<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
(Name of Subject Company)
TALMED MERGER CORPORATION
MEDPARTNERS, INC.
(Bidders)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(together with associated Junior Participating
Preferred Stock purchase rights)
(Title of Class of Securities)
874121-10-6
(Cusip Number of Class of Securities)
---------------------
J. BROOKE JOHNSTON, JR., ESQ.
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
MEDPARTNERS, INC.
3000 GALLERIA TOWER, SUITE 1000
BIRMINGHAM, ALABAMA 35244
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Bidders)
---------------------
COPY TO:
ROBERT E. LEE GARNER, ESQ.
HASKELL SLAUGHTER & YOUNG, L.L.C.
1200 AMSOUTH/HARBERT PLAZA
1901 SIXTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
---------------------
CALCULATION OF FILING FEE
Transaction Valuation*: $200,025,630 Amount of Filing Fee**: $40,005.13
* For purposes of calculating the fee only. This amount assumes the purchase of
3,175,010 shares of common stock, par value $.01 per share (the "Shares"), of
the subject company for $63.00 cash per Share, based on the number of Shares
represented by the subject company as outstanding as of August 14, 1997, and
the number of Shares issuable upon exercise of all outstanding options under
the subject company's stock option plan.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d)
under the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate of the cash offered by the bidders.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Not Applicable Filing Party: Not
Applicable
Form or Registration No.: Not Applicable Date Filed: Not
Applicable
</TABLE>
<PAGE> 2
14D-1
CUSIP NO. 874121-10-6
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
TALMED MERGER CORPORATION
2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Sources of Funds
BK, WC, AF
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f) [ ]
6. Citizenship or Place of Organization
DELAWARE
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares [ ]
9. Percent of Class Represented by Amount in Row 7
0%
10. Type of Reporting Person
CO
<PAGE> 3
14D-1
CUSIP NO. 874121-10-6
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
MEDPARTNERS, INC. TAX ID #63-1151076
2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Sources of Funds
BK, WC, OO
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f) [ ]
6. Citizenship or Place of Organization
DELAWARE
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares [ ]
9. Percent of Class Represented by Amount in Row 7
0%
10. Type of Reporting Person
CO
<PAGE> 4
SCHEDULE 14D-1
This Tender Offer Statement on Schedule 14D-1 relates to the offer by
Talmed Merger Corporation (the "Subsidiary"), a Delaware corporation and a
wholly-owned subsidiary of MedPartners, Inc., a Delaware corporation
("MedPartners"), to purchase all of the outstanding shares of common stock, par
value $.01 per share (the "Shares"), of Talbert Medical Management Holdings
Corporation at a purchase price of $63.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated August 20, 1997 and in the related Letter of
Transmittal (which, together with any supplements or amendments, collectively
constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and
(a)(2) hereto, respectively. The item numbers and responses thereto below are in
accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Talbert Medical Management Holdings
Corporation, a Delaware corporation (the "Company"). The address of the
Company's principal executive offices is 3540 Howard Way, Costa Mesa, California
92626.
(b) The class of equity securities to which this Schedule 14D-1 relates is
common stock, par value $.01 per share, together with the associated rights to
purchase shares of preferred stock, par value $.01 per share, designated as
"Junior Participating Preferred Stock," of the Company. The information set
forth in the Offer to Purchase under "Introduction" is incorporated herein by
reference.
(c) The information set forth in the Offer to Purchase under "Introduction"
and in Section 6 ("Price Range of Shares; Dividends") is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Subsidiary and
MedPartners. The information set forth in the Offer to Purchase under
"Introduction," in Section 8 ("Certain Information Concerning the Subsidiary and
MedPartners") and in Schedule I to the Offer to Purchase is incorporated herein
by reference.
(e)-(f) During the last five years, neither the Subsidiary, MedPartners
nor, to the best of their knowledge, any of the persons listed in Schedule I to
the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of or prohibiting activities subject to
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 10 ("Background of the Offer; Contacts with the
Company") and in Section 11 ("Purpose of the Offer; Merger Agreement; Plans for
the Company") is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the Offer to Purchase in Section 9
("Source and Amount of Funds") is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(c) The information set forth in the Offer to Purchase under
"Introduction," in Section 10 ("Background of the Offer; Contacts with the
Company") and in Section 11 ("Purpose of the Offer; Merger Agreement; Plans for
the Company") is incorporated herein by reference.
<PAGE> 5
(d) The information set forth in the Offer to Purchase in Section 10
("Background of the Offer; Contacts with the Company") and in Section 11
("Purpose of the Offer; Merger Agreement; Plans for the Company") is
incorporated herein by reference.
(e)-(g) The information set forth in the Offer to Purchase in Section 11
("Purpose of the Offer; Merger Agreement; Plans for the Company") and in Section
12 ("Effect of the Offer on the Market for the Shares, Exchange Act Registration
and Margin Regulations") is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Offer to Purchase under
"Introduction," in Section 8 ("Certain Information Concerning the Subsidiary and
MedPartners"), in Section 10 ("Background of the Offer; Contacts with the
Company") and in Section 11 ("Purpose of the Offer; Merger Agreement; Plans for
the Company") is incorporated herein by reference.
(b) The information set forth in the Offer to Purchase in Section 10
("Background of the Offer; Contacts with the Company") is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under "Introduction," in
Section 8 ("Certain Information Concerning the Subsidiary and MedPartners"), in
Section 9 ("Source and Amount of Funds"), in Section 10 ("Background of the
Offer; Contacts with the Company") and in Section 11 ("Purpose of the Offer;
Merger Agreement; Plans for the Company") is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under "Introduction" and
in Section 15 ("Fees and Expenses") is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 8 ("Certain
Information Concerning the Subsidiary and MedPartners") is incorporated herein
by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Offer to Purchase in Section 11
("Purpose of the Offer; Merger Agreement; Plans for the Company") is
incorporated herein by reference.
(b)-(e) The information set forth in the Offer to Purchase under
"Introduction," in Section 12 ("Effect of the Offer on the Market for the
Shares, Exchange Act Registration and Margin Regulations") and in Section 14
("Certain Legal Matters and Regulatory Approvals") is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, copies of which are filed as Exhibits (a)(1) and (a)(2)
hereto, respectively, is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated August 20, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Information Agent to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
2
<PAGE> 6
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of summary advertisement, dated August 20, 1997.
(a)(8) Text of joint press release issued by MedPartners and the Company on
August 14, 1997.
(b)-1 Credit Agreement, dated September 5, 1996, by and among MedPartners,
Inc., NationsBank, National Association (South), as administrative agent for the
Lenders, The First National Bank of Chicago, as Documentation Agent for the
Lenders, and the Lenders thereto, filed as Exhibit (10)-17 to the Company's
Registration Statement on Form S-1 (Registration No. 333-12465), is hereby
incorporated herein by reference.
(b)-2 Amendment No. 1 to Credit Agreement and Consent, dated September 5,
1996, by and among MedPartners, Inc., NationsBank, National Association (South),
as administrative agent for the Lenders, The First National Bank of Chicago, as
Documentation Agent for the Lenders, and the Lenders thereto, filed as Exhibit
(10)-18 to the Company's Registration Statement on Form S-1 (Registration No.
333-12465), is hereby incorporated herein by reference.
(c)(1) Agreement and Plan of Merger, dated as of August 14, 1997, by and
among MedPartners, the Subsidiary and the Company.
(c)(2) Form of Physician Warrant Agreement, filed as Exhibit 8 to the
Talbert Medical Management Holdings Corporation Schedule 14D-9 filed August 20,
1997, is hereby incorporated herein by reference.
(c)(3) Letter Agreement Regarding Management Incentive Program Bonus, filed
as Exhibit 6 to the Talbert Medical Management Holdings Corporation Schedule
14D-9 filed August 20, 1997, is hereby incorporated herein by reference.
(c)(4) Letter Agreement Regarding Transition Bonus, filed as Exhibit 7 to
the Talbert Medical Management Holdings Corporation Schedule 14D-9 filed August
20, 1997, is hereby incorporated herein by reference.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
3
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 20, 1997
TALMED MERGER CORPORATION
By /s/ LARRY R. HOUSE
------------------------------------
Its President
------------------------------------
MEDPARTNERS, INC.
By /s/ LARRY R. HOUSE
------------------------------------
Its Chairman and Chief Executive
Officer
------------------------------------
4
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - ------- -----------
<C> <C> <S>
(a)(1) -- Offer to Purchase dated August 20, 1997.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter from the Information Agent to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) -- Letter to clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) -- Form of summary advertisement, dated August 20, 1997.
(a)(8) -- Text of joint press release issued by MedPartners and the
Company on August 14, 1997.
(b)(1) -- Credit Agreement, dated September 5, 1996, by and among
MedPartners, Inc., NationsBank, National Association
(South), as administrative agent for the Lenders, The First
National Bank of Chicago, as Documentation Agent for the
Lenders, and the Lenders thereto, filed as Exhibit (10)-17
to the Company's Registration Statement on Form S-1
(Registration No. 333-12465), is hereby incorporated herein
by reference.
(b)(2) -- Amendment No. 1 to Credit Agreement and Consent, dated
September 5, 1996, by and among MedPartners, Inc.,
NationsBank, National Association (South), as administrative
agent for the Lenders, The First National Bank of Chicago,
as Documentation Agent for the Lenders, and the Lenders
thereto, filed as Exhibit (10)-18 to the Company's
Registration Statement on Form S-1 (Registration No.
333-12465), is hereby incorporated herein by reference.
(c)(1) -- Agreement and Plan of Merger, dated as of August 14, 1997,
by and among MedPartners, the Purchaser and the Company.
(c)(2) -- Form of Physician Warrant Agreement, filed as Exhibit 8 to
the Talbert Medical Management Holdings Corporation Schedule
14D-9 filed August 20, 1997, is hereby incorporated herein
by reference.
(c)(3) -- Letter Agreement Regarding Management Incentive Program
Bonus, filed as Exhibit 6 to the Talbert Medical Management
Holdings Corporation Schedule 14D-9 filed August 20, 1997,
is hereby incorporated herein by reference.
(c)(4) -- Letter Agreement Regarding Transition Bonus, filed as
Exhibit 7 to the Talbert Medical Management Holdings
Corporation Schedule 14D-9 filed August 20, 1997, is hereby
incorporated herein by reference.
</TABLE>
5
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK (TOGETHER WITH THE ASSOCIATED JUNIOR
PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS) OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
AT $63.00 NET PER SHARE IN CASH
BY TALMED MERGER CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
MEDPARTNERS, INC.
---------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY SEPTEMBER 19, 1997, UNLESS THE
OFFER IS EXTENDED.
---------------------
THE BOARD OF DIRECTORS OF TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
(THE "COMPANY") HAS BY UNANIMOUS VOTE OF THOSE PRESENT APPROVED THE OFFER AND
THE MERGER, DETERMINED THAT THE OFFER DESCRIBED HEREIN IS IN THE BEST INTEREST
OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT ALL STOCKHOLDERS TENDER THEIR
SHARES.
---------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST FIFTY-ONE PERCENT OF THE OUTSTANDING SHARES OF THE
COMPANY, ASSUMING CERTAIN EXERCISES (THE "MINIMUM CONDITION"). THE OFFER IS ALSO
SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 13.
---------------------
THE OFFER IS NOT CONDITIONED UPON MEDPARTNERS OR THE
SUBSIDIARY OBTAINING FINANCING.
---------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S
SHARES SHOULD EITHER (I) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF
TRANSMITTAL AND MAIL OR DELIVER THE LETTER OF TRANSMITTAL (OR SUCH FACSIMILE)
TOGETHER WITH THE CERTIFICATE(S) EVIDENCING THE TENDERED SHARES AND ANY OTHER
REQUIRED DOCUMENTS TO THE DEPOSITARY, OR TENDER SUCH SHARES PURSUANT TO THE
PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3; OR (II) REQUEST SUCH
STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO
EFFECT THE TRANSACTION FOR SUCH STOCKHOLDER. A STOCKHOLDER WHOSE SHARES ARE
REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY
OR OTHER NOMINEE IF SUCH STOCKHOLDER DESIRES TO TENDER SHARES SO REGISTERED.
A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFER TO PURCHASE ON A
TIMELY BASIS, MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURES FOR GUARANTEED
DELIVERY SET FORTH IN SECTION 3.
QUESTIONS AND REQUESTS FOR ASSISTANCE, OR FOR ADDITIONAL COPIES OF THIS
OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL OR OTHER OFFER MATERIALS, MAY BE
DIRECTED TO THE INFORMATION AGENT AT THE ADDRESS AND TELEPHONE NUMBER SET FORTH
ON THE BACK COVER OF THIS OFFER TO PURCHASE. STOCKHOLDERS MAY ALSO CONTACT
BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES FOR ASSISTANCE CONCERNING
THE OFFER.
AUGUST 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1
INTRODUCTION.............................................................
Section 1. Terms of the Offer; Expiration Date......................... 2
Section 2. Acceptance for Payment and Payment for Shares............... 4
Section 3. Procedure for Tendering Shares.............................. 5
Section 4. Withdrawal Rights........................................... 8
Section 5. Certain U.S. Federal Income Tax Matters..................... 9
Section 6. Price Range of the Company's Common Stock; Dividends........ 9
Section 7. Certain Information Concerning the Company.................. 10
Section 8. Certain Information Concerning the Subsidiary and
MedPartners................................................. 11
Section 9. Source and Amount of Funds.................................. 14
Section 10. Background of the Offer; Contacts with the Company.......... 14
Section 11. Purpose of the Offer; Merger Agreement; Plans for the
Company..................................................... 16
Section 12. Effect of the Offer on the Market for the Shares, Exchange
Act Registration and Margin Regulations..................... 23
Section 13. Certain Conditions to the Offer............................. 24
Section 14. Certain Legal Matters and Regulatory Approvals.............. 25
Section 15. Fees and Expenses........................................... 28
Section 16. Miscellaneous............................................... 28
Schedule I Information Concerning the Directors and Executive Officers
of MedPartners and the Subsidiary........................... S-1
</TABLE>
<PAGE> 3
TO: THE HOLDERS OF COMMON STOCK OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
INTRODUCTION
Talmed Merger Corporation (the "Subsidiary"), a Delaware corporation and a
wholly-owned subsidiary of MedPartners, Inc., a Delaware corporation
("MedPartners"), hereby offers to purchase all of the outstanding shares of
common stock, par value $.01 per share, together with the associated rights to
purchase shares of preferred stock, par value $.01 per share, designated as
"Junior Participating Preferred Stock" (the "Shares"), of Talbert Medical
Management Holdings Corporation, a Delaware corporation (the "Company"), at a
purchase price of $63.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any supplements or
amendments, collectively constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer and sale of Shares pursuant to
the Offer. The Subsidiary will pay all fees and expenses of ChaseMellon
Shareholder Services, L.L.C., as Depositary (the "Depositary") and Georgeson &
Company, Inc. as Information Agent (the "Information Agent"), incurred in
connection with the Offer. See Section 15.
The Offer is conditioned upon, among other things, there having been
validly tendered and not properly withdrawn prior to the expiration of the Offer
a number of Shares which constitutes at least fifty-one percent (51%) of the
Company's outstanding voting power (assuming the exercise of all outstanding
options and rights to purchase shares of Common Stock) (the "Minimum
Condition"). The Company has informed the Subsidiary that as of August 14, 1997,
there were 3,000,758 Shares issued and outstanding, and 174,252 shares of Common
Stock reserved for issuance under the Company's stock option plan, and that,
except as otherwise disclosed in the Merger Agreement, no other stock of the
Company is outstanding or committed to be issued. Based on this information, and
assuming all outstanding options to purchase shares of Common Stock will have
been accelerated so as to be fully exercisable prior to the consummation of the
Offer, the Subsidiary believes that the Minimum Condition will be satisfied if
the Subsidiary acquires at least 1,619,256 Shares in the Offer. MedPartners does
not directly or indirectly hold any Shares. Certain other conditions to the
Offer are described in Section 13.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of August 14, 1997 (the "Merger Agreement"), by and among MedPartners, the
Subsidiary and the Company. The Merger Agreement provides, among other things,
that not later than the second business day after satisfaction or, waiver of all
the conditions to the Merger, the Subsidiary will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation of the Merger and as a wholly-owned
subsidiary of MedPartners. Thereupon, each outstanding Share (other than Shares
owned directly or indirectly by the Company, MedPartners or any subsidiary of
the Company or MedPartners, and other than Shares held by stockholders, if any,
who have properly exercised appraisal rights) will be converted into and
represent the right to receive $63.00 in cash, or any higher price that may be
paid per Share in the Offer, without interest. See Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS" OR THE
"BOARD") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND HAS DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER (INCLUDING THE OFFER PRICE OF $63.00
PER SHARE IN CASH) IS IN THE BEST INTEREST OF THE COMPANY'S STOCKHOLDERS, AND
RECOMMENDS THAT ALL STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
The Company has advised MedPartners that Smith Barney Inc. ("Smith
Barney"), financial advisor to the Company, has delivered to the Board of
Directors a written opinion dated August 14, 1997 to the effect that, as of such
date and based upon and subject to certain matters stated in such opinion, the
$63.00 per Share cash consideration to be received by the holders of Shares
(other than MedPartners and its affiliates)
<PAGE> 4
in the Offer and the Merger, taken together, was fair from a financial point of
view to such holders. A copy of the written opinion of Smith Barney dated August
14, 1997, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Smith Barney, is attached as Exhibit 15
to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders concurrently herewith
and should be carefully read in its entirety. Smith Barney's opinion is directed
only to the fairness, from a financial point of view, of the cash consideration
to be received in the Offer and the Merger by holders of the Shares (other than
MedPartners and its affiliates) and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder should tender Shares
pursuant to the Offer. HOLDERS OF THE SHARES ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY.
The Merger Agreement provides that promptly upon the purchase of Shares by
the Subsidiary pursuant to the Offer, seven of the Company's nine directors will
resign, and MedPartners will designate three replacements for appointment or
election to the Company's Board of Directors. The Company will, upon request of
the Subsidiary, use its best efforts promptly to cause MedPartners' designees to
be so appointed or elected. The remaining two directors (and any successors
appointed or elected before the Effective Time) are referred to as the "Original
Directors." The Company will promptly take all actions required by Section 14(f)
of the Exchange Act and related Rule 14f-1 as is necessary to enable
MedPartners' designees to be elected to the Company's Board of Directors.
MedPartners or the Subsidiary will supply the Company in writing, and be solely
responsible for, any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1. Once MedPartners' designees constitute a majority of the Company's
Board of Directors, any amendment of the Merger Agreement, any termination of
the Merger Agreement by the Company, any extension of time for performance of
any of the obligations of MedPartners or the Subsidiary thereunder, any waiver
of any condition or any of the Company's rights thereunder or other action by
the Company thereunder may be effected only by the joint action of the Original
Directors.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required by law, the approval and adoption of
the Merger Agreement by the requisite vote of the stockholders of the Company.
See Section 11 and Section 13. Under the Company's Certificate of Incorporation
and the General Corporation Law of the State of Delaware ("the DGCL"), the
holders of Shares have one vote for each Share owned by them of record. Under
the Company's Certificate of Incorporation and the DGCL, a majority vote of the
then outstanding Shares is required to approve and adopt the Merger Agreement
and the Merger. Consequently, if the Minimum Condition is satisfied, the
Purchaser will have sufficient voting power to approve and adopt the Merger
Agreement and the Merger without the vote of any other stockholder.
Under the DGCL, if the Subsidiary acquires, pursuant to the Offer or
otherwise, at least 90% of the then outstanding Shares, the Subsidiary will be
able to consummate the Merger without a vote of the Company's stockholders. In
such event, MedPartners and the Subsidiary will take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition without a meeting of the Company's
stockholders. If, however, the Subsidiary does not acquire at least 90% of the
then outstanding Shares pursuant to the Offer or otherwise, and a vote of the
Company's stockholders is required under the DGCL, a longer period of time will
be required to effect the Merger. See Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY AND IN THEIR ENTIRETY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of such extension or amendment), the
Subsidiary will accept for payment and pay for all Shares validly tendered on or
prior to the Expiration Date and not properly withdrawn as permitted by Section
4 below. For purposes of the Offer, the term "Expiration Date" means 12:00
midnight, New York City time, on Friday, September 19, 1997, unless and until
the Purchaser, in its sole discretion (subject to the terms of the Merger
Agreement),
2
<PAGE> 5
has extended the period of time during which the Offer is open, in which event
the term "Expiration Date" will mean the latest time and date at which the
Offer, as so extended by the Subsidiary, shall expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the regulations thereunder (the "HSR Act"). The Offer is also subject to
certain other conditions set forth in Section 13 below. If these or any of the
other conditions referred to in Section 13 are not satisfied or any events
specified in Section 13 have occurred or are determined by the Subsidiary to
have occurred prior to the Expiration Date, the Subsidiary reserves the right
(but is not obligated), subject to the terms of the Merger Agreement and whether
or not any shares have theretofore been accepted for payment, (i) to decline to
purchase any of the Shares tendered in the Offer, terminate the Offer and return
all tendered Shares to the tendering stockholders, (ii) to waive or amend any or
all conditions to the Offer, to the extent permitted by applicable law and the
provisions of the Merger Agreement, and, subject to complying with applicable
rules and regulations of the Securities and Exchange Commission (the
"Commission"), purchase all Shares validly tendered, (iii) to extend the Offer
and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares which have been tendered during the period or
periods for which the Offer is extended or (iv) to delay acceptance for payment
or payment for Shares, subject to applicable law, until satisfaction or waiver
of the conditions to the Offer. In the event that the Subsidiary waives any of
the conditions set forth in Section 13, the Commission may, if the waiver is
deemed to constitute a material change to the information previously provided to
the stockholders, require that the Offer remain open for an additional period of
time and/or that the Subsidiary disseminate information concerning such waiver.
The Subsidiary will, subject to the conditions specified in Section 13,
accept for payment and pay for Shares which have been validly tendered and not
withdrawn pursuant to the Offer as soon as it is permitted to do so under
applicable law; provided that, if the number of Shares that have been validly
tendered and not withdrawn represent more than 75% but less than 90% of the
Company's outstanding voting power (calculated assuming the exercise of all
outstanding options and rights to purchase shares of Common Stock), the
Subsidiary may extend the Offer up to the tenth business day following the date
on which all conditions to the Offer shall first have been satisfied or waived.
If any of the conditions specified in Section 14 are not satisfied on the
initial Expiration Date, the Subsidiary may extend (and re-extend) the Offer
through October 20, 1997, to provide time to satisfy such conditions. During
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw its Shares. See Section 4.
The Merger Agreement provides that the Subsidiary may modify the terms of
the Offer except that, without the written approval of the Company, the
Subsidiary will not (i) reduce the number of Shares subject to the Offer; (ii)
decrease the price per Share paid in the Offer, (iii) modify or add to the
conditions set forth in Section 13 herein; (iv) allow the Offer to expire prior
to September 19, 1997; (v) extend the Offer beyond October 20, 1997; (vi) change
the form of consideration payable in the Offer; or (vii) make any other
modifications to the Offer that are otherwise materially adverse to the holders
of the Shares.
Subject to the applicable regulations of the Commission, the Subsidiary
also reserves the right, in its sole discretion, at any time and from time to
time, (i) to delay acceptance for payment of or, regardless of whether such
Shares were theretofore accepted for payment, payment for any Shares pending
receipt of any regulatory approval specified in Section 14 below or in order to
comply in whole or in part with any other applicable law, (ii) to terminate the
Offer (whether or not any Shares have theretofore been accepted for payment) if
any of the conditions referred to in Section 13 has not been satisfied or upon
the occurrence of any of the events specified in Section 13 and (iii) to waive
any condition or otherwise amend the Offer in any respect in any manner that is
not prohibited as described above, in each case by giving oral or written notice
of such delay, termination, waiver or amendment to the Depositary and by making
a public announcement thereof. The Subsidiary acknowledges that (i) Rule
14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Subsidiary to pay the consideration offered or return the
Shares tendered promptly after the termination or withdrawal of the Offer and
(ii) the Subsidiary may not delay acceptance for payment of, or payment for
(except as provided in clause (i) of the preceding sentence), any Shares upon
the
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occurrence of any of the conditions specified in Section 13 without extending
the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Except as provided by applicable law (including Rules 14d-4(c),
14d-6(d) and 14e-1(d) under the Exchange Act, which require that material
changes be promptly disseminated to stockholders in a manner reasonably designed
to inform them of such changes) and without limiting the manner in which the
Subsidiary may choose to make any public announcement, the Subsidiary shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release to the Dow Jones News
Service.
If the Subsidiary makes a material change in the terms of the Offer or if
it waives a material condition of the Offer, the Subsidiary will extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer, other than a change in
price or a change in the percentage of securities sought, will depend upon the
facts and circumstances, including the materiality, of the changes. With respect
to a change in price or, subject to certain limitations, a change in the
percentage of securities sought, a minimum ten business day period from the day
of such change is generally required to allow for adequate dissemination to
stockholders and investor response. For purposes of the Offer, a "business day"
means any day other than a Saturday, Sunday or a federal holiday and consists of
the time period from 12:01 a.m. through 12:00 Midnight, New York City time.
The Company has provided the Subsidiary with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms
and subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
Subsidiary will accept for payment and will pay for all Shares validly tendered
and not properly withdrawn on or prior to the Expiration Date promptly after the
Expiration Date provided that the conditions of the Offer set forth in Section
13, including, without limitation, the expiration or termination of the waiting
period applicable to the acquisition of Shares pursuant to the Offer under the
HSR Act, have been satisfied or waived prior to the Expiration Date. In
addition, subject to applicable rules of the Commission, the Subsidiary
expressly reserves the right to delay acceptance for payment of, or payment for,
Shares pending receipt of any other regulatory approvals specified in Section
14.
On August 15, 1997, MedPartners filed with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division") a Premerger Notification and Report Form under the HSR Act
with respect to the Offer. The waiting period under the HSR Act applicable to
the Offer would expire at 11:59 p.m., New York City time, on August 30, 1997,
unless prior to the expiration or termination of the waiting period the FTC or
the Antitrust Division extends the waiting period by requesting additional
information or documentary material from MedPartners. If such a request is made,
the waiting period applicable to the Offer will expire on the tenth calendar day
after the date of substantial compliance by MedPartners with such request.
Thereafter, the waiting period may be extended by court order or with the
consent of MedPartners. The waiting period under the HSR Act may be terminated
by the FTC and the Antitrust Division prior to its expiration. See Section 14.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates"), or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares,
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<PAGE> 7
if such procedure is available, into the Depositary's account at The Depository
Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry
Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in Section 3, (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed with
any required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer, and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message from a Book-Entry Transfer
Facility transmitted to, and received by, the Depositary forming a part of a
Book-Entry Confirmation, which states that (i) the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that are the subject of the Book-Entry
Confirmation, (ii) the participant has received and agrees to be bound by the
terms of the Letter of Transmittal and (iii) the Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, the Subsidiary will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Subsidiary gives oral or written notice to the
Depositary of the Subsidiary's acceptance of such Shares for payment pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Subsidiary
and transmitting those payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. If for any reason whatsoever acceptance for payment of or payment
for any Shares tendered pursuant to the Offer is delayed or the Subsidiary is
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
then, without prejudice to the Subsidiary's rights set forth herein, the
Depositary may nevertheless, on behalf of the Subsidiary, retain tendered
Shares, and those Shares may not be withdrawn except to the extent that the
tendering stockholder is entitled to exercise and duly exercises withdrawal
rights as described in Section 4, subject, however, to the Subsidiary's
obligation under Rule 14e-1(c) under the Exchange Act to pay for Shares tendered
or return those Shares promptly after termination or withdrawal of the Offer.
If any tendered Shares are not accepted for payment pursuant to the Offer
for any reason or if Share Certificates are submitted for more Shares than are
tendered, Share Certificates evidencing unpurchased or untendered Shares will be
returned (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), without expense to the
tendering stockholder, as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Subsidiary increases the
consideration offered to stockholders pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer, regardless of whether those Shares were tendered prior to
the increase in consideration.
The Subsidiary reserves the right to transfer or assign, in whole at any
time or in part from time to time, to one or more of the Subsidiary's
affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Subsidiary of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. Except as set forth below, in order for Shares to be validly
tendered pursuant to the Offer, (i) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed with any required signature
guarantees, or an Agent's Message in connection with a book-entry delivery of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses
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<PAGE> 8
set forth on the back cover of this Offer to Purchase on or prior to the
Expiration Date, and (ii) either (a) Share Certificates evidencing tendered
Shares must be received by the Depositary at such address, or the Shares must be
tendered pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date, or (b) the tendering stockholder must comply with
the guaranteed delivery procedures described below.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) must accompany each delivery.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's transfer procedures. However, although delivery of Shares may be
effected through book-entry transfer at a Book-Entry Transfer Facility, a Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed
with any required signature guarantees, or an Agent's Message in connection with
a book-entry transfer, and any other documents required by the Letter of
Transmittal, must in any case be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date, or the tendering stockholder must comply with the
guaranteed delivery procedures described below.
Delivery of documents to a Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary.
Signature Guarantees. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of a recognized
Medallion Signature Guarantee Program or by any other "eligible guarantor
institution," as defined in Rule 17A(b)-15 under the Exchange Act (each of the
foregoing, an "Eligible Institution"), unless the Shares tendered thereby are
tendered (i) by a registered holder of Shares who has not completed either the
box labeled "Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
person who signs the Letter of Transmittal, or if payment is to be made, or a
Share Certificate not accepted for payment or not tendered is to be returned, to
a person other than the registered holder(s), the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appears on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as provided above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available, time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date, or a stockholder cannot complete the
procedure for delivery by book-entry transfer on a timely basis, then such
stockholder's Shares may nevertheless be tendered, provided that all of the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates evidencing all tendered Shares, in proper
form for transfer, or a Book-Entry Confirmation, together with the Letter
of Transmittal (or a facsimile thereof) properly completed and duly
executed with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal, are received by the
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Depositary within three Nasdaq National Market trading days after the date
of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution and a representation that the stockholder
owns the Shares tendered within the meaning of, and that the tender of the
Shares effected thereby complies with, Rule 14e-4 under the Exchange Act, each
in the form set forth in the Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) Share Certificates evidencing such Shares or a
Book-Entry Confirmation of the delivery of such Shares (if available), (ii) a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) or, in the case of a book-entry transfer, an Agent's Message, and (ii)
any other documents required by the Letter of Transmittal. Accordingly, payment
may not be made to all tendering stockholders at the same time and will depend
upon when Share Certificates are received by the Depositary or Book-Entry
Confirmations of tendered Shares are received in the Depositary's account at a
Book-Entry Transfer Facility.
The method of delivery of Share Certificates and all other required
documents, including through any Book-Entry Transfer Facility, is at the option
and risk of the tendering stockholder and the delivery will be deemed made only
when actually received by the Depositary. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares pursuant to any of the procedures described above will be determined
by the Subsidiary, in its sole discretion, which determination shall be final
and binding on all parties. The Subsidiary reserves the absolute right to reject
any and all tenders determined by it not to be in proper form or the acceptance
for payment of which may, in the opinion of its counsel, be unlawful. The
Subsidiary also reserves the absolute right to waive any defect or irregularity
in any tender of Shares of any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. No
tender of Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived.
None of the Subsidiary, MedPartners, any of their affiliates or assigns,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Subsidiary's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints the Purchaser, its officers
and its designees, and each of them, as the stockholder's attorneys-in-fact and
proxies, with full power of substitution, in the manner set forth in the Letter
of Transmittal, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and accepted for payment by the
Purchaser (and with respect to any and all other Shares or other securities
issued or issuable in respect of the Shares on or after August 14, 1997). All
such powers of attorney and proxies shall be considered irrevocable and coupled
with an interest in the tendered Shares. Such appointment will be effective if,
when and only to the extent that, the Purchaser accepts such Shares for payment.
Upon such acceptance for payment, all prior powers of attorney and proxies given
by the stockholder with respect to the Shares (and such other Shares and
securities) will, without further action, be revoked, and no subsequent powers
of attorney, proxies or written consents may be given or executed (and if given
or executed will not be deemed effective with respect thereto by the
stockholder). The Subsidiary, its officers and its designees will, with respect
to the Shares (and such other Shares and securities) for which such appointment
is effective, be empowered to exercise all voting and other rights of the
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. The
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Subsidiary reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Subsidiary's payment for such Shares, the
Subsidiary must be able to exercise full voting rights with respect to such
Shares and other securities, including voting at any meeting of stockholders.
Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each stockholder surrendering
Shares in the Offer to the extent not previously provided must provide the payor
of such cash with the stockholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that the stockholder is not subject to backup
withholding. Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
If a stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on the stockholder and payment of cash to the stockholder pursuant to
the Offer may be subject to backup withholding. All stockholders surrendering
Shares pursuant to the Offer should complete and sign the Substitute Form W-9
included in the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Depositary).
Non-corporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status (a copy of which may be obtained from the
Depositary), in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
Other Requirements. The Subsidiary's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Subsidiary upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that such stockholder is the owner of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4 under the Exchange Act.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the
Offer are irrevocable, except that Shares tendered pursuant to the Offer may be
withdrawn at any time on or prior to the Expiration Date and unless already
accepted for payment by the Subsidiary pursuant to the Offer, may also be
withdrawn at any time after October 20, 1997. If the Subsidiary is delayed in
its acceptance for payment of Shares or is unable to purchase Shares validly
tendered pursuant to the Offer for any reason, then, without prejudice to the
Subsidiary's rights under the Offer, tendered Shares may be retained by the
Depositary on behalf of the Subsidiary, and may not be withdrawn except to the
extent that tendering stockholders are entitled to withdrawal rights as set
forth in this Section 4; subject, however, to the Subsidiary's obligation,
pursuant to Rule 14e-1(c) under the Exchange Act, to pay for the tendered Shares
or return those Shares promptly after termination or withdrawal of the Offer.
Any such delay will be accompanied by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Subsidiary, in its sole
discretion, whose determination will be final and binding. None of the
Subsidiary, MedPartners, any of their affiliates or assigns, the Depositary, the
Information Agent or any other
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person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
SECTION 5. CERTAIN U.S. FEDERAL INCOME TAX MATTERS. The summary of tax
consequences set forth below is for general information only and is based on the
law as currently in effect, including modifications made by the Taxpayer Relief
Act of 1997. The tax treatment of each stockholder will depend in part upon such
stockholder's particular situation. Special tax consequences not described
herein may be applicable to particular classes of taxpayers, such as financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States, stockholders who acquired their Shares through the exercise of an
employee stock option or otherwise as compensation and persons who received
payments in respect of options to acquire Shares. ALL STOCKHOLDERS SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX
LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign income or other tax laws. Generally, a tendering stockholder will
recognize gain or loss in an amount equal to the difference between the cash
received by the stockholder pursuant to the Offer or the Merger and the
stockholder's adjusted tax basis in the Shares tendered and purchased pursuant
to the Offer or the Merger. Gain or loss is computed separately for each block
of Shares (Shares which were purchased at the same time and price) sold. For
federal income tax purposes, such gain or loss will be a capital gain or loss if
the Shares are a capital asset in the hands of the stockholder, and a long-term
capital gain or loss if the stockholder meets one of the holding periods set
forth below as of the date the Subsidiary accepts such Shares for payment
pursuant to the Offer or the effective date of the Merger, as the case may be.
There are significant limitations on the deductibility of capital losses by
individuals or corporations. Capital losses can offset capital gains on a
dollar-for-dollar basis and, in the case of an individual stockholder, capital
losses in excess of capital gains can be deducted to the extent of $3,000
annually. An individual can carry forward unused capital losses indefinitely. A
corporation can utilize capital losses only to offset capital gain income; a
corporation's unused capital losses can be carried back three years and forward
five years.
Pursuant to the Tax Relief Act of 1997, long-term capital gains recognized
after July 28, 1997, on marketable securities such as the Shares, will be
taxable at a maximum rate of 20% for individuals if the individual's holding
period is more than 18 months and 28% if the holding period is more than one
year but not more than 18 months, and 35% for corporations. Ordinary income is
taxable at a maximum rate of 39.6% for individuals and 35% for corporations.
SECTION 6. PRICE RANGE OF THE COMPANY'S COMMON STOCK; DIVIDENDS. Shares
of the Company's common stock are traded in the Nasdaq National Market under the
symbol "TMMC." At August 18, 1997 there were 77 holders of record. The Company
went public through an offering of rights to purchase the common stock. Each
such right entitled the holder to purchase one share of Common Stock at a price
of $21.50. The rights were traded in the Nasdaq National Market from April 21,
1997 to May 20, 1997. The rights closed at $20.50 on the initial day of trading,
reached a high closing price of $20.50 and a low closing sale price of $13.63.
Shares of common stock began trading in the Nasdaq National Market on May 21,
1997, and closed at a sale price of $40.94 per share. Based on information
provided by the Company, the following table sets forth, for the periods
indicated, the high and low closing sale price per share of
9
<PAGE> 12
common stock subsequent to the day trading commenced. The sale prices per share
of common stock set forth below are as reported in published financial sources
and do not include commissions.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ending December 31, 1997:
First Quarter(1)............................................ -- --
Second Quarter(1)........................................... $48.00 $40.94
Third Quarter (through August 19, 1997)..................... $62.38 $45.00
</TABLE>
- - ---------------
(1) The Common Stock was not publicly traded prior to May 21, 1997.
The Company has not paid any cash dividends since its formation.
On August 13, 1997, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the reported closing sale
price per Share as reported on the Nasdaq National Market was $57.00. On August
18, 1997, two trading days prior to commencement of the Offer, the reported
closing sale price per share as reported on the Nasdaq was $62.25. STOCKHOLDERS
ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
SECTION 7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been taken from or based upon publicly
available documents and records on file with the Commission and other public
services. Neither MedPartners nor the Subsidiary assumes any responsibility for
the accurateness or completeness of the information concerning the Company
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to MedPartners or the
Subsidiary.
General. The Company is a Delaware corporation with its headquarters
located at 3540 Howard Way, Costa Mesa, California, 92626. The telephone number
of the Company at such offices is (714) 436-4800.
The Company, through its wholly-owned physician practice management
subsidiary, Talbert Medical Management Corporation ("TMMC"), organizes and
manages physician and dental practice groups that contract with health
maintenance organizations and other payors to provide health care services to
their members.
Financial Information. Set forth below is certain selected financial
information with respect to the Company and its subsidiaries, excerpted or
derived from the information contained in the audited financial statements for
the years ended December 31, 1996, 1995 and 1994 contained in the Company's
Prospectus (the "Prospectus") dated April 21, 1997, as filed with the Commission
under Rule 424(b) under the Securities Act of 1933, as amended, on April 18,
1997, and the unaudited financial statements for the six months ended June 30,
1997 contained in the Company's Quarterly Report on Form 10-Q filed with the
Commission on August 12, 1997.
10
<PAGE> 13
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------------ ENDED
1994 1995 1996 JUNE 30, 1997
-------- -------- -------- -------------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue....................................... $455,787 $495,699 $460,546 $206,624
Loss before income tax benefit...................... (27,681) (48,362) (12,066) (19,370)
Net loss............................................ (16,332) (28,608) (7,979) (17,647)
PER SHARE DATA:
Loss per common and common equivalent share(1)...... $ (5.45) $ (9.55) $ (2.66) $ (5.79)
BALANCE SHEET DATA:
Working capital..................................... $(18,742) $(18,638) $(16,110) $ 30,295
Total assets........................................ 23,087 23,178 86,699 103,370
Long-term obligations............................... -- -- -- --
Stockholders' equity (deficit)...................... (18,113) (17,886) (5,537) 44,433
</TABLE>
- - ---------------
(1) Loss per common and common equivalent share is computed based on 2,996,104
common equivalent shares for the years ended December 31, 1994, 1995 and
1996, and 3,044,555 common equivalent shares for the six months ended June
30, 1997.
Available Information. The Common Stock and associated rights are
registered under the Exchange Act. Accordingly, the Company is subject to the
information and reporting requirements of the Exchange Act and in accordance
therewith is obligated to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Information as of particular dates concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be disclosed in such
proxy statements and distributed to the Company's stockholders and filed with
the Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of this material may also be obtained by
mail, upon payment of the Commission's customary fees, from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov. In addition, such material should also be available for
inspection at Talbert Medical Management Holdings Corporation, 3540 Howard Way,
Costa Mesa, California, 92626.
A copy of this Offer to Purchase, and certain of the agreements referred to
herein, are attached to the Subsidiary's Tender Offer Statement on Schedule
14D-1, dated August 20, 1997 (the "Schedule 14D-1"), which has been filed with
the Commission. The Schedule 14D-1 and the exhibits thereto, along with such
other documents as may be filed by the Subsidiary with the Commission, may be
examined and copied from the offices of the Commission in the manner set forth
above.
SECTION 8. CERTAIN INFORMATION CONCERNING THE SUBSIDIARY AND
MEDPARTNERS. General. The Subsidiary, a newly incorporated Delaware
corporation and a wholly-owned subsidiary of MedPartners, was organized in
connection with the Offer and has not carried on any activities to date other
than in connection with the Offer and the Merger Agreement. The principal
executive office of the Subsidiary is located at 3000 Galleria Tower, Suite
1000, Birmingham, Alabama 35244, and the telephone number at such office is
(205) 733-8996. The principal executive office of MedPartners is located at
11
<PAGE> 14
3000 Galleria Tower, Suite 1000, Birmingham, Alabama 35244, and the telephone
number at such office is (205) 733-8996.
MedPartners. MedPartners is the largest physician practice management
("PPM") company in the United States, based on revenues. MedPartners develops,
consolidates and manages comprehensive integrated healthcare delivery systems,
consisting of primary care and specialty physicians, as well as the nation's
largest group of physicians engaged in the delivery of emergency medicine and
other hospital-based services. MedPartners provides services to prepaid managed
care enrollees and fee-for-service patients in 34 states through its network of
over 12,400 affiliated physicians. As an integral part of the PPM business,
MedPartners operates one of the nation's largest independent pharmacy benefit
management ("PBM") programs and provides disease management services and
therapies for patients with certain chronic conditions.
MedPartners affiliates with physicians who are seeking the resources
necessary to function effectively in healthcare markets that are evolving from
fee-for-service to managed care payor systems. MedPartners enhances clinic
operations by centralizing administrative functions and introducing management
tolls, such as clinical guidelines, utilization review and outcomes measurement.
MedPartners provides affiliated physicians with access to capital and advanced
management information systems. In addition, MedPartners contracts with health
maintenance organizations and other third-party payors that compensate
MedPartners and its affiliated physicians on a prepaid basis (collectively,
"HMOs"), as well as hospitals and outside providers on behalf of its affiliated
physicians. These relationships provide physicians with the opportunity to
operate under a variety of payor arrangements and increase their patient flow.
MedPartners also operates the largest hospital-based physician ("HBP") group in
the country with over 2,200 physicians providing emergency medicine, radiology,
anesthesiology, primary care and other hospital-based physician services. In
addition, MedPartners provides comprehensive medical care for inmates at various
correctional institutions and for military personnel and their dependents at
facilities owned by the Department of Defense.
MedPartners manages outpatient prescription drug benefit programs for
clients throughout the United States, including corporations, insurance
companies, unions, government employee groups and managed care organizations.
MedPartners dispenses over 44,000 prescriptions daily through four mail service
pharmacies and manages patients' immediate prescription needs through a network
of retail pharmacies. MedPartners is in the process of integrating its PBM
program with the PPM business by providing pharmaceutical services to affiliated
physicians, clinics and HMOs. MedPartners' disease management services are
intended to meet the healthcare needs of individuals with chronic diseases or
conditions. These services include the design, development and management of
comprehensive programs that comprise drug therapies, physician support and
patient education. MedPartners currently provides therapies and services for
individuals with such conditions as hemophilia, growth disorders, immune
deficiencies, genetic emphysema, cystic fibrosis and multiple sclerosis.
Financial Information. Set forth below is certain selected consolidated
financial information relating to MedPartners and its subsidiaries for
MedPartners' last five fiscal years. More comprehensive financial information
(including management's discussion and analysis of financial condition and
results of operations) is included in the reports and other documents filed by
MedPartners with the Commission. The following financial information is
qualified in its entirety by reference to such reports and other documents,
including the financial statements and related notes contained therein.
12
<PAGE> 15
MEDPARTNERS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................... $1,484,027 $1,980,967 $2,909,024 $3,908,717 $5,222,019 $2,524,407 $3,028,533
Income (loss) from continuing
operations....................... 25,351 55,017 63,510 32,189 (76,790) 42,393 46,445
Income (loss) from discontinued
operations....................... 5,858 30,808 25,902 (136,528) (68,698) (68,698) (75,434)
Net income (loss).................. 31,209 85,825 89,412 (104,339) (145,488) (26,305) (28,989)
Income (loss) per share from
continuing operations(1)......... 0.24 0.42 0.43 0.20 (0.44) 0.25 0.25
Income (loss) per share from
discontinued operations(1)....... 0.05 0.24 0.18 (0.86) (0.39) (0.40) (0.40)
Net income (loss) per share(1)..... 0.29 0.66 0.61 (0.66) (0.83) (0.15) (0.15)
Number of shares used in net income
(loss) per share................. 107,460 130,903 146,773 158,109 174,269 171,889 187,192
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 40,249 $ 44,852 $ 101,101 $ 87,581 $ 127,397 $ 134,162
Working capital................................ 158,634 251,736 180,198 286,166 226,409 277,766
Total assets................................... 832,671 1,117,557 1,682,345 1,964,130 2,423,120 2,661,509
Long-term debt, less current portion........... 92,873 177,141 394,811 541,391 715,996 926,524
Total stockholders' equity..................... 395,441 496,455 663,974 674,442 837,408 853,061
</TABLE>
- - ---------------
(1) Income (loss) per share amounts are computed by dividing income (loss) by
the number of common equivalent shares outstanding during the periods
presented in accordance with the applicable rules of the Commission. All
stock options issued have been considered as outstanding common equivalent
shares for all periods presented, even if anti-dilutive, under the treasury
stock method. Shares of Common Stock issued in February 1995 upon conversion
of the then outstanding convertible preferred stock are assumed to be common
equivalent shares for all periods presented.
The name, citizenship, business address, principal occupation or employment
and five year employment history of each of the directors and executive officers
of the Subsidiary and MedPartners are set forth in Schedule I to this Offer to
Purchase.
None of the Subsidiary, MedPartners nor, to the best knowledge of the
Subsidiary and MedPartners, any of the persons listed on Schedule I or any
associate or wholly-owned or majority-owned subsidiary of the Subsidiary,
MedPartners or any of the persons so listed, beneficially owns or has a right to
acquire directly or indirectly any Shares. None of the Subsidiary, MedPartners
nor, to the best knowledge of the Subsidiary and MedPartners, any of the persons
or entities referred to above, or any of the respective executive officers,
directors or subsidiaries of any of the foregoing, has effected any transactions
in the Shares during the past sixty (60) days.
Except as described in this Offer to Purchase, none of the Subsidiary,
MedPartners or, to the best knowledge of the Subsidiary and MedPartners, any of
the persons listed on Schedule I, has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including but not limited to contracts, arrangements, understandings or
relationships concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, none of the Subsidiary, MedPartners or, to the
best knowledge of the Subsidiary and MedPartners, any of the persons listed on
Schedule I, has had any business relationships or transactions with the Company
or any of its executive officers, directors or affiliates that are required to
be reported under the rules and
13
<PAGE> 16
regulations of the Commission applicable to the Offer. Except as set forth in
this Offer to Purchase, there have been no contacts, negotiations or
transactions between any of MedPartners, the Subsidiary or, to the best
knowledge of the Subsidiary and MedPartners, any of the persons listed on
Schedule I, on the one hand, and the Company or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets.
Available Information. MedPartners is subject to the information and
reporting requirements of the Exchange Act and in accordance therewith is
obligated to file certain information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning MedPartners' directors and officers, their remuneration, stock
options granted to them, the principal holders of MedPartners' securities and
any material interests of such persons in transactions with MedPartners is
contained in that information. This information may be inspected and copies may
be obtained from the offices of the Commission in the same manner as set forth
with respect to information about the Company in Section 7. Such information
concerning MedPartners can be inspected at the offices of The New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
SECTION 9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required
by the Subsidiary and MedPartners to consummate the Offer and the Merger
(including the cash out of stock options as described in Section 11) and to pay
related fees and expenses (approximately $2 million) is estimated to be
approximately $200 million.
The Subsidiary will obtain all necessary funds through capital
contributions or advances to be made by MedPartners. MedPartners has sufficient
funds available to it, from cash on hand and from available credit under its
existing $1.0 billion credit facility ("Credit Facility") with NationsBank,
National Association, as administrative agent to a group of lenders and other
sources, to fund fully all of its requirements and the Subsidiary's requirements
in connection with the Offer and the Merger. MedPartners may borrow up to an
aggregate amount of $1.0 billion under the Credit Facility for general corporate
purposes, including transactions contemplated by the Offer.
At MedPartners' option, pricing on the Credit Facility is based on either a
debt to cash flow test or MedPartners' senior debt ratings. No principal is due
on the facility until its maturity date of September 2001. As of June 30, 1997,
there was $383 million outstanding under the facility. The Credit Facility
contains affirmative and negative covenants which include requirements that
MedPartners maintain certain financial ratios (including minimum net worth,
minimum fixed charge coverage ratio and maximum indebtedness to cash flow), and
establishes certain restrictions on investments, mergers and sales of assets.
Additionally, MedPartners is required to obtain bank consent for acquisitions
with an aggregate purchase price in excess of $75 million and for which more
than half of the consideration is to be paid in cash. The Credit Facility is
unsecured but provides a negative pledge on substantially all assets of
MedPartners. As of June 30, 1997, MedPartners was in compliance with the
covenants in the Credit Facility.
MedPartners anticipates that any indebtedness incurred through borrowings
under the Credit Facility will be repaid from a variety of sources, which may
include, but may not be limited to, funds generated internally by MedPartners
and its affiliates (including, following the Merger, funds generated by the
Surviving Corporation). No decision has been made concerning the method
MedPartners will employ to repay such indebtedness. Such decision will be made
based on MedPartners' review from time to time of the advisability of particular
actions, as well as on prevailing interest rates and financial and other
economic conditions and such other factors as MedPartners may deem appropriate.
THE OFFER IS NOT CONDITIONED UPON THE SUBSIDIARY OBTAINING FINANCING.
SECTION 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
Background. The Company was separated from FHP International Corporation
("FHP") in May 1997 in conjunction with the merger of FHP and PacifiCare Health
Services, Inc. (the "FHP Merger"). In connection with MedPartners ongoing
expansion of its PPM business, MedPartners management kept it
14
<PAGE> 17
informed as to the progress of the FHP Merger and after the Company became a
publicly traded company, developed an interest in a possible combination.
On July 11, 1997, Larry R. House, Chairman of the Board and Chief Executive
Officer of MedPartners, met with Jack D. Massimino, the Company's President and
Chief Executive Officer. Mr. House and Mr. Massimino discussed generally the
operations and business strategy of the two companies and the potential
desirability of a combination. The pricing phase of their discussion focused on
consideration of an all cash tender offer at a substantial premium to the
Company's market price.
On July 18, 1997 Mark L. Wagar, the President and Chief Operating Officer
of MedPartners, and Kent Marquardt, the Chief Operating Officer for West Coast
Operations of MedPartners, met with Mr. Massimino and Kenneth S. Ord, the
Company's Executive Vice President and Chief Financial Officer. The parties
discussed information concerning, among other matters, the Company's medical
center locations and certain financial performance information.
On July 23, 1997, the Company and MedPartners executed the Confidentiality
Agreement.
On July 24, 1997, representatives of MedPartners began due diligence at the
offices of the Company's outside counsel. On July 25, 1997, Mr. Ord and Walter
R. Stone, the Company's Vice President of Finance, met with representatives of
MedPartners to discuss the Company's financial performance, and on July 26,
1997, a meeting was held in which members of the senior management of the
Company answered questions from representatives of MedPartners. Informational
discussions and meetings continued during the week of July 28.
On July 29, 1997, Mr. Massimino and Mr. Ord met with Mr. Wagar in person
and Michael S. Faulkner, Vice President of Finance, Mergers and Acquisitions, of
MedPartners by telephone and discussed the potential terms of a transaction.
On August 1, 1997, the Company received a non-binding letter of intent from
MedPartners proposing to acquire all outstanding Shares of the Company for
$63.00 per share, subject to legal and financial due diligence.
On August 5, 1997, at a special meeting of the Company's Board of
Directors, the directors reviewed the letter from MedPartners and reviewed with
Smith Barney, the Company's financial advisor, certain matters relating to the
financial aspects of the proposal from MedPartners. The Board authorized the
Company's management to pursue a definitive agreement with MedPartners to
present to the Board.
From August 5, 1997 until August 13, 1997, due diligence continued and
members of the Company's management met with MedPartners' representatives to
answer questions and explain material documents. On August 4, 1997, MedPartners
provided the Company and its counsel with a draft form of the Merger Agreement.
Between August 8, 1997 and August 13, 1997, the Company's counsel had a series
of meetings with J. Brooke Johnston, Jr., Senior Vice President and General
Counsel of the Parent, to negotiate the terms of a definitive agreement.
On August 12, the Company's Board of Directors met to hear reports from the
management and outside counsel concerning the status of discussions with
MedPartners.
Counsel for MedPartners and the Company concluded negotiating the
definitive agreements on August 13, 1997. That evening at a special meeting of
the Board of Directors of the Company, the Board of Directors approved the Offer
and the Merger by unanimous vote of the directors present. The parties executed
the Merger Agreement and announced such execution prior to the opening of
securities market trading on August 14, 1997.
To the extent any of the foregoing background describes events to which
MedPartners was not a party, it is based upon information provided by the
Company.
15
<PAGE> 18
SECTION 11. PURPOSE OF THE OFFER; MERGER AGREEMENT; PLANS FOR THE COMPANY.
Purpose of the Offer. The purpose of the Offer, the Merger and the Merger
Agreement is to enable MedPartners to acquire control of the entire equity
interest of the Company. Upon consummation of the Merger, the Company will
become a wholly-owned subsidiary of MedPartners. The Offer is being made
pursuant to the Merger Agreement.
Merger Agreement. The following is a summary of certain provisions of the
Merger Agreement. This summary does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, which is incorporated
herein by reference and a copy of which has been filed with the Commission as an
exhibit to the Schedule 14D-1. In particular, when the term material adverse
effect is used herein it has the meaning as defined in the Merger Agreement. The
Merger Agreement may be examined and copies may be obtained at the place and in
the manner set forth in Section 7 of this Offer to Purchase.
The Offer. The Merger Agreement provides that the Subsidiary will commence
the Offer not later than the fifth business day from the public announcement of
the execution of the Merger Agreement. The obligation of the Subsidiary to
commence the Offer and pay for any Shares tendered is subject to certain
conditions. See "-- Conditions to the Offer." The Merger Agreement provides that
the Subsidiary may in its sole discretion modify the terms and conditions of the
Offer, or waive certain conditions to the Offer. However, without the Company's
prior written consent, the Subsidiary cannot reduce the per Share amount, change
the form of consideration payable in the Offer, reduce the number of Shares
subject to the Offer, allow the Offer to expire before September 19, 1997, add
to or modify the conditions to the Offer set forth in the Merger Agreement, or
make any other modifications that are otherwise materially adverse to the
holders of Shares. The Subsidiary may, without the consent of the Company,
extend the term of the Offer on one or more occasions beyond the scheduled
expiration date if any of the conditions to the Subsidiary's obligation to
consummate the Offer have not been satisfied or waived by that date, provided
that the Subsidiary may not extend the Offer for a total of more than 60 days
from the commencement of the Offer. The Subsidiary may also extend the Offer for
a period not to exceed ten business days, notwithstanding that all conditions to
the Offer are satisfied as of that date, if the number of Shares tendered at
that date equal more than 75% but less than 90% of the outstanding Shares.
The Minimum Condition. One of the conditions to the Offer is that there
must be validly tendered and not withdrawn at least 51% (determined on a fully
diluted basis) of the outstanding Shares (the "Minimum Condition"). The Company
has informed the Subsidiary that, as of August 14, 1997, there were 3,000,758
Shares issued and outstanding, of which 174,252 shares of Common Stock were
reserved for future issuance pursuant to outstanding stock options, and that,
except as otherwise disclosed in the Merger Agreement, no other stock of the
Company is outstanding or committed to be issued. Based on this information and
assuming all outstanding options to purchase shares of Common Stock will have
been accelerated so as to be fully exercisable prior to the consummation of the
Offer, the Subsidiary believes that the Minimum Condition will be satisfied if
the Subsidiary acquires at least 1,619,256 Shares in the Offer. MedPartners does
not directly or indirectly hold any Shares.
16
<PAGE> 19
Conditions to the Offer. The Subsidiary is not required to accept for
payment or (subject to any applicable rules and regulations of the Commission)
to pay for Shares tendered pursuant to the Offer unless (i) the Minimum
Condition is satisfied, and (ii) any applicable waiting period under the HSR Act
has expired or been terminated. In addition, the Subsidiary is not obligated to
consummate the Offer if, at any time on or after the date of the Merger
Agreement and before the acceptance of Shares for payment, any of the following
events has occurred (other than as a result of the action or inaction of
MedPartners or any of its subsidiaries that constitutes a breach of the Merger
Agreement):
(a) any order, injunction, judgment or ruling in any legal proceeding
is entered that (i) makes illegal or otherwise restrains or prohibits the
acquisition by MedPartners or the Subsidiary of any Shares under the Offer
or the making or consummation of the Offer or the Merger, the performance
by the Company of any of its obligations under the Merger Agreement or the
consummation of any purchase of Shares contemplated thereunder, (ii)
prohibits or limits the ownership or operation by the Company, MedPartners
or any of their respective subsidiaries of a material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or MedPartners and its subsidiaries, taken as a whole, or compels the
Company or MedPartners to dispose of or hold separate any material portion
of the business or assets of the Company and its subsidiaries, taken as a
whole, or MedPartners and its subsidiaries, taken as a whole, as a result
of the Offer or the Merger, (iii) imposes material limitations on the
ability of MedPartners or the Subsidiary to acquire or hold, or exercise
full rights of ownership of, any Shares accepted for payment pursuant to
the Offer including, without limitation, the right to vote such Shares on
all matters properly presented to the stockholders of the Company or (iv)
prohibits MedPartners or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Company and its subsidiaries, taken as a whole; or
(b) any law is enacted, entered, enforced or deemed applicable to the
Offer or the Merger, or any other action is taken by any governmental
entity, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that results in any of the consequences
referred to in paragraph (a) above; or
(c) any material adverse change to the Company occurs; or
(d) (i) the Board of Directors of the Company or any committee thereof
withdraws or modifies in a manner adverse to MedPartners or the Subsidiary
its approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approves or recommends any other acquisition proposal or (ii)
the Company enters into any agreement to consummate any acquisition
proposal; or
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality are not true
and correct or any such representations and warranties that are not so
qualified are not true and correct in any respect that is reasonably likely
to have a material adverse effect, in each case at the date of the Merger
Agreement and at the scheduled expiration of the Offer; or
(f) the Company fails to perform in any material respect any material
obligation or to comply in any material respect with any material agreement
or material covenant of the Company to be performed or complied with by it
under the Merger Agreement; or
(g) there has occurred and continues for three business days (i) any
general suspension of trading in, or limitation on prices for, securities
on the New York Stock Exchange (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index),
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) commencement of a war or armed
hostilities or other national or international calamity involving the
United States which is reasonably expected to have a material adverse
effect or to materially adversely affect the Parent's or the Subsidiary's
ability to complete the Offer or the Merger or materially delay the
consummation of the Offer, the Merger or both or (iv) in case of any of the
foregoing existing on the date of the Merger Agreement, material
acceleration or worsening thereof occurs and continues to exist for at
least three business days; or
17
<PAGE> 20
(h) the Merger Agreement terminates in accordance with its terms.
For purposes of the Merger Agreement, "material adverse change" or "material
adverse effect" means with reference to a party any change, effect, event or
occurrence that has or is reasonably likely to have a material adverse impact on
the business or financial position of such party and its subsidiaries and other
controlled entities, taken as a whole. However, the meaning of "material adverse
change" or "material adverse effect" excludes (i) changes in generally accepted
accounting principles, (ii) changes in applicable law, (iii) changes or effects
of any kind that impact the party's industry generally, or, as to the Company,
Southern California, (iv) changes in Medicare reimbursement rates, (v) changes
or effects arising from the announcement of the Merger Agreement or from any
party's performance under the Merger Agreement, and (vi) any changes resulting
from any restructuring or other similar charges or write-offs taken by the
Company with the consent of MedPartners.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the DGCL, the Subsidiary will be
merged with and into the Company not later than the second business day after
the satisfaction or waiver of the conditions set forth in the Merger Agreement.
The Merger will become effective upon the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware (the "Effective Time"). As a
result of the Merger, the separate corporate existence of the Subsidiary will
cease, and the Company will continue as the surviving corporation (the
"Surviving Corporation"). In the Merger, each issued and outstanding Share
(other than Shares owned directly or indirectly by MedPartners or any of its
subsidiaries or by the Company as treasury stock, and other than Shares owned by
stockholders who have properly exercised rights of appraisal under the DGCL)
will be converted into the right to receive $63.00 per Share, without interest,
and each issued and outstanding share of common stock of the Subsidiary will be
converted into one fully paid and nonassessable shares of common stock of the
Surviving Corporation (which will constitute the only issued and outstanding
capital stock of the Surviving Corporation).
The Merger Agreement provides that the Certificate of Incorporation and
By-laws of the Subsidiary at the Effective Time will be the certificate of
incorporation and by-laws of the Surviving Corporation until amended in
accordance with applicable law. The Merger Agreement also provides that the
directors and officers of the Subsidiary at the Effective Time will be the
directors and officers of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
promptly upon the purchase of Shares by the Subsidiary pursuant to the Offer,
seven of the Company's nine directors will resign, and MedPartners will
designate three replacements for appointment or election to the Company's Board
of Directors. The Company will, upon request of the Subsidiary, use its best
efforts promptly to cause MedPartners' designees to be so appointed or elected.
The remaining two directors (and any successors appointed or elected before the
Effective Time) are referred to as the "Original Directors." Once MedPartners'
designees constitute a majority of the Company's Board of Directors, any
amendment of the Merger Agreement, any termination of the Merger Agreement by
the Company, any extension of time for performance of any of the obligations of
MedPartners or the Subsidiary thereunder, any waiver of any condition or any of
the Company's rights thereunder or other action by the Company thereunder may be
effected only by the joint action of the Original Directors. In connection with
the appointment of MedPartners' designees to the Board of Directors, the Company
has agreed to comply with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
Rights Agreement. Pursuant to the Merger Agreement, the Rights Agreement
was amended so that the Rights will not be distributed and do not become
exercisable as a consequence of the execution, announcement or consummation of
the transactions contemplated by the Merger Agreement.
Recommendation. In the Merger Agreement, the Company states that its Board
of Directors has, by unanimous vote of those present, (i) determined that the
Offer and the Merger are fair to and in the best interests of the stockholders
of the Company and (ii) resolved to recommend acceptance of the Offer and
approval and adoption of the Merger Agreement and the Merger by the stockholders
of the Company.
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Interim Operations. In the Merger Agreement, the Company has agreed to use
its commercially reasonable best efforts to preserve the business organization
of the Company intact, to keep available the services of the present employees
of the Company, and to preserve the goodwill of the suppliers, customers and
others having business relations with the Company. In addition, other than as
contemplated by the Merger Agreement and the related documents (including the
schedules thereto) or without the prior written consent of MedPartners, which
consent will not be unreasonably withheld, each of the Company and its
subsidiaries will not (other than in the ordinary course of business and
consistent with past practice or with respect to binding commitments entered
into before the date of the Merger Agreement):
(a) Encumber any material asset or enter into any material
transactions or make any material contract or commitment relating to the
properties, assets and business of the Company.
(b) Enter into any employment contract which is not terminable upon
notice of 30 days or less, at will, and without penalty to the Company.
(c) Enter into any contract or agreement (i) which cannot be performed
within three months or less, or (ii) which involves the expenditure of over
$100,000.
(d) Make any payment or distribution to the trustee under any bonus,
pension, profit-sharing or retirement plan or incur any obligation to make
any such payment or contribution which is not in accordance with the
Company's usual past practice, or, except as required pursuant to the
Employee Benefits and Compensation Allocation Agreement dated as of
February 14, 1997 between the Company and FHP, make any payment or
contributions or incur any obligation pursuant to or in respect of any
other plan or contract or arrangement providing for bonuses, executive
incentive compensation, pensions, deferred compensation, retirement
payments, profit-sharing or the like, establish or enter into any such
plan, contract or arrangement, or terminate any plan.
(e) Extend credit to anyone.
(f) Guarantee the obligation of any person, firm or corporation.
(g) Amend its Certificate of Incorporation or By-laws.
(h) Discharge or satisfy any material lien or encumbrance, or pay or
satisfy any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the
unaudited balance sheet dated June 30, 1997 included in the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1997 (the
"Company Balance Sheet") or (ii) liabilities incurred or due since the date
of the Company Balance Sheet in the ordinary course of business, which
discharge or satisfaction would have a material adverse effect on the
Company.
(i) Increase or establish any reserve for taxes or any other liability
on its books or otherwise provided therefor which would have a material
adverse effect on the Company, except as may have been required due to
income or operations of the Company since the date of the Company Balance
Sheet.
(j) Mortgage, pledge or subject to any material lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are
material to the business or financial condition of the Company.
(k) Sell or transfer any of the assets material to the consolidated
business of the Company, cancel any material debts owed to the Company or
claims reflected as assets on the Company Balance Sheet, or waive any
material rights, except in the ordinary course of business.
(l) Grant any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by the Company to any officer or employee, consultant or agent (other than
normal increases consistent with past practices), or by means of any bonus
or pension plan, contract or other commitment, increased in a material
respect the compensation of any officer, employee, consultant or agent.
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(m) Except for the Merger Agreement and any other agreement executed
and delivered pursuant to the Merger Agreement, enter into any material
transaction other than in the ordinary course of business or permitted
under other sections of the Merger Agreement.
(n) Issue any stock (other than pursuant to the Stock Incentive Plans,
as defined in the Merger Agreement), bonds or other securities or any
options or rights to purchase any of its securities.
No Solicitation. In the Merger Agreement, the Company has agreed not to
directly or indirectly furnish information and access, in response to
unsolicited requests, to any third party, participate in discussions and
negotiate with such third party concerning any proposal to acquire such party
upon a merger, purchase of assets, purchase of or tender offer for shares of its
Common Stock or similar transaction (an "Acquisition Transaction"). However, if
prior to the acceptance for payment of Shares pursuant to the Offer, the Board
of Directors, after receiving advice from outside legal counsel to the Company,
determines that a failure to act would be inconsistent with its fiduciary duties
to the Company's stockholders under applicable law, the Company may (i) furnish
information about and access to the Company to any third party in response to an
unsolicited request pursuant to a confidentiality agreement with terms and
conditions similar to the Confidentiality Agreement (as defined below), (ii)
participate in discussions and negotiations regarding any potential Acquisition
Transaction, and/or (iii) terminate the Merger Agreement. The Company will
notify the Parent of any unsolicited request for information and access in
connection with a possible Acquisition Transaction involving a third party,
which notification will include the identity of the third party and the proposed
material terms of the possible Acquisition Transaction.
Directors' and Officers' Insurance; Indemnification. For a period of four
years after the Effective Time, MedPartners has agreed to cause the Surviving
Corporation to maintain in effect directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms (including coverage amounts)
comparable to those now applicable under the current Company policy, subject to
certain prescribed limits on premiums.
The Merger Agreement provides that all rights to indemnification for acts
and omissions occurring prior to the Effective Time existing as of the date of
the Merger Agreement in favor of the current or former directors, officers,
employees and agents (the "Indemnified Parties") of the Company and its
subsidiaries as provided in their respective certificates of incorporation and
bylaws (or similar organizational documents) will survive the Merger and
continue for at least six years after the Effective Time. Additionally, for not
less than six years after the Effective Time, MedPartners will, and will cause
the Subsidiary to, (i) indemnify and hold harmless the Indemnified Parties to
the full extent they may be indemnified by applicable law, their respective
certificates of incorporation or by-laws (or similar organizational documents)
or pursuant to indemnification agreements in effect as of the date of the Merger
Agreement for acts or omissions occurring prior to the Effective Time, and (ii)
advance litigation expenses incurred by the Indemnified Parties in connection
with defending any action arising out of such acts or omissions to the extent
permitted by law or as otherwise provided by such certificates of incorporation,
by-laws, similar organizational documents or indemnification agreements.
Share Repurchase. The Merger Agreement provides that, after the
consummation of the Offer but before the consummation of the Merger, the Company
will repurchase, from any current or former director or officer of the Company
who is terminated during such period, all Shares held by any such individual who
desires to sell such Shares.
Stock Incentive Plan. The Merger Agreement provides that the Company will
take all actions to provide that each outstanding stock option to purchase
shares of Common Stock (an "Option") under the Talbert Medical Management
Holdings Corporation 1996 Stock Incentive Plan (the "Stock Incentive Plan") will
be accelerated so as to be fully exercisable on or prior to the consummation of
the Offer. Options (other than Options granted under Article 7 of the Stock
Incentive Plan) therefore may be exercised, and the corresponding Common Stock
tendered pursuant to this Offer, except to the extent that such tender could
result in short-swing profit liability under Section 16(b) of the Exchange Act.
Options granted under Article 7 of the Stock Incentive Plan (other than Options
granted within six months of the termination of such Option) will be fully
exercisable upon consummation of the Offer and prior to any of the resignations
of the current
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directors of the Company pursuant to the Merger Agreement. With respect to each
Option that remains outstanding immediately after the consummation of the Offer,
the Company, immediately after the consummation of the Offer, but prior to any
termination or resignation of the holder of such Option pursuant to the Merger
Agreement will pay to each such holder in connection with the surrender and
termination or settlement of such Options an amount in cash equal to the product
of (x) the number of shares of Common Stock then subject to the Option
multiplied by (y) the excess of the per Share amount over the per share exercise
price of the Option, less all applicable tax withholding. The Stock Incentive
Plan will terminate as of the Effective Time.
Management Incentive Program. In March 1997, the Company implemented an
executive bonus program (the "Management Incentive Program") for the year ending
December 31, 1997. Bonuses to participants are based on the achievement of
budgeted objectives and improvements to the quality of services provided to
members. Pursuant to the Merger Agreement and a letter agreement dated August
14, 1997 among MedPartners, the Subsidiary and the Company, MedPartners will
cause the Company and the Surviving Corporation to pay at the time of the
consummation of the Offer to each corporate-level employee currently
participating in the Company's Management Incentive Program cash awards
equivalent to the award that would have been received by the participants in
such program if calculated as of June 30, 1997. A copy of such letter agreement
is filed as Exhibit 6 to the Company's Schedule 14D-9 and incorporated herein by
reference.
Transition Bonus. Certain employees of the Company who do not participate
in the Company's Management Incentive Program will receive cash bonuses in the
amounts agreed to between the Company and MedPartners in another letter
agreement dated August 14, 1997. A copy of such letter agreement is filed as
Exhibit 7 to the Company's Schedule 14D-9 and incorporated herein by reference.
The bonuses will be paid from a $923,000 contribution from MedPartners. The
purpose of these cash bonuses is to reward such employees for remaining with the
Company in order to facilitate the transactions contemplated by the Merger
Agreement. The bonuses will be paid on January 1, 1998 to the listed employees
who are then employed by the Surviving Corporation or any of its affiliates. If
any listed employee is terminated before January 1, 1998 other than for cause,
the employee will be paid the designated amount on the effective date of
termination.
Other Provisions Relating to Employee Benefits. The Merger Agreement
provides that all service credited to each employee by the Company through the
Effective Time will be recognized by MedPartners for all purposes, including
eligibility, vesting and benefit accruals, under any employee benefit plan
provided by MedPartners or the Surviving Corporation for the benefit of the
employees. MedPartners further agrees not to take any action, or fail to take
any action, that would cause the Surviving Corporation not to honor (without
modification) and assume the employment agreements, executive termination
agreements and individual benefit arrangements of the Company.
Physician Warrant Agreements. In connection with the Merger, MedPartners
has agreed to enter into nontransferable warrant agreements (the "Physician
Warrant Agreements") with certain physicians (the "Physicians") who are employed
by the medical groups managed by Talbert Medical Management Corporation
("TMMC"), a wholly-owned subsidiary of the Company. Each Physician Warrant
Agreement provides that MedPartners will grant to the Physician party to such
agreement warrants with respect to an aggregate of 2,000 shares of the common
stock, par value $.001 per share, of MedPartners (the "Warrants"). Each Warrant
entitles the Physician to purchase one share of MedPartners' common stock. The
exercise price of the Warrants will be the average closing price of MedPartners'
common stock for the ten trading days preceding the date which is two days
before the Effective Time. A copy of the form of the Physician Warrant Agreement
is filed as Exhibit 8 to the Company's Schedule 14D-9 and incorporated herein by
reference.
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Conditions to the Merger. The Merger Agreement provides that the
respective obligations of the Company, MedPartners and the Subsidiary to effect
the Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions (any of which may be waived in writing by MedPartners,
the Purchaser and the Company, to the extent permitted by applicable law):
(i) None of MedPartners, the Subsidiary or the Company nor any of
their respective subsidiaries will be subject to any order, decree or
injunction by a United States federal or state court of competent
jurisdiction which prevents the consummation of the Merger.
(ii) No statute, rule or regulation will have been enacted or
promulgated by the government or any governmental agency of the United
States or any state that prohibits the consummation of the Merger.
(iii) The Subsidiary will have purchased and paid for the Shares
pursuant to the Offer.
(iv) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act will have expired or been
terminated.
(v) If required by law, the holders of shares of the Company's Common
Stock will have approved the adoption of the Merger Agreement.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to the Parent and the Subsidiary
with respect to, among other things, its organization, good standing,
capitalization, ownership of subsidiaries, foreign qualification, corporate
power, Commission reports and financial information, contracts, properties,
legal proceedings, events since June 30, 1997, accounts receivable, tax matters,
employee benefit plans, compliance with laws, regulatory approvals, and
commissions and fees. MedPartners and the Subsidiary have made customary
representations and warranties to the Company with respect to, among other
things, organization, good standing, corporate power, brokers, legal
proceedings, available funds, other transactions, and ownership of Shares.
Employment Agreements. The Company has entered into Change in Control
Employment Agreements with Jack D. Massimino, Kenneth S. Ord, Gloria L. Austin,
Becky J. Behlendorf, Jennifer M. Gutzmore, Regina B. Lightner, Peter W.
McKinley, Russell D. Phillips, Jr. and Walter R. Stone (the "Employment
Agreements"). In connection with the Merger, MedPartners has agreed to amend the
Employment Agreements (i) to remove certain contingent provisions relating to
the vesting of stock options which could have caused the vesting of a portion of
the executive's outstanding stock options to be deferred under certain
conditions and (ii) to revise the consideration that would be forfeited in the
event the executive does not enter into an agreed form of non-compete covenant
and settlement agreement. In addition, the Employment Agreements with Mr.
Massimino and Ms. Austin will be further amended by adding certain contingent
provisions relating to taxes, which provisions could result in certain payments
by MedPartners of certain additional amounts to Mr. Massimino and Ms. Austin not
to exceed $4,000,000.
Termination; Fees. The Merger Agreement may be terminated at any time
prior to the purchase of Shares pursuant to the Offer (i) by mutual written
consent of the Company, the Subsidiary and MedPartners; (ii) by either
MedPartners or the Company if a court of competent jurisdiction or governmental
entity issues a nonappealable final order, decree or ruling or takes any other
action having the effect of permanently restraining, enjoining or otherwise
prohibiting the Offer (or acceptance of or payment for Shares) or the Merger
(provided that the party seeking to terminate the Merger Agreement has used all
reasonable efforts to remove the order, decree or ruling or the taking of such
action); (iii) by either MedPartners or the Company if, before the purchase of
Company Shares in the Offer, there is, or is discovered, a material breach by
the other party of any representation, warranty, covenant or other agreement
contained in the Merger Agreement that cannot be or has not been cured within 10
days after the occurrence or discovery of such breach by the breaching party,
whichever is later (a "Material Breach") (provided that the terminating party is
not then in Material Breach of any representation, warranty, covenant or other
agreement contained in the Merger Agreement); (iv) by the Company if MedPartners
and the Subsidiary fail to commence the Offer in accordance with the Merger
Agreement, or if the Offer expires without the purchase of Shares pursuant to
the Offer; or (v) by the Company in response to a proposal from a third party
for an Acquisition Transaction.
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If the Company terminates the Merger Agreement in response to a proposal
from a third party for an Acquisition Transaction, the Company will pay to
MedPartners, in immediately available funds, the sum of $8 million and will
promptly reimburse upon demand (up to a maximum amount of $2 million) all
documented out-of-pocket expenses incurred by MedPartners and the Subsidiary in
connection with the transactions contemplated by the Merger Agreement. In the
event Shares are not purchased pursuant to the Offer, MedPartners will pay to
the Company, in immediately available funds, the sum of $8 million and will
promptly reimburse upon demand therefore (up to a maximum amount of $2 million)
all documented out-of-pocket expenses incurred by the Company in connection with
the transactions contemplated by the Merger Agreement, unless such failure to
purchase Shares is attributable solely to (i) a court or other governmental
entity issuing an order or taking any other action permanently enjoining,
restraining or otherwise prohibiting the Offer or the Merger, which order has
become final and nonappealable (provided that the order or action is not the
result of any action or inaction by MedPartners or the Subsidiary that
constitutes a breach of the Merger Agreement and the party seeking to terminate
the Merger Agreement has used all reasonable efforts to remove the order or
other action), (ii) MedPartners' valid termination of the Merger Agreement by
reason of the Company's breach of a representation, warranty, covenant or
agreement set forth in the Merger Agreement, or (iii) a failure of a condition
set forth in the Merger Agreement by reason of any act, event or circumstance
that is beyond the control of MedPartners and the Subsidiary. All other costs
and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring the
expense.
Plans for the Company. MedPartners intends, upon acquiring control of the
Company, to continue to focus on the development of a national integrated health
care delivery system and continue to grow the markets in which the Company
already operates.
SECTION 12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE ACT
REGISTRATION AND MARGIN REGULATIONS. Depending upon the aggregate market value
and per Share price of any Shares not purchased pursuant to the Offer, following
the Offer the common stock may no longer meet the standards for continued
listing on the Nasdaq National Market, which requires an issuer to have at least
100,000 publicly held shares with an aggregate market value of at least
$5,000,000. common stock held by directors and officers (or their immediate
families) of the Company and other concentrated holdings of 10% or more of the
common stock outstanding generally will not be considered to be publicly held
for the purpose of the foregoing standards. In the event that the common stock
were no longer quoted on the Nasdaq National Market, it is possible that the
common stock could continue to trade in the over-the-counter market and that
quotations would continue to be reported through other sources. The extent of
the public market for the common stock and the availability of such quotations
would, however, depend upon the number of stockholders remaining at such time,
the interest in maintaining a market in the common stock on the part of
securities firms, the possible termination of registration of the common stock
under the Exchange Act, as described below, and other factors.
The Shares are currently registered under the Exchange Act. Such
registration of the Shares may be terminated upon application of the Company to
the Commission if the Shares are not listed on a national securities exchange or
quoted on Nasdaq National Market and there are fewer than 300 holders of record
of the Shares. Deregistration of the Shares under the Exchange Act would reduce
substantially the information required to be furnished by the Company to holders
of Shares and to the Commission and would render inapplicable certain of the
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of Section 14(a) that the Company
furnish stockholders with proxy materials in connection with stockholders'
meetings and the requirements of Rule 13e-3 promulgated under the Exchange Act
with respect to "going private" transactions. Furthermore, "affiliates" of the
Company and persons holding "restricted securities" of the Company might be
deprived of the ability to dispose of Shares pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
If registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities." It is the current intention of
MedPartners to cause the Company to deregister the Shares after the consummation
of the Offer if the requirements for termination of registration are met.
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The Shares currently are "margin securities" under the rules of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), which
has the effect, among other things, of allowing brokers to extend credit on the
collateral of the Shares. Depending upon factors similar to those described
above regarding listing and market quotations, it is possible that following the
Offer, the Shares would cease to constitute "margin securities" for the purpose
of the Federal Reserve Board's margin regulations and, therefore, could no
longer be used as collateral for margin loans made by brokers.
SECTION 13. CERTAIN CONDITIONS TO THE OFFER. The Subsidiary is not
required to accept for payment or (subject to any applicable rules and
regulations of the Commission) to pay for any Shares tendered pursuant to the
Offer unless (i) the Minimum Condition has been satisfied, and (ii) any
applicable waiting period under the HSR Act at any time prior to the Expiration
Date, has not expired or been terminated. In addition, the Subsidiary is not
obligated to consummate the Offer if, at any time on or after August 14, 1997
and before the acceptance of Shares for payment, any of the following events has
occurred (other than as a result of any action or inaction of MedPartners or any
of its subsidiaries which constitutes a breach of the Merger Agreement):
(a) any order, injunction, judgment or ruling in any legal proceeding
that (i) makes illegal or otherwise directly or indirectly restrains or
prohibits the acquisition by MedPartners or the Subsidiary of any Shares
under the Offer or the making or consummation of the Offer or the Merger,
the performance by the Company of any of its obligations under the Merger
Agreement or the consummation of any purchase of Shares contemplated
thereunder, (ii) prohibits or limits the ownership or operation by the
Company, MedPartners or any of their respective subsidiaries of a material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or MedPartners and its subsidiaries, taken as a whole, or
compels the Company or MedPartners to dispose of or hold separate any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or MedPartners and its subsidiaries, taken
as a whole, as a result of the Offer or the Merger, (iii) imposes material
limitations on the ability of MedPartners or the Subsidiary to acquire or
hold, or exercise full rights of ownership of, any Shares accepted for
payment pursuant to the Offer including, without limitation, the right to
vote such Shares on all matters properly presented to the stockholders of
the Company or (iv) prohibits MedPartners or any of its subsidiaries from
effectively controlling in any material respect the business or operations
of the Company and its subsidiaries, taken as a whole; or
(b) any law is enacted, entered, enforced or deemed applicable to the
Offer or the Merger, or any other action is taken by any governmental
entity, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that results, in any of the consequences
referred to in paragraph (a) above; or
(c) any material adverse change to the Company occurs; or
(d) (i) the Board of Directors of the Company or any committee thereof
withdraws or modifies in a manner adverse to MedPartners or the Subsidiary
its approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approves or recommends any other acquisition proposal or (ii)
the Company enters into any agreement to consummate any acquisition
proposal; or
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality are not true
and correct or any such representations and warranties that are not so
qualified are not true and correct in any respect that is reasonably likely
to have a material adverse effect, in each case at the date of the
Agreement and at the scheduled expiration of the Offer; or
(f) the Company fails to perform in any material respect any material
obligation or to comply in any material respect with any material agreement
or material covenant of the Company to be performed or complied with by it
under the Merger Agreement; or
(g) there has occurred and continues to exist for at least three
business days (i) any general suspension of trading in, or limitation on
prices for, securities on the New York Stock Exchange (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index), (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in
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the United States, (iii) commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving
the United States which in any case is reasonably expected to have a
material adverse effect or to materially adversely affect MedPartners' or
the Subsidiary's ability to complete the Offer or the Merger or materially
delay the consummation of the Offer, the Merger or both or (iv) in case of
any of the foregoing existing on the date of the Merger Agreement, material
acceleration or worsening thereof; or
(h) the Merger Agreement terminates in accordance with its terms.
For purposes of the Offer and the Merger Agreement, "material adverse
change" or "material adverse effect" means with reference to a party any change,
effect, event or occurrence that has or is reasonably likely to have a material
adverse impact on the business or financial position of such party and its
subsidiaries and other controlled entities, taken as a whole. However, the
meaning of "material adverse change" or "material adverse effect" excludes
changes in generally accepted accounting principles, (ii) changes in applicable
law, (iii) changes in effects of any kind that impact the party's industry
generally, or, as to the Company, Southern California, (iv) changes in Medicare
reimbursement rates, (v) changes or effects arising from the announcement of the
Merger Agreement or from any party's performance under the Merger Agreement, and
(iv) any charges resulting from any restructuring or other similar charges or
write-offs taken by the Company with the consent of MedPartners.
The foregoing conditions are for the sole benefit of MedPartners or may,
subject to the terms of the Merger Agreement, be waived by the Subsidiary and
MedPartners in whole or in part at any time and from time to time in their sole
discretion. The failure by MedPartners at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time. The Offer is not subject to obtaining any consents from third
parties.
A public announcement will be made of a material change in, or waiver of,
such conditions to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, and the Offer will be extended in connection with any such change
or waiver to the extent required by such rules.
SECTION 14. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based upon an examination
of publicly available information filed by the Company with the Commission,
neither the Subsidiary nor MedPartners is aware of (i) any license or other
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, that might be adversely affected by the
Subsidiary's acquisition of Shares (and the indirect acquisition of the stock of
the Company's subsidiaries) pursuant to the Offer or the Merger, or (ii) any
filings, approvals or other actions by or with any domestic (federal or state),
foreign or supranational governmental authority or administrative or regulatory
agency that would be required prior to the acquisition of Shares (or the
indirect acquisition of the stock of the Company's subsidiaries) by the
Subsidiary as contemplated herein. Should any such approval or other action be
required, it is the Subsidiary's present intention to seek such approval or
action. However, the Subsidiary does not presently intend to delay the purchase
of Shares tendered pursuant to the Offer pending the receipt of any such
approval or the taking of any such action (subject to the Subsidiary's right to
delay or decline to purchase Shares if any of the conditions in Section 13 has
occurred). There can be no assurance that any such approval or other action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the business of the Company, MedPartners or the
Subsidiary or that certain parts of the businesses of the Company, MedPartners
or the Subsidiary might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or other
action or, in the event that such approval was not obtained or such other action
was not taken, any of which could cause the Subsidiary to elect to terminate the
Offer without the purchase of the Shares thereunder. The Subsidiary's obligation
under the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in this
Section 14. See Section 13.
25
<PAGE> 28
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three (3) years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. In connection with
the review of the proposed transaction, the Company's Board of Directors prior
to the execution of the Merger Agreement (i) by unanimous vote of those present
approved the Offer and the Merger and (ii) determined that the terms of the
Offer and the Merger including the Offer price of $63.00 per Share in cash, are
in the best interest of, the stockholders of the Company, and (iii) recommended
that the stockholders of the Company accept the Offer and tender their Shares
pursuant to the Offer. Accordingly, the Subsidiary and MedPartners believe that
Section 203 of the DGCL is inapplicable to the Merger Agreement, the Offer and
the Merger because its provisions have been satisfied.
A number of other states have also adopted takeover laws and regulations
which purport to varying degrees to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
or whose business operations have substantial economic effects in such states,
or which have substantial assets, security holders, principal executive offices
or principal places of business therein. To the extent that certain provisions
of certain of these state takeover statutes purport to apply to the Offer, the
Subsidiary believes that such laws conflict with federal law and constitute an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in Edgar v. MITE Corp., invalidated on constitutional grounds
the Illinois Business Takeovers Act, which, as a matter of state securities law,
made takeovers of corporations meeting certain requirements more difficult.
However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court
of the United States held that the State of Indiana could, as a matter of
corporate law and in particular those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without the prior approval of the
remaining stockholders, provided that such laws were applicable only under
certain conditions. Subsequently, a number of federal courts have ruled that
various state takeover statutes were unconstitutional insofar as they apply to
corporations incorporated outside the state of enactment.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Subsidiary does not know whether any of these laws will, by
their terms, apply to the Offer or the Merger and has not taken any action to
comply with any such laws. Should any person seek to apply any state takeover
law, the Subsidiary will take reasonable efforts to resist such application,
which may include challenging the validity or applicability of any such statute
in appropriate court proceedings. In the event it is asserted that one or more
state takeover laws is applicable to the Offer or the Merger, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer, the Subsidiary might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, the Subsidiary might be unable to accept for payment or pay for any
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer and the Merger. In such case, the Subsidiary may not be
obligated to accept for payment, or pay for, any Shares tendered. See Section
13.
Short-Form Merger. The DGCL would permit the Merger to occur without a
vote of the Company's stockholders (a "short-form merger") if the Purchaser were
to acquire at least 90% of the outstanding Shares. If, however, the purchase
does not acquire at least 90% of the then outstanding Shares pursuant to the
Offer or otherwise, and a vote of the Company's stockholders is required under
the DGCL, a longer period of time will be required to effect the Merger.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company would
have certain rights to dissent and demand appraisal of their Shares under
Section 262 of the DGCL. Dissenting stockholders who comply with the requisite
statutory procedures under the DGCL would be entitled to a judicial
determination and payment of the "fair value" of their Shares as of the close of
business on the day prior to the date of stockholder authorization of the
Merger, together with interest thereon, at such rate as the court finds
equitable, from the date the Merger is
26
<PAGE> 29
consummated until the date of payment. Under the DGCL, in fixing the fair value
of the Shares, a court would consider the nature of the transaction giving rise
to the stockholders' right to receive payment for Shares and its effects on the
Company and its stockholders, the concepts and methods then customary in the
relevant securities and financial markets for determining fair value of shares
of a corporation engaging in a similar transaction under comparable
circumstances, and all other relevant factors.
The foregoing summary of the rights of objecting stockholders does not
purport to be a complete statement of the procedures to be followed by
stockholders desiring to exercise any available dissenters' rights. The
preservation and exercise of dissenters' rights require strict adherence to the
applicable provisions of the DGCL.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information and documentation has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Subsidiary pursuant to the Offer is
subject to the HSR Act requirements. See Section 2.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Pre-merger
Notification and Report Form under the HSR Act by MedPartners, which MedPartners
filed on August 15, 1997. The waiting period under the HSR Act will expire at
11:59 p.m., New York City time, August 30, 1997, unless early termination of the
waiting period is granted or MedPartners receives a request from the Antitrust
Division or the FTC for additional information or documentary material prior
thereto. If such a request were made, the waiting period applicable to the Offer
would expire on the tenth calendar day after the date of substantial compliance
by MedPartners with such request.
The waiting period under the HSR Act may be terminated by the FTC and the
Antitrust Division prior to its expiration. Accordingly, pursuant to the HSR Act
each of MedPartners and the Company have requested early termination of the
waiting period applicable to the Offer. There can be no assurance, however, that
the 15-day HSR Act waiting period will be terminated early. Shares will not be
accepted for payment or paid for pursuant to the Offer until the expiration or
earlier termination of the applicable waiting period under the HSR Act. See
Section 2. Subject to Section 4, any extension of the waiting period will not
give rise to any withdrawal rights not otherwise provided for by applicable law.
If the Purchaser's acquisition of Shares is delayed due to a request by the
Antitrust Division or the FTC for additional information or documentary material
pursuant to the HSR Act and all other conditions to the Offer have been
satisfied, the Offer may be extended (and re-extended) until at least October
20, 1997, and may, with the consent of MedPartners, the Subsidiary and the
Company, be extended beyond that date.
No separate HSR Act requirements with respect to the Merger or the Merger
Agreement will apply if the 15-day waiting period relating to the Offer (as
described above) has expired or been terminated. However, if the Offer is
withdrawn or if the filing relating to the Offer is withdrawn prior to the
expiration or termination of the 15-day waiting period relating to the Offer,
the Merger may not be consummated until 30 calendar days after receipt by the
Antitrust Division and the FTC of the Pre-merger Notification and Report Forms
of both MedPartners and the Company, unless the 30-day period is earlier
terminated by the Antitrust Division and the FTC. Within such 30-day period, the
Antitrust Division or the FTC may request additional information or documentary
materials from MedPartners and/or the Company, in which event, the acquisition
of Shares pursuant to the Merger may not be consummated until 20 days after both
MedPartners and the Company substantially comply with such requests.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Subsidiary pursuant to the Offer. At any time before or after the purchase
by the Subsidiary of Shares pursuant to the Offer, either the FTC or the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition of Shares pursuant to the Offer or seeking the divestiture of Shares
purchased by the Subsidiary or the divestiture of substantial assets of
MedPartners, the Company or any of their respective subsidiaries. Private
parties and state attorneys general may also bring legal action under federal or
state antitrust laws under certain circumstances.
27
<PAGE> 30
Although the Subsidiary believes that the acquisition of Shares pursuant to
the Offer would not violate the antitrust laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if a challenge
is made, what the outcome will be.
SECTION 15. FEES AND EXPENSES. Except as set forth below, neither
MedPartners nor the Subsidiary will pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders of Shares
pursuant to the Offer.
The Subsidiary has also retained Georgeson & Company, Inc. to act as the
Information Agent and Chase Mellon Shareholder Services, L.L.C. to act as the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward the Offer
materials to beneficial owners. The Information Agent and the Depositary will
receive reasonable and customary compensation for their services relating to the
Offer and will be reimbursed for certain out-of-pocket expenses. The Subsidiary
and MedPartners have also agreed to indemnify the Information Agent and the
Depositary against certain liabilities and expenses in connection with the
Offer, including certain liabilities under the federal securities laws.
Brokers, dealers, commercial banks and trust companies will, upon request,
be reimbursed by the Subsidiary for customary mailing and handling expenses
incurred by them in forwarding the Offer materials to their customers.
SECTION 16. MISCELLANEOUS. The Offer is being made solely by this Offer
to Purchase and the related Letter of Transmittal and is being made to all
holders of Shares. The Subsidiary is not aware of any state where the making of
the Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If the Subsidiary becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Subsidiary will make a good faith effort to comply with any such
state statute or seek to have such statute declared inapplicable to the Offer.
If after such good faith effort, the Subsidiary cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Subsidiary by one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction.
A copy of this Offer to Purchase, and certain of the agreements referred to
herein, are attached to the Schedule 14D-1, which has been filed with the
Commission. The Schedule 14D-1 and the exhibits thereto, along with such other
documents as may be filed by the Subsidiary and MedPartners with the Commission,
may be examined and copied from the offices of the Commission in the manner set
forth in Section 7.
No person has been authorized to give any information or to make any
representation on behalf of the Subsidiary or MedPartners not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
TALMED MERGER CORPORATION
August 20, 1997
28
<PAGE> 31
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder or his
broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<C> <C> <C>
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road-Mail Drop Reorg 120 Broadway - 13(th) Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Dept. Attention: Reorganization Dept. Attention: Reorganization Dept.
</TABLE>
By Facsimile Transmission:
201-329-8936
Confirmation of Fax:
201-296-4860
29
<PAGE> 32
SCHEDULE I
INFORMATION REGARDING THE DIRECTORS AND EXECUTIVE OFFICERS OF
MEDPARTNERS AND THE SUBSIDIARY
1. DIRECTORS AND EXECUTIVE OFFICERS OF MEDPARTNERS. Set forth in the table
and paragraphs below are the name and the present principal occupations or
employment and the name, principal business and address of any corporation or
other organization in which such occupation or employment is conducted, and the
five-year employment history of each of the directors and executive officers of
MedPartners. MedPartners owns 100% of the equity interest in the Subsidiary.
Unless otherwise indicated, each person identified below is employed by
MedPartners. The principal business address of MedPartners and, unless otherwise
indicated, the business address of each person identified below is 3000 Galleria
Tower, Suite 1000, Birmingham, Alabama 35244.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH MEDPARTNERS
- - ---- --- --------------------------
<S> <C> <C>
Larry R. House..................... 53 Chairman of the Board and Chief Executive Officer and
Director
Mark L. Wagar...................... 45 President and Chief Operating Officer
John J. Gannon..................... 58 President -- Physician Practice Management
H. Lynn Massingale, M.D............ 44 President -- Team Health
Harold O. Knight, Jr............... 39 Executive Vice President and Chief Financial Officer
Tracy P. Thrasher.................. 34 Executive Vice President and Chief Administrative Officer
and Corporate Secretary
Edward J. Novinski................. 38 Executive Vice President -- Managed Care
John M. Deane...................... 42 Executive Vice President -- Information Services
J. Brooke Johnston, Jr............. 57 Senior Vice President and General Counsel
Charles C. Clark................... 47 Senior Vice President and Chief Tax Officer
Peter J. Clemens, IV............... 32 Vice President of Finance and Treasurer
Mark S. Weeks...................... 34 Vice President of Finance and Controller
Richard M. Scrushy................. 44 Director
Larry D. Striplin, Jr.(1).......... 67 Director
Charles W. Newhall III(1).......... 52 Director
Ted H. McCourtney(2)............... 58 Director
Walter T. Mullikin, M.D............ 79 Director
John S. McDonald, J.D.(1).......... 64 Director
Rosalio J. Lopez, M.D.............. 44 Chief Medical Officer and Director
C.A. Lance Piccolo (2)............. 56 Director
Roger L. Headrick (1).............. 60 Director
Harry M. Jansen Kraemer, Jr........ 42 Director
</TABLE>
- - ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Larry R. House has been Chief Executive Officer of MedPartners since August
1993, and has been Chairman of the Board since January 1993. Mr. House also
served as President from August 1993 until June 1997. From 1985 to 1992, he was
Chief Operating Officer of HEALTHSOUTH Rehabilitation Corporation, now
HEALTHSOUTH Corporation ("HEALTHSOUTH"). From 1992 to 1993, Mr. House was
President of HEALTHSOUTH International, Inc. Mr. House is a member of the Board
of Directors of each of HEALTHSOUTH, Capstone Capital Corporation, a publicly
traded real estate investment trust ("Capstone"), the American Sports Medicine
Institute, UAB Research Foundation and Monitor MedX.
Mark L. Wagar has been President and Chief Operating Officer of MedPartners
since June 1997. Form January 1996 until June 1997, Mr. Wagar was
President -- Western Operations of MedPartners. From January 1995 through
December 1995, Mr. Wagar was Chief Operating Officer of MME, from March 1994 to
December 1994, he was the President of CIGNA HealthCare of California, a
healthcare plan serving
S-1
<PAGE> 33
enrollees in California, Oregon and Washington, from January 1993 through
February 1994, was a Vice President of CIGNA HealthCare of California, an HMO.
From November 19898 to December 1992, he was the President of Managed Care
Partners, Inc., a private consulting management company specializing in managed
care services. He has been involved in healthcare management for over 20 years,
including 10 years in managed care companies.
John J. Gannon has been President -- Physician Practice Management of
MedPartners since June 1997. From July 1996 to June 1997, Mr. Gannon was
President -- Eastern Operations. For 23 years, Mr. Gannon was a Partner with
KPMG Peat Marwick. His most recent position with KPMG was that of National
Partner-in-Charge of Strategy and Marketing, Healthcare and Life Sciences. He
served as one of the firm's designated industry review specialists for
healthcare financial feasibility studies.
H. Lynn Massingale, M.D. has been President of Team Health since its
formation in March 1994. Dr. Massingale has served as President of Southeastern
Emergency Physicians, Inc., a subsidiary of Team Health, since 1981. A graduate
of the University of Tennessee Center for Health Sciences in Memphis, Dr.
Massingale is certified by the National Board of Medical Examiners, Tennessee
Board of Medical Examiners and American Board of Emergency Medicine. Dr.
Massingale's professional memberships include the Knoxville Academy of Medicine,
Tennessee Medical Association, American Medical Association and American College
of Emergency Physicians.
Harold O. Knight, Jr. has been Executive Vice President and Chief Financial
Officer of MedPartners since November 1994. Mr. Knight was Senior Vice President
of Finance and Treasurer of MedPartners from August 1993 to November 1994, and
from March 1993 to August 1993, Mr. Knight served as Vice President of Finance
of MedPartners. From 1980 to 1993, Mr. Knight was with Ernst & Young LLP, most
recently as Senior Manager. Mr. Knight is a member of the Alabama Society of
Certified Public Accountants and the American Institute of Certified Public
Accountants.
Tracy P. Thrasher was named Chief Administrative Officer of MedPartners in
June 1997 and has been Executive Vice President of MedPartners since November
1994 and Corporate Secretary since March 1994. Ms. Thrasher was Senior Vice
President of Administration from March 1994 to November 1994, and from January
1993 to March 1994, she served as Corporate Comptroller and Vice President of
Development. From 1990 to 1993, Ms. Thrasher was the Audit and Health Care
Management Advisory Service Manager with Burton, Canady, Moore & Carr, P.C.
independent public accountants. Ms. Thrasher began her career with Ernst & Young
LLP in 1985, and became a certified public accountant in 1986.
Edward J. Novinski has been Executive Vice President of Managed Care for
MedPartners since September 1996. Prior to joining MedPartners, Mr. Novinski was
most recently Vice President of Network Management for United HealthCare
Corporation in their corporate office and held various positions from August
1986 to August 1996. Mr. Novinski was responsible for United HealthCare's
network strategies for physician and hospital relationships with supported
United HealthCare's diverse managed care product line. From 1977 to 1986, Mr.
Novinski was with Lutheran General Health System in managerial and
administrative positions including Director of Physician Practice Management for
a large multi-specialty group.
John M. Deane has been Executive Vice President, Information Services of
MedPartners since January 1997. From January 1995 through December 1996, Mr.
Deane was Vice President Information Services and CIO of Caremark Pharmaceutical
Services Group, based in Northbrook, Illinois. Prior to 1985, Mr. Deane was
Director, Information Services -- Planning and Consulting for the Whirlpool
Corporation and a Senior Manager on large IS projects for Price Waterhouse's
Management Consulting Services practice in the Midwest, where he led large IS
engagements for various Fortune 100 companies.
J. Brooke Johnston, Jr. has been Senior Vice President and General Counsel
of MedPartners since April 1996. Prior to that, Mr. Johnston was a senior
principal of the law firm of Haskell Slaughter Young & Johnston, Professional
Association, Birmingham, Alabama, where he practiced corporate and securities
law for over seventeen years. Prior to that Mr. Johnston was engaged in the
practice of law in New York, New York and at another firm in Birmingham. Mr.
Johnston is a member of the Alabama State Bar and the New
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<PAGE> 34
York and American Bar Associations. Mr. Johnston is a member of the Board of
Directors of United Leisure Corporation, a publicly traded leisure time services
company.
Charles C. Clark has been Senior Vice President and Chief Tax Officer of
MedPartners since January 1997. Prior to that, Mr. Clark was a Partner with KPMG
Peat Marwick, having served as Tax Partner in Charge of the Birmingham, Alabama
office and leader of tax services for the Health Care & Life Sciences practice
in the Southeast. Mr. Clark was with KPMG Peat Marwick for 21 years. Mr. Clark
is a Certified Public Accountant holding memberships in the American Institute
of Certified Public Accountants and the Alabama and Mississippi Societies of
Certified Public Accountants.
Peter J. Clemens, IV has been Vice President of Finance and Treasurer of
MedPartners since April 1995. From 1991 to 1995, Mr. Clemens worked in Corporate
Banking with Wachovia Bank of Georgia, N.A. Mr. Clemens began his career with
AmSouth Bank, N.A. in 1987, and received a Masters Degree in Business
Administration from Vanderbilt University in 1991.
Mark S. Weeks has been Vice President of Finance and Controller of
MedPartners since June 1994. From 1985 to 1994, Mr. Weeks was with Ernst & Young
LLP, most recently as Senior Manager. Mr. Weeks is a certified public accountant
and a member of the American Institute of Certified Public Accountants.
Richard M. Scrushy has been a member of MedPartners' Board of Directors
since January 1993. Since 1984, Mr. Scrushy has been Chairman of the Board and
Chief Executive Officer of HEALTHSOUTH. Mr. Scrushy is also a member of the
Board of Directors of Capstone.
Larry D. Striplin, Jr. has been a member of MedPartners' Board of Directors
since January 1993. Since December 1995, Mr. Striplin has been the Chairman and
Chief Executive Officer of Nelson-Brantley Glass Contractors, Inc. and Chairman
and Chief Executive Officer of Clearview Properties, Inc. Until December 1995,
Mr. Striplin had been Chairman of the Board and Chief Executive Officer of
Circle "S" Industries, Inc., a privately owned bonding wire manufacturer. Mr.
Striplin is a member of the Board of Directors of Kulicke & Suffa, Inc., a
publicly traded manufacturer of electronic equipment, and of Capstone.
Charles W. Newhall III has been a member of MedPartners' Board of Directors
since September 1993. He has been a general partner of New Enterprise
Associates, a venture capital firm, since 1978. Mr. Newhall is a member of the
Board of Directors of HEALTHSOUTH, Integrated Health Services, Inc. and OPTA
Food Ingredients, Inc., all publicly traded companies. He is a founder and
Chairman of the Mid-Atlantic Venture Association, which was organized in 1988.
Ted H. McCourtney has been a member of MedPartners' Board of Directors
since August 1993. He has been a general partner of Venrock Associates, a
venture capital firm, since 1970. Mr. McCourtney is a member of the Board of
Directors of Cellular Communications, Inc., Cellular Communications of Puerto
Rico, Inc., Cellular Communications International, Inc., International CabelTel
Incorporated, SBSF, Inc. and Structural Dynamics Research Corporation, each of
which is publicly traded.
Walter T. Mullikin, M.D., a surgeon, has been a member of MedPartners'
Board of Directors since November 1995. Dr. Mullikin was a Chairman of the Board
of the general partner of MME from 1989 to 1995. He founded Pioneer Hospital and
the predecessors to MME's principal professional corporation in 1957. He was
also the Chairman of the Board, President and a stockholder of Mullikin
Independent Practice Association ("MIPA"), until November 1995. Dr. Mullikin is
a member of the Board of Directors of HealthNet, a publicly traded HMO, and was
one of the founders and a past chairman of the United Medical Group Association.
John S. McDonald, J.D. has been a member of MedPartners Board of Directors
since November 1995. Mr. McDonald was the Chief Executive Officer of the general
partner of MME from March 1994 to 1995, and he was an executive of Pioneer
Hospital and their related entities since 1967. Mr. McDonald was also a
director, the Secretary and a stockholder of MME's general partner. Mr. McDonald
is on the Board of Directors of the Truck Insurance Exchange and is a past
president of the United Medical Group Association.
Rosalio J. Lopez, M.D. has been a member of MedPartners' Board of Directors
since November 1995 and became Chief Medical Officer of MedPartners in June
1997. Dr. Lopez has been a director of the general
S-3
<PAGE> 35
partner of MME since 1989. Dr. Lopez joined MME's principal professional
corporation in 1984 and serves as the Chairman of its Medical Council and Family
Practice and Managed Care committees. He also acted as a director and a Vice
President of MME's principal professional corporation. He is also a director and
stockholder of MIPA.
C.A. Lance Piccolo has been a member of MedPartners' Board of Directors
since September 1997. From August 1992 to September 1996, he was Chairman of the
Board of Directors and Chief Executive Officer of Caremark. From 1987 until
November 1992, Mr. Piccolo was an Executive Vice President of Baxter and from
1988 until November 1992, he served as a director of Baxter. Mr. Piccolo also
serves as a director of Crompton & Knowles Corporation ("CKC"), which is
publicly traded.
Roger L. Headrick has been a member of MedPartners' Board of Directors
since September 1996 and has been President and Chief Executive Officer of the
Minnesota Vikings Football Club since 1991. Additionally, since June 1989, Mr.
Headrick has been President and Chief Executive Officer of ProtaTek
International, Inc., a bio-process and biotechnology company that develops and
manufactures animal vaccines. Prior to 1989, he was Executive Vice President and
Chief Financial Officer of The Pillsbury Company, a food manufacturing and
processing company. Mr. Headrick also serves as a director of CKC.
Harry M. Jansen Kraemer, Jr. has been a member of MedPartners' Board of
Directors since September 1996, and is President of Baxter, having served in
that capacity since April 1997. Mr. Kraemer served as Senior Vice President and
Chief Financial Officer of Baxter from November 1993 to April 1997. He was
promoted to Baxter's three-member Office of the Chief Executive in June 1995,
and appointed to Baxter's Board of Directors in November 1995. Mr. Kraemer has
been an employee of Baxter since 1982, serving in a variety of positions,
including Vice President, Group Contoller for Baxter's hospital and
alternate-site businesses, president of Baxter's Hospitex Division and Vice
President Finance and Operations for Baxter's global-business group.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE SUBSIDIARY. Set forth in the
table and paragraphs below are the name and the present principal occupations or
employment and the name, principal business and address of any corporation or
other organization in which such occupation or employment is conducted, and the
five-year employment history of each of the directors and executive officers of
the Subsidiary. Each person identified below is employed by MedPartners and is a
director of the Subsidiary. The principal business address of the Subsidiary and
of each person identified below is 3000 Galleria Tower, Suite 1000, Birmingham,
Alabama 35244.
<TABLE>
<CAPTION>
NAME AGE OFFICES WITH THE SUBSIDIARY
---- --- ---------------------------
<S> <C> <C>
Larry R. House....................... 53 President
Harold O. Knight, Jr................. 39 Vice President and Treasurer
Tracy P. Thrasher.................... 34 Vice President and Secretary
</TABLE>
Larry R. House has been Chief Executive Officer of MedPartners since August
1993, and has been Chairman of the Board since January 1993. Mr. House also
served as President from August 1993 until June 1997. From 1985 to 1992, he was
Chief Operating Officer of HEALTHSOUTH. From 1992 to 1993, Mr. House was
President of HEALTHSOUTH International, Inc. Mr. House is a member of the Board
of Directors of each of HEALTHSOUTH, Capstone, the American Sports Medicine
Institute, UAB Research Foundation and Monitor MedX.
Harold O. Knight, Jr. has been Executive Vice President and Chief Financial
Officer of MedPartners since November 1994. Mr. Knight was Senior Vice President
of Finance and Treasurer of MedPartners from August 1993 to November 1994, and
from March 1993 to August 1993, Mr. Knight served as Vice President of Finance
of MedPartners. From 1980 to 1993, Mr. Knight was with Ernst & Young LLP, most
recently as Senior Manager. Mr. Knight is a member of the Alabama Society of
Certified Public Accountants and the American Institute of Certified Public
Accountants.
S-4
<PAGE> 36
Tracy P. Thrasher was named Chief Administrative Officer of MedPartners in
June 1997 and has been Executive Vice President of MedPartners since November
1994 and Corporate Secretary since March 1994. Ms. Thrasher was Senior Vice
President of Administration from March 1994 to November 1994, and from January
1993 to March 1994, she served as Corporate Comptroller and Vice President of
Development. From 1990 to 1993, Ms. Thrasher was the Audit and Health Care
Management Advisory Service Manager with Burton, Canady, Moore & Carr, P.C.
independent public accountants. Ms. Thrasher began her career with Ernst & Young
LLP in 1985, and became a certified public accountant in 1986.
Any questions and requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal and related materials may be directed to
the Information Agent at the address and telephone number set forth below.
Stockholders may also contact their broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[GEORGESON & COMPANY INC. LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: 212-440-9800
All Others Call Toll Free: 1-800-223-2064
S-5
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TALBERT MEDICAL MANAGEMENT HOLDINGS
CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 20, 1997
BY
TALMED MERGER CORPORATION
A WHOLLY-OWNED SUBSIDIARY
OF
MEDPARTNERS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<C> <C> <C>
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road- 120 Broadway - 13(th) Floor
South Hackensack, NJ 07606 Mail Drop Reorg New York, NY 10271
Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attention: Reorganization Dept.
Attention: Reorganization Dept.
</TABLE>
By Facsimile Transmission:
201-329-8936
Confirmation of Fax:
201-296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in Section 2 of the Offer to Purchase)
is utilized, if tenders of Shares are to be made by book-entry transfer into the
account of ChaseMellon Shareholder Services, L.L.C., as Depositary (the
"Depositary"), at The Depository Trust Company or the Philadelphia Depository
Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities"), pursuant to the procedures set forth in
Section 3 of the Offer to Purchase (as defined below). Stockholders who tender
Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders."
Holders of Shares whose certificates evidencing such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot complete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- - ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATION) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER
SHARE CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL SHARES
- - ----------------------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Shareholders.
** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to
have been tendered. See Instruction 4.
- - ----------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution:
--------------------------------------------------------------------------------------------------------------------
Check box of Book-Entry Transfer Facility (check one):
[ ] The Depository Trust Company Account Number:
--------------------------------------------------------------------------------------------------------------------
[ ] Philadelphia Depository Trust Company Transaction Code Number:
--------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
--------------------------------------------------------------------------------------------------------------------
Window Ticket Number (if any):
--------------------------------------------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
--------------------------------------------------------------------------------------------------------------------
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility (check one):
[ ] The Depository Trust Company Account Number:
--------------------------------------------------------------------------------------------------------------------
[ ] Philadelphia Depository Trust Company Transaction Code Number:
--------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Talmed Merger Corporation (the
"Subsidiary"), a Delaware corporation and a wholly-owned subsidiary of
MedPartners, Inc., a Delaware corporation ("MedPartners"), the above-described
shares of common stock, par value $.01 per share, together with associated
rights to purchase shares of preferred stock, par value $.01 per share,
designated as "Junior Participating Preferred Stock" (the "Shares"), of Talbert
Medical Management Holdings Corporation, a Delaware corporation (the "Company"),
at a purchase price of $63.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated August 20, 1997 (the "Offer to Purchase") and in this
Letter of Transmittal (which, together with any supplements and amendments,
collectively constitute the "Offer"), receipt of which is hereby acknowledged.
The undersigned understands that the Subsidiary reserves the right to transfer
or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer.
Upon the terms and conditions of the Offer and subject to, and effective
upon, acceptance for payment for the Shares tendered herewith in accordance with
the terms of the Offer, the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Subsidiary all right, title and interest in and to all
of the Shares that are being tendered hereby and any and all dividends,
distributions (including additional Shares) or rights declared, paid or issued
with respect to the tendered Shares on or after August 14, 1997 and payable or
distributable to the undersigned on a date prior to the transfer to the name of
the Subsidiary or nominee or transferee of the Subsidiary on the Company's stock
transfer records of the Shares tendered herewith, and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to (a) deliver such
Share Certificates (as defined herein) or transfer ownership of such Shares on
the account books maintained by a Book-Entry Transfer Facility, together in
either case with all accompanying evidences of transfer and authenticity, to the
Depositary for the account of the Subsidiary upon receipt by the Depositary of
the purchase price, (b) present such Shares for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms and
subject to the conditions of the Offer.
The undersigned irrevocably appoints the Subsidiary, its officers and its
designees, and each of them, the attorneys-in-fact and proxies of the
undersigned, with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Subsidiary and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after August 14, 1997. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby and is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Subsidiary in accordance with the terms of the Offer. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares (and such other shares and securities) will be revoked without
further action, and no subsequent proxies may be given nor any subsequent
written consents executed (and, if given or executed, will not be deemed
effective) with respect thereto by the undersigned. The Subsidiary, its officers
and its designees will, with respect to the Shares (and such other securities)
tendered, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. The
Subsidiary reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Subsidiary's payment for such Shares the
Subsidiary must be able to exercise full voting rights with respect to such
Shares and other securities, including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and (b) when the Shares are accepted for payment by the
Subsidiary, the Subsidiary will acquire good, marketable and unencumbered title
to the Shares, free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse
3
<PAGE> 4
claim. The undersigned, upon request, will execute and deliver any additional
documents deemed by the Depositary or the Subsidiary to be necessary or
desirable to complete the sale, assignment and transfer of the Shares tendered
hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Offer to Purchase) and, unless theretofore
accepted for payment by the Subsidiary pursuant to the Offer, may also be
withdrawn at any time after October 20, 1997. See Section 4 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto and acceptance for payment of such Shares will constitute a
binding agreement between the undersigned and the Subsidiary upon the terms and
subject to the conditions set forth in the Offer, including the undersigned's
representation that the undersigned owns the Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated herein under "Special Delivery
Instructions," please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. The undersigned recognizes that the Subsidiary has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Subsidiary does not accept
for payment any of the Shares so tendered.
4
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" above, or (b)
if such Shares are tendered for the account of a firm which is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of a recognized Medallion Signature Guarantee Program (each of the
foregoing being referred to as an "Eligible Institution"). In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by stockholders either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if tenders are to be made pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Share Certificates, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility, as well as this Letter of Transmittal
(or a facsimile hereof), properly completed and duly executed with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the front
page of this Letter of Transmittal prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). Stockholders whose Share Certificates are
not immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary prior to the Expiration Date or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis may tender their Shares by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth
in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by the Subsidiary, must be received by the Depositary prior
to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry
Confirmation) representing all tendered Shares, in proper form for transfer, in
each case together with the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed with any required signature guarantees (or,
in the case of a book-entry delivery, an Agent's Message) and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq National Market trading days after the date of
execution of such Notice of Guaranteed Delivery. If Share Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased (unless you are tendering all of the Shares
you own). All tendering stockholders, by execution of this Letter of Transmittal
(or a facsimile hereof), waive any right to receive any notice of the acceptance
of their Shares for payment.
5
<PAGE> 6
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS) If fewer
than all of the Shares evidenced by any Share Certificate delivered to the
Depositary are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Number of Shares Tendered." In such a case, new
Share Certificates for the Shares that were evidenced by your old Share
Certificates, but were not tendered by you, will be sent to you (unless
otherwise provided in the appropriate box on this Letter of Transmittal) as soon
as practicable after the Expiration Date. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s)
for such Shares. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Subsidiary will pay or cause to be paid any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificate(s) for Shares not tendered or accepted for payment are to be
registered in the name of, any person other than the registered holder(s), if a
transfer tax is imposed for any reason other than the sale or transfer of Shares
to Subsidiary pursuant to the Offer, or if tendered certificate(s) are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or an exemption therefrom is submitted.
EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE
NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN
THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued in the name of, or any
Shares not tendered or not purchased are to be returned to, a person other than
the person(s) signing this Letter of Transmittal or if the check or any
6
<PAGE> 7
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account at any of the Book-Entry Transfer
Facilities as such stockholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not purchased
will be returned by crediting the account at the Book-Entry Transfer Facilities
designated above.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Subsidiary in whole or in part at any time and from time to time in its sole
discretion.
9. 31% BACKUP WITHHOLDING, SUBSTITUTE FORM W-9. Each tendering stockholder
is required to provide the Depositary with a correct Taxpayer Identification
Number ("TIN"), generally the stockholder's social security or federal employer
identification number, on Substitute Form W-9 below. Failure to provide the
information on the form may subject the tendering stockholder to 31% federal
income tax withholding on the payment of the purchase price. The box in Part 3
of the form may be checked if the tendering stockholder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future. If the box in Part 3 is checked and the Depositary is not provided with
a TIN by the time of payment, the Depositary will withhold 31% of all payments
of the purchase price thereafter until a TIN is provided to the Depositary.
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for purchase is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is his or her social security number. If a
stockholder fails to provide a TIN to the Depositary, such stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or of
the last transferee appearing on the transfers attached to, or endorsed on, the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Information Agent at its address and
telephone numbers set forth below. Additional copies of the Offer to Purchase,
this Letter of Transmittal and the Notice of Guaranteed Delivery
7
<PAGE> 8
may also be obtained from the Information Agent at the address and telephone
number set forth below, or from brokers, dealers, commercial banks or trust
companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate evidencing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Information Agent. The stockholder will then be instructed as to the
steps that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF
GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
8
<PAGE> 9
PAYER'S NAME: CHASE MELLON SHAREHOLDERS SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
- - -------------------------------------------------------------------------------------------------------------
Social Security
Number
---------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT OR
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
---------------------
Employer
Identification Number
-----------------------------------------------------------------------
PART 2 -- For Payees exempt from backup withholding, see the enclosed
Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed therein.
Certification -- Under penalties of perjury, I certify that: (1) The
number shown on this form is my correct Taxpayer Identification Number
Department of the Treasury, (or I am waiting for a number to be issued to me) and (2) I am not
Internal Revenue Service subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup withholding.
-----------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you
IDENTIFICATION NUMBER (TIN) have been notified by the IRS that you are currently subject to backup
withholding because of under-reporting interest or dividends on your
tax return. However, if after being notified by the IRS that you were PART 3
subject to backup withholding you received another notification from
the IRS that you are no longer subject to backup withholding, do not
cross out such Item 2). (Also see instructions in the enclosed Awaiting TIN [ ]
Guidelines.)
SIGNATURE __________________________DATE _____________________________
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a Taxpayer Identification Number by the time of payment, 31% of all
reportable payments made to me will be withheld.
<TABLE>
<S> <C>
, 1997
- - ------------------------------------------------------------ ----------------------------------------------------
Signature: Date:
</TABLE>
9
<PAGE> 10
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be issued in the name of someone other than the undersigned.
Issue: [ ] check and/or [ ] certificates to:
- - ------------------------------------------------------
NAME -- (PLEASE PRINT)
- - ------------------------------------------------------
ADDRESS
- - ------------------------------------------------------
(INCLUDE ZIP CODE)
- - ------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
[ ] Credit unpurchased Shares tendered by book-entry transfer to the account set
forth below:
Name of Account Party
------------------------------------------------------------
- - --------------------------------------------------------------------------------
Account Number at
---------------------------------------------------------------
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be sent to someone other than the undersigned or to the
undersigned at an address other than that appearing under "DESCRIPTION OF SHARES
TENDERED."
Issue: [ ] check and/or [ ] certificates to:
- - -------------------------------------------------------------------------------
NAME -- (PLEASE PRINT)
- - -------------------------------------------------------------------------------
ADDRESS
- - -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- - -------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
10
<PAGE> 11
- - --------------------------------------------------------------------------------
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(SIGNATURE OF HOLDER(S))
Dated: ______________________, 1997
(Must be signed by the registered holder(s) exactly as name(s) appear(s)
on Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide
the following information and See Instruction 5.)
Name(s)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------------------------------
Tax Identification or
Social Security No.
--------------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
--------------------------------------------------------------------------
Name
--------------------------------------------------------------------------
Name of Firm
--------------------------------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------------------------------
Dated:
------------------------, 1997
--------------------------------------------------------------------------
<PAGE> 12
THE INFORMATION AGENT FOR THE OFFER IS:
LOGO
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
ALL OTHERS CALL TOLL FREE: 1-800-223-2064
August 20, 1997
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if (i) certificates evidencing Shares of common stock,
par value $.01 per share, together with associated rights to purchase shares of
preferred stock, par value $.01 per share, designated as "Junior Participating
Preferred Stock" (the "Shares") are not immediately available, (ii) the
certificates evidencing Shares and all other required documents cannot be
delivered to the Depositary prior to the Expiration Date (as defined in Section
1 of the Offer to Purchase), or (iii) the procedure for delivery by book-entry
transfer cannot be completed on a timely basis. This instrument may be
transmitted by facsimile transmission or delivered by hand or mail to the
Depositary.
THE DEPOSITARY FOR THE OFFER IS:
ChaseMellon Shareholders Services, L.L.C.
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<C> <C> <C>
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road-Mail Drop Reorg 120 Broadway - 13(th) Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Dept. Attention: Reorganization Dept. Attention: Reorganization Dept.
</TABLE>
By Facsimile Transmission:
201-329-8936
Confirmation of Fax:
201-296-4860
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, the signature guarantee must appear on the
applicable space provided in the signature box in the Letter of Transmittal.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tender(s) to Talmed Merger Corporation, a Delaware
corporation and a wholly-owned subsidiary of MedPartners, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated August 20, 1997 (the "Offer to Purchase") and in the related
Letter of Transmittal (which, together with any supplements and amendments,
collectively constitute the "Offer"), receipt of which is hereby acknowledged,
the number of Shares indicated below of Talbert Medical Management Holdings
Corporation, a Delaware corporation, pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
(PLEASE TYPE OR PRINT)
Signature(s)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Name(s) of Record Holders
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Address(es)
- - --------------------------------------------------------------------------------
- - ----------------------------------------------------------------- Zip Code
- - --------------------------------------------------------------------------------
- - ----------------------------------------------------------------- Zip Code
Area Code and Telephone No.(s)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Number of Shares Certificate No.(s) (If Available)
- - --------------------------------------------------------------------------------
Check one box if Shares will be tendered by book-entry transfer
[ ] The Depository Trust Company [ ] Philadelphia Depository Trust
Company
Account Number
- - --------------------------------------------------------------------------------
Dated_____________, 1997
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, (a) represents that the above
named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b)
represents that the tender of those Shares complies with Rule 14e-4, (c)
guarantees to deliver to the Depositary either the certificates evidencing all
tendered Shares, in proper form for transfer, or to deliver Shares pursuant to
the procedure for book-entry transfer into the Depositary's account at the book
entry facility identified above (each a "Book-Entry Transfer Facility"), in
either case together with the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed with any required signature guarantees, or
an Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three Nasdaq
National Market trading days after the date hereof.
(PLEASE TYPE OR PRINT)
Name of Firm
- - --------------------------------------------------------------------------------
Authorized Signature
- - --------------------------------------------------------------------------------
Title
- - --------------------------------------------------------------------------------
Address
- - --------------------------------------------------------------------------------
- - ------------------------------------------------------------------ Zip Code
Area Code and Telephone No.
- - --------------------------------------------------------------------------------
Dated_________, 1997
NOTE: DO NOT SEND CERTIFICATES EVIDENCING SHARES WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE> 1
[GEORGESON & COMPANY INC. LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
ALL OTHERS CALL TOLL FREE: 1-800-223-2064
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
AT
$63.00 NET PER SHARE
BY
TALMED MERGER CORPORATION
A WHOLLY-OWNED SUBSIDIARY
OF
MEDPARTNERS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED
August 20, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Talmed Merger Corporation (the "Subsidiary"), a
Delaware corporation and a wholly-owned subsidiary of MedPartners, Inc., a
Delaware corporation ("MedPartners"), to act as Information Agent in connection
with the Subsidiary's offer to purchase for cash all of the outstanding shares
of common stock, par value $.01 per share, of Talbert Medical Management
Holdings Corporation, a Delaware corporation (the "Company"), (the "Shares") at
a purchase price of $63.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which, together with
any supplements or amendments, collectively constitute the "Offer") enclosed
herewith. Holders of Shares whose certificates evidencing such Shares (the
"Share Certificates") are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary (as
defined below) prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot complete the procedures for book-entry transfer on a
timely basis, must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is subject to there being validly tendered and not properly
withdrawn prior to the expiration of the Offer a number of Shares which
constitutes at least fifty-one percent (51%) of the outstanding Shares of the
Company, assuming certain exercises. The Offer is also subject to other terms
and conditions. See the Introduction and Section 13 of the Offer to Purchase.
<PAGE> 2
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated August 20, 1997.
2. The BLUE Letter of Transmittal to tender Shares for your use and
for the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares.
3. The GREY Notice of Guaranteed Delivery for Shares to be used to
accept the Offer if Share Certificates are not immediately available, if
such certificates and all other required documents cannot be delivered to
ChaseMellon Shareholder Services (the "Depositary") by the Expiration Date,
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date.
4. A YELLOW printed form of letter which may be sent to your clients
for whose accounts you hold Shares registered in your name or in the name
of your nominee, with space provided for obtaining your clients'
instructions with regard to the Offer.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding.
6. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE
OFFER IS EXTENDED.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Subsidiary will be deemed to have accepted for payment, and
will pay for, all Shares validly tendered and not properly withdrawn prior to
the Expiration Date when, as and if the Subsidiary gives oral or written notice
to the Depositary of the Subsidiary's acceptance of such Shares for payment
pursuant to the Offer. Payment for Shares purchased pursuant to the Offer will
be made only after timely receipt by the Depositary of certificates for such
Shares (or confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as described
in the Offer to Purchase)), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) (unless, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase) is utilized)
and any other documents required by the Letter of Transmittal.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal with any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares, and any other required documents should be sent
to the Depositary, and (ii) Share Certificates representing the tendered Shares
should be delivered to the Depositary, or such Shares should be tendered by
book-entry transfer into the Depositary's account maintained at one of the
Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Subsidiary will not pay any commissions or fees to any broker, dealer
or other person (other than the Depositary and the Information Agent) in
connection with the solicitation of tenders of Shares pursuant to the Offer. The
Subsidiary will, however, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Subsidiary will pay or cause to be paid any stock transfer taxes
payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
2
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed to
us, the Information Agent.
VERY TRULY YOURS,
AS INFORMATION AGENT
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE SUBSIDIARY, MEDPARTNERS, THE COMPANY, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
AT
$63.00 NET PER SHARE IN CASH
BY
TALMED MERGER CORPORATION
A WHOLLY-OWNED SUBSIDIARY
OF
MEDPARTNERS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.
August 20, 1997
TO OUR CLIENTS:
Enclosed for your consideration is an Offer to Purchase dated August 20,
1997 (the "Offer to Purchase") and the related Letter of Transmittal relating to
an offer by Talmed Merger Corporation (the "Purchaser"), a Delaware corporation
and a wholly-owned subsidiary of MedPartners, Inc., a Delaware corporation
("MedPartners"), to purchase all of the outstanding shares of common stock, par
value $.01 per share, together with associated rights to purchase shares of
preferred stock, par value $.01 per share, designated as "Junior Participating
Preferred Stock" (the "Shares"), of Talbert Medical Management Holdings
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$63.00 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase and in
the related Letter of Transmittal (which, together with any supplements or
amendments, collectively constitute the "Offer"). We are the holder of record of
Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY
US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The offer price is $63.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday September 19, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the Expiration Date
(as defined in the Offer to Purchase) a number of Shares which constitutes
at least fifty-one percent (51%) of the outstanding Shares of the Company
assuming certain exercises. The Offer is also subject to other terms and
conditions. See the Introduction and Section 13 of the Offer to Purchase.
5. The Board of Directors of the Company has unanimously approved the
Offer.
<PAGE> 2
6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. However, federal income tax backup withholding at a rate of 31% may
be required, unless a exemption is provided or unless the required taxpayer
identification information is provided. See Instruction 9 of the Letter of
Transmittal.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. The Subsidiary
is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Subsidiary becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Shares pursuant thereto, the Subsidiary will make
a good faith effort to comply with any such state statute or seek to have such
statute declared inapplicable to the Offer. If after such good faith effort, the
Subsidiary cannot comply with such state statute, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Subsidiary by one or more registered brokers
or dealers that are licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. An envelope to return your
instructions to us is enclosed. If you authorize a tender of your Shares, all
such Shares will be tendered unless otherwise specified in such instruction
form. Your instructions should be forwarded to us in ample time to permit us to
submit a tender on your behalf prior to the expiration of the Offer. Holders of
Shares whose Share Certificates (as defined in the Offer to Purchase) are not
immediately available or who cannot deliver their Certificates and all other
required documents to ChaseMellon Shareholder Services, L.L.C., as depositary
(the "Depositary"), or complete the procedures for book-entry transfer prior to
the Expiration Date must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (a) Share Certificates or
timely confirmation of the book-entry transfer of such Shares into the account
maintained by the Depositary at The Depository Trust Company or Philadelphia
Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"),
pursuant to the procedure set forth in Section 3 of the Offer to Purchase, (b)
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry delivery, and
(c) any other documents required by the Letter of Transmittal. Accordingly,
payment may not be made to all tendering shareholders at the same time depending
upon when Share Certificates for or confirmation of book-entry transfer of such
Shares into the Depositary's account at a Book-Entry Transfer Facility are
actually received by the Depositary.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated August 20, 1997 (the "Offer to Purchase") and the related
Letter of Transmittal pursuant to an offer by Talmed Merger Corporation, a
Delaware corporation and a wholly-owned subsidiary of MedPartners, Inc., a
Delaware corporation, to purchase all outstanding shares of common stock, par
value $0.01 per share, together with associated rights to purchase shares of
preferred stock, par value $.01 per share, designated as "Junior Participating
Preferred Stock", of Talbert Medical Management Holdings Corporation, a Delaware
corporation (the "Shares").
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
Number of Shares to be Tendered*: SIGN HERE
Shares
- - --------------------------------- ----------------------------
Account
Number
-------------------------- ----------------------------
Dated, 1997 Signature(s)
-------------
----------------------
Please type or print name(s)
Address
---------------------------
Area Code and Telephone Number
----------------------------------
Tax Identification or Social
Security Number
------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 000-000000. The table below will help determine the number to
give the payor.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- - -----------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
The actual owner of
2. Two or more individuals (joint the account or, if
account) combined funds, any
one of the
individuals(1)
The actual owner of
3. Husband and wife (joint the account or, if
account) joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor- trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(s)
- - -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- - -----------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate, or Legal entity (Do not
pension trust furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district or prison) that
receives agricultural program
payments
- - -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenants bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBERS. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
[Form of Advertisement]
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS BEING MADE SOLELY BY THE OFFER TO PURCHASE DATED
AUGUST 20, 1997 AND THE RELATED LETTER OF TRANSMITTAL AND IS BEING MADE TO ALL
HOLDERS OF SHARES. THE SUBSIDIARY IS NOT AWARE OF ANY STATE WHERE THE MAKING OF
THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY
VALID STATE STATUTE. IF THE SUBSIDIARY BECOMES AWARE OF ANY VALID STATE STATUTE
PROHIBITING THE MAKING OF THE OFFER OR THE ACCEPTANCE OF SHARES PURSUANT
THERETO, THE SUBSIDIARY WILL MAKE A GOOD FAITH EFFORT TO COMPLY WITH SUCH STATE
STATUTE OR SEEK TO HAVE SUCH STATUTE DECLARED INAPPLICABLE TO THE OFFER. IF,
AFTER SUCH GOOD FAITH EFFORT, THE SUBSIDIARY CANNOT COMPLY WITH SUCH STATE
STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF) THE HOLDER OF SHARES IN SUCH STATE. IN ANY JURISDICTION WHERE
SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED
BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE
SUBSIDIARY BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS
OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
AT
$63.00 NET PER SHARE IN CASH
BY
TALMED MERGER CORPORATION
A WHOLLY-OWNED SUBSIDIARY
OF
MEDPARTNERS, INC.
Talmed Merger Corporation (the "Subsidiary"), a Delaware corporation and a
wholly-owned subsidiary of MedPartners, Inc., a Delaware corporation
("MedPartners"), hereby offers to purchase all of the outstanding shares of
common stock, par value $.01 per share, of Talbert Medical Management Holdings
Corporation, a Delaware corporation (the "Company"), including the associated
Junior Participating Preferred Stock purchase rights ("Shares") at a purchase
price of $63.00 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and in the related Letter of Transmittal (which, together with any supplements
or amendments, collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST FIFTY-ONE PERCENT (51%) OF THE SHARES OUTSTANDING,
ASSUMING CERTAIN EXERCISES.
<PAGE> 2
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 14, 1997 (the "Merger Agreement"), by and among MedPartners, the
Subsidiary and the Company pursuant to which, following the consummation of the
Offer, the Subsidiary will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation of the Merger and as a wholly-owned subsidiary of MedPartners. At
the effective time of the Merger, each outstanding Share (other than treasury
Shares, Shares held by MedPartners, the Subsidiary or any other subsidiary of
MedPartners, and Shares held by stockholders, if any, who properly exercise
appraisal rights under Delaware law) will be converted into and represent the
right to receive $63.00 in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS, BY UNANIMOUS VOTE OF THOSE
PRESENT, APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED
THAT EACH OF THE OFFER AND THE MERGER IS IN THE BEST INTEREST OF THE COMPANY'S
STOCKHOLDERS AND RECOMMENDS THAT ALL STOCKHOLDERS ACCEPT THE OFFER AND TENDER
ALL OF THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, the Subsidiary will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Subsidiary gives oral or written notice to the
Depositary (as defined in the Offer to Purchase) of the Subsidiary's acceptance
of such Shares for payment pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Subsidiary and transmitting such payments to
stockholders whose Shares have been accepted for payment. In all cases, payment
for Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates evidencing such
Shares (or timely Book-Entry Confirmation (as defined in Section 2 of the Offer
to Purchase) with respect to such Shares), (ii) the Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed with
any required signature guarantees (or an Agent's Message (as defined in Section
2 of the Offer to Purchase) in connection with a book-entry transfer), and (iii)
all other documents required by the Letter of Transmittal. Under no
circumstances will interest on the purchase price for Shares be paid, regardless
of any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time on
Friday, September 19, 1997, unless and until the Subsidiary, in accordance with
the terms of the Offer and the Merger Agreement, shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
the Subsidiary, shall expire. Subject to the terms of the Merger Agreement, the
Subsidiary expressly reserves the right, at any time and from time to time, to
extend the period of time during which the Offer is open for any reason,
including the occurrence of any of the events specified in Section 13 of the
Offer to Purchase, by giving written notice of such extension to the Depositary.
Any such extension will be followed as promptly as practicable by public
announcement to be made not later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Subsidiary pursuant to the Offer, may also be withdrawn at any time after
October 20, 1997. For a withdrawal to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of the addresses set forth in the Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If certificates evidencing the Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 of the
Offer to Purchase), unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice
2
<PAGE> 3
of withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility (as defined in Section 2 of the Offer to Purchase) to be
credited with the withdrawn Shares. All questions as to the form and validity
(including time of receipt) of any notice of withdrawal will be determined by
the Subsidiary, in its sole discretion, whose determination will be final and
binding. Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be re-tendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3 of
the Offer to Purchase.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Subsidiary with the Company's stockholder
lists and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase, the Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares whose names appear
on the Company's stockholder list and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ CAREFULLY AND IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent as set forth below. Requests for copies of the Offer to Purchase, the
related Letter of Transmittal and other tender offer materials also may be
directed to the Information Agent, and copies will be furnished promptly at the
Subsidiary's expense. Neither MedPartners nor the Subsidiary will pay any fees
or commissions to any broker or dealer or any other person (other than the
Information Agent and the Depositary) in connection with the solicitation of
tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
LOGO
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
ALL OTHERS CALL TOLL FREE: 1-800-
August 20, 1997
3
<PAGE> 1
EXHIBIT (a)(8)
MedPartners(TM)
- - ------------------------------------------------------------------------------
NEWS RELEASE
For Immediate Release -
Contacts For MedPartners: For Talbert Medical:
Larry R. House Kenneth S. Ord
Chairman of the Board, CEO 714-436-4852
205-733-8996
Investor Relations:
Randy Pittman
205-733-8996
Media Relations:
Thomas Dingledy
205-733-8996
MedPartners Announces Acquisition of Talbert Medical Management
---------------------------------------------------------------
Birmingham, Alabama - August 14, 1997 - MedPartners, Inc. (NYSE:MDM) today
announced it has entered into a definitive agreement to acquire Talbert Medical
Management Holdings Corporation (NASDAQ:TMMC) of Costa Mesa, California,
pursuant to a tender offer followed by a merger, for $63 per share in cash, or
about $200 million. Talbert Medical Management is a physician practice
management company representing 282 primary and specialty care physicians and
operating 52 clinics in five Southwestern states. The acquisition will give
Medpartners the opportunity to broaden Talbert's patient and clinic base through
MedPartners' agreements with payors and existing clinic network. Efficiencies
will also be gained in corporate overhead expenses and other areas.
MedPartners said the acquisition will be accounted for as a purchase
transaction with MedPartners assuming all assets and liabilities of Talbert.
The transaction is contingent on receiving approval from the Federal Trade
Commission under the provisions of the Hart-Scott-Rodino Anti-Trust Improvements
Act of 1976.
-more-
<PAGE> 2
Add 1
MedPartners/Talbert
Talbert Medical Management, founded in 1961 as part of the FHP Health
Maintenance Organization (HMO), went public through an initial stock offering
in April 1997. FHP International merged with PacifiCare Health Systems, Inc.
(NASDAQ:PHYSA and PHYSB) in February 1997. Since then, Talbert has added
enrollees from other HMO companies and payors, although PacifiCare still
represents a significant portion of the 270,000 patients in the network; 88,000
of Talbert's patients are senior enrollees.
"Talbert Medical Management represents an excellent source of
highly-respected primary and specialty care physicians in the Southwest, and
dovetails with our existing network of providers extremely well," said Larry R.
House, MedPartners' chairman and chief executive officer. "It also gives us an
entree' into three new markets, Salt Lake City/Provo, Tucson, and Albuquerque
which are among the major markets in the United States that we have targeted
for entry or expansion. Their eight clinics in Phoenix and 24 in Southern
California will also significantly increase our presence in these markets."
"All of us at PacifiCare are supportive of this affiliation of Talbert
with MedPartners," said Alan Hoops, president and chief executive officer of
PacifiCare. "Because of the long-standing relationship we have with
MedPartners, we are confident that the contractual agreements between our
company and Talbert will be addressed in a manner which protects all parties'
interests."
Jack D. Massimino, president and chief executive officer of Talbert,
noted "Talbert has always strived to achieve excellence in patient care and
patient satisfaction. This makes for an excellent fit with MedPartners, which
shares the same philosophy. This partnership gives our existing patients an
even broader spectrum of physicians and services to choose from. It will also
enhance the services received by current MedPartners clients by giving them
access to our network of physicians and clinics. We are excited to be
associated with MedPartners' more than 13,000 physicians, and have the benefit
of their business and clinical expertise. MedPartners' Medical Advisory
Committee is on the leading edge of medicine, allowing for the sharing of best
clinical and administrative practices across the entire organization. Their
physician-led, patient-centered approach is a model for the industry."
-more-
<PAGE> 3
Add 2
MedPartners/Talbert
MedPartners, based in Birmingham, Alabama, is the nation's largest
manager of physician practices, and after the Talbert acquisition will operate
in 39 states. The company develops, consolidates and manages healthcare
delivery systems. Through the company's network of affiliated group and IPA
physicians, MedPartners provides primary and specialty healthcare services to
prepaid managed care enrollees and fee-for-service patients. After the
acquisition, the company will be affiliated with 13,410 physicians, which
includes 3,270 group physicians, 7,688 IPA physicians, 2,211 hospital-based
physicians, and 241 correctional and military care physicians. MedPartners
also manages the nation's largest independent prescription benefits management
(PBM) company. Through the PBM, the company dispenses 53 million prescriptions
annually.
-30-
EDITOR'S NOTE: The attached charts show selected statistical information for
MedPartners, Talbert and the combined companies. More information on
MedPartners is available on the World Wide Web at http:// www.medpartners.com.
Information may also be obtained by calling PR Newswire Company News on Call at
1-800-758-5804 extension 106751.
<PAGE> 4
MEDPARTNERS/TALBERT
COMBINED STATISTICAL DATA
<TABLE>
<CAPTION>
MEDPARTNERS TALBERT COMBINED
----------- ------- --------
<S> <C> <C> <C>
Physicians
Group 2,988 282 3,270
IPA 7,688 -0- 7,688
Hospital-Based 2,211 -0- 2,211
Government Services 241 -0- 241
--------- ------- ------
Total 13,128 282 13,410
Capitated Lives
Professional Only 998,380 270,090 1,268,470
Global 959,135 -0- 959,135
--------- ------- ---------
Total 1,957,515 270,090 2,227,605
Payor Type (Lives)
Commercial 1,583,470 182,090 1,765,560
Senior 163,531 88,000 251,531
Other 210,514 -0- 210,514
--------- ------- ---------
Total 1,957,515 270,090 2,227,605
Practive Locations 659 52 711
Hospital-Based Contracts 327 -0- 327
Government Services Contracts 60 -0- 60
</TABLE>
<PAGE> 5
PHYSICIANS AND ENROLLEES IN SELECTED
WESTERN STATES:
MedPartners
-----------
<TABLE>
<CAPTION>
Group Commercial Senior Other Total
State Physicians Sites Enrollees Enrollees Enrollees Enrollees
- - ----- ---------- ----- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Arizona 15 5 13,000 1,000 1,000 15,000
California 1,286 174 1,111,000 104,000 112,000 1,327,000
Nevada 16 5 13,000 1,000 -0- 14,000
New Mexico -0- -0- -0- -0- -0- -0-
Utah -0- -0- -0- -0- -0- -0-
TOTAL 1,317 184 1,137,000 106,000 113,000 1,356,000
</TABLE>
Talbert Medical Management
--------------------------
<TABLE>
<CAPTION>
Group Commercial Senior Other Total
State Physicians Sites Enrollees Enrollees Enrollees Enrollees
- - ----- ---------- ----- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Arizona 31 14 15,000 18,000 -0- 33,000
California 151 24 70,000 45,000 -0- 115,000
Nevada 4 2 1,000 2,000 -0- 3,000
New Mexico 23 5 12,000 12,000 -0- 24,000
Utah 73 7 84,000 11,000 -0- 95,000
TOTAL 282 52 182,000 88,000 -0- 270,000
</TABLE>
<PAGE> 1
EXHIBIT (C)-1
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 14, 1997
AMONG
MEDPARTNERS, INC.,
TALMED MERGER CORPORATION
AND
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
================================================================================
<PAGE> 2
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
AMONG
MEDPARTNERS, INC.,
TALMED MERGER CORPORATION
AND
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Effect of the Merger on the Capital Stock of the Constituent Corporations; Merger
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Payment of Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Certificate of Incorporation of Surviving Corporation . . . . . . . . . . . . . . . . . 8
3.4 By-laws of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Directors and Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . 8
Section 4. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . 9
4.1 Organization, Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Company Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Foreign Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 SEC Filings; Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4.7 Contracts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.10 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.13 Employee Benefit Plans; Employment Matters . . . . . . . . . . . . . . . . . . . . . . . 15
4.14 Compliance with Laws in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.15 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.16 Commissions and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.17 No Untrue Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.18 Amendment of Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.19 14D-1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5. Representations and Warranties of the Parent and the Subsidiary . . . . . . . . . . . . 18
5.1 Organization, Existence and Good Standing of the Parent and Subsidiary . . . . . . . . . 18
5.2 Power and Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 No Contracts or Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 The Parent to Cause Subsidiary to Perform . . . . . . . . . . . . . . . . . . . . . . . 19
5.9 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 14D-9 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.11 Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6. Access to Information and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Return of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Effect of Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Material Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Exemption from State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Resignation of Company Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Notice of Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.8 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.9 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.10 Additional Agreements Regarding Benefit Plans . . . . . . . . . . . . . . . . . . . . . 23
7.11 Physician Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
7.12 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.13 Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.14 Share Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.5 Procedure for Termination, Amendment, Extension or Waiver . . . . . . . . . . . . . . . 27
8.6 Termination Fee; Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9. Conditions to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.1 Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 29
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 Material Adverse Change or Material Adverse Effect . . . . . . . . . . . . . . . . . . . 30
10.7 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.13 No Rule of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Exhibit 1.1 Conditions of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit 7.11 Nontransferable Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 14, 1997 (the
"Agreement"), among MEDPARTNERS, INC., a Delaware corporation (the "Parent"),
TALMED MERGER CORPORATION, a Delaware corporation (the "Subsidiary"), and
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION, a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Parent, the Company
and the Subsidiary have each determined that it is in the best interests of
their respective stockholders for the Parent to acquire the Company upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, the Parent proposes to
cause the Subsidiary to make a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "Offer") to purchase all the
outstanding shares of Common Stock, par value $.01 per share, of the Company
and associated Rights, as defined in Section 4.2 ("Company Common Stock" or
"Company Shares"), at a purchase price of US$63.00 per share (such amount, or
any greater amount to be paid per share of Company Common Stock in the Offer,
being referred to as the "Per Share Amount"), net to the seller in cash, upon
the terms and subject to the conditions set forth in this Agreement and in the
Offer; and the Board of Directors of the Company has unanimously approved the
Offer and is recommending that the Company's stockholders accept the Offer and
tender their shares of Company Common Stock pursuant to the Offer;
WHEREAS, in furtherance of such acquisition, the respective Boards of
Directors of the Parent, the Company and the Subsidiary have approved the
merger of the Subsidiary with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement and in
accordance with the provisions of the Delaware General Corporation Law (the
"DGCL"), whereby each share of Company Common Stock, other than shares owned
directly or indirectly by the Parent or by the Company and other than
Dissenting Shares (as defined in Section 3.1(d)), will be converted into the
right to receive the Per Share Amount; and
WHEREAS, each of the Parent, the Subsidiary and the Company desire to
make certain representations, warranties, covenants and agreements in
connection with the Offer and also to prescribe various conditions to the
Offer.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1
<PAGE> 6
SECTION 1. THE OFFER
1.1 The Offer. (a) Subject to the provisions of this Agreement,
as promptly as practicable, but in no event later than five business days after
the date of the public announcement of this Agreement, the Subsidiary shall,
and the Parent shall cause the Subsidiary to, commence the Offer. The
obligation of the Subsidiary to, and of the Parent to cause the Subsidiary to,
commence the Offer and accept for payment, and pay for, any shares of Company
Common Stock tendered pursuant to the Offer shall be subject to the conditions
set forth in Exhibit 1.1 (any and all of which may, except as limited by the
following sentence, be waived in whole or in part by the Subsidiary in its sole
discretion), and to the terms and conditions of this Agreement. The Subsidiary
expressly reserves the right to modify the terms and conditions of the Offer,
except that, without the prior written consent of the Company or as expressly
permitted by this Agreement, the Subsidiary shall not (i) reduce the number of
shares of Company Common Stock subject to the Offer, (ii) reduce the Per Share
Amount, (iii) modify or add to the conditions set forth in Exhibit 1.1, (iv)
allow the Offer to expire prior to September 19, 1997; (v) except as provided
in the following sentence, extend the term of the Offer, (vi) change the form
of consideration payable in the Offer or (vii) make any other modifications
that are otherwise materially adverse to holders of Company Common Stock.
Notwithstanding the foregoing, the Subsidiary may, without the consent of the
Company, (A) extend the term of the Offer on one or more occasions beyond any
scheduled expiration date of the Offer if, at any such scheduled expiration
date, any of the conditions to the Subsidiary's obligation to accept for
payment, and pay for, shares of Company Common Stock tendered pursuant to the
Offer shall not have been satisfied or waived (provided, however, that the
Subsidiary may not extend the Offer under this subsection (A) for a total of
more than 60 days from the commencement of the Offer), (B) extend the Offer for
a period not to exceed 10 business days, notwithstanding that all conditions to
the Offer are satisfied as of such expiration date of the Offer, if,
immediately prior to that expiration date (as it may be extended), the Company
Shares validly tendered and not withdrawn pursuant to the Offer equal more than
75% but less than 90% of the outstanding Company Shares, and (C) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or any other applicable law.
(b) The Per Share Amount shall, subject to applicable withholding
of taxes, be net to the seller in cash, upon the terms and subject to the
conditions of the Offer. Subject to the terms and conditions of the Offer and
this Agreement, the Subsidiary shall, and the Parent shall cause the Subsidiary
to, pay for all shares of Company Common Stock validly tendered and not
withdrawn pursuant to the Offer promptly after the expiration of the Offer.
The Parent shall provide or cause to be provided to the Subsidiary on a timely
basis the funds necessary to pay for any shares of Company Common Stock that
the Subsidiary becomes obligated to accept for payment, and pay for, pursuant
to the Offer or this Agreement.
(c) On the date of commencement of the Offer, the Parent and the
Subsidiary shall file with the SEC a Tender Offer Statement on Schedule 14D-1
with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1
and the documents included therein pursuant to which the Offer will be
2
<PAGE> 7
made, together with any supplements or amendments thereto, the "Offer
Documents"). The Parent and the Subsidiary agree that the Offer Documents
shall comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
when first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Parent or the
Subsidiary with respect to information supplied by the Company for inclusion in
the Offer Documents or incorporated therein by reference to any statement,
report or other document filed by or on behalf of the Company with the SEC.
Each of the Parent, the Subsidiary and the Company agrees to correct promptly
any information provided by it for use in the Offer Documents if and to the
extent that such information shall have become false or misleading in any
material respect, and each of the Parent and the Subsidiary further agrees to
take all steps necessary to amend or supplement the Offer Documents and to
cause the Offer Documents as so amended or supplemented to be filed with the
SEC and to be disseminated to the Company's stockholders, in each case as and
to the extent required by applicable federal securities laws. The Company and
its counsel shall be given reasonable opportunity to review and comment upon
the Offer Documents and all amendments and supplements thereto prior to their
filing with the SEC or dissemination to stockholders of the Company. The
Parent and the Subsidiary agree to provide the Company and its counsel any
comments the Parent, the Subsidiary or their counsel may receive from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of
such comments and shall provide the Company and its counsel an opportunity to
participate in the response of the Parent and/or the Subsidiary to such
comments.
1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, has by unanimous vote of those present
adopted resolutions (i) approving this Agreement, the Offer and the Merger, (ii)
determining that the terms of the Offer and the Merger are fair to, and in the
best interests of, the Company's stockholders, and (iii) recommending that the
Company's stockholders accept the Offer, tender their shares pursuant to the
Offer and approve this Agreement. Subject to the fiduciary duties of the Board
under applicable law as advised by independent counsel (which may be the
Company's regularly engaged outside counsel) ("Independent Counsel"), the
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Board described in the immediately preceding sentence.
The Company has been advised by each of its directors and executive officers
that, subject to their fiduciary and contractual obligations, they intend to
tender all shares of Company Common Stock beneficially owned by them to the
Subsidiary pursuant to the Offer, unless to do so would potentially subject them
to short-swing liability under Section 16 of the Exchange Act.
(b) On the date the Offer Documents are filed with the SEC, or as
soon thereafter as is practicable, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9")
containing, subject to the fiduciary duties of the Board under
3
<PAGE> 8
applicable law as advised by Independent Counsel, the recommendation described
in Section 1.2(a) and shall mail the Schedule 14D-9 to the stockholders of the
Company. The Company agrees that the Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
when first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect
to information supplied by the Parent or the Subsidiary for inclusion in the
Schedule 14D-9. Each of the Company, the Parent and the Subsidiary agrees to
correct promptly any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. The Parent and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 and all amendments and supplements thereto prior to their filing with the
SEC or dissemination to stockholders of the Company. The Company agrees to
provide the Parent and its counsel with any comments the Company or its counsel
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments and shall provide the Parent and
its counsel an opportunity to participate in the response of the Company to
such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish the Subsidiary promptly with mailing labels
containing the names and addresses of the record holders of Company Common
Stock as of the most recent practicable date and of those persons becoming
record holders subsequent to such date, together with copies of all lists of
stockholders, security position listings and computer files and all other
information in the Company's possession or control regarding the beneficial
owners of Company Common Stock, and shall furnish to the Subsidiary such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as the Parent may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, the Parent and the Subsidiary shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver to the Company all
copies of such information then in their possession or control.
1.3 Directors. (a) Promptly upon the purchase of Company Shares
by the Subsidiary pursuant to the Offer, seven of the Company's nine directors
will resign, and the Parent shall designate three replacements for appointment
or election to the Company's Board of Directors. The Company shall, upon
request of the Subsidiary, use its best efforts promptly to cause the Parent's
designees to be so appointed or elected. The remaining two directors (and any
successors appointed or elected before the Effective Time, as defined in
Section 2.3 below,
4
<PAGE> 9
which successors shall not be affiliated with the Parent) are referred to as
the "Original Directors." The Company shall promptly take all actions required
by Section 14(f) of the Exchange Act and related Rule 14f-1 in order to fulfill
its obligations under this Section 1.3(a), including mailing to stockholders
the required information (or, at the Parent's request, furnishing such
information to the Parent for inclusion in the Offer Documents initially filed
with the SEC and distributed to the stockholders of the Company) as is
necessary to enable the Parent's designees to be elected to the Company's Board
of Directors. The Parent or the Subsidiary will supply the Company in writing,
and be solely responsible for, any information with respect to either of them
and their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1 as is necessary in connection with the appointment of any
of the Parent's designees under Section 1.3(a).
(b) Once the Parent's designees constitute a majority of the
Company's Board of Directors, any amendment of this Agreement, any termination
of this Agreement by the Company, any extension of time for performance of any
of the obligations of the Parent or the Subsidiary hereunder, any waiver of any
condition or any of the Company's rights hereunder or other action by the
Company hereunder may be effected only by the joint action of the Original
Directors.
SECTION 2. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, the Subsidiary shall
be merged with and into the Company at the Effective Time (as defined in
Section 2.3). Following the Effective Time, the separate corporate existence
of the Subsidiary shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") as a business corporation
incorporated under the laws of the State of Delaware under a name to be
designated by the Parent and shall succeed to and assume all the rights and
obligations of the Subsidiary and the Company in accordance with the DGCL.
2.2 The Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. Central Time on a date to be specified by the parties
(the "Closing Date"), which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Section 9.1, at
the offices of Haskell Slaughter & Young, L.L.C., Birmingham, Alabama, unless
another date or place is agreed to in writing by the parties hereto.
2.3 Effective Time. Subject to the provisions of this Agreement,
the Company and the Subsidiary shall file a Certificate of Merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL, and shall make all other filings or recordings required under the
DGCL to effect the Merger on the Closing Date. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other time as the
Parent, the Subsidiary and the Company shall agree should be specified in the
Certificate of Merger (the "Effective Time").
5
<PAGE> 10
2.4 Effect of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto and any other applicable laws, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and the Subsidiary shall vest in the Surviving Corporation, and all
debts, liabilities, restrictions, disabilities and duties of the Company and
the Subsidiary shall become the debts, liabilities, restrictions, disabilities
and duties of the Surviving Corporation.
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; MERGER CONSIDERATION
3.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder of the Company
Shares or any shares of capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of Common Stock, par
value $.01 per share, of the Subsidiary issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Company Common Stock. Each
share of Company Common Stock that is owned by the Company, the Parent or by
any subsidiary of the Company or the Parent shall automatically be canceled and
retired and shall cease to exist, and no cash or other consideration shall be
delivered in exchange therefor.
(c) Conversion of the Company Shares. At the Effective Time, each
Company Share (other than the Company Shares to be canceled in accordance with
Section 3.1(b)) issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive the Per Share Amount (the "Merger
Consideration"). Upon such conversion, all such Company Shares shall be
canceled and cease to exist, and each holder thereof shall cease to have any
rights with respect thereto other than the right to receive the Merger
Consideration paid in exchange therefor in accordance with the terms provided
herein.
(d) No Conversion of Dissenting Shares. Notwithstanding Section
3.1(c), if dissenters rights are available in connection with the Merger
pursuant to Section 262 of the DGCL, shares of Company Common Stock held by a
holder who has not voted in favor of the Merger and who, subject to and in
accordance with Section 262 of the DGCL, has demanded and perfected such
holder's right to an appraisal of such holder's shares of Company Common Stock
and has not effectively withdrawn or lost the right to such appraisal
("Dissenting Shares"), shall not be converted into a right to receive the
Merger Consideration, unless such holder withdraws or otherwise loses the right
to appraisal for such holder's shares of Company Common Stock. If after the
Effective Time such holder withdraws or loses the right to appraisal for such
holder's shares of Company Common Stock, such shares of Company Common Stock
shall be treated as if they had been converted as of the Effective Time into
the right to receive the Merger
6
<PAGE> 11
Consideration payable in respect of such shares of Company Common Stock
pursuant to Section 3.1(c).
3.2 Payment of Merger Consideration.
(a) Payment Agent. Prior to the expiration date of the Offer, the
Parent shall designate a bank or trust company reasonably acceptable to the
Company to act as payment agent in the Merger (the "Payment Agent"), and, from
time to time, prior to or after the Effective Time, the Parent shall make
available, or cause the Surviving Corporation to make available, to the Payment
Agent cash in amounts and at the times necessary for the payment of the Merger
Consideration (the "Payment Fund") upon surrender of certificates representing
Company Common Stock as part of the Merger pursuant to Section 3.1.
(b) Exchange Procedure. As soon as reasonably practicable after
the Effective Time, the Surviving Corporation shall cause the Payment Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Payment Agent and shall be in such form and have such other provisions as the
Parent may specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Payment Agent or to such other agent or
agents as may be appointed by the Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration, and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Parent that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 3.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
(c) Termination of Payment Fund. If any portion of the Payment
Fund remains undistributed to the holders of the Certificates for six months
after the Effective Time, the Parent may require the Payment Agent to deliver
such portion to the Parent, and any holders of the Certificates who have not
theretofore complied with this Section 3 shall thereafter look only to the
Parent for payment of the Merger Consideration.
7
<PAGE> 12
(d) No Liability. None of the Parent, the Surviving Corporation
or the Payment Agent shall be liable to any person in respect of any of the
Merger Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Investment of Payment Fund. The Payment Agent shall invest
such portions of the Merger Consideration as the Parent directs (it being
understood that any and all interest earned on funds made available to the
Payment Agent pursuant to this Agreement shall be the property of, and shall be
turned over to, the Parent), provided that such investments shall be in
obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in
deposit accounts, certificates of deposit or banker's acceptances of,
repurchase or reverse repurchase agreements with, or Eurodollar time deposits
purchased from, commercial banks with capital, surplus and undivided profits
aggregating in excess of US$100 million (based on the most recent financial
statements of such bank which are then publicly available at the SEC or
otherwise). The Merger Consideration shall not be used for any other purpose,
except as provided in this Agreement.
(f) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of Certificates in accordance with this Section 3 shall
be deemed to have been paid in full satisfaction of all rights pertaining to
the shares of Company Common Stock theretofore represented by such
Certificates, and, from and after the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Payment Agent
for any reason, they shall be cancelled and exchanged as provided in this
Section 3.
3.3 Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of the Subsidiary, effective immediately following
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation from and after the Effective Time and until thereafter amended as
provided by law and such Certificate of Incorporation; provided, however, that
at the Effective Time of the Merger such Certificate of Incorporation shall be
amended to change the Surviving Corporation's name as contemplated by Section
2.1.
3.4 By-laws of Surviving Corporation. The By-laws of the
Subsidiary shall be the By-laws of the Surviving Corporation from and after the
Effective Time and until thereafter altered, amended or repealed in accordance
with the DGCL, the Certificate of Incorporation of the Surviving Corporation
and the said By-laws.
3.5 Directors and Officers of Surviving Corporation. The
directors and officers of the Subsidiary immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-laws of
the Surviving Corporation.
8
<PAGE> 13
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and the
Subsidiary as follows:
4.1 Organization, Existence and Good Standing. The Company is a
Delaware corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has all necessary
corporate power to own its properties and assets and to carry on its business
as presently conducted.
4.2 Company Capital Stock. The Company's authorized capital
consists of 15 million shares of Common Stock and 1.2 million shares of
preferred stock, no par value (the "Preferred Stock") of which 3,000,758 shares
of Common Stock and no shares of Preferred Stock are issued and outstanding as
of the date of this Agreement. Pursuant to a Rights Agreement, dated as of May
21, 1997, as amended, by and between the Company and American Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agreement"), the Company has issued
to its stockholders certain rights (the "Rights") to purchase shares of Junior
Participating Cumulative Preferred Stock of the Company, which Junior
Participating Cumulative Preferred Stock is, under certain circumstances,
convertible into Company Common Stock. There were 174,252 shares of Company
Common Stock reserved for issuance upon exercise of outstanding Stock Options
(as defined in Section 7.10) as of the date of this Agreement. All of the
issued and outstanding Company Shares are duly and validly issued, fully paid
and nonassessable. Except for the Rights Agreement or as set forth in Exhibit
4.2 to the Disclosure Schedule delivered to the Parent and the Subsidiary by
the Company at the time of the execution and delivery of this Agreement (the
"Company Disclosure Schedule"), there are no options, warrants, or similar
rights granted by the Company or any other agreements to which the Company is a
party providing for the issuance or sale by it of any additional securities
which would remain in effect after the Effective Time. There is no liability
for dividends declared or accumulated but unpaid with respect to any of the
Company Shares.
4.3 Subsidiaries. (a) Exhibit 4.3 to the Company Disclosure
Schedule lists all of the Company's subsidiaries (the "Company Subsidiaries")
and states with respect to each Company Subsidiary, its jurisdiction of
incorporation, its authorized and outstanding capital stock, and the ownership
of its outstanding voting securities. Other than the Company Subsidiaries and
except as described in such Exhibit 4.3, the Company does not own stock in and
does not control, directly or indirectly, any other corporation, association or
business organization, nor does the Company own an equity interest in, or
control, directly or indirectly, any other joint venture or partnership.
(b) Each Company Subsidiary is duly organized in its jurisdiction
of organization, is validly existing and in good standing in that jurisdiction,
and has all necessary corporate power to own its properties and assets and to
carry on its business as presently conducted.
(c) Except as set forth in Exhibit 4.3 to the Company Disclosure
Schedule, (i) all of the issued and outstanding shares of each Company
Subsidiary are duly and validly issued, fully paid and nonassessable, and held
of record and beneficially by the Company, and (ii) there are
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no options, warrants, or similar rights granted by the Company or any Company
Subsidiary, or any other agreements to which the Company or any Company
Subsidiary is a party, providing for the issuance or sale by the Company or any
Company Subsidiary of any Company Subsidiary securities and which would remain
in effect after the Effective Time.
4.4 Foreign Qualifications. The Company and each Company
Subsidiary is qualified to do business and is in good standing in each
jurisdiction where the nature or character of the property owned, leased or
operated by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to so qualify would not have
a material adverse effect on its business or operations.
4.5 Power and Authority. Subject to the satisfaction of the
conditions precedent set forth herein, the Company has the corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered or to be executed and delivered by it pursuant
to this Agreement, and, subject to the satisfaction of the conditions precedent
set forth herein has taken all action required by its Certificate of
Incorporation, By-laws or otherwise, to authorize the execution, delivery and
performance of this Agreement and such related documents. Except as set forth
in Exhibit 4.5 to the Company Disclosure Schedule, the execution and delivery
of this Agreement does not and, subject to the receipt of required regulatory
approvals (and, in the case of the Merger if less than 90% of the Company
Shares are purchased in the Offer, Company stockholder approval) and any other
required third-party consents or approvals, the consummation of the Offer and
Merger will not, violate any provisions of the Certificate of Incorporation or
By-laws of the Company or any provisions of, or result in the acceleration of
any obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, to which the Company is a party, or by
which it is bound, or violate any restrictions of any kind to which they are
subject which, if violated or accelerated would have a material adverse effect
on the Company.
4.6 SEC Filings; Financial Information. (a) The Company has
filed with the SEC and made available to the Parent all forms, reports and
documents required to be filed with the SEC (the "Company SEC Reports"). The
Company SEC Reports (i) were prepared in all material respects in accordance
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and (ii) did not at the time of filing (or if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto), and each fairly presents in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as at the respective dates thereof and the consolidated statements
of income and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal
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and recurring year-end adjustments. The unaudited Balance Sheet dated June 30,
1997 included in the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 is referred to as the "Company Balance Sheet."
4.7 Contracts, etc. Exhibit 4.7 to the Company's Disclosure
Schedule lists all of the Company's "Material Contracts," defined as all
agreements to which the Company or any Company Subsidiary is a party or by
which any of them is bound, and which, as of the date of this Agreement, (i)
would be required to be filed as "material contracts" with the SEC pursuant to
the Exchange Act, or (ii) under which the consequences of a default, nonrenewal
or termination would have a material adverse effect on the Company
(collectively, the "Material Contracts"). The Company has made the Material
Contracts available to the Parent. Except as set forth in Exhibit 4.7 to the
Company Disclosure Schedule, to the Company's knowledge:
(a) All Material Contracts are (i) legally valid and binding in
accordance with their terms, (ii) in full force and effect, and (iii) do not
violate any federal, state or local law, rule, regulation or ordinance, and the
Company has provided the Parent and the Subsidiary with copies of all such
documents. All parties to the Material Contracts have complied with the
provisions of the Material Contracts, except for such failures as do not,
individually or in the aggregate, have a material adverse effect on the
Company. No party is in default under any Material Contract, and no event has
occurred which, but for the passage of time or the giving of notice or both,
would constitute a default thereunder, except, in each case, where the
invalidity of the Material Contract or the default or breach thereunder or
thereof would not, individually or in the aggregate, have a material adverse
effect on the Company. As of the date hereof, the Company has not received any
notice of termination or cancellation or a request to renegotiate any Material
Contract.
(b) No Material Contract will, by its terms, terminate as a result
of the transactions contemplated hereby or require any consent from any obligor
thereto in order to remain in full force and effect immediately after the
Effective Time, except for contracts or agreements which, if terminated, would
not have a material adverse effect on the Company.
(c) The Company has not granted any right of first refusal or
similar right in favor of any third party with respect to any material portion
of its properties or assets (excluding liens described in Section 4.8) or
entered into any non-competition agreement or similar agreement restricting its
ability to engage in any business in any location.
4.8 Properties and Assets. The Company or one of the Company
Subsidiaries owns or leases all of the real and personal property included in
the Company Balance Sheet (except assets recorded under capital lease
obligations and such property as has been disposed of during the ordinary
course of the Company's business since the date of the Company Balance Sheet),
free and clear of any liens, claims, charges, exceptions or encumbrances,
except for those if any, which in the aggregate are not material and which do
not materially affect the continued use of such property.
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4.9 Legal Proceedings. Except as listed in Exhibit 4.9 to the
Company Disclosure Schedule, there are no actions, suits or proceedings pending
or, to the knowledge of the Company, threatened against the Company, at law or
in equity, relating to or affecting the Company, that would reasonably be
expected to have a material adverse effect on the Company or the transactions
contemplated by this Agreement.
4.10 Subsequent Events. Except as set forth in Exhibit 4.10 to the
Company Disclosure Schedule or as contemplated by this Agreement, the Company
has not, since the date of the Company Balance Sheet:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability
(absolute, accrued, contingent or otherwise) other than (i)
liabilities shown or reflected on the Company Balance Sheet or (ii)
liabilities incurred or due since the date of the Company Balance
Sheet in the ordinary course of business, which discharge or
satisfaction would have a material adverse effect on the Company.
(c) Increased or established any reserve for taxes or any
other liability on its books or otherwise provided therefor which
would have a material adverse effect on the Company, except as may
have been required due to income or operations of the Company since
the date of the Company Balance Sheet.
(d) Mortgaged, pledged or subjected to any material lien,
charge or other encumbrance any of the assets, tangible or intangible,
which assets are material to the business or financial condition of
the Company.
(e) Sold or transferred any of the assets material to the
consolidated business of the Company, canceled any material debts owed
to the Company or claims reflected as assets on the Company Balance
Sheet, or waived any material rights, except in the ordinary course of
business.
(f) Granted any general or uniform increase in the rates
of pay of employees or any material increase in salary payable or to
become payable by the Company to any officer or employee, consultant
or agent (other than normal increases consistent with past practices),
or by means of any bonus or pension plan, contract or other
commitment, increased in a material respect the compensation of any
officer, employee, consultant or agent.
(g) Except for this Agreement and any other agreement
executed and delivered pursuant to this Agreement, entered into any
material transaction other than in the ordinary course of business or
permitted under other sections of this Agreement.
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(h) Issued any stock (other than pursuant to the Stock
Incentive Plans, as defined in Section 7.10), bonds or other
securities or any options or rights to purchase any of its securities.
4.11 Accounts Receivable. Since the date of the Company Balance
Sheet, the Company has not changed any principle or practice with respect to
the recordation of accounts receivable or the calculation of reserves therefor,
or any material collection, discount or write-off policy or procedure. The
Company is in compliance with the terms and conditions of all third-party payor
arrangements relating to its accounts receivable, except to the extent that
such noncompliance would not have a material adverse effect on the Company.
4.12 Tax Matters. Except as set forth in Exhibit 4.12 to the
Company Disclosure Schedule:
(a) Prior to its separation from FHP International
Corporation ("FHP") on February 14, 1997, the responsibility for
filing the Tax Returns of each of the Talbert Entities (as defined
below in this Section 4.12) was administered by FHP, and subsequently
by PacifiCare Health Systems, Inc. ("PacifiCare"). Except for any tax
periods prior to February 15, 1997, and based upon the best knowledge
of the officers of the Company:
(i) Each of the Talbert Entities (as defined
below in this Section 4.12) has filed all Tax Returns (as
defined below in this Section 4.12) that it was required to
file. All such Tax Returns were materially correct and
materially complete in all respects. All material Taxes (as
defined below in this Section 4.12) owed by any of the Talbert
Entities (whether or not shown on any Tax Return) have been
paid. None of the Talbert Entities currently is the
beneficiary of any extension of time within which to file any
Tax Return. No material claim has ever been made by an
authority in a jurisdiction where any of the Talbert Entities
does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no material security
interests on any of the assets of any of the Talbert Entities
that arose in connection with any failure (or alleged failure)
to pay any Tax.
(ii) Each of the Talbert Entities has withheld and
paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third
party.
(iii) There is no material dispute or claim
concerning any Tax liability of any of the Talbert Entities
either (A) claimed or raised by any authority in writing or
(B) as to which any of the officers (and employees responsible
for Tax matters) of the Talbert Entities has knowledge based
upon personal contact with any agent of such authority.
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<PAGE> 18
(iv) None of the Talbert Entities has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(v) None of the Talbert Entities has filed a
consent under Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code") concerning collapsible
corporations. None of the Talbert Entities has been a United
States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). Except as set forth on
Exhibit 4.12(a) to the Company Disclosure Schedule, none of
the Talbert Entities is a party to any Tax allocation or
sharing agreement. Except as set forth on such Exhibit
4.12(a), none of the Talbert Entities has any liability for
the Taxes of any person (other than any of the Talbert
Entities) under Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) The unpaid Taxes of the Talbert Entities (A)
did not, as of June 30, 1997, materially exceed the reserve
for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) set forth in the Company Balance Sheet (or in any
notes thereto) and (B) do not materially exceed that reserve
as adjusted for the passage of time through the consummation
of the Offer in accordance with the past custom and practice
of the Talbert Entities in filing their Tax Returns.
(vii) As of February 28, 1997, the Company and the
Company Subsidiaries did not have any receivables from or any
liabilities payable to any of the other Talbert Entities.
(viii) As discussed in Section 6, the Company has
made or will make available to the Parent all Tax Returns and
tax records of the Talbert Entities (or copies of such returns
or records) currently in possession of any of the Talbert
Entities.
(b) With respect to the June 30, 1996 Tax Returns filed
by FHP, the officers of the Company are not aware of any failure by
FHP to include the Talbert Entities in its: (i) consolidated federal
income tax return as members of an affiliated group within the meaning
of Code Section 1504(a), (ii) California unitary return as members of
a unitary group, (iii) Arizona combined return as members of a unitary
business or (iv) combined Utah return as members of a unitary group.
(c) The officers of the Company are not aware of any
material unrecorded liabilities for Taxes for any of the Talbert
Entities nor any material
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<PAGE> 19
unrecorded liabilities to FHP under the Tax Allocation Agreement
listed in Exhibit 4.12 to the Company Disclosure Schedule for the
periods preceding February 15, 1997.
(d) The officers of the Company are not aware of any Tax
Returns due for the Talbert Entities for Tax periods preceding
February 15, 1997 which FHP has not timely filed or caused to be
filed.
(e) The Company shall use its reasonable efforts to
obtain copies of all Tax returns (or portions of returns related to
any of the Talbert Entities) filed on behalf of the Talbert Entities
that are in the possession of PacifiCare or its related entities and
shall make such available to the Parent prior to the Closing Date.
(f) Prior to February 14, 1997, the Company was dormant
and had no material operations.
(g) To the Company's knowledge, FHP has never owned of
record any shares of common stock of the Company.
(h) Definitions: "Talbert Entities" means the Company,
Talbert Medical Management Corporation, Talbert Health Services
Corporation. Robert Anderson, DDS, Inc. (CA), (dba Talbert Dental
Group); James Brodahl, DDS, Inc. (CA), (dba Talbert Dental Group);
Larry Kaban, DDS, Inc. (CA), (dba Talbert Dental Group); John Whitley,
DDS, Inc. (CA), (dba Talbert Dental Group); Talbert Medical Group,
Inc. (CA), (dba Talbert Medical Group); Talbert Medical Group, LTD.
(NV); Talbert Dental Group, P.C. (AZ); Talbert Medical Group, P.C.
(AZ); Talbert Dental Group, Inc. (UT); and Talbert Medical Group, Inc.
(UT).
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
4.13 Employee Benefit Plans; Employment Matters. (a) Except as set
forth in Exhibit 4.13(a) to the Company Disclosure Schedule, the Company has
neither established nor
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maintained nor is obligated to make contributions to or under or otherwise
participate in (i) any bonus or other type of incentive compensation plan,
program or arrangement (whether or not set forth in a written document), (ii)
any pension, profit-sharing, retirement or other plan, program or arrangement,
or (iii) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of ERISA. To the Company's
knowledge, all such plans listed in such Exhibit 4.13(a) (individually, a
"Company Plan" and collectively, the "Company Plans") have been operated and
administered in all material respects in accordance with, as applicable, ERISA,
the Code, the Age Discrimination in Employment Act of 1967, as amended, and the
related rules and regulations adopted by those federal agencies responsible for
the administration of such laws. To the Company's knowledge, no act or failure
to act by the Company has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Company Plans that is not subject to a statutory or
regulatory exception and that could have a material adverse effect on the
Company. No "reportable event" (as defined in ERISA, but excluding any event
for which notice is waived under the ERISA regulations) has occurred with
respect to any of the Company Plans which is subject to Title IV of ERISA. The
Company has not previously made, is not currently making, and is not obligated
in any way to make, any contributions to any multi-employer plan within the
meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
(b) Except as set forth in Exhibit 4.13(b) to the Company
Disclosure Schedule, the Company is not a party to any oral or written (i)
union, guild or collective bargaining agreement which agreement covers
employees in the United States (nor is it aware of any union organizing
activity currently being conducted in respect to any of its employees), (ii)
agreement with any executive officer or other key employee the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction of the nature contemplated by this Agreement and
which provides for the payment of in excess of Twenty-Five Thousand Dollars
($25,000.00), or (iii) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement (except as
set forth in this Agreement).
4.14 Compliance with Laws in General. Except as set forth in
Exhibit 4.14 to the Company Disclosure Schedule, the Company has not received
any notices of, nor to the best of its knowledge, have there been any,
violations of any federal, state and local laws, regulations and ordinances
relating to its business and operations that would have a material adverse
effect on the Company, including, without limitation, the Occupational Safety
and Health Act, the Americans with Disabilities Act, the Medicare or applicable
Medicaid statutes and regulations, including billing and coding, and any
Environmental Laws, and no notice of any pending inspection or violation of any
such law, regulation or ordinance has been received by the Company which, if it
were determined that a violation had occurred, would have a material adverse
effect on the Company.
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4.15 Regulatory Approvals. Except as set forth in Exhibit 4.15 to
the Company Disclosure Schedule, to the knowledge of the Company, the Company
holds all licenses, certificates of need and other regulatory approvals
required or necessary to be applied for or obtained in connection with its
business as presently conducted or as proposed to be conducted, except where
the failure to obtain such license, certificate of need or regulatory approval
would not have a material adverse effect on the Company. All such licenses,
certificates of need and other regulatory approvals relating to the business,
operations and facilities of the Company are in full force and effect, except
where any failure of such license, certificate of need or regulatory approval
to be in full force and effect would not have a material adverse effect on the
Company. Any and all past litigation concerning such licenses, certificates of
need and regulatory approvals, and all claims and causes of action raised
therein, has been finally adjudicated. No such license, certificate of need or
regulatory approval has been revoked, conditioned (except as may be customary)
or restricted, and no action (equitable, legal or administrative), arbitration
or other process is pending, or to the best knowledge of the Company,
threatened, which in any way challenges the validity of, or seeks to revoke,
condition or restrict any such license, certificate of need, or regulatory
approval. Subject to compliance with applicable securities laws and the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), the
consummation of the Merger will not violate any law or restriction to which the
Company is subject which, if violated, would have a material adverse effect on
the Company.
4.16 Commissions and Fees. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
the Parent or the Company resulting from any action taken by the Company or its
officers, Directors or agents, or any of them, except for fees owed to Smith
Barney Inc.
4.17 No Untrue Representations. No representation or warranty by
the Company in this Agreement, and no Exhibit or certificate issued by the
Company and furnished or to be furnished to the Parent and the Subsidiary
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact in response to
the disclosure requested, or omits or will omit to state a material fact
necessary to make the statements or facts contained therein in response to the
disclosure requested not misleading in light of all of the circumstances then
prevailing.
4.18 Amendment of Rights Agreement. The Rights Agreement has been
duly and validly amended to the extent necessary to permit the Parent and the
Subsidiary to perform their obligations under this Agreement and consummate the
transactions contemplated hereby.
4.19 14D-1 Information. The information supplied, and to be
supplied to, the Parent in writing by the Company for inclusion in the Parent's
Schedule 14D-1 shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
SUBSIDIARY
Each of the Parent and the Subsidiary hereby, jointly and severally,
represent and warrant to the Company as follows:
5.1 Organization, Existence and Good Standing of the Parent and
Subsidiary.
(a) The Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Parent has
all necessary corporate power and authority to own its properties and assets
and to carry on its business as presently conducted. The Parent is qualified
to do business and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect.
(b) The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Subsidiary's authorized capital consists of 1,000 shares of Common Stock, par
value $.01 per share, all of which shares are validly issued and outstanding,
fully paid and registered in the name of and owned by the Parent free and clear
of all liens, claims and encumbrances. The Subsidiary has all necessary
corporate power and authority to own its properties and assets and to carry on
its business as presently conducted. The Subsidiary is qualified to do
business and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect.
5.2 Power and Authority; Non-Contravention.
(a) Each of the Parent and the Subsidiary has all necessary
corporate power and authority to execute, deliver and perform this Agreement
and all agreements and other documents executed and delivered, or to be
executed and delivered, by it pursuant to this Agreement, and, subject to the
satisfaction of the conditions precedent set forth herein, has taken all
actions required by law, its Certificate of Incorporation, its By-laws or
otherwise, to authorize the execution and delivery of this Agreement and such
related documents. The Agreement has been duly and validly executed and
delivered by the Parent and the Subsidiary and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement does not and,
subject to compliance with the HSR Act, the consummation of the transactions
contemplated hereby will not, violate any provisions of the Certificate of
Incorporation or By-laws of either the Parent or the Subsidiary, or any
agreement, instrument, order, judgment or decree to which the Parent or the
Subsidiary is a party or by which either is bound, violate any restrictions of
any kind to which the Parent or the Subsidiary is subject, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Subsidiary.
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5.3 Brokers. There are no claims for brokerage commissions,
investment bankers' fees or finder's fees in connection with the transaction
contemplated by this Agreement resulting from any action taken by either the
Parent or the Subsidiary or any of its officers, directors or agents, except
for fees owed to NationsBanc Capital Markets, Inc.
5.4 No Subsidiaries. The Subsidiary does not own stock in, and
does not control directly or indirectly, any other corporation, association or
business organization. The Subsidiary is not a party to any joint venture or
partnership.
5.5 Legal Proceedings. There are no actions, suits or proceedings
pending or threatened against either the Parent or the Subsidiary, that could
reasonably be expected to have a material adverse effect on the ability of the
Parent or the Subsidiary to consummate the transactions contemplated by this
Agreement.
5.6 No Contracts or Liabilities. The Subsidiary was formed solely
for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only
as contemplated hereby. Other than the obligations created under this
Agreement, the Subsidiary has no obligations or liabilities (contingent or
otherwise) under any contracts, claims, leases, loans or otherwise.
5.7 Available Funds. The Parent has funds available sufficient to
consummate the Offer and the Merger on the terms contemplated by this
Agreement. The Parent and the Subsidiary acknowledge, however, that they are
in any case obligated to accept for payment and promptly pay for all Company
Shares validly tendered pursuant to the Offer, subject to the conditions of the
Offer, and to consummate the Merger as contemplated by this Agreement.
5.8 The Parent to Cause Subsidiary to Perform. The Parent shall
cause the Subsidiary to fulfill the Subsidiary's covenants and obligations
under this Agreement.
5.9 Other Transactions. The Parent and its affiliates are not
engaged in, or intending to engage in or announce, prior to the Effective Time,
any other acquisition or similar transaction in the markets served by the
Company and the Company Subsidiaries.
5.10 14D-9 Information. The information supplied, and to be
supplied, to the Company in writing by the Parent and the Subsidiary for
inclusion in the Company's Schedule 14D-9 shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
5.11 Company Shares. Neither the Parent nor any of its affiliates
holds as of the date of this Agreement, or shall hold at any time prior to the
consummation of the Offer, any Company Shares.
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<PAGE> 24
SECTION 6. ACCESS TO INFORMATION AND DOCUMENTS
6.1 Access to Information. Between the date hereof and the
Closing Date, the Company will give to the Parent and its counsel, accountants
and other representatives reasonable access to all the Company's properties,
documents, contracts, personnel files and other records and shall furnish the
Parent with copies of such documents and with such information with respect to
the Company's affairs as the Parent may from time to time reasonably request.
The Company will disclose and make available to the Parent and its
representatives all books, contracts, accounts, personnel records, letters of
intent, papers, records, communications with regulatory authorities and other
documents relating to the business and operations of the Company. In addition,
the Company shall make available to the Parent all such banking, investment and
financial information as shall be necessary to allow for the efficient
integration of the Company's banking, investment and financial arrangements
with those of the Parent at the Effective Time.
6.2 Return of Records. If the transactions contemplated hereby
are not consummated and this Agreement terminates, each party agrees to
promptly return all documents, contracts, records or properties of the other
party, all copies thereof furnished pursuant to this Section 6 or otherwise,
and all copies thereof made by or for the receiving party, and agrees to
promptly destroy any analyses, evaluations, compilations or other materials
derived from such documents. All information disclosed by any party or any
affiliate or representative of any party shall be deemed to be "Evaluation
Material" under the terms of the Confidentiality Agreement, dated July 23,
1997, between the Company and the Parent (the "Confidentiality Agreement").
6.3 Effect of Access. Nothing contained in this Section 6 shall
be deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party. With respect
to matters as to which any party has made express representations or warranties
herein, the parties shall be entitled to rely upon such express representations
and warranties irrespective of any investigations made by such parties, except
to the extent that such investigations result in actual knowledge of the
inaccuracy or falsehood of particular representations and warranties.
SECTION 7. COVENANTS
7.1 Preservation of Business. From the date of this Agreement,
the Company will use its commercially reasonable best efforts to preserve the
business organization of the Company intact, to keep available to the Parent
and the Surviving Corporation the services of the present employees of the
Company, and to preserve for the Parent and the Surviving Corporation the
goodwill of the suppliers, customers and others having business relations with
the Company.
7.2 Material Transactions. Prior to the Effective Time, the
Company will not (other than as contemplated by the terms of this Agreement and
the related documents, other than in
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the ordinary course of business and consistent with prior practice, and other
than with respect to transactions for which binding commitments have been
entered into prior to the date hereof and transactions described in Exhibit 7.2
to the Company Disclosure Schedule which do not vary materially from the terms
set forth on such Exhibit 7.2), without first obtaining the written consent of
the Parent, which consent shall not be unreasonably withheld:
(a) Encumber any material asset or enter into any
material transaction or make any material contract or commitment
relating to the properties, assets and business of the Company, other
than in the ordinary course of business or as otherwise disclosed
herein.
(b) Enter into any employment contract which is not
terminable upon notice of 30 days or less, at will, and without
penalty to the Company except as provided herein.
(c) Enter into any contract or agreement (i) which cannot
be performed within three months or less, or (ii) which involves the
expenditure of over One Hundred Thousand Dollars ($100,000).
(d) Make any payment or distribution to the trustee under
any bonus, pension, profit-sharing or retirement plan or incur any
obligation to make any such payment or contribution which is not in
accordance with the Company's usual past practice, or, except as
required pursuant to the Employee Benefits and Compensation Allocation
Agreement dated as of February 14, 1997 between the Company and FHP,
make any payment or contributions or incur any obligation pursuant to
or in respect of any other plan or contract or arrangement providing
for bonuses, executive incentive compensation, pensions, deferred
compensation, retirement payments, profit-sharing or the like,
establish or enter into any such plan, contract or arrangement, or
terminate any plan.
(e) Extend credit to anyone, except in the ordinary
course of business consistent with prior practices.
(f) Guarantee the obligation of any person, firm or
corporation other than the Talbert Entities, except in the ordinary
course of business consistent with prior practices.
(g) Amend its Certificate of Incorporation or By-laws.
(h) Take any action described in Section 4.10(b) to
4.10(h), inclusive.
7.3 Exemption from State Takeover Laws. The Company shall take
all reasonable steps necessary and within its power to exempt the Offer and the
Merger from the requirements of any state takeover statute or other similar
state law which would prevent or impede the consummation of the transactions
contemplated hereby.
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7.4 Public Disclosures. The Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation except as may be required by applicable law or
requirements of the NYSE or NASDAQ. The parties shall issue a joint press
release, mutually acceptable to the Parent and the Company, promptly upon
execution and delivery of this Agreement.
7.5 Resignation of Company Directors. At the Effective Time, the
Original Directors shall be deemed to have resigned.
7.6 Notice of Subsequent Events. Each party hereto shall notify
the other parties of any changes, additions or events of which they have
knowledge which would cause any material change in or material addition to any
Exhibit to its Disclosure Schedule delivered by the notifying party under this
Agreement, promptly after the occurrence of the same. If the effect of such
change or addition would, individually or in the aggregate with the effect of
changes or additions previously disclosed pursuant to this Section 7.6,
constitute a material adverse effect on the notifying party, the non-notifying
party may, within ten days after receipt of such notice and so long as Company
Shares have not been purchased in the Offer, elect to terminate this Agreement.
If the non-notifying party does not give written notice of such termination
within such 10-day period, the non-notifying party shall be deemed to have
consented to such change or addition and shall not be entitled to terminate
this Agreement by reason thereof.
7.7 No Solicitations. The Company shall not, directly or
indirectly, furnish information and access, in response to unsolicited requests
therefor, to any corporation, partnership, person or other entity or group,
participate in discussions and negotiate with such corporation, partnership,
person or other entity or group concerning any proposal to acquire such party
upon a merger, purchase of assets, purchase of or tender offer for shares of
its Common Stock or similar transaction (an "Acquisition Transaction").
Notwithstanding the foregoing, if prior to the acceptance for payment of
Company Shares pursuant to the Offer, the Board of Directors, after receiving
advice from outside legal counsel to the Company, determines that a failure to
act would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law, the Company may (i) furnish information
about and access to the Company to any third party in response to an
unsolicited request pursuant to a confidentiality agreement with terms and
conditions similar to the Confidentiality Agreement, (ii) participate in
discussions and negotiations regarding any potential Acquisition Transaction,
and/or (iii) terminate this Agreement. The Company shall notify the Parent of
any unsolicited request for information and access in connection with a
possible Acquisition Transaction involving such party, such notification to
include the identity of such third party and the proposed material terms of
such possible Acquisition Transaction.
7.8 Other Actions. Subject to the provisions of Section 7.6
hereof, none of the Company, the Parent and the Subsidiary shall knowingly or
intentionally take any action, or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
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<PAGE> 27
material respect, or in any of the conditions to the Offer set forth in this
Agreement not being satisfied, or (unless such action is required by applicable
law) which would materially adversely affect the ability of the Company or the
Parent to obtain any consents or approvals required for the consummation of the
Offer or the Merger without imposition of a condition or restriction which
would have a material adverse effect on the Surviving Corporation or (unless
such action is permitted by Section 7.7) which would otherwise materially
impair the ability of the Company or the Parent to consummate the Offer and the
Merger in accordance with the terms of this Agreement or materially delay such
consummation.
7.9 Cooperation. (a) The Parent, the Subsidiary and the Company
shall together, or pursuant to an allocation of responsibility agreed to
between them, (i) cooperate with one another in determining whether any filings
required to be made or consents required to be obtained in any jurisdiction
prior to the Effective Time in connection with the consummation of the
transactions contemplated hereby and cooperate in making any such filings
promptly and in seeking to obtain timely any such consents, (ii) cooperate with
one another in coordinating the plan devised by the Parent for the swift
integration of the Company and the Company Subsidiaries with the operations of
the Parent as soon as practicable after the Effective Time, (iii) use their
respective best efforts to cause to be lifted any injunction prohibiting the
Merger, or any part thereof, or the other transactions contemplated hereby, and
(iv) furnish to one another and to one another's counsel all such information
as may be required to effect the foregoing actions.
(b) Subject to the terms and conditions herein provided, and
unless this Agreement shall have been validly terminated as provided herein,
each of the Parent, the Subsidiary and the Company shall use all reasonable
efforts (i) to take, or cause to be taken, all actions necessary to comply
promptly with all legal requirements which may be imposed on such party (or any
subsidiaries or affiliates of such party) with respect to this Agreement and to
consummate the transactions contemplated hereby and (ii) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order or
approval of, or any exemption by, any governmental entity and/or any other
public or private third party which is required to be obtained or made by such
party or any of its subsidiaries or affiliates in connection with this
Agreement and the transactions contemplated hereby. Each of the Parent, the
Subsidiary and the Company will promptly cooperate with and furnish information
to the other in connection with any such burden suffered by, or requirement
imposed upon, either of them or any of their subsidiaries or affiliates in
connection with the foregoing.
7.10 Additional Agreements Regarding Benefit Plans. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering the Stock Incentive
Plans (as defined below)) shall adopt such resolutions or take such other
actions (if any) as are required to provide that each outstanding stock option
to purchase shares of Company Common Stock (a "Stock Option") heretofore
granted under any stock option or stock purchase plan, program or arrangement
or other option agreement or contingent stock grant plan of the Company or any
of its subsidiaries (collectively, the "Stock Incentive Plans") shall be
accelerated so as to be fully exercisable on or prior to the consummation of
the Offer, and the Company shall assure that (i) any Stock Options (other than
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options granted under Article 7 of the Talbert Medical Management Holdings
Corporation 1996 Stock Incentive Plan) may be exercised and the corresponding
Company Common Stock be available to be tendered pursuant to the Offer, except
to the extent that such tender could result in short-swing profit liability
under Section 16 of the Exchange Act, (ii) Stock Options granted under Article
7 of the Talbert Medical Management Holdings Corporation 1996 Stock Incentive
Plan, except for any Stock Option granted within six months of the termination
of such Stock Option, shall be fully exercisable on consummation of the Offer
and prior to any of the resignations contemplated pursuant to Section 1.3, and
(iii) any Stock Options not tendered that remain outstanding immediately after
the consummation of the Offer shall no later than immediately prior to the
consummation of the Merger, be converted into, surrendered in exchange or
otherwise settled for an amount in cash from the Company, payable at the time
of such conversion, exchange or settlement, equal to the product of (x) the
number of shares of Company Common Stock then subject to the Stock Option and
(y) the excess of the Per Share Amount over the per share exercise price of the
Stock Option, subject, in each case to any applicable withholding taxes. A
listing of all outstanding Stock Options as of August 14, 1997, showing the
portions of such Stock Options that are exercisable as of such date, the dates
upon which such Stock Options expire and the exercise price of such Stock
Options, is set forth in Exhibit 7.10 of the Company Disclosure Schedule.
(b) All Stock Incentive Plans shall terminate as of the Effective
Time, and the Company shall use its best efforts to ensure that following the
Effective Time no holder of a Stock Option or any participant in any Stock
Incentive Plan shall have any right thereunder to acquire any capital stock of
the Company, the Parent or the Subsidiary.
(c) All service credited to each employee by the Company through
the Effective Time shall be recognized by the Parent for all purposes,
including for purposes of eligibility, vesting and benefit accruals under any
employee benefit plan provided by the Surviving Corporation or the Parent for
the benefit of the employees; provided, however, that, to the extent necessary
to avoid duplication of benefits, amounts payable under employee benefit plans
provided by the Surviving Corporation or the Parent may be reduced by amounts
payable under similar Company plans with respect to the same periods of
service.
(d) The Parent hereby agrees not to take any action, or omit to
take any action, that would cause the Surviving Corporation not to honor
(without modification) and assume the employment agreements, executive
termination agreements and individual benefit arrangements listed in Exhibit
4.13(a) to the Company Disclosure Schedule, all as in effect on the date hereof
or as amended after the date hereof with the Parent's consent pursuant to
Section 7.2.
(e) To provide bonuses for certain employees who do not
participate in the Company's Management Incentive Program, and to reward them
for staying with the Company to facilitate the transactions contemplated by
this Agreement, the Parent shall contribute US $923,000 to be paid to the
employees, and in the amounts, listed in the schedule attached to the letter
agreement of even date herewith between the Company and the Parent. These
respective amounts shall be paid on January 1, 1998 to the listed employees
then employed by the Surviving Corporation or any of its affiliates. If any
listed employee is terminated before
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January 1, 1998, other than for cause, he or she will be paid the designated
amount on the effective date of termination.
(f) The Parent hereby agrees to cause the Company and the
Surviving Corporation to pay, at the time of the consummation of the Offer, to
each employee currently participating in the Company's Management Incentive
Program cash awards in the amounts listed on the schedule attached to the
letter agreement of even date herewith between the Company and the Parent.
7.11 Physician Warrants. As soon as possible following the
purchase of Company Shares pursuant to the Offer, the Parent shall offer to
those physicians who are employed by Talbert Medical Group, Inc. (CA) (dba
Talbert Medical Group), Talbert Medical Group, Ltd. (NV), Talbert Medical
Group, P.C. (AZ), or Talbert Medical Group, Inc. (UT) and who are designated by
the Company before such purchase warrants to purchase the common stock of the
Parent (the "Warrants"). The Warrants shall be issued pursuant to Warrant
Agreements in substantially the form attached as Exhibit 7.11. Promptly
following the purchase of Company Shares in the Offer, the Parent shall cause
the offer and sale of the Warrants to be registered under the Securities Act of
1933.
7.12 Indemnification and Insurance. (a) The Parent and the
Subsidiary agree that all rights to indemnification for acts or omissions
occurring prior to the Effective Time now existing in favor of the current or
former directors, officers, employees and agents (the "Indemnified Parties") of
the Company and its subsidiaries as provided in their respective articles of
incorporation or by-laws (or similar organizational documents) shall survive
the Merger and shall continue in full force and effect in accordance with their
terms for a period of not less than six years. From and after the Effective
Time and for a period of not less than six years thereafter, the Parent shall,
and shall cause the Surviving Corporation to, indemnify and hold harmless any
and all Indemnified Parties to the full extent such persons may be indemnified
under applicable law, their respective certificates of incorporation or by-laws
(or similar organizational documents) or pursuant to indemnification agreements
as in effect on the date of this Agreement for acts or omissions occurring at
or prior to the Effective Time, and the Parent shall, or shall cause the
Surviving Corporation to, advance litigation expenses incurred by such persons
in connection with defending any action arising out of such acts or omissions
to the extent permitted by law or as otherwise provided by the respective terms
and provisions of such certificates of incorporation, by-laws, similar
documents or indemnification agreements as in effect on the date hereof.
(b) For not less than four years from the Effective Time, the
Parent shall cause to be maintained in effect directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to the Parent) on terms (including coverage
amounts) comparable to those now applicable under the current Company policy;
provided, however, that in no event shall the Parent be required to pay a
premium in any one year in an amount in excess of 175% of the annual premium
paid by the Company (which annual premium the Company represents and warrants
to be approximately US$282,000); and provided further that
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if the annual premiums of such insurance coverage exceed such amount, the
Parent shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) This Section 7.12 shall survive the consummation of the
Merger, is intended to benefit the Company, the Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of the Parent and the Surviving Corporation.
7.13 Antitrust. The Parent, the Subsidiary and the Company shall
take such actions as may be necessary to obtain any governmental consents,
orders or approvals required for the consummation of the Offer and the Merger,
or to avoid the imposition of any prohibition or the seeking of any restraining
order or similar act. Such actions may include the making of filings and
requests for extensions and waivers. Such actions may also include the sale or
other disposition of assets.
7.14 Share Repurchase. Before the Closing Date and after the
purchase of Company Shares pursuant to the Offer, the Company shall, and the
Parent shall cause the Company to, purchase, for a cash consideration equal to
the Per Share Amount, from any current or former director or officer of the
Company whose service with the Company is terminated for any reason between the
consummation of the Offer and the Closing Date, all shares of Company Common
Stock held by any such individual who desires so to sell such shares, promptly
upon delivery to the Company of the certificates therefor for cancellation.
SECTION 8. TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the purchase of Company Shares pursuant to the Offer:
(a) by mutual written consent of the Parent, the Subsidiary and
the Company;
(b) by either the Parent or the Company;
(i) if a United States federal or state court of
competent jurisdiction or other United States federal or state
governmental entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Offer (or the acceptance of or payment for Company
Shares) or the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; provided, that the party
seeking to terminate this Agreement shall have used all reasonable
efforts to remove such order, decree, ruling or other action;
(ii) if, before the purchase of Company Shares in the
Offer, there is, or is discovered, a material breach by the other
party of any representation, warranty, covenant or other agreement
contained in this Agreement that cannot
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be or has not been cured within 10 days after the occurrence or
discovery of such breach by the breaching party, whichever is later (a
"Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement);
(c) by the Company if the Parent and the Subsidiary fail to
commence the Offer in accordance with this Agreement, or if the Offer expires
without the purchase of Company Shares pursuant to the Offer; or
(d) by the Company under the circumstances described in the second
sentence of Section 7.7.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of Sections 6.2, 7.4, 8.2 and 8.6, and except
to the extent that such termination results from the willful and material
breach by a party of any of its representations, warranties, covenants or other
agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties at
any time before or after any required approval of matters presented in
connection with the Merger by the holders of the Company Shares; provided,
however, that after such approval, there shall be made no amendment that
pursuant to Section 251(d) of the DGCL requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3, or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of each of the
Parent, the Subsidiary and the Company, action by its Board of Directors or the
duly authorized designee of the Board of Directors. Once the Subsidiary's
designees are appointed or elected to the Board of Directors of the Company as
provided in Section 1.3, the affirmative vote of the Original Directors shall
be required for the Company to agree to any such termination, amendment,
extension or waiver.
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8.6 Termination Fee; Expenses. In the event of a termination of
this Agreement by the Company pursuant to Section 8.1(d), the Company shall pay
to the Parent, in immediately available funds, the sum of $8 million and shall
promptly reimburse upon demand therefor (up to a maximum amount of $2 million)
all documented out-of-pocket expenses incurred by Parent and Subsidiary in
connection with the transactions contemplated by this Agreement. In the event
that Company Shares are not purchased pursuant to the Offer, the Parent shall
pay to the Company, in immediately available funds, the sum of $8 million and
shall promptly reimburse upon demand therefor (up to a maximum amount of $2
million) all documented out-of-pocket expenses incurred by the Company in
connection with the transactions contemplated by this Agreement, unless such
failure to purchase Company Shares is (i) attributable solely to an event of
the kind described in Section 8.1(b)(i) that is not the result of any action or
inaction by the Parent or the Subsidiary which constitutes a breach of this
Agreement, (ii) attributable solely to Parent's valid termination of this
Agreement pursuant to Section 8.1(b)(ii) by reason of the Company's breach of a
representation, warranty, covenant or agreement set forth in this Agreement, or
(iii) attributable solely to a failure of a condition set forth in Exhibit 1.1
by reason of any act, event or circumstance that is beyond the control of the
Parent and the Subsidiary. Notwithstanding this Section 8.2, no payment of the
fee contemplated by this Section 8.6 shall relieve any party to this Agreement
from liability to another for its willful and material breach of any of its
representations, warranties, covenants or other agreements set forth in this
Agreement. Except as otherwise required by the preceding sentences of this
Section 8.6, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense.
SECTION 9. CONDITIONS TO THE CLOSING
9.1 Mutual Conditions. The respective obligations of each party
to effect the Merger shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions (any of which may be waived in
writing by the Parent, the Subsidiary and the Company, to the extent permitted
by applicable law):
(a) None of the Parent, the Subsidiary or the Company nor any of
their respective subsidiaries shall be subject to any order, decree or
injunction by a United States federal or state court of competent jurisdiction
which prevents the consummation of the Merger.
(b) No statute, rule or regulation shall have been enacted or
promulgated by the government or any governmental agency of the United States
or any state that prohibits the consummation of the Merger.
(c) The Subsidiary shall have purchased and paid for Company
Shares pursuant to the Offer.
(d) Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
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(e) If required by law, the holders of shares of the Company
Common Stock shall have approved the adoption of this Agreement.
SECTION 10. MISCELLANEOUS
10.1 Nonsurvival of Representations and Warranties. None of the
Company's representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the purchase of Company
Shares in the Offer. All covenants and agreements set forth in this Agreement
shall survive in accordance with their terms.
10.2 Notices. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery
or by facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as a party may advise the other in writing
from time to time:
If to the Parent or the Subsidiary:
MedPartners, Inc.
3000 Galleria Tower
Suite 1000
Birmingham, Alabama 35244
Attention: President
Fax: (205) 733-4154
with a copy to:
Haskell Slaughter & Young, L.L.C.
1200 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35244
Attention: Robert E.L. Garner, Esq.
Fax: (205) 324-1133
If to the Company:
Talbert Medical Management Holdings Corporation
3540 Howard Way
Costa Mesa, California 92626
Attention: President
Fax: 714-436-4860
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with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attention: C. James Levin, Esq.
Fax: 213-669-6407
All such communications shall be deemed to have been delivered on the
date of hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.3 Further Assurances. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
10.4 Governing Law. This Agreement shall be interpreted, construed
and enforced with the laws of the State of Delaware, applied without giving
effect to any conflicts-of-law principles.
10.5 Knowledge. "To the knowledge", "to the best knowledge,
information and belief", or any similar phrase shall be deemed to refer to the
knowledge of the Chief Executive Officer or Chief Financial Officer of a party
and to include the assurance that such knowledge is based upon a reasonable
investigation, unless otherwise expressly provided.
10.6 Material Adverse Change or Material Adverse Effect. "Material
adverse change" or "material adverse effect" means, when used in this Agreement
or Exhibit 1.1 hereto in connection with the Company or the Parent, any change,
effect, event or occurrence that has, or is reasonably likely to have,
individually or in the aggregate, a material adverse impact on the business or
financial position of such party and its subsidiaries and other controlled
entities identified herein or in any Schedule or Disclosure Schedule delivered
pursuant to this Agreement, including the subsidiaries and other entities,
taken as a whole; provided, however, that "material adverse change" and
"material adverse effect" shall be deemed to exclude the impact of (i) changes
in generally accepted accounting principles, (ii) changes in applicable law,
(iii) changes or effects of any kind that impact the party's industry generally
or, as to the Company, Southern California, (iv) changes in Medicare
reimbursement rates, (v) changes or effects that are reasonably expected to
have only short-term impacts on the party, (vi) changes or effects arising from
the announcement of this Agreement or from any party's performance under this
Agreement, and (vii) any changes resulting from any restructuring or other
similar charges or write-offs taken by the Company with the consent of the
Parent.
10.7 Hazardous Materials. The term "Hazardous Materials" means any
material which has been determined by any applicable governmental authority to
be harmful to the health or safety of human or animal life or vegetation,
regardless of whether such material is found on or below the surface of the
ground, in any surface or underground water, airborne in ambient
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<PAGE> 35
air or in the air inside any structure built or located upon or below the
surface of the ground or in building materials or in improvements of any
structures, or in any personal property located or used in any such structure,
including, but not limited to, all hazardous substances, imminently hazardous
substances, hazardous wastes, toxic substances, infectious wastes, pollutants
and contaminants from time to time defined, listed, identified, designated or
classified as such under any Environmental Laws (as defined in Section 10.8
regardless of the quantity of any such material).
10.8 Environmental Laws. The term "Environmental Laws" means any
federal, state or local statute, regulation, rule or ordinance, and any
judicial or administrative interpretation thereof, regulating the use,
generation, handling, storage, transportation, discharge, emission, spillage or
other release of Hazardous Materials or relating to the protection of the
environment.
10.9 Captions. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
10.10 Entire Agreement. This Agreement, the Company Disclosure
Schedule, the Exhibits attached hereto and the Confidentiality Agreement
contain the entire agreement of the parties and supersede any and all prior or
contemporaneous agreements between the parties, written or oral, with respect
to the transactions contemplated hereby.
10.11 Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
10.12 Binding Effect. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors
and assigns, and, except as contemplated by Sections 1.3(b), 7.10, 7.11, 7.12
and 7.14, no other person shall acquire or have any right under or by virtue of
this Agreement. No party may assign any right or obligation hereunder without
the prior written consent of the other parties.
10.13 No Rule of Construction. The parties agree that, because all
parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language
in favor of or against any party by reason of that party's role in drafting
this Agreement.
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IN WITNESS WHEREOF, the Parent, the Subsidiary and the Company have
caused this Agreement to be executed by their respective duly authorized
officers, all as of the day and year first above written.
MEDPARTNERS, INC.
By /s/ LARRY R. HOUSE
---------------------------------------
Larry R. House
Chairman and Chief Executive
Officer
TALMED MERGER CORPORATION
By /s/ LARRY R. HOUSE
---------------------------------------
Larry R. House
Chairman of the Board
TALBERT MEDICAL MANAGEMENT
HOLDINGS CORPORATION
By /s/ JACK D. MASSIMINO
---------------------------------------
Jack D. Massimino
President and CEO
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EXHIBIT 1.1
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Agreement, the
Subsidiary shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to the Subsidiary's obligation to pay for or return
tendered shares of Company Common Stock after the termination or withdrawal of
the Offer), to pay for any shares of Company Common Stock tendered pursuant to
the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of shares of Company Common
Stock which would constitute not less than 51% (determined on a fully diluted
basis) of the outstanding shares of Company Common Stock (the "Minimum
Condition"), and (ii) any waiting period under the HSR Act applicable to the
purchase of shares of Company Common Stock pursuant to the Offer shall have
expired or been terminated. Furthermore, notwithstanding any other terms of
the Offer or the Agreement, the Subsidiary shall not be required to accept for
payment or, subject as aforesaid, to pay for any shares of Company Common Stock
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date of the Agreement and before the acceptance
of such shares for payment, any of the following events shall occur (other than
as a result of any action or inaction of the Parent or any of its subsidiaries
which constitutes a breach of the Agreement):
(a) there shall have been entered any order, preliminary
or permanent injunction, decree, judgment or ruling in any suit,
action or proceeding that (i) makes illegal or otherwise directly or
indirectly restrains or prohibits the acquisition by the Parent or the
Subsidiary of any shares of Company Common Stock under the Offer or
the making or consummation of the Offer or the Merger, the performance
by the Company of any of its obligations under this Agreement or the
consummation of any purchase of Company Common Stock contemplated
hereby, (ii) prohibits or limits the ownership or operation by the
Company, the Parent or any of their respective subsidiaries of a
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or the Parent and its subsidiaries,
taken as a whole, or compels the Company or the Parent to dispose of
or hold separate any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or the Parent and its
subsidiaries, taken as a whole, as a result of the Offer or the
Merger, (iii) imposes material limitations on the ability of the
Parent or the Subsidiary to acquire or hold, or exercise full rights
of ownership of, any shares of Company Common Stock accepted for
payment pursuant to the Offer including, without limitation, the right
to vote such Company Common Stock on all matters properly presented to
the stockholders of the Company or (iv) prohibits the Parent or any of
its subsidiaries from effectively controlling in any material respect
the business or operations of the Company and its subsidiaries, taken
as a whole; or
A-1
<PAGE> 38
(b) there shall be any law enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger, or any
other action shall be taken by any governmental entity, other than the
application to the Offer or the Merger of applicable waiting periods
under the HSR Act, that results, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above; or
(c) there shall have occurred any material adverse change
to the Company; or
(d) (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse
to the Parent or the Subsidiary its approval or recommendation of the
Offer, the Merger or this Agreement, or approved or recommended any
other acquisition proposal or (ii) the Company shall have entered into
any agreement to consummate any acquisition proposal; or
(e) any of the representations and warranties of the
Company set forth in the Agreement that are qualified as to
materiality shall not be true and correct or any such representations
and warranties that are not so qualified shall not be true and correct
in any respect that is reasonably likely to have a material adverse
effect, in each case at the date of the Agreement and at the scheduled
expiration of the Offer; or
(f) the Company shall have failed to perform in any
material respect any material obligation or to comply in any material
respect with any material agreement or material covenant of the
Company to be performed or complied with by it under this Agreement;
or
(g) there shall have occurred and be continuing to exist
for at least three business days (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States which in any case is reasonably
expected to have a material adverse effect or to materially adversely
affect the Parent's or the Subsidiary's ability to complete the Offer
or the Merger or materially delay the consummation of the Offer, the
Merger or both or (iv) in case of any of the foregoing existing on the
date of this Agreement, material acceleration or worsening thereof; or
(h) the Agreement shall have been terminated in accordance
with its terms.
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<PAGE> 39
Subject to the provisions of the Agreement, the foregoing conditions
are for the sole benefit of the Parent and may, subject to the terms of the
Agreement, be waived by the Subsidiary and the Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by the
Parent at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time. Terms
used but not defined herein shall have the meanings assigned to such terms in
the Agreement to which this Exhibit 1.1 is a part.
A-3
