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[BEAR STEARNS LETTERHEAD]
December 22, 1997
Suburban Ostomy Supply Co., Inc.
75 October Hill Road
Holliston, MA 01746
Dear Sirs:
We understand that Suburban Ostomy Supply Co., Inc. ("Suburban") has received an
offer from Invacare Corporation ("Invacare") to acquire all of the outstanding
shares of the common stock of Suburban (the "Shares"). As more fully described
in the Agreement and Plan of Merger (the "Merger Agreement") among Suburban,
Invacare and a wholly-owned subsidiary of Invacare ("Subsidiary"), Subsidiary
(i) would promptly commence a tender offer (the "Tender Offer") to purchase all
Shares for $11.75 per share in cash (the "Consideration") and (ii) as promptly
after the completion of the Tender Offer as practicable, would merge with
Suburban (the "Merger") and each outstanding Share not previously tendered and
accepted for payment pursuant to the Tender Offer would be converted into the
right to receive $11.75 in cash (the Tender Offer and the Merger are
collectively referred to herein as the "Transaction"). You have provided us with
the Offer to Purchase and the Form 14D-9 in substantially the form to be sent to
shareholders of Suburban (collectively, the "Tender Offer Documents").
You have asked us to render our opinion as to whether the Consideration to be
received in the Transaction is fair, from a financial point of view, to the
shareholders of Suburban.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement and Tender Offer Documents;
2. reviewed Suburban's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended August 31, 1996 and August 30,
1997;
3. reviewed certain operating and financial information, including
projections, provided to us by the management of Suburban relating to
Suburban's business and prospects;
4. met with certain members of Suburban's senior management to discuss its
operations, historical financial statements and future prospects;
5. reviewed the historical prices and trading volume of the common shares
of Suburban;
6. reviewed publicly available financial data and stock market performance
date of companies which we deemed generally comparable to Suburban;
7. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Suburban; and
8. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
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In the course of our review, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us by Suburban.
With respect to Suburban's projected financial results, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Suburban as to its
expected future performance. We have not assumed any responsibility for
independent verification of any such information or of the projections provided
to us and we have further relied upon the assurances of the senior management
of Suburban that it is unaware of any facts that would make the information or
projections provided to us incomplete or misleading. In arriving at our
opinion, we have not performed or obtained any independent appraisal of the
assets or liabilities of Suburban. Our opinion is necessarily based on
economic, market and other conditions, and the information made available to
us, as of the date hereof.
We have acted as financial advisor to Suburban in connection with the
Transaction and will receive a fee for such services, payment of a significant
portion of which is contingent upon the consummation of the Transaction. As
part of our engagement, we assisted Suburban in identifying and contacting
various knowledgeable and qualified buyers which were given the opportunity to
make a thorough evaluation of Suburban in preparation for the submission of a
proposal to acquire Suburban. As a result of these efforts, Suburban received
various indications of interest regarding possible business transactions
involving Suburban, which we have assessed and reviewed with the senior
management and the Board of Directors of Suburban.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Suburban and does not constitute a recommendation to the
Board of Directors of Suburban as to how to vote in connection with the Merger
or to any holder of Shares as to whether to tender such Shares in connection
with the Tender Offer. This opinion does not address Suburban's underlying
business decision to pursue the Merger. This letter is not to be used for any
other purpose, or reproduced, disseminated, quoted to or referred to at any
time, in whole or in part, without our prior written consent; provided, however,
that this letter may be included in its entirety in any Form 14D-9 to be
distributed to the holders of Shares in connection with the Tender Offer.
In the ordinary course of our business as a full-service securities firm, we
may actively trade the equity and/or debt securities of Suburban and Invacare
for our own account or for the accounts of customers, and, accordingly, may at
any time hold a long or short position in such securities. As of the date of
this opinion, we held for our own account approximately 113,000 Shares.
Based on the foregoing, it is our opinion that the Consideration to be received
in the Transaction is fair, from a financial point of view, to the shareholders
of Suburban.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ David H. Glaser
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Managing Director
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