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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION / RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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SHERIDAN HEALTHCARE, INC.
(Name of Subject Company)
SHERIDAN HEALTHCARE, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE,
CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Titles of Classes of Securities)
823781109,
823781208
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(CUSIP Numbers of Classes of Securities)
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JAY A. MARTUS, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
SHERIDAN HEALTHCARE, INC.
4651 SHERIDAN STREET, SUITE 400
HOLLYWOOD, FLORIDA 33021
(954) 987-5822
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
Copies to:
STEPHEN K. RODDENBERRY, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A.
ONE S.E. THIRD AVENUE
28TH FLOOR
MIAMI, FLORIDA 33131
(305) 374-5600
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Sheridan Healthcare, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 4651 Sheridan Street, Suite 400, Hollywood, Florida 33021. The
titles of the classes of equity securities to which this statement relates are
the Company's Common Stock, par value $0.01 per share ("Common Stock"), and the
Company's Class A Common Stock, par value $0.01 per share ("Class A Common
Stock" and, together with the Common Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1 and Statement on Schedule 13D, dated
March 31, 1999 (as amended or supplemented, the "Schedule 14D-1"), filed by
Vestar/Sheridan, Inc., a Delaware corporation (formerly known as Vestar/Calvary,
Inc., "Purchaser"), Vestar/Sheridan Holdings, Inc. (formerly known as
Vestar/Calvary Holdings, Inc.) a Delaware corporation of which Purchaser is a
wholly owned subsidiary ("Parent"), and Vestar/Sheridan Investors, LLC, a
Delaware limited liability company (formerly known as Vestar/Calvary Investors,
LLC), of which Parent is a wholly owned subsidiary ("Holdings"), with the
Securities and Exchange Commission (the "Commission"), relating to an offer by
Purchaser to purchase all of the issued and outstanding Shares at a price of
$9.25 per Share, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase, dated March 31, 1999, and the related Letter of Transmittal
(together, as amended or supplemented, the "Offer Documents"), copies of which
are filed as Exhibits (a)(1) and (a)(2) to this Solicitation/Recommendation
Statement on Schedule 14D-9 (this "Schedule 14D-9"), respectively, and are
incorporated herein by reference in their entirety.
The Schedule 14D-9 indicates that the principal executive offices of
Purchaser, Parent and Holdings are located at 245 Park Avenue, 41st Floor, New
York, New York 10167. The Offer is being made pursuant to the Agreement and Plan
of Merger, dated as of March 24, 1999 (the "Merger Agreement"), among the
Company, Purchaser and Parent. A copy of the Merger Agreement is filed as
Exhibit (c)(1) to this Schedule 14D-9, and is incorporated herein by reference
in its entirety. Pursuant to the Merger Agreement, as soon as practicable
following the consummation of the Offer and the satisfaction or waiver of
certain conditions, Purchaser will be merged into the Company (the "Merger"),
with the Company continuing as the surviving corporation (the "Surviving
Corporation"). Pursuant to the Merger Agreement, as of the effective time of the
Merger (the "Effective Time"), each Share outstanding immediately prior to the
Effective Time (other than Shares owned by Parent or Purchaser and any Shares
held by stockholders who properly exercise their dissenters' rights (the
"Dissenting Shares") under Delaware General Corporation Law ("DGCL")) shall be
cancelled, extinguished and converted into the right to receive $9.25 per Share,
net to the Seller in cash, without interest thereon (the "Merger
Consideration"), upon the surrender of the certificate formerly representing
such Share (the "Certificate") in the manner described in the Merger Agreement
less any withholding taxes required under applicable law. The Merger Agreement
is more fully described in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the Company
and its subsidiaries, viewed as a single entity.
(b) In addition to the agreements described below, certain contracts,
agreements, arrangements or understandings between the Company or its affiliates
and certain of its executive officers, directors or affiliates are described in
the Company's Information Statement attached hereto as Annex A under the
headings "Executive Compensation," "Security Ownership of Management and Certain
Beneficial Owners" and "Certain Relationships and Related Transactions." Except
as described therein or as otherwise disclosed in this Schedule 14D-9, to the
knowledge of the Company, as of the date hereof there are no other material
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contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest with respect to the Offer or the Merger between
the Company or its affiliates and (i) the Company, its executive officers,
directors or affiliates or (ii) Purchaser, Parent and Holdings and their
executive officers, directors or affiliates. Capitalized terms used in the
description of agreements below and not otherwise defined herein shall have the
meanings ascribed to them in the particular agreement.
SUBSCRIPTION AND TENDER AGREEMENTS. Concurrently with the execution and
delivery of the Merger Agreement, Parent entered into the Subscription and
Tender Agreements with each of Dr. Mitchell Eisenberg, the Chairman, President
and Chief Executive Officer of the Company, Dr. Lewis D. Gold, the Executive
Vice President -- Business Development of the Company, Mr. Michael F. Schundler,
the Chief Operating Officer and Chief Financial Officer of the Company, Mr. Jay
A. Martus, the Vice President, Secretary and General Counsel of the Company and
Dr. Gilbert L. Drozdow, the Vice President -- Hospital Based Services of the
Company, and the Tender Agreement with Mr. Robert J. Coward, the Vice
President -- Finance of the Company (each of Drs. Eisenberg, Gold and Drozdow
and Messrs. Martus, Coward and Schundler, an "Executive"). The following is a
summary of the Subscription and Tender Agreements and the Tender Agreement,
which summary is qualified in its entirety by reference to the Subscription and
Tender Agreements and the Tender Agreement, copies of which are filed as
Exhibits (c)(2)-(c)(7) hereto, respectively, and are incorporated herein by
reference.
The Subscription and Tender Agreements and the Tender Agreement provide
that each Executive will validly tender his Shares in the Offer and will not
withdraw any Shares so tendered; provided that the Merger Agreement has not been
terminated. Each Executive also agrees, so long as the Executive is required to
tender his Shares, to vote the Shares (a) in favor of the adoption of the Merger
Agreement and the approval of the transactions contemplated thereby and (b)
against any action or agreement that would result in a breach of any covenant,
representation or warranty contained in the Merger Agreement or would impede,
interfere with, delay or prevent the consummation of the Merger or the purchase
of Shares pursuant to the Offer. Each Executive has agreed not to, so long as
the Executive is required to tender his Shares, purport to vote (or execute a
consent with respect to) his Shares (other than in accordance with the
requirements of the Subscription and Tender Agreements or the Tender Agreement)
or grant any proxy or power of attorney with respect to any Shares, deposit any
Shares into a voting trust or enter into any agreement, arrangement or
understanding with any person (other than the Subscription and Tender Agreements
and the Tender Agreement), directly or indirectly, to vote, grant any proxy or
give instructions with respect to the voting of his Shares, or agree to do any
of the foregoing. The Subscription and Tender Agreements and the Tender
Agreement also provide that no Executive shall, so long as the Executive is
required to tender Shares pursuant to his Subscription and Tender Agreement or
Tender Agreement, sell, transfer or otherwise dispose of, pledge or otherwise
encumber any Shares after the date of the agreement (except to tender Shares to
Purchaser pursuant to the Offer), or agree to do any of the foregoing.
Pursuant to the Subscription and Tender Agreements, each Executive party
thereto has agreed to subscribe for and purchase, and Parent has agreed to issue
and sell to the Executive, on the date Purchaser purchases Shares pursuant to
the Offer (the "Closing Date") a specific number of shares of common stock, par
value $0.01 per share ("Parent Common Stock"), at a price equal to the per Share
price paid pursuant to the Offer. The Executives have agreed to purchase an
aggregate number of shares of Parent Common Stock that are expected to
constitute approximately 4.8% of the shares of Parent Common Stock expected to
be outstanding upon the consummation of the Merger. Notwithstanding any other
provision of the Subscription and Tender Agreements, Parent shall have no
obligations to issue, sell or deliver any of its shares to any Executive (i) who
is not a full-time employee of, or consultant to, Parent or any of its
subsidiaries on the Closing Date, (ii) whose representations and warranties
contained in his Subscription and Tender Agreement are not true and correct as
of the Closing Date in all material respects or (iii) who has breached his
obligations under his Subscription and Tender Agreement.
The Subscription and Tender Agreements and the Tender Agreement also
provide that upon the consummation of the Merger (a) Parent shall adopt the
Vestar/Sheridan Holdings, Inc. 1999 Stock Option Plan (the "Option Plan") in
substantially the form attached to the Subscription and Tender Agreements and
the Tender Agreement and (b) Parent shall enter into stock option agreements
with each Executive in
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substantially the forms attached to the Subscription and Tender Agreements and
the Tender Agreement pursuant to which the Executives will be granted options to
purchase an aggregate of 950,000 shares of Parent Common Stock at an exercise
price per share equal to the per Share price paid pursuant to the Offer, subject
to the satisfaction of certain time vesting requirements or targets relating to
the financial performance of the Company which are described in the option
agreements.
STOCKHOLDERS AGREEMENT. Concurrently with the execution and delivery of
the Merger Agreement, Parent, Holdings, the Company and the Executives party to
Subscription and Tender Agreements entered into the Stockholders Agreement (the
"Stockholders Agreement"). Mr. Coward will enter into the Stockholders Agreement
upon the consummation of the Merger. The following is a summary of the
Stockholders Agreement, which summary is qualified in its entirety by reference
to the Stockholders Agreement, a copy of which is filed as Exhibit (c)(8) hereto
and is incorporated herein by reference.
Pursuant to the Stockholders Agreement, the shares of Parent Common Stock
beneficially owned by each Executive and any other employees of Parent and its
subsidiaries who become beneficial owners of Parent Common Stock (collectively,
the "Management Investors") are subject to restrictions on transfer, as well as
the other provisions described below.
The Stockholders Agreement provides that Holdings and the Management
Investors will vote all of their shares of Parent Common Stock to elect and
continue in office a Board of Directors of Parent and each subsidiary of Parent
(other than subsidiaries of the Company) consisting solely of the following:
(a) three designees of Holdings;
(b) two designees of the Management Investors (who shall be Mitchell
Eisenberg and Lewis D. Gold so long as each of them is an executive officer
of the Company); and
(c) two persons to be designated by Holdings in its sole discretion
after consultation with the representatives of the Management Investors.
In addition, each Management Investor has agreed that until the Lapse Date (as
defined in the Stockholders Agreement) he will vote all of his shares of Parent
Common Stock (i) consistent with the vote of Holdings with respect to its shares
of Parent Common Stock and (ii) to ratify, approve and adopt any and all actions
adopted or approved by the Board of Directors of Parent.
The Stockholders Agreement provides for customary "tag-along" and
"drag-along" rights with respect to shares of Parent Common Stock beneficially
owned by the Management Investors. In addition, Holdings has certain rights to
require Parent to register shares of Parent Common Stock held by it under the
Securities Act of 1933 (the "Securities Act"), and Holdings and the Management
Investors have certain rights to participate in publicly registered offerings of
Parent Common Stock initiated by Parent or other third parties.
The Stockholders Agreement provides that upon termination of a Management
Investor's employment with Parent and its subsidiaries, (a) Parent, Holdings and
the Company will have call rights with respect to shares of Parent Common Stock
owned by such Management Investor and certain transferees and (b) such
Management Investor and certain transferees in certain limited circumstances
will have a right to put shares of Parent Common Stock to the Company. The
amount paid for shares of Parent Common Stock upon a put or a call will vary
depending on the reason for the termination of the Management Investor's
employment. The Stockholders Agreement also contains non-competition,
non-solicitation and confidentiality provisions agreed to by each Management
Investor who is not party to a written employment agreement with Parent or one
of its subsidiaries which contains such provisions.
EMPLOYMENT AGREEMENTS. Concurrently with the execution and delivery of the
Merger Agreement, the Company entered into Employment Agreements with each of
Dr. Eisenberg, Dr. Gold, Mr. Schundler and Mr. Martus. The following is a
summary of the Employment Agreements, which summary is qualified in its entirety
by reference to the Employment Agreements, copies of which are filed as Exhibits
(c)(10)-(c)(13) hereto, respectively, and are incorporated herein by reference.
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The Employment Agreements shall become effective upon the purchase of
Shares pursuant to the Offer. Each Employment Agreement has a five year term
with automatic one year renewals thereafter, unless either party gives the other
six months' written notice prior to the end of the applicable term. The
Employment Agreements supersede all prior agreements and understandings between
each Executive and the Company and its affiliates; provided that it shall not
supersede the Executives' rights under the Company's employee benefit plans.
The Employment Agreements provide for a one-time cash bonus at the
Effective Time in the amounts of $650,000, $600,000, $250,000, and $245,000 for
Dr. Eisenberg, Dr. Gold, Mr. Schundler and Mr. Martus, respectively. In
addition, the Employment Agreements provide for annual base salaries of
$375,000, $350,000, $275,000 and $275,000 for Dr. Eisenberg, Dr. Gold, Mr.
Schundler and Mr. Martus, respectively. The Company has also agreed to establish
an annual incentive compensation plan pursuant to which the Executives shall be
eligible to receive bonuses equal to 50%, in the case of Dr. Eisenberg and Dr.
Gold, or 25%, in the case of Mr. Schundler and Mr. Martus, of their annual
salaries based upon satisfaction of annual performance targets established by
the Company Board.
If an Executive's employment pursuant to his Employment Agreement is
terminated (i) by the Company without cause (as defined in the Employment
Agreements), (ii) upon the death or permanent disability of the Executive or
(iii) by the Executive upon the occurrence of certain events, including the
failure of the Company to pay the Executive's salary or provide certain benefits
to which the Executive is entitled, certain relocations of the Company's offices
or a material breach of the Employment Agreement by the Company, the Company
shall make cash severance payments over a one-year period following any such
termination in an aggregate amount equal to the relevant Executive's base salary
(twice the base salary in the case of Dr. Eisenberg and Dr. Gold) plus the pro
rata portion of the annual bonus to which the Executive would otherwise have
been entitled for the fiscal year in which such termination occurs if such
Executive had remained employed by the Company for the entire fiscal year. In
addition, Dr. Eisenberg's and Dr. Gold's Employment Agreements provide that if
their employment is terminated due to any of the foregoing events within one
year following a Change of Control (as defined), such Executive shall receive in
addition to the severance amounts described above the excess of (A) the greater
of (i) $1 million and (ii) twice the sum of such Executive's current base salary
and the bonus he received in the prior year less (B) twice his current base
salary. Payment of all severance amounts is subject to the Executive's continued
compliance with his covenant not to compete with the Company.
Each Employment Agreement also provides for termination upon mutual
consent, for cause, and by the Executive upon 90 days' written notice or upon
due notice not to renew at the end of his term of employment, in which event the
Company has no further obligation to the Executive other than the obligations to
pay accrued but unpaid salary, to provide certain continuing medical malpractice
insurance coverage and to pay the Executive his accrued and unpaid bonus in
respect of prior completed fiscal years. If an Executive's employment is
terminated because the Company decides not to renew at the end of his term of
employment, the Executive shall be entitled to his accrued and unpaid salary and
bonus and, provided he complies with his covenant not to compete with the
Company, an amount equal to his base salary (twice the base salary in the case
of Dr. Eisenberg and Dr. Gold).
Each of the Executives is subject to certain non-competition,
non-solicitation and confidentiality provisions with respect to the Company and
its Controlled Entities (as defined in the Merger Agreement).
THE MERGER AGREEMENT, THE GUARANTY AGREEMENT AND THE MANAGEMENT AGREEMENT.
THE MERGER AGREEMENT. The following is a summary of the Merger Agreement,
which summary is qualified in its entirety by reference to the Merger Agreement,
which is attached as Exhibit (c)(1) hereto.
The Offer. The Merger Agreement provides for the commencement of the Offer
and for the acceptance for payment, purchase and payment for Shares validly
tendered on or prior to the expiration of the Offer and not withdrawn, subject
to the satisfaction or waiver of certain conditions described in Annex A to the
Merger Agreement, (the "Offer Conditions"). Purchaser has the right, in its sole
discretion, to waive any such condition and make any other changes in the terms
and conditions of the Offer; provided, however, without the written consent of
the Company, Purchaser may not amend or waive the Minimum Condition (as defined
in
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the Merger Agreement), decrease the price per Share payable in the Offer, change
the form of consideration payable in the Offer (other than by adding
consideration), reduce the maximum number of Shares to be purchased in the
Offer, or impose conditions to the Offer in addition to those set forth in the
Merger Agreement which are materially adverse to the holders of Shares.
Purchaser has the right in its sole discretion to extend the Offer for up to
five business days, notwithstanding the prior satisfaction of the Offer
Conditions, in order to attempt to satisfy the requirements of Section 253 of
the DGCL.
The Merger. The Merger Agreement provides that, at the Effective Time and
subject to the conditions set forth therein (including the Offer Conditions and
in accordance with the provisions of the DGCL), Purchaser shall merge into the
Company and the separate corporate existence of Purchaser shall cease, and the
Company shall continue as the Surviving Corporation of the Merger.
Certificate of Incorporation, By-laws, Directors and Officers. The Merger
Agreement provides that at the Effective Time the Certificate of Incorporation
of the Company as in effect immediately prior to the Effective Time shall be
amended so as to read in its entirety in the form set forth as Exhibit A to the
Merger Agreement and, as so amended, shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter further amended as provided
therein and under the DGCL. At the Effective Time, the By-laws of Purchaser as
in effect immediately prior to the Effective Time in the form set forth as
Exhibit B to the Merger Agreement shall be the By-laws of the Surviving
Corporation following the Merger and thereafter may be amended or repealed in
accordance with their terms or the certificate of incorporation of the Surviving
Corporation following the Merger and as provided under the DGCL. The Merger
Agreement further provides that the directors of Purchaser immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
following the Merger, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation following the Merger, and
the officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed (as the case may be) and
qualified.
Conversion of Securities. Pursuant to the Merger Agreement, as of the
Effective Time, each Share outstanding immediately prior to the Effective Time
(other than any Shares owned by Parent or Purchaser and any Dissenting Shares)
shall be cancelled, extinguished and converted into the right to receive the
Merger Consideration, without interest, upon surrender of the Certificate in the
manner described in the Merger Agreement, less any withholding taxes required
under applicable law.
Each share of common stock of Purchaser outstanding immediately prior to
the Effective Time shall be converted into and become one validly issued, fully
paid and nonassessable share of identical common stock of the Surviving
Corporation.
Stock Options. Under the Merger Agreement, each option to purchase Shares
(a "Company Option") outstanding immediately prior to the Effective Time shall
become immediately vested. Each Company Option with an exercise price per Share
less than the Merger Consideration shall automatically be converted into the
right to receive cash in the amount of the product of (a) the Merger
Consideration minus such exercise price, multiplied by (b) the number of Shares
underlying each such Company Option. Based on Merger Consideration of $9.25, the
officers and directors of the Company will receive $556,058 in the aggregate in
respect of their Company Options, and Drs. Eisenberg, Gold and Drozdow and
Messrs. Schundler, Martus and Coward will receive $30,168, $20,618, $39,551,
$185,618, $179,779 and $86,250, respectively, in respect of their Company
Options. All other Company Options outstanding as of the Effective Time shall
automatically be terminated effective as of the Effective Time.
Dissenters' Rights. The Merger Agreement provides that any Shares
outstanding immediately prior to the Effective Time held by a holder who has
demanded and perfected the right, if any, for appraisal of those Shares in
accordance with the provisions of Section 262 of the DGCL and as of the
Effective Time has not withdrawn or lost such right to such appraisal shall not
be converted into or represent a right to receive Merger Consideration, but the
holder shall only be entitled to such rights as are granted by the DGCL. If a
holder of Shares who demands appraisal of those Shares under the DGCL shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to appraisal, then, as of the Effective Time or the occurrence of such event,
whichever last occurs, those Shares shall be converted into and represent only
the right to receive the Merger Consideration without interest, upon the
surrender of the Certificate or Certificates.
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Interim Operations. The Company has agreed that, from March 24, 1999 until
the earlier of the termination of the Merger Agreement and the time persons
nominated by Parent or Purchaser constitute a majority of the Company Board,
except as set forth in the Company Disclosure Statement (as defined in the
Merger Agreement) or unless Parent shall otherwise agree in writing, the
businesses and operations of the Company and its Controlled Entities (as defined
in the Merger Agreement) will be conducted only in the ordinary course of
business and in a manner consistent with past practice. The Company has also
agreed that the Company and its Controlled Entities shall use their commercially
reasonable efforts during such period to preserve intact the business
organization and goodwill of the Company and its Controlled Entities, to keep
available the services of their present officers and employees and to maintain
satisfactory relationships with those persons having business relationships with
them.
The Company has also agreed that the Company and its Controlled Entities
shall refrain from directly or indirectly taking various actions without
Parent's consent until the time persons nominated by Parent or Purchaser
constitute a majority of the Company Board. These prohibitions cover, among
other things, limitations on making changes to their organizational documents,
selling their capital stock or their property or assets (other than in the
ordinary course of business), declaring or paying any dividend or other
distribution, entering into any material agreement or transaction, including
acquisitions and dispositions, incurring debt other than in the ordinary course
of business beyond specified limits, making capital expenditures beyond
specified limits, increasing the compensation payable to its directors, officers
and employees (except normal increases in the ordinary course of business for
employees who are not directors or officers of the Company), granting any
severance or termination pay (except to the extent required under existing
policies or agreements), changing accounting or tax policies, settling any
litigation beyond specified limits, changing the composition of the Company
Board, amending, modifying or terminating any rights to intellectual property,
and failing to maintain the existing insurance policies covering the Company and
its subsidiaries.
Stockholders Meeting. Pursuant to the Merger Agreement, the Company,
acting through the Company Board, shall, if required in accordance with
applicable law and the Company's Certificate of Incorporation and By-laws, (i)
duly call, give notice of, convene and hold a meeting of its stockholders as
soon as practicable following consummation of the Offer for the purpose of
adopting the Merger Agreement (the "Stockholders Meeting") and (ii) subject to
its fiduciary duties under applicable law (A) include in the proxy or
information statement relating to the Stockholders Meeting the unanimous
recommendation of the Company Board that the stockholders of the Company vote in
favor of the adoption of the Merger Agreement and the written opinions of
Salomon Smith Barney and Bowles Hollowell Conner (collectively, the "Financial
Advisors") that the consideration to be received by the stockholders of the
Company pursuant to the Offer and the Merger is fair to such stockholders from a
financial point of view and (B) use its reasonable best efforts to obtain the
necessary stockholder approval of the Merger Agreement. Parent and Purchaser
have agreed to cause all Shares then beneficially owned by them and their
subsidiaries to be voted in favor of adoption of the Merger Agreement at any
Stockholders Meeting.
The Merger Agreement provides that, notwithstanding the foregoing, if
Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer,
the Company and Parent shall, subject to the provisions of the Merger Agreement,
take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after such acquisition, without a
meeting of the Company's stockholders, in accordance with Section 253 of the
DGCL.
Proxy Statement. The Merger Agreement provides that, if required by
applicable law, as soon as practicable following Parent's request, the Company
shall file with the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder, and shall use its reasonable good faith efforts to have cleared by
the Commission and mailed to the Company's stockholders, the proxy or
information statement relating to the Stockholders Meeting. Parent, Purchaser
and the Company have agreed to cooperate with each other in the preparation of
the proxy or information statement. Without limiting the generality of the
foregoing, each of Parent and Purchaser is obliged to furnish to the Company the
information relating to it required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy Statement. The
Company has agreed to use its best efforts, after consultation with the other
parties hereto, to respond promptly to any comments
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made by the Commission with respect to the proxy or information statement and
any preliminary version thereof filed by it and to cause such proxy or
information statement to be mailed to the Company's stockholders at the earliest
practicable time.
Company Board Representation. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, Purchaser shall be entitled to designate up to that number of
directors, rounded up to the next whole number, on the Company Board as shall
give Purchaser representation on the Company Board equal to the product of the
total number of directors on the Company Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Purchaser or any affiliate of
Purchaser bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all action necessary to cause Purchaser's
designees to be so elected, including either increasing the size of the Company
Board or securing the resignations of incumbent directors or both. The Company
has agreed to use its reasonable best efforts to cause persons designated by
Purchaser to constitute the same percentage as is on the Company Board of (i)
each committee of the Company Board, (ii) each board of directors of each
Controlled Entity of the Company and (iii) each committee of each such board, in
each case only to the extent permitted by law. Until Purchaser acquires a
majority of the outstanding Shares on a fully diluted basis, the Company shall
use its reasonable best efforts to ensure that all the members of the Company
Board and such boards and committees as of March 24, 1999 who are not employees
of the Company or its Controlled Entities shall remain members of the Company
Board and such boards and committees.
Following the election or appointment of Purchaser's designees pursuant to
the Merger Agreement and prior to the Effective Time, any amendment of the
Merger Agreement or the Certificate of Incorporation or By-laws of the Company,
any termination of the Merger Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Parent or Purchaser or waiver of any of the Company's rights thereunder, will
require the concurrence of a majority of the directors of the Company then in
office who are neither designated by Purchaser or Parent nor are employees of
the Company or any of its Controlled Entities (the "Disinterested Directors").
Notwithstanding the immediately preceding paragraph, the number of Disinterested
Directors shall be not less than two; provided, however, that, in such event, if
the number of Disinterested Directors is reduced below two for any reason, the
remaining Disinterested Director is entitled to designate a person to fill the
vacancy, and such person will be deemed to be a Disinterested Director. If no
Disinterested Director remains, the other directors who were directors prior to
March 24, 1999 will designate two persons to fill such vacancies who cannot be
employees of any of the Company and its Controlled Entities or employees,
stockholders or affiliates of Parent or Purchaser, and such persons will be
deemed to be Disinterested Directors.
No Solicitations. The Merger Agreement provides that neither the Company
nor any of its Controlled Entities will (whether directly or indirectly through
advisors, agents or other intermediaries), nor will the Company or any of its
Controlled Entities authorize or permit any of its or their officers, directors,
agents, representatives, advisors or subsidiaries to, (a) solicit, initiate,
encourage (including by way of furnishing information) or take any action
knowingly to facilitate the submission of any inquiries, proposals or offers
(whether or not in writing) from any person (other than Parent and its
affiliates) relating to, other than the transactions contemplated by the Merger
Agreement, (i) any acquisition or purchase of 5% or more of the consolidated
assets of the Company and its Controlled Entities or of any class of equity
securities of the Company or any of its Controlled Entities, (ii) any tender
offer (including a self tender offer) or exchange offer that if consummated
would result in any person beneficially owning any class of equity securities of
the Company or any of its Controlled Entities, (iii) any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Controlled Entities whose assets, individually or in the aggregate,
constitute 5% or more of the consolidated assets of the Company, or (iv) any
other transaction the consummation of which would or would reasonably be
expected to impede, interfere with, prevent or materially delay the Merger or
which would or would reasonably be expected to materially dilute the benefits to
Parent or Purchaser of the transactions contemplated by the Merger Agreement
(collectively, "Transaction Proposals"), or agree to or endorse any Transaction
Proposal, or (b) enter into or participate in any discussions or negotiations
regarding any of the
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foregoing, or furnish to any other person any information with respect to its
business, properties or assets in connection with the foregoing, or otherwise
cooperate in any way with, or knowingly assist or participate in, facilitate or
encourage, any effort or attempt by any other person (other than any of Parent
and its affiliates) to do or seek any of the foregoing; provided, however, that
the foregoing shall not prohibit the Company, prior to the receipt of
stockholder approval of the transactions contemplated hereby, (A) from complying
with Rule 14e-2 and Rule 14d-9 under the Exchange Act with regard to a bona fide
tender offer or exchange offer or (B) from participating in negotiations or
discussions with or furnishing information to any person in connection with a
Transaction Proposal not solicited after March 24, 1999 which is submitted in
writing by such person to the Company Board after March 24, 1999; provided,
however, that prior to participating in any such discussions or negotiations or
furnishing any information, the Company receives from such person an executed
confidentiality agreement on terms not less favorable to the Company than the
Confidentiality Agreement; and provided, further, that the Company Board shall
have concluded in good faith, after consultation with its outside financial
advisors, that such Transaction Proposal is reasonably likely to constitute a
Superior Proposal (as defined below) and, after consultation with its outside
legal counsel, that participating in such negotiations or discussions or
furnishing such information is required in order to comply with its fiduciary
duties to the stockholders of the Company under applicable law; and provided,
further, that the Company Board shall not (unless it is prohibited from doing so
by the terms of the Transaction Proposal), take any of the foregoing actions
prior to two business days after it provides Parent with prompt (but in no event
later than 24 hours after the occurrence or commencement of such action) written
notice thereof. If the Company Board receives a Transaction Proposal, then the
Company shall, to the extent not prohibited in good faith by the terms of such
Transaction Proposal, promptly inform Parent of the terms and conditions of such
proposal and the identity of the person making it.
The Merger Agreement required the Company to cease and cause its advisors,
agents and other intermediaries to cease any and all activities, discussions or
negotiations with any parties conducted prior to March 24, 1999 with respect to
any of the foregoing and to use its reasonable best efforts to cause any such
parties in possession of confidential information about the Company that was
furnished by or on behalf of the Company to return or destroy all such
information in the possession of any such party or in the possession of any
agent or advisor of any such party. The Company has agreed not to release any
third party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party. "Superior Proposal" is defined as any
of the transactions described in clause (i), (ii) or (iii) of the definition of
Transaction Proposal (with all of the percentages included in the definition of
such term raised to 51% for purposes of the definition) with respect to which
the Company Board shall have concluded in good faith, after consultation with
its outside legal counsel and financial advisors, is reasonably likely to be
completed, taking into account all legal, financial, regulatory and other
aspects of the Transaction Proposal, including the status of the financing
therefor, and the person making the proposal, and would, if consummated, result
in a transaction more favorable to the Company's stockholders from a financial
point of view than the transactions contemplated by the Merger Agreement,
including the Merger.
Employee Benefits Plans. The Merger Agreement provides that the Surviving
Corporation must maintain benefit plans substantially comparable in the
aggregate to the benefit plans in place on March 24, 1999 and disclosed to
Parent for a period of at least one year following the Effective Time. For
purposes of satisfying the terms and conditions of such plans, the Surviving
Corporation must give full credit for eligibility and vesting (but not benefit
accrual) for each participant's period of service with the Company prior to the
Effective Time. To the extent the Surviving Corporation's benefit plans provide
medical or dental welfare benefits after the Effective Time, the Surviving
Corporation must cause all pre-existing condition exclusions and actively at
work requirements to be waived to the extent such exclusions and work
requirements have been satisfied under medical and dental plans in place on
March 24, 1999 and the Surviving Corporation must provide that any expenses
incurred on or before the Effective Time will be taken into account under the
Surviving Corporation's benefit plans for purposes of satisfying the applicable
deductible, coinsurance and maximum out-of-pocket provisions for such employees
and their covered dependents.
Indemnification of Directors and Officers. The Merger Agreement provides
that for a period of six years after the Effective Time the Surviving
Corporation must indemnify and hold harmless, and to honor its
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separate indemnification agreements with, each person who is an officer or
director of the Company or its Controlled Entities on March 24, 1999 (an
"Indemnified Person") from and against all damages, liabilities, judgments and
claims (and related expenses including, but not limited to, attorney's fees and
amounts paid in settlement) based upon or arising from his or her capacity as an
officer or director of the Company or its Controlled Entities prior to the
Effective Time, to the same extent he or she would have been indemnified under
the Certificate of Incorporation or By-laws of the Company or the applicable
Controlled Entity as such documents were in effect on March 24, 1999 and to the
extent permitted under applicable law.
The Merger Agreement also provides that for a period of six years after the
Effective Time the Surviving Corporation must maintain in full force and effect
(i) the Company's directors' and officers' liability insurance policy in
existence on February 19, 1999 or (ii) a substantially similar policy maintained
by the Surviving Corporation providing for coverages of not less than $5,000,000
for acts and/or omissions alleged to have occurred prior to the Effective Time;
provided that (x) the Surviving Corporation is not required to spend an
aggregate amount for such coverage in excess of $380,000; and provided, further,
that if the aggregate premiums of such insurance coverage exceed such amount,
the Surviving Corporation is obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the board of directors of the Surviving
Corporation, for an aggregate cost not exceeding such amount, and (y) such
policies may in the sole discretion of the Surviving Corporation be one or more
"tail" policies for all or any portion of the full six year period.
Further Action; Reasonable Best Efforts. The Merger Agreement provides
that, upon the terms and subject to the conditions thereof, each of the parties
thereto shall use its reasonable best efforts to take, or cause to be taken, all
action, and to do or cause to be done, and to assist and cooperate with the
parties in doing, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by the Merger Agreement and the
Stockholder Documents (as defined in the Merger Agreement) in the most
expeditious manner practicable. The Merger Agreement further provides that the
Company must use its commercially reasonable best efforts to obtain all
consents, approvals, agreements, extensions or other waivers of rights necessary
to ensure that all Leases (as defined in the Merger Agreement) and other
Material Contracts (as defined in the Merger Agreement) remain in full force and
effect for the benefit of the Company after the Effective Time on substantially
the same terms and conditions as in effect on the date of the Merger Agreement
(without any material increase in amounts payable by the Company thereunder).
The Company must file with the Internal Revenue Service a Form 3115 in form and
substance satisfactory to Parent and duly executed and acknowledged requesting
permission for the Company and each of the entities with which the Company files
a consolidated Federal income tax return to change the method of accounting for
taxable gross revenues to the non-accrual experience method as defined in
Internal Revenue Code Section 448(d)(5).
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto. Representations
and warranties of the Company include, without limitation, certain matters
concerning the Company's capitalization, the Company's authority to execute,
deliver and perform under, and the Company Board's approval of, the Offer, the
Merger, the Merger Agreement, the Stockholder Documents and the transactions
contemplated thereby, absence of any conflicts with charter documents and
contracts, required filings and consents, compliance with law, Commission
filings and financial statements, absence of certain changes or events, absence
of litigation, employee benefit plans, tax matters, environmental matters,
interim conduct of business, billing and coding, properties, 1998 financial
statements, brokers and year 2000 issues. Some of the representations are
qualified by a "Material Adverse Effect" clause. "Material Adverse Effect" means
(a) any change or effect that individually or in the aggregate would be
materially adverse to the business, operations, assets, liabilities, financial
condition or results of operations of such entity and its subsidiaries and
controlled entities taken as a whole or (b) a material impairment on the ability
of such entity or its subsidiaries and controlled entities taken as a whole to
perform any of their material obligations under the Merger Agreement or to
consummate the Merger.
Representations and warranties of Parent and Purchaser include, without
limitation, certain matters relating to their organization and qualification to
do business, their authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, their filings with the
Commission in connection with the Offer, consents and approvals required for the
execution and delivery of the Merger
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Agreement and the consummation of the transactions contemplated thereby, brokers
and commitment letters. Some of the representations are qualified by a "Material
Adverse Effect" clause.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of Parent and Purchaser, on the one hand, and the Company, on the
other hand, to consummate the Merger are subject to the satisfaction at or prior
to the Effective Time of the following conditions: (a) if required by the DGCL,
the Merger Agreement shall have been adopted by the requisite vote of the
stockholders of the Company; (b) no preliminary or permanent injunction or other
order, decree, statute, rule or regulation by any federal or state court or
federal, state, local or other governmental authority which prevents the
consummation of the Merger shall have been issued and remain in effect; (c) any
waiting period applicable to the consummation of the Merger under the HSR Act
(as defined in the Merger Agreement) shall have terminated or expired; and (d)
Purchaser shall have purchased Shares pursuant to the Offer. In addition, the
obligations of Parent and Purchaser to effect the Merger are subject to the
additional condition that funding under the Permanent Facilities (as defined in
the NationsBank Commitment Letter) in the amounts and on the other terms and
conditions set forth in the NationsBank Commitment Letter (as defined in the
Merger Agreement) shall have been received.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the adoption
of the Merger Agreement by the stockholders of the Company:
(a) By mutual written consent of Parent, Purchaser and the Company;
(b) By Parent or the Company, if any court of competent jurisdiction
or other governmental authority located or having jurisdiction within the
United States shall have issued an order, injunction, decree, judgment or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, injunction, decree,
judgment, ruling or other action is or shall have become final and
nonappealable;
(c) By Parent, if due to an occurrence or circumstance which resulted
in a failure to satisfy any of the Offer Conditions (other than as a result
of a material breach by Parent or Purchaser of any of its obligations under
the Merger Agreement), Purchaser shall have (i) terminated the Offer or
(ii) failed to pay for Shares pursuant to the Offer on or prior to May 31,
1999 (the "Outside Date");
(d) By the Company, prior to the purchase of Shares pursuant to the
Offer, if (i) pursuant to and in compliance with the Merger Agreement, the
Company Board withdraws, modifies or amends in a manner adverse to Parent
or Purchaser any of its recommendations described in the Merger Agreement
(or publicly announces its intention to do so), or (ii) the Company or the
Company Board approves a Superior Proposal; provided, however, that (A) the
Company shall have complied with the Merger Agreement, (B) the Company
Board shall have concluded in good faith, after consultation with its
outside legal counsel and financial advisors, that such proposal is a
Superior Proposal and (C) the Company Board shall have concluded in good
faith, after consultation with its outside legal counsel, that approving
and entering into an agreement in connection with, and consummating, such
Superior Proposal is required in order to comply with its fiduciary duties
to the stockholders of the Company under applicable law; provided, that the
Merger Agreement may not be terminated pursuant thereto unless (x)
concurrently with such termination, the Company pays to Parent the
Termination Fee (as hereinafter defined) and (y) the Company shall have
provided Parent with at least two business days advance notice of such
termination.
(e) By Purchaser, prior to the purchase of Shares pursuant to the
Offer, if the Company or the Company Board shall have (i) withdrawn,
modified or amended in any respect adverse to Parent or Purchaser any of
its recommendations described in the Merger Agreement (or publicly
announced its intention to do so), (ii) failed as promptly as reasonably
practicable to mail this Schedule 14D-9 to the Company's stockholders or
failed to include in such Schedule 14D-9 such recommendations, (iii)
approved, recommended or entered into an agreement with respect to, or
consummated, any Transaction Proposal from a person other than Parent or
any of its affiliates, (iv) resolved to do any of the
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foregoing, or (v) in response to the commencement of any tender offer or
exchange offer (other than the Offer) for outstanding Shares, not
recommended rejection of such tender offer or exchange offer.
(f) By the Company, prior to the purchase of Shares pursuant to the
Offer, if (i) Parent or Purchaser breaches any of its representations,
warranties, covenants or agreements contained in the Merger Agreement and
such breach is reasonably likely to have a Material Adverse Effect on
Parent and, with respect to any such breach that it is reasonably capable
of being remedied, the breach is not remedied prior to the earlier of (x)
20 days after the Company has furnished Parent with written notice of such
breach or (y) two business days prior to the date on which the Offer
expires, or (ii) Purchaser shall have (A) terminated the Offer or (B)
failed to pay for Shares pursuant to the Offer on or prior to the Outside
Date (unless such failure is caused by or results from the breach by the
Company of any of its representations, warranties, covenants or agreements
contained in the Merger Agreement).
(g) By Parent, if (i) the Company breaches any of its representations,
warranties, covenants or agreements contained in the Merger Agreement and
such breach is reasonably likely to have a Material Adverse Effect on the
Company and, with respect to any such breach that is reasonably capable of
being remedied, the breach is not remedied prior to the earlier of (x) 20
days after Parent has furnished the Company with written notice of such
breach or (y) two business days prior to the date on which the Offer
expires, or (ii) the Minimum Condition shall not have been satisfied by the
expiration date of the Offer as it may have been extended pursuant to the
Merger Agreement and on or prior to such date (A) any person (including the
Company but not including any of Parent and its other affiliates) shall
have made a public announcement, public disclosure or other formal
communication to the Company or its stockholders with respect to a
Transaction Proposal or (B) any person (including the Company or any of its
Controlled Entities), other than Parent or any of its affiliates, shall
have become (and remain at the time of termination) the beneficial owner of
19.9% or more of the Shares (provided that any person who on March 24, 1999
beneficially owns 19.9% or more of the Shares shall not have become the
beneficial owner of an additional 3% of the Shares) (unless such person
shall have tendered and not withdrawn such person's Shares pursuant to the
Offer).
Termination Fee and Expenses. (a) The Company shall (provided that neither
Parent nor Purchaser is then in material breach of its obligations under the
Merger Agreement) upon the termination of the Merger Agreement if such
termination shall have occurred, in whole or in part, by reason of the failure
of any of the Offer Conditions set forth in paragraphs (a), (b), (d), (e), (f)
and (i) of the Offer Conditions or the Financing Condition (as defined in
Purchaser's Offer to Purchase) (unless such financing is not received due to (i)
the occurrence of a material disruption of or material adverse change in
financial, banking or capital market conditions, (ii) a competing offering,
placement or arrangement of debt securities or bank financing by or on behalf of
the Company or any Controlled Entity thereof that was undertaken by, on behalf
of (with Parent's or Purchaser's consent), or at the direction of Parent or its
affiliates, or (iii) a material disruption or material adverse change in the
market for new issues of high yield securities or the financial or capital
markets in general), or paragraphs (d), (e) or (f) (ii) under "Termination"
above if Parent could have terminated the Merger Agreement and such termination
would have occurred, in whole or in part, for any of the reasons set forth
earlier in this sentence with respect to a termination pursuant to paragraphs
(c) or (g) under "Termination" above, promptly, but in no event later than two
business days following written notice thereof, together with reasonable
supporting documentation, reimburse Parent and Purchaser, in an aggregate amount
of up to $3,000,000, for all reasonable out-of-pocket expenses and fees
(including fees payable to all banks, investment banking firms and other
financial institutions, and their respective agents and counsel, and all fees of
counsel, accountants, financial printers, advisors, experts and consultants to
Parent and its affiliates), whether incurred prior to, concurrently with or
after the execution of the Merger Agreement in connection with the Offer or the
Merger or the consummation of any other transaction contemplated by the Merger
Agreement or the Stockholder Documents, the financing thereof or consents
related thereto (collectively, the "Expenses"). Such payment, together with any
Termination Fee (as defined below) which may be paid, shall serve as full
liquidated damages in respect of such breach, and Parent and Purchaser have
waived all claims against the Company and its Controlled Entities in respect of
breach or breaches occasioning the payment
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pursuant hereto. It is understood that if Purchaser is paid a Termination Fee
(as defined below), to the extent not previously paid, no amounts shall be
payable as Expenses.
(b) If the Merger Agreement is terminated by the Company pursuant to
paragraph (d) under "Termination" or by Purchaser pursuant to paragraph (e)
under "Termination" above, the Company shall pay to Parent by wire transfer of
immediately available funds to an account designated by Parent on the next
business day following such termination (or, in the case of a termination
pursuant to paragraph (d) under "Termination" above, prior to the effectiveness
of such termination) an amount equal to $6,400,000 (the "Termination Fee") less
any amount previously paid to Parent in respect of Expenses.
(c) If all of the following events have occurred:
(i) a Transaction Proposal is commenced, publicly disclosed, publicly
proposed or otherwise formally communicated to the Company or its
stockholders at any time on or after March 24, 1999 but prior to any
termination of the Merger Agreement and either (A) Parent terminates the
Merger Agreement pursuant to paragraph (c) under "Termination" above
(unless such termination shall have occurred, in whole or in part, due to
the failure of the condition set forth in paragraph (c) of the Offer
Conditions or of the Financing Condition due to, in the case of the failure
of the Financing Condition, (i) the occurrence of a material disruption of
or material adverse change in financial, banking or capital market
conditions, (ii) a competing offering, placement or arrangement of debt
securities or bank financing by or on behalf of the Company or any
Controlled Entity thereof that was undertaken by or on behalf of (with
Parent's or Purchaser's consent), or at the direction of Parent or any of
its affiliates, or (iii) a material disruption or material adverse change
in the market for new issues of high yield securities or the financial or
capital markets in general) or (B) the Company terminates the Merger
Agreement pursuant to paragraph (f)(ii) under "Termination" above or (C)
Parent terminates the Merger Agreement pursuant to paragraph (g) under
"Termination" above; and
(ii) thereafter, within 12 months of the date of such termination, the
Company enters into a definitive agreement with respect to, or consummates,
the Transaction Proposal referred to in clause (i) above or a Superior
Proposal (whether or not such Superior Proposal was commenced, publicly
disclosed, publicly proposed or otherwise communicated to the Company or
its stockholders prior to such termination);
then, the Company shall pay to Parent, concurrently with the earlier of the
execution of such definitive agreement or the consummation of such
Transaction Proposal, an amount equal to the Termination Fee (less any
amount previously paid to Parent in respect of Expenses).
(d) Purchaser shall (provided that the Company is not then in material
breach of any of its representations, warranties or obligations under the Merger
Agreement), following the termination of the Merger Agreement in accordance with
paragraph (f) under "Termination" above (if such termination shall have occurred
by reason of a material breach by Parent or Purchaser of any of its material
obligations under the Merger Agreement), promptly, but in no event later than
two business days following written notice thereof, together with reasonable
supporting documentation, reimburse the Company, in an aggregate amount of up to
$1,000,000, for all reasonable out-of-pocket expenses and fees (including those
payable to investment banking firms and other financial institutions, and their
respective agents and counsel and all fees of counsel, accountants, financial
printers, advisors, experts and consultants to the Company and its affiliates),
whether incurred prior to, concurrently with or after the execution of the
Merger Agreement, in connection with the Offer or the Merger or the consummation
of any other transaction contemplated thereby or by the Stockholder Documents,
the financing thereof or consents related thereto. Such payment shall serve as
full liquidated damages in respect of such breach and the Company has waived, on
behalf of itself and its Controlled Entities, all claims against Parent and its
affiliates in respect of the breach or breaches occasioning the payment pursuant
to such provisions.
(e) Except as otherwise specifically provided in the Merger Agreement, each
party thereto shall bear its own expenses in connection with the Merger
Agreement and the transactions contemplated thereby; provided
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that all expenses of Parent and Purchaser shall be paid by the Surviving
Corporation at or following the Effective Time.
GUARANTY. Concurrently with the execution and delivery of the Merger
Agreement, the Company entered into a Guaranty Agreement with Vestar Capital
Partners III, L.P., a Delaware limited partnership ("Vestar") which currently is
the sole member of Holdings, pursuant to which Vestar irrevocably guaranteed the
payment of Parent's obligations to the Company described in paragraph (d) under
"Termination Fee and Expenses." The foregoing summary of the Guaranty Agreement
is qualified in its entirety by reference to the Guaranty Agreement, a copy of
which is filed as an Exhibit (c)(14) hereto and is incorporated herein by
reference.
MANAGEMENT AGREEMENT. Concurrently with the execution and delivery of the
Merger Agreement, the Company, Vestar Capital Partners, a New York general
partnership affiliated with Vestar ("Vestar Capital"), and Parent entered into a
Management Agreement (the "Management Agreement"). The following is a summary of
the Management Agreement, which summary is qualified in its entirety by
reference to the Management Agreement, a copy of which is filed as an Exhibit
(c)(9) hereto and is incorporated herein by reference.
Pursuant to the Management Agreement, Vestar Capital has agreed commencing
upon the Effective Time to render to each of Parent and the Company (and their
subsidiaries) certain advisory and consulting services. In consideration of
those services, Parent and the Company jointly and severally agreed to pay to
Vestar Capital an aggregate per annum management fee equal to the greater of (i)
$300,000 and (ii) an amount per annum equal to 1.5% of the consolidated earnings
before depreciation, interest, taxes and amortization of Parent and its
subsidiaries for such fiscal year, determined in accordance with generally
accepted accounting principles, commencing at the Effective Time. Parent and the
Company also jointly and severally agreed to pay Vestar Capital at the Effective
Time a transaction fee equal to $1.6 million plus all out-of-pocket expenses
incurred by Vestar Capital prior to the Effective Time for services rendered by
Vestar Capital in connection with the consummation of the Offer and the Merger.
Parent and the Company also jointly and severally agreed to indemnify Vestar
Capital and its affiliates from and against all losses, claims, damages and
liabilities arising out of the performance by Vestar Capital of its services
pursuant to the Management Agreement. The Management Agreement shall terminate
upon the earlier to occur of (i) the termination of the Merger Agreement or (ii)
such time after the Effective Time as Vestar Capital and its partners and their
respective affiliates thereof hold, in the aggregate, less than 20% of the
voting power of the Company's outstanding voting stock.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF THE COMPANY BOARD.
At a meeting held on March 24, 1999, the Company Board unanimously (with
the interested directors abstaining) (i) determined that the Offer and the
Merger, taken together, are fair to and in the best interests of the Company's
stockholders, (ii) approved the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby and (iii) decided to recommend to the
Company's stockholders that they accept the Offer and tender their Shares
pursuant to the Offer and adopt the Merger Agreement, and the Company Board
(with the interested directors abstaining) recommends that all stockholders of
the Company accept the Offer and tender all their Shares pursuant to the Offer.
A letter to the Company's stockholders communicating the recommendation of
the Company Board and a copy of the press release issued jointly by the Company
and Parent on March 25, 1999 announcing the Merger and the Offer are filed as
Exhibits (a)(7) and (a)(3) hereto, respectively, and are incorporated herein by
reference in their entirety.
(B)BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION.
On August 5, 1998, the Company Board met to discuss various strategic
alternatives for the Company. At that time, because of the depressed market for
healthcare securities generally, and the current trading price of
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the Common Stock in particular, the Company Board concluded that the Company
would no longer be able to pursue its acquisition growth strategy through the
issuance of Common Stock. The Company believed that to continue such a strategy
would have an undesired dilutive effect for the Company's stockholders.
Consequently, the Company Board instructed the Company's management to consider
various means of securing additional capital. On October 29, 1998 the Company
publicly announced that it had engaged Salomon Smith Barney Inc. ("Salomon Smith
Barney")_ and Bowles Hollowell Conner, a division of First Union Capital Markets
Corp. ("Bowles Hollowell Conner"), as its financial advisors (collectively, the
"Financial Advisors") to evaluate the strategic alternatives available to the
Company, including, among other things, a possible recapitalization, a secondary
offering of securities to the public, a private placement of debt or equity
securities, a stock repurchase and a sale of the Company. After exploring
various alternatives, the Financial Advisors determined that they would solicit
indications of interest in a possible sale transaction from a select group of
potential purchasers who the Financial Advisors believed might be interested in
acquiring the Company.
On December 1, 1998, executives of the Company met James L. Elrod, Jr. of
Vestar, for the first time at a health care conference. Throughout the day, Mr.
Elrod and the executives discussed their respective businesses and the
executives indicated the Company's willingness to enter into a transaction that
would enable the Company to continue its growth strategy. Vestar and the
Company's management thereafter considered a possible merger, recapitalization
or similar transaction. As the discussions between Vestar and the Company
continued, the Company and Vestar executed a confidentiality agreement dated as
of December 1, 1998 (the "Confidentiality Agreement" filed as Exhibit (c)(15)
hereto and incorporated herein by reference) pursuant to which the Company
agreed to provide Vestar with non-public information and Vestar agreed to treat
such information as confidential. Thereafter, in December, 1998, the Company
directed the Financial Advisors to provide Vestar with a copy of the
Confidential Information Memorandum which the Financial Advisors had prepared on
behalf of the Company.
Throughout December 1998, Vestar and the Company were in frequent contact
discussing the Company's business and the possible structure of a transaction.
On December 15, 1998, Mr. Elrod visited the Company's headquarters in Hollywood,
Florida and met with Dr. Mitchell Eisenberg, the Chairman, President and Chief
Executive Officer of the Company, to discuss a possible transaction.
On January 7, 1999, Vestar submitted a preliminary, non-binding indication
of interest to Salomon Smith Barney that stated that Vestar would consider a
possible acquisition of the Company for a price of $11.00 to $13.00 per Share.
The Financial Advisors evaluated the price range which Vestar was considering
relative to the Company's then current trading price and determined that the
Company should continue negotiations with Vestar. Additionally, the Financial
Advisors considered Vestar's standing in the investment community, its track
record with respect to the companies in which it had made equity investments and
the capabilities of its partners and employees.
On January 18, 1999, Dr. Eisenberg and Dr. Lewis D. Gold, Executive Vice
President of the Company, met with James Elrod, Arthur J. Nagle and Daniel S.
O'Connell of Vestar to further discuss the Company's business. On January 27,
1999, the executive officers of the Company made a formal presentation to
Vestar's representatives. Vestar continued its business due diligence
investigation of the Company.
On February 12, 1999, Salomon Smith Barney requested by letter that Vestar
formally submit an offer to acquire the Company. On February 19, 1999, Vestar
submitted an offer to purchase for cash not less than 70% of the Company's
outstanding Shares in a recapitalization transaction structured as a one-step
merger at a price of $11.50 per Share, provided a sufficient number of Shares
were retained by the Company's existing stockholders to ensure that the
transaction would qualify for recapitalization accounting treatment. The offer
was subject to, among other things, Vestar's satisfactory completion of its due
diligence investigation of the Company. Along with the letter, Vestar provided
the Company with the written comments of Vestar's outside legal counsel to the
form of merger agreement previously provided to Vestar and other bidders.
On February 19, 1999, the Company Board held a meeting to review various
proposals that had been obtained by the Financial Advisors. At this meeting, the
Company Board, after consultation with management, determined that, due to the
likelihood that management would continue with the Company following an
acquisition transaction, management might be presented with a potential conflict
of interest. Accordingly, it
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was agreed that Drs. Eisenberg and Gold, the only members of management serving
on the Company Board, would abstain from voting on any proposal for the
acquisition of the Company that was considered by the Company Board. The
Company's outside directors determined that Drs. Eisenberg's and Gold's
abstinence from voting on potential transactions would facilitate the Company
Board's independent judgment but requested that the management directors
participate in certain future discussions and be available to advise the Company
Board as it considered the various proposals. Because the three outside
directors would be the only directors voting on an acquisition proposal, the
Company Board determined that an independent committee of the Company Board was
unnecessary.
At its February 19, 1999 meeting, the Company Board determined that the
proposed recapitalization transaction from Vestar was the most attractive
proposal that it had received. Following discussions as to whether to pursue
negotiations with other potential acquirors, the Company Board determined that
pursuing an acquisition transaction exclusively with Vestar would be most likely
to benefit its stockholders' interests and achieve the Company's objectives.
On February 26, 1999, at the request of Vestar, the Company entered into an
exclusivity agreement with Vestar. Vestar had stated to the Company's
representatives that such an agreement was necessary in order to justify
Vestar's continued investment of time and financial resources in connection with
the transaction. The exclusivity agreement was subsequently extended on March 9,
1999 and during this period Vestar's legal, accounting, tax, insurance and other
advisers commenced their due diligence review of the Company and its operations.
The exclusivity agreement expired on March 15, 1999.
On February 27 and February 28, 1999, representatives of management, the
Financial Advisors and outside counsel to the Company commenced negotiations
with respect to a definitive acquisition agreement and related documentation
with representatives of Vestar and its outside legal counsel. In addition,
representatives of Vestar and its legal counsel began discussions with certain
members of management regarding employment with, and equity investments in,
Parent and the Company.
As discussions and negotiations with respect to the proposed transaction
continued, the Company Board met on March 2, 1999 to assess, among other items,
the status of negotiations and the likelihood of the completion of the
transaction on terms favorable to the Company's stockholders. The Company Board
reviewed in detail the proposed terms of the transaction and Vestar's
requirement that senior management invest in and remain employed by the Company
following the consummation of the transaction. After discussions with respect to
potential conflicts of interest, it was determined that the senior managers who
would participate in the transaction should obtain counsel separate from the
Company's outside legal counsel. In light of Vestar's insistence that its
obligation to consummate the transaction be conditioned upon satisfactory
employment agreements and equity investment agreements with management being
agreed upon, the Company Board also directed management to negotiate fully the
scope and terms of all such arrangements prior to such time as the Company Board
was asked to consider a definitive transaction.
During this time, Vestar continued to review the transaction and conduct
its due diligence review of the Company. Based on the results of Vestar's due
diligence review, Mr. Elrod telephoned Dr. Eisenberg on March 14, 1999 to tell
him that the results of Vestar's due diligence review did not support
consummating a transaction at a price of $11.50 per Share but that Vestar was
willing to consider a transaction at a price of approximately $9.00 per Share.
Robert L. Rosner of Vestar subsequently had discussions with the Financial
Advisors outlining the results of Vestar's due diligence review and Vestar's
rationale for proposing to reduce the per Share price that would be offered to
the Company's stockholders. After various discussions among Vestar, the
Company's management, the Financial Advisors and others, Vestar agreed to submit
in writing its revised proposal to consummate a merger transaction, at its
current price per Share of $9.25 and as it is currently structured, and the
Company's representatives agreed to present that proposal to the Company Board
for its consideration.
The Company Board met on March 16, 1999 to review with the Company's
management and financial and legal advisors the terms and conditions of the
revised proposal. The Company Board queried the Company's management and the
Financial Advisors as to the likelihood that another suitor would pursue a
transaction with the Company on more favorable terms. The Financial Advisors
indicated that no other
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potential acquiror had expressed interest in the Company to the extent that
Vestar had and that, in their opinion, beginning the sale process again or
pursuing additional leads was unlikely to result in a proposal that would be
more advantageous to the Company's stockholders than Vestar's revised proposal.
In light of the timing of Vestar's proposed transaction, Vestar's willingness to
purchase all outstanding Shares and Vestar's willingness to structure the
transaction as a tender offer followed by a merger (which the Company Board
believed would be more expeditious than the structure originally proposed), the
Company Board instructed management to continue negotiations with Vestar.
Negotiations regarding the terms of the Merger Agreement and the other
agreements contemplated thereby continued through March 24, 1999. That night the
Company Board held a meeting at which management indicated that the parties had
reached definitive agreements with respect to the transaction. The Company's
outside legal counsel, outside counsel for the Executives, and the Financial
Advisors each gave presentations to the Company Board. The Company Board also
received fairness opinions from each of the Company's Financial Advisors, which
were delivered orally and subsequently confirmed in writing. See "Item 8(b)
Additional Information to be Furnished -- Opinions of the Financial Advisors."
Following discussions, the Company Board unanimously (excluding directors
who would be considered "interested directors" under Section 144 of the DGCL,
who abstained) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to, and in
the best interests of, the Company and its stockholders, approved the Merger
Agreement and the Offer and the Merger and the other transactions contemplated
thereby, declared the Merger to be advisable, directed that the Merger be
submitted for consideration at a special meeting of the stockholders of the
Company, resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares to Purchaser thereunder and adopt the Merger
Agreement, and approved the Merger Agreement and the Stockholder Documents and
the transactions contemplated thereby for purposes of Section 203 of the DGCL.
The Merger Agreement and the Stockholder Documents were executed and
delivered by the parties thereto following the meeting. A joint press release
was issued by the Company and Vestar the next morning announcing the
transaction, a copy of which is filed as Exhibit (a)(3) hereto and incorporated
herein by reference.
Factors considered by the Company Board.
In reaching its recommendations described above in paragraph (a) of this
Item 4, the Company Board considered a number of factors, including the
following:
1. The fact that Vestar's proposal represented the best offer received
by the Company Board after the Financial Advisors had contacted a select
group of potential purchasers who had been given an opportunity to receive
confidential information about the Company and either declined to submit a
proposal or submitted a proposal that the Company Board considered to be
less attractive to the Company's stockholders than the Vestar proposal.
2. The fact that the cash consideration that the Company's
stockholders would receive for each Share under the Vestar proposal was at
a premium to the Company's then current market price.
3. The fact that the Company Board had explored the possibility of
pursuing various other possible transactions that would secure the
necessary capital to finance future acquisitions in fulfillment of the
Company's growth strategy and that no alternative transaction was as
favorable to the Company's stockholders as the Vestar proposal.
4. The Company's business, prospects, financial condition, current
business strategy and competitive position in the healthcare industry.
5. The presentations and fairness opinions (including financial
analyses) of its Financial Advisors described below in Item 8.
6. The terms and conditions of the Merger Agreement, including the
fact that the Offer is subject to various conditions, including the
Financial Condition, and that the Merger Agreement contemplates the
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payment or reimbursement to Parent and Purchaser of certain fees and
expenses (including financing commitment fees and related expenses) and a
Termination Fee under certain circumstances . In analyzing the conditions
to this Offer, the Board of Directors considered, among other things, the
risks of failing to consummate the Offer and the Merger. In assessing the
expense payment and Termination Fee provision, the Company Board recognized
that its effect would be to increase by the amount of such fees and
expenses the cost of acquiring the Company by a third party other than
Purchaser.
7. The nature of the financing commitments received by Parent and
Purchaser with respect to the Offer and the Merger, including the identity
of the institutions providing such commitments and their proven experience
in consummating transactions such as the Offer and the Merger and the
conditions to the obligations of such institutions to fund such
commitments, as well as the fact that consummation of the Offer and the
Merger will not be dependent on the ability of Parent and the Purchaser to
raise funds through the high yield debt or other securities market.
8. The likelihood of soliciting a firm offer from a third party to
acquire the Company at a price in excess of that to be paid in the Offer
and the Merger, the timing of the receipt of any such offer, and the
possible consequences of unsuccessfully seeking to solicit such an offer.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Company Board did not find it
practicable to, and did not, qualify or otherwise assign relative weights to the
individual factors considered in reaching its determinations. Because only the
disinterested directors of the Company voted on the Vestar proposal and because
of the engagement of the Financial Advisors and outside legal counsel by the
Company Board, the Company Board did not consider it necessary to retain an
unaffiliated representative to act solely on behalf of the unaffiliated
stockholders of the Company for the purpose of negotiating the terms of the
Merger Agreement. As discussed above, the Merger Agreement does not require the
transactions contemplated thereby to be approved by a majority of the
unaffiliated stockholders of the Company.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
RETENTION OF BOWLES HOLLOWELL CONNER. Pursuant to an engagement letter
dated November 5, 1998 (the "Bowles Hollowell Conner Engagement Letter"), the
Company engaged Bowles Hollowell Conner to render financial advisory and
investment banking services to the Company and to render an opinion as to
whether or not the consideration to be paid in a proposed transaction with a
prospective purchaser is fair, from a financial point of view, to the Company.
Pursuant to the Bowles Hollowell Conner Engagement Letter, the Company agreed to
pay Bowles Hollowell Conner (i) an opinion fee of $60,000 upon the delivery of
its opinion described above and (ii) a transaction fee payable upon consummation
of the Offer and the Merger (or another transaction) equal to 40% of (x) 1.0% of
up to $100 million of the total proceeds payable to holders of Shares and
Company Options pursuant to the Offer and the Merger and (y) 1.5% of any such
proceeds in excess of $100 million. The opinion fee will be credited against the
transaction fee payable to Bowles Hollowell Conner if the Merger is effected.
The Company will be obligated to pay the transaction fee only if the Offer and
the Merger (or another transaction) are consummated. Accordingly, the payment of
a substantial majority of Bowles Hollowell Conner's total fee is subject to the
consummation of the Offer and the Merger. The Bowles Hollowell Conner Engagement
Letter also calls for the Company to reimburse Bowles Hollowell Conner for its
reasonable out-of-pocket expenses and for the Company to indemnify Bowles
Hollowell Conner, its affiliates, and their respective directors, agents,
employees and controlling persons against certain liabilities, including
liabilities under the federal securities laws, relating to or arising out of
Bowles Hollowell Conner's engagement. Bowles Hollowell Conner and its affiliates
may maintain business relationships with the Company, Holdings, Parent, other
bidders for the Company and their respective affiliates.
In the ordinary course of business, Bowles Hollowell Conner or its
affiliates may actively trade the debt and equity securities of the Company,
Holdings, Parent, other bidders for the Company or their respective affiliates
for its or any such affiliate's own account or for the account of customers and,
accordingly, may hold a long or short position in such securities. In addition,
Bowles Hollowell Conner and its affiliates in the past may have provided
investment and commercial banking products and services for the Company,
Holdings,
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Parent, other bidders for the Company, their respective affiliates and other
related persons. Bowles Hollowell Conner is not affiliated with the Company,
Holdings or Parent.
RETENTION OF SALOMON SMITH BARNEY. In the past Salomon Smith Barney has
rendered certain investment banking services to the Company for which it has
been paid fees. Pursuant to an engagement letter dated October 9, 1998, the
Company agreed to pay Salomon Smith Barney (i) an opinion fee of $90,000 upon
the delivery of its opinion and (ii) a transaction fee payable upon consummation
of the merger equal to 60% of (x) 1.0% of up to $100 million of the total
proceeds payable to shareholders and option holders of Sheridan in the tender
offer and merger and (y) 1.5% of such proceeds in excess of $100 million. Any
opinion fee paid will be credited against the transaction fee. Additionally, the
Company has agreed to reimburse Salomon Smith Barney for reasonable out-of
pocket expenses, including, without limitation, fees and expenses of Salomon
Smith Barney's legal counsel and agreed to indemnify Salomon Smith Barney and
certain related persons against certain liabilities, including liabilities under
the federal securities laws, related to or arising out of its engagement. In the
ordinary course of business, Salomon Smith Barney or its affiliates may actively
trade the securities of the Company for its own account and for the accounts' of
its customers and, accordingly, at any time may hold a long or short position in
such securities. Salomon Smith Barney and its affiliates (including Citigroup
Inc. and its affiliates) may have other business and financial relationships
with the Company and Holdings and its affiliates.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) From February 3, 1999 through the date hereof, the Company has
purchased 1,123,832 shares of its Common Stock which have been retired. The
shares were issued as consideration to former stockholders of certain acquired
practices and were purchased at prices ranging from $11.50 to $13.89 per share.
The average price per share paid for these shares was $11.99. During the past
sixty (60) days, no other transactions in the Shares have been affected by the
Company or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, all of the Executives and all
of the Company's other executive officers, directors, subsidiaries and
affiliates who own Shares, to the extent permitted by the applicable securities
laws, rules and regulations currently intend to tender all of their Shares
pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9 and Annex A hereto, no other
negotiation is being undertaken or is underway by the Company in response to the
Offer which relates to or would result in (i) an extraordinary transaction, such
as a merger or reorganization, involving the Company or any subsidiary thereof,
(ii) a purchase, sale or transfer of a material amount of assets by the Company
or any subsidiary thereof, (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth in this Schedule 14D-9 and Annex A hereto, there is
no other transaction, board resolution, agreement in principle or signed
contract in response to the Offer that relates to, or would result in, one or
more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) PENDING LITIGATION. On March 29, 1999, March 31, 1999, and March 31,
1999 purported class action lawsuits entitled Henner v. Sheridan Healthcare,
Inc., et al, Betz v. Sheridan Healthcare, Inc., et al, and Schoenfield v.
Sheridan Healthcare, Inc., et al, respectively, were filed in Delaware Chancery
Court by holders of Shares. The complaints name as defendants the Company, the
directors of the Company and Vestar Capital Partners, Inc. Among other things,
the plaintiffs allege that:
(1) the purchase price is inadequate relative to the market price of the
Shares prior to the announcement of the transactions contemplated by
the Merger Agreement;
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(2) the transactions contemplated by the Merger Agreement are timed to take
advantage of the temporarily depressed price of the Shares to the
disadvantage of the public stockholders;
(3) the terms of the transactions contemplated by the Merger Agreement are
the product of a conflict of interest on the part of Dr. Eisenberg and
Dr. Gold and are not fair to the public holders of Shares; and
(4) the defendants violated their fiduciary duties owed to the public
stockholders of the Company by agreeing to the terms of the
transactions contemplated by the Merger Agreement and the timing of
such transactions.
The lawsuits seek unspecified damages and costs and to enjoin or rescind
the transactions contemplated by the Merger Agreement, among other things. The
Company, Purchaser, Parent, Holdings and Vestar Capital Partners, Inc. believe
that these lawsuits are wholly without merit.
(b) OPINIONS OF THE FINANCIAL ADVISORS
Opinion of Bowles Hollowell Conner. Pursuant to the Bowles Hollowell
Conner Engagement Letter, the Company retained Bowles Hollowell Conner to act as
its financial advisor in considering the Company's strategic and financial
alternatives for maximizing stockholder value, including the possible sale of
all or a portion of the Company. The Company had previously retained Salomon
Smith Barney to also act as its financial advisor. See "Item 4. The Solicitation
or Recommendation." Bowles Hollowell Conner is a nationally recognized firm and,
as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Company selected Bowles
Hollowell Conner as its financial advisor on the basis of Bowles Hollowell
Conner's experience and expertise in transactions similar to the Offer and the
Merger and its reputation in the healthcare industry.
In connection with the consideration by the Company Board of the merits of
the Offer and the Merger, Bowles Hollowell Conner was asked under the terms of
the Bowles Hollowell Conner Engagement Letter to perform various financial
analyses and deliver to the Company Board its opinion based on such analyses.
THE OPINION OF BOWLES HOLLOWELL CONNER WAS DIRECTED TO THE COMPANY BOARD
FOR ITS CONSIDERATION IN CONNECTION WITH THE PROPOSED OFFER AND MERGER, AND IS
DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS
OF SHARES FROM A FINANCIAL POINT OF VIEW AND IT DOES NOT ADDRESS ANY OTHER
ASPECT OF THE MERGER AGREEMENT NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF SHARES AS TO WHETHER THE OFFER OR THE MERGER IS IN SUCH HOLDER'S BEST
INTERESTS OR AS TO WHETHER HOLDERS OF SHARES SHOULD TENDER THEIR SHARES OR VOTE
FOR OR AGAINST THE MERGER. THE FULL TEXT OF SUCH WRITTEN OPINION OF BOWLES
HOLLOWELL CONNER DATED MARCH 24, 1999, IS FILED AS EXHIBIT (a)(6) HERETO AND
INCORPORATED HEREIN BY REFERENCE AND SETS FORTH CERTAIN IMPORTANT
QUALIFICATIONS, ASSUMPTIONS MADE, MATTERS CONSIDERED, AREAS OF RELIANCE ON
OTHERS, AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH SUCH
OPINION. THE SUMMARY DESCRIPTION OF SUCH OPINION SET FORTH BELOW IS QUALIFIED IN
ITS ENTIRETY BY THE FULL TEXT OF THE OPINION FILED AS EXHIBIT (a)(6) HERETO AND
INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONNECTION WITH THE OFFER DOCUMENTS.
In arriving at its opinion, Bowles Hollowell Conner, among other things,
(i) reviewed certain publicly available business and financial information
relating to the Company; (ii) reviewed certain other information, including
financial forecasts, provided to Bowles Hollowell Conner by the Company, and met
with the Company's management to discuss the business and prospects of the
Company; (iii) considered certain financial data of the Company and compared
that data with similar data for publicly held companies in
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businesses similar to those of the Company; (iv) considered the financial terms
of certain other business combinations and other transactions which had recently
been effected; (v) reviewed the financial terms and conditions of the Merger
Agreement; and (vi) considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
Bowles Hollowell Conner deemed relevant.
Based upon and subject to its review of the foregoing, its work described
below, its experience as investment bankers and other factors it deemed
relevant, but subject to the limitations set forth below and in reliance upon
the assumptions set forth below, Bowles Hollowell Conner provided the Company
Board with its opinion as investment bankers that as of the date of its opinion
(which was the date that Bowles Hollowell Conner presented its financial
analyses to the Company Board), the aggregate consideration to be received by
the holders of Shares (other than the Executives, as to whom Bowles Hollowell
Conner expressed no opinion) pursuant to the Offer and the Merger was fair to
such holders from a financial point of view.
In connection with its opinion, Bowles Hollowell Conner made a presentation
to the Company Board on March 24, 1999 (the "Bowles Hollowell Conner
Presentation") as to the fairness of the Offer and the Merger based on the
foregoing analyses. A copy of the Bowles Hollowell Conner Presentation is filed
as Exhibit (a)(8) hereto and incorporated herein by reference. The Bowles
Hollowell Conner Presentation is available for inspection and copying at the
principal executive offices of the Company during its regular business hours to
any stockholder or his representative who has been so designated in writing.
No limitations were imposed by the Company on Bowles Hollowell Conner with
respect to the investigations made or procedures followed in rendering its
opinion.
In connection with its review, Bowles Hollowell Conner did not assume any
obligation for independent verification of financial and other information
reviewed by it and relied on such information being accurate and complete in all
material respects. With respect to the financial forecasts for the Company
provided to Bowles Hollowell Conner by the Company's management, Bowles
Hollowell Conner assumed that the forecasts had been reasonably prepared on
bases reflecting the best available estimates and judgments of the Company's
management as to the future financial performance of the Company and that such
projections provided a reasonable basis upon which Bowles Hollowell Conner could
form its opinion. Bowles Hollowell Conner also assumed that there had been no
material changes in the Company's assets, financial condition, results of
operations, business or prospects since the dates of the last financial
statements made available to Bowles Hollowell Conner. Bowles Hollowell Conner
relied on advice of the counsel and the independent accountants to the Company
as to all legal and financial reporting matters with respect to the Company,
Purchaser's Offer to Purchase, the Offer, the Merger and the Merger Agreement.
Bowles Hollowell Conner assumes that the Offer and the Merger will be
consummated in a manner that complies in all respects with the applicable
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Exchange Act and all other applicable federal and state statutes, rules and
regulations. In addition, Bowles Hollowell Conner did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of the Company, nor was
Bowles Hollowell Conner furnished with any such appraisals. Finally, Bowles
Hollowell Conner's opinion was based on economic, monetary, market and other
conditions as in effect on, and the information made available to Bowles
Hollowell Conner as of, the date of the opinion (March 24, 1999). Accordingly,
although subsequent developments may affect its opinion, Bowles Hollowell Conner
did not assume and does not have any obligation to update, revise or reaffirm
its opinion.
Bowles Hollowell Conner also assumed that the Offer and the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by the Company of any
of the conditions to its obligations thereunder. The terms of the Merger
Agreement and the conditions to the Company's obligations thereunder should be
reviewed and understood by holders of Shares in connection with their
consideration of the Offer and the Merger.
Set forth below is a brief summary of selected analyses presented by Bowles
Hollowell Conner in the Bowles Hollowell Conner Presentation in connection with
its March 24, 1999 opinion described above.
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Historical Stock Price Analysis
Bowles Hollowell Conner reviewed the trading performance of the Common
Stock for the period from November 1, 1995 to March 23, 1999, relative to the
performance of the Standard & Poor's 500 Index, the Russell 2000 Index, a
Multi-Specialty PPM Index and a Single Specialty PPM Index. The Multi-Specialty
and Single Specialty PPM Indexes were comprised of publicly traded
multi-specialty and single specialty physician practice management companies
that Bowles Hollowell Conner deemed to be similar to the Company. While the
Company provides both specialist physician and practice management services in
the areas of women's and children's health, Bowles Hollowell Conner regards the
Company as more comparable to multi-specialty physician practice management
organizations due to the number of specialist physician services it provides
within women's and children's health. The multi-specialty comparable companies
were MedPartners, Inc., Phycor, Inc., PhyMatrix Corp. and Promedco Management
Co. (collectively, the "Multi-Specialty Comparable Companies"). The single
specialty comparable companies were American Oncology Resources, Inc., American
Physician Partners, Inc., AmeriPath, Inc., Pediatrix Medical Group, Inc. and
Physician Reliance Network, Inc. (collectively, the "Single Specialty Comparable
Companies"). Bowles Hollowell Conner noted that during this period the price of
the Company's Common Stock declined 35%, while the Standard & Poor's 500 Index
increased 116%, the Russell 2000 Index increased 29%, the Multi-Specialty
Comparable Companies declined 86% and the Single Specialty Comparable Companies
declined 52%. Additionally, Bowles Hollowell Conner noted that a significant
amount of the price declines in the Multi-Specialty and Single Specialty PPM
Indexes has occurred since January 1, 1998. Bowles Hollowell Conner noted that
during this period the price of the Common Stock declined 46%, while the
Standard & Poor's 500 Index increased 30%, the Russell 2000 Index declined 12%,
the Multi-Specialty Comparable Companies declined 83% and the Single Specialty
Comparable Companies declined 48%.
Comparable Company Analysis
Using publicly available information and information provided by the
Company, Bowles Hollowell Conner compared the historical financial and operating
performance of the Company with the corresponding performance of the
Multi-Specialty Comparable Companies and the Single Specialty Comparable
Companies. In comparing the Company's financial performance to that of the
Comparable Companies, Bowles Hollowell Conner made the following observations,
among others: (i) the Company had a latest twelve months' ("LTM") earnings
(loss) before interest, taxes, depreciation and amortization ("EBITDA") margin
of 16.9%, compared to median LTM EBITDA margins of 10.4% and 30.1%,
respectively, for the Multi-Specialty and Single Specialty Comparable Companies;
(ii) the Company had a LTM earnings (loss) before interest and taxes ("EBIT")
margin of 13.1%, compared to median LTM EBIT margins of 9.7% and 22.7%,
respectively, for the Multi-Specialty and Single Specialty Comparable Companies;
and (iii) the Company had a LTM net income margin of 5.6%, compared to median
LTM net income margins of 5.0% and 10.3%, respectively, for the Multi-Specialty
and Single Specialty Comparable Companies.
In order to arrive at an implied valuation for the Company, Bowles
Hollowell Conner calculated the adjusted market value, defined as aggregate
equity value plus debt and preferred stock less cash and cash equivalents
("Adjusted Market Value"), of the Comparable Companies as a multiple of (i) LTM
sales, (ii) LTM EBITDA and (iii) LTM EBIT. An analysis of the multiples of
Adjusted Market Value to LTM sales yielded a range of multiples from 0.3x to
0.7x for the Multi-Specialty Comparable Companies, with a median multiple of
0.5x, and a range of multiples from 1.1x to 2.3x for the Single Specialty
Comparable Companies, with a median multiple of 1.7x. An analysis of the
multiples of Adjusted Market Value to LTM EBITDA yielded a range of multiples
from 4.5x to 39.8x, with a median multiple of 5.0x (excluding the 39.8x high end
of the range) for the Multi-Specialty Comparable Companies and a range of
multiples from 5.6x to 7.4x, with a median multiple of 6.7x for the Single
Specialty Comparable Companies. An analysis of the multiples of Adjusted Market
Value to LTM EBIT yielded a range of multiples from 6.3x to 9.9x, with a median
multiple of 7.1x for the Multi-Specialty Comparable Companies and a range of
multiples from 7.3x to 10.1x, with a median multiple of 8.8x for the Single
Specialty Comparable Companies. Bowles Hollowell Conner noted that these
multiples could be compared to LTM sales, LTM EBITDA and LTM EBIT multiples
implied by the Merger Consideration of 1.3x, 7.7x and 10.0x, respectively, for
the Company. Bowles
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Hollowell Conner applied the median LTM Sales, LTM EBITDA and LTM EBIT multiples
for the Multi-Specialty and Single Specialty Comparable Companies to the
corresponding historical results of the Company to calculate the implied
Adjusted Market Value range and the implied equity value range for the Shares
("Equity Value"). This analysis indicated an Adjusted Market Value range for the
Company of $94.9 million to $130.0 million and an implied Equity Value range of
$1.44 to $6.69 per Share. As noted above, Bowles Hollowell Conner regards the
Company as more comparable to multi-specialty physician practice management
organizations.
Comparable Acquisitions Analysis
Using publicly available information and certain other information and
estimates derived in the ordinary course of Bowles Hollowell Conner's business,
Bowles Hollowell Conner reviewed selected recent merger and acquisition
transactions in the physician practice management industry. These transactions
included: Madison Dearborn/Cornerstone/Beecken Petty & Co.'s acquisition of
MedPartners Team Health Operations; American Oncology Resources, Inc.'s
acquisition of Physician Reliance Network, Inc.; an acquisition in which Bowles
Hollowell Conner acted as financial advisor and for which financial information
is not publicly available (the "Private Deal"); Phycor, Inc.'s acquisition of
First Physician Care; MedPartners, Inc.'s acquisition of Talbert Medical
Management; FPA Medical Management Inc.'s acquisition of Health Partners, Inc.;
CRA Managed Care's acquisition of Occusystems, Inc.; MedPartners, Inc.'s
acquisition of InPhynet Medical Management; FPA Medical Management's acquisition
of AHI Healthcare Systems, Inc.; and Physician Resource Group's acquisition of
American Opthalmic, Inc. (collectively, the "Comparable Transactions"). Bowles
Hollowell Conner compared the Adjusted Market Value of the acquired companies as
implied by the consideration paid in each such transaction to the corresponding
LTM Sales, LTM EBITDA and LTM EBIT for the acquired companies at the time of
transaction announcement. As physician practice management company stock prices
and forward earnings multiples have declined particularly since early 1998,
Adjusted Market Value to LTM Sales, LTM EBITDA and LTM EBIT multiples have
similarly declined. Thus, Bowles Hollowell Conner believes acquisition
transaction multiples since January 1, 1998 are more relevant to the Company's
proposed transaction. Multi-Specialty comparable transactions since that time
include Madison Dearborn/Cornerstone/Beecken Petty & Co.'s acquisition of
MedPartners' Team Health Operations and the Private Deal while the only Single
Specialty comparable transaction since that time was the American Oncology
Resources, Inc.'s acquisition of Physician Reliance Network, Inc. Based on these
comparable Multi-Specialty transactions, Adjusted Market Value as a multiple of:
(i) LTM Sales ranged from 0.4x to 0.6x with a median value of 0.5x; (ii) LTM
EBITDA ranged from 6.2x to 8.5x with a median value of 7.3x; and (iii) LTM EBIT
was 7.5x. Based on the comparable Single Specialty transaction, Adjusted Market
Value as a multiple of: (i) LTM Sales was 1.8x; (ii) LTM EBITDA was 9.3x; and
(iii) LTM EBIT was 14.0x. Bowles Hollowell Conner applied median LTM Sales, LTM
EBITDA and LTM EBIT multiples for the Comparable Transactions to the
corresponding historical results of the Company, yielding an implied Adjusted
Market Value range for the Company of $111.1 million to $199.0 million and an
implied Equity Value range of $3.87 to $16.99 per Share. As noted above, Bowles
Hollowell Conner regards the Company as more comparable to multi-specialty
physician practice management organizations.
No other company or transaction used in the comparable company analysis or
the comparable acquisitions analysis as a comparison is identical to the Company
or the Offer and the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies to which the Company and the Offer and the Merger are being
compared.
Earnings Impact Analysis
Based on the Company's results for fiscal year 1998, Bowles Hollowell
Conner analyzed the potential pro-forma earnings impact of an acquisition of the
Company by a potential acquiror assuming an all cash purchase. Bowles Hollowell
Conner calculated the maximum cash purchase price that an acquiror could pay
which would result in no earnings dilution for fiscal year 1998, assuming costs
of financing ranging from 7% to
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8%. This analysis indicated an Adjusted Market Value range for the Company of
$127.3 million to $144.2 million and an Equity Value range of $6.27 to $7.60 per
Share at 8% and 7% cost of financing, respectively.
Discounted Cash Flow Analysis
Bowles Hollowell Conner performed a discounted cash flow analysis to
estimate the present value of the projected unlevered free cash flows for the
Company based on the Company's projections (the "Base Case"). The Base Case
assumes that the Company grows through a combination of internal growth
initiatives and acquisitions. Internal growth initiatives include internal
hospital outsourcing contract growth, new hospital outsourcing contracts,
physician startups within existing multi-specialty physician group practices and
the addition of ancillary surgery centers. Acquisitions of hospital-based and
office-based physician practices are assumed to be completed within the
Company's integrated physician networks at multiples of 5.0x practice EBITDA in
aggregate amounts of $60.0 million, $35.0 million, $40.0 million, $50.0 million
and $65.0 million for the years 1999 through 2003, respectively. Based on the
Base Case assumptions, Bowles Hollowell Conner calculated the estimated future
free cash flows that the Company would produce for the fiscal years 1999 through
2003 and a terminal value of the Company at the end of the forecasting period.
The terminal value was computed by multiplying the Company's year 2003 estimated
EBITDA by a range of multiples between 5.5x and 6.5x, chosen to reflect current
acquisition multiples of comparable multi-specialty physician practice
management companies. The projected free cash flows and terminal values were
discounted using a range of discount rates of 9.3% to 13.3%, chosen to reflect
assumptions regarding the Company's cost of capital. This analysis indicated an
Adjusted Market Value range for the Company of $169.0 million to $215.0 million
and an implied Equity Value range of $12.45 to $19.35 per Share.
Sensitivity of Discounted Cash Flow Analyses
Bowles Hollowell Conner relied on the Company's Base Case to perform the
Discounted Cash Flow Analysis. These projections reflect the best judgments of
the Company's management as to the future financial performance of the Company
and include assumptions regarding the impact of the integration of internal
growth initiatives and acquired physician practices. The Company has projected
it will realize certain revenue growth from increased local market density of
integrated networks and certain economies of scale. For purposes of comparison
and to test the sensitivity of the Discounted Cash Flow Analysis to changes in
the Base Case, Bowles Hollowell Conner reviewed scenarios that assumed the
Company: (i) completed no practice acquisitions going forward, and due to lower
projected revenue and earnings growth rates relative to the Base Case, applied
EBITDA terminal multiples of 4.0x to 5.0x; and (ii) completed the internal
growth initiatives and acquisitions contemplated in the Base Case, however, the
Company acquired physician practices at a multiple of 6.0x practice EBITDA,
resulting in acquisitions in aggregate amounts of $72.0 million, $42.0 million,
$48.0 million, $60.0 million and $78.0 million for the years 1999 through 2003,
respectively. Bowles Hollowell Conner performed these selected sensitivity
analyses on the Company's Base Case. The Discounted Cash Flow Analysis based on
the no acquisitions scenario resulted in an Adjusted Market Value range for the
Company of $100.0 million to $117.0 million and an implied Equity Value range of
$2.18 to $4.80 per Share. The Discounted Cash Flow Analysis based on the 6.0x
EBITDA acquisition multiple scenario resulted in an Adjusted Market Value range
for the Company of $135.0 million to $179.0 million and an implied Equity Value
range of $7.41 to $14.05 per Share.
Leveraged Buyout Analysis
Bowles Hollowell Conner analyzed a series of scenarios involving
hypothetical recapitalizations of the Company. Each scenario provided for the
distribution of an amount of cash in respect of each Share. The analysis assumed
the Company's Base Case projections and a terminal value at the end of the
forecasting period. The terminal value was computed by multiplying the Company's
year 2003 estimated EBITDA by a range of multiples between 5.5x and 6.5x, chosen
to reflect current acquisition multiples of comparable multi-specialty physician
practice management companies. The analyses assumed leverage levels appropriate
for physician practice management companies. Based on these and other
assumptions, an offer of $9.25 per Share could produce an internal rate of
return in the range of 25% to 30% over a five year period. Bowles Hollowell
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Conner analyzed these scenarios in light of various factors affecting the
feasibility of a leveraged buyout of the Company.
Healthcare LBO Premium Analysis
Bowles Hollowell Conner reviewed the consideration paid in U.S. healthcare
leveraged buyouts announced since May 7, 1996. Bowles Hollowell Conner
calculated the premiums paid in those transactions over: (i) the acquired
entity's applicable stock price one day prior to either the announcement of the
acquisition offer or the announcement by the acquired entity of information
relating to a possible corporate transaction, including its intention to
evaluate its strategic alternatives ("unaffected price"), (ii) the acquired
entity's 52-week high trading value as of the announcement date; (iii) the
acquired entity's 52-week low trading value as of the announcement date; and
(iv) the acquired entity's applicable stock price one day prior to announcement
of the acquisition offer ("affected price"). Seven transactions were reviewed
and the following premium ranges were observed: premium of offer price to
unaffected price, 15.2% to 88.2%; premium of offer price to 52-week high,
(52.9)% to 4.2%; premium of offer price to 52-week low, 53.5% to 170.9%; and
premium of offer price to affected price, 11.0% to 88.2%. The Bowles Hollowell
Conner analysis indicated that the consideration to be paid pursuant to the
Offer was 41.0% above the unaffected price, 47.1% below the 52-week high, 42.3%
above the 52-week low and 12.1% above the price of the Company's stock as of the
close of business on March 22, 1998.
While the foregoing summary describes all analyses and examinations that
Bowles Hollowell Conner deemed material to the preparation of its opinion to the
Company Board, it does not purport to be a comprehensive description of all
analyses and examinations actually conducted by Bowles Hollowell Conner. The
preparation of a fairness opinion necessarily is not susceptible to partial
analysis or summary description; and selecting portions of the analyses and of
the factors considered by Bowles Hollowell Conner, without considering all
analyses and factors, would create an incomplete view of the process underlying
the analyses set forth in the Bowles Hollowell Conner Presentation. In addition,
Bowles Hollowell Conner may have given some analyses more or less weight than
other analyses, and may have deemed various assumptions more or less probable
than other assumptions. Accordingly, the ranges of valuations resulting from any
particular analysis described above should not be taken to be Bowles Hollowell
Conner's view of the actual value of the Company or the Shares. To the contrary,
Bowles Hollowell Conner expressed no opinion on the actual value of the Company
or the Shares, and its opinion that is addressed and limited to the Company
Board extends only to the belief expressed by Bowles Hollowell Conner that the
immediate value to holders of Shares (other than the Executives, as to whom
Bowles Hollowell Conner expressed no opinion), from a financial point of view
under the Offer and the Merger, is within the range of values that might fairly
be ascribed to the Shares as of the date of the opinion of Bowles Hollowell
Conner (March 24, 1999), and as of the date of the Company Board's consideration
of the Offer and the Merger (March 24, 1999). At the time of the delivery of its
oral opinion, Bowles Hollowell Conner provided a draft form of opinion that was
the same in all material respects as the executed opinion later provided to the
Company Board.
In performing its analyses, Bowles Hollowell Conner made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of the
Company. The analyses performed by Bowles Hollowell Conner are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than those suggested by such analyses. Such analyses were
prepared solely as part of Bowles Hollowell Conner's analysis for the Company
Board of the fairness of the Offer and the Merger to the holders of Shares from
a financial point of view, and were provided solely to the Company Board in
connection with the Company Board's consideration of the Offer and the Merger.
The analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at any time in the future. Bowles Hollowell Conner used in its analyses various
projections of future performance prepared by the management of the Company. The
projections are based on numerous variables and assumptions which are inherently
unpredictable and must be considered not certain or accurate as projected.
Accordingly, actual results could vary significantly from those set forth in
such projections.
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As described above, the opinion of Bowles Hollowell Conner and the Bowles
Hollowell Conner Presentation summarized above were presented to the Company
Board. Bowles Hollowell Conner, however, does not make any recommendation to
holders of Shares (or to any other person or entity) as to whether such
stockholders should tender their shares pursuant to the Offer or vote for or
against the Merger.
In the ordinary course of business, Bowles Hollowell Conner or its
affiliates may actively trade the debt and equity securities of the Company,
Holdings, Parent, other bidders for the Company or their respective affiliates
for its or any such affiliate's own account or for the account of customers and,
accordingly, may hold a long or short position in such securities. In addition,
Bowles Hollowell Conner and its affiliates in the past may have provided
investment and commercial banking products and services for the Company,
Holdings, Parent, other bidders for the Company, their respective affiliates and
other related persons. Bowles Hollowell Conner is not affiliated with the
Company, Holdings or Parent.
Opinion of Salomon Smith Barney Salomon Smith Barney has acted as a
financial advisor to the Company in connection with the Offer and the Merger. On
March 24, 1999, Salomon Smith Barney stated to the Company Board its oral
opinion as investment bankers that, as of such date and based upon and subject
to the factors and assumptions set forth in its presentation, the consideration
to be received by the holders of Shares (other than Parent and its affiliates
and the Executives) (the "Public Stockholders") was fair, from a financial point
of view, to the Public Stockholders. Such opinion was subsequently confirmed in
a written opinion dated March 24, 1999.
The opinion and presentation of Salomon Smith Barney to the Company Board,
in connection with which Salomon Smith Barney was requested to evaluate the
fairness from a financial point of view of the consideration to the Public
Stockholders, was only one of many factors taken into consideration by the
Company Board in making its determination to approve the Merger Agreement. The
terms of the Merger were determined through negotiations between the Company and
Vestar and were approved by the Company Board.
THE FULL TEXT OF SALOMON SMITH BARNEY'S OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY SALOMON SMITH BARNEY, IS ATTACHED TO
THIS DOCUMENT AS EXHIBIT (a)(5) HERETO AND INCORPORATED HEREIN BY REFERENCE.
SALOMON SMITH BARNEY'S OPINION SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY. IT
IS DIRECTED ONLY TO THE COMPANY BOARD AND RELATES ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE PUBLIC
STOCKHOLDERS AND DOES NOT ADDRESS THE COMPANY'S UNDERLYING BUSINESS DECISION TO
EFFECT THE OFFER AND THE MERGER OR CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
SHARES AS TO WHETHER SUCH STOCKHOLDER SHOULD TENDER SHARES INTO THE OFFER OR AS
TO HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER. THE SUMMARY OF
SALOMON SMITH BARNEY'S OPINION SET FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED AS EXHIBIT (a)(5)
HERETO AND INCORPORATED HEREIN BY REFERENCE.
In connection with rendering its opinion, Salomon Smith Barney, among other
things:
- reviewed the March 23, 1999 draft of the Merger Agreement, in the form
provided to Salomon Smith Barney, and assumed that the final form of such
agreement would not vary in any respect that is material to Salomon Smith
Barney's analysis;
- reviewed certain publicly available business and financial information
relating to the Company that Salomon Smith Barney deemed relevant;
- reviewed certain other information, primarily financial in nature,
provided to Salomon Smith Barney by the Company relating to the Company's
business, including certain financial forecasts;
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- reviewed certain publicly available information with respect to certain
other companies that Salomon Smith Barney believed to be comparable to
the Company and the trading markets for such other companies' securities;
- reviewed and analyzed certain publicly available information concerning
the trading of, and the trading market for, the Common Stock;
- reviewed certain publicly available information concerning the nature and
terms of certain other transactions that Salomon Smith Barney deemed to
be relevant to Salomon Smith Barney's inquiry;
- considered and took into account the Company's lack of, and likely
difficulty in raising, adequate capital to fund its growth and
acquisition plans if the Offer and the Merger were not effected;
- discussed with certain officers and employees of the Company and Vestar
the foregoing, as well as other matters Salomon Smith Barney believed
relevant to its inquiry, and
- considered such other information, financial studies, analyses,
investigations and financial, economic and market criteria as Salomon
Smith Barney deemed relevant to its inquiry.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for Salomon Smith
Barney, or publicly available. With respect to the Company's financial
forecasts, Salomon Smith Barney was advised by management of the Company and
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments on the part of the management of the
Company, as to the future financial performance of the Company. Salomon Smith
Barney expressed no view as to such forecasts or the assumptions on which they
are based. Salomon Smith Barney did not assume any responsibility for making or
obtaining any independent evaluations or appraisals of the Company, nor for
conducting a physical inspection of, the properties and facilities of the
Company. The Salomon Smith Barney opinion was necessarily based upon market,
economic and other conditions as they existed and could be evaluated on March
24, 1999, and Salomon Smith Barney assumed no responsibility to update or revise
their opinion based upon circumstances or events occurring after March 24, 1999.
For purposes of rendering its opinion, Salomon Smith Barney assumed, in all
respects material to its analysis, that the representations and warranties of
each party contained in the Merger Agreement were true and correct, that each
party would perform all of the covenants and agreements required to be performed
by it under the Merger Agreement, and that all conditions to the consummation of
the Merger would be satisfied without waiver thereof. Salomon Smith Barney also
assumed that all material governmental, regulatory or other consents and
approvals would be obtained and that in the course of obtaining any necessary
governmental, regulatory or other consents and approvals, or any amendments,
modifications or waivers to any documents to which either the Company or
Holdings is a party, as contemplated by the Merger Agreement, no restrictions
would be imposed, or amendments, modifications or waivers made that would have
any material adverse effect on the contemplated benefits of the Merger.
The preparation of financial analyses and fairness opinions is a complex
process involving subjective judgments with respect to, among other things,
appropriate comparable companies and transactions, appropriate multiples of
various selected financial data, appropriate discount rates and other financial
and other factors and is not necessarily susceptible to partial analysis or
summary description. Salomon Smith Barney made no attempt to assign specific
weights to particular analyses or factors considered, but rather made
qualitative judgments as to the significance and relevance of the analyses and
factors considered. Accordingly, Salomon Smith Barney believes that its analyses
(and the summary set forth above) must be considered as a whole, and that
selecting portions of such analyses and of the factors considered by Salomon
Smith Barney, without considering all of such analyses and factors, could create
a misleading or incomplete view of the processes underlying the analyses
conducted by Salomon Smith Barney and its opinion.
With regard to the comparable company analysis summarized below, Salomon
Smith Barney selected comparable companies on the basis of various factors,
including the size of the company and similarity of the
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line of business; however, no company utilized as a comparison in such analysis
is identical to the Company, any business segment of the Company or the Merger.
As a result, these analyses are not purely mathematical, but also take into
account differences in financial and operating characteristics of the comparable
companies and other factors that could affect the value of the comparable
companies and transactions to which the Company and the Merger are being
compared.
In its analyses, Salomon Smith Barney made numerous assumptions with
respect to the Company, industry performance, general business, economic, market
and financial conditions and other matters, many of which are beyond the control
of the Company. Any estimates contained in Salomon Smith Barney's analyses are
not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. Estimates of values of companies do not purport to be
appraisals or necessarily to reflect the prices at which companies may actually
be sold. Salomon Smith Barney's analyses were prepared solely as part of Salomon
Smith Barney's analysis of the fairness of the consideration to the Public
Stockholders and were provided to the Company Board in that connection.
The projections furnished to Salomon Smith Barney and used in formulating
Salomon Smith Barney's opinion were provided to Salomon Smith Barney, in
connection with the review of the Merger, by the management of the Company. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projection.
THE FOLLOWING IS A SUMMARY OF THE MATERIAL FINANCIAL ANALYSES USED BY
SALOMON SMITH BARNEY IN CONNECTION WITH PROVIDING ITS OPINION TO THE COMPANY
BOARD. IT DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE ANALYSES
PERFORMED BY SALOMON SMITH BARNEY OR OF ITS PRESENTATION TO THE COMPANY BOARD
WHICH IS FILED AS EXHIBIT (a)(4) HERETO AND INCORPORATED HEREIN BY REFERENCE.
THE SALOMON SMITH BARNEY PRESENTATION IS AVAILABLE FOR INSPECTION AND COPYING AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY DURING ITS REGULAR BUSINESS HOURS
TO ANY STOCKHOLDER OR HIS REPRESENTATIVE WHO HAS BEEN DESIGNATED IN WRITING. THE
SUMMARIES OF FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT.
IN ORDER TO FULLY UNDERSTAND THE FINANCIAL ANALYSES USED BY SALOMON SMITH
BARNEY, THE TABLES MUST BE READ WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE
DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. IN
CONDUCTING ITS ANALYSES, SALOMON SMITH BARNEY ASSUMED THAT TOTAL DEBT AND SHARES
OUTSTANDING WERE AS AT MARCH 19, 1999, THAT EXCESS CASH WAS NOT AVAILABLE AND
THAT NO ACQUISITION EXPENDITURES WERE INCURRED IN THE FIRST QUARTER OF 1999.
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Comparable Company Analysis. Using publicly available information, Salomon
Smith Barney compared the Company to the following five multispecialty physician
practice management companies: Advanced Health Corporation, MedPartners, Inc.,
PhyCor, Inc., PhyMatrix Corporation and ProMedCo Management based on various
measures of performance. Salomon Smith Barney noted that the Company's market
value as a multiple of 1998 net income was 10.6x, compared with a median of 7.1x
for the selected group. Salomon Smith Barney also noted that the Company's
market value as a multiple of estimated 1999 net income and estimated 2000 net
income was 8.6x and 7.4x, respectively, compared with a median of 7.3x and 5.5x,
respectively, for the selected group.
MARKET VALUE AS MULTIPLE OF:
----------------------------------
1998 1999 2000
NET ESTIMATED ESTIMATED
INCOME NET INCOME NET INCOME
------ ---------- ----------
Company..................................................... 10.6x 8.6x 7.4x
Median for Multispecialty Group............................. 7.1x 7.3x 5.5x
Premium (Discount) to Multispecialty Median................. 49.1% 18.1% 33.6%
Salomon Smith Barney also calculated multiples of adjusted market value to
last twelve months net revenues, to last twelve months earnings before interest,
taxes, depreciation and amortization and to last twelve months earnings before
interest and taxes. The multiple of adjusted market value to last twelve months
net revenues for the Company was 1.2x compared with a median of 0.4x for the
selected group. The multiple of adjusted market value to last twelve months
earnings before interest, taxes, depreciation and amortization for the Company
was 7.3x compared with a median of 4.8x for the selected group. The multiple of
adjusted market value to last twelve months earnings before interest and taxes
for the Company was 9.5x compared with a median of 7.1x for the selected group.
ADJUSTED MARKET VALUE(1) AS MULTIPLE OF:
-----------------------------------------
LTM NET REVENUE LTM EBITDA LTM EBIT
--------------- ---------- --------
Company........................................... 1.2x 7.3x 9.5x
Median for Multispecialty Group(2)................ 0.4x 4.8x 7.1x
Premium (Discount) to Multispecialty Median....... 198.7% 52.2% 33.9%
- ---------------
(1) Adjusted market value equals fully diluted market value plus outstanding
debt minus cash.
(2) MedPartners, Inc. was excluded from the EBITDA and EBIT median calculation
because of its announced plan to exit the physician practice management
business.
Salomon Smith Barney also compared the Company to the following five single
specialty physician practice management companies: American Oncology Resources,
American Physician Partners, AmeriPath, Inc., Pediatrix Medical Group and
Response Oncology, Inc. based on various measures of performance. Salomon Smith
Barney noted that the Company's market value as a multiple of 1998 net income
was 10.6x, compared with a median of 8.6x for the selected group. Salomon Smith
Barney also noted that the Company's market value as a multiple of estimated
1999 net income and estimated 2000 net income was 8.6x and 7.4x, respectively,
compared with a median of 7.4x and 6.2x, respectively, for the selected group.
MARKET VALUE AS MULTIPLE OF:
----------------------------------------------------------
1998 1999 2000
NET INCOME ESTIMATED NET INCOME ESTIMATED NET INCOME
---------- -------------------- --------------------
Company.................................... 10.6x 8.6x 7.4x
Median for Single Specialty Group.......... 8.6x 7.4x 6.2x
Premium (Discount) to Single Specialty
Median................................... 23.4% 16.9% 18.8%
Salomon Smith Barney also calculated multiples of adjusted market value to
last twelve months net revenues, to last twelve months earnings before interest,
taxes, depreciation and amortization and to last twelve months earnings before
interest and taxes. The multiple of adjusted market value to last twelve months
net revenues for the Company was 1.2x compared with a median of 1.5x for the
selected group. The multiple
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of adjusted market value to last twelve months earnings before interest, taxes,
depreciation and amortization for the Company was 7.3x compared with a median of
6.4x for the selected group. The multiple of adjusted market value to last
twelve months earnings before interest and taxes for the Company was 9.5x
compared with a median of 8.5x for the selected group.
ADJUSTED MARKET VALUE(1) AS MULTIPLE OF:
-----------------------------------------
LTM NET REVENUE LTM EBITDA LTM EBIT
--------------- ---------- --------
Company........................................... 1.2x 7.3x 9.5x
Median for Single Specialty Group................. 1.5x 6.4x 8.5x
Premium (Discount) to Single Specialty Median..... (18.7%) 14.3% 11.7%
- ---------------
(1) Adjusted market value equals fully diluted market value plus outstanding
debt minus cash.
Discounted Cash Flow Valuation of the Company. Using a discounted cash
flow methodology, Salomon Smith Barney calculated a range of firm values of the
Company as of March 22, 1999 based on the estimated unlevered free cash flows
that the Company could produce on a stand-alone basis, which includes
management's projected acquisitions at a 5.0x EBITDA purchase price, at a 6.0x
EBITDA purchase price and at a 7.0x EBITDA purchase price, in each case over the
five-year period from fiscal year 1999 through fiscal year 2003. Salomon Smith
Barney also calculated a range of firm values based on the estimated unlevered
free cash flows that the Company could produce on a stand-alone basis, excluding
management's projected acquisitions, over the five-year period from fiscal year
1999 through fiscal year 2003.
Salomon Smith Barney discounted these cash flows by a range of discount
rates representing the weighted average cost of capital from 10% to 11%. Salomon
Smith Barney calculated firm values as of March 22, 1999 based on discount rates
from 10.3% to 10.8%. These calculations resulted in firm values ranging (i) from
$187 million to $218 million using projections provided by the Company's
management which included projected acquisitions at a 5.0x purchase price; (ii)
from $149 million to $180 million using projections provided by the Company's
management which included projected acquisitions at a 6.0x purchase price; (iii)
from $111 million to $142 million using projections provided by the Company's
management which included projected acquisitions at a 7.0x purchase price; and
(iv) from $110 million to $121 million using projections provided by the
Company's management which excluded projected acquisitions. These correspond to
a range of implied per share equity values (i) from approximately $15.00 to
$19.50; (ii) from approximately $9.50 to $14.00; (iii) from approximately $4.00
to $8.50; and (iv) from approximately $3.75 to $5.50, respectively.
IMPLIED PER SHARE
IMPLIED FIRM VALUE(1) EQUITY VALUE
--------------------- -----------------
(IN MILLIONS)
Based on Management Projections (including management's
projected acquisitions at 5.0x EBITDA)................ $187 - $218 $14.99 to $19.56
Based on Management Projections (including management's
projected acquisitions at 6.0x EBITDA)................ $149 - $180 $ 9.50 to $14.02
Based on Management Projections (including management's
projected acquisitions at 7.0x EBITDA)................ $111 - $142 $ 4.02 to $ 8.48
Based on Management Projections (excluding projected
acquisitions)......................................... $110 - $121 $ 3.83 to $ 5.47
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(1) Firm value equals equity value plus debt and contingencies of $85.2 million
less option proceeds of $2.0 million.
Implied Private Market Valuation of the Company. Salomon Smith Barney
derived an implied private market valuation for the Company based on the
Company's 1998 revenues and earnings before interest, taxes, depreciation and
amortization according to management data. Salomon Smith Barney reviewed
publicly available information regarding 9 selected merger transactions in the
physician practice management industry. The median transaction values as
multiples of last twelve month revenues and last twelve months earnings
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31
before interest, taxes, depreciation and amortization in the three transactions
occurring since October, 1997 were 1.5x and 6.0x, respectively.
Salomon Smith Barney applied a range of multiples of 1.2x to 1.5x to 1998
revenues, resulting in a range of implied equity value per Share of $7.58 to
$12.48. Salomon Smith Barney applied a range of multiples of 6.0x to 9.0x to
1998 earnings before interest, taxes, depreciation and amortization, resulting
in a range of implied equity value per Share prices of $4.58 to $12.89.
IMPLIED EQUITY
VALUE PER SHARE(1)
------------------
Based on 1998 Revenues.................................... $7.58 - $12.48
Based on 1998 EBITDA...................................... $4.58 - $12.89
- ---------------
(1) Equity value per Share reflects 6.916 million diluted Shares.
(c) Other Information. The information contained in Exhibits (a)(1)-(a)(8)
and (c)(1)-(c)(15), and in Annex A, referred to in Item 9 below, is incorporated
herein by reference.
30
32
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(a)(1) -- Offer to Purchase, dated March 31, 1999 (incorporated by
reference to Exhibit (d)(1) of the Schedule 13E-3).
(a)(2) -- Letter of Transmittal (incorporated by reference to Exhibit
(d)(2) of the Schedule 13E-3).
(a)(3) -- Joint Press Release, dated March 25, 1999 (incorporated by
reference to Exhibit (d)(6) of the Schedule 13E-3).
(a)(4) -- Presentation to the Company Board by Salomon Smith Barney,
Inc., dated March 24, 1999 (incorporated by reference to
Exhibit (b)(3) of the Schedule 13E-3).
(a)(5) -- Fairness Opinion of Salomon Smith Barney, Inc., dated March
24, 1999 (incorporated by reference to Annex A to Exhibit
(d)(1) of the Schedule 13E-3).*
(a)(6) -- Fairness Opinion of Bowles Hollowell Conner, dated March 24,
1999 (incorporated by reference to Annex B to Exhibit (d)(1)
of the Schedule 13E-3.*
(a)(7) -- Letter to Stockholders, dated April 8, 1999, from Mitchell
Eisenberg, M.D., Chairman, President and Chief Executive
Officer of the Company.*
(a)(8) -- Presentation to the Company Board by Bowles Hollowell
Conner, dated March 24, 1999 (incorporated by reference to
Exhibit (b)(4) of the Schedule 13E-3).
(a)(9) -- Summary Advertisement dated March 31, 1999 (incorporated by
reference to Exhibit (d)(7) of the Schedule 13E-3).
(c)(1) -- Agreement and Plan of Merger, dated as of March 24, 1999,
among Parent, Purchaser and the Issuer (incorporated by
reference to Exhibit (c)(1) of the Schedule 13E-3).
(c)(2) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Mitchell Eisenberg (incorporated by
reference to Exhibit (c)(7) of the Schedule 13E-3).
(c)(3) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Lewis D. Gold (incorporated by
reference to Exhibit (c)(8) of the Schedule 13E-3).
(c)(4) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Jay A. Martus (incorporated by
reference to Exhibit (c)(9) of the Schedule 13E-3).
(c)(5) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Michael F. Schundler (incorporated
by reference to Exhibit (c)(10) of the Schedule 13E-3).
(c)(6) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Gilbert L. Drozdow (incorporated by
reference to Exhibit (c)(11) of the Schedule 13E-3).
(c)(7) -- Tender Agreement, dated as of March 24, 1999, between Parent
and Robert J. Coward (incorporated by reference to Exhibit
(c)(12) of the Schedule 13E-3).
(c)(8) -- Stockholders Agreement, dated as of March 24, 1999, among
Parent, the Issuer, Holdings, Mitchell Eisenberg, Lewis D.
Gold, Gilbert L. Drozdow, Michael F. Schundler and Jay A.
Martus (incorporated by reference to Exhibit (c)(6) of the
Schedule 13E-3).
31
33
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(c)(9) -- Management Agreement, dated as of March 24, 1999, by and
among the Company, Parent and Vestar Capital Partners
(incorporated by reference to Exhibit (c)(14) of the
Schedule 14D-1, dated March 31, 1999, as amended by
Amendment No. 1 thereto).
(c)(10) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Mitchell Eisenberg (incorporated by
reference to Exhibit (c)(2) of the Schedule 13E-3).
(c)(11) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Lewis Gold (incorporated by reference to
Exhibit (c)(3) of the Schedule 13E-3).
(c)(12) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Michael F. Schundler (incorporated by
reference to Exhibit (c)(4) of the Schedule 13E-3).
(c)(13) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Jay A. Martus (incorporated by reference to
Exhibit (c)(5) of the Schedule 13E-3).
(c)(14) -- Guaranty Agreement, dated as of March 24, 1999, between
Vestar Capital Partners III, L.P. and the Company
(incorporated by reference to Exhibit (c)(13) of the
Schedule 13E-3).
(c)(15) -- Confidentiality Agreement, dated as of December 1, 1998, by
and between Vestar Capital Partners III, L.P. and the
Company (incorporated by reference to Exhibit (c)(3) of the
Schedule 14D-1, dated March 31, 1999, as amended by
Amendment No. 1 thereto).
Annex A -- Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934, as amended, and Rule 14f-1
thereunder.*
- ---------------
* Included with Schedule 14D-9 mailed to stockholders of the Company.
32
34
SIGNATURE
After reasonable 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.
SHERIDAN HEALTHCARE, INC.
By: /s/ MITCHELL EISENBERG, M.D.
------------------------------------
Chairman, President and Chief
Executive Officer
April 8, 1999
33
35
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(a)(1) -- Offer to Purchase, dated March 31, 1999 (incorporated by
reference to Exhibit (d)(1) of the Schedule 13E-3).
(a)(2) -- Letter of Transmittal (incorporated by reference to Exhibit
(d)(2) of the Schedule 13E-3).
(a)(3) -- Joint Press Release, dated March 25, 1999 (incorporated by
reference to Exhibit (d)(6) of the Schedule 13E-3).
(a)(4) -- Presentation to the Company Board by Salomon Smith Barney,
Inc., dated March 24, 1999 (incorporated by reference to
Exhibit (b)(3) of the Schedule 13E-3).
(a)(5) -- Fairness Opinion of Salomon Smith Barney, Inc., dated March
24, 1999 (incorporated by reference to Annex A to Exhibit
(d)(1) of the Schedule 13E-3).*
(a)(6) -- Fairness Opinion of Bowles Hollowell Conner, dated March 24,
1999 (incorporated by reference to Annex B to Exhibit (d)(1)
of the Schedule 13E-3).*
(a)(7) -- Letter to Stockholders, dated April 8, 1999, from Mitchell
Eisenberg, M.D., Chairman, President and Chief Executive
Officer of the Company.*
(a)(8) -- Presentation to the Company Board by Bowles Hollowell
Conner, dated March 24, 1999 (incorporated by reference to
Exhibit (b)(4) of the Schedule 13E-3).
(a)(9) -- Summary Advertisement dated March 31, 1999 (incorporated by
reference to Exhibit (d)(7) of the Schedule 13E-3).
(c)(1) -- Agreement and Plan of Merger, dated as of March 24, 1999,
among Parent, Purchaser and the Issuer (incorporated by
reference to Exhibit (c)(1) of the Schedule 13E-3).
(c)(2) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Mitchell Eisenberg (incorporated by
reference to Exhibit (c)(7) of the Schedule 13E-3).
(c)(3) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Lewis D. Gold (incorporated by
reference to Exhibit (c)(8) of the Schedule 13E-3).
(c)(4) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Jay A. Martus (incorporated by
reference to Exhibit (c)(9) of the Schedule 13E-3).
(c)(5) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Michael F. Schundler (incorporated
by reference to Exhibit (c)(10) of the Schedule 13E-3).
(c)(6) -- Subscription and Tender Agreement, dated as of March 24,
1999, between Parent and Gilbert L. Drozdow (incorporated by
reference to Exhibit (c)(11) of the Schedule 13E-3).
(c)(7) -- Tender Agreement, dated as of March 24, 1999, between Parent
and Robert J. Coward (incorporated by reference to Exhibit
(c)(12) of the Schedule 13E-3).
(c)(8) -- Stockholders Agreement, dated as of March 24, 1999, among
Parent, the Issuer, Holdings, Mitchell Eisenberg, Lewis D.
Gold, Gilbert L. Drozdow, Michael F. Schundler and Jay A.
Martus (incorporated by reference to Exhibit (c)(6) of the
Schedule 13E-3).
(c)(9) -- Management Agreement, dated as of March 24, 1999, by and
among the Company, Parent and Vestar Capital Partners
(incorporated by reference to Exhibit (c)(14) of the
Schedule 14D-1, dated March 31, 1999, as amended by
Amendment No. 1 thereto).
(c)(10) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Mitchell Eisenberg (incorporated by
reference to Exhibit (c)(2) of the Schedule 13E-3).
(c)(11) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Lewis Gold (incorporated by reference to
Exhibit (c)(3) of the Schedule 13E-3).
(c)(12) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Michael F. Schundler (incorporated by
reference to Exhibit (c)(4) of the Schedule 13E-3).
(c)(13) -- Employment Agreement, dated as of March 24, 1999, between
the Company and Jay A. Martus (incorporated by reference to
Exhibit (c)(5) of the Schedule 13E-3).
34
36
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(c)(14) -- Guaranty Agreement, dated as of March 24, 1999, between
Vestar Capital Partners III, L.P. and the Company
(incorporated by reference to Exhibit (c)(13) of the
Schedule 13E-3).
(c)(15) -- Confidentiality Agreement, dated as of December 1, 1998, by
and between Vestar Capital Partners III, L.P. and the
Company (incorporated by reference to Exhibit (c)(3) of the
Schedule 14D-1, dated March 31, 1999, as amended by
Amendment No. 1 thereto).
Annex A -- Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934, as amended, and Rule 14f-1
thereunder.*
- ---------------
* Included with Schedule 14D-9 mailed to stockholders of the Company.
35