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EXHIBIT (a)(20)
[LETTERHEAD OF ROGERS & WELLS]
February 13, 1999
Robert Knauss, Esq.
Munger Tolles & Olson
350 South Grand Avenue
Los Angeles, CA 90071-1560
Dear Rob:
I have read the February 12, 1999 letter from Charles Weissman to the Board of
Directors of COHR, Inc. in which Mr. Weissman says that Managed Health Care
Associates is prepared to pay $7.50 per share for COHR's common stock and to
execute a merger agreement, presumably relating to a transaction at that price.
Although Mr. Weissman's letter says that MHA understands that, pursuant to the
revised merger agreement with TCF Acquisition Corporation, COHR is precluded
from accepting or even considering such an offer, much of his letter either
ignores or misstates the provisions of the Amended Plan and Agreement of Merger
dated February 5, 1999, and the provisions of the original Plan and Agreement of
Merger dated December 24, 1998, which were applicable until the Amended Merger
Agreement was signed. Therefore, I thought it would be appropriate for me, on
behalf of the Three Cities Funds and TCF Acquisition Corp., to state how the
transaction Mr. Weissman describes would violate the Amended Merger Agreement
and, even if the Amended Merger Agreement had not been signed, would have
violated the original Merger Agreement. That is as follows:
1. The Amended Merger Agreement requires COHR to take various steps to assist
TCF Acquisition's tender offer, to facilitate stockholder approval of the merger
of TCF Acquisition and COHR and to carry out that merger if it is approved by
COHR's stockholders. It precludes COHR from, among other things, encouraging or
otherwise facilitating any inquiry or the making of any proposal or offer with
respect to a merger or a purchase of, or tender for, all or any significant
portion of its equity securities or assets. There is no provision permitting
COHR to terminate the Amended Merger Agreement because of a proposal received
from somebody other than TCF Acquisition. Therefore, Mr. Weissman is correct
that COHR is precluded from accepting or considering an offer from MHA (or
anyone else).
2. Under the original Merger Agreement, COHR could only accept a Superior
Proposal if it was received on or before February 2, 1999. While the Three
Cities Funds and TCF Acquisition do not believe what was set forth in Mr.
Weissman's letter of February 2, 1999 constituted a proposal or met the minimum
requirements to be deemed a Superior Proposal, even if it did, MHA could not
after, February 2, 1999, have increased the purchase price it proposed to pay. A
proposal at a new purchase price would be a new proposal. If MHA wanted COHR's
Board to consider a proposal for an MHA purchase at $7.50 per share, it should
have made a proposal of $7.50 per share while COHR's Board was still permitted
by the original Merger Agreement to consider proposals.
3. Referring to what MHA submitted to the COHR directors on February 2, 1999,
Mr. Weissman's February 12 letter states "MHA made it clear that it would seek
to negotiate and sign a merger agreement, without a due diligence or financing
contingency, on or prior to February 10, 1999." Mr. Weissman's statement makes
it clear that what was described in Mr. Weissman's February 2, 1999 letter was
subject to a financing contingency, as well as a contingency, on February 2,
1999. While Mr. Weissman says MHA would have eliminated those contingencies by
February 10, 1999, that would have been 8 days later than the last day for a
person to submit a proposal which was not subject to a financing contingency.
Further, it is far from clean that MHA would have been able to eliminate those
contingencies by February 10, 1999, or by any other date. While the letter from
Banque Nationale de Paris which accompanied Mr. Weissman's February 2 letter
said BNP was highly confident it would be able to syndicate a loan for all the
money MHA would need to pay $7.00 per share for COHR's shares, that "confidence"
was subject to satisfactory conclusion of diligence about the assets and
business of COHR, and specifically about the pending stockholder suits and
COHR's MasterPlan business, the two biggest problems currently confronting COHR.
There is no reason to think BNP would have been satisfied about those problems
by February 10, 1999, or that BNP could in the future
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Robert Knauss, Esq. Page 2
February 13, 1999
become satisfied about those problems if MHA were able to advance a proposal of
the type described in Mr. Weissman's February 12 letter. Certainly, Mr.
Weissman's February 12 letter does not say that the due diligence and financing
contingencies no longer exist.
4. Mr. Weissman's February 12 letter says that since the original Merger
Agreement allowed the COHR directors 10 business days from the receipt of a
Superior Proposal to notify TCF, "COHR was never at risk of losing TCF as a
$6.50 per share purchaser without having MHA as a $7.00 per share replacement
purchaser." That is not correct. Under the original Merger Agreement, the only
amount it was certain TCF Acquisition would pay was $5.375 per share. There was
a possibility the amount TCF Acquisition would pay would increase to $6.375 per
share, but that required that pending stockholder suits be settled within 120
days (or under some circumstances, 210 days). While COHR may never have been at
risk of losing TCF as a $5.375 (and possibly $6.375) per share purchaser, it was
not until COHR and TCF Acquisition signed the Amended Merger Agreement that for
the first time TCF was a $6.50 per share purchaser. Presumably the change from
$5.375 per share with the possibility of an additional $1 per share to a certain
$6.50 per share was a significant factor COHR's directors considered in deciding
to approve the Amended Merger Agreement.
5. Mr. Weissman's February 12 letter says that MHA was prepared to negotiate its
draft merger agreement to completion no later than February 10, 1999 and that
the completed agreement would have no due diligence or financing contingencies.
He goes on to say that, "Consequently the Board would have been in a position to
choose between an offer of $6.50 a share and an offer of $7.00 per share, with
all of the terms being materially identical." However, Three Cities was under no
obligation to keep its $6.50 per share offer open until February 10, 1999, and
had made it clear that offer would terminate at the end of the day on February
5, 1999. Therefore, the Board's choice on February 5 was between a certain $6.50
per share agreement and the highly contingent possibility that five days later
COHR would be able to enter into an agreement at $7.00 per share, with the
prospect of the transaction's remaining at $5.375, or maybe $6.375, if the $7.00
transaction did not eventuate.
6. If MHA were to make a tender offer at $7.50 per share (or any other price),
the Three Cities Funds, which own 48.3% of COHR's common stock, would be under
no obligation to tender their shares or to vote in favor of a merger following
the tender offer. Therefore, it would be virtually impossible for COHR to get
the necessary stockholder approval of a merger with a MHA subsidiary unless the
Three Cities Funds were in favor of the transaction.
7. The form of merger agreement which MHA submitted to COHR included a
representation that the Three Cities Funds had tendered their shares and a
representation that counsel for the plaintiffs in the Stockholder Suits have
made an offer to settle all such outstanding Stockholder Suits for an aggregate
of $13 million (inclusive of all fees and expenses) and such offer has not been
withdrawn. COHR could not make the first of these representations unless the
Three Cities Funds were in favor of the MHA transaction, and the second
representation might have to be qualified to point out that the Three Cities
Funds, which hold what probably are well over 50% in amount of the claims that
are the subject of the Stockholder Suits, would have the right to opt out of any
settlement.
In summary, it would violate the Amended Merger Agreement for COHR to enter into
an agreement with MHA relating to a transaction of the type described in Mr.
Weissman's February 12 letter, and even if the Amended Merger Agreement had not
been executed, it would have violated the original Merger Agreement for COHR at
this time to enter into such an agreement with MHA.
Earlier this week, a representative of Advent International Inc told
representatives of the Three Cities Funds that, unless MHA were assured that the
Three Cities Funds would negotiate regarding a sale of COHR's Purchase
Connection business to MHA after they acquired COHR, MHA could create roadblocks
that would make it more different for the Three Cities Funds to succeed in
acquiring COHR, although the representative of Advent acknowledged it was
unlikely that MHA could prevent the transaction from taking place. Mr.
Weissman's February 12 letter appears to be a step in MHA's trying to do that.
Any delay in the Three Cities Funds' completing their acquisition of COHR could
be costly to COHR, particularly in view of the need to address the operating
problems being encountered by COHR in its MasterPlan business. Mr. Weissman's
letter makes it clear that MHA knows that any steps by COHR to put together a
transaction with MHA would violate the Amended
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Robert Knauss, Esq. Page 3
February 13, 1999
Merger Agreement. If MHA nonetheless tries to pursue such a transaction or
otherwise interfere with the transaction between TCF Acquisition and COHR, the
Three Cities Funds will expect COHR to join them in seeking appropriate recourse
against MHA.
Very truly yours,
David W. Bernstein
cc: Kevin Masuda
J. William Uhrig
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