<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934
THERATX, INCORPORATED
(NAME OF SUBJECT COMPANY)
VENCOR, INC.
PEACH ACQUISITION CORP.
(BIDDERS)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
883384109
(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) 596-7300
(NAME, ADDRESS, AND TELEPHONE NUMBERS OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
JOSEPH B. FRUMKIN, ESQ. SULLIVAN & CROMWELL 125 BROAD STREET NEW YORK, NEW
YORK 10004 (212) 558-4000
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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<S> <C>
$406,581,894.90 $81,316.38
</TABLE>
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* For the purpose of calculating the filing fee only. This calculation assumes
the purchase of (i) 20,823,685 shares of Common Stock, par value $.001 per
share (the "Common Stock"), issued and outstanding as of February 12, 1997,
according to TheraTx, Incorporated (the "Company"), (ii) 2,874,109 shares of
Common Stock subject to issuance which provide the holder thereof with the
option to purchase shares of Common Stock at a price of $17.10 or less per
share of Common Stock pursuant to options granted under the Company's
Restated 1994 Stock Option/Stock Issuance Plan, the Company's 1996 Stock
Option/Stock Issuance Plan, the 1989 Amended and Restated Stock Option Plan
of Helian Health Group, Inc. and PersonaCare, Inc.'s 1992 Stock Option Plan
as of February 12, 1997, according to the Company and (iii) 78,925 shares of
Common Stock subject to issuance pursuant to warrants issued by the Company
as of February 12, 1997, according to the Company.
** 1/50 of 1% of the transaction value.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: Not applicable
Filing party: Not applicable
Form or registration number: Not applicable
Date filed: Not applicable
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<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is TheraTx, Incorporated, a Delaware
corporation (the "Company"), and the address of its principal executive
offices is 1105 Sanctuary Parkway, Alpharetta, Georgia 30201.
(b) The class of securities to which this Tender Offer Statement on Schedule
14D-1 (this "Statement") relates is the Common Stock, par value $.001 per
share (the "Shares"), of the Company. The information set forth in the
Introductory Section and Section 1 of the Offer to Purchase ("Offer to
Purchase") annexed hereto as Exhibit (a)(1) is incorporated herein by
reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) The information set forth in Section 9 of the Offer to
Purchase is incorporated herein by reference. The name, business address,
present principal occupation or employment, the material occupations,
positions, offices or employments for the past five years and citizenship of
each director and executive officer of Vencor, Inc., a Delaware corporation
("Offeror"), and of Peach Acquisition Corp., a Delaware corporation (the
"Purchaser"), and a wholly-owned subsidiary of Offeror, and the name,
principal business and address of any corporation or other organization in
which such occupations, positions, offices and employments are or were carried
on are set forth in Schedule I to the Offer to Purchase and incorporated
herein by reference.
(e)-(f) During the last five years, none of the Purchaser, Offeror, and, to
the best of Offeror's knowledge, none of the directors or executive officers
of the Purchaser or Offeror has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introductory Section and Sections
10 and 11 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 of the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introductory Section and Sections 7
and 11 of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introductory Section and Sections 9, 10 and
11 of the Offer to Purchase is incorporated herein by reference.
2
<PAGE>
ITEM 8. PERSON RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in Section 15 of the Offer to Purchase is
incorporated herein by reference.
(e) Not applicable.
(f) Not applicable.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <C> <S>
(a) (1) Offer to Purchase, dated February 14, 1997.
(a) (2) Letter of Transmittal with respect to the Shares.
(a) (3) Form of letter to brokers, dealers, commercial banks, trust
companies and nominees.
(a) (4) Form of letter to be used by brokers, dealers, commercial banks,
trust companies and nominees to their clients.
(a) (5) Press Release, dated February 10, 1997.
(a) (6) Form of newspaper advertisement, dated February 14, 1997.
(a) (7) Notice of Guaranteed Delivery.
(a) (8) IRS Guidelines to Substitute Form W-9.
(b) (1) Financing Commitment.
(c) (1) Merger Agreement, dated as of February 9, 1997, among the Company,
Offeror and the Purchaser.
</TABLE>
3
<PAGE>
SIGNATURE
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this statement is true, complete and correct.
Dated: February 14, 1997
Vencor, Inc.
/s/ W. Bruce Lunsford
By:__________________________________
Name: W. Bruce Lunsford
Title: Chairman of the Board,
President and Chief Executive
Officer
Peach Acquisition Corp.
/s/ W. Bruce Lunsford
By:__________________________________
Name: W. Bruce Lunsford
Title: Chairman of the Board,
President and Chief Executive
Officer
4
<PAGE>
EXHIBIT (a)(1)
Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the Associated Rights to Purchase
Series A Junior Participating Preferred Stock)
of
THERATX, INCORPORATED
at
$17.10 NET PER SHARE
by
PEACH ACQUISITION CORP.
A Wholly-Owned Subsidiary of
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, MARCH 14, 1997 UNLESS THE OFFER IS EXTENDED.
-----------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) A NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $.001 OF THERATX, INCORPORATED (INCLUDING THE
ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK)
REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK
ON A FULLY DILUTED BASIS BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO
THE EXPIRATION OF THE OFFER, (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT
TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED AND (3) THE RECEIPT OF
ALL NECESSARY APPROVALS UNDER CHANGE OF OWNERSHIP, HEALTHCARE
LICENSURE AND CERTIFICATE OF NEED LAWS AND REGULATIONS. SEE SECTION
13.
THE BOARD OF DIRECTORS OF THERATX, INCORPORATED HAS UNANIMOUSLY DETERMINED
THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF
THERATX AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THERATX'S STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock par value $.001 of TheraTx, Incorporated (the "Common
Stock") including the associated rights to purchase Series A Junior
Participating Preferred Stock (the "Rights" and together with the Common
Stock, the "Shares") should either (1) complete and sign the Letter of
Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of Transmittal, including any required signature guarantees, and mail
or deliver the Letter of Transmittal or such facsimile with his 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, 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 Common Stock
and a tender by a stockholder of such stockholder's shares of Common Stock
will also constitute a tender of the associated Rights (as defined herein). 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.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) or to the Dealer Manager (as defined herein) at
their respective addresses and telephone numbers set forth on the back cover
of this Offer to Purchase. Requests for additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information
Agent or to the Dealer Manager.
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
February 14, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<C> <S> <C>
Introduction............................................................ 1
1. Terms of the Offer............................................. 2
2. Acceptance for Payment and Payment for Shares.................. 3
3. Procedure for Tendering Shares................................. 3
4. Rights of Withdrawal........................................... 6
5. Certain Federal Income Tax Consequences of the Offer........... 7
6. Price Range of Shares; Dividends............................... 7
7. Effect of the Offer on Market for the Shares; Stock Quotation;
Exchange Act Registration; Margin Regulations................. 8
8. Certain Information Concerning the Company..................... 9
9. Certain Information Concerning the Purchaser and Vencor........ 13
10. Background of the Offer; Contacts with the Company............. 15
11. Purpose of the Offer; Plans for the Company; the Merger........ 16
12. Source and Amount of Funds..................................... 21
13. Certain Conditions of the Offer................................ 24
14. Dividends and Distributions.................................... 26
15. Certain Legal Matters.......................................... 26
16. Fees and Expenses.............................................. 28
17. Miscellaneous.................................................. 29
Schedule I Directors and Executive Officers of Vencor and the
Purchaser..................................................... I-1
</TABLE>
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF THERATX, INCORPORATED:
INTRODUCTION
PEACH ACQUISITION CORP., a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of VENCOR, INC., a Delaware corporation ("Vencor"),
hereby offers to purchase all of the outstanding shares of Common Stock, par
value $.001 per share (the "Common Stock"), of THERATX, INCORPORATED, a
Delaware corporation (the "Company"), including the associated rights to
purchase Series A Junior Participating Preferred Stock of the Company (the
"Rights") issued pursuant to the Rights Agreement, dated as of July 28, 1995
(as amended, the "Rights Agreement"), between the Company and U.S. Stock
Transfer Corporation (the Common Stock and the Rights together are referred to
herein as the "Shares") at $17.10 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which together constitute the
"Offer"). Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, subject to Instruction 6 of the Letter of Transmittal,
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").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) A NUMBER OF SHARES
REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED
BASIS BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER (THE "MINIMUM CONDITION"), (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO
THE OFFER HAVING EXPIRED OR BEEN TERMINATED AND (3) THE RECEIPT OF ALL
NECESSARY APPROVALS UNDER CHANGE OF OWNERSHIP, HEALTHCARE LICENSURE AND
CERTIFICATE OF NEED LAWS AND REGULATIONS. SEE SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AGREEMENT AND HAS UNANIMOUSLY RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of February 9, 1997, among the Company, Vencor
and the Purchaser, pursuant to which, after the completion of the Offer, the
Purchaser will be merged with and into the Company (the "Merger") and each
outstanding and issued Share, not owned by Vencor, the Purchaser or any other
subsidiary of Vencor (the "Vencor Companies") (or held by stockholders
exercising appraisal rights ("Dissenting Stockholders") pursuant to Section
262 of the Delaware General Corporation Law ("DGCL")), will be converted into
the right to receive, without interest, $17.10 in cash (the "Merger
Consideration").
The Company has advised Vencor and the Purchaser that, as of February 12,
1997, there were (i) 20,823,685 Shares outstanding, (ii) 4,520,412 Shares
subject to issuance pursuant to the Company's Restated 1994 Stock Option/Stock
Issuance Plan and the Company's 1996 Stock Option/Stock Issuance Plan, (iii)
98,430 options to purchase Shares issued pursuant to the 1989 Amended and
Restated Stock Option Plan of Helian Health Group, Inc., PersonaCare Inc.'s
1992 Stock Option Plan, (iv) 4,166,667 Shares subject to issuance pursuant to
the Company's 8% Convertible Subordinated Notes due 2002 (the "Notes") and (v)
78,925 Shares subject to issuance pursuant to the warrants (the "Warrants") to
purchase Shares issued by the Company.
Based on the foregoing, Vencor believes there are approximately 29,688,119
Shares outstanding on a fully diluted basis. Accordingly, Vencor believes the
Minimum Condition would be satisfied if at least approximately 14,844,060
Shares are validly tendered and not withdrawn prior to the Expiration Date (as
defined herein).
1
<PAGE>
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN ITS ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the Purchaser will accept for payment and pay
for all Shares validly tendered on or prior to the Expiration Date (as herein
defined) and not withdrawn as permitted by Section 4. The term "Expiration
Date" means 12:00 Midnight, New York City time, on March 14, 1997, unless and
until the Purchaser shall, in its sole discretion, have extended the period
for which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire.
Rights are presently evidenced by the certificates for the Common Stock and
the tender by a stockholder of such stockholder's shares of Common Stock will
also constitute a tender of the associated Rights. Pursuant to the Offer, no
separate payment will be made by the Purchaser for the Rights.
Subject to the terms of the Merger Agreement and applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"), the
Purchaser expressly reserves the right, in its sole discretion, at any time or
from time to time, to extend the period of time during which the Offer is open
by giving oral or written notice of such extension to the Depositary. Any such
extension will also be publicly announced by press release issued no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the terms and
conditions set forth in the Offer and subject to the right of a tendering
stockholder to withdraw such stockholder's Shares. See Section 4. Subject to
the applicable regulations of the Commission, the Purchaser also expressly
reserves the right, in its sole discretion, at any time or from time to time,
(i) to delay acceptance for payment of or, regardless of whether such Shares
were theretofore accepted for payment, payment for any Shares or to terminate
the Offer and not accept for payment any Shares, upon the occurrence of any of
the conditions specified in Section 13 and (ii) to waive any condition or
otherwise amend the Offer in any respect, by giving oral or written notice of
such delay, termination or amendment to the Depositary and by making a public
announcement thereof. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE
PRICE FOR SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT. If the Purchaser accepts any Shares for payment
pursuant to the terms of the Offer, it will accept for payment all Shares
validly tendered and not withdrawn prior to the Expiration Date, and, subject
to (i) above, will promptly pay for all Shares so accepted for payment. The
Purchaser confirms that its reservation of the right to delay payment for
Shares which it has accepted for payment is limited by Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer, and in any event not in excess of an unreasonable length of time.
Any extension, delay, termination or amendment of the Offer will be followed
as promptly as practicable by public announcement thereof, such announcement
in the case of an extension to be issued no later than 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under
the Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to
inform stockholders of such change), and without limiting the manner in which
the Purchaser may choose to make any public announcement, the Purchaser shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
The Purchaser confirms that if it makes a material change in the terms of
the Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, the Purchaser will extend the Offer to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act.
2
<PAGE>
Subject to the terms and conditions of the Merger Agreement, if, prior to
the Expiration Date, the Purchaser, in its sole discretion, decreases the
percentage of Shares being sought or decreases or increases the Merger
Consideration, such increase or decrease shall be applicable to all holders
whose Shares are accepted for payment pursuant to the Offer and, if at the
time notice of any increase or decrease is first published, sent or given to
holders of Shares, the Offer is scheduled to expire at any time earlier than
the tenth business day from and including the date that such notice is first
published, sent or given, the Offer will be extended until the expiration of
such ten business-day period. For purposes of the Offer, a "business day"
means any day other than a Saturday, Sunday or federal holiday and consists of
the time period from 12:01 A.M. through 12:00 Midnight, New York City time.
The Offer is being mailed to holders of Shares from a list provided to the
Purchaser by the Company.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and will pay for, Shares
validly tendered and not withdrawn as promptly as practicable after the later
of (i) the fulfillment of the Minimum Condition, (ii) the expiration or
termination of the waiting period applicable to the acquisition of Shares
pursuant to the Offer under the HSR Act, (iii) the receipt of all necessary
approvals under change of ownership, healthcare licensure and certificate of
need laws and regulations and (iv) the Expiration Date. In addition, subject
to applicable rules of the Commission, the Purchaser expressly reserves the
right to delay acceptance for payment of or payment for Shares in order to
comply, in whole or in part, with any applicable law. See Section 13. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a confirmation of a book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company or the
Philadelphia Securities Depository Trust Company (collectively, "Depository
Institutions")), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when the
Purchaser gives oral or written notice to the Depositary of its acceptance for
payment of such Shares pursuant to the Offer. Payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for the tendering
stockholders for the purpose of receiving payments from the Purchaser and
transmitting such payments to the tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES,
REGARDLESS OF ANY DELAY IN MAKING PAYMENT PURSUANT TO THE OFFER.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
for more Shares than are tendered, certificates for such unpurchased Shares
will be returned, without expense to the tendering stockholder (or, in the
case of Shares tendered by book-entry transfer of such Shares into the
Depositary's account at a Depository Institution pursuant to the procedures
set forth in Section 3, such Shares will be credited to an account maintained
with such Depository Institution), as soon as practicable following expiration
or termination of the Offer.
The Purchaser reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of Vencor the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
Valid Tender. To tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions of the Letter of Transmittal,
3
<PAGE>
with any required signature guarantees, certificates for Shares to be
tendered, and any other documents required by the Letter of Transmittal, must
be received by the Depositary prior to the Expiration Date at one of its
addresses set forth on the back cover of this Offer to Purchase, (b) such
Shares must be delivered pursuant to the procedures for book-entry transfer
described below (and a confirmation of such delivery received by the
Depositary, including an Agent's Message if the tendering stockholder has not
delivered a Letter of Transmittal), prior to the Expiration Date, or (c) the
tendering stockholder must comply with the guaranteed delivery procedures set
forth below. The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility 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 acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
Book-Entry Delivery. The Depositary will establish accounts with respect to
the Shares at the Depository Institutions (each a "Book-Entry Transfer
Facility" and, collectively, the "Book-Entry Transfer Facilities") for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in any of the Book-
Entry Transfer Facilities' systems may make book-entry transfer of Shares by
causing a Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of Shares may be effected
through book-entry transfer, either the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must be transmitted to and
received by the Depositary by the Expiration Date at one of its addresses set
forth on the back cover of this Offer to Purchase, or the tendering
stockholder must comply with the guaranteed delivery procedures described
below. The confirmation of a book-entry transfer of Shares or Rights into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY
INSURED REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures
on a Letter of Transmittal need not be guaranteed (a) if the Letter of
Transmittal is signed by the registered holders (which term, for purposes of
this section, includes any participant in any of the Book-Entry Transfer
Facilities' systems whose name appears on a security position listing as the
owner of the Shares) of Shares tendered therewith and such registered holder
has not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal or (b)
if such Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be returned to a person other
than the registered holder of the certificates surrendered, then the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the
4
<PAGE>
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as
described above. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. A stockholder who desires to tender Shares 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 below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal), and any other required documents, are received by the
Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery. A "trading day" is any day on which the New
York Stock Exchange (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Other Requirements. Notwithstanding any other provision hereof, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made
only after timely receipt by the Depositary of (a) certificates for (or a
timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer,
an Agent's Message in lieu of the Letter of Transmittal) and (c) any other
documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates
for Shares or 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 PAYMENT PURSUANT TO THE OFFER.
Tender Constitutes an Agreement. The valid tender of Shares pursuant to one
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms of and subject to
the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder irrevocably appoints designees of the Purchaser, and
each of them, as such stockholder's attorneys-in-fact and proxies in the
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and accepted for payment by the
Purchaser and with respect to any and all cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares on or after the date of this Offer to Purchase. All such proxies will
be considered coupled with an interest in the tendered Shares. Such
appointment is effective 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 such stockholder will be revoked, and no subsequent powers
of attorney, proxies and consents may be given (and, if given, will not be
deemed effective). The Purchaser's designees will, with respect to the Shares
for which the appointment is effective, be empowered to exercise all voting
and other rights of such stockholder as they, in their sole discretion, may
deem proper at any annual, special or adjourned meeting of the stockholders of
the Company, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's payment for such Shares,
the Purchaser must be able to exercise full voting rights with respect to such
Shares.
5
<PAGE>
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any and all tenders determined by it not to be in proper form
or the acceptance for payment of or payment for which may, in the opinion of
the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right to waive any defect or irregularity in the tender of any Shares of any
particular stockholder whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed
to have been validly made until all defects and irregularities relating
thereto have been cured or waived. None of Vencor, the Company, the Purchaser,
the Depositary, the Information Agent, the Dealer Manager or any other person
will be under any duty to give notification of any defects or irregularities
in tenders or incur any liability for failure to give any such notification.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and Instructions thereto) will be final
and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to
provide the certifications described above, the Internal Revenue Service (the
"IRS") may impose a penalty on such stockholder and payment of cash to such
stockholder pursuant to the Offer may be subject to backup withholding of 31%.
All stockholders surrendering Shares pursuant to the Offer should complete and
sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists
and is proved in a manner satisfactory to the Purchaser and the Depositary).
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. Non-
corporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
"Important Tax Information" in the Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after April
14, 1997.
To be effective, a written notice of withdrawal must be timely received by
the Depositary at one of its addresses or telephone numbers set forth on the
back cover of this Offer to Purchase. Any notice of withdrawal must specify
the name of the person having tendered the Shares to be withdrawn, the number
of Shares to be withdrawn and the names in which the certificate(s) evidencing
the Shares to be withdrawn are registered, if different from that of the
person who tendered such Shares. The signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution, unless such Shares have been
tendered for the account of any Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry tender as set forth in
Section 3, any notice of withdrawal must specify the name and number of the
account at the Depository Institution to be credited with the withdrawn
Shares. If certificates have been delivered or otherwise identified to the
Depositary, the name of the registered holder and the serial numbers of the
particular certificates evidencing the Shares withdrawn must also be furnished
to the Depositary as aforesaid prior to the physical release of such
certificates. All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by the Purchaser, in
its sole discretion, which determination shall be final and binding. None of
the Purchaser, Vencor, the Company, the Dealer Manager, the Depositary, the
Information Agent, or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give such notification. Any Shares properly
withdrawn will be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
6
<PAGE>
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept for payment Shares pursuant to the Offer, for
any reason, then, without prejudice to the Purchaser's rights under this
Offer, the Depositary may, nevertheless, retain tendered Shares on behalf of
the Purchaser, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as set forth in this
Section 4.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
Sales of Shares pursuant to the Offer and the surrender of Shares for cash
pursuant to the Merger will be taxable transactions for Federal income tax
purposes and may also be taxable under applicable state, local, foreign and
other tax laws. For Federal income tax purposes, a stockholder whose Shares
are purchased pursuant to the Offer or who receives cash as a result of the
Merger will realize gain or loss equal to the difference between the adjusted
basis of the Shares sold or surrendered and the amount of cash received
therefor. Such gain or loss will be capital gain or loss if the Shares are
held as capital assets by the stockholder, and, moreover, will be long-term
capital gain or loss if such stockholder's holding period for such Shares
exceeds one year.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL
SITUATIONS SUCH AS, AMONG OTHERS, STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON
THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND
STOCKHOLDERS WHO ARE NOT UNITED STATES PERSONS. STOCKHOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM
OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on The Nasdaq Stock Market's National Market ("Nasdaq
National Market"). The Company has not paid any dividends since its initial
public offering in June 1994. The following table sets forth, based upon
public sources, for the calendar quarters indicated, the high and low sale
prices for the Shares on the Nasdaq National Market under the symbol "THTX":
<TABLE>
<CAPTION>
SALES PRICE
COMMON STOCK
---------------
CALENDAR YEAR HIGH LOW
------------- ------- -------
<S> <C> <C>
1995:
First Quarter................................................ $23 1/8 $15 5/8
Second Quarter............................................... 18 3/4 10 7/8
Third Quarter................................................ 18 1/4 12
Fourth Quarter............................................... 14 1/4 10 3/4
1996:
First Quarter................................................ 13 1/8 8 5/8
Second Quarter............................................... 19 1/8 11 7/8
Third Quarter................................................ 19 1/8 10 7/8
Fourth Quarter............................................... 12 5/8 9
1997:
First Quarter (through February 13, 1997).................... 16 7/8 10 3/4
</TABLE>
On February 7, 1997, the last full trading day prior to the public
announcement of the terms of the Offer and the Merger, the reported closing
price on the Nasdaq National Market was $13 1/8 per Share. On February 13,
1997, the last full trading day prior to commencement of the Offer, the
reported closing price on the Nasdaq National Market was $16 5/8 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7
<PAGE>
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS
Market for the Shares. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and may reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by the public and
the market for the Notes, which are convertible into Shares.
Stock Quotation. The Shares are listed on the Nasdaq National Market.
According to the published guidelines of the National Association of
Securities Dealers, Inc. ("NASD"), the Shares would no longer be included in
the Nasdaq National Market if, among other things, the number of publicly-held
Shares (excluding Shares held directly or indirectly by officers, directors
and any person who is a beneficial owner of more than 10% of the Shares) was
less than 200,000, the aggregate market value of publicly-held Shares was less
than $1,000,000 or there were fewer than 400 holders of the Shares or 300
holders in round lots. If these standards were not met, quotations might
continue to be published in the over-the-counter "additional list" or one of
the "local lists" unless, as set forth in NASD's published guidelines, the
number of publicly-held Shares was less than 100,000, or there were fewer than
300 holders in total. According to the Company, there were 303 holders of
record of Shares on February 12, 1997 and as of February 12, 1997 there were
20,823,685 Shares outstanding.
If the Shares were to no longer meet the requirements of NASD for continued
inclusion in the Nasdaq National Market or another tier of The Nasdaq Stock
Market and the Shares were to no longer be included in the Nasdaq National
Market, or in any other tiers of The Nasdaq Stock Market, the market for the
Shares could be adversely affected. It is possible that the Shares would be
traded in the over-the-counter market, and that price quotations would be
reported by other sources. The extent of the public market for Shares and the
availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of Shares at such time, the
interest in maintaining a market in Shares on the part of securities firms,
the possible termination of registration of Shares under the Exchange Act and
other factors.
Margin Regulations. The Shares are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of such Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, the Shares might no longer constitute "margin securities" for the
purposes of the Federal Reserve Board's margin regulations, in which event the
Shares would be ineligible as collateral for margin loans made by brokers.
Exchange Act Registration. The Common Stock and associated Rights are
currently registered under the Exchange Act. Such registration may be
terminated by the Company upon application to the Commission if the
outstanding shares of Common Stock and associated Rights are not listed on a
national securities exchange and if there are fewer than 300 holders of record
of Shares. Termination of registration of the Common Stock and associated
Rights under the Exchange Act would reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b) and the requirement of furnishing a proxy
statement in connection with stockholders' meetings pursuant to Section 14(a)
and the related requirement of furnishing an annual report to stockholders, no
longer applicable with respect to the Common Stock and Rights. Furthermore,
the ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
under the Securities Act of 1933, as amended, may be impaired or eliminated.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for NASDAQ reporting or for continued
inclusion on the Federal Reserve Board's list of "margin securities." The
Purchaser intends to cause the Company to apply for termination of
registration of the Common Stock and associated Rights as soon as possible
after consummation of the Offer if the requirements for termination of
registration are met. Even if the registration of the Common Stock and
associated Rights under Section 12(b) of the Exchange Act is terminated, the
Exchange Act requirement that the Company file periodic reports would remain
applicable as long as the Shares, the Notes and the Warrants are in the
aggregate held of record by more than 300 persons.
8
<PAGE>
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at 1105 Sanctuary Parkway, Suite 100, Alpharetta, Georgia 30201. The
Company has described its business in publicly available information in the
manner set forth below.
The Company provides subacute rehabilitation and respiratory therapy program
management services to skilled nursing facilities and operates owned, leased
and managed inpatient facilities that provide a broad range of subacute,
specialty and basic medical and other geriatric services. Subacute care is
provided to patients who (i) are medically stable but fragile, and recovering
from an accident, illness or surgery; (ii) require a coordinated array of
extensive nursing, rehabilitation or other ancillary services in an inpatient
setting; and (iii) have clearly defined discharge goals, generally to their
homes or other community settings. Subacute care providers bridge the gap
between higher-cost acute-care hospitals and similar providers and lower-cost
traditional skilled nursing facilities that lack the intensive coordinated
services required to care for higher acuity patients.
The Company also provides occupational healthcare and related services in
outpatient clinics. Occupational medicine is the treatment of individuals
injured in the workplace. The treatment of work-related injuries typically
involves intense clinical care, including physical therapy and frequent
examinations. The goal is to return the employee to work as soon as is
medically feasible and minimize the employer's and insurer's lost-time wages,
disability payments and possible legal costs.
In addition to its primary practice areas, the Company operates outpatient
surgery centers, owns and operates an acute-care specialty hospital, provides
respiratory therapy and related services to hospitals and provides medical
supply distribution and related services to the long-term care industry.
Effective May 31, 1994, the Company acquired PersonaCare, Inc.
("PersonaCare") in a transaction accounted for as a purchase. The Company has
provided financial information with respect to PersonaCare in its public
filings.
Set forth below is certain summary selected consolidated financial
information for the Company's last three fiscal years and for PersonaCare for
the year ended December 31, 1993 and the five months ended May 31, 1994 as
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and for the Company for the nine months ended September 30,
1995 and 1996 as contained in, or derived from, the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996. More comprehensive
financial information is included in such reports (including management's
discussion and analysis of financial condition and results of operations) and
other documents filed by the Company with the Commission, and the following
summary is qualified in its entirety by reference to such reports and other
documents and all of the financial information and notes contained therein.
Copies of such reports and other documents may be examined at or obtained from
the Commission in the manner set forth below.
9
<PAGE>
THE COMPANY
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- -------------------------
1995(3)
1996 1995 PRO FORMA 1995 1994 1993
-------- -------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA(1)(2):
Net revenues............ $288,600 $225,575 $240,920 $314,176 $174,282 $76,427
Income (loss) from
operations............. 36,329 25,061 26,392 30,675 16,990 (5,116)
Income (loss) before
income taxes, minority
interest and
extraordinary item..... 27,331 18,543 18,647 20,773 14,564 (5,474)
Income (loss) before
minority interest and
extraordinary item..... 17,219 10,880 10,942 11,184 11,147 (4,035)
Income (loss) before
extraordinary item..... 17,197 10,942 11,004 11,257 11,593 (3,466)
Net income (loss)....... $ 17,197 $ 10,514 $ 10,576 $ 10,829 $ 11,593 $(3,466)
Income (loss) per share
before
extraordinary item..... 0.82 0.54 0.53 0.55 0.73 (0.57)
Net income (loss) per
share.................. 0.82 0.52 0.51 0.53 0.73 (0.57)
Weighted average shares
outstanding............ 20,871 20,292 20,658 20,407 15,972 6,092
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, -------------------------
1996 1995 1994 1993
---------------- -------- -------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA(1)(2)
Cash and cash equivalents........... $ 9,943 $ 10,530 $ 11,560 $ 5,739
Working capital..................... 94,513 71,270 49,320 11,672
Intangible assets, net.............. 104,584 97,844 27,427 2,234
Total assets........................ 367,035 329,798 181,985 51,370
Total debt.......................... 171,355 152,419 46,952 17,328
Total stockholders' equity.......... 157,811 139,899 110,244 24,941
</TABLE>
- --------
(1) Gives effect to the acquisitions of Respiratory Care Services, Inc. and
Helian Health Group, Inc., which have been recorded as poolings of
interests.
(2) Effective May 31, 1994, PersonaCare was acquired by the Company in a
transaction accounted for as a purchase. The Company's statements of
operations for the years ended December 31, 1994 and 1995 include
PersonaCare's results of operations subsequent to May 31, 1994.
(3) Pro forma for acquisition of Southern Management Services, Inc.
10
<PAGE>
PERSONACARE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE MONTHS ENDED YEAR ENDED
MAY 31, 1994 DECEMBER 31, 1993
----------------- --------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenues............................ $28,266 $56,465
Income from operations.................. 1,962 3,028
Income (loss) before income taxes,
minority interest and cumulative effect
of changes in accounting principles.... 466 (414)
Net income (loss)....................... 332 (250)
<CAPTION>
AT MAY 31, 1994 AT DECEMBER 31, 1993
----------------- --------------------
<S> <C> <C>
BALANCE SHEET DATA(1):
Cash and cash equivalents............... $ 1,737 $ 1,665
Working capital......................... 5,259 4,334
Intangible assets, net.................. 12,555 12,633
Total assets............................ 91,245 90,309
Total debt.............................. 56,069 56,072
Total stockholders' equity.............. 22,858 22,526
</TABLE>
- --------
(1) Effective May 31, 1994, PersonaCare was acquired by the Company in a
transaction accounted for as a purchase. The Company's statements of
operations for the years ended December 31, 1994 and 1995 include
PersonaCare results of operations subsequent to May 31, 1994.
11
<PAGE>
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources and is qualified in its entirety by reference thereto. Although Vencor
has no knowledge that would indicate that any statements contained herein
based on such documents and records are untrue, Vencor cannot take
responsibility for the accuracy or completeness of the information contained
in such documents and records, or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of
any such information but which are unknown to Vencor.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, stock options
granted to them, the principal holders of the Company's securities, any
material interests of such persons in transactions with the Company and other
matters is required to be disclosed in proxy statements distributed to the
Company's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference room at the Commission's office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, DC, and also should be available for inspection
and copying at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, NY 10048 and Citicorp Center, 500 West
Madison Street (Suite 1400), Chicago, IL 60661. Copies may be obtained, by
mail, upon payment of the Commission's customary charges, by writing to its
principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549. Such material should also be available for inspection at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, DC 20006.
Vencor has conducted due diligence reviews of the Company and has received
certain non-public information from the Company pursuant to the terms of a
confidentiality agreement dated September 17, 1996. The non-public information
provided by the Company included certain projections of the Company's future
operating performance. The projections do not give effect to the Offer, the
Merger or the financing thereof.
The Company does not as a matter of course publicly disclose projections as
to future revenues or earnings. The estimates of future financial performance
set forth below (the "Projections") were not prepared with a view to public
disclosure or compliance with the published guidelines of the Commission or
the guidelines established by the American Institute of Certified Public
Accountants regarding projections and are included in the Offer to Purchase
only because such information was made available to Vencor. None of Vencor,
the Purchaser, the Company or any of their respective financial advisors or
any of their respective directors or officers assumes any responsibility for
the accuracy of the Projections. The Company's independent auditors have not
examined or compiled the Projections presented herein and, accordingly, assume
no responsibility for them. In addition, because the estimates and
assumptions, many of which are not set forth herein, underlying the
Projections are inherently subject to significant economic, regulatory and
competitive uncertainties and contingencies which are difficult or impossible
to predict accurately and are beyond Vencor's and the Company's control, there
can be no assurance that the Projections will be realized. Accordingly, it is
expected that there will be differences between actual and projected results,
and actual results may be materially different than those set forth below,
including with respect to the effects of "salary equivalency" rates and the
Company's response thereto.
The Company has advised Vencor that it expects to have earnings before non-
recurring charges of $22.7 million in 1996. Management of the Company has
projected that the Company's earnings before non-recurring charges will
increase by approximately 26% and 33% in 1997 and 1998, respectively. Based on
a range of blended hourly rates for salary equivalency deemed likely by the
Company's management, management estimated that net income for 1997 could be
reduced by approximately 20%-40% (assuming that the new salary equivalency
guidelines had been in effect for the entire year) and net income for 1998
could be reduced by approximately 15%-35% (assuming that the new salary
equivalency guidelines had been in effect for the entire year). The estimated
reduction in net income takes into account the anticipated effect of the
Company's response plan to the implementation of salary equivalency
guidelines, which includes, among other things, changes in billing practices
to comply with anticipated salary equivalency procedures, operating
efficiencies that could be derived from newly implemented hand held technology
and possible changes in labor configuration. Management
12
<PAGE>
of the Company noted that the Projections, as revised to give effect to the
salary equivalency guidelines, did not include other sources of additional
revenue or cost-savings that might be achievable under the new guidelines,
since management was unable to estimate these benefits with any degree of
certainty prior to a formal proposal with respect to salary equivalency
guidelines. Management of the Company did advise Vencor, however, that there
could be additional opportunities for additional revenue or cost-savings,
which could reduce, in part, the negative impact of the salary equivalency
guidelines. Vencor took this information, together with its own analysis of
the possible effects of the adoption of salary equivalency guidelines, into
account in determining to proceed with the Merger.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND VENCOR
The Purchaser is a Delaware corporation and to date has engaged in no
activities other than those incident to its formation and the commencement of
the Offer. The Purchaser is a direct wholly-owned subsidiary of Vencor. The
principal executive offices of the Purchaser and Vencor are located at 3300
Providian Center, 400 West Market Street, Louisville, Kentucky 40202.
On September 28, 1995, The Hillhaven Corporation ("Hillhaven") merged into
Vencor, creating one of the nation's largest providers of healthcare services
primarily focusing on the needs of the elderly. At December 31, 1995, Vencor's
operations included 36 long-term intensive care hospitals containing 3,263
licensed beds, 311 nursing centers containing 39,480 licensed beds, 55 retail
and institutional pharmacy outlets and 23 retirement housing communities with
3,122 apartments. Healthcare services provided through this network of
facilities included long-term intensive hospital care, long-term nursing care,
contract respiratory therapy services, acute cardiopulmonary care, subacute
and post-operative care, inpatient and outpatient rehabilitation therapy,
specialized care for Alzheimer's disease, hospice care, pharmacy services and
retirement and assisted living. At December 31, 1995, Vencor was providing
subacute, rehabilitation and respiratory therapy services to 2,008 nursing and
subacute care centers through its contract services business. Vencor is
developing and maintaining ProTouch(TM), a comprehensive paperless clinical
information system designed to increase the operating efficiencies of Vencor's
facilities.
Additional information concerning Vencor is set forth in Vencor's Annual
Report on Form 10-K for the year ended December 31, 1995 and subsequent
Quarterly Reports on Form 10-Q, which reports may be obtained from the
Commission in the manner set forth with respect to information concerning the
Company in Section 8 and should also be available for inspection at the NYSE,
20 Broad Street, New York, New York 10005.
Set forth below is certain selected summary consolidated financial
information of Vencor:
13
<PAGE>
VENCOR, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $1,911,442 $1,705,831 $2,323,956 $2,032,827 $1,727,436
Income (loss) from
operations before
income taxes........... 149,647 (14,868) 32,364 132,920 79,065
Income (loss) from
operations............. 92,033 (20,628) 8,363 86,139 68,976
Extraordinary loss on
extinguishment of debt,
net of income tax
benefit................ -- (21,987) (23,252) (241) (2,217)
Cumulative effect on
prior years of a change
in accounting for
income taxes........... -- -- -- -- (1,103)
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ 92,033 $ (42,615) $ (14,889) $ 85,898 $ 65,656
========== ========== ========== ========== ==========
Earnings (loss) per
common and common
equivalent share:
Primary:
Income (loss) from
operations........... $ 1.30 $ (.27) $ .21 $ 1.37 $ 1.22
Extraordinary loss on
extinguishment
of debt.............. -- (.37) (.37) -- (.04)
Cumulative effect on
prior years of a
change in accounting
for income taxes..... -- -- -- -- (.02)
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ 1.30 $ (.64) $ (.16) $ 1.37 $ 1.16
========== ========== ========== ========== ==========
Fully diluted:
Income (loss) from
operations........... $ 1.30 $ (.27) $ .29 $ 1.28 $ 1.22
Extraordinary loss on
extinguishment of
debt................. -- (.37) (.32) -- (.04)
Cumulative effect on
prior years of a
change in accounting
for income taxes..... -- -- -- -- (.02)
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ 1.30 $ (.64) $ (.03) $ 1.28 $ 1.16
========== ========== ========== ========== ==========
Shares used in computing
earnings (loss) per
common and common
equivalent share:
Primary................ 70,800 59,139 62,318 57,037 54,555
Fully diluted.......... 70,800 59,139 71,967 69,014 60,640
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------------------
1996 1995 1994 1993
---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital............... $ 316,817 $ 239,666 $ 129,079 $ 114,339
Assets........................ 2,007,193 1,912,454 1,656,205 1,563,350
Long-term debt................ 720,527 778,100 746,212 784,801
Stockholders' equity.......... 829,948 772,064 596,454 485,550
</TABLE>
14
<PAGE>
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors
and executive officers of Vencor and the Purchaser are set forth in Schedule I
to this Offer to Purchase.
Neither the Purchaser nor Vencor, nor, to the best of their knowledge, any
of the persons listed in Schedule I hereto nor any associate or majority-owned
subsidiary of any of the foregoing, beneficially owns or has a right to
acquire any equity securities of the Company. Neither the Purchaser nor
Vencor, nor, to the best of their knowledge, any of the persons or entities
referred to above, nor any director, executive officer or subsidiary of any of
the foregoing, has effected any transaction in such equity securities during
the past 60 days.
Except as set forth in Section 11, neither the Purchaser nor Vencor, nor, to
the best of their knowledge, any of the persons listed in Schedule I hereto,
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies. Except as set forth in
Sections 10 and 11, there have been no contacts, negotiations or transactions
since January 1, 1994 between Vencor or the Purchaser, or, to the best of
their knowledge, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors, or a sale or other transfer of a
material amount of assets. Except as described in Sections 10 and 11, neither
the Purchaser nor Vencor, nor, to the best of their knowledge, any of the
persons listed in Schedule I hereto, has since January 1, 1994 had any
transaction with the Company or any of its executive officers, directors or
affiliates that would require disclosure under the rules and regulations of
the Commission applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
In September 1996, Vencor was contacted by representatives of the Company
regarding a possible transaction with the Company. Discussions between the
parties regarding possible strategic alliances or a combination of the
companies continued through early December 1996, at which time discussions
were suspended as the parties were unable to agree on mutually acceptable
terms for a business combination or other transaction. During early January
1997, representatives of Vencor discussed the possibility of the acquisition
of the Company by Vencor (the "Proposed Transaction") with Mr. John A. Bardis,
Chief Executive Officer of the Company. These discussions focused primarily on
the price Vencor would be willing to pay for Shares, and whether the
transaction would be a stock or cash transaction. On January 17, 1997, Mr.
James H. Gillenwater, Jr., Senior Vice President, Planning & Development of
Vencor telephoned Mr. Bardis concerning the Proposed Transaction. Also on
January 17, 1997 Vencor outlined for the Company the terms of the Proposed
Transaction that would be acceptable to it.
After discussion and negotiation, on January 21, 1997 the parties agreed to
work toward a transaction at a price of $17.50 per Share, subject to due
diligence by Vencor on the Company, and executed an exclusivity agreement
whereby the Company agreed not to discuss an acquisition with any person other
than Vencor until after February 14, 1997.
Commencing on January 24, 1997, representatives of Vencor were provided
access to non-public information concerning the Company and held a series of
due diligence meetings with senior management of the Company. This review
continued through February 9, 1997.
On February 4, 1997, Vencor and the Company agreed to a price of $17.10 per
Share, subject to negotiation of a mutually satisfactory merger agreement and
approval of the respective boards of directors of Vencor and the Company.
Thereafter, representatives of Vencor and the Company and their respective
financial and legal advisors began negotiating the Merger Agreement on
February 5, 1997. Negotiations continued through the late afternoon of
February 9, 1997. The principal issues involved in the negotiations included
the scope of the representations and warranties, the conditions to the
Purchaser's obligation to complete the Offer, the circumstances under which
Vencor would be permitted to terminate the Offer if it were unable to obtain
financing, the non-compete agreements and the circumstances under which a
termination fee would be payable to Vencor or the Company and the amount
thereof.
15
<PAGE>
On February 9, 1997, the respective boards of directors of the Purchaser and
the Company unanimously approved the Merger Agreement and the transactions
contemplated thereby. The terms of the Merger Agreement are set forth in
Section 11. A copy of the Merger Agreement has been filed as an Exhibit to the
Schedule 14D-1 filed by Vencor with the Commission and is available for
inspection and copying in the manner set forth in Section 8.
The Company and Vencor have entered into Non-Compete and Non-Solicitation
Agreements, dated February 9, 1997 (the "Non-Competes"), with each of John A.
Bardis, Bret W. Jorgensen, Donald R. Myll, Louis E. Hallman, III, Laura E.
Cayce and William J. Haffey, Ph.D., all of whom are currently executive
officers of the Company. Each Non-Compete prevents the respective employees
from competing with the Company or soliciting the Company's employees for a
period of time following the Effective Time (as defined below) or the
termination of such person's employment with the Company or any of its
affiliates.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER
Purpose. The purpose of the Offer is to acquire for cash as many outstanding
Shares as possible.
If the Purchaser acquires more than 50% of the outstanding Shares pursuant
to the Offer, it will have the votes necessary under the DGCL to approve the
Merger. The Merger Agreement provides that, promptly after expiration of the
Offer and receipt of any required approval by the Company's stockholders of
the Merger Agreement and the satisfaction or waiver of certain other
conditions, the Purchaser will be merged with and into the Company and the
separate corporate existence of Purchaser will cease. Under the DGCL, if
Vencor or the Purchaser or any of the Vencor Companies owns at least 90% of
the outstanding Shares, the Merger may be effected without the vote of the
Company's stockholders. Therefore, if 18,741,317 Shares (or such greater
number as may be necessary if Options (as defined herein) or Warrants are
exercised or Notes are converted into Shares) are acquired pursuant to the
Offer or otherwise, the Purchaser will be able to and intends to effect the
Merger without a meeting of holders of Shares. Upon consummation of the Merger
(the "Effective Time"), each then outstanding Share not owned by any of Vencor
Companies (other than Shares held by Dissenting Stockholders), will be
converted into the right to receive $17.10 in cash (the "Merger
Consideration"). The Merger Agreement provides that if all Warrants are not
exchanged for Shares or amended to clarify that after the Effective Time such
Warrants will be exercisable for, at the exercise price of such Warrant, the
Merger Consideration, the Company will, prior to the Effective Time, effect
the Warrant Reclassification so that each Share is redeemable at any time at
the option of the Company for an amount per Share equal to the Merger
Consideration. Notwithstanding this provision of the Merger Agreement, if
Purchaser owns at least 90% of the outstanding Shares after the Offer, Vencor
and the Purchaser may elect to proceed with the Merger prior to effecting the
Warrant Reclassification, but Vencor and the Purchaser are under no obligation
to do so. If the Purchaser proceeds with the Merger prior to the Warrant
Reclassification, Vencor would effect the Warrant Reclassification promptly
after the Merger.
Plans for the Company. Pursuant to the Merger Agreement, following the
purchase of more than 50% of the outstanding Shares pursuant to the Offer,
Vencor has the right to have persons designated by it become directors of the
Company so that the total number of such persons on the Company's board of
directors is approximately equal to the percentage of Shares owned by Vencor
or the Purchaser, but in any event, prior to the Effective Time, there will be
at least two members of the Company's Board of Directors who are neither
officers of Vencor nor designees, stockholders, or affiliates of Vencor. In
addition, pursuant to the terms of the Merger Agreement, the Company has
agreed to use its reasonable efforts to secure the resignation of directors or
to increase the size of its Board of Directors, or both, to permit Vencor's
designees to be elected to the Company's Board of Directors. Vencor intends to
exercise its rights with respect to such designees as soon as possible after
consummation of the Offer.
In connection with its consideration of the Offer, Vencor has made a
preliminary review, and will continue to review, on the basis of available
information, various possible business strategies that it might consider upon
acquiring control of the Company. If the Purchaser acquires Shares pursuant to
the Offer, Vencor intends to
16
<PAGE>
conduct a detailed review of the Company and its assets, businesses,
operations, properties, policies, corporate structure, capitalization and the
responsibilities and qualifications of the Company's management and personnel
and consider what, if any, changes Vencor deems desirable in light of its
review.
Except as described above or elsewhere in this Offer to Purchase, the
Purchaser has no present plans or proposals that would relate to or result in
an extraordinary corporate transaction involving the Company or any of its
subsidiaries (such as a merger, reorganization, liquidation, relocation of any
operations or sale or other transfer of a material amount of assets), any
change in the Company's board of directors or management, any material change
in the Company's capitalization or dividend policy or any other material
change in the Company's corporate structure or business.
THE FOLLOWING IS A SUMMARY OF THE TERMS AND CONDITIONS OF THE MERGER
AGREEMENT.
General. The Merger Agreement provides that, promptly after expiration of
the Offer and the receipt of any required approval by the Company's
stockholders of the Merger Agreement and the satisfaction or waiver of certain
other conditions, the Purchaser will be merged with and into the Company. At
the Effective Time, each then outstanding Share not owned by any of Vencor,
the Purchaser or any of the Vencor Companies or by any Dissenting Stockholders
will be converted into the right to receive the Merger Consideration.
The Merger Agreement contains customary representations and warranties of
the Company and of the Purchaser. The representations and warranties of the
Company generally are qualified so that they are deemed accurate so long as
any inaccuracy would not have a Company Material Adverse Effect (as defined
below), although certain representations are qualified only as being
immaterial to the Company or are given without qualification. Company Material
Adverse Effect is defined in the Merger Agreement to be a material adverse
effect on the financial condition, operations, properties, business or results
of operations of the Company and its subsidiaries taken as a whole.
The Merger Agreement also contemplates the amendment, effective at the
Effective Time, of Article Fourth of the Company's Certificate of
Incorporation to provide that the aggregate number of shares which the Company
shall have the authority to issue is 1,000 shares of Common Stock, par value
$0.001 per share, unless the Warrant Reclassification (as defined below)
occurs.
Conditions. The obligations of the Company, the Purchaser and Vencor to
effect the Merger are subject to the satisfaction of certain conditions set
forth in the Merger Agreement, including, among other things, (i) the purchase
by the Purchaser of Shares pursuant to the Offer, (ii) the receipt of approval
from the holders of a majority of the Shares, (iii) the receipt of any
required governmental consents or approvals and (iv) there being no statute,
rule, regulation, judgment, decree, injunction or other order enacted, issued,
promulgated, enforced or entered by any governmental or regulatory authority,
agency, commission or other governmental entity, domestic or foreign, which is
in effect and prohibits consummation of the transactions contemplated by the
Merger Agreement or imposes material restrictions on Vencor or the Company in
connection with consummation of the Merger or with respect to their business
operations, either prior to or subsequent to the Merger.
Termination Provisions. Pursuant to the terms of the Merger Agreement, the
Merger Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval by the stockholders of the Company, by the
mutual consent of Vencor and the Company. In addition, the Merger Agreement
may be terminated by either Vencor or the Company if (i) the Purchaser shall
have terminated the Offer without purchasing any Shares pursuant thereto;
provided, in the case of termination of the Merger Agreement by Vencor, such
termination of the Offer is not in violation of the terms of the Offer, (ii)
the Merger shall not have been consummated by September 30, 1997 or (iii) the
approval of holders of Shares shall not have been obtained at a meeting duly
convened therefor. The Merger Agreement may be terminated by Vencor if (i) the
board of directors of the Company has withdrawn or modified in a manner
adverse to Vencor or the Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger, or the board of directors of the
Company fails to reaffirm such approval or recommendation within 10 business
days after a request by Vencor to do so,
17
<PAGE>
(ii) the board of directors of the Company or any officers, employees, agents
or representatives of the Company, directly or indirectly, have any
discussions with, provide any confidential information or data to any person
relating to any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or 5% or more of the
equity securities of, the Company or any of its subsidiaries (any such
transaction or purchase being referred to as an "Acquisition Transaction")
that, in any such case, could reasonably be expected to lead to a breach of
the Merger Agreement or otherwise interfere with the completion of the Offer
or Merger (any such proposal being an "Acquisition Proposal") or any such
person otherwise facilitates any effort or attempt to make or implement an
Acquisition Proposal or (iii) the Company fails to comply in any material
respect with any of its covenants or agreements under the Merger Agreement,
subject to certain rights to cure.
In addition, the terms of the Merger Agreement provide that if the board of
directors of the Company authorizes the Company to enter into a binding
written agreement concerning a transaction that constitutes a Superior
Proposal (as defined below) and the Company notifies Vencor in writing that it
intends to enter into such an agreement and Vencor does not make, within five
days of receipt of the Company's written notification, an offer that is at
least as favorable, from a financial point of view, to the stockholders of the
Company as the Superior Proposal, then the Company may terminate the Merger
Agreement. The Merger Agreement also provides that the Company may terminate
the Merger Agreement if Vencor fails to comply in any material respect with
any of its covenants, subject to certain rights to cure.
The Merger Agreement also provides that if (x) Purchaser or the Company
terminates the Merger Agreement (i) after the Offer has remained open for a
minimum of at least 20 business days, (ii) after the date of the Merger
Agreement, any corporation, partnership, person, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act) other than Vencor or the
Purchaser or any of their respective subsidiaries or affiliates (collectively,
a "Person") becomes the beneficial owner of 15% or more of the outstanding
Shares or any Person commences, or publicly announces an intention to
commence, a tender offer or exchange offer for 15% or more of the outstanding
Shares, and (iii) the Minimum Condition has not been satisfied and the Offer
is terminated without the purchase of any Shares thereunder, or (y) Vencor
terminates the Merger Agreement as a result of the Company's breach of the
Merger Agreement, the directors of the Company having taken actions with
respect to their approval or recommendation which would give the Purchaser the
right to terminate the Merger Agreement or the Company taking actions that
would be proscribed by the non-solicitation provision, but for the proviso
therein, then the Company will pay to Vencor an amount equal to Vencor's out-
of-pocket expenses, including fees and expenses paid to investment bankers,
lawyers and financing sources, incurred in connection with the transactions
contemplated by the Merger Agreement in an amount not to exceed $1,500,000
("Vencor Expenses") and, if within 18 months of the date of such termination,
the Company or any of its subsidiaries consummates an Acquisition Transaction,
the Company will pay Vencor a fee of $10,000,000. No such fee will be paid if
Vencor is in material breach of its obligations under the Merger Agreement.
In addition, if the Merger Agreement is terminated as a result of the
provision of the Merger Agreement permitting the Company to terminate the
Merger Agreement following the Company providing notification to Vencor of its
intention to enter into a Superior Proposal, then the Company will pay Vencor
$10,000,000 upon such termination plus the Vencor Expenses.
The Merger Agreement provides that if the Merger Agreement is terminated by
the Company as a result of a breach of the provisions thereof by Vencor or the
Purchaser, then Vencor will promptly pay the Company an amount equal to the
Company's out-of-pocket expenses, including fees and expenses paid to
investment bankers and lawyers incurred in connection with the transactions
contemplated by the Merger Agreement, in an amount not to exceed $1,500,000.
In addition, if, solely as a result of the occurrence of events which would
reasonably be expected to have a material adverse effect on Vencor and its
subsidiaries (other than any material adverse effect resulting from salary
equivalency rates or any breach by Vencor of the Merger Agreement and, as a
result of such material adverse effect, Vencor is not permitted to borrow
funds necessary to consummate the Offer under its credit facilities then in
effect), the Purchaser and Vencor (i) terminate the Offer without paying for
18
<PAGE>
Shares or (ii) extend the expiration date of the Offer beyond September 30,
1997, then Vencor will pay the Company a fee of $40,000,000.
Composition of the Board of Directors. The Merger Agreement provides that
promptly following the purchase by the Purchaser of the Shares pursuant to the
Offer, Vencor may request that the Company take all actions necessary to cause
persons designated by Vencor to become directors of the Company so that the
total number of directorships held by such persons is proportionate to the
percentage calculated by dividing (i) the number of Shares accepted for
payment pursuant to the Offer plus Shares beneficially owned by the Purchaser
as of the date of the Merger Agreement by (ii) the total number of Shares
outstanding at the time of acceptance of the Shares for payment pursuant to
the Offer; provided that prior to the consummation of the Merger, the board of
directors of the Company will always have at least two members who are neither
officers, designees, shareholders or affiliates of the Purchaser. The Company
has also agreed to increase the size of the board of directors of the Company
or to secure the resignation of existing directors to ensure that it has
complied with this provision of the Merger Agreement.
Treatment of Options. The Merger Agreement also provides that in the event
that Vencor does not provide, by February 24, 1997, the notice of cash out
referred to in the following paragraph, then, at the Effective Time, each
outstanding option to purchase Shares (an "Option") granted under any of the
Company's stock option plans (other than any Option issued under the Company's
Employee Stock Purchase Plan), whether vested or unvested, will be converted
into an option to acquire, on the same terms and conditions as were applicable
under such Option, the number of shares of Common Stock, par value $0.25 per
share of Vencor (the "Vencor Common Stock"), equal to (a) the number of Shares
subject to the Option multiplied by (b) (i) the Merger Consideration, divided
by (ii) the average of the high and low price of Vencor Common Stock on the
trading day immediately preceding the date of the Effective Time as reported
in the New York City edition of The Wall Street Journal (rounded down to the
nearest whole number) (a "Replacement Option"), at an exercise price per share
(rounded up to the nearest whole cent) equal to (y) the aggregate exercise
price for the Shares which were purchasable pursuant to such Option divided by
(z) the number of full shares of Vencor Common Stock subject to such
Replacement Option in accordance with the foregoing.
If Vencor provides written notice to the Company by February 24, 1997 of its
election to cash out the Options, then, at the Effective Time, each then
outstanding Option, whether vested or unvested, will be cancelled and the
holder thereof will be entitled to receive an amount of cash equal to the
product of (x) the amount, if any, by which the Merger Consideration exceeds
the exercise price per Share subject to such Option (whether vested or
unvested) and (y) the number of Shares issuable pursuant to the unexercised
portion of such Option, less any required withholding of taxes.
Indemnification of Officers and Directors. Pursuant to the Merger Agreement,
Vencor has agreed that the bylaws and the certificate of incorporation of the
Company (as the surviving corporation of the Merger) 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
individuals who immediately prior to the Effective Time were directors,
officers or otherwise entitled to indemnification thereunder or under the
Company's bylaws or indemnification agreements. Vencor and the Purchaser have
also agreed to indemnify, defend and hold harmless individuals who immediately
prior to the Effective Time were directors, officers or otherwise entitled to
be indemnified by the Company as provided in the Company's certificate of
incorporation, bylaws or indemnification agreements, as in effect as of the
date of the Merger Agreement, with respect to matters occurring through the
Effective Time to the fullest extent the Company would have been permitted to
do so under Delaware law, the Company's Certificate of Incorporation and
Bylaws as in effect as of the date of the Merger Agreement. Vencor has agreed
to cause the Company, following the Merger, to maintain in effect for not less
than six years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company with respect to
matters occurring prior to the Effective Time; provided, however, that (i) the
Company, following the Merger, may substitute therefor policies of at least
the same coverage (with carriers comparable to the Company's existing
carriers) containing terms and conditions which are no less advantageous to
the officers, directors and employees of the Company and (ii) the Company,
following the
19
<PAGE>
Merger, will not be required to pay an annual premium for such insurance in
excess of two times the last annual premium paid prior to the date hereof, but
in such case shall purchase as much coverage as possible for such amount.
Acquisition Proposals. The Company has agreed in the Merger Agreement that
neither it nor any of its subsidiaries nor any of its executive officers or
directors will, and that it will direct and use its best efforts to cause its
non-executive officers and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly, (a)
initiate, solicit, knowingly encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to an Acquisition Proposal
or (b) have any discussion with or provide any confidential information or
data to any Person relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal; provided,
however, that nothing contained in the Merger Agreement will prevent the
Company or its board of directors from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal; (B)
engaging in any discussions or negotiations with or providing any information
to, any person in response to an unsolicited bona fide written Acquisition
Proposal by any such person (including a new and unsolicited Acquisition
Proposal received by the Company after execution of the Merger Agreement from
a person or entity whose initial contact with the Company may have been
solicited by the Company prior to the execution of the Merger Agreement); or
(C) recommending such an unsolicited bona fide written Acquisition Proposal to
the stockholders of the Company, if and only to the extent that, in such case
referred to in (B) or (C), above, (i) the board of directors of the Company
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 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 Merger Agreement, (ii) the board of
directors of the Company determines in good faith after consultation with
outside legal counsel that such action is necessary for its board of directors
to comply with its fiduciary duties under applicable law and (iii) prior to
providing any non-public information or data to any person in connection with
any Acquisition Proposal by any such person, the Company's board of directors
receives from such person an executed confidentiality agreement on terms
substantially similar to the confidentiality agreement entered into with
Vencor. The Company also agreed that it will notify Vencor immediately if any
such inquiries, 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 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.
Covenants. The Merger Agreement also contains certain other restrictions as
to the conduct of business by the Company pending the Merger. Pursuant to the
terms of the Merger Agreement, the Company has covenanted and agreed that,
prior to the Effective Time, the Company will refrain from taking certain
actions and will take certain other actions that the Company would not
otherwise necessarily refrain from taking or take if it had not so agreed in
the Merger Agreement.
Pursuant to the terms of the Merger Agreement, the Company has agreed to
cause the Rights issued under the Merger Agreement to expire at the
consummation of the Merger. In addition, pursuant to the terms of the Merger
Agreement, the Company has amended the Rights Agreement to provide that none
of the Purchaser, Vencor or any of Vencor's affiliates or associates will be
deemed an Acquiring Person (as defined in the Rights Agreement) with the
result that the consummation of the Offer will have no effect on the Rights
Agreement. Accordingly, 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 by the Merger Agreement.
Furthermore, 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(a)(iv) of the Rights Agreement.
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<PAGE>
The Merger Agreement also requires the Company to take certain action with
respect to the Warrants. Prior to the Effective Time, the Company shall cause
any one or more of the following events to occur: (i) the exercise or
conversion of all of the outstanding Warrants for or into Shares in accordance
with the terms of the applicable Warrants, (ii) the entry into agreements
between the Company and the holders of each of the outstanding Warrants
providing that each Warrant shall, following the Merger, be exercisable for,
at the exercise price of such Warrant, the securities, property or other
consideration which a holder of such Warrant would have received had the
holder exchanged or converted such Warrant for Shares immediately prior to the
Effective Time or (iii) a reclassification (the "Warrant Reclassification") of
the Company's Shares in accordance with the DGCL, so that each Share will be
redeemable at any time at the option of the Company for an amount per Share
equal to the Merger Consideration and simultaneously with the effectiveness of
the Warrant Reclassification issue to Vencor or the Purchaser or, at Vencor's
election, 1,000 shares (constituting all of the authorized shares of such
class) of a new class of Company non-redeemable common stock, par value $0.001
per share (or any combination of the events referred to in clauses (i), (ii)
or (iii) above which when taken together apply to all of the outstanding
Warrants so that no Warrants may be exercised for any Shares) which are not
redeemable at the Company's election.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, each stockholder of the Company
who has neither voted in favor of the Merger nor consented thereto in writing
will be entitled to an appraisal by the Delaware Court of Chancery of the fair
value of such stockholder's Shares, exclusive of any element of value arising
from the accomplishment or expectation of the Merger, together with a fair
rate of interest, if any, to be paid. In determining such fair value, the
Court may consider all relevant factors. The value so determined could be more
or less than the consideration to be paid in the Offer and the Merger. Any
judicial determination of the fair value could be based upon considerations
other than or in addition to the market value of the Shares, including, among
other things, asset values and earning capacity.
Rule 13e-3. Rule 13e-3 under the Exchange Act, which Vencor does not believe
would be applicable to the Merger, would require, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the proposed transaction and the consideration
offered to stockholders of the Company therein be filed with the Commission
and disclosed to stockholders of the Company prior to consummation of the
transaction.
There can be no assurance that the Merger will take place. In the event
that, for any reason, the Merger does not occur, depending on the results of
the Offer, Vencor may, subject to restrictions applicable to it under the
Merger Agreement, consider the desirability of acquiring additional Shares or
the entire remaining equity interest in the Company. If Vencor determines to
do either, any such future transaction or transactions might be by means of a
merger, reverse stock split, open market or privately negotiated purchases,
one or more additional tender offers, exchange offers or otherwise. Such
transactions might involve the exchange of Shares for cash, securities of
Vencor, or some combination of cash and securities, and may be on terms and at
prices more or less favorable than those of the Offer. Moreover, the decision
to enter into such future transactions and the forms they might take will
depend on the circumstances then existing, including the financial resources
of the Company and Vencor and Vencor's business, tax and accounting
objectives, performance of the Shares in the market, availability and
alternative sources of funds, money market and stock market conditions,
general economic conditions and other factors.
The foregoing description of the Merger Agreement is qualified in its
entirety by reference to the text of the Merger Agreement, a copy of which has
been filed by Vencor as an exhibit to the Schedule 14D-1 and may be obtained
in the manner described in Section 8.
12. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase
all of the outstanding Shares pursuant to the Offer and the Merger, to pay
related fees and expenses, to pay for any Notes tendered to the
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<PAGE>
Company pursuant to the terms of the Notes, to refinance the Company's
existing obligations under the Company's Amended and Restated Financing and
Security Agreement dated May 8, 1995 and to refinance Vencor's existing
obligations under Vencor's $1,000,000,000 Credit Agreement (the "Credit
Agreement") dated as of September 11, 1995, all of which obligations will be
payable at consummation of the Offer, will be approximately $1,200,000,000.
The Purchaser intends to obtain these funds by way of capital contributions
from Vencor. The consummation of the Offer and the Merger are not subject to
any condition that Vencor or the Purchaser obtain any requisite financing.
Vencor expects to obtain these funds in the form of revolving credit loans
(each a "Loan") pursuant to a five year $1.6 billion senior secured credit
facility (the "Credit Facility"), to be provided by Morgan Guaranty Trust
Company of New York ("Morgan") and NationsBank, N.A. (together with Morgan,
the "Agents") and additional banks to be determined. Pursuant to a commitment
letter, dated February 13, 1997, among Vencor, the Agents, J.P. Morgan
Securities Inc. ("J.P. Morgan"), NationsBanc Capital Markets, Inc. (together
with J.P. Morgan, the "Arrangers"), the Agents have each committed to
underwrite $800 million of the Credit Facility which commitment will expire on
April 15, 1997. The Credit Facility will be provided to Vencor on the terms
and conditions set forth in the Commitment Letter and the Term Sheet (the
"Term Sheet") attached to the Commitment Letter (the terms of which are
summarized below). The Term Sheet provides that Vencor's obligation under the
Credit Facility will be secured by a first priority lien on the capital stock
of Vencor's present and future principal subsidiaries and all present and
future intercompany debt owed to Vencor by its subsidiaries and will be
unconditionally guaranteed by Vencor's material subsidiaries. The Arrangers
may syndicate all or a portion of the Credit Facility to other banks and
financial institutions. The Commitment Letter provides that the commitment is
subject to certain conditions precedent, including, among other things, (i)
the terms and conditions set forth in the Term Sheet, (ii) there not having
occurred after February 13, 1997 a material adverse change in the market for
syndicated bank credit facilities or a material disruption of, or a material
adverse change in financial, banking, capital market conditions or
regulatory/healthcare reimbursement environment, (iii) prior to the
syndication of the Credit Facility there being no competing offering,
placement or arrangement of debt securities or bank financing on behalf of
Vencor and (iv) there not having occurred, after the date of the provision of
information relating to the Company and Vencor to the Agents and the
Arrangers, any material adverse change in the business, assets, liabilities
(actual or contingent), operations or financial condition of Vencor, the
Company and their respective subsidiaries taken as a whole. Pursuant to the
Commitment Letter, Vencor has agreed to reimburse the Agents and the Arrangers
for all reasonable out-of-pocket fees and expenses (including, but not limited
to, the reasonable fees, disbursements and other charges of special counsel
incurred in connection with the Credit Facility and the preparation of the
definitive documentation for the Credit Facility and the other transactions
contemplated by the Commitment Letter). In addition, Vencor has agreed that,
in the event that the Agents or the Arrangers become involved in any capacity
in any action, proceeding or investigation in connection with any matter
contemplated by the Commitment Letter, Vencor will reimburse the Agents and
the Arrangers for their reasonable legal and other out-of-pocket expenses
(including the cost of any investigation and preparation) as they are incurred
by the Agents or the Arrangers. Vencor has also agreed to indemnify and hold
harmless the Agents and the Arrangers and their affiliates and their
respective directors, officers, employees and agents from and against any and
all losses, claims, damages and liabilities, joint or several, related to or
arising out of any matters contemplated by the Commitment Letter, unless and
only to the extent that it is finally judicially determined that such losses,
claims, damages or liabilities resulted primarily from the gross negligence of
willful misconduct of the Agents or the Arrangers.
Representations and Warranties. The Term Sheet provides for representations
and warranties related to the conditions precedent to the loans, which
conditions are set forth below.
Conditions. The Term Sheet provides that the closing of the Credit Facility
is subject to the following conditions: (a) satisfactory closing
documentation, including receipt and perfection of security in form and
substance satisfactory to a syndicate of lenders acceptable to Vencor and the
Arrangers (the "Banks"), (b) prior to or simultaneously with the initial
borrowing under the Credit Facility, Vencor having acquired a sufficient
number of Shares to permit it to approve the Merger Agreement on behalf of the
Company, without the vote of
22
<PAGE>
the other stockholders of the Company, (c) no material adverse change having
occurred in the financial condition, results of operations or business of
Vencor, the Company and their respective subsidiaries since December 31, 1996,
(d) repayment of the Credit Agreement, (e) opinions of counsel in form and
substance satisfactory to Morgan and (f) receipt of regulatory approvals and
third party approvals, if any, relating to the Offer or the Credit Facility.
Interest and Interest Rates. The interest rates under which Vencor may
borrow funds under the Credit Facility pursuant to the Term Sheet are at a
LIBOR Rate (the "LIBOR Rate"), an Adjusted CD Rate (the "CD Rate"), a Base
Rate (the "Base Rate") and at a Money Market Rate (the "Money Market Rate").
The Term Sheet provides that pricing on the commitments and loans will be at
the rates set forth in the chart below expressed in basis points, and will
vary with credit quality:
<TABLE>
<CAPTION>
TOTAL DEBT TO
EBITDA FACILITY LIBOR CD BASE RATE
RATIO FEE (BP) PLUS (BP) PLUS (BP) PLUS (BP)
- ------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
[GREATER THAN] 3.50 31.25 68.75 81.25 0.00
[GREATER THAN] 3.25 25.00 62.50 75.00 0.00
[GREATER THAN] 3.00 25.00 50.00 62.50 0.00
[GREATER THAN] 2.50 20.00 42.50 55.00 0.00
[GREATER THAN] 2.00 17.50 37.50 50.00 0.00
[LESS THAN
OR EQUAL TO] 2.00 12.50 25.00 37.50 0.00
</TABLE>
Interest in respect of Loans is payable at the end of each applicable
Interest Period, or, in any event, quarterly. "Interest Period" is defined in
the Term Sheet as 1, 2, 3 or 6 months, in the case of LIBOR Loans; 30, 60, 90
or 180 days in the case of Adjusted CD Loans; a minimum of one month in the
case of Money Market LIBOR Loans; and a minimum of seven days in the case of
Money Market Absolute Rate Loans.
Availability. Drawings under the Credit Facility may be made on notice by
Vencor, ranging from same day notice to five business days' notice.
Maturity. The Credit Facility will mature five years from the date of the
closing of the Credit Facility (the "Facility Closing Date").
Mandatory and Permissive Terminations or Reduction of Commitments. The
Credit Facility will be reduced to $1.2 billion on the fourth anniversary of
the Facility Closing Date and may be reduced in $10,000,000 increments at any
time on three business days' notice by Vencor. The Term Sheet provides that
loans made at the Base Rate may be prepaid at any time on notice that day
before 12 noon, New York time. Loans made which carry the LIBOR Rate and the
CD Rate may not be prepaid before the end of the applicable Interest Period
unless compensation for funding losses is provided to the Banks. Loans
carrying the Money Market Rate may not be prepaid before the end of an
applicable Interest Period.
Covenants. The Term Sheet provides for standard covenants in a transaction
of this type which are applicable to Vencor and its subsidiaries including,
but not limited to, the following: (i) limitations on debt issuances; (ii)
limitation on mergers and acquisitions; (iii) limitation on investments; (iv)
a negative pledge on assets; (v) limitation on affiliate transactions and new
subsidiary debt; and (vi) limitation on restricted payments (until Vencor
reaches Investment Grade Status (as defined in the Term Sheet)). The Term
Sheet also provides that there will be financial covenants relating to, (i)
minimum coverage ratio; (ii) minimum consolidated net worth; and (iii) maximum
leverage ratio.
Repayment. Vencor intends to repay borrowings under the Credit Facility in
accordance with the terms thereof.
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<PAGE>
The foregoing descriptions of the Commitment Letter and the Term Sheet are
qualified in their entirety by reference to the texts thereof, a copy of each
of which has been filed by Vencor as an exhibit to the Schedule 14D-1 and may
be obtained in the manner described in Section 8.
13. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, until (i) expiration or
termination of all applicable waiting periods under the HSR Act and (ii)
receipt of all necessary approvals under change of ownership, healthcare
licensure and certificate of need laws and regulations, the Purchaser will not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to Vencor's obligation to pay for or return tendered
shares promptly after termination or withdrawal of the Offer), the Purchaser
will not be required to pay for, or may delay the acceptance for payment of or
payment for, any tendered Shares, or may, in its sole discretion (subject to
the Merger Agreement), terminate or amend the Offer as to any Shares not then
accepted for payment if the Minimum Condition has not been fulfilled, or, if
on or after February 9, 1997, and at or before the time of acceptance for
payment for any of such Shares, any of the following events occurs:
(a) (i) any general suspension of, or limitation on prices for, trading
in securities on the NYSE or the Nasdaq National Market or in the over-the-
counter market, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) any
limitation (whether or not mandatory) by any governmental or regulatory
authority, agency, commission or other entity, domestic or foreign
("Governmental Entity"), on, or any other event which might adversely
affect, the extension of credit by banks or other lending institutions or
(iv) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(b) the Company has 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 by the
earlier to occur of ten days after the giving of written notice to the
Company and the scheduled expiration date of the Offer or any
representation or warranty of the 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;
(c) there has been threatened, instituted or pending any action,
litigation, proceeding, investigation or other application (an "Action")
before any court or other Governmental Entity by any Governmental Entity:
(i) challenging the acquisition by Vencor or the Purchaser of Shares,
seeking to restrain or prohibit the consummation of the transactions
contemplated by the Offer or the Merger, seeking to obtain any material
damages or otherwise directly or indirectly relating to the transactions
contemplated by the Offer or the Merger; (ii) seeking to prohibit, or
impose any material limitations on, Vencor's or the Purchaser's ownership
or operation of all or any material portion of their or the Company's
business or assets (including the business or assets of their respective
affiliates and subsidiaries), or to compel Vencor or the Purchaser to
dispose of or hold separate all or any material portion of Vencor's or the
Purchaser's or the Company's business or assets (including the business or
assets of their respective affiliates and subsidiaries) as a result of the
transactions contemplated by the Offer or the Merger; (iii) seeking to make
the acceptance for payment, purchase of, or payment for, some or all of the
Shares illegal or render the Purchaser unable to, or restrict the ability
of the Purchaser to, accept for payment, purchase or pay for some or all of
the Shares; (iv) seeking to impose material limitations on the ability of
Vencor or the Purchaser effectively to acquire or hold or to exercise full
rights of ownership of the Shares including, without limitation, the right
to vote the Shares purchased by them on an equal basis with all other
Shares on all matters properly presented to the stockholders; or (v) that,
in any event, in the judgment of Vencor, would be reasonably likely to
have, individually or in the aggregate, a material adverse effect (a
"Company Material Adverse Effect") on the financial condition, operations,
properties, business or results of operations of the Company and its
subsidiaries taken as a whole as a result of consummation of the
transactions contemplated by the Offer and the Merger, other than any such
effect arising out of or relating to the proposal, adoption or
implementation after the date of the Merger Agreement of any law, statute,
rule or regulation relating to healthcare,
24
<PAGE>
Medicaid or Medicare, including without limitation the proposal, adoption
or implementation of "salary equivalency" rates (including amendments to
any salary equivalency rates currently in effect) relating to the delivery
of physical therapy, occupational therapy, respiratory therapy or speech
language pathology services;
(d) any statute, rule, regulation, order or injunction has been sought,
proposed, enacted, promulgated, entered, enforced or deemed or become
applicable to the Offer or the Merger by any Governmental Entity that
results in any of the effects of, or have any of the consequences referred
to in clauses (i) through (v) of paragraph (c) above, other than any such
effect or consequence arising out of or relating to the proposal, adoption
or implementation after the date of the Merger Agreement of any law,
statute, rule or regulation relating to healthcare, Medicaid or Medicare,
including without limitation the proposal, adoption or implementation of
"salary equivalency" rates (including amendments to any salary equivalency
rates currently in effect) relating to the delivery of physical therapy,
occupational therapy, respiratory therapy or speech language pathology
services;
(e) any person, entity or group has 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;
(f) any court or other Governmental Entity of competent jurisdiction has
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 transactions contemplated by the Merger Agreement or imposes material
restrictions on Vencor or the Company in connection with the consummation
of the Merger or with respect to their business operations either prior to
or subsequent to the Merger (collectively an "Order"), provided, that
Vencor shall have used reasonable best efforts to cause any such Order to
be lifted;
(g) any event, change or development has occurred or been discovered that
would reasonably be expected to have a Company Material Adverse Effect,
other than any such Company Material Adverse Effect arising out of any law,
statute, rule or regulation relating to healthcare, Medicaid or Medicare,
including without limitation the proposal, adoption or implementation after
the date of the Merger Agreement of "salary equivalency" rates (including
amendments to any salary equivalency rates currently in effect) relating to
the delivery of physical therapy, occupational therapy, respiratory therapy
or speech language pathology services;
(h) (i) any event, change or development has occurred or been discovered
that would reasonably be expected to have a material adverse effect (a
"Vencor Material Adverse Effect") on the financial condition, operations,
properties, business or results of operations of Vencor and its
subsidiaries, taken as a whole, other than any such material adverse effect
arising out of or relating to (a) the proposal, adoption or implementation
after the date of the Merger Agreement of "salary equivalency" rates
(including amendments to any salary equivalency rates currently in effect)
relating to the delivery of physical therapy, occupational therapy,
respiratory therapy or speech language pathology services, or (b) any
breach by Vencor of the Merger Agreement, and (ii) as a result of such
Vencor Material Adverse Effect, Vencor is not permitted to borrow funds
necessary to consummate the Offer under its credit facilities then in
effect;
(i) the Company's Board of Directors (or a committee thereof) has
amended, modified or withdrawn its recommendation of the Offer or the
Merger, or shall have failed to publicly reconfirm such recommendation
within ten business days upon request by Vencor or the Purchaser, or shall
have endorsed, approved or recommended any other Acquisition Proposal, or
shall have resolved to do any of the foregoing; or
(j) the Merger Agreement has been terminated by the Company or Vencor or
the Purchaser in accordance with its terms, or Vencor or the Purchaser has
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 action or inaction by
Vencor or the Purchaser) giving rise to any such conditions,
25
<PAGE>
makes it inadvisable to proceed with the Offer and/or with such acceptance for
payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Vencor and the
Purchaser and may be asserted by Vencor or the Purchaser regardless of the
circumstances (including any action or inaction by Vencor or the Purchaser)
giving rise to such condition or may be waived by Vencor or the Purchaser, by
express and specific action to that effect, in whole or in part at any time
and from time to time in its sole discretion. Any determination by Vencor and
the Purchaser concerning any event described in this Section 13 shall be final
and binding upon all parties except to the extent not permitted under the
Merger Agreement.
14. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from declaring, setting aside or paying any dividends payable in cash, stock
or property with respect to the Shares or splitting, combining or
reclassifying the outstanding Shares.
15. CERTAIN LEGAL MATTERS
General. Except as otherwise disclosed herein, based upon an examination of
publicly available filings with respect to the Company, Vencor and the
Purchaser are not aware of any licenses or other regulatory permits which
appear to be material to the business of the Company and which might be
adversely affected by the acquisition of Shares by the Purchaser pursuant to
the Offer or of any approval or other action by any governmental,
administrative or regulatory agency or authority which would be required for
the acquisition or ownership of Shares by the Purchaser pursuant to the Offer.
Should any such approval or other action be required, it is currently
contemplated that such approval or action would be sought or taken. There can
be no assurance that any such approval or action, if needed, would be obtained
or, if obtained, that it will be obtained without substantial conditions or
that adverse consequences might not result to the Company's or Vencor's
business or that certain parts of the Company's or Vencor's business might not
have to be disposed of in the event that such approvals were not obtained or
such other actions were not taken, any of which could cause the Purchaser to
elect to terminate the Offer without the purchase of the Shares thereunder.
The Purchaser's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions. See Section 13.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the FTC, certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Purchaser is subject to these
requirements. See Section 2 of this Offer to Purchase as to the effect of the
HSR Act on the timing of the Purchaser's obligation to accept Shares for
payment.
Pursuant to the HSR Act, Vencor filed a Notification and Report Form with
respect to the acquisition of Shares pursuant to the Offer with the Antitrust
Division and the FTC on February 14, 1997. Under the provisions of the HSR Act
applicable to the purchase of Shares pursuant to the Offer, such purchases may
not be made until the expiration of a 15-calendar day waiting period following
the filing by Vencor. Accordingly, the waiting period under the HSR Act will
expire at 11:59 p.m., New York City time, on February 28, 1997, unless early
termination of the waiting period is granted or Vencor receives a request for
additional information or documentary material prior thereto. Pursuant to the
HSR Act, Vencor has requested early termination of the waiting period
applicable to the Offer. There can be no assurances given, however, that the
15-day HSR Act waiting period will be terminated early. If either the FTC or
the Antitrust Division were to request additional information or documentary
material from Vencor, the waiting period would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance
by Vencor with such request. Thereafter, the waiting period could be extended
only by agreement or by court order. If the acquisition of Shares is delayed
pursuant to a request by the Antitrust Division or the FTC for additional
information or documentary material pursuant to the HSR Act, the purchase of
and payment for Shares will be deferred until 10 days after
26
<PAGE>
the request is substantially complied with unless the waiting period is sooner
terminated by the FTC or the Antitrust Division. See Section 2. Only one
extension of such waiting period pursuant to a request for additional
information is authorized by the rules promulgated under the HSR Act, except
by agreement or by court order. Any such extension of the waiting period will
not give rise to any withdrawal rights not otherwise provided for by
applicable law. See Section 4. Although the Company is required to file
certain information and documentary material with the Antitrust Division and
the FTC in connection with the Offer, neither the Company's failure to make
such filings nor a request from the Antitrust Division or the FTC for
additional information or documentary material made to the Company will extend
the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by the Purchaser pursuant to the Offer. At any time before or after the
Purchaser's purchase of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or seeking divestiture of Shares acquired by the
Purchaser or the divestiture of substantial assets of Vencor, the Company or
any of their respective subsidiaries. Private parties may also bring legal
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if a challenge is made, what the result will be of such challenge. See
Section 13 of this Offer to Purchase for certain conditions to the Offer that
could become applicable in the event of such a challenge.
Healthcare Regulations. According to materials publicly filed by the
Company, the principal businesses of the Company are in regulated industries.
The Company derives substantial portions of its revenues from third party
payors, including government reimbursement programs such as Medicare and
Medicaid, which may assert jurisdiction as a result of the change of control
over the Company and the indirect changes of control of the Company's
subsidiaries. In addition, participants in the Medicare and Medicaid programs
are required to comply with state licensure requirements. State licensure
requirements and state certificate of need and similar health planning laws
may require prior approval of the change of control of the Company and the
indirect change of control of the Company's subsidiaries. Any such approvals
might be required prior to the acceptance of Shares pursuant to the Offer or
prior to the consummation of the Merger. The Company has informed Vencor that
the Company and its subsidiaries currently own or operate facilities in the
states of Alabama, California, Connecticut, Florida, Georgia, Kentucky,
Louisiana, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas and
Wisconsin. Vencor intends to apply for all necessary approvals and currently
expects that it will be able to obtain all necessary approvals within the next
45 to 90 days.
Federal Reserve Board Regulations. Regulations G, T, U and X (the "Margin
Regulations") promulgated by the Federal Reserve Board place restrictions on
the amount of credit that may be extended for the purpose of purchasing margin
stock (including the Shares) if such credit is secured directly or indirectly
by margin stock. Vencor and the Purchaser will attempt to ensure that the
financing of the acquisition of the Shares will be in compliance with the
Margin Regulations.
State Takeover Laws. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets,
stockholders, principal executive offices or principal places of business
therein. In Edgar v. MITE Corporation, the Supreme Court of the United States
held that the Illinois Business Takeover Statute, which made the takeover of
certain corporations more difficult, imposed a substantial burden on
interstate commerce and was therefore unconstitutional. In CTS Corporation v.
Dynamics Corporation of America, the Supreme Court held that as a matter of
corporate law, and, in particular, those laws concerning corporate governance,
a state may constitutionally disqualify an acquiror of "Control Shares" (ones
representing ownership in excess of certain voting power thresholds, e.g.,
20%, 33 1/3% or 50%) of a corporation incorporated in its state and meeting
certain other jurisdictional requirements from exercising voting power with
respect to those shares without the approval of a majority of the
disinterested stockholders.
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<PAGE>
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's Board of Directors has approved the Merger
Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and,
therefore, Section 203 of DGCL is inapplicable to the Merger.
Based on information supplied by the Company, the Purchaser does not believe
that any other state takeover laws purport to apply to the Offer and,
therefore, has not taken any steps to comply with any state takeover laws.
Should any government official or third party seek to apply any state takeover
law to the Offer, the Purchaser will take such action as then appears
desirable and currently anticipates that it will contest the validity of such
statute in appropriate court proceedings.
If it is asserted that one or more state takeover laws applies to the Offer
and it is not determined by an appropriate court that such act or acts do not
apply or are invalid as applied to the Offer, the Purchaser might be required
to file certain information with, or receive approvals from, the relevant
state authorities. In addition, if enjoined, the Purchaser might be unable to
accept for payment any Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment any Shares tendered. See Section 13.
16. FEES AND EXPENSES
Credit Suisse First Boston Corporation ("CSFB" or "Credit Suisse First
Boston") is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services to the Purchaser in connection
therewith. The Purchaser has agreed to pay CSFB as compensation for its
services as Dealer Manager and as financial advisor in connection with the
Offer as follows: a financial advisory fee of $100,000 (the "Financial
Advisory Fee"), a fairness opinion fee of $500,000 (the "Fairness Opinion
Fee") and a transaction fee of $1,500,000 (the "Transaction Fee") upon the
acquisition of 50% or more of the Shares. Payments of the Financial Advisory
Fee and the Fairness Opinion Fee will be credited toward the Transaction Fee.
The Purchaser has agreed to reimburse CSFB for its reasonable out-of-pocket
expenses, including the fees and expenses of its counsel and any other
advisors retained by CSFB resulting from or arising out of this transaction,
in connection with the Offer, and has agreed to indemnify CSFB against certain
liabilities and expenses in connection with the Offer and the Merger.
In the ordinary course of its business, CSFB engages in securities trading,
market-making and brokerage activities and may, at any time, hold long or
short positions and may trade or otherwise effect transactions in securities
of the Company.
The Purchaser has also retained D.F. King & Co., Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive reasonable and customary compensation for such
services, plus reimbursement of out-of-pocket expenses, and the Purchaser will
indemnify the Information Agent against certain liabilities and expenses in
connection with the Offer, including liabilities under the federal securities
laws.
The Purchaser will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for out-of-
pocket expenses, and will indemnify the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. Brokers, dealers, commercial banks and trust companies will
be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding material to their customers.
28
<PAGE>
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. However, the Purchaser may, in its sole discretion, take
such action as it may deem necessary to make the Offer in any such
jurisdiction and extend the Offer to holders of Shares in such jurisdiction.
Neither the Purchaser nor Vencor is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction.
The Purchaser and Vencor have filed with the Commission a Statement on
Schedule l4D-1, pursuant to Rule l4d-3 of the General Rules and Regulations
under the Exchange Act, furnishing certain additional information with respect
to the Offer, and may file amendments thereto. Such Statement and any
amendments thereto, including exhibits, may be examined and copies may be
obtained from the principal office of the Commission in Washington, DC and the
NYSE in the manner set forth in Section 8.
No person has been authorized to give any information or make any
representation on behalf of Vencor or the Purchaser not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
Peach Acquisition Corp.
February 14, 1997
29
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF VENCOR AND THE PURCHASER
The following tables set forth the name, business address, present principal
occupation and material positions and occupations within the past five years of
each director and executive officer of Vencor and the Purchaser. Unless
otherwise specified, each person listed below is a citizen of the United States
and has his or her principal business address at 3300 Providian Center, 400
West Market Street, Louisville, Kentucky 40202.
VENCOR
<TABLE>
<CAPTION>
NAME AND BUSINESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL POSITIONS
ADDRESS HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS THEREOF
- ----------------- --------------------------------------------------------------
<S> <C>
W. Bruce Lunsford....... Chairman of the Board, President and Chief Executive Officer
of Vencor since 1985. Member and Chairman of the Executive
Committee (the "Executive Committee") of Vencor since 1988.
William C. Ballard Director of Vencor since 1988. Member of the Executive
Jr. ................... Committee since 1990. Executive Vice President Finance and
Administration of Humana Inc. from 1981 through 1992. Of
counsel to Greenebaum Doll & McDonald PLLC since 1992.
Michael R. Barr......... Director of Vencor since 1985. Chief Operating Officer and
Executive Vice President of Vencor since February 1996.
Executive Vice President of Vencor and Chief Executive Officer
of Vencor's Hospital Division from 1995 through 1996. Vice
President Operations from 1985 through 1995.
Walter F. Beran......... Director of Vencor since September 1995. Member of the Audit
515 South Flower Street Committee of Vencor (the "Audit Committee") since 1995.
Los Angeles, CA 90071 Chairman of Pacific Alliance Group since September 1986.
Donna R. Ecton.......... Director of Vencor since 1992. Member of the Audit Committee
10000 North 31st since 1992. Chief Operating Officer of PETsMART, Inc. since
Avenue, December 1996. Chairman, President and Chief Executive Officer
Suite C100 of Business Mail Express, Inc. from 1995 through 1996.
Phoenix, AZ 85051 President and Chief Executive Officer of Van Houten North
America, Inc. and Andes Candies Inc., from 1991 through 1994.
Greg D. Hudson.......... Director of Vencor since 1991. Member of the Executive
Highway 41A, Compensation Committee of Vencor (the "Executive Compensation
North Providence, KY Committee") since 1991. President of Hudson Chevrolet-
42450 Oldsmobile, Inc. since 1988.
William H. Lomicka...... Director of Vencor since 1987. Member of the Executive
2510 Providian Center Committee since 1988. Member and Chairman of the Audit
400 West Market Street Committee since 1988. President of Mayfair Capital Inc. since
Louisville, KY 40202 1989.
W. Earl Reed, III....... Director of Vencor since 1987. Chief Financial Officer and
Executive Vice President of Vencor since November 1995. Vice
President Finance and Development of Vencor from 1987 through
1995.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND BUSINESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL POSITIONS
ADDRESS HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS THEREOF
- ----------------- --------------------------------------------------------------
<S> <C>
R. Gene Smith........... Director of Vencor since 1985 and Vice Chairman of the Board
3600 National City since 1987. Member and Chairman of the Executive Compensation
Tower Committee since 1988. President of New Jersey Blockbuster,
101 South Fifth Street Ltd. from 1987 through 1995. Chairman of the Board of Taco
Louisville, KY 40202 Tico, Inc. since 1988. Managing General Partner of Direct
Program Services since 1993.
Jack O. Vance........... Director of Vencor since September 1995. Member of the
3592 Venture Drive, Executive Compensation Committee since 1995. Managing Director
Huntington Beach, CA of Management Research since 1990.
92649
</TABLE>
THE PURCHASER
<TABLE>
<CAPTION>
NAME AND BUSINESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL POSITIONS
ADDRESS HELD DURING PAST FIVE YEARS, AND BUSINESS ADDRESS THEREOF
- ----------------- --------------------------------------------------------------
<S> <C>
W. Bruce Lunsford....... Chairman of the Board of Directors, President and Chief
Executive Officer of the Purchaser since February 1997.
Chairman of the Board, President and Chief Executive Officer
of Vencor since 1985. Member and Chairman of the Executive
Committee since 1988.
W. Earl Reed, III....... Director and Vice President of the Purchaser since February
1997. Director of Vencor since 1987. Chief Financial Officer
and Executive Vice President of Vencor since November 1995.
Vice President Finance and Development of Vencor from 1987
through 1995.
Michael R. Barr......... Director and Vice President of the Purchaser since February
1997. Director of Vencor since 1985, Chief Operating Officer
and Executive Vice President of Vencor since February 1996.
Executive Vice President of Vencor and Chief Executive Officer
of Vencor's Hospital Division from 1995 through 1996. Vice
President Operations from 1985 through 1995.
Thomas T. Ladt.......... Director and Vice President of the Purchaser since February
1997. Executive Vice President Operations of Vencor since
February 1996. President of Vencor's Hospital Division from
1995 through 1996. Vice President of Vencor's Hospital
Division from 1995 through 1996. Regional Director of
Operations of Vencor from 1989 through 1993.
Jill L. Force........... Secretary of the Purchaser since February 1997. Senior Vice
President, General Counsel and Corporate Secretary of Vencor
since December 1996. Vice President, General Counsel and
Corporate Secretary from 1995 through 1996. General Counsel
and Corporate Secretary from 1989 through 1995.
James H. Gillenwater, Senior Vice President of Planning and Development of Vencor
Jr..................... since December 1996. Vice President of Planning and
Development of Vencor from November 1995 through December
1996. Director of Planning and Development of Vencor from 1989
through 1995. Vice President of the Purchaser since February
1997.
</TABLE>
I-2
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for the Shares and any other
required documents should be sent by each stockholder of the Company or such
stockholder's broker-dealer, commercial bank, trust company or other nominee
to the Depositary as follows:
The Depositary is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Facsimile (for Eligible Institutions Only):
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York of New York Company 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 New York, NY 10005
Plaza
New York, NY 10005
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank or trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 WATER STREET
NEW YORK, NY 10005
CALL COLLECT (212) 269-5550
CALL TOLL FREE (800) 755-3105
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
ELEVEN MADISON AVENUE
NEW YORK, NY 10010-3629
CALL TOLL FREE (800) 881-8320
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK)
OF
THERATX, INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 14, 1997
BY
PEACH ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, MARCH 14, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
First Chicago Trust Company of New York
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569 c/o The Depository Trust Company 14 Wall Street
Suite 4660--TTX 55 Water Street, DTC TAD 8th Floor, Suite 4680--TTX
Jersey City, NJ 07303-2569 Vietnam Veterans Memorial Plaza New York, NY 10005
New York, NY 10041
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 3 of the Offer to Purchase (as defined below)) 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 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 Section 1 of the Offer to Purchase), 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.
<PAGE>
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARES TENDERED
ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
- --------------------------------------------------------------------------------
[_] 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 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 which Guaranteed Delivery________________________________
If delivered by book-entry transfer, check box:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Account Number_______________________________________________________________
Transaction Code Number______________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Peach Acquisition Corp., a Delaware
corporation (the "Purchaser"), and a wholly-owned subsidiary of Vencor, Inc.,
a Delaware corporation ("Vencor"), the above-described shares, par value $.001
per share (the "Common Stock"), including the associated rights to purchase
Series A Junior Participating Preferred Stock (the "Rights"), of TheraTx,
Incorporated, a Delaware corporation (the "Company") (the Common Stock and the
Rights together are referred to herein as the "Shares"), pursuant to the
Purchaser's Offer to Purchase dated February 14, 1997 (the "Offer to
Purchase") all of the outstanding Shares at a price of $17.10 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth
in the Offer to Purchase, receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, 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.
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, or upon the order of, the Purchaser, all right, title and
interest in and to all of the Shares being tendered hereby and any and all
cash dividends, distributions, rights, other Shares or other securities issued
or issuable in respect of such Shares on or after February 14, 1997
(collectively, "Distributions"), and appoints First Chicago Trust Company of
New York (the "Depositary") the true and lawful agent and attorney-in-fact of
the undersigned with respect to such Shares (and any Distributions) with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to the fullest extent of such
stockholder's rights with respect to such Shares (and any Distributions) (a)
to deliver such Share Certificates (as defined herein) (and any Distributions)
or transfer ownership of such Shares (and any Distributions) on the account
books maintained by a Book-Entry Transfer Facility, together in either such
case with all accompanying evidences of transfer and authenticity, to or upon
the order of the Purchaser, (b) to present such Shares (and any Distributions)
for transfer on the books of the Company and (c) to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
Distributions), all in accordance with the terms and the conditions of the
Offer.
The undersigned 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 Distributions. The designees of the Purchaser
will, with respect to the Shares (and any associated Distributions) 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 Company's
stockholders, by written consent in lieu of any such meeting or otherwise.
This proxy and power of attorney shall be irrevocable and coupled with an
interest in the tendered Shares. Such appointment is effective when, and only
to the extent that, the Purchaser deposits the payment for such Shares with
the Depositary. Upon the effectiveness of such appointment, without further
action, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares (and any associated Distributions)
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 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), including voting at
any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares (and any
Distributions) 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; and, pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of any such Distributions and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof,
as determined by the Purchaser in its sole discretion.
<PAGE>
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
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.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares 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 certificates
for Shares 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 certificates for Shares 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 owner thereof if the Purchaser does not accept
for payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cate(s) for Shares not tendered cate(s) for Shares not tendered
or not accepted for payment or not accepted for payment
and/or the check for the purchase and/or the check for the purchase
price of Shares accepted for pay- price of Shares accepted for pay-
ment are to be issued in the name ment are to be sent to someone
of someone other than the under- other than the undersigned, or to
signed. the undersigned at an address
other than that shown above.
Issue: [_] Check [_] Certificate(s)
to: Delliver: [_] Check [_]
Certificate(s) to:
Name: ____________________________ Name: ____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address: _________________________ Address: _________________________
__________________________________ __________________________________
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
__________________________________
(TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
<PAGE>
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).................................................................
(PLEASE PRINT)
Capacity (Full Title)...................................................
Address.................................................................
........................................................................
........................................................................
.................................................................
(INCLUDING ZIP CODE)
.................................... ................................
AREA CODE AND TELEPHONE NO. TAX IDENTIFICATION OR SOCIAL
SECURITY NO.
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>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations
and brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed (a) if this
Letter of Transmittal is signed by the registered owners (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 owner 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 Letter of Transmittal or
(b) if such Shares are tendered for the account of an Eligible Institution.
See Instruction 5 of this Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. This Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in Section 3 of the
Offer to Purchase. Certificates for all physically tendered Shares ("Share
Certificates"), or confirmation of any book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of Shares
tendered by book-entry transfer, as well as this Letter of Transmittal
properly completed and duly executed with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth herein on or
prior to the Expiration Date (as defined in the Offer to Purchase).
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver all other required documents to the Depositary on or prior
to the Expiration Date or who cannot comply with the procedures for book-entry
transfer on a timely basis may nevertheless tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must
be received by the Depositary prior to the Expiration Date; and (iii) Share
Certificates or confirmation of any book-entry transfer into the Depositary's
account at a Depository Institution of Shares tendered by book-entry transfer,
as well as a Letter of Transmittal, properly completed and duly executed with
any required signature guarantees (or, in the case of a book-entry transfer,
an Agent's Message), and all other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange 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 Letter of Transmittal must accompany each such
delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE
CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
<PAGE>
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
schedule attached hereto.
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
"Number of Shares Tendered." In such cases, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered owner, unless otherwise provided in the appropriate box
on this 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 LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered owners 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 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 Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-at-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered owner(s) of the
Shares 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 Letter of Transmittal is signed by a person other than the
registered owner of the certificates(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 appears 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 Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or (in
the circumstances permitted hereby) if certificates for Shares not tendered or
accepted for payment are to be registered in the name of, any person other
than the registered owner, or if tendered certificates are registered in the
name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered owner or such person) payable on account of the transfer to such
person will be deducted from the purchase price if satisfactory evidence of
the payment of such taxes, or exemption therefrom, is not submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or accepted for
payment are to be issued or returned to, a person other than the signer of
this Letter of Transmittal or if a check and/or such certificates are to be
mailed to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter
of Transmittal should be completed.
<PAGE>
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses set forth below or from your broker, dealer,
commercial bank or trust company. Additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender
offer materials may be obtained from the Information Agent.
9. 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.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH SHARE CERTIFICATES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for purchase is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below and to
certify that such TIN is correct (or that such stockholder is awaiting a TIN)
or otherwise establish a basis for exemption from backup withholding. If such
stockholder is an individual, the TIN is his or her social security number. If
a stockholder fails to provide a TIN to the Depositary, such stockholder may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
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
<PAGE>
stockholder should check the box in Part 3 of the Substitute Form W-9) and
that (A) such stockholder is exempt from backup withholding, (B) such
stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of failure to report
all interest or dividends or (C) the Internal Revenue Service has notified the
stockholder that the stockholder is no longer subject to backup withholding.
The stockholder must sign and date the Substitute Form W-9 where indicated,
certifying that the information on such Form is correct.
Alternatively, a stockholder that qualifies as an exempt recipient (other
than a stockholder required to complete Form W-8 as described above) should
write "Exempt" in Part 1 of the Substitute Form W-9, enter its correct TIN and
sign and date such Form where indicated.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or
of the last transferee appearing on the transfers attached to, or endorsed on,
the Shares. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance
on which number to report.
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
- ------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR Social security number
TIN IN THE BOX AT RIGHT AND OR Employer
CERTIFY BY SIGNING AND identification number
DATING BELOW.
SUBSTITUTE
FORM W-9
DEPARTMENT OF ----------------------
THE TREASURY --------------------------------------------------------
INTERNAL PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I
REVENUE CERTIFY THAT:
SERVICE (1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting for a
number to be issued to me); and
(2) I am not subject to backup withholding because
(i) I am exempt from backup 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
PAYOR'S REQUEST FOR dividends, or (iii) the IRS has notified me that I am
TAXPAYER no longer subject to backup withholding.
IDENTIFICATION -------------------------------------------------------
NUMBER (TIN) Certification Instructions--You must PART 3 --
cross out item (2) in Part 2 above if Awaiting
you have been notified by the IRS TIN [_]
that you are subject to backup with-
holding because of under-reporting
interest or dividends on your tax re-
turn. However, if after being noti-
fied by the IRS that you were subject
to backup withholding you received
another notification from the IRS
stating that you are no longer sub-
ject to backup withholding, do not
cross out item (2).
SIGNATURE ______________ DATE _______
NAME (Please Print) ________
-----------------------------------------------------------------------------
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 CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
-----------------------------------------------------------------------------
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 taxpayer identification number to the Depositary.
__________________________________ __________________________________
Signature Date
__________________________________
Name (Please Print)
-----------------------------------------------------------------------------
<PAGE>
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) 881-8320
February 14, 1997
<PAGE>
EXHIBIT (a)(3)
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK)
OF
THERATX, INCORPORATED
AT
$17.10 NET PER SHARE
BY
PEACH ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MARCH 14, 1997, UNLESS THE OFFER
IS EXTENDED.
February 14, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Peach 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 outstanding shares of common stock, par value
$.001 per share (the "Common Stock"), including the associated rights to
purchase Series A Junior Participating Preferred Stock (the "Rights") (the
Common Stock and the Rights together are referred to herein as the "Shares"),
of TheraTx, Incorporated, a Delaware corporation (the "Company"), at $17.10 per
share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Purchaser's Offer to Purchase dated February 14, 1997 and the
related Letter of Transmittal (which together constitute the "Offer"). Please
furnish copies of the enclosed materials to those of your clients for whom you
hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are the following documents:
1. Offer to Purchase dated February 14, 1997;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. Letter to Stockholders of the Company from the President and Chief
Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A 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;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.
LOGO
<PAGE>
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) A NUMBER OF SHARES
REPRESENTING AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER (THE "MINIMUM CONDITION"), (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO
THE OFFER HAVING EXPIRED OR BEEN TERMINATED AND (3) THE RECEIPT OF ALL
NECESSARY APPROVALS UNDER CHANGE OF OWNERSHIP, HEALTHCARE LICENSURE AND
CERTIFICATE OF NEED LAWS AND REGULATIONS.
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
FRIDAY, MARCH 14, 1997 UNLESS THE OFFER IS EXTENDED.
The Board of Directors of the Company has unanimously determined that the
Offer and the Merger are fair to and in the best interests of the Company and
its stockholders and has unanimously approved the Offer and the Merger
Agreement and has unanimously recommended that the Company's stockholders
accept the Offer and tender their Shares pursuant to the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of February 9, 1997, among the Company, Vencor
and the Purchaser, pursuant to which, after the completion of the Offer, the
Purchaser will be merged with and into the Company and each outstanding and
issued Share, not owned by Vencor, the Purchaser or any other subsidiary of
Vencor (or held by stockholders exercising appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law) will be converted into
the right to receive, without interest, $17.10 in cash. The Merger Agreement
is more fully described in the Offer to Purchase.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares (or timely Book-Entry Confirmation (as defined in
the Offer to Purchase) of the book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in the
Offer to Purchase) pursuant to the procedures set forth in Section 3 of the
Offer to Purchase), (ii) the Letter of Transmittal, 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))
and (iii) any other documents required by such Letter of Transmittal. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT
PURSUANT TO THE OFFER.
Neither the Purchaser nor Vencor will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager as disclosed
in the Offer to Purchase) in connection with the solicitation of tenders of
Shares pursuant to the Offer. You will be reimbursed upon request 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 the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of the enclosed Offer to Purchase. Requests for
additional copies of the enclosed materials may be directed to the Information
Agent or to the Dealer Manager.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY
OTHER PERSON THE AGENT OF THE PURCHASER, VENCOR, THE DEALER MANAGER, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT
OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER
NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK)
OF
THERATX, INCORPORATED
AT
$17.10 NET PER SHARE
BY
PEACH ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, MARCH 14, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated February 14,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Peach Acquisition
Corp., a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary
of Vencor, Inc., a Delaware corporation ("Vencor"), to purchase, for cash, all
of the outstanding shares of common stock, par value $.001 per share (the
"Common Stock"), including the associated rights to purchase Series A Junior
Participating Preferred Stock (the "Rights"), of TheraTx, Incorporated, a
Delaware corporation (the "Company") (the Common Stock and the Rights together
are referred to herein as the "Shares"), upon the terms and subject to the
conditions set forth in the Offer. Also enclosed is the letter to Stockholders
of the Company from the President and Chief Executive Officer of the Company
accompanied by the Company's Solicitation/Recommendation Statement on Schedule
14D-9.
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 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 is $17.10 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 Board of Directors of the Company has unanimously approved the Offer
and the Merger (as defined below) and determined that the terms of the
Offer and the Merger are fair to, and in the best interests of, the
Company and its stockholders and has unanimously recommended that the
Company's stockholders accept the Offer and tender their Shares.
<PAGE>
4. The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of February 9, 1997 (the "Merger Agreement"), among the
Company, Vencor and the Purchaser, pursuant to which, after the
completion of the Offer, the Purchaser will be merged with and into the
Company (the "Merger") and each outstanding Share, not owned by Vencor,
the Purchaser or any other subsidiary of Vencor (or held by stockholders
exercising appraisal rights pursuant to Section 262 of the Delaware
General Corporation Law) will be converted into the right to receive,
without interest, an amount in cash equal to $17.10. The Merger
Agreement is more fully described in Section 11 of the Offer to
Purchase.
5. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 14, 1997, UNLESS THE OFFER IS EXTENDED BY THE
PURCHASER (THE "EXPIRATION DATE").
6. The Offer is conditioned upon, among other things, (1) a number of
Shares representing at least a majority of the outstanding Shares on a
fully diluted basis being validly tendered and not withdrawn prior to
the expiration of the Offer, (2) any waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder applicable to the purchase of the Shares pursuant
to the Offer having expired or been terminated and (3) the receipt of
all necessary approvals under change of ownership, healthcare licensure
and certificate of need laws and regulations.
7. Any stock transfer taxes applicable to a sale of Shares to the Purchaser
will be borne by the Purchaser, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
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. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will be in all
cases 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 (as defined in the Offer to Purchase) with respect to) such
Shares, (b) a Letter of Transmittal, properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer effected pursuant to the procedure set forth in Section 3 of the
Offer to Purchase, an Agent's Message, and (c) any other documents required by
the Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations with respect to Shares are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING PAYMENT
PURSUANT TO THE OFFER.
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 or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed made on behalf of the Purchaser by Credit Suisse First Boston
Corporation, the Dealer Manager for the Offer, or one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction. An
envelope in which to return your instructions to us is enclosed. If you
authorize tender of your Shares, 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.
2
<PAGE>
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 A Junior Participating
Preferred Stock)
of
THERATX, INCORPORATED
The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase
of Peach Acquisition Corp. dated February 14, 1997 (the "Offer to Purchase"),
and the related Letter of Transmittal relating to shares of common stock, par
value $.001 per share (the "Common Stock"), including the associated rights to
purchase Series A Junior Participating Preferred Stock (the "Rights") of
TheraTx, Incorporated, a Delaware corporation. The Common Stock and the Rights
together are referred to herein as the "Shares."
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 and related Letter of
Transmittal.
Number of Shares to be
Tendered:*
SIGN HERE
Shares
----------
-------------------------------------
Daytime Area Code
and Tel. No. ____________________ -------------------------------------
Taxpayer Identification Signature(s)
No. or Social Security No. ______
Dated:______________________,1997 -------------------------------------
-------------------------------------
(Please print name(s) and
address(es))
- --------
* Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
3
<PAGE>
EXHIBIT (a)(5)
[VENCOR LOGO]
Contact: AT VENCOR: AT THERATX:
W. Earl Reed, III Donald R. Myll, Sr.
Executive Vice President and Senior Vice President and
Chief Financial Officer Chief Financial Officer
(502) 596-7380 (770) 569-1840
VENCOR TO ACQUIRE THERATX
----------------
ACQUISITION TO BROADEN ANCILLARY SERVICES
LOUISVILLE, Kentucky (February 10, 1997)--Vencor Inc. (NYSE: VC) ("Vencor")
and TheraTx, Incorporated (Nasdaq/NM:THTX)("TheraTx")jointly announced that
they have signed a definitive merger agreement for Vencor to acquire all the
outstanding shares of TheraTx. Pursuant to the agreement, Vencor will pay
$17.10 per share for each outstanding share of TheraTx common stock. TheraTx
currently has approximately 20.7 million shares of common stock outstanding.
The transaction will be a cash tender offer followed by a cash merger to
acquire any shares not previously tendered. As a result of the transaction,
TheraTx will become a wholly-owned subsidiary of Vencor. The transaction has
been recommended by the Boards of Directors of Vencor and TheraTx. Vencor
expects to commence its cash tender offer on February 14, 1997. The cash
tender offer is subject to Vencor receiving at least a majority of the fully
diluted shares of TheraTx as well as the receipt of the required regulatory
approvals, and is expected to be completed within 90 days.
W. Bruce Lunsford, Chief Executive Officer of Vencor, remarked, "The
acquisition of TheraTx will significantly broaden our menu of Vencare contract
services. TheraTx has successfully developed a range of outcomes-oriented
healthcare services focused on rehabilitation care and occupational health.
Combining these services with Vencor's existing base of contract services will
enable Vencor to offer a comprehensive, integrated program of contract
services to healthcare providers. The efficiency of these services will be
further enhanced by TheraTx's proprietary TheraSys clinical information system
which measures clinical outcomes and the clinical efficiency of care. By
incorporating TheraSys with our ProTouch system, we will be able to offer the
Vencare network of over 4,000 nursing homes an integrated ancillary services
information system that is unavailable to the industry today."
<PAGE>
Lunsford added, "This acquisition signals the successful completion of our
integration of the Hillhaven acquisition and the beginning of our rededication
to the growth of Vencor. TheraTx has added value to the customers it serves
which, in turn, has led to an impressive record of growth. The inclusion of
TheraTx is expected to be accretive to earnings based on projected synergies.
We believe that the strategic value as well as the operating efficiencies
resulting from this transaction will support our plans to accelerate Vencor's
growth from that achieved in recent quarters."
John A. Bardis, Chief Executive Officer of TheraTx, stated, "This merger
creates the nation's premier integrated ancillary services provider, and one
that is uniquely positioned to capitalize on current and emerging
opportunities in post-acute healthcare. We believe that this offer is
attractive to our shareholders and that the combination of these two
innovative, outcomes-oriented healthcare companies will benefit our customers,
patients and employees."
TheraTx combines an outcomes-oriented approach with its proprietary
information systems to provide cost-effective quality care in 216
Rehabilitation Centers of Excellence, 28 nursing centers and 16 occupational
health clinics. For the nine months ended September 30, 1996, TheraTx reported
revenues of $288.6 million and net income of $17.2 million, or $0.82 per fully
diluted share. For the same period, Vencor reported revenues of $1.91 billion
and net income of $92.0 million, or $1.30 per fully diluted share.
Vencor operates an integrated, long-term healthcare network consisting of 38
long-term acute care hospitals and 279 nursing centers, 41 institutional
pharmacies and, through its Atria Communities affiliate, 23 independent and
assisted living communities. The Company also provides contract subacute,
rehabilitation and respiratory therapy services to nursing and subacute
centers.
2
<PAGE>
EXHIBIT (a)(6)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase,
dated February 14,1997 and the related Letter of Transmittal and any
amendments or supplements thereto, and is being made to all holders of
Shares. The Offer is not being made to (nor will tenders be accepted from or
on behalf of) holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Purchaser by Credit Suisse
First Boston Corporation ("Credit Suisse First Boston") or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK)
OF
THERATX, INCORPORATED
AT
$17.10 NET PER SHARE
BY
PEACH ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
VENCOR, INC.
Peach Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of Vencor, Inc., a Delaware corporation ("Vencor"), is
offering to purchase all of the outstanding shares of common stock, par value
$.001 per share, of TheraTx, Incorporated, a Delaware corporation (the
"Company"), including the associated rights to purchase Series A Junior
Participating Preferred Stock (together, the "Shares"), of the Company at
$17.10 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 14,1997, and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Tendering
stockholders will not be obligated to pay brokerage fees or commissions or,
subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares by the Purchaser pursuant to the Offer. The purpose of the
Offer is to acquire for cash as many of the outstanding Shares as possible.
Following the consummation of the Offer, the Purchaser intends to effect the
merger described below.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, MARCH 14,1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION OF THE OFFER AND NOT WITHDRAWN A NUMBER OF
SHARES WHICH WILL CONSTITUTE AT LEAST A MAJORITY OF THE TOTAL SHARES OUTSTANDING
ON A FULLY DILUTED BASIS, (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER
APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR
BEEN TERMINATED AND (3) THE RECEIPT OF ALL NECESSARY APPROVALS UNDER CHANGE OF
OWNERSHIP, HEALTHCARE LICENSURE AND CERTIFICATE OF NEED LAWS AND REGULATIONS.
SEE SECTION 13 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as
of February 9, 1997 (the "Merger Agreement"), among the Company, Vencor and the
Purchaser, pursuant to which, after the completion of the Offer, the Purchaser
will be merged with and into the Company (the "Merger") and each outstanding and
issued Share not owned by Vencor, the Purchaser or any other subsidiary of
Vencor (or held by stockholders exercising appraisal rights pursuant to Section
262 of the Delaware General Corporation Law), will be converted into the right
to receive, without interest, $17.10 in cash. The Merger Agreement is more fully
described in Section 11 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND HAS
UNANIMOUSLY RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES.
<PAGE>
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when the Purchaser
gives oral or written notice to First Chicago Trust Company of New York (the
"Depositary") of its acceptance for payment of such Shares pursuant to the
Offer. Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for the tendering stockholders for the purpose of receiving
payments from the Purchaser and transmitting such payments to the tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation of the book-entry transfer
of such Shares into the Depositary's account at The Depository Trust Company or
the Philadelphia Depository Trust Company (each a "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message (as defined in Section 3 of
the Offer to Purchase)) and (iii) any other documents required by such Letter of
Transmittal.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission, the Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time, to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary. Any such extension will also
be publicly announced by press release issued no later than 9:00 A.M., New York
City time, on the next business day after the previously scheduled expiration
date of the Offer.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
expiration of the Offer and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after April
14, 1997.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person having tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the names in which the certificate(s) evidencing the
Shares to be withdrawn are registered, if different from that of the person who
tendered such Shares. If certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then prior to the physical
release of such certificates, the name of the registered holder and the serial
numbers shown on such certificates must also be submitted to the Depositary and,
unless such Shares have been tendered for the account of any Eligible
Institution (as defined in Section 3 of the Offer to Purchase), the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer as
set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and otherwise comply with such Book-
Entry Transfer Facility's procedures for such withdrawal, in which case a notice
of withdrawal will be effective if delivered to the Depositary in writing.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for the purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described above in Section 3 of the Offer to Purchase at any time on
or prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase).
The information required to be disclosed by paragraph (e)(1)(vii) of Rule l4d-
6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided the Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the Letter of Transmittal and, if required,
other relevant materials, will be mailed by the Purchaser to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the Letter of the Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance may be directed to the Information Agent
or to the Dealer Manager at their respective addresses and telephone numbers set
forth below. Requests for additional copies of the Offer to Purchase, the
related Letter of Transmittal and other tender offer materials may be directed
to the Information Agent or the Dealer Manager. Such additional copies will be
furnished at the Purchaser's expense. All questions as to the form and validity
(including time of receipt) of any notice of withdrawal will be determined by
the Purchaser, in its sole discretion, which determination shall be final and
binding. The Purchaser will not pay any fees or commissions to any broker or
dealer or any other person (other than the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free (800) 755-3105
The Dealer Manager for the Offer is:
CREDIT FIRST
SUISSE BOSTON
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
February 14, 1997
<PAGE>
EXHIBIT (a)(7)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK)
OF
THERATX, INCORPORATED
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form or one substantially equivalent may be used to accept the Offer (as
defined below) if certificates for shares of common stock, par value $.001 per
share, (the "Common Stock"), of TheraTx, Incorporated, a Delaware corporation
(the "Company"), including the associated rights to purchase Series A Junior
Participating Preferred Stock of the Company (the "Rights"), 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 the Depositary prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase). The Common Stock and the Rights together are referred to
herein as the "Shares". 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 Section
3 of the Offer to Purchase). See Section 3 of the Offer to Purchase.
The Depositary:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand: By Overnight Courier:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York ATTN: Company of New York
Tenders & Exchanges Tenders & Exchangesc/o The Tenders & Exchanges 14
P.O. Box 2569 Suite Depository Trust Company Wall Street, 8th Floor
4660--TTX Jersey City, 55 Water Street, DTC TAD Suite 4680--TTX New
NJ 07303-2569 Vietnam Veterans Memorial York, NY 10005
Plaza New York, NY 10041
Facsimile (for Eligible Institutions Only):
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
----------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Peach Acquisition Corp., a Delaware
corporation (the "Purchaser") 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 February 14, 1997 (the "Offer to Purchase") and
the related Letter of Transmittal (which, together constitute the "Offer"),
receipt of which is hereby acknowledged, the number of Shares set forth below,
all pursuant to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
Number of Shares: ___________________
Name(s) of Record Holder(s): ________
Certificate Nos. _____________________________________
(if available): _____________________
_____________________________________
_____________________________________
Please Print
_____________________________________
Address(es): ________________________
(CHECK ONE BOX IF SHARES _____________________________________
Zip Code
WILL BE TENDERED BY BOOK-ENTRY
TRANSFER)
[_]The Depository Trust Company Daytime Area Code
and Tel. No.: _______________________
[_]Philadelphia Depository Trust
Company
Signature(s): _______________________
Account Number: _____________________
Dated: ______________________________ _____________________________________
<PAGE>
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 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 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.
Name of Firm: _______________________
_____________________________________
Authorized Signature
Address: ____________________________
Zip Code Name: _______________________________
Please Print
_____________________________________
Title: ______________________________
Area Code and Tel. No.: _____________
Dated: ______________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR
SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(8)
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>
<CAPTION>
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT NUMBER OF--
- -------------------------------------------
<S> <C>
1.An individual's The individual
account
2. Two or more The actual owner
individuals (joint of the account
account) or, if combined
funds, any one
of the
individuals(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4.a. The usual The grantor-
revocable savings trustee(1)
trust account
(grantor is also
trustee)
b. So-called trust The actual
account that is not owner(1)
a legal or valid
trust under State
law
5. Sole proprietorship The owner(3)
account
</TABLE>
<TABLE>
<CAPTION>
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT NUMBER OF--
--------------------------------------------------------------
<S> <C>
6. Sole proprietorship account The owner(3)
7. A valid trust, estate, or pension trust The legal
entity(4)
8. Corporate account The corporation
9. Association, club, religious, charitable, educational or other tax-exempt organization account The organization
10. Partnership The partnership
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of Agriculture in the name of a public entity (such as a State or local The public
government, school district, or prison) that receives agricultural program payments entity
</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>
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>
EXHIBIT (b)(1)
February 13, 1997
Mr. Richard A. Lechleiter
Vice President of Finance and
Corporate Controller
Vencor, Inc.
3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Dear Rich:
You have advised us that Vencor, Inc. (the "Borrower") intends to acquire
TheraTx, Incorporated (the "Acquired Company"; hereinafter the acquisition of
Acquired Company may be referred to as the "Acquisition") for approximately $550
million, including assumed debt. This Acquisition will be structured as a stock
acquisition. You have also advised us that $1.6 billion in a senior credit
facility (the "Credit Facility") will be required in order to effect the
Acquisition, to pay the costs and expenses related to the Acquisition and to
provide for ongoing general corporate purposes after completion of the
Acquisition.
In connection with the foregoing, Morgan Guaranty Trust Company of New York, as
Documentation Agent ("Morgan") and NationsBank, N.A., as Administrative Agent
("NationsBank"; "Morgan" and "NationsBank" collectively referred to as the
"Agents") are pleased to advise you of their commitment to each underwrite $800
million of the Credit Facility described in the term sheet attached hereto as
Annex I (the "Term Sheet"). The foregoing commitments are made by the Agents on
a several and not a joint basis. J.P. Morgan Securities Inc. ("JPMSI") and
NationsBanc Capital Markets, Inc. ("NCMI"; "JPMSI" and "NCMI" collectively the
"Arrangers") are pleased to advise you of their commitment as Arrangers and
Syndication Agents for the Credit Facility, to form a syndicate of financial
institutions (the "Lenders") reasonably acceptable to you and the Arrangers for
the Credit Facility. All capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Term Sheet.
The commitments of the Agents and the Arrangers hereunder are subject to the
satisfaction of each of the following conditions precedent in a manner
acceptable to the Agents and Arrangers in their sole discretion:
(a) each of the terms and conditions set forth herein;
(b) each of the terms and conditions set forth in the Term Sheet;
(c) execution by the Borrower, the Acquired Company and/or other
appropriate parties of the definitive Agreement and Plan of Merger
dated as of February 9, 1997, without material changes made thereto;
and execution of other related documentation relating to the
Acquisition in form and substance satisfactory to the Agents and the
Arrangers;
<PAGE>
2
(d) the negotiation, execution and delivery of definitive documentation
with respect to the Credit Facility consistent with the Term Sheet
satisfactory to the Agents and the Arrangers;
(e) there not having occurred and continuing since the date hereof a
material adverse change in the market for syndicated bank credit
facilities or a material disruption of, or a material adverse change
in, financial, banking, capital market conditions or
regulatory/healthcare reimbursement environment, in each case as
determined by the Agents and the Arrangers in their sole discretion;
and
(f) that prior to and during the syndication of the Credit Facility there
shall be no competing offering, placement or arrangement of debt
securities or bank financing on behalf of the Borrower (unless
otherwise agreed to by the Agents and the Arrangers).
No additional agents will be appointed or titles granted without the prior
approval of the Agents and the Arrangers.
Furthermore, the commitments of the Agents and the Arrangers hereunder are based
upon the financial and other information regarding the Borrower, the Acquired
Company and their respective subsidiaries previously provided to the Agents and
the Arrangers, and are subject to the condition, among others, that there shall
not have occurred after the date of such information any material adverse change
in the business, assets, liabilities (actual or contingent), operations or
financial condition of the Borrower, the Acquired Company and their respective
subsidiaries taken as a whole. If the continuing review by the Agents and the
Arrangers of the Borrower or the Acquired Company discloses information relating
to conditions or events not previously disclosed to the Agents and the Arrangers
or relating to new information or additional developments concerning conditions
or events previously disclosed to the Agents and the Arrangers which are
reasonably expected to have a material adverse effect on the financial
condition, assets, properties, business, operations or liabilities (actual or
contingent) of the Borrower or the Acquired Company and their respective
subsidiaries taken as a whole, the Agents and the Arrangers may, in their sole
discretion, suggest alternative financing amounts or structures that ensure
adequate protection for the Lenders or decline to participate in the proposed
financing.
You agree to actively assist the Agents and the Arrangers in achieving a
syndication of the Credit Facility that is satisfactory to the Agents, the
Arrangers and you. Syndication of the Credit Facility will be accomplished by a
variety of means, including direct contact during the syndication between senior
management and advisors of the Borrower and the Acquired Company, and the
proposed Lenders. To assist the Agents and the Arrangers in the syndication
efforts, you hereby agree to (a) provide and cause your advisors to provide the
Agents and the Arrangers and the other Lenders upon request with all information
reasonably deemed necessary by the Agents and the Arrangers to complete the
syndication, including but not limited to information and evaluations prepared
by the Borrower and the Acquired Company and their advisors, or on their behalf,
relating to the Acquisition, (b) assist the Agents and the Arrangers upon their
reasonable requests in the preparation of an Information Memorandum to be used
in connection with the syndication of the Credit Facility, and (c) otherwise
assist the Agents and the Arrangers in their syndication efforts, including by
making available officers and advisors of the Borrower and the Acquired Company
and their subsidiaries from time to time to attend and make presentations
regarding the business and prospects of the Borrower and the Acquired Company
and their subsidiaries, as appropriate, at a meeting or meetings of prospective
Lenders. You further agree to refrain from engaging in any additional
financings for the Acquired Company (except as described in this letter) during
such syndication process unless otherwise agreed to by the Agents and the
Arrangers.
<PAGE>
3
It is understood and agreed that the Agents and the Arrangers will manage and
control all aspects of the syndication, including decisions as to the selection
of proposed Lenders and any titles offered to proposed Lenders, when commitments
will be accepted and the final allocations of the commitments among the Lenders,
all of the foregoing in consultation with you. It is understood that no Lender
participating in the Credit Facility will receive compensation from you outside
the terms contained herein and in the Term Sheet in order to obtain its
commitment. It is also understood and agreed that the amount and distribution
of the fees among the Lenders will be at the sole discretion of the Agents and
the Arrangers and that any Lender commitments received as a result of a
syndication prior to execution of definitive documentation will reduce the
commitments of the Agents.
You hereby represent, warrant and covenant that (i) all information, other than
Projections (as defined below), which has been or is hereafter made available to
the Agents and the Arrangers or the Lenders by you or any of your
representatives in connection with the transactions contemplated hereby
("Information") when taken as a whole is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein misleading and (ii) all financial projections concerning the
Borrower and the Acquired Company that have been or are hereafter made available
to the Agents and the Arrangers or the Lenders by you or any of your
representatives (the "Projections") have been or will be prepared in good faith
based upon reasonable assumptions. You agree to furnish us with such
Information and Projections as we may reasonably request and to supplement the
Information and the Projections from time to time until the closing date for the
Credit Facility so that the representation and warranty in the preceding
sentence is correct on such date. In arranging and syndicating the Credit
Facility, the Agents and the Arrangers will be using and relying on the
Information and the Projections without independent verification thereof.
By executing this letter agreement, you agree to reimburse the Agents and the
Arrangers from time to time on demand for all reasonable out-of-pocket fees and
expenses (including, but not limited to, the reasonable fees and disbursements
and other charges of special counsel to the Agents incurred in connection with
the Credit Facility and the preparation of the definitive documentation for the
Credit Facility and the other transactions contemplated hereby).
In the event that the Agents or Arrangers become involved in any capacity in any
action, proceeding or investigation in connection with any matter contemplated
by this letter, the Borrower will reimburse the Agents and the Arrangers for
their reasonable legal and other out-of-pocket expenses (including the cost of
any investigation and preparation) as they are incurred by the Agents and the
Arrangers. The Borrower also agrees to indemnify and hold harmless the Agents
and Arrangers and their affiliates and their respective directors, officers,
employees and agents (the "Indemnified Parties") from and against any and all
losses, claims, damages and liabilities, joint or several, related to or arising
out of any matters contemplated by this letter, unless and only to the extent
that it shall be finally judicially determined that such losses, claims, damages
or liabilities resulted primarily from the gross negligence or willful
misconduct of the Agents or the Arrangers.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitments of the Agents and the Arrangers hereunder.
As described herein and in the Term Sheet, JPMSI and NCMI will act as Arrangers
and Syndication Agents for the Credit Facility. The Agents reserve the right to
allocate, in whole or in part, to JPMSI and
<PAGE>
4
NCMI certain fees payable to Morgan and NationsBank in such manner as the Agents
and the Arrangers agree in their sole discretion. You acknowledge and agree that
Morgan and NationsBank may share with any of their affiliates (including
specifically the Arrangers) any information relating to the Credit Facility, the
Borrower, the Acquired Company, and their subsidiaries and affiliates.
This letter agreement may not be assigned by the Borrower without the prior
written consent of the Agents and the Arrangers.
Except as required by applicable law, this letter and the contents hereof shall
not be disclosed by you to any third party (including the Acquired Company)
without the prior consent of the Agents and the Arrangers, other than to your
attorneys, financial advisors and accountants, in each case to the extent
necessary in your reasonable judgment; provided, however, it is understood and
agreed that, after acceptance of this letter by you by execution in the space
provided below, you may disclose the terms of this letter to the Acquired
Company in connection with the offer. We acknowledge and agree that this letter
will be filed with the Securities and Exchange Commission. Without limiting the
foregoing, in the event that you disclose the contents of this letter in
contravention of the preceding sentences, you shall be deemed to have accepted
the terms of this letter.
This letter may be executed in counterparts which, taken together, shall
constitute an original. This letter, together with the Term Sheet, embodies the
entire agreement and understanding among the Agents, the Arrangers and the
Borrower with respect to the specific matters set forth herein and supersedes
all prior agreements and understandings relating to the subject matter hereof,
not withstanding the foregoing, the parties hereto acknowledge that the terms of
the confidential letter dated July 21, 1995 from the Agents to the Borrower
shall be deemed to apply to confidential information delivered in connection
with the transaction described herein until the earlier of (a) one year from the
date hereof or (b) the execution of a definitive agreement with respect to the
Credit Facility including a confidentiality provision. No party has been
authorized by the Agents or the Arrangers to make any oral or written statements
inconsistent with this letter. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAW.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement no later than the close of business on
February 14, 1997. This letter agreement will become effective upon your
delivery to us of executed counterparts of this letter agreement and, without
limiting the more specific terms hereof and of the Term Sheet, you agree upon
acceptance of these commitments to pay the fees set forth in the Term Sheet.
These commitments shall terminate if not so accepted by you prior to that time.
Following acceptance by you, these commitments will terminate on April 15, 1997,
unless the Credit Facility is closed by such time.
<PAGE>
5
Very truly yours,
J. P. MORGAN SECURITIES INC. MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
/s/ Stephen Kenneally /s/ Diana H. Imhof
By: _________________________ By: ____________________________
Title: Vice President Title: Vice President
60 Wall Street 60 Wall Street
New York, New York 10260 New York, New York 10260
Telephone: 212/648-6993 Telephone: 212/648-7173
Telecopier: 212/648-5016 Telecopier: 212/648-5018
NATIONSBANC CAPITAL MARKETS, INC. NATIONSBANK, N.A.
/s/ Bruce Ofenloch /s/ Ashley M. Crabtree
By: ___________________________________ By: ______________________________
Title: Managing Director Title: Senior Vice President
NationsBank Corporate Center NationsBank Corporate Center
100 North Tryon Street 100 North Tryon Street
Charlotte, North Carolina 28255 Charlotte, North Carolina 28255
Telephone: 704/386-3569 Telephone: 704/386-3569
Telecopier: 704/386-0209 Telecopier: 704/386-0209
ACCEPTED AND AGREED TO
this 13th day of February, 1997:
VENCOR, INC.
/s/ Richard A. Lechleiter
By: __________________________________
Title: VP Finance &
Corporate Controller
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
FOR VENCOR, INC.
BORROWER: Vencor, Inc.
GUARANTORS: Material subsidiaries shall unconditionally
guarantee all amounts due and payable by the
Borrower.
AMOUNT: $1,600,000,000.
FACILITY DESCRIPTION: Five-year revolving credit facility maturing in
2002.
PURPOSE: To finance the acquisition of TheraTx,
Incorporated ("TheraTx") and for general corporate
purposes (including working capital and
acquisitions) and to finance existing and future
letters of credit.
PROJECT LOANS: To finance capital expansion
projects.
MERGER LOANS: To refinance existing debt at
TheraTx and existing debt at Vencor.
GENERAL PURPOSE LOANS: To finance general
corporate purposes.
LETTERS OF CREDIT: Up to $150 million for letters
of credit.
CO-ARRANGERS: J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of New York
("Morgan").
ADMINISTRATIVE AGENT: NationsBank, N.A. ("NationsBank").
L/C ISSUING BANKS: NationsBank, PNC Bank, Seattle First, Bank of
America, National City Bank, Wachovia Bank and any
other Bank designated by Vencor from time to time.
LENDERS: A syndicate of lenders acceptable to the Borrower
and the
Co-Arrangers (the "Banks").
SECURITY: Vencor's obligations under this facility and its
obligation to individual Banks with respect to
derivative obligations will be secured by a first
priority lien on the capital stock of Vencor's
present and future principal subsidiaries and by
all present and future intercompany debt owed to
Vencor by its subsidiaries.
February 13, 1997 Page 1
<PAGE>
Collateral to be automatically released upon
Vencor receiving a public senior unsecured long
term debt rating by both S&P and Moody's of BBB-
and Baa3 ("Investment Grade Status").
The Banks may also receive pledges of certain
mortgages as an abundance of caution, which may be
released without Banks consent at the request of
Vencor.
BORROWING OPTIONS: LIBOR, Adjusted CD, Base Rate and Money Market.
CD will be automatically adjusted for reserves and
other regulatory requirements. LIBOR adjustments
for Reg D will be charged by Banks individually
Base Rate means the higher of NationsBank's prime
rate or the federal funds rate + 0.50%.
MONEY MARKET OPTION: If the Borrower's debt is Investment Grade, the
Borrower may request the Administrative Agent to
solicit competitive bids from the Banks at a
margin over LIBOR or at an absolute rate. Each
Bank will bid at its own discretion for amounts up
to the total amount of the commitments, and the
Borrower will be under no obligation to accept any
of the bids. Any Money Market advances made by a
Bank shall be deemed usage of the facility for the
purpose of availability. However, each Bank's
advance shall not reduce such Bank's obligation to
lend its pro rata share of the remaining undrawn
commitment.
If the Borrower's debt is not Investment Grade,
but is rated no lower than BB by S&P and Ba2 by
Moody's, the Borrower may request bids from the
Banks as described above up to maximum amount of
$100,000,000.
PRICING: Pricing on the commitments, loans, and letters of
credit will be at the following rates per annum,
expressed in basis points, and will vary according
to to credit quality (see pricing grid below).
TOTAL DEBT/ FACILITY LIBOR CD BASE RATE
EBITDA RATIO FEE (BP) PLUS (BP) PLUS (BP) PLUS (BP)
-------------- --------- --------- --------- ----------
GREATER THAN 3.50 31.25 68.75 81.25 0.00
GREATER THAN 3.25 25.00 62.50 75.00 0.00
GREATER THAN 3.00 25.00 50.00 62.50 0.00
GREATER THAN 2.50 20.00 42.50 55.00 0.00
GREATER THAN 2.00 17.50 37.50 50.00 0.00
LESS THAN/
EQUAL TO 2.00 12.50 25.00 37.50 0.00
February 13, 1997 Page 2
<PAGE>
FACILITY FEE: A per annum fee calculated on a 365/366-day
basis on each Bank's commitment irrespective of
usage, payable quarterly in arrears.
LETTER OF CREDIT FEE: A per annum fee calculated on a 360-day basis on
the amount available for drawing under issued
letters of credit, payable quarterly in arrears
and upon termination of the facility. Such fee
shall be equal to the applicable LIBOR margin in
effect from time to time according to the above
pricing grid.
LETTER OF CREDIT FRONTING FEE: To be determined by Vencor and each L/C Issuing
Bank.
LETTERS OF CREDIT: Letters of credit will be issued by an L/C
Issuing Bank. Letters of credit will expire no
later than the fifth business day prior to the
maturity date of the facility.
Drawings under any letter of credit will be
reimbursed by Vencor on the same business day.
SWINGLINE OPTION: The Administrative Agent agrees to make
swingline loans to the Borrower from time to
time in an aggregate amount up to $20,000,000.
Such loans shall bear interest at a rate
mutually agreeable between the Borrower and the
Administrative Agent.
INTEREST PAYMENTS: At the end of each applicable Interest Period or
quarterly, if earlier.
INTEREST PERIODS: Syndicated Borrowings;
---------------------
LIBOR Loans - 1, 2, 3, or 6 months.
Adjusted CD Loans - 30, 60, 90, or 180 days.
Non-Syndicated Borrowings:
-------------------------
Money Market LIBOR Loans - minimum 1 month.
Money Market Absolute Rate Loans - minimum 7
days.
DRAWDOWNS: Minimum amounts of $5 million with additional
increments of $1 million for LIBOR, Adjusted CD
Loans and Money Market Loans ($1,000,000 with
additional increments of $100,000 for Base Rate
Loans). Drawdowns are at Vencor's option with
same day notice for Base Rate Loans, one
business day's for Money Market Absolute Rate
Loans, two business days' for Adjusted CD Loans,
three business days' for LIBOR Loans and five
business days' for Money Market LIBOR Loans.
TERMINATION OR REDUCTION Mandatory:
---------
OF COMMITMENTS: Facility to be reduced to $1.2 billion on the
fourth anniversary of the closing date.
February 13, 1997 Page 3
<PAGE>
Voluntary:
---------
Vencor may reduce the unused portion of the
commitments by an amount of at least $10,000,000
at any time on three business days' notice.
PREPAYMENTS: Base Rate Loans may be prepaid at any time on
same day's notice before 12 noon New York time.
LIBOR and Adjusted CD Loans may not be prepaid
before the end of an Interest Period unless
compensation for funding losses is provided to
the Banks. Money Market Loans may not be prepaid
before the end of an Interest Period.
REPRESENTATIONS AND WARRANTIES: With respect to Vencor, TheraTx and their
respective subsidiaries, including:
1. Corporate existence.
2. Corporate and governmental authorization; no
contravention; binding effect.
3. Financial information.
4. No material adverse change.
5. Environmental matters.
6. Compliance with laws, including ERISA.
7. No material litigation.
8. Existence, incorporation, etc. of
subsidiaries.
9. Payment of taxes.
10. Full disclosure.
11. Usual representations as to the merger
agreement and the collateral.
CONDITIONS TO CLOSING: Including:
1. Satisfactory closing documentation, including
receipt and perfection of security in form
and substance satisfactory to the Banks.
2. Prior to or simultaneously with the initial
borrowing the acquisition of sufficient
shares of TheraTx to permit completion of the
merger contemplated by the Agreement and Plan
of Merger dated as of February 9, 1997,
without consent of the other shareholders.
3. No material adverse change shall have
occurred in the financial condition, results
of operations, business of Vencor, TheraTx
and their respective subsidiaries since
December 31, 1996.
February 13, 1997 Page 4
<PAGE>
4. Repayment of Vencor's credit agreement dated
as of September 11, 1995, as amended.
5. Opinions of counsel in form and substance
satisfactory to the Documentation Agent.
6. Receipt of required regulatory approvals and
third party approvals, if any.
CONDITIONS TO BORROWING: Including but not limited to:
1. Absence of default.
2. Accuracy of representations and warranties.
COVENANTS: With respect to Vencor, TheraTx and their
respective subsidiaries (with certain existing
exceptions for Atria Communities), including but
not limited to:
1. Information.
2. Maintenance of property; insurance coverage.
3. Conduct of business; maintenance of
existence.
4. Compliance with laws, including ERISA and
environmental regulations.
5. Negative pledge (including subsidiary stock
and assets).
6. Consolidations, mergers and sale of assets.
7. Any new debt issuances shall be longer in
maturity and on terms no more restrictive
than the bank debt, except that refinancing
of existing debt may occur under terms
substantially equal to debt being
refinanced. This facility may be used to
refinance any existing debt. Vencor will be
allowed to do short term money market
borrowings outside the credit agreement
after reaching investment grade status.
8. New subsidiary debt limited to $25 million
in the aggregate, except no limitation on
subsidiary debt assumed in acquisitions not
created in contemplation thereof.
9. Use of proceeds.
10. Minimum consolidated net worth shall not at
any time be less than the sum of 80% of pro-
forma net worth at closing, plus 50% of
positive quarterly net income, plus 50% of
the amount by which net worth is increased
by equity issuances.
11. Maximum leverage ratio (Debt/EBITDA).
Initially, 4.00:1.0. Further levels to be
determined.
12. Coverage ratio (EBITDAR/I+R).
Initially, 2.50:1.0. Further levels to be
determined.
13. Restrictions on investments (in minority
owned affiliates) - basket not to exceed 7%
of consolidated net worth.
February 13, 1997 Page 5
<PAGE>
14. Limitations on restricted payments (until
Vencor reaches Investment Grade Status) -
basket not to exceed $50,000,000, plus
additional increments of $10,000,000 per
year thereafter.
15. Transactions with affiliates on arms-length
basis.
EVENTS OF DEFAULT: Including:
1. Failure to pay any principal or reimbursement
obligations payable under the credit
agreement when due; failure to pay interest
or fees within three business days.
2. Failure to meet covenants (with grace
periods, where appropriate).
3. Representations or warranties false in any
material respect when made.
4. Cross default to other debt of Vencor,
TheraTx and their respective subsidiaries
which is triggered by an event which permits
the holder to accelerate its debt or
terminate its commitment aggregating $25
million or more.
5. Change of ownership or control.
6. Other usual defaults with respect to Vencor,
TheraTx and their respective subsidiaries,
including but not limited to insolvency,
bankruptcy, ERISA, guarantees, collateral and
judgment defaults.
INCREASED COSTS/CHANGE OF
CIRCUMSTANCES: The credit agreement will contain customary
provisions protecting the Banks in the event of
unavailability of funding, illegality, increased
costs, capital adequacy and funding losses.
INDEMNIFICATION: Vencor will indemnify the Banks against all
losses, liabilities, claims, damages, or expenses
relating to their loans, Vencor's use of loan
proceeds or the commitments, including but not
limited to reasonable attorneys' fees and
settlement costs (except such as result from the
indemnitee's gross negligence or willful
misconduct).
TRANSFERS AND PARTICIPATIONS: Banks will have the right to transfer or sell
participations in their loans or commitments with
the transferability of voting rights limited to
changes in principal, rate, fees and term.
Assignments, which must be in amounts of at least
$15 million, will be allowed with the consent of
the Borrower, the L/C Issuing Banks and the
Administrative Agent, such consents not to be
unreasonably withheld. Assignments will be
allowed
February 13, 1997 Page 6
<PAGE>
within the Bank group and to Bank affiliates
without such consent.
REQUIRED BANKS: 51% of the Banks.
EXPENSES: Vencor will pay all legal and other reasonable
out-of-pocket expenses of the Documentation Agent
and Administrative Agent related to this
transaction and any subsequent amendments or
waivers, including the fees and reasonable
expenses of Davis Polk & Wardwell, special counsel
to the Documentation Agent subject to a mutually
agreed upon cap.
GOVERNING LAW: State of New York.
February 13, 1997 Page 7
<PAGE>
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated as
of February 9, 1997, among TheraTx, Incorporated a Delaware corporation (the
"Company"), Vencor, Inc., a Delaware corporation ("Purchaser"), and Peach
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Purchaser ("Merger Sub"), the Company and Merger Sub sometimes being
hereinafter collectively referred to as the "Constituent Corporations."
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each have
unanimously approved of this Agreement, the Offer (as defined herein) and the
Merger (as defined herein) and determined that it is in the best interests of
their respective companies and stockholders for Purchaser to acquire the
Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the representation,
warranties, covenants and agreements contained herein the parties hereto
hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.1. Tender Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article IX hereof and none of the events set forth in Annex A
hereto shall have occurred or be existing, within five business days of the
date hereof, Merger Sub will commence a tender offer (the "Offer") for all of
the outstanding shares of Common Stock, par value $0.001 per share of the
Company (the "Shares"), together with the associated rights to purchase (the
"Rights") Series A Junior Participating Preferred Stock of the Company (the
"Series A Preferred") at a price of $17.10 per Share in cash, net to the
seller, subject only to the conditions set forth in Annex A hereto. Subject to
the terms and conditions of the Offer, Purchaser will promptly pay for all
Shares duly tendered. The Company's Board of Directors shall recommend
acceptance of the Offer to its stockholders in a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to be filed with the
Securities and Exchange Commission (the "SEC") upon commencement of the Offer.
(b) Purchaser agrees, as to the Offer to Purchase and related Letter of
Transmittal (which together constitute the "Offer Documents") and the 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. The Company and its counsel, as to the Offer Documents,
and Merger Sub and its counsel, as to the Schedule 14D-9, shall be given an
opportunity to review such documents prior to their being filed with the SEC.
(c) In connection with the Offer, the Company will cause its Transfer Agent
to furnish promptly to Merger Sub a list, as of a recent date, of the record
holders of Shares and their addresses, as well as mailing labels containing
the names and addresses of all record holders of Shares and lists of security
positions of Shares held in stock depositories. The Company will furnish
Merger 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 Purchaser or Merger
Sub or their agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares.
1
<PAGE>
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 2.3) Merger Sub shall be merged with
and into the Company and the separate corporate existence of Merger Sub shall
thereupon cease (the "Merger"). The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the 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 specified in the Delaware General Corporation Law
(the "DGCL").
2.2. Closing. The closing of the Merger (the "Closing") shall take place (i)
at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at
10:00 A.M. on the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other place and
time and/or on such other date as the Company and Purchaser may agree.
2.3. Effective Time. As soon as practicable following the Closing, and
provided that this Agreement has not been terminated or abandoned pursuant to
Article IX hereof, the Company and the Purchaser will cause a Certificate of
Merger (the "Delaware Certificate of Merger") to be executed and filed with
the Secretary of State of Delaware as provided in Section 251 of the DGCL (or,
if permitted, Section 253 of the DGCL). The Merger shall become effective on
the date on which the Delaware Certificate of Merger has been duly filed with
the Secretary of State of Delaware, and such time is hereinafter referred to
as the "Effective Time."
ARTICLE III
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
3.1. The Certificate of Incorporation. The Certificate of Incorporation of
the Company (the "Certificate") in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended
in accordance with the terms thereof and the DGCL, except that Article IV
of the Certificate shall be amended to read in its entirety as follows unless
the event contemplated by Section 7.14(iii) shall have occurred, in which case
Article IV of the Certificate shall not be amended at the Effective Time:
"The aggregate number of shares which the Corporation shall
have the authority to issue is 1,000 shares of Common Stock,
par value $0.001 per share."
3.2. The Bylaws. The Bylaws of Merger Sub in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL.
ARTICLE IV
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
4.1. Officers and Directors. The directors of Merger Sub and the officers of
the Company at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
2
<PAGE>
4.2. Board of Directors; Committees.
(a) If requested by Purchaser, the Company will, promptly following the
purchase by Merger Sub of Shares pursuant to the Offer, take all actions
necessary to cause persons
designated by Purchaser 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 board of directors of the 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 Purchaser 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, the 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 Purchaser'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 members who are neither officers of Purchaser nor designees, shareholders
or affiliates of Purchaser ("Purchaser Insiders"). At such time, the Company,
if so requested, will use its reasonable efforts to cause persons designated
by Purchaser to constitute the same percentage of each committee of the Board
of Directors, each board of directors of each subsidiary of the Company and
each committee of each such board (in each case to the extent of the Company's
ability to elect such persons). The Company's obligations to appoint designees
to the Board of Directors shall be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. The Company shall promptly take all actions
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 4.2 and shall include in the Schedule 14D-9 such
information as is required under such Section and Schedule.
4.3. Actions by Directors. For purposes of Article IX and Sections 10.3 and
10.4, 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 the Company who are not Purchaser Insiders.
ARTICLE V
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
5.1. Conversion or Cancellation of Shares. The manner of converting or
canceling shares of the Company and Merger 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 Purchaser, Merger Sub
or any other subsidiary of Purchaser (collectively, the "Purchaser Companies")
or Shares which are held by stockholders ("Dissenting Stockholders")
exercising appraisal rights pursuant to Section 262 of the DGCL) 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 $17.10 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 5.2 or the right, if any, to receive
payment from the Surviving Corporation of the "fair value" of such Shares as
determined in accordance with Section 262 of the DGCL.
(b) At the Effective Time, each Share issued and outstanding at the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held at the Effective Time in the Company's treasury, 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.
(c) At the Effective Time, each share of Common Stock, par value $0.25 per
share of Merger Sub issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
Merger Sub or the holders of such shares, be converted into one Share.
5.2. Payment for Shares. Purchaser shall make available or cause to be made
available to a bank or trust company appointed by Purchaser with the Company's
prior approval (the "Paying Agent") amounts sufficient
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in the aggregate to provide all funds necessary for the Paying Agent to make
payments pursuant to Section 5.1(a) hereof to holders of Shares issued and
outstanding immediately prior to the Effective Time. Promptly after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
person who was, at the Effective Time, a holder of record (other than any of
the Purchaser Companies) of issued and outstanding Shares a form (mutually
agreed to by Purchaser and the Company) of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying Agent of such
certificates, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the Surviving
Corporation shall promptly cause to be paid to the persons entitled thereto a
check in the amount to which such persons are entitled, after giving effect to
any required tax withholdings. No interest will be paid or will accrue on the
amount payable upon the surrender of any such certificate. 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
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 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 Purchaser shall reimburse the Surviving Corporation for such
charges and expenses.
5.3. 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 Section 262 of the DGCL, the Company shall give Purchaser
notice thereof and Purchaser shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Purchaser, 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 5.1.
5.4. Transfer of Shares After the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Surviving Corporation at or
after the Effective Time.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser and Merger Sub that, except as set forth
in the correspondingly numbered Section of the letter, dated the date hereof,
from the Company to Purchaser (the "Disclosure Letter") to the extent
specifically disclosed with respect to the representation to which such
exception applies:
(a) Corporate Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation or
organization and is in good standing as a foreign corporation in each
jurisdiction where the properties and assets owned, leased or operated, or the
business conducted, by it require such qualification, except for such failure
to so qualify or be in such good standing, which, when taken together with all
other such failures, would
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not be reasonably likely to have a material adverse effect on the financial
condition, operations, properties, business or results of operations of the
Company and its subsidiaries taken as a whole (a "Company Material Adverse
Effect"). Each of the Company and its Significant Subsidiaries has the
requisite corporate power and authority to carry on its respective businesses
as they are now being conducted. The Company has made available to Purchaser a
complete and correct copy of the Certificate and the Amended and Restated
Bylaws of the Company (the "Bylaws"), each as amended to date and the
certificates of incorporation and Bylaws or similar governing instrument of
each of the Company's subsidiaries, each as amended to date. The Certificate
and the Bylaws and the certificates of incorporation, bylaws or similar
governing instruments of each of the Company's subsidiaries so made available
are in full force and effect.
(b) Authorized Capital. The authorized capital stock of the Company consists
of 50,000,000 Shares, of which 20,765,592 Shares were outstanding on February
5, 1997 and 5,000,000 shares of Preferred Stock par value $0.001 per share
(the "Preferred Shares"), of which no shares are outstanding. All of the
outstanding Shares have been duly authorized and are validly issued, fully
paid and nonassessable. The Company has no Shares or Preferred Shares reserved
for issuance or subject to issuance, except that, as of February 5, 1997,
there were (i) 6,495,467 Shares reserved for issuance pursuant to the
Company's Restated 1994 Stock Option/Stock Issuance Plan and the Company's
1996 Stock Option/Stock Issuance Plan (the "TheraTx Plans") of which 4,534,275
options to purchase Shares have been issued, (ii) 145,225 options to purchase
Shares issued pursuant to the 1989 Amended and Restated Stock Option Plan of
Helian Health Group, Inc., PersonaCare Inc.'s 1992 Stock Option Plan (the
"Additional Plans"), (iii) 1,000,000 Shares reserved for issuance pursuant to
the Company's Employee Stock Purchase Plan (together with the TheraTx Plans
and the Additional Plans the "Stock Plans"), (iv) 4,166,667 Shares subject to
issuance pursuant to the Company's 8% Convertible Subordinated Notes due 2002
(the "Notes"), (v) 78,925 Shares subject to issuance pursuant to the warrants
(the "Warrants") issued to the persons set forth on Section 6.1(b) of the
Disclosure Letter and (vi) 500,000 shares of Series A Preferred Stock reserved
for issuance pursuant to the Rights Agreement, dated as of July 28, 1995,
between the Company and U.S. Stock Transfer Corporation (as amended, the
"Rights Agreement"). Since February 5, 1997, no Shares have been issued except
pursuant to the exercise of options under the Stock Plans. Each of the
outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and owned,
either directly or indirectly, by the Company free and clear of all liens,
pledges, security interests, claims or other encumbrances. Except as set forth
above, there are no shares of capital stock of the Company authorized, issued
or outstanding and except as set forth above, there are no preemptive rights
nor any outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character relating to the
Shares or other issued or unissued capital stock or other securities of the
Company or any of its subsidiaries. Immediately prior to the consummation of
the Offer, no Shares, Preferred Shares, Series A Preferred Stock or any other
securities of the 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 Compensation and
Benefit Plan (as defined in Section 6.1(h)(i)) or pursuant to any
subscription, option, warrant, right, convertible security or other agreement
or commitment. Other than the Notes, the Company does not have 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 the Company on any matter.
(c) Corporate Authority. Subject only to approval of this Agreement by the
holders of a majority of the outstanding Shares, the Company has the requisite
corporate power and authority and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity. The Board of Directors (A) has unanimously approved this
Agreement, the Offer and the Merger and the other transactions contemplated
hereby and (B) has received the opinion of its financial advisor, The Beacon
Group, to the effect
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that the consideration to be received by holders of Shares pursuant to the
Offer and the Merger is fair from a financial point of view to such holders.
(d) Governmental Filings; No Violations; Contracts.
(i) Other than the filings provided for in Section 2.3, as required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and required under any healthcare licensure and certificate of
need laws and regulations, change of ownership filings pursuant to Medicare
and Medicaid laws, rules or regulations and the Exchange Act (the
"Regulatory Filings"), no notices, reports or other filings are required to
be made by the Company with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Company
from, any governmental or regulatory authority, agency, commission or other
governmental entity, domestic or foreign ("Governmental Entity"), in
connection with the execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby, the failure to make or obtain any or all of which would be
reasonably likely to have a Company Material Adverse Effect, or could
prevent or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by the Company does
not, and the consummation by the Company of the transactions contemplated
by this Agreement will not, constitute or result in (i) a breach or
violation of, or a default under, the Certificate or the Bylaws or the
comparable governing instruments of the Company or any of its subsidiaries,
(ii) except as disclosed in the Company Reports filed prior to the date
hereof, a breach or violation of, a default under or the triggering of any
payment or other material obligations pursuant to, any of the Company's
existing Benefit Plans or any grant or award made under any of the
foregoing, (iii) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any agreement,
lease, contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") of the Company or any of its subsidiaries or any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental
or non-governmental permit or license to which the Company or any of its
subsidiaries is subject or (iv) any change in the rights or obligations of
any party under any of the Contracts, except, in the case of clause (iii)
or (iv) above for Contracts other than those for the provision of
rehabilitation services or management, for such breaches, violations,
defaults, accelerations or changes that, alone or in the aggregate, would
not be reasonably likely to have a Company Material Adverse Effect or that
would not prevent or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement and, except in
the case of Contracts for the provision of rehabilitation services or
management, for such breaches, violations, defaults, accelerations or
changes that, alone or in the aggregate, are immaterial to the financial
condition, properties, operations, business or results of operations of the
Company and its subsidiaries taken as a whole or that would not prevent or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement.
(iii) (x) No party to any rehabilitation therapy services or management
Contract with the Company or any if its subsidiaries has indicated in
writing to the Company or any of its subsidiaries or, to the knowledge of
Bret Jorgensen, Lisa Adams or Greg Bellomy, otherwise indicated any
intention to terminate, fail to renew or seek to amend in any manner
adverse to the Company, any such Contract and (y) neither the Company nor
any of its subsidiaries is a party to or bound by any Contract prohibiting
or limiting its or any of its affiliate's ability to engage in any line of
business, compete with any person or carry on or expand the nature or
geographic scope of its business, except for such prohibitions, or
limitations on the Company or its subsidiaries that would not be reasonably
likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
(e) Company Reports; Financial Statements. The Company has made available to
Purchaser each registration statement, schedule, report, proxy statement or
information statement prepared by it since December 31, 1995 (the "Audit
Date"), including, without limitation, (i) the Company's Annual Report on
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Form 10-K for the year ended December 31, 1995 and (ii) the Company's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June 30,
1996 and September 30, 1996 each in the form (including exhibits and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, including any subsequently filed reports, the "Company
Reports"). As of their respective dates, the Company Reports did not, and any
Company Reports filed with the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related
notes and schedules and the consolidated balance sheets and schedules of
PersonaCare, Inc. ("PersonaCare")) fairly presents the consolidated financial
position of the Company and its subsidiaries including, without limitation,
PersonaCare as of its date and each of the consolidated statements of income
and of changes in financial position included in or incorporated by reference
into the Company Reports (including any related notes and schedules and
including the statements of income and changes in financial position of
PersonaCare and any related notes and schedules) fairly presents the results
of operations, retained earnings and changes in financial position, as the
case may be, of the Company and its subsidiaries including, without
limitation, PersonaCare for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which will
not be material in amount or effect), in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as may be noted therein. Other than the Company
Reports, the Company has not filed any other definitive reports or statements
with the SEC since December 31, 1995.
(f) Absence of Certain Changes. Except as disclosed in the Company Reports
filed with the SEC prior to the date hereof, since September 30, 1996 in the
case of clauses (i), (ii) and (iii) below and December 31, 1995, in the case
of clause (iv) below, the Company and its subsidiaries have conducted their
respective businesses only in, and have not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and there has not been (i) any change that would be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect other than any such change arising out of or relating to the proposal,
adoption or implementation after the date hereof of any law, statute, rule or
regulation relating to healthcare, Medicaid or Medicare, including without
limitation the proposal, adoption or implementation of "salary equivalency"
rates (including amendments to any salary equivalency rates currently in
effect) relating to the delivery of physical therapy, occupational therapy,
respiratory therapy or speech language pathology services; (ii) any material
damage or loss to any material asset or property, regardless of insurance;
(iii) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company; or (iv) any
change by the Company in accounting principles, practices or methods. Since
December 31, 1995, except as disclosed in the Company Reports filed with the
SEC prior to the date hereof and other than in the ordinary course, there has
not been any increase in the compensation payable or which could become
payable by the Company or its subsidiaries to their officers or key employees,
or any amendment of any Benefit Plans.
(g) Litigation and Liabilities. Except as disclosed in the Company Reports
filed with the SEC prior to the date hereof, there are no (i) civil, criminal
or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or (ii) obligations or liabilities,
whether or not accrued, contingent or otherwise and whether or not required to
be disclosed, including, without limitation, those relating to matters
involving any Environmental Law (as hereinafter defined), or any other facts
or circumstances of which the management of the Company has knowledge that
could result in any claims against or obligations or liabilities of the
Company or any of its subsidiaries, that, alone or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect.
(h) Employee Benefits.
(i) Section 6.1(h)(i) of the Disclosure Letter contains a complete and
accurate list of all existing bonus, incentive, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
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ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare and fringe benefit plans, employment or severance
agreements and all similar practices, policies and arrangements in which
any employee or former employee (the "Employees"), consultant or former
consultant (the "Consultants") or director or former director (the
"Directors") of the Company or any of its subsidiaries participates or to
which any such Employees, Consultants or Directors are a party (the
"Compensation and Benefit Plans"). Neither the Company nor any of its
subsidiaries has any commitment to create any additional material
Compensation and Benefit Plan or to modify or change any existing
Compensation and Benefit Plan in any material respect.
(ii) To the best of the Company's knowledge, each Compensation and
Benefit Plan has been operated and administered in all material respects in
accordance with its terms and with applicable law, including, but not
limited to, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code (as defined in Section 6.1(o)), the Securities Act of
1933, as amended (the "Securities Act") and the Exchange Act, or any
regulations or rules promulgated thereunder, and all filings, disclosures
and notices required by ERISA, the Code, the Securities Act, the Exchange
Act or any other applicable law have been timely made. Each Compensation
and Benefit Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a "Pension Plan") and which is intended
to be qualified under Section 401(a) of the Code has received a favorable
determination letter (including a determination that the related trust
under such Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the Internal Revenue Service ("IRS") for "TRA" (as
defined in Rev. Proc. 93-39), or will file for such determination letter
prior to the expiration of the remedial amendment period for such
Compensation and Benefit Plan, and the Company is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge of
the Company, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans. Neither the Company nor any of its
subsidiaries has engaged in a transaction, or omitted to take any action,
with respect to any Compensation and Benefit Plan that would reasonably be
expected to subject the Company or any of its subsidiaries to a tax or
penalty imposed by either Section 511 or 4975 of the Code or Section
502(c), 502(i), 502(l) or 4071 of ERISA in an amount which would be
reasonably likely to have a Company Material Adverse Effect, assuming for
purposes of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii) Neither the Company nor any entity (an "ERISA Affiliate") which is
considered one employer with the Company under Section 4001(b) of ERISA or
Section 414(b) or (c) of the Code has sponsored, maintained or incurred any
liability under Title IV of ERISA with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA or any Compensation and Benefit Plan subject to
Section 412 of the Code or Section 302 of ERISA. None of the Company, any
of its subsidiaries or any 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. To the knowledge of the Company,
there is no pending investigation or enforcement action by the Department
of Labor (the "DOL") or IRS or any other governmental agency with respect
to any Compensation and Benefit Plan.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA or any employee benefit arrangements
under any collective bargaining agreement to which the Company or any of
its subsidiaries is a party have been timely made or have been reflected on
the Company's financial statements.
(v) Neither the Company nor any of its subsidiaries has any obligations
to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code, and each such Compensation and
Benefit Plan may be amended or terminated without incurring liability
thereunder. There has been no communication to Employees by the Company or
any of its subsidiaries 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.
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(vi) The Company and its subsidiaries do not maintain any Compensation
and Benefit Plans covering Employees outside of the United States.
(vii) With respect to each Compensation and Benefit Plan, if applicable,
the Company has provided, made available, or will make available upon
request, to Purchaser, true and complete copies of existing:
(A) Compensation and Benefit Plan documents and amendments thereto; (B)
trust instruments and insurance contracts; (C) two most recent Forms 5500
filed with the IRS; (D) the most recent summary plan description; (E) most
recent determination letter issued by the IRS; (F) any Form 5310 or Form
5330 filed with the IRS; and (G) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests).
(viii) 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 Employee,
Consultant or Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Compensation and Benefit Plan or (C)
result in any material increase in benefits payable under any Compensation
and Benefit Plan.
(ix) Neither the Company nor any of its subsidiaries 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.
(x) 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 Purchaser, Merger Sub, the 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.
(i) Brokers and Finders. Neither the Company nor any of its subsidiaries has
employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders fees in connection with the transactions
contemplated herein, except that the Company has employed The Beacon Group as
its financial advisor, the arrangements with which have been disclosed in
writing to Purchaser prior to the date hereof.
(j) Rights Agreement.
(i) The Company has amended the Rights Agreement to provide that none of
Purchaser, Merger 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.
(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(a)(iv) of the Rights Agreement.
(k) Takeover Statutes. The Board of Directors has taken all necessary action
to approve the transactions contemplated by this Agreement such that the
restrictions on transactions with "interested stockholders" set forth in
Section 203 of the DGCL shall not apply to such transactions. No other state
or federal "fair price", "moratorium", "control share acquisition" or other
similar antitakeover statute or regulation (each a "Takeover Statute") is
applicable to the Company, the Shares, the Offer, the Merger or the
transactions contemplated thereby or hereby.
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(l) Environmental Matters. As of the date hereof, except as disclosed in the
Company Reports filed with the SEC prior to the date hereof, to the knowledge
of the Company, (i) the Company and its subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties presently or formerly owned
or operated by the Company or its subsidiaries (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties,
and buildings thereon) (the "Properties") do not contain any Hazardous
Substance (as hereinafter defined) other than as permitted under applicable
Environmental Laws, do not, and have not, contained any underground storage
tanks, do not have any asbestos present (and have not had any asbestos removed
therefrom) and have not been used as a sanitary landfill or hazardous waste
disposal site (provided, however, that with respect to Properties formerly
owned or operated by the Company, such representation is limited to the period
during which period the Company or one of its subsidiaries owned or operated
such Properties); (iii) neither the Company nor any of its subsidiaries has
received any notices, demand letters or request for information from any
Governmental Entity or any third party alleging that the Company may be in
violation of, or liable under, any Environmental Law and none of the Company,
its subsidiaries or the Properties are subject to any court order,
administrative order or decree arising under any Environmental Law and (iv) no
Hazardous Substance has been disposed of, released or transported from any of
the Properties during the time such Property was owned or operated by the
Company or one of its subsidiaries, other than as permitted under applicable
Environmental Law. Following the date hereof, except as would not reasonably
be expected to have a Company Material Adverse Effect, the representation in
Section 6.1(l) is true and correct without regard to any limitation as to the
date hereof or the knowledge of the Company.
"Environmental Law" means (i) any Federal, state, foreign or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, common law, order, judgment, decree, injunction,
requirement or agreement with any governmental entity, (x) relating to the
protection, preservation or restoration of the environment, (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any
other natural resource), or to human health or safety, or (y) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as now in effect. "Hazardous
Substance" means any substance presently listed, defined, designated or
classified as hazardous, toxic or radioactive (including petroleum and
regulated medical waste), under any Environmental Law, whether by type or by
quantity, including any substance containing any such substance as a
component.
(m) Real Property and Leases.
(i) The Company and its subsidiaries have sufficient title or leasehold
interests to all of their 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 be
reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect. Section 6.1(m) of the Disclosure Letter
sets forth a true and complete list of each lease, sublease or other
agreement relating to the possession of real property to which the Company
or any of its subsidiaries is a party.
(ii) All leases of real property leased for the use or benefit of the
Company or any of its subsidiaries to which the Company or any such
subsidiary is a party and all amendments and modifications thereto are in
full force and effect except for defaults which would, in the aggregate, be
immaterial to the financial condition, operations, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
(n) Medicare and Medicaid. Except as disclosed in any state health
department surveys for 1995 or 1996, copies of which have been made available
to Purchaser, the Company and its subsidiaries have complied with all Medicare
and Medicaid laws, rules and regulations and have filed all returns, cost
reports and other filings in any manner prescribed thereby except where the
failure to so comply, together with all other such failures, would be
immaterial to the financial condition, operations, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
All returns, cost reports and other filings made by the Company and its
subsidiaries since January 1, 1992 to Medicare, Medicaid or any other
governmental health or
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welfare related entity or third party payor are true and complete except where
the failure to be so true and complete, together with all other such failures,
would be immaterial to the financial condition, operations, properties,
business or results of operations of the Company and its subsidiaries taken as
a whole. Since January 1, 1992, no deficiency in any such returns, cost
reports and other filings, including deficiencies for late filings, has been
asserted or to the best of the Company's knowledge, after reasonable
investigation, threatened by any Federal or state agency or instrumentality or
other provider reimbursement entities relating to Medicare or Medicaid or
third party payor claims and to the best of the Company's knowledge, after
reasonable investigation, there is no basis for any successful claims or
requests for reimbursement from any such agency, instrumentality, entity or
third party payor except for any deficiencies, together with all other such
deficiencies, which would be immaterial to the financial condition,
operations, properties, business or results of operations of the Company and
its subsidiaries taken as a whole. Since January 1, 1992, neither the Company
nor any of its subsidiaries has been subject to any audit or investigation
relating to fraudulent Medicare or Medicaid procedure or practices except
audits or investigations which, together with all other such audits, would be
immaterial to the financial condition, operations, properties, business or
results of operations of the Company and its subsidiaries taken as a whole.
(o) Taxes.
(i) All Tax Returns that are required to be filed by or with respect to the
Company and its subsidiaries have been duly filed, (ii) all Taxes shown to be
due on the Tax Returns referred to in clause (i) have been paid in full, (iii)
none of the Tax Returns referred to in clause (i) have been examined by the
Internal Revenue Service or the appropriate state, local or foreign taxing
authority, and the period for assessment of the Taxes in respect of which such
Tax Returns were required to be filed has expired, (iv) no deficiencies have
been asserted or have been assessed by any Taxing Authority and (v) no waivers
of statutes of limitation have been given by or requested with respect to any
Taxes of the Company or its subsidiaries. The Company has made available to
Purchaser true and correct copies of the United States federal income Tax
Returns filed by the Company and its subsidiaries for each of the three most
recent fiscal years ended on or before December 31, 1995. Neither the Company
nor any of its subsidiaries has any liability with respect to income,
franchise or similar Taxes that accrued on or before the end of the most
recent period covered by the Company Reports in excess of the amounts accrued
with respect thereto that are reflected in the financial statements included
in the Company Reports filed on or prior to the date hereof, except where the
failure to be so accrued would not be reasonably likely to have a Company
Material Adverse Effect.
(ii) No Tax is required to be withheld pursuant to Section 1445 of the Code
as a result of the transfer contemplated by this Agreement.
As used in this Agreement, the following terms shall have the indicated
meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"Taxes" means all federal, state, local or 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 imposed with respect to such amounts and
any interest in respect of such penalties and additions.
(p) Labor Matters; Non-Competition.
(i) Neither the Company nor any of its subsidiaries is a party to or
otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
the Company or any of its subsidiaries the subject of any material proceeding
asserting that the Company or any of its subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any
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labor union or labor organization nor is there pending or, to the knowledge of
the Company, threatened, nor has there been for the past five years, any labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving the
Company or any of its subsidiaries.
(ii) The Company has entered into Non-Competition Agreements, dated the date
hereof (the "Non-Competes"), with each of John A. Bardis, Bret W. Jorgensen,
Donald R. Myll, Louis E. Hallman, III, Laura E. Cayce and William J. Haffey,
Ph.D. in the form set forth on Section 6.1(p) of the Disclosure Letter. Each
of the Non-Competes is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity.
(q) Intellectual Property.
(i) The Company and/or each of its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or materials that are
used in the business of the Company and its subsidiaries as currently
conducted, except for any such failures to own, be licensed or possess that
would not be reasonably likely to have, either individually or in the
aggregate, a Company Material Adverse Effect and to the knowledge of the
Company all patents, trademarks, trade names, service marks and copyrights
held by the Company and/or its subsidiaries are valid and subsisting.
(ii) The Company or one of its wholly-owned subsidiaries owns the entire
right, title and interest in and to all intellectual property subsisting in
the computer programs, software, applications (including all copies,
versions and derivative works) and related hardware used by the Company in
connection with the Company's clinical and management information system
known as "TheraSys" (the "TheraSys Program"), including all patents,
trademarks, tradenames, service marks, trade secrets and copyrights
(including, without limitation, the exclusive right to use and convey the
same) and there are no liens, security interests, licenses or other
encumbrances on the TheraSys Program or any intellectual property
subsisting therein. The Company has the right to use the TheraSys Program
and convey and disclose the TheraSys Program without violation of any law
or third party right. Copyright in the TheraSys Program has been duly
registered with the Copyright Office of the Library of Congress (Reg. No.
Txu 638-676) and such registration remains in full force and effect. No
affiliates, employees or independent contractors will, as of and after the
Closing, retain or obtain ownership of, or any rights over, any patents,
trade names, trademarks, trade secrets, services marks, or copyrights
relating to the TheraSys Program, all of which are owned solely by the
Company or one of its wholly-owned subsidiaries. To the Company's
knowledge, (i) there have been and are no claims by any person contesting
the Company's ownership of the intellectual property subsisting in the
TheraSys Program, and the use of the TheraSys Program by the Company does
not infringe on the rights of any person and no suits or proceedings are
pending or threatened against the Company or any of its respective
subsidiaries with respect to the foregoing; and (ii) no third party is
infringing the Company's intellectual property rights in the TheraSys
Program.
(r) Visitation Rights. Other than the current directors of the Company, no
person is contractually or otherwise entitled to attend any regular or special
meeting of the Board of Directors.
6.2. Representations and Warranties of Purchaser and Merger Sub. Purchaser
and Merger Sub represent and warrant to the Company that except as set forth
in the correspondingly numbered Section of the letter, dated the date hereof,
from Purchaser to the Company (the "Purchaser Disclosure Letter"):
(a) Corporate Organization and Qualification. Each of Purchaser and Merger
Sub is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and is in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification except for such failure to so qualify or to be in such good
standing, which, when taken together with all other such failures, would not
be reasonably likely to have a material adverse effect on the financial
condition, operations, properties, business or results of operations of
Purchaser and its subsidiaries, taken as a whole.
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(b) Corporate Authority. Purchaser and Merger Sub each has the requisite
corporate power and authority and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a valid and binding agreement of
Purchaser and Merger Sub enforceable against Purchaser and Merger Sub in
accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity.
(c) Governmental Filings; No Violations.
(i) Other than the Regulatory Filings, no notices, reports or other
filings are required to be made by Purchaser or Merger Sub with, nor are
any consents, registrations, approvals, permits or authorizations required
to be obtained by Purchaser or Merger Sub from, any Governmental Entity in
connection with the execution and delivery of this Agreement by Purchaser
and Merger Sub and the consummation of the transactions contemplated hereby
by Purchaser and Merger Sub, the failure to make or obtain any or all of
which would be reasonably likely to prevent or materially delay the ability
of Purchaser or Merger Sub to consummate the transactions contemplated by
this Agreement.
(ii) The execution and delivery of this Agreement by Purchaser and Merger
Sub do not, and the consummation of the transactions contemplated hereby by
Purchaser and Merger Sub will not, constitute or result in (i) a breach or
violation of, or a default under, the certificate of incorporation or by-
laws of Purchaser or Merger Sub or (ii) a breach or violation of, a default
under, the acceleration of or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any Contract of
Purchaser or Merger Sub or any law, ordinance, rule or regulation or
judgment, decree, order, award or governmental or non-governmental permit
or license to which Purchaser or Merger Sub is subject, except, in the case
of clause (ii) above, for such breaches, violations, defaults or
accelerations that, alone or in the aggregate, would not prevent or
materially delay the transactions contemplated by this Agreement.
ARTICLE VII
COVENANTS
7.1. Interim Operations of the Company. The Company covenants and agrees
that, prior to the Effective Time (unless Purchaser shall otherwise agree in
writing and except as otherwise expressly contemplated by this Agreement or in
the Disclosure Letter):
(a) the business of the Company and its subsidiaries shall be conducted only
in the ordinary and usual course and, to the extent consistent therewith, each
of the Company and its subsidiaries shall use its reasonable best efforts to
preserve its business organization intact and maintain its existing relations
with customers, suppliers, employees and business associates;
(b) the Company shall not (i) sell or pledge or agree to sell or pledge any
stock owned by it in any of its subsidiaries; (ii) amend the Certificate or
the Bylaws or, except as otherwise contemplated herein (including Section
7.2), amend, modify or terminate the Rights Agreement; (iii) split, combine or
reclassify the outstanding Shares; or (iv) declare, set aside or pay any
dividend payable in cash, stock or property with respect to the Shares or
Preferred Shares;
(c) except as set forth in Section 7.1(c) of the Disclosure Letter, neither
the Company nor any of its subsidiaries shall (i) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of its capital stock of any class of the Company
or its subsidiaries or any other property or assets other than, in the case of
the Company, Shares issuable pursuant to options outstanding on the date
hereof under the Stock Plans or upon conversion of the Notes or Warrants; (ii)
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any assets or incur or modify any indebtedness or other liability
other than in the ordinary
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and usual course of business; (iii) license or otherwise transfer to any third
party any rights to the TheraSys Program or related software; (iv) acquire
directly or indirectly by redemption or otherwise any shares of the capital
stock of the Company; or (v) authorize capital expenditures in excess of
$1,000,000 in the aggregate not disclosed in the Disclosure Letter or make any
acquisition of, or investment in, assets or stock of any other person or
entity other than ordinary course acquisitions of supplies used in the day-to-
day operations of the Company;
(d) neither the Company nor any of its subsidiaries shall increase in any
manner the compensation of, grant any severance or termination pay to, or
enter into or amend or renew any employment or severance agreement with, any
Director, Consultant or employee, provided, that, the Company and its
subsidiaries may in the ordinary course of business consistent with past
practice (including, without limitation, as to timing), grant increases in the
compensation of non-officer employees and increases of not more than 10% or
$15,000 in compensation of officers of the Company who are not executive
officers of the Company;
(e) neither the Company nor any of its subsidiaries shall establish, adopt,
enter into, make any Compensation and Benefit Plans, or voluntarily accelerate
the vesting of any stock options, restricted stock or other compensation or
benefit;
(f) neither the Company nor any of its subsidiaries shall settle or
compromise any claims or litigation involving payments by the Company of
$100,000 in any single instance or related instances, or that otherwise are
material 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;
(g) neither the Company nor any 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;
(h) neither the Company nor any of its subsidiaries will authorize or enter
into an agreement to do any of the foregoing; and
(i) neither the Company nor any of its subsidiaries will amend any of the
Non-Competes.
7.2. Acquisition Proposals. The Company agrees that neither it nor any of
its subsidiaries nor any of its executive officers or directors shall, and
that it shall direct and use its best efforts to cause its non-executive
officers and its subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its subsidiaries) not to, directly or indirectly, (a) initiate, solicit,
knowingly encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or 5% or more of the equity securities of,
the Company or any of its subsidiaries (any such transaction or purchase being
hereinafter referred to as an "Acquisition Transaction") that, in any such
case, could reasonably be expected to lead to a breach of this Agreement or
otherwise interfere with the completion of the Offer or Merger contemplated by
this Agreement (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or (b) have any discussion with or provide any
confidential information or data to any person relating to an Acquisition
Proposal or engage in any negotiations concerning an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent the Company or the Board of Directors from (A) complying with Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal; (B) engaging in any discussions or negotiations with or providing
any information to, any person in response to an unsolicited bona fide written
Acquisition Proposal by any such person (including a new and unsolicited
Acquisition Proposal received by the Company after execution of this Agreement
from a person or entity whose initial contact with the Company may have been
solicited by the Company prior to the execution of this Agreement); or (C)
recommending such an unsolicited bona fide written Acquisition Proposal to the
stockholders of the Company, if and only to the extent that, in such case
referred to in clause (B) or (C), (i) the Board of Directors concludes in good
faith (after consultation with its financial advisors) that such Acquisition
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Proposal is reasonably capable of being completed, taking into account all
legal, financial and other aspects of the proposal and the person 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 this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as a "Superior Proposal"), (ii) the Board
of Directors determines in good faith after consultation with outside legal
counsel that such action is necessary for the Board of Directors to comply
with its fiduciary duties under applicable law and (iii) prior to providing
any non-public information or data to any person in connection with an
Acquisition Proposal by any such person, the Board of Directors receives from
such person an executed confidentiality agreement on terms substantially
similar to those contained in the Confidentiality Agreement (as defined
below). The 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. The
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 7.2. The Company agrees that it will
notify Purchaser promptly if any such inquiries, 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 Purchaser 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. The 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 the Company
or any of its subsidiaries.
7.3. Meetings of the Company's Stockholders. If required following
termination of the Offer, the Company will take, consistent with applicable
law and the Certificate and the Bylaws, all action necessary to convene a
meeting of holders of Shares as promptly as practicable to consider and vote
upon the approval of this Agreement and the Merger. Subject to fiduciary
requirements of applicable law, the Board of Directors shall recommend such
approval and the Company shall take all lawful action to solicit such
approval. At any such meeting of the Company all of the Shares then owned by
the Purchaser Companies will be voted in favor of this Agreement. The
Company's proxy or information statement with respect to such meeting of
shareholders (the "Proxy Statement"), at the date thereof and 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 the Company in reliance upon and in
conformity with written information concerning the Purchaser Companies
furnished to the Company by Purchaser specifically for use in the Proxy
Statement. The Proxy Statement shall not be filed, and no amendment or
supplement to the Proxy Statement will be made by the Company, without
consultation with Purchaser and its counsel.
7.4. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Purchaser shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
and required under healthcare licensure and certificate of need laws and
regulations with respect to the Offer and the Merger; (b) with respect to
Purchaser, use its reasonable best efforts and with respect to the Company
commercially reasonable efforts (which shall include, among other things,
delivery of customary officers certificates and legal opinions) to obtain the
financing necessary for Purchaser and Merger Sub to purchase all Shares
pursuant to the Offer and the Merger and pay related fees and expenses, pay
for all of the outstanding Notes at the face value thereof, refinance
Purchaser's outstanding obligations under Purchaser's existing $1 Billion
Credit Agreement dated as of September 11, 1995 and the Company's outstanding
obligations under the Company's existing Amended and Restated Financing and
Security Agreement dated May 8, 1995; and (c) use reasonable best efforts to
promptly take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement as soon as practicable.
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7.5. Access. Upon reasonable notice, the Company shall (and shall cause each
of its subsidiaries to) afford Purchaser's officers, employees, counsel,
accountants and other authorized representatives ("Representatives") access,
during normal business hours throughout the period prior to the Effective
Time, to its properties, books, Contracts and records and, during such period,
the Company shall (and shall cause each of its subsidiaries to) furnish
promptly to Purchaser all information concerning its business, properties and
personnel as Purchaser or its Representatives may reasonably request, provided
that no investigation pursuant to this Section 7.5 shall affect or be deemed
to modify any representation or warranty made by the Company and provided,
further, that the foregoing shall not require the Company to permit any
inspection, or to disclose any information, which in the reasonable judgment
of the Company (a) would result in the disclosure of any trade secrets of
third parties if the Company shall have unsuccessfully used reasonable efforts
to obtain the consent of such third party to such inspection or disclosure,
(b) would be in violation of applicable law, rules or regulation or (c)
constitutes information protected by attorney-client privilege, but only to
the extent that disclosure would impair the Company's ability to assert such
attorney-client privilege. Upon any termination of this Agreement, Purchaser
will treat all documents obtained by it or any of its Representatives in
accordance with the terms of the Confidentiality Agreement, dated as of
September 17, 1996 (the "Confidentiality Agreement") between the Company and
Purchaser.
7.6. Notification of Certain Matters. The Company shall give prompt notice
to Purchaser of: (a) any notice of, or other communication relating to, any
environmental matter, a default or event that, with notice or lapse of time or
both, would become a default, received by the Company or any of its
subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any Contract to which the Company or any of its
subsidiaries is a party or is subject except for defaults or events which
individually or in the aggregate would be immaterial to the financial
condition, operations, properties, business or results of operations of the
Company and its subsidiaries taken as a whole; (b) any material adverse change
in the financial condition, operations, properties, business or results of
operations of the Company and its 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 the Company
and Purchaser 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 (c) 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 the Company or its subsidiaries
made by the Company in this Agreement to become inaccurate in any material
respect.
7.7. Publicity. The initial press release shall be a joint press release and
thereafter the Company and Purchaser shall consult with each other prior to
issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and prior to making any filings with
any Governmental Entity, with any national securities exchange or with the
National Association of Securities Dealers, Inc. with respect thereto.
7.8. Stocks Plans and Options. (a) Unless Purchaser shall provide the
Company with the notice contemplated by Section 7.8(b) below, then, at the
Effective Time, each outstanding option to purchase Shares under the Stock
Plans, other than any option granted under the Company's Employee Stock
Purchase Plan (collectively, the "Options"), whether vested or unvested, shall
be converted into an option to acquire, on the same terms and conditions as
were applicable under such Option, the number of shares of Common Stock, par
value $0.25 per share of Purchaser (the "Purchaser Common Stock") equal to (a)
the number of Shares subject to the Option, multiplied by (b) (i) the Merger
Consideration, divided by (ii) the average of the high and low price of
Purchaser Common Stock on the trading day immediately preceding the date of
the Effective Time as reported in the New York City edition of The Wall Street
Journal (rounded down to the nearest whole number) (a "Replacement Option"),
at an exercise price per share (rounded up to the nearest whole cent) equal to
(y) the aggregate exercise price for the Shares which were purchasable
pursuant to such Option divided by (z) the number of full shares of Purchaser
Common Stock subject to such Replacement Option in accordance with the
foregoing. At or prior to the Effective Time, the Company shall take all
action necessary with respect to the
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Stock Plans to permit the replacement of the outstanding Options by Purchaser
pursuant to this Section and as soon as practicable after the Effective Time
Purchaser shall use its reasonable best efforts to register under the
Securities Act on Form S-8 or other appropriate form (and use its reasonable
best efforts to maintain the effectiveness thereof) shares of Purchaser Common
Stock issuable pursuant to all Replacement Options. The Company shall take all
action necessary, including obtaining any required consents from optionees, to
provide that following the Effective Time no participant in any Stock Plan or
other plans, programs or arrangements shall have any right thereunder to
acquire equity securities of the Company, the Surviving Corporation or any
subsidiary thereof and to permit Purchaser to assume the Stock Plans (other
than the Company's Employee Stock Purchase Plan, with respect to which the
Company shall take all action necessary to terminate such plan immediately
prior to the Effective Time). The Company shall further take all action
necessary to amend the Stock Plans, to eliminate automatic grants or awards
thereunder following the Effective Time. At the Effective Time, Purchaser
shall assume the Stock Plans (other than the Company's Employee Stock Purchase
Plan); provided, that such assumption shall be only in respect of the
Replacement Options and that Purchaser shall have no obligation with respect
to any awards under the Stock Plans other than the Replacement Options or to
make any additional grants or awards under such assumed Stock Plans.
(b) If Purchaser shall provide written notice to the Company by February 24,
1997 of its election to treat the Options in accordance with the provisions of
this Section 7.8(b), then, at the Effective Time, each then outstanding
Option, whether vested or unvested, shall be cancelled and the holder thereof
shall be entitled to receive an amount of cash equal to the product of (x) the
amount, if any, by which the Merger Consideration exceeds the exercise price
per Share subject to such Option (whether vested or unvested) and (y) the
number of Shares issuable pursuant to the unexercised portion of such Option,
less any required withholding of taxes (such amount being hereinafter referred
to as the "Option Consideration"). The Option Consideration shall be paid as
soon as practicable following the Effective Time, but in any event within five
(5) days following the Effective Time. Prior to the Effective Time, the
Company shall take such actions as may be necessary to effectuate the
foregoing, including without limitation obtaining all applicable consents. The
cancellation of an Option in exchange for the Option Consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Option, and any required consents received from Option holders
shall so provide. All Stock Plans and Options shall terminate as of the
Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary thereof, shall be canceled as
of the Effective Time, and the Company shall take all action necessary,
including receiving applicable consents from optionees, to terminate all such
plans and to ensure that following the Effective Time no participant in any
Stock Plan or other plans, programs or arrangements shall have any right
thereunder to acquire equity securities of the Purchaser, the Company, the
Surviving Corporation or any subsidiary thereof. If Purchaser does not provide
the written notice referred to in the first sentence of Section 7.8(b), this
Section 7.8(b) shall be inapplicable.
Section 7.9. Indemnification; Directors' and Officers' Insurance.
(a) The bylaws and the certificate of incorporation 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 individuals who immediately prior to the
Effective Time were directors, officers, or otherwise entitled to
indemnification thereunder or under the Bylaws or indemnification agreements
(the "Indemnified Parties"). Purchaser and the Surviving Corporation shall
jointly and severally indemnify, defend and hold harmless the Indemnified
Parties (in the case of Purchaser, subject to the provisions of subsection (b)
below) as provided in the Certificate, Bylaws or indemnification agreements,
as in effect as of the date hereof, with respect to matters occurring through
the Effective Time to the fullest extent the Company would have been permitted
to do so under Delaware law, the Certificate and Bylaws as in effect as of the
date hereof. Purchaser shall cause Surviving Corporation to maintain in effect
for not less than six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by the Company with
respect to matters occurring prior to the Effective Time; provided, however,
that (i) the Surviving Corporation may substitute therefor policies of at
least the same coverage (with carriers comparable to the Company's existing
carriers) containing terms and conditions which are no less advantageous to
the officers, directors and employees
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of the Company and (ii) the Surviving Corporation shall not be required to pay
an annual premium for such insurance in excess of two times the last annual
premium paid prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount. Purchaser shall cause the Surviving
Corporation to reimburse all expenses including reasonable attorney's fees,
incurred by any person to enforce successfully the obligations of Purchaser
and the Surviving Corporation under this Section 7.9.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of Section 7.9 from Purchaser, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Purchaser thereof. In
the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) Purchaser or the
Surviving Corporation shall have the right to assume the defense thereof and
Purchaser and the Surviving Corporation 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 unless counsel for the Indemnified Parties reasonably
advises the Indemnified Parties that there are issues that raise conflicts of
interest between Purchaser and the Indemnified Parties that make such
assumption unadvisable, in which case the Indemnified Parties may retain
counsel, reasonably satisfactory to Purchaser and Purchaser shall pay the
reasonable legal expenses of such Indemnified Party, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Purchaser
shall not be liable for any settlement effected without its prior written
consent; and provided further that Purchaser 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.
7.10. Notes. If Merger Sub or any other Purchaser Company shall have
purchased Shares pursuant to the Offer, the Company shall take all necessary
action prior to the Effective Time, to enter into a supplemental indenture
with the Trustee pursuant to the Indenture under which the Notes were issued,
to provide, among other things, that on and after the Effective Time the Notes
will be convertible only into the Merger Consideration.
7.11. Benefit Plans. It is the intention of Purchaser that within a
reasonable period of time following the Effective Time (a) it will provide
employees of the Surviving Corporation with employee benefit plans
substantially similar in the aggregate to those provided to similarly situated
employees of Purchaser, (b) any such employees will receive credit for years
of service with the Company or any or its subsidiaries prior to the Effective
Time for the purpose of eligibility and vesting and (c) Purchaser shall cause
any and all pre-existing condition limitations (to the extent such limitations
did not apply to a pre-existing condition under the Compensation and Benefit
Plans) and eligibility waiting periods under group health plans to be waived
with respect to such participants and their eligible dependents. All
discretionary awards and benefits under any employee benefit plans of
Purchaser or the Surviving Corporation shall be subject to the discretion of
the persons or committee administering such plans.
7.12. Takeover Statute. If any Takeover Statute shall become applicable to
the transactions contemplated hereby, the Company and the members of the Board
of Directors shall grant such approvals and take such actions as are necessary
so that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated hereby.
7.13. 1996 10-K. The Company will periodically provide Purchaser with
current draft versions of the Company's Annual Report on Form 10-K, including
documents incorporated therein by reference, for the year ended December 31,
1996. The consolidated balance sheets included in or incorporated by reference
into the Company's Annual Report on Form 10-K for the year ended December 31,
1996 (the "1996 10-K") (including the related notes and schedules) will fairly
present the consolidated financial position of the Company and its
subsidiaries as of their respective dates and each of the consolidated
statements of income and of changes in financial position included in or
incorporated by reference into the 1996 10-K (including any related notes and
schedules) will fairly present the results of operations, retained earnings
and changes in financial position, as the case may be, of the Company and its
subsidiaries for the periods set forth therein in each case in accordance with
GAAP consistently applied during the periods involved.
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7.14. Warrants. Prior to the Effective Time, the Company shall cause any one
or more of the following events to occur: (i) the exercise or conversion of
all of the outstanding Warrants for or into Shares in accordance with the
terms of the applicable Warrants, (ii) the entry into agreements between the
Company and the holders of each of the outstanding Warrants providing that
each Warrant shall, following the Merger, be exercisable for, at the exercise
price of such Warrant, the securities, property or other consideration which a
holder of such Warrant would have received had the holder exchanged or
converted such Warrant for Shares immediately prior to the Effective Time or
(iii) a reclassification of the Company's Shares in accordance with the DGCL,
so that each Share shall be redeemable at any time at the option of the
Company for an amount per share equal to the Merger Consideration and
simultaneously with the effectiveness of such reclassification issue to
Purchaser or Merger Sub, at Purchaser's election, 1,000 shares (constituting
all of the authorized shares of such class) of a new class of Company non-
redeemable common stock, par value 0.25 per share (or, any combination of the
events referred to in clauses (i), (ii) or (iii) above, which when taken
together apply to all of the outstanding Warrants so that no Warrants may be
exercised for any Shares which are not redeemable at the Company's election).
7.15 Orders. In the event that any Order (as defined in Section 8.1(d))
shall come into effect, the parties shall use their reasonable best efforts to
cause any such Order to be lifted.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Obligations of Purchaser and Merger Sub. The respective
obligations of Purchaser and Merger Sub to consummate the Merger are subject
to the fulfillment of each of the following conditions, any or all of which
may be waived in whole or in part by Purchaser or Merger Sub, as the case may
be, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement shall have been duly approved by
the holders of a majority of the Shares, in accordance with applicable law and
the Certificate and the Bylaws and, if necessary, the reclassification shall
have been effected in accordance with Section 7.14;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser Companies) shall
have purchased Shares pursuant to the Offer;
(c) Governmental and Regulatory Consents. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated, all necessary approvals under healthcare licensure and certificate
of need laws and regulations shall have been received and, other than the
filings provided for in Section 2.3, all filings required to be made prior to
the Effective Time by the Company with, and all consents, approvals and
authorizations required to be obtained prior to the Effective Time by the
Company from, any Governmental Entity in connection with the execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby by the Company, Purchaser and Merger Sub
shall have been made or obtained (as the case may be), except where the
failure to be so obtained would be immaterial to the financial condition,
operations, properties, business or results of operations of each of Purchaser
and the Company and their respective subsidiaries, in each case, taken as a
whole;
(d) Litigation. No court or other Governmental Entity of competent
jurisdiction 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 transactions contemplated by this Agreement or imposes
material restrictions on Purchaser or the Company in connection with
consummation of the Merger or with respect to their business operations,
either prior to or subsequent to the Merger (collectively, an "Order");
provided, that, Purchaser and Merger Sub shall have complied with Section
7.15;
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(e) Compliance; Consents. The representations and warranties contained in
Section 6.1 shall be true in all material respects as of the Effective Time as
though made at and as of the Effective Time, except for changes contemplated
by this Agreement; and
(f) Rights Agreement. The Rights Agreement shall have expired.
8.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the fulfillment of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement shall have been duly approved by
the holders of a majority of the Shares, in accordance with applicable law and
the Certificate and By-Laws of the Company;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser Companies) shall
have purchased Shares pursuant to the Offer;
(c) Governmental Consents. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated and,
other than the filings provided for in Section 2.3, all filings required to be
made prior to the Effective Time by Purchaser and Merger Sub with, and all
consents, approvals, permits and authorizations required to be obtained prior
to the Effective Time by Purchaser and Merger Sub from, any Governmental
Entity in connection with the execution and delivery of this Agreement by
Purchaser and Merger Sub and the consummation of the transactions contemplated
hereby by Purchaser, Merger Sub and the Company shall have been made or
obtained (as the case may be); and
(d) Order. There shall be in effect no Order.
ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, by the mutual consent of Purchaser,
Merger Sub and the Company, by action of their respective Boards of Directors.
9.2. Termination by either Purchaser or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of either the board of
directors of Purchaser or the Board of Directors if (i) Merger Sub, or any
Purchaser Company, shall have terminated the Offer without purchasing any
Shares pursuant thereto; provided, in the case of termination of this
Agreement by Purchaser, such termination of the Offer is not in violation of
the terms of the Offer or (ii) the Merger shall not have been consummated by
September 30, 1997 whether or not such date is before or after the approval by
holders of Shares or (iii) the approval of shareholders required by Section
8.1(a) shall not have been obtained at a meeting duly convened therefor.
9.3. Termination by Purchaser. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, by action of the board of directors
of Purchaser, if (x) the Company shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement to
be complied with or performed by the Company at or prior to such date of
termination which failure is incapable of being cured or has not been cured by
the earlier to occur of 10 days after the giving of written notice to the
Company and the scheduled expiration date of the Offer, (y) the Board of
Directors shall have withdrawn or modified in a manner adverse to Purchaser or
Merger Sub its approval or recommendation of the Offer, this Agreement or the
Merger or the Board of Directors shall fail to reaffirm such approval or
recommendation within 10 business days after a request by Purchaser to do so,
or shall have resolved to do any of the foregoing, or (z) if the Company or
any of the other persons or entities described in Section 7.2 shall take any
actions that would be proscribed by Section 7.2 but for the exception
contained in the proviso to the first sentence of Section 7.2 allowing certain
actions to be taken in response to an unsolicited bona fide Acquisition
Proposal.
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9.4. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares by action of the Board of Directors,
(a) if Purchaser or Merger Sub (or another Purchaser Company) (i) shall have
failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by
Purchaser or Merger Sub at or prior to such date of termination which failure
is incapable of being cured or has not been cured by the earlier to occur of
10 days after the giving of written notice to Purchaser or the scheduled
expiration date of the Offer or (ii) shall have failed to commence the Offer
within the time required in Section 1.1 or (b) if the Board of Directors
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice, and Purchaser does not make, within
five days of receipt of the Company's written notification of its intention to
enter into a binding agreement for a Superior Proposal an offer that is at
least as favorable, from a financial point of view, to the stockholders of the
Company as the Superior Proposal; provided that the Company has complied with
all provisions of Section 7.2 and that it complies with all applicable
provisions of Section 9.5. The Company agrees (i) that it will not enter into
a binding agreement referred to in clause (b) above until at least the sixth
day after it has provided the notice to Parent required thereby and (ii) to
notify Purchaser promptly if its intention to enter into the written agreement
referred to in its notification shall change at any time after giving such
notification.
9.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and abandonment of the
Merger pursuant to this Article IX, no party hereto (or any of its directors,
officers, employees, agents or advisors (financial, legal or accounting) shall
have any liability or further obligation to any other party to this Agreement,
except as provided in Section 9.5(b) below and Section 10.2 and except that
nothing herein will relieve any party from liability for any breach of this
Agreement.
(b) If this Agreement is terminated (x) by the Company pursuant to Section
9.4(b) then the Company shall at or prior to the time of such termination, pay
Purchaser a fee of $10,000,000 (the "Termination Fee"), which amount shall be
payable in same day funds, plus an amount equal to Purchaser's out-of-pocket
expenses, including fees and expenses paid to investment bankers, lawyers and
financing sources, incurred in connection with the transactions contemplated
by this Agreement in an amount not to exceed $1,500,000 (the "Purchaser
Expenses") or (y) by the Company or Purchaser at any time after (i) the Offer
shall have remained open for a minimum of at least 20 business days, (ii)
after the date hereof any corporation, partnership, person, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act) other than
Purchaser or Merger Sub or any of their respective subsidiaries or affiliates
(collectively, a "Person") shall have become the beneficial owner of 15% or
more of the outstanding Shares or any Person shall have commenced, or shall
have publicly announced an intention to commence, a tender offer or exchange
offer for 15% or more of the outstanding Shares, and (iii) the Minimum
Condition (as defined in Annex A) shall not have been satisfied and the Offer
is terminated without the purchase of any Shares thereunder, or by Purchaser
pursuant to Section 9.3 then, if terminated pursuant to Section 9.3, the
Company shall promptly pay to Purchaser the Purchaser Expenses and, if within
18 months of the date of any termination referred to in clause (y) of this
Section 9.5(b), the Company or any of its subsidiaries shall consummate an
Acquisition Transaction, the Company shall, promptly, but in no event later
than two days after the entry into such agreement, pay Purchaser the
Termination Fee and shall also pay to Purchaser the Purchaser Expenses, if not
previously paid. The Company agrees that it will not structure any transaction
or agreement for the purpose of avoiding payment of the Termination Fee. The
Company acknowledges that the agreements contained in this Section 9.5(b) are
an integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Purchaser and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 9.5(b), and, in order to obtain such payment,
Purchaser or Merger Sub commences a suit which results in a judgment against
the Company for the fee set forth in this paragraph (b), the Company shall pay
to Purchaser or Merger Sub its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest on the amount of the fee
at the prime rate of Citibank, N.A. on the date such payment was required to
be made.
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(c) If this Agreement is terminated by the Company pursuant to Section
9.4(a)(i) or (ii) then Purchaser shall promptly pay to the Company an amount
equal to the Company's out-of-pocket expenses, including fees and expenses
paid to investment bankers and lawyers incurred in connection with the
transactions contemplated by this Agreement in an amount not to exceed
$1,500,000. If, solely as a result of the occurrence of any of the events
specified in paragraph (h) of Annex A, Merger Sub and Purchaser (i) terminate
the Offer without paying for Shares or (ii) extend the expiration date of the
Offer beyond September 30, 1997, then Purchaser shall, prior to or at the time
of such termination in the case of clause (i) above or on September 30, 1997
in the case of clause (ii) above, pay to the Company a fee of $40,000,000 in
same day funds, less any amounts paid pursuant to the preceding sentence.
Purchaser acknowledges that the agreements contained in this Section 9.5(c)
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the Company would not enter into this
Agreement; accordingly, if Purchaser fails to promptly pay the amount due
pursuant to this Section 9.5(c), and, in order to obtain such payment, the
Company commences a suit which results in a judgment against Purchaser for the
fee set forth in this paragraph (c), Purchaser shall pay to the Company its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of such payment at the prime rate of
Citibank, N.A. on the date such payment was required to be made.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Payment of Expenses. Except as otherwise set forth in Section 9.5,
whether or not the Merger shall be consummated, each party hereto shall pay
its own expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the Merger.
10.2. Survival. The agreements of the Company, Purchaser and Merger Sub
contained in Sections 5.2 (but only to the extent that such Section expressly
relates to actions to be taken after the Effective Time), 5.3, 5.4 ,7.8, 7.9,
7.10, 7.11 and 10.1 shall survive the consummation of the Merger. The
agreements of the Company, Purchaser and Merger Sub contained in Sections 7.5,
9.5 and 10.1 shall survive the termination of this Agreement. Except as
provided in Section 9.5(a), all other representations, warranties, agreements
and covenants in this Agreement shall not survive the consummation of the
Merger or the termination of this Agreement.
10.3. Modification or Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify
or amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
10.4. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.5. Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10.7. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, if to
Purchaser or Merger Sub, addressed to Purchaser or Merger Sub, as the case may
be, at Vencor, Inc., 400 West Market Street, Suite 3300, Louisville, Kentucky
40202, Attention: President (with a copy to Joseph B. Frumkin, Esq., Sullivan
& Cromwell, 125 Broad Street, New York, New York 10004); and if to the
Company, addressed to the Company at TheraTx, Incorporated, 1105 Sanctuary
Parkway, Suite 100, Alpharetta, Georgia 30201, Attention: President (with a
copy to Steven J. Gartner, Esq., Willkie Farr & Gallagher, 153 East 53rd
Street, New York, New York 10022), or to such other persons or addresses as
may be designated in writing by the party to receive such notice.
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10.8. Entire Agreement, etc. This Agreement (including any schedules,
exhibits or Annexes hereto) and the Confidentiality Agreement (a) constitute
the entire agreement, and supersedes all other prior agreements,
understandings, representations and warranties both written and oral, among
the parties, with respect to the subject matter hereof, and (b) shall not be
assignable by operation of law or otherwise and is not intended to create any
obligations to, or rights in respect of, any persons other than the parties
hereto, except as provided in Section 7.9); provided, however, that Purchaser
may designate, by written notice to the Company, another wholly-owned direct
or indirect subsidiary to be a Constituent Corporation in lieu of Merger Sub,
in the event of which, all references herein to Merger Sub shall be deemed
references to such other subsidiary except that all representations and
warranties made herein with respect to Merger Sub as of the date of this
Agreement shall be deemed representations and warranties made with respect to
such other subsidiary as of the date of such designation.
10.9. Definition of "Subsidiary" and "Significant Subsidiary". When a
reference is made in this Agreement to a subsidiary of a party, the word
"subsidiary" means any corporation or other organization whether incorporated
or unincorporated of which at least a majority of the securities or interests
having by the terms thereof ordinary voting power to elect at least a majority
of the board of directors or others performing similar functions with respect
to such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or by such
party and one or more of its subsidiaries. When a reference is made in this
Agreement to a "Significant Subsidiary," the term "Significant Subsidiary"
shall have the meaning set forth in Rule 1-02 of Regulation S-X.
10.10. Obligation of Purchaser. Whenever this Agreement requires Merger Sub
to take any action, such requirement shall be deemed to include an undertaking
on the part of Purchaser to cause Merger Sub to take such action.
10.11. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first
hereinabove written.
VENCOR, INC.
By: /s/ James H. Gillenwater, Jr.
-------------------------------
Name: James H. Gillenwater, Jr.
Title: Senior Vice President
PEACH ACQUISITION CORP.
By: /s/ W. Earl Reed, III.
-------------------------------
Name: W. Earl Reed, III.
Title: Vice President
THERATX, INCORPORATED
By: /s/ John A. Bardis
-------------------------------
Name: John A. Bardis
Title: President and C.E.O.
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ANNEX A
Certain Conditions of the Offer. Notwithstanding any other provision of the
Offer, until (i) expiration or termination of all applicable waiting periods
under the HSR Act and (ii) receipt of all necessary approvals under change of
ownership, healthcare licensure and certificate of need laws and regulations,
Merger Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c)
promulgated under the Exchange Act (relating to Purchaser's obligation to pay
for or return tendered shares promptly after termination or withdrawal of the
Offer), Merger Sub shall not be required to pay for, or may delay the
acceptance for payment of or payment for, any tendered Shares, or may, in its
sole discretion (subject to the Merger Agreement), terminate or amend the
Offer as to any Shares not then accepted for payment if a majority of the
total Shares outstanding on a fully diluted basis shall not have been properly
and validly tendered pursuant to the Offer and not withdrawn prior to the
expiration of the Offer (the "Minimum Condition"), or, if on or after February
9, 1997, and at or before the time of acceptance for payment for any of such
Shares, any of the following events shall occur:
(a) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange or Nasdaq
or in the over-the-counter market, (ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States, (iii)
any limitation (whether or not mandatory) by any governmental or regulatory
authority, agency, commission or other entity, domestic or foreign
("Governmental Entity"), on, or any other event which might adversely affect,
the extension of credit by banks or other lending institutions or (iv) or in
the case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof;
(b) the 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 by
the earlier to occur of 10 days after the giving of written notice to the
Company and the scheduled expiration date of the Offer or any representation
or warranty of the 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;
(c) there shall be threatened, instituted or pending any action, litigation,
proceeding, investigation or other application (hereinafter, an "Action")
before any court or other Governmental Entity by any Governmental Entity: (i)
challenging the acquisition by Purchaser or Merger Sub of Shares, seeking to
restrain or prohibit the consummation of the transactions contemplated by the
Offer or the Merger, seeking to obtain any material damages or otherwise
directly or indirectly relating to the transactions contemplated by the Offer
or the Merger; (ii) seeking to prohibit, or impose any material limitations
on, Purchaser's or Merger Sub's ownership or operation of all or any material
portion of their or the Company's business or assets (including the business
or assets of their respective affiliates and subsidiaries), or to compel
Purchaser or Merger Sub to dispose of or hold separate all or any material
portion of Purchaser's or Merger Sub's or the Company's business or assets
(including the business or assets of their respective affiliates and
subsidiaries) as a result of the transactions contemplated by the Offer or the
Merger; (iii) seeking to make the acceptance for payment, purchase of, or
payment for, some or all of the Shares illegal or render Merger Sub unable to,
or restrict, the ability of Merger Sub to accept for payment, purchase or pay
for some or all of the Shares; (iv) seeking to impose material limitations on
the ability of Purchaser or Merger Sub effectively to acquire or hold or to
exercise full rights of ownership of the Shares including, without limitation,
the right to vote the Shares purchased by them on an equal basis with all
other Shares on all matters properly presented to the stockholders; or (v)
that, in any event, in the judgment of Purchaser, would be reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect
as a result of consummation of the transactions contemplated by the Offer and
the Merger, other than any such effect arising out of or relating to the
proposal, adoption or implementation after the date of the Merger Agreement of
any law, statute, rule or regulation relating to healthcare, Medicaid or
Medicare, including without limitation the proposal, adoption or
implementation of "salary equivalency" rates (including amendments to any
salary equivalency rates currently in effect) relating to the delivery of
physical therapy, occupational therapy, respiratory therapy or speech language
pathology services;
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(d) any statute, rule, regulation, order or injunction shall be sought,
proposed, enacted, promulgated, entered, enforced or deemed or become
applicable to the Offer or the Merger by any Governmental Entity that results
in any of the effects of, or have any of the consequences referred to in
clauses (i) through (v) of paragraph (c) above, other than any such effect or
consequence arising out of or relating to the proposal, adoption or
implementation after the date of the Merger Agreement of any law, statute,
rule or regulation relating to healthcare, Medicaid or Medicare, including
without limitation the proposal, adoption or implementation of "salary
equivalency" rates (including amendments to any salary equivalency rates
currently in effect) relating to the delivery of physical therapy,
occupational therapy, respiratory therapy or speech language pathology
services;
(e) 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;
(f) any court or other Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Order, provided,
that, Purchaser shall have used reasonable best efforts to cause any such
Order to be lifted;
(g) any event, change or development shall have occurred or been discovered
that would reasonably be expected to have a Company Material Adverse Effect,
other than any such Company Material Adverse Effect arising out of any law,
statute, rule or regulation relating to healthcare, Medicaid or Medicare,
including without limitation the proposal, adoption or implementation after
the date of the Merger Agreement of "salary equivalency" rates (including
amendments to any salary equivalency rates currently in effect) relating to
the delivery of physical therapy, occupational therapy, respiratory therapy or
speech language pathology services;
(h) (i) any event, change or development shall have occurred or been
discovered that would reasonably be expected to have a material adverse effect
(a "Purchaser Material Adverse Effect") on the financial condition,
operations, properties, business or results of operations of Purchaser and its
subsidiaries, taken as a whole, other than any such material adverse effect
arising out of or relating to (a) the proposal, adoption or implementation
after the date of the Merger Agreement of "salary equivalency" rates
(including amendments to any salary equivalency rates currently in effect)
relating to the delivery of physical therapy, occupational therapy,
respiratory therapy or speech language pathology services, or (b) any breach
by Purchaser of the Merger Agreement and (ii) as a result of such Purchaser
Material Adverse Effect, Purchaser is not permitted to borrow funds necessary
to consummate the Offer under its credit facilities then in effect.
(i) the Board of Directors (or a committee thereof) shall have amended,
modified or withdrawn its recommendation of the Offer or the Merger, or shall
have failed to publicly reconfirm such recommendation within ten business days
upon request by Purchaser or Merger Sub, or shall have endorsed, approved or
recommended any other Acquisition Proposal, or shall have resolved to do any
of the foregoing; or
(j) the Merger Agreement shall have been terminated by the Company or
Purchaser or Merger Sub in accordance with its terms or Purchaser or Merger
Sub 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 Purchaser and Merger Sub, in any such
case, and regardless of the circumstances (including any action or inaction by
Purchaser or Merger Sub) 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.
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The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by Purchaser or Merger Sub)
giving rise to such condition or may be waived by Purchaser or Merger Sub, by
express and specific action to that effect, in whole or in part at any time
and from time to time in its sole discretion. Any determination by Purchaser
and Merger Sub concerning any event described in this Annex A shall be final
and binding upon all parties except to the extent not permitted under the
Merger Agreement.
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