder if an Event of Default has occurred and is continuing, in connection
with Permitted Dispositions.
Section 2.08 [Intentionally Omitted].
ARTICLE 3
INSURANCE, CASUALTY AND CONDEMNATION
Section 3.01 Insurance. The Mortgagor shall maintain in full force and effect
Insurance Policies with respect to the Property as required by Section 5.03 of
the Credit Agreement.
Section 3.02 Casualty and Condemnation
(a) The Mortgagor represents and warrants that, as of the date hereof, (i)
there is no Casualty Event or Condemnation Event, (ii) there are no negotiations
or proceedings which might result in a Condemnation Event and (iii) to the
knowledge of the Mortgagor, no Condemnation Event is proposed or threatened.
(b) If any Casualty Event or Condemnation Event occurs, the Mortgagor shall
immediately take such action as is required by Section 5.08 of the Credit
Agreement and the other Financing Documents and any Casualty Proceeds shall be
held, applied and disbursed as provided in or permitted by the Credit Agreement
and the Security Agreement.
ARTICLE 4
CERTAIN SECURED OBLIGATIONS
Section 4.01 Interest after Default. If, pursuant to the terms of this Mortgage,
the Mortgagee shall make any payment on behalf of the Mortgagor (including any
payment made by the Mortgagee pursuant to Section 5.10), or shall incur
hereunder any expense for which the Mortgagee is entitled to reimbursement
pursuant to the terms of the Financing Documents, such Secured Obligation shall
be payable on demand and any amounts not paid on demand shall bear interest,
payable on demand, for each day until paid at the Tranche A Default Rate for
such day. Such interest, and any other interest on the Secured Obligations
payable at the Tranche A Default Rate pursuant to the terms of the Financing
Documents, shall accrue through the date paid notwithstanding any intervening
judgment of foreclosure or sale. All such interest shall be part of the Secured
Obligations and shall be secured by this Mortgage.
Section 4.02 Changes in the Laws Regarding Taxation. If, after the date hereof,
there shall be enacted any applicable law changing in any way the taxation of
mortgages, deeds of trust or other Liens or obligations secured thereby, or the
manner of collection of such taxes, so as to adversely affect this Mortgage, the
Secured Obligations, the Mortgagee or any Secured Party, promptly after demand
by the Mortgagee or any affected Secured Party, the Mortgagor shall pay all
taxes, assessments or other charges resulting therefrom or shall reimburse such
affected Person for all such taxes, assessments or other charges which such
Person is obligated to pay as a result thereof.
<PAGE>
Section 4.03 Indemnification. The Mortgagor shall protect, indemnify and
defend each of the Mortgagee and the Secured Parties (each, an "Indemnified
Party") from and against all claims, damages, losses, liabilities, costs or
expenses of any kind and nature whatsoever (including reasonable attorneys' fees
and expenses) which may be imposed on, incurred by or asserted against any
Indemnified Party by reason or on account of, or in connection with (a) this
Mortgage (b) the Mortgagee's good faith exercise of any of its rights and
remedies hereunder; (c) any accident, injury to or death of persons or loss of
or damage to property occurring in, on or about the Property or any part thereof
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, street or ways; and (d) any use, misuse, non-use, condition, maintenance
or repair by the Mortgagor or anyone claiming by, through or under the
Mortgagor; provided, that any claims caused by the willful misconduct or gross
negligence of any Indemnified Party as determined by a court of competent
jurisdiction shall be excluded from the foregoing indemnification of such
Indemnified Party. Any amount payable under this Section will be deemed a demand
obligation and will bear interest pursuant to Section 4.01. The obligations of
the Mortgagor under this Section shall survive the termination of this Mortgage.
ARTICLE 5
DEFAULTS, REMEDIES AND RIGHTS
Section 5.01 Events of Default. Any Event of Default under the Credit
Agreement shall constitute an Event of Default hereunder. All notice and cure
periods provided in the Credit Agreement and the other Financing Documents shall
run concurrently with any notice or cure periods provided under applicable law.
Section 5.02 Remedies. (a) When an Event of Default has occurred and is
continuing, the Mortgagee shall have the right and power to exercise any of the
following remedies and rights, subject to mandatory provisions of applicable
law, to wit:
(i) to institute a proceeding or proceedings, by advertisement, judicial
process or otherwise as provided under applicable law, for the complete or
partial foreclosure of this Mortgage or the complete or partial sale of the
Mortgaged Property under the power of sale hereunder or under any applicable
provision of law; or
(ii) to sell the Mortgaged Property, and all estate, right, title, interest,
claim and demand of the Mortgagor therein and thereto, and all rights of
redemption thereof, at one or more sales, as an entirety or in parcels, with
such elements of real or personal property, at such time and place and upon such
terms as the Mortgagee may deem expedient or as may be required under applicable
law, and in the event of a sale hereunder or under any applicable provision of
law of less than all of the Mortgaged Property, this Mortgage shall continue as
a Lien on the remaining Mortgaged Property; or
(iii) to institute a suit, action or proceeding for the specific performance of
any of the provisions of this Mortgage; or
(iv) to be entitled to the appointment of a receiver, supervisor, trustee,
liquidator, conservator or other custodian (a "Receiver") of the Mortgaged
Property, without notice to the Mortgagor, to
<PAGE>
the fullest extent permitted by law, as a matter of right and without regard to,
or the necessity to disprove, the adequacy of the security for the Secured
Obligations or the solvency of the Mortgagor or any other obligor, and the
Mortgagor hereby, to the fullest extent permitted by applicable law, irrevocably
waives such necessity and consents to such appointment, without notice, said
appointee to be vested with the fullest powers permitted under applicable law,
including to the extent permitted under applicable law those under clause (v) of
this subsection (a); or
(v) to enter upon the Property, by the Mortgagee or a Receiver (whichever is
the Person exercising the rights under this clause), and, to the extent
permitted by applicable law, exclude the Mortgagor and its managers, employees,
contractors, agents and other representatives therefrom in accordance with
applicable law, without liability for trespass, damages or otherwise, and take
possession of all other Mortgaged Property and all books, records and accounts
relating thereto, and upon demand the Mortgagor shall surrender possession of
the Property, the other Mortgaged Property and such books, records and accounts
to the Person exercising the rights under this clause; and having and holding
the same, the Person exercising the rights under this clause may use, operate,
manage, preserve, control and otherwise deal therewith and conduct the business
thereof, either personally or by its managers, employees, contractors, agents or
other representatives, without interference from the Mortgagor or its managers,
employees, contractors, agents and other representatives; and, upon each such
entry and from time to time thereafter, at the expense of the Mortgagor and the
Mortgaged Property, without interference by the Mortgagor or its managers,
employees, contractors, agents and other representatives, the Person exercising
the rights under this clause may, as such Person deems expedient, (A) insure or
reinsure the Property, (B) make all necessary or proper repairs, renewals,
replacements, alterations, additions, Restorations, betterments and improvements
to the Property and (C) in such Person's own name or, at the option of such
Person, in the Mortgagor's name, exercise all rights, powers and privileges of
the Mortgagor with respect to the Mortgaged Property, including the right to
enter into Leases with respect to the Property, including Leases extending
beyond the time of possession by the Person exercising the rights under this
clause; and the Person exercising the rights under this clause shall not be
liable to account for any action taken hereunder, other than for Rents actually
received by such Person, and shall not be liable for any loss sustained by the
Mortgagor resulting from any failure to let the Property or from any other act
or omission of such Person, except to the extent such loss is caused by such
Person's own willful misconduct or gross negligence; or
(vi) with or, to the fullest extent permitted by applicable law, without entry
upon the Property, in the name of the Mortgagee or a Receiver as required by law
(whichever is the Person exercising the rights under this clause) or, at such
Person's option, in the name of the Mortgagor, to collect, receive, sue for and
recover all Rents and proceeds of or derived from the Mortgaged Property, and
after deducting therefrom all costs, expenses and liabilities of every character
incurred by the Person exercising the rights under this clause in collecting the
same and in using, operating, managing, preserving and controlling the Mortgaged
Property and otherwise in exercising the rights under clause (v) of this
subsection (a) or any other rights hereunder, including all amounts necessary to
pay Impositions, Rents, Insurance Premiums and other costs, expenses and
liabilities relating to the Property, as well as reasonable compensation for the
services of such Person and its managers, employees, contractors, agents or
other representatives, to apply the remainder as provided in Section 5.06; or
<PAGE>
(vii) to take any action with respect to any Mortgaged Property permitted under
the Local UCC; or
(viii) to take any other action, or pursue any other remedy or right, as the
Mortgagee may have under applicable law, including the right to foreclosure
through court action, and the Mortgagor does hereby grant the same to the
Mortgagee.
(b) To the fullest extent permitted by applicable law,
(i) each remedy or right hereunder shall be in addition to, and not exclusive
or in limitation of, any other remedy or right hereunder, under any other
Financing Document or under applicable law;
(ii) every remedy or right hereunder, under any other Financing Document or
under applicable law may be exercised concurrently or independently and whenever
and as often as deemed appropriate by the Mortgagee;
(iii) no failure to exercise or delay in exercising any remedy or right
hereunder, under any other Financing Document or under applicable law shall be
construed as a waiver of any Default or other occurrence hereunder or under any
other Financing Document;
(iv) no waiver of, failure to exercise or delay in exercising any remedy or
right hereunder, under any other Financing Document or under applicable law upon
any Default or other occurrence hereunder or under any other Financing Document
shall be construed as a waiver of, or otherwise limit the exercise of, such
remedy or right upon any other or subsequent Default or other or subsequent
occurrence hereunder or under any other Financing Document;
(v) no single or partial exercise of any remedy or right hereunder, under any
other Financing Document or under applicable law upon any Default or other
occurrence hereunder or under any other Financing Document shall preclude or
otherwise limit the exercise of any other remedy or right hereunder, under any
other Financing Document or under applicable law upon such Default or occurrence
or upon any other or subsequent Default or other or subsequent occurrence
hereunder or under any other Financing Document;
(vi) the acceptance by the Mortgagee, the Agent or any Secured Party of any
payment less than the amount of the Secured Obligation in question shall be
deemed to be an acceptance on account only and shall not be construed as a
waiver of any Default hereunder or under any other Financing Document with
respect thereto; and
(vii) the acceptance by the Mortgagee, the Agent or any Secured Party of any
payment of, or on account of, any Secured Obligation shall not be deemed to be a
waiver of any Default or other occurrence hereunder or under any other Financing
Document with respect to any other Secured Obligation.
(c) If the Mortgagee has proceeded to enforce any remedy or right hereunder or
with respect hereto by foreclosure, sale, entry or otherwise, it may compromise,
discontinue or abandon such proceeding for any reason without notice to the
Mortgagor or any other Person (except the Agent, the Lenders or the other
Secured Parties to the extent required by the other Financing
<PAGE>
Documents); and, if any such proceeding shall be discontinued, abandoned or
determined adversely for any reason, the Mortgagor and the Mortgagee shall
retain and be restored to their former positions and rights hereunder with
respect to the Mortgaged Property, subject to the Lien hereof except to the
extent any such adverse determination specifically provides to the contrary.
(d) For the purpose of carrying out any provisions of Section 5.02(a)(v),
5.02(a)(vi), 5.05, 5.07, 5.10 or 6.01 or any other provision hereunder
authorizing the Mortgagee or any other Person to perform any action on behalf of
the Mortgagor, the Mortgagor hereby irrevocably appoints the Mortgagee or a
Receiver appointed pursuant to Section 5.02(a)(iv) or such other Person as the
attorney-in-fact of the Mortgagor (with a power to substitute any other Person
in its place as such attorney-in-fact) to act in the name of the Mortgagor or,
at the option of the Person appointed to act under this subsection, in such
Person's own name, to take the action authorized under Section 5.02(a)(v),
5.02(a)(vi), 5.05, 5.07, 5.10 or 6.01 or such other provision, and to execute,
acknowledge and deliver any document in connection therewith or to take any
other action incidental thereto as the Person appointed to act under this
subsection shall deem appropriate in its discretion; and the Mortgagor hereby
irrevocably authorizes and directs any other Person to rely and act on behalf of
the foregoing appointment and a certificate of the Person appointed to act under
this subsection that such Person is authorized to act under this subsection.
Section 5.03 Waivers by the Mortgagor. To the fullest extent permitted under
applicable law, the Mortgagor shall not assert, and hereby irrevocably waives,
any right or defense the Mortgagor may have under any statute or rule of law or
equity now or hereafter in effect relating to (a) appraisement, valuation,
homestead exemption, extension, moratorium, stay, statute of limitations,
redemption, marshaling of the Mortgaged Property or the other assets of the
Mortgagor, sale of the Mortgaged Property in any order or notice of deficiency
or intention to accelerate any Secured Obligation; (b) impairment of any right
of subrogation or reimbursement; (c) any requirement that at any time any action
must be taken against any other Person, any portion of the Mortgaged Property or
any other asset of the Mortgagor or any other Person; (d) any provision barring
or limiting the right of the Mortgagee to sell any Mortgaged Property after any
other sale of any other Mortgaged Property or any other action against the
Mortgagor or any other Person; (e) any provision barring or limiting the
recovery by the Mortgagee of a deficiency after any sale of the Mortgaged
Property; (f) any other provision of applicable law which shall defeat, limit or
adversely affect any right or remedy of the Mortgagee or any Secured Party under
or with respect to this Mortgage or any other Collateral Document as it relates
to any Mortgaged Property; or (g) the right of the Mortgagee as Agent to
foreclose this Mortgage in its own name on behalf of all of the Secured Parties
by judicial action as the real party in interest without the necessity of
joining any Secured Party.
Section 5.04 Jurisdiction and Process. (a) To the extent permitted under
applicable law, in any suit, action or proceeding arising out of or relating to
this Mortgage or any other Collateral Document as it relates to any Mortgaged
Property, the Mortgagor irrevocably consents to the non-exclusive jurisdiction
of any state or federal court sitting in the State in which the Property is
located and irrevocably waives any defense or objection which it may now or
hereafter have to the jurisdiction of such court or the venue of such court or
the convenience of such court as the forum for any such suit, action or
proceeding; and irrevocably consents to the service of any process in accordance
with applicable law in any such suit, action or proceeding, or any notice
relating to any sale, or the exercise of any other remedy by the Mortgagee
hereunder by mailing
<PAGE>
a copy of such process or notice by United States registered or certified mail,
postage prepaid, return receipt requested to the Mortgagor at its address
specified in or pursuant to Section 7.03; such service to be effective in
accordance with applicable law.
(b) Nothing in this Section shall affect the right of the Mortgagee to bring
any suit, action or proceeding arising out of or relating to this Mortgage or
any other Collateral Document in any court having jurisdiction under the
provisions of any other Collateral Document or applicable law or to serve any
process, notice of sale or other notice in any manner permitted by any other
Collateral Document or applicable law.
Section 5.05 Sales. Except as otherwise provided herein, to the fullest extent
permitted under applicable law, at the election of the Mortgagee, the following
provisions shall apply to any sale of the Mortgaged Property hereunder, whether
made pursuant to the power of sale under Section 5.02 or under any applicable
provision of law, any judicial proceeding or any judgment or decree of
foreclosure or sale or otherwise:
(a) The Mortgagee or the court officer (whichever is the Person conducting any
sale) may conduct any number of sales from time to time. The power of sale
hereunder or with respect hereto shall not be exhausted by any sale as to any
part or parcel of the Mortgaged Property which is not sold, unless and until the
Secured Obligations shall have been paid in full, and shall not be exhausted or
impaired by any sale which is not completed or is defective. Any sale may be as
a whole or in part or parcels and, as provided in Section 5.03, the Mortgagor
has waived its right to direct the order in which the Mortgaged Property or any
part or parcel thereof is sold.
(b) Any sale may be postponed or adjourned by public announcement at the time
and place appointed for such sale or for such postponed or adjourned sale
without further notice.
(c) After each sale, the Person conducting such sale shall execute and deliver
to the purchaser or purchasers at such sale a good and sufficient instrument or
instruments granting, conveying, assigning, transferring and delivering all
right, title and interest of the Mortgagor in and to the Mortgaged Property sold
and shall receive the proceeds of such sale and apply the same as provided in
Section 5.06. The Mortgagor hereby irrevocably appoints the Person conducting
such sale as the attorney-in-fact of the Mortgagor (with full power to
substitute any other Person in its place as such attorney-in-fact) to act in the
name of the Mortgagor or, at the option of the Person conducting such sale, in
such Person's own name, to make without warranty by such Person any conveyance,
assignment, transfer or delivery of the Mortgaged Property sold, and to execute,
acknowledge and deliver any instrument of conveyance, assignment, transfer or
delivery or other document in connection therewith or to take any other action
incidental thereto, as the Person conducting such sale shall deem appropriate in
its discretion; and the Mortgagor hereby irrevocably authorizes and directs any
other Person to rely and act upon the foregoing appointment and a certificate of
the Person conducting such sale that such Person is authorized to act hereunder.
Nevertheless, upon the request of such attorney-in-fact the Mortgagor shall
promptly execute, acknowledge and deliver any documentation which such attorney-
in-fact may require for the purpose of ratifying, confirming or effectuating the
powers granted hereby or any such conveyance, assignment, transfer or delivery
by such attorney-in-fact.
<PAGE>
(d) Any statement of fact or other recital made in any instrument referred to
in Section 5.05(c) given by the Person conducting any sale as to the nonpayment
of any Secured Obligation, the occurrence of any Event of Default, the amount of
the Secured Obligations due and payable, the request to the Mortgagee to sell,
the notice of the time, place and terms of sale and of the Mortgaged Property to
be sold having been duly given, the refusal, failure or inability of the
Mortgagee to act, the appointment of any substitute or successor agent, any
other act or thing having been duly done by the Mortgagor, the Mortgagee or any
other such Person, shall be taken as conclusive and binding against all other
Persons as evidence of the truth of the facts so stated or recited.
(e) The receipt by the Person conducting any sale of the purchase money paid at
such sale shall be sufficient discharge therefor to any purchaser of any
Mortgaged Property sold, and no such purchaser, or its representatives, grantees
or assigns, after paying such purchase price and receiving such receipt, shall
be bound to see to the application of such purchase price or any part thereof
upon or for any trust or purpose of this Mortgage or the other Financing
Documents, or, in any manner whatsoever, be answerable for any loss,
misapplication or nonapplication of any such purchase money or be bound to
inquire as to the authorization, necessity, expediency or regularity of such
sale.
(f) Subject to mandatory provisions of applicable law, any sale shall operate
to divest all of the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of the Mortgagor in and to the
Mortgaged Property sold, and shall be a perpetual bar both at law and in equity
against the Mortgagor and any and all Persons claiming such Mortgaged Property
or any interest therein by, through or under the Mortgagor.
(g) At any sale, the Mortgagee may bid for and acquire the Mortgaged Property
sold and, in lieu of paying cash therefor, may make settlement for the purchase
price by crediting or causing the Secured Parties to credit against the Secured
Obligations, including the expenses of the sale and the cost of any enforcement
proceeding hereunder, the amount of the bid made therefor to the extent
necessary to satisfy such bid.
(h) If the Mortgagor or any Person claiming by, through or under the Mortgagor
shall transfer or fail to surrender possession of the Mortgaged Property, after
the exercise by the Mortgagee of the Mortgagee's remedies under Section
5.02(a)(v) or after any sale of the Mortgaged Property pursuant hereto, then the
Mortgagor or such Person shall be deemed a tenant at sufferance of the purchaser
at such sale, subject to eviction by means of summary process for possession of
land, or subject to any other right or remedy available hereunder or under
applicable law.
(i) Upon any sale, it shall not be necessary for the Person conducting such
sale to have any Mortgaged Property being sold present or constructively in its
possession.
(j) If a sale hereunder shall be commenced by the Mortgagee, the Mortgagee may
at any time before the sale abandon the sale, and may institute suit for the
collection of the Secured Obligations or for the foreclosure of this Mortgage;
or if the Mortgagee shall institute a suit for collection of the Secured
Obligations or the foreclosure of this Mortgage, the Mortgagee may at any time
before the entry of final judgment in said suit dismiss the same and sell the
Mortgaged Property in accordance with the provisions of this Mortgage.
<PAGE>
(k) Following any judicial sale of the real property covered by the Mortgage,
the redemption period shall be limited to one (1) month from and after the date
of such judicial sale.
Section 5.06 Proceeds. Except as otherwise provided herein or required under
applicable law, when an Event of Default has occurred and is continuing, the
proceeds of any sale of, or other realization upon, the Mortgaged Property
hereunder, whether made pursuant to the power of sale hereunder or under any
applicable provision of law, any judicial proceeding or any judgment or decree
of foreclosure or sale or otherwise, shall be applied and paid as follows:
(a) First: to pay the expenses of such sale or other realization, including
-----
compensation for the Person conducting such sale (which may include the
Mortgagee), the cost of title searches, foreclosure certificates and attorneys'
fees and expenses incurred by such Person, together with interest on any such
expenses paid by such Person at the Tranche A Default Rate from the date of
demand through the date repaid to such Person;
(b) Second: to pay the expenses and other amounts payable under Sections 4.02
------
and 5.10, if any; and
(c) Third: to pay the other Secured Obligations in the order and priority set
-----
forth in Section 15 of the Security Agreement.
Section 5.07 Assignment of Leases. (a) Subject to paragraph (d) below, the
assignments of the Leases and the Rents thereunder pursuant to Granting Clauses
V and VI are and shall be present, absolute and irrevocable assignments by the
Mortgagor to the Mortgagee and, subject to the license to the Mortgagor under
Section 5.07(b), the Mortgagee or a Receiver appointed pursuant to Section
5.02(a)(iv) (whichever is the Person exercising the rights under this Section)
shall have the absolute, immediate and continuing right to collect and receive
all such Rents now or hereafter, including during any period of redemption,
accruing with respect to the Property. At the request of the Mortgagee or such
Receiver, the Mortgagor shall promptly execute, acknowledge, deliver, record,
register and file any additional general assignment of the Leases or specific
assignment of any Lease which the Mortgagee or such Receiver may require from
time to time (all in form and substance satisfactory to the Mortgagee or such
Receiver) to effectuate, complete, perfect, continue or preserve the assignments
of the Leases and the Rents thereunder pursuant to Granting Clauses V and VI.
(b) The Mortgagor shall have a license granted hereby to collect and receive
all Rents under the Leases and apply the same subject to the provisions of the
Financing Documents, such license to be terminable by the Mortgagee as provided
in Section 5.07(c).
(c) When an Event of Default has occurred and is continuing, the Mortgagee or a
Receiver appointed pursuant to Section 5.02(a)(iv) (whichever is the Person
exercising the rights under this Section) shall have the right, exercisable upon
notice to the Mortgagor, to terminate the license granted under Section 5.07(b)
by notice to the Mortgagor and to exercise the rights and remedies provided
under Section 5.07(a), under Sections 5.02(a)(v) and (vi) or under applicable
law. Upon demand by the Person exercising the rights under this Section, the
Mortgagor shall promptly pay to such Person all security deposits under the
Leases and all Rents thereunder allocable to any period after such demand.
Subject to Sections 5.02(a)(v) and (vi) and any
<PAGE>
applicable requirement of law, any Rents received hereunder by such Person shall
be promptly paid to the Mortgagee, and any Rents received hereunder by the
Mortgagee shall be deposited in the Cash Proceeds Account, to be held, applied
and disbursed as provided in Section 15 of the Security Agreement, provided
that, subject to Sections 5.02(a)(v) and (vi) and any applicable requirement of
law, any security deposits actually received by such Person shall be promptly
paid to the Mortgagee, and any security deposits actually received by the
Mortgagee shall be held, applied and disbursed as provided in the applicable
Leases and applicable law.
(d) Nothing herein shall be construed to be an assumption by the Person
exercising the rights under this Section, or otherwise to make such Person
liable for the performance, of any of the obligations of the Mortgagor under the
Leases, provided that such Person shall be accountable as provided in Section
5.07(c) for any Rents or security deposits actually received by such Person.
Section 5.08 Dealing with the Mortgaged Property. Subject to Section 7.02, the
Mortgagee shall have the right to release any portion of the Mortgaged Property,
or grant or consent to the granting of any Lien affecting any portion of the
Mortgaged Property, to or at the request of the Mortgagor, for such
consideration as the Mortgagee may require without, as to the remainder of the
Mortgaged Property, in any way impairing or affecting the Lien or priority of
this Mortgage, or improving the position of any subordinate lienholder with
respect thereto, or the position of any guarantor, endorser, co-maker or other
obligor of the Secured Obligations, except to the extent that the Secured
Obligations shall have been reduced by any actual monetary consideration
received for such release and applied to the Secured Obligations, and may accept
by assignment, pledge or otherwise any other property in place thereof as the
Mortgagee may require without being accountable therefor to any other
lienholder.
Section 5.09 Right of Entry. The Mortgagee and the representatives of the
Mortgagee shall have the right, upon being instructed to do so by the Required
Lenders (a) without notice, when an Event of Default has occurred and is
continuing, (b) with simultaneous notice, if any payment or performance is
necessary in the opinion of the Mortgagee to preserve the Mortgagee's rights
under this Mortgage or with respect to the Mortgaged Property, or (c) after
reasonable notice, in all other cases, to enter upon the Property at reasonable
times, and with reasonable frequency, to inspect the Mortgaged Property or,
subject to the provisions hereof, to exercise any right, power or remedy of the
Mortgagee hereunder, provided that any Person so entering the Property shall not
unreasonably interfere with the ordinary conduct of the Mortgagor's business,
and provided further that no such entry on the Property, for the purpose of
performing obligations under Section 5.10 or for any other purpose, shall be
construed to be (i) possession of the Property by such Person or to constitute
such Person as a mortgagee in possession, unless such Person exercises its right
to take possession of the Property under Section 5.02(a)(v), or (ii) a cure of
any Default or waiver of any Default or Secured Obligation. The expense of any
inspection pursuant to clause (c) above shall be borne by the Mortgagee unless
an Event of Default shall have occurred and be continuing at the time of such
inspection, in which case the Mortgagor shall pay, or reimburse the Mortgagee
for, such expense.
Section 5.10 Right to Perform Obligations. If the Mortgagor fails to pay or
perform any obligation of the Mortgagor hereunder, after the expiration of any
applicable grace period the Mortgagee and the representatives of the Mortgagee
shall have the right, upon being instructed to do so by the Required Lenders at
any time, to pay or perform such obligation (a) without notice, when an
<PAGE>
Event of Default has occurred and is continuing, (b) with simultaneous notice,
if such payment or performance is necessary in the opinion of the Mortgagee to
preserve the Mortgagee's rights under this Mortgage or with respect to the
Mortgaged Property, or (c) after notice given reasonably in advance to allow the
Mortgagor an opportunity to pay or perform such obligation, provided that the
Mortgagor is not contesting payment or performance in accordance with the terms
hereof and further provided that no such payment or performance shall be
construed to be a cure of any Default or waiver of any Default or Secured
Obligation. The Mortgagor shall reimburse the Mortgagee on demand for the
reasonable costs of performing any such obligations and any amounts not paid on
demand shall bear interest, payable on demand, for each day until paid at the
Tranche A Default Rate for such day.
Section 5.11 Concerning the Mortgagee. (a) The provisions of Section 16 of
the Security Agreement shall inure to the benefit of the Mortgagee in respect of
this Mortgage and shall be binding upon the parties to the Credit Agreement and
the other Financing Documents in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Mortgagee therein set
forth:
(i) The Mortgagee is authorized to take all such action as is provided to be
taken by it as Mortgagee hereunder and all other action incidental thereto. As
to any matters not expressly provided for herein (including the timing and
methods of realization upon the Mortgaged Property) the Mortgagee shall act or
refrain from acting in accordance with written instructions from the Required
Lenders or, in the absence of such instructions, in accordance with its
discretion.
(ii) The Mortgagee shall not be responsible for the existence, genuineness or
value of any of the Mortgaged Property or for the validity, perfection, priority
or enforceability of the Lien of this Mortgage on any of the Mortgaged Property,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder. The Mortgagee shall have no duty to ascertain or
inquire as to the performance or observance of any of the terms of this Mortgage
by the Mortgagor.
(b) At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Mortgagee may appoint another bank or trust company or one
or more other Persons, either to act as co-agent or co-agents, jointly with the
Mortgagee, or to act as separate agent or agents on behalf of the Lenders or the
other Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Mortgagee,
include provisions for the protection of such co-agent or separate agent similar
to the provisions of this Section 5.11). References to the Mortgagee in Section
5.12 shall be deemed to include any co-agent or separate agent appointed
pursuant to this Section 5.11.
Section 5.12 Expenses. The Mortgagor agrees that it will forthwith on demand
pay to the Mortgagee the amount of any taxes which the Mortgagee may have been
required to pay in order to free any of the Mortgaged Property from any Lien
thereon (other than Permitted Liens), the amount of any and all out-of-pocket
expenses, including the fees and disbursements of counsel and of any other
experts, which the Mortgagee may reasonably incur in connection with preserving
the value of the Mortgaged Property and the validity, perfection, rank or value
of the Lien of this
<PAGE>
Mortgage and the amount of any and all out-of-pocket expenses, including the
fees and disbursements of counsel and of any other experts, which the Mortgagee
may reasonably incur in connection with the collection, sale or other
disposition of any of the Mortgaged Property.
ARTICLE 6
SECURITY AGREEMENT AND FIXTURE FILING
Section 6.01 Security Agreement. To the extent that the Mortgaged Property
constitutes or includes tangible or intangible personal property, including
goods or items of personal property which are or are to become fixtures under
applicable law, the Mortgagor hereby grants to the Mortgagee a security interest
therein and this Mortgage shall also be construed as a pledge and a security
agreement under the Local UCC; and, when an Event of Default has occurred and is
continuing, the Mortgagee shall be entitled to exercise with respect to such
tangible or intangible personal property all remedies available under the Local
UCC and all other remedies available under applicable law. Without limiting the
foregoing, any personal property may, at the Mortgagee's option and, except as
otherwise required by applicable law, without the giving of notice, (i) be sold
hereunder, (ii) be sold pursuant to the Local UCC or (iii) be dealt with by the
Mortgagee in any other manner permitted under applicable law. The Mortgagee may
require the Mortgagor, after an Event of Default has occurred and is continuing,
to assemble the personal property and make it available to the Mortgagee at a
place to be designated by the Mortgagee. At any time and from time to time when
an Event of Default has occurred and is continuing, the Mortgagee shall be the
attorney-in-fact of the Mortgagor with respect to any and all matters pertaining
to the personal property with full power and authority to give instructions with
respect to the collection and remittance of payments, to endorse checks, to
enforce the rights and remedies of the Mortgagor and to execute on behalf of the
Mortgagor and in Mortgagor's name any instruction, agreement or other writing
required therefor. The Mortgagor acknowledges and agrees that a disposition of
the personal property in accordance with the Mortgagee's rights and remedies in
respect of the Property as heretofore provided is a commercially reasonable
disposition thereof. Notwithstanding the foregoing, to the extent that the
Mortgaged Property includes personal property covered by the Security Agreement
the provisions of the Security Agreement shall govern with respect to such
personal property.
Section 6.02 Fixture Filing. To the extent that the Mortgaged Property
includes goods or items of personal property which are or are to become fixtures
under applicable law, and to the extent permitted under applicable law, the
filing of this Mortgage in the real estate records of the county in which the
Mortgaged Property is located shall also operate from the time of filing as a
fixture filing with respect to such Mortgaged Property, and the following
information is applicable for the purpose of such fixture filing, to wit:
(a) Name and address of the debtor:
Vencor Operating, Inc.
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Attention: _________________
<PAGE>
(b) Name and address of the secured party:
Morgan Guaranty Trust Company of New York, as Collateral Agent
[500 Stanton Christiana Road
Newark, Delaware 19713-2107]
(c) This instrument covers goods or items of personal property which are or are
to become fixtures upon the Property.
(d) The Mortgagor is the record owner of the real estate on which such fixtures
are or are to be located.
ARTICLE 7
MISCELLANEOUS
Section 7.01 Revolving Credit Loans. The Secured Obligations secured by this
Mortgage include revolving credit Loans made, and LC Reimbursement Obligations
relating to Letters of Credit issued or extended, under the Credit Agreement
which are advanced, paid and readvanced from time to time. Notwithstanding the
amount outstanding at any particular time, this Mortgage secures the total
amount of [Secured Obligations] [$_______]. The unpaid balance of the revolving
credit Loans and the outstanding LC Reimbursement Obligations relating to
Letters of Credit issued or extended under the Credit Agreement may at certain
times be, or be reduced to, zero. A zero balance, by itself, does not affect any
LC Issuing Bank's obligation to issue or extend Letters of Credit or to make
payments upon draws under Letters of Credit or any Lender's obligation to
advance revolving credit Loans subject to the conditions stated in the Credit
Agreement. Each of the security interest of the Mortgagee hereunder and the
priority of the Lien of this Mortgage will remain in full force and effect with
respect to all of the Secured Obligations notwithstanding such a zero balance of
the revolving credit Loans and LC Reimbursement Obligations and the Lien of this
Mortgage will not be extinguished until this Mortgage has been terminated
pursuant to Section 7.02(a).
Section 7.02 Release of Mortgaged Property. (a) This Mortgage shall cease,
terminate and thereafter be of no further force or effect (except as provided in
Section 4.03) upon (i) payment in full of all Secured Obligations described in
clause (i) in the definition thereof, (ii) the termination of all Letters of
Credit issued under the Credit Agreement, (iii) the termination of all
Commitments under the Credit Agreement and (iv) payment in full of all other
Secured Obligations known to the Mortgagee to be then due and payable.
(b) Upon direction from the Administrative Agent pursuant to Section 2.13 of
the Credit Agreement and upon the Mortgagor's compliance with Section 18 of the
Security Agreement, the Mortgagee shall release all or a portion of the
Mortgaged Property (but not any proceeds of any sale giving rise to such
release). In addition, at any time and from time to time prior to such
termination of this Mortgage, the Mortgagee may release any of the Mortgaged
Property with the consent of the Required Lenders, provided that if such release
is in connection with the release of all or substantially all of the collateral
granted to secure the Secured Obligations, such release shall require the
consent of all Lenders.
<PAGE>
(c) Any termination or release under this Section 7.02 shall be at the
Mortgagor's request and expense and either in the statutory form or in a form
reasonably satisfactory to the Mortgagee.
Section 7.03 Notices. All notices, approvals, requests, demands and other
communications hereunder shall be given (i) if to the Mortgagor, in accordance
with Section 11.01 of the Credit Agreement at the "Address for Notices"
specified below the intended recipient's name on the signature pages thereof, or
at such other address as shall be designated by such party in a Notice to the
other parties in accordance with such Section 11.01 of the Credit Agreement; and
(ii) if to the Mortgagee, in accordance with Section 11.01 of the Credit
Agreement.
Section 7.04 Amendments in Writing. No provision of this Mortgage shall be
modified, waived or terminated, and no consent to any departure by the Mortgagor
from any provision of this Mortgage shall be effective, unless the same shall be
by an instrument in writing, signed by the Mortgagor and the Mortgagee in
accordance with Section 11.05 of the Credit Agreement with the consent of the
Required Lenders (except that any change, waiver, discharge or termination of
Section 7.02 shall require the consent of all the Lenders). Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 7.05 Severability. All rights, powers and remedies provided in this
Mortgage may be exercised only to the extent that the exercise thereof does not
violate applicable law, and all the provisions of this Mortgage are intended to
be subject to all mandatory provisions of applicable law and to be limited to
the extent necessary so that they will not render this Mortgage illegal,
invalid, unenforceable or not entitled to be recorded, registered or filed under
applicable law. If any provision of this Mortgage or the application thereof to
any Person or circumstance shall, to any extent, be illegal, invalid or
unenforceable, or cause this Mortgage not to be entitled to be recorded,
registered or filed, the remaining provisions of this Mortgage or the
application of such provision to other Persons or circumstances shall not be
affected thereby, and each provision of this Mortgage shall be valid and be
enforced to the fullest extent permitted under applicable law.
Section 7.06 Binding Effect. (a) The provisions of this Mortgage shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
(b) To the fullest extent permitted under applicable law, the provisions of
this Mortgage binding upon the Mortgagor shall be deemed to be covenants
which run with the land.
(c) Nothing in this Section shall be construed to permit the Mortgagor to
Transfer or grant a Lien upon the Mortgaged Property contrary to the
provisions of the Credit Agreement.
Section 7.07 Governing Law. THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
Section 7.08 Counterparts. This Agreement may be signed in any number of
counterparts each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 7.09 Last Dollars Secured. This Mortgage secures only a portion of the
Secured Obligations owing or which may become owing by the Mortgagor.
Notwithstanding anything to the contrary
<PAGE>
contained in the Financing Documents, the parties agree that any payments or
repayments of such Secured Obligations by the Mortgagor shall be deemed to apply
first to the portion of the Secured Obligations that is not secured hereby, it
being the parties' intent that the portion of the Secured Obligations last
remaining unpaid shall be deemed secured hereby.
IN WITNESS WHEREOF, this Mortgage has been executed by the parties
hereto as of the day first set forth above.
MORTGAGOR:
[VENCOR ENTITY]
By: _______________________
Name:
Title:
[Add acknowledgments]
<PAGE>
EXHIBIT A
DESCRIPTION OF THE LAND
<PAGE>
EXHIBIT C
SUBSIDIARY GUARANTY AGREEMENT
Guaranty Agreement dated as of September 13, 1999 (as amended from time to
time, this "Guaranty Agreement") by the undersigned Subsidiaries (the
"Subsidiary Guarantors") of Vencor, Inc., a Delaware corporation ("Vencor"), for
the benefit of the Lenders from time to time party to the Credit Agreement
referred to below.
WHEREAS, Vencor and certain Subsidiaries of Vencor party thereto, each as
debtor and debtor-in-possession (the "Borrowers"), have entered into a
Debtor-In-Possession Credit Agreement dated as of September 13, 1999 with the
Lenders, LC Issuing Banks and Morgan Guaranty Trust Company of New York, as
Arranger, Collateral Agent and Administrative Agent (as amended from time to
time, the "Credit Agreement") pursuant to which the Borrowers desire to borrow
funds and obtain letters of credit, all on the terms and conditions set forth
therein;
WHEREAS, the Lenders and the LC Issuing Banks are not willing to make loans
or maintain, issue or participate in letters of credit under the Credit
Agreement unless the Subsidiary Guarantors guarantee the performance of the
Obligations under the Credit Agreement and the Note referred to therein;
NOW, THEREFORE, each Subsidiary Guarantor agrees as follows:
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
Section 2. The Guarantees. Each Subsidiary Guarantor, jointly and
severally, unconditionally and irrevocably guarantees the full and punctual
payment of all present and future indebtedness and other obligations of the
Borrowers evidenced by or arising under any Financing Document as and when the
same shall become due and payable, whether at maturity or by declaration or
otherwise, according to the terms hereof and thereof (including any interest
which accrues on any of the foregoing obligations after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Borrower, whether or not allowed or allowable as a claim
in any such proceeding). If any Borrower fails punctually to pay any
indebtedness or other obligation guaranteed hereby, each Subsidiary Guarantor
unconditionally agrees to cause such payment to be made punctually as and when
the same shall become due and payable, whether at maturity or by declaration or
otherwise, and as if such payment were made by such Borrower.
Section 3. Taxes. Each Subsidiary Guarantor agrees to comply with Section
10.02 of the Credit Agreement as if it were a party thereto.
C-1
<PAGE>
Section 4. Guarantee Unconditional. Except as provided in Section 8 hereof,
the obligations of each Subsidiary Guarantor under this Guaranty Agreement shall
be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any other Vencor Company under any
Financing Document by operation of law or otherwise;
(b) any modification, amendment or waiver of or supplement to any
Financing Document;
(c) any release, impairment, non-perfection or invalidity of any
direct or indirect security, or of any guarantee or other liability of any
third party, for any obligation of any other Vencor Company under any
Financing Document;
(d) any change in the corporate existence, structure or ownership
of any other Vencor Company, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting any other Vencor Company or its
assets, or any resulting release or discharge of any obligation of any
other Vencor Company contained in any Financing Document;
(e) the existence of any claim, set-off or other rights which such
Subsidiary Guarantor may have at any time against any other Vencor Company,
any Lender Party or any other Person, whether or not arising in connection
with this Guaranty Agreement; provided that nothing herein shall prevent
the assertion of any such claim by separate suit or compulsory
counterclaim;
(f) any invalidity or unenforceability relating to or against any
other Vencor Company for any reason of any Financing Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by any other Vencor Company of any amount payable by it under any
Financing Document; or
(g) any other act or omission to act or delay of any kind by any
other Vencor Company, any Lender Party or any other Person or any other
circumstance whatsoever that might, but for the provisions of this Section,
constitute a legal or equitable discharge of such Subsidiary Guarantor's
obligations under this Guaranty Agreement.
Section 5. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Each Subsidiary Guarantor's obligations under this Guaranty
Agreement constitute a continuing guaranty and shall remain in full force and
effect until the Credit Exposure of each Lender shall have been reduced to zero
and all amounts payable by any Borrower under the Financing Documents shall have
been paid in full. If at any time any amount payable by the Borrower under any
Financing Document is rescinded or must be otherwise restored or returned upon
the insolvency, bankruptcy or reorganization of the Borrower or otherwise, each
Subsidiary Guarantor's obligations under this Guaranty Agreement with respect to
such payment shall be reinstated at such time as though such payment had become
due but had not been made at such time.
Section 6. Waiver. Each Subsidiary Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement
C-2
<PAGE>
that at any time any action be taken by any Person against any Borrower or any
other Person or against any security.
Section 7. Subrogation and Contribution. When any Subsidiary Guarantor
makes any payment hereunder with respect to the obligations of any Borrower,
such Subsidiary Guarantor shall be subrogated to the rights of the payee against
such Borrower with respect to the portion of such obligations paid by such
Subsidiary Guarantor, and shall also have a right of contribution in respect of
such payment against all other Subsidiary Guarantors pro rata among them based
on their respective net fair value as enterprises; provided that such Subsidiary
Guarantor shall not enforce any payment by way of subrogation against any
Borrower or contribution against any other Subsidiary Guarantor so long as any
Lender has any Credit Exposure under the Credit Agreement or any Existing Lender
has any Credit Exposure under and as defined in the Existing Credit Facilities
or any amount payable by any Borrower under any Financing Document or under or
in respect of the Existing Credit Facilities remains unpaid.
Section 8. Limit of Liability. The Subsidiary Guarantors and the
beneficiaries of this Guaranty Agreement intend that this Guaranty Agreement
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If and to
the extent that the obligations of any Subsidiary Guarantor under this Guaranty
Agreement would, in the absence of this sentence, be adjudicated to be invalid
or unenforceable because of any applicable state or federal law relating to
fraudulent conveyances or transfers, then the amount of such Subsidiary
Guarantor's liability hereunder in respect of the obligations of any Borrower
guaranteed hereunder shall be deemed to be reduced ab initio to the maximum
amount which would be permitted without causing such Subsidiary Guarantor's
obligations hereunder to be so invalidated.
Section 9. Notices. Notices and other communications hereunder shall be
given in writing in the manner specified in or pursuant to Section 11.01 of the
Credit Agreement.
Section 10. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS GUARANTY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. EACH SUBSIDIARY GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY. EACH SUBSIDIARY GUARANTOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT
C-3
<PAGE>
IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 11. Successors and Assigns. This Guaranty Agreement is for the
benefit of the Lender Parties and their respective successors and assigns. If
any Loans, participations in Letters of Credit, Notes or other amounts payable
under the Financing Documents are assigned pursuant to Section 11.06 of the
Credit Agreement, the rights hereunder, to the extent applicable to the
indebtedness so assigned, shall be transferred with such indebtedness.
Section 12. No Waiver. No failure or delay by any Lender Party in
exercising any right, power or privilege under any Financing Document operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in the Financing Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 13. Amendments and Waivers. Any provision of this Guaranty
Agreement may be amended, supplemented, modified or waived as (and only as)
provided in Section 11.05 of the Credit Agreement.
Section 14. Counterparts. This Guaranty Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto were upon the same instrument.
Section 15. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT, THE OTHER FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. EACH SUBSIDIARY GUARANTOR
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES TO THE FINANCING DOCUMENTS HAVE BEEN INDUCED TO
ENTER INTO THIS GUARANTY AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AS
APPLICABLE, BY (AMONG OTHER THINGS) THE WAIVERS AND CERTIFICATIONS IN THIS
SECTION 15 AND SECTION 11.11 OF THE CREDIT AGREEMENT.
C-4
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this Guaranty
Agreement to be duly executed by its authorized officer as of the day and year
first above written.
Caribbean Behavioral Health Systems, Inc.
By:
_______________________________________
Name:
Title:
C-5
<PAGE>
EXHIBIT D
FINANCIAL OFFICER'S CERTIFICATE
This certificate is being furnished pursuant to Section 5.01(c) of the
Debtor-In-Possession Credit Agreement dated as of September 13, 1999 (the
"Credit Agreement") among Vencor, Inc. ("Vencor") and each of its Subsidiaries
party thereto, each as debtor and debtor-in-possession (the "Borrowers"), the
Lenders, the LC Issuing Banks and Morgan Guaranty Trust Company of New York, as
Arranger, Collateral Agent and Administrative Agent. Terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Credit
Agreement.
The undersigned hereby certifies that [he][she] is the [principal financial
officer] [principal accounting officer] [treasurer] of Vencor Operating, Inc.
The undersigned further certifies that, to the best of [his][her] knowledge:
[1.] The enclosed consolidated financial statements of Vencor and
its Consolidated Subsidiaries at __________, __ and for the
[__________ period] [Fiscal Quarter] then ended [and the portion
of the current Fiscal Year then ended], present fairly the
[financial condition, results of operations and] cash flows of
Vencor and its Consolidated Subsidiaries at such date and for
such period[s] subject to normal year-end adjustments./1/
[1.][2.] As of [date of the relevant financial statements], Vencor
was in compliance with the requirements of Article 6 of the
Credit Agreement, as shown on the attached Schedule 1 to this
certificate.
[2.][3.] No Default exists as of the date of this certificate./2/
[3.][4.] Since the date of the Most Recent Audited Financial
Statements, no event has occurred or condition arisen which has
had a Material Adverse Effect which is not reflected in the
financial statements as of [date] and for the [month] [__________
period] [Fiscal Quarter] then ended./3/
- ----------------------
/1/ Include this paragraph when delivering this certificate for the first three
Fiscal Quarters of each Fiscal Year.
/2/ If a Default exists, provide the details thereof and the action that Vencor
is taking or proposes to take with respect thereto.
/3/ If not true, provide explanation.
D-1
<PAGE>
[4.][5.] No change in the GAAP applied in preparing such financial
statements has been made from those applied in preparing the Most
Recent Audited Financial Statements which is material to the
enclosed financial statements./4/
Date: VENCOR OPERATING, INC.
By:___________________________
Name:
Title:
- --------------------
/4/ If not true, provide explanation.
D-2
<PAGE>
SCHEDULE 1
TO THE FINANCIAL
OFFICER'S CERTIFICATE
CALCULATION OF COMPLIANCE WITH FINANCIAL COVENANTS
[Date]
<TABLE>
Monthly Reporting
------------------
<S> <C>
A. CONSOLIDATED EBITDAR [Section 6.01]
Consolidated EBITDAR for period then ended:
1. Consolidated Net Income: $_________
2. Adjustments to Consolidated Net Income: $_________
3. Adjusted Consolidated Net Income (A.1-A.2): $_________
4. Consolidated Interest Expense: $_________
5. Income tax expense: $_________
6. Depreciation, amortization and other similar non-cash
charges: $_________
7. Consolidated Rental Expense: $_________
8. Non-cash compensation expense: $_________
9. Cash paid in respect of non-cash compensation expense
accrued during prior period: $_________
10. Total of A.3 + A.4 + A.5 + A.6 + A.7 + A.8-A.9: $_________
11. Exclusions:
</TABLE>
D-3
<PAGE>
<TABLE>
<S> <C>
(1) extraordinary, unusual, or non-recurring items: $_________
(2) discontinued operations: $_________
(3) effect of accounting changes: $_________
(4) EBITDA of certain Subsidiaries
subject to dividend limitations: $_________
12. Consolidated EBITDAR (A.10-A.11): $_________
13. Minimum Consolidated EBITDAR permitted under Section 6.01: $_________
B. NET AMOUNT OF ELIGIBLE ACCOUNTS [Section 6.04]
1. Net Amount of Eligible Accounts (as of __________, ____): $_________
2. Net Amount of Eligible Accounts: $400,000,000
C. CONSOLIDATED CAPITAL EXPENDITURES [Section 6.06]
1. Consolidated Capital Expenditures from September 1, 1999
through __________, ____: $_________
2. Maximum permitted Consolidated Capital Expenditures for
period from September 1, 1999 through __________, ____: $_________
</TABLE>
D-4
<PAGE>
Weekly Reporting
----------------
<TABLE>
<S> <C>
A. NURSING HOME DAILY CENSUS [Section 6.02]
1. Nursing Home Daily Census (as of __________, ____): _________
[**repeat A.1 as necessary for each Census Measurement Day**]
2. Minimum permitted under Section 6.02: 30,000
B. HOSPITAL DAILY CENSUS [Section 6.03]
1. Hospital Daily Census (as of __________, ____): _________
[**repeat B.1 as necessary for each Census Measurement
Day**]
2. Minimum permitted under Section 6.03: _________
C. COMPLIANCE WITH CASH PLAN [Section 6.05]
1. Cumulative net cash flow (actual) in report delivered
pursuant to Section 5.01(a)(i) of the Credit Agreement for
weekly period ending __________, ____): ---------
2. Cumulative net cash flow set forth in Cash Plan for such period: _________
3. Amount of adverse variance (E.1-E.2, if the absolute
value of E.1 is greater than that of E.2): _________
4. Permitted variance for such period: _________
[**repeat C.1 through C.4 for prior week**]
</TABLE>
D-5
<PAGE>
EXHIBIT E-1
FORM OF OPINION OF SPECIAL DELAWARE COUNSEL
FOR THE BORROWERS AND SUBSIDIARY GUARANTORS
September __, 1999
Morgan Guaranty Trust Company of New York
As Arranger, Collateral Agent and Administrative Agent
60 Wall Street
23rd Floor
New York, NY 10260
Re: Vencor, Inc., et al.
-------------------
Ladies and Gentlemen:
We have acted as Delaware bankruptcy counsel to (i) Vencor, Inc.
("Vencor"), a Delaware corporation and a debtor and debtor-in-possession in a
jointly administered bankruptcy case, Case Nos. ___________________ (the
"Case"), in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"), pending under chapter 11 of the United States Code (the
"Bankruptcy Code"), and (ii) the corporations listed on Attachment I, each of
which is a subsidiary of the Borrower and a debtor and debtor-in-possession in
the Case (each such corporation, a "Subsidiary Borrower" and together with
Vencor, the "Borrowers"), in connection with the transactions contemplated by
the Credit Agreement, dated as of September __, 1999 (the "Credit Agreement"),
among the Borrowers, the several banks, financial institutions and other
entities parties thereto as lenders (collectively, the "Lenders"), and Morgan
Guaranty Trust Company of New York, as arranger, collateral agent and
administrative agent for the Lender. This opinion is being delivered to you
pursuant to the requirements of the Credit Agreement.
In rendering this opinion, we have examined and relied upon copies of
the following documents: the _____________Order, dated _____________, 1999 (the
"Interim Order") executed by Judge _____________ in connection with the Case, a
copy of which is attached hereto as Exhibit A; a certified copy of the docket of
the Clerk of the Bankruptcy Court
<PAGE>
in the Case (the "Docket"), a copy of which is attached hereto as Exhibit B;
and the Credit Agreement. In our examination of documents, we have assumed the
genuineness of the signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies and the legal capacity of natural persons to complete the execution
of documents. As to facts material to our opinion, we have relied without
independent investigation on the above-referenced documents and on the accuracy
as of the date hereof of the matters therein contained. We express no opinion
below as to the existence or effect of any matter entered on the Docket after
the effective time of our review of the Docket (as referenced below). Further,
we express no view whether the terms of the Interim Order are in conformance
with the Bankruptcy Code or other applicable law.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law and federal bankruptcy law, it is our view, based solely
upon our review of the Docket as it existed as of _______:________ .m. on
September 13, 1999, that (i) the Interim Order is in full force and effect, (ii)
no notice of appeal of the Interim Order has been filed with the Bankruptcy
Court, (iii) no motion to amend, reargue, stay, vacate or rescind the Interim
Order has been filed with the Bankruptcy Court and (iv) no order amending,
staying, granting reargument, vacating or rescinding the Interim Order has been
entered by the Bankruptcy Court.
The opinions herein expressed are intended solely for the benefit of
the addressee hereof and the Lenders in connection with the transactions
contemplated by the Credit Agreement and may not be relied upon by any other
person or entity, or for any other purpose, without our prior written consent.
Notwithstanding the forgoing, we hereby consent to reliance hereon by any person
becoming a Lender under Section 11.06 of the Credit Agreement. This opinion
speaks only as of the date hereof and is based on our understandings and
assumptions as to present facts, and our review of the above-referenced
documents and the application of Delaware and federal bankruptcy law as the same
exist on the date hereof, and we undertake no obligation to update or supplement
this opinion after the date hereof for the benefit of any person or entity with
respect to any facts or circumstances that may hereafter come to our attention
or any changes in facts or law that may hereafter occur or take effect.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE>
EXHIBIT E-2
FORM OF OPINION OF SPECIAL COUNSEL
FOR THE BORROWERS AND SUBSIDIARY GUARANTORS
September __, 1999
The Agents and Lenders party on
the date hereof to the Credit Agreement
referred to below
Ladies and Gentlemen:
We have acted as special counsel to Vencor, Inc. ("Vencor") and Vencor
Operating, Inc. ("Vencor Operating"), each a Delaware corporation and a debtor
and debtor-in-possession in jointly administered cases pending under Chapter 11
of Title 11 of the United States Code commenced in the United States Bankruptcy
Court for the District of Delaware. This opinion letter is being furnished
pursuant to Section 3.01(i) of the Debtor-in-Possession Credit Agreement dated
as of September __, 1999 (the "Credit Agreement") among Vencor, Vencor
Operating, the other subsidiaries of Vencor party thereto, the financial
institutions listed therein as Lenders ("Lenders"), and Morgan Guaranty Trust
Company of New York, as arranger, administrative agent and collateral agent for
the Lenders (in such capacity, the "Agent").
In arriving at the opinion expressed below, we have reviewed the
following documents:
(a) the Certificate of Incorporation and Bylaws of each of Vencor and
Vencor Operating, certified by the Secretary of State of the State of Delaware
and the corporate assistant secretary (the "Corporate Secretary") of Vencor and
Vencor Operating, respectively;
(b) a certificate of good standing received from the Office of the
Secretary of State of the State of Delaware for each of Vencor and Vencor
Operating (each a "Certificate of Good Standing");
<PAGE>
(c) the resolutions adopted by the Board of Directors of Vencor at a
special meeting thereof on ___________, 1999, certified by the Corporate
Secretary of Vencor in the form attached hereto as Exhibit A; and
(d) the resolutions adopted by the Board of Directors of Vencor
Operating by unanimous written consent on _________, 1999, certified by the
Corporate Secretary of Vencor Operating in the form attached hereto as
Exhibit B.
In addition, we have reviewed the originals or copies certified or
otherwise identified to our satisfaction of all such corporate records of each
of Vencor and Vencor Operating and such other instruments and other certificates
of public officials, officers and representatives of each of Vencor and Vencor
Operating and such other persons, and we have made such investigations of law as
we have deemed appropriate as a basis for the opinion expressed below.
In rendering the opinion expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. In addition, we have
assumed and have not verified the accuracy as to factual matters of each
document we have reviewed.
Based on the foregoing, and subject to the further assumptions and
qualifications set forth below, it is our opinion that the filing of a voluntary
petition for relief under the provisions of Chapter 11 of Title 11 of United
States Code by each of Vencor and Vencor Operating has been duly authorized by
all necessary corporate action of Vencor and Vencor Operating, respectively.
Insofar as the foregoing opinion relates to the valid existence and
good standing of Vencor and Vencor Operating, it is based solely on the
Certificates of the Good Standing and a telephonic confirmation from the
Secretary of State of the State of Delaware on the date hereof. The foregoing
opinion is limited to the General Corporation Law of the State of Delaware.
We are furnishing this opinion letter to you solely for your benefit
in connection with the Credit Agreement. This opinion letter is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By______________________________________,
a Partner
<PAGE>
Exhibit A
OFFICER'S CERTIFICATE
I, Joseph L. Landenwich, the Assistant Secretary of Vencor, Inc.
("Vencor"), hereby certify the following to Cleary, Gottlieb, Steen & Hamilton
("CGS&H"), in connection with the delivery of an opinion by CGS&H pursuant to
Section 3.01(I) of the Debtor-in-Possession Credit Agreement (the "Credit
Agreement"), dated as of September ___, 1999, by and among each of the Borrowers
(as defined therein), the several banks and other financial institutions from
time to time party thereto (collectively, the "Lenders") and Morgan Guaranty
Trust Company of New York, as arranger, administrative agent and collateral
agent thereunder (in such capacity, the ("Agent"). (Capitalized terms used
herein but not defined herein shall have the meaning set forth in the Credit
Agreement.)
1. A true and complete copy of the Certificate of Incorporation and
Bylaws of Vencor (including any and all amendments thereto), as the
same are in full force and effect on the date hereof, are attached
hereto as Attachment A.
2. A true and complete copy of the resolution (the "Resolutions") adopted
by the Board of Directors of Vencor (the "Board") at a special meeting
thereof on September 10, 1999 is attached hereto as Attachment B.
3. The Resolutions were duly adopted by a majority of the directors
present at a special meeting called by the Chairman for which proper
notice was given and at which a quorum was present, and which in all
other respects was held and conducted in accordance with the
provisions of the Certificate of Incorporation, the Bylaws and the
General Corporation Law of the State of Delaware. The Resolutions are
in full force and effect on the date hereof and have not been revoked
or rescinded, in whole or in part, by any subsequent action of the
Board.
4. Each person who was present and voted as a director at the meeting
referred to in paragraph 3 above is a member of the Board, duly
elected and in good standing in accordance with the provisions of the
Certificate of Incorporation, the Bylaws and the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this certificate this __ day of
September, 1999.
_________________________________
Name: Joseph L. Landenwich
Title: Assistant Secretary
I, M. Suzanne Riedman, General Counsel of Vencor, Inc., do hereby certify
that Joseph L.. Landenwich has been duly elected or appointed and has been duly
qualified as, and on this day is, Assistant Secretary of Vencor, Inc., and that
the signature above is his genuine signature.
_________________________________
Name: M. Suzanne Riedman
Title: General Counsel
<PAGE>
Exhibit B
OFFICER'S CERTIFICATE
I, Joseph L. Landenwich, the Assistant Secretary of Vencor, Inc. ("Vencor
Operating"), hereby certify the following to Cleary, Gottlieb, Steen & Hamilton
("CGS&H"), in connection with the delivery of an opinion by CGS&H pursuant to
Section 3.01(I) of the Debtor-in-Possession Credit Agreement (the "Credit
Agreement"), dated as of September ___, 1999, by and among each of the Borrowers
(as defined therein), the several banks and other financial institutions from
time to time party thereto (collectively, the "Lenders") and Morgan Guaranty
Trust Company of New York, as arranger, administrative agent and collateral
agent thereunder (in such capacity, the ("Agent"). (Capitalized terms used
herein but not defined herein shall have the meaning set forth in the Credit
Agreement.)
1. A true and complete copy of the Certificate of Incorporation and
Bylaws of Vencor Operating (including any and all amendments thereto),
as the same are in full force and effect on the date hereof, are
attached hereto as Attachment A.
2. A true and complete copy of the resolution (the "Resolutions") adopted
by the Board of Directors of Vencor (the "Board") at a special meeting
thereof on September 10, 1999 by unanimous written consent (the
"Unanimous Written Consent") is attached hereto as Attachment B. The
Resolutions are in full force and effect on the date hereof and have
not been revoked or rescinded, in whole or in part, by any subsequent
action of the Board. The Unanimous Written Consent has been filed with
the minutes of the proceedings of the Board in accordance with the
provisions of the Certificate of Incorporation, the Bylaws and the
General Corporation Law of the State of Delaware.
3. Each person who executed the Unanimous Written Consent is a member of
the Board, duly elected and in good standing in accordance with the
provisions of the Certificate of Incorporation, the Bylaws and the
General Corporation Law of the State of Delaware. Such persons
constitute all members of the Board.
IN WITNESS WHEREOF, I have signed this certificate this __ day of
September, 1999.
_________________________________
Name: Joseph L. Landenwich
Title: Assistant Secretary
I, M. Suzanne Riedman, General Counsel of Vencor, Inc., do hereby certify
that Joseph L.. Landenwich has been duly elected or appointed and has been duly
qualified as, and on this day is, Assistant Secretary of Vencor, Inc., and that
the signature above is his genuine signature.
_________________________________
Name: M. Suzanne Riedman
Title: General Counsel
<PAGE>
EXHIBIT F-1
NOTICE OF BORROWING
-------------------
TO: Morgan Guaranty Trust Company of New York, as Administrative Agent
RE: Debtor-In-Possession Credit Agreement dated as of September 13, 1999
(the "Credit Agreement") among Vencor, Inc., each of its Subsidiaries
party thereto, the Lenders, the LC Issuing Banks and Morgan Guaranty
Trust Company of New York, as Arranger, Collateral Agent and
Administrative Agent
Pursuant to Section 2.02 of the Credit Agreement, we hereby give
notice requesting the following Borrowing:
Date of Borrowing: ____________________________________
Principal Amount: Tranche A Loans: $___________
Tranche B Loans: $___________
Terms used herein have the meanings assigned to them in the Credit
Agreement.
The Borrowers certify that:
(i) the Borrowers believe that the assumptions on which the Cash
Plan is based are reasonable and that the Cash Plan, taken as a whole, provides
reasonable estimations of future performance, subject to the uncertainties and
approximations inherent in any projections, and the proceeds of the Loans
requested hereby shall be applied in accordance with, and for the purposes
identified in, the Cash Plan;
(ii) the limitations on borrowing set forth in Section 2.01(c) of the
Credit Agreement have been complied with [and the limitations on Tranche B Loan
Borrowings prescribed by Supermajority Lenders pursuant to Section 2.01(b) of
the Credit Agreement have been complied with];/1/
(iii) no Default has occurred and is continuing immediately before
and after giving effect to the Borrowing contemplated hereby; and
_____________________
/1/ Include for all Borrowings after the Tranche B Commencement Date.
<PAGE>
(iv) each of the representations made by any of the Borrowers or the
Subsidiary Guarantors in or pursuant to any Financing Document to which it is a
party are true on and as of the date hereof as if made on the date hereof.
Date:
VENCOR OPERATING, INC.,
for itself and on behalf of the Borrowers
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT F-2
LETTER OF CREDIT REQUEST
------------------------
TO: Morgan Guaranty Trust Company of New York, as Administrative Agent
RE: Debtor-In-Possession Credit Agreement dated as of September 13, 1999
(the "Credit Agreement") among Vencor, Inc., each of its Subsidiaries
party thereto, the Lenders, the LC Issuing Banks and Morgan Guaranty
Trust Company of New York, as Arranger, Collateral Agent and
Administrative Agent
Pursuant to Section 2.05 of the Credit Agreement, we hereby give
notice requesting the issuance of a Letter of Credit as follows:
1. LC Issuing Bank: ________________________________
---------------
2. Date of issuance of Letter of Credit: ________________, ________
------------------------------------
3. Face amount of Letter of Credit: $________________________
-------------------------------
4. Expiration date of Letter of Credit: ________________, ________
-----------------------------------
5. Name and address of beneficiary:
-------------------------------
___________________________________________
___________________________________________
___________________________________________
___________________________________________
6. Attached hereto is:
------------------
[_]a. the verbatim text of such proposed Letter of Credit
[_]b. a description of the proposed terms and conditions of such
Letter of Credit, including a precise description of any documents to
be presented by the beneficiary which, if presented by the beneficiary
prior to the expiration date of such Letter of Credit, would require
the LC Issuing Lender to make payment under such Letter of Credit, and
a description of the nature of the transactions proposed to be
supported thereby.
The Borrowers certify that:
(i) the Borrowers believe that the assumptions on which the Cash Plan
is based are reasonable and that the Cash Plan, taken as a whole, provides
reasonable estimations of future performance, subject to the uncertainties and
approximations inherent in any projections, and the proceeds of the Letter of
Credit requested hereby, if any, shall be applied in accordance with, and for
the purposes identified in, the Cash Plan;
<PAGE>
(ii) the limitations on borrowing set forth in Section 2.01(c) of the
Credit Agreement have been complied with [and the limitations on Tranche B Loan
Borrowings prescribed by Supermajority Lenders pursuant to Section 2.01(b) of
the Credit Agreement have been complied with];/1/
(iii) no Default has occurred and is continuing immediately before
and after giving effect to the issuance of the proposed Letter of Credit;
(iv) each of the representations made by any of the Borrowers or the
Subsidiary Guarantors in or pursuant to any Financing Document to which it is a
party are true on and as of the date hereof as if made on the date hereof; and
(v) after giving effect to the issuance of the proposed Letter of
Credit, the Aggregate LC Exposure shall not exceed $15,000,000.
Date:
VENCOR OPERATING, INC.,
as agent and attorney-in-fact for the Borrowers
By: __________________________
Name:
Title:
___________________________
/1/ Include for all Borrowings after the Tranche B Commencement Date.
<PAGE>
EXHIBIT G
NOTICE OF PREPAYMENT
--------------------
TO: Morgan Guaranty Trust Company of New York, as Administrative Agent
RE: Debtor-In-Possession Credit Agreement dated as of September 13, 1999
(the "Credit Agreement") among Vencor, Inc., each of its Subsidiaries
party thereto, the Lenders, the LC Issuing Banks and Morgan Guaranty
Trust Company of New York, as Arranger, Collateral Agent and
Administrative Agent
Pursuant to Section 2.09 of the Credit Agreement, we hereby give notice of
the following prepayment:
Date of Prepayment:
Principal Amount
to be Repaid: Tranche A Loans: $___________
Tranche B Loans: $___________
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Date:
VENCOR OPERATING, INC.,
as agent and attorney-in-fact for the Borrowers
By:______________________________________________
Name:
Title:
G-1
<PAGE>
EXHIBIT H
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and
between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to that certain Debtor-In-Possession Credit Agreement
described in the Schedule of Terms (said Debtor-In-Possession Credit Agreement,
as amended, supplemented or otherwise modified to the date hereof and as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
-------------------------
(a) Effective upon the Settlement Date specified in Item 4 of the
Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Financing Documents with
respect to Assignor's Tranche A Commitment and Tranche B Commitment and
outstanding Loans, if any, which represents, as of the Settlement Date, the
percentage interest specified in Item 3 of the Schedule of Terms of all rights
and obligations of Lenders arising under the Credit Agreement and the other
Financing Documents with respect to the Commitments and any outstanding Loans
(the "Assigned Share"). Without limiting the generality of the foregoing, the
parties hereto hereby expressly acknowledge and agree that any assignment of all
or any portion of Assignor's rights and obligations relating to Assignor's
Tranche A Commitment and Tranche B Commitment shall include (i) in the event
Assignor is an LC Issuing Bank with respect to any outstanding Letters of Credit
(any such Letters of Credit being "Assignor Letters of Credit"), the sale to
Assignee of a participation in the Assignor Letters of Credit and any drawings
thereunder as contemplated by subsection 2.05(a) of the Credit Agreement and
(ii) the sale to Assignee of a ratable portion of any participations previously
purchased by Assignor pursuant to said subsection 2.05(a) with respect to any
Letters of Credit other than the Assignor Letters of Credit.
(b) In consideration of the assignment described above, Assignee
hereby agrees to pay to Assignor, on the Settlement Date, the principal amount
of any outstanding Loans included within the Assigned Share, such payment to be
made by wire transfer of immediately available funds in accordance with the
applicable payment instructions set forth in Item 5 of the Schedule of Terms.
H-1
<PAGE>
(c) Assignor hereby represents and warrants that Item 3 of the
Schedule of Terms correctly sets forth the amount of the Tranche A Commitment,
the Tranche B Commitment and the Percentage of Assignee after giving effect to
the assignment and assumption described above.
(d) Assignor and Assignee hereby agree that, upon giving effect to
the assignment and assumption described above, (i) Assignee shall be a party to
the Credit Agreement and shall have all of the rights and obligations under the
Financing Documents, and shall be deemed to have made all of the covenants and
agreements contained in the Financing Documents, arising out of or otherwise
related to the Assigned Share, and (ii) Assignor shall be absolutely released
from any of such obligations, covenants and agreements assumed or made by
Assignee in respect of the Assigned Share. Assignee hereby acknowledges and
agrees that the agreement set forth in this Section 1(d) is expressly made for
the benefit of Borrowers, Administrative Agent, Assignor and the other Lenders
and their respective successors and permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitments and the Percentage of
Assignee set forth in Item 3 of the Schedule of Terms or on the interest of
Assignee in any outstanding Loans corresponding thereto, and (iii) from and
after the Settlement Date, Agent shall make all payments under the Credit
Agreement in respect of the Assigned Share (including without limitation all
payments of principal and accrued but unpaid interest, commitment fees and
letter of credit fees with respect thereto) (A) in the case of any such interest
and fees that shall have accrued prior to the Settlement Date, to Assignor, and
(B) in all other cases, to Assignee; provided that Assignor and Assignee shall
--------
make payments directly to each other to the extent necessary to effect any
appropriate adjustments in any amounts distributed to Assignor and/or Assignee
by Agent under the Financing Documents in respect of the Assigned Share in the
event that, for any reason whatsoever, the payment of consideration contemplated
by Section 1(b) occurs on a date other than the Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
--------------------------------------------------
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Financing Documents or for any representations,
warranties, recitals or statements made therein or made in any written or oral
statements or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by Assignor to Assignee or
by or on behalf of Company or any of its Subsidiaries to Assignor or Assignee in
connection with the Financing Documents and the transactions contemplated
thereby or for the financial condition or business affairs of Company or any
other Person liable for the
H-2
<PAGE>
payment of any Obligations, nor shall Assignor be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Financing Documents
or as to the use of the proceeds of the Loans or the use of the Letters of
Credit or as to the existence or possible existence of any Event of Default or
Potential Event of Default.
(c) Assignee represents and warrants that it is an Eligible Assignee;
that it has experience and expertise in the making of loans such as the Loans;
that it has acquired the Assigned Share for its own account and not with any
present intention of selling all or any portion of such interest; and that it
has received, reviewed and approved a copy of the Credit Agreement (including
all Exhibits and Schedules thereto).
(d) Assignee represents and warrants that it has received from
Assignor such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the other
party hereto that it has full power and authority to enter into this Agreement
and to perform its obligations hereunder in accordance with the provisions
hereof, that this Agreement has been duly authorized, executed and delivered by
such party and that this Agreement constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 3. Miscellaneous.
-------------
(a) Each of Assignor and Assignee hereby agrees from time to time,
upon request of the other such party hereto, to take such additional actions and
to execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Agreement) against whom enforcement of such change,
waiver, discharge or termination is sought.
H-3
<PAGE>
(c) Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 11.01 of the
Credit Agreement.
(d) In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW
AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the
"Effective Date") upon which all of the following conditions are satisfied: (i)
the execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
receipt by Administrative Agent of the processing and recordation fee referred
to in subsection 11.06(c) of the Credit Agreement, (iii) in the event Assignee
is organized under the laws of a jurisdiction outside the United States, the
delivery by Assignee to Administrative Agent of such forms, certificates or
other evidence with respect to United States federal income tax withholding
matters as Assignee may be required to deliver to Administrative Agent pursuant
to said subsection 11.06(c), (iv) the execution of a counterpart hereof by each
LC Issuing Bank as evidence of its consent hereto and by Administrative Agent as
evidence of its consent to and acceptance hereof, (v) the receipt by
Administrative Agent of originals or telefacsimiles of the
H-4
<PAGE>
counterparts described above and authorization of delivery thereof, and (vi) the
recordation by Administrative Agent in the Register of the pertinent information
regarding the assignment effected hereby in accordance with subsection 11.06(c)
of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
[Remainder of page intentionally left blank]
H-5
<PAGE>
SCHEDULE OF TERMS
1. Borrower: Vencor, Inc., Vencor Operating, Inc. and each of the
--------
Subsidiaries of Vencor, Inc. party to the Credit Agreement referred to
below.
2. Name and Date of Credit Agreement: Debtor-In-Possession Credit Agreement
---------------------------------
dated as of September 13, 1999 by and among Vencor, Inc. and each of its
subsidiaries party thereto, the Lenders, the LC Issuing Banks, and Morgan
Guaranty Trust Company of New York, as Arranger, Collateral Agent and
Administrative Agent.
3. Amounts:
-------
Tranche Tranche
A Loans B Loans
(a) Aggregate Commitments of all Lenders: $_______ $________
(b) Assigned Share/Percentage: _______% ________%
(c) Amount of Assigned Share of Commitments: $_______ $________
4. Settlement Date: ____________, ____
---------------
5. Payment Instructions:
--------------------
ASSIGNOR: ASSIGNEE:
__________________________ _____________________________
__________________________ _____________________________
__________________________ _____________________________
Attention: _______________ Attention: __________________
Reference: _______________ Reference: __________________
6. Notice Addresses:
----------------
ASSIGNOR: ASSIGNEE:
__________________________ _____________________________
__________________________ _____________________________
__________________________ _____________________________
__________________________ _____________________________
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<PAGE>
7. Signatures:
----------
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By: _______________________ By: _________________________
Title: ____________________ Title: ______________________
Consented to and accepted in accordance with
subsection 11.06(c) of the Credit Agreement
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as LC
Issuing Bank and as Administrative Agent
By: _______________________
Title: ____________________
Consented to in accordance with
Section 11.06(c) of the Credit Agreement:
[OTHER LC ISSUING BANKS]
By: _______________________
Title: ____________________
H-7
<PAGE>
EXHIBIT I
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re )
) Case Nos. 99-______( )
Vencor, Inc., et al., ) through 99-______( )
)
) Chapter 11
)
Debtors and Debtors in Possession ) Jointly Administered
INTERIM ORDER (i) AUTHORIZING POSTPETITION
FINANCING PURSUANT TO 11 U.S.C. (S) 364,
(ii) GRANTING SENIOR LIENS AND SUPERPRIORITY
ADMINISTRATIVE EXPENSE CLAIM STATUS PURSUANT TO
11 U.S.C. (S)(S) 105, 503(b), 507 AND 364, (iii) AUTHORIZING USE
OF CASH COLLATERAL PURSUANT TO 11 U.S.C. (S) 363,
(iv) GRANTING ADEQUATE PROTECTION PURSUANT TO
11 U.S.C. (S)(S) 363 AND 364, AND (v) SCHEDULING A FINAL
HEARING PURSUANT TO BANKRUPTCY RULE 4001(b) and (c)
---------------------------------------------------
Upon the motion of the above-captioned debtors and debtors-in-
possession, Vencor, Inc., et al. (jointly and severally, the "Debtors")1 dated
September 13, 1999 (the "Motion") for entry of an order, pursuant to (S)(S) 105,
363, 364(c) and (d), 503(b) and 507 of the United States Bankruptcy Code, 11
U.S.C. (S) 101 et seq. (the "Bankruptcy Code")2, and Rules 2002, 4001(b), (c)
and (d) and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules"):
(i) authorizing the Debtors to obtain postpetition financing in the
form of loans and other financial accommodations, including the issuance of
letters of credit, pursuant to that certain Debtor-in-Possession Credit
Agreement substantially in the form annexed to the Motion (the "DIP Credit
Agreement") by and among the Debtors, as joint and several borrowers, Morgan
Guaranty Trust Company of New York, as Arranger, Collateral Agent and
Administrative Agent (the "DIP Agent"), the Lenders signatory thereto and the LC
Issuing Banks party thereto (collectively, the "DIP Lenders"), in an aggregate
principal amount not to exceed $100 million, in two tranches of $75 million and
$25 million, respectively (the "DIP Financing");
________________________
1 The Debtors are listed on Schedule A attached hereto.
2 All section and rule references are to the Bankruptcy Code and Bankruptcy
Rules, respectively, unless otherwise indicated.
<PAGE>
(ii) authorizing the Debtors to cause Caribbean Behavioral Health
Systems, Inc., a certain non-Debtor Subsidiary of the Debtors (the "DIP
Guarantor") to guarantee the Obligations arising under the DIP Credit Agreement
pursuant to the Subsidiary Guaranty Agreement in the form annexed to the DIP
Credit Agreement (the "DIP Guaranty"), and to grant to the DIP Agent, for the
benefit of the DIP Lenders, pursuant to the terms of the Security Agreement
among the Debtors, the DIP Guarantor and the DIP Agent of even date with the DIP
Credit Agreement in the form annexed to the DIP Credit Agreement (the "DIP
Security Agreement"), security interests in and liens upon all of the assets of
such DIP Guarantor (except to the extent, if any, specifically provided in the
DIP Security Agreement) as security therefor, subject only to valid, perfected
and non-voidable liens and security interests existing as of the Petition Date,
as defined below (the DIP Credit Agreement, the DIP Guaranty, the DIP Security
Agreement, and all other agreements, instruments and documents executed and
delivered in connection therewith, collectively, the "DIP Financing Documents")
3;
(iii) granting to DIP Agent for the benefit of DIP Lenders (A)
pursuant to (S) 364(c)(2), first priority, valid, perfected and non-voidable
security interests in and liens upon all unencumbered assets of the estates of
each of the Debtors, including (without limitation) all real, personal or mixed
property of each of the Debtors (including leasehold interests and capital
stock) at any time existing or arising, wherever located, and all proceeds and
products thereof (but excluding causes of action of the Debtors' estates under
(S)(S) 544, 545, 547, 548 and 550 and any other asset specifically excluded from
such security interests and liens pursuant to the terms of the DIP Security
Agreement), (B) pursuant to (S) 364(d), valid, perfected and non-voidable
security interests in and liens upon all assets of each of the Debtors as of the
Petition Date (the "Prepetition Collateral"), having priority over the valid,
perfected and non-voidable liens and security interests in favor of the
Prepetition Agent (as defined in the Motion) for the benefit of the Prepetition
Secured Parties (as defined in the Motion) with respect to the Prepetition
Collateral and (C) pursuant to (S) 364(c)(3), valid, perfected and non-voidable
security interests in and liens upon the Prepetition Collateral, subject (to the
extent permitted by the DIP Financing Documents) only to the Petition Date Liens
(as defined below) (the collateral described in subparagraph (ii) and clauses
(A), (B) and (C) of this subparagraph (iii) being collectively referred to as
the "DIP Collateral"), all of the DIP Collateral to secure the loans, advances
and all Obligations at any time owing or to be performed by the Debtors pursuant
to the DIP Credit Agreement and the other DIP Financing Documents, and subject
only to the Carve-Out (as defined below);
(iv) pursuant to (S) 364(c)(1), granting superpriority administrative
claim status for such Obligations, subject only to the Carve-Out;
(v) pursuant to (S) 363(c), authorizing the Debtors to use Cash
Collateral (as defined in the Motion) of the Prepetition Agent and the
Prepetition Secured Parties;
(vi) pursuant to (S)(S) 361, 363(e) and 364(d), providing adequate
protection to the Prepetition Agent and the Prepetition Secured Parties with
respect to any diminution in the value of Prepetition Agent's or the Prepetition
Secured Parties' interests in the Prepetition
___________________________
3 Capitalized terms used herein and not otherwise defined have the meaning
assigned to such terms in the DIP Financing Documents.
2
<PAGE>
Collateral resulting from (A) the priming liens and security interests to be
granted herein pursuant to (S) 364(d) to the DIP Agent for the benefit of the
DIP Lenders to secure the Obligations, (B) the Debtors' use of Cash Collateral,
(C) the use, sale or lease of the Prepetition Collateral (other than Cash
Collateral) and (D) the imposition of the automatic stay pursuant to (S) 362(a);
and
(vii) scheduling a final hearing (the "Final Hearing") to consider
entry of a final order substantially in the form annexed to the DIP Credit
Agreement and acceptable to the DIP Agent (the "Final Order") authorizing the
above-matters in full;
and such Motion also requesting that this Court hold an immediate emergency
hearing (the "Emergency Hearing") on the Motion to consider entry of this
interim order (the "Interim Order") pursuant to Rule 4001(b) and (c) authorizing
the Debtors to use Cash Collateral of the Prepetition Agent and the Prepetition
Secured Parties and borrow from the DIP Lenders an amount not to exceed $45
million under the DIP Credit Agreement for a period of no more than twenty-five
days until the Final Hearing, upon the terms and conditions set forth in the DIP
Credit Agreement and the other DIP Financing Documents, pending the Final
Hearing; and it further appearing, based upon the record presented to this
Court, that:
a. The ability of the Debtors to continue in business so that they
can attempt to confirm a plan of reorganization under the Bankruptcy Code
depends entirely upon obtaining the relief requested in the Motion and the
Debtors will suffer immediate and irreparable injury if such relief is not
granted; and
b. Notice of the Motion and Emergency Hearing has been given to
(i) the United States Trustee, (ii) the twenty largest unsecured creditors of
the Debtors, and (iii) the Prepetition Agent and the Prepetition Secured
Parties;
NOW, THEREFORE, upon the entire record of the Emergency Hearing held
before this Court with respect to the Motion on September __, 1999, and upon the
presentations of counsel made at the Emergency Hearing; and this Court having
found good and sufficient cause therefor, it is hereby FOUND that:
A. On September 13, 1999 (the "Petition Date"), the Debtors filed
voluntary chapter 11 petitions under the Bankruptcy Code. Each chapter 11
petition filed by a Debtor commencing its Chapter 11 Case was duly authorized by
all requisite actions of the board of directors, shareholders, general and
limited partners, or managing members, as applicable, of such Debtor, in
accordance with applicable law and the Organizational Documents of such
3
<PAGE>
Debtor. No trustee, examiner or statutory committee of creditors has been
appointed as of the date of this Order. Pursuant to (S)(S) 1107(a) and 1108, the
Debtors are authorized to operate their business as debtors-in-possession.
B. This Court has jurisdiction over these Chapter 11 Cases and the
Motion pursuant to 28 U.S.C. (S)(S) 157 and 1334. Consideration of the Motion
constitutes a core proceeding as defined in 28 U.S.C. (S) 157(b)(2).
C. The Debtors do not have sufficient funds to meet expenses
necessary for the operation of their business and have requested that they be
authorized to use Cash Collateral and that the DIP Agent and the DIP Lenders
extend loans and other financial accommodations to the Debtors pursuant to the
terms and conditions set forth in the DIP Financing Documents.
D. The Debtors are unable to obtain the financing necessary for
the operation of their business either (i) on an unsecured basis under (S)
503(b)(1), (ii) pursuant to (S)(S) 364(a) or 364(b), (iii) solely on a junior
secured basis under (S) 364(c)(3), or (iv) on any other terms or conditions more
favorable to the Debtors than the terms and conditions set forth in the DIP
Financing Documents.
E. The DIP Lenders (who are certain of the Prepetition Secured
Parties) have agreed to provide the DIP Financing on the terms and conditions
set forth in the DIP Financing Documents provided that the Court enters an order
satisfactory to the DIP Agent and the DIP Lenders approving the DIP Financing
Documents and granting such claims and priorities to or for the benefit of the
DIP Agent and the DIP Lenders as are set forth herein, in the DIP Credit
Agreement and in the other DIP Financing Documents with respect to all
Obligations.
F. The Debtors will receive and benefit from the loans and other
financial accommodations to be provided by the DIP Agent and the DIP Lenders
under the DIP Financing Documents. The loans and other financial accommodations
provided under the DIP Financing
4
<PAGE>
Documents are necessary to fund the business of the Debtors and will contribute
to payment of the actual and necessary costs and expenses of preserving their
estates.
G. The Debtors admit that they are indebted to the Prepetition
Agent and the Prepetition Secured Parties under the Prepetition Credit Agreement
(as defined in the Motion) without defense, counterclaim or offset of any kind,
and that as of the Petition Date, the Debtors were liable to the Prepetition
Agent and the Prepetition Secured Parties in the aggregate unpaid principal
amount plus letter of credit exposure outstanding of approximately
$520,176,612.89, plus accrued interest, fees and other charges thereunder.
H. The Debtors further admit that the indebtedness owed to the
Prepetition Agent and the Prepetition Secured Parties under the Prepetition
Credit Agreement (the "Prepetition Obligations") is without defense, offset or
counterclaim, and is secured by valid, perfected, enforceable and non-voidable
first priority liens and security interests granted by the Debtors to
Prepetition Agent, for the benefit of the Prepetition Secured Parties, in the
Prepetition Collateral pursuant to the Prepetition Collateral Documents (as
defined in the Motion), subject only to liens permitted therein. Substantially
all of the Debtors' cash on hand and proceeds of Prepetition Collateral received
after the Petition Date constitute the Cash Collateral of the Prepetition Agent
and Prepetition Secured Parties.
I. The Prepetition Agent and Prepetition Secured Parties are
entitled, pursuant to (S)(S) 361, 363(e) and 364(c) and (d), to adequate
protection of their interests in the Prepetition Collateral in order to protect
the Prepetition Agent and the Prepetition Secured Parties from any diminution in
the value of the Prepetition Collateral resulting from (i) the Debtors' use of
Cash Collateral, (ii) the priming liens and security interests granted to the
DIP Agent for the benefit of the DIP Lenders pursuant to this Order, the DIP
Credit Agreement and
5
<PAGE>
the other DIP Financing Documents, (iii) the Debtors' use, sale or lease of the
Prepetition Collateral other than Cash Collateral, and (iv) the imposition of
the automatic stay.
J. The Debtors admit that, since at least January 1999, they have
caused or permitted to occur certain defaults and events of default under the
Prepetition Credit Agreement, as to which defaults and events of default the
Prepetition Secured Parties have exercised forbearance from pursuing their
remedies in order to permit negotiation of a plan for the orderly commencement
and early conclusion of the Chapter 11 Cases.
K. The Debtors do not have sufficient available sources of working
capital from the Prepetition Secured Parties' Cash Collateral or other financing
to carry on the operation of their business without the DIP Financing. The
ability of the Debtors to provide patient care, maintain business relationships
with their vendors and suppliers, purchase new inventory, pay necessary
employees and otherwise finance their operations is essential to the Debtors'
continued viability. In addition, the Debtors' critical need for financing is
immediate. In the absence of access to Cash Collateral and the DIP Financing the
continued operation of the Debtors' business would not be possible, a
precipitate liquidation would ensue, and immediate and irreparable harm to the
Debtors' patients, the Debtors' unsecured creditors, and the Debtors' estates
would occur.
L. The ability of the Debtors to continue in business so they can
attempt to reorganize under the Bankruptcy Code depends on obtaining the relief
sought in the Motion.
M. Entry of this Interim Order on an emergency basis is necessary
to avoid immediate and irreparable harm to the estates pending the Final
Hearing.
N. Based on the record presented to this Court by the Debtors at
the Emergency Hearing, the terms of the DIP Financing are fair and reasonable,
reflect the Debtors'
6
<PAGE>
exercise of prudent business judgment consistent with their fiduciary duties,
and, when the initial Loans are funded, will be supported by reasonably
equivalent value and fair consideration.
O. Based on the record before the Court, the financing
arrangements contemplated by the DIP Credit Agreement and the other DIP
Financing Documents are the product of an arm's length negotiation and are
entered into by the DIP Agent and the DIP Lenders in good faith, as the term
"good faith" is used in (S) 364(e), and such arrangements and the transactions
contemplated by the DIP Credit Agreement and the other DIP Financing Documents
do not provide the DIP Agent or DIP Lenders with sufficient control over the
Debtors so as to subject the DIP Agent or the DIP Lenders to any liability
(including, without limitation, environmental liability as an "owner",
"operator" or "responsible person" as those terms are used in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorizations Act of 1986) in connection with
the management of any of the Debtors' businesses or properties.
P. The Emergency Hearing was held pursuant to Rule 4001(b)(2) and
(c)(2), and notice of the Motion has been given pursuant to (S)(S) 102(l),
363(c) and 364(c) and (d), and Rules 2002 and 4001(b) and (c), to the parties
set forth above.
Based upon the foregoing findings and conclusions, and upon the record
made before this Court, and good and sufficient cause appearing therefor,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:
1. The Motion is granted and the Debtors are hereby authorized to
execute and deliver the DIP Financing Documents, subject to the terms and
conditions hereinafter set forth; provided, however, that the issue of the right
--------
and remedy of the DIP Agent, after delivery of an Enforcement Notice, to collect
all amounts owing to any of the Debtors by the United States or any department
or agency thereof (including the Health Care Finance Administration)
7
<PAGE>
or any fiscal intermediary (collectively, the "U.S.") directly from the U.S.,
shall be reserved for determination at the Final Hearing.
2. Debtors are authorized to: (a) pending the Final Hearing,
obtain loans and request the issuance of letters of credit pursuant to the terms
of the DIP Financing Documents in an aggregate amount not to exceed $45 million;
and (b) use Cash Collateral in the operation of the Debtors' business, in each
case in a manner consistent with this Order, the DIP Credit Agreement
(including, without limitation, the prohibitions set forth in section 5.06
thereof), the other DIP Financing Documents and the Cash Plan.
3. The Debtors are hereby authorized and directed to (a) execute
and deliver the DIP Financing Documents and all other documents necessary or
desirable to implement the DIP Financing (through one or more officers
designated by them), (b) grant the security interests and liens contemplated
hereby and thereby (c) effect all transactions and take any actions provided for
in or contemplated by the DIP Financing Documents or deemed necessary by the DIP
Agent or the DIP Lenders to effectuate the terms and conditions of the DIP
Financing Documents and this Order, including, without limitation, the payment
of any and all fees, costs, charges, commissions and expenses, including
reasonable counsel fees, payable under the DIP Financing Documents or this
Order, and (d) comply with all provisions of the DIP Financing Documents,
including, without limitation, the payment and satisfaction in full of all
Obligations when due in accordance with the terms of the DIP Financing
Documents; provided, however, that the issue of the right and remedy of the DIP
--------
Agent, after delivery of an Enforcement Notice, to collect all amounts owing to
any of the Debtors by the U.S. directly from the U.S., shall be reserved for
determination at the Final Hearing.
4. The Obligations shall be entitled to the following protections,
security interests, liens and priorities in favor of the DIP Agent and the DIP
Lenders, to secure full and
8
<PAGE>
complete compliance with, and timely payment of, all Obligations at any time
owing or to be performed by the Debtors pursuant to the DIP Credit Agreement and
the other DIP Financing Documents, subject only to the Carve-Out (as defined
below):
(a) pursuant to (S) 364(c)(2), first priority, valid, perfected and
non-voidable security interests in and liens upon all unencumbered assets of the
estates of each of the Debtors including (without limitation) all real, personal
or mixed property of each of the Debtors (including leasehold interests and
capital stock) at any time existing or arising, wherever located, and all
proceeds and products thereof (but excluding causes of action of the Debtors'
estates under (S)(S) 544, 545, 547, 548 and 550, and any other asset
specifically excluded from such security interests and liens pursuant to the
terms of the DIP Security Agreement);
(b) pursuant to (S) 364(d), valid, perfected and non-voidable
security interests in and liens upon all assets of each of the Debtors which, as
of the Petition Date, constituted the Prepetition Collateral of the Prepetition
Agent and the Prepetition Secured Parties, having priority over and senior to
the security interests and liens of the Prepetition Agent and the Prepetition
Secured Parties; and
(c) pursuant to (S) 364(c)(3), valid, perfected and non-voidable
security interests in and liens upon all assets of each of the Debtors that
were, as of the Petition Date, subject (to the extent permitted by the DIP
Financing Documents) only to valid, perfected and non-voidable liens and
security interests in favor of any party other than the Prepetition Agent and
the Prepetition Security Parties (the "Petition Date Liens"), such security
interests and liens in favor of the DIP Agent and the DIP Lenders to be junior
and subordinate only to the Petition Date Liens.
5. Debtors are authorized as holders of the entire equity interest
in DIP Guarantor to cause the DIP Guarantor to enter into the Subsidiary
Guaranty Agreement and the DIP Security Agreement, thereby guarantying payment
of the Obligations and granting security interests in and liens upon all of the
assets of the DIP Guarantor as set forth in (ii) on page 2 of this Interim
Order.
6. In addition, in order to further assure full and complete
compliance with, and timely payment of, all Obligations at any time owing or to
be performed by the Debtors pursuant to the DIP Credit Agreement or the other
DIP Financing Documents, the DIP Agent and the DIP Lenders are hereby granted
(subject to the Carve-Out), pursuant to (S) 364(c)(1), superpriority
administrative claim status for such Obligations. All Obligations owing to the
DIP
9
<PAGE>
Agent and the DIP Lenders under the DIP Credit Agreement and the other DIP
Financing Documents (including, but not limited to, the obligation to pay
principal, interest, professional fees, costs, charges, commissions and
expenses) shall be paid as provided in the DIP Credit Agreement and the other
DIP Financing Documents when due, without defense, offset, reduction or
counterclaim, and shall constitute allowed claims to the full extent thereof
against the Debtors arising under (S) 364(c)(1), with priority for such claims
over any and all administrative expenses (other than the Carve-Out) of the kind
specified or ordered pursuant to any provision of the Bankruptcy Code,
including, but not limited to, (S)(S) 105, 326, 328, 330, 331, 503(b), 506(c),
507(a), 507(b) and 726, provided that the superpriority administrative claim
--------
status of the Obligations, and the liens and security interests securing same,
shall be subject only to (i) unpaid professional fees and expenses incurred (x)
prior to the date of the delivery of a notice from the Administrative Agent or
Required Lenders to the Borrowers of the occurrence of an Event of Default and
specifying that the limitation on professional fees and expenses referred to in
the following clause (ii) is in effect (such notice being the "Carve-Out
Notice") or (y) after the earlier of (1) such time as no Event of Default shall
be continuing or (2) such time as such Carve-Out Notice shall be rescinded in
writing by the Administrative Agent at the direction of Required Lenders in
their sole discretion, and which are allowed by the Court in the Chapter 11
Cases (either on an interim or final basis), (ii) after and from the date of the
delivery of a Carve-Out Notice, professional fees and expenses allowed by the
Court in the Chapter 11 Cases in an aggregate amount (determined without regard
to fees and expenses incurred prior to the date of the delivery of such Carve-
Out Notice and which are at any time allowed by the Court either on an interim
or final basis) not to exceed $2,000,000 (for any period commencing at the time
a Carve-Out Notice shall have been so delivered and ending at the earlier of (1)
such subsequent time as no Event of Default shall be continuing and (2) such
time as such Carve-Out Notice shall
10
<PAGE>
be rescinded in writing by the Administrative Agent at the direction of Required
Lenders in their sole discretion), and (iii) fees payable to the Clerk of the
Court and to the United States Trustee pursuant to 28 U.S.C. (S)1930(a)(6) (the
"Carve-Out"), provided further, however, that in no event shall there be paid
-------- -------
from proceeds of the DIP Facility or Cash Collateral any fees and expenses
incurred in challenging the liens or claims of the Prepetition Agent or the
Prepetition Secured Parties, although counsel for an official creditors'
committee may be paid (to the extent allowed by the Court) fees and expenses
incurred in analyzing such liens or claims in an amount not to exceed $100,000.
Subject to the Carve-Out, such claims of the DIP Agent and DIP Lenders shall at
all times be senior, in this and any subsequent case under the Bankruptcy Code,
to the rights of the Debtors, any trustee or examiner and any unsecured claims
of any creditor or other entity. No cost or expense of administration or any
claims in this case, including those resulting from or incurred after any
conversion of this case pursuant to (S) 1112 shall (except to the extent of the
Carve-Out) rank prior to, or on parity with, the claims of the DIP Agent and DIP
Lenders arising hereunder, under the DIP Credit Agreement or under the other DIP
Financing Documents.
7. Other than the liens and security interests granted pursuant to
or referred to in this Order, and under the terms of the DIP Credit Agreement
and the other DIP Financing Documents, no liens or security interests shall
attach to any property of the Debtors' estates in this or any subsequent case
under the Bankruptcy Code unless either (a) the DIP Agent and DIP Lenders give
their express written consent, or (b) the DIP Financing has been terminated and
all Obligations have been paid in full and the Commitments terminated
("Discharge of the DIP Financing").
8. Prior to Discharge of the DIP Financing, the Debtors shall not
incur Indebtedness not permitted by the DIP Credit Agreement or the other DIP
Financing Documents
11
<PAGE>
unless (a) the DIP Agent and DIP Lenders consent in writing thereto, or (b) the
proceeds thereof are used first to satisfy in full all Obligations owing to the
DIP Agent or the DIP Lenders under the DIP Credit Agreement or the other DIP
Financing Documents in accordance with the terms thereof.
9. Prior to Discharge of the DIP Financing, no cost or expense,
including, but not limited to, any cost or expense of administration of the
Debtors' Chapter 11 Cases or any future proceeding that may develop out of such
cases, including liquidation in chapter 7 or other case under the Bankruptcy
Code, but excluding the Carve-Out, shall be charged against the DIP Collateral
pursuant to (S) 506(c) or otherwise, without the prior written consent of the
DIP Agent and DIP Lenders, and no such consent shall be implied from any action,
inaction or acquiescence by the DIP Agent or DIP Lenders.
10. The Prepetition Agent and the Prepetition Secured Parties are
granted adequate protection of their interests in the Prepetition Collateral as
hereinafter set forth. As adequate protection to the Prepetition Agent and
Prepetition Secured Parties for any diminution in the value of their respective
interests in the Prepetition Collateral resulting from (a) the Debtors' granting
of priming liens on and security interests in the Prepetition Collateral,
pursuant to (S) 364(d), in favor of the DIP Agent and DIP Lenders, (b) the
Debtors' use of Cash Collateral pursuant to (S) 363(c), (c) the use, sale or
lease of the Prepetition Collateral (other than Cash Collateral) pursuant to (S)
363, and (d) the imposition of the automatic stay pursuant to (S) 362(a):
(i) the Prepetition Agent and the Prepetition Secured Parties are
granted (effective upon the date of this Order and without the necessity of the
execution by the Debtors of mortgages, security agreements, pledge agreements,
financing statements or otherwise), valid, perfected and non-voidable
replacement security interests in and liens upon (the "Replacement Liens") all
property of each of the Debtors including, without limitation, all real,
personal and
12
<PAGE>
mixed property of the Debtors (including leasehold interests and capital stock)
at any time existing or arising, wherever located, and all proceeds and products
thereof (but excluding causes of action of the Debtors' estates under (S)(S)
544, 545, 547, 548 and 550 and any assets specifically excluded from the
security interests and liens granted to the DIP Agent and the DIP Lenders
pursuant to the terms of the DIP Security Agreement), subject only to (x) the
Carve-Out, (y) the liens and security interests granted pursuant to this Order
and the DIP Financing Documents to the DIP Agent and DIP Lenders to secure the
Obligations, and (z) the Petition Date Liens; and
(ii) Prepetition Agent and Prepetition Secured Parties are granted
superpriority claims with priority over any and all administrative expenses of
the kind specified or ordered pursuant to any provision of the Bankruptcy Code,
including, but not limited to, (S)(S) 105, 326, 328, 330, 331, 503(b), 506(c),
507(a), 507(b) and 726, subject only to (x) the superpriority claims granted to
DIP Agent and DIP Lenders in respect of the Obligations pursuant to the Interim
Order and (y) the Carve-Out.
11. Subject to the terms and conditions of the DIP Financing Documents,
the DIP Financing shall terminate (the "Commitment Termination Date") on the
earliest to occur of (a) March 13, 2000, (b) the effective date of a joint plan
of reorganization in the Chapter 11 Cases, as specified in such plan, (c) the
date distributions commence to any class of creditors, equity holders or other
claimants under any such plan of reorganization in the Chapter 11 Cases, (d) the
date of substantial consummation of any such plan of reorganization in the
Chapter 11 Cases, (e) the date of termination of exclusivity as to the proposal
of any reorganization plan by any Debtor in any of the Chapter 11 Cases without
the prior written approval of Required Lenders, (f) the date of termination in
whole of the Commitments pursuant to Article 8 of the DIP Credit Agreement, (g)
the date of filing with the Court in any of the Chapter 11 cases of any plan of
reorganization or any modification to any previously filed plan of
reorganization, in any
13
<PAGE>
case which has not been approved in writing by Required Lenders prior to such
filing, (h) the date that is twenty-five days after the Petition Date if the
Final Order has not been entered by the Court by such date, and (i) the date of
any sale, transfer or other disposition of all or substantially all of the
assets or stock of Debtors and their Subsidiaries.
12. The security interests and liens in the DIP Collateral granted to the
DIP Agent for the benefit of the DIP Lenders herein are valid, enforceable and
fully perfected by entry of this Order, and neither the DIP Agent nor the DIP
Lenders shall be required to file or record financing statements, mortgages,
leasehold mortgages, deeds of trust or other documents in any jurisdiction or
take any other action (including obtaining possession) in order to validate,
perfect or otherwise enforce the security interests and liens in such DIP
Collateral. If the DIP Lenders or the DIP Agent shall, in their or its sole
discretion, choose to file financing statements or file or record any other
documents or otherwise confirm perfection of such security interests and liens
in the DIP Collateral, the DIP Lenders or the DIP Agent are authorized to effect
such filings and recordations, and the automatic stay of (S) 362 is hereby
modified to allow such actions, and all such financing statements or similar
documents shall be deemed to have been filed or recorded on the date of entry of
this Order. The Debtors are hereby authorized and directed to execute and
deliver to the DIP Agent and/or the DIP Lenders, as applicable, any and all such
documents as the DIP Agent and/or the DIP Lenders may request in order to
confirm the perfection of the liens and security interests in the DIP
Collateral. The DIP Agent and/or the DIP Lenders are hereby authorized to file
this Order as evidence of their security interests and liens in lieu of a
financing statement or other filing or recording, and the appropriate state and
local official shall accept the same for filing or recording.
13. The DIP Agent and DIP Lenders, having been found to be acting in good
faith, shall be entitled to the full protection of (S) 364(e) and the claims,
liens, security interests
14
<PAGE>
and priorities created or authorized in this Order, the DIP Credit Agreement and
the other DIP Financing Documents are so created and authorized pursuant to
(S)(S) 364(c) and (d) and are entitled to the benefits and protections of (S)
364(e).
14. The DIP Agent and DIP Lenders are entitled to all of the rights,
benefits, privileges and remedies set forth or provided herein or in the DIP
Financing Documents, including, but not limited to, without further application
to or order of this Court, all of the rights, benefits, privileges and remedies
available to the DIP Agent or DIP Lenders upon the occurrence and during the
continuance of a Default or an Event of Default (as defined in the DIP Credit
Agreement including, without limitation, any reversal, stay or modification of
this Order without the consent of the DIP Agent or Required Lenders, the
appointment or election of an interim or permanent trustee in this case or the
conversion or dismissal of this case), and the automatic stay of (S) 362 (to the
extent applicable) is vacated solely to permit the exercise, enjoyment and
enforcement of any of such rights, benefits, privileges and remedies including,
but not limited to (a) the termination by the DIP Agent and the DIP Lenders of
all Commitments under the DIP Credit Agreement, (b) the declaration of all
Obligations to be immediately due and payable in full, and (c) the exercise of
remedies against the DIP Collateral, including, without limitation, foreclosing
on such DIP Collateral under applicable state or federal law, provided that the
--------
DIP Agent or the DIP Lenders shall give the Debtors, any official committee
appointed pursuant to (S) 1102, and the United States Trustee five (5) business
days' prior written notice (an "Enforcement Notice") of any exercise of remedies
against the DIP Collateral (other than acceleration of the Loans or other
Obligations, termination of the Commitments, or the exercise of any rights of
set-off or counterclaim under the DIP Credit Agreement or under any other DIP
Financing Document), and shall file a copy of the Enforcement Notice with the
Court; provided, however, that the issue of the right and remedy of the DIP
--------
Agent, after delivery of an
15
<PAGE>
Enforcement Notice, to collect all amounts owing to any of the Debtors by the
U.S. directly from the U.S., shall be reserved for determination at the Final
Hearing.
15. The provisions of this Interim Order, including the priority and
validity of all claims and liens in favor of the DIP Lenders, and any actions
taken pursuant hereto or in reliance hereon, shall survive entry of any other
order which may be entered in this case, including any order (a) confirming any
plan of reorganization, (b) converting these cases from cases under chapter 11
to cases under chapter 7, (c) appointing a trustee or examiner (including an
examiner with expanded powers), or (d) dismissing this case, and the terms and
provisions of this Order, as well as the priorities in payment granted pursuant
to this Order, the DIP Credit Agreement and the other DIP Financing Documents
shall continue in full force and effect notwithstanding the entry of such other
order, until all of the Obligations owing to the DIP Lenders are irrevocably
paid in full in accordance with the terms of the DIP Credit Agreement and the
other DIP Financing Documents and all of the Commitments thereunder have been
terminated.
16. If any or all of the provisions of this Order are hereafter reversed,
modified, vacated or stayed by subsequent order of this Court (including in
connection with the Final Hearing) or any other court, such reversal, stay,
modification or vacatur shall not affect the validity and enforceability of any
Obligation, debt or claim incurred or any priority that is or was incurred or
granted pursuant to the DIP Credit Agreement, the other DIP Financing Documents
or this Order, and notwithstanding any stay, reversal, modification or vacatur
of this Order, any Obligations owing to the DIP Agent or DIP Lenders arising
prior to the effective date of such stay, reversal, modification or vacatur
shall be governed in all respects by the original provisions of this Order and
the DIP Financing Documents, as the case may be, and the DIP Agent and DIP
Lenders shall be entitled to all of their respective rights, privileges and
benefits hereunder and
16
<PAGE>
under the DIP Financing Documents including, without limitation, the priorities,
rights and remedies granted herein and therein to or for their benefit with
respect to all Obligations owing to the DIP Agent and the DIP Lenders.
17. The findings contained in paragraphs G and H shall be binding upon
all parties in interest, including but not limited to, the Debtors and any
official committee appointed in the Chapter 11 Cases unless (a) any such
committee has properly filed an adversary proceeding or contested matter
challenging the validity, enforceability, nonavoidability, perfection or
priority of the Prepetition Obligations, or the Prepetition Agent's or
Prepetition Secured Parties' liens on and security interests in the Prepetition
Collateral, no later than the date that is sixty (60) days after the date of
appointment of the first official committee, and (b) a Final Order has been
entered in favor of such committee in any such timely and properly filed
adversary proceeding or contested matter. If no such adversary proceeding or
contested matter is properly commenced as of such date, (i) the Prepetition
Obligations shall constitute allowed claims for all purposes in the Chapter 11
Cases and any subsequent chapter 7 cases, and the Prepetition Agent's and
Prepetition Secured Parties' liens on and security interests in the Prepetition
Collateral shall be deemed legal, valid, binding, and properly perfected, and
not subject to subordination or avoidance, and (ii) the Prepetition Obligations
and the Prepetition Agent's and Prepetition Secured Parties' liens on and
security interests in the Prepetition Collateral shall not be subject to any
other or further challenge by any party in interest seeking to exercise the
rights of any Debtor's estate including, without limitation, any successor
thereto.
18. This Court retains and reserves jurisdiction to enforce all
provisions of this Interim Order.
19. Pursuant to Rule 4001(c), the Final Hearing on the Motion shall be
held on September __, 1999 at __ .m. Notice of the Final Hearing shall be
served on the United States
17
<PAGE>
Trustee, the twenty largest unsecured creditors of the Debtors, members of and
counsel for any official committee and holders of Permitted Liens. Objections,
if any, to the Motion shall be filed with the Court and served on Cleary,
Gottlieb, Steen & Hamilton, Debtors' counsel, at One Liberty Plaza, New York,
New York 10006-1470, Attention: Thomas J. Moloney, Esq.; O'Melveny & Myers LLP,
counsel for the DIP Lenders and Prepetition Secured Parties, at Citicorp Center,
153 E. 53rd Street, New York, New York 10022, Attention: Joel B. Zweibel,
Esq.; and Davis Polk & Wardwell, counsel for the Prepetition Agent, at 450
Lexington Avenue, New York, New York 10017, Attention: Karen Wagner, Esq., and
all parties who have demanded service thereof, such that Objections are received
no later than _____________, 1999 at __ .m. If no Objections have been
received, this Interim Order may be entered without further hearing or notice
dates.
Dated: September __, 1999
Wilmington, Delaware
_________________________________________
[_____________________]
United States Bankruptcy Judge
18
<PAGE>
SCHEDULE A
----------
DEBTORS
-------
1. Vencor, Inc.
2. Vencor Operating, Inc.
3. Vencor Nursing Centers East, L.L.C.
4. Vencor Nursing Centers West, L.L.C.
5. Vencor Nursing Centers Limited Partnership
6. Vencor Hospitals East, L.L.C.
7. Vencor Hospitals West, L.L.C.
8. Vencor Hospitals Limited Partnership
9. Advanced Infusion Systems, Inc.
10. American X-Rays, Inc.
11. Community Behavioral Health System, Inc.
12. Community Psychiatric Centers of Arkansas, Inc.
13. Community Psychiatric Centers of California
14. Community Psychiatric Centers of Florida, Inc.
15. Community Psychiatric Centers of Idaho, Inc.
16. Community Psychiatric Centers of Indiana, Inc.
17. Community Psychiatric Centers of Kansas, Inc.
18. Community Psychiatric Centers of Mississippi, Inc.
19. Community Psychiatric Centers of Missouri, Inc.
20. Community Psychiatric Centers of North Carolina, Inc.
21. Community Psychiatric Centers of Oklahoma, Inc.
22. Community Psychiatric Centers of Utah, Inc.
23. Community Psychiatric Centers Properties Incorporated
24. Community Psychiatric Centers Properties of Oklahoma, Inc.
25. Community Psychiatric Centers Properties of Texas, Inc.
26. Community Psychiatric Centers Properties of Utah, Inc.
27. Courtland Gardens Health Center, Inc.
28. CPC Investment Corp.
29. CPC of Georgia, Inc.
30. C.P.C. of Louisiana, Inc.
31. CPC Managed Care Health Services, Inc.
32. CPC Properties of Arkansas, Inc.
33. CPC Properties of Illinois, Inc.
34. CPC Properties of Indiana, Inc.
35. CPC Properties of Kansas, Inc.
36. CPC Properties of Louisiana, Inc.
37. CPC Properties of Mississippi, Inc.
38. CPC Properties of Missouri, Inc.
39. CPC Properties of North Carolina, Inc.
40. First Rehab, Inc.
41. Florida Hospital Properties, Inc.
<PAGE>
42. Health Care Holdings, Inc.
43. Health Care Technology, Inc.
44. Helian ASC of Northridge, Inc.
45. Helian Health Group, Inc.
47. Helian Recovery Corporation
48. Homestead Health Center, Inc.
49. Horizon Healthcare Services, Inc.
50. Interamericana Health Care Group
51. J.B. Thomas Hospital, Inc.
52. Lafayette Health Care Center, Inc.
53. MedEquities, Inc.
54. Medisave of Tennessee, Inc.
55. Medisave Pharmacies, Inc.
56. Old Orchard Hospital, Inc.
57. Palo Alto Surgecenter Corporation
58. Peachtree-Parkwood Hospital Inc.
59. PersonaCare, Inc.
60. PersonaCare of Bradenton, Inc.
61. PersonaCare of Clearwater, Inc.
62. PersonaCare of Connecticut, Inc.
63. PersonaCare of Georgia, Inc.
64. PersonaCare of Huntsville, Inc.
65. PersonaCare of Little Rock, Inc.
66. PersonaCare of Ohio, Inc.
67. PersonaCare of Owensboro, Inc.
68. PersonaCare of Pennsylvania, Inc.
69. PersonaCare of Pompano East, Inc.
70. PersonaCare of Pompano West, Inc.
71. PersonaCare of Reading, Inc.
72. PersonaCare of San Antonio, Inc.
73. PerrsonaCare of San Pedro, Inc.
74. PersonaCare of Shreveport, Inc.
75. PersonaCare of St. Petersburg, Inc.
76. PersonaCare of Warner Robbins, Inc.
77. PersonaCare of Wisconsin, Inc.
78. PersonaCare Living Center of Clearwater, Inc.
79. PersonaCare Properties, Inc.
80. ProData Systems, Inc.
81. Recovery Inns of America, Inc.
82. Respiratory Care Services, Inc.
83. Stamford Health Facilities, Inc.
84. THC-Chicago, Inc.
85. THC-Hollywood, Inc.
86. THC Houston, Inc.
86. THC Minneapolis, Inc.
<PAGE>
87. THC-North Shore, Inc.
88. THC-Orange County, Inc.
89. THC-San Diego, Inc.
90. THC-Seattle, Inc.
91. TheraTx Health Services, Inc.
92. TheraTx Healthcare Management, Inc.
93. TheraTx Management Services, Inc.
94. TheraTx Medical Supplies, Inc.
95. TheraTx Rehabilitation Services, Inc.
96. TheraTx Staffing, Inc.
97. Transitional Hospitals Corporation (DE)
98. Transitional Hospitals Corporation
99. Transitional Hospitals Corporation of Indiana, Inc.
100. Transitional Hospitals Corporation of Louisiana, Inc.
101. Transitional Hospitals Corporation of Michigan, Inc.
102. Transitional Hospitals Corporation of Nevada, Inc.
103. Transitional Hospitals Corporation of New Mexico, Inc.
104. Transitional Hospitals Corporation of Tampa, Inc.
105. Transitional Hospitals Corporation of Texas, Inc.
106. Transitional Hospitals Corporation of Wisconsin, Inc.
107. Tucker Nursing Center, Inc.
108. Tunstall Enterprises, Inc.
109. VC - OIA, Inc.
110. VC - TOHC, Inc.
111. VC - WM, Inc.
112. Vencare, Inc.
113. Vencare Rehab Services, Inc.
114. Vencor Facility Services, Inc.
115. Vencor Holdings, L.L.C.
116. Vencor Home Care Services, Inc.
117. Vencor Hospice, Inc.
118. Vencor Insurance Holdings, Inc.
119. Vencor Investment Company
120. Vencor Nevada, L.L.C.
121. Vencor Nursing Centers Central, L.L.C.
122. Vencor Nursing Centers North, L.L.C.
123. Vencor Nursing Centers South, L.L.C.
124. Vencor Pediatric Care, Inc.
125. Vencor Provider Network, Inc.
126. Ventech Systems, Inc.
127. Stamford Health Associates, L.P.
128. Vencor Home Care and Hospice Indiana Partnership
129. Vencor Nursing Centers Central Limited Partnership
<PAGE>
EXHIBIT J
BORROWING ORDER
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re )
) Case Nos. 99-______( )
Vencor, Inc., et al., ) through 99-______( )
)
) Chapter 11
)
Debtors and Debtors in Possession ) Jointly Administered
FINAL ORDER (i) AUTHORIZING POSTPETITION
FINANCING PURSUANT TO 11 U.S.C. (S) 364,
(ii) GRANTING SENIOR LIENS AND SUPERPRIORITY
ADMINISTRATIVE EXPENSE CLAIM STATUS PURSUANT TO
11 U.S.C. (S)(S) 105, 503(b), 507 AND 364, (iii) AUTHORIZING USE
OF CASH COLLATERAL PURSUANT TO 11 U.S.C. (S) 363, AND
(iv) GRANTING ADEQUATE PROTECTION PURSUANT TO
11 U.S.C. (S)(S) 363 AND 364.
-----------------------------
Upon the motion of the above-captioned debtors and debtors-in-
possession, Vencor, Inc., et al. (jointly and severally, the "Debtors")/1/ dated
September 13, 1999 (the "Motion") for entry of an order, pursuant to (S)(S) 105,
363, 364(c) and (d), 503(b) and 507 of the United States Bankruptcy Code, 11
U.S.C. (S) 101 et seq. (the "Bankruptcy Code")/2/, and Rules 2002, 4001(b), (c)
and (d) and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules"):
(i) authorizing the Debtors to obtain postpetition financing in the
form of loans and other financial accommodations, including the issuance of
letters of credit, pursuant to that certain Debtor-in-Possession Credit
Agreement substantially in the form annexed to the Motion dated as of September
__, 1999 (the "DIP Credit Agreement") by and among the
________________________________
/1/ The Debtors are listed on Schedule A attached hereto.
/2/ All section and rule references are to the Bankruptcy Code and Bankruptcy
Rules, respectively, unless otherwise indicated.
<PAGE>
Debtors, as joint and several borrowers, Morgan Guaranty Trust Company of New
York, as Arranger, Collateral Agent and Administrative Agent (the "DIP Agent"),
the Lenders signatory thereto and the LC Issuing Banks party thereto
(collectively, the "DIP Lenders"), in an aggregate principal amount not to
exceed $100 million, in two tranches of $75 million and $25 million,
respectively (the "DIP Financing");
(ii) authorizing the Debtors to cause Caribbean Behavioral Health
Systems, Inc., certain non-Debtor Subsidiary of the Debtors (the "DIP
Guarantor"), to guarantee the Obligations arising under the DIP Credit Agreement
pursuant to the Subsidiary Guaranty Agreement in the form annexed to the DIP
Credit Agreement (the "DIP Guaranty"), and to grant to the DIP Agent, for the
benefit of the DIP Lenders, pursuant to the terms of the Security Agreement
among the Debtors, the DIP Guarantor and the DIP Agent of even date with the DIP
Credit Agreement in the form annexed to the DIP Credit Agreement (the "DIP
Security Agreement"), security interests in and liens upon all of the assets of
such DIP Guarantor (except to the extent, if any, specifically provided in the
DIP Security Agreement) as security therefor, subject only to valid, perfected
and non-voidable liens and security interests existing as of the Petition Date,
as defined below (the DIP Credit Agreement, the DIP Guaranty, the DIP Security
Agreement, and all other agreements, instruments and documents executed and
delivered in connection therewith, collectively, the "DIP Financing Documents")
/3/;
(iii) granting to DIP Agent for the benefit of DIP Lenders (A)
pursuant to (S) 364(c)(2), first priority, valid, perfected and non-voidable
security interests in and liens upon all unencumbered assets of the estates of
each of the Debtors, including (without limitation) all real, personal or mixed
property of each of the Debtors (including leasehold interests and capital
stock) at any time existing or arising, wherever located, and all proceeds and
products thereof (but excluding causes of action of the Debtors' estates under
(S)(S) 544, 545, 547, 548 and 550 and any other asset specifically excluded from
such security interests and liens pursuant to the terms of the DIP Security
Agreement), (B) pursuant to (S) 364(d), valid, perfected and non-voidable
security interests in and liens upon all assets of each of the Debtors as of the
Petition Date (the "Prepetition Collateral"), having priority over the valid,
perfected and non-voidable liens and security interests in favor of the
Prepetition Agent (as defined in the Motion) for the benefit of the Prepetition
Secured Parties (as defined in the Motion), and (C) pursuant to (S) 364(c)(3),
valid, perfected and non-voidable security interests in and liens upon the
Prepetition Collateral, subject (to the extent permitted by the DIP Financing
Documents) only to the Petition Date Liens (as defined below) (the collateral
described in subparagraph (ii) and clauses (A), (B) and (C) of this subparagraph
(iii) being collectively referred to as the "DIP Collateral"), all of the DIP
Collateral to secure the loans, advances and all Obligations at any time owing
or to be performed by the Debtors pursuant to the DIP Credit Agreement and the
other DIP Financing Documents, and subject only to the Carve-Out (as defined
below);
(iv) pursuant to (S) 364(c)(1), granting superpriority
administrative claim status for such Obligations, subject only to the Carve-Out;
_____________________________
/3/ Capitalized terms used herein and not otherwise defined have the meaning
assigned to such terms in the DIP Financing Documents.
2
<PAGE>
(v) pursuant to (S) 363(c), authorizing the Debtors to use Cash
Collateral (as defined in the Motion) of the Prepetition Agent and the
Prepetition Secured Parties;
(vi) pursuant to (S)(S) 361, 363(e) and 364(d), providing adequate
protection to the Prepetition Agent and the Prepetition Secured Parties with
respect to any diminution in the value of Prepetition Agent's or the Prepetition
Secured Parties' interests in the Prepetition Collateral resulting from (A) the
priming liens and security interests to be granted herein pursuant to (S) 364(d)
to the DIP Agent for the benefit of the DIP Lenders to secure the Obligations,
(B) the Debtors' use of Cash Collateral, (C) the use, sale or lease of the
Prepetition Collateral (other than Cash Collateral) and (D) the imposition of
the automatic stay pursuant to (S) 362(a); and
(vii) scheduling a final hearing (the "Final Hearing") to consider
entry of a final order substantially in the form annexed to the DIP Credit
Agreement and acceptable to the DIP Agent (the "Final Order") authorizing the
above-matters in full;
and such Motion also requesting that this Court hold an immediate emergency
hearing (the "Emergency Hearing") on the Motion to consider entry of an interim
order (the "Interim Order") pursuant to Rule 4001(b) and (c) authorizing the
Debtors to use Cash Collateral of the Prepetition Agent and the Prepetition
Secured Parties and borrow from the DIP Lenders an amount not to exceed $45
million under the DIP Credit Agreement for a period of no more than twenty-five
days until the Final Hearing, upon the terms and conditions set forth in the DIP
Credit Agreement and the other DIP Financing Documents, pending the Final
Hearing; and the Interim Order having been entered on September __, 1999; and it
further appearing, based upon the record presented to this Court, that:
a. The ability of the Debtors to continue in business so that they
can attempt to confirm a plan of reorganization under the Bankruptcy Code
depends entirely upon obtaining the relief requested in the Motion and the
Debtors will suffer immediate and irreparable injury if such relief is not
granted; and
b. Notice of the Motion and the Final Hearing has been given to
(i) the United States Trustee, (ii) the twenty largest unsecured creditors of
the Debtors, (iii) Debtors' counsel, (iv) counsel for the DIP Lenders and
Prepetition Secured Parties and (v) counsel for the Prepetition Agent;
NOW, THEREFORE, upon the entire record of the Emergency Hearing held
before this Court with respect to the Motion on September __, 1999, and the
Final Hearing held before this Court with respect to the Motion on September __,
1999 and upon the presentations of counsel made at both the Emergency Hearing
and Final Hearing; and this Court having found good and sufficient cause
therefor, it is hereby FOUND that:
3
<PAGE>
A. On September 13, 1999 (the "Petition Date"), the Debtors filed
voluntary chapter 11 petitions under the Bankruptcy Code. Each chapter 11
petition filed by a Debtor commencing its Chapter 11 Case was duly authorized by
all requisite actions of the board of directors, shareholders, general and
limited partners, or managing members, as applicable, of such Debtor, in
accordance with applicable law and the Organizational Documents of such Debtor.
No trustee, examiner or statutory committee of creditors has been appointed as
of the date of this Order. Pursuant to (S)(S) 1107(a) and 1108, the Debtors are
authorized to operate their business as debtors-in-possession.
B. This Court has jurisdiction over these Chapter 11 Cases and the
Motion pursuant to 28 U.S.C. (S)(S) 157 and 1334. Consideration of the Motion
constitutes a core proceeding as defined in 28 U.S.C. (S) 157(b)(2).
C. The Debtors do not have sufficient funds to meet expenses
necessary for the operation of their business and have requested that they be
authorized to use Cash Collateral and that the DIP Agent and the DIP Lenders
extend loans and other financial accommodations to the Debtors pursuant to the
terms and conditions set forth in the DIP Financing Documents.
D. The Debtors are unable to obtain the financing necessary for the
operation of their business either (i) on an unsecured basis under (S)
503(b)(1), (ii) pursuant to (S)(S) 364(a) or 364(b), (iii) solely on a junior
secured basis under (S) 364(c)(3), or (iv) on any other terms or conditions more
favorable to the Debtors than the terms and conditions set forth in the DIP
Financing Documents.
E. The DIP Lenders (who are certain of the Prepetition Secured
Parties) have agreed to provide the DIP Financing on the terms and conditions
set forth in the DIP Financing Documents provided that the Court enters an order
satisfactory to the DIP Agent and the DIP Lenders approving the DIP Financing
Documents and granting such claims and priorities to or
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for the benefit of the DIP Agent and the DIP Lenders as are set forth herein, in
the DIP Credit Agreement and in the other DIP Financing Documents with respect
to all Obligations.
F. The Debtors will receive and benefit from the loans and other
financial accommodations to be provided by the DIP Agent and the DIP Lenders
under the DIP Financing Documents. The loans and other financial accommodations
provided under the DIP Financing Documents are necessary to fund the business of
the Debtors and will contribute to payment of the actual and necessary costs and
expenses of preserving their estates.
G. The Debtors admit that they are indebted to the Prepetition Agent
and the Prepetition Secured Parties under the Prepetition Credit Agreement (as
defined in the Motion) without defense, counterclaim or offset of any kind, and
that as of the Petition Date, the Debtors were liable to the Prepetition Agent
and the Prepetition Secured Parties in the aggregate unpaid principal amount
plus letter of credit exposure outstanding of approximately $520,176,612.89,
plus accrued interest, fees and other charges thereunder.
H. The Debtors further admit that the indebtedness owed to the
Prepetition Agent and the Prepetition Secured Parties under the Prepetition
Credit Agreement (the "Prepetition Obligations") is without defense, offset or
counterclaim, and is secured by valid, perfected, enforceable and non-voidable
first priority liens and security interests granted by the Debtors to
Prepetition Agent, for the benefit of the Prepetition Secured Parties, in the
Prepetition Collateral pursuant to the Prepetition Collateral Documents (as
defined in the Motion), subject only to liens permitted therein. Substantially
all of the Debtors' cash on hand and proceeds of Prepetition Collateral received
after the Petition Date constitute the Cash Collateral of the Prepetition Agent
and Prepetition Secured Parties.
I. The Prepetition Agent and Prepetition Secured Parties are
entitled, pursuant to (S)(S) 361, 363(e) and 364(c) and (d), to adequate
protection of their interests in the
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Prepetition Collateral in order to protect the Prepetition Agent and the
Prepetition Secured Parties from any diminution in the value of the Prepetition
Collateral resulting from (i) the Debtors' use of Cash Collateral, (ii) the
priming liens and security interests granted to the DIP Agent for the benefit of
the DIP Lenders pursuant to this Order, the DIP Credit Agreement and the other
DIP Financing Documents, (iii) the Debtors' use, sale or lease of the
Prepetition Collateral other than Cash Collateral, and (iv) the imposition of
the automatic stay.
J. The Debtors admit that, since at least January 1999, they have
caused or permitted to occur certain defaults and events of default under the
Prepetition Credit Agreement, as to which defaults and events of default the
Prepetition Secured Parties have exercised forbearance from pursuing their
remedies in order to permit negotiation of a plan for the orderly commencement
and early conclusion of the Chapter 11 Cases.
K. The Debtors do not have sufficient available sources of working
capital from the Prepetition Secured Parties' Cash Collateral or other financing
to carry on the operation of their business without the DIP Financing. The
ability of the Debtors to provide patient care, maintain business relationships
with their vendors and suppliers, purchase new inventory, pay necessary
employees and otherwise finance their operations is essential to the Debtors'
continued viability. In addition, the Debtors' critical need for financing is
immediate. In the absence of access to Cash Collateral and the DIP Financing
the continued operation of the Debtors' business would not be possible, a
precipitate liquidation would ensue, and immediate and irreparable harm to the
Debtors' patients, the Debtors' unsecured creditors, and the Debtors' estates
would occur.
L. The ability of the Debtors to continue in business so they can
attempt to reorganize under the Bankruptcy Code depends on obtaining the relief
sought in the Motion.
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M. Entry of this Final Order is necessary for the Debtors to
continue in business and accomplish their goal of reorganizing under the
Bankruptcy Code.
N. Based on the record presented to this Court by the Debtors at the
Final Hearing, the terms of the DIP Financing are fair and reasonable, reflect
the Debtors' exercise of prudent business judgment consistent with their
fiduciary duties, and, when the initial Loans are funded, will be supported by
reasonably equivalent value and fair consideration.
O. Based on the record before the Court, the financing arrangements
contemplated by the DIP Credit Agreement and the other DIP Financing Documents
are the product of an arm's length negotiation and are entered into by the DIP
Agent and the DIP Lenders in good faith, as the term "good faith" is used in (S)
364(e), and such arrangements and the transactions contemplated by the DIP
Credit Agreement and the other DIP Financing Documents do not provide the DIP
Agent or DIP Lenders with sufficient control over the Debtors so as to subject
the DIP Agent or the DIP Lenders to any liability (including, without
limitation, environmental liability as an "owner", "operator" or "responsible
person" as those terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorizations Act of 1986) in connection with the management of any of
the Debtors' businesses or properties.
P. The Emergency Hearing was held on September __, 1999 pursuant to
Rule 4001(b)(2) and (c)(2), and notice of the Motion was given pursuant to
(S)(S) 102(l), 363(c) and 364(c) and (d), and Rules 2002 and 4001(b) and (c), to
the appropriate parties. The Interim Order was entered September __, 1999.
Q. The Final Hearing was held on September __, 1999 pursuant to
Rule 4001(b)(2) and (c)(2), and notice of the Motion was given pursuant to
(S)(S) 102(l), 363(c) and 364(c) and (d), and Rules 2002 and 4001(b) and (c), to
the parties set forth above.
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Based upon the foregoing findings and conclusions, and upon the record
made before this Court, and good and sufficient cause appearing therefor,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:
1. The Motion is granted and the DIP Financing Documents are
hereby approved in all respects, subject to the terms and conditions hereinafter
set forth.
2. Debtors are authorized to: (a) obtain loans and request the
issuance of letters of credit pursuant to the terms of the DIP Financing
Documents in an aggregate amount not to exceed $100 million; and (b) use Cash
Collateral in the operation of the Debtors' business, in each case in a manner
consistent with this Order, the DIP Credit Agreement (including, without
limitation, the prohibitions set forth in section 5.06 thereof), the other DIP
Financing Documents and the Cash Plan.
3. The Debtors are hereby authorized and directed to (a) execute
and deliver the DIP Financing Documents and all other documents necessary or
desirable to implement the DIP Financing (through one or more officers
designated by them), (b) grant the security interests and liens contemplated
hereby and thereby (c) effect all transactions and take any actions provided for
in or contemplated by the DIP Financing Documents or deemed necessary by the DIP
Agent or the DIP Lenders to effectuate the terms and conditions of the DIP
Financing Documents and this Order, including, without limitation, the payment
of any and all fees, costs, charges, commissions and expenses, including
reasonable counsel fees, payable under the DIP Financing Documents or this
Order, and (d) comply with all provisions of the DIP Financing Documents,
including, without limitation, the payment and satisfaction in full of all
Obligations when due in accordance with the terms of the DIP Financing
Documents.
4. The Obligations shall be entitled to the following protections,
security interests, liens and priorities in favor of the DIP Agent and the DIP
Lenders, to secure full and complete compliance with, and timely payment of, all
Obligations at any time owing or to be
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performed by the Debtors pursuant to the DIP Credit Agreement and the other DIP
Financing Documents, subject only to the Carve-Out (as defined below):
(a) pursuant to (S) 364(c)(2), first priority, valid, perfected and
non-voidble security interests in and liens upon all unencumbered assets of the
estates of each of the Debtors including (without limitation) all real, personal
or mixed property of each of the Debtors (including leasehold interests and
capital stock) at any time existing or arising, wherever located, and all
proceeds and products thereof (but excluding causes of action of the Debtors'
estates under (S)(S) 544, 545, 547, 548 and 550, and any other asset
specifically excluded from such security interests and liens pursuant to the
terms of the DIP Security Agreement);
(b) pursuant to (S) 364(d), valid, perfected and non-voidable security
interests in and liens upon all assets of each of the Debtors which, as of the
Petition Date, constituted the Prepetition Collateral of the Prepetition Agent
and the Prepetition Secured Parties, having priority over and senior to the
security interests and liens of the Prepetition Agent and the Prepetition
Secured Parties; and
(c) pursuant to (S) 364(c)(3), valid, perfected and non-voidable
security interests in and liens upon all assets of each of the Debtors that
were, as of the Petition Date, subject (to the extent permitted by the DIP
Financing Documents) only to valid, perfected and non-voidable liens and
security interests in favor of any party other than the Prepetition Agent and
the Prepetition Secured Parties ( the "Petition Date Liens"), such security
interests and liens in favor of the DIP Agent and the DIP Lenders to be junior
and subordinate only to the Petition Date Liens.
5. Debtors are authorized as holders of the entire equity interest
in DIP Guarantor to cause the DIP Guarantor to enter into the Subsidiary
Guaranty Agreement and the DIP Security Agreement, thereby guarantying payment
of the obligations and granting security interests in and liens upon all of the
assets of the DIP Guarantor as set forth in (ii) on page 2 of this Final Order.
6. In addition, in order to further assure full and complete
compliance with, and timely payment of, all Obligations at any time owing or to
be performed by the Debtors pursuant to the DIP Credit Agreement or the other
DIP Financing Documents, the DIP Agent and the DIP Lenders are hereby granted
(subject to the Carve-Out), pursuant to (S) 364(c)(1), superpriority
administrative claim status for such Obligations. All Obligations owing to the
DIP Agent and the DIP Lenders under the DIP Credit Agreement and the other DIP
Financing
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Documents (including, but not limited to, the obligation to pay principal,
interest, professional fees, costs, charges, commissions and expenses) shall be
paid as provided in the DIP Credit Agreement and the other DIP Financing
Documents when due, without defense, offset, reduction or counterclaim, and
shall constitute allowed claims to the full extent thereof against the Debtors
arising under (S) 364(c)(1), with priority for such claims over any and all
administrative expenses (other than the Carve-Out) of the kind specified or
ordered pursuant to any provision of the Bankruptcy Code, including, but not
limited to, (S)(S) 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b) and
726, provided that the superpriority administrative claim status of the
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Obligations, and the liens and security interests securing same, shall be
subject only to (i) unpaid professional fees and expenses incurred (x) prior to
the date of the delivery of a notice from the Administrative Agent or Required
Lenders to the Borrowers of the occurrence of an Event of Default and specifying
that the limitation on professional fees and expenses referred to in the
following clause (ii) is in effect (such notice being the "Carve-Out Notice") or
(y) after the earlier of (1) such time as no Event of Default shall be
continuing or (2) such time as such Carve-Out Notice shall be rescinded in
writing by the Administrative Agent at the direction of Required Lenders in
their sole discretion, and which are allowed by the Court in the Chapter 11
Cases (either on an interim or final basis), (ii) after and from the date of the
delivery of a Carve-Out Notice, professional fees and expenses allowed by the
Court in the Chapter 11 Cases in an aggregate amount (determined without regard
to fees and expenses incurred prior to the date of the delivery of such Carve-
Out Notice and which are at any time allowed by the Court either on an interim
or final basis) not to exceed $2,000,000 (for any period commencing at the time
a Carve-Out Notice shall have been so delivered and ending at the earlier of (1)
such subsequent time as no Event of Default shall be continuing and (2) such
time as such Carve-Out Notice shall be rescinded in writing by the
Administrative Agent at the direction of Required Lenders in their
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sole discretion), and (iii) fees payable to the Clerk of the Court and to the
United States Trustee pursuant to 28 U.S.C. (S)1930(a)(6) (the "Carve-Out"),
provided further, however, that in no event shall there be paid from proceeds of
- ------- -------
the DIP Facility or Cash Collateral any fees and expenses incurred in
challenging the liens or claims of the Prepetition Agent or the Prepetition
Secured Parties, although counsel for an official creditors' committee may be
paid (to the extent allowed by the Court) fees and expenses incurred in
analyzing such liens or claims in an amount not to exceed $100,000. Subject to
the Carve-Out, such claims of the DIP Agent and DIP Lenders shall at all times
be senior, in this and any subsequent case under the Bankruptcy Code, to the
rights of the Debtors, any trustee or examiner and any unsecured claims of any
creditor or other entity. No cost or expense of administration or any claims in
this case, including those resulting from or incurred after any conversion of
this case pursuant to (S) 1112 shall (except to the extent of the Carve-Out)
rank prior to, or on parity with, the claims of the DIP Agent and DIP Lenders
arising hereunder, under the DIP Credit Agreement or under the other DIP
Financing Documents.
7. Other than the liens and security interests granted pursuant to
or referred to in this Order and the under the terms of the DIP Credit Agreement
and the other DIP Financing Documents, no liens or security interests shall
attach to any property of the Debtors' estates in this or any subsequent case
under the Bankruptcy Code unless either (a) the DIP Agent and DIP Lenders give
their express written consent, or (b) the DIP Financing has been terminated and
all Obligations have been paid in full and the Commitments terminated
("Discharge of the DIP Financing").
8. Prior to Discharge of the DIP Financing, the Debtors shall not
incur Indebtedness not permitted by the DIP Credit Agreement or the other DIP
Financing Documents unless (a) the DIP Agent and DIP Lenders consent in writing
thereto, or (b) the proceeds thereof
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are used first to satisfy in full all Obligations owing to the DIP Agent or the
DIP Lenders under the DIP Credit Agreement or the other DIP Financing Documents
in accordance with the terms thereof.
9. Prior to Discharge of the DIP Financing, no cost or expense,
including, but not limited to, any cost or expense of administration of the
Debtors' Chapter 11 Cases or any future proceeding that may develop out of such
cases, including liquidation in chapter 7 or other case under the Bankruptcy
Code, but excluding the Carve-Out, shall be charged against the DIP Collateral
pursuant to (S) 506(c) or otherwise, without the prior written consent of the
DIP Agent and DIP Lenders, and no such consent shall be implied from any action,
inaction or acquiescence by the DIP Agent or DIP Lenders.
10. The Prepetition Agent and the Prepetition Secured Parties are
granted adequate protection of their interests in the Prepetition Collateral as
hereinafter set forth. As adequate protection to the Prepetition Agent and
Prepetition Secured Parties for any diminution in the value of their respective
interests in the Prepetition Collateral resulting from (a) the Debtors' granting
of priming liens on and security interests in the Prepetition Collateral,
pursuant to (S) 364(d), in favor of the DIP Agent and DIP Lenders, (b) the
Debtors' use of Cash Collateral pursuant to (S) 363(c), (c) the use, sale or
lease of the Prepetition Collateral (other than Cash Collateral) pursuant to (S)
363, and (d) the imposition of the automatic stay pursuant to (S) 362(a):
(i) the Prepetition Agent and the Prepetition Secured Parties are
granted (effective upon the date of the Interim Order and without the necessity
of the execution by the Debtors of mortgages, security agreements, pledge
agreements, financing statements or otherwise), valid, perfected and non-
voidable replacement security interests in and liens upon (the "Replacement
Liens") all property of each of the Debtors including, without limitation, all
real, personal and mixed property of the Debtors (including leasehold interests
and capital stock,
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other than the capital stock of any Insurance Subsidiary to the extent the
pledge thereof is prohibited by applicable law or any regulations applicable to
such Insurance Subsidiary) at any time existing or arising, wherever located,
and all proceeds and products thereof (but excluding causes of action of the
Debtors' estates under (S)(S) 544, 545, 547, 548 and 550 and any assets
specifically excluded from the security interests and liens granted to the DIP
Agent and the DIP Lenders pursuant to the terms of the DIP Security Agreement),
subject only to (x) the Carve-Out, (y) the liens and security interests granted
pursuant to this Order and the DIP Financing Documents to the DIP Agent and DIP
Lenders to secure the Obligations, and (z) the Petition Date Liens; and
(ii) Prepetition Agent and Prepetition Secured Parties are granted
superpriority claims with priority over any and all administrative expenses of
the kind specified or ordered pursuant to any provision of the Bankruptcy Code,
including, but not limited to, (S)(S) 105, 326, 328, 330, 331, 503(b), 506(c),
507(a), 507(b) and 726, subject only to (x) the superpriority claims granted to
DIP Agent and DIP Lenders in respect of the Obligations pursuant to the Interim
Order and (y) the Carve-Out.
11. Subject to the terms and conditions of the DIP Financing
Documents, the DIP Financing shall terminate (the "Commitment Termination Date")
on the earliest to occur of (a) March 13, 2000, (b) the effective date of a
joint plan of reorganization in the Chapter 11 Cases, as specified in such plan,
(c) the date distributions commence to any class of creditors, equity holders or
other claimants under any such plan of reorganization in the Chapter 11 Cases,
(d) the date of substantial consummation of any such plan of reorganization in
the Chapter 11 Cases, (e) the date of termination of exclusivity as to the
proposal of any reorganization plan by any Debtor in any of the Chapter 11 Cases
without the prior written approval of Required Lenders, (f) the date of
termination in whole of the Commitments pursuant to Article 8 of the
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DIP Credit Agreement, (g) the date of filing with the Court in any of the
Chapter 11 Cases of any plan of reorganization or any modification to any
previously filed plan of reorganization, in any case which has not been approved
in writing by Required Lenders prior to such filing, and (h) the date of any
sale, transfer or other disposition of all or substantially all of the assets or
stock of Debtors and their Subsidiaries.
12. The security interests and liens in the DIP Collateral granted
to the DIP Agent for the benefit of the DIP Lenders herein are valid,
enforceable and fully perfected by entry of this Order, and neither the DIP
Agent nor the DIP Lenders shall be required to file or record financing
statements, mortgages, leasehold mortgages, deeds of trust or other documents in
any jurisdiction or take any other action (including obtaining possession) in
order to validate, perfect or otherwise enforce the security interests and liens
in such DIP Collateral. If the DIP Lenders or the DIP Agent shall, in their or
its sole discretion, choose to file financing statements or file or record any
other documents or otherwise confirm perfection of such security interests and
liens in the DIP Collateral, the DIP Lenders or the DIP Agent are authorized to
effect such filings and recordations, and the automatic stay of (S) 362 is
hereby modified to allow such actions, and all such financing statements or
similar documents shall be deemed to have been filed or recorded on the date of
entry of this Order. The Debtors are hereby authorized and directed to execute
and deliver to the DIP Agent and/or the DIP Lenders, as applicable, any and all
such documents as the DIP Agent and/or the DIP Lenders may request in order to
confirm the perfection of the liens and security interests in the DIP
Collateral. The DIP Agent and/or the DIP Lenders are hereby authorized to file
this Order as evidence of their security interests and liens in lieu of a
financing statement or other filing or recording, and the appropriate state and
local official shall accept the same for filing or recording.
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13. The DIP Agent and DIP Lenders, having been found to be acting
in good faith, shall be entitled to the full protection of (S) 364(e) and the
claims, liens, security interests and priorities created or authorized in this
Order, the DIP Credit Agreement and the other DIP Financing Documents are so
created and authorized pursuant to (S)(S) 364(c) and (d) and are entitled to the
benefits and protections of (S) 364(e).
14. The DIP Agent and DIP Lenders are entitled to all of the
rights, benefits, privileges and remedies set forth or provided herein or in the
DIP Financing Documents, including, but not limited to, without further
application to or order of this Court, all of the rights, benefits, privileges
and remedies available to the DIP Agent or DIP Lenders upon the occurrence and
during the continuance of a Default or an Event of Default (as defined in the
DIP Credit Agreement including, without limitation, any reversal, stay or
modification of this Order without the consent of the DIP Agent or Required
Lenders, the appointment or election of an interim or permanent trustee in this
case or the conversion or dismissal of this case), and the automatic stay of (S)
362 (to the extent applicable) is vacated solely to permit the exercise,
enjoyment and enforcement of any of such rights, benefits, privileges and
remedies including, but not limited to (a) the termination by the DIP Agent and
the DIP Lenders of all Commitments under the DIP Credit Agreement, (b) the
declaration of all Obligations to be immediately due and payable in full, and
(c) the exercise of remedies against the DIP Collateral, including, without
limitation, foreclosing on such DIP Collateral under applicable state or federal
law, provided that the DIP Agent or the DIP Lenders shall give the Debtors, any
--------
official committee appointed pursuant to (S) 1102, and the United States Trustee
five (5) business days' prior written notice (an "Enforcement Notice") of any
exercise of remedies against the DIP Collateral (other than acceleration of the
Loans or other Obligations, termination of the Commitments, or the exercise
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of any rights of set-off or counterclaim under the DIP Credit Agreement or under
any other DIP Financing Document), and shall file a copy of the Enforcement
Notice with the Court.
15. The provisions of this Final Order, including the priority and
validity of all claims and liens in favor of the DIP Lenders, and any actions
taken pursuant hereto or in reliance hereon, shall survive entry of any other
order which may be entered in this case, including any order (a) confirming any
plan of reorganization, (b) converting these cases from cases under chapter 11
to cases under chapter 7, (c) appointing a trustee or examiner (including an
examiner with expanded powers), or (d) dismissing this case, and the terms and
provisions of this Order, as well as the priorities in payment granted pursuant
to this Order, the DIP Credit Agreement and the other DIP Financing Documents
shall continue in full force and effect notwithstanding the entry of such other
order, until all of the Obligations owing to the DIP Lenders are irrevocably
paid in full in accordance with the terms of the DIP Credit Agreement and the
other DIP Financing Documents and all of the Commitments thereunder have been
terminated.
16. If any or all of the provisions of this Order are hereafter
reversed, modified, vacated or stayed by subsequent order of this Court or any
other court, such reversal, stay, modification or vacatur shall not affect the
validity and enforceability of any Obligation, debt or claim incurred or any
priority that is or was incurred or granted pursuant to the DIP Credit
Agreement, the other DIP Financing Documents or this Order, and notwithstanding
any stay, reversal, modification or vacatur of this Order, any Obligations owing
to the DIP Agent or DIP Lenders arising prior to the effective date of such
stay, reversal, modification or vacatur shall be governed in all respects by the
original provisions of this Order and the DIP Financing Documents, as the case
may be, and the DIP Agent and DIP Lenders shall be entitled to all of their
respective rights, privileges and benefits hereunder and under the DIP Financing
Documents including, without limitation, the priorities, rights and remedies
granted herein and
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therein to or for their benefit with respect to all Obligations owing to the DIP
Agent and the DIP Lenders.
17. The findings contained in paragraphs G and H shall be binding
upon all parties in interest, including but not limited to, the Debtors and any
official committee appointed in the Chapter 11 Cases unless (a) any such
committee has properly filed an adversary proceeding or contested matter
challenging the validity, enforceability, nonavoidability, perfection or
priority of the Prepetition Obligations, or the Prepetition Agent's or
Prepetition Secured Parties' liens on and security interests in the Prepetition
Collateral, no later than the date that is sixty (60) days after the date of
appointment of the first official committee, and (b) a Final Order has been
entered in favor of such committee in any such timely and properly filed
adversary proceeding or contested matter. If no such adversary proceeding or
contested matter is properly commenced as of such date, (i) the Prepetition
Obligations shall constitute allowed claims for all purposes in the Chapter 11
Cases and any subsequent chapter 7 cases, and the Prepetition Agent's and
Prepetition Secured Parties' liens on and security interests in the Prepetition
Collateral shall be deemed legal, valid, binding, and properly perfected, and
not subject to subordination or avoidance, and (ii) the Prepetition Obligations
and the Prepetition Agent's and Prepetition Secured Parties' liens on and
security interests in the Prepetition Collateral shall not be subject to any
other or further challenge by any party in interest seeking to exercise the
rights of any Debtor's estate including, without limitation, any successor
thereto.
18. This Court retains and reserves jurisdiction to enforce all
provisions of this Final Order.
Dated: September __, 1999
Wilmington, Delaware
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_______________________________
[_____________________]
United States Bankruptcy Judge
18
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SCHEDULE A
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DEBTORS
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1. Vencor, Inc.
2. Vencor Operating, Inc.
3. Vencor Nursing Centers East, L.L.C.
4. Vencor Nursing Centers West, L.L.C.
5. Vencor Nursing Centers Limited Partnership
6. Vencor Hospitals East, L.L.C.
7. Vencor Hospitals West, L.L.C.
8. Vencor Hospitals Limited Partnership
9. Advanced Infusion Systems, Inc.
10. American X-Rays, Inc.
11. Community Behavioral Health System, Inc.
12. Community Psychiatric Centers of Arkansas, Inc.
13. Community Psychiatric Centers of California
14. Community Psychiatric Centers of Florida, Inc.
15. Community Psychiatric Centers of Idaho, Inc.
16. Community Psychiatric Centers of Indiana, Inc.
17. Community Psychiatric Centers of Kansas, Inc.
18. Community Psychiatric Centers of Mississippi, Inc.
19. Community Psychiatric Centers of Missouri, Inc.
20. Community Psychiatric Centers of North Carolina, Inc.
21. Community Psychiatric Centers of Oklahoma, Inc.
22. Community Psychiatric Centers of Utah, Inc.
23. Community Psychiatric Centers Properties Incorporated
24. Community Psychiatric Centers Properties of Oklahoma, Inc.
25. Community Psychiatric Centers Properties of Texas, Inc.
26. Community Psychiatric Centers Properties of Utah, Inc.
27. Courtland Gardens Health Center, Inc.
28. CPC Investment Corp.
29. CPC of Georgia, Inc.
30. C.P.C. of Louisiana, Inc.
31. CPC Managed Care Health Services, Inc.
32. CPC Properties of Arkansas, Inc.
33. CPC Properties of Illinois, Inc.
34. CPC Properties of Indiana, Inc.
35. CPC Properties of Kansas, Inc.
36. CPC Properties of Louisiana, Inc.
37. CPC Properties of Mississippi, Inc.
38. CPC Properties of Missouri, Inc.
39. CPC Properties of North Carolina, Inc.
40. First Rehab, Inc.
41. Florida Hospital Properties, Inc.
<PAGE>
42. Health Care Holdings, Inc.
43. Health Care Technology, Inc.
44. Helian ASC of Northridge, Inc.
45. Helian Health Group, Inc.
46. Helian Recovery Corporation
47. Homestead Health Center, Inc.
48. Horizon Healthcare Services, Inc.
49. Interamericana Health Care Group
50. J.B. Thomas Hospital, Inc.
51. Lafayette Health Care Center, Inc.
52. MedEquities, Inc.
53. Medisave of Tennessee, Inc.
54. Medisave Pharmacies, Inc.
55. Old Orchard Hospital, Inc.
56. Palo Alto Surgecenter Corporation
57. Peachtree-Parkwood Hospital Inc.
58. PersonaCare, Inc.
59. PersonaCare of Bradenton, Inc.
60. PersonaCare of Clearwater, Inc.
61. PersonaCare of Connecticut, Inc.
62. PersonaCare of Georgia, Inc.
63. PersonaCare of Huntsville, Inc.
64. PersonaCare of Little Rock, Inc.
65. PersonaCare of Ohio, Inc.
66. PersonaCare of Owensboro, Inc.
67. PersonaCare of Pennsylvania, Inc.
68. PersonaCare of Pompano East, Inc.
69. PersonaCare of Pompano West, Inc.
70. PersonaCare of Reading, Inc.
71. PersonaCare of San Antonio, Inc.
72. PersonaCare of San Pedro, Inc.
73. PersonaCare of Shreveport, Inc.
74. PersonaCare of St. Petersburg, Inc.
75. PersonaCare of Warner Robbins, Inc.
76. PersonaCare of Wisconsin, Inc.
77. PersonaCare Living Center of Clearwater, Inc.
78. PersonaCare Properties, Inc.
79. ProData Systems, Inc.
80. Recovery Inns of America, Inc.
81. Respiratory Care Services, Inc.
82. Stamford Health Facilities, Inc.
83. THC-Chicago, Inc.
84. THC-Hollywood, Inc.
85. THC Houston, Inc.
86. THC Minneapolis, Inc.
<PAGE>
87. THC-North Shore, Inc.
88. THC-Orange County, Inc.
89. THC-San Diego, Inc.
90. THC-Seattle, Inc.
91. TheraTx Health Services, Inc.
92. TheraTx Healthcare Management, Inc.
93. TheraTx Management Services, Inc.
94. TheraTx Medical Supplies, Inc.
95. TheraTx Rehabilitation Services, Inc.
96. TheraTx Staffing, Inc.
97. Transitional Hospitals Corporation (DE)
98. Transitional Hospitals Corporation
99. Transitional Hospitals Corporation of Indiana, Inc.
100. Transitional Hospitals Corporation of Louisiana, Inc.
101. Transitional Hospitals Corporation of Michigan, Inc.
102. Transitional Hospitals Corporation of Nevada, Inc.
103. Transitional Hospitals Corporation of New Mexico, Inc.
104. Transitional Hospitals Corporation of Tampa, Inc.
105. Transitional Hospitals Corporation of Texas, Inc.
106. Transitional Hospitals Corporation of Wisconsin, Inc.
107. Tucker Nursing Center, Inc.
108. Tunstall Enterprises, Inc.
109. VC - OIA, Inc.
110. VC - TOHC, Inc.
111. VC - WM, Inc.
112. Vencare, Inc.
113. Vencare Rehab Services, Inc.
114. Vencor Facility Services, Inc.
115. Vencor Holdings, L.L.C.
116. Vencor Home Care Services, Inc.
117. Vencor Hospice, Inc.
118. Vencor Insurance Holdings, Inc.
119. Vencor Investment Company
120. Vencor Nevada, L.L.C.
121. Vencor Nursing Centers Central, L.L.C.
122. Vencor Nursing Centers North, L.L.C.
123. Vencor Nursing Centers South, L.L.C.
124. Vencor Pediatric Care, Inc.
125. Vencor Provider Network, Inc.
126. Ventech Systems, Inc.
127. Stamford Health Associates, L.P.
128. Vencor Home Care and Hospice Indiana Partnership
129. Vencor Nursing Centers Central Limited Partnership
<PAGE>
EXHIBIT K
FORM OF FACILITIES STATUS REPORT
Regulatory Investigation/Intervention Status Report
Date:______________________________________________
<TABLE>
<CAPTION>
Actual/
Today Covenant
Default
<S> <C> <C> <C>
Hospitals A B
------------------
1. Terminated Medicare/Medicaid Contracts XXXXX XXXXX
------------------
1. Conditional Accreditation XXXXX
------------------
1. "Fast Track" 23 day Termination of Medicare/
Medicaid Contract XXXXX
------------------
1. Denial of Payment for New Medicare/
Medicaid Admissions XXXXX
------------------
1. Operating under Involuntary Receivership/
Involuntary Management XXXXX
------------------
-----------------------------------------------
3 | 10
-----------------------------------------------
Total Hospitals being reported (without duplication)
Nursing Home Facilities
------------------
1. Terminated Medicare/Medicaid Contracts XXXXX XXXXX
------------------
1. Admissions Hold XXXXX
------------------
2. Current Civil Money Penalties ("CMP's") over $2,000 per day XXXXX
------------------
1. Operating Under Involuntary Receivership/Involuntary
Management XXXXX XXXXX
-----------------------------------------------
Total Nursing Home Facilities being reported (without duplication) 15 | 40
-----------------------------------------------
1. To be reported on a monthly basis and within 5 days of notification to
facility when a change in status occurs.
2. Only reported on a monthly basis.
If either the number of Nursing Homes or Hospitals exceeds the
covenant level, indicated above, a default will occur.
</TABLE>
<PAGE>
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Lender Tranche A Loan Tranche B Loan Percentage Total Commitment
Commitment Commitment (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ableco Finance LLC $ 7,500,000 $ 2,500,000 10.000% $ 10,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
Appaloosa Investment Limited Partnership I $ 9,000,000 $ 3,000,000 12.000% $ 12,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
Bankers Trust Company $ 7,500,000 $ 2,500,000 10.000% $ 10,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank $ 9,000,000 $ 3,000,000 12.000% $ 12,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Credit Partners L.P. $ 9,000,000 $ 3,000,000 12.000% $ 12,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Paribas $ 7,500,000 $ 2,500,000 10.000% $ 10,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Van Kampen Prime Rate Income Trust $ 7,500,000 $ 2,500,000 10.000% $ 10,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Company of New York $18,000,000 $ 6,000,000 24.000% $ 24,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $75,000,000 $25,000,000 100.000% $100,000,000
===================================================================================================================================
</TABLE>
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Cash Plan
Period: Weeks Beginning September 13, 1999 to October 25, 1999
(in millions)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOW FORECAST: (Prepared by Company on September 8, 1999)
Week Beginning: 9/13/99 9/20/99 9/27/99 10/4/99 10/11/99 10/18/99 10/25/99
-------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Projected Receipts:
Facility Receipts $ 27.0 $ 40.0 $ 36.0 $ 27.5 $ 34.8 $ 36.0 $ 35.0
Agency Receipts 18.3 16.8 13.8 14.0 17.3 20.0 18.0
PIP Receipts 12.0 - 12.0 - 12.0 - 12.0
Misc Receipts - - - - - - -
-------- -------- -------- -------- --------- --------- ---------
Subtotal Receipts $ 57.3 $ 56.8 $ 61.8 $ 41.5 $ 64.1 $ 56.0 $ 65.0
Projected Disbursements:
Accounts Payable $ (13.0) $ (38.8) $ (40.2) $ (29.8) $ (25.8) $ (25.8) $ (25.8)
Ventas (15.2) - - (15.2) - - -
PIP Settlement - - - (1.5) - - -
Payroll (18.0) (18.0) (18.0) (20.0) (16.3) (16.2) (18.0)
Taxes (9.7) (6.3) (7.3) (6.3) (10.0) (4.3) (10.0)
VEBA Funding (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0)
Vendor Deposits (4.0) (2.7) (1.8) (1.8) (1.8) (1.8) (1.8)
Restructuring Costs (3.2) - - - - (1.5) -
-------- -------- -------- -------- --------- --------- ---------
Subtotal Uses of Cash $ (64.1) $ (66.8) $ (68.3) $ (75.6) $ (54.9) $ (50.6) $ (56.6)
-------- -------- -------- -------- --------- --------- ---------
Daily Cash Flow before Next Day
Funding Requirements $ (6.8) $ (10.0) $ (6.5) $ (34.1) $ 9.2 $ 5.4 $ 8.4
Reduce (Borrow) Next Day Funding (3.6) (2.5) (2.4) 8.5 - - -
Requirement -------- -------- -------- -------- --------- --------- ---------
Subtotal Net Sources (Uses) of Cash $ (10.4) $ (12.5) $ (8.9) $ (25.6) $ 9.2 $ 5.4 $ 8.4
-------- -------- -------- -------- --------- --------- ---------
Forecasted Revolver (Borrowing) Repayment $ (10.4) $ (12.5) $ (8.9) $ (25.6) $ 9.2 $ 5.4 $ 8.4
Beginning Revolver $ - $ (11.4) $ (23.9) $ (32.8) $ (58.8) $ (49.1) $ (43.8)
Activity (11.4) (12.5) (8.9) (26.0) 9.7 5.3 8.4
-------- -------- -------- -------- --------- --------- ---------
Ending Revolver $ (11.4) $ (23.9) $ (32.8) $ (58.8) $ (49.1) $ (43.8) $ (35.4)
======== ======== ======== ======== ========= ========= =========
Beginning Cash $ 9.0 $ 10.0 $ 10.0 $ 10.0 $ 10.4 $ 9.9 $ 10.0
Net Change in Cash 1.0 - - 0.4 (0.5) 0.1 -
-------- -------- -------- -------- --------- --------- ---------
Ending Cash $ 10.0 $ 10.0 $ 10.0 $ 10.4 $ 9.9 $ 10.0 $ 10.0
======== ======== ======== ======== ========= ========= =========
COVENANT COMPUTATION:
Cumulative Net Cash Flow $ (6.8) $ (16.8) $ (23.3) $ (57.4) $ (48.2) $ (42.8) $ (34.4)
Permitted Variance (23.2) (23.2) (21.7) (18.6) (18.8) (18.2) (18.6)
-------- -------- -------- -------- --------- --------- ---------
Compliance with Cash Plan $ (30.0) $ (40.0) $ (45.0) $ (76.0) $ (67.0) $ (61.0) $ (53.0)
======== ======== ======== ======== ========= ========= =========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 2
----------
PREPETITION REORGANIZATION AGREEMENTS
-------------------------------------
1. Development Agreement dated as of April 30, 1998 between Vencor,
Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
2. Participation Agreement dated as of April 30, 1998 between Vencor,
Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
3. Employee Benefits Agreement dated as of April 30, 1998 between
Vencor, Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
4. Intellectual Property Agreement dated as of April 30, 1998 between
Vencor, Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
5. Tax Allocation Agreement dated as of April 30, 1998 between
Vencor, Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
6. Agreement of Indemnity - Third Party Leases dated as of April 30,
1998 between Vencor Healthcare, Inc. (now Vencor, Inc.), Vencor Operating, Inc.,
Vencor Nursing Centers East LLC, Vencor Nursing Centers West LLC, Vencor Nevada
LLC, New Vencor Hospitals East LLC (now Vencor Hospitals East LLC), Vencor
Hospitals West LLC, Vencor Hospitals Limited Partnership, Vencor Nursing Centers
Limited Partnership, Vencor, Inc. (now Ventas, Inc.), First Healthcare
Corporation, Hillhaven/Indiana Partnership, Nationwide Care, Inc. and Pasatiempo
Development Corporation.
7. Agreement of Indemnity - Third Party Contracts dated as of April
30, 1998 between Vencor Healthcare, Inc. (now Vencor, Inc.), Vencor Operating,
Inc., Vencor Nursing Centers East LLC, Vencor Nursing Centers West LLC, Vencor
Nevada LLC, New Vencor Hospitals East LLC (now Vencor Hospitals East LLC),
Vencor Hospitals West LLC, Vencor Hospitals Limited Partnership, Vencor Nursing
Centers Limited Partnership, Vencor, Inc. (now Ventas, Inc.) and First
Healthcare Corporation.
8. Distribution Agreement dated as of April 30, 1998 between Vencor,
Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
9. Agreement and Plan of Reorganization dated as of April 30, 1998
between Vencor, Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor,
Inc.).
10. Master Lease Agreements: (i) Master Lease Agreement dated as of
April 30, 1998 between Ventas, Inc. (formerly known as Vencor, Inc.) and Ventas
Realty, Limited Partnership, as Lessor, and Vencor, Inc. (formerly known as
Vencor Healthcare, Inc.) and Vencor Operating, Inc., as Tenant (known as "Master
Lease No. 1"); (ii) Master Lease Agreement dated as of April 30, 1998 between
Ventas, Inc. (formerly known as Vencor, Inc.) and Ventas Realty, Limited
Partnership, as Lessor, and Vencor, Inc. (formerly known as Vencor Healthcare,
Inc.) and Vencor Operating, Inc., as Tenant (known as "Master Lease No. 2"); and
<PAGE>
(iii) Master Lease Agreement dated as of April 30, 1998 between Ventas, Inc.
(formerly known as Vencor, Inc.) and Ventas Realty, Limited Partnership, as
Lessor, and Vencor, Inc. (formerly known as Vencor Healthcare, Inc.) and Vencor
Operating, Inc., as Tenant (known as "Master Lease No. 3"); and (iv) Master
Lease Agreement dated as of April 30, 1998 between Ventas, Inc. (formerly known
as Vencor, Inc.) and Ventas Realty, Limited Partnership, as Lessor, and Vencor,
Inc. (formerly known as Vencor Healthcare, Inc.) and Vencor Operating, Inc., as
Tenant (known as "Master Lease No. 4").
11. Lease Agreement dated as of August 7, 1998 between Ventas Realty,
Limited Partnership, as Lessor, and Vencor Nursing Centers Limited Partnership,
as Tenant (lease with respect to Corydon).
12. Insurance Agreement dated as of April 30, 1998 between Vencor,
Inc. (now Ventas, Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.).
13. Debt and Cash Allocation Agreement dated as of April 30, 1998
between Vencor, Inc. (now Ventas, Inc.) and Ventas Realty, Limited Partnership
and Vencor Healthcare, Inc. (now Vencor, Inc.) and Vencor Operating, Inc.
<PAGE>
SCHEDULE 3
----------
APPRAISED PROPERTIES
--------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
FACILITY NO. FACILITY OWNER
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
695 Vencor Hospital . Los Angeles Vencor Operating, Inc.
5525 West Slauson Avenue
Los Angeles, CA 90056
- ----------------------------------------------------------------------------------------------
608 Vencor Hospital . Sacramento Vencor Operating, Inc.
223 Fargo Way
Folsom, CA 95630
- ----------------------------------------------------------------------------------------------
212 Woodside Nursing Center Vencor Nursing Centers
1425 Woodside Drive West, L.L.C.
San Luis Obispo, CA 93401
- ----------------------------------------------------------------------------------------------
610 Boca Raton Rehabilitation Center Vencor Nursing Centers
755 Meadows Road East, L.L.C.
Boca Raton, FL 33487
- ----------------------------------------------------------------------------------------------
781 Bashford East Health Care Vencor Operating, Inc.
3535 Bardstown Road
Louisville, KY 40218
- ----------------------------------------------------------------------------------------------
610 Vencor Hospital . Dallas Vencor Hospitals Limited
9525 Greenville Avenue Partnership
Dallas, TX 75214
- ----------------------------------------------------------------------------------------------
649 Vencor Hospital . Arlington, TX Transitional Hospitals
1000 North Cooper Street Corporation of Texas, Inc.
Arlington, TX 76011
- ----------------------------------------------------------------------------------------------
643 Vencor Hospital . Seattle THC - Seattle, Inc.
10560 Fifth Avenue, N.E.
Seattle, WA 98125
- ----------------------------------------------------------------------------------------------
160 First Health Care Center Vencor Nursing Centers
1334 Terry Avenue West, L.L.C.
Seattle, WA 98101
- ----------------------------------------------------------------------------------------------
663 Vencor Hospital . Milwaukee Transitional Hospitals
5017 South 110/th/ Street Corporation
Greenfield, WI 53228
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPERTIES HELD FOR SALE
------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
FACILITY NO. PROPERTY OWNER
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
N/A Unimproved land Vencor Nursing Centers
6116 E. Arbor Avenue West, L.L.C.
East Mesa, AZ
- --------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
Tucson, AZ (Oracle Road) West, L.L.C.
- --------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
1600 E. River Road West, L.L.C.
Tucson, AZ (River Road)
- --------------------------------------------------------------------------------------------------------
N/A 3.6 acres of unimproved land Vencor Nursing Centers
2222 Avenue A West, L.L.C.
Yuma, AZ
- --------------------------------------------------------------------------------------------------------
683 Vencor Hospital . Burbank Vencor Operating, Inc.
466 East Olive Avenue
Burbank, CA 91501
- --------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
LeMay Ave. & Southridge Greens Blvd. West, L.L.C.
Ft. Collins, CO
- --------------------------------------------------------------------------------------------------------
115 The Rehabilitation Center of the Palm Vencor Nursing Centers
Beaches East, L.L.C.
300 15/th/ Street
West Palm Beach, FL 33401
- --------------------------------------------------------------------------------------------------------
N/A 6.2 acres of unimproved land PersonaCare Properties, Inc.
Rosewell Rd./Sanctuary Pkwy.
Alpharetta, GA
- --------------------------------------------------------------------------------------------------------
N/A 10.95 acres of unimproved land Vencor Hospitals West, L.L.C.
S.E. Corner of Ustick Rd. & S. 10/th/
Street
Caldwell, ID
- --------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
S. 63/rd/ St., E. Greenwood Dr., W. East, L.L.C.
Hallett and N. Shawnee Mission Pkwy.
Shawnee, KS
- --------------------------------------------------------------------------------------------------------
699 615, 617, 619 & 621 W. Main Vencor Operating, Inc.
Louisville, KY
- --------------------------------------------------------------------------------------------------------
699 Vencor on Fifth Vencor Operating, Inc.
444 S. 5/th/ Avenue
Louisville, KY
- --------------------------------------------------------------------------------------------------------
548 Dixfield Health Care Center Vencor Nursing Centers
100 Weld Street East, L.L.C.
Dixfield, ME 04224
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FACILITY NO. PROPERTY OWNER
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
3819 Wornall Health Care Center Vencor Nursing Centers
12000 Wornall Rd. East, L.L.C.
Kansas City, MO
- ---------------------------------------------------------------------------------------------------------
100K 21.872 acres of unimproved land Vencor Operating, Inc.
Nashua, NH
- ---------------------------------------------------------------------------------------------------------
145 Reno Healthcare Vencor Nevada, L.L.C.
1300 Mill Street
Reno, NV 89502
- ---------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nevada, L.L.C.
Durango Road (Desert Inn)
Las Vegas, NV
- ---------------------------------------------------------------------------------------------------------
651 Vencor Hospital . Cincinnati Vencor Hospitals East, L.L.C.
3156 Glenmore Avenue
Cincinnati, OH 45211
- ---------------------------------------------------------------------------------------------------------
157A Unimproved land Vencor Operating, Inc.
7700 South Memorial
Lot 2, Blk 1 Mayfair Courts
Tulsa, OK
- ---------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
1030 S.W. Green Oaks Blvd. Limited Partnership
Arlington, TX
- ---------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
3801 W.D. Tate Avenue, Hwy 21 Limited Partnership
Grapevine, TX
- ---------------------------------------------------------------------------------------------------------
N/A 6 acres unimproved land Vencor Nursing Centers
Missouri City, TX Limited Partnership
- ---------------------------------------------------------------------------------------------------------
N/A Unimproved land Vencor Nursing Centers
1301 Richardson Drive Limited Partnership
Richardson, TX
- ---------------------------------------------------------------------------------------------------------
N/A 601 E. Elmira Vencor Hospitals Limited
Corner of Euclid & Erie Partnership
San Antonio, TX
- ---------------------------------------------------------------------------------------------------------
684 DePaul Hospital - Milwaukee Vencor Hospitals Limited
4143 South 13/th/ Street Partnership
Milwaukee, WI 53220
- ---------------------------------------------------------------------------------------------------------
N/A Shares of common and preferred stock See Schedule 1 to the
in Behavioral Healthcare Corporation, Security Agreement
a Delaware corporation
- ---------------------------------------------------------------------------------------------------------
N/A Cessna Plane Vencor, Inc./1/
- ---------------------------------------------------------------------------------------------------------
</TABLE>
______________________________
/1/ Contract to purchase.
<PAGE>
SCHEDULE 4
SUBSIDIARIES OF VENCOR, INC.
----------------------------
I. CORPORATIONS AND L.L.C.S
----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest Percentage Number of Status (1)
Organization Interest Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Cornerstone Insurance Company CI/2/ Vencor, Inc. 100 1,000,000 IS
2. Vencor Operating, Inc. DE Vencor, Inc. 100 100 B
3. Vencor Hospitals East, L.L.C. DE Vencor Operating, Inc. 100 B
4. Vencor Hospitals West, L.L.C. DE Vencor Operating, Inc. 100 B
5. Vencor Nursing Centers East, L.L.C. DE Vencor Operating, Inc. 100 B
6. Vencor Nursing Centers West, L.L.C. DE Vencor Operating, Inc. 100 B
7. Vencor Nursing Centers South, L.L.C. DE Vencor Operating, Inc. 100 B
8. Vencor Nursing Centers North, L.L.C. DE Vencor Operating, Inc. 100 B
9. Vencor Nursing Centers Central, L.L.C. DE Vencor Operating, Inc. 100 B
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
__________________________
/2/ CI=Cayman Islands
IS=Insurance Subsidiary
B=Borrower
SG=Subsidiary Guarantor
SS=Shell Subsidiary
EP=Excluded Partnership
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest Percentage Number of Status (1)
Organization Interest Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10. Vencor Nevada, L.L.C. DE Vencor Operating, Inc. 100 B
11. Vencor Holdings, L.L.C. DE Vencor Operating, Inc. 100 B
12. Vencor Investment Company DE Vencor Operating, Inc. 100 100 B
13. Medisave Pharmacies, Inc. DE Vencor Operating, Inc. 100 10 B
14. Advanced Infusion Systems, Inc. CA Medisave Pharmacies, Inc. 100 1,000 B
15. American X-Rays, Inc. LA Medisave Pharmacies, Inc. 100 2,000 B
16. First Rehab, Inc. DE Medisave Pharmacies, Inc. 100 1,000 B
17. Medisave of Tennessee, Inc. DE Medisave Pharmacies, Inc. 100 1,000 B
18. Vencare, Inc. DE Vencor Operating, Inc. 100 100 B
19. Vencor Hospice, Inc. KY Vencare, Inc. 100 60 B
20. Vencor Facility Services, Inc. DE Vencor Operating, Inc. 100 100 B
21. Vencor Home Care Services, Inc. DE Vencor Operating, Inc. 100 100 B
22. Vencor Insurance Holdings, Inc. DE Vencor Operating, Inc. 100 100 B
23. Vencor Provider Network, Inc. DE Vencor Insurance Holdings, Inc. 100 100 B
24. Vencor Pediatric Care, Inc. DE Vencor Operating, Inc. 100 100 B
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest Percentage Number of Status (1)
Organization Interest Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25. Ventech Systems, Inc. DE Vencor Operating, Inc. 100 100 B
26. Vencare Rehab Services, Inc. /3/ DE Vencor Operating, Inc. 100 1,000 B
27. Health Care Holdings, Inc. DE Vencare Rehab Services, Inc. 100 1,000 B
28. Health Care Technology, Inc. DE Health Care Holdings, Inc. 100 1,000 B
29. Helian Health Group, Inc. DE Vencare Rehab Services, Inc. 100 1,000 B
30. Helian ASC of Northridge, Inc. CA Helian Health Group, Inc. 100 100,000 B
31. MedEquities, Inc. CA Helian ASC of Northridge, Inc. 100 10,000 B
32. Helian Recovery Corporation CA Helian Health Group, Inc. 100 1,100 B
33. Recovery Inns of America, Inc. CA Helian Recovery Corporation 100 2,500 B
34. VC - OIA, Inc. AZ Helian Health Group, Inc. 100 1,000 B
35. Palo Alto Surgecenter Corporation CA Helian Health Group, Inc. 100 100 B
36. VC - TOHC, Inc. AZ Helian Health Group, Inc. 100 1,000 B
37. Horizon Healthcare Services, Inc. GA Vencare Rehab Services, Inc. 100 1,000 B
38. Tunstall Enterprises, Inc. GA Horizon Healthcare Services, Inc. 100 100 B
39. PersonaCare, Inc. DE Vencare Rehab Services, Inc. 100 995 B
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
_______________________________
/3/ Formerly TheraTx, Inc.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest Percentage Number of Status (1)
Organization Interest Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
40. Lafayette Health Care Center, Inc. GA PersonaCare, Inc. 100 1,000 B
41. PersonaCare Living Center of Clearwater, Inc. DE PersonaCare, Inc. 100 1,000 B
42. PersonaCare of Bradenton, Inc. DE PersonaCare, Inc. 100 1,000 B
43. PersonaCare of Clearwater, Inc. DE PersonaCare, Inc. 100 1,000 B
44. PersonaCare of Connecticut, Inc. CT PersonaCare, Inc. 100 1,000 B
45. Courtland Gardens Health Center, Inc. CT PersonaCare of Connecticut, Inc. 100 1,000 B
46. Homestead Health Center, Inc. CT PersonaCare of Connecticut, Inc. 100 1,000 B
47. Stamford Health Facilities, Inc. CT PersonaCare of Connecticut, Inc. 100 1,000 B
48. PersonaCare of Georgia, Inc. DE PersonaCare, Inc. 100 1,000 B
49. PersonaCare of Huntsville, Inc. DE PersonaCare, Inc. 100 1,000 B
50. PersonaCare of Little Rock, Inc. DE PersonaCare, Inc. 100 100 B
51. PersonaCare of Ohio, Inc. DE PersonaCare, Inc. 100 1,000 B
52. PersonaCare of Owensboro, Inc. DE PersonaCare, Inc. 100 1,000 B
53. PersonaCare of Pennsylvania, Inc. DE PersonaCare, Inc. 100 1,000 B
54. PersonaCare of Pompano East, Inc. DE PersonaCare, Inc. 100 1,000 B
55. PersonaCare of Pompano West, Inc. DE PersonaCare, Inc. 100 1,000 B
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest Percentage Number of Status (1)
Organization Interest Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
56. PersonaCare of Reading, Inc. DE PersonaCare, Inc. 100 1,000 B
57. PersonaCare of San Antonio, Inc. DE PersonaCare, Inc. 100 1,000 B
58. PersonaCare of San Pedro, Inc. DE PersonaCare, Inc. 100 1,000 B
59. PersonaCare of Shreveport, Inc. DE PersonaCare, Inc. 100 1,000 B
60. PersonaCare of St. Petersburg, Inc. DE PersonaCare, Inc. 100 1,000 B
61. PersonaCare of Warner Robbins, Inc. DE PersonaCare, Inc. 100 1,000 B
62. PersonaCare of Wisconsin, Inc. DE PersonaCare, Inc. 100 1,000 B
63. PersonaCare Properties, Inc. GA PersonaCare, Inc. 100 1,000 B
64. Tucker Nursing Center, Inc. GA PersonaCare, Inc. 100 500 B
65. Respiratory Care Services, Inc. DE Vencare Rehab Services, Inc. 100 1,000 B
66. TheraTx Health Services, Inc. DE Vencare Rehab Services, Inc. 100 1,000 B
67. TheraTx Rehabilitation Services, Inc. DE TheraTx Health Services, Inc. 100 1,000 B
68. TheraTx Healthcare Management, Inc. DE Vencare Rehab Services, Inc. 100 1,000 B
69. TheraTx Management Services, Inc. CA Vencare Rehab Services, Inc. 100 1,0000 B
70. TheraTx Medical Supplies, Inc. DE Vencare Rehab Services, Inc. 100 1,000 B
71. TheraTx Staffing, Inc. IL Vencare Rehab Services, Inc. 100 1,000 B
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Percentage Number of Status (1)
Organization Interest Interest Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
72. VC - WM, Inc. FL Vencare Rehab Services, Inc. 100 700 B
73. Transitional Hospitals Corporation NV Vencor Operating, Inc. 100 100 B
74. Community Psychiatric Centers of Transitional Hospitals Corporation
Oklahoma, Inc. OK (NV) 100 1,000 B
75. Community Psychiatric Centers Properties OK Transitional Hospitals Corporation
of Oklahoma, Inc. (NV) 100 1,000 B
76. CPC of Georgia, Inc. GA Transitional Hospitals Corporation
(NV) 100 500 B
77. Peachtree-Parkwood Hospital, Inc. GA CPC of Georgia, Inc. 100 200 B
78. Interamericana Health Care Group NV Transitional Hospitals Corporation
(NV) 100 1,000 B
79. Caribbean Behavioral Health Systems, Inc. NV Interamericana Health Care Group 100 1,000 SG
80. InteHgro Holdings, Ltd. CI Interamericana Health Care Group 100 1 SS
81. Gorgas International Medical Center,
L.L.C. DE InteHgro Holdings, Ltd. 100 N/A
82. Transitional Hospitals Corporation DE Transitional Hospitals Corporation
(NV) 100 1,000 B
83. J. B. Thomas Hospital, Inc. MA Transitional Hospitals Corporation
(DE) 100 1,000 B
84. THC - Chicago, Inc. IL Transitional Hospitals Corporation
(DE) 100 1,000 B
85. THC - North Shore, Inc. IL THC - Chicago, Inc. 100 1,000 B
86. THC - Hollywood, Inc. FL Transitional Hospitals Corporation
(DE) 100 1,000 B
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Percentage Number of Status (1)
Organization Interest Interest Shares
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
87. THC - Houston, Inc. TX Transitional Hospitals Corporation
(DE) 100 1,000 B
88. THC - Minneapolis, Inc. MN Transitional Hospitals Corporation
(DE) 100 1,000 B
89. THC - Orange County, Inc. CA Transitional Hospitals Corporation
(DE) 100 1,000 B
90. THC - San Diego, Inc. CA Transitional Hospitals Corporation
(DE) 100 1,000 B
91. THC - Seattle, Inc. WA Transitional Hospitals Corporation
(DE) 100 1,000 B
92. Transitional Hospitals Corporation of IN Transitional Hospitals Corporation
Indiana, Inc. (DE) 100 1,000 B
93. Transitional Hospitals Corporation of LA Transitional Hospitals Corporation
Louisiana, Inc. (DE) 100 1,000 B
94. Transitional Hospitals Corporation of NM Transitional Hospitals Corporation
New Mexico, Inc. (DE) 100 1,000 B
95. Transitional Hospitals Corporation of NV Transitional Hospitals Corporation
Nevada, Inc. (DE) 100 1,000 B
96. Transitional Hospitals Corporation of FL Transitional Hospitals Corporation
Tampa, Inc. (DE) 100 1,000 B
97. Transitional Hospitals Corporation of TX Transitional Hospitals Corporation
Texas, Inc. (DE) 100 1,000 B
98. Transitional Hospitals Corporation of WI Transitional Hospitals Corporation
Wisconsin, Inc. (DE) 100 1,000 B
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
No. Name State of Holder of Stock/Ownership Interest
Organization
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
99. Transitional Hospitals Corporation of Michigan, Inc. MI Transitional Hospitals Corporation (NV)
100. Community Psychiatric Centers of Arkansas, Inc. AR Transitional Hospitals Corporation (NV)
101. Community Psychiatric Centers of California CA Transitional Hospitals Corporation (NV)
102. Community Psychiatric Centers Properties CA Community Psychiatric Centers of California
Incorporated
103. CPC Investment Corp. CA Community Psychiatric Centers Properties
Incorporated
104. CPC Properties of Illinois, Inc. IL Community Psychiatric Centers Properties
Incorporated
105. CPC Properties of Missouri, Inc. MO Community Psychiatric Centers Properties
Incorporated
106. Community Psychiatric Centers of Florida, Inc. FL Transitional Hospitals Corporation (NV)
107. Community Psychiatric Centers of Idaho, Inc. ID Transitional Hospitals Corporation (NV)
108. Community Psychiatric Centers of Indiana, Inc. IN Transitional Hospitals Corporation (NV)
109. Community Psychiatric Centers of Kansas, Inc. KS Transitional Hospitals Corporation (NV)
110. Community Psychiatric Centers of Mississippi, Inc. MS Transitional Hospitals Corporation (NV)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
No. Percentage Number of Status (1)
Interest Shares
- ------------------------------------------------------------------
<S> <C> <C> <C>
99. 100 1,000 B
100. 100 1,000 B
101. 100 1,518 B
102. 100 2,500 B
103. 100 5,000 B
104. 100 1,000 B
105. 100 1,000 B
106. 100 7,500 B
107. 100 5,000 B
108. 100 1,000 B
109. 100 1,000 B
110. 100 1,000 B
- ------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
No. Name State of Holder of Stock/Ownership Interest
Organization
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
111. Community Psychiatric Centers of Missouri, Inc. MO Transitional Hospitals Corporation (NV)
112. Community Psychiatric Centers of North Carolina, Inc. NC Transitional Hospitals Corporation (NV)
113. Community Psychiatric Centers of Utah, Inc. UT Transitional Hospitals Corporation (NV)
114. Community Psychiatric Centers Properties of Texas, Inc. TX Transitional Hospitals Corporation (NV)
115. Community Psychiatric Centers Properties of Utah, Inc. UT Transitional Hospitals Corporation (NV)
116. C.P.C. of Louisiana, Inc. LA Transitional Hospitals Corporation (NV)
117. CPC Managed Care Health Services, Inc. DE Transitional Hospitals Corporation (NV)
118. Community Behavioral Health System, Inc. LA CPC Managed Care Health Services, Inc.
119. CPC Properties of Arkansas, Inc. AR Transitional Hospitals Corporation (NV)
120. CPC Properties of Indiana, Inc, IN Transitional Hospitals Corporation (NV)
121. CPC Properties of Kansas, Inc. KS Transitional Hospitals Corporation (NV)
122. CPC Properties of Louisiana, Inc. LA Transitional Hospitals Corporation (NV)
123. CPC Properties of Mississippi, Inc. MS Transitional Hospitals Corporation (NV)
124. CPC Properties of North Carolina, Inc. NC Transitional Hospitals Corporation (NV)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------
No. Percentage Number of Status (1)
Interest Shares
- ---------------------------------------------------
<S> <C> <C> <C>
111. 100 1,000 B
112. 100 1,000 B
113. 100 1,000 B
114. 100 1,000 B
115. 100 1,000 B
116. 100 1,000 B
117. 100 1,000 B
118. 100 1,000 B
119. 100 1,000 B
120. 100 1,000 B
121. 100 1,000 B
122. 100 1,000 B
123. 100 1,000 B
124. 100 1,000 B
- ---------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
No. Name State of Holder of Stock/Ownership Interest
Organization
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
125. Florida Hospital Properties, Inc. FL Transitional Hospitals Corporation (NV)
126. Old Orchard Hospital, Inc. IL Transitional Hospitals Corporation (NV)
127. ProData Systems, Inc. AL Vencor Home Care and Hospice Indiana Partnership
128. Pharm-Assist, L.L.C. KY Vencor, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------
No. Percentage Number of Status/(1)/
Interest Shares
- ---------------------------------------------------------
<S> <C> <C> <C>
125. 100 7,500 B
126. 100 100 B
127. 100 333.33 B
128. 50 N/A EP
- ----------------------------------------------------
</TABLE>
<PAGE>
II. PARTNERSHIPS
-----------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest
Organization
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
129. Vencor Hospitals Limited Partnership DE Vencor Nursing Centers Limited Partnership
Vencor Operating, Inc.
130. Vencor Nursing Centers Limited Partnership DE Vencor Hospitals Limited Partnership
Vencor Operating, Inc.
131. Vencor Home Care and Hospice Indiana IN Vencor Home Care Services, Inc.
Partnership Vencor Hospice, Inc.
132. Vencor Nursing Centers Central Limited DE Vencor Nursing Centers, Limited Partnership
Partnership Vencor Operating, Inc.
133. California Respiratory Care Partnership CA Advanced Infusion Systems, Inc.
134. Foothill Nursing Company Partnership CA Vencor Operating, Inc.
135. Pharmaceutical Infusion Therapy Partnership CA Advanced Infusion Systems, Inc.
136. Stamford Health Associates, L.P. CT Stamford Health Facilities, Inc.
PersonaCare, Inc.
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------
Percentage Number of Status
No. Interest Shares
- ------------------------------------------
<S> <C> <C> <C>
129. 1(GP) N/A B
1(GP), N/A
98(LP) N/A
130. 1(GP) N/A B
1(GP), N/A
98(LP) N/A
131. 50(GP) N/A B
50(GP) N/A
132. 1(GP) N/A B
1(GP), N/A
98(LP) N/A
133. 51(GP) N/A EP
134. 50(GP) N/A EP
135. 50.99(GP) N/A EP
136. 1(GP) N/A B
99(LP) N/A
- ------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
No. Name State Of Holder of Stock/Ownership Interest
Organization
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
137. Visiting Nurse Advanced Infusion Systems - CA Advanced Infusion Systems, Inc.
Anaheim
138. Visiting Nurse Advanced Infusion Systems - CA Advanced Infusion Systems, Inc.
Colton
139. Visiting Nurse Advanced Infusion Systems - CA Advanced Infusion Systems, Inc.
Newbury Park
140. Northridge Surgery Center, Ltd. CA Northbridge Surgery Center Development, Ltd.
Helian Health Group, Inc.
Helian ASC of Northridge, Inc.
141. Northridge Surgery Center Development, Ltd. CA MedEquities, Inc.
142. Recovery Inn of Menlo Park, L.P. CA Recovery Inns of America, Inc.
Helian Recovery Corporation
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------
Percentage Number of Status
No. Interest Shares
- -------------------------------------------
<S> <C> <C> <C>
137. 51.01(GP) N/A EP
138. 51.01(GP) N/A EP
139. 51.01(GP) N/A EP
140. 38(GP) N/A EP
13.5(GP) N/A
13(GP), N/A
6(LP) N/A
141. 43(GP) N/A EP
142. 12(LP) N/A EP
58(GP), N/A
27.6(LP) N/A
- -------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 5
Vencor, Inc. Hospitals
-----------------------
(as of 6/30/99)
<TABLE>
<CAPTION>
Count Fac. # Name Street Address City/State/Zip Code
- ----- ------ ---- -------------- -------------------
<S> <C> <C> <C> <C>
OWNED
-----
1 608 Vencor Hospital - Sacramento 223 Fargo Way Folsom, CA 95630
2 610 Vencor Hospital - Dallas 9525 Greenville Avenue Dallas, TX 75214
3 643 Vencor Hospital - Seattle 10560 Fifth Avenue, N.E. Seattle, WA 98125
4 649 Vencor Hospital - Arlington, TX 1000 North Cooper Street Arlington, TX 76011
5 663 Vencor Hospital - Milwaukee 5017 South 110th Street Greenfield, WI 53228
6 695 Vencor Hospital - Los Angeles 5525 West Slauson Avenue Los Angeles, CA 90056
LEASED -- MASTER LEASES
-----------------------
7 602 Vencor Hospital - Coral Gables 5190 Southwest Eighth Street Coral Gables, FL 33134
8 607 Vencor Hospital - Ontario 550 North Monterey Avenue Ontario, CA 91764
9 611 Vencor Hospital - St. Petersburg 3030 6th Street South St. Petersburg, FL 33705
10 612 Vencor Hospital - Kansas City 8701 Troost Avenue Kansas City, MO 64131
11 614 Vencor Hospital - Philadelphia 6129 Palmetto Street Philadelphia, PA 19111
12 615 Vencor Hospital - Sycamore 225 Edward Street Sycamore, IL 60178
13 617 Northern Virginia Community Hospital 601 South Carlin Springs Road Arlington, VA 22204
14 618 Vencor Hospital - Oklahoma City 1407 North Robinson Avenue Oklahoma City, OK 73103
15 619 Vencor Hospital - Pittsburgh 7777 Steubenville Pike Pittsburgh, PA 15071
16 620 Vencor Hospital - LaGrange 207 North Townline Road LaGrange, IN 46761
17 622 Vencor Hospital - San Leandro 2800 Benedict Drive San Leandro, CA 94577
18 628 Vencor Hospital - Chattanooga 709 Walnut Street Chattanooga, TN 37402
19 633 Vencor Hospital - Louisville 1313 St. Anthony Place Louisville, KY 40204
<CAPTION>
Count County Tenant
- ----- ------ ------
<S> <C> <C>
1 Sacramento Vencor Operating, Inc.
2 Dallas Vencor Hospitals, Inc.
3 King THC-Seatle, Inc.
4 Tarrant Transitional Hospitals Corporation of Texas, Inc.
5 Milwaukee Transitional Hospitals Corporation of Wisconsin, Inc.
6 Los Angeles Vencor Operating, Inc.
7 Dade Vencor Operating, Inc.
8 San Bernardino Vencor Operating, Inc.
9 Pinellas Vencor Hospitals East, L.L.C.
10 Jackson Vencor Hospitals East, L.L.C.
11 Philadelphia Vencor Hospitals East, L.L.C.
12 DeKalb THC-Chicago
13 Arlington Vencor Hospitals East, L.L.C.
14 Oklahoma Vencor Hospitals East, L.L.C.
15 Allegheny Vencor Hospitals East, L.L.C.
16 LaGrange Vencor Hospitals Limited Partnership
17 Alameda Vencor Operating, Inc.
18 Hamilton Vencor Hospitals Limited Partnership
19 Jefferson Vencor Hospitals Limited Partnership
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C>
20 635 Vencor Hospital - San Antonio 3636 Medical Drive San Antonio, TX 78229
21 637 Vencor Hospital - Chicago North 2544 West Montrose Avenue Chicago, IL 60618
22 638 Vencor Hospital - Indianapolis 1700 West 10th Street Indianapolis, IN 46222
23 642 Vencor Hospital - Orange County 200 Hospital Circle Westminster, CA 92683
24 644 Vencor Hospital - Brea 875 North Brea Boulevard Brea, CA 92621
25 645 Vencor Hospital - Ft. Lauderdale 1516 East Las Olas Boulevard Ft. Lauderdale, FL 33301
26 647 Vencor Hospital - Las Vegas 5100 West Sahara Avenue Las Vegas, NV 89102
27 648 Vencor Hospital - San Diego 1940 El Cajon Boulevard San Diego, CA 92104
28 652 Vencor Hospital - North Florida 801 Oak Street Green Cove Springs, FL 32043
29 653 Vencor Hospital - Fort Worth Southwest 7800 Oakmont Boulevard Fort Worth, TX 76132
30 654 Vencor Hospital - Houston Northwest 11297 Fallbrook Drive Houston, TX 77065
31 656 Vencor Hospital - Phoenix 40 East Indianola Avenue Phoenix, AZ 85012
32 658 Vencor Hospital - Tucson 355 North Wilmot Road Tucson, AZ 85711
33 659 Vencor Hospital - Minneapolis 4101 Golden Valley Road Golden Valley, MN 55422
34 660 Mansfield General Hospital 1802 Highway 157 North Mansfield, TX 76063
35 662 Vencor Hospital - Greensboro 2401 Southside Boulevard Greensboro, NC 27406
36 664 Vencor Hospital - Albuquerque 700 High Street, N.E. Albuquerque, NM 87102
37 665 Vencor Hospital - Denver 1920 High Street Denver, CO 80218
38 666 Vencor Hospital - New Orleans 3601 Coliseum Street New Orleans, LA 70115
39 668 Vencor Hospital - Fort Worth West 815 Eighth Avenue Fort Worth, TX 76104
40 671 Vencor - Lake Shore 6130 North Sheridan Road Chicago, IL 60660
41 673 Vencor Hospital - Boston North Shore 15 King Street Peabody, MA 01960
42 674 Vencor Hospital - Central Tampa 4801 North Howard Avenue Tampa, FL 33603
43 675 Vencor Hospital - Detroit 26400 West Outer Drive Lincoln Park, MI 48146
44 676 Vencor Hospital - Hollywood 1859 Van Buren Street Hollywood, FL 33020
45 677 Vencor Hospital - Metro Detroit 2700 Martin Luther King, Jr. Blvd. Detroit, MI 48208
46 680 Vencor Hospital - St. Louis 4930 Lindell Boulevard St. Louis, MO 63108
47 685 Vencor Hospital - Houston 6441 Main Street Houston, TX 77030
48 688 Vencor Hospital - Boston 1515 Commonwealth Avenue Boston, MA 02135
<CAPTION>
<S> <C> <C>
20 Bexar Vencor Hospitals Limited Partnership
21 Cook Vencor Hospitals East, L.L.C.
22 Marion Vencor Hospitals Limited Partnership
23 Orange Vencor Operating, Inc.
24 Orange THC-Orange County
25 Broward Vencor Hospitals East, L.L.C.
26 Clark Transitional Hospitals Corporation of Nevada
27 San Diego Vencor Operating, Inc.
28 Clay Vencor Hospitals East, L.L.C.
29 Tarrant Transitional Hospitals Corporation of Texas
30 Harris THC-Houston, Inc.
31 Maricopa Vencor Hospitals West, L.L.C.
32 Pima Vencor Hospitals West, L.L.C.
33 Hennepin THC-Minneapolis, Inc.
34 Tarrant Vencor Hospitals Limited Partnership
35 Guilford Vencor Hospitals East, L.L.C.
36 Bernalillo Transitional Hospitals Corporation of New Mexico, Inc.
37 Denver Vencor Hospitals West, L.L.C.
38 Orleans Transitional Hospitals Corporation of Louisiana, Inc.
39 Tarrant Vencor Hospitals Limited Partnership
40 Cook THC-North Shore, Inc.
41 Essex JB Thomas Hospital, Inc.
42 Hillsborough Transitional Hospitals Corporation of Tampa, Inc.
43 Wayne Vencor Hospitals East, L.L.C.
44 Broward THC-Hollywood, Inc.
45 Wayne THC-Michigan, Inc.
46 St. Louis Vencor Hospitals East, L.L.C.
47 Harris Vencor Hospitals Limited Partnership, Inc.
48 Suffolk Vencor Hospitals East, L.L.C.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C> <C>
49 690 Vencor Hospital - Northlake 365 East North Avenue Northlake, IL 60164
50 693 Recovery Inn of Menlo Park 570 Willow Road Menlo Park, CA 94025
LEASED -- THIRD PARTY LEASES
--------------
51 640 Vencor Hospital - Tampa 4555 South Manhattan Avenue Tampa, FL 33611
52 657 Vencor Hospital - Bay Area-Houston 1004 Seymour Street Pasadena, TX 77506
53 667 Vencor Hospital - Chicago Central 4058 West Melrose Street Chicago, IL 60641
54 670 Vencor Hospital - Atlanta 705 Juniper Street NE Atlanta, GA 30365
55 672 Vencor Hospital - Indianapolis South 898 East Main Street Greenwood, IN 46143
56 686 Vencor Hospital - Dallas East 9440 Poppy Drive Dallas, TX 75218
<CAPTION>
<S>
49 Cook THC-Chicago, Inc.
50 San Mateo Helian
51 Hillsborough Vencor Hospitals East, L.L.C.
52 Harris THC-Houston, Inc.
53 Cook THC-Chicago, Inc.
54 Clayton Vencor Hospitals Limited Partnership
55 Johnson Transitional Hospitals Corporation of Indiana, Inc.
56 Dallas Vencor Hospitals Limited Partnership
</TABLE>
23
<PAGE>
Vencor, Inc. Nursing Centers
----------------------------
(as of 6/30/99)
<TABLE>
<CAPTION>
Count Fac. Name Street Address
- ----- ---- ---- --------------
#
-
<S> <C> <C> <C>
OWNED
-----
57 115 The Rehabilitation Center of the Palm Beaches 300 15th Street
58 160 First Hill Care Center 1334 Terry Avenue
59 212 Woodside Nursing Center 1425 Woodside Drive
60 217 Caldwell Care Center 210 Cleveland Boulevard
61 610 Boca Raton Rehabilitation Center 755 Meadows Road
62 781 Bashford East Health Care 3535 Bardstown Road
LEASED -- MASTER LEASES
-----------------------
63 111 Rolling Hills Health Care Center 3625 St. Joseph Road
64 112 Royal Oaks Health Care & Rehabilitation Center 3500 Maple Avenue
65 113 Southwood Health & Rehabilitation Center 2222 Margaret Avenue
66 114 Arden Rehabilitation and Healthcare Center 16357 Aurora Avenue North
67 116 Pettigrew Rehabilitation and Healthcare Center 1515 West Pettigrew
68 117 East Manor Medical Care Center 1524 East Aveue South
69 124 Healthcare and Rehabilitation Center of Sanford 950 Mellonville Avenue
70 125 Titusville Rehabilitation & Nursing Center 1705 Jess Parrish Court
71 127 Northwest Continuum Care Center 128 Beacon Hill
72 132 Madison Healthcare and Rehabilitation Center 431 Larkin Springs Road
73 136 LaSalle Healthcare Center 411 South LaSalle Street
74 137 Sunnybrook Alzheimer's and Healthcare Specialists 25 Sunnybrook Road
75 138 Blue Ridge Rehabilitation and Healthcare Center 91 Victoria Road
76 140 Wasatch Care Center 3430 Harrison Boulevard
77 143 Raleigh Rehabilitation and Healthcare Center 616 Wade Avenue
78 146 Rose Manor Healthcare Center 4230 North Roxboro Road
79 150 Nob Hill Healthcare Center 1359 Pine Street
80 155 Savannah Rehabilitation & Nursing Center 815 East 63rd Street
81 158 Bellingham Health Care and Rehabilitation Services 1200 Birchwood Avenue
82 165 Rainier Vista Care Center 920 12th Avenue SE
83 167 Canyonwood Nursing and Rehab Center 2120 Benton Drive
84 168 Lakewood Health Care Center 11411 Bridgeport Way
85 180 Vencor of Vancouver Healthcare and Rehabilitation 400 East 33rd Street
Center
86 182 Cordova Rehabilitation and Nursing Center 955 Germantown Road
<CAPTION>
City/State/Zip Code County Tenant
------------------- ------ ------
<S> <C> <C> <C> <C>
57 West Palm Beach, FL 33401 Palm Beach Vencor Nursing Centers East, L.L.C. Owned
58 Seattle, WA 98101 King Vencor Nursing Centers West, L.L.C. Owned
59 San Luis Obispo, CA 93401 San Luis Obispo Vencor Nursing Centers West, L.L.C. Owned
60 Caldwell, ID 83605 Canyon Vencor Nursing Centers West, L.L.C. Owned
61 Boca Raton, FL 33487 Palm Beach Vencor Nursing Centers East, L.L.C. Owned
62 Louisville, KY 40218 Jefferson Vencor Nursing Centers Limited Partnership Owned
63 New Albany, IN 47150 Floyd Vencor Nursing Centers Limited Partnership Leased
64 Terre Haute, IN 47804 Vigo Vencor Nursing Centers Limited Partnership Leased
65 Terre Haute, IN 47802 Vigo Vencor Nursing Centers Limited Partnership Leased
66 Seattle, WA 98133 King Vencor Nursing Centers West, L.L.C. Leased
67 Durham, NC 27705 Durham Vencor Nursing Centers East, L.L.C. Leased
68 Sarasota, FL 34239 Sarasota Vencor Nursing Centers East, L.L.C. Leased
69 Sanford, FL 32771 Seminole Vencor Nursing Centers East, L.L.C. Leased
70 Titusville, FL 32796 Brevard Vencor Nursing Centers East, L.L.C. Leased
71 Longview, WA 98632 Cowlitz Vencor Nursing Centers West, L.L.C. Leased
72 Madison, TN 37115 Davidson Vencor Nursing Centers Limited Partnership Leased
73 Durham, NC 27705 Durham Vencor Nursing Centers East, L.L.C. Leased
74 Raleigh, NC 27610 Wake Vencor Nursing Centers East, L.L.C. Leased
75 Asheville, NC 28801 Buncombe Vencor Nursing Centers East, L.L.C. Leased
76 Ogden, UT 84403 Ogden Vencor Nursing Centers West, L.L.C. Leased
77 Raleigh, NC 27605 Wake Vencor Nursing Centers East, L.L.C. Leased
78 Durham, NC 27704 Durham Vencor Nursing Centers East, L.L.C. Leased
79 San Francisco, CA 94109 San Francisco Vencor Nursing Centers West, L.L.C. Leased
80 Savannah, GA 31405 Chatham Vencor Nursing Centers Limited Partnership Leased
81 Bellingham, WA 98225 Whatcom Vencor Nursing Centers West, L.L.C. Leased
82 Puyallup, WA 98372 Pierce Vencor Nursing Centers West, L.L.C. Leased
83 Redding, CA 96003 Shasta Vencor Nursing Centers West, L.L.C. Leased
84 Tacoma, WA 98499 Pierce Vencor Nursing Centers West, L.L.C. Leased
85 Vancouver, WA 98663 Clerk Vencor Nursing Centers West, L.L.C. Leased
86 Cordova, TN 38018 Shelby Vencor Nursing Centers Limited Partnership Leased
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
87 185 Heritage Health and Rehabilitation Center 3605 Y Street
88 188 Cypress Pointe Rehabilitation and Health Care Center 2006 South 16th Street
89 190 Winston-Salem Rehabilitation and Healthcare Center 1900 West 1st Street
90 191 Silas Creek Manor 3350 Silsas Creek Parkway
91 209 Valley View Health Care Center 333 West Mishawaka Road
92 210 Californian Care Center 2211 Mount Vernon Avenue
93 213 Wildwood Health Care Center 7301 E. 16th Street
94 216 Hillcrest Rehabilitation & Care Center 1001South Hilton
95 218 Cascade Care Center 2814 South Indiana Avenue
96 219 Emmett Rehabilitation & Healthcare 714 North Butte
97 221 Lewiston Rehabilitation & Care Center 3315 8th Street
98 222 Nampa Care Center 404 Horton
99 223 Weiser Rehabilitation & Care Center 331East Park
100 225 Moscow Care Center 420 Rowe Street
101 230 Crosslands Rehabilitation & Healthcare Center 575 East 11000 South
102 245 Bay Pointe Nursing Pavilion 4201 31sth Street South
103 247 St. George Care and Rehabilitation Center 1032 East 100th South
104 268 Colonial Oaks Rehabilitation Center - Fort Myers 3250 Winkler Avenue Extension
105 269 Meadowvale Health & Rehabilitation Center 1520 W. Lancaster
106 277 Rosewood Health Care Center 550 High Street
107 278 Oakview Nursing and Rehabilitation Center 10456 U.S. Highway 62
108 279 Cedars of Lebanon Rest Home 337 South Harrison Street
109 280 Winchester Centre for Health and Rehabilitation 200 White Drive
110 281 Riverside Manor Healthcare Center Highway 136
111 282 Maple Manor Health Care Center 515 Greene Drive
112 286 Columbia Healthcare Center 621 West Columbia
113 289 San Luis Medical and Rehabilitation Center 2305 San Luis Place
114 290 Bremen Health Care Center 316 Woodies Lane
115 294 Windsor Estates of Kokomo 429 West Lincoln Road
116 307 Lincoln Nursing Center 1410 East Gaston Street
117 320 Magnolia Gardens Care Center 1609 Trousdale Drive
118 327 Laurel Ridge Rehabilitation and Nursing Center 174 Forest Hill Street
119 335 Lawton Healthcare Center 1575 7th Avenue
120 350 Valley Gardens Health Care & Rehabilitation Center 1517 E. Knickerbocker Drive
121 372 Carrollwood Care Center 15002 Hutchinson Road
<CAPTION>
<S> <C> <C> <C> <C>
87 Vancouver, WA 98663 Clerk Vencor Nursing Centers West, L.L.C. Leased
88 Wilmington, NC 28401 New Hanover Vencor Nursing Centers East, L.L.C. Leased
89 Winston-Salem, NC 27104 Forsyth Vencor Nursing Centers East, L.L.C. Leased
90 Winston-Salem, NC 27103 Forsyth Vencor Nursing Centers East, L.L.C. Leased
91 Elkhart, IN 46517 Elkhart Vencor Nursing Centers Limited Partnership Leased
92 Bakersfield, CA 93306 Kern Vencor Nursing Centers West, L.L.C. Leased
93 Indianapolis, IN 46219 Marion Vencor Nursing Centers Limited Partnership Leased
94 Boise, ID 83705 Ada Vencor Nursing Centers West, L.L.C. Leased
95 Caldwell, ID 83605 Canyon Vencor Nursing Centers West, L.L.C. Leased
96 Emmett, ID 83617 Gem Vencor Nursing Centers West, L.L.C. Leased
97 Lewiston, ID 83501 Nez Perce Vencor Nursing Centers West, L.L.C. Leased
98 Nampa, ID 83651 Canyon Vencor Nursing Centers West, L.L.C. Leased
99 Weiser, ID 83672 Washington Vencor Nursing Centers West, L.L.C. Leased
100 Moscow, ID 83843 Latah Vencor Nursing Centers West, L.L.C. Leased
101 Sandy, UT 84070 Salt Lake Vencor Nursing Centers West, L.L.C. Leased
102 St. Petersburg, FL 33712 Pinellas Vencor Nursing Centers East, L.L.C. Leased
103 St. George, UT 84770 Washington Vencor Nursing Centers West, L.L.C. Leased
104 Fort Myers, FL 33916 Lee Vencor Nursing Centers East, L.L.C. Leased
105 Bluffton, IN 46714 Wells Vencor Nursing Centers Limited Partnership Leased
106 Bowling Green, KY 42102 Warren Vencor Nursing Centers Limited Partnership Leased
107 Calvert City, KY 42029 Marshall Vencor Nursing Centers Limited Partnership Leased
108 Lebanon, KY 40033 Marion Vencor Nursing Centers Limited Partnership Leased
109 Winchester, KY 40391 Clark Vencor Nursing Centers Limited Partnership Leased
110 Calhoun, KY 42327 McLean Vencor Nursing Centers Limited Partnership Leased
111 Greenville, KY 42345 Muhlenberg Vencor Nursing Centers Limited Partnership Leased
112 Evansville, IN 47710 Vanderburg Vencor Nursing Centers Limited Partnership Leased
113 Green Bay, WI 54304 Brown Vencor Nursing Centers Limited Partnership Leased
114 Bremen, IN 46506 Marshall Vencor Nursing Centers Limited Partnership Leased
115 Kokomo, IN 46901 Howard Vencor Nursing Centers Limited Partnership Leased
116 Lincolnton, NC 28092 Lincoln Vencor Nursing Centers East, L.L.C. Leased
117 Burlingame, CA 94010 San Mateo Vencor Nursing Centers West, L.L.C. Leased
118 Boston, MA 02130 Jamaica Plain Vencor Nursing Centers East, L.L.C. Leased
119 San Francisco, CA 94122 San Francisco Vencor Nursing Centers West, L.L.C. Leased
120 Stockton, CA 95210 San Joaquin Vencor Nursing Centers West, L.L.C. Leased
121 Tampa, FL 33625 Hillsborough Vencor Nursing Centers East, L.L.C. Leased
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
122 406 Muncie Health Care Center 4301 North Walnut
123 407 Parkwood Health Care Center 1001 North Grant Street
124 409 Mountain Valley Care & Rehabilitation Center 601 W. Cameron
125 411 Alta Vista Healthcare 9020 Garfield Avenue
126 416 Park Place Health Care Center 1500 32nd St. So.
127 420 Maywood Acres Healthcare 2641 South C Street
128 433 Parkview Acres Care and Rehabilitation 200 Oregon Street
129 436 Valley Health Care and Rehabilitation Center 5545 East Lee Street
130 441 Mountain Towers Healthcare and Rehabilitation Center 3128 Boxelder Drive
131 452 Sunnyside Care Center 4515 Sunnyside Road SE
132 453 Medford Rehabilitation and Healthcare Center 625 Stevens Street
133 461 Edmonds Rehabilitation and Healthcare Center 21008 76th Avenue West
134 462 Queen Anne Healthcare 2717 Dexter Avenue North
135 481 South Central Wyoming Healthcare and Rehabilitation 542 16th Street
136 482 Wind River Healthcare and Rehabilitation Center 1002 Forest Drive
137 483 Sage View Care Center 1325 Sage Street
138 501 Blue Hills Alzheimer's Care Center 1044 Park Street
139 503 Brigham Manor Nursing and Rehabilitation Center 77 High Street
140 506 Presentation Nursing & Rehabilitation Center 10 Bellamy Street
141 507 Country Manor Rehabilitation and Nursing Center 180 Low Street
142 508 Crawford Skilled Nursing and Rehabilitation Center 273 Oak Grove Avenue
143 513 Hallmark Nursing and Rehabilitation Center 1123 Rockdale Avenue
144 514 Sachem Skilled Nursing & Rehabilitation Center 66 Central Street
145 516 Hammersmith House Nursing Care Center 73 Chestnut Street
146 517 Oakwood Rehabilitation and Nursing Center 11 Pontiac Avenue
147 518 Timberlyn Heights Nursing and Alzheimer's Center 320 Maple Avenue
148 523 Star of David Nursing, Rehabilitation and 1100 VFW Parkway
Alzheimer's Care Center
149 525 La Veta Healthcare Center 920 West La Veta Street
150 526 Brittany Healthcare Center 168 West Central Street
151 527 Briarwood Healthcare Nursing Center 150 Lincoln
152 528 Westridge Healthcare Center 121 Northboro Road
153 529 Bolton Manor Nursing Home 400 Bolton Street
154 532 Hillcrest Nursing Home 94 Summer Street
155 534 Country Gardens Skilled Nursing & Rehabilitation 2045 Grand Army Highway
Center
156 537 Quincy Rehabilitation and Nursing Center 11 McGrath Highway
157 538 West Roxbury Manor Nursing Home 5060 Washington Street
158 539 Newton & Wellesley Alzheimer Center 694 Worcestor Road
159 542 Den-Mar Rehabilitation and Nursing Center 44 South Street
160 544 Augusta Rehabilitation Center 187 Eastern Avenue
161 545 Eastside Rehabilitation and Living Center 516 Mt. Hope Avenue
162 546 Winship Green Nursing Center Winship Street
163 547 Brewer Rehab and Living Center 74 Parkway South
<CAPTION>
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122 Muncie, IN 47303 Delaware Vencor Nursing Centers Limited Partnership Leased
123 Lebanon, IN 46052 Boone Vencor Nursing Centers Limited Partnership Leased
124 Kellogg, ID 83837 Shoshone Vencor Nursing Centers West, L.L.C. Leased
125 Riverside, CA 92503 Riverside Vencor Nursing Centers West, L.L.C. Leased
126 Great Falls, MT 59403 Cascade Vencor Nursing Centers West, L.L.C. Leased
127 Oxnard, CA 93033 Ventura Vencor Nursing Centers West, L.L.C. Leased
128 Dillon, MT 59725 Beaverhead Vencor Nursing Centers West, L.L.C. Leased
129 Tucson, AZ 85712 Pima Vencor Nursing Centers West, L.L.C. Leased
130 Cheyenne, WY 82001 Laramie Vencor Nursing Centers West, L.L.C. Leased
131 Salem, OR 97302 Marion Vencor Nursing Centers West, L.L.C. Leased
132 Medford, OR 97501 Jackson Vencor Nursing Centers West, L.L.C. Leased
133 Edmonds, WA 98020 Snohomish Vencor Nursing Centers West, L.L.C. Leased
134 Seattle, WA 98109 King Vencor Nursing Centers West, L.L.C. Leased
135 Rawlins, WY 82301 Carbon Vencor Nursing Centers West, L.L.C. Leased
136 Riverton, WY 82501 Fremont Vencor Nursing Centers West, L.L.C. Leased
137 Rock Springs, WY 82901 Sweetwater Vencor Nursing Centers West, L.L.C. Leased
138 Stoughton, MA 02072 Norfolk Vencor Nursing Centers East, L.L.C. Leased
139 Newburyport, MA 01950 Essex Vencor Nursing Centers East, L.L.C. Leased
140 Brighton, MA 02135 Suffolk Vencor Nursing Centers East, L.L.C. Leased
141 Newburyport, MA 01950 Essex Vencor Nursing Centers East, L.L.C. Leased
142 Fall River, MA 02723 Bristol/Mass Vencor Nursing Centers East, L.L.C. Leased
143 New Bedford, MA 02740 Bristol Vencor Nursing Centers East, L.L.C. Leased
144 East Bridgewater, MA 02333 Plymouth Vencor Nursing Centers East, L.L.C. Leased
145 Saugus, MA 01906 Essex Vencor Nursing Centers East, L.L.C. Leased
146 Webster, MA 01570 Worcester Vencor Nursing Centers East, L.L.C. Leased
147 Great Barrington, MA 01230 Berkshire Vencor Nursing Centers East, L.L.C. Leased
148 West Roxbury, MA 02132 Suffolk Vencor Nursing Centers East, L.L.C. Leased
149 Orange, CA 92668 Orange Vencor Nursing Centers West, L.L.C. Leased
150 Natick, MA 01760 Middlesex Vencor Nursing Centers East, L.L.C. Leased
151 Needham, MA 02192 Norfolk Vencor Nursing Centers East, L.L.C. Leased
152 Marlborough, MA 01752 Middlesex Vencor Nursing Centers East, L.L.C. Leased
153 Marlborough, MA 01752 Middlesex Vencor Nursing Centers East, L.L.C. Leased
154 Fitchburg, MA 01420 Worcester Vencor Nursing Centers East, L.L.C. Leased
155 Swansea, MA 02777 Bristol Vencor Nursing Centers East, L.L.C. Leased
156 Quincy, MA 02169 Norfolk Vencor Nursing Centers East, L.L.C. Leased
157 West Roxbury, MA 02132 Suffolk Vencor Nursing Centers East, L.L.C. Leased
158 Wellesley, MA 02181 Norfolk Vencor Nursing Centers East, L.L.C. Leased
159 Rockport, MA 01966 Essex Vencor Nursing Centers East, L.L.C. Leased
160 Augusta, ME 04330 Kennebec Vencor Nursing Centers West, L.L.C. Leased
161 Bangor, ME 04401 Penobscot Vencor Nursing Centers West, L.L.C. Leased
162 Bath, ME 04530 Sagadahoc Vencor Nursing Centers West, L.L.C. Leased
163 Brewer, ME 04412 Penobscot Vencor Nursing Centers West, L.L.C. Leased
</TABLE>
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164 549 Kennebunk Nursing and Rehabilitation Center 158 Ross Road
165 550 Norway Convalescent Center Marion Avenue
166 552 Shore Village Nursing Center 201 Camden Street
167 554 Westgate Manor 750 Union Street
168 555 Brentwood Rehabilitation and Nursing Center 122 Portland Street
169 558 Fieldcrest Manor 126 Depot Street
170 559 Birchwood Terrace Healthcare 43 Starr Farm Road
171 560 Franklin Woods Health Care Center 2770 Clime Road
172 562 Andrew House Healthcare 66 Clinic Drive
173 563 Camelot Nursing and Rehabilitation Center 89 Viets Street
174 565 Hamilton Rehabilitation and Healthcare Center 50 Palmer Street
175 566 Windsor Rehabilitation and Healthcare Center 581 Poquonock Avenue
176 567 Nutmeg Pavilion Healthcare 78 Viets Street Extension
177 568 Parkway Pavilion Healthcare 1157 Enfield Street
178 569 Chillicothe Nursing & Rehabilitation Center 60 Marietta Road
179 570 Pickerington Nursing and Rehabilitation Center 1300 Hill Road North
180 571 Logan Health Care Center 300 Arlington Road
181 572 Winchester Place I & II 36 Lehman Drive
182 573 Eagle Pond Rehabilitation and Living Center One Love Lane
183 577 Minerva Park Place Nursing Home 5460 Cleveland Avenue
184 578 West Lafayette Care Center 620 East Main Street
185 581 Blueberry Hill Healthcare Nursing Home 75 Brimbal Avenue
186 582 Colony House Nursing and Rehabilitation Center 277 Washington Street
187 583 Embassy House Skilled Nursing and Rehabilitation Center 2 Beaumont Street
188 584 Franklin Skilled Nursing and Rehabilitation Center 130 Chestnut Street
189 585 Great Barrington Rehabilitation and Nursing Center 148 Maple Avenue
190 587 River Terrace Healthcare Nursing Home 1675 N. Main Street
191 588 Walden Rehabilitation and Nursing Center 785 Main Street
192 591 Dover Rehabilitation and Living Center 307 Plaza Drive
193 592 Greenbriar Terrace Healthcare 55 Harris Road
194 593 Hanover Terrace Healthcare 53 Lyme Road
195 634 Cambridge Health & Rehabilitation Center 1471 Wills Creek Valley Drive
196 635 Coshocton Health & Rehabilitation Center 100 S. Whitewoman Street
197 637 Evergreen Woods Health & Rehabilitation Center 7045 Evergreen Woods Trail
198 640 Las Vegas Healthcare and Rehabilitation Center 2832 Maryland Parkway
199 641 Torrey Pines Care Center 1701 South Torrey Pines Drive
200 645 Specialty Care of Marietta 26 Tower Road NE
201 655 Federal Heights Rehabilitation and Nursing Center 41 South Ninth East
202 660 Savannah Specialty Care Center 11800 Abercorn Street
203 690 Wasatch Valley Rehabilitation 2200 East 3300 South
204 694 Wedgewood Healthcare Center 101 Potters Lane
205 704 Guardian Care of Roanoke Rapids 305 Fourteenth Street
206 706 Guardian Care of Henderson 280 S. Beckford Drive
207 707 Rehabilitation and Nursing Center of Monroe 1212 Sunset Drive
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164 Kennebunk, ME 04043 York Vencor Nursing Centers West, L.L.C. Leased
165 Norway, ME 04268 Oxford Vencor Nursing Centers West, L.L.C. Leased
166 Rockland, ME 04841 Knox Vencor Nursing Centers West, L.L.C. Leased
167 Bangor, ME 04401 Penobscot Vencor Nursing Centers West, L.L.C. Leased
168 Yarmouth, ME 04096 Cumberland Vencor Nursing Centers West, L.L.C. Leased
169 Waldoboro, ME 04572 Lincoln Vencor Nursing Centers West, L.L.C. Leased
170 Burlington, VT 05401 Chittenden Vencor Nursing Centers East, L.L.C. Leased
171 Columbus, OH 43223 Franklin Vencor Nursing Centers East, L.L.C. Leased
172 New Britain, CT 06051 Hartford Vencor Nursing Centers East, L.L.C. Leased
173 New London, CT 06320 New London Vencor Nursing Centers East, L.L.C. Leased
174 Norwich, CT 06360 New London Vencor Nursing Centers East, L.L.C. Leased
175 Windsor, CT 06095 Hartford Vencor Nursing Centers East, L.L.C. Leased
176 New London, CT 06320 New London Vencor Nursing Centers East, L.L.C. Leased
177 Enfield, CT 06062 Hartford Vencor Nursing Centers East, L.L.C. Leased
178 Chillicothe, OH 45601 Ross Vencor Nursing Centers East, L.L.C. Leased
179 Pickerington, OH 43147 Fairfield Vencor Nursing Centers East, L.L.C. Leased
180 Logan, OH 43138 Hocking Vencor Nursing Centers East, L.L.C. Leased
181 Canal Winchester, OH 43110 Franklin Vencor Nursing Centers East, L.L.C. Leased
182 Dennis, MA 02660 Barnstable Vencor Nursing Centers East, L.L.C. Leased
183 Columbus, OH 43231 Franklin Vencor Nursing Centers East, L.L.C. Leased
184 West Lafayette, OH 43845 Coshocton Vencor Nursing Centers East, L.L.C. Leased
185 Beverly, MA 01915 Essex Vencor Nursing Centers East, L.L.C. Leased
186 Abington, MA 02351 Plymouth Vencor Nursing Centers East, L.L.C. Leased
187 Brockton, MA 02402 Plymouth Vencor Nursing Centers East, L.L.C. Leased
188 Franklin, MA 02038 Norfolk Vencor Nursing Centers East, L.L.C. Leased
189 Great Barrington, MA 01230 Berkshire Vencor Nursing Centers East, L.L.C. Leased
190 Lancaster, MA 01523 Worcester Vencor Nursing Centers East, L.L.C. Leased
191 Concord, MA 01742 Middlesex Vencor Nursing Centers East, L.L.C. Leased
192 Dover, NH 03820 Strafford Vencor Nursing Centers West, L.L.C. Leased
193 Nashua, NH 03062 Hillsborough Vencor Nursing Centers West, L.L.C. Leased
194 Hanover, NH 03755 Grafton Vencor Nursing Centers West, L.L.C. Leased
195 Cambridge, OH 43725 Guernsey Vencor Nursing Centers East, L.L.C. Leased
196 Coshocton, OH 43812 Coshocton Vencor Nursing Centers East, L.L.C. Leased
197 Spring Hill, FL 34608 Hernando Vencor Nursing Centers East, L.L.C. Leased
198 Las Vegas, NV 89109 Clark Vencor Nevada, L.L.C. Leased
199 Las Vegas, NV 89102 Clark Vencor Nevada, L.L.C. Leased
200 Marietta, GA 30090 Cobb Vencor Nursing Centers Limited Partnership Leased
201 Salt Lake City, UT 84102 Salt Lake Vencor Nursing Centers West, L.L.C. Leased
202 Savannah, GA 31499 Chatham Vencor Nursing Centers Limited Partnership Leased
203 Salt Lake City, UT 84109 Salt Lake Vencor Nursing Centers West, L.L.C. Leased
204 Clarksville, IN 47129 Clark Vencor Nursing Centers Limited Partnership Leased
205 Roanoke Rapids, 27870 Halifax Vencor Nursing Centers East, L.L.C. Leased
206 Henderson, NC 27536 Vance Vencor Nursing Centers East, L.L.C. Leased
207 Monroe, NC 28110 Union Vencor Nursing Centers East, L.L.C. Leased
</TABLE>
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208 711 Guardian Care of Kinston 907 Cunningham Road
209 713 Guardian Care of Zebulon 509 West Gannon Avenue
210 723 Guardian Care of Rocky Mount 160 Winstead Avenue
211 724 Rehabilitation and Health Center of Gastonia 416 North Highland Street
212 726 Guardian Care of Elizabeth City 901 S. Halstead Boulevard
213 738 Bay View Nursing and Rehabilitation Center 516 Willow Street
214 742 Sonoran Rehabilitation and Care Center 4202 North 20th Avenue
215 743 Desert Life Rehabilitation and Care Center 1919 West Medical St.
216 744 Cherry Hills Health Care Center 3575 South Washington Street
217 745 Aurora Care Center 10201 East Third Avenue
218 746 Homestead Healthcare & Rehabilitation Center 4735 South 54th Street
219 765 Eastview Medical and Rehabilitation Center 729 Park Street
220 766 Colonial Manor Medical and Rehabilitation Center 1010 East Wausau Avenue
221 767 Colony Oaks Care Center 601 Briarcliff Drive
222 769 North Ridge Medical and Rehabilitation Center 1445 North 7th Street
223 770 Vallhaven Care Center 125 Byrd Avenue
224 771 Kennedy Park Medical & Rehabilitation Center 6001 Alderson Street
225 772 Family Heritage Medical and Rehabilitation Center 130 Strawberry Lane
226 773 Mount Carmel Medical and Rehabilitation Center 677 East State Street
227 774 Mt. Carmel Health & Rehabilitation Center 5700 West Layton Avenue
228 775 Sheridan Medical Complex 8400 Sheridan Road
229 776 Woodstock Health and Rehabilitation Center 3415 Sheridan Road
230 779 Westview Nursing and Rehabilitation Center 1510 Clinic Drive
231 780 Columbus Health and Rehabilitation Center 2100 Midway
232 782 Danville Centre for Health and Rehabilitation 642 North 3rd Street
233 783 Lexington Center for Health and Rehabilitation 353 Waller Avenue
234 784 Northfield Centre for Health and Rehabilitation 6000 Hunting Road
235 785 Hillcrest Health Care Center 3740 Old Hartford Road
236 787 Woodland Terrace Health Care Facility 1117 Woodland Drive
237 791 Rehabilitation and Healthcare Center of Huntsville 105 Teakwood Drive
238 796 Hacienda Rehabilitation and Care Center 660 Coronado Drive
239 802 Bridgepark Center for Rehabilitation & Nursing 145 Olive Street
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208 Kinston, NC 28501 Lenoir Vencor Nursing Centers East, L.L.C. Leased
209 Zebulon, NC 27597 Wake Vencor Nursing Centers East, L.L.C. Leased
210 Rocky Mount, NC 27804 Nash Vencor Nursing Centers East, L.L.C. Leased
211 Gastonia, NC 28052 Gaston Vencor Nursing Centers East, L.L.C. Leased
212 Elizabeth City, NC 27909 Pasquotank Vencor Nursing Centers East, L.L.C. Leased
213 Alameda, CA 94501 Alameda Vencor Nursing Centers West, L.L.C. Leased
214 Phoenix, AZ 85015 Maricopa Vencor Nursing Centers West, L.L.C. Leased
215 Tucson, AZ 85704 Pima Vencor Nursing Centers West, L.L.C. Leased
216 Englewood, CO 80110 Arapahoe Vencor Nursing Centers West, L.L.C. Leased
217 Aurora, CO 80010 Arapahoe Vencor Nursing Centers West, L.L.C. Leased
218 Lincoln, NE 68516 Lancaster Vencor Nursing Centers West, L.L.C. Leased
219 Antigo, WI 54409 Lanefade Vencor Nursing Centers Limited Partnership Leased
220 Wausau, WI 54401 Marathon Vencor Nursing Centers Limited Partnership Leased
221 Appleton, WI 54915 Autagamie Vencor Nursing Centers Limited Partnership Leased
222 Manitowoc, WI 54220 Manitowoc Vencor Nursing Centers Limited Partnership Leased
223 Neenah, WI 54956 Winnebago Vencor Nursing Centers Limited Partnership Leased
224 Schofield, WI 54476 Marathon Vencor Nursing Centers Limited Partnership Leased
225 Wisconsin Rapids, WI 54494 Wood Vencor Nursing Centers Limited Partnership Leased
226 Burlington, WI 53105 Racine Vencor Nursing Centers Limited Partnership Leased
227 Milwaukee, WI 53220 Milwaukee Vencor Nursing Centers Limited Partnership Leased
228 Kenosha, WI 53140 Kenosha Vencor Nursing Centers Limited Partnership Leased
229 Kenosha, WI 53140 Kenosha Vencor Nursing Centers Limited Partnership Leased
230 Bedford, IN 47421 Lawrence Vencor Nursing Centers Limited Partnership Leased
231 Columbus, IN 47201 Bartholomew Vencor Nursing Centers Limited Partnership Leased
232 Danville, KY 40422 Boyle Vencor Nursing Centers Limited Partnership Leased
233 Lexington, KY 40504 Fayette Vencor Nursing Centers Limited Partnership Leased
234 Louisville, KY 40222 Jefferson Vencor Nursing Centers Limited Partnership Leased
235 Owensboro, KY 42301 Daviess Vencor Nursing Centers Limited Partnership Leased
236 Elizabethtown, KY 42701 Hardin Vencor Nursing Centers Limited Partnership Leased
237 Huntsville, AL 35801 Madison Vencor Nursing Centers East, L.L.C. Leased
238 Sierra Vista, AZ 85635 Chochise Vencor Nursing Centers West, L.L.C. Leased
239 Akron, OH 44310 Summit Vencor Nursing Centers East, L.L.C. Leased
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Services
240 804 Rehabilitation and Healthcare Center of Birmingham 2728 Tenth Avenue South
241 806 Chapel Hill Rehabilitation and Healthcare Center 1602 East Franklin Street.
242 822 Primacy Healthcare and Rehabilitation Center 6025 Primacy Parkway
243 824 Rehabilitation and Healthcare Center of Mobile 1758 limited Avenue
244 825 Nansemond Pointe Rehabilitation and Healthcare 200 Constance Road
Center
245 826 Harbour Pointe Medical and Rehabilitation Centre 1005 Hampton Boulevard
246 829 River Pointe Rehabilitation and Healthcare Center 4142 Bonney Road
247 836 Rehabilitation and Healthcare Center of Tampa 4411 North Habanan Avenue
248 837 Rehabilitation and Healthcare Center of Cape Coral 2629 Delprado Boulevard
249 842 Bay Pointe Medical and Rehabilitation Centre 1148 First Colonial Road
250 851 Villa Campana Health Care Center 6651 Carondelet Drive, East
251 853 Kachina Point Health Care and Rehabilitation Center 505 Jacks Canyon Road
252 859 Castle Garden Care Center 401 Malley Drive
253 864 Harrodsburg Health Care Manor 853 Lexington Road
254 868 Lebanon Country Manor 700 Monroe Road
255 873 Brighton Care Center 2025 East Egbert Street
256 884 Masters Health Care Center 278 Dry Valley Road
257 1217 Casa Mora Rehabilitation and Extended Care 1902 59th Street West
258 1218 North Broward Rehabilitation and Nursing Center 401 East Sample Road
259 1220 Highland Pines Rehabilitation & Nursing Center 1111 South Highland Avenue
260 1221 Courtland Gardens Health Care Center 53 Courtland Avenue
261 1224 Health Havens Nursing Center 100 Wampanoag Trail
262 1226 Homestead Health Center 160 Glenbrook Road
263 1228 Lafayette Nursing and Rehab Center 110 Brandywine Boulevard
264 1231 Oak Hill Nursing and Rehabilitation Center 544 Pleasant Street
265 1232 Pompano Rehabilitation and Nursing Center 51 West Sample Road
266 1233 The Abbey Rehabilitation Center 7109 9th Street North
267 1234 San Pedro Manor 515 West Ashby Place
268 1237 PersonaCare of Wyoming 1000 E. Wyomissing Boulevard
269 1238 Tucker Nursing Center 2165 Idlewood Road
LEASED--THIRD PARTY LEASES
---------------------------
270 131 Vencor at Corydon
271 148 Village Square Nursing and Rehabilitation Center 1586 West San Marcos Boulevard
272 161 Issaquah Care Center 805 Front Street South
273 163 Talbot Center for Rehabilitation and Healthcare 4430 Talbot Road South
274 171 Pine Meadows Healthcare and Rehabilitation Center 700 Nuckolls Road
275 174 Camden Healthcare and Rehabilitation Center 197 Hospital Drive
276 175 Jefferson City Health and Rehabilitation Center 283 West Broadway Boulevard
277 177 Loudon Healthcare Center 1520 Grove Street
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240 Birmingham, AL 35205 Jefferson Vencor Nursing Centers East, L.L.C. Leased
241 Chapel Hill, NC 27514 Orange Vencor Nursing Centers East, L.L.C. Leased
242 Memphis, TN 38119 Shelby Vencor Nursing Centers Limited Partnership Leased
243 Mobile, AL 36607 Mobile Vencor Nursing Centers East, L.L.C. Leased
244 Suffolk, VA 23434 NA Vencor Nursing Centers East, L.L.C. Leased
245 Norfolk, VA 23507 Richmond Vencor Nursing Centers East, L.L.C. Leased
246 Virginia Beach, VA 23452 Virginia Beach Vencor Nursing Centers East, L.L.C. Leased
247 Tampa, FL 33614 Hillsborough Vencor Nursing Centers East, L.L.C. Leased
248 Cape Coral, FL 33904 Lee Vencor Nursing Centers East, L.L.C. Leased
249 Virginia Beach, VA 23454 Virginia Beach Vencor Nursing Centers East, L.L.C. Leased
250 Tucson, AZ 85710 Pima Vencor Nursing Centers West, L.L.C. Leased
251 Sedona, AZ 86336 Yavapai Vencor Nursing Centers West, L.L.C. Leased
252 Northglenn, CO 80233 Adams Vencor Nursing Centers West, L.L.C. Leased
253 Harrodsburg, KY 40330 Mercer Vencor Nursing Centers Limited Partnership Leased
254 Lebanon, OH 45036 Warren Vencor Nursing Centers East, L.L.C. Leased
255 Brighton, CO 80601 Adams Vencor Nursing Centers West, L.L.C. Leased
256 Algood, TN 38501 Putnam Vencor Nursing Centers Limited Partnership Leased
257 Bradenton, FL Manatee PersonaCare of Bradenton, Inc. Leased
258 Pompano Beach, FL 33064 Broward PersonaCare of Pompano, Inc. Leased
259 Clearwater, FL 34616 Pinellas PersonaCare of Georgia, Inc. Leased
260 Stamford, CT 06902 Fairfield Courtland Gardens Health Care, Inc. Leased
261 E. Providence, RI 02915 Providence HH Association Leased
262 Stamford, CT 06902 Fairfield Homestead Health Center, Inc. Leased
263 Fayetteville, GA 30214 Fayette Lafayette Health Care Center, Inc. Leased
264 Pawtucket, RI 02860 Providence Oak Hill Association Leased
265 Pompano Beach, FL 33064 Broward PersonaCare of Pompano, Inc. Leased
266 St. Petersburg, FL 33702 Pinellas PersonaCare of St. Petersburg, Inc. Leased
267 San Antonio, TX 78212 Bexar PersonaCare of San Pedro, Inc. Leased
268 Reading, PA 19611 Berks PersonaCare of Reading, Inc. Leased
269 Tucker, GA 30084 De Kalb Tucker Nursing Center, Inc. Leased
LEASED--THIRD PARTY LEASES
--------------------------
270 Vencor Nursing Centers Limited Partnership Leased
271 San Marcos, CA 92069 San Diego Vencor Nursing Centers West, L.L.C. Leased
272 Issaquah, WA 98027 King Vencor Nursing Centers West, L.L.C. Leased
273 Renton, WA 98055 King Vencor Nursing Centers West, L.L.C. Leased
274 Bolivar, TN 38008 Hardeman Vencor Nursing Centers Limited Partnership Leased
275 Camden, TN 38320 Benton Vencor Nursing Centers Limited Partnership Leased
276 Jefferson City, TN 37760 Jefferson Vencor Nursing Centers Limited Partnership Leased
277 Loudon, TN 37774 Loudon Vencor Nursing Centers Limited Partnership Leased
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278 178 Shelby Pines Rehabilitation and Healthcare Center 3909 Covington Pike
279 179 Huntingdon Health and Rehabilitation Center 635 High Street
280 181 Windsor Woods Convalescent Center 13719 Dallas Drive
281 183 Ripley Healthcare and Rehabilitation Center 118 Hallburton Road
282 184 Greystone Health Care Center P.O. Box 1133 TCAS
283 186 Park Manor Rehabilitation Center 1710 Plaza Way
284 187 Maryville Healthcare and Rehabilitation Center 1012 Jamestown Way
285 189 Fairpark Healthcare Center 307 N. 5th
286 193 Rehabilitation and Healthcare Center of Alamance 779 Woody Dr.
287 194 Vencor at Eagle Creek
288 197 Oshkosh Medical & Rehabilitation Center 1850 Bowen Street
289 198 Harrington House Nursing and Rehabilitation Center 160 Main Street
290 199 Vencor at Sellersburg 7823 Old Highway #60,
291 204 Angel River Health and Rehabilitation (1) 5233 Rosebud Lane
292 205 Hacienda Care Center 76 Fenton Street
293 224 Regency Place of Castleton 5226 E. 82nd Street
294 227 Alcorn County Care Inn 3701 JoAnne Drive
295 232 Regency Place of Dyer 2300 Great Lakes Drive
296 237 Newark Healthcare Center 75 McMIllen Drive
297 240 Regency Place of Greenwood 377 Westridge Boulevard
298 246 The Oaks at Avon 1010 US27 North
299 248 Liberty Care Center Highway 127 South, PO Box 1435
300 271 Heritage Manor Health Care Center 4th & Indiana Avenue
301 287 Crestview 3801 Old Bruceville Road
302 288 Indian Creek Health and Rehabilitation Center 240 Beechmont Drive
303 295 Whitehouse Country Manor 11239 Waterville Street
304 296 Chalet Village Health and Rehabilitation Center 1065 Parkway Street
305 368 Santa Cruz Healthcare Center 1115 Capitola Road
306 402 Regency Place of Fort Wayne 6006 Brandy Chase Cove
307 403 Regency Place of Greenfield 200 Green Meadows Drive
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278 Memphis, TN 38134 Shelby Vencor Nursing Centers Limited Partnership Leased
279 Huntingdon, TN 38344 Carroll Vencor Nursing Centers Limited Partnership Leased
280 Hudson, FL 34667 Pasco Vencor Nursing Centers East, L.L.C. Leased
281 Ripley, TN 38063 Landerdale Vencor Nursing Centers Limited Partnership Leased
282 Blountville, TN 37617 Sullivan Vencor Nursing Centers Limited Partnership Leased
283 Walla Walla, WA 99362 Walla Walla Vencor Nursing Centers West, L.L.C. Leased
284 Maryville, TN 37803 Blount Vencor Nursing Centers Limited Partnership Leased
285 Maryville, TN 37801 Blount Vencor Nursing Centers Limited Partnership Leased
286 Graham, NC 27253 Alamance Vencor Nursing Centers East, L.L.C. Leased
287 Indianapolis, IN Marion Vencor Nursing Centers Limited Partnership Leased
288 Oshkosh, WI 54901 Winnebago Vencor Nursing Centers Limited Partnership Leased
289 Walpole, MA 02081 Norfolk Vencor Nursing Centers East, L.L.C. Leased
290 Sellersburg, IN 47172 Clark Vencor Nursing Centers Limited Partnership Leased
291 Newburgh, IN 47630
292 Livermore, CA 94550 Alameda Vencor Nursing Centers West, L.L.C. Leased
293 Indianapolis, IN 46250 Marion Vencor Nursing Centers Limited Partnership Leased
294 Corinth, MS 38834 Alcorn Vencor Nursing Centers East, L.L.C. Leased
295 Dyer, IN 46311 Lake Vencor Nursing Centers Limited Partnership Leased
296 Newark, OH 43055 Licking Vencor Nursing Centers East, L.L.C. Leased
297 Greenwood, IN 46142 Johnson Vencor Nursing Centers Limited Partnership Leased
298 Avon Park, FL 33825 Highlands Vencor Nursing Centers East, L.L.C. Leased
299 Liberty, KY 42539 Casey Vencor Nursing Centers Limited Partnership Leased
300 Mayfield, KY 42066 Graves Vencor Nursing Centers Limited Partnership Leased
301 Vincennes, IN 47591 Knox Vencor Nursing Centers Limited Partnership Leased
302 Corydon, IN 47112 Harrison Vencor Nursing Centers Limited Partnership Leased
303 Whitehouse, OH 43571 Lucas Vencor Nursing Centers East, L.L.C. Leased
304 Berne, IN 46711 Adams Vencor Nursing Centers Limited Partnership Leased
305 Santa Cruz, CA 95062 Santa Cruz Vencor Nursing Centers West, L.L.C. Leased
306 Ft. Wayne, IN 46815 Allen Vencor Nursing Centers Limited Partnership Leased
307 Greenfield, IN 46140 Hancock Vencor Nursing Centers Limited Partnership Leased
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<S> <C> <C> <C>
308 404 Regency Place of Lafayette 300 Windy Hill Drive
309 405 Regency Place of South Bend 52654 N. Ironwood Road
310 408 Colonial Oaks Health Care Center 4725 South Colonial Oaks Drive
311 415 Highland Nursing and Rehabilitation Center 7534 Palm Avenue
312 419 Salt Lake Nursing and Rehabilitation Center 165 South 1000 East
313 434 Livingston Health and Rehabilitation Center 510 South 14th Street
314 455 Hyland Hills Rehab Center 11850 SW Allen Boulevard
315 531 Nichols House Nursing Home 184 Main Street
316 540 Brook Farm Rehabilitation and Nursing Center 1190 VFW Parkway
317 541 Westborough Health Care Center 5 Colonial Drive
318 717 Guardian Care of Scotland Neck 920 Junior High School Road
319 718 Guardian Care of Ahoskie Stokes Street Extension
320 722 Guardian Care of Kenansville Beasley Street, P.O. Box 430
321 786 Riverfront Terrace Health Care Center 501 North Third Street
322 789 Northhaven Health Care Center 3300 Broadway NE
323 849 Iliff Care Center 6060 East Iliff Avenue
324 870 Community Health Care Center 175 Community Drive
325 909 Golden Gate Health Care Center 2707 Pine Street
326 911 Victorian Healthcare Center 2121 Pine Street
327 1213 Eastview Nursing Home 3020 Jeffersonville Road
328 1214 Elberta Health Care 419 Elberta Road
329 1216 Middleton Village Nursing and Rehabilitation Center 6201 Elmwood Avenue
330 1219 PersonaCare of Clayton 2055 Rex Road
331 1223 PersonaCare at Eastwood 2125 Fairview Avenue
332 1225 Hermitage Nursing and Rehabilitation Center 1614 Parrish Avenue
333 1227 Big Springs Specialty Care Center 500 St. Clair Avenue South
334 1229 The LakeMed Nursing and Rehabilitation Center 70 Normandy Drive
335 1230 Normandy Terrace Northeast 8607 Village Drive
336 1235 Irving Place Rehabilitation and Nursing Center 1736 Irving Place
337 1236 PersonaCare of Warner Robbins 1601 Elberta Road
<CAPTION>
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308 Lafayette, IN 47905 Tippecanoe Vencor Nursing Centers Limited Partnership Leased
309 South Bend, IN 46635 St. Joseph Vencor Nursing Centers Limited Partnership Leased
310 Marion, IN 46953 Grant Vencor Nursing Centers Limited Partnership Leased
311 Highland, CA 92346 San Bernardino Vencor Nursing Centers West, L.L.C. Leased
312 Salt Lake City, UT 84102 Salt Lake Vencor Nursing Centers West, L.L.C. Leased
313 Livingston, MT 59047 Park Vencor Nursing Centers West, L.L.C. Leased
314 Beaverton, OR 97005 Washington Vencor Nursing Centers West, L.L.C. Leased
315 Fairhaven, MA 02719 Bristol Vencor Nursing Centers East, L.L.C. Leased
316 West Roxbury, MA 02132 Suffolk Vencor Nursing Centers East, L.L.C. Leased
317 Westborough, MA 01581 Worcester Vencor Nursing Centers East, L.L.C. Leased
318 Scotland Neck, NC 27874 Halifax Vencor Nursing Centers East, L.L.C. Leased
319 Ahoskie, NC 27910 Hertford Vencor Nursing Centers East, L.L.C. Leased
320 Kenansville, NC 28349 Duplin Vencor Nursing Centers East, L.L.C. Leased
321 Paducah, KY 42001 McCracken Vencor Nursing Centers Limited Partnership Leased
322 Knoxville, TN 38917 Knox Vencor Nursing Centers Limited Partnership Leased
323 Denver, CO 80222 Denver Vencor Nursing Centers West, L.L.C. Leased
324 Marion, OH 43302 Marion Vencor Nursing Centers East, L.L.C. Leased
325 San Francisco, CA 94115 San Francisco Vencor Nursing Centers West, L.L.C. Leased
326 San Francisco, CA 94115 San Francisco Vencor Nursing Centers West, L.L.C. Leased
327 Macon, GA 31298 Bibb Tunstall Enterprises, Inc. Leased
328 Warner Robins, GA 31093 Houston Tunstall Enterprises, Inc. Leased
329 Middleton, WI 53562 Dane PersonaCare of Wisconsin, Inc. Leased
330 Lake City, GA 30260 Clayton PersonaCare of Clayton, Inc. Leased
331 Easton, PA 18042 Northampton PersonaCare of Pennsylvania, Inc. Leased
332 Owensboro, KY 42301 PersonaCare of Owensboro, Inc. Leased
333 Huntsville, AL 35801 Madison PersonaCare of Huntsville, Inc. Leased
334 Painesville, OH 44077 Lake PersonaCare of Ohio, Inc. Leased
335 San Antonio, TX 78217 Bexar PersonaCare of San Antonio, Inc. Leased
336 Shreveport, LA 71101 Caddo PersonaCare of Shreveport, Inc. Leased
337 Warner Robins, GA 31093 Houston PersonaCare of Warner Robbins, Inc. Leased
</TABLE>
(1) The Angel River facility is not yet licensed for operation.
<PAGE>
SCHEDULE 6
EXISTING AFFILIATE AGREEMENTS
-----------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
FACILITY AGREEMENT RELEVANT AFFILIATE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
926 Management Agreement dated as of February Hillhaven-MSC Partnership
Nineteenth Avenue HCC 29, 1988, by and between Hillhaven, Inc.
2043 - 19/th/ Avenue (whose obligations have been assumed by
San Francisco, CA Vencor Nursing Centers West, LLC), and
Hillhaven-MSC Partnership, a California
general partnership
- ----------------------------------------------------------------------------------------------------------
949 Management Agreement dated as of 1985, by Ledgewood Healthcare
Ledgewood Rehab. & Nsg. and between The Hillhaven Corporation Corporation
87 Herrick Street (whose obligations have been assumed by
Beverly, MA Vencor Nursing Centers East, LLC), and
Ledgewood Health Care Corporation, a
Massachusetts corporation
- ----------------------------------------------------------------------------------------------------------
983 Long Term Care Facility Management Fox Hill Village Partnership
Clark House Nrsg. Ctr. Agreement dated as of July 1, 1990, by and
30 Longwood Drive between First Healthcare Corporation
Westwood, MA (whose obligations have been assumed by
Vencor Nursing Centers East, LLC), and Fox
Hill Village Partnership, a Massachusetts
general partnership
- ----------------------------------------------------------------------------------------------------------
995 Agreement to Provide Management Services Starr Farm Partnership
Starr Farm Nursing Center to a Health Care Facility dated as of
98 Starr Farm Road December 30, 1986, by and between First
Burlington, VT Healthcare Corporation (whose obligations
have been assumed by Vencor Nursing
Centers East, LLC), and Starr Farm
Partnership, a Vermont general partnership
- ----------------------------------------------------------------------------------------------------------
Corporate Shareholders and Registration Rights Atria Communities, Inc.
Agreement dated as of September 15, 1998
among Atria Communities, Inc., Kapson
Senior Quarters Corp., Vencor, Inc.,
Vencor Holdings, LLC and the management
shareholders party thereto
- ----------------------------------------------------------------------------------------------------------
Corporate Sale and Purchase Agreement dated February HealthEssentials Solutions,
25, 1999 between NPPA of America, Inc., Inc.
HealthEssentials Solutions, Inc.; Harris
W. Miers, Jr., Gregory P. Guidroz, Lana S.
Ralston, Robert B. Teague and Vencor
Operating, Inc. (continuing registration
and preemptive rights)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Corporate $110,000 Promissory Note made by HealthEssentials Solutions,
HealthEssentials Solutions, Inc. in favor Inc.
of Vencor Operating, Inc.
- ----------------------------------------------------------------------------------------------------------
Corporate $500,000 Promissory Note made by HealthEssentials Solutions,
HealthEssentials Solutions, Inc. in favor Inc.
of Vencor Operating, Inc.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 7
----------
MANAGEMENT CONTRACTS
--------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
FACILITY AGREEMENT MANAGER
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
169 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
Menorah House January 31, 1990
9945 Central Park Blvd. N
Boca Raton, FL
- ---------------------------------------------------------------------------------------------------------------
226 Management Agreement dated as of Vencor Nursing Centers West, L.L.C.
Brookhaven Nrsg. Center January 31, 1990
1855 Cheyenne Drive
Carrollton, TX
- ---------------------------------------------------------------------------------------------------------------
815 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
Lago Vista Care Center January 31, 1990
5430 Linton Boulevard
Delray Beach, FL
- ---------------------------------------------------------------------------------------------------------------
920 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
Marietta Ctr for Hlth & Rehab July 12, 1983
117 Bartlett Street
Marietta, OH
- ---------------------------------------------------------------------------------------------------------------
926 Management Agreement dated as of Vencor Nursing Centers West, L.L.C.
Nineteenth Avenue HCC February 29, 1988
2043 - 19/th/ Avenue
San Francisco, CA
- ---------------------------------------------------------------------------------------------------------------
949 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
Ledgewood Rehab. & Nsg. 1985
87 Herrick Street
Beverly, MA
- ---------------------------------------------------------------------------------------------------------------
950 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
Salemhaven Nursing Home April 21, 1983
23 Geremonty Drive
Salem, NH
- ---------------------------------------------------------------------------------------------------------------
978 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
North Shore Living Center January 31, 1990
106 Medical Center Drive
Slidell, LA
- ---------------------------------------------------------------------------------------------------------------
981 Foothill Skilled Nursing Vencor Nursing Centers West, L.L.C.
Foothill Nsg. & Rehab Ctr. Facility Management Agreement
401 West Ada Avenue dated as of 1986
Glendora, CA
- ---------------------------------------------------------------------------------------------------------------
983 Long Term Care Facility Vencor Nursing Centers East, L.L.C.
Clark House Nrsg. Ctr. Management Agreement dated as of
30 Longwood Drive July 1, 1990
Westwood, MA
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
FACILITY AGREEMENT MANAGER
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
990 Management Agreement dated as of Vencor Nursing Centers East, L.L.C.
Jo Ellen Smith Conv. Center January 31, 1990
4502 General Meyer Avenue
New Orleans, LA
- ---------------------------------------------------------------------------------------------------------------
992 Agreement to Provide Management Vencor Nursing Centers West, L.L.C.
Holladay Healthcare Center Services to a Health Care
4782 South Holladay Blvd. Facility dated as of September
Salt Lake City, UT 1, 1985
- ---------------------------------------------------------------------------------------------------------------
995 Agreement to Provide Management Vencor Nursing Centers East, L.L.C.
Starr Farm Nursing Center Services to a Health Care
98 Starr Farm Road Facility dated as of December
Burlington, VT 30, 1986
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 8
LITIGATION
----------
Summary descriptions of various significant legal and regulatory activities
follow (all references to the "Company" are references to Vencor, Inc. or Vencor
Operating, Inc., as appropriate):
On March 18, 1999, the Company served Ventas with a demand for mediation
pursuant to the Reorganization Agreement. On March 31, 1999, the Company and
Ventas entered into the Standstill Agreement which provided that both companies
would postpone through April 12, 1999 any claims either may have against the
other, including any claims that Ventas would have for the Company's decision
not to pay rent due on April 1, 1999. The Standstill Agreement was entered into
in furtherance of the discussions between the Company and Ventas concerning
possible reductions in the rent payments and other concessions under the Master
Lease Agreements. On April 12, 1999, the Company and Ventas entered into the
Second Standstill which provided for the payment on various dates of the rent
payments initially due on April 1. The Second Standstill further provided that
neither party would pursue any claims against the other or any other third party
related to the Reorganization Transactions as long as the Company complied with
the payment terms. The Second Standstill was scheduled to terminate on May 5,
1999. Pursuant to the Tolling Agreement, the Company and Ventas also agreed that
any statutes of limitations or other time-related constraints in a bankruptcy or
other proceeding that might be asserted by one party against the other would be
extended and tolled from April 12, 1999 until May 5, 1999 or until the
termination of the Second Standstill. As a result of the Company's failure to
pay rent, Ventas served the Company with notices of nonpayment under the Master
Lease Agreements. Subsequently, the Company and Ventas have entered into further
amendments to the Second Standstill and the Tolling Agreement to extend the time
during which no remedies may be pursued by either party and to extend the date
by which the Company may cure its failure to pay rent. The Second Standstill and
the Tolling Agreement have been extended to provide that Ventas cannot exercise
any remedy under the Master Lease Agreements through September 9, 1999 and
neither party can bring any action against the other through September 9, 1999
unless the Company fails to make the rescheduled rent payments or unless the
Company files for bankruptcy or a bankruptcy action is filed against the
Company. The Company will have until September 14, 1999 to cure any default
related to the nonpayment of the August and September rent. The Company has paid
all rent due under the Master Lease Agreements through July 1999. If the parties
are unable to resolve their disputes or maintain an interim resolution, the
Company's failure to pay the rent, in the absence of a temporary restraining
order or other interim relief, would result in an Event of Default under the
Master Lease Agreements. Upon an Event of Default under the Master Lease
Agreements, the remedies available to Ventas include terminating the Master
Lease Agreements, repossessing and reletting the leased properties and requiring
the Company to (1) remain liable for all obligations under the Master Lease
Agreements, including the difference between the rent under the Master Lease
Agreements and the rent payable as a result of reletting the leased properties
or (2) pay the net present value of the rent due for the balance of the terms of
the Master Lease Agreements. In the absence of any agreement with Ventas for the
payment of rent under the Master Lease Agreements during the
<PAGE>
Company's Chapter 11 proceedings, the Company would vigorously dispute the
enforceability and bona fides of the Master Lease Agreements.
The Company's subsidiary, TheraTx, Incorporated ("TheraTx"), is a plaintiff
in a declaratory judgment action entitled TheraTx, Incorporated v. James W.
Duncan, Jr., et al. currently pending in the United States District Court for
the Northern District of Georgia. The defendants have asserted counterclaims
against TheraTx under breach of contract, securities fraud, negligent
misrepresentation and fraud theories for allegedly not performing as promised
under a merger agreement related to TheraTx's purchase of a company called
PersonaCare, Inc. and for allegedly failing to inform the
defendants/counterclaimants prior to the merger that TheraTx's possible
acquisition of Southern Management Services, Inc. might cause the suspension of
TheraTx's shelf registration under relevant rules of the Securities and Exchange
Commission. The court granted summary judgment for the
defendants/counterclaimants and ruled that TheraTx breached the shelf
registration provision in the merger agreement, but dismissed the defendants'
remaining counterclaims. Additionally, the court ruled after trial that
defendants/counterclaimants were entitled to damages and prejudgment interest in
the amount of approximately $1.3 million and attorneys' fees and other
litigation expenses of approximately $700,000. The Company and the
defendants/counterclaimants both have appealed the court's rulings.
The Company is pursuing various claims against private insurance companies
who issued Medicare supplement insurance policies to individuals who became
patients of the Company's hospitals. After the patients' Medicare benefits are
exhausted, the insurance companies become liable to pay the insureds' bills
pursuant to the terms of these policies. The Company has filed numerous
collection actions against various of these insurers to collect the difference
between what Medicare would have paid and the hospitals' usual and customary
charges. These disputes arise from differences in interpretation of the policy
provisions and certain Federal and state regulations governing such policies.
Various courts have issued various rulings on the different issues, most of
which have been appealed. The Company intends to continue to pursue these claims
vigorously. If the Company does not prevail on these issues, future results of
operations may be materially adversely affected.
The Company received notice in June 1998 that the State of Georgia found
regulatory violations with respect to patient discharges, among other things, at
one of the Company's nursing centers in Savannah, Georgia. The state recommended
a Federal fine of $543,000 for these violations, which HCFA has imposed. The
Company has appealed this fine.
On April 9, 1998, a class action lawsuit captioned Mongiovi et al. v.
Vencor, Inc., et al., Case No. 98-769-CIV-T24E, was filed in the United States
District Court for the Middle District of Florida on behalf of a purported class
consisting of certain residents of a Tampa nursing center operated by the
Company and other residents in the Company's nursing centers nationwide. The
complaint alleges various breaches of contract, and statutory and regulatory
violations including violations of Federal and state RICO statutes. The original
complaint has been amended to delineate several purported subclasses. The
plaintiffs seek class certification, unspecified damages, attorneys' fees and
costs. The action was dismissed without prejudice on July 5, 1999.
<PAGE>
A class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., was
filed on December 24, 1997 in the United States District Court for the Western
District of Kentucky (Civil Action No. 3-97CV-8354). The class action claims
were brought by an alleged stockholder of the Company against the Company and
certain executive officers and directors of the Company. The complaint alleges
that the Company and certain current and former executive officers of the
Company during a specified time frame violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (the "Exchange Act"), by, among other things,
issuing to the investing public a series of false and misleading statements
concerning the Company's current operations and the inherent value of the
Company's common stock. The complaint further alleges that as a result of these
purported false and misleading statements concerning the Company's revenues and
successful acquisitions, the price of the Company's common stock was
artificially inflated. In particular, the complaint alleges that the Company
issued false and misleading financial statements during the first, second and
third calendar quarters of 1997 which misrepresented and understated the impact
that changes in Medicare reimbursement policies would have on the Company's core
services and profitability. The complaint further alleges that the Company
issued a series of materially false statements concerning the purportedly
successful integration of its recent acquisitions and prospective earnings per
share for 1997 and 1998 which the Company knew lacked any reasonable basis and
were not being achieved. The suit seeks damages in an amount to be proven at
trial, pre-judgment and post-judgment interest, reasonable attorneys' fees,
expert witness fees and other costs, and any extraordinary equitable and/or
injunctive relief permitted by law or equity to assure that the plaintiff has an
effective remedy. On January 22, 1999, the court granted the Company's motion to
dismiss the case. The plaintiff has appealed the dismissal to the United States
Court of Appeals for the Sixth Circuit (the "Sixth Circuit"). The Company is
defending this action vigorously.
A shareholder derivative suit entitled Thomas G. White on behalf of Vencor,
Inc. and Ventas, Inc. v. W. Bruce Lunsford, et al., Case No. 98CI03669, was
filed in June 1998 in the Jefferson County, Kentucky, Circuit Court. The suit
was brought on behalf of the Company and Ventas against certain current and
former executive officers and directors of the Company and Ventas. The complaint
alleges that the defendants damaged the Company and Ventas by engaging in
violations of the securities laws, engaging in insider trading, fraud and
securities fraud and damaging the reputation of the Company and Ventas. The
plaintiff asserts that such actions were taken deliberately, in bad faith and
constitute breaches of the defendants' duties of loyalty and due care. The
complaint is based on substantially similar assertions to those made in the
class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., discussed
above. The suit seeks unspecified damages, interest, punitive damages,
reasonable attorneys' fees, expert witness fees and other costs, and any
extraordinary equitable and/or injunctive relief permitted by law or equity to
assure that the Company and Ventas have an effective remedy. On March 19, 1999,
the parties agreed to stay all proceedings in the action pending the resolution
of the appeal currently before the Sixth Circuit for the Helwig case described
above. The Company believes that the allegations in the complaint are without
merit and intends to defend this action vigorously.
A class action lawsuit entitled Jules Brody v. Transitional Hospitals
Corporation, et al., Case No. CV-S-97-00747-PMP, was filed on June 19, 1997 in
the United States District Court for the District of Nevada on behalf of a class
consisting of all persons who sold shares of Transitional Hospitals Corporation
("Transitional") common stock during the period from
<PAGE>
February 26, 1997 through May 4, 1997, inclusive. The complaint alleges that
Transitional purchased shares of its common stock from members of the investing
public after it had received a written offer to acquire all of Transitional's
common stock and without making the required disclosure that such an offer had
been made. The complaint further alleges that defendants disclosed that there
were "expressions of interest" in acquiring Transitional when, in fact, at that
time, the negotiations had reached an advanced stage with actual firm offers at
substantial premiums to the trading price of Transitional's stock having been
made which were actively being considered by Transitional's Board of Directors.
The complaint asserts claims pursuant to Sections 10(b), 14(e) and 20(a) of the
Exchange Act, and common law principles of negligent misrepresentation and names
as defendants Transitional as well as certain former senior executives and
directors of Transitional. The plaintiff seeks class certification, unspecified
damages, attorneys' fees and costs. In June 1998, the court granted the
Company's motion to dismiss with leave to amend the Section 10(b) claim and the
state law claims for misrepresentation. The court denied the Company's motion to
dismiss the Section 14(e) and Section 20(a) claims, after which the Company
filed a motion for reconsideration. On March 23, 1999, the court granted the
Company's motion to dismiss all remaining claims and the case has been
dismissed. The plaintiff has appealed this ruling. The Company is defending this
action vigorously.
The Company's subsidiary, American X-Rays, Inc. ("AXR"), is the defendant
in a civil qui tam lawsuit which was filed in the United States District Court
for the Eastern District of Arkansas and served on the Company on July 7, 1997.
The DOJ has intervened in the suit which was brought under the Federal Civil
False Claims Act. AXR provided portable X-ray services to nursing facilities
(including those operated by the Company) and other healthcare providers. The
Company acquired an interest in AXR when The Hillhaven Corporation ("Hillhaven")
was merged into the Company in September 1995 and purchased the remaining
interest in AXR in February 1996. The civil suit alleges that AXR submitted
false claims to the Medicare and Medicaid programs. The suit seeks damages in an
amount of not less than $1,000,000, treble damages and civil penalties. In a
related criminal investigation, the United States Attorney's Office for the
Eastern District of Arkansas indicted four former employees of AXR; those
individuals were convicted of various fraud related counts in January 1999. AXR
had been informed previously that it was not a target of the criminal
investigation, and AXR was not indicted. The Company cooperated fully in the
criminal investigation. The Company is defending vigorously the qui tam action.
On June 6, 1997, Transitional announced that it had been advised that it
was the target of a Federal grand jury investigation being conducted by the
United States Attorney's Office for the District of Massachusetts arising from
activities of Transitional's formerly owned dialysis business. The investigation
involves an alleged illegal arrangement in the form of a partnership which
existed from June 1987 to June 1992 between Damon Corporation and Transitional.
Transitional spun off its dialysis business, now called Vivra, Incorporated, on
September 1, 1989. In January 1998, the Company was informed that no criminal
charges would be filed against the Company. In March 1998, the Company was added
as a defendant to a previously pending qui tam lawsuit against the other
partners related to the partnership's former Medicare billing practices. The
Company has moved to dismiss the action. The Company intends to defend
vigorously the action.
<PAGE>
On April 14, 1999, a lawsuit entitled Lenox Healthcare, Inc., et al. v.
Vencor, Inc., et al., Case No. BC 208750, was filed in the Superior Court of Los
Angeles, California by Lenox Healthcare, Inc. ("Lenox") asserting various causes
of action arising out of the Company's sale and lease of several nursing centers
to Lenox in 1997. Lenox subsequently removed certain of its causes of action and
refiled these claims before the United States District Court for the Western
District of Kentucky in a case entitled Lenox Healthcare, Inc. v. Vencor, Inc.,
et al., Case No. 3:99 CV-348-H. The Company has asserted counterclaims,
including RICO claims, against Lenox in the Kentucky action. The Company
believes that the allegations made by Lenox in both complaints are without merit
and intends to defend these actions vigorously.
The Company has been informed by the DOJ that it is the subject of ongoing
investigations into various Medicare reimbursement issues, including various
hospital cost reporting issues, Vencare billing practices and various quality of
care issues in its hospitals and nursing centers. The Company is cooperating
fully in the investigations. One such investigation arises out of a
whistleblower action entitled United States of America, ex rel., Virginia Lee
Lanford and Gwendolyn E. Cavanaugh v. Vencor, Inc. and Ventas, Inc., Civil
Action No. 97-2845-CIV-T-23B pending in the United States District Court for the
Middle District of Florida in which the DOJ intervened on May 17, 1999. This
case alleges violation of the Federal False Claims Act by the Company's
hospitals which included the revenues and expenses related to the provision of
contract services by hospital employees to residents of skilled nursing
facilities on the hospitals' Medicare cost reports. The Company is prepared to
defend the action vigorously. However, the Company is engaged in active
discussions with the DOJ which may result in a resolution of some or all of the
DOJ investigations including the above case. Such a resolution could include a
payment to the government which could have a material adverse effect on the
Company's liquidity and financial position.
In connection with the Reorganization Transactions, liabilities arising
from various legal proceedings and other actions were assumed by the Company and
the Company agreed to indemnify Ventas against any losses, including any costs
or expenses, it may incur arising out of or in connection with such legal
proceedings and other actions. The indemnification provided by the Company also
covers losses, including costs and expenses, which may arise from any future
claims asserted against Ventas based on the former healthcare operations of
Ventas. In connection with its indemnification obligation, the Company has
assumed the defense of various legal proceedings and other actions.
The Company is a party to certain legal actions and regulatory
investigations arising in the normal course of its business. The Company is
unable to predict the ultimate outcome of pending litigation and regulatory
investigations. In addition, there can be no assurance that HCFA or other
regulatory agencies will not initiate additional investigations related to the
Company's business in the future, nor can there be any assurance that the
resolution of any litigation or investigations, either individually or in the
aggregate, would not have a material adverse effect on the Company's results of
operations, liquidity or financial position. In addition, the above litigation
and investigations (as well as future litigation and investigations) are
expected to consume the time and attention of senior management and may have a
disruptive effect upon the Company's operations.
<PAGE>
SCHEDULE 9
OTHER PREPETITION INDEBTEDNESS
------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CREDITOR BALANCE/4/ DESCRIPTION
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Financing $85,171,712 PIP Overpayment
Administration
- -----------------------------------------------------------------------------------------------
FPL Energy $ 14,854 CAP Lease on HVAC System in Boca
Raton Convalescence Center
- -----------------------------------------------------------------------------------------------
Larry Lamb & Sleepnostics $ 32,500 Secured by non-compete agreement
- -----------------------------------------------------------------------------------------------
Middleton Village $ 1,735,132 mortgage on real/personal property
- Nursing Center
- -----------------------------------------------------------------------------------------------
Various Landlords under $ 3,673,088 See attached chart
Capitalized Leases
- -----------------------------------------------------------------------------------------------
Tenet Healthcare Corporation Approximately Total lease payments guaranteed by
$53,000,000 Tenet Healthcare Corporation,
Borrowers are primary obligors.
- -----------------------------------------------------------------------------------------------
City of Louisville $ 4,200,000 Lien on property under a city
development grant for corporate
headquarters.
- -----------------------------------------------------------------------------------------------
Recovery Inns of Menlo $ 1,787,650 Intercompany balance
Park, L.P. (open accounts)
- -----------------------------------------------------------------------------------------------
Caribbean Behavioral Health $ 392,618 Intercompany balance
Systems, Inc. (open accounts)
- -----------------------------------------------------------------------------------------------
</TABLE>
________________________________
/4/ All balances as of August 31, 1999.
<PAGE>
OTHER PREPETITION INDEBTEDNESS (continued)
------------------------------------------
CAPITALIZED LEASES
------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT SECURED DESCRIPTION
BY LIEN
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IBM Credit Corp. Vencor, Inc. $2,358,054 IBM Rise 6000 Computer
290 Harbor Drive Servers
P.O. Box 10399
Stamford, CT 06904-2399
- -----------------------------------------------------------------------------------------------------------------------------------
Wesleyan Retirement Center Vencor Nursing Centers Limited $ 48,926 Personal Property
D/b/a/ Colonial Oaks Ret. Apts. Partnership
714 S. Colonial Oaks Drive Colonial Oaks Health
Marion, IN 46953 Care Center
4725 South Colonial Oaks
Drive
Marion, IN 46953
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing Centers Limited $ 164,791 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of
Castleton
5226 East 82/nd/ Street
Indianapolis, IN 46250
- -----------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing Centers Limited $ 148,467 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of Dyer
2300 Great Lakes Drive
Dyer, IN 46311
- -----------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing Centers Limited $ 243,980 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of
Greenwood
377 Westridge Boulevard
Greenwood, IN 46142
- -----------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing Centers Limited $ 160,415 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of Fort
Wayne
6006 Brandy Chase Cove
Ft. Wayne, IN 46815
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Health Quest Vencor Nursing Centers Limited $239,573 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of Greenfield
200 Green Meadows Drive
Greenfield, IN 46140
- --------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing Centers Limited $160,415 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of Lafayette
300 Windy Hill Drive
Lafayette, IN 47905
- --------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing Centers Limited $148,467 Personal Property
315 West Jefferson Boulevard Partnership
South Bend, IN 46601-1586 Regency Place of South Bend
52654 North Ironwood Road
South Bend, IN 46635
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 10
EXISTING LIENS
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN/(5)/ COVERED BY LIEN STATEMENT
NUMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rhode Island Department of Vencor Operating, Inc. $2,000,000 Cash collateral, primarily N/A
Health investments
3 Capitol Hill
Providence, RI 02908
- ------------------------------------------------------------------------------------------------------------------------------------
IBM Credit Corp. Vencor, Inc. $2,358,054 Leased Equipment Jefferson Co., KY
290 Harbor Drive (computer services 97-00389 1/14/97
P.O. Box 10399 photocopiers) 97-00390 1/14/97
Stamford, CT 06904-2399 97-00667 1/23/97
97-02289 3/24/97
97-02291 3/24/97
97-05677 7/3/97
97-05678 7/3/97
97-05679 7/3/97
97-05680 7/3/97
97-06021 7/17/97
9605938 7/10/96
- ------------------------------------------------------------------------------------------------------------------------------------
City of Louisville Vencor, Inc. $4,200,000 The Fifth Avenue Building Jefferson Co., KY
Law Department 444 South Fifth Street 98-03489 4/29/98
601 W. Jefferson Street Louisville, KY 40202 Bk 4672 pg 0324
Louisville, KY 40202 (5 story office building) 4/29/98
Bk 027 pg 816
4/29/98
Bk 4713 pg 0324
6/4/98 (Rerecord)
Bk 027 pg 816
6/4/98 (Rerecord)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
______________________
/(5)/ All amounts as of August 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN/(5)/ COVERED BY LIEN STATEMENT
NUMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mellon First United Leasing Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
100 Corporate North 97-09362 11/12/97
Bannockburn, IL 60015
- ------------------------------------------------------------------------------------------------------------------------------------
Comerica Leasing Corporation Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
29201 Telegraph Road 96-01631 2/27/96
Southfield, MI 48034 9408519 9/26/94
9409930 11/8/94
95-00615 1/18/95
95-03995 5/4/95
95-05167 6/9/95
9600513 1/17/96
- ------------------------------------------------------------------------------------------------------------------------------------
The Fifth Third Bank Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
38 Fountain Square Plaza 9506189 7/11/95
Cincinnati, OH 45263
- ------------------------------------------------------------------------------------------------------------------------------------
Colonial Pacific Leasing Corp. Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
P.O. Box 1100 10/10/95
Tualatin, OR 97062
- ------------------------------------------------------------------------------------------------------------------------------------
Vanguard Financial Service Corp. Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
1110 North Main St. 95-09715 10/23/95
Lombard, IL 60148
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Bank & Trust Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
One Towne Square 9508153 9/6/95
Suite 1700 9601009 2/2/96
96-06855A 8/7/96
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN/(5)/ COVERED BY LIEN STATEMENT
NUMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Southfield, MI 48076 96-0856A 8/7/96
96-06857A 8/7/96
96-06858A 8/7/96
96-06859A 8/7/96
97-06595 8/4/97
97-07628A
9/11/97
9804215 5/19/98
9804216 5/19/98
9804217 5/19/98
- ------------------------------------------------------------------------------------------------------------------------------------
Bankers Trust Company, as Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
custodian or trustee 9604100 5/13/96
Four Albany Street 96-04734 6/3/96
10/th/ Floor
New York, NY 10006
- ------------------------------------------------------------------------------------------------------------------------------------
BellSouth Communication Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
Systems, Inc. (telephones) 96-08153 9/17/96
1936 Blue Hills Drive NE
Roanoke, VA 24012
- ------------------------------------------------------------------------------------------------------------------------------------
The CIT Group/Equipment Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
Financing, Inc. 96-095929A
900 Ashwood Parkway 11/7/96
Suite 600 97-02875A
Atlanta, GA 30338 4/10/97
97-06596 8/4/97
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan Heritage Bank Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
21211 Haggerty Road 97-05336A
Novi, MI 48375 6/24/97
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN COVERED BY LIEN STATEMENT
NUMBERS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9804214 5/19/98
- ------------------------------------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
Corporation 98-04224 5/19/98
27 Waterview Drive
Shelton, CT 06484
- ------------------------------------------------------------------------------------------------------------------------------------
Steelcase Financial Services, Vencor, Inc. N.A. Leased Equipment Jefferson Co., KY
Inc. 96-05444, 6/24/96
1111 44/th/ Street, SE
Grand Rapids, MI 45908
- ------------------------------------------------------------------------------------------------------------------------------------
Wesleyan Retirement Center Vencor Nursing $ 48,926 Capital Lease N/A
D/b/a/ Colonial Oaks Ret. Centers
Apts. Limited
714 S. Colonial Oaks Drive Partnership
Marion, IN 46953
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $164,791 Capital Lease N/A
315 West Jefferson Centers
Boulevard Limited
South Bend, IN 46601-1586 Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $148,467 Capital Lease N/A
315 West Jefferson Boulevard Centers
South Bend, IN 46601-1586 Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $243,980 Capital Lease N/A
315 West Jefferson Boulevard Centers
South Bend, IN 46601-1586 Limited
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN COVERED BY LIEN STATEMENT
NUMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $ 160,415 Capital Lease N/A
315 West Jefferson Boulevard Centers
South Bend, IN 46601-1586 Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $ 239,573 Capital Lease N/A
315 West Jefferson Boulevard Centers
South Bend, IN 46601-1586 Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $ 160,415 Capital Lease N/A
315 West Jefferson Boulevard Centers
South Bend, IN 46601-1586 Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Health Quest Vencor Nursing $ 148,467 Capital Lease N/A
315 West Jefferson Boulevard Centers
South Bend, IN 46601-1586 Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
Safeco Credit Co. Inc. Community Psychiatric N.A. Leased Equipment California SOS
Safco Plaza, A - Bldg. Centers of 9624960474
Seattle, WA 98185 California 9/3/96
- ------------------------------------------------------------------------------------------------------------------------------------
Advanta Business Services Corp Community Psychiatric N.A. Leased Equipment Florida SOS
1020 Laurel Oak Road Centers of 970000258044-3
Voorhees, NJ 08043 Florida, Inc. 11/14/97
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN COVERED BY LIEN STATEMENT
NUMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European American Bank Courtland Gardens N.A. Equipment Lease Connecticut SOS
Legal Division - 2722 Health Center, 1743758 1/13/97
EAB Plaza East Tower Inc.
Uniondale,NY 11555
- ------------------------------------------------------------------------------------------------------------------------------------
BankPlus CPC Properties of Estimated at $20,000 24" Pontoon boat Mississippi SOS
3366 North Liberty Street Mississippi, 60 HP Motor 00882012 4/14/95
Canton, MS 39046 Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Financial Leasing, Helian Health Group, N.A. Leased Equipment California SOS
Inc. Inc. 9632760446
14515 North Outer Forty 11/21/96
Suite 110
Chesterfield, MO 63017
- -----------------------------------------------------------------------------------------------------------------------------------
NEC America, Inc. Homestead Health N.A. Leased Equipment Connecticut SOS
365 West Passaic Street Center Inc. (telephones) 1636759 8/7/95
Rochelle Park, NJ 07662
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Bank & Trust PersonaCare, Inc. N.A. Leased Equipment DeKalb Co., GA
One Towne Square 441996007056
17/th/ Floor 7/23/96
Southfield, MI 48076
- ------------------------------------------------------------------------------------------------------------------------------------
Orix Credit Alliance, Inc. PersonaCare of N.A. Leased Equipment Florida SOS
1625 NW Amberglen Court Clearwater, 970000116908-1
Suite 100 Inc. 5/29/97
Beaverton, OR 97006
- ------------------------------------------------------------------------------------------------------------------------------------
American Business Credit PersonaCare of N.A. Leased Equipment Florida SOS
Corp Clearwater, (copiers) 970000258691-1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL
SECURED BY LIEN COVERED BY LIEN
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
P.O. Box 728 Inc.
Park Ridge, NJ 07656
- --------------------------------------------------------------------------------------------------------------------------------
Health Care REIT, Inc. PersonaCare of N.A. Leased Equipment
One SeaGate, Suite 1500 Owensboro,
P.O. Box 1475 Inc.
Toledo, Ohio 43603e
- --------------------------------------------------------------------------------------------------------------------------------
Borough of Nazareth, PersonaCare of $1,201.97 Judgement
Pennsylvania Pennsylvania
30 Belvidere Street
Nazareth, PA 18064
- --------------------------------------------------------------------------------------------------------------------------------
Orix Credit Alliance, Inc. PersonaCare of St. N.A. Leased Equipment
1625 NW Amberglen Court Petersburg,
Suite 100 Inc.
Beaverton, OR 97006
- --------------------------------------------------------------------------------------------------------------------------------
IBM Corporation ProData Systems, Inc. N/A Leased Equipment
Dept C4E Mail Stop 311
290 Harbor Drive
Stamford, CT 06904
- --------------------------------------------------------------------------------------------------------------------------------
BFSF Equipment Leasing ProData Systems, Inc. N/A Leased Equipment
4333 Edgewood Road NE (telephone system)
Cedar Rapids, IA 52499
- --------------------------------------------------------------------------------------------------------------------------------
BellSouth Communication ProData Systems, Inc. N/A Leased Equipment
Systems, Inc. (telephones)
1936 Blue Hills Drive, NE
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
LIEN HOLDER FINANCING
STATEMENT
NUMBERS
- --------------------------------------------------------------------------------
<S> <C>
P.O. Box 728 11/17/97
Park Ridge, NJ 07656
- --------------------------------------------------------------------------------
Health Care REIT, Inc. Daviess Co., KY
One SeaGate, Suite 1500 68581 10/18/93
P.O. Box 1475
Toledo, Ohio 43603
- --------------------------------------------------------------------------------
Borough of Nazareth, Northampton Co.,
Pennsylvania PA
30 Belvidere Street 1995 - J - 004965
Nazareth, PA 18064
- ---------------------------------------------------------------------------------
Orix Credit Alliance, Inc. Florida SOS
1625 NW Amberglen Court 970000066683-0
Suite 100 3/31/97
Beaverton, OR 97006
- ---------------------------------------------------------------------------------
IBM Corporation Alabama SOS
Dept C4E Mail Stop 311 95-25383 FS
290 Harbor Drive 6/19/95
Stamford, CT 06904
- ---------------------------------------------------------------------------------
BFSF Equipment Leasing Alabama SOS
4333 Edgewood Road NE B 96-35740 FS
Cedar Rapids, IA 52499 8/27/96
B 97-15416 FS
4/10/97
- ----------------------------------------------------------------------------------
BellSouth Communication Alabama SOS
Systems, Inc. B 97-09539 FS
1936 Blue Hills Drive, NE 3/7/97
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL
SECURED BY LIEN COVERED BY LIEN
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Roanoke, VA 24012
- --------------------------------------------------------------------------------------------------------------------------------
Harris Bank Arlington-Meadows THC - Chicago, Inc. Estimated at $200,000 Specific Equipment
3250 Kirchoff Road (orthoscopic surgery
Rolling Meadows, IL 60008 equipment)
- --------------------------------------------------------------------------------------------------------------------------------
Execulease Corporation THC - Chicago, Inc. N/A Leased Equipment
1975 Linden Blvd.
Elmont, NY 11003
- --------------------------------------------------------------------------------------------------------------------------------
American Commerce Bank THC - Houston, Inc. N/A Leased Equipment
300 So. Mills Road
Venture, CA 93003
- --------------------------------------------------------------------------------------------------------------------------------
Pitney Bowes Credit THC - Minneapolis, Inc. N/A Leased Equipment
Corporation
201 Merritt Seven
Norwalk, CT 06856
- --------------------------------------------------------------------------------------------------------------------------------
State of Minnesota THC - Minnesota, Inc. $36,003.64 State Tax Lien
Dept. of Revenue
600 N. Robert Street
St. Paul, MN 55146
- --------------------------------------------------------------------------------------------------------------------------------
Picker Financial Group, THC - Seattle, Inc. N/A Leased Equipment
L.L.C.
595 Miner Road
Highland Heights, OH 44143
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
LIEN HOLDER FINANCING
STATEMENT
NUMBERS
- --------------------------------------------------------------------------------
<S> <C>
Roanoke, VA 24012
- --------------------------------------------------------------------------------
Harris Bank Arlington-Meadows Illinois SOS
3250 Kirchoff Road 3521527 3/25/96
Rolling Meadows, IL 60008
- --------------------------------------------------------------------------------
Execulease Corporation Illinois SOS
1975 Linden Blvd. 3574011 8/5/96
Elmont, NY 11003
- --------------------------------------------------------------------------------
American Commerce Bank Texas SOS
300 So. Mills Road 023308 2/6/97
Venture, CA 93003
- --------------------------------------------------------------------------------
Pitney Bowes Credit Minnesota SOS
Corporation 1939187 5/6/97
201 Merritt Seven
Norwalk, CT 06856
- --------------------------------------------------------------------------------
State of Minnesota Minnesota SOS
Dept. of Revenue SL 015502 4/13/99
600 N. Robert Street
St. Paul, MN 55146
- --------------------------------------------------------------------------------
Picker Financial Group, Washington SOS
L.L.C. 99-035-0388
595 Miner Road 2/4/99
Highland Heights, OH 44143
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------ --------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT
SECURED BY LIEN
- ---------------------------------------- ------------------------------ --------------------------------
<S> <C> <C>
American National Bank and Trust TheraTx Staffing, Inc. Company obtaining termination
Company of Chicago letter. (*See note below.)
1836 N. Broadway
Melrose Park, IL 60160
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Pitney Bowes Credit Corporation Transitional Hospitals N/A
27 Waterview Drive Corporation
Shelton, CT 06484
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
State of Louisiana Transitional Hospitals $72,151.02
Department of Labor Corporation of
Office of Employment Security Louisiana, Inc.
P.O. Box 44127
Baton Rouge, LA 70804
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Chiron Diagnostics Corp Transitional Hospitals Estimated at $75,000
115 Norwood Park South Corporation of New
Norwood, MA 02062 Mexico, Inc.
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
OFC Capital Corporation Tucker Nursing Center, Inc. Estimated at $100,000
570 Colonial Park Drive
#305
Roswell, GA 30075
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Ecolab Inc. Tucker Nursing Center N/A
Ecolab Center North
370 Wabasha Street
<CAPTION>
- ---------------------------------- -----------------------
COLLATERAL FINANCING
COVERED BY LIEN STATEMENT
NUMBERS
- ---------------------------------- -----------------------
<S> <C>
Blanket Lien Illinois SOS
3392240 4/24/95
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased equipment Nevada SOS
9718110 10/28/97
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
State Tax Lien Orleans Parish, LA
125029 1/14/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
(Diagnostic Equipment) New Mexico SOS
970122008 1/22/97
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Specific Equipment Jefferson Co., KY
(fire & security system) 9809306 10/20/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment DeKalb Co., GA
441998009542 9/25/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------ --------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT
SECURED BY LIEN
- ---------------------------------------- ------------------------------ --------------------------------
<S> <C> <C>
St. Paul, MN 55102
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Charles H. Siegel Tucker Nursing Center, Inc. $29,701.28
4124 Barberry Drive
Roswell, GA
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Pitney Bowes Credit Corporation Vencor Hospitals East, N/A
201 Merritt Seven L.L.C.
Norwalk, CT 06856
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Lease Corporation of America Vencor Hospitals East, L.L.C. N/A
340 E. Big Beaver Rd
Suite 560
Troy, MI 48083
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Olympus America Inc. Vencor Hospitals East, L.L.C. N/A
Two Corporate Center Drive
Melville, NY 11747
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Dade Financial Services Vencor Hospitals East, L.L.C. N/A
55 Federal Road
Danbury, CT 06810
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Pitney Bowes Credit Corporation Vencor Hospitals Limited N/A
27 Waterview Drive Partnership
Shelton, CT 06484
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Alcon Laboratories, Inc. Vencor Hospitals Limited $47,400
6201 South Freeway
<CAPTION>
- ---------------------------------- -----------------------
COLLATERAL FINANCING
COVERED BY LIEN STATEMENT
NUMBERS
- ---------------------------------- -----------------------
<S> <C>
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Mechanic's Lien DeKalb Co., GA
Bk 10174 Pg 471
9/11/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Virginia SOS
960124 7259
970310 7015
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Virginia SOS
990308 7277
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Pennsylvania SOS
29300377 8/20/98
Allegheny Co., PA
98-6379 8/20/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Arlington Co., VA
59074 2/22/97
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Jefferson Co., KY
99-01464 2/25/99
Tennessee SOS
2202873 7/13/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Equipment Jefferson Co., KY
97-03558 5/1/97
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------ --------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT
SECURED BY LIEN
- ---------------------------------------- ------------------------------ --------------------------------
<S> <C> <C>
Mail Stop S2-11 Partnership
Fort Worth, TX 76134
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Quaker State Leasing Company Vencor Hospitals Limited N/A
4 Sentry Parkway Partnership
Suite 220
Blue Bell, PA 19422
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
Michigan Heritage Bank Vencor Operating, Inc. N/A
21211 Haggerty Road
Novi, MI 48375
- ---------------------------------------- ------------------------------ --------------------------------
- ---------------------------------------- ------------------------------ --------------------------------
DVI Capital Company Vencor Operating, Inc. N/A
500 Hyde Park
Doylestown, PA 18901
<CAPTION>
- ---------------------------------- -----------------------
COLLATERAL FINANCING
COVERED BY LIEN STATEMENT
NUMBERS
- ---------------------------------- -----------------------
<S> <C>
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Tennessee SOS
982088204 10/23/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Jefferson Co., KY
98-06395A 7/20/98
98-06396A 7/20/98
98-06397A 7/20/98
- ---------------------------------- -----------------------
- ---------------------------------- -----------------------
Leased Equipment Jefferson Co., KY
98-08510A 9/22/98
98-10279A 11/23/98
99-05422A 7/28/99
99-04048 6/7/99
99-02264A
3/26/99
99-00604A
1/25/99
99-00023A 1/5/99
99-00034A 1/5/99
- ---------------------------------- -----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN COVERED BY LIEN STATEMENT
NUMBERS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comerica Leasing Corporation Vencor Operating, Inc. N/A Leased Equipment Jefferson Co., KY
a division of Comerica Bank 98-09204A 10/15/98
29201 Telegraph Road 98-09205A 10/15/98
2/nd/ Floor 99-04885A 7/12/99
Southfield, MI 48034 99-04886A 7/12/99
- --------------------------------------------------------------------------------------------------------------------------
U.S. Bank Trust N.A. Vencor Operating, Inc. N/A Leased Equipment Jefferson Co., KY
as custodian or trustee 98-09868A 11/9/98
180 E. Fifth Street 98-10043A 11/16/98
St. Paul, MN 55101 98-10044A 11/16/98
98-10016A 11/16/98
98-10154A 11/19/98
98-10543 12/4/98
98-11172A 12/28/98
98-11173A 12/28/98
98-11188A 12/29/98
99-00025A 1/5/99
99-00155 1/11/99
99-00159 1/11/99
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN COVERED BY LIEN STATEMENT
NUMBERS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
99-00510 1/21/99
99-01017A 2/10/99
99-01234A 2/19/99
99-01235A 2/19/99
99-01277A 2/22/99
99-01307A 2/22/99
99-02161A 3/25/99
99-02234A 3/26/99
99-02626A 4/9/99
99-02764A 4/16/99
99-02766A 4/16/99
- -------------------------------------------------------------------------------------------------------------------------
Americorp Financial, Inc. Vencor Operating, Inc. N/A Leased Equipment Jefferson Co., KY
877 South Adams Road 99-06009 8/17/99
Birmingham, MI 48009 99-02831 4/21/99
99-02832 4/21/99
99-02833 4/21/99
99-02834 4/21/99
99-02835 4/21/99
99-02836 4/21/99
- -------------------------------------------------------------------------------------------------------------------------
IBM Credit Corporation Vencor Operating, Inc. N/A Leased Equipment Jefferson Co., KY
1 North Castle Drive 99-00173 1/11/99
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
LIEN HOLDER LIEN GRANTOR AMOUNT OF DEBT COLLATERAL FINANCING
SECURED BY LIEN COVERED BY LIEN STATEMENT
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armonk, NY 10504
- ----------------------------------------------------------------------------------------------------------------------------
King County, Washington THC-Seattle, Inc. $35,525.45 Vencor Hospital . Seattle N/A
10560 Fifth Avenue, N.E.
Seattle, WA 98125
(Tax lien due but not
delinquent)
- ----------------------------------------------------------------------------------------------------------------------------
King County, Washington Vencor Nursing Centers $31,362.24 First Health Care Center N/A
West, L.L.C. 1334 Terry Avenue
Seattle, WA 98101
(Tax lien due but not
delinquent)
- ----------------------------------------------------------------------------------------------------------------------------
Eagle Finance Corp. of Vencor Operating, Inc. $ 5,272.68 Judgement Hillsborough Co., FL
Delaware d/b/a Or Bk 09423 Pg 1720
c/o Daniel Consuegra, Esq.
6901 N. Armenia Ave. Transitional Hospitals 1/4/99
Tampa, FL 33604 Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Hillsborough County Board of Vencor Hospitals East, $ 677.00 Judgement Hillsborough Co.
Commissioners L.L.C. Circuit Court
Office of the County Attorney Or Bk 09690 {g 1162
601 East Kennedy Blvd. 6/15/99
27/th/ Floor
Tampa, Florida
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Borrowers hereby represent and warrant that the items indicated on this
Schedule 10 with an "*" are financing statements that were filed in respect of
indebtedness and other obligations that were subsequently paid in full. The
Borrowers hereby agree to use best efforts to terminate such financing
statements and properly record proof of each termination in accordance with
all applicable laws and statutes as soon as possible after the Closing Date.
<PAGE>
SCHEDULE 11
-----------
EXISTING INVESTMENTS
--------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HOLDER INVESTMENT
- --------------------------------------------------------------------------------
<S> <C>
Vencor Operating, Inc. Commercial paper issued by General Electric
Corporation in a face amount of $2,000,000
maturing on September 27, 1999
- --------------------------------------------------------------------------------
Vencor Operating, Inc. Promissory Notes evidencing loans made by Vencor
Operating, Inc. to officers of Vencor not
exceeding $16,000,000 aggregate amount
- --------------------------------------------------------------------------------
Vencor Operating, Inc. $110,000 Promissory Note made by
HealthEssentials Solutions, Inc.
- --------------------------------------------------------------------------------
Vencor Operating, Inc. $500,000 Promissory Note made by
HealthEssentials Solutions, Inc.
- --------------------------------------------------------------------------------
Vencor, Inc. Promissory Notes evidencing loans made by
Vencor, Inc. to officers of Vencor with an
aggregate value of $1,708,600
- --------------------------------------------------------------------------------
First Healthcare Corporation $3,965,000 Promissory Note made by Foothill
(assigned to Vencor Nursing Company Partnership
Operating, Inc.)
- --------------------------------------------------------------------------------
Vencor Operating, Inc. 7,500 shares in Ledgewood Health Care
Corporation, a Massachusetts corporation
- --------------------------------------------------------------------------------
Vencor Operating, Inc. 1,933,901 shares in Lectus Inc., a California
corporation
- --------------------------------------------------------------------------------
Vencor Holdings, L.L.C. 1,234,568 shares in Atria Communities, Inc., a
Delaware corporation
- --------------------------------------------------------------------------------
Vencor Operating, Inc. 50,000 shares in HealthEssentials Solutions,
Inc., a Delaware corporation
- --------------------------------------------------------------------------------
Community Psychiatric Centers 1,385,076 shares of common stock and 4,350,712
Properties, Incorporated shares of Series A Preferred in Behavioral
Healthcare Corporation, a Delaware corporation
- --------------------------------------------------------------------------------
Community Psychiatric Centers 1,112,919 shares of common stock and 1,299,817
of California shares of Series A Preferred in Behavioral
Healthcare Corporation, a Delaware corporation
- --------------------------------------------------------------------------------
Interamericana Health Care 246,900 shares of common stock in Behavioral
Group Healthcare Corporation, a Delaware corporation
- --------------------------------------------------------------------------------
Transitional Hospitals 3,248,405 shares of common stock in Behavioral
Corporation Healthcare Corporation, a Delaware corporation
- --------------------------------------------------------------------------------
C.P.C. of Louisiana, Inc. 6,700 shares of common stock and 838 shares of
Series A Preferred in Behavioral Healthcare
Corporation, a Delaware corporation
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Vencor Operating, Inc. 50% general partnership interest in Fox Hill
Village Partnership, a Massachusetts general
partnership
- --------------------------------------------------------------------------------
Vencor Operating, Inc. 50% general partnership interest in Hillhaven-
MSC Partnership, a California general
partnership
- --------------------------------------------------------------------------------
Vencor Operating, Inc. 50% general partnership interest in Starr Farm
Partnership, a Vermont partnership
- --------------------------------------------------------------------------------
Advanced Infusion Systems, Approximately 46% general partnership interest
Inc. in VNA/CPS Pharmaceutical Services, a California
general partnership
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 12
-----------
UNCERTIFIED FACILITIES
----------------------
1. (Facility # 148) Village Square Nursing and Rehabilitation Center
in San Marcos, CA is currently decertified from participation in Medicare and
Medicaid.
2. (Facility # 983) Clark House at Fox Hill Village in Westwood, MA
is not certified for participation in Medicaid.
3. (Facility # 614) Vencor Hospital - Philadelphia in Philadelphia,
PA is not certified for participation in Medicaid.
4. (Facility # 619) Vencor Hospital - Pittsburgh in Pittsburgh, PA
is not certified for participation in Medicaid.
5. (Facility # 1223) Personacare at Eastwood in Easton, PA is not
certified for participation in Medicaid.
6. (Facility # 628) Vencor Hospital - Chattanooga in Chattanooga, TN
is not certified for participation in Medicaid.
7. (Facility # 822) Primacy Healthcare and Rehabilitation Center in
Memphis, TN is not certified for participation in Medicaid.
8. (Facility # 771) Middleton Village Nursing and Rehabilitation
Center in Middleton, WI is not certified for participation in Medicaid.
<PAGE>
SCHEDULE 13
POST-CLOSING DELIVERIES
-----------------------
The Borrowers agree to deliver to the Collateral Agent as soon as practicable
but in no event later than 60 days after the Petition Date (i) a promissory note
issued by Foothill Nursing Company Partnership to Vencor Operating, Inc., in
replacement of (and in the same principal amount as) the promissory note
delivered to the Collateral Agent on the Closing Date, which note was issued on
April 1, 1998 to First Healthcare Corporation in the principal amount of
$3,965,000, and (ii) a note power with respect to such replacement note duly
endorsed in blank by Vencor Operating, Inc.
If the following notes have not previously been pledged, delivered and endorsed
over to Morgan as collateral agent under the Existing Facilities, the Borrowers
agree to use their best efforts to locate and deliver, and endorse over, each of
the following promissory notes to the Collateral Agent as soon as possible but
in no event later than 60 days after the Petition Date:
1. That certain promissory note in the principal amount of $110,000 made by
HealthEssentials Solutions, Inc., payable to Vencor Operating, Inc.; and
2. That certain promissory note, in the principal amount of $500,000 made by
HealthEssentials Solutions, Inc., payable to Vencor Operating, Inc.
Notwithstanding the foregoing, if, despite Borrowers' best efforts, the
Borrowers fail to deliver any of the foregoing items to the Collateral Agent
within such 60-day period, the Administrative Agent may (but shall not be
obligated to) consent to an additional period of time for such delivery.
<PAGE>
Exhibit 10.6
AMENDMENT NUMBER 7 TO THE SECOND STANDSTILL AGREEMENT
-----------------------------------------------------
DATED APRIL 12, 1999 AND
------------------------
AMENDMENT NUMBER 6
-------------------
TO THE TOLLING AGREEMENT
------------------------
DATED APRIL 12, 1999
--------------------
These Amendments dated as of September 3, 1999 are made and entered into
among Vencor, Inc., a corporation organized under the laws of Delaware, for and
on behalf of itself and its various subsidiaries and affiliates, including,
without limitation, Vencor Operating, Inc., and for and on behalf of any of
their respective successors including, without limitation, any debtor or debtor-
in-possession in a bankruptcy case commenced under Title 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") or any trustee appointed in any such
case (collectively, "Vencor"); and Ventas, Inc., a corporation organized under
the laws of Delaware, for and on behalf of itself and its various subsidiaries
and affiliates, including, without limitation, Ventas Realty, Limited
Partnership, and for and on behalf of any of their respective successors
including, without limitation, any debtor or debtor-in-possession in a
bankruptcy case commenced under the Bankruptcy Code or any trustee appointed in
any such case (collectively, "Ventas").
Morgan Guaranty Trust Company of New York (the "Collateral Agent") is a
signatory hereto for the sole purpose of providing the confirmations and
agreements referred to in paragraph 1 hereof.
WHEREAS, Vencor and Ventas are in the process of attempting to resolve any
and all existing and potential claims that Vencor has asserted or might in the
future assert against Ventas (the "Vencor Claims"), the validity of which Ventas
has disputed, and any and all existing and potential claims that Ventas has
asserted or might in the future assert against Vencor (the "Ventas Claims"), the
validity of which Vencor has disputed (the Vencor Claims and the Ventas Claims
are collectively referred to herein as the "Claims");
WHEREAS, to that end Vencor and Ventas are parties to that certain Second
Standstill Agreement dated April 12, 1999 (as modified and amended to date, the
"Second Standstill Agreement") and that certain Tolling Agreement dated April
12, 1999 (as modified and amended to date, the "Tolling Agreement");
WHEREAS, on Thursday, August 5, 1999, by agreement of the parties, Ventas
was deemed to have delivered five notices of non-payment of rent (the "August
Non-Payment
<PAGE>
Notices") pursuant to paragraph 16.1(b) of the agreements referenced in the
first paragraph of each of the August Non-Payment Notices, such agreements being
collectively defined in the Second Standstill Agreement as the Five Leases;
WHEREAS, the parties hereto wish to extend the cure period referred to in
Section 16.1 of the Five Leases with respect to the August Non-Payment Notices,
to extend certain other deadlines, to specify the cure period referred to in the
September Non-Payment Notices (as defined below), and to agree to certain other
matters to permit continued discussions concerning a consensual resolution of
their differences, subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and other good cause and
adequate consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Extension of the Second Standstill Period and the Cure Period in the Five Leases
1. The fifth numbered paragraph of the Second Standstill Agreement shall
be deleted and replaced with the following paragraph:
(a) Other than (i) Ventas' delivery on Friday May 7, 1999, after 5:00
p.m., by letters of T. Richard Riney, Vice President and General
Counsel of Ventas, of five notices of non-payment of rent (the "May
Non-Payment Notices") (which are now moot as a result of Vencor's
payment of Rent for the month of May 1999, in the manner agreed to by
the parties); (ii) the deemed delivery by Ventas of notices of non-
payment of rent as a result of Vencor's non-payment or late payment of
rent under the Five Leases for the month of June 1999 (the "June Non-
Payment Notices") (which are now moot as a result of Vencor's payment
of Rent for the month of June 1999, in the manner agreed to by the
parties); (iii) the deemed delivery by Ventas of notices of non-
payment of rent as a result of Vencor's non-payment or late payment of
rent under the Five Leases for the month of July 1999 (the "July Non-
Payment Notices") (which are now moot as a result of Vencor's payment
of Rent for the month of July 1999, in the manner agreed to by the
parties); (iv) the deemed delivery by Ventas of similar notices of
non-payment of rent as a result of Vencor's non-payment or late
payment of rent under the Five Leases for the month of August 1999
(the "August Non-Payment Notices"); and
2
<PAGE>
(v) the deemed delivery by Ventas of similar notices of non-payment of
rent as a result of Vencor's non-payment or late payment of rent under
the Five Leases for the month of September 1999 (the "September Non-
Payment Notices"); during the period from the date of the Second
Standstill Agreement, April 12, 1999, through and including the
earlier of (A) the commencement by or against Vencor, as debtor, of a
voluntary or involuntary bankruptcy case under Title 11 of the United
States Code, or (B) 5:00 p.m. Eastern Daylight Savings Time on
September 9, 1999 (such period being referred to herein as the "Second
Standstill Period"), neither Vencor nor Ventas will file, commence,
serve, or otherwise initiate any civil action, arbitration proceeding,
or other similar action, litigation, case, or proceeding of any kind,
character, or nature whatsoever (an "Action") against the other or any
third party, including, without limitation, any of Vencor's or Ventas'
current or former officers, directors, or employees, arising from or
relating to the Reorganization Agreement, any Ancillary Agreement, or
any of the Five Leases, or with respect to the various disputes
identified in Vencor's March 18, 1999 letter; nor shall Ventas
exercise any rights or remedies it may have against Vencor under any
of the Five Leases (including the giving of notices of termination
pursuant to Section 16.1 of the Five Leases or any of them) based on
Vencor's late payment of the Rent (as that term is defined in the Five
Leases) due under the Five Leases, or based on any default arising
from or related to the disclosures made by Vencor to Ventas commencing
on or about March 30 and March 31, 1999 and continuing to the date
hereof.
(b) [intentionally left blank]
(c) If Vencor or the Leasehold Mortgagee (as defined in the Five Leases)
pays the Rent for the month of August 1999 prior to 5:00 p.m. Eastern
Daylight Savings Time on September 14, 1999, then such payment shall
be deemed to be a timely cure, within the meaning of Section 16.1 of
the Five Leases and the August Non-Payment Notices, and that, in such
event, no Event of Default (as that term is used in the August Non-
Payment Notices and defined in the Five Leases) shall have occurred
with respect to the late payment or non-payment of Rent for the month
3
<PAGE>
of August 1999. Notwithstanding anything to the contrary contained
herein, Ventas shall not send a notice of termination pursuant to
paragraph 16.1 of the Five Leases, or any of them, based upon Vencor's
non-payment or late payment of Rent for the month of August 1999 so
long as Vencor or the Leasehold Mortgagee has a right to cure or has
cured such non-payment or late payment of Rent for the month of August
1999. This subparagraph 5(c) shall only apply to the August Non-
Payment Notices and to the non-payment or late payment of the August
1999 Rent under the Five Leases.
(d) The Collateral Agent hereby confirms to Ventas and Vencor that it is
the collateral agent for the Leasehold Mortgagee and that it is
authorized to make the confirmations and agreements contained herein.
Ventas, Vencor, and the Collateral Agent (for and on behalf of the
Leasehold Mortgagee) confirm and agree that the period of time within
which Vencor or the Leasehold Mortgagee is entitled to cure the
failure of Vencor to pay Rent for the month of August 1999 under this
agreement and the Five Leases in order to prevent a termination of the
Five Leases will expire at 5:00 p.m. Eastern Daylight Savings Time on
September 14, 1999.
(e) Ventas, Vencor and the Collateral Agent hereby agree that (i) the June
Non-Payment Notices, copies of which are attached hereto as Exhibits A
through E, are hereby deemed for all purposes to have been given by
Ventas and received by Vencor and the Collateral Agent as of June 6,
1999 without need for any further act or delivery by Ventas, (ii) the
July Non-Payment Notices, copies of which are attached hereto as
Exhibits F through J, are hereby deemed for all purposes to have been
given by Ventas and received by Vencor and the Collateral Agent on and
as of July 6, 1999, (iii) the August Non-Payment Notices, copies of
which are attached hereto as Exhibits K through O, are hereby deemed
for all purposes to have been given by Ventas and received by Vencor
and the Collateral Agent on and as of August 5, 1999, and (iv) the
September Non-Payment Notices, which will be provided by Ventas and be
substantially in the form of the August Non-Payment Notices, are to be
attached hereto as Exhibits P through T, are hereby
4
<PAGE>
deemed for all purposes to have been given by Ventas and received by
Vencor and the Collateral Agent on and as of September 3, 1999,
without need for any further act or delivery by Ventas (except for
delivery of Exhibits P through T).
(f) Ventas further agrees that if Vencor or the Leasehold Mortgagee pays
the Rent for the month of September 1999 on or before September 14,
1999, at 5:00 p.m. Eastern Daylight Savings Time, then such payment
shall be deemed to be a timely cure, within the meaning of Section
16.1 of the Five Leases and the September Non-Payment Notices, and
that, in such event, no Event of Default (as that term is used in the
September Non-Payment Notices and defined in the Five Leases) shall
have occurred with respect to the late payment or non-payment of Rent
for the month of September 1999. Notwithstanding anything to the
contrary contained herein, Ventas shall not send a notice of
termination pursuant to paragraph 16.1 of the Five Leases, or any of
them, based upon Vencor's non-payment or late payment of Rent for the
month of September 1999 so long as Vencor or the Leasehold Mortgagee
has a right to cure or has cured such non-payment or late payment of
Rent for the month of September 1999. This subparagraph 5(f) shall
only apply to the September Non-Payment Notices and to the non-payment
or late payment of the September 1999 Rent under the Five Leases.
(g) Ventas, Vencor, and the Collateral Agent (for and on behalf of the
Leasehold Mortgagee) confirm and agree that the period of time by
which Vencor or the Leasehold Mortgagee is entitled to cure the
failure of Vencor to pay Rent for the month of September 1999 under
this Amendment and the Five Leases in order to prevent a termination
of the Five Leases will expire at 5:00 p.m. Eastern Daylight Savings
Time on September 14, 1999.
Amendment to Tolling Agreement
2. The first numbered paragraph of the Tolling Agreement shall be deleted
and replaced with the following paragraph:
Any Vencor Claim, including, without limitation, those arising or
available under the Bankruptcy Avoidance Provisions (defined below)
that Vencor could
5
<PAGE>
otherwise assert against Ventas if Vencor were a debtor in a case
under the Bankruptcy Code commenced on April 12, 1999, and whether
arising under the Bankruptcy Code or under other applicable federal or
state law, shall not be prejudiced, impaired, or waived by Vencor's
failure to commence such a bankruptcy case, and any and all statutes
of limitations, repose, or other legal or equitable constraints on the
time by which such a bankruptcy case or pleading initiating any Vencor
Claim (including, without limitation, a cause of action under (S) 548
of the Bankruptcy Code) shall be tolled during the period of time from
April 12, 1999 to and including the earlier of (i) 5:00 p.m. Eastern
Daylight Savings Time on September 9, 1999, or (ii) the earlier time
and date on which the Second Standstill Period (as defined in the
Second Standstill Agreement) shall automatically terminate as a result
of Vencor's nonpayment or late payment of rent or failure to deliver
certain reports (as provided for in paragraph 5 of the Second
Standstill Agreement, the provisions of which are hereby incorporated
by reference) (the "Tolling Period"). For all purposes herein, both
the first and last day of the Tolling Period shall be deemed to be
contained in the Tolling Period.
[Remainder of Page Intentionally Left Blank].
6
<PAGE>
Counterparts
3. These Amendments may be executed in one or more counterparts and by
facsimile, each of which counterparts shall be deemed an original hereof, but
all of which together shall constitute one agreement.
Choice of Law
4. These Amendments adopt the ninth numbered paragraph of the Second
Standstill Agreement as the choice of law provision for these Amendments.
CONFIRMED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN BY:
VENCOR, INC. VENTAS, INC.
By:______________________ By:_______________________
Name: Name:
Title: Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Collateral Agent for the
Leasehold Mortgagee
By:_____________________
Name:
Title:
7
<PAGE>
Exhibit 10.7
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: )
) Case Nos. 99-3199 (MFW)
Vencor, Inc., et al., ) through 99-3327 (MFW)
)
) Chapter 11
Debtors and Debtors in Possession. )
) Jointly Administered
STIPULATION AND ORDER PURSUANT TO SECTION 365
OF THE BANKRUPTCY CODE REGARDING VENCOR, INC.,
VENCOR OPERATING, INC. AND VENCOR NURSING CENTERS
LIMITED PARTNERSHIP'S PERFORMANCE OF OBLIGATIONS
UNDER, AND EXTENDING THE TIME WITHIN WHICH
VENCOR, INC. VENCOR OPERATING, INC. AND VENCOR
NURSING CENTERS LIMITED PARTNERSHIP MAY
ACCEPT OR REJECT, CERTAIN AGREEMENTS
BETWEEN VENCOR, INC., VENCOR OPERATING, INC.,
VENCOR NURSING CENTERS LIMITED PARTNERSHIP,
VENTAS, INC. AND VENTAS REALTY, LIMITED PARTNERSHIP
---------------------------------------------------
This stipulation and order (the "Stipulation and Order") is entered
into as of the date set forth below by and among Vencor, Inc. ("VCI"), Vencor
Operating, Inc. ("Vencor Operating"), the other above-captioned debtors and
debtors in possession (collectively with VCI and Vencor Operating, the "Debtors"
or "Vencor"), Ventas, Inc. ("VTI") and Ventas Realty Limited Partnership ("VRLP"
and together with VTI, "Ventas," and, together with Vencor, the "Parties").
WHEREAS, on the date hereof (the "Petition Date"), the Debtors filed
their respective petitions for relief under chapter 11, title 11 of the United
States Code (the "Bankruptcy Code"). They are now operating their business and
managing their property as debtors in possession pursuant to sections 1107(a)
and 1108 of the Bankruptcy Code; and
<PAGE>
WHEREAS, on or about April 30, 1998, VCI, Vencor Operating, VTI, First
Healthcare Corporation, Nationwide Care, Inc., Northwest Health Care, Inc.,
Hillhaven of Central Florida, Inc., Hillhaven/Indiana Partnership, St. George
Nursing Home Limited Partnership, Vencor Hospitals Illinois, Inc., Carrolwood
Care Center, Windsor Woods Nursing Home Partnership, San Marcos Nursing Home
Partnership, New Pond Village Associates, Health Haven Associates, L.P., Oak
Hill Nursing Associates, L.P., Vencor Hospitals East, Inc., Hahnemann Hospital,
Inc. and VRLP all entered into four agreements styled as master leases (jointly
and severally, as amended to date, the "Master Leases"), relating to certain
properties listed on the respective schedule 1 attached thereto; and
WHEREAS, VRLP and Vencor Nursing Centers Limited Partnership ("VNCLP")
entered into a further agreement styled as a lease on August 7, 1998 for a
nursing center in Corydon, Indiana as amended to date (the "Corydon Agreement",
and collectively with the Master Leases, the "Agreements").
WHEREAS, in the absence of this Stipulation and Order the Parties do or
may dispute, inter alia, (1) the bona fides, validity, enforceability and/or the
----- ---- ---- -----
avoidability of the Agreements generally, (2) whether or not the Agreements
constitute leases subject to section 365 of the Bankruptcy Code ("Section 365"),
(3) to the extent that the Agreements are subject to Section 365, whether the
Agreements concern "nonresidential real property" within the meaning of section
365(d)(3) or "residential real property" within the meaning of section 365(d)(2)
and the appropriate rent or use and occupancy, if any, payable, and (4) whether
Vencor and Ventas are separate entities or should be substantively consolidated;
and
WHEREAS, without waiver of or prejudice to (1) each Party's right, upon
the date of termination of this Stipulation and Order, to dispute, inter alia:
----- ----
(a) the bona fides,
---- -----
2
<PAGE>
validity, enforceability and/or the avoidability of the Agreements generally,
(b) whether or not the Agreements constitute leases subject to Section 365, (c)
to the extent that the Agreements are subject to Section 365, whether the
Agreements concern residential or non-residential properties and the appropriate
rent or use and occupancy, if any, payable, and (d) whether Vencor and Ventas
are separate entities or should be substantively consolidated, (2) Ventas's
right to assert a claim for any unpaid rent by or defaults of any Vencor entity
under the Agreements whether accrued prior or subsequent to the Petition Date,
and (3) any other rights, remedies, claims or defenses the Parties have under
the Agreements, other agreements by, among or relating to the Parties and/or
applicable law, the Debtors and Ventas desire to (a) stipulate to certain
conditions the satisfaction of which will constitute, if applicable, VCI, Vencor
Operating and VNCLP's timely performance of the minimum monthly base rent
obligations under the Agreements arising from and after the Petition Date, and
(b) extend, if necessary, the time under Section 365 within which VCI, Vencor
Operating and VNCLP may assume or reject the Agreements;
NOW, THEREFORE, IT IS HEREBY AGREED AND STIPULATED, subject to Court
approval of this Stipulation, by the Parties as follows:
1. Commencing with the month of October, 1999, VCI, Vencor Operating
and VNCLP shall, on or before the fifth day of each month (provided however,
that if the fifth day is not a business day, then the next business day), pay to
Ventas minimum monthly base rent of $15,133,556.59 (the "Monthly Payment"),
provided that the Parties may agree to a later date for payment (in their sole
and absolute discretion, it being understood that nothing herein shall be deemed
to create an obligation to negotiate or otherwise reach any such agreement) in
writing without further order of the Court. For September, 1999, VCI, Vencor
Operating and VNCLP shall pay the Monthly Payment (without proration) on or
before three (3) business days after the
3
<PAGE>
Petition Date. Subject to paragraph 5 below, such Monthly Payment shall
constitute VCI, Vencor Operating and VNCLP's timely performance under Section
365(d)(3) of their minimum monthly base rental obligations arising from and
after the Petition Date under the Agreements for the month within which payment
is made (i.e., the minimum monthly base rent shall be $15,133,556.59 for
purposes of section 365(d)(3) only). In addition, the Debtors shall be
authorized and agree to fulfill all of their other obligations under the
Agreements, as well as all of their obligations under the Agreement and Plan of
Reorganization by and between Vencor, Inc. (now Ventas, Inc.) and Vencor
Healthcare, Inc. (now Vencor, Inc.) dated as of April 30, 1998 and related
agreements (the "Reorganization Agreements") including, without limitation,
their continuing obligations to indemnify and defend Ventas pursuant to Article
III of the Reorganization Agreements regardless of the period which obligations
relate, during the period while this Stipulation and Order is in effect as such
obligations become due (provided however that nothing herein shall constitute an
assumption of the Agreements).
2. For each month this Stipulation and Order is in effect, Ventas shall
accrue a claim against VCI, Vencor Operating and VNCLP in an amount equal to the
difference between the monthly rent due under the Agreements and the Monthly
Payment (the "Agreement Rent Claim"), which claim shall be (a) joint and several
but only to the extent which that claim was joint and several prior to the
Petition Date against VCI and Vencor Operating with respect to the Master Leases
and VCI, Vencor Operating and VNCLP with respect to the Corydon Agreement, and
(b) several as to any other Debtor liable with respect to the Master Leases and
the Corydon Agreement in amounts proportional to their respective obligations
under the Master Leases and the Corydon Agreement. The Agreement Rent Claim
shall be given superpriority administrative creditor claim status under section
507(b) of the Bankruptcy Code, junior in right only to any liens or
superpriority claims provided to the lenders under the Debtors' DIP Credit
Agreement, any fees due to the Office of the United States Trustee, the Carve
Out under the DIP facility (as defined in the Interim Order (i) Authorizing
Postpetition Financing Pursuant to 11 U.S.C. (S) 364, (ii) Granting Senior Liens
and Superpriority Administrative Expense Claim Status
4
<PAGE>
Pursuant to 11 U.S.C. (S)(S) 105, 503(b), 507 and 364, (iii) Authorizing Use of
Cash Collateral Pursuant to 11 U.S.C. (S) 363, (iv) Granting Adequate Protection
Pursuant to 11 U.S.C. (S)(S) 363 and 364, and (v) Scheduling a Final Hearing
Pursuant to Bankruptcy Rule 4001(b) and (c) (the "Interim DIP Order"), as may be
amended from time to time with the approval of the DIP lenders), any liens or
superpriority claims granted to prepetition secured creditors as adequate
protection for their claims under the Interim DIP Order and the Final DIP Order,
as defined in the DIP Credit Agreement, and prepetition liens granted to the
lenders under the Senior Credit Agreement as of April 29, 1998 and related
agreements, to the extent such prepetition claims are allowed as secured. As
long as the Stipulation and Order is in effect, Ventas agrees not to assert a
claim for minimum monthly base rent due for any period on or after the Petition
Date in excess of the Monthly Payment, including but not limited to the
Agreement Rent Claim, provided however that upon the termination of the
Stipulation and Order, and without limiting any of the Parties' other rights
under this Stipulation and Order, Ventas reserves its right to seek payment of
the Agreement Rent Claim under section 365(d)(3) of the Bankruptcy Code or
otherwise and the Debtors reserve their right to challenge the amount and timing
of payment of the Agreement Rent Claim, to the extent that any such claim is
allowed and provided further that Ventas shall have the right to commence
proceedings seeking the allowance and payment of such claim and any other
appropriate remedies upon receipt by any Party of any notice pursuant to
paragraph 4(b) below and the Debtors shall have the right to contest any such
proceedings.
3. To the extent applicable, the period in which Vencor, Inc., Vencor
Operating and VNCLP may assume or reject the Agreements under section 365(d)(4)
of the Bankruptcy Code is hereby extended to and including the date which is
fifteen (15) days after the date of termination of the Stipulation and Order
pursuant to the terms herein, provided however
-------- -------
5
<PAGE>
that such extension is without prejudice to the Debtors' right to seek an Order
of the Bankruptcy Court further extending such period pursuant to and subject to
section 365(d)(4) of the Bankruptcy Code.
4. Subject to the provisions of (P) 5 below, this Stipulation and Order
shall remain in full force from the Petition Date through October 31, 1999, and
automatically each one month period thereafter (the "Effective Period"), unless
and until (a)(i) terminated by Ventas, without the need for any further order of
this Court, if VCI, Vencor Operating or VNCLP fail to make any Monthly Payment
pursuant to the terms of this Stipulation and Order, (ii) the occurrence of the
effective date of any joint plan of reorganization for the Debtors, or (iii)
terminated on three business days written notice by Ventas, without the need for
any further order of this Court, if the DIP lenders have sent a notice
terminating the commitment under the DIP facility or an enforcement notice, or
(b) after October 31, 1999 a Party provides written notice by facsimile (receipt
confirmed) or overnight mail (i) at least fourteen days prior to the last
business day of the then current month, of its intent to terminate, to the other
Parties, the official committee of unsecured creditors, if one is appointed, the
DIP Agent, and to the Office of the United States Trustee (collectively, the
"Notice Parties"), whereupon such termination will occur on the last day of such
month in which such written notice is given unless such termination notice is
rescinded or revoked in writing by the Party sending the termination notice on
or prior to the date which is five business days prior to the last day of such
month or (ii) after the date which is 14 days prior to the last business day of
the then current month, of its intent to terminate, to the Notice Parties,
whereupon such termination will occur on the last day of the following month
unless such termination is rescinded or revoked in writing by the Party sending
6
<PAGE>
the termination notice on or prior to the date which is five business days prior
to the last day of such following month.
5. Notwithstanding any provision contained in this Stipulation and Order
to the contrary, (a) except as expressly provided in (b) below, each Party shall
have the right, upon notice of termination given pursuant to paragraph 4 or at
any time thereafter to dispute, inter alia (1) the bona fides, validity,
----- ---- ---- -----
enforceability and/or the avoidability of the Agreements generally, (2) whether
or not the Agreements constitute leases subject to Section 365, (3) to the
extent that the Agreements are subject to Section 365, whether the Agreements
concern residential or nonresidential properties, (4) the amount of rent or use
and occupancy, if any, that need be paid on a monthly basis going forward, (5)
the amount of the administrative claim, if any, due to unpaid rent, if
applicable, for the time period that this Stipulation was in force, and other
claims for unpaid rent or defaults, if any, that Ventas may have under the
Agreements, (6) whether Vencor and Ventas are separate entities or should be
substantively consolidated and (7) any other rights, remedies, claims or
defenses the Parties have under the Agreements, other agreements by, among or
relating to the Parties and/or applicable law; and (b) the Monthly Payments to
be made during the Effective Period shall not be subject to avoidance,
recoupment, defense, setoff, counterclaim, recovery or any similar remedy or
defense.
6. The first numbered paragraph of the Tolling Agreement dated April 12,
1999 between Vencor, Inc. and Ventas, Inc. (the "Tolling Agreement") shall be
deleted and replaced with the following paragraph:
Any Vencor Claim, including, without limitation, those arising or available
under the Bankruptcy Avoidance Provisions (defined below) that Vencor could
otherwise assert against Ventas if Vencor were a debtor in a case under the
Bankruptcy Code commenced on April 12, 1999, and whether arising under the
Bankruptcy Code or under other applicable federal or state law, shall not
be prejudiced, impaired, or otherwise waived by Vencor's failure to
commence such
7
<PAGE>
a bankruptcy case or to initiate suit against Ventas after commencement
of a bankruptcy case, and any and all statutes of limitations, repose,
or other legal or equitable constraints on the time by which such a
bankruptcy case or pleading initiating any Vencor Claim (including,
without limitation, a cause of action under (S) 548 of the Bankruptcy
Code) shall be tolled during the period of time from April 12, 1999 to
and including the date that is five business days following the
termination of the Stipulation and Order Pursuant to Section 365 of the
Bankruptcy Code Regarding Vencor, Inc., Vencor Operating and Vencor
Nursing Centers Limited Partnership's Performance of Obligations Under,
and Extending the Time Within Which Vencor, Inc., Vencor Operating and
Vencor Nursing Centers Limited Partnership May Accept or Reject,
Certain Agreements Between Vencor, Inc., Vencor Operating, Inc. Vencor
Nursing Centers Limited Partnership, Ventas, Inc. and Ventas Realty,
Limited Partnership dated September 13, 1999 (the "Tolling Period").
For all purposes herein, both the first and last day of the Tolling
Period shall be deemed to be contained in the Tolling Period.
The foregoing tolling shall not be deemed to shorten any tolling
period otherwise provided pursuant to section 108 of the Bankruptcy Code.
7. The terms and conditions of the Agreements and each Party's rights
and remedies thereunder are not otherwise modified except as expressly stated
herein.
8. This Stipulation and Order may not be modified unless in writing
signed by all of the Parties and so ordered by the Court.
9. This Stipulation and Order shall be binding upon each of the
Parties and their successors and assigns, including, but not limited to, any
trustee appointed in any Debtor's chapter 11 case and, in the event any of these
chapter 11 cases is converted to chapter 7, any trustee appointed in such
chapter 7 case.
10. Nothing in this Stipulation and Order shall constitute admissions
by any of the Parties and shall not be used in any subsequent litigation by the
Parties or any other person or entity other than for the purpose of enforcement
of this Stipulation and Order.
11. Each of the Parties has the right to terminate the Stipulation and
Order upon written notice to the other Parties if this Stipulation and Order is
not signed by the Court within five (5) business days of the Petition Date.
8
<PAGE>
12. Any Notices to be sent in accordance with this Stiplation and
Order will not be effective unless sent to the following:
To Ventas: Debra Cafaro, Chief Executive Officer
Ventas, Inc.
4360 Brownsboro Road, Suite 115
Louisville, KY 40207-1642
Fax (502) 357-9029
Rick Riney, General Counsel
Ventas, Inc.
4360 Brownsboro Road, Suite 115
Louisville, KY 40207-1642
Fax (502) 357-9029
Fax (502) 357-9001
S. David Peress, Esq.
Young Conaway Stargatt & Taylor
Rodney Square North, 11th Floor
Wilmington DE 19899-0391
Fax (302) 571-1253
Myron Trepper, Esq. and Michael J. Kelly, Esq.
Willkie, Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Fax (212) 728-8111
To Vencor:
General Counsel
Vencor, Inc.
680 South Fourth Street
Louisville, KY 40202
Fax (502) 596-4075
Thomas J. Moloney, Esq. and Lindsee P. Granfield, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Fax (212) 225-3999
9
<PAGE>
To Vencor Bank Group:
Mr. Houston Stebbins
Morgan Guaranty Trust Company
DIP Agent
60 Wall Street, 23rd Floor
New York, New York 10260
Fax (212) 648-5005
Karen Wagner, Esq.
Davis, Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Fax (212) 450-5403
Joel B. Zweibel, Esq.
O'Melveny & Myers, LLP
Citicorp Center
153 E. 53rd Street
New York, New York 10022
Fax (212) 326-2061
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE>
13. This Stipulation and Order constitutes the entire agreement of the
Parties regarding the subject matter hereof. Dated: September 13, 1999
YOUNG CONAWAY STARGATT & TAYLOR MORRIS, NICHOLS, ARSHT & TUNNELL
_______________________________ ___________________________________
By: By:
S. David Peress (Del. Bar #2679) William H. Sudell, Jr.(Del.Bar# 463)
Rodney Square North, 11th Floor Eric D. Schwartz (Del. Bar # 3134)
Wilmington, DE 19899-0391 1201 North Market Street
Tel.: (302) 571-6600 P.O. Box 1347
Wilmington, Delaware 19899-1347
- and - (302) 658-9200
- and -
WILLKIE FARR & GALLAGHER CLEARY, GOTTLIEB, STEEN & HAMILTON
Myron Trepper Thomas J. Moloney
Michael Kelly Lindsee P. Granfield
787 Seventh Avenue One Liberty Plaza
New York, NY 10019 New York, New York 10006
(212) 728-8000 (212) 225-2000
Attorneys for Ventas, Inc. and Ventas Attorneys for Debtors and Debtors
Realty, Limited Partnership in Possession
SO ORDERED THIS 13th DAY OF
SEPTEMBER, 1999
________________________________
United States Bankruptcy Judge
11
<PAGE>
Exhibit 10.8
AGREEMENT
---------
This Separation Agreement and Release of Claims ("Agreement") is entered
into by Jill L. Force and all of her agents, successors and assigns
("Employee"), and Vencor, Inc. ("Vencor") and all companies related to Vencor
and all of its affiliates, directors, officers, supervisors, employees, agents,
successors, assigns, representatives, subsidiaries or related companies, past
and present (collectively, the "Company").
Employee and the Company hereby desire to settle all disputes and issues
related to the resignation of Employee from her services as an employee to
and/or director of the Company.
NOW, THEREFORE, in consideration of the premises and the terms and
conditions contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties agree as follows:
1. Resignation. Employee's employment with Vencor, Inc. has been
------------
severed and Employee also hereby resigns from all capacities and positions with
the Company, both effective August 25, 1999 ("Date of Termination").
2. Obligations of the Company. Following the execution of this
--------------------------
Agreement, the Company shall pay Employee her base salary through the Date of
Termination and any amounts owed to Employee pursuant to the Company's standard
reimbursement procedures. In addition, subject to the terms and conditions of
this Agreement (including Section 12), Employee shall be entitled to the
following additional payments and benefits:
(a) $44,325 representing the prorated portion of the Employee's
target bonus for 1999 less amounts previously paid.
(b) 25,972 shares of Vencor common stock representing the
prorated portion of the Employee's Performance Share Award for 1999.
(c) $277,500 representing an amount equal to 1.5 times the
Employee's base salary for 1999.
(d) $166,500 representing an amount equal to 1.5 times the
Employee's target bonus for 1999.
-1-
<PAGE>
(e) 60,000 shares of Vencor common stock representing an amount
equal to 1.5 times the number of performance shares to be awarded to the
Employee pursuant to the Vencor, Inc. 1998 Incentive Compensation Plan
(including assumed awards granted under the Vencor, Inc. 1987 Incentive
Compensation Program).
(f) For a period of 18 months following the Date of Termination,
the Employee shall be treated as if she had continued to be an executive for all
purposes under the Vencor Health Insurance Plan and Dental Insurance Plan or the
Company will provide substantially the same coverage arranged by the Company.
Following this continuation period, the Employee shall be entitled to receive
continuation coverage under Part 6 of Title I of ERISA ("COBRA Benefits")
treating the end of this period as a termination of the Employee's employment if
allowed by law.
(g) For a period of 18 months following the Date of Termination,
the Company shall maintain in force, at its expense, the Employee's life
insurance in effect under the Vencor, Inc. Voluntary Life Insurance Benefit Plan
as of the Date of Termination or the Company will provide substantially the same
coverage arranged by the Company.
(h) For a period of 18 months following the Date of Termination,
the Company shall provide short-term and long-term disability insurance benefits
to Employee equivalent to the coverage that the Employee would have had had she
remained employed under the disability insurance plans applicable to Employee on
the Date of Termination. Should Employee become disabled during such period,
Employee shall be entitled to receive such benefits, and for such duration, as
the applicable plan provides.
(i) To the extent not already vested pursuant to the terms of
such plan, the Employee's interests under the Vencor Retirement Savings Plan
shall be automatically fully vested, without regard to otherwise applicable
percentages for the vesting of employer matching contributions based upon the
Employee's years of service with the Company.
(j) The Company shall adopt such amendments to its employee
benefit plans, if any, as are necessary to effectuate the provisions of this
Agreement.
(k) The Company shall take such action as is required to cause
the promissory note, dated June 15, 1998 in the remaining principal amount of
$54,090 (the "Tax Loan") entered into in connection with the loan made to
Employee to cover certain
-2-
<PAGE>
taxes owed by Employee, to be amended to provide that the Tax Loan and any
payments scheduled to be made in respect thereof shall not be due and payable
prior to the fifth anniversary of the Date of Termination.
(l) The Company shall take such action as is required to cause
the promissory note entered into in connection with the loan to Employee, dated
April 30, 1998, and as amended September 28, 1998, in an original principal
amount of $486,000 (the "Preferred Stock Loan") to be amended to provide that
(w) the Preferred Stock Loan shall not be due and payable until April 30, 2008,
(x) any payments scheduled to be made in respect to the Preferred Stock Loan
shall not be due and payable prior to the fifth anniversary of the Date of
Termination, (y) if the average closing price of Vencor common stock for the 90
days prior to any interest payment date is less than $8.00, such interest
payment shall be forgiven and (z) during the five-day period following the
expiration of the fifth anniversary of the Date of Termination, the Employee
shall have the right to put the preferred stock underlying the Preferred Stock
Loan to the Company at a price of $1,000 per share. Notwithstanding the above,
this Agreement shall not limit or impair any rights of Employee under the
Agreement dated as of August 17, 1999 between Employee and Vencor Operating,
Inc. concerning certain rights with respect to Preferred Stock of Vencor, Inc.
held by Employee (the "Put Agreement").
(m) Employee shall be credited with an additional 18 months of
vesting for purposes of all outstanding stock option awards to purchase Vencor
common stock and Employee will have an additional 18 months in which to exercise
such stock options.
(n) Employee shall receive the computer which Employee is
utilizing as of the Date of Termination. Employee shall provide the Company with
access to such computer so that Company files and information may be deleted
from the memory.
(o) All commitments made to Employee under paragraphs (a) through
(e) above shall be paid or issued upon the later of 14 days from the Date of
Termination or the expiration of the seven day period referenced in Section 15.
3. Death after Resignation. In the event of the death of Employee
-----------------------
during the period Employee is receiving payments pursuant to this Agreement,
Employee's designated beneficiary shall be entitled to receive the balance of
the payments; or in the event of no designated beneficiary, the remaining
payments shall be made to Employee's estate.
-3-
<PAGE>
4. Employee Acknowledgment and Release. Employee expressly
-----------------------------------
acknowledges that the above payments include consideration for the settlement,
waiver, release and discharge of any and all claims or actions arising from
Employee's employment, the terms and conditions of Employee's employment, or
Employee's termination of employment with the Company, including claims of
employment discrimination, wrongful termination, unemployment compensation or
any claim arising under law or equity, express or implied contract, tort, public
policy, common law or any federal, state or local statute, ordinance, regulation
or constitutional provision. Notwithstanding anything contained in this Section
4, this Agreement shall not limit or impair Employee's right to indemnification
under any agreements with the Company or under its certificate of incorporation
or bylaws.
(a) The claims released and discharged by Employee include, but
are not limited to, claims arising under Title VII of the Civil Rights Act of
1964, as amended; the Civil Rights Act of 1991; The Older Workers Benefit
Protection Act ("OWBPA"); the Age Discrimination in Employment Act of 1967
("ADEA"), as amended; the Americans with Disabilities Act ("ADA"); the Fair
Labor Standards Act; the Employee Retirement Income and Security Act of 1974, as
amended; the National Labor Relations Act; the Labor Management Relations Act;
the Equal Pay Act of 1963; the Pregnancy Discrimination Act of 1978; the
Rehabilitation Act of 1973; workers' compensation laws; Kentucky Wage and Hours
Laws, claims before the Kentucky Commission for Human Rights and Kentucky
Revised Statutes sections 341 et seq.
(b) Employee recognizes that by signing this Agreement, she may
be giving up some claim, demand or cause of action which she now has or may
have, but which is unknown to her. Employee also acknowledges that she is giving
up any right to seek future employment with the Company, that the Company has no
obligation to rehire her at any future date, and agrees that she will not apply
for work with the Company.
(c) Employee agrees not to file any charges, complaints, lawsuits
or other claims against the Company that relate in any manner to the Employee's
employment or the resignation or termination of Employee's employment with the
Company.
(d) Employee expressly waives any present or future claims
against the Company for alleged race, color, religious, sex, national origin,
age or disability discrimination or harassment under Title VII of the Civil
Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Equal Pay Act
of 1963; the Americans with Disabilities Act; the Family Medical Leave Act; the
Age Discrimination in Employment
-4-
<PAGE>
Act of 1967; the Older Workers Benefit Protection Act; the Rehabilitation Act of
1973; or any other federal or state law protecting against such discrimination
or harassment.
(e) Employee acknowledges that the Company has not and does not
admit that it engaged in any discrimination, wrong doing or violation of law on
the Company's part concerning Employee. Employee and the Company agree that by
entering into this Agreement no discrimination, wrong doing, or violation of law
has been acknowledged by the Company or assumed by Employee. Employee and the
Company further acknowledge that this Agreement is not an admission of
liability.
5. Confidentiality. Employee and the Company agree to keep the
---------------
contents and terms of this Agreement confidential and not to voluntarily
disclose the terms or amount of settlement to third parties. The only exception
is that Employee may reveal the terms of this Agreement to her spouse, attorney,
tax preparer or as otherwise required by law. The Company may reveal the terms
of this Agreement to its attorneys, accountants, financial advisors, managerial
employees, and any disclosure required by law or business necessity. Employee
and the Company agree that in the event the terms of this Agreement are
disclosed to the third parties as allowed or required herein, the third parties
will be advised of the obligation to keep the terms of this Agreement
confidential, and will obtain the third party's agreement to abide by the terms
of the confidentiality provisions set forth in this Agreement. In the event
that Employee breaches the confidentiality of this Agreement, Employee
understands that the Company shall have the right to pursue all appropriate
legal relief, including, but unlimited to, attorneys' fees and costs.
6. Public Statement. Employee further agrees not to make derogatory
----------------
or negative remarks or comments about the Company, its affiliates and their
respective directors, officers, shareholders, agents or employees, to any third
parties, and not to otherwise defame the Company in any manner. In the event
that Employee defames the Company, its affiliates and their respective
directors, officers, shareholders, agents or employees, Employee understands
that the Company shall have the right to pursue all appropriate legal relief,
including but not limited to, attorneys fees and costs, and reimbursement of all
monies paid hereunder. Company agrees not to make derogatory or negative remarks
or comments about Employee to any third parties, and not to otherwise defame the
Employee in any manner. In the event that the Company defames Employee, Company
understands that the Employee shall have the right to pursue all appropriate
legal relief, including but not limited to, attorneys' fees and costs.
7. Ability to Revoke.
-----------------
-5-
<PAGE>
(a) Employee acknowledges and agrees that the Company has advised
her and encouraged her to consult with an attorney, and she has consulted with
an attorney regarding this Agreement prior to signing below, and that she has
been given a period of at least twenty one (21) days within which to consider
this Agreement, including waiver of any ADEA and OWBPA age claims before
voluntarily signing this Agreement.
(b) Employee agrees and understands that she may revoke this
Agreement within seven (7) days after signing the Agreement, and that the
Agreement shall not become effective or enforceable until the revocation period
has expired.
(c) Any revocation of this Agreement must be made in writing and
delivered by hand or certified mail to Owen E. Dorsey, Vencor, Inc., One Vencor
Place, 680 South Fourth Avenue, Louisville, Kentucky 40202, before the
expiration of the revocation period.
8. Cooperation. Employee agrees that should the Company request
-----------
Employee's cooperation in connection with litigation, government investigations
or other administrative or legal proceeding, Employee shall cooperate fully with
the Company or its designated agents. Employee further agrees to cooperate
fully in disclosing to the Company or its designated agents, any information
which Employee obtained during the course and scope of her employment with the
Company, and to which other employees of the Company were not privy. If
Employee's cooperation in any individual matter would result in more than one
hour of service by Employee or if Employee's cooperation in all matters would
result in more than two hours of service in any one calendar month, then the
Company shall reimburse Employee for such services at an hourly rate of $90 per
hour, provided, however, Employee shall not be entitled to any reimbursement in
any matter for which the Company is providing Employee with indemnification.
Any request for reimbursement shall include, in reasonable detail, the services
provided, the length of time of providing the services and the date the services
were provided. In addition, the Company shall promptly reimburse Employee for
all reasonable, pre-approved expenses incurred by Employee in performing the
services requested by the Company, provided that Employee properly accounts
therefor in accordance with the Company's established policies.
9. Disputes. Any dispute or controversy arising under, out of, or
--------
in connection with this Agreement shall, at the election and upon written demand
of either party, be finally determined and settled by binding arbitration in the
City of Louisville, Kentucky, in accordance with the Labor Arbitration rules and
procedures of the American Arbitration Association, and judgment upon the award
may be entered in any court
-6-
<PAGE>
having jurisdiction thereof. If the Employee is successful in any such
arbitration, the Company shall pay all costs of the arbitration and all
reasonable attorneys' and accountants' fees of Employee incurred in connection
therewith, including any litigation to enforce any arbitration award.
10. Successors. This Agreement is personal to Employee and without
----------
the prior written consent of the Company shall not be assignable by Employee
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Employee's legal
representatives. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
11. Other Severance Benefits. Employee hereby agrees that in
------------------------
consideration for the payments to be received under this Agreement, Employee
waives any and all rights to any payments or benefits under any plans, programs,
contracts or arrangements of the Company that provide for severance payments or
benefits upon a termination of employment, including, without limitation, the
Employment Agreement between Employee and Vencor Operating, Inc. dated as of
July 28, 1998 and the Change in Control Severance Agreement between the Employee
and Vencor Operating, Inc. Notwithstanding the above, this Agreement shall not
limit or impair Employee's rights under the Vencor, Inc. Supplemental Executive
Retirement Plan.
12. Withholding. All payments, stock issuances and forgiveness of
-----------
debt to be made to Employee hereunder will be subject to all applicable required
withholding of taxes.
13. No Mitigation. Employee shall have no duty to mitigate her
-------------
damages by seeking other employment and, should Employee actually receive
compensation from any such other employment, the payments required hereunder
shall not be reduced or offset by any such compensation.
14. Execution by Employee. Employee will execute this Agreement and
---------------------
deliver the executed Agreement to Owen E. Dorsey, Vencor, Inc., 680 South Fourth
Avenue, Louisville, Kentucky 40202.
15. Termination of Waiting Period. After receipt of the executed
-----------------------------
Agreement from Employee, and after the expiration of the seven (7) day waiting
period referenced in Section 7(b) of this Agreement, the Company will execute
the Agreement.
16. Voluntary Action. Employee acknowledges that she has read and
----------------
fully understands all of the provisions of this Agreement and that she is
entering into this Agreement freely and voluntarily.
-7-
<PAGE>
17. Notices. Except as expressly provided in this Agreement, any
-------
notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or sent by
telephone facsimile transmission, personal or overnight couriers, or registered
mail with confirmation or receipt, addressed as follows:
If to Employee:
--------------
Jill L. Force
1732 Spring Drive
Louisville, Kentucky 40205
If to Company:
-------------
Vencor Operating, Inc.
One Vencor Place
680 South Fourth Avenue
Louisville, KY 40202
Attn: Legal Department
18. Governing Law. This Agreement shall be governed by the laws of
-------------
the Commonwealth of Kentucky.
19. Waiver of Breach and Severability. The waiver by either party of
---------------------------------
a breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by either party. In the
event any provision of this Agreement is found to be invalid or unenforceable,
it may be severed from the Agreement and the remaining provisions of the
Agreement shall continue to be binding and effective.
20. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter hereof. No provisions of this Agreement
may be modified, waived or discharged unless such modification, waiver or
discharge is agreed to in writing signed by Employee and a designated officer of
the Company. Notwithstanding the above, this Agreement shall not limit or impair
any rights of Employee under the Put Agreement.
21. Headings. The headings in this Agreement are for convenience
--------
only and shall not be used to interpret or construe its provisions.
-8-
<PAGE>
22. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VENCOR, INC.
By:/s/ Owen E. Dorsey
Title: Chief Administrative Officer
EMPLOYEE
/s/ Jill L. Force
-----------------
Jill L. Force
-9-
<PAGE>
Exhibit 10.9
AGREEMENT
---------
THIS AGREEMENT ("Agreement") is made and entered into this 17th day of
August 1999 by and among ___________________ ("Employee"), VENCOR, INC., a
Delaware corporation ("Vencor"), and VENCOR OPERATING, INC., a Delaware
corporation ("Vencor Operating," and together with Vencor and Employee,
"Parties").
RECITALS:
--------
A. Whereas, certain management employees of Vencor Operating purchased 6%
Series A Non-Voting Convertible Preferred Stock of Vencor (the "Preferred
Stock"), in connection with which the employees obligated themselves to Vencor
Operating under promissory notes dated on or around September 28, 1998 (the
"Promissory Notes") secured by such Preferred Stock.
B. Whereas, Employee and Vencor entered into an agreement effective as of
April 23, 1999 (the "April Agreement") granting Employee a put option with
respect to the Preferred Stock purchased by Employee.
C. Whereas, the April Agreement does not clearly and accurately reflect
the intent of Employee and Vencor and therefore Employee and Vencor wish to
rescind such April Agreement.
NOW, THEREFORE, the Parties hereby agree as follows:
AGREEMENT:
---------
1. Rescission. Vencor and Employee hereby agree to mutually
----------
rescind the April Agreement and treat the April Agreement as null and void ab
initio.
2. Put Right. Vencor agrees that Employee has the right to put the
---------
Preferred Stock owned by Employee back to Vencor at any time from January 1,
2000 to December 31, 2000, for a sales price equal to the outstanding principal
on the Promissory Note and unpaid interest (including accrued and past-due
interest) thereon (the "Put Right").
3. Right of Offset. Employee agrees that Vencor may satisfy its
---------------
obligation to Employee under the Put Right by delivering the Promissory Note to
Employee in cancellation thereof, which shall be treated as a cash payment in an
amount equal to the outstanding principal on the Promissory Note and unpaid
interest (including accrued and past-due interest) thereon.
4. Guarantee. Vencor Operating agrees to guarantee Vencor's
----------
performance of its obligations under Section 2 hereof.
<PAGE>
5. Forbearance. Subject to Section 3 hereof, Vencor Operating
------------
agrees that it will forbear from taking any actions prior to January 1, 2001 to
collect from Employee any interest due and unpaid on the Promissory Note.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VENCOR OPERATING, INC. VENCOR, INC.
By:________________________________ By:_____________________________
Richard A. Schweinhart Richard A. Schweinhart
Chief Financial Officer and Chief Financial Officer and
Senior Vice President Senior Vice President
________________________________
Employee
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM VENCOR, INC.'S
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 101,345
<SECURITIES> 0
<RECEIVABLES> 511,364
<ALLOWANCES> (107,963)
<INVENTORY> 28,938
<CURRENT-ASSETS> 727,793
<PP&E> 814,857
<DEPRECIATION> (317,879)
<TOTAL-ASSETS> 1,767,183
<CURRENT-LIABILITIES> 324,142
<BONDS> 0
1,743
0
<COMMON> 17,625
<OTHER-SE> 186,342
<TOTAL-LIABILITY-AND-EQUITY> 1,767,183
<SALES> 0
<TOTAL-REVENUES> 2,071,048
<CGS> 0
<TOTAL-COSTS> 1,625,538
<OTHER-EXPENSES> 375,511
<LOSS-PROVISION> 23,515
<INTEREST-EXPENSE> 65,598
<INCOME-PRETAX> (97,493)
<INCOME-TAX> 150
<INCOME-CONTINUING> (97,643)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (8,923)
<NET-INCOME> (106,566)
<EPS-BASIC> (1.53)
<EPS-DILUTED> (1.53)
</TABLE>
