<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
(Name of Subject Company)
HORIZON PRSM CORPORATION
(Bidder)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
694926 10 6
(CUSIP Number of Class of Securities)
------------------------
SCOT SAUDER
Vice President of Legal Affairs,
Secretary and General Counsel
Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, NM 87110
(505) 881-4961
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
Copy to:
JAMES H. WILSON
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
(713) 758-2222
------------------------
<TABLE>
<CAPTION>
CALCULATION OF FILING FEE
<S> <C>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$54,135,361 $10,828
</TABLE>
* For purposes of calculating filing fee only. The amount of the filing fee,
calculated in accordance with Rule 0-11, equals 1/50 of one percentum of the
cash offered by Bidder. Bidder is offering to purchase all of the issued and
outstanding Common Stock of the Subject Company, other than shares held by
the Bidder, for $6.50 cash net to the seller. As of November 15, 1996, there
were 8,328,517 shares of the Subject Company's Common Stock issued and
outstanding. As of such date, the Bidder held no shares of the Subject
Company's Common Stock.
/ / 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.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CUSIP No. 694926 10 6 14D-1
- --------------------------------------------------------------------------------
(1) Name of reporting person....................................................
Horizon PRSM
Corporation
S.S. or I.R.S. Identification No. of above person............................
85-0446446
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group
(see instructions):
(a) / /
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Sources of funds (see instructions)
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f): / /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
Delaware
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by reporting person
None
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row 7 excludes certain shares
(see instructions) / /
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in Row 7
None
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions)
CO
- --------------------------------------------------------------------------------
2
<PAGE>
CUSIP No. 694926 10 6 14D-1
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
a tender offer (the "Offer") by Horizon PRSM Corporation, a Delaware corporation
(the "Purchaser"), to purchase all of the outstanding shares of common stock,
par value $0.01 per share ("Shares"), of Pacific Rehabilitation & Sports
Medicine, Inc., a Delaware corporation (the "Company"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated November 22,
1996 (the "Offer to Purchase"), and in the related Letter of Transmittal, copies
of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively. The
Purchaser is an indirect wholly owned subsidiary of Horizon/CMS Healthcare
Corporation, a Delaware corporation ("Parent").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) and (b) The information set forth in "INTRODUCTION" and "THE TENDER
OFFER--Certain Information Concerning the Company" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "THE TENDER OFFER--Price Range of the
Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d) and (g) The information set forth in "INTRODUCTION" and
"THE TENDER OFFER-- Certain Information Concerning Parent and the Purchaser" of
the Offer to Purchase is incorporated herein by reference.
(e) and (f) During the last five years, none of the Purchaser or any of the
persons listed in "THE TENDER OFFER--Certain Information Concerning Parent and
the Purchaser--DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER" of
the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree, or final
order enjoining further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in "SPECIAL FACTORS--Background of the
Transactions" of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in "INTRODUCTION;" "SPECIAL
FACTORS--Background of the Transactions;" "SPECIAL FACTORS--Purpose of the
Transactions;" "SPECIAL FACTORS--Plans for the Company" and "THE MERGER
AGREEMENT" is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in "FINANCING THE TRANSACTIONS" of
the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
3
<PAGE>
CUSIP No. 694926 10 6 14D-1
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) The information set forth in "INTRODUCTION;" "SPECIAL
FACTORS--Background of the Transactions;" "SPECIAL FACTORS--Purpose of the
Transactions;" "SPECIAL FACTORS--Plans for the Company" and "THE MERGER
AGREEMENT" of the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) The information set forth in "SPECIAL FACTORS--Plans for the Company"
and "THE MERGER AGREEMENT--Composition of the Company's Board of Directors" of
the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in "FINANCING THE TRANSACTIONS" of the Offer
to Purchase is incorporated herein by reference.
(e) The information set forth in "INTRODUCTION" and "SPECIAL FACTORS--Plans
for the Company" of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in "INTRODUCTION;" and "THE TENDER
OFFER--Effect of the Offer on the Market for the Shares, Nasdaq Stock Market
Listing and Exchange Act Registration" of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "THE TENDER OFFER--Certain
Information Concerning Parent and the Purchaser--INTERESTS IN SECURITIES OF THE
COMPANY" 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 "INTRODUCTION;" "THE MERGER AGREEMENT" and "THE
TENDER OFFER--Procedures for Tendering Shares--APPOINTMENT" of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "INTRODUCTION" and "THE TENDER OFFER--Persons
Retained, Employed or to be Compensated" of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in "SPECIAL FACTORS--Interests of Certain
Persons in the Transactions; Potential Conflicts of Interest" of the Offer to
Purchase is incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS--Governmental and
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in "SPECIAL FACTORS--Governmental and
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
4
<PAGE>
CUSIP No. 694926 10 6 14D-1
(d) and (e) None.
(f) Additional information concerning the Offer is set forth in the Offer to
Purchase, which is attached hereto as Exhibit (a)(1), and in the Appendices to
the Offer to Purchase.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(1) -- Offer to Purchase dated November 22, 1996.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4) -- Letter to Clients.
(a)(5) -- Press release issued by Pacific Rehabilitation & Sports Medicine, Inc. on October
30, 1996.
(a)(6) -- Joint Press release issued by Horizon/CMS Healthcare Corporation and Pacific
Rehabilitation & Sports Medicine, Inc. on November 18, 1996.
(a)(7) -- Notice of Guaranteed Delivery.
(a)(8) -- Summary Advertisement dated November 22, 1996.
(a)(9) -- Delaware General Corporation Law Appraisal Rights (See Offer to Purchase,
Appendix A).
(a)(10) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
(b)(1) -- Amended and Restated Credit Agreement dated as of September 26, 1995 among
Horizon/ CMS Healthcare Corporation, Continental Medical Systems, Inc., the
Lenders named therein and NationsBank of Texas, N.A. as Agent and Issuing Bank
(incorporated by reference to Exhibit 10.1 to Horizon/CMS Healthcare
Corporation's Quarterly Report on Form 10-Q for the quarter ended August 31,
1995).
(b)(2) -- First Amendment dated as of April 15, 1996 to the Amended and Restated Credit
Agreement dated as of September 26, 1995 among Horizon/CMS Healthcare
Corporation, Continental Medical Systems, Inc., the Lenders named therein and
NationsBank of Texas, N.A., as Agent and Issuing Bank (incorporated by
reference to Exhibit 4.23 to Horizon/CMS Healthcare Corporation's Annual Report
on Form 10-K for the fiscal year ended May 31, 1996).
(b)(3) -- Second Amendment dated as of July 16, 1996 to the Amended and Restated Credit
Agreement dated as of September 26, 1995 among Horizon/CMS Healthcare
Corporation, Continental Medical Systems, Inc., the Lenders named therein and
NationsBank of Texas, N.A., as Agent and Issuing Bank (incorporated by
reference to Exhibit 4.24 to Horizon/CMS Healthcare Corporation's Annual Report
on Form 10-K for the fiscal year ended May 31, 1996).
(b)(4) -- Third Amendment dated as of November 6, 1996 to the Amended and Restated Credit
Agreement dated as of September 26, 1995 among Horizon/CMS Healthcare
Corporation, Continental Medical Systems, Inc., the Lenders named therein and
NationsBank of Texas, N.A., as Agent and Issuing Bank.
(c)(1) -- Agreement and Plan of Merger, dated as of November 17, 1996. (See Offer to
Purchase, Appendix B).
(c)(2) -- Confidentiality Agreement dated October 24, 1996 between Horizon/CMS Healthcare
Corporation and Pacific Rehabilitation & Sports Medicine, Inc.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
5
<PAGE>
CUSIP No. 694926 10 6 14D-1
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
<TABLE>
<S> <C>
Date: November 22, 1996 HORIZON PRSM CORPORATION
By: /s/Scot Sauder
Scot Sauder
VICE PRESIDENT--LEGAL AFFAIRS
</TABLE>
6
<PAGE>
CUSIP No. 694926 10 6 14D-1
14D-1 EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- --------------------------------------------------------------------------------------- -------------
<S> <C> <C> <C>
(a)(1) -- Offer to Purchase dated November 22, 1996.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4) -- Letter to Clients.
(a)(5) -- Press release issued by Pacific Rehabilitation & Sports Medicine, Inc., on October 30,
1996.
(a)(6) -- Joint Press release issued by Horizon/CMS Healthcare Corporation and Pacific
Rehabilitation & Sports Medicine, Inc., dated November 18, 1996.
(a)(7) -- Notice of Guaranteed Delivery.
(a)(8) -- Summary Advertisement dated November 22, 1996
(a)(9) -- Delaware General Corporation Law Appraisal Rights (See Offer to Purchase, Appendix A).
(a)(10) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(b)(1) -- Amended and Restated Credit Agreement dated as of September 26, 1995 among Horizon/CMS
Healthcare Corporation, Continental Medical Systems, Inc., the Lenders named therein
and NationsBank of Texas, N.A. as Agent and Issuing Bank (incorporated by reference
to Exhibit 10.1 to Horizon/ CMS Healthcare Corporation's Quarterly Report on Form
10-Q for the quarter ended August 31, 1995).
(b)(2) -- First Amendment dated as of April 15, 1996 to the Amended and Restated Credit Agreement
dated as of September 26, 1995 among Horizon/CMS Healthcare Corporation, Continental
Medical Systems, Inc., the Lenders named therein and NationsBank of Texas, N.A., as
Agent and Issuing Bank (incorporated by reference to Exhibit 4.23 to Horizon/CMS
Healthcare Corporation's Annual Report on Form 10-K for the fiscal year ended May 31,
1996).
(b)(3) -- Second Amendment dated as of July 16, 1996 to the Amended and Restated Credit Agreement
dated as of September 26, 1995 among Horizon/CMS Healthcare Corporation, Continental
Medical Systems, Inc., the Lenders named therein and NationsBank of Texas, N.A., as
Agent and Issuing Bank (incorporated by reference to Exhibit 4.24 to Horizon/CMS
Healthcare Corporation's Annual Report on Form 10-K for the fiscal year ended May 31,
1996).
(b)(4) -- Third Amendment dated as of November 6, 1996 to the Amended and Restated Credit
Agreement dated as of September 26, 1995 among Horizon/ CMS Healthcare Corporation,
Continental Medical Systems, Inc., the Lenders named therein and NationsBank of
Texas, N.A., as Agent and Issuing Bank.
(c)(1) -- Agreement and Plan of Merger, dated as of November 17, 1996. (See Offer to Purchase,
Appendix B).
(c)(2) -- Confidentiality Agreement dated October 24, 1996 between Horizon/CMS Healthcare
Corporation and Pacific Rehabilitation & Sports Medicine, Inc.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
7
<PAGE>
EXHIBIT (A)(1)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
AT
$6.50 NET PER SHARE
BY
HORIZON PRSM CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
HORIZON/CMS HEALTHCARE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, DECEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED.
A MAJORITY OF THE BOARD OF DIRECTORS OF PACIFIC REHABILITATION & SPORTS
MEDICINE, INC. (THE "COMPANY") HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND HAS
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER ALL THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY HORIZON/CMS HEALTHCARE
CORPORATION OR ITS AFFILIATES, REPRESENTS AT LEAST A MAJORITY OF THE OUTSTANDING
SHARES OF COMMON STOCK OF THE COMPANY ON A FULLY DILUTED BASIS. THE OFFER IS
ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS THAT ARE CONTAINED IN THIS
OFFER TO PURCHASE. SEE "INTRODUCTION" AND "THE TENDER OFFER."
------------------------
THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share, of the Company ("Shares")
pursuant to the Offer should either (i) complete and sign the enclosed Letter of
Transmittal or a facsimile copy thereof in accordance with the instructions in
the Letter of Transmittal, have such stockholder's signature thereon guaranteed
if required by Instruction 1 to the Letter of Transmittal, mail or deliver the
Letter of Transmittal (or such facsimile) and any other required documents to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") and either deliver
the certificate(s) for such Shares to the Depositary along with the Letter of
Transmittal (or facsimile) or tender such Shares pursuant to the procedures for
book-entry transfer set forth in "THE TENDER OFFER-- Procedures for Tendering
Shares" or (ii) request such stockholder's broker, dealer, bank, trust company
or other nominee to effect the transaction for such stockholder. A stockholder
having Shares registered in the name of a broker, dealer, bank, trust company or
other nominee must contact such broker, dealer, bank, trust company or other
nominee if such stockholder desires to tender such Shares.
Any 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 in a timely manner, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedures for guaranteed delivery set forth in
"THE TENDER OFFER--Procedures for Tendering Shares."
Questions and requests for assistance may be directed to the Information
Agent or the Depositary at the addresses or telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be obtained from the Information Agent.
------------------------
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
1-800-223-2064
------------------------
NOVEMBER 22, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION............................................................................................... 1
SPECIAL FACTORS............................................................................................ 2
Background of the Transactions........................................................................... 2
Interests of Certain Persons in the Transactions; Potential Conflicts of Interest........................ 3
Certain Information Provided by the Company.............................................................. 3
Purpose of the Transactions.............................................................................. 4
Plans for the Company.................................................................................... 5
Appraisal Rights......................................................................................... 5
Certain Tax Consequences................................................................................. 6
Governmental and Regulatory Approvals.................................................................... 6
FINANCING THE TRANSACTIONS................................................................................. 7
General.................................................................................................. 7
The Credit Facility...................................................................................... 7
Conditions............................................................................................... 7
THE MERGER AGREEMENT....................................................................................... 7
The Offer................................................................................................ 8
Composition of the Company's Board of Directors.......................................................... 8
The Merger............................................................................................... 8
Conditions to the Merger................................................................................. 10
Representations and Warranties........................................................................... 11
Conduct of Business Pending the Merger................................................................... 11
Access; Confidentiality.................................................................................. 12
Company Proxy Statement.................................................................................. 13
Public Announcements..................................................................................... 13
Acquisition Proposals.................................................................................... 13
Directors' & Officers' Indemnification................................................................... 14
Company Plans............................................................................................ 14
Deposit.................................................................................................. 14
Termination.............................................................................................. 15
Termination Fees and Expenses............................................................................ 16
THE TENDER OFFER........................................................................................... 17
Terms of the Offer....................................................................................... 17
Acceptance for Payment and Payment....................................................................... 18
Procedures for Tendering Shares.......................................................................... 19
Withdrawal Rights........................................................................................ 22
Price Range of the Shares................................................................................ 23
Effect of the Offer on the Market for the Shares, Nasdaq Stock Market Listing and Exchange Act
Registration........................................................................................... 23
Certain Information Concerning the Company............................................................... 24
Certain Information Concerning Parent and the Purchaser.................................................. 24
Certain Conditions to the Offer.......................................................................... 26
State Takeover Laws...................................................................................... 27
Persons Retained, Employed or to Be Compensated.......................................................... 28
Miscellaneous............................................................................................ 28
APPENDICES
Appendix A--Appraisal Rights Provisions under the Delaware General Corporation Law
Appendix B--Agreement and Plan of Merger
</TABLE>
<PAGE>
To the Holders of Common Stock
of Pacific Rehabilitation & Sports Medicine, Inc.
INTRODUCTION
Horizon PRSM Corporation, a Delaware corporation (the "Purchaser"), hereby
offers to purchase all of the issued and outstanding shares of common stock, par
value $.01 per share ("Shares"), of Pacific Rehabilitation & Sports Medicine,
Inc., a Delaware corporation (the "Company"), at a price of $6.50 per Share, net
to the seller in cash, without interest upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). The Purchaser is an indirect
wholly owned subsidiary of Horizon/CMS Healthcare Corporation, a Delaware
corporation ("Parent").
Tendering stockholders who hold Shares in their own name will not be charged
brokerage fees or commissions or, subject to Instruction 7 of the Letter of
Transmittal, transfer taxes as a result of their sale of Shares pursuant to the
Offer. The Purchaser will pay all fees and expenses of Georgeson & Company Inc.,
as Information Agent (the "Information Agent"), and ChaseMellon Shareholder
Services, L.L.C., as Depositary (the "Depositary"), incurred in connection with
the Offer. See "THE TENDER OFFER--Persons Retained, Employed or to be
Compensated" below.
A majority of the Company's Board of Directors has determined that the Offer
and the Merger are fair to, and in the best interests of, the stockholders of
the Company and has approved the Offer and the Merger Agreement and recommends
that stockholders accept the Offer and tender their shares pursuant to the
Offer. In addition, the Company's Board of Directors has received the opinion
dated November 17, 1996 of Smith Barney Inc. ("Smith Barney"), the Company's
financial advisor, to the effect that, as of such date and based upon and
subject to certain matters stated therein, the cash consideration to be received
by holders of Shares (other than Parent and its affiliates) in the Offer and the
Merger, taken together, was fair, from a financial point of view, to such
holders.
The Offer is conditioned upon, among other things, there being validly
tendered, and not properly withdrawn, prior to the Expiration Time (as defined
in "THE TENDER OFFER--Terms of the Offer" below) Shares which, together with any
Shares beneficially owned by Parent and its affiliates, represent at least a
majority of the Shares outstanding on a fully diluted basis (the "Minimum Tender
Condition").
The purpose of the Offer is for a wholly owned subsidiary of Parent, Eagle
Rehab Corporation, to acquire the entire equity interest in the Company. The
Offer is being made pursuant to that certain Agreement and Plan of Merger dated
as of November 17, 1996 (the "Merger Agreement") among the Company, Parent and
the Purchaser, a copy of which is attached hereto as Appendix B. Pursuant to the
Merger Agreement, as soon as practicable after the consummation of the Offer and
the satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company ("Merger"). As a result of the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation of the Merger (the "Surviving Corporation"). In the
Merger, each outstanding Share at the Effective Time (as defined below) (other
than Shares held in the treasury of the Company, or held by Parent or any wholly
owned subsidiary of the Company or Parent and Shares, if any, held by
stockholders who have not consented in writing to, or otherwise voted in favor
of, the Merger and who properly exercise appraisal rights under the Delaware
General Corporation Law ("DGCL")) will, by virtue of the Merger and without any
action by the holder thereof, be converted into the right to receive $6.50 in
cash, or any higher price paid per Share in the Offer, payable to the holder
thereof, without interest thereon (the "Merger Consideration"), upon the
surrender of the certificate formerly representing such Share (a "Certificate").
See "THE MERGER AGREEMENT" for a more detailed description of the Merger and the
Merger Agreement. The Offer and the Merger are sometimes collectively referred
to herein as the "Transactions" and the time at which the Merger is consummated
is referred to herein as the "Effective Time."
The Company has informed the Purchaser that, as of November 15, 1996, there
were 8,328,517 Shares issued and outstanding, 9,787,250 Shares issued and
outstanding on a fully diluted basis, and approximately 158 holders of record.
Neither the Parent nor any of its affiliates currently hold any Shares and will,
based
<PAGE>
on the number of Shares outstanding on a fully diluted basis on such date,
therefore, need to acquire at least 4,893,626 Shares pursuant to the Offer to
satisfy the Minimum Tender Condition. Upon satisfaction of the Minimum Tender
Condition, the Purchaser will have sufficient voting power under the DGCL to
approve and effect the Merger at a special meeting of the Company's stockholders
without the affirmative vote of any other stockholder of the Company. If the
Purchaser acquires at least 90% of the issued and outstanding Shares, the
Purchaser will be able to consummate the Merger under the DGCL without a vote of
the Company's stockholders at a meeting or the written consent of the Company's
stockholders. See "SPECIAL FACTORS--Purpose of the Transactions."
The Company has advised the Purchaser that, to the Company's knowledge, all
of its executive officers, directors and affiliates, except for Mr. Bill
Barancik, intend to tender their Shares pursuant to the Offer.
The Merger Agreement provides that, subject to the terms and conditions of
the Offer, the Purchaser will accept for payment all Shares that have been
validly tendered and not withdrawn pursuant to the Offer at the earliest time
following the Expiration Time (12:00 midnight New York City time on Friday,
December 20, 1996, unless extended by the Purchaser) that all conditions to the
Offer (which are set forth herein under "THE TENDER OFFER--Certain Conditions to
the Offer") shall have been satisfied or waived by the Purchaser. The Purchaser
will pay for all such Shares as promptly as practicable thereafter. The Offer
will not remain open following the time Shares are accepted for payment.
It is the present intention of the Purchaser to seek to cause the Company to
make an application for the termination of the registration of the Shares under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as
practicable after the purchase of all validly tended Shares pursuant to the
Offer if the requirements for termination of registration are met. See "THE
TENDER OFFER--Effect of the Offer on the Market for the Shares; Nasdaq Stock
Market Listing and Exchange Act Registration."
The Purchaser estimates that the total funds required to purchase all Shares
validly tendered pursuant to the Offer, to consummate the Merger to repay
certain outstanding indebtedness of the Company and to pay all related costs and
expenses will be approximately $78 million. The Purchaser anticipates that it
will fund such amount pursuant to its existing bank credit facility. See
"FINANCING OF THE TRANSACTIONS."
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
SPECIAL FACTORS
BACKGROUND OF THE TRANSACTIONS
In November 1995, the Company and Parent entered into a definitive agreement
(the "Previous Merger Agreement") providing for a stock-for-stock merger
transaction pursuant to which each Share would have been converted into 0.3483
of a share of Parent's common stock. Pursuant to the Previous Merger Agreement,
either party could terminate such agreement if the merger had not been effected
on or before April 1, 1996. In March 1996, it became apparent that the merger
could not be effected on or before April 1, 1996. Parent had previously informed
the Company that it intended to terminate the Previous Merger Agreement if the
merger contemplated thereby had not been effected by April 1, 1996, unless the
Company agreed to a lower implied purchase price. The Company was unwilling to
agree to a reduced purchase price and terminated the Previous Merger Agreement
on April 2, 1996.
On several occasions thereafter, representatives of Parent and the Company
discussed the possibility of a business combination involving Parent and the
Company. On September 13, 1996, representatives of Parent met with John
Elorriaga, a member of the Company's Board of Directors, to discuss the possible
acquisition of the Company. Later that day, Parent delivered a letter to the
Company in which Parent indicated an interest in acquiring all outstanding
Shares at a purchase price of $6.25 per Share in cash, subject to certain
conditions. As a result of several conversations among representatives of Parent
and the
2
<PAGE>
Company and an indication by the Company that it would not accept Parent's
initial proposal, on October 3, 1996 Parent submitted a revised proposal to the
Company that provided for a cash purchase price of $6.50 per Share, subject to
certain conditions.
On October 17, 1996, Smith Barney contacted Parent for clarification of
certain terms and conditions set forth in the revised Parent proposal. On
October 21, 1996, Parent responded in writing to such request for clarification.
Between October 23 and November 17, 1996, representatives of Parent conducted
due diligence and negotiated the terms and conditions of a merger agreement and
related documents with representatives of the Company.
On October 24, 1996, the Company and Parent entered into a Confidentiality
Agreement pursuant to which the Company agreed to supply certain information to
Parent and its affiliates, and Parent agreed to treat, and to cause its
affiliates, representatives and advisors to treat, such information as
confidential. Parent also agreed to indemnify the Company and its affiliates and
representatives from liabilities arising out of a breach or alleged breach of
the Confidentiality Agreement.
On October 30, 1996, the Company issued a press release that it was in
discussions concerning the possibility of a merger of the Company with Parent at
a price of $6.50 per Share in cash. The closing price per Share, as reported by
the Nasdaq Stock Market, on October 29, 1996 (the day prior to such public
announcement) was $3.875. On November 8, 1996, the Board of Directors of Parent
approved the Offer and the Merger and authorized Parent's officers to negotiate
and execute a definitive merger agreement on behalf of Parent. The parties
executed the Merger Agreement on November 17, 1996. Public announcement of such
execution was made on the morning of November 18, 1996.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS; POTENTIAL CONFLICTS OF
INTEREST
The Company's stockholders should be aware that certain members of the
Company's Board of Directors and management have certain interests respecting
the Merger separate from their interests as holders of Shares. The Schedule
14D-9 filed by the Company with the Securities and Exchange Commission (the
"Commission") contains important information in this regard that should be read
carefully before any decision is made with respect to the Offer.
CERTAIN INFORMATION PROVIDED BY THE COMPANY
Except as otherwise provided in this Offer to Purchase, the information
concerning the Company contained in this Offer to Purchase, incluing financial
information, has been taken from or based upon records on file with the
Commission and other publicly available information. Although neither the
Purchaser nor Parent has any knowledge that any such information is untrue,
neither Purchaser nor Parent takes any responsibility for the accuracy or
completeness of such information or for any failure by the Company to disclose
events that may have occurred or may affect the significance or accuracy of such
information.
In the course of its discussions with Parent, described in "--Background of
the Transaction" above, the Company provided Parent with certain business and
financial information that Parent believes was not publicly available. Such
information included, among other things, certain financial projections for the
fourth quarter of 1996 and the first two quarters of 1997 (the "Company
Projections") prepared by management of the Company. The Company Projections do
not take into account any of the potential effects of the Offer and the Merger.
The Company does not as a matter of course publicly disclose internal
projections as to future revenues, earnings or financial condition.
3
<PAGE>
Set forth below is a summary of the Company Projections.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997 JUNE 30, 1997
------------------- ------------------- -------------------
<S> <C> <C> <C>
(IN THOUSANDS)
Adjusted net revenue............................. $ 10,673 $ 11,462 $ 11,722
Gross profit..................................... 4,250 4,711 5,022
Pre-tax income................................... 760 1,079 1,258
Income tax provision............................. 330 468 546
Net income....................................... 430 611 712
</TABLE>
THE COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE
PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION
WAS PROVIDED TO PARENT. NONE OF PARENT, THE PURCHASER OR ANY PARTY TO WHOM THE
PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH
INFORMATION. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE
BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY
WHICH, THOUGH PARENT HAS BEEN ADVISED WERE CONSIDERED REASONABLE BY THE COMPANY
AT THE TIME THEY WERE FURNISHED TO PARENT, MAY NOT BE REALIZED AND ARE SUBJECT
TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE
REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN. THE
PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED BY THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH
PROJECTIONS WERE COMPILED, THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS WILL
BE REALIZED, OR THAT ACTUAL RESULTS WILL NOT BE HIGHER OR LOWER THAN THOSE
ESTIMATED. THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN
INDICATION THAT PARENT, THE PURCHASER OR ANY OTHER PARTY WHO RECEIVED SUCH
INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS.
PURPOSE OF THE TRANSACTIONS
The purpose of the Transactions is for Parent to acquire the entire equity
interest in the Company. Following the completion of the Offer, any remaining
equity interest in the Company not owned by the Purchaser, will be acquired by
consummating the Merger. The acquisition of the entire equity interest in the
Company has been structured as a cash tender offer followed by a cash merger in
order to provide a prompt and orderly transfer of ownership of the Company from
the public stockholders to Parent and to provide stockholders of the Company
with cash for all their Shares.
The DGCL requires that the Merger be approved by the holders of at least a
majority of the issued and outstanding Shares entitled to vote on the Merger.
Upon satisfaction of the Minimum Tender Condition, the Purchaser will have
sufficient voting power to approve and effect the Merger at a special
4
<PAGE>
meeting of the Company's stockholders without the affirmative vote of any other
stockholder of the Company. If the Purchaser acquires at least 90% of the issued
and outstanding Shares, Purchaser will be able to consummate the Merger under
the DGCL without a vote of the Company's stockholders at a meeting or the
written consent of the Company's stockholders. In such event, the Purchaser
expects to effect the Merger as promptly as practicable following the purchase
of Shares pursuant to the Offer.
As a result of the Merger, the Company will be a privately held company. The
Merger will result in the termination of all of the rights of the Company's
stockholders as stockholders. Such stockholders will not participate in the
earnings and growth of the Surviving Corporation after the Merger and will not
have any right to vote on corporate matters. Similarly, such stockholders will
not face the risk of decline in the value of the Company and the Shares after
the Merger. If the Merger is consummated, Parent will indirectly own 100% of the
equity interests of the Company and will be entitled to all benefits resulting
from those interests, including all income generated by the Company's operations
and any future increase in the Company's value.
The Purchaser believes that the primary benefit of the Offer to the
stockholders of the Company, other than the Purchaser, is that they will be
afforded the opportunity to sell their Shares at a price determined by the Board
of Directors of the Company to be fair and that represents an approximate 68%
premium over the $3.875 closing price of the Shares on the last full trading day
prior to the public announcement on October 30, 1996 that the Company and Parent
were discussing a potential transaction. See "THE TENDER OFFER--Price Range of
the Shares."
PLANS FOR THE COMPANY
Pursuant to the Merger Agreement, upon the purchase of Shares by Purchaser
pursuant to the Offer and from time to time thereafter, Parent will be entitled
to designate that number of directors, rounded up to the next whole number, to
the Company's Board of Directors as will give Parent representation on such
Board equal to the percentage of Shares so purchased to the total number of
outstanding Shares. See "THE MERGER AGREEMENT--Composition of the Company's
Board or Directors." At the Effective Time, the officers and directors of the
Purchaser immediately prior to the Effective Time will become the officers and
directors of the Surviving Corporation. Following the consummation of the
Merger, the Board of Directors of the Surviving Corporation intends to conduct a
detailed review of the Company, including its assets, corporate structure,
dividend policy, capitalization, operations, properties, policies, and personnel
and to consider what, if any, changes would be desirable in light of the
circumstances that then exist. After such review, such changes could include the
acquisition or disposition of assets or other changes in the Company's
capitalization, dividend policy, corporate structure, business, Certificate of
Incorporation or By-Laws.
Except for the Transactions and as set forth in this Offer to Purchase, the
Purchaser has no present plans or proposals that would result in an
extraordinary corporate transaction such as a merger, reorganization,
liquidation, or sale or transfer of a material amount of assets, involving the
Company or any of its subsidiaries, or any material changes in the Company's
capitalization, dividend policy, corporate structure, business or the
composition of the Company's management or its Board of Directors.
APPRAISAL RIGHTS
Stockholders do not have appraisal rights as a result of the Offer. If the
Merger is consummated, stockholders of the Company will have the right to
dissent therefrom and demand appraisal of their Shares under Section 262 of the
DGCL. Dissenting stockholders who comply with the statutory procedures would be
entitled to receive a judicial determination and payment of the "fair value" of
their 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, on
the amount determined to be the fair value. Any such judicial determination of
the fair value of the Shares could be based upon considerations other than or in
addition to the price paid per Share in the Offer or the market value of the
Shares. In WEINBERGER V. UOP, INC., the Delaware Supreme
5
<PAGE>
Court stated, among other things, that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in an appraisal proceeding.
The value so determined could be more or less than the purchase price per Share
paid pursuant to the Offer or the consideration per Share paid in the Merger or
other similar business combination. Moreover, the Purchaser may argue in an
appraisal proceeding that, for purposes of such a proceeding, the fair value of
the Shares is less than the price paid in the Offer and the Merger. See Appendix
A to this Offer to Purchase for the procedures required for perfecting appraisal
rights in connection with the Merger.
In addition, several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders which requires that the merger be
fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of the consideration to be received by the stockholders and
whether there was fair dealing among the parties.
CERTAIN TAX CONSEQUENCES
The summary of tax consequences set forth below is for general information
only and is based on the law as currently in effect. The tax treatment of each
stockholder will depend in part upon such stockholder's particular situation.
Special tax consequences not described herein may be applicable to particular
classes of taxpayers, such as financial institutions, broker-dealers, persons
who are not citizens or residents of the United States and stockholders who
acquired their Shares through the exercise of an employee stock option or
otherwise as compensation. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO
THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, ANY
STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
Sales of Shares pursuant to the Offer (and the receipt of cash pursuant to
the Offer) will be taxable transactions for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the "Code"), and may also be
taxable transactions under applicable state, local or foreign income and other
tax laws. Generally, for federal income tax purposes a tendering stockholder
will recognize gain or loss in an amount equal to the difference between the
cash received by the stockholder pursuant to the Offer and the stockholder's
adjusted tax basis in the Shares tendered by the stockholder and purchased
pursuant to the Offer. Gain or loss will be calculated for each block of Shares
tendered and purchased pursuant to the Offer. For federal income tax purposes,
such gain or loss will be a capital gain or loss if the Shares are a capital
asset in the hands of the stockholder, and a long-term capital gain or loss if
the stockholder's holding period is more than one year. The receipt of cash by
stockholders pursuant to the Merger should result in similar federal income tax
consequences to such stockholders.
GOVERNMENTAL AND REGULATORY APPROVALS
ANTITRUST MATTERS. Transactions such as the Offer and the Merger are
reviewed by the Department of Justice (the "DOJ") and the Federal Trade
Commission (the "FTC") to determine whether they comply with applicable
antitrust laws. Under the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Offer could not be
consummated until such time as the specified waiting period requirements of the
HSR Act have been satisfied. On February 9, 1996, the DOJ and the FTC granted
early termination of the waiting period in connection with the transactions
contemplated by the Previous Merger Agreement. Such early termination is
effective for a period of one year and is also applicable to the Offer and the
Merger.
MEDICARE. The Company has been advised by its counsel that the transactions
contemplated by the Merger Agreement will constitute a "change of ownership" of
certain of the Company's "providers" for
6
<PAGE>
purposes of the Medicare program. As a result, the Company will be required to
provide post-Merger notification to its medicare fiscal intermediaries.
Except as described above, the Purchaser is not aware of any other
governmental or regulatory approvals required for consummation of the Offer and
the Merger.
FINANCING THE TRANSACTIONS
GENERAL
Approximately $78 million will be required by the Purchaser to acquire all
of this issued and outstanding Shares pursuant to the Offer and the Merger, to
pay the outstanding principal amount of certain indebtedness of the Company and
to pay related transaction costs and expenses. It is anticipated that such
financing will be obtained by the Purchaser pursuant to (i) a credit agreement
dated as of September 26, 1995 (as amended, the "Credit Facility") with
NationsBank of Texas, N.A., as Agent, and the lenders named therein, in an
aggregate amount of $750 million of which up to $78 million will be available to
finance the Offer and the Merger and (ii) working capital of the Purchaser.
A summary of certain provisions of the Credit Facility is set forth below.
Such summary is qualified in its entirety by reference to the text of the Credit
Facility and the amendments thereto, which are exhibits to the Schedule 14D-1
filed by the Purchaser with the Commission in connection with the Offer, each of
which may be obtained from the Commission or upon request from the Purchaser.
See "THE TENDER OFFER--Miscellaneous" below.
THE CREDIT FACILITY
The aggregate revolving credit commitment under the Credit Facility is $750
million, of which the Company had borrowed $528.4 million and had outstanding
letters of credit of $34.9 million at August 31, 1996. Borrowings under the
Credit Facility bear interest, payable monthly, at a rate equal to either, as
selected by the Company, the Alternate Base Rate (as therein defined) of the
Agent in effect from time to time, or the Adjusted London Inter-Bank Offer Rate
plus 0.625% to 1.25% per annum, depending on the maintenance of specified
financial ratios. The applicable interest rates at August 31, 1996 were 8.25%
and 6.44% - 6.63% on the Alternate Base Rate and Adjusted London Inter-Bank
Offer Rate advances, respectively. In addition, borrowings thereunder mature in
September 2000 and are secured by a pledge of the capital stock of substantially
all subsidiaries of the Company. Under the terms of the Credit Facility, the
Company is required to maintain certain financial ratios and is restricted in
the payment of dividends to an amount which shall not exceed 20% of the
Company's net earnings for the prior fiscal year.
CONDITIONS
The Banks' obligation to make loans under the Credit Facility is subject,
among other things, to compliance with certain covenants and restrictions. Such
provisions (i) require Parent to maintain certain financial ratios, (ii)
restrict Parent's ability to enter into capital leases beyond certain specified
amounts, (iii) prohibit transactions with affiliates not at arm's length, (iv)
allow Parent to make only permitted investments, (v) restrict certain
indebtedness, liens, dispositions of property and issuances of securities and
(vi) prohibit a change in control or a fundamental change in the business of
Parent except under certain limited circumstances. The Credit Facility further
provides that certain limited events or occurrences that would or could
reasonably be expected to have a material adverse effect on Parent's ability to
repay the loans or to perform its obligations under the Credit Facility will
constitute an event of default under the Credit Facility.
THE MERGER AGREEMENT
The following is a summary of certain provisions contained in the Merger
Agreement and is qualified in its entirety by reference to the full text of the
Merger Agreement which is attached as Appendix B to this
7
<PAGE>
Offer to Purchase and is incorporated herein by reference. Capitalized terms
used but not otherwise defined herein have the meanings ascribed to such terms
in the Merger Agreement.
THE OFFER
The Purchaser is required by law to keep the Offer open for not fewer than
20 business days from and including the date of its commencement. Subject to the
terms and conditions of the Offer, the Purchaser is obligated to accept for
payment Shares that have been validly tendered and not withdrawn pursuant to the
Offer at a price of $6.50 per Share, net to the seller in cash, promptly after
expiration of the Offer; PROVIDED that, Purchaser may extend the Offer up to the
tenth business day after the later of (i) the initial expiration date of the
Offer and (ii) the date on which all conditions to the Offer shall first have
been satisfied or waived. The Company agrees that no Shares held by the Company
will be tendered to Parent pursuant to the Offer; PROVIDED, that Shares held
beneficially or of record by any plan, program or arrangement sponsored or
maintained for the benefit of employees of the Company shall not be deemed to be
held by the Company, regardless of whether the Company has, directly or
indirectly, the power to vote or control the disposition of such Shares. The
obligation of the Purchaser to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer is subject to the Minimum Tender Condition and
certain other conditions that are described in "THE TENDER OFFER--Terms of the
Offer" and "The Tender Offer-- Certain Conditions to the Offer" below. The
Purchaser expressly reserves the right to increase the price per share payable
in the Offer or to make any other changes in the terms and conditions of the
Offer; provided that, Purchaser may not, without the prior written consent of
the Company, (a) decrease or change the form of the consideration payable in the
Offer, (b) decrease the number of Shares sought pursuant to the Offer, (c) add
to or change the conditions of the Offer, except that Parent in its sole
discretion may waive any of the conditions to the Offer other than the Minimum
Tender Condition, which may not be waived without the Company's prior written
consent, or (d) make any other change in the terms or conditions of the Offer
which is adverse to the holders of the Shares.
COMPOSITION OF THE COMPANY'S BOARD OF DIRECTORS
The Merger Agreement provides that promptly upon the purchase by the
Purchaser pursuant to the Offer of such number of Shares as represents at least
a majority of the outstanding Shares and from time to time thereafter, Parent
shall be entitled to designate such number of directors (the "Parent
Designees"), rounded up to the next whole number, to the Board of Directors of
the Company as will give Parent representation on such Board equal to the
product of the number of directors on the Board of Directors of the Company and
the percentage that such number of Shares so purchased bears to the number of
Shares outstanding, and the Company shall, upon request of Parent, exercise
reasonable efforts to increase the size of the Board of Directors of the Company
or secure the resignations of such number of directors as is necessary to enable
such Parent Designees to be so elected or appointed. Such Parent Designees will
abstain from any action proposed to be taken by the Company to amend or
terminate the Merger Agreement or waive any action by Parent or the Purchaser,
which actions will be effective with the approval of a majority of the remaining
directors. The Company's obligations to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act. At the request
of Parent, the Company shall take all action reasonably necessary to effect any
such election or appointment, including mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, unless such information previously has been provided to
the Company's stockholders pursuant to the Company's Schedule 14D-9. Parent and
the Purchaser will supply to the Company, and will be solely responsible for,
all information with respect to themselves and their officers, directors and
affiliates required by such Section and Rule.
THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions therein, and in accordance with the DGCL, at the Effective Time, the
Purchaser shall be merged with and into the
8
<PAGE>
Company. As a result of the Merger, the separate corporate existence of the
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger.
As provided in the Merger Agreement, by virtue of the Merger and without any
action on the part of any of the parties thereto or the holders of Shares:
(a) each Share that is issued and outstanding immediately prior to the
Effective Time (other than any Shares owned by Parent, the Purchaser or their
respective affiliates or held by the Company in its treasury, which Shares will
be cancelled and extinguished and any Dissenting Shares, as hereinafter defined)
shall be changed and converted into and represent the right to receive $6.50 in
cash, or any higher price paid per Share in the Offer (the "Per Share Merger
Consideration"). All such Shares shall no longer be outstanding and shall
automatically be cancelled and extinguished and shall cease to exist, and each
certificate which immediately prior to the Effective Time evidenced any such
Shares (other than Shares owned by Parent, the Purchaser or their respective
affiliates or held by the Company in its treasury, which Shares will be
cancelled and extinguished, and any Dissenting Shares) shall thereafter
represent the right to receive (without interest), upon surrender of such
certificate in accordance with the provisions of the Merger Agreement, the Per
Share Merger Consideration multiplied by the number of Shares evidenced by such
certificate (the "Merger Consideration"). The holders of certificates previously
evidencing Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect thereto (including, without limitation,
any rights to vote or to receive dividends and distributions in respect of such
Shares), except as otherwise provided in the Merger Agreement or by law; and
(b) each share of capital stock of the Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
Notwithstanding anything in the Merger Agreement to the contrary, Shares
that are outstanding immediately prior to the Effective Time and that are held
by stockholders who shall have perfected dissenters' rights in accordance with
Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration, unless and until such
holder shall have failed to perfect or shall have effectively withdrawn or lost
such holder's rights to appraisal under the DGCL. If any such holder shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
rights to appraisal of such Shares under the DGCL, such holder's shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, at the Effective Time, the right to receive, upon surrender as provided
above, the Merger Consideration for the certificate or certificates that
formerly evidenced such Shares.
The Merger Agreement provides that immediately prior to the Effective Time,
(a) all outstanding (i) options and other rights to acquire Shares granted
to employees under any stock option or purchase plan, program or similar
arrangement of the Company (each, as amended, an "Option Plan" and, such options
and other rights, "Stock Options"), and (ii) any other rights to acquire Shares
("Company Acquisition Rights"), whether or not then exercisable or vested, will
be cancelled by the Company upon consummation of the Offer, and the holders
thereof shall be entitled to receive, for each Share subject to such Stock
Option or Company Acquisition Right, in settlement and cancellation thereof, an
amount in cash equal to the positive difference, if any, between the Per Share
Merger Consideration and the exercise price per share of such Stock Option or
Company Acquisition Right, as the case may be, which amount shall be paid at the
time the Stock Option or Company Acquisition Right is cancelled; PROVIDED, that,
with respect to any person subject to Section 16 of the Exchange Act, any such
amount shall be paid as soon as practicable after the first date payment can be
made without liability to such person under Section 16(b) of the Exchange Act.
All applicable withholding taxes attributable to the payments made under the
Merger Agreement or to distributions contemplated thereby shall be deducted from
the amounts payable under the Merger Agreement and all such taxes attributable
to the cancellation of Stock
9
<PAGE>
Options and Company Acquisition Rights shall be withheld from the proceeds
received in connection with the cancellation thereof.
(b) Except as provided in the Merger Agreement or as otherwise agreed to by
the parties and to the extent permitted by the Option Plans, the Option Plans
shall terminate as of the Effective Time and any rights under any provisions in
any other plan, program or arrangement providing for the issuance or grant by
the Company of any interest in respect of the capital stock of the Company shall
be cancelled as of the Effective Time.
The Merger Agreement provides that, unless the Merger is consummated without
a meeting of the Company's stockholders in accordance with Section 253 of the
DGCL, and subject to applicable law, the Company, acting through its Board of
Directors, shall, in accordance with the DGCL, its Certificate of Incorporation
and its Bylaws, (a) duly call, give notice of, convene and hold a special
meeting of its stockholders as soon as reasonably practicable following the
consummation of the Offer for the purpose of considering and taking action upon
the Merger Agreement (the "Company Stockholders' Meeting") and (b) subject to
the fiduciary duties of its Board of Directors, include in the proxy statement
or information statement prepared by the Company for distribution to
stockholders of the Company in advance of the Company Stockholders' Meeting in
accordance with Regulation 14A or Regulation 14C promulgated under the Exchange
Act (the "Company Proxy Statement") the recommendation of the majority of its
Board of Directors in favor of the Offer and the Merger. Parent will provide the
Company with the information concerning Parent and the Purchaser required to be
included in the Company Proxy Statement, and will vote, or cause to be voted,
all Shares owned by it or its affiliates in favor of approval and adoption of
the Merger Agreement and the Merger.
Notwithstanding anything to the contrary in the Merger Agreement, if Parent,
the Purchaser or their respective affiliates shall acquire at least 90% of the
outstanding Shares, each of Parent, the Purchaser and the Company shall take all
necessary and appropriate action to cause the Merger to become effective, as
soon as practicable after the consummation of the Offer, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
CONDITIONS TO THE MERGER
Under the Merger Agreement, the respective obligations of each party thereto
to effect the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which may be waived,
in whole or in part, to the extent permitted by applicable law: (a) Parent
having accepted for payment and purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; PROVIDED that this condition will be deemed
satisfied if Parent fails to accept for payment or pay for Shares pursuant to
the Offer in breach of the terms of the Offer or the Merger Agreement; (b)
unless the Merger is consummated without a meeting of the Company's stockholders
in accordance with Section 253 of the DGCL, the Merger Agreement having been
adopted, and the Merger having been approved, by a vote of the holders of a
majority of the outstanding Shares; (c) no federal or state governmental or
regulatory body or court of competent jurisdiction having enacted, issued,
promulgated or enforced any statute, rule, regulation, executive order, decree,
judgment, preliminary or permanent injunction or other order that is in effect
and that prohibits, enjoins or otherwise restrains the consummation of the
Merger; PROVIDED, HOWEVER, that the parties shall use all commercially
reasonable efforts to cause any such decree, judgment, injunction or order to be
vacated or lifted; (d) any waiting period under the HSR Act applicable to the
Merger having terminated or otherwise expired; and (e) all material filings
required to be made prior to the Effective Time with, and all material consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from, governmental and regulatory authorities in connection with
the Merger and the consummation of the other transactions contemplated by the
Merger Agreement that are listed in the Company Disclosure Schedule (as defined
in the Merger Agreement) having been made or obtained, as the case may be.
10
<PAGE>
The obligation of the Company to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
additional conditions, unless waived by the Company: (a) all representations and
warranties made by Parent and the Purchaser in the Merger Agreement being true
and correct in all material respects on and as of the Effective Time, with the
same force and effect as though such representations and warranties had been
made on and as of the Effective Time, except for changes permitted or
contemplated by the Merger Agreement and except for representations and
warranties that were made as of a specific date or time, which must be true and
correct in all material respects only as of such specific date or time; (b) each
of Parent and the Purchaser having performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in the Merger Agreement to be performed or complied with by
it prior to or at the Effective Time; and (c) the Company having received the
Deposit (as hereinafter defined).
The obligation of Parent and the Purchaser to effect the Merger is also
subject to the satisfaction at or prior to the Effective Time of each of the
following additional conditions, unless waived by either of Parent or the
Purchaser: (a) all representations and warranties made by the Company in the
Merger Agreement being true and correct in all material respects on and as of
the Effective Time, with the same force and effect as though such
representations and warranties had been made on and as of the Effective Time,
except for changes permitted or contemplated by the Merger Agreement and except
for representations and warranties that were made as of a specific date or time,
which must be true and correct in all material respects only as of such specific
date or time; and (b) the Company having performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in the Merger Agreement to be performed or complied with by
it prior to or on the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the parties. Representations and warranties of the Company
include, without limitation, certain matters relating to its organization and
qualifications to do business, capitalization, authority to enter into the
Merger Agreement and to consummate the transactions contemplated thereby,
consents and approvals required for the execution and delivery of the Merger
Agreement and the consummation of the transactions contemplated thereby, the
absence of certain violations, filings with the Commission, the absence of
certain changes since December 31, 1995, litigation, employee benefit matters,
taxes, compliance with law, intellectual property, insurance, employment
agreements, brokers and finders, opinions of financial advisors, permits,
business practices, disclosure of certain agreements, and the accuracy of the
Offer Documents, the Company Proxy Statement and the Company's Schedule 14D-9.
Representations and warranties of the Purchaser and Parent include, without
limitation, certain matters relating to its organization and qualifications to
do business, authority to enter into the Merger Agreement and to consummate the
transactions contemplated thereby, consents and approvals required for the
execution and delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby, the absence of certain violations,
litigation, financing for the transactions contemplated by the Merger Agreement,
brokers and finders, the operations of Purchaser, and the accuracy of the Offer
Documents, the Company Proxy Statement and the Company's Schedule 14D-9.
CONDUCT OF BUSINESS PENDING THE MERGER
From the date of the Merger Agreement until the Effective Time, except as
otherwise required or contemplated by the Merger Agreement or as required by
applicable law or as set forth in the Company Disclosure Schedule, the Company
shall: (a) use all commercially reasonable efforts to conduct its business and
the business of its subsidiaries (the "Subsidiaries") in all material respects
only in the ordinary course of business and consistent with past practice; (b)
not amend its Certificate of Incorporation or Bylaws or declare, set aside or
pay any dividend or other distribution or payment in cash, stock or property in
respect of its capital stock; (c) not reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire,
11
<PAGE>
directly or indirectly, any of its capital stock; (d) not issue, grant, sell or
pledge or agree or authorize the issuance, grant, sale or pledge of any shares
of, or rights of any kind to acquire any shares of, its capital stock other than
the grant of stock options to purchase up to an aggregate of 5,000 Shares in the
ordinary course of business and consistent with past practice under current
employee benefit plan arrangements and other than Shares issuable upon the
exercise of stock options or issuable upon the exercise of convertibility
features in its securities outstanding on the date of the Merger Agreement; (e)
not acquire, sell, transfer, lease or encumber any material assets except in the
ordinary course of business and consistent with past practice; (f) use all
commercially reasonable efforts to preserve intact its business organizations
and the business organizations of its Subsidiaries, and to keep available the
services of its present key officers and employees; PROVIDED, HOWEVER, that to
satisfy the foregoing obligation, the Company shall not be required to make any
payments or enter into or amend any contractual arrangements or understandings,
except in the ordinary course of business and consistent with past practice; (g)
not adopt a plan of complete or partial liquidation or adopt resolutions
providing for the complete or partial liquidation, dissolution, consolidation,
merger, restructuring or recapitalization of the Company or any of its
Subsidiaries; (h) not grant any severance or termination pay (otherwise than
pursuant to policies in effect on the date of the Merger Agreement) to, or enter
into any employment agreement with, any of its executive officers or directors;
(i) not, except in the ordinary course of business consistent with past practice
or pursuant to obligations imposed by collective bargaining agreements, increase
the compensation payable or to become payable to its officers or employees,
enter into any contract or other binding commitment in respect of any such
increase with any of its directors, officers or other employees or any director,
officer or other employee of its Subsidiaries, and not establish, adopt, enter
into, make any new grants or awards under or amend, any collective bargaining
agreement or Company Benefit Plan, except as required by applicable law,
including any obligation to engage in good faith collective bargaining, to
maintain tax-qualified status or as may be required by any Company Benefit Plan
as of the date of the Merger Agreement; (j) not settle or compromise any
material claims or litigation or, except in the ordinary course of business,
modify, amend or terminate any of its material contracts or waive, release or
assign any material rights or claims, or make any payment, direct or indirect,
of any material liability before the same becomes due and payable in accordance
with its terms; (k) not take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice with
respect to accounting policies or procedures (including tax accounting policies
and procedures), except as may be required by the Commission or the Financial
Accounting Standards Board; (l) not make any material tax election or permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business; and (m) not authorize or enter into an agreement to do any
of the foregoing.
ACCESS; CONFIDENTIALITY
From the date of the Merger Agreement until the Effective Time, upon
reasonable prior notice to the Company, the Company shall give Parent and its
authorized representatives reasonable access during normal business hours to its
executive officers and such other officers or other representatives of the
Company approved in advance by the Company (which approval shall not be
unreasonably withheld), properties, books and records, and shall furnish Parent
and its authorized representatives with such financial and operating data and
other information concerning the business and properties of the Company as
Parent may from time to time reasonably request. Parent and the Purchaser will
hold and treat, and will cause their respective affiliates, agents and other
representatives to hold and treat, all documents and information concerning the
Company furnished to Parent, Purchaser or their respective representatives in
connection with the transactions contemplated by the Merger Agreement
confidential in accordance with the Confidentiality Agreement dated October 24,
1996 between the Company and Parent, which Confidentiality Agreement shall
remain in full force and effect until the termination of the Merger Agreement or
otherwise in accordance with its terms.
12
<PAGE>
COMPANY PROXY STATEMENT
Unless the Merger is consummated without a meeting of the Company's
stockholders in accordance with Section 253 of the DGCL, the Company shall, as
soon as reasonably practicable after the consummation of the Offer, prepare a
preliminary form of the Company Proxy Statement (the "Company Preliminary Proxy
Statement"). The Company shall (a) file the Company Preliminary Proxy Statement
with the Commission promptly after it has been prepared in a form reasonably
satisfactory to the Company and Parent and (b) use commercially reasonable
efforts to promptly prepare any amendments to the Company Preliminary Proxy
Statement required in response to comments of the Commission or its staff or
that the Company with the advice of counsel deems necessary or advisable and to
cause the Company Proxy Statement to be mailed to the Company's stockholders as
soon as reasonably practicable after the Company Preliminary Proxy Statement, as
so amended, is cleared by the Commission.
PUBLIC ANNOUNCEMENTS
None of the Parties shall issue any press release or make any public
statement concerning the Merger Agreement or any of the transactions
contemplated therein, without the prior written consent of the other parties
thereto; PROVIDED, HOWEVER, that a party may, without the prior written consent
of the other party thereto, issue such a press release or make such a public
statement to the extent required by applicable law or any listing agreement with
a national securities exchange by which such party is bound if it has used
commercially reasonable efforts to consult with the other parties and to obtain
such parties' consent but has been unable to do so in a timely manner.
ACQUISITION PROPOSALS
Except as contemplated in the Merger Agreement, the Company shall not
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the making
of any proposal relating to, or that may reasonably be expected to lead to, the
acquisition of all or a significant part of the business and properties or
capital stock of the Company or its Subsidiaries, taken as a whole, whether by
merger, purchase of assets, tender offer or otherwise with a third party other
than Parent (an "Acquisition Proposal"), or enter into discussions or negotiate
with any person or entity in furtherance of such inquiries or to obtain an
Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or
authorize or knowingly permit any of the officers, directors, employees or
agents of the Company or its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other agent retained by the Company or any of
its Subsidiaries to take any such action. The Company shall as promptly as
practicable notify Parent of all relevant terms of any such inquiries or
proposals received by the Company or its Subsidiaries and, if such inquiry or
proposal is in writing, the Company shall as promptly as practicable deliver or
cause to be delivered to Parent a copy of such inquiry or proposal.
Notwithstanding the foregoing, nothing shall prohibit the Company's Board of
Directors from (a) furnishing information to, or entering into discussions or
negotiations with, any persons or entity in connection with an unsolicited bona
fide proposal in connection with an Acquisition Proposal if, and only to the
extent that (i) such unsolicited bona fide proposal is on terms that the
Company's Board determines it cannot reject, based on applicable fiduciary
duties and the advice of counsel and (except with respect to furnishing
information) for which financing, to the extent required, is then committed, or
in the good faith judgment of the Board, could reasonably be expected to be
obtained, and (ii) prior to furnishing such information to, entering into
discussions or negotiations with, such person or entity the Company provides
written notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity; or (b)
complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal.
13
<PAGE>
DIRECTORS' & OFFICERS' INDEMNIFICATION
The Company, Parent and the Purchaser have agreed that from the Effective
Time through the later of (i) the sixth anniversary of the date on which the
Effective Time occurs and (ii) the expiration of any statute of limitations
applicable to any claim, action, suit, proceeding or investigation referred to
below, the Surviving Corporation shall indemnify and hold harmless each present
and former director and officer of the Company and its Subsidiaries, determined
as of the Effective Time (the "Indemnified Parties"), against any 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 (including,
without limitation, the Merger, the preparation, filing and mailing of the Proxy
Statement and the other transactions and actions contemplated by the Merger
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company or such Subsidiary would have been
permitted, under applicable law, indemnification agreements existing on the date
of the Merger Agreement, the Certificate of Incorporation or Bylaws of the
Company or such Subsidiary in effect on the date thereof, to indemnify such
Person (and the Surviving Corporation shall also advance expenses as incurred to
the fullest extent permitted under applicable law). To the extent that the
Surviving Corporation fails to perform any of its indemnification obligations
pursuant to the Merger Agreement, Parent shall assume such indemnification
obligations and rights of the Surviving Corporation under the Merger Agreement.
COMPANY PLANS
Following the Effective Time, Parent will cause the Surviving Corporation to
provide to persons who were employees of the Company or any of its Subsidiaries
prior to the Effective Time (the "Company Personnel") employee benefit plans,
programs and arrangements (the "Surviving Corporation Plans") which in the
aggregate are substantially comparable to those employee benefit plans, programs
and arrangements generally provided to the employees of Parent as of the
Effective Time.
Following the Effective Time, Parent will also cause the Surviving
Corporation Plans to recognize any prior accrued service, compensation credit,
credit toward satisfying deductible expense requirements, out-of-pocket expense
limits and maximum lifetime benefit limits of such Company Personnel and/or such
Company Personnel's eligible dependents, to the extent such prior service,
credits and limits were recognized under the comparable employee benefit plans,
programs or arrangements of the Company as of the Effective Time (the "Assumed
Plans"), for all purposes under the Surviving Corporation Plans (including, but
not limited to, participation, eligibility, vesting and the calculation of
benefits), and Parent shall cause the Surviving Corporation Plans to waive any
preexisting condition, exclusion or limitation under any such Plan to the extent
such condition, exclusion or limitation would be covered by the comparable plan,
program or arrangement of the Company as of the Effective Time.
DEPOSIT
Pursuant to the terms of the Merger Agreement, Parent provided the Company
with an earnest money deposit in the amount of $1.0 million (the "Deposit"),
which Deposit shall be refunded by the Company to Parent on the earlier of (a)
the date on which the fee described below in paragraph (a) of "Termination Fees
and Expenses" is due and payable by the Company to Parent, (b) the date on which
the Company consummates a business combination or other transaction pursuant to
an Acquisition Proposal, or (c) within 120 days of termination of the Merger
Agreement or termination of the Offer without the purchase of any Shares;
PROVIDED, that the Deposit shall not be required to be refunded by the Company
if the events specified below in paragraph (b)(i) of "Termination Fees and
Expenses" shall occur.
14
<PAGE>
TERMINATION
The Merger Agreement may be terminated and the Offer and the Merger may be
abandoned at any time (notwithstanding approval of the Merger by the
stockholders of the Company, if required by applicable provisions of the DGCL),
prior to the Effective Time:
(a) by either the Company or Parent, (i) upon mutual written consent of both
the Company and Parent; (ii) if the Effective Time shall not have occurred on or
before 120 days from the date of the Merger Agreement; PROVIDED, that such right
to terminate shall not be available to any party whose misrepresentation in the
Merger Agreement or whose failure to perform any of its covenants and agreements
or to satisfy any obligation under the Merger Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date; or (iii)
if any federal or state court of competent jurisdiction or other federal or
state governmental or regulatory body shall have issued any judgment,
injunction, order or decree prohibiting, enjoining or otherwise restraining the
transactions contemplated by the Merger Agreement and such judgment, injunction,
order or decree shall have become final and nonappealable (PROVIDED, HOWEVER,
that the party seeking to so terminate the Merger Agreement shall have used
commercially reasonable efforts to remove such judgment, injunction, order or
decree) or if any statute, rule, regulation or executive order promulgated or
enacted by any federal or state governmental authority after the date of the
Merger Agreement that prohibits the consummation of the Offer or the Merger
shall be in effect;
(b) by the Company, if (i) Parent fails to commence the Offer as provided in
the Merger Agreement, (ii) the Offer expires or is terminated without any Shares
being purchased thereunder, (iii) Parent fails to purchase validly tendered
Shares in violation of the terms and conditions of the Offer or the Merger
Agreement, (iv) the Merger Agreement is not adopted or, unless the Merger is
consummated without a meeting of the Company's stockholders in accordance with
Section 253 of the DGCL, the Merger is not approved at the Company Stockholders'
Meeting by the holders of a majority of the outstanding Shares, (v) there shall
have been a material breach of any representation, warranty or material covenant
or agreement on the part of either of Parent or the Purchaser, which is
incurable or which is not cured after 30 days' written notice by the Company to
Parent, (vi) the Company's Board of Directors shall withdraw, modify or change
its approval or recommendation of the Offer or the Merger or shall have resolved
to do any of the foregoing in order to comply with Rule 14d-9 or Rule 14e-2
under the Exchange Act with regard to an Acquisition Proposal, (vii) or any
Person or group of Persons shall have made an Acquisition Proposal the
acceptance of which the Company's Board of Directors determines, after
consultation with legal counsel, is required to comply with its fiduciary duties
under applicable law; or
(c) by Parent, if (i) the Offer is not commenced as provided in the Merger
Agreement directly as a result of actions or inaction by the Company, (ii) the
Offer is terminated or expires as a result of the failure of the Minimum Tender
Condition or one of the other conditions to the Offer specified under "THE
TENDER OFFER--Certain Conditions to the Offer" below or upon the expiration of
the Offer without the purchase of any Shares thereunder, unless such termination
or expiration has been caused by or resulted from the failure of Parent or the
Purchaser to perform any covenants and agreements of Parent or the Purchaser
contained in the Merger Agreement, (iii) prior to the consummation of the Offer,
the Company Board withdraws or modifies in a manner materially adverse to Parent
or the Purchaser its favorable recommendation of the Offer or the Merger or
shall have recommended any Acquisition Proposal with a party other than Parent
or any of its affiliates, or (iv) there shall have been a material breach of any
representation, warranty or material covenant or agreement on the part of the
Company, which is incurable or which is not cured after 30 days' written notice
by Parent to the Company.
15
<PAGE>
TERMINATION FEES AND EXPENSES
The Company, Parent and Purchaser have agreed that:
(a) Provided that neither Parent nor the Purchaser shall be in breach of
their respective obligations under the Merger Agreement, if (i) prior to the
consummation of the Offer, the Company's Board of Directors terminates the
Merger Agreement as described above in paragraphs (b)(vi) or (vii) of
"Termination" or Parent terminates the Merger Agreement as described above in
paragraph (c)(iii) or (iv) of "Termination" and (ii) as a result thereof, Parent
shall have terminated the Offer, allowed the Offer to expire without purchasing
any Shares thereunder or failed to commence the Offer in accordance with the
terms of the Merger Agreement and (iii) the Company enters into a definitive
agreement relating to an Acquisition Proposal or a business combination or other
transaction contemplated by such Acquisition Proposal shall have been
consummated (A) prior to or within six months following such termination (in the
case of a termination by the Board as described above in paragraphs (b)(vi) or
(vii) of "Termination" or by Parent as described above in paragraph (c)(iii) of
"Termination"), or (B) prior to or within three months following such
termination with respect to an Acquisition Proposal that provides for
consideration in excess of $6.50 per Share (in the case of a termination by
Parent as described above in paragraph (c)(iv) of "Termination"), then the
Company agrees that it will immediately thereafter pay to Parent a fee of
$2,500,000 in cash, payable in same day funds. Parent and Purchaser have agreed
that, so long as Parent has received such fee, it shall not assert or pursue in
any manner, directly or indirectly, (i) any claim or cause of action based in
whole or in part upon alleged tortious or other interference with rights under
the Merger Agreement against any third party submitting an Acquisition Proposal,
or (ii) any claim or cause of action against the Company or any of its officers,
directors, employees, agents or other representatives based in whole or in part
upon its or their receipt, consideration, recommendation or approval of, or
other action taken with respect to, an Acquisition Proposal or based in whole or
in part upon the failure of the transactions contemplated by the Merger
Agreement to be consummated.
(b) Provided that the Company shall not be in breach of its obligations
under the Merger Agreement, (i) if, notwithstanding the satisfaction or waiver
of the Minimum Tender Condition and the other conditions to the Offer specified
under "THE TENDER OFFER--Certain Conditions to the Offer" below, and the mutual
conditions of Parent and the Company and the other conditions of Parent to
effect the Merger, Parent shall for any reason fail to consummate the
transactions contemplated by the Merger Agreement or, as a result of actions or
inaction of Parent, any of the foregoing conditions shall not have been
satisfied and as a result thereof the transactions contemplated by the Merger
Agreement are not consummated, then Parent agrees that it will immediately
thereafter pay to the Company a fee of $2,500,000 in cash (less the Deposit),
payable in same day funds, or (ii) if Parent shall fail to consummate the
transactions contemplated by the Merger Agreement as a result of the failure to
satisfy any of the conditions described in clause (i) above and such failure is
neither a result of any action or inaction of Parent nor a result of a
termination by the Company of the Merger Agreement under circumstances in which
the Company would be required to pay to Parent the fee described above in
paragraph (a) of "Termination Fees and Expenses," then, in lieu of the fee
specified above, Parent shall reimburse the Company for its actual and
documented out-of-pocket expenses incurred in connection with the transactions
contemplated by the Merger Agreement.
(c) Except as provided above, whether or not the Offer or the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby (including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants) shall be borne by the party which incurs such cost or expense;
PROVIDED, that if the Merger Agreement is terminated as described above in
"Termination" as a result of a material misrepresentation by a party or a
material breach by a party of any of its covenants or arrangements set forth
therein, such party shall pay the costs and expenses incurred by the other party
in connection with the Merger Agreement; and PROVIDED, FURTHER, that all costs
and expenses related to the preparation, printing, filing and mailing (as
applicable) of the Company Proxy Statement and all Commission and other
regulatory filing fees incurred
16
<PAGE>
in connection with the Company Proxy Statement shall be borne equally by the
Company, on the one hand, and Parent and the Purchaser, on the other hand.
THE TENDER OFFER
TERMS OF THE OFFER
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 pay for all Shares validly
tendered on or prior to the Expiration Time and not theretofore withdrawn in
accordance with the procedures for proper withdrawal set forth in "THE TENDER
OFFER-- Withdrawal Rights" below. The term "Expiration Time" means 12:00
midnight, New York City time, on December 20, 1996, unless and until the
Purchaser shall have extended the period of time during which the Offer is open,
in which event the term "Expiration Time" shall mean the latest time and date on
which the Offer, as so extended by the Purchaser, shall expire.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, to (i) extend the period
of time during which the Offer is open and thereby delay acceptance for payment
of and the payment for any Shares by giving oral or written notice of such
extension to the Depositary and (ii) amend the Offer in any other respect by
giving oral or written notice of such amendment to the Depositary. The Purchaser
shall not have any obligation to pay interest on the purchase price for tendered
Shares, whether or not the Purchaser exercises its right to extend the Offer.
If by 12:00 midnight, New York City time, on December 20, 1996, (or any
other date or time then set as the Expiration Time), any or all conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, to (i) terminate the Offer and not accept for payment any Shares and
return all tendered shares to tendering stockholders, (ii) waive all the
unsatisfied conditions (other than the Minimum Tender Condition) and, subject to
complying with the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, accept for payment and pay for all Shares validly
tendered prior to the Expiration Time and not theretofore withdrawn, (iii)
extend the Offer and, subject to the right of stockholders to withdraw Shares
until the Expiration Time, retain the Shares that have been tendered during the
period or periods for which the Offer is extended or (iv) amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Exchange Act requires that the announcement be issued no
later than 9:00 A.M., New York City time, on the next business day after the
date of the previously scheduled Expiration Time in accordance with the public
announcement requirements of Rule 14d-4(c) under the Exchange Act. 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 will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of or payment for Shares (whether before or after its acceptance for payment of
Shares) or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in "THE TENDER OFFER--
17
<PAGE>
Withdrawal Rights" below. The ability of the Purchaser to delay the payment for
Shares that the Purchaser has accepted for payment is, however, limited by Rule
14e-1 under the Exchange Act, which requires that a bidder pay the consideration
offered or return the securities deposited by or on behalf of holders of
securities promptly after the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of ten business days is generally required to allow for
adequate dissemination to stockholders and investor response. Accordingly, if
prior to the Expiration Time the Purchaser should increase or decrease the
consideration offered pursuant to the Offer, and if the Offer is scheduled to
expire at any time earlier than the period ending on the tenth business day from
and including the date that notice of such increase or decrease is first
published, sent or given to holders of Shares, the Offer will be extended at
least until the expiration of such ten business day period.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Tender Condition and the other conditions set forth in "THE TENDER OFFER--Terms
of the Offer" below. Subject to the terms and conditions contained in the Merger
Agreement, the Purchaser reserves the right (but shall not be obligated) to
waive any or all of such conditions. However, if the Purchaser (with the
Company's consent) waives or amends the Minimum Tender Condition during the last
five business days during which the Offer is open, the Purchaser will be
required to extend the Expiration Time so that the Offer will remain open for at
least five business days after the announcement of such waiver or amendment is
first published, sent or given to holders of Shares.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares promptly upon the initial public announcement of the Offer and will be
furnished by the Purchaser to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder lists or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
ACCEPTANCE FOR PAYMENT AND PAYMENT
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 all Shares
validly tendered prior to the Expiration Time and not properly withdrawn in
accordance with "THE TENDER OFFER--Withdrawal Rights" below promptly after the
Expiration Time. Any determination concerning the satisfaction of such terms and
conditions will be within the sole discretion of the Purchaser, and such
determination will be final and binding on all tendering stockholders. The
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of or payment for Shares in order to comply in whole or
in part with any applicable law. Any such delays will be effected in compliance
with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer).
In all cases, payment for Shares purchased 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 of a transfer of such Shares as
described in "THE TENDER OFFER--Procedures for Tendering Shares" below), (ii) a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature
18
<PAGE>
guarantees, and (iii) any other documents required by the Letter of Transmittal.
The per Share consideration paid to any stockholder pursuant to the Offer will
be the highest per Share consideration paid to any other stockholder pursuant to
the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. 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
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. Under no circumstances will
interest be paid on the purchase price of the Shares to be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment. The Purchaser will pay any transfer taxes incident to the transfer to
it of validly tendered Shares, except as otherwise provided in Instruction 7 of
the Letter of Transmittal, as well as charges and expenses of the Depositary and
the Information Agent in connection with the Offer.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain the
tendered Shares, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly choose to exercise,
withdrawal rights as described in "THE TENDER OFFER--Withdrawal Rights."
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the Depositary's account at
a Book-Entry Transfer Facility pursuant to the procedure set forth in "THE
TENDER OFFER--Procedures for Tendering Shares," such Shares will be credited to
an account maintained at the appropriate Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Offer.
PROCEDURES FOR TENDERING SHARES
VALID TENDER. For a stockholder validly to tender Shares pursuant to the
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Time. In addition, either (i) certificates for tendered Shares must
be received by the Depositary along with the Letter of Transmittal or such
Shares must be tendered pursuant to the procedure for book-entry transfer set
forth below and a Book-Entry Confirmation (as defined below) must be received by
the Depositary, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
BOOK ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at a Book-Entry Transfer Facility 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 delivery 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 into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to, and received by, the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Time, or the tendering stockholder must
19
<PAGE>
comply with the guaranteed delivery procedure described below. The confirmation
of a book-entry transfer of Shares 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.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered holder
of Shares (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 listing as the owner of the Shares) tendered therewith and such
registered holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (ii) such Shares are tendered for the account of a firm that
is a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in the United States or by any other "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act (each, an "Eligible Institution"). In all other cases, all
signatures on the Letters of Transmittal must be guaranteed by an Eligible
Institution. See Instructions 1 and 5 to 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 issued to a person
other than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of
Transmittal.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Time, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) 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 Time; and
(3) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by the
Depositary within three Nasdaq Stock Market trading days after the date of
execution of such Notice of Guaranteed Delivery.
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 and a representation that
the tender of Shares effected thereby complies with Rule 14e-4 under the
Exchange Act, each in the form set forth in such Notice of Guaranteed Delivery.
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 (i) certificates for (or a timely
20
<PAGE>
Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and (iii) 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 are actually received by the Depositary. Under no circumstances
will interest be paid on the purchase price of the Shares to be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment.
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 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 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 other Shares or other securities or rights issued or issuable in respect
of such Shares on or after the date of this Offer to Purchase. All such proxies
shall be considered coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts for payment Shares tendered by such stockholder as provided herein. Upon
such acceptance for payment all prior powers of attorney and proxies given by
such stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered, among other things, 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
Company's stockholders, by written consent or otherwise. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser must be able to exercise full voting and other rights with respect to
such Shares.
DETERMINATION OF VALIDITY AND BACKUP WITHHOLDING. All questions as to the
validity, form, eligibility (including timeliness 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 or 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 any tender with respect to
any particular Shares, whether or not similar defects or irregularities are
waived in the case of other Shares. No tender of Shares will be deemed to have
been validly made until all defects or irregularities relating thereto have been
cured or waived. None of the Purchaser, the Depositary, the Information Agent or
any other person will be under any duty to give notification of any defects or
irregularities in tenders or will 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 the instructions thereto)
will be final and binding.
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
provide the payor of such cash 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. Certain stockholders (including, among others,
all corporations and certain foreign individuals and entities) are not subject
to backup withholding. If a stockholder does not provide its correct TIN or
fails to provide the certifications described above, the Internal Revenue
Service 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
21
<PAGE>
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). Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
WITHDRAWAL RIGHTS
Except as otherwise provided below, all tenders of Shares made pursuant to
the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Time and, unless theretofore accepted for payment and paid for by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after January
20, 1997.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer as set forth in "THE TENDER OFFER--Procedures for
Tendering Share" above, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be re-tendered by again following
one of the procedures described in "THE TENDER OFFER--Procedures for Tendering
Shares" above at any time prior to the Expiration Time.
All questions as to the form and validity (including time and time lines of
receipt) of notices of withdrawal will be determined by the Purchaser in its
sole discretion, which determination shall be final and binding. None of the
Purchaser, 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 will incur any liability for failure to give any such
notification.
22
<PAGE>
PRICE RANGE OF THE SHARES
The Shares are listed and principally traded on the Nasdaq Stock Market
under the symbol "PRHB." The following table sets forth for the calendar periods
indicated the high and low sales prices, according to the Nasdaq Stock Market.
<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
1994:
Fourth Quarter.... $ 6 1/2 $ 4
1995:
First Quarter..... 9 4 1/2
Second Quarter.... 11 8 1/8
Third Quarter..... 10 1/8 5 7/8
Fourth Quarter.... 8 3/8 4 1/2
1996:
First Quarter..... 9 3/8 3 5/8
Second Quarter.... 5 1/2 4
Third Quarter..... 4 3/4 3 3/4
Fourth Quarter
(through
November 18,
1996)........... 6 1/4 3 11/16
</TABLE>
- ------------------------
* The Common Stock of the Company began trading on the Nasdaq Stock Market in
April 1994.
On October 29, 1996, the last full day of trading prior to the public
announcement that the Company and Parent were discussing a potential
transaction, the reported closing price of the Shares on the Nasdaq Stock Market
was $3.875. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ STOCK MARKET LISTING
AND EXCHANGE ACT REGISTRATION
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
The Shares are currently listed and traded on the Nasdaq Stock Market, which
constitutes the principal trading market for the Shares. Depending upon the
number of Shares purchased pursuant to the Offer, the Shares may no longer meet
the requirements for continued quotation on the Nasdaq Stock Market and may
cease to be authorized to be quoted on such market. The Nasdaq Stock Market's
published guidelines indicate that it would consider delisting the Shares if,
among other things, the number of publicly held Shares (exclusive of holdings of
directors, officers and members of their immediate families and other
concentrated holdings of 10% or more) should fall below 200,000, the aggregate
market value of the "publicly held" Shares should fall below $1 million, the
number of stockholders should fall below 400 or the number of holders of round
lots should fall below 300.
The Company has informed the Purchaser that, as of November 15, 1996, there
were 158 holders of record of the Shares and 8,328,517 Shares were outstanding.
If, as a result of the purchase of Shares pursuant to the Offer or otherwise,
the Shares no longer meet the requirements of the Nasdaq Stock Market for
continued quotation and the Shares cease to be authorized to be quoted on the
Nasdaq Stock Market, the market for the Shares could be adversely affected or
eliminated.
If the Shares cease to be listed on the Nasdaq Stock Market, it is possible
that the Shares would begin to trade in the over-the-counter market and that
price quotations would be reported by the National Association of Securities
Dealers, Inc. through its Automated Quotation System or by other sources. The
extent of the public market for the Shares and the availability of such
quotations would, however, depend upon such factors as the number of
stockholders remaining at such time, the interest in maintaining a
23
<PAGE>
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act (as described below) and other factors.
The Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse impact on the market price
for or the marketability of the Shares.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially 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 no longer
applicable to the Company, such as the short-swing profit recovery provisions of
Section 16(b) of the Exchange Act, the requirement of furnishing a proxy
statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholder's meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions. 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 or 144A promulgated
under the Securities Act of 1933, as amended, may be impaired or eliminated.
The Purchaser may seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act after the completion of the
Offer if the requirements for such termination are met. If registration of the
Shares is not terminated prior to the Merger, then the Shares will be delisted
from the Nasdaq Stock Market and the registration of the Shares under the
Exchange Act will be terminated following the consummation of the Merger.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Company's principal executive offices are located at One S.W. Columbia
Street, Suite 900, Portland, Oregon 97258. The Company provides outpatient
physical therapy services at 70 outpatient rehabilitation clinics in Washington,
Oregon, California, Hawaii, Nevada, Arizona, Texas, Mississippi, Florida and
Maryland.
CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
The principal executive offices of Parent and the Purchaser are located at
6001 Indian School Road, N.E., Suite 530, Albuquerque, New Mexico 87110.
Parent is a leading provider of post acute health care services and
long-term care services, principally in the Midwest, Southwest and Northeast
regions of the United States. As of November 18, 1996, Parent provided specialty
health care services through 37 acute rehabilitation hospitals in 16 states
(2,065 beds), 58 specialty hospitals and subacute care units in 17 states (1,925
beds), 290 outpatient rehabilitation clinics in 25 states and 1,800
rehabilitation therapy contracts in 35 states. Parent provides long-term
services through 121 owned or leased facilities (15,147 beds) and 142 managed
facilities (15,798 beds) in a total of 18 states. Other medical services offered
by Parent include pharmacy, laboratory, Alzheimer's care, physician practice
management, non-invasive medical diagnostic services, home respiratory, home
infusion therapy, assisted living, and hospice care, and CompHealth, a
physician/locum tenens services business which provides temporary physician and
allied health professional staffing services throughout the United States.
The Purchaser is an indirect wholly owned subsidiary of Parent recently
incorporated for the sole purpose of effecting the Offer and the Merger.
24
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER. The names and
current positions of each director and executive officer of Parent and the
Purchaser are as follows:
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------------------- -------------------------------------------------
<S> <C>
Neal M. Elliott............................ President, Chief Executive Officer and Chairman
of the Board of Parent and President and
Director of the Purchaser
Michael A. Jeffries........................ Senior Vice President of Operations and Director
of Parent
Charles H. Gonzales........................ Senior Vice President of Subsidiary Operations
and Director of Parent and Senior Vice
President and Director of the Purchaser
Ernest A. Schofield........................ Senior Vice President, Chief Financial Officer
and Director of Parent and of the Purchaser and
Treasurer of Parent
Scot Sauder................................ Vice President of Legal Affairs and Secretary of
Parent and of the Purchaser and General Counsel
of Parent
Frank M. McCord............................ Director of Parent
Raymond N. Noveck.......................... Director of Parent
Charles K. Bradford........................ Director of Parent
Maria Pappas............................... Director of Parent
Ronald N. Riner, M.D....................... Director of Parent
</TABLE>
All of the foregoing persons are citizens of the United States of America.
The business address of each of the executive officers of Parent and the
Purchaser is 6001 Indian School Road, N.E., Suite 530, Albuquerque, New Mexico
87110. The business address of Mr. McCord is 2828 Colby Avenue, Everett,
Washington 98201. The business address of Mr. Noveck is 460 Totten Pond Road,
Waltham, Maryland 02154. The business address of Mr. Bradford is 400 N. Michigan
Avenue, Suite 1616, Chicago, Illinois 60602. The business address of Ms. Pappas
is 3 First National Plaza, Suite 525, Chicago, Illinois 60602. The business
address of Dr. Riner is 1034 South Brentwood, Suite 1605, St. Louis, Missouri
63117.
BUSINESS EXPERIENCE. Material occupations, positions, offices or
employments for the past five years of each director and executive officer of
the Parent and the Purchaser, including the dates of each, are as follows:
Neal M. Elliott, Parent's President, Chief Executive Officer and Chairman of
the Board, has served in those capacities since July 1986. Mr. Elliott is a
director of Frontier Natural Gas Corporation and of LTC Properties, Inc., a real
estate investment trust which invests in health care related real estate.
Michael A. Jeffries, Parent's Senior Vice President of Operations, has
served Parent in such position since June 1989. He became a Director of Parent
in January 1992.
Charles H. Gonzales, Parent's Senior Vice President of Subsidiary
Operations, has served in such position since January 1992. He became a Director
of Parent in January 1992. From September 1986 to January 1992, Mr. Gonzales
served as Senior Vice President of Government Programs for Parent.
Ernest A. Schofield, Parent's Senior Vice President, Treasurer, and Chief
Financial Officer, has been with Parent since July 1987. He became a Director of
Parent in July 1996. From November 1990 to August
25
<PAGE>
1994, Mr. Schofield served as Vice President of Finance. He assumed his present
position in September 1994.
Scot Sauder, Parent's Vice President of Legal Affairs, Secretary and General
Counsel, has been with Parent since September 1993. From September 1993 to
September 1994, he served as General Counsel to Parent. From September 1994
through July 1995, he served as Secretary and General Counsel to Parent. Prior
to joining Parent, Mr. Sauder, an attorney licensed to practice in Texas and
certain federal courts, was a director of Geary, Glast & Middleton, P.C., and
Smith & Underwood, P.C. (law firms).
Frank M. McCord is the Chairman and Chief Executive Officer of Cascade
Savings Bank in Everett, Washington, a position he has held since March 1990. He
became a Director of Parent in October 1986.
Raymond N. Noveck, a certified public accountant, has served as the
President of Strategic Systems, Inc., a provider of audiotex health and medical
information since January 1990. He became a Director of Parent in July 1987.
Charles K. Bradford, a certified public accountant, has served since 1993 as
the Vice President and Regional Manager for Cain Brothers, a private investment
banking and financial advisory firm that serves the health care industry. He
became a Director of Parent in July 1996. Prior to joining Cain Brothers, he
served as National, and then, International Director of the health care practice
of Arthur Andersen LLP.
Maria Pappas, a Ph.D. in Counseling and Psychology and an attorney, has
served as a Cook County Commissioner in the State of Illinois since November
1990. Ms. Pappas is currently the chair of the Law Enforcement Committee of the
Cook County Commissioners. She became a Director of Parent in July 1996.
Ronald N. Riner, M.D., a physician specializing in cardio vascular disease,
serves as the President of The Riner Group, Inc. in St. Louis, a professional
advisory and consulting company providing services to the medical, business,
investment and scientific communities on issues concerning health care
management, clinical practice management, risk management, strategic planning,
clinical trials and medical device development. He has served in this capacity
since 1981. He became a Director of Parent in July 1996.
INTERESTS IN SECURITIES OF THE COMPANY. As of the date hereof, no Shares
were beneficially owned by Parent, any of Parent's subsidiaries or any of the
executive officers, directors of Parent or the Purchaser and none of the
foregoing entities and persons has made any acquisitions of Shares in the past
60 days.
CERTAIN CONDITIONS TO THE OFFER
The Purchaser may terminate or, subject to the terms and conditions of the
Merger Agreement, amend the Offer as to any Shares not then accepted for
payment, shall not be required to accept for payment or pay for any Shares, or
may delay the acceptance for payment of Shares tendered, if (i) at the
expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by Parent and its
affiliates, shall not constitute a majority of the outstanding Shares on a fully
diluted basis or (ii) at any time after November 17, 1996 and prior to the
acceptance for payment of Shares, any of the following events shall occur:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding before
any federal or state court or governmental, administrative or regulatory
authority or agency, located or having jurisdiction within the United States, or
any other action taken, proposed or threatened, or statute, rule, regulation,
legislation, interpretation, judgment or order proposed, sought, enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to the
Purchaser, the Company or any subsidiary or affiliate of the Purchaser or the
Company or the Offer or the Merger, by any legislative body, court, government
or governmental, administrative or regulatory authority or agency located or
having jurisdiction within the United States, which could reasonably be expected
to have the
26
<PAGE>
effect of: (i) making illegal, materially delaying or otherwise restraining or
prohibiting the Offer or the Merger or the acquisition by Parent or the
Purchaser of any Shares; (ii) prohibiting or materially limiting the ownership
or operation by Parent, the Purchaser or their respective affiliates of any
material portion of the business or assets of the Company or compelling Parent
or the Purchaser to dispose of or hold separate all or any material portion of
the business or assets of the Company, in each case as a result of the
transactions contemplated by the Merger Agreement; (iii) imposing material
limitations on the ability of Parent or any of its affiliates to exercise full
rights of ownership of Shares, including, without limitation, the right to vote
any Shares purchased by them on all matters properly presented to the
stockholders of the Company; or (iv) preventing Parent or any of its affiliates
from acquiring, or to require divestiture by Parent or any of its affiliates of,
any Shares; or
(b) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on any national securities exchange or in
the over-the-counter market in the United States, (ii) the declaration of any
banking moratorium or any suspension of payments in respect of banks or any
limitation (whether or not mandatory) on the extension of credit by lending
institutions in the United States, (iii) the commencement of a war, material
armed hostilities or any other material international or national calamity
involving the United States, 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; or
(c) any Person, entity or "group" (as such term is used in Section 13(d)(3)
of the Exchange Act) other than Parent or any of its affiliates shall have
become the beneficial owner (as that term is used in Rule 13d-3 under the
Exchange Act) of more than 50% of the outstanding Shares; or
(d) the Company shall have breached or failed to comply in any material
respect with any of its obligations under the Merger Agreement (which breach, if
curable, has not been cured within 30 days following receipt of written notice
thereof by Parent specifying in reasonable detail the basis of such alleged
breach), or any representation or warranty of the Company contained in the
Merger Agreement shall not have been true and correct in all material respects,
except (i) for changes specifically permitted or contemplated by the Merger
Agreement and (ii) those representations and warranties that address matters
only as to a particular date which are true and correct in all material respects
as of such date; or
(e) the Merger Agreement shall have been terminated pursuant to its terms or
amended pursuant to its terms to provide for such termination or amendment of
the Offer; or
(f) the Board of Directors of the Company shall have modified or amended in
any manner materially adverse to Parent or the Purchaser or shall have withdrawn
its recommendation of the Offer or the Merger, or shall have resolved to do any
of the foregoing;
which, in the good faith judgment of the Purchaser makes it inadvisable to
proceed with the Offer or with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be asserted or waived by Parent or the Purchaser in whole or
in part at any time or from time to time in its discretion subject to the terms
and conditions of the Merger Agreement. The failure of Parent or the Purchaser
at any time to exercise any of the foregoing rights will not be deemed a waiver
of any such right and each such right will be deemed an ongoing right that may
be asserted at any time and from time to time.
STATE TAKEOVER LAWS
Section 203 of 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 has approved the Merger Agreement and
27
<PAGE>
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 state takeover statutes purport to apply to the Offer or the Merger.
The Purchaser has not currently complied with any state takeover statute or
regulation. The Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer or the Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer or the Merger is intended as a waiver of such right. If it is asserted
that any state takeover statute is applicable to the Offer or the Merger and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer or the Merger, the Purchaser might be required to file
certain information with, or to receive approvals from, the relevant state
authorities, and the Purchaser might be unable, and may not be obligated, to
accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer or the Merger.
PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Georgeson & Company Inc. is acting as Information Agent in connection with
the Offer. The Purchaser has agreed to pay the Information Agent as compensation
for all such services a base fee of $10,000, plus an additional fee of $5 per
telephone call to individual stockholders. In addition the Purchaser has agreed
to reimburse the Information Agent for its reasonable out-of-pocket expenses in
connection with the Offer, and the Purchaser has agreed to indemnify the
Information Agent and certain related persons against certain liabilities and
expenses, including certain liabilities under the federal securities laws.
The Purchaser has retained ChaseMellon Shareholder Services, L.L.C. to act
as the Depositary in connection with the Offer. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
The Purchaser will pay no fees or commissions to any broker or dealer or
other person (other than the Information Agent) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks
and trust companies will be reimbursed by the Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
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. The Purchaser is not aware of any jurisdiction in which the making
of the Offer or the tender of Shares in connection therewith would not be in
compliance with the laws of such jurisdiction. To the extent the Purchaser
becomes aware of any state law that would limit the class of offerees in the
Offer, the Purchaser will amend the Offer and, depending on the timing of such
amendment, if any, will extend the Offer to provide adequate dissemination of
such information to holders of Shares prior to the expiration of the Offer. In
any jurisdiction in which the securities, blue sky or other laws of such
jurisdiction require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized. Neither the delivery of this Offer
to Purchase nor any purchase pursuant to the Offer shall, under any
circumstances, create any implication
28
<PAGE>
that there has been no change in the affairs of Parent, the Purchaser or the
Company since the date as of which information is furnished or the date of this
Offer to Purchase.
The Purchaser has filed with the Commission a Schedule 14D-1, with exhibits
thereto, pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer and the Merger. In addition,
the Company has filed with the Commission a Schedule 14D-9 pursuant to Rule
14d-9 under the Exchange Act, setting forth its recommendation with respect to
the Offer and the reasons for such recommendation and furnishing certain
additional related information. Such schedules and any amendments thereto,
including exhibits, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material may be obtained from the Public Reference
Section of the Commission at such address at prescribed rates. Copies of such
material may also be obtained from the web site that the Commission maintains at
http://www.sec.gov.
29
<PAGE>
APPENDIX A
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to SectionSection 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof:
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
A-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
A-2
<PAGE>
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders, entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation
A-3
<PAGE>
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
A-4
<PAGE>
APPENDIX B
AGREEMENT AND PLAN OF MERGER
AMONG
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
HORIZON/CMS HEALTHCARE CORPORATION
AND
HORIZON PRSM CORPORATION
DATED AS OF NOVEMBER 17, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I THE OFFER............................................................................. B-1
1.1 The Offer............................................................................. B-1
1.2 Company Actions....................................................................... B-2
1.3 Stockholder Lists..................................................................... B-2
1.4 Directors............................................................................. B-2
ARTICLE II THE MERGER............................................................................ B-3
2.1 The Merger............................................................................ B-3
2.2 Closing............................................................................... B-3
2.3 Effective Time........................................................................ B-3
2.4 Effect of the Merger.................................................................. B-3
2.5 Certificate of Incorporation and Bylaws............................................... B-3
2.6 Directors and Officers................................................................ B-4
2.7 Consideration; Conversion of Shares................................................... B-4
2.8 Exchange of Certificates.............................................................. B-4
2.9 Stock Transfer Books.................................................................. B-5
2.10 Options and Other Purchase Rights..................................................... B-5
2.11 Dissenting Shares..................................................................... B-6
2.12 Company Stockholders' Meeting......................................................... B-6
2.13 Merger Without Meeting of Stockholders................................................ B-6
2.14 Withholding Taxes..................................................................... B-6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... B-7
3.1 Organization and Qualification........................................................ B-7
3.2 Capitalization of the Company......................................................... B-7
3.3 Authorization and Validity of Agreement............................................... B-7
3.4 Consents and Approvals................................................................ B-7
3.5 No Violation.......................................................................... B-8
3.6 SEC Reports; Financial Statements..................................................... B-8
3.7 Schedule 14D-9; Offer Documents and Company Proxy Statement........................... B-9
3.8 Compliance with Law................................................................... B-9
3.9 Absence of Certain Changes............................................................ B-9
3.10 Litigation............................................................................ B-9
3.11 Employee Benefit Matters.............................................................. B-9
3.12 Taxes................................................................................. B-10
3.13 Insurance............................................................................. B-10
3.14 Employment Agreements................................................................. B-10
3.15 Brokers and Finders................................................................... B-10
3.16 Opinion of Financial Advisor.......................................................... B-11
3.17 Certain Business Practices............................................................ B-11
3.18 Permits; Compliance................................................................... B-11
3.19 Certain Agreements.................................................................... B-12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER................................ B-12
4.1 Organization and Qualification........................................................ B-12
4.2 Authorization and Validity of Agreement............................................... B-12
4.3 Consents and Approvals................................................................ B-13
4.4 No Violation.......................................................................... B-13
4.5 Litigation............................................................................ B-13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
4.6 Offer Documents; Company Proxy Statement; Schedule 14D-9.............................. B-13
4.7 Financing; Sufficient Funds........................................................... B-14
4.8 Brokers and Finders................................................................... B-14
4.9 Operations of Purchaser............................................................... B-14
ARTICLE V COVENANTS............................................................................. B-14
5.1 Conduct of Business Pending the Merger................................................ B-14
5.2 Access; Confidentiality............................................................... B-15
5.3 Further Actions....................................................................... B-16
5.4 Notice of Certain Matters............................................................. B-16
5.5 Company Proxy Statement............................................................... B-16
5.6 State Takeover Statutes............................................................... B-16
5.7 Cooperation........................................................................... B-16
5.8 Public Announcements.................................................................. B-17
5.9 Acquisition Proposals................................................................. B-17
5.10 D&O Indemnification................................................................... B-18
5.11 Company Plans......................................................................... B-19
5.12 Deposit............................................................................... B-19
ARTICLE VI CLOSING CONDITIONS.................................................................... B-20
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................... B-20
6.2 Conditions Precedent to the Obligations of the Company................................ B-20
6.3 Conditions Precedent to the Obligations of Parent and Purchaser....................... B-20
ARTICLE VII TERMINATION........................................................................... B-21
7.1 Termination........................................................................... B-21
7.2 Effect of Termination................................................................. B-22
7.3 Fees and Expenses..................................................................... B-22
ARTICLE VIII MISCELLANEOUS......................................................................... B-23
8.1 No Survival........................................................................... B-23
8.2 Notices............................................................................... B-23
8.3 Certain Definitions................................................................... B-24
8.4 Entire Agreement...................................................................... B-25
8.5 Assignment; Binding Effect............................................................ B-25
8.6 Amendments............................................................................ B-25
8.7 Waiver................................................................................ B-25
8.8 Captions.............................................................................. B-25
8.9 Counterparts.......................................................................... B-25
8.10 Validity.............................................................................. B-25
8.11 Governing Law......................................................................... B-25
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 17, 1996 by and among
PACIFIC REHABILITATION & SPORTS MEDICINE, INC., a Delaware corporation (the
"COMPANY"), HORIZON/CMS HEALTHCARE CORPORATION, a Delaware corporation
("PARENT"), and HORIZON PRSM CORPORATION, a Delaware corporation and wholly
owned indirect subsidiary of Parent ("PURCHASER").
RECITALS
WHEREAS, the respective Boards of Directors of the Company, Parent and
Purchaser have approved the acquisition of the Company by Parent, upon the terms
and subject to the conditions set forth herein;
WHEREAS, it is intended that the acquisition be accomplished by Purchaser
commencing a cash tender offer for Shares (as defined in Section 1.1) to be
followed by a merger of Purchaser with and into the Company; and
NOW, THEREFORE, in consideration of the foregoing and of the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
1.1 THE OFFER.
(a) As promptly as practicable (but in no event later than five business
days following the public announcement of the execution hereof), Purchaser shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT")), an offer to purchase all of the
Company's outstanding shares of common stock, par value $0.01 per share (the
"SHARES"), at a price of $6.50 per Share, net to the seller in cash (as such
offer may be amended in accordance with the terms of this Agreement, the
"OFFER"), subject to the conditions set forth in Annex A hereto. Purchaser will
not, without the prior written consent of the Company, (i) decrease or change
the form of the consideration payable in the Offer, (ii) decrease the number of
Shares sought pursuant to the Offer, (iii) impose additional conditions to the
Offer, (iv) change the conditions to the Offer, except that Parent in its sole
discretion may waive any of the conditions to the Offer other than the condition
set forth in clause (1) of ANNEX A, which may not be waived without the
Company's prior written consent, or (v) make any other change in the terms or
conditions of the Offer that is adverse to the holders of Shares. Purchaser
will, on the terms and subject to the prior satisfaction or waiver of the
conditions to the Offer, accept for payment and pay for all Shares validly
tendered and not withdrawn pursuant to the Offer promptly after expiration of
the Offer; PROVIDED that, Purchaser may extend the Offer up to the tenth
business day after the later of (i) the initial expiration date of the Offer and
(ii) the date on which all such conditions shall first have been satisfied or
waived. The Company agrees that no Shares held by the Company will be tendered
to Parent pursuant to the Offer; PROVIDED, that Shares held beneficially or of
record by any plan, program or arrangement sponsored or maintained for the
benefit of employees of the Company shall not be deemed to be held by the
Company, regardless of whether the Company has, directly or indirectly, the
power to vote or control the disposition of such Shares. The obligations of
Purchaser to commence the Offer and to accept for payment and to pay for Shares
validly tendered on or prior to the expiration of the Offer and not withdrawn
shall be subject only to the conditions set forth in Annex A hereto.
(b) On the date of commencement of the Offer, Parent and Purchaser shall
file or cause to be filed with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1
B-1
<PAGE>
(together with all amendments thereto, the "SCHEDULE 14D-1") with respect to the
Offer, which shall contain the offer to purchase and related letter of
transmittal and other ancillary offer documents and instruments pursuant to
which the Offer will be made (collectively, together with any supplements or
amendments thereto, the "OFFER DOCUMENTS"). Parent and Purchaser will
disseminate the Offer Documents to holders of Shares. Each of Parent, Purchaser
and the Company will promptly correct any information provided by it for use in
the Offer Documents that becomes false or misleading in any material respect and
Parent and Purchaser will take all steps necessary to cause the Offer Documents
as so corrected to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable law. The
Company and its counsel shall be given a reasonable opportunity to review and
comment on the Offer Documents prior to their filing with the SEC. Parent and
Purchaser agree to provide the Company with any comments that may be received
from the SEC or its staff with respect to the Offer Documents promptly after
receipt thereof and to further provide the Company with a reasonable opportunity
to participate in all substantive communications with the SEC and its staff
relating to the Offer Documents, the Offer or the transactions contemplated
thereby.
1.2 COMPANY ACTIONS. The Company hereby consents to the Offer and
represents and warrants that a majority of its Board of Directors (at meetings
duly called and held) has (a) determined as of the date hereof that the Offer
and the Merger are fair to and in the best interests of the stockholders of the
Company and (b) subject to the fiduciary duties of the Board of Directors,
resolved to recommend acceptance of the Offer and, if required by applicable
law, approval and adoption of this Agreement and the Merger by the stockholders
of the Company. As soon as practicable after the commencement of the Offer, the
Company shall file or cause to be filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9")
containing the recommendation of the majority of the Board of Directors in favor
of the Offer and the Merger and shall permit the inclusion in the Schedule 14D-1
of such recommendation, in each case subject to the fiduciary duties of the
Board of Directors of the Company. Each of the Company, Parent and Purchaser
will promptly correct any information provided by it for use in the Schedule
14D-9 that becomes false or misleading in any material respect and the Company
will take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable law. Parent and its counsel shall be
given a reasonable opportunity to review and comment on the Schedule 14D-9 prior
to its filing with the SEC. The Company agrees to provide Parent with any
comments that may be received from the SEC or its staff with respect to the
Schedule 14D-9 promptly after receipt thereof and to further provide Parent with
a reasonable opportunity to participate in all substantive communications with
the SEC and its staff relating to the Schedule 14D-9, the Offer or the
transactions contemplated thereby.
1.3 STOCKHOLDER LISTS. In connection with the Offer, the Company shall
promptly furnish or cause to be furnished to Purchaser mailing labels and
security position listings and any available listing or computer file containing
the names and addresses of the record holders of Shares as of a recent date and
shall furnish Purchaser with such information reasonably available to the
Company and such assistance as Parent or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Offer and the Merger, Parent, Purchaser and their respective
affiliates will hold in confidence such listings and other information, shall
use such information only in connection with the Offer and the Merger and, if
this Agreement is terminated, shall, and shall cause their respective agents or
other representatives to, promptly deliver to the Company all copies of all such
information (and extracts or summaries thereof) then in their possession.
1.4 DIRECTORS. Promptly upon the purchase by Purchaser pursuant to the
Offer of such number of Shares as represents at least a majority of the
outstanding Shares and from time to time thereafter, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as will give Parent representation on the
Board of Directors of the
B-2
<PAGE>
Company equal to the product of the number of directors on the Board of
Directors of the Company and the percentage that such number of Shares so
purchased bears to the number of Shares outstanding, and the Company shall, upon
request of Parent, exercise reasonable efforts to increase the size of the Board
of Directors of the Company or secure the resignations of such number of
directors as is necessary to enable such Parent designees to be so elected or
appointed. Such designees will abstain from any action proposed to be taken by
the Company to amend or terminate this Agreement or waive any action by Parent
or Purchaser, which actions will be effective with the approval of a majority of
the remaining directors. The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act. At the
request of Parent, the Company shall take all action reasonably necessary to
effect any such election or appointment, including mailing to its stockholders
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, unless such information previously has been provided to
the Company's stockholders in the Schedule 14D-9. Parent and Purchaser will
supply to the Company, and will be solely responsible for, all information with
respect to themselves and their officers, directors and affiliates required by
such Section and Rule.
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), at the Effective Time (as defined below), Purchaser shall
be merged with and into the Company (the "MERGER"). As a result of the Merger,
the separate corporate existence of Purchaser shall cease and the Company shall
continue as the surviving corporation of the Merger (the "SURVIVING
CORPORATION").
2.2 CLOSING. Unless this Agreement shall have been terminated pursuant to
Article VII and subject to the satisfaction or, if permissible, waiver of the
conditions set forth in Article VI, the consummation of the Merger and the other
transactions contemplated hereby (the "CLOSING") shall take place at the offices
of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019, as
promptly as practicable (and in any event within two business days) following
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VI, unless another place, date or time is agreed to in writing by Parent
and the Company.
2.3 EFFECTIVE TIME. As promptly as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in Article VI, the parties
hereto will cause a certificate of merger (the "CERTIFICATE OF MERGER") to be
executed, acknowledged and filed with the Delaware Secretary of State in
accordance with the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is filed with the Delaware Secretary of State in
accordance with the DGCL, or at such later time as may be agreed to by Parent
and the Company and specified in the Certificate of Merger in accordance with
applicable law. The date and time when the Merger shall become effective is
referred to herein as the "EFFECTIVE TIME."
2.4 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all properties, rights, privileges, powers and franchises
of the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
2.5 CERTIFICATE OF INCORPORATION AND BYLAWS. At the Effective Time, the
Amended and Restated Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION") and the Amended and Restated Bylaws (the "BYLAWS") of the
Company, in each case as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation and the Bylaws of the Surviving
Corporation until thereafter amended as provided by law.
B-3
<PAGE>
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the officers and
directors of Purchaser immediately prior to the Effective Time shall become the
officers and directors of the Surviving Corporation, each to hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation and applicable law. The
Company shall use commercially reasonable efforts to cause each executive
officer and director of the Company to tender his or her resignation effective
at or before the Effective Time.
2.7 CONSIDERATION; CONVERSION OF SHARES. At the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto or
the holders of any of the following securities:
(a) Each Share that is issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
2.7(b) and any Dissenting Shares, as defined below) shall be changed and
converted into and represent the right to receive $6.50 in cash, or any
higher price paid per Share in the Offer (the "PER SHARE MERGER
CONSIDERATION"). All such Shares shall no longer be outstanding and shall
automatically be cancelled and extinguished and shall cease to exist, and
each certificate which immediately prior to the Effective Time evidenced any
such Shares (other than Shares to be cancelled pursuant to Section 2.7(b)
and any Dissenting Shares) shall thereafter represent the right to receive
(without interest), upon surrender of such certificate in accordance with
the provisions of Section 2.8, the Per Share Merger Consideration multiplied
by the number of Shares evidenced by such certificate (the "MERGER
CONSIDERATION"). The holders of certificates previously evidencing Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect thereto (including, without limitation, any rights to
vote or to receive dividends and distributions in respect of such Shares),
except as otherwise provided herein or by law.
(b) All Shares, which immediately prior to the Effective Time are owned
by Parent, Purchaser or their respective affiliates or held by the Company
in its treasury, shall be cancelled and extinguished and shall cease to
exist and no consideration shall be delivered with respect thereto.
(c) Each share of capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
2.8 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. As of the Effective Time, Parent shall, pursuant to an
agreement with a paying agent mutually acceptable to Parent and the Company (the
"PAYING AGENT"), deposit, or cause to be deposited, with or for the account of
the Paying Agent in trust for the benefit of the holders of Shares (other than
Shares to be cancelled pursuant to Section 2.7(b) and any Dissenting Shares) for
exchange through the Paying Agent in accordance with this Article II, cash in
the aggregate amount required to be exchanged for Shares pursuant to Section 2.7
(the "PAYMENT FUND"). The Paying Agent shall, pursuant to irrevocable
instructions, deliver the Merger Consideration out of the Payment Fund to
holders of Shares. The Payment Fund shall not be used for any other purpose. The
Paying Agent shall invest funds in the Payment Fund only in short-term
securities issued or guaranteed by the United States government or certificates
of deposit of commercial banks that have consolidated total assets of not less
than $5,000,000,000 and are "well capitalized" within the meaning of the
applicable federal bank regulations. Any interest or other income earned on the
investment of funds in the Payment Fund shall be for the account of and payable
to the Surviving Corporation. Parent shall replace any monies lost through any
investment made pursuant to this Section 2.8.
(b) PAYMENT PROCEDURE. Promptly after the Effective Time, Parent will
cause the Paying Agent to mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time evidenced outstanding
Shares (other than Shares to be cancelled pursuant to Section 2.7(b) and any
Dissenting Shares) ("CERTIFICATES"), (i) a notice of the effectiveness of the
Merger, (ii) a letter of transmittal
B-4
<PAGE>
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such customary form and have such other provisions
as Parent may reasonably specify in accordance with the terms of this Agreement)
and (iii) instructions to effect the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, the Merger Consideration may
be paid or issued to the transferee if the Certificate representing such Shares
is presented to the Paying Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. In the event that any Certificate shall have been
lost, stolen or destroyed, the Paying Agent shall issue in exchange therefor,
upon the making of an affidavit of that fact by the holder thereof and such
bond, security or indemnity as Parent may reasonably require, the Merger
Consideration that such holder has the right to receive pursuant to the
provisions of this Article II. Until surrendered as contemplated by this Section
2.8, each Certificate shall be deemed at any time after the Effective Time to
evidence only the right to receive upon such surrender the Merger Consideration
applicable to the Shares evidenced by such Certificate.
(c) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund that
remains undistributed to the holders of Shares for six months after the
Effective Time shall be delivered to Parent upon demand, and any holders of
Shares who have not theretofore complied with this Article II shall thereafter
look, subject to Section 2.8(d), only to Parent for the Merger Consideration to
which they are entitled pursuant to this Article II.
(d) ABANDONED PROPERTY LAWS. Neither the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Certificate for any cash from
the Payment Fund properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) TRANSFER TAXES. Except as provided in paragraph (b) above, Parent
shall pay or cause to be paid any real property transfer, gains or similar real
property taxes imposed in connection with or as a result of the Merger,
including any such tax that is imposed on a shareholder of the Company.
2.9 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of Shares thereafter on the records of the Company other than to
reflect transfers of Shares effected on or prior to the date on which the
Effective Time occurs. At and after the Effective Time, any Certificates
presented to the Paying Agent or the Surviving Corporation for any reason shall
be converted into the Merger Consideration applicable to the Shares evidenced
thereby.
2.10 OPTIONS AND OTHER PURCHASE RIGHTS.
(a) All outstanding (i) options and other rights to acquire Shares granted
to employees under any stock option or purchase plan, program or similar
arrangement of the Company (each, as amended, an "OPTION PLAN" and, such options
and other rights, "STOCK OPTIONS"), and (ii) any other rights to acquire Shares
(the "COMPANY ACQUISITION RIGHTS"), whether or not then exercisable or vested,
will be cancelled by the Company upon consummation of the Offer, and the holders
thereof shall be entitled to receive, for each Share subject to such Stock
Option or Company Acquisition Rights, in settlement and cancellation thereof, an
amount in cash equal to the positive difference, if any, between the Per Share
Merger Consideration and the exercise price per share of such Stock Option or
Company Acquisition Right, as the case may be, which amount shall be paid at the
time the Stock Option or Company Acquisition Right is cancelled; PROVIDED, that,
with respect to any person subject to Section 16 of the Exchange Act, any such
amount shall be paid as soon as practicable after the first date payment can be
made without liability to such person under Section 16(b) of the Exchange Act.
All applicable withholding taxes attributable to the
B-5
<PAGE>
payments made hereunder or to distributions contemplated hereby shall be
deducted from the amounts payable under this Section 2.10 and all such taxes
attributable to the cancellation of Stock Options and Company Acquisition Rights
shall be withheld from the proceeds received in connection with the cancellation
thereof.
(b) Except as provided herein or as otherwise agreed to by the parties and
to the extent permitted by the Option Plans, the Option Plans shall terminate as
of the Effective Time and any rights under any provisions in any other plan,
program or arrangement providing for the issuance or grant by the Company of any
interest in respect of the capital stock of the Company shall be cancelled as of
the Effective Time.
2.11 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and that are held by stockholders who shall have perfected dissenters' rights in
accordance with Section 262 of the DGCL (the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration,
unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost such holder's rights to appraisal under the DGCL.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's rights to appraisal of such Shares under the
DGCL, such holder's shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, at the Effective Time, the right to
receive, upon surrender as provided above, the Merger Consideration for the
Certificate or Certificates that formerly evidenced such Shares.
2.12 COMPANY STOCKHOLDERS' MEETING. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.13, and
subject to applicable law, the Company, acting through its Board of Directors,
shall, in accordance with the DGCL, its Certificate of Incorporation and its
Bylaws, (a) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as reasonably practicable following the consummation of the
Offer for the purpose of considering and taking action upon this Agreement (the
"COMPANY STOCKHOLDERS' MEETING") and (b) subject to the fiduciary duties of its
Board of Directors, include in the proxy statement or information statement
prepared by the Company for distribution to stockholders of the Company in
advance of the Company Stockholders' Meeting in accordance with Regulation 14A
or Regulation 14C promulgated under the Exchange Act (the "COMPANY PROXY
STATEMENT") the recommendation of its Board of Directors referred to in Section
1.2 hereof. Parent will provide the Company with the information concerning
Parent and Purchaser required to be included in the Company Proxy Statement, and
will vote, or cause to be voted, all Shares owned by it or its affiliates in
favor of approval and adoption of this Agreement and the Merger.
2.13 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding anything to
the contrary in this Agreement, if Parent, Purchaser or their respective
affiliates shall acquire at least 90% of the outstanding Shares, each of Parent,
Purchaser and the Company shall take all necessary and appropriate action to
cause the Merger to become effective, as soon as practicable after the
consummation of the Offer, without a meeting of stockholders of the Company, in
accordance with Section 253 of the DGCL.
2.14 WITHHOLDING TAXES. Except as otherwise provided in Section 2.8(e),
Parent and Purchaser shall be entitled to deduct and withhold, or cause the
Paying Agent to deduct and withhold, from the consideration otherwise payable to
a holder of Shares pursuant to the Offer or the Merger any stock transfer taxes
and such amounts as are required under the Internal Revenue Code of 1986, as
amended (the "CODE"), or any applicable provision of state, local or foreign tax
law, as specified in the Offer Documents. To the extent that amounts are so
withheld by Parent or Purchaser, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by Parent or Purchaser,
in the circumstances described in the Offer Documents, and Parent shall provide,
or cause the Paying Agent to provide, to the holders of such Certificates
written notice of the amounts so deducted or withheld.
B-6
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of the Company and its
subsidiaries (the "SUBSIDIARIES") which are listed in Section 3.1 of the
Company's disclosure schedule delivered to Parent in connection with this
Agreement (the "COMPANY DISCLOSURE SCHEDULE") (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (b) has all requisite corporate power to carry on its business as
it is now being conducted, and (c) is in good standing and duly qualified to do
business in each jurisdiction in which the transaction of its business makes
such qualification necessary, except where the failure to be in good standing or
so qualified would not have a Material Adverse Effect (as defined in Section
8.3(c) below) on the Company. True and complete copies of the Certificate of
Incorporation and the Bylaws, as amended to date, of the Company have been made
available to Parent.
3.2 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Company consists of 20,000,000 Shares and 5,000,000 shares of preferred stock,
$0.01 par value (the "COMPANY PREFERRED STOCK"). As of November 15, 1996,
8,328,247 Shares were issued and outstanding, and no shares of Company Preferred
Stock were outstanding. As of such date, no Shares were owned beneficially or of
record by any Subsidiary of the Company. All outstanding Shares are validly
issued, and are fully paid and nonassessable. Except as disclosed in the Company
SEC Documents (as defined in Section 3.6) or in Section 3.2 of the Company
Disclosure Schedule, there are no outstanding subscriptions, options, warrants,
calls, rights, commitments or any other agreement to which the Company is a
party or by which the Company is bound that, directly or indirectly, obligate
the Company to issue, deliver or sell or cause to be issued, delivered or sold
any additional Shares or any other capital stock of the Company or any other
securities convertible into, or exercisable or exchangeable for, or evidencing
the right to subscribe for any such Shares or other capital stock of the
Company.
3.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof (subject to
the approval and adoption of this Agreement and the Merger by the holders of a
majority of the outstanding Shares, if required by applicable law). A majority
of the Company's Board of Directors (the "COMPANY BOARD") has duly authorized
the execution, delivery and performance of this Agreement by the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby (other than the
approval and adoption of this Agreement and the Merger by the holders of a
majority of the outstanding Shares, if required by applicable law). This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes the legal, valid and binding obligation of Parent and
Purchaser, constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may be
limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.4 CONSENTS AND APPROVALS.
(a) Neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby will
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority by reason of the
Company's status or operations, except (i) in connection with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (ii) pursuant to the applicable requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
B-7
<PAGE>
regulations promulgated thereunder, and the Exchange Act, and the rules and
regulations promulgated thereunder, and state securities or "blue sky" laws and
state takeover laws, (iii) the filing and recordation of the Certificate of
Merger pursuant to the DGCL and appropriate documents with the relevant
authorities of other states in which the Company is authorized to do business,
(iv) as set forth in Section 3.4 of the Company Disclosure Schedule or (v) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not in the aggregate have a Material
Adverse Effect on the Company or prevent the consummation of the transactions
contemplated hereby.
(b) A majority of the Company Board has approved this Agreement and the
transactions contemplated hereby for purposes of Section 203 of the DGCL so that
Section 203 of the DGCL is not applicable to the transactions provided for in
this Agreement. Unless the Merger is otherwise consummated as contemplated by
Section 2.13 hereof, the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of capital stock of the
Company necessary to approve the Merger.
3.5 NO VIOLATION. Except as set forth in Section 3.5 of the Company
Disclosure Schedule, assuming the Merger has been duly approved by the holders
of a majority of the outstanding Shares or the Merger is consummated as
contemplated by Section 2.13 hereof, neither the execution and delivery of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby will conflict with or violate the Certificate of
Incorporation or Bylaws of the Company, result in a violation or breach of,
constitute a default under, give rise to any right of termination, cancellation
or acceleration of, or result in the imposition of any lien, charge or other
encumbrance on any material assets or property of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license or other
instrument or obligation to which the Company is a party or by which the Company
or any of its assets or properties may be bound, except for such violations,
breaches and defaults (or rights of termination, cancellation or acceleration or
lien or other charge or encumbrance) as to which requisite waivers or consents
have been obtained or which in the aggregate would not have a Material Adverse
Effect on the Company or prevent the consummation of the transactions
contemplated hereby or assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 3.4 and this Section
3.5 are duly and timely obtained or made and the approval of the Merger by the
holders of a majority of the outstanding Shares has been obtained or the Merger
is consummated as contemplated by Section 2.13 hereof, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its assets and properties, except for such violations which would not in the
aggregate have a Material Adverse Effect on the Company or prevent the
consummation of the transactions contemplated hereby.
3.6 SEC REPORTS; FINANCIAL STATEMENTS.
(a) Since April 14, 1994, the Company has filed with the SEC all forms,
reports, schedules, statements and other documents required to be filed by it
with the SEC pursuant to the Exchange Act, the Securities Act and the SEC's
rules and regulations thereunder (all such forms, reports and other documents,
including any such reports filed prior to the Effective Time, collectively, the
"COMPANY SEC DOCUMENTS"). The Company SEC Documents, including, without
limitation, any financial statements or schedules included therein, at the time
filed (or, if amended, at the time of such amended filing), or in the case of
registration statements on their respective effective dates, complied in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder and did not at the time they were filed (or, if amended, at
the time of such amended filing and, in the case of registration statements, at
the time of effectiveness), contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements of the Company (including
any related notes thereto) included in the Company SEC Documents (excluding the
Company SEC Documents described in
B-8
<PAGE>
Section 3.7 hereof) comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the period involved
(except as may be indicated in such financial statements or in the notes thereto
or, in the case of unaudited financial statements, as permitted by the
requirements of Form 10-Q) and fairly present (subject, in the case of the
unaudited statements, to normal year-end adjustments and the absence of
footnotes) the consolidated financial position of the Company as of the dates
thereof and the consolidated results of the Company's operations and cash flows
for the periods presented therein.
3.7 SCHEDULE 14D-9; OFFER DOCUMENTS AND COMPANY PROXY STATEMENT. None of
the Schedule 14D-9, the Company Proxy Statement nor any information supplied by
the Company specifically for inclusion in the Offer Documents will, at the
respective times filed with the SEC or first published, sent or given to
stockholders, as the case may be, or, in the case of the Company Proxy
Statement, at the date mailed to the Company stockholders and at the time of the
Company Stockholders' Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Schedule 14D-9 and the Company Proxy
Statement will, when filed by the Company with the SEC, comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to the statements made in any
of the foregoing documents based on information supplied by or on behalf of
Parent or Purchaser or any of their respective affiliates specifically for
inclusion therein.
3.8 COMPLIANCE WITH LAW. Except as set forth in Section 3.8 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
violation of any applicable law, rule, regulation, decree or order of any
governmental or regulatory authority applicable to the Company or its
Subsidiaries, except for violations which in the aggregate do not have a
Material Adverse Effect on the Company. The Company holds all permits, licenses,
exemptions, orders and approvals of all governmental and regulatory authorities
necessary for the lawful conduct of its businesses, except where the failures to
hold permits, licenses, exemptions, orders and approvals do not in the aggregate
have a Material Adverse Effect on the Company.
3.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company SEC
Documents filed with the SEC prior to the date hereof or in Section 3.9 of the
Company Disclosure Schedule, since December 31, 1995, the Company has conducted
its business only in the ordinary course of such business and there has not been
(a) any Material Adverse Effect on the Company; (b) any declaration, setting
aside or payment of any dividend or other distribution with respect to the
Company's capital stock; or (c) any material change in the Company's accounting
principles, practices or methods.
3.10 LITIGATION. Except as disclosed in the Company SEC Documents or in
Section 3.10 of the Company Disclosure Schedule, there are no claims, actions,
proceedings or governmental investigations pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, by or before
any court or other governmental or regulatory body, which, if adversely
determined, would have a Material Adverse Effect on the Company. As of the date
hereof, to the knowledge of the Company, no action or proceeding has been
instituted or threatened before any court or other governmental or regulatory
body by any Person (as defined in Section 8.3) seeking to restrain or prohibit
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby.
3.11 EMPLOYEE BENEFIT MATTERS. All employee benefit plans and other
benefit arrangements covering employees of the Company and its Subsidiaries are
listed in the Company SEC Documents or in Section 3.11 of the Company Disclosure
Schedule, except such benefit plans and other benefit arrangements that are not
material (the "COMPANY BENEFIT PLANS"). True and complete copies of the Company
Benefit Plans have been made available to Parent. To the extent applicable, the
Company Benefit Plans comply, in all
B-9
<PAGE>
material respects, with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code, and any Company
Benefit Plan intended to be qualified under Section 401(a) of the Code has
received a determination letter from the Internal Revenue Service (the "IRS")
stating that it is so qualified. No Company Benefit Plan is covered by Title IV
of ERISA or Section 412 of the Code. There has been no transaction involving any
Company Benefit Plan that has resulted or would result in any material liability
or penalty under Section 4975 of the Code or Section 502(i) of ERISA. Each
Company Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with ERISA and the Code to the extent
applicable thereto. To the knowledge of the executive officers of the Company,
there are no pending or anticipated material claims against or otherwise
involving any of the Company Benefit Plans and no suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
Company Benefit Plan activities) has been brought against or with respect to any
such Company Benefit Plan, except for any of the foregoing that would not have a
Material Adverse Effect on the Company. All material contributions required to
be made as of the date hereof to the Company Benefit Plans have been made or
provided for. Neither the Company nor any entity under "common control" with the
Company within the meaning of Section 4001 of ERISA has contributed to, or been
required to contribute to, any "multi-employer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA). Except as disclosed in Section 3.11 of the
Company Disclosure Schedule, the Company does not maintain or contribute to any
plan or arrangement that provides or has any liability to provide life
insurance, medical or other employee welfare benefits to any employee or former
employee upon his retirement or termination of employment, except as required by
Section 4980B of the Code, and the Company has never represented, promised or
contracted (whether in oral or written form) to any employee or former employee
that such benefits would be provided. Except as disclosed in the Company SEC
Documents or in Section 3.11 of the Company Disclosure Schedule, the execution
of, and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy, arrangement or agreement or
any trust or loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund benefits with respect
to any employee.
3.12 TAXES. The Company and each of its Subsidiaries (i) has timely filed
all material federal, state and foreign tax returns required to be filed by any
of them for tax years ended prior to the date of this Agreement or requests for
extensions have been timely filed and any such request shall have been granted
and not expired and all such returns are complete in all material respects, (ii)
has paid or accrued all taxes shown to be due and payable on such returns, (iii)
has properly accrued all such taxes for such periods subsequent to the periods
covered by such returns and (iv) has "open" years for federal income tax returns
only as set forth in the Company SEC Documents or in Section 3.12 of the Company
Disclosure Schedule.
3.13 INSURANCE. True and complete copies of all material insurance
policies maintained by the Company have been made available to Parent. Such
policies provide coverage for the operations of the Company and its Subsidiaries
in amounts and covering such risks as the Company believes is necessary to
conduct its business. Neither the Company nor any of its Subsidiaries has
received notice that any such policy is invalid or unenforceable.
3.14 EMPLOYMENT AGREEMENTS. Except as disclosed in the Company SEC
Documents or as set forth in Section 3.14 of the Company Disclosure Schedule,
there are no (a) material employment, consulting, noncompetition, severance or
indemnification agreements between the Company and any current or former officer
or director of the Company, (b) employment, consulting or severance agreements
between the Company or any of its Subsidiaries and any other Person providing
for payments in excess of $50,000 per annum and (c) material noncompetition or
indemnification agreements between the Company or any of its Subsidiaries and
any other Person.
3.15 BROKERS AND FINDERS. No broker, finder or investment bank has acted
directly or indirectly for the Company, nor has the Company incurred any
obligation to pay any brokerage, finder's or other fee or
B-10
<PAGE>
commission in connection with the transactions contemplated hereby, other than
Smith Barney Inc. ("SMITH BARNEY"), the fees and expenses of which shall be
borne by the Company. Section 3.15 of the Company Disclosure Schedule sets forth
the fees payable to Smith Barney pursuant to the Company's engagement letter
with Smith Barney (a copy of which has been provided to Parent).
3.16 OPINION OF FINANCIAL ADVISOR. Smith Barney has delivered its opinion,
dated the date of this Agreement, to the Board of Directors of the Company to
the effect that, as of the date of this Agreement, the cash consideration to be
received by the holders of Shares (other than Parent and its affiliates) in the
Offer and the Merger is fair, from a financial point of view, to such holders.
3.17 CERTAIN BUSINESS PRACTICES. None of the Company or, to the Company's
knowledge, any of its Subsidiaries or any directors, officers, agents or
employees of the Company or any of its Subsidiaries (in their capacities as
such) has (a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, (c) consummated any
transaction, made any payment, entered into any agreement or arrangement or
taken any other action in violation of Section 1128B(b) of the Social Security
Act, as amended, or (d) made any other unlawful payment, in all cases except
where the impact from such contributions, gifts, entertainment, payments,
violations, agreements, arrangements, actions or payments would not in the
aggregate have a Material Adverse Effect on the Company.
3.18 PERMITS; COMPLIANCE.
Except as disclosed in Section 3.18(a) of the Company Disclosure Schedule,
each of the Company and its Subsidiaries is in possession of (i) all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, identification and registration numbers, approvals and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted and (ii) agreements from all federal,
state and local governmental agencies and accrediting and certifying
organizations having jurisdiction over such facility or facilities that are
required to operate the facility or facilities in the manner in which it or they
are currently operated and receive reimbursement for care provided to patients
covered under the federal Medicare program or any applicable state Medicaid
program (collectively, the "COMPANY PERMITS"), except where the failure to
possess such Company Permits could not reasonably be expected to have a Material
Adverse Effect on the Company. Without limiting the generality of the foregoing,
certain of the Company's facilities are certified for participation or
enrollment in the Medicare program, have a current and valid provider contract
with the Medicare program and are in substantial compliance with the conditions
of participation of such programs. Neither the Company nor any of its
Subsidiaries has received notice from the regulatory authorities that enforce
the statutory or regulatory provisions in respect to either the Medicare or
Medicaid programs, of any pending or threatened investigations or surveys, and
no such investigations or surveys are pending or, to the knowledge of the
Company, threatened or imminent that could reasonably be expected to have a
Material Adverse Effect on the Company. Section 3.18(a) of the Company
Disclosure Schedule sets forth, as of the date of this Agreement, all actions,
proceedings, investigations or surveys pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries that could
reasonably be expected to result in (i) the loss or revocation of a Company
Permit necessary to operate one or more facilities or for a facility to receive
reimbursement under the Medicare or Medicaid programs or (ii) the suspension or
cancellation of any other Company Permit, except any such Company Permit where
such suspension or cancellation could not reasonably be expected to have a
Material Adverse Effect on the Company. Except as set forth in Section 3.18(a)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of (a) any law
applicable to the Company or any of its Subsidiaries or by or to which any of
their respective properties is bound or subject or (b) any of the Company
Permits, except for any such conflicts, defaults or violations that could not
reasonably be expected to have a Material Adverse Effect on the Company. Except
as set forth in Section 3.18(a) of the
B-11
<PAGE>
Company Disclosure Schedule, since December 31, 1994, neither the Company nor
any of its Subsidiaries has received from any Governmental Entity (as defined in
Section 5.7) any written notification with respect to possible conflicts,
defaults or violations of laws, except for written notices relating to possible
conflicts, defaults or violations of laws that could not reasonably be expected
to have a Material Adverse Effect on the Company.
(b) The Company and its Subsidiaries, as appropriate, are approved
participating providers in and under all third-party payment programs from which
they receive revenues. No action or investigation is pending or, to the best
knowledge of the Company, threatened to suspend, limit, terminate, condition or
revoke the status of the Company or any of its Subsidiaries as a provider in any
such program, and neither the Company nor any of its Subsidiaries has been
provided notice by any third-party payor of its intention to suspend, limit,
terminate, revoke, condition or fail to renew in whole or in part or decrease
the amounts payable under any arrangement with the Company or such subsidiary as
a provider, which action, investigation or proceeding would have a Material
Adverse Effect on the Company.
(c) The Company and its Subsidiaries have filed on a timely basis all
claims, cost reports or annual filings required to be filed to secure payments
for services rendered by them under any third-party payment program from which
they receive or expect to receive revenues, except where the failure to file
such claim, report or other filing would not have a Material Adverse Effect on
the Company. Except as indicated in its financial statements included in the
Company SEC Documents (as defined in Section 3.6 above), the Company or its
Subsidiaries, as applicable, have paid, or caused to be paid, all refunds,
discounts, adjustments, or amounts owing that have become due to such
third-party payors pursuant to such claims, reports or filings, and neither the
Company nor any of its Subsidiaries has any knowledge or notice of any material
changes required to be made to any cost reports, claims or filings made by them
for any period or of any deficiency in any such claim, report, or filing, except
for changes and deficiencies that in the aggregate would not have a Material
Adverse Effect on the Company.
3.19 CERTAIN AGREEMENTS. Section 3.19 of the Company Disclosure Schedule
sets forth a complete and accurate list in all material respects of all (i) real
property leases, (ii) agreements with respect to indebtedness for borrowed money
(including capital leases) with a principal amount in excess of $50,000 and
(iii) acquisition agreements providing for the payment in the future of
contingent consideration in an amount in excess of $50,000, in each case to
which the Company or any or its Subsidiaries is a party on the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant, jointly and severally, to
the Company as follows:
4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Purchaser (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has all requisite corporate power to
carry on its business as it is now being conducted and (c) is in good standing
and duly qualified to do business in each jurisdiction in which the transaction
of its business makes such qualification necessary, except where the failure to
be in good standing or so qualified would not have a Material Adverse Effect on
Parent or Purchaser.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of Parent and Purchaser
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby in accordance
with the terms hereof. The Boards of Directors of Parent and Purchaser,
respectively, and Eagle Rehab Corporation, as the sole stockholder of Purchaser,
have duly authorized the execution, delivery and performance of this Agreement
by each of Parent and Purchaser, and no other corporate proceedings on the part
of either Parent or Purchaser are necessary to authorize
B-12
<PAGE>
this Agreement or the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Purchaser and, assuming this
Agreement constitutes the legal, valid and binding obligation of the Company,
constitutes the legal, valid and binding obligation of each of Parent and
Purchaser, enforceable against each of Parent and Purchaser in accordance with
its terms, except as may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by Parent and Purchaser nor the consummation by Parent and Purchaser
of the transactions contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority by reason of Parent's or Purchaser's status or (as
applicable) operations, except in connection with the applicable requirements of
the HSR Act, pursuant to the applicable requirements of the Securities Act, the
Exchange Act, the rules and regulations promulgated thereunder, and state
securities or "blue sky" laws and state takeover laws, the filing and
recordation of the Certificate of Merger pursuant to the DGCL, (d) except as may
be required in connection with the Financing (as defined in Section 4.7 below),
which consents have been duly obtained or (e) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect on
either of Parent or Purchaser or prevent the consummation of the transactions
contemplated hereby.
4.4 NO VIOLATION. Neither the execution and delivery of this Agreement by
Parent and Purchaser nor the consummation by Parent and Purchaser of the
transactions contemplated hereby will conflict with or violate the Certificate
of Incorporation or Bylaws of Parent or Purchaser, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, give rise to any right of termination, cancellation or
acceleration of, or result in the imposition of any lien, charge or other
encumbrance on any material assets or property of either of Parent or Purchaser
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license or other instrument or obligation to which either of Parent or Purchaser
is a party or by which either of Parent or Purchaser or any of their respective
assets or properties are bound, except for such violations, breaches and
defaults (or rights of termination, cancellation or acceleration or lien or
other charge or encumbrance) as to which consents have been obtained or which in
the aggregate would not have a Material Adverse Effect on either of Parent or
Purchaser or prevent the consummation of the transactions contemplated hereby or
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 4.3 are duly and timely obtained or made,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to either of Parent or Purchaser or any of their respective assets or
properties, except for such violations which would not in the aggregate have a
Material Adverse Effect on either of Parent or Purchaser or prevent the
consummation of the transactions contemplated hereby.
4.5 LITIGATION. Except as set forth in the Parent SEC Documents, there are
no claims, actions, proceedings or governmental investigations pending or, to
the knowledge of Parent and Purchaser, threatened against either of Parent or
Purchaser or any of their respective subsidiaries before any court or other
governmental or regulatory body, which, if adversely determined, would impair,
interfere with, or otherwise adversely affect the ability of Parent or Purchaser
to consummate the transactions contemplated hereby in any material respect. As
of the date hereof, no action or proceeding has been instituted or, to the
knowledge of Parent or Purchaser, threatened before any court or other
governmental or regulatory body by any Person seeking to restrain or prohibit or
to obtain damages with respect to the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
4.6 OFFER DOCUMENTS; COMPANY PROXY STATEMENT; SCHEDULE 14D-9. Neither the
Offer Documents nor any other document filed or to be filed by or on behalf of
Parent or Purchaser with the SEC or any other governmental entity in connection
with the transactions contemplated by this Agreement nor any information
supplied by or on behalf of Parent or Purchaser specifically for inclusion in
the Schedule 14D-9 or
B-13
<PAGE>
Company Proxy Statement will, at the respective times filed with the SEC or
other governmental entity, or at any time thereafter when the information
included therein is required to be updated pursuant to applicable law, or, in
the case of the Company Proxy Statement, at the date mailed to the Company's
stockholders and at the time of the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
Offer Documents will, when filed by Parent or Purchaser with the SEC or other
governmental entity, comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, Parent and Purchaser make no representation or
warranty with respect to the statements made in the foregoing documents based on
information supplied by or on behalf of the Company or any of its affiliates
specifically for inclusion therein.
4.7 FINANCING; SUFFICIENT FUNDS. Parent and Purchaser have received and
furnished to the Company a copy of the amendment to Parent's existing $750
million credit facility to provide to Parent and Purchaser in connection with
the Offer and the transactions contemplated thereby the funds necessary to
consummate such Offer and transactions (the "FINANCING"). Parent and Purchaser
have no knowledge of any facts or circumstances, nor will Parent or Purchaser
take any action or omit to take any action, that could be expected to result in
the inability of Parent or Purchaser to obtain and use the funds available from
the Financing for consummation of the Offer and the transactions contemplated
thereby. Parent and Purchaser will have available to them and will utilize, upon
consummation of the Offer and at the Effective Time, all immediately available
funds necessary to consummate the transactions contemplated by this Agreement,
to pay all related fees and expenses for which Parent or Purchaser will be
responsible, and to provide adequate working capital for the operation of the
Company upon consummation of the Offer and at the Effective Time.
4.8 BROKERS AND FINDERS. No broker, finder or investment bank has acted
directly or indirectly for either of Parent or Purchaser, nor has either of
Parent or Purchaser incurred any obligation to pay any brokerage, finder's or
other fee or commission in connection with the transactions contemplated hereby.
4.9 OPERATIONS OF PURCHASER. Purchaser has been formed solely for the
purpose of engaging in the transactions contemplated hereby and prior to the
Effective Time will have engaged in no other business activities, will have
incurred no other liabilities or obligations other than as contemplated herein,
will have no subsidiaries other than the Company and its Subsidiaries, and will
have conducted its operations only as contemplated hereby.
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS PENDING THE MERGER. From the date hereof until the
Effective Time, except as otherwise required or contemplated hereunder or as
required by applicable law or as set forth in Section 5.1 of the Company
Disclosure Schedule, the Company shall:
(a) use all commercially reasonable efforts to conduct its business and
the business of its Subsidiaries in all material respects only in the
ordinary course of business and consistent with past practice;
(b) not amend its Certificate of Incorporation or Bylaws or declare, set
aside or pay any dividend or other distribution or payment in cash, stock or
property in respect of its capital stock;
(c) not reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(d) not issue, grant, sell or pledge or agree or authorize the issuance,
grant, sale or pledge of any shares of, or rights of any kind to acquire any
shares of, its capital stock other than the grant of stock
B-14
<PAGE>
options to purchase up to an aggregate of 5,000 Shares in the ordinary
course of business and consistent with past practice under current employee
benefit plan arrangements and other than Shares issuable upon the exercise
of stock options or issuable upon the exercise of convertibility features in
its securities outstanding on the date hereof;
(e) not acquire, sell, transfer, lease or encumber any material assets
except in the ordinary course of business and consistent with past practice;
(f) use all commercially reasonable efforts to preserve intact its
business organizations and the business organizations of its Subsidiaries,
and to keep available the services of its present key officers and
employees; PROVIDED, HOWEVER, that to satisfy the foregoing obligation, the
Company shall not be required to make any payments or enter into or amend
any contractual arrangements or understandings, except in the ordinary
course of business and consistent with past practice;
(g) not adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or
any of its Subsidiaries;
(h) not grant any severance or termination pay (otherwise than pursuant
to policies in effect on the date hereof) to, or enter into any employment
agreement with, any of its executive officers or directors;
(i) not, except in the ordinary course of business consistent with past
practice or pursuant to obligations imposed by collective bargaining
agreements, increase the compensation payable or to become payable to its
officers or employees, enter into any contract or other binding commitment
in respect of any such increase with any of its directors, officers or other
employees or any director, officer or other employee of its Subsidiaries,
and not establish, adopt, enter into, make any new grants or awards under or
amend, any collective bargaining agreement or Company Benefit Plan, except
as required by applicable law, including any obligation to engage in good
faith collective bargaining, to maintain tax-qualified status or as may be
required by any Company Benefit Plan as the date hereof;
(j) not settle or compromise any material claims or litigation or,
except in the ordinary course of business, modify, amend or terminate any of
its material contracts or waive, release or assign any material rights or
claims, or make any payment, direct or indirect, of any material liability
before the same becomes due and payable in accordance with its terms;
(k) not take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice with respect
to accounting policies or procedures (including tax accounting policies and
procedures), except as may be required by the SEC or the Financial
Accounting Standards Board;
(l) not make any material tax election or permit any material insurance
policy naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Parent, except in the ordinary course of
business; and
(m) not authorize or enter into an agreement to do any of the foregoing.
5.2 ACCESS; CONFIDENTIALITY.
(a) From the date of this Agreement until the Effective Time, upon
reasonable prior notice to the Company, the Company shall give Parent and its
authorized representatives reasonable access during normal business hours to its
executive officers and such other officers or other representatives of the
Company approved in advance by the Company (which approval shall not be
unreasonably withheld), properties, books and records, and shall furnish Parent
and its authorized representatives with such financial and operating data and
other information concerning the business and properties of the Company as
Parent may from time to time reasonably request.
B-15
<PAGE>
(b) Parent and Purchaser will hold and treat, and will cause their
respective affiliates, agents and other representatives to hold and treat, all
documents and information concerning the Company furnished to Parent, Purchaser
or their respective representatives in connection with the transactions
contemplated by this Agreement confidential in accordance with the
Confidentiality Agreement dated October 24, 1996, between the Company and
Parent, which Confidentiality Agreement shall remain in full force and effect
until the termination of this Agreement or otherwise in accordance with its
terms.
5.3 FURTHER ACTIONS. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall act in good faith toward and use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable, and
consult and fully cooperate with and provide reasonable assistance to each other
party, in order to consummate and make effective the transactions contemplated
by this Agreement as soon as practicable hereafter, including, without
limitation, (a) using all commercially reasonable efforts to obtain all
consents, approvals, authorizations or permits of governmental or regulatory
authorities (including early termination of any waiting period under the HSR
Act) or other Persons as are necessary for the consummation of the transactions
contemplated hereby, (b) taking such actions and doing such things as any other
party hereto may reasonably request in order to cause any of the conditions
specified in Article VI to such other party's obligation to consummate such
transactions to be fully satisfied, and (c) in the event and to the extent
required, amending this Agreement so that this Agreement and the Merger comply
with the DGCL. Prior to making any application to or filing with any
governmental or regulatory authority or other Person in connection with this
Agreement, the Company, on the one hand, and Parent and Purchaser, on the other
hand, shall provide the other with drafts thereof and afford the other a
reasonable opportunity to comment on such drafts.
5.4 NOTICE OF CERTAIN MATTERS. The Company shall give prompt notice to
Parent, and Parent and Purchaser shall give prompt notice to the Company, of (a)
the occurrence or nonoccurrence of any event that would be likely to cause (i)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all material
respects and (b) any failure of the Company or of Parent or Purchaser, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder in any material respect.
5.5 COMPANY PROXY STATEMENT. Unless the Merger is consummated as
contemplated in Section 2.13 hereof, the Company shall, as soon as reasonably
practicable after the consummation of the Offer, prepare a preliminary form of
the Company Proxy Statement (the "COMPANY PRELIMINARY PROXY STATEMENT"). The
Company shall (a) file the Company Preliminary Proxy Statement with the SEC
promptly after it has been prepared in a form reasonably satisfactory to the
Company and Parent and (b) use commercially reasonable efforts to promptly
prepare any amendments to the Company Preliminary Proxy Statement required in
response to comments of the SEC or its staff or that the Company with the advice
of counsel deems necessary or advisable and to cause the Company Proxy Statement
to be mailed to the Company's stockholders as soon as reasonably practicable
after the Company Preliminary Proxy Statement, as so amended, is cleared by the
SEC.
5.6 STATE TAKEOVER STATUTES. The Company, Parent and Purchaser will
cooperate to take reasonable steps to (a) exempt the Offer and the Merger from
the requirements of any applicable state takeover law and (b) assist in any
challenge by any of the parties to the validity or applicability to the Offer or
the Merger of any state takeover law.
5.7 COOPERATION. Subject to the terms and conditions of this Agreement and
applicable law, each of the parties shall act in good faith and use reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement as soon as practicable,
including such actions or things as any other party may reasonably request in
order to cause any of the conditions to such other party's obligation
B-16
<PAGE>
to consummate the transactions contemplated by this Agreement to be fully
satisfied. Without limiting the foregoing, the parties shall (and shall cause
their respective subsidiaries, and use reasonable efforts to cause their
respective affiliates, directors, officers, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide assistance to each other in (a) the preparation and filing with the SEC
of the Offer Documents, the Schedule 14D-9, the Company Preliminary Proxy
Statement and the Company Proxy Statement, and any necessary amendments or
supplements thereto; (b) seeking to have the Company Preliminary Proxy Statement
cleared by the SEC as soon as reasonably practicable after filing; (c) obtaining
all necessary consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications, or other permissions or actions by, and giving
all necessary notices to and making all necessary filings with and applications
and submissions to, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic (federal, state or local) or
foreign (collectively, "GOVERNMENTAL ENTITY") or other Person as soon as
reasonably practicable after filing; (d) seeking early termination of any
waiting period under the HSR Act; (e) providing all such information concerning
such party, its subsidiaries and its officers, directors, partners and
affiliates and making all applications and filings as may be necessary or
reasonably requested in connection with any of the foregoing; (f) in general,
consummating and making effective the transactions contemplated hereby; and (g)
in the event and to the extent required, amending this Agreement so that this
Agreement and the Offer and the Merger comply with the DGCL. The parties shall
(and shall cause their respective affiliates, directors, officers, employees,
agents, attorneys, accountants and representatives to) use their reasonable
efforts to cause the lifting of any permanent or preliminary injunction or
restraining order or other similar order issued or entered by any court or other
Governmental Entity preventing or restricting consummation of the transactions
contemplated hereby in the manner provided for herein. Prior to making any
application to or filing with any Governmental Entity or other Person in
connection with this Agreement (other than filing under the HSR Act), each party
shall provide the other party with drafts thereof and afford the other party a
reasonable opportunity to comment on such drafts.
5.8 PUBLIC ANNOUNCEMENTS. No party hereto shall or shall permit any of its
subsidiaries to (and each party shall use commercially reasonable efforts to
cause its affiliates, directors, officers, employees, agents or representatives
not to) issue any press release or make any public statement concerning this
Agreement or any of the transactions contemplated hereby, without the prior
written consent of the other parties hereto; PROVIDED, HOWEVER, that a party
may, without the prior written consent of the other party hereto, issue such a
press release or make such a public statement to the extent required by
applicable law or any listing agreement with a national securities exchange by
which such party is bound if it has used commercially reasonable efforts to
consult with the other parties and to obtain such parties' consent but has been
unable to do so in a timely manner.
5.9 ACQUISITION PROPOSALS. Except as contemplated hereby, the Company
shall not (and shall not permit any of its subsidiaries to, and shall use its
best efforts to cause its officers, directors and employees and any investment
banker, attorney, accountant, or other agent retained by it or any of its
subsidiaries not to) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal relating to, or that may reasonably
be expected to lead to, the acquisition of all or a significant part of the
business and properties or capital stock of the Company or its Subsidiaries,
taken as a whole, whether by merger, purchase of assets, tender offer or
otherwise with a third party other than Parent (an "ACQUISITION PROPOSAL"), or
enter into discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal, or agree to or endorse any
Acquisition Proposal, or authorize or knowingly permit any of the officers,
directors, employees or agents of the Company or its Subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of its Subsidiaries to take any
such action. The Company shall as promptly as practicable notify Parent of all
relevant terms of any such inquiries or proposals received by the Company or its
Subsidiaries and, if such inquiry or proposal is in writing, the Company shall
as promptly as practicable deliver or cause to be delivered to Parent a copy of
such inquiry or proposal. Notwithstanding the foregoing, nothing shall prohibit
the Company's Board of
B-17
<PAGE>
Directors from (a) furnishing information to, or entering into discussions or
negotiations with, any persons or entity in connection with an unsolicited bona
fide proposal in connection with an Acquisition Proposal if, and only to the
extent that (i) such unsolicited bona fide proposal is on terms that the
Company's Board of Directors determines it cannot reject, based on applicable
fiduciary duties and the advice of counsel and (except with respect to
furnishing information) for which financing, to the extent required, is then
committed, or in the good faith judgment of the Board of Directors, could
reasonably be expected to be obtained, and (ii) prior to furnishing such
information to, entering into discussions or negotiations with, such person or
entity the Company provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity; or (b) complying with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
5.10 D&O INDEMNIFICATION.
(a) From the Effective Time through the later of (i) the sixth anniversary
of the date on which the Effective Time occurs and (ii) the expiration of any
statute of limitations applicable to any claim, action, suit, proceeding or
investigation referred to below, the Surviving Corporation shall indemnify and
hold harmless each present and former director and officer of the Company and
its Subsidiaries, determined as of the Effective Time (the "INDEMNIFIED
PARTIES"), against any claims, losses, liabilities, damages, judgments, fines,
fees, costs or expenses, including without limitation attorneys' fees and
disbursements (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 (including, without
limitation, the Merger, the preparation, filing and mailing of the Proxy
Statement and the other transactions and actions contemplated by this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company or such subsidiary would have been
permitted, under applicable law, indemnification agreements existing on the date
hereof, the Certificate of Incorporation or Bylaws of the Company or such
subsidiary in effect on the date hereof, to indemnify such Person (and the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law provided the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under this
Section 5.10, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability or obligation it may have to such Indemnified Party except, and only
to the extent, that such failure materially prejudices the Surviving
Corporation. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before, at or after the Effective Time), the
Surviving Corporation shall have the right to assume the defense thereof 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, except that if
the Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues that raise conflicts of
interest between the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received. If such
indemnity is not available with respect to any Indemnified Party, then the
Surviving Corporation and the Indemnified Party shall contribute to the amount
payable in such proportion as is appropriate to reflect relative faults and
benefits. In the event that any claim or claims are asserted or made within the
aforesaid six-year period, all rights to indemnification in respect of any such
claim or claims shall continue until the final disposition of any and all such
claims.
(c) Notwithstanding anything herein to the contrary, if any claim, action,
suit, proceeding or investigation (whether arising before, at or after the
Effective Time) is made against any present or former
B-18
<PAGE>
director or officer of the Company, on or prior to the sixth anniversary of the
Effective Time, the provisions of this Section 5.10 shall continue in effect
until the final disposition of such claim, action, suit, proceeding or
investigation.
(d) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs and
legal representatives. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which an Indemnified Party is entitled,
whether pursuant to law, contract or otherwise.
(e) To the extent that the Surviving Corporation fails to perform any of its
obligations pursuant to this Section 5.10, Parent shall assume the obligations
and rights of the Surviving Corporation under this Section 5.10.
5.11 COMPANY PLANS.
(a) Following the Effective Time, Parent shall cause the Surviving
Corporation to provide to persons who were employees of the Company or any of
its Subsidiaries prior to the Effective Time (the "COMPANY PERSONNEL") employee
benefit plans, programs and arrangements (the "SURVIVING CORPORATION PLANS")
which in the aggregate are substantially comparable to those employee benefit
plans, programs and arrangements generally provided to the employees of Parent
as of the Effective Time.
(b) Following the Effective Time, Parent shall cause the Surviving
Corporation Plans to recognize any prior accrued service, compensation credit,
credit toward satisfying deductible expense requirements, out-of-pocket expense
limits and maximum lifetime benefit limits of such Company Personnel and/or such
Company Personnel's eligible dependents, to the extent such prior service,
credits and limits were recognized under the comparable employee benefit plans,
programs or arrangements of the Company as of the Effective Time (the "ASSUMED
PLANS"), for all purposes under the Surviving Corporation Plans (including, but
not limited to, participation, eligibility, vesting and the calculation of
benefits), and Parent shall cause the Surviving Corporation Plans to waive any
preexisting condition, exclusion or limitation under any such Plan to the extent
such condition, exclusion or limitation would be covered by the comparable plan,
program or arrangement of the Company as of the Effective Time.
(c) Each of the employment agreements, the employment security agreements
and severance agreements for the benefit of Company Personnel identified in
Section 5.11 of the Company Disclosure Schedule shall be assumed by the
Surviving Corporation at the Effective Time on the same terms and subject to the
same conditions as in effect under such agreements immediately prior to the
Effective Time (the "ASSUMED AGREEMENTS").
(d) Parent hereby absolutely, irrevocably and unconditionally guarantees the
performance of all of the Surviving Corporation's obligations under the Assumed
Plans and the Assumed Agreements, as specified hereunder or otherwise.
(e) Parent shall, and shall cause the Surviving Corporation to, honor and
fully defend all such agreements in accordance with their terms.
5.12 DEPOSIT. Promptly following execution of this Agreement (but in no
event later than two business days thereafter), Parent shall provide the
Company, by wire transfer of immediately available funds, with an earnest money
deposit in the amount of $1.0 million (the "DEPOSIT"), which Deposit shall be
refunded by the Company to Parent on the earlier of (a) the date on which the
fee pursuant to Section 7.3(b) is due and payable by the Company to Parent, (b)
the date on which the Company consummates a business combination or other
transaction pursuant to an Acquisition Proposal, or (c) within 120 days of
termination of this Agreement or termination of the Offer without the purchase
of any Shares; PROVIDED, that the Deposit shall not be required to be refunded
by the Company if the events specified in Section 7.3(c)(i) shall occur.
B-19
<PAGE>
ARTICLE VI
CLOSING CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) PURCHASE OF SHARES. Parent will have accepted for payment and
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; PROVIDED that this condition will be deemed to have been satisfied if
Parent fails to accept for payment or pay for Shares pursuant to the Offer
in breach of the terms hereof or thereof.
(b) STOCKHOLDER APPROVAL. Unless the Merger is consummated as
contemplated in Section 2.13 hereof, this Agreement shall have been adopted,
and the Merger shall have been approved, by a vote of the holders of a
majority of the outstanding Shares.
(c) NO INJUNCTION. No federal or state governmental or regulatory body
or court of competent jurisdiction shall have enacted, issued, promulgated
or enforced any statute, rule, regulation, executive order, decree,
judgment, preliminary or permanent injunction or other order that is in
effect and that prohibits, enjoins or otherwise restrains the consummation
of the Merger; PROVIDED, HOWEVER, that the parties shall use all
commercially reasonable efforts to cause any such decree, judgment,
injunction or order to be vacated or lifted.
(d) HSR ACT. Any waiting period under the HSR Act applicable to the
Merger shall have terminated or otherwise expired.
(e) GOVERNMENTAL AND REGULATORY CONSENTS. All material filings
required to be made prior to the Effective Time with, and all material
consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from, governmental and regulatory authorities in
connection with the Merger and the consummation of the other transactions
contemplated hereby which are listed in Section 3.4 of the Company
Disclosure Schedule shall have been made or obtained, as the case may be.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger is also subject to the satisfaction at or
prior to the Effective Time of each of the following additional conditions,
unless waived by the Company:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Parent and Purchaser herein shall be true and correct
in all material respects on and as of the Effective Time, with the same
force and effect as though such representations and warranties had been made
on and as of the Effective Time, except for changes permitted or
contemplated by this Agreement and except for representations and warranties
that are made as of a specific date or time, which shall be true and correct
in all material respects only as of such specific date or time.
(b) COMPLIANCE WITH COVENANTS. Each of Parent and Purchaser shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants, contained in this
Agreement to be performed or complied with by it prior to or on the
Effective Time.
(c) DEPOSIT. The Company shall have received the Deposit.
6.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT AND PURCHASER. The
obligation of Parent and Purchaser to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
additional conditions, unless waived by either of Parent or Purchaser:
B-20
<PAGE>
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Company herein shall be true and correct in all
material respects on and as of the Effective Time, with the same force and
effect as though such representations and warranties had been made on and as
of the Effective Time, except for changes permitted or contemplated by this
Agreement and except for representations and warranties that are made as of
a specific date or time, which shall be true and correct in all material
respects only as of such specific date or time.
(b) COMPLIANCE WITH COVENANTS. The Company shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with all covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Effective Time.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the stockholders of the Company, if required by applicable provisions of the
DGCL), prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Effective Time shall not
have occurred on or before 120 days from the date hereof; PROVIDED, that the
right to terminate this Agreement under this clause (b) shall not be
available to any party whose misrepresentation in this Agreement or whose
failure to perform any of its covenants and agreements or to satisfy any
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date;
(c) by either the Company or Parent, if any federal or state court of
competent jurisdiction or other federal or state governmental or regulatory
body shall have issued any judgment, injunction, order or decree
prohibiting, enjoining or otherwise restraining the transactions
contemplated by this Agreement and such judgment, injunction, order or
decree shall have become final and nonappealable (PROVIDED, HOWEVER, that
the party seeking to terminate this Agreement pursuant to this clause (c)
shall have used commercially reasonable efforts to remove such judgment,
injunction, order or decree) or if any statute, rule, regulation or
executive order promulgated or enacted by any federal or state governmental
authority after the date of this Agreement which prohibits the consummation
of the Offer or the Merger shall be in effect;
(d) by the Company, if (i) Parent fails to commence the Offer as
provided in Section 1.1, (ii) the Offer expires or is terminated without any
Shares being purchased thereunder or (iii) Parent fails to purchase validly
tendered Shares in violation of the terms and conditions of the Offer or
this Agreement;
(e) by Parent, if (i) the Offer is not commenced as provided in Section
1.1 directly as a result of actions or inaction by the Company or (ii) the
Offer is terminated or expires as a result of the failure of a condition
specified in ANNEX A hereto or on the expiration of the Offer without the
purchase of any Shares thereunder, unless such termination or expiration has
been caused by or resulted from the failure of Parent or Purchaser to
perform any covenants and agreements of Parent or Purchaser contained in
this Agreement;
(f) prior to the consummation of the Offer, by Parent, if the Company
Board withdraws or modifies in a manner materially adverse to Parent or
Purchaser its favorable recommendation of the Offer or the Merger or shall
have recommended any Acquisition Proposal with a party other than Parent or
any of its affiliates;
B-21
<PAGE>
(g) by the Company, if this Agreement is not adopted or, unless the
Merger is consummated as contemplated in Section 2.13 hereof, the Merger is
not approved at the Company Stockholders' Meeting by the holders of a
majority of the outstanding Shares;
(h) by Parent, if there shall have been a material breach of any
representation, warranty or material covenant or agreement on the part of
the Company, which is incurable or which is not cured after thirty (30)
days' written notice by Parent to the Company;
(i) by the Company, if there shall have been a material breach of any
representation, warranty or material covenant or agreement on the part of
either of Parent or Purchaser, which is incurable or which is not cured
after thirty (30) days' written notice by the Company to Parent; or
(j) by the Company, if (i) the Company Board shall withdraw, modify or
change its approval or recommendation of the Offer or the Merger or shall
have resolved to do any of the foregoing pursuant to Section 5.9 or (ii) any
Person or group of Persons shall have made an Acquisition Proposal the
acceptance of which the Company Board determines, after consultation with
legal counsel, is required to comply with its fiduciary duties under
applicable law.
7.2 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 7.1, this Agreement forthwith shall become void
and of no further force or effect, and no party hereto (or any of its
affiliates, directors, officers, agents or representatives) shall have any
liability or obligation hereunder, except in any such case (a) as provided in
Sections 5.2(b) (Confidentiality), 5.8 (Public Announcements), and 7.3 (Fees and
Expenses), which shall survive any such termination and (b) to the extent such
termination results from the breach by such party of any of its representations,
warranties, covenants or agreements contained in this Agreement.
7.3 FEES AND EXPENSES.
(a) Whether or not the Offer or the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, fees and disbursements of
counsel, financial advisors and accountants) shall be borne by the party which
incurs such cost or expense; PROVIDED, that if this Agreement is terminated
pursuant to Section 7.1 as a result of a material misrepresentation by a party
or a material breach by a party of any of its covenants or arrangements set
forth herein, such party shall pay the costs and expenses incurred by the other
party in connection with this Agreement; and PROVIDED, FURTHER, that all costs
and expenses related to the preparation, printing, filing and mailing (as
applicable) of the Company Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Company Proxy Statement shall be
borne equally by the Company, on the one hand, and Parent and Purchaser, on the
other hand.
(b) Notwithstanding the foregoing, provided that neither Parent nor
Purchaser shall be in breach of their respective obligations under this
Agreement, if (i) prior to the consummation of the Offer, the Company Board
terminates this Agreement pursuant to Section 7.1(j) or Parent terminates this
Agreement pursuant to Section 7.1(f) or Section 7.1(h) and (ii) as a result
thereof, Parent shall have terminated the Offer, allowed the Offer to expire
without purchasing any Shares thereunder or failed to commence the Offer in
accordance with the terms hereof and (iii) the Company enters into a definitive
agreement relating to an Acquisition Proposal or a business combination or other
transaction contemplated by such Acquisition Proposal shall have been
consummated (A) prior to or within six months following such termination (in the
case of a termination by the Company Board pursuant to Section 7.1(j) or by
Parent pursuant to Section 7.1(f)), or (B) prior to or within three months
following such termination with respect to an Acquisition Proposal that provides
for consideration in excess of $6.50 per Share (in the case of a termination by
Parent pursuant to Section 7.1(h)), then the Company agrees that it will
immediately thereafter pay to Parent a fee of $2,500,000 in cash, payable in
same day funds. The Company acknowledges that the provisions of this Section
7.3(b) are an integral part of the transactions contemplated in this Agreement
and that, without such provisions, Parent and Purchaser would not enter into
this Agreement.
B-22
<PAGE>
Parent and Purchaser hereby agree that, so long as Parent has received the fee
contemplated by this Section 7.3(b), it shall not assert or pursue in any
manner, directly or indirectly, (i) any claim or cause of action based in whole
or in part upon alleged tortious or other interference with rights under this
Agreement against any third party submitting an Acquisition Proposal, or (ii)
any claim or cause of action against the Company or any of its officers,
directors, employees, agents or other representatives based in whole or in part
upon its or their receipt, consideration, recommendation or approval of, or
other action taken with respect to, an Acquisition Proposal or based in whole or
in part upon the failure of the transactions contemplated by this Agreement to
be consummated.
(c) Notwithstanding the foregoing, provided that the Company shall not be in
breach of its obligations under this Agreement, (i) if, notwithstanding the
satisfaction or waiver of the conditions specified in Annex A and Sections 6.1
and 6.3, Parent shall for any reason fail to consummate the transactions
contemplated by this Agreement or, as a result of actions or inaction of Parent,
any of the conditions set forth in Annex A or Section 6 hereof shall not have
been satisfied and as a result thereof the transactions contemplated by this
Agreement are not consummated, then Parent agrees that it will immediately
thereafter pay to the Company a fee of $2,500,000 in cash (less the Deposit to
the extent previously paid by Parent as contemplated by Section 5.12 hereof),
payable in same day funds or (ii) if Parent shall fail to consummate the
transactions contemplated by this Agreement as a result of the failure to
satisfy any condition set forth in Annex A or Sections 6.1 or 6.3 and such
failure is neither a result of any action or inaction of Parent nor a result of
a termination by the Company of this Agreement under circumstances in which the
Company would be required to pay to Parent the fee contemplated by Section
7.3(b), then, in lieu of the fee specified in clause (i) above, Parent shall
reimburse to the Company the actual and documented out-of-pocket expenses
incurred by the Company in connection with the transactions contemplated hereby.
Parent and Purchaser acknowledge that the provisions of this Section 7.3(c) are
an integral part of the transactions contemplated in this Agreement and that,
without such provisions, the Company would not enter into this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 NO SURVIVAL. None of the representations, warranties, covenants or
agreements contained in this Agreement or in any certificate or other instrument
delivered pursuant to this Agreement shall survive the Effective Time, except
for the covenants and agreements contained in Sections 5.10 (D&O Indemnification
and Insurance), 5.11 (Company Plans) and 5.12 (Severance Agreements).
8.2 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) or sent by facsimile (with immediate
confirmation) or nationally recognized overnight courier service, as follows:
(a) if to Parent or Purchaser, to:
Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, New Mexico 97110
Attn: Scot Sauder, Esq.
Fax: (505) 881-5907
B-23
<PAGE>
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fanninp
Houston, Texas 77002
Attn: James H. Wilson, Esq.
Fax: (713) 615-5926
(b) if to the Company, to:
Pacific Rehabilitation & Sports Medicine, Inc.
One S.W. Columbia Street, Suite 900
Portland, Oregon 97258
Attn: Michael McArthur-Phillips, Esq.
Fax: (503) 222-6995
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attn: Denise A. Cerasani, Esq.
Fax: (212) 259-6333
or to such other Person or address or facsimile number as any party shall
specify by like written notice to the other parties hereto (any such notice of a
change of address to be effective only upon actual receipt thereof).
8.3 CERTAIN DEFINITIONS. The following terms, when used in this Agreement,
shall have the following respective meanings:
(a) "AFFILIATE" shall have the meaning assigned to such term in Section
12(b)-2 of the Exchange Act.
(b) "BUSINESS DAY" shall have the meaning set forth in Rule 14d-1(c)(6)
under the Exchange Act.
(c) "MATERIAL ADVERSE EFFECT" means, with respect to any Person, any
change or effect that is materially adverse to the financial condition or
results of operations of such Person and its subsidiaries, taken as a whole,
excluding in all cases: (i) events or conditions generally affecting the
industry in which such Person and its subsidiaries operate or arising from
changes in general business or economic conditions; (ii) out-of-pocket fees
and expenses (including without limitation legal, accounting, investigatory,
and other fees and expenses) incurred in connection with the transactions
contemplated by this Agreement; (iii) in the case of the Company, the
payment by the Company and/or its Subsidiaries of all amounts due to any
officers or employees of the Company or any of its Subsidiaries under
employment contracts or other employee benefit plans in effect as of the
date hereof; (iv) any effect resulting from any change in law or generally
accepted accounting principles, which affect generally entities such as such
Person; and (v) any effect resulting from compliance by such Person with the
terms of this Agreement.
(d) "PERSON" means any natural person, corporation, limited liability
company, partnership, unincorporated organization or other entity.
(e) "SUBSIDIARY" of any Person means any other corporation or entity of
which such Person owns, directly or indirectly, stock or other equity
interests having a majority of the votes entitled to be cast in
B-24
<PAGE>
the election of directors of such corporation or entity under ordinary
circumstances or of which such Person owns a majority beneficial interest.
8.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and other documents referred to herein), together with the Confidentiality
Agreement referred to in Section 5.2(b), constitutes the entire agreement
between and among the parties hereto and supersedes all prior agreements and
understandings, oral and written, between or among any of the parties with
respect to the subject matter hereof.
8.5 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, benefits or obligations hereunder may be assigned, in whole or in part,
by any party (whether by operation of law or otherwise) without the prior
written consent of the other parties hereto. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, other than
rights conferred upon Indemnified Parties under Section 5.10.
8.6 AMENDMENTS. This Agreement may be amended by the parties at any time
prior to the Effective Time; PROVIDED, that, after approval of the Merger and
this Agreement by the stockholders of the Company if required under applicable
law, no amendment shall be made that by law requires further approval by the
stockholders of the Company, without such approval. This Agreement may not be
amended or modified except by an instrument in writing signed on behalf of each
of the parties hereto.
8.7 WAIVERS. At any time prior to the Effective Time, Parent (for Parent
and Purchaser), on the one hand, or the Company, on the other hand, may, to the
extent legally allowed, extend the time specified herein for the performance of
any of the obligations or other acts of the other, waive any inaccuracies in the
representations and warranties of the other contained herein or in any document
delivered pursuant hereto, or waive compliance by the other with any of the
agreements or covenants of such other party or parties (as the case may be)
contained herein. Any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of the party or parties to be bound
thereby. No such extension or waiver shall constitute a waiver of, or estoppel
with respect to, any subsequent or other breach or failure to strictly comply
with the provisions of this Agreement. The failure of any party to insist on
strict compliance with this Agreement or to assert any of its rights or remedies
hereunder or with respect hereto shall not constitute a waiver of such rights or
remedies.
8.8 CAPTIONS. The Table of Contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
8.10 VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
8.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
any applicable principles of conflicts of law.
B-25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Merger as of the date first above written.
PACIFIC REHABILITATION & SPORTS
MEDICINE, INC.
By: /s/ BILL BARANCIK
-----------------------------------------
Bill Barancik
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HORIZON/CMS HEALTHCARE CORPORATION
By: /s/ CHARLES GONZALES
-----------------------------------------
Charles Gonzales
SENIOR VICE PRESIDENT -- SUBSIDIARY
OPERATIONS
HORIZON PRSM CORPORATION
By: /s/ CHARLES GONZALES
-----------------------------------------
Charles Gonzales
SENIOR VICE PRESIDENT
B-26
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex A shall have the meanings assigned to
them in the Agreement to which it is attached (the "MERGER AGREEMENT").
Parent shall not be required to accept for payment, purchase or pay for any
Shares tendered until the expiration of any applicable waiting period for the
Offer under the HSR Act and Parent may terminate or, subject to the terms and
conditions of the Merger Agreement, amend the Offer as to any Shares not then
accepted for payment, shall not be required to accept for payment or pay for any
Shares, or may delay the acceptance for payment of Shares tendered, if (1) at
the expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by Parent and its
affiliates, shall not constitute a majority of the outstanding Shares on a fully
diluted basis or (2) at any time after November 17, 1996 and prior to the
acceptance for payment of Shares, any of the following events shall occur:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding
before any federal or state court or governmental, administrative or
regulatory authority or agency, located or having jurisdiction within the
United States, or any other action taken, proposed or threatened, or
statute, rule, regulation, legislation, interpretation, judgment or order
proposed, sought, enacted, entered, enforced, promulgated, amended, issued
or deemed applicable to Purchaser, the Company or any subsidiary or
affiliate of Purchaser or the Company or the Offer or the Merger, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency located or having jurisdiction within the
United States, which could reasonably be expected to have the effect of: (i)
making illegal, materially delaying or otherwise restraining or prohibiting
the Offer or the Merger or the acquisition by Parent or Purchaser of any
Shares; (ii) prohibiting or materially limiting the ownership or operation
by Parent, Purchaser or their respective affiliates of any material portion
of the business or assets of the Company or compelling Parent or Purchaser
to dispose of or hold separate all or any material portion of the business
or assets of the Company, in each case as a result of the transactions
contemplated by the Merger Agreement; (iii) imposing material limitations on
the ability of Parent or any of its affiliates to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares purchased by them on all matters properly presented to the
stockholders of the Company; or (iv) preventing Parent or any of its
affiliates from acquiring, or to require divestiture by Parent or any of its
affiliates of, any Shares; or
(b) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) the
declaration of any banking moratorium or any suspension of payments in
respect of banks or any limitation (whether or not mandatory) on the
extension of credit by lending institutions in the United States, (iii) the
commencement of a war, material armed hostilities or any other material
international or national calamity involving the United States, 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; or
(c) any Person, entity or "group" (as such term is used in Section
13(d)(3) of the Exchange Act) other than Parent or any of its affiliates
shall have become the beneficial owner (as that term is used in Rule 13d-3
under the Exchange Act) of more than 50% of the outstanding Shares; or
(d) the Company shall have breached or failed to comply in any material
respect with any of its obligations under the Merger Agreement (which
breach, if curable, has not been cured within thirty (30) days following
receipt of written notice thereof by Parent specifying in reasonable detail
the basis
B-27
<PAGE>
of such alleged breach), or any representation or warranty of the Company
contained in the Merger Agreement shall not have been true and correct in
all material respects, except (i) for changes specifically permitted or
contemplated by the Merger Agreement and (ii) those representations and
warranties that address matters only as to a particular date which are true
and correct in all material respects as of such date; or
(e) the Merger Agreement shall have been terminated pursuant to its
terms or amended pursuant to its terms to provide for such termination or
amendment of the Offer; or
(f) the Board of Directors of the Company shall have modified or amended
in any manner materially adverse to Parent or Purchaser or shall have
withdrawn its recommendation of the Offer or the Merger, or shall have
resolved to do any of the foregoing;
which, in the good faith judgment of Parent makes it inadvisable to proceed with
the Offer or with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted or waived by Parent or Purchaser in whole or in part at any
time or from time to time in its discretion subject to the terms and conditions
of the Merger Agreement. The failure of Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
B-28
<PAGE>
Manually signed facsimiles of the Letter of Transmittal will be accepted. A
Letter of Transmittal, Share certificates (unless delivered by book-entry
transfer) and any other required documents should be sent or delivered by each
stockholder or such stockholder's broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
P.O. Box 798, Midtown Station
New York, New York 10018
BY HAND OR OVERNIGHT MAIL:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
120 Broadway -- 13th Floor
New York, New York 10271
BY FACSIMILE:
(201) 329-8936
(For Eligible Institutions Only)
Confirm By Telephone
(201) 296-4209
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 at its telephone number and location listed
below. You may also contact your broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
30th Floor
New York, New York 10005
(800) 223-2064
<PAGE>
EXHIBIT (A)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 22, 1996
BY
HORIZON PRSM CORPORATION
A WHOLLY OWNED INDIRECT SUBSIDIARY OF
HORIZON/CMS HEALTHCARE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, DECEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
------------------------
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT MAIL:
ChaseMellon Shareholder Services, L.L.C. (201) 329-8936 ChaseMellon Shareholder Services, L.L.C.
Reorganization Department (for Eligible Institutions Only) Reorganization Department
P.O. Box 798, Midtown Station Confirm by Telephone 120 Broadway -- 13th Floor
New York, New York 10018 (201) 296-4209 New York, New York 10271
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS
LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
Stockholders who have properly tendered Shares (as defined below) and not
validly withdrawn the tendered Shares and who wish to have those Shares
purchased pursuant to the Offer (as defined below) need not take any further
action except for complying with the procedure for guaranteed delivery if that
procedure is being used.
This Letter of Transmittal is to be completed by holders of Shares either if
certificates are to be forwarded herewith or if a tender of Shares is to be made
by book-entry transfer to the account maintained by the Depositary at The
Depositary Trust Company ("DTC"), pursuant to the procedures set forth in "THE
TENDER OFFER-- Procedures for Tendering Shares" of the Offer to Purchase.
Holders of Shares whose certificates are not immediately available, or who are
unable to deliver their certificates and all other documents required hereby to
the Depositary prior to the Expiration Time (as defined in the Offer to
Purchase) (or who cannot comply with the book-entry transfer procedures on a
timely basis), must tender their Shares according to the guaranteed delivery
procedure set forth in "THE TENDER OFFER--Procedures for Tendering Shares" of
the Offer to Purchase. See Instruction 2. Delivery of documents to the DTC does
not constitute delivery to the Depositary.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE(S) TENDERED
HOLDER(S) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
<S> <C> <C> <C>
TOTAL NUMBER OF
CERTIFICATE SHARES EVIDENCED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------
------------------------
------------------------
TOTAL SHARES**
* NEED NOT BE COMPLETED BY STOCKHOLDERS TENDERING BY BOOK-ENTRY
TRANSFER.
** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES DESCRIBED ABOVE ARE BEING TENDERED. SEE INSTRUCTION 4.
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution ______________________________________________
<PAGE>
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) _____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution that Guaranteed Delivery _______________________________
/ / Check Box if Delivered by Book-Entry Transfer and complete the
following:
Account Number ___________________ Transaction Code Number _________________
Ladies and Gentlemen:
The undersigned hereby tenders to Horizon PRSM Corporation, a Delaware
corporation (the "Purchaser"), the shares of common stock, par value $.01 per
share ("Shares"), of Pacific Rehabilitation & Sports Medicine, Inc., a Delaware
corporation (the "Company"), described above, pursuant to the Purchaser's offer
to purchase all outstanding Shares at a price of $6.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated November 22, 1996 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in accordance with this Letter of Transmittal
(which together constitute the "Offer").
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 extension or
amendment), subject to and effective upon acceptance for payment of and payment
for 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 tendered
hereby and irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such shares with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (i) deliver such Shares or transfer ownership of
such Shares on the account books maintained by the DTC, together, in either such
case, with all accompanying evidence of transfer and authenticity, to or upon
the order of the Purchaser, (ii) present such Shares for transfer on the books
of the Company and (iii) receive all benefits and otherwise exercise all rights
of beneficial ownership of such Shares, all in accordance with the terms of the
Offer.
The undersigned irrevocably appoints designees of the Purchaser, and each of
them, attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights, including to vote
in such manner as each such attorney-in-fact and proxy or his substitute shall,
in his or her sole discretion, deem proper, and otherwise act (including
pursuant to written consent), with respect to all Shares tendered hereby that
have been accepted for payment by the Purchaser prior to the time of such vote
or action, which the undersigned is entitled to vote at any meeting of
stockholders (whether annual or special and whether or not an adjourned meeting)
of the Company or by written consent or otherwise. This power of attorney and
proxy is irrevocable and is granted in consideration of, and is effective upon,
the Purchaser's oral or written notice to the Depositary of its acceptance for
payment of such Shares in accordance with the terms of the Offer. Such
acceptance for payment shall revoke all prior powers of attorney and proxies
granted by the undersigned at any time with respect to such Shares and no
subsequent powers of attorney or proxies will be given, nor any subsequent
written consent executed by the undersigned, with respect thereto by the
undersigned (and if given will not be effective). The designees of the Purchaser
will hereby be empowered, among other things, 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 Company's stockholders, by
written consent or otherwise. The Purchaser reserves the right to require that,
in order for Shares to be validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting rights and other rights of a record and beneficial holder, including
rights in respect of acting by written consent, with respect to such Shares.
The undersigned hereby represents and warrants that: (i) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and (ii) 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, claims 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 or confirm the sale, assignment and transfer of the Shares tendered
hereby. In addition, the undersigned will promptly remit and transfer to the
Depositary for the account of
<PAGE>
the Purchaser any and all distributions with respect to the Shares tendered
hereby, accompanied by appropriate documentation of transfer and, pending
remittance or appropriate assurance thereof, the Purchaser will 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 of Shares tendered
hereby the amount or value thereof, as determined by the Purchaser in its sole
discretion.
All authority herein conferred or agreed to be conferred 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 tenders of Shares and acceptance for
payment of Shares pursuant to any of the procedures described in "THE TENDER
OFFER--Procedures for Tendering Shares" of the Offer to Purchase and in the
Instructions hereto 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 of Shares purchased and/or return
any certificates for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(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 any Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the undersigned at the address
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 return such
certificates to the person or persons so indicated. Stockholders who tender
Shares by book-entry transfer may request that any Shares not accepted for
payment be returned by crediting such account maintained at the DTC as such
stockholder may designate by making an appropriate entry under "SPECIAL PAYMENT
INSTRUCTIONS." If no such instructions are given, any such Shares not purchased
will be returned by crediting the account at the DTC designated above. The
undersigned recognizes that the Purchaser has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
<PAGE>
<TABLE>
<CAPTION>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares (To be completed ONLY if certificates for Shares
not tendered or not accepted for payment and/or not tendered or not accepted for payment and/or
the check for the purchase price of Shares the check for the purchase price of Shares
purchased are to be issued in the name of someone purchased are to be sent to someone other than
other than the undersigned, or if Shares the undersigned, or to the undersigned at an
delivered by book-entry transfer that are not address other than that shown above.
purchased are to be returned by credit to an Mail: / / check / / certificates to:
account maintained at the DTC other than the Name ----------------------------------------
account indicated above. (Please
Issue: / / check / / certificates to: Print)
Name---------------------------------------- Address--------------------------------------
(Please ----------------------------------------------
Print) ----------------------------------------------
Address-------------------------------------- ----------------------------------------------
- ---------------------------------------------- (Zip Code)
- ---------------------------------------------- -------------------------------------------------
- ---------------------------------------------- TAX IDENTIFICATION OR SOCIAL SECURITY
(Zip Code) NO.
(SEE FORM W-9 ON REVERSE
SIDE)
<S> <C>
- --------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE FORM W-9 ON REVERSE SIDE)
/ / Credit unpurchased Shares tendered by book-
entry transfer to the DTC account set forth
below:
---------------------------------------------
(DTC ACCOUNT NUMBER)
</TABLE>
<PAGE>
SIGN HERE
PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE
Signature(s) of Owner(s) _________________________________________
__________________________________________________________________
Dated: ___________________________________________________, 199___
(Must be signed by registered holder(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 holder(s)
by certificates and documents transmitted herewith. If signature
is by an officer of a corporation, attorney-in-fact, executor,
administrator, trustee, guardian, agent or any other person acting
in a fiduciary or representive capacity, please set forth full
title. See Instruction 5.
Name(s) __________________________________________________________
__________________________________________________________________
(Please Print)
Capacity (full title) ____________________________________________
(See Instruction 5)
Address __________________________________________________________
__________________________________________________________________
Zip Code
- ---------------------------------------- -----------------------------------
Tax Identification or Social
Area Code and Telephone No. Security No.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _____________________________________________
Name _____________________________________________________________
(Please Print)
Title ____________________________________________________________
Name of Firm _____________________________________________________
Address __________________________________________________________
Zip Code
Dated:
- --------------------------------------- -------------------------------
Area Code and Telephone No.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by an Eligible Institution (as defined below) unless the Shares
tendered hereby are tendered (i) by a registered holder of Shares who has not
completed either the box entitled "SPECIAL DELIVERY INSTRUCTIONS" or the box
entitled "SPECIAL PAYMENT INSTRUCTIONS" on this Letter of Transmittal or (ii)
for the account of any Eligible Institution. See Instruction 5. If the
certificate(s) are registered in the name of a person other than the signer of
this Letter of Transmittal or if payment is to be made or certificates for
Shares not accepted for payment or not tendered are to be issued to a person
other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificates with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instruction 5. For purposes of the Offer, "Eligible
Institution" means a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, including (as such terms are
defined therein) any (i) bank, (ii) broker, dealer, municipal securities dealer,
municipal securities broker, government securities dealer and government
securities broker, (iii) credit union, (iv) national securities exchange,
registered securities association or clearing agency or (v) savings association.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in "THE TENDER OFFER--Procedures for
Tendering Shares" of the Offer to Purchase. Certificates for all physically
tendered Shares, or confirmation of any book-entry transfer into the
Depositary's account at the DTC of Shares tendered by book-entry transfer,
together with a properly completed and duly executed Letter of Transmittal or
facsimile thereof, and any required signature guarantees and all other documents
required by this Letter of Transmittal, must be received by the Depositary at
its address set forth herein prior to the Expiration Time (as defined in the
Offer to Purchase). Stockholders whose certificates are not immediately
available or who cannot deliver their certificates and all other required
documents to the Depositary prior to the Expiration Time may tender their Shares
by properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth in "THE TENDER OFFER--
Procedures for Tendering Shares" of the Offer to Purchase. Pursuant to such
procedures, (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 with the Offer to Purchase,
must be received by the Depositary as provided below prior to the Expiration
Time and (iii) the certificates for all physically tendered Shares, in proper
form for transfer, or confirmation of any book-entry transfer into the
Depositary's account at the DTC of Shares tendered by book-entry transfer,
together with a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, any required signature guarantees and all other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq Stock Market trading days after the date of the
execution of such Notice of Guaranteed Delivery, all as provided in "THE TENDER
OFFER--Procedures for Tendering Shares" of the Offer to Purchase.
The method of delivery of Shares, this Letter of Transmittal and all other
required documents is at the option and risk of the tendering stockholder. If
sent by mail, it is recommended that certificates and documents be sent by
registered mail, with return receipt requested, properly insured. In all cases,
sufficient time should be allowed to assure timely delivery.
No alternative, conditional or contingent tenders will be accepted. 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.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares that are to be
tendered in the box entitled "Number of Shares Tendered." In such case, new
certificates for the remainder of the Shares that were evidenced by old
certificates will be sent to the registered holder(s), unless otherwise provided
in the appropriate box on this Letter of Transmittal, as soon as practicable
after the Expiration Time. 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 holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face(s) of the certificate(s) without alteration, enlargement or any change
whatsoever.
<PAGE>
If any of the Shares tendered hereby are held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any 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 certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer
of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority to so act must be
submitted.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificate(s) listed and
submitted herewith, the certificate(s) must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the certificate(s), unless this Letter of
Transmittal is signed by an Eligible Institution. Signatures on certificates or
stock powers must be guaranteed by an Eligible Institution.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
certificates for unpurchased Shares and/or Shares not accepted for payment or
not tendered are to be issued in the name of a person other than the signer of
this Letter of Transmittal, or if a check is to be sent and/or such certificates
are to be returned to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed. Stockholders tendering Shares
by book-entry transfer may request that Shares not accepted for payment or not
tendered be credited to such account maintained at the DTC as such stockholder
may designate hereon. If no such instructions are given, such Shares not
accepted for payment or not tendered will be returned by crediting the account
at the DTC designated above.
7. STOCK TRANSFER TAXES. The Purchaser will pay or cause to be paid any
stock transfer taxes with respect to the transfer and sale of the purchased
Shares to its order pursuant to the Offer. If, however, payment of the purchase
price is to be made to, or if certificates for Shares not tendered or not
purchased are to be registered in the name of any person other than the
registered holder(s), or if tendered certificates are registered in the name of
any persons other than the persons signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered owner or
such other person) payable on account of the transfer to such other person will
be deducted from the purchase price unless evidence satisfactory to the
Purchaser of the payment of such taxes or exemption therefrom is submitted.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at the address or telephone numbers set
forth below. Additional copies of the Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
obtained from the Information Agent at the telephone numbers or address set
forth below or from your broker, dealer, commercial bank, trust company or other
nominee.
9. TAX IDENTIFICATION NUMBER. Each tendering stockholder is required to
provide the Depositary with such stockholder's correct taxpayer identification
number ("TIN"), generally the stockholder's social security or federal employer
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below, or, alternatively, to establish another basis
for exemption from backup withholding. A stockholder must cross out item (2) in
the Certification box on Substitute Form W-9 if such stockholder is subject to
backup withholding. If the Depositary is not provided with the correct taxpayer
identification number and certificate of no loss of exemption from backup
withholding or other adequate basis for exemption, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service, and any gross
proceeds resulting from the Offer to be paid to such stockholder may be subject
to backup withholding equal to 31% of such proceeds. Any amount withheld under
these rules will be creditable against the stockholder's federal income tax
liability; and if withholding results in an overpayment of taxes, a refund may
be obtained. The box in Part 3 of the form should be checked and the certificate
set forth below the form completed 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, thereafter the Depositary will withhold 31% on all
payments made to such stockholder pursuant to the Offer until a TIN is provided
to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, TOGETHER WITH 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 TIME.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with such
stockholder's correct TIN on Substitute Form W-9 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 the Depositary is not provided with
the correct taxpayer identification number and certificate of no loss of
exemption from backup withholding or other adequate basis for exemption, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service, and any gross proceeds resulting from the Offer paid to the stockholder
may be subject to backup withholding equal to 31% of such proceeds. Any amount
withheld under these rules will be creditable against the stockholder's federal
income tax liability; and if withholding results in an overpayment of taxes, a
refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding, each nonexempt stockholder must provide his
or her correct taxpayer identification number by completing the Substitute Form
W-9 set forth below, certifying that the TIN provided is correct (or that such
stockholder is awaiting a TIN) and that (i) the 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
(ii) the Internal Revenue Service has notified such stockholder that such
stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary its TIN (e.g., social
security number or employer identification number). If Shares are held in more
than one name or are held 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.
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C> <C>
PART 1--PLEASE PROVIDE YOUR TIN IN
THE BOX AT RIGHT AND CERTIFY BY
SUBSTITUTE SIGNING AND DATING BELOW
Form W-9 Social Security number
OR
Employer identification number
Payor's Request
PART 2--Certification--Under penalties of perjury, I certify that:
for Taxpayer (1) The number shown on this form is my correct Taxpayer Identification Number (or I
Identification am waiting for a number to be issued to me) and
Number ("TIN") (2) I am not subject to backup withholding because (i) I have not been notified by
the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends, or (ii) the IRS has
notified me that I am no longer subject to backup withholding.
Certificate instructions--You must cross out item (2) in
Part 2 above if you have been notified by the IRS that you PART 3--
are subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after Awaiting TIN / /
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2).
Signature DATE
Name (Please Print)
</TABLE>
NOTE: FAILURE TO COMPLETE 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 DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been
issued to me and either (a) 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 (b) 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 payments made to me pursuant to the Offer thereafter will be withheld until I provide a
number.
Date
Signature
Name (Please Print)
</TABLE>
------------------------
Questions and requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at the address set forth below.
GEORGESON & COMPANY INC.
Wall Street Plaza
30th Floor
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
Call Toll Free: 1-800-233-2064
<PAGE>
EXHIBIT (A)(3)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
AT
$6.50 NET PER SHARE
BY
HORIZON PRSM CORPORATION
A WHOLLY OWNED INDIRECT SUBSIDIARY OF
HORIZON/CMS HEALTHCARE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, DECEMBER 20, 1996, UNLESS EXTENDED.
November 22, 1996
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
We have been appointed by Horizon PRSM Corporation (the "Purchaser"), a
Delaware corporation and wholly owned indirect subsidiary of Horizon/CMS
Healthcare Corporation, a Delaware corporation ("Parent"), to act as Information
Agent in connection with its offer to purchase all outstanding shares of common
stock, par value $.01 per share ("Shares"), of Pacific Rehabilitation & Sports
Medicine, Inc., a Delaware corporation (the "Company"), at $6.50 per Share, net
to the seller in cash and without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 22, 1996 (the
"Offer to Purchase") and in the related Letter of Transmittal (which together
constitute the "Offer").
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated November 22, 1996;
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients, together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9;
3. The Schedule 14D-9 of the Company, containing the recommendation of
a majority of the Company's Board of Directors that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer;
4. Notice of Guaranteed Delivery to be used to accept the Offer, if
Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Time (as defined in the Offer to Purchase);
5. Form of letter that may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer; and
6. Return envelope addressed to ChaseMellon Shareholder Services,
L.L.C. (the "Depositary").
We are asking you to contact the clients for whom you hold Shares registered
in your name (or in the name of a nominee) or who hold Shares registered in
their own name. Please bring the Offer to the attention of your clients as
promptly as possible. The Purchaser will not pay any fees or commissions to any
broker or dealer or any other person (other than the undersigned, as Information
Agent) in connection
<PAGE>
with the solicitation of tenders of Shares pursuant to the Offer. You will be
reimbursed by the Purchaser, upon request, for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Purchaser will pay or cause to be paid all Share transfer taxes
applicable to the purchase of Shares pursuant to the Offer, except as set forth
in Instruction 7 of the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a facsimile copy thereof), with any required
signature guarantees, or a Book-Entry Confirmation (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares, and any other
required documents, should be sent to the Depositary, and certificates
representing the tendered Shares should be delivered, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to tender their Shares or other required documents prior to the
Expiration Time or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified under "The Offer -- Procedures for Tendering Shares" of the Offer to
Purchase.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 20, 1996, UNLESS EXTENDED.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
undersigned at the address and telephone numbers set forth on the back cover of
the Offer to Purchase.
Very truly yours,
Georgeson & Company Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, PARENT, ANY AFFILIATE OF THE
PURCHASER OR PARENT, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU
OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY
OF THEM IN CONNECTION WITH THE OFFER EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (A)(4)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
AT
$6.50 NET PER SHARE
BY
HORIZON PRSM CORPORATION
A WHOLLY OWNED INDIRECT SUBSIDIARY OF
HORIZON/CMS HEALTHCARE CORPORATION
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated November 22,
1996 and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the offer by Horizon PRSM Corporation (the
"Purchaser"), a Delaware corporation and wholly owned indirect subsidiary of
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Parent"), to
purchase all of the outstanding shares of common stock, par value $.01 per share
("Shares"), of Pacific Rehabilitation & Sports Medicine, Inc., a Delaware
Corporation (the "Company"), at a price of $6.50 per Share, net to the seller in
cash and without interest. Also enclosed is the Schedule 14D-9 of the Company,
containing the recommendation of a majority of the Company's Board of Directors
that the holders of Shares accept the Offer and tender their Shares pursuant to
the Offer.
WE ARE THE HOLDER OF RECORD OF SHARES HELD 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 SPECIMEN LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Please note the following:
1. The tender price is $6.50 per Share, net to you in cash and without
interest.
2. The Offer and withdrawal rights expire at 12:00 Midnight, New York
City time, on Friday, December 20, 1996, unless the Offer is extended.
3. The Offer is conditioned upon, among other things, there being
validly tendered, and not properly withdrawn prior to the expiration of the
Offer, Shares which, together with any Shares owned by Parent and its
affiliates, represent at least majority of the Shares outstanding on a fully
diluted basis. See "THE OFFER -- Certain Conditions to the Offer" of the
Offer to Purchase for certain other conditions to the Offer.
4. A majority of the Company's Board of Directors has determined that
the Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company and has approved the Offer and the Merger
Agreement and recommends that the Company's stockholders accept the Offer
and tender their Shares pursuant to the Offer.
5. Tendering stockholders of the Company will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 7 of
the Letter of Transmittal, Share transfer taxes on the purchase of Shares by
the Purchaser pursuant to the Offer.
<PAGE>
If you wish to have us tender all or any 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 last page of this letter. An envelope to
return your instructions to us is enclosed. If you authorize tender of your
Shares, all such Shares will be tendered unless otherwise specified on the last
page of this letter. Your instructions should be forwarded to us in ample time
to permit us to submit a tender on your behalf by the expiration of the Offer.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, stockholders of the Company in any jurisdiction in which the making
of the Offer or acceptance thereof would not be in compliance with the laws of
such jurisdiction. In any jurisdiction the securities laws or blue sky laws of
which require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of the Purchaser by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated November 22, 1996, and the related Letter of Transmittal, in
connection with the offer by Horizon PRSM Corporation, a wholly owned indirect
subsidiary of Horizon/CMS Healthcare Corporation, to purchase all outstanding
shares of common stock, par value $.01 per share ("Shares"), of Pacific
Rehabilitation & Sports Medicine, Inc.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
<TABLE>
<S> <C> <C>
Number of Shares to be tendered: SIGN HERE
Shares*
-------------------- ---------------------------------------
Signature(s)
---------------------------------------
---------------------------------------
---------------------------------------
Please print name(s) and address(s) here
Dated:
------------------------------ ---------------------------------------
Taxpayer identification or
Social Security Number(s)
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE>
EXHIBIT (A)(5)
<PAGE>
Pacific Rehabilitation & Sports Medicine, Inc.
One SW Columbia Street
Suite 900
Portland, OR 97258
NEWS RELEASE Contact: Bill Barancik
- ------------ President and Chief
FOR IMMEDIATE RELEASE Executive Officer
or
William A. Norris
Executive VP-Finance
Pacific Rehabilitation &
Sports Medicine, Inc.
(503) 222-4191
PACIFIC REHABILITATION & SPORTS MEDICINE, INC. ANNOUNCES
DISCUSSIONS CONCERNING POSSIBLE MERGER WITH HORIZON/CMS
HEALTHCARE CORPORATION
Portland, Oregon (October 30, 1996) -- Pacific Rehabilitation & Sports
Medicine, Inc. (Nasdaq: PRHB) today announced that it is in discussions
concerning the possibility of a merger of the Company with Horizon/CMS
Healthcare Corporation (NYSE:HHC) at a price of $6.50 per share in cash.
The Company emphasized that discussions were on-going and that no
definitive agreement has been reached with respect to any terms of a
transaction. There is no assurance that any definitive agreement will be
reached, or if a definitive agreement is reached, that the potential merger
will be successfully completed. Any definitive agreement, if reached, will be
subject to the satisfaction of regulatory and other conditions.
Pacific Rehab provides outpatient physical therapy services at 70
outpatient rehabilitation clinics in Washington, Oregon, California, Hawaii,
Nevada, Arizona, Texas, Mississippi, Florida and Maryland.
<PAGE>
EXHIBIT (A)(6)
<PAGE>
[Logo]
Horizon/CMS Healthcare Corporation to Acquire Pacific Rehabilitation &
Sports Medicine, Inc.
ALBUQUERQUE, N.M., Nov. 18 /PRNewswire/ -- Horizon/CMS Healthcare
Corporation ("Horizon/CMS") (NYSE: HHC) and Pacific Rehabilitation & Sports
Medicine, Inc. ("Pacific Rehab") (Nasdaq: PRHB) jointly announced today that
they have entered into a definitive merger agreement pursuant to which
Horizon/CMS will offer to purchase all of the outstanding shares of common
stock of Pacific Rehab for $6.50 per share in cash. Following the completion
of the offer and subject to the terms and conditions set forth in the
agreement, any shares of common stock not purchased in the tender offer will
be acquired at the same price in a cash merger. The consummation of the
tender offer and the merger are conditioned upon, among other things, the
valid tender of a majority of the outstanding shares of common stock of
Pacific Rehab.
Horizon/CMS intends to commence the offer no later than November 22,
1996. The full terms and conditions of the offer, as well as important
related information, will be contained in the parties' filings with the
Securities and Exchange Commission and mailings to Pacific Rehab stockholders.
Questions relating to the tender offer should be directed to Georgeson &
Company, Inc., (800-223-2064) information agent for the tender offer.
The aggregate price of the transaction is approximately $56.0 million
plus acquired debt.
Commenting on the proposed acquisition, Horizon/CMS Healthcare
Corporation's Chairman and CEO Neal Elliott stated, "We are very enthusiastic
about the acquisition of Pacific Rehab, which will significantly expand our
extensive network of outpatient rehabilitation centers. The acquisition will
increase Horizon/CMS's outpatient rehabilitation clinic network to 290
locations, enhance our market penetration of outpatient services in existing
markets such as Nevada, Washington and Florida and open several new markets,
including Oregon, Maryland, Mississippi and Hawaii to Horizon/CMS."
Paul Zimmerman, President of Eagle Rehab, Horizon/CMS's wholly owned
outpatient rehabilitation subsidiary added, "The acquisition will enable us
to broaden our base of patient referrals. It will also provide operational
synergies and cost savings and will enhance our ability to compete
effectively for insurer and managed care contracts."
Pacific Rehab provides outpatient physical therapy services at 66
outpatient rehabilitation clinics in ten states. Pacific Rehab's annualized
revenues, based on the nine months ended September 30, 1996, are
approximately $38.5 million. Pacific Rehab derived over 90% of its revenues
from insurance and private payment sources during such quarter.
- more -
<PAGE>
-2-
Smith Barney, Inc. has acted as financial advisor to Pacific Rehab in
connection with the proposed transaction.
Horizon/CMS Healthcare Corporation is a leading provider of post acute
health care services and long-term care services, principally in the Midwest,
Southwest and Northeast regions of the United States. At the completion of
this transaction Horizon/CMS will provide specialty health care services
through 37 acute rehabilitation hospitals in 16 states, (2,065 beds), 58
specialty hospitals and subacute care units in 17 states (1,925 beds), 290
patient rehabilitation clinics in 25 states and 1,800 rehabilitation therapy
contracts in 35 states. Horizon/CMS provides long-term care services through
121 owned or leased facilities (15,147 beds) and 142 managed facilities
(15,798 beds) in a total of 18 states. Other medical services offered by the
Company include pharmacy, laboratory, Alzheimer's care, physician practice
management, non-invasive medical diagnostic services, assisted living, home
respiratory, home infusion therapy, and hospice care, and CompHealth, a
physician/locum tenens services business which provides temporary physician
and allied health professional staffing services throughout the United States.
Certain of the matters discussed in this press release contain
forward-looking statements that involves risks and uncertainties. Although
Horizon/CMS believes that these assumptions accompanying such forward-looking
statements are reasonable, they cannot give any assurance that expected
results will occur. A significant variation between actual results and any of
such assumptions may cause actual results to differ materially from
expectations.
(Visit Horizon/CMS Healthcare Corporation on the World Wide Web at
hhtp: \\www.Horizon/CMS.com)
SOURCE Horizon/CMS Healthcare Corporation
-0- 11/18/96
/CONTACT: Michael H. Seeliger, Vice President, Investor and Corporate
Relations, 505-878-6351; or William A. Norris, Executive Vice President
Finance and Administration. 503-222-4191/
(HHC PRHB)
-0-
<PAGE>
EXHIBIT (A)(7)
<PAGE>
NOTICE OF GUARANTEED DELIVERY
of
Tender of Shares of Common Stock
of
PACIFIC REHABILITATION & SPORTS MEDICINE, INC.
This Notice of Guaranteed Delivery or one substantially in the form hereof
must be used to accept the Offer (as defined below) if certificates for shares
of common stock, par value $0.01 per share ("Shares"), of Pacific Rehabilitation
& Sports Medicine, Inc., a Delaware corporation, are not immediately available
or time will not permit all required documents to reach the Depositary prior to
the Expiration Time (as defined in "THE TENDER OFFER--Terms of the Offer" in the
Offer to Purchase (as defined below)) of the Offer or the procedure for
book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram
or facsimile transmission to the Depositary. See "THE TENDER OFFER--Procedures
for Tendering Shares" in the Offer to Purchase.
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
Facsimile: (201) 329-8936
(for Eligible Institutions Only)
Confirm by Telephone: (201) 296-4209
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C.
Reorganization Department Reorganization Department
120 Broadway - 13th Floor P.O. Box 798, Midtown Station
New York, NY 10271 New York, NY 10018
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN THAT LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
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.
The Eligible Institution which completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary in the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Horizon PRSM Corporation, a Delaware
corporation (the "Purchaser"), upon the terms and subject to the conditions in
the Offer to Purchase dated November 22, 1996 (the "Offer to Purchase") and in
the related Letter of Transmittal (which together with the Offer to Purchase
constitutes the "Offer"), receipt of each of which is hereby acknowledged,
________________ Shares pursuant to the guaranteed delivery procedure set forth
in "THE TENDER OFFER--Procedures for Tendering Shares" in the Offer to Purchase.
<TABLE>
<S> <C> <C>
Signature(s): If shares will be delivered by book-entry
----------------------------- transfer, provide the following information:
-----------------------------
Name(s) of Account Number:
Record Holder(s): ----------------------------
--------------------------
Please type or Print
Date:
------------------------------------------- --------------------------------------
Certificate Nos.
(if available):
----------------------------
Address:
-----------------------------------
-------------------------------------------
Zip Code
Area Code and
Tel. No.:
----------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in the "THE TENDER
OFFER--Procedures for Tendering Shares" in the Offer to Purchase), hereby (i)
represents that the above-named persons are deemed to own the Shares tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 14e-4"), (ii) represents that such
tender of Shares complies with Rule 14e-4 and (iii) guarantees either delivery
to the Depositary of the certificates representing the Shares tendered hereby in
proper form for transfer or confirmation of the book-entry transfer of such
Shares into the Depositary's account at The Depositary Trust Company, together
with a Letter of Transmittal (or a facsimile copy thereof), properly completed
and duly executed, and any required signature guarantee and any other documents
required by the Letter of Transmittal, within three Nasdaq Stock Market trading
days after the date hereof.
<TABLE>
<S> <C> <C>
Name of Firm:
------------------------------ -------------------------------------------
Authorized Signature
Address: Name
----------------------------------- ---------------------------------------
Please Print
-------------------------------------------
Zip Code Title:
Area Code and -------------------------------------
Tel. No.: Date:
---------------------------------- --------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL
<PAGE>
EXHIBIT (A)(8)
<PAGE>
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
NOVEMBER 22, 1996, AND THE RELATED LETTER OF TRANSMITTAL AND ANY AMENDMENTS OR
SUPPLEMENTS THERETO AND IS BEING MADE TO ALL HOLDERS OF SHARES. THE
PURCHASER IS NOT AWARE OF ANY STATE WHERE THE MAKING OF THE OFFER IS
PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY STATE
STATUTE. IF THE PURCHASER BECOMES AWARE OF ANY VALID STATE STATUTE
PROHIBITING THE MAKING OF THE OFFER, THE PURCHASER WILL MAKE A GOOD
FAITH EFFORT TO COMPLY WITH SUCH STATUTE OR SEEK TO HAVE SUCH
STATUTE DECLARED INAPPLICABLE TO THE OFFER. IF, AFTER SUCH GOOD
FAITH EFFORT, THE PURCHASER CANNOT COMPLY WITH ANY APPLICABLE
STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH
STATE. IN THOSE JURISDICTIONS WHERE THE LAWS REQUIRE THE
OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE
PURCHASER BY ONE OR MORE REGISTERED BROKERS OR DEALERS
LICENSED UNDER THE LAWS OF SUCH JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PACIFIC REHABILITATION
& SPORTS MEDICINE, INC.
AT
$6.50 NET PER SHARE
BY
HORIZON PRSM CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
HORIZON/CMS HEALTHCARE CORPORATION
Horizon PRSM Corporation (the "Purchaser"), an indirect wholly owned
subsidiary of Horizon/CMS Healthcare Corporation ("Parent"), is offering to
purchase all outstanding shares of Common Stock, par value $.01 per share
("Shares"), of Pacific Rehabilitation & Sports Medicine, Inc. (the "Company") at
a price of $6.50 per share, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
November 22, 1996 (the "Offer to Purchase") and in the related Letter of
Transmittal (which together constitute the "Offer"). Tendering stockholders who
hold Shares in their own name will not be charged brokerage fees or commissions
or, subject to Instruction 7 of the Letter of Transmittal, transfer taxes as a
result of their sale of Shares pursuant to the Offer. The purpose of the Offer
is to acquire for cash as many outstanding Shares as possible as a first step in
acquiring the entire equity interest in the Company. 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, DECEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered, and not properly withdrawn prior to the expiration of the Offer,
Shares which, together with any Shares owned by Parent and its affiliates,
represent at least a majority of the Shares outstanding on a fully diluted basis
(the "Minimum Tender Condition"). As of November 15, 1996, there were 9,787,250
Shares outstanding on a fully diluted basis. The Purchaser and its affiliates
owned no Shares at such date.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 17, 1996 (the "Merger Agreement") among the Company, Parent and the
Purchaser. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and the satisfaction of certain
other conditions, the Purchaser will be merged with and into the Company (the
"Merger"). As a result of the Merger, the Company will become an indirect wholly
owned subsidiary of Parent and each Share issued and outstanding immediately
prior to the effective time of the Merger (other than Shares held by the
Purchaser, held in the treasury of the Company or held by any wholly owned
subsidiary of the Purchaser or the Company, all of which will be canceled
without any payment being made with respect thereto, and other than Shares held
by stockholders who properly exercise and perfect appraisal rights under
Delaware law) will be converted into the right to receive $6.50 in cash, or such
higher price as shall have been paid in the Offer.
A majority of the Board of Directors of the Company has determined that the
Offer and the Merger are fair to, and in the best interests of, the stockholders
of the Company and has approved the Offer and the Merger Agreement and
recommends that the Company's stockholders accept the Offer and tender their
Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to the Purchaser and
not properly withdrawn if, as and when the Purchaser gives oral or written
notice to the ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of its
acceptance of such Shares for payment pursuant to the Offer. Payment for Shares
accepted for payment pursuant to the Offer will be made through the Depositary,
which will act as agent for the tendering stockholders for the purpose of
receiving payment from the Purchaser and transmitting payments to tendering
stockholders. Under no circumstances will interest be paid by the Purchaser on
the purchase price of Shares, regardless of any delay in making such payment. In
all cases, payment for
<PAGE>
Shares purchased pursuant to the Offer will be made only after timely receipt by
the Depositary of (i) certificates for such Shares (or timely confirmation of
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility (as defined in the Offer to Purchase) pursuant to the
procedures set forth in "THE TENDER OFFER--Procedures for Tendering Shares" in
the Offer to Purchase), (ii) a properly completed and duly executed Letter of
Transmittal or facsimile thereof and (iii) any other documents required by the
Letter of Transmittal.
The Offer shall expire at 12:00 midnight, New York City time, on Friday,
December 20, 1996, unless the Offer is extended by the Purchaser. The Purchaser
expressly reserves the right (but will not be obligated), in its sole
discretion, subject to the terms of the Merger Agreement, to extend at any time,
or from time to time, the period during which the Offer is open by giving oral
or written notice of such extension to the Depositary and by making a public
announcement of such extension not later than 9:00 a.m. New York City time on
the next business day after the date on which the Offer was previously scheduled
to expire. The Purchaser also expressly reserves the right, subject to the
limitations set forth in the Merger Agreement, at any time or from time to time,
to amend the Offer in any respect by public announcement.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth in the Offer to Purchase at any time prior to the
expiration of the Offer, and, unless theretofore accepted for payment and paid
for by the Purchaser, may also be withdrawn after January 20, 1997. For a
withdrawal of Shares to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of the Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and, if the
certificates representing such Shares have been delivered or otherwise
identified to the Depositary, the name in which the certificates representing
such Shares to be withdrawn are registered, if different from that of the person
tendering 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 serial numbers shown on the particular
certificates evidencing such Shares to be withdrawn must be submitted and,
unless such Shares have been tendered for the account of an Eligible Institution
(as defined in "THE TENDER OFFER--Procedures for Tendering Shares" in the Offer
to Purchase), the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in "THE TENDER OFFER--Procedures for
Tendering Shares" in the Offer to Purchase, any notice of withdrawal must
identify and specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares and must otherwise
comply with such Book-Entry Transfer Facility's procedures. Any Shares properly
withdrawn will be deemed to be not validly tendered for the purposes of the
Offer. Withdrawn Shares may be re-tendered by following any of the procedures
described in "THE TENDER OFFER-- Procedures for Tendering Shares" in the Offer
to Purchase at any subsequent time prior to the expiration of the Offer. All
questions as to the form and validity (including name and timeliness of receipt)
of notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination shall be final and binding.
The Offer is subject to certain conditions set forth in the Offer to
Purchase. If any such condition is not satisfied, the Purchaser may (a)
terminate the Offer and not accept for payment or pay for any Shares and return
all untendered Shares to tendering stockholders, (b) waive all the unsatisfied
conditions (other than the Minimum Tender Condition) and accept for payment and
pay for all Shares validly tendered prior to the expiration of the Offer or (c)
extend the Offer and, subject to the right of stockholders to withdraw Shares
until the expiration of the Offer, retain the Shares that have been tendered
during the period or periods for which the Offer is extended.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under
Regulation 14D of the 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 related Letter of Transmittal
and other material will be mailed to record holders of Shares and 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 the beneficial owners of
Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT STOCKHOLDERS ARE URGED TO REVIEW CAREFULLY BEFORE
MAKING ANY DECISION WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number as set forth below. Additional copies
of the Offer to Purchase, the related Letter of Transmittal and other tender
offer materials may be obtained from the Information Agent as set forth below,
and will be furnished promptly at the Purchaser's expense. No fees or
commissions will be payable to brokers, dealers or other persons (other than the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
CALL TOLL FREE: 1-800-223-2064
November 22, 1996
<PAGE>
EXHIBIT (A)(10)
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER INDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER 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 number to
give the payer.
<TABLE>
<S> <C>
- --------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- --------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account The minor (2)
of a minor (Uniform
Gift to Minors Act)
5. Adult and minor The adult or, if the
(joint account) minor is the only
contributor, the
minor(1)
6. A. The usual The grantor-trustee(1)
revocable
savings trust
account (grantor
is also trustee)
B. So-called trust The actual owner(1)
account that is
not a legal or
valid trust
under State law
7. Sole proprietorship The owner(4)
account
<CAPTION>
- --------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- --------------------------------------------------
<S> <C> <C>
8. Sole proprietorship The owner(4)
account
9. A valid trust, The legal entity (Do
estate, or pension not furnish the
trust identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization
account
12. Partnership account The partnership
held in the name of
the business
13. A broker or The broker or nominee
registered nominee
14. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or
prison) that
receives
agricultural
program payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner, but you may also enter your business or "doing
business as" names. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, 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, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP
WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under
Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or
an individual retirement plan.
- The United States or any agency or instrumentality
thereof.
- A State, the District of Columbia, a possession of
the United States, or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a
foreign government, or any agency or instrumentality thereof.
- An international organization or any agency or
instrumentality thereof.
- A registered dealer in securities or commodities
registered in the United States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under
Section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-
exempt trust described in Section 4947(a)(1) of the Code.
- An entity registered at all times under the
Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to
withholding under Section 1441 of the Code.
- Payments to partnerships not engaged in a trade or
business in the United States and which have at least one nonresident
partner.
- Payments of patronage dividends where the
amount received is not paid in money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by
individuals. Note: You may be subject to backup withholding if this interest is
$600 or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-
interest dividends under Section 852 of the Code).
- Payments described in Section 6049(b)(5) of the
Code to nonresident aliens.
- Payments on tax-free covenant bonds under
Section 1451 of the Code.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6042, 6044, 6045, 6050A and 6050N of the Code.
PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients of
dividends, interest, or other payments to give taxpayer identification numbers
to payers who must report the payments to IRS. IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1993, payers
must generally withhold 31% of taxable interest, dividends, 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) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your 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.--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)(4)
<PAGE>
EXECUTION COPY
THIRD AMENDMENT dated as of November 6, 1996 (this
"THIRD AMENDMENT"), to the Amended and Restated Credit
Agreement dated as of September 26, 1995 (as amended to
the date hereof, the "AMENDED CREDIT AGREEMENT"), among
Horizon/CMS Healthcare Corporation, a Delaware corporation
("HORIZON"), Continental Medical Systems, Inc., a
Delaware corporation ("CONTINENTAL"), and together with
Horizon, the "BORROWERS"), the lenders listed on the
signature pages thereto (the "LENDERS") and NationsBank
of Texas, N.A., as agent for the Lenders (in such
capacity, the "AGENT") and as issuing bank (in such
capacity, the "ISSUING BANK").
The parties hereto have agreed, subject to the terms and conditions
hereof, to amend the Amended Credit Agreement as provided herein.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Amended Credit Agreement (the Amended
Credit Agreement, as amended and waived by, and together with, this Third
Amendment, and as hereinafter amended, modified, extended or restated from
time to time, being called the "AMENDED AGREEMENT").
Accordingly, the parties hereto hereby agree as follows:
SECTION 1.01. AMENDMENTS TO SECTION 1.01 AND RELATED AMENDMENT TO
COMPLIANCE CERTIFICATE. (a) The definition of "Total Funded Debt" in Section
1.01 of the Amended Agreement is hereby amended by adding the following
phrase after the words "account party" in cause (b) thereof:
", but excluding letters of credit issued in support of facility
lease agreements, to the extent that the costs associated with such
lease arrangements for any period are fully reflected in Rental Expense
of such person for such period"
(b) The form of Compliance Certificate attached as Exhibit G to the
Amended Agreement is hereby amended by adding the following language at the
end of Line I.3. of Exhibit G:
", but excluding letters of credit issued in support of facility
lease agreements, to the extent that the costs associated with such
lease agreements for such period are fully reflected in Rental Expense
for such period"
(c) The definition of "Rental Expense" in Section 1.01 of the Amended
Agreement is hereby amended by adding the following phrase after the words
"Consolidated Subsidiaries":
"(net of the aggregate amount of fixed and contingent rentals
receivable by such person and its Consolidated Subsidiaries)"
<PAGE>
SECTION 1.02. AMENDMENT TO SECTION 6.04 and Adoption of Related Schedule.
(a) Section 6.04 of the Amended Agreement is hereby amended by deleting the
period at the end of paragraph (1) thereof and adding "; and" in lieu thereof
and by adding the following paragraph immediately after paragraph (1) thereof:
"(m) investments described on Schedule 6.04(a) hereto."
(b) Schedule 6.04(a) attached to this Third Amendment is hereby adopted as
Schedule 6.04(a) for purposes of the Amended Agreement.
SECTION 1.03. AMENDMENTS TO SECTION 6.05 AND ADOPTION OF RELATED SCHEDULE.
(a) Section 6.05(a) of the Amended Agreement is hereby amended by deleting
the period at the end of clause (D) thereof and adding "; and" in lieu
thereof and by adding the following clause immediately after clause (D)
thereof:
"(E) dispositions described on Schedule 6.05(b) hereto, so long as
100% of the Net Proceeds thereof remaining after the repayment of
existing debt, if any, relating to the assets being disposed of in such
described dispositions shall be promptly applied to the prepayment of
outstanding Loans, but shall not be applied to reduce the Commitments."
(b) Schedule 6.05(b) attached to this Third Amendment is hereby adopted
as Schedule 6.05(b) for purposes of the Amended Agreement.
SECTION 1.04. AMENDMENTS TO SCHEDULE 6.05(a) AND RELATED AMENDMENTS TO
SECTION 3.07 AND 6.02. (a) Schedule 6.05(a) attached to the Second
Amendment to the Amended Agreement is hereby amended by adding the following
information:
"Notwithstanding anything to the contrary set forth herein, the
following leased facilities will be subleased to GranCare, Inc. under
terms that mirror the terms of the master lease and that require the
sublessee to assume all the obligations of the lessee under the master
lease:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
# ANNUAL LEASE
FACILITY NAME AND ADDRESS BEDS LANDLORD RENT TERMINATION
- --------------------------------------------------------------------------------
Canterbury Villa of Alliance
1785 S. Preshley Avenue Alliance Associates
Alliance, OH 44601 100 Ltd. Partnership $ 466,000 02/13/00
- --------------------------------------------------------------------------------
Colonial Manor
196 Colonial Drive Little Forest Medical
Youngstown, OH 44505 100 Center $ 164,250 12/31/04
- --------------------------------------------------------------------------------
Wyant Woods Care Center
200 Wyant Rd.
Akron, OH 44313 200 HRPT $1,045,400 5/31/97
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
# ANNUAL LEASE
FACILITY NAME AND ADDRESS BEDS LANDLORD RENT TERMINATION
- --------------------------------------------------------------------------------
Horizon Village Nursing &
Rehab Center
2473 North Road NE Nationwide Health
Warren, OH 44483 222 Properties $ 943,332 10/31/97
- --------------------------------------------------------------------------------
Heritage Care Center
100 Rogers Lane Cardinal Nursing
Shelby, OH 44875 50 Home, Inc. $ 87,300 06/30/00
- --------------------------------------------------------------------------------
Imperial Skilled Care Center
4121 Tod Avenue Little Forest Medical
Warren, OH 44485 121 Center $ 200,385 12/31/04
- --------------------------------------------------------------------------------
Boardman Community Care
Center
5665 South Avenue Nationwide Health
Youngstown, OH 44512 221 Properties $ 843,756 10/31/97
- --------------------------------------------------------------------------------
Ridge Crest Care Center
1926 Ridge Avenue Warren Assoc. Ltd.
Warren, OH 44484 100 Partnership $ 416,400 03/22/99
- --------------------------------------------------------------------------------
Horizon Meadows
1495 S. Preshley Road Nationwide Health 12/15/98
Alliance, OH 44601 78 Properties $ 286,968 10/31/97
- --------------------------------------------------------------------------------
Rosewood Manor
935 Rosewood Drive Nationwide Health
Galion, OH 44833 90 Properties $ 350,520 10/31/97
- --------------------------------------------------------------------------------
Village Care Center
925 Wagner Avenue Cardinal Nursing
Galion, OH 44833 58 Home, Inc. $ 121,500 06/30/00
- --------------------------------------------------------------------------------
Village Square Nursing Center
7787 Staley Rd. Village Square
East Orwell, OH 44076 50 Nursing Center, Inc. $ 186,000 08/31/02
- --------------------------------------------------------------------------------
Hudson Elms Nursing Home
563 W. Streetsboro Rd.
Hudson, OH 44236 50 Hudson Care Corp. $ 180,000 03/31/01
- --------------------------------------------------------------------------------
Auburn Manor
375 Glenn Avenue
Wash. Court House, OH Nationwide Health
43160 100 Properties $ 393,132 09/30/01
- --------------------------------------------------------------------------------
Janesville Health Care Center
119 S. Parker Drive
Janesville, WI 53545 104 Mi-Conn Associates $ 362,400 03/31/06
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
# ANNUAL LEASE
FACILITY NAME AND ADDRESS BEDS LANDLORD RENT TERMINATION
- --------------------------------------------------------------------------------
Greenery Rehabilitation Center
99 Chestnut Hill Avenue
Brighton, MA 02135 201 HRPT $3,109,926 06/30/05
- --------------------------------------------------------------------------------
Greenery Rehab & Skilled
Nursing Center of Hyannis
89 Lewis Bay Road
Hyannis, MA 02601 142 HRPT $1,040,800 06/30/05
- --------------------------------------------------------------------------------
Greenery Rehab & Skilled
Nursing Ctr. of Middleboro
23 Isaac Street, P.O. Box 1330
Middleboro, MA 02346 124 HRPT $2,131,243 06/30/05
- --------------------------------------------------------------------------------
Greenery Extended Care
Center of North Andover
75 Park Street
North Andover, MA 01845 122 HRPT $1,567,473 06/30/05
- --------------------------------------------------------------------------------
Greenery Extended Care
Center
59 Acton Street
Worcester, MA 01604 173 HRPT $2,198,253 06/30/05
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) Section 3.07(c) of the Amended Agreement is hereby amended by deleting
the second sentence thereof and adding the following in lieu thereof:
"Each of Horizon and the Subsidiaries enjoys peaceful and undisturbed
possession under all material leases to which it is a party, except for
facilities which are listed on Schedule 6.05(a) as having been subleased
to GranCare, Inc. under terms that mirror the terms of the master lease
and that require the sublessee to assume all the obligations of the
lessee under the master lease. GranCare, Inc. has complied in all
material respects with all obligations under such subleases."
(c) Section 6.02 of the Amended Agreement is hereby amended by adding the
following phrase immediately prior to the semicolon at the end of paragraph
(b) thereof:
"and subleases of facilities which are listed on Schedule 6.05(a) as
having been subleased to GranCare, Inc., provided that the terms of each
such sublease mirrors the terms of the master lease and require the
sublessee to assume all the obligations of the lessee under the master
lease"
SECTION 1.05. AMENDMENT TO SECTION 6.06. Section 6.06 is hereby amended by
(a) deleting the "and" at the end of paragraph (v) of the proviso thereof,
(b) deleting the period at the end of paragraph (vi) of the proviso thereof,
(c) substituting in lieu thereof "; and" and (d) adding the following
paragraph immediately following paragraph (vi) of the proviso thereof:
4
<PAGE>
"(vii) so long as no Default or Event of Default has occurred and is
continuing at the time thereof or would occur immediately after giving
effect thereto, Horizon may repurchase shares of its Common Stock for
cash in an aggregate amount of up to $25,000,000.
SECTION 1.06. AMENDMENT TO SECTION 6.19(d). The table in Section 6.19(d)
is hereby amended (a) with respect to the second quarter of fiscal year 1997,
by deleting the ratio of "5.00:1.00" and by substituting in lieu thereof the
ratio of "5.25:1.00" and (b) with respect to the fourth quarter of fiscal
year 1997, by deleting the ratio of "4.50:1.00" and by substituting in lieu
thereof the ratio of "5.00:1.00".
SECTION 1.07. WAIVER. On and as of (but not before) the Third Amendment
Effective Date (as defined in Section 1.09), the failure of the Borrower to
comply with paragraph (B) of the proviso to Section 6.04(e) of the Amended
Agreement solely as a result of the acquisition of outstanding common stock
of Pacific Rehabilitation & Sports Medicine, Inc. ("PRSM") through a tender
offer and, ultimately, the merger of Horizon PRSM Corporation with and into
PRSM, with PRSM becoming a Wholly-Owned Subsidiary of Eagle Rehab Corporation
(a Wholly-Owned Subsidiary of Horizon) for aggregate consideration of up to
$78,000,000 shall be permanently waived. The preceding sentence shall be
limited precisely as written.
SECTION 1.08. REPRESENTATIONS AND WARRANTIES. The Borrowers hereby
represent and warrant to the Agent and the Lenders, as follows:
(a) The representations and warranties set forth in Article III of
the Amended Agreement, and in each other Loan Document, are true and
correct in all material respects on and as of the date hereof and on and
as of the Third Amendment Effective Date (as defined below) with the
same effect as if made on and as of the date hereof or the Third
Amendment Effective Date, as the case may be, except to the extent such
representations and warranties expressly relate solely to an earlier
date.
(b) Each of the Borrowers, the Subsidiary Pledgors and the Subsidiary
Guarantors is in compliance with all the terms and conditions of the
Amended Agreement and the other Loan Documents on its part to be
observed or performed and no Default or Event of Default has occurred or
is continuing under the Amended Agreement.
(c) The execution, delivery and performance by each of the Borrowers
of this Third Amendment have been duly authorized by such party.
(d) This Third Amendment constitutes the legal, valid and binding
obligation of each of the Borrowers, enforceable against it in
accordance with its terms.
(e) The execution, delivery and performance by each of the Borrowers
of this Third Amendment (i) do not conflict with or violate (A) any
provision of law, statute, rule or regulation, or of the certificate of
incorporation or by-laws of either of the Borrowers, (B) any order of
any Governmental Authority or
5
<PAGE>
(C) any provision of any indenture, agreement or other instrument to
which either of the Borrowers is a party or by which it or any of its
property may be bound and (ii) do not require any consents under, result
in a breach of or constitute (with notice or lapse of time or both) a
default under any such indenture, agreement or instrument.
SECTION 1.09. EFFECTIVENESS. This Third Amendment shall become effective
only upon satisfaction of the following considerations precedent (the first
date upon which each such condition has been satisfied being herein called
the "THIRD AMENDMENT EFFECTIVE DATE"):
(a) The Agent shall have received duly executed counterparts of this
Third Amendment which, when taken together, bear the authorized
signatures of the Borrowers and the Required Lenders.
(b) The Required Lenders shall be satisfied that the representations
and warranties set forth in Section 1.08 are true and correct on and as
of the Third Amendment Effective Date and that no Default or Event of
Default has occurred or is continuing.
(c) There shall not be any action pending or any judgment, order or
decree in effect which, in the judgment of the Required Lenders or their
counsel, is likely to restrain, prevent or impose materially adverse
conditions upon performance by any of the Borrowers, the Subsidiary
Pledgors or the Subsidiary Guarantors of its obligations under the Loan
Documents.
(d) Horizon shall have pledged and delivered to the Agent for the
benefit of the Secured Parties the promissory notes and preferred stock
described on Schedule 6.04(a), together with instruments of assignment
executed in blank.
(e) The Required Lenders shall have received such other documents,
legal opinions, instruments and certificates as they shall reasonably
request and such other documents, legal opinions, instruments and
certificates shall be satisfactory in form and substance to the Required
Lenders and their counsel. All corporate and other proceedings taken or
to be taken in connection with this Third Amendment and all documents
incidental thereto, whether or not referred to herein, shall be
satisfactory in form and substance to the Required Lenders and their
counsel.
(f) Horizon shall have paid in full all amounts due and payable as of
the Third Amendment Effective Date under the Amended Agreement and
upon receipt of the Required Lenders' consent shall have paid to the
Agent for the account of each Lender that consents to this Third
Amendment on or prior to November 6, 1996 an amendment fee in an
aggregate principal amount equal to (i) .06% of the consenting Lender's
Commitments, so long as a signature page to the Third Amendment executed
by such Lender is received by Fennebresque, Clark, Swindell & Hay by
5:00 p.m., Charlotte time, on November 4, 1996 and (ii) .04% of the
consenting Lender's Commitments, so long as a signature page to the
Third Amendment executed by such Lender is received
6
<PAGE>
by Fennebresque, Clark, Swindell & Hay after 5:00 p.m., Charlotte time,
on November 4, 1996 but by 5:00 p.m., Charlotte time, on November 6, 1996.
SECTION 1.10 APPLICABLE LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA MAY APPLY.
SECTION 1.11. EXPENSES. The Borrowers shall pay all reasonable
out-of-pocket expenses incurred by the Agent and the Required Lenders in
connection with the preparation, negotiation, execution, delivery and
enforcement of this Third Amendment, including, but not limited to, the
reasonable fees and disbursements of counsel. The agreement set forth in this
Section 1.11 shall survive the termination of this Third Amendment and the
Amended Agreement.
SECTION 1.12. COUNTERPARTS. This Third Amendment may be executed in any
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement.
SECTION 1.13. CREDIT AGREEMENT. Except as expressly set forth herein,
the amendments and waiver provided herein shall not by implication or
otherwise limit, constitute a waiver of, or otherwise affect the rights and
remedies of the Lenders, the Agent or the other Secured Parties under the
Amended Agreement or any other Loan Document, nor shall they constitute a
waiver of any Default or Event of Default, nor shall they alter, modify,
amend or in any way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Amended Agreement or any other Loan
Document. Each of the amendments and waiver provided herein shall apply and
be effective only with respect to the provisions of the Amended Agreement
specifically referred to by such amendment or waiver, as the case may be.
Except as expressly amended herein, the Amended Agreement shall continue in
full force and effect in accordance with the provisions thereof. As used in
the Amended Agreement, the terms "Agreement", "herein", "hereinafter",
"hereunder", "hereto" and words of similar import shall mean, from and after
the date hereof, the Amended Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed by their duly authorized officers, all as of the date
first above written.
HORIZON/CMS HEALTHCARE CORPORATION
as a Borrower
by /s/ ERNEST A. SCHOFIELD
---------------------------------------
Name: Ernest A. Schofield
Title: Senior Vice President
CONTINENTAL MEDICAL SYSTEMS, INC.
as a Borrower
by /s/ ERNEST A. SCHOFIELD
---------------------------------------
Name: Ernest A. Schofield
Title: Senior Vice President
NATIONSBANK OF TEXAS, N.A. as Agent, as
Issuing Bank and as a Lender
by /s/ THOMAS BLAKE
---------------------------------------
Name: Thomas Blake
Title: SVP
BANK OF AMERICA NT & SA, as Managing Agent
and as a Lender
by /s/ RUTH EDWARDS
---------------------------------------
Name: Ruth Edwards
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as a Lender
by /s/ ROBERT OSIESKI
---------------------------------------
Name: Robert Osieski
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
as Co-Agent and as a Lender
by /s/ F. TAVANGAR
---------------------------------------
Name: Farboud Tavangar
Title: Vice President
8
<PAGE>
LONG TERM CREDIT BANK OF JAPAN, LTD., LA
AGENCY, as Co-Agent and as a Lender
by /s/ T. MORGAN EDWARDS, II
---------------------------------------
Name: T. Morgan Edwards, II
Title: Deputy General Manager
PNC BANK, NATIONAL ASSOCIATION, as Co-Agent
and as a Lender
by /s/ KAREN M. GEORGE
---------------------------------------
Name: Karen M. George
Title: AVP
THE CHASE MANHATTAN BANK, as successor to
Chemical Bank, as a Lender
by /s/ DAWN LEE LUM
---------------------------------------
Name: Dawn Lee Lum
Title: Vice President
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, formerly First Interstate
Bank of Texas, N.A., as a Lender
by
---------------------------------------
Name:
Title:
TORONTO DOMINION (TEXAS) INC., as a Lender
by /s/ NEVA NESBITT
---------------------------------------
Name: Neva Nesbitt
Title: Vice President
BANKERS TRUST COMPANY, as a Lender
by /s/ PATRICIA HOGAN
---------------------------------------
Name: Patricia Hogan
Title: Vice President
9
<PAGE>
BANQUE PARIBAS, as a Lender
by /s/ ROSEMARY DAVIS
---------------------------------------
Name: ROSEMARY DAVIS
Title: Vice President
by /s/ LARRY ROBINSON
---------------------------------------
Name: Larry Robinson
Title: Vice President
BANQUE NATIONALE de PARIS, as a Lender
by
---------------------------------------
Name:
Title:
by
---------------------------------------
Name:
Title:
DEUTSCHE BANK AG, LOS ANGELES AND/OR
CAYMAN ISLANDS BRANCHES, as a Lender
by
---------------------------------------
Name:
Title:
by
---------------------------------------
Name:
Title:
MELLON BANK, N.A., as a Lender
by /s/ RICHARD A. LOPATT
---------------------------------------
Name: Richard A. Lopatt
Title: Vice President
FLEET NATIONAL BANK, f/k/a/ Fleet Bank of
Massachusetts, as a Lender
by
---------------------------------------
Name:
Title:
10
<PAGE>
KEYBANK NATIONAL ASSOCIATION as successor
to Society National Bank, as a Lender
by /s/ ANGELA G. MAGO
------------------------------------
Name: Angela G. Mago
Title: Vice President
SUNWEST BANK OF ALBUQUERQUE, N.A., as a
Lender and as Issuing Bank
by /s/ NANCY K. MADIGAN
------------------------------------
Name: Nancy K. Madigan
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY, as a Lender
by
------------------------------------
Name:
Title:
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
as a Lender
by /s/ JUAN A. CAZORLA
------------------------------------
Name: Juan A. Cazorla
Title: Vice President
THE NIPPON CREDIT BANK, LTD., LOS ANGELES
AGENCY, as a Lender
by /s/ BERNARDO E. CORREA-HENSCHKE
------------------------------------
Name: Bernardo E. Correa-Henschke
Title: Vice President & Senior Manager
THE SUMITOMO BANK, LIMITED, as a Lender
by /s/ TATFUO UEDA
------------------------------------
Name: Tatfuo Ueda
Title: General Manager
THE SUMITOMO TRUST & BANKING CO., LTD., NEW
YORK BRANCH, as a Lender
by /s/ SURAJ P. BHATIA
------------------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
Manager, Corporate Finance Dept.
11
<PAGE>
THE SUMITOMO BANK, LIMITED, CHICAGO
BRANCH, as a Lender
by /s/ KIRK L. STITES
------------------------------------
Name: Kirk L. Stites
Title: Vice President & Manager
by /s/ JULIE A. SCHELL
------------------------------------
Name: Julie A. Schell
Title: Vice President
THE MITSUBISHI BANK, LTD., LOS ANGELES
BRANCH, as a Lender
by
------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
as a Lender
by /s/ AKIJIRO YOSHINO
------------------------------------
Name: Akijiro Yoshino
Title: Executive Vice President,
Houston Office
NATIONSBANK, N.A., as a Lender
by /s/ CHRIS BARTON
------------------------------------
Name: Chris Barton
Title: VP
12
<PAGE>
EXHIBIT (C)(2)
<PAGE>
[LETTERHEAD]
October 24, 1996
Horizon/CMS Healthcare Corporation
6100 Indian School Rd., NE
PO Box 30278
Albuquerque, New Mexico 87190-0278
Attention: Mr. Charles Gonzales
Senior Vice President Subsidiary Operations
CONFIDENTIALITY AGREEMENT
Ladies and Gentlemen:
You (together with your subsidiaries and affiliates, "Recipient") have
expressed an interest in a possible transaction involving Pacific
Rehabilitation & Sports Medicine, Inc. (together with its subsidiaries and
affiliates, the "Company" and, such transaction, the "Transaction"). In
connection with Recipient's evaluation of such Transaction, Recipient has
requested certain information concerning the Company which is non-public,
confidential or otherwise proprietary in nature (such information, including,
without limitation, any notes, summaries, reports, analyses or other
materials derived in whole or in part from such information, the
"Confidential Information"). For purposes of this Agreement, the term
"Confidential Information" shall not include such portions of the
Confidential Information that (i) are or become generally available to the
public other than as a result of disclosure by Recipient or its
Representatives (as defined in paragraph 1 below), (ii) become available to
Recipient on a non-confidential basis from a source not subject to a
confidentiality obligation to the Company, whether by contractual, legal or
fiduciary obligation or otherwise, or (iii) were in Recipient's possession on
a non-confidential basis prior to the Company's disclosure to Recipient. As a
condition to being furnished the Confidential Information, Recipient agrees
as follows:
1. Recipient recognizes and acknowledges the competitive value of the
Confidential Information and the damage that could result from the
disclosure thereof to third parties. Accordingly, Recipient agrees to
treat the Confidential Information strictly confidential and Recipient
will not, without the prior written consent of the Company, disclose the
Confidential Information (or the fact that the Confidential Information
has been made available, that discussions or negotiations concerning a
Transaction are taking place or any of the terms, conditions or other
facts relating to a Transaction) to any third party in any manner
whatsoever, in whole or in part, except that Recipient may disclose the
Confidential Information to those of Recipient's directors, officers,
employees, agents, advisors or other representatives (collectively,
"Representatives") who need to know the Confidential Information for the
purpose of evaluating the proposed Transaction and who have agreed to
treat the Confidential Information in strict confidence in accordance
with the terms of this Agreement. All Confidential Information disclosed
to Recipient or its Representatives will be used by Recipient and its
Representatives solely for the purpose of evaluating the Transaction and
for no other purpose. Recipient agrees to be responsible for any breach
by any of its Representatives of the matters referred to herein.
2. Recipient hereby acknowledges that Recipient is aware (and that its
Representatives have been or will be advised) that the United States
securities laws restrict persons with material non-public information
about a company from purchasing or selling securities of such company or
from communicating such information to a third party under circumstances
in which it is reasonably foreseeable that such third party is likely to
purchase or sell such securities.
<PAGE>
3. Upon request of the Company or its Representatives, Recipient shall,
and shall cause its Representatives to, promptly return all Confidential
Information to the Company, without retaining any copies, summaries, or
extracts thereof. In the event of such request, all documents, analyses,
compilations, studies or other materials prepared by Recipient or its
Representatives that contain or reflect Confidential Information shall
be destroyed and no copy thereof shall be retained (such destruction to
be confirmed in writing by a duly authorized officer of Recipient, if
requested by the Company). Notwithstanding the return or destruction of
the Confidential Information, Recipient and its Representatives shall
continue to be bound by their obligations of confidentiality and other
obligations hereunder.
4. In the event that Recipient or its Representatives are requested or
become legally compelled (by oral questions, interrogatories, requests
for information or documents, subpoena, investigative demand or similar
process) to disclose any of the Confidential Information, Recipient and
its Representatives will promptly provide the Company with written
notice so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or
waiver. Recipient or its Representatives are, after consultation with
the Company, legally compelled to disclose such Confidential Information
to any tribunal or else stand liable for contempt or suffer other
censure or penalty. Recipient and its Representatives will furnish only
that portion of the Confidential Information which is legally required
to be furnished and each will exercise its best efforts to obtain
reliable assurance that confidential treatment will be accorded such
Confidential Information.
5. In the event that a Transaction is not consummated, neither Recipient
nor its Representatives shall, directly or indirectly, solicit for
employment any of the Company's senior management for a period of one
year from the date hereof, except with the prior written approval of the
Company. In addition, for a period of one year from the date hereof,
without the Company's prior written consent, Recipient shall not and
Recipient shall cause each of its Representatives not to, directly or
indirectly, alone or in concert with others, (a) acquire, offer to
acquire, or agree to acquire, by purchase, gift or otherwise, any
securities (as defined below), or propose (or request permission to
propose) or make any offer for any Transaction involving the Company or
its securities, (b) make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are used in the proxy rules
of the United States Securities and Exchange Commission), or advise or
seek to influence any person or entity with respect to the voting of, or
giving of consents with respect to, any securities, (c) form, join or in
any way participate in a "group" (as such term is used in Rule 13d-5 of the
Securities Exchange Act of 1934, as amended) or otherwise act to seek to
control or influence the management, board of directors, policies or
affairs of the Company, (d) make any request to waive or amend any
provision of this Agreement or otherwise take any action specified
herein if, in the sole judgment of the Company, such request may require
public disclosure by the Company or (e) encourage any third party to do
any of the foregoing. As used in this Agreement, the term "securities"
shall mean any securities of the Company and any direct or indirect
warrants, rights or options to acquire securities of the Company.
6. Recipient acknowledges, on behalf of itself and its Representatives,
that neither the Company nor its Representatives makes any
representations or warranties, express or implied, as to the accuracy or
completeness of the Confidential Information, that neither the Company
nor its Representatives shall have any liability whatsoever to Recipient
or its Representatives or any other person as a result of the use of the
Confidential Information or any errors therein or omissions therefrom by
virtue of this Agreement and that Recipient and its Representatives shall
assume full responsibility for all conclusions derived from the
Confidential Information. Only those representations and warranties that
are made in a final definitive agreement between the Company and
Recipient regarding a Transaction, when, as and if executed and subject
to such limitations and restrictions as may be specified therein, will
have any legal effect. Recipient further acknowledges and agrees that
the Company shall at all times have the right, in its sole discretion,
to reject any and all proposals made by Recipient and/or its
Representatives in respect of a Transaction, to terminate discussions
and negotiations with Recipient and its Representatives at any time and
to conduct any process for a Transaction involving the Company as it may
determine (including, without limitation, negotiating with any other
interested parties, entering into a definitive agreement with such
parties, or modifying any procedures relating to such process or
Transaction, in each case, without prior notice to Recipient or its
Representatives).
<PAGE>
7. Recipient hereby agrees that money damages would not be a sufficient
remedy for any breach or threatened breach of this Agreement by
Recipient or its Representatives and that the Company shall be entitled,
without the requirement of posting a bond or other security, to specific
performance and injunctive or other equitable relief in the event of
any such breach or threatened breach, in addition to all other remedies
available to the Company at law or in equity. In the event of litigation
relating to this Agreement, the prevailing party shall be entitled to
reimbursement for legal fees and expenses incurred in connection with
such litigation, including any appeals therefrom.
8. All inquiries for information about the Company or the Transaction
and any communications with the Company shall be made through: Brian P.
Gottlieb, Vice President, Smith Barney Inc. Neither Recipient nor its
Representatives will contact any third party with whom the Company has
a business or other relationship (including any employee, customer,
supplier, stockholder or creditor of the Company) in connection with a
Transaction without the prior written consent of the Company.
9. a. No failure or delay by the Company or its Representatives in
exercising any right, power of privilege under this Agreement shall
operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise of any right, power or
privilege hereunder. The invalidity or unenforceability of any
provisions of this agreement shall not affect the validity or
enforceability of the remaining provisions of this Agreement.
b. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF WASHINGTON, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS. RECIPIENT, ON BEHALF OF ITSELF AND ITS
REPRESENTATIVES, AGREES TO SUBMIT TO THE JURISDICTION OF ANY COURT OF
COMPETENT JURISDICTION LOCATED IN THE STATE OF WASHINGTON TO RESOLVE ANY
DISPUTE RELATING TO THIS AGREEMENT AND WAIVES THE RIGHT TO MOVE TO
DISMISS OR TRANSFER ANY SUCH ACTION BROUGHT IN ANY SUCH COURT ON THE
BASIS OF ANY OBJECTION TO PERSONAL JURISDICTION OR VENUE.
If Recipient agrees to the terms and conditions of this Agreement,
please indicate such acceptance by signing and returning to the undersigned
the duplicate copy of this Agreement. This Agreement may be executed in
several counterparts, all of which together shall constitute one and the same
agreement.
Very truly yours,
PACIFIC REHABILITATION & SPORTS
MEDICINE, INC.
By: /s/ Michael McArthur-Phillips
---------------------------------
Michael McArthur-Phillips
Senior Vice President
and General Counsel
Agreed to as of the date first written above:
Horizon/CMS Healthcare Corporation
By: /s/ Charles Gonzales
--------------------------------
Charles Gonzales
Senior Vice President
of Subsidiary Operations
