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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: August 21, 1997
(Date of earliest event reported)
RETIREMENT CARE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
COLORADO 1-14114 43-1441789
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
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6000 LAKE FORREST DRIVE, SUITE 200
ATLANTA, GEORGIA 30328
(Address of principal executive offices)
(404) 255-7500
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On August 21, 1997, Retirement Care Associates, Inc. ("RCA") entered
into an amendment (the "Amendment") to the Agreement and Plan of Merger and
Reorganization, dated as of February 17, 1997, as amended by Amendment No. 1
thereto dated as of May 27, 1997 (as amended, the "Merger Agreement"), by and
among RCA, Sun Healthcare Group, Inc., a Delaware corporation ("Sun"), and Peach
Acquisition Corporation, a Colorado corporation and wholly-owned subsidiary of
Sun ("Merger Sub"), pursuant to which Merger Sub will be merged (the "Merger")
with and into RCA.
The Amendment changes the exchange ratio provided for in the Merger
Agreement such that RCA shareholders will now receive 0.520 shares instead of
0.68265 shares of Sun common stock for each share of RCA common stock owned by
them on the effective date of the Merger. The Amendment also (i) contains
certain provisions requiring RCA to revise and restate its fiscal year 1997
financial statements for the quarters ended September 30, 1996, December 31,
1996 and March 31, 1997; (ii) waives certain representations and warranties set
forth in the Merger Agreement and increases the materiality threshold for RCA's
representations and warranties; (iii) contains certain provisions related to the
resignation of Coopers & Lybrand L.L.P. as RCA's independent auditors; (iv)
amends the provisions indemnifying RCA's directors and officers; and (v) extends
the date after which either party may freely terminate the Merger Agreement from
September 30, 1997 to November 30, 1997 (or, under certain circumstances, to
December 31, 1997).
The Merger is subject to approval by the shareholders of Sun and RCA
and will be considered at separate meetings now anticipated to occur in the
fourth quarter of 1997. The Merger remains subject to other customary
conditions. The Merger will be effective promptly following shareholder
approval, assuming satisfaction of the other conditions to the Merger.
The foregoing description is qualified in its entirety by reference to
the full text of the Amendment, which is attached hereto as Exhibit 2.1 and
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits. The following is a list of the Exhibits attached hereto.
Exhibit No. 2.1 Amendment No. 2 to the Agreement and Plan of Merger and
Reorganization dated as of February 17, 1997 among Sun
Healthcare Group, Inc., Peach Acquisition Corporation and
Retirement Care Associates, Inc.
Exhibit No. 99.1 Joint Press Release
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RETIREMENT CARE ASSOCIATES, INC.
By:/s/ Darrell C. Tucker
--------------------------------
Darrell C. Tucker, Its Treasurer
Dated as of August 21, 1997.
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION PAGE
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2.1 Amendment No. 2 to the Agreement and Plan of
Merger and Reorganization dated as of February
17, 1997 among Sun Healthcare Group, Inc., Peach
Acquisition Corporation and Retirement Care
Associates, Inc.
99.1 Joint Press Release
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EXHIBIT 2.1
AMENDMENT NO. 2 TO THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 2 (this "Amendment") to the AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION, dated as of February 17, 1997, as amended by
Amendment No. 1 thereto dated as of May 27, 1997 (as so amended, the "MERGER
AGREEMENT," capitalized terms used but not otherwise defined herein are used
herein as therein defined), among SUN HEALTHCARE GROUP, INC., a corporation
organized and existing under the laws of the State of Delaware ("PARENT"),
PEACH ACQUISITION CORPORATION, a corporation organized and existing under the
laws of the State of Colorado ("MERGER SUB") and a direct wholly owned
subsidiary of parent, and RETIREMENT CARE ASSOCIATES, INC., a corporation
organized and existing under the laws of the State of Colorado (the "COMPANY"),
is made this 21st day of August, 1997 by and among Parent, Merger Sub and the
Company.
W I T N E S S E T H:
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WHEREAS, Parent, Merger Sub and the Company have entered into the
Merger Agreement which provides, upon the terms and subject to the conditions
set forth therein, for the Merger of Merger Sub with and into the Company, and
WHEREAS, the boards of directors of Parent, Merger Sub and the Company
have each determined that it is consistent with and in furtherance of their
respective long-term business strategies and fair to and in the best interest
of their respective stockholders to amend the Merger Agreement as provided
herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION 1. Amendment to Merger Agreement. The Merger Agreement is
hereby amended as follows:
(a) The definitions of "COMPANY DISCLOSURE SCHEDULE" included in
Section 1.01 of the Merger Agreement is hereby amended and restated in its
entirety to read as follows:
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"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure
schedule entitled "Company Disclosure Schedule of Retirement Care
Associates, Inc. Re: Project Peach" dated February 17, 1997,
delivered by the Company to Paraent prior to the execution of this
Agreement, as amended by Schedules I, II, and III to Amendment No. 1 to
this Agreement, and as further supplemented by Schedule I to Amendment
No. 2 to this Agreement, and forming a part hereof."
(b) The definition of "COMPANY MATERIAL ADVERSE EFFECT"
included in Section 1.01 of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of the Company and the Company Subsidiaries that
is, or could reasonably be expected to be, materially adverse to the
business, prospects, assets (including intangible assets), liabilities
(contingent or otherwise), condition (financial or otherwise) or
results of operations of the Company and the Company Subsidiaries taken
as a whole; provided, however, that no such change in or effect on the
business of the Company and the Company Subsidiaries shall constitute a
"Company Material Adverse Effect" unless such change or effect
has, or could reasonably be expected to have, individually or in the
aggregate, an effect of more than $10,000,000 on the assets,
liabilities or results of operations of the Company for one or more
financial reporting periods, exclusive of any change or effect that
results from any of the matters described in the Company Disclosure
Schedule."
(c) Section 3.01(a) of the Merger Agreement is hereby
amended and restated in its entirety to read as follows:
"(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be cancelled pursuant to Section
3.01(d) and any Dissenting Shares) and all rights in respect thereof
shall forthwith cease to exist and shall be converted into and become
exchangeable for the lower of (i) 0.520 shares of Parent Common
Stock and (ii) in the event that the Series AA Exchange Ratio is
greater than 0.714, 0.520 shares of Parent Common Stock multiplied by
the Adjustment Factor (the lower of such numbers, calculated to three
decimal places, being the "COMMON EXCHANGE RATIO")."
(d) Section 4.07(a) of the Merger Agreement is hereby
amended by deleting clause (A) thereof and adding the following clause (a) in
place thereof:
"(A) with the SEC and the NYSE since June 30, 1994 through the date of
Amendment No. 2 of this Agreement (collectively and as amended
(including any amendment filed after the date of this Agreement
pursuant to Section 6.13 hereof), the "COMPANY REPORTS") and".
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(e) Section 4.08 of the Merger Agreement is hereby amended
by deleting clause (i) thereof and adding the following clause (i) in place
thereof.
"(i) any event or events which, individually or in the aggregate,
constitute a Company Material Adverse Effect, excluding any changes
and effects resulting from changes in economic, regulatory or
political conditions or changes in conditions generally applicable to
the industries in which the Company and the Company Subsidiaries are
involved."
(f) Section 6.01 of the Merger Agreement is hereby amended
by deleting the word "or" immediately preceding clause (m) thereof and adding
the following immediately after clause (m) thereof:
";
(n) institute, file or commence any claim, action, suit or
proceeding."
(g) Section 6.03 of the Merger Agreement is hereby amended
by adding the following sentence immediately following the third sentence
thereof:
"In addition, the Company shall give Parent prompt notice of any suit,
claim, action, proceeding or investigation pending or, to the knowledge
of the Company, threatened, against the Company, any Company Subsidiary
or any Indemnified Party which could reasonably be expected to be
materially adverse to the business, prospects, assets (including
intangible assets), liabilities (contingent or otherwise), condition
(financial or otherwise) or results of operations of the Company and
the Company Subsidiaries, taken as a whole, or to such Indemnified
Party, as the case may be, and the Parent shall have the right to
participate in all negotiations and proceedings with respect to any
such suit, claim, action, proceeding or investigation."
(h) Section 6.08 of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"SECTION 6.08. Letters of Accountants. At the written request
of Parent, each of the Company and/or Parent shall use all reasonable
efforts to cause to be delivered to the other "comfort" letters of
their respective independent public accountants, each such letter
dated and delivered as of the date the Registration Statement
shall have become effective and as of the Effective Time, and
addressed to Parent and the Company, respectively, in form and
substance reasonably satisfactory to the recipient thereof and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with mergers such as the
Merger contemplated hereby."
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(i) Article VI of the Merger Agreement is hereby amended by
adding the following Sections 6.13 and 6.14 immediately following Section 6.12
thereto.
"SECTION 6.13. Amended Company Reports. Not later than August
25, 1997, the Company shall file with the SEC amendments to its
Quarterly Reports on Form 10-Q for the fiscal quarters ended September
30, 1996, December 31, 1996, and March 31, 1997, containing
financial statements reflecting all of the adjustments described in
Section 4.07(a) of Schedule I to Amendment No. 2 to this Agreement, and
shall promptly deliver to Parent copies of each such amended Form 10-Q
filed with the SEC. The disclosure included in the form of amended
Forms 10-Q that will be filed with the SEC pertaining to the matters
described in Section 4.07(a) of Schedule I to Amendment No. 2 to this
Agreement shall not differ in any respect from the information included
in Section 4.07(a) of Schedule I to Amendment No. 2 to this Agreement
without the prior written consent of Parent. The Company shall not
file with the SEC any amendment to any Company Report without the prior
written consent of Parent unless such amendment is permitted by this
Section 6.13.
SECTION 6.14. Consent of Accountants; Work Papers. (a) The
Company shall use its best efforts to cause Coopers & Lybrand L.L.P. to
consent to the use in the Registration Statement and the Proxy
Statement of their report on the consolidated financial statements of
the Company appearing in the Company 1996 10-K; provided, however, that
the Company shall not be required under this Section 6.14(a) to pay any
amounts claimed by Coopers & Lybrand L.L.P. which, in the Company's
good faith exercise of its reasonable judgment, are subject to valid
claims of set-off or other defenses or counterclaims.
(b) The Company shall use its best efforts to cause Coopers &
Lybrand L.L.P. to make available to Arthur Andersen L.L.P. copies of
all materials in Coopers & Lybrand L.L.P.'s possession relating to (i)
Coopers & Lybrand L.L.P.'s audit of the Company's financial statements
for the year ended June 30, 1997, including all work papers, computer
files and other materials prepared by Coopers & Lybrand L.L.P. in
connection with such audit, and (ii) Coopers & Lybrand L.L.P.'s
analysis as to whether any condition exists with respect to the Company
that will preclude "pooling of interests" accounting treatment for the
Merger under applicable United States accounting rules, including all
computer files and other material prepared by Coopers & Lybrand L.L.P.
in connection with such analysis; provided, however, that the Company
shall not be required under this Section 6.14(b) to pay any amounts
claimed by Coopers & Lybrand L.L.P. which, in the Company's good faith
exercise of its reasonable judgment, are subject to valid claims of
set-off or other defenses or counterclaims.
(j) Section 7.04 of the Merger Agreement is hereby amended
and restated in its entirety to read as follow:
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"SECTION 7.04. Directors' and Officers' Indemnification. (a)
The articles of incorporation and bylaws of the Surviving Corporation
shall contain the provisions with respect to indemnification that are
set forth, as of the date of this Agreement, in the articles of
incorporation and bylaws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective
Time were directors or officers of the Company; provided, however, that
the Surviving Corporation may amend or otherwise modify the provisions
with respect to indemnification that are set forth in its articles of
incorporation and bylaws to exclude any right to indemnification
thereunder with respect to any civil or criminal penalties, damages,
fines, disgorgement or other similar personal liabilities, or any
injunctions or consent decrees, incurred, imposed or entered into in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, brought or
assessed by any Governmental Entity or any settlement thereof
("EXCLUDED ITEMS").
(b) From and after the Effective Time, Parent and the
Surviving Corporation shall indemnify and hold harmless each present
and former director and officer of the Company (the "INDEMNIFIED
PARTIES"), against (i) any costs or expenses (including reasonable
attorneys' fees) and (ii) judgments, fines, losses, claims, damages or
liabilities, but excluding from this clause (ii) Excluded Items
(collectively, "COSTS"), incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time,
to the extent permitted under the articles of incorporation and bylaws
of the Company or Parent (each as in effect on the Effective Date).
(c) If any Indemnified Party shall seek indemnification
pursuant to this Section 7.04, such Indemnified Party shall give prompt
notice to Parent and the Surviving Corporation, stating the amount of
the Costs, if known, and method of computation thereof. The
obligations and liabilities of Parent and the Surviving Corporation
under this Section 7.04 with respect to Costs arising from any claims,
actions, suits, proceedings or investigations of any third party,
including any Governmental Entity, which are subject to the
indemnification provided for in this Section 7.04 ("THIRD PARTY
CLAIMS") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnified Party shall receive
notice of any Third Party Claim, the Indemnified Party shall give
Parent and the Surviving Corporation notice of such Third Party Claim
within 10 days of the receipt by the Indemnified Party of such notice;
provided, however, that the failure to provide such notice shall not
release Parent and the Surviving Corporation from any of its
obligations under this Section 7.04 except to the extent Parent and the
Surviving Corporation are materially prejudiced by such failure. Upon
receipt of notice from an Indemnified Party as provided in this Section
7.04(c), Parent and the Surviving
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Corporation shall be entitled to assume and control the defense of such
Third Party Claim at their expense and through counsel of their choice
if they give notice of their intention to do so to the Indemnified
Party within 30 days of the receipt of such notice from the Indemnified
Party. In the event that any Indemnified Party shall seek
indemnification as provided herein, the Indemnified Party shall make
available to Parent and the Surviving Corporation, at Parent's and
the Surviving Corporation's expense, all witnesses, pertinent records,
materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably
required by Parent and the Surviving Corporation;
(d) Notwithstanding anything set forth in this Section
7.04 to the contrary, (i) if there exists a conflict of interest that
would make it inappropriate for the same counsel to represent both the
Indemnified Party and Parent and the Surviving Corporation in
connection with any Third Party Claim (other than an Excluded Item),
then the Indemnified Party shall be entitled to retain its own counsel
that is reasonably satisfactory to Parent and the Surviving
Corporation at the expense of Parent and the Surviving Corporation,
(ii) if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the judgment of the
Indemnified Party for the same counsel to represent both the
Indemnified Party and Parent and the Surviving Corporation in
connection with any Excluded Item, then the Indemnified Party shall be
entitled to retain its own counsel at its own expense, and (iii) if
there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the counsel
selected by Parent to defend an Excluded Item for the same counsel to
represent both the Indemnified Party and Parent and the Surviving
Corporation in connection with such Excluded Item, then the Indemnified
Party shall retain its own counsel at its own expense.
(k) Section 9.01(b) of the Merger Agreement is hereby
amended and restated in its entirety to read as follows:
"(b) by either Parent or the Company, if the Effective Time
shall not have occurred on or before November 30, 1997; provided,
however, that in the event that the Effective Time has not occurred
by such time (i) due to the failure to satisfy the condition specified
in Section 8.01(b), and as of such time (A) the condition specified in
Section 8.01(a) shall have been satisfied, (B) neither the Company
Stockholders' Meeting nor, if applicable, the Parent Stockholders'
Meeting, shall have been held, and (C) neither Parent nor the Company
shall be entitled to terminate this Agreement under any other paragraph
of this Section 9.01, then such date shall be extended, without any
action on the part of any party hereto, until December 31, 1997; or
(ii) solely due to the failure to satisfy the condition specified in
Section 8.01(d) or 8.01(e), then such date may be extended, at the
optioin of Parent, until December 31, 1997; and provided, further, that
the right to terminate this Agreement under this Section 9.01(b) shall
not be available to any party whose failure to fulfill any
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obligation under this Agreement shall have caused, or resulted
in, the failure of the Effective Time to occur on or before such date."
(l) Section 9.01(g) of the Merger Agreement is hereby
amended and restated in its entirety to read as follows:
"(g) by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth
in this Agreement, or if any representation or warranty of the Company
shall have become untrue, incomplete or incorrect, in either case such
that the conditions set forth in Section 8.03 would not be satisfied (a
"Terminating Company Breach"); provided, however, that if such
Terminating Company Breach (i) is curable by the Company through the
exercise of its reasonable efforts within 30 days and for so long as
the Company continues to exercise such reasonable efforts, or (ii) has
been disclosed on Schedule I, II or III to Agreement No. 1 to this
Agreement or on Schedule I to Amendment No. 2 to this Agrement, Paraent
may not terminate this Agreement under this Section 9.01(g); and
provided further that the preceding proviso shall not in any event be
deemed to extend any date set forth in paragraph (b) of this Section
9.01;"
(m) Section 9.01(k) of the Merger Agreement is hereby
amended and restated in its entirety to read as follows:
"(k) by the Company, if the Company shall have failed to
obtain the Company Fairness Opinion by the close of business (New York
City time) on August 27, 1997; provided, however, that Parent may
extend such date by up to ten business days by delivering
written notice thereof to the Company; and provided, further that such
termination shall not be effective unless and until the Company shall
have paid to Parent an amount equal to all of Parent's Expenses, as
evidenced by the reasonable documentation, in an amount no greater than
$750,000, by wire transfer of immediately available funds to an account
designated by Parent; or".
(n) Section 9.01 of the Merger Agreement is hereby amended
by deleting the word "or" immediately preceding clause (k) thereof and adding
the following clause (l) immediately following clause (k) thereof:
"(l) by Parent, if the letter of Coopers & Lybrand L.L.P.
required by Item 304(a)(3) of Regulation S-K expresses any material
disagreement with the contents of the Current Report on Form 8-K filed
by the Company with the SEC on August 21, 1997."
SECTION 2. Representations and Warranties
(a) Representations and Warranties of the Company. The
Company hereby represents and warrants to Parent and Merger Sub that: The board
of directors of the
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Company has determined that it is consistent with and in furtherance of the
Company's long-term business strategy and fair to and in the best interests of
the Company's stockholders to amend the Merger Agreement as provided herein.
The Company has all necessary corporate power and authority to execute and
deliver this Amendment, to perform its obligations under the Merger Agreement as
amended hereby and to consummate the transactions contemplated hereby. The
execution and delivery of this Amendment by the Company and the consummation by
the Company of the transactions contemplated by the Merger Agreement as amended
hereby have been duly and validly authorized by all necessary corporate action
(other than stockholder approval as described in the Merger Agreement). This
Amendment has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Merger Sub, constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. After giving effect to Section 1(a) of
this Amendment and the amendment of certain Company Reports pursuant to Section
6.13 of the Merger Agrement, as amended hereby, each of the representations and
warranties of the Company contained in the Merger Agreement that is qualified by
materiality is true, complete and correct on and as of the date hereof as if
made at and as of the date hereof (other than representations and warranties
which address matters only as of a certain date which shall be true, complete
and correct as of such certain date) and each of the representations and
warranties that is not so qualified shall be true, complete and correct in all
material respects on and as of the date hereof as if made at and as of the date
hereof (other than representations and warranties which address matters only as
of a certain date which shall be true, complete and correct in all material
respects as of such certain date), in each case except as contemplated or
permitted by the Merger Agreement.
(b) Representations and Warranties of Parent and Merger Sub.
Parent and Merger Sub hereby jointly and severally represent and warrant to the
Company that: Parent and Merger sub have all necessary corporate power and
authority to execute and deliver this Amendment, to perform their respective
obligations under the Merger Agreement as amended hereby and to consummate the
transactions contemplated hereby. The execution and delivery of this Amendment
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated by the Merger Agrement as amended hereby have been
duly and validly authorized by all necessary corporate action (other than
stockholder approval as described in the Merger Agreement). This Amendment has
been duly executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with its terms. Each of the
representations and warranties of Parent and Merger Sub contained in the Merger
Agreement that is qualified by materiality is true, complete and correct on and
as of the date hereof as if made at and as of the date hereof (other than
representations and warranties which address matters only as of a certain date
which shall be true, complete and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true,
complete and correct in all material respects on and as of the date hereof as
if made at and as of the date hereof (other than representations and warranties
which address matters
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only as of a certain date which shall be true, complete and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by the Merger Agreement.
SECTION 3. Effect on Merger Agreement. Except as otherwise
specifically provided herein, the Merger Agreement shall not be amended but
shall remain in full force and effect.
SECTION 4. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO CONTRACT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING NEW
YORK LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE STATE OF
NEVADA.
SECTION 5. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
By:/s/ Robert D. Woltil
--------------------------------------------
Name: Robert D. Woltil
Title: Senior Vice President for Financial
Services and Chief Financial Officer
PEACH ACQUISITION CORPORATION
By:/s/ Robert D. Woltil
--------------------------------------------
Name: Robert D. Woltil
Title: Vice President
RETIREMENT CARE ASSOCIATES, INC.
By: /s/ Christopher F. Brogdon
--------------------------------------------
Name: Christopher F. Brogdon
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
FRIDAY AUGUST 22 8:03 AM EDT
COMPANY PRESS RELEASE
Source: Sun Healthcare Group, Inc.
SUN HEALTHCARE GROUP AND RETIREMENT CARE ASSOCIATES AMEND MERGER AGREEMENT
ALBUQUERQUE, N.M. and ATLANTA, Aug. 22 /PRNewswire/ -- Sun Healthcare Group,
Inc. (NYSE: SHG) and Retirement Care Associates, Inc (NYSE: RCA) announced
today that they have amended the terms of their merger agreement. The
principal effect of the amendment is to change the number of shares of Sun
common stock that will be issued for each share of RCA common stock from
0.68265 to 0.520. The boards of directors of Sun and RCA have each approved the
merger agreement amendment.
RCA has filed a Form 8-K indicating its intention to revise and restate its
fiscal 1997 financial statements for the quarters ended Sept. 30, 1996, Dec.
31, 1996, and March 31, 1997. The aggregate effect of these adjustments on
pretax income for these three quarters is expected to be approximately $13.5
million. The Form 8-K also announces the resignation of RCA's independent
auditors. Both companies expect new auditors to be appointed promptly to
ensure consummation of the merger on a timely basis.
Sun originally entered into separate merger agreements with RCA and Contour
Medical, Inc. (Nasdaq SmallCap: CTMI) on Feb. 17, 1997. RCA also owns
approximately 65 percent of the outstanding shares of Contour. There has been
no change in the financial terms of the Contour merger agreement, which
provides for the payment of cash and/or stock consideration with a value of
$8.50 for each share of Contour common stock. Sun's merger agreement with
Contour has been amended primarily to match the RCA amendment in extending the
date after which either party may freely terminate the agreement from Sept. 30,
1997 to Nov. 30, 1997 (or, under certain circumstances, to Dec. 31, 1997). The
parties now contemplate closing both transactions in the fourth quarter of
1997. The transactions are expected to be accretive to Sun's earnings in 1998.
Closing of the transactions is subject to the satisfaction of customary
conditions. The RCA acquisition is intended to be accounted for as a pooling
of interests. The Contour acquisition is intended to be accounted for as a
purchase.
Headquarted in Albuquerque, N.M., Sun Healthcare Group, Inc. is a diversified
international long-term care provider. Sun companies operate long-term care
facilities in the United States, the United Kingdom and Spain, and manage
pharmacies that serve the nursing home industry. Sun subsidiaries also provide
therapy services in the United States, fulfill the medical supply needs of
nursing homes, and offer a comprehensive array of ancillary services for the
healthcare industry.
Atlanta, Ga.-based RCA operates approximately 120 long-term care, independent
and assisted living facilities located primarily in the southeastern United
States. Contour Medical is a national provider of medical supplies for the
long-term care industry.
Except for historical information, all other matters in this press release are
forward-looking statements that involve risks and uncertainties, including but
not limited to those detailed from time to time in Sun's SEC filings, including
Sun's annual report on Form 10-K for the fiscal year ended Dec 31, 1996 and its
Form 10-Q for the quarter ended June 30, 1997
