<PAGE> 1
================================================================================
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)
(AMENDMENT NO. 8)
------------------------
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
<TABLE>
<CAPTION>
================================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- ------------------------------------------------------------------------------------------------
<S> <C>
$685,108,176 $137,021.64
================================================================================================
</TABLE>
* For the purpose of calculating the filing fee only. This calculation assumes
the purchase of (i) 38,994,413 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 June 11, 1997,
according to the Company and (ii) 3,824,848 shares of Common Stock subject to
issuance pursuant to options to purchase shares of Common Stock granted
pursuant to the Company's stock option plans and employee related agreements
as of June 11, 1997 according to the Company.
** 1/50 of 1% of the transaction value.
[X] 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> <C> <C>
Amount Previously Paid: $136,992.42 Filing Party: Vencor, Inc.
Form or Registration No.: 14D-1 Date Filed: May 7, 1997
</TABLE>
================================================================================
<PAGE> 2
This Amendment No. 8 (this "Amendment") is filed to supplement and amend
the information set forth in the Tender Offer Statement on Schedule 14D-1 filed
by Vencor, Inc., a Delaware corporation ("Vencor"), and LV Acquisition Corp., a
Delaware corporation (the "Purchaser"), on May 7, 1997 as previously amended (as
amended, the "Schedule 14D-1") with respect to the shares of Common Stock, par
value $1.00 per share, of Transitional Hospitals Corporation, a Nevada
corporation (the "Company"), including the associated rights to purchase Series
B Junior Participating Preferred Stock of the Company. Unless otherwise
indicated, the capitalized terms used herein shall have the meanings specified
in the Schedule 14D-1, including the Offer to Purchase (the "Offer to Purchase")
attached as Exhibit (a)(1) thereto and the supplement to the Offer to Purchase,
dated June 12, 1997 (the "Supplement") attached hereto as Exhibit (a)(14).
ITEM 1. SECURITY AND SUBJECT COMPANY.
(b) The information set forth in the Introduction and Section 5 of the
Supplement annexed hereto as Exhibit (a)(10) is incorporated herein by
reference.
(c) The information set forth in Section 2 of the Supplement is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 3 of the Supplement is
incorporated herein by reference.
(e)-(f) During the last five years, to the best of Vencor's knowledge,
neither of the new directors of Vencor referred to in Section 3 of the
Supplement have 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
either 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 Introduction and Sections 4 and 5
of the Supplement is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 7 of the Supplement 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 1, 4 and
5 of the Supplement is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 3 of the Supplement 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 Introduction and Sections 4, 5 and 6 of
the Supplement is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 3 of the Supplement is incorporated
herein by reference.
<PAGE> 3
ITEM 10. ADDITIONAL INFORMATION.
(b)-(c) The information set forth in the Introduction and Sections 4, 5, 6
and 8 of the Supplement is incorporated herein by reference.
(e) The information set forth in Sections 5 and 8 is incorporated herein by
reference.
(f) The information set forth in the entire text of the Supplement is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(14) Supplement to Offer to Purchase, dated June 12, 1997.
(a)(15) Revised Letter of Transmittal with respect to the Shares.
(a)(16) Form of second letter to brokers, dealers, commercial banks, trust
companies and nominees.
(a)(17) Form of second letter to be used by brokers, dealers, commercial
banks, trust companies and nominees to their clients.
(a)(18) Revised Notice of Guaranteed Delivery.
(a)(19) IRS Guidelines to Substitute Form W-9.
(a)(20) Letter dated June 12, 1997 from Vencor, Inc. to Transitional
Hospitals Corporation (exhibit omitted).
(a)(21) Form of Agreement and Plan of Merger by and among Vencor, Inc., LV
Acquisition Corp. and Transitional Hospitals Corporation.
(b)(1) $1.75 billion Credit Agreement (the "Credit Agreement") dated as of
March 17, 1997, amended as of March 31, 1997, among Vencor, the various banks
party thereto, the Managing Agents and Co-Agents party thereto, Morgan Guaranty
Trust Company of New York, as Documentation Agent and Collateral Agent, and
Nationsbank, N.A., as Administrative Agent (incorporated by reference to
Vencor's Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1997 (File No. 1-10989).
(b)(2) Form of Amendment No. 1 to the Credit Agreement, dated as of April
22, 1997.
(b)(3) Form of Amended and Restated Credit Agreement, dated as of May 30,
1997.
<PAGE> 4
SIGNATURE
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this Amendment is true, complete and correct.
Dated: June 12, 1997
VENCOR, INC.
By: /s/ W. BRUCE LUNSFORD
------------------------------------
Name: W. Bruce Lunsford
Title:Chairman of the Board,
President and Chief Executive
Officer
LV ACQUISITION CORP.
By: /s/ W. BRUCE LUNSFORD
------------------------------------
Name: W. Bruce Lunsford
Title: Chairman of the Board,
President and Chief Executive
Officer
<PAGE> 1
Supplement to Offer to Purchase Dated May 7, 1997
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 HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JUNE 19, 1997, UNLESS THE OFFER IS FURTHER
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 (THE
"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) LV ACQUISITION CORP. (THE
"PURCHASER") BEING SATISFIED THAT ALL HEALTHCARE APPROVALS HAVE BEEN RECEIVED,
(3) 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 ("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), (4) THE RIGHTS
HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER
BEING SATISFIED THAT THE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE
INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS CONTEMPLATED HEREIN, (5) THE
PURCHASER BEING SATISFIED THAT THE NEVADA CONTROL SHARE ACQUISITION STATUTE
SHALL BE INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS CONTEMPLATED HEREIN, (6)
THE PURCHASER BEING SATISFIED THAT THE NEVADA BUSINESS COMBINATION STATUTE SHALL
BE INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS CONTEMPLATED HEREIN AND (7)
THE COMPANY HAVING EXECUTED AND DELIVERED TO VENCOR, INC. ("VENCOR") AND THE
PURCHASER A MERGER AGREEMENT IN THE FORM AGREED TO BY VENCOR OR SUCH OTHER FORM
AS VENCOR, THE PURCHASER AND THE COMPANY MAY AGREE. SEE SECTION 6.
------------------------
THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING.
On June 12, 1997, Vencor delivered a form of Agreement and Plan of Merger (the
"Vencor Merger Agreement") including related disclosure schedules, to the
Company together with a letter agreement providing that Vencor would, subject to
certain limited conditions including the prior termination of the Select Medical
Agreement, the Company's execution and delivery of the Vencor Merger Agreement
and the absence of any of the conditions set forth in paragraphs (a) through (e)
of Annex A to the Vencor Merger Agreement, enter into such form of Agreement and
Plan of Merger. Also on June 12, 1997, the Company announced that it had
delivered written notice of termination of the Select Medical Merger Agreement
in accordance with Section 9.1(g) thereof. Section 9.1(g) of the Select Medical
Merger Agreement provides, among
(Continued on following page)
The Dealer Manager for the Offer is:
<TABLE>
<S> <C>
CREDIT FIRST
SUISSE BOSTON
</TABLE>
June 12, 1997
<PAGE> 2
(Continued from previous page)
other things, that the Company may under certain circumstances terminate the
Select Medical Merger Agreement upon five days prior written notice to Select
Medical. The Company is required by the terms of the Select Medical Merger
Agreement to negotiate with Select Medical during that five day period to make
such adjustments in the terms and conditions of the Select Medical Merger
Agreement as would enable the parties thereto to proceed with the transactions
contemplated by the Select Medical Merger Agreement.
Vencor presently anticipates that if the Select Medical Merger Agreement is
terminated as contemplated in the notice provided by the Company to Select
Medical and the Company enters into the Vencor Merger Agreement, the conditions
of the Offer will be satisfied by 12:00 midnight, New York City time on
Thursday, June 19, 1997 and that the Offer will be completed at that time.
However, there can be no assurance that the Select Medical Merger Agreement will
be terminated, that the Company will enter into the Vencor Merger Agreement or
that all of the conditions to the Offer will be satisfied at that time. VENCOR
URGES ALL HOLDERS OF SHARES WHO WISH TO PARTICIPATE IN THE OFFER TO TENDER THEIR
SHARES PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME ON THURSDAY JUNE 19, 1997.
In anticipation of the execution and delivery by the Company, Vencor and the
Purchaser of the Vencor Merger Agreement, the Purchaser is, with this Supplement
to the Offer to Purchase (the "Supplement"), amending the conditions to the
Offer to be those conditions contemplated by the Vencor Merger Agreement and
those structural conditions that will be satisfied prior to or simultaneously
with the entry by the Company, Vencor and the Purchaser into the Vencor Merger
Agreement. See Section 6.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares, including the associated rights to purchase Series B Junior
Participating Preferred Stock (the "Rights") should either (1) complete and sign
the revised or original Letter of Transmittal or a facsimile thereof in
accordance with the instructions in the revised or original Letter of
Transmittal, including any required signature guarantees, and mail or deliver
the revised or original Letter of Transmittal or such facsimile with such
stockholder's certificate(s) for the tendered Shares and any other required
documents to the Depositary, (2) follow the procedure for book-entry tender of
Shares set forth in Section 3 of the Offer to Purchase, dated May 7, 1997 (the
"Offer to Purchase"), 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.
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. If the Vencor Merger Agreement Condition (as
defined herein) is not satisfied, a Distribution Date (as defined in the Offer
to Purchase) could occur prior to the Expiration Date (as defined herein) and,
if a Distribution Date were to occur, stockholders would 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 then the procedures set
forth in the Offer to Purchase with respect to separate delivery of Rights
Certificates must be followed. If the Vencor Merger Agreement Condition is
satisfied, the Rights Condition will be satisfied. For the purposes of this
Supplement (other than with respect to any discussion of the Rights Condition)
it will be assumed that the Rights Condition has been satisfied.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3 of the Offer to
Purchase.
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
Supplement. Requests for additional copies of this Supplement and the revised
Letter of Transmittal or the Offer to Purchase may be directed to the
Information Agent or to the Dealer Manager.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
Introduction.............................................................................. 1
1. Amended Terms of the Offer..................................................... 3
2. Price Range of Shares; Dividends............................................... 4
3. Certain Information Concerning Vencor.......................................... 4
4. Background of the Offer Since May 7, 1997; Contacts with the Company........... 5
5. Purpose of the Offer and the Vencor Merger; Plans for the Company.............. 6
6. Amended Conditions of the Offer................................................ 13
7. Source and Amount of Funds..................................................... 14
8. Certain Legal Matters.......................................................... 14
9. Miscellaneous.................................................................. 15
</TABLE>
i
<PAGE> 4
TO THE HOLDERS OF SHARES OF
TRANSITIONAL HOSPITALS CORPORATION:
INTRODUCTION
The following information amends and supplements the Offer to Purchase,
dated May 7, 1997 (the "Offer to Purchase"), of LV ACQUISITION CORP., a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of VENCOR, INC., a
Delaware corporation ("Vencor"). Pursuant to this Supplement (as defined below),
the Purchaser is continuing to 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, as
amended and supplemented by this supplement (the "Supplement"), and in the
related revised 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 revised 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 otherwise requires, 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 Rights pursuant to the Rights
Agreement. Except as otherwise set forth in this Supplement and in the revised
Letter of Transmittal, the terms and conditions previously set forth in the
Offer to Purchase and the related original Letter of Transmittal remain
applicable in all respects to the Offer, and this Supplement should be read in
conjunction with the Offer to Purchase. Unless the context otherwise requires,
capitalized terms used but not defined herein have the meanings ascribed to them
in the Offer to Purchase.
Procedures for tendering Shares are set forth in Section 3 of the Offer to
Purchase. Tendering stockholders may continue to use the original Letter of
Transmittal and the original Notice of Guaranteed Delivery previously circulated
with the Offer to Purchase, or use the revised Letter of Transmittal and the
revised Notice of Guaranteed Delivery circulated with this Supplement. While the
Letter of Transmittal previously circulated with the Offer to Purchase refers
only to the Offer to Purchase, stockholders using such document to tender their
Shares will nevertheless be deemed to be tendering pursuant to the Offer.
SHARES PREVIOUSLY VALIDLY TENDERED AND NOT WITHDRAWN CONSTITUTE VALID
TENDERS FOR THE PURPOSES OF THE OFFER. STOCKHOLDERS ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION WITH RESPECT TO SUCH SHARES, EXCEPT AS MAY BE REQUIRED BY THE
GUARANTEED DELIVERY PROCEDURE IF SUCH PROCEDURE WAS UTILIZED. SEE SECTION 4 OF
THE OFFER TO PURCHASE FOR THE PROCEDURES FOR WITHDRAWING SHARES TENDERED
PURSUANT TO THE OFFER.
IF THE VENCOR MERGER AGREEMENT CONDITION (AS DEFINED BELOW) IS SATISFIED,
THE SELECT MEDICAL TERMINATION CONDITION (AS DEFINED BELOW), THE RIGHTS
CONDITION (AS DEFINED BELOW), THE CONTROL SHARE CONDITION (AS DEFINED BELOW) AND
THE BUSINESS COMBINATION CONDITION (AS DEFINED BELOW) WILL ALL BE SATISFIED. THE
MINIMUM CONDITION (AS DEFINED BELOW) AND THE HEALTHCARE CONDITION (AS DEFINED
BELOW) AND CERTAIN OTHER TERMS AND CONDITIONS CONTAINED HEREIN WILL STILL BE
REQUIRED TO BE SATISFIED OR WAIVED. SEE SECTION 6.
On June 12, 1997, Vencor delivered a form of Agreement and Plan of Merger
(the "Vencor Merger Agreement"), including related disclosure schedules, to the
Company together with a letter agreement (the "June 12 Letter") providing that
Vencor would, subject to certain limited conditions including the prior
termination of the Select Medical Agreement, the Company's execution and
delivery of the Vencor Merger Agreement and the absence of any of the conditions
set forth in paragraphs (a) through (e) of Annex A to the Vencor Merger
Agreement, enter into such form of Agreement and Plan of Merger. Also on June
12, 1997, the
<PAGE> 5
Company announced that it had delivered written notice of termination of the
Select Medical Merger Agreement in accordance with Section 9.1(g) thereof.
Section 9.1(g) of the Select Medical Merger Agreement provides, among other
things, that the Company may under certain circumstances terminate the Select
Medical Merger Agreement upon five days prior written notice to Select Medical.
The Company is required by the terms of the Select Medical Merger Agreement to
negotiate with Select Medical during that five day period to make such
adjustments in the terms and conditions of the Select Medical Merger Agreement
as would enable the parties to proceed with the transactions contemplated by the
Select Medical Merger Agreement.
The Vencor Merger Agreement provides for, among other things, (i) the
amendment of the conditions to the Offer as set forth in their entirety in
Section 6 of this Supplement, (ii) extension of the expiration date of the Offer
to 12:00 midnight, New York City time, on Thursday June 19, 1997 (unless
otherwise extended) and (iii) the merger of the Purchaser with and into the
Company (the "Vencor Merger") as promptly as is practicable following the
consummation of the transactions contemplated by the Vencor Merger Agreement. In
the Vencor Merger, each Share issued and outstanding immediately prior to the
Effective Time (as defined below) (other than any Shares owned by Vencor, the
Purchaser or any other subsidiary of Vencor (the "Vencor Companies") or Shares
which are held by Dissenting Stockholders (as defined in the Vencor Merger
Agreement)), if any, will be converted into the right to receive $16.00 in cash
(the "Offer Consideration").
Based upon the representations, warranties and covenants contained in the
Vencor Merger Agreement, prior to or upon the execution and delivery by the
Company of the Vencor Merger Agreement, each of the Rights Condition, the
Control Share Condition, the Business Combination Condition, the Select Medical
Termination Condition, and the Vencor Merger Agreement Condition, each as
defined below, will be satisfied. See "Amended Conditions of the Offer."
CONDITIONS TO THE OFFER
The Offer is subject to the fulfillment of, among others, the following
conditions:
Minimum Condition. CONSUMMATION OF THE OFFER IS CONDITIONED (THE "MINIMUM
CONDITION") UPON 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.
The Company has advised Vencor that as of June 11, 1997 there were (i)
38,994,413 Shares issued and outstanding, (ii) 3,824,848 Shares subject to
issuance pursuant to the Company's stock option and incentive plans and (iii)
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
42,997,779 Shares outstanding on a fully diluted basis. Accordingly, the
Purchaser believes that the Minimum Condition would be satisfied if at least
approximately 28,665,186 Shares were to be validly tendered and not withdrawn at
the time Shares are accepted for payment, assuming that the number of Shares
outstanding on a fully diluted basis on the date the Shares are accepted for
payment is the same as the number of Shares outstanding on a fully diluted basis
on June 11, 1997.
Healthcare Condition. CONSUMMATION OF THE OFFER IS CONDITIONED (THE
"HEALTHCARE CONDITION") UPON THE PURCHASER BEING SATISFIED THAT ALL APPROVALS
UNDER HEALTHCARE LICENSING, CERTIFICATE OF NEED CHANGE OF OWNERSHIP LAWS AND
REGULATIONS AND SIMILAR MATTERS THAT ARE MATERIAL TO VENCOR OR THE COMPANY OR TO
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREIN ("HEALTHCARE
APPROVALS") HAVE BEEN RECEIVED.
2
<PAGE> 6
Select Medical Termination Condition. CONSUMMATION OF THE OFFER IS
CONDITIONED (THE "SELECT MEDICAL TERMINATION CONDITION") 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).
Upon entry into the Vencor Merger Agreement the Select Medical Termination
Condition will be satisfied. For additional information concerning the Select
Medical Termination Condition, see the Offer to Purchase.
Rights Condition. CONSUMMATION OF THE OFFER IS CONDITIONED (THE "RIGHTS
CONDITION") UPON THE RIGHTS HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF
THE COMPANY OR THE PURCHASER BEING SATISFIED THAT THE RIGHTS HAVE BEEN
INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE TRANSACTIONS
CONTEMPLATED HEREIN.
Upon entry into the Vencor Merger Agreement the Rights Condition will be
satisfied. For additional information concerning the Rights Condition, see the
Offer to Purchase.
The Control Share Condition. CONSUMMATION OF THE OFFER IS CONDITIONED (THE
"CONTROL SHARE CONDITION") UPON THE PURCHASER BEING SATISFIED THAT THE NEVADA
CONTROL SHARE ACQUISITION STATUTE SHALL BE INAPPLICABLE TO THE OFFER AND THE
TRANSACTIONS CONTEMPLATED HEREIN.
Upon entry into the Vencor Merger Agreement the Control Share Condition
will be satisfied. For additional information concerning the Control Share
Condition, see the Offer to Purchase.
The Business Combination Condition. CONSUMMATION OF THE OFFER IS
CONDITIONED (THE "BUSINESS COMBINATION CONDITION") UPON THE PURCHASER BEING
SATISFIED THAT THE NEVADA BUSINESS COMBINATION STATUTE IS INAPPLICABLE TO THE
OFFER AND THE VENCOR MERGER
Upon entry into the Vencor Merger Agreement the Business Combination
Condition will be satisfied. For additional information concerning the Business
Combination Condition, see the Offer to Purchase.
The Vencor Merger Agreement Condition. CONSUMMATION OF THE OFFER IS
CONDITIONED (THE "VENCOR MERGER AGREEMENT CONDITION") UPON THE COMPANY HAVING
EXECUTED AND DELIVERED TO VENCOR AND THE PURCHASER THE VENCOR MERGER AGREEMENT
OR ANOTHER MERGER AGREEMENT IN SUCH OTHER FORM AS VENCOR, THE PURCHASER AND THE
COMPANY MAY AGREE.
Upon entry into the Vencor Merger Agreement, the Vencor Merger Agreement
Condition will be satisfied.
Certain other conditions to consummation of the Offer are described in
Section 6. The Purchaser expressly reserves the right, in its sole discretion,
to waive any one or more of the conditions to the Offer. See Sections 5 and 6.
THIS SUPPLEMENT, THE OFFER TO PURCHASE AND THE REVISED LETTER OF
TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
1. AMENDED TERMS OF THE OFFER. In anticipation of the parties execution
and delivery of the Vencor Merger Agreement, the Offer has been amended. The
primary effect of the amendment is a reduction in the number of conditions to
the Offer. Until a Distribution Date occurs the Rights will remain attached to
the Shares. If the amendment is made to the Rights Agreement as contemplated by
the Vencor Merger Agreement, the Rights will remain attached to the Shares.
3
<PAGE> 7
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. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Thursday June 19, 1997, unless and until the Purchaser shall
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.
This Supplement, the revised Letter of Transmittal and other relevant
materials are being mailed to holders of Shares from a list provided to the
Purchaser by the Company.
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.
2. PRICE RANGE OF SHARES; DIVIDENDS. The reported high and low sales
prices for the Shares on the New York Stock Exchange ("NYSE") Composite Tape
during the second calendar quarter of 1997 through June 11, 1997, were $15 7/8
and $8 1/4, respectively. On June 11, 1997, the last full trading day prior to
the public announcement of the terms of the June 12 Letter and the terms of the
Vencor Merger Agreement, the reported closing price on the NYSE was $15 3/8 per
Share. Stockholders of the Company are urged to obtain a current market
quotation for the Shares. The Company has not paid a dividend to its
stockholders during the second calendar quarter of 1997 to the date hereof.
3. CERTAIN INFORMATION CONCERNING VENCOR. The selected summary
consolidated financial information of Vencor set forth below has been excerpted
and derived from Vencor's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997. Additional information concerning Vencor is set forth in such
summary consolidated report and in other reports and documents filed with the
Securities and Exchange Commission (the "Commission"). Such reports may be
obtained from the Commission and examined in the manner set forth in Section 8
of the Offer to Purchase.
4
<PAGE> 8
VENCOR, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................................... $680,696 $626,337
Income from operations before income taxes............................. 55,891 44,894
Income from operations................................................. 33,982 27,610
Extraordinary loss on extinguishment of debt, net of income tax
benefit.............................................................. (2,259) --
-------- --------
Net income................................................... $ 31,723 $ 27,610
======== ========
Earnings per common and common equivalent share:
Primary:
Income from operations............................................ $ 0.48 $ 0.39
Extraordinary loss on extinguishment of debt...................... (0.03) --
-------- --------
Net income................................................... $ 0.45 $ 0.39
======== ========
Fully diluted:
Income from operations............................................ $ 0.48 $ 0.39
Extraordinary loss on extinguishment of debt...................... (0.03) --
-------- --------
Net income................................................... $ 0.45 $ 0.39
======== ========
Shares used in computing earnings per common and common equivalent
share:
Primary.............................................................. 70,207 71,455
Fully diluted........................................................ 70,621 71,455
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
1997
-------------
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................. $ 427,690
Assets.......................................................................... 2,660,706
Long-term debt.................................................................. 1,286,843
Stockholders' equity............................................................ 833,483
</TABLE>
On May 15, 1997, Elaine L. Chao and Ulysses L. Bridgeman, Jr. were elected
as directors of Vencor, replacing William C. Ballard Jr. and Jack O. Vance. Ms.
Chao's business address is: The Heritage Foundation, 214 Massachusetts Avenue,
NE, Washington, D.C. 20002-4999 and Mr. Bridgeman's business address is: B.F.
South, Inc., Suite 104, 12910 Shelbyville Road, Louisville, Kentucky 40243. Each
of Ms. Chao and Mr. Bridgeman is a United States citizen. Ms. Chao is currently
a Distinguished Fellow of The Heritage Foundation and Mr. Bridgeman is currently
the President of Bridgeman Foods, Inc., a franchisee of 51 Wendy's Old Fashioned
Restaurants. In addition to her position at The Heritage Foundation, Ms. Chao
served as President and Chief Executive Officer of the United Way of America
from 1992 to 1996 and as the Director of the Peace Corps from 1991 to 1992. Mr.
Bridgeman has served in his current position since 1988. Each of Ms. Chao and
Mr. Bridgeman has served on the Audit Committee of the Board of Directors of
Vencor since May 1997. The information set forth in Section 9 of the Offer to
Purchase is also applicable to each such person.
4. BACKGROUND OF THE OFFER SINCE MAY 7, 1997; CONTACTS WITH THE
COMPANY. On May 9, 1997, the Company issued a press release announcing that the
Board of Directors of the Company (the "Company Board") had authorized
management of the Company to initiate discussions with Vencor. Thereafter,
representatives of Vencor and the Company began discussing the terms of a
possible merger agreement. On May 14, 1997, counsel for Vencor sent a letter
(the "May 14 Letter") to counsel for the Company which, among other things,
5
<PAGE> 9
(i) requested that the Company conduct itself so as not to give Select Medical
any right to receive a termination fee pursuant to the Select Medical Merger
Agreement and (ii) noted that pursuant to the terms of the Select Medical Merger
Agreement, the Company could terminate the Select Medical Merger Agreement, in
certain circumstances, without paying a termination fee to Select Medical. The
text of the May 14 Letter was attached to an amendment to the Schedule 14D-1 as
Exhibit (a)(9) and the foregoing description is qualified in its entirety to the
text of the May 14 Letter. On May 19, 1997, the Company filed a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
with the Commission stating that the Company Board did not believe it would be
prudent to take a position with respect to the Offer. The Schedule 14D-9 states
that the Company Board took this position because among other things, the
Company Board continued to believe that the consideration payable pursuant to
the Select Medical Merger Agreement is an attractive price for the Company and
that there were "uncertainties and contingencies" associated with the Offer,
which would have to be resolved to the Company Board's satisfaction.
During the period commencing on May 8, 1997 through and including June 12,
1997, representatives of Vencor and the Company discussed the terms of a
possible merger agreement and negotiated the Vencor Merger Agreement.
On May 22, 1997, Vencor received a request for additional information from
the Antitrust Division, extending the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), which otherwise
would have expired at 12:00 midnight on May 22, 1997.
On June 8, 1997, the waiting period under the HSR Act with respect to the
indirect acquisition of shares of capital stock of BHC owned by the Company
expired.
On June 11, 1997, the Antitrust Division notified Vencor that it had
concluded its review of the combination of Vencor and the Company and that it
would be so notifying the Premerger Notification Office of the FTC. On June 12,
1997, Vencor was advised by the Premerger Notification Office of the FTC that
the waiting period under the HSR Act with respect to the acquisition of Shares
had been terminated.
On June 12, 1997 Vencor sent the June 12 Letter to the Company and the
Company announced that it had delivered written notice of the termination of the
Select Medical Merger Agreement in accordance with Section 9.1(g) thereof.
5. PURPOSE OF THE OFFER AND THE VENCOR MERGER; PLANS FOR THE COMPANY.
The following is a summary of the Vencor Merger Agreement, a copy of which
is attached as Exhibit (a)(21) to Amendment No. 8 to the Schedule 14D-1 of
Vencor and the Purchaser (as amended, the "Schedule 14D-1") which has been filed
with the Commission and should be available for inspection and copying in the
manner set forth in Section 8 of the Offer to Purchase. Such summary is
qualified in its entirety by reference to the text of the Vencor Merger
Agreement which is incorporated herein by reference. The Vencor Merger Agreement
has not yet been entered into by Vencor, the Purchaser and the Company.
General. The Vencor Merger Agreement provides that Vencor will proceed
with the Amended Offer (as defined in the Vencor Merger Agreement). The Vencor
Merger Agreement further provides that, without the prior written consent of
Company, the Purchaser will not decrease the Offer Consideration or waive the
Minimum Condition, impose additional conditions to the Amended Offer, extend the
Expiration Date if the conditions to the Offer have been satisfied, provided
that none of the conditions which are not to be in existence after June 12, 1997
and prior to the Expiration Date are existing at such time, or amend any other
term of the Amended Offer in any manner adverse to the holders of Shares. In
addition, the Vencor Merger Agreement provides that the Purchaser will extend
the Expiration Date until such time as the conditions to this Amended Offer have
been satisfied, provided that no single extension will be for more than ten
business days.
The Vencor Merger Agreement provides that as promptly as practicable
following the satisfaction or waiver of the conditions to the Vencor Merger, the
Purchaser will be merged with and into Company (the "Effective Time"). At the
Effective Time, each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by the Vencor Companies or Shares which
are held by stockholders ("Dissenting Stockholders") exercising appraisal rights
pursuant to Section 92A.380 of the NGCL) will, by virtue of the
6
<PAGE> 10
Vencor Merger and without any action on the part of the holder thereof, be
converted into the right to receive, without interest, an amount in cash equal
to the Offer Consideration.
The Vencor Merger Agreement provides that the directors of the Purchaser at
the Effective Time will be the initial directors of the Company following the
Vencor Merger (sometimes referred to with respect to the period following the
Vencor Merger as the "Surviving Corporation") and the officers of the Purchaser
at the Effective Time will be the initial officers of the Surviving Corporation
and shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualify in the manner provided in the Articles
of Incorporation and by-laws of the Surviving Corporation or as otherwise
provided by law.
Directors Following the Vencor Merger. The Vencor Merger Agreement
provides that following the acceptance of payment of Shares by the Purchaser, if
requested by Vencor, the Company will promptly take all actions necessary to
cause persons designated by Vencor to become directors of the Company so that
the total number of such persons equals that number of directors, rounded up to
the next whole number, which represents the product of (x) the total number of
directors on the Company Board multiplied by (y) the percentage that the number
of Shares accepted for payment by the Purchaser plus any Shares beneficially
owned by Vencor or its affiliates on the date of the Vencor Merger Agreement
bears to the number of Shares outstanding at the time of acceptance for payment.
The Company has agreed that it will increase the size of the Company Board, or
use its reasonable efforts to secure the resignation of directors, or both, as
is necessary to permit Vencor's designees to be elected to the Company Board.
The Vencor Merger Agreement further provides that, prior to the Effective Time,
the Company Board will always have at least two, and at the Company's election
three, members (one of whom will be Richard Conte) who are neither officers of
Vencor nor designees, stockholders or affiliates of Vencor ("Vencor Insiders").
No action taken by the Company Board with respect to termination of the Vencor
Merger Agreement will be effective unless it is approved by the vote of at least
a majority of the directors of the Company who are not Vencor Insiders.
Representations and Warranties. The Vencor Merger Agreement contains
customary representations and warranties of Vencor and the Company. The
representations and warranties are qualified so that they are deemed to be
accurate so long as any inaccuracy would not have a material adverse effect on
either the Company or Vencor, and their respective subsidiaries taken as a
whole. Among the representations and warranties supplied by the Company, the
Company has represented and warranted with respect to the financial condition,
results of operations, properties, assets or liabilities of Behavioral Health
Corporation, that the Company Board has taken all appropriate action so that (i)
neither Vencor nor the Purchaser will be an "interested stockholder" within the
meaning of the Nevada Business Combination Statute by virtue of the execution of
the Vencor Merger Agreement or the consummation of the transactions contemplated
by the Vencor Merger Agreement and (ii) the entry into the Vencor Merger
Agreement and the consummation of the transactions contemplated hereunder shall
be exempted from the provisions of the Nevada Control Share Statute, that the
Company has amended the Rights Agreement to provide that none of Vencor, the
Purchaser or any of their respective affiliates or associates will be deemed to
be an Acquiring Person (as defined in the Rights Agreement) and that the
Distribution Date will not be deemed to occur and the Rights will not separate
from the Shares as a result of the commencement of the Offer or as a result of
consummation of the transactions contemplated by the Merger Agreement, that the
Select Medical Merger Agreement will have been terminated in accordance with its
terms, that the Company will not be required to make any payment to Select
Medical, SM Acquisition Co. or any of their respective affiliates except
pursuant to Section 9.2 of the Select Medical Merger Agreement.
Conduct of Business by the Company Pending the Vencor Merger. The Vencor
Merger Agreement provides that from the date of the Vencor Merger Agreement
until the earlier of (i) the time that persons designated by Vencor are
appointed as directors of the Company pursuant to the terms of the Vencor Merger
Agreement and (ii) the Effective Time: (A) the business of the Company will be
conducted only in the ordinary and usual course of business and consistent with
past practice, and there will be no material change in the conduct of the
operations of the Company and the Company's subsidiaries taken as a whole, and,
the Company will use its reasonable best efforts to preserve its business
organization intact, maintain its existing relations with customers, suppliers,
employees and business associates, and preserve the goodwill of those having
business relationships with it; (B) the Company will not (I) sell or pledge or
agree to sell, pledge, dispose of or encumber any stock or other equity
interests owned by it in any of its subsidiaries; (II) amend its Articles of
Incorporation or by-laws or,
7
<PAGE> 11
except as contemplated by the Vencor Merger Agreement, amend, modify, consummate
or redeem the Rights Agreement or Rights; or (III) split, combine or reclassify
any shares of its outstanding capital stock; or (IV) declare, set aside or pay
any dividend or other distribution payable in cash, stock or property, or redeem
or otherwise acquire any shares of its capital stock or shares of the capital
stock of any of its subsidiaries; (C) neither the Company nor any of its
subsidiaries will (I) authorize for issuance, issue, pledge, dispose of,
encumber or sell any additional shares of, or rights of any kind to acquire, any
shares of or securities convertible or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, its capital stock of any
class (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise), except for
unissued Shares which may be issued upon the exercise or conversion of
outstanding rights, options, warrants, commitments, subscriptions, rights to
purchase, or otherwise; (II) acquire, dispose of, transfer, lease, guarantee,
license, mortgage, pledge or encumber any fixed or other assets in excess of
$200,000 in any one or a series of related transactions or more than $1,000,000
in the aggregate other than ordinary course acquisitions of supplies used in the
day-to-day operations of the Company; (III) incur, assume or prepay any
indebtedness or any other material liabilities; (IV) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person other than a wholly owned
subsidiary of the Company in the ordinary course of business and consistent with
past practices in an amount in excess of $1,000,000 in the aggregate; (V) make
any loans, advances or capital contributions to, or investments in, any other
person in an amount in excess of $200,000 in any one or series of related
transactions or more than $1,000,000 in the aggregate; (VI) authorize capital
expenditures, other than certain specified capital expenditures in excess of
$200,000 in any one or a series of related transactions or $500,000 in the
aggregate; or (VII) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing; (D) neither the Company nor
any of its subsidiaries will make any change in the compensation payable or to
become payable to any of its officers, directors or employees except pursuant to
existing agreements, grant any severance or termination pay to, or enter into or
amend any employment, severance, termination or other similar agreement, adopt
any new employee benefit plan or amend any existing employee benefit plan or
voluntarily accelerate the vesting of any stock options, restricted stock or
other compensation or benefit or make any loans to any of its officers,
directors or employees or make any changes in its existing borrowing or lending
arrangements for or on behalf of any of such persons, whether contingent on
consummation of the Merger or otherwise, other than as may be required under
applicable law or the terms of any existing employee benefit plan or agreement
provided, however, that the Company and its subsidiaries may amend any plan to
provide for the effectuation thereof immediately prior to the expiration of the
Amended Offer and/or the Effective Time so long as the amounts payable
thereunder, individually or in the aggregate, are not increased; (E) neither the
Company nor any of its subsidiaries will settle or compromise any material
claims or litigation or, except in the ordinary and usual course of business,
modify, amend or terminate any of its material Contracts (as defined in the
Vencor Merger Agreement) or waive, release or assign any material rights or
claims; (F) neither the Company nor any of its subsidiaries will take, or omit
to take, any action that is reasonably likely to cause any representation and
warranty of the Company in the Vencor Merger Agreement to become untrue in any
material respect; and (G) neither the Company nor any subsidiary will make any
tax election or permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to Vencor, except in
the ordinary and usual course of business, neither the Company nor any
subsidiaries of the Company shall take any action to remove the Select Medical
Termination Fee from the escrow it is held in by the Nevada District Court
except pursuant to an order by the Nevada District Court or such other court of
competent jurisdiction.
Acquisition Proposals. The Vencor Merger Agreement provides that from the
date of the Vencor Merger Agreement until its termination, the Company and its
subsidiaries will not, and will cause their respective officers, directors,
employees or other agents (including, without limitation, investment bankers,
attorneys or accountants) not to, directly or indirectly, (i) solicit, initiate,
encourage, enter into any agreement or otherwise facilitate any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving the Company or the acquisition of any equity interest in,
or a substantial portion of the assets of the Company or any transaction that
would conflict with or interfere with consummation of the transactions
contemplated by the Vencor Merger Agreement, other than the transactions
contemplated by the Vencor Merger Agreement and other than the sale of the
hospital in Kirkland, Washington and the sale of real estate and buildings
relating to hospitals
8
<PAGE> 12
formerly operated by the Company or one of its subsidiaries or certain specified
real property at hospitals presently operated by the Company or any of its
subsidiaries (any such proposal being an "Acquisition Proposal" and any such
acquisition or transaction being an "Acquisition Transaction"), or (ii) engage
in or continue discussions or negotiations with, or disclose any nonpublic
information relating to the Company or any of its subsidiaries, respectively, or
afford access to their respective properties, books or records to, any person
that may be considering making, or has made, an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. Notwithstanding the foregoing, the Vencor Merger Agreement provides
that, nothing contained in the Vencor Merger Agreement will prohibit the Company
and the Company Board from (i) taking and disclosing a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
by the Commission under the Exchange Act, or (ii) furnishing information to, or
entering into negotiations with, any person or entity that makes an unsolicited
bona fide written proposal to acquire the Company pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of the assets,
business combination or other similar transaction, if, and only to the extent
that, (i) the Company Board concludes in good faith (after consultation with its
financial advisors) that such Acquisition Proposal is reasonably capable of
being completed, taking into account all legal, financial and other aspects of
the proposal and the person or entity making the proposal, and would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated by
the Vencor Merger Agreement (any such more favorable Acquisition Proposal being
referred to as a "Superior Proposal") and (ii) the Company Board determines in
good faith upon advice of counsel that such action is required for the Company
Board to comply with its fiduciary duties to stockholders imposed by law.
Pursuant to the terms of the Vencor Merger Agreement, the Company has agreed
that it will notify Vencor promptly if any such proposals or offers are received
by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
person and the terms and conditions of any proposals or offers and thereafter
will keep Vencor informed, on a current basis, of the status and terms of any
such proposals or offers and the status of any such discussions or negotiations.
Proxy Statement; Stockholder Approval. Pursuant to the terms of the Vencor
Merger Agreement, the Company has agreed, to the extent required, to prepare and
file with the Commission a Proxy Statement and to hold a meeting of stockholders
to approve the Vencor Merger or if such meeting is not required, to prepare an
Information Statement and to use its reasonable efforts to obtain such
stockholder approval.
Antitrust Laws. Pursuant to the Merger Agreement, the Company, Vencor and
the Purchaser have each agreed that they will use best reasonable efforts to
oppose the imposition of any Offer Order (as defined below) or any Order (as
defined below) and to appeal the imposition of any such Offer Order or any
Order. The Vencor Merger Agreement also provides that if the Purchaser shall not
have accepted Shares for payment pursuant to the Amended Offer on or before
September 1, 1997 due to the existence of an Offer Order, Vencor and the
Purchaser will increase the Offer Consideration by an amount per Share equal to
interest accruing on $16.00 from September 1, 1997 at a rate of 5% per annum
through and including the date Shares are accepted for payment pursuant to the
Amended Offer.
Treatment of Employee Stock Options. The Vencor Merger Agreement provides
that at the Effective Time all outstanding options to purchase Shares
("Options") will immediately vest and become fully exercisable. The Vencor
Merger Agreement also provides that at the Effective Time each Option with an
exercise price of less than the Offer Consideration (a "Lower Priced Option")
will be amended to provide that the holders need not tender any exercise price
therefor and that upon exercise the holder shall receive an amount of cash equal
to the product of (x) the amount by which the Offer Consideration exceeds the
exercise price per Share subject to such Lower Priced Option, and (y) the number
of Shares issuable pursuant to the unexercised portion of such Lower Priced
Option, less any required withholding of taxes. Pursuant to the terms of the
Vencor Merger Agreement, at such time, all Options other than Lower Priced
Options shall be converted into a right to receive, upon exercise of such
Options (including payment of the exercise price of such Options), an amount in
cash equal to the (x) the product of the Offer Consideration and (y) the number
of Shares issuable pursuant to the unexercised portion of such Option, less any
required withholding of taxes. Pursuant to the terms of the Vencor Merger
Agreement, the Company has agreed that prior to the Expiration Date it will
cancel certain of the converging options issued under the Company's 1989 Stock
Incentive Plan and will use its best efforts to cancel all other converging
options.
9
<PAGE> 13
Indemnification Rights. The Vencor Merger Agreement provides that the
Articles of Incorporation and by-laws of the Surviving Corporation will contain
provisions with respect to indemnification of individuals who at any time prior
to the expiration of the Offer (or at any time after expiration of the offer and
prior to the Effective Time) were directors, officers, or otherwise entitled to
indemnification thereunder (the "Indemnified Parties") which are at least as
favorable to each Indemnified Party as the Articles of Incorporation and By-laws
of the Company as of the date of the Vencor Merger Agreement. The Vencor Merger
Agreement further provides that the Articles of Incorporation and By-laws of the
Surviving Corporation will not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of an Indemnified Party. The Vencor Merger
Agreement also provides that for a period of six years from and after the
Effective Time, Vencor and the Surviving Corporation will indemnify, defend and
advance expenses in matters that may be subject to indemnification to the
Indemnified Parties with respect to liabilities and claims (and related
expenses) made against them resulting from their service as such prior to the
Effective Time to the fullest extent permitted under, and subject to the
requirements and other provisions of, the Company's Articles of Incorporation,
By-laws and indemnification agreements in effect on the date of the Vencor
Merger Agreement and applicable provisions of law. In addition, the Vencor
Merger Agreement provides that for a period expiring six years after the
expiration or termination of any consulting obligations under any agreement
requiring any Indemnified Party to provide consulting services to Vencor or the
Surviving Corporation following the expiration of the Amended Offer or the
Effective Time, Vencor, the Company and the Surviving Corporation will
indemnify, defend and advance expenses to Indemnified Parties in matters that
would be subject to indemnification with respect to liabilities and claims (and
related expenses) made against them resulting from their service as a consultant
under any such agreement to the fullest extent permitted under, and subject to
the requirements and other provisions of, the Company's Articles of
Incorporation, By-laws, indemnification and consulting agreements in effect on
the date of the Vencor Merger Agreement and applicable provisions of law.
The Vencor Merger Agreement also provides that Vencor will cause to be
maintained in effect for a period ending not sooner than the sixth anniversary
of the Effective Time directors' and officers' liability insurance providing at
least the same coverage with comparable carriers with respect to the Company's
directors and officers as the policies maintained on behalf of directors and
officers of the Company as of the date of the Vencor Merger Agreement, and
containing terms and conditions which are no less advantageous, with respect to
matters occurring on or prior to the Effective Time (to the extent such
insurance is available with respect to such matters); provided, that in no event
will Vencor be required to expend to maintain or procure insurance coverage in
an amount per annum in excess of 200% of the current annual premiums for the
twelve-month period ended November 30, 1996 (the "Maximum Premium") with respect
to such insurance, or, if the cost of such coverage exceeds the Maximum Premium,
the maximum amount of coverage that can be purchased or maintained for the
Maximum Premium. In addition, the Vencor Merger Agreement provides that, in the
event that any claim for which coverage under the Company's directors' and
officers' liability insurance policy would be available is not paid pursuant to
such directors' and officers' liability insurance policy because such amount
does not exceed the "deductible" or "retention amount" of such policy, Vencor or
Purchaser will promptly, at the election of the officer or director, reimburse
or pay or promptly cause the Company to reimburse or pay any officer or director
for any amount, up to an aggregate of $500,000 for all officers and directors,
payable or paid because such amount is not in excess of the "deductible". In the
event that rights are reserved with regard to whether coverage for any claim is
available under the Company's directors' and officers' insurance policy, upon
written request from an officer or director, Vencor or the Purchaser will pay or
cause the Company to pay, upon receipt of an undertaking from the officer or
director making the written request to reimburse any amounts paid if it is
ultimately determined that coverage with respect to such claim is not available
under such policy, any officer or director for any amount, up to an aggregate of
$500,000, together with all other amounts payable pursuant to this subsection
(d) of Section 8.7 of the Vencor Merger Agreement for all officers and
directors, payable by such persons because such amount is not in excess of the
"deductible" or "retention amount".
Expenses. The parties have agreed in the Vencor Merger Agreement that
except with respect to expenses incurred in connection with the termination of
the Vencor Merger Agreement (as described below), whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Vencor
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such expenses except for certain other expenses that are to be
shared equally by Vencor and the Company.
10
<PAGE> 14
Conditions to the Vencor Merger. The Vencor Merger Agreement provides that
respective obligations of each party to the Vencor Merger Agreement to effect
the Vencor Merger are subject to the satisfaction at or prior to the Effective
Time of the following conditions: (i) any waiting period applicable to the
consummation of the Vencor Merger under the HSR Act having expired or been
terminated, (ii) to the extent required by the NGCL, the Vencor Merger Agreement
and the transactions contemplated thereby having been approved and adopted by
the requisite vote or consent of the stockholders of the Company in accordance
with applicable law, (iii) no court or other governmental or regulatory
authority, agency, commission or other governmental entity, domestic or foreign
("Governmental Entity") of competent jurisdiction having enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, preliminary or permanent injunction or other order which is in effect
and prohibits consummation of the transactions contemplated by the Vencor Merger
Agreement (collectively, an "Order"), (iv) each of the Company and Vencor having
obtained such consents from Governmental Entities in addition to those required
pursuant to the HSR Act as are required and which are material to Vencor or the
Company and to consummation of the transactions contemplated by the Vencor
Merger Agreement and (v) the Purchaser having purchased Shares pursuant to the
Offer.
In addition to the conditions set forth above, the Vencor Merger Agreement
provides that the obligation of the Company to effect the Vencor Merger is
subject to the satisfaction at or prior to the Effective Time of the condition
that each of Vencor and the Purchaser has performed in all material respects its
obligations under the Vencor Merger Agreement required to be performed by it at
or prior to the Effective Time and the representations and warranties of Vencor
and the Purchaser contained in the Vencor Merger Agreement are true and correct
in all material respects at and as of the Effective Time as if made at and as of
such time, except as contemplated by the Vencor Merger Agreement, and the
Company having received a certificate of the Chairman of the Board, the Chief
Executive Officer, the President or an Executive Vice President of Vencor as to
the satisfaction of this condition.
The Vencor Merger Agreement also provides that the obligations of Vencor
and the Purchaser to effect the Vencor Merger is subject to the satisfaction at
or prior to the Effective Time of the following condition that the Company has
performed in all material respects its obligations under the Vencor Merger
Agreement required to be performed by it at or prior to the earlier of (i) the
time that persons designated by Vencor are appointed as directors of the Company
pursuant to the terms of the Vencor Merger Agreement and (ii) the Effective
Time, and the representations and warranties of the Company contained in the
Vencor Merger Agreement are true and correct in all material respects at and as
of the earlier of (i) the time that persons designated by Vencor are appointed
as directors of the Company pursuant to the terms of the Vencor Merger Agreement
and (ii) the Effective Time as if made at and as of such time, except as
contemplated by the Vencor Merger Agreement, and Vencor and the Purchaser having
received a Certificate of the Chairman of the Board, the Chief Operating
Officer, or an Executive Vice President of the Company as to the satisfaction of
this condition.
Termination. Pursuant to the terms of the Vencor Merger Agreement, the
Vencor Merger Agreement may be terminated at any time before the Effective Time,
either before or after the approval of the stockholders of the Company has been
obtained, in each case as authorized by either the Vencor Board or the Company
Board by (i) mutual written consent of the parties; (ii) either Vencor or the
Company, if the Vencor Merger has not been consummated on or before November 30,
1997 (the "Termination Date"); provided, however, that this particular right to
terminate is not be available to any party whose failure to fulfill any
obligation under the Vencor Merger Agreement has been directly or indirectly the
cause of, or resulted in, the failure of the Effective Time to occur on or
before the Termination Date; (iii) either Vencor or the Company, if a court of
competent jurisdiction or Governmental Entity has issued an order, decree or
ruling or taken any other action (which order, decree or ruling the parties
shall use their commercially reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Vencor Merger Agreement, and such order, decree, ruling or
other action has become final and nonappealable; (iv) Vencor, if the Company is
in material breach of its obligations under the Vencor Merger Agreement and such
breach has not been cured within ten days of written notice thereof to the
Company; (v) the Company, if Vencor or the Purchaser is in material breach of
their respective obligations under the Vencor Merger Agreement and such breach
has not been cured within ten days' written notice thereof to Vencor; (vi)
Vencor, if the Company Board (A) withdraws or modifies (or publicly announces an
intention to withdraw or modify) in any adverse manner its approval or
recommendation of the
11
<PAGE> 15
Vencor Merger Agreement or the Vencor Merger, (B) approves or recommends any
Acquisition Proposal, other than by a party to the Vencor Merger Agreement or an
affiliate of Vencor or (C) resolves to take any of the actions specified in
clauses (A) or (B) above; (vii) either Vencor or the Company, if any required
approval of the stockholders of the Company has not been obtained; (viii) the
Company, upon five days' prior written notice to Vencor, if, as a result of a
written Acquisition Proposal received by the Company from a person other than
Vencor or any of its affiliates, the Company Board determines in good faith and
in accordance with the conditions set forth in the Vencor Merger Agreement that
the members' fiduciary obligations under applicable law require that such
Acquisition Proposal be accepted; provided, however, that (A) the Company Board
has determined in good faith, after considering applicable provisions of state
law and after giving effect to all concessions, if any, which have been offered
by Vencor pursuant to clause (B) below, on the basis of oral or written advice
of outside counsel, that such action is required by the members' fiduciary
obligations under applicable law, and (B) prior to any such termination, the
Company negotiates with, and causes its respective financial and legal advisors
to, negotiate with, Vencor to make such adjustments in the terms and conditions
of the Vencor Merger Agreement as would enable such party to proceed with the
transactions contemplated by the Vencor Merger Agreement; or (ix) Vencor if the
Company Board fails to take any of the actions contemplated by the provisions of
the Vencor Merger Agreement relating to the holding of a meeting of the
stockholders of the Company.
Effect of Termination. The Vencor Merger Agreement provides that in the
event of termination of the Vencor Merger Agreement pursuant to the terms of the
Vencor Merger Agreement, the Vencor Merger Agreement will become void and there
will be no liability on the part of any of the parties or any of their
respective directors, officers, employees or representatives other than with
respect to the payment of the termination fee and expenses set forth below and
with respect to certain other provisions.
The Vencor Merger Agreement provides that if (x) (i) the Offer has remained
open for a minimum of at least 20 business days, (ii) a number of Shares
necessary to satisfy the Minimum Condition have not been validly tendered and
not withdrawn and the Offer is terminated without the purchase of any Shares,
(iii) no Offer Order (as defined below) shall be in effect, (iv) a competing
Acquisition Proposal which provides for a transaction equal to or more favorable
to the Company's shareholders from a financial point of view than the
transactions contemplated by the Vencor Merger Agreement is made prior to the
termination of the Offer, and (v) the Company or any of its subsidiaries
consummates an Acquisition Transaction within eighteen months after the
termination of the Vencor Merger Agreement, or (y) Vencor shall have terminated
the Vencor Merger Agreement pursuant to the provisions of the Vencor Merger
Agreement permitting termination in the event of (A) the Company Board
withdrawing its recommendation, (B) the Company Board approving an Acquisition
Transaction or (C) the Company breaching the provision of the Vencor Merger
Agreement relating to the holding of a meeting of the Company's stockholders or
(z) the Company having terminated (or seeking to terminate) the Vencor Merger
Agreement pursuant to the provision of the Vencor Merger Agreement permitting
termination in the event of the acceptance of an Acquisition Proposal then at
the request of Vencor, the Company will pay Vencor a fee of $17,415,000 plus an
amount equal to Vencor's out-of-pocket expenses up to $2,000,000, including fees
and expenses paid to investment bankers, lawyers and financing sources, incurred
in connection with the transactions contemplated by the Vencor Merger Agreement.
Amendment and Waiver. The Vencor Merger Agreement provides that subject to
applicable provisions of the NGCL, the Vencor Merger Agreement may be amended by
the parties thereto pursuant to a writing adopted by action taken by all of the
parties at any time before the Effective Time. The Vencor Merger Agreement
further provides that at any time before the Effective Time, any party to the
Vencor Merger Agreement may (i) extend the time for the performance of any of
the obligations or other acts of the other parties, (ii) waive, in whole or in
part, any inaccuracies in the representations and warranties contained in the
Vencor Merger Agreement or in any document delivered pursuant thereto or waive
compliance with any of the agreements or conditions contained therein. The
Vencor Merger Agreement also provides that any agreement on the part of a party
to the Vencor Merger Agreement to any such extension or waiver will be valid
only as against such party and only if set forth in an instrument in writing
signed by such party. Additionally the Vencor Merger Agreement provides that at
any time after the appointment of persons designated by Vencor as directors of
the Company pursuant to terms of the Vencor Merger Agreement, a majority of the
directors of the Company who are not Vencor Insiders may grant such extensions
or waivers.
12
<PAGE> 16
6. AMENDED CONDITIONS OF THE OFFER.
The conditions of the Offer are amended and restated in their entirety as
follows:
Notwithstanding any other provision of the Offer, until satisfaction
or waiver of the Healthcare Condition, the Select Medical Condition, the
Rights Condition, the Control Share Condition, the Business Combination
Condition, and the Vencor Merger Agreement Condition, neither Vencor nor
the Purchaser shall be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rules
14e-l(c) promulgated under the Exchange Act (relating to Vencor's
obligation to pay for or return tendered shares promptly after termination
or withdrawal of the Offer), neither Vencor nor the Purchaser shall 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 (subject to the
Vencor Merger Agreement), terminate or amend the Offer as to any Shares not
then accepted for payment if the Minimum Condition shall not have been
satisfied, or, if on or after June 12, 1997 and at or before the Expiration
Date any of the following events shall occur (subject to any required
extension of the Offer or as provided in the Vencor Merger Agreement):
(a) The Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under
the Vencor Merger Agreement which failure is incapable of being cured or
has not been cured within ten days after the giving of notice to the
Company (provided, that if such notice is given within ten days of the
Expiration Date, the Expiration Date will be extended so as to provide
the Company with a minimum of ten days from the date of such written
notice to cure such breach or failure) or any representation or warranty
of the Company set forth in the Vencor Merger Agreement shall have been
inaccurate or incomplete in any material respect when made or thereafter
shall become inaccurate or incomplete in any material respect;
(b) any court or other Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation
of the Offer or imposes material restrictions on Vencor, the Purchaser
or the Company in connection with consummation of the Offer or with
respect to their business operations, either prior to or subsequent to
the consummation of the Offer (collectively, an "Offer Order"); provided
that, Vencor shall have used best reasonable efforts to cause any such
Offer Order to be lifted;
(c) any person, entity or group shall have entered into a
definitive agreement with the Company 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;
(d) the Company Board (i) shall withdraw or modify (or publicly
announce an intention to withdraw or modify) in any adverse manner its
approval or recommendation of the Vencor Merger Agreement, the Offer or
the Vencor Merger or shall have failed to reconfirm such approval or
recommendation upon request by Vencor or the Purchaser, (ii) shall
approve or recommend any Acquisition Proposal, other than by Vencor, the
Purchaser or an affiliate thereof, or (iii) shall resolve to take any of
the actions specified in clause (i) or (ii) above; or
(e) the Vencor Merger Agreement shall have been terminated by the
Company or Vencor or the Purchaser in accordance with its terms or
Vencor or the Purchaser shall have reached an agreement or understanding
in writing with the Company providing for termination or amendment of
the Offer or delay in payment for the Shares;
which, in the reasonable judgment of Vencor and the Purchaser, in any such case,
and regardless of the circumstances (including any permitted action or inaction
by Vencor or the Purchaser but excluding any action or inaction by Vencor or the
Purchaser in breach of the Vencor Merger Agreement) 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.
13
<PAGE> 17
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 permitted action or inaction by Vencor or the
Purchaser), but excluding any action or inaction by Vencor or the Purchaser in
breach of the Vencor Merger Agreement giving rise to such condition or may be
waived by Vencor or the Purchaser, by and specific action to that effect in
whole or in part at any time and from time to time in its sole discretion.
7. SOURCE AND AMOUNT OF FUNDS.
As stated in the Offer to Purchase, the Purchaser estimates that the total
amount of funds required to purchase all of the outstanding Shares pursuant to
the Offer and the Vencor 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. Vencor currently
anticipates that it may obtain the funds necessary to purchase Shares from
borrowings under its Amended and Restated Credit Agreement (as defined below).
On May 30, 1997 Vencor amended and restated its $1.75 billion Credit
Agreement dated as of March 17, 1997, amended as of March 31, 1997 and April 22,
1997, among Vencor, the various banks party thereto, the Swingline Bank party,
the LC Issuing Banks party thereto, the Managing Agents and Co-Agents party
thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent and
Collateral Agent, and Nationsbank, N.A., as Administrative Agent (the "Amended
and Restated Credit Agreement"). The Amended and Restated Credit Agreement
provides that it will not be effective until the conditions thereto are met,
including a condition that the Purchaser has accepted Shares for payment
pursuant to the Offer in an amount necessary to satisfy the Minimum Condition.
Interest is payable pursuant to the Credit Agreement at rates up to either
(i) the prime rate or the daily federal funds rate plus 1/2%, (ii) LIBOR plus
11/16% or (iii) the bank certificate of deposit rate plus 13/16%. The Credit
Agreement is collateralized by the capital stock of certain subsidiaries and
intercompany borrowings and contains covenants which require, among other
things, maintenance of certain financial ratios and limit amounts of additional
debt and repurchases of common stock. The Amended and Restated Credit Agreement
would amend the Credit Agreement by providing that, among other things, the
total amount of Commitments (as defined in the Amended and Restated Credit
Agreement) would be increased from $1.75 billion to $2 billion. Interest would
be payable under the Amended and Restated Credit Agreement at rates up to any of
(i) the prime rate plus 1/2%, (ii) the daily federal funds rate plus 1%, (iii)
LIBOR plus 1 1/8% or (iv) the bank certificate of deposit rate plus 1 1/4%.
The foregoing discussion of the Credit Agreement and the Amended and
Restated Credit Agreement is qualified in its entirety by the text of the Credit
Agreement (including the Amendments to the Credit Agreement) and the Amended and
Restated Credit Agreement which are attached to Amendment No. 8 to the Schedule
14D-1 as Exhibits (b)(1), (b)(2) and (b)(3).
As stated in the Offer to Purchase, it is anticipated that the indebtedness
incurred by Vencor in connection with the Offer and the Vencor Merger will be
paid from funds generated internally by Vencor and its subsidiaries (including,
after the Vencor 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.
8. CERTAIN LEGAL MATTERS.
On May 22, 1997, Vencor received a request for additional information from
the Antitrust Division, extending the waiting period under the HSR Act that
otherwise would have expired at 12:00 midnight on May 22, 1997.
14
<PAGE> 18
On June 8, 1997, the waiting period under the HSR Act with respect to the
indirect acquisition of shares of capital stock of BHC owned by the Company
expired.
On June 11, 1997, the Antitrust Division notified Vencor that it had
concluded its review of the combination of Vencor and the Company and that it
would be so notifying the Premerger Notification Office of the FTC. On June 12,
1997, Vencor was advised by the Premerger Notification Office of the FTC that
the waiting period under the HSR Act with respect to the acquisition of Shares
had been terminated.
Vencor has made all filings believed by it to be required to satisfy the
Healthcare Condition and believes that the Healthcare Condition will be
satisfied prior to the Effective Time.
Pursuant to the terms of the Vencor Merger Agreement, the parties have
agreed that the Select Medical Merger Agreement will be terminated in accordance
with its terms, that the Company will not be required to make any payment to
Select Medical, SM Acquisition Co. or any of their respective affiliates except
pursuant to Section 9.2 of the Select Medical Merger Agreement. Vencor intends
to discontinue Vencor, Inc., et al. v. Transitional Hospitals Corporation, et
al., CV-S-97-00565. Vencor has determined to take this action based on
information that it has obtained during the course of its negotiations with the
Company which has led Vencor to believe that the actions taken by the Company
Board forming the basis of Vencor's complaint were the result of
misunderstandings.
9. 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 the 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 in the same
manner as set forth in Section 8 of the Offer to Purchase.
EXCEPT AS OTHERWISE SET FORTH IN THIS SUPPLEMENT AND IN THE REVISED LETTERS
OF TRANSMITTAL, THE TERMS AND CONDITIONS PREVIOUSLY SET FORTH IN THE OFFER TO
PURCHASE REMAIN APPLICABLE IN ALL RESPECTS TO THE OFFER, AND THIS SUPPLEMENT
SHOULD BE READ IN CONJUNCTION WITH THE OFFER TO PURCHASE.
No person has been authorized to give any information or make any
representation on behalf of Vencor or the Purchaser not contained in this
Supplement, the Offer to Purchase or in the revised Letter of Transmittal and,
if given or made, such information or representation must not be relied upon as
having been authorized.
Neither the delivery of this Supplement or the Offer to Purchase nor any
purchase pursuant to the Offer shall, under any circumstances, create any
implication that there has been no change in the affairs of Vencor, the
Purchaser, the Company or any of their respective subsidiaries since the date as
of which information is furnished or the date of this Supplement.
LV Acquisition Corp.
June 12, 1997
15
<PAGE> 19
Manually signed facsimile copies of the revised or original Letter of
Transmittal will be accepted. The revised or original 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
Supplement, the Offer to Purchase, the revised Letter of Transmittal and the
revised 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 AND
THE SUPPLEMENT THERETO DATED JUNE 12, 1997
BY
LV ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
THE OFFER HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JUNE 19, 1997, UNLESS
THE OFFER IS FURTHER 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 REVISED LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS REVISED LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS REVISED LETTER OF TRANSMITTAL IS COMPLETED.
This revised Letter of Transmittal or the original Letter of Transmittal
are to be used if certificates for Shares (as defined below) are to be forwarded
herewith or, unless an Agent's Message as defined in Section 3 of the Offer to
Purchase, dated May 7, 1997 (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 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 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 the
Supplement (as defined below)), may tender their Shares 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.
As a result of amendments to the Rights Agreement, dated as of June 21,
1996, between Community Psychiatric Centers (the predecessor name of the Company
(as defined below)) and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (the "Rights Agreement"), that are required by the Vencor Merger Agreement
(as defined in the Supplement to the Offer to Purchase, dated June 12, 1997 (the
"Supplement")), if the Vencor Merger Agreement Condition is satisfied, the
Rights Condition will be satisfied and by tendering Shares, holders of Shares
will be deemed to have their rights to purchase preferred stock of the Company
issued pursuant to the Rights Agreement. For purposes of this revised Letter of
Transmittal, it is being assumed that the Vencor Merger Agreement Condition (as
defined in the Supplement) has been satisfied and accordingly the Rights
Condition has been satisfied.
<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.
================================================================================
<PAGE> 3
[ ] CHECK HERE IF TENDERED SHARES 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 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 (as defined in the Supplement (as defined below)), 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 as amended and supplemented by the
Supplement dated June 12, 1997 (the "Supplement"), receipt of which is hereby
acknowledged, and in this related revised Letter of Transmittal (which together
with the Offer to Purchase and the Supplement, as amended from time to time,
constitute the "Offer"). 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.
If the Vencor Merger Agreement Condition (as defined in the Supplement) is
satisfied the Rights Condition (as defined in the Supplement) will be satisfied
and stockholders tendering their Shares pursuant to the Offer will automatically
tender their Rights. For purposes of this revised Letter of Transmittal, it is
assumed that the Vencor Merger Agreement Condition has been satisfied and,
accordingly, that the Rights Condition has been satisfied.
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, 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 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 (a) to deliver certificates for such Shares (individually, a "Share
Certificate") or transfer ownership of such Shares 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 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, all in accordance with the terms and the
conditions of the Offer.
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. 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 (as defined below)).
<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 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 ("Distributions"), then, subject to the
provisions of Section 6 of the Supplement, the Offer Consideration (as defined
in the Supplement) payable to the undersigned will be reduced by the amount of
any such Distribution if the whole of any such Distribution received by the
undersigned shall not 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 Distribution and may withhold the
entire Offer Consideration or deduct from 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
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 revised
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 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 tendered
hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
registered owner(s) appearing under "Description of Shares Tendered." Similarly,
unless otherwise indicated under "Special Delivery Instructions," please mail
the check for the purchase price and/or return any Share Certificates 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." 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 Share
Certificates 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
from the name of the registered holder thereof if the Purchaser does not accept
for payment any of the Shares so tendered.
<PAGE> 6
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS REVISED LETTER OF TRANSMITTAL)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
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 REVISED LETTER OF TRANSMITTAL)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
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 revised 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 revised Letter of Transmittal need
not be guaranteed (a) if this revised 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) of Shares
tendered herewith and such registered owner has not completed the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this revised Letter of Transmittal or (b) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 5 of this
revised Letter of Transmittal.
2. DELIVERY OF REVISED LETTER OF TRANSMITTAL AND CERTIFICATES OR
BOOK-ENTRY CONFIRMATIONS. This revised Letter of Transmittal is to be completed
by stockholders either if Share 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. Share Certificates for
all physically tendered Shares, or any Book-Entry Confirmation of Shares, as the
case may be, as well as this revised 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 revised 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. If a holder's Share
Certificates are not immediately available 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 may nevertheless be tendered by properly completing and duly executing
either the original or revised 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 original or
revised 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, the certificates for all tendered
Shares, in proper form for transfer, or a Book-Entry Confirmation, together with
a properly completed and duly executed revised 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 this revised Letter of Transmittal, must be received by the
Depositary, within three New York Stock Exchange ("NYSE") trading days after the
date of execution of such Notice of Guaranteed Delivery. If Share Certificates
are forwarded separately to the Depositary, a properly completed and duly
executed revised 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, that such participant has
received and agrees to be bound by the terms of this revised Letter of
Transmittal and that the Purchaser may enforce such agreement against the
participant.
The method of delivery of this revised Letter of Transmittal, Share
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 this
Instruction 2 of this revised Letter of Transmittal, the delivery will be deemed
made only when actually received by the Depositary.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this revised Letter of Transmittal (or manually signed facsimile thereof), waive
any right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
<PAGE> 9
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If
fewer than all the Shares evidenced by any certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Description of Shares Tendered." In such cases, new Share
Certificate(s) for the remainder of the Shares that were evidenced by the old
certificate(s) will be sent to the registered holder, unless otherwise provided
in the appropriate box on this revised Letter of Transmittal, as soon as
practicable after the Expiration Date. All Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON REVISED LETTER OF TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS. If this revised Letter of Transmittal is signed by the registered
holder(s) of the Shares 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 tendered hereby are owned of record by two or more
joint owners, all such owners must sign this revised Letter of Transmittal.
If any of the tendered Shares 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 revised 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 revised Letter of Transmittal is signed by the registered owner(s)
of the Shares 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 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 revised 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 Share Certificates 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 revised 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 REVISED
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 not tendered or accepted for
payment are to be issued or returned to, a person other than the signer(s) of
this revised Letter of Transmittal or if a check and/or such certificates are to
be mailed to a person other than the signer(s) of this revised Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this revised Letter of Transmittal should be completed. Stockholders
tendering Shares by book-entry transfer may request that Shares 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
not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above.
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,
the Supplement, this revised Letter of Transmittal, the revised 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.
<PAGE> 10
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 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 Share Certificate(s)
has been lost, destroyed or stolen, the stockholder should promptly notify
ChaseMellon Shareholder Services, 85 Challenger Road, Overpeck Centre,
Ridgefield Park, NJ 07660, Attention: John Koushakjian, Lost Securities,
Telephone number (800) 647- 4273. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This
revised Letter of Transmittal and related documents cannot be processed until
the procedures for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS REVISED LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF)
(TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR THE REVISED OR ORIGINAL 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.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a stockholder whose
tendered Shares 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.
<PAGE> 11
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
June 12, 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 HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JUNE 19, 1997, UNLESS THE OFFER
IS FURTHER EXTENDED.
June 12, 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, between Community Psychiatric
Centers (the predecessor name of the Company) and ChaseMellon Shareholder
Services, L.L.C., as 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, as amended and supplemented by the Supplement
thereto dated June 12, 1997 (the "Supplement"), and in the related revised
Letter of Transmittal (which together constitute the "Offer").
<PAGE> 2
Tendering stockholders may continue to use the original Letter of
Transmittal and the original Notice of Guaranteed Delivery previously circulated
with the Offer to Purchase, or the revised Letter of Transmittal and the revised
Notice of Guaranteed Delivery circulated with the Supplement. While the Letter
of Transmittal previously circulated with the Offer to Purchase refers only to
the Offer to Purchase, stockholders using such will be deemed to be tendering
pursuant to the Offer, as amended. Until a Distribution Date (as defined in the
Offer to Purchase) occurs, the Rights will trade with the Shares. If the Vencor
Merger Agreement Condition (as defined in the Supplement) is satisfied, the
Rights Condition (as defined in the Supplement) will be satisfied, a
Distribution Date will not occur and stockholders tendering their Shares
pursuant to the Offer will automatically tender their rights to purchase
preferred stock associated with the Shares. For purposes of this Letter it is
assumed that the Vencor Merger Agreement has been satisfied and accordingly, the
Rights Condition has been satisfied.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee. Enclosed herewith are the following documents:
1. The Supplement dated June 12, 1997;
2. The revised Letter of Transmittal to be used by stockholders of the
Company in accepting the Offer;
3. A second printed form of letter that may be sent to your clients for
whose account you hold Shares in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
4. The revised 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, the satisfaction or
waiver of each of the (1) Minimum Condition, (2) Healthcare Condition, (3)
Select Medical Termination Condition, (4) Rights Condition, (5) Control Share
Condition, (6) Business Combination Condition, and (7) Vencor Merger Agreement
Condition (each as defined in the Supplement).
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
THURSDAY, JUNE 19, 1997, UNLESS THE OFFER IS FURTHER EXTENDED.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by First Chicago Trust Company of New
York (the "Depositary") of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares (or a timely Book-Entry Confirmation,
if available, with respect thereto) (b) a revised Letter of Transmittal or an
original Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantee (or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in
lieu of the revised Letter of Transmittal) and (c) any other documents required
by the revised Letter of Transmittal. Accordingly, tendering stockholders may be
paid at different times depending upon when certificates for Shares or
Book-Entry Confirmations with respect to Shares 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.
<PAGE> 3
A stockholder who desires to tender Shares pursuant to the Offer and whose
certificates for Shares 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, may
tender such Shares by following all of the procedures set forth in the revised
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 revised Notice of Guaranteed Delivery.
Neither the Purchaser nor Vencor will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and the
Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer. You will be reimbursed for customary mailing and handling
expenses incurred by you in forwarding the enclosed offering materials to your
clients.
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.
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, THE SUPPLEMENT OR THE REVISED 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 HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JUNE 19, 1997, UNLESS THE OFFER
IS FURTHER EXTENDED.
To Our Clients:
Enclosed for your consideration is a Supplement dated June 12, 1997 (the
"Supplement") which amends and supplements the Offer to Purchase dated May 7,
1997 (the "Offer to Purchase"), and the revised 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, 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,
between Community Psychiatric Centers (the predecessor name of the Company) and
ChaseMellon Shareholder Services, L.L.C., as 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. Until a Distribution Date (as defined in the Offer to
Purchase) occurs, the Rights will trade with the Shares. If the Vencor Merger
Agreement Condition (as defined in the Supplement) is satisfied the Rights
Condition (as defined in the Supplement) will be satisfied, a Distribution Date
will not occur and stockholders tendering their Shares pursuant to the Offer
will automatically tender their Rights. For purposes of this Letter it is
assumed that the Vencor Merger Agreement has been satisfied and accordingly, the
Rights Condition has been satisfied.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE REVISED LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES 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 continues to be $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 Thursday, June 19, 1997, unless the Offer is further extended
(the "Expiration Date").
<PAGE> 2
4. The Offer is conditioned upon, among other things, the satisfaction or
waiver of each of the (1) Minimum Condition, (2) Healthcare Condition,
(3) Select Medical Termination Condition, (4) Rights Condition, (5)
Control Share Condition, (6) Business Combination Condition and (7)
Vencor Merger Agreement Condition (each as defined in the Supplement).
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions to Credit Suisse First Boston Corporation (the "Dealer
Manager"), First Chicago Trust Company of New York (the "Depositary") or
the Information Agent (as defined in the Offer to Purchase) or, except as
set forth in Instruction 6 to the Letter of Transmittal, transfer taxes
on the sale of Shares pursuant to the Offer.
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 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. An envelope
in which to return your instructions to us is enclosed. If you authorize tender
of your Shares, all such Shares 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 on your behalf prior to the
expiration of 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, (b) a
revised or original 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 a revised or original Letter of Transmittal) and (c) any
other documents required by the revised Letter of Transmittal. Accordingly,
tendering stockholders may be paid at different times depending upon when
certificates for Shares or Book-Entry Confirmations with respect to Shares 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 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 the Dealer Manager for the
Offer, or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
<PAGE> 3
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 Supplement, dated
June 12, 1997 (the "Supplement"), which amends and supplements the Offer to
Purchase of LV Acquisition Corp. (the "Purchaser") dated May 7, 1997 (the "Offer
to Purchase"), and the related revised 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 issued pursuant
to the Rights Agreement, dated as of June 21, 1996, between Community
Psychiatric Centers (the predecessor name of the Company) and ChaseMellon
Shareholder Services, L.L.C., as 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, the Supplement and the related revised Letter of Transmittal.
This will instruct you to tender the number of Shares 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, the Supplement and the related
revised Letter of Transmittal.
<TABLE>
<S> <C>
Number of Shares to be Tendered:* SIGN HERE
-------------------Shares
-------------------------------------------------
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 are to be
tendered.
<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
This revised Notice of Guaranteed Delivery, the original Notice of
Guaranteed Delivery 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"), including the associated rights to purchase Series
B Junior Participating Preferred Stock of the Company issued pursuant to the
Rights Agreement, dated as of June 21, 1996, between Community Psychiatric
Centers (the predecessor name of the Company) and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent, are not immediately available 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
Supplement which is described below). 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 Supplement which is described below). See Section 3 of the Offer to
Purchase.
The Depositary
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<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 the
original Letter of Transmittal or a revised 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 original Letter of Transmittal or a revised 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"), as amended and
supplemented by the Supplement thereto dated June 12, 1997 (the "Supplement")
and the related revised Letter of Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares set
forth below, all pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Number of Shares:
- ---------------------------------
Share 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
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 tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Shares, in any such case together with a
properly completed and duly executed original Letter of Transmittal or revised
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 three trading days after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the original Letter of Transmittal
or revised Letter of Transmittal and certificates for Shares 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 WITH THIS NOTICE. CERTIFICATES
FOR SHARES 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
VENCOR, INC.
400 West Market Street
3300 Providian Center
Louisville, Kentucky 40202
June 12, 1997
Transitional Hospitals Corporation
5110 West Sahara Boulevard
Las Vegas, Nevada 89102
Attention: Richard L. Conte, Chief Executive Officer
Dear Mr. Conte:
This letter is intended to confirm our commitment with respect to the
form of Agreement and Plan of Merger by and among Vencor, Inc., a Delaware
corporation ("Vencor"), LV Acquisition Corp., a Delaware corporation ("Merger
Sub"), and Transitional Hospitals Corporation, a Nevada Corporation ("THC"),
and the associated disclosure schedules (together, the "Merger Agreement")
which is attached as Exhibit A to this letter. We understand that in reliance
upon Vencor's commitment in this letter THC may terminate the Agreement and Plan
of Merger, dated as of May 2, 1997, by and among THC, Select Medical
Corporation, a Delaware corporation ("Select Medical") and SM Acquisition Co.,
a Nevada corporation and a wholly owned subsidiary of Select Medical (the
"Select Medical Merger Agreement").
Vencor hereby agrees, subject to the proviso set forth below, that it will
execute and deliver the Merger Agreement to THC promptly following the
termination of the Select Medical Merger Agreement in accordance with its terms
and THC's execution and delivery of the Merger Agreement (including the
disclosure schedules in the attached form) to Vencor; provided, that none of the
conditions set forth in paragraphs (a), (b), (c), (d) or (e) of Annex A to the
Merger Agreement (the "Conditions") shall exist at such time (for purposes of
determining the existence of a Condition as set forth in the proviso it will be
assumed that the Merger Agreement is in existence). Vencor agrees that if any of
the Conditions set forth in paragraph (b) of Annex A do exist at a time when
Vencor otherwise would be required to execute the Merger Agreement, Vencor shall
use all reasonable efforts to cause the abatement of any such Conditions and to
execute the Merger Agreement promptly after none of such Conditions exist.
This agreement shall be null and void and shall terminate (i) at 8:00 p.m.
Pacific Daylight Time on Thursday, June 12, 1997 unless THC shall have given
Select Medical the written notice of termination of the Select Medical Merger
Agreement in accordance with Section 9.1(g) thereof and (ii) at the earlier of
the time at which Vencor and THC execute and deliver the Merger Agreement to
each other and 12:00 noon Pacific Daylight Time on Wednesday, June 18, 1997,
except that the termination of this agreement pursuant to clause (ii) shall be
extended until such time, not later than November 30, 1997, as is necessary to
comply with the last sentence of the preceding paragraph.
Very truly yours,
VENCOR, INC.
By: /s/ James H. Gillenwater, Jr.
_______________________________
Name: James H. Gillenwater, Jr.
Title: Senior Vice President
<PAGE> 1
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
By and Among
VENCOR, INC.,
LV ACQUISITION CORP.
and
TRANSITIONAL HOSPITALS CORPORATION
Dated as of June __, 1997
- ------------------------------------------------------------------------------
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June __,
1997, is made by and among Vencor, Inc., a Delaware corporation ("Parent"), LV
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Transitional Hospitals Corporation, a Nevada corporation
("Company").
WHEREAS, the Boards of Directors of Parent, Sub and Company deem it
advisable and in the best interests of their respective stockholders that Sub
merge with and into Company (the "Merger"), and such Boards of Directors have
unanimously approved (with two directors of Company abstaining) the merger of
Sub with and into Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, on May 7, 1997, Sub commenced an offer to purchase (the "Offer")
all outstanding shares of Common Stock, par value $1.00 per share (the
"Shares"), of Company, including the associated rights to purchase (the
"Rights") Series B Junior Participating Preferred Stock (the "Series B
Preferred") issued pursuant to the Rights Agreement, dated as of June 21, 1996
(the "Rights Agreement"), between Company and Chase Mellon Shareholder Services,
L.L.C. at a purchase price of $16.00 Share, net to the seller in cash, subject
to certain conditions and subject to increase as contemplated by Section 8.4 of
the Agreement;
WHEREAS, the Board of Directors of Company, Parent and Sub have each
determined that it is in the best interests of their respective stockholders for
Sub to acquire Shares pursuant to the Offer, as amended pursuant to the terms of
this Agreement (the "Amended Offer");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE AMENDED TENDER OFFER
Section 1.1 Amended Tender Offer.
(a) Parent and Sub have filed with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
which contains (included as an exhibit) Sub's Offer to Purchase dated May 7,
1997 (the "Offer
-1-
<PAGE> 3
to Purchase") and form of the related letter of transmittal (collectively, the
"Offer Documents"). As promptly as practicable (but no later than the third
business day after the date of this Agreement), Parent and Sub shall file with
the SEC an amendment to the Offer Documents (as so amended, and as the same may
be further amended or supplemented in accordance with the terms of this
Agreement, the "Amended Offer Documents"), unless such Amended Offer Documents
shall have been filed on or prior to the date of this Agreement. The Amended
Offer Documents shall contain a supplement to the Offer to Purchase, which shall
be mailed to the holders of Shares and which shall describe this Agreement and
the negotiations preceding this Agreement and shall amend the Offer to provide
that the Offer shall only be subject to the conditions set forth in Annex A
hereto, and to extend the expiration date of the Amended Offer to 12:00
midnight, New York City time, on June 19, 1997; it being understood and agreed
that, except for the foregoing amendments or as otherwise provided herein, the
Amended Offer shall be on the same terms and subject to the same conditions as
the Offer. Without the prior written consent of Company, Sub shall not decrease
the price per Share or waive the Minimum Condition (as defined in Annex A),
impose additional conditions to the Amended Offer, extend the expiration date of
the Amended Offer if the conditions to the Amended Offer have been satisfied,
provided that none of the conditions set forth in Annex A are existing at such
time, or amend any other term of the Amended Offer in any manner adverse to the
holders of Shares. Sub shall extend the expiration date of the Offer until such
time as the conditions to the Amended Offer have been satisfied, provided that
no single extension shall be for more than 10 business days. Subject to the
terms and conditions of the Amended Offer, upon the expiration of the Amended
Offer, Parent will promptly pay for all Shares duly tendered. Company's Board of
Directors shall recommend acceptance of the Amended Offer to its stockholders in
an amendment to its Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to be filed with the Securities and Exchange Commission (the
"SEC") concurrently with the execution of this Agreement, provided that such
recommendation may subsequently be withdrawn, modified or amended to the extent
Company's Board of Directors determines in good faith that the fiduciary duties
of such Board of Directors under applicable law require such withdrawal,
modification or amendment.
(b) Parent agrees, as to the Amended Offer Documents, and Company agrees,
as to the Schedule 14D-9, that such documents shall, in all material respects,
comply with the requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations thereunder and other
applicable laws. Company and its counsel, as to the Amended Offer Documents, and
Sub and its counsel, as to the Schedule 14D-9, shall be given an opportunity to
review such documents (and any amendments thereto and any other submissions to
the SEC) prior to their being filed with the SEC.
(c) In connection with the Offer, Company has caused its transfer agent to
furnish to Sub a list, as of a recent date, of the record holders of Shares and
their
-2-
<PAGE> 4
addresses, as well as a magnetic tape containing the names and addresses of all
record holders of Shares and lists of security positions of Shares held in stock
depositories. Company will furnish Sub with such additional information
(including, but not limited to, updated lists of holders of Shares and their
addresses, mailing labels and lists of security positions) and such other
assistance as Parent or Sub or their agents may reasonably request in
communicating the Amended Offer to the record and beneficial holders of Shares.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 2.2 hereof), Sub shall be
merged with and into Company and the separate corporate existence of Sub shall
thereupon cease, and Company shall be the surviving corporation in the Merger
(the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Nevada and the separate corporate existence of Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Section 3.1. The Merger shall have the
effects set forth in Section 92A.250 of the General Corporation Law of the State
of Nevada (the "GCL").
Section 2.2 Effective Time of The Merger. The Merger shall be effective
when properly executed Articles of Merger ("Articles of Merger") are duly filed
by the Secretary of State of the State of Nevada and a properly executed
certificate of merger ("Certificate of Merger") is duly filed with the Secretary
of State of the State of Delaware, which filings shall be made as soon as
practicable following the Closing (as hereinafter defined), and provided that
this Agreement has not been terminated or abandoned pursuant to Article X
hereof. When used in this Agreement, the term "Effective Time" shall mean the
later of the date and time at which such Articles of Merger and Certificate of
Merger are so filed.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 Articles of Incorporation. The Articles of Incorporation of
Company in effect at the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, until duly amended in accordance with the terms
thereof and the GCL.
-3-
<PAGE> 5
Section 3.2 By-Laws. Subject to Section 8.7 hereof, the by-laws of Company
as in effect at the Effective Time shall be the by-laws of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
GCL.
Section 3.3 Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and by-laws of the
Surviving Corporation or as otherwise provided by law.
(b) The officers of Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and by-laws of the
Surviving Corporation, or as otherwise provided by law.
Section 3.4 Board of Directors; Committees. If requested by Parent,
Company will, promptly following the purchase by Sub of Shares pursuant to the
Amended Offer, take all actions necessary to cause persons designated by Parent
to become directors of Company so that the total number of such persons equals
that number of directors, rounded up to the next whole number, which represents
the product of (x) the total number of directors on the board of directors of
Company (the "Board of Directors") multiplied by (y) the percentage that the
number of Shares so accepted for payment plus any Shares beneficially owned by
Parent or its affiliates on the date hereof bears to the number of Shares
outstanding at the time of such acceptance for payment. In furtherance thereof,
Company will increase the size of the Board of Directors, or use its reasonable
efforts to secure the resignation of directors, or both, as is necessary to
permit Parent's designees to be elected to the Board of Directors; provided,
however, that prior to the Effective Time, the Board of Directors shall always
have at least two, and at the Company's election three, members (one of whom
shall be Richard Conte) who are neither officers of Parent nor designees,
stockholders or affiliates of Parent ("Parent Insiders"). At such time, Company,
if so requested, will use its reasonable efforts to cause persons designated by
Parent to constitute the same percentage of each committee of the Board of
Directors, each board of directors of each Company Subsidiary and each committee
of each such board (in each case to the extent of Company's ability to elect
such persons) provided, however. that prior to the Effective Time each such
committee and each subsidiary board shall, at Company's election, always have at
least one member (who may be Richard Conte) who is not a Parent Insider.
Company's obligations to appoint designees to its Board of Directors shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Company
shall promptly take all actions
-4-
<PAGE> 6
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 3.4 and shall include in the Schedule 14D-9 such information
as is required under such Section and Schedule. Parent agrees to furnish to
Company all information concerning Parent's designees which may be necessary to
comply with the foregoing and agrees that such information will comply with the
Exchange Act and the rules and regulations thereunder and other applicable laws.
Section 3.5 Actions by Directors. For purposes of Article X hereof, no
action taken by the Board of Directors prior to the Merger shall be effective
unless such action is approved by the affirmative vote of at least a majority of
the directors of Company who are not Parent Insiders.
ARTICLE IV
CONVERSION OF SHARES
Section 4.1 Conversion or Cancellation of Shares. The manner of converting
or canceling shares of Company and Sub in the Merger shall be as follows:
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent, Sub
or any other subsidiary of Parent (collectively, the "Parent Companies") or
Shares which are held by stockholders ("Dissenting Stockholders") exercising
appraisal rights pursuant to Section 92A.380 of the GCL) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, without interest, an amount in cash equal to $16.00
or such greater amount which may be paid pursuant to the Offer (the "Merger
Consideration"). All such Shares, by virtue of the Merger and without any action
on the part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall thereafter cease to have any rights with
respect to such Shares, except the right to receive the Merger Consideration for
such Shares upon the surrender of such certificate in accordance with Section
4.2 or the right, if any, to receive payment from the Surviving Corporation of
the "fair value" of such Shares as determined in accordance with Sections
92A.300 et seq. of the GCL.
(b) At the Effective Time, each Share issued and outstanding at the
Effective Time and owned by any of the Parent Companies, and each Share issued
and held in Company's treasury at the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
-5-
<PAGE> 7
(c) At the Effective Time, each share of Common Stock, par value
$0.25 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Sub or the holders of such shares, be converted into one Share.
Section 4.2 Payment for Shares.
(a) Parent shall make available, or shall cause to be made available, with
a paying agent selected by Parent and reasonably satisfactory to Company (the
"Paying Agent"), the following: (i) cash to be paid pursuant to Section 4.1(a)
and (ii) cash to be paid on the exercise of any Options to purchase Shares
outstanding immediately prior to the Effective Time which have an exercise price
of less than the Merger Consideration, less, with respect to each such Option,
the exercise price thereof.
(b) Promptly after the Effective Time, Parent shall cause the Paying Agent
to mail (or deliver at its principal office) to each holder of record of a
certificate or certificates representing Shares (i) a letter of transmittal
which shall specify that delivery shall be effected, and risk of loss and title
to the certificates for Shares shall pass, only upon delivery of the
certificates for Shares to the Paying Agent and shall be in such form and have
such other provisions, including appropriate provisions with respect to back-up
withholding, as Parent may reasonably specify, and (ii) instructions for use in
effecting the surrender of the certificates for Shares. Upon surrender of a
certificate for Shares to the Paying Agent, or upon notice of the exercise of
Options, accompanied by such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, the holder thereof shall be
entitled to receive the amount which such holder has the right to receive
pursuant to the provisions of this Article IV, after giving effect to any
required withholding tax, and the certificate for Shares so surrendered shall
forthwith be canceled. No interest will be paid or accrued on any amount payable
upon the surrender of any certificate for Shares. If payment is to be made to a
person other than the registered holder of the certificate surrendered, it shall
be a condition of such payment that the certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the certificate
surrendered or establish to the reasonable satisfaction of the Surviving
Corporation or the Paying Agent that such tax has been paid or is not
applicable. One hundred and eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any funds (including any interest received with respect thereto) made
available to the Paying Agent which have not been disbursed to holders of
certificates formerly representing Shares outstanding on the Effective Time, and
thereafter such holders shall be entitled to look to the Surviving Corporation
only as general creditors thereof with respect to the cash payable upon due
surrender of their certificates. Notwithstanding the foregoing, neither the
Paying Agent
-6-
<PAGE> 8
nor any party hereto shall be liable to any holder of certificates formerly
representing Shares for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law. The Surviving Corporation
shall pay all charges and expenses, including those of the Paying Agent, in
connection with the exchange of cash for Shares and Parent shall reimburse the
Surviving Corporation for such charges and expenses.
Section 4.3 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to or shall assert entitlement to be paid the "fair value" of his or
her Shares, as provided in Sections 92A.300 et seq. of the GCL, Company shall
give Parent notice thereof and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither Company
nor the Surviving Corporation shall, except with the prior written consent of
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail to
perfect or shall have effectively withdrawn or lost the right to dissent, the
Shares held by such Dissenting Stockholder shall thereupon be treated as though
such Shares had been converted into the Merger Consideration pursuant to Section
4.1.
Section 4.4 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of Company shall be closed, and no transfer of Shares shall
thereafter be made. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for Merger Consideration applicable to such Shares.
Section 4.5 Closing. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York, at 10:00 a.m., local time, one
business day after the day on which all of the conditions set forth in Article
IX are satisfied or waived or at such other date, time and place as Parent and
Company shall agree.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as otherwise disclosed to Company in a disclosure schedule
delivered to it concurrently with the execution hereof (which disclosure
schedule shall contain appropriate references to identify the representations
and warranties herein to which the information in such disclosure schedule
relates) (the "Parent Disclosure Schedule"), and except as otherwise expressly
contemplated by this Agreement, Parent represents and warrants to Company as
follows:
-7-
<PAGE> 9
Section 5.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has the corporate power to carry on its business as it is
now being con ducted or presently proposed to be conducted. Each of Parent and
Sub is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or to be in such good
standing, which, when taken together with all other such failures, would not
have a material adverse effect on the business, assets, liabilities, results of
operations or financial condition of Parent and its subsidiaries, taken as a
whole (a "Parent Material Adverse Effect").
Section 5.2 Authority Relative to This Agreement. Each of Parent and Sub
has the requisite corporate power and authority to enter into this Agreement and
to carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by each of Parent and Sub of the transactions contemplated hereby
have been duly authorized by the Board of Directors of each of Parent and Sub
and by Parent as the sole stockholder of Sub, and no other corporate action or
proceedings on the part of either Parent or Sub (including without limitation
any action by Parent's stockholders) are necessary to authorize the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and Sub, as applicable, and constitutes a valid and binding
agreement of each of Parent and Sub, enforceable against each of Parent and Sub
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally or to general principles of equity.
Section 5.3 Consents and Approvals; No Violations. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Exchange Act, state or foreign laws relating to
takeovers, if applicable, state securities or blue sky laws, certain filings and
approvals relating to healthcare licensing, certificate of need, change of
ownership filings pursuant to Medicare and Medicaid laws and similar matters,
and the filing of appropriate Articles of Merger and Certificate of Merger in
such form as required by, and executed in accordance with the relevant
provisions of, the GCL and the General Corporation Law of Delaware, no filing
with, and no permit, authorization, consent or approval of, any governmental or
regulatory authority, agency, commission or other governmental entity, domestic
or foreign ("Governmental Entity"), is necessary in connection with the
consummation by Parent or Sub of the transactions contemplated by this
Agreement, except for such filings, permits, authorizations, consents or
approvals the failure of which to be made or obtained would not individually or
in the aggregate prevent, materially delay or materially impair
-8-
<PAGE> 10
the ability of Parent or Sub to consummate the transactions contemplated by this
Agreement. Neither the execution and delivery by Parent or Sub of this
Agreement, nor the consummation by Parent or Sub of the transactions
contemplated hereby, nor compliance by Parent or Sub with any of the provisions
hereof, will (a) conflict with or result in any breach of any provisions of the
charter documents or by-laws of Parent or Sub, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(b) and (c) for violations, breaches or defaults which would not prevent,
materially delay or materially impair the ability of Parent or Sub to consummate
the transactions contemplated by this Agreement.
Section 5.4 Consents. Parent, as of the date hereof, after taking into
account, among other things, its compliance with health care regulatory
requirements, has no reason to believe that it will not obtain the consents
referred to in Section 9.1(d) on or before June 19, 1997.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as otherwise disclosed to Parent and Sub in a disclosure schedule
delivered to them concurrently with the execution hereof (which disclosure
schedule shall contain appropriate references to identify the representations
and warranties herein to which the information in such letter relates) (the
"Company Disclosure Schedule"), and except as otherwise expressly contemplated
by this Agreement, Company represents and warrants to Parent and Sub as set
forth below.
Section 6.1 Organization. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has the
requisite corporate power to carry on its business as it is now being conducted
or presently proposed to be conducted. Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified or to be in such good standing, which, when taken together with all
other such failures, would not have a material adverse effect on the business,
assets, liabilities, results of operations or financial condition of Company and
Company Subsidiaries (as defined below), taken as a whole
-9-
<PAGE> 11
(a "Company Material Adverse Effect"). Company has made available to Parent a
complete and correct copy of the Articles of Incorporation and the By-laws of
Company (the "By-laws"), each as amended to date and the articles of
incorporation and by-laws or similar governing instrument of each Company
Subsidiary, each as amended to date. The Articles of Incorporation and the
By-laws and the articles of incorporation, by-laws or similar governing
instruments of each Company Subsidiary so delivered are in full force and
effect.
Section 6.2 Capitalization. The authorized capital stock of Company
consists of 100,000,000 Shares and 2,000,000 shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"). As of June 11, 1997, (i)
38,994,413 Shares were issued and outstanding (excluding Shares held by Company
in treasury), (ii) options to acquire 3,824,848 Shares were outstanding under
all Plans (as defined in Section 6.14) of Company, (iii) 178,518 Shares were
subject to issuance in connection with Company's 5 3/4% Convertible Subordinated
Debentures due 2012, (iv) no shares of Preferred Stock were outstanding, and (v)
Rights to purchase 389,945 shares of Series B Preferred Stock were outstanding
(excluding Rights attached to Shares held by Company in its treasury). All of
the issued and outstanding Shares are duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights. There are not now, and at
the Effective Time there will not be, any shares of capital stock of Company
issued or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating Company to
issue, transfer or sell any shares of its capital stock or other issued or
unissued capital stock or other securities of Company or any Company Subsidiary
except as set forth above (including upon the exercise of the options and Rights
and conversion of the convertible debentures referred to above). Immediately
prior to the consummation of the Amended Offer, no Shares, Preferred Shares,
Preferred Stock or any other securities of Company will be subject to issuance
pursuant to the Rights Agreement, and after the Effective Time the Surviving
Corporation will have no obligation to issue, transfer or sell any Shares or
other capital stock or other securities of the Surviving Corporation pursuant to
any Plan or pursuant to any subscription, option, warrant, right, convertible
security or other agreement or commitment. Other than the Debentures, neither
Company nor any Company Subsidiary has outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to vote) with
the stockholders of Company or any Company Subsidiary on any matter.
Section 6.3 Subsidiaries. Each Company Subsidiary (as defined herein) is,
directly or indirectly, wholly owned by Company and Exhibit 6.3 contains a true
and complete list of each Company Subsidiary. As used herein, "Company
Subsidiary" shall mean any corporation, partnership, joint venture or other
business entity of which Company owns, directly or indirectly, greater than
fifty percent of the shares of capital stock or other equity interests
(including partnership interests) entitled (without regard to
-10-
<PAGE> 12
the occurrence of any contingency) to cast at least a majority of the votes that
may be cast by all shares or equity interests having ordinary voting power for
the election of directors or other governing body of such entity. Each of the
outstanding shares of capital stock or other equity interests of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
owned, either directly or indirectly, by Company free and clear of all liens,
pledges, security interests, claims or other encumbrances ("Liens"). Each of the
shares of capital stock of BHC beneficially owned by Company is duly authorized,
validly issued, fully paid and nonassessable and is owned free and clear of all
Liens (except as contained in the stockholders agreement relating to BHC) and
the transfer of control over such shares contemplated hereby will not violate,
or give any third party rights under, any agreement to which Company or any
Company Subsidiary is a party.
(a) Each Company Subsidiary is duly organized, validly existing and in
good standing under the laws of the state of its organization, except where the
failure to comply with the foregoing would not individually or in the aggregate
have a Company Material Adverse Effect.
(b) Each Company Subsidiary has the requisite power to carry on its
business as it is now being conducted or presently proposed to be conducted,
except where the failure to have such power would not individually or in the
aggregate have a Company Material Adverse Effect.
(c) Each Company Subsidiary is duly qualified to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except for such failures to be so qualified, or to be in good
standing, which, when taken together with all other such failures, would not
have a Company Material Adverse Effect.
(d) There are no outstanding options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating
Company or any Company Subsidiary to issue, transfer or sell any securities or
other equity interests of any Company Subsidiary or otherwise take actions with
respect to the capital stock or other equity interests or securities of any
Company Subsidiary.
(e) There are no voting trusts, standstill, stockholder or other
agreements or understandings to which Company or any of Company Subsidiaries is
a party or is bound with respect to the voting of the capital stock or other
equity interests of Company or any of Company Subsidiaries.
Section 6.4 Authority Relative to This Agreement. Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations
-11-
<PAGE> 13
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery by Company of this Agreement and the consummation by Company of the
trans actions contemplated hereby have been duly authorized by Company's Board
of Directors and, to the extent required under the GCL, except for the approval
of Company's stockholders to be sought as contemplated by Section 8.3(a) hereof,
no other corporate action or proceedings on the part of Company are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Company and constitutes a
valid and binding agreement of Company, enforceable against Company in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally or to general principles of equity. The Board of
Directors has unanimously (with two directors abstaining) approved this
Agreement, the Amended Offer and the Merger and the other transactions
contemplated hereby.
Section 6.5 Consents and Approvals; No Violation. Except for applicable
requirements of the HSR Act, the Exchange Act, state securities or blue sky
laws, certain filings and approvals relating to health care licensing,
certificate of need, change of ownership filings pursuant to Medicare and
Medicaid laws and similar matters, and the filings and recordation of the
Articles of Merger as required by the GCL, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Company of the transactions contemplated by the this
Agreement, except for such filings, permits, authorizations, consents or
approvals the failure of which to be made or obtained would not individually or
in the aggregate have a Company Material Adverse Effect or could not prevent,
materially delay or materially impair the ability of Company to consummate the
transactions contemplated by this Agreement. Neither the execution and delivery
by Company of this Agreement, nor the consummation by Company of the
transactions contemplated hereby, nor compliance by Company with any of the
provisions hereof, will (i) conflict with or result in any breach of any
provisions of the charter documents or by-laws of Company or any of Company
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation ("Contracts") to which
Company or any of Company Subsidiaries is a party or by which any of them or any
of their properties or assets may be bound, or (iii) assuming compliance with
the matters referred to in this Section 6.5, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Company, any of
Company Subsidiaries or any of their properties or assets, except in the case of
clauses (ii) and (iii) for violations, breaches or defaults which would not ,
alone or in the aggregate, have a Company Material Adverse Effect or that would
not prevent, materially delay or materially impair the ability of Company to
consummate the transactions contemplated by this Agreement.
-12-
<PAGE> 14
Section 6.6 Reports and Financial Statements. Company has delivered to
Purchaser each registration statement, schedule, report, proxy statement or
information statement prepared by it since November 30, 1996 (the "Audit Date"),
including, without limitation, (i) Company's Annual Report on Form 10-K for the
year ended November 30, 1996 and (ii) Company's Quarterly Report on Form 10-Q
for the quarterly period ended February 28, 1997, each in the form (including
exhibits and any amendments thereto) filed with the SEC, and Company has timely
filed all reports required to be filed with the SEC pursuant to the Exchange Act
since January 1, 1994 (collectively, the "Company SEC Reports"). None of such
Company SEC Reports, as of their respective dates, contained any 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 under which they were made, not misleading. Each of the balance
sheets (including the related notes and schedules) included in or incorporated
by reference into the Company SEC Reports fairly presents the consolidated
financial position of Company and its consolidated subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes and schedules) included or incorporated by reference therein
fairly present the results of operations, retained earnings and the changes in
financial position of Company and Company Subsidiaries for the respective
periods or as of the respective dates set forth therein (subject, in the case of
unaudited statements, to normal year-end adjustments), all in conformity with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as otherwise noted therein.
Section 6.7 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which (i) are accrued or reserved against in Company's financial
statements or reflected in the notes thereto included in the Company SEC Reports
filed prior to the date hereof, or (ii) were incurred after February 28, 1997 in
the ordinary course of business and consistent with past practices, neither
Company nor any Company Subsidiary has any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be reflected in a corporate balance sheet or the notes thereto. Except
as accrued or reserved against in Company's financial statements included in
Company's SEC Reports filed prior to the date hereof, as of the date hereof
there are no obligations or liabilities, whether or not accrued, contingent or
otherwise and whether or not required to be disclosed, or any facts or
circumstances of which Company has knowledge that could result in any claims
against or liabilities of Company or any Company Subsidiaries that, alone or in
the aggregate, would be reasonably likely to have a Company Material Adverse
Effect.
Section 6.8 Absence of Certain Changes or Events. Except as set forth in
the Company SEC Reports filed prior to the date hereof, since the Audit Date
neither Company nor any of Company Subsidiaries has: (i) taken any of the
actions set forth in Section 7.1(b), clauses (i), (iii), (iv) or (v) of Section
7.1(c) or Section 7.1(e) hereof; (ii)
-13-
<PAGE> 15
suffered any material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of Company and Company
Subsidiaries taken as a whole (other than any change relating to the United
States economy in general or to the United States investor owned hospital
business or to the acute care hospital business in general) or any development
or combination of developments of which management of Company has knowledge
which is reasonably likely to result in any such change; (iii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of Company; (iv) any change by Company in accounting
principles, practices or methods; or (v) except as permitted by Section 7.1
hereof, conducted its business and operations other than in the ordinary course
of business and consistent with past practices. Since November 30, 1996, except
as disclosed in the Company Reports filed prior to the date hereof and except as
permitted by Schedule 8.10 hereto, there has not been any increase in the
compensation payable or which could become payable by Company and its
subsidiaries to their officers or key employees, or any amendment of any Plans
except for such increases in compensation (i) reflected in Schedule 6.8 hereof
or (ii) which are given to persons who are not officers of Company in the
ordinary course of business and consistent with past practices.
Section 6.9 Litigation. Except for litigation disclosed in the notes to
the financial statements included in the Company SEC Reports filed prior to the
date hereof, there are no civil, criminal or administrative actions, suits,
claims, hearings, investigations or proceedings pending or, to the knowledge of
Company, threatened against Company or any Company Subsidiary that, alone or in
the aggregate, would be reasonably likely to have a Company Material Adverse
Effect.
Section 6.10 BHC. Since the Audit Date, to Company's knowledge, there has
not been any material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of BHC and its
subsidiaries, taken as a whole.
Section 6.11 No Default. Neither Company nor any of Company Subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter documents or by-laws, (ii) any
Contract to which Company or any of Company Subsidiaries is a party or by which
they or any of their properties or assets may be bound, or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to Company or
any of Company Subsidiaries, except in the case of clauses (ii) and (iii) above
for defaults or violations which, alone or in the aggregate, would not have a
Company Material Adverse Effect or that would not prevent, materially delay or
materially impair the ability of Company to consummate the transactions
contemplated by this Agreement.
-14-
<PAGE> 16
Section 6.12 Taxes.
(a) Except for such matters that would not, individually or in the
aggregate, have a Company Material Adverse Effect, Company and Company
Subsidiaries have duly filed all material Tax Returns required to be filed by
Company or Company Subsidiaries and have paid in full the Taxes shown to be due
thereon. Neither Company nor any Company Subsidiaries has any material liability
with respect to Taxes that accrued on or before the end of the most recent
period covered by the Company SEC Reports filed prior to the date hereof which
in the aggregate exceeds, by a material amount, the aggregate amounts accrued
with respect thereto that are reflected in the financial statements included in
the Company SEC Reports filed prior to the date hereof.
(b) To Company's knowledge, no Tax is required to be withheld pursuant to
Section 1445 of the Code as a result of the transfer contemplated by this
Agreement.
(c) For purposes of this Agreement:
(i) "Taxes" shall mean all Federal, state, local and foreign taxes,
including, without limitation, income, gross receipts, windfall profits,
gains, excise, severance, property, production, sales, use, transfer,
license, franchise, employment, withholding, environmental, customs duty,
capital stock, stamp, payroll, unemployment, disability, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additional amounts
imposed with respect to such amounts and any interest in respect of such
penalties and additions.
(ii) "Tax Returns" shall mean any Federal, state, local or foreign
tax returns, elections, disclosures, estimates, declarations, statements,
reports, schedules, forms and information returns and any amended return
required to be filed with respect to any Tax.
Section 6.13 Medicare Participation/Accreditation.
(a) All hospitals or significant health care facilities owned or operated
as of the date hereof as continuing operations by Company or any Company
Subsidiary (each, a "Company Facility") are certified for participation in the
Medicare and Medicaid programs, have a current and valid provider agreement with
the Medicare and Medicaid programs, have complied with all Medicare and Medicaid
laws, rules, regulations, manuals and other conditions of participation of such
programs, to the extent applicable, and have filed all cost reports and other
requests for payment in the manner prescribed thereby except where the failure
to be so certified, to have such agreements, or to be in such compliance would,
individually or in the aggregate not have a Company Material
-15-
<PAGE> 17
Adverse Effect. Neither Company nor any of Company Subsidiaries has received
notice from any governmental agency, fiscal intermediary, carrier or similar
entity which enforces or administers the statutory or regulatory provisions in
respect to any Government Health Care Program of any pending or threatened
investigations, and to Company's knowledge no such investigations are pending,
threatened or imminent, which would be reasonably expected to have a Company
Material Adverse Effect. Each Company Facility eligible for such accreditation
is accredited by the Joint Commission on Accreditation of Healthcare
Organizations or other appropriate accreditation agency.
(b) All cost reports and other requests for payment made by Company and
Company Subsidiaries to Medicare, Medicaid or any other governmental health care
program or third party payor are complete and accurate, except where the failure
to be so complete and accurate would not, individually or in the aggregate, have
a Company Material Adverse Effect. No adjustment or disallowance in any such
cost reports and other requests for payment, including adjustments or
disallowances for late filings, has been made or, to Company's knowledge,
threatened by any Federal or state agency or instrumentality or other provider
reimbursement entities relating to Medicare or Medicaid or by any third party
payor, and to Company's knowledge, there is no basis for any successful claims
or requests for recovery of overpayments from any such agency, instrumentality,
entity or third party payor, except for any such claims or requests which would
not have, individually or in the aggregate, a Company Material Adverse Effect.
Since January 1, 1992 neither Company nor any Company Subsidiary has prior to
the date hereof been subject to any audit relating to fraudulent Medicare or
Medicaid practices and neither Company nor any Company Subsidiary is subject to
any audit relating to fraudulent Medicare or Medicaid practices that would be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) Each such Company Facility is licensed by the state department of
health or applicable state agency and is authorized to operate the number of
beds utilized therein. The Company Facilities are presently in compliance with
the terms, conditions and provisions of such licenses except where the failure
to be in such compliance would not have a Company Material Adverse Effect. The
facilities, equipment, staffing and operations of Company Facilities satisfy the
applicable state health care licensing requirements in all material respects.
Section 6.14 Employee Benefit Plans; ERISA.
(a) With respect to each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement, thrift, savings,
employee stock ownership, stock bonus, restricted stock, welfare and fringe
benefit plan, program, agreement or arrangement, and
-16-
<PAGE> 18
each other employee benefit plan, program, agreement (including but not limited
to employment agreements) or arrangement, other than such as are immaterial (the
"Plans"), currently maintained or contributed to or required to be contributed
to by (i) Company, (ii) any Company Subsidiary or (iii) any trade or business,
whether or not incorporated (a "Company ERISA Affiliate"), that together with
Company is considered a "single employer" within the meaning of Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA"), or Section 414(b) or (c) of
the Code for the benefit of any employee or former employee, consultant or
former consultant, or director or former director of either Company, any Company
Subsidiary or any Company ERISA Affiliate.
(b) Except as set forth on Schedule 8.10 hereto, neither Company nor any
Company Subsidiary has any commitment to create any additional material Plan or
to modify or change any existing Plan in any material respect. If applicable,
Company has heretofore delivered or made available to Parent, upon request, true
and complete copies of:
(i) existing Plan documents(including all amendments thereto);
(ii) the Form 5500, actuarial report and financial statement for the
two most recent plan years ending prior to the date hereof;
(iii) the most recent Summary Plan Description, together with any
Summary of Material Modifications;
(iv) trust instruments, insurance contracts or any other third party
funding vehicle(including all amendments thereto) and the latest financial
statements with respect to the last reporting period ended immediately
prior to the date hereof;
(v) the most recent determination letter received prior to the date
hereof from the Internal Revenue Service ("IRS") with respect to each Plan
intended to qualify under Section 401 of the Code; and
(vi) any Form 5310 or Form 5330 filed with the IRS.
(c) No liability under Title IV of ERISA has or is expected to be incurred
by Company, any Company Subsidiary or any Company ERISA Affiliate that has not
been satisfied in full when due. Company has no reason to expect to incur any
liability under ERISA arising in connection with the termination of, or complete
withdrawal from, any Plan previously covered by Title IV of ERISA which would
have a Company Material
-17-
<PAGE> 19
Adverse Effect or give rise to a lien under Title IV of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Plan within the 12- month period ending on the date hereof, and no such
notice will be required to be filed as a result of the transactions contemplated
by this Agreement. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any Plan and, to Company's knowledge, no
condition exists that presents a material risk that such proceedings will be
instituted. To the knowledge of Company, there is no pending investigation or
enforcement action by the PBGC, the Department of Labor (the "DOL") or IRS or
any other governmental agency with respect to any Plan. Under each Plan to the
extent applicable, as of the date of the most recent actuarial valuation
performed prior to the date of this Agreement, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions
contained in such actuarial valuation of such Plan), did not exceed the then
current value of the assets of such Plan and since such date there has been
neither an adverse change in the financial condition of such Plan nor any
amendment or other change to such Plan that would increase the amount of
benefits thereunder which reasonably would be expected to change such result.
(d) No Plan subject to the minimum funding requirements of Section 412 of
the Code or Section 302 of ERISA or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of such Plan ended prior to the date hereof. All
contributions required to be made with respect to any Plan on or prior to the
date hereof have been timely made. None of Company, any Company Subsidiary or
any Company ERISA Affiliate (x) has provided, or would reasonably be expected to
be required to provide, security to any Plan pursuant to Section 401(a)(29) of
the Code, and (y) has taken any action, or omitted to take any action, that has
resulted, or would reasonably be expected to result, in the imposition of a lien
under Section 412(n) of the Code or pursuant to ERISA.
(e) No Plan is a "multiemployer pension plan," as defined in Section 3(37)
of ERISA, nor is any Plan a plan described in Section 4063(a) of ERISA. None of
Company, any Company Subsidiary or any Company ERISA Affiliate has contributed,
or has been obligated to contribute to a multiemployer plan under Subtitle E of
ERISA at any time since September 26, 1980.
(f) Each Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA and is intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable determination
letter including a determination that the related trust under such Plan is
exempt from tax under Section 501(a) of the Code from the IRS as to its
qualification for "TRA" (as defined in Rev. Proc
-18-
<PAGE> 20
93-39) and, to Company's knowledge, there are no circumstances likely to result
in the disqualification of such Plan.
(g) Each of the Plans has been operated and administered in all material
respects in accordance with applicable laws, including, but not limited to,
ERISA and the Code. There is no material pending or, to the knowledge of
Company, threatened legal action, suit, or claim relating to the Plans.
(h) No Plan, individually or collectively, constitutes a "defined benefit
plan" as defined in Section 3(35) of ERISA.
(i) To Company's knowledge, none of Company, any Company Subsidiary or any
Company ERISA Affiliate, any of the ERISA Plans, any trust created thereunder,
or any trustee or administrator thereof has engaged in a transaction in
connection with which Company, any Company Subsidiary, any Company ERISA
Affiliate, any of the ERISA Plans, any such trust or any trustee or
administrator thereof, or any party dealing with the ERISA Plans or any such
trust is subject to either a civil liability under Section 409 of ERISA or
Section 502(i) of ERISA, or a tax imposed pursuant to Section 4975 or 4976 of
the Code which would reasonably be expected to have a Company Material Adverse
Effect.
(j) Neither Company nor any Company Subsidiary has any obligations to
provide retiree health and life insurance or other retiree death benefits under
any Plan, other than benefits mandated by Section 4980B of the Code, and each
Plan may be amended or terminated without incurring liability thereunder. There
has been no communication to employees by Company or any Company Subsidiary
that would reasonably be expected to promise or guarantee such employees retiree
health or life insurance or other retiree death benefits on a permanent basis.
(k) All Plans covering foreign employees comply in all material respects
with applicable local law. Company and any Company Subsidiary have no material
unfunded liabilities with respect to any Plan which covers foreign employees.
(l) Except as provided in Schedule 8.10 hereto, the consummation of the
transactions contemplated by this Agreement would not, directly or indirectly
(including, without limitation, as a result of any termination of employment
prior to or following the Effective Time), reasonably be expected to (A) entitle
any current or former employee, consultant or director to any payment (including
severance pay or similar compensation) or any increase in compensation except in
connection with Shares and options held by them, (B) result in the vesting or
acceleration of any benefits under any Plan or (C) result in any material
increase in benefits payable under any Plan.
-19-
<PAGE> 21
(m) Neither Company nor any Company Subsidiary maintains any compensation
plans, programs or arrangements the payments under which would not reasonably be
expected to be deductible as a result of the limitations under Section 162(m) of
the Code and the regulations issued thereunder.
(n) As a result, directly or indirectly, of the transactions contemplated
by this Agreement (including, without limitation, as a result of any termination
of employment prior to or following the Effective Time), none of the Parent,
Sub, Company or the Surviving Corporation, or any of their respective
subsidiaries will be obligated to make a payment that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code), without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
Section 6.15 Vote Required. Approval of the Merger by the stockholders of
Company will require the affirmative vote or consent of the holders of at least
two-thirds of the outstanding Shares.
Section 6.16 Opinion of Financial Advisor. The Board of Directors of
Company has received the opinion of Morgan Stanley & Co., Company's financial
advisor, substantially to the effect that the consideration to be received by
holders of the Shares pursuant to this Agreement is fair from a financial point
of view.
Section 6.17 Certain Actions Under Nevada Law. The Board of Directors of
Company has taken all appropriate action so that (i) neither Parent nor Sub will
be an "interested stockholder" within the meaning of Sections 78.378 to 78.3793
of the GCL by virtue of the execution of this Agreement or the consummation of
the transactions contemplated hereby and (ii) the entry into this Agreement and
the consummation of the transactions contemplated hereunder shall be exempted
from the provisions of Sections 78.411 to 78.444 of the GCL. No other "fair
price", "moratorium", "control share acquisition" or other similar antitakeover
statute or regulation (each a "Takeover Statute") is applicable to Company, the
Shares, the Offer, the Merger or the transactions contemplated thereby or
hereby.
Section 6.18 Stockholder Rights Plan. (i) The Company has amended the
Rights Agreement to provide that none of Parent, Sub or any of their respective
affiliates or associates will be deemed to be an Acquiring Person (as defined in
the Rights Agreement) and that the Distribution Date (as defined in the Rights
Agreement) shall not be deemed to occur, and the Rights will not separate from
the Shares, as a result of the commencement of the Offer or as a result of
consummation of the transactions contemplated hereby.
-20-
<PAGE> 22
(ii) The Company has taken all necessary action with respect to the
Rights Agreement to ensure that the Rights Agreement will expire at the
Effective Time pursuant to Section 7.1(iii) of the Rights Agreement.
Section 6.19 Real Property and Leases. (i) Company and Company Subsidi-
aries have sufficient title or leasehold interests to all of their respective
properties to conduct their respective businesses as currently conducted or as
contemplated to be conducted, except where the failure to have such sufficient
title or leasehold interest would not, either individually or in the aggregate,
have a Company Material Adverse Effect. Section 6.19 of the Disclosure Schedule
sets forth a true and complete list of each lease, sublease or other similar
agreement relating to the possession of real property to which Company or any of
Company Subsidiaries is a party which provides for annual payments in excess of
$60,000.
(ii) All leases of real property leased for the use or benefit of
Company or any Company Subsidiaries to which Company or any such subsidiary is a
party and all amendments and modifications thereto are in full force and effect
except where the failure to be in full force and effect would not have a Company
Material Adverse Effect.
Section 6.20 Termination of Select Medical Merger Agreement. The
Agreement and Plan of Merger, dated as of May 2, 1997 (the "Select Medical
Merger Agreement"), by and among Select Medical Corporation ("Select Medical"),
SM Acquisition Co. and Company has been terminated in accordance with its terms.
Company is not required under the Select Medical Merger Agreement (or under any
other Contract) to make any payment to Select Medical Corporation, SM
Acquisition Co. or any of their respective affiliates except pursuant to Section
9.2 thereof.
Section 6.21 Brokers. Company represents and warrants that, (i) except for
Dean Witter Reynolds, Inc., Morgan Stanley & Co. and Cronus Partners, Inc., its
financial advisors, no broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of
-21-
<PAGE> 23
Company and (ii) Company's fee arrangements with such financial advisors have
been disclosed in writing to Parent and Sub.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1 Conduct of Business by Company Pending The Merger. From the
date of this Agreement until the earlier of (i) the time that persons designated
by Parent are appointed as directors of Company pursuant to Section 3.4 hereof
and (ii) the Effective Time, unless Parent shall otherwise agree in writing, or
as otherwise contemplated by this Agreement, any Schedule hereto or Company
Disclosure Schedule:
(a) the respective businesses of Company and Company Subsidiaries shall be
conducted only in the ordinary and usual course of business and consistent with
past practice, and there shall be no material change in the conduct of the
operations of Company and Company Subsidiaries taken as a whole and, to the
extent consistent therewith, each of Company and Company Subsidiaries shall use
its reasonable best efforts to preserve its business organization intact,
maintain its existing relations with customers, suppliers, employees and
business associates, and preserve the goodwill of those having business
relationships with it and Company Subsidiaries;
(b) Company shall not (i) sell or pledge or agree to sell, pledge, dispose
of or encumber any stock or other equity interests owned by it in any of Company
Subsidiaries; (ii) amend its Articles of Incorporation or by-laws or, except as
contemplated hereby, amend, modify, consummate or redeem the Rights Agreement or
Rights; or (iii) split, combine or reclassify any shares of its outstanding
capital stock; or (iv) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or redeem or otherwise acquire
any shares of its capital stock or shares of the capital stock of any of Company
Subsidiaries;
(c) neither Company nor any of Company Subsidiaries shall (i) authorize
for issuance, issue, pledge, dispose of, encumber or sell any additional shares
of, or rights of any kind to acquire, any shares of or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, its capital stock of any class (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise), except for unissued Shares which may be issued upon the exercise or
conversion of outstanding rights, options and debentures referred to in Section
6.2 hereof; (ii) except as otherwise permitted herein acquire, dispose of,
transfer, lease, guarantee, license, mortgage, pledge or encumber any fixed or
other assets in excess of $200,000 in any one or a series of related
transactions or more than $1,000,000 in the aggregate other than ordinary course
acquisitions of supplies used
-22-
<PAGE> 24
in the day-to-day operations of Company; (iii) incur, assume or prepay any
indebtedness or any other material liabilities; (iv) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person other than a wholly-owned
Company Subsidiary in the ordinary course of business and consistent with past
practices in an amount in excess of $1,000,000 in the aggregate; (v) make any
loans, advances or capital contributions to, or investments in, any other person
in an amount in excess of $200,000 in any one or a series of related
transactions or more than $1,000,000 in the aggregate; (vi) authorize capital
expenditures (other than presently budgeted capital expenditures set forth on
Schedule 7.1(c)) in excess of $200,000 in any one or a series of related
transactions or $500,000 in the aggregate; or (vii) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(d) neither Company nor any of Company Subsidiaries shall make any change
in the compensation payable or to become payable to any of its officers,
directors or employees, except pursuant to existing agreements, grant any
severance or termination pay to, or enter into or amend any employment,
severance, termination or other similar agreement, adopt any new Plan or amend
any existing Plan or voluntarily accelerate the vesting of any stock options,
restricted stock or other compensation or benefit or make any loans to any of
its officers, directors or employees or make any changes in its existing
borrowing or lending arrangements for or on behalf of any of such persons,
whether contingent on consummation of the Merger or otherwise, other than as may
be required under applicable law or the terms of any existing Plan or agreement
provided, however, that Company and Company Subsidiary may amend any Plan to
provide for the effectuation thereof immediately prior to the expiration of the
Amended Offer and/or the Effective Time so long as the amounts payable
thereunder, individually or in the aggregate, are not increased.
(e) neither Company nor any Company Subsidiary shall settle or compromise
any material claims or litigation or, except in the ordinary and usual course of
business, modify, amend or terminate any of its material Contracts or waive,
release or assign any material rights or claims;
(f) neither Company nor any Company Subsidiary shall take, or omit to
take, any action that is reasonably likely to cause any representation and
warranty of Company in this Agreement to become untrue in any material respect;
(g) neither Company nor any Company Subsidiary shall make any Tax election
or permit any insurance policy naming it as a beneficiary or a loss payable
payee to be canceled or terminated without notice to Purchaser, except in the
ordinary and usual course of business; and
-23-
<PAGE> 25
(h) neither Company nor any Company Subsidiary will authorize or enter
into an agreement to do any of the foregoing.
Section 7.2 Conduct of Business of Sub. From the date hereof to the
Effective Time, Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement or to facilitate the consummation
of the transactions contemplated hereby.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Company shall, and shall cause each
Company Subsidiary to, afford to Parent and its financial advisors, legal
counsel, accountants, consultants and other representatives full access at all
reasonable times throughout the period prior to the Effective Time to all of its
books, records, properties, plants and personnel and, during such period, shall
furnish promptly to Parent (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities laws and (ii) all other information as Parent may reasonably
request provided that no investigation pursuant to this Section 8.1 shall affect
or be deemed to modify any representation or warranty made by Company.
Notwithstanding the foregoing, Company shall not be required to permit any
access, or to disclose any information, which in the reasonable judgment of
Company (i) would result in the disclosure of any trade secrets of third parties
if Company shall have unsuccessfully used reasonable efforts to obtain the
consent of such third party to such inspection or disclosure, (ii) would be in
violation of applicable law, rules or regulation or (iii) constitutes
information protected by attorney-client privilege, but only to the extent that
disclosure would impair Company's ability to assert such attorney-client
privilege. Parent and its respective affiliates, representatives and agents
shall keep confidential all nonpublic information in accordance with the terms
of the Confidentiality Letter dated October 28, 1996 (the "Confidentiality
Letter") between Company and Parent.
Section 8.2 Acquisition Proposals. From the date hereof until the
termination hereof, Company and Company Subsidiaries will not, and will cause
their respective officers, directors, employees or other agents (including,
without limitation, investment bankers, attorneys or accountants) not to,
directly or indirectly, (i) solicit, initiate,
-24-
<PAGE> 26
encourage, enter into any agreement or otherwise facilitate any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving Company or the acquisition of any equity interest in, or a
substantial portion of the assets of Company or any transaction that would
conflict with or interfere with consummation of the transactions contemplated by
this Agreement, other than the transactions contemplated by this Agreement and
other than the sale of the hospital in Kirkland, Washington and the sale of real
estate and buildings relating to hospitals formerly operated by Company or a
Company Subsidiary or real property set forth on Schedule 8.2 at hospitals
presently operated by Company or a Company Subsidiary (any such proposal being
an "Acquisition Proposal" and any such acquisition or transaction being an
"Acquisition Transaction"), or (ii) engage in or continue discussions or
negotiations with, or disclose any nonpublic information relating to Company or
Company Subsidiaries, respectively, or afford access to their respective
properties, books or records to, any person that may be considering making, or
has made, an Acquisition Proposal, or otherwise facilitate any effort or attempt
to make or implement an Acquisition Proposal. Notwithstanding the foregoing,
nothing contained in this Section 8.2 shall prohibit Company and its Board of
Directors from (i) taking and disclosing a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated by the
SEC under the Exchange Act, or (ii) furnishing information to, or entering into
negotiations with, any person or entity that makes an unsolicited bona fide
written proposal to acquire Company pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of the assets, business combination
or other similar transaction, if, and only to the extent that, (i) Company's
Board of Directors concludes in good faith (after consultation with its
financial advisors) that such Acquisition Proposal is reasonably capable of
being completed, taking into account all legal, financial and other aspects of
the proposal and the person or entity making the proposal, and would, if
consummated, result in a transaction more favorable to Company's stockholders
from a financial point of view than the transaction contemplated by this
Agreement (any such more favorable Acquisition Proposal being referred to in
this Agreement as a "Superior Proposal") and (ii) such Board of Directors
determines in good faith upon advice of counsel that such action is required for
the Board of Directors to comply with its fiduciary duties to stockholders
imposed by law. Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Company agrees
that it will take the necessary steps to promptly inform the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 8.2. Company agrees that it will notify Parent promptly if any
such proposals or offers are received by, any such information is requested
from, or any such discussions or negotiations are sought to be initiated or
continued with, any of its representatives indicating, in connection with such
notice, the name of such person and the terms and conditions of any proposals or
offers and thereafter shall keep Parent informed, on a current basis, of the
status and terms of any such proposals or offers and the status of any such
discussions or negotiations.
-25-
<PAGE> 27
Company also agrees that it will promptly request that each person that has
heretofore executed a confidentiality agreement in connection with its
consideration of any Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of Company or any of its
subsidiaries.
Section 8.3 Proxy Statement; Stockholder Approval.
(a) Company, acting through its Board of Directors, shall, in accordance
with applicable law and its Articles of Incorporation and by-laws:
(i) as soon as practicable following the purchase of Shares by the
Purchaser pursuant to the Amended Offer, Company will prepare and file
with the SEC a Proxy Statement (the "Proxy Statement") with respect to a
special meeting of shareholders of Company (the "Special Meeting") (except
to the extent approval of shareholders of Company is not required to be
obtained pursuant to the GCL or may be obtained by written consent) for
the purpose of voting to approve and adopt this Agreement (or, in the
event that the Parent Companies shall have the right to vote a sufficient
number of Shares such that the Parent Companies may approve and adopt this
Agreement, an Information Statement with respect to the Special Meeting
(the "Information Statement")) and shall use its reasonable efforts to
obtain such stockholder approval; and
(ii) promptly and duly call, give notice of, convene and hold the
Special Meeting (except to the extent approval of shareholders of Company
is not required to be obtained pursuant to the GCL or may be obtained by
written consent) as soon as practicable following the date upon which the
Proxy Statement or Information Statement is cleared for mailing by the
SEC, (except to the extent approval of shareholders of Company is not
required to be obtained pursuant to the GCL or may be obtained by written
consent); and
(iii) recommend approval and adoption of this Agreement by the
stockholders of Company and include in the Proxy Statement or Information
Statement such recommendation, and take all lawful action to solicit such
approval.
(b) Company, as promptly as practicable following the date upon which the
Proxy Statement or Information Statement is cleared for mailing by the SEC,
shall cause the definitive Proxy Statement or Information Statement to be mailed
to its stockholders. At the Special Meeting (i) Company shall vote or cause to
be voted in favor of approval and adoption of this Agreement all Shares as to
which it holds proxies at such time and (ii) the Parent Companies shall vote or
cause to be voted in favor of the approval and adoption of this Agreement all
Shares owned by them or as to which they hold proxies at
-26-
<PAGE> 28
such time. The Proxy Statement or Information Statement, at the date thereof
and, if applicable, at the date of such meeting, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any such untrue statement
of a material fact or omission to state a material fact was made by Company in
reliance upon and in conformity with written information concerning the Parent
Companies furnished to Company by Parent specifically for use in the Proxy
Statement or Information Statement. Parent agrees that the information provided
to Company for use in the Proxy Statement or Information Statement shall in all
material respects comply with the requirements of the Exchange Act and the rules
and regulations thereunder. The Proxy Statement or Information Statement shall
not be filed, and no amendment or supplement to the Proxy Statement or
Information Statement will be made by Company, without consultation with Parent
and its counsel.
(c) Company's obligations under this Section 8.3 shall at all times remain
subject to its fiduciary duties imposed under applicable law, in the event that,
if required by such fiduciary duties as advised by counsel, the Board of
Directors of Company shall have withdrawn or modified its recommendation that
stockholders approve and adopt this Agreement.
Section 8.4 Antitrust Laws. As promptly as practicable, Company, Parent and
Sub shall make all filings and submissions required by any Governmental Entity
as may be reasonably required to be made in connection with this Agreement and
the transactions contemplated hereby. Company will furnish to Parent and Sub,
and Parent and Sub will furnish to Company, such information and assistance as
the other may reasonably request in connection with the preparation of any such
filings or submissions. Company will provide Parent and Sub, and Parent and Sub
will provide Company, with copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof) between such
party or any of its representatives, on the one hand, and any governmental
agency or authority or members of their respective staffs, on the other hand,
with respect to this Agreement and the transactions contemplated hereby. The
Company, Parent and Sub each agree that they shall use best reasonable efforts
to oppose the imposition of any Offer Order (as defined in Annex A) or any
Order (as defined herein) and to appeal the imposition of any such Offer Order
or any Order. If the Purchaser shall not have accepted Shares for payment
pursuant to the Amended Offer on or before September 1, 1997 due to the
existence of an Offer Order, Parent and the Purchaser agree to increase the
$16.00 per Share consideration to be paid pursuant to the Amended Offer by an
amount per Share equal to interest accruing on $16.00 from September 1, 1997 at
a rate of 5% per annum through and including the date Shares are accepted for
payment pursuant to the Amended Offer.
-27-
<PAGE> 29
Section 8.5 Employee Stock Options. At the Effective Time (or, at
Company's election, prior to expiration of the Amended Offer) all outstanding
Options to acquire Shares shall immediately vest and become fully exercisable.
At the Effective Time (or, at Company's election, prior to expiration of the
Amended Offer) Company shall take such actions as may be necessary to cause each
Option with an exercise price of less than the Merger Consideration (a "Lower
Priced Option") to be amended to provide that the holder thereof need not tender
any exercise price therefor and that upon exercise such holder shall receive an
amount of cash equal to the product of (x) the amount by which the Merger
Consideration exceeds the exercise price per Share subject to such Lower Priced
Option, and (y) the number of Shares issuable pursuant to the unexercised
portion of such Lower Priced Option, less any required withholding of taxes. At
such time, all Options other than Lower Price Options shall be converted into a
right to receive, upon exercise of such options (including payment of the
exercise price of such options), an amount in cash equal to the product of (x)
the Merger Consideration, and (y) the number of Shares issuable pursuant to the
unexercised portion of such option, less any required withholding of taxes.
Anything to the contrary in this Agreement notwithstanding, no payment shall be
made pursuant to this Section 8.5 that would be inconsistent with and would
violate Article 12 of Company's 1989 Stock Incentive Plan. Prior to the
Expiration Date of the Amended Offer Company shall cancel the converging options
issued to Richard Conte, Wendy Simpson, James Langhlin, Ronald Odey and Julia
Kopta under Company's 1989 Stock Incentive Plan and shall use its best efforts
to cancel all other converging options issued under Company's 1989 Stock
Incentive Plan. The Company shall take all action necessary to ensure that
following the Effective Time no participant in any Plan shall have any right
thereunder to acquire equity securities of Parent, Company, Sub, Surviving
Corporation or any subsidiary thereof or any cash payment with respect thereto,
other than cash amounts payable to holders of Options pursuant to this Section
8.5.
Section 8.6 Public Announcements. Parent and Sub, on the one hand, and
Company, on the other hand, agree that they will consult with each other prior
to issuing any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby.
Section 8.7 Continuance of Existing Indemnification Rights.
(a) The Articles of Incorporation and By-laws of the Surviving Corporation
shall contain provisions with respect to indemnification of individuals who at
any time prior to the expiration of the Amended Offer (or at any time after
expiration of the Amended Offer and prior to the Effective Time) were directors,
officers, or otherwise entitled to indemnification thereunder (the "Indemnified
Parties") which are at least as favorable to each Indemnified Party as the
Articles of Incorporation and By-laws of
-28-
<PAGE> 30
Company as of the date hereof. The Articles of Incorporation and By-laws of the
Surviving Corporation shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of an Indemnified Party. For a period of six years
from and after the Effective Time, Parent and Surviving Corporation shall
indemnify, defend and advance expenses in matters that may be subject to
indemnification to the Indemnified Parties with respect to liabilities and
claims (and related expenses) made against them resulting from their service as
such prior to the Effective Time to the fullest extent permitted under, and
subject to the requirements and other provisions of, Company's Articles of
Incorporation, By-laws and indemnification agreements in effect on the date of
this Agreement and applicable provisions of Law. In addition, for a period
expiring six years after the expiration or termination of any consulting
obligations under any agreement requiring any Indemnified Party to provide
consulting services to Parent or the Surviving Corporation following the
expiration of the Amended Offer or the Effective Time, Parent, Company and the
Surviving Corporation shall indemnify, defend and advance expenses to
Indemnified Parties in matters that would be subject to indemnification with
respect to liabilities and claims (and related expenses) made against them
resulting from their service as a consultant under any such agreement to the
fullest extent permitted under, and subject to the requirements and other
provisions of, Company's Articles of Incorporation, By-laws, indemnification and
consulting agreements in effect on the date of this Agreement and applicable
provisions of Law.
(b) Parent shall cause to be maintained in effect for a period ending not
sooner than the sixth anniversary of the Effective Time directors' and officers'
liability insurance providing at least the same coverage with comparable
carriers with respect to Company's directors and officers as the policies
maintained on behalf of directors and officers of Company as of the date hereof,
and containing terms and conditions which are no less advantageous, with respect
to matters occurring on or prior to the Effective Time (to the extent such
insurance is available with respect to such matters); provided, that in no event
shall Parent be required to expend to maintain or procure insurance coverage
pursuant to this Section 8.7 an amount per annum in excess of 200% of the
current annual premiums for the twelve-month period ended November 30, 1996 (the
"Maximum Premium") with respect to such insurance, or, if the cost of such
coverage exceeds the Maximum Premium, the maximum amount of coverage that can be
purchased or maintained for the Maximum Premium.
(c) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.7, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, provided that
the failure of an Indemnified Party to promptly notify Parent shall not relieve
Parent of its obligations under this Section 8.7 except to the extent Parent is
materially prejudiced by such failure. In the event of any such claim, action,
suit, proceeding or investigation (whether arising
-29-
<PAGE> 31
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent, which consent shall not
be unreasonably withheld; and provided further that Parent shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(d) Without limiting any other provision of this Agreement, in the event
that any claim for which coverage under Company's directors' and officers'
liability insurance policy would be available is not paid pursuant to such
directors' and officers' liability insurance policy because such amount does not
exceed the "deductible" or "retention amount" of such policy, Parent or Sub
shall promptly, at the election of the director or officer, reimburse or
pay or promptly cause Company to reimburse or pay any officer or director for
any amount, up to an aggregate of $500,000 for all officers and directors,
payable or paid because such amount is not in excess of the "deductible" or the
"retention amount". In the event that rights shall be reserved with regard to
whether coverage for any claim is available under Company's directors' and
officers' insurance policy, upon written request from an officer or director,
Parent or Sub shall pay or cause Company to pay, upon receipt of an undertaking
from the officer or director making the written request to reimburse any amounts
paid if it is ultimately determined that coverage with respect to such claim is
not available under such policy, any officer or director for any amount, up to
an aggregate of $500,000, together with all other amounts payable pursuant to
this subsection (d) of this Section 8.7 for all officers and directors, payable
by such persons because such amount is not in excess of the "deductible" or
"retention amount".
Section 8.8 Expenses. Except as set forth in this Section 8.8, whether or
not the Merger is consummated all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expenses except that those expenses incurred in
connection with printing the Schedule 14D-9, the Proxy Statement and any
information statement, as well as the filing fee relating to the Proxy Statement
and any information statement will be shared equally by Parent and Company.
Section 8.9 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and/or
directors of Parent, Sub and Company shall take all such necessary action.
Section 8.10 Certain Employee Benefits. Parent and Company agree to take
the action described in Schedule 8.10 hereto.
Section 8.11 Notification of Certain Matters. Company shall give prompt
notice to Parent of: (a) any notice of, or other communication relating to, any
actual or
-30-
<PAGE> 32
alleged noncompliance with any state licensure law, rule or regulation or any
laws, rules, regulations, manuals and other conditions relating to the Medicare
and Medicaid programs or any other government health care program or third party
payor requirements except for such instances of noncompliance which,
individually, or in the aggregate, would be immaterial to the financial
condition, operation, properties, prospects, business or results of operations
of Company and Company Subsidiaries taken as a whole, or a default or event
that, with notice or lapse of time or both, would become a default, received by
Company or any of its subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, under any Contract to which Company or any of
Company Subsidiaries is a party or is subject except for defaults or events
which, individually or in the aggregate, would not be reasonably likely to have
a Company Material Adverse Effect; (b) any material adverse change in the
business, assets, liabilities, results of operations or financial condition of
Company and Company Subsidiaries taken as a whole or the occurrence of any event
which, so far as reasonably can be foreseen at the time of its occurrence, would
result in any such change. Each of Company and Parent shall give prompt notice
to the other party of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement and the
occurrence or failure to occur of an event that would, or, with the lapse of
time could reasonably be expected to cause any representation or warranty of
Company in this Agreement to become inaccurate in any material respect.
Section 8.12 Consummation of the Merger. Parent and Sub shall take such
reasonable actions as may be reasonably necessary to cause the Effective Time to
occur as promptly as reasonably practicable following consummation of the
Amended Offer.
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to Each Party's Obligation to Effect The Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Any waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(b) To the extent required by the GCL, this Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite vote
or consent of the stockholders of Company in accordance with applicable law.
-31-
<PAGE> 33
(c) No court or other Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, preliminary or permanent injunction or other order
which is in effect and prohibits consummation of the transactions contemplated
by this Agreement (collectively, an "Order").
(d) Each of Company and Parent shall have obtained such consents from
Governmental Entities in addition to pursuant to the HSR Act as shall be
required and which are material to Parent or Company and to consummation of the
transactions contemplated hereby.
(e) Sub shall have purchased Shares pursuant to the Offer.
Section 9.2 Conditions to Obligation of Company to Effect the Merger. The
obligation of Company to effect the Merger shall be subject to the satisfaction
at or prior to the Effective Time of the following additional condition:
(a) Each of Parent and Sub shall have performed in all material respects
its obligations under this Agreement required to be performed by it at or prior
to the Effective Time and the representations and warranties of Parent and Sub
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time as if made at and as of such time, except as
contemplated by this Agreement, and Company shall have received a certificate of
the Chairman of the Board, the Chief Executive Officer, the President or an
Executive Vice President of Parent as to the satisfaction of this condition.
Section 9.3 Conditions to Obligations of Parent and Sub to Effect The
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
additional condition:
(a) Company shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the earlier
of (i) the time that persons designated by Parent are appointed as directors of
Company pursuant to Section 3.4 hereof and (ii) the Effective Time and the
representations and warranties of Company contained in this Agreement shall be
true and correct in all material respects at and as of the earlier of (i) the
time that persons designated by Parent are appointed as directors of Company
pursuant to Section 3.4 hereof and (ii) the Effective Time as if made at and as
of such time, except as contemplated by this Agreement, and Parent and Sub shall
have received a Certificate of the Chairman of the Board, the Chief Operating
Officer, or an Executive Vice President of Company as to the satisfaction of
this condition.
-32-
<PAGE> 34
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time
before the Effective Time, either before or after the approval of the
stockholders of Company shall have been obtained, in each case as authorized by
the respective Board of Directors of Parent or Company:
(a) By mutual written consent of the parties;
(b) By either Parent or Company if the Merger shall not have been consum
mated on or before November 30, 1997 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 10.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been directly or indirectly the cause of, or resulted
in, the failure of the Effective Time to occur on or before the Termination
Date;
(c) By either Parent or Company if a court of competent jurisdiction or
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties shall use their
commercially reasonable efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(d) By Parent if Company shall be in material breach of its obligations
under this Agreement and such breach has not been cured within ten days' written
notice thereof to Company; or by Company if Parent or Sub shall be in material
breach of their respective obligations under this Agreement and such breach has
not been cured within ten days' notice thereof to Parent.
(e) By Parent if the Board of Directors of Company (i) shall withdraw or
modify (or publicly announce an intention to withdraw or modify) in any adverse
manner its approval or recommendation of this Agreement or the Merger, (ii)
shall approve or recommend any Acquisition Proposal, other than by a party to
this Agreement or an affiliate of Parent or (iii) shall resolve to take any of
the actions specified in clause (i) or (ii) above;
(f) By either Parent or Company if any required approval of the
stockholders of Company shall fail to have been obtained;
-33-
<PAGE> 35
(g) By Company upon five days' prior written notice to Parent, if, as a
result of a written Acquisition Proposal received by Company from a person other
than Parent or any of its affiliates, the Board of Directors of Company
determines in good faith and in accordance with the conditions set forth in
Section 8.2 that the members' fiduciary obligations under applicable law require
that such Acquisition Proposal be accepted; provided, however, that (i) the
Board of Directors of Company shall have determined in good faith, after
considering applicable provisions of state law and after giving effect to all
concessions, if any, which have been offered by Parent pursuant to clause (ii)
below, on the basis of oral or written advice of outside counsel, that such
action is required by the members' fiduciary obligations under applicable law,
and (ii) prior to any such termination, Company shall, and shall cause its
respective financial and legal advisors to, negotiate with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable such
party to proceed with the transactions contemplated hereby; provided, however,
that no termination shall be effective pursuant to Section 10.1(g) under
circumstances in which a Company Termination Fee (as defined below) is payable
by the terminating party under Section 10.2(b) unless concurrently with such
termination such termination fee is paid in accordance with the provisions of
Sections 10.2(b); or
(h) By Parent if the Board of Directors of Company shall have failed to
take any of the actions contemplated by Section 8.3(a) as a result of the
exercise of its rights under Section 8.3(c).
Section 10.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in Section
10.1 hereof, and except as otherwise provided in this Agreement, this Agreement
shall forthwith become void and there shall be no liability on the part of any
of the parties or any of their respective directors, officers, employees or
representatives, except (i) as set forth in this Section 10.2 and in Sections
8.1 and 8.8 and (ii) nothing herein shall relieve any party from liability for
any breach hereof.
(b) If (x) (i) the Offer and the Amended Offer shall together in the
aggregate have remained open for a minimum of at least 20 business days, (ii) a
number of Shares necessary to satisfy the Minimum Condition (as defined in Annex
A) shall not have been validly tendered and not withdrawn and the Amended Offer
is terminated without the purchase of any Shares thereunder, (iii) no Offer
Order shall be in effect (as defined in Annex A), (iv) a competing Acquisition
Proposal which provides for a transaction equal to or more favorable to
Company's shareholders from a financial point of view than the transactions
contemplated by this Agreement shall be made prior to the termination of the
Amended Offer, and (v) Company or any Company Subsidiary shall consummate an
Acquisition Transaction within eighteen months after the termination of this
-34-
<PAGE> 36
Agreement or (y) Parent shall have terminated this Agreement pursuant to Section
10.1(e) or (h) hereof, or (z) Company shall have terminated (or seek to
terminate) this Agreement pursuant to Section 10.1(g) hereof, then at the
request of Parent, Company shall promptly, but in no event later than two days
after the date of such request, pay Parent a fee of $17,415,000 which amount
shall be payable in cash in same day funds plus an amount equal to Parent's
out-of-pocket expenses up to $2,000,000, including fees and expenses paid to
investment bankers, lawyers and financing sources, incurred in connection with
the transactions contemplated by this Agreement.
(c) Parent and Company agree that the agreements contained in Section
10.2(b) above are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If Company fails
to promptly pay any fee due under such Section 10.2(b), Company shall pay the
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
publicly announced reference rate of Bank of America N.T. & S.A. from the date
such fee was required to be paid.
Section 10.3 Amendment. Subject to applicable provisions of the GCL, this
Agreement may be amended by the parties pursuant to a writing adopted by action
taken by all of the parties at any time before the Effective Time.
Section 10.4 Waiver. At any time before the Effective Time, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties, (ii) waive, in whole or in part, any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
to any such extension or waiver shall be valid only as against such party and
only if set forth in an instrument in writing signed by such party. At any time
after the appointment of persons designated by Parent as directors of Company
pursuant to Section 3.4 hereof, a majority of the directors of Company who are
not Parent Insiders may grant such extensions or waivers.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Survival of Representations, Warranties and Agreements. No
representations, warranties or agreements contained herein shall survive beyond
the Effective Time, except that the representations, warranties or agreements
contained in Sections 4.1, 4.2, 4.3, 4.4, 8.5, 8.7, and 8.10 hereof shall
survive beyond the Effective Time. Such representations, warranties and
agreements shall be deemed to have been
-35-
<PAGE> 37
made to, and may be enforced by, (i) the Holders in the case of Sections 4.1,
4.2, and 4.3, (ii) holders of Options in the case of Section 8.5, (iii) the
persons referred to in Sections 8.7 and Schedule 8.10 in the case of Sections
8.7 and 8.10, respectively, in each case after the appointment of persons
designated by Parent as directors of Company pursuant to Section 3.4 hereof or
the Effective Time, whichever is earlier. Prior to such time, such persons shall
not be deemed to be third party beneficiaries of this Agreement.
Section 11.2 Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed duly given or
made as follows: (i) if delivered personally, upon receipt; (ii) if sent by
registered or certified mail (postage prepaid, return receipt requested), upon
receipt; (iii) if sent by reputable overnight air courier (such as Federal
Express or DHL), two business days after mailing; or (iv) if sent by facsimile
transmission, with a copy mailed as provided in clauses (ii) or (iii) above,
when transmitted and receipt is confirmed by telephone. Such notices, claims,
demands and other communications shall be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Company, to:
Transitional Hospitals Corporation
5110 West Sahara Boulevard
Las Vegas, Nevada 89102
Attention: Chief Executive Officer
with a copy to:
Transitional Hospitals Corporation
5110 West Sahara Boulevard
Las Vegas, Nevada 89102
Attention: General Counsel
and:
Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Stephen D. Silbert
-36-
<PAGE> 38
(b) if to Parent or Sub, to:
Vencor, Inc.
3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: Sr. Vice President Planning
and Development
with copies to:
Vencor, Inc.
3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Joseph B. Frumkin
Section 11.3 Descriptive Headings; Dating. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. References herein to "The Date of
this Agreement", "as of the date hereof", "prior to the date hereof" or similar
expressions shall for all purposes shall be deemed to refer to as of June 12,
1997.
Section 11.4 Entire Agreement, Assignment. This Agreement (including the
Exhibits, Annexes, Schedules, Disclosure Schedules and other documents and
instruments referred to herein) and the Confidentiality Letter (i) constitutes
the entire agreement and supersedes all other prior agreements and
understandings, both written and oral among the parties or any of them, with
respect to the subject matter hereof; (ii) except as set forth in Section 11.1
hereof, is not intended to confer upon any other person any rights or remedies
hereunder; and (iii) shall not be assigned by operation of law or otherwise.
Section 11.5 Severability. If any provision of this Agreement or the
application of any such provision shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not
-37-
<PAGE> 39
affect any other provision hereof. In lieu of any such invalid, illegal or
unenforceable provision, the parties hereto intend that there shall be added as
part of this Agreement a provision as similar in terms to such invalid, illegal
or unenforceable provision as may be possible and be valid, legal and
enforceable.
Section 11.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without giving
effect to the provisions thereof relating to conflicts of law. Each party
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Nevada located in Clark County, Nevada, and the
courts of the United States of America located in Clark County, Nevada (the
"Nevada Courts"), for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in the Nevada Courts), waives any
objection to the laying of venue of any such litigation in the Nevada Courts and
agrees not to plead or claim in any Nevada Court that such litigation brought
therein has been brought in an inconvenient forum. In any action between Parent,
Company or the Surviving Corporation and any of the individuals referred to in
clauses (i), (ii) and (iii) of the second sentence of Section 11.1, the
prevailing party in any such action brought pursuant to Section 11.1 thereof
shall be entitled to recover its reasonable fees and disbursements of counsel.
Section 11.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
-38-
<PAGE> 40
IN WITNESS WHEREOF each of the parties hereto has caused this Agreement to
be executed on behalf of its officers thereunto duly authorized, all as of the
date first above written.
Attest: VENCOR, INC.
______________________ By:___________________________________
Name: Name:_________________________________
Title: Secretary Title:________________________________
Attest: LV ACQUISITION CORP.
______________________ By:___________________________________
Name: Name:_________________________________
Title: Secretary Title:________________________________
Attest: TRANSITIONAL HOSPITALS CORPORATION
______________________ By:___________________________________
Name: Name:_________________________________
Title: Secretary Title:________________________________
-39-
<PAGE> 41
ANNEX A
Notwithstanding any other provision of the Amended Offer, until receipt of
all approvals under health care licensing, certificate of need, change of
ownership laws and regulations and similar matters which are material to Parent
or Company or to the consummation of the transactions contemplated hereby,
neither Parent nor Sub, shall be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rules 14e-l(c)
promulgated under the Exchange Act (relating to Parent's obligation to pay for
or return tendered shares promptly after termination or withdrawal of the
Amended Offer), neither Parent nor Sub shall be required to pay for, or may
delay the acceptance for payment of or payment for, any tendered shares, or may
(subject to the Merger Agreement) terminate or amend the Amended Offer as to any
Shares not then accepted for payment if at least two-thirds of the total Shares
outstanding on a fully diluted basis at such time shall not have been properly
and validly tendered pursuant to the Amended Offer and not withdrawn prior to
the expiration of the Amended Offer (the "Minimum Condition"), or, if on or
after June 12, 1997 and at or before the Expiration Date of the Amended Offer
any of the following events shall occur (subject to any required extension of
the Amended Offer as provided in the Merger Agreement):
(a) Company shall have breached or failed to perform in any material
respect any of its obligations, covenants or agreements under the Merger
Agreement which failure is incapable of being cured or has not been cured within
ten days after the giving of notice to Company (provided, that if such notice is
given within ten days of the expiration date, the expiration date will be
extended so as to provide Company with a minimum of ten days from the date of
such written notice to cure such breach or failure) or any representation or
warranty of Company set forth in the Merger Agreement shall have been inaccurate
or incomplete in any material respect when made or thereafter shall become
inaccurate or incomplete in any material respect;
(b) any court or other Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and (i) prohibits consummation of the Amended Offer or (ii)
imposes material restrictions on Parent, Sub or Company in connection with
consummation of the Amended Offer or with respect to their business operations,
either prior to or subsequent to the consummation of the Offer (collectively, an
"Offer Order"); provided that, Parent shall have used best reasonable efforts to
cause any such Offer Order to be lifted.
(c) any person, entity or group shall have entered into a definitive
agreement with Company with respect to a tender offer or exchange offer for some
portion or all of
A-1
<PAGE> 42
the Shares or a merger, consolidation or other business combination with or
involving Company;
(d) the Board of Directors of Company (i) shall withdraw or modify (or
publicly announce an intention to withdraw or modify) in any adverse manner its
approval or recommendation of the Merger Agreement, the Amended Offer or the
Merger (ii) shall approve or recommend any Acquisition Proposal, other than by
Parent, Sub or an affiliate thereof, or (iii) shall resolve to take any of the
actions specified in clause (i) or (ii) above; or
(e) the Merger Agreement shall have been terminated by Company or Parent
or Sub in accordance with its terms or Parent or Sub shall have reached an
agreement or understanding in writing with Company providing for termination or
amendment of the Amended Offer or delay in payment for the Shares;
which, in the reasonable judgment of Parent and Sub, in any such case, and
regardless of the circumstances (including any permitted action or inaction by
Parent or Sub, but excluding any action or inaction by Parent or Sub in breach
of the Merger Agreement) giving rise to any such conditions, makes it
inadvisable to proceed with the Amended Offer and/or with such acceptance for
payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Sub and
may be asserted by Parent or Sub regardless of the circumstances (including any
permitted action or inaction by Parent or Sub but excluding any action or
inaction by Parent or Sub in breach of the Merger Agreement) giving rise to such
condition or may be waived by Parent or Sub, by and specific action to that
effect in whole or in part at any time and from time to time in its sole
discretion.
A-2
<PAGE> 1
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of April 22, 1997 to the Credit Agreement dated as
of March 17, 1997, as amended as of March 31, 1997 (the "CREDIT AGREEMENT")
among Vencor, Inc. ("VENCOR"), the BANKS, SWINGLINE BANK, LC ISSUING BANKS,
MANAGING AGENTS and CO-AGENTS party thereto, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Documentation Agent (the "DOCUMENTATION AGENT") and Collateral
Agent, and NATIONSBANK, N.A. as Administrative Agent.
W I T N E S S E T H :
WHEREAS, Vencor desires (i) to amend the existing Subsidiary Guaranty
Agreements and the form of any future Subsidiary Guaranty Agreements to include
a guarantee of Vencor's obligations under designated interest rate swap
agreements or interest rate cap and floor agreements and (ii) to add a covenant
to the Credit Agreement restricting the aggregate notional principal amount of
the agreements so designated; and
WHEREAS, Vencor desires (i) to guarantee TheraTx' outstanding 8%
Convertible Subordinated Notes due 2002 pursuant to a guarantee that will be
subordinated to all present and future indebtedness of Vencor except trade debt
and (ii) to be permitted to guarantee other pre-existing Debt in connection with
any future acquisition of one or more health care facilities or other
businesses;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Definitions. (a) Section 1.01 of the Credit Agreement is
amended by adding the following new definition in the appropriate alphabetical
order:
"DESIGNATED INTEREST RATE AGREEMENT" means the interest rate
swap agreements listed on Annex B to the Security Agreement and any
other interest rate swap agreement or any interest rate cap and floor
agreement designated by Vencor, in a notice to the Documentation Agent
and the Administrative Agent, as a Designated Interest Rate Agreement
for purposes of the Subsidiary Guaranty Agreements.
<PAGE> 2
(b) The definition of "SUBSIDIARY GUARANTY" in Section 1.01 of the
Credit Agreement is amended to read as follows:
"SUBSIDIARY GUARANTY" means a guaranty by a Subsidiary
Guarantor that Vencor will perform its obligations under this Agreement
and any Designated Interest Rate Agreement, such guaranty to be set
forth in a Subsidiary Guaranty Agreement.
SECTION 3. Form of Subsidiary Guaranty Agreement. (a) The form of
Subsidiary Guaranty Agreement set forth in Exhibit O to the Credit Agreement is
amended by adding the following new definition to Section 1 thereof in the
appropriate alphabetical order:
"DESIGNATED INTEREST RATE AGREEMENT" means the interest rate
swap agreements listed on Annex B to the Security Agreement and any
other interest rate swap agreement or any interest rate cap and floor
agreement designated by Vencor, in a notice to the Documentation Agent
and the Administrative Agent, as a Designated Interest Rate Agreement
for purposes of this Guaranty.
(b) Section 3 of said form of Subsidiary Guaranty Agreement is amended
by adding, immediately after the words "guarantees the full and punctual payment
of all present and future indebtedness and other obligations of Vencor evidenced
by or arising under any Financing Document", the words "or any Designated
Interest Rate Agreement".
SECTION 4. Amendment of Existing Subsidiary Guaranty Agreements. The
parties hereto agree that each of the Subsidiary Guaranty Agreements outstanding
on the date hereof shall be amended to be substantially in the form of Exhibit O
to the Credit Agreement as amended by Section 3 above or shall be replaced by a
new Subsidiary Guaranty Agreement in such form.
SECTION 5. Limitation on Designated Interest Rate Agreements. Article 5
of the Credit Agreement is amended by adding the following new Section 5.25 at
the end thereof:
SECTION 5.25. Limitation of Designated Interest Rate
Agreements. Vencor will not designate any interest rate swap agreement
or any interest rate cap and floor agreement as a Secured Obligation
for purposes of the Security Agreement or as a Designated Interest Rate
Agreement for purposes of the Subsidiary Guaranty Agreements if,
immediately after giving effect to such designation, the aggregate
notional principal amount of all such agreements then in effect which
are Secured Obligations and/or Designated Interest Rate Agreements
would exceed $1,000,000,000.
SECTION 6. Guarantees by Vencor of Debt of Acquired Businesses. Clause
(g) of Section 5.07 of the Credit Agreement is amended to read as follows:
(g) Debt assumed by Vencor after the Initial Closing Date or
Guaranteed by Vencor after the Initial Closing Date (including any such
Guarantee of TheraTx' 8%
2
<PAGE> 3
Convertible Subordinated Notes due 2002) in connection with the
acquisition of one or more health care facilities or other businesses;
provided in each case that (i) such Debt was outstanding before such
facility or other business was acquired and was not incurred in
contemplation of such acquisition and (ii) any such Guarantee by Vencor
of subordinated debt shall be subordinated to Vencor's obligations
under this Agreement and any Designated Interest Rate Agreements by
subordination provisions reasonably satisfactory to the Documentation
Agent;
SECTION 7. Defaults. Section 6.01(b) of the Credit Agreement is amended
to read as follows:
(b) Vencor shall fail to observe or perform any
covenant contained in Section 5.01(e), Section 5.01(f),
Sections 5.07 through 5.23, inclusive, or Section 5.25; or
SECTION 8. Representations of Vencor. Vencor represents and warrants
that (i) each of the representations and warranties made by Vencor or any of its
Subsidiaries in or pursuant to any Financing Document to which it is a party are
true on and as of the date hereof and (ii) no Default has occurred and is
continuing on the date hereof.
SECTION 9. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 10. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 11. Effectiveness. This Amendment shall become effective as of
the date hereof when the Documentation Agent shall have received from each of
Vencor and the Required Banks a counterpart hereof signed by such party or
facsimile or other written confirmation (in form satisfactory to the
Documentation Agent) that such party has signed a counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
VENCOR, INC.
By:__________________________________
Name:
Title:
3
<PAGE> 4
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:_________________________________
Name:
Title:
NATIONSBANK, N.A.
By:_________________________________
Name:
Title:
THE CHASE MANHATTAN BANK
By:_________________________________
Name:
Title:
PNC BANK, KENTUCKY, INC
By:_________________________________
Name:
Title:
BANK OF AMERICA NT & SA
By:_________________________________
Name:
Title:
4
<PAGE> 5
THE BANK OF NEW YORK
By:_________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By:_________________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By:_________________________________
Name:
Title:
5
<PAGE> 6
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLAND BRANCHES
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
FLEET NATIONAL BANK
By:_________________________________
Name:
Title:
MELLON BANK, N.A.
By:_________________________________
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:_________________________________
Name:
Title:
WACHOVIA BANK OF GEORGIA, N.A.
By:_________________________________
Name:
Title:
6
<PAGE> 7
ABN AMRO BANK N.V.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BANK OF MONTREAL
By:_________________________________
Name:
Title:
BANK ONE, KENTUCKY, NA
By:_________________________________
Name:
Title:
COMERICA BANK
By:_________________________________
Name:
Title:
CORESTATES BANK, N.A.
By:_________________________________
Name:
Title:
7
<PAGE> 8
THE FUJI BANK, LIMITED
By:_________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By:_________________________________
Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By:_________________________________
Name:
Title:
NBD BANK, N.A.
By:_________________________________
Name:
Title:
LTCB TRUST COMPANY
By:_________________________________
Name:
Title:
8
<PAGE> 9
UNION BANK OF CALIFORNIA, N.A.
By:_________________________________
Name:
Title:
U.S. BANK OF WASHINGTON, N.A.
By:_________________________________
Name:
Title:
AMSOUTH BANK OF ALABAMA
By:_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:_________________________________
Name:
Title:
KREDIETBANK N.V.
By:_________________________________
Name:
Title:
9
<PAGE> 10
SOCIETE GENERALE, CHICAGO
BRANCH
By:_________________________________
Name:
Title:
FIRST AMERICAN NATIONAL BANK
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BANK OF LOUISVILLE
By:_________________________________
Name:
Title:
10
<PAGE> 1
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT AND RESTATEMENT dated as of May 30, 1997 amending and
restating the Credit Agreement dated as of March 17, 1997, as amended as of
March 31, 1997 and April 22, 1997 (the "CREDIT AGREEMENT") among VENCOR, INC.
("VENCOR"), the BANKS, SWINGLINE BANK, LC ISSUING BANKS, MANAGING AGENTS and
CO-AGENTS party thereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent (the "DOCUMENTATION AGENT") and Collateral Agent, and
NATIONSBANK, N.A. as Administrative Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement to (i)
increase the aggregate amount of the Commitments to $2,000,000,000, (ii) permit
Vencor to finance the potential acquisition of Transitional Hospitals
Corporation, (iii) revise the Pricing Schedule, (iv) modify certain financial
covenants and (v) add the banks listed under the heading "NEW BANKS" on the
signature pages hereof (the "NEW BANKS") as parties to the Credit Agreement;
WHEREAS, the parties hereto desire to cause the Collateral Agent to
release all shares of common stock of Atria held by it under the Security
Agreement and to deliver the stock certificates evidencing such shares to Vencor
Assisted Living Holdings, Inc., a Delaware corporation wholly-owned by Vencor,
to be held by it until such shares are distributed to Vencor's shareholders,
sold or otherwise disposed of as permitted by Section 16(D) of the Security
Agreement; and
WHEREAS, the parties hereto desire to restate the Credit Agreement in
its entirety to read as the Credit Agreement currently reads with the amendments
specified herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment and Restatement
becomes effective, refer to the Credit Agreement as amended hereby. Each
reference in the Financing Documents (and in any agreement relating to interest
rate swaps between Vencor and a Bank party hereto) referring to the Credit
Agreement as "amended from time to time" shall be interpreted to include the
Credit Agreement as amended and restated from time to time.
<PAGE> 2
SECTION 2. Definitions. Section 1.01 of the Credit Agreement is amended
by adding the following new definitions in the appropriate alphabetical order:
"ATRIA SHARES" means shares of common stock of Atria.
"BASE RATE MARGIN" has the meaning set forth in the Pricing Schedule.
"CONSOLIDATED SENIOR DEBT FOR BORROWED MONEY" means all Consolidated
Debt for Borrowed Money except Subordinated Debt and Subordinated Subsidiary
Guaranties.
"OFFER TO PURCHASE" means the Offer dated May 7, 1997 by THC Merger Sub
to purchase for cash all of the outstanding shares of common stock (together
with the associated rights to purchase Series B Junior Participating Preferred
Stock) of THC.
"SUBORDINATED DEBT" means Debt of Vencor that (i) complies with the
provisions of Section 5.07(e) and (ii) is by its terms, or by the terms of the
instrument creating or evidencing it, subordinated to Vencor's obligations under
the Financing Documents; provided that the subordination provisions and other
substantive provisions applicable to such Debt (and any subsequent changes
therein) shall have been approved by the Agents.
"SUBORDINATED SUBSIDIARY GUARANTY" means a guaranty by a Subsidiary
Guarantor of Subordinated Debt of Vencor; provided that such guaranty is
subordinated to the obligations of such Subsidiary Guarantor under its
Subsidiary Guaranty by subordination provisions that shall have been approved by
the Agents.
"THC" means Transitional Hospitals Corporation, a Nevada corporation,
and its successors.
"THC MERGER" means a proposed merger or other business combination
between THC Merger Sub and THC described in the Offer to Purchase.
"THC MERGER SUB" means LV Acquisition Corp., a Delaware corporation,
and its successors.
"THC SHARES" means shares of common stock of THC.
SECTION 3. Increase in Commitments. The Commitment Schedule attached to
the Credit Agreement is deleted and replaced by the Commitment Schedule attached
to this Amendment and Restatement.
SECTION 4. Amendment of Pricing Schedule. The Pricing Schedule attached
to the Credit Agreement (the "EXISTING PRICING SCHEDULE") is deleted and
replaced by the Pricing Schedule attached to this Amendment and Restatement (the
"NEW PRICING SCHEDULE"). The New
2
<PAGE> 3
Pricing Schedule shall apply to interest and fees accruing under the Credit
Agreement on and after the Amendment Effective Date (as such term is defined in
Section 22 below). The Existing Pricing Schedule shall continue to apply to
interest and fees accruing under the Credit Agreement prior to the Amendment
Effective Date.
SECTION 5. Interest Rate for Base Rate Loans. (a) The first sentence of
Section 2.06(a) of the Credit Agreement is amended by deleting the words "at a
rate per annum equal to the Base Rate for such day" at the end of such sentence
and substituting the words "at a rate per annum equal to the sum of the Base
Rate Margin (if any) for such day plus the Base Rate for such day".
(b) The words "the Base Rate for such day" are deleted and replaced by
the words "the rate otherwise applicable to Base Rate Loans for such day" in the
last sentence of Section 2.06(a);
(c) The words "the Base Rate for such day" are deleted and replaced by
the words "the rate applicable to Base Rate Loans for such day" in the first
sentence of Section 2.06(b), the last sentence of Section 2.06(b), the last
sentence of Section 2.06(d), the last sentence of Section 2.06(e), the last
sentence of Section 2.08(j)(ii), the first sentence of Section 2.08(k)(ii), the
first sentence of Section 2.09(e), the last sentence of Section 2.09(e) and the
last sentence of Section 8.01.
(d) Section 2.12(a) of the Credit Agreement is amended by deleting the
words "bearing interest at the Base Rate" with the words "bearing interest at
the rate applicable to Base Rate Loans".
SECTION 6. Commitment Reduction. Section 2.13 of the Credit Agreement
is amended by changing "$1,200,000,000" to "$1,500,000,000".
SECTION 7. Use of Proceeds. Section 5.06(f) of the Credit Agreement is
amended to read as follows:
(f) None of the proceeds of the Loans or the Letters of Credit
will be used in violation of any applicable law or regulation and,
without limiting the generality of the foregoing, no use of any such
proceeds or Letters of Credit for general corporate purposes will
include any use thereof, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any
Margin Stock except the TheraTx Shares and the THC Shares.
SECTION 8. Limitation on Debt of Subsidiaries. Section 5.08 of the
Credit Agreement is amended by (i) deleting the word "and" at the end of clause
(k), (ii) changing the period at the end of clause (l) to "; and" and (iii)
adding the following new clause (m) immediately after clause (l):
(m) Subordinated Subsidiary Guaranties of Subordinated Debt
issued by Vencor.
3
<PAGE> 4
SECTION 9. Negative Pledge. Section 5.09 of the Credit Agreement is
amended by changing the period at the end of said Section to a semi-colon and
adding the following proviso on the next line (separated from clause (l) by a
space):
provided that this Section 5.09 shall not apply to any THC Shares or
Atria Shares that constitute Margin Stock.
SECTION 10. Asset Sales. Section 5.10 of the Credit Agreement is
amended by adding the following new subsection (d) at the end of said Section:
(d) Notwithstanding the foregoing, this Section 5.10 shall not
in any way restrict any sale or other disposition of any THC Shares or
Atria Shares that constitute Margin Stock.
SECTION 11. Investments in Minority-Owned Affiliates. (a) Section 5.12
of the Credit Agreement is amended by (x) deleting the word "and" at the end of
clause (iii), (y) changing the period at the end of clause (iv) to "; and" and
(z) adding the following new clause (v) immediately after clause (iv):
(v) Investments in Behavioral Healthcare Corporation, a
Delaware corporation, held by THC when THC becomes a Subsidiary of
Vencor.
(b) Clause (iv) of Section 5.12 of the Credit Agreement is further
amended by changing the words "clause (i), (ii) or (iii) of this Section" to
"clause (i), (ii), (iii) or (v) of this Section".
SECTION 12. Leverage Ratio. Section 5.17 of the Credit Agreement is
amended to read as follows:
SECTION 5.17. Leverage Ratio. At the end of each Fiscal
Quarter (a "QUARTERLY MEASUREMENT DATE"), the ratio of (x) Consolidated
Debt for Borrowed Money to (y) Consolidated EBITDA for the four
consecutive Fiscal Quarters then ended will not exceed the ratio set
forth below opposite the period in which such Quarterly Measurement
Date falls:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
June 1, 1997 through September 29, 1998 4.75 to 1
September 30, 1998 through December 30, 1998 4.60 to 1
December 31, 1998 through December 30, 1999 4.50 to 1
December 31, 1999 and thereafter 4.00 to 1
</TABLE>
For purposes of calculating the foregoing ratio at any Quarterly
Measurement Date, if any corporation or other entity shall have been
acquired by any Vencor Company during the relevant period of four
consecutive Fiscal Quarters, Consolidated EBITDA for such
4
<PAGE> 5
period shall be calculated as if such corporation or other entity had
been acquired at the beginning of such period, to the extent that the
relevant financial information with respect to it for the portion of
such period prior to such acquisition can be determined with reasonable
accuracy.
SECTION 13. Fixed Charge Coverage Ratio. Section 5.18 of the Credit
Agreement is amended to read as follows:
SECTION 5.18. Fixed Charge Coverage Ratio. At the end of each
Fiscal Quarter (a "QUARTERLY MEASUREMENT DATE"), the ratio of (i)
Consolidated EBITDAR for the four consecutive Fiscal Quarters then
ended to (ii) the sum of Consolidated Interest Expense and Consolidated
Rental Expense for the same four Fiscal Quarters will not be less than
the ratio set forth below opposite the period in which such Quarterly
Measurement Date falls:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
June 1, 1997 through December 30, 1998 2.25 to 1
December 31, 1998 and thereafter 2.50 to 1
</TABLE>
SECTION 14. Guaranty by Future Wholly-Owned Material Subsidiaries.
Section 5.21 of the Credit Agreement is amended by adding the following proviso
at the end of said Section:
; provided that this Section 5.21 shall not (x) apply to THC Merger Sub
prior to the consummation of the THC Merger or (y) apply to Vencor
Assisted Living Holdings, Inc. so long as it holds any Atria Shares.
SECTION 15. Pledge of THC Shares. Section 5.22 of the Credit Agreement
is amended by adding the following proviso at the end of said Section:
provided that this Section 5.22 shall not apply to THC and its
Subsidiaries or to any THC Shares until five Domestic Business Days
after THC has become a Wholly-Owned Subsidiary and the THC Shares have
been delisted from the New York Stock Exchange.
SECTION 16. Amendment of Article 5. The following new Sections are
added at the end of Article 5 of the Credit Agreement:
SECTION 5.26. Senior Debt Leverage Ratio. At the end of each
Fiscal Quarter (a "QUARTERLY MEASUREMENT DATE"), the ratio of (x)
Consolidated Senior Debt for Borrowed Money to (y) Consolidated EBITDA
for the four consecutive Fiscal Quarters then ended will not exceed the
ratio set forth below opposite the period in which such Quarterly
Measurement Date falls:
5
<PAGE> 6
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
June 1, 1997 through December 30, 1997 4.50 to 1
December 31, 1997 through March 30, 1998 4.00 to 1
March 31, 1998 through June 29, 1998 3.85 to 1
June 30, 1998 through September 29, 1998 3.80 to 1
September 30, 1998 through December 30, 1998 3.75 to 1
December 31, 1998 through December 30, 1999 3.50 to 1
December 31, 1999 and thereafter 3.00 to 1
</TABLE>
For purposes of calculating the foregoing ratio at any Quarterly
Measurement Date, if any corporation or other entity shall have been
acquired by any Vencor Company during the relevant period of four
consecutive Fiscal Quarters, Consolidated EBITDA for such period shall
be calculated as if such corporation or other entity had been acquired
at the beginning of such period, to the extent that the relevant
financial information with respect to it for the portion of such period
prior to such acquisition can be determined with reasonable accuracy.
SECTION 5.27. Hedging Facilities. Vencor will enter into and
maintain in full force and effect interest rate hedging arrangements
reasonably satisfactory to the Agents to the extent, if any, required
so that at least 30% of Consolidated Debt for Borrowed Money (excluding
Guarantees referred to in clause (z) of the definition of "Consolidated
Debt for Borrowed Money") will be either fixed rate debt or floating
rate debt hedged to a fixed rate by such hedging arrangements; provided
that Vencor shall not be required to comply with this Section at any
time when its senior unsecured long-term debt securities without any
third party credit enhancement are Rated (i) at least BB, if Rated by
S&P but not by Moody's, (ii) at least Ba2, if Rated by Moody's but not
by S&P, or (iii) at least BB by S&P and at least Ba2 by Moody's, if
Rated by both. As used in this Section the term "RATED" means publicly
rated (or, if not publicly rated, having an Implied Rating or Private
Letter Rating).
SECTION 5.28. Restrictions on THC Merger Sub and Vencor
Assisted Living Holdings, Inc. (a) Prior to the consummation of the THC
Merger, Vencor will not permit THC Merger Sub to:
(i) incur any debt other than (x) its obligations
under the Offer to Purchase, (y) its obligations under any
merger agreement entered into by it and THC and (z) Debt owing
by it to Vencor;
(ii) engage in any business other than acquiring and
holding THC Shares and engaging in the related activities
contemplated by the Offer to Purchase; or
6
<PAGE> 7
(iii) sell or otherwise dispose of any THC Shares
owned by THC Merger Sub unless (x) such shares are sold for
cash, (y) fair value is received for such shares and (z) the
proceeds of such sale are either held as cash or invested in
certificates of deposit, U.S. government securities,
commercial paper or other money market instruments that are
exempted securities under the federal securities laws.
(b) So long as Vencor owns, directly or indirectly, any Atria
Shares, Vencor will hold such Atria Shares through Vencor Assisted
Living Holdings, Inc. and will not permit Vencor Assisted Living
Holdings, Inc. to incur any debt or to engage in any business other
than holding Atria Shares and activities related thereto. Nothing in
this subsection (b) shall in any way restrict Vencor's right or ability
to cause such Atria Shares to be sold or otherwise disposed of.
SECTION 17. Representations of Vencor. Vencor represents and warrants
that (i) the representations and warranties of Vencor set forth in Article 4 of
the Credit Agreement will be true on and as of the Amendment Effective Date and
(ii) no Default will have occurred and be continuing on such date.
SECTION 18. Repayment of Outstanding Loans. On the Amendment Effective
Date Vencor shall (i) repay all Committed Loans outstanding under the Credit
Agreement immediately prior thereto and (ii) pay all interest on such Committed
Loans and all facility fees and letter of credit fees accrued under the Credit
Agreement to but excluding the Amendment Effective Date. The parties hereto
waive any requirement in Section 2.12 of the Credit Agreement that Vencor give
prior notice of such payments. Vencor shall compensate the Banks for any funding
losses resulting from such payments as and when provided in Section 2.15 of the
Credit Agreement.
SECTION 19. Release of Atria Shares. Pursuant to Section 16(B) of the
Security Agreement, Vencor hereby requests the Collateral Agent to release all
Atria Shares held by it under the Security Agreement on the Amendment Effective
Date and to deliver all stock certificates evidencing such Atria Shares and any
related stock powers to Vencor Assisted Living Holdings, Inc. Each of the
undersigned Banks and New Banks consents to such release.
SECTION 20. Governing Law. This Amendment and Restatement shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 21. Counterparts. This Amendment and Restatement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 22. Effectiveness. This Amendment and Restatement shall become
effective, and the Credit Agreement will be amended and restated in its entirety
to read as the Credit
7
<PAGE> 8
Agreement currently reads with the amendments specified herein, on the date when
the following conditions are met (the "AMENDMENT EFFECTIVE DATE"):
(a) the Documentation Agent shall have received from each of Vencor,
the Banks and the New Banks a counterpart hereof signed by such party
or facsimile or other written confirmation (in form satisfactory to the
Documentation Agent) that such party has signed a counterpart hereof;
(b) the Documentation Agent shall have received for the account of
each New Bank a duly executed Note dated on or before the Amendment
Effective Date and complying with the provisions of Section 2.05 of the
Credit Agreement;
(c) the Documentation Agent shall have received from each Subsidiary
Guarantor a writing confirming that it consents to the increase of the
aggregate amount of the Commitments to $2,000,000,000 and agrees with
the interpretation set forth in the last sentence of Section 1 hereof;
(d) the Documentation Agent shall have received an opinion of Jill L.
Force, General Counsel of Vencor, dated the Amendment Effective Date
and substantially in the form of Exhibit A hereto;
(e) the Documentation Agent shall have received an opinion of Ogden,
Newell & Welch, special counsel for Vencor, dated the Amendment
Effective Date and substantially in the form of Exhibit B hereto;
(f) the Collateral Agent shall have released all Atria Shares held by
it under the Security Agreement and Vencor shall have contributed such
Atria Shares to Vencor Assisted Living Holdings, Inc.;
(g) the Documentation Agent shall have received evidence satisfactory
to it that Vencor will make the payments required by Section 18 hereof
on the Amendment Effective Date with the proceeds of Loans to be
borrowed immediately after this Amendment and Restatement becomes
effective under the Credit Agreement as amended hereby and/or with
other funds available for such purpose;
(h) the Administrative Agent shall have received amendment and/or
participation fees for the accounts of the Banks calculated as provided
in letters dated May 13, 1997 from the Co-Arrangers to the "Vencor,
Inc. Lenders" and "Vencor, Inc. Prospective Lenders";
(i) THC Merger Sub shall have accepted for payment more than 662/3% of
the outstanding THC Shares on a fully diluted basis or, if the Offer to
Purchase is terminated,
8
<PAGE> 9
THC shall have become a Wholly-Owned Subsidiary of Vencor by merging
with THC Merger Sub or otherwise; and
(j) Vencor shall, by notice to the Agents, designate THC Merger Sub
and Vencor Assisted Living Holdings, Inc. as Material Subsidiaries and
shall have signed and delivered to the Collateral Agent an
appropriately completed Security Agreement Supplement granting a
security interest in the shares of capital stock of THC Merger Sub and
Vencor Assisted Living Holdings, Inc. held by Vencor;
provided that this Amendment and Restatement shall not become effective unless
all of the foregoing conditions are met on or before August 29, 1997.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be duly executed as of the date first above
written.
VENCOR, INC.
By:
-----------------------------
Name:
Title:
EXISTING BANKS:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
-----------------------------
Name:
Title:
NATIONSBANK, N.A.
By:
-----------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
-----------------------------
Name:
Title:
<PAGE> 11
PNC BANK, KENTUCKY, INC
By:
----------------------------------
Name:
Title:
BANK OF AMERICA NT & SA
By:
----------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
----------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
----------------------------------
Name:
Title:
<PAGE> 12
CREDIT SUISSE FIRST BOSTON
By:
----------------------------------
Name:
Title:
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLAND BRANCHES
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
FLEET NATIONAL BANK
By:
----------------------------------
Name:
Title:
MELLON BANK, N.A.
By:
----------------------------------
Name:
Title:
<PAGE> 13
TORONTO DOMINION (TEXAS), INC.
By:
-----------------------------------
Name:
Title:
WACHOVIA BANK OF GEORGIA, N.A.
By:
-----------------------------------
Name:
Title:
ABN AMRO BANK N.V.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
BANK OF MONTREAL
By:
-----------------------------------
Name:
Title:
BANK ONE, KENTUCKY, NA
By:
-----------------------------------
Name:
Title:
<PAGE> 14
COMERICA BANK
By:
------------------------------
Name:
Title:
CORESTATES BANK, N.A.
By:
------------------------------
Name:
Title:
THE FUJI BANK, LIMITED
By:
------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By:
------------------------------
Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By:
------------------------------
Name:
Title:
<PAGE> 15
NBD BANK, N.A.
By:
-------------------------------
Name:
Title:
LTCB TRUST COMPANY
By:
-------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
-------------------------------
Name:
Title:
U.S. BANK OF WASHINGTON, N.A.
By:
-------------------------------
Name:
Title:
AMSOUTH BANK OF ALABAMA
By:
-------------------------------
Name:
Title:
<PAGE> 16
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:
--------------------------------
Name:
Title:
KREDIETBANK N.V.
By:
--------------------------------
Name:
Title:
SOCIETE GENERALE, CHICAGO
BRANCH
By:
--------------------------------
Name:
Title:
FIRST AMERICAN NATIONAL BANK
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE> 17
BANK OF LOUISVILLE
By:
---------------------------------------
Name:
Title:
<PAGE> 18
NEW BANKS:
BANQUE PARIBAS
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
THE SAKURA BANK LIMITED
NEW YORK BRANCH
By:
------------------------------
Name:
Title:
THE MITSUBSIHI TRUST AND BANKING
CORPORATION
By:
------------------------------
Name:
Title:
18
<PAGE> 19
CIBC, INC.
By:
------------------------------------
Name:
Title:
FIFTH THIRD BANK
By:
------------------------------------
Name:
Title:
THE DAI-ICHI KANGYO BANK, LTD.
CHICAGO BRANCH
By:
------------------------------------
Name:
Title:
19
<PAGE> 20
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
BANK COMMITMENT
---- ----------
<S> <C>
Morgan Guaranty Trust Company of New York $112,000,000
NationsBank, N.A. $112,000,000
Bank of America NT & SA $91,000,000
The Bank of New York $91,000,000
The Chase Manhattan Bank $91,000,000
PNC Bank, Kentucky, Inc. $91,000,000
Toronto Dominion (Texas), Inc. $91,000,000
The Bank of Nova Scotia $72,000,000
Credit Lyonnais New York Branch $72,000,000
Credit Suisse First Boston $72,000,000
Deutsche Bank AG New York and/or Cayman Island Branches $72,000,000
Fleet National Bank $72,000,000
The Industrial Bank of Japan Trust Company $72,000,000
Wachovia Bank of Georgia, N.A. $72,000,000
ABN AMRO Bank N.V. $50,000,000
Bank of Montreal $50,000,000
Bank One, Kentucky, NA $50,000,000
Comerica Bank $50,000,000
CoreStates Bank, N.A. $50,000,000
The Fuji Bank, Limited $50,000,000
LTCB Trust Company $50,000,000
National City Bank of Kentucky $50,000,000
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
BANK COMMITMENT
---- ----------
<S> <C>
NBD Bank, N.A. $50,000,000
Union Bank of California, N.A. $40,000,000
Amsouth Bank of Alabama $35,000,000
Bank Paribas $35,000,000
First Union National Bank of North Carolina $35,000,000
U.S. Bank of Washington, N.A. $30,000,000
CIBC Inc. $25,000,000
Kredietbank N.V. $25,000,000
The Mitsubishi Trust and Banking Corporation $25,000,000
The Sakura Bank Limited New York Branch $25,000,000
Societe Generale, Chicago Branch $25,000,000
First American National Bank $20,000,000
Bank of Louisville $17,000,000
The Dai-Ichi Kangyo Bank, Ltd. Chicago Branch $15,000,000
Fifth Third Bank $15,000,000
-----------
TOTAL $2,000,000,000
==============
</TABLE>
21
<PAGE> 22
PRICING SCHEDULE
Each of "Euro-Dollar Margin", "CD Margin", "Base Rate Margin",
"Facility Fee Rate" and "LC Fee Rate" means:
(i) for any day before August 15, 1997, the rate set forth below in the
row opposite such term and in the column headed "Level VI"; and
(ii) for any day on or after August 15, 1997, the rate set forth below
in the row opposite such term and in the column corresponding to the "Pricing
Level" that applies on such day:
<TABLE>
<CAPTION>
==========================================================================================================================
Pricing Level Level I Level II Level III Level IV Level V Level VI Level VII
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin 0.3750% 0.4250% 0.5000% 0.6250% 0.6875% 0.8750% 1.1250%
- --------------------------------------------------------------------------------------------------------------------------
CD Margin 0.5000% 0.5500% 0.6250% 0.7500% 0.8125% 1.0000% 1.2500%
- --------------------------------------------------------------------------------------------------------------------------
Base Rate
Margin 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.2500% 0.5000%
- --------------------------------------------------------------------------------------------------------------------------
Facility
Fee Rate 0.1750% 0.2000% 0.2500% 0.2500% 0.3125% 0.3750% 0.3750%
- --------------------------------------------------------------------------------------------------------------------------
LC Fee Rate 0.3750% 0.4250% 0.5000% 0.6250% 0.6875% 0.8750% 1.1250%
==========================================================================================================================
</TABLE>
Terms defined in the Agreement and not otherwise defined herein have,
as used herein, the respective meanings provided for therein. For purposes of
this Pricing Schedule, the following additional terms, as used herein, have the
following respective meanings:
"Level I Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, the Leverage Ratio was less than or equal to 2.50 to
1.
"Level II Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, the Leverage Ratio was greater than 2.50 to 1.00 and
not greater than 3.00 to 1.
"Level III Pricing" applies during any Rate Period if, at the end of
the Preceding Fiscal Quarter, the Leverage Ratio was greater than 3.00 to 1.00
and not greater than 3.25 to 1.00.
"Level IV Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, the Leverage Ratio was greater than 3.25 to 1.00 and
not greater than 3.50 to 1.00.
"Level V Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, the Leverage Ratio was greater than 3.50 to 1.00 and
not greater than 4.00 to 1.00.
IV-1
<PAGE> 23
"Level VI Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, the Leverage Ratio was greater than 4.00 to 1.00 and
not greater than 4.50 to 1.00.
"Level VII Pricing" applies during any Rate Period if, at the end of
the Preceding Fiscal Quarter, the Leverage Ratio was greater than 4.50 to 1.00.
"Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of
(x) Consolidated Debt for Borrowed Money at the end of such Fiscal Quarter to
(y) Consolidated EBITDA for the period of four consecutive Fiscal Quarters then
ended.
"Preceding Fiscal Quarter" means, with respect to any Rate Period, the
most recent Fiscal Quarter ended before such Rate Period begins.
"Pricing Level" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing, Level V Pricing,
Level VI Pricing or Level VII Pricing applies on any day. Pricing Levels are
referred to in ascending order (e.g., Level III Pricing is a higher Pricing
Level than Level II Pricing).
"Rate Period" means any period from and including the 46th day of a
Fiscal Quarter to and including the 45th day of the immediately succeeding
Fiscal Quarter; provided that the first Rate Period shall begin on and include
August 15, 1997.
IV-2
<PAGE> 24
IV-3
