<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
TRANSITIONAL HOSPITALS CORPORATION
(NAME OF SUBJECT COMPANY)
VENCOR, INC.
LV ACQUISITION CORP.
(BIDDERS)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
893719104
(CUSIP NUMBER OF CLASS OF SECURITIES)
JILL L. FORCE
SENIOR VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
VENCOR, INC.
3300 PROVIDIAN CENTER
400 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 596-4000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
------------------------
Copies to:
JOSEPH B. FRUMKIN, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- ------------------------------------------------------------------------------------------------------
<S> <C>
$684,962,080 $136,992.42
======================================================================================================
</TABLE>
* For the purpose of calculating the filing fee only. This calculation assumes
the purchase of (i) 38,829,000 shares of Common Stock, par value $1.00 per
share, of Transitional Hospitals Corporation, a Nevada corporation (the
"Company") (the "Common Stock"), issued and outstanding as of March 31, 1997,
according to the Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1997 and (ii) 3,981,130 shares of Common stock subject to
issuance pursuant to option to purchase shares of Common Stock granted
pursuant to the Company's stock option plans and employee related agreements
as of March 31, 1997, according to the Agreement and Plan of Merger, dated as
of May 2, 1997 among Select Medical Corporation, SM Acquisition Co., and
Transitional Hospitals Corporation.
** 1/50 of 1% of the transaction value.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number or the Form or
Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Not
applicable. Filing Party: Not
applicable.
Form or Registration: Not
applicable. Date Filed: Not
applicable.
</TABLE>
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<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Transitional Hospitals Corporation,
a Nevada corporation (the "Company"), and the address of its principal executive
offices is 5110 West Sahara Avenue, Las Vegas, Nevada 89102.
(b) The class of securities to which this statement relates is the Common
Stock, par value $1.00 per share (the "Shares"), of the Company. The information
set forth in the Introductory Section and Section 1 of the Offer to Purchase
("Offer to Purchase") annexed hereto as Exhibit (a)(1) is incorporated herein by
reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 9 of the Offer to
Purchase is incorporated herein by reference. The name, business address,
present principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each director
and executive officer of Vencor, Inc., a Delaware corporation ("Offeror"), of LV
Acquisition Corp., a Delaware corporation (the "Purchaser"), and a wholly-owned
subsidiary of Offeror, and the name, principal business and address of any
corporation or other organization in which such occupations, positions, offices
and employments are or were carried on are set forth in Schedule I hereto and
incorporated herein by reference.
(e)-(f) During the last five years, none of the Purchaser, Offeror, and, to
the best of Offeror's knowledge, none of the directors or executive officers of
the Purchaser or Offeror has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introductory Section and Section
10 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introduction and Sections 7 and 11
of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Sections 9 and 10 of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introductory Section and Sections 9, 10
and 11 of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSON RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
1
<PAGE> 3
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth in Section 15 of the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Sections 7 and 15 of the Offer to Purchase
is incorporated herein by reference.
(e) The information set forth in the Introduction and Section 15 is
incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated May 7, 1997.
(a)(2) Letter of Transmittal with respect to the Shares.
(a)(3) Form of letter to brokers, dealers, commercial banks, trust
companies and nominees.
(a)(4) Form of letter to be used by brokers, dealers, commercial banks,
trust companies and nominees to their clients.
(a)(5) Form of newspaper advertisement, dated May 7, 1997.
(a)(6) Notice of Guaranteed Delivery.
(a)(7) IRS Guidelines to Substitute Form W-9.
(b) Not applicable.
(c)(1) Confidentiality Agreement, dated as of October 28, 1996, between
the Company and the Offeror.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
2
<PAGE> 4
SIGNATURE
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this statement is true, complete and correct.
Dated: May 7, 1997
VENCOR, INC.
By: /s/ JAMES H. GILLENWATER, JR.
--------------------------------------
Name: James H. Gillenwater, Jr.
Title: Senior Vice President
LV ACQUISITION CORP.
By: /s/ JAMES H. GILLENWATER, JR.
--------------------------------------
Name: James H. Gillenwater, Jr.
Title: Vice President
3
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- -------------------------------------------------------------------------- ------------
<S> <C> <C>
(a)(1) Offer to Purchase, dated May 7, 1997. ....................................
(a)(2) Letter of Transmittal with respect to the Shares. ........................
(a)(3) Form of letter to brokers, dealers, commercial banks, trust companies and
nominees. ................................................................
(a)(4) Form of letter to be used by brokers, dealers, commercial banks, trust
companies and nominees to their clients. .................................
(a)(5) Form of newspaper advertisement, dated May 7, 1997. ......................
(a)(6) Notice of Guaranteed Delivery. ...........................................
(a)(7) IRS Guidelines to Substitute Form W-9. ...................................
(b) Not applicable. ..........................................................
(c)(1) Confidentiality Agreement, dated as of October 28, 1996, between the
Company and the Offeror. .................................................
(d) Not applicable. ..........................................................
(e) Not applicable. ..........................................................
(f) Not applicable. ..........................................................
</TABLE>
<PAGE> 1
Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the Associated Rights to Purchase
Series B Junior Participating Preferred Stock)
of
TRANSITIONAL HOSPITALS CORPORATION
at
$16.00 NET PER SHARE
by
LV ACQUISITION CORP.
A Wholly-Owned Subsidiary of
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $1.00 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS TO
PURCHASE SERIES B JUNIOR PARTICIPATING PREFERRED STOCK) (THE "SHARES"), OF
TRANSITIONAL HOSPITALS CORPORATION (THE "COMPANY"), THAT WILL CONSTITUTE AT
LEAST 66 2/3% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS AS OF THE DATE
SHARES ARE ACCEPTED FOR PAYMENT, (2) THE AGREEMENT AND PLAN OF MERGER, DATED AS
OF MAY 2, 1997 (THE "SELECT MEDICAL MERGER AGREEMENT"), BY AND AMONG THE
COMPANY, SELECT MEDICAL CORPORATION, A DELAWARE CORPORATION, AND SM ACQUISITION
CO., A NEVADA CORPORATION, HAVING BEEN TERMINATED WITHOUT ANY PAYMENTS BY OR
LIABILITY ON THE PART OF THE COMPANY (OTHER THAN ANY APPLICABLE PAYMENTS
PURSUANT TO SECTION 9.2 OF THE SELECT MEDICAL MERGER AGREEMENT), (3) THE RIGHTS
HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER
BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED
OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS CONTEMPLATED
HEREIN, (4) THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE
NEVADA CONTROL SHARE ACQUISITION STATUTE SHALL BE INAPPLICABLE TO THE OFFER AND
THE MERGER, (5) THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE
NEVADA BUSINESS COMBINATION STATUTE SHALL BE INAPPLICABLE TO THE OFFER AND THE
MERGER, (6) THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT ALL
NECESSARY HEALTHCARE APPROVALS HAVE BEEN OBTAINED ON TERMS SATISFACTORY TO THE
PURCHASER, AND (7) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED
BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER. SEE SECTION 13.
THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING.
IMPORTANT
VENCOR, INC. ("VENCOR") AND LV ACQUISITION CORP. ("THE PURCHASER") ARE
SEEKING TO NEGOTIATE WITH THE COMPANY WITH RESPECT TO THE ACQUISITION OF THE
COMPANY BY VENCOR OR THE PURCHASER. THE PURCHASER RESERVES THE RIGHT TO AMEND
THE OFFER UPON ENTERING INTO A MERGER AGREEMENT WITH THE COMPANY, OR TO
NEGOTIATE A MERGER AGREEMENT WITH THE COMPANY NOT INVOLVING A TENDER OFFER.
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $1.00 per share, of the Company (the
"Shares"), including the associated rights to purchase Series B Junior
Participating Preferred Stock (the "Rights") should either (1) complete and sign
the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal, including any required signature
guarantees, and mail or deliver the Letter of Transmittal or such facsimile with
such stockholder's certificate(s) for the tendered Shares and, if separate
Rights certificates (the "Rights Certificates") have been issued by the Company,
Rights and any other required documents to the Depositary, (2) follow the
procedure for book-entry tender of Shares and Rights set forth in Section 3, or
(3) request such stockholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such stockholder. Stockholders
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact such broker, dealer, commercial
bank, trust company or other nominee if they desire to tender Shares so
registered. Unless the context requires otherwise, all references to Shares
herein shall include the associated Rights.
(Continued on following page)
The Dealer Manager for the Offer is:
<TABLE>
<S> <C>
CREDIT FIRST
SUISSE BOSTON
</TABLE>
May 7, 1997
<PAGE> 2
(Continued from previous page)
The Rights are presently evidenced by the certificates for the Shares and a
tender by a stockholder of such stockholder's Shares will also constitute a
tender of the associated Rights so long as the Distribution Date (as defined
herein) does not occur prior to the Expiration Date (as defined herein).
Stockholders will be required to tender one associated Right for each Share
tendered in order to effect a valid tender of such Share. If the Distribution
Date occurs prior to the Expiration Date and the Purchaser waives that portion
of the Rights Condition (as defined herein) requiring that a Distribution Date
not have occurred, the procedures set forth herein with respect to separate
delivery of Rights Certificates must be followed.
A stockholder who desires to tender Shares and Rights and whose
certificates for such Shares (and, if applicable, Rights) are not immediately
available, or who cannot comply with the procedure for book-entry transfer on a
timely basis, may tender such Shares (and, if applicable, Rights) by following
the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent (as defined below) or to the Dealer Manager (as defined below) at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase and
the Letter of Transmittal may be directed to the Information Agent or to the
Dealer Manager.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
Introduction............................................................. 1
1. Terms of the Offer....................................................... 5
2. Acceptance for Payment and Payment for Shares............................ 6
3. Procedure for Tendering Shares........................................... 7
4. Rights of Withdrawal..................................................... 11
5. Certain Federal Income Tax Consequences of the Offer..................... 11
6. Price Range of Shares; Dividends......................................... 12
7. Effect of the Offer on Market for the Shares, Stock Exchange Listing, and
Exchange Act Registration................................................ 12
8. Certain Information Concerning the Company............................... 13
9. Certain Information Concerning the Purchaser and Vencor.................. 15
10. Background of the Offer; Contacts with the Company....................... 18
11. Purpose of the Offer and the Merger; Plans for the Company and the
Merger................................................................... 20
12. Source and Amount of Funds............................................... 21
13. Certain Conditions of the Offer.......................................... 21
14. Dividends and Distributions.............................................. 24
15. Certain Legal Matters.................................................... 24
16. Fees and Expenses........................................................ 28
17. Miscellaneous............................................................ 29
</TABLE>
Schedule I Information Concerning the Directors and Executive Officers of
Vencor and the Purchaser
i
<PAGE> 4
TO THE HOLDERS OF SHARES OF
TRANSITIONAL HOSPITALS CORPORATION:
INTRODUCTION
LV ACQUISITION CORP., a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of VENCOR, INC., a Delaware corporation ("Vencor"),
hereby offers to purchase all of the outstanding shares of Common Stock, par
value $1.00 per share (the "Shares"), of TRANSITIONAL HOSPITALS CORPORATION, a
Nevada corporation (the "Company"), including the associated rights to purchase
Series B Junior Participating Preferred Stock (the "Rights") issued pursuant to
the Rights Agreement, dated as of June 21, 1996 (the "Rights Agreement"),
between Community Psychiatric Centers (the predecessor name of the Company) and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"),
at $16.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer"). Tendering stockholders will
not be obligated to pay brokerage fees or commissions or, subject to Instruction
6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares
by the Purchaser. The Purchaser will pay all charges and expenses of First
Chicago Trust Company of New York (the "Depositary") and D.F. King & Co., Inc.
(the "Information Agent"). UNLESS THE CONTEXT REQUIRES OTHERWISE, ALL REFERENCES
TO SHARES HEREIN SHALL INCLUDE THE ASSOCIATED RIGHTS, AND ALL REFERENCES TO THE
RIGHTS SHALL INCLUDE ALL BENEFITS THAT MAY INURE TO THE HOLDERS OF THE RIGHTS
PURSUANT TO THE RIGHTS AGREEMENT.
In addition, if prior to the Expiration Date the obligation of the Company
to pay the $19,415,000 termination fee to Select Medical Corporation, a Delaware
corporation ("Select Medical"), is reduced or eliminated (without any payment by
the Company) by final judicial action or agreement between Select Medical and
the Company, then Vencor will increase the aggregate amount to be paid pursuant
to the Offer and the cash-out of Company options by two-thirds of any such
reduction. If the termination fee were invalidated in its entirety, the Offer
price would increase by $0.32 per share. If the obligation of the Company is to
pay the $19,415,000 termination fee is reduced or eliminated (without any
payment by the Company) after the Expiration Date, Vencor will cause the Company
to donate two-thirds of any such reduction to charities in the communities in
which the Company has hospital facilities.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES, THAT
WILL CONSTITUTE AT LEAST 66 2/3% OF THE OUTSTANDING SHARES OF THE COMPANY ON A
FULLY DILUTED BASIS AS OF THE DATE SHARES ARE ACCEPTED FOR PAYMENT (THE "MINIMUM
CONDITION"), (2) THE AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 2, 1997 (THE
"SELECT MEDICAL MERGER AGREEMENT"), BY AND AMONG THE COMPANY, SELECT MEDICAL,
AND SM ACQUISITION CO., A NEVADA CORPORATION, HAVING BEEN TERMINATED WITHOUT ANY
PAYMENTS BY OR LIABILITY ON THE PART OF THE COMPANY (OTHER THAN ANY APPLICABLE
PAYMENTS PURSUANT TO SECTION 9.2 OF THE SELECT MEDICAL MERGER AGREEMENT) (THE
"SELECT MEDICAL TERMINATION CONDITION"), (3) THE RIGHTS HAVING BEEN REDEEMED BY
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") OR THE PURCHASER
BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED
OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS CONTEMPLATED
HEREIN (THE "RIGHTS CONDITION"), (4) THE PURCHASER BEING SATISFIED, IN ITS SOLE
DISCRETION, THAT THE NEVADA CONTROL SHARE ACQUISITION STATUTE (AS DEFINED
HEREIN) SHALL BE INAPPLICABLE TO THE OFFER AND THE MERGER (THE "CONTROL SHARE
CONDITION"), (5) THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE
NEVADA BUSINESS COMBINATION STATUTE (AS DEFINED HEREIN) SHALL BE INAPPLICABLE TO
THE OFFER AND THE MERGER (THE "BUSINESS COMBINATION CONDITION"), (6) THE
PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT ALL NECESSARY HEALTHCARE
APPROVALS (AS DEFINED HEREIN) HAVE BEEN OBTAINED ON TERMS SATISFACTORY TO THE
PURCHASER (THE "HEALTHCARE CONDITION"), AND (7) THE EXPIRATION OR TERMINATION OF
ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT"). SEE SECTION
13.
<PAGE> 5
THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING.
Purpose of the Offer; The Merger. The purpose of the Offer is to acquire
for cash as many outstanding Shares as possible as a first step in acquiring the
entire equity interest in the Company. Vencor is seeking to negotiate with the
Company a definitive acquisition agreement pursuant to which the Company would,
as soon as practicable following consummation of the Offer, consummate a merger
or similar business combination (the "Merger") between the Company and the
Purchaser or an affiliate thereof, pursuant to which each Share that is issued
and outstanding immediately prior to the effective time of the Merger (other
than Shares held in the treasury of the Company or owned by Vencor, the
Purchaser or any direct or indirect subsidiary of Vencor, or held by
stockholders who properly exercise dissenters' rights, if any), would be
converted pursuant to the terms of the Merger into the right to receive an
amount in cash equal to $16.00 per Share (or such higher price as may be paid
pursuant to the Offer (the "Offer Consideration")). See Section 11.
Although the Purchaser will seek to have the Company consummate the Merger
as soon as practicable after consummation of the Offer, if the Company Board
opposes the Offer and the Merger, certain terms of the Rights, provisions of the
Nevada General Corporation Law (the "NGCL") and provisions of the Company's
Restated Articles of Incorporation (the "Articles") may affect the ability of
the Purchaser to consummate the Offer, to obtain control of the Company and to
effect the Merger. The timing of consummation of the Offer and the Merger will
depend on a variety of factors and legal requirements, the actions of the
Company Board, the number of Shares (if any) acquired by the Purchaser pursuant
to the Offer, and whether the Minimum Condition, the Select Medical Termination
Condition, the Rights Condition, the Control Share Condition, the Business
Combination Condition and the Healthcare Condition have been satisfied or
waived.
Vencor and the Company were in the process of negotiating a merger
agreement on May 2, 1997 when representatives of the Company advised
representatives of Vencor that the Company had entered into the Select Medical
Merger Agreement. On May 5, 1997, the Company announced publicly that it had
entered into the Select Medical Merger Agreement, providing for a merger of SM
Acquisition Co. with and into the Company in a transaction in which Shares would
be converted into the right to receive $14.55 per Share in cash and for the
payment by the Company of a $19,415,000 termination fee to Select Medical
Corporation if the Company terminates the Select Medical Merger Agreement to
accept an offer from Vencor or another party. See Section 10 for a description
of the background of the Offer.
Vencor believes the Company's decision to enter into the Select Medical
Merger Agreement was unfair and the product of a process in which the Company's
management favored bidders other than Vencor. Vencor believes that the Offer,
together with Vencor's willingness to enter into negotiations with the Company
regarding a merger agreement, will permit representatives of the Company to
discuss a negotiated transaction with Vencor. Commencement of the Offer will
also permit Vencor to commence the process of obtaining regulatory approvals for
its acquisition of the Company and facilitate a more rapid completion of such an
acquisition.
Although Vencor is seeking a negotiated transaction with the Company,
Vencor and the Purchaser intend, if necessary, to nominate, and solicit proxies
for the election of, a slate of nominees who support the Offer and the Merger
(the "Vencor Nominees"), to replace all the members of the Company Board at the
next Annual Meeting of Stockholders of the Company (the "Annual Meeting").
Vencor expects that, if elected, and subject to their fiduciary duties under
applicable law, the Vencor Nominees would cause the Company Board to: approve
the Merger; amend the Rights Agreement or redeem the Rights, or otherwise act to
ensure that the Rights Condition is satisfied; satisfy the Control Share
Condition; satisfy the Business Combination Condition; and take any other
actions necessary to permit the Offer and the Merger to be consummated. Vencor
may also solicit proxies or consents to amend the Amended and Restated Bylaws
(the "Bylaws") or take other actions to facilitate completion of the Offer and
the Merger. In connection with the Offer, Vencor or Purchaser may commence a
solicitation of proxies from the Company's stockholders against approval of the
merger pursuant to the Select Medical Merger Agreement (the "Select Medical
Merger"). Any such solicitations will be made pursuant to separate proxy
materials complying with the requirements of Section 14(a) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act").
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL
2
<PAGE> 6
MEETING OF THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION WHICH VENCOR AND/OR
THE PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY SOLICITATION
MATERIALS COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE
EXCHANGE ACT.
VENCOR AND THE PURCHASER ARE SEEKING TO NEGOTIATE WITH THE COMPANY WITH
RESPECT TO THE ACQUISITION OF THE COMPANY BY VENCOR OR THE PURCHASER. THE
PURCHASER RESERVES THE RIGHT TO AMEND THE OFFER UPON ENTERING INTO A MERGER
AGREEMENT WITH THE COMPANY, OR TO NEGOTIATE A MERGER AGREEMENT WITH THE COMPANY
NOT INVOLVING A TENDER OFFER.
Minimum Tender Condition. THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS,
THE MINIMUM TENDER CONDITION BEING SATISFIED. See Section 13. According to the
Quarterly Report on Form 10-Q for the quarter ended February 28, 1997 of the
Company (the "Company 10-Q"), filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Exchange Act, as of March
31, 1997 there were 38,829,000 Shares issued and outstanding and, according to
the representations made by the Company in the Select Medical Merger Agreement,
there were 3,981,130 Shares subject to issuance pursuant to the Company's stock
option and incentive plans and 178,518 Shares subject to issuance pursuant to
the 5 3/4% Convertible Subordinated Debentures due 2012 of the Company.
Based on the foregoing, the Purchaser believes there are approximately
42,988,945 Shares outstanding on a fully diluted basis. Accordingly, the
Purchaser believes that the Minimum Tender Condition would be satisfied if at
least approximately 28,659,297 Shares are validly tendered prior to the
Expiration Date and not withdrawn.
Select Medical Termination Condition. THE OFFER IS CONDITIONED ON, AMONG
OTHER THINGS, THE SELECT MEDICAL TERMINATION CONDITION BEING
SATISFIED. Consummation of the Offer is conditioned upon the Select Medical
Merger Agreement having been terminated without any payments by or liability on
the part of the Company (other than any applicable payments pursuant to Section
9.2 of the Select Medical Merger Agreement). In the event that the Select
Medical Merger Agreement has not been terminated and the Company is believed by
the Purchaser to be taking steps to seek stockholder approval of the Select
Medical Merger Agreement, Vencor and the Purchaser may solicit proxies in
opposition to the Select Medical Merger.
Rights Condition. THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THE
RIGHTS CONDITION BEING SATISFIED. See Section 13. The Purchaser has requested
that the Company Board redeem the Rights in order to allow stockholders the
opportunity to receive the consideration offered pursuant to the Offer. As
described in Section 15, the Purchaser is today commencing litigation in the
United States District Court for the District of Nevada (the "Nevada District
Court") against the Company and each member of the Company Board seeking, among
other things, an order enjoining those defendants from implementing the Rights
Agreement with respect to the Offer and requiring them to redeem the Rights. The
lawsuit also asserts other claims against those defendants and others in
connection with the Offer. See Section 15. Unless the Rights Condition shall
have been satisfied, stockholders will be required to tender one Right for each
Share tendered in order to effect a valid tender in accordance with the
procedures set forth in Section 2. The tender of Rights with Shares shall not,
in itself, however, satisfy the Rights Condition. Unless separate certificates
for the Rights are issued (the "Rights Certificates"), a tender of Shares will
also constitute a tender of the associated Rights. See Section 1. For a
description of the Rights, see Section 15.
The Control Share Condition. THE OFFER IS CONDITIONED ON, AMONG OTHER
THINGS, THE CONTROL SHARE CONDITION BEING SATISFIED. See Section 13. The
Control Share Condition requires that the Purchaser be satisfied, in its sole
discretion, that Sections 78.378 to 78.3793 of the NGCL (the "Nevada Control
Share Acquisition Statute") shall be inapplicable to the Offer and the Merger.
Pursuant to the Nevada Control Share Acquisition Statute, an "acquiring
person," who acquires a "controlling interest" in an "issuing corporation," may
not exercise voting rights on any "control share" unless such voting rights are
conferred by a majority vote of the disinterested stockholders of the issuing
corporation at an annual or special meeting of such stockholders. In the event
that the control shares are accorded full voting rights and the acquiring person
acquires control shares with a majority or more of all the voting power, any
stockholder, other than the acquiring person, who does not vote in favor of
authorizing voting rights for the
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<PAGE> 7
control shares, is entitled to demand payment for the fair value of such
stockholder's Shares, and the corporation must comply with the demand within 30
days after its delivery. For purposes of the provisions under this subsection,
"acquiring person" means any person who, individually or in association with
others, acquires or offers to acquire, directly or indirectly, the ownership of
outstanding voting shares of an issuing corporation sufficient to enable the
acquiring person, individually or in association with others, directly or
indirectly, to exercise (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, and/or (iii) a majority or more, of
all the voting power of the issuing corporation in the election of directors.
Voting rights must be conferred by a majority of the outstanding voting shares
of disinterested stockholders as each threshold is reached and/or exceeded.
Pursuant to the Nevada Control Share Acquisition Statute, "control share"
means those outstanding voting shares of an issuing corporation which an
acquiring person acquires or offers to acquire in an acquisition and acquires
within 90 days immediately preceding the date when the acquiring person became
an acquiring person. "Issuing corporation" means a corporation that is organized
in Nevada, has 200 or more stockholders (at least 100 of whom are stockholders
of record and residents of Nevada) and does business in Nevada directly or
through an affiliated corporation.
The above provisions do not apply if the articles of incorporation or
bylaws of the company in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provide that said provisions do not
apply. The Articles and the Bylaws currently do not provide that the
restrictions imposed by such provisions do not apply to the Company. The Control
Share Condition would be satisfied if the Bylaws were amended such that, on the
tenth day following consummation of the Offer, the Bylaws provide that the
provisions of the Nevada Control Share Acquisition Statute do not apply, or if
the Purchaser, in its sole discretion, were satisfied that the Nevada Control
Share Acquisition Statute was invalid or its restrictions were otherwise
inapplicable to the Purchaser in connection with the Offer and the Merger for
any reason, including, without limitation, those specified in the Nevada Control
Share Acquisition Statute.
The Business Combination Condition. THE OFFER IS CONDITIONED ON, AMONG
OTHER THINGS, THE BUSINESS COMBINATION CONDITION BEING SATISFIED. See Section
13. The Business Combination Condition requires that the Purchaser be satisfied,
in its sole discretion, that Sections 78.411 to 78.444 of the NGCL are
inapplicable to the Offer and the Merger.
The Nevada Business Combination Statute restricts the ability of a
"resident domestic corporation" to engage in any combination with an "interested
stockholder" for three years following the interested stockholder's date of
acquiring the shares that caused such stockholder to become an interested
stockholder, unless the combination or the purchase of shares by the interested
stockholder on the interested stockholder's date of acquiring the shares that
caused such stockholder to become an interested stockholder is approved by the
board of directors of the resident domestic corporation before that date.
If the combination was not previously approved, the interested stockholder
may effect a combination after the three-year period only if such combination
meets all of the requirements of the articles of incorporation of the resident
domestic corporation and such stockholder receives approval from a majority of
the outstanding voting shares of disinterested stockholders or the offer meets
certain fair price criteria.
For purposes of the above provisions, "resident domestic corporation" means
a Nevada corporation that has 200 or more stockholders. "Interested stockholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation, or (ii) an affiliate or associate of the resident domestic
corporation and, at any time within three years immediately before the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding shares of the resident domestic
corporation. The above provisions do not apply to corporations that so elect in
their original articles of incorporation or in a charter amendment approved by a
majority of the outstanding voting shares of disinterested stockholders. Such a
charter amendment, however, would not become effective until 18 months after its
passage and could apply only to stock acquisitions occurring after its effective
date. The Articles do not exclude the Company from the restrictions imposed by
such provisions.
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The Business Combination Condition would be satisfied if the Company Board
approved the Offer and the Merger prior to consummation of the Offer and the
Merger or if the Purchaser, in its sole discretion, were satisfied that the
Nevada Business Combination Statute was invalid or its restrictions were
otherwise inapplicable to the Purchaser in connection with the Offer and the
Merger for any reason, including, without limitation, those specified in the
Nevada Business Combination Statute.
Healthcare Condition. THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THE
HEALTHCARE CONDITION BEING SATISFIED. See Section 13. According to the Company
10-K, the Company's hospitals are subject to federal, state and local
regulation. These regulations include healthcare licensure, certificate of need
laws, change of ownership rules and regulations relating to Medicare and
Medicaid programs. Certain of these laws, rules and regulations may require
consents or approvals of various federal, state and local regulators. Vencor
believes that certain of these laws, rules, regulations and regulators require
filings and/or approvals prior to a change in control of the Company.
Certain other conditions to consummation of the Offer are described in
Section 13. The Purchaser expressly reserves the right, in its sole discretion,
to waive any one or more of the conditions to the Offer. See Section 13.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions set
forth in the Offer (including, if the Offer is extended or amended, the terms
and conditions of such extension or amendment), the Purchaser will accept for
payment, and pay for, all Shares validly tendered on or prior to the Expiration
Date (as defined below) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on June 4, 1997,
unless and until the Purchaser shall, in its sole discretion, have extended the
period for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire.
Rights are presently evidenced by the certificates for Shares and the
tender by a stockholder of such stockholder's Shares will also constitute a
tender of the associated Rights. No separate payment will be made by the
Purchaser for the Rights pursuant to the Offer. Based on publicly available
information, Vencor believes that pursuant to the Rights Agreement, Rights will
be evidenced by the certificates representing Shares until the earlier of (i)
the tenth day after the Shares Acquisition Date (as defined in the Rights
Agreement) or (ii) the tenth day after the date of the commencement of, or first
public announcement of the intent of any Person (as defined in the Rights
Agreement) to commence, a tender or exchange offer the consummation of which
would result in any Person becoming the Beneficial Owner (as defined in the
Rights Agreement) of Shares aggregating 15% or more of the then outstanding
Shares (the earlier of (i) and (ii) being the "Distribution Date"). Following
the Distribution Date, holders of Shares would be sent Rights Certificates.
Prior to the Distribution Date, the Company Board may postpone the Distribution
Date beyond the earlier of the dates set forth in the second preceding sentence
if there are Continuing Directors (as defined in the Rights Agreement) then in
office and any such postponement is approved by at least a majority of such
Continuing Directors. If Rights Certificates have been distributed to
stockholders prior to the date of their tender pursuant to the Offer, Rights
Certificates representing the number of Rights equal to the number of Shares
being tendered must be delivered to the Depositary in order for Shares to be
validly tendered. If stockholders are entitled to receive Rights Certificates
but Rights Certificates have not been distributed prior to the time Shares are
tendered pursuant to the Offer, a tender of Shares constitutes an agreement by
the tendering stockholder to deliver to the Depositary, within five days of the
date Rights Certificates are distributed, all Rights Certificates associated
with the Shares tendered pursuant to the Offer. The Purchaser reserves the right
to require that the Depositary receive such Rights Certificates, if any have
been issued, prior to accepting Shares for payment. In all cases, payment for
Shares tendered and purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of, among other things, the Rights
Certificates, if such certificates have been distributed to stockholders.
The Purchaser expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary.
Any such extension will also be publicly announced by press release issued no
later than 9:00 A.M.,
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<PAGE> 9
New York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension, all Shares (and, if applicable,
Rights) previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering stockholder to withdraw such stockholder's
Shares. See Section 4. Subject to the applicable regulations of the Commission,
the Purchaser also expressly reserves the right, in its sole discretion, at any
time or from time to time, (I) to delay acceptance for payment of or, regardless
of whether such Shares were theretofore accepted for payment, payment for any
Shares or to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment, or paid for, upon the occurrence of
any of the conditions specified in Section 13 and (II) to waive any condition or
otherwise amend the Offer in any respect, by giving oral or written notice of
such delay, termination, waiver or amendment to the Depositary and by making a
public announcement thereof. If the Purchaser accepts any Shares for payment
pursuant to the terms of the Offer, it will accept for payment all Shares
validly tendered prior to the Expiration Date and not withdrawn, and, subject to
(I) above, will promptly pay for all Shares so accepted for payment. The
Purchaser confirms that its reservation of the right to delay payment for Shares
which it has accepted for payment is limited by Rule 14e-1(c) under the Exchange
Act, which requires that a tender offeror pay the consideration offered or
return the tendered securities promptly after the termination or withdrawal of a
tender offer.
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change) and without limiting the manner in which
the Purchaser may choose to make any public announcement, the Purchaser shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release or other public
announcement.
The Purchaser confirms that if it makes a material change in the terms of
the Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, the Purchaser will extend the Offer to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act.
If, prior to the Expiration Date, the Purchaser, in its sole discretion,
shall decrease the percentage of Shares being sought or increase or decrease the
consideration offered to holders of Shares, such increase or decrease shall be
applicable to all holders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any increase or decrease is first published,
sent or given to holders of Shares, the Offer is scheduled to expire at any time
earlier than the tenth business day from and including the date that such notice
is first so published, sent or given, the Offer will be extended until the
expiration of such ten business-day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
A demand is being made to the Company for the use of the Company's
stockholder list, its list of holders of Rights, if any, and security position
listings for the purpose of disseminating the Offer to holders of Shares. Upon
compliance by the Company with such request, this Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of Shares and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder list and its list of holders
of Rights, if any, or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares or Rights.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and will pay for, Shares
validly tendered and not withdrawn as promptly as practicable after the later of
(i) (A) the expiration or termination of the waiting period applicable to the
acquisition of Shares pursuant to the Offer under the HSR Act, (B) the
satisfaction or waiver of the Select Medical Termination Condition, (C) the
satisfaction or waiver of the Control Share Condition, (D) the satisfaction or
waiver of the Business Combination Condition, (E) the
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<PAGE> 10
satisfaction or waiver of the Rights Condition, and (F) the satisfaction or
waiver of the Healthcare Condition and (ii) the Expiration Date if, at the time
of the later of the occurrence of (i) and (ii) above, the Minimum Condition has
been satisfied or waived. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of or payment for Shares in order to comply, in whole or in part, with
any applicable law. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or, if applicable, Rights) (or a
confirmation of a book-entry transfer of such Shares (or, if applicable, Rights)
into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (collectively, "Depository
Institutions")), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment Shares validly tendered and not withdrawn as, if and when the
Purchaser gives oral or written notice to the Depositary of its acceptance for
payment of such Shares pursuant to the Offer. Payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for the tendering
stockholders for the purpose of receiving payments from the Purchaser and
transmitting such payments to the tendering stockholders. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES, REGARDLESS OF ANY DELAY
IN MAKING PAYMENT PURSUANT TO THE OFFER.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares tendered by book-entry transfer of such Shares into the Depositary's
account at a Depository Institution pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained with such
Depository Institution), as soon as practicable following expiration or
termination of the Offer.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to holders of Shares pursuant to the Offer, such increased
consideration will be paid to all holders whose Shares are purchased in the
Offer.
The Purchaser reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of Vencor the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. To tender Shares pursuant to the Offer, either (a) a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions of the Letter of Transmittal, with
any required signature guarantees, certificates for Shares to be tendered, and
any other documents required by the Letter of Transmittal, must be received by
the Depositary prior to the Expiration Date at one of its addresses set forth on
the back cover of this Offer to Purchase, (b) such Shares must be delivered
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such delivery received by the Depositary, including an Agent's
Message if the tendering stockholder has not delivered a Letter of Transmittal),
prior to the Expiration Date, or (c) the tendering stockholder must comply with
the guaranteed delivery procedures set forth below. The term "Agent's Message"
means a message, transmitted by a Book-Entry Transfer Facility (as defined
herein) to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation (as defined herein), which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
Unless the Rights Condition is satisfied, stockholders will be required to
tender one Right (subject to adjustment) for each Share tendered in order to
effect a valid tender of Shares. Accordingly, stockholders who
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<PAGE> 11
sell their Rights separately from their Shares and do not otherwise acquire
Rights may not be able to satisfy the requirements of the Offer for a valid
tender of Shares.
Until the close of business on the Distribution Date, the Rights will be
transferred with and only with the certificates for Shares and the surrender for
transfer of any certificates for Shares will also constitute the transfer of the
Rights associated with the Shares represented by such certificate.
If Rights Certificates are issued to holders of Shares prior to the time a
holder's Shares are tendered pursuant to the Offer, certificates representing
the number of Rights equal to the number of Shares tendered must be delivered to
the Depositary, or, if available, a Book-Entry Confirmation received by the
Depositary with respect thereto, in order for such Shares to be validly
tendered. If the Distribution Date occurs and Rights Certificates are not
distributed prior to the time Shares are tendered pursuant to the Offer, Rights
may be tendered prior to a stockholder receiving the Rights Certificates by use
of the guaranteed delivery procedure described below. A tender of Shares
constitutes an agreement by the tendering stockholder to deliver Rights
Certificates representing all Rights formerly associated with the number of
Shares tendered pursuant to the Offer to the Depositary prior to expiration of
the period permitted by such guaranteed delivery procedures for delivery of
Rights Certificates for, or a Book-Entry Confirmation with respect to, Rights
(the "Rights Delivery Period"). However, after expiration of the Rights Delivery
Period, the Purchaser may elect to reject as invalid a tender of Shares with
respect to which Rights Certificates for, or a Book-Entry Confirmation with
respect to, the number of Rights required to be tendered with such Shares have
not been received by the Depositary. Nevertheless, the Purchaser will be
entitled to accept for payment Shares tendered by a stockholder prior to receipt
of the Rights Certificates required to be tendered with such Shares, or a
Book-Entry Confirmation with respect to such Rights, and either (a) subject to
complying with applicable rules and regulations of the Commission, withhold
payment for such Shares pending receipt of the Rights Certificates for, or a
Book-Entry Confirmation with respect to, such Rights or (b) make payment for
Shares accepted for payment pending receipt of the Rights Certificates for, or a
Book-Entry Confirmation with respect to, such Rights in reliance upon the
agreement of a tendering stockholder to deliver such Rights and to comply with
such guaranteed delivery procedures. Any determination by the Purchaser to make
payment for Shares in reliance upon such agreement and such guaranteed delivery
procedures or, after expiration of the Rights Delivery Period, to reject a
tender as invalid will be made in the sole and absolute discretion of the
Purchaser.
Book-Entry Delivery. The Depositary will establish accounts with respect
to the Shares at the Depository Institutions (each a "Book-Entry Transfer
Facility" and, collectively, the "Book-Entry Transfer Facilities") for purposes
of the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in any of the Book-Entry
Transfer Facilities' systems may make a book-entry transfer of Shares by causing
a Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. Although delivery of Shares may be effected through book-entry
transfer, either the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees, or
an Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must be transmitted to and received by the Depositary by the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. If the Distribution Date occurs, the
Depositary will also make a request to establish an account with respect to the
Rights at each of the Book-Entry Transfer Facilities, but no assurance can be
given that book-entry transfer of Rights will be available. If book-entry
transfer of Rights is available, the foregoing book-entry transfer procedures
will also apply to Rights. If book-entry transfer of Rights is not available and
the Distribution Date occurs, a tendering stockholder will be required to tender
Rights by means of physical delivery to the Depositary of Rights Certificates
(in which event references in this Offer to Purchase to Book-Entry Confirmations
with respect to Rights will be inapplicable). The confirmation of a book-entry
transfer of Shares or Rights into the Depositary's account at a Book-Entry
Transfer Facility as described above is referred to herein as a Book-Entry
Confirmation. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, RIGHTS, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANS-
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FER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY
INSURED REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. Except as otherwise provided below, all signatures
on a Letter of Transmittal must be guaranteed by a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (an "Eligible Institution"). Signatures on a Letter
of Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed
by the registered holders (which term, for purposes of this section, includes
any participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares or Rights) of
Shares (or Rights, if applicable) and such registered holder has not completed
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares (or
Rights, if applicable) are tendered for the account of an Eligible Institution.
See Instructions 1 and 5 of the Letter of Transmittal. If the certificates for
Shares or Rights are registered in the name of a person other than the signer of
the Letter of Transmittal, or if payment is to be made or certificates for
Shares or Rights not tendered or not accepted for payment are to be returned to
a person other than the registered holder of the certificates surrendered, then
the tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holders or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
Guaranteed Delivery. A stockholder who desires to tender Shares (or
Rights, if applicable) pursuant to the Offer and whose certificates for Shares
(or Rights, if applicable) are not immediately available (including, because
Rights Certificates have not yet been distributed by the Rights Agent), or who
cannot comply with the procedure for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary prior to the
Expiration Date, may tender such Shares and/or Rights, if applicable, by
following all of the procedures set forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Shares and/or Rights, in
proper form for transfer (or a Book-Entry Confirmation with respect to all
such Shares and/or Rights), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal), and any other required
documents, are received by the Depositary (a) in the case of Shares within
three trading days after the date of execution of such Notice of Guaranteed
Delivery or (b) in the case of Rights, within a period ending on the later
of (1) three trading days after the date of execution of such Notice of
Guaranteed Delivery or (2) three trading days after the date Rights
Certificates are distributed to stockholders by the Rights Agent. A trading
day is any day on which the New York Stock Exchange (the "NYSE") is open
for business,
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Other Requirements. Notwithstanding any provision hereof, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares and, if the Distribution
Date occurs, Rights Certificates (or a timely Book-Entry Confirmation, if
available, with respect thereto), unless the Purchaser elects to make payment
for such Shares pending receipt of the certificates for, or a Book-Entry
Confirmation with
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<PAGE> 13
respect to, such Rights as described above, (b) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal) and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares (or
Rights, if applicable) or Book-Entry Confirmations with respect to Shares (or
Rights, if available) are actually received by the Depositary. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF THE SHARES BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Rights Condition is satisfied, the guaranteed delivery procedures
with respect to certificates for Rights and the requirement for the tender of
Rights will no longer apply.
Tender Constitutes an Agreement. The valid tender of Shares and, if
applicable, Rights pursuant to one of the procedures described above will
constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder irrevocably appoints designees of the Purchaser, and each
of them, as such stockholder's attorneys-in-fact and proxies in the manner set
forth in the Letter of Transmittal, each with full power of substitution, to the
full extent of such stockholder's rights with respect to the Shares tendered by
such stockholder and accepted for payment by the Purchaser and with respect to
any and all cash dividends, distributions, rights, other Shares or other
securities issued or issuable in respect of such Shares on or after the date of
this Offer to Purchase. All such proxies will be considered coupled with an
interest in the tendered Shares and Rights. Such appointment is effective if,
when and only to the extent that, the Purchaser deposits the payment for such
Shares with the Depositary. Upon the effectiveness of such appointment, all
prior powers of attorney, proxies, consents or revocations given by such
stockholder will be revoked, and no subsequent powers of attorney, proxies and
consents may be given (and, if given, will not be deemed effective). The
Purchaser's designees will, with respect to the Shares for which the appointment
is effective, be empowered to exercise voting and other rights of such
stockholder, as they, in their sole discretion, may deem proper at any annual,
special or adjourned meeting of the stockholders of the Company, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's payment for such Shares, the Purchaser must be
able to exercise full voting rights with respect to such Shares.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
or Rights will be determined by the Purchaser in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance for payment of or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right
to waive any defect or irregularity in the tender of any Shares or Rights of any
particular stockholder whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares or Rights will be
deemed to have been validly made until all defects and irregularities relating
thereto have been cured or waived. None of the Purchaser, the Depositary, the
Information Agent, the Dealer Manager or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and Instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner
10
<PAGE> 14
satisfactory to the Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Non-corporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction [10] to the
Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL. Tenders of Shares and Rights made pursuant to the
Offer are irrevocable except that Shares and Rights tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after July 7, 1997.
To be effective, a written notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase. Any such notice of withdrawal must specify the name of the person
having tendered the Shares or Rights to be withdrawn, the number of Shares or
Rights to be withdrawn and the names in which the Shares Certificates or Rights
Certificates to be withdrawn are registered, if different from that of the
person who tendered such Shares or Rights. The signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution, unless such Shares or
Rights have been tendered for the account of any Eligible Institution. If Shares
or Rights have been tendered pursuant to the procedures for book-entry tender as
set forth in Section 3, any notice of withdrawal must specify the name and
number of the account at the Depository Institution to be credited with the
withdrawn Shares or Rights. If certificates have been delivered or otherwise
identified to the Depositary, the name of the registered holder and the serial
numbers of the particular certificates withdrawn must also be furnished to the
Depositary as aforesaid prior to the physical release of such certificates. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. None of the Purchaser, Vencor, the
Dealer Manager, the Depositary, the Information Agent, or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification. Any Shares properly withdrawn will be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares or Rights
may be retendered by following one of the procedures described in Section 3 at
any time prior to the Expiration Date.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares, or is unable to accept for payment Shares pursuant to the
Offer, for any reason, then, without prejudice to the Purchaser's rights under
this Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares and Rights, and such Shares and Rights may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as set forth in this Section 4.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER. Sales of Shares
pursuant to the Offer and the exchange of Shares for cash pursuant to the Merger
will be taxable transactions for Federal income tax purposes and may also be
taxable under applicable state, local and other tax laws. For Federal income tax
purposes, a stockholder whose Shares are purchased pursuant to the Offer or who
receives cash as a result of the Merger will realize gain or loss equal to the
difference between the adjusted basis of the Shares sold or exchanged and the
amount of cash received therefor. Such gain or loss will be capital gain or loss
if the Shares are held as capital assets by the stockholder.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED
STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
11
<PAGE> 15
6. PRICE RANGE OF SHARES; DIVIDENDS. The Common Stock is listed on the
NYSE and the Pacific Stock Exchange (the "PSE"). The following table sets forth,
for the calendar quarters indicated, the high and low sales prices for the
Shares on the NYSE and the amount of cash dividends paid per Share, based upon
public sources:
<TABLE>
<CAPTION>
SALES PRICE
SHARES
-----------
CALENDAR YEAR HIGH LOW
---------------------------------------------------------------- --- ---
<S> <C> <C>
1995:
First Quarter................................................. $12 7/8 $10 1/8
Second Quarter................................................ 13 3/4 10 1/2
Third Quarter................................................. 13 1/2 10 1/2
Fourth Quarter................................................ 12 1/4 10 1/4
1996:
First Quarter................................................. 12 3/8 8
Second Quarter................................................ 10 1/8 8
Third Quarter................................................. 9 1/2 7 5/8
Fourth Quarter................................................ 10 8 1/8
1997:
First Quarter................................................. 10 5/8 8 1/4
Second Quarter (through May 6, 1997).......................... 14 5/8 8 1/4
</TABLE>
The Rights trade together with the Shares. On May 2, 1997, the last full
trading day prior to the public announcement of the terms of the Select Medical
Merger, the reported closing price on the NYSE was $10 per Share. On May 6,
1997, the last full trading day prior to the announcement and commencement of
the Offer, the reported closing price on the NYSE was $14 3/8 per Share.
Stockholders of the Company are urged to obtain a current market quotation for
the Shares.
Based on publicly available information, it appears that the only dividend
paid by the Company with respect to Shares during its two previous fiscal years
and the portion of the current fiscal year was a dividend of $.01 per Share in
cash paid during the second fiscal quarter of the Company's fiscal year ended
November 30, 1995.
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, STOCK EXCHANGE LISTING,
AND EXCHANGE ACT REGISTRATION. The purchase of Shares by the Purchaser pursuant
to the Offer will reduce the number of Shares that might otherwise trade
publicly and may reduce the number of holders of Shares, which could adversely
affect the liquidity and market value of the remaining Shares held by the
public.
The Shares and associated Rights are listed on the NYSE and the PSE.
According to the NYSE's published guidelines, the NYSE would consider delisting
the Shares if, among other things, the number of holders of at least 100 Shares
should fall below 1,200, the number of publicly-held Shares (exclusive of
holdings of officers and directors of the Company and their immediate families
and other concentrated holdings of 10% or more) should fall below 600,000, or
the aggregate market value of the publicly-held Shares should fall below
$5,000,000. Published guidelines of the PSE indicate that such exchange would
consider delisting the Shares if, among other things, the number of
publicly-held Shares exclusive of management and other concentrated holdings
were less than 100,000 or there were fewer than 500 record holders. The PSE
would also consider delisting the Shares if the number of holders of record of
at least 100 Shares is less than 200 or the aggregate market value of
publicly-held Shares (exclusive of management and other concentrated holdings)
should fall below $500,000. According to the Annual Report on Form 10-K for the
year ended November 30, 1996 of the Company (the "Company 10-K"), there were
5,842 holders of record of Shares on February 14, 1997 and, according to the
Company 10-Q, as of March 31, 1997 there were 38,829,000 Shares outstanding. If
the Shares were to be delisted, the associated Rights would be delisted as well.
If the NYSE and PSE were to delist the Shares and the Rights, the market
therefore could be adversely affected. It is possible that the Shares and the
Rights would be traded on other securities exchanges or in the over-the-counter
market, and that price quotations would be reported by such exchanges, or
through the National Association of Securities Dealers Automated Quotation
System, Inc. ("Nasdaq National Market") or other
12
<PAGE> 16
sources. The extent of the public market for the Shares and the Rights and the
availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the Shares and the Rights
remaining at such time, the interest in maintaining a market in the Shares and
the Rights on the part of securities firms, the possible termination of
registration of the Shares and the Rights under the Exchange Act and other
factors.
The Shares are presently "margin securities" under the regulations of the
Federal Reserve Board, which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending upon
factors similar to those described above regarding listing and market
quotations, the Shares might no longer constitute "margin securities" for the
purposes of the Federal Reserve Board's margin regulations in which event the
Shares would be ineligible as collateral for margin loans made by brokers.
The Shares and Rights are currently registered under the Exchange Act. Such
registration may be terminated by the Company upon application to the Commission
if the outstanding Shares and Rights are not listed on a national securities
exchange and if there are fewer than 300 holders of record of Shares and Rights.
Termination of registration of the Shares and Rights under the Exchange Act
would reduce the information required to be furnished by the Company to its
stockholders and to the Commission and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the related requirement of
furnishing an annual report to stockholders, no longer applicable with respect
to the shares of Common Stock and Rights. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 under the Securities
Act of 1933, as amended, may be impaired or eliminated. If registration of the
Shares under the Exchange Act were terminated, the Shares would no longer be
eligible for Nasdaq National Market reporting or for continued inclusion on the
Federal Reserve Board's list of "margin securities". The Purchaser intends to
cause the Company to apply for termination of registration of the Shares and
associated Rights as soon as possible after consummation of the Offer if the
requirements for termination of registration are met.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial information
and information relating to the Rights and the Rights Agreement, has been taken
from or is based upon publicly available documents and records on file with the
Commission and other public sources. None of Vencor, the Purchaser or the Dealer
Manager assumes any responsibility for the accuracy or completeness of the
information concerning the Company contained in such documents and records or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to Vencor, the Purchaser or the Dealer Manager.
The Company is a Nevada corporation with its principal executive offices
located at 5110 W. Sahara Avenue, Las Vegas, Nevada 89102. The following
description of the Company's business has been taken from the Company 10-K:
"[T]he Company will . . . focus on the development and growth of its core
business of operating long-term acute care hospitals. As of November 30, 1996,
THC operated 14 long-term acute care hospitals and two satellite facilities,
with a total of 1,340 licensed beds, located in 12 states. In December 1996, the
Company opened one new THC facility in San Diego (34 beds) and a satellite
facility in Pasadena, Texas (46 beds). The Company is evaluating numerous other
development projects and potential acquisitions across the country and other
alternatives to enhance shareholder value.
"In November 1992, to diversify beyond psychiatric care, the Company began
to offer long-term acute care services in converted, previously underutilized
psychiatric hospitals and newly-acquired freestanding acute care facilities. THC
offers long-term acute care to patients who are stabilized and do not require
the complete spectrum of intensive care services provided by traditional acute
care hospitals, but who are too ill to return home or be placed in a nursing
home. THC provides care to those suffering from pulmonary diseases, kidney
failure and other complex medical problems; such patients require a variety of
intensive services including life-support system, post-surgical stabilization,
intravenous therapy, subacute rehabilitation and wound care. THC also provides
contract respiratory therapy services to nursing homes and hospital facilities
owned by third parties.
13
<PAGE> 17
THC's strategy is to provide a comprehensive range of long-term acute care that
will enable it to treat most types of critical care patients, regardless of
their diagnosis or medical condition, with the objective of returning these
patients to full activity.
"THC offers managed care organizations and indemnity insurance payors a
single source from which to obtain long-term acute care services . . ."
Set forth below is certain summary consolidated financial information for
the Company excerpted or derived from the audited financial information
contained in the Company 10-K and the Company 10-Q. More comprehensive financial
information is included in such reports (including management's discussion and
analysis of financial condition and results of operations) and other documents
filed by the Company with the Commission, and the following summary is qualified
in its entirety by reference to such report and other documents and all of the
financial information and notes contained therein. Copies of such report and
other documents may be examined at or obtained from the Commission or from the
NYSE and PSE in the manner set forth below.
TRANSITIONAL HOSPITALS CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 28/29, FISCAL YEAR ENDED NOVEMBER 30,
----------------------- ------------------------------
1997 1996 1996 1995 1994
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT OPERATIONS INFORMATION:
Net operating revenues................. $ 74,916 $127,489 $503,266 $514,991 $423,955
Operating expense...................... 58,992 101,277 402,686 393,146 328,508
Net (loss) income...................... 4,701 3,723 (5,352) (41,632) 10,220
Net (loss) income per Share............ 0.12 0.09 (0.12) (0.95) 0.24
Average number of Shares............... 40,697 43,702 43,942 43,642 43,645
</TABLE>
<TABLE>
<CAPTION>
AT FEBRUARY AT NOVEMBER 30,
28, -------------------
1997 1996 1995
------------ -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Current Assets......................... $181,413 $206,243 $195,347
Total assets........................... 437,885 465,947 604,625
Current Liabilities.................... 62,702 65,033 80,025
Long-term debt, exclusive of current
maturities.......................... 12,706 14,858 84,883
Total liabilities...................... 79,591 83,748 205,836
Stockholder's equity................... 358,294 382,199 398,789
</TABLE>
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources and is qualified in its entirety by reference thereto. Although
Vencor, the Purchaser or the Dealer Manager has no knowledge that would indicate
that any statements contained herein based on such documents and records are
untrue, Vencor, the Purchaser or the Dealer Manager cannot take responsibility
for the accuracy or completeness of the information contained in such documents
and records, or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to Vencor, the Purchaser or the Dealer Manager.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities, any material interests of such
persons in transactions with the Company and other matters is required
14
<PAGE> 18
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information should be available for inspection at the public reference room at
the Commission's office located at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C., and also should be available for inspection and copying at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601. Copies of this material may also be obtained, by mail,
upon payment of the Commission's customary charges, by writing to its principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such
material should also be available for inspection at the NYSE, 20 Broad Street,
New York, New York and the PSE, 301 Pine Street, San Francisco, California.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND VENCOR. The Purchaser
is a Delaware corporation and to date has engaged in no activities other than
those incident to its formation and the commencement of the Offer. The Purchaser
is a direct wholly-owned subsidiary of Vencor. The principal executive offices
of the Purchaser and Vencor are located at 3300 Providian Center, 400 West
Market Street, Louisville, Kentucky 40202.
Vencor is one of the nation's largest providers of healthcare services
primarily focusing on the needs of the elderly. At December 31, 1996, Vencor's
operation included 38 long-term acute care hospitals containing 3,325 licensed
beds, 313 skilled nursing centers containing 39,619 licensed beds, 34
institutional pharmacies and, through its affiliate, Atria Communities, Inc., 21
assisted and independent living communities with 2,942 units. Healthcare
services provided through this network of facilities included long-term
intensive hospital care, nursing care, contract respiratory therapy services,
acute cardiopulmonary care, subacute and post-operative care, inpatient and
outpatient rehabilitation therapy, specialized cared for Alzheimer's disease,
hospice care, home health care, pharmacy services and assisted and independent
living. At December 31, 1996, Vencor was providing contract healthcare services
to over 4,000 nursing and subacute care centers. Vencor also continues to
develop Protouch(TM), formerly known as VenTouch(R), a comprehensive paperless
clinical information system designed to increase the operating efficiencies of
Vencor's facilities.
In March 1997, Vencor acquired TheraTx, Incorporated, a Delaware
corporation ("TheraTx") through a merger (the "TheraTx") following a cash tender
offer for $17.10 per share of Common Stock, par value $.001, of TheraTx. TheraTx
provides subacute rehabilitation and respiratory therapy program management
services to skilled nursing facilities and operates owned, leased and managed
inpatient facilities that provide a broad range of subacute, specialty and basic
medical and other geriatric services. Subacute care is provided to patients who
(i) are medically stable but fragile, and recovering from an accident, illness
or surgery; (ii) require a coordinated array of extensive nursing,
rehabilitation or other ancillary services in an inpatient setting; and (iii)
have clearly defined discharge goals, generally to their homes or other
community settings. Subacute care providers bridge the gap between higher-cost
acute-care hospitals and similar providers and lower-cost traditional skilled
nursing facilities that lack the intensive coordinated services required to care
for higher acuity patients.
TheraTx also provides occupational healthcare and related services in
outpatient clinics. Occupational medicine is the treatment of individuals
injured in the workplace. The treatment of work-related injuries typically
involves intense clinical care, including physical therapy and frequent
examinations. The goal is to return the employee to work as soon as is medically
feasible and minimize the employer's and insurer's lost-time wages, disability
payments and possible legal costs.
In addition to its primary practice areas, TheraTx operates outpatient
surgery centers, owns and operates an acute-care specialty hospital, provides
respiratory therapy and related services to hospitals and provides medical
supply distribution and related services to the long-term care industry.
Additional information concerning Vencor is set forth in Vencor's Annual
Report on Form 10-K for the year ended December 31, 1996, which report may be
obtained from the Commission in the manner set forth with respect to information
concerning the Company in Section 8.
Additional information concerning TheraTx is set forth in TheraTx's Annual
Report on Form 10-K for the year ended December 31, 1996, which report may be
obtained from the Commission in the manner set forth with respect to information
concerning the Company in Section 8.
15
<PAGE> 19
Set forth below is certain selected summary consolidated financial
information of Vencor:
VENCOR, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $2,577,783 $2,323,956 $2,032,827
Income before income taxes............................. 83,180 32,364 132,920
Income from operations................................. 48,005 8,363 86,139
Extraordinary loss on extinguishment of debt, net of
income tax benefit..................................... -- (23,252) (241)
---------- ---------- ----------
Net income (loss)...................................... $ 48,005 $ (14,889) $ 85,898
========== ========== ==========
Earnings (loss) per common and common equivalent share:
Primary:
Income from operations............................ $ 0.68 $ 0.21 $ 1.37
Extraordinary loss on extinguishment of debt...... -- (0.37) --
---------- ---------- ----------
Net income (loss).................................... $ 0.68 $ (0.16) $ 1.37
========== ========== ==========
Fully diluted:
Income from operations............................... $ 0.68 $ 0.29 $ 1.28
Extraordinary loss on extinguishment of debt......... -- (0.32) --
---------- ---------- ----------
Net income (loss).................................... $ 0.68 $ (0.03) $ 1.28
========== ========== ==========
Shares used in computing earnings (loss) per common and
common equivalent share:
Primary.............................................. 70,702 62,318 57,037
Fully diluted........................................ 70,702 71,967 69,014
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................................... $ 320,123 $ 239,666
Assets.............................................................. 1,968,856 1,912,454
Long-term debt...................................................... 710,507 778,100
Stockholders' equity................................................ 797,091 772,064
</TABLE>
16
<PAGE> 20
Set forth below is certain selected summary consolidated financial
information of TheraTx.
THERATX, INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)(2):
Net revenues............................................... $391,155 $314,176 $174,282
Income from operations..................................... 48,579 30,675 16,990
Income before income taxes, minority interest and
extraordinary item....................................... 36,116 20,773 14,564
Income before minority interest and extraordinary item..... 22,752 11,184 11,147
Income before extraordinary item........................... 22,717 11,257 11,593
Net income................................................. 21,583 10,829 11,593
Earnings per share before extraordinary item............... 1.11 0.55 0.73
Net income per share....................................... 1.05 0.53 0.73
Weighted average shares outstanding........................ 20,544 20,407 15,972
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
BALANCE SHEET DATA(1)(2):
Cash and cash equivalents.............................................. $ 10,708 $ 10,530
Working capital........................................................ 108,551 71,270
Total assets........................................................... 385,322 329,798
Total liabilities...................................................... 222,948 189,899
Total stockholders' equity............................................. 162,374 139,899
</TABLE>
- ---------------
(1) Gives effect to the acquisition of Respiratory Care Services, Inc. and
Helian Health Group, Inc., which have been recorded as poolings of
interests.
(2) Effective May 31, 1994, PersonaCare Inc. was acquired by TheraTx in a
transaction accounted for as a purchase. TheraTx statements of operations
for the years ended December 31, 1994 and 1995 include TheraTx results of
operations subsequent to May 31, 1994.
The name, citizenship, business address, present principal occupation, and
material positions held during the past five years of each of the directors and
executive officers of Vencor and the Purchaser are set forth in Schedule I to
this Offer to Purchase.
Except for Jill L. Force, Senior Vice President, Secretary and General
Counsel of Vencor who beneficially owns 243 shares, neither the Purchaser nor
Vencor nor, to the best of their knowledge, any of the persons listed in
Schedule I hereto nor any associate or majority-owned subsidiary of any of the
foregoing, beneficially owns or has a right to acquire any equity securities of
the Company. Neither the Purchaser nor Vencor, nor, to the best of their
knowledge, any of the persons or entities referred to above, nor any director,
executive officer or subsidiary of any of the foregoing, has effected any
transaction in such equity securities during the past 60 days.
Except as set forth in Section 10, neither the Purchaser nor Vencor, nor,
to the best of their knowledge, any of the persons listed in Schedule I hereto,
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies. Except as set forth in the Introduction and
Section 10, there have been no contacts, negotiations or transactions since
January 1, 1994 between Vencor or the Purchaser, or, to the best of their
17
<PAGE> 21
knowledge, any of the persons listed in Schedule I hereto, on the one hand, and
the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets. Except as described in Section 10, neither the Purchaser nor Vencor,
nor, to the best of their knowledge, any of the persons listed in Schedule I
hereto, has since January 1, 1994 had any transaction with the Company or any of
its executive officers, directors or affiliates that would require disclosure
under the rules and regulations of the Commission applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
During the fall of 1996 when it appeared that the Company was going to
dispose of its psychiatric hospitals business, representatives of Vencor
contacted representatives of the Company to determine the Company's interest in
selling its hospitals business to Vencor. Vencor and the Company entered into a
confidentiality agreement, dated October 28, 1996 (the "Confidentiality
Agreement") limiting disclosures of non-public information of the Company
provided to Vencor. The Confidentiality Agreement also provides, among other
things, that for one year from the date of the Confidentiality Agreement Vencor
may not offer to purchase any Shares unless such action is taken in accordance
with a definitive agreement between Vencor and the Company. Vencor believes that
the Company has breached the Confidentiality Agreement, this provision of the
Confidentiality Agreement is unenforceable and that any attempt by the Company
to enforce this provision of the Confidentiality Agreement would constitute a
breach of the Company Board's duties to stockholders.
The Company provided Vencor only with very limited non-public information
during 1996 and in early 1997 and representatives of Vencor contacted the
Company and indicated dissatisfaction with the Company's failure to engage in a
good faith sales process. Thereafter, one of the Company's financial advisors
contacted representatives of Vencor and a more customary, but still limited, due
diligence process was commenced. During this process Vencor indicated an
interest in acquiring the Company Shares for cash after the distribution to
holders of Shares of interests in a liquidating trust that would hold all of the
Company's investment in Behavioral Health Corporation ("BHC"), the corporation
that acquired all of the Company's psychiatric hospitals business, which Vencor
preferred be excluded from the transaction. During the second half of April
Vencor proposed three possible structures to acquire all of the outstanding
Shares, and on April 28 representatives of the Company advised a representative
of Vencor that Vencor's $14.25 per Share proposal was the highest received and
that Vencor could commence detailed due diligence and negotiation of a
definitive acquisition agreement. Representatives of Vencor began a detailed due
diligence investigation at the Company's headquarters and hospitals on April 30.
On the morning of May 2, a representative of the Company told a
representative of Vencor that another bidder might be submitting a higher offer
for the Shares and asking whether Vencor wished to raise its offer. The
representative of Vencor indicated that he was not in a position to determine
whether Vencor could increase its offer at that time. A few hours later, after
conferring with Vencor's Chief Executive Officer, Vencor's representative
submitted a written proposal to acquire the Company for $15.00 per Share in
cash, but shortly thereafter representatives of the Company advised a Vencor
representative that the Company Board had approved a merger agreement with a
third party with respect to a transaction at $14.55 per Share and containing a
termination fee. The Vencor representative advised the Company representatives
that he believed the failure to provide Vencor with an opportunity to pay a
higher price before granting a termination fee was unfair, that the process had
been manipulated to achieve a sale to a party favored by management of the
Company and that the Company's actions would disadvantage the Company's
stockholders. The Company's representative noted that the Company Board would
consider any proposal Vencor might make, and if Vencor intended to submit a
proposal over the weekend that the Company would hold a meeting of the Company
Board on May 4 to consider it. On May 3, a representative of Vencor communicated
to a representative of the Company that Vencor continued to work toward
submitting a proposal but it could not complete its work by May 4.
On May 7, 1997, James H. Gillenwater, Jr., Senior Vice President of Vencor
sent the following letter to Richard L. Conte, Chairman and Chief Executive
Officer of the Company:
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On May 7, 1997, James H. Gillenwater, Jr., Senior Vice President of Vencor
sent the following letter to Richard L. Conte, Chairman and Chief Executive
Officer of the Company:
May 7, 1997
Mr. Richard L. Conte
Chairman and Chief Executive Officer
Transitional Hospitals Corporation
5110 West Sahara Avenue
Las Vegas, NV 89102
Dear Richard:
As I told you when I was leaving your offices last Friday afternoon, we do
not understand the decisions of the Board of Directors of Transitional Hospitals
Corporation ("THC") to agree to sell the company to Select Medical Corporation
("Select"), and to grant Select a huge break-up fee, without seeking a higher
offer from Vencor. Vencor was actively negotiating a definitive agreement with
THC, and informed you immediately prior to the board meeting that the due
diligence process was completed, that Vencor was prepared to execute a mutually
acceptable definitive agreement within 48 hours, and that Vencor was open to
further discussions about price. We do not believe your decisions were in the
best interests of your shareholders.
As a result of these actions, Vencor is today commencing a tender offer for
all of the outstanding shares of THC at a price of $16.00 per share, net to the
sellers, in cash. We have concluded that this course of action will create the
best opportunity for a fair auction of THC, will prevent any possibility of
misunderstanding as to our intentions, and will generate the greatest value for
THC shareholders.
We will also agree to give THC's shareholders two-thirds of any amounts by
which we or THC are able to reduce the $19.4 million break-up fee payable to
Select. We intend to pursue all avenues to increase this price by eliminating
the payment of a break-up fee to Select, and hope that THC will do the same.
We believe that Vencor's offer includes several compelling advantages over
the competing agreement with THC. These include a higher price, a faster
approval period, and the opportunity for all of the field employees of THC to
work with a leading healthcare company committed to growth and excellence. We
believe that Vencor will be able to obtain all necessary regulatory approvals
and close a transaction within 30 to 45 days. We are making filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 today, and expect to make
all other required filings by the end of the week. In contrast, it appears that
THC's agreement to sell to Select will not be completed for many months. In
addition, that transaction is likely to raise issues with state regulators, both
with respect to its financial backers and the proposed management team.
Vencor remains fully committed to the acquisition of THC. To that end, we
are prepared to enter into negotiations at any time with respect to the merger
agreement that our counsel will forward to your counsel today. We hope that the
Board of Directors of THC will promptly decide to enter into a merger agreement
with Vencor.
Sincerely,
VENCOR, INC.
/s/ JAMES H. GILLENWATER, JR.
--------------------------------------
James H. Gillenwater, Jr.
cc: Board of Directors of THC
On May 7, 1997, Vencor commenced the Offer.
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11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
General. The purpose of the Offer is to acquire for cash as many
outstanding Shares as possible as a first step in acquiring the entire equity
interest in the Company.
Vencor is seeking to negotiate with the Company a definitive acquisition
agreement pursuant to which the Company would, as soon as practicable upon
consummation of the Offer, consummate the Merger. In the Merger, each Share that
is issued and outstanding immediately prior to the effective time of the Merger
(other than Shares held in the treasury of the Company or owned by Vencor, the
Purchaser or any direct or indirect wholly owned subsidiary of Vencor, or held
by stockholders who properly exercise dissenters' rights, if any) would be
converted pursuant to the terms of the Merger into the right to receive an
amount in cash equal to $16.00 per Share.
If the Purchaser acquires 66 2/3% of the outstanding Shares pursuant to the
Offer, it will have the vote necessary under the Articles and Nevada law to
approve the Merger. The merger agreement that the Purchaser and Vencor would
then propose to enter into with the Company would provide that the Purchaser
will be merged into the Company.
In connection with the Offer and Merger, Vencor and the Purchaser intend,
if necessary, to nominate, and solicit proxies for the election of the Vencor
Nominees to replace all the members of the Company Board at the Annual Meeting.
Vencor expects that, if elected, and subject to their fiduciary duties under
applicable law, the Vencor Nominees would cause the Company Board to: approve
the Merger; amend the Rights Agreement or redeem the Rights, or otherwise act to
ensure that the Rights Condition is satisfied; satisfy the Select Medical
Termination Condition; satisfy the Control Share Condition; satisfy the Business
Combination Condition; satisfy the Healthcare Condition; and take any other
actions necessary to permit the Offer and the Merger to be consummated. Vencor
may also solicit proxies or consents to amend the Bylaws or for other actions to
facilitate completion of the Offer and the Merger. In connection with the Offer,
Vencor or Purchaser may commence a solicitation of proxies from the Company's
stockholders against approval of the Select Medical Merger. Any such
solicitations will be made pursuant to separate proxy materials complying with
the requirements of Section 14(a) of the Exchange Act.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION WHICH
VENCOR AND/OR THE PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE
PROXY SOLICITATION MATERIALS COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF
SECTION 14(a) OF THE EXCHANGE ACT, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Plans for the Company. In connection with the Offer, Vencor and the
Purchaser have reviewed, and will continue to review, on the basis of publicly
available information, various possible business strategies that they might
consider in the event that the Purchaser and Vencor acquire control of the
Company. In addition, if and to the extent that the Purchaser and Vencor acquire
control of the Company or otherwise obtain access to the books and records of
the Company, Vencor and the Purchaser intend to conduct a detailed review of the
Company and its assets, financial projections, corporate structure,
capitalization, operation, properties, policies, management and personnel and
consider and determine what, if any, changes would be desirable in light of the
circumstances which then exist. Such strategies might include, among other
things, changes in the Company's business, facility locations, corporate
structure, marketing strategies, capitalization, or management. In particular,
with respect to the Company's investment in BHC, Vencor and the Purchaser would
consider means by which they could maximize the value of such investment,
recognizing contractual limitations on their ability to dispose of this
investment.
Appraisal Rights and "Going-Private" Transactions. Upon consummation of
the Merger, if, as of the record date fixed to determine the stockholders of the
Company entitled to receive notice of and to vote at the meeting of stockholders
of the Company to act upon the Merger, the Shares are neither (i) listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the
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<PAGE> 24
National Association of Securities Dealers, Inc. (the "NASD") nor (ii) held of
record by more than 2,000 holders, holders of Shares who do not vote in favor of
the Merger and who comply with applicable statutory procedures under the NGCL
will be entitled to receive a judicial determination and payment of the "fair
value" (excluding any element of value arising from the accomplishment or
expectation of the Merger) of their Shares (subject to certain exceptions). The
value so determined could be the same as, or more or less than, the price per
Share offered pursuant to the Offer or proposed to be paid in the Merger. The
Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to
certain "going-private" transactions and which may under certain circumstances
be applicable to the Merger. Rule 13e-3 would be inapplicable if (i) the Shares
were deregistered under the Exchange Act prior to the Merger or other business
combination or (ii) if holders of Shares receive only equity securities of
Vencor in the Merger. If applicable, Rule 13e-3 would require, among other
things, that certain financial information concerning the Company and certain
information relating to the fairness of the Merger and the consideration offered
to minority stockholders be filed with the Commission and distributed to
minority stockholders before the consummation of any such transaction.
12. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to purchase all of the outstanding Shares pursuant to
the Offer and the Merger and to pay related fees and expenses will be
approximately $585,000,000. The Purchaser expects to obtain these funds from
capital contributions or advances made by Vencor. Vencor plans to obtain the
funds for such capital contributions or advances from a combination of its and
the Company's available cash, and Vencor's working capital, existing credit
facilities, borrowings under credit facilities that Vencor will seek to obtain
from commercial banks and/or issuance of public debt. Although there are no
commitments by such borrowing sources at this time, Vencor intends to have such
credit facility or facilities in effect prior to the satisfaction or waiver of
the conditions to the Offer.
It is anticipated that the indebtedness incurred by Vencor in connection
with the Offer and the Merger will be paid from funds generated internally by
Vencor and its subsidiaries (including, after the Merger, if consummated,
dividends paid by the surviving corporation and its subsidiaries), through
additional borrowings, through application of proceeds of dispositions or
through a combination of two or more such sources. No final decisions have been
made, however, concerning the method Vencor will employ to repay such
indebtedness. Such decisions, when made will be based on Vencor's review from
time to time of the advisability of particular actions, as well as on prevailing
interest rates and financial and other economic conditions.
13. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, until (i) expiration or termination of all applicable waiting
periods under the HSR Act and (ii) satisfaction of the Rights Condition, the
Select Medical Termination Condition, the Control Share Condition, the Business
Combination Condition and the Healthcare Condition, the Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered shares promptly after termination or withdrawal of the Offer),
Purchaser shall not be required to pay for, or may delay the acceptance for
payment of or payment for, any tendered Shares, or may, in its sole discretion,
terminate or amend the Offer as to any Shares not then accepted for payment if
the Minimum Condition has not been satisfied, or, if on or after May 7, 1997,
and at or before the Expiration Time, any of the following events shall occur:
(a) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE or in the
over-the-counter market, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) a
commencement or escalation of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any
governmental or regulatory authority, agency, commission or other entity,
domestic or foreign ("Governmental Entity"), on, or any other event which
might affect, the extension of credit by banks or other lending
institutions, (v) any extraordinary or material adverse change in the
United States securities or financial markets, generally, including,
without limitation, a decline of at least 15% in the Dow Jones Industrial
Average or Standard & Poor's 500 Stock Index or (vi) in the case of any of
the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
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<PAGE> 25
(b) there shall be threatened, instituted or pending any action,
litigation, proceeding, investigation or other application (an "Action")
before any court or other Governmental Entity by any Governmental Entity:
(i) challenging the acquisition by Vencor or the Purchaser of Shares,
seeking to restrain or prohibit the consummation of the transactions
contemplated by the Offer or the Merger or other subsequent business
combination, seeking to obtain any material damages or otherwise directly
or indirectly relating to the transactions contemplated by the Offer or the
Merger or other subsequent business combination; (ii) seeking to prohibit,
or impose any material limitations on, the Purchaser's or Vencor's
ownership or operation of all or any portion of their or the Company's
business or assets (including the business or assets of their respective
affiliates and subsidiaries) or to compel Vencor or the Purchaser to
dispose of or hold separate all or any portion of Vencor's or the
Purchaser's or the Company's business or assets (including the business or
assets of their respective affiliates and subsidiaries) as a result of the
transactions contemplated by the Offer or the Merger or other subsequent
business combination; (iii) seeking to make the acceptance for payment,
purchase of, or payment for, some or all of the Shares illegal or render
the Purchaser unable to, or result in a delay in, or restrict the ability
of the Purchaser to accept for payment, purchase or pay for some or all of
the Shares; (iv) seeking to impose material limitations on the ability of
Vencor or the Purchaser effectively to acquire or hold or to exercise full
rights of ownership of the Shares including, without limitation, the right
to vote the Shares purchased by them on an equal basis with all other
Shares on all matters properly presented to the stockholders; or (v) that,
in any event, in the judgment of Vencor, would be reasonably likely to have
a material adverse effect on the financial condition, operations,
properties, prospects, business or operations of the Company or Vencor or
the Purchaser (or any of their respective affiliates or subsidiaries) or
the value of the Shares to the Purchaser or the benefits expected to be
derived by Vencor or the Purchaser as a result of consummation of the
transactions contemplated by the Offer and the Merger;
(c) any statute, rule, regulation, order or injunction shall be
sought, proposed, enacted, promulgated, entered, enforced or deemed or
become applicable to the Offer or the Merger that results in any of the
effects of, or have any of the consequences referred to in clauses (i)
through (v) of paragraph (b) above;
(d) a tender or exchange offer for some portion or all of the Shares
shall have been commenced or publicly proposed to be made by another person
(including the Company or its subsidiaries), or it shall have been publicly
disclosed or Vencor shall have learned that (i) any person, entity or
"group" (as defined in Section 13(d) of the Exchange Act and the rules
promulgated thereunder) shall have become the beneficial owner (as defined
in Section 13(d) of the Exchange Act and the rules promulgated thereunder)
of more than 5% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the formation of
a group or otherwise, or shall have been granted any right, option or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 5% of any class or series of capital stock of the Company (including
the Shares) other than acquisitions for bona fide arbitrage purposes only
and except as disclosed in a Schedule 13D or Schedule 13G on file with the
Commission on the date of this Offer to Purchase; or (ii) any such person,
entity or group, which before the date of this Offer to Purchase, had filed
such a Schedule 13D or Schedule 13G with the Commission has acquired or
proposes to acquire, through the acquisition of stock, the formation of a
group or otherwise beneficial ownership of an additional 1% or more of any
class or series of capital stock of the Company (including the Shares), or
shall have been granted any right, option or warrant, conditional or
otherwise, to acquire beneficial ownership of an additional 1% or more of
any class or series of capital stock of the Company (including the Shares),
other than acquisitions for bona fide arbitrage purposes only; or (iii) any
person, entity or group shall have entered into or amended a definitive
agreement or an agreement in principle or made a proposal with respect to a
tender offer or exchange offer for some portion or all of the Shares or a
merger, consolidation or other business combination with or involving the
Company;
(e) the Company or any of its subsidiaries, joint ventures or
partnerships or other affiliates shall have (i) split, combined or
otherwise changed, or authorized or proposed the split, combination or
other change, of the Shares or its capitalization, (ii) acquired or
otherwise caused a reduction in the number of, authorized or proposed the
acquisition or other reduction in the number of, any presently outstanding
Shares or other securities or equity interests of the Company, (iii)
issued, distributed or sold or authorized or proposed the issuance,
distribution or sale of, additional Shares, other than Shares issued or
sold upon the exercise or
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conversion (in accordance with publicly disclosed terms thereof) of
employee stock options outstanding on November 30, 1996 or issued since
that date in the ordinary course of business consistent with past practice,
Shares of any other class of capital stock or other equity interests, other
voting securities, debt securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of
the foregoing, (iv) declared, paid or proposed to declare to pay any cash
dividend or other distribution on any shares of capital stock of the
Company, (v) altered or proposed to alter any material term of any
outstanding security or material contract, permit or license, (vi) incurred
any debt other than in the ordinary course of business or any debt
containing, in the sole judgment of the Purchaser, burdensome covenants or
security provisions, (vii) authorized, recommended, proposed, entered into
or amended an agreement with respect to any merger, consolidation,
recapitalization, liquidation, dissolution, business combination,
acquisition of assets, disposition of assets, release or relinquishment of
any material contractual or other right of the Company or any of its
subsidiaries or any comparable event not in the ordinary course of
business, (viii) authorized, recommended, proposed or entered into, or
announced its intention to authorize, recommend, propose or enter into, any
agreement or arrangement with any person or group that, in Vencor's sole
opinion, could have the effect of impairing the ability of the Purchaser to
acquire the Company or could adversely affect either the value of the
Company or any of its subsidiaries, joint ventures or partnerships or the
value of the Shares to Vencor, (ix) transferred into escrow any amounts
required to fund any existing benefit, employment or severance agreements
with any of its employees, consultants or directors or entered into any new
employment, change in control, severance, executive compensation or similar
agreement, arrangement or plan with or for one or more of its employees,
consultants or directors, or entered into or amended, or made grants or
awards pursuant to, any agreements, arrangements or plans so as to provide
for increased benefits to one or more employees, consultants or directors,
whether or not as a result of or in connection with the transaction
contemplated by the Offer or the Merger, (x) except as may be required by
law, taken any action to terminate or amend any employee benefit plan (as
defined in Section 3(c) of the Employee Retirement Income Security Act of
1974, as amended) of the Company or any of its subsidiaries, or the
Purchaser shall have become aware of any such action which was not
previously disclosed in publicly available filings or otherwise known to
the Purchaser as of the date hereof or (xi) the Company or any of its
subsidiaries shall have failed to comply with any state licensure law, rule
or regulation Medicare or Medicaid law, rule, regulation, manual or other
condition of participation in the Medicare or Medicaid programs, or have
failed to file any return, cost report or other filing in the manner
prescribed thereby except where the failure to be in such compliance would
be immaterial to the financial condition, properties, prospects, business
or operations of the Company and its subsidiaries, taken as an entirety
(xii) amended or authorized or proposed any amendment to the Articles or
the Bylaws or similar organizational documents, or the Purchaser shall
become aware that the Company or any of its subsidiaries shall have
proposed or adopted any such amendment which shall not have been previously
disclosed;
(f) any Action is commenced, instituted or pending by a
non-governmental person or entity which, if successful on the merits, could
have a material adverse effect on the financial condition, operations,
properties, prospects, business or operations of the Company or Vencor or
the Purchaser (or any of their respective affiliates or subsidiaries) or
the value of the Shares to Vencor or the Purchaser or the benefits expected
to be derived by Vencor and the Purchaser as a result of the consummation
of the transactions contemplated by the Offer and the Merger;
(g) any change shall have occurred or be threatened (or any
development shall have occurred or been threatened involving a prospective
change) in the financial condition, operations, properties, prospects,
businesses or results of operations of the Company or any of its
subsidiaries that could be materially adverse to the Company and its
subsidiaries taken as a whole, or Vencor or the Purchaser shall have become
aware of any fact (including, but not limited to, any such change) that
could have a material adverse effect on the value of the Shares or the
Company and its subsidiaries taken as a whole to Vencor or the Purchaser;
(h) Vencor shall have reached an agreement or understanding with the
Company providing for termination of the Offer, or Vencor or any of its
affiliates shall have entered into a definitive agreement or announced an
agreement in principle with the Company providing for a merger or other
business
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<PAGE> 27
combination with the Company or the purchase of stock or assets of the
Company which does not contemplate the Offer;
(i)(A) any material contractual right of the Company or any of its
subsidiaries or affiliates shall be impaired or otherwise adversely
affected or any material amount of indebtedness of the Company or any of
its subsidiaries, joint ventures or partnerships shall become accelerated
or otherwise become due before its stated due date, in either case, with or
without notice or the lapse of time or both, as a result of the
transactions contemplated by the Offer or the Merger or (B) any covenant,
term or condition in any of the Company's or any of its subsidiaries',
joint ventures' or partnerships' instruments or agreements is or may be
materially adverse to the value of the Shares in the hands of Vencor
(including, but not limited to, any event of default that may ensue as a
result of the consummation of the Offer or the Merger or the acquisition by
Vencor of control of the Company) or (C) any report, document, instrument,
financial statement or schedule of the Company or any of its subsidiaries
filed with the Commission contained, when filed, an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; or
(j) Vencor or the Purchaser shall not have obtained any waiver,
consent, extension, approval, action or non-action from any Governmental
Entity which is necessary to consummate the Offer;
which, in the sole judgments of Vencor and the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Vencor or
the Purchaser) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Vencor and the
Purchaser and may be asserted by Vencor or the Purchaser regardless of the
circumstances (including any action or inaction by Vencor or the Purchaser)
giving rise to such condition or may be waived by Vencor or the Purchaser, by
express and specific action to that effect, in whole or in part at any time and
from time to time in its sole discretion. Any determination by Vencor and the
Purchaser concerning any event described in this Section 13 shall be final and
binding.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after May 7, 1997, the Company
should split, combine or otherwise change the Shares or its capitalization, or
shall disclose that it has taken any such action, then the Purchaser, in its
discretion, may make such adjustments in the Offer consideration and other terms
of the Offer as it deems appropriate to reflect such split, combination or other
change.
If, on or after May 7, 1997, the Company should declare or pay any cash or
stock dividend or other distribution or issue any rights (other than the Rights)
with respect to the Shares, payable or distributable to stockholders of record
on a date occurring on or after May 7, 1997 and prior to the transfer to the
name of the Purchaser or its nominees or transferees on the Company's stock
transfer records of the Shares purchased pursuant to the Offer, then, without
prejudice to the Purchaser's rights under Section 13, (i) the per Share
consideration to be paid pursuant to the Offer will be reduced by the amount of
any such cash dividend or distribution and (ii) the whole of any non-cash
dividend or distribution (including additional Shares or rights as aforesaid)
received by a tendering stockholder shall be required to be promptly remitted
and transferred by the tendering stockholder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance or appropriate assurance thereof, the Purchaser will be, subject
to applicable law, entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
15. CERTAIN LEGAL MATTERS.
General. Except as otherwise disclosed herein, based upon an examination
of publicly available filings with respect to the Company, Vencor and the
Purchaser are not aware of any licenses or other regulatory permits which appear
to be material to the business of the Company and which might be adversely
affected by the acquisition of Shares by the Purchaser pursuant to the Offer or
of any approval or other action by any governmental, administrative or
regulatory agency or authority which would be required for the acquisition or
24
<PAGE> 28
ownership of Shares by the Purchaser pursuant to the Offer. Should any such
approval or other action be required, it is currently contemplated that such
approval or action would be sought or taken. There can be no assurance that any
such approval or action, if needed, would be obtained or, if obtained, that it
will be obtained without substantial conditions or that adverse consequences
might not result to the Company's or Vencor's business or that certain parts of
the Company's or Vencor's business might not have to be disposed of in the event
that such approvals were not obtained or such other actions were not taken, any
of which could cause the Purchaser to elect to terminate the Offer without the
purchase of the Shares thereunder. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See
Section 13.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission ("FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the United States Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The acquisition of Shares by the Purchaser is
subject to these requirements. See Section 2 of this Offer to Purchase as to the
effect of the HSR Act on the timing of the Purchaser's obligation to accept
Shares for payment.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act as of the date of this Offer to Purchase, and the
waiting period under the HSR Act will expire at 11:59 P.M., New York City time,
on the fifteenth calendar day after such filing unless early termination of the
waiting period is granted or Vencor receives a request for additional
information or documentary material prior thereto. If either the FTC or the
Antitrust Division were to request additional information or documentary
material from Vencor, the waiting period would expire at 11:59 P.M., New York
City time, on the tenth calendar day after the date of substantial compliance by
Vencor with such request. Thereafter, the waiting period could be extended only
by agreement or by court order. If the acquisition of Shares is delayed pursuant
to a request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the purchase of and payment for
Shares will be deferred until 10 days after the request is substantially
complied with unless the waiting period is sooner terminated by the FTC or the
Antitrust Division. See Section 2. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the rules
promulgated under the HSR Act, except by agreement or by court order. Any such
extension of the waiting period will not give rise to any withdrawal rights not
otherwise provided for by applicable law. See Section 4.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the Purchaser's
purchase of Shares, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by the Purchaser or the
divestiture of substantial assets of Vencor, the Company or any of their
respective subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if a challenge
is made, what the result will be. See Section 13 of this Offer to Purchase for
certain conditions to the Offer that could become applicable in the event of
such a challenge.
State Takeover Laws. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. In Edgar v.
MITE Corporation, the Supreme Court of the United States held that the Illinois
Business Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS Corporation v. Dynamics Corporation of America, the
Supreme Court held that as a matter of corporate law, and in particular, those
laws concerning corporate governance, a state may constitutionally disqualify an
acquiror of "Control Shares" (ones representing ownership in excess of certain
voting power thresholds e.g. 20%, 33 1/3% or 50%) of a corporation incorporated
in its state and meeting certain other jurisdictional requirements from
exercising voting power with respect to those shares without the approval of a
majority of the disinterested stockholders.
CONTROL SHARES. The Company is incorporated under the laws of Nevada. As
described above, pursuant to the Nevada Control Share Acquisition Statute an
"acquiring person", who acquires a "controlling interest" in an
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<PAGE> 29
"issuing corporation," may not exercise voting rights on any "control share"
unless such voting rights are conferred by a majority vote of the disinterested
stockholders of the issuing corporation at a meeting of such stockholders. See
the Introduction.
The above provisions do not apply if the articles of incorporation or
bylaws of the company in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provide that said provisions do not
apply. The Articles and Bylaws currently do not exclude the Company from the
restrictions imposed by such provisions. The Control Share Condition would be
satisfied if the Bylaws were amended such that, on the tenth day following
consummation of the Offer, the Bylaws provide that the provisions of the Nevada
Control Share Acquisition Statute do not apply, or, if the Purchaser, in its
sole discretion, were satisfied that the Nevada Control Share Acquisition
Statute was invalid or its restrictions were otherwise inapplicable to the
Purchaser in connection with the Offer and the Merger for any reason, including,
without limitation, those specified in the Nevada Control Share Acquisition
Statute.
BUSINESS COMBINATIONS. As further described above, the Nevada Business
Combination Statute restricts the ability of a "resident domestic corporation"
to engage in any combination with an "interested stockholder" for three years
following the interested stockholder's date of acquiring the shares that caused
such stockholder to become an interested stockholder, unless the combination or
the purchase of shares by the interested stockholder on the interested
stockholder's date of acquiring the shares that caused such stockholder to
become an interested stockholder is approved by the board of directors of the
resident domestic corporation before that date. See "Introduction." If the
combination was not previously approved, the interested stockholder may effect a
combination after the three-year period only if such combination meets all of
the requirements of the articles of incorporation of the resident domestic
corporation and such stockholder receives approval from a majority of the
outstanding voting shares of disinterested stockholders or the offer meets
certain fair price criteria.
The Business Combination Condition would be satisfied if the Company Board
approved the Offer and the Merger prior to consummation of the Offer and the
Merger or if the Purchaser, in its sole discretion, were satisfied that the
Nevada Business Combination Statute was invalid or its restrictions were
otherwise inapplicable to the Purchaser in connection with the Offer and the
Merger for any reason, including, without limitation, those specified in the
Nevada Business Combination Statute.
ADDITIONAL STATUTES. The Company, directly or through subsidiaries,
conducts business in a number of states throughout the United States, some of
which have enacted takeover laws. The Purchaser does not know whether any of
these laws will, by their terms, apply to the Offer and has not complied with
any such laws. Should any person seek to apply any state takeover law, the
Purchaser will take such action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to the Offer and the Merger and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer, Purchaser
might be required to file certain information with, or receive approvals from,
the relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer or the Merger. In such case, the
Purchaser may not be obligated to accept for payment any Shares tendered. See
Section 13.
Certain Litigation. On May 7, 1997, Vencor, the Purchaser and an executive
officer of Vencor and the Purchaser who is a long-time stockholder of the
Company filed a Complaint against the Company in the Nevada District Court. This
Complaint seeks, among other things, (i) injunctive relief requiring the Company
Board to redeem the Rights and to make inapplicable to the Offer and any
subsequent merger the Nevada Control Share Acquisition Statute and the Nevada
Business Combination Statute, (ii) injunctive relief to invalidate the
provisions of the Select Medical Merger Agreement providing for a break-up fee
of $19,415,000 in the event the Company terminates the Select Medical Merger
Agreement to enter into a merger agreement with Vencor and (iii) damages against
the Company's directors for breaching their fiduciary duties in connection with
the negotiation and execution of the Select Medical Merger Agreement.
The Rights. The following is a summary of the material terms of the Rights
Agreement. This summary is qualified in its entirety by reference to the Rights
Agreement, a copy of which was filed with the Commission as an Exhibit to the
Company's Registration Statement on Form 8-A dated July 10, 1996 (the "Company
8-A") and
26
<PAGE> 30
should be available for inspection, and copies may be obtained, in the same
manner as set forth in Section 8. The Company 8-A describes the Rights
substantially as follows (defined terms used but not defined in the following
quoted excerpt are used as defined in this Offer to Purchase):
On June 21, 1996, the Company declared a dividend of one Right on each
outstanding Share, payable to stockholders of record on July 16, 1996. Each
Right will entitle the holder thereof after the Rights become exercisable
and until June 20, 2006 (or the earlier redemption, exchange or termination
of the Rights), to buy one one-hundredth of a share of Series B Junior
Participating Preferred Stock (the "Preferred Stock") at an exercise price
of $45.00, subject to certain antidilution adjustments (the "Purchase
Price"). The Rights will be represented by the Share certificates and will
not be exercisable or transferable apart from the Shares until the earlier
of (i) the tenth day after the public announcement that a Person or group
has become an Acquiring Person (a Person who has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the Shares), or
(ii) the tenth day after a Person or group commences, or announces an
intention to commence, a tender or exchange offer, the consummation of
which would result in the beneficial ownership by a Person or group of 15%
or more of the Common Stock (the earlier of (i) and (ii) being called
herein the "Distribution Date"). Prior to the Distribution Date, the
Company Board has the power, under certain circumstances, to postpone the
Distribution Date. Separate certificates representing the Rights will be
mailed to holders of the Shares as of the Distribution Date. The Rights
will first become exercisable on the Distribution Date, unless earlier
redeemed or exchanged, and may then begin trading separately from the
Shares. The Rights will at no time have any voting rights.
In the event that a Person were to become an Acquiring Person (except
pursuant to certain cash offers for all outstanding Shares approved by the
Company Board) or if the Company were the surviving corporation in a merger
and its Shares were not changed or exchanged, each holder of a Right, other
than Rights that are or were acquired or beneficially owned by the
Acquiring Person (which Rights will thereafter be void), will thereafter
have the right to receive upon exercise that number of shares of Common
Stock having a market value of two times the then-current exercise price of
one Right. With certain exceptions, in the event that (i) the Company were
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation or its Shares are changed or
exchanged (other than a merger which follows certain cash offers for all
outstanding Shares approved by the Company Board) or (ii) more than 50% of
the Company's assets or earning power were sold, proper provision shall be
made so that each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the right to receive,
upon exercise thereof, that number of shares of common stock of the
acquiring company which at the time of such transaction would have a market
value of two times the then-current exercise price of one Right.
At any time after a Person has become an Acquiring Person and prior to
the acquisition of 50% or more of the then-outstanding Shares by such
Acquiring Person, the Company Board may cause the Company to acquire the
Rights (other than Rights owned by an Acquiring Person which have become
void), in whole or in part, in exchange for that number of Shares having an
aggregate value equal to the excess of the value of the Shares issuable
upon exercise of a Right after a Person becomes an Acquiring Person over
the Purchase Price.
The Rights are redeemable at $0.01 per Right prior to the first date
of public announcement that a Person or group has become an Acquiring
Person. Prior to the expiration of the period during which the Rights may
be redeemed, the Company Board has the power, under certain circumstances,
to extend the redemption period. The Rights will expire on June 20, 2006
(unless earlier redeemed or exchanged). ChaseMellon Shareholder Services,
L.L.C. is the Rights Agent. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem or to lengthen or shorten the
redemption period shall require the concurrence of a majority of the
Continuing Directors (as defined in the Rights Agreement).
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of
the Preferred Stock of certain rights or warrants to subscribe for or
purchase
27
<PAGE> 31
the Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to
holders of the Preferred Stock of evidences of indebtedness, cash,
securities or assets (excluding regular periodic cash dividends at a rate
not in excess of 125% of the last regular periodic cash dividend
theretofore paid or, in case regular periodic dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net
income per share of the Company for the four quarters ended immediately
prior to the payment of such dividend, or dividends payable in the
Preferred Stock) or of subscription rights or warrants (other than those
referred to above). No adjustments in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price.
Based on its review of publicly available information, Vencor believes that
a Continuing Director is defined in the Rights Agreement as any director who is
not an Acquiring Person, or affiliated or associated with, nominated by or an
employee, director, representative or designee of an Acquiring Person, and who
is a director at the time when such Person becomes an Acquiring Person, or
nominated to be a director after such time and is approved by a majority of
Continuing Directors. Among other provisions, to the understanding of Vencor and
Purchaser, the Rights Agreement also provides that in the event that any Person
becomes an Acquiring Person, the approval of a majority of Continuing Directors
is required for both the initial and any subsequent postponement of the
Distribution Date and for the redemption of the Rights.
Healthcare Regulations. According to materials publicly filed by the
Company, the principal businesses of the Company are in regulated industries.
The Company derives substantial portions of its revenues from third party
payors, including government reimbursement programs such as Medicare and
Medicaid, which may assert jurisdiction as a result of the change of control
over the Company and the indirect changes of control, of the Company's
subsidiaries which would occur if the Offer and the Merger were consummated. In
addition, participants in Medicare and Medicaid programs are required to comply
with state licensure requirements. State licensure requirements and state
certificate of need and similar healthcare laws may require prior approval of
the change of control of the Company and the indirect change of control of the
Company's subsidiaries. Any such approvals might be required either prior to the
acceptance of Shares pursuant to the Offer or prior to the consummation of the
Merger. Based on publicly available information, Vencor believes that the
Company and its subsidiaries currently own or operate facilities in the states
of California, Florida, Illinois, Indiana, Louisiana, Massachusetts, Michigan,
Minnesota, Nevada, New Mexico, Texas, Washington and Wisconsin. Vencor intends
to apply for all necessary approvals and currently expects that it will be able
to obtain all necessary approvals within the next 30 to 45 days.
Federal Reserve Board Regulations. Regulations G, T, U and X (the "Margin
Regulations") promulgated by the Federal Reserve Board place restrictions on the
amount of credit that may be extended for the purpose of purchasing margin stock
(including the Shares) if such credit is secured directly or indirectly by
margin stock. Vencor and the Purchaser will attempt to ensure that the financing
of the acquisition of the Shares will be in compliance with the Margin
Regulations.
16. FEES AND EXPENSES. Credit Suisse First Boston Corporation ("CSFB" or
"Credit Suisse First Boston") is acting as Dealer Manager in connection with the
Offer and has provided certain financial advisory services to the Purchaser in
connection therewith. Purchaser has agreed to pay CSFB as compensation for its
services as Dealer Manager and as financial advisor in connection with the Offer
as follows a financial advisory fee of $100,000 (the "Financial Advisory Fee"),
a fairness opinion fee of $500,000 (the "Fairness Opinion Fee"), a tender offer
fee of $500,000 (the "Tender Offer Fee") and a transaction fee of $4,250,000
(the "Transaction Fee") upon the acquisition of 50 percent or more of the
Shares. Payments of the Financial Advisory Fee the Fairness Opinion Fee and the
Tender Offer Fee will be credited toward the Transaction Fee. The Purchaser has
agreed to reimburse CSFB for its reasonable out-of-pocket expenses, including
the fees and expenses of its counsel and any other advisors retained by CSFB
resulting from or arising out of this transaction, in connection with the Offer,
and has agreed to indemnify CSFB against certain liabilities and expenses in
connection with the Offer and the Merger. Purchaser has agreed to reimburse CSFB
for its reasonable out-of-pocket expenses, including the fees and expenses of
its counsel, in connection with the Offer, and has agreed to indemnify CSFB
against certain liabilities and expenses in connection with the Offer, including
liabilities under the federal securities laws.
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<PAGE> 32
In the ordinary course of its business, CSFB engages in securities trading,
market-making and brokerage activities and may, at any time, hold long or short
positions and may trade or otherwise effect transactions in securities of the
Company.
Purchaser has also retained D.F. King & Co., Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation for such services, plus
reimbursement of out-of-pocket expenses and the Purchaser will indemnify the
Information Agent against certain liabilities and expenses in connection with
the Offer, including liabilities under the federal securities laws.
The Purchaser will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. However, Purchaser may, in its sole
discretion, take such action as it may deem necessary to make the Offer in any
such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
Neither the Purchaser nor Vencor is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction.
The Purchaser and Vencor have filed with the Commission a Statement on
Schedule 14D-1 pursuant to Rule 14d-3 of the General Rules and Regulations under
the Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Statement and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
principal office of the Commission in Washington, D.C., the NYSE and the PSE in
the manner set forth in Section 8.
No person has been authorized to give any information or make any
representation on behalf of Vencor or the Purchaser not contained in this Offer
to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
LV Acquisition Corp.
29
<PAGE> 33
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
VENCOR AND THE PURCHASER
The following tables set forth the name, business address, present
principal occupation and material positions and occupations within the past five
years of each director and executive officer of Vencor and the Purchaser. Unless
otherwise specified, each person listed below is a citizen of the United States
and has his or her principal business address at 3300 Providian Center, 400 West
Market Street, Louisville, Kentucky 40202.
VENCOR
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL
POSITIONS
HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS
NAME AND BUSINESS ADDRESS THEREOF
- ----------------------------------- --------------------------------------------------------
<S> <C>
W. Bruce Lunsford.................. Chairman of the Board, President and Chief Executive
Officer of Vencor since 1985. Member and Chairman of the
Executive Committee (the "Executive Committee") of
Vencor since 1988.
William C. Ballard Jr.............. Director of Vencor since 1988. Member of the Executive
Committee since 1990. Executive Vice President Finance
and Administration of Humana Inc. from 1981 through
1992. Of counsel to Greenebaum Doll & McDonald PLLC
since 1992.
Michael R. Barr.................... Director of Vencor since, 1985. Chief Operating Officer
and Executive Vice President of Vencor since February
1996. Executive Vice President of Vencor and Chief
Executive Officer of Vencor's Hospital Division from
1995 through 1996. Vice President Operations from 1985
through 1995.
Walter F. Beran.................... Director of Vencor since September 1995. Member of the
515 South Flower Street Audit Committee of Vencor (the "Audit Committee") since
Los Angeles, CA 90071 1995. Chairman of Pacific Alliance Group since September
1986.
Donna R. Ecton..................... Director of Vencor since 1992. Member of the Audit
10000 North 31st Avenue Committee since 1992. Chief Operating Officer of
Suite C100 PETsMART, Inc. since December 1996. Chairman, President
Phoenix, AZ 85051 and Chief Executive Officer of Business Mail Express,
Inc. from 1995 through 1996. President and Chief
Executive Officer of Van Houten North America, Inc. and
Andes Candies Inc., from 1991 through 1994.
Greg D. Hudson..................... Director of Vencor since 1991. Member of the Executive
Highway 41A Compensation Committee of Vencor (the "Executive
North Providence, KY 42450 Compensation Committee") since 1991. President of Hudson
Chevrolet-Oldsmobile, Inc. since 1988.
William H. Lomicka................. Director of Vencor since 1987. Member of the Executive
2510 Providian Center Committee since 1988. Member and Chairman of the Audit
400 West Market Street Committee since 1988. President of Mayfair Capital Inc.
Louisville, KY 40202 since 1989.
W. Earl Reed, III.................. Director of Vencor since 1987. Chief Financial Officer
and Executive Vice President of Vencor since November
1995. Vice President Finance and Development of Vencor
from 1987 through 1995.
</TABLE>
I-1
<PAGE> 34
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL
POSITIONS
HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS
NAME AND BUSINESS ADDRESS THEREOF
- ----------------------------------- --------------------------------------------------------
<S> <C>
R. Gene Smith...................... Director of Vencor since 1985 and Vice Chairman of the
3600 National City Tower Board since 1987. Member and Chairman of the Executive
101 South Fifth Street Compensation Committee since 1988. President of New
Louisville, KY 40202 Jersey Blockbuster, Ltd. from 1987 through 1995.
Chairman of the Board of Taco Tico, Inc. since 1988.
Managing General Partner of Direct Program Services
since 1993.
Jack O. Vance...................... Director of Vencor since September 1995. Member of the
3592 Venture Drive Executive Compensation Committee since 1995. Managing
Huntington Beach, CA 92649 Director of Management Research since 1990.
Thomas T. Ladt..................... Executive Vice President Operations of Vencor since
February 1996. President of Vencor's Hospital Division
from 1995 through 1996. Vice President of Vencor's
Hospital Division from 1995 through 1996. Regional
Director of Operations of Vencor from 1989 through 1993.
Jill L. Force...................... Senior Vice President, General Counsel and Corporate
Secretary of Vencor since December 1996. Vice President,
General Counsel and Corporate Secretary from 1995
through 1996. General Counsel and Corporate Secretary
from 1989 through 1995.
James H. Gillenwater, Jr. ......... Senior Vice President of Planning and Development of
Vencor since December 1996. Vice President of Planning
and Development of Vencor from November 1995 through
December 1996. Director of Planning and Development of
Vencor from 1989 through 1995.
</TABLE>
I-2
<PAGE> 35
THE PURCHASER
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL
POSITIONS
HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS
NAME AND BUSINESS ADDRESS THEREOF
- ----------------------------------- --------------------------------------------------------
<S> <C>
W. Bruce Lunsford.................. Chairman of the Board of Directors, President and Chief
Executive Officer of the Purchaser since May 1997.
Chairman of the Board, President and Chief Executive
Officer of Vencor since 1985. Member and Chairman of the
Executive Committee of Vencor since 1988.
W. Earl Reed, III.................. Director and Vice President of the Purchaser since May
1997. Director of Vencor since 1987. Chief Financial
Officer and Executive Vice President of Vencor since
November 1995. Vice President Finance and Development of
Vencor from 1987 through 1995.
Michael R. Barr.................... Director and Vice President of the Purchaser since May
1997. Director of Vencor since 1985, Chief Operating
Officer and Executive Vice President of Vencor since
February 1996. Executive Vice President of Vencor and
Chief Executive Officer of Vencor's Hospital Division
from 1995 through 1996. Vice President Operations of
Vencor from 1985 through 1995.
Thomas T. Ladt..................... Director and Vice President of the Purchaser since May
1997. Executive Vice President Operations of Vencor
since February 1996. President of Vencor's Hospital
Division from 1995 through 1996. Vice President of
Vencor's Hospital Division from 1995 through 1996.
Regional Director of Operations of Vencor from 1989
through 1993.
Jill L. Force...................... Secretary of the Purchaser since May 1997. Senior Vice
President, General Counsel and Corporate Secretary of
Vencor since December 1996. Vice President, General
Counsel and Corporate Secretary of Vencor from 1995
through 1996. General Counsel and Corporate Secretary of
Vencor from 1989 through 1995.
James H. Gillenwater, Jr. ......... Vice President of the Purchaser since May 1997. Senior
Vice President of Planning and Development of Vencor
since December 1996. Vice President of Planning and
Development of Vencor from November 1995 through
December 1996. Director of Planning and Development of
Vencor from 1989 through 1995. Vice President of the
Purchaser since May 1997.
</TABLE>
I-3
<PAGE> 36
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for the Shares and any other
required documents should be sent by each stockholder of the Company or such
stockholder's broker-dealer, commercial bank, trust company or other nominee to
the Depositary as follows:
The Depositary is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Facsimile (for Eligible Institutions Only):
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges ATTN: Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569 c/o The Depository Trust Company 14 Wall Street, 8th Floor
Suite 4660 -- TTX 55 Water Street, DTC TAD Suite 4680 -- TTX
Jersey City, NJ 07303-2569 Vietnam Veterans Memorial Plaza New York, NY 10005
New York, NY 10041
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 WATER STREET
NEW YORK, NY 10005
CALL COLLECT (212) 269-5550
CALL TOLL FREE (800) 755-3105
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
ELEVEN MADISON AVENUE
NEW YORK, NY 10010-3629
CALL TOLL FREE (800) 646-4543
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK)
OF
TRANSITIONAL HOSPITALS CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED MAY 7, 1997
BY
LV ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569 c/o The Depository Trust Company 14 Wall Street
Suite 4660-TTX 55 Water Street, DTC TAD 8th Floor, Suite 4680-TTX
Jersey City, NJ 07303-2569 Vietnam Veterans Memorial Plaza New York, NY 10005
New York, NY 10041
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) or, if applicable, rights (as defined in the Offer to
Purchase (as defined below)), are to be forwarded herewith or, unless an Agent's
Message (as defined in Section 3 of the Offer to Purchase) is utilized, if
delivery of Shares is to be made by book-entry transfer to an account maintained
by the Depositary at a Book-Entry Transfer Facility (as defined in Section 3 of
the Offer to Purchase) and pursuant to the procedures set forth in Section 3 of
the Offer to Purchase. Stockholders who deliver Shares or, if applicable, Rights
by book-entry transfer are referred to herein as Book-Entry Stockholders and
other stockholders are referred to herein as Certificate Stockholders.
Stockholders whose certificates for Shares or, if applicable, Rights are not
immediately available or who cannot comply with the procedure for book-entry
transfer on a timely basis, or who cannot deliver all required documents to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), may tender their Shares or, if applicable, Rights in accordance with
the Guaranteed Delivery Procedure set forth in Section 3 of the Offer to
Purchase. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Unless the Rights Condition (as defined in the Offer to Purchase) is
satisfied, stockholders will be required to tender one Right (subject to
adjustment) for each Share tendered in order to effect a valid tender of Shares.
Accordingly, stockholders who sell their Rights separately from their Shares and
do not otherwise acquire Rights may not be able to satisfy the requirements of
the Offer for a valid tender of Shares.
Until the close of business on the Distribution Date (as defined in the
Offer to Purchase), the Rights will be transferred with and only with the
certificates for Shares and the surrender for transfer of any certificates for
Shares will also constitute the transfer of the Rights associated with the
Shares represented by such certificate.
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARES TENDERED
ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered. See Instruction 4.
================================================================================
- --------------------------------------------------------------------------------
DESCRIPTION OF RIGHTS TENDERED(1)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) RIGHTS CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF RIGHTS NUMBER
CERTIFICATE REPRESENTED BY OF RIGHTS
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Needs to be completed only if the tendered Rights are represented by
separate Rights Certificates. In such case provide the certificate numbers
of such Rights Certificates.
(2) Need not be completed by Book-Entry Stockholders.
(3) Unless otherwise indicated, it will be assumed that all Rights being
delivered to the Depositary are being tendered. See Instruction 4.
================================================================================
<PAGE> 3
[ ] CHECK HERE IF TENDERED SHARES OR RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY FINANCIAL INSTITUTIONS
THAT ARE PARTICIPANTS IN THE SYSTEM OF ANY BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES OR RIGHTS BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
- --------------------------------------------------------------------------------
Check box of Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES OR RIGHTS ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s)
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------------------------------------------
Name of Institution that Guaranteed Delivery
----------------------------------------------------------------------
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to LV Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of Vencor, Inc., a
Delaware corporation ("Vencor"), the above described shares of Common Stock, par
value $1.00 per share (the "Shares"), of Transitional Hospitals Corporation, a
Nevada corporation (the "Company"), including the associated rights to purchase
Series B Junior Participating Preferred Stock (the "Rights") issued pursuant to
the Rights Agreement, dated June 21, 1996 (the "Rights Agreement"), between
Community Psychiatric Centers (the predecessor name of the Company) and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"),
at $16.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated May 7, 1997, receipt of
which is hereby acknowledged, and in this related Letter of Transmittal (which,
as amended from time to time, together constitute the "Offer"). Unless the
context requires otherwise, all references to Shares herein shall include the
associated Rights. The undersigned understands that the Purchaser reserves the
right to transfer or assign, from time to time, in whole or in part, to one or
more of its affiliates, the right to purchase the Shares tendered herewith.
Upon the terms and conditions of the Offer, subject to, and effective upon,
acceptance for payment of, and payment for, the Shares tendered herewith in
accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to the Purchaser, all right, title and interest in and to the
Shares that are being tendered hereby on or after May 7, 1997 (collectively,
"Distributions"), and appoints First Chicago Trust Company of New York (the
"Depositary") the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares (and any Distributions) with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to the fullest extent of such stockholder's rights
with respect to such Shares (and any Distributions) (a) to deliver certificates
for such Shares and Rights (individually, a "Share Certificate" and a "Right
Certificate," respectively) (and any Distributions) or transfer ownership of
such Shares (and any Distributions) on the account books maintained by a
Book-Entry Transfer Facility, together in either such case with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchaser,
(b) to present such Shares (and any Distributions) for transfer on the books of
the Company and (c) to receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distributions), all in accordance
with the terms and the conditions of the Offer.
The undersigned understands that, unless the Rights Condition (as defined
in the Offer to Purchase) is satisfied, stockholders will be required to tender
one Right (subject to adjustment) for each Share tendered in order to effect a
valid tender of such Shares. The undersigned understands that if Rights
Certificates are issued to holders of Shares prior to the time a holder's Shares
are tendered pursuant to the Offer, Rights Certificates representing a number of
Rights equal to the number of Shares being tendered herewith must be delivered
to the Depositary or, if available, a Book-Entry Confirmation received by the
Depositary with respect thereto, in order for Shares to be validly tendered. If
the Distribution Date occurs and Rights Certificates are not distributed prior
to the time Shares are tendered herewith, Rights may be tendered prior to a
stockholder receiving the Rights Certificates by use of the guaranteed delivery
procedures. See Section 3 of the Offer to Purchase. The undersigned agrees
hereby to deliver Rights Certificates representing all Rights formerly
associated with the number of Shares tendered herewith to the Depositary within
three trading days after the date such Rights Certificates are distributed.
The undersigned hereby irrevocably appoints the designees of the Purchaser,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to the full extent of such stockholder's rights
with respect to the Shares tendered hereby which have been accepted for payment
and with respect to any and all cash dividends, distributions, rights, other
Shares or other securities issued or issuable in respect of such Shares on or
after the date of the Offer to Purchase. This proxy is considered coupled with
an interest in the tendered Shares and Rights. Such appointment is effective if,
when, and only to the extent that, the Purchaser deposits the payment for such
Shares with the Depositary. Upon the effectiveness of such appointment, all
prior powers of attorney, proxies and consents given by the undersigned with
respect to such Shares will be revoked, and no subsequent powers of attorney,
proxies, consents or revocations may be given (and, if given, will not be deemed
effective). The Purchaser's designees will, with respect to the Shares for which
the appointment is effective, be empowered to exercise all voting and any other
rights of such stockholder, as they, in their sole discretion, may deem proper
at any annual, special or adjourned meeting of the stockholders of the Company,
and by written consent in lieu of any such meeting or otherwise. The Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares (and any associated Distributions).
<PAGE> 5
If, on or after May 7, 1997, the Company should declare or pay any cash or
stock dividend or other distribution on or issue any rights (other than the
Rights) with respect to the Shares payable or distributable to stockholders of
record on a date occurring after May 7, 1997 and prior to the transfer to the
name of the Purchaser or its nominee or transferee on the Company's stock
transfer records of the Shares purchased pursuant to the Offer, then, subject to
the provisions of Section 13 of the Offer to Purchase, (i) the purchase price
per Share payable by the Purchaser pursuant to the Offer will be reduced by the
amount of any such cash dividend or cash distribution and (ii) the whole of any
such non-cash dividend, distribution (including additional Shares or Rights)
received by the undersigned shall be promptly remitted and transferred by the
undersigned to the Depositary for the account of the Purchaser, accompanied by
appropriate documentation of transfer. Pending such remittance or appropriate
assurance thereof, the Purchaser will be, subject to applicable law, entitled to
all rights and privileges as owner of any such non-cash dividend, distribution
or right and may withhold the entire purchase price or deduct from the purchase
price the amount of value thereof, as determined by the Purchaser in its sole
discretion.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares and
Rights tendered hereby and, when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and the same will not be subject to any adverse claim. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Depositary or the Purchaser to be necessary or desirable to complete the sale,
assignment, and transfer of the Shares (and any Distributions) tendered hereby.
In addition, the undersigned shall promptly remit and transfer to the Depositary
for the account of the Purchaser any and all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, personal and legal representatives, executors,
administrators, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable, provided that Shares and Rights tendered pursuant to the Offer may
be withdrawn at any time prior to their acceptance for payment.
The undersigned understands that the valid tender of Shares pursuant to one
of the procedures described in Section 3 of the Offer to Purchase will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in the Offer to Purchase, the
Purchaser may not be required to accept for payment any of the Shares and Rights
tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates for
Shares or Rights not tendered or accepted for payment in the name(s) of the
registered owner(s) appearing under "Description of Shares Tendered" and
"Description of Rights Tendered." Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail the check for the purchase price
and/or return any certificates for Shares or Rights not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered owner(s) appearing under "Description of Shares Tendered" and
"Description of Rights Tendered." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or issue any certificates for Shares or
Rights not tendered or accepted for payment (and any accompanying documents, as
appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to, the person or
persons so indicated. The undersigned recognizes that Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
or Rights from the name of the registered holder thereof if the Purchaser does
not accept for payment any of the Shares or Rights so tendered.
<PAGE> 6
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER OF
TRANSMITTAL)
To be completed ONLY if certificate(s) for Shares and/or Rights not
tendered or not accepted for payment and/or the check for the purchase
price of Shares and/or Rights accepted for payment are to be issued in the
name of someone other than the undersigned.
Issue: [ ] Check [ ] Certificate(s) to:
Name:
--------------------------------------------------
(Please Print)
Address:
-----------------------------------------------
------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
(Tax Identification or Social Security No.)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER
OF TRANSMITTAL)
To be completed ONLY if certificate(s) for Shares and/or Rights not
tendered or not accepted for payment and/or the check for the purchase
price of Shares and/or Rights purchased are to be sent to someone other
than the undersigned, or to the undersigned at an address other than that
shown above.
Deliver: [ ] Check [ ] Certificate(s) to:
Name:
--------------------------------------------------
(Please Print)
Address:
-----------------------------------------------
----------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
<PAGE> 7
IMPORTANT
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
Signature(s) of Holder(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
- --------------------------- , 1997
(Must be signed by registered owner(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered owner(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
Address
================================================================================
(PLEASE TYPE OR PRINT)
Capacity (Full Title)
- --------------------------------------------------------------------------------
Address
================================================================================
(INCLUDING ZIP CODE)
<TABLE>
<S> <C>
- ---------------------------------------------------------- ----------------------------------------------------------
(AREA CODE AND TELEPHONE NO.) (TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
</TABLE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
================================================================================
(INCLUDE ZIP CODE)
Name of Firm
- --------------------------------------------------------------------------------
Dated:
- --------------------------- , 1997
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed (a) if this
Letter of Transmittal is signed by the registered holders (which term, for
purposes of this document, includes any participant in any of the Book-Entry
Transfer Facilities' systems whose name appears on a security position listing
as the holder of the Shares or Rights) of Shares or Rights tendered herewith and
such registered owner has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this Letter
of Transmittal or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instruction 5 of this Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. This Letter of Transmittal is to be completed by stockholders
either if certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for delivery by book-entry transfer set forth in
Section 3 of the Offer to Purchase. Certificates for all physically tendered
Shares and/or Rights, or any Book-Entry Confirmation of Shares and/or Rights, as
the case may be, as well as this Letter of Transmittal properly completed and
duly executed (or manually signed facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined below), in the case of a
book-entry delivery, and any other documents required by this Letter of
Transmittal must be transmitted to and received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and, if a Distribution
Date has occurred and the Purchaser has waived that portion of the Rights
Condition requiring that a Distribution Date not have occurred, Rights
Certificates, or Book-Entry Confirmation of a transfer of rights into the
Depositary's account at a Book-Entry Transfer Facility, if available (together
with, if rights are forwarded separately from Shares, a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) with any required
signature guarantee, or an Agent's Message in the case of a book-entry delivery,
and any other documents required by the Letter of Transmittal), must be received
by the Depositary at one of its addresses set forth herein prior to the
Expiration Date or, if later, within three business days after the date on which
such rights Certificates are distributed. If a holder's Share Certificates and,
if applicable, Rights Certificates, are not immediately available (including, if
Rights Certificates have not yet been distributed) or time will not permit all
required documents to reach the Depositary prior to the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, such
holder's Shares and/or Rights may nevertheless be tendered by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure, (i) such tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Purchaser, must
be received by the Depositary prior to the Expiration Date and (iii) in the case
of a guarantee of Shares and/or Rights, the certificates for all tendered Shares
and/or Rights, in proper form for transfer, or a Book-Entry Confirmation,
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signature guarantee (or, in
the case of a book-entry transfer, an Agent's Message) and any other documents
required by such Letter of Transmittal, must be received by the Depositary (a)
in the case of Shares, within three New York Stock Exchange ("NYSE") trading
days after the date of execution of such Notice of Guaranteed Delivery or (b) in
the case of Rights, within a period ending on the later of (i) three NYSE
trading days after the date of execution of such Notice of Guaranteed Delivery
or (ii) three business days after Rights Certificates are distributed to
stockholders by the Company. If Share Certificates and Rights Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) must accompany each such delivery.
The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer
Facility to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has received
an express instruction from the participant in such Book-Entry Transfer Facility
tendering the Shares or Rights, that such participant has received and agrees to
be bound by the terms of this Letter and that the Purchase may enforce such
agreement against the participant.
The method of delivery of this Letter of Transmittal, Shares Certificates,
and, if applicable, Rights Certificates, and all other required documents,
including delivery through any Book-Entry Transfer Facility, is at the option
and risk of the tendering stockholder, and the delivery will be deemed made only
when actually received by the Depositary. If delivery is by mail, properly
insured registered mail with return receipt requested is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery. Except as
otherwise provided in Instruction 2 of this Letter of Transmittal, the delivery
will be deemed made only when actually received by the Depositary.
<PAGE> 9
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares or Rights will be purchased. All tendering stockholders, by
execution of this Letter of Transmittal (or manually signed facsimile thereof),
waive any right to receive any notice of the acceptance of their Shares or
Rights for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and, if applicable, Rights
should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If
fewer than all the Shares or Rights evidenced by any certificate submitted are
to be tendered, fill in the number of Shares or Rights which are to be tendered
in the box entitled "Description of Shares Tendered" and "Description of Rights
Tendered". In such cases, new certificate(s) for the remainder of the Shares or
Rights that were evidenced by the old certificate(s) will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date. All
Shares and Rights represented by certificates delivered to the Depositary will
be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this letter of Transmittal is signed by the registered holder(s) of the Shares
and Rights tendered hereby, the signature must correspond with the names as
written on the face of the certificates without alteration, enlargement or any
other change whatsoever.
If any of the Shares or Rights tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares or Rights are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered owner(s) of the
Shares and Rights listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless payment is to be made to, or
certificates for Shares or Rights not tendered or accepted for payment are to be
issued in the name of, a person other than the registered owner(s). Signatures
on such certificates or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by the appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or holders appear on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of purchased Shares to it or its order
pursuant to the Offer. If, however, payment of the purchase price is to be made
to, or (in the circumstances permitted hereby) if certificates for Shares and/or
Rights not tendered or accepted for payment are to be registered in the name of,
any person other than the registered owner, or if tendered certificates are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered owner or such person) payable on account of the transfer to
such person will be deducted from the purchase price if satisfactory evidence of
the payment of such taxes, or exemption therefrom, is not submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares or Rights not tendered or
accepted for payment are to be issued or returned to, a person other than the
signer of this Letter of Transmittal or if a check and/or such certificates are
to be mailed to a person other than the signer of this Letter of Transmittal or
to an address other than that shown above, the appropriate boxes on this Letter
of Transmittal should be completed. Stockholders tendering Shares or Rights by
book-entry transfer may request that Shares and Rights not purchased be credited
to such account maintained at a Book-Entry Transfer Facility as such Stockholder
may designate hereon. If no such instructions are given, such Shares and Rights
not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above.
<PAGE> 10
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses set forth below or from your broker, dealer,
commercial bank or trust company. Additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender
offer materials may be obtained from the Dealer Manager or the Information Agent
at the addresses set forth below or from your broker, dealer, commercial bank or
trust company.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived, in
whole or in part, by the Purchaser, in its sole discretion, at any time and from
time to time, in the case of any Shares or Rights tendered.
10. SUBSTITUTE FORM W-9. Each tendering stockholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN"),
generally the stockholder's social security or federal employer identification
number, on Substitute Form W-9 below. Failure to provide the information on the
form may subject the tendering stockholder to 31% federal income tax backup
withholding on the payment of the purchase price. The box in Part 3 of the form
may be checked if the tendering stockholder has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is checked and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of all payments of the purchase price
thereafter until a TIN is provided to the Depositary.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares or Rights has been lost, destroyed or stolen, the
stockholder should promptly notify the Depositary. The stockholder will then be
instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF) (TOGETHER
WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for purchase is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below and to certify
that such TIN is correct (or that such stockholder is awaiting a TIN) or
otherwise establish a basis for exemption from backup withholding. If such
stockholder is an individual, the TIN is his or her social security number. If a
stockholder fails to provide a TIN to the Depositary, such stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares and Rights
purchased pursuant to the Offer may be subject to backup withholding of 31% (see
below).
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must generally submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder or payee. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certification of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding. If a
stockholder's TIN is provided to the Depositary within 60 days of the date of
the Substitute Form W-9, payment will be made to such stockholder without the
imposition of backup withholding. If a stockholder's TIN is not provided to the
Depositary within such 60-day period, the Depositary will make such payment,
subject to backup withholding.
<PAGE> 11
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a stockholder whose
tendered Shares or Rights are accepted for purchase, the stockholder is required
to notify the Depositary of its correct TIN by completing Substitute Form W-9
certifying that the TIN provided on such Form is correct (or that such
stockholder is awaiting a TIN, in which case the stockholder should check the
box in Part 3 of the Substitute Form W-9) and that (A) such stockholder is
exempt from backup withholding, (B) such stockholder has not been notified by
the Internal Revenue Service that such stockholder is subject to backup
withholding as a result of failure to report all interest or dividends or (C)
the Internal Revenue Service has notified the stockholder that the stockholder
is no longer subject to backup withholding. The stockholder must sign and date
the Substitute Form W-9 where indicated, certifying that the information on such
Form is correct.
Alternatively, a stockholder that qualifies as an exempt recipient (other
than a stockholder required to complete Form W-8 as described above) should
write "Exempt" in Part 1 of the Substitute Form W-9, enter its correct TIN and
sign and date such Form where indicated.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or of
the last transferee appearing on the transfers attached to, or endorsed on, the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
<PAGE> 12
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 10)
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ------------------------------
DEPARTMENT OF Social Security Number
THE TREASURY or
INTERNAL REVENUE ------------------------------
SERVICE Employer Identification Number
----------------------------------------------------------------------------------
PART 2 -- Certification Under penalties of perjury, I certify that:
PAYER'S REQUEST (1) The number shown on this form is my correct Taxpayer Identification Number
FOR TAXPAYER (or I am waiting for a number to be issued to me); and
IDENTIFICATION (2) I am not subject to backup withholding because (i) I am exempt from backup
NUMBER ("TIN") withholding, (ii) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (iii) the IRS has notified me that I am
no longer subject to backup withholding.
----------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out PART 3 --
item (2) in Part 2 above if you have been notified Awaiting TIN
by the IRS that you are subject to backup
withholding because of under-reporting interest or [ ]
dividends on your tax return. However, if after
being notified by the IRS that you were subject to
backup withholding you received another notifi-
cation from the IRS stating that you are no longer
subject to backup withholding, do not cross out
item (2).
- ---------------------------------------------------------------------------------------------------------
Signature Date
Name (Please Print)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED THE BOX IN
PART 3 OF FORM W-9.
<PAGE> 13
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (i) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (ii)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number to the Depositary.
_____________________________________________
Signature Date
_________________________________________
Name
(Please
Print)
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Call Collect (212) 269-5550
Call Toll Free (800) 755-3105
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 646-4543
May 7, 1997
<PAGE> 1
<TABLE>
<S> <C>
CREDIT FIRST
SUISSE BOSTON
</TABLE>
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK)
OF
TRANSITIONAL HOSPITALS CORPORATION
AT
$16.00 NET PER SHARE
BY
LV ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
================================================================================
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED.
================================================================================
May 7, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by LV Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly-owned subsidiary of Vencor, Inc., a Delaware
corporation ("Vencor"), to act as Dealer Manager in connection with the
Purchaser's offer to purchase all of the outstanding shares of Common Stock, par
value $1.00 per share (the "Shares"), of Transitional Hospitals Corporation, a
Nevada corporation (the "Company"), including the associated rights to purchase
Series B Junior Participating Preferred Stock (the "Rights") issued pursuant to
the Rights Agreement, dated as of June 21, 1996 (the "Rights Agreement"),
between Community Psychiatric Centers (the predecessor name of the Company) and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"),
at $16.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated May 7, 1997, and in the
related Letter of Transmittal (which together constitute the "Offer"). Unless
the context requires otherwise, all references to Shares herein shall include
the associated Rights.
Unless the Rights Condition (as defined in the Offer to Purchase) is
satisfied, stockholders will be required to tender one Right (subject to
adjustment) for each Share tendered in order to effect a valid tender of Shares.
Accordingly, stockholders who sell their Rights separately from their Shares and
do not otherwise acquire Rights may not be able to satisfy the requirements of
the Offer for a valid tender of Shares. Until the close of business on the
Distribution Date (as defined in the Offer to Purchase), the Rights will be
transferred with and only with the certificates for Shares and the surrender for
transfer of any certificates for Shares will also constitute the transfer of the
Rights associated with the Shares
<PAGE> 2
represented by such certificate. If Rights Certificates (as defined in the Offer
to Purchase) are issued to holders of Shares prior to the time a holder's Shares
are tendered pursuant to the Offer, certificates representing the number of
Rights equal to the number of Shares tendered must be delivered to First Chicago
Trust Company of New York (the "Depositary"), or, if available, a Book-Entry
Confirmation received by the Depositary with respect thereto, in order for such
Shares to be validly tendered. If the Distribution Date occurs and Rights
Certificates are not distributed prior to the time Shares are tendered pursuant
to the Offer, Rights may be tendered prior to a stockholder receiving the Rights
Certificates by use of the guaranteed delivery procedure described below. A
tender of Shares constitutes an agreement by the tendering stockholder to
deliver Rights Certificates representing all Rights formerly associated with the
number of Shares tendered pursuant to the Offer to the Depositary prior to
expiration of the period permitted by such guaranteed delivery procedures for
delivery of Rights Certificates for, or a Book-Entry Confirmation with respect
to, Rights (the "Rights Delivery Period"). However, after expiration of the
Rights Delivery Period, the Purchaser may elect to reject as invalid a tender of
Shares with respect to which Rights Certificates for, or a Book-Entry
Confirmation with respect to, the number of Rights required to be tendered with
such Shares have not been received by the Depositary. Nevertheless, the
Purchaser will be entitled to accept for payment Shares tendered by a
stockholder prior to receipt of the Rights Certificates required to be tendered
with such Shares, or a Book-Entry Confirmation with respect to such Rights, and
either (a) subject to complying with applicable rules and regulations of the
Securities and Exchange Commission, withhold payment for such Shares pending
receipt of the Rights Certificates for, or a Book-Entry Confirmation with
respect to, such Rights or (b) make payment for Shares accepted for payment
pending receipt of the Rights Certificates for, or a Book-Entry Confirmation
with respect to, such Rights in reliance upon the agreement of a tendering
stockholder to deliver such Rights and to comply with such guaranteed delivery
procedures. Any determination by the Purchaser to make payment for Shares in
reliance upon such agreement and such guaranteed delivery procedures or, after
expiration of the Rights Delivery Period, to reject a tender as invalid will be
made in the sole and absolute discretion of the Purchaser.
Enclosed herewith are the following documents:
1. Offer to Purchase dated May 7, 1997;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. A printed form of letter that may be sent to your clients for whose
account you hold Shares and Rights in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
4. Notice of Guaranteed Delivery;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.
The offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the expiration date a number of Shares that
will constitute at least 66 2/3% of the outstanding Shares on a fully diluted
basis as of the date Shares are accepted for payment, (2) The Agreement and Plan
of Merger, dated as of May 2, 1997 (the "Select Medical Merger Agreement"), by
and among the Company, Select Medical Corporation, a Delaware corporation, and
SM Acquisition Co., a Nevada corporation, having been terminated without any
payments by or liability on the part of the Company (other than any applicable
payments pursuant to Section 9.2 of the Select Medical Merger Agreement), (3)
the Rights having been redeemed by the Board of Directors of the Company or the
Purchaser being satisfied, in its sole discretion, that the Rights have been
invalidated or are otherwise inapplicable to the Offer and the transactions
contemplated in the Offer to Purchase, (4) the Purchaser being satisfied, in its
sole discretion, that the Nevada Control Share Acquisition Statute (as defined
in the Offer to Purchase) shall be inapplicable to the Offer and the Merger (as
defined in the Offer to Purchase), (5) the Purchaser being satisfied, in its
sole discretion, that the Nevada Business Combination Statute (as defined in the
Offer to Purchase) shall be inapplicable to the Offer and the Merger,
<PAGE> 3
(6) the Purchaser being satisfied, in its sole discretion, that all necessary
Healthcare Approvals (as defined in the Offer to Purchase) have been obtained on
terms satisfactory to the Purchaser, and (7) the expiration or termination of
all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations thereunder.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation with respect to) such Shares and, if
the Distribution Date occurs, Rights Certificates (or a timely Book-Entry
Confirmation, if available, with respect thereto), unless the Purchaser elects
to make payment for such Shares pending receipt of the certificates for, or a
Book-Entry Confirmation with respect to, such Rights as described above, (b) a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in
lieu of the Letter of Transmittal) and (c) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares (or Rights, if
applicable) or Book-Entry Confirmations with respect to Shares (or Rights, if
applicable) are actually received by the Depositary. Under no circumstances will
interest on the purchase price of the Shares be paid by the Purchaser,
regardless of any extension of the Offer or any delay in making such payment.
A stockholder who desires to tender Shares (or Rights, if applicable)
pursuant to the Offer and whose certificates for Shares (or Rights, if
applicable) are not immediately available (including, because Rights
Certificates have not yet been distributed by the Rights Agent), or who cannot
comply with the procedure for book-entry transfer on a timely basis or who
cannot deliver all required documents to the Depositary prior to the Expiration
Date, may tender such Shares and/or Rights, if applicable, by following all of
the procedures set forth in the Notice of Guaranteed Delivery, which may be
delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery.
Questions and requests for assistance may be directed to, and additional
copies of the enclosed materials may be obtained from, the undersigned, Credit
Suisse First Boston Corporation, by calling Toll-Free (800) 646-4543 or by
calling the Information Agent, D.F. King & Co., Inc., at (212) 269-5550
(collect), or Toll-Free (800) 755-3105, or from brokers, dealers, commercial
banks or trust companies.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, VENCOR, THE DEALER MANAGER, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR
MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT
CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK)
OF
TRANSITIONAL HOSPITALS CORPORATION
AT
$16.00 NET PER SHARE
BY
LV ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated May 7, 1997
(the "Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer") relating to the offer by LV Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Vencor,
Inc., a Delaware corporation ("Vencor"), to purchase all of the outstanding
shares of Common Stock, par value $1.00 per share (the "Shares"), of
Transitional Hospitals Corporation, a Nevada corporation (the "Company"),
including, the associated rights to purchase Series B Junior Participating
Preferred Stock (the "Rights") issued pursuant to the Rights Agreement, dated as
of June 21, 1996 (the "Rights Agreement"), between Community Psychiatric Centers
(the predecessor name of the Company) and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "Rights Agent"), at $16.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer. Unless the context requires otherwise, all references to Shares herein
shall include the associated Rights.
Unless the Rights Condition (as defined in the Offer to Purchase) is
satisfied, stockholders will be required to tender one Right (subject to
adjustment) for each Share tendered in order to effect a valid tender of Shares.
Accordingly, stockholders who sell their Rights separately from their Shares and
do not otherwise acquire Rights may not be able to satisfy the requirements of
the Offer for a valid tender of Shares. Unless certificates representing Rights
("Rights Certificates") are issued, a tender of Shares will also constitute a
tender of the associated Rights. Until the close of business on the Distribution
Date (as defined in the Offer to Purchase), the Rights will be transferred with
and only with the certificates for Shares and the surrender for transfer of any
certificates for Shares will also constitute the transfer of the Rights
associated with the Shares represented by such certificate. If Rights
Certificates are issued to holders of Shares prior to the time a holder's Shares
are tendered pursuant to the Offer, certificates representing a number of Rights
equal to the number of Shares tendered must be delivered to the First Chicago
Trust Company of New York (the "Depositary"), or, if available, a Book-Entry
Confirmation (as defined in the Offer to Purchase) received by the Depositary
with respect thereto, in order for such Shares to be validly tendered. If the
Distribution Date occurs and Rights Certificates are not distributed prior to
the time Shares are tendered pursuant to the Offer, Rights may be tendered prior
to a stockholder receiving the Rights Certificates by use of the guaranteed
delivery procedure described below. A tender of Shares constitutes an agreement
by the tendering stockholder to deliver Rights Certificates representing all
Rights formerly associated with the number of Shares tendered pursuant to the
Offer to the Depositary prior to expiration of the period permitted by such
guaranteed delivery procedures for delivery of Rights Certificates for, or a
Book-Entry Confirmation with respect to, Rights (the "Rights Delivery Period").
However, after expiration of the Rights Delivery Period, the Purchaser may elect
to reject as invalid a tender of Shares with respect to which Rights
Certificates for, or a Book-Entry Confirmation with respect to, the number of
Rights required to be tendered with such Shares have not been received by the
Depositary. Nevertheless, the Purchaser will be entitled to accept for payment
Shares tendered by
<PAGE> 2
a stockholder prior to receipt of the Rights Certificates required to be
tendered with such Shares, or a Book-Entry Confirmation with respect to such
Rights, and either (a) subject to complying with applicable rules and
regulations of the Securities and Exchange Commission, withhold payment for such
Shares pending receipt of the Rights Certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for Shares
accepted for payment pending receipt of the Rights Certificates for, or a
Book-Entry Confirmation with respect to, such Rights in reliance upon the
agreement of a tendering stockholder to deliver such Rights and to comply with
such guaranteed delivery procedures. Any determination by the Purchaser to make
payment for Shares in reliance upon such agreement and such guaranteed delivery
procedures or, after expiration of the Rights Delivery Period, to reject a
tender as invalid will be made in the sole and absolute discretion of the
Purchaser.
WE ARE THE HOLDER OF RECORD OF SHARES AND RIGHTS HELD BY US FOR YOUR
ACCOUNT. A TENDER OF SUCH SHARES AND RIGHTS CAN BE MADE ONLY BY US AS THE HOLDER
OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES
AND RIGHTS HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The Offer price is $16.00 per Share, net to the Seller in cash, without
interest thereon, upon the terms and subject to the conditions of the
Offer.
2. The Offer is being made for all of the outstanding Shares.
3. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED (THE
"EXPIRATION DATE").
4. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration date a number
of Shares that will constitute at least 66 2/3% of the outstanding Shares
on a fully diluted basis as of the date Shares are accepted for payment,
(2) The Agreement and Plan of Merger, dated as of May 2, 1997 (the
"Select Medical Merger Agreement"), by and among the Company, Select
Medical Corporation, a Delaware corporation, and SM Acquisition Co., a
Nevada corporation, having been terminated without any payments by or
liability on the part of the Company (other than any applicable payments
to the Company pursuant to Section 9.2 of the Select Medical Merger
Agreement), (3) the Rights having been redeemed by the Board of Directors
of the Company or the Purchaser being satisfied, in its sole discretion,
that the Rights have been invalidated or are otherwise inapplicable to
the Offer and the transactions contemplated in the Offer, (4) the
Purchaser being satisfied, in its sole discretion, that the Nevada
Control Share Acquisition Statute (as defined in the Offer to Purchase)
shall be inapplicable to the Offer and the Merger (as defined in the
Offer to Purchase), (5) the Purchaser being satisfied, in its sole
discretion, that the Nevada Business Combination Statute (as defined in
the Offer to Purchase) shall be inapplicable to the Offer and the Merger,
(6) the Purchaser being satisfied, in its sole discretion, that all
necessary Healthcare Approvals (as defined in the Offer to Purchase) have
been obtained on terms satisfactory to the Purchaser, and (7) the
expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder.
5. Tendering shareholders will not be obligated to pay brokerage fees or
commissions to the Dealer Manager, the Depositary or the Information
Agent or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer.
A tendering shareholder who holds securities with such shareholder's
broker may be required by such broker to pay a service charge or other
fee.
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the Expiration Date.
If you wish to have us tender any of or all of the Shares and/or Rights held
by us for your account, please so instruct us by completing, executing,
detaching and returning to us the instruction form on the detachable part
hereof. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation with respect to) such Shares and, if
the Distribution Date occurs, Rights Certificates (or a timely Book-Entry
Confirmation, if available, with respect thereto), unless the Purchaser elects
to make payment for such Shares pending receipt of the
<PAGE> 3
certificates for, or a Book-Entry Confirmation with respect to, such Rights as
described above, (b) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase) in lieu of the Letter of Transmittal) and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares (or
Rights, if applicable) or Book-Entry Confirmations with respect to Shares (or
Rights, if available) are actually received by the Depositary. Under no
circumstances will interest on the purchase price of the Shares be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares or Rights in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In any jurisdiction where securities, blue sky or other
laws require the Offer to be made by a licensed broker or dealer, the Offer will
be deemed to be made on behalf of the Purchaser by Credit Suisse First Boston
Corporation, the Dealer Manager for the Offer, or one or more registered brokers
or dealers licensed under the laws of such jurisdiction. An envelope in which to
return your instructions to us is enclosed. If you authorize tender of your
Shares and Rights, all such Shares and Rights will be tendered unless otherwise
indicated in such instruction form. Please forward your instructions to us as
soon as possible to allow us ample time to tender Shares and Rights on your
behalf prior to the expiration of the Offer.
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE SERIES B JUNIOR PARTICIPATING
PREFERRED STOCK)
OF
TRANSITIONAL HOSPITALS CORPORATION
The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase
of LV Acquisition Corp. (the "Purchaser") dated May 7, 1997 (the "Offer to
Purchase"), and the related Letter of Transmittal relating to the offer by the
Purchaser to purchase (i) all of the outstanding shares of Common Stock, par
value $1.00 per share (the "Shares"), of Transitional Hospitals Corporation, a
Nevada corporation (the "Company"), including the associated rights to purchase
Series B Junior Participating Preferred Stock (the "Rights") issued pursuant to
the Rights Agreement, dated as of June 21, 1996 (the "Rights Agreement"),
between Community Psychiatric Centers, (the predecessor name of the Company) and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"),
at $16.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase. Unless the context requires
otherwise, all references to Shares herein shall include the associated Rights.
This will instruct you to tender the number of Shares and Rights indicated
below held by you for the account of the undersigned, on the terms and subject
to the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
<TABLE>
<S> <C>
Number of Shares and Rights to be Tendered:* SIGN HERE
-------------------Shares
-------------------------------------------------
-------------------Rights
Daytime Area Code
and Tel. No.
- ------------------------------------------- -------------------------------------------------
Signature(s)
Taxpayer Identification
No. or Social Security No.
- ----------------------------- -------------------------------------------------
Dated: ---------------------------------------- ,
1997
-------------------------------------------------
(Please print name(s) and address(es))
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all your Shares and Rights
are to be tendered.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated May 7, 1997 and the related Letter of Transmittal
and any amendments or supplements thereto, and is being made to all holders of
Shares. The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (as defined below) by Credit Suisse
First Boston Corporation ("Credit Suisse First Boston"), or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK)
OF
TRANSITIONAL HOSPITALS CORPORATION
AT
$16.00 NET PER SHARE
BY
LV ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
LV Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of Vencor, Inc., a Delaware corporation ("Vencor"), is
offering to purchase all of the outstanding shares of Common Stock, par value
$1.00 per share (the "Shares"), of Transitional Hospitals Corporation, a Nevada
corporation (the "Company"), including the associated rights to purchase Series
B Junior Participating Preferred Stock of the Company (the "Rights"), at $16.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated May 7, 1997, and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Unless the context
requires otherwise, all references to Shares herein shall include the associated
Rights, and all references to the Rights shall include all benefits that may
inure to the holders of the Rights pursuant to the Rights Agreement (as defined
in the Offer to Purchase). If separate certificates representing Rights (the
"Rights Certificates") are issued to holders of Shares prior to the time a
holder's Shares are tendered pursuant to the Offer, certificates representing
the number of Rights equal to the number of Shares tendered must be delivered to
First Chicago Trust Company of New York (the "Depositary"), or, if available, a
Book-Entry Confirmation (as defined in the Offer to Purchase) received by the
Depositary with respect thereto, in order for such Shares to be validly
tendered. Accordingly, stockholders who sell their Rights separately from their
Shares and do not otherwise acquire Rights may not be able to satisfy the
requirements of the Offer for a valid tender of Shares. Tendering stockholders
will not be obligated to pay brokerage fees or commissions or, subject to
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of
Shares by the Purchaser pursuant to the Offer.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JUNE 4, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES THAT
WILL CONSTITUTE AT LEAST 66 2/3% OF THE OUTSTANDING SHARES ON A FULLY DILUTED
BASIS AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT, (2) THE AGREEMENT AND
PLAN OF MERGER (THE "SELECT MEDICAL MERGER AGREEMENT"), DATED AS OF MAY 2, 1997,
BY AND AMONG SELECT MEDICAL CORPORATION, A DELAWARE CORPORATION, SM ACQUISITION
CO., A NEVADA CORPORATION, AND THE COMPANY, HAVING BEEN TERMINATED WITHOUT ANY
PAYMENTS BY OR LIABILITY ON THE PART OF THE COMPANY (OTHER THAN ANY APPLICABLE
PAYMENTS PURSUANT TO SECTION 9.2 OF THE SELECT MEDICAL MERGER AGREEMENT), (3)
THE RIGHTS HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE
PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN
INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS
CONTEMPLATED IN THE OFFER TO PURCHASE, (4) THE PURCHASER BEING SATISFIED, IN ITS
SOLE DISCRETION, THAT THE NEVADA CONTROL SHARE ACQUISITION STATUTE (AS DEFINED
IN THE OFFER TO PURCHASE) SHALL BE INAPPLICABLE TO THE OFFER AND THE MERGER (AS
DEFINED BELOW), (5) THE PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT
THE NEVADA BUSINESS COMBINATION STATUTE (AS DEFINED IN THE OFFER TO PURCHASE)
SHALL BE INAPPLICABLE TO THE OFFER AND THE MERGER, (6) THE PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT ALL NECESSARY HEALTHCARE APPROVALS (AS
DEFINED IN THE OFFER TO PURCHASE) HAVE BEEN OBTAINED ON TERMS SATISFACTORY TO
THE PURCHASER, AND (7) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS
IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED,
AND THE REGULATIONS THEREUNDER. SEE SECTION 13 OF THE OFFER TO PURCHASE.
<PAGE> 2
THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING.
Vencor and the Purchaser are seeking to negotiate with the Company with
respect to the acquisition of the Company by Vencor or the Purchaser. The
Purchaser reserves the right to amend the Offer upon entering into a merger
agreement with the Company, or to negotiate a merger agreement with the Company
not involving a tender offer.
The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company. Vencor is seeking to negotiate with the Company a definitive
acquisition agreement pursuant to which the Company would, as soon as
practicable following consummation of the Offer, consummate a merger or some
similar business combination (the "Merger") between the Company and the
Purchaser or an affiliate thereof, pursuant to which each Share that is issued
and outstanding immediately prior to the effective time of the Merger (other
than Shares held in the treasury of the Company or owned by Vencor, the
Purchaser or any direct or indirect subsidiary of Vencor, or held by
stockholders who properly exercise dissenters' rights, if any) would be
converted pursuant to the terms of the Merger into the right to receive an
amount in cash equal to $16.00 per Share (or such higher price as may be paid
pursuant to the Offer).
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when the Purchaser
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
the purpose of receiving payments from the Purchaser and transmitting such
payments to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE FOR SHARES, REGARDLESS OF ANY DELAY IN MAKING PAYMENT
PURSUANT TO THE OFFER.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation with respect to) such Shares and, if
the Distribution Date (as defined in the Offer to Purchase) occurs, Rights
Certificates (or a timely Book-Entry Confirmation, if available, with respect
thereto), unless the Purchaser elects to make payments for such Shares pending
receipt of the certificates for, or a Book-Entry Confirmation with respect to,
such Rights as described above, (b) a Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase) in lieu of the Letter of Transmittal), and (c)
any other documents required by the Letter of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission, the Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary. Any such extension will also be publicly announced
by press release issued no later than 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date (as defined in the
Offer to Purchase).
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares and Rights made pursuant to the Offer are irrevocable, except that
Shares and Rights tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after July 7,
1997 or at such later time as may apply if the Offer is extended. A withdrawal
of Shares will also constitute a withdrawal of the associated Rights. Rights may
not be withdrawn unless the associated Shares are also withdrawn.
To be effective, a written notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of the Offer
to Purchase. Any such notice of withdrawal must specify the name of the person
having tendered the Shares or Rights to be withdrawn, the number of Shares or
Rights to be withdrawn and the names in which the certificates evidencing such
Shares and Rights Certificates to be withdrawn are registered, if different from
that of the person who tendered such Shares or Rights. The signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in the Offer to Purchase), unless such Shares or Rights have been tendered for
the account of an Eligible Institution. If Shares or Rights have been tendered
pursuant to the procedures for book-entry transfer as set forth in Section 3 of
the Offer to Purchase, any notice of withdrawal must specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares or Rights. If certificates have been delivered or otherwise
identified to the Depositary, the name of the registered holder and the serial
numbers of the particular certificates withdrawn must also be furnished to the
Depositary as aforesaid prior to the physical release of such certificates. Any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares or Rights may be retendered
following one of the procedures described above in Section 3 of the Offer to
Purchase at any time prior to the Expiration Date. All questions as to the form
and validity (including time of receipt) of any notice of withdrawal will be
determined by the Purchaser, in its sole discretion, which determination shall
be final and binding.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares and Rights, and such Shares and Rights may not be withdrawn except to the
extent that tendering stockholders are entitled to withdrawal rights as
described in Section 4 of the Offer to Purchase.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
A demand is being made to the Company for the use of the Company's
stockholder list, its list of holders of Rights, if any, and security position
listings for the purpose of disseminating the Offer to holders of Shares. Upon
compliance by the Company with such request, this Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of Shares and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder list and its list of holders
of Rights, if any, or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares or Rights.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth below. Requests for additional copies of the Offer to
Purchase, the related Letter of Transmittal and other tender offer materials may
be directed to the Information Agent or the Dealer Manager. Such additional
copies will be furnished at the Purchaser's expense. The Purchaser will not pay
any fees or commissions to any broker or dealer or any other person (other than
the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Call Toll Free (800) 755-3105
The Dealer Manager for the Offer is:
[CREDIT SUISSE/FIRST BOSTON LOGO]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 646-4543
May 7, 1997
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK)
OF
TRANSITIONAL HOSPITALS CORPORATION
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form or one substantially equivalent may be used to accept the Offer (as defined
below) if certificates for shares of Common Stock, par value $1.00 per share
(the "Shares"), of Transitional Hospitals Corporation, a Nevada corporation (the
"Company"), or, if applicable, certificates for the associated rights (the
"Rights Certificates") to purchase Series B Junior Participating Preferred Stock
of the Company (the "Rights") issued pursuant to the Rights Agreement, dated as
of June 21, 1996 (the "Rights Agreement"), between Community Psychiatric Centers
(the predecessor name of the Company) and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "Rights Agent"), are not immediately available
(including because a Distribution Date (as defined in the Offer to Purchase) has
occurred but Rights have not yet been distributed by the Rights Agent), or if
the procedure for book-entry transfer cannot be complied with on a timely basis,
or all required documents cannot be delivered to First Chicago Trust Company of
New York (the "Depositary") prior to the Expiration Date (as defined in the
Offer to Purchase). This form may be delivered by hand to the Depositary or
transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution (as defined in the Offer to
Purchase). See Section 3 of the Offer to Purchase.
The Depositary
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges ATTN: Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569 c/o The Depository Trust Company 14 Wall Street, 8th Floor
Suite 4660-TTX 55 Water Street, DTC TAD New York, New York 10005
Jersey City, NJ 07303-2569 Vietnam Veterans Memorial Plaza
New York, NY 10041
</TABLE>
Facsimile (for Eligible Institutions Only):
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
----------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to LV Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Vencor, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated May 7, 1997 (the "Offer to Purchase") and the related Letter
of Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares and Rights set forth below, all
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
Number of Shares:
- ---------------------------------
Number of Rights:
- ----------------------------------
Share Certificate Nos.
(if available):
- ---------------------------------------
- ------------------------------------------------------
Rights Certificate Nos.
(if available):
- ---------------------------------------
(CHECK ONE BOX IF SHARES
WILL BE TENDERED BY BOOK-ENTRY TRANSFER)
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
- -----------------------------------
Dated:
- ----------------------------------------------
Name(s) of Record Holder(s) of Shares:
- ------------
- ------------------------------------------------------
Please Type or Print
Name(s) of Record Holder(s) of Rights:
- ------------
- ------------------------------------------------------
Please Type or Print
Address(es):
- ----------------------------------------
- ------------------------------------------------------
Zip Code
Daytime Area Code
and Tel. No.:
- --------------------------------------
Signature(s):
- ---------------------------------------
- ------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares (and Rights, if
applicable) tendered hereby, in proper form for transfer, or a Book-Entry
Confirmation (as defined in the Offer to Purchase) with respect to such Shares
and Rights, in any such case together with a properly completed and duly
executed Letter of Transmittal, with any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents, within (a) in the case of Shares, three trading days after the date
hereof or (b) in the case of Rights, a period ending on the later of (i) three
trading days after the date of execution hereof or (ii) three trading days after
the date Rights Certificates are distributed to stockholders.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares (and Rights, if applicable) to the Depositary within the
time period shown herein. Failure to do so could result in a financial loss to
such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm:
------------------------------------ --------------------------------------------
Authorized Signature
Address:
------------------------------------------- Name:
--------------------------------------------
Please Type or Print
Title:
- -------------------------------------------- --------------------------------------------
Zip Code
Area Code and
Telephone Number:
------------------------------- Dated:
------------------------------------- , 1997
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR RIGHTS WITH THIS NOTICE.
CERTIFICATES FOR SHARES OR RIGHTS SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the name and
number to give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
=========================================================
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
5. Sole proprietorship account The owner(3)
- ---------------------------------------------------------
6. Sole proprietorship account The owner(3)
7. A valid trust, estate, or The legal entity(4)
pension trust
8. Corporate account The corporation
9. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
account
10. Partnership The partnership
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your Social Security Number or
Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4 Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees specifically exempted from backup withholding
depending upon the type of payment (see below):
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA or a
custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
For interest and dividends, all listed payees are exempt except item (9). For
broker transactions, payees listed in items (1) through (13) and a person
registered under the Investment Advisers Act of 1940 who regularly acts as a
broker are exempt.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 1 OF THE FORM, AND RETURN IT TO
THE PAYER. If you are a nonresident alien or a foreign entity not subject to
backup withholding, give the payer a completed Form W-8, Certificate of Foreign
Status.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-- If you fail to furnish
your correct taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
[COMMUNITY PSYCHIATRIC CENTERS LETTERHEAD]
October 28, 1996
Vencor, Inc.
3300 Providian Center
400 West Market Street
Louisville, KY 40202
Attention: Mr. W. Bruce Lunsford
Chairman, President and Chief Executive Officer
In connection with the consideration of negotiations and/or a possible
transaction or series of transactions (a "Transaction") between Community
Psychiatric Centers, Inc. ("CPC") and Vencor, Inc. ("VC") (VC and CPC are
sometimes referred to as a "Party" and collectively as the "Parties"), each
Party and its advisors and agents are prepared to make available certain
information which is non-public, confidential or proprietary in nature. The
Party to whom such information is delivered is sometimes referred to herein as
the "Receiving Party".
By execution of this letter agreement (the "Agreement"), each Party
agrees to treat confidentially all such information whether written or oral
(the "Evaluation Material"), and to observe the terms and conditions set forth
herein. Each Party also agrees that, subject to the fourth paragraph of this
letter, prior to giving any of its directors, officers, employees, partners,
affiliates, agents, advisors, or representatives (the "Representatives") access
to any of the Evaluation Material, it shall require each such Representative to
agree to be bound by the terms of this Agreement.
For purposes of this Agreement, Evaluation Material shall include,
without limitation, all information, data, reports, analyses, compilations,
studies, interpretations, projections, forecasts, records, and other material
(whether prepared by a Party or otherwise and in whatever form maintained,
whether documentary, computerized or otherwise), regardless of the form of
communication, that contain or otherwise reflect information concerning a Party
that a Receiving Party or its Representatives may be provided by or on behalf
of a Party in the course of the Receiving Party's evaluation of a possible
Transaction. The term "Evaluation Material" shall also include all information,
data, reports, analyses, computations, studies, interpretations, projections,
forecasts, records, notes, memoranda, summaries or other material in whatever
form maintained, whether documentary, computerized or otherwise, whether
prepared by a Receiving Party or its Representatives or others, that contain or
otherwise reflect or are based upon, in whole or in part, any such Evaluation
Material or that reflect the Receiving Party's review of, or interest in, a
Transaction involving all or any portion of a Party (collectively, the
"Notes"). This Agreement shall be inoperative as to those particular portions
of the Evaluation Material that (i) become generally available to the public
other than as result of a disclosure by a Receiving Party or any of
<PAGE> 2
Page 2
October 28, 1996
its Representatives, (ii) were available to a Receiving Party on a
non-confidential basis prior to the disclosure of such Evaluation Material to a
Receiving Party pursuant to this Agreement, provided that the source of such
information was not known by a Receiving Party or any of its Representatives,
after reasonable investigation, to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality
to a Party or any of its affiliates with respect to such material, or (iii)
becomes available to a Receiving Party on a non-confidential basis from a source
other than a Party or its Representatives, provided that the source of such
information was not known by a Receiving Party or its Representatives, after
reasonable investigation, to be bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to a Party
or any of its affiliates with respect to such material.
Each Party agrees not to use the Evaluation Material for any purpose
other than determining whether to enter into a Transaction. Each Party agrees
not to disclose or allow disclosure to others of any Evaluation Material,
provided that, subject to the second paragraph of this Agreement, each Party may
disclose Evaluation Material to its Representatives to the extent necessary to
permit such Representatives to assist it in making the determination referred to
in the prior sentence. In furtherance of the foregoing, each Party agrees not
to use the Evaluation Material in any way directly or indirectly detrimental
to the other Party.
In addition, each Party agrees not to make any disclosure (i) that the
Parties are having or have had discussion, (ii) that it has received Evaluation
Material from a Party concerning a Transaction, (iii) that it is considering a
possible Transaction, or (iv) concerning any discussions related to a possible
Transaction, including the status thereof, any termination thereof, any decision
not to consider any such Transaction or any of the terms, conditions or other
facts with respect thereto, provided that a Party may make such disclosure if it
has received the written opinion of its outside counsel that such disclosure is
required by law and, prior to such disclosure, such Party promptly advises and
consults with the other Party and its legal counsel concerning the information
proposed to be disclosed.
Although each Party will endeavor to include in the Evaluation
Material information known to it which it believes relevant for the purpose of
the Receiving Party's investigation, the Receiving Party understands and agrees
that neither the other Party nor any of its affiliates, agents, advisors or
representatives (i) has made or makes any representations or warranty,
expressed or implied, as to the accuracy or completeness of the Evaluation
Material or (ii) shall have any liability whatsoever to the Receiving Party or
its Representatives relating to or resulting from the use of the Evaluation
Material or any errors therein or omissions therefrom.
Without limiting the generality of the immediately proceeding
paragraph, the Evaluation Material may include certain statements, estimates
and projections provided by a Party or with respect to its anticipated future
performance. Such statements, estimates and projections reflect
<PAGE> 3
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October 28, 1996
various assumptions made by a Party concerning anticipated results, which
assumptions may or may not prove to be correct. No representations are made as
to the accuracy of such assumptions, statements, estimates or projections. The
only information that will have any legal effect will be specifically
represented in a definitive agreement.
In the event that the Receiving Party or anyone to whom it transmits
any Evaluation Material in accordance with this Agreement are requested or
required (by deposition, interrogatories, requests for information or documents
in legal proceedings, subpoenas, civil investigative demand or similar process),
in connection with any proceeding, to disclose any Evaluation Material, the
Receiving Party will give the other Party prompt written notice of such request
or requirement so that the other Party may seek an appropriate protective order
or other remedy and/or waive compliance with the provisions of this Agreement,
and the Receiving Party will cooperate with the other Party to obtain such
protective order. In the event that such protective order or other remedy is not
obtained or the other Party waives compliance with the relevant provisions of
the Agreement, the Receiving Party (or such other persons to whom such that
such request is directed) will furnish only that portion of the Evaluation
Material which, in the written opinion of the Receiving Party's counsel, is
legally required to be disclosed. It is further agreed that, if in the absence
of the protective order, the Receiving Party (or such other persons to whom such
request is directed) is nonetheless legally compelled to disclose such
information, the Receiving Party may make such disclosure without liability
hereunder, provided that the Receiving Party gives the other Party notice of the
information to be disclosed as far in advance of its disclosure as is
practicable and, upon the other Party's request, use its best efforts to obtain
assurance that confidential treatment will be accorded to such information and,
provided, further, that such disclosure was not caused by and did not result
from a previous disclosure by the Receiving Party or any of its Representative
not permitted hereunder.
If a Party decides not to proceed with a Transaction, such Party will
promptly notify the other Party of that decision. In that case, or if a Party
shall elect at any time to terminate further arrears by the Receiving Party to
the Evaluation Material for any reason, the Receiving Party will promptly
destroy or deliver to the other Party all copies of the Evaluation Material in
the possession of the Receiving Party or its affiliates or its Representatives,
will destroy all Notes and will further deliver to the other Party a certificate
executed by one of the Receiving Party's duly authorized executive officers
indicating that the requirements of this sentence have been satisfied in full.
Notwithstanding the return or destruction of Evaluation Material and Notes, the
Receiving Party and its Representatives will continue to be bound by their
obligations of confidentiality and other obligations hereunder.
Each Party understands that (i) the other Party shall conduct the
process for a possible Transaction as it in its sole discretion shall
determine, (ii) any procedures relating to such a Transaction may be changed at
any time without notice, and (iii) each Party shall have the right to reject or
accept any proposal or offer for any reason whatsoever,
<PAGE> 4
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October 28, 1996
and only such terms of a Transaction that are outlined in a definitive
agreement shall be binding upon either Party, if and when such agreement is
executed.
The Parties agree that, for a period of two (2) years following the
date of this Agreement, neither Party will hire any of the other party's
managerial employees that have been introduced to the other Party as part of a
review of a Transaction.
Each Party hereby acknowledges that they are aware that the securities
laws of the United States prohibit any person who has material, non-public
information concerning the other Party or a possible Transaction involving the
Parties from purchasing or selling securities in reliance upon such information
or from communicating such information to any other person or entity under
circumstances in which it is reasonably foreseeable that such person or entity
is likely to purchase or sell such securities in reliance upon such
information. The Parties also agree that, for a period of one (1) year
following the date of this Agreement, neither Party shall purchase, offer to
purchase or otherwise acquire any shares of the other Party's common stock by
any means unless such purchase is in accordance with the terms of a definitive
agreement between the two Parties.
Each Party agrees that unless and until a definitive agreement between
the Parties with respect to any Transaction has been executed and delivered,
neither Party will be under any legal obligation of any kind whatsoever with
respect to such Transaction, except for the obligations set forth in this
Agreement.
Each Party agrees that money damages would not be a sufficient remedy
for any breach of this Agreement by the other Party. Accordingly, in addition
to all other remedies available to it, the nonbreaching Party shall be entitled
to specific performance and injunctive or other equitable relief as a remedy
for any such breach, and each Party further agrees to waive any requirement for
the securing or posting of any bond in connection with such remedy. In the event
of litigation relating to this Agreement, if a court of competent jurisdiction
determines that a Party has breached this Agreement, the losing party shall be
liable and pay to the winning party the reasonable legal fees incurred by the
winning party in connection with such litigation, including, any appeal thereof.
All modifications or waivers of and amendments to this Agreement or any
part hereof must be in writing signed on behalf of each Party.
It is further understood and agreed that no failure or delay by a Party
in exercising any right, power or provision under this Agreement shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise of any right, power or privilege hereunder.
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October 28, 1996
In the event that any provision or portion of this Agreement is
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by
applicable law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.
If you are in agreement with the foregoing, please so indicate by
signing, dating and returning one copy of this Agreement, which will constitute
our Agreement with respect to the matters set forth herein.
Sincerely yours,
By: /s/ Julia L. Kopta
------------------------------
Julia L. Kopta
Executive Vice President and General Counsel
Community Psychiatric Centers
Agreed and accepted:
By: /s/ Jill L. Force
-----------------------------
Name: Jill L. Force
---------------------------
Title: VP & General Counsel
--------------------------
Vencor, Inc.
