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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 1-10989
VENCOR, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 61-1055020
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3300 PROVIDIAN CENTER
400 WEST MARKET STREET
LOUISVILLE, KY 40202
(Address of principal executive offices) (Zip Code)
</TABLE>
(502) 596-7300
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
Common Stock, par value $.25 per share ON WHICH REGISTERED
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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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 by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment of this Form 10-K. [X]
As of March 3, 1997, there were 68,938,295 shares of the Registrant's Common
Stock, $.25 par value, outstanding. The aggregate market value of the shares
of Registrant held by non-affiliates of the Registrant, based on the closing
price of such stock on the New York Stock Exchange on March 3, 1997, was
approximately $2,215,208,000. For purposes of the foregoing calculation only,
all directors and executive officers of the Registrant have been deemed
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
A portion of Part III is incorporated by reference from the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held on May 15,
1997. A portion of Part II is incorporated by reference from the Registrant's
Annual Report to Stockholders for the year ended December 31, 1996.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 24
Item 3. Legal Proceedings........................................... 24
Item 4. Submission of Matters to a Vote of Security Holders......... 25
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 26
Item 6. Selected Financial Data..................................... 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 28
Item 8. Financial Statements and Supplementary Data................. 31
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 31
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 32
Item 11. Executive Compensation...................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 32
Item 13. Certain Relationships and Related Transactions.............. 32
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 32
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PART I
ITEM 1. BUSINESS
GENERAL
Vencor, Inc. ("Vencor" or the "Company") is one of the nation's largest
providers of healthcare services primarily focusing on the needs of the
elderly. At December 31, 1996, the Company's operations included 38 long-term
acute care hospitals containing 3,325 licensed beds, 313 skilled nursing
centers containing 39,619 licensed beds, 34 institutional pharmacies and,
through its affiliate, Atria Communities, Inc. ("Atria"), 21 assisted and
independent living communities with 2,942 units. Healthcare services provided
through this network of facilities included long-term intensive hospital care,
nursing care, contract respiratory therapy services, acute cardiopulmonary
care, subacute and post-operative care, inpatient and outpatient
rehabilitation therapy, specialized care for Alzheimer's disease, hospice
care, home health care, pharmacy services and assisted and independent living.
At December 31, 1996, the Company was providing contract healthcare services
to over 4,000 nursing and subacute care centers. The Company also continues to
develop VenTouch(TM), formerly known as ProTouch(R), a comprehensive paperless
clinical information system designed to increase the operating efficiencies of
the Company's facilities.
The Company was incorporated in Kentucky in 1983 as Vencare, Inc. and
commenced operations in 1985. It was reorganized as a Delaware corporation in
1987. The Company changed its name to Vencor, Incorporated in 1989 and to
Vencor, Inc. in 1993. On September 28, 1995, The Hillhaven Corporation
("Hillhaven") merged into the Company (the "Hillhaven Merger").
This Report contains a number of forward-looking statements. These
statements are qualified by reference to the cautionary statements set forth
under "Business--Additional Company Information--Cautionary Statements."
VENCOR STRATEGY
The healthcare system of the United States remains in a period of
significant change. Factors affecting the healthcare system include cost
containment, the expansion of managed care, improved medical technology, an
increased focus on measurable medical outcomes, and a growing public awareness
of healthcare spending by governmental agencies at the federal and state
levels.
At the same time, the Company believes that the need for long-term care is
increasing. Improved medical care and advances in medical technology increase
the survival rates for victims of disease and trauma of all ages. Many of
these patients never fully recover and require long-term care. The incidence
of chronic problems increases with age, particularly in connection with
certain degenerative conditions. As the average age of the United States
population increases, the Company believes there will be an increase in the
need for long-term care at all levels of the continuum of care.
Payors are increasingly requiring providers to move patients from high-
acuity care environments to lower-acuity care settings as quickly as is
medically appropriate. The Company is positioned to respond to this trend.
With the addition of its home health services, the Company now provides a full
range of clinical expertise, as well as advanced technologies for cost-
efficiencies, to accommodate patients at any level of long-term care.
The Company is continuing to develop full-service integrated networks to
meet the range of needs of patients requiring long-term care. The Company is
continuing to integrate and expand the operations of its long-term acute care
hospitals and skilled nursing centers and is also investigating and developing
related healthcare services. The Company is exploring other ways in which it
can transfer its expertise in the efficient delivery of cardiopulmonary and
other long-term care to other healthcare businesses. Such efforts may include
affiliating with or acquiring other healthcare businesses.
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The Company's strategy for implementing full-service integrated networks for
long-term care is set forth below.
Focus on Long-Term Care Continuum. The Company intends to continue expanding
its long-term care network. The Company conducts market research prior to
entering new markets, which research may address: (i) the need for placement
of long-term patients or residents, (ii) existing provider referral patterns,
(iii) the presence of competitors, (iv) payor mix, and (v) the political and
regulatory climate.
On March 21, 1997, the Company completed its acquisition of TheraTx,
Incorporated ("TheraTx") (the "TheraTx Merger"), a provider of subacute
rehabilitation and respiratory therapy management services to skilled nursing
facilities and an operator of 29 skilled nursing facilities that provide a
broad range of subacute, specialty and basic medical and other geriatric
services. For additional information regarding the TheraTx Merger, see
"Business--Recent Developments." Although the Company is continually
considering opportunities for future growth and is actively negotiating to
acquire additional facilities and related healthcare businesses, as of March
21, 1997, the Company had not entered into any agreements regarding future
acquisitions.
From time to time, the Company may also sell all or a portion of its
interest in a facility or business where such disposition would be in the best
interest of the Company. During 1996, Vencor sold a portion of its interest in
its assisted and independent living communities through the formation of Atria
and the initial public offering of Atria's common stock in August 1996 (the
"IPO"). In addition, the Company entered into a definitive agreement in
November 1996 to sell 34 of its nursing facilities to Lenox Healthcare, Inc.,
a privately held company based in Pittsfield, Massachusetts.
Expand Specialty Care Services. The Company intends to continue to expand
the specialty care programs and services at its nursing centers. These
services generally produce higher revenues than do routine nursing care
services and serve to differentiate the Company's facilities from others in a
given market. The Company is focusing on the expansion of its subacute,
medical and rehabilitation services, including physical, occupational and
speech therapies, wound care, oncology treatment, brain injury care, stroke
therapy and orthopedic therapy.
Expand Vencare Contract Services. In 1993, the Company initiated its Vencare
program of providing respiratory therapy and subacute care services in nursing
and hospital facilities owned by third parties. The Vencare program also
currently includes hospice care, management of cardiopulmonary hospital
departments, rehabilitation therapy services, and mobile radiology services.
Vencare enables the Company to provide its services to lower acuity, subacute
patients in cost-efficient settings. In November 1996, Medisave Pharmacies,
Inc. (acquired as part of the Hillhaven Merger) was consolidated into the
Company's Vencare health services operations and renamed Vencare Pharmacy
Services. Vencare Pharmacy Services provides hospital-based clinical pharmacy
services and institutional pharmacy services. Vencare services are provided
pursuant to contracts with nursing and subacute care centers and hospitals.
The Company intends to continue to expand its Vencare program.
Expand Home Health Services. During the summer of 1996, the Company
consolidated its home health services business to establish Vencor Home Health
Services. The Company intends to expand its home health and infusion services
as an affordable and practical approach to many healthcare needs. These
services include home health nursing and home infusion products and services.
The expansion of home health services extends Vencor's continuum of care to
the lowest cost setting.
Further Implement Patient Information System. In 1993, the Company formed
Ventech Systems, Inc. ("Ventech") to develop the VenTouch(TM) electronic
patient medical record system. During 1996, the Company consolidated Ventech's
operations into its information systems operations. VenTouch(TM) is a software
application which allows nurses, physicians and other clinicians to access and
manage clinical information utilized in the healthcare delivery process. Among
the features of VenTouch(TM) are on-line access and update of an electronic
patient chart, on-line trend analysis using electronic flowsheets and graphs,
and remote access for authorized users. The system is designed to decrease
administrative time, reduce paper and support the delivery of quality care.
The Company had installed VenTouch(TM) in all of its existing hospitals during
1995 and began installing
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VenTouch(TM) in its nursing centers in 1996. In addition, during 1997, the
Company intends to offer its VenTouch(TM) information system as part of the
menu of services offered by Vencare to skilled nursing centers not owned by
the Company.
This section contains a number of forward-looking statements. These
statements are qualified by reference to the cautionary statements set forth
under "Business--Additional Company Information--Cautionary Statements."
RECENT DEVELOPMENTS
On March 21, 1997, the Company consummated the TheraTx Merger. The TheraTx
Merger was structured as a cash tender offer in which the Company paid $17.10
for each outstanding share of TheraTx common stock. Following the completion
of the tender offer, the Company merged its acquisition subsidiary with and
into TheraTx and TheraTx became a wholly-owned subsidiary of the Company. Upon
consummation of the TheraTx Merger, each share of TheraTx common stock not
purchased through the tender offer was converted into the right to receive
$17.10 in cash.
TheraTx provides subacute rehabilitation and respiratory therapy program
management services to skilled nursing facilities and operates 29 skilled
nursing facilities that provide a broad range of subacute, specialty and basic
medical and other geriatric services. TheraTx also provides occupational
healthcare and related services in outpatient clinics. In addition to its
primary practice areas, TheraTx also operates two outpatient surgery centers,
one acute-care specialty hospital and 16 occupational health facilities,
provides respiratory therapy and related services to hospitals and provides
medical supply distribution and related services to the long-term healthcare
industry.
TheraTx utilizes a proprietary clinical information system, TheraSys(R),
which measures clinical outcomes and clinical efficiency of care for its
rehabilitation services. TheraSys(R) allows for direct entry of patient
information into the system and facilitates the accumulation and analyses of
patient care data. Using the data derived from TheraSys(R), TheraTx's clinical
teams can better manage patient, family and payor expectations about the
likely length, cost and results of therapy.
HOSPITAL OPERATIONS
The Company's hospitals primarily provide long-term acute care to medically
complex, chronically ill patients. The Company's hospitals have the capability
to treat patients who suffer from multiple systemic failures or conditions
such as neurological disorders, head injuries, brain stem and spinal cord
trauma, cerebral vascular accidents, chemical brain injuries, central nervous
system disorders, developmental anomalies and cardiopulmonary disorders.
Chronic patients are often dependent on technology for continued life support,
such as mechanical ventilators, total parenteral nutrition, respiration or
cardiac monitors and dialysis machines. Generally, approximately 60% of the
Company's chronic patients are ventilator-dependent for some period of time
during their hospitalization. The Company's patients suffer from conditions
which require a high level of monitoring and specialized care, yet may not
necessitate the continued services of an intensive care unit. Due to their
severe medical conditions, the Company's hospital patients generally are not
clinically appropriate for admission to a skilled nursing facility or
rehabilitation hospital. The medical condition of most of the Company's
hospital patients is periodically or chronically unstable. By combining
general acute care services with the ability to care for chronic patients, the
Company believes that its long-term hospitals provide its patients with high
quality, cost-effective care. During 1996, the average length of stay for
chronic patients in the Company's long-term hospitals was approximately 50
days. Although the Company's patients range in age from pediatric to
geriatric, typically more than 70% of the Company's chronic patients are over
65 years of age.
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HOSPITAL FACILITIES
The following table lists by state the number of hospitals and related
licensed beds owned and leased by the Company as of December 31, 1996:
<TABLE>
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NUMBER OF FACILITIES
LICENSED -----------------------
STATE BEDS OWNED LEASED TOTAL
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Arizona.................................. 110 2 - 2
California............................... 506 6 - 6
Colorado................................. 68 1 - 1
Florida.................................. 338 4 1 5
Georgia.................................. 72 - 1 1
Illinois................................. 365 3 - 3
Indiana.................................. 121 2 - 2
Kentucky................................. 374 1 - 1
Massachusetts............................ 40 1 - 1
Michigan................................. 160 1 - 1
Missouri................................. 227 2 - 2
North Carolina........................... 124 1 - 1
Oklahoma................................. 59 1 - 1
Pennsylvania............................. 101 2 - 2
Tennessee................................ 49 1 - 1
Texas.................................... 345 5 1 6
Virginia................................. 206 1 - 1
Wisconsin................................ 60 1 - 1
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Totals................................. 3,325 35 3 38
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SERVICES PROVIDED BY COMPANY HOSPITALS
Chronic. The Company has devised a comprehensive program of care for its
chronic patients that draws upon the talents of interdisciplinary teams,
including licensed pulmonary specialists. The teams evaluate chronic patients
upon admission to determine a treatment plan. Where appropriate, the treatment
programs may involve the services of several disciplines, such as pulmonary
and physical therapy. Individual attention to patients who have the cognitive
and physical abilities to respond to therapy is emphasized. Patients who
successfully complete treatment programs are discharged to skilled nursing
facilities, rehabilitation hospitals or home care settings.
General Acute Care. The Company operates two general acute care hospitals.
Certain of the Company's long-term hospitals also provide general acute care
and outpatient services in support of their long-term care services. Certain
of the Company's hospitals maintain subacute units. General acute care and
outpatient services may include inpatient services, diagnostic services,
emergency services, CT scanning, one-day surgery, hospice services,
laboratory, X-ray, respiratory therapy, cardiology and physical therapy. The
Company may expand its general acute care and outpatient services as its long-
term hospitals mature.
Major factors contributing to the growth in demand for the Company's
intensive care hospital services include the following:
Increased Patient Population. Improved medical care and advancements in
medical technology have increased the survival rates for infants born with
severe medical problems, as well as victims of disease and trauma of all ages.
Many of these patients never fully recover and require long-term hospital
care. The incidence of chronic respiratory problems increases with age,
particularly in connection with certain degenerative conditions. As the
average age of the United States population increases, the Company believes
there will be an increase in the need for long-term hospital care.
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Medically Displaced Patients. The Company's hospital patients require a high
level of monitoring and specialized care, yet may not require the continued
services of an intensive care unit. Due to their extended recovery period, the
Company's hospital patients generally do not receive specialized
multidisciplinary treatment focused on the unique aspects of a long-term
recovery program in a general acute care hospital and yet cannot qualify for
admission to a skilled nursing facility or rehabilitation hospital.
Economically Displaced Patients. Historically, reimbursement policies and
practices designed to control healthcare costs have made it difficult to place
medically complex, chronically ill patients in an appropriate healthcare
setting. Under the Medicare program, general acute care hospitals are
reimbursed under the prospective payment system ("PPS"), a fixed payment
system which provides an economic incentive to general acute care hospitals to
minimize the length of patient stay. As a result, these hospitals generally
receive less than full cost for providing care to patients with extended
lengths of stay. Furthermore, PPS does not provide for reimbursement more
frequently than once every 60 days, placing an additional economic burden on a
general acute care hospital providing long-term care. The Company's long-term
hospitals, however, are exempt from PPS and thus receive reimbursement on a
more favorable basis for providing long-term hospital care to Medicare
patients. Commercial reimbursement sources, such as insurance companies and
health maintenance organizations ("HMOs"), some of which pay based on
established hospital charges, typically seek the most economical source of
care available. The Company believes that its emphasis on long-term hospital
care allows it to provide high quality care to chronic patients on a cost-
effective basis.
HOSPITAL PATIENT ADMISSION
Substantially all of the acute and medically complex patients admitted to
the Company's hospitals are transfers from other healthcare providers.
Patients are referred from general acute care hospitals, rehabilitation
hospitals, skilled nursing facilities and home care settings. Referral sources
include discharge planners, case managers of managed care plans, social
workers, physicians, third party administrators, HMOs and insurance companies.
The Company employs case managers who educate healthcare professionals from
other hospitals as to the unique nature of the services provided by the
Company's long-term hospitals. The case managers develop an annual admission
plan for each hospital with assistance from the hospital's administrator. To
identify specific service opportunities, the admission plan for each hospital
is based on a variety of factors, including population characteristics,
physician characteristics and incidence of disability statistics. The
admission plans involve ongoing education of local physicians, utilization
review and case management personnel, acute care hospitals, HMOs and preferred
provider organizations ("PPOs"). The Company maintains a pre-admission
assessment system at its regional referral centers to evaluate certain
clinical and other information in determining the appropriateness of each
patient referred to its hospitals.
PROFESSIONAL STAFF
Each of the Company's hospitals is staffed with a multidisciplinary team of
healthcare professionals. A professional nursing staff trained to care for the
long-term acute patient is on duty 24 hours each day in the Company's
hospitals. Other professional staff includes respiratory therapists, physical
therapists, occupational therapists and registered dietitians.
The physicians at the Company's hospitals generally are not employees of the
Company and may also be members of the medical staff of other hospitals. Each
of the Company's hospitals has a fully credentialled, multispecialty medical
staff to meet the needs of the patients. Each patient is visited at least once
a day by a physician. Typically, the Company does not enter into exclusive
contracts with physicians to provide services to its hospital patients. The
Company's hospitals and physicians enter into service contracts providing for
pulmonary, radiology, pathology, infection control and anesthesiology
services, most of which are cancelable on no more than 90 days' notice.
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The Company believes that its future success will depend in large part upon
its continued ability to hire and retain qualified personnel. The Company
seeks the highest quality of professional staff within each market.
CENTRALIZED MANAGEMENT AND OPERATIONS
A hospital administrator supervises and is responsible for the day-to-day
operations at each of the Company's hospitals. Each hospital also employs a
controller who monitors the financial matters of each hospital, including the
measurement of actual operating results compared to goals established by the
Company. In addition, each hospital employs an assistant administrator to
oversee the clinical operations of the hospital and a quality assurance
manager to direct an integrated quality assurance program. The Company's
corporate headquarters provides services in the areas of system design and
development, training, human resource management, reimbursement expertise,
legal advice, technical accounting support, purchasing and facilities
management. Financial control is maintained through fiscal and accounting
policies that are established at the corporate level for use at each hospital.
The Company has standardized operating procedures and monitors its hospitals
to assure consistency of operations.
HOSPITAL MANAGEMENT INFORMATION SYSTEM
The financial information for each Company hospital is centralized at the
corporate headquarters through its management information system. The Company
installed its VenTouch(TM) information system, an electronic patient medical
record system, in all of the Company's hospitals in 1995. See "Business--
Management Information System."
QUALITY ASSESSMENT AND IMPROVEMENT
The Company maintains a strategic outcomes program which includes a
centralized pre-admission evaluation program and concurrent review of all of
its patient population against utilization and quality screenings, as well as
quality of life outcomes data collection and patient and family satisfaction
surveys. In addition, each hospital has an integrated quality assessment and
improvement program administered by a quality review manager which encompasses
utilization review, quality improvement, infection control and risk
management. The objective of these programs is to ensure that patients are
appropriately admitted to the Company's hospitals and that quality healthcare
is rendered to them in a cost-effective manner.
The Company has implemented a program whereby its hospitals will be reviewed
annually by internal quality auditors for compliance with standards of the
Joint Commission on Accreditation of Health Care Organizations ("JCAHO"). The
purposes of this internal review process are to (i) ensure ongoing compliance
with industry recognized standards for hospitals, (ii) assist management in
analyzing each hospital's operations and (iii) provide consulting and
educational opportunities for each hospital to identify opportunities to
improve patient care.
SELECTED HOSPITAL OPERATING DATA
The following table sets forth certain operating data for the Company's
hospitals:
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YEAR ENDED DECEMBER 31,
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1996 1995 1994
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Hospitals in operation at end of period........... 38 36 33
Number of licensed beds at end of period.......... 3,325 3,263 2,511
Patient days...................................... 586,144 489,612 403,623
Average daily census.............................. 1,601 1,341 1,123
Occupancy percentage.............................. 53.7% 47.6% 48.8%
</TABLE>
As used in the above table, the term "licensed beds" refers to the maximum
number of beds permitted in the hospital under its license regardless of
whether the beds are actually available for patient care. "Patient days"
refers to the total number of days of patient care provided by the Company's
hospitals for the periods indicated.
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"Average daily census" is computed by dividing each hospital's patient days by
the number of calendar days the respective hospital is in operation.
"Occupancy percentage" is computed by dividing average daily census by the
number of licensed beds, adjusted for the length of time each facility was in
operation during each respective period.
SOURCES OF HOSPITAL REVENUES
The Company receives payment for hospital services from third-party payors,
including government reimbursement programs such as Medicare and Medicaid and
nongovernment sources such as commercial insurance companies, HMOs, PPOs and
contracted providers. Patients covered by nongovernment payors are generally
more profitable to the Company than those covered by Medicare and Medicaid
programs. The following table sets forth the approximate percentages of the
Company's hospital revenues derived from the specified payor sources
indicated:
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YEAR ENDED
DECEMBER 31,
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1996 1995 1994
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Medicare...................................................... 59% 57% 56%
Medicaid...................................................... 12 12 11
Private and other............................................. 29 31 33
</TABLE>
For the year ended December 31, 1996, hospital revenues totaled
approximately $551 million, or 21% of the Company's total revenues.
HOSPITAL COMPETITION
As of December 31, 1996, the hospitals owned, leased or managed by the
Company were located in 33 geographic markets in 18 states. In each geographic
market, there are general acute care hospitals which provide services
comparable to those offered by the Company's hospitals. In addition, the
Company believes that as of December 31, 1996, there were approximately 160
hospitals in the United States certified by Medicare as general long-term
hospitals, some of which provide similar cardiopulmonary services to those
provided by the Company's hospitals. Many of these long-term hospitals are
larger and more established than the Company's hospitals. Certain hospitals
that compete with the Company's hospitals are operated by not-for-profit,
nontaxpaying or governmental agencies, which can finance capital expenditures
on a tax-exempt basis, and which receive funds and charitable contributions
unavailable to the Company's hospitals. Cost containment efforts by federal
and state governments and other third-party payors designed to encourage more
efficient utilization of hospital services have generally resulted in lower
hospital industry occupancy rates in recent years. As a result of these
efforts, a number of acute care hospitals have converted to specialized care
facilities. Some hospitals are developing step-down units which attempt to
serve the needs of patients who require care at a level between that provided
by an intensive care unit and a general medical/surgical floor. This trend is
expected to continue due to the current oversupply of acute care hospital beds
and the increasing consolidation and affiliation of free-standing hospitals
into larger systems. As a result, the Company may experience increased
competition from existing hospitals and converted facilities.
Competition for patients covered by nongovernment reimbursement sources is
intense. The primary competitive factors in the long-term intensive care
business include quality of services, charges for services and responsiveness
to the needs of patients, families, payors and physicians. Other companies
have entered the long-term intensive care market with licensed hospitals that
compete with the Company's hospitals.
Some skilled nursing facilities, while not licensed as hospitals, have
developed units which provide a greater intensity of care than the care
typically provided by a skilled nursing facility. The condition of patients in
these skilled nursing facilities is less acute than the condition of patients
cared for in the Company's hospitals.
The competitive position of any hospital, including the Company's hospitals,
is also affected by the ability of its management to negotiate contracts with
purchasers of group healthcare services, including private
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employers, PPOs and HMOs. Such organizations attempt to obtain discounts from
established hospital charges. The importance of obtaining contracts with PPOs,
HMOs and other organizations which finance healthcare, and its effect on a
hospital's competitive position, vary from market to market, depending on the
number and market strength of such organizations.
The Company also competes with other healthcare companies for hospital and
other healthcare acquisitions.
HOSPITAL REGULATION
The healthcare industry is subject to regulation by a number of government
and private agencies. Regulatory activities affect the Company's business
activities by controlling its growth, requiring licensure and certification
for its hospitals, regulating the use of its properties and controlling
reimbursement to the Company for services provided.
Certificates of Need and State Licensing. Certificates of Need ("CON")
regulations control the development and expansion of healthcare services and
facilities in certain states. CON laws generally provide that approval must be
obtained from the designated state health planning agency prior to the
expansion of existing facilities, construction of new facilities, addition of
beds, acquisition of major items of equipment or introduction of new services.
The stated objective of the CON process is to promote quality healthcare at
the lowest possible cost and avoid unnecessary duplication of services,
equipment and facilities. Recently, some states (including Florida,
Massachusetts and Tennessee) have amended their CON regulations to require CON
approval prior to the conversion of a hospital from general short-term
facility to a general long-term facility. Of the 18 states in which the
Company's hospitals were located as of December 31, 1996, Florida, Georgia,
Illinois, Kentucky, Massachusetts, Michigan, Missouri, North Carolina,
Pennsylvania, Tennessee, Virginia and Wisconsin have CON programs. With one
exception, the Company was not required to obtain a CON in connection with
previous acquisitions, due to the relatively low renovation costs and the
absence of the need for additional licensed beds or changes in services. CONs
may be required in connection with the Company's future hospital and contract
services expansion. There can be no assurance that the Company will be able to
obtain the CONs necessary for any or all future projects. If the Company is
unable to obtain the requisite CONs, its growth and business could be
adversely affected.
State licensing of hospitals is a prerequisite to the operation of each
hospital and to participation in government programs. Once a hospital becomes
licensed and operational, it must continue to comply with federal, state and
local licensing requirements in addition to local building and life-safety
codes. All of the Company's hospitals in operation have obtained the necessary
licenses to conduct business.
Medicare and Medicaid. Medicare is a federal program that provides certain
hospital and medical insurance benefits to persons age 65 and over and certain
disabled persons. Medicaid is a medical assistance program administered by
each state pursuant to which hospital benefits are available to certain
indigent patients. Within the Medicare and Medicaid statutory framework, there
are substantial areas subject to administrative rulings, interpretations and
discretion which may affect payments made under Medicare and Medicaid. A
substantial portion of the Company's hospital revenues is derived from
patients covered by Medicare and Medicaid. See "Business--Hospital
Operations--Sources of Hospital Revenues."
In order to receive Medicare reimbursement, each hospital must meet the
applicable conditions of participation set forth by the Department of Health
and Human Services ("HHS") relating to the type of hospital, its equipment,
personnel and standard of medical care, as well as comply with state and local
laws and regulations. The Company has developed a management system to ensure
compliance with the various standards and requirements. Each of the Company's
hospitals employs a person who is responsible for an on-going quality
assessment and improvement program. Hospitals undergo periodic on-site
Medicare certification surveys, which are generally limited if the hospital is
accredited by JCAHO. As of December 31, 1996, all of the Company's hospitals
were certified as Medicare providers, and 36 of its hospitals were also
certified by their respective state Medicaid programs. Applications are
pending for Medicaid certification with respect to the Company's other
10
<PAGE>
hospitals. A loss of certification could adversely affect a hospital's ability
to receive payments from Medicare and Medicaid programs.
Prior to 1983, Medicare reimbursed hospitals for the reasonable direct and
indirect cost of the services provided to beneficiaries. The Social Security
Amendments of 1983 implemented PPS as a means of controlling healthcare costs.
Under PPS, Medicare inpatient costs are reimbursed based upon a fixed payment
amount per discharge using diagnosis related groups ("DRGs"). The DRG payment
under PPS is based upon the national average cost of treating a Medicare
patient's condition. Although the average length of stay varies for each DRG,
the average stay for all Medicare patients subject to PPS is approximately six
days. An additional outlier payment is made for patients with unusually
extended lengths of stay or higher treatment costs. Outlier payments are only
designed to cover marginal costs. Additionally, PPS payments can only be made
once every 60 days. Thus, PPS creates an economic incentive for general short-
term hospitals to discharge chronic Medicare patients as soon as clinically
possible. Hospitals that are certified by Medicare as general long-term
hospitals are excluded from PPS. Management believes that the incentive for
short-term hospitals to discharge chronic medical patients as soon as
clinically possible creates a substantial referral source for the Company's
general long-term hospitals.
The Social Security Amendments of 1983 exempted psychiatric, rehabilitation,
cancer, children's and general long-term hospitals from PPS. A general long-
term hospital is defined as a hospital which has an average length of stay
greater than 25 days. Inpatient operating costs for general long-term
hospitals are reimbursed under the cost-based reimbursement system, subject to
a computed target rate (the "Target") per discharge for inpatient operating
costs established by the Tax Equity and Fiscal Responsibility Act of 1982
("TEFRA"). Until October 1991, Medicare operating costs per discharge in
excess of the Target were not reimbursed. Effective October 1, 1991, Medicare
operating costs in excess of the Target are reimbursed at the rate of 50% of
the excess up to 10% of the Target. Hospitals whose operating costs are lower
than the Target are reimbursed their actual costs plus an incentive. The
incentive is equal to 50% of the difference between their actual costs and the
Target and may not exceed 5% of the Target. New hospitals may apply for an
exemption from the TEFRA Target provisions. For hospitals certified prior to
October 1, 1992, the exemption was optional and, if granted, lasted for three
years. For certifications after October 1, 1992, the exemption is automatic
and is effective for two years. As of December 31, 1996, 32 of the Company's
hospitals were subject to TEFRA Target provisions. The Company's other
hospitals were not subject to TEFRA because they had qualified for the new
hospital exemptions described above. During 1997, three more of the Company's
hospitals will become subject to TEFRA Target provisions. The TEFRA limits
have not had a material adverse effect on the Company's results of operations,
and the Company does not expect that the TEFRA limits will have a material
effect on the Company's results of operations in 1997.
Medicare and Medicaid reimbursements are generally determined from annual
cost reports filed by the Company which are subject to audit by the respective
agency administering the programs. Management believes that adequate
provisions for loss have been recorded to reflect any adjustments which could
result from audits of these cost reports. Adjustments to the Company's cost
reports have not had an adverse effect on the Company's hospital operating
results.
Federal regulations provide that admission to and utilization of hospitals
by Medicare and Medicaid patients must be reviewed by peer review
organizations ("PROs") in order to ensure efficient utilization of hospitals
and services. A PRO may conduct such review either prospectively or
retroactively and may, as appropriate, recommend denial of payments for
services provided to a patient. Such review is subject to administrative and
judicial appeal. Each of the Company's hospitals employs a clinical
professional to administer the hospital's integrated quality assurance and
improvement program, including its utilization review program. PRO denials
have not had an adverse effect on the Company's hospital operating results.
Medicare and Medicaid antifraud and abuse amendments codified under Section
1128B(b) of the Social Security Act (the "Antifraud Amendments") prohibit
certain business practices and relationships that might affect the provision
and cost of healthcare services reimbursable under Medicare and Medicaid.
Sanctions for
11
<PAGE>
violating the Antifraud Amendments include criminal and civil penalties and
exclusion from the Medicare and Medicaid programs. Pursuant to the Medicare
and Medicaid Patient and Program Protection Act of 1987, HHS and the Office of
the Inspector General ("OIG") specified certain "safe harbors" which describe
conduct and business relationships permissible under the Antifraud Amendments.
These "safe harbor" regulations may result in more aggressive enforcement of
the Antifraud Amendments by HHS and the OIG.
Section 1877 of the Social Security Act (commonly known as "Stark I") states
that a physician who has a financial relationship with a clinical laboratory
is generally prohibited from referring patients to that laboratory. The
Omnibus Budget Reconciliation Act of 1993 contains provisions ("Stark II")
amending Section 1877 to greatly expand the scope of Stark I. Effective
January 1995, Stark II broadened the referral limitations of Stark I to
include, among other designated health services, inpatient and outpatient
hospital services. Under Stark I and Stark II (collectively referred to as the
"Stark Provisions"), a "financial relationship" is defined as an ownership
interest or a compensation arrangement. If such a financial relationship
exists, the entity is generally prohibited from claiming payment for such
services under the Medicare or Medicaid programs. Compensation arrangements
are generally exempted from the Stark Provisions if, among other things, the
compensation to be paid is set in advance, does not exceed fair market value
and is not determined in a manner that takes into account the volume or value
of any referrals or other business generated between the parties. The Company
expects that business practices of providers and financial relationships
between providers will be subject to increased scrutiny as healthcare reform
efforts continue on federal and state levels.
Healthcare Reform. In recent years, an increasing number of legislative
proposals have been introduced or proposed in Congress and in some state
legislatures which could effect major changes in the healthcare system. In
October 1993, the Clinton Administration submitted comprehensive healthcare
reform legislation to Congress designed to provide, among other things, for
universal access to healthcare. Neither the Clinton Administration's plan nor
other healthcare reform legislation was enacted by Congress. More recently, a
significant effort has been initiated in Congress and the Clinton
Administration to balance the federal budget in seven years. This effort could
include significant reductions in Medicare and Medicaid spending, which may be
achieved through restrictions on growth of healthcare costs, implementation of
various aggregate cost limits, or a restructuring of Medicaid through block
grants to the states. The Company believes that implementation of block grants
to the states could add incentives to provide an increased amount of
healthcare services through managed care health plans.
A number of legislative proposals have included a moratorium on the
designation of additional long-term hospitals and changes in the Medicare
reimbursement system for long-term hospitals. However, the Company cannot
predict the content of any healthcare or budget reform legislation which may
be proposed in Congress or in state legislatures in the future, and whether
such legislation, if any, will be adopted. Accordingly, the Company is unable
to assess the effect of any such legislation on its business. There can be no
assurance that any such legislation will not have a material adverse impact on
the Company's future growth, revenues and income.
Gramm-Rudman. The Company's Medicare revenues may be adversely affected by
the Balanced Budget and Emergency Deficit Control Act of 1985, as amended
("Gramm-Rudman"). Under Gramm-Rudman, if the Office of Management and Budget
and the Congressional Budget Office determine that the federal deficit will
exceed certain specified levels for a federal fiscal year through 1998,
sufficient reductions in federal spending must be made to remove the excess
deficit. One-half of these reductions must be made in nondefense programs.
Although Medicaid funding is exempt from reductions under Gramm-Rudman, the
Medicare program is not. If reductions are made in the Medicare program, each
payment to providers that is paid on a reasonable cost basis may be reduced.
Payment reductions under Gramm-Rudman in federal fiscal years through 1998
could have an adverse effect on the Company's revenues and earnings. However,
because the actual amount of the reduction for any fiscal year may vary
according to the federal deficit, the financial impact of Gramm-Rudman on the
Company's results of operations cannot be predicted.
JCAHO Accreditation. Hospitals receive accreditation from JCAHO, a
nationwide commission which establishes standards relating to the physical
plant, administration, quality of patient care and operation of
12
<PAGE>
medical staffs of hospitals. Generally, hospitals and certain other healthcare
facilities are required to have been in operation at least six months in order
to be eligible for accreditation by JCAHO. After conducting on-site surveys,
JCAHO awards accreditation for up to three years to hospitals found to be in
substantial compliance with JCAHO standards. Accredited hospitals are
periodically resurveyed, at the option of JCAHO, upon a major change in
facilities or organization and after merger or consolidation. As of December
31, 1996, 36 of the Company's hospitals were accredited by JCAHO. The Company
intends to apply for JCAHO accreditation for its other hospitals within the
next year. The Company intends to seek and obtain JCAHO accreditation for any
additional facilities it may purchase or lease and convert into long-term
hospitals. The Company does not believe that the failure to obtain JCAHO
accreditation at any hospital would have a material adverse effect on its
results of operations.
State Regulatory Environment. The Company currently operates five hospitals
and a chronic unit in Florida, a state which regulates hospital rates. These
operations contribute a significant portion of the Company's revenues and
operating income from its hospitals. Accordingly, the Company's hospital
revenues and operating income could be materially adversely affected by
Florida rate setting laws or other cost containment efforts. The Company also
operates six hospitals in Texas, six hospitals in California, and three
hospitals in Illinois which contribute a significant portion of the Company's
revenues and operating income from its hospitals. Although Texas, California
and Illinois do not currently regulate hospital rates, the adoption of such
legislation or other cost containment measures in these or other states could
have a material adverse effect on the Company's hospital revenues and
operating income. The Company is unable to predict whether and in what form
such legislation will be adopted. The Company's revenues and operating income
could be adversely affected by other state rate setting laws. Certain other
states in which the Company operates hospitals require disclosure of specified
financial information. In evaluating markets for expansion, the Company
considers the regulatory environment, including but not limited to, any
mandated rate setting.
VENCARE HEALTH SERVICES OPERATIONS
In 1993, the Company initiated its Vencare health services program. Through
Vencare, the Company has expanded the scope of its cardiopulmonary care by
providing subacute care, rehabilitation therapy and respiratory care services
and supplies to nursing and subacute care centers. The Company also manages
cardiopulmonary departments for other hospitals. The Company provides hospice
services to nursing center patients, hospital patients and persons in private
residences. In November 1996, the Company consolidated its pharmacy operations
under its Vencare health services. For the year ended December 31, 1996,
revenues from the Vencare program totaled approximately $387 million which
represented 15% of the Company's total revenues.
RESPIRATORY CARE SERVICES
The Company provides respiratory care services and supplies to nursing and
subacute center patients pursuant to contracts between the Company and the
nursing center or subacute center. The services are provided by respiratory
therapists based at the Company's hospitals. These respiratory therapists
perform a wide variety of procedures, including oxygen therapy, bronchial
hygiene, nebulizer and aerosol treatments, tracheostomy care, ventilator
management and patient respiratory education. Pulse oximeters and arterial
blood gas machines are used to evaluate the patient's condition, as well as
the effectiveness of the treatment. The Company also provides respiratory
equipment and supplies to nursing and subacute centers.
The Company receives payments from the nursing centers and subacute centers
for services rendered and these facilities, in turn, receive payments from the
appropriate provider. Respiratory therapy and supplies are generally covered
under the Medicare program and reimbursed as an ancillary service when the
service is provided by hospital-based respiratory therapists. Many commercial
insurers and managed care providers are seeking hospital discharge options for
lower acuity respiratory patients. Management believes that the
13
<PAGE>
Company's pricing and successful clinical outcomes make its respiratory care
program attractive to commercial insurers and managed care providers.
At December 31, 1996, the Company had entered into contracts to provide
contract respiratory therapy services and supplies to approximately 1,600
nursing and subacute care centers, which includes approximately 250 nursing
centers owned or operated by the Company.
SUBACUTE SERVICES
At December 31, 1996, the Company had entered into contracts to provide
subacute care services to 13 nursing and subacute care centers. These
services, which are also an extension of the cardiopulmonary services provided
by the Company's hospitals, may include ventilator management, tracheostomy
care, continuation of airway restoration programs, enteral and parenteral
nutritional support, IV therapy for hydration and medication administration,
progressive wound care, chronic chest tube management, laboratory, radiology,
pharmacy and dialysis services, customized rehabilitation services and program
marketing. Subacute patients generally require assisted ventilation through
mechanical ventilation devices.
REHABILITATION THERAPY SERVICES
The Company provides physical, occupational and speech therapies to nursing
and subacute care center patients, as well as home health patients and public
school systems. At December 31, 1996, the Company had entered into contracts
to provide rehabilitation services to patients at 385 facilities.
HOSPICE SERVICES
The Company provides hospice services to nursing center patients, hospital
patients and persons in private residences. At December 31, 1996, the Company
had entered into approximately 160 contracts to provide hospice services to
patients in nursing and subacute care centers, hospitals and residences.
MOBILE DIAGNOSTIC SERVICES
The Company is a hospital based provider of on-call mobile X-ray services.
These services are primarily provided to skilled nursing facilities, but the
Company also provides services to correctional facilities, rehabilitation
hospitals and dialysis centers. These services are provided 24 hours a day,
365 days a year to 270 facilities.
COMPETITION IN THE CONTRACT SERVICES MARKET
Although the respiratory therapy services, rehabilitation services, subacute
services and hospice care markets are fragmented, significant competition
exists for the Company's contract services. The primary competitive factors
for the contract services business are quality of services, charges for
services and responsiveness to the needs of patients, families and the
facilities in which the services are provided. Certain hospitals are
establishing and managing their own step-down and subacute facilities. Other
hospital companies have entered the contract services market through
affiliation agreements and management contracts.
PHARMACIES
The Company provides institutional and other pharmacy services. As of
December 31, 1996, the Company operated 34 institutional pharmacies and 12
retail pharmacies in 18 states. In November 1996, the Company consolidated its
Medisave Pharmacies into its Vencare health services operations and now
provides its hospital-based clinical pharmacy services as part of its Vencare
services.
14
<PAGE>
The institutional pharmacy business focuses on providing a full array of
pharmacy services to over 700 nursing centers and specialized care centers.
Institutional pharmacy sales encompass a wide variety of products including
prescription medication, prosthetics, respiratory services, infusion services
and enteral therapies. In addition, the Company provides a variety of
pharmaceutical consulting services designed to assist hospitals, nursing
centers, and home health agencies in program administration. As in prior
years, the Company continued its efforts to sell or close its retail
pharmacies. Management believes that the expected discontinuance of the retail
pharmacy operations in 1997 will not have a material adverse effect on
Vencare's operations.
The following table lists by state the number of pharmacies operated by the
Company as of December 31, 1996:
<TABLE>
<CAPTION>
STATE INSTITUTIONAL RETAIL TOTAL
----- ------------- ------ -----
<S> <C> <C> <C>
Arizona............................................ 1 - 1
California......................................... 14 - 14
Florida............................................ 2 - 2
Idaho.............................................. 1 - 1
Illinois........................................... - 2 2
Kansas............................................. - 2 2
Louisiana.......................................... - 2 2
Massachusetts...................................... 1 - 1
Mississippi........................................ - 1 1
Missouri........................................... 1 - 1
Nevada............................................. 2 - 2
North Carolina..................................... 4 - 4
Ohio............................................... 1 1 2
Tennessee.......................................... 2 - 2
Texas.............................................. - 4 4
Utah............................................... 1 - 1
Virginia........................................... 1 - 1
Wisconsin.......................................... 3 - 3
--- --- ---
Totals........................................... 34 12 46
=== === ===
</TABLE>
GOVERNMENTAL REGULATION OF PHARMACIES
Pharmaceutical operations are subject to regulation by the various states in
which the Company conducts its business as well as by the federal government.
The Company's pharmacies are regulated under the Food, Drug and Cosmetic Act
and the Prescription Drug Marketing Act, which are administered by the United
States Food and Drug Administration. Under the Comprehensive Drug Abuse
Prevention and Control Act of 1970, which is administered by the United States
Drug Enforcement Administration ("DEA"), dispensers of controlled substances
must register with the DEA, file reports of inventories and transactions and
provide adequate security measures. Failure to comply with such requirements
could result in civil or criminal penalties.
15
<PAGE>
NURSING CENTER AND ASSISTED AND INDEPENDENT LIVING COMMUNITY OPERATIONS
NURSING CENTER--GENERAL INFORMATION
At December 31, 1996, the Company's nursing center operations provided long-
term care and subacute medical and rehabilitation services in 313 nursing
centers containing 39,619 licensed beds located in 32 states. At December 31,
1996, the Company owned 217 nursing centers and leased 80 nursing centers. The
Company also managed 16 nursing centers, including seven centers owned by
Tenet Healthcare Corporation ("Tenet"), which holds a greater than 10%
interest in the Company. In November 1996, the Company entered into a
definitive agreement to sell 34 of its nursing facilities in early 1997 to
Lenox Healthcare, Inc., a privately-held company based in Pittsfield,
Massachusetts.
The Company is a leading provider of rehabilitation services, including
physical, occupational and speech therapies. The majority of patients in
rehabilitation programs stay for eight weeks or less. Patients in
rehabilitation programs generally provide higher revenues than other nursing
center patients because they use a higher level of ancillary services. In
addition, management believes that the Company is one of the leading providers
of care for patients with Alzheimer's disease. At December 31, 1996, the
Company offered specialized programs covering approximately 3,000 beds in 86
nursing centers for patients suffering from Alzheimer's disease. Most of these
patients reside in separate units within the nursing centers and are cared for
by teams of professionals specializing in the unique problems experienced by
Alzheimer's patients.
NURSING CENTER MARKETING
The factors which affect consumers' selection of a nursing center vary by
community and include a nursing center's competitive position and its
relationships with local referral sources. Competition creates the standards
against which nursing centers in a given market are judged by various referral
sources, which include physicians, hospital discharge planners, community
organizations and families. Therefore, the Company's nursing center marketing
efforts are conducted at the local market level by the nursing center
administrators, admissions coordinators and others. Nursing center personnel
are assisted in carrying out their marketing strategies by regional marketing
staffs. The Company's marketing efforts are directed toward improving the
payor mix at the nursing centers by maximizing the census of private pay
patients and Medicare patients.
NURSING CENTER OPERATIONS
Each nursing center is managed by a state-licensed administrator who is
supported by other professional personnel, including a director of nursing,
staff development professional (responsible for employee training), activities
director, social services director, licensed dietitian, business office
manager and, in general, physical, occupational and speech therapists. The
directors of nursing are state-licensed nurses who supervise nursing staffs
which include registered nurses, licensed practical nurses and nursing
assistants. Staff size and composition vary depending on the size and
occupancy of each nursing center and on the level of care provided by the
nursing center. The nursing centers contract with physicians who serve as
medical directors and serve on quality assurance committees.
The nursing centers are supported by regional staff in the areas of nursing,
dietary and rehabilitation services, maintenance, sales and financial
services. In addition, corporate staff provide other services in the areas of
sales assistance, human resource management, state and federal reimbursement,
state licensing and certification, legal, finance and accounting support.
Financial control is maintained principally through fiscal and accounting
policies established at the corporate level for use at the nursing centers.
Quality of care is monitored and enhanced by quality assurance committees,
and family satisfaction surveys. The quality assurance committees oversee
patient healthcare needs and resident and staff safety. Additionally,
physicians serve on the quality assurance committees as medical directors and
advise on healthcare policies and practices. Nursing professionals visit each
nursing center periodically to review practices and recommend
16
<PAGE>
improvements where necessary in the level of care provided and to assure
compliance with requirements under applicable Medicare and Medicaid
regulations. Surveys of residents' families are conducted from time to time in
which the families are asked to rate various aspects of service and the
physical condition of the nursing centers. These surveys are reviewed by
nursing center administrators to help ensure quality care.
The Company provides training programs for nursing center administrators,
managers, nurses and nursing assistants. These programs are designed to
maintain high levels of quality patient care.
Substantially all of the nursing centers are currently certified to provide
services under Medicare and Medicaid programs. A nursing center's
qualification to participate in such programs depends upon many factors, such
as accommodations, equipment, services, safety, personnel, physical
environment and adequate policies and procedures.
SELECTED NURSING CENTER OPERATING DATA
The following table sets forth certain operating data for the Company's
nursing centers:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Number of nursing centers in operation at
end of period............................. 313 311 310
Number of licensed beds at end of period... 39,619 39,480 39,423
Patient days............................... 12,566,763 12,569,600 12,654,016
Average daily census....................... 34,335 34,437 34,669
Occupancy percentage....................... 91.9% 92.2% 92.9%
</TABLE>
SOURCES OF NURSING CENTER REVENUES
Nursing center revenues are derived principally from Medicare and Medicaid
programs and from private pay patients. Consistent with the nursing home
industry generally, changes in the mix of the Company's patient population
among these three categories significantly affect the profitability of the
Company's operations. Although Medicare and other high acuity patients
generally produce the most revenue per patient day, profitability is reduced
by the costs associated with the higher level of nursing care and other
services required by such patients. The Company believes that private pay
patients generally constitute the most profitable and Medicaid patients
generally constitute the least profitable category.
The following table sets forth certain percentages related to the payor mix
of the Company's owned and leased nursing centers:
<TABLE>
<CAPTION>
MEDICARE MEDICAID PRIVATE AND OTHER
----------------- ----------------- ---------------------
PATIENT NET PATIENT NET PATIENT NET
YEAR DAYS REVENUES DAYS REVENUES DAYS REVENUES
----- ------- --------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1996.................. 12% 30% 65% 44% 23% 26%
1995.................. 12 29 65 44 23 27
1994.................. 11 25 65 47 24 28
</TABLE>
For the year ended December 31, 1996, nursing center revenues totaled
approximately $1.6 billion, or 62% of the Company's total revenues.
Both governmental and private third-party payors employ cost containment
measures designed to limit payments made to healthcare providers. Those
measures include the adoption of initial and continuing recipient eligibility
criteria which may limit payment for services, the adoption of coverage
criteria which limit the services that will be reimbursed and the
establishment of payment ceilings which set the maximum reimbursement that a
provider may receive for services. Furthermore, government reimbursement
programs are
17
<PAGE>
subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings and government funding restrictions, all of which may
materially increase or decrease the rate of program payments to the Company
for its services. There can be no assurance that payments under governmental
and private third-party payor programs will remain at levels comparable to
present levels or will be sufficient to cover the costs allocable to patients
eligible for reimbursement pursuant to such programs. In addition, there can
be no assurance that facilities owned, leased or managed by the Company, or
the provision of services and supplies by the Company, will meet the
requirements for participation in such programs. The Company could be
adversely affected by the continuing efforts of governmental and private
third-party payors to contain the amount of reimbursement for healthcare
services. In an attempt to limit the federal budget deficit, there have been,
and the Company expects that there will continue to be, a number of proposals
to limit Medicare and Medicaid reimbursement for healthcare services.
Medicare. The Medicare Part A program provides reimbursement for extended
care services furnished to Medicare beneficiaries who are admitted to skilled
nursing centers after at least a three-day stay in an acute care hospital.
Covered services include supervised nursing care, room and board, social
services, physical and occupational therapies, pharmaceuticals, supplies and
other necessary services provided by skilled nursing centers.
Under the Medicare program, skilled nursing center reimbursement is based
upon reasonable direct and indirect costs of services provided to
beneficiaries. Routine costs are subject to a routine cost limit ("RCL"). The
RCL is a national average cost per patient day which is adjusted for
variations in local wages. Revenues under this program are subject to audit
and retroactive adjustment. Management believes that adequate provisions for
loss have been recorded to reflect any adjustments which could result from
such audits. Settlements of Medicare audits have not had a material adverse
effect on the Company's nursing center operating results.
Medicaid. Medicaid is a state-administered program financed by state funds
and matching federal funds. The program provides for medical assistance to the
indigent and certain other eligible persons. Although administered under broad
federal regulations, states are given flexibility to construct programs and
payment methods consistent with their individual goals. Accordingly, these
programs differ from state to state in many respects.
Federal law requires Medicaid programs to pay rates that are reasonable and
adequate to meet the costs incurred by an efficiently and economically
operated nursing center providing quality care and services in conformity with
all applicable laws and regulations. However, despite these federal
requirements, disagreements frequently arise between nursing centers and
states regarding the adequacy of Medicaid payments. In addition, the Medicaid
programs are subject to statutory and regulatory changes, administrative
rulings, interpretations of policy by the state agencies and certain
government funding limitations, all of which may materially increase or
decrease the level of program payments to nursing centers operated by the
Company. Management believes that the payments under these programs are not
sufficient on an overall basis to cover the costs of serving residents
participating in these programs. Furthermore, the Omnibus Budget
Reconciliation Act of 1987, as amended ("OBRA") mandates an increased emphasis
on ensuring quality patient care, which has resulted in additional
expenditures by nursing centers.
There can be no assurance that the payments under Medicaid programs will
remain at levels comparable to current levels or, in the future, will be
sufficient to cover the costs incurred in serving residents participating in
such programs. The Company provides to eligible individuals Medicaid-covered
services consisting of nursing care, room and board and social services. In
addition, states may at their option cover other services such as physical,
occupational and speech therapies and pharmaceuticals.
Private Payment. The Company's nursing centers seek to maximize the number
of private pay patients, including those covered under private insurance and
managed care health plans. Private payment patients typically have financial
resources (including insurance coverage) to pay for their monthly services and
do not rely on government programs for support.
18
<PAGE>
NURSING CENTER COMPETITION
The Company's nursing centers compete on a local and regional basis with
other nursing centers. The Company's competitive position varies within each
community served. The Company believes that the quality care provided,
reputation, location and physical appearance of its nursing centers and, in
the case of private patients, the charges for services, are significant
competitive factors. Although there is limited, if any, price competition with
respect to Medicare and Medicaid patients (since revenues received for
services provided to such patients are based on fixed rates or cost
reimbursement principles) there is significant competition for both private
payment and Medicare patients.
The long-term care industry is divided into a variety of competitive areas
which market similar services. These competitors include nursing centers,
hospitals, extended care centers, assisted living facilities and communities,
home health agencies and similar institutions. The industry includes
government-owned, church-owned, secular not-for-profit and for-profit
institutions.
NURSING CENTER FACILITIES
The following table lists by state the number of nursing centers and related
licensed beds operated by the Company as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
LICENSED --------------------------
BEDS OWNED LEASED MANAGED TOTAL
-------- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Alabama/1/................................ 447 3 - - 3
Arizona................................... 970 5 2 - 7
California................................ 4,473 22 15 3 40
Colorado.................................. 935 4 3 - 7
Connecticut............................... 716 6 - - 6
Florida/1/................................ 1,995 11 3 2 16
Georgia/1/................................ 370 3 - - 3
Hawaii.................................... 90 1 - - 1
Idaho..................................... 903 7 2 - 9
Indiana/1/................................ 4,263 16 14 - 30
Kentucky/1/................................ 2,014 13 3 - 16
Louisiana................................. 258 - - 2 2
Maine/1/.................................. 882 11 - - 11
Massachusetts/1/.......................... 4,246 33 3 2 38
Minnesota................................. 159 1 - - 1
Mississippi............................... 125 - 1 - 1
Montana1.................................. 456 2 1 - 3
Nebraska.................................. 167 - 1 - 1
Nevada/1/................................. 314 3 - - 3
New Hampshire............................. 622 3 - 1 4
North Carolina/1/......................... 3,261 20 9 - 29
Ohio/1/................................... 2,061 10 4 1 15
Oklahoma/1/............................... 100 - - 1 1
Oregon/1/................................. 468 2 2 - 4
Tennessee/1/.............................. 2,669 5 11 - 16
Texas..................................... 180 - - 1 1
Utah...................................... 740 5 - 1 6
Vermont/1/................................ 428 1 - 2 3
Virginia/1/............................... 764 4 1 - 5
Washington................................ 1,507 10 3 - 13
Wisconsin/1/.............................. 2,585 12 2 - 14
Wyoming/1/................................ 451 4 - - 4
------ --- --- --- ---
Totals.................................. 39,619 217 80 16 313
====== === === === ===
</TABLE>
- --------
(1) These states have Certificate of Need regulations. See "Governmental
Regulation of Nursing Centers and Assisted and Independent Living
Communities."
19
<PAGE>
ASSISTED AND INDEPENDENT LIVING COMMUNITIES
In the third quarter of 1996, the Company completed the IPO through the
issuance of 5,750,000 shares of Atria common stock. On December 31, 1996, the
Company owned 10,000,000 shares, or 63.2% of Atria's outstanding common stock.
As of December 31, 1996, Atria's assisted and independent living operations
consisted of 21 communities. These communities included 2,942 units and were
located in 12 states. Atria owns 18 of these communities, leases one community
and manages two communities. Atria also had 16 assisted living communities
under development with a total of approximately 1,050 units as of December 31,
1996. Assisted and independent living revenues approximated $52 million in
1996, or 2% of the Company's total revenues.
Assisted and independent living communities serve more independent and self-
sufficient residents than do the nursing centers. Assisted and independent
living units are typically studio to an occasional three-bedroom unit.
Approximately 40% of a typical community is devoted to common areas and
amenities. Residents typically receive basic services such as health
screenings, meal service, housekeeping, local transportation, 24-hour
emergency call system and social and recreational programs. Atria also offers
additional services to residents who may require assistance with at least one
activity of daily living, such as eating and personal hygiene.
Residents are responsible for monthly fees which typically are paid by the
resident or the resident's family members. Assisted and independent living
operations do not presently qualify for reimbursement under Medicare, Medicaid
or Veterans Administration healthcare programs because they do not offer the
levels of care required under such programs. Monthly fees paid by residents
are based upon the resident's apartment size, the number of services the
resident elects to purchase and the level of personal care required by the
resident.
The following table lists by state the number of assisted and independent
living communities operated by Atria as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
NUMBER ---------------------------
STATE OF UNITS OWNED1 LEASED MANAGED TOTAL
----- -------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C>
Arizona.................................. 526 4 - - 4
California............................... 212 1 - - 1
Colorado................................. 99 1 - - 1
Florida.................................. 626 4 - - 4
Idaho.................................... 115 1 - - 1
Indiana.................................. 135 1 - 1 2
Kansas................................... 155 1 - - 1
Massachusetts............................ 555 - 1 1 2
Missouri................................. 172 1 - - 1
New Hampshire............................ 28 1 - - 1
Utah..................................... 120 1 - - 1
Washington............................... 199 2 - - 2
----- --- --- --- ---
Totals................................. 2,942 18 1 2 21
===== === === === ===
</TABLE>
- --------
(1) Includes assisted and independent living communities owned by partnerships
in which Atria has a limited and/or general partnership interest.
In connection with Atria's IPO, Atria entered into a $200 million bank
credit facility (the "Atria Credit Facility"). The obligations under the Atria
Credit Facility are secured by all of Atria's property, the capital stock of
Atria's present and future principal subsidiaries and all intercompany
indebtedness owed to Atria by its subsidiaries. The Atria Credit Facility is
conditioned upon, among other things, ownership by Vencor of at least
20
<PAGE>
30% of Atria's common stock. In addition, Vencor has agreed to guarantee up to
$100 million in the first year following Atria's IPO, declining to $75
million, $50 million and $25 million in each respective year thereafter. Atria
has agreed to pay Vencor a fee equal to 1.5% of the average outstanding sum of
the principal balance of all debts guaranteed by Vencor.
GOVERNMENTAL REGULATION OF NURSING CENTERS AND ASSISTED AND INDEPENDENT LIVING
COMMUNITIES
The federal government and all states in which the Company operates regulate
various aspects of the Company's nursing center business. In particular, the
development and operation of nursing centers and assisted and independent
living communities and the provision of healthcare services are subject to
federal, state and local laws relating to the adequacy of medical care,
equipment, personnel, operating policies, fire prevention, rate-setting and
compliance with building codes and environmental laws. Nursing centers are
subject to periodic inspection by governmental and other authorities to assure
continued compliance with various standards, their continued licensing under
state law, certification under the Medicare and Medicaid programs and
continued participation in the Veterans Administration program. Assisted and
independent living communities and their owners are subject to periodic
inspection by governmental authorities to assure compliance with various
standards including standards relating to the financial condition of the
owners of such communities. The failure to obtain or renew any required
regulatory approvals or licenses could adversely affect the Company's
operations.
Effective October 1, 1990, OBRA increased the enforcement powers of state
and federal certification agencies. Additional sanctions were authorized to
correct noncompliance with regulatory requirements, including fines, temporary
suspension of admission of new patients to nursing centers and, in extreme
circumstances, decertification from participation in the Medicare or Medicaid
programs.
Nursing centers managed and operated by the Company are licensed either on
an annual or bi-annual basis and certified annually for participation in
Medicare and Medicaid programs through various regulatory agencies which
determine compliance with federal, state and local laws. These legal
requirements relate to the quality of the nursing care provided, the
qualifications of the administrative personnel and nursing staff, the adequacy
of the physical plant and equipment and continuing compliance with the laws
and regulations governing the operation of nursing centers. From time to time
the Company's nursing centers receive statements of deficiencies from
regulatory agencies. In response, the Company implements plans of correction
with respect to these nursing centers to address the alleged deficiencies. The
Company believes that its nursing centers are in material compliance with all
applicable regulations or laws.
In certain circumstances, federal law mandates that conviction of certain
abusive or fraudulent behavior with respect to one nursing center may subject
other facilities under common control or ownership to disqualification for
participation in Medicare and Medicaid programs. In addition, some state
regulations provide that all nursing centers under common control or ownership
within a state are subject to delicensure if any one or more of such
facilities are delicensed.
Revised federal regulations under OBRA, which became effective in 1995,
affect the survey process for nursing centers and the authority of state
survey agencies and the Health Care Financing Administration to impose
sanctions on facilities based upon noncompliance with requirements. Available
sanctions include imposition of civil monetary penalties, temporary suspension
of payment for new admissions, appointment of a temporary manager, suspension
of payment for eligible patients and suspension or decertification from
participation in the Medicare and/or Medicaid programs. The Company is unable
to project how these regulatory changes and their implementation will affect
the Company.
In addition to license requirements, many states in which the Company
operates have statutes that require a CON to be obtained prior to the
construction of a new nursing center, the addition of new beds or services or
the incurring of certain capital expenditures. Certain states also require
regulatory approval prior to certain changes in ownership of a nursing center.
Certain states in which the Company operates have eliminated their CON
programs and other states are considering alternatives to their CON programs.
To the extent that CONs or other
21
<PAGE>
similar approvals are required for expansion of Company operations, either
through facility acquisitions or expansion or provision of new services or
other changes, such expansion could be adversely affected by the failure or
inability to obtain the necessary approvals, changes in the standards
applicable to such approvals or possible delays and expenses associated with
obtaining such approvals.
The Company's operations are also subject to federal and state laws which
govern financial and other arrangements between healthcare providers. These
laws often prohibit certain direct and indirect payments or fee-splitting
arrangements between healthcare providers that are designed to induce or
encourage the referral of patients to, or the recommendation of, a particular
provider for medical products and services. Such laws include the anti-
kickback provisions of the federal Medicare and Medicaid Patients and Program
Protection Act of 1987. These provisions prohibit, among other things, the
offer, payment, solicitation or receipt of any form of remuneration in return
for the referral of Medicare and Medicaid patients. In addition, some states
restrict certain business relationships between physicians and pharmacies, and
many states prohibit business corporations from providing, or holding
themselves out as a provider of, medical care. Possible sanctions for
violation of any of these restrictions or prohibitions include loss of
licensure or eligibility to participate in reimbursement programs as well as
civil and criminal penalties. These laws vary from state to state.
HOME HEALTH SERVICES
During the summer of 1996, the Company consolidated its home health services
business to establish Vencor Home Health Services. These services include home
health nursing products and services and home infusion therapy. These services
are generally provided to patients on an individual basis. At December 31,
1996, the Company provided services from 28 locations in eight states. For
1996, home health services generated approximately $12 million in revenues,
representing less than 1% of the Company's total revenues.
Significant competition exists for the Company's home health services. The
Company's home health agencies compete on a local and regional basis with
other providers of home health services. The Company believes that the primary
competitive factors for home health services include quality of service,
charges for services provided and attention to the individual needs of
patients.
22
<PAGE>
MANAGEMENT INFORMATION SYSTEM
The financial information for each Company facility is centralized at the
corporate headquarters through its management information system. The Company
uses a comprehensive financial reporting system which enables it to monitor,
on a daily basis, certain key financial data at each facility such as payor
mix, admissions and discharges, cash collections, net revenues and staffing.
In addition, the financial reporting system provides monthly budget analysis,
financial comparisons to prior periods and comparisons among the Company's
facilities.
The Company has developed the VenTouch(TM) electronic patient medical record
system. VenTouch(TM) is a software application which allows nurses, physicians
and other clinicians to manage clinical information utilized in the patient
care delivery process.
Among the features of VenTouch(TM) are on-line access and update of an
electronic patient chart, an on-line trend analysis using electronic
flowsheets and graphs, and remote access for authorized users. Features
specific to the nursing centers include a complete on-line Resident Assessment
Instrument Process that incorporates state specific guidelines, computer
generated Resident Assessment Protocols, on-line HCFA Resident Assessment
Instrument manual and electronic data transfer capabilities. The system is
designed to decrease administrative time, reduce paper and support the
delivery of quality patient care.
The Company completed the installation of VenTouch(TM) in its hospitals
during 1995 and began installation of VenTouch(TM) in its nursing centers in
1996. In addition, during 1997, the Company intends to offer VenTouch(TM) as
part of the menu of services offered by Vencare to skilled nursing facilities
not owned by the Company.
ADDITIONAL COMPANY INFORMATION
EMPLOYEES
As of December 31, 1996, the Company had approximately 48,300 full-time and
16,200 part-time and per diem employees. The Company was a party to 24
collective bargaining agreements covering approximately 3,000 employees as of
December 31, 1996.
LIABILITY INSURANCE
The Company's hospitals, contract services, nursing centers and
pharmaceutical operations are insured by the Company's wholly-owned captive
insurance company, Cornerstone Insurance Company. Cornerstone Insurance
Company reinsures losses in excess of $500,000 per claim and $8,000,000 in
annual aggregation. Coverages for losses in excess of various limits are
maintained through unrelated commercial insurance carriers to provide
$130,000,000 limits per claim and in the aggregate.
The Company believes that its insurance is adequate in amount and coverage.
There can be no assurance that in the future such insurance will be available
at a reasonable price or that the Company will be able to maintain adequate
levels of malpractice insurance coverage.
CAUTIONARY STATEMENTS
Information provided in this Report by the Company contains, and from time
to time the Company may disseminate materials and make statements which may
contain, "forward-looking" information, as that term is defined by the Private
Securities Litigation Reform Act of 1995 (the "Act"). These cautionary
statements are being made pursuant to the provisions of the Act and with the
intention of obtaining the benefits of the "safe harbor" provisions of the
Act. The Company cautions investors that any forward-looking statements made
by the Company are not guarantees of future performance and that actual
results may differ materially from those in the forward-looking statements as
a result of various factors, including, but not limited to, the following:
23
<PAGE>
(i) In recent years, an increasing number of legislative proposals have
been introduced or proposed by Congress and in some state legislatures
which would effect major changes in the healthcare system. However, the
Company cannot predict the form of healthcare reform legislation which may
be proposed or adopted by Congress or by state legislatures. Accordingly,
the Company is unable to assess the effect of any such legislation on its
business. There can be no assurance that any such legislation will not have
a material adverse impact on the future growth, revenues and net income of
the Company.
(ii) The Company derives substantial portions of its revenues from third-
party payors, including government reimbursement programs such as Medicare
and Medicaid, and nongovernment sources, such as commercial insurance
companies, HMOs, PPOs and contract services. Both government and
nongovernment payors have undertaken cost-containment measures designed to
limit payments to healthcare providers. There can be no assurance that
payments under governmental and nongovernmental payor programs will be
sufficient to cover the costs allocable to patients eligible for
reimbursement. The Company cannot predict whether or what proposals or
cost-containment measures will be adopted or, if adopted and implemented,
what effect, if any, such proposals might have on the operations of the
Company.
(iii) The Company is subject to extensive federal, state and local
regulations governing licensure, conduct of operations at existing
facilities, construction of new facilities, purchase or lease of existing
facilities, addition of new services, certain capital expenditures, cost-
containment and reimbursement for services rendered. The failure to obtain
or renew required regulatory approvals or licenses, the delicensing of
facilities owned, leased or operated by the Company or the disqualification
of the Company from participation in certain federal and state
reimbursement programs could have a material adverse effect upon the
operations of the Company.
(iv) There can be no assurance that the Company will be able to continue
its substantial growth or be able to fully implement its strategy to
develop long-term care networks. The success of the Company's growth
strategy will be determined by various factors, including the Company's
ability to identify suitable acquisition candidates, competition for such
acquisitions, the future financial performance of acquired entities, and
the ability of the Company to integrate effectively the operations of
acquired entities.
ITEM 2. PROPERTIES
For information concerning the hospitals, pharmacies, nursing centers and
assisted and independent living communities operated by the Company, see
"Business--Hospital Operations--Hospital Facilities," "Business--Vencare
Health Services Operations--Pharmacies," and "Business--Nursing Center and
Assisted and Independent Living Community Operations." The Company believes
that its facilities are adequate for the Company's future needs in such
locations.
ITEM 3. LEGAL PROCEEDINGS
Hillhaven and its directors were 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") in connection with the sale of Hillhaven.
These complaints raised allegations that Hillhaven and its directors had
breached their fiduciary duties to Hillhaven's stockholders in connection with
the consideration of the acquisition proposal by Horizon Health Corporation
("Horizon") and certain corporate actions also cited in Horizon's
counterclaim. These actions sought declaratory and injunctive relief and, in
California, compensatory damages in unspecified amounts. The merger with
Vencor rendered moot the issues raised in the Nevada and California State
Court Actions, with the exception of the plaintiffs' request for an award of
attorneys' fees and costs. During 1996, the Court denied the plaintiff's
request for attorneys' fees and costs. The plaintiffs have appealed. The
Company believes that the likelihood of the plaintiffs ultimately prevailing
on their motion for attorneys' fees and costs is remote.
As is typical in the healthcare industry, the Company is subject to claims
and legal actions by patients and others in the ordinary course of business.
The Company believes that all such claims and actions currently
24
<PAGE>
pending against it either are adequately covered by insurance or would not
have a material adverse effect on the Company if decided in a manner
unfavorable to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the present executive officers of the Company, their
ages (as of January 1, 1997), their positions with the Company and the year in
which they first became an executive officer of the Company:
<TABLE>
<CAPTION>
FIRST ELECTED
EXECUTIVE
NAME AGE POSITION OFFICER
- ---- --- -------- -------------
<S> <C> <C> <C>
Michael R. Barr......... 47 Chief Operating Officer and Executive Vice President 1985(1)
Jill L. Force........... 44 Senior Vice President, General Counsel and Corporate Secretary 1995(2)
James H. Gillenwater,
Jr..................... 39 Senior Vice President, Planning and Development 1995(3)
Thomas T. Ladt.......... 46 Executive Vice President, Operations 1993(4)
Richard A. Lechleiter... 38 Vice President, Finance and Corporate Controller 1995(5)
W. Bruce Lunsford....... 49 Chairman of the Board, President and Chief Executive Officer 1985(6)
W. Earl Reed, III....... 45 Chief Financial Officer and Executive Vice President 1987(7)
</TABLE>
- --------
(1) Mr. Barr, a founder of the Company, physical therapist and certified
respiratory therapist, has served as Chief Operating Officer and Executive
Vice President of the Company since February 1996. From November 1995 to
February 1996, he was Executive Vice President of the Company and Chief
Executive Officer of the Company's Hospital Division. Mr. Barr served as
Vice President of Operations for the Company from 1985 to November 1995.
(2) Ms. Force, a certified public accountant and attorney, has served as
Senior Vice President, General Counsel and Corporate Secretary of the
Company since December 1996. From November 1995 through December 1996, she
served as Vice President, General Counsel and Corporate Secretary of the
Company. From 1989 to 1995, she was General Counsel and Corporate
Secretary of the Company.
(3) Mr. Gillenwater has served as Senior Vice President, Planning and
Development of the Company since December 1996. From November 1995 through
December 1996, he served as Vice President, Planning and Development of
the Company. From 1989 to November 1995, he was Director of Planning and
Development of the Company.
(4) Mr. Ladt has served as Executive Vice President, Operations of the Company
since February 1996. From November 1995 to February 1996, he served as
President of the Company's Hospital Division. From 1993 to November 1995,
Mr. Ladt was Vice President of the Company's Hospital Division. From 1989
to December 1993, Mr. Ladt was a Regional Director of Operations for the
Company.
(5) Mr. Lechleiter, a certified public accountant, has served as Vice
President, Finance and Corporate Controller of the Company since November
1995. From June 1995 to November 1995, he was Director of Finance of the
Company. Mr. Lechleiter was Vice President and Controller of Columbia/HCA
Healthcare Corp. from September 1993 to May 1995, of Galen Health Care,
Inc. from March 1993 to August 1993, and of Humana Inc. from September
1990 to February 1993.
(6) Mr. Lunsford, a founder of the Company, certified public accountant and
attorney, has served as Chairman of the Board, President and Chief
Executive Officer of the Company since it commenced operations in 1985.
(7) Mr. Reed, a certified public accountant, has served as Chief Financial
Officer and Executive Vice President of the Company since November 1995.
From 1987 to November 1995, Mr. Reed served as Vice President, Finance and
Development of the Company.
25
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by Item 5 of this Report appears on the inside back
cover of the 1996 Annual Report to Stockholders and is incorporated by
reference in this Report.
26
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
VENCOR, INC.
SELECTED FINANCIAL DATA
AS OF AND FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICS)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Revenues................ $2,577,783 $2,323,956 $2,032,827 $1,727,436 $1,575,225
---------- ---------- ---------- ---------- ----------
Salaries, wages and 1,490,938 1,360,018 1,167,181 985,163 921,508
benefits...............
Supplies................ 218,083 188,754 162,053 126,473 117,940
Rent.................... 77,795 79,476 79,371 74,323 85,942
Other operating 449,335 416,969 366,621 330,014 299,813
expenses...............
Depreciation and 99,533 89,478 79,519 69,126 56,408
amortization...........
Interest expense........ 45,922 60,918 62,828 73,559 62,532
Investment income....... (12,203) (13,444) (13,126) (16,056) (12,820)
Non-recurring 125,200 109,423 (4,540) 5,769 113,265
transactions...........
---------- ---------- ---------- ---------- ----------
2,494,603 2,291,592 1,899,907 1,648,371 1,644,588
---------- ---------- ---------- ---------- ----------
Income (loss) from 83,180 32,364 132,920 79,065 (69,363)
operations before
income taxes...........
Provision for income 35,175 24,001 46,781 10,089 12,051
taxes..................
---------- ---------- ---------- ---------- ----------
Income (loss) from 48,005 8,363 86,139 68,976 (81,414)
operations.............
Reinstatement of - - - - 24,743
discontinued
operations.............
Extraordinary gain
(loss) on
extinguishment of debt,
net of income taxes.... - (23,252) (241) (2,217) 380
Cumulative effect on
prior years of a change
in accounting for
income taxes........... - - - (1,103) -
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ 48,005 $ (14,889) $ 85,898 $ 65,656 $ (56,291)
========== ========== ========== ========== ==========
Earnings (loss) per
common and common
equivalent share:
Primary:
Income (loss) from $ 0.68 $ 0.21 $ 1.37 $ 1.22 $ (1.57)
operations............
Reinstatement of - - - - 0.47
discontinued
operations............
Extraordinary gain - (0.37) - (0.04) 0.01
(loss) on
extinguishment of
debt..................
Cumulative effect on
prior years of a
change
in accounting for
income taxes.......... - - - (0.02) -
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ 0.68 $ (0.16) $ 1.37 $ 1.16 $ (1.09)
========== ========== ========== ========== ==========
Fully diluted:
Income (loss) from $ 0.68 $ 0.29 $ 1.28 $ 1.22 $ (1.57)
operations............
Reinstatement of - - - - 0.47
discontinued
operations............
Extraordinary gain - (0.32) - (0.04) 0.01
(loss) on
extinguishment of
debt..................
Cumulative effect on
prior years of a
change
in accounting for
income taxes.......... - - - (0.02) -
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ 0.68 $ (0.03) $ 1.28 $ 1.16 $ (1.09)
========== ========== ========== ========== ==========
Shares used in
computing earnings
(loss) per common
and common equivalent
share:
Primary................ 70,702 62,318 57,037 54,555 52,820
Fully diluted.......... 70,702 71,967 69,014 60,640 52,820
FINANCIAL POSITION:
Working capital......... $ 320,123 $ 239,666 $ 129,079 $ 114,339 $ 114,695
Assets.................. 1,968,856 1,912,454 1,656,205 1,563,350 1,515,812
Long-term debt.......... 710,507 778,100 746,212 784,801 988,998
Stockholders' equity.... 797,091 772,064 596,454 485,550 283,791
OPERATING DATA:
Number of hospitals..... 38 36 33 26 18
Number of hospital 3,325 3,263 2,511 2,198 1,717
licensed beds..........
Number of hospital 586,144 489,612 403,623 293,367 223,483
patient days...........
Number of nursing 313 311 310 325 369
centers................
Number of nursing center 39,619 39,480 39,423 40,759 45,419
licensed beds..........
Number of nursing center 12,566,763 12,569,600 12,654,016 12,770,435 13,709,222
patient days...........
Number of Vencare 2,205 2,008 948 128 -
contracts..............
Number of pharmacy 46 55 60 88 131
outlets................
Number of Atria 21 22 21 21 22
communities............
Number of Atria units... 2,942 3,022 2,950 2,993 3,153
</TABLE>
27
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Selected Financial Data in Item 6 and the consolidated financial
statements included in this Form 10-K set forth certain data with respect to
the financial position, results of operations and cash flows of Vencor which
should be read in conjunction with the following discussion and analysis.
BACKGROUND INFORMATION
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 assisted and independent living communities
with 3,122 units. Annualized revenues approximated $1.7 billion. See Note 2 of
the Notes to Consolidated Financial Statements for a description of the
Hillhaven Merger.
Prior to its merger with Vencor, Hillhaven completed a merger with
Nationwide Care, Inc. ("Nationwide") (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 assisted and independent
living communities with 442 units. Annualized revenues approximated $125
million. See Note 3 of the Notes to Consolidated Financial Statements for a
description of the Nationwide Merger.
As discussed in the Notes to Consolidated Financial Statements, the
Hillhaven Merger and Nationwide Merger have been accounted for by the pooling-
of-interests method. Accordingly, the accompanying 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 the third quarter of 1996, Vencor completed the IPO of Atria. At December
31, 1996, Vencor owned 10,000,000 shares, or 63.2%, of Atria's outstanding
common stock. For accounting purposes, the accounts of Atria continue to be
consolidated with those of Vencor and the Company has recorded minority
interests in the earnings and equity of Atria since consummation of the IPO.
See Note 4 of the Notes to Consolidated Financial Statements for a description
of the IPO.
RESULTS OF OPERATIONS
A summary of revenues follows (dollars in thousands--prior period revenues
have been reclassified to conform with the 1996 presentation):
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------- 1994
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Hospitals................ $ 551,268 20.8 $ 456,486 26.4 $ 361,111
---------- ---------- ----------
Nursing centers.......... 1,627,479 5.2 1,546,832 11.2 1,390,731
Non-recurring
transactions............ - (24,500) -
---------- ---------- ----------
1,627,479 6.9 1,522,332 9.5 1,390,731
---------- ---------- ----------
Vencare.................. 386,730 26.1 306,601 26.9 241,601
Atria.................... 51,846 8.1 47,976 20.7 39,758
---------- ---------- ----------
2,617,323 12.2 2,333,395 14.8 2,033,201
Elimination.............. (39,540) (9,439) (374)
---------- ---------- ----------
$2,577,783 10.9 $2,323,956 14.3 $2,032,827
========== ========== ==========
</TABLE>
Hospital revenues increased in both 1996 and 1995 from the acquisition of
facilities and growth in same-store patient days. Hospital patient days rose
20% to 586,144 in 1996 and 21% to 489,612 in 1995. Price increases in both
years were not significant.
28
<PAGE>
Excluding the effect of non-recurring transactions, nursing center revenue
increases resulted primarily from growth in the volume of Medicare patients,
who typically require higher levels of medical care. Medicare patient days
grew 3% to 1,562,600 in 1996 and 11% to 1,511,300 in 1995. Nursing center
revenue growth was adversely impacted by a decline in private pay patient days
to 2,812,700 in 1996 from 2,911,500 in 1995 and 3,052,000 in 1994. In an
effort to attract increased volumes of Medicare and private pay patients, the
Company has adopted a plan to expend approximately $200 million over the next
two years to improve existing facilities and expand the range of services
provided to accomodate higher acuity patients.
Vencare, the Company's ancillary services division organized in 1993,
provides primarily respiratory and rehabilitation therapy and pharmacy
management services to nursing centers and other healthcare providers. Growth
in ancillary services revenues in both 1996 and 1995 was primarily
attributable to the expansion of the Vencare contract services business. The
number of Vencare contracts (most of which relate to respiratory therapy) grew
from 948 at the end of 1994 to 2,008 and 2,205 at December 31, 1995 and 1996,
respectively.
Revenues from Vencor's assisted and independent living business, Atria,
increased in both years as a result of price increases, growth in occupancy,
expansion of ancillary services and, in 1995, the purchase of controlling
interest in two communities previously accounted for under the equity method
and the effect of two newly constructed communities.
In the fourth quarter of 1996, Vencor recorded pretax charges aggregating
$125.2 million ($79.9 million net of tax) primarily to complete the
integration of Hillhaven. In November 1996, Vencor executed a definitive
agreement to sell 34 underperforming or non-strategic nursing centers in early
1997. A charge of $65.3 million was recorded in connection with the
disposition. In addition, Vencor's previously independent institutional
pharmacy business, acquired as part of the Hillhaven Merger, was integrated
into Vencare, resulting in a charge of $39.6 million related primarily to
costs associated with employee severance and benefit costs (approximately 500
employees), facility close-down expenses and the writeoff of certain deferred
costs for services to be discontinued. A provision for loss totaling $20.3
million related to the planned replacement of one hospital and three nursing
centers was also recorded in the fourth quarter.
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
consummation of 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 (approximately 500 employees), (iii) $26.9
million of losses associated with the planned disposition of certain nursing
center properties and (iv) $24.5 million of charges to reflect Vencor's change
in estimates of accrued revenues recorded in connection with certain prior-
year nursing center third-party reimbursement issues. During 1996, activities
related to the elimination of duplicative corporate and operational functions
was substantially completed, and management expects that the dispositions of
certain nursing center properties will be concluded in 1997. Operating results
for 1995 also include pretax charges of $5.5 million ($3.7 million net of tax)
recorded in the second quarter related primarily to the Nationwide Merger.
Non-recurring transactions related primarily to sales of assets and nursing
center restructuring activities increased pretax income by $4.5 million ($2.7
million net of tax) in 1994.
Income from operations for 1996 totaled $48.0 million, compared to $8.3
million and $86.1 million for 1995 and 1994, respectively. Excluding the
effect of non-recurring transactions, 1996 income from operations increased
25% to $127.9 million ($1.81 per share--fully diluted) and 22% to $101.9
million ($1.45 per share--fully diluted) in 1995. The growth in both periods
resulted primarily from increased hospital volumes and growth in higher margin
ancillary services in both Vencare and the nursing center business and, in
1996, realization of substantial synergies resulting from the Hillhaven
Merger. Management believes that additional revenues resulting from patient
cross-referrals within the healthcare network created by the Hillhaven Merger
aggregated approximately $80 million in 1996. In addition, cost reductions
from elimination of duplicative functions, increased cost efficiencies and
refinancing of long-term debt increased 1996 pretax income by approximately
$20 million.
For more information concerning the provision for income taxes as well as
information regarding differences between effective income tax rates and
statutory rates, see Note 7 of the Notes to Consolidated Financial Statements.
29
<PAGE>
LIQUIDITY
Cash provided by operations totaled $183.5 million for 1996 compared to
$113.6 million for 1995 and $133.0 million for 1994. Cash payments in 1996 and
1995 related to non-recurring transactions reduced cash flows from operations
by approximately $22 million and $32 million, respectively.
During each of the past three years, cash flows from operations have been
adversely impacted by growth in the outstanding days of revenues in accounts
receivable. Growth in accounts receivable has been primarily related to the
integration of acquired hospital facilities, delays in payments from certain
state Medicaid programs and managed care plans and, in 1996, the restructuring
of Vencor's pharmacy operations. Management believes that these factors may
have an adverse effect on cash flows from operations in 1997.
Concurrent with the consummation of the Hillhaven Merger, Vencor established
a $1 billion bank credit facility (the "Vencor $1 Billion 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 December 31, 1996,
available borrowings under the Vencor $1 Billion Credit Facility approximated
$224 million. Following completion of the IPO, Atria consummated the Atria
Credit Facility ($200 million) to finance its expansion and development
program. At December 31, 1996, amounts available under the Atria Credit
Facility aggregated $107 million.
In connection with the TheraTx Merger, Vencor consummated a new bank credit
facility on March 18, 1997 aggregating $1.6 billion (the "Vencor $1.6 Billion
Credit Facility"), replacing the Vencor $1 Billion Credit Facility.
Working capital totaled $320.1 million at December 31, 1996 compared to
$239.7 million at December 31, 1995. Cash and cash equivalents at December 31,
1996 includes $65.2 million related to Atria, a substantial portion of which
will be used to finance Atria's development and expansion program. Management
believes that cash flows from operations and amounts available under the
Vencor $1.6 Billion Credit Facility are sufficient to meet future expected
liquidity needs.
CAPITAL RESOURCES
Excluding acquisitions, capital expenditures totaled $135.0 million for 1996
compared to $136.9 million for 1995 and $111.5 million for 1994. Planned
capital expenditures in 1997 (excluding acquisitions) are expected to
approximate $200 million to $250 million and include significant expenditures
related to nursing center improvements and the expansion of Atria's assisted
and independent living business. Management believes that its capital
expenditure program is adequate to expand, improve and equip existing
facilities.
Vencor also expended $26.2 million, $59.3 million and $36.4 million for
acquisitions of new facilities (and related healthcare businesses) and
previously leased nursing centers during 1996, 1995 and 1994, respectively, of
which $5.2 million, $44.2 million and $32.4 million related to additional
hospital facilities. Management intends to acquire additional hospitals,
nursing centers and ancillary service businesses in the future.
Capital expenditures during the last three years were financed primarily
through internally generated funds and, in 1996, from the collection of notes
receivable aggregating $78.2 million. In addition, capital expenditures in
1995 were financed through the public offering of 2.2 million shares of common
stock, the proceeds from which totaled $66.5 million. Vencor intends to
finance a substantial portion of its capital expenditures with internally
generated funds, additional long-term debt and, with respect to Atria,
proceeds from the IPO. Sources of capital include available borrowings under
the Vencor $1.6 Billion Credit Facility, the Atria Credit Facility, public or
private debt and equity.
During 1996, Vencor repurchased 1,950,000 shares of common stock at an
aggregate cost of $55.3 million.
As discussed in Note 9 of the Notes to Consolidated Financial Statements,
Vencor called for redemption all of its outstanding convertible debt
securities in the fourth quarter of 1995, resulting in the issuance of
30
<PAGE>
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 had no material effect
on earnings per common and common equivalent share.
As discussed in Note 9 of the Notes to Consolidated Financial Statements,
Vencor entered into certain interest rate swap agreements in the fourth
quarter of 1995 to eliminate the impact of changes in interest rates on $400
million of floating rate debt outstanding. 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% plus 1/2% to 1 1/4%.
HEALTH CARE LEGISLATION
Congress is currently considering various proposals which could 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.
Medicare revenues as a percentage of total revenues were 31%, 30% and 27%
for 1996, 1995 and 1994, respectively, while Medicaid percentages of revenues
approximated 31%, 33% and 36% for the respective periods.
OTHER INFORMATION
Various lawsuits and claims arising in the ordinary course of business are
pending against Vencor. Resolution of litigation and other loss contingencies
is not expected to have a material adverse effect on Vencor's liquidity,
financial position or results of operations.
The Vencor $1 Billion Credit Facility and the Atria Credit Facility contain
customary covenants which require maintenance of certain financial ratios and
limit amounts of additional debt and repurchases of common stock. Vencor was
in compliance with all such covenants at December 31, 1996.
During 1996, Vencor adopted Financial Accounting Standards Board Statements
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" and No. 123, "Accounting for Stock-Based
Compensation." See Notes 5 and 12 of the Notes to Consolidated Financial
Statements.
On March 21, 1997, the Company consummated the TheraTx Merger, which will be
accounted for using the purchase method. The TheraTx Merger was structured as
a cash tender offer in which the Company paid $17.10 for each outstanding
share of TheraTx common stock. Following the completion of the tender offer,
the Company merged its acquisition subsidiary with and into TheraTx and
TheraTx became a wholly-owned subsidiary of the Company. Upon consummation of
the TheraTx Merger, each share of TheraTx common stock not purchased through
the tender offer was converted into the right to receive $17.10 in cash. See
Note 18 of the Notes to Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is included in appendix pages F-1
through F-21 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
31
<PAGE>
PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items other than the information set forth
above under Part I, "Executive Officers of the Registrant," is omitted because
the Company is filing a definitive proxy statement pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this
Report which includes the required information. The required information
contained in the Company's proxy statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Index to Consolidated Financial Statements and Financial Statement
Schedules:
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Report of Independent Auditors...................................... F-2
Consolidated Statement of Operations for the years ended December
31, 1996, 1995, and 1994........................................... F-3
Consolidated Balance Sheet, December 31, 1996 and 1995.............. F-4
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994................................... F-5
Consolidated Statement of Cash Flows for the years ended December
31, 1996, 1995 and 1994............................................ F-6
Notes to Consolidated Financial Statements.......................... F-7
Quarterly Consolidated Financial Information (Unaudited)............ F-20
Financial Statement Schedules (a):
Schedule II--Valuation and Qualifying Accounts for the years ended
December 31, 1996, 1995 and 1994................................. F-21
</TABLE>
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(a) All other schedules have been omitted because the required information is
not present or not present in material amounts.
32
<PAGE>
(a)(2) Index to Exhibits:
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S>
3.1 Certificate of Incorporation of the Company, as amended. Exhibit 3 to
the Company's Form 10-Q for the quarterly period ended September 30,
1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
3.2 Second Amended and Restated Bylaws of the Company. Exhibit 3.2 to the
Company's Form 10-K for the year ended January 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
4.1 Specimen Common Stock Certificate. Exhibit 4.1 to the Company's Form
10-K for the year ended December 31, 1995 (Comm. File No. 1-10989) is
hereby incorporated by reference.
4.2 Article IV of the Certificate of Incorporation of the Company is
included in Exhibit 3.1.
4.3 $1 Billion Credit Agreement dated September 11, 1995 (conformed to
include Amendment No. 1) among the Company, 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). Exhibit 4(b) to the
Company's Form 10-Q for the quarterly period ended September 30, 1995
(Comm. File No. 1-10989) is hereby incorporated by reference.
4.4 Amendment No. 2 to the $1 Billion Credit Agreement dated as of
September 11, 1995 among the Company, the other Borrowers referred to
therein and the Banks, Co-Agents, LC Issuing Banks and Agents referred
to therein. Exhibit 4(c) to the Company's Form 10-Q for the quarterly
period ended September 30, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
4.5 Amendment No. 3 to the $1 Billion Credit Agreement dated as of
November 27, 1995 among the Company, the other Borrowers referred to
therein and the Banks, Co-Agents, LC Issuing Banks and Agents referred
to therein. Exhibit 4.5 to the Company's Form 10-K for the year ended
December 31, 1995 (Comm. File. No. 1-10989) is hereby incorporated by
reference.
4.6 Amendment No. 4 to the $1 Billion Credit Agreement dated as of June
19, 1996 among the Company, the other Borrowers referred to therein
and the Banks, Co-Agents, LC Issuing Banks and Agents referred to
therein.
4.7 Amendment No. 5 to the $1 Billion Credit Agreement dated as of August
26, 1996 among the Company, the other Borrowers referred to therein
and the Banks, Co-Agents, LC Issuing Banks and Agents referred to
therein.
4.8 Form of Indenture between Hillhaven and State Street Bank and Trust
Company, as Trustee with respect to the 10 1/8% Senior Subordinated
Notes due 2001. Exhibit 4.7 to the Company's Form 10-K for the year
ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
4.9 Form of 10 1/8% Senior Subordinated Note due 2001. Exhibit 4.8 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
4.10 First Supplemental Indenture dated September 27, 1995, among the
Company, Hillhaven and State Street Bank and Trust Company, as
Trustee, relating to 10 1/8% Senior Subordinated Notes due 2001.
Exhibit 4(a) to the Company's Form 10-Q for the quarterly period ended
September 30, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
</TABLE>
33
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S>
4.11 $200 Million Credit Agreement dated as of August 15, 1996, among (a)
Atria Communities, Inc., as Borrower; (b) the lending institutions
listed on Annex I to the Credit Agreement, as Lenders; (c) PNC Bank,
National Associations, as Administrative Agent; (d) PNC Bank,
Kentucky, Inc., as Managing Agent; (e) National City Bank of Kentucky,
as Documentation Agent, and (f) PNC Bank, National Association,
National City Bank of Kentucky, and The Toronto-Dominion Bank, New
York Agency, as Syndication Agents.
10.1* Directors and Officers Insurance and Company Reimbursement Policies.
Exhibit 10.1 to the Company's Form 10-K for the year ended December
31, 1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
10.2* Vencor, Incorporated Retirement Savings Plan as amended and restated
as of January 1, 1989. Exhibit 10.13 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-36703) is hereby incorporated by
reference.
10.3* Amendment No. 1 to the Vencor, Incorporated Retirement Savings Plan
dated December 7, 1990. Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-38188) is hereby incorporated by
reference.
10.4* Amendment No. 2 to the Vencor, Incorporated Retirement Savings Plan
dated May 15, 1991. Exhibit 10.16 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-43097) is hereby incorporated by
reference.
10.5* Amendment No. 3 to the Vencor, Incorporated Retirement Savings Plan
dated November 26, 1991. Exhibit 10.10 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.6* Amendment No. 4 to the Vencor, Incorporated Retirement Savings Plan
dated January 15, 1992. Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.7* Amendment No. 5 to the Vencor, Incorporated Retirement Savings Plan
dated January 15, 1992. Exhibit 10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 (Comm. File No.
1-10989) is hereby incorporated by reference.
10.8* Amendment No. 6 to the Vencor, Incorporated Retirement Savings Plan
dated December 22, 1992. Exhibit 10.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.9* Amendment No. 7 to the Vencor, Incorporated Retirement Savings Plan,
dated May 20, 1994. Exhibit 10.9 to the Company's Form 10-K for the
year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.10* Amendment No. 8 to the Vencor, Incorporated Retirement Savings Plan,
dated August 13, 1995. Exhibit 10.10 to the Company's Form 10-K for
the year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.11* Amendment No. 9 to the Vencor, Incorporated Retirement Savings Plan,
dated March 27, 1996.
10.12* Vencor, Incorporated Retirement Savings Plan Trust Agreement dated
July 10, 1990 by and between the Company and First Kentucky Trust
Company, Trustee. Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-36703) is hereby incorporated by
reference.
10.13* 1987 Non-Employee Directors Stock Option Plan. Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (Reg. No. 33-30212) is
hereby incorporated by reference.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S>
10.14* 1987 Incentive Compensation Program. Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-30212) is hereby
incorporated by reference.
10.15* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated May 15, 1991. Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-40949) is hereby incorporated by
reference.
10.16* Amendments to the Vencor, Inc. 1987 Incentive Compensation Program
dated May 18, 1994. Exhibit 10.13 to the Company's Form 10-K for the
year ended December 31, 1994 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.17* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated February 15, 1995. Exhibit 10.14 to the Company's Form 10-K for
the year ended December 31, 1994 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.18* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated September 27, 1995. Exhibit 10.17 to the Company's Form 10-K for
the year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.19* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated May 15, 1996.
10.20* Form of Vencor, Inc. Incentive Compensation Program Performance Share
Award, as amended. Exhibit 10.18 to the Company's Form 10-K for the
year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.21* Vencor, Incorporated Non-Employee Directors Deferred Compensation
Plan. Exhibit 10.19 to the Company's Form 10-K for the year ended
December 31, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
10.22* Amendment to Vencor, Incorporated Non-Employee Directors Deferred
Compensation Plan dated September 26, 1995. Exhibit 10.20 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.23* Vencor, Inc. 1997 Incentive Compensation Plan dated December 31, 1996.
10.24* Vencor, Inc. Non-Qualified Deferred Compensation Plan dated January 1,
1996.
10.25* Vencor, Inc. 1997 Stock Option Plan for Non-Employee Directors dated
December 31, 1996.
10.26* Vencor, Inc. Employee Benefit Trust Agreement dated December 27, 1990
by and between the Company and First Kentucky Trust Company. Exhibit
10.20 to the Company's Registration Statement on Form S-1 (Reg. No.
33-39017) is hereby incorporated by reference.
10.27* The Amended Hillhaven Corporation Board of Directors Retirement Plan.
Exhibit 10.25 to the Company's Form 10-K for the year ended December
31, 1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
10.28* Deferred Savings Plan of The Hillhaven Corporation. Exhibit 10.26 to
the Company's Form 10-K for the year ended December 31, 1995 (Comm.
File No. 1-10989) is hereby incorporated by reference.
10.29* The Hillhaven Corporation Annual Incentive Plan, amended as of
December 6, 1994. Exhibit 10.27 to the Company's Form 10-K for the
year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.30* The Amended and Restated Hillhaven Corporation Deferred Compensation
Plan. Exhibit 10.28 to the Company's Form 10-K for the year ended
December 31, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S>
10.31* The Hillhaven Corporation Supplemental Executive Retirement Plan.
Exhibit 10.29 to the Company's Form 10-K for the year ended December
31, 1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
10.32* Form of Indemnification Agreement between Vencor, Inc. and certain of
its officers and employees. Exhibit 10.31 to the Company's Form 10-K
for the year ended December 31, 1995 (Comm. File No. 1-10989) is
hereby incorporated by reference.
10.33* Form of Vencor, Inc. Change-in-Control Severance Agreement. Exhibit
10.32 to the Company's Form 10-K for the year ended December 31, 1995
(Comm. File No. 1-10989) is hereby incorporated by reference.
10.34 Services Agreement between Hillhaven and Tenet, dated as of January
31, 1990. Exhibit 10.33 to the Company's Form 10-K for the year ended
December 31, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
10.35 Government Programs Agreement between Hillhaven and Tenet, dated
January 31, 1990. Exhibit 10.34 to the Company's Form 10-K for the
year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.36 Insurance Agreement between Hillhaven and Tenet, dated as of January
31, 1990. Exhibit 10.35 to the Company's Form 10-K for the year ended
December 31, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
10.37* Employee and Employee Benefits Agreement between Hillhaven and Tenet,
dated as of January 31, 1990. Exhibit 10.36 to the Company's Form 10-K
for the year ended December 31, 1995 (Comm. File No. 1-10989) is
hereby incorporated by reference.
10.38 Form of Assignment and Assumption of Lease Agreement between Hillhaven
and certain subsidiaries, on the one hand, and Tenet and certain
subsidiaries on the other hand, together with the related Guaranty by
Hillhaven, dated on or prior to January 31, 1990. Exhibit 10.37 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.39 Form of Management Agreement between First Healthcare Corporation and
certain Tenet subsidiaries, dated on or prior to January 31, 1990.
Exhibit 10.38 to the Company's Form 10-K for the year ended December
31, 1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
10.40 Reorganization and Distribution Agreement between Hillhaven and Tenet,
dated as of January 8, 1990, as amended on January 30, 1990. Exhibit
10.39 to the Company's Form 10-K for the year ended December 31, 1995
(Comm. File No. 1-10989) is hereby incorporated by reference.
10.41 Guarantee Reimbursement Agreement between Hillhaven and Tenet, dated
as of January 31, 1990. Exhibit 10.40 to the Company's Form 10-K for
the year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.42 First Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of October 30, 1990. Exhibit 10.41 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.43 First Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of May 30, 1991. Exhibit 10.42 to the Company's
Form 10-K for the year ended December 31, 1995 (Comm. File No. 1-
10989) is hereby incorporated by reference.
10.44 Second Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of October 2, 1991. Exhibit 10.43 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
</TABLE>
36
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S>
10.45 Third Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of April 1, 1992. Exhibit 10.44 to the Company's
Form 10-K for the year ended December 31, 1995 (Comm. File No. 1-
10989) is hereby incorporated by reference.
10.46 Fourth Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of November 12, 1992. Exhibit 10.45 to
the Company's Form 10-K for the year ended December 31, 1995 (Comm.
File No. 1-10989) is hereby incorporated by reference.
10.47 Fifth Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of February 19, 1993. Exhibit 10.46 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.48 Sixth Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of May 28, 1993. Exhibit 10.47 to the Company's
Form 10-K for the year ended December 31, 1995 (Comm. File No. 1-
10989) is hereby incorporated by reference.
10.49 Seventh Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of May 28, 1993. Exhibit 10.48 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.50 Eighth Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of September 2, 1993. Exhibit 10.49 to
the Company's Form 10-K for the year ended December 31, 1995 (Comm.
File No. 1-10989) is hereby incorporated by reference.
10.51 Facility Agreement among First Healthcare Corporation and Certain
Limited Partnerships, dated as of April 23, 1992 relating to the sale
of 32 nursing centers. Exhibit 10.50 to the Company's Form 10-K for
the year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.52 First Amendment to Facility Agreement among First Healthcare
Corporation and Certain Limited Partnerships, dated as of July 31,
1992 relating to the sale of 32 nursing centers. Exhibit 10.51 to the
Company's Form 10-K for the year ended December 31, 1995 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.53 Forbearance Agreement among First Healthcare Corporation, Medisave
Pharmacies, Inc. and Certain Limited Partnerships, dated as of August
25, 1995. Exhibit 10.52 to the Company's Form 10-K for the year ended
December 31, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
10.54 Letter of Intent dated June 22, 1993 between Hillhaven and Tenet.
Exhibit 10.53 to the Company's
Form 10-K for the year ended December 31, 1995 (Comm. File No. 1-
10989) is hereby incorporated by reference.
10.55 Trust Agreement between The Hillhaven Corporation and Wachovia Bank of
North Carolina, N.A., as Trustee, dated as of January 16, 1995.
Exhibit 10.55 to the Company's Form 10-K for the year ended December
31, 1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
10.56 Amended and Restated Agreement and Plan of Share Exchange and
Agreements to Assign Partnership Interests dated as of February 27,
1995 by and among The Hillhaven Corporation, Nationwide Care, Inc.,
Phillippe Enterprises, Inc., Meadowvale Skilled Care Center, Inc. and
Specified Partners of Camelot Care Centers, Evergreen Woods, Ltd. and
Shangri-La Partnership. Exhibit 10.56 to the Company's Form 10-K for
the year ended December 31, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.57 Amended and Restated Agreement and Plan of Merger. Appendix A to
Amendment No. 2 to Registration Statement on Form S-4 of Vencor, Inc.
(Reg. No. 33-59345) is hereby incorporated by reference.
</TABLE>
37
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S>
10.58 Other Debt Instruments--Copies of debt instruments for which the
related debt is less than 10% of total assets will be furnished to the
Commission upon request.
10.59 Parent Guaranty dated as of August 15, 1996 among (a) Atria
Communities, Inc., as Borrower, (b) Vencor, Inc., as Parent Guarantor,
(c) First Healthcare Corporation, Northwest Healthcare, Inc., Medisave
Pharmacies, Inc., Hillhaven of Central Florida, Inc., and Nationwide
Care, Inc., as Supporting Guarantors, and (d) PNC Bank, National
Association, as Administrative Agent.
11 Statement Regarding Computation of Earnings Per Share.
13.1 Annual Report to Shareholders--Market Prices and Dividend Information
(for the fiscal year ended December 31, 1996). No portion of this
Annual Report shall be deemed to be filed with the Commission except
to the extent that information is specifically incorporated herein by
reference.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule (included only in filings under the Electronic
Data Gathering, Analysis, and Retrieval System).
</TABLE>
- --------
* Compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K During Last Quarter of Fiscal Year.
Not applicable.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a separate section of
this Report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is included in appendix page F-21 of
this Report.
38
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Date: March 26, 1997 VENCOR, INC.
By /s/ W. Bruce Lunsford
-----------------------------------
W. BRUCE LUNSFORD CHAIRMAN OF THE
BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ William C. Ballard Jr. Director March 26, 1997
- -------------------------------------
WILLIAM C. BALLARD JR.
/s/ Michael R. Barr Executive Vice March 26, 1997
- ------------------------------------- President, Chief
MICHAEL R. BARR Operating Officer
and Director
/s/ Walter F. Beran Director March 26, 1997
- -------------------------------------
WALTER F. BERAN
/s/ Donna R. Ecton Director March 26, 1997
- -------------------------------------
DONNA R. ECTON
/s/ Greg D. Hudson Director March 26, 1997
- -------------------------------------
GREG D. HUDSON
/s/ Richard A. Lechleiter Vice President, March 26, 1997
- ------------------------------------- Finance and
RICHARD A. LECHLEITER Corporate
Controller
(Principal
Accounting Officer)
/s/ William H. Lomicka Director March 26, 1997
- -------------------------------------
WILLIAM H. LOMICKA
39
<PAGE>
SIGNATURES TITLE DATE
/s/ W. Bruce Lunsford Chairman of the March 26, 1997
- ------------------------------------- Board, President,
W. BRUCE LUNSFORD Chief Executive
Officer (Principal
Executive Officer)
and Director
/s/ W. Earl Reed, III Executive Vice March 26, 1997
- ------------------------------------- President, Chief
W. EARL REED, III Financial Officer
(Principal
Financial Officer)
and Director
/s/ R. Gene Smith Vice Chairman of the March 26, 1997
- ------------------------------------- Board and Director
R. GENE SMITH
/s/ Jack O. Vance Director March 26, 1997
- -------------------------------------
JACK O. VANCE
40
<PAGE>
VENCOR, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Financial Statements:
Consolidated Statement of Operations for the years ended December 31,
1996, 1995 and 1994.................................................... F-3
Consolidated Balance Sheet, December 31, 1996 and 1995.................. F-4
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1996,
1995 and 1994.......................................................... F-5
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995 and 1994.................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Quarterly Consolidated Financial Information (Unaudited)................ F-20
Financial Statement Schedules (a):
Schedule II--Valuation and Qualifying Accounts for the years ended
December 31, 1996,
1995 and 1994.......................................................... F-21
</TABLE>
- --------
(a) All other schedules have been omitted because the required information is
not present or not present in material amounts.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders Vencor, Inc.
We have audited the accompanying consolidated balance sheet of Vencor, Inc.
as of December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. Our audits also included the financial
statement schedule listed in the index to Item 14(a). These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Vencor, Inc. at December 31, 1996 and 1995, and the consolidated results of
its operations and cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
LOGO
Louisville, Kentucky
February 17, 1997
F-2
<PAGE>
VENCOR, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER
31, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues................................... $2,577,783 $2,323,956 $2,032,827
---------- ---------- ----------
Salaries, wages and benefits............... 1,490,938 1,360,018 1,167,181
Supplies................................... 218,083 188,754 162,053
Rent....................................... 77,795 79,476 79,371
Other operating expenses................... 449,335 416,969 366,621
Depreciation and amortization.............. 99,533 89,478 79,519
Interest expense........................... 45,922 60,918 62,828
Investment income.......................... (12,203) (13,444) (13,126)
Non-recurring transactions................. 125,200 109,423 (4,540)
---------- ---------- ----------
2,494,603 2,291,592 1,899,907
---------- ---------- ----------
Income from operations before income taxes. 83,180 32,364 132,920
Provision for income taxes................. 35,175 24,001 46,781
---------- ---------- ----------
Income from operations..................... 48,005 8,363 86,139
Extraordinary loss on extinguishment of
debt, net of income
tax benefit of $14,839 in 1995 and $125 in
1994...................................... - (23,252) (241)
---------- ---------- ----------
Net income (loss)...................... 48,005 (14,889) 85,898
Preferred stock dividend requirements and
other items............................... - (5,280) (7,753)
Gain on redemption of preferred stock...... - 10,176 -
---------- ---------- ----------
Income (loss) available to common
stockholders.............................. $ 48,005 $ (9,993) $ 78,145
========== ========== ==========
Earnings (loss) per common and common
equivalent share:
Primary:
Income from operations................... $ 0.68 $ 0.21 $ 1.37
Extraordinary loss on extinguishment of
debt...................................... - (0.37) -
---------- ---------- ----------
Net income (loss)...................... $ 0.68 $ (0.16) $ 1.37
========== ========== ==========
Fully diluted:
Income from operations................... $ 0.68 $ 0.29 $ 1.28
Extraordinary loss on extinguishment of
debt...................................... - (0.32) -
---------- ---------- ----------
Net income (loss)...................... $ 0.68 $ (0.03) $ 1.28
========== ========== ==========
Shares used in computing earnings (loss)
per common
and common equivalent share:
Primary.................................. 70,702 62,318 57,037
Fully diluted............................ 70,702 71,967 69,014
</TABLE>
See accompanying notes.
F-3
<PAGE>
VENCOR, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 AND 1995 (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
ASSETS ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 112,466 $ 35,182
Accounts and notes receivable less allowance for loss
of $23,915--1996 and $16,785--1995................... 420,758 360,147
Inventories........................................... 24,939 24,862
Income taxes.......................................... 67,808 77,997
Other................................................. 35,162 26,491
---------- ----------
661,133 524,679
Property and equipment, at cost:
Land.................................................. 113,749 111,232
Buildings............................................. 975,399 992,992
Equipment............................................. 435,787 403,338
Construction in progress (estimated cost to complete
and equip after December 31, 1996--$50,000).......... 84,835 44,731
---------- ----------
1,609,770 1,552,293
Accumulated depreciation.............................. (416,608) (362,199)
---------- ----------
1,193,162 1,190,094
Notes receivable less allowance for loss of $15,305--
1995.................................................. - 78,090
Intangible assets less accumulated amortization of
$25,218--1996
and $22,149--1995..................................... 31,608 42,580
Other.................................................. 82,953 77,011
---------- ----------
$1,968,856 $1,912,454
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 103,518 $ 99,887
Salaries, wages and other compensation................ 111,366 99,937
Other accrued liabilities............................. 71,434 75,617
Long-term debt due within one year.................... 54,692 9,572
---------- ----------
341,010 285,013
Long-term debt......................................... 710,507 778,100
Deferred credits and other liabilities................. 84,053 75,573
Minority interests in equity of consolidated entities.. 36,195 1,704
Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; authorized 1,000
shares; none issued and outstanding.................. - -
Common stock, $0.25 par value; authorized 180,000
shares;
issued 72,615 shares--1996 and 72,158 shares--1995... 18,154 18,040
Capital in excess of par value........................ 713,527 684,377
Retained earnings..................................... 150,870 102,865
---------- ----------
882,551 805,282
Common treasury stock; 3,730 shares--1996 and 2,025
shares--1995......................................... (85,460) (33,218)
---------- ----------
797,091 772,064
---------- ----------
$1,968,856 $1,912,454
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
VENCOR, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SHARES
--------------------------
PAR VALUE
COMMON ----------------- CAPITAL IN COMMON
PREFERRED COMMON TREASURY PREFERRED COMMON EXCESS OF RETAINED TREASURY
STOCK STOCK STOCK STOCK STOCK PAR VALUE EARNINGS STOCK TOTAL
--------- ------ -------- --------- ------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1993................... 157 53,208 (2,993) $ 23 $13,302 $451,027 $ 58,911 $(37,713) $485,550
Net income............. 85,898 85,898
Cash dividends on
preferred stock
($82.50 per share) and
provision for
redemption value...... (3,066) (3,066)
In-kind dividend on
preferred stock....... 4 2 4,506 (4,508) -
Issuance of common
stock in connection
with employee benefit
plans................. 360 121 89 5,458 1,518 7,065
Issuance of common
stock in connection
with acquisitions..... 698 9,089 8,565 17,654
Exercise of common
stock purchase
warrants.............. 5,610 1,403 61,897 63,300
Tender of preferred
stock in connection
with exercise of
common stock purchase
warrants.............. (63) (10) (63,290) (63,300)
Other.................. 3,974 (621) 3,353
---- ------ ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1994................... 98 59,178 (2,174) 15 14,794 472,661 136,614 (27,630) 596,454
Net loss............... (14,889) (14,889)
Cash dividends on
preferred stock
($67.98 per share) and
provision for
redemption value...... (2,380) (2,380)
In-kind dividend on
preferred stock....... 3 2,900 (2,900) -
Issuance of common
stock in connection
with employee benefit
plans................. 664 (150) 166 24,111 (11,098) 13,179
Issuance of common
stock in connection
with acquisitions..... 439 (3,227) 5,498 2,271
Increase in value of
common stock purchase
warrants of acquired
entities.............. 9,810 (9,810) -
Public offering of
common stock.......... 2,200 550 65,944 66,494
Conversion of long-term
debt.................. 7,260 1,815 149,645 151,460
Issuance of common
stock to grantor
trust................. 3,927 (3,927) 982 87,297 (88,279) -
Hillhaven Merger:
Issuance of common
stock and related
income tax benefits... 2,732 683 51,561 52,244
Termination of grantor
trust................. (3,786) 3,786 (946) (87,146) 88,279 187
Redemption of preferred
stock................. (101) (15) (91,253) (91,268)
Other.................. (17) 1 (4) 2,074 (3,770) 12 (1,688)
---- ------ ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1995................... - 72,158 (2,025) - 18,040 684,377 102,865 (33,218) 772,064
Net income............. 48,005 48,005
Increase in equity
resulting from initial
public offering of
Atria Communities,
Inc. common stock..... 19,828 19,828
Issuance of common
stock in connection
with employee benefit
plans................. 457 246 114 9,223 3,083 12,420
Repurchase of common
stock................. (1,950) (55,305) (55,305)
Other.................. (1) 99 (20) 79
---- ------ ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1996................... - 72,615 (3,730) $ - $18,154 $713,527 $150,870 $(85,460) $797,091
==== ====== ====== ==== ======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
VENCOR, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER
31, 1996, 1995 AND 1994 (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................ $ 48,005 $ (14,889) $ 85,898
Adjustments to reconcile net income (loss) to
net cash
provided by operating activities:
Depreciation and amortization............... 99,533 89,478 79,519
Deferred income taxes....................... (34,814) (23,570) 5,526
Extraordinary loss on extinguishment of
debt....................................... - 38,091 366
Non-recurring transactions.................. 121,789 102,166 2,500
Other....................................... 5,685 14,809 (1,575)
Change in operating assets and liabilities:
Accounts and notes receivable.............. (64,304) (107,761) (63,247)
Inventories and other assets............... 1,284 (3,478) 12,385
Accounts payable........................... 2,165 22,157 4,718
Other accrued liabilities.................. 4,196 (3,366) 6,946
--------- --------- ---------
Net cash provided by operating
activities.............................. 183,539 113,637 133,036
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment........... (135,027) (136,893) (111,486)
Acquisition of healthcare businesses and
previously leased facilities................ (26,236) (59,343) (36,391)
Sale of assets............................... 9,147 899 6,530
Collection of notes receivable............... 78,151 4,715 8,965
Net change in investments.................... (445) (12,779) 14,046
Other........................................ (6,576) (8,241) 3,032
--------- --------- ---------
Net cash used in investing activities.... (80,986) (211,642) (115,304)
--------- --------- ---------
Cash flows from financing activities:
Net change in borrowings under revolving
lines of credit............................. (1,500) 161,600 21,000
Issuance of long-term debt................... 10,495 438,052 18,599
Repayment of long-term debt.................. (31,586) (474,896) (75,124)
Public offering of common stock.............. 52,247 66,494 -
Other issuances of common stock.............. 2,242 6,520 1,289
Repurchase of common stock................... (55,305) - -
Redemption of preferred stock................ - (91,268) -
Payment of dividends......................... - (2,779) (3,070)
Other........................................ (1,862) (9,554) (2,338)
--------- --------- ---------
Net cash provided by (used in) financing
activities.............................. (25,269) 94,169 (39,644)
--------- --------- ---------
Change in cash and cash equivalents........... 77,284 (3,836) (21,912)
Cash and cash equivalents at beginning of
period....................................... 35,182 39,018 60,930
--------- --------- ---------
Cash and cash equivalents at end of period.... $ 112,466 $ 35,182 $ 39,018
========= ========= =========
Supplemental information:
Interest payments............................ $ 46,527 $ 69,916 $ 59,733
Income tax payments.......................... 55,303 42,218 37,332
</TABLE>
See accompanying notes.
F-6
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--ACCOUNTING POLICIES
REPORTING ENTITY
Vencor, Inc. ("Vencor" or "the Company") operates an integrated network of
healthcare services in forty-one states primarily focused on the needs of the
elderly. At December 31, 1996, Vencor operated 38 hospitals (3,325 licensed
beds), 313 nursing centers (39,619 licensed beds), a contract services
business ("Vencare") which provides respiratory therapy, rehabilitation
therapy, subacute medical services and pharmacy management services to nursing
centers and other healthcare providers and 21 assisted and independent living
communities with 2,942 units.
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 2.
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 3.
In the third quarter of 1996, Vencor completed an initial public offering
related to its assisted and independent living business through the issuance
of 5,750,000 common shares of Atria Communities, Inc. ("Atria") (the "IPO").
See Note 4.
BASIS OF PRESENTATION
The consolidated financial statements include all subsidiaries. Significant
intercompany transactions have been eliminated.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and include amounts
based upon the estimates and judgments of management. Actual amounts may
differ from these estimates.
The Hillhaven Merger and the Nationwide Merger have been accounted for by
the pooling-of-interests method. Accordingly, the consolidated financial
statements included herein give retroactive effect to these transactions and
include the combined operations of Vencor, Hillhaven and Nationwide for all
periods presented.
In connection with the IPO, Vencor retained a controlling interest in Atria.
Accordingly, the accounts of Atria continue to be consolidated with those of
Vencor, and the Company has recorded minority interests in the earnings and
equity of Atria since consummation of the IPO.
REVENUES
Revenues are recorded based upon estimated amounts due from patients and
third-party payors for healthcare services provided, including anticipated
settlements under reimbursement agreements with Medicare, Medicaid and other
third-party payors.
F-7
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)
REVENUES (CONTINUED)
A summary of revenues by payor type follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Medicare.................................... $ 822,589 $ 691,297 $ 554,443
Medicaid.................................... 821,828 776,278 731,491
Commercial and other........................ 972,906 865,820 747,267
---------- ---------- ----------
2,617,323 2,333,395 2,033,201
Elimination................................. (39,540) (9,439) (374)
---------- ---------- ----------
$2,577,783 $2,323,956 $2,032,827
========== ========== ==========
</TABLE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less. Carrying values of cash and cash equivalents
approximate fair value due to the short-term nature of these instruments.
ACCOUNTS RECEIVABLE
Accounts receivable consist primarily of amounts due from the Medicare and
Medicaid programs, other government programs, managed care health plans,
commercial insurance companies and individual patients.
INVENTORIES
Inventories consist primarily of medical supplies and are stated at the
lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Depreciation expense, computed by the straight-line method, was $91.6
million in 1996, $79.7 million in 1995, and $71.6 million in 1994.
Depreciation rates for buildings range generally from 20 to 45 years.
Estimated useful lives of equipment vary from 5 to 15 years.
During 1996, Vencor adopted Financial Accounting Standards Board Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." See Note 5.
INTANGIBLE ASSETS
Intangible assets consist primarily of costs in excess of the fair value of
identifiable net assets of acquired entities and are amortized using the
straight-line method over periods ranging from 10 to 25 years. Noncompete
agreements and debt issuance costs are amortized based upon the lives of the
respective contracts or loans.
PROFESSIONAL LIABILITY RISKS
Provisions for loss for professional liability risks are based upon
actuarially determined estimates. To the extent that subsequent claims
information varies from management's estimates, earnings are charged or
credited.
F-8
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER COMMON SHARE
Share and per share amounts have been retroactively restated to reflect a 3-
for-2 stock split distributed in October 1994.
The computation of earnings per common and common equivalent share give
retroactive effect to the Hillhaven Merger and the Nationwide Merger and is
based upon the weighted average number of common shares outstanding and the
dilutive effect of common stock equivalents consisting primarily of stock
options. In addition, the 1995 and 1994 computations also include the dilutive
effect of convertible debt securities.
During 1995, all convertible debt securities were redeemed in exchange for
cash or converted into Vencor common stock. Accordingly, the computation of
fully diluted earnings per common share assumes that the equivalent number of
common shares underlying such debt securities were outstanding during the
entire year even though the result thereof is antidilutive.
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, fully diluted earnings
per common and common equivalent share were increased by $0.14.
NOTE 2--HILLHAVEN MERGER
On September 27, 1995, the stockholders of both Vencor and Hillhaven
approved the Hillhaven Merger, effective September 28, 1995. In connection
with the Hillhaven Merger, Vencor issued approximately 31,651,000 shares of
common stock in exchange for all of the outstanding common stock of Hillhaven
(an exchange ratio of 0.935 of a share of Vencor common stock for each share
of Hillhaven common stock).
The Hillhaven Merger has been accounted for as a pooling of interests, and
accordingly, the consolidated financial statements give retroactive effect to
the Hillhaven Merger and include the combined operations of Vencor and
Hillhaven for all periods presented. The following is a summary of the results
of operations of the separate entities for periods prior to the Hillhaven
Merger (dollars in thousands):
<TABLE>
<CAPTION>
NON-RECURRING
VENCOR HILLHAVEN TRANSACTIONS ELIMINATION CONSOLIDATED
-------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Nine months ended
September 30,
1995 (unaudited):
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.............. $400,018 $1,633,183 $ - $ (374) $2,032,827
Income from
operations............. 31,416 51,976 2,747 - 86,139
Net income............ 31,416 51,735 2,747 - 85,898
</TABLE>
F-9
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--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 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 consolidated financial statements give retroactive effect to
the Nationwide Merger and include the combined operations of Hillhaven and
Nationwide for all periods presented. The following is a summary of the
results of operations of the separate entities for periods prior to the
Nationwide Merger (dollars in thousands):
<TABLE>
<CAPTION>
NON-RECURRING
HILLHAVEN NATIONWIDE TRANSACTIONS CONSOLIDATED
---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Six months ended June 30,
1995 (unaudited):
Revenues................... $ 803,793 $ 66,800 $ - $ 870,593
Income from operations..... 23,837 2,147 (3,686) 22,298
Net income................. 23,459 (266) (3,686) 19,507
1994:
Revenues................... $1,509,729 $123,454 $ - $1,633,183
Income from operations..... 47,178 4,798 2,747 54,723
Net income................. 46,937 4,798 2,747 54,482
</TABLE>
NOTE 4--INITIAL PUBLIC OFFERING OF ATRIA
In the third quarter of 1996, Vencor completed the IPO, the net proceeds
from which aggregated approximately $52.2 million. At December 31, 1996,
Vencor owned 10,000,000 shares, or 63.2%, of Atria's outstanding common stock.
Significant agreements related to the IPO are discussed below.
Credit Facility
Concurrently with the consummation of the IPO, Atria entered into a bank
credit facility (the "Atria Credit Facility"), which matures in four years and
may be extended at the option of the banks for an additional year. The Atria
Credit Facility aggregates up to $200 million, including a letter of credit
option not to exceed $70 million. Loans under the Atria Credit Facility bear
interest, at Atria's option, at either (i) a base rate based on PNC Bank's
prime rate or the daily federal funds rate or (ii) a LIBOR rate, plus an
additional percentage based on certain leverage ratios. The obligations under
the Atria Credit Facility are secured by substantially all of Atria's
property, the capital stock of Atria's present and future principal
subsidiaries and all intercompany indebtedness owned to Atria by its
subsidiaries. The Atria Credit Facility is conditioned upon, among other
things, Vencor's ownership of at least 30% of Atria's common stock.
Agreements with Atria
Atria and Vencor or its subsidiaries have entered into certain arrangements
which are intended to facilitate an orderly transition of Atria from a
division of Vencor to a separate publicly held entity which will be minimally
disruptive to both Atria and Vencor. In addition to various agreements related
to administrative support, shared services and real estate leases, significant
agreements with Atria include:
Guarantees--Vencor will guarantee for four years certain borrowings by
Atria under the Atria Credit Facility in amounts up to $100 million in the
first year following the IPO, declining to $75 million, $50 million and $25
million in each respective year thereafter.
F-10
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--INITIAL PUBLIC OFFERING OF ATRIA (CONTINUED)
Income Taxes--A tax sharing agreement provides for risk-sharing
arrangements in connection with various income tax related issues.
Registration Rights--Atria has granted demand and piggyback registration
rights to Vencor with respect to registration under the Securities Act of
1933 of Atria common stock owned by Vencor. Four demand registrations are
permitted. Atria will pay the fees and expenses of two demand registrations
and the piggyback registrations, while Vencor will pay all underwriting
discounts and commissions. The registration rights expire five years from
the completion of the IPO and are subject to certain conditions and
limitations, including the right of underwriters of an offering to limit
the number of shares owned by Vencor included in such registration.
Liabilities and Indemnifications--Atria has agreed to assume all
contractual liabilities relating to the assets transferred by Vencor to
Atria.
NOTE 5--NON-RECURRING TRANSACTIONS
1996
In the fourth quarter of 1996, Vencor recorded pretax charges aggregating
$125.2 million primarily to complete the integration of Hillhaven. In November
1996, Vencor executed a definitive agreement to sell 34 underperforming or
non-strategic nursing centers in early 1997. A charge of $65.3 million was
recorded in connection with the disposition. In addition, Vencor's previously
independent institutional pharmacy business, acquired as part of the Hillhaven
Merger, was integrated into Vencare, resulting in a charge of $39.6 million
related primarily to costs associated with employee severance and benefit
costs (approximately 500 employees), facility close-down expenses and the
writeoff of certain deferred costs for services to be discontinued. A
provision for loss totaling $20.3 million related to the planned replacement
of one hospital and three nursing centers was also recorded in the fourth
quarter.
1995
In the third quarter of 1995, Vencor recorded pretax charges aggregating
$128.4 million primarily in connection with the consummation of 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 (approximately 500 employees), (iii) $26.9 million of losses associated
with the planned disposition of certain nursing center properties and (iv)
$24.5 million of charges 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). During 1996,
activities related to the elimination of duplicative corporate and operational
functions was substantially completed, and management expects that the
disposition of certain nursing center properties will be concluded in 1997.
Pretax charges aggregating $5.5 million were recorded in the second quarter
primarily in connection with the Nationwide Merger.
1994
In the first quarter of 1994, Vencor recorded a pretax charge of $2.5
million in connection with the prior disposition of certain nursing centers.
Operating results in the fourth quarter of 1994 include a pretax gain of $7
million on the sale of assets.
F-11
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--BUSINESS COMBINATIONS OTHER THAN HILLHAVEN AND NATIONWIDE
Vencor has acquired a number of healthcare facilities (including certain
previously leased facilities) and other related businesses, substantially all
of which have been accounted for by the purchase method. Accordingly, the
aggregate purchase price of these transactions has been allocated to tangible
and identifiable intangible assets acquired and liabilities assumed based upon
their respective fair values. The consolidated financial statements include
the operations of acquired entities since the respective acquisition dates.
The pro forma effect of these acquisitions on Vencor's results of operations
prior to consummation was not significant.
The following is a summary of acquisitions consummated during the last three
years under the purchase method of accounting (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets acquired.................... $ 26,621 $ 78,893 $ 54,045
Fair value of liabilities assumed................ (385) (16,475) -
-------- -------- --------
Net assets acquired............................ 26,236 62,418 54,045
Cash received from acquired entities............. - (804) -
Issuance of common stock......................... - (2,271) (17,654)
-------- -------- --------
Net cash paid for acquisitions................. $ 26,236 $ 59,343 $ 36,391
======== ======== ========
The purchase price paid in excess of the fair value of identifiable net
assets of acquired entities aggregated $4.8 million in 1996, $9.7 million in
1995 and $8.3 million in 1994.
NOTE 7--INCOME TAXES
Provision for income taxes consists of the following (dollars in thousands):
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ 59,470 $ 40,008 $ 34,697
State........................................... 10,519 7,563 6,558
-------- -------- --------
69,989 47,571 41,255
Deferred......................................... (34,814) (23,570) 5,526
-------- -------- --------
$ 35,175 $ 24,001 $ 46,781
======== ======== ========
Reconciliation of federal statutory rate to effective income tax rate
follows:
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate........................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax
benefit......................................... 3.6 4.3 4.0
Merger and restructuring costs................... 3.5 34.6 -
Targeted jobs tax credits........................ - - (4.5)
Other items, net................................. 0.2 0.3 0.7
-------- -------- --------
Effective income tax rate...................... 42.3% 74.2% 35.2%
======== ======== ========
</TABLE>
F-12
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--INCOME TAXES (CONTINUED)
A summary of deferred income taxes by source included in the consolidated
balance sheet at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Depreciation........................... $ - $47,256 $ - $40,912
Insurance.............................. 12,058 - 10,269 -
Doubtful accounts...................... 37,989 - 26,723 -
Property............................... 34,767 - 10,148 -
Compensation........................... 17,030 - 19,133 -
Other.................................. 33,120 19,990 16,127 8,584
-------- ------- ------- -------
$134,964 $67,246 $82,400 $49,496
======== ======= ======= =======
</TABLE>
Management believes that the deferred tax assets in the table above will
ultimately be realized. Management's conclusion is based primarily on the
existence of sufficient taxable income within the allowable carryback periods
to realize the tax benefits of deductible temporary differences recorded at
December 31, 1996.
Deferred income taxes totaling $62.4 million and $54.7 million at December
31, 1996 and 1995, respectively, are included in other current assets.
Noncurrent deferred income taxes, included in other long-term assets, totaled
$5.3 million at December 31, 1996. Noncurrent deferred income taxes at
December 31, 1995 totaling $21.8 million are included principally in deferred
credits and other liabilities.
NOTE 8--PROFESSIONAL LIABILITY RISKS
Vencor has insured a substantial portion of its professional liability risks
through a wholly owned insurance subsidiary since June 1, 1994. Provisions for
such risks underwritten by the subsidiary were $10.4 million for 1996, and
$11.1 million for 1995, and $6.9 million for 1994.
Amounts funded for the payment of claims and expenses incident thereto,
included principally in cash and cash equivalents and other assets, aggregated
$20.7 million and $17.5 million at December 31, 1996 and 1995, respectively.
Allowances for professional liability risks, included principally in deferred
credits and other liabilities, were $21.6 million and $15.9 million at
December 31, 1996 and 1995, respectively.
NOTE 9--LONG-TERM DEBT
CAPITALIZATION
A summary of long-term debt at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Senior collateralized debt, 4.4% to 12% (rates generally
floating) payable in periodic installments through 2019... $119,634 $140,813
Non-interest bearing residential mortgage bonds, payable in
periodic installments through 2040........................ 33,917 33,344
Bank revolving credit agreements due 2001 (floating rates
averaging 6.3%)........................................... 333,100 205,600
Bank term loans (floating rates averaging 6.3%) payable in
periodic installments
through 2001.............................................. 271,000 400,000
10 1/8% Senior Subordinated Notes due 2001................. 3,291 3,289
Other...................................................... 4,257 4,626
-------- --------
Total debt, average life of seven years (rates averaging
5.9%)..................................................... 765,199 787,672
Amounts due within one year................................ (54,692) (9,572)
-------- --------
Long-term debt........................................... $710,507 $778,100
======== ========
</TABLE>
F-13
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--LONG-TERM DEBT (CONTINUED)
CREDIT FACILITY
Concurrent with the consummation of the Hillhaven Merger, Vencor entered
into a five and one-half year $1 billion bank credit facility (the "Vencor $1
Billion Credit Facility") comprising a $400 million term loan and a $600
million revolving credit facility. The Vencor $1 Billion 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 the 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. The Vencor $1 Billion Credit Facility is collateralized by the
capital stock of certain subsidiaries and contains covenants which require
maintenance of certain financial ratios and limit amounts of additional debt
and repurchases of common stock.
REFINANCING ACTIVITIES
During 1995, Vencor recorded $23.3 million of after-tax losses from
refinancing of long-term debt, substantially all of which was incurred in
connection with the Hillhaven Merger. Amounts refinanced in 1995 included $171
million of 10 1/8% Senior Subordinated Notes due 2001 (the "10 1/8% Notes"),
$112 million of outstanding borrowings under prior revolving credit
agreements, and $173 million of other senior debt.
In the fourth quarter of 1995, Vencor called for redemption its $115 million
of 6% Convertible Subordinated Notes due 2002 (the "6% Notes") and $75 million
of 7 3/4% Convertible Subordinated Debentures due 2002 (the "7 3/4%
Debentures") which were convertible into Vencor common stock at the rate of
$26.00 and $17.96 per share, respectively. Approximately $80.6 million
principal amount of the 6% Notes were converted into approximately 3,098,000
shares of common stock and the remainder were redeemed in exchange for cash
equal to 104.2% of face value plus accrued interest. All outstanding 7 3/4%
Debentures were converted into approximately 4,161,000 shares of common stock.
These transactions had no material effect on earnings per common and common
equivalent share.
OTHER INFORMATION
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. 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% plus 1/2% to 1 1/4%.
Maturities of long-term debt in years 1998 through 2001 are $66 million, $82
million, $111 million and $313 million, respectively.
The estimated fair value of Vencor's long-term debt was $752 million and
$777 million at December 31, 1996 and 1995, respectively, compared to carrying
amounts aggregating $765 million and $788 million. The estimate of fair value
includes the effect of the interest rate swap agreement and is based upon the
quoted market prices for the same or similar issues of long-term debt, or on
rates available to Vencor for debt of the same remaining maturities.
F-14
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--LEASES
Vencor leases real estate and equipment under cancelable and non-cancelable
arrangements. Future minimum payments and related sublease income under non-
cancelable operating leases are as follows (dollars in thousands):
<TABLE>
<CAPTION>
MINIMUM SUBLEASE
PAYMENTS INCOME
-------- --------
<S> <C> <C>
1997.......................................................... $48,341 $ 8,519
1998.......................................................... 42,265 7,335
1999.......................................................... 36,681 6,317
2000.......................................................... 32,655 6,116
2001.......................................................... 23,011 4,962
Thereafter.................................................... 61,414 17,608
</TABLE>
Sublease income aggregated $8.8 million, $13.7 million and $13.2 million for
1996, 1995 and 1994, respectively.
NOTE 11--CONTINGENCIES
Management continually evaluates contingencies based upon the best available
evidence. In addition, allowances for loss are provided currently for disputed
items that have continuing significance, such as certain third-party
reimbursements and deductions that continue to be claimed in current cost
reports and tax returns.
Management believes that allowances for losses have been provided to the
extent necessary and that its assessment of contingencies is reasonable.
Management believes that resolution of contingencies will not materially
affect Vencor's liquidity, financial position or results of operations.
Principal contingencies are described below:
Revenues--Certain third-party payments are subject to examination by
agencies administering the programs. Vencor is contesting certain issues
raised in audits of prior year cost reports.
Professional liability risks--Vencor has provided for loss for professional
liability risks based upon actuarially determined estimates. Actual
settlements may differ from the provisions for loss.
Interest rate swap agreements--Vencor is a party to certain agreements which
reduce the impact of changes in interest rates on $400 million of its floating
rate long-term debt. In the event of nonperformance by other parties to these
agreements, Vencor may incur a loss to the extent that market rates exceed
contract rates.
Guarantees of indebtedness--Letters of credit and guarantees of indebtedness
aggregated $29 million at December 31, 1996.
Income taxes--Vencor is contesting adjustments proposed by the Internal
Revenue Service for years 1990, 1991 and 1992.
Litigation--Various suits and claims arising in the ordinary course of
business are pending against Vencor.
F-15
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CAPITAL STOCK
PLAN DESCRIPTIONS
In September 1995, Vencor common stockholders voted to increase the number
of authorized shares of common stock from 60 million to 180 million and
increase the number of common shares issuable under certain employee benefit
plans from approximately 3.2 million to 6.9 million. At December 31, 1996,
approximately 5.6 million shares of common stock were reserved for issuance
under Vencor's stock compensation plans.
Vencor has plans under which options to purchase common stock may be granted
to officers, employees and certain directors. Options have been granted at not
less than market price on the date of grant. Exercise provisions vary, but
most options are exercisable in whole or in part beginning one to four years
after grant and ending ten years after grant. Activity in the plans is
summarized below:
<TABLE>
<CAPTION>
SHARES WEIGHTED
UNDER OPTION PRICE AVERAGE
OPTION PER SHARE EXERCISE PRICE
--------- ---------------- --------------
<S> <C> <C> <C>
Balances, December 31, 1993.......... 1,660,826 $ 0.53 to $24.25
Granted............................ 536,239 11.53 to 22.75
Exercised.......................... (102,230) 0.53 to 22.09
Canceled or expired................ (48,185) 5.35 to 22.09
---------
Balances, December 31, 1994.......... 2,046,650 0.53 to 24.25
Granted............................ 1,537,820 11.50 to 32.50
Exercised.......................... (593,918) 0.53 to 29.14
Canceled or expired................ (51,151) 5.35 to 28.50
---------
Balances, December 31, 1995.......... 2,939,401 0.53 to 32.50
Granted............................ 1,467,451 25.50 to 38.38 $26.02
Exercised.......................... (368,758) 0.53 to 28.50 6.10
Canceled or expired................ (351,271) 14.17 to 32.63 26.65
---------
Balances, December 31, 1996.......... 3,686,823 $ 0.53 to $38.38 $23.54
=========
</TABLE>
A summary of stock options outstanding at December 31, 1996 follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ---------------------
NUMBER NUMBER
OUTSTANDING WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1996 LIFE PRICE 1996 PRICE
- --------------- ------------ ------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.53 to $5.95.......... 219,032 1 to 4 years $ 2.87 219,032 $ 2.87
$14.17 to $24.25........ 821,635 5 to 7 years 19.08 629,517 18.99
$25.50 to $38.38........ 2,646,156 8 to 10 years 26.63 294,139 27.49
--------- ---------
3,686,823 $23.54 1,142,688 $18.09
========= =========
</TABLE>
The weighted average remaining contractual life of options outstanding at
December 31, 1996 approximated eight years. Shares of common stock available
for future grants were 1,387,396 at December 31, 1996 and 2,470,066 at
December 31, 1995.
In 1995, Vencor issued long-term incentive agreements to certain officers
and key employees whereby the Company may annually issue shares of common
stock to such individuals in satisfaction of predetermined performance goals.
Share awards aggregated 80,913 for 1996 and 92,500 for 1995.
F-16
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CAPITAL STOCK (CONTINUED)
PLAN DESCRIPTIONS (CONTINUED)
In 1993, Vencor adopted a Shareholder Rights Plan under which common
stockholders have the right to purchase Series A Preferred Stock in the event
of accumulation of or tender offer for 15% or more of Vencor's common stock.
The rights will expire in 2003 unless redeemed earlier by Vencor.
STATEMENT NO. 123 DATA
Vencor has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement No.
123"), requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise price of
Vencor's employee stock options is equal to the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement No. 123, which also requires that the information be
determined as if Vencor has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value of such options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 6.33% for 1996 and 1995; no dividend
yield; expected term of seven years and volatility factors of the expected
market price of the Company's common stock of .24 for 1996 and .25 for 1995.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because Vencor's employee stock options have characteristics significantly
different from those of traded options, and because the changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the respective vesting period. The
weighted average fair values of options granted during 1996 and 1995 under the
Black-Scholes model were $10.95 and $11.74, respectively. Pro forma
information follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Pro forma income (loss) available to common stockholders.... $42,530 $(10,842)
Pro forma earnings (loss) per common and common equivalent
share:
Primary.................................................... 0.61 (0.17)
Fully diluted.............................................. 0.61 (0.05)
</TABLE>
Because Statement No. 123 is applicable only to options granted subsequent
to December 31, 1994, its pro forma effect will not be fully reflected until
1999.
F-17
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--EMPLOYEE BENEFIT PLANS
Vencor maintains defined contribution retirement plans covering employees
who meet certain minimum eligibility requirements. Benefits are determined as
a percentage of a participant's contributions and are generally vested based
upon length of service. Retirement plan expense was $8.8 million for 1996,
$9.7 million for 1995 and $7.0 million for 1994. Amounts equal to retirement
plan expense are funded annually.
NOTE 14--ACCRUED LIABILITIES
A summary of other accrued liabilities at December 31 follows (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Interest....................................................... $ 3,502 $ 3,582
Taxes other than income........................................ 20,238 22,000
Patient accounts............................................... 17,919 13,319
Merger related costs........................................... 16,640 19,071
Other.......................................................... 13,135 17,645
------- -------
$71,434 $75,617
======= =======
</TABLE>
NOTE 15--SPIN-OFF AND RELATED TRANSACTIONS
Hillhaven became an independent public company in January 1990 as a result
of a spin-off transaction with Tenet Healthcare Corporation (formerly National
Medical Enterprises, Inc.) ("Tenet"). The following is a summary of
significant transactions with Tenet:
Debt guarantees--Tenet and Vencor are parties to a guarantee agreement under
which Vencor pays a fee to Tenet in consideration for Tenet's guarantee of
certain Vencor obligations. Such fees totaled $3.0 million in 1996, $3.8
million in 1995, and $5.0 million in 1994.
Insurance--Prior to June 1, 1994, substantially all of the professional and
general liability risks of Hillhaven were insured by a subsidiary of Tenet.
Provisions for loss were $3.1 million in 1994.
Leases--Vencor leases certain nursing centers from a joint venture in which
Tenet has a minority interest. Lease payments to the joint venture aggregated
$10.3 million, $9.9 million and $9.3 million for 1996, 1995 and 1994,
respectively.
Equity ownership--At December 31, 1996, Tenet owned 8,301,067 shares of
Vencor common stock. Prior to the Hillhaven Merger, Tenet also owned all of
Hillhaven's outstanding Series C and Series D Preferred Stock.
Management agreements--Fees paid by Tenet for management, consulting and
advisory services in connection with the operation of seven nursing centers
owned or leased by Tenet aggregated $2.7 million in both 1996 and 1995 and
$2.5 million in 1994.
NOTE 16--FAIR VALUE DATA
A summary of fair value data at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.................. $112,466 $112,466 $ 35,182 $ 35,182
Notes receivable........................... - - 88,729 89,992
Long-term debt, including amounts due
within one year........................... 765,199 751,843 787,672 777,090
</TABLE>
F-18
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17--STOCK REPURCHASE PROGRAM
In June 1996, the Board of Directors authorized the repurchase of up to
2,000,000 shares of Vencor common stock. As of December 31, 1996, Vencor had
repurchased 1,950,000 shares at an aggregate cost of approximately $55.3
million.
NOTE 18--EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF
INDEPENDENT AUDITORS
On March 21, 1997, Vencor completed the acquisition of TheraTx, Incorporated
("TheraTx"), a provider of rehabilitation and respiratory therapy management
services and nursing center operator (the "TheraTx Merger"). Under the terms
of the merger agreement, Vencor paid $17.10 cash for each outstanding share of
TheraTx common stock, which aggregated approximately 20.6 million shares at
December 31, 1996. The TheraTx Merger will be recorded using the purchase
method of accounting.
In connection with the TheraTx Merger, Vencor entered into a new five-year
bank credit facility aggregating $1.6 billion on March 18, 1997, replacing the
Vencor $1 Billion Credit Facility.
F-19
<PAGE>
VENCOR, INC. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues....................... $626,337 $634,554 $650,551 $666,341
Net income (loss)(a)........... 27,610 30,865 33,558 (44,028)
Per common share:
Primary earnings (loss)....... 0.39 0.43 0.48 (0.64)
Fully diluted earnings (loss). 0.39 0.43 0.48 (0.64)
Market prices (b):
High......................... 39 7/8 35 34 1/2 33 1/4
Low.......................... 31 1/2 28 1/8 25 1/2 27 1/2
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues....................... $552,178 $578,314 $575,339 $618,125
Net income (loss):
Income (loss) from operations
(c)........................... 21,172 21,087 (62,887) 28,991
Extraordinary loss on
extinguishment of debt........ (66) (2,725) (19,196) (1,265)
Net income (loss)............ 21,106 18,362 (82,083) 27,726
Per common share:
Primary earnings (loss):
Income (loss) from operations
(c)........................... 0.33 0.32 (0.91) 0.43
Extraordinary loss on
extinguishment of debt........ - (0.05) (0.32) (0.02)
Net income (loss)........... 0.33 0.27 (1.23) 0.41
Fully diluted earnings (loss):
Income (loss) from operations
(c)........................... 0.31 0.30 (0.91) 0.41
Extraordinary loss on
extinguishment of debt........ - (0.04) (0.32) (0.02)
Net income (loss)........... 0.31 0.26 (1.23) 0.39
Market prices (b):
High......................... 37 38 36 1/8 33 3/4
Low.......................... 27 1/8 28 1/2 28 1/4 26
</TABLE>
- --------
(a) Fourth quarter results includes $79.9 million ($1.16 per share) of costs
in connection with the sale of 34 nursing centers, the restructuring of
the pharmacy operations and the planned replacement of certain facilities.
See Note 5 of the Notes to Consolidated Financial Statements.
(b) Vencor common stock is traded on the New York Stock Exchange (ticker
symbol--VC).
(c) Second quarter results include $3.7 million ($0.05 per share) of costs
related to the Nationwide Merger. Third quarter loss includes $89.9
million ($1.50 per share) of costs related to the Hillhaven Merger. See
Note 5 of the Notes to Consolidated Financial Statements.
F-20
<PAGE>
VENCOR, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER DEDUCTIONS AT END
OF PERIOD EXPENSES ACCOUNTS OR PAYMENTS OF PERIOD
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowances for loss on
accounts and
notes receivable:
Year ended December
31, 1994............... $21,316 $ 9,055 $ (344)(a) $ (1,762) $28,265
Year ended December
31, 1995............... 28,265 7,851 - (4,026) 32,090
Year ended December
31, 1996............... 32,090 15,001 - (23,176) 23,915
Allowances for loss on
assets held
for disposition:
Year ended December
31, 1994............... $56,646 $ - $(56,646)(a)(b) $ - $ -
Year ended December
31, 1995............... - 26,900(c) - - 26,900
Year ended December
31, 1996............... 26,900 64,000(d) - (22,812) 68,088
</TABLE>
- --------
(a) Adjustment to reflect change in fiscal year of acquired entities.
(b) Includes $54.6 million related to reinstatement of assets previously held
for disposition.
(c) Reflects provision for loss associated with the planned disposition of
certain nursing center properties recorded in connection with the
Hillhaven Merger.
(d) Reflects provision for loss associated with the sale of 34 nursing centers
and the planned replacement of one hospital and three nursing centers.
F-21
<PAGE>
EXHIBIT 4.6
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of June 19, 1996, between
VENCOR, INC. ("Vencor") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor
by merger to J.P. Morgan Delaware), as Collateral Agent (the "Collateral
Agent").
WHEREAS, Vencor, First Healthcare Corporation and Morgan Guaranty Trust
Company of New York (successor by merger to J.P. Morgan Delaware), as Collateral
Agent, are parties to a Security Agreement dated as of September 11, 1995 (as
heretofore amended and/or supplemented, the "Security Agreement");
WHEREAS, terms defined in the Security Agreement (or whose definitions
are incorporated by reference in Section 1.01 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein; and
WHEREAS, Vencor desires to add certain assets to the Collateral
thereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security lnterest. In order to secure the full and punctual
--------------------------
payment of the Secured Obligations in accordance with the terms thereof, Vencor
grants to the Collateral Agent for the benefit of the Secured Parties a
continuing security interest in all of the following assets of Vencor (the "New
Collateral"):
All Equity Interests in Atria Communities, Inc., a
Delaware corporation, now or hereafter beneficially owned by
Vencor, all rights and privileges of Vencor with respect to such
Equity Interests, and all dividends, distributions, and other
payments with respect thereto.
The New Collateral constitutes Required Collateral.
<PAGE>
2. Delivery of Stock Certificates. Concurrently with delivering this
------------------------------
Security Agreement Supplement to the Collateral Agent, Vencor is delivering to
the Collateral Agent all stock certificates representing capital stock included
in the New Collateral, either in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Collateral Agent.
3. Representations and Warranties as to Collateral. Vencor makes, with
-----------------------------------------------
respect to the New Collateral, all of the representations and warranties set
forth in Section 2 of the Security Agreement with respect to the Required
Collateral.
4. Governing Law. This Security Agreement Supplement shall be construed
-------------
in accordance with and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement Supplement to be duly executed by their respective authorized officers
as of the day and year first above written
VENCOR, INC.
By: /s/ Richard A. Lechleiter
----------------------------------
Name: Richard A. Lechleiter
Title: VP Finance & Corporate Controller
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Collateral Agent
By: /s/ Robert J. Henchey
-----------------------------------
Name: Robert J. Henchey
Title: Vice President
2
<PAGE>
AMENDMENT NO. 1 TO SECURITY AGREEMENT
AMENDMENT NO. 1 dated as of June 19, 1996 to the Security Agreement
dated as of September 11, 1995 (the "Security Agreement") among Vencor, Inc. and
First Healthcare Corporation, as Grantors, and Morgan Guaranty Trust Company of
New York (successor by merger to J.P. Morgan Delaware), as Collateral Agent (the
"Collateral Agent").
The undersigned parties agree as follows:
SECTION 1. Termination of Security Interests: Release of Collateral.
--------------------------------------------------------
Section 16 of the Security Agreement is amended by replacing the words "Equity
Interests in Ventech Systems, Inc." in line 5 of clause (D) thereof with "Equity
Interests in Ventech Systems, Inc. or Atria."
SECTION 2. Rights Otherwise Unaffected. This Amendment is limited to
---------------------------
the matters expressly set forth herein. Except to the extent specifically
amended hereby, all terms of the Security Agreement shall remain in full force
and effect.
SECTION 3. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 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
signatures thereto and hereto were upon the same instrument.
SECTION 5. Effectiveness. This Amendment shall become effective only if
-------------
and when (i) the Documentation Agent shall have received from each of the
parties hereto a counterpart hereof signed by such party, (ii) the Documentation
Agent shall have received from each of the Super-Majority Banks either a signed
consent of such Bank to this Amendment, or facsimile or other written
confirmation from such Bank that it has signed such a consent, and (iii) all the
conditions to the effectiveness of such consents shall have been satisfied.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
to be duly executed as of the date first above written.
VENCOR, INC., as a Grantor
By: /s/ Richard A. Lechleiter
----------------------------------
Name: Richard A. Lechleiter
Title: VP Finance & Corporate Controller
FIRST HEALTHCARE CORPORATION,
as a Grantor
By: /s/ Richard A. Lechleiter
-----------------------------------
Name: Richard A. Lechleiter
Title: VP Finance & Corporate Controller
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Collateral Agent
By: /s/ Richard A. Lechleiter
-----------------------------------
Name: Robert J. Henchey
Title: Vice President
2
<PAGE>
REIMBURSEMENT RECONCILIATION AGREEMENT
AGREEMENT dated as of June 19,1996, between VENCOR, INC. ("Vencor")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan").
WHEREAS, the Bonds identified on Schedule 1 hereto are outstanding
on the date hereof and are supported by the Original Letters of Credit
identified on Schedule 1.
WHEREAS the Original Letters of Credit are scheduled to expire on
August 1, 1996;
WHEREAS, Vencor has requested that Morgan issue Direct Pay IRB
Letters of Credit (as amended and extended from time to time, the "Replacement
Letters of Credit") pursuant to the Credit Agreement to replace the Original
Letters of Credit;
WHEREAS, Vencor, as the Requesting Borrower, will be obligated to
reimburse Morgan for drawings under the Replacement Letters of Credit as
provided in Section 2.06 of the Credit Agreement;
WHEREAS, in order to minimize changes in the documentation relating
to the Bonds, Vencor has asked Morgan to enter into an Owner Reimbursement
Agreement with each of the four Owners identified on Schedule 1 hereto, in each
case obligating such Owner to reimburse Morgan for drawings under the relevant
Replacement Letter of Credit; and
WHEREAS, Vencor and Morgan desire to reconcile the reimbursement
obligations of Vencor under the Credit Agreement and the reimbursement
obligations of the Owners under the four Owner Reimbursement Agreements in such
a way that Morgan will, in each case, receive the full amount provided for in
the Credit Agreement, but not more than such full amount;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SECTION 1. Definitions. The following terms, as used herein, have
-----------
the following meanings;
"Bonds" means the Bonds identified on Schedule 1 hereto:
"Credit Agreement" means the Credit Agreement dated as of September
11, 1995 among Vencor, the other Borrowers referred to therein and the Banks,
Co-Agents, LC Issuing Banks and Agents referred to therein, as heretofore
amended and as such agreement may hereafter be amended from time to time.
"Direct Pay IRB Letter of Credit" has the meaning specified in the
Section 1.01 of the Credit Agreement.
"Facilities" means the four facilities identified on Schedule 1
hereto.
"Original Letters of Credit" means the four letters of credit
identified on Schedule 1 hereto.
"Owner" means, with respect to each Facility, the owner thereof
identified on Schedule 1 hereto.
"Owner Reimbursement Agreements" means four separate reimbursement
agreements, each of which will be entered into by an Owner and Morgan and will
obligate such Owner to reimburse Morgan for drawings under the Replacement
Letter of Credit issued by Morgan to support the Bonds that financed all or
part of the cost of the Facility owned by such Owner, as such agreements may be
amended from time to time.
"Requesting Borrower" has the meaning specified in Section 1.01 of
the Credit Agreement.
SECTION 2. Vencor's Obligations under Credit Agreement. Vencor
-------------------------------------------
acknowledges and agrees that (i) Vencor has requested that Morgan issue the
Replacement Letters of Credit pursuant to Section 2.06 of the Credit Agreement
and (ii) Vencor, as the Requesting Borrower, will be irrevocably and
unconditionally obligated to reimburse Morgan for drawings under the
Replacement Letters of Credit and to perform the other obligations of the
Requesting Borrower with respect thereto, all as provided in Section 2.06 of the
Credit Agreement.
SECTION 3. Owners' Obligations under Owner Reimbursement Agreements.
--------------------------------------------------------
Vencor acknowledges that, at its request, Morgan is entering into an Owner
Reimbursement Agreement with each of the Owners, as a result of which each Owner
will be obligated to reimburse Morgan for drawings under the relevant
Replacement Letter of Credit and perform the other obligations of such Owner as
provided therein. However,
2
<PAGE>
Vencor agrees that Morgan shall have no duty to take any action to enforce the
provisions of any Owner Reimbursement Agreement and Vencor's obligations under
Section 2.06 of the Credit Agreement will not be reduced (except as provided in
Section 4 hereof), postponed or otherwise affected by the existence of the Owner
Reimbursement Agreements.
SECTION 4. Payments by Owners to be Credited Against Obligations of
--------------------------------------------------------
Vencor. Morgan agrees to apply each amount received by it from an Owner pursuant
- ------
to an Owner Reimbursement Agreement as a credit against the corresponding amount
owed by Vencor under Section 2.06 of the Credit Agreement. If any amount owed by
Vencor under the Credit Agreement exceeds the corresponding amount so credited,
Vencor shall pay Morgan such excess amount. If any amount owed by any Owner
under an Owner Reimbursement Agreement exceeds the corresponding amount owed by
Vencor under the Credit Agreement, Morgan hereby waives its right to receive
such excess amount from such Owner and will make no attempt to collect the same.
SECTION 5. Choice of Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the date and year first set
forth above.
VENCOR, INC.
By: /s/ RICHARD A. LECHLEITER
-------------------------------------
Name: Richard A. Lechleiter
Title: VP Finance & Corporate Controller
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ VERNON M. FORD
-------------------------------------
Name: Vernon M. Ford
Title: Vice President
3
<PAGE>
SCHEDULE I
ORIGINAL LETTERS OF CREDIT
1. Irrevocable Letter of Credit No. 2853 dated August 2, 1988 (as amended and
extended from time to time) issued by Swiss Bank Corporation, San
Francisco Branch.
Facility: Tucson Retirement Center
Owner: Tucson Retirement Center Limited Partnership, an
Oregon limited partnership
Bonds: Industrial Development Revenue Refunding Bonds
(Tucson Retirement Center Project) Series 1988
in the aggregate principal amount of $10,750,000
Beneficiary: Bankers Trust Company, as Trustee under an Indenture
dated as of August 1, 1988 between The Industrial
Development Authority of the County of Pima and such
Trustee
4
<PAGE>
2. Irrevocable Letter of Credit No. 2854 dated August 2, 1988 (as amended and
extended from time to time) issued by Swiss Bank Corporation, San
Francisco Branch.
Facility: Kachina Pointe
Owner: Hillhaven Properties, Ltd., an Oregon
corporation
Bonds: Industrial Development Revenue Refunding Bonds
(Kachina Pointe Project) Series 1988 in the
aggregate principal amount of $6,200 000
Beneficiary: Bankers Trust Company, as Trustee under an
Indenture dated as of August 1, 1988 between The
Industrial Development Authority of the County
of Yavapai and such Trustee
3. Irrevocable Letter of Credit No. 2855 dated August 2, 1988 (as amended and
extended from time to time) issued by Swiss Bank Corporation, San
Francisco Branch.
Facility: Sandy Retirement Center
Owner: Sandy Retirement Center Limited Partnership,
an Oregon limited partnership
5
<PAGE>
Bonds: Elderly Housing Revenue Refunding Bonds (Sandy
Retirement Center Project) Series 1988 in the
aggregate principal amount of $5,900,000
Beneficiary: Bankers Trust Company, as Trustee under an
Indenture dated as of August 1, 1988 between
The Housing Authority of the County of Salt
Lake and such Trustee
4. Irrevocable Letter of Credit No. 2856 dated August 30, 1988 (as amended
and extended from time to time) issued by Swiss Bank Corporation, San
Francisco Branch.
Facility: Castle Gardens Retirement Center
Owner: Castle Gardens Retirement Center Limited
Partnership, an Oregon limited partnership
Bonds: Industrial Development Revenue Refunding Bonds
(Castle Gardens Retirement Center Project)
Series 1988 in the aggregate principal amount of
$5,000,000
Beneficiary: Bankers Trust Company, as Trustee under an
Indenture dated as of August 1, 1988 between
The City of Northglenn, Colorado and such
Trustee
6
<PAGE>
AMENDMENT NO. 4 TO CREDIT AGREEMENT,
WAIVER OF CERTAIN PROVISIONS, AND
CONSENT TO RELEASE CERTAIN COLLATERAL
AMENDMENT NO. 4 dated as of June 19, 1996 to the Credit Agreement dated
as of September 11, 1995 among Vencor, Inc. ("Vencor"), 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"), WAIVER of
certain provisions thereof and CONSENT TO RELEASE CERTAIN COLLATERAL from the
Lien of the Security Agreement dated as of September 11, 1995 (the "Security
Agreement") among Vencor and First Healthcare Corporation ("First Healthcare"),
as Grantors, and Morgan Guaranty Trust Company of New York (successor by merger
to J.P. Morgan Delaware), as Collateral Agent (the "Collateral Agent").
WHEREAS, terms defined in the Credit Agreement or the Security
Agreement have the same respective meanings when used herein;
WHEREAS, Vencor desires that (i) First Healthcare shall transfer to
Atria Communities, Inc. ("Atria"), a newly formed Subsidiary of First
Healthcare, all the common stock of Hillhaven Properties, Ltd. ("Properties");
(ii) Vencor, First Healthcare, and Nationwide Care, Inc. ("Nationwide") shall
transfer to Atria the partnership interests they own in all partnerships in
which Properties is a general partner (the "Partnerships"); (iii) First
Healthcare shall transfer to Atria all other assisted living and retirement
assets and liabilities of First Healthcare; (iv) Nationwide shall transfer to
Atria all assisted living assets of Nationwide; and (v) Properties shall
transfer to Nationwide all of Properties' partnership interests in partnerships
that own skilled nursing facilities;
WHEREAS, in consideration of the foregoing transfers, Atria will issue
shares of its common stock to Vencor, First Healthcare, and Nationwide ;
WHEREAS, First Healthcare and Nationwide will thereafter transfer to
Vencor the common stock of Atria issued to them;
WHEREAS, substantially concurrently with such transfers, Atria expects
to make a public offering of additional shares of its common stock;
WHEREAS, after such public offering, Atria and the Partnerships will
continue to be Subsidiaries of Vencor;
<PAGE>
WHEREAS, Vencor wishes to amend certain covenants in the Credit
Agreement so that, after such public offering, Atria and its Subsidiaries (i)
will be permitted to incur up to $150,000,000 aggregate principal amount of
additional Debt, (ii) will be permitted to secure such additional Debt with
their respective assets and (iii) will no longer be subject to the covenant in
Section 5.14 of the Credit Agreement which prohibits certain types of
restrictions in agreements made by Subsidiaries of Vencor;
WHEREAS, Vencor is also requesting the Banks to amend the Security
Agreement to consent to the release of common stock of Atria in connection with
any future sale or other disposition thereof;
WHEREAS, Vencor has asked the Banks to agree to the foregoing
amendments of the Credit Agreement and the Security Agreement, and to consent to
the release of the stock of Properties from the Lien of the Security Agreement;
and
WHEREAS, in an unrelated transaction, Vencor has asked Morgan Guaranty
Trust Company of New York ("Morgan") to issue certain letters of credit, as more
fully described in the Reimbursement Reconciliation Agreement attached as
Exhibit A hereto;
NOW, THEREFORE, the undersigned parties agree as follows:
SECTION 1. Definitions. Section 1.01 of the Credit Agreement is amended
-----------
by adding the following new definition immediately after the definition of
"Assignee":
"Atria" means Atria Communities, Inc., a Delaware corporation, and its
successors.
SECTION 2. Limitation on Debt of Subsidiaries. Section 5.08 of the
----------------------------------
Credit Agreement is amended by deleting the word "and" at the end of clause (i);
inserting "; and" in place of the period at the end of clause (j); and adding
the following new clause (k):
(k) Debt incurred after June 30, 1996 by Atria and its Subsidiaries;
provided that the aggregate outstanding principal amount of all Debt incurred
- --------
pursuant to this clause (k), calculated on a consolidated basis, shall not at
any time exceed $150,000,000.
SECTION 3. Negative Pledge. Section 5.09 of the Credit Agreement is
---------------
amended by deleting the word "and" at the end of clause (i); inserting "; and"
in place of the period at the end of clause (j); and adding the following new
clause (k):
2
<PAGE>
(k) Liens on assets of Atria and its Subsidiaries securing Debt
permitted by Section 5.08(k).
SECTION 4. Limitation on Restrictions Affecting Subsidiaries. Section
-------------------------------------------------
5.14 of the Credit Agreement is amended by replacing the words "prohibits or
limits the ability of any Subsidiary" in lines 4-5 thereof with the words
"prohibits or limits the ability of any Subsidiary (other than Atria and its
Subsidiaries)".
SECTION 5. Waiver Relating to Certain Letters of Credit. Each of the
--------------------------------------------
undersigned parties:
(i) consents to the execution and delivery of a Reimbursement
Reconciliation Agreement substantially in the form of Exhibit A hereto;
(ii) agrees that the reimbursement obligations of Vencor with
respect to the Replacement Letters of Credit (as defined in Exhibit A)
will be governed by Section 2.06 (j) of the Credit Agreement and not by
the Owner Reimbursement Agreements (as defined in Exhibit A); and
(iii) waives any requirement in Section 2.06 (s)(ii) of the
Credit Agreemet that Vencor designate such Owner Reimbursement
Agreements as "Substitute Reimbursement Agreements" and additional
"Financing Documents" for purposes of the Credit Agreement and the
other Financing Documents.
SECTION 6. Amendment of Security Agreement. Each of the undersigned
-------------------------------
Banks consents to an amendment of the Security Agreement substantially in the
form of Exhibit B hereto, and authorizes the Collateral Agent to sign such an
amendment.
SECTION 7. Release of Collateral. (a) First Healthcare requests that
---------------------
the Collateral Agent release the following Collateral from the Lien of the
Security Agreement:
(i) all Equity Interests in Hillhaven Properties, Ltd., an
Oregon corporation, now or hereafter beneficially owned by First
Healthcare, all rights and privileges of First Healthcare with respect
to such Equity Interests, and all dividends, distributions and other
payments with respect thereto; and
(ii) all proceeds of the Collateral described in the
foregoing clause (i).
Each of the undersigned Banks consents to the foregoing release if and when the
conditions set forth in Section 11 hereof are satisfied.
3
<PAGE>
SECTION 8. Rights Otherwise Unaffected. This Amendment, Waiver and
---------------------------
Consent 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.
SECTION 9. Governing Law. This Amendment, Waiver and Consent shall be
-------------
governed by and construed in accordance with the laws of the State of New York.
SECTION 10. Counterparts. This Amendment, Waiver and Consent may be
------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 11. Effectiveness. This Amendment, Waiver and Consent shall
-------------
become effective only if and when all the following conditions are satisfied:
(a) the Documentation Agent shall have received from each of
the Super-Majority Banks and each of the Borrowers either a counterpart
hereof signed by such party or facsimile or other written confirmation
from such party that it has signed a counterpart hereof;
(b) First Healthcare shall have transferred the Collateral
described in Section 7 hereof to Atria;
(c) First Healthcare and Nationwide shall have transferred to
Vencor all Equity Interests in Atria received by them in connection
with their transfers of assets to Atria, so that all the Equity
Interests in Atria beneficially owned by Vencor and its Subsidiaries
are owned beneficially and of record by Vencor;
(d) Vencor shall have (i) signed and delivered to the
Collateral Agent a Security Agreement Supplement in substantially the
form of Exhibit C hereto, adding to the Collateral all Equity Interests
in Atria now or hereafter beneficially owned by Vencor, and (ii)
delivered to the Collateral Agent stock certificates representing all
the capital stock of Atria beneficially owned by Vencor (after giving
effect to the transfers referred to in (c) above), either in suitable
form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent; and
(e) no Enforcement Notice shall be in effect when the
Collateral described in Section 7 hereof is released.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this
Amendment, Waiver and Consent to be duly executed as of the date first above
written.
BORROWERS
---------
VENCOR, INC.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
FIRST HEALTHCARE CORPORATION
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
NORTHWEST HEALTH CARE, INC.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
MEDISAVE PHARMACIES, INC.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
5
<PAGE>
HILLHAVEN PROPERTIES, LTD.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
NATIONWIDE CARE, INC.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President Finance &
Corporate Controller
BANKS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Ruth Z. Edwards
------------------------------
Name: Ruth Z. Edwards
Title: Vice President
6
<PAGE>
THE BANK OF NEW YORK
By: /s/ Douglas Ober
------------------------------
Name: Douglas Ober
Title: Vice President
CHEMICAL BANK
By: /s/ Dawn Lee Lum
------------------------------
Name: Dawn Lee Lum
Title: Vice President
CREDIT SUISSE
By: /s/ Geoffrey M. Craig
------------------------------
Name: Geoffrey M. Craig
Title: Member of Senior Management
By: /s/ Kristinn R. Kristinnson
------------------------------
Name: Kristinn R. Kristinnson
Title: Associate
MELLON BANK, N.A.
By: /s/ Marsha Wicker
------------------------------
Name: Marsha Wicker
Title: Vice President
7
<PAGE>
PNC BANK, KENTUCKY, INC.
By: /s/ Todd D. Munson
------------------------------
Name: Todd D. Munson
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/ Edward D. Ridenhour
------------------------------
Name: Edward D. Ridenhour
Title: Senior Vice President/Group
Executive
BANK OF LOUISVILLE AND TRUST
COMPANY
By: /s/ Roy L. Johnson, Jr.
------------------------------
Name: Roy L. Johnson, Jr.
Title: Senior Vice President
8
<PAGE>
BANK ONE, COLUMBUS, NA
By: /s/ James Zook
------------------------------
Name: James Zook
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ Ann M. Dodd
------------------------------
Name: Ann M. Dodd
Title: Senior Vice President
FLEET BANK OF MASSACHUSETTS
By: /s/ Ginger Stolzenthaler
------------------------------
Name: Ginger Stolzenthaler
Title: Vice President
LTCB TRUST COMPANY
By: /s/ Rene LeBlanc
------------------------------
Name: Rene LeBlanc
Title: Senior Vice President
9
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Robert J. Henchey
------------------------------
Name: Robert J. Henchey
Title: Vice President
NATIONAL CITY BANK, KENTUCKY
By: /s/ Deroy Scott
------------------------------
Name: Deroy Scott
Title: Vice President
NATIONSBANK, N. A.
By: /s/ S.W. Choppin
------------------------------
Name: S.W. Choppin
Title: Senior Vice President
NBD BANK
By: /s/ Randall K. Stephens
------------------------------
Name: Randall K. Stephens
Title: Vice President
SEATTLE-FIRST NATIONAL BANK
By:
------------------------------
Name:
Title:
10
<PAGE>
U.S. BANK OF WASHINGTON NATIONAL
ASSOCIATION
By: /s/ Arnold J. Conrad
------------------------------
Name: Arnold J. Conrad
Title: Vice President
11
<PAGE>
EXHIBIT 4.7
AMENDMENT NO. 5 TO CREDIT AGREEMENT
AMENDMENT NO. 5 dated as of August 26, 1996 to the Credit
Agreement dated as of September 11, 1995 among Vencor, Inc. ("Vencor"), the
other Borrowers referred to therein (the "Subsidiary Borrowers") and the Banks,
Co-Agents, LC Issuing Banks and Agents referred to therein, as heretofore
amended ("Vencor's Credit Agreement").
WHEREAS, terms defined in Vencor's Credit Agreement have the
same respective meanings when used herein;
WHEREAS, Atria Communities, Inc. ("Atria") proposes to enter
into a $200,000,000 credit agreement ("Atria's Credit Agreement"), to borrow
thereunder from time to time and to cause letters of credit to be issued (or
deemed issued) thereunder to provide, among other things, credit support for IRB
Debt;
WHEREAS, Atria proposes to grant Liens on its assets to secure
its obligations in respect of such borrowings, its reimbursement obligations in
respect of drawings under such letters of credit and its obligations under
certain interest rate hedging agreements;
WHEREAS, Atria proposes to cause one or more of its
subsidiaries to guarantee such obligations and to secure their respective
guarantees by granting Liens on their respective assets;
WHEREAS, Vencor proposes to guarantee such obligations of
Atria (other than certain portions thereof relating to mature properties) up to
a maximum guaranteed amount of $100,000,000 and such maximum guaranteed amount
is to be reduced from time to time as provided in Section 2.2 of the Parent
Guaranty (as hereinafter defined);
WHEREAS, Vencor proposes to cause the Subsidiary Borrowers to
guarantee Vencor's performance of its guarantee of the obligations of Atria and
may hereafter cause one or more other Subsidiaries to give similar guarantees of
Vencor's performance thereof (the Subsidiary Borrowers and such other
Subsidiaries, if any, being herein collectively called the "Supporting
Guarantors");
WHEREAS, Vencor has asked the Banks to amend certain covenants
in Vencor's Credit Agreement to permit the foregoing transactions;
<PAGE>
WHEREAS, in consideration of such amendment, Vencor proposes
to cause each Supporting Guarantor to guarantee Vencor's performance of its
obligations under Vencor's Credit Agreement; and
WHEREAS, the guarantees of the Supporting Guarantors in
respect of Vencor's Credit Agreement and their guarantees in respect of Atria's
Credit Agreement are to be limited in amount (to the extent required by
applicable insolvency laws), are to be enforced only upon the occurrence of
certain significant credit events and, if and when enforced, are to be enforced
on a pro rata basis in proportion to the outstanding amounts then guaranteed
thereunder;
NOW, THEREFORE, the undersigned parties agree as follows:
SECTION 1. Definitions. (a) Section 1.01 of Vencor's Credit
-----------
Agreement is amended by adding the following new definitions in the appropriate
alphabetical order:
"Atria's Credit Agreement" means the $200,000,000 Credit
Agreement dated as of August 15, 1996 among Atria, the lending
institutions named therein, PNC Bank, National Association, as
Administrative Agent, National City Bank of Kentucky, as Documentation
Agent and the Syndication Agents named therein, as said Credit
Agreement may be amended from time to time.
"Atria Supporting Guaranties" means guaranties by the
Supporting Guarantors that Vencor will perform its obligations under
the Parent Guaranty, such guaranties to be substantially in the form of
Section 19 of the Parent Guaranty.
"Parent Guaranty" means Vencor's guaranty dated as of August
15, 1996 of the obligations of Atria under Atria's Credit Agreement, as
such guaranty may be amended from time to time; provided that no such
--------
amendment shall, without the prior written consent of the Required
Banks, (i) increase the "Maximum Guaranteed Amount" (as defined
therein) or, except as expressly provided in Section 5.19 hereof,
postpone or reduce the amount of any scheduled reduction of said
Maximum Guaranteed Amount specified in Section 2.2 thereof or (ii)
change any provision of Atria's Supporting Guaranties or the meaning of
any defined term used therein.
"Supporting Guarantors" means, at any time, each Subsidiary
Borrower and each other Subsidiary (if any) that is a guarantor of the
obligations of Vencor under the Parent Guaranty at such time.
2
<PAGE>
"Vencor Supporting Guaranties" means guaranties by the
Supporting Guarantors that Vencor will perform its obligations under
Vencor's Credit Agreement, such guaranties to be substantially in the
form of Exhibit O hereto.
(b) The definition of "Borrower" in Section 1.01 of Vencor's Credit
Agreement is amended by deleting the words "Hillhaven Properties, Ltd., an
Oregon Corporation," and Hillhaven Properties Ltd. is deleted from the cover
page, the first paragraph and the signature pages of Vencor's Credit Agreement.
SECTION 2. Supporting Guaranties. Vencor's Credit Agreement is amended
---------------------
by adding the following new Section 2.16 at the end of Article II:
SECTION 2.16. Supporting Guaranties. If at any time any
---------------------
Subsidiary of Vencor (other than Atria and its subsidiaries) enters
into any Guaranty of any obligation of Atria or any of Atria's
Subsidiaries, (i) such Guaranty shall be an Atria Supporting Guaranty
and (ii) such Subsidiary shall simultaneously enter into a Vencor
Supporting Guaranty. If at any time all the Atria Supporting Guaranties
are terminated because the provisions for the termination thereof set
forth in Section 21 of the Parent Guaranty are met, all Vencor
Supporting Guaranties then in effect shall be terminated concurrently
therewith.
SECTION 3. Form of Vencor Supporting Guaranty. Exhibit O hereto is
----------------------------------
added to Vencor's Credit Agreement as Exhibit O thereto.
SECTION 4. Representations and Warranties. Vencor's Credit Agreement
------------------------------
is amended by adding the following new Section 4.16 at the end of Article IV:
SECTION 4.16. Vencor Supporting Guaranties. The
----------------------------
representations of each Supporting Guarantor in Section 2 of its Vencor
Supporting Guaranty are true and correct.
SECTION 5. Limitation on Debt of Vencor. Section 5.07(f) of Vencor's
----------------------------
Credit Agreement is amended to read as follows:
(f) (i) a Guarantee of Debt of Atria not exceeding
$100,000,000 in aggregate principal amount, it being understood that
such Guarantee of Debt of Atria may remain in effect even if Atria is
no longer a Subsidiary, and (ii) Guarantees of Debt of Subsidiaries
(other than Atria and its subsidiaries) permitted by Section 5.08;
SECTION 6. Limitation on Debt of Subsidiaries. (a) Section 5.08(e) of
----------------------------------
Vencor's Credit Agreement is amended to read as follows:
3
<PAGE>
(e) Guarantees by one or more Subsidiaries of (i) Vencor's
performance of its obligations under the Parent Guaranty not exceeding
$100,000,000 in aggregate principal amount, it being understood that
such Guarantees may remain in effect even if Atria is no longer a
Subsidiary, and (ii) Debt of Subsidiaries (other than Atria and its
subsidiaries) permitted by this Section, provided that the aggregate
--------
amount of Debt Guaranteed pursuant to this clause (ii) shall not exceed
$100,000,000 at any time;
(b) Section 5.08(k) of Vencor's Credit Agreement is amended to
read as follows:
(k) Debt incurred after June 30, 1996 by Atria and its
subsidiaries under Atria's Credit Agreement and Guarantees by Atria and
its subsidiaries of such Debt; provided that the aggregate outstanding
--------
principal amount of all Debt incurred or Guaranteed by Atria and its
subsidiaries pursuant to this clause (k) and clause (h) of this
Section, calculated on a consolidated basis, shall not at any time
exceed $200,000,000.
SECTION 7. Negative Pledge. Section 5.09(k) of Vencor's
---------------
Credit Agreement is amended to read as follows:
(k) Liens on assets of Atria and its subsidiaries securing (x)
Debt of Atria and its subsidiaries permitted by Section 5.08(k), (y)
reimbursement obligations of Atria and its subsidiaries permitted by
Section 5.08(h) and (z) obligations of Atria and its subsidiaries under
"Designated Interest Rate Agreements" (as such term is defined in
Atria's Credit Agreement).
SECTION 8. Limitation on Investments in Minority-Owned
-------------------------------------------
Affiliates. Clause (i) of Section 5.12 of Vencor's Credit Agreement is amended
- ----------
to read as follows:
(i) Investments existing on the Closing Date in Minority-Owned
Affiliates existing on the Closing Date and identified on Schedule III
hereto and Investments in shares of common stock of Atria existing on
August 20, 1996 and the Term Promissory Note dated August 19, 1996 in
the principal amount of $14 million evidencing the obligation of
Hillhaven Properties, Ltd. to repay to Vencor such principal amount and
the interest thereon.
SECTION 9. Transactions with Affiliates. Schedule IV to
----------------------------
Vencor's Credit Agreement is amended by adding the following two items at the
end of the list of Affiliate Agreements that Vencor is permitted to perform
notwithstanding the restriction on transactions with Affiliates set forth in
Section 5.13 of Vencor's Credit Agreement:
4
<PAGE>
8. Service Agreements whereby First Healthcare Corporation
or Nationwide Care, Inc. agree to provide certain
administrative, maintenance, operation and utility
services for and on behalf of Atria Communities, Inc. or
an affiliate of Atria Communities, Inc. Atria
Communities, Inc. has agreed to pay the expenses
incurred by First Healthcare Corporation or Nationwide
Care, Inc. in rendering the services required under the
Service Agreements. First Healthcare Corporation and
Nationwide Care, Inc. will not make any profit on
providing the services to Atria Communities, Inc. or its
affiliates under the Service Agreements.
9. A Lease Agreement between New Pond Village Associates
and Atria Communities, Inc. whereby Atria Communities,
Inc. leases from New Pond Village Associates the
assisted living center located in New Pond Massachusetts
and known as New Pond Village. Under the terms of the
Lease, Atria Communities, Inc. must pay as rental all
costs and expenses relating to the assisted living
center, including without limitation, all debt service.
The assisted living facility will be transferred to
Atria Communities, Inc. for $1.00 upon satisfaction of
certain conditions, including without limitation,
satisfaction of all zoning requirements.
SECTION 10. Limitation on Restrictions Affecting Subsidiaries.
-------------------------------------------------
Section 5.14 of Vencor's Credit Agreement is amended by deleting the word "or"
at the end of clause (e), changing the period at the end of clause (f) to ";
and" and adding the following new clause (g):
(g) the Parent Guaranty, insofar as the provisions thereof
require that, if any Subsidiary of Vencor (other than Atria and its
subsidiaries) secures any Consolidated Debt for Borrowed Money, it must
secure the Debt and reimbursement obligations of Atria and its
Subsidiaries permitted by Section 5.08(h) and 5.08(k) equally and
ratably with such Consolidated Debt for Borrowed Money; provided that
--------
the foregoing provision of the Parent Guaranty shall not in any event
apply to any of the assets included or required to be included in the
Collateral pursuant to subsections (A), (B) and (C) of Section 3 of the
Security Agreement as in effect on August 15, 1996 or any proceeds
thereof.
SECTION 11. Reduction of Amount of Parent Guaranty. Vencor's
--------------------------------------
Credit Agreement is amended by adding the following new Section 5.19 at the end
of Article V:
SECTION 5.19. Reduction of Amount of Parent Guaranty. Vencor
--------------------------------------
will cause the maximum amount guaranteed by it pursuant to the Parent
Guaranty to be reduced as and when provided in Section 2.2 of the
Parent Guaranty (and will not
5
<PAGE>
elect to defer any such reduction or reduce the amount of any such
reduction); provided that Vencor may elect to defer all or any portion
--------
of any such reduction for a period not exceeding 12 months.
SECTION 12. Defaults. Section 6.01 of Vencor's Credit
--------
Agreement is amended by replacing "5.18" in the third line of clause (b) with
"5.19".
SECTION 13. 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 Vencor's Credit Agreement
shall remain in full force and effect.
SECTION 14. Governing Law. This Amendment shall be governed
-------------
by and construed in accordance with the laws of the State of New York.
SECTION 15. 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 signatures thereto and hereto were upon the same instrument.
SECTION 16. Effectiveness. This Amendment shall become
-------------
effective when the following conditions are satisfied:
(a) 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 facsimile or other written confirmation
from such party that it has signed a counterpart hereof;
(b) each of the conditions to the effectiveness of Amendment
No. 4 to Vencor's Credit Agreement shall have been satisfied and said
Amendment No. 4 shall have become effective as provided in Section 11
thereof;
(c) the Documentation Agent shall have received a Vencor
Supporting Guaranty from each of the Subsidiary Borrowers; and
(d) the Documentation Agent shall have received an opinion of
counsel for Vencor with respect to (i) corporate existence and power of
Vencor and the Supporting Guarantors, (ii) corporate and governmental
authorization of Vencor and the Supporting Guarantors, and (iii)
noncontravention and binding effect of Vencor's Credit Agreement as
amended by this Amendment No. 5, the Vencor Supporting Guaranties and
the Atria Supporting Guaranties, in form and substance satisfactory to
the Documentation Agent in its sole discretion (by its execution and
delivery of this Amendment No. 5, Vencor authorizes and directs such
counsel to delivery such opinion).
6
<PAGE>
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/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
FIRST HEALTHCARE CORPORATION
By: /s/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
NORTHWEST HEALTH CARE, INC.
By: /s/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
MEDISAVE PHARMACIES, INC.
By: /s/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
HILLHAVEN PROPERTIES, LTD.
By: /s/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
<PAGE>
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
NATIONWIDE CARE, INC.
By: /s/ Richard A. Lechleiter
---------------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
BANKS
-----
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ James C. Colegate
---------------------------------------
Name: James C. Colgate
Title: Senior Vice President
THE BANK OF NEW YORK
By: /s/ Douglas Ober
---------------------------------------
Name: Douglas Ober
Title: Vice President
THE CHASE MANHATTAN BANK (as
successor by merger to Chemical Bank)
By: /s/ Dawn Lee Lum
---------------------------------------
Name: Dawn Lee Lum
Title: Vice President
/dpw/cw/028/27009/107/CA/amend5.exec
8
<PAGE>
CREDIT SUISSE
By: /s/ Harry R. Olsen
---------------------------------------
Name: Harry R. Olsen
Title: Member of Senior Management
By: /s/ Kristinn R. Kristinsson
---------------------------------------
Name: Kristinn R. Kristinsson
Title: Associate
MELLON BANK, N.A.
By: /s/ Marsha Wicker
---------------------------------------
Name: Marsha Wicker
Title: Vice President
PNC BANK, KENTUCKY, INC.
By: /s/ Todd D. Munson
---------------------------------------
Name: Todd D. Munson
Title: Vice President
TORONTO-DOMINION (TEXAS), INC.
By: /s/ Warren Finlay
---------------------------------------
Name: Warren Finlay
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA
By: /s/ Robert G. Brookby
---------------------------------------
Name: Robert G. Brookby
Title: Executive Vice President
BANK OF LOUISVILLE AND TRUST
COMPANY
By: /s/ Roy L. Johnson, Jr.
---------------------------------------
Name: Roy L. Johnson, Jr.
Title: Senior Vice President
9
<PAGE>
BANK ONE, COLUMBUS, NA
By: /s/ James Zook
---------------------------------------
Name: James Zook
Title: Vice President
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Joseph H. Towell
---------------------------------------
Name: Joseph H. Towell
Title: Senior Vice President
FLEET NATIONAL BANK, formerly known as,
FLEET BANK OF MASSACHUSETTS
By: /s/ Ginger Stolzenthaler
---------------------------------------
Name: Ginger Stolzenthaler
Title: Vice President
LTCB TRUST COMPANY
By: /s/ Rene LeBlanc
---------------------------------------
Name: Rene LeBlanc
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
---------------------------------------
Name: Diana H. Imhof
Title: Vice President
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Deroy Scott
---------------------------------------
Name: Deroy Scott
Title: Vice President
<PAGE>
NATIONSBANK, N. A.
By: /s/ S.W. Choppin
---------------------------------------
Name: S.W. Choppin
Title: Senior Vice President
NBD BANK
By: /s/ Cindy A. Herzog
---------------------------------------
Name: Cindy A. Herzog
Title: Authorized Agent
BANK OF AMERICA NW, N.A. doing business as
SEAFIRST BANK
aka SEATTLE-FIRST NATIONAL BANK
By: /s/ Ward G. Kerby
---------------------------------------
Name: Ward G. Kerby
Title: Assistant Vice President
U.S. BANK OF WASHINGTON NATIONAL
ASSOCIATION
By: /s/ Arnold J. Conrad
---------------------------------------
Name: Arnold J. Conrad
Title: Vice President
<PAGE>
Exhibit O
FORM OF
VENCOR SUPPORTING GUARANTY
Guaranty dated as of August __, 1996 by _______________ (the
"Supporting Guarantor") for the benefit of the Banks, Co-Agents, LC Issuing
Banks, Administrative Agent, Documentation Agent and Collateral Agent from time
to time party to Vencor's Credit Agreement (as defined below) (the "Vencor
Lenders") and, to the extent set forth in Section 9 below, the Creditors from
time to time party to Atria's Credit Agreement (as defined below):
WHEREAS, terms defined in the Credit Agreement dated as of
September 11, 1995 among Vencor, Inc. ("Vencor"), the other Borrowers referred
to therein (the "Subsidiary Borrowers") and the Banks, Co-Agents, LC Issuing
Banks and Agents referred to therein, as such agreement may be amended from time
to time ("Vencor's Credit Agreement"), have the same respective meanings when
used herein;
WHEREAS, Atria Communities, Inc. ("Atria") proposes to enter
into a $200,000,000 credit agreement ("Atria's Credit Agreement"), to borrow
thereunder from time to time and to cause letters of credit to be issued
thereunder to provide credit support for IRB Debt;
WHEREAS, Vencor proposes to guarantee such obligations of
Atria (other than a portion thereof relating to mature properties);
WHEREAS, Vencor proposes to cause the Subsidiary Borrowers to
guarantee Vencor's performance of its guarantee of the obligations of Atria and
may hereafter cause one or more other Subsidiaries to give similar guarantees of
Vencor's performance thereof (the Subsidiary Borrowers and such other
Subsidiaries, if any, herein collectively called the "Supporting Guarantors");
WHEREAS, Vencor and the Banks have agreed to amend certain
covenants in Vencor's Credit Agreement to permit the foregoing transactions; and
WHEREAS, in consideration of such Amendment, Vencor has agreed
to cause each Supporting Guarantor to guarantee Vencor's performance of its
obligations under Vencor's Credit Agreement;
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. The following terms, as used
-----------
herein, have the following meanings:
<PAGE>
"Atria's Administrative Agent" means PNC Bank, National
Association, as Administrative Agent under the Atria Credit Agreement and any
permitted successor thereto that has been identified as such by notice from
Atria to Vencor's Administrative Agent.
"Atria's Required Lenders" means the "Required Lenders" as
such term is defined in Atria's Credit Agreement.
"Corresponding Atria Guaranty" means the guaranty by the
Supporting Guarantor that Vencor will perform its obligations under the Parent
Guaranty (as such term is defined in Atria's Credit Agreement).
"Significant Credit Event" shall have the meaning set forth in
Section 9 hereof.
"Vencor's Administrative Agent" means NationsBank, N.A., as
Administrative Agent under Vencor's Credit Agreement and any permitted successor
thereto that has been identified as such by notice from Vencor to Atria's
Administrative Agent.
"Vencor's Required Banks" means the "Required Banks" as such
term is defined in Vencor's Credit Agreement.
SECTION 2. Representations and Warranties. The Supporting
------------------------------
Guarantor represents and warrants that:
(a) The Supporting Guarantor is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
(b) The execution, delivery and performance by the Supporting
Guarantor of this Guaranty are within the corporate powers of the Supporting
Guarantor, 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 the certificate of incorporation or by-laws
of the Supporting Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Supporting Guarantor or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset of
the Supporting Guarantor or any of its Subsidiaries.
(c) This Guaranty constitutes a valid and binding agreement of
the Supporting Guarantor, enforceable in accordance with its terms.
2
<PAGE>
(d) There is no action, suit or proceeding pending against, or
to the knowledge of the Supporting Guarantor threatened against or affecting,
the Supporting Guarantor 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 upon the condition (financial or otherwise), results of
operations, business, or prospects of Vencor and its Subsidiaries, considered as
a whole, or which in any manner draws into question the validity or
enforceability of this Guaranty.
SECTION 3. The Guarantee. The Supporting Guarantor
-------------
unconditionally and irrevocably guarantees the full and punctual payment of all
present and future indebtedness and other obligations of Vencor evidenced by or
arising under any Financing Document as and when the same shall become due and
payable, whether at maturity or by declaration or otherwise, according to the
terms hereof and thereof (including any interest which accrues on any of the
foregoing obligations after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of Vencor,
whether or not allowed or allowable as a claim in any such proceeding). If
Vencor fails punctually to pay the indebtedness and other obligations guaranteed
by the Supporting Guarantor hereby, the Supporting Guarantor unconditionally
agrees to cause such payment to be made punctually as and when the same shall
become due and payable, whether at maturity or by declaration or otherwise, and
as if such payment were made by Vencor.
SECTION 4. Guarantee Unconditional. Except as provided in
-----------------------
Section 9, the obligations of the Supporting Guarantor under this Guaranty 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 Vencor 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 Vencor under any Financing
Document;
(d) any change in the corporate existence, structure or
ownership of Vencor or any of its Subsidiaries, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting Vencor
or any of its Subsidiaries or its assets, or
3
<PAGE>
any resulting release or discharge of any obligation of Vencor or any
of its Subsidiaries contained in any Financing Document;
(e) the existence of any claim, set-off or other rights which
the Supporting Guarantor or Vencor 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 Guaranty, 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
Vencor for any reason of any Financing Document, or any provision of
applicable law or regulation purporting to prohibit the payment by
Vencor of any amount payable by it under any Financing Document; or
(g) any other act or omission to act or delay of any kind by
Vencor, 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 4, constitute a legal or equitable discharge of the
Supporting Guarantor's obligations under this Guaranty.
SECTION 5. Discharge Only Upon Payment in Full; Reinstatement
--------------------------------------------------
in Certain Circumstances. The Supporting Guarantor's obligations under this
- ------------------------
Guaranty constitute a continuing guaranty and shall remain in full force and
effect until either (i) this Guaranty is terminated pursuant to Section 2.16 of
Vencor's Credit Agreement or (ii) the Commitments of each Bank shall have been
terminated and the Credit Exposure of each Bank shall have been reduced to zero
and all amounts payable by Vencor under the Financing Documents shall have been
paid in full. If at any time any amount payable by Vencor under any Financing
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of Vencor or otherwise, the Supporting
Guarantor's obligations under this Guaranty with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.
SECTION 6. Waiver. The Supporting Guarantor 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 Vencor or any other Person or against any security.
SECTION 7. Subrogation and Contribution. Upon making any
----------------------------
payment hereunder with respect to the obligations of Vencor, the Supporting
Guarantor shall be subrogated to the rights of the payee against Vencor with
respect to such payment, and shall also have a right of contribution against all
other Supporting Guarantors in respect of any such payment pro rata among same
based on their respective net fair value as
4
<PAGE>
enterprises; provided that the Supporting Guarantor shall not enforce any
--------
payment by way of subrogation against Vencor or contribution against any other
Supporting Guarantor so long as any Bank has any Commitment to Vencor under
Vencor's Credit Agreement or any amount payable by Vencor under any Financing
Document remains unpaid.
SECTION 8. Stay of Acceleration. If acceleration of the time
--------------------
for payment of any amount payable by Vencor under any Financing Document is
stayed upon the insolvency, bankruptcy or reorganization of Vencor, all such
amounts otherwise subject to acceleration under the terms of such Financing
Document shall nonetheless be payable by the Supporting Guarantor hereunder
forthwith on demand by the Documentation Agent made at the request of the
requisite number of Banks specified in Section 6.01 of Vencor's Credit
Agreement.
SECTION 9. Deferral of Enforcement; Pro Rata Sharing.
-----------------------------------------
(a) This Guaranty shall not be enforced unless one or more
"Significant Credit Events" shall have occurred and be continuing. For purposes
hereof, the term "Significant Credit Event" means:
(i) Vencor, Atria or any Supporting Guarantor commences 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 consents 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 makes a general assignment
for the benefit of creditors, or fails generally to pay its debts as
they become due, or takes any corporate action to authorize any of the
foregoing; or
(ii) an involuntary case or other proceeding is commenced
against Vencor, Atria or any Supporting Guarantor 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 Vencor, Atria or any Supporting
Guarantor under the Federal bankruptcy laws as now or hereafter in
effect; or
(iii) all amounts outstanding under either Atria's Credit
Agreement or Vencor's Credit Agreement shall have become due and
payable upon the final maturity thereof or by reason of acceleration;
or
5
<PAGE>
(iv) Vencor's Required Banks (as such term is defined in
Vencor's Credit Agreement) have signed and delivered to Atria's
Administrative Agent a certificate stating that (x) an event of default
under Vencor's Credit Agreement has occurred and is continuing, and (y)
Vencor's Required Banks have determined that the credit facility
provided under Vencor's Credit Agreement is in a "workout;" or
(v) Atria's Required Lenders (as such term is defined in
Atria's Credit Agreement) have signed and delivered to Vencor's
Administrative Agent a certificate stating that (x) an event of default
under Atria's Credit Agreement has occurred and is continuing, and (y)
Atria's Required Lenders have determined that the credit facility
provided under Atria's Credit Agreement is in a "workout."
(b) It is the desire and intent of the Supporting Guarantor
and the beneficiaries of this Guaranty that this Guaranty be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Supporting Guarantor under this Guaranty would, in the
absence of this sentence, be adjudicated to be invalid or unenforceable because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, then the amount of the Supporting Guarantor's liability hereunder in
respect of the obligations of Vencor guaranteed hereunder shall be deemed to be
reduced ab initio to that maximum amount which would be permitted without
causing such Supporting Guarantor's obligations hereunder to be so invalidated;
provided that if, at the time of enforcement of either this Guaranty or the
- --------
Corresponding Atria Guaranty, the amount payable under this Guaranty or the
Corresponding Atria Guaranty is limited by this Section 9(b) or the
substantially identical provision set forth in the Corresponding Atria Guaranty,
as the case may be, then the amounts payable under both this Guaranty and the
Corresponding Atria Guaranty shall be limited so that the maximum amount payable
under each guaranty is proportional to the respective aggregate amount
guaranteed under each such guaranty (without regard to the limits under this
Section 9(b) or the substantially identical provision of the Corresponding Atria
Guaranty) when the Significant Credit Event that exists at the time of
enforcement occurred (or if two or more Significant Credit Events exist at the
time of enforcement, when the earlier of such Significant Credit Events
occurred).
(c) The Supporting Guarantor agrees that, if it makes any
payments upon enforcement of either this Guaranty or the Corresponding Atria
Guaranty, it will make a pro rata payment under the other of such guaranties so
that (i) the payments under this Guaranty and the Corresponding Atria Guaranty
are concurrent and (ii) the total amount paid under each guaranty is
proportional to the aggregate amount guaranteed under such guaranty (without
regard to the limits under Section 9(b) hereof or the substantially identical
provision of the Corresponding Atria Guaranty) when the Significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit
6
<PAGE>
Events exist at the time of enforcement, when the earlier of such Significant
Credit Events occurred.)
(d) The provisions of this Section 9 are intended for the
benefit of the beneficiaries of the Corresponding Atria Guaranty and shall be
directly enforceable by them.
(e) The Corresponding Atria Guaranty contains provisions
substantially identical to this Section 9, which provisions are intended for the
benefit of the beneficiaries of this Guaranty and shall be directly enforceable
by them. The Supporting Guarantor will not permit such provisions to be
terminated, amended, waived or otherwise changed without the prior written
consent of Vencor's Required Banks.
SECTION 10. Notices. Notices and other communications
-------
hereunder shall be given in writing in the manner specified in Section 11.01 of
Vencor's Credit Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed
-------------
by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Supporting Guarantor has caused this
Guaranty to be duly executed by its authorized officer as of the day and year
first above written.
[NAME OF SUPPORTING GUARANTOR]
By:
-----------------------------
Name:
Title:
7
<PAGE>
VENCOR SUPPORTING GUARANTY
Guaranty dated as of August 26, 1996 by FIRST HEALTHCARE
CORPORATION (the "Supporting Guarantor") for the benefit of the Banks,
Co-Agents, LC Issuing Banks, Administrative Agent, Documentation Agent and
Collateral Agent from time to time party to Vencor's Credit Agreement (as
defined below) (the "Vencor Lenders") and, to the extent set forth in Section 9
below, the Creditors from time to time party to Atria's Credit Agreement (as
defined below):
WHEREAS terms defined in the Credit Agreement dated as of
September 11, 1995 among Vencor, Inc. ("Vencor"), the other Borrowers referred
to therein (the "Subsidiary Borrowers") and the Banks, Co-Agents, LC Issuing
Banks and Agents referred to therein, as such agreement may be amended from time
to time ("Vencor's Credit Agreement"), have the same respective meanings when
used herein;
WHEREAS, Atria Communities, Inc. ("ATRIA") proposes to
enter into a $200,000,000 credit agreement ("Atria's Credit Agreement"), to
borrow thereunder from time to time and to cause letters of credit to be issued
thereunder to provide credit support for IRB Debt;
WHEREAS, Vencor proposes to guarantee such obligations of
Atria (other than a portion thereof relating to mature properties);
WHEREAS Vencor proposes to cause the Subsidiary Borrowers
to guarantee Vencor's performance of its guarantee of the obligations of Atria
and may hereafter cause one or more other Subsidiaries to give similar
guarantees of Vencor's performance thereof (the Subsidiary Borrowers and such
other Subsidiaries, if any, herein collectively called the "Supporting
Guarantors");
WHEREAS, Vencor and the Banks have agreed to amend certain
covenants in Vencor's Credit Agreement to permit the foregoing transactions; and
WHEREAS, in consideration of such Amendment, Vencor has
agreed to cause each Supporting Guarantor to guarantee Vencor's performance of
its obligations under Vencor's Credit Agreement;
<PAGE>
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. The following terms, as used
-----------
herein, have the following meanings:
"Atria's Administrative Agent" means PNC Bank, National
Association, as Administrative Agent under the Atria Credit Agreement and any
permitted successor thereto that has been identified as such by notice from
Atria to Vencor's Administrative Agent.
"Atria's Required Lenders" means the "Required Lenders"
as such term is defined in Atria's Credit Agreement.
"Corresponding Atria Guaranty" means the guaranty by the
Supporting Guarantor that Vencor will perform its obligations under the Parent
Guaranty (as such term is defined in Atria's Credit Agreement).
"Significant Credit Event" shall have the meaning set
forth in Section 9 hereof.
"Vencor's Administrative Agent" means NationsBank, N.A.,
as Administrative Agent under Vencor's Credit Agreement and any permitted
successor thereto that has been identified as such by notice from Vencor to
Atria's Administrative Agent.
"Vencor's Required Banks" means the "Required Banks" as
such term is defined in Vencor's Credit Agreement
SECTION 2. Representations and Warranties. The Supporting
------------------------------
Guarantor represents and warrants that:
(a) The Supporting Guarantor is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
(b) The execution, delivery and performance by the
Supporting Guarantor of this Guaranty are within the corporate powers of the
Supporting Guarantor, 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 the certificate of
incorporation or by-laws of the
2
<PAGE>
Supporting Guarantor or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Supporting Guarantor or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset
of the Supporting Guarantor or any of its Subsidiaries.
(c) This Guaranty constitutes a valid and binding
agreement of the Supporting Guarantor, enforceable in accordance with its terms.
(d) There is no action, suit or proceeding pending
against, or to the knowledge of the Supporting Guarantor threatened against or
affecting, the Supporting Guarantor 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 upon the condition (financial or otherwise), results of
operations, business, or prospects of Vencor and its Subsidiaries, considered as
a whole, or which in any manner draws into question the validity or
enforceability of this Guaranty.
SECTION 3. The Guarantee. The Supporting Guarantor
-------------
unconditionally and irrevocably guarantees the full and punctual payment of all
present and future indebtedness and other obligations of Vencor evidenced by or
arising under any Financing Document as and when the same shall become due and
payable, whether at maturity or by declaration or otherwise, according to the
terms hereof and thereof (including any interest which accrues on any of the
foregoing obligations after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of Vencor,
whether or not allowed or allowable as a claim in any such proceeding). If
Vencor fails punctually to pay the indebtedness and other obligations guaranteed
by the Supporting Guarantor hereby, the Supporting Guarantor unconditionally
agrees to cause such payment to be made punctually as and when the same shall
become due and payable, whether at maturity or by declaration or otherwise, and
as if such payment were made by Vencor.
SECTION 4. Guarantee Unconditional. Except as provided in
-----------------------
Section 9, the obligations of the Supporting Guarantor under this Guaranty 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 Vencor
under any Financing Document by operation of law or otherwise;
(b) any modification, amendment or waiver of or
supplement to any Financing Document;
3
<PAGE>
(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 Vencor under any
Financing Document;
(d) any change in the corporate existence,
structure or ownership of Vencor or any of its
Subsidiaries, or any insolvency bankruptcy,
reorganization or other similar proceeding
affecting Vencor or any of its Subsidiaries or its
assets, or any resulting release or discharge of
any obligation of Vencor or any of its Subsidiaries
contained in any Financing Document;
(e) the existence of any claim, set-off or other
rights which the Supporting Guarantor or Vencor 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 Guaranty, 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 Vencor for any reason of any Financing
Document, or any provision of applicable law or
regulation purporting to prohibit the payment by
Vencor of any amount payable by it under any
Financing Document; or
(g) any other act or omission to act or delay of
any kind by Vencor, 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 4, constitute a legal or
equitable discharge of the Supporting Guarantor's
obligations under this Guaranty.
SECTION 5. Discharge Only Upon Payment in Full
-----------------------------------
Reinstatement in Certain Circumstances. The Supporting Guarantor's obligations
- --------------------------------------
under this Guaranty constitute a continuing guaranty and shall remain in full
force and effect until either (i) this Guaranty is terminated pursuant to
Section 2.16 of Vencor's Credit Agreement or (ii) the Commitments of each Bank
shall have been terminated and the Credit Exposure of each Bank shall have been
reduced to zero and all amounts payable by Vencor under the Financing Documents
shall have been paid in full. If at any time any amount payable by Vencor under
any Financing Document is rescinded or must be otherwise restored or returned
upon the
4
<PAGE>
insolvency, bankruptcy or reorganization of Vencor or otherwise, the Supporting
Guarantor's obligations under this Guaranty with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.
SECTION 6. Waiver. The Supporting Guarantor 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 Vencor or any other Person or against any security.
SECTION 7. Subrogation and Contribution. Upon making any
----------------------------
payment hereunder with respect to the obligations of Vencor, the Supporting
Guarantor shall be subrogated to the rights of the payee against Vencor with
respect to such payment, and shall also have a right of contribution against all
other Supporting Guarantors in respect of any such payment pro rata among same
based on their respective net fair value as enterprises; provided that the
--------
Supporting Guarantor shall not enforce any payment by way of subrogation against
Vencor or contribution against any other Supporting Guarantor so long as any
Bank has any Commitment to Vencor under Vencor's Credit Agreement or any amount
payable by Vencor under any Financing Document remains unpaid.
SECTION 8. Stay of Acceleration. If acceleration of the
--------------------
time for payment of any amount payable by Vencor under any Financing Document is
stayed upon the insolvency, bankruptcy or reorganization of Vencor, all such
amounts otherwise subject to acceleration under the terms of such Financing
Document shall nonetheless be payable by the Supporting Guarantor hereunder
forthwith on demand by the Documentation Agent made at the request of the
requisite number of Banks specified in Section 6.01 of Vencor's Credit
Agreement.
SECTION 9. Deferral of Enforcement Pro Rata Sharing.
----------------------------------------
(a) This Guaranty shall not be enforced unless one or more
"Significant Credit Events" shall have occurred and be continuing. For purposes
hereof, the term "Significant Credit Event" means:
(i) Vencor, Atria or any Supporting Guarantor commences
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 consents to any such relief
or to the appointment of or taking possession by any such official in
5
<PAGE>
an involuntary case or other proceeding commenced against it, or
makes a general assignment for the benefit of creditors, or fails
generally to pay its debts as they become due, or takes any corporate
action to authorize any of the foregoing; or
(ii) an involuntary case or other proceeding is commenced
against Vencor, Atria or any Supporting Guarantor 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 Vencor
Atria or any Supporting Guarantor under the Federal bankruptcy laws
as now or hereafter in effect; or
(iii) all amounts outstanding under either Atria's
Credit Agreement or Vencor's Credit Agreement shall have become due
and payable upon the final maturity thereof or by reason of
acceleration; or
(iv) Vencor's Required Banks (as such term is defined in
Vencor's Credit Agreement) have signed and delivered to Atria's
Administrative Agent a certificate stating that (x) an event of
default under Vencor's Credit Agreement has occurred and is
continuing, and (y) Vencor's Required Banks have determined that the
credit facility provided under Vencor's Credit Agreement is in a
"workout;" or
(v) Atria's Required Lenders (as such term is
defined in Atria's Credit Agreement) have signed and delivered to
Vencor's Administrative Agent a certificate stating that (x) an event
of default under Atria's Credit Agreement has occurred and is
continuing, and (y) Atria's Required Lenders have determined that the
credit facility provided under Atria's Credit Agreement is in a
"workout."
(b) It is the desire and intent of the Supporting
Guarantor and the beneficiaries of this Guaranty that this Guaranty be enforced
to the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Supporting Guarantor under this Guaranty would, in the
absence of this sentence, be adjudicated to be invalid or unenforceable because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, then the amount of the Supporting Guarantor's liability hereunder in
respect of the obligations of Vencor guaranteed hereunder shall be deemed to be
reduced ab initio to that maximum
6
<PAGE>
amount which would be permitted without causing such Supporting Guarantor's
obligations hereunder to be so invalidated; provided that if, at the time of
--------
enforcement of either this Guaranty or the Corresponding Atria Guaranty, the
amount payable under this Guaranty or the Corresponding Atria Guaranty is
limited by this Section 9(b) or the substantially identical provision set forth
in the Corresponding Atria Guaranty, as the case may be, then the amounts
payable under both this Guaranty and the Corresponding Atria Guaranty shall be
limited so that the maximum amount payable under each guaranty is proportional
to the respective aggregate amount guaranteed under each such guaranty (without
regard to the limits under this Section 9(b) or the substantially identical
provision of the Corresponding Atria Guaranty) when the Significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit Events exist at the time of enforcement, when the earlier of such
Significant Credit Events occurred).
(c) The Supporting Guarantor agrees that, if it makes any payments
upon enforcement of either this Guaranty or the Corresponding Atria Guaranty, it
will make a pro rata payment under the other of such guaranties so that (i) the
payments under this Guaranty and the Corresponding Atria Guaranty are concurrent
and (ii) the total amount paid under each guaranty is proportional to the
aggregate amount guaranteed under such guaranty (without regard to the limits
under Section 9(b) hereof or the substantially identical provision of the
Corresponding Atria Guaranty) when the Significant Credit Event that exists at
the time of enforcement occurred (or if two or more Significant Credit Events
exist at the time of enforcement, when the earlier of such Significant Credit
Events occurred).
(d) The provisions of this Section 9 are intended for the benefit of
the beneficiaries of the Corresponding Atria Guaranty and shall be directly
enforceable by them.
(e) The Corresponding Atria Guaranty contains provisions substantially
identical to this Section 9, which provisions are intended for the benefit of
the beneficiaries of this Guaranty and shall be directly enforceable by them.
The Supporting Guarantor will not permit such provisions to be terminated,
amended, waived or otherwise changed without the prior written consent of
Vencor's Required Banks.
7
<PAGE>
SECTION 10. Notices. Notices and other communications hereunder shall
-------
be given in writing in the manner specified in Section 11.01 of Vencor's Credit
Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
8
<PAGE>
IN WITNESS WHEREOF, the Supporting Guarantor has caused this Guaranty
to be duly executed by its authorized officer as of the day and year first above
written.
FIRST HEALTHCARE CORPORATION
By: /s/ Richard A. Lechleiter
-----------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
<PAGE>
VENCOR SUPPORTING GUARANTY
Guaranty dated as of August 26, 1996 by HILLHAVEN OF CENTRAL FLORIDA,
INC. (the "Supporting Guarantor") for the benefit of the Banks, Co-Agents, LC
Issuing Banks, Administrative Agent, Documentation Agent and Collateral Agent
from time to time party to Vencor's Credit Agreement (as defined below) (the
"Vencor Lenders") and, to the extent set forth in Section 9 below, the Creditors
from time to time party to Atria's Credit Agreement (as defined below):
WHEREAS, terms defined in the Credit Agreement dated as of September
11, 1995 among Vencor, Inc. ("Vencor"), the other Borrowers referred to therein
(the "Subsidiary Borrowers") and the Banks, Co-Agents, LC Issuing Banks and
Agents referred to therein, as such agreement may be amended from time to time
("Vencor's Credit Agreement"), have the same respective meanings when used
herein;
WHEREAS, Atria Communities, Inc. ("Atria") proposes to enter into a
$200,000,000 credit agreement ("Atria's Credit Agreement"), to borrow thereunder
from time to time and to cause letters of credit to be issued thereunder to
provide credit support for IRB Debt;
WHEREAS, Vencor proposes to guarantee such obligations of Atria (other
than a portion thereof relating to mature properties):
WHEREAS, Vencor proposes to cause the Subsidiary Borrowers to
guarantee Vencor's performance of its guarantee of the obligations of Atria and
may hereafter cause one or more other Subsidiaries to give similar guarantees of
Vencor's performance thereof (the Subsidiary Borrowers and such other
Subsidiaries, if any, herein collectively called the "Supporting Guarantors");
WHEREAS, Vencor and the Banks have agreed to amend certain covenants
in Vencor's Credit Agreement to permit the foregoing transactions; and
WHEREAS, in consideration of such Amendment, Vencor has agreed to
cause each Supporting Guarantor to guarantee Vencor's performance of its
obligations under Vencor's Credit Agreement;
<PAGE>
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. The following terms, as used herein, have the
-----------
following meanings:
"Atria's Administrative Agent" means PNC Bank, National Association,
as Administrative Agent under the Atria Credit Agreement and any permitted
successor thereto that has been identified as such by notice from Atria to
Vencor's Administrative Agent.
"Atria's Required Lenders" means the "Required Lenders" as such term
is defined in Atria's Credit Agreement.
"Corresponding Atria Guaranty" means the guaranty by the Supporting
Guarantor that Vencor will perform its obligations under the Parent Guaranty (as
such term is defined in Atria's Credit Agreement).
"Significant Credit Event" shall have the meaning set forth in Section
9 hereof.
"Vencor's Administrative Agent" means NationsBank, N.A., as
Administrative Agent under Vencor's Credit Agreement and any permitted successor
thereto that has been identified as such by notice from Vencor to Atria's
Administrative Agent.
"Vencor's Required Banks" means the "Required Banks" as such term is
defined in Vencor's Credit Agreement.
SECTION 2. Representations and Warranties. The Supporting Guarantor
------------------------------
represents and warrants that:
(a) The Supporting Guarantor is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
(b) The execution, delivery and performance by the Supporting
Guarantor of this Guaranty are within the corporate powers of the Supporting
Guarantor, 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
2
<PAGE>
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Supporting Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Supporting Guarantor or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset of
the Supporting Guarantor or any of its Subsidiaries.
(c) This Guaranty constitutes a valid and binding agreement of the
Supporting Guarantor, enforceable in accordance with its terms.
(d) There is no action, suit or proceeding pending against, or to the
knowledge of the Supporting Guarantor threatened against or affecting, the
Supporting Guarantor 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
upon the condition (financial or otherwise), results of operations, business, or
prospects of Vencor and its Subsidiaries, considered as a whole, or which in any
manner draws into question the validity or enforceability of this Guaranty.
SECTION 3. The Guarantee. The Supporting Guarantor unconditionally and
-------------
irrevocably guarantees the full and punctual payment of all present and future
indebtedness and other obligations of Vencor evidenced by or arising under any
Financing Document as and when the same shall become due and payable, whether at
maturity or by declaration or otherwise, according to the terms hereof and
thereof (including any interest which accrues on any of the foregoing
obligations after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of Vencor, whether or
not allowed or allowable as a claim in any such proceeding). If Vencor fails
punctually to pay the indebtedness and other obligations guaranteed by the
Supporting Guarantor hereby, the Supporting Guarantor unconditionally agrees to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at maturity or by declaration or otherwise, and as if such
payment were made by Vencor.
SECTION 4. Guarantee Unconditional. Except as provided in Section 9,
-----------------------
the obligations of the Supporting Guarantor under this Guaranty 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 Vencor under any Financing Document by
operation of law or otherwise;
3
<PAGE>
(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 Vencor under
any Financing Document;
(d) any change in the corporate existence, structure or ownership
of Vencor or any of its Subsidiaries, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
Vencor or any of its Subsidiaries or its assets, or any resulting
release or discharge of any obligation of Vencor or any of its
Subsidiaries contained in any Financing Document;
(e) the existence of any claim, set-off or other rights which the
Supporting Guarantor or Vencor 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 Guaranty, 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
Vencor for any reason of any Financing Document, or any provision
of applicable law or regulation purporting to prohibit the
payment by Vencor of any amount payable by it under any Financing
Document; or
(g) any other act or omission to act or delay of any kind by
Vencor, 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 4, constitute a legal or equitable
discharge of the Supporting Guarantor's obligations under this
Guaranty.
SECTION 5. Discharge Only Upon Payment in Full; Reinstatement in
-----------------------------------------------------
Certain Circumstances. The Supporting Guarantor's obligations under this
- ---------------------
Guaranty constitute a continuing guaranty and shall remain in full force and
effect until either (i) this Guaranty is terminated pursuant to Section 2.16 of
Vencor's Credit Agreement or (ii) the Commitments of each Bank shall have been
terminated and the Credit Exposure of each Bank shall have been reduced to zero
4
<PAGE>
and all amounts payable by Vencor under the Financing Documents shall have been
paid in full. If at any time any amount payable by Vencor under any Financing
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of Vencor or otherwise, the Supporting
Guarantor's obligations under this Guaranty with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.
SECTION 6. Waiver. The Supporting Guarantor 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 Vencor or any other Person or against any security.
SECTION 7. Subrogation and Contribution. Upon making any payment
----------------------------
hereunder with respect to the obligations of Vencor, the Supporting Guarantor
shall be subrogated to the rights of the payee against Vencor with respect to
such payment, and shall also have a right of contribution against all other
Supporting Guarantors in respect of any such payment pro rata among same based
on their respective net fair value as enterprises; provided that the Supporting
--------
Guarantor shall not enforce any payment by way of subrogation against Vencor or
contribution against any other Supporting Guarantor so long as any Bank has any
Commitment to Vencor under Vencor's Credit Agreement or any amount payable by
Vencor under any Financing Document remains unpaid.
SECTION 8. Stay of Acceleration. If acceleration of the time for
--------------------
payment of any amount payable by Vencor under any Financing Document is stayed
upon the insolvency, bankruptcy or reorganization of Vencor, all such amounts
otherwise subject to acceleration under the terms of such Financing Document
shall nonetheless be payable by the Supporting Guarantor hereunder forthwith on
demand by the Documentation Agent made at the request of the requisite number of
Banks specified in Section 6.01 of Vencor's Credit Agreement.
SECTION 9. Deferral of Enforcement; Pro Rata Sharing.
----------------------------------------
(a) This Guaranty shall not be enforced unless one or more
"Significant Credit Events" shall have occurred and be continuing. For purposes
hereof, the term "Significant Credit Event" means:
(i) Vencor, Atria or any Supporting Guarantor commences 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
5
<PAGE>
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or consents 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 makes a general assignment for the benefit of creditors, or fails
generally to pay its debts as they become due, or takes any corporate
action to authorize any of the foregoing; or
(ii) an involuntary case or other proceeding is commenced against
Vencor, Atria or any Supporting Guarantor 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 Vencor, Atria or any Supporting Guarantor under the Federal
bankruptcy laws as now or hereafter in effect; or
(iii) all amounts outstanding under either Atria's Credit Agreement or
Vencor's Credit Agreement shall have become due and payable upon the final
maturity thereof or by reason of acceleration; or
(iv) Vencor's Required Banks (as such term is defined in Vencor's
Credit Agreement) have signed and delivered to Atria's Administrative
Agent a certificate stating that (x) an event of default under Vencor's
Credit Agreement has occurred and is continuing, and (y) Vencor's
Required Banks have determined that the credit facility provided under
Vencor's Credit Agreement is in a "workout;" or
(v) Atria's Required Lenders (as such term is defined in Atria's
Credit Agreement) have signed and delivered to Vencor's Administrative
Agent a certificate stating that (x) an event of default under Atria's
Credit Agreement has occurred and is continuing, and (y) Atria's Required
Lenders have determined that the credit facility provided under Atria's
Credit Agreement is in a "workout."
(b) It is the desire and intent of the Supporting Guarantor and the
beneficiaries of this Guaranty that this Guaranty be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Supporting Guarantor under this Guaranty would, in the
absence of this sentence, be adjudicated to be invalid or unenforceable because
of any applicable state or
6
<PAGE>
federal law relating to fraudulent conveyances or transfers, then the amount of
the Supporting Guarantor's liability hereunder in respect of the obligations of
Vencor guaranteed hereunder shall be deemed to be reduced ab initio to that
maximum amount which would be permitted without causing such Supporting
Guarantor's obligations hereunder to be so invalidated; provided that if, at the
--------
time of enforcement of either this Guaranty or the Corresponding Atria Guaranty,
the amount payable under this Guaranty or the Corresponding Atria Guaranty is
limited by this Section 9(b) or the substantially identical provision set forth
in the Corresponding Atria Guaranty, as the case may be, then the amounts
payable under both this Guaranty and the Corresponding Atria Guaranty shall be
limited so that the maximum amount payable under each guaranty is proportional
to the respective aggregate amount guaranteed under each such guaranty (without
regard to the limits under this Section 9(b) or the substantially identical
provision of the Corresponding Atria Guaranty) when the Significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit Events exist at the time of enforcement, when the earlier of such
Significant Credit Events occurred).
(c) The Supporting Guarantor agrees that, if it makes any payments
upon enforcement of either this Guaranty or the Corresponding Atria Guaranty, it
will make a pro rata payment under the other of such guaranties so that (i) the
payments under this Guaranty and the Corresponding Atria Guaranty are concurrent
and (ii) the total amount paid under each guaranty is proportional to the
aggregate amount guaranteed under such guaranty (without regard to the limits
under Section 9(b) hereof or the substantially identical provision of the
Corresponding Atria Guaranty) when the Significant Credit Event that exists at
the time of enforcement occurred (or if two or more Significant Credit Events
exist at the time of enforcement, when the earlier of such Significant Credit
Events occurred).
(d) The provisions of this Section 9 are intended for the benefit of
the beneficiaries of the Corresponding Atria Guaranty and shall be directly
enforceable by them.
(e) The Corresponding Atria Guaranty contains provisions substantially
identical to this Section 9, which provisions are intended for the benefit of
the beneficiaries of this Guaranty and shall be directly enforceable by them.
The Supporting Guarantor will not permit such provisions to be terminated,
amended, waived or otherwise changed without the prior written consent of
Vencor's Required Banks.
7
<PAGE>
SECTION 10. Notices. Notices and other communications hereunder shall
-------
be given in writing in the manner specified in Section 11.01 of Vencor's
Credit Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
8
<PAGE>
IN WITNESS WHEREOF, the Supporting Guarantor has caused this Guaranty
to be duly executed by its authorized officer as of the day and year first above
written.
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ Richard A. Lechleiter
---------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
<PAGE>
VENCOR SUPPORTING GUARANTY
Guaranty dated as of August 26, 1996 by MEDISAVE PHARMACIES, INC. (the
"Supporting Guarantor") for the benefit of the Banks, Co-Agents, LC Issuing
Banks, Administrative Agent, Documentation Agent and Collateral Agent from time
to time party to Vencor's Credit Agreement (as defined below) (the "Vencor
Lenders") and, to the extent set forth in Section 9 below, the Creditors from
time to time party to Atria's Credit Agreement (as defined below):
WHEREAS, terms defined in the Credit Agreement dated as of September
11, 1995 among Vencor, Inc. ("Vencor"), the other Borrowers referred to therein
(the "Subsidiary Borrowers'.) and the Banks, Co-Agents, LC Issuing Banks and
Agents referred to therein, as such agreement may be amended from time to time
("Vencor's Credit Agreement"), have the same respective meanings when used
herein;
WHEREAS, Atria Communities, Inc. ("Atria") proposes to enter into a
$200,000,000 credit agreement ("Atria's Credit Agreement"), to borrow thereunder
from time to time and to cause letters of credit to be issued thereunder to
provide credit support for IRB Debt;
WHEREAS, Vencor proposes to guarantee such obligations of Atria (other
than a portion thereof relating to mature properties);
WHEREAS, Vencor proposes to cause the Subsidiary Borrowers to
guarantee Vencor's performance of its guarantee of the obligations of Atria and
may hereafter cause one or more other Subsidiaries to give similar guarantees of
Vencor's performance thereof (the Subsidiary Borrowers and such other
Subsidiaries, if any, herein collectively called the "Supporting Guarantors");
WHEREAS, Vencor and the Banks have agreed to amend certain covenants
in Vencor's Credit Agreement to permit the foregoing transactions; and
WHEREAS, in consideration of such Amendment, Vencor has agreed to
cause each Supporting Guarantor to guarantee Vencor's performance of its
obligations under Vencor's Credit Agreement;
<PAGE>
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. The following terms, as used herein, have the
-----------
following meanings:
"Atria's Administrative Agent" means PNC Bank, National Association,
as Administrative Agent under the Atria Credit Agreement and any permitted
successor thereto that has been identified as such by notice from Atria to
Vencor's Administrative Agent.
"Atria's Required Lenders" means the "Required Lenders" as such term
is defined in Atria's Credit Agreement.
"Corresponding Atria Guaranty" means the guaranty by the Supporting
Guarantor that Vencor will perform its obligations under the Parent Guaranty (as
such term is defined in Atria's Credit Agreement).
"Significant Credit Event" shall have the meaning set forth in Section
9 hereof.
"Vencor's Administrative Agent" means NationsBank, N.A., as
Administrative Agent under Vencor's Credit Agreement and any permitted successor
thereto that has been identified as such by notice from Vencor to Atria's
Administrative Agent.
"Vencor's Required Banks" means the "Required Banks" as such term is
defined in Vencor's Credit Agreement.
SECTION 2. Representations and Warranties. The Supporting Guarantor
------------------------------
represents and warrants that:
(a) The Supporting Guarantor is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
(b) The execution, delivery and performance by the Supporting
Guarantor of this Guaranty are within the corporate powers of the Supporting
Guarantor, 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 the certificate of incorporation or by-laws
of the Supporting Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Supporting Guarantor or any of its
Subsidiaries
2
<PAGE>
or result in the creation or imposition of any Lien on any asset of the
Supporting Guarantor or any of its Subsidiaries.
(c) This Guaranty constitutes a valid and binding agreement of the
Supporting Guarantor, enforceable in accordance with its terms.
(d) There is no action, suit or proceeding pending against, or to the
knowledge of the Supporting Guarantor threatened against or affecting, the
Supporting Guarantor 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
upon the condition (financial or otherwise), results of operations, business, or
prospects of Vencor and its Subsidiaries, considered as a whole, or which in any
manner draws into question the validity or enforceability of this Guaranty.
SECTION 3. The Guarantee. The Supporting Guarantor unconditionally
-------------
arid irrevocably guarantees the full and punctual payment of all present and
future indebtedness and other obligations of Vencor evidenced by or arising
under any Financing Document as and when the same shall become due and payable,
whether at maturity or by declaration or otherwise, according to the terms
hereof and thereof (including any interest which accrues on any of the foregoing
obligations after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of Vencor, whether or
not allowed or allowable as a claim in any such proceeding). If Vencor fails
punctually to pay the indebtedness and other obligations guaranteed by the
Supporting Guarantor hereby, the Supporting Guarantor unconditionally agrees to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at maturity or by declaration or otherwise, and as if such
payment were made by Vencor.
SECTION 4. Guarantee Unconditional. Except as provided in Section 9,
-----------------------
the obligations of the Supporting Guarantor under this Guaranty 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 Vencor 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
3
<PAGE>
liability of any third party, for any obligation of Vencor under
any Financing Document;
(d) any change in the corporate existence, structure or ownership
of Vencor or any of its Subsidiaries, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
Vencor or any of its Subsidiaries or its assets, or any resulting
release or discharge of any obligation of Vencor or any of its
Subsidiaries contained in any Financing Document;
(e) the existence of any claim, set-off or other rights which
the Supporting Guarantor or Vencor may have at any time against
any Bank, any LC Issuing Bank, any Agent or any other Person,
whether or nor arising in connection with this Guaranty,
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
Vencor for any reason of any Financing Document, or any provision
of applicable law or regulation purporting to prohibit the
payment by Vencor of any amount payable by it under any Financing
Document; or
(g) any other act or omission to act or delay of any kind by
Vencor, 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 4, constitute a legal or equitable
discharge of the Supporting Guarantor's obligations under this
Guaranty.
SECTION 5. Discharge Only Upon Payment in Full; Reinstatement in
-----------------------------------------------------
Certain Circumstances. The Supporting Guarantor's obligations under this
- ---------------------
Guaranty constitute a continuing guaranty and shall remain in full force and
effect until either (i) this Guaranty is terminated pursuant to Section 2.16 of
Vencor's Credit Agreement or (ii) the Commitments of each Bank shall have been
terminated and the Credit Exposure of each Bank shall have been reduced to zero
and all amounts payable by Vencor under the Financing Documents shall have been
paid in full. If at any time any amount payable by Vencor under any Financing
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of Vencor or otherwise, the Supporting
Guarantor's obligations under this Guaranty 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.
4
<PAGE>
SECTION 6. Waiver. The Supporting Guarantor 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 Vencor or any other Person or against any security.
SECTION 7. Subrogation and Contribution. Upon making any payment
----------------------------
hereunder with respect to the obligations of Vencor, the Supporting Guarantor
shall be subrogated to the rights of the payee against Vencor with respect to
such payment, and shall also have a right of contribution against all other
Supporting Guarantors in respect of any such payment pro rata among same based
on their respective net fair value as enterprises; provided that the Supporting
--------
Guarantor shall not enforce any payment by way of subrogation against Vencor or
contribution against any other Supporting Guarantor so long as any Bank has any
Commitment to Vencor under Vencor's Credit Agreement or any amount payable by
Vencor under any Financing Document remains unpaid.
SECTION 8. Stay of Acceleration. If acceleration of the time for
--------------------
payment of any amount payable by Vencor under any Financing Document is stayed
upon the insolvency, bankruptcy or reorganization of Vencor, all such amounts
otherwise subject to acceleration under the terms of such Financing Document
shall nonetheless be payable by the Supporting Guarantor hereunder forthwith on
demand by the Documentation Agent made at the request of the requisite number of
Banks specified in Section 6.01 of Vencor's Credit Agreement.
SECTION 9. Deferral of Enforcement: Pro Rata Sharing.
-----------------------------------------
(a) This Guaranty shall not be enforced unless one or more
"Significant Credit Events" shall have occurred and be continuing. For purposes
hereof, the term "Significant Credit Event" means:
(i) Vencor, Atria or any Supporting Guarantor commences 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 selling the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or consents 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 makes a
general assignment for the benefit of creditors, or fails generally to pay
its debts as they become due, or takes any corporate action to authorize
any of the foregoing; or
(ii) an involuntary case or other proceeding is commenced against
Vencor, Atria or any Supporting Guarantor seeking liquidation,
5
<PAGE>
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 Vencor, Atria or any Supporting Guarantor under the Federal
bankruptcy laws as now or hereafter in effect; or
(iii) all amounts outstanding under either Atria's Credit
Agreement or Vencor's Credit Agreement shall have become due and payable
upon the final maturity thereof or by reason of acceleration; or
(iv) Vencor's Required Banks (as such term is defined in Vencor's
Credit Agreement) have signed and delivered to Atria's Administrative Agent
a certificate stating that (x) an event of default under Vencor's Credit
Agreement has occurred and is continuing, and (y) Vencor's Required Banks
have determined that the credit facility provided under Vencor's Credit
Agreement is in a "workout;" or
(v) Atria's required Lenders (as such term is defined in Atria's
Credit Agreement) have signed and delivered to Vencor's Administrative
Agent a certificate stating that (x) an event of default under Atria's
Credit Agreement has occurred and is continuing, and (y) Atria's Required
Lenders have determined that the credit facility provided under Atria's
Credit Agreement is in a "workout."
(b) It is the desire and intent of the Supporting Guarantor and the
beneficiaries of this Guaranty that this Guaranty be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Supporting Guarantor under this Guaranty would, in the
absence of this sentence, be adjudicated to be invalid or unenforceable because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, then the amount of the Supporting Guarantor's liability hereunder in
respect of the obligations of Vencor guaranteed hereunder shall be deemed to be
reduced ab initio to that maximum amount which would be permitted without
causing such Supporting Guarantor's obligations hereunder to be so invalidated;
provided that if, at the time of enforcement of either this Guaranty or the
Corresponding Atria Guaranty, the amount payable under this Guaranty or the
Corresponding Atria Guaranty is limited by this Section 9(b) or the
substantially identical provision set forth in the Corresponding Atria Guaranty,
as the case may be, then the amounts payable under both this Guaranty and the
Corresponding Atria Guaranty shall be limited so that the maximum amount payable
under each guaranty is proportional to the respective aggregate amount
guaranteed under each such guaranty (without regard
6
<PAGE>
to the limits under this Section 9(b) or the substantially identical provision
of the corresponding Atria Guaranty) when the Significant Credit Event that
exists at the time of enforcement occurred (or if two or more Significant Credit
Events exist at the time of enforcement, when the earlier of such Significant
Credit Events occurred).
(c) The Supporting Guarantor agrees that, if it makes any payments
upon enforcement of either this Guaranty or the Corresponding Atria Guaranty, it
will make a pro rata payment under the other of such guaranties so that (i) the
payments under this Guaranty and the Corresponding Atria Guaranty are concurrent
and (ii) the total amount paid under each guaranty is proportional to the
aggregate amount guaranteed under such guaranty (without regard to the limits
under Section 9(b) hereof or the substantially identical provision of the
Corresponding Atria Guaranty) when the Significant Credit Event that exists at
the time of enforcement occurred (or if two or more Significant Credit Events
exist at the time of enforcement when the earlier of such Significant Credit
Events occurred).
(d) The provisions of this Section 9 are intended for the benefit of
the beneficiaries of the Corresponding Atria Guaranty and shall be directly
enforceable by them.
(e) The Corresponding Atria Guaranty contains provisions substantially
identical to this Section 9, which provisions are intended for the benefit of
the beneficiaries of this Guaranty and shall be directly enforceable by them.
The Supporting Guarantor will not permit such provisions to be terminated
amended, waived or otherwise changed without the prior written consent of
Vencor's Required Banks.
SECTION 10. Notices. Notices and other communications hereunder shall
-------
be given in writing in the manner specified in Section 11.01 of Vencor's Credit
Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
7
<PAGE>
IN WITNESS WHEREOF, the Supporting Guarantor has caused this Guaranty
to be duly executed by its authorized officer as of the day and year first above
written.
MEDISAVE PHARMACIES, INC.
By: /s/ Richard A. Lechleiter
------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
<PAGE>
VENCOR SUPPORTING GUARANTY
Guaranty dated as of August 26, 1996 by NATIONWIDE CARE, INC. (the
"Supporting Guarantor") for the benefit of the Banks, Co-Agents, LC Issuing
Banks, Administrative Agent, Documentation Agent and Collateral Agent from time
to time party to Vencor's Credit Agreement (as defined herein) (the "Vencor
Lenders") and, to the extent set forth in Section 9 below, the Creditors from
time to time party to Atria's Credit Agreement (as defined below):
WHEREAS, terms defined in the Credit Agreement dated as of September
11, 1995 among Vencor, Inc. ("Vencor"), the other Borrowers referred to therein
(the "Subsidiary Borrowers") and the Banks, Co-Agents, LC Issuing Banks and
Agents referred to therein, as such agreement may be amended from time to time
("Vencor's Credit Agreement"), have the same respective meanings when used
herein;
WHEREAS, Atria Communities, Inc. ("Atria") proposes to enter into a
$200,000,000 credit agreement ("Atria's Credit Agreement"), to borrow thereunder
from time to time and to cause letters of credit to be issued thereunder to
provide credit support for IRB Debt;
WHEREAS, Vencor proposes to guarantee such obligations of Atria (other
than a portion thereof relating to mature properties);
WHEREAS, Vencor proposes to cause the Subsidiary Borrowers to
guarantee Vencor's performance of its guarantee of the obligations of Atria and
may hereafter cause one or more other Subsidiaries to give similar guarantees of
Vencor's performance thereof (the Subsidiary Borrowers and such other
Subsidiaries, if any, herein collectively called the "Supporting Guarantors");
WHEREAS, Vencor and the Banks have agreed to amend certain covenants
in Vencor's Credit Agreement to permit the foregoing transactions; and
WHEREAS, in consideration of such Amendment, Vencor has agreed to
cause each Supporting Guarantor to guarantee Vencor's performance of its
obligations under Vencor's Credit Agreement;
<PAGE>
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. The following terms, as used herein, have the
-----------
following meanings:
"Atria's Administrative Agent" means PNC Bank, National Association,
as Administrative Agent under the Atria Credit Agreement and any permitted
successor thereto that has been identified as such by notice from Atria to
Vencor's Administrative Agent.
"Atria's Required Lenders" means the "Required Lenders" as such term
is defined In Atria's Credit Agreement.
"Corresponding Atria Guaranty" means the guaranty by the Supporting
Guarantor that Vencor will perform its obligations under the Parent Guaranty (as
such term is defined in Atria's Credit Agreement)
"Significant Credit Event" shall have the meaning set forth in Section
9 hereof.
"Vencor's Administrative Agent" means NationsBank, N.A., as
Administrative Agent under Vencor's Credit Agreement and any permitted successor
thereto that has been identified as such by notice from Vencor to Atria's
Administrative Agent.
"Vencor's Required Banks" means the "Required Banks" as such term is
defined in Vencor's Credit Agreement.
SECTION 2. Representations and Warranties. The Supporting Guarantor
------------------------------
represents and warrants that:
(a) The Supporting Guarantor is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
(b) The execution, delivery and performance by the Supporting
Guarantor of this Guaranty are within the corporate powers of the Supporting
Guarantor, 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
2
<PAGE>
law or regulation or of the certificate of incorporation or by-laws of the
Supporting Guarantor or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Supporting Guarantor or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset of
the Supporting Guarantor or any of its Subsidiaries.
(c) This Guaranty constitutes a valid and binding agreement of the
Supporting Guarantor, enforceable in accordance with its terms.
(d) There is no action, suit or proceeding pending against,
or to the knowledge of the Supporting Guarantor threatened against or affecting,
the Supporting Guarantor 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 upon the condition (financial or otherwise), results of
operations, business, or prospects of Vencor and its Subsidiaries, considered as
a whole, or which in any manner draws into question the validity or
enforceability of this Guaranty.
SECTION 3. The Guarantee. The Supporting Guarantor unconditionally
-------------
and irrevocably guarantees the full and punctual payment of all present and
future indebtedness and other obligations of Vencor evidenced by or arising
under any Financing Document as and when the same shall become due and payable,
whether at maturity or by declaration or otherwise, according to the terms
hereof and thereof (including any interest which accrues on any of the foregoing
obligations after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of Vencor, whether or
not allowed or allowable as a claim in any such proceeding). If Vencor fails
punctually to pay the indebtedness and other obligations guaranteed by the
Supporting Guarantor hereby, the Supporting Guarantor unconditionally agrees to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at maturity or by declaration or otherwise, and as if such
payment were made by Vencor.
SECTION 4. Guarantee Unconditional. Except as provided in Section
-----------------------
9, the obligations of the Supporting Guarantor under this Guaranty 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 Vencor under any Financing
Document by operation of law or otherwise;
3
<PAGE>
(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 Vencor
under any Financing Document;
(d) any change in the corporate existence, structure or
ownership of Vencor or any of its Subsidiaries, or any
insolvency, bankruptcy, reorganization or other similar
proceeding affecting Vencor or any of its Subsidiaries or its
assets, or any resulting release or discharge of any
obligation of Vencor or any of its Subsidiaries contained in
any Financing Document:
(e) the existence of any claim, set-off or other rights which
the Supporting Guarantor or Vencor 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
Guaranty, provided that nothing herein shall prevent the
--------
assertion of any such claim by separate Suit Of compulsory
counterclaim;
(f) any invalidity or unenforceability relating to or against
Vencor for any reason of any Financing Document, or any
provision of applicable law or regulation purporting to
prohibit the payment by Vencor of any amount payable by it
under any Financing Document: or
(g) any other act or omission to act or delay of any kind by
Vencor, 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 4, constitute a legal or
equitable discharge of the Supporting Guarantor's obligations
under this Guaranty.
SECTION 5. Discharge Only Upon Payment in Full: Reinstatement
--------------------------------------------------
in Certain Circumstances. The Supporting Guarantor's obligations under this
- ------------------------
Guaranty constitute a continuing guaranty and shall remain in full force and
effect until either (i) this Guaranty is terminated pursuant to Section 216 of
Vencor's Credit Agreement or (ii) the Commitments of each Bank shall have been
4
<PAGE>
terminated and the Credit Exposure of each Bank shall have been reduced to zero
and all amounts payable by Vencor under the Financing Documents shall have been
paid in full. If at any time any amount payable by Vencor under any Financing
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of Vencor or otherwise, the Supporting
Guarantor's obligations under this Guaranty with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.
SECTION 6. Waiver. The Supporting Guarantor 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 Vencor or any other Person or against any security.
SECTION 7. Subrogation and Contribution. Upon making any payment
----------------------------
hereunder with respect to the obligations of Vencor, the Supporting Guarantor
shall be subrogated to the rights of the payee against Vencor with respect to
such payment, and shall also have a right of contribution against all other
Supporting Guarantors in respect of any such payment pro rata among same based
on their respective net fair value as enterprises; provided that the Supporting
--------
Guarantor shall not enforce any payment by way of subrogation against Vencor or
contribution against any other Supporting Guarantor so long as any Bank has any
Commitment to Vencor under Vencor's Credit Agreement or any amount payable by
Vencor under any Financing Document remains unpaid.
SECTION 8. Stay of Acceleration. If acceleration of the time
--------------------
for payment of any amount payable by Vencor under any Financing Document is
stayed upon the insolvency, bankruptcy or reorganization of Vencor all such
amounts otherwise subject to acceleration under the terms of such Financing
Document shall nonetheless be payable by the Supporting Guarantor hereunder
forthwith on demand by the Documentation Agent made at the request of the
requisite number of Banks specified in Section 6.01 of Vencor's Credit
Agreement.
SECTION 9. Deferral of Enforcement: Pro Rata Sharing.
-----------------------------------------
(a) This Guaranty shall not be enforced unless one of more
"Significant Credit Events" shall have occurred and be continuing. For purposes
hereof, the term "Significant Credit Event" means:
(i) Vencor, Atria or any Supporting Guarantor commences a
voluntary case or other proceeding seeking liquidation, reorganization
or
5
<PAGE>
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
consents 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 makes a general assignment for the
benefit of creditors, or fails generally to pay its debts as they
become due, or takes any corporate action to authorize any of the
foregoing; or
(ii) an involuntary case or other proceeding is commenced
against Vencor, Atria or any Supporting Guarantor 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 Vencor, Atria or any Supporting
Guarantor under the Federal bankruptcy laws as now or hereafter in
effect; or
(iii) all amounts outstanding under either Atria's
Credit Agreement or Vencor' s Credit Agreement shall have become due
and payable upon the final maturity thereof or by reason of
acceleration; or
(iv) Vencor's Required Banks (as such term is defined in
Vencor's Credit Agreement) have signed and delivered to Atria's
Administrative Agent a certificate stating that (x) an event of
default under Vencor's Credit Agreement has occurred and is
continuing, and (y) Vencor's Required Banks have determined that the
credit facility provided under Vencor's Credit Agreement is in a
"workout;" or
(v) Atria's Required Lenders (as such term is
defined in Atria's Credit Agreement) have signed and delivered to
Vencor's Administrative Agent a certificate stating that (x) an event
of default under Atria's Credit Agreement has occurred and is
continuing, and (y) Atria's Required Lenders have determined that the
credit facility provided under Atria's Credit Agreement is in a
"workout."
(b) It is the desire and intent of the Supporting Guarantor
and the beneficiaries of this Guaranty that this Guaranty be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which
6
<PAGE>
enforcement is sought. If and to the extent that the obligations of the
Supporting Guarantor under this Guaranty would, in the absence of this sentence,
be adjudicated to be invalid or unenforceable because of any applicable state or
federal law relating to fraudulent conveyances or transfers, then the amount of
the Supporting Guarantor's liability hereunder in respect of the obligations of
Vencor guaranteed hereunder shall be deemed to be reduced ab initio to that
maximum amount which would be permitted without causing such Supporting
Guarantor's obligations hereunder to be so invalidated; provided that if; at the
--------
time of enforcement of either this Guaranty or the Corresponding Atria Guaranty,
the amount payable under this Guaranty or the Corresponding Atria Guaranty is
limited by this Section 9(b) or the substantially identical provision set forth
in the Corresponding Atria Guaranty, as the case may be, then the amounts
payable under both this Guaranty and the Corresponding Atria Guaranty shall be
limited so that the maximum amount payable under each guaranty is proportional
to the respective aggregate amount guaranteed under each such guaranty (without
regard to the limits under this Section 9(b) or the substantially identical
provision of the Corresponding Atria Guaranty) when the Significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit Events exist at the time of enforcement, when the earlier of such
Significant Credit Events occurred).
(c) The Supporting Guarantor agrees that, if it makes any
payments upon enforcement of either this Guaranty or the Corresponding Atria
Guaranty, it will make a pro rata payment under the other of such guaranties so
that (i) the payments under this Guaranty and the Corresponding Atria Guaranty
are concurrent and (ii) the total amount paid under each guaranty is
proportional to the aggregate amount guaranteed under such guaranty (without
regard to the limits under Section 9(b) hereof or the substantially identical
provision of the Corresponding Atria Guaranty) when the Significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit Events exist at the time of enforcement, when the earlier of such
Significant Credit Events occurred).
(d) The provisions of this Section 9 are intended for the
benefit of the beneficiaries of the Corresponding Atria Guaranty and shall be
directly enforceable by them.
(e) The Corresponding Atria Guaranty contains provisions
substantially identical to this Section 9, which provisions are intended for the
benefit of the beneficiaries of this Guaranty and shall be directly enforceable
by them. The Supporting Guarantor will not permit such provisions to be
terminated,
7
<PAGE>
amended, waived or otherwise changed without the prior written consent of
Vencor's Required Banks.
SECTION 10. Notices. Notices and other communications hereunder
-------
shall be given in writing in the manner specified in Section 11.01 of Vencor's
Credit Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed by and
------------
construed in accordance with the laws of the State of New York.
8
<PAGE>
IN WITNESS WHEREOF, the Supporting Guarantor has caused this
Guaranty to be duly executed by its authorized officer as of the day and year
first above written.
NATIONWIDE CARE, INC.
By: /s/ Richard A. Lechleiter
---------------------------------
Name: Richard A. Lechleiter
Title: Vice President of Finance
and Corporate Controller
<PAGE>
VENCOR SUPPORTING GUARANTY
Guaranty dated as of August 26, 1996 by NORTHWEST HEALTH CARE, INC.
(the "Supporting Guarantor") for the benefit of the Banks, Co-Agents, LC Issuing
Banks, Administrative Agent, Documentation Agent and Collateral Agent from time
to time party to Vencor's Credit Agreement (as defined below) (the "Vencor
Lenders") and, to the extent set forth in Section 9 below, the Creditors from
time to time party to Atria's Credit Agreement (as defined below):
WHEREAS, terms defined in the Credit Agreement dated as of
September 11, 1995 among Vencor, Inc. ("Vencor"), the other Borrowers referred
to therein (the "Subsidiary Borrowers") and the Banks, Co-Agents, LC Issuing
Banks and Agents referred to therein, as such agreement may be amended from time
to time ("Vencor's Credit Agreement"), have the same respective meanings when
used herein;
WHEREAS, Atria Communities, Inc. ("Atria") proposes to enter into a
$200,000,000 credit agreement ("Atria's Credit Agreement"), to borrow thereunder
from time to time and to cause letters of credit to be issued thereunder to
provide credit support for IRB Debt;
WHEREAS, Vencor proposes to guarantee such obligations of Atria
(other than a portion thereof relating to mature properties);
WHEREAS, Vencor proposes to cause the Subsidiary Borrowers to
guarantee Vencor's performance of its guarantee of the obligations of Atria and
may hereafter cause one or more other Subsidiaries to give similar guarantees of
Vencor's performance thereof (the Subsidiary Borrowers and such other
Subsidiaries, if any, herein collectively called the "Supporting Guarantors");
WHEREAS, Vencor and the Banks have agreed to amend certain
covenants in Vencor's Credit Agreement to permit the foregoing transactions; and
WHEREAS, in consideration of such Amendment, Vencor has agreed to
cause each Supporting Guarantor to guarantee Vencor's performance of its
obligations under Vencor's Credit Agreement;
<PAGE>
NOW, THEREFORE, it is agreed as follows:
SECTION 1. Definitions. The following terms, as used herein, have
-----------
the following meanings:
"Atria's Administrative Agent" means PNC Bank, National
Association, as Administrative Agent under the Atria Credit Agreement and any
permitted successor thereto that has been identified as such by notice from
Atria to Vencor's Administrative Agent.
"Atria's Required Lenders" means the "Required Lenders" as such
term is defined in Atria's Credit Agreement.
"Corresponding Atria Guaranty" means the guaranty by the
Supporting Guarantor that Vencor will perform its obligations under the Parent
Guaranty (as such term is defined in Atria's Credit Agreement).
"Significant Credit Event" shall have the meaning set forth in
Section 9 hereof.
"Vencor's Administrative Agent" means NationsBank, N.A., as
Administrative Agent under Vencor's Credit Agreement and any permitted successor
thereto that has been identified as such by notice from Vencor to Atria's
Administrative Agent.
"Vencor's Required Banks" means the "Required Banks" as such term
is defined in Vencor's Credit Agreement.
SECTION 2. Representations and Warranties. The Supporting Guarantor
------------------------------
represents and warrants that:
(a) The Supporting Guarantor is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
(b) The execution, delivery and performance by the Supporting
Guarantor of this Guaranty are within the corporate powers of the Supporting
Guarantor, 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
2
<PAGE>
law or regulation or of the certificate of incorporation or by-laws of the
Supporting Guarantor or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Supporting Guarantor or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset of
the Supporting Guarantor or any of its Subsidiaries.
(c) This Guaranty constitutes a valid and binding agreement of
the Supporting Guarantor, enforceable in accordance with its terms.
(d) There is no action, suit or proceeding pending against, or
to the knowledge of the Supporting Guarantor threatened against or affecting,
the Supporting Guarantor 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 upon the condition (financial or otherwise), results of
operations, business, or prospects of Vencor and its Subsidiaries, considered as
a whole, or which in any manner draws into question the validity or
enforceability of this Guaranty.
SECTION 3. The Guarantee. The Supporting Guarantor unconditionally
-------------
and irrevocably guarantees the full and punctual payment of all present and
future indebtedness and other obligations of Vencor evidenced by or arising
under any Financing Document as and when the same shall become due and payable,
whether at maturity or by declaration or otherwise, according to the terms
hereof and thereof (including any interest which accrues on any of the foregoing
obligations after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of Vencor, whether or
not allowed or allowable as a claim in any such proceeding). If Vencor fails
punctually to pay the indebtedness and other obligations guaranteed by the
Supporting Guarantor hereby, the Supporting Guarantor unconditionally agrees to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at maturity or by declaration or otherwise, and as if such
payment were made by Vencor.
SECTION 4. Guarantee Unconditional. Except as provided in
-----------------------
Section 9, the obligations of the Supporting Guarantor under this Guaranty 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 Vencor under any Financing
Document by operation of law or otherwise;
3
<PAGE>
(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 Vencor
under any Financing Document;
(d) any change in the corporate existence, structure or
ownership of Vencor or any of its Subsidiaries, or any
insolvency, bankruptcy reorganization or other similar
proceeding affecting Vencor or any of its Subsidiaries or its
assets, or any resulting release or discharge of any
obligation of Vencor or any of its Subsidiaries contained in
any Financing Document;
(e) the existence of any claim, set-off or other rights which
the Supporting Guarantor or Vencor may have at any time
against any Bank, any L.C. Issuing Bank, any Agent or any
other person, whether or not arising in connection with this
Guaranty, 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
Vencor for any reason of any Financing Document, or any
provision of applicable law or regulation purporting to pro-
hibit the payment by Vencor of any amount payable by it under
any Financing Document; or
(g) any other act or omission to act or delay of any kind by
Vencor, 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 4, constitute a legal or
equitable discharge of the Supporting Guarantor's obligations
under this Guaranty.
SECTION 5. Discharge Only Upon Payment in Full: Reinstatement
--------------------------------------------------
in Certain Circumstances. The Supporting Guarantor's obligations under this
- ------------------------
Guaranty constitute a continuing guaranty and shall remain in full force and
effect until either (i) this Guaranty is terminated pursuant to Section 2.16 of
Vencor's Credit Agreement or (ii) the Commitments of each Bank shall have been
terminated and the Credit Exposure of each Bank shall have been reduced to zero
and all amounts payable by Vencor under the Financing Documents shall have been
paid in full. If at any time any amount payable by Vencor under any Financing
Document is rescinded or must be otherwise restored or returned upon the
4
<PAGE>
insolvency, bankruptcy or reorganization of Vencor or otherwise the Supporting
Guarantor' s obligations under this Guaranty with respect to such payment shall
be reinstated at such time as though such payment had become due but had not
been made at such time.
SECTION 6. Waiver. The Supporting Guarantor irrevocably waives
------
acceptance hereof, presentment, demand, protect and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against Vencor or any other Person or against any security.
SECTION 7. Subrogation and Contribution. Upon mailing any
----------------------------
payment hereunder with respect to the obligations of Vencor, the Supporting
Guarantor shall be subrogated to the rights of the payee against Vencor with
respect to such payment, and shall also have a right of contribution against all
other Supporting Guarantors in respect of any such payment pro rata among same
based on their respective net fair value as enterprises; provided that the
--------
Supporting Guarantor shall not enforce any payment by way of subrogation against
Vencor or contribution against any other Supporting Guarantor so long as any
Bank has any Commitment to Vencor under Vencor's Credit Agreement or any amount
payable by Vencor under any Financing Document remains unpaid.
SECTION 8. Stay of Acceleration. If acceleration of the time
--------------------
for payment of any amount payable by Vencor under any Financing Document is
stayed upon the insolvency, bankruptcy or reorganization of Vencor, all such
amounts otherwise subject to acceleration under the terms of such Financing
Document shall nonetheless be payable by the Supporting Guarantor hereunder
forthwith on demand by the Documentation Agent made at the request of the
requisite number of Banks specified in Section 6.01 of Vencor's Credit
Agreement.
SECTION 9. Deferral of Enforcement: Pro Rata Sharing.
-----------------------------------------
(a) This Guaranty shall not be enforced unless one or more
"Significant Credit Events" shall have occurred and be continuing. For purposes
hereof, the term "Signiticant Credit Event" means:
(i) Vencor, Atria or any Supporting Guarantor commences 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 selling the appointment
of a trustee, receiver, liquidator, custodian or other such official of it
or any substantial part of its property, or consents to any such relief or
to the appointment of or taking possession by any such official in
5
<PAGE>
an involuntary case or other proceeding commenced against it, or makes a
general assignment for the benefit of creditors, or fails generally to pay
its debts as they become due, or takes any corporate action to authorize
any of the foregoing; or
(ii) an involuntary case or other proceeding is commenced against
Vencor, Atria or any Supporting Guarantor 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 Vencor, Atria or any Supporting Guarantor under the Federal
bankruptcy laws as now or hereafter in effect; or
(iii) all amounts outstanding under either Atria's Credit
Agreement or Vencor's Credit Agreement shall have become due and payable
upon the final maturity thereof or by reason of acceleration; or
(iv) Vencor's Required Banks (as such term is defined in Vencor's
Credit Agreement) have signed and delivered to Atria's Administrative Agent
a certifcate stating that (x) an event of default under Vencor's Credit
Agreement has occurred and is continuing, and (y) Vencor's Required Banks
have determined that the credit facility provided under Vencor's Credit
Agreement is in a "workout;" or
(v) Atria's Required Lenders (as such term is defined in
Atria's Credit Agreement) have signed and delivered to Vencor's
Administrative Agent a certificate stating that (x) an event of default
under Atria's Credit Agreement has occurred and is continuing, and (y)
Atria's Required Lenders have determined that the credit facility provided
under Atria's Credit Agreement is in a "workout."
(b) It is the desire and intent of the Supporting Guarantor
and the beneficiaries of this Guaranty that this Guaranty be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Supporting Guarantor under this Guaranty would, in the
absence of this sentence, be adjudicated to be invalid or unenforceable because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, then the amount of the Supporting Guarantor's liability hereunder in
respect of the obligations of Vencor guaranteed hereunder shall be deemed to be
reduced ab initio to that maximum
6
<PAGE>
amount which would be permitted without causing such Supporting Guarantor's
obligations hereunder to be so invalidated; provided that if, at the time of
--------
enforcement of either this Guaranty or the Corresponding Atria Guaranty, the
amount payable under this Guaranty or the Corresponding Atria Guaranty is
limited by this Section 9(b) or the substantially identical provision set forth
in the Corresponding Atria Guaranty, as the case may be, then the amounts
payable under both this Guaranty and the Corresponding Atria Guaranty shall be
limited so that the maximum amount payable under each guaranty is proportional
to the respective aggregate amount guaranteed under each such guaranty (without
regard to the limits under this Section 9(b) or the substantially identical
provision of the Corresponding Atria Guaranty) when the Significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit Events exist at the time of enforcement, when the earlier of such
Significant Credit Events occurred).
(c) The Supporting Guarantor agrees that, if it makes any
payments upon enforcement of either this Guaranty or the Corresponding Atria
Guaranty, it will make a pro rata payment under the other of such guaranties so
that (i) the payments under this Guaranty and the Corresponding Atria Guaranty
are concurrent and (ii) the total amount paid under each guaranty is
proportional to the aggregate amount guarantee under such guaranty (without
regard to the limits under Section 9(b) hereof or the substantially identical
provision of the Corresponding Atria Guaranty) when the significant Credit Event
that exists at the time of enforcement occurred (or if two or more Significant
Credit Events exist at the time of enforcement, when the earlier of such
Significant Credit Events occurred).
(d) The provisions of this Section 9 are intended for the
benefit of the beneficiaries of the Corresponding Atria Guaranty and shall be
directly enforceable by them.
(e) The Corresponding Atria Guaranty contain provisions
substantially identical to this Section 9, which provisions are intended for the
benefit of the beneficiaries of this Guaranty and shall be directly enforceable
by them. The Supporting Guarantor will not permit such provisions to be
terminated, amended, waived or otherwise changed without the prior written
consent of Vencor's Required Banks.
7
<PAGE>
SECTION 10. Notices. Notices and other communications hereunder
-------
shall be given in writing in the manner specified in Section 11.01 of Vencor's
Credit Agreement.
SECTION 11. Governing Law. This Guaranty shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
8
<PAGE>
IN WITNESS WHEREOF, the Supporting Guarantor has caused this
Guaranty to be duly executed by its authorized officer as of the day and year
first above written.
NORTHWEST HEALTH CARE, INC
By: /s/ Richard A. Lechleiter
--------------------------
Name: Richard A. Lechleirer
Title: Vice President of Finance
and Corporate Controller
<PAGE>
HIRN DOHENY & HARPER
2000 Meidinger Tower Telephone (502) 585-2450
Louisville, Kentucky 40202 Telecopier (502) 585-2207
August 26, 1996
To the Banks, LC Issuing Banks
and Agents referred to in
the Vencor Credit Agreement defined
below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, NY 10260
Ladies and Gentlemen:
We have acted as special counsel for (a) Vencor, Inc., a Delaware
corporation ("Vencor"), and (b) First Healthcare Corporation, a Delaware
corporation, Northwest Health Care, Inc., an Idaho corporation, Medisave
Pharmacies, Inc., a Delaware corporation, Hillhaven of Central Florida, Inc., a
Delaware corporation, and Nationwide Care, Inc., an Indiana corporation
(collectively) the "Supporting Guarantors", and individually, a "Supporting
Guarantor") in connection with the execution and delivery of (i) Amendment No. 5
to Credit Agreement dated as of August 26, 1996 ("Amendment No. 5") among
Vencor, the Supporting Guarantors, the Banks, Co-Agents and LC Issuing Banks
referred to therein, 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, which amends the Credit Agreement dated as of
September 11, 1995 (as previously amended, the "Vencor Credit Agreement"),
among the same parties to Amendment No. 5, (ii) the Vencor Supporting
Guaranties, each dated as of August 26, 1996, respectively executed and
delivered by the Supporting Guarantors (collectively, the "Vencor Supporting
Guaranties") pursuant to Amendment No. 5, and (iii) the Parent Guaranty dated as
of August 15, 1996 (the "Atria Supporting Guaranty"), among Atria Corumunities,
Inc., a Delaware corporation ("Atria"), Vencor, the Supporting Guarantors and
PNC Bank, National Association, as Administrative Agent under the Credit
Agreement dated as of August 15, 1996 (the "Atria Credit Agreement"), among
Atria, the Lenders (as defined therein), PNC Bank, National Association, as
Administrative Agent, National City Bank of Kentucky, as Documentation Agent,
and PNC Bank, National Association, National City Bank of Kentucky and The
Toronto Dominion Bank, New York Agency, as Syndication Agents. This opinion is
being rendered to you pursuant to Section 16(d) of Amendment No. 5. Unless
otherwise defined herein, terms defined in either the Vencor Credit Agreement or
the Atria Credit Agreement are used herein as respectively defined therein.
<PAGE>
HIRN DOHENY & HARPER
To the Banks, LC Issuing Banks
and Agents
August 26, 1996
Page 2
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of the Vencor Credit Agreement, the Atria Credit Agreement,
Amendment No. 5, the Vencor Supporting Guaranties, the Atria Supporting Guaranty
and such other documents, corporate records, certificates of public officials
and other instruments, and have conducted such other investigations of fact and
law, as we have deemed necessary or advisable for purposes of this opinion.
For purposes of the opinions hereinafter expressed, we have assumed
(i) the due execution and delivery of the Vencor Credit Agreement, Amendment
No. 5, the Atria Credit Agreement and the Atria Supporting Guaranty, pursuant to
due authorization, by all parties thereto other than Vencor and the Supporting
Guarantors, (ii) that the Vencor Credit Agreement, Amendment No. 5, the Atria
Credit Agreement and the Atria Supporting Guaranty each constitutes the legal,
valid and binding obligation, enforceable in accordance with its terms, of each
party thereto other than Vencor and the Supporting Guarantors, (iii) that all
materials, records and documents, including the Vencor Credit Agreement, the
Atria Credit Agreement, Amendment No. 5, the Vencor Supporting Guaranties and
the Atria Supporting Guaranty, examined by us in connection with the preparation
of this opinion are complete, authentic and accurate and, to the extent
represented by certified or photostatic copies, conform to their respective
originals, (iv) that all signatures (other than those of the respective officers
of Vencor and the Supporting Guarantors) contained in such materials, records
and documents, including the Vencor Credit Agreement, the Atria Credit
Agreement, Amendment No. 5 and the Atria Supporting Guaranty, are genuine
signatures of the parties purporting to have signed the same, and (v) that no
action has been taken which amends, revokes or otherwise affects any of the
materials, records or documents, including the Vencor Credit Agreement, the
Atria Credit Agreement, Amendment No. 5, the Vencor Supporting Guaranties and
the Atria Supporting Guaranty; provided, however, that in the course of our
review, nothing has come to our attention leading us to question, or giving us
reasonable grounds to question, the validity of any such assumptions.
Upon the basis of the foregoing, we are of the opinion that:
1. Vencor is a corporation validly existing under the laws of the State
of Delaware. Each Supporting Guarantor is a corporation validly existing under
the respective laws of the state of its incorporation.
<PAGE>
HIRN DOHENY & HARPER
To the Banks, LC Issuing Banks
and Agents
August 26, 1996
Page 3
2. The execution and delivery by Vencor and each Supporting Guarantor
of Amendment No. 5, as the same amends the Vencor Credit Agreement, and the
Atria Supporting Guaranty and, in the case of each Supporting Guarantor; the
respective Vencor Supporting Guaranty to which it is a party, and the
performance by Vencor and each Supporting Guarantor of its obligations
thereunder (i) are within the corporate powers thereof, (ii) have been duly
authorized by all necessary corporate and governmental action, and (iii) do not
contravene, or constitute a default under, the respective organizational
documents thereof or any agreement executed in connection with the incurrence of
Debt for borrowed money and which is binding upon Vencor or such Supporting
Guarantor or any of its respective Subsidiaries and, other than as provided in
the Atria Supporting Guaranty and Amendment No. 5, do not result in or require
the imposition of any Lien on any asset thereof or any of its respective
Subsidiaries under any agreement executed in connection with the incurrence of
Debt for borrowed money and which is binding thereupon or upon any of its
respective Subsidiaries.
3. Each of the Vencor Credit Agreement, as amended by Amendment No. 5,
and the Atria Supporting Guaranty constitutes a valid and binding agreement of
Vencor and each Supporting Guarantor, enforceable in connection with its terms.
The Vencor Supporting Guaranty of each Supporting Guarantor constitutes a valid
and binding agreement of such Supporting Guarantor, enforceable in accordance
with its terms.
We express no opinion as to the applicability (and, if applicable, the
effect) of Section 548 of the United States Bankruptcy Code or any comparable
provision of state law to the questions addressed above or the conclusions
expressed with respect thereto.
The opinions expressed in paragraph 3 above are subject to the following
qualifications:
(i) the enforceability of the Vencor Credit Agreement, as amended
by Amendment No. 5, the Vencor Supporting Guaranties and the Atria Supporting
Guaranty may be limited by bankruptcy, reorganization, insolvency, moratorium,
or other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles;
(ii) insofar as provisions contained in the Vencor Credit
Agreement, as amended by Amendment No. 5, the Vencor Supporting Guaranties and
the Atria Supporting Guaranty provide for
<PAGE>
HIRN DOHENY & HARPER
To the Banks, LC Issuing Banks
and Agents
August 26, 1996
Page 4
indemnification, the enforcement thereof may be limited by public policy
considerations;
(iii) We express no opinion as to the validity or enforceability
of any provision in the Vencor Credit Agreement, as amended by Amendment No. 5,
the Vencor Supporting Guaranties or the Atria Supporting Guaranty (A) modifying
or waiving any requirement of commercial reasonableness or prior notice or the
right of redemption, arising under the Kentucky UCC, (B) purporting to grant to
the Banks, the Collateral Agent, the Lenders or the Administrative Agent any
rights, remedies or powers with respect to the disposition of property, with or
without notice, to the extent that such rights, remedies or powers are not
expressly permitted under the Kentucky UCC, (C) purporting to preclude the
modification of the Vencor Credit Agreement, as amended by Amendment No. 5, the
Vencor Supporting Guaranties or the Atria Supporting Guaranty through conduct,
custom or course of performance, action or dealing, (D) purporting to waive
equitable rights or remedies, or (E) purporting to require the payment or
reimbursement of fees, costs, expenses or other amounts which are unreasonable
in nature or amount; and
(iv) the provisions of the Vencor Credit Agreement, as amended by
Amendment No. 5, the Vencor Supporting Guaranties and the Atria Supporting
Guaranty regarding the payment of attorneys' fees as a remedy upon demand will,
to the extent that the substantive laws of the Commonwealth of Kentucky govern
such provisions, be limited to those attorneys' fees recoverable pursuant to
KRS 411.195.
With respect to the opinions expressed in paragraph 3 above, we point
out that the Vencor Credit Agreement, as amended by Amendment No. 5, and the
Vencor Supporting Guaranties (the "New York Law Documents") contain provisions
stating that such documents are governed by and are to be construed in
accordance with the laws of the State of New York. We are of the opinion that,
under the existing statutory and decisional law of the Commonwealth of Kentucky,
a Kentucky state court or a United States federal court sitting in the
Commonwealth of Kentucky would give effect to the provisions in the New York Law
Documents providing for New York law to govern the New York Law Documents
(except as aforesaid), and we have no reason to believe that any such court
would refuse to enforce any of the provisions thereof for public policy reasons
or otherwise. If the New York Law Documents were governed by the laws of the
Commonwealth of Kentucky, we would give the same opinions
<PAGE>
HIRN DOHENY & HARPER
To the Banks, LC Issuing Banks
and Agents
August 26, 1996
Page 5
expressed in paragraph 3 above with respect thereto under such laws.
With respect to the opinions expressed in paragraph 1 above, we have
relied exclusively upon a certificate of existence for Vencor and each
Supporting Guarantor, as issued by the Secretary of State of the state of
incorporation thereof. With respect to the opinions expressed in paragraphs 2
and 3 above we have relied upon the opinion of Richard T. Riney, Transactions
Counsel of Vencor and the Supporting Guarantors, of even date herewith, as to
(i) Vencor's due authorization of the execution and delivery of Amendment No. 5
and the Atria Supporting Guaranty, (ii) Vencor's corporate power to execute and
deliver Amendment No. 5 and the Atria Supporting Guaranty, (iii) the Supporting
Guarantors' due authorization of the execution and delivery of Amendment No. 5,
the Atria Supporting Guaranty, and the Vencor Supporting Guaranties, (iv) the
Supporting Guarantors' corporate power to execute and deliver Amendment No. 5,
the Atria Supporting Guaranty, and the Vencor Supporting Guaranties, and (v) the
non-contravention of, the absence of default under, and the absence of the
imposition of any Lien on any asset by or under, any agreement executed in
connection with the incurrence of Debt for borrowed money which is binding upon
Vencor or any Supporting Guarantor or any of their respective Subsidiaries.
We are members of the bar of the Commonwealth of Kentucky and the
opinions expressed above are limited to the laws of the Commonwealth of Kentucky
and the federal laws of the United States of America. We have made no
examination of the effects of the laws of any other jurisdiction upon the issues
covered by such opinions.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
/s/ Hirn Doheny & Harper
HIRN DOHENY & HARPER
<PAGE>
EXHIBIT 4.11
================================================================================
U.S.$200,000,000
CREDIT AGREEMENT
dated as of
August 15, 1996
Among
ATRIA COMMUNITIES, INC.
as Borrower
THE LENDING INSTITUTIONS NAMED THEREIN
as Lenders
PNC BANK, NATIONAL ASSOCIATION
as Administrative Agent
PNC BANK, KENTUCKY, INC.
as Managing Agent
NATIONAL CITY BANK OF KENTUCKY
as Documentation Agent
PNC BANK, NATIONAL ASSOCIATION
NATIONAL CITY BANK OF KENTUCKY
THE TORONTO-DOMINION BANK, New York Agency
as Syndication Agents
================================================================================
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TABLE OF CONTENTS
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SECTION 1. AMOUNT AND TERMS OF CREDIT.................................................................... 1
1.1. Commitments................................................................................... 1
1.2. Minimum Borrowing Amounts, etc................................................................ 3
1.3. Notice of Borrowing........................................................................... 3
1.4. Disbursement of Funds......................................................................... 4
1.5. Notes......................................................................................... 4
1.6. Conversions................................................................................... 4
1.7. Pro Rata Borrowings........................................................................... 5
1.8. Interest...................................................................................... 5
1.9. Interest Periods.............................................................................. 7
1.10. Increased Costs, Illegality, etc.............................................................. 8
1.11. Compensation.................................................................................. 9
1.12. Change of Lending Office...................................................................... 10
SECTION 2. LETTERS OF CREDIT............................................................................. 10
2.1. Letters of Credit............................................................................. 10
2.2. Letter of Credit Requests: Notices of Issuance................................................ 10
2.3. Agreement to Repay Letter of Credit Drawings.................................................. 11
2.4. Letter of Credit Participations............................................................... 11
2.5. Increased Costs............................................................................... 13
2.6. Obligations Absolute.......................................................................... 13
2.7. Guaranty of Subsidiary Letter of Credit Obligations........................................... 14
SECTION 3. FEES; COMMITMENTS............................................................................. 16
3.1. Fees.......................................................................................... 16
3.2. Voluntary Reduction of Commitments............................................................ 16
3.3. Mandatory Adjustments of Commitments, etc..................................................... 16
3.4. Extension of Revolving Loan Maturity Date..................................................... 17
SECTION 4. PAYMENTS...................................................................................... 17
4.1. Voluntary Prepayments......................................................................... 17
4.2. Mandatory Prepayments......................................................................... 17
4.3. Method and Place of Payment................................................................... 18
4.4. Net Payments.................................................................................. 19
SECTION 5. CONDITIONS PRECEDENT.......................................................................... 20
5.1. Conditions Precedent at Closing Date.......................................................... 20
5.2. Conditions Precedent to All Credit Events..................................................... 26
SECTION 6. REPRESENTATIONS AND WARRANTIES................................................................ 26
6.1. Corporate Status, etc......................................................................... 26
6.2. Corporate Power and Authority, etc............................................................ 27
6.3. No Violation.................................................................................. 27
6.4. Litigation.................................................................................... 27
6.5. Use of Proceeds; Margin Regulations........................................................... 27
6.6. Governmental Approvals........................................................................ 27
6.7. True and Complete Disclosure.................................................................. 28
6.8. Financial Condition: Financial Statements..................................................... 28
6.9. Security Interests............................................................................ 29
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6.10. Representations and Warranties in Transaction Documents....................................... 29
6.11. Tax Returns and Payments...................................................................... 29
6.12. Compliance with ERISA......................................................................... 29
6.13. Subsidiaries.................................................................................. 30
6.14. Intellectual Property, etc.................................................................... 30
6.15. Environmental Matters......................................................................... 30
6.16. Properties.................................................................................... 31
6.17. Labor Relations: Collective Bargaining Agreements............................................. 31
6.18. Indebtedness.................................................................................. 31
6.19. Transaction................................................................................... 31
6.20. Certain Material Agreements................................................................... 31
6.21. Third-Party Rights............................................................................ 32
SECTION 7. AFFIRMATIVE COVENANTS......................................................................... 32
7.1. Reporting Requirements........................................................................ 32
7.2. Books, Records and Inspections................................................................ 34
7.3. Insurance..................................................................................... 34
7.4. Payment of Taxes.............................................................................. 35
7.5. Corporate Franchises.......................................................................... 35
7.6. Compliance with Statutes, etc................................................................. 35
7.7. Good Repair................................................................................... 35
7.8. Compliance with Environmental Laws............................................................ 35
7.9. Change of Fiscal Years, Fiscal Quarters....................................................... 36
7.10. Additional Security; Further Assurances....................................................... 36
7.11. Corporate Separateness........................................................................ 38
7.12. ERISA......................................................................................... 38
7.13. Senior Debt................................................................................... 39
SECTION 8. NEGATIVE COVENANTS............................................................................ 39
8.1. Changes in Business........................................................................... 39
8.2. Consolidation, Merger or Sale of Assets, etc.................................................. 39
8.3. Liens......................................................................................... 41
8.4. Indebtedness.................................................................................. 43
8.5. Advances, Investments and Loans............................................................... 44
8.6. Certain Leases................................................................................ 45
8.7. Prepayments and Refinancings of IRB Debt, Modifications of Agreements, etc.................... 46
8.8. Dividends, etc................................................................................ 46
8.9. Transactions with Affiliates.................................................................. 47
8.10. Consolidated Net Worth........................................................................ 47
8.11. Capitalization Ratio.......................................................................... 47
8.12. Leverage Ratio................................................................................ 47
8.13. Interest Coverage............................................................................. 48
8.14. Creation of Subsidiaries...................................................................... 48
8.15. Limitation on Certain Restrictions on Subsidiaries............................................ 48
8.16. Interest Rate Hedging......................................................................... 49
SECTION 9. EVENTS OF DEFAULT............................................................................. 49
9.1. Events of Default............................................................................. 49
9.2. Acceleration, etc............................................................................. 52
9.3. Application of Liquidation Proceeds........................................................... 52
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SECTION 10. DEFINITIONS................................................................................... 54
SECTION 11. THE ADMINISTRATIVE AGENT AND THE MANAGING AGENT............................................... 72
11.1. Appointment................................................................................... 72
11.2. Delegation of Duties.......................................................................... 72
11.3. Exculpatory Provisions........................................................................ 73
11.4. Reliance by Agents............................................................................ 73
11.5. Notice of Default............................................................................. 73
11.6. Non-Reliance.................................................................................. 74
11.7. Indemnification............................................................................... 74
11.8. The Agents in Their Individual Capacity....................................................... 74
11.9. Successor Agents.............................................................................. 75
11.10. Other Agents.................................................................................. 75
SECTION 12. MISCELLANEOUS..................................................................................75
12.1. Payment of Expenses etc....................................................................... 75
12.2. Right of Setoff............................................................................... 76
12.3. Notices....................................................................................... 76
12.4. Benefit of Agreement.......................................................................... 76
12.5. No Waiver: Remedies Cumulative................................................................ 78
12.6. Payments Pro Rata............................................................................. 78
12.7. Calculations: Computations.................................................................... 78
12.8. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial........................ 79
12.9. Counterparts.................................................................................. 79
12.10. Effectiveness................................................................................. 79
12.11. Headings Descriptive.......................................................................... 80
12.12. Amendment or Waiver........................................................................... 80
12.13. Survival...................................................................................... 80
12.14. Domicile of Loans............................................................................. 80
12.15. Confidentiality............................................................................... 80
12.16. Lender Register............................................................................... 81
12.17. Limitations on Liability of the Letter of Credit Issuers...................................... 81
12.18. General Limitation of Liability............................................................... 81
12.19. No Duty....................................................................................... 81
12.20. Lenders and Agent Not Fiduciary to Credit Parties, etc........................................ 82
12.21. Survival of Representations and Warranties.................................................... 82
12.22. Limitation on Enforcement of Guaranties and Security Documents................................ 82
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ANNEX I - INFORMATION AS TO LENDERS
ANNEX II - INFORMATION AS TO SUBSIDIARIES
ANNEX III - DESCRIPTION OF REAL PROPERTIES
ANNEX IV - DESCRIPTION OF EXISTING INDEBTEDNESS
ANNEX V - DESCRIPTION OF EXISTING LIENS
ANNEX VI - DESCRIPTION OF EXISTING ADVANCES, LOANS AND INVESTMENTS
ANNEX VII - DESCRIPTION OF LETTERS OF CREDIT DEEMED ISSUED UNDER THE
CREDIT AGREEMENT
EXHIBIT A-1 - FORM OF NOTICE OF BORROWING
EXHIBIT A-2 - FORM OF LETTER OF CREDIT REQUEST
EXHIBIT B - FORM OF REVOLVING NOTE
EXHIBIT C-1 - FORM OF OPINION OF SPECIAL COUNSEL TO THE BORROWER
EXHIBIT C-2 - FORM OF OPINION OF GENERAL COUNSEL TO THE PARENT
EXHIBIT D - FORM OF OFFICER'S CERTIFICATE
EXHIBIT E - FORM OF PARENT GUARANTY
EXHIBIT F - FORM OF SUBSIDIARY GUARANTY
EXHIBIT G - FORM OF PLEDGE AGREEMENT
EXHIBIT H - FORM OF SECURITY AGREEMENT
EXHIBIT I - FORM OF ASSIGNMENT AGREEMENT
EXHIBIT J - FORM OF SOLVENCY CERTIFICATE
EXHIBIT K - FORM OF SECTION 4.4(b)(ii) CERTIFICATE
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT, dated as of August 15, 1996, among the following:
(i) ATRIA COMMUNITIES, INC., a Delaware corporation (herein,
together with its successors and assigns, the "Borrower");
(ii) the lending institutions listed in Annex I hereto (each
a "Lender" and collectively, the "Lenders");
(iii) PNC BANK, NATIONAL ASSOCIATION, a national banking
association, as administrative agent (the "Administrative Agent");
(iv) PNC BANK, KENTUCKY, INC., a Kentucky banking
corporation, as managing agent (the "Managing Agent");
(v) NATIONAL CITY BANK of KENTUCKY, a national banking
association, as documentation agent (the "Documentation Agent"); and
(vi) PNC BANK, NATIONAL ASSOCIATION, a national banking
association, NATIONAL CITY BANK of KENTUCKY, a national banking
association, and THE TORONTO-DOMINION BANK, New York Agency, as
syndication agents (the "Syndication Agents"):
PRELIMINARY STATEMENTS:
(1) Unless otherwise defined herein, all capitalized terms used herein
and defined in section 10 are used herein as so defined.
(2) The Borrower has applied to the Lenders for credit facilities in
order to refinance certain indebtedness of the Borrower and in order to provide
working capital and funds for acquisitions and other lawful purposes.
(3) Subject to and upon the terms and conditions set forth herein, the
Lenders are willing to make available to the Borrower the credit facilities
provided for herein.
NOW, THEREFORE, it is agreed:
SECTION 1. AMOUNT AND TERMS OF CREDIT
1.1. Commitments. Subject to and upon the terms and
conditions herein set forth, each Lender severally agrees to make a loan or
loans (each a "Loan" and, collectively, the "Loans") to the Borrower, which
Loans shall be drawn and considered outstanding, to the extent such Lender has a
commitment hereunder, as set forth below:
(a) Loans may be made either as MPP Revolving Loans or DPP
Revolving Loans, as such terms are defined below. The term "Loans"
includes both MPP Revolving Loans and DPP Revolving Loans.
(b) Loans which are made with reference to the Mature
Property Pool (each an "MPP Revolving Loan" and, collectively, the
"MPP Revolving Loans"): (i) may be made at any time and from time to
time on and after the Closing Date and prior to the Revolving Loan
Maturity Date, provided that, after giving effect thereto, the sum of
the outstanding MPP Revolving Loans,
<PAGE>
the Allocated MPP Letter of Credit Outstandings and the Allocated
Measured MPP Swap Credit Exposure do not exceed the MPP Revolving Loan
Sublimit, and provided, further, that, after giving effect thereto,
the sum of the outstanding Loans, the Letter of Credit Outstandings
and the Aggregate Measured Swap Credit Exposure do not exceed the
aggregate Commitments; (ii) except as hereinafter provided, may, at
the option of the Borrower, be incurred and maintained as, and/or
converted into, MPP Revolving Loans which are Base Rate Loans or
Eurodollar Loans, provided that all MPP Revolving Loans made as part
of the same Borrowing shall, unless otherwise specifically provided
herein, consist of MPP Revolving Loans of the same Type; (iii) may be
repaid and reborrowed in accordance with the provisions hereof; and
(iv) shall not for any Lender exceed the amount which remains after
subtracting from the Commitment of such Lender at such time the sum of
(A) the outstanding principal amount of all other Loans made by such
Lender, plus (B) the product at such time of (x) such Lender's
Percentage and (y) the sum of the Letter of Credit Outstandings and
the Aggregate Measured Swap Credit Exposure at such time.
(c) Loans which cannot be made as MPP Revolving Loans because
of the limitation contained in the first proviso to clause (i) of
section 1.1(b) above (each a "DPP Revolving Loan" and, collectively,
the "DPP Revolving Loans"): (i) may be made at any time and from time
to time on and after the Closing Date and prior to the DPP Loan
Maturity Date, provided that, after giving effect thereto, the sum of
the outstanding DPP Revolving Loans, the Allocated DPP Letter of
Credit Outstandings and the Allocated Measured DPP Swap Credit
Exposure do not exceed the DPP Revolving Loan Sublimit, and provided,
further, that, after giving effect thereto, the sum of the outstanding
Loans, the Letter of Credit Outstandings and the Aggregate Measured
Swap Credit Exposure do not exceed the aggregate Commitments; (ii)
except as hereinafter provided, may, at the option of the Borrower, be
incurred and maintained as, and/or converted into, DPP Revolving Loans
which are Base Rate Loans or Eurodollar Loans, provided that all DPP
Revolving Loans made as part of the same Borrowing shall, unless
otherwise specifically provided herein, consist of DPP Revolving Loans
of the same Type; (iii) may be repaid and reborrowed in accordance
with the provisions hereof; and (iv) shall not for any Lender exceed
the amount which remains after subtracting from the Commitment of such
Lender at such time the sum of (A) the outstanding principal amount of
all other Loans made by such Lender, plus (B) the product at such time
of (x) such Lender's Percentage and (y) the sum of the Letter of
Credit Outstandings and the Aggregate Measured Swap Credit Exposure at
such time.
(d) No DPP Revolving Loans shall be made at any time when the
Borrower could obtain an MPP Revolving Loan in any amount.
(e) In the event that, at any time while any DPP Revolving
Loans are outstanding, the Borrower would, by reason of any change in
the Mature Property Pool or otherwise, be entitled to make MPP
Revolving Loans, the Borrower may request that the Managing Agent
determine, or the Managing Agent on its own initiative may determine,
that a portion of the outstanding principal amount of DPP Revolving
Loans be
reclassified hereunder as MPP Revolving Loans, provided that the
principal amount so reclassified shall not exceed the principal amount
of the MPP Revolving Loans that the Borrower could obtain at such
time. The Managing Agent shall promptly notify the Borrower and the
Lenders of any such determination by the Managing Agent that any
principal amount of DPP Revolving Loans is being reclassified as MPP
Revolving Loans, specifying the principal amount so reclassified, the
particular Borrowing relating thereto and the effective date of such
reclassification (which shall not be earlier than the date of such
notice).
(f) The Borrower shall from time to time upon request from
the Managing Agent or the Administrative Agent advise the Managing
Agent and the Administrative Agent in writing of the amount of the
Allocated MPP Letter of Credit Outstandings, the amount of the
Allocated DPP Letter of Credit Outstandings, the amount of the
Allocated Measured MPP Swap Credit Exposure, the amount of the
Allocated Measured DPP Swap Credit Exposure, the amount of the MPP
Revolving Loan Sublimit, the amount of the DPP Revolving Loan
Sublimit, and shall identify which Loans are classified as MPP
Revolving Loans and which are classified as DPP Revolving
2
<PAGE>
Loans, providing such financial and other information and computations
as may be necessary to support the computation of any such amounts or
the classification of any such Loans. In so advising the Managing
Agent and the Administrative Agent as to the amount of the Allocated
Measured MPP Swap Credit Exposure and the Allocated Measured DPP Swap
Credit Exposure, the Borrower shall be entitled to rely upon such
financial methodology for determining the amount thereof as shall have
been furnished by the Managing Agent. Any such amounts or the
classification of any such Loans so advised by the Borrower will be
effective for all purposes hereunder and under the other Credit
Documents until further written advice from the Borrower is delivered
to the Managing Agent and the Administrative Agent with respect
thereto which changes any such amounts or classifications; provided,
that in the event that the Managing Agent (acting on instructions from
the Required Lenders) at any time disagrees with the Borrower's advice
as to any such amount or the classification of any such Loans, such
amount or the classification of such Loans shall instead be determined
by the Managing Agent, upon the basis of financial statements,
information and certifications provided by the Borrower, and such
other evidence as the Managing Agent considers appropriate, and in
such event the Managing Agent shall from time to time, or promptly
upon request, provide notice of such determinations to the Borrower,
the Administrative Agent and the Lenders. Any such determination by
the Managing Agent pursuant to this section 1.1 shall be conclusive
and binding, absent manifest error, and the Managing Agent shall incur
no liability hereunder or under any other Credit Document or in
connection herewith or therewith in the event of any error or other
mistake in any such determination in the absence of bad faith on the
part of the Managing Agent.
1.2. Minimum Borrowing Amounts, etc.1.2.Minimum Borrowing Amounts,
etc. The aggregate principal amount of each Borrowing shall not be less than the
Minimum Borrowing Amount for such Borrowing. More than one Borrowing may be
incurred on any day, provided that at no time shall there be outstanding more
than nine Borrowings of Eurodollar Loans.
1.3. Notice of Borrowing. (a) Whenever the Borrower desires to incur
Loans, it shall give the Administrative Agent at its Notice Office, (A) prior to
1:00 P.M. (local time at the Notice Office), at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing of Eurodollar Loans, and (B) prior to 12:00 noon (local time at the
Notice Office) on the proposed date thereof written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made
hereunder. Each such notice (each such notice, a "Notice of Borrowing") (or the
written confirmation) shall be in the form of Exhibit A-1 and shall be
irrevocable and shall specify: (i) whether the respective Borrowing consists of
MPP Revolving Loans or DPP Revolving Loans; (ii) the aggregate principal amount
of the Loans to be made pursuant to such Borrowing; (iii) the date of Borrowing
(which shall be a Business Day); and (iv) whether the respective Borrowing shall
consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Administrative Agent
shall promptly give each Lender written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such Lender's proportionate
share thereof and of the other matters covered by the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower entitled to give telephonic notices under this Agreement on behalf of
the Borrower. In each such case, the Administrative Agent's record of the terms
of such telephonic notice shall be conclusive absent manifest error.
1.4. Disbursement of Funds. (a) No later than 1:00 P.M. (local time
at the Payment Office) on the date specified in each Notice of Borrowing
relating to Eurodollar Loans, and no later than 3:00 P.M. (local time at the
Payment Office) on the date specified in each Notice of Borrowing relating to
Base Rate Loans, each Lender will make available its pro rata share, if any, of
each Borrowing requested to be made on such date in the manner provided below.
All amounts shall be made available to the Administrative Agent in U.S. dollars
and immediately available funds at the Payment Office and the Administrative
Agent promptly will make available to the Borrower by depositing to its account
at the Payment Office the aggregate of the amounts so made available in the type
of funds received. Unless the Administrative Agent shall have been notified by
any Lender prior to the date of Borrowing
3
<PAGE>
that such Lender does not intend to make available to the Administrative Agent
its portion of the Borrowing or Borrowings to be made on such date, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent on such date of Borrowing, and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent by such Lender and the Administrative Agent has made available same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Lender or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a rate per annum equal to (x) if paid
by such Lender, the overnight Federal Funds Effective Rate or (y) if paid by the
Borrower, the then applicable rate of interest, calculated in accordance with
section 1.8, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
1.5. Notes. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made to it by each Lender shall be evidenced by a
promissory note substantially in the form of Exhibit B with blanks appropriately
completed in conformity herewith (each a "Note" and, collectively, the "Notes").
(b) The Note issued to a Lender shall: (i) be executed by the
Borrower; (ii) be payable to the order of such Lender and be dated on or prior
to the Closing Date; (iii) be in a stated principal amount equal to the
Commitment of such Lender and be payable in the principal amount of Loans
evidenced thereby; (iv) mature, in the case of MPP Revolving Loans, on the
Revolving Loan Maturity Date, and in the case of DPP Revolving Loans, on the DPP
Loan Maturity Date; (v) bear interest as provided in the appropriate clause of
section 1.8 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby; (vi) be subject to mandatory prepayment as provided
in section 4.2: and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(c) Each Lender will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of its Note, endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation shall not affect the Borrower's obligations in
respect of such Loans.
1.6. Conversions. The Borrower shall have the option to convert on
any Business Day all or a portion at least equal to the applicable Minimum
Borrowing Amount of the outstanding principal amount of the Loans into a
Borrowing or Borrowings of the other Type of Loan, provided that: (i) no
conversion of MPP Revolving Loans into DPP Revolving Loans, or vice versa, may
be made; (ii) no partial conversion of a Borrowing of Eurodollar Loans shall
reduce the outstanding principal amount of the Eurodollar Loans made pursuant to
such Borrowing to less than the Minimum Borrowing Amount applicable thereto;
(iii) Base Rate Loans may only be converted into Eurodollar Loans if no Default
under section 9.1(a) or Event of Default is in existence on the date of the
conversion unless the Required Lenders otherwise agree; and (iv) Borrowings of
Eurodollar Loans resulting from this section 1.6 shall be limited in numbers as
provided in section 1.2. Each such conversion shall be effected by the Borrower
giving the Administrative Agent at its Notice Office, prior to 1:00 P.M. (local
time at the Notice Office), at least three Business Days' (or prior to 12:00
noon (local time at the Notice Office) same Business Day's, in the case of a
conversion into Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each a "Notice of Conversion") specifying the
Loans to be so converted, the Type of Loans to be converted into and, if to be
converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall give each Lender
prompt notice of any such proposed conversion affecting any of its Loans.
4
<PAGE>
1.7. Pro Rata Borrowings. All Borrowings of Loans shall be made by
the Lenders pro rata on the basis of their Commitments. It is understood that no
Lender shall be responsible for any default by any other Lender in its
obligation to make Loans hereunder and that each Lender shall be obligated to
make the Loans provided to be made by it hereunder, regardless of the failure of
any other Lender to fulfill its commitments hereunder.
1.8. Interest. (a) The unpaid principal amount of each MPP Revolving
Loan which is a Base Rate Loan shall bear interest from the date of the
Borrowing thereof until maturity (whether by acceleration or otherwise) at a
rate per annum which shall at all times be the Applicable MPP Base Rate Margin
(as defined below) plus the Base Rate in effect from time to time. The unpaid
principal amount of each DPP Revolving Loan which is a Base Rate Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable DPP Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each MPP Revolving Loan which is a
Eurodollar Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Applicable MPP Eurodollar Margin (as defined below) plus the
relevant Eurodollar Rate. The unpaid principal amount of each DPP Revolving Loan
which is a Eurodollar Loan shall bear interest from the date of the Borrowing
thereof until maturity (whether by acceleration or otherwise) at a rate per
annum which shall at all times be the Applicable DPP Eurodollar Margin plus the
relevant Eurodollar Rate.
(c) Notwithstanding the above provisions, if a Default under section
9.1(a) or Event of Default is in existence, all outstanding amounts of principal
and, to the extent permitted by law, all overdue interest, in respect of each
Loan shall bear interest at a rate per annum equal to the Base Rate in effect
from time to time plus the sum of (i) 2% per annum and (ii) the Applicable MPP
Base Rate Margin then in effect for MPP Revolving Loans which are Base Rate
Loans.
(d) Interest shall accrue from and including the date of any Borrowing
to but excluding the date of any repayment thereof and shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on the last Business Day of
March, June, September and December, (ii) in respect of each Eurodollar Loan, on
the last day of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on the dates which are successively
three months after the commencement of such Interest Period, and (iii) in
respect of each Loan, on any prepayment or conversion (on the amount prepaid or
converted), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) All computations of interest hereunder shall be made in accordance
with section 12.7(b).
(f) The Administrative Agent upon determining the interest rate for
any Borrowing shall promptly notify the Borrower and the Lenders thereof.
(g) As used herein, the term "Applicable MPP Base Rate Margin" means
0.00% per annum and the term "Applicable MPP Eurodollar Margin" means 1+1/8% per
annum; provided, that if a Default under section 9.1(a) or Event of Default
shall have occurred and be continuing, the Applicable MPP Base Rate Margin and
the Applicable MPP Eurodollar Rate Margin shall so long as such Default or Event
of Default shall be continuing be the highest percentage rates per annum
indicated in the Pricing Grid tables which appear below, based on the ratio
referred to in section 8.12(a) or (b), whichever is applicable, and provided,
further, that if subsequent to the fiscal quarter of the Borrower ended nearest
to September 30, 1996, no Default under section 9.1(a) or Event of Default shall
have occurred and be continuing, the Applicable MPP Base Rate Margin and the
Applicable MPP Eurodollar Margin will change to the percentage rate per annum
indicated in the Pricing Grid tables which appear below, based on the ratio
referred to in section 8.12(a) or (b), whichever is applicable. Changes in the
Applicable MPP Base Rate Margin and the Applicable MPP Eurodollar Margin based
upon changes in such ratio shall become effective on the first day of the month
following the delivery to the Administrative Agent pursuant to clause (a) or (b)
of section 7.1 of the financial statements of the Borrower, accompanied by the
certificate referred to in clause (e) of section 7.1, demonstrating the
computation of such ratio, based upon the ratio in effect at the end of the
applicable period covered by such financial statements. Any changes in the
Applicable MPP Base Rate Margin or Applicable MPP Eurodollar Margin shall be
determined by the Managing Agent and from time to time, or promptly upon
request, the Managing
5
<PAGE>
Agent will provide notice of such determinations to the
Borrower, the Administrative Agent and the Lenders. Any such determination by
the Managing Agent pursuant to this section 1.8(g) shall be conclusive and
binding absent manifest error.
PRICING GRID
<TABLE>
<CAPTION>
===================================================================================================================================
Ratio Provided Applicable MPP Base Applicable MPP
in 8.12(a) Rate Margin Eurodollar Margin
===================================================================================================================================
<S> <C> <C>
[greater than] 4.00 to 1.00 [less than or equal to] 4.75 to 1.00 3/4 of 1% 2+1/4%
- -----------------------------------------------------------------------------------------------------------------------------------
[greater than] 3.25 to 1.00 [less than or equal to] 4.00 to 1.00 1/2 of 1% 2%
- -----------------------------------------------------------------------------------------------------------------------------------
[greater than] 2.50 to 1.00 [less than or equal to] 3.25 to 1.00 1/8 of 1% 1+5/8%
- -----------------------------------------------------------------------------------------------------------------------------------
[greater than] 1.50 to 1.00 [less than or equal to] 2.50 to 1.00 0% 1+3/8%
- -----------------------------------------------------------------------------------------------------------------------------------
[less than or equal to] 1.50 to 1.00 0% 1+1/8%
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
Ratio Provided Applicable MPP Base Applicable MPP
in 8.12(a) Rate Margin Eurodollar Margin
===================================================================================================================================
<S> <C> <C>
[greater than] 3.25 to 1.00 1/2 of 1% 2%
- -----------------------------------------------------------------------------------------------------------------------------------
[greater than] 2.50 to 1.00 [less than or equal to] 3.25 to 1.00 1/8 of 1% 1+5/8%
- -----------------------------------------------------------------------------------------------------------------------------------
[greater than] 1.50 to 1.00 [less than or equal to] 2.50 to 1.00 0% 1+3/8%
- -----------------------------------------------------------------------------------------------------------------------------------
[less than or equal to] 1.50 to 1.00 0% 1+1/8%
===================================================================================================================================
</TABLE>
(h) As used herein, the term "Applicable DPP Base Rate Margin" means
0% per annum and the term "Applicable DPP Eurodollar Margin" means 7/8 of 1% per
annum; provided, that if a Default under section 9.1(a) or Event of Default
shall have occurred and be continuing, the Applicable DPP Base Rate Margin and
the Applicable DPP Eurodollar Rate Margin shall so long as such Default or Event
of Default shall be continuing be the highest percentage rates per annum
indicated in the Pricing Grid tables which appear below, based on the leverage
ratio referred to in section 14(b) of the Parent Guaranty, and provided,
further, that if subsequent to the fiscal quarter of the Parent ended nearest to
June 30, 1996, no Default under section 9.1(a) or Event of Default shall have
occurred and be continuing, the Applicable DPP Base Rate Margin and the
Applicable DPP Eurodollar Margin will change to the percentage rate per annum
indicated in the Pricing Grid table which appears below, based on the leverage
ratio referred to in section 14(b) of the Parent Guaranty. Changes in the
Applicable DPP Base Rate Margin and the Applicable DPP Eurodollar Margin based
upon changes in such ratio shall become effective on first day of the month
following the delivery to the Administrative Agent pursuant to subdivision (a)
or (b) of section 7 of the Parent Guaranty of the financial statements of the
Parent, accompanied by the certificate referred to in subdivision (c) of such
section, demonstrating the computation of such ratio, based upon the ratio in
effect at the end of the applicable period covered by such financial statements.
Any changes in the Applicable DPP Base Rate Margin or Applicable DPP Eurodollar
Margin shall be determined by the Managing Agent and from time to time, or
promptly upon request, the Managing Agent will provide notice of such
determinations to the Borrower, the Administrative Agent and the Lenders. Any
such determination by the Managing Agent pursuant to this section 1.8(h) shall
be conclusive and binding absent manifest error.
6
<PAGE>
PRICING GRID
<TABLE>
<CAPTION>
===================================================================================================================================
Applicable DPP Base Applicable DPP
Leverage Ratio Rate Margin Eurodollar Margin
===================================================================================================================================
<S> <C> <C>
[less than or equal to] 2.00 to 1.00 0% 3/4 of 1%
- -------------------------------------------------------------------- ------------------------------ -------------------------------
[greater than] 2.00 to 1.00 [less than or equal to] 2.25 to 1.00 0% 7/8 of 1%
- -------------------------------------------------------------------- ------------------------------ -------------------------------
[greater than] 2.25 to 1.00 [less than or equal to] 2.50 to 1.00 0% 1%
- -------------------------------------------------------------------- ------------------------------ -------------------------------
[greater than] 2.50 to 1.00 [less than or equal to] 2.75 to 1.00 1/8 of 1% 1+1/8%
- -------------------------------------------------------------------- ------------------------------ -------------------------------
[greater than] 2.75 to 1.00 [less than or equal to] 3.00 to 1.00 1/4 of 1% 1+1/4%
- -------------------------------------------------------------------- ------------------------------ -------------------------------
[greater than] 3.00 to 1.00 1/2 of 1% 1+1/2%
==================================================================== ============================== ===============================
</TABLE>
1.9. Interest Periods. (a) At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 1:00 P.M. (local time at the Notice
Office) on the third Business Day prior to the expiration of an Interest Period
applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect
by giving the Administrative Agent written notice (or telephonic notice promptly
confirmed in writing) of the Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of the Borrower, be a one, two, three or
six month period. Notwithstanding anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of
such Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period begins on a day for which there
is no numerically corresponding day in the calendar month at the end
of such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day; and
(iv) no Interest Period may be elected at any time when a
Default under section 9.1(a) or an Event of Default is then in
existence unless the Required Lenders otherwise agree.
(b) If upon the expiration of any Interest Period the Borrower has
failed to (or may not) elect a new interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed to have elected to convert such Borrowing to Base Rate Loans effective
as of the expiration date of such current Interest Period.
1.10. Increased Costs, Illegality, etc. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Lender, shall have determined on a reasonable
basis (which determination shall, absent manifest error, be final and conclusive
and binding upon all parties hereto):
7
<PAGE>
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the
Effective Date affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate
on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased
costs or reductions in the amounts received or receivable hereunder in
an amount which such Lender deems material with respect to any
Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a
change in the rate of taxes or similar charges) because of (x) any
change since the Effective Date in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having
the force of law), or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule,
regulation, guideline, order or request (such as, for example, but not
limited to, a change in official reserve requirements, but, in all
events, excluding reserves includable in the Eurodollar Rate pursuant
to the definition thereof) and/or (y) other circumstances adversely
affecting the interbank Eurodollar market or the position of such
Lender in such market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any change since the Effective Date in any law,
governmental rule, regulation, guideline or order, or the
interpretation or application thereof, or would conflict with any
thereof not having the force of law but with which such Lender
customarily complies or has become impracticable as a result of a
contingency occurring after the Effective Date which materially
adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent in the
case of clause (i) above) shall (x) on such date and (y) within 10 Business Days
of the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Lenders). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower
with respect to Eurodollar Loans which have not yet been incurred shall be
deemed rescinded by the Borrower or, in the case of a Notice of Borrowing,
shall, at the option of the Borrower, be deemed converted into a Notice of
Borrowing for Base Rate Loans to be made on the date of Borrowing contained in
such Notice of Borrowing, (y) in the case of clause (ii) above, the Borrower
shall pay to such Lender, upon written demand therefor, such additional amounts
(in the form of an increased rate of, or a different method of calculating,
interest or otherwise as such Lender shall determine) as shall be required to
compensate such Lender, for such increased costs or reductions in amounts
receivable hereunder (a written notice as to the additional amounts owed to such
Lender, showing the basis for the calculation thereof, which basis must be
reasonable, submitted to the Borrower by such Lender shall, absent manifest
error, be final and conclusive and binding upon all parties hereto) and (z) in
the case of clause (iii) above, the Borrower shall take one of the actions
specified in section 1.10(b) as promptly as possible and, in any event, within
the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, by giving the Administrative Agent telephonic notice
(confirmed promptly in writing) thereof on the same date that the Borrower was
notified by a Lender pursuant to section 1.10(a)(ii) or (iii), cancel said
Borrowing, convert the related Notice of Borrowing into one requesting a
Borrowing of Base Rate Loans or require the affected Lender to make its
requested Loan as a Base Rate Loan, or (ii) if the affected Eurodollar Loan is
then outstanding, upon at least one Business Day's notice to the Administrative
Agent, require the affected Lender to convert each such Eurodollar Loan into a
Base Rate Loan, provided that if more than one Lender is affected at any time,
then all affected Lenders must be treated the same pursuant to this section
1.10(b).
8
<PAGE>
(c) If any Lender shall have determined that after the Effective Date,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged by law with the interpretation or administration thereof, or
compliance by such Lender or its parent corporation with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank: or comparable agency, in each case made
subsequent to the Effective Date, has or would have the effect of reducing by an
amount reasonably deemed by such Lender to be material the rate of return on
such Lender's or its parent corporation's capital or assets as a consequence of
such Lender's commitments or obligations hereunder to a level below that which
such Lender or its parent corporation could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Lender's or
its parent corporation's policies with respect to capital adequacy), then from
time to time, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or its parent corporation for
such reduction. Each Lender, upon determining in good faith that any additional
amounts will be payable pursuant to this section 1.10(c), will give prompt
written notice thereof to the Borrower, which notice shall set forth the basis
of the calculation of such additional amounts, which basis must be reasonable,
although the failure to give any such notice shall not release or diminish any
of the Borrower's obligations to pay additional amounts pursuant to this section
1.10(c) upon the subsequent receipt of such notice.
(d) Notwithstanding anything in this Agreement to the contrary, (i) no
Lender shall be entitled to compensation or payment or reimbursement of other
amounts under section 1.10, 2.5 or 4.4 for any amounts incurred or accruing more
than 90 days prior to the giving of notice to the Borrower of additional costs
or other amounts of the nature described in such sections, and (ii) no Lender
shall demand compensation for any reduction referred to in section 1.10(c) or
payment or reimbursement of other amounts under section 2.5 or 4.4 if it shall
not at the time be the general policy or practice of such Lender to demand such
compensation, payment or reimbursement in similar circumstances under comparable
provisions of other credit agreements.
1.11. Compensation. The Borrower shall compensate each Lender, upon
its written request (which request shall set forth the detailed basis for
requesting and the method of calculating such compensation), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss,
expense or liability incurred by reason of the liquidation or reemployment of
deposits or other funds required by such Lender to fund its Eurodollar Loans)
which such Lender may sustain: (i) if for any reason (other than a default by
such Lender or the Administrative Agent) a Borrowing of Eurodollar Loans does
not occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to section 1.10(a)); (ii) if any repayment, prepayment or conversion of
any of its Eurodollar Loans occurs on a date which is not the last day of an
Interest Period applicable thereto; (iii) if any prepayment of any of its
Eurodollar Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of (x) any other default by the
Borrower to repay its Eurodollar Loans when required by the terms of this
Agreement or (y) an election made pursuant to section 1.10(b).
1.12. Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of section 1.10(a)(ii) or
(iii), 1.10(c), 2.5 or 4.4 with respect to such Lender, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Lender) to designate another lending office for any Loans or Commitment
affected by such event, provided that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such section. Nothing in this section 1.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in section 1.10, 2.5 or 4.4.
SECTION 2. LETTERS OF CREDIT
2.1. Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time on or after the Closing Date and prior to the
date that is 30 days prior to the Revolving Loan Maturity Date to issue, for the
account of the Borrower or any of
9
<PAGE>
its Subsidiaries and in support of (x) trade obligations, workmen's
compensation and other obligations of the Borrower or any such Subsidiary
incurred in the ordinary course of its business and/or (y) such other
obligations of the Borrower or any such Subsidiary to any other person that are
acceptable to the Administrative Agent and such Letter of Credit Issuer, and
subject to and upon the terms and conditions herein set forth such Letter of
Credit Issuer agrees to issue from time to time, irrevocable standby, direct pay
or documentary letters of credit in such form as may be approved by such Letter
of Credit Issuer and the Administrative Agent (each such letter of credit (and
each Existing Letter of Credit described in section 2.1(d)), a "Letter of
Credit" and collectively, the "Letters of Credit").
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings at such time, would exceed either (x) $70,000,000 or (y) when added
to the aggregate principal amount of all Loans then outstanding, an amount equal
to the Total Commitment at such time, and (ii) each Letter of Credit shall have
an expiry date (including any renewal periods) occurring not later than 5 days
prior to the Revolving Loan Maturity Date, on terms acceptable to the
Administrative Agent and the relevant Letter of Credit Issuer.
(c) Notwithstanding the foregoing, in the event a Lender Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless such Letter of Credit Issuer has entered into arrangements
satisfactory to it and the Borrower to eliminate such Letter of Credit Issuer's
risk with respect to the participation in Letters of Credit of the Defaulting
Lender or Lenders, including by cash collateralizing such Defaulting Lender's or
Lenders' Percentage of the Letter of Credit Outstandings.
(d) Annex VII hereto contains a description of all letters of credit
outstanding on, and to continue in effect after, the Closing Date. Each such
letter of credit issued by a bank that is or becomes a Lender under this
Agreement on the Effective Date (each, an "Existing Letter of Credit") shall
constitute a "Letter of Credit" for all purposes of this Agreement, issued, for
purposes of section 2.4(a), on the Closing Date, and the Borrower, the
Administrative Agent and the Lenders hereby agree that, from and after such
date, the terms of this Agreement shall apply to such Letters of Credit,
superseding any other agreement theretofore applicable to them to the extent
inconsistent with the terms hereof.
2.2. Letter of Credit Requests: Notices of Issuance2.2. Letter of
Credit Requests: Notices of Issuance. (a) Whenever it desires that a Letter of
Credit be issued, the Borrower shall give the Administrative Agent and the
Letter of Credit Issuer written notice (including by way of telecopier) in the
form of Exhibit A-2 hereto prior to 1:00 P.M. (local time at the Notice Office)
at least five Business Days (or such shorter period as may be acceptable to the
relevant Letter of Credit Issuer) prior to the proposed date of issuance (which
shall be a Business Day) (each a "Letter of Credit Request"), which Letter of
Credit Request shall include such supporting documents that such Letter of
Credit Issuer customarily requires in connection therewith (including, in the
case of a Letter of Credit for an account party other than the Borrower, an
application for, and if applicable a reimbursement agreement with respect to,
such Letter of Credit). Any such documents executed in connection with the
issuance of a Letter of Credit, including the Letter of Credit itself, are
herein referred to as "Letter of Credit Documents". In the event of any
inconsistency between any of the terms or provisions of any Letter of Credit
Document and the terms and provisions of this Agreement respecting Letters of
Credit, the terms and provisions of this Agreement shall control. The
Administrative Agent shall promptly notify each Lender of each Letter of Credit
Request.
(b) Each Letter of Credit Issuer shall, on the date of each issuance
of a Letter of Credit by it, give the Administrative Agent, each Lender and the
Borrower written notice of the issuance of such Letter of Credit, accompanied by
a copy to the Administrative Agent of the Letter of Credit or Letters of Credit
issued by it. Each Letter of Credit Issuer shall provide to the Administrative
Agent a quarterly (or monthly if requested by any Lender) summary describing
each Letter of Credit issued by such Letter of Credit Issuer and then
outstanding.
2.3. Agreement to Repay Letter of Credit Drawings2.3. Agreement to
Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse (or
cause any Subsidiary for whose account a Letter of Credit was issued to
reimburse) each Letter of Credit Issuer, by making payment directly to such
Letter of Credit Issuer in immediately available funds at the payment office of
such Letter of Credit Issuer, for any payment or disbursement made by such
Letter of Credit Issuer under any Letter of Credit (each such amount so paid or
disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in any
event on the date on which, such Letter of Credit Issuer notifies the Borrower
(or any such Subsidiary for
10
<PAGE>
whose account such Letter of Credit was issued) of such payment or disbursement
(which notice to the Borrower (or such Subsidiary) shall be delivered reasonably
promptly after any such payment or disbursement), with interest on the amount so
paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed
prior to 1:00 P.M. (local time at the payment office of the Letter of Credit
Issuer) on the date of such payment or disbursement, from and including the date
paid or disbursed to but not including the date such Letter of Credit Issuer is
reimbursed therefor at a rate per annum which shall be the rate then applicable
to MPP Revolving Loans which are Base Rate Loans (plus an additional 2% per
annum if not reimbursed by the third Business Day after the date of such payment
or disbursement), in the case of payments or disbursements related to Allocated
MPP Letter of Credit Outstandings, or the rate then applicable to DPP Revolving
Loans which are Base Rate Loans (plus an additional 2% per annum if not
reimbursed by the third Business Day after the date of such payment or
disbursement), in the case of payments or disbursements related to Allocated DPP
Letter of Credit Outstandings, any such interest also to be payable on demand.
(b) The Borrower's obligation under this section 2.3 to reimburse each
Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against such Letter of Credit Issuer,
the Administrative Agent, any other Letter of Credit Issuer or any Lender,
including, without limitation, any defense based upon the failure of any drawing
under a Letter of Credit to conform to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such
drawing, provided, however that the Borrower shall not be obligated to reimburse
a Letter of Credit Issuer for any wrongful payment made by such Letter of Credit
Issuer under a Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of such Letter of Credit
Issuer.
2.4. Letter of Credit Participations. (a) Immediately upon the
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each Lender, and
each Lender (each a "Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Lender's Percentage, in such Letter of Credit, each
substitute letter of credit, each drawing made thereunder and the obligations of
the Borrower under this Agreement with respect thereto (although Letter of
Credit Fees shall be payable directly to the Administrative Agent for the
account of the Lenders as provided in section 3.1(b) and the Participants shall
have no right to receive any portion of any Facing Fees) and any security
therefor or guaranty pertaining thereto. Upon any change in the Commitments of
the Lenders pursuant to section 12.4(b), it is hereby agreed that, with respect
to all outstanding Letters of Credit and Unpaid Drawings, there shall be an
automatic adjustment to the participations pursuant to this section 2.4 to
reflect the new Percentages of the assigning and assignee Lender.
(b) In determining whether to pay under any Letter of Credit, a Letter
of Credit Issuer shall not have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or omitted
to be taken by a Letter of Credit Issuer under or in connection with any Letter
of Credit if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for such Letter of Credit Issuer any resulting
liability.
(c) In the event that a Letter of Credit Issuer makes any payment
under any Letter of Credit and the Borrower shall not have reimbursed such
amount in full to such Letter of Credit Issuer pursuant to section 2.3(a), such
Letter of Credit Issuer shall promptly notify the Administrative Agent, and the
Administrative Agent shall promptly notify each Participant of such failure, and
each Participant shall promptly and unconditionally pay to the Administrative
Agent for the account of such Letter of Credit Issuer, the amount of such
Participant's Percentage of such payment in U.S. dollars and in same day funds,
provided, however, that no Participant shall be obligated to pay to the
Administrative Agent its Percentage of such unreimbursed amount for any wrongful
payment made by such Letter of Credit Issuer under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross negligence
on the part of such Letter of Credit Issuer. If the Administrative Agent so
notifies any Participant required to fund a payment under a Letter of Credit
prior to 11:00 A.M. (local time at the Notice Office) on any Business Day, such
Participant shall make available to the Administrative Agent for the account of
the relevant Letter of Credit Issuer such Participant's Percentage of the amount
of such payment on such Business Day in same day
11
<PAGE>
funds. If and to the extent such Participant shall not have so made its
Percentage of the amount of such payment available to the Administrative Agent
for the account of the relevant Letter of Credit Issuer, such Participant agrees
to pay to the Administrative Agent for the account of such Letter of Credit
Issuer, forthwith on demand such amount, together with interest thereon, for
each day from such date until the date such amount is paid to the Administrative
Agent for the account of such Letter of Credit Issuer at the Federal Funds
Effective Rate. The failure of any Participant to make available to the
Administrative Agent for the account of the relevant Letter of Credit Issuer its
Percentage of any payment under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the Administrative
Agent for the account of such Letter of Credit Issuer its Percentage of any
payment under any Letter of Credit on the date required, as specified above, but
no Participant shall be responsible for the failure of any other Participant to
make available to the Administrative Agent for the account of such Letter of
Credit Issuer such other Participant's Percentage of any such payment.
(d) Whenever a Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of such Letter of Credit Issuer any payments from the Participants
pursuant to section 2.4(c) above, such Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its Percentage thereof, in U.S. dollars and in same
day funds, an amount equal to such Participant's Percentage of the principal
amount thereof and interest thereon accruing after the purchase of the
respective participations, as and to the extent so received.
(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of each Letter of Credit Issuer with
respect to Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit
(or any person for whom any such transferee may be acting), the
Administrative Agent, any Letter of Credit Issuer, any Lender, or
other person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the
Borrower and the beneficiary named in any such Letter of Credit),
other than any claim which the Borrower (or any Subsidiary which is
the account party with respect to a Letter of Credit) may have against
any applicable Letter of Credit Issuer for gross negligence or wilful
misconduct of such Letter of Credit Issuer in making payment under any
applicable Letter of Credit;
(iii) any draft, certificate or other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents: or
(v) the occurrence of any Default or Event of Default.
2.5. Increased Costs. If after the Effective Date, the adoption of
any applicable law, rule or regulation, or any change therein, 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 Letter of Credit Issuer or any
Lender with any request or directive (whether or not having the force of law) by
any such authority, central bank or comparable agency (in each case made
subsequent to the Effective Date) shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement against
Letters of Credit issued by such Letter of Credit Issuer or such Lender's
participation therein, or (ii) shall impose
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on such Letter of Credit Issuer or any Lender any other conditions affecting
this Agreement, any Letter of Credit or such Lender's participation therein; and
the result of any of the foregoing is to increase the cost to such Letter of
Credit Issuer or such Lender of issuing, maintaining or participating in any
Letter of Credit, or to reduce the amount of any sum received or receivable by
such Letter of Credit Issuer or such Lender hereunder (other than any increased
cost or reduction in the amount received or receivable resulting from the
imposition of or a change in the rate of taxes or similar charges), then, upon
demand to the Borrower by such Letter of Credit Issuer or such Lender (a copy of
which notice shall be sent by such Letter of Credit Issuer or such Lender to the
Administrative Agent), the Borrower shall pay to such Letter of Credit Issuer or
such Lender such additional amount or amounts as will compensate any such Letter
of Credit Issuer or such Lender for such increased cost or reduction. A
certificate submitted to the Borrower by any Letter of Credit Issuer or any
Lender, as the case may be (a copy of which certificate shall be sent by such
Letter of Credit Issuer or such Lender to the Administrative Agent), setting
forth the basis for the determination of such additional amount or amounts
necessary to compensate any Letter of Credit Issuer or such Lender as aforesaid
shall be conclusive and binding on the Borrower absent manifest error, although
the failure to deliver any such certificate shall not release or diminish any of
the Borrower's obligations to pay additional amounts pursuant to this section
2.5. Reference is hereby made to the provisions of section 1.10(d) for certain
limitations upon the rights of a Letter of Credit Issuer or Lender under this
section.
2.6. Obligations Absolute. The obligations of the Borrower under this
Agreement in respect of any Letter of Credit and under any other agreement or
instrument relating to any Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement (as the same may be amended from time to time) and such other
agreement or instrument under all circumstances, including, without limitation,
to the extent permitted by law, the following circumstances:
(i) any lack of validity or enforceability of any agreement
or instrument the obligations under which are supported by a Letter of
Credit;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the obligations of the Borrower
(or any Subsidiary) in respect of the Letters of Credit or any other
amendment or waiver of or any consent to departure from all or any of
the Letter of Credit Documents or any other Credit Document;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the obligations of the
Borrower (or any Subsidiary) in respect of the Letters of Credit;
(iv) the existence of any claim, set-off, defense or other
right that the Borrower (or any Subsidiary) may have at any time
against any beneficiary or any transferee of a Letter of Credit (or
any persons for whom any such beneficiary or any such transferee may
be acting), the Letter of Credit Issuer, or any other person, whether
in connection with the Credit Documents, the transactions contemplated
hereby or by the Letter of Credit Documents or any unrelated
transaction, other than any claim which the Borrower (or any
Subsidiary which is the account party with respect to a Letter of
Credit) may have against any applicable Letter of Credit Issuer for
gross negligence or wilful misconduct of such Letter of Credit Issuer
in making payment under any applicable Letter of Credit;
(v) any statement or any other document presented under or in
connection with any Letter of Credit or other Credit Document proving
to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect,
provided that payment by a Letter of Credit Issuer under such Letter
of Credit against presentation of such statement or document shall not
have constituted gross negligence or willful misconduct;
(vi) payment by a Letter of Credit Issuer under a Letter of
Credit against presentation of a draft or certificate that does not
comply with the terms of the Letter or Credit, except any such payment
resulting solely from the gross negligence or willful misconduct of
the Letter of Credit Issuer; and
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(vii) any other circumstance or happening whatsoever other
than the payment in full of all obligations hereunder in respect of
any Letter of Credit or any agreement or instrument relating to any
Letter of Credit, whether or not similar to any of the foregoing, that
might otherwise constitute a defense available to, or a discharge of,
the Borrower.
2.7. Guaranty of Subsidiary Letter of Credit Obligations. (a) The
Borrower hereby unconditionally guarantees, for the benefit of the
Administrative Agent and the Lenders, the full and punctual payment of the
Obligations of each Subsidiary under each Letter of Credit Document to which
such Subsidiary is now or hereafter becomes a party. Upon failure by any such
Subsidiary to pay punctually any such amount, the Borrower shall forthwith on
demand by the Administrative Agent pay the amount not so paid at the place and
in the currency and otherwise in the manner specified in this Agreement or any
applicable Letter of Credit Document.
(b) As a separate, additional and continuing obligation, the Borrower
unconditionally and irrevocably undertakes and agrees, for the benefit of the
Administrative Agent and the Lenders, that, should any amounts not be
recoverable from the Borrower under section 2.7(a) for any reason whatsoever
(including, without limitation, by reason of any provision of any Credit
Document or any other agreement or instrument executed in connection therewith
being or becoming void, unenforceable, or otherwise invalid under any applicable
law) then, notwithstanding any notice or knowledge thereof by any Lender, the
Administrative Agent, any of their respective Affiliates, or any other person,
at any time, the Borrower as sole, original and independent obligor, upon demand
by the Administrative Agent, will make payment to the Administrative Agent, for
the account of the Lenders and the Administrative Agent, of all such obligations
not so recoverable by way of full indemnity, in such currency and otherwise in
such manner as is provided in the Credit Documents.
(c) The obligations of the Borrower under this section shall be
unconditional and absolute and, without limiting the generality of the foregoing
shall not be released, discharged or otherwise affected by the occurrence, one
or more times, of any of the following:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect to any obligation of any Subsidiary under any
Letter of Credit Document, by operation of law or otherwise:
(ii) any modification or amendment of or supplement to this
Agreement, any Note or any other Credit Document;
(iii) any release, non-perfection or invalidity of any direct
or indirect security for any obligation of the Borrower under this
Agreement, any Note or any other Credit Document or of any Subsidiary
under any Letter of Credit Document;
(iv) any change in the corporate existence, structure or
ownership of any Subsidiary or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any Subsidiary or
its assets or any resulting release or discharge of any obligation of
any Subsidiary contained in any Letter of Credit Document;
(v) the existence of any claim, set-off or other rights which
the Borrower may have at any time against any Subsidiary, the
Administrative Agent, any Lender or any other person, whether in
connection herewith or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against any Subsidiary for any reason of any Letter of Credit
Document, or any provision of applicable law or regulation purporting
to prohibit the payment by any Subsidiary of any Obligations in
respect of any Letter of Credit; or
(vii) any other act or omission to act or delay of any kind
by any Subsidiary, the Administrative Agent, any Lender or any other
person or any other circumstance whatsoever which
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might, but for the provisions of this section, constitute a legal or
equitable discharge of the Borrower's obligations under this section.
(d) The Borrower's obligations under this section shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Borrower and
each other Credit Party under the Credit Documents shall have been paid in full.
If at any time any payment of any of the Obligations of any Subsidiary in
respect of any Letter of Credit Documents is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of such
Subsidiary, the Borrower's obligations under this section with respect to such
payment shall be reinstated at such time as though such payment had been due but
not made at such time.
(e) The Borrower 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 or any other person, or against any collateral or guaranty of any
other person.
(f) Until the indefeasible payment in full of all of the Obligations
and the termination of the Commitments of the Lenders hereunder, the Borrower
shall have no rights, by operation of law or otherwise, upon making any payment
under this section to be subrogated to the rights of the payee against any
Subsidiary with respect to such payment or otherwise to be reimbursed,
indemnified or exonerated by any Subsidiary in respect thereof.
(g) In the event that acceleration of the time for payment of any
amount payable by any Subsidiary under any Letter of Credit Document is stayed
upon insolvency, bankruptcy or reorganization of such Subsidiary, all such
amounts otherwise subject to acceleration under the terms of any applicable
Letter of Credit Document shall nonetheless by payable by the Borrower under
this section forthwith on demand by the Administrative Agent.
SECTION 3. FEES; COMMITMENTS.
3.1. Fees. (a) The Borrower agrees to pay to the Administrative Agent
a Commitment Commission ("Commitment Commission") for the account of each Non-
Defaulting Lender for the period from and including the Effective Date to but
not including the date the Total Commitment has been terminated, computed at a
rate equal to 3/8 of 1 % per annum on the average daily Unutilized Commitment of
such Lender. Such Commitment Commission shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December of
each year, commencing September, 1996, and on the date upon which the Total
Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent, for the
account of each Non-Defaulting Lender, pro rata on the basis of its Percentage,
a fee in respect of each Letter of Credit (the "Letter of Credit Fee") computed
(i) in the case of Letters of Credit constituting a part of the Allocated MPP
Letter of Credit Outstandings, at the rate per annum equal to the Applicable MPP
Eurodollar Margin in effect from time to time, and (ii) in the case of Letters
of Credit constituting a part of the Allocated DPP Letter of Credit
Outstandings, at the rate per annum equal to the Applicable DPP Eurodollar
Margin in effect from time to time, in each case on the average daily Stated
Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and
payable quarterly in arrears on the last Business Day of each March, June,
September and December of each year, commencing September, 1996, and on the date
upon which the Total Commitment is terminated.
(c) The Borrower agrees to pay directly to each Letter of Credit
Issuer a fee in respect of each Letter of Credit issued by it (the "Facing
Fee"), computed at such rate as may from time to time be agreed between such
Letter of Credit Issuer and the Borrower, on the average daily Stated Amount of
such Letter of Credit. Such Facing Fees shall be due and payable on such dates
as may be agreed in the case of any Letter of Credit by the Borrower and the
Letter of Credit Issuer which has issued such Letter of Credit.
(d) The Borrower agrees to pay directly to each Letter of Credit
Issuer upon each issuance of, drawing under, and/or amendment of, a Letter of
Credit issued by it such amount as shall at the time of such issuance, drawing
or amendment be the administrative charge which such Letter of Credit Issuer is
customarily charging for issuances of, drawings under or amendments of, letters
of credit issued by it.
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(e) The Borrower shall pay to the Administrative Agent on the Closing
Date and thereafter for its own account and/or for distribution to the Lenders
such fees as heretofore agreed by the Borrower, the Administrative Agent and the
Documentation Agent.
(f) All computations of Fees shall be made in accordance with section
12.7(b).
3.2. Voluntary Reduction of Commitments. Upon at least three Business
Days' prior written notice (or telephonic notice confirmed in writing) to the
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Lenders), the Borrower shall have the
right, without premium or penalty, to terminate or partially reduce the
Unutilized Total Commitment, provided that (i) any such termination shall apply
to proportionately and permanently reduce the Commitment, if any, of each of the
Lenders, and (ii) any partial reduction pursuant to this section 3.2 shall be in
the amount of at least $10,000,000 (or, if greater, in integral multiples of
$1,000,000).
3.3. Mandatory Adjustments of Commitments, etc. (a) The Commitment of
each Lender shall terminate on the Expiration Date unless the Closing Date has
occurred on or before such date .
(b) On each date upon which a mandatory prepayment of Loans pursuant
to section 4.2(d) is required, the Total Commitment shall be permanently reduced
by an amount equivalent to the principal amount of the Loans so prepaid.
(c) The Total Commitment (and the Commitment of each Lender) shall
terminate on the earlier of (x) the Revolving Loan Maturity Date and (y) the
date on which a Change of Control occurs.
(d) Each partial reduction of the Total Commitment provided for in
this section 3.3 shall apply pro rata to the Commitment of each Lender.
3.4. Extension of Revolving Loan Maturity Date. At any time following
the second anniversary of the Closing Date and during the 30 day period
following delivery by the Borrower pursuant to section 7.1(a) of its
consolidated financial statements for its fiscal year then most recently ended,
and annually thereafter during the 30 day period following delivery by the
Borrower of its consolidated financial statements pursuant to section 7.1(a),
the Borrower may request the Administrative Agent to determine if all of the
Lenders are then willing to extend the Revolving Loan Maturity Date for a single
additional year. If the Borrower so requests, the Administrative Agent will so
advise the Lenders. If the Lenders in their sole discretion are all willing to
so extend the Revolving Loan Maturity Date, after taking into account such
considerations as any Lender may deem relevant (including, without limitation,
the financial condition of the Borrower and applicable termination provisions
applicable to the Parent Guaranty), the Borrower, the Administrative Agent and
all of the Lenders (including each Letter of Credit Issuer) shall execute and
deliver a definitive written instrument so extending the Revolving Loan Maturity
Date. No such extension of the Revolving Loan Maturity Date shall be valid or
effective for any purpose unless such definitive written instrument is so signed
and delivered within 60 days following the giving by the Administrative Agent of
notice to the Lenders that the Borrower has requested such an extension, and
only one such extension may be granted pursuant to this provision.
SECTION 4. PAYMENTS.
4.1. Voluntary Prepayments. The Borrower shall have the right to
prepay Loans, in whole or in part, without premium or penalty, from time to time
on the following terms and conditions: (i) no MPP Revolving Loans may be prepaid
at any time if after giving effect thereto any DPP Revolving Loans are
outstanding; (ii) the Borrower shall give the Administrative Agent at the
Payment Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loans, whether such Loans are MPP Revolving
Loans or DPP Revolving Loans, the amount of such prepayment and (in the case of
Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be received by the Administrative Agent by (x) 1:00 P.M. (local time at
the Notice Office) one Business Day prior to the date of such prepayment, in the
case of any prepayment of Eurodollar Loans, or (y) 12:00 noon (local time at the
Notice Office) on the date of such prepayment, in the case of any prepayment of
Base
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Rate Loans, and which notice shall promptly be transmitted by the Administrative
Agent to each of the Lenders; (iii) each partial prepayment of any Borrowing
shall be in an aggregate principal of at least $500,000 or an integral multiple
of $100,000 in excess thereof, in the case of Base Rate Loans and at least
$2,500,000 or an integral multiple of $500,000 in excess thereof, in the case of
Eurodollar Loans, provided that no partial prepayment of Eurodollar Loans made
pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans
outstanding pursuant to such Borrowing to an amount less than the Minimum
Borrowing Amount applicable thereto; (iv) each prepayment in respect of any
Loans made pursuant to a Borrowing shall be applied pro rata among such Loans;
and (v) each prepayment of Eurodollar Loans pursuant to this section 4.1 on any
date other than the last day of the Interest period applicable thereto shall be
accompanied by any amounts payable in respect thereof under section 1.11.
4.2. Mandatory Prepayments. (a) If on any date (after giving effect
to any other payments on such date) the sum of (i) the aggregate outstanding
principal amount of Loans plus (ii) the aggregate amount of Letter of Credit
Outstandings, exceeds the Total Commitment as then in effect, the Borrower shall
prepay on such date that principal amount of Loans and, after Loans have been
paid in full, Unpaid Drawings, in an aggregate amount equal to such excess. If,
after giving effect to the prepayment of Loans and Unpaid Drawings, the
aggregate amount of Letter of Credit Outstandings exceeds the Total Commitment
as then in effect, the Borrower shall pay to the Administrative Agent an amount
in cash and/or Cash Equivalents equal to such excess and the Administrative
Agent shall hold such payment as security for the obligations of the Borrower
hereunder pursuant to a cash collateral agreement to be entered into in form and
substance reasonably satisfactory to the Administrative Agent and the Borrower
(which shall permit certain investments in Cash Equivalents satisfactory to the
Administrative Agent and the Borrower until the proceeds are applied to the
secured obligations).
(b) If on any date (after giving effect to any other payments on such
date) the aggregate outstanding principal amount of MPP Revolving Loans plus the
Allocated MPP Letter of Credit Outstandings, exceeds the MPP Revolving Loan
Sublimit then in effect, the Borrower shall prepay on such date that principal
amount of MPP Revolving Loans in an aggregate amount equal to such excess. If on
any date (after giving effect to any other payments on such date) the aggregate
outstanding principal amount of DPP Revolving Loans plus the Allocated DPP
Letter of Credit Outstandings, exceeds the DPP Revolving Loan Sublimit then in
effect, the Borrower shall prepay on such date that principal amount of DPP
Revolving Loans in an aggregate amount equal to such excess.
(c) Promptly, and in any event not later than the third Business Day
following the date of receipt thereof by the Borrower and/or any of its
Subsidiaries of the Cash Proceeds from any Asset Sale, an amount equal to such
portion of the Net Cash Proceeds then received from such Asset Sale as is
required pursuant to the terms of section 8.2 to be applied as a prepayment of
Loans shall be so applied as a mandatory prepayment of principal of (x) first,
the then outstanding MPP Revolving Loans and (y) second, once no MPP Revolving
Loans remain outstanding, the then outstanding DPP Revolving Loans.
(d) On the date of which a Change of Control occurs the then
outstanding principal amount of all Loans, if any, shall become due and payable
and shall be prepaid in full, and the Borrower shall contemporaneously either
(i) cause all outstanding Letters of Credit to be surrendered for cancellation
(any such Letters of Credit to be replaced by letters of credit issued by other
financial institutions), or (ii) the Borrower shall pay to the Administrative
Agent an amount in cash and/or Cash Equivalents equal to 100% of the Letter of
Credit Outstandings and the Administrative Agent shall hold such payment as
security for the obligations of the Borrower hereunder pursuant to a cash
collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent and the Borrower (which shall permit
certain investments in Cash Equivalents satisfactory to the Administrative Agent
and the Borrower until the proceeds are applied to the secured obligations).
(e) With respect to each prepayment of Loans required by this section
4.2, the Borrower shall designate the Types of Loans which are to be prepaid,
whether such Loans are MPP Revolving Loans or DPP Revolving Loans and the
specific Borrowing(s) pursuant to which such prepayment is to be made, provided
that (i) the Borrower shall first so designate all Loans that are Base Rate
Loans and Eurodollar Loans with Interest Periods ending on the date of
prepayment prior to designating any other Eurodollar Loans for prepayment, (ii)
if the outstanding principal amount of Eurodollar Loans made pursuant to a
Borrowing is reduced below the applicable Minimum Borrowing Amount as a result
of any such prepayment, then all the Loans outstanding pursuant to such
Borrowing shall be converted into Base Rate Loans, and (iii) each prepayment of
any Loans made pursuant to a Borrowing shall be
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applied pro rata among such Loans. In the absence of a designation by the
Borrower as described in the preceding sentence, the Administrative Agent shall,
subject to the above, make such designation in its sole discretion with a view,
but no obligation, to minimize breakage costs owing under section 1.11.
4.3. Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the
Administrative Agent for the ratable (based on its pro rata share) account of
the Lenders entitled thereto, not later than 1:00 P.M. (local time at the
Payment Office) on the date when due and shall be made in immediately available
funds and in lawful money of the United States of America at the Payment Office,
it being understood that written notice by the Borrower to the Administrative
Agent to make a payment from the funds in the Borrower's account at the Payment
Office shall constitute the making of such payment to the extent of such funds
held in such account. Any payments under this Agreement which are made later
than 1:00 P.M. (local time at the Payment Office) shall be deemed to have been
made on the next succeeding Business Day. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such extension.
4.4. Net Payments. (a) All payments made by the Borrower hereunder,
under any Note or any other Credit Document, will be made without setoff,
counterclaim or other defense. Except as provided for in section 4.4(b), all
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any tax, imposed on or measured by the net income or
net profits of a Lender pursuant to the laws of the jurisdiction under which
such Lender is organized or the jurisdiction in which the principal office or
applicable lending office of such Lender is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect to
such non excluded taxes, levies imposts, duties, fees, assessments or other
charges (all such nonexcluded taxes levies, imposts, duties, fees assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes and
such additional amounts as may be necessary so that every payment of all amounts
due hereunder, under any Note or under any other Credit Document, after
withholding or deduction for or on account of any Taxes will not be less than
the amount provided for herein or in such Note or in such other Credit Document.
If any amounts are payable in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse each Lender, upon the written request
of such Lender for taxes imposed on or measured by the net income or profits of
such Lender pursuant to the laws of the jurisdiction in which such Lender is
organized or in which the principal office or applicable lending office of such
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Lender is located and for any withholding of income or
similar taxes imposed by the United States of America as such Lender shall
determine are payable by, or withheld from, such Lender in respect of such
amounts so paid to or on behalf of such Lender pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Lender
pursuant to this sentence. The Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes, or any withholding or
deduction on account thereof, is due pursuant to applicable law certified copies
of tax receipts, or other evidence satisfactory to the Lender, evidencing such
payment by the Borrower. The Borrower will indemnify and hold harmless the
Administrative Agent and each Lender, and reimburse the Administrative Agent or
such Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid or withheld by such Lender.
(b) Each Lender that is not a United States person (as such term is
defined in section 7701(a)(30) of the Code) for Federal income tax purposes
agrees to provide to the Borrower and the Administrative Agent on or prior to
the Effective Date, or in the cases of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to section 12.4 (unless
the respective Lender was already a Lender hereunder immediately prior to such
assignment or transfer and such Lender is in compliance with the provisions of
this section 4.4(b)), on the date of such assignment or transfer to such Lender,
(i) two accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement
to a complete exemption from United States withholding tax with respect to
payments to be made under this Agreement, any Note or any other Credit Document,
or (ii) if the Lender is not a "bank" within the meaning of section 881(c)(3)(A)
of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a
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certificate substantially in the form of Exhibit K (any such certificate, a
"section 4.4(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement, any Note or any other Credit Document. In addition, each Lender
agrees that from time to time after the Effective Date, when a lapse in time or
change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a section 4.4(b)(ii)
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement, any Note or any other Credit Document, or it
shall immediately notify the Borrower and the Administrative Agent of its
inability to deliver any such Form or Certificate, in which case such Lender
shall not be required to deliver any such Form or Certificate pursuant to this
section 4.4(b). Notwithstanding anything to the contrary contained in section
4.4(a), but subject to section 12.4(b) and the immediately succeeding sentence,
(x) the Borrower shall be entitled, to the extent it is required to do so by
law, to deduct or withhold income or other similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Lender which is not a United States person (as such term is defined in section
7701(a)(30) of the Code) for United States federal income tax purposes and which
has not provided to the Borrower such forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be obligated
pursuant to section 4.4(a) hereof to gross-up payments to be made to a Lender in
respect of income or similar taxes imposed by the United States or any
additional amounts with respect thereto (I) if such Lender has not provided to
the Borrower the Internal Revenue Service forms required to be provided to the
Borrower pursuant to this section 4.4(b) or (II) in the case of a payment other
than interest, to a Lender described in clause (ii) above, to the extent that
such forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this section 4.4 and except as specifically provided for in section
12.4(b), the Borrower agrees to pay additional amounts and indemnify each Lender
in the manner set forth in section 4.4(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any Taxes
deducted or withheld by it as described in the previous sentence as a result of
any changes after the Effective Date in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of income or similar Taxes.
(c) Reference is hereby made to the provisions of section 1.10(d) for
certain limitations upon the rights of a Lender under this section.
SECTION 5. CONDITIONS PRECEDENT.
5.1. Conditions Precedent at Closing Date. The obligation of the
Lenders to make Loans, and of any Letter of Credit Issuer to issue Letters of
Credit, is subject to the satisfaction of each of the following conditions on
the Closing Date:
(a) Effectiveness; Notes. On or prior to the Closing Date,
(i) the Effective Date shall have occurred and (ii) there shall have
been delivered to the Administrative Agent for the account of each
Lender the appropriate Note executed by the Borrower, in each case, in
the amount, maturity and as otherwise provided herein.
(b) Opinions of Counsel. On the Closing Date, the
Administrative Agent shall have received opinions, addressed to the
Administrative Agent and each of the Lenders and dated the Closing
Date, from (i) Greenebaum Doll & McDonald PLLC, special counsel to the
Borrower, substantially in the form of Exhibit C-1 hereto and covering
such other matters incident to the transactions contemplated hereby as
the Administrative Agent or the Documentation Agent may reasonably
request, and (ii) T. Richard Riney, Esq., Transactions Counsel of the
Parent, substantially in the form of Exhibit C-2 hereto and covering
such other matters incident to the transactions contemplated hereby as
the Administrative Agent or the Documentation Agent may reasonably
request, all such opinions to be in form and substance satisfactory to
the Administrative Agent and the Documentation Agent.
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(c) Corporate Proceedings. (i) On the Closing Date, the
Administrative Agent shall have received from (x) each Credit Party a
certificate, dated the Closing Date, signed by the President or any
Vice-President of such Credit Party in the form of Exhibit D hereto
with appropriate insertions and deletions, together with copies of the
articles of incorporation, partnership agreement, limited liability
company agreement, certificate of formation and the bylaws or other
organizational documents of such Credit Party and the resolutions, or
such other administrative approval of such Credit Party referred to in
such certificate and all of the foregoing shall be reasonably
satisfactory to the Administrative Agent, and (y) the Borrower a
certificate of its chief financial officer, dated the Closing Date, to
the effect that all of the applicable conditions set forth in sections
5.1(e), (h), (i), (j) and (k) and 5.2 exist as of such date.
(ii) On the Closing Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Transaction Documents
shall be reasonably satisfactory in form and substance to the
Administrative Agent and the Documentation Agent, and the
Administrative Agent and the Documentation Agent shall have received
all information and copies of all certificates, documents, and papers,
including good standing certificates and any other records of
corporate proceedings and governmental approvals, if any, which the
Administrative Agent or the Documentation Agent may have reasonably
requested in connection therewith such documents and papers where
appropriate, to be certified by proper corporate or governmental
authorities.
(d) Plans, etc. On or prior to the Closing Date, there shall
have been made available for review by the Administrative Agent and
the Documentation Agent true and correct copies of:
(i) any Plans, and for each Plan (x) that is a
Single-Employer plan the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled
actuary and the Schedule B (Actuarial Information) to the
most recent annual report (Form 5500 Series) for each Plan
filed with the Internal Revenue Service and (y) that is a
Multiemployer Plan, each of the documents referred to in
clause (x) either in the possession of the Borrower or any of
its Subsidiaries or any ERISA Affiliate or reasonably
available thereto from the sponsor or trustees of such Plan:
(ii) any collective bargaining agreements or any other
similar agreement or arrangements covering the employees of
the Borrower or any of its Subsidiaries (collectively, the
"Collective Bargaining Agreements");
(iii) all agreements evidencing or relating to the
Existing Indebtedness (the "Existing Indebtedness
Agreements");
(iv) all agreements entered into by the Borrower
governing the terms and relative rights of its capital stock,
agreements entered into by shareholders of the Borrower with
and any respect to its capital stock (collectively, the
"Shareholders' Agreements");
(v) any agreement with respect to, the management of the
Borrower or any of its Subsidiaries (collectively, the
"Management Agreements");
(vi) any material employment agreements entered into by
the Borrower or any of its Subsidiaries (collectively, the
"Employment Agreements");
(vii) management contracts relating to assisted living
communities or similar facilities managed by the Borrower or
any of its Subsidiaries (collectively the "Management
Contracts") to the extent in existence on the
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Closing Date; and
(viii) any tax sharing, tax allocation and other similar
agreements entered into by the Borrower and/or any of its
Subsidiaries (collectively, the "Tax Sharing Agreements");
all of which Plans, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Shareholders' Agreements, Management
Agreements, Employment Agreements, Management Contracts and Tax
Sharing Agreements shall be in form and substance satisfactory to the
Administrative Agent and the Documentation Agent.
(e) Adverse Change, etc. From December 31, 1995 to the
Closing Date, nothing shall have occurred (and neither the Lenders nor
the Administrative Agent or the Documentation Agent shall have become
aware of any facts or conditions not previously known) which the
Administrative Agent, the Documentation Agent or the Required Lenders
shall reasonably determine (i) has, or could reasonably be expected to
have, a material adverse effect on the Assets or the rights or
remedies of the Lenders or the Administrative Agent under this
Agreement or any other Credit Document, or on the ability of the
Borrower to perform its obligations to them, or (ii) has, or could
reasonably be expected to have, a Material Adverse Effect.
(f) Litigation. No actions, suits or proceedings shall be
pending or, to the knowledge of the Borrower, threatened against the
Parent or any of its Subsidiaries or any of their assets on the
Closing Date (i) with respect to this Agreement or any other Credit
Document or (ii) which the Administrative Agent, the Documentation
Agent or the Required Lenders shall determine has, or could reasonably
be expected to have, (x) a Material Adverse Effect or (y) a material
adverse effect on the Assets or the rights or remedies of the Lenders
or the Administrative Agent hereunder or under any other Credit
Document or on the ability of any Credit Party to perform its
respective obligations to the Lenders hereunder or under any other
Credit Document.
(g) Approvals. On the Closing Date, all material governmental
and third party approvals in connection with the transactions
contemplated by the Credit Documents and the other Transaction
Documents and otherwise referred to herein or therein shall have been
obtained and remain in effect, and all applicable waiting periods
shall have expired without any action being taken by any competent
authority (including any court having jurisdiction) which restrains or
prevents such transactions or imposes, in the judgment of the Required
Lenders, the Administrative Agent or the Documentation Agent,
materially adverse conditions upon the consummation of such
transactions.
(h) Reorganization. On or prior to the Closing Date, there
shall have been transferred to the Borrower assets and business
comprising the assisted and independent living divisions of the Parent
in exchange for, among other things, the issuance by the Borrower of
common stock of the Borrower, in accordance with the terms and
provisions of the Incorporation Agreement (collectively, the
"Reorganization"), and the Reorganization shall have been consummated
in compliance with all applicable laws and in a manner reasonably
satisfactory to the Administrative Agent and the Documentation Agent.
(i) Acquisition Documents, etc. On or prior to the Closing
Date, the Borrower shall have delivered to the Administrative Agent
all Acquisition Documents, certified as true and correct by an
Authorized Officer, all of which Acquisition Documents shall be in the
same form as they were in on August 15, 1996 or shall otherwise be
satisfactory to the Administrative Agent and the Documentation Agent
and each of the conditions precedent to the obligations of the
Borrower to consummate the Acquisition shall have been satisfied
(without any waiver thereto not consented to by the Administrative
Agent) to the satisfaction of the Administrative Agent.
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(j) IPO Proceeds; Ownership by Parent Guarantor. On or prior
to the Closing Date, the Borrower shall have received in available
funds at least $50,000,000, consisting of (i) an incremental equity
contribution of $4,350,000 to the Borrower and/or one or more of its
Subsidiaries by the Parent and/or one or more of its Subsidiaries
(other than the Borrower and its Subsidiaries), above and beyond any
equity contribution otherwise provided for pursuant to the
Incorporation Agreement, and (ii) net cash proceeds of at least
$45,650,000 from the initial public issuance of its common stock (the
"IPO") effected as contemplated by the Registration Statement, but
without giving effect to the over-allotment option referred to in the
Registration Statement. After giving effect to the completion of the
IPO (but without regard to such over-allotment option), the Parent
Guarantor shall be the owner, beneficially and of record, of not less
than 55% of the outstanding shares of Common Stock of the Borrower on
a fully diluted basis, if the public offering price per share in the
IPO is $13.00 or greater (63%, if such offering price per share is
less than $13.00).
(k) Other Debt. On the Closing Date and after giving effect
to the consummation of the Transaction, neither the Borrower nor any
of its Subsidiaries shall have any outstanding Indebtedness other than
the Existing Indebtedness described in section 6.18 and no default or
event of default under and as defined in the documentation governing
any such Existing Indebtedness shall have occurred or be continuing
both before and after giving effect to the Transaction.
(l) Parent Guaranty. On the Closing Date, the Borrower, the
Parent and each Subsidiary of the Parent named therein shall have duly
authorized, executed and delivered a Guaranty in the form of Exhibit E
hereto (as modified, amended or supplemented from time to time in
accordance with the terms hereof and thereof, the "Parent Guaranty"),
and the Parent Guaranty shall be in full force and effect.
(m) Subsidiary Guaranty. On the Closing Date, each
Wholly-Owned Subsidiary shall have duly authorized, executed and
delivered a Guaranty in the form of Exhibit F hereto (as modified,
amended or supplemented from time to time in accordance with the terms
hereof and thereof, the "Subsidiary Guaranty"), and the Subsidiary
Guaranty shall be in full force and effect.
(n) Security Documents. (i) Pledge Agreement. On the Closing
Date, each Credit Party named therein shall have duly authorized,
executed and delivered a Pledge Agreement substantially in the form of
Exhibit G hereto (as modified, amended or supplemented from time to
time in accordance with the terms thereof and hereof, the "Pledge
Agreement"), and shall have delivered to the Collateral Agent, as
pledgee thereunder:
(A) all of the certificates and instruments representing
the Pledged Securities referred to therein, endorsed in blank
or accompanied by executed and undated stock or bond powers;
and
(B) executed copies of notices delivered to each
partnership entity or limited liability company entity which
is the issuer of partnership interests or membership
interests, as the case may be, pledged under the Pledge
Agreement and executed copies of acknowledgements executed by
each such entity, together with evidence that such other
actions have been taken as may be necessary or, in the
opinion of the Collateral Agent, desirable to perfect the
security interest purported to be created by the Pledge
Agreement (including, without limitation, evidence that each
such partnership entity or limited liability company entity
has duly recorded the security interest created by the Pledge
Agreement on the partnership or limited liability company
books and records of such entity);
and the Pledge Agreement shall be in full force and effect.
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(ii) Security Agreement. On the Closing Date, each Credit
Party named therein shall have duly authorized, executed and delivered
a Security Agreement substantially in the form of Exhibit H (as
modified, supplemented or amended from time to time in accordance with
the terms thereof and hereof, the "Security Agreement") covering all
of such Credit Party's present and future Security Agreement
Collateral, in each case together with:
(A) executed copies of Financing Statements (Form UCC-1)
in appropriate form for filing under the UCC of each
jurisdiction as may be necessary to perfect the security
interests purported to be created by the Security Agreement;
(B) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, each of recent
date listing all effective financing statements that name
each Credit Party as debtor and that are filed in the
jurisdictions referred to in clause (A), together with copies
of such financing statements (none of which shall cover the
Collateral except (x) those with respect to which appropriate
termination statements executed by the secured lender
thereunder have been delivered to the Collateral Agent and
(y) to the extent evidencing Liens permitted pursuant to
section 8.3(d));
(C) evidence of the completion of all other recordings
and filings of, or with respect to, the Security Agreement
as may be necessary or, in the opinion of the Collateral
Agent, desirable to perfect the security interests intended
to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to
perfect and protect the security interest purported to be
created by the Security Agreement have been taken;
and the Security Agreement shall be in full force and effect.
(iii) Mortgages. On the Closing Date, the Collateral Agent
shall have received:
(A) fully executed counterparts of mortgages, deeds of
trust or deeds to secure debt, in each case in form and
substance reasonably satisfactory to the Collateral Agent and
the Documentation Agent (each as modified, amended or
supplemented from time to time in accordance under the terms
hereof and thereof, a "Mortgage" and, collectively, the
"Mortgages"), which Mortgages shall cover such of the Real
Property owned or leased by any Credit Party as is designated
on Part I of Annex III as a mortgaged property (each
"Mortgaged Property" and, collectively, the "Mortgaged
Properties"), together with evidence that counterparts of the
Mortgages have been delivered to the title insurance company
insuring the Lien of the Mortgages for recording in all
places to the extent necessary or, in the reasonable opinion
of the Collateral Agent, desirable to effectively create a
valid and enforceable first priority mortgage lien on such
Credit Party's interest in each Mortgaged Property (subject
only to Permitted Encumbrances) in favor of the Collateral
Agent (or such other trustee as may be required or desired
under local law) for the benefit of the Lenders;
(B) executed copies of Financing Statements (Form UCC-1
or other applicable form) in appropriate form for filing
under the UCC of each jurisdiction as may be reasonably
necessary to perfect the security interests in fixtures,
equipment and personal property purported to be created by
the Mortgages;
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(C) executed copies of such consents of landlords,
non-disturbance and attornment agreements, and similar
documents, in form and substance reasonably satisfactory to
the Collateral Agent and the Documentation Agent, as the
Collateral Agent or the Documentation Agent may consider
necessary or desirable in connection with the creation of the
lien of any Mortgage on any Mortgaged Property or the
enforcement thereof;
(D) mortgagee title insurance policies (or marked
commitments to issue the same) for the Mortgaged Properties
issued by title insurers reasonably satisfactory to the
Collateral Agent (each a "Mortgage Policy" and, collectively,
the "Mortgage Policies") in amounts satisfactory to the
Collateral Agent assuring the Collateral Agent that the
Mortgages on such Mortgaged Properties are valid and
enforceable first priority mortgage liens on such Mortgaged
Properties, free and clear of all defects and encumbrances
except Permitted Encumbrances, and the Mortgage Policies
shall otherwise be in form and substance reasonably
satisfactory to the Collateral Agent and the Documentation
Agent; and
(E) surveys, in form and substance reasonably
satisfactory to the Collateral Agent and the Documentation
Agent, of the Mortgaged Properties specified by the
Administrative Agent or the Documentation Agent, certified in
a manner satisfactory to the Collateral Agent and the
Documentation Agent (which certification must include, among
other things, a certification whether the Mortgaged Property
is located in a special flood hazard area, and if it is so
located, as to the flood zone designation which appears in
the Flood Insurance Rate Map for the area in which the
Mortgaged Property is located, including the Community Panel
Number of the map used) by a licensed professional surveyor
reasonably satisfactory to the Collateral Agent and the
Documentation Agent.
(o) Solvency. On the Closing Date, the Administrative Agent
shall have received from the chief financial officer of the Borrower a
certificate in the form of Exhibit J hereto, expressing opinions of
value and other appropriate facts or information regarding the
solvency of the Borrower and its Subsidiaries taken as a whole.
(p) Fees, etc. On or prior to the Closing Date, the Borrower
shall have paid to (i) the Administrative Agent and the Lenders all
Fees and expenses agreed upon by such parties to be paid on or prior
to such date, and (ii) Jones, Day, Reavis & Pogue, special counsel to
the Documentation Agent, such fees and disbursements as shall have
been invoiced by such firm in connection with the transactions
contemplated hereby in accordance with the proposal letter of such
firm dated July 16, 1996.
(q) Insurance Policies. On the Closing Date, the Collateral
Agent shall have received evidence of insurance complying with the
requirements of section 7.3 for the business and properties of the
Borrower and its Subsidiaries, in form and substance satisfactory to
the Administrative Agent and with respect to all casualty insurance,
naming the Collateral Agent as an additional insured and loss payee.
(r) Environmental Reports. On or prior to the Closing Date,
the Administrative Agent and the Documentation Agent shall have
received Phase I environmental assessments from Dames & Moore (or such
other firm satisfactory to the Administrative Agent and the
Documentation Agent and in form and substance satisfactory to the
Administrative Agent and the Documentation Agent, and covering each
Mortgaged Property.
(s) Appraisals. On or prior to the Closing Date, the
Administrative Agent and the Documentation Agent shall have received
copies of any appraisals obtained by the Borrower or any
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of its Affiliates with respect to any of the properties of the
Borrower or any of its Subsidiaries within the two year period prior
to the Closing Date.
5.2. Conditions Precedent to All Credit Events. The obligations of
the Lenders to make each Loan and/or of a Letter of Credit Issuer to issue each
Letter of Credit is subject, at the time thereof, to the satisfaction of the
following conditions:
(a) Notice of Borrowing, etc. The Administrative Agent shall
have received a Notice of Borrowing meeting the requirements of
section 1.3 with respect to the incurrence of Loans or a Letter of
Credit Request meeting the requirement of section 2.2 with respect to
the issuance of a Letter of Credit.
(b) No Default; Representations and Warranties. At the time
of each Credit Event and also after giving effect thereto, (i) there
shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein or in the other Credit
Documents shall be true and correct in all material respects with the
same effect as though such representations and warranties had been
made on and as of the date of such Credit Event, except to the extent
that such representations and warranties expressly relate to an
earlier date.
(c) Sublimit Matters. The Administrative Agent shall have
received such certificates pursuant to section 7.1(e) and other
evidence as it may require to establish that such Credit Event
complies with the MPP Revolving Loan Sublimit or DPP Revolving Loan
Sublimit specified in section 1.1(b) or (c), as applicable.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to each of the Lenders that all of
the applicable conditions specified in section 5.1 and/or 5.2, as the case may
be, exist as of that time. All of the certificates, legal opinions and other
documents and papers referred to in this section 5, unless otherwise specified,
shall be delivered to the Administrative Agent for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts for each of the
Lenders, and the Administrative Agent will promptly distribute to the Lenders
their respective Notes and the copies of such other certificates, legal opinions
and documents.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Agreement and to
make the Loans, and/or to issue and/or to participate in the Letters of Credit
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Agreement and each Credit Event:
6.1. Corporate Status, etc. Each of the Borrower and its Subsidiaries
(i) is a duly organized or formed and validly existing corporation, partnership
or limited liability company, as the case may be, in good standing under the
laws of the jurisdiction of its formation and has the corporate, partnership or
limited liability company power and authority, as applicable, to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (ii) has duly qualified and is authorized to do
business in all jurisdictions where it is required to be so qualified except
where the failure to be so qualified would not have a Material Adverse Effect.
6.2. Corporate Power and Authority, etc. Each Credit Party has the
corporate or other organizational power and authority to execute, deliver and
carry out the terms and provisions of the Credit Documents to which it is party
and has taken all necessary corporate or other organizational action to
authorize the execution, delivery and performance of the Credit Documents to
which it is party. Each Credit Party has duly executed and delivered each Credit
Document to which it is party and each Credit Document to which it is party
constitutes the legal, valid and binding agreement or obligation of each Credit
Party enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or
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other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
6.3. No Violation. Neither the execution, delivery and performance by
any Credit Party of the Credit Documents to which it is party nor compliance
with the terms and provisions thereof, nor the consummation of the loan
transactions contemplated therein (i) will contravene any provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality applicable to such Credit Party or its properties
and assets, (ii) will conflict with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
(other than pursuant to the Security Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of the
property or assets of the Borrower or any of its Subsidiaries pursuant to the
terms of any indenture, mortgage, deed of trust, agreement or other instrument
to which the Borrower or any of its Subsidiaries is a party or by which it or
any of its property or assets are bound or to which it may be subject, or (iii)
will violate any provision of the partnership agreement, certificate of
formation, certificate or articles of incorporation or by-laws, as the case may
be, of such Credit Party.
6.4. Litigation. There are no actions, suits or proceedings pending
or, to, the knowledge of the Borrower, threatened with respect to the Borrower
or any of its Subsidiaries (i) that have, or could reasonably be expected likely
to have, a Material Adverse Effect, or (ii) that have, or could reasonably be
expected to have, a material adverse effect on the rights or remedies of the
Collateral Agent, the Administrative Agent or the Lenders or on the ability of
any Credit Party to perform its obligations to them hereunder and under the
other Credit Documents.
6.5. Use of Proceeds; Margin Regulations. (a) The proceeds of all
Loans shall be utilized (i) to finance Permitted Acquisitions, and (ii) for
general corporate purposes, other than to finance Permitted Acquisitions and/or
any other acquisition, not inconsistent with the requirements of this Agreement.
(b) No part of the proceeds of any Credit Event will be used directly
or indirectly to purchase or carry Margin Stock, or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock. Neither any Credit
Event, nor the use of the proceeds thereof, will violate or be inconsistent with
the provisions of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. At no time
would more than 25% of the value of the assets of the Borrower or of the
Borrower and its consolidated Subsidiaries that are subject to any "arrangement"
(as such term is used in section 221.2(g) of such Regulation U) hereunder be
represented by Margin Stock.
6.6. Governmental Approvals. No order, consent approval license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of any
Credit Document, other than filings and recordings necessary to establish and
perfect the security interests and Liens provided for in the Security Documents.
6.7. True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Borrower
or any of its Subsidiaries in writing to the Administrative Agent or any Lender
for purposes of or in connection with this Agreement or any transaction
contemplated herein is, and all other such factual information (taken as a
whole) hereafter furnished by or on behalf of such person in writing to any
Lender will be, true and accurate in all material respects on the date as of
which such information is dated or certified and not incomplete by omitting to
state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided. The projections and pro forma financial information
prepared by the Borrower which are contained in such materials are based on good
faith estimates and assumptions believed by such persons to be reasonable at the
time made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ materially from the
projected results. As of the Effective Date, there is no fact known to the
Borrower or any of its Subsidiaries which
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has, or could reasonably be expected to have, a Material Adverse Effect which
has not theretofore been disclosed to the Lenders or to the Administrative Agent
on behalf of the Lenders.
6.8. Financial Condition: Financial Statements. (a) On and as of the
Closing Date on a pro forma basis after giving effect to the Transaction and to
all Indebtedness incurred and to be incurred, and Liens created, and to be
created, by the Borrower in connection therewith, (i) the sum of the assets, at
a fair valuation, of the Borrower will exceed its debts, (ii) the Borrower will
not have incurred or intended to, or believe that it will, incur debts beyond
its ability to pay such debts as such debts mature and (iii) the Borrower will
have sufficient capital with which to conduct its business. For purposes of this
section 6.8, "debt" means any liability on a claim, and "claim" means (x) right
to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured; or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
(b) (i) The combined balance sheets of the Borrower (formerly the
assisted and independent living business of the Parent and certain of its
Affiliates) at December 31, 1994 and December 31, 1995, and the related combined
statements of income, investments by and advances from the Parent, and cash
flows for the fiscal periods ended as of said dates, which have been examined by
Ernst & Young LLP, independent certified public accountants, and (ii) the pro
forma (after giving effect to the Transaction and the related financings
thereof) consolidated balance sheet of the Borrower and its Subsidiaries as of
March 31, 1996, copies of each of which have heretofore been furnished to each
Lender, present fairly the financial position of the respective entities as of
the dates of said statements and the results for the periods covered thereby
(or, in the case of the balance sheet, presents a good faith estimate of the
consolidated financial condition of the Borrower and its Subsidiaries after
giving effect to the Transaction and the related financings thereof at the date
thereof). All such financial statements (other than the aforesaid pro forma
balance sheets) have been prepared in accordance with generally accepted
accounting principles and practices consistently applied except to the extent
provided in the notes to said financial statements. Nothing has occurred since
December 31, 1995 that has had a Material Adverse Effect.
(c) Except as fully reflected in the financial statements and the
notes thereto described in section 6.8(b), there were as of the Closing Date
(after giving effect to the Loans made on such date), no material Contingent
Obligations, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation,
interest rate or foreign currency swap or exchange transaction with respect to
the Borrower or any of its Subsidiaries which, either individually or in
aggregate, would be material to the Borrower and its Subsidiaries taken as a
whole, except as incurred in the ordinary course of business consistent with
past practices subsequent to December 31, 1995.
(d) The Borrower has delivered to the Lenders prior to the execution
and delivery of this Agreement (i) a brochure dated July 1996 prepared by the
Administrative Agent and the Documentation Agent, which contains a general
description of the business and affairs of the Borrower and its Subsidiaries
(the "Information Memorandum"), and (ii) financial projections prepared by
management of the Borrower which are included in the Information Memorandum
under Tab VIII thereof for the Borrower for the fiscal years 1996-2000 (the
"Financial Projections"). The Financial Projections were prepared on behalf of
the Borrower in good faith after taking into account the existing and historical
levels of business activity of the Borrower, its Subsidiaries and their
predecessors in interest, known trends, including general economic trends, and
all other information, assumptions and estimates pertinent thereto. The
Financial Projections were considered by management of the Borrower, as of such
date of preparation, to be realistically achievable; provided, that no
representation or warranty is made as to the impact of future general economic
conditions or as to whether the Borrower's projected consolidated results as set
forth in the Financial Projections will actually be realized. No facts are known
to the Borrower at the date hereof which, if reflected in the Financial
Projections, would result in a material adverse change in the assets,
liabilities, results of operations or cash flows reflected therein.
6.9. Security Interests. Once executed and delivered, and until
terminated in accordance with the terms thereof, each of the Security Documents
creates, as security for the obligations purported to be secured thereby, a
valid and enforceable perfected security interest in and Lien on all of the
Collateral subject thereto from time to time,
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superior to and prior to the rights of all third persons (subject in the case of
the Mortgages to Permitted Encumbrances and subject to no other Liens (except
that the Security Agreement Collateral and/or Mortgaged Properties may be
subject to Permitted Liens and (in the case of the Mortgaged Properties)
Permitted Encumbrances relating thereto)) in favor of the Collateral Agent for
the benefit of the Lenders. No filings or recordings are required in order to
perfect the security interests created under any Security Document except for
filings or recordings required in connection with any such Security Document
which shall have been made, or for which satisfactory arrangements have been
made, upon or prior to the execution and delivery thereof. All mortgage,
mortgage recording, stamp, intangible or other similar taxes required to be paid
by any person under applicable Legal Requirements or other laws applicable to
the Real Property encumbered by the Mortgages in connection with the execution,
delivery, recordation, filing, registration, perfection or enforcement of the
Mortgages have been paid.
6.10. Representations and Warranties in Transaction Documents. All
representations and warranties of the Parent and/or any of its Subsidiaries set
forth in any of the Transaction Documents were true and correct in all material
respects as of the time such representations and warranties were made and shall
be true and correct in all material respects as of the Closing Date as if such
representations and warranties were made on and as of such date, unless stated
to relate to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date.
6.11. Tax Returns and Payments. Each of the Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, other than
those not yet delinquent and except for those contested in good faith. The
Borrower and each of its Subsidiaries have paid, or have provided adequate
reserves for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof (giving effect to the Reorganization).
6.12. Compliance with ERISA. Each Plan (and each related trust,
insurance contract or fund) is in substantial compliance with its terms and with
all applicable laws, including without limitation ERISA and the Code; each Plan
(and each related trust, if any) which is intended to be qualified under section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that it meets the requirements of sections 401(a) and
501(a) of the Code; no Reportable Event has occurred; no Plan which is a
multiemployer plan (as defined in section 4001(a)(3) of ERISA) is insolvent or
in reorganization; no Plan has an Unfunded Current Liability; no Plan which is
subject to section 412 of the Code or section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period, within the meaning of section 412 of the
Code or section 303 or 304 of ERISA; all contributions required to be made with
respect to a Plan have been timely made; neither the Borrower nor any Subsidiary
of the Borrower nor any ERISA Affiliate has incurred any material liability
(including any indirect, contingent or secondary liability) to or on account of
a Plan pursuant to section 409, 502(i), 502(i), 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or section 401(a)(29), 4971 or 4975 of the Code or
expects to incur any such liability under any of the foregoing sections with
respect to any Plan; no condition exists which presents a material risk to the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no proceedings have been instituted to terminate or appoint
a trustee to administer any Plan which is subject to Title IV of ERISA; no
action, suit, proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of any Plan (other than
routine claims for benefits) is pending, expected or threatened; using actuarial
assumptions and computation methods consistent with Part 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of the Borrower and its
Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans
(as defined in section 4001(a)(3) of ERISA) in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date hereof, would not exceed $100,000; each group
health plan (as defined in section 607(1) of ERISA or section 4980B(g)(2) of the
Code) which covers or has covered employees or former employees of the Borrower,
any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and section 4980B of the Code; no lien imposed under the Code or ERISA on
the assets of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and the Borrower
and its Subsidiaries do not maintain or contribute to any employee welfare
benefit plan (as defined in section 3(1) of ERISA) which provides benefits to
retired employees or other former employees (other than as
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required by section 601 of ERISA) or any Plan the obligations with respect to
which could reasonably be expected to have a material adverse effect on the
ability of any Credit Party to perform its obligations under this Agreement or
the other Credit Documents.
6.13. Subsidiaries. Annex II hereto lists each Subsidiary of the
Borrower (and the direct and indirect ownership interest of the Borrower
therein), in each case existing on the Closing Date but after giving effect to
the Transaction.
6.14. Intellectual Property, etc. The Borrower and each of its
Subsidiaries has obtained or has the right to use during the term of this
Agreement all material patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of its business as presently conducted and as
proposed to be conducted.
6.15. Environmental Matters. (a) The Borrower and each of its
Subsidiaries is in compliance with all Environmental Laws governing its business
except to the extent that any such failure to comply (together with any
resulting penalties, fines or forfeitures) would not reasonably be expected to
have a Material Adverse Effect. All licenses, permits, registrations or
approvals required for the business of the Borrower and each of its
Subsidiaries, as conducted as of the Closing Date, under any Environmental Law
have been secured and the Borrower and each of its Subsidiaries is in
substantial compliance therewith, except for such licenses, permits,
registrations or approvals the failure to secure or to comply therewith is not
reasonably likely to have a Material Adverse Effect. Neither the Borrower nor
any of its Subsidiaries is in any respect in noncompliance with, breach of or
default under any applicable writ, order, judgment, injunction, or decree to
which the Borrower or such Subsidiary is a party or which would affect the
ability of the Borrower or such Subsidiary to operate any real property and no
event has occurred and is continuing which, with the passage of time or the
giving of notice or both, would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance, breaches or defaults
as would not reasonably be expected to, in the aggregate, have a Material
Adverse Effect. There are as of the Closing Date no Environmental Claims pending
or, to the best knowledge of the Borrower, threatened wherein an unfavorable
decision, ruling or finding would reasonably be expected to have a Material
Adverse Effect. There are no facts, circumstances, conditions or occurrences on
any Real Property now or at any time owned, leased or operated by the Borrower
or any of its Subsidiaries or, to the knowledge of the Borrower, on any property
adjacent to any such Real Property that could reasonably be expected (i) to form
the basis of an Environmental Claim against the Borrower or any of its
Subsidiaries or any Real Property of the Borrower or any of its Subsidiaries, or
(ii) to cause such Real Property to be subject to any restrictions on the
ownership, occupancy, use or transferability of such Real Property under any
Environmental Law, except in each such case, such Environmental Claims or
restrictions that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated, used,
treated or stored on, or transported to or from, any Real Property of the
Borrower or any of its Subsidiaries or (ii) released on any such Real Property,
in each case where such occurrence or event is reasonably likely to have a
Material Adverse Effect.
(c) There are not now any underground storage tanks located on any
Real Property owned, leased or operated by the Borrower or any of its
Subsidiaries.
6.16. Properties. Annex III contains a true and complete list of each
Real Property owned or leased by the Borrower or any of its Subsidiaries on the
Closing Date (after giving effect to the Transaction) and the type of interest
therein held by the Borrower or the respective Subsidiary. The Borrower and each
of its Subsidiaries has good and indefeasible title in fee to each Real Property
owned by it and a valid and subsisting Leasehold in each Real Property leased by
it, in each case, after giving effect to the Transaction, free and clear of all
Liens and security interests other than the Liens created pursuant to the
Mortgages, Permitted Liens and Permitted Encumbrances. The Borrower and each of
its Subsidiaries has received all material assignments, waivers, consents and
other documents, and duly effected all material recordings, filings and other
material actions necessary to establish, protect and perfect its right, title
and interest in and to each Real Property owned or leased by it. All material
transfer taxes, deed stamps, intangible taxes or other amounts in the nature of
transfer taxes required to be paid by any person under applicable Legal
Requirements or other laws applicable to the Real Property in connection,with
the Transaction have been paid.
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6.17. Labor Relations: Collective Bargaining Agreements. There is (i)
no significant unfair labor practice complaint pending against the Borrower or
any of its Subsidiaries or, to the knowledge of the Borrower, threatened against
any of them, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is now pending against the Borrower or any of
its Subsidiaries or, to the knowledge of the Borrower, threatened against any of
them, (ii) no significant strike, labor dispute, slowdown or stoppage is pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against the Borrower or any of its Subsidiaries, and (iii)
to the knowledge of the Borrower, no union representation question exists with
respect to the employees of the Borrower or any of its Subsidiaries, except
(with respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as would not reasonably be expected to
have a Material Adverse Effect.
6.18. Indebtedness. Annex IV sets forth a true and complete list of
all Indebtedness of the Borrower and each of its Subsidiaries (after giving
effect to the Transaction) incurred prior to, but which is to remain outstanding
after, the Closing Date (collectively, the "Existing Indebtedness"), in each
case showing the aggregate principal amount, amortization and interest rate
thereof (and available commitments, if any, thereunder) and the name of the
respective borrower and any other entity which directly or indirectly guaranteed
such debt.
6.19. Transaction. On and as of the Closing Date, (i) all material
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required to be obtained, given, filed or taken by the Parent,
the Borrower or any other Credit Party in order to make or consummate each
component of the Transaction will have been obtained, given, filed or taken and
are or will be in full force and effect (or effective judicial relief with
respect thereto will have been obtained) except for filings, consents or notices
not required by federal or state securities laws to be made at such time, which
filings, consents or notices have been or will be made during the period in
which they are required to be made and (ii) each component of the Transaction
shall have been consummated in accordance, in all material respects, with the
applicable Transaction Documents and in compliance, in all material respects,
with all applicable laws.
6.20. Certain Material Agreements. After giving effect to the
Transaction, each Management Contract and each Existing Indebtedness Agreement
is in full force and effect in accordance with its respective terms, without any
material default existing thereunder.
6.21. Third-Party Rights. No person holds any right of first refusal,
option to purchase or lease, buy-out right, right of first offer or other
similar right or option with respect to any portion of the Collateral or any
partnership interest, joint venture interest or shareholder interest owned by
the Borrower in any of its Subsidiaries.
SECTION 7. AFFIRMATIVE COVENANTS.
The Borrower hereby covenants and agrees that so long as this
Agreement is in effect and until such time as the Total Commitment has been
terminated, no Notes are outstanding and the Loans, together with interest, Fees
and all other Obligations hereunder, have been paid in full:
7.1. Reporting Requirements. The Borrower will furnish to the
Administrative Agent, in sufficient quantities for the Lenders (and the
Administrative Agent will promptly transmit such copies to the Lenders):
(a) Annual Financial Statements. As soon as available and in
any event within 90 days after the close of each fiscal year of the
Borrower, the consolidated and consolidating balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such
fiscal year and the related consolidated statements of income, of
stockholder's equity and of cash flows and consolidating statement of
income for such fiscal year, in each case setting forth comparative
figures for the preceding fiscal year and accompanied by the opinion
of independent certified public accountants of recognized national
standing as to such consolidated financial statements, which opinion
shall not be qualified as to the scope of audit or as to the status of
the Borrower or any of its Subsidiaries as a going concern, together
with a certificate of such accounting firm stating that in the course
of its regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, nothing came to the
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attention of such accounting firm which would lead it to believe that
any Default or Event of Default as they relate to accounting matters
has occurred and is continuing or if in the opinion of such accounting
firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year of the Borrower, the
consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such quarterly period and
the related consolidated statements of income and of cash flows and
the consolidating income statement for such quarterly period, and
setting forth, in the case of such consolidated statements of income
and of cash flows, comparative figures for the related periods in the
prior fiscal year, and which shall be certified on behalf of the
Borrower by the Chief Financial Officer or other Authorized Officer of
the Borrower, subject to changes resulting from normal year-end audit
adjustments.
(c) Monthly Property Specific Financial Statements. As soon
as available and in any event within 30 days after the close of each
month, financial statements for each separate Mature Property and
completed Development Property, showing Cash Flow from Operations
therefor for such period and for the elapsed portion of the fiscal
year ended with the last day of such period, together with such other
financial information with respect thereto as the Administrative Agent
may reasonably request, and which shall be certified on behalf of the
Borrower by the Chief Financial Officer or other Authorized Officer of
the Borrower, subject to changes resulting from normal year-end audit
adjustments.
(d) Budget. Not less than 10 days prior to the commencement
of each fiscal year of the Borrower, a preliminary consolidated budget
(to be followed no later than 30 days after the commencement of such
fiscal year by a final consolidated budget) of the Borrower and its
Subsidiaries in reasonable detail for each of the four fiscal quarters
of such fiscal year, and for any subsequent fiscal years, as
customarily prepared by management for its internal use, setting
forth, with appropriate discussion, the forecasted balance sheet,
income statement, operating cash flows and capital expenditures of the
Borrower and its Subsidiaries for the period covered thereby, and the
principal assumptions upon which forecasts and budget are based.
(e) Officer's Certificates. At the time of the delivery of
the financial statements provided for in sections 7.1(a), (b) and (c),
a certificate on behalf of the Borrower of the Chief Financial Officer
or other Authorized Officer of the Borrower to the effect that no
Default or Event of Default exists or, if any Default or Event of
Default does exist, specifying the nature and extent thereof, which
certificate shall set forth the calculations required to establish
compliance with the provisions of sections 8.10, 8.11, 8.12 and 8.13
of this Agreement, and (if the Parent Guarantor has notified the
Administrative Agent that it believes the conditions specified in
section 2.3 of the Parent Guaranty have been satisfied so as to
entitle the Parent Guarantor to an early termination of the Parent
Guaranty) sections 2.3(a) and (b) of the Parent Guaranty as at the end
of such fiscal year or quarter or month, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of (i) the occurrence
of any event which constitutes a Default or Event of Default, which
notice shall specify the nature thereof, the period of existence
thereof and what action the Borrower proposes to take with respect
thereto, and (ii) any litigation or governmental or regulatory
proceeding pending against the Borrower or any of its Subsidiaries
which is likely to have a Material Adverse Effect or a material
adverse effect on the Collateral or the ability of any Credit Party to
perform its obligations hereunder or under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy
of each other report or management letter" submitted to the Borrower
or any of its Subsidiaries by their independent
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accountants or independent actuaries in connection with any annual,
interim or special audit made by them of the books of the Borrower or
any of its Subsidiaries.
(h) ERISA. Promptly upon completion thereof, a complete copy
of the annual report (Form 5500) of each Plan (including, to the
extent required, the related financial and actuarial statements and
opinions and other supporting statements, certifications, schedules
and information) required to be filed with the Internal Revenue
Service. In addition to any certificates or notices delivered pursuant
to the first sentence hereof, copies of reports and any material
notices received by the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate with respect to any Plan shall be delivered to the
Administrative Agent (in sufficient quantities for the Lenders)
promptly after the Borrower is aware, and in any event no later than
30 days after the date such report has been filed with the Internal
Revenue Service or such notice has been received by the Borrower, such
Subsidiary or such ERISA Affiliate, as applicable.
(i) Environmental Matters. Promptly upon, and in any event
within 10 Business Days after, an officer of the Borrower or any of
its Subsidiaries obtains knowledge thereof, notice of one or more of
the following environmental matters: (i) any pending or threatened (in
writing) material Environmental Claim against the Borrower or any of
its Subsidiaries or any Real Property owned or operated by the
Borrower or any of its Subsidiaries; (ii) any condition or occurrence
on or arising from any Real Property owned or operated by the Borrower
or any of its Subsidiaries that (A) results in material noncompliance
by the Borrower or any of its Subsidiaries with any applicable
Environmental Law or (B) would reasonably be expected to form the
basis of a material Environmental Claim against the Borrower or any of
its Subsidiaries or any such Real Property; (iii) any condition or
occurrence on any Real Property owned, leased or operated by the
Borrower or any of its Subsidiaries that could reasonably be expected
to cause such Real Property to be subject to any material restrictions
on the ownership, occupancy, use or transferability by the Borrower or
any of its Subsidiaries of such Real Property under any Environmental
Law; and (iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material
on any Real Property owned, leased or operated by the Borrower or any
of its Subsidiaries as required by any Environmental Law or any
governmental or other administrative agency. All such notices shall
describe in reasonable detail the nature of the Environmental Claim
and the Borrower's or such Subsidiary's response thereto.
(j) SEC Reports and Registration Statements. Promptly upon
transmission thereof or other filing with the SEC, copies of all
registration statements (other than the exhibits thereto and any
registration statement on Form S-8 or its equivalent) and annual,
quarterly or current reports that the Borrower or any of its
Subsidiaries files with the SEC.
(k) Other Information. With reasonable promptness, such other
information or documents (financial or otherwise) relating to the
Borrower or any of its Subsidiaries or any property included in the
Mature Property Pool or the Development Property Pool as the
Administrative Agent on its own behalf or on behalf of the Required
Lenders may reasonably request from time to time.
7.2. Books, Records and Inspections. The Borrower will, and will
cause each of its Subsidiaries to, permit, upon at least two Business Days'
notice to the Chief Financial Officer or any other Authorized Officer of the
Borrower, officers and designated representatives of the Administrative Agent or
any of the Lenders to visit and inspect any of the properties or assets of the
Borrower and any of its Subsidiaries in whomsoever's possession (but only to the
extent the Borrower or such Subsidiary has the right to do so to the extent in
the possession of another person), and to examine the books of account of the
Borrower and any of its Subsidiaries and discuss the affairs, finances and
accounts of the Borrower and of any of its Subsidiaries with, and be advised as
to the same by, its and their officers and independent accountants and
independent actuaries, if any, all at such reasonable times and intervals and to
such reasonable extent as the Administrative Agent or any of the Lenders may
request.
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7.3. Insurance. (a) The Borrower will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance with
reputable and solvent insurers in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice, provided that
this covenant shall be satisfied in respect of any Mortgaged Property to the
extent the insurance covenants in the related Mortgage are satisfied. The
Borrower will, and will cause each of its Subsidiaries to, furnish annually, on
or prior to May 1, to the Administrative Agent a summary of the insurance
carried.
(b) The Borrower will, and will cause each of its Subsidiaries to, at
all times keep their respective property insured in favor of the Collateral
Agent, and all policies (including the Mortgage Policies) or certificates (or
certified copies thereof) with respect to such insurance (and any other
insurance maintained by the Borrower or any such Subsidiary) (i) shall be
endorsed to the Collateral Agent's satisfaction for the benefit of the
Collateral Agent (including, without limitation, by naming the Collateral Agent
as loss payee (with respect to Collateral) or, to the extent permitted by
applicable law, as an additional insured), (ii) shall state that such insurance
policies shall not be cancelled without 30 days' prior written notice thereof
(or 10 days' prior written notice in the case of cancellation for the
non-payment of premiums) by the respective insurer to the Collateral Agent,
(iii) shall provide that the respective insurers irrevocably waive any and all
rights of subrogation with respect to the Collateral Agent and the Lenders, and
(iv) shall be deposited with the Collateral Agent. In no event shall the
Borrower be required to deposit the actual insurance policies with the
Collateral Agent. The Administrative Agent shall deliver copies of any
certificates of insurance to a Lender upon such Lender's request.
(c) If the Borrower or any of its Subsidiaries shall fail to maintain
all insurance in accordance with this section 7.3, or if the Borrower or any of
its Subsidiaries shall fail to so endorse and deposit all policies or
certificates with respect thereto, the Administrative Agent and/or the
Collateral Agent shall have the right (but shall be under no obligation), upon
prior notice to the Borrower, to procure such insurance and the Borrower agrees
to reimburse the Administrative Agent or the Collateral Agent, as the case may
be for all costs and expenses of procuring such insurance.
7.4. Payment of Taxes. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims (other than claims relating to the adjustment or
settling, in the ordinary course of business, of claims in respect of insurance
policies or reinsurance contracts) which, if unpaid, might become a Lien or
charge upon any properties of the Borrower or any of its Subsidiaries, provided
that neither the Borrower nor any of its Subsidiaries shall be required to pay
any such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
7.5. Corporate Franchises. The Borrower will do, and will cause each
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its corporate existence, rights and authority,
provided that any transaction permitted by section 8.2 will not constitute a
breach of this section 7.5.
7.6. Compliance with Statutes, etc. The Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property other than those the noncompliance with which would
not have, and which would not be reasonably expected to have, a Material Adverse
Effect or a material adverse effect on the Collateral or the ability of any
Credit Party to perform its obligations under any Credit Document.
7.7. Good Repair. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in good
repair, working order and condition, normal wear and tear excepted, and that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and improvements, thereto, to the extent and in the manner customary for
companies in similar businesses.
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7.8. Compliance with Environmental Laws. (a) The Borrower will comply,
and will cause each of its Subsidiaries to comply, in all material respects,
with all Environmental Laws applicable to the ownership, lease or use of all
Real Property now or hereafter owned, leased or operated by the Borrower or any
of its Subsidiaries, will promptly pay or cause to be paid all costs and
expenses incurred in connection with such compliance, and will keep or cause to
be kept all such Real Property free and clear of any Liens imposed pursuant to
such Environmental Laws. Neither the Borrower nor any of its Subsidiaries will
generate, use, treat, store, release or dispose of, or permit the generation,
use, treatment, storage, release or disposal of, Hazardous Materials on any Real
Property now or hereafter owned, leased or operated by the Borrower or any of
its Subsidiaries or transport or permit the transportation of Hazardous
Materials to or from any such Real Property other than in compliance with
applicable Environmental Laws and in the ordinary course of business. If
required to do so under any applicable directive or order of any governmental
agency, the Borrower will undertake, and cause each of its Subsidiaries to
undertake, any clean up, removal, remedial or other action necessary to remove
and clean up any Hazardous Materials from any Real Property owned, leased or
operated by the Borrower or any of its Subsidiaries in accordance with, in all
material respects, the requirements of all applicable Environmental Laws and in
accordance with, in all material respects, such orders and directives of all
governmental authorities, except to the extent that the Borrower or such
Subsidiary is contesting such order or directive in good faith and by
appropriate proceedings and for which adequate reserves have been established to
the extent required by GAAP.
(b) At the written request of the Administrative Agent or the Required
Lenders, which request shall specify in reasonable detail the basis therefor, at
any time and from time to time (i) while an Event of Default exists, or (ii)
after the Lenders receive notice under section 7.1(i) for any event for which
notice is required to be delivered for any Real Property, the Borrower will
provide, at its sole cost and expense, an environmental site assessment report
concerning any such Real Property now or hereafter owned, leased or operated by
the Borrower or any of its Subsidiaries, prepared by an environmental consulting
firm approved by the Administrative Agent, indicating the presence or absence of
Hazardous Materials and the potential cost of any removal or a remedial action
in connection with any Hazardous Materials on such Real Property. If the
Borrower fails to provide the same within 90 days after such request was made,
the Administrative Agent may order the same, and the Borrower shall grant and
hereby grants, to the Administrative Agent and the Lenders and their agents,
access to such Real Property and specifically grants the Administrative Agent
and the Lenders an irrevocable non-exclusive license, subject to the rights of
tenants, to undertake such an assessment, all at the Borrower's expense.
7.9. Change of Fiscal Years, Fiscal Quarters. In the event that the
Borrower, for financial reporting purposes, shall change its or any of its
Subsidiaries' fiscal years or fiscal quarters, the Borrower will promptly, and
in any event within 30 days following any such change, deliver a notice to the
Administrative Agent (in sufficient quantities for the Lenders) describing such
change and any material accounting entries made in connection therewith and
stating whether such change will have any impact upon any financial computations
to be made hereunder, and if any such impact is foreseen, describing in
reasonable detail the nature and extent of such impact.
7.10. Additional Security; Further Assurances. (a) Developed
Properties Acquired and Property Development Completed Following the Closing
Date. The Borrower will give the Collateral Agent not less than 10 days prior
written notice of the scheduled closing date for any Permitted Acquisition by
the Borrower or any of its Subsidiaries occurring after the Closing Date.
Subject to obtaining any consents from third parties (including third party
lessors and co-venturers) necessary to be obtained for the granting of a Lien on
the interests or assets acquired pursuant to any such Permitted Acquisition
(with the Borrower hereby agreeing to use its reasonable best efforts to obtain
such consents), the Borrower will, and will cause its Subsidiaries to, grant the
Collateral Agent for the benefit of the Lenders security interests and mortgages
(each an "Additional Security Document") in the interests or properties of the
Borrower or any Subsidiary (A) which are acquired after the Closing Date as
fully developed properties, or (B) the completion of the development of which
has occurred after the Closing Date, other than (i) any Real Property and
related personal property assets acquired by a joint venture (in which there are
minority interests held by persons who are not Affiliates of the Borrower) with
the proceeds of equity investments made by the Borrower or a Subsidiary to the
extent such equity investments are pledged to the Collateral Agent, and (ii) any
Real Property and related personal property assets acquired with the proceeds
of, and securing, or subject to assumed, Priority Debt and those constituting
expansions of existing facilities subject to mortgages in favor of other
persons), as additional security for the Obligations. Each Additional Security
Document shall be granted pursuant to documentation satisfactory in form and
substance to the Administrative Agent and the Documentation Agent, which
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documentation shall be accompanied by such Phase I environmental assessments (in
the case of owned property), surveys and surveyor's certifications (in the case
of owned property) meeting the requirements contemplated by section
5.1(n)(iii)(E), mortgage policy of title insurance, consents of landlords and
other supporting documentation requested by and satisfactory in form and
substance to the Administrative Agent and the Documentation Agent, and shall
constitute a valid and enforceable perfected Lien upon the interests or
properties so acquired, superior to and prior to the rights of all third persons
and subject to no other Liens except those permitted by section 8.3 or otherwise
agreed by the Administrative Agent at the time of perfection thereof and such
other encumbrances as may be set forth in the mortgage policy, if any, relating
to such Additional Security Document which shall be delivered to the Collateral
Agent together with such Additional Security Document and which shall be
satisfactory in form and substance to the Collateral Agent. The Borrower, at its
sole cost and expense, will cause each Additional Security Document or
instruments related thereto to be duly recorded or filed in such manner and in
such places as are required by law to establish, perfect, preserve and protect
the Liens created thereby required to be granted pursuant to the Additional
Security Document, and will pay or cause to be paid in full all taxes, fees and
other charges payable in connection therewith.
(b) Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, at the expense of the Borrower, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, and other assurances or instruments and take such further steps
relating to the Collateral covered by any of the Security Documents as the
Collateral Agent may reasonably require. If at any time the Collateral Agent
determines, based on applicable law, that all applicable taxes (including,
without limitation, mortgage recording taxes or similar charges) were not paid
in connection with the recordation of any Mortgage, the Borrower shall promptly
pay the same upon demand. Furthermore, the Borrower shall cause to be delivered
to the Collateral Agent such opinions of local counsel, title insurance,
surveys, environmental assessments, consents of landlords, lien waivers from
landlords (if and to the extent that the aggregate value of the Borrower's and
its Subsidiaries' equipment located on leaseholds and not covered by effective
lien waivers from landlords exceeds $500,000) and other related documents as may
be reasonably requested by the Administrative Agent or the Collateral Agent in
connection therewith, all of which documents shall be in form and substance
satisfactory to the Administrative Agent and the Collateral Agent, except that
no title insurance or surveys shall be required for any leasehold properties
(unless the lessee has a nominal or bargain purchase option).
(c) Certain Appraisals. Recognizing that the Lenders, in making their
own respective credit analyses and determinations whether to enter into this
Agreement, (i) have relied primarily on the financial condition and results of
operations of the Borrower and its consolidated subsidiaries and, to the extent
relevant to the performance by the Borrower of its obligations under this
Agreement and the other Credit Documents to which it is or is to be a party, the
terms and provisions of the Parent Guaranty and the financial condition and
results of operations of the Parent and its consolidated subsidiaries, and (ii)
have determined that it is not necessary or appropriate, in light of their
respective credit analyses and determinations, to require the Borrower to
deliver to the Lenders at the Closing Date appraisals covering the Mortgaged
Properties, the Borrower will nevertheless (A) comply with all provisions of the
Credit Documents respecting the execution, delivery and performance of all
Mortgages, and any other provisions of this Agreement and the other Credit
Documents related thereto, and (B) if requested by any Lender at any time, in
order to meet any legal requirement applicable to such Lender, provide to
Administrative Agent, the Documentation Agent and the Lenders, at the sole cost
and expense of the Borrower, appraisals and other supporting documentation
relating to the Mortgage or Mortgages covering any or all of the Mortgaged
Properties, as specified by any Lender, meeting the appraisal and other
documentation requirements of the Real Estate Reform Amendments of the Financial
Institution Reform, Recovery and Enforcement Act of 1989, as amended, or any
other legal requirements applicable to any Lender, which in the case of any such
appraisal shall be prepared by one or more valuation firms of national standing,
acceptable to the Required Lenders, utilizing appraisal standards satisfying
such Amendments, Act or other legal requirements.
(d) Mortgage Taxes, etc. The Administrative Agent may, in the case of
any Mortgage to be recorded in any jurisdiction which imposes a significant
documentary stamp tax, intangible tax, or other tax or governmental charge
incident to the recording of a mortgage or deed of trust, include in such
Mortgage appropriate provisions limiting the amount of the obligations secured
thereby, or the amount of the maximum recovery upon foreclosure or other
exercise of remedies, to an amount which, in the reasonable opinion of the
Managing Agent, approximates
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the maximum reasonably expected fair market value of the property subject
thereto during the period such Mortgage is expected to be effective, as
determined by the Managing Agent on the basis of a fixed price per unit, a
multiple of potential cash flow per unit, or other method which may be employed
by the Managing Agent. In the case of the two properties located in Florida
which are being subjected to Mortgages on the Closing Date, the Borrower and the
Managing Agent have agreed that provisions shall be included in those Mortgages
of the nature referred to above which reflect a valuation of approximately
$70,000 per unit for each such property. The Managing Agent has proposed, and
the Borrower has approved, a valuation methodology for any additional properties
as to which provisions of this nature may be included in the applicable
Mortgage. Such valuation methodology, which is subject to change by the Managing
Agent from time to time in light of perceived changes in market conditions,
values a property in accordance with the following formula: (RCP) x (CF) x (No.
Units) x (95% occupancy) x (CF per Unit) = Resulting Value, where RCP is the
reciprocal of an appropriate capitalization rate, such as 8.5 based on a 12%
capitalization rate, CF is a coefficient for inflation and potentially higher
market values, such as 1.3, representing a potential 30% combined increase in
value (after inflation) of the property over the expected life of the Mortgage,
No. Units is the number of individual assisted or independent living units
available for occupancy at the applicable property, 95% occupancy is an assumed
occupancy rate, CF per Unit is the reasonably expected annual Cash Flow from
Operations for each such unit (not expected to be less than $8,400 per unit),
and Resulting Value is the value of the property, based on such formula
valuation, which would be included in the applicable provisions of the Mortgage
relating thereto. The Managing Agent shall be free to use its own judgment in
directing the Administrative Agent to include any such provisions in any such
Mortgage, shall not be required to rely upon any appraisals or other supporting
evidence as to valuation in determining any such amounts, shall not be required
to obtain any consent or instructions from any Lenders in directing the
Administrative Agent to include any such provisions in any such Mortgage, and
such actions of the Managing Agent and the Administrative Agent's actions in
including any such provisions in any such Mortgage shall be entitled to the
benefit of the provisions of section 11.4 hereof.
(e) Lenders to be Provided with copies of Additional Security
Documents. The Borrower will provide the Administrative Agent with sufficient
copies of each Additional Security Document and any additional supporting
documents delivered in connection therewith for distribution of copies thereof
to the Lenders, and the Administrative Agent will promptly so distribute such
copies.
(f) Actions to be Completed. The Borrower agrees that each action
required above by this section 7.10 shall be completed as soon as possible, but
in no event later than 60 days after such action is requested to be taken by the
Administrative Agent, the Collateral Agent or the Required Lenders. In the case
of any property which is proposed to be added to the Mature Property Pool,
reference is made to the requirements of the definition of the term Mature
Property Pool for information concerning the conditions to be satisfied prior to
the addition of properties to the Mature Property Pool, including, without
limitation, the requirement that the Mortgage in respect thereof must have been
perfected for a period of at least 90 days prior to the date such property is
added to the Mature Property Pool.
7.11. Corporate Separateness. The Borrower will take, and will cause
each of its Subsidiaries to take, all such action as is necessary to keep the
operations of the Borrower and its Subsidiaries separate and apart from those of
each Subsidiary which has outstanding IRB Debt or Priority Debt, including,
without limitation, ensuring that all customary formalities regarding corporate
existence, including holding regular board of directors' meetings and
maintenance of corporate records, are followed. All financial statements of the
Borrower and its Subsidiaries provided to creditors will clearly evidence the
corporate separateness of the Borrower and its other Subsidiaries from each
Subsidiary which has IRB Debt or Priority Debt outstanding. Finally, neither the
Borrower nor any of its other Subsidiaries will take any action, or conduct its
affairs in a manner which is likely to result in the corporate existence of a
Subsidiary which has IRB Debt or Priority Debt outstanding, on the one hand, and
the Borrower and its other Subsidiaries, on the other hand, being ignored, or in
the assets and liabilities of the Borrower or any of its other Subsidiaries
being substantively consolidated with those of a Subsidiary which has IRB Debt
or Priority Debt outstanding in a bankruptcy, reorganization or other insolvency
proceeding. No action or indemnity, or provision of support in the form of a
letter of credit, expressly permitted by this Agreement will breach this
covenant.
7.12. ERISA. As soon as possible and, in any event, within 10 days
after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows
or has reason to know of the occurrence of any of the following, the Borrower
will deliver to each of the Lenders a certificate of the chief financial officer
of the Borrower setting forth
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the full details as to such occurrence and the action, if any, that the
Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to
take, together with any notices required or proposed to be given to or filed
with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: that a Reportable
Event has occurred; that an accumulated funding deficiency, within the meaning
of section 412 of the Code or section 302 of ERISA, has been incurred or an
application may be or has been made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under section 412 of the Code or section 303 or 304
of ERISA with respect to a Plan; that any contribution required to be made with
respect to a Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be or
have been instituted to terminate or appoint a trustee to administer a Plan
which is subject to Title IV of ERISA; that a proceeding has been instituted
pursuant to section 515 of ERISA to collect a delinquent contribution to a Plan;
that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or
may incur any liability (including any indirect, contingent, or secondary'
liability) to or on account of the termination of or withdrawal from a Plan
under section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under section 401(a)(29), 4971, 4975 or 4980 of the Code or
section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan
(as defined in section 607(1) of ERISA or section 4980B(g)(2) of the Code) under
section 4980B of the Code; or that the Borrower or any Subsidiary of the
Borrower may incur any material liability pursuant to any employee welfare
benefit plan (as defined in section 3(1) of ERISA) that provides benefits to
retired employees or other former employees (other than as required by section
601 of ERISA) or any Plan.
7.13. Senior Debt. The Borrower will at all times ensure that (a) the
claims of the Lenders in respect of the Obligations of the Borrower will not be
subordinate to, and will in all respects at least rank pari passu with, the
claims of every other senior unsecured creditor of the Borrower, and (b) any
Indebtedness subordinated in any manner to the claims of any other senior
unsecured creditor of the Borrower will be subordinated in like manner to such
claims of the Lenders.
SECTION 8. NEGATIVE COVENANTS.
The Borrower hereby covenants and agrees that on the Effective Date
and thereafter for so long as this Agreement is in effect and until such time as
the Total Commitment has been terminated, no Notes remain outstanding and the
Loans, together with interest, Fees and all other Obligations incurred hereunder
are paid in full:
8.1. Changes in Business. The Borrower will not permit the business
activities of itself and its Subsidiaries taken as a whole to be substantively
altered from the business activities conducted by the Borrower and its
Subsidiaries (after giving effect to the Transaction) on the Closing Date, and
business activities incidental or directly related thereto, such as those
related to home health care.
8.2. Consolidation, Merger or Sale of Assets, etc. The Borrower will
not, and will not permit any Subsidiary to, wind up, liquidate or dissolve its
affairs, or enter into any transaction of merger or consolidation or sell or
otherwise dispose of any of its property or assets (but excluding any sale or
disposition of obsolete or excess furniture, fixtures or equipment or excess
land in the ordinary course of business), or purchase, lease or otherwise
acquire (in one transaction or a series of related transactions) all or any part
of the property or assets of any person (excluding any purchases, leases or
other acquisitions of property or assets in, and for use in, the ordinary course
of business) or agree to do any of the foregoing at any future time, except that
the following shall be permitted:
(a) capital expenditures by the Borrower and its
Subsidiaries;
(b) the investments permitted pursuant to section 8.5;
(c) if no Default or Event of Default shall have occurred and
be continuing or would result therefrom, (i) the merger or
consolidation of any Subsidiary Guarantor with or into the Borrower or
another Subsidiary Guarantor or the liquidation or dissolution of any
Subsidiary (contemporaneously with the retirement or other discharge
of all IRB Debt and Priority Debt of
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such Subsidiary, if any) or (ii) the transfer or other disposition of
any property by the Borrower to any Subsidiary Guarantor or by any
Subsidiary Guarantor to the Borrower or any other Subsidiary
Guarantor, provided that all Liens granted pursuant to the Security
Documents on any property or assets involved in any of the foregoing
transactions shall remain in full force and effect (with the same
priority as they would have if such transfer pursuant to this clause
(ii) had not occurred), either as a result of any such transfer being
made subject to such Liens or as a result of the surviving or
transferee entity executing and delivering new Security Documents, in
each case to the satisfaction of the Administrative Agent;
(d) if no Default or Event of Default shall have occurred and
be continuing or would result therefrom, the Borrower or any
Subsidiary may make Permitted Acquisitions, provided that at least 10
days prior to the date of such acquisition, the Borrower shall have
delivered to the Administrative Agent an officer's certificate
executed on behalf of the Borrower by an Authorized Officer of the
Borrower, which certificate shall (i) contain the date such Permitted
Acquisition is scheduled to be consummated, (ii) contain the estimated
purchase price of such Permitted Acquisition, (iii) contain a
description of the property and/or assets acquired in connection with
such Permitted Acquisition, (iv) demonstrate that at the time of
making any such Permitted Acquisition the covenants contained in
sections 8.10, 8.11, 8.12 and 8.13 shall be complied with on a pro
forma basis as if the properties and/or assets so acquired had been
owned by the Borrower, and the Indebtedness assumed and/or incurred to
acquire and/or finance same has been outstanding, for the 12 month
period immediately preceding such acquisition (without giving effect
to any credit for unobtained or unrealized gains in connection with
such Permitted Acquisition, but taking into account such adjustments
to the overhead of such properties and assets as may reasonably
determined and specified by the Borrower to reflect the overhead
generally applicable to similar properties and assets owned by the
Borrower and its Subsidiaries, including provision for a management
fee of 5%, as and to the extent the Administrative Agent determines
such adjustments to be reasonable and appropriate under the particular
circumstances), (v) to the extent applicable, confirms that the
Borrower has obtained an environmental assessment which demonstrate
that the representations and warranties of the Borrower contained in
this Agreement (including those set forth in section 6.15) shall be
true and correct after giving effect to such Permitted Acquisition,
(vi) confirms that the property acquired pursuant to such Permitted
Acquisition (or owned by the partnership or other entity in which
interests have been acquired or to which loans and/or advances have
been made pursuant to such Permitted Acquisition) is to be managed by
the Borrower or any Subsidiary Guarantor, and (vii) attach thereto a
true and correct copy of the then proposed purchase agreement or
similar agreement, partnership agreement and/or management contract
entered into in connection with such Permitted Acquisition;
(e) if no Default or Event of Default shall have occurred and
be continuing or would result therefrom, the Borrower or any of its
Subsidiaries may (i) sell any property, land or building (including
any related receivables or other intangible assets), or (ii) sell the
entire capital stock (or other equity interests) and Indebtedness of
any Subsidiary owned by the Borrower or any other Subsidiary, or (iii)
permit any Subsidiary to be merged or consolidated with a person which
is not an Affiliate, or (iv) consummate any other Asset Sale; provided
that (A) the consideration for such transaction represents fair value
(as determined by the Board of Directors of the Borrower), (B) such
consideration consists of at least 90% cash or Cash Equivalents, or in
the case of an exchange of properties the property acquired represents
reasonably equivalent value (or to the extent that such value is less
than the value of the property transferred, the difference is payable
in cash or Cash Equivalents), (C) at least 15 days prior to the date
of any such transaction, the Borrower shall have delivered to the
Administrative Agent an officer's certificate executed on behalf of
the Borrower by an Authorized Officer of the Borrower, which
certificate shall contain a description of the proposed transaction,
the date such transaction is scheduled to be consummated, the
estimated purchase price or other consideration for such transaction,
and which shall include a certified copy of the draft or definitive
documentation pertaining thereto, (D) any such assets, capital stock
(or other equity interests) and Indebtedness or Subsidiary shall not
represent more than 5% of the Consolidated Net Worth of the Borrower
as at the end of its most recently completed
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fiscal quarter for which financial statements have been delivered
pursuant to section 7.1(a) or (b), and shall not have contributed more
than 5% of EBITDA of the Borrower for the four consecutive fiscal
quarters ended most recently prior thereto for which financial
statements have been delivered pursuant to section 7.1(a) or (b), (E)
all such assets, capital stock (or other equity interests) and
Indebtedness or Subsidiary so disposed of after the Closing Date shall
not represent more than 15% of the Consolidated Net Worth of the
Borrower as at the end of its most recently completed fiscal quarter
prior to the last such transaction for which financial statements have
been delivered pursuant to section 7.1(a) or (b);
(f) the Borrower may complete any transaction otherwise
permitted by the preceding clause (e), notwithstanding the limitations
contained in clauses (D) and (E) thereof, if (A) as to any such
transaction where the Net Cash Proceeds are not in excess of
$5,000,000, within six months following any such transaction the
Borrower purchases or enters into a binding commitment to purchase
property, land or buildings of at least equivalent value, and if any
such property, land or buildings of at least equivalent value are not
so purchased within six months, the Borrower will take such actions in
respect thereof as are contemplated by clauses (C) or (D) below, or
(B) contemporaneously with the consummation of such transaction, the
Borrower purchases property, land or buildings of at least equivalent
value which are subjected to the Lien of Additional Security Documents
in accordance with the provisions hereof, or (C) the Borrower prepays
the Loans in an aggregate amount (1) equal to the Net Cash Proceeds of
such transaction, in the case of any such property which is part of
the Development Property Pool, or (2) in the case of any property
which is part of the Mature Property Pool, the amount determined for
such property on the basis of the multiple (i.e. 5, 4.75 or 4)
reflected in the maximum ratio contained in section 8.12(a) applicable
at the time (even if section 8.12(a) shall no longer be in effect,
having been superseded by section 8.12(b), times the Cash Flow from
Operations for such property, or (D) the Borrower pays to the
Administrative Agent an amount in cash and/or Cash Equivalents equal
to such amount and the Administrative Agent shall hold such payment as
security for the obligations of the Borrower hereunder pursuant to a
cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent and the Borrower
(which shall permit certain investments in Cash Equivalents
satisfactory to the Administrative Agent and the Borrower until the
proceeds are applied to the secured obligations or earlier released by
the Administrative Agent to the Borrower from time to time in amounts
equal to the aggregate MPP Revolving Loans which the Borrower could
obtain at any such time, based upon the receipt by the Administrative
Agent of such certificates pursuant to section 7.1(e) and other
evidence as it may require to establish the amount of MPP Revolving
Loans which could be obtained at any such time in compliance with the
MPP Revolving Loan Sublimit and other applicable provisions of this
Agreement);
(g) the Reorganization; and
(h) the Borrower or any of its Subsidiaries may enter into
leases of property or assets not constituting Permitted Acquisitions
in the ordinary course of business not otherwise in violation of this
Agreement and to the extent not prohibited by section 8.6.
To the extent the Required Lenders (or all of the Lenders as shall be required
by section 12.12) waive the provisions of this section 8.2 with respect to the
sale, transfer or other disposition of any Collateral, or any Collateral is
sold, transferred or disposed of as permitted by a this section 8.2, (i) such
Collateral shall be sold, transferred or disposed of free and clear of the Liens
created by the respective Security Document; (ii) if such Collateral includes
all of the capital stock of a Subsidiary Guarantor, such capital stock shall be
released from the Pledge Agreement and such Subsidiary shall be released from
the Subsidiary Guaranty; and (iii) the Administrative Agent and the Collateral
Agent shall be authorized to take actions deemed appropriate by them in order to
effectuate the foregoing.
8.3. Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
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or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries, other than for purposes of collection in
the ordinary course of business) or assign any right to receive income, or file
or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute, except:
(a) Liens for taxes not yet delinquent or Liens for taxes
being contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of the
Borrower) have been established;
(b) Liens in respect of property or assets imposed by law
which were incurred in the ordinary course of business, such as
carriers', warehousemen's, materialmen's and mechanics' Liens and
other similar Liens arising in the ordinary course of business, which
do not in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the
operation of the business of the Borrower or any Subsidiary;
(c) Liens created by this Agreement or the other Credit
Documents;
(d) Liens (i) in existence on the Closing Date which are
listed, and the Indebtedness secured thereby and the property subject
thereto on the Closing Date described, in Annex V, (ii) arising out of
the refinancing, extension, renewal or refunding of any Indebtedness
secured by any such Liens, provided that the principal amount of such
Indebtedness is not increased and such Indebtedness is not secured by
any additional assets;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under section
9.1(h);
(f) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money);
(g) Leases or subleases granted to others not interfering in
any material respect with the business of the Borrower or any of its
Subsidiaries and any interest or title of a lessor under any lease not
in violation of this Agreement;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material, respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from financing statements regarding leases
not in violation of this Agreement;
(j) Liens securing Priority Debt to the extent such Liens do
not attach to any property or assets other than the property or asset
financed or refinanced by any such Debt;
(k) Liens created by virtue of Capitalized Lease Obligations,
provided that such Liens are only in respect of the property or assets
subject to, and secure only, the respective Capital Lease;
(l) Liens (i) placed upon equipment or machinery used in the
ordinary course of business of the Borrower or any Subsidiary at the
time of (or within 180 days after) the acquisition thereof by the
Borrower or any such Subsidiary to secure Indebtedness incurred to pay
all or a portion of the purchase price thereof, provided that the Lien
encumbering the equipment or
40
<PAGE>
machinery so acquired does not encumber any other asset of the
Borrower or any such Subsidiary; or (ii) existing on specific tangible
assets at the time acquired by the Borrower or any Subsidiary or on
assets of a person at the time such person first becomes a Subsidiary
of the Borrower, provided that (A) any such Liens were not created at
the time of or in contemplation of the acquisition of such assets or
person by the Borrower or any of its Subsidiaries, (B) in the case of
any such acquisition of a person, any such Lien attaches only to
specific tangible assets of such person and not assets of such person
generally, (C) the Indebtedness secured by any such Lien does not
exceed 100% of the fair market value of the asset to which such lien
attaches, determined at the time of the acquisition of such asset or
the time at which such person becomes a Subsidiary of the Borrower
(except in the circumstances described in clause (ii) above to the
extent such Liens constituted customary purchase money Liens at the
time of incurrence entered into in the ordinary course of business),
and (D) the Indebtedness secured thereby is permitted by section
8.4(b); and
(m) Permitted Encumbrances.
8.4. Indebtedness. The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Indebtedness of the Borrower or any Subsidiary subject to
Liens permitted by section 8.3(l), provided that the aggregate
principal amount of such Indebtedness shall not exceed $3,000,000 at
any time outstanding; and Indebtedness of the Borrower or any
Subsidiary in respect of Capital Leases, provided that the aggregate
amount of such Capitalized Lease Obligations under all Capital Leases
entered into after the Closing Date shall not exceed $10,000,000 at
any time outstanding;
(c) Existing Indebtedness, and any refinancing, extension,
renewal or refunding of any such Existing Indebtedness, provided that
(i) the aggregate principal amount of any such Indebtedness in respect
of Residential Mortgage Bond programs of the Borrower and its
Subsidiaries (as described in the Registration Statement) currently in
existence is not increased above $50,000,000, and (ii) the principal
amount of any other such Existing Indebtedness is not increased;
(d) Indebtedness of the Borrower under the Interest Rate
Agreements entered into pursuant to section 8.16;
(e) Indebtedness of (i) the Borrower to any Subsidiary
Guarantor; or (ii) any Subsidiary Guarantor to the Borrower or any
other Subsidiary Guarantor; or (iii) any Subsidiary (other than a
Subsidiary Guarantor) to the Borrower or to a Subsidiary Guarantor, in
an aggregate principal amount not in excess of $10,000,000 at any time
outstanding for all Indebtedness of all Subsidiaries which are not
Subsidiary Guarantors to the Borrower and the Subsidiary Guarantors;
provided that such Indebtedness referred to in this clause (e) shall
be evidenced by a promissory note which shall be pledged to the
Collateral Agent pursuant to the Pledge Agreement;
(f) Contingent Obligations of (i) the Borrower or any
Subsidiary in respect of (A) leases of real property entered into by
the Borrower or any Subsidiary and (B) obligations of any Subsidiary
Guarantor permitted under this Agreement and (ii) the Borrower or any
Subsidiary in respect of any other person (other than in respect of
indebtedness for borrowed money) arising as a matter of applicable law
because the Borrower or such Subsidiary is or is deemed to be a
general partner of such other person;
(g) any Subsidiary may incur indebtedness ("Priority Debt")
to finance or refinance a property owned at the Closing Date and not
then subject to any IRB Debt or acquired pursuant
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<PAGE>
to a Permitted Acquisition, provided that (i) Priority Debt of any
Subsidiary which is not a Subsidiary Guarantor shall not be guaranteed
(or otherwise supported) directly or indirectly by the Borrower, any
Subsidiary Guarantor or any other Subsidiary (other than the
Subsidiary incurring same) (except that the documentation governing
any Priority Debt may contain provisions relating to customary
indemnities from the Borrower or a Subsidiary Guarantor for fraud, use
of proceeds and environmental matters or as are otherwise reasonably
acceptable to the Administrative Agent), (ii) the principal amount of
any issue of Priority Debt shall not exceed 115% of the fair market
value of the property securing such Debt, determined at the time of
the acquisition of such property by the Borrower (and evidenced by a
certificate on behalf of the Borrower by an Authorized Officer of the
Borrower, if requested by the Administrative Agent), and (iii) the
aggregate principal amount of Priority Debt incurred by all
Subsidiaries at any time outstanding shall not exceed an amount equal
to 25% of Consolidated Net Worth, determined as of the most recently
completed fiscal quarter prior to the date of the most recent such
incurrence for which financial statements have been delivered pursuant
to section 7.1(a) or (b); and
(h) the Borrower or any Subsidiary Guarantor may incur
additional Indebtedness other than any guaranty or other Contingent
Obligation created in respect of Priority Debt (except for the
indemnities specifically referred to in clause (g)) in an aggregate
principal amount not to exceed $5,000,000 at any time outstanding.
8.5. Advances, Investments and Loans. The Borrower will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any person, except:
(a) the Borrower or any of its Subsidiaries may invest in
cash and Cash Equivalents;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(c) loans and advances (i) to employees for business-related
travel expenses, moving expenses and other similar expenses, in each
case incurred in the ordinary course of business, and (ii) to
employees in an aggregate principal amount not to exceed $500,000 at
any time outstanding, shall be permitted;
(d) to the extent allowed by section 8.2(c), (d) or (h), and
the creation of Subsidiaries in compliance with section 8.14 shall be
permitted;
(e) investments acquired by the Borrower or any of its
Subsidiaries (i) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer
of such other investment, or (ii) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
(f) investments of the Borrower in Interest Rate Agreements
entered into pursuant to section 8.16;
(g) Loans and advances permitted by section 8.4(e);
(h) the investments outstanding on the Closing Date which are
listed on Annex VI hereto (without any increase thereto); and
(i) loans, advances and investments not otherwise permitted
pursuant to the preceding clauses, made in cash or Cash Equivalents
after the Closing Date and taking into account any
42
<PAGE>
repayment of any such loans or advances or the return or other
realization in cash or Cash Equivalents of the amount of such
investments, in compliance with the following requirements: (A) at the
time of making any such loan, advance or investment and after giving
effect thereto, no Default or Event of Default shall have occurred and
be continuing; (B) the person (including a joint venture) to which
such loan or advance is made, or in which such investment is made,
shall own or be committed to acquire one or more assisted living
properties located in the United States; (C) the Borrower or a
Subsidiary Guarantor shall have been retained (or shall have a
commitment to be retained upon completion of any proposed development)
to manage such property or properties, subject to any termination of
any existing management contracts pertaining thereto; (D) at least 10
days prior to the date of any such loan, advance or investment
involving $3,000,000 or more (including any commitments in respect of
future loans, advances or investments), the Borrower shall have
delivered to the Administrative Agent an officer's certificate
executed on behalf of the Borrower by an Authorized Officer of the
Borrower, which certificate shall (1) contain the date such loan,
advance or investment is scheduled to be consummated, (2) specify the
known or estimated amount thereof, (3) contain a description, to the
extent then known, of the property and/or assets owned or proposed to
be acquired by such person, (4) demonstrate that at the time of making
any such loan, advance or investment the covenants contained in
sections 8.10, 8.11, 8.12 and 8.13 shall be complied with on a pro
forma basis as if the loan, advance or investment so made had been
made by the Borrower, and the Indebtedness assumed and/or incurred to
acquire and/or finance same has been outstanding, for the 12 month
period immediately preceding such loan, advance or investment (without
giving effect to any credit for unobtained or unrealized gains in
connection therewith), (5) confirms that the property acquired or to
be acquired by such person with the proceeds of such loan, advance or
investment is to be (or is to be following completion of development
thereof) managed by the Borrower or a Subsidiary Guarantor, and (6)
attach thereto a true and correct copy of the then proposed loan
agreement, purchase agreement or similar agreement, partnership
agreement and/or management contract entered into in connection with
such loan, advance or investment; and (E) the aggregate amount of all
such loans, advances and investments made after the Closing Date, when
taken together with the aggregate principal amount of all loans and
advances at the time outstanding made by the Borrower and the
Subsidiary Guarantors to all Subsidiaries which are not Subsidiary
Guarantors, shall not exceed $20,000,000; provided that there shall be
excluded from the foregoing amount the amount of any such loans,
advances and investments made pursuant to this clause (i) as to which
the person to whom or in whom any such loan, advance or investment is
made has executed and delivered to the Administrative Agent (I) a
guaranty agreement, substantially in the form of the Subsidiary
Guaranty, guaranteeing the Obligations, subject to the effect of any
limitations on the enforceability of such guaranty arising under any
fraudulent transfer laws and has provided to the Administrative Agent
such evidence as the Administrative Agent may reasonably request to
establish the financial condition and solvency of such person, and
(II) a mortgage and security agreement, satisfactory in form and
substance to the Administrative Agent, pursuant to which such person
has granted a first priority Lien on and security interest in all of
its assets and properties, subject to no encumbrances which are not
acceptable to the Administrative Agent, accompanied by such supporting
documentation as is contemplated by section 7.10(a).
8.6. Certain Leases. The Borrower will not permit the aggregate
payments (including, without limitation, any property taxes paid by the Borrower
and its Subsidiaries as additional rent or lease payments) by the Borrower and
its Subsidiaries on a consolidated basis under agreements in effect as of the
Closing Date and/or entered into after the Closing Date (including any such
agreement that is an extension, replacement, substitution, or renewal of any
agreement entered into prior to such date) to rent or lease any real or personal
property (exclusive of (i) Capitalized Lease Obligations and (ii) "true leases",
that is leases which for Federal income tax purposes the Borrower or any
Subsidiary is not considered the owner of the property involved) to exceed
$1,000,000 in any fiscal year of the Borrower.
8.7. Prepayments and Refinancings of IRB Debt, Modifications of
Agreements, etc. The Borrower will not, and will not permit any of its
Subsidiaries to:
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(a) make (or give any notice in respect thereof) any
voluntary or optional payment or prepayment or redemption or
acquisition for value of (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities
before due for the purpose of paying when due) or exchange of, or
refinance or refund, any Existing Indebtedness which is IRB Debt;
provided that the Borrower or any Subsidiary may refinance or refund
any such IRB Debt if the aggregate principal amount thereof is not
increased and the weighted average life to maturity thereof (computed
in accordance with standard financial practice) is not reduced by more
than 10%, or if such aggregate principal amount is so increased (in
compliance with any limitations contained in section 8.4) or weighted
average life to maturity is so decreased, the Borrower shall have, or
shall have caused the applicable Subsidiary to have, granted to the
Administrative Agent, as security for the Obligations, a Mortgage
covering the property financed by such IRB Debt, together with such
supporting documentation as is contemplated by section 7.10(a), which
Mortgage shall be (i) a first priority Mortgage, if such IRB Debt is
supported, directly or indirectly by a Letter of Credit issued (or
deemed issued) hereunder, securing only the Obligations (and such IRB
Debt), or (ii) a second priority Mortgage, securing the Obligations,
which is junior to any mortgage securing such IRB Debt (and any
letters of credit issued in support thereof), in the case of any such
IRB Debt not supported, directly or indirectly by a Letter of Credit
issued (or deemed issued) hereunder;
(b) amend or modify (or permit the amendment or modification
of) any of the terms or provisions of or terminate (other than any
scheduled termination in accordance with the terms thereof) (i) in any
manner adverse to the interests of the Lenders any documents or
agreement governing any Existing Indebtedness, or (ii) in any manner
that has, or which would reasonably be expected to have, a Material
Adverse Effect, any Acquisition Document: and/or
(c) amend, modify or change in any manner materially adverse
to the interests of the Lenders the certificate of incorporation
(including, without limitation, and in any event, by the filing of any
certificate of designation), partnership agreement, certificate of
formation or by-laws of any Credit Party, or enter into any new
agreement with respect to the capital stock or equity interests, as
the case may be, of any Credit Party (to the extent adverse to the
interests of the Lenders).
8.8. Dividends, etc. The Borrower will not, and will not permit any
Subsidiary to declare or pay any dividends (other than, in the case of the
Borrower, dividends payable solely in common stock of the Borrower) or return
any capital to, its stockholders, equity holders or partners or authorize or
make any other distribution, payment or delivery of property or cash to its
stockholders, equity holders or partners, as such, or redeem, retire, purchase
or otherwise acquire, directly or indirectly, for any consideration, any shares
of any class of its capital stock or equity or partnership interests now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, or permit any Subsidiary to purchase or otherwise acquire
for consideration, any shares of any class of the capital stock or equity or
partnership interests of the Borrower or any such Subsidiary, as the case may
be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued with respect to such capital stock or limited
liability company or partnership interests) (all of the foregoing "Dividends"),
except that (i) any Wholly-Owned Subsidiary of the Borrower may pay Dividends to
the Borrower or to any Subsidiary Guarantor, and (ii) any other Subsidiary of
the Borrower may pay Dividends to the holders of its equity interests in
accordance with such contractual arrangements as may exist from time to time
among the holders of its equity interests.
8.9. Transactions with Affiliates. The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction or series of transactions
with any Affiliate (other than, in the case of a Subsidiary, the Borrower or a
Subsidiary Guarantor) other than in the ordinary course of business and on terms
and conditions substantially as favorable to the Borrower or such Subsidiary as
would be obtainable, in the Borrower's reasonable judgment, by the Borrower or
such Subsidiary at the time in a comparable arm's-length transaction with a
person other than an Affiliate except (i) Management Contracts, (ii) investments
permitted by section 8.5 and (iii) payments made pursuant to section 8.8.
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8.10. Consolidated Net Worth. The Borrower will not permit
Consolidated Net Worth at any time to be less than $69,928,000 (plus the net
proceeds of the exercise of the over-allotment option referred to in the
Registration Statement, if such option is exercised), except that (i) effective
as of the end of the Borrower's fiscal quarter ended December 31, 1996, and as
of the end of each fiscal quarter thereafter, the foregoing amount (as it may
from time to time be increased as herein provided), shall be increased by 50% of
Consolidated Net Income for the fiscal quarter ended on such date, if any (there
being no reduction in the case of any such Consolidated Net Income which
reflects a deficit), and (ii) the foregoing amount (as it may from time to time
be increased as herein provided), shall be increased by an amount equal to 100%
of the cash proceeds (net of underwriting discounts and commissions and other
customary fees and costs associated therewith) from any sale or issuance of
equity by the Borrower after the Closing Date (other than (i) the over-allotment
option related to the IPO and (ii) any sale or issuance to management or
employees).
8.11. Capitalization Ratio. The Borrower will not at any time permit
the ratio of (i) Total Indebtedness to (ii) Total Capitalization, expressed as a
percentage, to exceed (A) 75.00%, at any time prior to the termination of the
Parent Guaranty in accordance with its terms, or (B) 60.00% at any time
thereafter.
8.12. Leverage Ratio. (a) The Borrower will not, at any time prior to
the termination of the Parent Guaranty in accordance with its terms, permit the
ratio of (i) Net Debt on the Mature Property Pool to (ii) Cash Flow from
Operations for the Mature Property Pool for any Test Period of 12 consecutive
months, to exceed the ratio applicable at such time as follows:
<TABLE>
<CAPTION>
==================================================== ===============================================================
Time Ratio
==================================================== ===============================================================
<S> <C>
Prior to June 30, 1997 4.75 to 1.00
- ---------------------------------------------------- ---------------------------------------------------------------
June 30, 1997 through June 29, 1998 4.75 to 1.00
- ---------------------------------------------------- ---------------------------------------------------------------
June 30, 1998 through June 29, 1999 4.50 to 1.00
- ---------------------------------------------------- ---------------------------------------------------------------
Thereafter 4.25 to 1.00
==================================================== ===============================================================
</TABLE>
As used herein, the term "Net Debt on the Mature Property Pool" means (i) all
Indebtedness of the Borrower and its Subsidiaries, on a consolidated basis, but
without duplication in respect of Letters of Credit supporting any Indebtedness
otherwise included, less the sum of (ii) cash and Cash Equivalents of the
Borrower and the Subsidiary Guarantors, to the extent that the same exceeds
$10,000,000, (iii) any such Indebtedness guaranteed pursuant to the Parent
Guaranty, (iv) the existing $14,000,000 Indebtedness owed to HPL, incurred
pursuant to the Incorporation Agreement, (v) any such Indebtedness associated
with the existing Resident Mortgage Bonds programs referred to in the
Registration Statement (without giving effect to any refinancing thereof which
increases the aggregate principal amount thereof above $50,000,000), and (v) any
such Indebtedness which constitutes Priority Debt of a Subsidiary; and the term
"Cash Flow from Operations" means, for any particular property or group of
properties, the sum of, after elimination of minority interests not owned by the
Borrower or a Subsidiary Guarantor, of net income, depreciation, amortization
and other non-cash charges to net income, interest expense and provision for
income taxes, minus non-cash credits to net income, all as determined under GAAP
with respect to the property or group of properties, and after allocation of a
management fee of 5% with respect to such property or group of properties. In
determining Cash Flow from Operations with respect to properties in the Mature
Property Pool, there shall be excluded from such Cash Flow from Operations the
Cash Flow from Operations in respect of (A) any such properties which are leased
(other than Hearthstone #7165), to the extent that the Cash Flow from Operations
of all such properties for any Test Period exceeds $1,000,000, (B) any such
properties which are managed but not owned or leased, to the extent that the
Cash Flow from Operations of all such properties for any Test Period exceeds
$200,000.
(b) The Borrower will not, at any time following the termination of
the Parent Guaranty in accordance with its terms, permit the ratio of (i) Total
Indebtedness to (ii) EBITDA for any Test Period, to exceed 3.50 to 1.00.
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8.13. Interest Coverage. The Borrower will not permit the Interest
Coverage Ratio for any Test Period to be less than 2.00 to 1.00.
8.14. Creation of Subsidiaries. The Borrower will not, and will not
permit any Subsidiary to, create or acquire any Subsidiary other than (i) a
Subsidiary that executes a counterpart of the Subsidiary Guaranty, the Pledge
Agreement and the Security Agreement, and (ii) a Subsidiary (other than a
Wholly-Owned Subsidiary, unless such Wholly-Owned Subsidiary has outstanding
Priority Debt), to the extent, in each case, that 100% of the capital stock or
other equity interests of such entity which is owned by the Borrower or any
other Subsidiary is pledged to the Collateral Agent pursuant to the Pledge
Agreement. Upon an entity ceasing to be a Subsidiary to which reference is made
in the preceding clause (ii), such entity, unless liquidated, shall become a
Subsidiary Guarantor and execute all documents required by the preceding and
following sentences. In addition, each new Subsidiary Guarantor created pursuant
to this section 8.14 shall execute and deliver, or cause to be executed, all
other relevant documentation of the type described in section 5 as such new
Subsidiary Guarantor would have had to deliver if such new Subsidiary were a
Credit Party on the Closing Date.
8.15. Limitation on Certain Restrictions on Subsidiaries. The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction in the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's other Subsidiaries, or transfer any of its property or assets to the
Borrower or any of the Borrower's other Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) this Agreement and the other Credit Documents, (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of a Subsidiary of the Borrower, (iv) customary provisions restricting
assignment of any licensing agreement entered into by any Subsidiary of the
Borrower in the ordinary course of business, (v) customary provisions
restricting the transfer of assets subject to Liens permitted under section
8.3(j) and (l), (vi) customary restrictions governing any of the Indebtedness of
a Subsidiary permitted pursuant to 8.4(d) or (g), (vii) restrictions contained
in the reimbursement and other agreements relating to existing letters of credit
issued to support outstanding industrial revenue bonds the proceeds of which
were used to finance 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, (viii) any document relating
to Indebtedness secured by a Lien permitted by section 8.3, insofar as the
provisions thereof limit grants of junior liens on the assets securing such
Indebtedness, (ix) any agreement relating to industrial revenue bonds permitted
by section 8.4(c) insofar as the provisions thereof limit grants to other
persons of Liens on the related facility or on any of such industrial revenue
bonds held by the remarketing agent with respect thereto (or, in the case where
the obligor thereon is a partnership, on any other assets of such partnership),
and (x) 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.
8.16. Interest Rate Hedging. The Borrower will not, and will not
permit any Subsidiary to, enter into any Interest Rate Agreement unless (i) such
Interest Rate Agreement is intended to fix or establish a maximum interest rate
in respect of Indebtedness with a notional amount not in excess of the Total
Commitment and is embodied in a standard ISDA form of agreement which is
acceptable to the Documentation Agent with respect to any intercreditor issues,
(ii) the counterparty is a Lender or another financial institution acceptable to
the Managing Agent and the Documentation Agent, and (iii) the Borrower promptly
provides a true and complete copy of such Interest Rate Agreement to the
Documentation Agent, the Managing Agent and the Administrative Agent. At or
following the effective date of any such Interest Rate Agreement, the Managing
Agent may, upon written notification to the Borrower, the Administrative Agent,
the Lenders and such counterparty, designate (which designation shall be made
only upon the instructions or with the consent of the Required Lenders in the
event the counterparty is not a Lender or an Affiliate of a Lender) the credit
exposure of such counterparty under such Interest Rate Agreement as an
obligation entitled to share, pari passu with the Obligations, in respect of the
benefits provided by the Collateral under the Security Documents, in accordance
with the applicable provisions of the Security Documents, and/or in the benefits
provided by the Parent Guaranty (in respect of any credit exposure which
constitutes a Required Payment
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<PAGE>
(as defined in the Parent Guaranty)), and if the Managing Agent so designates
such credit exposure, the applicable Interest Rate Agreement of such
counterparty shall be considered a "Designated Interest Rate Agreement".
SECTION 9. EVENTS OF DEFAULT.
9.1. Events of Default. Upon the occurrence of any of the following
specified events (each an "Event of Default"):
(a) Payments: the Borrower shall (i) default in the payment
when due of any principal of the Loans or any reimbursement obligation
in respect of any Unpaid Drawing or (ii) default, and such default
shall continue for three or more days, in the payment when due of any
interest on the Loans or any Fees or any other amounts owing hereunder
or under any other Credit Document; or
(b) Representations, etc.: any representation, warranty or
statement made by any Credit Party herein or in any other Credit
Document or in any statement or certificate delivered or required to
be delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or
(c) Covenants: the Parent or the Borrower shall (i) default
in the due performance or observance by it of any term, covenant or
agreement contained in section 11, 12, 13(f), 14, 15, 16 or 17 of the
Parent Guaranty or section 7.10, 7.11 or 8 of this Agreement, or (ii)
default in the due performance or observance by it of any term,
covenant or agreement (other than those referred to in clause (a) or
(b) above or the preceding clause (i) of this clause (c)) contained in
the Parent Guaranty or this Agreement or any other Credit Document and
such default shall continue unremedied for a period of at least 30
days after notice by the Administrative Agent or the Required Lenders;
or
(d) Default Under Other Agreements: (i) Borrower and
Subsidiaries: the Borrower or any of its Subsidiaries shall (A)
default in any payment with respect to any Indebtedness (other than
the Obligations and/or any non-recourse Indebtedness), and such
default shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such
Indebtedness, or (B) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained
in any instrument or agreement evidencing, securing or relating
thereto (and all grace periods applicable to such observance,
performance or condition shall have expired), or any other event shall
occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its
stated maturity; or any such Indebtedness of the Borrower or any of
its Subsidiaries shall be declared to be due and payable, or shall be
required to be prepaid (other than by a regularly scheduled required
prepayment or redemption, prior to the stated maturity thereof),
provided that it shall not constitute an Event of Default pursuant to
this clause (d)(i) unless the aggregate amount of all Indebtedness
referred to in this clause (d)(i) above exceeds $2,000,000 at any one
time; or
(ii) Parent and Certain of its Subsidiaries: unless the
Parent Guaranty shall have been terminated in accordance with its
terms, (A) any event or condition shall occur that constitutes an
Event of Default under and as defined in the 1995 Credit Agreement (as
defined in the Parent Guaranty), after giving effect to any waivers,
consents or amendments with respect thereto; or (B) any event or
condition shall occur that (1) results in the acceleration of the
maturity of any Indebtedness of the Parent or any of its Subsidiaries
(other than the Borrower and its Subsidiaries), other than any such
Indebtedness outstanding under the 1995 Credit Agreement, or (2)
enables the holder or holders of such Indebtedness 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 Parent
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and such Subsidiaries upon the acceleration of all Indebtedness
referred to in this clause (B) equals or exceeds $25,000,000; or
(e) Bankruptcy, etc.: (i) Borrower and Subsidiaries: the
Borrower or any of its Material Subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Material Subsidiaries and
the petition is not controverted within 10 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of,
all or substantially all of the property of the Borrower or any of its
Material Subsidiaries; or the Borrower or any of its Material
Subsidiaries commences (including by way of applying for or consenting
to the appointment of, or the taking of possession by, a
rehabilitator, receiver, custodian, trustee, conservator or liquidator
(collectively, a "conservator") of itself or all or any substantial
portion of its property) any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency, liquidation, rehabilitation, conservatorship
or similar law of any jurisdiction whether now or hereafter in effect
relating to the Borrower or any of its Material Subsidiaries; or any
such proceeding is commenced against the Borrower or any of its
Material Subsidiaries to the extent such proceeding is consented by
such person or remains undismissed for a period of 60 days; or the
Borrower or any of its Material Subsidiaries is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Borrower or any of its Material
Subsidiaries suffers any appointment of any conservator or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Borrower or
any of its Material Subsidiaries makes a general assignment for the
benefit of creditors; or any corporate (or similar organizational)
action is taken by the Borrower or any of its Material Subsidiaries
for the purpose of effecting any of the foregoing; or
(ii) Parent and Certain of its Subsidiaries: unless the
Parent Guaranty shall have been terminated in accordance with its
terms, an involuntary case or other proceeding shall be commenced
against the Parent or any of its Material Subsidiaries (other than the
Borrower and its Subsidiaries) 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 the Parent or any of its Material Subsidiaries (other
than the Borrower and its Subsidiaries) under the Bankruptcy Code; or
(f) ERISA: (i) any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under
section 412 of the Code or section 302 of ERISA or a waiver of such
standard or extension of any amortization period is sought or granted
under section 412 of the Code or section 303 or 304 of ERISA, a
Reportable Event shall have occurred, any Plan which is subject to
Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan which is subject to Title
IV of ERISA is, shall have been or is likely to be terminated or to be
the subject of termination proceedings under ERISA, any Plan shall
have an Unfunded Current Liability, a contribution required to be made
with respect to a Plan has not been timely made, the Borrower, or any
Subsidiary of the Borrower or any ERISA Affiliate has incurred or is
likely to incur any liability to or on account of a Plan under section
409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or section 401(a)(29), 4971 or 4975 of the Code or on account
of a group health plan (as defined in section 607(1) of ERISA or
section 4980B(g)(2) of the Code) under section 4980B of the Code, or
the Borrower, or any Subsidiary of the Borrower has incurred or is
likely to incur liabilities pursuant to one or more employee welfare
benefit plans (as defined in section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as
required by section 601 of ERISA) or Plans; or (ii) there shall result
from any such event or events the imposition of a lien, the granting
of a
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security interest, or a liability or a material risk of incurring a
liability; and (iii) any such event or events or any such lien,
security interest or liability, individually, and/or in the aggregate,
in the opinion of the Required Lenders, has had, or could reasonably
be expected to have, a Material Adverse Effect; or
(g) Security Documents: any Security Document shall cease to
be in full force and effect (other than upon termination thereof in
accordance with its terms), or shall cease to give the Collateral
Agent the Liens purported to be created thereby in favor of the
Collateral Agent, or any Credit Party shall default in the due
performance or observance of any material term, covenant or agreement
on its part to be performed or observed pursuant to any Security
Document and such default shall continue beyond any cure or grace
period specifically provided for in such Security Document; or
(h) Judgments: (i) Borrower and Subsidiaries: one or more
judgments or decrees shall be entered against the Borrower and/or any
of its Subsidiaries involving a liability (not paid or fully covered
by insurance) of $2,000,000 or more in the aggregate for all such
judgments and decrees for the Borrower and its Subsidiaries) and any
such judgments or decrees shall not have been vacated, discharged or
stayed or bonded pending appeal within 30 days from the entry thereof;
or
(ii) Parent and Certain of its Subsidiaries: unless the
Parent Guaranty shall have been terminated in accordance with its
terms, any 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 Parent or any of its Subsidiaries (other than the Borrower
and its Subsidiaries), net of any portion thereof covered by insurance
as to which the insurance carrier has acknowledged its responsibility;
or
(i) Guaranty: any Guaranty or any provision thereof shall
cease to be in full force or effect at any time prior to the
termination thereof in accordance with its terms, or any Guarantor or
any person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such Guaranty or any
Guarantor shall default in the due performance or observance of any
material term, covenant, or agreement on its part to be performed or
observed pursuant to the relevant Guaranty.
9.2. Acceleration, etc. Upon the occurrence of any Event of Default,
and at any time thereafter, if any Event of Default shall then be continuing,
the Administrative Agent shall, upon the written request of the Required
Lenders, by written notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of the Administrative Agent or any
Lender to enforce its claims against the Borrower, except as otherwise
specifically provided for in this Agreement (provided that, if an Event of
Default specified in section 9.1(e) shall occur with respect to the Borrower,
the result which would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Lender shall forthwith
terminate immediately and any Commitment Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest in respect of all Loans, all Unpaid Drawings and all
obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii)
enforce, as Administrative Agent (or direct the Collateral Agent to enforce),
any or all of the Liens and security interests created pursuant to the Security
Documents; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; and (v) direct the Borrower to pay (and the Borrower
hereby agrees that on receipt of such notice or upon the occurrence of an Event
of Default with respect to the Borrower under section 9.1(e), it will pay) to
the Collateral Agent an amount of cash equal to the aggregate Stated Amount of
all Letters of Credit then outstanding (such amount to be held as security after
the Borrower's reimbursement obligations in respect thereof).
9.3. Application of Liquidation Proceeds9.3. Application of
Liquidation Proceeds. All monies received by the Administrative Agent, the
Collateral Agent or any Lender from the exercise of remedies hereunder or under
the Security Documents, the other
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Credit Documents or under any other documents relating to this Agreement shall,
unless otherwise required by the terms of the Security Documents, the other
Credit Documents or by applicable law, be applied as follows:
(a) Proceeds of Parent Guaranty. All monies received from the
exercise of remedies under the Parent Guaranty shall be applied:
(i) first, to the payment of all expenses (to the extent
not paid by the Parent) incurred by the Administrative Agent,
the Collateral Agent and the Lenders in connection with the
exercise of such remedies, including, without limitation, all
costs and expenses of collection, attorneys' fees, court
costs and foreclosure expenses;
(ii) second, to the payment pro rata of interest then
accrued on the outstanding DPP Revolving Loans;
(iii) third, to the payment pro rata of any fees then
accrued and payable to the Administrative Agent, any Letter
of Credit Issuer or any Lender under this Agreement in
respect of the DPP Revolving Loans or the Allocated DPP
Letter of Credit Outstandings;
(iv) fourth, to the payment pro rata of (A) the principal
balance then owing on the outstanding DPP Revolving Loans,
(B) the Stated Amount of the Allocated DPP Letter of Credit
Outstandings (to be held and applied by the Collateral Agent
as security for the reimbursement obligations in respect
thereof), and (C) the amounts owing in respect of the
Designated Interest Rate Agreements which constitute Required
Payments (as defined in the Parent Guaranty);
(v) fifth, to the payment to the Lenders of any amounts
then accrued and unpaid under sections 1.07, 1.11, 1.14 and
8.08(d) hereof and which constitute Required Payments (as
defined in the Parent Guaranty), and if such proceeds are
insufficient to pay such amounts in full, to the payment of
such amounts pro rata;
(vi) sixth, to the payment pro rata of all other amounts
owed by the Borrower or any other Credit Party to the
Administrative Agent, to any Letter of Credit Issuer or any
Lender under this Agreement, any Security Document, or any
other Credit Document, which constitute Required Payments (as
defined in the Parent Guaranty), and if such proceeds are
insufficient to pay such amounts in full, to the payment of
such amounts pro rata; and
(vii) finally, any remaining surplus after all of the
Required Payments (as defined in the Parent Guaranty) have
been paid in full, to the Parent, the Borrower or to
whomsoever shall be entitled thereto.
(b) Other Proceeds. All monies received from the exercise of
remedies under any Credit Document (other than the Parent Guaranty)
shall be applied:
(i) first, to the payment of all expenses (to the extent
not paid by the Parent) incurred by the Administrative Agent,
the Collateral Agent and the Lenders in connection with the
exercise of such remedies, including, without limitation, all
costs and expenses of collection, attorneys' fees, court
costs and foreclosure expenses;
(ii) second, to the payment pro rata of interest then
accrued on the outstanding MPP Revolving Loans;
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(iii) third, to the payment pro rata of any fees then
accrued and payable to the Administrative Agent, any Letter
of Credit Issuer or any Lender under this Agreement in
respect of the MPP Revolving Loans or the Allocated MPP
Letter of Credit Outstandings;
(iv) fourth, to the payment pro rata of (A) the
principal balance then owing on the outstanding MPP Revolving
Loans, (B) the Stated Amount of the Allocated MPP Letter of
Credit Outstandings (to be held and applied by the Collateral
Agent as security for the reimbursement obligations in
respect thereof), and (C) the amounts owing in respect of the
Designated Interest Rate Agreements which do not constitute
Required Payments (as defined in the Parent Guaranty);
(v) fifth, to the payment to the Lenders of any
amounts then accrued and unpaid under sections 1.07, 1.11,
1.14 and 8.08(d) hereof and which do not constitute Required
Payments (as defined in the Parent Guaranty), and if such
proceeds are insufficient to pay such amounts in full, to the
payment of such amounts pro rata;
(vi) sixth, to the payment pro rata of all other
amounts owed by the Borrower or any other Credit Party to the
Administrative Agent, to any Letter of Credit Issuer or any
Lender under this Agreement, any Security Document, or any
other Credit Document, which do not constitute Required
Payments (as defined in the Parent Guaranty), and if such
proceeds are insufficient to pay such amounts in full, to the
payment of such amounts pro rata;
(vii) seventh, any remaining surplus after all
Obligations (other than Obligations which constitute Required
Payments, as defined in the Parent Guaranty) have been paid
in full, as provided and in the order of priority specified
in clause (a) above; and
(viii) finally, any remaining surplus after all of the
Obligations have been paid in full, to the Parent, the
Borrower or to whomsoever shall be entitled thereto.
SECTION 10. DEFINITIONS.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms in this Agreement
shall include in the singular number the plural and in the plural the singular:
"Acquisition" shall mean the acquisition by the Borrower of the Assets
as provided in the Acquisition Documents.
"Acquisition Documents" shall mean the Incorporation Agreement and the
transfer documents referred to therein, in each case in the form delivered to
the Administrative Agent pursuant to section 5.1(i) and without giving effect to
any amendment or modification thereof not consented to by the Required Lenders.
"Additional Security Documents" shall have the meaning provided in
section 7.10.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to section 11.9.
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"Administrative Services Agreement" shall mean the Administrative
Services Agreement, between the Borrower and the Parent, in the form delivered
to the Administrative Agent pursuant to section 5.1(d) and without giving effect
to any amendment or modification thereof not consented to by the Required
Lenders.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such person. A person shall be deemed to control a second
person if such first person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors or managers of such second person or (ii) to direct or cause the
direction of the management and policies of such second person, whether through
the ownership of voting securities, by contract or otherwise.
"Aggregate Measured Swap Credit Exposure" shall mean the sum of the
Allocated Measured MPP Swap Credit Exposure and the Allocated Measured DPP Swap
Credit Exposure.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time further modified, amended and/or supplemented.
"Allocated DPP Letter of Credit Outstandings" shall mean the portion,
expressed as a percentage of the Letter of Credit Outstandings, which the
Administrative Agent determines from time to time has been a deemed utilization
of the Commitments in respect of DPP Revolving Loans. The sum of the Allocated
MPP Letter of Credit Outstandings and the Allocated DPP Letter of Credit
Outstandings shall always equal 100%.
"Allocated Measured DPP Swap Credit Exposure" shall mean, at any time
or times, an amount which is equal to (i) a fraction the numerator of which is
the largest amount of DPP Revolving Loans which the Borrower could have
outstanding under this Agreement at such time and the denominator of which is
the Total Commitment at such time, times (ii) the aggregate credit exposure of
the Borrower to the counterparties to the Designated Interest Rate Agreements,
calculated in accordance with standard financial practices, including
appropriate assumptions, employed by financial institutions in evaluating such
credit exposure.
"Allocated MPP Letter of Credit Outstandings" shall mean the portion,
expressed as a percentage of the Letter of Credit Outstandings, which the
Administrative Agent determines from time to time has been a deemed utilization
of the Commitments in respect of MPP Revolving Loans. The sum of the Allocated
DPP Letter of Credit Outstandings and the Allocated MPP Letter of Credit
Outstandings shall always equal 100%.
"Allocated Measured MPP Swap Credit Exposure" shall mean, at any time
or times, an amount which is equal to the aggregate credit exposure of the
Borrower to the counterparties to the Designated Interest Rate Agreements,
calculated in accordance with standard financial practices, including
appropriate assumptions, employed by financial institutions in evaluating such
credit exposure, reduced by the amount, if any, of the Allocated Measured DPP
Swap Credit Exposure.
"Assets" shall mean the assets acquired by the Borrower pursuant to,
and as more fully described in, the Acquisition Documents.
"Asset Sale" shall mean the sale, transfer or other disposition
(including by liquidations of a partnership of the interests therein of the
Borrower or any Subsidiary) by the Borrower or any Subsidiary to any person
other than the Borrower or any Subsidiary Guarantor of any of their respective
asset (other than sales, transfers or other dispositions of obsolete or excess
furniture, fixtures or equipment in the ordinary course of business).
"Assignment Agreement" shall mean an Assignment Agreement
substantially in the form of Exhibit I hereto.
"Authorized Officer" shall mean any officer or employee of a Credit
Party designated as such in writing to the Administrative Agent by such Credit
Party.
"Bankruptcy Code" shall have the meaning provided in section 9.1(e).
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"Base Rate" shall mean, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum shall at
all times be equal to the greater of (i) the rate of interest established by PNC
Bank in Pittsburgh, Pennsylvania, from time to time, as its prime rate, whether
or not publicly announced, which interest rate may or may not be the lowest rate
charged by it for commercial loans or other extensions of credit; and (ii) the
Federal Funds Effective Rate in effect from time to time plus 1/2 of 1% per
annum.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in section 1.8(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean the incurrence of MPP Revolving Loans or DPP
Revolving Loans, as the case may be, consisting of one Type of Loan, by the
Borrower from all of the Lenders having Commitments on a pro rata basis on a
given date (or resulting from conversions on a given date), having in the case
of Eurodollar Loans the same Interest Period.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in Pittsburgh, Pennsylvania or Louisville, Kentucky a legal holiday or a day
on which banking institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
any day which is a Business Day described in clause (i) and which is also a day
for trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.
"Capital Lease" as applied to any person shall mean any lease of any
property (whether real, personal or mixed) by that person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers' acceptances of (x) any Lender or
(y) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank, an "Approved Lender"), in each case with maturities of
not more than one year from the date of acquisition, (iii) commercial paper
issued by any Lender or Approved Lender or by the parent company of any Lender
or Approved Lender and commercial paper issued by, or guaranteed by, any
industrial or financial company with a short- term commercial paper rating of at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's, or guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing within one
year after the date of acquisition and (iv) investments in money market funds
substantially all the assets of which are comprised of securities of the types
described in clauses (i) through (iii) above.
"Cash Flow from Operations" shall have the meaning provided in section
8.12(a).
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any Subsidiary from such Asset
Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. (S) 9601 et seq.
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"Change of Control" shall mean and include (i) any person or group (as
such term is defined in section 13(d)(3) of the 1934 Act), other than the
Parent, shall acquire, directly or indirectly, beneficial ownership (within the
meaning of Rule 13d-3 and 13d-5 of the 1934 Act) of more than 50%, on a fully
diluted basis, of the economic or voting interest in the Borrower's capital
stock, (ii) the Parent shall cease, for any reason, to have, directly or
indirectly, beneficial ownership (within the meaning of Rule 13d-3 and 13d-5 of
the 1934 Act) of at least 30%, on a fully diluted basis, of the economic or
voting interest in the Borrower's capital stock, and/or (iii) unless the Parent
Guaranty shall have been terminated in accordance with its terms, any person or
group (as such term is defined in section 13(d)(3) of the 1934 Act), shall
acquire, directly or indirectly, beneficial ownership (within the meaning of
Rule 13d-3 and 13d-5 of the 1934 Act) of more than 35%, on a fully diluted
basis, of the economic or voting interest in the Parent's capital stock.
"Closing Date" shall mean the date, on or after the Effective Date,
upon which the conditions specified in section 5.1 are satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the Effective
Date and any subsequent provisions of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Lenders pursuant to the Security Documents.
"Collective Bargaining Agreement" shall have the meaning provided in
section 5.1(d).
"Commitment" shall mean, with respect to each Lender, the amount set
forth opposite such Lender's name in Annex I as its "Commitment" as the same may
be reduced from time to time pursuant to section 3.2, 3.3 and/or 9 or adjusted
from time to time as a result of assignments to or from such Lender pursuant to
section 12.4.
"Commitment Commission" shall have the meaning provided in section
3.1(a).
"Consolidated Net Income" shall mean for any period, the net income
(or loss), without deduction for minority interests, of the Borrower and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP, provided that there shall
be excluded (i) the income (or loss) of any entity (other than a Subsidiary) in
which any other person (other than the Borrower or any of its Subsidiaries) has
a joint interest, except to the extent of the amount of dividends or other
distributions actually paid to the Borrower or any of its Subsidiaries by any
such entity during such period, (ii) the income, (or loss) of any entity accrued
prior to the date it becomes a Subsidiary or is merged into or consolidated with
the Borrower or any of its Subsidiaries or on which its assets are acquired by
the Borrower or any of its Subsidiaries and (iii) the income of any Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary.
"Consolidated Net Worth" shall mean at any time for the determination
thereof all amounts which, in conformity with GAAP, would be included under the
caption "total stockholders' equity" (or any like caption) on a consolidated
balance sheet of the Borrower as at such date.
"Contingent Obligations" shall mean as to any person any obligation of
such person guaranteeing any Indebtedness, leases, dividends or other
obligations ("primary obligations") of any other person (the "primary obligor")
in any manner, whether directly or indirectly, including, without limitation,
any obligation of such person, whether or not contingent, (a) to purchase any
such primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring
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the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such person is required to perform thereunder) as determined by such
person in good faith.
"Credit Documents" shall mean this Agreement, the Notes, the Security
Documents, the Parent Guaranty, the Subsidiary Guaranty and any Letter of Credit
Document.
"Credit Event" shall mean the making of any Loans and/or the issuance
of any Letter of Credit.
"Credit Party" shall mean the Parent, each Affiliate of the Parent
which is a party to the Parent Guaranty, the Borrower and each Subsidiary
Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with, respect to which a
Lender Default is in effect.
"Designated Interest Rate Agreement" shall have the meaning provided
in section 8.16.
"Development Property Pool" shall mean any and all properties owned,
leased or managed by the Borrower or any of its Subsidiaries which at the time
are not part of the Mature Property Pool.
"Dividends" shall have the meaning provided in section 8.9.
"DPP Loan Maturity Date" shall mean the date the Parent Guaranty
terminates in accordance with its terms.
"DPP Revolving Loan" shall have the meaning provided in section 1.1.
"DPP Revolving Loan Sublimit" shall mean (i) during the period
commencing on the Closing Date and ending 120 days thereafter, or such earlier
time as there shall be no possibility that any properties included in the Mature
Property Pool pursuant to clause (i) of the definition of the term Mature
Property Pool will be excluded therefrom because of failure to satisfy
conditions applicable thereto as provided in clause (i) of such definition,
$34,000,000, and (ii) at any time thereafter, the Maximum Guaranteed Amount, as
defined in the Parent Guaranty, which at any time of determination will be
applicable (without any reduction) for at least 30 days thereafter (it being
understood that if any reduction in the Maximum Guaranteed Amount is to become
effective within 30 days, then such reduced Maximum Guaranteed Amount shall be
applicable for purposes of this clause (ii)).
"EBIT" shall mean, for any period, (A) the sum of the amounts for such
period of (i) Consolidated Net Income, (ii) provisions for taxes based on
income, (iii) Total Interest Expense, (iv) amortization or write-off of deferred
financing costs to the extent deducted in determining Consolidated Net Income
and (v) losses on sales of assets (excluding sales in the ordinary course of
business) and other extraordinary losses and other onetime non-cash charges,
less (B) gains on sales of assets (excluding sales in the ordinary course of
business) and other extraordinary gains and other one-time non-cash gains, all
as determined for the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"EBITDA"' shall mean, for any period, the sum of the amounts for such
period of (i) EBIT, (ii) depreciation expense, (iii) amortization expense and
(iv) any other non-cash charges, all as determined for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.
"Effective Date" shall have the meaning provided in section 12.10.
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"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in SEC
Regulation D), in each case which (i) so long as no Event of Default shall have
occurred and be continuing, and so long as the financial covenants and the
borrowing base limitations contained in this Agreement have not been waived or
modified following a deterioration in the financial condition or results of
operations of the Borrower, is not disapproved in writing by the Borrower in a
notice given to a requesting Lender and the Administrative Agent, specifying the
reasons for such disapproval, within five Business Days following the giving of
notice to the Borrower of the identity of any proposed transferee (any such
disapproval by the Borrower must be reasonable), and (ii) is not a direct
competitor of the Borrower or engaged in the same or similar business as the
Borrower, or any of its respective Subsidiaries or is not an Affiliate of any
such competitors of the Borrower or any of its respective Subsidiaries.
"Employment Agreements" shall have the meaning provided in section
5.1(d).
"Enforceable Judgment" shall mean 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 Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law or any permit issued under any such law
(hereafter "Claims"), including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy and rule of common
law now or hereafter in effect and in each case as amended, and any binding and
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment issued to or
rendered against the Borrower or any of its Subsidiaries relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. (S) 3803 et seq.; the Oil Pollution Act of 1990,
33 U.S.C. (S) 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. (S) 11001 et seq., the Hazardous Material
Transportation Act, 49 U.S.C. (S) 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. (S) 651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); and any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
Effective Date and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in section 3(9)
of ERISA) which together with the Borrower or a Subsidiary of the Borrower would
be deemed to be a "single employer" (i) within the meaning of section
414(b),(c), (m) or (o) of the Code or (ii) as a result of the Borrower or a
Subsidiary of the Borrower being or having been a general partner of such
person.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in section 1.8(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (A) (i) the rate for deposits in U.S. Dollars for a period
equal to such Interest Period which appears on the Telerate Page 3750 as
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of 11:00 A.M. London time, on, the day that is two Business Days prior to the
commencement of such Interest Period or (ii) in the event that the Eurodollar
Rate can not be determined pursuant to the preceding clause (i), the offered
quotation to first-class banks in the interbank Eurodollar market by the
Administrative Agent for dollar deposits of amounts in same day funds comparable
to the outstanding principal amount of the Eurodollar Loan of the Administrative
Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 11:00 A.M. (London time) on the date which is two Business Days
prior to the commencement of such Interest Period, in each case divided (and
rounded to the nearest 1/100th of 1%) by (B) a percentage equal to 100% minus
the then stated maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency liabilities as defined in Regulation D (or any successor category
of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in section 9.1.
"Existing Indebtedness" shall have the meaning provided in section
6.18.
"Existing Indebtedness Agreements" shall have the meaning provided in
section 5.1(d).
"Existing Letter of Credit" shall have the meaning provided in section
2.1(d).
"Expiration Date" shall mean September 15, 1996.
"Facing Fee" shall have the meaning provided in section 3.1(c)
"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three Federal
Funds brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
section 3.1.
"Financial Projections" shall have the meaning provided in section
6.8(d).
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of section 8,
including defined terms as used therein, are subject (to the extent provided
therein) to section 12.7(a).
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranties" shall mean the Parent Guaranty and the Subsidiary
Guaranty.
"Guarantor" shall mean the Parent and each Subsidiary Guarantor.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials,' "restricted hazardous materials," "extremely hazardous wastes, a
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect under any applicable Environmental Law.
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"HPL" shall mean Hillhaven Properties, Ltd., an Oregon corporation,
and its successors and assigns, a Wholly-Owned Subsidiary of the Borrower.
"Incorporation Agreement" shall mean the Incorporation Agreement, by
and among the Borrower, the Parent, and certain Affiliates of the Parent, in the
form delivered to the Administrative Agent pursuant to section 5.1(i) and
without giving effect to any amendment or modification thereof not consented to
by the Required Lenders.
"Indebtedness" of any person shall mean without duplication (i) all
indebtedness of such person for borrowed money, (ii) all bonds, notes,
debentures and similar debt securities of such person, (iii) the deferred
purchase price of assets or services which in accordance with GAAP would be
shown on the liability side of the balance sheet of such person, (iv) the face
amount of all letters of credit issued for the account of such person and,
without duplication, all drafts drawn thereunder, (v) all Indebtedness of a
second person secured by any Lien on any property owned by such first person,
whether or not such indebtedness has been assumed, (vi) all Capitalized Lease
Obligations of such person, (vii) all obligations of such person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (viii) all net obligations
of such person under Interest Rate Agreements and (ix) all Contingent
Obligations of such person, provided that neither trade payables and accrued
expenses, in each case arising in the ordinary course of business, nor
obligations in respect of insurance policies or performance or surety bonds
which themselves are not guarantees of Indebtedness (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 Indebtedness.
"Information Memorandum" shall have the meaning provided in section
6.8(d).
"Interest Coverage Ratio" shall mean, for any Test Period, the ratio
of (x) EBITDA to (y) Total Interest Expense, in each case for such Test Period.
"Interest Period" with respect to any Eurodollar Loan shall mean the
interest period applicable thereto, as determined pursuant to section 1.9.
"Interest Rate Agreement" shall mean any interest rate swap agreement,
any interest rate cap agreement, any interest rate collar agreement or other
similar agreement or arrangement designed to protect against fluctuations in
interest rates.
"IPO" shall have the meaning provided in section 5.1(j).
"IRB Debt" shall mean the industrial revenue bonds or similar
instruments comprising a part of the Existing Indebtedness as identified in
Annex IV hereto, and any industrial revenue bonds or similar instruments issued
in connection with a refinancing or refunding of any thereof.
"Leaseholds" of any person means all the right, title and interest of
such person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Legal Requirements" shall mean all applicable laws, rules, orders and
regulations made by any legislature or government or any governmental body or
regulatory authority having jurisdiction over the Borrower or a Subsidiary.
"Lender" shall have the meaning provided in the first paragraph of
this Agreement.
"Lender Default" shall mean (i) the refusal (which has not been
retracted) in violation of the terms of this Agreement of a Lender to make
available its portion of any incurrence of Loans or to fund its portion of any
unreimbursed payment under section 2.4(c) or (ii) a Lender having notified the
Administrative Agent and/or the Borrower that it does not intend to comply with
the obligations under section 1.1 and/or section 2.4(c), in the case of either
(i) or (ii) as a result of the appointment of a receiver or conservator with
respect to such Lender at the direction or request of any regulatory agency or
authority.
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"Letter of Credit" shall have the meaning provided in section 2.1(a).
"Letter of Credit Documents" shall have the meaning specified in
section 2.2(a).
"Letter of Credit Fee" shall have the meaning provided in section
3.1(b).
"Letter of Credit Issuer" shall mean (i) PNC Bank, (ii) in respect of
each Existing Letter of Credit, the Lender that has issued same as of the
Effective Date and/or (iii) such other Lender that is requested, and agrees, to
so act by the Borrower.
"Letter of Credit Outstandings" shall mean, at anytime, the sum,
without duplication, of (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in section
2.2(a).
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall have the meaning provided in section 1.1.
"Management Agreements" shall have the meaning provided in section
5.1(d).
"Management Contracts" shall have the meaning provided in section
5.1(d).
"Managing Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Managing
Agent appointed pursuant to section 11.9.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of, when used with reference to the Parent, the Parent
and its Subsidiaries, taken as a whole, or when used with reference to the
Borrower, the Borrower and its Subsidiaries, taken as a whole, as the case may
be, in each case after giving effect to the Transaction.
"Material Subsidiary" shall mean, at any time, with reference to any
person, any Subsidiary of such person that (x) has assets at such time
comprising 5% or more of the consolidated assets of such person and its
Subsidiaries or (y) had net income in the most recently ended fiscal year of
such person comprising 5% or more of the consolidated net income of such person
and its Subsidiaries for such fiscal year.
"Mature Property Pool" shall mean:
(i) all properties owned, leased or managed by the Borrower
or any of its Subsidiaries on the Closing Date (after giving effect to
consummation of the Transaction), other than the Valley Manor property
located in Tucson, Arizona, as to which the following conditions are
satisfied:
(1) in the case of any property described in Part I
or Part II of Annex III, the Borrower shall have provided to
the Managing Agent a Phase I environmental audit report,
addressed to the Managing Agent and the Administrative Agent,
or accompanied by an appropriate letter authorizing such
reliance, with respect to such property, prepared by an
environmental consulting firm acceptable to the Managing
Agent, which report shall be satisfactory in form and
substance to the Managing Agent, and the Borrower shall have,
or shall have caused its applicable Subsidiary to, complete,
to the satisfaction of the Managing Agent, any remedial work
and establish any additional environmental compliance
activities as are recommended in such environmental report;
provided, that with respect to any such property as to which
such
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requirement was not satisfied on the Closing Date, such
property shall be excluded from the Mature Property Pool and
become part of the Development Property Pool if either (i)
such condition is not satisfied within 90 days following the
Closing Date, or (ii) the Managing Agent determines at any
time thereafter that any such remedial work or establishment
of environmental compliance activities has not been completed
to its satisfaction;
(2) in the case of any property described in Part I of
Annex III which is owned by the Borrower or a Subsidiary, the
Borrower shall have provided to the Managing Agent, with
respect to such property, a survey, in form and substance
reasonably satisfactory to the Collateral Agent and the
Managing Agent, of such property, certified in a manner
satisfactory to the Collateral Agent and the Managing Agent
by a licensed professional surveyor reasonably satisfactory
to the Collateral Agent and the Managing Agent, and an
endorsement to the Mortgage Policy covering such property
which eliminates the "survey" exception, or if such "survey"
exception is so eliminated by endorsement without the
necessity of an updated survey, such endorsement shall have
been so delivered, whether or not an updated survey is so
delivered; provided, that with respect to any such property
as to which such requirement was not satisfied on the Closing
Date, such property shall be excluded from the Mature
Property Pool and become part of the Development Property
Pool if such condition is not satisfied within 90 days
following the Closing Date;
(3) in the case of any property described in Part II of
Annex III as to which there is outstanding any IRB Debt
supported directly or indirectly by a Letter of Credit issued
(or deemed issued) hereunder and which is owned or leased by
the Borrower or a Subsidiary, such property shall be excluded
from the Mature Property Pool and become part of the
Development Property Pool if within 120 days following the
Closing Date any of the following conditions are not
satisfied with respect to such property:
(A) in connection with the original issuance or
refunding of such IRB Debt prior to the Closing Date, the
Borrower or the applicable Subsidiary shall have
mortgaged such property or entered into a deed of trust
with respect to such property, as security for such IRB
Debt and/or such Letter of Credit (or another letter of
credit supported by such Letter of Credit, under
circumstances where a drawing under such Letter of Credit
shall entitle the applicable Letter of Credit Issuer to
succeed to the rights of the issuer of such other letter
of credit as a beneficiary of such mortgage or deed
of trust), which mortgage or deed of trust shall be
first priority and subject to no Liens which are not
acceptable to the Managing Agent;
(B) any Subsidiary which is the owner of any direct
or indirect interest therein shall have become (if it is
not already) a party to the Subsidiary Guaranty, the
Pledge Agreement and the Security Agreement; and
(C) there shall have been delivered in connection
with such mortgage or deed of trust such related UCC
financing statements, consents of landlords,
non-disturbance and attornment agreements and similar
documents, and such other documents as are customarily
delivered in connection with similar transactions, and
copies thereof shall have been delivered to the Managing
Agent and the Collateral Agent, with respect to such
property;
(4) in the case of any property described in Part II of
Annex III as to which there is outstanding any IRB Debt
supported directly or indirectly by a Letter of Credit issued
(or deemed issued) hereunder and which is owned or leased by
the Borrower, and as to which the conditions specified in the
foregoing clause (3) are not satisfied as provided therein,
such property shall be excluded from the Mature Property Pool
and become part of the Development Property Pool if within
120 days following the Closing Date any of the following
conditions are not satisfied with respect to such property:
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(A) either (i) the Collateral Agent shall have been
granted a Mortgage covering such property (or the
interest of the Borrower or its Subsidiary therein, in
the case of a leasehold), which Mortgage shall, if a
first priority mortgage as to such property (or
leasehold) has been granted to secure existing IRB Debt
related thereto, or letters of credit issued to support
such IRB Debt, constitute a second priority Lien thereon,
subject to such Permitted Encumbrances as may be
acceptable to the Managing Agent, or (ii) the Lenders
shall have acquired a 100% risk participation in all
such letters of credit on terms and conditions
satisfactory to all of the Lenders in their sole
discretion, in which event such letters of credit shall
be deemed Letters of Credit issued hereunder, and the
Collateral Agent shall have been granted or assigned a
first priority Mortgage on such property (or leasehold),
or a second priority Mortgage on such property (or
leasehold) in the event a trustee for any industrial
revenue bonds shall hold a first mortgage thereon;
(B) any Subsidiary which is the owner of any direct
or indirect interest therein shall have become (if it is
not already) a party to the Subsidiary Guaranty, the
Pledge Agreement and the Security Agreement; and
(C) the Managing Agent and the Collateral Agent shall
have received related UCC financing statements, consents
of landlords, non-disturbance and attornment agreements
and similar documents, a Mortgage Policy, a survey and
such other documents as are contemplated by section
5.1(n) and this definition, all in form and substance
satisfactory to the Managing Agent and the Collateral
Agent, with respect to such property;
(5) in the case of any other property described in Part
III of Annex III which is leased by the Borrower or a
Subsidiary, such property shall be excluded from the Mature
Property Pool and become part of the Development Property
Pool if within 120 days following the Closing Date any of the
following conditions are not satisfied with respect to such
property:
(A) the Collateral Agent shall have been granted a
Mortgage covering such leasehold interest in such
property, which Mortgage shall be first priority and
subject to no Permitted Encumbrances which are not
acceptable to the Managing Agent;
(B) any Subsidiary which is the owner of any direct
or indirect interest therein shall have become (if it is
not already) a party to the Subsidiary Guaranty, the
Pledge Agreement and the Security Agreement; and
(C) the Managing Agent and the Collateral Agent shall
have received related UCC financing statements, consents
of landlords, non-disturbance and attornment agreements
and similar documents, and such other documents (not
including a Mortgage Policy or a survey) as are
contemplated by section 5.1(n) and this definition, all
in form and substance satisfactory to the Managing Agent
and the Collateral Agent, with respect to such property;
(6) in the case of the San Marcos Facility, such Facility
shall be excluded from the Mature Property Pool and become
part of the Development Property Pool if any of the following
conditions are not satisfied with respect to such Facility on
the Closing Date:
(A) the Borrower shall have pledged to the Collateral
Agent all equity interests in HPL held by the Borrower,
pursuant to the Pledge Agreement;
(B) HPL shall have pledged to the Collateral Agent
all promissory notes of San Marcos Courtyard, Ltd.
("SMCL") issued to it pursuant to the Restructuring
Agreement, dated as of December 1, 1994, between HPL and
SMCL, or otherwise held by HPL, pursuant to the Pledge
Agreement;
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(C) HPL shall have assigned to the Collateral Agent,
pursuant to a collateral assignment in form and substance
satisfactory to the Collateral Agent and the
Documentation Agent, as security for the Obligations, all
right, title and interest of HPL under the deed of trust,
granted as of December 1, 1994 by SMCL only for the
benefit of HPL, First Healthcare Corporation and
Hillhaven Corporation, to secure SMCL's share of
obligations under the Restructuring Agreement and the
Tenants in Common Agreement, each dated as of December 1,
1994, and a Working Capital Note related thereto, and all
recordings and filings necessary to give effect to such
collateral assignment shall have been duly made;
(D) HPL shall have collaterally assigned to the
Collateral Agent all contractual rights under all
contracts pertaining to the San Marcos Facility
(including, without limitation, the Tenants in Common
Agreement and the Restructuring Agreement), pursuant to
the Security Agreement; and
(E) HPL shall have entered into the Subsidiary
Guaranty; and
(7) in the case of any such property managed by a
Subsidiary of the Borrower, such Subsidiary shall have become
(if it is not already) a party to the Subsidiary Guaranty,
the Pledge Agreement and the Security Agreement; and
(ii) all properties owned, leased or managed by the Borrower
or any Subsidiary which are added to the Mature Property Pool (whether
by reason of transfer from the Development Property Pool or upon
acquisition thereof in a Permitted Acquisition) upon satisfaction of
the following conditions:
(1) in the case of the Valley Manor property (which is
covered by a Mortgage delivered on the Closing Date) only,
the Borrower shall have, or shall have caused its applicable
Subsidiary to, complete, to the satisfaction of the Managing
Agent, any further investigative work or remedial work with
respect to fill pipes, as identified in the environmental
report with respect thereto, as the same may be supplemented
after the Closing Date; provided, that with respect to any
such property as to which such requirement was not satisfied
on the date such property was added to the Mature Property
Pool, such property shall be excluded from the Mature
Property Pool and become part of the Development Property
Pool if the Managing Agent determines at any time thereafter
that any such remedial work has not been completed to its
satisfaction;
(2) any such property (other than the Valley Manor
property referred to in clause (1) above) which is owned or
leased by the Borrower or any Subsidiary must have achieved
an annualized Cash Flow from Operations per unit of $8,400
for three consecutive months (determined as provided below),
and the Borrower shall have provided to the Managing Agent
such certificates, information and other evidence as the
Managing Agent may reasonably require to demonstrate
satisfaction of this condition;
(3) any such property (other than the Valley Manor
property referred to in clause (1) above) must have achieved
at least 85% occupancy for each month during such three
consecutive month period, and the Borrower shall have
provided to the Managing Agent such certificates, information
and other evidence as the Managing Agent may reasonably
require to demonstrate satisfaction of this condition;
(4) if any such property (other than the Valley Manor
property referred to in clause (1) above, as to which this
condition has already been satisfied) is owned, leased or
managed by a Subsidiary of the Borrower, such Subsidiary
shall have become (if it is not already) a party to the
Subsidiary Guaranty, the Pledge Agreement and the Security
Agreement;
(5) if any such property (other than the Valley Manor
property referred to in clause (1) above) is owned or leased
by the Borrower or any Subsidiary, the Borrower shall have
provided
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to the Managing Agent a Phase I environmental audit report,
addressed to the Managing Agent and the Administrative Agent,
or accompanied by an appropriate letter authorizing such
reliance, with respect to such property, prepared by an
environmental consulting firm acceptable to the Managing
Agent, which report shall be satisfactory in form and
substance to the Managing Agent, and the Borrower shall have,
or shall have caused its applicable Subsidiary to, complete,
to the satisfaction of the Managing Agent, any remedial work
and establish any additional environmental compliance
activities as are recommended in such environmental report;
provided, that with respect to any such property as to which
such requirement was not satisfied on the date such property
was added to the Mature Property Pool, such property shall be
excluded from the Mature Property Pool and become part of the
Development Property Pool if the Managing Agent determines at
any time thereafter that any such remedial work or
establishment of environmental compliance activities has not
been completed to its satisfaction;
(6) if any such property (other than the Valley Manor
property referred to in clause (1) above, as to which the
following conditions have been satisfied) is owned or leased
by the Borrower or any Subsidiary, all of the following
conditions are satisfied with respect to such property:
(A) the Collateral Agent shall have been granted a
Mortgage covering the ownership interest or leasehold
interest of the Borrower or such Subsidiary in such
property, which Mortgage shall be first priority and
subject to no Permitted Encumbrances which are not
acceptable to the Managing Agent, and such Mortgage shall
have been duly recorded and effective to establish such
Lien for a period of at least 90 days; and
(B) the Managing Agent and the Collateral Agent shall
have received related UCC financing statements, consents
of landlords, non-disturbance and attornment agreements
and similar documents, a Mortgage Policy, a survey and
such other documents as are contemplated by section
5.1(n) and this definition, all in form and substance
satisfactory to the Managing Agent and the Collateral
Agent, with respect to such property; and
(7) in the case of any such property (other than the
Valley Manor property referred to in clause (1) above, as to
which this condition has already been satisfied) managed by a
Subsidiary of the Borrower, such Subsidiary shall have become
(if it is not already) a party to the Subsidiary Guaranty,
the Pledge Agreement and the Security Agreement; and
(8) in the case of any property as to which any of the
applicable conditions specified above has not been satisfied,
the Borrower may propose in writing to the Managing Agent
that such property nevertheless be included in the Mature
Property Pool upon compliance with such conditions, and
subject to such adjustments, if any, the Cash Flow from
Operations with respect to such property, as the Borrower may
determine to be appropriate and generally consistent with the
overall intent of this Agreement, with any such proposal to
be accompanied by such supporting materials as the Borrower
considers appropriate to a full and fair consideration of
such proposal by the Lenders, in which event the Managing
Agent shall advise the Lenders of such proposal and provide
the Lenders with copies of all materials submitted by the
Borrower in connection with such proposal; the Managing Agent
shall use reasonable efforts to communicate with the Lenders
and the Borrower as to any objections any Lender may have as
to such inclusion as proposed by the Borrower; if within
three weeks following the submission by the Managing Agent of
any such proposal to the Lenders the Managing Agent shall not
have received written indications of consent or approval to
such proposal (as it may be modified in any manner acceptable
to the Borrower and all of the Lenders) from all of the
Lenders, such proposal shall not become effective to add such
property to the Mature Property Pool; otherwise, if such
proposal (as it may be modified in any manner acceptable to
the Borrower and all of the Lenders) is approved as evidenced
by written consents or approvals from all of the Lenders,
such proposal (including any such modifications) shall become
effective to add such property to the Mature Property Pool;
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other than, in any such case referred to in clause (i) or (ii) of this
definition, any such properties owned, leased or managed by a Subsidiary which
has Priority Debt outstanding, and any such property which is encumbered by any
Lien securing or otherwise relating to any Residential Mortgage Bond Programs of
the Borrower and its Subsidiaries or with reference to which any such
Residential Mortgage Bond Program is in effect. The Managing Agent shall
determine from time to time which properties are included in the Mature Property
Pool. The Managing Agent shall notify the Borrower, the Administrative Agent and
the Lenders promptly after making any such determinations and from time to time,
in response to a request from any Lender, the Administrative Agent or the
Borrower, shall notify the Administrative Agent, the Lenders and the Borrower of
the properties included in the Mature Property Pool and the reasons why any
particular property has been excluded from the Mature Property Pool. Any
properties not in the Mature Property Pool shall be considered part of the
Development Property Pool. Any such determination by the Managing Agent shall be
conclusive and binding absent manifest error.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans,
$500,000, with minimum increments thereafter of $100,000 and (ii) for Eurodollar
Loans, $2,500,000, with minimum increments thereafter of $500,000.
"Moody's" shall mean Moody's Investors Service, Inc. and its
successors.
"Mortgage" shall have the meaning provided in section 5.1(n)(iii) and,
after the execution and delivery thereof, shall include each mortgage
constituting an Additional Security Document.
"Mortgage Policies" shall have the meaning provided in section
5.1(n)(iii).
"Mortgaged Property" shall have the meaning provided in section
5.1(n)(iii) and, after the execution and delivery of any mortgage or deed of
trust constituting an Additional Security Document, shall include the respective
property subject thereto but shall not include after the date of such release
any real property theretofore a Mortgaged Property that has been released from
the Liens of the Security Documents in accordance with the terms thereof or of
this Agreement.
"MPP Revolving Loan" shall have the meaning provided in section 1.1.
"MPP Revolving Loan Sublimit" shall mean an amount, as determined from
time to time by the Managing Agent and notified to the Borrower and the Lenders,
equal to the sum of (i) the amount that the Managing Agent determines would not
result in, or contribute to, a violation by the Borrower of the covenants
contained in section 8.12(a), whether or not the covenants contained in section
8.12(a) shall have been superseded by the covenants contained in section
8.12(b), plus (ii) if the Borrower has cash and Cash Equivalents which are
unencumbered by any Lien (including any cash collateral agreement in favor of
the Administrative Agent) in excess of $10,000,000, the amount of cash and Cash
Equivalents of the Borrower in excess of such amount which has been deposited by
the Borrower with the Administrative Agent pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Administrative Agent and the Borrower (which shall permit certain
investments in Cash Equivalents satisfactory to the Administrative Agent and the
Borrower until the proceeds are applied to the secured obligations or earlier
released by the Administrative Agent to the Borrower from time to time). Any
such determination by the Managing Agent shall be conclusive and binding absent
manifest error.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of (i) reasonable and customary expenses
of sale incurred in connection with such Asset Sale, and other reasonable and
customary fees and expenses incurred, and all state, and local taxes paid or
reasonably estimated to be payable by such person, as a consequence of such
Asset Sale and the payment of principal, premium and interest of Indebtedness
secured by the asset which is the subject of the Asset Sale and required to be,
and which is, repaid under the terms thereof as a result of such Asset Sale,
(ii) amounts of any distributions payable to holders of minority interests in
the relevant person or in the relevant property or assets and (iii) incremental
income taxes paid or payable as a result thereof.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Non-Defaulting Lender" shall mean each Lender other than a Defaulting
Lender.
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"Note" shall have the meaning provided in section 1.5(a).
"Notice of Borrowing" shall have the meaning provided in section
1.3(a).
"Notice of Conversion" shall have the meaning provided in section 1.6.
"Notice Office" shall mean the office of the Administrative Agent at
One PNC Plaza, Fourth Floor Annex, Fifth Avenue and Wood Street, Pittsburgh,
Pennsylvania 15265, Attention: Arlene Ohler, Vice President, Multi-Bank Loan
Administration (telephone: (412) 762-3627; facsimile: (412) 762-8672), or such
other office as the Administrative Agent may designate to the Borrower from time
to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Administrative Agent or any Lender pursuant to the terms of this Agreement
or any other Credit Document.
"Parent" shall mean Vencor, Inc., a Delaware corporation, and its
successors and assigns.
"Parent Guaranty" shall have the meaning provided in section 5.1(l).
"Participant" shall have the meaning provided in section 2.4(a).
"Payment Office" shall mean the office of the Administrative Agent's
Affiliate, PNC Kentucky, at 500 West Jefferson Street, Louisville, Kentucky
40202, Attention: Todd Munson, Vice President, Mail Stop: K1-KHDQ-08-03
(telephone: (502) 581-4734; facsimile: (502) 581-2302), or such other office as
the Administrative Agent may designate to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean, at any time for each Lender with a
Commitment, the percentage obtained by dividing such Lender's Commitment by the
Total Commitment, provided that if the Total Commitment has been terminated, the
Percentage of each Lender shall be determined by dividing such Lender's
Commitment immediately prior to such termination by the Total Commitment
immediately prior to such termination.
"Permitted Acquisitions" shall mean and include, exclusive of
expenditures (including the purchase of adjacent land) to expand then existing
assisted living facilities located in the United States to the extent owned by
the Borrower or any Subsidiary Guarantor on the Closing Date or acquired
pursuant to a Permitted Acquisition, and exclusive of any loans, advances or
investments permitted pursuant to section 8.5(i): (i) advances or credit
extensions to, or other investments in, any person owning an assisted living
property located in the United States made in connection with the Borrower or
any Subsidiary Guarantor obtaining a management contract for such assisted
living property, in an aggregate amount not to exceed $500,000 for all advances,
credit extensions and investments pursuant to this clause (i); and (ii)
acquisitions (whether by purchase, lease or otherwise, and including
expenditures for start-up activities and operations and renovations) of assisted
living properties (or interests in such properties) located in the United States
and/or interests in (or the making of advances or credit extensions to or
investments in) partnerships or joint ventures owning assisted living properties
located in the United States, provided that the only Indebtedness that may be
incurred by the Borrower and its Subsidiaries to effect a Permitted Acquisition
shall be MPP Revolving Loans (if such Permitted Acquisition qualifies for
addition to the Mature Property Pool), DPP Revolving Loans and Priority Debt;
provided, that, unless the Required Lenders otherwise consent, with respect to
any transaction referred to in the foregoing clauses (i) and (ii), no such
transaction shall be considered a Permitted Acquisition if (A) the value of the
consideration paid or agreed to be paid (including any Priority Debt) exceeds
$15,000,000 on an individual facility basis, or $25,000,000 on a per transaction
basis, or (B) the cumulative consideration paid or agreed to be paid (including
Priority Debt) for all such transactions would exceed $50,000,000 in any fiscal
year, or (C) such transaction is not "friendly", or the validity or
effectiveness of the transaction itself is contested in any manner by the
seller, any holders of equity interests in the seller, or any governmental
agency, or (D) as a result thereof the Borrower or any Subsidiary acquires any
equity interest in any person and either (1) such person does not by virtue
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of such transaction become a Subsidiary of the Borrower, or (2) if such person
does not become a Subsidiary of the Borrower, all equity interests in such
person owned by the Borrower or any Subsidiary are not pledged pursuant to the
Pledge Agreement. For purposes of the preceding proviso, consideration paid in
the form of common stock of the Borrower shall be valued at 50% of the last
reported sales price of such stock on a national securities exchange or on
NASDAQ, as applicable, prior to the issuance thereof as payment in such
transaction.
"Permitted Encumbrances" shall mean, with respect to a Real Property
constituting part of the Collateral, (i) the liens, encumbrances and other
matters disclosed in the Mortgage Policy relating to the Mortgage on such Real
Property or "insured over" or "insured around" to the satisfaction of the
Collateral Agent in such Mortgage Policy, (ii) such other title and survey
exceptions as the Collateral Agent may approve in writing in its sole
discretion, and (iii) the Permitted Liens, if any, described in section 8.3(h)
affecting such Real Property.
"Permitted Liens" shall mean Liens described in section 8.3.
"person" shall mean any individual, partnership, joint venture, firm
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as defined
in section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Borrower or a Subsidiary of the
Borrower or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Borrower, or a Subsidiary of
the Borrower or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in section
5.1(n)(i).
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"PNC Bank" shall mean PNC Bank, National Association, and its
successors and assigns.
"PNC Kentucky" shall mean PNC Bank, Kentucky, Inc., and its successors
and assigns.
"Priority Debt" shall have the meaning provided in section 8.4(g).
"Prohibited Transaction" shall mean a transaction with respect to a
Plan that is prohibited under section 4975 of the Code or section 406 of ERISA
and not exempt under section 4975 of the Code or section 408 of ERISA.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. (S) 6901 et seq.
"Real Property" of any person shall mean all of the right, title and
interest of such person in and to land, improvements and fixtures, including
Leaseholds.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, between the Borrower and the Parent, in the form delivered to the
Administrative Agent pursuant to section 5.1(d) and without giving effect to any
amendment or modification thereof not consented to by the Required Lenders.
"Registration Statement" shall mean the Registration Statement on Form
S-1, Registration Number 333-06907 filed by the Borrower with the SEC on June
26, 1996, as amended by Amendment No. 1 thereto filed by the Borrower with the
SEC on July 10, 1996, as amended by Amendment No. 2 thereto filed by the
Borrower with the SEC on July 29, 1996, together with any subsequent amendment
thereto satisfactory to the Administrative Agent.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
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"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Reorganization" shall have the meaning provided in section 5.1(h).
"Reportable Event" shall mean an event described in section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation section 2615.
"Required Lenders" shall mean Non-Defaulting Lenders whose outstanding
Loans and Unutilized Commitments constitute at least a majority of the sum of
the total outstanding Loans and Unutilized Commitments of Non-Defaulting
Lenders.
"Revolving Loan Maturity Date" shall mean the fourth anniversary of
the Closing Date, unless extended as provided in section 3.4.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., and its successors.
"San Marcos Facility" shall mean the 212 unit independent and assisted
living facility known as San Marcos Retirement Village, located in San Marcos,
California, owned as tenants in common by HPL, a Wholly-Owned Subsidiary of the
Borrower, as to a 65% interest, and San Marcos Courtyard, Ltd., a California
limited partnership, as to a 35% interest, pursuant to a Tenants in Common
Agreement, dated as of December 1, 1994, pursuant to which, among other things,
HPL manages the facility, the facility has been leased to HPL and HPL has
certain rights to acquire the facility commencing September 15, 1999, or
pursuant to a right of first refusal. "SEC" shall mean the United States
Securities and Exchange Commission.
"SEC Regulation D" shall mean Regulation D as promulgated under the
Securities Act of 1933, as amended, as the same may be in effect from time to
time.
"section 4.4(b)(ii) Certificate" shall have the meaning provided in
section 4.4(b)(ii).
"Security Agreement" shall have the meaning provided in section
5.1(n)(ii).
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean the Pledge Agreement, the Security
Agreement, each Mortgage, each other Additional Security Document and each
security document entered into pursuant to section 8.2(c).
"Shareholders' Agreements" shall have the meaning provided in section
5.1(d).
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions or other
requirements for drawing could then be met).
"Subsidiary" of any person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean each Wholly-Owned Subsidiary that is
party to the Subsidiary Guaranty.
"Subsidiary Guaranty" shall have the meaning provided in section
5.1(m).
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"Tax Sharing Agreements" shall have the meaning provided in section
5.1(d).
"Taxes" shall have the meaning provided in section 4.4.
"Testing Period" shall mean (i) for any determination made prior to
June 30, 1997, the consecutive fiscal quarters of the Borrower then last ended
plus any period of historical results prior to consummation of the Transaction
necessary to make such period consist of four consecutive fiscal quarters, and
(ii) for any determination made thereafter, the four consecutive fiscal quarters
of the Borrower then last ended.
"Total Capitalization" shall mean the sum of Total Indebtedness and
Consolidated Net Worth.
"Total Commitment" shall mean the sum of the Commitments of the
Lenders.
"Total Indebtedness" shall mean all Indebtedness for borrowed money,
and all bonds, notes, debentures and similar debt securities, and all
Capitalized Lease Obligations, of or guaranteed by the Borrower and/or any of
its Subsidiaries all as determined on a consolidated basis.
"Total Interest Expense" shall mean, for any period, total interest
expense (including that which is capitalized and that which is attributable to
Capital Leases, in accordance with GAAP) of the Borrower and its Subsidiaries on
a consolidated basis with respect to all outstanding Indebtedness of the
Borrower and its Subsidiaries including, without limitation, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
net costs under Interest Rate Agreements, but excluding, however, any
amortization of deferred financing costs, all as determined in accordance with
GAAP.
"Transaction" shall include (i) the Reorganization, (ii) the IPO, and
(iii) if consummated on the Closing Date, any Permitted Acquisition.
"Transaction Documents" shall mean and include the Acquisition
Documents, the Registration Rights Agreement, the Administrative Services
Agreement, the Tax Sharing Agreement, the Registration Statement, all agreements
and documents governing the Transaction and the Credit Documents.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in section 2.3(a).
"Unutilized Commitment" for any Lender at any time shall mean the
excess of (i) such Lender's Commitment at such time over (ii) the sum of the
principal amount of Loans made by such Lender and outstanding at such time and
(y) such Lender's Percentage of Letter of Credit Outstandings at such time.
"Unutilized Total Commitment" shall mean, at any time, the excess of
(i) the Total Commitment at such time over (ii) the sum of (x) the aggregate
principal amount of all Loans then outstanding plus (y) the aggregate Letter of
Credit Outstandings at such time.
"Wholly-Owned Subsidiary" shall mean each Subsidiary of the Borrower
all of whose capital stock, equity interests and partnership interests are owned
directly or indirectly by the Borrower, its officers, stockholders and
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affiliates but excluding any Subsidiary primarily engaged in the business of
issuing insurance and/or insurance policies.
"Written" or "in writing" shall mean any form of written communication
or a communication by means of telex, facsimile transmission, telegraph or
cable.
SECTION 11. THE ADMINISTRATIVE AGENT
AND THE MANAGING AGENT.
11.1. Appointment. Each Lender hereby irrevocably designates and
appoints PNC Bank as Administrative Agent (such term to include, for the
purposes of this section 11, PNC Bank acting as Collateral Agent) and PNC
Kentucky as Managing Agent, in each case to act as specified herein and in the
other Credit Documents, and each such Lender hereby irrevocably authorizes PNC
Bank as the Administrative Agent for such Lender and PNC Kentucky as the
Managing Agent for such Lender, to take such action on its behalf under the
provisions of this Agreement and the other Credit Documents and to exercise such
powers and perform such duties as are expressly delegated to the Administrative
Agent or the Managing Agent, as the case may be, by the terms of this Agreement
and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Administrative Agent and the Managing Agent
each agrees to act as such upon the express conditions contained in this section
11. Notwithstanding any provision to the contrary elsewhere in this Agreement,
neither the Administrative Agent nor the Managing Agent shall have any duties or
responsibilities, except those expressly set forth herein or in the other Credit
Documents, nor any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent
or the Managing Agent. The provisions of this section 11 are solely for the
benefit of the Administrative Agent and the Managing Agent, and the Lenders, and
no Credit Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
the Administrative Agent and the Managing Agent shall each act solely as agent
of the Lenders and do not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for any Credit Party.
11.2. Delegation of Duties. The Administrative Agent and the Managing
Agent may each execute any of its duties under this Agreement or any other
Credit Document by or through agents or attorneys-in-fact and each shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Neither the Administrative Agent nor the Managing Agent shall be responsible for
the negligence or misconduct of the other or for any agents or attorneys-in-fact
selected by it with reasonable care except to the extent otherwise required by
section 11.3.
11.3. Exculpatory Provisions. Neither the Administrative Agent nor the
Managing Agent, nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with this Agreement (except for its or such person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
the Borrower or any other Credit Party or any of their respective officers
contained in this Agreement, any other Credit Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent or the Managing Agent under or in connection with,
this Agreement or any other Credit Document or for any failure of the Borrower
or any other Credit Party or any of their respective officers to perform its
obligations hereunder or thereunder. Neither the Administrative Agent nor the
Managing Agent shall be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Borrower or any other Credit Party. Neither the Administrative
Agent nor the Managing Agent shall be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any Credit Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent or the Managing Agent to the
Lenders or by or on behalf of the Borrower or any other Credit Party to the
Administrative Agent, the Managing Agent or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions,
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provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
11.4. Reliance by Agents. The Administrative Agent and the Managing
Agent shall each be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, facsimile transmission, telex or teletype message,
statement, order or other document or conversation 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 upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any other Credit
Party), independent accountants and other experts selected by the Administrative
Agent or the Managing Agent, as the case may be. The Administrative Agent and
the Managing Agent shall each be fully justified in failing or refusing to take
any action under this Agreement or any other Credit Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent and
the Managing Agent shall each in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
11.5. Notice of Default. Neither the Administrative Agent nor the
Managing Agent shall be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the Administrative Agent or the
Managing Agent, as the case may be, has received notice from a Lender or the
Borrower or any other Credit Party referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Administrative Agent or the managing Agent
receives such a notice, the Administrative Agent or the Managing Agent, as the
case may be, shall give prompt notice thereof to the Lenders. The Administrative
Agent or the Managing Agent, as the case may be, shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders, provided that unless and until the Administrative Agent or
the Managing Agent, as the case may be, shall have received such directions, the
Administrative Agent or the Managing Agent, as the case may be, may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as shall be both (x) consistent with
the terms and provisions of the Credit Documents (including, without limitation,
the terms and provisions of section 12.12 hereof governing changes, waivers,
discharges and terminations) and (y) deemed advisable by it as being in the best
interests of the Lenders.
11.6. Non-Reliance. Each Lender expressly acknowledges that neither
the Administrative Agent nor the Managing Agent, nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates have
made any representations or warranties to it and that no act by the
Administrative Agent or the Managing Agent, as the case may be, hereinafter
taken, including any review of the affairs of the Borrower or other Credit
Party, shall be deemed to constitute any representation or warranty by the
Administrative Agent or the Managing Agent to any Lender. Each Lender represents
to the Administrative Agent and the Managing Agent that it has, independently
and without reliance upon the Administrative Agent or the Managing Agent, or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and the other Credit Parties and made its own
decision to make its Loans hereunder and enter into this Agreement. Each Lender
also represents that it will, independently and without reliance upon the
Administrative Agent or the Managing Agent, or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrower and the other Credit Parties. Neither the Administrative Agent nor the
Managing Agent shall have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, operations, assets,
property, financial and other conditions, prospects or creditworthiness of the
Borrower or any other Credit Party which may come into the possession of the
Administrative Agent or the Managing Agent, as the case may be, or any of its
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates, other than the copies of certificates, financial statements and
documents provided by or on behalf of the Parent or the Borrower pursuant to the
provisions of the Credit Documents which are intended for the Lenders generally
and as to which the Administrative Agent or the Managing Agent, as the case may
be, is specifically required to provide copies thereof to the Lenders, and in
any such case the Administrative Agent or
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the Managing Agent, as the case may be, shall promptly so provide the Lenders
with such copies.
11.7. Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Managing Agent in their respective capacities as
such ratably according to their respective Loans and unutilized Commitments,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Obligations) be imposed on,
incurred by or asserted against the Administrative Agent or the Managing Agent
in its capacity as such in any way relating to or arising out of this Agreement
or any other Credit Document, or any documents contemplated by or referred to
herein or the transactions contemplated hereby or any action taken or omitted to
be taken by the Administrative Agent or the Managing Agent, as the case may be,
under or in connection with any of the foregoing, but only to the extent that
any of the foregoing is not paid by the Borrower or another Credit Party,
provided that no Lender shall be liable to the Administrative Agent or the
Managing Agent for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements to the extent resulting solely from the Administrative Agent's or
the Managing Agent's, as the case may be, gross negligence or willful
misconduct. If any indemnity furnished to the Administrative Agent or the
Managing Agent for any purpose shall, in the opinion of the Administrative Agent
or the Managing Agent, as the case may be, be insufficient or become impaired,
the Administrative Agent or the Managing Agent, as the case may be, may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
section 11.7 shall survive the payment of all Obligations.
11.8. The Agents in Their Individual Capacity. The Administrative
Agent and the Managing Agent and their respective Affiliates may make loans to,
accept deposits from and generally engage in any kind of business with the
Borrower, the other Credit Parties and their Affiliates as though not acting as
Administrative Agent or Managing Agent, as the case may be, hereunder. With
respect to the Loans made by it and all Obligations owing to it, the
Administrative Agent and the Managing Agent shall each have the same rights and
powers under this Agreement as any Lender and may exercise the same as though it
were not the Administrative Agent or the Managing Agent, as the case may be, and
the terms "Lender" and "Lenders" shall include the Administrative Agent and the
Managing Agent in their respective individual capacities.
11.9. Successor Agents. The Administrative Agent and the Managing
Agent may each resign as the Administrative Agent or the Managing Agent, as the
case may be, upon 20 days' notice to the Lenders and the Borrower. The Required
Lenders shall appoint from among the Lenders a successor Administrative Agent or
Managing Agent, as the case may be, for the Lenders subject to prior approval by
the Borrower (such approval not to be unreasonably withheld or delayed),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent or the Managing Agent, as the case may be, and the term
"Administrative Agent" or "Managing Agent", as the case may be, shall include
such successor agent effective upon its appointment, and the resigning
Administrative Agent's or Managing Agent's, as the case may be, rights, powers
and duties as the Administrative Agent or the Managing Agent, as the case may
be, shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or Managing Agent, as the case may be, or any
of the parties to this Agreement. After the retiring Administrative Agent's or
Managing Agent's, as the case may be, resignation hereunder as the
Administrative Agent or as the Managing Agent, as the case may be, the
provisions of this section 11 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent or the Managing
Agent, as the case may be, under this Agreement.
11.10. Other Agents. The above provisions of this section 11 shall
inure to the benefit of the Documentation Agent as fully as if the Documentation
Agent were the Administrative Agent hereunder. Any Lender identified herein as a
Co-Agent, Syndication Agent or any other corresponding title, other than
"Administrative Agent", "Managing Agent", "Collateral Agent" or "Documentation
Agent", shall have no right, power, obligation, liability, responsibility or
duty under this Agreement or any other Credit Document except those applicable
to all Lenders as such. Each Lender acknowledges that it has not relied, and
will not rely, on any Lender so identified in deciding to enter into this
Agreement or in taking or not taking any action hereunder.
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SECTION 12. MISCELLANEOUS.
12.1. Payment of Expenses etc. The Borrower agrees to: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Administrative Agent, the Managing Agent
and the Documentation Agent in connection with the negotiation, preparation,
execution and delivery of the Credit Documents and the documents and instruments
referred to therein and any amendment, waiver or consent relating thereto
(including, without limitation, the reasonable fees and disbursements of Jones,
Day, Reavis & Pogue, in accordance with the proposal letter dated July 16, 1996
of such firm) and of the Administrative Agent and each of the Lenders in
connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Administrative Agent and for each of
the Lenders); (ii) in the event (x) that any of the Mortgages are foreclosed in
whole or in part or that any of the Mortgages are put into the hands of an
attorney for collection, suit, action or foreclosure, (y) of the foreclosure of
any mortgage prior to or subsequent to any of the Mortgages in which proceeding
the Collateral Agent is made a party, or (z) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of the Borrower or any of
its Subsidiaries, pay all costs of collection and defense, including reasonable
attorneys' fees in connection therewith and in connection with any appellate
proceeding or post-judgment action involved therein, which shall be due and
payable together with all required service or use taxes; (iii) pay and hold each
of the Lenders harmless from and against any and all present and future stamp
and other similar taxes with respect to the foregoing matters and save each of
the Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Lender) to pay such taxes; and (iv) indemnify each Lender, its officers,
directors, employees, representatives and agents (collectively, the
"Indemnitees") from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of (a) any interest in
any Real Property (other than as permitted hereunder and/or under the other
Credit Documents) is claimed by any other person, (b) any investigation,
litigation or other proceeding (whether or not any Lender is a party thereto)
related to the entering into and/or performance of any Credit Document or the
use of the proceeds of any Loans hereunder or the Transaction or the
consummation of any transactions contemplated in any Credit Document, or (c) the
actual or alleged presence of Hazardous Materials in the air, surface water or
groundwater or on the surface or subsurface of any Real Property owned, leased
or at any time operated by the Borrower or any of its Subsidiaries, the release,
generation, storage, transportation, handling or disposal of Hazardous Materials
at any location, whether or not owned or operated by the Borrower or any of its
Subsidiaries, the non-compliance of any Real Property with foreign, federal,
state and local laws, regulations and ordinances (including applicable permits
thereunder) applicable to any Real Property, or any Environmental Claim asserted
against the Borrower or any of its Subsidiaries or any Real Property owned,
leased or at any time operated by the Borrower or any of its Subsidiaries,
including, in each case, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the person to be indemnified or of any other
Indemnitee who is such person or an Affiliate of such person). To the extent
that the undertaking to indemnify, pay or hold harmless any person set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, the Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
12.2. Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Lender (including, without limitation, by
branches and agencies of such Lender wherever located) to or for the credit or
the account of the Borrower against and on account of the Obligations and
liabilities of the Borrower to such Lender under this Agreement or under any of
the other Credit Documents, including, without limitation, all interests in
Obligations the Borrower purchased by such Lender pursuant to section 12.4(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or not
such Lender shall have made any demand hereunder and although said Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
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12.3. Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile transmission or cable communication)
and mailed, telegraphed, telexed, transmitted, cabled or delivered, if to the
Borrower, at 3300 Providian, 400 West Market Street, Louisville, Kentucky 40202,
attention: Chief Financial Officer (facsimile: (502) 596-4160); if to any Lender
at its address specified for such Lender on Annex I hereto; if to the
Administrative Agent, at its Notice Address; if to the Managing Agent, to PNC
Bank, Kentucky, Inc. at 500 West Jefferson Street, Louisville, Kentucky 40202,
Attention: Todd Munson, Vice President, Mail Stop: K1-KHDQ-08-03 (telephone:
(502) 581-4734; facsimile: (502) 581-2302); or at such other address as shall be
designated by any party in a written notice to the other parties hereto. All
such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
12.4. Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that no Credit Party may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of all the Lenders. Each Lender may at any time grant participations in
any of its rights hereunder or under any of the Notes to another financial
institution, provided that in the case of any such participation, (i) the
participant shall not have any rights under this Agreement or any of the other
Credit Documents, including rights of consent, approval or waiver (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto), (ii) such Lender's obligations under this
Agreement (including, without limitation, its Commitment hereunder) shall remain
unchanged, (iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iv) such Lender shall
remain the holder of any Note for all purposes of this Agreement and (v) the
Borrower, the Administrative Agent, and the other Lenders shall continue to deal
solely and directly with the selling Lender in connection with such Lender's
rights and obligations under this Agreement, and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation, except that the participant shall be entitled to the benefits of
sections 1.10, 1.11 and 4.4 of this Agreement to the extent that such Lender
would be entitled to such benefits if the participation had not been entered
into or sold, and, provided further, that no Lender shall transfer, grant or
sell any participation under which the participant shall have rights to approve
any amendment to or waiver of this Agreement or any other Credit Document except
to the extent such amendment or waiver would (x) extend the final scheduled
maturity of the Loans in which such participant is participating (it being
understood that any waiver of the making of, or the application of any
amortization payment or other prepayment or the method of any application of any
prepayment to the amortization of the Loans shall not constitute an extension of
the final maturity date thereof), or reduce the rate or extend the time of
payment of interest or Fees thereon (except in connection with a waiver of the
applicability of any post-default increase in interest rates), or reduce the
principal amount thereof, or increase such participant's participating interest
in any Commitment over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default or of any mandatory prepayment
or a mandatory reduction in the Total Commitment, or a mandatory prepayment,
shall not constitute a change in the terms of any Commitment), (y) release all
or substantially all of the Collateral (in each case except as expressly
provided in the Credit Documents) or (z) consent to the assignment or transfer
by the Parent and/or the Borrower of any of its rights and obligations under
this the Parent Guaranty and this Agreement.
(b) Notwithstanding the foregoing, (x) any Lender may assign all or a
portion of its Loans and/or Commitment, and its rights and obligations hereunder
to another Lender that is not a Defaulting Lender or to an Affiliate of such
Lender which is a commercial bank, financial institution or other "accredited
investor" (as defined in SEC Regulation D), and (y) any Lender may assign all,
or if less than all, a portion equal to at least $5,000,000 in the aggregate for
the assigning Lender or assigning Lenders, of its Loans and/or Commitment and
its rights and obligations hereunder, to one or more Eligible Transferees, each
of which assignees shall become a party to this Agreement as a Lender by
execution of an Assignment Agreement, provided that, (i) at such time Annex I
shall be deemed modified to reflect the Commitment of such new Lender and of the
existing Lenders, (ii) upon surrender of the old Notes, new Notes will be
issued, at the Borrower's expense, to such new Lender and to the assigning
Lender, such new Notes to be in conformity with the requirements of section 1.5
(with appropriate modifications) to the extent needed to reflect the revised
Commitments, (iii) in the case of clause (y) only, the consent of the
Administrative Agent and each Letter of Credit Issuer shall be required in
connection with any such assignment (which consent shall not be unreasonably
withheld or delayed), and (iv) the Administrative Agent shall receive at the
time of each such assignment, from the assigning or assignee Lender, the payment
of a non-refundable assignment fee of $2,000 and,
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provided further, that such transfer or assignment will not be effective until
recorded by the Administrative Agent on a register maintained by it. To the
extent of any assignment pursuant to this section 12.4(b) the assigning Lender
shall be relieved of its obligations hereunder with respect to its assigned
Commitments. At the time of each assignment pursuant to this section 12.4(b) to
a person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in section 7701(a)(30) of the Code) for
Federal income tax purposes, the respective assignee Lender shall provide to the
Borrower and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable a section 4.4(b)(ii) Certificate) described in section
4.4(b). To the extent that an assignment of all or any portion of a Lender's
Commitment and related outstanding Obligations pursuant to this section 12.4(b)
would, at the time of such assignment, result in increased costs under section
1.10 from those being charged by the respective assigning bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to any other increased costs of the
type described above resulting from changes after the date of the respective
assignment). Nothing in this section 12.4(b) shall prevent or prohibit any
Lender from pledging its Notes or Loans to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this section 12.4, no
transfer or assignment of the interests or obligations of any Lender hereunder
or any grant of participation therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.
(d) Each Lender initially party to this Agreement hereby represents,
and each person that became a Lender pursuant to an assignment permitted by this
section 12.4 will, upon its becoming party to this Agreement, represent that it
is a commercial lender, other financial institution or other "accredited"
investor (as defined in SEC Regulation D) which makes or acquires loans in the
ordinary course of its business and that it will make or acquire Loans for its
own account in the ordinary course of such business, provided that subject to
the preceding sections 12.4(a) and (b), the disposition of any promissory notes
or other evidences of or interests in Indebtedness held by such Lender shall at
all times be within its exclusive control.
(e) The Administrative Agent shall maintain at its Notice Office a
copy of each Assignment Agreement delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Administrative
Agent and the Lenders may treat each person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
12.5. No Waiver: Remedies Cumulative. No failure or delay on the part
of the Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Administrative Agent or any Lender shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Administrative
Agent or any Lender would otherwise have. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
12.6. Payments Pro Rata. (a) The Administrative Agent agrees that
promptly after its receipt of each payment from or on behalf of the Borrower in
respect of any Obligations, it shall distribute such payment to the Lenders
(other than any Lender that has expressly waived in writing its right to receive
its pro rata share thereof) pro rata based upon their respective shares, if any,
of the Obligations with respect to which such payment was received. As to any
such payment received by the Administrative Agent prior to 1:00 P.M. (local time
at the Payment Office) in funds which are immediately available on such day, the
Administrative Agent will use all reasonable efforts to distribute such payment
in immediately available funds on the same day to the Lenders as aforesaid.
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(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Lenders is in a greater proportion than the total of such
Obligation then owed and due to such Lender bears to the total of such
Obligation then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall purchase for cash
without recourse or warranty from the other Lenders an interest in the
Obligations to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount, provided that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
12.7. Calculations: Computations. (a) The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders); provided, that except as otherwise specifically
provided herein, all computations determining compliance with sections 4.2 and
8, including definitions used therein, shall utilize accounting principles and
policies in effect at the time of the preparation of, and in conformity with
those used to prepare, the December 31, 1995 financial statements delivered to
the Lenders pursuant to section 6.8(b), but shall not give effect to purchase
accounting adjustments required or permitted by APB 16 (including non-cash
write-ups and non-cash charges relating to inventory and fixed assets, in each
case arising in connection with the Transaction) and APB 17 (including non-cash
charges relating to intangibles and goodwill arising in connection with the
Transactions).
(b) All computations of interest on Base Rate Loans hereunder and all
computations of Commitment Commission hereunder shall be made on the actual
number of days elapsed over a year of 365 or 366 days, as applicable, and all
computations of interest on Eurodollar Loans, Letter of Credit Fees and other
Fees (other than Commitment Commission) hereunder shall be made on the actual
number of days elapsed over a year of 360 days.
12.8. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury
Trial. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF KENTUCKY,
EXCEPT THAT THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE
LIENS CREATED PURSUANT TO THE MORTGAGES SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE REAL PROPERTY IS
LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF
SUCH STATE, THE LAW OF THE COMMONWEALTH OF KENTUCKY SHALL GOVERN THE VALIDITY
AND ENFORCEABILITY OF ALL CREDIT DOCUMENTS, INCLUDING ALL MORTGAGES, AND ALL OF
THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED
BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO
ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF KENTUCKY
GOVERNS THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, EXCEPT TO THE
EXTENT AFORESAID WITH RESPECT TO THE LIENS CREATED BY THE MORTGAGES. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the Jefferson Circuit Court, Louisville, Kentucky, or of the
United States for the Western District of Kentucky, and, by execution and
delivery of this Agreement, the Borrower hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Borrower hereby further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address for notices pursuant to section
12.3, such service to become effective 30 days after such mailing or at such
earlier time as may be provided under applicable law. Nothing herein shall
affect the right of the Administrative Agent or any Lender to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrower in any other jurisdiction.
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(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in section 12.8(a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) Each of the parties to this Agreement hereby irrevocably waives
all right to a trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
12.9. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same agreement. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
12.10. Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower and each of the Lenders shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Administrative Agent at the Notice Office of the
Administrative Agent or, in the case of the Lenders, shall have given to the
Administrative Agent telephonic (confirmed in writing), written telex or
facsimile transmission notice (actually received) at such office that the same
has been signed and mailed to it.
12.11. Headings Descriptive. The headings of the several sections and
other portions of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
12.12. Amendment or Waiver. Neither this Agreement nor any terms
hereof or thereof may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed by the Borrower
and the Required Lenders, provided that no such change, waiver, discharge or
termination shall, without the consent of each Lender (other than a Defaulting
Lender) affected thereby, (i) extend the final maturity date applicable to a
Loan or a Commitment (it being understood that any waiver of the making of, or
application of any prepayment of or the method of application of any
amortization payment or other prepayment to, the amortization of, the Loans
shall not constitute an extension of such final maturity thereof), reduce the
rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates) or
Fees thereon, or reduce the principal amount thereof, or increase the Commitment
of any Lender over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of any mandatory prepayment or a
mandatory reduction in the Total Commitment shall not constitute a change in the
terms of any Commitment of any Lender), (ii) release all or substantially all of
the Collateral (in each case except as expressly provided in the Credit
Documents), (iii) release any Guarantor from its Guaranty, except in strict
compliance with the provisions thereof, (iv) change the definition of the term
"Change of Control", (v) amend, modify or waive any provision of this section
12.12, or section 11.7, 12.1, 12.4, 12.6 or 12.7(b), (vi) reduce the percentage
specified in, or otherwise modify, the definition of Required Lenders, or (vii)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement. No provision of section 2 or 11 may be amended
without the consent of (x) any Letter of Credit Issuer adversely affected
thereby or (y) the Administrative Agent, respectively.
12.13. Survival. All indemnities set forth herein including, without
limitation, in section 1.10, 1.11, 2.5, 4.4, 11.7 or 12.1 shall survive the
execution and delivery of this Agreement and the making and repayment of Loans.
12.14. Domicile of Loans. Each Lender may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or affiliate of such
Lender, provided that the Borrower shall not be responsible for costs arising
under section 1.10 or 4.4 resulting from any such transfer (other than a
transfer pursuant to section 1.12) to the extent not otherwise applicable to
such Lender prior to such transfer.
12.15. Confidentiality. Subject to section 12.4, the Lenders shall
hold all non-public information obtained pursuant to the requirements of this
Agreement which has been identified as such by the Borrower in accordance with
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its customary procedure for handling confidential information of this nature and
in accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by any bona fide transferee or participant in
connection with the contemplated transfer of any Loans or Commitment or
participation therein (provided that each such prospective transferee and/or
participant shall execute an agreement for the benefit of the Borrower with such
prospective transferor Lender containing provisions substantially identical to
those contained in this section 12.15), to its auditors, attorneys or as
required or requested by any governmental agency or representative thereof or
pursuant to legal process, provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify the Borrower of any
request by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information, and provided further that
in no event shall any Lender be obligated or required to return any materials
furnished by or on behalf of the Borrower or any other Credit Party. The
Borrower hereby agrees that the failure of a Lender to comply with the
provisions of this section 12.15 shall not relieve the Borrower of any of the
obligations to such Lender under this Agreement and the other Credit Documents.
12.16. Lender Register. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this section
12.16, to maintain a register (the "Lender Register") on which it will record
the Commitments from time to time of each of the Lenders, the Loans made by each
of the Lenders and each repayment in respect of the principal amount of the
Loans of each Lender. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Lender, the transfer of the Commitments of such
Lender and the rights to the principal of, and interest on, any Loan made
pursuant to such Commitments shall not be effective until such transfer is
recorded on the Lender Register maintained by the Administrative Agent with
respect to ownership of such Commitments and Loans and prior to such recordation
all amounts owing to the transferor with respect to such Commitments and Loans
shall remain owing to the transferor. The registration of assignment or transfer
of all or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Lender Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to section 12.4(b). The Borrower agrees to
indemnify the Administrative Agent from and against any and all losses, claims,
damages and liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Administrative Agent in performing its duties under
this section 12.16.
12.17. Limitations on Liability of the Letter of Credit Issuers. The
Borrower assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letters of
Credit. Neither any Letter of Credit Issuer nor any of its officers or directors
shall be liable or responsible for: (a) the use which may be made of any Letter
of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents should prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by a
Letter of Credit Issuer against presentation of documents that do not comply
with the terms of a Letter of Credit, including failure of any documents to bear
any reference or adequate reference to such Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that such Borrower shall have a claim against a Letter of
Credit Issuer, and a Letter of Credit Issuer shall be liable to the Borrower, to
the extent of any direct, but not consequential, damages suffered by the
Borrower which the Borrower proves were caused by (i) such Letter of Credit
Issuer's willful misconduct or gross negligence in determining whether documents
presented under a Letter of Credit comply with the terms of such Letter of
Credit or (ii) such Letter of Credit Issuer's willful failure to make lawful
payment under any Letter of Credit after the presentation to it of documentation
strictly complying with the terms and conditions of such Letter of Credit. In
furtherance and not in limitation of the foregoing, a Letter of Credit Issuer
may accept documents that appear on their face to be in order, without
responsibility for further investigation.
12.18. General Limitation of Liability. No claim may be made by the
Borrower, any Lender, the Administrative Agent, the Documentation Agent, any
Letter of Credit Issuer or any other person against the Administrative Agent,
the Documentation Agent, any Letter of Credit Issuer, or any other Lender or the
Affiliates, directors, officers, employees, attorneys or agents of any of them
for any special, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any of the other Credit
Documents, or any act, omission or event
77
<PAGE>
occurring in connection therewith; and each of the Borrower, each Lender, the
Administrative Agent and each Letter of Credit Issuer hereby waives, releases
and agrees not to sue or counterclaim upon any such claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
12.19. No Duty. All attorneys, accountants, appraisers, consultants
and other professional persons (including the firms or other entities on behalf
of which any such person may act) retained by the Administrative Agent, the
Documentation Agent or any Lender with respect to the transactions contemplated
by the Credit Documents shall have the right to act exclusively in the interest
of the Administrative Agent, the Documentation Agent or such Lender, as the case
may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to the Borrower, to
any of the other Credit Parties, to any of their Subsidiaries, or to any other
person, with respect to any matters within the scope of such representation or
related to their activities in connection with such representation.
12.20. Lenders and Agent Not Fiduciary to Credit Parties, etc. The
relationship among the Credit Parties and their Subsidiaries, on the one hand,
and the Administrative Agent, the Documentation Agent, each Letter of Credit
Issuer and the Lenders, on the other hand, is solely that of debtor and
creditor, and the Administrative Agent, the Documentation Agent, each Letter of
Credit Issuer and the Lenders have no fiduciary or other special relationship
with the Credit Parties and their Subsidiaries, and no term or provision of any
Credit Document, no course of dealing, no written or oral communication, or
other action, shall be construed so as to deem such relationship to be other
than that of debtor and creditor.
12.21. Survival of Representations and Warranties. All representations
and warranties herein shall survive the making of Loans and the issuance of
Letters of Credit hereunder, the execution and delivery of this Agreement, the
Notes and the other documents the forms of which are attached as Exhibits
hereto, the issue and delivery of the Notes, any disposition thereof by any
holder thereof, and any investigation made by the Administrative Agent or any
Lender or any other holder of any of the Notes or on its behalf. All statements
contained in any certificate or other document delivered to the Administrative
Agent or any Lender or any holder of any Notes by or on behalf of the Borrower
or any other Credit Party pursuant hereto or otherwise specifically for use in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower hereunder, made as of the
respective dates specified therein or, if no date is specified, as of the
respective dates furnished to the Administrative Agent or any Lender.
12.22. Limitation on Enforcement of Guaranties and Security Documents.
The Lenders agree that the Parent Guaranty, the Subsidiary Guaranty and the
Security Documents may be enforced by the action of the Administrative Agent or
the Collateral Agent, in each case acting upon the instructions of the Required
Lenders and that no Lender shall have any right individually to seek to enforce
or to enforce the Parent Guaranty, the Subsidiary Guaranty or any Security
Document or to realize upon the security to be granted by any Security Document,
it being understood and agreed that such rights and remedies may be exercised by
the Administrative Agent or the Collateral Agent for the benefit of the Lenders
(and any Interest Rate Creditors, as such term is respectively defined in the
Parent Guaranty, the Subsidiary Guaranty and the Security Documents) upon the
terms of this Agreement, the Parent Guaranty, the Subsidiary Guaranty and any
Security Document.
[The balance of this page is intentionally blank.]
78
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
ATRIA COMMUNITIES, INC.
By: /s/ J. Timothy Wesley
----------------------------
Chief Financial Officer and
Vice President of Development
PNC BANK, NATIONAL ASSOCIATION,
individually as a Letter of Credit
Issuer and as Administrative Agent
By: /s/ Edward J. Weisto
----------------------------
Vice President
NATIONAL CITY BANK OF KENTUCKY,
individually and as
Documentation Agent
By: /s/ Deroy Scott
----------------------------
Vice President
PNC BANK, KENTUCKY, INC.,
individually and as Managing Agent
By: /s/ Todd T. Munson
----------------------------
Vice President
THE TORONTO-DOMINION BANK,
New York Agency
By: /s/ Warren Finlay
----------------------------
Vice President
79
<PAGE>
BANK ONE, KENTUCKY, NA
By: /s/ Dennis P. Heishman
----------------------------
Vice President
NATIONSBANK, N.A.
By: /s/ S. Walter Choppin
----------------------------
Vice President
FLEET NATIONAL BANK
By: /s/ Ginger Stolzenthaler
----------------------------
Vice President
THE BANK OF NEW YORK
By: /s/ Douglas Ober
----------------------------
Vice President
THE CHASE MANHATTAN BANK
By: /s/ Dawn Lee-Lum
----------------------------
Vice President
80
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Diana H. Imhof
----------------------------
Vice President
AMSOUTH BANK OF ALABAMA
By: /s/ Timothy J. Vardaman
----------------------------
Vice President
U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By: /s/ Arnold J. Conrad
----------------------------
Vice President
FIRST AMERICAN NATIONAL BANK
By: /s/ Wallace Carter III
----------------------------
Vice President
81
<PAGE>
ANNEX I
INFORMATION AS TO LENDERS
<TABLE>
<CAPTION>
====================================================================================================================
- --------------------------------------------------------------------------------------------------------------------
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
<S> <C> <C> <C>
PNC Bank, National No Commitment; PNC Bank, National Association PNC Bank, National Association
Association Letter of Credit One PNC Plaza One PNC Plaza
Issuer and Fifth Avenue and Wood Street Fifth Avenue and Wood Street
Administrative Pittsburgh, Pennsylvania 15265 Pittsburgh, Pennsylvania 15265
Agent only
Contacts/Notification Methods:
C. David Cook
Senior Vice President
PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Mail Stop: P1-POPP-06-3
Telephone: (412) 762-2217
Facsimile: (412) 762-2784
Edward J. Weisto
Assistant Vice President
PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Mail Stop: P1-POPP-05-3
Telephone: (412) 762-8358
Facsimile: (412) 762-2784
Contact to Arrange all Borrowings
from the Lenders and Prepayments
to the Lenders:
Arlene Ohler
Vice President
4th Floor Annex
PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Telephone: (412) 762-3627
Facsimile: (412) 762-8672
Letter of Credit Notification:
Mary Ann McCarthy
Letter of Credit Officer
PNC Bank, National Association
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15265
Telephone: (412) 762-2798
Payment Instructions
for Payments to the
Administrative Agent:
PNC Bank, Louisville
ABA # 083 000 108
Credit: Commercial Loan Operations
Ref.: Atria Communities, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
- --------------------------------------------------------------------------------------------------------------------
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
<S> <C> <C> <C>
National City Bank $25,000,000 National City Bank of Kentucky National City Bank of Kentucky
of Kentucky 101 South Fifth Street 101 South Fifth Street
Louisville Regional Division--8th Floor Louisville Regional
Louisville, Kentucky 40202 Division--8th Floor
Louisville, Kentucky 40202
Contacts/ Notification Methods:
Deroy Scott
Vice President
Telephone: (502) 581-7821
Facsimile: (502) 581-4424
Chuck Denney
Vice President
Telephone: (502) 581-4212
Facsimile: (502) 581-4424
Contact for Borrowings, Payments, etc.:
Sandy Elmore
Commercial Loan Operations
14th Floor
Telephone: (502) 581-5637
Facsimile: (502) 581-4079
Letter of Credit Notification:
Dawn Norris
International Division
7th Floor
Telephone: (502) 581-4386
Facsimile: (502) 581-7925
Wiring Information:
ABA # 0830-0005-6
Commercial Loan Operations:
Account No. 151-804
Letter of Credit Division:
Account No.: GL # 29930
re: Atria Communities, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PNC Bank, Kentucky, $25,000,000 PNC Bank, Kentucky, Inc. PNC Bank, Kentucky, Inc.
Inc. 500 West Jefferson Street 500 West Jefferson Street
Louisville, Kentucky 40202 Louisville, Kentucky 40202
Notices/Primary Contacts:
Michael Vairin
Senior Vice President
Mail Stop: K1-KHDQ-08-03
Direct Dial: (502) 581-7178
Facsimile: (502) 581-2302
Todd Munson
Vice President
Mail Stop: K1-KHDQ-08-03
Direct Dial: (502) 581-4734
Facsimile: (502) 581-2302
Contact for Borrowings, Payments, etc.:
Todd Munson
Vice President
Mail Stop: K1-KHDQ-08-03
Direct Dial: (502) 581-4734
Facsimile: (502) 581-2302
0r the Commercial Loan Operations
Department
Wiring Information:
ABA # 083-000-108
Ref.: Atria Communities, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
- --------------------------------------------------------------------------------------------------------------------
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
<S> <C> <C> <C>
The Toronto-Dominion $25,000,000 The Toronto-Dominion Bank, New York The Toronto-Dominion Bank, New
Bank, New York Agency Agency York Agency
31 West 52nd Street 31 West 52nd Street
New York, New York 10019-6101 New York, New York 10019-6101
Notices:
Toronto Dominion (Texas), Inc.
909 Fannin Street, 17th Floor
Houston, Texas 77010
Attn.: Jimmy Simien
Assistant Manager, Credit
Administration
Direct Dial: (713) 653-8259
Facsimile: (713) 951-9921
Main Tel. No.: (713) 653-8200
Swift Address: TDOMUS4H
with a copy to:
The Toronto-Dominion Bank, New York
Agency
31 West 52nd Street
New York, New York 10019-6101
Attention: Sara S. Tirner,
Director Health Care Finance
Facsimile: (212) 974-0396
Primary Contacts:
Credit Contact:
Sara S. Tirner,
Director Health Care Finance
The Toronto-Dominion Bank, New York
Agency
31 West 52nd Street
New York, New York 10019-6101
Telephone: (212) 468-0746
Facsimile: (212) 974-0396
Operations Contact:
Toronto Dominion (Texas), Inc.
909 Fannin Street, 17th Floor
Houston, Texas 77010
Attn.: Jimmy Simien
Assistant Manager, Credit
Administration
Direct Dial: (713) 653-8259
Facsimile: (713) 951-9921
Main Tel. No.: (713) 653-8200
Swift Address: TDOMUS4H
Contact for Borrowings, Payments, etc.:
[see Operations Contact above]
Wiring Information:
Toronto-Dominion Bank-New York
ABA # 026003243
Credit: Acct. #2159251
Favor: TD Houston
Re: Atria Communities, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One, Kentucky, Bank One, Kentucky, NA Bank One, Kentucky, NA
NA $25,000,000 416 West Jefferson Street 416 West Jefferson Street
Louisville, Kentucky 40202 Louisville, Kentucky 40202
Notices:
Bank One, Kentucky, NA
416 West Jefferson Street
Louisville, Kentucky 40202
Attention: Dennis Heishman
Senior Vice President
Primary Contact:
Dennis Heishman
Senior Vice President
Bank One, Kentucky, NA
2nd Floor
416 West Jefferson Street
Louisville, Kentucky 40202
Telephone: (502) 566-2018
Facsimile: (502) 566-2367
Secondary Contact:
David M. Bryant
Associate Relationship Manager
Bank One, Kentucky, NA
2nd Floor
416 West Jefferson Street
Louisville, Kentucky 40202
Telephone: (502) 566-4844
Facsimile: (502) 566-2367
Contact for Borrowings, Payments, etc.:
Cathy P. Harris
Corporate Banking Representative
Bank One, Kentucky, NA
2nd Floor
416 West Jefferson Street
Louisville, Kentucky 40202
Telephone: (502) 566-8146
Facsimile: (502) 566-2367
Wiring Information:
ABA # 083-000-137
GL #151010 Center 2000
Ref.: Commercial Loan Operations
Account of Atria Communities, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NationsBank, N.A. $20,000,000 NationsBank, N.A. NationsBank, N.A.
100 North Tryon Street 100 North Tryon Street
Charlotte, North Carolina 28255 Charlotte, North Carolina 28255
Notices:
NationsBank
One NationsBank Plaza
Fifth Floor
Nashville, Tennessee 37239-1697
Attention:
S. Walter Choppin
Senior Vice President
Telephone: (615) 749-3023
Facsimile: (615) 749-4640
with a copy to the Secondary Contact
indicated below
Primary Contact:
S. Walter Choppin
Senior Vice President
NationsBank
One NationsBank Plaza
Fifth Floor
Nashville, Tennessee 37239-1697
Telephone: (615) 749-3023
Facsimile: (615) 749-4640
Secondary Contact:
Alan B. Gardner
Senior Vice President
NationsBank, N.A.
100 North Tryon Street
Charlotte, North Carolina 28255
Telephone: (704) 388-6005
Facsimile: (704) 388-6007
Contact for Borrowings, Payments, etc.:
Jacquette Banks
NationsBank, N.A.
100 North Tryon Street
NC 1-001-15-05
Charlotte, North Carolina 28255
Telephone: (704) 388-1111
Facsimile: (704) 386-8694
Wiring Information:
NationsBank, N.A.
ABA # 053 000 196
Corporate Credit Services
A/C No.: 136621-22506
Ref.: Atria Communities, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fleet National Bank $20,000,000 Fleet National Bank Fleet National Bank
Fleet Center Fleet Center
75 State Street 75 State Street
Boston, Massachusetts 02109-1810 Boston, Massachusetts 02109-1810
Notices:
Fleet National Bank
Fleet Center
75 State Street
Boston, Massachusetts 02109-1810
Attention:
Ginger Stolzenthaler
Vice President
Mail Stop: MA BO FO4A
Telephone: (617) 346-1647
Facsimile: (617) 346-1634
Primary Contact:
Ginger Stolzenthaler
Vice President
Mail Stop: MA BO FO4A
Telephone: (617) 346-1647
Facsimile: (617) 346-1634
Secondary Contact:
Richard Mynahan
Mail Stop: MA BO FO4A
Telephone: (617) 346-1575
Facsimile: (617) 346-1634
Contact for Borrowings, Payments, etc.:
Cassie Carlan
Mail Stop: MA BO FO4A
Telephone: (617) 346-1635
Facsimile: (617) 346-1634
Wiring Information:
ABA # 011-000-138
Incoming Wire
Account No. 151035103145
Ref.: Atria Communities, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Bank of The Bank of New York The Bank of New York
New York $10,000,000 One Wall Street One Wall Street
22nd Floor 22nd Floor
New York, New York 10286 New York, New York 10286
Notices:
The Bank of New York
One Wall Street
Midwest Division, 22nd Floor
New York, New York 10286
Attention:Gail Kurz
Assistant Treasurer
Telephone: (212) 635-7842
Facsimile: (212) 635-6434
Primary Contact:
Gail Kurz
Assistant Treasurer
Telephone: (212) 635-7842
Facsimile: (212) 635-6434
Secondary Contact:
Douglas Oher
Telephone: (212) 635-1330
Facsimile: (212) 635-6434
Contact for Borrowings, Payments, etc.:
Janeth Lopez
The Bank of New York
One Wall Street
Corporate Administration, 22nd Floor
New York, New York 10286
Telephone: (212) 635-6761
Facsimile: (212) 635-6397
Wiring Information:
The Bank of New York
ABA # 021000018
Account Name: Commercial Loans
A/C No.: GLA 111556
Attn.: Lorna Alleyne
Ref.: Atria Communities, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Chase Manhattan The Chase Manhattan Bank The Chase Manhattan Bank
Bank $10,000,000 270 Park Avenue 270 Park Avenue
New York, New York 10017 New York, New York 10017
Notices:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attn.: Carol Burt
Telephone: (212) 270-7684
Facsimile: (212) 270-3279
Primary Contact:
Carol Burt
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Telephone: (212) 270-7684
Facsimile: (212) 270-3279
Secondary Contact:
Dawn Lee-Lum
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Telephone: (212) 270-2472
Facsimile: (212) 270-3279
Contact for Borrowings, Payments, etc.:
Renee Pierre Louis
The Chase Manhattan Bank
140 East 45th Street
New York, New York 10017
Telephone: (212) 622-1442
Facsimile: (212) 622-0002
Wiring Information:
ABA # 021000021
Attn.: Loan Dep't./John Knapp
Ref.: Atria Communities, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Morgan Guaranty Morgan Guaranty Trust Company of New Morgan Guaranty Trust Company
Trust Company of New $10,000,000 York of New York
York 60 Wall Street 60 Wall Street
New York, New York 10260-0060 New York, New York 10260-0060
Notices:
Morgan Guaranty Trust Company of New
York
60 Wall Street
New York, New York 10260-0060
Attention: Diana H. Imhof
Vice President
Telephone: (212) 648-6498
Facsimile: (212) 648-5018
Primary Contact:
Diana H. Imhof
Vice President
Morgan Guaranty Trust Company of New
York
60 Wall Street
New York, New York 10260-0060
Telephone: (212) 648-6498
Facsimile: (212) 648-5018
Secondary Contact:
Robert M. Osieski
Vice President
Morgan Guaranty Trust Company of New
York
60 Wall Street
New York, New York 10260-0060
Telephone: (212) 648-7173
Facsimile: (212) 648-5018
Contact for Borrowings, Payments, etc.:
Jeannie Mattson
Associate
J. P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware 19713
Telephone: (302) 634-1938
Facsimile: (302) 634-1092
Wiring Information:
Morgan Guaranty Trust Company of New
York
ABA # 021 000 238
Attn.: Loan Dep't.
A/C No.: 999-99-090
- ---------------------------------------------------------------------------------------------------------------------
Ref.: Atria Communities, Inc.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AmSouth Bank of $10,000,000 AmSouth Bank of Alabama AmSouth Bank of Alabama
Alabama 1900 Fifth Avenue North 1900 Fifth Avenue North
Sonat 7th Floor Sonat 7th Floor
Birmingham, Alabama 35203 Birmingham, Alabama 35203
Notices:
AmSouth Bank of Alabama
1900 Fifth Avenue North
Sonat 7th Floor
Birmingham, Alabama 35203
Attn.: Timothy L. Vardaman
Commercial Banking Officer
Telephone: (205) 801-0358
Facsimile: (205) 326-4790
Primary Contact:
Timothy L. Vardaman
Commercial Banking Officer
Telephone: (205) 801-0358
Facsimile: (205) 326-4790
Secondary Contact:
L. Mark Housel
Relationship Representative
Telephone: (205) 307-7278
Facsimile: (205) 326-4790
Contact for Borrowings, Payments, etc.:
Nancy C. Parsons
Commercial Banking Officer/ParaLender
Telephone: (205) 326-5191
Facsimile: (205) 326-4790
Wiring Information:
ABA # 062 000 019
A/C Name: Corporate Clearing
A/C No.: 0011 0245 0400 100
Attn.: Healthcare Banking
- ---------------------------------------------------------------------------------------------------------------------
Ref.: Atria Communities, Inc.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Bank of $10,000,000 U.S. Bank of Washington, National U.S. Bank of Washington,
Washington, National Association National Association
Association 1420 Fifth Avenue 1420 Fifth Avenue
National Corporate Banking, 11th Floor Loan Servicing Department, 7th
Seattle, Washington 98101 Floor
Seattle, Washington 98101
Notices:
U.S. Bank of Washington, National
Association
National Corporate Banking, 11th Floor
1420 Fifth Avenue
Seattle, Washington 98101
Attn.: Arnold J. Conrad
Vice President
Telephone: (206) 587-5236
Facsimile: (206) 587-5259
Primary Contact:
Arnold J. Conrad
Vice President
Telephone: (206) 587-5236
Facsimile: (206) 587-5259
Secondary Contact:
Isha Singh
ARM (Analyst)
Telephone: (206) 587-5205
Facsimile: (206) 587-5259
Contact for Borrowings, Payments, etc.:
Lorrie Smith
Commercial Note Specialist
Loan Servicing Department--Notes, 7th
Floor
Telephone: (206) 344-4696
Facsimile: (206) 340-8367
Wiring Information:
ABA # 125 000 105
C/O Commercial Loan Department
Account # 4703-1111061
Attn.: Lorrie Smith
Ref.: Atria Communities, Inc.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Lender Commitment Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First American $10,000,000 First American National Bank First American National Bank
National Bank First American Center First American Center
Nashville, Tennessee 37237 Nashville, Tennessee 37237
Notices:
First American National Bank
First American Center
Nashville, Tennessee 37237
Attn.: Wallace Carter III
Senior Vice President
Telephone: (615) 748-6972
Facsimile: (615) 748-2812
Primary Contact:
Wallace Carter III
Senior Vice President
Telephone: (615) 748-6972
Facsimile: (615) 748-2812
Secondary Contact:
Kent Wood
Banking Officer
Telephone: (615) 748-1490
Facsimile: (615) 748-2812
Contact for Borrowings, Payments, etc.:
Tina Callahan
Commercial Banking Representative
Telephone: (615) 748-6917
Facsimile: (615) 748-2812
Wiring Information:
ABA # 064 0000 17
Wire Transfer Clearing Account
A/C 0901256
Attn.: Frenisa Joy
- --------------------------------------------------------------------------------------------------------------------
Ref.: Atria Communities, Inc.
TOTAL
====================================================================================================================
$200,000,000
</TABLE>
13
<PAGE>
ANNEX II
INFORMATION AS TO SUBSIDIARIES
<TABLE>
<CAPTION>
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Name of Jurisdiction Percentage of Names and Jurisdictions Jurisdictions
Subsidiary Where Outstanding Stock Addresses Where Where
and Organized or other Equity of Minority Qualified as Substantial
Type of Interests Owned Holders, a foreign Assets
Organization (Indicating whether if Any corporation Located
owned by the or
Borrower or a other entity
specified Subsidiary)
- --------------------------------------------------------------------------------------------------------------------
Lantana Partners, Florida 100%, owned as follows: None Florida
Ltd., a limited
partnership 98% limited partnership
interest owned by the
Borrower
1% general partnership
interest owned by
Twenty-Nine Hundred
Associates Limited
Partnership
1% general partnership
interest owned by
Hillhaven Properties,
Ltd.
- --------------------------------------------------------------------------------------------------------------------
Phillippe Indiana 100% of Common Stock, Florida
Enterprises, represented by 2,000
Inc., a shares, owned by the
corporation Borrower
- --------------------------------------------------------------------------------------------------------------------
Hillhaven Oregon 100% of Common Stock, Florida;
Properties, Ltd., represented by 1,000 Washington;
a corporation shares, owned by the Arizona;
Borrower California;
Colorado;
Kansas; Utah
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
Name of Jurisdicition Percentage of Names and Jurisdictions Jurisdictions
Subsidiary Where Outstanding Stock Addresses Where Where
and Organized or other Equity of Minority Qualified as Substantial
Type of Interests Owed Holders, a foreign Assets
Organization (Indicating whether If Any corporation Located
owned by the or
Borrower or a other entity
specified Subsidiary)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Castle Gardens Colorado 100%, owned as follows: Colorado
Retirement
Center, a general 98% general partnership
partnership interest, owned by the
Borrower
2% general partnership
interest owned by
Hillhaven Properties,
Ltd.
- --------------------------------------------------------------------------------------------------------------------
Hillcrest Oregon 100%, owned as follows: Idaho
Retirement
Center, Ltd., a 68.6% limited
limited partnership interest,
partnership owned by the Borrower
29.4% balance of LP and
2% GP interests held by
Fairview Living
Centers, Inc., a wholly
owned subsidiary of
Hillhaven Properties,
Ltd.
- --------------------------------------------------------------------------------------------------------------------
Sandy Retirement Oregon 100%, owned as follows: Utah
Center Limited
Partnership, a 98% limited partnership
limited interest, owned by the
partnership Borrower
2% general partnership
interest owned by
Hillhaven Properties,
Ltd.
====================================================================================================================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Jurisdiction Percentage of Names and Jurisdictions Jurisdictions
Subsidiary Where Outstanding Stock Addresses Where Where
and Organized or other Equity of Minority Qualified as Substantial
Type of Interest Owned Holders, a foreign Assets
Organization (Indicating whether if Any corporation Located
owned by the or
Borrower or a other entity
specified Subsidiary)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Topeka Retirement Missouri 100%, owned as follows: Kansas
Center, Ltd., a
limited 10% limited partnership
partnership interest, owned by the
Borrower
90% general partner
interest owned by
Hillhaven Properties,
Ltd.
- --------------------------------------------------------------------------------------------------------------------
Evergreen Woods, Florida 100%, owned as follows: Florida
Ltd., a limited
partnership 98% limited partner
interest, and 1%
general partner
interest owned by the
Borrower
Hillhaven Properties,
Ltd. owns a 1% limited
partnership interest
- --------------------------------------------------------------------------------------------------------------------
Fairview Living Oregon 100% of capital stock, Idaho
Centers, Inc., a represented by 10
corporation shares, owned by
Hillhaven Properties,
Ltd.
- --------------------------------------------------------------------------------------------------------------------
Twenty-Nine Florida 100%, owned as follows: Florida
Hundred
Associates, Ltd., 99% limited partner
a limited interest owned by the
partnership Borrower
1% general partner
interest owned by
Twenty-Nine Hundred
Corporation
====================================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
Name of Jurisdiction Percentage of Names and Jurisdictions Jurisdictions
Subsidiary Where Outstanding Stock Addresses Where Where
and Organized or other Equity of Minority Qualified as Substantial
Type of Interest Owned Holders, a foreign Assets
Organization (Indicating whether if Any corporation Located
owned by the or
Borrower or a other entity
specified Subsidiary)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Twenty-Nine Florida 100% of capital stock, Florida
Hundred represented by
---
Corporation, a shares, owned by
corporation Hillhaven Properties,
Ltd.
- --------------------------------------------------------------------------------------------------------------------
Woodhaven Florida 100%, owned as follows: Florida
Partners, Ltd., a
limited Hillhaven Properties,
partnership Ltd. owns a 51% GP
interest
The Borrower owns a 49%
LP interest
- --------------------------------------------------------------------------------------------------------------------
Tucson Retirement Arizona 100%, owned as follows: Arizona
Center Limited
Partnership, a Hillhaven Properties,
limited Ltd. owns an 80% GP
partnership interest
The Borrower owns a 20%
LP interest
====================================================================================================================
</TABLE>
4
<PAGE>
ANNEX III
DESCRIPTION OF REAL PROPERTIES
Definitions:
FHC = First Healthcare Corporation, a DE corporation
HPL = Hillhaven Properties Ltd., an OR corporation
Nationwide = Nationwide Care, Inc., an IN corporation
PEI = Phillippe Enterprises, Inc., an IN corporation
PART I. PROPERTIES MORTGAGED ON THE CLOSING DATE
<TABLE>
<CAPTION>
====================================================================================================================
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pima County, Tucson,
Arizona Valley Manor 437 69 Atria will own fee simple interest by
transfer from FHC. Mortgage to be
granted by Atria.
- --------------------------------------------------------------------------------------------------------------------
Pima County, Tucson,
Arizona Villa Campana 852 141 HPL will own fee simple interest by
transfer from FHC. Mortgage to be
granted by HPL.
- --------------------------------------------------------------------------------------------------------------------
Hernando County,
Springhill, Florida Evergreen Woods 7132 216 Fee simple interest held by Evergreen
Woods, Ltd., a FL limited partnership.
Subdivision required: nursing home will
be transferred by EWL to Nationwide
(not part of deal); assisted living
facility stays in name of EWL; 1% GP
and 98% LP interest in EWL to be
assigned to Atria by Nationwide and 1%
LP interest to be transferred from FHC
to its wholly owned sub HPL; Atria will
acquire 100% of the stock of HPL from
FHC. Mortgage to be granted by EWL.
- --------------------------------------------------------------------------------------------------------------------
Hernando County,
Brooksville, Florida Heritage at Hernando 7135 57 Fee held by PEI; Atria will acquire
100% of the stock of PEI from Vencor.
Mortgage to be granted by PEI.
====================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ada County,
Boise, Idaho Hillcrest 7160 115 Fee simple interest held by Hillcrest
Retirement Center, Ltd., an OR limited
partnership; Atria will hold 68.6% LP
interest by transfer from FHC; 29.4% LP
interest and 2% GP interest held by
Fairview Living Centers, Inc. of which
HPL owns 100% of the stock; Atria will
acquire 100% of the stock of HPL from
FHC. Mortgage to be granted by HRCL.
- --------------------------------------------------------------------------------------------------------------------
Marion County,
Indianapolis, Indiana Heritage at Wildwood 616 72 Atria will own fee simple interest by
transfer from Nationwide. Mortgage to
be granted by Atria.
- --------------------------------------------------------------------------------------------------------------------
Jackson County,
Kansas City, Missouri Villa Ventura 821 172 Atria will own fee simple interest by
transfer from FHC. Mortgage to be
granted by Atria.
- --------------------------------------------------------------------------------------------------------------------
Pierce County,
Tacoma, Washington Narrows
Glen/Laurel 7195 142/57 Fee held by HPL; Atria will acquire
House 100% of the stock of HPL from FHC.
Mortgage to be granted by HPL
====================================================================================================================
</TABLE>
2
<PAGE>
PART II. OTHER PROPERTIES WHICH HAVE OUTSTANDING IRB DEBT
OR MAY BE SUBSEQUENTLY MORTGAGED
<TABLE>
<CAPTION>
====================================================================================================================
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pima County, Fee held by Tucson Retirement Center
Tucson, Arizona Campana Del Rio 7100 214 Limited Partnership, an AZ limited
partnership; HPL is the 80% GP; Atria
will acquire 100% of the stock of HPL from
FHC; Atria owns 20% LP interest already
- --------------------------------------------------------------------------------------------------------------------
Yavapai County, Fee held by HPL; Atria will acquire
Sedona, Arizona Kachina Point 7105 102 100% of the stock of HPL from FHC
- --------------------------------------------------------------------------------------------------------------------
San Diego County, Courtyard at San
San Marcos, California Marcos 7112 212 Fee held as joint tenants per Joint
Tenant Agreement with 65% interest held
by HPL; Atria will acquire 100% of the
stock of HPL from FHC (35% interest
held by San Marcos Courtyard Ltd., a CA
limited partnership, an unrelated
entity). Leased to HPL w/ option to
purchase - CHECK
- --------------------------------------------------------------------------------------------------------------------
Adams County, Courtcastle Gardens Fee held by Castle Gardens Retirement
Denver, Colorado 7125 99 Center, a CO general partnership; Atria
will acquire 98% GP interest in CGRCLP
from FHC and 2% GP interest
held by HPL will be acquired by Atria
pursuant to acquisition of stock of HPL
from FHC
- --------------------------------------------------------------------------------------------------------------------
Pasco County, Woodhaven at Windsor 7137 180 Fee simple interest held by Woodhaven
Hudson, Florida Woods Partners, Ltd., a FL limited
partnership; HPL is a 51% GP; Atria will
acquire 100% of stock of HPL from FHC;
Atria holds 49% LP interest
====================================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Palm Beach County, Meridian House 7138 173 Fee simple interest held by Lantana
Lantana, Florida Lantana Partners, Ltd., a FL limited
partnership; HPL is a 1% general partner;
and Twenty-Nine Hundred Associates, Ltd, a
FL limited partnership is also a 1%
general partner; Atria will acquire 100%
of stock of HPL from FHC; Vencor holds 98%
LP interest in Lantana Partners, Ltd. and
will transfer that interest to the
Borrower; FHC holds 99% LP interest in
Twenty-Nine Hundred Associates, Ltd. and
will transfer that interest to Atria; HPL
owns all of the stock of Twenty-Nine
Hundred Corporation which, in turn, owns a
1% GP interest in Twenty-Nine Hundred
Associates, Ltd.
- --------------------------------------------------------------------------------------------------------------------
Shawnee County, Hearthstone 7165 155 Fee held by The City of Topeka;
Topeka, Kansas leasehold interest held by Topeka
Retirement Center, Ltd., a MO limited
partnership; 10% LP interest in TRCL held
by FHC (to be assigned to Atria) and 90%
GP interest held by HPL; Atria will
acquire 100% of the stock of HPL from FHC.
- --------------------------------------------------------------------------------------------------------------------
Salt Lake County, Crosslands 7185 120 Fee held by Sandy Retirement Center
Sandy, Utah Limited Partnership, an OR limited
partnership, (also an assumed business
name of HPL in UT); FHC is the 98% limited
partner of SRCLP; and HPL is the 2%
general partner; Atria will acquire 98% LP
interest in TSCL from FHC by assignment of
partners interest and 2% GP interest by
acquisition of stock of HPL from FHC
====================================================================================================================
</TABLE>
4
<PAGE>
PART III. LEASED PROPERTIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Newark, Ohio McMillen Center 238 80 Leasehold Mortgage may be given after
the Closing Date
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PART IV. MANAGED PROPERTIES-NO LIEN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marion, Indiana Colonial Oaks 618 63
- --------------------------------------------------------------------------------------------------------------------
Westwood, Massachusetts Foxhill Village 7174 356
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PART VI. "NO LIEN" PROPERTIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walpole, Massachusetts New Pond Village 7176 199 99 year rent free lease with option to
buy; zoning problem
- --------------------------------------------------------------------------------------------------------------------
Hanover, New Hampshire The Greens 589 28 Residential Mortgage Bonds
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
PART VII. DEVELOPMENT PROPERTIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LOCATION COMMUNITY SITE NO. UNITS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sedona, Arizona 853/7101 60 Zoned/May 1997 (includes 20 units for
the memory impaired)
- --------------------------------------------------------------------------------------------------------------------
Tucson, Arizona N/A 40 Zoned/Needs Special Use
Permit/September 1997
- --------------------------------------------------------------------------------------------------------------------
Redding, California 167 60 Under Construction/April
1997/Subdivision Required/leased from
Vencor under 99-year lease under which
Atria will acquire the property upon
obtaining certain approvals
- --------------------------------------------------------------------------------------------------------------------
Northglenn, Colorado [adjacent to 40 Zoned/October 1997 (all units for
existing communities] memory impaired)
- --------------------------------------------------------------------------------------------------------------------
Dennis, Massachusetts 573 40 Land Acquired/June 1998
- --------------------------------------------------------------------------------------------------------------------
Charlotte, North Eastover Manor N/A 90 Zoned/December 1997
Carolina
- --------------------------------------------------------------------------------------------------------------------
Sandy, Utah N/A 63 Under Construction/February 1997
- --------------------------------------------------------------------------------------------------------------------
Virginia Beach, N/A 90 Land Acquired/November 1997
Virginia
- --------------------------------------------------------------------------------------------------------------------
Tacoma, Washington 7195 40 Zoned/September 1997
- --------------------------------------------------------------------------------------------------------------------
Kenosha, Wisconsin 775-776 40 Land Acquired/December 1997
- --------------------------------------------------------------------------------------------------------------------
Lantana, Florida [adjacent to 7138 60 Zoned/July 1997/adjacent to existing
Meridian House] Atria communities
- --------------------------------------------------------------------------------------------------------------------
Topeka, Kansas [adjacent to 7165 60 Zoned/August 1996/adjacent to existing
Hearthstone] Atria communities
- --------------------------------------------------------------------------------------------------------------------
Tulsa, Oklahoma Mayfair Regal 157
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
ANNEX IV
DESCRIPTION OF EXISTING INDEBTEDNESS
<TABLE>
<CAPTION>
====================================================================================================================
Name Principal
Facility of @ Interest
No. Borrower 6/30/96 Maturity Rate Amort.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7137 Woodhaven Partners, Ltd. 9,500,000 1/2009 3.4% floating none
- --------------------------------------------------------------------------------------------------------------------
7165 Topeka Retirement Center, 8,440,000 1/2009 3.4% floating none
Ltd.
- --------------------------------------------------------------------------------------------------------------------
7112 San Marcos Retirement 11,500,000 12/2010 3.5% floating $500,000/yr.
Village Ptnshp.
- --------------------------------------------------------------------------------------------------------------------
7100 Tucson Retirement Center 10,750,000 1/2009 3.3% floating none
Ptnshp.
- --------------------------------------------------------------------------------------------------------------------
7105 Hillhaven Properties, Ltd. 5,300,000 1/2009 3.3% floating none
- --------------------------------------------------------------------------------------------------------------------
7125 Castle Gardens Partnership 5,000,000 1/2009 3.3% floating none
- --------------------------------------------------------------------------------------------------------------------
7185 Sandy Retirement Center LP. 5,900,000 1/2009 3.3% floating none
- --------------------------------------------------------------------------------------------------------------------
7138 Lantana Partners, Ltd. 5,725,000 5/2010 4.0 % floating $325,000/yr
- --------------------------------------------------------------------------------------------------------------------
7160 First Healthcare Corp./1/ 3,586,000
- --------------------------------------------------------------------------------------------------------------------
616 Nationwide Care, Inc./2/ 2,505,000
- --------------------------------------------------------------------------------------------------------------------
7132 Nationwide Care, Inc./3/ 3,045,000
- --------------------------------------------------------------------------------------------------------------------
Hillhaven Properties, Ltd. 14,000,000/4/ 1 year Prime + 1% none
- --------------------------------------------------------------------------------------------------------------------
7176 New Pond Village Associates 31,147,000 1/2040 0.0% none
- --------------------------------------------------------------------------------------------------------------------
589 Atria Communities, Inc. 2,032,000 None stated 0.0% none
- --------------------------------------------------------------------------------------------------------------------
118,430,000
====================================================================================================================
</TABLE>
LETTERS OF CREDIT
- ------------------------------
/1/ This debt is currently under the VC Revolver and will be replaced with
Atria debt after the closing of the Atria credit facility.
/2/ Same as above footnote.
/3/ Same as above footnote.
/4/ This subordinated note was not outstanding at 6/30/96 but will be
outstanding as of IPO date.
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
LC At
L/C # Issuer Back Benef. For A/C Request Facility Amount Expiry
Stop of of #
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I-147751 Bank of Cal Y State St. Lantana FHC 7138 7,018,938 11/29/96
Bank & Trust Partners, (original
Ltd. request)
PNC Bank of Cal,
A-305498 N.A. 7,018,938 12/30/96
- --------------------------------------------------------------------------------------------------------------------
9770 KredeitBank Y 1st American Topeka FHC 7165 8,805,734 12/1/96
Nat'l Bank Retirement (original
PNC Bank Center, request)
A-305576 KredeitBank Ltd. 1/1/97
N.V. 8,805,734
- --------------------------------------------------------------------------------------------------------------------
9771 KredeitBank Y 1st American Woodhaven FHC 7137 9,975,000 1/10/97
Nat'l Bank Partners, (original
PNC Bank Ltd. request)
A-305639 KredeitBank 9,975,000 2/10/97
N.V.
- --------------------------------------------------------------------------------------------------------------------
S-867642 JP Morgan Bankers Trust Castle Vencor 7125 5,166,667 8/1/97
Company Gardens GP (original
request)
- --------------------------------------------------------------------------------------------------------------------
S-867639 JP Morgan Bankers Trust Tucson Vencor 7100 11,108,333 8/1/97
Company Retirement (original
Center LP request)
- --------------------------------------------------------------------------------------------------------------------
S-867640 JP Morgan Bankers Trust Hillhaven Vencor 7105 5,476,667 8/1/97
Company Properties, (original
ltd. request)
- --------------------------------------------------------------------------------------------------------------------
S-867641 JP Morgan Bankers Trust Sandy Vencor 7185 6,096,667 8/1/97
Company Retirement (original
Center, LP request)
- --------------------------------------------------------------------------------------------------------------------
ASB 222769 B of A State Street First 7512 11,681,164 9/15/99
Bank & Trust Healthcare
Corp.
====================================================================================================================
</TABLE>
2
<PAGE>
ANNEX V
DESCRIPTION OF EXISTING LIENS
1. The liens on the projects financed by the IRB Debt, granted to secure
the IRB Debt or letters of credit issued in support thereof.
2. The liens on community known as The Greens, Hanover, New Hampshire,
related to the Residential Mortgage Bond Program for such community.
[End of Annex V]
<PAGE>
ANNEX VI
DESCRIPTION OF EXISTING ADVANCES, LOANS AND INVESTMENTS
1. Working Capital Promissory Note dated December 1, 1994, in the
principal amount of $4,526,516.22 plus Advances, made by Hillhaven
Properties, Ltd., acting in its capacity as a 65% tenant in common, and
San Marcos Courtyard Limited, acting in its capacity as a 35% tenant in
common, payable to the order of Hillhaven Properties, Ltd., which Note
is to be pledged pursuant to the Pledge Agreement.
[End of Annex VI]
<PAGE>
ANNEX VII
DESCRIPTION OF LETTERS OF CREDIT DEEMED ISSUED UNDER
THE CREDIT AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LETTER OF ORIGINAL DATE AND NO./ EXPIRATION
CREDIT ISSUER APPLICANT BENEFICIARY AMOUNT DATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PNC Bank, National Topeka Retirement No.: A-305576 $8,805,734 January 1, 1997
Association Center, Ltd. dated January 28, 1994
Attn.: Robert K. and amended August 10,
Letter of Credit Schneider, Treasurer 1994 and August 30, 1995
Department 1148 Broadway Plaza
3rd Floor Annex Tacoma, Washington 98402 KredeitBank N.V.
237 Fifth Avenue 550 South Hope Street
Pittsburgh, Los Angeles, California
Pennsylvania 15222 90071
Attn.: Patrick Daems,
Sr. Rep.
- --------------------------------------------------------------------------------------------------------------------
PNC Bank, National First Healthcare No.: A-305639 $9,975,000 February 10, 1997
Association Corporation dated February 24, 1994
Attn.: Robert K. and amended August 17,
Letter of Credit Schneider, Treasurer 1994 and September 14,
Department 1148 Broadway Plaza 1995
3rd Floor Annex Tacoma, Washington 98402
237 Fifth Avenue KredeitBank N.V.
Pittsburgh, 550 South Hope Street
Pennsylvania 15222 Los Angeles, California
90071
Attn.: Patrick Daems,
Sr. Rep.
- --------------------------------------------------------------------------------------------------------------------
PNC Bank, National First Healthcare No.: A-305498 $7,018,938.42 December 30, 1996
Association Corporation dated December 29, 1993
Attn.: Robert K. and amended July 22,
Letter of Credit Schneider, Treasurer 1994 and August 30, 1995
Department 1148 Broadway Plaza
3rd Floor Annex Tacoma, Washington 98402 The Bank of California,
237 Fifth Avenue N.A.
Pittsburgh, 400 California Street
Pennsylvania 15222 7th Floor
San Francisco,
California 94104
Attn.: Manager Letter
of Credit
- --------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Sandy Retirement Center No.: S-867641 $6,096,666.67 August 1, 1997
Company of New York Limited Partnership dated July 2, 1996
c/o J.P. Morgan c/o Hillhaven
Services, Inc. Properties, Ltd. Bankers Trust Company
P.O. Box 6071 3300 Providian Center 4 Albany Street
Newark, Delaware 400 West Market St. 4th Floor
19714-9857 Louisville, Kentucky New York, New York 10006
40202
Attention: re: $5,900,000 The
International Trade Attn.: Chief Financial Housing Authority of
Services Officer the County of Salt Lake
Elderly Housing Revenue
Refunding Bonds (Sandy
Retirement Center
Project) Series 1988
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LETTER OF ORIGINAL DATE AND NO./ EXPIRATION
CREDIT ISSUER APPLICANT BENEFICIARY AMOUNT DATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Morgan Guaranty Trust Castle Gardens No.: S-867642 $5,166,666.67 August 1, 1997
Company of New York Retirement Center dated July 2, 1996
c/o J.P. Morgan c/o Hillhaven
Services, Inc. Properties, Ltd. Bankers Trust Company
P.O. Box 6071 3300 Providian Center 4 Albany Street
Newark, Delaware 400 West Market St. 4th Floor
19714-9857 Louisville, Kentucky New York, New York 10006
40202
Attention: re: $5,000,000 The City
International Trade Attn.: Chief Financial of Northglen, Colorado,
Services Officer Industrial Development
Revenue Refunding Bonds
(Castle Gardens
Retirement Center
Project) Series 1988
- --------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Tucson Retirement No.: S-867639 $11,108,333.33 August 1, 1997
Company of New York Center Limited dated July 2, 1996
c/o J.P. Morgan Partnership
Services, Inc. c/o Hillhaven Bankers Trust Company
P.O. Box 6071 Properties, Ltd. 4 Albany Street
Newark, Delaware 3300 Providian Center 4th Floor
19714-9857 400 West Market St. New York, New York 10006
Louisville, Kentucky
Attention: 40202 re: $10,750,000 The
International Trade Industrial Development
Services Attn.: Chief Financial Authority of the County
Officer of Pima Industrial
Development Revenue
Refunding Bonds (Tucson
Retirement Center
Project) Series 1988
- --------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Hillhaven Properties No.: S-867640 $5,476,666.67 August 1, 1997
Company of New York Ltd. dated July 2, 1996
c/o J.P. Morgan 3300 Providian Center
Services, Inc. 400 West Market St. Bankers Trust Company
P.O. Box 6071 Louisville, Kentucky 4 Albany Street
Newark, Delaware 40202 4th Floor
19714-9857 New York, New York 10006
Attn.: Chief Financial
Attention: Officer re: $6,200,000 The
International Trade Industrial Development
Services Authority of the County
of Yavapai Industrial
Development Revenue
Refunding Bonds
(Kachina Pointe Project)
Series 1988
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT A-1
NOTICE OF BORROWING
[Date]
PNC Bank, National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15265
Attention: Commercial Loan Operations
--------------------------
Ladies and Gentlemen:
The undersigned, Atria Communities, Inc. (the "Borrower"), refers to
the Credit Agreement, dated as of August 15, 1996 (as amended from time to time,
the "Credit Agreement", the terms defined therein being used herein as therein
defined), among the Borrower, the financial institutions from time to time party
thereto (the "Lenders"), and you, as Administrative Agent for such Lenders, and
hereby gives you notice, irrevocably, pursuant to section 1.3(a) of the Credit
Agreement, that the undersigned hereby requests one or more Borrowings under the
Credit Agreement, and in that connection sets forth in the schedule attached
hereto the information relating to each such Borrowing (collectively the
"Proposed Borrowing") as required by section 1.3(a) of the Credit Agreement.
The undersigned hereby specifies that the Proposed Borrowing will
consist of [MPP Revolving Loans] [DPP Revolving Loans].
The undersigned hereby certifies that at the date of the Proposed
Borrowing the MPP Revolving Loan Sublimit is $ and the DPP Revolving
----------
Loan Sublimit is $ . The undersigned hereby further certifies that
----------
after giving effect to the Proposed Borrowing:
(i) $ principal amount of Loans classified as MPP
---------
Revolving Loans will be outstanding;
(ii) $ principal amount of Loans classified as DPP
---------
Revolving Loans will be outstanding;
(iii) the Allocated MPP Letter of Credit Outstandings will be
$ ;
-----------
(iv) the Allocated DPP Letter of Credit Outstandings will be
$ ;
-----------
(v) the Allocated Measured MPP Swap Credit Exposure will be
$ ; and
-----------
(vi) the Allocated Measured DPP Swap Credit Exposure will be
$ ;
-----------
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:
<PAGE>
(A) the representations and warranties contained in the Credit
Agreement and the other Credit Documents are and will be true and
correct in all material respects, before and after giving effect to the
Proposed Borrowing and to the application of the proceeds thereof, as
though made on such date, except to the extent that such
representations and warranties expressly relate to an earlier date; and
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Borrowing or from the
application of the proceeds thereof.
Very truly yours,
ATRIA COMMUNITIES, INC.
By:
------------------------------------
Title:
2
<PAGE>
BORROWING SCHEDULE
Proposed Borrowing #1:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Business Day Interest Period
of Aggregate Amount if Loans are
Proposed Borrowing Type of Loans of Loans Eurodollar Loans
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Base Rate Loans One Month
- -----------------,
19 Eurodollar Loans $ Two Months
---- --------------------
[Circle One of Three Months
Above]
Six Months
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Proposed Borrowing #2:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Business Day Interest Period
of Aggregate Amount if Loans are
Proposed Borrowing Type of Loans of Loans Eurodollar Loans
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Base Rate Loans One Month
- -----------------,
19 Eurodollar Loans $ Two Months
---- --------------------
[Circle One of Three Months
Above]
Six Months
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Proposed Borrowing #3:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Business Day Interest Period
of Aggregate Amount if Loans are
Proposed Borrowing Type of Loans of Loans Eurodollar Loans
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Base Rate Loans One Month
- -----------------,
19 Eurodollar Loans $ Two Months
---- --------------------
[Circle One of Three Months
Above]
Six Months
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A-2
LETTER OF CREDIT REQUEST
No. /5/
--------------
Dated /6/
-----------
PNC Bank, National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15265
Attention: Commercial Loan Operations
--------------------------
Ladies and Gentlemen:
The undersigned, Atria Communities, Inc. (the "Borrower"), refers to
the Credit Agreement, dated as of August 15, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the capitalized terms
defined therein being used herein as therein defined), among the Borrower, the
financial institutions from time to time party thereto (the "Lenders"), and you,
as Administrative Agent for such Lenders.
The undersigned hereby requests that , as a Letter of Credit Issuer,
issue a Letter of Credit on , 199 (the "Date of Issuance") in the aggregate
amount of $ , for the account of .
--------------------
The beneficiary of the requested Letter of Credit will be ,/7/
-------
and such Letter of Credit will be in support of /8/ and will have a
-------
stated termination date of ./9/
-------
The undersigned hereby certifies that at the Date of Issuance the MPP
Revolving Loan Sublimit will be $ and the DPP Revolving Loan Sublimit
----------
will be $ . The undersigned hereby further certifies that after giving
----------
effect to the requested issuance of the Letter of Credit:
(i) $ principal amount of Loans classified
---------
as MPP Revolving Loans will be outstanding;
- ----------------------------------
/5/ Letter of Request Number
/6/ Date of Letter of Request (at least five Business Days prior to the Date
of Issuance or such lesser number as may be agreed by the relevant Letter
of Credit Issuer.
/7/ Insert name and address of beneficiary.
/8/ Insert description of the important obligations, name of agreement and/or
the commercial transaction to which this Letter of Credit Request
relates.
/9/ Insert last date upon which drafts may be presented (which may not be
beyond the 5th day next prededing the Revolving Loan Maturity Date).
<PAGE>
(ii) $ principal amount of Loans classified
---------
as DPP Revolving Loans will be outstanding;
(iii) the Allocated MPP Letter of Credit Outstandings will
be $ ;
-----------
(iv) the Allocated DPP Letter of Credit Outstandings will
be $ ;
-----------
(v) the Allocated Measured MPP Swap Credit Exposure will
be $ ; and
-----------
(vi) the Allocated Measured DPP Swap Credit Exposure will
be $ .
-----------
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the Date of Issuance:
(A) the representations and warranties contained in the Credit
Agreement and the other Credit Documents are and will be true and
correct in all material respects, before and after giving effect to the
issuance of the Letter of Credit requested hereby, as though made on
the Date of Issuance, except to the extent that such representations
and warranties expressly relate to an earlier date; and
(B) no Default or Event of Default has occurred and is
continuing, or would result after giving effect to the issuance of the
Letter of Credit requested hereby.
Copies of all documentation with respect to the supported transaction
are attached hereto.
Very truly yours,
ATRIA COMMUNITIES, INC.
By: ____________________________________
Title:
2
<PAGE>
EXHIBIT B
REVOLVING NOTE
$ Louisville, Kentucky
---------------
, 1996
------------
FOR VALUE RECEIVED, the undersigned ATRIA COMMUNITIES, INC., a Delaware
corporation (herein, together with its successors and assigns, the "Borrower"),
hereby promises to pay to the order of (the "Lender"),
-------------------------
in lawful money of the United States of America in immediately available funds,
at the Payment Office (as defined in the Agreement referred to below) of PNC
Bank, National Association (the "Administrative Agent"), on the Revolving Loan
Maturity Date (as defined in the Agreement referred to below), in the case of
any such Loans which are MPP Revolving Loans, or on the DPP Loan Maturity Date,
in the case of any such Loans which are DPP Revolving Loans (as such terms are
defined in the Agreement), the principal sum of DOLLARS ($ )
---------------- ---
or, if less, the then unpaid principal amount of all Loans (as defined in the
Agreement) made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount of each Loan made by the Lender in like money at said office from the
date hereof until paid at the rates and at the times provided in section 1.8 of
the Agreement.
This Note is one of the Notes referred to in the Credit Agreement,
dated as of August 15, 1996, among the Borrower, the financial institutions from
time to time party thereto (including the Lender), and PNC Bank, National
Association, as Administrative Agent (as from time to time in effect, the
"Agreement"), and is entitled to the benefits thereof and of the other Credit
Documents (as defined in the Agreement). As provided in the Agreement, this Note
is subject to mandatory prepayment prior to the Revolving Loan Maturity Date, in
whole or in part.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE COMMONWEALTH OF KENTUCKY.
ATRIA COMMUNITIES, INC.
By:
------------------------------------
Chief Financial Officer and
Vice President of Development
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------------------------------------------
Amount
of
Date Amount MPP Type Principal Unpaid
of of or of Interest Paid or Principal Made
Notation Loan DPP Loan Period Prepaid Balance By
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
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</TABLE>
<PAGE>
EXHIBIT C-1
FORM OF OPINION OF SPECIAL COUNSEL TO THE BORROWER
, 1996
--------- --
PNC Bank, National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15265
Attention: Commercial Loan Operations
--------------------------
--and--
the Documentation Agent, the Collateral Agent
and each of the Lenders party to the
Credit Agreement referred to below
Re: U.S. $200,000,000 Credit Agreement
with Atria Communities, Inc.
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Atria Communities, Inc., a Delaware
corporation (the "Borrower"), in connection with (i) the execution and delivery
of the Credit Agreement, dated as of August 15, 1996 (the "Credit Agreement"),
among the Borrower, the financial institutions party thereto (the "Lenders") and
PNC Bank, National Association, as Administrative Agent, and (ii) the
transactions contemplated thereby. As used herein, the term "Credit Party"
refers only to the Borrower and such of its Subsidiaries as are party to any
Credit Document. Unless otherwise indicated, capitalized terms used herein but
not otherwise defined herein shall have the respective meanings set forth in the
Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein, including without limitation (a) the Credit Documents, (b) the other
Transaction Documents and (c) such other public and corporate documents and
records as we deem necessary or appropriate in connection with this opinion.
In our examination we have assumed the genuineness of all signatures
(other than as to the Borrower and the other Credit Parties), the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such copies. As to questions of fact
not independently verified by us we have relied, to the extent we deemed
appropriate, upon representations and certificates of officers of the Borrower,
the other Credit Parties, public officials and other appropriate persons.
Based upon the foregoing, we are of the opinion that:
1. Each of the Borrower and its Subsidiaries (i) is a validly existing
corporation or partnership, as the case may be, under the laws of the
jurisdiction of its formation and has the corporate or other organizational
power
<PAGE>
and authority, as applicable, to own its property and assets and to
transact the business in which it is engaged and presently proposed to engage
and (ii) to our knowledge, is duly qualified and is authorized to do business
and is in good standing in each jurisdiction where it is required to be so
qualified except where the failure to be so qualified would not have a Material
Adverse Effect.
2. Each Credit Party has the corporate or other organizational power
and authority to execute, deliver and carry out the terms and provisions of each
of the Credit Documents to which it is a party and has taken all necessary
corporate or other organizational action to authorize the execution, delivery
and performance of the Credit Documents to which it is a party. Each Credit
Party has duly executed and delivered each Credit Document to which it is a
party and each Credit Document to which it is a party constitutes the legal,
valid and binding agreement or obligation of each Credit Party enforceable in
accordance with its terms.
3. Neither the execution, delivery or performance by any Credit Party
of the Credit Documents to which it is a party nor compliance with the terms and
provisions thereof nor the consummation of the loan transactions contemplated
therein, (i) will contravene any provision of any law, statute, rule, regulation
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System), or, to our knowledge, any order, writ,
injunction or decree of any court or governmental instrumentality applicable to
such Credit Party or its properties and assets, (ii) will conflict or result in
any breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Security Documents)
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of the Borrower or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
agreement or other instrument of which we have knowledge to which the Borrower
or any of its Subsidiaries is a party or by which it or any of its property or
assets are bound or to which it may be subject or (iii) will violate any
provision of the partnership agreement, certificate of formation, the
certificate of incorporation or by-laws, as the case may be, of such Credit
Party.
4. To our knowledge, there are no actions, suits or proceedings pending
or, to our knowledge, threatened with respect to the Borrower or any of its
Subsidiaries (i) that have, or could reasonably be likely to have, a Material
Adverse Effect or (ii) that have, or could reasonably be expected to have a
Material Adverse Effect on the rights or remedies of the Lenders or the
Administrative Agent or on the ability of any Credit Party to perform its
obligations to them under the Credit Documents.
5. No order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, any foreign or
domestic governmental or public body or authority, or any subdivision thereof,
is required to authorize or is required in connection with (i) the execution,
delivery and performance of any Credit Document or (ii) the legality, validity,
binding effect or enforceability of Credit Documents, other than filings and
recordings necessary to establish and perfect the security interests and Liens
provided for in the Security Documents.
6. All material consents and approvals of, and filings and
registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required to be obtained, given, filed
or taken by the Borrower or any other Credit Party in order to make or
consummate each component of the Transaction have been obtained, given, filed or
taken and are in full force and effect. Each component of the Transaction has
been consummated in accordance, in all material respect, with the applicable
Transaction Documents and in compliance, in all material respects, with all
applicable laws.
7. The Registration Statement is effective under the Securities Act of
1933, as amended, and, to the best of our knowledge after due inquiry, no stop
order suspending the effectiveness of such Registration Statement has been
issued under the Securities Act of 1933, as amended, or proceedings therefor
initiated or threatened by the SEC.
8. On the Closing Date and after giving effect to the Transaction, the
authorized capital stock of the Borrower consists solely of 50,000,000 shares of
Common Stock, par value $0.10 per share, and 5,000,000 shares of Preferred
Stock, par value $1.00 per share, of which 15,095,000 shares of Common Stock are
issued and outstanding and no shares of Preferred Stock are issued and
outstanding. All of such outstanding shares have been
2
<PAGE>
duly and validly issued, are fully paid and nonassessable and are free of
preemptive rights. On the Closing Date and after giving effect to the
Transaction, the Parent is the legal and beneficial owner of
------------
shares of Common Stock of the Borrower.
9. To our knowledge, Annex II to the Credit Agreement correctly sets
forth each Subsidiary of the Borrower and the direct and indirect ownership
interest of the Borrower therein.
10. To our knowledge, each Management Contract and each Existing
Indebtedness Agreement is in full force and effect in accordance with its
respective terms, without any material default existing thereunder.
11. To our knowledge, each Credit Party is the record owner of all of
the Stock and Notes (as each such term is defined in the Pledge Agreement)
listed under its name on Annex B and C, respectively, of the Pledge Agreement.
After giving effect to the delivery to the Collateral Agent of the Pledged Stock
and Pledged Notes (as each such term is defined in the Pledge Agreement), and
assuming the continued possession by the Collateral Agent of such Pledged Stock
and Pledged Notes in the Commonwealth of Pennsylvania, the security interest
created in favor of the Collateral Agent under the Pledge Agreement constitutes
a valid and enforceable first perfected security interest in such Pledged
Securities subject to no other security interest. No filings or recordings are
required in order to perfect the security interest created under the Pledge
Agreement with respect to the Pledged Stock and the Pledged Notes.
12. To our knowledge, each Credit Party is the legal and beneficial
owner of the Partnership Interests (as defined in the Pledge Agreement) listed
under its name on Annex D to the Pledge Agreement. We have examined the
financing statements (the "Financing Statements") to be filed in the filing
offices listed for such Credit Party on Schedule A attached hereto (the "Filing
Offices"), and (i) upon the filing of such Financing Statements in the Filing
Offices, assuming that the representations made by each Credit Party in the
Security Agreement with respect to the location of its chief executive office
and registered office are and remain true and correct and (ii) upon the delivery
of the Partnership Notice (as defined in the Pledge Agreement) to the relevant
partnership and the registration of the pledge on the partnership books of such
partnership, all filings, registrations, recordings and other actions necessary
or appropriate to create, maintain, preserve, protect and perfect the security
interests granted by such Credit Party to the Pledgee under the Pledge Agreement
in respect of Partnership Interests pledged thereunder will have been
accomplished and the security interests granted to the Pledgee pursuant to the
Pledge Agreement in and to such Partnership Interests will constitute perfected
security interests therein.
13. We have examined the Financing Statements to be filed in the Filing
Offices, and upon the filing of such Financing Statements in the Filing Offices,
assuming that the representations made by the relevant Credit Party in the
Security Agreement with respect to the location of its Collateral (as defined in
the Security Agreement) and its registered office are and remain true and
correct, all actions, filings, registrations and recordings necessary or
appropriate to create, maintain, preserve subject to continuation, protect and
perfect the security interests granted by such Credit Party to the Collateral
thereunder will have been accomplished and the security interests granted to the
Collateral Agent pursuant to the Security Agreement in and to such Collateral
will constitute a perfected security interest therein to the extent that the
Collateral consists of the type of property in which a security interest may be
perfected by filing a financing statement under the Uniform Commercial Code (the
"UCC").
14. Assuming that the representation made by the relevant Credit Party
in section 2.4 of the Security Agreement with respect to the location of its
chief executive office and of its registered office is and remains true and
correct, the law of the respective jurisdiction in which a Credit Party's chief
executive office or registered office is located governs the perfection and
priority of the security interests granted by such Credit Party in its
Receivables, Contracts, Contract Rights and General Intangibles (as each such
term is defined in the Security Agreement) to the extent that said Receivables,
Contracts, Contract Rights and General Intangibles consist of "accounts" and
"general intangibles" as described in the UCC of such jurisdiction. Upon the
filing of the Financing Statements in the Filing Offices, assuming that the
representations made by such Credit Party in the Security Agreement with respect
to the location of its chief executive office and registered office is and
remains true and correct, all actions, filings, registrations or recordings
necessary or appropriate to create, maintain, preserve, protect and perfect the
security interest granted by such Credit Party to the Collateral Agent under the
Security Agreement in respect of all Receivables, Contracts, Contract Rights and
General Intangibles thereunder will have been accomplished and the
3
<PAGE>
security interest granted to the Collateral Agent pursuant to the Security
Agreement in and to such Collateral will constitute a perfected security
interest therein.
15. The recordation of the Security Agreement in the United States
Patent and Trademark Office will be effective, under all applicable law, to
perfect the security interest granted to the Collateral Agent in trademarks the
covered by Security Agreement, and the filing of the Security Agreement with the
United States Copyright Office will be effective under applicable law to perfect
the security interest granted to the Collateral Agent in the copyrights covered
by the Security Agreement.
The foregoing opinions are subject to the following qualifications and
limitations:
A. To the extent that the obligations of any party under the Credit
documents and all other documents and instruments as to which any opinion is
rendered herein may be dependent upon such matters, we assume for purposes of
this opinion that all parties other than the Credit Parties (the "Other
Parties") have obtained all necessary authorizations and approvals to execute
and deliver such documents and instruments and to perform the obligations of the
Other Parties under them and that such instruments and documents constitute
legal, valid, binding and enforceable obligations on their part.
B. Whenever our opinion herein with respect to the existence or
non-existence of facts is qualified by the phrase "to our knowledge," "to our
knowledge" "we know," "known to us," "in the course of our review" or any
similar phrase implying a limitation on the basis of knowledge, it is intended
to indicate that, during the course of our representation in connection with the
transactions referenced in this letter, no information has come to our attention
that would give us actual knowledge of the existence or non-existence of facts
contrary to the opinions expressed herein and so qualified. We have not
undertaken, however, any special investigation to determine the existence or
absence of such facts, and no inference as to our knowledge or information
concerning the existence or absence of such facts should be drawn from our
representation. Such phrases shall not be deemed to include matters that may be
contained in our files relating to previous unrelated transactions involving any
of the entities represented by us in connection with these transactions.
C. The opinions expressed herein are limited to matters governed by the
laws of the United States of America, the Commonwealth of Kentucky and the
corporate laws of the State of Delaware as reflected solely in its statutes and
without review of case law decided under or in regard to such corporate laws.
D. The opinions expressed hereinabove are qualified to the extent that
the validity or enforceability of any of the provisions of the Credit documents
may be subject to or affected by (i) laws related to bankruptcy, insolvency,
reorganization, fraudulent conveyance, preferences, arrangements or moratorium
or by other similar laws affecting the rights of creditors generally, (ii)
equitable principles affecting the enforcement of obligations and contractual
rights generally, regardless of whether enforcement is considered in a
proceeding in equity or at law, including without limitation concepts of
materiality, adequacy of security, reasonableness, good faith sand fair dealing,
and procedures such as the marshalling of assets, and (ii) judicial discretion
and statutory limitations with respect to the availability of equitable remedies
and defenses, the calculation of damages and the entitlement of a party to
attorney's fees and other costs.
E. You should be aware that under the UCC, a financing statement is
effective only for a period of five (5) years from the date of its original
filing and unless an appropriate continuation statement is filed as provided in
the UCC within the six (6) months prior to the expiration of said five-year
period, and each successive five-year period thereafter, the financing statement
will lapse and the security interest evidenced thereby will no longer be
perfected.
F. In the event that any Credit Party changes its registered office in
Kentucky, its chief executive office or its principal place of business in any
other jurisdiction or changes the location of any of the Collateral to another
jurisdiction, and the Collateral Agent has notice of the same, we believe that
it would risk the perfected status of its security interest if it failed to file
appropriate financing statements in such other jurisdictions.
4
<PAGE>
G. The Credit Documents include proceeds within the description of the
Collateral. If proceeds are actually received by a Credit Party, preservation of
the security interest in such proceeds, as against third parties, may be subject
to the limitation on the perfection of continuing security interests in
commingled cash proceeds set forth in KRS 355.9-306.
H. We call your attention to the fact that where under traditional
Kentucky common law, the parties' choice of law will be upheld, so long as it is
deemed to be reasonable, this may no longer hold true. Recent Kentucky cases
have imposed a "most significant relationship" test, which is a question of
fact; Breeding v. Massachusetts Indemnity and Life Insurance Company, Ky., 633
--------------------------------------------------------------
S.W.2d 717 (1982). At least one federal court has indicated that Kentucky courts
will apply Kentucky law unless there are overwhelming interests to the contrary;
Harris Corp. v. Comair, Inc., 712 F.2d 1069 (6th Cir., 1983). Most recently in
Paine v. La Quinta Motor Inns, Inc., 736 S.W.2d 355 (1987), the court
- -----------------------------------
specifically approved of the Harris rule that Kentucky could apply to its own
laws when there are "significant contacts and no overwhelming interests to the
contrary, even if the parties have voluntarily agreed to apply the law of a
different state."
I. No opinion is expressed with respect to the Credit Documents as to
the enforceability of (i) self-help provisions; (ii) waivers of constitutional
and statutory rights; (iii) provisions related to the waiver of remedies (or
delay in or omission of enforcement thereof), disclaimers, exculpation clauses,
liability limitations with respect to third parties, release of legal or
equitable rights, discharges of defenses or the creation of remedies not
available under Kentucky laws; (iv) provisions purporting to waive any
requirements of diligent performance or care on the part of the Lenders with
respect to the recognition and preservations of the Credit Parties' rights to or
interest in any property subject to the liens or security interests created
under the Credit Documents; (v) covenants to the extent that they can be
construed as independent clauses (although a violation of the terms of such
covenants would constitute an act or event of default if the Credit Documents so
provided); (vi) provisions purporting to shift evidentiary burdens of proof;
(vii) provisions purporting to appoint the Lenders, or any of them, as
attorney-in-fact or agent for any of the Credit Parties or any other Person;
(viii) provisions purporting to modify the rights to notice and to service of
process in accordance with the requirements of Kentucky law of the laws of any
other jurisdiction; (ix) any provision purporting to preclude the modification
of any of the Credit Documents through conduct, custom, or course of
performance, action or dealing; or (x) any provision purporting to require the
payment or reimbursement of fees, costs, expenses or other amounts which are
unreasonable in nature or amount or purporting to provide indemnification
against liability for actions taken under the Credit Documents, but the
inclusion of any such provisions discussed herein (or all of them) does not
affect the validity of any of the Credit Documents, taken as a whole, and each
of the Credit Documents, taken as a whole, together with applicable law,
contains adequate provisions for the practical realization of the benefits of
the security created thereby.
J. The opinions expressed herein are rendered as of the date hereof. We
assume no obligation to update or supplement these opinions to reflect any fact
or other matter which may hereafter come to our attention or any change in
applicable law which may hereafter occur.
The foregoing conclusions are limited to the matters expressly stated
herein, and no other conclusions are implied or may be inferred beyond such
matters. This opinion is rendered solely for your benefit and may not be relied
upon in any manner by any other person without our written consent.
Very truly yours,
5
<PAGE>
EXHIBIT C-2
FORM OF OPINION OF TRANSACTIONS COUNSEL TO THE PARENT
, 1996
-------- --
PNC Bank, National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15265
Attention: Commercial Loan Operations
--------------------------
--and--
the Documentation Agent, the Collateral Agent
and each of the Lenders party to the
Credit Agreement referred to below
Re: U.S. $200,000,000 Credit Agreement
with Atria Communities, Inc.
----------------------------------
Ladies and Gentlemen:
I am Transactions Counsel of Vencor, Inc., a Delaware corporation (the
"Parent"), and have acted as counsel to the Parent in connection with (i) the
execution and delivery of the Guaranty, dated as of August 15, 1996 (the "Parent
Guaranty"), by the Parent and the Supporting Guarantors named therein (the
Parent and all such Supporting Guarantors, each a "Guarantor" and collectively,
the "Guarantors"), in favor of, among others, the Lenders party to the Credit
Agreement referred to therein and PNC Bank, National Association, as
Administrative Agent (the "Administrative Agent") for the Lenders under the
Credit Agreement, and (ii) the transactions contemplated thereby. Unless
otherwise indicated, capitalized terms used herein but not otherwise defined
herein shall have the respective meanings set forth in the Parent Guaranty or
the Credit Agreement referred to in the Parent Guaranty.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of such documents as I
have deemed necessary or appropriate as a basis for the opinions set forth
herein, including without limitation (a) the Parent Guaranty, (b) the other
Credit Documents, (c) the other Transaction Documents and (d) such other public
and corporate documents and records as I deem necessary or appropriate in
connection with this opinion.
In my examination I have assumed the genuineness of all signatures
(other than as to the Guarantors), the authenticity of all documents submitted
to me as originals, the conformity to original documents of all documents
submitted to me as certified or photostatic copies and the authenticity of the
originals of such copies. As to questions of fact not independently verified by
me I have relied, to the extent I deemed appropriate, upon representations and
certificates of officers of the Parent, the other Guarantors, public officials
and other appropriate persons.
Based upon the foregoing, I am of the opinion that:
<PAGE>
1. The Parent (i) is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware and has the corporate
power and authority to own its property and assets and to transact the business
in which it is engaged and presently proposed to engage and (ii) is qualified
and is authorized to do business and is in good standing in each jurisdiction
where it is required to be so qualified except where the failure to be so
qualified would not have a Material Adverse Effect.
2. Each Supporting Guarantor (i) is a corporation organized and
existing and in good standing under the laws of the jurisdiction of its
formation and has the corporate power and authority to own its property and
assets and to transact the business in which it is engaged and presently
proposed to engage and (ii) is qualified and is authorized to do business and is
in good standing in each jurisdiction where it is required to be so qualified
except where the failure to be so qualified would not have a Material Adverse
Effect.
3. Each Guarantor has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Parent Guaranty and has
taken all necessary corporate or other organizational action to authorize the
execution, delivery and performance of the Parent Guaranty. Each Guarantor has
duly executed and delivered the Parent Guaranty and the Parent Guaranty
constitutes the legal, valid and binding agreement or obligation of each
Guarantor enforceable in accordance with its terms.
4. Neither the execution, delivery or performance by any Guarantor of
the Parent Guaranty nor compliance with the terms and provisions thereof (i)
will contravene any provision of any law, statute, rule, regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), order, writ, injunction or decree of any court or
governmental instrumentality applicable to any such Guarantor or its properties
and assets, (ii) will conflict or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of any such Guarantor or any of its Subsidiaries pursuant to the terms of
any indenture, mortgage, deed of trust, agreement or other instrument to which
any such Guarantor or any of its Subsidiaries is a party or by which it or any
of its property or assets are bound or to which it may be subject or (iii) will
violate any provision of the certificate of incorporation or by-laws of such
Guarantor.
5. There are no actions, suits or proceedings pending, or to the best
of my knowledge after due inquiry, threatened with respect to any Guarantor or
any of its Subsidiaries that have, or could be reasonably likely to have, a
Material Adverse Effect.
6. No order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, any foreign or
domestic governmental or public body or authority, or any subdivision thereof,
is required to authorize or is required in connection with (i) the execution,
delivery and performance of the Parent Guaranty or (ii) the legality, validity,
binding effect or enforceability of the Parent Guaranty.
7. All material consents and approvals of, and filings and
registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required to be obtained, given, filed
or taken by the Parent in order to make or consummate each component of the
Transaction have been obtained, given, filed or taken and are in full force and
effect. Each component of the Transaction has been consummated in accordance, in
all material respects, with the applicable Transaction Documents and in
compliance, in all material respects, with all applicable laws.
The opinions expressed herein are subject to the following limitations
and exceptions:
A. The enforceability of the Parent Guaranty and the obligations of the
Guarantors thereunder and the availability of certain rights and remedial
provisions provided for in the Parent Guaranty, may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, liquidation, conservatorship,
reorganization, moratorium, or other federal or state laws (including, but not
limited to the Constitution of the United States of America and the Commonwealth
of Kentucky) affecting the enforceability of rights of creditors generally and
by equitable principles.
2
<PAGE>
B. No opinion is expressed as to the enforceability of (i) self-help
provisions; (ii) waivers of constitutional rights; (iii) provisions related to
the waiver of remedies (or delay in or omission of enforcement thereof),
disclaimers, exculpation clauses, liability limitations with respect to third
parties, releases of legal or equitable rights, discharges of defenses,
liquidated damages or the creation of remedies not available under Kentucky law;
(iv) any purported assignment of any approval, license, permit, agreement of
rights for which the specific written consent of any other party or person
affected thereby has not been obtained; (v) covenants to the extent that they
can be construed as independent clauses as distinguished from clauses which
trigger events of default; (vi) any provisions which purport to shift
evidentiary burdens of proof; (vii) any provisions purported to appoint a Lender
as attorney-in-fact or agent for a Guarantor; (viii) any provisions regarding
payment of attorneys' fees except to the extent permitted by KID 411.195;; (ix)
provisions relating to lender indemnification; and (x) any provisions purporting
to modify the rights of notice of service of process requirements of the laws of
the Commonwealth of Kentucky.
C. The opinions contained in this letter are rendered only as
of the date hereof, and I undertake no obligation to update my opinions after
the date hereof.
I am a member of the Bar of the Commonwealth of Kentucky and, except as
described in the following sentence, I do not hold myself out as being
conversant with, and express no opinion as to, the laws of any other
jurisdiction. My examination of matters of law in connection with the opinions
expressed herein has been limited to the laws of the Commonwealth of Kentucky,
the federal laws of the United States, and the General Corporation Law of the
State of Delaware.
This opinion is being furnished only to the addresses and is solely for
their benefit and the benefit of their participants and assigns in connection
with the above transaction. This opinion may not be relied upon for any other
purpose, or relied upon by any other person, firm or corporation for any
purpose, without a prior written consent.
Very truly yours,
T. Richard Riney
Transactions Counsel
Vencor, Inc.
3
<PAGE>
EXHIBIT D
OFFICER'S CERTIFICATE
I, the undersigned, [President/Vice President] of [NAME OF CREDIT
PARTY], [a corporation organized and existing under the laws of the State of
] [limited liability company organized and existing under the laws of
- ---------
the State of ] (the "Company") [which corporation constitutes the general
-------
partner of , a limited partnership (the "Partnership")],
------------ ---------
do hereby certify on behalf of the Company [as the general partner of the
Partnership] that:
1. This Certificate is furnished pursuant to the Credit Agreement,
dated as of August 15, 1996, among Atria Communities, Inc., the financial
institutions from time to time party thereto, and PNC Bank, National
Association, as Administrative Agent (such Credit Agreement, as in effect on the
date of this Certificate, being herein called the "Credit Agreement"). Unless
otherwise defined herein, capitalized terms used in this Certificate shall have
the meanings set forth in the Credit Agreement.
2. The individuals named on Annex A hereto /10/ are elected or
appointed officers of the Company and each holds the office of the Company set
forth opposite his name. The signature written opposite the name and title of
each such officer is his genuine signature.
3. Attached hereto as Exhibit A is a certified copy of the [Certificate
of Incorporation of the Company] [Certificate of Formation and Limited Liability
Company Agreement] [Partnership Agreement of the Partnership], [as filed in the
Office of the Secretary of State of the State of on , 19 ],
---------- -------- --
together with all amendments thereto adopted through the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy of the
By-Laws of the Company which were duly adopted, are in full force and effect on
the date hereof, and have been in effect since , 19 .
---------- -- --
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions which were duly adopted on , 1996 [by unanimous written
---------
consent of the Board of Directors of the Company] [by a meeting of the Board of
Directors of the Company at which a quorum was present and acting throughout],
and said resolutions have not been rescinded, amended or modified. Except as
attached hereto as Exhibit C, no resolutions have been adopted by the Board of
Directors of the Company which deal with the execution, delivery or performance
of any of the Documents to which the Company [as the general manager partner of
the Partnership] is party.
6. Attached hereto as Exhibit D is a true and complete list of all
Plans, true and correct copies of which have been made available to the
Administrative Agent.
7. Attached hereto as Exhibit E is a true and complete list of all
Collective Bargaining Agreements, true and correct copies of which have been
made available to the Administrative Agent.
8. Attached hereto as Exhibit F is a true and complete list of all
Existing Indebtedness Agreements, true and correct copies of which have been
made available to the Administrative Agent.
9. Attached hereto as Exhibit G is a true and complete list of all
Shareholders' Agreements, true and correct copies of which have been made
available to the Administrative Agent.
- -----------------------------
/10/ Include name, office and signature of each officer who will sign any
Credit Document, including the officers signing this certificate.
<PAGE>
10. Attached hereto as Exhibit H is a true and complete list of all
Management Agreements, true and correct copies of which have been made available
to the Administrative Agent.
11. Attached hereto as Exhibit I is a true and complete list of all
Employment Agreements, true and correct copies of which have been made available
to the Administrative Agent.
12. Attached hereto as Exhibit J is a true and complete list of all
Management Contracts, true and correct copies of which have been made available
to the Administrative Agent.
13. Attached hereto as Exhibit K is a true and complete list of all Tax
Sharing Agreements, true and correct copies of which have been made available to
the Administrative Agent.
14. Attached hereto as Exhibit L is a true and complete list of all
Acquisition Documents, true and correct copies of which have been delivered to
the Administrative Agent.
15. On the date hereof, all of the conditions set forth in sections
5.1(e), (h), (i), (j) and (k), and section 5.2 have been duly satisfied./11/
[6][16]. On the date hereof, the representations and warranties
contained in the Credit Agreement and in the other Credit Documents are true and
correct in all material respects with the same effect as those such
representations and warranties have been made on the date hereof, after giving
effect to the incurrence of Loans on the date hereof and the application of the
proceeds thereof, unless stated to relate to a specific earlier date, in which
case such representation and warranties were true and correct in all material
respects as of such earlier date.
[7][17]. On the date hereof, no Default or Event of Default has
occurred and is continuing or would result from the Borrowing to occur on the
date hereof or from the application of the proceeds thereof.
[8][18]. There is not proceeding dissolution or liquidation of the
Company or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this day of
----
1996.
- ----------
[NAME OF CREDIT PARTY]
By:
---------------------------
Name:
Title:
- -----------------------------
/11/ Insert items 6 through 15 only in the Certificate for the Borrower.
2
<PAGE>
I, the undersigned, [Secretary/Assistant Secretary] of the Company, do
hereby certify [on behalf of the Company] [on behalf of the Company as general
partner of the Partnership] that:
1. [Name of person making above certifications] is the duly elected
and qualified [President/Vice President] of the Company and the signature above
is his genuine signature.
2. The certifications made by [name of person making above
certifications] in Items 2, 3, 4, 5 and [8][20] above are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this day of
----
August, 1996.
[NAME OF CREDIT PARTY]
By:
---------------------------
Name:
Title:
3
<PAGE>
ANNEX A
Name Office Signature
- ------------ ------------ ----------------------
----------------
----------------
----------------
----------------
<PAGE>
EXHIBIT E
----------------------------
FORM OF
PARENT GUARANTY
----------------------------
<PAGE>
EXHIBIT F
----------------------------
FORM OF
SUBSIDIARY GUARANTY
----------------------------
<PAGE>
EXHIBIT G
----------------------------
FORM OF
PLEDGE AGREEMENT
----------------------------
<PAGE>
EXHIBIT H
----------------------------
FORM OF
SECURITY AGREEMENT
----------------------------
<PAGE>
EXHIBIT I
----------------------------
FORM OF
ASSIGNMENT AGREEMENT
----------------------------
<PAGE>
ASSIGNMENT AGREEMENT
DATE:
-------------
Reference is made to the Credit Agreement described in Item 2 of Annex
I annexed hereto (as such Credit Agreement may hereafter be amended, modified or
supplemented from time to time, the "Credit Agreement"). Unless defined in Annex
I attached hereto, terms defined in the Credit Agreement are used herein as
therein defined.
(the "Assignor") and (the "Assignee")
------------- --------------
hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I (the "Assigned Share") of all of
Assignor's outstanding rights and obligations under the Credit Agreement
indicated in Item 4 of Annex I, including, without limitation, all rights and
obligations with respect to the Assigned Share of the Assignor's Commitment and
of the Loans, Unpaid Drawings and the Notes held by the Assignor. After giving
effect to such sale and assignment, the Assignee's Commitment will be as set
forth in Item 4 of Annex I.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any liens or security interests; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any other Credit Party or the performance or observance by the
Borrower or any other Credit Party of any of its obligations under the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is duly authorized
to enter into and perform the terms of this Assignment Agreement; (ii) confirms
that it has received a copy of the Credit Agreement and the other Credit
Documents, together with copies of the financial statements referred to therein
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment Agreement;
(iii) agrees that it will, independently and without reliance upon the
Administrative Agent, the Managing Agent, the Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iv) appoints and authorizes each of the
Administrative Agent and the Managing Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement and the other
Credit Documents as are delegated to the Administrative Agent or the Managing
Agent, as the case may be, by the terms thereof, together with such powers as
are reasonably incidental thereto; [and] (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender[; and (vi) to
the extent legally entitled to do so, attaches the forms described in section
4.4(b)(ii) of the Credit Agreement /12/.
4. Following the execution of this Assignment Agreement by the Assignor
and the Assignee, an executed original hereof (together with all attachments)
will be delivered to the Administrative Agent. The effective date of this
Assignment Agreement shall be the date of execution hereof by the Assignor, the
Assignee and the
- -----------------------------
/12/ If the assignee is organized under the laws of a jurisdiction outside
the United States.
<PAGE>
consent hereof by the Administrative Agent and the receipt by the Administrative
Agent of the administrative fee referred to in section 12.4(b) of the Credit
Agreement, unless otherwise specified in Item 5 of Annex I hereto (the
"Settlement Date").
5. Upon the delivery of a fully executed original hereof to the
Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment
Agreement, have the rights and obligations of a Lender thereunder and under the
other Credit Documents and (ii) the Assignor shall, to the extent provided in
this Assignment Agreement, relinquish its rights and be released from its
obligations under the Credit Agreement and the other Credit Documents.
6. It is agreed that upon the effectiveness hereof, the Assignee shall
be entitled to (x) all interest on the Assigned Share of the Loans at the rates
specified in Item 6 of Annex I, (y) all Commitment Commission (if applicable) on
the Assigned Share of the Commitment at the rate specified in Item 7 of Annex I,
and (z) all Letter of Credit Fees (if applicable) on the Assignee's
participation in all Letters of Credit at the rate specified in Item 8 of Annex
I hereto, which, in each case, accrue on and after the Settlement Date, such
interest and, if applicable, Commitment Commission and Letter of Credit Fees, to
be paid by the Administrative Agent, upon receipt thereof from the Borrower,
directly to the Assignee. It is further agreed that all payments of principal
made by the Borrower on the Assigned Share of the Loans which occur on and after
the Settlement Date will be paid directly by the Agent to the Assignee. Upon the
Settlement Date, the Assignee shall pay to the Assignor an amount specified by
the Assignor in writing which represents the Assigned Share of the principal
amount of the respective Loans made by the Assignor pursuant to the Credit
Agreement which are outstanding on the Settlement Date, net of any closing
costs, and which are being assigned hereunder. The Assignor and the Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
for periods prior to the Settlement Date directly between themselves on the
Settlement Date.
7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF KENTUCKY.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
[NAME OF ASSIGNOR],
as Assignor
By
----------------------------
Title:
[NAME OF ASSIGNEE],
as Assignee
By
----------------------------
Title:
2
<PAGE>
Acknowledged and Agreed:
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent
By:
------------------------------
Title:
3
<PAGE>
ANNEX 1
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. The Borrower: ATRIA COMMUNITIES, INC.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of August 15, 1996, among Atria Communities,
Inc., the Lenders from time to time party thereto, and PNC Bank, National
Association, as Administrative Agent.
3. Date of Assignment Agreement:
199
--------- ---
4. Amounts (as of date of item #3 above):
Commitments Loans
a. Aggregate Amount
for all Lenders $ $
-------- --------
b. Assigned Share %
--------- ----------
c. Amount of Assigned
Share $ $
-------- --------
5. Settlement Date:
199
--------- ---
6. Rate of Interest
to the Assignee: As set forth in section 1.8 of the Credit
Agreement (unless otherwise agreed
to by the Assignor and the Assignee). /13/
- -----------------------------
/13/ The Borrower and the Administrative Agent shall direct the entire amount
of the interest to the Assignee at the rate set forth in section 1.8 of
the Credit Agreement, with the Assignor and Assignee effecting any
agreed upon sharing of interest through payments by the Assignee to the
Assignor.
<PAGE>
7. Commitment
Commission: As set forth in section 3.1(a) of the Credit
Agreement (unless otherwise agreed to by the
Assignor and the Assignee)14.
8. Letter of
Credit Fees: As set forth in section 3.1(b) of the Credit
Agreement (unless otherwise agreed to by the
Assignor and the Assignee)15.
9. Notices:
ASSIGNOR:
-------------
-------------
-------------
Attention:
Telephone No.:
Facsimile No.:
ASSIGNEE:
-------------
-------------
-------------
Attention:
Telephone No.:
Facsimile No.:
- -----------------------------
/14/ The Borrower and the Administrative Agent shall direct the entire
amount of the rate set forth in section 3.1(a) of the Credit
Agreement, with the Assignor and the Assignee affecting any
agreed upon sharing of Commitment Commission through payment by the
Assignee to the Assignor.
/15/ The Borrower and the Adiminstrative Agent shall direct the entire
amount of the Letter of Credit Fees to the Assignee at the rate set
forth in section 3.1(b) of the Credit Agreement, with the Assignor and
the Assignee effecting any agreed upon sharing of the Letter of
Credit Fee through payment by the Assignee to the Assignor.
2
<PAGE>
10. Payment Instructions:
ASSIGNOR:
-------------
-------------
-------------
ABA No.:
Account No.:
Reference:
Attention:
ASSIGNEE:
-------------
-------------
-------------
ABA No.:
Account No.:
Reference:
Attention:
3
<PAGE>
EXHIBIT J
SOLVENCY CERTIFICATE
I, the undersigned, the Chief Financial Officer of Atria Communities,
Inc., a corporation organized and existing under the laws of the State of
Delaware (the "Borrower"), do hereby certify on behalf of the Borrower that:
1. This Certificate is furnished pursuant to section 5.1(o) of the
Credit Agreement, dated as of August 15, 1996, among the Borrower, the financial
institutions from time to time party thereto (the "Lenders"), and PNC Bank,
National Association, as Administrative Agent (such Credit Agreement, as in
effect on the date of this Certificate, being herein called the "Credit
Agreement"). Unless otherwise defined herein, capitalized terms used in this
Certificate shall have the meanings set forth in the Credit Agreement.
2. For purposes of this Certificate, the terms below shall have the
following definitions:
(a) "Fair Value"
The amount at which the assets, in their entirety, of
the Borrower would change hands between a willing buyer and a
willing seller, within a commercially reasonable period of
time, each having reasonable knowledge of the relevant facts,
with neither being under any compulsion to act
(b) "Present Fair Salable Value"
The amount that could be obtained by an independent
willing seller from an independent willing buyer if the assets
of the Borrower are sold with reasonable promptness under
normal selling conditions for the sale of comparable business
enterprises in a current market.
(c) "New Financing"
The Indebtedness incurred or to be incurred by the
Borrower under the Credit Documents (assuming the full
utilization by the Borrower of the Commitments under the
Credit Agreement) and the other Transaction Documents and all
other financings contemplated by the Transaction Documents
(including, without limitation, the IPO), in each case after
giving effect to the Transaction.
(d) "Stated Liabilities"
The recorded liabilities (including contingent
liabilities that would be recorded in accordance with
generally accepted accounting principles ("GAAP")) of the
Borrower as of [insert Closing Date] after giving effect to
the consummation of the Transaction, determined in accordance
with GAAP consistently applied, together with the amount of
all Obligations.
(e) "Identified Contingent Liabilities"
The maximum estimated amount of liabilities
reasonably likely to result from pending litigation, asserted
claims and assessments, guaranties, uninsured risks and other
contingent liabilities of the Borrower after giving effect to
the Transaction (including all fees and expenses related
thereto but exclusive of such contingent liabilities to the
extent reflected in Stated Liabilities), as identified and
explained in terms of their nature and estimated magnitude by
responsible officers of the Borrower.
(f) "Will be able to pay its Stated Liabilities,
including Identified Contingent Liabilities, as they mature"
<PAGE>
For the period from the date hereof through the
Revolving Loan Maturity Date, the Borrower will have
sufficient assets and cash flow to pay its Stated Liabilities
and Identified Contingent Liabilities as those liabilities
mature or otherwise become payable.
(g) "Does not have Unreasonably Small Capital"
For the period from the date hereof through the
Revolving Loan Maturity Date, the Borrower, after consummation
of the Transaction and all New Financing (including the Loans)
being incurred or assumed and Liens created by the Borrower in
connection therewith, is a going concern and has sufficient
capital to ensure that it will continue to be a going concern
for such period and to remain a going concern.
3. For purposes of this Certificate, I, or officers of the Borrower
under my direction and supervision, have performed the following procedures as
of and for the periods set forth below.
(a) I have reviewed the financial statements of the
Borrower referred to in section 6.8(b) of the Credit
Agreement.
(b) I have reviewed the unaudited pro forma consolidated
balance sheet of the Borrower referred to in section 6.8(b) of
the Credit Agreement.
(c) I have made inquiries of certain officials of the
Borrower who have responsibility for financial and accounting
matters regarding the existence and amount of Identified
Contingent Liabilities associated with the business of the
Borrower.
(d) I have knowledge of and have reviewed to my satis-
faction the Credit Documents and the other Transaction
Documents, and the respective Annexes, Schedules and Exhibits
thereto.
(e) With respect to Identified Contingent Liabilities, I:
1. inquired of certain officials of the Borrower who
have responsibility for legal, financial and accounting
matters as to the existence and estimated liability with
respect to all contingent liabilities associated with the
business of the Borrower; and
2. confirmed with officers of the Borrower, to the
best of such officers' knowledge, that (i) all appropriate
items were included in Stated Liabilities or Identified
Contingent Liabilities and that (ii) the amounts relating
thereto were the maximum estimated amount of liabilities
reasonably likely to result therefrom as of the date hereof.
3. hereby certify that, to the best of my knowledge,
all material Identified Contingent Liabilities that may arise
from any pending litigation, asserted claims and assessments,
guarantees, uninsured risks and other Identified Contingent
Liabilities of the Borrower, (exclusive of such Identified
Contingent Liabilities to the extent reflected in Stated
Liabilities) have been considered in making the certification
set forth in paragraph 4 below, and with respect to each such
Identified Contingent Liability the estimable maximum amount
of liability with respect thereto was used in making such
certification.
(f) I have made inquiries of certain officers of the Borrower
who have responsibility for financial reporting and accounting
matters regarding whether they were aware of any events or
conditions that, as of the date hereof, would cause the
Borrower after giving effect to the consummation of the
Transaction and the New Financing (including the making of
Loans under the Credit Agreement), to (i) have assets with a
Fair Value or Present Fair Salable Value that are less than
Stated Liabilities and Identified Contingent Liabilities; (ii)
have Unreasonably Small Capital; or (iii) not be able to pay
its Stated Liabilities and Identified Contingent Liabilities
as they mature or otherwise become payable.
2
<PAGE>
(g) I have made inquiries of certain officers of the Borrower,
who have responsibility for financial reporting and accounting
matters regarding whether they were aware of any events or
conditions that, as of the date hereof, would cause the
Borrower, after giving effect to the consummation of the
Transaction and the related financing transactions (including
the incurrence of the New Financing), to (i) have assets with
a Fair Value or Present Fair Salable Value that are less than
its or their Stated Liabilities and Identified Contingent
Liabilities; (ii) have Unreasonable Small Capital; or (iii)
not be able to pay its or their Stated Liabilities and
Identified Contingent Liabilities as they mature or otherwise
become payable.
4. Based on and subject to the foregoing, I hereby certify on behalf of
the Borrower that, after giving effect to the consummation of the Transaction
and the New Financing (including the making of Loans under the Credit
Agreement), it is my opinion that (i) the Fair Value and Present Fair Salable
Value of the assets of the Borrower exceed its Stated Liabilities and Identified
Contingent Liabilities; (ii) the Borrower does not have Unreasonably Small
Capital; and (iii) the Borrower will be able to pay its Stated Liabilities and
Identified Contingent Liabilities as they mature or otherwise become payable.
IN WITNESS WHEREOF, I have hereto set my hand this day of
----
1996.
- ---------
ATRIA COMMUNITIES, INC.
By
----------------------------
Name:
Title:
3
<PAGE>
EXHIBIT K
SECTION 4.4(b)(ii) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of August
15, 1996, among Atria Communities, Inc., the financial institutions party
thereto from time to time and PNC Bank, National Association, as Administrative
Agent (the "Credit Agreement"). Pursuant to the provisions of section 4.4(b)(ii)
of the Credit Agreement, the undersigned hereby certifies that it is not a
"bank" as such term is used in section 881(c)(3)(A) of the Internal Revenue Code
of 1986, as amended.
[NAME OF BANK]
By:
---------------------------------
Title:
Dated:
----------
<PAGE>
EXHIBIT 10.11
Amendment Number 9
Vencor, Inc. Retirement Savings Plan
WHEREAS Vencor, Inc. ("Sponsoring Employer") adopted the Vencor, Inc.
Retirement Savings Plan ("Plan") effective as of January 1, 1986; and
WHEREAS the Sponsoring Employer reserved the right to amend the Plan by
action of its Board of Directors; and
WHEREAS the Sponsoring Employer now desires to amend said Plan to make
certain changes as a result of recent plan mergers;
NOW, THEREFORE, the Plan is amended, effective January 1, 1996, except as
otherwise indicated herein, in the following respects:
(1) Section 1.28 is amended to read as follows:
Section 1.28 Individual Account means the detailed record kept of the
amounts credited or charged to each Participant in accordance
with the terms hereof. Such Individual Account is comprised
of the following accounts: a Base Contribution Account, a
Profit Sharing Contribution Account, a Salary Redirection
Account, a Matching Contribution Account, a Prior Plan Salary
Redirection Account, if applicable, and a Prior Plan Employer
Contribution Account, if applicable.
(2) New Subsection 1.45(g) is added to read as follows:
(g) Service with a predecessor employer will be credited to an employee as
Service for the Employer as required pursuant to Code Section 414(a).
For purposes of this Subsection, a predecessor employer is an employer
who sponsored a plan qualified under Code Section 401(a) which is
maintained by the Company.
(3) New Section 1.53 is added to read as follows:
Section 1.53 Prior Plan Employer Contribution Account means that portion
of a Participant's Individual Account attributable to (i) any
employer contributions and accumulated earnings allocated to
such Participant under the terms of a plan which has been
merged into this Plan (but does not include the Prior Plan)
and (ii) the Participant's proportionate share attributable
to his Prior Plan Employer Contribution Account, of the
Adjustments, reduced by any distributions from such Account.
-1-
<PAGE>
(4) New Section 1.54 is added to read as follows:
Section 1.54 Prior Plan Salary Redirection Account means that portion of a
Participant's Individual Account attributable to (i) any pre-
tax deferrals and accumulated earnings allocated to such
Participant under the terms of a plan which has been merged
into this Plan (but does not include the Prior Plan) and (ii)
the Participant's proportionate share attributable to his
Prior Plan Salary Redirection Account, of the Adjustments,
reduced by any distributions from such Account.
(5) Section 2.3 is amended effective September 28, 1995, to read as follows:
Section 2.3 Reemployment and Transfers
(a) Termination of employment shall be deemed to occur when
an Employee has an interruption in continuity of his
employment by the Company. Such termination may have
resulted from retirement, death, voluntary or involuntary
termination of employment, unauthorized absence, or by
failure to return to active employment with the Company
or to retire by the date on which an authorized leave of
absence expired.
(b) If an Employee who was not eligible to become a
Participant in the Plan during his prior period of
employment is reemployed, he shall be eligible to
participate in the Plan after he has met the requirements
of Section 2.1.
(c) If an Employee who was a participant in the Plan during
his prior period of employment (or who had met the age
and service requirements of Section 2.1(a) but did not
remain employed until the applicable Entry Date) is
reemployed, he shall be eligible to again become a
Participant as of the date he again becomes an Employee.
(d) If an Employee transfers employment from a non-adopting
employer to the Employer, the Employee shall become a
Participant under this Plan as of the date of transfer of
employment to the Employer provided he has been employed,
as of the date of transfer of employment, for six (6)
consecutive months calculated from his original date of
hire with the non-adopting employer. If the Employee who
transfers employment from a non-adopting employer to the
Employer has not been employed, as of the date of
transfer of employment, for at least six (6) consecutive
months
-2-
<PAGE>
calculated from his original date of hire with the non-adopting
employer, he shall become a Participant under this Plan upon
meeting the eligibility requirements of Section 2.1. calculated
from his original date of hire with the non-adopting employer.
For purposes of this Subsection, a non-adopting employer is an
entity which is part of the Company but which has not adopted
the Plan for the benefit of its employees.
(6) Subsection 3.1(b) is amended to read as follows:
(b) Submission of Form. In order for Salary Redirection to commence on
the appropriate date (the beginning of a payroll period), the Salary
Redirection agreement must be received by the Committee at least
thirty (30) days prior to the date Salary Redirection is to start, or
as soon as the Salary Redirection agreement can administratively be
implemented, or such shorter period as is administratively feasible.
Notwithstanding the above, a terminated Participant who is reemployed
and is eligible to participate upon reemployment may enter into a
Salary Redirection agreement on his reemployment date to be
applicable to Compensation earned on and after such date or as soon
as the Salary Redirection agreement can administratively be
implemented. In addition, an Employee who transfers employment from a
non-adopting employer to an Employer and is eligible to participate
upon his transfer may enter into a Salary Redirection agreement on
his date of transfer to be applicable to Compensation earned after
that date or as soon as the Salary Redirection agreement can
administratively be implemented. In the event a Participant does not
so elect when initially eligible, he may subsequently elect to have
Salary Redirection made on his behalf commencing with the first day
following the Valuation Date which is at least thirty (30) days after
the date his election form is delivered to the Committee, or such
shorter period as is administratively feasible. The Salary
Redirection agreement shall be on a form provided by the Committee.
Such agreement shall authorize the employer to reduce Compensation
otherwise payable to the Participant during each pay period by the
amount of Salary Redirection elected.
(7) Section 4.2 is amended to read as follows:
Section 4.2 Investment of Accounts
(a) There shall be established the following Investment Funds
within the Trust Fund:
(1) Fixed Income Fund - a fund consisting primarily of
fixed income obligations of the United States
government and
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<PAGE>
its agencies and of companies other than the
Sponsoring Employer, in order to provide protection
of principal consistent with an attractive rate of
return.
(2) Equity Fund - a fund consisting primarily of equity
investments.
(3) Company Stock Fund - a fund consisting primarily of
shares of common stock of the Sponsoring Employer
and dividends and distributions attributable to
said common stock, plus temporary investments held
pending purchase of additional shares of common
stock of the Sponsoring Employer.
(b) Each Participant shall have the right to direct the
Committee to invest the cumulative balance in his
Individual Account attributable to Salary Redirection.
Prior Plan Salary Redirection Contributions. Prior Plan
Employer Contributions and current Salary Redirection in
increments of twenty-five percent (25%) in the
Investment Funds provided in Subsection (a) of this
Section. Such direction shall be made by giving the
direction to the Committee thirty (30) days prior to the
first day following any Valuation Date to be effective
on said first day following the Valuation Date.
(c) A Participant who does not make any election under this
Section shall have the Individual Account attributable
to Salary Redirection, Prior Plan Salary Redirection
Contributions, Prior Plan Employer Contributions and
current Salary Redirection made on his behalf invested
in the Fixed Income Fund.
(d) All cumulative and current contributions attributable to
Employer Contributions (including employer contributions
under the Prior Plan) and the Profit Sharing
Contribution Account shall be invested in the Company
Stock Fund.
(8) New Section 3.9 is added to read as follows:
Section 3.9 Qualified Nonelective Contributions
The Employer may, as of any Valuation Date, make a Qualified
Nonelective Contribution to the Trust Fund on behalf of any
Participant with a Prior Plan Employer Contribution Account or
Prior Plan Salary
-4-
<PAGE>
Redirection Account in an amount equal to the surrender charges
assessed by the insurer which held the assets in those accounts in
the plan which was merged into this Plan. Such Qualified
Nonelective Contributions shall be added to the Salary Redirection
Accounts of those Participants in amounts equal to the allocation
of the surrender charges to the Participant's combined Prior Plan
Employer and Prior Plan Salary Redirection Accounts, shall be one
hundred percent (100%) vested when made, subject to the same
distribution rules as Salary Redirection Contribution, and shall
be tested for nondiscrimination as Salary Redirection
Contributions in accordance with the provisions of Section 3.5.
(9) Subsection 5.6(b) is amended to read as follows:
(b) A Participant shall always be one hundred percent (100%) vested in the
balance of his Salary Redirection Account, Prior Plan Salary
Redirection Account and Base Contribution Account.
(10) Subsection 5.6(c) is amended to read as follows:
(c) Effective for Participants who terminate employment on or after
July 1, 1990, a Participant shall be vested in the balance
attributable to his Prior Plan Employer Contribution Account, Matching
Contribution Account and Profit Sharing Contribution Account based on
years of Service as of his date of termination, in accordance with the
following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 1 year 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 years or more 100%
(11) Subsection 5.8(a) is amended to read as follows:
(a) A Participant or Beneficiary shall elect a distribution of the
Individual Account in a single lump sum payment in cash as provided
hereinafter. Notwithstanding the preceding sentence, a Participant may
request that the Company Stock Fund be distributed in kind, provided
that the Participant has at least one hundred (100) shares of
Sponsoring Employer common stock in his Individual Account at the date
of distribution. Any non-stock balance in his Company Stock Fund will
be paid in cash and fractional shares will be paid in cash based on
the fair market value of such fractional shares as of the date of
distribution. In the event a
-5-
<PAGE>
Participant elect to receive his Company Stock Fund in cash, the
shares of Sponsoring Employer stock as of the date of distribution
will be converted to cash based on the fair market value of such
shares as of such date. Except as provided in Subsection (c) of this
Section or Section 5.12, no other manner of distribution shall be
provided. The request by the Participant or the Beneficiary shall be
in writing and shall be filed with the Committee at least thirty (30)
days before distribution is to be made. The Committee may not require
a distribution without the consent of the Participant prior to his
reaching Normal Retirement Age or, if the Participant is deceased,
without the consent of his spouse, if the spouse is living and if the
spouse is his Beneficiary, unless the vested value of the Individual
Account is not more than three thousand five hundred dollars
($3,500). If the vested value of the Participant's Individual Account
is less than three thousand five hundred dollars ($3,500), the
benefits payable will be paid as soon as reasonably possible
following the actual date of severance, notwithstanding lack of
consent If the vested value of the Participant's Individual Account
has been more than three thousand five hundred dollars ($3,500) at
the time of any subsequent distribution, the value of the
Participant's Individual Account will be deemed to be more than three
thousand five hundred dollars ($3,500) at the time of any
subsequent distribution for purposes of the consent requirements of
this paragraph.
(12) New Subsection 5.8(c) is added to read as follows:
(c) Notwithstanding anything in this Section to the contrary, in the case
of a Participant who has a Prior Plan Salary Redirection Account or a
Prior Plan Employer Contribution Account, the Participant may take
distribution of his Prior Plan Salary Redirection Account or Prior
Plan Employer Contribution Account at such time or in such other form
as was provided in the plan (as in effects as of the date of
transfer) from which the Prior Plan Salary Redirection Account or
Prior Plan Employer Contribution Account was transferred.
(13) New Section 5.12 is added to read as follows:
Section 5.12 Joint and Survivor Options
(a) This Section shall only apply to a Participant who
has a Prior Plan Employer Contribution Account and/or
a Prior Plan Salary Redirection Account that was
transferred as a result of a plan merger from a plan
that provided for an annuity form of distribution.
(b) Qualified Joint and Survivor Annuity. Except as
otherwise provided below, unless an optional form
of benefit is selected
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<PAGE>
pursuant to a qualified election within the 90 day period ending on
the date benefit payments would commence, a Participant's vested Prior
Plan Employer Contribution Account and Prior Plan Salary Redirection
Account will be paid in the form of a qualified joint and survivor
annuity, and an unmarried Participant's benefit shall be paid in the
form of a life annuity unless otherwise elected by the Participant. A
qualified joint survivor annuity will not be applicable and this
Section shall not apply if the following conditions are met:
(1) The Participant's vested Individual Account is payable in full,
on the death of the Participant, to the Participant's surviving
spouse, or if there is no surviving spouse, or if the surviving
spouse has previously consented to the designation of a non-
spouse Beneficiary in the manner prescribed under this Section,
and
(2) Such Participant does not elect a payment of benefits in the
form of a life annuity, and
(3) With respect to such Participant, such Plan is not a direct or
indirect transfer of a Plan which is described in clause (i) or
(ii) or Section 401(a)(11)(B) of the Code, or
(4) If the distribution is subject to the terms and conditions
contained in Section 5.8 concerning the distribution of vested
Individual Accounts of three thousand five hundred dollars
($3,500) or less.
(b) Qualified Pre-Retirement Survivor Annuity. Except as otherwise
provided in this Subsection, unless an optional form of benefit has
been selected within the election period pursuant to a qualified
election, if a Participant dies before benefits have commenced, then
the Participant's vested Prior Plan Employer Contribution Account and
Prior Plan Salary Redirection Account shall be applied toward the
purchase of an annuity for the life of the surviving spouse. Benefits
will not be required to be paid in the form of a pre-retirement
survivor annuity if the following conditions are met:
(1) The Participant's vested Individual Account is payable in full,
on the death of the Participant, to the Participant's surviving
spouse, or if there is no surviving spouse, or if
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<PAGE>
the surviving spouse has previously consented to the designation
of a non-spouse Beneficiary in the manner prescribed under this
Section, and
(2) Such Participant does not elect a payment of benefits in the
form of a life annuity, and
(3) With respect to such Participant, such Plan is not a direct or
indirect transfer of a Plan which is described in clause (i) or
(ii) or Section 401(a)(11)(b) of the Code, and
(4) If the distribution is subject to the terms and conditions
contained in Section 5.8 concerning the distribution of vested
Individual Accounts of three thousand five hundred dollars
($3,500) or less
(c) Election Period shall mean, for purposes of this Section, the period
which begins on the first day of the Plan Year in which the Participant
attains age thirty-five (35) and ends on the date of the Participant's
death. If a Participant separates from service prior to the first day of
the Plan Year in which age thirty-five (35) is attained, with respect to
the Individual Account Balance as of the date of separation, the
election period shall begin on the date of separation.
(d) Early Retirement Age shall mean, for purposes of this Section, the
earliest date on which, under the Plan, the Participant could elect to
receive retirement benefits.
(e) Qualified Election shall mean, for purposes of this Section, an election
pursuant to this Subsection. A waiver of a qualified joint and survivor
annuity or a qualified pre-retirement survivor annuity is permitted. The
waiver must be in writing, must be executed by the Participant, must
specify the Beneficiary and the optional form of benefit and must be
consented to by the Participant's spouse. The spouse's consent to a
waiver must be witnessed by a Plan representative or a notary public.
Notwithstanding this consent requirement, if the Participant establishes
to the satisfaction of a Plan representative that such written consent
may not be obtained because there is no spouse or the spouse cannot be
located, a waiver will be deemed a qualified election. Any consent
necessary under this provision will be valid only with respect to the
spouse who signs the consent, or in the event of a deemed qualified
-8-
<PAGE>
election, the designated spouse. Additionally a revocation of a
prior waiver may be made by a Participant without the consent of
the spouse at any time before the commencement of benefits. The
number of revocations shall not be limited.
(f) Qualified Joint and Survivor Annuity shall mean, for purposes of
this Section, an annuity for the life of the Participant with a
survivor annuity for the life of the spouse which is not less
than fifty percent (50%) and not more than one hundred percent
(100%) of the amount of the annuity which is payable during the
joint lives of the Participant and the spouse and which is the
amount of benefit which can be purchased with the Particpant's
vested Prior Plan Employer Contribution Account and Prior Plan
Salary Redirection Account.
(g) Qualified Pre-Retirement Survivor Annuity shall mean, for
purposes of this Section, a survivor annuity for the life of the
surviving spouse, the actuarial equivalent of which is not less
than fifty percent (50%) of the vested Prior Plan Employer
Contribution Account and Prior Plan Salary Redirection Account
of the Participant as of the date of death, which may become
payable as a result of the Participant's death prior to his
Normal Retirement Date.
(h) Notice Requirements.
(1) In the case of a qualified joint and survivor annuity the
Committee shall provide each Participant no less than
thirty (30) days and no more than ninety (90) day prior to
the annuity starting date (or such other time as provided
by regulations or other pronouncements), a written
explanation of: (i) the terms and conditions of a qualified
joint and survivor annuity; (ii) the Participant's right to
make and the effect of an election to waive the qualified
joint and survivor annuity form of benefit; (iii) the
rights of a Participant's spouse; and (iv) the right to
make and the effect of a revocation of a previous election
to waive the qualified joint and survivor annuity.
(2) In the case of a qualified pre-retirement survivor annuity
the Committee shall provide each Participant within the
period beginning on the first day of the Plan Year in which
the Participant attains age thirty-two (32) and ending with
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<PAGE>
the close of the Plan Year preceding the Plan
Year in which the Participants attains age
thirty-five (35), a written explanation of the
qualified pre-retirement survivor annuity in
such terms and in such manner as would be
comparable to the explanation provided for
meeting the requirement of a qualified joint and
survivor annuity. If a Participant enters the
Plan after the first day of the Plan Year in
which the Participant attained age thirty-two
(32), the Committee shall provide notice no
later than the close of the third Plan Year
succeeding the entry of the Participant in the
Plan.
(3) Notwithstanding the other requirements of this
Section, the respective notices prescribed by
this Section need not be given to a Participant
if the Plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or
qualified preretirement survivor annuity, and
the Participant cannot elect another form of
benefit. For purposes of this Section, the Plan
fully subsidizes the costs of a benefit if under
the Plan the failure to waive such a benefit by
a Participant would not result in a decrease in
any plan benefits with respect to such
Participant and would not result in increased
contributions from the Participant.
(14) Subsection 6.1(a) is amended to read as follows:
(a) Except as otherwise provided in this Section, and upon proper
written application of a Participant made at least thirty (30)
days in advance of the withdrawal date, in such form as the
Committee may specify, the Committee in its sole discretion may
permit the Participant to withdraw a portion or all of the
balance of his Salary Redirection Account and Prior Plan Salary
Redirection Account (but only to the extent that he would have
been permitted to withdraw his Prior Plan Salary Redirection
Account based on hardship withdrawal, if it had not been
transferred from the prior plan which was merged into this
Plan); provided that earnings allocated to said account may not
be withdrawn, Such withdrawal shall be based on the Valuation
Date coincident with or immediately preceding the date of
application plus contributions made to such Account since such
Valuation Date.
(15) New Section 6.2 is added to read as follows:
Section 6.2 Prior Plan Employer Contribution Account Withdrawals
Upon proper written application in such manner and in
such form as the Committee may specify, a Participant
shall be permitted to withdraw a
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O:\TSS\VENCOR.AM9 March 20, 1996
<PAGE>
portion or all of the balance of his Prior Plan Employer
Contribution Account and Prior Plan Salary Redirection
Account while employed determined as of the Valuation Date
coincident with or immediately preceding the date of
application but only to the extent that he would have been
permitted to withdraw the funds in the account if they had
not been transferred from the prior plan which was merged
into this Plan.
(16) New Section 6.3 is added to read as follows:
Section 6.3 Participant Loans
No Participant loans are permitted under this Plan. However,
to the extent that a plan that is merged into this plan has
loans outstanding, the outstanding loan balance and accrued
interest may be transferred to this Plan and segregated in
the Participant's Individual Account until repaid. The loan
shall be repaid and subject to the terms of the loan
agreement, including the provisions of the merged plan.
* * * * * * * * * * * * *
SIGNATURES
----------
IN WITNESS WHEREOF, the Sponsoring Employer has caused this Amendment
Number 9 to be executed this the day of , 1996,
----- -------------------------
but effective January 1, 1996, except as otherwise indicated herein.
Attest: Vencor, Inc.
By
- ----------------------------- ----------------------------
Secretary
Title
-------------------------
-11-
<PAGE>
EXHIBIT 10.19
AMENDMENT TO THE VENCOR, INC.
1987 INCENTIVE COMPENSATION PROGRAM
The undersigned, JOSEPH L. LANDENWICH, the duly elected and acting
Assistant Secretary of VENCOR, INC., a Delaware corporation (the "Company"),
hereby certifies that set forth below are Amendments to the Vencor, Inc. 1987
Incentive Compensation Program (the "Program"), which Amendments became
effective May 15, 1996:
Section 2 of the Program is amended by adding the following new Section
2.3:
"2.3 Certification. The Committee shall certify the
-------------
Performance Goal(s) (as defined herein) for awards of
performance shares and cash bonuses under this Program have
been satisfied prior to the determination and payment of any
such incentive in accordance with the Program."
Section 3 of the Program is amended by adding at the end of the fourth
sentence thereof the following:
"Notwithstanding the foregoing, the Committee may not delegate
its responsibilities hereunder if such delegation would
jeopardize compliance with the "outside directors"
requirements (or any other applicable requirement) under
section 162(m) of the Code. The Committee shall establish
Performance Goal(s) applicable to a particular fiscal year
within ninety (90) days of the commencement of such fiscal
year, provided that the outcome of the Performance Goal(s) are
substantially uncertain at the time of their adoption. Each
Performance Goal applicable to a fiscal year shall identify
one or more business criteria that is to be monitored during
the fiscal year. Such business criteria may include net
income, earnings per share or return on equity for Vencor, or
net income or return on equity for a division, region,
subsidiary or other unit of Vencor. The Committee shall
determine the target level(s) of performance that must be
achieved with respect to each criteria that is identified in a
Performance Goal in order for a Performance Goal to be treated
as attained in whole or in part. The Committee may base
Performance Goal(s) on one or more of the foregoing business
criteria. In the event Performance Goal(s) are based on more
than one business criteria, the Committee may determine to
make a grant of an Incentive upon attainment of the
Performance Goal(s) relating to any one or more of such
criteria."
The second sentence of Section 6.2 of the Program is amended by
deleting the number "100,000" and substituting therefor the number "250,000."
The first three sentences of Section 9.1 of the Program are hereby
deleted and the following is substituted therefor:
"The maximum number of performance shares which may be
allocated to a participant during any calendar year shall be
150,000
<PAGE>
shares, subject to adjustment as provided in Section 11.6. If
the Performance Goal(s) are achieved in full, and the
participant remains employed with the Company as of the end of
the relevant performance period, the participant will be
allocated shares of Common Stock equal to that number of
performance shares initially awarded to that participant for
the relevant performance period. Each award of performance
shares may provide for the allocation of fewer performance
shares in the event of partial fulfillment of Performance
Goal(s)."
The second and fourth sentences of Section 10 of the Program are hereby
deleted and the following is added after the first sentence of such Section:
"The maximum amount of a cash award which may be granted to a
participant during any calendar year shall not be greater than
$500,000. Payment of a cash award will depend on meeting
Performance Goal(s). Each award of cash may provide for lesser
payments in the event of partial fulfillment of Performance
Goal(s)."
A new section, Section 11.14, is hereby added after Section 11.13 and
shall read as follows:
"11.14 Modification of Award(s). The Committee may determine
------------------------
to reduce any award under this Program but the Committee shall
be precluded from increasing such award(s) without stockholder
approval."
WITNESS the signature of the undersigned Assistant Secretary of the
Company as of March 12, 1997.
/s/ Joseph L. Landenwich
Assistant Secretary
<PAGE>
EXHIBIT 10.23
VENCOR, INC.
1997 INCENTIVE COMPENSATION PLAN
--------------------------------
ARTICLE 1. PURPOSE
The purpose of this 1997 Incentive Compensation Plan ("Plan") is to advance
the interest of Vencor, Inc., a Delaware corporation ("Company"), and its
stockholders by encouraging employees who will largely be responsible for the
long-term success and development of the Company. The Plan is also intended to
provide flexibility to the Company in attracting, retaining and motivating
employees and promoting their efforts on behalf of the Company.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings provided by such
definitions, and the terms set forth below shall have the following meanings (in
either case, such terms shall apply equally to both the singular and plural
forms of the terms defined):
(a) "Award" shall mean, individually or collectively, a grant under the
Plan of Options, Restricted Stock, SARs, Performance Units, stock awards and
cash awards.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean, unless otherwise defined in an agreement
evidencing an Award, a felony conviction of a Participant or the failure of a
Participant to contest prosecution for a felony, or a Participant's willful
misconduct or dishonesty, any of which is determined by the Committee to be
directly and materially harmful to the business or reputation of the Company or
its Subsidiaries.
(d) A "Change in Control" shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any Person immediately
after which such Person has beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) ("Beneficial Ownership and/or
Beneficially Owned") of 20% or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a Non-Control Acquisition (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (i) the Company or any Subsidiary, (ii)
an employee benefit plan (or a trust forming a part thereof) maintained by the
Company or any Subsidiary, or (iii) any Person in connection with a Non-Control
Transaction (as hereinafter defined);
<PAGE>
(2) The individuals who, as of December 31, 1996, are members of the
Board ("Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that if the election, or nomination for
election by the Company's stockholders, of any new director was approved by a
vote of at least a majority of the Incumbent Board, such new director shall, for
purposes of the Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened election contest (as described in Rule 14a-11
promulgated under the Exchange Act) ("Election Contest") or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board ("Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless such is a Non-Control Transaction. For purposes of the Plan, the
term "Non-Control Transaction" shall mean a merger, consolidation or
reorganization of the Company in which:
(i) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization, at least a
majority of the combined voting power of the voting securities of the
corporation resulting from such merger or consolidation or reorganization
("Surviving Corporation") over which any Person has Beneficial Ownership in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization;
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at least a majority
of the members of the board of directors of the Surviving Corporation; and
(iii) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any Person who,
immediately prior to such merger, consolidation or reorganization had Beneficial
Ownership of 20% or more of the then outstanding Voting Securities) has
Beneficial Ownership of 20% or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities;
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
2
<PAGE>
(4) Any other event that the Committee shall determine constitutes an
effective Change in Control of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person ("Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person; provided, however, that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(f) "Committee" shall mean the committee described in Section 3.1.
(g) "Disability" shall mean the total disability as determined by the
Committee in accordance with standards and procedures similar to those under the
Company's long-term disability plan, or, if none, a physical or mental infirmity
which the Committee determines impairs the Participant's ability to perform
substantially his or her duties for a period of 180 consecutive days.
(h) "Employee" shall mean an individual who is a full-time employee of the
Company, a Subsidiary or a partnership or limited liability company in which the
Company or its Subsidiaries own a majority interest.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" of the Shares shall mean, as of any applicable
date, the closing sale price of the Shares on the New York Stock Exchange or any
national or regional stock exchange in which the Shares are traded, or if no
such reported sale of the Shares shall have occurred on such date, on the next
preceding date on which there was such a reported sale. If there shall be any
material alteration in the present system of reporting sale prices of the
Shares, or if the Shares shall no longer be listed on the New York Stock
Exchange or a national or regional stock exchange, the fair market value of the
Shares as of a particular date shall be determined by such method as shall be
determined by the Committee.
(k) "ISOs" shall have the meaning given such term in Section 6.1.
(1) "NQSOs" shall have the meaning given such term in Section 6.1.
3
<PAGE>
(m) "Option" shall mean an option to purchase Shares granted pursuant to
Article 6.
(n) "Option Agreement" shall mean an agreement evidencing the grant of an
Option as described in Section 6.2.
(o) "Option Exercise Price" shall mean the purchase price per Share
subject to an Option, which shall not be less than the Fair Market Value of the
Share on the date of grant (110% of Fair Market Value in the case of an ISO
granted to a Ten Percent Shareholder).
(p) "Participant" shall mean any Employee selected by the Committee to
receive an Award under the Plan.
(q) "Performance Goals" shall have the meaning given such term in Section
8.4.
(r) "Performance Period" shall have the meaning given such term in
Section 8.3.
(s) "Performance Unit" shall mean the right to receive a payment from the
Company upon the achievement of specified Performance Goals as set forth in a
Performance Unit Agreement.
(t) "Performance Unit Agreement" shall mean an agreement evidencing a
Performance Unit Award, as described in Section 8.2.
(u) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
(v) "Plan" shall mean this Vencor, Inc. 1997 Incentive Compensation Plan
as the same may be amended from time to time.
(w) "Restriction Period" shall mean the period determined by the
Committee during which the transfer of Shares is limited in some way or Shares
are otherwise restricted or subject to forfeiture as provided in Article 7.
(x) "Restricted Stock" shall mean Shares granted pursuant to Article 7 as
to which the restrictions have not expired.
(y) "Restricted Stock Agreement" shall mean an agreement evidencing a
Restricted Stock Award, as described in Section 7.2.
(z) "Retirement" shall mean retirement by a Participant in accordance
with the terms of the Company's retirement or pension plans.
(aa) "Shares" shall mean the shares of the Company's common stock, par
value $.25 per share.
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(ab) "Subsidiary" shall mean, with respect to any company, any corporation
or other Person of which a majority of its voting power, equity securities, or
equity interest is owned directly or indirectly by such company but excluding
Atria Communities, Inc.
(ac) "Ten Percent Shareholder" shall mean an Employee who, at the time an
ISO is granted, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company.
2.2 Gender and Number. Except where otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee appointed
by the Board consisting of three or more directors of the Company or the entire
Board of the Company. Members of the Committee shall be "outside directors"
within the meaning of Section 162(m) of the Code (or any successor provision
thereto). The Committee shall meet at such times and places as it determines
and may meet through a telephone conference call. The members of the Committee
shall be appointed from time to time by, and shall serve at the discretion of,
the Board.
3.2 Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have full authority to:
(a) select Participants to whom Awards are granted;
(b) determine the size, types and frequency of Awards granted under
the Plan;
(c) determine the terms and conditions of Awards, including any
restrictions or conditions to the Award, which need not be identical;
(d) cancel or modify, with the consent of the Participant, outstanding
Awards and to grant new Awards in substitution therefor;
(e) accelerate the exercisability of any Award, for any reason;
(f) construe and interpret the Plan and any agreement or instrument
entered into under the Plan;
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(g) establish, amend and rescind rules and regulations for the Plan's
administration; and
(h) amend the terms and conditions of any outstanding Award to the
extent such terms and conditions are within the discretion of the Committee as
provided in the Plan.
The Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. The Committee may delegate its
authority as identified hereunder; provided, however, that such delegation is
permitted by law and Rule 16b-3 promulgated under the Exchange Act and that such
delegation would not jeopardize compliance with the "outside directors"
requirements (or any other applicable requirement) under Section 162(m) of the
Code.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive and binding upon all
persons, including the Company, its stockholders, Employees, Participants and
their estates and beneficiaries.
3.4 Section 16 Compliance; Bifurcation of Plan. It is the intention of
the Company that the Plan and the administration of the Plan comply in all
respects with Section 16(b) of the Exchange Act and the rules and regulations
promulgated thereunder. If any Plan provision, or any aspect of the
administration of the Plan, is found not to be in compliance with Section 16(b)
of the Exchange Act, the provision or administration shall be deemed null and
void, and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3 promulgated under the Exchange Act. Notwithstanding
anything in the Plan to the contrary, the Board or the Committee, in its
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Participants who are subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other Participants.
ARTICLE 4. SHARES AVAILABLE UNDER THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.2,
the number of Shares reserved for issuance upon the exercise of Awards and the
payment of benefits in connection with Awards is 3,400,000 Shares. Any Shares
issued under the Plan may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares. If and to the extent an Award shall expire
or terminate for any reason without having been exercised in full (including a
cancellation and regrant of an Option), or shall be forfeited, the Shares
(including Restricted Stock) associated with such Awards shall again become
available for Awards under the Plan.
4.2 Adjustments in Authorized Shares and Outstanding Awards. In the event
of a merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, property dividend, share repurchase, share combination,
share exchange, issuance of warrants, rights or debentures, or other change in
the corporate structure of the Company affecting the Shares, the Committee may
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substitute or adjust the total number and class of Shares or other stock or
securities which may be issued under the Plan, and the number, class and/or
price of Shares subject to outstanding Awards, as it determines to be
appropriate and equitable to prevent dilution or enlargement of the rights of
Participants and to preserve, without exceeding, the value of any outstanding
Awards; and further provided, that the number of Shares subject to any Award
shall always be a whole number. In the case of ISOs, such adjustments shall be
made in such a manner so as not to constitute a "modification" within the
meaning of Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
All Employees are eligible to receive Awards under the Plan. In selecting
Employees to receive Awards under the Plan, as well as in determining the number
of Shares subject to, and the other terms and conditions applicable to, each
Award, the Committee shall take into consideration such factors as it deems
relevant in promoting the purposes of the Plan, including the duties of the
Employees, their present and potential contribution to the success of the
Company and their anticipated number of years of active service as employees.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
the Committee may grant Options to Participants at any time and from time to
time, in the form of options which are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code ("ISOs"), Options which
are not intended to so qualify ("NQSOs") or a combination thereof. All ISOs
must be granted within ten years from the date on which the Plan was adopted by
the Board, and may only be granted to employees of the Company or any subsidiary
corporation (within the meaning of Section 422(f)). The maximum number of
Shares with respect to which Options may be granted to any Participant during
any calendar year shall be 250,000, subject to adjustment as provided in Section
4.2.
6.2 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the Option Exercise Price, the duration of the
Option, the number of Shares to which the Option relates and such other
provisions as the Committee may determine or which are required by the Plan.
The Option Agreement shall also specify whether the Option is intended to be an
ISO or a NQSO and shall include such provisions applicable to the particular
type of Option granted.
6.3 Duration of Options. Each Option shall expire at such time as is
determined by the Committee at the time of grant; provided, however, that no
Option shall be exercised later than the tenth anniversary of its grant (fifth
anniversary in the case of an ISO granted to a Ten Percent Shareholder).
6.4 Exercise of Options. Options shall be exercisable at such times and
be subject to such restrictions and conditions as the Committee shall approve at
the time of grant, which need not be the same for each grant or for each
Participant. Except as provided in Section 6.6,
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however, in no event may any Option become exercisable within six months of the
date of grant in the case of any Participant subject to Section 16(b) of the
Exchange Act. Subject to the foregoing sentence, the Committee may accelerate
the exercisability of any Option. Options shall be exercised, in whole or in
part, by delivery to the Company of a written notice of exercise, setting forth
the number of Shares with respect to which the Option is to be exercised and
accompanied by full payment of the Option Exercise Price and all applicable
withholding taxes.
6.5 Payment of Option Exercise Price. The Option Exercise Price for
Shares as to which an Option is exercised shall be paid to the Company in full
at the time of exercise either (a) in cash in the form of currency or other cash
equivalent acceptable to the Company, (b) by tendering Shares having a Fair
Market Value (determined as of the close of the business day immediately
preceding the day on which the Option is exercised) equal to the Option Exercise
Price (provided, however, that in the case of a Participant subject to Section
16(b) of the Exchange Act, such Shares have been held by the Participant for at
least six months prior to their tender), (c) any other reasonable consideration
that the Committee may deem appropriate or (d) by a combination of the forms of
consideration described in (a), (b) and (c) of this Section 6.5. The Committee
may permit the cashless exercise of Options as described in Regulation T
promulgated by the Federal Reserve Board, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
6.6 Vesting Upon Change in Control. Upon a Change in Control, any then
outstanding Options held by Participants shall become fully vested and
immediately exercisable. Furthermore, if provided in an Option Agreement, the
Participant shall have the right to sell the Option back to the Company for an
amount generally equal to the excess of the Fair Market Value of the Shares
subject to the Option over the Option Price.
6.7 Termination of Employment. If the employment of a Participant is
terminated for Cause, all then outstanding Options of such Participant, whether
or not exercisable, shall terminate immediately. If the employment of a
Participant is terminated for any reason other than for Cause, death, Disability
or Retirement, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by such Participant or such
Participant's personal representative at any time prior to the expiration date
of the Options or within 90 days after the date of such termination of
employment, whichever is earlier. In the event of the Retirement of a
Participant, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by the Participant (a) in the case of
NQSOs, within two years after the date of Retirement and (b) in the case of
ISOs, within 90 days after Retirement; provided, however, that no such Options
may be exercised on a date subsequent to their expiration. In the event of the
death or Disability of a Participant while employed by the Company or a
Subsidiary, all then outstanding Options of such Participant shall become fully
vested and immediately exercisable, and may be exercised at any time (a) in the
case of NQSOs, within two years after the date of death or determination of
Disability and (b) in the case of ISOs, within one year after the date of death
or determination of Disability; provided, however, that no such Options may be
exercised on a date subsequent to their expiration. In the event of the death
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of a Participant, the Option may be exercised by the person or persons to whom
rights pass by will or by the laws of descent and distribution, or if
appropriate, the legal representative of the deceased Participant's estate. In
the event of the Disability of a Participant, Options may be exercised by the
Participant, or if such Participant is incapable of exercising the Options, by
such Participant's legal representative.
6.8 Transferable Options. The Committee may, in its discretion by
appropriate provision in the Participant's Option Agreement, authorize all or a
portion of any NQSOs to be granted to a Participant be on terms which permit
transfer by such Participant to (i) the spouse, children or grandchildren of the
Participant ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Participant and/or his Immediate Family Members, or
(iii) a partnership or limited liability company in which such Participant
and/or his Immediate Family Members are the only partners or members, as
applicable; provided that (a) there may be no consideration for any such
transfer, (b) the Option Agreement must expressly provide for transferability in
a manner consistent with this Section and (c) subsequent transfers of
transferable NQSOs shall be prohibited except by will or the laws of descent and
distribution. Following transfer, any such NQSOs shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of this Article 6 (excluding Section 6.7)
the term "Participant" shall be deemed to refer to the transferee. The events
of termination of employment as set forth in Section 6.7 shall continue to be
applied with respect to the original Participant. Any transferred NQSOs shall
be exercisable by the transferee only to the extent, and for the periods,
specified in the Option Agreement.
6.9 Repurchase. Upon approval of the Committee, the Company may
repurchase a previously granted Option from a Participant by mutual agreement
before such Option has been exercised by payment to the Participant of an amount
equal to the amount by which (i) the Fair Market Value of the Shares subject to
the Option on the date immediately preceding the date of repurchase exceeds (ii)
the Option Exercise Price of such Shares.
6.10 Certificate Legend. For any Shares issued upon exercise of an ISO, the
Company may legend such Shares as it deems appropriate.
ARTICLE 7. RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Restricted Stock to Participants at any
time and from time to time and upon such terms and conditions as it may
determine.
7.2 Restricted Stock Agreement. Each grant of Restricted Stock shall be
evidenced by a Restricted Stock Agreement which shall specify the Restriction
Period, the number of shares of Restricted Stock granted and such other
provisions as the Committee may determine and which are required by the Plan.
7.3 Non-Transferability of Restricted Stock. Except as provided in this
Article 7, shares of Restricted Stock may not be sold, transferred, pledged,
assigned or otherwise alienated
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or hypothecated until the end of the applicable Restriction Period as specified
in the Restricted Stock Agreement, or upon earlier satisfaction of any other
conditions determined at the time of grant specified in the Restricted Stock
Agreement. Except as provided in Section 7.8, however, in no event may any
Restricted Stock become vested in a Participant subject to Section 16(b) of the
Exchange Act prior to six months following the date of its grant.
7.4 Other Restrictions. The Committee may impose such other restrictions
on any shares of Restricted Stock as it may deem advisable, including, without
limitation, restrictions based upon the achievement of Performance Goals, years
of service and/or restrictions under applicable Federal or state securities
laws. The Committee may provide that any share of Restricted Stock shall be
held (together with a stock power executed in blank by the Participant) in
custody by the Company until any or all restrictions thereon shall have lapsed.
7.5 Reacquisition of Restricted Stock. Committee shall determine and set
forth in a Participant's Restricted Stock Agreement such events upon which a
Participant's shares of Restricted Stock shall be reacquired by the Company,
which may include, without limitation, the termination of a Participant's
employment during the Restriction Period or the nonachievement of Performance
Goals. Any such forfeited shares of Restricted Stock held by a Participant
which are to be reacquired by the Company shall be immediately returned to the
Company by the Participant, and the Participant shall only receive the amount,
if any, paid by the Participant for such Restricted Stock.
7.6 Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 7.4, each certificate representing shares of Restricted
Stock shall bear the following legend:
"The sale or other transfer of the shares represented by this
Certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer as set forth in the
Vencor, Inc. 1997 Incentive Compensation Plan, and in the related
Restricted Stock Agreement. A copy of the Plan and such Restricted
Stock Agreement may be obtained from the Secretary of Vencor, Inc."
7.7 Lapse of Restrictions Generally. Except as otherwise provided in this
Article 7, shares of Restricted Stock shall be delivered to the Participant and
no longer subject to reacquisition after the last day of the Restriction Period;
provided, however, that if the restriction relates to the achievement of a
Performance Goal, the Restriction Period shall not end until the Committee has
certified in writing that the Performance Goal has been met. Once the shares of
Restricted Stock are released from their restrictions, the Participant shall be
entitled to have the legend required by Section 7.6 removed from the
Participant's share certificate, which certificate shall thereafter represent
Shares free from any and all restrictions under the Plan.
7.8 Lapse of Restrictions Upon Change in Control. Upon a Change in
Control, any restrictions and other conditions pertaining to then outstanding
shares of Restricted Stock held by
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Participants, including, but not limited to, vesting requirements, shall lapse
and such Shares shall thereafter be immediately free from any and all
restrictions under the Plan.
7.9 Voting Rights; Dividends and Other Distributions. Unless the
Committee exercises its discretion as provided in Section 7.10, during the
Restriction Period, Participants holding shares of Restricted Stock may exercise
full voting rights, and shall be entitled to receive all dividends and other
distributions paid, with respect to such Restricted Stock. If any dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions as the shares of Restricted Stock with respect to which they were
paid.
7.10 Treatment of Dividends. At the time shares of Restricted Stock are
granted to a Participant, the Committee may, in its discretion, determine that
the payment of dividends, or a specified portion thereof, declared or paid on
such Shares shall be deferred until the lapse of the restrictions with respect
to such Shares, in which event such deferred dividends shall be held by the
Company for the account of the Participant. In the event of such deferral,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account during the year at a rate per annum as the Committee,
in its discretion, may determine. Deferred dividends, together with interest
accrued thereon, if any, shall be (i) paid to the Participant upon the lapse of
restrictions on the shares of Restricted Stock as to which the dividends related
or (ii) revert to the Company upon the reacquisition of such Shares.
7.11 Termination of Employment. If the employment of a Participant is
terminated for any reason other than death or Disability prior to the expiration
of the Restriction Period applicable to any shares of Restricted Stock then held
by the Participant, such Shares shall thereupon be immediately reacquired by and
returned to the Company, and the Participant shall only receive the amount, if
any, paid by the Participant for such Restricted Stock. If the employment of a
Participant is terminated as a result of death or Disability prior to the
expiration of the Restriction Period applicable to any Shares of Restricted
Stock then held by the Participant, any restrictions and other conditions
pertaining to such Shares then held by the Participant, including, but not
limited to, vesting requirements, shall immediately lapse and such Shares shall
thereafter be immediately transferable and nonforfeitable. Notwithstanding
anything in the Plan to the contrary, except in the case of Restricted Stock for
which a Performance Goal must be achieved, the Committee may determine, in its
sole discretion, in the case of any termination of a Participant's employment
other than for Cause, that the restrictions on some or all of the shares of
Restricted Stock awarded to a Participant shall immediately lapse and such
Shares shall thereafter be immediately transferable and nonforfeitable.
ARTICLE 8. PERFORMANCE UNITS
8.1 Grant of Performance Units. The Committee may, from time to time and
upon such terms and conditions as it may determine, grant Performance Units
which will become payable to a Participant upon certification in writing by the
Committee that the Performance Goals related thereto have been achieved. The
maximum number of Performance Units which may be awarded to a Participant during
any calendar year shall be 100,000 units, subject to adjustment as provided in
Section 4.2. If the Performance Goals are achieved in full, and the
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Participant remains employed with the Company as of the end of the relevant
Performance Period, the Participant will be allocated Shares equal to the number
of Performance Units initially awarded to the Participant for the relevant
Performance Period. Each award of Performance Units may provide for the
allocation of fewer Performance Units in the event of partial fulfillment of
Performance Goals.
8.2 Performance Unit Agreement. Each Performance Unit grant shall be
evidenced by a Performance Unit Agreement that shall specify the Performance
Goals, the Performance Period and the number of Performance Units to which it
pertains.
8.3 Performance Period. The period of performance ("Performance Period")
with respect to each Performance Unit shall be such period of time, which shall
not be less than six months, nor more than five years, as determined by the
Committee, for the measurement of the extent to which Performance Goals are
attained.
8.4 Performance Goals. The goals ("Performance Goals") that are to be
achieved with respect to each Performance Unit (or Restricted Stock, stock
award or cash award subject to a requirement that Performance Goals be
achieved), shall be those objectives established by the Committee as it deems
appropriate, and which may be expressed in terms of (a) earnings per Share, (b)
Share price, (c) pre-tax profit, (d) net earnings, (e) return on equity or
assets, (f) revenues, (g) any combination of the foregoing, or (h) such other
goals as the Committee may determine. Performance Goals may be in respect of
the performance of the Company and its Subsidiaries (which may be on a
consolidated basis), a Subsidiary, a division or other operating unit of the
Company. Performance Goals may be absolute or relative and may be expressed in
terms of a progression within a specified range. The Committee shall establish
Performance Goals applicable to a particular fiscal year within 90 days of the
commencement of such fiscal year, provided that the outcome of the Performance
Goal is substantially uncertain at the time of its adoption. The Performance
Goals with respect to a Performance Period shall be established by the Committee
in order to comply with Rule 16b-3 under the Exchange Act and Section 162(m) of
the Code, as applicable. The Committee shall determine the target levels of
performance that must be achieved with respect to each criteria that is
identified in a Performance Goal in order for a Performance Goal to be treated
as attained in whole or in part. In the event that the Performance Goals are
based on more than one business criteria, the Committee may determine to make a
grant of an Award upon attainment of the Performance Goal relating to any one or
more of such criteria.
8.5 Termination of Employment. If the employment of a Participant shall
terminate prior to the expiration of the Performance Period for any reason other
than for death or Disability, the Performance Units then held by the Participant
shall terminate. In the case of termination of employment by reason of death or
Disability of a Participant prior to the expiration of the Performance Period,
then all Performance Units which are potentially available under an outstanding
Award and which have not been issued shall be fully vested in, paid and issued
to Participant or, in the case of Participant's death, shall be vested in, paid
and issued to Participant's estate, as of the date of the Participant's death.
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8.6 Payment Upon Change In Control. Upon a Change in Control, any and all
outstanding Performance Units which are potentially available under any
outstanding Award shall become fully vested and immediately payable.
8.7 Payment of Performance Units. Subject to such terms and conditions as
the Committee may impose, and unless otherwise provided in the Performance Unit
Agreement, Performance Units shall be payable within 90 days following the end
of the Performance Period during which the Participant attained at least the
minimum acceptable level of achievement under the Performance Goals, or 90 days
following a Change in Control, as applicable. The Committee, in its discretion,
may determine at the time of payment required in connection with a Performance
Unit whether such payment shall be made (a) solely in cash, (b) solely in Shares
(valued at the Fair Market Value of the Shares on the date of payment) or (c) a
combination of cash and Shares; provided, however, that if a Performance Unit
becomes payable upon a Change in Control, the Performance Unit shall be paid
solely in cash.
8.8 Designation of Beneficiary. Each Participant may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom the right to receive payments under a Performance Unit is
to be paid in case of the Participant's death before receiving any or all such
payments. Each such designation shall revoke all prior designations by the
Participant, shall be in a form prescribed by the Company and shall be effective
only when filed by the Participant in writing with the Committee during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
8.9 No Rights as Stockholder. The award of Performance Units to a
Participant shall not create any rights in such Participant as a stockholder of
the Company, until the payment of any Shares associated with such Performance
Units.
ARTICLE 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights. An SAR is a right to receive,
without payment to the Company, a number of Shares, cash or any combination
thereof, the amount of which is determined pursuant to the formula set forth in
Section 9.5. An SAR may be granted (a) with respect to any Option granted under
the Plan, either concurrently with the grant of such Option or at such later
time as determined by the Committee (as to all or any portion of the Shares
subject to the Option) or (b) alone, without reference to any Option.
9.2 Number of SARs. Each SAR granted to any Participant shall relate to
such number of Shares as the Committee shall determine, subject to adjustment as
provided in Section 4.2. If an SAR is granted in conjunction with an Option,
the number of Shares to which the SAR pertains shall be reduced by the same
number for which the holder of the Option exercises the related Option. The
maximum number of SARs which may be granted to any Participant during any
calendar year shall be 100,000, subject to adjustment as provided in Section
4.2.
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9.3 Duration. Subject to early termination as herein provided, the term
of each SAR shall be as determined by the Committee, but shall not exceed ten
years from the date of grant. Unless otherwise provided by the Committee, each
SAR shall become exercisable at such time or times, to such extent and upon such
conditions as the Option, if any, to which it relates is exercisable.
Notwithstanding the above, no SAR may be exercised during the first six months
of its term. Subject to the foregoing sentence, the Committee may, in its
discretion, accelerate the exercisability of any SAR.
9.4 Exercise. A holder may exercise an SAR, in whole or in part, by
giving written notice to the Company, specifying the number of SARs which such
Participant wishes to exercise. Upon receipt of such written notice, the
Company shall deliver, within 90 days thereafter, to the exercising holder,
certificates for the Shares or cash or both as determined by the Committee, to
which the Participant is entitled pursuant to Section 9.5.
9.5 Payment.
(a) Number of Shares. Subject to the right of the Committee to deliver
----------------
cash in lieu of Shares (which, as it pertains to officers and directors of the
Company, shall comply with all requirements of the Exchange Act and regulations
adopted thereunder), the number of Shares which shall be issuable upon the
exercise of an SAR shall be determined by dividing (i) the number of Shares to
which the SAR is exercised multiplied by the amount of the appreciation in such
Shares (for this purpose, the "appreciation" shall be the amount by which the
Fair Market Value of the Shares subject to the SAR on the date of exercise
exceeds (x) in the case of an SAR related to an Option, the Option Exercise
Price of the Shares under the Option or (y) in the case of an SAR granted alone
without reference to a related Option, an amount that the Committee determined
at the time of grant to be the Fair Market Value of a Share, subject to
adjustment as provided in Section 4.2) by (ii) the Fair Market Value of a Share
on the exercise date.
(b) Cash. In lieu of issuing Shares upon the exercise of an SAR, the
----
Committee may elect, in its sole discretion, to pay the holder of the SAR cash
equal to the Fair Market Value on the exercise date of any or all of the Shares
which would otherwise be issuable. No fractional Shares shall be issued upon
exercise of an SAR; instead, the holder of the SAR shall be entitled to receive
a cash adjustment equal to the same fraction of the Fair Market Value of a Share
on the exercise date or to purchase the portion necessary to make a whole Share
at its Fair Market Value on the date of exercise.
9.6 SAR Agreement. Each SAR shall be evidenced by an SAR Agreement that
shall further specify the terms and conditions of such Award. Any terms and
conditions of the Award shall be consistent with the terms of the Plan.
ARTICLE 10. STOCK AND CASH AWARDS
A stock award consists of the transfer by the Company to a Participant of
Shares, without other payment therefor, as additional compensation for services
to the Company. A cash award consists of a monetary payment made by the Company
to a Participant as additional
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compensation for services to the Company. The Committee shall determine, in its
sole discretion, the amount of any stock or cash award. Stock and cash awards
may be subject to the terms and conditions, which may vary from time to time and
among Participants, as the Committee deems appropriate. The maximum amount of a
cash award which may be granted to a Participant during any calendar year under
the Plan shall not be greater than $500,000. Payment of a stock or cash award
will normally depend on meeting Performance Goals. Each award of stock or cash
may provide for lesser payment in the event of partial fulfillment of
Performance Goals.
ARTICLE 11. AMENDMENT, MODIFICATION AND TERMINATION
11.1 Effective Date. The Plan shall become effective upon adoption by the
Board. The Plan shall be rescinded and all Options, Shares of Restricted Stock,
SARs and Performance Units granted hereunder shall be null and void unless
within 12 months from the date of the adoption of the Plan by the Board it shall
have been approved by the holders of a majority of the outstanding Shares
present or represented and entitled to vote on the Plan at a stockholders'
meeting.
11.2 Termination Date. The Plan shall terminate on the earliest to occur
of (a) the tenth anniversary of the adoption of the Plan by the Board, (b) the
date when all Shares available under the Plan shall have been acquired pursuant
to the exercise of Awards and the payment of all benefits in connection with
Performance Unit Awards has been made or (c) such other date as the Board may
determine in accordance with Section 11.3.
11.3 Amendment, Modification and Termination. The Board may, at any time,
amend, modify or terminate the Plan. Without the approval of the stockholders
of the Company (as may be required by the Code, Section 16 of the Exchange Act
and the rules promulgated thereunder, any national securities exchange or system
on which the Shares are then listed or reported or a regulatory body having
jurisdiction with respect hereto), however, no such amendment, modification or
termination may:
(a) materially increase the benefits accruing to Participants under the
Plan;
(b) increase the total amount of Shares which may be issued under the
Plan, except as provided in Section 4.2; or
(c) materially modify the class of Employees eligible to participate in
the Plan.
11.4 Awards Previously Granted. No amendment, modification or termination
of the Plan shall in any manner adversely affect any outstanding Award without
the written consent of the Participant holding such Award.
15
<PAGE>
ARTICLE 12. NON-TRANSFERABILITY
Except as expressly provided in the Plan, a Participant's rights under the
Plan may not be assigned, pledged or otherwise transferred other than by will or
the laws of descent and distribution, except that upon a Participant's death,
the Participant's rights to payment pursuant to a Performance Unit may be
transferred to a beneficiary designated in accordance with Section 8.8. Except
as expressly provided in the Plan, during a Participant's lifetime, an Award may
be exercised only by such Participant.
ARTICLE 13. NO GRANTING OF EMPLOYMENT RIGHTS
Neither the Plan, nor any action taken under the Plan, shall be construed
as giving any Employee the right to become a Participant, nor shall an Award
under the Plan be construed as giving a Participant any right with respect to
continuance of employment by the Company. The Company expressly reserves the
right to terminate, whether by dismissal, discharge or otherwise, a
Participant's employment at any time, with or without Cause, except as may
otherwise be provided by any written agreement between the Company and the
Participant.
ARTICLE 14. WITHHOLDING
14.1 Tax Withholding. A Participant shall remit to the Company an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA and Medicare obligation) required by law to be withheld with
respect to any grant, exercise or payment made under or as a result of the Plan.
14.2 Share Withholding. If the Company has a withholding obligation upon
the issuance of Shares under the Plan, a Participant may, subject to the
discretion of the Committee, elect to satisfy the withholding requirement, in
whole or in part, by having the Company withhold Shares having a Fair Market
Value on the date the withholding tax is to be determined equal to the amount
required to be withheld under applicable law. Notwithstanding the foregoing,
the Committee may, by the adoption of rules or otherwise, modify the provisions
of this Section 14.2 or impose such other restrictions or limitations on such
elections as may be necessary to ensure that such elections will be exempt
transactions under Section 16(b) of the Exchange Act.
ARTICLE 15. INDEMNIFICATION
No member of the Board or the Committee, nor any officer or Employee acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,
and all members of the Board, the Committee and each officer or Employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.
16
<PAGE>
ARTICLE 16. SUCCESSORS
All obligations of the Company with respect to Awards granted under the
Plan shall be binding on any successor to the Company, whether the existence of
such successor is a result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of the Company.
ARTICLE 17. GOVERNING LAW
To the extent not preempted by Federal law, the Plan, and all agreements
under the Plan, shall be governed by, and construed in accordance with, the laws
of the State of Delaware without regard to its conflict of laws rules.
Furthermore, the Plan and all Option Agreements relating to ISOs shall be
interpreted so as to qualify as incentive stock options under the Code.
IN WITNESS WHEREOF, this Vencor, Inc. 1997 Incentive Compensation Plan has
been executed by the Company as of the 31st day of December, 1996, being the
date the Plan was adopted by the Board.
VENCOR, INC.
By: /s/ W. Bruce Lunsford
----------------------------------------
Title: Chairman of the Board, President
and Chief Executive Officer
17
<PAGE>
EXHIBIT 10.24
THE VENCOR, INC.
DEFERRED COMPENSATION PLAN
Effective January 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
DEFINITIONS............................................... 1
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY........................ 5
2.1 Selection by Committee......................................... 5
2.2 Enrollment Requirements........................................ 5
2.3 Eligibility; Commencement of Participation..................... 6
ARTICLE 3
DEFERRAL COMMITMENTS/INTEREST CREDITING................... 6
3.1 Minimum and Maximum Deferral................................... 6
3.2 Company Contribution........................................... 6
3.3 Election to Defer; Effect of Election Form..................... 7
3.4 Withholding of Deferral Amounts................................ 7
3.5 Interest Crediting Prior to Distribution....................... 7
3.6 Installment Distributions...................................... 8
3.7 FICA and Other Taxes........................................... 8
ARTICLE 4
UNFORESEEABLE FINANCIAL EMERGENCIES....................... 8
ARTICLE 5
RETIREMENT BENEFIT........................................ 9
5.1 Retirement Benefit............................................. 9
5.2 Payment of Retirement Benefits................................. 9
5.3 Death Prior to Completion of Retirement Benefits............... 9
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT........................... 9
6.1 Pre-Retirement Survivor Benefit................................ 9
6.2 Payment of Pre-Retirement Survivor Benefits.................... 9
ARTICLE 7
TERMINATION BENEFIT....................................... 10
7.1 Termination Benefits........................................... 10
7.2 Payment of Termination Benefit................................. 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8
DISABILITY WAIVER AND BENEFIT...................... 11
8.1 Disability Waiver............................................... 11
8.2 Disability Benefit.............................................. 11
ARTICLE 9
BENEFICIARY DESIGNATION............................ 11
9.1 Beneficiary..................................................... 11
9.2 Beneficiary Designation; Change; Spousal Consent................ 12
9.3 Receipt by Committee............................................ 12
9.4 No Beneficiary Designation...................................... 12
9.5 Doubt as to Beneficiary......................................... 12
9.6 Discharge of Obligations........................................ 12
ARTICLE 10
LEAVE OF ABSENCE................................... 13
10.1 Paid Leave of Absence........................................... 13
10.2 Unpaid Leave of Absence......................................... 13
ARTICLE 11
TERMINATION, AMENDMENT OR MODIFICATION............. 13
11.1 Termination..................................................... 13
11.2 Termination on Change of Control Event.......................... 14
11.3 Amendment....................................................... 14
11.4 Effect of Payment............................................... 14
ARTICLE 12
ADMINISTRATION..................................... 14
12.1 Committee Duties................................................ 14
12.2 Agents.......................................................... 15
12.3 Binding Effect of Decisions..................................... 15
12.4 Indemnity of Committee.......................................... 15
12.5 Employer Information............................................ 15
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS...................... 15
ARTICLE 14
CLAIMS PROCEDURES.................................. 15
14.1 Presentation of Claim........................................... 15
14.2 Notification of Decision........................................ 16
14.3 Review of a Denied Claim........................................ 16
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
14.1 Decision of Review.............................................. 17
14.5 Legal Action.................................................... 17
ARTICLE 15
TRUST.............................................. 17
15.1 Establishment of the Trust...................................... 17
15.2 Interrelationship of the Plan and the Trust..................... 17
ARTICLE 16
MISCELLANEOUS...................................... 17
16.1 Unsecured General Creditor...................................... 17
16.2 Employer's Liability............................................ 18
16.3 Nonassignability................................................ 18
16.4 Not a Contract of Employment.................................... 18
16.5 Furnishing Information.......................................... 18
16.6 Terms........................................................... 19
16.7 Captions........................................................ 19
16.8 Governing Law................................................... 19
16.9 Notice.......................................................... 19
16.10 Successors...................................................... 19
16.11 Spouse's Interest............................................... 19
16.12 Incompetent..................................................... 20
16.13 Court Order..................................................... 20
16.14 Distribution in the Event of Taxation........................... 20
16.15 Legal Fees to Enforce Rights After a Change of Control Event.... 20
16.16 Taxes and Withholding........................................... 21
16.17 Severability.................................................... 21
</TABLE>
iii
<PAGE>
THE VENCOR, INC.
DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1996
PURPOSE
The purpose of this Plan is to provide specified benefits to a select
group of management or highly compensated Employees who contribute materially to
the continued growth, development and future business success of Vencor, Inc., a
Delaware corporation and its subsidiaries and affiliates. This Plan shall be
unfunded for tax purposes and for purposes of Title I of ERISA.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the context,
the following phrases or terms shall have the following indicated meanings:
1.1 "Account Balance" shall mean with respect to Participant the sum of (i)
his or her Deferral Amount, plus (ii) his or her company contributions,
contributed under Section 3.2 hereof plus (iii) interest credited in
accordance with all the applicable interest crediting provisions of this
Plan, less (iv) all distributions. This account shall be a bookkeeping
entry only and shall be utilized solely as a device for the measurement
and determination of the amounts to be paid to a Participant pursuant to
this Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually to a Participant and designated as an "Annual
Bonus" under rules adopted by the Committee.
1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary and/or Annual Bonus to be paid during a Plan Year that a
Participant elects to have and is deferred in accordance with Article 3,
for any one Plan Year. In the event of Participant's Retirement,
Disability (if deferrals cease in accordance with Section 8.1), death or
Termination of Employment prior to the end of a Plan Year, such year's
Annual Deferral Amount shall be the actual amount deferred and withheld
prior to such event.
1
<PAGE>
1.4 "Base Annual Salary" shall mean the annual compensation, including
commissions, and incentive payments (other than amounts considered
part of the Annual Bonus), but excluding overtime, severance pay,
compensation received as a result of deferral, any equity-based
compensation and fringe benefits (including but not limited to relocation
expenses, non-monetary awards, directors fees and other fees, automobile,
educational uniform, professional dues, and employee expense allowances),
paid to a Participant for employment services rendered to any Employer
before reduction for compensation deferred pursuant to all qualified,
non-qualified and Code Section 125 plans of any Employer. Notwithstanding
the foregoing, the Company may elect to permit directors fees to be
included in the definition of Base Annual Salary by written notice to
affected Participants.
1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under this Plan upon the death of a Participant.
1.6 "Beneficiary Designation Form" shall mean the form established from time
to time by the Committee that a Participant completes, signs and returns
to the Committee to designate one or more Beneficiaries.
1.7 "Board" shall mean the board of directors of the Company.
1.8 For purposes of the Plan, a "Change of Control Event" shall occur upon
(i) the acquisition by any person after the date hereof of beneficial
ownership of 50% or more of the voting power of the Company's outstanding
voting stock, (ii) five or more of the current members of the Board
ceasing to be members of the Board unless any replacement director was
elected by a vote of either at least 75% of the remaining directors, or
of at least 75% of the shares entitled to vote on such replacement, or
(iii) approval by the stockholders of the Company of (a) a merger or
consolidation of the Company with another corporation if the stockholders
of the Company immediately before such vote will not, as a result of such
merger or consolidation, own more than 50% of the voting stock of the
corporation resulting from such merger or consolidation, or (b) a
complete liquidation of the Company or sale of all, or substantially all,
of the assets of the Company. Notwithstanding the foregoing, a Change of
Control Event shall not occur solely because 50% or more of the voting
stock of the Company is acquired by (i) a trust which is part of an
employee benefit plan maintained by the Company or its subsidiaries, or
(ii) a corporation which, immediately following such acquisition, is
owned directly or indirectly by the stockholders of the Company in the
same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
1.9 "Claimant" shall have the meaning set forth in Section 14.1.
2
<PAGE>
1.10 "Code" shall mean the Internal Revenue Code of 1986, as may be amended
from time to time.
1.11 "Committee" shall mean the committee described in Article 12.
1.12 "Company" shall mean Vencor, Inc., a Delaware corporation.
1.13 "Crediting Rate" shall mean an interest rate determined and announced by
the Committee before the Plan Year for which it is to be used that is
equal to 100% of the Moody's Rate. The Moody's Rate for a Plan Year shall
be an interest rate that is published in Moody's Bond Record under the
heading of "Moody's Corporate Bond Yield Baa Average" for the month of
October which precedes the Plan Year for which the rate is to be used.
1.14 "Deferral Amount" shall mean the sum of all of a Participant's Annual
Deferral Amounts.
1.15 "Deduction Limitation" shall mean the following described limitation on
the annual benefit that may be distributed pursuant to the provisions of
this Plan. The limitation shall be applied to distributions under this
Plan as set forth in this Plan. If the Company determines in good faith
prior to a Change of Control Event that there is a reasonable likelihood
that any compensation paid to a Participant for a taxable year of the
Company would not be deductible by the Company solely by reason of the
limitation under Code Section 162(m), then to the extent deemed necessary
by the Company to ensure that the entire amount of any distribution to
the Participant pursuant to this Plan prior to the Change of Control
Event is deductible, the Company may defer all or any portion of the
distribution. Any amounts deferred pursuant to this limitation shall
continue to be credited with interest in accordance with Section 3.5
below. The amounts so deferred and interest thereon in accordance with
Section 3.5 below. The amounts so deferred and interest thereon shall be
distributed to the Participant or his or her Beneficiary (in the event of
the Participant's death) at the earliest possible date, as determined by
the Company in good faith, on which the deductibility of compensation
paid or payable to the Participant for the taxable year of the Company
during which the distribution is made will not be limited by Section
162(m), or if earlier, the effective date of a Change of Control Event.
1.16 "Disability" shall mean a period of disability during which a Participant
qualifies for benefit payments under the Participant's Employer's long-
term disability plan.
1.17 "Disability Benefit" shall mean the benefit set forth in Article 8.
3
<PAGE>
1.18 "Election Form" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the
Committee to make an election under the Plan.
1.19 "Employee" shall mean a person who is an employee of any Employer.
1.20 "Employer(s)" shall mean the (i) the Company, and all of the legal
entities that are part of a controlled group of affiliated service group
with Company pursuant to the provisions of Code Sections 414(b), (c), or
(m); (ii) partnerships in which the Company or a wholly-owned subsidiary
owns an interest; (iii) any entity that has entered into a contract with
the Company or a subsidiary for the receipt of management services at one
or more facilities owned by such entity if the entity has been selected
by the Committee to participate in the Plan; and (iv) any entity which
the consent of the Board becomes a sponsoring Employer hereunder.
Obligations of each Employer hereunder shall be separate except where
Vencor, Inc. has by specific action of its Board of Directors or other
written agreement executed by a duly authorized officer agreed that it
and/or its wholly-owned subsidiaries will undertake joint and several
liability.
1.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
1.22 "Participant" shall mean any Employee (i) who is selected to participate
in the Plan; (ii) who elects to participate in the Plan; (iii) who signs
a Plan Agreement and an Election Form; (iv) whose signed Plan Agreement
and Election Form are received by the Committee; (v) who commences
participation in the Plan; and (vi) whose Plan Agreement has not
terminated. A Participant shall also include a former Employee who has an
Account Balance hereunder. By addendum to this Plan, the Board or the
Committee may permit directors of any of the Employers to become
Participants hereunder regardless of whether they are Employees.
1.23 "Plan" shall mean the Company's Deferred Compensation Plan, which shall
be evidenced by this instrument and, with respect to each Participant, by
his or her one or more Plan Agreements, as may be amended from time to
time.
1.24 "Plan Agreement" shall mean a written agreement which is entered into by
and between the Company and a Participant. A Participant may be required
to enter into more than one Agreement depending on the entity employing
him or her any time and the manner in which the Company and another
Employer have agreed to allocate and assume responsibility for
liabilities accrued hereunder.
4
<PAGE>
1.25 "Years of Plan Participation" shall mean the total number of full Plan
Years a Participant has been a Participant in the Plan. For purposes of a
Participant's first Plan Year of participation only, any partial Plan
Year of participation shall be treated as a full Plan Year.
1.26 "Plan Year" shall be the calendar year.
1.27 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.28 "Retirement", "Retires" or "Retired" shall mean severance from employment
with all Employers or retirement from directorship for any reason other
than a leave of absence, death or Disability on or after the attainment
of age 65.
1.29 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.30 "Termination Benefit" shall mean the benefit set forth in Article 7.
1.31 "Termination of Employment" shall mean the ceasing of employment with all
Employers voluntarily or involuntarily, for any reason other than death.
1.32 "Trust" shall mean a grantor, or "rabbi" trust, within the meaning of
Code Section 671.
1.33 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that
would result in severe financial hardship to the Participant resulting
from (i) a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, (ii) a loss of the Participant's
property due to casualty, or (iii) such other extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant, all as determined in the sole discretion of
the Committee.
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 Selection by Committee. Participation in the Plan shall be limited to a
----------------------
select group of management or highly compensated Employees. From that
group, the Committee shall select, in its sole discretion, Employees to
participate in the Plan.
2.2 Enrollment Requirements. Individuals may commence participation as soon
-----------------------
as they complete, execute and return to the Committee a Plan Agreement
and Election Form, provided such documents are returned within 30 days of
5
<PAGE>
notification of eligibility to participate. In addition, the Committee
may establish from time to time such other enrollment requirements as it
determines, in its sole discretion, are necessary.
2.3 Eligibility: Commencement of Participation. Participation in this Plan
------------------------------------------
shall commence on the first day of the month following the month in which
the Employee completes all enrollment requirements. If an Employee fails
to meet in a timely fashion all such requirements then he or she shall
not be eligible to participate in the Plan until the first day of the
Plan Year following the delivery to and receipt by the Committee of the
required documents.
ARTICLE 3
DEFERRAL COMMITMENTS/INTEREST CREDITING
3.1 Minimum and Maximum Deferral. For each Plan Year, a Participant may elect
----------------------------
to defer Base Annual Salary and Annual Bonus that would otherwise be
received during a Plan Year. The Committee may permit a separate election
to be applied to Annual Bonus. The Following minimum and maximum amounts
shall apply to the deferral election:
Minimum Amount 1%
Maximum Amount 50%
If not election is made for a particular Plan Year, the amount deferred
for each type of compensation on the most recent preceding election shall
control. All amounts deferred under this Section 3.1(a) shall at all
times be fully vested and nonforfeitable.
3.2 Company Contribution.
--------------------
(a) In order to receive Employer contributions hereunder, a Participant
must elect to make elective deferrals under the Code Section 401(k)
Plan for which he or she is eligible in an amount equal to the
lesser of (i) the amount which would result in the maximum Employer
match, or (ii) the maximum amount permitted under the
nondiscrimination rules applicable to elective deferrals. Subject to
amendment or termination of the Plan and applicable limitations
herein, as of the last day of each pay period, each Employer shall
credit to the account of each Participant in its employ as of the
last day of such pay period an amount equal to (1) 100% of the
Participant's Annual Deferral Amount for the pay period, not in
excess of the first 3% of the Participant's Base Annual Salary and
Annual Bonus received during such pay period less; (2) the maximum
Employer matching
6
<PAGE>
contribution to which the Participant would be entitled under the
401(k) Plan for which he or she is eligible without regard to the
Participant's completed years of service.
(b) Subject to Section 3.2(c), all amounts deferred under Section 3.2(a)
shall at all times be fully vested and nonforfeitable.
(c) Notwithstanding any other provision of this Plan including Section
3.2(b), the Committee shall have the right in its sole discretion to
cause any or all of the Employer contributions credited to an
Account Balance, including earnings, to be forfeited if the
Committee at any time determines that:
(i) The Participant has divulged Employer confidential
information to the competitors of the Employer which is detrimental
to the Employer; or
(ii) The Participant has engaged in criminal conduct which
is detrimental to the Employer.
3.3 Election to Defer: Effect of Election Form. In connection with a
------------------------------------------
Participant's commencement of participation in the Plan, the Participant
shall make a deferral election by delivering to the Committee a completed
and signed Election Form, which election and form must be accepted by the
Committee for valid election to exist. For each succeeding Plan Year, a
new Election Form must be delivered to the Committee, in accordance with
its rules and procedures, before the end of the Plan Year preceding the
Plan Year for which the election is made in order to increase, decrease
or terminate a contribution election. If no Election Form is timely
delivered for a Plan Year, the prior year's deferral election shall
remain in effect.
3.4 Withholding of Deferral Amounts. For each Plan Year, the Base Annual
-------------------------------
Salary portion of the Annual Deferral Amount shall be withheld each
payroll period in accordance with the Participant's election as a
percentage of Base Annual Salary. The Annual Bonus portion of the Annual
Deferral Amount shall be withheld at the time the Annual Bonus is or
otherwise would be paid to the Participant.
3.5 Interest Crediting Prior to Distribution. Prior to any distribution of
----------------------------------------
benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited and
compounded annually on a Participant's Account Balance as though the
Participant's Annual Deferral Amount and Employer contributions were made
in two installments, one-half on the first day of the year and the
balance on the last day of the year. The rate of interest for crediting
shall be the Crediting Rate.
7
<PAGE>
3.6 Installment Distributions. In the event a benefit is paid in
-------------------------
installments under Articles 5, 6, 7, 8 or 11, installment payment
amounts shall be determined in the following manner:
(a) Interest Rate. The interest rate to be used to calculate installment
-------------
payment amounts shall be a fixed interest rate that is equal to the
Crediting Rate for the Plan Year preceding the Plan Year in which
installment payments commence.
(b) "Deemed" Installment Payments. For purposes of calculating
-----------------------------
installment payment amounts only (and notwithstanding the fact that
installment payments shall be paid monthly), installment payments
for each 3 month period, starting with the date that the
Participant became eligible to receive a benefit under this Plan
(the "Eligibility Date") and continuing thereafter for each
additional 3 month period until the Participant's Account Balance is
paid in full, shall be deemed to have been paid in one sum as of the
first day of each such 3 month period.
(c) Amortization. Based on the interest rate determined in accordance
------------
with Section 3.6(a) above and the "deemed" form of installment
payments determined in accordance with Section 3.6(b) above, the
Participant's Account Balance shall be amortized in equal quarterly
installment payments over the term of the specified payment period
(starting as of the Eligibility Date and Stated in quarters rather
than months).
(d) Monthly Payments. The quarterly installment payment determined in
----------------
Section 3.6(c) above shall be divided by 3, and the resulting number
shall be the monthly installment payment that is to be paid each
month during the specified monthly installment payment period in
accordance with the other terms and conditions of this Plan.
3.7 FICA and Other Taxes. For each Plan Year in which an Annual Deferral
--------------------
Amount is being withheld, the Participant's Employer(s) shall ratably
withhold from that portion of the Participant's Base Annual Salary that
is not being deferred, the Participant's share of FICA and other
employment taxes. If necessary, the Committee shall reduce the Annual
Deferral Amount in order to comply with this Section 3.7.
8
<PAGE>
ARTICLE 4
UNFORESEEABLE FINANCIAL EMERGENCIES
If the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to (i) suspend any deferrals required to
be made by a Participant and/or (ii) receive a partial or full payout from the
Plan. The petition shall be accompanied by such documentation in support of the
existence of the Unforeseeable Financial Emergency as the Committee shall
require. The payout shall not exceed the lesser of the Participant's Account
Balance, calculated as if such Participant were receiving a Termination Benefit,
or the amount reasonably needed to satisfy the Unforeseeable Financial
Emergency. If, subject to the sole discretion of the Committee, the petition for
a suspension and/or payout is approved, suspension shall take effect upon the
date of approval and any payout shall be made within 90 days of the date of
approval.
ARTICLE 5
RETIREMENT BENEFIT
5.1 Retirement Benefit. Subject to the Deduction Limitation, a Participant
------------------
who Retires shall receive, as a Retirement Benefit, his or her Account
Balance.
5.2 Payment of Retirement Benefits. A participant, in connection with his or
------------------------------
her commencement of participation in the Plan, shall elect on an Election
Form to receive the Retirement Benefit in a lump sum or in equal monthly
payments (the latter determined in accordance with Section 3.6 above)
over a period 5, 10, or 15 years. The lump sum payment shall be made, or
installment payments shall commence, no later than 90 days after the date
the Participant Retires.
5.3 Death Prior to Completion of Retirement Benefits. If a Participant dies
------------------------------------------------
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall
be paid to the Participant's Beneficiary over the remaining number of
months and in the same amounts as that benefit would have been paid to
the Participant had the Participant survived.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 Pre-Retirement Survivor Benefit. Subject to the Deduction Limitation, if
-------------------------------
a Participant dies before he or she Retires, experiences a Termination
of Employment or suffers a Disability, the Participant's Beneficiary
shall receive a Pre-Retirement Survivor Benefit equal to the
Participant's Account Balance.
9
<PAGE>
6.2 Payment of Pre-Retirement Survivor Benefits. A Participant, in connection
-------------------------------------------
with his or her commencement of participation in the Plan shall elect on
an Election Form whether the Pre-Retirement Survivor Benefit shall be
received by his or her Beneficiary in a lump sum or in equal monthly
payments (the latter determined in accordance with Section 3.6 above)
over a period of 60, 120 or 180 months. The Participant may change this
election to an allowable alternative payout period by submitting a new
Election Form to the Committee, which form must be accepted by the
Committee in its sole discretion. The Election Form most recently
accepted by the Committee prior to the Participant's death shall govern
the payout of the Participant's Pre-Retirement Survivor Benefit. Despite
the foregoing, if the Participant's Account Balance at the time of his or
her death is less than $50,000, payment of the Pre-Retirement Survivor
Benefit may be made, in the sole discretion of the Committee, in a lump
sum or in installment payments that do no exceed five years in duration.
The lump sum payment shall be made, or installment payments shall
commence, no later than 90 days after the date the Committee is provided
with proof that is satisfactory to the Committee of the Participant's
death. In no event may the Beneficiary select the manner of payment
either before or after the Participant's death.
ARTICLE 7
TERMINATION BENEFIT
7.1 Termination Benefits. Subject to the Deduction Limitation, if a
--------------------
Participant experiences a Termination of Employment prior to his or her
Retirement, death or Disability, the Participant shall receive a
Termination Benefit, which shall be equal to the Participant's vested
Account Balance, with interest credited in the manner provided in Section
3.5 above.
7.2 Payment of Termination Benefit. The Termination Benefit shall be paid
------------------------------
commencing within 90 days of the Termination of Employment as follows:
(a) A Termination Benefit of $50,000 or less shall be paid in a lump
sum.
(b) A Termination Benefit in excess of $50,000 shall be paid in 60
approximately equal monthly installments.
(c) Notwithstanding (b), the Committee in its sole discretion may
authorize a lump sum payment or installments over a period of less
than five years.
If payment is made in installments, the interest rate to be credited to
the Account Balance during the installment payout shall be the otherwise
applicable rate determined in accordance with Section 3.6.
10
<PAGE>
ARTICLE 8
DISABILITY WAIVER AND BENEFIT
8.1 Disability Waiver.
-----------------
(a) Eligibility. By participating in the Plan, all Participants are
-----------
eligible for this waiver.
(b) Waiver of Deferral. A Participant who qualifies for Disability
------------------
payments under the Participant's Employer's long-term disability
plan shall, if the Disability originated while the Participant was
employed by an Employer, shall be excused from fulfilling that
portion of the Annual Deferral Amount commitment that would
otherwise have been withheld from a Participant's Base Annual Salary
or Annual Bonus for the Plan Year during which the Participant first
suffers a Disability. During the period of Disability, the
Participant shall not be allowed to make any additional deferral
elections.
(c) Return to Work. If a Participant returns to employment with an
--------------
Employer after a Disability ceases, the Participant may elect to
defer an Annual Deferral Amount for the Plan Year of his or her
return to employment or service and for every Plan Year thereafter
while a Participant in the Plan; provided such deferral elections
are otherwise allowed and an Election Form is delivered to and
accepted by the Committee for each such election in accordance with
Section 3.3 above.
8.2 Disability Benefit. A Participant suffering a Disability shall, for all
------------------
purposes under this Plan, continue to be considered to be employed by an
Employer and shall be eligible for the benefits provided for in Articles
4, 5, 6 or 7 in accordance with the provisions of those Articles.
Notwithstanding the above, the Committee shall have the right, in its
sole and absolute discretion and for purposes of this Plan only, to treat
------------------------------
the Participant as terminated at any time after such Participant is
determined to be permanently disabled under the Participant Employer's
long-term disability plan.
ARTICLE 9
BENEFICIARY DESIGNATION
9.1 Beneficiary. Each Participant shall have the right, at any time, to
-----------
designate his or her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable under the Plan to a
beneficiary upon the death of a Participant. The Beneficiary designated
under this Plan may be the same as or different from the
11
<PAGE>
Beneficiary designation under any other plan of an Employer in which the
Participant participates.
9.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall
------------------------------------------------
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing, and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules and
procedures, as in effect from time to time. If the Participant names
someone other than his or her spouse as a Beneficiary, a spousal consent,
in the form designated by the Committee, must be signed by that
Participant's spouse and returned to the Committee. Upon the acceptance
by the Committee of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Committee shall be
entitled to rely on the last Beneficiary Designation Form filed by the
Participant and accepted by the Committee prior to his or her death.
9.3 Receipt by Committee. Not designation or change in designation of a
--------------------
Beneficiary shall be effective until received by the Committee or its
designated agent. The Committee may reject a designation in its
discretion for any reason.
9.4 No Beneficiary Designation. If a Participant fails to designate a
--------------------------
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the Participant's
estate.
9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper
-----------------------
Beneficiary to receive payments pursuant to this Plan, the Committee
shall have the right, exercisable in its discretion, to cause the
Participant's Employer to withhold such payments until this matter is
resolved to the Committee's satisfaction.
9.6 Discharge of Obligations. The payment of benefits under the Plan to a
------------------------
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
12
<PAGE>
ARTICLE 10
LEAVE OF ABSENCE
10.1 Paid Leave of Absence. If a Participant is authorized by the
---------------------
Participant's Employer for any reason to take a paid leave of absence
from the employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Annual Deferral Amount shall
continue to be withheld during such paid leave of absence in accordance
with Article 3. Notwithstanding the foregoing, a Participant who incurs
undue hardship as a result of continued deferrals may petition the
Committee for a suspension of deferrals during the paid leave of absence,
which suspension may be granted by the Committee in its sole discretion.
10.2 Unpaid Leave of Absence. If a Participant is authorized by the
-----------------------
Participant's Employer for any reason to take an unpaid leave of absence
from the employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Participant shall be excused
from making deferrals until the earlier of the date the leave of absence
expires or the Participant returns to a paid employment status. Upon such
expiration or return, deferrals shall resume for the remaining portion of
the Plan Year in which the expiration or return occurs, based on the
deferral election, if any, made for that Plan Year. If no election was
made for that Plan Year, no deferral shall be withheld.
ARTICLE 11
TERMINATION, AMENDMENT OR MODIFICATION
11.1 Termination. Any Employer reserves the right to terminate the Plan at any
-----------
time with respect to its participating Employees by the action of its
board of directors. Upon the termination of the Plan, all Plan Agreements
of a Participant shall terminate and his or her Account Balance,
determined as if he or she had experienced a Termination of Employment on
the date of Plan termination or, if Plan termination occurs after the
date upon which the Participant was eligible to Retire, the Participant
had Retired on the date of Plan termination, shall be paid to the
Participant in the discretion of the Employer (a) in a lump sum, or (b)
in monthly installments up to 15 years. The Employer shall have the right
in its sole discretion to accelerate installment payments at any time and
pay the Participant's remaining Account Balance in one lump sum amount.
Except as provided above, the termination of the Plan shall not adversely
affect any Participant or Beneficiary who has become entitled to the
payment of any benefits under the Plan as of the date of termination.
13
<PAGE>
11.2 Termination on Change of Control Event. Upon the occurrence of a Change
--------------------------------------
of Control Event, the Plan shall immediately terminate and the Account
Balance of each Participant shall be paid to the Participant in a lump
sum as soon as administratively possible.
11.3 Amendment. Any Employer may, at any time, amend or modify the Plan in
---------
whole or in part with respect to that Employer by the action of its board
of directors; provided, however, that no amendment or modification shall
be effective to decrease or restrict the value of a Participant's Account
Balance in existence at the time the amendment or modification is made,
calculated as if the Participant had experienced a Termination of
Employment as of the effective date of the amendment or modification; or,
if the amendment or modification occurs after the date upon which the
Participant was eligible to Retire, the Participant had Retired as of the
effective date of the amendment or modification. The amendment or
modification of the Plan shall not affect any Participant or Beneficiary
who has become entitled to the payment of benefits under the Plan as of
the date of the amendment or modification; provided, however, that the
Employer shall have the right to accelerate installment payments by
paying Participant's remaining Account Balance in one lump sum amount.
11.4 Effect of Payment. The full payment of the applicable benefit under
-----------------
Articles 5, 6, or 7 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries
under this Plan and the Participant's Plan Agreement shall terminate.
ARTICLE 12
ADMINISTRATION
12.1 Committee Duties. This Plan shall be administered by the Executive
----------------
Compensation Committee of the Board. An Employee who is a member of the
Committee may be a Participant under this Plan. The Committee shall have
the authority in its sole and unfettered discretion to (i) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Plan; and (ii) decide or resolve any and all
questions including claims for benefits and interpretations of this Plan,
as may arise in connection with the Plan. Notwithstanding the foregoing,
the Committee may in its discretion delegate to the Retirement Committee
of Vencor, Inc. as defined in the Vencor, Inc. Retirement Savings Plan
any or all of its responsibilities hereunder, in which event the actions
of such Retirement Committee shall have the same force and effect as if
taken by the Committee.
14
<PAGE>
12.2 Agents. In the administration of this Plan, the Committee may, from time
------
to time, employ agents and delegate to them such administrative duties as
it sees fit (including acting through a duly appointed representative)
and may from time to time consult with counsel who may be counsel to any
Employer.
12.3 Binding Effect of Decisions. The decision or action of the Committee with
---------------------------
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
12.4 Indemnity of Committee. All Employers shall indemnify and hold harmless
----------------------
the members of the Committee, and in the event of delegation or
responsibility to the Retirement Committee of Vencor, Inc., the members
of that Committee, against any and all claims, losses, damages, expenses
or liabilities arising from any action or failure to act with respect to
this Plan, except in the case of willful misconduct by the Committee or
any of its members.
12.5 Employer Information. To enable the Committee to perform its functions,
--------------------
each Employer shall supply full and timely information to the Committee
on all matters relating to the compensation of its Participants, the date
and circumstances of the Retirement, Disability, death or Termination of
Employment of its Participants, and such other pertinent information as
the Committee may reasonably require.
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and Participant's Beneficiary
under the Plan are in addition to any other benefits available to such
Participant under any other plan or program for employees of the Participant's
Employer. The Plan shall supplement and shall not supersede, modify or amend any
other such plan or program except as may otherwise be expressly provided.
ARTICLE 14
CLAIMS PROCEDURES
14.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
---------------------
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after
such notice was received by the Claimant. The claim must state
15
<PAGE>
with particularity the determination desired by the Claimant. All other
claims must be made within 180 days of the date on which the event that
caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.
14.2 Notification of Decision. The Committee shall consider a Claimant's
------------------------
claim within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice
must set forth in a manner calculated to be understood by the
Claimant:
(i) the specific reason(s) for the denial of the claim, or any
part of it;
(ii) specific reference(s) to pertinent provisions of the Plan
upon which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary;
and
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3 Review of a Denied Claim. Within 60 days after receiving a notice from
------------------------
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file with
the Committee a written request for a review of the denial of the claim.
Thereafter, but not later than 30 days after the review procedure began,
the Claimant (or the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion,
may grant.
16
<PAGE>
14.4 Decision on Review. The Committee shall render its decision on review
------------------
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood by
the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which
the decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 Legal Action. A Claimant's compliance with the foregoing provisions of
------------
this Article 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
ARTICLE 15
TRUST
15.1 Establishment of the Trust. The Company may establish a Trust and in
--------------------------
that event the Employers shall transfer over to the Trust such assets as
the Employers determine, in their sole discretion, are necessary to
assist in providing funds to meet the Employers' liabilities created
hereunder.
15.2 Interrelationship of the Plan and the Trust. If the Company establishes
-------------------------------------------
a Trust, the provisions of the Plan and the Plan Agreement shall govern
the rights of a Participant to receive distributions pursuant to the
Plan. The provisions of the Trust shall govern the rights of the
Employers, Participants and the creditors of the Employers to the assets
transferred to the Trust. Each Employer shall at all times remain liable
to carry out its obligations under the Plan. Each Employer's obligations
under the Plan may be satisfied with Trust assets distributed pursuant to
the terms of the Trust, and any such distribution shall reduce the
Employer's obligations under this Agreement.
ARTICLE 16
MISCELLANEOUS
16.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs,
--------------------------
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of any Employer. Any and all of
Employers' assets shall
17
<PAGE>
be, and remain, the general, unpledged unrestricted assets of the
Employers. An Employer's obligation under the Plan shall be merely that
of an unfunded and unsecured promise to pay money in the future and a
Participant shall have only an unsecured contractual right to the
amounts, if any, payable hereunder, against the Company or a particular
Employer, as reflected in the Participant's one or more Plan Agreements.
16.2 Employer's Liability. An Employer's liability for the payment of
--------------------
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An Employer shall
have no obligation to a Participant under the Plan except as expressly
provided in the Plan and his or her Plan Agreement.
16.3 Nonassignability. Neither a Participant nor any other person shall have
----------------
any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are expressly declared
to be, unassignable and non-transferable, except that the foregoing shall
not apply to any family support obligations set forth in a court order.
No part of the amounts payable shall, prior to actual payment, be subject
to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other
person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
16.4 Not a Contract of Employment. The terms and conditions of this Plan
----------------------------
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged to
be an "at will" employment relationship that can be terminated at any
time for any reason, with or without cause, unless expressly provided in
a written employment agreement. Nothing in this Plan shall be deemed to
give a Participant the right to be retained in the service of any
Employer, either as an Employer or a Director, or to interfere with the
right of any Employer to discipline or discharge the Participant at any
time.
16.5 Furnishing Information. A Participant or his or her Beneficiary will
----------------------
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and the
payments of benefits hereunder, including but not limited to taking such
physical examinations as the Committee may deem necessary.
18
<PAGE>
16.6 Terms. Whenever any words are used herein in the masculine, they shall
-----
be construed as though they were also in the feminine in all cases where
they would so apply; and whenever any words are used herein in the
singular or in the plural, they shall be construed as though they were
used in the plural or the singular, as the case may be, in all cases
where they would so apply.
16.7 Captions. The captions of the articles, sections and paragraphs of this
--------
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
16.8 Governing Law. Subject to ERISA, the provisions of this Plan shall be
-------------
construed and interpreted according to the laws of the State of Kentucky
without regard to its conflicts of laws principles.
16.9 Notice. Any notice or filing required or permitted to be given to the
------
Committee under this Plan shall be sufficient if in writing and hand-
delivered, or sent by registered or certified mail, to the address below:
General Counsel
Vencor, Inc.
3300 Providian Center
400 West Market Street
Louisville, KY 40202
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.
16.10 Successors. The provisions of this Plan shall bind and inure to the
----------
benefit of the Participant's Employer and its successors and assigns and
the Participant and the Participant's designated Beneficiaries.
16.11 Spouse's Interest. The interest in the benefits hereunder of a spouse of
-----------------
a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in
any manner, including but not limited to such spouse's will, nor shall
such interest pass under the laws of intestate succession.
19
<PAGE>
16.12 Incompetent. If the Committee determines in its discretion that a
-----------
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that
person's property, the Committee may direct payment of such benefit to
the guardian, legal representative or person having the care and custody
of such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetency, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
16.13 Court Order. The Committee is authorized to make any payments directed
-----------
by court order in any action in which the Plan or the Committee has been
named as a party.
16.14 Distribution in the Event of Taxation.
-------------------------------------
(a) General. If, for any reason, all or any portion of a Participant's
-------
benefit under this Plan becomes taxable to the Participant prior to
receipt, a Participant may petition the Committee for a distribution
of that portion of his or her benefit that has become taxable. Upon
the grant of such a petition, which grant shall not be unreasonably
withheld, a Participant's Employer shall distribute to the
Participant immediately available funds in an amount equal to the
taxable portion of his or her benefit (which amount shall not exceed
a Participant's unpaid vested Account Balance under the Plan). If
the petition is granted, the tax liability distribution shall be
made within 90 days of the date when the Participant's petition is
granted. Such a distribution shall affect and reduce the benefits to
be paid under this Plan.
(b) Trust. If the Company establishes a Trust, the Trust terminates,
-----
and benefits are distributed from the Trust to a Participant, the
Participant's benefits under this Plan shall be reduced to the
extent of such distributions.
16.15 Legal Fees to Enforce Rights After a Change of Control Event. The
------------------------------------------------------------
Company is aware that upon the occurrence of a Change of Control Event,
the Board (which might then be composed of new members) or a shareholder
of the Company, or of any successor corporation might then cause or
attempt to cause the Company or such successor to refuse to comply with
its obligations under the Plan and might cause or attempt to cause the
Company to institute, or may institute, litigation seeking to deny
Participants the benefits intended under the Plan. In these
circumstances, the purpose of the Plan could be frustrated. Accordingly,
if,
20
<PAGE>
following a Change of Control Event, it should appear to any Participant
that the Company or the Trustee has failed to comply with any of its
obligations under the Plan or any agreement thereunder or, if the Company
or any other person takes any action to declare the Plan void or
unenforceable or institutes any litigation or other legal action designed
to deny, diminish or to recover from any Participant the benefits
intended to be provided, then the Participant may retain counsel to
represent such Participant in connection with the initiation or defense
of any litigation, whether by or against the Company or any director,
officer, shareholder or other person affiliated with the Company or any
successor thereto in any jurisdiction. Company shall then indemnify
Participant for the cost of such litigation and reasonable attorney's
fees if the Participant prevails in such litigation.
16.16 Taxes and Withholding. The Participant's Employer(s) or the trustee of
---------------------
the Trust if the Company establishes a Trust, may withhold from any
distribution under this Plan any and all employment and income taxes that
are required to be withheld under applicable law.
16.17 Severability. If and to the extent any provision hereof is held to be
------------
void or unenforceable, the Plan shall remain in full-force and effect
with such provision severed as though such provision had not been
included in the original Plan.
IN WITNESS WHEREOF, the Company has executed this plan document as of
November 29, 1995.
VENCOR, INC., a Delaware corporation
By:____________________________________
Title:_________________________________
21
<PAGE>
EXHIBIT 10.25
VENCOR, INC.
1997 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
----------------------
ARTICLE 1. PURPOSE
The purpose of this 1997 Stock Option Plan for Non-Employee Directors is to
promote the interests of Vencor, Inc., its subsidiaries and stockholders, by
allowing the Company to attract and retain highly qualified non-employee
directors by permitting them to obtain or increase their proprietary interest in
the Company.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings provided by such
definitions, and the terms set forth below shall have the following meanings (in
either case, such terms shall apply equally to both the singular and plural
forms of the terms defined):
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean, unless otherwise defined in an Option Agreement, a
felony conviction of a Non-Employee Director or the failure of a Non-Employee
Director to contest prosecution for a felony, or a Non-Employee Director's
willful misconduct or dishonesty, any of which is determined by the Committee to
be directly and materially harmful to the business or reputation of the Company
or its Subsidiaries.
(c) "Change in Control" shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any Person immediately
after which such Person has beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) ("Beneficial Ownership and/or
Beneficially Owned") of 20% or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a Non-Control Acquisition (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (i) the Company or any Subsidiary, (ii)
an employee benefit plan (or a trust forming a part thereof) maintained by the
Company or any Subsidiary, or (iii) any Person in connection with a Non-Control
Transaction (as hereinafter defined);
(2) The individuals who, as of December 31, 1996, are members of the
Board ("Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that if the election, or nomination for
election by the Company's stockholders, of any
<PAGE>
new director was approved by a vote of at least a majority of the Incumbent
Board, such new director shall, for purposes of the Plan, be considered as a
member of the Incumbent Board; provided, further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened election contest
(as described in Rule 14a-11 promulgated under the Exchange Act) ("Election
Contest") or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board ("Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless such is a Non-Control Transaction. For purposes of the Plan, the
term "Non-Control Transaction" shall mean a merger, consolidation or
reorganization of the Company in which:
(i) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization, at least a
majority of the combined voting power of the voting securities of the
corporation resulting from such merger or consolidation or reorganization
("Surviving Corporation") over which any Person has Beneficial Ownership in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization;
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least a majority of the
members of the board of directors of the Surviving Corporation; and
(iii) no Person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation, or any Person who, immediately prior to
such merger, consolidation or reorganization had Beneficial Ownership of 20% or
more of the then outstanding Voting Securities) has Beneficial Ownership of 20%
or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities;
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
(4) Any other event that the Committee shall determine constitutes an
effective Change in Control of the Company.
2
<PAGE>
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person ("Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person; provided, however, that if
a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Committee" shall mean the Committee provided for in Section 5.1.
(f) "Company" shall mean Vencor, Inc., a Delaware corporation.
(g) "Disability" shall mean the total disability as determined by the
Committee in accordance with standards and procedures similar to those under the
Company's long-term disability plan, or, if none, a physical or mental infirmity
which the Committee determines impairs the Participant's ability to perform
substantially his or her duties for a period of 180 consecutive days.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(i) "Fair Market Value" of the Shares shall mean, as of any applicable
date, the closing sale price of the Shares on the New York Stock Exchange or any
national or regional stock exchange in which the Shares are traded, or if no
such reported sale of the Shares shall have occurred on such date, on the next
preceding date on which there was such a reported sale. If there shall be any
material alteration in the present system of reporting sale prices of the
Shares, or if the Shares shall no longer be listed on the New York Stock
Exchange or a national or regional stock exchange, the fair market value of the
Shares as of a particular date shall be determined by such method as shall be
determined by the Committee.
(j) "Non-Employee Director" shall mean a member of the Board who is not an
employee of the Company or any Subsidiary.
(k) "Option" shall mean an option granted to an Optionee pursuant to the
Plan.
(l) "Option Agreement" shall mean a written agreement between the Company
and an Optionee evidencing the granting of an Option and containing terms and
conditions concerning the exercise of the Option.
3
<PAGE>
(m) "Optionee" shall mean a Non-Employee Director who has been granted an
Option or the personal representative, heir or legatee of an Optionee who has
the right to exercise the Option upon the death of the Optionee.
(n) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
(o) "Plan" shall mean this 1997 Stock Option Plan for Non-Employee
Directors, as the same may be amended from time to time.
(p) "Shares" shall mean the shares of the Company's common stock, par value
$.25 per share.
(q) "Subsidiary" shall mean, with respect to any company, any corporation
or other Person of which a majority of its voting power, equity securities or
equity interest is owned directly or indirectly by such company.
2.2 Gender and Number. Except where otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. SHARES SUBJECT TO THE PLAN
The stock to be offered under the Plan shall be the Shares, which Shares
may be unissued Shares or treasury Shares. Subject to the adjustments provided
for in Section 6, the aggregate number of Shares to be delivered upon exercise
of all Options granted under the Plan shall not exceed 200,000 Shares. Shares
subject to, but not delivered under, an Option terminating or expiring for any
reason prior to its exercise in full shall be deemed available for Options to be
granted thereafter during the term of the Plan.
ARTICLE 4. TERMS AND CONDITIONS OF OPTIONS
4.1 Non-Discretionary Grants. On January 1 of each year during the term
of the Plan, each Non-Employee Director who is elected a director at the
preceding annual meeting of shareholders and who is acting as a director on
January 1, shall receive a grant of an Option for 3,000 Shares having the
following terms and conditions:
(a) The exercise price of the Option shall be equal to 100% of the
Fair Market Value of the Shares on the date the Option is granted.
4
<PAGE>
(b) The term of the Option shall be ten years from the date of grant
unless sooner terminated as provided herein.
(c) The Option shall be exercisable in four equal annual
installments, with the first installment becoming exercisable on the first
anniversary of the date of grant of the Option. Notwithstanding the provisions
of this Section 4.1, upon a Change in Control or the retirement of the director,
the Optionee shall have the right to exercise the Option in full as to all
Shares subject to the Option.
4.2 Termination of Option.
(a) If the Optionee ceases to be a director of the Company for any
reason other than death, Disability, retirement or removal for Cause, the Option
shall terminate three months after the Optionee ceases to be a director of the
Company (unless the Optionee dies during such period), or on the Option's
expiration date, if earlier, and shall be exercisable during such period after
the Optionee ceases to be a director of the Company only with respect to the
number of Shares which the Optionee was entitled to purchase on the day
preceding the day on which the Optionee ceased to be a director.
(b) If the Optionee ceases to be a director of the Company because of
removal for Cause, the Option shall terminate on the date of the Optionee's
removal.
(c) In the event of the Optionee's death, Disability or retirement
while a director of the Company, or the Optionee's death within three months
after the Optionee ceases to be a director (other than by reason of removal for
Cause), the Option shall terminate upon the earlier to occur of (A) 12 months
after the date of the Optionee's death, Disability or retirement, or (B) the
Option's expiration date. The Option shall be exercisable during such period
after the Optionee's death or Disability with respect to the number of Shares as
to which the Option shall have been exercisable on the date preceding the
Optionee's death or Disability, as the case may be. In the event of the
retirement of the director, the Option shall be fully exercisable during such
period.
4.3 Restrictions on Transferability of Option. The Option shall not be
transferable by the Optionee otherwise than by bequest or the laws of descent
and distribution, and shall be exercisable during the Optionee's lifetime only
by the Optionee; provided, however, that the Optionee may, subject to any
restrictions under Section 16(b) of the Exchange Act, transfer the Options to
(i) the Optionee's spouse or lineal descendants ("Immediate Family Members"),
(ii) trusts for the exclusive benefit of such Optionee and/or his Immediate
Family Members, or (iii) a partnership or limited liability company in which
such Optionee and/or his Immediate Family Members are the only partners or
members, as applicable; provided that (a) there may be no consideration for any
such transfer and (b) subsequent transfers of any transferred Option shall be
prohibited other than by bequest or the laws of descent and distribution.
Following transfer, any such Option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
that for purposes of the Plan (excluding Section 4.2) the term "Optionee" shall
be deemed to refer to the transferee. Notwithstanding the above, the
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<PAGE>
provisions of Section 4.2 concerning the termination of an Option shall continue
to be applied with respect to the original Optionee. Any transferred Option
shall be exercisable by the transferee only to the extent, and for the periods,
specified in the Option Agreement.
4.4 Payment of Exercise Price. The exercise price shall be paid in cash
at the time of exercise, except that in lieu of all or part of the cash, the
Optionee may tender to the Company Shares already owned by the Optionee having a
Fair Market Value equal to the exercise price, less any cash paid. The Fair
Market Value of such tendered Shares shall be determined as of the close of the
business day immediately preceding the day on which the Option is exercised.
4.5 Option Agreement. Each Option shall be evidenced by an Option
Agreement which shall set forth the number of Shares for which the Option was
granted, the provisions set forth in this Article 4 relating to the Option and
such other terms and conditions consistent with the Plan.
ARTICLE 5. ADMINISTRATION
5.1 The Committee. The Plan is designed to operate automatically and not
require any significant administration. To the extent administration is
required, the Plan shall be administered by a Committee appointed by the Board
which shall include two or more directors of the Company or the entire Board.
The Committee shall meet at such times and places as it determines and may meet
through a telephone conference call. A majority of its members shall constitute
a quorum, and the decision of the majority of those present at any meeting at
which a quorum is present shall constitute the decision of the Committee. Any
decision reduced to writing and signed by a majority of the members of the
Committee shall be fully effective as if it had been made by a majority at a
meeting duly held. No discretion concerning decisions under the Plan shall be
afforded to a person who is not a "disinterested person." All decisions,
determinations and selections made by the Committee pursuant to the provisions
of the Plan shall be final. To the extent required by law and Rule 16b-3
promulgated under the Exchange Act, the Committee may delegate its authority
hereunder.
5.2 Section 16 Compliance. It is the intention of the Company that the
Plan and the administration of the Plan comply in all respects with Section
16(b) of the Exchange Act and the rules and regulations promulgated thereunder.
If any Plan provision, or any aspect of the administration of the Plan, is found
not to be in compliance with Section 16(b) of the Exchange Act, the provision or
administration shall be deemed null and void, and in all events the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3 promulgated
under the Exchange Act.
ARTICLE 6. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION
Notwithstanding the limitations set forth in Article 3, in the event of a
merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, property dividend, share repurchase, share combination,
share exchange, issuance of warrants, rights or debentures or other change in
corporate structure of the Company affecting the Shares, the Committee shall
make an
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<PAGE>
appropriate and equitable adjustment in the maximum number of Shares available
under the Plan or to any one individual and in the number, kind and exercise
price of Shares subject to Options granted under the Plan to prevent dilution or
enlargement of the rights of Non-Employee Directors under the Plan and
outstanding Options.
ARTICLE 7. AMENDMENTS AND DISCONTINUANCE
7.1 In General. Except as provided in Section 7.2, the Board may
discontinue, amend, modify or terminate the Plan at any time.
7.2 Section 16(b) Compliance. To the extent required to meet the
conditions for exemption from Section 16(b) of the Exchange Act or the
requirements of any national securities exchange or system on which the Shares
are then listed or reported or a regulatory body having jurisdiction with
respect thereto, without the approval of the stockholders of the Company, no
amendment, modification or termination may:
(a) materially increase the benefits accruing to Non-Employee
Directors under the Plan;
(b) increase the total number of Shares which may be issued under the
Plan, except as provided in Article 6; or
(c) materially modify the eligibility requirements to receive an
Option under the Plan.
Furthermore, to the extent required to meet the conditions for exemption
from Section 16(b) of the Exchange Act, no amendment which would change the
amount, price or timing of Option grants, other than to comply with changes in
the Code or the Employee Retirement Income Security Act of 1974, as amended (to
which the Plan is not currently subject), or the rules and regulations
promulgated thereunder, shall be made more than once every six months.
7.3 No Effect on Outstanding Options. Any Option which is outstanding
under the Plan at the time of the Plan's amendment or termination shall remain
in effect in accordance with its terms and conditions and those of the Plan as
in effect when the Option was granted.
ARTICLE 8. MERGER, CONSOLIDATION, ETC.
8.1 Conversion on Certain Mergers. In the event the Company merges or
consolidates with another corporation, or all or substantially all of the
Company's capital stock or assets are acquired by another corporation, and the
surviving or acquiring corporation issues shares of its stock to the Company's
stockholders in connection with the merger, consolidation or acquisition, the
surviving or acquiring corporation shall adopt the Plan. Following such
adoption, the Optionee shall, at no additional cost (other than the exercise
price), be entitled to receive upon the exercise of an Option, in lieu of the
number of Shares to which such Option is then exercisable, the number and class
of stock or other securities to which the Optionee would
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<PAGE>
have been entitled pursuant to the terms of the merger, consolidation or
acquisition if immediately prior thereto the Optionee had been the holder of
record of a number of Shares equal to the number of Shares as to which the
Option shall then be exercisable.
8.2 No Conversion on Other Mergers. In the event that the Company merges
or consolidates with another corporation, or all or substantially all of the
Company's capital stock or assets are acquired by another corporation, and the
surviving or acquiring corporation does not issue shares of its stock to the
Company's stockholders in connection with the merger, consolidation or
acquisition, then, notwithstanding any other provision of the Plan to the
contrary, no Option may be exercised after the effective date of the merger,
consolidation or acquisition.
ARTICLE 9. EFFECTIVE DATE AND TERMINATION OF THE PLAN
9.1 Effective Date. The Plan shall become effective upon adoption by the
Board. The Plan shall be rescinded and all Options granted hereunder shall be
null and void unless within 12 months from the date of the adoption of the Plan
by the Board it shall have been approved by the holders of a majority of the
outstanding Shares present or represented and entitled to vote on the Plan at a
stockholders' meeting.
9.2 Termination Date. The Plan shall terminate on the earliest to occur
of (i) the date when all of the Shares available under the Plan shall have been
acquired through the exercise of Options granted under the Plan; (ii) 10 years
after the date of adoption of the Plan by the Board; or (iii) such earlier date
as the Board may determine.
ARTICLE 10. NO RIGHT TO RE-ELECTION
Neither the Plan, nor any action taken under the Plan, shall be construed
as conferring upon a Non-Employee Director any right to continue as a director
of the Company, to be renominated by the Board or re-elected by the stockholders
of the Company.
ARTICLE 11. INDEMNIFICATION
No member of the Board or the Committee, nor any officer or employee acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,
and all members of the Board, the Committee and each officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.
ARTICLE 12. GOVERNING LAW
The provisions of the Plan shall be construed, administered and enforced
according to the laws of the State of Delaware without regard to its conflict of
laws rules.
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<PAGE>
IN WITNESS WHEREOF, this 1997 Stock Option Plan for Non-Employee Directors
has been executed by the Company as of the 31st day of December, 1996, being the
date the Plan was adopted by the Board.
VENCOR, INC.
By: /s/ W. Bruce Lunsford
-------------------------------------
Title: Chairman of the Board, President
---------------------------------
and Chief Executive Officer
---------------------------------
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<PAGE>
EXHIBIT 10.59
================================================================================
ATRIA COMMUNITIES, INC.
as Borrower
And
VENCOR, INC.
as Parent Guarantor
FIRST HEALTHCARE CORPORATION
NORTHWEST HEALTHCARE, INC.
MEDISAVE PHARMACIES, INC.
HILLHAVEN OF CENTRAL FLORIDA, INC.
NATIONWIDE CARE, INC.
as Support Guarantors
With
PNC BANK, NATIONAL ASSOCIATION
as Administrative Agent
----------------------------
PARENT GUARANTY
dated as of
August 15, 1996
----------------------------
================================================================================
<PAGE>
PARENT GUARANTY
PARENT GUARANTY ("this Agreement"), dated as of August 15, 1996, by:
(a) ATRIA COMMUNITIES, INC., a Delaware corporation (herein,
together with its successors and assigns, the "Borrower");
(b) VENCOR, INC., a Delaware corporation and the record and
beneficial owner of more than 60% of all of the issued and outstanding
shares of Common Stock of the Borrower (herein, together with its
successors and assigns, the "Parent Guarantor"); and
(c) FIRST HEALTHCARE CORPORATION, a Delaware corporation,
NORTHWEST HEALTHCARE, INC., an Idaho corporation, MEDISAVE PHARMACIES,
INC., a Delaware corporation, HILLHAVEN OF CENTRAL FLORIDA, INC., a
Delaware corporation, and NATIONWIDE CARE, INC., an Indiana corporation
(each, together with its successors and assigns, a "Supporting
Guarantor" and collectively, the "Supporting Guarantors");
with PNC BANK, NATIONAL ASSOCIATION, a national banking association, as
Administrative Agent (herein, together with its successors and assigns in such
capacity, the "Administrative Agent") for itself and the other Lenders (defined
below), for the benefit of (i) the Administrative Agent, (ii) the Lenders from
time to time party to the Credit Agreement referred to below, and (iii) the
Interest Rate Creditors referred to below:
PRELIMINARY STATEMENTS:
(1) This Agreement is made pursuant to the Credit Agreement, dated as
of the date hereof (herein, as amended or otherwise modified from time to time,
the "Credit Agreement"), among the Borrower, the financial institutions named as
lenders therein, and the Administrative Agent, as agent for the Lenders (as
defined in the Credit Agreement), providing, among other things, for loans or
advances or other extensions of credit to or for the benefit of the Borrower of
up to $200,000,000, with such loans or advances being evidenced by promissory
notes (the "Notes", such term to include all notes and other securities issued
in exchange therefor or in replacement thereof), and is made to induce the
Lenders to make Loans to the Borrower, and to issue and participate in Letters
of Credit for the account of the Borrower or any of its Subsidiaries, pursuant
to the Credit Agreement.
(2) The Borrower may from time to time be party to one or more
Designated Interest Rate Agreements (as defined in the Credit Agreement). Any
institution that participates, and in each case their subsequent assigns, as a
counterparty to any Designated Interest Rate Agreement (collectively, the
"Interest Rate Creditors," and the Interest Rate Creditors together with the
Lenders, collectively the "Creditors"), shall benefit hereunder as herein
provided.
(3) This Agreement is made for the pro rata benefit of the
Administrative Agent and the Creditors to guarantee the payment of the principal
of and interest on the Notes and the payment and performance by the Borrower of
its obligations under the Credit Agreement, the other Credit Documents to which
the Borrower is a party and the Designated Interest Rate Agreements. This
Agreement is one of the Credit Documents referred to in the Credit Agreement.
(4) The Supporting Guarantors are entering into this Agreement to
guarantee the obligations of the Parent Guarantor hereunder, as set forth in
section 19 hereof.
NOW, THEREFORE, it is agreed as follows:
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<PAGE>
1. Defined Terms. Certain capitalized terms used herein without
definition shall have the respective meanings specified in the Credit Agreement
and the other Credit Documents.
2. Guaranty by the Parent Guarantor, etc.
2.1. Required Payments. The Parent Guarantor hereby guarantees to the
Administrative Agent and the Creditors, for the ratable benefit of the
Administrative Agent and the Creditors, the due and punctual payment, when and
as the same shall become due and payable, of the following amounts, including
amounts that would become due but for the operation of the automatic stay under
section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a) (the "Required
Payments"):
(a) all amounts of principal becoming due and payable on the
DPP Revolving Loans in accordance with the terms thereof and of the
Credit Agreement, whether at stated maturity or as an installment or by
required prepayment or notice of optional prepayment or declaration of
acceleration or otherwise;
(b) all amounts of interest becoming due and payable on the
DPP Revolving Loans in accordance with the terms thereof and of the
Credit Agreement, including interest on any overdue principal and (to
the extent permitted by applicable law) on any overdue interest;
(c) all amounts payable by the Borrower to the Administrative
Agent or any Letter of Credit Issuer as reimbursement for any payment
or disbursement made by such Letter of Credit Issuer under any Letter
of Credit issued (or deemed issued) as contemplated by the Credit
Agreement, to the extent the same relates to Allocated DPP Letter of
Credit Outstandings;
(d) all other amounts payable by the Borrower to the
Administrative Agent, the Lenders and any Letter of Credit Issuer under
the Credit Agreement and the other Credit Documents which are related
to any of the foregoing; and
(e) with respect to all amounts payable by the Borrower to all
Interest Rate Creditors under all Designated Interest Rate Agreements,
the portion thereof, as reasonably determined by the Administrative
Agent at any time or from time to time (any such determination being
conclusive on all persons affected thereby, in the absence of manifest
error), which is equal to (i) a fraction the numerator of which is the
Allocated Measured DPP Swap Credit Exposure at such time, and the
denominator of which is the Aggregate Measured Swap Credit Exposure at
such time, times (ii) the aggregate of all amounts payable by the
Borrower to all Interest Rate Creditors under all Designated Interest
Rate Agreements.
Such guaranty is an absolute, unconditional, present and continuing guaranty of
payment and not of collectibility and is in no way conditioned or contingent
upon any attempt to collect from the Borrower, or any other action, occurrence
or circumstance whatsoever. If the Borrower shall fail to make any Required
Payment when and as the same shall become due and payable, the Parent Guarantor
shall forthwith make such Required Payment upon demand by the Administrative
Agent, in U. S. Dollars, in immediately available funds, directly to the
Administrative Agent, at its address specified in or pursuant to this Agreement,
or at such other place as the Administrative Agent shall direct, for application
as provided in section 27.
2.2. Maximum Guaranteed Amount. Notwithstanding any provisions of this
Agreement to the contrary, the maximum amount which the Parent Guarantor shall
be required to pay under section 2.1 hereof, together with any further amounts
or damages to which the Administrative Agent (on behalf of itself and the
Creditors) would be entitled for any breach by the Parent Guarantor of its
representations, warranties and covenants contained in sections 10, 11, 12, 13,
14, 15, 16 or 17 of this Agreement, specifically exclusive of any amounts or
damages to which the Administrative Agent (on behalf of itself and the
Creditors) would be entitled under sections 23, 24 and 26 of this Agreement,
shall be the amount identified below (the "Maximum Guaranteed Amount")
corresponding to the applicable period during which the Administrative Agent
shall have made demand upon the Parent Guarantor under section 2.1 hereof:
2
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<TABLE>
<CAPTION>
is made by the Administrative Agent Maximum Guaranteed Amount
- ----------------------------------- -------------------------
<S> <C>
On or prior to the first anniversary
of the Closing Date $100,000,000
Thereafter and on or prior to the
second anniversary of the
Closing Date $75,000,000
Thereafter and on or prior to the
third anniversary of the
Closing Date $50,000,000
Thereafter and on or prior to the
fourth anniversary of the
Closing Date $25,000,000
Thereafter $-0-
</TABLE>
; provided, however, that the Parent Guarantor may irrevocably elect, upon
written notice from the Parent Guarantor which is received by the Administrative
Agent prior to any date identified in the above table on which the Maximum
Guaranteed Amount is scheduled to reduce in amount, that the reduction so
scheduled to occur on such date shall not be effective and that the Parent
Guarantor elects either of the following: (i) that the Maximum Guaranteed Amount
shall not be reduced on such scheduled date of reduction, or (ii) that the
Maximum Guaranteed Amount shall be reduced on such scheduled date of reduction,
but by an amount less than the amount of the reduction scheduled to occur on
such date, specifying such lesser amount of reduction; and any such notice from
the Parent Guarantor shall specify any such election; and provided, further,
that no reduction in the Maximum Guaranteed Amount scheduled to take place in
accordance with the foregoing table shall become effective for any purpose
unless (A) during the entire 30-day period ending on any such scheduled date of
reduction, the sum of the aggregate outstanding DPP Revolving Loans, the
Allocated DPP Letter of Credit Outstandings and the Allocated Measured DPP Swap
Credit Exposure, is not greater than the amount to which the Maximum Guaranteed
Amount is scheduled to reduce on such date (taking into account any actions of
the Parent Guarantor pursuant to the preceding proviso), and (B) during the
period commencing 30 days prior to such scheduled date of reduction and ending
15 days prior to such scheduled date of reduction, the Borrower shall have
delivered to the Administrative Agent and the Managing Agent a written notice,
referring specifically to this section 2.2, advising the Administrative Agent
and the Managing Agent of the reduction in the Maximum Guaranteed Amount which
is scheduled to occur, and certifying that the condition specified in the
preceding clause (A) will be satisfied with reference to the scheduled reduction
in the Maximum Guaranteed Amount.
2.3. Early Termination of Guaranty of Required Payments. The guaranty
provided in section 2.1 will terminate, except with respect to any outstanding
demands by the Administrative Agent in respect thereof, at any time after the
third anniversary of the Closing Date if, at such time, each of the following
conditions is satisfied:
(a) the Borrower's ratio of Total Indebtedness to Total
Capitalization as of the end of the most recent fiscal period for which
financial statements have been delivered pursuant to section 7.1(a) or
(b) of the Credit Agreement, expressed as a percentage, is less than
60%;
(b) the Borrower's ratio of Total Indebtedness to EBITDA for the
most recent Testing Period for which financial statements have been
delivered pursuant to section 7.1(a) or (b) of the Credit Agreement, is
less than 3.50 to 1.00;
(c) the Borrower shall have delivered to the Administrative
Agent its financial statements pursuant to section 7.1(a) or (b) of the
Credit Agreement, together with the certificate referred to in section
7.1(e) of the Credit Agreement relating thereto, demonstrating to the
satisfaction of the Managing Agent that the conditions specified in
clauses (a) and (b) above have been satisfied;
3
<PAGE>
(d) the number of the individual properties in the Mature
Property Pool which are owned or leased by the Borrower or any of its
Subsidiaries shall be at least three times the number of individual
properties in the Development Property Pool;
(e) no Default or Event of Default shall have occurred and be
continuing, or would result from such termination; and
(f) no Change of Control shall have occurred.
In the event the Parent Guarantor believes such conditions are satisfied as
herein contemplated, it will so notify the Administrative Agent and the Managing
Agent in writing and will provide to the Administrative Agent and the Managing
Agent contemporaneously with any such notice such supporting materials upon
which such belief is based, and the Administrative Agent will promptly notify
the Creditors in writing of such notification by the Parent Guarantor and will
provide to the Creditors contemporaneously therewith copies of any such
supporting materials provided by the Parent Guarantor. Upon the Managing Agent's
determination that such conditions are satisfied as herein contemplated, it will
so notify the Administrative Agent, the Parent Guarantor and the Borrower in
writing (and the Administrative Agent shall promptly provide a copy of such
notice to the Creditors) and such termination shall be effective when such
notice is so given by the Managing Agent.
2.4. Subrogation. In the event the Parent Guarantor shall at any time
make any Required Payment, in the performance of its obligations to guarantee
payment thereof by the Borrower in accordance with the terms and provisions of
this Agreement, all rights of the Parent Guarantor for subrogation,
reimbursement, indemnity, contribution or otherwise against the Borrower in
respect thereof, together with all rights of the Parent Guarantor in any
collateral securing payment or performance obligations of the Borrower, shall in
all respects be subordinated and junior in right of payment to the indefeasible
payment in full of all Required Payments owed to the Administrative Agent and
the Creditors and all other Obligations of the Borrower under the Credit
Documents and the Designated Interest Rate Agreements; provided, however, that
to the extent any such right of subrogation, reimbursement, indemnity,
contribution or otherwise, or right in collateral, would constitute the Parent
Guarantor a creditor of the Borrower in respect thereof within the meaning of
section 547(b) of the Bankruptcy Code, as now in effect or hereafter amended, or
any comparable provisions of any successor statute, in the event a case
involving the Borrower shall at any time be commenced under the Bankruptcy Code,
as now in effect or hereafter amended, or any comparable provision of any
successor statute, the Parent Guarantor hereby irrevocably waives such right and
agrees that it will not assert, enforce or otherwise exercise any such right.
2.5. Reinstatement. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of,
or in respect of, any Required Payment is rescinded or must otherwise be
restored by the Administrative Agent or any Creditor, or any other creditor of
the Borrower, upon the bankruptcy or reorganization of the Borrower or
otherwise.
2.6. Guarantor Familiar with Borrower's Affairs, etc. The Parent
Guarantor confirms that it has executed and delivered this Agreement after
reviewing the terms and conditions of the Credit Agreement, this Agreement and
the other Credit Documents and such other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute and
deliver this Agreement. The Parent Guarantor confirms that it has made its own
independent investigation with respect to the Borrower's creditworthiness and is
not executing and delivering this Agreement in reliance on any representation or
warranty by the Administrative Agent or any Creditor or any other person acting
on behalf of the Administrative Agent or any Creditor as to such
creditworthiness. The Parent Guarantor expressly assumes all responsibilities to
remain informed of the financial condition of the Borrower and any circumstances
affecting (a) the Borrower's ability to perform its obligations under the Credit
Agreement, the other Credit Documents to which it is a party, and any Designated
Interest Rate Agreement, or (b) any collateral securing, or other guaranty
supporting, all or any part of the Borrower's payment and performance
obligations thereunder.
3. Subordination. The Parent Guarantor agrees that all Indebtedness
of the Borrower to the Parent Guarantor, whether now outstanding or hereafter
incurred or assumed and whether arising out of any prior loans or advances or
this Agreement or otherwise, in each case whether for principal, premium, if
any, or interest (all such Indebtedness being herein called "Subordinated
Indebtedness") shall be subordinate and junior in right of payment
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to all Indebtedness of the Borrower included in the Required Payments, all other
Obligations of the Borrower under the Credit Documents and all obligations under
any of the Designated Interest Rate Agreements, including any extensions,
modifications or renewals of any thereof and any amounts accruing after the
commencement of any proceeding of the character referred to in subdivision (b)
of this section 3 (all such Indebtedness being herein called "Senior
Indebtedness"), as follows:
(a) Unless and until all Senior Indebtedness shall have been paid
in full, the Borrower will not directly or indirectly purchase or
otherwise acquire any Subordinated Indebtedness, and the Borrower will
not make and neither the Parent Guarantor nor any other holder of
Subordinated Indebtedness will demand, accept or receive, any direct or
indirect payment (in cash, property, by set-off or otherwise) of or on
account of any Subordinated Indebtedness, and no such payment shall be
due, and neither the Parent Guarantor nor any other holder of
Subordinated Indebtedness will commence any action, suit or other
proceeding, or otherwise take any enforcement action, against the
Borrower with respect thereto; provided that nothing contained in this
subdivision (a) shall prevent the Borrower from making, or the Parent
Guarantor from accepting and receiving, any payment to the Parent
Guarantor on account of Subordinated Indebtedness if at the time of
such payment (i) no Default or Event of Default shall have occurred and
be continuing under the Credit Agreement or would result therefrom, and
(ii) the Administrative Agent shall not have given notice to the
Borrower and the Parent Guarantor that a Default or Event of Default
shall have occurred and be continuing under the Credit Agreement.
(b) In the event of any proceeding with respect to the Borrower or
any significant part of its properties or assets involving insolvency
or bankruptcy, including without limitation, any insolvency,
bankruptcy, receivership, liquidation, reorganization, readjustment,
composition, arrangement or other similar proceeding, or any such
proceeding by, among or on behalf of any of its creditors, as such, or
any proceeding for the voluntary liquidation, dissolution or other
winding up of the Borrower (whether or not involving insolvency or
bankruptcy proceedings) or any assignment for the benefit of its
creditors, or any other marshalling of its assets, then and in any such
event:
(i) all Senior Indebtedness shall first be paid in full
before any payment or distribution of any character, whether in
cash, securities or other property, shall be made on account of
any Subordinated Indebtedness;
(ii) payment or distribution of any character, whether in
cash, securities or other property, which would otherwise (but for
the terms of this section 3) be payable or deliverable in respect
of any Subordinated Indebtedness shall be paid or delivered
directly to the Administrative Agent or any Lender for application
as provided in the Credit Agreement, to the extent necessary to
pay all Senior Indebtedness in full;
(iii) the holders of Subordinated Indebtedness irrevocably
authorize and empower the Administrative Agent to demand, sue for,
collect and receive all such payments and distributions and
receipt therefor, and to file and prove all such claims and take
all such other action in the name of the holders of Subordinated
Indebtedness or otherwise as the Administrative Agent may
determine to be necessary or appropriate for the enforcement of
this Agreement; and
(iv) the holders of Subordinated Indebtedness will execute
and deliver to the Administrative Agent and each Creditor all such
further instruments confirming the above authorization, and all
such powers of attorney, proofs of claim, assignments of claim and
other instruments, and will, take all such other action, as may be
requested by the Administrative Agent or any Creditor in order to
enable the Administrative Agent and the Creditors to enforce all
claims upon or in respect of any such payment or distribution in
respect of Subordinated Indebtedness.
(c) If any payment or distribution of any character, whether
in cash, securities or other property, in respect of any Subordinated
Indebtedness (other than payments permitted pursuant to subdivision (a)
of this section 3) shall, despite the terms of this section 3, be
received by the Parent Guarantor or any other holder of Subordinated
Indebtedness before all Senior Indebtedness shall have been paid
in full, such payment or distribution shall be held in trust
for the benefit of the holders of Senior Indebtedness and shall
forthwith be paid
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over or delivered to the Administrative Agent, for application
as provided in the Credit Agreement, to the extent necessary to pay all
Senior Indebtedness in full.
(d) In the event that, notwithstanding any of the terms of this
section 3, any Subordinated Indebtedness is declared or otherwise
becomes due and payable under circumstances when neither the terms of
subdivision (a) nor of subdivision (b) of this section 3 are
applicable, neither the Parent Guarantor nor any other holder of
Subordinated Indebtedness shall be entitled to receive any payment
thereon until all Senior Indebtedness shall have been paid in full.
(e) Without limiting the effect of any of the other terms of this
section 3, during the continuance of any Event of Default no payment of
or on account of any Subordinated Indebtedness shall be made unless and
until all Senior Indebtedness shall have been paid in full.
(f) The Borrower will not execute and deliver, issue or give, and
neither the Parent Guarantor nor any other holder of Subordinated
Indebtedness will demand, accept or receive, any instrument or other
evidence of, or any security for, any Subordinated Indebtedness, except
that notwithstanding the foregoing the Borrower may issue to the Parent
Guarantor a single promissory note evidincing all Subordinated
Indebtedness owed to the Parent Guarantor if such promissory note
contains a legend, or has attached thereto an allonge, satisfactory in
form and substance to the Administrative Agent, indicating that the
indebtedness evidenced thereby has been subordinated to the Senior
Indebtedness in accordance with the provisions of this Agreement and
that any holder of such promissory note shall be bound by the
subordination provisions of this Agreement applicable to the
indebtedness evidenced by such promissory note.
(g) Upon payment in full of all Senior Indebtedness, the holders
of Subordinated Indebtedness shall be subrogated to the rights of the
holders of Senior Indebtedness to receive any further payments or
distributions in respect of the Senior Indebtedness, as and to the
extent provided in section 2.4.
(h) For the purposes of this section 3, Senior Indebtedness shall
not be deemed to have been paid in full unless and until the holders of
Senior Indebtedness shall have received cash or marketable securities,
taken at their then market value, or both, equal to the amount of such
Senior Indebtedness at the time outstanding.
(i) The Borrower and the Parent Guarantor will cause their
respective books of account, and those of any other holder of
Subordinated Indebtedness, to be marked in such manner as shall be
effective to give proper notice of the provisions of this section 3.
(j) Unless and until all Senior Indebtedness shall have been paid
in full, neither the Parent Guarantor nor any other holder of
Subordinated Indebtedness will assign or otherwise transfer, or in any
way encumber, any Subordinated Indebtedness or any interest therein,
without the prior written consent of the Administrative Agent, except
that all Subordinated Indebtedness at the time held by the Parent
Guarantor may be transferred to any corporation assuming the
obligations of the Parent Guarantor hereunder in connection with a
transaction permitted by section 12.
4. Certain Notices by the Borrower and the Administrative Agent.
Without diminishing in any respect any of the waivers contained in section 6, or
the absolute and unconditional nature of the obligations of the Parent Guarantor
under section 2 or under section 5:
(i) the Borrower agrees to give the Parent Guarantor prompt notice
of (A) any events which might affect any scheduled reduction in the
Maximum Guaranteed Amount pursuant to section 2.2 hereof; and (B) any
of the matters referred to in section 5, or any other events or
circumstances involving the Borrower, which could reasonably be
expected to be materially adverse to the interests of the Parent
Guarantor; and
(ii) if the Administrative Agent (A) believes that the Borrower
has failed to give the Parent Guarantor notice of any material
amendment to, or other material modification of, any of the
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Credit Documents, or (B) gives any formal written notice to the
Borrower concerning an Event of Default under the Credit Agreement, or
concerning an acceleration of the maturity of the Notes upon the
occurrence of an Event of Default under the Credit Agreement, then the
Administrative Agent shall use reasonable efforts to give reasonably
prompt notice thereof to the Parent Guarantor, but failure to give any
such notice shall not result in any monetary liability on the part of
the Administrative Agent.
5. Guarantor's Obligations Absolute, etc. The obligations of the Parent
Guarantor under sections 2.1, 2.4, 2.5 and 3 of this Agreement shall, except as
limited in section 2.2, (i) be absolute and unconditional, (ii) not be subject
to any counterclaim, setoff, deduction or defense based on any claim the Parent
Guarantor may have against the Borrower, the Administrative Agent, any Creditor,
or any of their respective Affiliates, and (iii) remain in full force and effect
without regard to, and shall not be released, suspended, abated, deferred,
reduced, discharged, terminated or otherwise affected by any circumstance or
occurrence whatsoever (whether or not the Parent Guarantor or any of its
Affiliates shall have any knowledge or notice thereof), including, without
limitation: (a) any renewal, extension, amendment or modification of or addition
or supplement to or deletion from the Credit Agreement, the Notes, any other
Credit Document, or any other instrument or agreement applicable to the Parent
Guarantor, the Borrower, or any other person, or any part thereof, or any
assignment, transfer or other disposition of any thereof; (b) any failure of the
Credit Agreement, the Notes, any other Credit Document, or any other instrument
or agreement applicable to the Parent Guarantor, the Borrower, or any other
person, to constitute the legal, valid and binding agreement or obligation of
any party thereto, enforceable in accordance with its terms; (c) any failure on
the part of the Borrower or any other person to perform or comply with any term
or provision of the Credit Agreement, the Notes, any other Credit Document, or
any such instrument or agreement; (d) any waiver, consent, extension, indulgence
or other action or inaction (including, without limitation, any lack of
diligence or failure to mitigate damages) under or in respect of the Credit
Agreement, the Notes, any other Credit Document, or any such instrument or
agreement, or any obligation or liability of the Borrower or any other person,
or any exercise or non-exercise of any right, power or remedy under or in
respect of the Credit Agreement, the Notes, any other Credit Document, or any
such instrument or agreement, or any such obligation or liability; (e) the
existence of any right of offset or banker's lien, or any failure to exercise
rights in respect thereof, or any release thereof; (f) any furnishing of any
additional security or any additional guaranty to the Administrative Agent or
any Creditor or any acceptance thereof or any release of any security or any
guaranty by the Administrative Agent or any Creditor; (g) any limitation on any
other person's liability or obligation under the Credit Agreement, the Notes,
any other Credit Document, or any such instrument or agreement or any such
obligation or liability or any termination, cancellation, commercial or other
frustration, invalidity, unenforceability or ineffectiveness, in whole or in
part, of the Credit Agreement, the Notes, any other Credit Document, or any such
instrument or agreement or any such obligation or liability or any term or
provision of any thereof; (h) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition, arrangement or other
similar proceeding relating to the Borrower or to any of its properties or
assets, or any such proceeding by, among or on behalf of any of its creditors,
as such, or any proceeding for the voluntary liquidation or dissolution or other
winding up of the Borrower, whether or not insolvency or bankruptcy proceedings,
or any assignment for the benefit of its creditors, or any other marshalling of
its assets, or any action taken by any trustee or receiver or by any court in
any such proceeding; (i) any disallowance or limitation of any claim of the
Administrative Agent or any Creditor, or any other person, in any such
proceeding; (j) any change in the ownership of all or any part of the capital
stock of the Borrower, or any merger or consolidation involving the Borrower or
any of its Affiliates, or any purchase, sale or lease by the Borrower or any of
its Affiliates of any assets; (k) any inability of the Borrower to create or
incur Subordinated Indebtedness, or the existence of any contractual or other
restriction upon the ability of the Borrower to issue and sell shares of its
capital stock, to purchase, sell, lease or otherwise dispose of assets, to incur
Indebtedness, or to otherwise conduct its business affairs; (l) any assignment,
transfer or other disposition, in whole or in part, by the Borrower or any other
person of its interest in any of the property subjected to the liens and
security interests created by the Security Documents; (m) any failure of any of
the Security Documents to effectively subject any property to the liens and
security interests purported to be created thereunder, or any failure of any
such liens or security interests to establish or maintain the priority over
other liens and security interests contemplated thereby; (n) any taking of or
any encumbrance on or interference with any use of or any damage to or
destruction of such property, or any part thereof or interest therein; or
(o) any other circumstance or occurrence, whether similar or dissimilar to any
of the foregoing.
6. Waiver. The Parent Guarantor unconditionally waives, to the
maximum extent permitted under any applicable law now or hereafter in effect,
insofar as its obligations under section 2.1, 2.4, 2.5 and 3 of this Agreement
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are concerned, (a) notice of any of the matters referred to in section 4 or
section 5, (b) all notices required by statute, rule of law or otherwise to
preserve any rights against the Parent Guarantor hereunder, including, without
limitation, any demand, presentment, proof or notice of non-payment of any
Required Payments or any Senior Indebtedness, and notice of any failure on the
part of the Borrower to perform or comply with any term or provision of the
Credit Agreement, the Notes, the other Credit Documents or any other agreement
or instrument to which the Borrower or any other person is a party, (c) any
right to the enforcement, assertion or exercise against the Borrower or against
any other person or any collateral of any right, power or remedy under or in
respect of the Credit Agreement, the Notes, the other Credit Documents or any
other agreement or instrument, and (d) any requirement that the Parent Guarantor
be joined as a party to any proceedings against the Borrower or any other person
for the enforcement of any term or provision of the Credit Agreement, the Notes,
the other Credit Documents or any other agreement or instrument.
7. Financial Statements and Other Information. The Parent Guarantor
will deliver to the Administrative Agent, in sufficient quantities for each
Lender (and the Administrative Agent shall promptly furnish to the Lenders the
copies thereof intended for the Lenders), so long as the Credit Agreement is in
effect and until such time as the Total Commitment has been terminated, no Notes
are outstanding and the Loans, together with interest, Fees and all other
Obligations under the Credit Documents, have been paid in full:
(a) within 45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year, commencing with the first
such quarterly period ending on or after the date hereof, a condensed
consolidated balance sheet of the Parent Guarantor and its consolidated
subsidiaries as at the end of such period, and the related condensed
consolidated statements of income and cash flows of the Parent
Guarantor and its consolidated subsidiaries for such period, setting
forth in each case in comparative form figures for the corresponding
periods of the previous fiscal year, and certified, subject to changes
resulting from year-end audit adjustments, as fairly presenting the
consolidated financial position of the Parent Guarantor and its
consolidated subsidiaries as at the end of such period and the
consolidated results of their operations and cash flows for such period
in conformity with GAAP (except for the omission of any footnotes which
would be required under GAAP) consistently applied (except as noted
therein), by a responsible financial officer of the Parent Guarantor;
(b) within 90 days after the end of each fiscal year, commencing
with the first such fiscal year ending on or after the date hereof, a
consolidated balance sheet of the Parent Guarantor and its consolidated
subsidiaries as at the end of such year, and the related consolidated
statements of income, cash flows and of shareholders' equity of the
Parent Guarantor and its consolidated subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and accompanied by the
opinion thereon of independent public accountants of recognized
national standing selected by the Parent Guarantor, which opinion shall
state that such accountants audited such consolidated financial
statements in accordance with generally accepted auditing standards,
that such accountants believe that such audit provides a reasonable
basis for their opinion, and that in their opinion such consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Parent Guarantor and its
consolidated subsidiaries as at the end of such fiscal year and the
consolidated results of their operations and cash flows for such fiscal
year in conformity with GAAP;
(c) together with each delivery of the consolidated financial
statements of the Parent Guarantor and its consolidated subsidiaries
pursuant to subdivision (a) or (b) above, a certificate of a
responsible financial or accounting officer the Parent Guarantor to the
effect that the signer has reviewed the relevant terms of the Credit
Agreement, this Agreement and the other Credit Documents, and has made
or caused to be made under his or her supervision an adequate review of
the transactions and condition of the Parent Guarantor and its
subsidiaries during the fiscal period covered by such financial
statements and as at the date of such certificate, and that such review
has not disclosed the existence, during such fiscal period or as at the
date of such certificate, of any condition or event which constitutes
or which, after notice or lapse of time or both, would constitute an
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
the Parent Guarantor has taken or is taking or proposes to take with
respect thereto, which certificate shall set forth the calculations
required to establish compliance with the provisions of section 14 and
(if the Parent Guarantor has notified the Administrative Agent that it
believes the conditions specified in section 2.3 have been satisfied so
as to entitle the Parent Guarantor to an early
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termination of this Agreement) any necessary information related to
establishing satisfaction of the conditions specified in section 2.3;
(d) unless the Parent Guarantor has an Investment Grade Rating,
together with each delivery of the consolidated financial statements of
the Parent Guarantor and its consolidated subsidiaries pursuant to
subdivision (b) above, a certificate of the independent public
accountants reporting thereon, stating whether or not their examination
has disclosed the existence, during the fiscal year covered by such
financial statements, of any condition or event which constitutes or
which, after notice or lapse of time or both, would constitute an Event
of Default and, if their examination has disclosed any such condition
or event, specifying the nature and period of existence thereof (it
being understood that such certificate may state that, in making their
examination, such accountants have not carried out or performed any
special procedures which are beyond the scope of generally accepted
auditing standards and procedures for examination of financial
statements);
(e) forthwith upon any principal officer of the Parent Guarantor
obtaining knowledge of any condition or event which constitutes or
which, after notice of lapse of time or both, would constitute an Event
of Default, an officers' certificate of the Parent Guarantor,
specifying the nature and period of existence thereof and what action
the Parent Guarantor has taken or is taking or proposes to take with
respect thereto;
(f) promptly after execution thereof, copies of any amendment to
its existing Credit Agreement, dated as of September 11, 1995, with the
banks named therein and Morgan Guaranty Trust Company of New York, as
Documentation Agent, and NationsBank, N.A. (Carolinas), as
Administrative Agent, as in effect on the Closing Date (as so in effect
on the Closing Date, and as the same may be amended, supplemented or
modified, or replaced with an agreement with substantially the same
bank group (whether in the same or a larger or smaller aggregate amount
of credit facilities), the "1995 Credit Agreement"), and copies of any
other credit agreement entered into after the Closing Date in
connection with a replacement or refinancing thereof (and any
amendments thereto); and
(g) promptly upon transmission thereof or other filing with the
SEC, copies of all registration statements (other than the exhibits
thereto and any registration statement on Form S-8 or its equivalent)
and annual, quarterly or current reports that the Parent Guarantor or
any of its Subsidiaries (other than the Borrower or any of its
Subsidiaries) files with the SEC; and
(h) with reasonable promptness, such other information or
documents (financial or otherwise) relating to the Parent Guarantor or
any of its Subsidiaries (other than the Borrower or any of its
Subsidiaries) as the Administrative Agent on its own behalf or on
behalf of the Required Lenders may reasonably request from time to
time.
As used herein, the term "Investment Grade Rating" means the publicly held
senior unsecured and unsupported debt securities of the Parent Guarantor have a
rating from Standard & Poor's Ratings Group, or its successor, of BBB- or
better, and a rating from Moody's Investors Service, Inc., or its successor, of
Baa3 or better, or the equivalent of such ratings if such rating agencies change
their terminology for such ratings.
8. Further Assurance, etc. The Borrower and the Parent Guarantor, at
their respective expense, will duly execute, acknowledge and deliver all such
instruments and take all such action as the Administrative Agent may reasonably
request in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.
9. Consent to Performance by the Borrower. The Parent Guarantor, as
the record and beneficial owner of a majority of all of the issued and
outstanding shares of Common Stock of the Borrower, consents to and approves the
execution, delivery and performance by the Borrower of the Credit Agreement,
this Agreement and the other Credit Documents to which the Borrower is a party.
10. Representations and Warranties by the Parent Guarantor. The Parent
Guarantor represents and warrants to the Administrative Agent, for the benefit
of the Administrative Agent and the Creditors, that:
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(a) Organization, Standing, etc. The Parent Guarantor is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business and to enter into this
Agreement, to guarantee the Required Payments as herein provided, and
to carry out the terms hereof.
(b) Qualification. The Parent Guarantor is duly qualified and in
good standing as a foreign corporation authorized to do business in all
jurisdictions wherein the character of the properties owned by it or
the nature of the business carried on by it makes such qualification
necessary, except in such respects as do not and could not reasonably
be expected to, individually or in the aggregate, result in a Material
Adverse Effect.
(c) Ownership of Borrower Stock. The Parent Guarantor is at the
Closing Date the record and beneficial owner of 10,000,000 shares of
Common Stock of the Borrower.
(d) Authorization, Validity and Enforceability of Agreement, etc.
This Agreement has been duly authorized by all necessary corporate or
other organizational action on the part of the Parent Guarantor and
each Supporting Guarantor (no approval of the shareholders or partners
of the Parent Guarantor or any Supporting Guarantor, as the case may
be, being required), has been duly executed and delivered by a duly
authorized officer or officers of the Parent Guarantor and each
Supporting Guarantor (or a partner thereof, in the case of any
Supporting Guarantor which is a partnership), and constitutes the valid
and binding agreement or obligation of the Parent Guarantor and each
Supporting Guarantor, enforceable against the Parent Guarantor and each
Supporting Guarantor in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the rights
of creditors generally, or (ii) principles of equity (regardless of
whether such principles are considered in a proceeding at law or in
equity).
(e) Financial Statements; Changes, etc. The Parent Guarantor has
furnished to the Lenders complete and correct copies of (i) the audited
consolidated balance sheet of the Parent Guarantor and its consolidated
subsidiaries at December 31, 1995 and 1994, and the related audited
consolidated statements of operations, shareholders' equity and cash
flows for the three years in the period ended December 31, 1995,
together with the report thereon of Ernst & Young LLP, its independent
public accountants, as included in the Parent Guarantor's Form 10-K
filed with the SEC for the fiscal year ended December 31, 1995, and
(ii) its unaudited condensed consolidated statement of income for the
three months ended March 31, 1996 and 1995, its unaudited condensed
consolidated balance sheet at March 31, 1996 and December 31, 1995, and
its unaudited condensed consolidated statement of cash flows for the
three months ended March 31, 1996 and 1995, as included in the Parent
Guarantor's Form 10-Q filed with the SEC for the quarterly period ended
March 31, 1996. Such consolidated financial statements are complete and
correct, have been prepared in accordance with GAAP, consistently
applied (except as stated therein), and fairly present the consolidated
financial position of the Parent Guarantor and its consolidated
subsidiaries as at the respective dates indicated and the results of
their consolidated operations and cash flows for the respective periods
indicated. Since the date of the most recent audited balance sheet
furnished pursuant to this section 10(e), no condition has come into
existence which has had, or is reasonably likely to have, a Material
Adverse Effect.
(f) Tax Payments. The Parent Guarantor and its consolidated
subsidiaries 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 as to which reserves have been provided. The charges, accruals
and reserves on the books of the Parent Guarantor and its consolidated
subsidiaries in respect of taxes or other governmental charges are, in
the opinion of the Parent Guarantor, adequate.
(g) Litigation, etc. There is no action, suit or proceeding
pending against, or to the knowledge of the Parent Guarantor or any of
its consolidated subsidiaries threatened against or affecting, the
Parent Guarantor or any of its consolidated subsidiaries 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, except as disclosed in item 3
entitled "Legal Proceedings" in the Parent Guarantor's
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Form 10-K annual report for its fiscal year ended December 31, 1995,
filed with the SEC, or (ii) which in any manner questions this
Agreement.
(h) Compliance with Other Instruments, etc. The execution,
delivery and performance by the Parent Guarantor, the Borrower, or any
Supporting Guarantor, as the case may be, of this Agreement, the Credit
Agreement, the Notes, and the other Credit Documents to which it is a
party do not violate or result in any violation of or conflict with or
constitute a default under or result in the creation of, or impose any
obligation on the Parent Guarantor, the Borrower or any Supporting
Guarantor to create, any Lien, other than pursuant to the Security
Documents, on any of the Parent Guarantor's or its subsidiaries'
properties or assets pursuant to, any provision of the charter or by-
laws of the Parent Guarantor, or of any agreement, indenture or other
instrument, or of any license, permit or other authorization or of any
judgment, decree, order, law, statute, ordinance or governmental rule
or regulation applicable to the Parent Guarantor or any of its
subsidiaries.
(i) Governmental Consent, etc. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental or public body or authority on the part of the Parent
Guarantor or any Supporting Guarantor, or consent, approval or
authorization of its shareholders (or partners, in the case of any
Supporting Guarantor which is a partnership), is required for the valid
execution, delivery or performance of this Agreement.
(j) Investment Company Act. The Parent Guarantor is not an
"investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
(k) Full Disclosure. All information heretofore furnished in
writing by the Parent Guarantor to the Administrative Agent or the
Documentation Agent for inclusion in the Information Memorandum or any
of the Agents or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby was, and all such
information hereafter furnished in writing by the Parent Guarantor to
any of the Agents or any Lender will be, true and accurate in every
material respect or based on reasonable estimates on the date as of
which such information is or was stated or certified. The Parent
Guarantor has disclosed to the Lenders in writing all facts which are
known to it and which have had or could reasonably be expected to have
a Material Adverse Effect.
11. Disposition of Indebtedness or Securities of the Borrower, etc.
The Parent Guarantor will not:
(a) except for the pledge of any Subordinated Indebtedness and
any shares of capital stock of the Borrower as security for obligations
under the 1995 Credit Agreement, and any sale, assignment or other
transfer of any thereof in connection with the enforcement of such
pledge (through judicial proceedings or otherwise):
(i) directly or indirectly sell, assign, pledge, transfer or
otherwise dispose of any Subordinated Indebtedness; or
(ii) directly or indirectly sell, assign, pledge, transfer or
otherwise dispose of any shares of capital stock of any class (or
any warrants, rights or options to acquire, or any securities
convertible into or exchangeable for, any such shares) of the
Borrower, under circumstances which would result in a Change of
Control, unless effective provision shall have been made for the
prepayment of all Obligations of the Borrower and for termination
of the Commitments of the Lenders under the Credit Agreement; or
(b) permit the Borrower, directly or indirectly, to issue or sell
any shares of its capital stock of any class (or any warrants, rights
or options to acquire, or any securities convertible into or
exchangeable for, any such shares), under circumstances which would
result in a Change of Control, unless effective provision shall have
been made for the prepayment of all Obligations of the Borrower and for
termination of the Commitments of the Lenders under the Credit
Agreement;
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provided that all the shares of capital stock of all classes (and all warrants,
rights and options to acquire, and all securities convertible into or
exchangeable for, any such shares) of the Borrower and all Subordinated
Indebtedness of the Borrower, at the time owned or held by the Parent Guarantor,
may be sold at the same time in connection with a transaction which meets all
the requirements of section 12.
12. Consolidation, Merger, Sale, etc. The Parent Guarantor will not
directly or indirectly consolidate with or merge into any other corporation,
limited liability company, partnership or other person, or permit any other
corporation, limited liability company, partnership or other person to
consolidate with or merge into it, or sell, lease, assign, transfer, abandon or
otherwise dispose of all or substantially all of its properties or assets,
except that the Parent Guarantor may consolidate with or merge into any other
corporation, or permit any other corporation to consolidate with or merge into
it, or sell or otherwise transfer all or substantially all of its properties and
assets, provided that,
(a) the acquiring or surviving person shall be a solvent
corporation organized and existing under the laws of the United States
of America, or any state thereof or the District of Columbia, and (if
other than the Parent Guarantor) shall prior to the effectiveness of
such transaction, execute and deliver to the Administrative Agent and
the Lenders an agreement by which such acquiring or surviving person
shall expressly and unconditionally assume all the obligations of the
Parent Guarantor hereunder, together with an opinion, satisfactory in
substance and form to the Administrative Agent, of counsel, reasonably
satisfactory to the Administrative Agent, of such acquiring or
surviving person, as to the due authorization, execution and delivery
and the enforceability of such agreement and as to such other matters
as the Administrative Agent may reasonably request;
(b) immediately prior to, and immediately after giving effect to,
such transaction (and such assumption), no Change of Control shall
exist, unless effective provision shall have been made for the
prepayment of all Obligations of the Borrower and for termination of
the Commitments of the Lenders under the Credit Agreement
contemporaneously with such Change of Control; and
(c) immediately prior to, and immediately after giving effect to,
such transaction (and such assumption), no condition or event shall
exist which constitutes or which, after notice or lapse of time or
both, would constitute an Event of Default.
No sale or transfer of properties or assets permitted by this section 12 shall
release the Parent Guarantor from any of its obligations hereunder.
13. Affirmative Covenants. The Parent Guarantor will comply with the
following covenants:
(a) Maintenance of Existence, Rights, etc. The Parent Guarantor
will, and will cause its Subsidiaries to, 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 its business; provided, that nothing in this section
13(a) shall prohibit (i) any merger or consolidation not prohibited by
section 12, (ii) the termination of the corporate existence of any
Subsidiary if (A) the Parent Guarantor determines that such termination
is in its best interest and (B) such termination is not adverse in any
material respect to the Lenders, 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.
(b) Compliance with Laws, etc. The Parent Guarantor will comply,
and cause each of its Subsidiaries to 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 being 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.
(c) Insurance. The Parent Guarantor will maintain, and cause each
of its Subsidiaries to maintain, insurance with responsible insurance
companies or associations in such amounts and against such
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risks as is usually carried by owners of similar businesses and
properties in the same general area in which it operates.
(d) Books and Records. The Parent Guarantor will keep proper books
of record and account in which entries in conformity with generally
accepted accounting principles (and all legal requirements) shall be
made of all dealings and transactions in relation to their businesses
and activities.
(e) Payment of Taxes, etc. The Parent Guarantor will pay and
discharge, and will cause each Subsidiary of the Parent Guarantor to
pay and discharge, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges or levies imposed upon it
or upon it or upon its property, and (ii) all lawful claims which, if
unpaid, (x) might by law become a Lien upon its property or (y) would
otherwise be reasonably likely to have a Material Adverse Effect;
provided, however, that neither the Parent Guarantor nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge, levy or claim which is being contested in good
faith by proper proceedings and as to which appropriate reserves have
been provided.
(f) Additional Supporting Guarantors. In the event that any
present or future Subsidiary of the Parent Guarantor, other than the
Supporting Guarantors, becomes a co-borrower or guarantor under the
1995 Credit Agreement, the Parent Guarantor will immediately (i) notify
the Administrative Agent thereof in writing, with reference to this
provision, (ii) include in such notice an offer to cause such
Subsidiary to become a Supporting Guarantor hereunder, and (iii)
provide contemporaneously with such notice a supplement to this
Agreement, satisfactory in form and substance to the Administrative
Agent, duly executed by such Subsidiary of the Parent Guarantor and by
the Parent Guarantor and each Supporting Guarantor, pursuant to which
such Subsidiary shall become a Supporting Guarantor hereunder and be
and become bound by all of the representations, warranties covenants
and provisions hereof applicable to any Supporting Guarantor. Unless
the Administrative Agent acting upon the instructions of the Required
Lenders elects upon written notice to the Parent Guarantor that any
such supplement be ineffective, this Agreement shall be considered
supplemented by any such supplement and such Subsidiary shall become a
Supporting Guarantor hereunder as provided therein.
14. Financial Covenants. The Parent Guarantor will comply with the
following covenants:
(a) Leverage Covenant in 1995 Credit Agreement. The Parent
Guarantor will comply with the covenant contained in Section 5.17 of
the 1995 Credit Agreement.
(b) Separate Leverage Covenant. The Parent Guarantor will maintain
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 not in
excess of 3.50 to 1.00. For purposes of calculating the foregoing ratio
at any Quarterly Measuring 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. As used in this Agreement, the terms "Fiscal
Quarters", "Combined Companies", "Consolidated Debt for Borrowed
Money", "Consolidated EBITDA", "Consolidated Net Worth" and "Debt",
shall have the same meanings as are ascribed to such terms in the 1995
Credit Agreement as in effect on the Closing Date, without giving
effect to any subsequent modification or termination thereof.
15. Negative Pledge. The Parent Guarantor will not:
(i) permit any Subsidiary of the Parent Guarantor (other than the
Borrower and its Subsidiaries) to create, incur or suffer to exist any
Lien upon or with respect to any of its property, whether now owned or
hereafter acquired, or assign any right to receive income, in each case
to secure or provide for the payment of any Consolidated Debt for
Borrowed Money, other than:
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(A) (1) Liens created prior to the Closing Date pursuant to
any document securing obligations under the 1995 Credit Agreement;
(2) the Project Mortgages (as defined in the 1995 Credit Agreement
as in effect on the Closing Date); and (3) Liens on equity
interests in and, debt obligations owed by, any Principal
Subsidiary (as defined in the 1995 Credit Agreement as in effect
on the Closing Date) required to be pledged as security for
obligations under the 1995 Credit Agreement pursuant to
contractual obligations not substantially more onerous to the
Parent Guarantor than those contained in Section 3(C) of the
Security Agreement, dated as of September 11, 1995, in favor of
the Collateral Agent under the 1995 Credit Agreement, as in effect
on the Closing Date;
(B) Liens existing on September 28, 1995 (other than Liens
permitted by clause (A) above) securing Debt outstanding on
September 28, 1995 in an aggregate principal amount not exceeding
$200,000,000;
(C) any Lien existing on any asset prior to the acquisition
thereof by the Parent Guarantor or such Subsidiary and not created
in contemplation of such acquisition;
(D) any Lien existing on any asset of any person at the time
such person becomes a Subsidiary of the Parent Guarantor or merges
into the Parent Guarantor 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 other 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
the foregoing clauses (A) through (E), provided that the principal
amount of such Debt is not increased and such Debt is not secured
by any additional assets;
(G) Permitted Encumbrances (as defined in the 1995
Credit Agreement, as in effect on the Closing Date);
(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 the Parent Guarantor 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 the Parent Guarantor 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; or
(ii) itself create, incur or suffer to exist any Lien upon or with
respect to any of its property, whether now owned or hereafter
acquired, or assign any right to receive income, in each case to secure
or provide for the payment of any Consolidated Debt for Borrowed Money
owed pursuant to the 1995 Credit Agreement, other than:
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(A) Liens on certain Indiana properties, and any other
properties, stock, securities, interests or other assets, granted
as security for obligations under the 1995 Credit Agreement prior
to the Closing Date, including any extensions or renewals
thereof); and
(B) Liens on equity interests in and, debt obligations owed
by, any Principal Subsidiary (as defined in the 1995 Credit
Agreement as in effect on the Closing Date) required to be pledged
as security for obligations under the 1995 Credit Agreement
pursuant to contractual obligations not substantially more onerous
to the Parent Guarantor than those contained in Section 3(C) of
the Security Agreement, dated as of September 11, 1995, in favor
of the Collateral Agent under the 1995 Credit Agreement, as in
effect on the Closing Date,
without making effective provision, and the Parent Guarantor in such case will
make or cause to be made effective provision, whereby the Required Payments and
the obligations of the Parent Guarantor hereunder shall be secured by such Lien
equally and ratably with any and all other indebtedness or obligations thereby
secured.
16. Senior Indebtedness. The Parent Guarantor will at all times ensure
that (i) the claims of the Administrative Agent and the Creditors hereunder will
not be subordinate to, and will in all respects at least rank pari passu with,
the claims of every other senior unsecured creditor of the Parent Guarantor, and
(ii) any indebtedness subordinated in any manner to the claims of any other
senior unsecured creditor of the Parent Guarantor will be subordinated in like
manner to the claims of the Administrative Agent and the Creditors hereunder.
17. Loans or Advances to the Borrower by Supporting Guarantors, etc.
The Parent Guarantor will not permit any of the Supporting Guarantors, or any of
its or their Subsidiaries or Affiliates, other than Subsidiaries of the
Borrower, to make or have outstanding at any time any loan or advance to the
Borrower unless such loan or advance is subordinated to the Senior Indebtedness
in accordance with subordination provisions to the same effect as is provided in
section 3 hereof.
18. No Assignment by the Borrower. Without the prior written consent
of the Administrative Agent, the Borrower will not sell, mortgage, pledge,
transfer or otherwise dispose of or encumber all or any part of its rights under
this Agreement, except for the Liens provided in the Security Documents.
19. Guaranty by the Supporting Guarantors; Deferral of
Enforcement,etc.
19.1. Joint and Several Guaranty. Each Supporting Guarantor hereby,
jointly and severally, unconditionally guarantees, for the benefit of the
Administrative Agent and the Creditors, the full and punctual payment of the
obligations of the Parent Guarantor under this Agreement. Upon failure by the
Parent Guarantor to pay punctually any such amount, each Supporting Guarantor
shall forthwith on demand by the Administrative Agent pay the amount not so
paid, in U. S. Dollars, in immediately available funds, directly to the
Administrative Agent, at its address specified in or pursuant to this Agreement,
or at such other place as the Administrative Agent shall direct, for application
as provided in section 27.
19.2. Guaranty Obligations Absolute, etc. The obligations of the
Supporting Guarantors under this section 19 shall be unconditional and absolute
and, without limiting the generality of the foregoing shall not be released,
discharged or otherwise affected by the occurrence, one or more times, of any of
the following:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect to any obligation of the Parent Guarantor under this
Agreement, by operation of law or otherwise:
(ii) any modification or amendment of or supplement to this
Agreement, the Credit Agreement, any other Credit Document, or any
other agreement or instrument referred to herein;
(iii) any release, non-perfection or invalidity of any direct
or indirect security for any obligation of the Borrower under the
Credit Agreement, any Note or any other Credit Document or of the
Parent Guarantor hereunder;
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(iv) any change in the corporate existence, structure or
ownership of the Parent Guarantor or any Subsidiary or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Parent Guarantor or any Subsidiary or its assets or any resulting
release or discharge of any obligation of the Parent Guarantor or any
Subsidiary contained in this Agreement or any other agreement or
instrument referred to herein;
(v) the existence of any claim, set-off or other rights which
any Supporting Guarantor may have at any time against the Parent
Guarantor, any Subsidiary of the Parent Guarantor, the Borrower, the
Administrative Agent, any Creditor or any other person, whether in
connection herewith or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Parent Guarantor for any reason of this Agreement, or any provision
of applicable law or regulation purporting to prohibit the payment by
the Parent Guarantor of any obligations in respect of this Agreement;
or
(vii) any other act or omission to act or delay of any kind by
the Borrower, the Administrative Agent, any Creditor or any other
person or any other circumstance whatsoever which might, but for the
provisions of this section, constitute a legal or equitable discharge
of a Supporting Guarantor's obligations under this section.
19.3. Reinstatement. The Supporting Guarantors' obligations under this
section shall remain in full force and effect until the obligations of the
Parent Guarantor hereunder shall have terminated in accordance with the terms
and provisions of this Agreement. If at any time any payment of any of the
obligations of the Parent Guarantor hereunder is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of the
Parent Guarantor, the Supporting Guarantors' obligations under this section with
respect to such payment shall be reinstated at such time as though such payment
had been due but not made at such time.
19.4. Waiver. Each Supporting Guarantor 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 the Parent Guarantor or any other person, or against any collateral or
guaranty of any other person.
19.5. Subrogation. Until the indefeasible payment in full of all of the
obligations of the Parent Guarantor under this Agreement and the termination of
this Agreement in accordance with the terms and provisions hereof, no Supporting
Guarantor shall have any rights, by operation of law or otherwise, upon making
any payment under this section to be subrogated to the rights of the payee
against the Parent Guarantor with respect to such payment or otherwise to be
reimbursed, indemnified or exonerated by the Parent Guarantor in respect
thereof.
19.6. Amounts Due Even if Acceleration of Guaranteed Obligations
Stayed. In the event that acceleration of the time for payment of any amount
payable by the Parent Guarantor under this Agreement is stayed upon insolvency,
bankruptcy or reorganization of the Parent Guarantor, all such amounts otherwise
subject to acceleration under the terms of this Agreement shall nonetheless by
payable by the Supporting Guarantors under this section forthwith on demand by
the Administrative Agent.
19.7. Contribution. Each Supporting Guarantor, in addition to the
subrogation rights it shall have against the Parent Guarantor under applicable
law as a result of any payment it makes hereunder, shall also have a right of
contribution against all other Supporting Guarantors in respect of any such
payment pro rata among same based on their respective net fair value as
enterprises, provided any such right of contribution shall be subject and
subordinate to the prior payment in full of the obligations of the Parent
Guarantor under this Agreement (and such Supporting Guarantor's obligations in
respect thereof).
19.8. Deferral of Enforcement; Pro Rata Sharing, etc. The guaranty
obligations of the Supporting Guarantors under this section 19 shall not be
enforced unless one or more Significant Credit Events shall have occurred and be
continuing.
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19.9. Certain Definitions. As used in this section 19:
"Corresponding Vencor Guaranty" means any guaranty or
guaranties entered into by the Supporting Guarantors, as the same may
be amended or modified from time to time, in connection with and as a
guaranty of obligations under the Parent Guarantor's 1995 Credit
Agreement, which guaranty or guaranties contain substantially identical
provisions to those contained in section 19.8 through section 19.13.
"Significant Credit Event" means:
(i) the Parent Guarantor, any Supporting Guarantor or the
Borrower commences 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
consents 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 makes a general assignment
for the benefit of creditors, or fails generally to pay its debts
as they become due, or takes any corporate action to authorize
any of the foregoing; or
(ii) an involuntary case or other proceeding is commenced
against the Parent Guarantor, any Supporting Guarantor or the
Borrower 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 the Parent Guarantor,
any Supporting Guarantor or the Borrower under the Federal
bankruptcy laws as now or hereafter in effect; or
(iii) all amounts outstanding under either the Credit
Agreement or the 1995 Credit Agreement shall have become due
and payable upon the final maturity thereof or by reason of
acceleration; or
(iv) the Parent Guarantor's Required Banks (as such term is
defined in the 1995 Credit Agreement) have signed and delivered
to the Administrative Agent a certificate stating that (x) an
event of default under the 1995 Credit Agreement has occurred and
is continuing, and (y) the Parent Guarantor's Required Banks have
determined that the credit facility provided under the 1995
Credit Agreement is in a "workout"; or
(v) the Borrower's Required Lenders (as such term is defined
in the Credit Agreement) have signed and delivered to the
Administrative Agent under the Parent Guarantor's 1995 Credit
Agreement a certificate stating that (x) an event of default
under the Borrower's Credit Agreement has occurred and is
continuing, and (y) the Borrower's Required Lenders have
determined that the credit facility provided under the Borrower's
Credit Agreement is in a "workout".
19.10. Fraudulent Transfer Laws. It is the desire and intent of each
Supporting Guarantor and the Creditors that this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If and to the extent that the
obligations of any Supporting Guarantor under this Agreement would, in the
absence of this sentence, be adjudicated to be invalid or unenforceable because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, then the amount of such Supporting Guarantor's liability hereunder in
respect of the obligations of the Parent Guarantor guaranteed hereunder shall be
deemed to be reduced ab initio to that maximum amount which would be permitted
without causing such Supporting Guarantor's obligations hereunder to be so
invalidated; provided that if, at the time of enforcement of this Agreement
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against any Supporting Guarantor or any Corresponding Vencor Guaranty against
any Supporting Guarantor which is a party thereto, the amount payable under this
Agreement by such Supporting Guarantor or the Corresponding Vencor Guaranty of
such Supporting Guarantor is limited by this section 19.10 or the corresponding
provision of the Corresponding Vencor Guaranty, as the case may be, then the
amounts payable by such Supporting Guarantor under both this Agreement and the
Corresponding Vencor Guaranty shall be limited so that the maximum amount
payable under each of this Agreement and the Corresponding Vencor Guaranty is
proportional to the respective aggregate amount guaranteed under this Agreement
or such Corresponding Vencor Guaranty (without regard to the limits under this
section 19.10 or the substantially identical provision of the Corresponding
Vencor Guaranty), as the case may be, when the Significant Credit Event that
exists at the time of enforcement occurred (or if two or more Significant Credit
Events exist at the time of enforcement, when the earlier of such Significant
Credit Events occurred).
19.11. Pro Rata Payments. Each Supporting Guarantor agrees that, if it
makes any payments upon enforcement of either this Agreement or the
Corresponding Vencor Guaranty of such Supporting Guarantor, it will make a pro
rata payment under the other of this Agreement or such Corresponding Vencor
Guaranty so that (i) the payments under this Agreement and the Corresponding
Vencor Guaranty of such Supporting Guarantor are concurrent and (ii) the total
amount paid by such Supporting Guarantor under each of this Agreement and its
Corresponding Vencor Guaranty is proportional to the aggregate amount guaranteed
under this Agreement or such Corresponding Vencor Guaranty, as the case may be
(without regard to the limits under section 19.10 or the substantially identical
provisions of the Corresponding Vencor Guaranty) when the Significant Credit
Event that exists at the time of enforcement occurred (or if two or more
Significant Credit Events exist at the time of enforcement, when the earlier of
such Significant Credit Events occurred).
19.12. Provisions Intended to Benefit. The provisions of sections 19.8
through 19.13 are intended for the benefit of the beneficiaries of any
Corresponding Vencor Guaranty and shall be directly enforceable by them.
19.13. Corresponding Vencor Guaranty. Each Corresponding Vencor
Guaranty contains provisions substantially identical to the provisions of
sections 19.8 through this section 19.13, which provisions are intended for the
benefit of the beneficiaries of this Agreement and shall be enforceable directly
by them. No Supporting Guarantor will permit such provisions to be terminated,
amended, waived or otherwise changed without the prior written consent of the
Required Lenders.
20. Survival of Agreements, etc. All agreements, representations and
warranties of the Borrower and the Parent Guarantor hereunder shall be deemed to
have been relied upon by the Administrative Agent and the Creditors and shall
survive the execution and delivery of this Agreement, the making of the Loans,
the issue and delivery of the Notes, any disposition thereof by any holder
thereof, and any investigation at any time made by the Administrative Agent or
any Creditor or on its or their behalf. All statements contained in any
certificate or other document delivered to the Administrative Agent or any
Creditor by or on behalf of the Borrower or the Parent Guarantor pursuant hereto
or pursuant to the Credit Agreement or any other Credit Document or otherwise
specifically for use in connection with the transactions contemplated thereby
shall constitute representations and warranties by the Parent Guarantor
hereunder, made as of the respective dates specified therein or, if no date is
specified, as of the respective dates furnished to the Administrative Agent or
any Creditor. Certain sections of this Agreement provide expressly that the
agreements and obligations of the Parent Guarantor thereunder survive
termination of this Agreement.
21. Termination. Upon the earlier of (i) reduction of the Maximum
Guaranteed Amount to zero as provided in section 2.2 and satisfaction by the
Parent Guarantor of any then outstanding demands for payment under section 2.1
hereof, (ii) the termination of this Agreement in accordance with section 2.3
hereof, and (iii) the date after which the Total Commitment and all Designated
Interest Rate Agreements shall have been terminated, no DPP Revolving Loans
shall be outstanding, no Allocated DPP Letter of Credit Outstandings shall
exist, the payment (or the making of provision satisfactory to the
Administrative Agent for the payment) of all other amounts included in the
Required Payments, and no claims in respect of any guaranty payment due under
this Agreement shall be outstanding against the Parent Guarantor or any
Supporting Guarantor hereunder, then this Agreement shall terminate and the
Administrative Agent, at the request and expense of the Parent Guarantor or the
Borrower, will execute and deliver to the Borrower and the Parent Guarantor a
proper instrument or instruments acknowledging the satisfaction and termination
of this Agreement, and will duly assign, transfer and deliver to the Borrower or
as the Borrower may direct all of the rights and moneys at the time held by the
Administrative Agent hereunder for which there has been no provision for
application
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to the Notes, any other amounts included in the Required Payments or the
performance of any obligations guaranteed pursuant to section 2.1. Certain
sections of this Agreement provide expressly that the agreements and obligations
of the Parent Guarantor thereunder survive termination of this Agreement.
22. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given when delivered or mailed or
registered or certified first class mail, postage prepaid, addressed (i) if to
the Administrative Agent, at the address of the Administrative Agent specified
in or pursuant to the Credit Agreement, or (ii) if to any Lender, at its address
specified in or pursuant to the Credit Agreement, or (iii) if to any other
Creditor, at such address as such Creditor shall have furnished to the Borrower
and the Administrative Agent in writing, or (iv) if to the Borrower, at the
address of the Borrower specified in or pursuant to the Credit Agreement, or (v)
if to the Parent Guarantor, at 3300 Providian Center, 400 West Market Street,
Louisville, Kentucky 40202, attention: Rich Lechleiter, Vice President Finance
(facsimile: (502) 596-4099), or at such other address as the Parent Guarantor
shall have furnished to the Administrative Agent and each Creditor in writing,
or (vi) if to any Supporting Guarantor, to it in care of the Parent Guarantor,
at the address of the Parent Guarantor provided herein.
23. Net Payments. (a) All payments made by the Parent Guarantor
hereunder will be made without setoff, counterclaim or other defense. All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding, except as provided in the second succeeding
sentence, any tax, imposed on or measured by the net income or net profits of a
Creditor pursuant to the laws of the jurisdiction under which such Creditor is
organized or the jurisdiction in which the principal office or applicable
lending office of such Creditor is located or any subdivision thereof or
therein) and all interest, penalties or similar liabilities with respect to such
non excluded taxes, levies imposts, duties, fees, assessments or other charges
(all such nonexcluded taxes levies, imposts, duties, fees assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so levied
or imposed, the Parent Guarantor agrees to pay the full amount of such Taxes and
such additional amounts as may be necessary so that every payment of all amounts
due hereunder, after withholding or deduction for or on account of any Taxes
will not be less than the amount provided for herein. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence, the Parent Guarantor
agrees to reimburse each Creditor, upon the written request of such Creditor for
taxes imposed on or measured by the net income or profits of such Creditor
pursuant to the laws of the jurisdiction in which such Creditor is organized or
in which the principal office or applicable lending office of such Creditor is
located or under the laws of any political subdivision or taxing authority of
any such jurisdiction in which the principal office or applicable lending office
of such Creditor is located and for any withholding of income or similar taxes
imposed by the United States of America as such Creditor shall determine are
payable by, or withheld from, such Creditor in respect of such amounts so paid
to or on behalf of such Creditor pursuant to the preceding sentence and in
respect of any amounts paid to or on behalf of such Creditor pursuant to this
sentence. The Parent Guarantor will furnish to the Administrative Agent within
45 days after the date the payment of any Taxes, or any withholding or deduction
on account thereof, is due pursuant to applicable law certified copies of tax
receipts, or other evidence satisfactory to the Creditor, evidencing such
payment by the Parent Guarantor. The Parent Guarantor will indemnify and hold
harmless the Administrative Agent and each Creditor, and reimburse the
Administrative Agent or such Creditor upon its written request, for the amount
of any Taxes so levied or imposed and paid or withheld by such Creditor.
(b) Without prejudice to the survival of any other agreement of the
Parent Guarantor hereunder, the agreements and obligations of the Parent
Guarantor contained in this section shall survive the payment in full of the
principal of and interest on the Notes and termination of this Agreement.
24. Costs and Expenses of Enforcement, etc. The Parent Guarantor
will pay on demand all costs and expenses (including counsel fees and expenses)
in connection with the enforcement (whether through negotiations of proposed
modifications of any of the Credit Documents, legal proceedings or otherwise)
against the Parent Guarantor or any Supporting Guarantor of this Agreement,
including, without limitation, counsel fees and expenses in connection with the
enforcement of rights under this section. Without prejudice to the survival of
any other agreement of the Parent Guarantor hereunder, the agreements and
obligations of the Parent Guarantor contained in this section shall survive the
payment in full of the principal of and interest on the Notes and termination of
this Agreement.
19
<PAGE>
25. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request of the
Required Lenders specified by section 9.2 of the Credit Agreement to authorize
the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of section 9.2 of the Credit Agreement, or the acceleration of the
Notes upon the occurrence of an Event of Default specified in section 9.1(e) of
the Credit Agreement, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Parent Guarantor or any Supporting Guarantor
against any and all of the obligations of the Parent Guarantor or any such
Supporting Guarantor now or hereafter existing under this Agreement, whether or
not such Lender shall have made any demand under the Credit Agreement or any
other Credit Document and although such obligations may be unmatured. Each
Lender will promptly notify the Parent Guarantor or any applicable Supporting
Guarantor, as the case may be, after any such set-off and application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
26. Interest on Overdue Amounts. If any payment required to be made
by the Parent Guarantor or any Supporting Guarantor hereunder is not paid when
due, the Parent Guarantor or the applicable Supporting Guarantor, as the case
may be, will pay interest, on demand, on the overdue amount from the due date to
the date the same is paid in full at a rate per annum equal to the Base Rate in
effect from time to time under the Credit Agreement plus the sum of (i) 2% per
annum and (ii) the Applicable DPP Base Rate Margin then in effect for DPP
Revolving Loans which are Base Rate Loans.
27. Application of Guaranty Payments, etc. (a) The payments by the
Parent Guarantor under section 2.1 and by any Supporting Guarantor under section
19, and any amounts recovered by the Administrative Agent in respect of any such
payment obligations in connection with any enforcement of this Agreement, shall
be applied by the Administrative Agent as follows:
(i) first, to the payment or reimbursement of all costs and
expenses of the Administrative Agent in enforcing payment thereof, to
the extent not theretofore reimbursed by the Parent Guarantor
hereunder;
(ii) second, to the extent proceeds remain after the
application pursuant to preceding clause (i), an amount equal to the
outstanding Required Payments to the Creditors shall be paid to the
Creditors as provided in section 27(c) with each Creditor receiving an
amount equal to its outstanding Required Payments or, if the proceeds
are insufficient to pay in full all such Required Payments, its Pro
Rata Share of the amount remaining to be distributed; and
(iii) third, to the extent remaining after the application
pursuant to the preceding clauses (i) and (ii) or following the
termination of this Agreement pursuant to section 21 hereof, to the
Parent Guarantor or the Supporting Guarantors, as applicable, or to
whomever may be lawfully entitled to receive such payment.
(b) For purposes of this Agreement, "Pro Rata Share" shall mean, when
calculating a Creditor's portion of any distribution or amount, the amount
(expressed as a percentage) equal to a fraction the numerator of which is the
then outstanding amount of the relevant Required Payments owed such Creditor and
the denominator of which is the then outstanding amount of all Required
Payments.
(c) All payments required to be made to the (i) Lenders hereunder shall
be made to the Administrative Agent for the account of the respective Lenders
and (ii) Interest Rate Creditors hereunder shall be made to the paying agent
under the applicable Designated Interest Rate Agreement or, in the case of
Designated Interest Rate Agreements without a paying agent, directly to the
applicable Interest Rate Creditor.
(d) For purposes of applying payments received in accordance with this
section 27, the Administrative Agent shall be entitled to rely upon any Interest
Rate Creditor for determination (which each Interest Rate Creditor agrees to
provide upon request to the Administrative Agent) of the outstanding Interest
Rate Obligations owed to such Interest Rate Creditor. Unless it has actual
knowledge (including by way of written notice from a Creditor) to the contrary,
the
20
<PAGE>
Administrative Agent, in acting hereunder, shall be entitled to assume that no
Designated Interest Rate Agreements or Required Payments with respect thereto
are in existence.
28. Jury Trial Waiver. The Parent Guarantor, the Borrower, each
Supporting Guarantor and the Administrative Agent (on behalf of itself and the
Creditors, by its acceptance hereof) each hereby irrevocably waives all right to
a trial by jury in any action, proceeding or counterclaim arising out of or
relating to this Agreement, the other Credit Documents, any other agreements or
instruments referred to herein, or the transactions contemplated hereby or
thereby.
29. Waiver; Amendment. (a) None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Administrative Agent (with the consent of
the Required Lenders or, to the extent required by section 12.12 of the Credit
Agreement, all of the Lenders), provided, however, that no such change, waiver,
modification or variance shall be made to section 27 hereof or this section 29
without the consent of each Creditor adversely affected thereby, provided
further that any change, waiver, modification or variance affecting the rights
and benefits of a single Class of Creditors (and not all Creditors in a like or
similar manner) shall require the written consent of the Requisite Creditors of
such Class of Secured Creditors. For the purpose of this Agreement, the term
"Class" shall mean each class of Creditors, i.e., whether (x) the Lenders as
holders of the Required Payments in respect of the Credit Documents or (y) the
Interest Rate Creditors as holders of the Required Payments in respect of the
Designated Interest Rate Agreements. For the purpose of this Agreement, the term
"Requisite Creditors" of any Class shall mean each of (x) with respect to the
Lenders as holders of the Required Payments in respect of the Credit Documents,
the Required Lenders and (y) with respect to the Interest Rate Creditors as
holders of the Required Payments in respect of the Designated Interest Rate
Agreements, the holders of 51% of all obligations constituting Required Payments
outstanding from time to time under the Designated Interest Rate Agreements.
30. Kentucky Notice of Guaranteed Amount and Termination Date. For
purposes of Kentucky Revised Statutes ss. 371.065, it is hereby declared and
agreed, without, however, increasing, expanding, extending or otherwise changing
or affecting any of the rights or obligations of the Parent Guarantor or any
Supporting Guarantor under the other provisions of this Agreement, that the
maximum principal amount of indebtedness guaranteed hereunder, exclusive of
interest, fees, and charges and costs of collecting guaranteed indebtedness, is
$100,000,000, and that the termination date of the guaranty obligations
hereunder is December 31, 2003.
31. Miscellaneous. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. If any term or provision of this Agreement or
any application thereof shall be held to be invalid, illegal or unenforceable,
the remainder of this Agreement and any other application of such term or
provision shall not be affected thereby. Any term or provision of this Agreement
may be amended, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such amendment, waiver,
discharge or termination is sought, entered into as provided in section 29. No
Lender or other Creditor shall have any power to amend, discharge or terminate
this Agreement, all such actions being within the powers of the Administrative
Agent (acting on behalf of the Lenders and other Creditors pursuant to the terms
and provisions of the Credit Agreement and section 30 hereof). No waiver by any
Creditor, as such, of any obligations of the Borrower or the Parent Guarantor or
any Supporting Guarantor shall be binding on any other Creditor or the
Administrative Agent. No delay or failure on the part of the Administrative
Agent, any Lender or any other Creditor to exercise any power or right hereunder
shall operate as a waiver thereof, nor as an acquiesence in any default or
breach of any term or provision of this Agreement, nor shall any single or
partial exercise of any power or right preclude any other or further exercise
thereof, or the exercise of any other power or right. The Parent Guarantor and
each Supporting Guarantor each hereby approves each and every determination, in
the absence of manifest error, of amounts payable by the Borrower under the
Credit Agreement, the Notes, the other Credit Documents and any Designated
Interest Rate Agreement, whether made by the Administrative Agent, any Lender,
any other Creditor or by a third person used for the purpose of making such
determination. Each and every Default and Event of Default under the Credit
Agreement and each and every default in payment or performance of any
obligation, covenant or agreement of the Borrower under any Credit Document or
Designated Interest Rate Agreement, shall give rise to a separate claim and
cause of action hereunder, and separate claims or suits may be made and brought,
as the case may be, hereunder as each such Default, Event of Default or default
occurs. The obligations of the Parent Guarantor and the Supporting Guarantors
set forth in this Agreement constitute full recourse obligations of the Parent
Guarantor and the Supporting Guarantors. The powers,
21
<PAGE>
rights and remedies herein provided or otherwise available under applicable
law are cumulative, may be exercised singly or cumulatively, and are not
exclusive of any other rights or remedies provided by law. The Lenders and any
other Creditor are third party beneficiaries of this Agreement, but any legal
proceedings or other enforcement actions on behalf of any Lender or other
Creditor against the Parent Guarantor or any Supporting Guarantor with respect
to this Agreement shall be undertaken and maintained by the Administrative
Agent, acting on behalf and for the ratable benefit of the Administrative Agent,
the Lenders and any other Creditors, with the proceeds of any such proceedings
or enforcement actions to be applied as provided section 27 hereof and after
such application as provided in the Credit Agreement or the applicable
Designated Interest Rate Agreement, as the case may be. This Agreement
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with and governed by the laws of
the Commonwealth of Kentucky. The headings in this Agreement are for
purposes of reference only and shall not limit or define the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
[The balance of this page is intentionally blank.]
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATRIA COMMUNITIES, INC.
By: /s/ J. Timothy Wesley
-------------------------------
Chief Financial Officer
VENCOR, INC.
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Vice President
FIRST HEALTHCARE CORPORATION
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Vice President
NORTHWEST HEALTHCARE, INC.
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Vice President
MEDISAVE PHARMACIES, INC.
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Vice President
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Vice President
23
<PAGE>
NATIONWIDE CARE, INC.
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Vice President
PNC BANK, NATIONAL ASSOCIATION, as
Administrative Agent
By: /s/ Edward J. Weisto
-------------------------------
Vice President
24
<PAGE>
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss):
Income from operations............................. $48,005 $ 8,363 $86,139
Preferred stock dividend requirements.............. - (5,280) (7,574)
Gain on preferred stock redemption................. - 10,176 -
Other.............................................. - - (179)
------- -------- -------
Income from operations available to common
stockholders...................................... 48,005 13,259 78,386
Extraordinary loss on extinguishment of debt, net
of income tax benefit............................. - (23,252) (241)
------- -------- -------
Income (loss) available to common stockholders... $48,005 $ (9,993) $78,145
======= ======== =======
Shares used in the computation:
Weighted average common shares outstanding......... 69,704 61,196 55,522
Dilutive effect of common stock equivalents........ 998 1,122 1,515
------- -------- -------
Shares used in computing earnings (loss) per
common and common equivalent share.............. 70,702 62,318 57,037
======= ======== =======
Primary earnings (loss) per common and common
equivalent share:
Income from operations............................. $ 0.68 $ 0.21 $ 1.37
Extraordinary loss on extinguishment of debt....... - (0.37) -
------- -------- -------
Net income (loss)................................ $ 0.68 $ (0.16) $ 1.37
======= ======== =======
</TABLE>
<PAGE>
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
Earnings (loss):
Income from operations available to common
stockholders...................................... $48,005 $ 13,259 $78,386
Interest addback on convertible securities, net of
income taxes...................................... - 7,380 10,127
------- -------- -------
Adjusted income from operations available to common
stockholders...................................... 48,005 20,639 88,513
Extraordinary loss on extinguishment of debt, net
of income tax benefit............................. - (23,252) (241)
------- -------- -------
Income (loss) available to common stockholders.... $48,005 $ (2,613) $88,272
======= ======== =======
Shares used in the computation:
Weighted average common shares outstanding......... 69,704 61,196 55,522
Dilutive effect of common stock equivalents and
other dilutive securities (a)..................... 998 10,771 13,492
------- -------- -------
Shares used in computing earnings (loss) per
common
and common equivalent share...................... 70,702 71,967 69,014
======= ======== =======
Fully diluted earnings (loss) per common and common
equivalent share:
Income from operations............................. $ 0.68 $ 0.29 $ 1.28
Extraordinary loss on extinguishment of debt....... - (0.32) -
------- -------- -------
Net income (loss)................................. $ 0.68 $ (0.03) $ 1.28
======= ======== =======
</TABLE>
- --------
(a) During 1995 all convertible debt securities were redeemed in exchange for
cash or converted into Vencor common stock. Accordingly, the computation
of fully diluted earnings per common share assumes that the equivalent
number of common shares underlying such debt securities were outstanding
during the entire year even though the result thereof is antidilutive.
<PAGE>
EXHIBIT 13.1
MARKET PRICES AND DIVIDEND INFORMATION
Vencor has approximately 31,000 shareholders based on the number of record
holders of the Company's common stock and an estimate of the number of
individual participants represented by security position listings. No cash
dividends have been paid. The prices in the table below represent the high and
low sale prices for Vencor common stock as reported by the New York Stock
Exchange. All prices have been adjusted and rounded to the nearest one-eighth to
reflect prior stock splits.
<TABLE>
<CAPTION>
1996 1995
----------------------------------
High Low High Low
----------------------------------
<S> <C> <C> <C> <C>
First Quarter $39-7/8 $31-1/2 $37 $27-1/8
Second Quarter $35 $28-1/8 $38 $28-1/2
Third Quarter $34-1/2 $25-1/2 $36-1/8 $28-1/4
Fourth Quarter $33-1/4 $27-1/2 $33-3/4 $26
</TABLE>
<PAGE>
Exhibit 21
REGISTRANT'S SUBSIDIARIES
Vencor, Inc., a Delaware corporation
VCI Specialty Services, Inc., a Delaware corporation
Vencor Properties, Inc., a Delaware corporation
Vencor Investments, Inc., a Delaware corporation
Vencor Hospitals California, Inc., a Delaware corporation
Vencor Hospitals South, Inc., a Delaware corporation
Ventech Systems, Inc., a Delaware corporation
Vencor Hospitals East, Inc., a Delaware corporation
Hahnemann Hospital, Inc., a Delaware corporation
Vencor Hospitals Illinois, Inc., a Delaware corporation
Vencor Kentucky, Inc., a Delaware corporation
Vencare, Inc., a Delaware corporation
Vencare Hospice, Inc., a Kentucky corporation
Atria Communities, Inc., a Delaware corporation
Hillhaven Properties Ltd., an Oregon corporation
Fairview Living Centers, Inc., an Oregon corporation
Twenty-Nine Hundred Corporation, a Florida corporation
Phillippe Enterprises, Inc., an Indiana corporation
Castle Gardens Retirement Center, a Colorado general partnership
Evergreen Woods, Ltd., a Florida limited partnership
Hillcrest Retirement Center, Ltd., an Oregon limited partnership
<PAGE>
Lantana Partners, Ltd., a Florida limited partnership
San Marcos Retirement Village, a California general partnership
Sandy Retirement Center Limited Partnership, an Oregon limited
partnership
Topeka Retirement Center, Ltd. Limited Partnership, a Missouri
limited partnership
Tucson Retirement Center Limited Partnership, an Oregon limited
partnership
Twenty-Nine Hundred Associates, Ltd., a Florida limited partnership
Woodhaven Partners, Ltd., a Florida limited partnership
Vencor Home Health Services, Inc., a Delaware corporation
Healthcare Rehabilitation, a California corporation
First Healthcare Corporation, a Delaware corporation
Hillhaven of Central Florida, Inc., a Delaware corporation
Northwest Health Care, Inc., an Idaho corporation
Pasatiempo Development Corp., a California corporation
Hillhaven Home Care, Inc., a Delaware corporation
Ledgewood Health Care Corporation, a Massachusetts corporation*
Cornerstone Insurance Company, a Cayman Islands corporation
Brim of Massachusetts, Inc., a Massachusetts corporation
Medisave Pharmacies, Inc., a Delaware corporation
Medisave of Florida, Inc., a Delaware corporation
Medisave of Tennessee, Inc., a Delaware corporation
American X-Rays, Inc., a Louisiana corporation
First Rehab, Inc., a Delaware corporation
2
<PAGE>
Advanced Infusion Systems, Inc., a California corporation
Nationwide Care, Inc., an Indiana corporation
Meadowvale Skilled Care Center, Inc., a Delaware corporation
Vencor Hospitals Texas, Ltd., a Texas Limited Partnership
Hillhaven Community Health Partnership, a Florida General Partnership*
Windsor Woods Nursing Home Partnership, a Washington General Partnership
St. George Nursing Home Limited Partnership, an Oregon Limited Partnership
Bartlesville Nursing Home Partnership, an Oregon General Partnership*
Carrollwood Care Center, a Tennessee General Partnership
Foothill Nursing Company Partnership, a California General Partnership*
San Marcos Nursing Home Partnership, a California General Partnership*
Fox Hill Village Partnership, a Massachusetts General Partnership*
Starr Farm Partnership, a Vermont General Partnership*
New Pond Village Associates, a Massachusetts General Partnership
Hillhaven-MSC Partnership, a California General Partnership*
Stockton Health Care Center Limited Partnership, an Oregon Limited Partnership
MediLife Pharmacy Network Partnership, a Tennessee General Partnership*
Hillhaven/Indiana Partnership, a Washington General Partnership
Hillhaven/Westfield Partnership, a Washington General Partnership
Pharmaceutical Infusion Therapy, a California General Partnership**
CPS-Sacramento, a California General Partnership***
California Respiratory Care Partnership, a California general partnership**
3
<PAGE>
Visiting Nurse Advanced Infusion Systems - Anaheim, a California general
partnership*
Visiting Nurse Advanced Infusion Systems - Colton, a California general
partnership**
Visiting Nurse Advanced Infusion Systems - Newbury Park, a California general
partnership**
* Only fifty percent (50%) is owned by one of the Registrant's subsidiaries
** Only fifty-one percent (51%) is owned by one of the Registrant's
subsidiaries
*** Only sixty percent (60%) is owned by one of the Registrant's subsidiaries
4
<PAGE>
Exhibit 23
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-38188) pertaining to the Vencor, Inc. Retirement Savings Plan;
in the Registration Statement (Form S-8 No. 33-34191) pertaining to the Vencor,
Inc. 1987 Incentive Compensation Program; in the Registration Statement (Form S-
8 No. 33-40949) pertaining to the Vencor, Inc. 1987 Incentive Compensation
Program-additional shares; in the Registration Statement (Form S-8 No. 33-34192)
pertaining to the Vencor, Inc. 1987 Stock Option Plan for Nonemployee
Directors; in the Registration Statement (Form S-8 No. 33-66774) pertaining to
the Vencor, Inc. Nonemployee Directors Deferred Compensation Plan; in the
Registration Statement (Form S-8 No. 33-81988) pertaining to the Vencor, Inc.
1987 Incentive Compensation Program-additional shares; and in the Registration
Statement (Form S-3 No. 33-71910) pertaining to shares to be issued in
connection with acquisitions, of our report dated February 17, 1997, with
respect to the consolidated financial statements and schedule of Vencor, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
Louisville, Kentucky
March 24, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM VENCOR, INC.'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 112,466
<SECURITIES> 0
<RECEIVABLES> 420,758
<ALLOWANCES> (23,915)
<INVENTORY> 24,939
<CURRENT-ASSETS> 661,133
<PP&E> 1,609,770
<DEPRECIATION> (416,608)
<TOTAL-ASSETS> 1,968,856
<CURRENT-LIABILITIES> 341,010
<BONDS> 710,507
0
0
<COMMON> 18,154
<OTHER-SE> 778,937
<TOTAL-LIABILITY-AND-EQUITY> 1,968,856
<SALES> 0
<TOTAL-REVENUES> 2,577,783
<CGS> 0
<TOTAL-COSTS> 1,786,816
<OTHER-EXPENSES> 438,473
<LOSS-PROVISION> 10,862
<INTEREST-EXPENSE> 45,922
<INCOME-PRETAX> 83,180
<INCOME-TAX> 35,175
<INCOME-CONTINUING> 48,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,005
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
</TABLE>
