EFiled: Mar 4 2011 4:17PM EST Transaction ID 36287948 Case No. 6245- IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE PLUMBERS & PIPEFITTERS NATIONAL PENSION FUND, on Behalf of Itself and All Other Similarly Situated Shareholders of RehabCare Group, Inc., Case No. Plaintiff, v. HARRY E. RICH, JOHN H. SHORT, COLLEEN CONWAY-WELCH, CHRISTOPHER T. HJELM, ANTHONY S. PISZEL, SUZAN L. RAYNER, LARRY WARREN, THEODORE M. WIGHT, REHABCARE GROUP, INC., and KINDRED HEALTHCARE, INC., Defendants. VERIFIED CLASS ACTION COMPLAINT 1. Plaintiff Plumbers & Pipefitters National Pension Fund ( Plaintiff ), on behalf of itself and all other similarly situated public shareholders (the Class ) of RehabCare Group, Inc. ( RehabCare or the Company ), by its attorneys, makes the following allegations against RehabCare, the members of RehabCare s Board of Directors (the RehabCare Board or the Board ), and Kindred Healthcare, Inc. ( Kindred ) (collectively, the Defendants ), in support of Plaintiff s claims challenging Defendants conduct with regard to the proposed buyout of all of RehabCare s outstanding shares by Kindred (the Proposed Transaction ). The allegations are based on the personal knowledge of Plaintiff as to itself and on information and belief (including the investigation of counsel and review of publicly-available information) as to all other matters stated herein.
NATURE OF THE ACTION 2. This is a stockholder class action brought by Plaintiff on behalf of itself and the public shareholders of RehabCare against the Company, certain of its officers and directors, and Kindred to enjoin the Proposed Transaction. 3. On February 8, 2011, RehabCare and Kindred issued a joint press release disclosing that they had entered into a definitive Agreement and Plan of Merger (the Merger Agreement ), pursuant to which the Company would be acquired by Kindred for $1.3 billion, or approximately $35.18 per share, consisting of $26.00 in cash and a right to receive 0.471 shares of Kindred common stock (the Merger Price ). The joint press release also announced that the Proposed Transaction is expected to close on or about June 30, 2011, and has been unanimously approved by the boards of directors of both Kindred and RehabCare. 4. The Merger Price is inadequate and substantially undervalues RehabCare. While the Proposed Transaction is clearly a great deal for Kindred, it is equally clear that it is not a great deal for RehabCare shareholders. Kindred s stock closed at $25.00 per share on the day the transaction was announced, up $5.52 per share, or 28.3 percent, demonstrating the market s belief that the Proposed Transaction is a bargain for Kindred. The Proposed Transaction will turn Kindred into the largest post-acute healthcare services company in the United States with more than $6 billion in annual revenues and operations in 46 states. The added revenue would catapult Kindred from No. 477 on the Fortune 500 list into the top 360. 5. Because the Proposed Transaction is predominantly a cash deal, the RehabCare Board is required to maximize shareholder value as shareholders are being forever cashed-out of the majority of their investment in RehabCare. - 2 -
6. The Merger Price is also inadequate because RehabCare continues to have stellar revenue growth. RehabCare s total revenues have been steadily increasing, e.g., in the fourth quarter of 2010, total revenue increased to $339 million, and increased by 39 percent in comparison to the third quarter of 2009. 7. Furthermore, it appears that RehabCare is poised to continue this exceptional growth, as analysts project that RehabCare s earnings per share will increase from $2.53 in 2010, to $2.78 in 2011, and finally to $3.15 in 2012. 8. Additionally, the Merger Price does not provide RehabCare s stockholders with adequate consideration for the synergies that Kindred has acknowledged will be realized from the Proposed Transaction. As Kindred explained in the joint press release announcing the Proposed Transaction: Kindred believes the transaction will be highly accretive to earnings and operating cash flows... Kindred expects the combined company to achieve operating synergies of approximately $40 million within a period of two years following consummation of the acquisition, with $25 million expected in the first year after closing. As such, if the Proposed Transaction is consummated, RehabCare s shareholders will be almost completely cashed out of their interest in the Company at a price below the Company s true value and without receiving an adequate premium to the trading price of RehabCare s stock. 9. The bargain Merger Price is the product of a poorly-motivated and flawed process during which RehabCare s Board made no meaningful attempt to generate interest from other buyers or otherwise maximize value for RehabCare s shareholders. The RehabCare Board, which was not already seeking suitors when Kindred came calling, has focused exclusively on a sale to Kindred and seems to have eschewed an active canvass of superior proposals. There is no - 3 -
reasonable basis for failing to undertake any exploration of interest by other potential purchasers before agreeing to the Proposed Transaction. 10. Further, the benefits the Proposed Transaction provides for the Director Defendants, defined below, may have motivated the Board to approve the Proposed Transaction to the detriment of Plaintiff and the Class. Specifically, Defendant John H. Short, RehabCare s President and CEO, will realize $1.25 million upon the consummation of the Proposed Transaction, due to the vesting of restricted stock that he received simultaneously with the announcement of the Proposed Transaction. Additionally, Defendant Short and the other Director Defendants have, on information and belief, other substantial holdings of restricted stock, all of which will vest immediately when the Proposed Transaction is consummated. 11. The Merger Agreement does not contain a go shop provision, which would allow RehabCare to solicit superior proposals from third parties. Rather, the Merger Agreement includes a restrictive no solicitation provision and a $26 million termination fee, that together prevent the Board from entertaining outside bids in any meaningful way. 12. For these reasons and others set forth in detail herein, Defendants have violated their fiduciary duties of due care, good faith, fair dealing and loyalty (or aided and abetted breaches of fiduciary duties by the other Defendants) in negotiating and approving the Proposed Transaction. 13. Plaintiff seeks to enjoin, preliminarily and permanently, the Proposed Transaction, and, in the event the Proposed Transaction is consummated, recover damages as a result of the violations of law alleged herein. - 4 -
THE PARTIES 14. Plaintiff Plumbers & Pipefitters National Pension Fund is a pension fund, established in 1968, that provides retirement benefits for employees in the plumbing and pipefitting industry nationwide. It invests on behalf of more than 100,000 members, retirees, and beneficiaries, and oversees assets of almost $4 billion. At all times relevant hereto, Plumbers & Pipefitters National Pension Fund has been and is a holder of RehabCare common stock and has held such shares since prior to the wrongs complained of herein. 15. Defendant RehabCare is incorporated under the laws of the State of Delaware, with headquarters located at 7733 Forsyth Boulevard, Suite 2300, St. Louis, Missouri 63105. RehabCare provides rehabilitation program management services in hospitals, skilled nursing facilities, outpatient facilities, and other long-term care facilities in the United States. RehabCare s stock trades on the New York Stock Exchange ( NYSE ) under the ticker symbol RHB. 16. Defendant Harry E. Rich ( Rich ) has served as the Chairman of the Board of Directors of RehabCare since August 2006 and a RehabCare director since February 2006. 17. Defendant John H. Short ( Short ) is the President and CEO of RehabCare and has held those positions since May 2004. Short has also been a RehabCare director since 1991. 18. Defendant Colleen Conway-Welch ( Conway-Welch ) has served as a RehabCare director since September 2000. She is the chairwoman of the Compliance Committee. 19. Defendant Christopher T. Hjelm ( Hjelm ) has served as a RehabCare director since July 2007. He is a member of the Audit Committee. - 5 -
20. Defendant Anthony S. Piszel ( Piszel ) has served as a RehabCare director since October 2005. He is the chairman of the Audit Committee. 21. Defendant Suzan L. Rayner ( Rayner ) has served as a RehabCare director since July 2005. She is a member of the Compliance Committee. 22. Defendant Larry Warren ( Warren ) has served as a RehabCare director since October 2005. He is a member of the Governance, Compensation & Nominating and Compliance Committees. 23. Defendant Theodore M. Wight ( Wight ) has served as a RehabCare director since 1991. He is the chairman of the Governance, Compensation & Nominating Committees. 24. The Defendants enumerated in paragraphs 16-23 above are referred to herein collectively as the Director Defendants. By reason of their positions, the Director Defendants owe fiduciary duties of due care, good faith, fair dealing and loyalty to RehabCare s shareholders. 25. Defendant Kindred, headquartered in Louisville, Kentucky and incorporated in Delaware, operates as a FORTUNE 500 healthcare services company in the United States. Kindred s stock is listed on the NYSE under the ticker symbol HIND. CLASS ACTION ALLEGATIONS 26. Plaintiff brings this action pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of itself and all other stockholders of the Company (except the Defendants herein and any persons, firm, trust, corporation, or other entity related to or affiliated with them and their successors in interest), who are, or will be, threatened with injury arising from Defendants actions, as more fully described herein. 27. This action is properly maintainable as a class action for the following reasons: - 6 -
(a) The Class is so numerous that joinder of all members is impracticable. As of October 31, 2010, there were 24,935,730 shares of RehabCare common stock outstanding. Upon information and belief, RehabCare common stock is owned by thousands of shareholders of record nationwide. (b) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff s claims are typical of the claims of the other members of the Class and Plaintiff has the same interests as the other members of the Class. Accordingly, Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. (c) The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class, which would establish incompatible standards of conduct for Defendants, or adjudications with respect to individual members of the Class that would, as a practical matter, be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. (d) To the extent Defendants take further steps to effectuate the Proposed Transaction, preliminary and final injunctive relief on behalf of the Class as a whole will be entirely appropriate because Defendants have acted, or refused to act, on grounds generally applicable and causing injury to the Class. 28. There are questions of law and fact that are common to the Class and that predominate over questions affecting any individual Class member, including, among others: - 7 -
(a) whether Defendants breached their fiduciary duties of due care, good faith, fair dealing and loyalty with respect to Plaintiff and the other members of the Class as a result of the conduct alleged herein; Class; (b) (c) whether the Proposed Transaction is entirely fair to the members of the whether the process implemented and set forth by the Defendants for the Proposed Transaction, including, but not limited to, the Merger Agreement, the negotiations concerning the Merger Agreement, and the proposed shareholder approval process, is entirely fair to the members of the Class; (d) whether Kindred aided and abetted the Director Defendants breaches of fiduciary duties of due care, good faith, fair dealing and loyalty with respect to Plaintiff and the other members of the Class as a result of the conduct alleged herein; and (e) whether Plaintiff and the other members of the Class would be irreparably harmed if RehabCare, the Director Defendants, and Kindred are not enjoined from effectuating the conduct described herein. SUBSTANTIVE ALLEGATIONS A. RehabCare s Growing Business: 1. The History of RehabCare 29. Founded in 1982, RehabCare is a national provider of post-acute services, managing rehabilitation programs in partnership with over 1,270 hospitals and nursing facilities in 42 states. RehabCare also owns and operates 35 long-term acute care hospitals ( LTACHs ) and rehabilitation hospitals, and has 18,000 employees. - 8 -
30. On November 24, 2009, RehabCare completed a merger with Triumph HealthCare, making RehabCare the fourth largest post-acute hospital operator and third largest LTACH provider in the country. 31. According to the Company s website: Our long-term strategic plan, which includes continuing to expand our reach in the post-acute space and building out our freestanding hospital operations, together with a healthy balance sheet and increasing demand for post-acute care, create a winning combination of growth opportunities for investors. 2. RehabCare Is Perfectly Poised for Continued Growth 32. RehabCare is one of the largest post-acute providers focused on program management services and operating hospitals. Further, RehabCare is the largest provider for outsourced skilled nursing rehab services, operating over 1,131 skilled nursing facilities programs across 37 states. Finally, RehabCare is also the largest provider of outsourced inpatient rehabilitation facilities services. 33. In the wake of healthcare reform and continued downward pressure on reimbursements, RehabCare reported strong revenue growth in the fourth quarter of 2010. Fourth quarter 2010 revenues increased to $339 million, a 39% increase in revenue compared to fourth quarter 2009 revenues. Notably, RehabCare s 2010 revenues increased by 57% in 2010, growing from $849 million in 2009 to $1.3 billion in 2010. 34. As it did in 2009, RehabCare outpaced its direct competitors in year-over-year quarterly revenue growth for the fourth quarter of 2010. RehabCare reported 39% revenue growth in the fourth quarter of 2010. However, its competitors, HealthSouth Corp., Select Medical Holdings Corporation and Kindred Healthcare Inc., only reported revenue growth of 4.30%, 7.80%, 0.40%, respectively, for the fourth quarter of 2010. - 9 -
35. Significantly, RehabCare projected exceptional growth in 2010 for its Hospital, Skilled Nursing Rehabilitation Services, and Hospital Rehabilitation Services divisions. In its Hospital division, RehabCare expects 2011 total year revenues of $700 to $725 million, or at least an 11% increase from 2010 revenues of $633 million. Similarly, the Skilled Nursing Rehabilitation Services division projects that 2011 revenues will increase by at least 2% to $525 million to $540 million from $516 million. Finally, the Hospital Rehabilitation Services division expects to generate full-year revenues of $185 to $200 million in 2011, a 54% increase over 2010 revenues of $120 million. 36. For 2010, RehabCare almost tripled its net earnings from 2009. RehabCare s 2010 net earnings increased from $23 million in 2009 to $63 million at year end. Further, RehabCare reported 2010 fourth quarter net earnings of $17.1 million compared to $0.07 million in 2009. 37. Further, analysts predict that RehabCare will continue to deliver steady revenue and EPS growth through 2012. Deutsche Bank analysts estimate that RehabCare s revenues will top $1.4 billion in 2011 and approach $1.5 billion in 2012. In addition, Deutsche Bank analysts also project that RehabCare s earnings per share will increase from $2.53 in 2010 to $2.78 in 2011 and finally to $3.15 in 2012. 38. Before the announced acquisition, RehabCare was positioning itself to expand its operations and grab additional market share in the challenging healthcare marketplace. In the first quarter of 2011, RehabCare expects to take over a 40-bed IRF in Indiana, in a joint venture with Saint Joseph s. In 2012, RehabCare anticipates opening a 46-bed IRF in Houston and will expand bed capacity at its Central Texas IRF from 20 beds to 60 beds in 1Q 2012. Even Kindred - 10 -
admitted that the deal would be highly accretive to earnings and operating cash flows immediately upon closing. 39. RehabCare is liquid and has a solid balance sheet. For the fourth quarter of 2010, RehabCare reported $23 million in cash and $222 million that it would likely convert to cash in approximately 60 days. Although RehabCare has long-term debt, it paid down approximately $66 million of debt in 2010. In addition, RehabCare has ample liquidity, with $1.72 to pay every $1.00 of current liabilities. 40. Based on a preliminary valuation using publicly-available information, the consideration offered in the Proposed Transaction is inadequate. RehabCare generated $103 million in operating cash flow in 2010, almost double its 2010 net earnings of $62 million. In the fourth quarter of 2010, RehabCare outperformed its competitors by generating growth in quarterly income that far exceeded its competitors. B. Defendants Have Breached Their Fiduciary Duties 41. The Director Defendants have fiduciary obligations to: (a) undertake an appropriate evaluation of RehabCare s net worth as a merger/acquisition candidate; (b) act independently to protect the interests of the Company s public shareholders; (c) adequately ensure that no conflicts of interest exist between (i) the Director Defendants own interests and their fiduciary obligations and (ii) any proposed counterparties to a cash-out transaction and the Company, and, if such conflicts exist, to ensure that all conflicts are resolved in the best interests of RehabCare s public shareholders; and (d) actively evaluate the Proposed Transaction and engage in a meaningful auction with third parties in an attempt to obtain the best value on any sale of RehabCare. - 11 -
42. The Director Defendants have breached their fiduciary duties because of the acts and transactions complained of herein, including their decision to enter into the Proposed Transaction without making the requisite effort to obtain the best transaction reasonably available. 43. With the Proposed Transaction, Kindred has aided and abetted the Director Defendants breaches of fiduciary duties. C. The Proposed Transaction Is Financially Unfair to RehabCare s Public Shareholders 44. Based on a preliminary valuation using publicly available information, the consideration offered in the Proposed Transaction is inadequate. The failure of the Director Defendants to secure an adequate Merger Price and their betrayal of the interests of the Company s public shareholders is apparent from the approximately $35 per share consideration to which the Director Defendants agreed. This consideration is unfair and grossly inadequate because, among other things, the intrinsic value of RehabCare is materially in excess of the amount offered in the Proposed Transaction, giving due consideration to the Company s anticipated operating results, net asset value, cash flow profitability and established markets. The consideration is additionally unfair and inadequate in that RehabCare s shareholders are being forever cashed out of the majority of their investment. 45. Moreover, RehabCare s Board has not adequately negotiated a fair price for the sale of the Company, as the Merger Agreement does not contain a go shop provision. Further, there is no indication that the Company shopped itself around seeking competing offers. Absent an authentic attempt to market the Company, the RehabCare Board, aided and abetted by Kindred, have neglected their duty to obtain full value for shareholders. RehabCare s Board - 12 -
should not permit Kindred to benefit from a bargain-basement sale of the Company without a market check. 46. In sum, the Proposed Transaction will deny Class members their right to share proportionately and equitably in the true value of Company s valuable and profitable business, and future growth in profits and earnings, at a time when the Company is poised to increase its profitability. D. The Board Breached its Fiduciary Duties by Agreeing to Onerous Deal Protection Devices 47. The Merger Agreement also includes a combination of restrictive deal protection devices that collectively are unreasonable and effectively preclude more attractive bids, making the Proposed Acquisition a virtual fait accompli. 1. Unfair Termination Fee 48. Section 10.04 of the Merger Agreement contains an unfair termination fee provision. The Company would be required to pay Kindred a termination fee of $26 million if RehabCare terminates because it or its representatives withhold, withdraw or modify their approval or recommendation of the Merger in favor of a competing takeover proposal. The Company would also be required to pay Kindred a termination fee of $26 million if RehabCare terminates because (i) the Merger is not consummated on or before September 30, 2011; (ii) an alternate transaction proposal is announced, proposed to the Board, or made to the shareholders prior to termination; and (iii) the Company enters into a definitive agreement or consummates an alternate transaction whereby the acquiring company acquires 50% or more of RehabCare s voting stock within twelve months following the date of termination. The Company would also be required to pay Kindred a termination fee of $26 million under certain other conditions. - 13 -
2. Unfair No Solicitation Provision 49. Section 5.02 of the Merger Agreement severely restricts the Board s ability to enter into discussions and negotiations involving a competing takeover proposal. 50. Section 5.02(a) provides that the Company shall immediately cease any discussions or negotiations with any parties that may be ongoing with respect to a takeover proposal. 51. Section 5.02(a) also provides that the Company and its representatives shall not (i) solicit or otherwise encourage any competing takeover proposal; (ii) enter into or participate in any discussions or negotiations with, furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, any Third Party that, to the knowledge of the Company, is seeking to make, or has made, an Acquisition Proposal ; (iii) withhold, withdraw or modify the Board s recommendation of the Proposed Transaction or adopt, recommend or approve any competing acquisition offer; or (iv) enter into any agreements in connection with a competing takeover proposal. 52. Further, Section 5.02(d) provides that the Company promptly notify Kindred of any such competing takeover proposals. E. Management and the Board Are Motivated to Support the Proposed Transaction 53. Defendant Short, the President and CEO of RehabCare, will personally benefit from the Proposed Transaction. In its Form 8-K filed with the SEC on February 10, 2011, RehabCare disclosed that Defendant Short had received 46,393 shares of stock, worth a total of $1.25 million, on February 8, 2011, the same day of the announcement of the Proposed Transaction. While this stock is restricted, and would theoretically vest only after Short met a - 14 -
series of performance goals over the next 3 years, the stock will in fact vest immediately upon the consummation of the Proposed Transaction, as set forth in Section 1.01 of the Merger Agreement. 1 54. Other members of management and the Board also have substantial holdings of RehabCare stock. On information and belief, much of these stock holdings of other members of management and the Board are also restricted and will vest immediately upon consummation of the Proposed Transaction. For example, Defendant Short owns 317,408 shares of RehabCare stock. Additionally, Defendant Rich owns 21,272 shares; Defendant Conway-Welch owns 21,002 shares; Defendant Hjelm owns 17,772 shares; Defendants Piszel, Rayner and Warren each own 20,272 shares; and Defendant Wight owns 35,372 shares. Accordingly, the Director Defendants have a strong financial incentive to support the Proposed Transaction. COUNT I Claim for Breach of Fiduciary Duties Against RehabCare and the Director Defendants 55. Plaintiff repeats and realleges each and every allegation set forth herein. 56. RehabCare and the Director Defendants have violated the fiduciary duties owed to the public shareholders of RehabCare and have acted to put their personal interests ahead of the interests of RehabCare shareholders or acquiesced in those actions by fellow Defendants. These Defendants have failed to take adequate measures to ensure that the interests of RehabCare s shareholders are properly protected and have embarked on a process that deters 1 Section 1.01 provides, in pertinent part, that All currently issued and outstanding options to purchase RehabCare common stock will vest and be converted into the right to an amount of cash equal to $26.00 in cash plus the value of the stock portion of the Merger Consideration for the five trading day period prior to closing, less the exercise price, subject to withholding taxes. All currently issued and outstanding restricted shares of RehabCare common stock that are subject solely to time-based vesting conditions will vest and be converted into the right to receive the Merger Consideration. With respect to currently issued and outstanding restricted shares of RehabCare common stock that are subject to performance-based vesting conditions, the number of such restricted shares which would vest upon the attainment of target performance, as set out in the applicable award agreement, shall vest and be converted into the right to receive the Merger Consideration. - 15 -
competitive bidding and provides Kindred with an unfair advantage by effectively excluding other alternative proposals. 57. By the acts, transactions, and courses of conduct alleged herein, these Defendants, individually and acting as a part of a common plan, will unfairly deprive Plaintiff and other members of the Class of the true value of their RehabCare investment. Plaintiff and other members of the Class will suffer irreparable harm unless the actions of these Defendants are enjoined and a fair process is substituted. 58. The Director Defendants have breached their duties of due care, good faith, fair dealing and loyalty by not taking adequate measures to ensure that the interests of RehabCare s public shareholders are properly protected from overreaching by Kindred. 59. By reason of the foregoing acts, practices, and courses of conduct, the Director Defendants have failed to exercise due care and diligence in the exercise of their fiduciary obligations toward Plaintiff and the other members of the Class. 60. As a result of the actions of Defendants, Plaintiff and the Class have been, and will be, irreparably harmed in that they have not, and will not, receive their fair portion of the value of RehabCare s stock and businesses, and will be prevented from obtaining a fair price for their common stock. 61. Unless enjoined by this Court, the Director Defendants will continue to breach the fiduciary duties owed to Plaintiff and the Class and may consummate the Proposed Transaction to the disadvantage of RehabCare s stockholders, without providing sufficient information to enable the Company s public shareholders to cast informed votes on the Proposed Transaction. - 16 -
62. The Director Defendants have engaged in self-dealing, acted in bad faith to Plaintiff and the other members of the Class, and breached, and are breaching, fiduciary requirements to the members of the Class. 63. Plaintiff and members of the Class have no adequate remedy at law. Only through the exercise of this Court s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury that these actions threaten to inflict. COUNT II Claim Against Kindred for Aiding and Abetting RehabCare s and the Director Defendants Breaches of Fiduciary Duties 64. Plaintiff repeats and realleges each and every allegation set forth herein. 65. RehabCare and the Director Defendants breached their fiduciary duties to the RehabCare stockholders by the actions alleged herein. 66. Such breaches of fiduciary duties could not, and would not, have occurred but for the conduct of Defendant Kindred, which, therefore, aided and abetted such breaches through entering into the Proposed Transaction between RehabCare and Kindred. 67. Defendant Kindred had knowledge that it was aiding and abetting the Director Defendants breaches of fiduciary duties owed to RehabCare stockholders. 68. Defendant Kindred rendered substantial assistance to the Director Defendants in their breaches of their fiduciary duties to RehabCare stockholders. 69. As a result of Kindred s conduct of aiding and abetting the Director Defendants breaches of fiduciary duties, Plaintiff and the other members of the Class have been, and will be, damaged in that they have been, and will be, prevented from obtaining a fair price for their shares. - 17 -
70. As a result of the unlawful actions of Defendant Kindred, Plaintiff and the other members of the Class will be irreparably harmed in that they will be prevented from obtaining the fair value of their equity ownership in the Company. Unless they are enjoined by the Court, Defendant Kindred will continue to aid and abet the Director Defendants breaches of their fiduciary duties owed to Plaintiff and the members of the Class, and will aid and abet a process that inhibits the maximization of stockholder value and the disclosure of material information. 71. Plaintiff and the other members of the Class have no adequate remedy at law. Only through the exercise of this Court s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury that Defendants actions threaten to inflict. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment and preliminary and permanent relief, including injunctive relief, in its favor and in favor of the Class, and against the Defendants as follows: (a) certifying this case as a class action, certifying the proposed Class, and designating Plaintiff as a class representative and the undersigned as class counsel; (b) declaring that the conduct of RehabCare and the Director Defendants in approving the Proposed Transaction and failing to negotiate in good faith with Kindred and other acts and omissions set forth herein are breaches of the Director Defendants fiduciary duties; (c) declaring that Kindred has aided and abetted the Director Defendants and RehabCare s breaches of fiduciary duty; (d) preliminarily and permanently enjoining RehabCare and the Director Defendants from placing their own interests ahead of the interests of the Company and its shareholders; - 18 -
(e) preliminarily and permanently enjoining the Director Defendants from initiating any defensive measures that would inhibit the Director Defendants ability to maximize value for RehabCare shareholders; (f) (g) awarding Plaintiff and the Class appropriate compensatory damages; awarding Plaintiff the costs, expenses, and disbursements of this action, including any attorneys and experts fees and, if applicable, pre-judgment and post judgment interest; and (h) awarding Plaintiff and the Class such other relief as this Court deems just, equitable, and proper. - 19 -
Dated: March 4, 2011 LABATON SUCHAROW LLP /s/ Christine S. Azar Christine S. Azar (DE Bar #4170) One Commerce Center 1201 N. Orange St., Suite 801 Wilmington, DE 19801 Telephone: (302) 573-2530 Facsimile: (302) 573-2529 Email: cazar@labaton.com Carol V. Gilden COHEN MILSTEIN SELLERS & TOLL PLLC 190 South LaSalle Street Suite 1705 Chicago, IL 60603 Telephone: (312) 357-0370 Facsimile: (312) 357-0369 Steven J. Toll Daniel S. Sommers S. Douglas Bunch COHEN MILSTEIN SELLERS & TOLL PLLC 1100 New York Avenue, N.W. Suite 500, West Tower Washington, D.C. 20005 Telephone: (202) 408-4600 Facsimile: (202) 408-4699 James R. O Connell Mark W. Kunst O DONOGHUE & O DONOGHUE LLP 4748 Wisconsin Avenue, N.W. Washington, D.C. 20016 Telephone: (202) 362-0041 Facsimile: (202) 362-2640 Counsel for Plaintiff - 20 -