Exhibit 10.4.1
AGREEMENT AND PLAN OF REORGANIZATION
by and between
VENCOR, INC.
and
VENCOR HEALTHCARE, INC.
Dated as of April 30, 1998
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
1.01. General..............................................................1
ARTICLE II.
PRE-DISTRIBUTION TRANSACTIONS; CERTAIN COVENANTS
2.01. Corporate Restructuring Transactions................................11
2.02. Charters and Bylaws.................................................11
(a) Certificate of Incorporation and By-Laws of Vencor...........11
(b) Certificate of Incorporation and By-Laws of
Healthcare Company...........................................12
2.03. Election of Directors of Vencor and Healthcare Company..............12
2.04. Transfer and Assignment of Certain Licenses and Permits.............12
(a) Licenses and Permits Relating to the Real Estate Business....12
(b) Licenses and Permits Relating to the Healthcare Business.....12
2.05. Transfer of Assets and Assumption of Liabilities....................12
2.06. Financing Arrangements..............................................12
2.07. Consents............................................................13
2.08. Other Transactions..................................................13
2.09. Election of Officers................................................13
2.10. Registration Statement..............................................13
2.11. State Securities Laws...............................................13
2.12. Listing Application.................................................13
2.13. Director, Officer and Employee Resignations.........................14
(a) Resignation by Directors and Employees of the
Vencor Group.................................................14
(b) Resignations by Directors and Employees of the
Healthcare Company Group.....................................14
2.14. Ancillary Agreements................................................14
ARTICLE III.
SURVIVAL, ASSUMPTION AND INDEMNIFICATION
3.01. Survival of Agreements..............................................14
3.02. Taxes...............................................................14
3.03. Assumption And Indemnification......................................14
3.04. Procedure For Indemnification.......................................16
ARTICLE IV.
CERTAIN ADDITIONAL COVENANTS
4.01. Further Assurances..................................................18
4.02. Receivables Collection And Other Payments...........................19
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ARTICLE V.
ACCESS TO INFORMATION
5.01. Provision of Corporate Records......................................19
5.02. Access to Information...............................................20
5.03. Litigation Support And Production of Witnesses......................20
5.04. Reimbursement.......................................................20
5.05. Retention of Records................................................21
5.06. Privileged Information..............................................21
5.07. Confidentiality.....................................................22
ARTICLE VI.
DISPUTE RESOLUTION
6.01. Mediation...........................................................23
6.02. Arbitration.........................................................23
ARTICLE VII.
NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS
7.01. No Representations or Warranties; Exceptions........................23
ARTICLE VIII.
MISCELLANEOUS
8.01. Conditions to Obligations...........................................24
8.02. Complete Agreement..................................................25
8.03. Expenses............................................................26
8.04. Governing Law.......................................................26
8.05. Notices.............................................................26
8.06. Amendment And Modification..........................................27
8.07. Successors And Assigns; No Third
Party Beneficiaries..............................................27
8.08. Counterparts........................................................27
8.09. Interpretation......................................................27
8.10. Legal Enforceability................................................27
8.11. References; Construction............................................28
8.12. Termination.........................................................28
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SCHEDULES
Schedule 1.01(a) Development Properties
Schedule 1.01(b) Healthcare Company Subsidiaries
Schedule 1.01(c) Properties
Schedule 1.01(d) Vencor Subsidiaries
EXHIBITS
Exhibit A Form of Corporate Restructuring Transactions
Exhibit B Form of Debt and Cash Allocation Agreement
Exhibit C Form of Development Agreement
Exhibit D Form of Distribution Agreement
Exhibit E Form of Employee Benefits Agreement
Exhibit F Healthcare Company Pro Forma Balance Sheet
Exhibit G Form of Insurance Agreement
Exhibit H Form of Intellectual Property Agreement
Exhibit I Form of Master Lease Agreement
Exhibit J Form of Participation Agreement
Exhibit K Form of Tax Allocation Agreement
Exhibit L Form of Transition Services Agreement
Exhibit M Vencor Pro Forma Balance Sheet
Exhibit N-1 Vencor Certificate of Incorporation
Exhibit N-2 Vencor By-Laws
Exhibit O-1 Healthcare Company Certificate of Incorporation
Exhibit O-2 Healthcare Company By-Laws
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"! is made and
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entered into as of this 30th day of April 1998, by and between Vencor, Inc., a
Delaware corporation ("Vencor"), and Vencor Healthcare, Inc., a Delaware
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corporation ("Healthcare Company").
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WITNESSETH:
WHEREAS, the Board of Directors of Vencor has determined that it is
appropriate and desirable to (a) separate Vencor and its subsidiaries into two
publicly-owned companies so that (i) the assets and liabilities relating to
substantially all of the Vencor-owned land, buildings and other improvements
and real estate related assets are allocated to Vencor (the "Real Estate
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Business"), which will be renamed "Ventas, Inc.," a Delaware corporation,
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immediately prior to the Distribution (as defined herein), and (ii) the other
assets and liabilities relating to the historical operations of Vencor,
including the Development Properties (as defined herein), are allocated to
Healthcare Company (the "Healthcare Business"), which will be renamed Vencor,
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Inc. immediately prior to the Distribution; and (b) pursuant to a Distribution
Agreement (as defined herein) distribute (the "Distribution"), following such
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reorganization, as a dividend to the holders of the issued and outstanding
shares of common stock, par value $.25 per share, of Vencor ("Vencor Common
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Stock") all of the issued and outstanding shares of common stock, par value
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$.25 per share, of Healthcare Company ("Healthcare Company Common Stock") on
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the basis of one share of Healthcare Company Common Stock for each share of
Vencor Common Stock;
WHEREAS, the parties hereto have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such separation and the Distribution and to set forth other agreements that
will govern certain other matters prior to and following the Distribution;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.01. General. Unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Action" shall mean any demand, action, suit, countersuit, arbitration,
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inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"Affiliate" shall mean with respect to any specified Person, a Person that
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directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person;
provided, however, that for purposes of this Agreement, no member of either
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Group shall be deemed to be an Affiliate of any member of the other Group.
"Agreement" shall have the meaning set forth in the preamble to this
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Agreement.
"Agreement Disputes" shall have the meaning set forth in Section 6.01 of
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this Agreement.
"Ancillary Agreements" shall mean all the written agreements, instruments,
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understandings, assignments or other arrangements (other than this Agreement)
entered into by the parties hereto or any other member of their respective
Group in connection with the Corporate Restructuring Transactions, the
Distribution and the other transactions contemplated hereby or thereby,
including, without limitation, the following:
(i) the Master Lease Agreement;
(ii) the Development Agreement;
(iii) the Participation Agreement;
(iv) the Employee Benefits Agreement;
(v) the Intellectual Property Agreement;
(vi) the Tax Allocation Agreement;
(vii) the Transition Services Agreement;
(viii) the Conveyance and Assumption Instruments;
(ix) the Debt and Cash Allocation Agreement;
(x) the Distribution Agreement; and
(xi) the Insurance Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
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on which banking institutions located in the Commonwealth of Kentucky or the
State of New York or Delaware are authorized or obligated by law or executive
order to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
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successor legislation and the regulations promulgated thereunder.
"Conveyancing and Assumption Instruments" shall mean, collectively, the
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various writtef agreements, instruments and other documents to be entered into
to effect the Corporate Restructuring Transactions or otherwise effect the
transfer of assets and the assumption of
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liabilities in the manner contemplated by this Agreement, the Ancillary
Agreements and the Corporate Restructuring Transactions.
"Corporate Restructuring Transactions" shall mean, collectively, (a) each
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of the mergers, transfers, conveyances, contributions, assignments and other
transactions described and set forth on Exhibit A attached hereto, and (b) such
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other mergers, transfers, conveyances, contributions, assignments and other
transactions that may be appropriate or required to be accomplished, effected
or consummated by Vencor or Healthcare Company or any of their respective
Subsidiaries and Affiliates in order to separate and divide, in a series of
transactions, Vencor so that: (i) the Healthcare Company Assets, Healthcare
Company Liabilities and Healthcare Business shall be owned, directly or
indirectly, by Healthcare Company; and (ii) the Vencor Assets, Vencor
Liabilities and Real Estate Business that remain after the separation and
division described in clause (i) above, are, after giving effect to the
Distribution, owned directly or indirectly, by Vencor.
"Debt and Cash Allocation Agreement" shall mean the Debt and Cash
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Allocation Agreement by and between Vencor and Healthcare Company, which
agreement shall be entered into prior to or on the Distribution Date in the
form attached hereto as Exhibit B.
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"Development Agreement" shall mean the Development Agreement by and
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between Vencor and Healthcare Company, which agreement shall be entered into
prior to or on the Distribution Date in the form attached hereto as Exhibit C.
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"Development Properties" shall mean the real property listed on Schedule
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1.01(a) of this Agreement.
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"DGCL" shall mean the Delaware General Corporation Law, as amended.
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"Distribution" shall have the meaning set forth in the preamble to this
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Agreement.
"Distribution Agreement" shall mean the Distribution Agreement by and
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between Vencor and Healthcare Company, which agreement shall be entered into
prior to or on the Distribution Date in the form attached hereto as Exhibit D.
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"Distribution Date" shall mean the date, to be determined by the Board of
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Directors of Vencor, or such committee of the Board as shall be designated by
the Board of Directors, as of which the Distribution shall be effected.
"Employee Benefits Agreement" shall mean the Employee Benefits Agreement
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by and between Vencor and Healthcare Company, which agreement shall be entered
into prior to or on the Distribution Date in the form attached hereto as
Exhibit E.
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"Environmental Laws" shall mean any and all federal, state, local and
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foreign statutes, laws, regulations, ordinances, rules, principles of common
law, judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions (including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Net, 42 U.S.C. 9601, et seq.), whether now or hereafter in existence, relating
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to the
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environment, natural resources, human health or safety, endangered or
threatened species of fish, wildlife and plants$ or to emissions, discharges or
releases of pollutants, contaminant, petroleum or petroleum products, chemicals
or industrial, toxic or hazardous substances or wastes into the environment
(including without limitation indoor or outdoor air, surface water, groundwater
and surface or subsurface soils), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes or the
investigation, cleanup or other remediation thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
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together with the rules and regulations promulgated thereunder.
"Financing Transactions" shall mean the Healthcare Company Financing
----------------------
Transactions and the Vencor Financing Transactions.
"Governmental Authority" shall mean any Federal, state, local, foreign or
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international court, government, department, commission, board, bureau, agency,
the NYSE or other regulatory, administrative or governmental authority.
"Group" shall mean, with respect to Vencor, the Vencor Group and, with
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respect to Healthcare Company, the Healthcare Company Group.
"Healthcare Business" shall have the meaning set forth in the preamble to
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this Agreement.
"Healthcare Company" shall have the meaning set forth in the preamble to
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this Agreement.
"Healthcare Company Assets" shall mean, collectively, all the rights and
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assets that are owned by Healthcare Company or any of its Subsidiaries as of
the close of business on the Distribution Date, including without limitation:
(i) the capital stock of the Healthcare Subsidiaries;
(ii) all the assets included on the Healthcare Company Pro
Forma Balance Sheet that are to be owned by Healthcare
Company or any of its Subsidiaries as of the close of
business on the Distribution Date, including the
Development Properties;
(iii) all the assets and rights expressly allocated to
Healthcare Company or any of the Healthcare Company
Subsidiaries under this Agreement or any of the
Ancillary Agreements; and
(iv) any other asset acquired by Vencor or any of its
Subsidiaries from the date of the Healthcare Company Pro
Forma Balance Sheet to the close of business on the
Distribution Date that is owned by Vencor or any of its
Subsidiaries as of the close of business on the
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Distribution Date and that is of a nature or type that
would have resulted in such asset being included as an
asset on the Healthcare Company Pro Forma Balance Sheet
had it been acquired on or prior to the date of the
Healthcare Pro Forma Balance Sheet, determined on a
basis consistent with the determination of the assets
included on the Healthcare Company Pro Forma Balance
Sheet.
"Healthcare Company Common Stock" shall have the meaning set forth in the
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preamble to this Agreement.
"Healthcare Company Financing Transactions" shall mean the entry into or
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issuance by Healthcare Company of (i) a revolving credit facility in the amount
of $300 million, (ii) a term loan in the amount of $300 million, (iii) a second
term loan in the amount of $200 million, (iv) a bridge loan in the amount of
$200 million, (v) $17.7 million proceeds of Healthcare Company preferred stock
and (vi) $300 million of senior subordinated debt or such other financing
transactions approved by the Healthcare Company Board of Directors.
"Healthcare Company Group" shall mean Healthcare Company, the Healthcare
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Company Subsidiaries and the corporation, partnerships, joint ventures, limited
liability companies, investments and other entities that represent equity
investments of Healthcare Company or any of the Healthcare Company Subsidiaries
following the consummation of the Corporate Restructuring Transactions and the
Distribution.
"Healthcare Company Indemnitees" shall mean:
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(i) Healthcare Company and each Affiliate thereof after
giving effect to the Corporate Restructuring
Transactions and the Distribution; and
(ii) each of the respective past, present and future
directors, officers, members, employees and agents of
any of the entities described in the immediately
preceding clause (i) and each of the heirs, executors,
successors and assigns of any of such directors,
officers, members, employees and agents.
"Healthcare Company Liabilities" shall mean, collectively, all of the
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Liabilities of Healthcare Company, the Healthcare Company Subsidiaries and each
of the other members of the Healthcare Company Group after giving effect to the
Corporate Restructuring Transactions, the Distribution and the transactions
contemplated under the Debt and Cash Allocation Agreement, including, without
limitation:
(i) all the Liabilities included on the Healthcare Company
Pro Forma Balance Sheet which remain outstanding as of
the close of business on the Distribution Date;
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(ii) all Liabilities associated with Healthcare Company's
obligation to pay for a portion of Vencor's 8 5/8%
Senior Subordinated Notes Due 200_ which are repurchased
and the assumption of such Senior Subordinated Notes and
the indenture relating thereto;
(iii) all other Liabilities that are incurred or which accrue
or are accrued at any time prior to, on or after the
date of the Healthcare Company Pro Forma Balance Sheet
and that arise or arose out of, or in connection with,
the Healthcare Company Assets or the Healthcare
Business, determined on a basis consistent with the
determination of the Liabilities of Healthcare Company
on the Healthcare Company Pro Forma Balance Sheet;
(iv) all the Liabilities of Healthcare Company, the
Healthcare Company Subsidiaries or any of the other
members of the Healthcare Company Group under, or to be
retained or assumed by Healthcare Company, any
Healthcare Company Subsidiary or any of the other
members of the Healthcare Company Group pursuant to this
Agreement or any of the Ancillary Agreements; and
(v) all the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior
to, at or following the Distribution Date) arising out
of or in connection with or otherwise relating to the
management or conduct before or after the Distribution
Date of the Healthcare Business, except as otherwise
specifically provided herein.
"Healthcare Company Pro Forma Balance Sheet" shall mean the pro forma
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balance sheet of Healthcare Company at December 31, 1997, attached hereto as
Exhibit F.
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"Healthcare Company Subsidiaries" shall mean all of the subsidiaries
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listed on Schedule 1.01(b).
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"Holders" shall mean the holders of record of shares of Vencor Common
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Stock as of the Record Date.
"Indemnifiable Losses" shall mean all Losses which are subject to being
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indemnified by Vencor or Healthcare Company pursuant to Article III.
"Indemnifying Party" shall mean a Person who or which is obligated under
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this Agreement to provide indemnification.
"Indemnitee" shall mean a Person who may seek indemnification under this
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Agreement.
"Indemnity Payment" shall mean an amount that an Indemnifying Party is
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required to pay to an Indemnitee pursuant to Article III.
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"Information" shall mean all records, books, contracts, instruments,
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computer data and other data and information.
"Insurance Agreement" shall mean the Insurance Agreement by and between
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Vencor and Healthcare Company, which Agreement shall be entered into prior to
or on the Distribution Date in the form attached hereto as Exhibit G.
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"Insurance Proceeds" shall mean, with respect to any insured party, those
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monies, net of any applicable premium adjustment, retrospectively-rated
premium, deductible, retention or cost of reserve paid or held by or for the
benefit of such insured, which are either: (i) received by an insured from an
insurance carrier; or (ii) paid by an insurance carrier on behalf of an insured.
"Intellectual Property Agreement" shall mean the Intellectual Property
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Agreement by and between Vencor and Healthcare Company or members of their
respective Groups, which agreement will be entered into prior to or on the
Distribution Date in the form attached hereto as Exhibit H.
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"IRS" shall mean the Internal Revenue Service.
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"Law" shall mean all laws, statutes and ordinances and all regulations,
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rules and other pronouncements of Governmental Authorities having the effect of
law of the United States, any foreign country, or any domestic or foreign
state, province, commonwealth, city, country, municipality, territory,
protectorate, possession or similar instrumentality, or any Governmental
Authority thereof.
"Liabilities" shall mean any and all debts, liabilities, obligations,
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responsibilities, response actions, losses, damages (whether compensatory,
punitive or treble), fines, penalties and sanctions, absolute or contingent,
matured or unmatured, liquidated or unliquidated, foreseen or unforeseen,
joint, several or individual, asserted or unasserted, accrued or unaccrued,
known or unknown, whenever arising, including without limitation those arising
under or in connection with any Law (including any Environmental Law), Action,
threatened Action, order or consent decree of any Governmental Authority or any
award of any arbitration tribunal, and those arising under any contract,
guarantee, commitment or undertaking, whether sought to be imposed by a
Governmental Authority, private party, or party to this Agreement, whether
based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute, or otherwise, and including any costs, expenses,
interest, attorneys' fees, disbursement and expense of counsel, expert and
consulting fees and costs related thereto or to the investigation or defense
thereof.
"Litigation Matters" shall have the meaning set forth in Section 5.06(a)
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hereof.
"Losses" shall mean all losses, liabilities, damages, claims, demands,
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judgments or settlements of any nature or kind, known or unknown, fixed,
accrued, absolute or contingent, liquidated or unliquidated, including all
reasonable costs and expenses (legal, accounting, or otherwise as such costs
are incurred) relating thereto, suffered by an Indemnitee.
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"Master Lease Agreement" shall mean the Master Lease Agreement, which
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agreement will be entered into prior to or on the Distribution Date between
Vencor and Healthcare Company or members of their respective Groups in the form
attached hereto as Exhibit I.
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"Notices" shall have the meaning set forth in Section 8.05 of this
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Agreement.
"NYSE" shall mean the New York Stock Exchange, Inc.
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"Participation Agreement" shall mean the Participation Agreement by and
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between Vencor and the Healthcare Company, which agreement shall be entered
into prior to or on the Distribution Date in the form attached hereto as
Exhibit J.
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"Person" shall mean an individual, a partnership, a joint venture, a
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corporation, a trust, a limited liability company, an unincorporated
organization or a government or any department or agency thereof.
"Prime Rate" shall mean the rate which Citibank N.A. (or any successor
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thereto or other major money center commercial bank agreed to by the parties
hereto) announces from time to time as its base lending rate, as in effect from
time to time.
"Privileged Information" shall have the meaning set forth in Section
----------------------
5.06(a) hereof.
"Properties" shall mean the real property listed on Schedule 1.01(c).
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"Proxy Statement" shall mean the Proxy Statement dated March 25, 1998 as
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sent to the holders of shares of Vencor Common Stock in connection with the
Corporate Restructuring Transactions and the Distribution including any
amendments or supplements thereto.
"Real Estate Business" shall have the meaning set forth in the preamble
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to this Agreement.
"Record Date" shall mean the date determined by the Board of Directors of
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Vencor, or such committee of the Board as shall be authorized by the Board of
Directors, as the record date for determining stockholders of Vencor entitled
to receive the Distribution.
"Registration Statement" shall mean the registration statement on Form 10
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to effect the registration of the Healthcare Company Common Stock pursuant to
the Exchange Act.
"Representative" shall mean, with respect to any Person, any of such
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Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"SEC" shall mean the Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended,
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together with the rules and regulations promulgated thereunder.
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"Subsidiary" shall mean with respect to any specified Person, any
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corporation or other legal entity of which such Person or any of its
Subsidiaries controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of members to
the board of directors or similar governing body; provided, however, that for
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purposes of this Agreement, (a) the Healthcare Company Subsidiaries shall be
deemed to be Subsidiaries of Healthcare Company and (b) Healthcare Company and
the Healthcare Company Subsidiaries shall not be deemed to be Subsidiaries of
Vencor or any of Vencor's Subsidiaries.
"Tax" shall have the meaning set forth in the Tax Sharing Agreement.
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"Tax Allocation Agreement" shall mean the Tax Allocation Agreement by and
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between Vencor and Healthcare Company, which agreement shall be entered into
prior to or on the Distribution Date in the form attached hereto as Exhibit K.
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"Third Party" shall mean a Person who is not a parry hereto or a
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wholly-owned Subsidiary thereof.
"Third Party Claim" shall mean any claim, suit, arbitration, inquiry,
-----------------
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Third Party.
"Transition Services Agreement" shall mean the Transition Services
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Agreement by and between Vencor and Healthcare Company, which agreement shall
be entered into prior to or on the Distribution Date in the form attached
hereto as Exhibit L.
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"Vencor" shall have the meaning set forth an the preamble to this
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Agreement.
"Vencor Assets" shall mean, collectively, all the rights and assets that
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are owned by Vencor or any of its Subsidiaries as of the close of business on
the Distribution Date (other than the Healthcare Company Assets and the capital
stock of Healthcare Company), including without limitation:
(i) the capital stock of the Vencor Subsidiaries;
(ii) all the assets included on the Vencor Pro Forma Balance
Sheet which are owned by Vencor and its Subsidiaries as
of the close of business on the Distribution Date,
including the Properties;
(iii) all the assets and rights expressly allocated to Vencor
or any of its Subsidiaries under this Agreement and any
of the Ancillary Agreements; and
(iv) any other asset acquired by Vencor or any of its
Subsidiaries from the date of the Vencor Pro Forma
Balance Sheet to the close of business on the
Distribution Date that is owned by Vencor or any of its
Subsidiaries and that is of a nature or type that would
have resulted in such asset being included as an asset
on the Vencor Pro
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Forma Balance Sheet had it been acquired on or prior to
the date of the Vencor Pro Forma Balance Sheet,
determined on a basis consistent with the determination
of the assets included on the Vencor Pro Forma Balance
Sheet.
"Vencor Certificate Amendments" shall mean the amendments to the Vencor
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Certificate of Incorporation proposed by the Board of Directors of Vencor to be
considered and voted on by the stockholders of Vencor in the Proxy Statement.
"Vencor Common Stock" shall have the meaning set forth in the preamble to
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this Agreement.
"Vencor Financing Transactions" shall mean the entry into by Vencor of (i)
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a revolving credit facility in the amount of $250 million, (ii) a term loan in
the amount of $250 million, (iii) a second term loan in the amount of $250
million and (iv) a bridge loan in the amount of $450 million or such other
financing transactions approved by the Vencor Board of Directors.
"Vencor Group" means Vencor, the Vencor Subsidiaries and the corporations,
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partnerships, joint ventures, investments, limited liability companies and
other entities that represent equity investments of Vencor or any of the Vencor
Subsidiaries following consummation of the Corporate Restructuring Transactions
and the Distribution.
"Vencor Indemnitees" means:
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(i) Vencor, the Vencor Subsidiaries and each Affiliate
thereof after giving effect to the Corporate
Restructuring Transactions and the Distribution; and
(ii) each of the respective past, present and future
directors, officers, employees and agents of any of the
entities described in the immediately preceding clause
(i) and each of the heirs, executors, successors and
assigns of such directors, officers, members, employees
and agents.
"Vencor Liabilities" means, collectively, all the Liabilities of Vencor
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and the Vencor Subsidiaries and each of the other members of the Vencor Group
remaining after giving effect to the Corporate Restructuring Transactions, the
Distribution and the transactaons contemplated under the Debt and Cash
Allocation Agreement, including without limitation:
(i) all the Liabilities included on the Vencor Pro Forma
Balance Sheet which remain outstanding as of the close
of business on the Distribution Date;
(ii) all other Liabilities that are incurred or which
otherwise accrue or are accrued at any time prior to, on
or after the date of the Vencor Pro Forma Balance Sheet
and that arise or arose out of, or in connection with,
the Vencor Assets or the Real Estate Business,
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determined on a basis consistent with the determination
of the Liabilities of Vencor on the Vencor Pro Forma
Balance Sheet;
(iii) all the Liabilities of Vencor, the Vencor Subsidiaries
or any of the other members of the Vencor Group under,
or to be retained or assumed by Vencor, any Vencor
Subsidiary or any of the other members of the Vencor
Group pursuant to the Corporate Restructuring
Transactions, this Agreement, or any of the Ancillary
Agreements; and
(iv) all the Liabilities of t`e parties hereto or their
respective Subsidiaries (whenever arising, whether prior
to, on or following the Distribution Date) arising out
of or in connection with or otherwise relating to the
management or conduct before or after the Distribution
Date of the Real Estate Business, except as otherwise
specifically provided herein.
"Vencor Pro Forma Balance Sheet" shall mean the pro forma balance sheet of
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Vencor at December 31, 1997, attached hereto as Exhibit M.
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"Vencor Subsidiaries" shall mean the Subsidiaries of Vencor set forth on
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Schedule 1.01(d) hereto and all other Subsidiaries of Vencor other than
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Healthcare Company and the Healthcare Company Subsidiaries.
ARTICLE II.
PRE-DISTRIBUTION TRANSACTIONS;
CERTAIN COVENANTS
2.01. Corporate Restructuring Transactions. Each of Vencor and
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Healthcare Company shall, and shall cause each of their respective Subsidiaries
to, as applicable, tace such action or actions as is necessary to cause,
effect and consummate the Corporate Restructuring Transactions in accordance
with the terms and provisions set forth in Exhibit A hereto. Each of Vencor and
---------
Healthcare Company hereby agrees that any one or more of the Corporate
Restructuring Transactions may be modified, supplemented or eliminated;
provided, however, that such modification, supplement or elimination is
- -------- -------
determined to be necessary or appropriate (a) to separate and divide Vencor so
that (i) the Real Estate Business shall be owned directly or indirectly by
Vencor, and (ii) the Healthcare Business shall be owned directly or indirectly
by Healthcare Company, or (b) to distribute the outstanding Healthcare Company
Common Stock pursuant to the Distribution.
2.02. Charters and Bylaws.
-------------------
(a) Certificate of Incorporation and By-Laws of Vencor. On or prior
--------------------------------------------------
to the Distribution Date (but in all events prior to the Distribution), Vencor
shall take all necessary
-11-
actions so that, as of the Distribution Date, the Certificate of Incorporation
and By-Laws of Vencor will be substantially in the forms set forth in Exhibit
-------
N-1 and Exhibit N-2, respectively.
- --- -----------
(b) Certificate of Incorporation and By-Laws of Healthcare Company.
--------------------------------------------------------------
On or prior to the Distribution Date (but in all events prior to the
Distribution), Vencor and Healthcare Company shall each take all necessary
actions so that, as of the Distribution Date, the Certificate of Incorporation
and By-Laws of Healthcare Company will be substantially in the forms set forth
in Exhibit O-1 and Exhibit O-2, respectively.
----------- -----------
2.03. Election of Directors of Vencor and Healthcare Company.
------------------------------------------------------
On or prior to the Distribution Date, the parties hereto shall and shall cause
their respective Subsidiaries to take all necessary action so that as of the
Distribution Date (a) the directors of Vencor will be as set forth in the Proxy
Statement, subject to stockholder approval, and (b) the directors of Healthcare
Company will be as set forth in the Proxy Statement.
2.04. Transfer and Assignment of Certain Licenses and Permits.
-------------------------------------------------------
(a) Licenses and Permits Relating to the Real Estate Business.
---------------------------------------------------------
On or prior to the Distribution Date, or as soon as reasonably practicable
thereafter, each of Vencor and Healthcare Company shall (and, if applicable,
shall cause any other Person over which it has direct or indirect control to)
duly and validly transfer or obtain, as applicable, or cause to be duly and
validly transferred or obtained, as applicable, all licenses, permits and
authorizations issued by any Governmental Authority that relate to the Real
Estate Business but which are held in the name of any member of the Healthcare
Company Group or any of its respective employees, officers, members, directors,
stockholders or agents to the Vencor Group.
(b) Licenses and Permits Relating to the Healthcare Business.
--------------------------------------------------------
On or prior to the Distribution Date, or as soon as reasonably practicable
thereafter, each of Vencor and Healthcare Company shall (and, if applicable,
shall cause any other Person over which it has direct or indirect control to)
duly and validly transfer or cause to be duly and validly transferred to the
appropriate member of the Group (as directed by Healthcare Company) all
transferable licenses, permits and authorizations issued by any Governmental
Authority that relate to the Healthcare Business but which are held in the name
of any member of the Vencor Group or any of its respective employees, officers,
members, directors, stockholders or agents.
2.05. Transfer of Assets and Assumption of Liabilities. On or
------------------------------------------------
prior to the Distribution Date, the parties hereto shall and shall cause their
respective Subsidiaries (a) to execute instruments of assignment and transfer
and/or supplemental indentures and to take such other corporate action as is
necessary to transfer to Healthcare Company and its Subsidiaries all of the
right, title and interest of the Vencor Group in the Healthcare Company Assets;
and (b) to take all action necessary to cause Healthcare Company or its
Subsidiaries to assume all of the Healthcare Liabilities.
2.06. Financing Arrangements. Each of the parties hereto agrees
----------------------
that it will use reasonable efforts to enter into and consummate the Financing
Transactions on terms satisfactory to each of them. Each of the parties hereto
agrees that it will use reasonable efforts to obtain,
-12-
prior to the Distribution Date, all necessary consents, waivers or amendments
to each bank credit agreement, debt security or other financing facility to
which it or any of its Subsidiaries is a party or by which it or any of its
Subsidiaries is bound, or to assign or refinance such agreement, security or
facility, in each case on terms satisfactory to Vencor and Healthcare Company,
as applicable, and to the extent necessary to permit the Corporate
Restructuring Transactions, the Financing Transactions, the repurchase of
Vencor's 8 5/8% Senior Subordinated Notes Due 2007 and the assumption of such
Senior Subordinated Notes and the indenture relating thereto by Healthcare
Company and the Distribution to be consummated without any material breach of
the terms of such agreement, security or facility.
2.07. Consents. The parties hereto shall use their best efforts
--------
to obtain any third-party consents or approvals that are required to consummate
the Corporate Restructuring Transactions, the Distribution and the other
transactions contemplated hereby (the "Consent").
-------
2.08. Other Transactions. On or prior to the Distribution, each
------------------
of Vencor and Healthcare Company shall have consummated those other
transactions in connection with the Corporate Restructuring Transactions and
the Distribution that are contemplated by the Proxy Statement _____ not
specifically referred to in Sections 2.01 through 2.07, subject, however, to
the limitations set forth in Section 2.01 above.
2.09. Election of Officers. On or prior to the Distribution Date,
--------------------
each of Vencor and Healthcare Company shall, as applicable, take all actions
necessary and desirable so that as of the Distribution Date the officers of
Vencor and Healthcare Company, respectively, will be as set forth in the Proxy
Statement.
2.10. Registration Statement. Each of Vencor and Healthcare
----------------------
Company shall prepare, and shall cause to be filed with the SEC, the
Registration Statement in accordance with the terms of this Section. The
Registration Statement shall set forth appropriate disclosure concerning
Healthcare Company, the Corporate Restructuring Transactions, the Distribution
and such other matters as may be required to be disclosed therein by the
provisions of the Exchange Act. The Registration Statement shall include the
Proxy Statement relating to the 1998 Annual Meeting of the Vencor stockholders
at which, among other things, the Vencor stockholders will be asked to vote on
the Corporate Restructuring Transactions and the Distribution. Vencor and
Healthcare Company shall take all such actions as may be reasonably necessary
or appropriate in order to cause the Registration Statement to become effective
by order of the SEC pursuant to the Exchange Act.
2.11. State Securities Laws. Prior to the Distribution Date,
---------------------
Vencor and Healthcare Company shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in order to effect the Distribution.
2.12. Listing Application. Prior to the Distribution Date, Vencor
-------------------
and Healthcare Company shall prepare and file with the NYSE a listing
application and related documents and shall take all such other actions with
respect thereto as shall be necessary or desirable in order to
-13-
cause the NYSE to list on or prior to the Distribution Date, subject to
official notice of issuance, the Healthcare Company Common Stock.
2.13. Director, Officer and Employee Resignations. Subject
-------------------------------------------
to the provisions of Sections 2.03 and 2.09:
(a) Resignation by Directors and Employees of the Vencor
----------------------------------------------------
Group. Vencor shall cause all the directors and all employees of the Vencor
- -----
Group to resign, effective as of the close of business on the Distribution
Date, from all boards of directors or similar governing bodies of each member
of the Healthcare Company Group on which they serve, and from all positions as
officers or employees of any member of the Healthcare Company Group, except as
otherwise set forth in the Proxy Statement or mutually agreed to in writing on
or prior to the Distribution Date bq Vencor, on the one hand, and Healthcare
Company, on the other hand.
(b) Resignatigns by Directors and Employees of the Healthcare
---------------------------------------------------------
Company Group. Healthcare Company shall cause all the directors and all
- -------------
employees of the Healthcare Company Group to resign, effective as of the close
of business on the Distribution Date, from all boards of directors or similar
governing bodies of each member of the Vencor Group on which they serve, and
from all positions as officers or employees of any member of the Vencor Group,
except as otherwise set forth in the Proxy Statement or mutually agreed to in
writing on or prior to the Distribution Date by Healthcare Company, on the one
hand, and Vencor, on the other hand.
2.14. Ancillary Agreements. On or prior to the Distribution Date,
--------------------
each of Vencor and Healthcare Company shall enter into, and/or where applicable
shall cause such other members of their respective Groups to enter into, (a)
the Ancillary Agreements, and (b) any other agreements in respect of the
Corporate Restructuring Transactions and the Distribution as are reasonably
necessary or appropriate in connection with the transactions contemplated
hereby and thereby.
ARTICLE III.
SURVIVAL, ASSUMPTION AND INDEMNIFICATION
3.01. Survival of Agreements. All covenants and agreements
----------------------
of the parties hereto contained in this Agreement and all covenants and
agreements of the parties hereto and their respective Subsidiaries contained in
the Ancillary Agreements shall survive the Distribution Date in accordance with
their respective terms and shall not be merged into any deeds or other transfer
or closing instruments or documents.
3.02. Taxes. This Article III shall not be applicable to any
-----
Indemnifiable Losses or Liabilities related to (a) Taxes which shall be
governed by the Tax Allocation Agreement, or (b) which are otherwise expressly
provided for in the Ancillary Agreements.
3.03. Assumption And Indemnification.
------------------------------
(a) Subject to Sections 3.02 and 3.03(c) and except as expressly
provided in the Ancillary Agreements, from and after the Distribution Date,
Vencor shall retain or assume, as the case may be, and shall indemnify, defend
and hold harmless each member of the Healthcare
-14-
Company Group, and each of their Representatives and Affiliates, from and
against, net of any Tax benefit accruing to any Indemnified Party relating
thereto, (i) all Vencor Liabilities, (ii) all Liabilities that arise out of, or
in connection with, the use and operation of the Vencor Assets by Vencor
following the Distribution and (iii) all Losses of any such member of the
Healthcare Company Group, Representative or Affiliate relating to, arising out
of or due to the failure to pay, perform or discharge in due course the Vencor
Liabilities by any member of the Vencor Group who has an obligation with
respect thereto.
(b) Subject to Section 3.02 and 3.03(c) and except as expressly
provided in the Ancillary Agreements, from and after the Distribution Date,
Healthcare Company shall retain or assume, as the case may be, and shall
indemnify, defend and hold harmless each member of the Vencor Group, and each
of their Representatives and Affiliates, from and against, (i) all Healthcare
Company Liabilities, (ii) all Liabilities that arise out of, or in connection
with, the use and operation of the Healthcare Company Assets by Healthcare
Company following the Distribution, and (iii) any and all Losses of any such
member of the Vencor Group, Representative or Affiliate relating to, arising
out of or due to the failure to pay, perform or discharge in due course the
Healthcare Company Liabilities by any member of the Healthcare Company Group
who has an obligation with respect thereto.
(c) The amount which an Indemnifying Party is required to pay
any Indemnitee pursuant to Section 3.03(a) or (b) shall be reduced (including,
without limitation, retroactively) by any Insurance Proceeds and other amounts
(including, without limitation, amounts received from Third Parties in respect
of other indemnification or contribution obligations of Third Parties) actually
recovered by such Indemnitee in reduction of the related Indemnifiable Loss, it
being understood and agreed that each member of the Vencor Group and the
Healthcare Company Group shall use its reasonable best efforts, at the expense
of the Indemnifying Party, to collect any such proceeds or other such amounts
to which it or any of its Subsidiaries is entitled, without regard to whether
it is the Indemnified Party hereunder. If an Indemnitee receives an Indemnity
Payment in respect of an Indemnifiable Loss and subsequently receives Insurance
Proceeds or other amounts in respect of such Indemnifable Loss, then such
Indemnitee shall pay to such Indemnifying Party an amount equal to the
difference between (i) the sum of the amount of such Indemnity Payment and the
amount of such Insurance Proceeds or other amounts actually received and (ii)
the amount of such Indemnifable Loss. An insurer or a Third Party (including,
without limitation, purchasers under any assets purchase agreements, real
estate agreements or any other agreements relating to Healthcare Company
Liabilities or Vencor Liabilities) who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto, or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that no
insurer or any other Third Party shall be entitled to a benefit they would not
be entitled to receive in the absence of the indemnification provisions set
forth herein by virtue of the indemnification provisions hereof.
(d) On the Distribution Date, Healthcare Company shall assume
(or shall cause one of its Subsidiaries to assume) (i) the prosecution of all
claims which relate to the Healthcare Business and are pending on the
Distribution Date; and (ii) the defense against all Third Party Claims which
are Healthcare Company Liabilities and are pending on the Distribution Date.
-15-
Vencor shall use reasonable efforts to make available and shall cause its
Subsidiaries to use reasonable efforts to make available to Healthcare Company
and its Subsidiaries, at Healthcare Company's expense, (i) any personnel or any
books, records or other documents within its control or which it otherwise has
the ability to make available that Healthcare Company or such Subsidiary
reasonably believes are necessary or appropriate for such prosecution or
defense as provided in this Article III; and (iii) such other assistance in
support of the prosecution or defense of such litigation as Healthcare Company
or its Subsidiaries may reasonably request, including without limitation, the
right to assert in the name of Vencor or any of its Subsidiaries such rights,
claims, counterclaims or defenses that Vencor or Vencor's Subsidiary would be
or would have been entitled to assert in such litigation or in the prosecution
of or defense against such claim had the Distribution not occurred; provided,
--------
however, that no member of the Vencor Group shall be required to take any
- -------
action, refrain from taking any action or make available any assistance if
doing so would have the effect of increasing Liabilities of the Vencor Group.
3.04. Procedure For Indemnification.
-----------------------------
(a) If any Indemnitee receives notice of the assertion of any Third
Party Claim with respect to which an Indemnifying Party is obligated under this
Agreement to provide indemnification, such Indemnitee shall give such
Indemnifying Party notice thereof promptly after becoming aware of such Third
Party Claim; provided, however, that the failure of any Indemnitee to give
-------- -------
notice as provided in this Section 3.04 shall not relieve any Indemnifying
Party of its obligations under this Article III, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third Party Claim in reasonable detail and$ if
practicable, shall indicate the estimated amount of the Indemnifiable Loss that
has been or may be sustained by such Indemnitee. Thereafter, such Indemnitee
shall deliver to the Indemnafying Party, promptly after the Indemnitee's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnitee relating to such Third Party Claim.
(b) An Indemnifying Party, at such Indemnifying Party's own
expense and through counsel chosen by such Indemnifying Party (which counsel
shall be reasonably satisfactory to the Indemnitee), may elect to defend any
Third Party Claim. If an Indemnifying Party elects to defend a Third Party
Claim, then, within fifteen Business Days after receiving notice of such Third
Party Claim or sooner (but in no event less than five Business Days) if the
nature of such Third Party Claim so requires, such Indemnifying Party shall
notify the Indemnitee of its intent to do so. Such Indemnitee shall thereupon
use reasonable efforts to make available to such Indemnifying Party, at such
Indemnifying Party's expense, such assistance in support of the prosecution or
defense of such litigation as the Indemnifying Party may reasonably request,
including without limitation, the right to assert in the name of the Indemnitee
such rights, claims, counterclaims or defenses that such Indemnitee would be or
would have been permitted to assert in such litigation or in the prosecution of
a claim or counterclaim against a Third Party or in defense against such Third
Party Claim had the Distribution not occurred. Such Indemnifying Party shall
pay such Indemnitee's reasonable out-of-pocket expenses incurred in connection
with such cooperation consistent with the provisiofs of Article III. Except as
provided herein, after notice from an Indemnifying Party to an Indemnitee of
its election to assume the defense of a Third Party Claim, such Indemnifying
Party shall not be liable to such Indemnitee under this
-16-
Article III for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof. If an Indemnifying Party
elects not to defend against a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 3.04 within the period
of fifteen (or five, if applicable) Business Days described above, such
Indemnitee may defend, compromise and settle such Third Party Claim; provided,
--------
however, that no such Indemnitee may compromise or settle any such Third Party
- -------
Claim without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed.
(c) Notwithstanding the foregoing, the Indemnifying Party shall not,
without the prior written consent of the Indemnitee, settle or compromise any
Third Party Claim or consent to the entry of any judgmeft which does not
include as an unconditional term thereof the delivery by the claimant or
plaantiff to the Indemnitee of a written release from all Liability in respect
of such Third Party Claim.
(d) If an Indemnifying Party chooses to defend or to seek to
compromise any Third Party Claim, the related Indemnitee shall make available
to such Indemnifying Partq any personnel or any books, records or other
documents within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense.
(e) Any claim on account of an Indemnifiable Loss arising out of or
due to the failure to pay, perform or discharge in due course its respective
Liabilities by any member of the Indemnifying Party's Group who has an
obligation with respect thereto but which does not result from a Third Party
Claim shall be asserted by written notice given by the Indemnitee to the
related Indemnifying Party, such Indemnifying Party shall have a period of 30
days after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period. Such
Indemnifying Party shall be deemed to have refused to accept responsibility to
make payment. If such Indemnifying Party does not respond within such 30-day
period or rejects such claim in whole or in part, such Indemnitee shall be free
to pursue such remedies as may be available to such party under Article VI of
this Agreement.
(f) If the amount of any Indemnifiable Loss shall, at any time
subsequent to the payment required by this Agreement, be reduced by recovery,
settlement or otherwise, t`e amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnitee to
the Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to
any events or circumstances in respect of which such Indemnitee may have any
right or claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim. Such Indemnitee shall cooperate
with such Indemnifying Party in a reasonable manner, and at the cost and
expense of such Indemnifying Party, in prosecuting any subrogated right or
claim, including without limitation, permitting the Indemnifying Party to bring
suit against such Third Party in the name of the Indemnitee.
-17-
ARTICLE IV.
CERTAIN ADDITIONAL COVENANTS
4.01. Further Assurances.
------------------
(a) In addition to the actions specifically provided for elsewhere in
this Agreement and in the Ancillary Agreements, each of the parties hereto
shall use its reasonable efforts to take, or cause to be takef, all actions,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws, regulations and agreements to consummate and
make effective t`e transactions contemplated by this Agreement, to confirm
Healthcare Company's title to all of the Healthcare Company Assets and
assumption of all Healthcare Company Liabilities, to put Healthcare Company in
actual possession and operating control of the Healthcare Company Assets, and
to permit Healthcare Company to exercise all rights and to perform its
obligations with respect to the Healthcare Business. Without limiting the
foregoing, each party hereto shall cooperate with the other party, and execute
and deliver, or use its reasonable efforts to cause to be executed and
delivered, all instruments, including instruments of conveyance, assignment and
transfer, and to make all filings with, and to obtain all consents, approvals
or authorizations of, any Governmental Authority or any other Person under any
permit, license, agreement, indenture or other instrument, and take all such
other actions as such party may reasonably be requested to take by any other
party hereto from time to time, consistent with the terms of this Agreement, in
order to effectuate the provisions and purposes of this Agreement, the
Corporate Restructuring Transactions, the assumption of Liabilities and the
other transactions contemplated hereby. If the Corporate Restructuring
Transactions or assumption of Liabilities, including but not limited to,
assignments of contracts, is not consummated prior to or at the Distribution
Date for any reason, including but not limited to, the absence of receipt of
any Consents, then the party hereto retaining such asset or Liability shall
thereafter hold such asset in trust for the use and benefit of the party
entitled thereto (at the expense of the party entitled thereto), or shall
retain such Liability for the account of the party by whom such Liability is to
be assumed pursuant hereto, as the case may be, and shall take such other
action as may be reasonably requested by the party to whom such asset is to be
transferred, or by whom such Liability is to be assumed, as the case may be, in
order to place such party, insofar as reasonably possible, in the same position
as if such asset or Liability had been transferred as contemplated hereby. If
and when any such asset or Liability becomes transferable, such transfer shall
be effected forthwith. The parties hereto agree that, as of the Distribution
Date, as between the parties, Healthcare Company shall be deemed to have
acquired complete and sole beneficial ownership of all of the Healthcare
Company Assets, together with all rights, powers and privileges incident
thereto, and shall be deemed to have assumed in accordance with the terms of
this Agreement all of the Healthcare Company Liabilities, and all duties,
obligations and responsibilities incident thereto.
(b) Without limiting the generality of Section 4.01(a), Vencor, as
the sole stockholder of Healthcare Company prior to the Distribution, shall
ratify any actions which are reasonably necessary or desirable to be taken by
Healthcare Company to effectuate the transactions contemplated by this
Agreement or the Ancillary Agreements in a manner consistent with the terms of
this Agreement or such Ancillary Agreements.
-18-
(c) In the event any registration, licenses, permits or other
rights granted by Governmental Authorities to the Vencor Group must be
transferred, amended or issued in order to conduct operations of the Healthcare
Company Business after the Distribution Date, and such permit transfer,
amendment or issuance has not been accomplished as of such date, Vencor shall
permit Healthcare Company to use the registration, license or permit of the
Vencor Group to continue to operate the Healthcare Company Business until such
transfer, amendment or issuance is accomplished, at Healthcare Company's
expense, if permitted by Law, until such permit is transferred or issued to
Healthcare Company. Healthcare Company shall use its reasonable efforts to
obtain such registrations, licenses, permits or other rights granted by
Governmental Authorities as soon as reasonably practicable. Healthcare Company
shald indemnify and hold harmless Vencor from and against any and all Third
Party Claims arising frgm or related to Healthcare Company's use of the
registration, license or permit or other rights granted to the Vencor Group by
Governmental Authorities.
(d) If Healthcare Company elects to pursue any claim or right
relating to the Healthcare Business, Vencor, upon request and at Healthcare
Company's expense, shall use reasonable efforts to make available to Healthcare
Company such assistance in support of the prosecution of such litigation as
Healthcare Company may reasonably request, including without limitation, the
right to assert, as needed, in the name of Vencor or any member of the Vencor
Group such rights and claims that Vencor or such member would be or would have
been permitted to assert in such litigation had the Distribution not occurred;
provided, however, that no member of the Vencor Group shall be required to take
- -------- -------
any action, refrain from taking any action or make available any assistance if
doing so would have the effect of increasing Liabilities of the Vencor Group.
4.02. Receivables Collection And Other Payments. If after the
-----------------------------------------
Distribution Date either party receives payments belonging to the other party,
the recipient shall promptly account for and remit same to the other party.
ARTICLE V.
ACCESS TO INFORMATION
5.01. Provision of Corporate Records. From and after the Distribution
------------------------------
Date, all such books, records and copies (where copies are delivered in lieu of
originals) transferred to Healthcare Company Group whether or not delivered
shall be the property of the Healthcare Company Group; provided, however, that
-------- -------
all such Information contained in such books, records or copies relating to the
Vencor Group, the Real Estate Business, the Vencor Liabilities, or the Ancillary
Agreements shall be subject to the applicable confidentiality provisions and
restricted use provisions, if any, contained in this Agreement or the Ancillary
Agreements and any confidentiality restrictions imposed by law. Vencor, if it so
elects, may retain copies of any original books and records delivered to
Healthcare Company along with those original books and records of the Vencor
Group authorized herein to be retained; provided, however, that all such
-------- -------
Information contained in such books, records or copies (whether or not delivered
by the Vencor Group) relating to the Healthcare Company Group, the Healthcare
Company Business, and the Healthcare Company Liabilities shall be subject to the
applicable confidentiality provisions and
-19-
restricted use provisions, if any, contained in this Agreement or the Ancillary
Agreements and any confidentiality restrictions imposed by daw.
5.02. Access to Information. In addition to the provisions set
---------------------
forth in Section 5.01 above, from and after the Distribution Date and upon
reasonable notice, each of the Vencor Group and the Healthcare Company Group
shall afford to the other and to the other's Representatives at the expense of
the other party, reasonable access and duplicating rights during normal
business hours to all Information developed or obtained prior to the
Distribution Date within such party's possession relating to the other party or
its businesses, its former businesses, its assets, its Liabilities, or the
Ancillary Agreements, insofar as such access is reasonably requested by such
other party, but subject to the applicable confidentiality provisions and
restricted use provisions, if any, contained in this Agreement or the Ancillary
Agreements and any confidentiality restrictions imposed by law. In addition,
without limiting the foregoing, Information may be requested under this Section
5.02 for audit, accounting, claims, intellectual property protection,
litigation and Tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations. In each case, the requesting party agrees to
cooperate with the other party to minimize the risk of unreasonable
interference with the other party's business. In the event access to any
Information otherwise required to be granted herein or in the Ancillary
Agreements is restricted by law or otherwise, the parties agree to take such
actions as are reasonably necessary, proper or advisable to have such
restrictions removed or to seek an exemption therefrom or to otherwise provide
the requesting party with the benefit of the Information to the same extent
such actions would have been taken on behalf of the requesting party had such a
restriction existed and the Distribution not occurred.
5.03. Litigation Support And Production of Witnesses. After the
----------------------------------------------
Distribution Date, each member of the Vencor Group and the Healthcare Company
Group shall use reasonable efforts to provide assistance to the other with
respect to Litigation Matters and to make available to the other, upon written
request: (a) such employees who have expertise or knowledge with respect to the
other party's business or products or matters in litigation, for the purpose of
consultation and/or as a witness; and (b) its directors, officers, other
employees and agents, as witnesses, in each case to the extent that the
requesting party believes any such Person may reasonably be useful or required
in connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved. The employing party agrees
that such consultant or witfess shall be made available to the requesting party
upon reasonable notice to the same extent that such employing party would have
made such consultant or witness available if the Distribution had not occurred.
The requesting party agrees to cooperate with the employing party in giving
consideration to business demands of suc` Persons.
5.04. Reimbursement. Except to the extent otherwise contemplated by
-------------
this Agreement or any Ancillary Agreement, a party providing Information,
consultant, or witness services to the other party under this Article V shall
be entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements,
travel expenses, and other out-of-pocket expenses (including the direct and
indirect costs of employees providing consulting and expert witness services in
connection with litigation, but excluding direct and indirect costs of
employees who provide Information or are
-20-
fact witnesses) as may be reasonably incurred in providing such Information,
consulting or witness services.
5.05. Retention of Records. Except as otherwise required by law or
--------------------
agreed in writing, or as otherwise provided in the Tax Sharing Agreement, eac`
member of the Vencor Group and the Healthcare Company Group shall retain, for a
period of five years or such longer period as may be required by law, this
Agreement or the Ancillary Agreements, all significant Information in such
party's possession or under its control relating to the business, former
business, assets or Liabilities of the other party or this Agreement or the
Ancillary Agreements and, after the expiration of such applicable period, prior
to destroying or disposing of any of such Information, (a) the party proposing
to dispose of or destroy any such Information shall provide no less than 30
days' prior written notice to the other party, specifying the Information
proposed to be destroyed or disposed of, and (b) if, prior to the scheduled
date for such destruction or disposal, the other party requests in writing that
any of the Information proposed to be destroyed or disposed of be delivered to
such other party, the party proposing to dispose of or destroy such Information
promptly shall arrange for the delivery of the requested Information to a
location specified by, and at the expense of, the requesting party.
5.06. Privileged Information. In furtherance of the rights and
obligations of the parties set forth in this Article V:
(a) Each party hereto acknowledges that (i) each of the Vencor
Group on the one hand, and the Healthcare Companq Group on the other hand, has
or may obtain Information regarding a member of the other Group, or any of its
operations, employees, assets or Liabilities (whether in documents or stored in
any other form or known to its employees or agents), as applicable, that is or
may be protected from disclosure pursuant to the attorney-client privilege, the
work product doctrine or other applicable privileges ("Privileged
----------
Information"); (ii) there are a number of actual, threatened or future
- -----------
litigations, investigations, proceedings (including arbitration proceedings),
claims or other legal matters that have been or may be asserted by or against,
or otherwise affect, each or both of Vencor and Healthcare Company (or members
of either Group) ("Litigation Matters"); (iii) Vencor and Healthcare Company
------------------
have a common legal interest in Litigation Matters, in the Privileged
Information, and in the preservation of the confidential status of the
Privileged Information, in each case relating to the Real Estate Business or
the Healthcare Business or any former businesses, the assets or the Liabilities
of each parry as it or they existed prior to the Distribution Date or relating
to or arising in connection with the relationship between the constituent
elements of the Groups on or prior to the Distribution Date; and (iv) Vencor
and Healthcare Company intend that the transactions contemplated by this
Agreement and the Ancillary Agreements and any transfer of Privileged
Information in connection herewith or therewith shall not operate as a waiver
of any potentially applicable privilege.
(b) Each of Vencor and Healthcare Company agrees, on behalf of
itself and each member of the Group of which it is a member, not to disclose or
otherwise waive any privilege attaching to any Privileged Information relating
to the Real Estate Business or the Healthcare Business or any former businesses
or assets or Liabilities of either party or relating to or arising in
connection with the relationship between the Groups on or prior to the
Distribution Date,
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without providing prompt written notice to and obtaining the prior written
consent of the other, which consent shall not be unreasonably withheld and
shall not be withheld if the other party certifies that such disclosure is to
be made in response to a likely threat of suspension or debarment or similar
action; provided, however, that Vencor and Healthcare Company may make such
-----------------
disclosure or waiver with respect to Privileged Information if such Privileged
Information relates, in the case of Vencor, solely to the Real Estate Business
or the Vencor Liabilities as each existed prior to the Distribution Date or, in
the case of Healthcare Company, solely to the Healthcare Business, its former
businesses (other than the Real Estate Business) or the Healthcare Company
Liabilities, as each existed prior to the Distribution Date. In the event of a
disagreement between any member of the Vencor Group and any member of the
Healthcare Company Group concerning the reasonableness of withholding such
consent, no disclosure shall be made prior to (i) a final, nonappealable
resolution of such disagreement by a court of competent jurisdiction if such
requirement to disclose is part of a pending judicial proceeding; or (ii) a
final determination by an arbitrator appointed pursuant to Article VI if such
requirement to disclose is not part of a pending judicial proceeding.
(c) Upon any member of the Vencor Group or any member of the
Healthcare Company Group receiving any subpoena or other compulsory disclosure
notice from a court, other governmental agency or otherwise which requests
disclosure of Privileged Information, in each case relating to the Real Estate
Business or the Vencor Liabilities (in the case of the Healthcare Company
Group) or the Healthcare Business, its former businesses (other than the Real
Estate Business) or the Healthcare Company Liabilities (in the case of the
Vencor Group), as they or it existed prior to the Distribution Date or relating
to or arising in connection with the relationship between the constituent
elements of the Groups on or prior to the Distribution Date, the recipient of
the notice shall promptly provide to Vencor, in the case of receipt by a member
of the Healthcare Company Group, or to Healthcare Company, in the case of
receipt by a member of the Vencor Group, a copy of such notice, the intended
response, and all materials or information relating to the other Group that
might be disclosed. In the event of a disagreement as to the intended response
or dasclosure, unless and until the disagreement is resolved as provided in
paragraph (b) above, Vencor and Healthcare Company shall cooperate to assert
all defenses to disclosure claimed by either Group, at the cost and expense of
the Group claiming such defense to disclosure, and shall not disclose any
disputed documents or information until all legal defenses and claims of
privilege have been finally determined.
5.07. Confidentiality. From and after the Distribution Date, each
---------------
of Vencor and Healthcare Company shall hold, and shall use its reasonable best
efforts to cause its employees, Affiliates and Representatives to hold, in
strict confidence all Information concerning or belonging to the other party
obtained by it prior to the Distribution Date or furnished to it by such other
party pursuant to this Agreement or the Ancillary Agreements and shall not
release or disclose such Information to any other Person, except its
Representatives, who shall be bound by the provisions of this Section 5.07;
provided, however, that Vencor and Healthcare Company and their respective
- -------- -------
employees, Affiliates and Representatives may disclose such Information to the
extent that (a) disclosure is compelled by judicial or administrative process
or, in the opinion of such party's counsel, by other requirements of law, or
(b) such party can show that such Information was (i) available to such party
after the Distribution Date from Third Party sources other than employees or
former employees of either party, their Affiliates, former Affiliates,
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Representatives or former Representatives, on a nonconfidential basis prior to
its disclosure to such party after the Distribution Date by the other party,
(ii) in the public domain through no fault of such party, (iii) lawfully
acquired by such parry from Third Party sources other than employees or former
employees of either party, their Affiliates, former Affiliates, Representatives
or former Representatives, after the time that it was furnished to such party
pursuant to this Agreement or the Ancillary Agreements or (iv) is independently
discovered or developed after the Distribution Date by employees of such party.
Notwithstanding the foregoing, each of Vencor and Healthcare Company and their
respective Representatives and Affiliates shall be deemed to have satisfied its
obligations under this Section 5.07 with respect to any Information if it
exercises the same care with regard to such Information as it takes to preserve
confidentiality for its own similar Information.
ARTICLE VI.
DISPUTE RESOLUTION
6.01. Mediation. In the event of a controversy, dispute or claim
---------
arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement or of any
Ancillary Agreements or otherwise arising out of, or in any way related to this
Agreement or any Ancillary Agreements or any transaction contemplated hereby or
thereby, including, without limitation, any claim based on contract, tort,
statute or constitution (collectively, "Agreement Disputes"), the general
------------------
counsels (or other chief legal officers) of the relevant parties shall
negotiate in good faith for a reasonable period of time to settle such
Agreement Dispute.
6.02. Arbitration. If after a reasonable period of time the relevant
-----------
general counsels (or other chief legal officers) are unable to settle an
Agreement Dispute as provided in Section 6.01, such Agreement Dispute shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its applicable Rules for Commercial Arbitration and judgment on
the award rendered by the arbitrator maybe entered in any court having
jurisdiction thereof. Any such arbitration shall be commenced and adl the
proceedings thereof conducted in Louisville, Kentucky.
ARTICLE VII.
NO REPRESEFTATIONS OR WARRANTIES; EXCEPTIONS
7.01. No Representations or Warranties; Exceptions. Healthcare
--------------------------------------------
Company understands and agrees that no member of the Vencor Group is, in this
Agreement or in any Ancillary Agreement, representing or warranting to the
Healthcare Company Group in any way as to the Healthcare Business, the
Healthcare Company Liabilities, or the Healthcare Company Assets, or as to any
consents or approvals required in connection with the consummation of the
transactions contemplated by this Agreement, it being agreed and understood as
between the Groups, the members of the Healthcare Company Group shall take all
of the Healthcare Business "as is, where is" and that, except as provided in
this Section 7.01 or in Section 4.01, the members of Healthcare Company Group
shall bear the economic and legal risk that conveyances of the
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Healthcare Business shall prove to be insufficient or that the title of any
member of the Healthcare Company Group to any Healthcare Business shall be
other than good and marketable and free from encumbrances. Real property in the
United States being transferred to Healthcare Company will be conveyed by
Special Warranty Deed, in recordable form and warranting title to be free afd
clear from all lawful claims of those claiming by, through or under Vencor, but
not otherwise; provided, however, such Special Warranty Deed shall be subject
to deed restrictions, easements, rights-of-way, and all other matters of record.
ARTICLE VIII.
MISCELLANEOUS
8.01. Conditions to Obligations.
-------------------------
(a) The obligations of the parties hereto to consummate the
transactions which are set forth in this Agreement and the Distribution are
subject to the satisfaction, as determined by Vencor in its sole discretion, of
each of the following conditions:
(i) This Agreement shall have been approved by
the holders of a majority of the outstanding shares of
Vencor Common Stock at the Annual Meeting;
(ii) The Distribution shall have been approved by the holders
of a majority of the outstanding shares of Vencor Common
Stock at the Annual Meeting.
(iii) Each of the Vencor Certificate Amendments shall have
been approved by the holders of a majority of the
outstanding shares of Vencor Common Stock;
(iv) The transactions contemplated by Article II shall have been
consummated in all material respects;
(v) The Healthcare Company Common Stock shall have been
approved for listing on the NYSE, subject to official
notice of issuance;
(vi) The Registration Statement shall have been filed with the
SEC and shall have become effective, and no stop order
with respect thereto shall be in effect;
(vii) All material authorizations, consents, approvals and
clearances of Federal, state, local and foreign
governmental agencies required to permit the valid
consummation by the parties hereto of the transactions
contemplated by this Agreement shall have been obtained;
and no such authorization, consent, approval or clearance
shall contain
-24-
any conditions which would have a material adverse effect
on (A) the Real Estate Business or the Healthcare
Business, (B) the Healthcare Company Assets and Vencor
Assets, results of operations or financial condition of
the Vencor Group or the Healthcare Company Group, in each
case taken as a whole, or (C) the ability of Vencor or
Healthcare Company to perform its obligations under this
Agreement; and all statutory requirements for such valid
consummation shall `ave been fulfilled;
(viii) No preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent
jurisdiction or by a government, regulatory or
administrative agency or commission, and no statute,
rule, regulation or executive order promulgated or
enacted by any governmental authority, shall be in effect
preventing the consummation of this Agreement or the
Distribution; and
(ix) The Financing Transactions shall have occurred and all
bank credit agreements, debt security or other financing
facility entered into pursuant thereto shall be in place
and all conditions to borrowing thereunder (other than any
conditions concerning consummation of the Distribution and
the transfers of assets and liabilities described
hereunder) shall have been satisfied, and all necessary
consents, waivers or amendments to each bank credit
agreement, debt security or other financing facility to
which any member of the Vencor Group or the Healthcare
Company Group is a Party or by which any such member is
bound shall have been obtained, or each such agreement,
security or facility shall have been refinanced, in each
case on terms satisfactory to Vencor and to t`e extent
necessary to permit the Distribution to be consummated
without any material breach of the terms of such
agreement, security or facility.
(b) The foregoing conditions are for the sole benefit of Vencor
and shall not give rise to any duty on the part of Vencor or its Board of
Directors to waive or not waive any such condition. Any determination made by
the Board of Directors of Vencor in good faith on or prior to the Distribution
Date concerning the satisfaction or waiver of any or all of the conditions set
forth in Section 8.01(a) shall be conclusive.
8.02. Complete Agreement. This Agreement, the Exhibits and
------------------
Schedules hereto, the Ancillary Agreements and the agreements and other
documents referred to herein shall constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and
-25-
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter.
8.03. Expenses. All costs and expenses of any parry hereto whether
--------
incurred prior to or after the Distribution Date in connection with the
preparation, execution, delivery and implementation of this Agreement and with
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, including but not limited to legal fees, accounting fees,
investment banking fees, and all such other costs and expenses shall be
allocated among Vencor and the Healthcare Company in accordance with the Debt
and Cash Allocation Agreement and the Tax Allocation Agreement.
8.04. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware (other than the
laws regarding choice of laws and conflicts of laws) as to all matters,
including matters of validity, construction, effect, performance and remedies.
8.05. Notices. All notices, requests, claims, demands and other
-------
communications hereunder (collectively, "Notices") shall be in writing and
-------
shall be given (and shall be deemed to have been duly given upon receipt) by
delivery in person, by cable, telegram, facsimile, electronic mail or other
standard form of telecommunications (provided confirmation is delivered to the
recipient the next Business Day in the case of facsimile, electronic mail or
other standard form of telecommunications) or by registered or certified mail,
postage prepaid$ return receipt requested, addressed as follows:
If to Vencor:
President
Vencor, Inc.
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Telephone: (502) 596-7300
Facsimile: (502) 596-4026
with a copy to:
General Counsel
Vencor, Inc.
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Telephone: (502) 596-7300
Facsimile: (502) 596-4075
If to Healthcare Company:
-26-
President
Vencor Healthcare, Inc.
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Telephone: (502) 596-7300
Facsimile: (502) 596-4026
with a copy to:
General Counsel
Vencor Healthcare, Inc.
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Telephone: (502) 596-7300
Facsimile: (502) 596-4075
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 8.05.
8.06. Amendment And Modification. This Agreement may be
--------------------------
amended, modified or supplemented only by a written agreement signed by both of
the parties hereto.
8.07. Successors And Assigns; No Third Party Beneficiaries. This
----------------------------------------------------
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns
but neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party (which consent shall not be unreasonably withheld or
delayed). Except for the provisions of Sections 3.03 and 3.04 relating to
Indemnities, which are also for the benefit of the Indemnitees, this Agreement
is solely for the benefit of the parties hereto and their Subsidiaries and
Affiliates and is not intended to confer upon any other Persons any rights or
remedies hereunder.
8.08 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.09. Interpretation. The Artacle and Section headings contained in
--------------
this Agreement are solely fgr the purpose of reference, are not part of the
agreement of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
8.10. Legal Enforceability. Any provision of this Agreement which
--------------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable
-27-
such provision in any other jurisdiction. Each party acknowledges that money
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder shall be
specifically enforceable.
8.11. References; Construction. References to any "Article",
------------------------
"Exhibit", "Schedule" or "Section", without more, are to Appendices, Articles,
Exhibits, Schedules and Sections to or of this Agreement. Unless otherwise
expressly stated, clauses beginning with the term "including" set forth
examples only and in no way limit the generality of the matters thus
exemplified.
8.12. Termination. Notwithstanding any provision hereof this
-----------
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution Date by and in the sole discretion of the Board of Directors
of Vencor without the approval of any other parry hereto or of Vencor's
stockholders. In the event of such termination, no party hereto shall have and
Liability to any Person by reason of this Agreement,
-28-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
VENCOR, INC.
By: /s/ Jill L. Force
-----------------------------------
Name: Jill L. Force
Title: Senior Vice President and
General Counsel
VENCOR HEALTHCARE, INC.
By: /s/ Jill L. Force
-----------------------------------
Name: Jill L. Force
Title: Senior Vice President and
General Counsel
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