<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1995
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 1-10989
VENCOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 61-1055020
(STATE OR OTHER JURISDICTION (I.R.S.
OF INCORPORATION OR EMPLOYER
ORGANIZATION) IDENTIFICATION
NO.)
3300 PROVIDIAN CENTER
400 WEST MARKET STREET
LOUISVILLE, KY 40202
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
</TABLE>
(502) 569-7300
(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.
<TABLE>
<CAPTION>
CLASS OF COMMON STOCK OUTSTANDING AT OCTOBER 31, 1995
--------------------------------------------------- -------------------------------
<S> <C>
Common stock, $.25 par value....................... 64,856,313 shares
</TABLE>
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<PAGE> 2
VENCOR, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statement of Operations -- for the quarters and nine
months ended September 30, 1995 and 1994.................................. 3
Condensed Consolidated Balance Sheet -- September 30, 1995 and December 31,
1994...................................................................... 4
Condensed Consolidated Statement of Cash Flows -- for the nine months ended
September 30, 1995 and 1994............................................... 5
Notes to Condensed Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................... 18
Item 2. Changes in Securities....................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders......................... 19
Item 6. Exhibits and Reports on Form 8-K............................................ 20
</TABLE>
2
<PAGE> 3
VENCOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTERS NINE MONTHS
------------------- -----------------------
1995 1994 1995 1994
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues........................................... $575,339 $519,117 $1,705,831 $1,501,521
-------- -------- ---------- ----------
Salaries, wages and benefits....................... 347,251 300,452 999,512 857,447
Supplies........................................... 47,868 41,083 138,266 119,212
Rent............................................... 20,225 19,727 59,575 59,867
Other operating expenses........................... 105,335 93,353 309,217 274,247
Depreciation and amortization...................... 23,263 20,545 66,940 58,898
Interest expense................................... 15,169 15,532 47,798 48,073
Interest income.................................... (3,304) (3,310) (10,032) (9,875)
Nonrecurring transactions.......................... 103,868 - 109,423 2,500
-------- -------- ---------- ----------
659,675 487,382 1,720,699 1,410,369
-------- -------- ---------- ----------
Income (loss) from operations before
income taxes..................................... (84,336) 31,735 (14,868) 91,152
Provision for income taxes......................... (21,449) 11,220 5,760 31,590
-------- -------- ---------- ----------
Income (loss) from operations...................... (62,887) 20,515 (20,628) 59,562
Extraordinary loss on early extinguishment of debt,
net of income tax benefit........................ (19,196) (58) (21,987) (229)
-------- -------- ---------- ----------
Net income (loss)........................ (82,083) 20,457 (42,615) 59,333
Preferred stock dividend requirements and other
items............................................ (1,692) (1,719) (5,280) (5,960)
Gain on redemption of preferred stock.............. 10,176 - 10,176 -
-------- -------- ---------- ----------
Income (loss) available to common
stockholders........................... $(73,599) $ 18,738 $ (37,719) $ 53,373
======== ======== ========== ==========
Earnings (loss) per common and common equivalent
share:
Primary:
Income (loss) from operations.................... $ (.91) $ .32 $ (.27) $ .94
Extraordinary loss on early extinguishment of
debt.......................................... (.32) - (.37) -
-------- -------- ---------- ----------
Net income (loss)................................ $ (1.23) $ .32 $ (.64) $ .94
======== ======== ========== ==========
Fully diluted:
Income (loss) from operations.................... $ (.91) $ .31 $ (.27) $ .90
Extraordinary loss on early extinguishment of
debt.......................................... (.32) - (.37) -
-------- -------- ---------- ----------
Net income (loss)................................ $ (1.23) $ .31 $ (.64) $ .90
======== ======== ========== ==========
Shares used in computing earnings (loss) per common
and common equivalent share:
Primary.......................................... 60,011 57,822 59,139 56,667
Fully diluted.................................... 60,011 69,804 59,139 68,699
</TABLE>
See accompanying notes.
3
<PAGE> 4
VENCOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 76,872 $ 39,018
Accounts and notes receivable less allowance for loss of
$16,135 -- September 30 and $12,856 -- December 31............ 316,152 272,119
Inventories...................................................... 25,565 23,387
Income taxes..................................................... 66,526 24,736
Other............................................................ 22,641 27,018
---------- ----------
507,756 386,278
---------- ----------
Property and equipment, at cost.................................... 1,492,192 1,367,455
Accumulated depreciation........................................... (344,582) (284,964)
---------- ----------
1,147,610 1,082,491
Notes receivable less allowance for loss of $15,329 -- September 30
and $15,409 -- December 31....................................... 79,478 84,133
Intangible assets less accumulated amortization of
$28,308 -- September 30 and $32,439 -- December 31............... 46,106 51,492
Other.............................................................. 62,942 51,811
---------- ----------
$ 1,843,892 $1,656,205
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 82,595 $ 76,575
Accrued salaries, wages and other compensation................... 91,417 72,130
Other accrued liabilities........................................ 91,627 57,393
Income taxes..................................................... - 7,612
Long-term debt due within one year............................... 9,588 43,489
---------- ----------
275,227 257,199
---------- ----------
Long-term debt..................................................... 922,165 746,212
Deferred credits and other liabilities............................. 55,172 56,340
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized;
98,402 shares issued and outstanding at December 31........... - 15
Common stock, $.25 par value; 180,000,000 shares authorized;
64,856,313 and 59,178,119 issued at September 30 and
December 31................................................... 16,214 14,794
Capital in excess of par value................................... 535,556 472,661
Retained earnings................................................ 75,300 136,614
---------- ----------
627,070 624,084
Common stock held in treasury and trust; (2,085,025 shares --
September 30 and 2,173,798 shares -- December 31)............. (35,742) (27,630)
---------- ----------
591,328 596,454
---------- ----------
$ 1,843,892 $1,656,205
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
VENCOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................. $ (42,615) $ 59,333
Adjustments to reconcile net income (loss) to net cash provided by
operations:
Depreciation and amortization................................... 66,940 58,898
Deferred income taxes........................................... (20,030) 4,115
Extraordinary loss on early extinguishment of debt.............. 35,058 375
Nonrecurring transactions....................................... 114,311 2,500
Other........................................................... 13,867 (372)
Changes in operating assets and liabilities:
Accounts and notes receivable................................. (63,132) (41,843)
Inventories and other assets.................................. (2,367) 2,678
Accounts payable.............................................. 15,673 8,867
Other accrued liabilities..................................... (3,144) 8,572
-------- --------
Net cash provided by operating activities....................... 114,561 103,123
-------- --------
Cash flows from investing activities:
Purchase of property and equipment................................. (102,271) (82,420)
Acquisition of healthcare facilities............................... (45,257) (28,246)
Proceeds from sales of property and equipment...................... 674 5,422
Collection of notes receivable..................................... 2,870 8,487
Change in investments.............................................. 160 14,571
Other.............................................................. (6,849) 7,871
-------- --------
Net cash used in investing activities........................... (150,673) (74,315)
-------- --------
Cash flows from financing activities:
Net change in borrowings under revolving lines of credit........... 68,750 4,000
Borrowings of long-term debt....................................... 656,421 15,054
Reduction of long-term debt........................................ (610,029) (52,489)
Proceeds from public offering of common stock...................... 66,494 -
Other issuances of common stock.................................... 6,588 535
Redemption of preferred stock...................................... (91,268) -
Payment of dividends............................................... (2,779) (2,301)
Other.............................................................. (20,211) (25,204)
-------- --------
Net cash provided by (used in) financing activities............. 73,966 (60,405)
-------- --------
Net increase (decrease) in cash and cash equivalents................. 37,854 (31,597)
Cash and cash equivalents at beginning of period..................... 39,018 60,930
-------- --------
Cash and cash equivalents at end of period........................... $ 76,872 $ 29,333
======== ========
Supplemental information:
Interest payments.................................................. $ 50,813 $ 48,772
Income tax payments................................................ 61,878 26,540
</TABLE>
See accompanying notes.
5
<PAGE> 6
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- REPORTING ENTITY
Vencor, Inc. ("Vencor") operates an integrated network of healthcare
services primarily focused on the needs of the elderly. At September 30, 1995,
Vencor operated 35 hospitals, 311 nursing centers, a contract services business
("Vencare") which provides respiratory therapy and subacute services primarily
to nursing centers, 56 retail and institutional pharmacy outlets and 23
retirement communities with 3,122 apartments.
On September 28, 1995, Vencor consummated a merger with The Hillhaven
Corporation ("Hillhaven") in a tax-free, stock-for-stock transaction (the
"Hillhaven Merger"). See Note 4.
Prior to its merger with Vencor, Hillhaven consummated a merger with
Nationwide Care, Inc. ("Nationwide") on June 30, 1995 in a tax-free,
stock-for-stock transaction (the "Nationwide Merger"). See Note 5.
NOTE 2 -- BASIS OF PRESENTATION
The Hillhaven and Nationwide Mergers have been accounted for by the
pooling-of-interests method. Accordingly, the accompanying condensed
consolidated financial statements give retroactive effect to these transactions
and include the combined operations of Vencor, Hillhaven and Nationwide for all
periods presented. In addition, the historical financial information of
Hillhaven and Nationwide (previously reported on fiscal years ending May 31 and
September 30, respectively) have been recast to conform to Vencor's annual
reporting period ending December 31.
The accompanying 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, the reader of these financial statements may wish to refer to the
audited consolidated financial statements of Vencor (Form 10-K/A for the year
ended December 31, 1994) and Hillhaven (Form 8-K dated September 1, 1995 for the
year ended May 31, 1995) filed with the Securities and Exchange Commission.
The accompanying condensed consolidated financial statements have been
prepared in accordance with Vencor's customary accounting practices and have not
been audited. Management believes that the financial information included herein
reflects all adjustments necessary for a fair presentation of interim results
and, except as discussed in Note 6, all such adjustments are of a normal and
recurring nature.
NOTE 3 -- EARNINGS PER SHARE
The computation of earnings per common and common equivalent share give
retroactive effect to the Hillhaven and Nationwide Mergers and is based upon the
weighted average number of common shares outstanding. In addition, the 1994
computations also included the dilutive effect of common stock equivalents
(consisting primarily of stock options) and convertible debt securities.
In connection with the Hillhaven Merger, Vencor realized a gain of
approximately $10.2 million upon the cash redemption of Hillhaven preferred
stock. Although the gain had no effect on net income, 1995 third quarter and
nine-month net loss per share was reduced by $.17.
NOTE 4 -- HILLHAVEN MERGER
On September 27, 1995, the stockholders of both Vencor and Hillhaven
approved the Hillhaven Merger, effective September 28, 1995. In accordance with
the merger agreement, each outstanding share of Hillhaven common stock was
converted on a tax-free basis into 0.935 of a share of Vencor common stock. All
outstanding shares of Hillhaven preferred stock were redeemed in exchange for
cash aggregating $91.3 million plus accrued dividends.
The Hillhaven Merger has been accounted for as a pooling of interests and,
accordingly, the condensed consolidated financial statements give retroactive
effect to the combined operations of Vencor and Hillhaven
6
<PAGE> 7
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(including Nationwide) for all periods presented. Summarized operating results
of the separate entities for periods prior to the Hillhaven Merger follow
(dollars in thousands):
<TABLE>
<CAPTION>
NONRECURRING
VENCOR HILLHAVEN TRANSACTIONS ELIMINATION CONSOLIDATED
-------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Third quarter:
1995:
Revenues.......................... $150,139 $ 452,280 $(24,500) $(2,580) $ 575,339
Income (loss) from operations..... 11,605 15,383 (89,875) - (62,887)
Net income (loss)................. 10,750 (2,958) (89,875) - (82,083)
1994:
Revenues.......................... $103,483 $ 415,724 $ - $ (90) $ 519,117
Income from operations............ 8,330 12,185 - - 20,515
Net income........................ 8,330 12,127 - - 20,457
Nine months:
1995:
Revenues.......................... $411,233 $1,322,873 $(24,500) $(3,775) $ 1,705,831
Income (loss) from operations..... 31,566 41,367 (93,561) - (20,628)
Net income (loss)................. 30,711 20,235 (93,561) - (42,615)
1994:
Revenues.......................... $288,980 $1,212,631 $ - $ (90) $ 1,501,521
Income from operations............ 21,532 39,542 (1,512) - 59,562
Net income........................ 21,532 39,313 (1,512) - 59,333
</TABLE>
NOTE 5 -- NATIONWIDE MERGER
Prior to its merger with Vencor, Hillhaven completed the Nationwide Merger
on June 30, 1995. In connection therewith, 4,675,000 shares of common stock
(effected for the Hillhaven Merger exchange ratio) were issued on a tax-free
basis in exchange for all of the outstanding shares of Nationwide.
The Nationwide Merger has been accounted for as a pooling of interests and,
accordingly, the condensed consolidated financial statements give retroactive
effect to the combined operations of Hillhaven and
7
<PAGE> 8
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Nationwide for all periods presented. Summarized operating results of the
separate entities for periods prior to the Nationwide Merger follow (dollars in
thousands):
<TABLE>
<CAPTION>
NONRECURRING
HILLHAVEN NATIONWIDE TRANSACTIONS CONSOLIDATED
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Six months ended June 30, 1995:
Revenues.............................. $ 803,793 $ 66,800 $ - $ 870,593
Income from operations................ 23,837 2,147 (3,686) 22,298
Net income (loss)..................... 23,459 (266) (3,686) 19,507
Quarter ended September 30, 1994:
Revenues.............................. $ 384,615 $ 31,109 $ - $ 415,724
Income (loss) from operations......... 12,257 (72) - 12,185
Net income (loss)..................... 12,199 (72) - 12,127
Nine months ended September 30, 1994:
Revenues.............................. $1,120,503 $ 92,128 $ - $ 1,212,631
Income from operations................ 35,931 3,611 (1,512) 38,030
Net income............................ 35,702 3,611 (1,512) 37,801
</TABLE>
NOTE 6 -- NONRECURRING TRANSACTIONS
In the third quarter of 1995, Vencor recorded pretax charges aggregating
$128.4 million primarily in connection with the Hillhaven Merger. The charges
included (i) $23.2 million of investment advisory and professional fees, (ii)
$53.8 million of employee benefit plan and severance costs, (iii) $26.9 million
of losses associated with the planned disposition of certain nursing center
properties and (iv) $24.5 million of losses to reflect Vencor's change in
estimates of accrued revenues recorded in connection with certain prior-year
nursing center third-party reimbursement issues (recorded as a reduction of
revenues).
Operating results for the nine months ended September 30, 1995 include
pretax charges of $5.5 million recorded in the second quarter related to the
Nationwide Merger.
In February 1994, Vencor recorded a pretax charge of $2.5 million in
connection with the prior disposition of certain nursing centers.
NOTE 7 -- LONG-TERM DEBT
Concurrent with the consummation of the Hillhaven Merger, Vencor entered
into a five and one-half year $1 billion senior credit facility (the "Credit
Facility") comprised of a $400 million term loan and a $600 million revolving
credit facility. The Credit Facility was established to finance the redemption
of Hillhaven preferred stock, repay certain higher rate debt and borrowings
under prior revolving credit agreements discussed below, and provide sufficient
credit for future expansion. Interest is payable at rates up to either (i) the
prime rate plus 1/4% or daily federal funds rate plus 3/4%, (ii) LIBOR plus
1 1/4% or (iii) the bank certificate of deposit rate plus 1 3/8%. Outstanding
borrowings under the $400 million term loan are payable in various installments
beginning in 1997 through 2001. The Credit Facility contains customary covenants
which include limitations on additional debt and repurchases of common stock,
and maintenance of certain financial ratios. Outstanding borrowings under the
Credit Facility aggregated $557.8 million at September 30, 1995.
During the third quarter of 1995, Vencor refinanced $344.2 million of
Hillhaven higher rate debt and repaid $112.5 million of outstanding borrowings
under prior revolving credit agreements. After-tax losses associated with these
activities totaled $19.2 million or $.32 per share. Vencor incurred an
additional after-tax
8
<PAGE> 9
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
loss of $2.7 million in the second quarter of 1995 primarily in connection with
the refinancing of certain Nationwide long-term debt.
NOTE 8 -- CONTINGENCIES
In January 1995, Horizon Healthcare Corporation ("Horizon") proposed a
transaction in which holders of Hillhaven common stock would receive common
stock of Horizon valued by Horizon at $28. Horizon also had entered into an
agreement with Tenet Healthcare Corporation ("Tenet"), a Hillhaven stockholder,
pursuant to which Tenet indicated that it was supportive of Horizon's proposal.
A formal proposal was presented by Horizon to Hillhaven and was rejected by a
special committee (the "Special Committee") of the Hillhaven Board of Directors
for, among other reasons, the belief that the arrangements between Horizon and
Tenet had caused Horizon to become the "beneficial owner" of Tenet's Hillhaven
common stock. Because Nevada law prohibits a merger for three years between
Hillhaven and any person acquiring beneficial ownership or more than 10% of
Hillhaven common stock without prior Hillhaven approval, the Horizon proposal
could not be consummated. The Special Committee authorized Hillhaven to commence
litigation seeking a determination that Horizon could not effect a merger with
Hillhaven in compliance with Nevada law.
On February 6, 1995, Hillhaven filed a complaint against Horizon in the
United States District Court for the District of Nevada seeking injunctive and
declaratory relief that a business combination between Horizon and Hillhaven is
prohibited by the Nevada statute regarding business combinations with interested
stockholders (NRS Sections 78.411 through 78.444) by reason of Horizon's
arrangements with Tenet. On February 27, 1995, Horizon filed an answer and a
counterclaim alleging that, among other things, Hillhaven and all of its
directors (other than Messrs. de Wetter and Andersons) had breached their
fiduciary duties to Hillhaven's stockholders in connection with their
consideration of Horizon's acquisition proposal and certain actions recently
taken by Hillhaven, including the formation of a grantor trust and the amendment
of Hillhaven's rights plan. The counterclaim seeks injunctive and declaratory
relief and compensatory and punitive damages in unspecified amounts. The parties
to this action have stipulated to a dismissal; however, such dismissal has not
yet been entered by the Court.
Hillhaven and its directors are named as defendants in a number of putative
class action complaints filed on behalf of Hillhaven's stockholders in Nevada
state court (the "Nevada State Court Actions") and California state court (the
"California State Court Actions"). These complaints raise allegations that
Hillhaven's directors breached their fiduciary duties to Hillhaven's
stockholders in connection with the consideration of Horizon's acquisition
proposal and certain corporate actions also cited in Horizon's counterclaim.
These actions seek declaratory and injunctive relief and, in California,
compensatory damages in unspecified amounts. The plaintiffs in the Nevada State
Court Actions moved to dismiss their complaints, which dismissal was opposed by
Hillhaven and its directors. In addition, Tenet filed a complaint against
Hillhaven and two of its directors, Mr. Busby and Mr. Marker (the "Tenet
Actions"), in the state court of California seeking declaratory and injunctive
relief and alleging, among other things, that they breached their fiduciary
duties to Tenet and Hillhaven's other stockholders in connection with their
consideration of Horizon's acquisition proposal and certain other corporate
actions cited in the Horizon and putative class action complaints. The Service
Employees International Union (AFL-CIO) and Joann Sforza, a Hillhaven employee
and union member, are seeking to intervene as party plaintiffs in the Tenet
Action and in one of the putative class actions brought on behalf of Hillhaven's
stockholders, alleging that their interests as stockholders and employees of
Hillhaven are not adequately represented. Management has opposed this
intervention and believes these actions are without merit.
By stipulation of the parties, the proceedings in the Tenet Action have
been dismissed with prejudice. No schedule has been established with respect to
further proceedings in the Nevada State Court Actions and the California State
Court Actions.
9
<PAGE> 10
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 9 -- STOCKHOLDERS' EQUITY
On September 27, 1995, Vencor common stockholders voted to increase the
number of authorized shares of common stock from 60,000,000 to 180,000,000 and
increase the number of common shares issuable under certain employee benefit
plans from 3,162,562 to 6,900,000.
NOTE 10 -- SUBSEQUENT EVENTS
In October 1995, Vencor called for redemption its $115 million 6%
Convertible Subordinated Notes (the "6% Notes") and $75 million 7.75%
Convertible Debentures (the "7.75% Debentures") which were convertible into
Vencor common stock at the rate of $26.00 and $17.96 per share, respectively. In
November 1995, $80.6 million principal amount of the 6% Notes was converted into
approximately 3,098,000 shares of common stock and the remainder was redeemed in
exchange for cash equal to 104.2% of face value plus accrued interest. All
outstanding 7.75% Debentures were converted into approximately 4,161,000 shares
of common stock. These transactions will have no material effect on earnings per
common and common equivalent share.
On October 30, 1995, Vencor entered into certain interest rate swap
agreements to eliminate the impact of changes in interest rates on $400 million
of floating rate debt outstanding under the Credit Facility. The agreements
expire in April 1997 ($100 million), October 1997 ($200 million) and April 1998
($100 million) and provide for fixed rates at 5.7%.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
HILLHAVEN AND NATIONWIDE MERGERS
The Hillhaven Merger was consummated on September 28, 1995. At the time of
the Hillhaven Merger, Hillhaven operated 311 nursing centers, 56 retail and
institutional pharmacies and 23 retirement communities with 3,122 apartments.
Annualized revenues approximated $1.7 billion.
Prior to its merger with Vencor, Hillhaven completed the Nationwide Merger
on June 30, 1995. At the time of the Nationwide Merger, Nationwide operated 23
nursing centers containing 3,257 licensed beds and four retirement communities
with 442 apartments. Annualized revenues approximated $125 million.
As discussed in the Notes to Condensed Consolidated Financial Statements,
the Hillhaven and Nationwide Mergers have been accounted for by the
pooling-of-interests method. Accordingly, the accompanying condensed
consolidated financial statements and financial and operating data included
herein give retroactive effect to these transactions and include the combined
operations of Vencor, Hillhaven and Nationwide for all periods presented. In
addition, the historical financial information and operating data of Hillhaven
and Nationwide (previously reported on fiscal years ending May 31 and September
30, respectively) have been recast to conform to Vencor's annual reporting
period ending December 31.
RESULTS OF OPERATIONS
Vencor operates an integrated network of healthcare services focused
primarily on the needs of the elderly through the operation of hospitals,
nursing centers and ancillary services businesses which include Vencare,
pharmacies and retirement communities. A summary of revenues follows (dollars in
thousands):
<TABLE>
<CAPTION>
QUARTERS NINE MONTHS
-------------------- % ------------------------ %
1995 1994 CHANGE 1995 1994 CHANGE
-------- -------- ------ ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Hospitals...................... $119,705 $ 91,972 30.2 $ 337,036 $ 263,076 28.1
-------- -------- ---------- ----------
Nursing centers:
Long-term care............... 271,274 262,498 3.3 793,789 757,684 4.8
Subacute care and medical
rehabilitation............ 125,952 98,675 27.6 361,124 276,162 30.8
-------- -------- ---------- ----------
397,226 361,173 10.0 1,154,913 1,033,846 11.7
Nonrecurring transactions.... (24,500) - (24,500) -
-------- -------- ---------- ----------
372,726 361,173 3.2 1,130,413 1,033,846 9.3
-------- -------- ---------- ----------
Ancillary services:
Vencare...................... 30,434 11,511 164.4 74,197 25,904 186.4
Pharmacies................... 43,406 46,230 (6.1) 133,741 149,163 (10.3)
Retirement communities....... 11,648 8,321 40.0 34,219 29,622 15.5
-------- -------- ---------- ----------
85,488 66,062 29.4 242,157 204,689 18.3
-------- -------- ---------- ----------
Elimination.................... (2,580) (90) (3,775) (90)
-------- -------- ---------- ----------
$575,339 $519,117 10.8 $1,705,831 $1,501,521 13.6
======== ======== ========= =========
</TABLE>
Excluding the effect of nonrecurring transactions, revenues grew 16% and
15% for the third quarter and nine months ended September 30, 1995,
respectively, compared to the same periods last year due primarily to growth in
hospital patient days, nursing center subacute and medical rehabilitation care
and Vencare contracts. Hospital patient days rose 27% to 124,475 in the third
quarter of 1995 and 21% to 362,326 for the nine-month period as a result of both
acquisitions and same-store growth. Nursing center patient days related to
subacute and medical rehabilitation care increased 16% to 419,499 in the third
quarter and 14% to 1,234,010 for the nine-month period. The number of Vencare
contracts at September 30, 1995 totaled 1,917 compared to 795 at September 30,
1994.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
In the third quarter of 1995, Vencor recorded pretax charges aggregating
$128.4 million ($89.9 million net of tax) primarily in connection with the
Hillhaven Merger. The charges included (i) $23.2 million of investment advisory
and professional fees, (ii) $53.8 million of employee benefit plan and severance
costs, (iii) $26.9 million of losses associated with the planned disposition of
certain nursing center properties and (iv) $24.5 million of losses to reflect
Vencor's change in estimates of accrued revenues recorded in connection with
certain prior-year nursing center third-party reimbursement issues. Operating
results for the nine months ended September 30, 1995 include pretax charges of
$5.5 million ($3.7 million net of tax) recorded in the second quarter related
primarily to the Nationwide Merger. In February 1994, Vencor recorded a pretax
charge of $2.5 million ($1.5 million net of tax) in connection with the prior
disposition of certain nursing centers.
For the third quarter and nine months ended September 30, 1995, losses from
operations totaled $62.9 million and $20.6 million, respectively, compared to
income of $20.5 million and $59.6 million for the respective periods in 1994.
Excluding the effect of nonrecurring transactions, third quarter income from
operations increased 32% to $27.0 million ($.38 per share - fully diluted) from
$20.5 million ($.31 per share), and 19% to $72.9 million ($1.04 per share) from
$61.1 million ($.92 per share) for the respective nine-month periods. The
improvement in both periods resulted primarily from revenue growth and operating
efficiencies associated with increased volume of services.
LIQUIDITY
Cash provided by operations totaled $114.6 million for the nine months
ended September 30, 1995 compared to $103.1 million last year due primarily to
growth in income from operations before nonrecurring transactions. Cash payments
in September 1995 related to nonrecurring transactions reduced cash flows from
operations by approximately $20 million. In addition, certain nonrecurring
transaction costs for merger-related fees and employee benefits will reduce cash
flows from operations for the remainder of 1995 and 1996.
Concurrent with the consummation of the Hillhaven Merger, Vencor
established the Credit Facility to finance the redemption of Hillhaven preferred
stock, repay certain Hillhaven higher rate debt and borrowings under prior
revolving credit agreements and provide sufficient credit for future expansion.
At September 30, 1995, available borrowings under the Credit Facility
approximated $348 million.
Working capital totaled $232.5 million at September 30, 1995 compared to
$129.1 million at December 31, 1994. Management believes that cash flows from
operations and amounts available under the Credit Facility are sufficient to
meet future expected liquidity needs.
CAPITAL RESOURCES
Excluding acquisitions, capital expenditures totaled $102.3 million for the
nine months ended September 30, 1995 compared to $82.4 million for the same
period of 1994. Planned capital expenditures in 1995 (excluding acquisitions)
are expected to approximate $150 million. Management believes that its capital
expenditure program is adequate to expand, improve and equip existing
facilities.
Vencor also expended $45.3 million and $28.2 million for acquisitions
during the respective nine-month periods of 1995 and 1994, of which $36.1
million and $24.2 million related to additional hospital facilities. Management
intends to acquire additional hospitals and nursing centers in the future.
Capital expenditures in both 1995 and 1994 were financed primarily through
internally generated funds and, in 1995, from the public offering of 2,200,000
shares of common stock, the proceeds from which aggregated $66.5 million. Vencor
intends to finance all capital expenditures with internally generated and
borrowed funds. Sources of capital include available borrowings under the Credit
Facility, public or private debt and equity.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CAPITAL RESOURCES (CONTINUED)
As discussed in Note 10 of the Notes to Condensed Consolidated Financial
Statements, Vencor called for redemption all of its outstanding convertible debt
securities in October 1995, resulting in the issuance of approximately 7,259,000
shares of common stock. Approximately $34.4 million of the convertible
securities were redeemed in exchange for cash equal to 104.2% of face value plus
accrued interest. These transactions will not have a material effect on earnings
per common and common equivalent share. Had these transactions occurred on
September 30, 1995, the ratio of debt to debt plus stockholders' equity would
have improved from 61.2% to 51.0%.
As discussed in Note 10 of the Notes to Condensed Consolidated Financial
Statements, Vencor entered into certain interest rate swap agreements on October
30, 1995 to eliminate the impact of changes in interest rates on $400 million of
floating rate debt outstanding under the Credit Facility. The agreements expire
in April 1997 ($100 million), October 1997 ($200 million) and April 1998 ($100
million) and provide for fixed rates at 5.7%.
HEALTH CARE LEGISLATION
Congress is currently considering various proposals which would reduce
expenditures under certain government health and welfare programs, including
Medicare and Medicaid. Management cannot predict whether such proposals will be
adopted, or if adopted, what effect, if any, such proposals would have on its
business.
For the nine months ended September 30, 1995, Medicare and Medicaid
revenues as a percentage of Vencor's hospital revenues approximated 58% and 11%,
respectively, while revenues from such programs approximated 29% and 45%,
respectively, of Vencor's nursing center revenues.
OTHER INFORMATION
Various lawsuits and claims arising in the ordinary course of business are
pending against Vencor. As discussed in Note 8 of the Notes to Condensed
Consolidated Financial Statements, Vencor is a party to certain litigation
involving the proposed acquisition of Hillhaven by Horizon in January 1995.
Resolution of such litigation and other loss contingencies is not expected to
have a material adverse effect on Vencor's financial position or results of
operations.
The Credit Facility contains customary covenants which include limitations
on additional debt and repurchases of common stock, and maintenance of certain
financial ratios. Vencor was in compliance with all such covenants at September
30, 1995.
13
<PAGE> 14
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>
1995 QUARTERS
----------------------------------
FIRST SECOND THIRD NINE MONTHS
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
Revenues.................................... $552,178 $578,314 $575,339 $1,705,831
-------- -------- -------- ----------
Salaries, wages and benefits................ 321,806 330,455 347,251 999,512
Supplies.................................... 43,516 46,882 47,868 138,266
Rent........................................ 19,579 19,771 20,225 59,575
Other operating expenses.................... 99,247 104,635 105,335 309,217
Depreciation and amortization............... 21,170 22,507 23,263 66,940
Interest expense............................ 15,458 17,171 15,169 47,798
Interest income............................. (3,180) (3,548) (3,304) (10,032)
Nonrecurring transactions................... - 5,555 103,868 109,423
-------- -------- -------- ----------
517,596 543,428 659,675 1,720,699
-------- -------- -------- ----------
Income (loss) from operations before
income taxes................................ 34,582 34,886 (84,336) (14,868)
Provision for income taxes.................... 13,410 13,799 (21,449) 5,760
-------- -------- -------- ----------
Income (loss) from operations................. 21,172 21,087 (62,887) (20,628)
Extraordinary loss on early extinguishment of
debt, net of income taxes................... (66) (2,725) (19,196) (21,987)
-------- -------- -------- ----------
Net income (loss)................... 21,106 18,362 (82,083) (42,615)
Preferred stock dividend requirements......... (1,793) (1,795) (1,692) (5,280)
Gain on redemption of preferred stock......... - - 10,176 10,176
-------- -------- -------- ----------
Income (loss) available to common
stockholders...................... $ 19,313 $ 16,567 $(73,599) $ (37,719)
======== ======== ======== ==========
Earnings (loss) per common and common
equivalent share:
Primary:
Income (loss) from operations............ $ .33 $ .32 $ (.91) $ (.27)
Extraordinary loss on early
extinguishment of debt................. - (.05) (.32) (.37)
-------- -------- -------- ----------
Net income (loss)................... $ .33 $ .27 $ (1.23) $ (.64)
======== ======== ======== ==========
Fully diluted:
Income (loss) from operations............ $ .31 $ .30 $ (.91) $ (.27)
Extraordinary loss on early
extinguishment of debt................. - (.04) (.32) (.37)
-------- -------- -------- ----------
Net income (loss)................... $ .31 $ .26 $ (1.23) $ (.64)
======== ======== ======== ==========
Shares used in computing earnings (loss) per
common and common equivalent share:
Primary..................................... 58,981 60,673 60,011 59,139
Fully diluted............................... 70,826 72,454 60,011 59,139
</TABLE>
14
<PAGE> 15
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>
1994 QUARTERS
-----------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues........................... $479,822 $502,582 $519,117 $531,306 $2,032,827
-------- -------- -------- -------- ----------
Salaries, wages and benefits....... 275,050 281,945 300,452 309,734 1,167,181
Supplies........................... 37,605 40,524 41,083 42,841 162,053
Rent............................... 20,141 19,999 19,727 19,504 79,371
Other operating expenses........... 90,316 90,578 93,353 92,374 366,621
Depreciation and amortization...... 18,426 19,927 20,545 20,621 79,519
Interest expense................... 15,339 17,202 15,532 14,755 62,828
Interest income.................... (3,267) (3,298) (3,310) (3,251) (13,126)
Nonrecurring transactions.......... 2,500 - - (7,040) (4,540)
-------- -------- -------- -------- ----------
456,110 466,877 487,382 489,538 1,899,907
-------- -------- -------- -------- ----------
Income from operations before
income taxes..................... 23,712 35,705 31,735 41,768 132,920
Provision for income taxes......... 8,105 12,265 11,220 15,191 46,781
-------- -------- -------- -------- ----------
Income from operations............. 15,607 23,440 20,515 26,577 86,139
Extraordinary loss on early
extinguishment of debt, net of
income taxes..................... (15) (156) (58) (12) (241)
-------- -------- -------- -------- ----------
Net income............... 15,592 23,284 20,457 26,565 85,898
Preferred stock dividend
requirements and other items..... (2,374) (1,867) (1,719) (1,793) (7,753)
-------- -------- -------- -------- ----------
Income available to
common stockholders.... $ 13,218 $ 21,417 $ 18,738 $ 24,772 $ 78,145
======== ======== ======== ======== ==========
Earnings per common and common
equivalent share:
Primary.......................... $ .24 $ .38 $ .32 $ .43 $ 1.37
Fully diluted.................... $ .24 $ .35 $ .31 $ .38 $ 1.28
Shares used in computing earnings
per common and common equivalent
share:
Primary.......................... 54,923 57,222 57,822 58,003 57,037
Fully diluted.................... 66,986 69,169 69,804 69,931 69,014
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OPERATING DATA
(UNAUDITED)
<TABLE>
<CAPTION>
1995 QUARTERS
----------------------------------------
FIRST SECOND THIRD NINE MONTHS
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Hospitals................................. $ 101,145 $ 116,186 $ 119,705 $ 337,036
-------- -------- -------- ----------
Nursing centers:
Long-term care.......................... 261,145 261,370 271,274 793,789
Subacute medical and rehabilitation..... 114,668 120,504 125,952 361,124
Nonrecurring transactions............... - - (24,500) (24,500)
-------- -------- -------- ----------
375,813 381,874 372,726 1,130,413
-------- -------- -------- ----------
Ancillary services:
Vencare................................. 19,286 24,477 30,434 74,197
Pharmacies.............................. 45,123 45,212 43,406 133,741
Retirement communities.................. 11,156 11,415 11,648 34,219
-------- -------- -------- ----------
75,565 81,104 85,488 242,157
-------- -------- -------- ----------
Elimination............................... (345) (850) (2,580) (3,775)
-------- -------- -------- ----------
$ 552,178 $ 578,314 $ 575,339 $1,705,831
======== ======== ======== ==========
HOSPITAL DATA:
End of period data:
Number of hospitals..................... 34 36 35
Number of licensed beds................. 2,859 3,275 3,214
Patient revenue mix %:
Medicare................................ 58.6 57.2 57.9 57.9
Medicaid................................ 11.3 11.6 11.2 11.4
Private and other....................... 30.1 31.2 30.9 30.7
Patient days:
Medicare................................ 74,742 80,236 79,282 234,260
Medicaid................................ 14,609 19,330 21,014 54,953
Private and other....................... 23,814 25,120 24,179 73,113
-------- -------- -------- ----------
113,165 124,686 124,475 362,326
======== ======== ======== ==========
NURSING CENTER DATA:
End of period data:
Number of nursing centers............... 310 311 311
Number of licensed beds................. 39,418 39,509 39,513
Patient revenue mix %:
Medicare................................ 28.8 29.1 28.9 29.0
Medicaid................................ 45.0 44.6 45.3 45.0
Private and other....................... 26.2 26.3 25.8 26.0
Patient days:
Long-term care.......................... 2,700,250 2,710,176 2,758,760 8,169,186
Subacute medical and rehabilitation..... 402,261 412,250 419,499 1,234,010
-------- -------- -------- ----------
3,102,511 3,122,426 3,178,259 9,403,196
======== ======== ======== ==========
ANCILLARY SERVICES DATA:
End of period data:
Number of Vencare contracts............. 1,093 1,703 1,917
Number of pharmacy outlets.............. 57 55 56
Number of retirement communities........ 23 23 23
Number of retirement community
apartments........................... 3,122 3,122 3,122
</TABLE>
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OPERATING DATA (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 QUARTERS
---------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Hospitals................................ $ 81,532 $ 89,572 $ 91,972 $ 98,035 $ 361,111
-------- -------- -------- ---------- ----------
Nursing centers:
Long-term care......................... 244,942 250,244 262,498 259,908 1,017,592
Subacute medical and rehabilitation.... 88,056 89,431 98,675 106,935 383,097
-------- -------- -------- ---------- ----------
332,998 339,675 361,173 366,843 1,400,689
-------- -------- -------- ---------- ----------
Ancillary services:
Vencare................................ 5,431 8,962 11,511 13,003 38,907
Pharmacies............................. 50,116 52,817 46,230 43,941 193,104
Retirement communities................. 9,745 11,556 8,321 9,768 39,390
-------- -------- -------- ---------- ----------
65,292 73,335 66,062 66,712 271,401
-------- -------- -------- ---------- ----------
Elimination.............................. - - (90) (284) (374)
-------- -------- -------- ---------- ----------
$ 479,822 $ 502,582 $ 519,117 $ 531,306 $2,032,827
======== ======== ======== ========== ==========
HOSPITAL DATA:
End of period data:
Number of hospitals.................... 31 31 33 33
Number of licensed beds................ 2,316 2,316 2,511 2,511
Patient revenue mix %:
Medicare............................... 57.2 55.9 55.9 57.0 56.5
Medicaid............................... 10.6 10.2 11.8 11.7 11.1
Private and other...................... 32.2 33.9 32.3 31.3 32.4
Patient days:
Medicare............................... 63,299 63,026 59,616 65,370 251,311
Medicaid............................... 15,282 14,276 15,222 15,407 60,187
Private and other...................... 21,543 24,244 23,254 23,084 92,125
-------- -------- -------- ---------- ----------
100,124 101,546 98,092 103,861 403,623
======== ======== ======== ========== ==========
NURSING CENTER DATA:
End of period data:
Number of nursing centers.............. 310 311 311 310
Number of licensed beds................ 39,615 39,506 39,508 39,423
Patients revenue mix %:
Medicare............................... 24.5 24.4 25.3 26.7 25.3
Medicaid............................... 48.3 48.0 47.6 46.6 47.6
Private and other...................... 27.2 27.6 27.1 26.7 27.1
Patient days:
Long-term care......................... 2,759,488 2,785,050 2,837,119 2,802,735 11,184,392
Subacute medical and rehabilitation.... 355,482 365,009 363,138 385,995 1,469,624
-------- -------- -------- ---------- ----------
3,114,970 3,150,059 3,200,257 3,188,730 12,654,016
======== ======== ======== ========== ==========
ANCILLARY SERVICES DATA:
End of period data:
Number of Vencare contracts............ 496 630 795 948
Number of pharmacy outlets............. 85 71 61 60
Number of retirement communities....... 23 22 22 22
Number of retirement community
apartments.......................... 3,092 2,992 2,992 3,049
</TABLE>
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1995, Horizon Healthcare Corporation ("Horizon") proposed a
transaction in which holders of Hillhaven common stock would receive common
stock of Horizon valued by Horizon at $28. Horizon also had entered into an
agreement with Tenet Healthcare Corporation ("Tenet"), a Hillhaven stockholder,
pursuant to which Tenet indicated that it was supportive of Horizon's proposal.
A formal proposal was presented by Horizon to Hillhaven and was rejected by a
special committee (the "Special Committee") of the Hillhaven Board of Directors
for, among other reasons, the belief that the arrangements between Horizon and
Tenet had caused Horizon to become the "beneficial owner" of Tenet's Hillhaven
common stock. Because Nevada law prohibits a merger for three years between
Hillhaven and any person acquiring beneficial ownership or more than 10% of
Hillhaven common stock without prior Hillhaven approval, the Horizon proposal
could not be consummated. The Special Committee authorized Hillhaven to commence
litigation seeking a determination that Horizon could not effect a merger with
Hillhaven in compliance with Nevada law.
On February 6, 1995, Hillhaven filed a complaint against Horizon in the
United States District Court for the District of Nevada seeking injunctive and
declaratory relief that a business combination between Horizon and Hillhaven is
prohibited by the Nevada statute regarding business combinations with interested
stockholders (NRS Sections 78.411 through 78.444) by reason of Horizon's
arrangements with Tenet. On February 27, 1995, Horizon filed an answer and a
counterclaim alleging that, among other things, Hillhaven and all of its
directors (other than Messrs. de Wetter and Andersons) had breached their
fiduciary duties to Hillhaven's stockholders in connection with their
consideration of Horizon's acquisition proposal and certain actions recently
taken by Hillhaven, including the formation of a grantor trust and the amendment
of Hillhaven's rights plan. The counterclaim seeks injunctive and declaratory
relief and compensatory and punitive damages in unspecified amounts. The parties
to this action have stipulated to a dismissal; however, such dismissal has not
yet been entered by the Court.
Hillhaven and its directors are named as defendants in a number of putative
class action complaints filed on behalf of Hillhaven's stockholders in Nevada
state court (the "Nevada State Court Actions") and California state court (the
"California State Court Actions"). These complaints raise allegations that
Hillhaven's directors breached their fiduciary duties to Hillhaven's
stockholders in connection with the consideration of Horizon's acquisition
proposal and certain corporate actions also cited in Horizon's counterclaim.
These actions seek declaratory and injunctive relief and, in California,
compensatory damages in unspecified amounts. The plaintiffs in the Nevada State
Court Actions moved to dismiss their complaints, which dismissal was opposed by
Hillhaven and its directors. In addition, Tenet filed a complaint against
Hillhaven and two of its directors, Mr. Busby and Mr. Marker (the "Tenet
Actions"), in the state court of California seeking declaratory and injunctive
relief and alleging, among other things, that they breached their fiduciary
duties to Tenet and Hillhaven's other stockholders in connection with their
consideration of Horizon's acquisition proposal and certain other corporate
actions cited in the Horizon and putative class action complaints. The Service
Employees International Union (AFL-CIO) and Joann Sforza, a Hillhaven employee
and union member, are seeking to intervene as party plaintiffs in the Tenet
Action and in one of the putative class actions brought on behalf of Hillhaven's
stockholders, alleging that their interests as stockholders and employees of
Hillhaven are not adequately represented. Hillhaven has opposed this
intervention and believes these actions are without merit.
By stipulation of the parties, the proceedings in the Tenet Action have
been dismissed with prejudice. No schedule has been established with respect to
further proceedings in the Nevada State Court Actions and the California State
Court Actions.
ITEM 2. CHANGES IN SECURITIES
Vencor, Hillhaven and State Street Bank and Trust Company, as Trustee,
entered into a Supplemental Indenture as of September 27, 1995 (the
"Supplemental Indenture"), whereby Vencor assumed the
18
<PAGE> 19
PART II. OTHER INFORMATION (CONTINUED)
ITEM 2. CHANGES IN SECURITIES (CONTINUED)
obligations of Hillhaven under the Indenture dated as of September 2, 1992,
relating to Hillhaven's 10 1/8% Senior Subordinated Notes due 2001 (the
"Indenture") and amended the Indenture to:
(i) eliminate covenants contained in the Indenture relating to: (a)
maintenance of corporate existence, (b) payment of taxes, (c) maintenance
of properties, (d) maintenance of insurance, (e) limitation on the
incurrence of debt by Vencor and its subsidiaries, (f) limitation on
restricted payments, (g) limitation on the issuance of preferred stock by
subsidiaries of Vencor, (h) limitation on restrictions on distributions
from subsidiaries of Vencor, (i) limitation on liens securing pari passu
indebtedness and subordinated indebtedness of Vencor and its subsidiaries,
(j) the provision of Vencor financial statements, (k) limitation on
transactions with affiliates, (l) limitation on issuance of guarantees by
subsidiaries of Vencor and (m) limitation on other senior subordinated
debt;
(ii) modify the covenant contained in the Indenture relating to
statements by officers of Vencor as to compliance with conditions and
covenants and statements by officers of Vencor as to defaults;
(iii) modify the provision in the Indenture relating to mergers or
transfer of assets by eliminating (a) the pro forma no-default requirement,
(b) the consolidated net worth requirement and (c) the additional debt
incurrence provisions;
(iv) modify the provision of the Indenture concerning events of
default by eliminating as an event of default any breach of a covenant or
agreement which was deleted as described in paragraph (i) above and by
eliminating as events of default certain defaults under other loan
agreements and certain judgments against Vencor or its subsidiaries; and
(v) make certain conforming and other changes.
The foregoing summary is qualified in its entirety by reference to the
Supplemental Indenture, a copy of which is included in this report as Exhibit
4(a).
On September 28, 1995, Vencor's Certificate of Incorporation was amended to
increase the number of authorized shares of common stock from 60,000,000 shares
to 180,000,000 shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 27, 1995, a Special Meeting of Stockholders of Vencor was held
in Louisville, Kentucky. A summary of proposals considered and voted upon
follows:
(1) Adoption and approval of an Amended and Restated Agreement and
Plan of Merger, dated as of April 23, 1995 and as amended and restated as
of July 31, 1995, between Vencor and Hillhaven, and approval of all
transactions contemplated by such agreement (the "Merger Proposal"):
for -- 21,869,360 shares; against -- 813,679 shares; abstain -- 63,495
shares; and broker non-vote -- 107,332 shares.
(2) Approval to amend Vencor's Certificate of Incorporation to
increase the authorized number of shares of Vencor common stock from
60,000,000 to 180,000,000: for -- 21,918,939 shares; against -- 754,043
shares; and abstain -- 180,884 shares.
(3) Approval to amend Vencor's 1987 Incentive Compensation Program to
increase the number of shares of Vencor common stock which may be issued
upon the exercise of stock options and other stock and cash awards granted
under the program from 3,162,562 shares to 6,900,000 shares:
for -- 17,950,368 shares; against -- 4,574,454 shares; abstain -- 221,712
shares; and broker non-vote -- 107,332 shares.
On September 27, 1995, a Special Meeting of Stockholders of Hillhaven was
held in Tacoma, Washington. Stockholders approved the Merger Proposal as
follows:
(1) Common Stock: for -- 33,521,360 shares; against -- 74,679 shares;
and abstain -- 34,804 shares.
(2) Series C Preferred Stock: for -- 35,000 shares; no shares against
or abstaining.
(3) Series D Preferred Stock: for -- 65,430 shares; no shares against
or abstaining.
19
<PAGE> 20
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3 Vencor Certificate of Incorporation, including amendments dated
September 27, 1995 and September 28, 1995.
4(a) Supplemental Indenture dated September 27, 1995, among Vencor,
Hillhaven and State Street Bank and Trust Company, as Trustee,
relating to 10 1/8% Senior Subordinated Notes due 2001.
4(b) $1 Billion Credit Agreement dated September 11, 1995 (conformed
to include Amendment No. 1) among Vencor, various banks and
other financial institutions, Morgan Guaranty Trust Company of
New York, (as Documentation Agent), Nationsbank, N.A (as
Administrative Agent) and J.P. Morgan Delaware (as Collateral
Agent).
4(c) Amendment No. 2 to Credit Agreement dated as of September 11,
1995 among Vencor, Inc., the other Borrowers referred to therein
and the Banks, Co-Agents, LC Issuing Banks and Agents referred
to therein.
10 Incentive Stock Award Agreements dated September 28, 1995 by and
among Vencor, Hillhaven, Bruce L. Busby, Christopher J. Marker,
Jeffrey M. McKain and Robert F. Pacquer, respectively.
11 Statement Re: Computation of earnings per common and common
equivalent share for the quarter and nine months ended September
30, 1995 and 1994.
27 Financial Data Schedule (included only in filings submitted
under the Electronic Data Gathering Retrieval and Analysis
("EDGAR") system).
(b) Reports filed on Form 8-K:
During the quarter ended September 30, 1995, the following reports on
Form 8-K were filed by Vencor and Hillhaven:
Reports filed by Vencor:
Report dated August 11, 1995, relating to an amendment to the Rights
Agreement, dated as of July 20, 1993, between Vencor and National City
Bank, as Rights Agent (the "Rights Agreement") to modify certain provisions
in the Summary of Rights to Purchase Series A Participating Preferred
Stock.
Report dated August 22, 1995, relating to the Agreement dated as of
August 22, 1995, by and among Vencor, Hillhaven and Tenet.
Report dated September 1, 1995, which included the following financial
information: (i) selected historical financial information for both Vencor
and Hillhaven (ii) selected financial data, management's discussion and
analysis of financial condition and results of operations, and the
consolidated financial statements and financial statement schedules of
Hillhaven for each of the three years in the period ended May 31, 1995
(iii) supplemental consolidated financial statements and financial
statement schedules of Hillhaven for each of the three years in the period
ended May 31, 1995 which reflect the Nationwide Merger and (iv) unaudited
pro forma condensed combined financial information of Vencor and Hillhaven
for each of the three years ended December 31, 1994, 1993 and 1992 and the
six months ended June 30, 1995 and 1994.
20
<PAGE> 21
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
Reports filed by Hillhaven:
Report dated July 31, 1995 which included the combined results of
operations of Hillhaven and Nationwide for the period from July 1, 1995
through July 31, 1995.
Report dated August 11, 1995, which included the consolidated
financial statements and management's discussion and analysis of financial
condition and results of operations of Nationwide through May 31, 1995.
Report dated August 29, 1995 (amended August 30, 1995), which included
Hillhaven's supplemental audited consolidated financial statements and
related schedule for each of the three years in the period ended May 31,
1995 reflecting the Nationwide Merger.
Report dated September 27, 1995, which included the results of
operations of Hillhaven for the fiscal quarters ended August 31, 1995 and
1994. A copy of the press release announcing the quarterly earnings was
filed as an exhibit thereto.
21
<PAGE> 22
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.
<TABLE>
<S> <C>
VENCOR, INC.
Date: November 14, 1995 /s/ Bruce Lunsford, Esq.
-----------------------------------------------
W. Bruce Lunsford, Esq.
Chairman of the Board, President
and Chief Executive Officer
Date: November 14, 1995 /s/ W. Earl Reed, III
-----------------------------------------------
W. Earl Reed, III
Vice President, Finance and
and Development
</TABLE>
22
<PAGE> 1
EXHIBIT 3
CERTIFICATE OF INCORPORATION
OF
VENCARE, INC.
Pursuant to the provisions of Section 102 and Section 103 of the
General Corporation Law of the State of Delaware, the undersigned, acting as
incorporator of a corporation, hereby adopts the following Certificate of
Incorporation for such corporation:
ARTICLE I
NAME
The name of the Corporation is Vencare, Inc.
ARTICLE II
REGISTERED OFFICE; REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is organized are to engage in
any lawful act or activity for which corporations may be organized under, and
to exercise any power that corporations may now or hereafter exercise under,
the General Corporation Law of the State of Delaware, including the general
business of establishing and operating hospital and providing acute care and
specialized treatment of patients with complex medical or respiratory disorders.
ARTICLE IV
CAPITAL STOCK
The total number of shares of stock that the Corporation shall have
authority to issue is 3,600,000, of which 3,500,000 shall be shares of common
stock, having a par value of one dollar per share (the "Common Shares"), and
100,000 shall be shares of preferred stock, having a par value of one dollar
per share (the "Preferred Shares"). The designations, voting powers and
relative rights and preferences of the two classes of shares of stock shall be
as set forth above.
<PAGE> 2
A. COMMON SHARES.
1. POWERS, RIGHTS AND PREFERENCES. The Common Shares
shall be without distinction as to powers, rights and preferences, and shall
have one vote per share on all matters on which shareholders are generally
entitled to vote.
2. DIVIDENDS. After the requirements regarding to
preferential dividends on the Preferred Shares (fixed in accordance with the
provisions of paragraph B of this Article IV), if any, have been met and after
the Corporation has complied with all the requirements, if any, regarding the
setting aside of sums as sinking funds or redemption or purchase accounts
(fixed in accordance with the provisions of paragraph B of this Article IV) and
subject further to any other conditions which may be fixed in accordance with
the provisions of paragraph B of this Article IV, then, but not otherwise, the
holders of Common Shares shall be entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors.
3. DISTRIBUTIONS. After distribution in full of the
preferential amount (as may be fixed in accordance with the provisions of
paragraph B of this Article IV), if any, to be distributed to the holders of
Preferred Shares, and subject to any further rights of the holders of Preferred
Shares (as may be fixed in accordance with the provisions of paragraph B of this
Article IV) to further participate in a liquidation, distribution or sale of
assets, dissolution or winding-up of the Corporation, the holders of Common
Shares shall be entitled to receive, upon the liquidation, distribution or sale
of assets, dissolution or winding-up of the Corporation, all its remaining
assets, tangible and intangible, of whatever kind available for distribution to
the shareholders, ratably in proportion to the number of Common Shares held by
each.
B. PREFERRED SHARES.
1. ISSUANCE BY BOARD RESOLUTION SERIES. The Board of
Directors of the Corporation shall have authority by resolution to issue from
time to time Preferred Shares on such terms as it may determine and for such
consideration as fixed by the Board of Directors. The Preferred Shares may be
issued in one or more series as may be determined from time to time by the
Board of Directors. Each series shall be distinctly designated by number,
letter or title. All Preferred Shares of any one series shall be alike in every
particular, except that there may be different dates from which dividends
thereon, if any, shall be cumulative, if made cumulative. The powers,
preferences and relative, participating, optional and other rights of each such
series, and the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding.
2. PREFERENCES AND RIGHTS. Subject to the provisions of
subparagraph 3 of this paragraph B of Article IV, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any Preferred Shares of each
particular series, the designation, powers, preferences and relative,
participating, optional and other rights, and the qualifications, limitations
and restrictions thereof, if any, of such series, including the following:
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<PAGE> 3
(a) The voting rights of which the holders of any
series of Preferred Shares are entitled, if any, including the right to vote as
a separate class or as one class with the holders of any other series of
Preferred Shares or the Common Shares or both;
(b) The distinctive designation of, and the number
and class of Preferred Shares which shall constitute the series, which number
from time to time may be increased or decreased (but not below the number of
shares thereof then outstanding) from time to time by action of the Board of
Directors;
(c) The rate and times at which, and the terms and
conditions upon which, dividends on the shares of the series shall be paid,
whether the dividends shall be cumulative or non-cumulative, and if cumulative,
from what date or dates, and the preferences or relation, if any, of such
dividends to the dividends payable on any shares of any other series or class
of the Corporation;
(d) Whether Preferred Shares of the series shall be
subject to redemption, and the redemption price or prices (including a
redemption price or prices payable in Common Shares), and the time or times at
which, and the terms and conditions on which, Preferred Shares of the series
may be redeemed;
(e) Whether holders of any series of Preferred Shares
shall be entitled to the benefit of a sinking fund or redemption or purchase
account to be applied to the purchase or redemption of Preferred Shares of the
series and, if so entitled, the amount of such fund and the terms and
conditions relative to its operations;
(f) Whether any series of Preferred Shares shall be
convertible into, or exchangeable for, any Common or other series of Preferred
Shares of the Corporation or any other securities and, if so convertible or
exchangeable, the conversion price or prices, or the rates of exchange, and any
adjustments thereof, at which such conversion or exchange may be made, and any
other terms and conditions of such conversion or exchange;
(g) The rights, if any, of the holders of any series of
Preferred Shares upon liquidation, merger, consolidation, distribution or sale
of assets, dissolution or winding-up of the Corporation;
(h) Whether any series of Preferred Shares shall have
priority over or parity with or be junior to Preferred Shares of any other
series, or shall be entitled to the benefit of limitations restricting (i) the
creation of indebtedness of the Corporation, (ii) the issuance of shares of any
other class or series having priority over or being on a parity with the shares
of such series, or (iii) the payment of dividends on, the making of other
distributions with respect to, or the purchase or redemption of shares of any
other class or series on parity with or ranking junior to Preferred Shares of
any such series as to dividends or other distributions, and the terms of any
such restrictions, or any other restrictions with respect to shares of any
class or series on parity with or ranking junior to Preferred Shares of such
series in any respect; and
(i) Any other powers, preferences, privileges and
relative, participating, optional, or other special rights of such series, and
the qualifications, limitations or restrictions thereof, to the full extent now
and hereafter permitted by law.
-3-
<PAGE> 4
3. ISSUANCE OF PREFERRED SHARES. The relative powers,
preferences and rights of each series of Preferred Shares in relation to the
powers, preferences and rights of other series of Preferred Shares shall, in
each case, be as fixed from time to time by the Board of Directors in
resolutions adopted pursuant to authority granted in this paragraph B of
Article IV, and the consent by series vote or otherwise, of the holders,
of such of the series of Preferred Shares as are from time to time outstanding
shall not be required for the issuance by the Board of Directors of any other
series of Preferred Shares, whether or not the powers, preferences and rights
of such other series shall be fixed by the Board of Directors as senior to, or
on a parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors may
provide in such resolutions regarding any series of Preferred Shares that the
consent of the holders of a certain percentage, as fixed therein by the Board
of Directors, of the outstanding Preferred Shares of such series shall be
required for the issuance of any other series of Preferred Shares.
ARTICLE V
SOLE INCORPORATOR
W. Bruce Lunsford, whose address is Levy Building, Suite 500, 133 South
Third Street, Louisville, Kentucky 40202, is the sole incorporator of the
Corporation.
ARTICLE VI
DIRECTORS
A. NUMBER OF DIRECTORS. The affairs of the Corporation shall be
managed and conducted by a Board of Directors, and unless otherwise provided in
the By-Laws, the election of directors need not be by written ballot. The
number of directors which shall constitute the whole Board of Directors shall
be fixed by, or in the manner provided in, the By-Laws of the Corporation. A
majority of the number of directors so fixed shall constitute a quorum for the
transaction of business, except that any vacancy on the Board of Directors,
whether created by an increase in the number of directors or otherwise, may be
filled by a majority of directors then in office, although less than a quorum,
or by a sole remaining director.
B. POWER AND AUTHORITY OF THE BOARD OF DIRECTORS. The Board of
Directors shall have such powers as are conferred on the Board of Directors by
the laws of the State of Delaware. In furtherance of such powers, the Board of
Directors is expressly authorized to adopt, amend or repeal the By-Laws of the
Corporation, without the consent or vote of the stockholders.
ARTICLE VII
INITIAL DIRECTOR
The name and mailing address of the person who is to serve as the
initial Director of the Corporation is W. Bruce Lunsford, Levy Building, Suite
500, 133
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<PAGE> 5
South Third Street, Louisville, Kentucky 40202, who shall serve until the first
annual meeting of the stockholders and until his successor in office is
elected and has qualified.
ARTICLE VIII
ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for a breach of a director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) any transaction from which a director derived an improper personal
benefit.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. RIGHT TO INDEMNIFICATION. To the fullest extent authorized by
the General Corporation Law of the State of Delaware, the Corporation shall
indemnify each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding") because he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
all expenses, liabilities and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) actually and reasonably incurred or suffered by him in connection
with such Proceeding. The Corporation may provide, by action of its Board of
Directors through agreement, resolution or by a provision in the By-Laws of the
Corporation, indemnification of the Corporation's employees and agents with
substantially the scope and effect as the indemnification provided in this
Article IX.
B. ADVANCEMENT OF EXPENSES. Expenses incurred by such a person
in his capacity as a director of officer of the Corporation (and not in any
other capacity in which service was or is rendered by such person while a
director or officer) in defending a Proceeding may be paid by the Corporation
in advance of the final disposition of such Proceeding as authorized by the
Board of Directors in a specific case upon receipt of an undertaking by or on
behalf of that person to repay such amounts unless it is ultimately determined
that that person is entitled to be indemnified by the Corporation as authorized
by the General Corporation Law of the State of Delaware. Expenses incurred by
a person in any capacity other than as an officer or director of the
Corporation may be paid in advance of the final disposition of a Proceeding on
such terms and conditions, if any, as the Board of Directors deems appropriate.
-5-
<PAGE> 6
C. CONTRACT RIGHT; NON-EXCLUSIVITY OF RIGHTS.
1. CONTRACT RIGHT. The indemnification provided for by
this Article IX shall be a contract right and shall continue as to persons who
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person. No
amendment to this Certificate of Incorporation or repeal of any Article of this
Certificate of Incorporation shall increase the liability of any director or
officer of the Corporation for acts or omissions of such persons occurring
prior to such amendment or repeal.
2. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification
conferred by this Article IX shall not be deemed exclusive of any other rights
to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to actions taken in his official capacity and in any other capacity while
holding such office.
D. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, trustee, officer, partner, employee, or agent of another domestic or
foreign corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in such capacity
or arising out of his status as such, whether or not the Corporation would have
the power or be obligated to indemnify him against such liability under the
provisions of this Article IX or the General Corporation Law of the State of
Delaware.
E. RIGHT OF CLAIMANT TO BRING SUITE. If a claim under paragraph A
of this Article IX is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suite against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
- 6 -
<PAGE> 7
ARTICLE X
BUSINESS COMBINATIONS
A. HIGHER VOTE FOR APPROVAL OF BUSINESS COMBINATION. The
affirmative vote of the holders of not less than eighty percent of the
outstanding shares of "Voting Stock" (as hereinafter defined) of the
Corporation and the affirmative vote of the holders of not less than two-thirds
of the outstanding shares of Voting Stock held by stockholders other than a
"Related Person" (as hereinafter defined) shall be required for the approval or
authorization of any "Business Combination" (as hereinafter defined) of the
Corporation with any Related Person.
B. EXCEPTIONS TO HIGHER VOTING REQUIREMENT. The eighty percent and
two-thirds voting requirements required by paragraph A of this Article X shall
not be applicable if:
1. Two-thirds of the "Continuing Directors" (as hereinafter
defined) of the Corporation then in office shall have approved the Business
Combination;
2. The Business Combination is solely between the
Corporation and another corporation all of which Voting Stock is owned directly
or indirectly by the Corporation; or
3. The Business Combination is a merger or consolidation
and the per share consideration to be received by holders of Common Shares of
the Corporation in the Business Combination is in cash and is in an amount not
less than the highest per share price (with appropriate adjustments for
recapitalizations and for stock splits, stock dividends and like distributions
or transactions) paid by the Related Person in acquiring any of its holdings of
the Common Shares.
C. DEFINITIONS.
1. BUSINESS COMBINATION. The term "Business Combination"
shall mean (a) any merger, consolidation or share exchange of the Corporation or
a subsidiary of the Corporation with a Related Person, (b) any sale, lease,
exchange, transfer or other disposition, including a mortgage or any other
security device, of all or any "Substantial Part" (as hereinafter defined) of
the assets either of the Corporation or of a subsidiary of the Corporation to a
Related Person, (c) any sale, lease, exchange, transfer or other disposition
of all or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation, (d) the issuance of any
securities of the Corporation or a subsidiary of the Corporation to a Related
Person, (e) any recapitalizaton that would have the effect of increasing a
Related Person's voting power in the Corporation, (f) the adoption of any plan
or proposal for the liquidation or dissolution of the Corporation proposed by or
on behalf of a Related Person, or (g) any agreement, contract or other
arrangement providing for any of the transactions described above.
2. RELATED PERSON. The term "Related Person" shall mean
and include any individual, corporation, partnership or other person or entity
(other than the persons and entities who were stockholders of the Corporation
on the date the Corporation's Common Shares were publicly offered pursuant to a
registration statement filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended) which, together with its "Affiliates"
and "Associates" (as
- 7 -
<PAGE> 8
defined under Rule 12b-2 in effect as of June 12, 1987, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
"beneficially owns" (as defined herein and under Rule 13d-3 in effect as of
June 12, 1987, promulgated under the Exchange Act) in the aggregate twenty
percent or more of the outstanding Voting Stock of the Corporation, and any
Affiliate or Associate of any such individual, corporation, partnership or
other person or entity.
3. SUBSTANTIAL PART. The term "Substantial Part" shall mean
more than thirty percent of the fair market value of the total assets of the
Corporation or entity in question, as of the end of its most recent fiscal
year ending prior to the time the determination is being made.
4. BENEFICIAL OWNERSHIP. Notwithstanding anything in
Rule 13d-3 to the contrary, any shares of Voting Stock of the Corporation that
any Related Person has the right to acquire pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise, shall be
deemed beneficially owned by the Related Person.
5. VOTING STOCK. The term "Voting Stock" shall mean all
outstanding shares of capital stock of the Corporation or another corporation
entitled to vote generally in the election of directors and each reference to
a proportion of shares of Voting Stock shall refer to such proportion of the
votes entitled to be cast by such shares.
6. CONTINUING DIRECTOR. The term "Continuing Director"
shall mean a Director who was a member of the Board of Directors of the
Corporation immediately prior to the time that the Related Person involved in a
Business Combination became a Related Person.
D. AMENDMENT. The provisions set forth in this Article X may not
be repealed or amended in any respect, unless such action is approved by the
affirmative vote of the holders of not less than eighty percent of the
outstanding shares of Voting Stock of the Corporations provided, however, that
if there is a Related Person at that time, such action must also be approved by
the affirmative vote of the holders of not less than two-thirds of the
outstanding shares of Voting Stock held by stockholders other than the Related
Person. Notwithstanding anything in the foregoing to the contrary, if
two-thirds of the Continuing Directors then in office declare any amendment,
alteration, change or repeal of any provision of this Article X to be
advisable, then such amendment, alteration, change or repeal may be approved by
the affirmative vote of two-thirds of the outstanding shares of Voting Stock of
the Corporation.
ARTICLE XI
CONSENT ACTIONS OF STOCKHOLDERS
Any action required or permitted to be taken by the stockholders at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, only if a consent in writing, setting
forth the actions so taken, shall be signed by the holders of at least eighty
percent of all the issued and outstanding shares of stock of the Corporation
entitled to vote thereon.
-8-
<PAGE> 9
I, THE UNDERSIGNED, being the sole incorporator hereinabove named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this Certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 12th day of June, 1987.
/s/ W. BRUCE LUNSFORD
-------------------------------
W. Bruce Lunsford, Incorporator
-9-
<PAGE> 10
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VENCARE, INC.
Pursuant to the provisions of Section 242 and Section 103 of the
General Corporation Law of the State of Delaware, the undersigned Corporation
adopts the following Certificate of Amendment to its Certificate of
Incorporation:
FIRST: The name of the Corporation is Vencare, Inc.
SECOND: The first paragraph of Article IV of the Certificate
of Incorporation is amended to read in its entirety
as follows:
"ARTICLE IV
Capital Stock
The total number of shares of stock that the
Corporation shall have authority to issue is 3,600,000
of which 3,500,000 shall be shares of Common Stock,
having a par value of Twenty Five Cents per share (the
"Common Shares"), and 100,000 shall be shares of
preferred stock, having a par value of one dollar per
share (the "Preferred Shares"). The designations,
voting powers and relative rights and preferences of
the two classes of shares of stock shall be set forth
below."
THIRD: The foregoing amendment to the Certificate of Incorporation
was adopted by the written consent of the sole shareholder
and sole director of the Corporation dated July 10, 1987, in
the manner prescribed in the General Corporation Law of the
State of Delaware for amending the Certificate of
Incorporation when shares have been issued.
Dated: July 30, 1987.
VENCARE, INC.
By: /s/ W. BRUCE LUNSFORD
----------------------------
W. Bruce Lunsford, President
Attested:
/s/ MARIA M. LEVERING
- ---------------------
Maria M. Levering,
Assistant Secretary
<PAGE> 11
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF JEFFERSON )
I, a Notary Public, in and for the State and County aforesaid, do
hereby certify that on this 30th day of July, 1987, personally appeared before
me W. Bruce Lunsford, who being by me first duly sworn declared that he is the
President of Vencare, Inc., that he signed the foregoing document as President
of said Corporation, and that the statements contained therein are true and
correct.
My Commission Expires: March 22, 1989
[SIGNATURE]
----------------------------------
Notary Public
(SEAL)
I hereby certify that I prepared
the foregoing document:
/s/ CARMIN D. GRANDINETTI
- ---------------------------------
Carmin D. Grandinetti
Greenebaum Doll & McDonald
3300 First National Tower
Louisville, Kentucky 40202
(502) 589-4200
<PAGE> 12
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Plan of Merger") is made and
entered into as of this 3rd day of August, 1987, between VENCARE, INC., a
Kentucky corporation ("Vencare"), and VENCARE, INC., a Delaware corporation and
a wholly owned subsidiary of Vencare (the "Subsidiary") (both hereinafter
sometimes collectively referred to as the "Constituent Corporations").
RECITAL:
The Board of Directors and shareholders of the Constituent Corporations
have approved this Plan of Merger, authorized its execution and have approved
and adopted the merger of Vencare into the Subsidiary in the manner prescribed
by the provisions of the Kentucky Business Corporation Act and the General
Corporation Law of the State of Delaware.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. THE MERGER. Vencare shall be merged into the Subsidiary (the
"Merger") in accordance with the General Corporation Law of the State of
Delaware and the Kentucky Business Corporation Act. The merger shall be
effective upon the later of the filing of this Plan of Merger with the
Secretary of State of Delaware or the issuance of a Certificate of Merger by
the Kentucky Secretary of State (the "Effective Time").
2. EFFECT OF THE MERGER. At and after the Effective Time:
(a) The separate corporate existence of Vencare shall
thereupon cease. The Subsidiary shall be the surviving corporation succeeding
to all purposes, objects, rights, privileges, powers, franchises, licenses and
interests of the Constituent Corporations, pursuant to the provisions of, and
with the effect provided in, the Kentucky Business Corporation Act and the
General Corporation Law of the State of Delaware. For purposes of reference to
the Subsidiary at and after the Effective Time, the Subsidiary is sometimes
hereinafter referred to as the "Surviving Corporation."
(b) The Certificate of Incorporation of the Subsidiary, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until further amended in accordance
with the General Corporation Law of the State of Delaware. The By-Laws of the
Subsidiary, as in effect immediately prior to the Effective Time, shall be the
By-Laws of the Surviving Corporation until duly amended in accordance with the
provisions of the General Corporation Law of the State of Delaware and the
Surviving Corporation's Certificate of Incorporation and By-Laws.
<PAGE> 13
(c) The directors of the Surviving Corporation shall
consist of those persons who were the directors of Vencare immediately prior to
the Effective Time. Each such person shall serve as a director of the
Surviving Corporation until the next regular annual meeting of its stockholders
and until his successor is elected and has qualified.
(d) The officers of the Surviving Corporation shall be
those persons who were the officers of Vencare immediately prior to the
Effective Time. The officers of the Surviving Corporation shall hold office
subject to the provisions of the General Corporation Law of the State of
Delaware and the Surviving Corporation's Certificate of Incorporation and
By-Laws.
3. CONVERSION OF SHARES. At the Effective Time:
(a) Each common share, without par value, of Vencare
("Vencare Shares"), that is issued and outstanding immediately prior to the
Effective Time shall be converted into 1,000 shares of common stock, having a
par value of twenty-five cents per share, of the Surviving Corporation; and
(b) Each share of common stock, having a par value of
twenty-five cents per share, of the Subsidiary that is issued and outstanding
immediately prior to the Effective Time and held of record by Vencare shall be
cancelled and returned to the status of authorized but unissued, and no stock
of the Surviving Corporation or any other security or consideration shall be
issued in exchange therefor.
4. EXCHANGE OF STOCK CERTIFICATES.
(a) At and after the Effective Time, all of the outstanding
certificates which prior to that time represented Vencare Shares shall
represent ownership of the number of shares of common stock, having a par value
of twenty-five cents per share, of the Surviving Corporation into which they
have been converted. Until such certificates have been surrendered for
conversion or otherwise accounted for to the Surviving Corporation, each holder
of a certificate that represents Vencare Shares shall be entitled to exercise
all voting and other rights regarding, and to receive any dividend and other
distribution upon, the number of shares of common stock, having a par value of
twenty-five cents per share, of the Surviving Corporation into which such
Vencare Shares were converted as provided herein.
(b) As soon as practical after the Effective Time, the
holders of the certificates theretofore representing Vencare Shares shall
surrender the certificates to the Surviving Corporation. Upon surrender of the
certificates, the Surviving Corporation shall issue to the holders a
certificate representing the number of shares of common stock, having a par
value of twenty-five cents per share, of the Surviving Corporation that the
holders are entitled to receive by virtue of the merger.
5. MISCELLANEOUS.
(a) FURTHER ASSURANCES. The officers and directors of the
Surviving Corporation are fully authorized in the name and on behalf of
Vencare or otherwise to take any and all such action and to execute and deliver
any and all such deeds and other instruments from time to time, as they shall
deem appropriate or
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<PAGE> 14
necessary to vest or perfect, or to conform to record or otherwise, in the
Surviving Corporation the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises, and
authority of Vencare and otherwise to carry out the purposes of this Plan of
Merger.
(b) AMENDMENT. This Plan of Merger may be amended in any
manner (except that any of the principal terms may not be amended without the
approval of holders of a majority of the outstanding voting shares of Vencare)
as may be determined in the judgment of the respective Boards of Directors of
the Surviving Corporation and Vencare to be necessary, desirable or expedient
in order to clarify the intention of the parties hereto or to effect or
facilitate the purposes and intent of this Plan of Merger.
(c) ABANDONMENT. At any time before the Effective Time,
this Plan of Merger may be terminated and the Merger may be abandoned by the
Board of Directors of either Vencare or the Surviving Corporation or both,
notwithstanding the approval of this Plan of Merger by the shareholders of
Vencare.
IN WITNESS WHEREOF, the Constituent Corporations have caused their
duly authorized officers to execute and deliver this Plan of Merger on and as
of the date first written above.
VENCARE, INC.
ATTEST: By: /s/ W. BRUCE LUNSFORD
----------------------------
W. Bruce Lunsford, President
/s/ MARIA M. LEVERING
- ----------------------------------- ("Vencare")
Maria M. Levering,
Assistant Secretary
VENCARE, INC.
ATTEST: By: /s/ W. BRUCE LUNSFORD
----------------------------
W. Bruce Lunsford, President
/s/ CARMIN D. GRANDINETTI (the "Subsidiary")
- -----------------------------------
Carmin D. Grandinetti,
Assistant Secretary
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF JEFFERSON )
I, a Notary Public in and for the Commonwealth and County aforesaid, do
hereby certify that on this day there personally appeared before me W. Bruce
Lunsford being by me first duly sworn, declared that he is President of both
VENCARE, INC., a Kentucky corporation, and VENCARE, INC., a Delaware
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<PAGE> 15
corporation, that he signed the foregoing document as the President of both
corporations, and that the statements contained therein are true and correct.
IN TESTIMONY WHEREOF, witness my signature and notarial seal this 3rd
day of August, 1987.
My Commission expires: 6/24/91.
/s/ CARMIN D. GRANDINETTI
(SEAL) -----------------------------------
Notary Public
This instrument prepared by:
/s/ CARMIN D. GRANDINETTI
- ------------------------------------
Carmin D. Grandinetti
GREENEBAUM DOLL & MCDONALD
3300 First National Tower
Louisville, KY 40202
(502) 589-4200
<PAGE> 16
CERTIFICATE
The undersigned, being the duly qualified and elected Assistant
Secretary of Vencare, Inc., a Delaware corporation ("Corporation"), DOES HEREBY
CERTIFY that annexed hereto is a true and correct copy of the Agreement and
Plan of Merger of Vencare, Inc. adopted by the unanimous written consent of the
Sole Initial Director as of July 1, 1987, and by the Sole Shareholder of the
Corporation as of July 14, 1987, and that it continues in full force and effect
as of the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of August,
1987.
/s CARMEN D. GRANDINETTI
------------------------------------------
Carmin D. Grandinetti, Assistant Secretary
Vencare, Inc.
COMMONWEALTH OF KENTUCKY )
) SS
COUNTY OF JEFFERSON )
Subscribed and sworn to before me, a Notary Public in and for the
aforementioned Commonwealth and County, do hereby certify that on this 5th day
of August, 1987, personally appeared before me Carmin D. Grandinetti, who being
by me first duly sworn, declared that he is Assistant Secretary of Vencare,
Inc. and that he signed the foregoing Certificate as Assistant Secretary of the
aforementioned corporation, and that the statements therein contained are
true.
[SIGNATURE]
(SEAL) ------------------------------------------
Notary Public
My Commission Expires: June 19, 1991
<PAGE> 17
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
OF
VENCARE, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Vencare, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
FIRST: The name of the Corporation is Vencare, Inc.
SECOND: The date on which the Certificate of Incorporation of the
Corporation was filed with the Secretary of State of Delaware is June 22, 1987.
THIRD: The Certificate of Incorporation, as amended, provides for a
class of stock known as Preferred Stock, par value one dollar, consisting of
100,000 shares, and expressly authorizes the Board of Directors of the
Corporation to designate, fix the number of shares of, and determine the
rights, preferences, privileges and restrictions of any wholly unissued series
of Preferred Stock.
FOURTH: That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, and in accordance with Section
151 of the General Corporation Law of the State of Delaware, the Board of
Directors at a meeting duly convened and held on December 22, 1987 adopted the
following resolution creating a series of 65,000 shares of Preferred Stock,
designated as Series A Preferred Stock:
"RESOLVED, that pursuant to the authority granted to the Board of
Directors by Article V, Paragraph B of the Certificate of Incorporation of the
Corporation, there is hereby created, and the Corporation is hereby authorized
to issue, 65,000 shares of a series of Preferred Stock, designated "SERIES A
PREFERRED STOCK," which series of Preferred Stock shall have, the following
rights, preferences, privileges and restrictions:
1. Designation. 65,000 of the shares of Preferred Stock shall be
designated and known as "Series A Preferred Stock".
<PAGE> 18
2. Dividends.
(a) No dividends or distributions (other than those payable
solely in the Common Stock of the Corporation or those which in the aggregate
do not exceed $2,000 per year) shall be paid on any Common Stock of the
Corporation during any fiscal year of the Corporation until dividends in the
total amount of $2.09 per share (as adjusted for any combinations,
consolidations, stock distributions or stock dividends with respect to such
shares) on the Series A Preferred Stock shall have been paid or declared and
set apart during that fiscal year, and no dividends or distributions (other
than those payable solely in Common Stock or those which in the aggregate do
not exceed $2,000 per year) shall be paid on any share of Common Stock unless a
dividend or distribution (including the amount of any dividends paid pursuant
to the above provisions of this paragraph 2(a)) is paid with respect to all
outstanding shares of Series A Preferred Stock in an amount for each such share
of Series A Preferred Stock equal to or greater than the aggregate amount paid
on all shares of Common Stock into which each such share of Series A Preferred
Stock could then be converted. Such Series A Preferred Stock dividends shall
be non-cumulative and shall be payable only when and as declared by the Board
of Directors.
(b) For purposes of this Section 2, unless the context
requires otherwise, "distribution" shall mean the transfer of cash or property
without consideration, whether by way of dividend or otherwise, payable other
than in Common Stock, or the purchase or redemption of shares of the
Corporation (other than repurchases of Common Stock held by employees or
directors of, or consultants to, the Corporation upon termination of their
employment or services pursuant to agreements providing for such repurchase and
other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase, or redemption by a
subsidiary of the Corporation.
3. Liquidation Reference.
(a) If the Corporation liquidates, dissolves or winds up its
business, either voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
$26.16 per share (as adjusted for any combinations, consolidations, stock
distributions or stock dividends with respect to such shares) plus all declared
but unpaid dividends on such share for each share of Series A Preferred Stock
then held by them. If upon the occurrence of such event, the assets and funds
thus distributed among
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<PAGE> 19
the holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed among the holders of the Series A Preferred Stock in
proportion to the shares of Series A Preferred Stock then held by them.
(b) After payment to the holders of the Series A Preferred
Stock of the amounts set forth in paragraph (a) above, the entire remaining
assets and funds of the Corporation legally available for distribution, if any,
shall be distributed among the holders of the Common Stock and the Series A
Preferred Stock in proportion to the shares of Common Stock then held by them
and the shares of Common Stock which they then have the right to acquire upon
conversion of the shares of Series A Preferred Stock then held by them.
(c) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 3, but shall be
subject to the provisions of Section 6 hereof.
(d) If the Corporation proposes to take any action regarding
the liquidation, dissolution or winding up of the Corporation which will
involve the distribution of assets other than cash, the value of the assets to
be distributed to the holders of shares of the Series A Preferred Stock shall
be determined by the consent or vote of the Board of Directors and such
determination shall be binding upon the holders of the Series A Preferred
Stock, except that any securities distributed shall be valued in accordance
with the provisions of paragraph 6(c) below.
4. Voting Rights; Directors.
(a) Except as otherwise expressly provided herein or as
required by law, the holder of each share of the Series A Preferred Stock shall
be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Series A Preferred Stock could be converted and
shall have voting rights and powers equal to the voting rights and powers of
the Common Stock (except as otherwise expressly provided herein or as required
by law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws
of the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating
all shares into which shares of Series A Preferred Stock held by each holder
could be converted) shall be rounded
-3-
<PAGE> 20
to the nearest whole number (with one-half being rounded upward).
(b) So long as 30% of the shares of Series A Preferred Stock
originally issued remain outstanding, the holders of the Series A Preferred
Stock shall be entitled to elect two directors of the Corporation at each
election of directors. The holders of shares of Common Stock and Series A
Preferred Stock, voting together in accordance with paragraph 4(a) above, shall
be entitled to elect the remaining directors of the Corporation. In the case of
any vacancy in the office of a director occurring among the directors elected
by the holders of a class of stock pursuant to this paragraph 4(b), such
vacancy shall be filled by action of the remaining director elected by the
holders of such class of stock or, if such director fails so to act, by action
of the remaining directors.
5. Conversion. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert and Automatic Conversion.
(i) Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and non-assessable shares of
Common Stock as is determined by dividing $26.16 plus all declared but unpaid
dividends on each share of Series A Preferred Stock by the then applicable
Conversion Price, determined as hereinafter provided, in effect on the date the
certificate is surrendered for conversion. The price at which shares of
Common Stock shall be deliverable upon conversion (the "Conversion Price")
shall initially be $6.54 per share of Common Stock. Such initial Conversion
Price shall be adjusted as hereinafter provided.
Notwithstanding the foregoing, in the event of the mailing of a notice of
redemption of any shares of Series A Preferred Stock pursuant to Section 7
hereof, the Conversion Rights shall terminate as to the number of shares
designated for redemption at the close of business on the fifth day prior to the
redemption date specified in the redemption notice, unless default is made in
payment of the redemption price, in which case the Conversion Rights for such
shares shall continue until such default is remedied.
(ii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price as follows immediately upon the closing of the sale of the
Corporation's Common
-4-
<PAGE> 21
Stock in a firm commitment, underwritten public offering registered under the
Securities Act of 1933, as amended (other than a registration relating solely
to a transaction under Rule 145 under such Act (or any successor thereto) or to
an employee benefit plan of the Company), at a public offering price (prior to
underwriter commissions and expenses) equal to or exceeding $19.62 per share
of Common Stock (appropriately adjusted for subdivisions and combinations of
shares of Common Stock and dividends on Common Stock payable in shares of
Common Stock) and the aggregate proceeds to the Corporation (after deduction
for underwriter commissions and expenses relating to the issuance, including
without limitation fees of the Corporation's counsel) of which equal or exceed
$10,000,000.
(b) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent for such
stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of surrender of the
shares of Series A Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
(c) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this
paragraph 5(c), the following definitions apply:
(1) "Options" shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Original Issue Date" shall mean the
date on which a share of Series A Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any
evidences of indebtedness, shares (other than Common Stock and Series A
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.
-5-
<PAGE> 22
(4) "Additional shares of Common Stock"
shall mean all shares of Common Stock issued (or, pursuant to paragraph
5(c)(iii), deemed to be issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Series
A Preferred Stock;
(B) to officers, directors or
employees of, or consultants to, the Corporation, on terms approved by the
Board of Directors, but not exceeding 300,000 shares of Common Stock (net of
any repurchases of such shares and including shares issuable upon exercise of
options outstanding on the Original Issue Date), subject to adjustment for all
subdivisions and combinations;
(C) as a dividend or distribution on
Series A Preferred Stock; or
(D) for which adjustment of the
Conversion Price is made pursuant to paragraph 5(c)(vi).
(ii) No Adjustment of Conversion Price. No
adjustment in the Conversion Price of a particular share of Series A Preferred
Stock shall be made in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to such issue,
for such share of Series A Preferred Stock.
(iii) Deemed Issue of Additional Shares of Common
Stock. In the event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
then entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein designed to protect against
dilution) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date,
provided that Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined pursuant to
paragraph 5(c)(v) hereof) of such Additional Shares of Common Stock would be
less than the Conversion Price in effect on the
-6-
<PAGE> 23
date of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which Additional Shares
of Common Stock are deemed to be issued
(1) no further adjustments in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(2) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Conversion Price shall effect Common Stock previously issued upon conversion of
the Series A Preferred Stock);
(3) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Series A Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation upon such exercise,
or for the issue of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options and the
consideration
-7-
<PAGE> 24
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Corporation (determined
pursuant to Section 5(c)(v)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(4) no readjustment pursuant to clauses (2)
or (3) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (A) the Conversion Price on the original
adjustment date, or (B) the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original adjustment
date and such readjustment date;
(5) in the case of any Options which expire
by their terms not more than 30 days after the date of issue thereof, no
adjustment of the Series A Conversion Price shall be made, except as to shares
of Series A Preferred Stock converted in such period, until the expiration or
exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (3) above; and
(6) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed thereof, the adjustment previously made in the Series A Conversion Price
which became effective on such record date shall be cancelled as of the close
of business on such record date, and shall instead be made on the actual date
of issuance, if any.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to paragraph 5(c)(iii)) without consideration or
for a consideration per share less than the Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, such
Conversion Price shall be reduced, concurrently with such issues to a price
(calculated to the nearest cent) determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding (including Common Stock issuable upon conversion of
the shares of Series A Preferred Stock outstanding immediately prior to such
issue) plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Conversion Price, and
the denominator of which shall be the number of shares of Common Stock
outstanding (including Common Stock or issuable upon conversion of the shares
of
-8-
<PAGE> 25
Series A Preferred Stock outstanding immediately prior to such issue) plus the
number of such Additional Shares of Common Stock so issued.
(v) Determination of Consideration. For purposes
of this paragraph 5(c), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration
shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property
other than cash, be computed at the fair value thereof at the time of such
issue, as determined in good faith by the Board of Directors of the
Corporation; and
(C) in the event Additional Shares of
Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors of
the Corporation.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to paragraph 5(c)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein designed to protect against
dilution) payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution)
issuable upon the
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<PAGE> 26
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Adjustments for Combinations or Subdivisions of
Common Stock. In the event that this Corporation at any time or from time to
time after the Original Issue Date shall declare or pay any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock,
or shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the Conversion Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.
(d) Other Distributions. In the event the Corporation
shall at any time or from time to time make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of its
subsidiaries other than Additional Shares of Common Stock, then in each such
event provision shall be made so that the holders of Series A Preferred Stock
shall receive, upon the conversion thereof, the securities of the Corporation
which they would have received had their stock been converted into Common Stock
on the date of such event.
(e) No Impairment. The Corporation will not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 5 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.
(f) Certificates as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Section 5, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and cause
independent public accountants selected by the Corporation to verify such
computation and prepare and furnish to each holder of Series A Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of
-10-
<PAGE> 27
any holder of Series A Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of Series A Preferred
Stock.
(g) Notices of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive Additional
Shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property,
or to receive any other right, the Corporation shall mail to each holder of
Series A Preferred Stock at least 20 days prior to the date specified therein,
a notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, security or right, and the amount and
character of such dividend, distribution, security or right.
(h) Issue Taxes. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of shares of Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be
obligated to pay any transfer taxes resulting from any transfer requested by
any holder in connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
the Series A Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary
amendment to these Articles.
(j) Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Series
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<PAGE> 28
A Preferred Stock. All shares of Common Stock (including fractions hereof)
issuable upon conversion of more than one share of Series A Preferred Stock by
a holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).
(k) Notices. Any notice required by the provisions of
this Section 5 to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.
(l) Adjustments. Except as provided in Section 6, in case
of any reorganization or any reclassification of the capital stock of the
Corporation, any consolidation or merger of the Corporation with or into
another corporation or corporations, or the conveyance of all or substantially
all of the assets of the Corporation to another corporation, each share of
Series A Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property (including cash) to which a
holder of the number of shares of Common Stock deliverable upon conversion of
such share of Series A Preferred Stock would have been entitled upon the record
date of (or date of, if no record date is fixed) such reorganization,
reclassification, consolidation, merger or conveyance; and, in any case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of such Series A Preferred
Stock, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to any
shares of stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of such Series A Preferred Stock.
6. Merger, Consolidation.
(a) At any time, in the event of:
(i) a consolidation or merger of the Corporation
with or into any corporation, or any other entity or person, other than a
wholly-owned subsidiary,
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<PAGE> 29
(ii) any corporate reorganization in which the
Corporation shall not be the continuing or surviving entity of such
reorganization,
(iii) a sale of all or substantially all of the
assets of the Corporation, or
(iv) any transaction approved by the Corporation in
which more than 50% of the outstanding stock of the Corporation (on an
as-converted basis) is exchanged in any three month period,
the holders of the Series A Preferred Stock shall be paid, prior and in
preference to any distribution of any proceeds to the holders of Common Stock,
in cash or in securities received from the acquiring corporation, or a
combination thereof, at the closing of such transaction, an amount equal to the
amount per share that would be payable to such holders pursuant to paragraph 3
hereof if all consideration received by the Corporation and its shareholders in
connection with such event were being distributed in a liquidation of the
Corporation.
(b) Such payment shall be made by redemption of such
shares or by purchase of such shares by the surviving corporation, entity or
person or by a third party.
(c) Any securities to be delivered to the holders of the
Series A Preferred Stock and Common Stock pursuant to paragraph 6(a) above
shall be valued as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability:
(1) If traded on a securities exchange, the
value shall be deemed to be the average of the security's closing prices on
such exchange over the 30-day period ending three days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three days prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as determined in good faith by
the Board of Directors of the Corporation; and
(ii) The method of valuation of securities subject
to investment letter or other restrictions on free
-13-
<PAGE> 30
marketability shall be to make an appropriate discount from the market value
determined as above in (i)(1), (2) or (3) to reflect the approximate fair
market value thereof, as determined in good faith by the Board of Directors of
the Corporation.
(d) In the event the full amount of such payment is not
placed on deposit with a bank or trust company having an aggregate capital and
surplus in excess of $100,000,000 at least three days prior to such closing, to
be held in escrow for delivery to the holders of Series A Preferred Stock upon
the closing of such transaction (or to be returned to the depositor in the
event such transaction is not closed), the Corporation shall forthwith either:
(i) cause such closing to be postponed until such
time as the requirements of this subparagraph have been complied with, or
(ii) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A Preferred
Stock shall revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first notice referred
to in paragraph 6(e) hereof.
(e) The Corporation shall give each holder of record of
Series A Preferred Stock written notice of such impending transaction not later
than 30 days prior to the shareholders' meeting called to approve such
transaction or 30 days prior to the closing of such transaction, whichever is
earlier, and shall also notify such holders in writing of the final approval of
such transaction. The first of said notices shall describe the material terms
and conditions of the contemplated transaction as well as the terms and
conditions of this Section 6, and the Corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no
event take place sooner than 30 days after the mailing by the Corporation of
the first notice provided for herein or sooner than 20 days after the mailing
by the Corporation of any notice of material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of not less than 66-2/3% of the then outstanding Series A
Preferred Stock.
7. Redemption.
(a) On or at any time after December 29, 1989, this
Corporation may at any time it may lawfully do so, at the option of the Board
of Directors, and on December 29, 1992 the Corporation shall be obligated to,
redeem all shares of Series A Preferred Stock then outstanding by paying in
-14-
<PAGE> 31
cash therefor an amount equal to $26.16 per share of Series A Preferred Stock,
plus all declared but unpaid dividends thereon, if any, through the date fixed
for redemption (the "Series A Redemption Price").
(b) (i) At least 30 but no more than 60 days prior to
the date fixed for any redemption pursuant to this Section 7 (the "Redemption
Date"), written notice shall be mailed, postage prepaid, to each holder of
record (at the close of business on the business day next preceding the day on
which notice is given) of shares to be redeemed, at the address last shown on
the records of this Corporation for such holder or given by the holder to this
Corporation for the purpose of notice or if no such address appears or is given
at the place where the principal executive office of this Corporation is
located, notifying such holder of the redemption to be effected, specifying the
Redemption Date, the redemption price, the place at which payment may be
obtained and the date on which such holder's Conversion Rights as to such
shares terminate and calling upon such holder to surrender to this Corporation,
in the manner and at the place designated, the certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
provided in paragraph 7(b)(ii), on or after the Redemption Date, each holder of
such shares to be redeemed shall surrender to this Corporation the certificate
or certificates representing such shares, in the manner and at the place
designated in the Redemption Notice, and thereupon the redemption price of such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(ii) From and after the Redemption Date, unless
there shall have been a default in payment of the redemption price for the
shares of Series A Preferred Stock to be redeemed pursuant to this Section 7,
all rights of the holders of such shares as holders of shares of Series A
Preferred Stock (except the right to receive the redemption price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares and such shares shall not thereafter be transferred on
the books of this Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption
of shares of its stock on any Redemption Date are insufficient to redeem the
total number of shares to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of shares
ratably among the holders of such shares to be redeemed. The shares not
redeemed shall remain outstanding and entitled
-15-
<PAGE> 32
to all the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
shares of the Corporation's stock, such funds will immediately be used to
redeem the balance of the shares which the Corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
(iii) Three days prior to the Redemption Date, the
Corporation shall deposit the aggregate redemption price of all outstanding
shares designated for redemption in the Redemption Notice, and not yet redeemed
or converted, with a bank or trust company having aggregate capital and surplus
in excess of $50,000,000 as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet redeemed.
Simultaneously, the Corporation shall deposit irrevocable instructions and
authority to such bank or trust company to publish the notice of redemption
thereof (or to complete such publication if theretofore commenced) and to pay,
on and after the date fixed for redemption or prior thereto, the redemption
price of the shares to be redeemed to the holders thereof upon surrender of
their certificates. Any money deposited by the Corporation pursuant to this
paragraph 7(b)(iii) for the redemption of shares which are thereafter converted
into shares of Common Stock pursuant to Section 5 hereof no later than the
close of business on the fifth day prior to the Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
money deposited by the Corporation pursuant to this paragraph 7(b)(iii)
remaining unclaimed at the expiration of six months following the Redemption
Date shall thereafter be returned to the Corporation upon its request expressed
in a resolution of its Board of Directors, provided that the stockholder to
which such money would be payable hereunder shall be entitled, upon proof of
its ownership of the shares designated for redemption and payment of any bond
requested by the Corporation, to receive such money but without interest from
the Redemption Date.
8. Restrictions and Limitations. So long as 30% of the shares of
Series A Preferred Stock originally issued remain outstanding (as adjusted for
any stock split, stock dividend, recapitalization or like transaction), the
Corporation shall not, without the vote or written consent by the holders of
more than 66-2/3% of the then outstanding shares of Series A Preferred Stock:
(i) Purchase, redeem or otherwise acquire (or pay
into or set aside for a sinking fund for such purpose), any of the Common
Stock of the Corporation, provided, however, that this restriction shall not
apply to the repurchase of shares of Common Stock from directors, officers,
consultants or employees of the Corporation or any subsidiary pursuant
- 16 -
<PAGE> 33
to agreements approved by the Corporation's Board of Directors under which the
Corporation has the option to repurchase such shares upon the occurrence of
certain events, including termination of employment or services;
(ii) Effect any sale or other conveyance of all or
substantially all of the assets of the Corporation or any of its subsidiaries,
or any consolidation or merger involving the Corporation or any of its
subsidiaries;
(iii) Amend or repeal any provision of, or add any
provision to, this Certificate of Designation, the Corporation's Certificate of
Incorporation or Bylaws if such action would alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of the Series A Preferred Stock;
(iv) Increase or decrease (other than by redemption
or conversion) the total number of authorized shares of Preferred Stock of the
Corporation or the total numbers of such shares of Preferred Stock designated
Series A Preferred Stock;
(v) Create any new series or class of stock having
any preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Series A Preferred Stock; or
(vi) Change the authorized size of the Corporation's
Board of Directors.
9. No Reissuance of Series A Preferred Stock. No share or shares
of Series A Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be returned to the status of undesignated shares of Preferred
Stock."
FIFTH: That said Certificate of Designation was duly adopted in
accordance with the provisions of the Corporation's Certificate of
Incorporation and Section 151 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Vencare, Inc. has caused this Certificate of
Designation to be signed by its President and
-17-
<PAGE> 34
attested to by its Secretary this 23rd day of December, 1987.
Vencare, Inc.
/s/ W. BRUCE LUNSFORD
-------------------------------
W. Bruce Lunsford
President
Attested
/s/ MARIA M. LEVERING
- --------------------------------
Maria M. Levering
Secretary
-18-
<PAGE> 35
CERTIFICATE OF AMENDMENT
CERTIFICATE OF INCORPORATION
OF
VENCARE, INC.
VENCARE, INC., a Delaware corporation (the "Corporation"), DOES HEREBY
CERTIFY AS FOLLOWS:
FIRST: That at a meeting of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth the
proposed amendment to the Certificate of Incorporation of the
Corporation, declaring the Amendment to be advisable and
calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolutions setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the
Corporation be amended by changing Article I to read in
its entirety as follows:
"The name of the corporation is Vencor, Incorporated."
SECOND: That thereafter, pursuant to resolution of the Corporation's
Board of Directors, a Special Meeting of the stockholders of
the Corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law of
the State of Delaware, at which meeting the necessary number of
shares as required by statute were voted in favor of the
amendment.
THIRD: That the foregoing amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its President and Secretary this 28th day of February, 1989.
/s/ W. BRUCE LUNSFORD
--------------------------------
By: W. Bruce Lunsford
President and Chairman
of the Board
ATTEST:
/s/ MARIA M. LEVERING
- -------------------------------
Maria M. Levering
Secretary
<PAGE> 36
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VENCOR, INCORPORATED
Pursuant to the provisions of Section 242 and Section 103 of the
General Corporation Law of the State of Delaware, the undersigned Corporation
adopts the following Certificate of Amendment to its Certificate of
Incorporation:
FIRST: The name of the Corporation is Vencor, Incorporated.
SECOND: The first paragraph of Article IV of the Certificate of
Incorporation is amended to read in its entirety as follows:
"ARTICLE IV
Capital Stock
The total number of shares that the Corporation shall
have authority to issue is 11,000,000 of which 10,000,000 shall
be shares of Common Stock, having a par value of Twenty Five
Cents per share (the "Common Shares"), and 1,000,000 shall be
shares of Preferred Stock, having a par value of one dollar per
share (the "Preferred Shares"). The designations, voting
powers and relative rights and preferences of the two classes
of shares of stock shall be set forth below."
THIRD: Article X - Business Combinations of the Certificate of
Incorporation is deleted in its entirety.
FOURTH: The foregoing amendments to the Certificate of Incorporation
were adopted by the Board of Directors at a Special
<PAGE> 37
Meeting of the Board held on May 26, 1989, and by the
Shareholders of the Corporation at a Special Shareholders'
Meeting held on June 20, 1989, in the manner prescribed in the
General Corporation Law of the State of Delaware for amending
the Certificate of Incorporation when shares have been issued.
Dated: June 20, 1989
VENCOR, INCORPORATED
By: /s/ W. BRUCE LUNSFORD
----------------------------------
W. Bruce Lunsford, President
and Chairman of the Board
Attested:
/s/ MARIA M. LEVERING,
- -----------------------------------
Maria M. Levering,
Secretary
2
<PAGE> 38
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF JEFFERSON )
I, a Notary Public, in and for the State and County aforesaid, do
hereby certify that on this 20th day of June, 1989, personally appeared before
me W. Bruce Lunsford, who being by me first duly sworn declared that he is the
President and Chairman of the Board of Vencor, Incorporated, that he signed the
foregoing document as President and Chairman of the Board of said Corporation,
and that the statements contained therein are true and correct.
My Commission Expires: 10/26/89
-------------------
/s/ MARIA M. LEVERING
--------------------------
Notary Public
[SEAL]
I hereby certify that I prepared the foregoing document:
/s/ LAUREL L.F. GARRETT
- -----------------------------
Laurel L.F. Garrett
Greenebaum Doll & McDonald
3300 First National Tower
Louisville, Kentucky 40202
(502) 589-4200
<PAGE> 39
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VENCOR, INCORPORATED
Vencor, Incorporated, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: That at a meeting of the Board of Directors
of the Corporation resolutions were duly adopted setting
forth a proposed amendment of the Certificate of
Incorporation of the Corporation, declaring said amendment
to be advisable and providing that the amendment be
presented to stockholders for consideration at the annual
meeting of stockholders to be held on May 15, 1991. The
resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the first paragraph of Article IV of the
Certificate of Incorporation of the Corporation be amended
to reflect an increase in the number of shares of Common
Stock the Corporation has the authority to issue, to read as
follows:
"ARTICLE IV
Capital Stock
The total number of shares that the Corporation shall
have authority to issue shall be 21,000,000, of which
20,000,000 shall be shares of Common Stock, having a par
value of Twenty-Five Cents per share (the "Common Shares"),
and 1,000,000 shall be shares of Preferred Stock, having a
par value of One Dollar per share (the "Preferred Shares").
The designations, voting powers and relative rights and
preferences of the two classes of shares of stock shall be
as set forth below."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of stockholders of the
Corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor
of the amendment.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
FOURTH: That the capital of the Corporation shall not be
reduced under or by reason of said amendment."
<PAGE> 40
IN WITNESS WHEREOF, Vencor, Incorporated has caused this certificate to
be signed by W. Bruce Lunsford, its Chairman of the Board, President and Chief
Executive Officer, and Jill L. Force, its Secretary, this 15th day of May,
1991.
VENCOR, INCORPORATED
BY: /s/ W. BRUCE LUNSFORD
-----------------------------------
W. Bruce Lunsford, Chairman of the
Board, President and Chief Executive
Officer
ATTESTED: /s/ JILL L. FORCE
---------------------------
Jill L. Force, Secretary
<PAGE> 41
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VENCOR, INCORPORATED
Vencor, Incorporated, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable and
providing that the amendment be presented to stockholders for
consideration at the annual meeting of stockholders to be held
on May 14, 1992. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the first paragraph of Article IV of the
Certificate of Incorporation of the Corporation be amended
to reflect an increase in the number of shares of Common Stock
the Corporation has the authority to issue, as follows:
"ARTICLE IV
CAPITAL STOCK
The total number of shares that the Corporation shall have
authority to issue shall be 61,000,000, of which 60,000,000
shall be shares of Common Stock, having a par value of
Twenty-Five Cents ($.25) per share (the "Common Shares"), and
1,000,000 shall be shares of Preferred Stock, having a par
value of One Dollar ($1.00) per share (the "Preferred Shares").
The designations, voting powers and relative rights and
preferences of the two classes of shares of stock shall be as
set forth below."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of stockholders of the
Corporation was duly called and held, upon notice in accordance
with Section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law
of the State of Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under
or by reason of said amendment.
<PAGE> 42
IN WITNESS WHEREOF, Vencor, Incorporated has caused this certificate to
be signed by W. Bruce Lunsford, its Chairman of the Board, President and Chief
Executive Officer, and Jill L. Force, its Secretary, this 14th day of May,
1992.
VENCOR, INCORPORATED
By: /s/ W. BRUCE LUNSFORD
------------------------------------
W. Bruce Lunsford, Chairman of the
Board, President and Chief Executive
Officer
ATTESTED: /s/ JILL L. FORCE
-------------------------
Jill L. Force, Secretary
<PAGE> 43
CERTIFICATE OF DESIGNATION OF
RELATIVE RIGHTS, PREFERENCES, AND LIMITATIONS OF
SERIES A PARTICIPATING PREFERRED STOCK
Pursuant to Delaware General Corporation Law Section 151, the Board of
Directors of Vencor, Incorporated, a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation, the Board on July 20, 1993, adopted the
following resolution creating a series of three hundred thousand (300,000)
shares of Preferred Stock designated as Series A Participating Preferred Stock;
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock, $1.00 par value, of
the Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences, and relative rights of the shares
of such series, and the qualifications, limitations, or restrictions thereof
are as follows:
1. DESIGNATION AND AMOUNT. Three hundred thousand (300,000)
shares of the Preferred Stock of the Corporation shall be designated as
"Series A Participating Preferred Stock", par value $1.00 per share (the
"Series A Preferred Stock"). Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than that of the shares then outstanding plus the number of shares issuable
upon exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the
holders of any shares of stock of the Corporation ranking prior and superior
to the shares of Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of assets legally
available for the purpose, quarterly dividends payable in cash on the first
business day of January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject
to the provision for adjustment hereinafter set forth,
<PAGE> 44
100 times the aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of Common Stock,
par value $.25 per share, of the Corporation (the "Common Stock") or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock.
In the event the Corporation shall at any time after the Record Date
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of
Common Stock in a reclassification or change of the outstanding shares of
Common Stock (including any such reclassification or change in connection with
a merger in which the Corporation is the continuing or surviving Corporation),
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Shares A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled
-2-
<PAGE> 45
to receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 30 days
prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Except as provided in paragraph C of this Section 3 and
subject to the provision for adjustment hereinafter set forth, each share of
Series A Preferred Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C)(i) If, on the date used to determine stockholders of
record for any meeting of stockholders for the election of directors, a
default in preference dividends (as defined in subparagraph (v) below) on the
Series A Preferred Stock shall exist, the holders of the Series A Preferred
Stock shall have the right, voting as a class as described in subparagraph (ii)
below, to elect two directors (in addition to the directors elected by holders
of Common Stock of the Corporation). Such right may be exercised (a) at any
meeting of stockholders for the election of directors or (b) at a meeting of
the holders of shares of Voting Preferred Stock (as hereinafter defined),
called for the purpose in accordance with the By-Laws of the Corporation, until
all such cumulative dividends (referred to above) shall have been paid in full
or until non-cumulative dividends have been paid regularly for at least one
year.
(ii) The right of the holders of Series A Preferred Stock to
elect two directors, as described above, shall be exercised as a class
concurrently with the rights of holders of any other series of any class of
preferred stock of the Corporation upon which voting rights to elect such
directors have been conferred and are then exercisable. The Series A Preferred
Stock and any additional series of such preferred stock which the
-3-
<PAGE> 46
Corporation may issue and which may provide for the right to vote with the
foregoing series of preferred stock are collectively referred to herein as
"Voting Preferred Stock."
(iii) Each director elected by the holders of shares of
Voting Preferred Stock shall be referred to herein as a "Preferred
Director." A Preferred Director so elected shall continue to serve as such
director for a term of one year, except that upon any termination of the right
of all of such holders to vote as a class for Preferred Directors, the term of
office of such directors shall terminate. Any Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of a majority of the outstanding shares of Voting Preferred Stock then
entitled to vote for the election of directors, present (in person or by proxy)
and voting together as a single class (a) at a meeting of the stockholders, or
(b) at a meeting of the holders of shares of such Voting Preferred Stock,
called for that purpose in accordance with the By-laws of the Corporation.
(iv) So long as a default in any preference dividends on the
Series A Preferred Stock shall exist or the holders of any other series of
Voting Preferred Stock shall be entitled to elect Preferred Directors,
(a) any vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (b)) by an instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and (b) in the case
of the removal of any Preferred Director, the vacancy may be filled by the vote
of the holders of a majority of the outstanding shares of Voting Preferred
Stock then entitled to vote for election of directors, present (in person or by
proxy) and voting together as a single class, at such time as the removal shall
be effected. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
(v) For purposes hereof, a "default in preference
dividends" on the Series A Preferred Stock shall be deemed to have occurred
whenever the amount of cumulative and unpaid dividends on the Series A
Preferred Stock shall be equivalent to six full quarterly dividends or more
(whether or not consecutive), and, having so occurred, such default shall be
deemed to exist thereafter until but only until, all cumulative dividends on
all shares of the Series A Preferred Stock then outstanding shall have been
paid through the last Quarterly Dividend Payment Date or until, but only until,
non-cumulative dividends have been paid regularly for at least one year.
(D) Except as set forth herein (or as otherwise required by
applicable law), holders of Series A Preferred Stock
-4-
<PAGE> 47
shall have no general or special voting rights and their consent shall not be
required for taking any corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled (based upon their respective liquidation values);
(iii) redeem or purchase or otherwise acquire for
consideration (except as provided in (iv) below) shares of any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up) to the Series A
Preferred Stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consider-
-5-
<PAGE> 48
ation any shares of stock of the Corporation unless the Corporation could,
under paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Restated Certificate of Incorporation, in any Certificate of Amendment creating
a series of Preferred Stock or as otherwise required by law.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Subject to the prior and superior rights of holders of
any shares of stock of the Corporation ranking prior and superior to the shares
of Series A Preferred Stock with respect to rights upon liquidation,
dissolution or winding up (voluntary or otherwise), no distribution shall be
made to the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Preferred
Stock unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Capital Adjustment") equal to the quotient
obtained by dividing (i) the Series A Liquidation Preference by (ii) 100
(subject to the provision for adjustment hereinafter set forth in subparagraph
(C) below) (such number in clause (ii), the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the
Capital Adjustment in respect of all outstanding shares of Series A Preferred
Stock and Common Stock, respectively, holders of Series A Preferred Stock and
holders of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of stock of the
Corporation, if any, which rank on a
-6-
<PAGE> 49
parity with the Series A Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of Series A Preferred Stock and the holders
of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Capital Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Record Date (i) declare any dividend on Common Stock payable in shares
of Common stock, (ii) subdivide the outstanding Common Stock, (iii) combine or
consolidate the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of Common Stock in a reclassification or exchange of the
outstanding shares of Common Stock (including any such reclassification or
exchange in connection with a merger in which the Corporation is the continuing
or surviving corporation), then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then, in any such case, the shares
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
9. RANKING. The Series A Preferred Stock shall rank junior to
all other series of stock of the Corporation (other than the Common Stock) as
to the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
10. AMENDMENT. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them
-7-
<PAGE> 50
adversely without the affirmative vote of the holders of a majority or more of
the outstanding shares of Series A Preferred Stock, voting separately as a
class.
IN WITNESS WHEREOF, the Board has executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this 20th day of July, 1993.
By: /s/ W. BRUCE LUNSFORD
-----------------------------------
W. Bruce Lunsford, Chairman of the
Board, President and Chief Executive
Officer
Attested:
/s/ JILL L. FORCE
- ---------------------------
Jill L. Force
Secretary
<PAGE> 51
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
VENCOR MERGE CORP.
INTO
VENCOR, INCORPORATED
(PURSUANT TO SECTION 253 OF THE
GENERAL CORPORATION LAW OF DELAWARE)
Vencor, Incorporated, a Delaware corporation (the "Corporation"), does
hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of Vencor Merge Corp., a Delaware corporation.
THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 12th day of August, 1993, determined to merge
into itself Vencor Merge Corp., on the terms and conditions set forth in such
resolutions:
RESOLVED, that, effective upon the filing of a Certificate of
Ownership and Merger, a form of which is attached hereto as Exhibit
A, Vencor, Incorporated shall merge into itself its subsidiary, Vencor
Merge Corp., and assume all of said subsidiary's rights and
obligations;
FURTHER RESOLVED, that, pursuant to the aforesaid merger, the name of
the Corporation shall be changed to "Vencor, Inc." by deleting
Article I of the Certificate of Incorporation of the Corporation and
inserting in lieu thereof a new Article I to read as follows:
NAME
The name of the Corporation is Vencor, Inc.
FURTHER RESOLVED, that the Chairman of the Board, President and Chief
Executive Officer, and the General Counsel and Secretary, of the
Corporation, be and they hereby are directed to make, execute and
acknowledge the Certificate of Ownership and Merger setting forth a
copy of the resolution to merge Vencor Merge Corp. into the Corporation
and to assume said subsidiary's rights and obligations at the date of
adoption thereof and to file
<PAGE> 52
the same in the office of the Secretary of State of Delaware and
a certified copy thereof in the Office of the Recorder of Deeds of
New Castle County, Delaware.
IN WITNESS WHEREOF, Vencor, Incorporated has caused its corporate seal
to be affixed and this certificate to be signed by W. Bruce Lunsford, its
Chairman of the Board, President and Chief Executive Officer, and Jill L.
Force, its General Counsel and Secretary, this 31st day of August, 1993.
VENCOR, INCORPORATED
By: /s/ W. BRUCE LUNSFORD
--------------------------------
W. Bruce Lunsford
Chairman of the Board, President
and Chief Executive Officer
ATTEST:
/s/ JILL L. FORCE
- -------------------------------
Jill L. Force
General Counsel and Secretary
2
<PAGE> 53
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VENCOR, INC.
Vencor, Inc., a Delaware corporation, hereby certifies as follows:
FIRST. The Board of Directors of said corporation duly adopted a
resolution setting forth and declaring advisable the amendment of the first
paragraph of Article IV of the certificate of incorporation of said corporation
to increase the total number of shares which the corporation shall have
authority to issue from 61,000,000 shares, of which 60,000,000 were shares of
Common Stock of the par value of twenty-five cents per share and 1,000,000 were
shares of Preferred Stock of the par value of one dollar per share, to
181,000,000, of which 180,000,000 shall be shares of Common Stock of the par
value of twenty-five cents per share and 1,000,000 shall be shares of Preferred
Stock of the par value of one dollar per share, so that, as amended, the first
paragraph of said Article shall read as follows:
"ARTICLE IV
CAPITAL STOCK
The total number of shares of stock that the Corporation shall have
authority to issue is 181,000,000 shares, of which 180,000,000 shall be
shares of common stock, having a par value of twenty-five cents per
share (the "Common Shares"), and 1,000,000 shall be shares of preferred
stock, having a par value of one dollar per share (the "Preferred Shares").
The designations, voting powers and relative rights and preferences of the
two classes of shares of stock shall be set forth below."
SECOND. The foregoing amendment has been duly adopted by the favorable
vote of the holders of a majority of the outstanding stock entitled to vote
thereon in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE> 54
IN WITNESS WHEREOF, Vencor, Inc. has caused this certificate to be
signed by W. Earl Reed, III, its Vice President of Finance and Development, on
the 27th day of September, 1995.
VENCOR, INC.
By: W. EARL REED
---------------------------------------
Name: W. Earl Reed, III
Title: Vice President of Finance
and Development
<PAGE> 55
CERTIFICATE OF MERGER
OF
THE HILLHAVEN CORPORATION
INTO
VENCOR, INC.
(Under Section 252 of the General
Corporation Law of the State of Delaware)
VENCOR, INC. hereby certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations are:
(a) The Hillhaven Corporation, a Nevada corporation; and
(b) Vencor, Inc., a Delaware corporation.
SECOND: An Amended and Restated Agreement and Plan of Merger, dated as
of April 23, 1995 and as amended and restated as of July 31, 1995 (the "Merger
Agreement"), has been approved, adopted, certified, executed and acknowledged
by The Hillhaven Corporation and Vencor, Inc. in accordance with the provisions
of subsection (c) of Section 252 of the General Corporation Law of the State of
Delaware.
THIRD: The name of the surviving corporation is Vencor, Inc.
FOURTH: The certificate of incorporation of the surviving corporation
shall be the Certificate of Incorporation of Vencor, Inc.
FIFTH: The executed Merger Agreement is on file at the principal
place of business of Vencor, Inc. at 3300 Providian Center, 400 West Market
Street, Louisville, Kentucky 40202.
SIXTH: A copy of the Merger Agreement will be furnished by Vencor,
Inc., on request and without cost, to any stockholder of The Hillhaven
Corporation or Vencor, Inc.
<PAGE> 56
SEVENTH: The authorized capital stock of The Hillhaven Corporation is
60,000,000 shares of common stock, par value $.75 per share, and 25,000,000
shares of preferred stock, par value $.15 per share.
IN WITNESS WHEREOF, Vencor, Inc. has caused this certificate to be
signed by W. Earl Reed, III, its Vice President of Finance and Development, and
attested to by Jill L. Force, its General Counsel and Secretary, on the 28th
day of September, 1995.
VENCOR, INC.
By: /s/ W. EARL REED, III
-------------------------------
W. Earl Reed, III
Vice President of Finance
and Development
ATTEST:
By: /s/ JILL L. FORCE
-----------------------------
Jill L. Force
General Counsel and Secretary
-2-
<PAGE> 1
EXHIBIT 4(A)
- ------------------------------------------------------------------------------
THE HILLHAVEN CORPORATION
and
VENCOR, INC.
to
------------
STATE STREET BANK AND TRUST COMPANY,
Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 27, 1995
------------
$175,000,000
10-1/8% Senior Subordinated Notes
due 2001
- ------------------------------------------------------------------------------
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as
of September 27, 1995, among THE HILLHAVEN CORPORATION, a Nevada corporation
("Hillhaven"), VENCOR, INC., a Delaware corporation ("Vencor"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts banking corporation (the
"Trustee").
WHEREAS, Hillhaven and the Trustee are parties to an Indenture, dated
as of September 2, 1993 (the "Indenture"), pursuant to which Hillhaven issued
its 10-1/8% Senior Subordinated Notes due 2001 (the "Notes");
WHEREAS, Hillhaven has entered into an Agreement and Plan of Merger
(the "Merger Agreement") dated as of April 23, 1995, as amended and restated as
of July 31, 1995, between Vencor and Hillhaven, pursuant to which Hillhaven is
to be merged with and into Vencor with Vencor being the surviving corporation
in compliance with Section 801 of the Indenture; and Hillhaven and Vencor have
delivered to the Trustee their respective Officers' Certificates and opinions
of Counsel, each stating, among other things, that the Supplemental Indenture
complies with the Indenture;
WHEREAS, Section 901 of the Indenture provides, among other things,
that Hillhaven, when authorized by a Board Resolution (as defined in the
Indenture), and the Trustee, at any time and from time to time may, without
prior notice to or the consent of any of the Holders (as defined in the
Indenture), enter into one or more indentures supplemental to the Indenture, in
a form satisfactory to the Trustee, to evidence succession of another Person
(as defined in the Indenture) to Hillhaven and the assumption by such Person of
all of the obligations, including the performance of all covenants contained in
the Indenture, of Hillhaven under the Notes and the Indenture;
WHEREAS, Hillhaven and Vencor have jointly offered to purchase for
cash any and all of the outstanding Notes upon terms and subject to conditions
set forth in the Offer to Purchase and Consent Solicitation (the "Offer to
Purchase and Consent Solicitation"), dated August 15, 1995, as supplemented by
the Supplement (the "Supplement"), dated September 13, 1995, to the Offer to
Purchase and Consent Solicitation and in the accompanying Second Letter of
Transmittal and Consent (which, together with the blue Letter of Transmittal
and Consent distributed with the Offer to Purchase and Consent Solicitation,
collectively constitute the "Offer"), pursuant to which, among other things,
Hillhaven and Vencor are soliciting consents to certain proposed amendments to
the Indenture as described in the Offer to Purchase and Consent Solicitation,
as supplemented by the Supplement;
<PAGE> 3
WHEREAS, Section 902 of the Indenture provides, among other things,
that Hillhaven, when authorized by a Board Resolution, and the Trustee, at any
time and from time to time may, with the consent of the Holders of not less
than a majority in aggregate principal amount of the outstanding Notes (the
"Requisite Consents"), may enter into one or more indentures supplemental to
the Indenture, in form and substance satisfactory to the Trustee, for the
purpose of adding certain provisions to or changing in any manner or
eliminating certain provisions of the Indenture or of modifying in certain
manners the rights of the Holders under the Indenture, the Notes or any
Guarantee (as defined in the Indenture);
WHEREAS, Hillhaven and Vencor have obtained the Requisite Consents to
amend the Indenture as provided herein and have delivered or caused to be
delivered such Consents to the Trustee, all as provided in Section 902 of the
Indenture;
WHEREAS, the execution and delivery of this instrument has been duly
authorized by Board Resolution, and all conditions and requirements necessary
to make this instrument a valid and binding agreement have been duly performed
and complied with; and
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, it is mutually covenanted and agreed, for the equal proportionate
benefit of all Holders, as follows:
ARTICLE I
ASSUMPTION AND SECURITIES
Section 1.1. Vencor hereby assumes, effective as of the Effective Time
(as defined in the Merger Agreement), all of the obligations, including the
performance of all covenants contained in the Indenture, of Hillhaven under the
Notes and the Indenture.
ARTICLE II
AMENDMENTS TO THE INDENTURE
Section 2.1. Effective as of the Acceptance Date (as defined in the
Offer to Purchase and Consent
<PAGE> 4
Solicitation, as supplemented by the Supplement), the Indenture is amended as
follows:
Section 501.
(i) To amend Section 501(c)(i) in its entirety to read as
follows:
"(i) there shall be a default in the performance, or breach,
of any covenant or agreement of the Company or of any
Guarantor under this Indenture (other than a default in the
performance or breach of a covenant or agreement which is
specifically dealt with in clauses (a) or (b) or subclauses
(ii), (iii) or (iv) of this clause (c) or pursuant to Sections
1004, 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012, 1013,
1014, 1016, 1017 or 1019 of this Indenture and such default or
breach shall continue for a period of 30 days after written
notice has been given by certified mail, (x) to the Company by
the Trustee or (y) to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the
outstanding Securities;"
(ii) To delete the text of Sections 501(d), 501(e) and
501(f) in its entirety and replace such text in each instance with the
text "[intentionally omitted]."
Section 801. To delete the text of clauses (ii), (iii) and (iv) of
Section 801(a) in its entirety and replace such text in each instance with the
text "(intentionally omitted]."
Section 1004. To delete the text of Section 1004 in its entirety and
replace such text with the text "(intentionally omitted]."
Section 1005. To delete the text of Section 1005 in its entirety and
replace such text with the text "(intentionally omitted]."
Section 1006. To delete the text of Section 1006 in its entirety and
replace such text with the text "(intentionally omitted]."
Section 1007. To delete the text of Section 1007 in its entirety and
replace such text with the text "[intentionally omitted]."
<PAGE> 5
Section 1008. To delete the text of Section 1008 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1009. To delete the text of Section 1009 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1010. To delete the text of Section 1010 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1011. To delete the text of Section 1011 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1012. To delete the text of Section 1012 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1013. To delete the text of Section 1013 in its entirety and
replace such text with the text "(intentionally omitted]."
Section 1014. To delete the text of Section 1014 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1016. To delete the text of Section 1016 in its entirety and
replace such text with the text "(intentionally omitted]."
Section 1017. To delete the text of Section 1017 in its entirety and
replace such text with the text "[intentionally omitted]."
Section 1019. To delete the text of Section 1019 in its entirety and
replace such text with the following text:
"The Company will deliver to the Trustee on or before a date
not more than 120 days after the end of each Fiscal Year of
the Company ending after the date hereof a written statement
signed by the principal executive officer, principal financial
officer or principal accounting officer of the Company
stating, whether or not, after a review of the activities of
the Company during such year and the Company's performance
under this Indenture to the best knowledge, based on such
review, of the signers thereof, the Company has fulfilled all
its obligations and is in compliance (such compliance to be
determined without regard to any period of grace or
requirement of notice provided under the
<PAGE> 6
Indenture) with all conditions and covenants under the
Indenture throughout such year and if there has been a
Default, specifying each Default and the nature and status
thereof."
ARTICLE III
MISCELLANEOUS
Section 3.1. The Trustee accepts the trusts created by the Indenture,
as supplemented by this Supplemental Indenture, and agrees to perform the same
upon the terms and conditions of the Indenture, as supplemented by this
Supplemental Indenture.
Section 3.2. Each of Vencor and the Trustee hereby confirms and
reaffirms the Indenture in every particular, except as modified, supplemented
and expressly amended by this Supplemental Indenture.
Section 3.3. In case any provisions in this Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 3.4. Nothing in this Supplemental Indenture or the Notes,
express or implied, shall give to any Person (other than the parties hereto and
their successors under the Indenture, as supplemented by this Supplemental
Indenture, any Paying Agent (as defined in the Indenture) the holders and the
Holders of Senior Indebtedness (as defined in the Indenture)) any benefit or
any legal or equitable right, remedy or claim under the Indenture, as
supplemented by this Supplemental Indenture.
Section 3.5. This instrument may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart were
upon a single instrument, and all such counterparts together shall be deemed to
be an original of this Supplemental Indenture.
Section 3.6. This Supplemental Indenture shall be governed by and
construed in accordance with the laws of the State of New York (without giving
effect to the conflicts of laws principles thereof).
Section 3.7. Upon the execution and effectiveness of this Supplemental
Indenture, the Indenture shall be modified in accordance herewith, and this
Supplemental Indenture shall form a part of the Indenture for all purposes; and
every Holder of Notes theretofore or
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
THE HILLHAVEN CORPORATION
By /s/ ROBERT F. PACQUER
----------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
Attest:
By /s/ RICHARD P. ADCOCK
----------------------------------
Name: Richard P. Adcock
Title: Secretary
VENCOR, INC.
By
----------------------------------
Name:
Title:
Attest:
By
----------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee as aforesaid
By
----------------------------------
Name:
Title:
Attest:
By
----------------------------------
Name:
Title:
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
THE HILLHAVEN CORPORATION
By
----------------------------------
Name:
Title:
Attest:
By
----------------------------------
Name:
Title:
VENCOR, INC.
By
----------------------------------
Name:
Title:
Attest:
By
----------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee as aforesaid
By /s/ BRIAN J. CURTIS
----------------------------------
Name: Brian J. Curtis
Title: Assistant Vice President
Attest:
By /s/ ANDREW M. SINASKY
----------------------------------
Name: Andrew M. Sinasky
Title: Assistant Secretary
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
THE HILLHAVEN CORPORATION
By
----------------------------------
Name:
Title:
Attest:
By
----------------------------------
Name:
Title:
VENCOR, INC.
By /s/ W. EARL REED, III
----------------------------------
Name: W. Earl Reed, III
Title: Vice President of Finance
and Development
Attest:
By /s/ JUNE N. KING
----------------------------------
Name: June N. King
Title: Assistant Secretary
STATE STREET BANK AND TRUST
COMPANY, as Trustee as aforesaid
By
----------------------------------
Name:
Title:
Attest:
By
----------------------------------
Name:
Title:
<PAGE> 10
thereafter authenticated and delivered under the Indenture shall be bound by
this Supplemental Indenture.
<PAGE> 1
EXHIBIT 4(b)
CONFORMED COPY
[with exhibits conformed as
executed and changes made
by Amendment No. 1 dated
9/26/95 incorporated]
$1,000,000,000 CREDIT AGREEMENT
dated as of
September 11, 1995
among
VENCOR, INC.
as Borrower and as Guarantor
FIRST HEALTHCARE CORPORATION
NORTHWEST HEALTH CARE, INC.
MEDISAVE PHARMACIES, INC.
HILLHAVEN PROPERTIES, LTD.
HILLHAVEN OF CENTRAL FLORIDA, INC.
NATIONWIDE CARE, INC.
as Borrowers
THE BANKS REFERRED TO HEREIN
THE CO-AGENTS REFERRED TO HEREIN
THE LC ISSUING BANKS REFERRED TO HEREIN
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent
NATIONSBANK, N.A. (CAROLINAS),
as Administrative Agent
and
J.P. MORGAN DELAWARE,
as Collateral Agent
<PAGE> 2
Pricing Schedule
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Schedule I -- Commitments of the Banks
Schedule II -- Existing Letters of Credit
Schedule III -- Minority-Owned Affiliates
Schedule IV -- Affiliate Agreements
Exhibit A -- Form of Term Loan Note
Exhibit B -- Form of Project Loan Note
Exhibit C -- Form of General Purpose Note
Exhibit D -- Form of Security Agreement
Exhibit E -- Financial Officer's Certificate
Exhibit F -- Form of Opinion of the General Counsel of Vencor
Exhibit G -- Form of Opinion of General Counsel of Hillhaven
Exhibit H-1 -- Form of Opinion of Special Counsel for the Borrowers
Exhibit H-2 -- Form of Opinion of Special Washington Counsel for the Borrowers
Exhibit I -- Form of Opinion of Davis Polk & Wardwell, Special Counsel for the Agents
Exhibit J -- Form of Opinion of Counsel for Additional Borrower
Exhibit K -- Form of Election to Participate
Exhibit L -- Form of Election to Terminate
Exhibit M -- Form of Notice of Borrowing
Exhibit N -- Form of Notice of Prepayment
</TABLE>
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.03. Classes and Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.04. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE II
THE FACILITIES
2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.02. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.03. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.04. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.05. Method of Electing Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.06. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.07. Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.08. Re-payments and Prepayments of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.09. Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.10. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.11. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.12. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.13. Regulation D Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.14. Additional Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.15. Termination of Commitments Under Existing Credit Agreements . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE III
CONDITIONS
3.01. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.02. Credit Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
3.03. First Borrowing-by Each Additional Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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1 The Table of Contents is not a part of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . 60
4.03. Binding Effect; Liens of Collateral Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.07. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.08. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.09. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.10. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.12. Vencor's Ownership of Other Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.13. Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.14. Effect of Merger on Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.15. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE V
COVENANTS
5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.02. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.04. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.05. Maintenance of Existence, Rights, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.06. Use of Proceeds and Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.07. Limitation on Debt of Vencor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.08. Limitation on Debt of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.09. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.10. Consolidations, Mergers and Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
5.11. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.12. Limitation on Investments in Minority-Owned Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 76
5.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
5.14. Limitation on Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 78
5.15. No Modification of Certain Documents Without Consent . . . . . . . . . . . . . . . . . . . . . . . . . 80
5.16. Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
5.17. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
5.18. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
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ARTICLE VI
DEFAULTS
6.01. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6.03. Cash Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE VII
THE AGENTS
7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.02. Agents and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.03. Action by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.05. Liability of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.08. Agents' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.09. Successor Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.10. Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE VIII
CHANGES IN CIRCUMSTANCES
8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . . . 89
8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans . . . . . . . . . . . . . . . . . . . . . . 94
8.06. Substitution of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE IX
GUARANTEE BY VENCOR
9.01. The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
9.02. Guarantee Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
9.03. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances . . . . . . . . . . . . . 97
9.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.05. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.06. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
</TABLE>
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ARTICLE X
REPRESENTATIONS AND WARRANTIES
OF ADDITIONAL BORROWERS
10.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . 99
10.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE XI
MISCELLANEOUS
11.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
11.02. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
11.05. Amendments and waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
11.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
11.07. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
11.08. Failure of Bank to Satisfy Minimum Rating Condition . . . . . . . . . . . . . . . . . . . . . . . . . 104
11.09. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
11.10. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
11.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
11.12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
</TABLE>
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CREDIT AGREEMENT
AGREEMENT dated as of September 11, 1995 among VENCOR, INC., as a
Borrower and guarantor, FIRST HEALTHCARE CORPORATION, NORTHWEST HEALTH CARE,
INC., MEDISAVE PHARMACIES, INC., HILLHAVEN PROPERTIES, LTD., HILLHAVEN OF
CENTRAL FLORIDA, INC. and NATIONWIDE CARE, INC., as Borrowers, the BANKS
referred to herein, the CO-AGENTS referred to herein, the LC ISSUING BANKS
referred to herein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation
Agent, NATIONSBANK, N.A. (CAROLINAS), as Administrative Agent, and J.P. MORGAN
DELAWARE, as Collateral Agent.
WHEREAS, pursuant to a Merger Agreement dated as of July 31, 1995,
Vencor will acquire Hillhaven by merging Hillhaven with and into Vencor (with
Vencor as the surviving corporation);
WHEREAS, concurrently with or shortly after such merger Vencor and
certain Subsidiaries desire to borrow Term Loans hereunder in an aggregate
principal amount not to exceed $400,000,000 to refinance debt of Vencor,
Hillhaven and certain Subsidiaries of Hillhaven outstanding on the date hereof,
to make the cash payments that holders of preferred stock of Hillhaven are
entitled to receive under the Merger Agreement and to pay certain transaction
expenses;
WHEREAS, Vencor desires to have available to it and its Subsidiaries,
on and after the date of such merger, a revolving credit facility in the
aggregate amount of $600,000,000 pursuant to which Vencor and its Subsidiaries
may (i) borrow Project Loans to finance capital expansion projects or refinance
debt that was incurred to finance such projects, (ii) borrow General Purpose
Loans for general corporate purposes and (iii) obtain or maintain letters of
credit (including certain existing letters of credit) not to exceed
$150,000,000 in aggregate outstanding available amount for general corporate
purposes, including providing credit support for certain industrial revenue
bonds;
WHEREAS, the obligations of Vencor and its Subsidiaries under this
Agreement and certain obligations owed to individual Banks in connection with
derivatives transactions are to be secured pursuant to a Security Agreement by
(i) the capital stock of Vencor's present and future principal subsidiaries,
(ii) all present and future intercompany debt owed to Vencor by its
Subsidiaries and (iii) from time to time certain notes secured by mortgages
<PAGE> 8
in specific facilities; provided that the grantors of such Collateral may (x)
cause collateral described in clauses (i) and (ii) above to be released when
Vencor's senior unsecured long-term debt (without any third-party credit
enhancement) receives investment grade ratings from both Moody's and S&P; and
(y) cause collateral described in clause (iii) above to be released at any
time; and
WHEREAS, the Banks are willing to make the foregoing loans and to
participate pro rata in the foregoing letters of credit, the LC Issuing Banks
that issued such existing letters of credit are willing to maintain them under
this Agreement and such LC Issuing Banks or any other Banks may (but are not
obligated to) issue additional letters of credit hereunder from time to time,
all on and subject to the terms and conditions herein provided;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Account Party" means (i) for each Existing Letter of Credit, the
party identified on Schedule II hereto as the Account Party for such Existing
Letter of Credit and (ii) for each Additional Letter of Credit, the party
identified as the Account Party for such Additional Letter of Credit pursuant
to Section 2.06(d).
"Additional Borrower" means any Wholly-Owned Domestic Subsidiary that
becomes an Additional Borrower for purposes of this Agreement pursuant to
Section 2.14.
"Additional Letter of Credit" means each of the standby letters of
credit described in Section 2.06(t) and any other letter of credit issued
hereunder by an LC Issuing Bank on or after the Closing Date.
"Adjusted CD Rate" has the meaning set forth in Section 2.04(b).
"Adjusted Consolidated Net Income" means, for any period,
Consolidated Net Income for such period, adjusted to exclude therefrom, without
duplication, (i) gains or losses
2
<PAGE> 9
from the sale of assets (other than inventory sold in the ordinary course of
business) net of related tax effects and (ii) the net income (or loss) of any
Person (other than a Consolidated Subsidiary or Non-Consolidated Partnership)
in which a Combined Company has an ownership interest, except to the extent
that such Person pays dividends or distributions in cash to a Combined Company
during such period.
"Adjusted Term Commitments" means, at any time during the Term Loan
Availability Period, the Term Commitments reduced ratably by an aggregate
amount equal to the sum of the aggregate principal amount of the 10 1/8%
Subordinated Notes then outstanding and not irrevocably tendered for purchase
pursuant to a tender offer by Vencor or Hillhaven; provided that the
commitments shall not be so reduced unless such aggregate outstanding principal
amount exceeds $5,000,000.
"Administrative Agent" means NationsBank, in its capacity as
administrative agent for the Banks under the Financing Documents, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to Vencor and the
Documentation Agent) duly completed by such Bank.
"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.
"Affiliate Agreements" means the agreements listed in Schedule IV
hereto.
"Agents" means the Documentation Agent, the Administrative Agent and
the Collateral Agent.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Base Rate Loans and CD Loans and its participations in the
Letters of Credit and LC Liabilities, its Domestic Lending Office and (ii) in
the
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<PAGE> 10
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assignee" has the meaning set forth in Section 11.06(c).
"Bank" means each bank or other financial institution listed on the
signature pages hereof under the heading "Banks", each Assignee which becomes a
"Bank" for purposes hereof pursuant to Section 8.06 or 11.06(c), and their
respective successors.
"Bank One" means Bank one, Indianapolis, National Association, and
its successors.
"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.
"Base Rate Loan" means (i) a Loan which bears interest at a rate
based on the Base Rate pursuant to the applicable Notice of Borrowing or Notice
of Interest Rate Election or the provisions of Article VIII or (ii) an overdue
amount that was a Base Rate Loan immediately before it became overdue.
"Base Rate Margin" has the meaning set forth in the Pricing Schedule.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means any of Vencor, First Healthcare, Northwest Health
Care, Inc., an Idaho corporation, Medisave Pharmacies, Inc., a Delaware
corporation, Hillhaven Properties, Ltd., an Oregon corporation, Hillhaven of
Central Florida, Inc., a Delaware corporation, Nationwide and the Additional
Borrowers (if any); provided that the status of any such Person (except Vencor)
as a Borrower hereunder shall terminate when the Documentation Agent (i)
receives a Notice of Termination with respect to such Person, duly executed on
behalf of Vencor, and (ii) confirms to its satisfaction that the
representations and warranties of Vencor set forth in such Notice of
Termination are true.
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<PAGE> 11
"Borrowing" means a borrowing hereunder consisting of Loans made to
the same Borrower at the same time by the Banks pursuant to Article II.
"Capital Lease", means a lease that would be capitalized on a balance
sheet of the lessee prepared in accordance with GAAP.
"CD Loan" means (i) a Loan which bears interest at a rate based on
the Adjusted CD Rate pursuant to the applicable Notice of Borrowing or Notice
of Interest Rate Election or the provisions of Article VIII or (ii) an overdue
amount that was a CD Loan immediately before it became overdue.
"CD Margin" has the meaning set forth in the Pricing Schedule.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and the regulations
promulgated thereunder.
"Charter Documents" means, in relation to any corporation, the
certificate or articles of incorporation, by-laws and other constitutional
documents of such corporation, including the certificate of designation for any
series of its preferred stock.
"Class" has the meaning set forth in Section 1.03.
"Closing Date" means the date on or after the Effective Date on which
the Documentation 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.
"Co-Agents" means the Banks designated as Co-Agents on the signature
pages hereof, in their respective capacities as Co-Agents in connection with
the credit facility provided hereunder.
"Collateral" means all property, real and personal, tangible and
intangible, with respect to which Liens are created or are purported to be
created pursuant to the Collateral Documents.
"Collateral Agent" means Morgan Delaware, in its capacity as
Collateral Agent for the Banks, the LC Issuing
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Banks and the Agents under the Collateral Documents, and its successors in such
capacity.
"Collateral Documents" means the Security Agreement and all
supplemental or additional security agreements, mortgages or similar
instruments delivered pursuant hereto or thereto, except the Project Mortgage
Notes and Project Mortgages.
"Combined Basis", when used with respect to determining any amount,
means that such amount is to be determined by combining (i) the relevant amount
determined with respect to Vencor and its Consolidated Subsidiaries on a
consolidated basis and (ii) the relevant amount determined with respect to
Hillhaven and its Consolidated Subsidiaries on a consolidated basis.
"Combined Companies" means Vencor and its Subsidiaries and Hillhaven
and its Subsidiaries. Unless the context otherwise requires, whenever an
amount is to be determined hereunder with respect to the Combined Companies,
such amount shall be determined (i) as of any time or for any period before the
Merger is consummated, on a Combined Basis and (ii) as of any time or for any
period after the Merger is consummated, for Vencor and its Consolidated
subsidiaries on a consolidated basis.
"Commitment" means any Term Commitment or Revolving Credit Commitment
and "Commitments" means any or all of the foregoing, as the context may
require.
"Commitment Fee Rate" means a rate per annum determined in accordance
with the Pricing Schedule.
"Commitment Reduction Dates" means June 30, 2000, September 30, 2000
and December 31, 2000.
"Consolidated Debt for Borrowed Money" means at any date the sum,
without duplication, of (x) the aggregate amount of Debt of the types described
in clauses (i), (ii) and (iv) of the definition of "Debt" which is either Debt
of Vencor and its Consolidated Subsidiaries or Debt of others Guaranteed by
Vencor or any of its Consolidated Subsidiaries, and (y) the aggregate amount of
Debt of the type described in clause (vi) of the definition of "Debt" which is
either non-contingent Debt of Vencor and its Consolidated Subsidiaries or
non-contingent Debt of others Guaranteed by Vencor or any of its Consolidated
Subsidiaries, all determined on a consolidated basis as of
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<PAGE> 13
such date after excluding accrued interest for the then current period not yet
due and payable.
"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, (iii) depreciation, amortization and other
similar non-cash charges and (iv) non-cash compensation expense and minus any
cash paid during such period in respect of non-cash compensation expense
accrued during any prior period; provided that (x) for any portion of such
period before the Closing Date, Consolidated EBITDA shall be determined on a
Combined Basis and (y) Consolidated EBITDA 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. If
any Subsidiary of Vencor is subject to a limitation permitted by clause (2) of
Section 5.14(f) at the end of the relevant period, Consolidated EBITDA for such
period shall also be adjusted (except for purposes of said clause (2)) to
exclude any portion thereof that is attributable to such Subsidiary and that,
as a result of such limitation, would be prohibited from paying directly or
indirectly, to Vencor at the end of such period.
"Consolidated EBITDAR" means, for any period, Consolidated EBITDA for
such period plus, to the extent deducted in determining Consolidated EBITDA for
such period, Consolidated Rental Expense for 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; provided that, for any portion of such period
before the Closing Date, "Consolidated Interest Expense" shall be determined on
a Combined Basis.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Vencor and its Consolidated Subsidiaries, determined on a consolidated
basis for such period; provided that, for any portion of such period before the
Closing Date, "Consolidated Net Income" shall be determined on a Combined
Basis.
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<PAGE> 14
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of Vencor and its Consolidated Subsidiaries determined as
of such date.
"Consolidated Rental Expense" means, for any period, the total rental
expense (reduced by rental income) for operating leases of Vencor and its
Consolidated Subsidiaries, determined on a consolidated basis for such period;
provided that, for any portion of such period before the Closing Date,
"Consolidated Rental Expense" shall be determined on a Combined Basis.
"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 (i) when used with respect to any time or
period before the Merger, a Consolidated Subsidiary of either Vencor or
Hillhaven and (ii) when used with respect to any time or period after the
Merger, a Consolidated Subsidiary of Vencor.
"Convertible Subordinated Debt" means (i) Hillhaven's 7-3/4%
Convertible Subordinated Debentures due 2002 which were outstanding in the
aggregate principal amount of $74,750,000 at June 30, 1995 and (ii) Vencor's 6%
Convertible Subordinated Notes due 2002 which were outstanding in the aggregate
principal amount of $114,992,000 at June 30, 1995.
"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 Bank at any time, the sum of (i)
the principal amount of its Term Loans outstanding at such time, determined
after giving effect to any assignments by or to such Bank pursuant to Section
11.06(c), (ii) its Revolving Credit Commitment at such time or, if its
Revolving Credit Commitment shall have terminated, its Revolving Credit
Exposure at such time and (iii) its unused Term Commitment (if any) at such
time.
"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
8
<PAGE> 15
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 bank or other Person in
respect of amounts paid under a letter of credit, banker's acceptance or
similar instrument, (vii) all Debt 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 Debt of others Guaranteed by such Person; provided that neither
trade accounts payable arising in the ordinary course of business nor
obligations 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.
"Direct Pay IRB Letter of Credit" has the meaning set forth in
Section 2.06(s).
"Documentation Agent" means Morgan, in its capacity as documentation
agent for the Banks under the Financing Documents, and its successors in such
capacity.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City, New York or Charlotte,
North Carolina are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to Vencor and the Administrative Agent.
"Eastern Time" means local time in the Eastern time zone of the
United States.
"Effective Date" means the date on which this Agreement becomes
effective in accordance with Section 11.10.
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<PAGE> 16
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit K hereto.
"Election to Terminate" means an Election to Terminate substantially
in the form of Exhibit L hereto.
"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.
"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 Combined Companies (including any entity which is, in
whole or in part, a predecessor of any of the Combined 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 Security" of any Person means any capital stock or other
equity security issued by such Person or any warrant, option or other right to
purchase or otherwise acquire such an equity security from such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Combined Companies and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common
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<PAGE> 17
control which, together with any of the Combined Companies, are treated as a
single employer under Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to Vencor and the Administrative Agent.
"Euro-Dollar Loan" means (i) a Loan which bears interest at a rate
based on the London Interbank Offered Rate pursuant to the applicable Notice of
Borrowing or Notice of Interest Rate Election or (ii) an overdue amount that
was a Euro-Dollar Loan immediately before it became overdue.
"Euro-Dollar Margin" has the meaning set forth in the Pricing
Schedule.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.13.
"Event of Default" has the meaning set forth in Section 6.01.
"Evergreen Letter of Credit" means a Letter of Credit that is
automatically renewed or extended unless the relevant LC Issuing Bank gives
notice to the account party and/or beneficiary thereof stating that such Letter
of Credit will not be extended or renewed.
"Executive Officer" means any "executive officer" (within the meaning
of Rule 3b-7 under the Securities Exchange Act of 1934, as amended) of Vencor.
"Existing Letters of Credit" means the letters of credit issued by
the LC Issuing Banks before the Closing Date and listed in Schedule II hereto.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest
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<PAGE> 18
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 Domestic Business Day next succeeding such day, provided that
(i) if such day is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if no such rate is so published on such next succeeding Domestic 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.
"Final Maturity Date" means March 31, 2001.
"Financial Accommodations" means arrangements for the extension of
credit or other financial accommodation to one or more of the Combined
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 trade accounts payable arising in the
ordinary course of business.
"Financial Officer" means the principal financial officer, principal
accounting officer or treasurer of Vencor.
"Financing Documents" means this Agreement, the Notes, the Collateral
Documents and any Substitute Reimbursement Agreement that Vencor designates as
an additional Financing Document after the Closing Date pursuant to Section
2.06(s).
"First Healthcare" means First Healthcare Corporation, a Delaware
corporation, and its successors.
"First Healthcare's Existing Credit Agreement" means the Credit
Agreement dated as of September 1, 1993, as amended, among First Healthcare, as
Borrower, The Hillhaven Corporation, as Guarantor, the banks referred to
therein, the LC issuing banks referred to therein, Morgan, as agent,
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<PAGE> 19
Chemical Bank, as administrative agent, and Morgan Delaware, as collateral
agent.
"Fiscal Quarter" means a fiscal quarter of Vencor.
"Fiscal Year" means a fiscal year of Vencor.
"GAAP" means generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes concurred
in by Vencor's independent public accountants) with the most recent audited
consolidated financial statements of Vencor and its Consolidated Subsidiaries
theretofore delivered to the Banks. The term "GAAP" includes treating the
Merger as a "polling of interests" transaction as contemplated by the Merger
Agreement, and any other accounting treatment of the Merger would constitute a
change in GAAP for purposes of Section 1.02.
"General Purpose Loan" means a loan made by a Bank to a Borrower
pursuant to Section 2.01(c); provided that if any such loan or loans (or
portions thereof) are combined or subdivided pursuant to a Notice of Interest
Rate Election, the term "General Purpose Loan" shall refer to the combined
principal amount resulting from such combination or to each of the separate
principal amounts resulting from such subdivision, as the case may be.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Loans of the same Class that are made to the same Borrower and are Base
Rate Loans at such time, (ii) all Loans of the same Class that are made to the
same Borrower and are Euro-Dollar Loans having the same Interest Period at such
time or (iii) all Loans of the same Class that are made to the same Borrower
and are Adjusted CD Loans having the same Interest Period at such time;
provided that, if Loans of any particular Bank are converted to or made as Base
Rate Loans pursuant to Section 8.02 or 8.05, such Loans shall be included in
the same Group or Groups of Loans from time to time as they would have been in
if they had not been so converted or made.
"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
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<PAGE> 20
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.
"Hillhaven" means The Hillhaven Corporation, a Nevada corporation, and
its successors.
"Hillhaven Funding's Existing Liquidity Agreement" means the Amended
and Restated Liquidity Agreement, dated as of April 29, 1994, among Hillhaven
Funding Corporation, Bank of America National Trust and Savings Association and
Seattle-First National Bank, as Banks, and Bank of America National Trust and
Savings Association, as agent for the Banks.
"Hillhaven's Series C Preferred Stock" means Hillhaven's 8-1/4%
Cumulative Non-Voting Series C Preferred Stock.
"Hillhaven's Series D Preferred Stock" means (i) Hillhaven's
Payable-in-Kind Non-Voting Series D Preferred stock and (ii) additional shares
of such preferred stock issued in lieu of cash dividends in accordance with the
terms of such preferred stock.
"Indemnitee" has the meaning set forth in Section 11.03(b).
"Information Memorandum" means the confidential financing memorandum
dated July 21, 1995 furnished to the Banks in connection with the transactions
contemplated hereby.
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<PAGE> 21
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice
of Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the relevant
Borrower may elect in the applicable notice; provided that:
(a) any Interest Period that would otherwise end on a day
that is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such day falls in another
calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period that begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall, subject to the provisions of
clause (c) of this proviso, end on the last Euro-Dollar Business Day
of a calendar month; and
(c) if any Interest Period includes a date on which a
payment of principal of the Loans is required (as of the commencement
of such Interest Period) to be made under subsection (a) or (b) of
Section 2.08 or subsection (a)(iii) of Section 2.09 but does not end
on such date, then (i) the principal amount (if any) of each
Euro-Dollar Loan required to be repaid on such date shall have an
Interest Period ending on such date and (ii) the remainder (if any) of
each such Euro-Dollar Loan shall have an Interest Period determined as
set forth above;
(2) with respect to each CD Borrowing, the period commencing on the date
of borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the relevant Borrower may elect in the applicable
notice; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b)(i) of this proviso) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a
payment of principal of the Loans is required
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<PAGE> 22
(as of the commencement of such Interest Period) to be made under
subsection (a) or (b) of Section 2.08 or subsection (a)(iii) of
Section 2.09 but does not end on such date, then (i) the principal
amount (if any) of each CD Loan required to be repaid on such date
shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such CD Loan shall have an Interest Period
determined as set forth above.
"Interest Type" has the meaning set forth in Section 1.03.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"IRB Debt" means industrial revenue bonds or similar instruments
issued for the benefit of a Combined Company or a partnership in which a
Combined Company is a general partner (or for which a Combined Company is
otherwise liable).
"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.
"Investment Grade Rating" means a rating of senior long-term unsecured
debt securities of Vencor without any third-party credit enhancement as (i)
BBB- or higher by S&P and (ii) Baa3 or higher by Moody's.
"LC Exposure" means, with respect to any Bank at any time, its
Revolving Credit Percentage of the LC Liabilities at such time.
"LC Fee Rate" means a rate per annum determined in accordance with
the Pricing Schedule.
"LC Indemnitees" has the meaning set forth in Section 2.06(o).
"LC Issuing Bank" means National City Bank, Kentucky, PNC Bank,
National Association, Seattle First National Bank, Wachovia Bank of North
Carolina, N.A., and their successors, and any other Bank which Vencor shall
have designated as an "LC Issuing Bank" by notice to the Administrative Agent,
each in its capacity as an LC Issuing Bank under the letter of credit facility
described in Section 2.06.
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<PAGE> 23
"LC Liabilities" 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 amount of all LC Reimbursement Obligations outstanding at such
time; provided that, until the standby letters of credit described in Section
2.06(t) are issued, an aggregate amount of $21,000,000 shall be reserved to
permit the issuance thereof and shall be deemed to be included in LC
Liabilities (and therefore also included in the Revolving Credit Exposures for
purposes of Sections 2.01(b), 2.01(c) and 2.06(b)).
"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 2.06(i).
"LC Reimbursement Obligations" means, at any time, all obligations of
the Borrowers to reimburse the LC Issuing Banks pursuant to Section 2.06 for
amounts paid by the LC Issuing Banks in respect of drawings under Letters of
Credit, including any portion of any such obligation to which a Bank has become
subrogated pursuant to Section 2.06(k)(i).
"Letter of Credit" means any Existing Letter of Credit or Additional
Letter of Credit.
"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 the economic effect of which is to give a creditor
preferential access to such asset to satisfy its claim. For the purpose of
this Agreement, any Combined 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.
"Loan" means any Term Loan, Project Loan or General Purpose Loan, and
"Loans" means any or all of the foregoing, as the context may require.
"London Interbank Offered Rate" has the meaning set forth in Section
2.04(c).
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<PAGE> 24
"Material Adverse Effect" means (i) any material adverse effect upon
the condition (financial or otherwise), results of operations, business or
prospects of the Combined Companies, 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 purported to be
created under the Collateral Documents.
"Material Debt" means Debt (other than Debt arising under this
Agreement) of Vencor and/or one or more of its Subsidiaries, arising in one or
more related or unrelated transactions, in an aggregate outstanding principal
amount of $25,000,000 or more.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
"Merger" means the merger of Hillhaven with and into Vencor (with
Vencor as the surviving corporation) pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
July 31, 1995 between Vencor and Hillhaven in the form included in Vencor's
Form S-4.
"Minority-Owned Affiliate" means any Person (other than a Subsidiary)
in which (i) the Combined Companies own 10% or more of any class of capital
stock or other equity interests or (ii) any Combined Company is a general
partner.
"Moody's" means Moody's Investors Service, Inc.
"Morgan" means Morgan Guaranty Trust Company of New York and its
successors.
"Morgan Delaware" means J.P. Morgan Delaware and its successors.
"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.
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<PAGE> 25
"NationsBank" means NationsBank, N.A. (Carolinas), and its successors.
"Nationwide" means Nationwide Care, Inc., an Indiana corporation, and
its successors.
"Nationwide's Existing Credit Agreement" means the Amended and
Restated Credit Agreement dated as of July 1, 1995, as amended, among
Nationwide, Nationwide Funding Corporation, Hillhaven and Bank one.
"NME Guarantee Reimbursement Agreement" means the Guarantee
Reimbursement Agreement dated as of January 31, 1990, as amended, between
National Medical Enterprises, Inc. and Hillhaven.
"Non-Consolidated Partnership" means any partnership (other than a
Consolidated Subsidiary) in which a Combined Company is a general partner.
"Note" means a promissory note of a Borrower payable to the order of a
Bank evidencing such Borrower's obligation to repay the Loans of a specific
Class or of a specific Interest Type and Class made by such Bank to such
Borrower. Each Note shall be substantially in the form of Exhibit A, B or C
hereto, as the case may be for the relevant Class (modified as provided in
Section 2.03(b), if applicable). "Notes" means any or all of such promissory
notes, as the context may require.
"Notice of Borrowing" has the meaning set forth in Section 2.02(a).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.05(a).
"Optional Additional Collateral" has the meaning set forth in the
security Agreement.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty corporation or any entity
succeeding to any or all of its functions under ERISA.
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<PAGE> 26
"Permitted Encumbrances" means, with respect to any real property
owned or leased by any of the Combined Companies:
(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 Combined 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 Combined Company, in accordance with GAAP; and
(c) other Liens or title defects (including matters which
an accurate survey might disclose) which (x) do not secure Debt and
(y) do not materially detract from the value of such real property or
materially impair the use thereof by such Combined Company in the
operation of its business.
"Permitted Intercompany Debt" means:
(a) Debt of Vencor owing to any Subsidiary;
(b) Debt of any Subsidiary owing to Vencor; 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 possesses a first priority, perfected security
interest under the Security Agreement at all times until such security
interest is released pursuant to Section 16 thereof; and
(c) Debt of any Subsidiary owing to any other Subsidiary.
"Permitted Liens" means Liens permitted to exist under Section 5.09.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or
20
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organization, including a government or political subdivision or an agency or
instrumentality thereof.
"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.
"Pre-Closing Period" means (i) with respect to Vencor and its
Subsidiaries, the period from June 30, 1995 to the Closing Date, (ii) with
respect to Hillhaven and its Subsidiaries (other than Nationwide and its
affiliates), the period from May 31, 1995 to the Closing Date and (iii) with
respect to Nationwide and its affiliates, the period from December 31, 1994 to
the Closing Date.
"Pricing Level" has the meaning set forth in the Pricing Schedule.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by the
Administrative Agent in New York City from time to time as its Prime Rate.
"Project Loan" means (i) a loan made by a Bank to a Borrower pursuant
to Section 2.01(b) or (ii) a loan resulting from a Bank's purchase of an
interest in Bank One's outstanding loans to Nationwide pursuant to Section
2.01(f) ; provided that if any such loan or loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Interest Rate Election, the term
"Project Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Project mortgage Notes" means the promissory notes secured by Project
Mortgages that are included in the collateral from time to time pursuant to
Section 3(D) of the Security Agreement.
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"Project Mortgages" means mortgages, deeds of trust and similar
instruments relating to facilities financed with the proceeds of Project Loans
(or the proceeds of Debt refinanced by Project Loans).
"Qualification" means, with respect to any report of independent
public accountants covering financial statements, a qualification to such
report (such as a "subject to" or "except for" statement therein) (i) resulting
from a limitation on the scope of examination of such financial statements or
the underlying data, (ii) as to the capability of the Person whose financial
statements are certified to continue operations as a going concern or (iii)
which could be eliminated by changes in financial statements or notes thereto
covered by such report (such as, by the creation of or increase in a reserve or
a decrease in the carrying value of assets); provided that neither of the
following shall constitute a Qualification: (a) a consistency exception
relating to a change in accounting principles with which the independent public
accountants for the Person whose financial statements are being examined have
concurred or (b) a qualification relating to the outcome or disposition of any
uncertainty, including but not limited to threatened litigation, pending
litigation being contested in good faith, pending or threatened claims or other
contingencies, the impact of which litigation, claims, contingencies or
uncertainties cannot be determined with sufficient certainty to permit
quantification in such financial statements.
"Rate Period" has the meaning set forth in the Pricing Schedule.
"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.
"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.
"Requesting Borrower" means (i) for each Existing Letter of Credit,
the Borrower identified on Schedule II hereto as the Requesting Borrower for
such Existing Letter of Credit and (ii) for each Additional Letter of Credit,
the
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<PAGE> 29
Borrower that requests the relevant LC Issuing Bank to issue such Additional
Letter of Credit pursuant to Section 2.06(b).
"Required Banks" means at any time Banks having more than 50% of the
aggregate amount of the Credit Exposures of all the Banks at such time.
"Restricted Payment" means (i) any dividend or other distribution on
any Equity Securities of Vencor (except dividends payable solely in Equity
Securities of the same class) and (ii) any payment on account of the purchase,
redemption, retirement or acquisition of any such Equity Securities of Vencor.
"Revolving Credit Commitment" means (i) with respect to any Bank
listed on Schedule I hereto, the amount set forth opposite the name of such
Bank under the heading "Revolving Credit Commitments" in Schedule I hereto or
(ii) with respect to any Assignee, the amount of the transferor Bank's
Revolving Credit 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 2.09 or changed as a result of an assignment pursuant to Section
11.06(c).
"Revolving Credit Exposure" means, with respect to any Bank at any
time, the sum of (i) the aggregate outstanding principal amount of its Project
Loans at such time, (ii) the aggregate outstanding principal amount of its
General Purpose Loans at such time and (iii) its LC Exposure at such time.
"Revolving Credit Percentage" means, with respect to any Bank at any
time, the percentage equivalent to a fraction the numerator of which is the
amount of such Bank's Revolving Credit Commitment at such time and the
denominator of which is the aggregate amount of all the Revolving Credit
Commitments at such time.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the United States Securities and Exchange commission.
"Security Agreement" means the Security Agreement dated as of
September 11, 1995 among Vencor, First Healthcare and the Collateral Agent,
substantially in the form of Exhibit D hereto.
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<PAGE> 30
"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 partnership that, in accordance with GAAP, is a Consolidated
Subsidiary of such Person. Unless otherwise specified, "Subsidiary" means a
Subsidiary of Vencor.
"Subsidiary Borrower" means any Borrower other than Vencor.
"Substitute Reimbursement Agreement" has the meaning set forth in
Section 2.06(s).
"10 1/8% Subordinated Notes" means Hillhaven's 101/8% Senior
Subordinated Notes due 2001 which were outstanding in the aggregate principal
amount of $174,494,142 at June 30, 1995.
"Term Commitment" means (i) with respect to any Bank listed on
Schedule I hereto, the amount set forth opposite its name under the heading
"Term Commitments" in Schedule I hereto or (ii) with respect to any Assignee,
the amount of the transferor Bank's Term 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 2.09 or changed as a result of an assignment
pursuant to Section 11.06(c).
"Term Loan" means a loan made by a Bank to a Borrower during the Term
Loan Availability Period pursuant to Section 2.01(a); provided that if any such
loan or loans (or portions thereof) are combined or subdivided pursuant to a
Notice of Interest Rate Election, the term "Term Loan" shall refer to the
combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
"Term Loan Availability Period" means a period of 14 Business Days
commencing on and including the Closing Date.
"UCC" has the meaning set forth in Section 1 of the Security Agreement.
"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
24
<PAGE> 31
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.
"Vencor" means Vencor, Inc., a Delaware corporation, and its
successors.
"Vencor's Existing Credit Agreement" means the Fourth Amended and
Restated Loan Agreement dated as of January 30, 1995 among Vencor, the banks
party thereto and National City Bank, Kentucky, as agent for such Banks, as
amended from time to time.
"Vencor's Form S-4" means Amendment No. 3 to the registration
statement on Form S-4 filed by Vencor with the SEC on August 11, 1995.
"Wholly-Owned Domestic Subsidiary" means at any time any Subsidiary
that meets the following three conditions at such time: (i) such Subsidiary is
a corporation incorporated under the laws of a state of the United States, (ii)
such Subsidiary conducts its business and its transactions under this Agreement
in such a way that no Taxes are required to be withheld or otherwise deducted
from payments made by it hereunder under the laws of any jurisdiction outside
the United States and (iii) all of the outstanding Equity Securities of such
Subsidiary are at the time owned, directly or indirectly, by Vencor.
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 Vencor notifies the Documentation Agent that Vencor wishes to
amend any provision hereof to eliminate the effect of any change in GAAP on the
operation of such provision (or if the Documentation Agent notifies Vencor that
the Required Banks wish to amend any provision hereof for such purpose), then
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compliance with such provision shall be determined 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 Vencor and the Required Banks.
SECTION 1.03. Classes and Types of Loans. Loans hereunder are
distinguished by "Class" and by "Interest Type". The "Class" of a Loan refers
to whether such Loan is a Term Loan, a Project Loan or a General Purpose Loan,
each of which constitutes a Class. The "Interest Type" of a Loan refers to
whether such Loan is a Euro-Dollar Loan, a CD Loan or a Base Rate Loan.
Identification of a Loan by both Class and Interest Type (e.g., a "General
Purpose Euro-Dollar Loan") indicates that such Loan is both a General Purpose
Loan and a Euro-Dollar Loan. Identification of a Borrowing or Group of Loans
by Class and/or Interest Type indicates that such Borrowing or Group of Loans
is comprised of Loans of the specified Class and/or Interest Type.
SECTION 1.04. 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 in accordance with the
terms hereof and thereof.
ARTICLE II
THE FACILITIES
SECTION 2.01. Commitments to Lend.
(a) Term Loans. Subject to the terms and conditions set forth in
this Agreement, each Bank severally agrees to make one or more term loans to
the Borrowers pursuant to this subsection (a) from time to time during the Term
Loan Availability Period; provided that the aggregate principal amount of all
term loans made by such Bank under
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this subsection (a) shall not exceed its Adjusted Term Commitment. Each
Borrowing under this subsection (a) shall be made from the several Banks
ratably in proportion to their respective Adjusted Term Commitments.
(b) Project Loans. Subject to the terms and conditions set forth
in this Agreement, each Bank severally agrees to make loans to the Borrowers
pursuant to this subsection (b) from time to time during the period from and
including the Closing Date to but excluding the Final Maturity Date; provided
that, immediately after each such loan is made, such Bank's Revolving Credit
Exposure shall not exceed its Revolving Credit Commitment. Each Borrowing
under this subsection (b) shall be made from the several Banks ratably in
proportion to their respective Revolving Credit Commitments.
(c) General Purpose Loans. Subject to the terms and conditions
set forth in this Agreement, each Bank severally agrees to make loans to the
Borrowers pursuant to this subsection (c) from time to time during the period
from and including the Closing Date to but excluding the Final Maturity Date;
Provided that, immediately after each such loan is made, such Bank's Revolving
Credit Exposure shall not exceed its Revolving Credit Commitment. Each
Borrowing under this subsection (c) shall be made from the several Banks
ratably in proportion to their respective Revolving Credit Commitments.
(d) Amount of Each Borrowing. Each Borrowing under this Section
2.01 shall be in an aggregate principal amount of (i) $5,000,000 or any larger
multiple of $1,000,000 in the case of a Euro-Dollar Borrowing or a CD Borrowing
or (ii) $1,000,000 or any larger multiple of $100,000 in the case of a Base
Rate Borrowing (except that any Borrowing of Term Loans may be in an aggregate
amount equal to the aggregate unused amount of the Term Commitments and any
Borrowing of Project Loans or General Purpose Loans may be in an aggregate
amount equal to the aggregate unused amount of the Revolving Credit
Commitments).
(e) Ability to Repay and Reborrow. Within the limits specified in
this Agreement, the Borrowers may borrow pursuant to subsection (b) or (c) of
this Section 2.01, repay Project Loans or General Purpose Loans and reborrow
pursuant to subsection (b) or (c) of this Section.
(f) Purchase of Existing Nationwide Loans. Subject to the terms
and conditions set forth in this Agreement, each Bank severally agrees to
purchase from Bank
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<PAGE> 34
One on the Closing Date an undivided interest in the loans then outstanding to
Nationwide under Nationwide's Existing Credit Agreement. Such purchase shall
be made by the several Banks, ratably in proportion to their respective
Revolving Credit Commitments, for an aggregate purchase price equal to the then
outstanding principal amount of such loans. Concurrently with such purchase,
Nationwide shall pay to Bank One all interest accrued on such outstanding loans
to but excluding the Closing Date and all other amounts then due and payable to
Bank One under Nationwide's Existing Credit Agreement. Immediately after such
purchase, the terms and conditions applicable to such loans shall, without
further action by any of the parties hereto, be amended and restated to be the
terms and conditions applicable to Project Loans made pursuant to subsection
(b) of this Section, and each Bank's undivided interest therein shall
thereafter be deemed to be a Project Loan outstanding from such Bank to
Nationwide hereunder. The initial Interest Type of such Project Loans and the
duration of the initial Interest Period applicable thereto shall be specified
by Vencor in a Notice of Borrowing given pursuant to Section 2.02 as if such
Project Loans comprised a Borrowing to be made by Nationwide hereunder on the
Closing Date.
SECTION 2.02. Method of Borrowing. (a) Vencor shall give the
Administrative Agent notice, substantially in the form of Exhibit M hereto (a
"Notice of Borrowing"), not later than 12:00 Noon (Eastern Time) on (x) the
date of each Base Rate Borrowing, (y) the second Domestic Business Day before
each CD Borrowing and (z) the third Euro-Dollar Business Day before each
Euro-Dollar Borrowing, specifying:
(i) the name of the Borrower;
(ii) the proposed date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Borrowing;
(iii) the aggregate amount of such Borrowing;
(iv) the Class and Interest Type of the Loans comprising such
Borrowing; and
(v) in the case of a CD Borrowing or a Euro-Dollar Borrowing, the
duration of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
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No Notice of Borrowing shall create a new Group of Loans if, immediately after
giving effect thereto, there would be more than 25 Groups of Loans (other than
Base Rate Loans) outstanding hereunder.
(b) Upon receipt of a Notice of Borrowing, the Administrative
Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such Borrowing, and such Notice of Borrowing shall not
thereafter be revocable by the relevant Borrower.
(c) Not later than (i) 2:00 P.M. (Eastern Time) on the date of
each Base Rate Borrowing and (ii) 1:00 P.M. (Eastern Time) on the date of each
other Borrowing, each Bank shall make available its ratable share of such
Borrowing, in Federal or other immediately available funds, 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 III has not been satisfied, the Administrative
Agent will make the funds so received from the Banks available to the relevant
Borrower on such date at the Administrative Agent's aforesaid address.
(d) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
Section 2.02(c) and the Administrative Agent may (but shall not be obligated
to), in reliance upon such assumption, make available to the relevant Borrower
on such date a corresponding amount. If and to the extent that such Bank shall
not have so made such share available to the Administrative Agent, such Bank
and the relevant Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to such Borrower until
the date such amount is repaid to the Administrative Agent, at (i) in the case
of such Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.04, and
(ii) in the case of such Bank, a rate per annum equal to (x) for each day from
the date such amount is made available to such Borrower to the third succeeding
Domestic Business Day, inclusive, the Federal Funds Rate for such day as
determined by the Administrative Agent and (y) for each day thereafter until
the date such amount is repaid to the Administrative
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<PAGE> 36
Agent, the sum of 2% plus the Base Rate for such day. If such Bank shall repay
to the Administrative Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Loan included in such Borrowing for purposes of
this Agreement.
SECTION 2.03. Notes. (a) Each Bank's Loans of each Class to each
Borrower shall be evidenced by a single Note payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans of such Class to such
Borrower.
(b) Each Bank may, by notice to Vencor and the Documentation
Agent, request that its Loans to each Borrower of a particular Interest Type
and Class be evidenced by a separate Note in an amount equal to the aggregate
unpaid principal amount of such Loans. Each such Note shall be in the
appropriate form for such Class, with appropriate modifications to reflect the
fact that it evidences solely Loans of the relevant Interest Type. Each
reference in this Agreement to the "Notes" of such Bank shall be deemed to
refer to and include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Notes pursuant to Section 3.01(b),
the Documentation Agent shall forward such Notes to such Bank. Each Bank shall
record the Interest Type, date and amount of each Loan made by it and the date
and amount of each payment of principal made by the relevant Borrower with
respect thereto, and may, in connection with any transfer or enforcement of any
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 the failure of any Bank
to make any such recordation or endorsement shall not affect the obligations of
any Borrower under any of the Financing Documents. Each Bank is hereby
irrevocably authorized by each Borrower so to endorse its Notes and to attach
to and make a part of its Notes a continuation of any such schedule as and when
required.
SECTION 2.04. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Loan is made (or is converted to a Base Rate Loan) to
but excluding the date it becomes due (or is converted to a Euro-Dollar Loan or
CD Loan), at a rate per annum equal to the sum of the Base Rate for such day
plus the Base Rate Margin (if any) for such day. Such interest shall be
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payable quarterly in arrears on the last Domestic Business Day of each calendar
quarter and, with respect to the principal amount of any Base Rate Loan
converted to a Euro-Dollar Loan or CD Loan, on the date such Base Rate Loan is
so converted. Any overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans
for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan or any portion thereof shall, as a result of clause (2)(b)(i) of the
definition of Interest Period, have an Interest Period of less than 30 days,
such portion shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 90 days, 90 days after the first day thereof. Any
overdue principal of or interest on any CD Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the rate applicable to Base Rate Loans for such day.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
________________
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (Eastern Time) (or as soon
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thereafter as practicable) on the first day of such Interest Period by two or
more New York certificate of deposit dealers of recognized standing for the
purchase at face value from NationsBank of its certificates of deposit in an
amount comparable to the principal amount of the CD Loan of NationsBank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York city having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months, three
months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period
means (i) the rate per annum, for deposits in dollars for a maturity most
nearly comparable to such Interest Period which appears on page 3740 or 3750,
as
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applicable, of the Dow Jones Telerate Screen as of 11:00 A.M. (Eastern time)
two Euro-Dollar Business Days before the first day of such Interest Period or
(ii) if such a rate does not appear on such page, the rate per annum at which
deposits in dollars are offered to the principal London office of NationsBank
in the London interbank market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the Euro-Dollar Loan of
NationsBank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid, at a rate per
annum equal to the sum of 2% plus the Euro-Dollar Margin for such day plus the
quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than six months as the Administrative
Agent may select) deposits in dollars in an amount approximately equal to such
overdue payment due to NationsBank are offered to NationsBank in the London
interbank market for the applicable period determined as provided above by (y)
1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such
day).
(e) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to Vencor and the Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(f) NationsBank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated hereby upon receipt of
notice from the Administrative Agent that it has received a Notice of Borrowing
or a Notice of Interest Rate Election. If NationsBank does not furnish a
timely quotation, the provisions of Section 8.01 shall apply.
SECTION 2.05. Method of Electing Interest Rates. (a) The Loans
included in each Borrowing shall bear
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interest initially at the type of rate specified by the relevant Borrower in
the applicable Notice of Borrowing. Thereafter, such Borrower may from time to
time elect to change or continue the type of interest rate borne by each Group
of Loans (subject in each case to the provisions of Article VIII), as follows:
(i) such Borrower may elect to convert the Base Rate Loans of any
Class to Euro-Dollar Loans of the same Class as of any Euro-Dollar Business
Day or to CD Loans of the same Class as of any Domestic Business Day;
provided that notice of such election may not be given if an Event of
Default shall have occurred and be continuing on the third Euro-Dollar
Business Day before such conversion is to be effective (in the case of a
conversion to Euro-Dollar Loans) or the second Domestic Business Day before
such conversion is to be effective (in the case of a conversion to CD
Loans);
(ii) such Borrower may elect to convert any Group of CD Loans of
any Class to Euro-Dollar Loans of the same Class or to Base Rate Loans of
the same Class or to continue such Loans as CD Loans of the same Class for
an additional Interest Period, in each case effective on the last day of
the then current Interest Period applicable to such Loans; and
(iii) such Borrower may elect to convert any Group of Euro-Dollar
Loans of any Class to Base Rate Loans of the same Class or to CD Loans of
the same Class or elect to continue such Loans as Euro-Dollar Loans of the
same Class for an additional Interest Period, in each case effective on the
last day of the then current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent not later than 12:00 Noon (Eastern
Time) on the third Euro-Dollar Business Day (or the second Domestic Business
Day in the case of a conversion to CD Loans) before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group, (ii) the portion to
which such notice applies, and the remaining portion to which it does not
apply, are each at least $5,000,000 (if such portion is to be comprised of CD
Loans or Euro-Dollar Loans) or at least $1,000,000 (if such portion is to be
comprised of Base Rate
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Loans) and (iii) immediately after giving effect to such Notice of Interest
Rate Election, there shall be no more than 25 Groups of Loans (other than Base
Rate Loans) outstanding hereunder.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Class and Group of Loans (or portion thereof) to which
such notice applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of Section 2.05(a);
(iii) if the Loans comprising such Group are to be converted, the
new Interest Type of Loans and, if such Loans are to be converted to
Euro-Dollar Loans of the same Class or CD Loans of the same Class, the
duration of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans of the
same Class or CD Loans of the same Class for an additional Interest Period,
the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
relevant Borrower pursuant to Section 2.05(a), the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by such Borrower. If the relevant Borrower fails to
deliver a timely Notice of Interest Rate Election to the Administrative Agent
for any Group of Euro-Dollar Loans or CD Loans, such Loans shall be converted to
Base Rate Loans on the last day of the then current Interest Period applicable
thereto.
SECTION 2.06. Letters of Credit. (a) Existing Letters of Credit on the
Closing Date, each LC Issuing Bank that has issued an Existing Letter of Credit
shall be deemed, without further action by any party hereto, to have sold to
each other Bank, and each such Bank shall be deemed, without further action by
any party hereto, to have purchased from such LC Issuing Bank, a participation
in such Existing Letter of Credit and the related LC Liabilities
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equal to such Bank's Revolving Credit Percentage thereof. With respect to each
Existing Letter of Credit (i) if the relevant LC Issuing Bank has heretofore
sold a participation therein (under First Healthcare's Existing Credit
Agreement, Vencor's Existing Credit Agreement or otherwise) to a bank or
financial institution that is a party hereto, such bank or financial
institution and such LC Issuing Bank agree that such participation shall be
automatically canceled on the Closing Date without further action by any of the
parties thereto and (ii) if the relevant LC Issuing Bank has heretofore sold a
participation therein to any bank or financial institution that is not a party
hereto, such LC Issuing Bank shall exercise its best efforts to cause such
participation to be canceled on or before the Closing Date. On and after the
Closing Date each Existing Letter of Credit shall constitute a Letter of Credit
for all purposes hereof.
(b) Issuance of Additional Letters of Credit. Any LC Issuing Bank
may, but shall not be obligated to, issue a letter of credit at the request of
any Borrower pursuant to this subsection (b) from time to time during the
period from and including the Closing Date to but excluding the date that is 30
days before the Final Maturity Date; provided that, immediately after each such
letter of credit is issued and participations therein are sold to the Banks as
provided in this subsection (b):
(i) the aggregate amount of the LC Liabilities then outstanding
shall not exceed $150,000,000 and
(ii) no Bank's Revolving Credit Exposure shall exceed its Revolving
Credit Commitment.
Upon the issuance by any LC Issuing Bank of an Additional Letter of Credit
pursuant to this subsection (b), such LC Issuing Bank shall be deemed, without
further action by any party hereto, to have sold to each other Bank, and each
such Bank shall be deemed, without further action by any party hereto, to have
purchased from such LC Issuing Bank, a participation in such Additional Letter
of Credit and the related LC Liabilities equal to such Bank's Revolving Credit
Percentage thereof.
(c) Expiry Dates. No Letter of Credit shall have an expiry date
later than the fifth Domestic Business Day before the Final Maturity Date.
(d) Notice of Proposed Issuance. With respect to each Additional
Letter of Credit, the Requesting Borrower shall give the relevant LC Issuing
Bank and the
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Administrative Agent at least three Domestic Business Days' prior notice (i)
specifying the date such Additional Letter of Credit is to be issued, (ii)
describing the proposed terms of such Additional Letter of Credit and the
nature of the transactions proposed to be supported thereby and (iii)
specifying the Account Party for such Additional Letter of Credit, which may be
the Requesting Borrower, any of its subsidiaries or any partnership in which it
is a general partner or any other entity managed by it. Upon receipt of such
notice, the Administrative Agent shall promptly notify each Bank of the
contents thereof.
(e) Conditions to Issuance. No LC Issuing Bank shall issue any
Additional Letter of Credit unless:
(i) such Letter of Credit shall be satisfactory in form and
substance to such LC Issuing Bank,
(ii) the Requesting Borrower shall have executed and delivered such
other instruments and agreements relating to such Additional Letter of
Credit as such LC Issuing Bank shall have reasonably requested,
(iii) if the Account Party for such Letter of Credit is not the
Requesting Borrower, such Account Party 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,
(iv) if such Letter of Credit is a Direct Pay IRB Letter of Credit,
the Administrative Agent shall have notified the relevant LC Issuing Bank
pursuant to Section 2.06(s) that the form of the Underlying LC Documents is
satisfactory, the applicable conditions specified in Section 2.06(s)(ii)
shall have been satisfied and such Direct Pay IRB Letter of Credit shall be
issued prior to March 31, 2000;
(v) 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 (b) of this Section will
not be exceeded immediately after such Letter of Credit is issued and
(vi) such LC Issuing Bank shall not have been notified in writing
by any Borrower, the Administrative Agent, the Documentation Agent or the
Required Banks that any condition specified in clause (c) or (d) of
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Section 3.02 is not satisfied on the date such Letter of Credit is to
be issued.
(f) Notice of Proposed Extensions of Expiry Dates. The relevant
LC Issuing Bank or Vencor shall give the Administrative Agent at least three
Domestic Business Days' notice before such LC Issuing Bank extends (or allows
an automatic extension of) the expiry date of any Letter of Credit issued by it
(whether such extension results from a request therefor by the Requesting
Borrower or, in the case of an Evergreen Letter of Credit, from the absence of
a request by the Requesting Borrower for the termination thereof). 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 Bank 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
Domestic Business Day before the Final Maturity Date or (y) such LC Issuing
Bank shall have been notified by the Administrative Agent, the Documentation
Agent or the Required Banks that any condition specified in clause (c) or (d)
of Section 3.02 is not satisfied on the date such Letter of Credit is to be
extended.
(g) Notice of Actual Issuances and Extensions. Promptly upon
issuing any Additional Letter of Credit or extending any Letter of Credit (or
allowing any Evergreen Letter of Credit to be extended), 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 Bank of the contents thereof
and the amount of such Bank's participation in the relevant Letter of Credit.
Promptly upon issuing any Additional Letter of Credit, the relevant LC Issuing
Bank will send a copy of such Additional Letter of Credit to the Administrative
Agent.
(h) Fees. Each Requesting Borrower (or Vencor on its behalf)
shall pay to the Administrative Agent, for the account of the Banks ratably in
accordance with their respective Revolving Credit Percentages, a letter of
credit fee for each day at the LC Fee Rate on the aggregate amount available
for drawings (whether or not conditions for
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drawing thereunder have been satisfied) under all Letters of Credit issued at
the request of such Requesting Borrower and remaining 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 Domestic Business Day
of each calendar quarter for so long as such Letter of Credit is outstanding
and on the final expiry date thereof. Each Requesting Borrower (or Vencor on
its behalf) shall pay to each LC Issuing Bank additional fronting fees,
quarterly in arrears, and reasonable expenses in the amounts and at the times
agreed between such Requesting Borrower and such LC Issuing Bank.
(i) 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 Vencor 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.
(j) Reimbursement and Other Payments by the Relevant Borrower. (A)
If any amount is drawn under any Letter of Credit, the Requesting Borrower
irrevocably and unconditionally agrees 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 such Requesting Borrower 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 a Requesting
Borrower 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
Domestic Business Day.
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(B) In addition, each Requesting Borrower agrees to pay to the
relevant LC Issuing Bank interest on any and all amounts not paid by such
Requesting Borrower when due hereunder with respect to a Letter of Credit
issued at its request by such LC Issuing Bank, for each day from and including
the date when such amount becomes due to but excluding the date such amount is
paid in full, whether before or after judgment, payable on demand, at a rate
per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans
for such day.
(C) Each payment to be made by a Requesting Borrower pursuant to
this subsection (j) shall be made to the relevant LC Issuing Bank in Federal or
other funds immediately available to it at its address referred to in Section
11.01.
(k) Payments by Banks with Respect to Letters of Credit. (i) If
the relevant Requesting Borrower fails to reimburse the relevant LC Issuing
Bank as and when required by subsection (j) above for all or any portion of any
amount drawn under a Letter of Credit issued by it, such LC Issuing Bank may
notify the Administrative Agent of such unreimbursed amount and request that
the Banks reimburse such LC Issuing Bank for their respective Revolving Credit
Percentages thereof. Upon receiving any such notice from an LC Issuing Bank,
the Administrative Agent shall promptly notify each Bank of the unreimbursed
amount and such Bank's share thereof. Upon receiving such notice from the
Administrative Agent, each Bank shall make available to such LC Issuing Bank,
at its address referred to in Section 11.01, an amount equal to such Bank's
share 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) (i) on the day such Bank receives such notice if it is received
at or before 12:00 Noon (Eastern Time) on such day or (ii) on the Domestic
Business Day following such Bank's receipt of such notice if it is received
after 12:00 Noon (Eastern Time) on the date of receipt, in each case together
with interest on such amount for each day from and including the relevant LC
Payment Date to but excluding the day such payment is due from such Bank at the
Federal Funds Rate for such day. Upon payment in full thereof, such Bank shall
be subrogated to the rights of such LC Issuing Bank against such Requesting
Borrower to the extent of such Bank's pro rata share of the related LC
Reimbursement Obligation (including interest accrued thereon). Nothing in this
subsection (k) shall affect any rights any Bank may have against any LC Issuing
Bank for any action or mission for which such LC Issuing
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Bank is not indemnified under subsection (o) of this Section.
(ii) If any Bank fails to pay any amount required to be paid by it
pursuant to clause (i) of this subsection (k) on the date on which such payment
is due, interest shall accrue on such Bank's obligation to make such payment,
for each day from and including the date such payment became due to but
excluding the date such Bank makes such payment, whether before or after
judgment, at a rate per annum equal to (x) for each day from the day such
payment is due to the third succeeding Domestic 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 sum of 2% plus the Base Rate for such day.
Any payment made by any Bank after 3:00 P.M. (Eastern Time) on any Domestic
Business Day shall be deemed for purposes of the preceding sentence to have
been made on the next succeeding Domestic Business Day.
(iii) If any Requesting Borrower shall reimburse any LC Issuing Bank
for any drawing with respect to which any Bank shall have made funds available
to such LC Issuing Bank in accordance with clause (i) of this subsection (k),
such LC Issuing Bank shall promptly upon receipt of such reimbursement
distribute to such Bank its pro rata share thereof, including interest, to the
extent received by such LC Issuing Bank.
(l) 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 Bank 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 Bank or LC Issuing Bank of
issuing or maintaining any Letter of Credit or any participation therein, or to
reduce any amount receivable by any Bank or LC Issuing Bank under this Section
2.06 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 Bank's or LC Issuing Bank's reasonable
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allocation of the aggregate of such increases or reductions resulting from such
event), then, within 15 days after demand by such Bank or LC Issuing Bank (with
a copy to the Administrative Agent), Vencor (or the relevant Requesting
Borrower if such Letter of Credit was issued at its request) agrees to pay to
such Bank or LC Issuing Bank, from time to time as specified by such Bank or LC
Issuing Bank, such additional amounts as shall be sufficient to compensate such
Bank or LC Issuing Bank for such increased cost or reduction. A certificate of
such Bank or LC Issuing Bank submitted to Vencor (or the relevant Requesting
Borrower) pursuant to this Section 2.06(l) and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error.
(m) Exculpatory Provisions. Each Requesting Borrower's
obligations under this Section shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or defense
to payment which such Requesting Borrower may have or have had against any LC
Issuing Bank, any Bank, the beneficiary of any Letter of Credit or any other
Person. Each Requesting Borrower assumes all risks of the acts or omissions of
any beneficiary of any Letter of Credit issued at its request with respect to
the use of such Letter of Credit by such beneficiary. None of the LC Issuing
Banks, the Banks and their respective officers, directors, employees and agents
shall be responsible for, and the obligations of each Bank to make payments to
each LC Issuing Bank and of such Requesting Borrower to reimburse each LC
Issuing Bank for drawings pursuant to this Section (other than obligations
resulting solely 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 Combined 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 Combined 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
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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 Bank under
or in connection with any Letter of Credit and the related drafts and
documents, if done without willful misconduct or gross negligence, shall be
binding upon the relevant Requesting Borrower and shall not place any LC
Issuing Bank or any Bank under any liability to such Requesting Borrower.
(n) Reliance, Etc. 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 each Requesting Borrower set forth in the last
sentence of Section 3.02 to establish whether the conditions specified in
clauses (c) and (d) of Section 3.02 are met in connection with any issuance or
extension of a Letter of Credit. Each LC Issuing Bank shall be entitled to
rely, and shall be fully protected in relying, upon advice and statements of
legal counsel, independent accountants and other experts selected by such LC
Issuing Bank and upon any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document believed by it in good
faith to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and may accept documents that appear on their face to
be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary unless the beneficiary and the
relevant Requesting Borrower shall have notified such LC Issuing Bank that such
documents do not comply with the terms and conditions of such Letter of Credit.
Any LC Issuing Bank shall be fully justified in refusing to take any action
requested of it under this Section in respect of any Letter of Credit issued by
it unless it shall first have received such advice or concurrence of the
Required Banks as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take, or omitting or continuing to omit, any such action.
Notwithstanding any other provision of this Section, each LC Issuing Bank shall
in all cases be fully protected in acting, or in refraining from acting, under
this Section in respect of any Letter of Credit in accordance with a request of
the Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and all future holders of
participations in such Letter of Credit; provided that this sentence shall not
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affect any rights the relevant Requesting Borrower may have against the Banks
that made such request.
(o) Indemnification by Each Borrower. Each Requesting Borrower
agrees to indemnify and hold harmless each Bank, each LC Issuing Bank and the
Administrative Agent (collectively, the "LC Indemnitees") from and against any
and all claims and 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 whatsoever) 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 issued at the request of such Requesting Borrower or any
actual or proposed use of any such 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 Bank to fulfill or
comply with its obligations to any LC Issuing Bank hereunder in connection with
any such Letter of Credit (but nothing herein contained shall affect any rights
such Requesting Borrower may have against any such defaulting Bank); provided
that no Requesting Borrower shall 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 (o) is intended to limit the obligations of any Requesting
Borrower under any other provision of this Section.
(p) Indemnification by the Banks. Each Bank shall, ratably in
accordance with its Revolving Credit Percentage, indemnify each LC Issuing
Bank, its affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Borrowers) 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
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connection with this Section or any action taken or omitted by such indemnitee
under this Section.
(q) Liability for Damages. Nothing in this section shall preclude
any Requesting Borrower or any Bank from asserting against any LC Issuing Bank
any claim for direct (but not consequential) damages suffered by such
Requesting Borrower or such Bank to the extent, but only to the extent, caused
by (A) 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 (B) 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.
(r) Dual Capacities. In its capacity as a Bank, each LC Issuing
Bank shall have the same rights and obligations under this Section as any other
Bank.
(s) Direct Pay IRB Letters of Credit. (i) From time to time after
the Closing Date Vencor may, by notice to the Administrative Agent, the
Documentation Agent and the relevant LC Issuing Bank, request that such LC
Issuing Bank determine whether it would be willing to issue one or more
direct-pay letters of credit to support IRB Debt (each, a "Direct Pay IRB
Letter of Credit"). Such notice shall be accompanied by the proposed form of
the Direct Pay IRB Letter of Credit, the proposed form of the related
reimbursement agreement and such other instruments and agreements relating
thereto as the Administrative Agent, the Documentation Agent or such LC Issuing
Bank may reasonably request (collectively, the "Underlying LC Documents"). If
(x) the Documentation Agent shall have notified Vencor, the Administrative
Agent and such LC Issuing Bank that such Underlying LC Documents comply with
the provisions of Section 2.06(c) and are otherwise satisfactory in form and
substance to it, (y) such LC Issuing Bank shall have notified Vencor and the
Administrative Agent that such Underlying LC Documents are satisfactory in form
and substance to it and (z) the Administrative Agent shall not have received
notice from any Bank, within ten Domestic Business Days after delivery of
copies of such Underlying LC Documents to the Banks, stating that such Bank
objects to the terms of such Direct Pay IRB Letter of Credit or the related
reimbursement agreement for the reasons identified in such notice, the
Administrative Agent shall promptly notify Vencor and such LC Issuing Bank that
the form of the Underlying LC Documents is satisfactory and such LC Issuing
Bank may, subject to the terms and conditions of this
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Agreement, issue Direct Pay IRB Letters of Credit based on documents in such
form from time to time upon request of a Requesting Borrower.
(ii) Any notice given by a Requesting Borrower pursuant to Section
2.06(d) requesting the issuance of a Direct Pay IRB Letter of Credit shall
include definitive copies of such Direct Pay IRB Letter of Credit, the related
reimbursement agreement and such other instruments and agreements relating
thereto as the Administrative Agent may reasonably request, all of which shall
be substantially in the forms previously furnished to the Administrative Agent
pursuant to Section 2.06(s)(i). Upon receipt of such notice and other
documents, the Administrative Agent shall promptly provide such documents to
each Bank. The issuance by an LC Issuing Bank of any Direct Pay IRB Letter of
Credit shall be subject to the conditions specified in Section 2.06(e) and to
the additional conditions that (A) if the Account Party is not Vencor, the
related reimbursement agreement shall contain an unconditional and irrevocable
guarantee by Vencor, in form and substance satisfactory to the Documentation
Agent, of such Account Party's obligations thereunder and (B) Vencor shall have
executed and delivered to the Documentation Agent documentation, in form and
substance satisfactory to the Documentation Agent, designating the related
reimbursement agreement (a "Substitute Reimbursement Agreement") as an
additional "Financing Document" for all purposes of this Agreement and the
other Financing Documents.
(iii) Notwithstanding the other provisions of this Section 2.06, the
reimbursement obligations of the Requesting Borrower (and the Account Party, if
it is an entity other than the Requesting Borrower) in respect of any Direct
Pay IRB Letter of Credit shall be governed by the related Substitute
Reimbursement Agreement and not by Section 2.06(j).
(iv) Any provision of any Substitute Reimbursement Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed by the Requesting Borrower (and by the Account Party, if it is an
entity other than the Requesting Borrower) and the relevant LC Issuing Bank
(with the prior written consent of the Required Banks); provided that no such
consent of the Required Banks shall be required if the effect of such amendment
or waiver would not be adverse in any material respect to the Banks.
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(t) Wachovia's Standby Letters of Credit. Notwithstanding
anything to the contrary in any other provision of this Section 2.06, Wachovia
Bank of North Carolina, N.A. may issue on the Closing Date or at any time
within five Domestic Business Days thereafter, without regard to whether the
conditions specified in Sections 2.06(b) and 2.06(c) are satisfied, six standby
letters of credit in an aggregate face amount not exceeding $21,000,000 to
provide credit support for six direct pay letters of credit issued by Wachovia
Bank of Georgia, N.A. before the date hereof to support IRB Debt. Such standby
letters of credit shall expire on the earlier of (i) the tenth day of the
seventeenth month following receipt by the beneficiary thereof of a written
notice of non-extension from Wachovia Bank of North Carolina, N.A. or (ii) the
fifth Domestic Business Day before the Final Maturity Date.
(u) 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 amount of the LC Liabilities existing from time to time and
(ii) the amount of any fee payable for the account of the Banks under Section
2.06(h).
SECTION 2.07. Commitment Fees. (a) Vencor shall pay to the
Administrative Agent for the account of each Bank a commitment fee, calculated
for each day at the Commitment Fee Rate for such day, on the unused portion of
such Bank's Term Commitment at the close of business on such day. Such
commitment fees shall accrue from and including the earlier of (i) October 31,
1995 and (ii) the Closing Date to but excluding the last day of the Term Loan
Availability Period (or any earlier date on which the Term Commitments are
fully utilized or terminate in their entirety) and shall be paid on the last
day of the Term Loan Availability Period.
(b) Vencor shall pay to the Administrative Agent for the account
of each Bank a commitment fee, calculated for each day at the Commitment Fee
Rate for such day, on the amount by which such Bank's Revolving Credit
Commitment exceeds its Revolving Credit Exposure at the close of business on
such day. Such commitment fees shall accrue from and including the earlier of
(i) October 31, 1995 and (ii) the Closing Date to but excluding the date on
which the Revolving Credit Commitments shall have terminated in their entirety
and shall be payable quarterly on the last Domestic Business Day of each
calendar quarter and on the date on which the Revolving Credit Commitments
terminate in their entirety.
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SECTION 2.08. Repayments and Prepayments of Loans.
(a) Final Maturity. The Loans shall mature on the Final Maturity
Date, and any Loans then outstanding shall be due and payable on such date.
(b) Mandatory Prepayments of Term Loans. On each date set forth
below, the Borrowers shall prepay Term Loans in an aggregate principal amount
equal to the amount listed opposite such date (subject to reduction as provided
in Section 2.08(e)):
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 1997 $12,500,000
June 30, 1997 $12,500,000
September 30, 1997 $12,500,000
December 31, 1997 $12,500,000
March 31, 1998 $18,750,000
June 30, 1998 $18,750,000
September 30, 1998 $18,750,000
December 31, 1998 $18,750,000
March 31, 1999 $25,000,000
June 30, 1999 $25,000,000
September 30, 1999 $25,000,000
December 31, 1999 $25,000,000
March 31, 2000 $37,500,000
June 30, 2000 $37,500,000
September 30, 2000 $37,500,000
December 31, 2000 $37,500,000
March 31, 2001 $25,000,000
</TABLE>
(c) Notice of Prepayment. Prior to the date of each mandatory
prepayment pursuant to this Section 2.08, Vencor shall, by notice,
substantially in the form of Exhibit N hereto, to the Administrative Agent
given not later than 12:00 Noon (Eastern Time) on (i) the date of prepayment of
any Group of Base Rate Loans, (ii) the second Domestic Business Day prior to
the date of prepayment of any Group of CD Loans or (iii) the third Euro-Dollar
Business Day prior to the date of prepayment of any Group of Euro-Dollar Loans,
select which outstanding Group or Groups of Loans are to be prepaid. Upon
receipt of such notice of prepayment, the Administrative Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share of such
prepayment, and such notice of prepayment shall not thereafter be revocable by
Vencor or any other relevant Borrower.
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<PAGE> 55
(d) Optional Prepayments.
(i) Base Rate Loans. Vencor may, upon giving notice to the
Administrative Agent, substantially in the form of Exhibit N hereto, before
12:00 Noon (Eastern Time) on the date of prepayment, prepay any Group of Base
Rate Loans on any Domestic Business Day in whole, or in part in amounts
aggregating $1,000,000 or any larger multiple of $100,000.
(ii) CD Loans. Vencor may, upon at least two Domestic Business
Days' notice to the Administrative Agent, substantially in the form of Exhibit
N hereto, prepay any Group of CD Loans on any Domestic Business Day in whole,
or in part in amounts aggregating $5,000,000 or any larger multiple of
$1,000,000. Unless such Loans are prepaid on the last day of an Interest
Period applicable thereto, the relevant Borrower shall comply with Section 2.11
in connection with such prepayment.
(iii) Euro-Dollar Loans. Vencor may, upon at least three
Euro-Dollar Business Days' notice to the Administrative Agent, substantially in
the form of Exhibit N hereto, prepay any Group of Euro-Dollar Loans on any
Euro-Dollar Business Day in whole, or in part in amounts aggregating $5,000,000
or any larger multiple of $1,000,000. Unless such Loans are prepaid on the
last day of an Interest Period applicable thereto, the relevant Borrower shall
comply with Section 2.11 in connection with such prepayment.
(iv) Notice to Banks. Upon receipt of a notice pursuant to this
Section 2.08(d), the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share of the prepayment pursuant to
this Section 2.08(d) and such notice shall not thereafter be revocable by
Vencor.
(e) Reduction of Scheduled Prepayments of Term Loans. The amounts
of the scheduled prepayments of the Term Loans set forth in Section 2.08(b)
shall be reduced pro rata at the end of the Term Loan Availability Period by an
aggregate amount equal to the amount by which (i) $400,000,000 exceeds (ii) the
aggregate principal amount of all the Term Loans made during the Term Loan
Availability Period. The amount of any optional prepayment of the Term Loans
pursuant to Section 2.08(d) shall be applied ratably to reduce each subsequent
scheduled prepayment of the Term Loans set forth in Section 2.08(b).
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<PAGE> 56
(f) Ratable Application. Each repayment or prepayment of any
Group of Loans pursuant to this Section 2.08 shall be applied ratably to the
Loans of the several Banks included in such Group of Loans.
(g) Payment of Accrued Interest. On the date of each prepayment
of Loans pursuant to this Section 2.08, the relevant Borrower shall pay
interest accrued on the principal amount prepaid to the date of prepayment.
SECTION 2.09. Termination or Reduction of Commitments.
(a) Mandatory Termination or Reduction. (i) The Term Commitments
shall terminate on the last day of the Term Loan Availability Period.
(ii) If the aggregate amount of the Revolving Credit Commitments on
the first Commitment Reduction Date exceeds $450,000,000 (the amount of such
excess being the "Excess Amount"), the Revolving Credit Commitments shall be
reduced on each Commitment Reduction Date by an amount equal to one-third of
the Excess Amount.
(iii) On each Commitment Reduction Date, the Borrowers shall repay
such principal amount (together with accrued interest thereon) of each Bank's
Project Loans and/or General Purpose Loans as may be necessary so that
immediately after such repayment such Bank's Revolving Credit Exposure shall
not exceed its Revolving credit Commitment as then reduced.
(iv) The Revolving Credit Commitments shall terminate on the Final
Maturity Date.
(b) Optional Termination or Reduction. Vencor may, upon at least
three Domestic Business Days' notice to the Administrative Agent, (i) terminate
the Term Commitment at any time, or permanently reduce from time to time by an
aggregate amount of $10,000,000 or any larger multiple of $1,000,000, the
unused portion of the Term Commitments or (ii) terminate the Revolving Credit
Commitments at any time, or permanently reduce by an aggregate amount of
$10,000,000 or any larger multiple of $1,000,000, the unused portion of the
Revolving Credit Commitments.
(c) Application of Reductions. Each reduction of the Term
Commitments or the Revolving Credit Commitments pursuant to this Section 2.09
shall be applied ratably to
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all the Term Commitments or all the Revolving Credit Commitments, as the case
may be.
SECTION 2.10. General Provisions as to Payments. (a) The Borrowers
shall make each payment of principal of, and interest on, the Loans and each
payment of commitment fees and letter of credit fees hereunder not later than
1:00 P.M. (Eastern Time) on the date when due, in Federal or other immediately
available funds, to the Administrative Agent at its address for payments
specified in or pursuant to Section 11.01. The Administrative Agent will
promptly distribute to each Bank its ratable share of each such payment
received by the Administrative Agent for the account of the Banks. Whenever
any payment of principal of, or interest on, any Group of Base Rate Loans or CD
Loans or of commitment fees or letter of credit fees shall be due on a day
which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar 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 relevant Borrower prior to the date on which any payment is due to the
Banks hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent may
(but shall not be obligated to), in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then
due such Bank. If and to the extent that such Borrower shall not have so made
such payment, each Bank shall repay to the Administrative Agent forthwith on
demand such amount distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal Funds
Rate.
SECTION 2.11. Funding Losses. (a) If any Borrower makes any payment of
principal with respect to any CD Loan or Euro-Dollar Loan or if any CD Loan or
Euro-Dollar
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Loan is converted to a Base Rate Loan (whether such payment or conversion is
pursuant to Article II, VI or VIII or otherwise) on any day other than the last
day of an Interest Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.04(d), or if any Borrower fails to borrow or
prepay any CD Loans or Euro-Dollar Loans after notice has been given to any
Bank in accordance with Section 2.02(b), 2.08(c) or 2.08(d), such Borrower
shall reimburse each Bank pursuant to this Section for any resulting loss or
expense incurred by such Bank (or by any existing or prospective Participant in
the related Loan), including any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or conversion or failure to borrow or prepay.
(b) Each Bank wishing to demand reimbursement pursuant to this
Section shall, within seven Domestic Business Days after the relevant payment
or conversion or failure to borrow or prepay occurs, notify the Administrative
Agent that it demands such reimbursement and deliver to the Administrative
Agent a certificate as to the amount of such Bank's resulting loss or expense
showing the calculation thereof in reasonable detail. Such certificate (which
may be based on quotations obtained in the relevant market whether or not the
relevant Loans were in fact funded in such market) shall be conclusive in the
absence of manifest error. Promptly after the end of such period of seven
Domestic Business Days, the Administrative Agent shall notify Vencor of all
demands for such reimbursement received by it during such period and deliver to
Vencor copies of the supporting certificates received by it from the Banks.
Within 15 days thereafter, the relevant Borrower shall pay to the
Administrative Agent the aggregate amount properly demanded by the Banks
pursuant to this Section and, upon receipt thereof, the Administrative Agent
shall distribute such amount to the Banks entitled thereto.
SECTION 2.12. Computation of Interest and Fees. (a) Interest based on
the Prime Rate and commitment 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). All
other interest and all letter of credit fees hereunder shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).
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<PAGE> 59
(b) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder and each Commitment Fee Rate and LC Fee Rate
applicable hereunder. The Administrative Agent shall give prompt notice to the
relevant Borrower and the Banks of each rate of interest, Commitment Fee Rate
and LC Fee Rate so determined, and its determination thereof shall be
conclusive in the absence of manifest error; provided that, if the
Administrative Agent makes such determinations for any Rate Period on the basis
of an estimated Pricing Level set forth in a certificate delivered by Vencor
pursuant to Section 5.01(e) and subsequently determines (or receives a
certificate pursuant to Section 5.01(e) establishing) that a higher Pricing
Level applies during such Rate Period, the Administrative Agent shall promptly
notify the relevant Borrowers and the Banks of such higher Pricing Level and,
within two Domestic Business Days after receiving such notice, such Borrowers
shall pay to the Administrative Agent, for the accounts of the Banks, the
additional interest and fees that should have been paid prior to such time by
reason of the applicability of such higher Pricing Level. If the
Administrative Agent makes such determinations on the basis of a Pricing Level
estimated by Vencor and subsequently determines (or receives a certificate
pursuant to Section 5.01(e) establishing) that a lower Pricing Level applied
during the relevant Rate Period, no adjustment shall be made for any resulting
overpayments of interest or fees theretofore made by the Borrowers on the basis
of the higher Pricing Level estimated by Vencor.
SECTION 2.13. Regulation D Compensation. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of such Bank to
United States residents), and as a result the cost to such Bank (or its
Euro-Dollar Lending office) of making or maintaining its Euro-Dollar Loans is
increased, then such Bank may require each Borrower to pay, contemporaneously
with each payment of interest on the Euro-Dollar Loans made to such Borrower,
additional interest on the related Euro-Dollar Loan of such Bank at a rate per
annum, up to but not exceeding the amount by which (x) (A) the applicable
London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve
Percentage exceeds (y) the applicable London Interbank Offered Rate. Any Bank
wishing to require payment of such additional interest (i) shall so notify
Vencor and the Administrative Agent, in which case such additional interest
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on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the
place indicated in such notice with respect to each Interest Period commencing
at least three Euro-Dollar Business Days after such notice is given and (ii)
shall furnish to each Borrower, at least five Euro-Dollar Business Days prior to
each date on which interest is payable on the Euro-Dollar Loans made to such
Borrower, an officer's certificate setting forth the amount to which such Bank
is then entitled under this Section 2.13.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor), for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
SECTION 2.14. Additional Borrowers. (a) Vencor may from time to time
cause any Wholly-Owned Domestic Subsidiary to become eligible to borrow under
Section 2.01 or to become the Requesting Borrower for any Additional Letter of
Credit issued under Section 2.06 by delivering to the Documentation Agent an
Election to Participate with respect to such Wholly-Owned Domestic Subsidiary,
duly executed on behalf of such Wholly-Owned Domestic Subsidiary and Vencor.
Promptly upon receiving any such Election to Participate, the Documentation
Agent shall give notice to the other Agents and the Banks of its receipt
thereof, whereupon such Wholly-Owned Domestic Subsidiary shall become an
Additional Borrower for all purposes of this Agreement.
(b) The eligibility of any such Additional Borrower to borrow
under Section 2.01 and become the Requesting Borrower for any Additional Letter
of Credit issued under Section 2.06 shall terminate when the Documentation
Agent receives a Notice of Termination with respect to such Additional
Borrower, duly executed on behalf of Vencor. Promptly upon receiving any such
Election to Terminate, the Documentation Agent shall give notice to the other
Agents and the Banks of its receipt thereof, and thereafter such Additional
Borrower shall no longer be eligible to borrow under Section 2.01 or to become
a Requesting Borrower under Section 2.06. The delivery of an
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Election to Terminate shall not affect any obligation of such Additional
Borrower theretofore incurred.
SECTION 2.15. Termination of Commitments Under Existing Credit
Agreements. Each of the parties hereto that is a party to Vencor's Existing
Credit Agreement, First Healthcare's Existing Credit Agreement, Nationwide's
Existing Credit Agreement or Hillhaven Funding's Existing Liquidity Agreement
agrees that the commitments of the banks thereunder shall terminate, without
further action by any of the parties thereto, concurrently with the closing
under this Agreement on the Closing Date. First Healthcare agrees to give
timely notice of such termination to (or obtain a waiver of such notice from)
each bank that is a party to First Healthcare's Existing Credit Agreement but
not a party to this Agreement.
ARTICLE III
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur when (i)
this Agreement shall have become effective in accordance with Section 11.10,
(ii) the Documentation Agent shall have received the following documents, each
dated the Closing Date unless otherwise indicated, and (iii) the other
conditions specified below shall have been satisfied:
(a) evidence satisfactory to the Documentation Agent that all of
the conditions to the obligations of Vencor and Hillhaven specified in
Article VIII of the Merger Agreement have been satisfied and the Merger has
been consummated substantially on the terms set forth in the Merger
Agreement;
(b) duly executed Notes of each Borrower for the account of each
Bank complying with the provisions of Section 2.03;
(c) duly executed counterparts of the Security Agreement,
substantially in the form of Exhibit D hereto, together with the stock
certificates listed in Schedule I thereto and signed stock powers relating
thereto;
(d) all signed UCC financing statements reasonably requested by
the Collateral Agent to perfect its security interests in the Collateral
and evidence
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satisfactory to the Documentation Agent that arrangements satisfactory
to it have been made for filing such UCC financing statements on or
promptly after the Closing Date;
(e) evidence satisfactory to the Documentation Agent that on the
Closing Date (i) Vencor will pay in full all loans and reimbursement
obligations then outstanding under Vencor's Existing Credit Agreement and
all interest and fees accrued thereunder, (ii) First Healthcare will pay in
full all loans and reimbursement obligations then outstanding under First
Healthcare's Existing Credit Agreement and all interest and fees accrued
thereunder, (iii) Bank One will deliver to the Documentation Agent all
promissory notes of Nationwide evidencing the loans purchased by the Banks
pursuant to Section 2.01(f) and an assignment of such loans to the Banks,
in form and substance satisfactory to the Documentation Agent, and (iv)
Hillhaven Funding Corporation will pay in full all loans and reimbursement
obligations then outstanding under Hillhaven Funding's Existing Liquidity
Agreement;
(f) evidence satisfactory to the Documentation Agent that
arrangements satisfactory to it shall have been made for the release of all
Liens (except Permitted Liens) on the assets of the Combined Companies;
(g) the Documentation Agent shall not have received notice from
the Required Banks stating that they have determined in good faith that (i)
any action, suit or proceeding is pending or threatened against any of the
Combined Companies in which there is a reasonable possibility of an adverse
decision which would have a Material Adverse Effect or (ii) since June 30,
1995 any event has occurred or any condition has come into existence which
has had, or is reasonably likely to have, a Material Adverse Effect;
(h) Notices of Borrowing pursuant to Section 2.02 for all amounts
to be borrowed hereunder on the Closing Date and for the aggregate amount
to be applied pursuant to Section 2.01(f) to purchase Bank One's
outstanding loans to Nationwide;
(i) the fact that, during the Pre-Closing Period, none of the
Combined Companies (i) declared or paid any dividend or made any other
distribution on any Equity Securities of Vencor or Hillhaven, except
regular
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dividends payable on Hillhaven's Series C Preferred Stock and Hillhaven's
Series D Preferred Stock, (ii) made any payment on account of the purchase,
redemption, retirement or acquisition of any Equity Securities of Vencor
or Hillhaven, except payments pursuant to and as described in the Merger
Agreement, (iii) entered into any Guarantee of Debt of any Minority-Owned
Affiliate or (iv) made any Investment in any Minority-Owned Affiliate,
except payments made pursuant to Guarantees of Debt of Minority-Owned
Affiliates entered into before the Pre-Closing Period began;
(j) evidence satisfactory to the Documentation Agent that Vencor
has paid or will pay on the Closing Date all fees, expenses and other
amounts payable by Vencor on or before the Closing Date to the Agents and
the Banks in connection with this Agreement;
(k) an opinion of Jill L. Force, General Counsel of Vencor,
substantially in the form of Exhibit F hereto;
(l) an opinion of Richard P. Adcock, General Counsel of Hillhaven,
substantially in the form of Exhibit G hereto;
(m) an opinion of Hirn, Doheny, Reed & Harper, special counsel for
the Borrowers, substantially in the form of Exhibit H hereto;
(n) an opinion of Davis Polk & Wardwell, special counsel for the
Agents, substantially in the form of Exhibit I hereto;
(o) evidence satisfactory to the Documentation Agent that each
participation in an Existing Letter of Credit heretofore granted by an LC
Issuing Bank to a bank or other financial institution that is not a party
to this Agreement has been canceled on or before the Closing Date as
contemplated by Section 2.06(a);
(p) all approvals, consents and other actions by or in respect of,
or filings with any governmental body, agency, official, authority or other
Person 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
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authority) as to which the failure to have obtained, taken or made them
is not, in the aggregate, material)
(q) receipt by the Documentation Agent of each opinion, report and
other document delivered pursuant to Article VIII of the Merger Agreement
in connection with the Merger, with a letter in form and substance
satisfactory to the Documentation Agent from each of the law firms
delivering such opinions authorizing reliance thereon by the Banks; and
(r) all documents the Documentation Agent may reasonably request
relating to the existence of each Borrower, the corporate authority for and
the validity of the Financing Documents, the consummation of the Merger,
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 Documentation Agent.
Promptly after the closing hereunder occurs, the Documentation Agent shall
notify Vencor and the Banks of the Closing Date, and such notice shall be
conclusive and binding on all parties hereto.
SECTION 3.02. Credit Events. The obligation (i) of each Bank to
make a Loan on the occasion of each Borrowing, (ii) of each Bank to purchase
each participation in a Letter of Credit and the related LC Liabilities as and
when provided in Section 2.06 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 2.06, are each subject to the
satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or prior
to December 31, 1995;
(b) receipt by the Administrative Agent of the notice required by
Section 2.02(a), 2.06(d) or 2.06(f), 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 the Borrowers in or pursuant to the Financing Documents shall be true on
and as of the date
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of such Credit Event as if made on and as of such date; and
(e) if the relevant Borrower is a Subsidiary, Vencor shall own,
directly or indirectly, 100% of the issued and outstanding capital stock of
such Subsidiary Borrower.
Each Credit Event under this Agreement shall be deemed to be a representation
and warranty by Vencor on the date of such Credit Event as to the facts
specified in clauses (c), (d) and, if applicable, (e) of this Section.
SECTION 3.03. First Borrowing by Each Additional Borrower. The
obligation of each Bank to make a Loan on the occasion of the first Borrowing
by each Additional Borrower is subject to the satisfaction of the following
further conditions:
(a) receipt by the Documentation Agent and the Administrative
Agent of an Election to Participate with respect to such Additional
Borrower appropriately completed and signed;
(b) receipt by the Documentation Agent for the account of each
Bank of duly executed Notes of such Additional Borrower, dated on or before
the date of such Borrowing, complying with the provisions of Section 2.03;
(c) receipt by the Documentation Agent of one or more opinions
of counsel for such Additional Borrower acceptable to the Documentation
Agent, which taken together cover the matters set forth in Exhibit J
hereto; and
(d) receipt by the Documentation Agent of all documents which it
may reasonably request relating to (i) the existence of such Additional
Borrower, (ii) the corporate authority for and validity of such Additional
Borrower's Election to Participate and Notes and (iii) the corporate
authorization by Vencor's board of directors of the guaranty set forth in
Article IX hereof with respect to such Additional Borrower, in each case in
form and substance satisfactory to the Documentation Agent.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Vencor represents and warrants to the Agents, the Banks and the LC
Issuing Banks that:
SECTION 4.01. Corporate Existence and Power. Each of the Combined
Companies is a corporation or partnership duly incorporated or organized, as
the case may be, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, as the case may be, and has all
corporate or partnership powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and as proposed to be conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution and delivery by each Borrower of each of the
Financing Documents to which it is a party and the performance by such Borrower
of its obligations thereunder are within the corporate power of such Borrower,
have been duly authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body, agency or official
(except such as shall have been made at or prior to 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 provision of applicable law or
regulation or of the Charter Documents of any of the Combined Companies or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon any of the Combined Companies or result in or require the imposition of
any Lien (other than the Liens created by the Collateral Documents) on any
asset of any of the Combined Companies.
SECTION 4.03. Binding Effect; Liens of Collateral Documents. This
Agreement constitutes a valid and binding agreement of each Borrower, and the
other Financing Documents, when executed and delivered as contemplated by this
Agreement, will constitute valid and binding obligations of each Borrower that
is a party thereto, in each case enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general equitable principles. The
Collateral Documents create valid security interests in the Collateral
purported to be covered thereby, which security interests are and will remain
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perfected security interests prior to all other Liens, until such security
interests are released pursuant to Section 16 of the Security Agreement.
SECTION 4.04. Financial Information. (a) The consolidated balance
sheet of Vencor and its Consolidated subsidiaries as of December 31, 1994 and
the related consolidated statements of operations, cash flows and shareholders'
equity for the Fiscal Year then ended, reported on by Ernst & Young LLP and set
forth in Vencor's 1994 Annual Report to Shareholders, a copy of which has been
delivered to each of the Banks, fairly present, 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) The unaudited consolidated balance sheet of Vencor and its
Consolidated Subsidiaries as of June 30, 1995 and the related unaudited
consolidated statements of operations and cash flows for the six months then
ended, a copy of which has been delivered to each of the Banks, fairly present,
on a basis consistent with the financial statements referred to in Section
4.04(a), 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 six-month period (subject to normal year-end adjustments).
(c) The consolidated balance-sheet of Hillhaven and its
Consolidated Subsidiaries as of May 31, 1995 and the related consolidated
statements of operations, cash flows and changes in stockholders' equity for
its fiscal year then ended, reported on by KPMG Peat Marwick and set forth in
Hillhaven's report on Form 10-K for such fiscal year, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of
Hillhaven and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(d) The unaudited pro forma condensed combined balance sheet of
the Combined Companies and their unaudited pro forma condensed combined income
statements set forth in Vencor's Form S-4, a copy of which has been delivered
to each of the Banks, fairly present their combined financial position and
combined results of operations at the dates and for the periods specified
therein, on the basis described in the introductory text and the notes to such
pro forma
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financial statements and giving effect to the transactions and events
contemplated by the Merger Agreement.
(e) Since the beginning of the Pre-Closing Period, 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 4.05. Litigation. Except as disclosed under the heading
"Hillhaven Litigation" in Vencor's Form S-4, there is no action, suit or
proceeding pending against, or to the knowledge of Vencor threatened against or
affecting, any of the Combined Companies before any court or arbitrator or any
governmental body, agency or official (i) in which there is a reasonable
possibility of an adverse decision which could have a Material Adverse Effect
or (ii) which in any manner questions the validity of any Financing Document.
SECTION 4.06. 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 in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
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 4.07. Taxes. The Combined Companies have filed all United
States Federal income tax returns that are required to be filed by them 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 Combined Companies in respect of taxes or
other governmental charges are, in the opinion of Vencor, adequate.
SECTION 4.08. Compliance with Laws. The Combined Companies are in
compliance in all material respects with
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all applicable laws, rules and regulations, other than such laws, rules or
regulations (i) the validity or applicability of which the relevant Combined
Company is contesting in good faith or (ii) the failure to comply with which
could not, in the aggregate, have a Material Adverse Effect.
SECTION 4.09. Investment Company Act. None of the Combined Companies
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. None of the
Combined Companies is 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.
SECTION 4.11. Environmental Matters. (a) Each of Vencor and Hillhaven
has from time to time reviewed the effect of Environmental Laws on its
business, operations and properties and those of its Subsidiaries, in the
course of which it has identified and evaluated associated liabilities and
costs. On the basis of such reviews, Vencor has reasonably concluded that such
associated liabilities and costs are unlikely to have a Material Adverse
Effect.
(b) Except to the extent that the Environmental Liabilities of the
Combined 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
or Hillhaven, proposed, threatened or anticipated with respect to or in
connection with the operation of any properties now or previously owned, leased
or operated by any of the Combined Companies.
SECTION 4.12. Vencor's Ownership of Other Borrowers. At all times
after the consummation of the Merger, all of the authorized capital stock of
each Borrower other than Vencor will be owned, directly or indirectly,
beneficially and of record by Vencor, subject to no Lien except Liens created
by the Collateral Documents.
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SECTION 4.13. Merger Agreement. The copy of the Merger Agreement
heretofore delivered to each of the Banks is a correct and complete copy
thereof.
SECTION 4.14. Effect of Merger on Outstanding Debt. No Debt or other
securities of the Combined Companies outstanding immediately before the Closing
Date will become subject to acceleration or mandatory repayment, repurchase or
other retirement by any of the Combined Companies by reason of the Merger
and/or any change of control of Hillhaven and its Subsidiaries effected
thereby, except:
(i) Debt and preferred stock of the Combined companies to be
refinanced as disclosed in Appendix B to the Information Memorandum;
(ii) Hillhaven's 7-3/4% Convertible Subordinated Debentures due
2002, as to which the market price at August 15, 1995 of the common stock
into which such debentures are convertible significantly exceeded the price
which the holders thereof would receive if they required such debentures to
be repurchased as a result of any such change of control; and
(iii) other Debt not exceeding $20,000,000 in aggregate outstanding
principal amount.
SECTION 4.15. Full Disclosure. All information heretofore furnished
in writing by any of the Combined Companies to the Documentation Agent for
inclusion in the Information Memorandum or to any of the Agents or any Bank 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 Combined Companies to any of the Agents or any Bank 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 Banks 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.
ARTICLE V
COVENANTS
Vencor agrees that, so long as any Bank has any Commitment or Credit
Exposure hereunder or any interest or letter of credit fees accrued hereunder
remain unpaid:
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SECTION 5.01. Information. Vencor will deliver the following
information to the Administrative Agent (with copies thereof for each Bank if
requested by the Administrative Agent) and, upon receipt thereof, the
Administrative Agent will deliver a copy thereof to each Bank:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year, a consolidated balance sheet of Vencor and its
Consolidated Subsidiaries as of the end of such Fiscal Year, and the
related consolidated statements of operations, cash flows and changes in
stockholders' equity for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all reported on
in a manner acceptable to the SEC by independent public accountants of
nationally recognized standing, which report (x) shall state that such
financial statements present fairly, in all material respects, the
consolidated financial position of Vencor and its Consolidated Subsidiaries
as of the date of such financial statements and their consolidated results
of operations and cash flows for the period covered by such financial
statements in conformity with GAAP and (y) shall not contain any
Qualification;
(b) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, (i) an
unaudited consolidated balance sheet of Vencor and its Consolidated
Subsidiaries and the related consolidated statements of operations for such
Fiscal Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter and of cash flows for the portion of the Fiscal Year
ended at the end of such Fiscal Quarter, setting forth in each case in
comparative form the unaudited consolidated statements of operations and
cash flows for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all prepared 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, and (ii) a
certificate (subject to normal year-end adjustments) of a Financial Officer
as to the fairness of presentation and consistency of such financial
statements;
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(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 5.01(a) and (b), a certificate of a
Financial Officer, substantially in the form of Exhibit E hereto, (i)
setting forth in reasonable detail such calculations as are required to
establish whether Vencor was in compliance with the requirements of
Sections 5.11, 5.12, 5.16, 5.17 and 5.18 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
financial statements delivered pursuant to Section 5.01(a) or (b), 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 financial statements
previously delivered pursuant to Section 5.01(a) or (b), 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 previously so delivered which is material to the financial
statements then being delivered;
(d) unless Vencor has an Investment Grade Rating, simultaneously
with the delivery of each set of annual financial statements referred to in
Section 5.01(a), a letter from the firm of independent public accountants
that reported on such statements stating (i) whether anything has come to
their attention in the course of their normal audit procedures to cause
them to believe that any Default existed on the date of such financial
statements and (ii) whether in their opinion the calculations of compliance
with the requirements of Sections 5.16, 5.17 and 5.18 set forth in the
Financial officer's certificate delivered simultaneously therewith pursuant
to Section 5.01(c), to the extent derived from data contained in the
accounting records of Vencor and its Consolidated Subsidiaries, have been
determined in accordance with the relevant provisions of this Agreement;
(e) within 45 days after the end of each Fiscal Quarter, a
certificate signed by a Financial Officer setting forth the Pricing Level
applicable during the
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Rate Period that begins 46 days after the end of such Fiscal Quarter and in
reasonable detail the calculations required to establish that such Pricing
Level will be applicable; provided that (x) in the case of the last Fiscal
Quarter of any Fiscal Year, such certificate may set forth only Vencor's
estimate of the applicable Pricing Level (it being understood that, if
Vencor in good faith cannot determine with reasonable certainty which of
two Pricing Levels applies, Vencor may, in view of the provisions of
Section 2.12(b), appropriately estimate that the lower of such Pricing
Levels applies), and (y) if such certificate sets forth only an estimated
Pricing Level, Vencor will, within 90 days after the end of such Fiscal
Year, deliver a further certificate signed by a Financial Officer setting
forth the calculations contemplated by this clause (e) and either
confirming that such estimated Pricing Level applies or, if not, setting
forth the Pricing Level that does apply during the relevant Rate Period and
requesting the Administrative Agent to determine the amounts of any
additional interest and/or additional fees payable by Vencor pursuant
to Section 2.12(b);
(f) within five Domestic Business Days after any Executive Officer
obtains knowledge of any Default, if such Default is then continuing, a
certificate of a Financial Officer setting forth the details thereof and
the action that Vencor is taking or proposes to take with respect thereto;
(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 Vencor or any of its Subsidiaries 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
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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 in respect of any Benefit
Arrangement or makes any amendment to any Plan or Benefit Arrangement which
has resulted or could result in the imposition of a Lien or the posting of
a bond or other security, a certificate of a Financial officer setting
forth details as to such occurrence and the action, if any, which Vencor 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 Vencor or any of its Subsidiaries 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 a Financial Officer setting forth the nature of
such action, suit or proceeding and such additional information as may be
reasonably requested by any Bank;
(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 Vencor or any of its Subsidiaries, 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 Vencor or any of
its Subsidiaries to the public concerning material developments in the
business of Vencor and its Subsidiaries; and
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(l) from time to time such additional information regarding the
financial position, results of operations or business of any of the
Combined Companies as any Bank may reasonably request through the
Documentation Agent.
SECTION 5.02. Maintenance of Property. Each of the Combined Companies
will keep all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.
SECTION 5.03. Insurance. Each of the Combined Companies will maintain
insurance in 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.
SECTION 5.04. Compliance with Law. Each of the Combined Companies
will comply in all material respects with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities (including
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 proceedings, in which case adequate and reasonable reserves will be
established in accordance with GAAP, 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 of the
Combined Companies will preserve, renew and keep in full force and effect its
corporate existence and its rights, privileges, licenses and franchises
necessary or desirable in the normal conduct of business; provided that nothing
in this Section 5.05 shall prohibit (i) any merger or consolidation permitted
by Section 5.10, (ii) the termination of the corporate existence of any
Subsidiary if (A) Vencor determines that such termination is in its best
interest and (B) such termination is not adverse in any material respect to the
Banks, or (iii) the loss of any rights, privileges, licenses and franchises if
the loss thereof, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.06. Use of Proceeds and Letters of Credit. (a) The proceeds
of the Term Loans will be used (i) to refinance Debt of the Combined Companies
outstanding on the Closing Date, (ii) to make the cash payments that holders of
Hillhaven's Series C Preferred Stock and Hillhaven's Series D Preferred Stock
are entitled to receive
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under the Merger Agreement, and (iii) to pay the expenses of the foregoing
transactions and the other transactions contemplated by this Agreement and the
Merger Agreement.
(b) The proceeds of the Project Loans will be used to finance
capital expansion projects or to refinance Debt that was incurred to finance
capital expansion projects.
(c) The proceeds of the General Purpose Loans will be used for
general corporate purposes including, without limitation, financing
acquisitions, financing capital expansion projects and refinancing outstanding
Debt of the Combined Companies.
(d) The Existing Letters of Credit were used, and the Additional
Letters of Credit will be used, for general corporate purposes, including
providing credit support for IRB Debt.
(e) 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 for general corporate purposes will include any use thereof,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any "margin stock" within the meaning of
Regulation U.
SECTION 5.07. Limitation on Debt of Vencor. After the Closing Date,
Vencor 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 and Guarantees outstanding under this Agreement;
(b) Permitted Intercompany Debt;
(c) Debt and Guarantees (other than those referred to in clauses
(a) and (b) above) outstanding at the close of business on the Closing Date
not exceeding $400,000,000 in aggregate outstanding principal amount;
(d) Debt incurred after the Closing Date and Guarantees of Debt
entered into after the Closing Date; provided that (i) the Debt so incurred
or Guaranteed is
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incurred in exchange for or to repay, prepay, repurchase, redeem, defease,
retire or refinance ("refinance") outstanding Debt of Vencor permitted by
clauses (c), (d), (e), (g), (h) and (j) of this Section 5.07 or outstanding
Debt of Subsidiaries permitted by clauses (c), (d), (f), (g) and (i) of
Section 5.08; (ii) the principal amount of the Debt so incurred or
Guaranteed shall not exceed the unpaid principal amount of the Debt so
exchanged or refinanced, (iii) the aggregate principal amount of the Debt
so incurred or Guaranteed that is required to be repaid, on a cumulative
basis, through any date (a "date of determination") prior to the Final
Maturity Date shall not exceed the aggregate principal amount of the Debt
so exchanged or refinanced that would have been required to have been
repaid, on a cumulative basis, after the date of the relevant exchange or
refinancing and on or before the same date of determination and (iv) no
restriction is imposed on any of the Combined Companies in connection with
the Debt so incurred or Guaranteed that is more restrictive than the
provisions of this Agreement (or, if more restrictive, the provisions of
the documents applicable to the Debt so exchanged or refinanced);
(e) Debt incurred after the Closing Date and Guarantees of Debt
entered into after the Closing Date; provided that the Debt so incurred or
Guaranteed (i) matures after March 31, 2002, (ii) is not subject to any
prepayment, instalment payment, sinking fund, repurchase or other similar
requirement for the' retirement thereof (either mandatory or at the option
of the holder thereof) at any time on or before March 31, 2002 and (iii)
does not impose any restriction on any of the Combined Companies that is
more restrictive than the provisions of this Agreement; provided, further,
that if Vencor has an Investment Grade Rating when such Debt is incurred or
such Guarantee is entered into, the date specified in (i) and (ii) above
shall be changed from March 31, 2002 to June 30, 2001;
(f) Guarantees of Debt of Subsidiaries permitted by Section 5.08;
(g) Debt assumed by Vencor after the Closing Date in connection
with the acquisition of one or more health care facilities or other
businesses; provided in each case that such Debt was outstanding before
such facility or other business was acquired and was not incurred in
contemplation of such acquisition;
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(h) Debt evidenced by bonds issued by Vencor (or, prior to the
Merger, by Hillhaven) to tenants of residential units of New Pond Village
in Walpole, Massachusetts or The Greens at Hanover in Nashua, New Hampshire
evidencing the obligation to repay at the end of their tenancies amounts
paid by them at the beginning of their tenancies, provided that the
aggregate outstanding principal amount of all bonds referred to in this
clause (h) and Section 5.08(g) (including any such bonds outstanding on the
Closing Date) does not exceed $55,000,000;
(i) letters of credit issued to provide credit support for IRB
Debt and reimbursement obligations in respect of drawings thereunder,
provided that such IRB Debt is otherwise permitted under this Section 5.07
or Section 5.08;
(j) Debt incurred or assumed after the Closing Date for the
purpose of financing all or any part of the cost of acquiring or
constructing an asset of Vencor; provided that (i) such Debt is secured by
a Lien on such asset that is permitted by Section 5.09(e) and (ii) the
aggregate outstanding principal amount of all Debt permitted by this clause
(j) and Section 5.08(i) does not at any time exceed $25,000,0000;
(k) Debt incurred by Vencor at a time when Vencor has an
Investment Grade Rating, for a consideration consisting entirely of cash,
provided that (i) such Debt matures no more than 90 days after it is
incurred and (ii) the aggregate outstanding principal amount thereof does
not at any time exceed $150,000,000; and
(l) any other Debt incurred by Vencor after the Closing Date and
any other Guarantees entered into by Vencor after the Closing Date;
provided that the aggregate outstanding principal amount of all Debt
incurred or Guaranteed pursuant to this clause (1) shall not at any time
exceed $25,000,000.
SECTION 5.08. Limitation on Debt of Subsidiaries. Vencor will not
permit any Subsidiary, at any time after the Closing Date, to 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 and Guarantees outstanding under this Agreement;
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(b) Permitted Intercompany Debt;
(c) Debt and Guarantees (other than those referred to in clauses
(a) and (b) above) outstanding at the close of business on the Closing Date
not exceeding $210,000,000 in aggregate outstanding principal amount;
(d) Debt incurred after the Closing Date and Guarantees of Debt
entered into after the Closing Date; provided that (i) the Debt so incurred
or Guaranteed is incurred in exchange for or to repay, prepay, repurchase,
redeem, defease, retire or refinance ("refinance") any outstanding Debt of
Subsidiaries permitted by clauses (c), (d), (f), (g) and (i) of this
Section 5.08; (ii) the principal amount of the Debt so incurred or
Guaranteed shall not exceed the unpaid principal amount of the Debt so
exchanged or refinanced, (iii) the aggregate principal amount of the Debt
so incurred or Guaranteed that is required to be repaid, on a cumulative
basis, through any date (a "date of determination") prior to the Final
Maturity Date shall not exceed the aggregate principal amount of the Debt
so exchanged or refinanced that would have been required to have been
repaid, on a cumulative basis, after the date of the relevant exchange or
refinancing and on or before the same date of determination and (iv) no
restriction is imposed on any of the Combined Companies in connection with
the Debt so incurred or Guaranteed that is more restrictive than the
provisions of this Agreement (or, if more restrictive, the provisions of
the documents applicable to the Debt so exchanged or refinanced);
(e) Guarantees of Debt of other Subsidiaries permitted by this
Section;
(f) Debt of any Person that becomes a Subsidiary after the Closing
Date and any other Debt assumed by a Subsidiary after the Closing Date in
connection with the acquisition of one or more health care facilities or
other businesses; provided in each case that such Debt was outstanding
before such Person became a Subsidiary or such facility or business was
acquired, as the case may be, and was not incurred in contemplation
thereof;
(g) Debt evidenced by bonds issued by such Subsidiary to tenants
of residential units of New Pond Village in Walpole, Massachusetts or The
Greens at
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Hanover in Nashua, New Hampshire evidencing the obligation to repay at the
end of their tenancies amounts paid by them at the beginning of their
tenancies, provided that the aggregate outstanding principal amount of all
bonds referred to in this clause (g) and Section 5.07(h) (including any
such bonds outstanding on the Closing Date) does not exceed $55,000,000;
(h) letters of credit issued to provide credit support for IRB
Debt and reimbursement obligations in respect of drawings thereunder,
provided that such IRB Debt is otherwise permitted under Section 5.07 or
this Section 5.08;
(i) Debt incurred or assumed after the Closing Date for the
purpose of financing all or any part of the cost of acquiring or
constructing an asset of such Subsidiary; provided that (i) such Debt is
secured by a Lien on such asset that is permitted by Section 5.09(e) and
(ii) the aggregate outstanding principal amount of all Debt permitted by
this clause (i) and Section 5.07(j) does not at any time exceed
$25,000,0000; and
(j) any other Debt incurred by such Subsidiary after the Closing
Date or any other Guarantees entered into by such Subsidiary after the
Closing Date; provided that the aggregate outstanding principal amount of
all Debt incurred or Guaranteed by Subsidiaries pursuant to this clause (j)
shall not at any time exceed $25,000,000.
SECTION 5.09. Negative Pledge. After the Closing Date, Vencor will
not, and will not permit any Subsidiary to, create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, except:
(a) Liens created pursuant to the Collateral Documents and the
Project Mortgages;
(b) Liens existing on the Closing Date (other than Liens permitted
by clause (a) above) securing Debt outstanding on the Closing Date in an
aggregate principal amount not exceeding $200,000,000;
(c) any Lien existing on any asset prior to the acquisition
thereof by Vencor or such Subsidiary and not created in contemplation of
such acquisition;
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(d) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary of Vencor or merges into Vencor or any of its
Subsidiaries; provided that such Lien was not created in contemplation of
such event;
(e) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset, provided that such Lien attaches to such asset
concurrently with or within 180 days after the acquisition or completion of
construction thereof and attaches to no asset other than such asset so
financed;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that the principal amount of such Debt is
not increased and such Debt is not secured by any additional assets;
(g) Permitted Encumbrances;
(h) Liens arising in the ordinary course of business (other than
Liens of the types described in the definition of "Permitted Encumbrances")
which (i) do not secure Debt, (ii) do not secure any single obligation (or
series of related obligations) in an amount exceeding $5,000,000; provided
that the limitation in this clause (ii) shall not apply to Liens securing
worker's compensation, unemployment insurance and other types of social
security, and (iii) do not in the aggregate materially detract from the
value of the assets of Vencor and its Subsidiaries, taken as a whole, or
materially impair the use thereof in the operation of their business;
(i) other Liens securing Debt of Vencor not exceeding $25,000,000
in aggregate outstanding principal amount; and
(j) other Liens securing Debt of Subsidiaries not exceeding
$25,000,000 in aggregate outstanding principal amount.
SECTION 5.10. Consolidations, Mergers and Asset Sales. Vencor will
not, and will not permit any Subsidiary (except Ventech Systems, Inc.) to,
consolidate or merge with or into, or sell, lease or otherwise dispose of all
or substantially all of its assets to, any other Person, except
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that of Vencor may merge with any Person if Vencor is the surviving corporation
and if immediately after such merger (and giving effect thereto) no Default
shall have occurred and be continuing and (ii) any Subsidiary may merge or
consolidate with or into, or transfer all or substantially all of its assets
to, any Person if immediately after such transaction (and giving effect
thereto) no Default shall have occurred and be continuing and either (A) the
surviving corporation or transferee is Vencor or a Subsidiary or (B) such
merger, consolidation or transfer of all or substantially all assets is in
conjunction with a disposition by Vencor and its Subsidiaries of their entire
investment in such Subsidiary and such disposition is not prohibited by any
provision of the Financing Documents (other than this Section). No merger,
consolidation or transfer of all or substantially all of the assets of any
Subsidiary Borrower shall be permitted under this Section 5.10 unless the
surviving corporation or transferee is Vencor or a Wholly-Owned Domestic
Subsidiary.
SECTION 5.11. Restricted Payments. Unless Vencor has an Investment
Grade Rating, Vencor will not, and will not permit any Subsidiary to, declare
or make any Restricted Payment on or after the Closing Date, except:
(a) payments made with respect to Equity Securities of Hillhaven
pursuant to and as described in the Merger Agreement;
(b) prepayments or purchases of any Convertible Subordinated
Debt that is not converted into common stock after Vencor calls such
Convertible Subordinated Debt for prepayment or offers to purchase such
Convertible Subordinated Debt;
(c) any distribution of shares of Ventech Systems, Inc. by Vencor
to its own shareholders; and
(d) any other Restricted Payment if, immediately after such
Restricted Payment is declared or made, the aggregate amount of all
Restricted Payments declared or made after the Closing Date (excluding
those permitted by clauses (a), (b) and (c) of this Section) does not
exceed the sum of (i) $10,000,000, (ii) 10% of Consolidated Net Income for
the period (considered as one accounting period) from the end of the Fiscal
Quarter in which the Closing Date occurs to the end of the last Fiscal
Quarter ending before such Restricted Payment is declared or made, and
(iii) the net cash
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proceeds received by Vencor after the Closing Date from the sale of
shares of its common stock;
provided that in no event shall Vencor or any Subsidiary declare or make any
Restricted Payment pursuant to clause (c) or (d) of this Section if,
immediately before or after giving effect thereto, any Default shall have
occurred and be continuing.
SECTION 5.12. Limitation on Investments in Minority-Owned Affiliates.
After the Closing Date none of the Combined Companies will make, acquire or
hold any Investment in any Minority-Owned Affiliate, except
(i) Investments existing on the Closing Date in Minority-Owned
Affiliates existing on the Closing Date and identified on Schedule III
hereto;
(ii) payments made pursuant to a Guarantee of Debt of
Minority-Owned Affiliates, provided that such Guarantee is not prohibited
by Section 5.07 or 5.08;
(iii) working capital loans to Minority-Owned Affiliates not at any
time exceeding $30,000,000 in aggregate outstanding principal amount; and
(iv) any other Investment made after the Closing Date; provided
that, immediately after such Investment is made, the aggregate amount of
all Investments made after the Closing Date pursuant to this clause (iv)
does not exceed 5% of Consolidated Net Worth.
For purposes of clause (iv) of this Section, the amount of each Investment
shall be deemed to be the original amount invested less any principal repaid or
capital returned, but not less than zero.
SECTION 5.13. Transactions with Affiliates. After the Closing Date,
none of the Combined Companies 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 provisions of this
Section shall not prohibit:
(a) any Combined Company from making any Investment in
Minority-Owned Affiliates permitted by Section 5.12;
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(b) any Combined 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,
if such sales or purchases are made or such services are rendered in the
ordinary course of business and on terms and conditions at least as
favorable to such Combined Company as the terms and conditions which would
apply in a similar transaction with a Person not an Affiliate;
(c) any Combined Company from making payments of principal,
interest and premium on any Debt of such Combined Company held by an
Affiliate if the terms of such Debt are substantially as favorable to such
Combined Company as the terms which could have been obtained at the time of
the creation of such Debt from a lender which was not an Affiliate;
(d) any Combined Company from participating in, or effecting any
transaction in connection with, any joint enterprise or other joint
arrangement with any Affiliate if such Combined Company participates in the
ordinary course of its business and on a basis no less advantageous than
the basis on which such Affiliate participates;
(e) any Combined Company from maintaining, entering into or
adopting any executive or employee incentive or compensation plan, contract
or other arrangement (including any loans or extensions of credit in
connection therewith), or any arrangement to terminate any of the
foregoing, if such plan, contract, or arrangement has been or is approved
either (i) at any time by the shareholders of Vencor prior to the Merger,
by the shareholders of Hillhaven, in each case in accordance with such
voting requirements as may be applicable, or (ii) at any time by the board
of directors of Vencor or, prior to the Merger, by the board of directors
of Hillhaven (or in each case a duly constituted committee of such board)
at a meeting at which a quorum of disinterested directors is present;
(f) any Combined Company from making any loan, guarantee or other
accommodation in accordance with Vencor's policies and practices concerning
employee relocation in the ordinary course of its business; or
(g) performance of the Affiliate Agreements.
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SECTION 5.14. Limitation on Restrictions Affecting Subsidiaries. None
of the Combined Companies will enter into, or suffer to exist, any agreement
(other than the Financing Documents) which prohibits or limits the ability of
any Subsidiary to (i) pay dividends or make other distributions or pay any Debt
owed to Vencor or any of its Subsidiaries, (ii) make loans or advances to
Vencor or any of its Subsidiaries 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 Borrower under any
Financing Document; provided that the foregoing shall not prohibit any such
prohibition or limitation contained in
(a) the NME Guarantee Reimbursement Agreement, insofar as the
provisions thereof in effect immediately before the Closing Date limit
grants to other Persons of Liens on assets of any Subsidiary of Hillhaven;
(b) the reimbursement and other agreements relating to existing
letters of credit issued to support outstanding industrial revenue bonds
the proceeds of which were used by First Healthcare and its Subsidiaries to
acquire the Valley Gardens Health Care Center located in Stockton,
California and the Meridian House retirement housing facility located in
Lantan, Florida, insofar as the provisions thereof in effect on the Closing
Date prohibit distributions to partners of the partnerships which own such
facilities unless certain cash flow tests have been satisfied;
(c) any document relating to Debt secured by a Lien permitted by
Section 5.09, insofar as the provisions thereof limit grants of junior
liens on the assets securing such Debt;
(d) any agreement relating to IRB Debt insofar as the provisions
thereof limit grants to other Persons of Liens on the related health care
facility or on any such IRB Debt held by the remarketing agent with respect
thereto (or, in cases where the obligor thereon is a partnership, on any
other assets of such partnership);
(e) any operating lease or capital lease, insofar as the
provisions thereof limit grants of a security interest in, or other
assignments of, the related leasehold interest to any other Person; or
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(f) if a Person (other than Hillhaven and its Subsidiaries)
becomes a Subsidiary of Vencor after the date hereof, any agreement that is
binding on such Person and was not entered into in contemplation of its
becoming a Subsidiary of Vencor, insofar as such agreement limits such
Person's ability to take any action described in clause (i), (ii) or (iii)
of this Section, provided that either:
(1) such limitation is terminated within 60 days after such
Person becomes a Subsidiary of Vencor or
(2) not more than 5% of Consolidated EBITDA for any period
of four consecutive Fiscal Quarters is attributable, in the aggregate,
to Persons that become Subsidiaries of Vencor after the date hereof
and remain subject to such limitations more than 60 days after
becoming Subsidiaries of Vencor.
SECTION 5.15. No Modification of Certain Documents Without Consent.
(a) None of the Combined Companies will consent to or solicit any amendment or
supplement to, or any waiver or other modification of, any Affiliate Agreement
if the effect thereof would be to increase the amount, or to accelerate the
date of payment, of any obligation of any of the Combined Companies thereunder.
(b) None of the Combined Companies will consent to or solicit any
amendment or supplement to, or any waiver or other modification of, any
agreement or instrument evidencing or governing the 10 1/8% Subordinated Notes
or any Convertible Subordinated Debt if the effect thereof would be adverse in
any respect to the Banks.
SECTION 5.16. Minimum Consolidated Net Worth. Consolidated Net Worth
will at no time be less than the Minimum Compliance Level. The "Minimum
Compliance Level" means, at any date (the "date of determination"), an amount
equal to the sum of (i) $480,000,000 plus (ii) for each Fiscal Quarter ended
after September 30, 1995 and on or prior to the date of determination for which
Consolidated Net Income is a positive number, an amount equal to 50% of such
positive number plus (iii) the net amount (after deducting all applicable
transaction expenses) by which Consolidated Net Worth shall have been increased
after June 30, 1995 and on or prior to the date of determination from the
conversion of Convertible Subordinated Debt.
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The Minimum Compliance Level shall not be reduced if Consolidated Net Income
for any Fiscal Quarter is a negative number.
SECTION 5.17. Leverage Ratio. At the end of each Fiscal Quarter (a
"Quarterly Measurement Date"), the ratio of (x) Consolidated Debt for Borrowed
Money to (y) Consolidated EBITDA for the four consecutive Fiscal Quarters then
ended will not exceed the ratio set forth below opposite the period in which
such Quarterly Measurement Date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 1995 through
September 30, 1996 3.50 to 1
October 1, 1996 through
September 30, 1997 3.00 to 1
October 1, 1997
and thereafter 2.50 to 1
</TABLE>
For purposes of calculating the foregoing ratio at any Quarterly Measurement
Date, if any corporation or other entity shall have been acquired by any of the
Combined Companies during the relevant period of four consecutive Fiscal
Quarters, Consolidated EBITDA for such period shall be calculated as if such
corporation or other entity had been acquired at the beginning of such period,
to the extent that the relevant financial information with respect to it for
the portion of such period prior to such acquisition can be determined with
reasonable accuracy.
SECTION 5.18. Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter (a "Quarterly Measurement Date"), the ratio of (i) Consolidated EBITDAR
for the four consecutive Fiscal Quarters then ended to (ii) the sum of
Consolidated Interest Expense and Consolidated Rental Expense for the same four
Fiscal Quarters will not be less than the ratio set forth below opposite the
period in which such Quarterly Measurement Date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 1995 through
September 30, 1996 2.25 to 1
October 1, 1996 through
September 30, 1997 2.50 to 1
October 1, 1997
and thereafter 2.75 to 1
</TABLE>
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ARTICLE VI
DEFAULTS
SECTION 6.01. Defaults. If one or more of the following events
("Events 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, fees or other amount payable
hereunder shall not be paid within three Domestic Business Days after the
due date thereof; or
(b) Vencor shall fail to observe or perform any covenant contained
in Section 5.01(e), Section 5.01(f) or Sections 5.07 through 5.18,
inclusive; or
(c) Vencor 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 Vencor by the Documentation Agent at the request
of any Bank; or
(d) any representation, warranty, certification or statement made
by any Borrower 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
(e) the Combined Companies shall fail to make any payment in
respect of Material Debt when due or within any period of grace applicable
to such payment; or
(f) any event or condition (other than the Merger and the change
in control of Hillhaven and its Subsidiaries effected thereby) shall occur
that (i) results in the acceleration of the maturity of any Financial
Accommodation, or (ii) enables the holder or holders of such Financial
Accommodation or any Person acting on behalf of such holder or holders to
accelerate the maturity thereof, and the aggregate amount that would be
payable by the Combined Companies upon the acceleration of all Financial
Accommodations referred to in clauses (i) and (ii) above equals or exceeds
$25,000,000; or
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(g) any of the Combined Companies shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against any of the Combined Companies seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
any of the Combined Companies under the Federal bankruptcy laws as now or
hereafter in effect; or
(i) 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 Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more
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members of the ERISA Group to incur a current payment obligation in excess
of $1,000,000; or
(j) one or more Enforceable Judgments for the payment of money
aggregating in excess of $20,000,000 shall be rendered against one or more
of the Combined Companies (net of any portion thereof covered by insurance
as to which the insurance carrier has acknowledged its responsibility); or
(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the SEC under said Act) of 35% or more of the outstanding shares of
common stock of Vencor; or, during any period of 24 consecutive calendar
months, individuals who were members of the board of directors of Vencor or
Hillhaven on the first day of such period shall cease to constitute a
majority of the board of directors of Vencor; or
(l) any Lien created by any of the Collateral Documents shall at
any time fail to constitute a valid and perfected Lien on all of the
Collateral purported to be subject to such Lien, subject to no prior or
equal Lien (except Permitted Liens on Optional Additional Collateral) or
any Borrower shall so assert in writing; or
(m) any provision of Article IX shall cease to be in full force
and effect with respect to Vencor, or Vencor or any Person acting on behalf
of Vencor shall so assert in writing;
then, and in every such event, the Documentation Agent shall:
(i) if requested by Banks having more than 50% in aggregate amount
of the Revolving Credit Commitments and unused Term Commitments (if then in
effect), by notice to Vencor terminate the Commitments and they shall
thereupon terminate;
(ii) if requested by Banks having more than 50% of the aggregate
amount of the LC Exposures, by notice to each LC Issuing Bank instruct such
LC Issuing Bank (x) not to extend the expiry date of any outstanding Letter
of Credit and/or (y) in the case of any Evergreen Letter of Credit, to give
notice to the beneficiary
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thereof terminating such Letter of Credit as soon as is permitted by the
provisions thereof, 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 relevant Borrower; and
(iii) if requested by Banks holding Notes evidencing more than 50%
in aggregate outstanding principal amount of the Loans, by notice to each
Borrower declare its Notes (together with accrued interest thereon) to be,
and such Notes shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower;
provided that in the case of an Event of Default specified in Section 6.01(g)
or (h) with respect to any Borrower, without any notice to any Borrower or any
other act by the Documentation Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (together with accrued interest thereon)
shall become immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by each Borrower.
SECTION 6.02. Notice of Default. The Documentation Agent shall give
notice to Vencor under Section 6.01(c) promptly upon being requested to do so
by any Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Cover. Each Borrower agrees, in addition to the
provisions of Section 6.01, that upon the occurrence and during the continuance
of any Event of Default, it shall, if requested by the Documentation Agent upon
instruction from Banks having more than 50% of the aggregate amount of the LC
Exposures, pay (and, in the case of any of the Events of Default specified in
Section 6.01(g) or (h) with respect to any Borrower, forthwith, without any
demand or the taking of any other action by the Documentation Agent or any
Bank, it shall pay) to the Collateral Agent an amount in immediately available
funds equal to the then aggregate amount available for subsequent drawings
under all outstanding Letters of Credit issued for the account of such Borrower
to be held for the benefit of the Banks 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.
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ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization. (a) Each Bank
irrevocably appoints the Documentation Agent to act as its agent in connection
herewith and authorizes the Documentation Agent to take such action as agent on
such Bank's behalf and to exercise such powers under the Financing Documents as
are delegated to the Documentation Agent by the terms thereof, together with
all such powers as are reasonably incidental thereto.
(b) Each Bank 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 Bank'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.
(c) Each of the Banks, the LC Issuing Banks, the Documentation
Agent 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 7.02. Agents and Affiliates. Each of Morgan, NationsBank and
Morgan Delaware shall have the same rights and powers under this Agreement as
any other Bank and may exercise or refrain from exercising the same as though
it were not one of the Agents. Each of Morgan, NationsBank and Morgan Delaware
and their respective affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with any of the Combined Companies or
their Affiliates as if it were not one of the Agents.
SECTION 7.03. 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 VI hereof and in the Collateral Documents.
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SECTION 7.04. Consultation with Experts. Each of the Agents may
consult with legal counsel (who may be counsel for a Borrower), 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 7.05. 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 Banks 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 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 Borrower under any Financing Document; (iii) the satisfaction of any
condition specified in Article III except, in the case of the Documentation
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, 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 7.06. Indemnification. The Banks shall, ratably in accordance
with their respective Credit Exposures, indemnify each Agent, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrowers) 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.
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SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agents or any other Bank, 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 Bank also
acknowledges that it will, independently and without reliance upon the Agents
or any other Bank, 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 7.08. Agents' Fees. Vencor shall pay fees to each of the
Agents in the amounts and at the times agreed to by Vencor and such Agent.
SECTION 7.09. Successor Agents. Each of the Agents may resign at any
time (a "Retiring Agent") by giving notice thereof to the Banks, the other
Agents and Vencor. Upon any such resignation, the Required Banks 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 Banks, 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
Banks, appoint a Successor Agent, which shall be a Bank or any other 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 $500,000,000.
Upon the acceptance of its appointment as a Successor Agent, such Successor
Agent shall thereupon 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 VII shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was one of the
Agents.
SECTION 7.10. 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 Banks 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
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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 any Borrower.
SECTION 7.11. Obligations of Co-Agents. The Co-Agents in their
capacities as such, shall have no duties, obligations or liabilities of any
kind hereunder.
ARTICLE VIII
CHANGES IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Group of
Euro-Dollar Loans or CD Loans:
(a) the Administrative Agent is advised by NationsBank that
deposits in dollars (in the applicable amounts) are not being offered to it
in the relevant market for such Interest Period, or
(b) Banks holding Notes evidencing 50% or more of the aggregate
outstanding principal amount of the Loans to which such Interest Period
will apply advise the Administrative Agent that the London Interbank
Offered Rate or the Adjusted CD Rate, as the case may be, as determined by
the Administrative Agent will not adequately and fairly reflect the cost to
such Banks of funding their Euro-Dollar Loans or CD Loans, as the case may
be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to Vencor and the
Banks, whereupon until the Administrative Agent notifies Vencor that the
circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make Euro-Dollar Loans or CD Loans, as the case may
be, or to convert outstanding Loans of a different Interest Type to Euro-Dollar
Loans or CD Loans, as the case may be, shall be suspended and (ii) each
outstanding Euro-Dollar
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Loan or CD Loan, as the case may be, shall be converted into a Base Rate Loan
on the last day of the then current Interest Period applicable thereto. Unless
the relevant Borrower notifies the Administrative Agent at least two Domestic
Business Days before the date of any Euro-Dollar Borrowing or CD Borrowing, as
the case may be, for which a Notice of Borrowing has previously been given that
it elects not to borrow on such date, such Borrowing shall instead be made as a
Base Rate Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
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 Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks and
Vencor, whereupon until such Bank notifies Vencor and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding
Base Rate Loans or CD Loans into Euro-Dollar Loans, shall be suspended. Before
giving any notice to the Administrative Agent pursuant to this Section 8.02,
such Bank shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (i) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (ii) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If, on or after
the date of this Agreement, 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
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agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Applicable Lending Office) 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 but
excluding (i) with respect to any Euro-Dollar Loan, any such requirement
included in an applicable Euro-Dollar Reserve Percentage and (ii) with respect
to any CD Loan, any such requirement included in an applicable Domestic Reserve
Percentage) against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) or the London interbank market or the
United States market for certificates of deposit any other condition affecting
its Euro-Dollar Loans or CD Loans, its Notes or its obligation to make
Euro-Dollar Loans or CD Loans, and the result of any of the foregoing is to
increase the cost to such Bank (or its Applicable Lending Office) of making or
maintaining its Euro-Dollar Loans or its CD Loans, or to reduce the amount of
any sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Notes with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after demand by such
Bank (with a copy to the Administrative Agent), the relevant Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction; provided that the relevant Borrower shall not
be liable to any Bank in respect of any such increased cost or reduction with
respect to any period of time more than three months before Vencor receives the
notice required by the first sentence of Section 8.03(c) or more than six
months before Vencor receives the relevant certificate referred to in the
second sentence of Section 8.03(c).
(b) If any Bank shall have determined that, after the date of this
Agreement, 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 Bank (or its Parent) as a consequence of such Bank's
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obligations hereunder to a level below that which such Bank (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 Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Administrative Agent), Vencor
shall pay to such Bank such additional amount or amounts as will compensate
such Bank (or its Parent) for such reduction; provided that Vencor shall not be
liable to any Bank 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 8.03(c).
(c) Each Bank will promptly notify Vencor and the Administrative
Agent of any event of which it has knowledge, occurring after the date of this
Agreement, which will entitle such Bank to compensation pursuant to this
Section 8.03 and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. A certificate of any Bank claiming compensation under this Section
8.03 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
Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) Any and all payments by any Borrower to or
for the account of any Bank, any LC Issuing Bank or any Agent hereunder or under
any other 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 Bank, each LC Issuing Bank and each Agent, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which it is organized or any political subdivision thereof and, in the
case of each Bank, taxes imposed on its income, and franchise or similar taxes
imposed on it, by the jurisdiction of such Bank's Applicable Lending 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 Borrower shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder or under any other
Financing Document to any Bank, any LC Issuing Bank or any
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Agent, (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 8.04) such Bank, LC Issuing Bank or Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions,
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (iv) such
Borrower 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, Vencor agrees 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, this Agreement or any other Financing Document (hereinafter
referred to as "Other Taxes").
(c) Vencor agrees to indemnify each Bank, LC Issuing Bank and
Agent 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 8.04) paid by such Bank, LC Issuing Bank or Agent (as the case may be)
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 Bank, LC Issuing Bank or Agent (as the case may be)
makes demand therefor.
(d) Each Bank 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 Bank listed on the signature pages hereof
and on or prior to the date on which it becomes a Bank in the case of each
other Bank, and from time to time thereafter if requested in writing by Vencor
(but only so long as such Bank remains lawfully able to do so), shall provide
Vencor and the Administrative Agent with Internal Revenue Service form 1001 or
4224, as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Bank 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 or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States. If the form provided by a
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Bank at the time such Bank 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 considered excluded from "Taxes" as defined in Section
8.04(a).
(e) For any period with respect to which a Bank has failed to
provide Vencor and the Administrative Agent with the appropriate form pursuant
to Section 8.04(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 Bank shall not be entitled to indemnification
under Section 8.04(a) with respect to Taxes imposed by the United States;
provided that should a Bank, 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, each Borrower shall take such steps as
such Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If any Borrower is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 8.04, then such Bank will
change the jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such change,
in the sole judgment of such Bank, is not otherwise disadvantageous to such
Bank.
(g) Without prejudice to the survival of any other agreement of
any Borrower hereunder, the agreements and obligations of each Borrower
contained in this Section 8.04 shall survive the payment in full of the
principal of and interest on the Notes and the LC Reimbursement Obligations.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (x) the obligation of any Bank to make or maintain Euro-Dollar
Loans has been suspended pursuant to Section 8.02 or (y) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans
and Vencor shall, by at least five Euro-Dollar Business Days' prior notice to
such Bank through the Administrative Agent, have elected that the provisions of
this Section 8.05 shall apply to such Bank, then, unless and until such Bank
notifies Vencor that the circumstances giving rise to such suspension or demand
for compensation no longer exist:
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(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) Euro-Dollar Loans shall instead be Base
Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks),
and
(b) after each of its Euro-Dollar Loans has been repaid (or
converted to a Base Rate Loan), all payments of principal which would
otherwise be applied to repay such Euro-Dollar Loans shall be applied to
repay its Base Rate Loans to the relevant Borrower instead.
If such Bank notifies Vencor that the circumstances giving rise to such notice
no longer apply, the principal amount of each such Domestic Loan shall be
converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of Banks. If any Bank (a "Selling Bank")
(i) gives notice pursuant to Section 8.02 that it is unlawful or impossible for
such Bank to make, maintain or fund its Euro-Dollar Loans or (ii) demands
compensation under Section 2.06(l), 8.03 or 8.04, Vencor shall have the right,
with the assistance of the Documentation Agent, to seek one or more banks or
other institutions (collectively, the "Purchasing Banks") willing to purchase
the Notes of the Selling Bank and its participation in any outstanding LC
Reimbursement Obligations and to assume the Selling Bank's Revolving Credit
Commitment, its unused Term Commitment (if any) and its participation in the LC
Liabilities on the terms specified in this Section 8.06; provided that any such
purchase and assumption by a Purchasing Bank that is not already a Bank shall
be subject to the consent of the Administrative Agent and each LC Issuing Bank
(which consents shall not be unreasonably withheld). The Selling Bank shall be
obligated to sell its Notes and its participation in any outstanding LC
Reimbursement Obligations to such Purchasing Bank or Banks (which may include
one or more of the Banks) within 15 days after receiving notice from Vencor
requiring it to do so, at an aggregate price equal to the outstanding principal
amount thereof plus unpaid interest accrued thereon up to but excluding the
date of sale. In connection with any such sale, and as a condition thereof,
Vencor shall pay to the Selling Bank all commitment fees and letter of credit
fees accrued for its account hereunder to but excluding the date of such sale,
plus, if demanded by the Selling Bank at least
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two Domestic Business Days prior to such sale, (i) the amount of any
compensation which would be due to the Selling Bank under Section 2.11 if the
relevant Borrowers had prepaid the outstanding Euro-Dollar Loans of the Selling
Bank on the date of such sale and (ii) any additional compensation accrued for
its account under Section 8.03 to but excluding said date. Upon such sale, the
Purchasing Bank or Banks shall assume the Selling Bank's Revolving Credit
Commitment, its unused Term Commitment (if any) and its participation in the LC
Liabilities, and the Selling Bank shall be released from its obligations
hereunder to a corresponding extent. If any Purchasing Bank is not already one
of the Banks, the Selling Bank, as assignor, such Purchasing Bank, as assignee,
the Administrative Agent and each LC Issuing Bank shall enter into an
appropriate assignment and assumption agreement, whereupon such Purchasing Bank
shall be a Bank party to this Agreement, shall be deemed to be an Assignee
hereunder and shall have all the rights and obligations of a Bank with a
Revolving Credit Commitment and unused Term Commitment (if any) equal to its
ratable share of the Revolving Credit Commitment and unused Term Commitment (if
any) of the Selling Bank and with a participation in the LC Liabilities equal
to its ratable share of the Selling Bank's participation in the LC Liabilities.
Upon the consummation of any sale pursuant to this Section 8.06, the Selling
Bank, the Administrative Agent and the Borrowers shall make appropriate
arrangements so that, if required, each Purchasing Bank receives new Notes
complying with the provisions of Section 2.03.
ARTICLE IX
GUARANTEE BY VENCOR
SECTION 9.01. The Guarantee. Vencor unconditionally and irrevocably
guarantees the full and punctual payment of all present and future indebtedness
and other obligations of each Subsidiary Borrower evidenced by or arising out
of any Financing Document, including the full and punctual payment of principal
of and interest on the Notes of each Subsidiary Borrower and the full and
punctual payment of all other sums now or hereafter owed by any Subsidiary
Borrower 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
Subsidiary
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Borrower, whether or not allowed or allowable as a claim in any such
proceeding). If any Subsidiary Borrower fails punctually to pay the
indebtedness and other obligations guaranteed by Vencor hereby, Vencor
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 Subsidiary Borrower.
SECTION 9.02. Guarantee Unconditional. The obligations of Vencor
under this Article IX 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 Subsidiary Borrower 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 Subsidiary Borrower under any
Financing Document;
(d) any change in the corporate existence, structure or ownership
of any Subsidiary Borrower, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting any Subsidiary Borrower or its
assets, or any resulting release or discharge of any obligation of any
subsidiary Borrower contained in any Financing Document;
(e) the existence of any claim, set-off or other rights which
Vencor or any subsidiary Borrower may have at any time against any Bank,
any LC Issuing Bank, any Agent or any other Person, whether or not arising
in connection with this 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
Subsidiary Borrower for any reason of any Financing Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Subsidiary Borrower of the principal of or interest
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on any Note or any other amount payable by it under any Financing
Document; or
(g) any other act or omission to act or delay of any kind by any
Subsidiary Borrower, any Bank, any LC Issuing Bank, any Agent or any other
Person or any other circumstance whatsoever that might, but for the
provisions of this Section 9.02, constitute a legal or equitable discharge
of Vencor's obligations under this Article IX.
SECTION 9.03. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Vencor's obligations under this Article IX constitute a
continuing guaranty and shall remain in full force and effect until the
Commitments of each Bank shall have terminated and the Credit Exposure of each
Bank shall have been reduced to zero and all amounts payable by each Subsidiary
Borrower under the Financing Documents shall have been paid in full. If at any
time any payment of the principal of or interest on any Note or any other
amount payable by any Subsidiary Borrower under any Financing Document is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of such Subsidiary Borrower or otherwise, Vencor's
obligations under this Article IX 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 9.04. Waiver. Vencor irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against any
Subsidiary Borrower or any other Person or against any security.
SECTION 9.05. Subrogation. Upon making any payment with respect to
the obligations of any Subsidiary Borrower hereunder, Vencor shall be subrogated
to the rights of the payee against such Subsidiary Borrower with respect to such
payment; provided that Vencor shall not enforce any payment by way of
subrogation against such Subsidiary Borrower so long as any Bank has any
Commitment to such Subsidiary Borrower hereunder or any Credit Exposure to such
Subsidiary Borrower hereunder or any interest or fees payable by such Subsidiary
Borrower hereunder remain unpaid.
SECTION 9.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Subsidiary Borrower under any Financing
Document is
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stayed upon the insolvency, bankruptcy or reorganization of such Subsidiary
Borrower, all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by Vencor hereunder forthwith on
demand by the Documentation Agent made at the request of the requisite number
of Banks specified in Section 6.01.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
OF ADDITIONAL BORROWERS
Each Wholly-Owned Domestic Subsidiary that becomes an Additional
Borrower pursuant to Section 2.14 shall, by signing and delivering its Election
to Participate, represent and warrant as of the date thereof that:
SECTION 10.01. Corporate Existence and Power. It is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is, and at the time of each Borrowing by it
hereunder will be, a Wholly-Owned Domestic Subsidiary.
SECTION 10.02. Corporate and Governmental Authorization; No
Contravention. The execution and delivery by it of its Election to Participate
and its Notes, and the performance by it of its obligations under this
Agreement and its Notes, are within its corporate powers, have been duly
authorized by all necessary corporate 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 Charter Documents, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon Vencor or such
Additional Borrower or result in the creation or imposition of any Lien on any
asset of Vencor or any of its Subsidiaries.
SECTION 10.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of such Additional Borrower and its Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of such Additional Borrower, in each case enforceable in accordance
with its terms, except as may be limited by (i) bankruptcy, insolvency or other
similar laws affecting the rights and remedies of creditors generally and (ii)
general principles of equity.
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ARTICLE XI
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, telex, facsimile copy or
similar writing) and shall be given to such party at its address or telex or
facsimile number set forth on the signature pages hereof (or, in the case of
any Bank, in its Administrative Questionnaire) or such other address or telex
or facsimile number as such party may hereafter specify for the purpose by
notice to the Agents and Vencor. Each such notice, request or other
communication shall be effective (i) is given by telex, when such telex is
transmitted to the telex number specified in this Section 11.01 and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number referred to in this Section 11.01 and
confirmation of receipt is received, (iii) if given by mail, ten days after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iv) if given by any other means, when delivered at
the address specified in this Section 11.01, provided that notices to the
Documentation Agent or the Administrative Agent under Article II or VIII shall
not be effective until received.
SECTION 11.02. No Waiver. No failure or delay by the Agents, the
Banks or the LC Issuing Banks, 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) Vencor shall pay on
demand (i) all reasonable out-of-pocket expenses of the Documentation Agent and
the Collateral Agent (including reasonable fees and disbursements of Davis Polk
& Wardwell, special counsel for the Agents) in connection with the preparation
and administration of the Financing Documents, any waiver, consent or amendment
of any provision thereof, or any Default or alleged Default hereunder, and (ii)
if any, Event of Default occurs, all out-of-pocket expenses incurred by any
Bank, LC Issuing Bank or Agent, including fees and disbursements of counsel
(including internal charges
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reasonably allocated to services performed by in-house counsel), in connection
with such Event of Default and collection and other enforcement proceedings
resulting therefrom.
(b) Vencor shall indemnify each Bank, LC Issuing Bank and Agent,
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind (including the reasonable fees and disbursements of
counsel for any Indemnitee in connection with any investigative, administrative
or judicial proceeding, whether or not such Indemnitee shall be designated a
party thereto, and any Environmental Liabilities) which may be incurred by any
Indemnitee relating to or arising out of the Financing Documents or any actual
or proposed use of the proceeds of the Loans or the Letters of Credit; provided
that no Indemnitee shall have the right to be indemnified hereunder for its own
gross negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 11.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
(i) payment of a proportion of the aggregate amount of principal and interest
due with respect to any Note of any Borrower held by it which is greater than
the proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note of such Borrower
(evidencing Loans of the same Class) held by such other Bank or (ii) payment of
a proportion of its participation in the LC Liabilities of any Borrower which
is greater than the proportion received by any other Bank in respect of its
participation in the LC Liabilities of the same Borrower, the Bank receiving
such proportionately greater payment shall purchase such participations in the
relevant Notes or the relevant LC Liabilities (as the case may be) of the other
Banks, and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to the Notes of each
Borrower (evidencing Loans of the same Class) held by the Banks shall be shared
by the Banks pro rata and all such payments with respect to the LC Liabilities
of each Borrower shall be shared by the Banks pro rata; provided that nothing
in this Section 11.04 shall impair the right of any Bank 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 any Borrower other than its
indebtedness
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under its Notes or its LC Liabilities. Each Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note of such Borrower or the LC Liabilities of such
Borrower, 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 such Borrower in the amount of such participation.
SECTION 11.05. Amendments and Waivers. (a) Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrowers and the Required Banks
(and, if the rights or duties of any Agent or LC Issuing Bank are affected
thereby, by it); provided that no such amendment or waiver shall, unless signed
by all the Banks, (i) increase or decrease the Commitment of any Bank (except
for a ratable decrease in the corresponding Commitments of all the Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan or LC Reimbursement Obligation or any fees payable
for the account of the Banks hereunder, (iii) postpone the date fixed for any
scheduled payment or prepayment of principal of or interest on any Loan, any LC
Reimbursement Obligation or any such fees hereunder or for any termination or
reduction of any Commitments pursuant to Section 2.09, (iv) amend Section 11.03
or Article IX or release Vencor from its obligations thereunder or (v) change
the percentage of the Commitments, the Credit Exposures, the LC Exposures or
the aggregate unpaid principal amount of the Notes, or the number of Banks,
which shall be required for the Banks or any of them to take any action under
this Section 11.05 or any other provision of this Agreement.
(b) Any provision of the Security Agreement may be amended as, and
only as, provided in Section 22 thereof. Any provision of any other Collateral
Document may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed or otherwise approved in writing by Vencor and the
Required Banks (and, if the rights or duties of any Agent are affected thereby,
by it).
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 no Borrower may assign
or otherwise transfer any of its rights under this Agreement without the prior
written consent of all the Banks.
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(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitments
or any or all of its Loans or its participations in the LC Liabilities. If any
Bank grants a participating interest to a Participant, whether or not upon
notice to Vencor and the Agents, such Bank shall remain responsible for the
performance of its obligations hereunder, and each Borrower and the Agents
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under the Financing Documents. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrowers 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 Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii), (iii) or
(iv) of Section 11.05(a) without the consent of the Participant and (B) such
Bank will agree to vote the Participant's participating interest with respect
to any matter requiring a vote of the Super-Majority Banks (as defined in the
Security Agreement) under the Security Agreement as the Participant may direct.
Each Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Section 2.06(f) and
Article VIII with respect to its participating interest. An assignment or
other transfer which is not permitted by Section 11.06(c) or (d) shall be given
effect for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this Section 11.06(b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a ratable portion (in the case of
each Assignee, equivalent to initial Commitments aggregating not less than
$15,000,000) of all, of its rights and obligations under this Agreement and the
Notes, and such Assignee shall assume such rights and obligations, with (and
subject to) the consent of Vencor, the Administrative Agent and each LC Issuing
Bank (which consents shall not be unreasonably withheld); provided that (i) if
an Assignee is an affiliate of such transferor Bank or is already a Bank
immediately prior to such assignment, no such consent shall be required, but
written notice of such assignment shall be given to the Administrative Agent
and Vencor and (ii) any such assignment may be made to an Assignee that is
already a Bank without
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regard to the foregoing minimum assignment amount. Upon execution and delivery
of an appropriate instrument and payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, such Assignee shall be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank with a Commitment or
Commitments as set forth in such instrument of assumption, and the transferor
Bank 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 Section 11.06(c), the
transferor Bank, the Administrative Agent and each Borrower shall make
appropriate arrangements so that, if required, new Notes complying with the
provisions of Section 2.03 are issued to the Assignee. In connection with any
such assignment, the transferor Bank shall pay to the Administrative Agent an
administrative fee for processing such assignment in the amount of $2,500. if
the Assignee is not incorporated under the laws of the United States or a state
thereof, it shall deliver to Vencor and the Administrative Agent certification
as to exemption from deduction or withholding of United States federal income
taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Notes as security to a Federal Reserve
Bank. No such assignment shall release the transferor Bank from its
obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 2.06(l),
8.03 or 8.04 than such Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with Vencor's prior
written consent or by reason of the provisions of section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable 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 Banks represents to the
Agents and each of the other Banks that it in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral in the extension
or maintenance of the credit provided for in this Agreement.
SECTION 11.08. Failure of Bank to Satisfy Minimum Rating Condition.
If at any time any Bank fails to satisfy
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<PAGE> 111
the Minimum Rating Condition, such Bank (a "Non-Complying Bank") shall (i)
promptly notify Vencor, the Documentation Agent, the Administrative Agent and
the LC Issuing Banks thereof and (ii) assist the Borrower in seeking one or
more Eligible Banks to purchase its Notes and its participation in any
outstanding LC Reimbursement Obligations and to assume its Revolving Credit
Commitment, its unused Term Commitment (if any) and its participation in the LC
Liabilities. If such a sale and assumption has not been effected within 60
days after such Non-Complying Bank first fails to satisfy the Minimum Rating
Condition, then, for so long as such failure continues, such Non-Complying Bank
shall cause Eligible Collateral to be pledged, or letters of credit to be
issued by one or more Eligible Banks, in favor of each of the LC Issuing Banks,
in each case in an amount at least equal from time to time to the aggregate
amount of such Non-Complying Bank's Revolving Credit Percentage of the LC
Liabilities then outstanding in respect of Letters of Credit issued by such LC
Issuing Bank and otherwise on terms satisfactory to such LC Issuing Bank.
For purposes of this Section 11.08:
(i) the "Minimum Rating Condition" is satisfied by a Bank at any
time if (A) the issuer rating of such Bank or its Parent is then at least
"C" by Thompson BankWatch, Inc. (or its successors) (or, in the case of any
Bank organized under the laws of any jurisdiction outside the United
States, the individual rating of the Bank or its Parent is then at least
"C" by IBCA Limited (or its successors)), (B) the scoring of such Bank or
its Parent is then at least "2" by Thompson BankWatch, Inc. (or its
successors) or (C) long-term unsecured public debt of such Bank or its
Parent is then rated at least "BBB" by S&P and at least "Baa2" by Moody's;
(ii) "Eligible Bank" means any bank or other financial institution
whose (or whose Parent's) long-term unsecured public debt is rated at least
"A-" by S&P or at least "A3" by Moody's; and
(iii) "Eligible Collateral" means (A) cash, (B) direct obligations
of the United States or any agency thereof, or obligations guaranteed by
the United States or any agency thereof, and (C) debt securities of an
issuer incorporated under the laws of the United States or any state
thereof which are rated at least "A" by S&P or "A1" by Moody's, in each
case (except in the case of cash) maturing not more than one year after
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<PAGE> 112
such obligation or security is pledged pursuant to this Section 11.08.
SECTION 11.09. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Borrower 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 this
Agreement or the transactions contemplated hereby. Each Borrower 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 11.10. Counterparts; Integration; Effectiveness. 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. This Agreement shall become effective upon receipt by the
Documentation Agent of counterparts hereof signed by each of the parties hereto
(or, in the case of any party as to which an executed counterpart had not been
received, receipt by the Documentation Agent in form satisfactory to it of
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
SECTION 11.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
AGENTS, THE BANKS AND THE LC ISSUING BANKS HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 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 11.11.
106
<PAGE> 113
SECTION 11.12. Confidentiality. Each Bank agrees to keep the
information contained in the Information Memorandum and any other non-public
information delivered or made available by any Borrower to it confidential and
to use such information only for the purpose of evaluating, approving,
structuring and administering the Loans and the Letters of Credit; provided
that nothing herein shall prevent any Bank from disclosing such information (i)
to persons employed or retained by such Bank who are engaged or expected to be
engaged in evaluating, approving, structuring or administering the Loans and
the Letters of Credit, (ii) to any other person if reasonably incidental to the
administration of the Loans or the Letters of Credit, (iii) to any other Bank
or to any Agent, (iv) pursuant to any subpoena or express direction 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 Bank on a non-confidential basis from a source that
is not, to its knowledge, subject to a confidentiality agreement with Vencor,
(vii) in connection with any litigation to which any of the Agents, the Banks
or their respective subsidiaries or Parents may be a party, (viii) to the
extent necessary in connection with the exercise of any remedy hereunder, (ix)
to such Bank's affiliates, legal counsel and independent auditors and (x) to
any actual or proposed Participant or Assignee that has signed a written
agreement containing provisions substantially similar to this Section 11.12.
Any Bank 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 Bank discloses confidential
information pursuant to clause (iv) or (vii) of the foregoing proviso, such
Bank shall, to the extent permitted by law, advise Vencor of such proposed
disclosure so that Vencor may, in its discretion, seek an appropriate
protective order.
107
<PAGE> 114
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
VENCOR, INC.
By: /s/ W. Earl Reed, III
--------------------------------------
Title: Vice President of Finance and
Development
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
FIRST HEALTHCARE CORPORATION
By: /s/ Robert F. Pacquer
--------------------------------------
Title: Senior Vice President
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: 206-502-3623
With a copy to:
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
108
<PAGE> 115
NORTHWEST HEALTH CARE, INC.
By: /s/ Robert F. Pacquer
---------------------------------------
Title: Senior Vice President
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: 206-502-3623
With a copy to:
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
MEDISAVE PHARMACIES, INC.
By: /s/ Robert F. Pacquer
---------------------------------------
Title: Senior Vice President
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: 206-502-3623
With a copy to:
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
109
<PAGE> 116
HILLHAVEN PROPERTIES, LTD.
By: /s/ Robert F. Pacquer
---------------------------------------
Title: Senior Vice President
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: 206-502-3623
With a copy to:
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ Robert F. Pacquer
---------------------------------------
Title: Senior Vice President
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: 206-502-3623
With a copy to:
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
110
<PAGE> 117
NATIONWIDE CARE, INC.
By: /s/ Robert F. Pacquer
---------------------------------------
Title: Senior Vice President
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: 206-502-3623
With a copy to:
Address: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: 502-569-7499
111
<PAGE> 118
AGENTS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as
Documentation Agent
By: /s/ Diana H. Imhof
---------------------------------------
Title: Vice President
Address: 60 Wall Street
New York, NY 10260
Facsimile: 212-648-5014
J.P. MORGAN DELAWARE,
as Collateral Agent
By: /s/ Robert J. Henchey
---------------------------------------
Title: Vice President
902 Market Street
Wilmington, Delaware 19801
Attention: Robert Henchey
Facsimile number: 302-652-7416
112
<PAGE> 119
NATIONSBANK, N. A. (CAROLINAS),
as Administrative Agent
By: /s/ Ashley M. Crabtree
---------------------------------------
Title: Vice President
For Wire Transfers:
ABA #053000196
Attention: Corporate Credit Services
Account No. 136621-22506
Reference: Vencor
Notices Relating to Operations:
101 North Tryon Street
NCl-001-15-04
Charlotte, NC 20255
Attention: Iris Austin
Tel: 704-386-9372
Fax: 704-386-9923
All Other Communications:
1 NationsBank Plaza, 5th Floor
Nashville, TN 37239-1697
Attention: Ashley Crabtree
Tel: 615-749-3524
Fax: 615-749-4640
CO-AGENTS
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
and a Co-Agent
By: /s/ Ruth Z. Edwards
---------------------------------------
Title: Vice President
113
<PAGE> 120
THE BANK OF NEW YORK, as a Bank and
a Co-Agent
By: /s/ Paula M. DiPonzio
-------------------------------------
Title: Vice President
CHEMICAL BANK, as a Bank and a
Co-Agent
By: /s/ William J. Caggiano
-------------------------------------
Title: Managing Director
CREDIT SUISSE, as a Bank and a
Co-Agent
By: /s/ William P. Murray
-------------------------------------
Title: Member of Senior Management
By: /s/ Kristinn R. Kristinsson
-------------------------------------
Title: Associate
MELLON BANK, N.A., as a Bank and a
Co-Agent
By: /s/ Marsha Wicker
-------------------------------------
Title: Vice President
114
<PAGE> 121
PNC BANK, KENTUCKY, INC., as a Bank
and a Co-Agent
By: /s/ Jefferson M. Green
-------------------------------------
Title: Vice President
TORONTO-DOMINION (TEXAS), INC.,
as a Bank and a Co-Agent
By: /s/ Lisa Allison
-------------------------------------
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA,
N.A., as a Bank and a Co-Agent
By: /s/ Robert G. Brookby
-------------------------------------
Title: Executive Vice President
115
<PAGE> 122
BANKS
BANK OF LOUISVILLE AND TRUST
COMPANY, as a Bank
By: /s/ Roy L. Johnson, Jr.
-------------------------------------
Title: Senior Vice President
BANK ONE, COLUMBUS, NA, as a Bank
By: /s/ James Zook
-------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as a Bank
By: /s/ Joseph Towell
-------------------------------------
Title: Senior Credit Officer
FLEET BANK OF MASSACHUSETTS,
as a Bank
By: /s/ Ginger Stolzenthaler
-------------------------------------
Title: Vice President
116
<PAGE> 123
LTCB TRUST COMPANY, as a Bank
By: /s/ Rene 0. LeBlanc
-------------------------------------
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a Bank
By: /s/ Diana H. Imhof
-------------------------------------
Title: Vice President
NATIONAL CITY BANK, KENTUCKY,
as a Bank
By: /s/ Deroy Scott
-------------------------------------
Title: Vice President
NATIONSBANK, N. A. (CAROLINAS),
as a Bank
By: /s/ Ashley M. Crabtree
-------------------------------------
Title: Vice President
NBD BANK, as a Bank
By: /s/ Gary C. Wilson
-------------------------------------
Title: Vice President
117
<PAGE> 124
U.S. BANK OF WASHINGTON NATIONAL
ASSOCIATION, as a Bank
By: /s/ Matthew S. Thoreson
-------------------------------------
Title: Vice President
LC ISSUING BANKS
NATIONAL CITY BANK, KENTUCKY,
as a LC Issuing Bank
By: /s/ Deroy Scott
-------------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
as a LC Issuing Bank
By: /s/ Karen M. George
-------------------------------------
Title: Commercial Banking Officer
SEATTLE-FIRST NATIONAL BANK,
as a LC Issuing Bank
By: /s/ Thomas P. Rook
-------------------------------------
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA,
N.A., as a LC Issuing Bank
By: /s/ Robert G. Brookby
-------------------------------------
Title: Executive Vice President
118
<PAGE> 1
EXHIBIT 10
INCENTIVE STOCK AWARD AGREEMENT
THIS INCENTIVE STOCK AWARD AGREEMENT (this "Agreement") is made as of
this 28th day of September, 1995 by and among The Hillhaven Corporation, a
Nevada corporation (the "Company"), Vencor, Inc., a Delaware corporation
("Vencor"), and Bruce L. Busby (the "Employee").
WHEREAS, under the Company's 1990 Stock Incentive Plan (the "Plan")
and the Incentive Stock Award Agreement entered into by and between the Company
and the Employee on December 6, 1994 (the "Incentive Award Agreement"), the
Company has agreed, subject to the terms and conditions of the Incentive Award
Agreement, to issue to the Employee up to 350,000 shares of the common stock of
the Company (the "Company Common Stock"), par value $.75 per share (the
"Performance Shares").
WHEREAS, pursuant to the Incentive Award Agreement and the Plan, the
Performance Shares become vested pursuant to a performance schedule set forth
in the Incentive Award Agreement;
WHEREAS, the Company and Vencor have entered into an Amended and
Restated Agreement and Plan of Merger, dated as of April 23, 1995 and as
amended and restated as of July 31, 1995
<PAGE> 2
(the "Merger Agreement"), providing for the merger of the Company with and into
Vencor (the "Merger");
WHEREAS, the Merger Agreement provides that each Performance Share
awarded under the Plan will, upon the effective time of the Merger as defined
in the Merger Agreement (the "Effective Time"), be converted into a performance
share award (the "Vencor Common Stock Award") with respect to the number of
full shares of Vencor common stock, par value $.25 per share ("Vencor Common
Stock"), equal to the product of (i) .75 times the "Conversion Number" (as
defined in the Merger Agreement), and (ii) the number of shares of Company
Common Stock subject to such Performance Share; and
WHEREAS, the Compensation Committee of Vencor (the "Vencor Committee")
has determined that each holder of a Performance Share outstanding immediately
prior to the Effective Time that is converted pursuant to the Merger Agreement
into a Vencor Common Stock Award shall be offered an election to have his or
her Vencor Common Stock Award vest immediately following the Effective Time, in
lieu of being subject to continuing performance criteria, subject to the terms
and conditions set forth herein.
-2-
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and conditions contained herein, the parties hereto agree
as follows:
1. Conversion of Performance Shares. At the Effective Time,
Employee's Performance Shares shall be converted into a Vencor Common Stock
Award for the number of full shares of Vencor Common Stock equal to the product
of (i) .75 times the Conversion Number and (ii) the number of Performance
Shares.
2. Vesting of Vencor Common Stock Award. The parties hereby
agree, pursuant to the election of the Employee as evidenced by his execution
of this Agreement, that immediately following the Effective Time, each Vencor
Common Stock Award shall, subject to the terms and conditions of this
Agreement, vest and shall no longer be subject to any performance criteria or
the risk of forfeiture.
3. Delivery of Vencor Common Stock. Within five (5) days
following the Effective Time (the Scheduled Time"), subject to Section 4 below,
the shares of Vencor Common Stock subject to the Vencor Common Stock Award
shall be delivered by Vencor to the Employee.
4. Deferral of Delivery of Vencor Common Stock.
(a) Deferral. Except as otherwise provided in
-3-
<PAGE> 4
paragraphs 4(b), (c) or (d) below and Section 7(b), if and to the extent that
as of January 2 of each year following the Scheduled Time Vencor reasonably
anticipates, based on Employee's compensation and status as an executive
officer of Vencor, that any amount of compensation which would be recognized by
the Employee by reason of the delivery of Vencor Common Stock to the Employee
pursuant to Section 3:
(i) would not be deductible by Vencor if the shares of Vencor
Common Stock are delivered at the Scheduled Time by reason of the deduction
disallowance rules of Section 162(m) of the Internal Revenue Code of 1986,
as amended ("Section 162(m)"), and
(ii) would be deductible by Vencor if such delivery of shares is
deferred until a later time, the delivery of such shares of Vencor Common
Stock to the Employee shall be deferred until the earliest time at which it
is determined by Vencor that the shares of Vencor Common Stock can be
delivered without disallowance of the deduction for payment of the
compensation by reason of Section 162(m). If Vencor reasonably determines
that in any year following the year of the Scheduled Time a portion of, but
not all of, the deferred shares of Vencor Common Stock can be delivered
without disallowance of the
-4-
<PAGE> 5
deduction as a result of Section 162(m), that portion that can be so
delivered shall be delivered by Vencor during that year (as soon as
practicable (but not more than five days) following its determination) and
the remainder of the shares of Vencor Common Stock, except as otherwise
provided in paragraphs (b), (c) or (d) below (or pursuant to Section 7
(b)), shall continue to be deferred until a later year. Vencor agrees to
review the ability to deliver shares hereunder at any time reasonably
requested by the Employee.
(b) Early Payout of Deferred Vencor Common Stock if Deferral is
Determined to be Ineffective. If the delivery of any shares of Vencor Common
Stock is deferred under paragraph (a) above with the expectation that the
compensation with respect to such shares will be deductible by Vencor if the
shares are delivered in a later year and Vencor later determines that the
compensation will not be deductible by Vencor even if the delivery thereof is
deferred until a later year, then the deferral with respect to such shares of
Vencor Common Stock shall terminate and Vencor shall deliver such shares of
Vencor Common Stock to the Employee.
(c) Payout Following Termination of Employment in All Events. As
soon as practicable (but not more than five
-5-
<PAGE> 6
days) following the Employee's termination of employment from Vencor and its
subsidiaries for any reason, including, without limitation, death, disability,
termination by Vencor or termination by the Employee for any reason, Vencor
shall deliver to the Employee (or his estate) all shares of Vencor Common Stock
the delivery of which has been deferred pursuant to this Section 4 and that
have not previously been delivered.
(d) Change in Control. Upon a Change in Control of Vencor, all
shares of Vencor Common Stock subject to Vencor Common Stock Awards shall be
issued and delivered to the Employee. As used herein, "Change in Control"
shall have the meaning set forth in subsections (A)-(D) of Section 9(d) of the
Plan (with Vencor substituted for the Company in such subsections).
5. Taxes. The Employee agrees to pay promptly after delivery of
any shares of Vencor stock pursuant to this Agreement the amount of Federal and
state withholding taxes which become due as a result of the delivery of Vencor
Common Stock to the Employee. If Vencor agrees to make a loan to Employee to
pay such taxes, any amount borrowed from Vencor to pay taxes shall be secured
by a pledge of such number of shares of Vencor Common Stock as may be
determined by Vencor in accordance with applicable laws, and shall be repaid
on the
-6-
<PAGE> 7
date of any sale of the pledged shares, but in no event later than the April 15
following the calendar year with respect to which the taxes have accrued.
6. No Shareholder Rights. (a) Until shares of Vencor Common Stock
are issued to the Employee (or, upon the Employee's death, to the Employee's
estate), pursuant to the terms of this Agreement, the Employee shall have no
rights with respect to shares of Vencor Common Stock, including the right to
vote, or the right to transfer, assign, alienate, pledge, hypothecate or
otherwise dispose of, such shares of Vencor Common Stock.
(b) Notwithstanding the foregoing, in the event Vencor declares
and pays any dividend or other distribution in cash or that does not otherwise
result in an adjustment pursuant to Section 7(a) below, Employee shall be
entitled to receive the amount of cash or other property he would have been
entitled to receive had he been a record holder of all deferred shares of
Vencor Common Stock under this Agreement on the record date of such dividend or
other distribution.
7. Adjustments.
(a) Subject to Section 7(b) hereof, if the outstanding shares of
Common Stock of Vencor are increased,
-7-
<PAGE> 8
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities or property (other than cash) are distributed with respect to such
shares of Vencor Common Stock or other securities, through merger,
consolidation, sale of all or substantially all the property of Vencor,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other distribution with respect to such shares of
Vencor Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in the number and kind of shares or other securities
subject to this Agreement.
(b) Notwithstanding the provisions of Sections 4 and 7(a) hereof,
upon dissolution or liquidation of Vencor or upon a reorganization, merger or
consolidation of Vencor with one or more corporations as a result of which
Vencor is not the surviving corporation, or upon the sale of all or
substantially all the property of Vencor, all shares of Vencor Common Stock
subject to the Vencor Common Stock Award shall be issued to the Employee,
unless provision is made with the approval of Employee in connection with such
transaction for the continuance of this Agreement and the assumption or the
substitution of stock or securities of a successor employer
-8-
<PAGE> 9
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.
8. Confidentiality. The Employee acknowledges that this
Agreement and the award of Vencor Common Stock Awards to the Employee is
confidential, and the Employee agrees not to disclose any of the terms of this
Agreement except to duly authorized representatives of Vencor acting in the
course of their employment, as may otherwise be required by law, including any
applicable filings under the federal securities laws, and to the Employee's
personal tax and financial advisors.
9. Tax Free Pooling. If the actions contemplated by this
Agreement, either alone or in conjunction with the actions contemplated in
similar agreements among the Company, Vencor and other similarly situated
employees of the Company (the "Employee Group"), would prevent the Merger or
the acquisition of Nationwide, Care Inc. by the Company from being treated for
financial accounting purposes as a "pooling of interests" in accordance with
generally accepted accounting principals and the rules, regulations and
interpretations of the Securities and Exchange Commission, then this Agreement
and each agreement with the other members of the Employee
-9-
<PAGE> 10
Group shall be deemed void and of no further force or effect. In such event the
parties shall cooperate to restructure the actions taken pursuant to this
Agreement, provided, that the parties will endeavor to ensure that such
restructuring shall have no less favorable economic effect to the Employee as
this Agreement would have to the Employee.
10. Conditions. This Agreement shall be subject to the condition
subsequent that the Effective Time (as defined in the Merger Agreement) shall
have occurred. In the event that the Merger Agreement is terminated or such
condition subsequent is not satisfied, this Agreement shall be deemed void and
of no further force or effect.
11. Assignment. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder or the Vencor Common Stock Awards
shall be assigned by any of the parties hereto without the prior written
consent of the other parties hereto.
12. Employment. In the event the Employee's employment with the
Company terminates prior to the Effective Time, this Agreement shall be void
and of no further force or effect, and the terms and conditions of the
Performance Shares
-10-
<PAGE> 11
shall be governed by the Plan and the Incentive Award Agreement. The grant of
Vencor Common Stock Awards to the Employee neither confers on the Employee the
right to continue to perform services in any particular position and/or remain
employed by Vencor or any of its subsidiaries, nor affects the right of Vencor
or any of its subsidiaries to remove the Employee from his position or to
terminate Employee's employment with Vencor or a subsidiary thereof, for any
reason with or without cause.
13. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to its conflict of laws rules.
14. Entire Understanding and Waiver. This Agreement embodies the
entire understanding and agreement of the parties in relation to the subject
matter hereof and expressly supersedes the Incentive Award Agreement which
shall be of no further effect, and no promise, condition, representation or
warranty, expressed or implied, not herein stated, shall bind either party
hereto. None of the terms and conditions of this Agreement may be changed,
modified, waived or cancelled except by a writing, signed by the parties hereto
specifying such change, modification, waiver or cancellation.
-11-
<PAGE> 12
A waiver by either party, at any time, of compliance with any of the terms and
conditions of this Agreement shall not be considered a modification,
cancellation or consent to a future waiver of such terms and conditions or of
any preceding or succeeding breach hereof, unless expressly so stated.
15. 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.
16. Registration of Shares. Vencor shall take all steps necessary
to ensure that all shares of Vencor Common Stock (and any other securities)
delivered pursuant to this Agreement are covered by an effective registration
statement filed with the Securities Exchange Commission on Form S-8 or
otherwise.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ RICHARD P. ADCOCK
---------------------------------
Name: Richard P. Adcock
Title: Senior Vice President
VENCOR, INC.
By /s/ W. EARL REED, III
---------------------------------
Name: W. Earl Reed, III
Title: Vice President of
Finance and Development
EMPLOYEE
[SIGNATURE]
---------------------------------
-13-
<PAGE> 14
INCENTIVE STOCK AWARD AGREEMENT
THIS INCENTIVE STOCK AWARD AGREEMENT (this "Agreement") is made as of
this 28th day of September, 1995 by and among The Hillhaven Corporation, a
Nevada Corporation (the "Company"), Vencor, Inc., a Delaware corporation
("Vencor"), and Chris Marker (the "Employee").
WHEREAS, under the Company's 1990 Stock Incentive Plan (the "Plan")
and the Incentive Stock Award Agreement entered into by and between the Company
and the Employee on December 6, 1994 (the "Incentive Award Agreement"), the
Company has agreed, subject to the terms and conditions of the Incentive Award
Agreement, to issue to the Employee up to 200,000 shares of the common stock of
the Company (the "Company Common Stock"), par value $.75 per share (the
"Performance Shares").
WHEREAS, pursuant to the Incentive Award Agreement and the Plan, the
Performance Shares become vested pursuant to a performance schedule set forth
in the Incentive Award Agreement;
WHEREAS, the Company and Vencor have entered into an Amended and
Restated Agreement and Plan of Merger, dated as of April 23, 1995 and as
amended and restated as of July 31, 1995
<PAGE> 15
(the "Merger Agreement") , providing for the merger of the Company with and
into Vencor (the "Merger");
WHEREAS, the Merger Agreement provides that each Performance Share
awarded under the Plan will, upon the effective time of the Merger as defined
in the Merger Agreement (the "Effective Time"), be converted into a performance
share award (the "Vencor Common Stock Award") with respect to the number of
full shares of Vencor common stock, par value $.25 per share ("Vencor Common
Stock"), equal to the product of (i) .75 times the "Conversion Number" (as
defined in the Merger Agreement), and (ii) the number of shares of Company
Common Stock subject to such Performance Share; and
WHEREAS, the Compensation Committee of Vencor (the "Vencor Committee")
has determined that each holder of a Performance Share outstanding immediately
prior to the Effective Time that is converted pursuant to the Merger Agreement
into a Vencor Common Stock Award shall be offered an election to have his or
her Vencor Common Stock Award vest immediately following the Effective Time, in
lieu of being subject to continuing performance criteria, subject to the terms
and conditions set forth herein.
-2-
<PAGE> 16
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and conditions contained herein, the parties hereto agree
as follows:
1. Conversion of Performance Shares. At the Effective Time,
Employee's Performance Shares shall be converted into a Vencor Common Stock
Award for the number of full shares of Vencor Common Stock equal to the product
of (i) .75 times the Conversion Number and (ii) the number of Performance
Shares.
2. Vesting of Vencor Common Stock Award. The parties hereby
agree, pursuant to the election of the Employee as evidenced by his execution
of this Agreement, that immediately following the Effective Time, each Vencor
Common Stock Award shall, subject to the terms and conditions of this
Agreement, vest and shall no longer be subject to any performance criteria or
the risk of forfeiture.
3. Delivery of Vencor Common Stock. Within five (5) days
following the Effective Time (the "Scheduled Time"), subject to Section 4
below, the shares of Vencor Common Stock subject to the Vencor Common Stock
Award shall be delivered by Vencor to the Employee.
4. Deferral of Delivery of Common Stock.
(a) Deferral. Except as otherwise provided in
-3-
<PAGE> 17
paragraphs 4(b), (c) or (d) below and Section 7(b), if and to the extent that
as of January 2 of each year following the Scheduled Time Vencor reasonably
anticipates, based on Employee's compensation and status as an executive
officer of Vencor, that any amount of compensation which would be recognized by
the Employee by reason of the delivery of Vencor Common Stock to the Employee
pursuant to Section 3:
(i) would not be deductible by Vencor if the shares of Vencor
Common Stock are delivered at the Scheduled Time by reason of the deduction
disallowance rules of Section 162(m) of the Internal Revenue Code of 1986,
as amended ("Section 162(m)"), and
(ii) would be deductible by Vencor if such delivery of shares is
deferred until a later time, the delivery of such shares of Vencor Common
Stock to the Employee shall be deferred until the earliest time at which it
is determined by Vencor that the shares of Vencor Common Stock can be
delivered without disallowance of the deduction for payment of the
compensation by reason of Section 162(m). If Vencor reasonably determines
that in any year following the year of the Scheduled Time a portion of, but
not all of, the deferred shares of Vencor Common Stock can be delivered
without disallowance of the
-4-
<PAGE> 18
deduction as a result of Section 162(m), that portion that can be so
delivered shall be delivered by Vencor during that year (as soon as
practicable (but not more than five days) following its determination) and
the remainder of the shares of Vencor Common Stock, except as otherwise
provided in paragraphs (b), (c) or (d) below (or pursuant to Section 7(b)),
shall continue to be deferred until a later year. Vencor agrees to review
the ability to deliver shares hereunder at any time reasonably
requested by the Employee.
(b) Early Payout of deferred Vencor Common Stock if Deferral is
Determined to be Ineffective. If the delivery of any shares of Vencor Common
Stock is deferred under paragraph (a) above with the expectation that the
compensation with respect to such shares will be deductible by Vencor if the
shares are delivered in a later year and Vencor later determines that the
compensation will not be deductible by Vencor even if the delivery thereof is
deferred until a later year, then the deferral with respect to such shares of
Vencor Common Stock shall terminate and Vencor shall deliver such shares of
Vencor Common Stock to the Employee.
(c) Payout Following Termination of Employment in All Events. As
soon as practicable (but not more than five
-5-
<PAGE> 19
days) following the Employee's termination of employment from Vencor and its
subsidiaries for any reason, including, without limitation, death, disability,
termination by Vencor or termination by the Employee for any reason, Vencor
shall deliver to the Employee (or his estate) all shares of Vencor Common Stock
the delivery of which has been deferred pursuant to this Section 4 and that
have not previously been delivered.
(d) Change in Control. Upon a Change in Control of Vencor, all
shares of Vencor Common Stock subject to Vencor Common Stock Awards shall be
issued and delivered to the Employee. As used herein, "Change in Control"
shall have the meaning set forth in subsections (A) - (D) of Section 9(d) of the
Plan (with Vencor substituted for the Company in such subsections).
5. Taxes. The Employee agrees to pay promptly after delivery of
any shares of Vencor stock pursuant to this Agreement the amount of Federal and
state withholding taxes which become due as a result of the delivery of Vencor
Common Stock to the Employee. If Vencor agrees to make a loan to Employee to
pay such taxes, any amount borrowed from Vencor to pay taxes shall be secured
by a pledge of such number of shares of Vencor Common Stock as may be
determined by Vencor in accordance with applicable laws, and shall be repaid on
the
-6-
<PAGE> 20
date of any sale of the pledged shares, but in no event later than the April 15
following the calendar year with respect to which the taxes have accrued.
6. No Shareholder Rights. (a) Until shares of Vencor Common Stock
are issued to the Employee (or, upon the Employee's death, to the Employee's
estate), pursuant to the terms of this Agreement, the Employee shall have no
rights with respect to shares of Vencor Common Stock, including the right to
vote, or the right to transfer, assign, alienate, pledge, hypothecate or
otherwise dispose of, such shares of Vencor Common Stock.
(b) Notwithstanding the foregoing, in the event Vencor declares
and pays any dividend or other distribution in cash or that does not otherwise
result in an adjustment pursuant to Section 7(a) below, Employee shall be
entitled to receive the amount of cash or other property he would have been
entitled to receive had he been a record holder of all deferred shares of
Vencor Common Stock under this Agreement on the record date of such dividend or
other distribution.
7. Adjustments.
(a) Subject to Section 7(b) hereof, if the outstanding shares of
Common Stock of Vencor are increased,
-7-
<PAGE> 21
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities or property (other than cash) are distributed with respect to such
shares of Vencor Common Stock or other securities, through merger,
consolidation, sale of all or substantially all the property of Vencor,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other distribution with respect to such shares of
Vencor Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in the number and kind of shares or other securities
subject to this Agreement.
(b) Notwithstanding the provisions of Sections 4 and 7(a) hereof,
upon dissolution or liquidation of Vencor or upon a reorganization, merger or
consolidation of Vencor with one or more corporations as a result of which
Vencor is not the surviving corporation, or upon the sale of all or
substantially all the property of Vencor, all shares of Vencor Common Stock
subject to the Vencor Common Stock Award shall be issued to the Employee,
unless provision is made with the approval of Employee in connection with such
transaction for the continuance of this Agreement and the assumption or the
substitution of stock or securities of a successor employer
-8-
<PAGE> 22
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.
8. Confidentiality. The Employee acknowledges that this
Agreement and the award of Vencor Common Stock Awards to the Employee is
confidential, and the Employee agrees not to disclose any of the terms of this
Agreement except to duly authorized representatives of Vencor acting in the
course of their employment, as may otherwise be required by law, including any
applicable filings under the federal securities laws, and to the Employee's
personal tax and financial advisors.
9. Tax Free Pooling. If the actions contemplated by this
Agreement, either alone or in conjunction with the actions contemplated in
similar agreements among the Company, Vencor and other similarly situated
employees of the Company (the "Employee Group"), would prevent the Merger or
the acquisition of Nationwide, Care Inc. by the Company from being treated for
financial accounting purposes as a "pooling of interests" in accordance with
generally accepted accounting principals and the rules, regulations and
interpretations of the Securities and Exchange Commission, then this Agreement
and each agreement with the other members of the Employee
-9-
<PAGE> 23
Group shall be deemed void and of no further force or effect. In such event
the parties shall cooperate to restructure the actions taken pursuant to this
Agreement, provided, that the parties will endeavor to ensure that such
restructuring shall have no less favorable economic effect to the Employee as
this Agreement would have to the Employee.
10. Conditions. This Agreement shall be subject to the condition
subsequent that the Effective Time (as defined in the Merger Agreement) shall
have occurred. In the event that the Merger Agreement is terminated or such
condition subsequent is not satisfied, this Agreement shall be deemed void and
of no further force or effect.
11. Assignment. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder or the Vencor Common Stock Awards
shall be assigned by any of the parties hereto without the prior written
consent of the other parties hereto.
12. Employment. In the event the Employee's employment with the
Company terminates prior to the Effective Time, this Agreement shall be void
and of no further force or effect, and the terms and conditions of the
Performance Shares
-10-
<PAGE> 24
shall be governed by the Plan and the Incentive Award Agreement. The grant of
Vencor Common Stock Awards to the Employee neither confers on the Employee the
right to continue to perform services in any particular position and/or remain
employed by Vencor or any of its subsidiaries, nor affects the right of Vencor
or any of its subsidiaries to remove the Employee from his position or to
terminate Employee's employment with Vencor or a subsidiary thereof, for any
reason with or without cause.
13. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to its conflict of laws rules.
14. Entire Understanding and Waiver. This Agreement embodies the
entire understanding and agreement of the parties in relation to the subject
matter hereof and expressly supersedes the Incentive Award Agreement which
shall be of no further effect, and no promise, condition, representation or
warranty, expressed or implied, not herein stated, shall bind either party
hereto. None of the terms and conditions of this Agreement may be changed,
modified, waived or cancelled except by a writing, signed by the parties hereto
specifying such change, modification, waiver or cancellation.
-11-
<PAGE> 25
A waiver by either party, at any time, of compliance with any of the terms and
conditions of this Agreement shall not be considered a modification,
cancellation or consent to a future waiver of such terms and conditions or of
any preceding or succeeding breach hereof, unless expressly so stated.
15. 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.
16. Registration of Shares. Vencor shall take all steps necessary
to ensure that all shares of Vencor Common Stock (and any other securities)
delivered pursuant to this Agreement are covered by an effective registration
statement filed with the Securities Exchange Commission on Form S-8 or
otherwise.
-12-
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ RICHARD P. ADCOCK
---------------------------------
Name: Richard P. Adcock
Title: Senior Vice President
VENCOR, INC.
By: /s/ W. EARL REED, III
---------------------------------
Name: W. Earl Reed, III
Title: Vice President of
of Finance and Development
EMPLOYEE
[SIGNATURE]
---------------------------------
-13-
<PAGE> 27
INCENTIVE STOCK AWARD AGREEMENT
THIS INCENTIVE STOCK AWARD AGREEMENT (this "Agreement") is made as of
this 27th day of September, 1995 by and among The Hillhaven Corporation, a
Nevada corporation (the "Company"), Vencor, Inc., a Delaware corporation
("Vencor"), and Jeffrey M. McKain (the "Employee").
WHEREAS, under the Company's 1990 Stock Incentive Plan (the "Plan")
and the Incentive Stock Award Agreement entered into by and between the Company
and the Employee on December 6, 1994 (the "Incentive Award Agreement"), the
Company has agreed, subject to the terms and conditions of the Incentive Award
Agreement, to issue to the Employee up to 150,000 shares of the common stock of
the Company (the "Company Common Stock"), par value $.75 per share (the
"Performance Shares").
WHEREAS, pursuant to the Incentive Award Agreement and the Plan, the
Performance Shares become vested pursuant to a performance schedule set forth
in the Incentive Award Agreement;
WHEREAS, the Company and Vencor have entered into an Amended and
Restated Agreement and Plan of Merger, dated as of April 23, 1995 and as
amended and restated as of July 31, 1995
<PAGE> 28
(the "Merger Agreement"), providing for the merger of the Company with and into
Vencor (the "Merger");
WHEREAS, the Merger Agreement provides that each Performance Share
awarded under the Plan will, upon the effective time of the Merger as defined
in the Merger Agreement (the "Effective Time"), be converted into a performance
share award (the "Vencor Common Stock Award") with respect to the number of
full shares of Vencor common stock, par value $.25 per share ("Vencor Common
Stock"), equal to the product of (i) .75 times the "Conversion Number" (as
defined in the Merger Agreement), and (ii) the number of shares of Company
Common Stock subject to such Performance Share; and
WHEREAS, the Compensation Committee of Vencor (the "Vencor Committee")
has determined that each holder of a Performance Share outstanding immediately
prior to the Effective Time that is converted pursuant to the Merger Agreement
into a Vencor Common Stock Award shall be offered an election to have his or
her Vencor Common Stock Award vest immediately following the Effective Time, in
lieu of being subject to continuing performance criteria, subject to the terms
and conditions set forth herein.
-2-
<PAGE> 29
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and conditions contained herein, the parties hereto agree
as follows:
1. Conversion of Performance Shares. At the Effective Time,
Employee's Performance Shares shall be converted into a Vencor Common Stock
Award for the number of full shares of Vencor Common Stock equal to the product
of (i) .75 times the Conversion Number and (ii) the number of Performance
Shares.
2. Vesting of Vencor Common Stock Award. The parties hereby
agree, pursuant to the election of the Employee as evidenced by his execution
of this Agreement, that immediately following the Effective Time, each Vencor
Common Stock Award shall, subject to the terms and conditions of this
Agreement, vest and shall no longer be subject to any performance criteria or
the risk of forfeiture.
3. Delivery of Vencor Common Stock. Within five (5) days
following the Effective Time (the "Scheduled Time"), subject to Section 4
below, the shares of Vencor Common Stock subject to the Vencor Common Stock
Award shall be delivered by Vencor to the Employee.
4. Deferral of Delivery of Vencor Common Stock.
(a) Deferral. Except as otherwise provided in
-3-
<PAGE> 30
paragraphs 4(b), (c) or (d) below and Section 7(b), if and to the extent that
as of January 2 of each year following the Scheduled Time Vencor reasonably
anticipates, based on Employee's compensation and status as an executive
officer of Vencor, that any amount of compensation which would be recognized by
the Employee by reason of the delivery of Vencor Common Stock to the Employee
pursuant to Section 3:
(i) would not be deductible by Vencor if the shares of Vencor
Common Stock are delivered at the Scheduled Time by reason of the deduction
disallowance rules of Section 162(m) of the Internal Revenue Code of 1986,
as amended ("Section 162(m)"), and
(ii) would be deductible by Vencor if such delivery of shares is
deferred until a later time, the delivery of such shares of Vencor Common
Stock to the Employee shall be deferred until the earliest time at which it
is determined by Vencor that the shares of Vencor Common Stock can be
delivered without disallowance of the deduction for payment of the
compensation by reason of Section 162(m). If Vencor reasonably determines
that in any year following the year of the Scheduled Time a portion of, but
not all of, the deferred shares of Vencor Common Stock can be delivered
without disallowance of the
-4-
<PAGE> 31
deduction as a result of Section 162(m), that portion that can be so
delivered shall be delivered by Vencor during that year (as soon as
practicable (but not more than five days) following its determination) and
the remainder of the shares of Vencor Common Stock, except as otherwise
provided in paragraphs (b), (c) or (d) below (or pursuant to Section 7(b)),
shall continue to be deferred until a later year. Vencor agrees to review
the ability to deliver shares hereunder at any time reasonably
requested by the Employee.
(b) Early Payout of Deferred Vencor Common Stock if Deferral is
Determined to be Ineffective. If the delivery of any shares of Vencor Common
Stock is deferred under paragraph (a) above with the expectation that the
compensation with respect to such shares will be deductible by Vencor if the
shares are delivered in a later year and Vencor later determines that the
compensation will not be deductible by Vencor even if the delivery thereof is
deferred until a later year, then the deferral with respect to such shares of
Vencor Common Stock shall terminate and Vencor shall deliver such shares of
Vencor Common Stock to the Employee.
(c) Payout Following Termination of Employment in All Events. As
soon as practicable (but not more than five
-5-
<PAGE> 32
days) following the Employee's termination of employment from Vencor and its
subsidiaries for any reason, including, without limitation, death, disability,
termination by Vencor or termination by the Employee for any reason, Vencor
shall deliver to the Employee (or his estate) all shares of Vencor Common Stock
the delivery of which has been deferred pursuant to this Section 4 and that
have not previously been delivered.
(d) Change in Control. Upon a Change in Control of Vencor, all
shares of Vencor Common Stock subject to Vencor Common Stock Awards shall be
issued and delivered to the Employee. As used herein, "Change in Control"
shall have the meaning set forth in subsections (A)- (D) of section 9(d) of the
Plan (with Vencor substituted for the Company in such subsections).
5. Taxes. The Employee agrees to pay promptly after delivery of
any shares of Vencor stock pursuant to this Agreement the amount of Federal and
state withholding taxes which become due as a result of the delivery of Vencor
Common Stock to the Employee. If Vencor agrees to make a loan to Employee to
pay such taxes, any amount borrowed from Vencor to pay taxes shall be secured
by a pledge of such number of shares of Vencor Common Stock as may be
determined by Vencor in accordance with applicable laws, and shall be repaid on
the
-6-
<PAGE> 33
date of any sale of the pledged shares, but in no event later than the April 15
following the calendar year with respect to which the taxes have accrued.
6. No Shareholder Rights. (a) Until shares of Vencor Common Stock
are issued to the Employee (or, upon the Employee's death, to the Employee's
estate), pursuant to the terms of this Agreement, the Employee shall have no
rights with respect to shares of Vencor Common Stock, including the right to
vote, or the right to transfer, assign, alienate, pledge, hypothecate or
otherwise dispose of, such shares of Vencor Common Stock.
(b) Notwithstanding the foregoing, in the event Vencor declares
and pays any dividend or other distribution in cash or that does not otherwise
result in an adjustment pursuant to Section 7(a) below, Employee shall be
entitled to receive the amount of cash or other property he would have been
entitled to receive had he been a record holder of all deferred shares of
Vencor Common Stock under this Agreement on the record date of such dividend or
other distribution.
7. Adjustments.
(a) Subject to Section 7(b) hereof, if the outstanding shares of
Common Stock of Vencor are increased,
-7-
<PAGE> 34
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities or property (other than cash) are distributed with respect to such
shares of Vencor Common Stock or other securities, through merger,
consolidation, sale of all or substantially all the property of Vencor,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other distribution with respect to such shares of
Vencor Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in the number and kind of shares or other securities
subject to this Agreement.
(b) Notwithstanding the provisions of Sections 4 and 7(a) hereof,
upon dissolution or liquidation of Vencor or upon a reorganization, merger or
consolidation of Vencor with one or more corporations as a result of which
Vencor is not the surviving corporation, or upon the sale of all or
substantially all the property of Vencor, all shares of Vencor Common Stock
subject to the Vencor Common Stock Award shall be issued to the Employee,
unless provision is made with the approval of Employee in connection with such
transaction for the continuance of this Agreement and the assumption or the
substitution of stock or securities of a successor employer
-8-
<PAGE> 35
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.
8. Confidentiality. The Employee acknowledges that this
Agreement and the award of Vencor Common Stock Awards to the Employee is
confidential, and the Employee agrees not to disclose any of the terms of this
Agreement except to duly authorized representatives of Vencor acting in the
course of their employment, as may otherwise be required by law, including any
applicable filings under the federal securities laws, and to the Employee's
personal tax and financial advisors.
9. Tax Free Pooling. If the actions contemplated by this
Agreement, either alone or in conjunction with the actions contemplated in
similar agreements among the Company, Vencor and other similarly situated
employees of the Company (the "Employee Group"), would prevent the Merger or
the acquisition of Nationwide, Care Inc. by the Company from being treated for
financial accounting purposes as a "pooling of interests" in accordance with
generally accepted accounting principals and the rules, regulations and
interpretations of the Securities and Exchange Commission, then this Agreement
and each agreement with the other members of the Employee
-9-
<PAGE> 36
Group shall be deemed void and of no further force or effect. In such event
the parties shall cooperate to restructure the actions taken pursuant to this
Agreement, provided, that the parties will endeavor to ensure that such
restructuring shall have no less favorable economic effect to the Employee as
this Agreement would have to the Employee.
10. Conditions. This Agreement shall be subject to the condition
subsequent that the Effective Time (as defined in the Merger Agreement) shall
have occurred. In the event that the Merger Agreement is terminated or such
condition subsequent is not satisfied, this Agreement shall be deemed void and
of no further force or effect.
11. Assignment. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder or the Vencor Common Stock Awards
shall be assigned by any of the parties hereto without the prior written
consent of the other parties hereto.
12. Employment. In the event the Employee's employment with the
Company terminates prior to the Effective Time, this Agreement shall be void
and of no further force or effect, and the terms and conditions of the
Performance Shares
-10-
<PAGE> 37
shall be governed by the Plan and the Incentive Award Agreement. The grant of
Vencor Common Stock Awards to the Employee neither confers on the Employee the
right to continue to perform services in any particular position and/or remain
employed by Vencor or any of its subsidiaries, nor affects the right of Vencor
or any of its subsidiaries to remove the Employee from his position or to
terminate Employee's employment with Vencor or a subsidiary thereof, for any
reason with or without cause.
13. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to its conflict of laws rules.
14. Entire Understanding and Waiver. This Agreement embodies the
entire understanding and agreement of the parties in relation to the subject
matter hereof and expressly supersedes the Incentive Award Agreement which
shall be of no further effect, and no promise, condition, representation or
warranty, expressed or implied, not herein stated, shall bind either party
hereto. None of the terms and conditions of this Agreement may be changed,
modified, waived or cancelled except by a writing, signed by the parties hereto
specifying such change, modification, waiver or cancellation.
-11-
<PAGE> 38
A waiver by either party, at any time, of compliance with any of the terms and
conditions of this Agreement shall not be considered a modification,
cancellation or consent to a future waiver of such terms and conditions or of
any preceding or succeeding breach hereof, unless expressly so stated.
15. 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.
16. Registration of Shares. Vencor shall take all steps necessary
to ensure that all shares of Vencor Common Stock (and any other securities)
delivered pursuant to this Agreement are covered by an effective registration
statement filed with the Securities Exchange Commission on Form S-8 or
otherwise.
-12-
<PAGE> 39
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ RICHARD P. ADCOCK
---------------------------------
Name: Richard P. Adcock
Title: Senior Vice President
VENCOR, INC.
By: /s/ W. EARL REED, III
---------------------------------
Name: W. Earl Reed, III
Title: Vice President of
Finance and Development
EMPLOYEE
[SIGNATURE]
-------------------------------------
-13-
<PAGE> 40
INCENTIVE STOCK AWARD AGREEMENT
THIS INCENTIVE STOCK AWARD AGREEMENT (this "Agreement") is made as
of this 28th day of September, 1995 by and among The Hillhaven Corporation, a
Nevada corporation (the "Company"), Vencor, Inc., a Delaware corporation
("Vencor"), and Robert F. Pacquer (the "Employee").
WHEREAS, under the Company's 1990 Stock Incentive Plan (the "Plan")
and the Incentive Stock Award Agreement entered into by and between the Company
and the Employee on December 6, 1994 (the "Incentive Award Agreement"), the
Company has agreed, subject to the terms and conditions of the Incentive Award
Agreement, to issue to the Employee up to 150,000 shares of the common stock of
the Company (the "Company Common Stock"), par value $.75 per share (the
"Performance Shares").
WHEREAS, pursuant to the Incentive Award Agreement and the Plan, the
Performance Shares become vested pursuant to a performance schedule set forth
in the Incentive Award Agreement;
WHEREAS, the Company and Vencor have entered into an Amended and
Restated Agreement and Plan of Merger, dated as of April 23, 1995 and as
amended and restated as of July 31, 1995
<PAGE> 41
(the "Merger Agreement"), providing for the merger of the Company with and into
Vencor (the "Merger");
WHEREAS, the Merger Agreement provides that each Performance Share
awarded under the Plan will, upon the effective time of the Merger as defined
in the Merger Agreement (the "Effective Time"), be converted into a performance
share award (the "Vencor Common Stock Award") with respect to the number of
full shares of Vencor common stock, par value $.25 per share ("Vencor Common
Stock"), equal to the product of (i) .75 times the "Conversion Number" (as
defined in the Merger Agreement) , and (ii) the number of shares of Company
Common Stock subject to such Performance Share; and
WHEREAS, the Compensation Committee of Vencor (the "Vencor Committee")
has determined that each holder of a Performance Share outstanding immediately
prior to the Effective Time that is converted pursuant to the Merger Agreement
into a Vencor Common Stock Award shall be offered an election to have his or
her Vencor Common Stock Award vest immediately following the Effective Time, in
lieu of being subject to continuing performance criteria, subject to the terms
and conditions set forth herein.
-2-
<PAGE> 42
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants and conditions contained herein, the parties hereto agree
as follows:
1. Conversion of Performance Shares. At the Effective Time,
Employee's Performance Shares shall be converted into a Vencor Common Stock
Award for the number of full shares of Vencor Common Stock equal to the product
of (i) .75 times the Conversion Number and (ii) the number of Performance
Shares.
2. Vesting of Vencor Common Stock Award. The parties hereby
agree, pursuant to the election of the Employee as evidenced by his execution
of this Agreement, that immediately following the Effective Time, each Vencor
Common Stock Award shall, subject to the terms and conditions of this
Agreement, vest and shall no longer be subject to any performance criteria or
the risk of forfeiture.
3. Delivery of Vencor Common Stock. Within five (5) days
following the Effective Time (the "Scheduled Time"), subject to Section 4
below, the shares of Vencor Common Stock subject to the Vencor Common Stock
Award shall be delivered by Vencor to the Employee.
4. Deferral of Delivery of Common Stock.
(a) Deferral. Except as otherwise provided in
-3-
<PAGE> 43
paragraphs 4(b), (c) or (d) below and Section 7(b), if and to the extent that
as of January 2 of each year following the Scheduled Time Vencor reasonably
anticipates, based on Employee's compensation and status as an executive
officer of Vencor, that any amount of compensation which would be recognized by
the Employee by reason of the delivery of Vencor Common Stock to the Employee
pursuant to Section 3:
(i) would not be deductible by Vencor if the shares of Vencor
Common Stock are delivered at the Scheduled Time by reason of the deduction
disallowance rules of Section 162(m) of the Internal Revenue Code of 1986,
as amended ("Section 162(m)"), and
(ii) would be deductible by Vencor if such delivery of shares is
deferred until a later time, the delivery of such shares of Vencor Common
Stock to the Employee shall be deferred until the earliest time at which it
is determined by Vencor that the shares of Vencor Common Stock can be
delivered without disallowance of the deduction for payment of the
compensation by reason of Section 162(m). If Vencor reasonably determines
that in any year following the year of the Scheduled Time a portion of, but
not all of, the deferred shares of Vencor Common Stock can be delivered
without disallowance of the
-4-
<PAGE> 44
deduction as a result of Section 162 (m), that portion that can be so
delivered shall be delivered by Vencor during that year (as soon as
practicable (but not more than five days) following its determination) and
the remainder of the shares of Vencor Common Stock, except as otherwise
provided in paragraphs (b), (c) or (d) below (or pursuant to Section 7(b)),
shall continue to be deferred until a later year. Vencor agrees to review
the ability to deliver shares hereunder at any time reasonably
requested by the Employee.
(b) Early Payout of Deferred Vencor Common Stock if Deferral is
Determined to be Ineffective. If the delivery of any shares of Vencor Common
Stock is deferred under paragraph (a) above with the expectation that the
compensation with respect to such shares will be deductible by Vencor if the
shares are delivered in a later year and Vencor later determines that the
compensation will not be deductible by Vencor even if the delivery thereof is
deferred until a later year, then the deferral with respect to such shares of
Vencor Common Stock shall terminate and Vencor shall deliver such shares of
Vencor Common Stock to the Employee.
(c) Payout Following Termination of Employment in All Events. As
soon as practicable (but not more than five
-5-
<PAGE> 45
days) following the Employee's termination of employment from Vencor and its
subsidiaries for any reason, including, without limitation, death, disability,
termination by Vencor or termination by the Employee for any reason, Vencor
shall deliver to the Employee (or his estate) all shares of Vencor Common Stock
the delivery of which has been deferred pursuant to this Section 4 and that
have not previously been delivered.
(d) Change in Control. Upon a Change in Control of Vencor, all
shares of Vencor Common Stock subject to Vencor Common Stock Awards shall be
issued and delivered to the Employee. As used herein, "Change in Control"
shall have the meaning set forth in subsections (A)-(D) of Section 9(d) of the
Plan (with Vencor substituted for the Company in such subsections).
5. Taxes. The Employee agrees to pay promptly after delivery of
any shares of Vencor stock pursuant to this Agreement the amount of Federal and
state withholding taxes which become due as a result of the delivery of Vencor
Common Stock to the Employee. If Vencor agrees to make a loan to Employee to
pay such taxes, any amount borrowed from Vencor to pay taxes shall be secured
by a pledge of such number of shares of Vencor Common Stock as may be
determined by Vencor in accordance with applicable laws, and shall be repaid on
the
-6-
<PAGE> 46
date of any sale of the pledged shares, but in no event later than the April 15
following the calendar year with respect to which the taxes have accrued.
6. No Shareholder Rights. (a) Until shares of Vencor Common Stock
are issued to the Employee (or, upon the Employee's death, to the Employee's
estate), pursuant to the terms of this Agreement, the Employee shall have no
rights with respect to shares of Vencor Common Stock, including the right to
vote, or the right to transfer, assign, alienate, pledge, hypothecate or
otherwise dispose of, such shares of Vencor Common Stock.
(b) Notwithstanding the foregoing, in the event Vencor declares
and pays any dividend or other distribution in cash or that does not otherwise
result in an adjustment pursuant to Section 7(a) below, Employee shall be
entitled to receive the amount of cash or other property he would have been
entitled to receive had he been a record holder of all deferred shares of
Vencor Common Stock under this Agreement on the record date of such dividend or
other distribution.
7. Adjustments.
(a) Subject to Section 7(b) hereof, if the outstanding shares of
Common Stock of Vencor are increased,
-7-
<PAGE> 47
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities or property (other than cash) are distributed with respect to such
shares of Vencor Common Stock or other securities, through merger,
consolidation, sale of all or substantially all the property of Vencor,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other distribution with respect to such shares of
Vencor Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in the number and kind of shares or other securities
subject to this Agreement.
(b) Notwithstanding the provisions of Sections 4 and 7(a) hereof,
upon dissolution or liquidation of Vencor or upon a reorganization, merger or
consolidation of Vencor with one or more corporations as a result of which
Vencor is not the surviving corporation, or upon the sale of all or
substantially all the property of Vencor, all shares of Vencor Common Stock
subject to the Vencor Common Stock Award shall be issued to the Employee,
unless provision is made with the approval of Employee in connection with such
transaction for the continuance of this Agreement and the assumption or the
substitution of stock or securities of a successor employer
-8-
<PAGE> 48
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.
8. Confidentiality. The Employee acknowledges that this
Agreement and the award of Vencor Common Stock Awards to the Employee is
confidential, and the Employee agrees not to disclose any of the terms of this
Agreement except to duly authorized representatives of Vencor acting in the
course of their employment, as may otherwise be required by law, including any
applicable filings under the federal securities laws, and to the Employee's
personal tax and financial advisors.
9. Tax Free Pooling. If the actions contemplated by this
Agreement, either alone or in conjunction with the actions contemplated in
similar agreements among the Company, Vencor and other similarly situated
employees of the Company (the "Employee Group"), would prevent the Merger or
the acquisition of Nationwide, Care Inc. by the Company from being treated for
financial accounting purposes as a "pooling of interests in accordance with
generally accepted accounting principals and the rules, regulations and
interpretations of the Securities and Exchange Commission, then this Agreement
and each agreement with the other members of the Employee
-9-
<PAGE> 49
Group shall be deemed void and of no further force or effect. In such event
the parties shall cooperate to restructure the actions taken pursuant to this
Agreement, provided, that the parties will endeavor to ensure that such
restructuring shall have no less favorable economic effect to the Employee as
this Agreement would have to the Employee.
10. Conditions. This Agreement shall be subject to the condition
subsequent that the Effective Time (as defined in the Merger Agreement) shall
have occurred. In the event that the Merger Agreement is terminated or such
condition subsequent is not satisfied, this Agreement shall be deemed void and
of no further force or effect.
11. Assignment. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder or the Vencor Common Stock Awards
shall be assigned by any of the parties hereto without the prior written
consent of the other parties hereto.
12. Employment. In the event the Employee's employment with the
Company terminates prior to the Effective Time, this Agreement shall be void
and of no further force or effect, and the terms and conditions of the
Performance Shares
-10-
<PAGE> 50
shall be governed by the Plan and the Incentive Award Agreement. The grant of
Vencor Common Stock Awards to the Employee neither confers on the Employee the
right to continue to perform services in any particular position and/or remain
employed by Vencor or any of its subsidiaries, nor affects the right of Vencor
or any of its subsidiaries to remove the Employee from his position or to
terminate Employee's employment with Vencor or a subsidiary thereof, for any
reason with or without cause.
13. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to its conflict of laws rules.
14. Entire Understanding and Waiver. This Agreement embodies the
entire understanding and agreement of the parties in relation to the subject
matter hereof and expressly supersedes the Incentive Award Agreement which
shall be of no further effect, and no promise, condition, representation or
warranty, expressed or implied, not herein stated, shall bind either party
hereto. None of the terms and conditions of this Agreement may be changed,
modified, waived or cancelled except by a writing, signed by the parties hereto
specifying such change, modification, waiver or cancellation.
-11-
<PAGE> 51
A waiver by either party, at any time, of compliance with any of the terms and
conditions of this Agreement shall not be considered a modification,
cancellation or consent to a future waiver of such terms and conditions or of
any preceding or succeeding breach hereof, unless expressly so stated.
15. 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.
16. Registration of Shares. Vencor shall take all steps necessary
to ensure that all shares of Vencor Common Stock (and any other securities)
delivered pursuant to this Agreement are covered by an effective registration
statement filed with the Securities Exchange Commission on Form S-8 or
otherwise.
-12-
<PAGE> 52
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ RICHARD P. ADCOCK
-------------------------------------
Name: Richard P. Adcock
Title: Senior Vice President
VENCOR, INC.
By: /s/ W. EARL REED, III
-------------------------------------
Name: W. Earl Reed, III
Title: Vice President of
Finance and Development
EMPLOYEE
[SIGNATURE]
----------------------------------------
-13-
<PAGE> 53
EXHIBIT 4(c)
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of October 12, 1995 to the Credit Agreement dated as
of September 11, 1995 among Vencor, Inc., the other Borrowers referred to
therein and the Banks, Co-Agents, LC Issuing Banks and Agents referred to
therein, as heretofore amended (the "Credit Agreement").
WHEREAS, terms defined in the Credit Agreement have the same
respective meanings when used herein; and
WHEREAS, Vencor (i) desires to purchase shares of its common stock held
by a trustee under a trust originally created by The Hillhaven Corporation to
provide funding for various employee benefit plans and (ii) to permit such
purchase, desires to increase the amount of Restricted Payments permitted by
Section 5.1(d)(i) of the Credit Agreement from $10,000,000 to $20,000,000;
NOW, THEREFORE, the undersigned parties hereto agree as follows:
1. Amendment of Section 5.11. Section 5.11(d)(i) of the Credit
Agreement is hereby amended by changing the amount specified therein from
"$10,000,000" to "$20,000,000".
2. Rights Otherwise Unaffected. This Amendment is limited to the
matters expressly set forth herein. Except to the extent specifically amended
or waived hereby, all terms of the Credit Agreement shall remain in full force
and effect.
3. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
4. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signature thereto and hereto were upon the same instrument.
5. Effectiveness. This Amendment shall become effective when the
Documentation Agent shall have received from each of the Required Banks and
each of the Borrowers either a counterpart hereof signed by such party or
telegraphic, telex or other written confirmation from such party that it has
signed a counterpart hereof.
<PAGE> 54
IN WITNESS WHEREOF, the undersigned parties have caused this amendment
to be duly executed as of the date first above written.
BORROWERS
VENCOR, INC.
By: /s/ JILL L. FORCE
---------------------------------
Name: Jill L. Force
Title: Secretary and General Counsel
FIRST HEALTHCARE CORPORATION
By: /s/ ROBERT F. PACQUER
---------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
NORTHWEST HEALTH CARE, INC.
By: /s/ ROBERT F. PACQUER
---------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
MEDISAVE PHARMACIES, INC.
By: /s/ ROBERT F. PACQUER
---------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
HILLHAVEN PROPERTIES, LTD.
By: /s/ ROBERT F. PACQUER
---------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
<PAGE> 55
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ ROBERT F. PACQUER
---------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
NATIONWIDE CARE, INC.
By: /s/ ROBERT F. PACQUER
---------------------------------
Name: Robert F. Pacquer
Title: Sr. Vice President
BANKS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ RUTH EDWARDS
---------------------------------
Name: Ruth Edwards
Title: Vice President
THE BANK OF NEW YORK
By: /s/ DOUGLAS OBER
---------------------------------
Name: Douglas Ober
Title: Vice President
CHEMICAL BANK
By: /s/ WILLIAM J. CAGGIANO
---------------------------------
Name: William J. Caggiano
Title: Managing Director
<PAGE> 56
CREDIT SUISSE
By: /s/ JAN KOFOL
---------------------------------
Name: Jan Kofol
Title: Member of Senior Management
By: /s/ KRISTINN R. KRISTINSSON
---------------------------------
Name: Kristinn R. Kristinsson
Title: Associate
MELLON BANK, N.A.
By: /s/ LINDA L. DASH
---------------------------------
Name: Linda L. Dash
Title: Asst. Vice President
PNC BANK, KENTUCKY, INC.
By: /s/ JEFFERSON M. GREEN
---------------------------------
Name: Jefferson M. Green
Title: Vice President
TORONTO-DOMINION (TEXAS), INC.
By: /s/ LISA ALLISON
---------------------------------
Name: Lisa Allison
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /s/ ROBERT G. BROOKBY
---------------------------------
Name: Robert G. Brookby
Title: Executive Vice President
4
<PAGE> 57
BANK OF LOUISVILLE AND TRUST
COMPANY
By: /s/ ROY L. JOHNSON, JR.
-----------------------------------
Name: Roy L. Johnson, Jr.
Title: Senior Vice President
BANK ONE, COLUMBUS, NA
By: /s/ JAMES ZOOK
-----------------------------------
Name: James Zook
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ JOSEPH J. TOWELL
-----------------------------------
Name: Joseph H. Towell
Title: Senior Vice President
FLEET BANK OF MASSACHUSETTS
By: /s/ GINGER STOLZENTHALER
-----------------------------------
Name: Ginger Stolzenthaler
Title: Vice President
LTCS TRUST COMPANY
By: /s/ RENE LEBLANC
-----------------------------------
Name: Rene LeBlanc
Title: Senior Vice President
<PAGE> 58
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ DIANA H. IMHOF
-----------------------------------
Name: Diana H. Imhof
Title: Vice President
NATIONAL CITY BANK, KENTUCKY
By: /s/ CHARLES P. DENNY
-----------------------------------
Name: Charles P. Denny
Title: Senior Vice President
NATIONSBANK, N.A.
By: /s/ ASHLEY M. CRABTREE
-----------------------------------
Name: Ashley M. Crabtree
Title: Vice President
NBD BANK
By: /s/ RANDALL K. STEPHENS
-----------------------------------
Name: Randall K. Stephens
Title: Vice President
U.S. BANK OF WASHINGTON NATIONAL
ASSOCIATION
By: /s/ ARNOLD J. CONRAD
-----------------------------------
Name: Arnold J. Conrad
Title: Vice President
6
<PAGE> 1
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER NINE MONTHS
-------------------- --------------------
1995 1994 1995 1994
-------- ------- -------- -------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss):
Income (loss) from operations................... $(62,887) $20,515 $(20,628) $59,562
Preferred stock dividend requirements........... (1,692) (1,719) (5,280) (5,781)
Gain on preferred stock redemption.............. 10,176 - 10,176 -
Other........................................... - - - (179)
-------- ------- -------- -------
Income (loss) available to common
stockholders................................. (54,403) 18,796 (15,732) 53,602
Extraordinary loss on early extinguishment of
debt, net of income tax benefit.............. (19,196) (58) (21,987) (229)
-------- ------- -------- -------
Net income (loss)....................... $(73,599) $18,738 $(37,719) $53,373
======== ======= ======== =======
Shares used in the computation:
Vencor (prior to the Hillhaven Merger):
Weighted average common shares outstanding... 28,367 25,331 27,582 25,020
Dilutive effect of common stock equivalents
and other dilutive securities(a)........... - 852 - 840
-------- ------- -------- -------
Vencor common and common equivalent shares... 28,367 26,183 27,582 25,860
-------- ------- -------- -------
Hillhaven:
Weighted average common shares outstanding... 33,844 33,564 33,751 32,199
Dilutive effect of common stock equivalents
and other dilutive securities(a)........... - 274 - 750
-------- ------- -------- -------
Hillhaven common and common equivalent
shares..................................... 33,844 33,838 33,751 32,949
Merger exchange ratio........................ 0.935 0.935 0.935 0.935
-------- ------- -------- -------
Adjusted Hillhaven common and common
equivalent shares.......................... 31,644 31,639 31,557 30,807
-------- ------- -------- -------
Shares used in earnings (loss) per common
and common equivalent share
computations............................ 60,011 57,822 59,139 56,667
======== ======= ======== =======
Primary earnings (loss) per common and common
equivalent share:
Income (loss) from operations................... $ (.91) $ .32 $ (.27) $ .94
Extraordinary loss on early extinguishment of
debt......................................... (.32) - (.37) -
-------- ------- -------- -------
Net income (loss)....................... $ (1.23) $ .32 $ (.64) $ .94
======== ======= ======== =======
</TABLE>
- ---------------
(a) Dilutive securities are excluded from the computation for net loss reporting
periods.
23
<PAGE> 2
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (CONTINUED)
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER COMMON AND COM-
MON EQUIVALENT SHARE:
Earnings (loss):
Income (loss) available to common
stockholders................................. $(54,403) $18,796 $(15,732) $53,602
Interest addback on convertible securities, net
of income taxes.............................. 2,102 2,557 6,937 7,797
-------- ------- -------- -------
Adjusted income (loss) available to common
stockholders............................... (52,301) 21,353 (8,795) 61,399
Extraordinary loss on early extinguishment of
debt, net of income tax benefit............ (19,196) (58) (21,987) (229)
-------- ------- -------- -------
Net income (loss)....................... $(71,497) $21,295 $(30,782) $61,170
======== ======= ======== =======
Shares used in the computation:
Vencor (prior to Hillhaven Merger):
Weighted average common shares outstanding... 28,367 25,331 27,582 25,020
Dilutive effect of common stock equivalents
and other dilutive securities(a)........... - 5,275 - 5,264
-------- ------- -------- -------
Vencor common and common equivalent shares... 28,367 30,606 27,582 30,284
-------- ------- -------- -------
Hillhaven:
Weighted average common shares outstanding... 33,844 33,564 33,751 32,199
Dilutive effect of common stock equivalents
and other dilutive securities(a)........... - 8,359 - 8,887
-------- ------- -------- -------
Hillhaven common and common equivalent
shares..................................... 33,844 41,923 33,751 41,086
Merger exchange ratio........................ 0.935 0.935 0.935 0.935
-------- ------- -------- -------
Adjusted Hillhaven common and common
equivalent shares.......................... 31,644 39,198 31,557 38,415
-------- ------- -------- -------
Shares used in earnings (loss) per
common and common equivalent share
computations.......................... 60,011 69,804 59,139 68,699
======== ======= ======== =======
Fully diluted earnings (loss) per common and
common equivalent share:
Income (loss) from operations................... $ (.91) $ .31 $ (.27) $ .90
Extraordinary loss on early extinguishment of
debt......................................... (.32) - (.37) -
-------- ------- -------- -------
Net income (loss)....................... $ (1.23) $ .31 $ (.64) $ .90
======== ======= ======== =======
</TABLE>
- ---------------
(a) Dilutive securities are excluded from the computation for net loss reporting
periods.
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS AND NINE
MONTHS ENDED SEPTEMBER 30, 1995 AND THE CONDENSED CONSOLIDATED BALANCE SHEET AS
OF SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 76,872
<SECURITIES> 0
<RECEIVABLES> 332,287
<ALLOWANCES> (16,135)
<INVENTORY> 25,565
<CURRENT-ASSETS> 507,756
<PP&E> 1,492,192
<DEPRECIATION> (344,582)
<TOTAL-ASSETS> 1,843,892
<CURRENT-LIABILITIES> 275,227
<BONDS> 922,165
<COMMON> 16,214
0
0
<OTHER-SE> 575,114
<TOTAL-LIABILITY-AND-EQUITY> 1,843,892
<SALES> 1,705,831
<TOTAL-REVENUES> 1,705,831
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,676,381
<LOSS-PROVISION> 6,552
<INTEREST-EXPENSE> 47,798
<INCOME-PRETAX> (14,868)
<INCOME-TAX> 5,760
<INCOME-CONTINUING> (20,628)
<DISCONTINUED> 0
<EXTRAORDINARY> (21,987)
<CHANGES> 0
<NET-INCOME> (42,615)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
</TABLE>
