Exhibit 99.2
WAIVER NO. 2
WAIVER NO. 2 (this "Waiver No. 2") dated as of March 31, 1999, under the
$1,000,000,000 Credit Agreement dated as of April 29, 1998 (as heretofore
amended, the "Credit Agreement") among VENCOR OPERATING, INC., VENCOR, INC.
(formerly named Vencor Healthcare, Inc.), the LENDERS, SWINGLINE BANK AND LC
ISSUING BANKS party thereto, the SENIOR MANAGING AGENTS, MANAGING AGENTS AND CO-
AGENTS party thereto and XXXXXX GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent and Collateral Agent, and NATIONSBANK, N.A., as
Administrative Agent.
W I T N E S S E T H:
WHEREAS, Vencor has advised the Lender Parties that due to its recent
results of operations and current financial condition it needs an extension of
certain waivers under the Credit Agreement granted in the Waiver dated January
29, 1999 by the Lenders party thereto (hereinafter "Waiver No. 1"), as well as
certain additional waivers and amendments, and, subject to the terms and
conditions hereof, the Lenders party hereto are willing to extend such waivers
under the Credit Agreement, grant such additional waivers and make such
amendments, all under the terms more fully set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise specifically defined herein,
each term used herein that is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. As used herein, the
following additional terms have the following meanings:
"Freeze Period" means any period during which:
(a) any Vencor Company has failed to pay any rent or other sum payable
to a Ventas Company under any Master Lease Agreement when the same became due
and payable and any Ventas Company has given any Vencor Company a notice
pursuant to Section 16.1(b) of such Master Lease Agreement demanding payment
thereof, and by 11:30 A.M. on the fifth day after such notice none of the
following circumstances exists: (i) such rent or other sum has been paid in
full, (ii) a stay of any termination or notice of termination of such Master
Lease Agreement is in effect by order of a court or arbitral authority or (iii)
the relevant Ventas Company has agreed in writing to withdraw its demand for
payment or to a standstill or other suspension of its rights to give a notice of
termination of such Master Lease Agreement, provided that if a Freeze Period
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does not exist on account of eit her clause (ii) or (iii), a Freeze Period shall
nonetheless subsequently and immediately exist if (A) any such stay expires or
is withdrawn or (B) any such withdrawal, standstill or other suspension by its
terms ceases to be in effect or otherwise terminates, as the case may be; or
(b) the obligor of any Medicaid Receivable, Medicare Receivable or VA
Receivable (or any agent thereof) collects a payment of any PPS Overpayment
Amount by exercising a right of set-off or recoupment (or any similar right)
against its obligations on account of any such Receivable or, on account of any
demand by such an obligor or agent for payment by a date certain of any PPS
Overpayment Amount (after giving effect to any negotiations with such obligor or
agent prior to such date certain), any Vencor Company pays or will be, on the
day following any date of determination, obligated to pay any PPS Overpayment
Amount, and the cumulative amount of all PPS Overpayment Amounts so collected by
exercise of the right of set-off, recoupment or similar right from or paid by
the Vencor Companies, in the aggregate, or that the Vencor Companies, in the
aggregate, are obligated to pay during the period from March 10, 1999 to the
date of determination (without duplication) exceeds $10,000,000.
"Lease Accounting Issue" means the circumstance that under generally
accepted accounting principles, the Master Lease Agreements should have been
treated as capital leases in the preparation of Vencor's financial statements as
a consequence of the provisions in Section 16.4 thereof.
"March 10 Meeting Materials" means the written materials prepared by or on
behalf of Vencor and distributed to the Persons attending the lender meeting
held by Vencor on March 10, 1999 at such meeting.
"PPS Overpayment Amount" means any amount that constitutes a liability of a
Vencor Company to a federal or state governmental authority on account of
hospital and skilled nursing facility PIP overpayments made to it, as described
in the March 10 Meeting Materials (but including amounts accrued after December
31, 1998).
Section 2. Certain Waivers. (a) The Lenders hereby waive (including for
purposes of Section 9.02 of the Credit Agreement but, in the case of clauses
(iv) and (v), subject to Section 9) any Default that:
(i) may have occurred or occurs as a result of Vencor failing to be in
compliance with the provisions of Article 6 of the Credit Agreement;
(ii) occurs as a result of any Vencor Company failing to pay any rent
or other sum payable to any Ventas Company under or pursuant to the terms
of any Master Lease Agreement when the same becomes due and payable;
(iii) occurs as a result of the Borrower's failure to make the
interest payment on the 1998 Subordinated Notes due on May 1, 1999;
(iv) may have occurred as a result of the Borrower at any time prior
to the date hereof having made or been deemed to have made the
representation and warranty set forth in Section 4.05(d) of the Credit
Agreement without qualification by reference to the
circumstances described in the March 10 Meeting Materials and the Lease
Accounting Issue;
(v) may have occurred as a result of the Borrower at any time prior to
the date hereof having made or been deemed to have made the representations
and warranties set forth in Sections 4.05(b), 4.05(c) and 4.14 and such
representations and warranties, in light of the circumstances described in
the March 10 Meeting Materials or the Lease Accounting Issue, having been
incorrect in material respects when made or deemed made; and
(vi) occurs by reason of Vencor failing timely to deliver its 1998
financial statements pursuant to Section 5.01(a) of the Credit Agreement.
The Lenders also agree that any amendment of any Master Lease Agreement to
delete Section 16.4 thereof would not constitute a violation of Section 7.11(b)
of the Credit Agreement.
(b) The foregoing waivers shall be effective solely during the period
ending 5:00 P.M. (Eastern time) on May 28, 1999 (the "Waiver Period").
Section 3. Revolving Credit Facility. (a) The Revolving Credit
Commitments are hereby permanently ratably reduced to an aggregate amount of
$125,000,000.
(b) The maximum Aggregate LC Exposure set forth in Section 2.07(b)(i) of
the Credit Agreement is hereby permanently reduced to $30,000,000. In addition
to the limit on expiry dates set forth in Section 2.07(c) of the Credit
Agreement, no Letter of Credit issued or extended during the Waiver Period shall
have an expiry date when issued or so extended later than one year from the date
of issuance or the expiry date in effect immediately prior to such extension, as
the case may be.
(c) The requirements of clause (d) of Section 3.02 of the Credit
Agreement are hereby waived during the Waiver Period to the limited extent that
(i) the representation and warranty set forth in Section 4.05(d) is not true
solely on account of the circumstances described in the March 10 Meeting
Materials or the Lease Accounting Issue or (ii) the representations and
warranties set forth in Sections 4.05(b), 4.05(c) and 4.14, in light of the
circumstances described in the March 10 Meeting Materials or the Lease
Accounting Issue, are incorrect in material respects, and any representation or
warranty made or deemed made by the Borrower on or after the date hereof during
the Waiver Period pursuant to Section 3.02 of the Credit Agreement shall be
deemed qualified to such extent.
Section 4. Borrowings. (a) The Borrower agrees that during the period
from the date hereof until 5:30 P.M. (New York City time) on May 28, 1999, it
will not give any Notice of Borrowing for Swingline Loans or Revolving Credit
Loans in an amount in excess of its actual cash needs in the ordinary course of
business (net of other sources of funds available or expected to be available to
it, including previous Borrowings) during the three-day period beginning with
the related date of Borrowing, for amounts it actually intends to pay and
determined consistent
with the Borrower's historical cash management practices (it being agreed that
such practices may need to take into account any changes in funds availability
made by the Vencor Companies' cash management banks as a result of Vencor's
current financial condition), as certified in reasonable detail (including a
breakdown by category of the expenses or other amounts to be paid during such
periods) by the Borrower's Chief Financial Officer or Treasurer in a certificate
accompanying such Notice of Borrowing, provided that:
(i) if the amount so determined is less than $1,000,000, such
Borrowing may be in the amount of $1,000,000;
(ii) the Borrower will not make any Borrowing for the purpose of
making payment of any rent or other sum payable to any Ventas Company under
a Master Lease Agreement except on the date a Vencor Company is actually
going to make such payment (as certified by the Borrower's Chief Financial
Officer or Treasurer in the certificate accompanying the related Notice of
Borrowing), and the requirement to make any such payment shall be
disregarded when determining the Borrower's actual cash needs on any day
prior to such day;
(iii) the maximum amount of Swingline Borrowings and Revolving Credit
Borrowings and Aggregate LC Exposure that may be outstanding during the
Waiver Period may not exceed $55,000,000 (determined without including the
Aggregate LC Exposure on account of Letters of Credit outstanding on the
date of Waiver No. 1 (and any extensions thereof)); and
(iii) during any Freeze Period, the Borrower will not give any Notice
of Borrowing or request the issuance of any Additional Letter of Credit
other than for purposes of extending, without any increase in the amount
thereof, any Letter of Credit that was outstanding on the date of Waiver
No. 1 (or any previous extension thereof), and during any Freeze Period
neither the Revolving Credit Lenders nor the Swingline Bank nor any LC
Issuing Bank shall have any obligation to fund any Borrowing or issue any
Additional Letter of Credit (other than as so qualified) (whether or not
the related Notice of Borrowing or notice of issuance was given before or
during such Freeze Period), provided that the foregoing does not affect the
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rights of the Swingline Bank and the obligations of the Revolving Credit
Lenders under Section 2.08(i) of the Credit Agreement.
(b) The Borrower further agrees that:
(i) all Borrowings made pursuant to this Section 4 shall be made and
remain outstanding solely as Base Rate Borrowings;
(ii) any Notice of Borrowing for a Borrowing of Revolving Credit Loans
during the Waiver Period shall be given not later than Noon (Eastern time)
on the date of such Borrowing and any Notice of Swingline Borrowing during
the Wavier Period shall be
given not later than 1:00 P.M. (Eastern time) on the date of the related
Swingline Borrowing;
(iii) during the Waiver Period and at any time thereafter when any
Default has occurred and is continuing, the Applicable Margin, LC Fee Rate
and Commitment Fee Rate shall always be determined as if Level IX were
applicable, regardless of the actual Leverage Ratio;
(iv) during the Waiver Period and at any time thereafter when any
Default has occurred and is continuing, interest on all Base Rate Loans
shall be payable on the 22nd day of each month rather than quarterly and
letter of credit fees payable pursuant to Section 2.07(h) of the Credit
Agreement and commitment fees payable pursuant to Section 2.09 of the
Credit Agreement shall be payable on the 22nd day of each month instead of
quarterly (and on each other date specified in the applicable section); and
(v) during the Waiver Period and at any time thereafter when any
Default has occurred and is continuing, the Borrower may not elect any
Interest Period for a Fixed Rate Loan pursuant to Section 2.06 other than
one month or 30 days, as the case may be.
Section 5. Additional Covenants. Each of Vencor and the Borrower agrees
that, so long as any Lender has any Credit Exposure under the Credit Agreement
or any interest or fee accrued thereunder remains unpaid:
(a) Vencor will deliver the following information to the Administrative
Agent:
(i) notice by facsimile immediately, and in any event on the
same day, if any Vencor Company either pays or fails to pay any rent or
other amount payable to any Ventas Company under any Master Lease Agreement
when due (without regard for any grace period);
(ii) notice by facsimile immediately, and in any event on the
same day, if the Borrower either makes or fails to make any payment of
principal of or interest on the 1998 Subordinated Notes when due (without
regard for any grace period);
(iii) notice by facsimile promptly, and in any event on the same
day, of receipt from any Ventas Company of a notice pursuant to Section
16.1(b) of any Master Lease Agreement demanding payment of any rent or
other sum payable under such Master Lease Agreement that was not paid when
due, together with a copy of such notice;
(iv) notice by facsimile promptly, and in any event on the same
day, of receipt from the trustee under the 1998 Subordinated Note Indenture
or Persons purporting to constitute the holders of at least 25% of the
outstanding 1998 Subordinated Notes of notice accelerating the maturity of
the 1998 Subordinated Notes, together with a copy of such notice, or of
knowledge that Persons purporting to be the holders of 10% or
more of the principal amount of the 1998 Notes have commenced legal
proceedings to collect any unpaid amount of principal of or interest on the
1998 Subordinated Notes;
(v) notice by facsimile promptly, and in any event on the same
day, of receiving notice or otherwise becoming aware that the obligor of
any Medicaid Receivable, Medicare Receivable or VA Receivable (or any agent
thereof) has collected a payment of any PPS Overpayment Amount by
exercising a right of set-off or recoupment (or any similar right) against
its obligations on account of such Receivable or receipt of a demand by
such an obligor or agent for payment by a date certain of any PPS
Overpayment Amount, specifying the amount of such payment so collected or
amount demanded and the cumulative amount (without duplication) of all such
payments made by, or so demanded or so collected from, the Vencor
Companies, in the aggregate, during the period from March 10, 1999 to the
date of such notice and, in any event, of determining that a Freeze Period
exists pursuant to clause (b) of the definition thereof;
(vi) by facsimile no later than 5:00 P.M. (Eastern time) on each
Tuesday (or, if such day is not a Domestic Business Day, the next
succeeding Domestic Business Day), a report setting forth for each day (a
"Census Measurement Day") during the seven-day period ending on the day
preceding such report the 10-day moving average of the daily census in (1)
its hospitals (the "Hospital Daily Census") and (2) its nursing homes (the
"Nursing Homes Daily Census") (all such calculations to be made in a manner
consistent with Vencor's historical practices in compiling and reporting
such data); and
(vii) within 25 days after the end of each month (with sufficient
copies for each Lender) a copy of Vencor's monthly management operating
report (including financial statements) for such month, to be in
substantially the same format and level of detail as the prior period
report delivered to the Agents in connection with the negotiation of this
Waiver No. 2 (with such exclusions and variations as the Agents may
approve).
(b) For each Census Measurement Day, the Hospital Daily Census shall
be no less than 2,500 and the Nursing Home Daily Census shall be no less than
29,000.
Section 6. Miscellaneous Other Provisions. (a) The rights of each Lender
Party pursuant to clause (ii) of Section 12.03(a) of the Credit Agreement shall
be determined without giving effect to this Waiver No. 2 or Waiver No. 1.
Without limiting the generality of Section 12.03(a), the Borrower agrees that it
will pay on demand all statements for fees and expenses (which may include
amounts on account) of any financial, accounting or valuation advisers or
special counsel retained by the Agents or the steering committee for the
Lenders, as well as all out-of-pocket expenses incurred by either Agent or any
member of the steering committee in connection with it acting as such.
(b) The right of the Borrower pursuant to Section 12.06(c) to consent
to any Assignee and the related assignment shall be determined without giving
effect to this Waiver No. 2, and any Assignee and the related assignment shall
always (including any time after expiration
of the Waiver Period) be subject to the consent of the Administrative Agent
regardless of whether any Event of Default has occurred and is continuing.
(c) The amount specified in Section 9.02(k) of the Credit Agreement is
permanently reduced from $20,000,000 to $1,000,000.
Section 7. Lapse of Waiver. Vencor agrees that its failure to comply
with any provision of this Waiver No. 2 (which shall include the failure, for
whatever reason, of the Hospital Daily Census or the Nursing Home Daily Census
to be at or above the applicable level specified in Section 5(b)) shall cause
the waivers granted hereby to cease to be in effect (i) in the case of clauses
(i) through (v) of Section 5(a), if such failure continues for one Domestic
Business Day (without the requirement of any notice from the Administrative
Agent or any Lenders), (ii) in the case of clause (vii) of Section 5(a), if such
failure continues for more than five days after notice from the Administrative
Agent given at the direction of the Required Basic Lenders and (iii) in all
other cases, immediately and without the requirement of any prior notice from or
further action on the part of any Lender or the Agents.
Section 8. Representations Correct; No Default. Vencor represents and
warrants that, except as expressly waived hereby, on and as of the date hereof
(i) the representations and warranties contained in the Credit Agreement are
true as though made on and as of the date hereof and (ii) no Default has
occurred and is continuing.
Section 9. Counterparts; Effectiveness. (a) This waiver may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
(b) This Waiver No. 2 shall become effective as of the date hereof when
the Documentation Agent shall have received duly executed counterparts hereof
signed by Vencor, the Borrower and the Required Basic Lenders (or, in the case
of any Lender as to which an executed counterpart shall not have been received,
the Documentation Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
Lender).
(c) Promptly after this Waiver No. 2 has become effective, the Borrower
shall pay to the Administrative Agent, in immediately available funds, for the
account of each Basic Lender that has evidenced its agreement hereto as provided
in Section 9(b) by 5:00 P.M. (Eastern time) on the later of (i) March 26, 1999
and (ii) the date the Documentation Agent issues a notice to the Basic Lenders
saying that this Waiver No. 2 has become effective, a waiver fee in an amount
equal to 0.10% of the sum of (A) the Revolving Credit Commitment of such Lender
(after giving effect to the reduction in the Revolving Credit Commitments
pursuant to Section 3(a)) and (B) the aggregate outstanding principal amount of
the Facility A Loans of such Lender (as at the opening of business on the date
hereof).
(d) Except as expressly set forth herein, the waivers contained herein
shall not constitute a waiver or amendment of any term or condition of the
Credit Agreement or any other
Financing Document, and all such terms and conditions shall remain in full force
and effect and are hereby ratified and confirmed in all respects. Each of Vencor
and the Borrower understands and accepts the interim nature of the waivers
provided hereby, and agrees that no failure or delay by the Lender Parties, or
any of them, in exercising any right, power or privilege under this Waiver No.
2, Waiver No. 1 or any Financing Document, or any other action taken or not
taken or statement made during the period that Waiver No. 1 was in effect or
this Waiver No. 2 is in effect shall operate as a waiver thereof or obligate any
Lender Party to agree to an extension of the waivers granted hereby or any other
waivers, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise of thereof or of any other
right, power or privilege. The waivers set forth in clauses (iv) and (v) of
Section 2(a) are solely for the purpose of clarifying the ability of the
Borrower during the Waiver Period, subject to the terms hereof, to continue to
have available to it Revolving Credit Loans, Swingline Loans and Additional
Letters of Credit, and do not constitute a waiver, release or other diminution
of any claim, cause of action or other right that any Lender Party may have
against any Person on account of or in any way based on any representation and
warranty made under any Financing Document having been incorrect in any respect
when made or deemed made, all of which claims, causes of action and other rights
are expressly preserved.
Section 10. Governing Law. THIS WAIVER NO. 2 SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 2 to be
duly executed by their respective authorized officers as of the day and year
first above written.
VENCOR OPERATING, INC.
By
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Name:
Title:
VENCOR, INC.
By
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Name:
Title:
LENDERS
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XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK
By
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Name:
Title:
NATIONSBANK, N.A.
By
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Name:
Title:
PARIBAS
By
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Name:
Title:
By
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Name:
Title:
THE BANK OF NOVA SCOTIA
By
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Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By
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Name:
Title:
CREDIT SUISSE FIRST BOSTON
By
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Name:
Title:
By
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Name:
Title:
FLEET NATIONAL BANK
By
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Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By
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Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By
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Name:
Title:
SOCIETE GENERALE
By
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Name:
Title:
TORONTO-DOMINION (TEXAS), INC.
By
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Name:
Title:
WACHOVIA BANK, N.A.
By
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Name:
Title:
ABN AMRO BANK, N.V.
By
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Name:
Title:
By
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Name:
Title:
BANK ONE, KENTUCKY, NA
By
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Name:
Title:
COMERICA BANK
By
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Name:
Title:
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By
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Name:
Title:
By
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Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By
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Name:
Title:
BANK OF AMERICA NT & SA
By
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Name:
Title:
THE BANK OF NEW YORK
By
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Name:
Title:
U.S. BANK
By
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Name:
Title:
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By
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Name:
Title:
By
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Name:
Title:
STAR BANK, N.A.
By
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Name:
Title:
AMSOUTH BANK
By
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Name:
Title:
FIRST AMERICAN NATIONAL BANK
By
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Name:
Title:
FIRST UNION NATIONAL BANK
By
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Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By
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Name:
Title:
BANK OF LOUISVILLE
By
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Name:
Title:
FIFTH THIRD BANK
By
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Name:
Title:
MICHIGAN NATIONAL BANK
By
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Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
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Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By
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Name:
Title:
HIBERNIA NATIONAL BANK
By
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Name:
Title:
THE SUMITOMO BANK LIMITED
By
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Name:
Title:
SUMMIT BANK
By
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Name:
Title:
UNION BANK OF CALIFORNIA
By
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Name:
Title:
XXX XXXXXX SENIOR INCOME TRUST
By
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Name:
Title:
XXX XXXXXX PRIME RATE INCOME
TRUST
By
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Name:
Title:
XXX XXXXXX CLO I, LIMITED
By Xxx Xxxxxx Management Inc., as Collateral
Manager
By
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Name:
Title:
XXX XXXXXX SENIOR FLOATING RATE
FUND
By
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Name:
Title:
FIRST DOMINION FUNDING I
By
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Name:
Title:
