SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
Amendment No. 1 to
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities
Exchange Act of 1934 and Rule 13e-3
(Section 240.13e-3) thereunder)
-----------------------------
COMMUNITY CARE SERVICES, INC.
(Name of the Issuer)
Community Care Services, Inc.
Alan J. Landauer
Landauer Hospital Supplies, Inc.
LTTR HomeCare, LLC
LHS Merger Sub, Inc.
(Name of Persons Filing Statement)
Common Stock, Par Value $.01
(Title of Class of Securities)
-----------------------------
20390-10-8
(CUSIP Number of Class of Securities)
Elia C. Guarneri
Chief Financial Officer
Community Care Services, Inc.
18 Sargent Place, Mount Vernon, NY 10550
(800) 631-3031
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person(s) Filing Statement)
-----------------------------
with copies to:
Brian M. Hand, Esq.
Nordlicht & Hand
645 Fifth Avenue
11th Floor
New York, NY 10022
<PAGE>
This statement is being filed in connection with (check the
appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A [17CFR 240.14a-1 to 240.14b-1],
Regulation 14C [17CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c)
[Section 240.13e-3(c)] under the Securities Exchange Act of
1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X]
Calculation of Filing Fee
Transaction Valuation (1) Amount of Filing Fee
--------- -----------
$6,035,521.20 $0
[X] 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
umber, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $1,207.10
Form or Registration No.: Preliminary Proxy Statement on Schedule 14A
Filing Party: Community Care Services, Inc.
Date Filed: June 17, 1999
1. This amount is based on (i) 7,217,851 (the number of outstanding
shares of the Company's common stock as of June 15, 1999) minus (ii) 2,188,250
(the number of shares of the Company's common stock owned by Alan J. Landauer
and LTTR Home Care, LLC) multiplied by (iii) $1.20 (the cash consideration per
share of the Company's common stock to be paid by Mr. Landauer) with the
resulting sum multiplied by (iv) 1/50th of one percent, to arrive at $1,207.10
as the amount of the filing fee, pursuant to Section 13(e)(3) of the Exchange
Act. However, as permitted by Rule 0-11 (a)(2) under the Exchange Act, the
foregoing filing fee will be offset by the amount paid as the filing fee in
connection with the Preliminary Proxy Statement on Schedule 14A, filed on June
__, 1999, and as a result no filing fee is due in connection with this Schedule
13E-3.
Community Care Services, Inc., a New York corporation (the "Company"),
Alan J. Landauer, Landauer Hospital Supplies, Inc., a New York corporation
("LHS"), LTTR HomeCare, LLC, a New York limited liability company ("LTTR"), and
LHS Merger Sub, Inc., a New York corporation ("Merger Sub"), hereby submit their
Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
2
<PAGE>
"Schedule 13E-3"). The Schedule 13E-3 relates to an Agreement and Plan of Merger
dated as of June 14, 1999 (the "Merger Agreement"), by and among the Company,
LHS and Merger Sub. The Merger Agreement provides for the merger (the "Merger")
of Merger Sub with and into the Company, with the Company surviving and becoming
a wholly-owned subsidiary of LHS. Subject to the terms and conditions of the
Merger Agreement, upon consummation of the Merger each share of the Company's
common stock, par value $.01 (other than shares held by dissenting shareholders,
LTTR's member and Merger Sub), will be converted into the right to receive $1.20
in cash. Consummation of the Merger is subject to the approval of the Company's
shareholders at a Special Meeting of the Company's shareholders. A preliminary
proxy statement detailing the terms and effects on the Company of the Merger and
the Merger Agreement (the "Proxy Statement") was filed concurrently with the
Schedule 13E-3. Amendment No. 1 to the Proxy Statement is being filed
concurrently with the Amendment No. 1 to the Schedule 13E-3.
Definitive proxy materials will be mailed to the Company's shareholders
no earlier than the 11th day after the date of filing of the Proxy Statement,
subject to any delay necessitated by the time needed to respond to any comments
by the Securities and Exchange Commission (the "Commission").
This Schedule 13E-3 is intended to satisfy the reporting requirements
of Section 13(e) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Amendment No. 1 to the Proxy Statement was filed immediately
prior to the filing of this Amendment No. 1 to Schedule 13E-3.
The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement of
the information required to be included in response to items of this Schedule
13E-3. The information in the Proxy Statement, including all exhibits thereto,
is expressly incorporated herein by reference, and the responses to each item in
this Schedule 13E-3 are qualified in their entirety by the provisions of the
Proxy Statement.
CROSS REFERENCE SHEET
ITEM IN WHERE LOCATED IN SCHEDULE 13E-3 PROXY
SCHEDULE 13E-3 STATEMENT
- -------------- ---------
Item 1(a) Cover Page; Notice of Special Meeting of
Shareholders; Page One of the Proxy Statement;
Parties to the Merger Agreement - The Company
Item 1(b) Page One of the Proxy Statement; The Special
Meeting - Vote Required; Market for Common Equity
and Related Stockholder Matters
Item 1(c)-(d) Market for Common Equity and Related Stockholder
Matters
Item 1(e) Additional Information about the Company and its
Business -
3
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Business Development
Item 1(f) Special Factors - Background of the Merger
Item 2(a) This Schedule 13E-3 is being filed by the
Company, Alan J. Landauer, Landauer Hospital
Supplies, Inc., a New York corporation ("LHS"),
LTTR HomeCare, LLC, a New York limited liability
company ("LTTR"), and LHS Merger Sub, Inc., a New
York corporation ("Merger Sub").
Item 2(b) Alan J. Landauer's business address and the
business address of each of LHS, LTTR and Merger
Sub is c/o Landauer Hospital Supplies, Inc., 99
Calvert Street, Harrison, NY 10528.
Item 2(c)-(d) Parties to the Merger Agreement; Additional
Information about the Company and its Business -
The Company's Directors and Executive Officers
Item 2(e)-(f) **
Item 2(g) Alan J. Landauer is a United States citizen.
Item 3(a)(1)-(2) Special Factors - Background of the Merger;
Description of the Merger and the Merger
Agreement; Annex A - Agreement and Plan of Merger
Item 3(b) Special Factors - Background of the Merger;
Description of the Merger and the Merger
Agreement; Sloane Shareholders' Agreement; Annex
A - Agreement and Plan of Merger
Item 4(a) Pages One and Two of the Proxy Statement;
Description of the Merger and the Merger
Agreement; Annex A - Agreement and Plan of Merger
Item 4(b) Special Factors - Interests of Certain Persons in
the Merger; Special Factors - Effects of the
Merger - Effect on Alan J. Landauer and his
Affiliates; Special Factors - Effects of the
Merger - Effect on Management
Item 5(a)-(g) Pages One and Two of the Proxy Statement; Special
Factors Effects of the Merger - In General;
Special Factors - Effects of the Merger - Effect
on the Company; Description of the Merger and the
Merger Agreement; Delisting and Deregistration of
the Common Stock and Warrants; Annex A -
Agreement and Plan of Merger
Item 6(a), (c)(1)-(2) Page One of the Proxy Statement; Source and
Amount of Funds
4
<PAGE>
Item 6(b) The Special Meeting - Solicitation of Proxies;
Description of the Merger and the Merger
Agreement - Fees and Expenses
Item 6(d) **
Item 7(a)-(c) Special Factors - Purposes of the Merger; Special
Factors Background of the Merger; Special Factors
- The Company's Reasons for the Merger; Special
Factors - The Landauer Group's Reasons for the
Merger
Item 7(d) Special Factors - Interests of Certain Persons in
the Merger; Special Factors - The Company's
Reasons for the Merger; Special Factors - Effects
of the Merger - In General; Special Factors
Effects of the Merger - Effect on the
Unaffiliated Shareholders; Special Factors -
Effects of the Merger - Effect on the Company;
Special Factors - Effects of the Merger - Effect
on Alan J. Landauer and his Affiliates; Special
Factors - Effects of the Merger - Effect on
Management; Special Factors - Federal Income Tax
Consequences; Description of the Merger and the
Merger Agreement - Conversion of Securities;
Description of the Merger and the Merger
Agreement - Payment of Merger Price; Rights of
Dissenting Shareholders
Item 8(a)-(b) Pages One and Two of the Proxy Statement; The
Special Meeting - Purpose of the Meeting; Special
Factors - Background of the Merger; Special
Factors - Fairness of the Transaction; Special
Factors - The Company's Reasons for the Merger;
Special Factors - Opinion of Financial Advisor;
Annex C - Opinion of Financial Advisor
Item 8(c) Special Factors - Fairness of the Transaction;
Special Factors The Company's Reasons for the
Merger
Item 8(d) Special Factors - Fairness of the Transaction;
Special Factors The Company's Reasons for the
Merger
Item 8(e) Special Factors - Fairness of the Transaction
Item 8(f) Special Factors - Purposes of the Merger; Special
Factors Fairness of the Transaction; Special
Factors - The Company's Reasons for the Merger;
Special Factors - Opinion of Financial Advisor
Item 9(a)-(c) Special Factors - Background of the Merger;
Special Factors The Company's Reasons for the
Merger; Special Factors Opinion of Financial
Advisor; Annex C - Opinion of Financial Advisor
5
<PAGE>
Item 10(a) Security Ownership of Certain Beneficial Owners
and Management
Item 10(b) None
Item 11 Page One of the Proxy Statement; The Special
Meeting - Vote Required; Special Factors -
Interests of Certain Persons in the Merger;
Special Factors - Background of the Merger;
Description of the Merger and the Merger
Agreement; Sloane Shareholders' Agreement;
Security Ownership of Certain Beneficial Owners
and Management
Item 12(a)-(b) Notice of Special Meeting of Shareholders; Pages
One and Two of the Proxy Statement; The Special
Meeting - Vote Required; Special Factors -
Background of the Merger; Special Factors The
Company's Reasons for the Merger; Sloane
Shareholders' Agreement; Security Ownership of
Certain Beneficial Owners and Management
Item 13(a) Special Factors - Fairness of the Transaction;
Special Factors The Company's Reasons for the
Merger; Rights of Dissenting Shareholders; Annex
B - Business Corporation Law of the State of New
York - Dissenters' Rights
Item 13(b) **
Item 13(c) **
Item 14(a)(1)-(2) Incorporation by Reference
Item 14(a)(3)-(4) Additional Information about the Company and its
Business Certain Financial Information
Item 14(b) **
Item 15(a)-(b) Page Two of the Proxy Statement; The Special
Meeting Solicitation of Proxies
Item 16 Proxy Statement and Annexes
Item 17(a) No loan agreement is filed as an exhibit to the
Proxy Statement because the source and terms of
financing are not yet final.
Item 17(b)(i) Annex C - Opinion of Financial Advisor
Item 17(b)(ii) Materials present to the Company's Board of
Directors on June 15, 1999
Item 17(c) Incorporated by reference to Amendment to the
Schedule 13D
6
<PAGE>
filed by LTTR HomeCare, LLC and Alan J. Landauer
on June 9, 1999
Item 17(d) The Proxy Statement
Item 17(e) Annex B - Business Corporation Law of the State
of New York - Dissenters' Rights
Item 17(f) **
** The Item is inapplicable or the answer thereto is
in the negative.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth on the cover page of the Proxy Statement,
under "Notice of Special Meeting of Shareholders," on page one of the Proxy
Statement and under "Parties to the Merger Agreement - The Company" in the Proxy
Statement is incorporated herein by reference.
(b) The information set forth on page one of the Proxy Statement, under
"The Special Meeting - Vote Required" and under "Market for Common Equity and
Related Stockholder Matters" in the Proxy Statement is incorporated herein by
reference.
(c)-(d) The information set forth under "Market for Common Equity and
Related Stockholder Matters" in the Proxy Statement is incorporated herein by
reference.
(e) The information set forth under "Additional Information about the
Company and its Business - Business Development" in the Proxy Statement is
incorporated herein by reference.
(f) The information set forth under "Special Factors - Background of
the Merger" in the Proxy Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13E-3 is being filed by Community Care Services,
Inc., Alan J. Landauer, Landauer Hospital Supplies, Inc., a New York corporation
("LHS"), LTTR HomeCare, LLC, a New York limited liability company ("LTTR"), and
LHS Merger Sub, Inc. a New York corporation ("Merger Sub").
(b) The business address of each of Mr. Landauer, LHS, LTTR and Merger
Sub is c/o Landauer Hospital Supplies, Inc. 99 Calvert Street, Harrison, NY
10528.
(c)-(d) The information contained under "Parties to the Merger
Agreement" and under "Additional Information about the Company and its Business
- - The Company's Directors and Executive Officers" in the Proxy Statement is
incorporated herein by reference.
7
<PAGE>
(e) Mr. Landauer, LHS, LTTR and Merger Sub have not, during the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(f) Mr. Landauer, LHS, LTTR and Merger Sub have not, during the last
five years, been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction.
(g) Mr. Landauer is a citizen of the United States of America.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1)-(2) The information set forth under "Special Factors -
Background of the Merger," under "Description of the Merger and the Merger
Agreement" and under "Annex A - Agreement and Plan of Merger" in the Proxy
Statement is incorporated herein by reference.
(b) The information set forth under "Special Factors - Background of
the Merger," under "Description of the Merger and the Merger Agreement," under
"Sloane Shareholders' Agreement" and under "Annex A - Agreement and Plan of
Merger" is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth on pages one and two of the Proxy
Statement, under "Description of the Merger and the Merger Agreement" and under
"Annex A - Agreement and Plan of Merger" in the Proxy Statement is incorporated
herein by reference.
(b) The information set forth under "Special Factors - Interests of
Certain Persons in the Merger," under "Special Factors - Effects of the Merger -
Effect on Alan J. Landauer and his Affiliates" and under "Special Factors -
Effects of the Merger - Effect on Management" in the Proxy
Statement is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The information set forth on pages one and two of the Proxy
Statement, under "Special Factors - Effects of the Merger - In General," under
"Special Factors - Effects of the Merger - Effect on the Company," under
"Description of the Merger and the Merger Agreement," under "Delisting and
Deregistration of Common Stock and Warrants" and under "Annex A Agreement and
Plan of Merger" in the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a), (c)(1)-(2) The information set forth on page one of the Proxy
Statement and under "Source and Amount of Funds" in the Proxy Statement is
incorporated herein by reference.
(b) The information set forth under "The Special Meeting - Solicitation
of Proxies" and under "Description of the Merger and the Merger Agreement - Fees
and Expenses" in the Proxy Statement is incorporated herein by reference.
8
<PAGE>
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth under "Special Factors - Purposes of
the Merger," under "Special Factors - Background of the Merger," under "Special
Factors - The Company's Reasons for the Merger" and under "Special Factors - The
Landauer Group's Reasons for the Merger" in the Proxy Statement is incorporated
herein by reference.
(d) The information set forth under "Special Factors - Interests of
Certain Persons in the Merger," under "Special Factors - The Company's Reasons
for the Merger," under "Special Factors - Effects of the Merger - In General,"
under "Special Factors - Effects of the Merger - Effect on the Unaffiliated
Shareholders," under "Special Factors - Effects of the Merger - Effect on the
Company," under "Special Factors - Effects of the Merger - Effect on Alan J.
Landauer and his Affiliates," under Special Factors - Effects of the Merger -
Effect on Management," under "Special Factors Federal Income Tax Consequences,"
under "Description of the Merger and the Merger Agreement Conversion of
Securities," under "Description of the Merger and the Merger Agreement Payment
of Merger Price" and under "Rights of Dissenting Shareholders" in the Proxy
Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth on pages one and two of the Proxy
Statement, under "The Special Meeting - Purpose of the Meeting," under "Special
Factors - Background of the Merger," under "Special Factors - Fairness of the
Transaction," under "Special Factors - The Company's Reasons for the Merger,"
under "Special Factors - Opinion of Financial Advisor" and under "Annex C -
Opinion of Financial Advisor" in the Proxy Statement is incorporated herein by
reference.
(c) The information set forth under "Special Factors - Fairness of the
Transaction" and under "Special Factors - The Company's Reasons for the Merger"
in the Proxy Statement is incorporated herein by reference.
(d) The information set forth under "Special Factors - Fairness of the
Transaction" and under "Special Factors - The Company's Reasons for the Merger"
in the Proxy Statement is incorporated herein by reference.
(e) The information set forth under "Special Factors - Fairness of the
Transaction" in the Proxy Statement is incorporated herein by reference.
(f) This information set forth under "Special Factors - Purposes of the
Merger," under "Special Factors - Fairness of the Transaction," under "Special
Factors - The Company's Reasons for the Merger" and under "Special Factors -
Opinion of Financial Advisor" in the Proxy Statement is incorporated herein by
reference.
9
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ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth under "Special Factors - Background
of the Merger," under "Special Factors - The Company's Reasons for the Merger,"
under "Special Factors - Opinion of Financial Advisor" and under "Annex C -
Opinion of Financial Advisor" in the Proxy Statement is incorporated herein by
reference. The section of the Proxy Statement entitled "Annex C Opinion of
Financial Advisor" is a copy of the opinion of Pinnacle Partners rendered in
connection with the 13E-3 transaction.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth under "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference.
(b) No transactions of the type required to be disclosed by Item 10(b)
have been effected in the past 60 days.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The information set forth on page one of the Proxy Statement, under
"The Special Meeting Vote Required," under "Special Factors - Interests of
Certain Persons in the Merger," under "Special Factors - Background of the
Merger," under "Description of the Merger and the Merger Agreement," under
"Sloane Shareholders' Agreement" and under "Security Ownership of Certain
Beneficial Owners and Management" is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION.
(a)-(b) The information set forth under "Notice of Special Meeting of
Shareholders," on pages one and two of the Proxy Statement, under "The Special
Meeting - Vote Required," under "Special Factors - Background of the Merger,"
under "Special Factors - The Company's Reasons for the Merger," under "Sloane
Shareholders' Agreement" and under "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement is incorporated herein by
reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth under "Special Factors - Fairness of the
Transaction," under "Special Factors - The Company's Reasons for the Merger,"
under "Rights of Dissenting Shareholders" and under "Annex B - Business
Corporation Law of the State of New York - Dissenters' Rights" in the Proxy
Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
10
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ITEM 14. FINANCIAL INFORMATION.
(a)(1)-(2) The information incorporated by reference in the Proxy
Statement under "Incorporation by Reference" is also incorporated herein by
reference.
(a)(3)-(4) The information set forth under "Additional Information
about the Company and its Business - Certain Financial Information" is
incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) The information set forth on page two of the Proxy Statement
and under "The Special Meeting - Solicitation of Proxies" in the Proxy Statement
is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
Reference is hereby made to the Proxy Statement and to each annex
attached thereto, each of which is incorporated by reference herein.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) No loan agreement is filed as an exhibit to this Schedule 13E-3 or
to the Proxy Statement because the source and terms of financing are not yet
final. See "Source and Amount of Funds" in the Proxy Statement.
(b)(i) The information set forth under "Annex C - Opinion of Financial
Advisor" in the Proxy Statement is incorporated herein by reference.
(b)(ii) The materials presented to the Company's Board of Directors on
June 15, 1999 are attached hereto as Exhibit 17(b)(ii).
(c) The information set forth in the Amendment to the Schedule 13D
filed by LTTR Home Care, LLC and Alan J. Landauer on June 9, 1999 is
incorporated herein by reference.
(d) The Proxy Statement is incorporated herein by reference.
(e) The information set forth under "Annex B - Business Corporation Law
of the State of New York - Dissenters' Rights" in the Proxy Statement is
incorporated herein by reference.
(f) Not applicable.
11
<PAGE>
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 ___, 1999
COMMUNITY CARE SERVICES, INC.
By:
-------------------------------------
Elia C. Guarneri,
Chief Financial Officer and Principal
Financial and Accounting Officer
After due inquiry and to the best of his or its knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: August ___, 1999
-------------------------------------
Alan J. Landauer
LANDAUER HOSPITAL SUPPLIES, INC.
By:
-------------------------------------
Alan J. Landauer
President
LTTR HOMECARE, LLC
By:
-------------------------------------
Alan J. Landauer
Managing Member
LHS MERGER SUB, INC.
By:
-------------------------------------
Alan J. Landauer
President
12
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EXHIBIT 17(b)(ii)
---------------------------------------
Fairness Opinion Presentation Materials
---------------------------------------
CONFIDENTIAL PRESENTATION PREPARED FOR
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
OF COMMUNITY CARE SERVICES, INC.
JUNE 15, 1999
Pinnacle Advisory Group, L.C.
<PAGE>
Fairness Opinion Presentation Materials
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TABLE OF CONTENTS
Section
-------
Introduction.................................................................1
Overview of the Company......................................................2
Summary Terms of Proposed Transaction........................................3
Historical Financial Information.............................................4
Historical Stock Trading Data................................................5
Analysis of Premiums Paid in Merger Transactions.............................6
Analysis of Selected Publicly Traded Companies...............................7
Analysis of Selected Precedent Transactions..................................8
Discounted Cash Flow Analysis................................................9
Summary of Valuation Analysis...............................................10
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Fairness Opinion Presentation Materials
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INTRODUCTION - DEFINED TERMS
Company; Community Care Services, Inc. (the "Company")
Common Stock Common Stock of the Company, par value $0.01 (the
"Common Stock")
LHS; Acquiror Landauer Hospital Supplies Inc. ("LHS" or the
"Acquiror")
LTTR LTTR Home Care, LLC ("LTTR")
Merger Sub LHS Merger Sub, Inc. ("Merger Sub")
Landauer Alan J. Landauer ("Landauer"), President and sole
shareholder of LHS, Managing Director and sole
member of LTTR, and the Chairman of the Company
Sloane Group Dean L. Sloane, a director of the Company, Craig V.
Sloane, Mary Sloane, Joshua Sloane, the Sloane
Family Foundation and DMJ Management Group, Inc.
(the "Sloane Group")
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Fairness Opinion Presentation Materials
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INTRODUCTION - DEFINED TERMS
Sloane Shareholders' Pursuant to a shareholders' agreement among the
Agreement; LHS Affiliates Sloane Group and LHS (the "Sloane Shareholders'
Agreement"), the Sloane Group has granted an
irrevocable proxy to LHS and any designee of LHS to
vote its shares of Common Stock in favor of the
Merger (Landauer, LTTR and the Sloane Group
hereinafter referred to as the "LHS Affiliates").
Merger Agreement; Pursuant to the Agreement and Plan of Merger (the
Merger "Merger Agreement"), dated as of June 14, 1999, by
and among LHS, Merger Sub and the Company, and the
transactions contemplated thereby, Merger Sub will
be merged with and into the Company, with the
Company continuing as the surviving entity, thereby
becoming a wholly-owned subsidiary of LHS (the
"Merger").
Merger Price;
Merger Consideration Subject to the terms and conditions of the Merger
Agreement, upon consummation of the Merger, each
share of Common Stock will be converted into the
right to receive $1.20 in cash (the "Merger Price"
or "Merger Consideration").
Effective Time or Closing The date on which the transactions contemplated by
the Merger Agreement are effectuated is referred to
herein as the Closing Date (the "Closing Date"). The
date and time upon which the Merger becomes
effective is herein referred to as the Effective
Time (the "Effective Time").
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Fairness Opinion Presentation Materials
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INTRODUCTION - SCOPE OF THE FAIRNESS OPINION
Engagement Pinnacle Advisory Group, L.C., an affiliate of
Pinnacle Partners, Inc. ("Pinnacle Partners") has
been engaged by the Special Committee of the Board
of Directors of the Company ("Board of Directors")
to review the Merger and render a fairness opinion
as described herein.
Fairness Opinion In connection with its engagement, the Special
Committee of the Board of Directors (the "Special
Committee") requested that Pinnacle Partners
evaluate the fairness, from a financial point of
view, to the holders of Common Stock (other than the
LHS Affiliates, as to which Pinnacle Partners was
not requested to express an opinion) of the
consideration to be received by such holders in the
Merger (the "Fairness Opinion").
Pinnacle Partners' Reliance Pinnacle Partners has relied upon the accuracy and
completeness of all of the financial and other
information reviewed and has assumed its accuracy
and completeness for purposes of the Fairness
Opinion.
No Valuation or Appraisal Pinnacle Partners has not made an independent
valuation or appraisal and did not physically
inspect the assets of the Company and it has not
made an independent valuation of the liabilities of
the Company, nor has Pinnacle Partners been
furnished with any such evaluation or appraisal.
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Fairness Opinion Presentation Materials
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INTRODUCTION - SCOPE OF THE FAIRNESS OPINION
Based Upon the Date Hereof The Fairness Opinion is based upon, among other
things, the economic and market conditions existing
on the date hereof.
Assistance to the Special The Fairness Opinion is provided for the information
Committee of the and assistance of the Special Committee in
Board of Directors connection with its consideration of the
transactions contemplated by the Merger Agreement.
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Fairness Opinion Presentation Materials
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INTRODUCTION - INFORMATION REVIEWED
In arriving at the Fairness Opinion, Pinnacle Partners reviewed various
information and documentation or held discussions on or related to the Company
and the Merger, including:
MERGER-RELATED DOCUMENTS REVIEWED
(i) the Merger Agreement dated June 14, 1999;
(ii) a draft of the Proxy Statement dated June 14, 1999;
(iii) the Sloane Shareholders' Agreement dated June 14, 1999;
(iv) the Stock Purchase Agreement, dated February 12, 1999, between
Landauer and Alan T. Sheinwald, the former Chief Executive Officer of
the Company;
PUBLICLY FILED COMPANY DOCUMENTS REVIEWED
(v) the Company's prospectus, dated as of October 18, 1996, filed with the
Securities and Exchange Commission (the "SEC");
(vi) the Company's Annual Reports on Form 10-K for the fiscal years ended
March 31, 1997 and 1998, filed with the SEC;
(vii) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended June 30, 1998, September 30, 1998 and December 31, 1998, filed
with the SEC;
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INTRODUCTION - INFORMATION REVIEWED (CONT'D)
OTHER INFORMATION RECEIVED AND REVIEWED; OTHER ACTIONS TAKEN
(viii) certain interim and estimated unaudited, year-end financial statements
and analysis for the Company prepared by management of the Company;
(ix) projected financial statements and related forecasts of the Company
prepared by or based upon information supplied by management of the
Company;
(x) held discussions with certain senior officers, directors and other
representatives and advisors of the Company (including the Company's
certified public accountants and legal counsel) concerning the history,
business, operations, financial condition and prospects of the Company
(including discussions held with representatives of Pinnacle Partners
who visited the Company's corporate headquarters);
PUBLICLY AVAILABLE INFORMATION REVIEWED
(xi) the financial terms of the Merger, as set forth in the Merger
Agreement, in relation to, among other things: current and historical
market prices and trading volumes of the Common Stock; the historical
and projected earnings and other operating data of the Company; and the
capitalization and financial condition of the Company, including
near-term liquidity needs of, and capital resources available to, the
Company;
(xii) to the extent publicly available, certain business, financial, stock
market and other information relating to the businesses of other
companies whose operations Pinnacle Partners considered relevant in
evaluating those of the Company;
(xiii) to the extent publicly available, the financial terms of certain
transactions which Pinnacle Partners considered relevant in evaluating
the Merger; and
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INTRODUCTION - INFORMATION REVIEWED (CONT'D)
(xiv) the historical trading prices and volumes of the shares of Common Stock
as traded on Nasdaq and the over-the-counter bulletin board.
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SCOPE OF THE FAIRNESS OPINION
As part of Pinnacle Partners' approach to determining whether the Merger is fair
to the holders of Common Stock (other than the LHS Affiliates), from a financial
point of view, Pinnacle Partners attempted to integrate its transactional
experience with theoretical models accepted and used in the financial markets to
support the Fairness Opinion. Pinnacle Partners performed various financial
analyses, as it deemed appropriate, of the Company using generally accepted
analytical methodologies, including the following:
[ ] an analysis of premiums paid in public merger and acquisition transactions;
[ ] the application of the public trading multiples of companies which Pinnacle
Partners deemed comparable to the Company to the financial results of the
Company;
[ ] the application of the multiples reflected in selected mergers and
acquisitions involving businesses which Pinnacle Partners deemed comparable
to the Company to the financial results of the Company; and
[ ] a discounted projected cash flow analysis.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Selecting
portions of this analysis or of this summary without considering the analysis as
a whole, could create an incomplete view of the processes underlying the
Fairness Opinion. IN ARRIVING AT ITS FAIRNESS DETERMINATION, PINNACLE PARTNERS
CONSIDERED THE RESULTS OF ALL OF THE ANALYSES PERFORMED BY IT AND ALL OF THE
FACTORS REVIEWED AND CONSIDERED BY IT IN PREPARATION OF THE FAIRNESS OPINION.
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INTRODUCTION - CAPITALIZATION OF THE COMPANY
Pinnacle Partners understands the Company's book capitalization, as of March 31,
1999, includes the following:
Current Portion of Long Term Debt $3,820,000
Long Term Debt $ 357,000
Stockholders' Equity
Common Stock $ 72,000
Additional Paid in Capital 10,172,000
Accumulated Deficit (5,373,000)
------------
Total Stockholders' Equity $4,871,000
----------
Total Book Capitalization $9,048,000
----------
Source: Unaudited financial statements for the year ended March 31, 1999, as
prepared by management
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INTRODUCTION - OWNERSHIP OF COMMON STOCK
Pinnacle Partners understands the ownership of the Company's Common Stock, as of
June 15, 1999, to be as presented in the table below:
<TABLE>
<CAPTION>
Percent of Total
Name of Owner of Common Stock Shares Owned Outstanding
- ------------------------------------------------------- -------------------------- --------------------
<S> <C> <C>
Alan J. Landauer (including LTTR Home Care LLC) 2,188,250(1) 30.32%
The Sloane Group 2,091,450(1) 28.98%
Officers and Directors (other than Landauer and Sloane) 365,299(2) 5.06%
Other Shareholders (including public shareholders) 2,572,852 35.64%
--------- -----
7,217,851 100.00%
Common Stock Equivalents Total Outstanding
- ------------------------------------------------------- -------------------------
Class A Warrants(3) 5,685,182
Stock Options(4) 177,000
</TABLE>
_________________
(1) Does not include 2,091,450 shares owned by the Sloane Group for which
proxies have been granted to LHS to vote such shares for a six-month period
of time pursuant to the Sloane Shareholders' Agreement dated June 14, 1999
(2) Does not include options to purchase 25,000 shares of Common Stock at an
exercise price of $.50 per share granted as of December 14, 1998.
(3) Each Class A Warrant entitles its holder to purchase one share of Common
Stock at an exercise price of $6.00 through October 17, 2003
(4) Options are exercisable at various prices ranging from $.50 to $5.10.
Source: Information contained within the Draft Preliminary Proxy Statement dated
June 14, 1999, as well as Company management.
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OVERVIEW OF THE COMPANY
BACKGROUND OF THE COMPANY
[] Incorporated in 1992 under the laws of the State of New York
[] Provider of home healthcare products and services primarily in:
[] Five boroughs of New York City
[] Westchester County (NY)
[] Rockland County (NY)
[] Nassau County (NY)
[] Northern New Jersey
[] Products and services consist primarily of:
[] Respiratory equipment
[] Sale and rental of durable medical equipment ("DME")
[] Other home healthcare supplies
[] Company completed its initial public offering in October 1996, selling
1,495,000 shares of its Common Stock, and 1,495,000 Class A Warrants. Gross
and net proceeds from the offering were approximately $7.8 million and $5.6
million, respectively.
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OVERVIEW OF THE COMPANY
BACKGROUND OF THE COMPANY (CONT'D)
[] In May 1997, the Company acquired, in separate transactions, Metropolitan
Respirator Service, Inc. ("MRS"), a provider of medical supplies and DME
within the New York Metropolitan area, for cash, stock and notes valued at
approximately $8.5 million
[] In May 1997, the New York State Department of Social Services issued a
Draft Notice of Proposed Agency Action and Draft Audit Report to the
Company
[] In June 1997, the United States Department of Justice commenced a criminal
investigation targeting the Company and its then Chief Executive Officer,
Alan Sheinwald, ("Sheinwald") and Chief Operating Officer, Allan Goldfeder
("Goldfeder")
[] In July 1997, Sheinwald was dismissed as an executive and employee of the
Company
[] In October 1998, Joel Quall, the Company's Chief Financial Officer and
Secretary, resigned. Elia C. Guarneri was appointed as the Acting Chief
Financial Officer, and subsequently appointed as the Chief Financial
Officer in February 1999.
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OVERVIEW OF THE COMPANY
PRODUCTS AND SERVICES
[] Patients are referred to the Company by nurses, physicians, social workers
and payor case managers, as well as discharge planners at hospitals, health
maintenance organizations and preferred provider organizations and
rehabilitation centers
[] The primary categories of products provided by the Company (and examples of
the products available in each category) are set forth below:
<TABLE>
<CAPTION>
Durable Medical Equipment Disposable Medical Supplies Rehabilitation Products Respiratory Equip. and Products
- ------------------------- --------------------------- ----------------------- -------------------------------
<S> <C> <C> <C>
Hospital Beds Incontinent Products Power Operated Vehicles O(2) Concentrators
Wheelchairs Wound Care Products Advanced Support Surfaces Nebulizers
Walking Aids Nutritional Products Specialized Seating Suction Pumps
Bathroom Safety Equip. Diabetic Supplies Oximetry Equipment
Patient Lifts Ostomy Supplies C-PAP Equipment
Urological Supplies Bi-PAP Equipment
Blood Pressure Products
Skin Care Products
</TABLE>
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OVERVIEW OF THE COMPANY
INDUSTRY OVERVIEW
[] According to a recent report issued by the Health Care Financing
Administration's Office of the Actuary, total national expenditures on home
healthcare services in 1998 were estimated to exceed $33 billion
[] The market for home healthcare services is expected to grow by over 8% per
year to over $66 billion in 2007
[] Growth is being driven by several factors, including:
0 the aging of America and, in particular, the Baby Boomer generation,
which will increase, in the aggregate, the number of persons suffering
from chronic diseases;
0 the increased acceptance of home healthcare by physicians, patients
and third-party payors of home healthcare services as a viable
alternative for administering care outside of an institutional
setting; and
0 the cost effectiveness of home healthcare versus hospitalization.
[] The home healthcare industry is highly fragmented and characterized by
local providers that typically do not offer a comprehensive range of
cost-effective services
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OVERVIEW OF THE COMPANY
COMPETITION
[] The home healthcare provider industry is highly competitive, with most of
the Company's significant competition coming from small commercial
providers operating within the New York metropolitan area
[] Relatively few barriers to entry
[] Recent consolidation of home healthcare companies within the New York
Metropolitan area
[] The Company believes that its JCAHO accreditation provides it with an
advantage when competing against non-accredited providers
GOVERNMENT REGULATION AND REIMBURSEMENT
[] Extensive federal and state regulations in connection with participation in
Medicaid and Medicare reimbursement programs
[] As part of its settlement with the New York State Department of Health
("DOH"), the Company surrendered its Medicaid provider number and
subsequently transferred its Medicaid business to MRS
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OVERVIEW OF THE COMPANY
[] The Company is subject to governmental audits and other reviews and
investigations related to Medicaid and Medicare reimbursement claims, and
is also subject to various fraud and abuse laws designed to maintain the
integrity of the Medicare and Medicaid programs
[] The Company has implemented a Medicare and Medicaid Compliance Plan that
encompasses a code of conduct, corporate policies on vendor contracting,
sales and marketing, billing, records management, and other matters
INSURANCE
[] The Company carries a broad range of general liability, comprehensive
property damage, workers' compensation, professional liability, automobile
and other insurance coverage that management considers adequate for the
protection of its assets and operations
EMPLOYEES
[] As of April 30, 1999, the Company had approximately 130 employees, 117 of
whom were full-time employees
[] The Company is not a party to any collective bargaining agreements and
considers its relations with employees to be good
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OVERVIEW OF THE COMPANY
FACILITIES
[] The Company's offices and warehouse are located in a 20,000 square foot
facility in Mount Vernon, New York, which is leased pursuant to a five year
lease that commenced January 1, 1996 and that provides for annual rental
payments of $114,000 for the first three years of the lease and $132,000
for the last two years of the lease
LEGAL PROCEEDINGS
[] On June 4, 1997, a search warrant was executed at the Company's executive
offices, at which time the Company was informed that Sheinwald and
Goldfeder and the Company were targets of a Department of Justice criminal
investigation for allegedly improper payments relating to a contract,
involving Medicare, to provide healthcare services outside of New York
State
0 The Company has cooperated with the government in the Department of
Justice criminal investigation
0 If it is determined that the Company engaged in criminal wrongdoing,
the Company will be subject to criminal penalties, which may include
fines of up to $1,000,000 or more and an order of restitution, would
be terminated as a Medicaid and Medicare services provider, and could
also be at the risk of having its contracts with private insurers and
other non-governmental agencies terminated
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OVERVIEW OF THE COMPANY
[] On May 16, 1997, the predecessor agency to the DOH issued a Draft Notice of
Proposed Agency Action and Draft Audit Report regarding the Company seeking
recovery of $227,000 from the Company as well as exclusion of the Company
as a provider under the New York State Medicaid program. Subsequently:
0 DOH reduced the amount of the proposed audit recovery to $83,978;
0 The Company agreed to surrender its Medicaid provider number
(effective March 1, 1999), in favor of conducting its Medicaid
business through MRS; and
0 During the fourth quarter of fiscal 1999 the Company transferred the
majority of its Medicaid business to MRS
MANAGEMENT
[] Alan J. Landauer, Chairman of the Board of Directors
[] Saverio D. Burdi, Chief Operating Officer
[] Louis Rocco, Vice President of the Company and President of MRS
[] Elia C. Guarneri, Chief Financial Officer
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER
[] December, 1998: Landauer contacts Dean Sloane ("Sloane"), the then Chairman
of the Board of Directors of the Company, expressing an interest in
purchasing the 2,126,250 shares of Common Stock held by Sheinwald. Sloane
and Louis Rocco ("Rocco"), who was in attendance at the meeting, suggest
that Landauer contact Sheinwald directly. Landauer contacts Sheinwald, and
in mid-December, Landauer and Sheinwald reach an oral agreement providing
for Landauer's purchase of Sheinwald's shares for approximately $1.5
million, or $0.71 per share.
[] January 16, 1999: Landauer notified Sloane telephonically that LTTR, an
entity controlled by Landauer, had executed a Letter of Intent with
Sheinwald to purchase his shares of Common Stock in the Company.
[] January 19, 1999: The Company received a copy of the Letter of Intent
executed between LTTR and Sheinwald providing for the purchase by LTTR of
Sheinwald's shares of Common Stock for a purchase price of up to $1.5
million, subject to adjustment. The Letter of Intent also made the closing
of the transaction contingent upon the approval of the Board of Directors
on or before February 8, 1999.
[] January 21, 1999: Landauer and Sloane met, at which time Landauer stated
his belief that the Company should be taken private.
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER (CONT.)
[] FEBRUARY 3, 1999: Landauer entered into a definitive Stock Purchase
Agreement for the shares of Common Stock owned by Sheinwald, the closing of
which was contingent upon, among other things, the approval of the Board of
Directors on or before February 8, 1999, which approval was ultimately not
granted
[] FEBRUARY 4, 1999: In response to a request by Landauer to meet with the
Board of Directors, Landauer was (i) requested to provide a written
proposal regarding his intentions, and (ii) advised that the Board of
Directors would not be able to meet with him at that time
[] FEBRUARY 5, 1999: Landauer responded, through his counsel, reserving his
rights as a shareholder, and indicated that he would consider whether to
complete the acquisition of the Sheinwald shares despite the Board's not
having approved such transaction
[] FEBRUARY 11, 1999: Legal counsel for the Company advise Landauer's counsel
that any and all inquiries should be directed to Sloane
[] FEBRUARY 12, 1999: LTTR consummated its acquisition of the Sheinwald
shares, with LTTR and Landauer jointly filing a Schedule 13D reflecting
their beneficial ownership of 2,126,250 shares of Common Stock, as well as
an additional 12,000 shares of Common Stock acquired by Landauer in the
open market. Landauer reported in the 13D that he was acquiring Sheinwald's
stock as an investment, but that LTTR
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER (CONT.)
intended to review the business affairs and financial position of the
Company and that based upon such review may consider from time to time
various alternative courses of action both with respect to the business of
the Company and with respect to LTTR's equity position therein.
Additionally on this date, Landauer's legal counsel requested a meeting
between Messrs. Landauer and Sloane any time after February 19, 1999.
[] FEBRUARY 12, 1999: The Company announced that, among other things, Pinnacle
Partners had been retained to serve as the Company's financial advisor to,
among other things, explore the Company's strategic alternatives to enhance
shareholder value
[] FEBRUARY 26, 1999: Sloane and Landauer met, and Landauer offered to
purchase Sloane's shares. Sloane rejected Landauer's offer, noting that he
would not entertain an offer for his holdings only. Subsequently, Landauer
offered to purchase all of the outstanding shares of Common Stock at a
price of $1.00 to $1.10 per share. Sloane subsequently reported the offer
to the other Directors and consulted with Pinnacle Partners regarding the
offer.
[] MARCH 1999: Sloane and Landauer spoke throughout the month in an effort to
further negotiate Landauer's proposal. During this period, drafts of a
letter of intent describing the basic terms of a transaction were prepared
and negotiated.
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER (CONT.)
[] MARCH 12, 1999: Landauer notified the Company of his intent to nominate
three directors for election at the Company's annual meeting of
shareholders
[] MARCH 18, 1999: Landauer filed an amended Schedule 13D indicating that,
pursuant to a shareholders' agreement entered into on March 12, 1999
between Landauer, LTTR and several of the Company's shareholders and/or
Directors (including Donald Fargnoli, Allan Goldfeder, Louis Rocco, Saverio
Burdi and Wade Wilson), he had been granted irrevocable proxies
representing an additional approximately 11% of the Company's Common Stock
to vote on the election or removal of directors, as well as cause the
Company to have a Board of Directors consisting of five Directors, three of
whom would be nominees of Landauer
[] MARCH 22, 1999: The Company's Board of Directors held a meeting to review a
presentation by Pinnacle Partners regarding the potential strategic
alternatives available to the Company to enhance shareholder value,
including (i) a sale or merger of the Company, (ii) a leveraged buy-out of
the Company, (iii) an acquisition and consolidation strategy, and (iv) a
continuation of the Company's business plan on a status quo basis. Pinnacle
Partners concluded with a recommendation to the Board of Directors that it
believed a sale or merger would enhance shareholder value. The Board of
Directors then authorized Pinnacle Partners to commence activities designed
to solicit interest from parties that might be interested in acquiring or
merging with the Company. Pinnacle Partners was also advised that Sloane
would continue to negotiate with Landauer regarding his proposal to acquire
the Company. Pinnacle Partners indicated that the proposal set forth by
Landauer to acquire the Company could represent an attractive alternative
to the Company.
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER (CONT.)
[] MARCH 23, 1999: Two of the Company's directors, Bruce L. Asnes and Dr.
Bernard M. Kruger, resigned from the Board of Directors for personal
reasons.
[] MARCH 24, 1999: At a meeting between Sloane and Landauer, Landauer
increased his offer to $1.20 per share. Sloane indicated to Landauer that
he needed to consult with Pinnacle Partners as well as review the proposal
with the Board of Directors.
[] MARCH 24, 1999 - APRIL 6, 1999: Sloane consulted with Pinnacle Partners
regarding Landauer's offer, and requested that Pinnacle Partners prepare an
analysis in order to evaluate the fairness of the proposed merger.
[] APRIL 6, 1999: The Company and LTTR executed a letter of intent providing
for the purchase by LTTR or one of its affiliates of all of the Company's
issued and outstanding Common Stock for $1.20 per share, subject to the
successful negotiation of a definitive written agreement and the approval
of the Company's shareholders. Also on this date, Sloane and several
parties related to Sloane, executed a letter of intent pursuant to which
they each agreed, for a period of forty five days, not to transfer,
encumber, or engage in any discussions or negotiations with respect to the
Common Stock owned by them.
[] APRIL 8, 1999: At the Company's annual meeting, the three nominees proposed
by Landauer - Landauer, Thomas C. Blum and Gary J. Spirgel ("Spirgel") -
were elected to the Board of Directors. Also on this date, at
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER (CONT.)
meeting of the Board of Directors that followed the annual meeting, a
Special Committee of independent board members, composed of Sloane, Rocco
and Spirgel, was created to evaluate the merger, including the authority to
approve the transaction on behalf of the Board of Directors if it found the
Merger to be in the best interests of the Company's shareholders.
[] MAY 19, 1999: Sloane reports to the Special Committee that an agreement has
been reached with Landauer, subject to the approval of the Special
Committee. The Company's legal advisors reported on the status of the
negotiations and remaining issues in the Merger agreement. The Special
Committee discussed the draft of the Fairness Opinion provided by Pinnacle
Partners. The Special Committee also discussed the potential benefits and
risks of the transaction, as well as the status of the Company and the
potential risks of not entering into a transaction. At the conclusion of
the meeting, the Special Committee of the Board of Directors unanimously
agreed to enter into the Merger Agreement, subject to satisfactory
resolution of the remaining legal issues with the Merger Agreement.
[] JUNE 7, 1999: The Special Committee met to discuss the status of the
Merger. Pinnacle Partners (participating telephonically) reviewed with the
Board of Directors financial and other analyses performed by Pinnacle
Partners in connection with its evaluation of the Merger Price and rendered
to the Special Committee an oral opinion (which opinion was subsequently
confirmed by delivery of a written opinion, dated June 15, 1999) to the
effect that, as of the date of such opinion, and based upon and subject to
certain matters stated therein (including confirmation from the Company's
certified public accountants as to the status of the Company's
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OVERVIEW OF THE COMPANY
SUMMARY OF EVENTS RELATED TO THE MERGER (CONT.)
audit and proposed adjustments and reclassifications to the Company's
operating results for the period ended March 31, 1999), the Merger
Consideration was fair, from a financial point of view, to the holders of
Common Stock (other than Alan Landauer, LTTR and their affiliates,
including the Sloane Group, as to which Pinnacle Partners was not requested
to express an opinion). The Board of Directors subsequently ratified the
action of the Special Committee in approving the Merger.
[] JUNE 14, 1999: The Merger Agreement and the Sloane Shareholders' Agreement
were executed. The Company also issued a press release on this date
announcing the Merger.
[] JUNE 15, 1999: A telephonic meeting of the Special Committee was held at
which Pinnacle Partners reviewed certain adjustments in the calculations
upon which the Fairness Opinion was based, but indicated that the
adjustments were immaterial and did not impact the opinion. The Special
Committee then ratified its prior decision to approve the Merger.
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SUMMARY TERMS OF PROPOSED TRANSACTION
The material terms contained within the Merger Agreement are as follows:
THE MERGER
[] Subject to the terms and conditions of the Merger Agreement, Merger Sub
will merge with and into the Company and the Company shall be the
corporation surviving the Merger (the "Surviving Corporation").
CONSIDERATION AND EFFECT ON COMMON STOCK
[] Upon consummation of the Merger, each share of Common Stock (other than
shares held by dissenting shareholders, LTTR, LTTR's members and Merger
Sub) will be cancelled and converted into the right to receive $1.20 per
share in cash.
[] Each dissenting shareholder shall be entitled to receive the "fair value"
of his Common Stock as determined in accordance with Section 623 of the New
York Business Corporation Law.
[] Each share of Common Stock owned by the Acquiror shall be cancelled.
[] Each issued and outstanding share of common stock, par value $0.01 per
share, of Merger Sub shall be converted into one share of Common Stock of
the Surviving Corporation.
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SUMMARY TERMS OF PROPOSED TRANSACTION
[] Each option to purchase shares of Common Stock shall be cancelled, with the
option holder receiving the difference between $1.20 per share and the
exercise price of the option.
PAYMENT MECHANICS
[] Immediately after the Effective Time, the Acquiror will cause the Surviving
Corporation to deposit with Continental Stock Transfer and Trust Company
(the "Paying Agent") an aggregate amount in cash sufficient for the Paying
Agent to make full payment of the Merger Consideration to the holders of
all outstanding Common Stock (other than dissenting shareholders, LTTR,
LTTR's members and Merger Sub).
[] As soon as is practical after the Effective Time, the Paying Agent will
mail to each holder of record immediately prior to the Effective Time a
transmittal letter setting forth (i) certain representations and other
provisions, the acceptance of which the holder will have to acknowledge
with his signature, and (ii) instructions relating to the surrender of
stock certificates to the Paying Agent.
[] Upon surrender of the stock certificate to the Paying Agent, together with
a duly executed letter of transmittal and such other documents as the
Paying Agent may reasonably require, the Paying Agent will deliver the
applicable Merger Price.
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SUMMARY TERMS OF PROPOSED TRANSACTION
REPRESENTATIONS AND WARRANTIES
[] The Merger Agreement contains various usual and customary representations
and warranties of the Company, the Acquiror and the Merger Sub. Except for
the agreements relating to the payment of the Merger Consideration and
provisions governing insurance and indemnification, none of the
representations, warranties and covenants of the parties to the Merger
Agreement will survive the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
[] The Company has agreed that from the date of the Merger Agreement it will
not (and will not cause or permit any of its subsidiaries to) engage in any
practice, take any action, or enter into any transaction outside the
ordinary course of business.
EXCLUSIVITY
[] The Company has agreed that it will not solicit, initiate or encourage the
submission of any proposal or offer from any person relating to the
acquisition of all or substantially all of its capital stock or assets.
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SUMMARY TERMS OF PROPOSED TRANSACTION
CONDITIONS PRECEDENT TO THE MERGER
The obligations of the Company, the Acquiror and the Merger Sub to consummate
the Merger are conditioned, among other things, on the following:
[] LHS obtains all required financing to complete the Merger;
[] The affirmative vote of holders of at least two thirds of the outstanding
Common Stock in favor of the Merger;
[] The Company obtains all required third party consents to the Merger;
[] Absence of any pending or threatened action, suit or proceeding which could
(i) prevent the consummation of, or if subsequent to the Closing, cause the
rescission of, any of the transactions contemplated by the Merger
Agreement, (ii) adversely affect the right of LHS to own capital stock of
the Surviving Corporation or (iii) adversely affect the right of the
Surviving Corporation to own its assets and operate its business;
[] Receipt of all required authorizations, consents and approvals of
governments and governmental agencies; and
[] The number of dissenting shares does not exceed 5% of the total number of
issued and outstanding shares of Common Stock (not including those shares
owned by LTTR, LTTR's members and Merger Sub).
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SUMMARY TERMS OF PROPOSED TRANSACTION
TERMINATION
The Merger Agreement may be terminated at any time prior to the Closing, whether
before or after approval by the Company's shareholders:
[] By mutual written consent of the parties;
[] By either party if the other party has breached any material
representation, warranty or covenant contained in the Merger Agreement in
any material respect and failed to cure such breach for a period of ten
days after receipts of notice of the breach;
[] By either party if the closing does not occur on or before August 30, 1999
due to the failure of any condition precedent to the obligation of such
party to close (unless the failure results primarily from such party
breaching any representation, warranty or covenant contained in the Merger
Agreement); and
[] By any party giving notice to the other party at any time after the Special
Meeting if the Merger Agreement and the Merger fail to receive the
requisite shareholder approval.
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SUMMARY TERMS OF PROPOSED TRANSACTION
EFFECT OF TERMINATION; BREAK-UP FEE
[] Regardless of whether the Merger is consummated, all expenses incurred in
connection with the transactions contemplated by the Merger Agreement will
be paid by the party incurring such expenses (including legal fees).
[] If the Merger Agreement terminates prior to the Closing because either:
(i) the requisite shareholder approval is not obtained at the Special
Meeting; or,
(ii) there is a breach by the Company of any material representation,
warranty or covenant contained in the Merger Agreement in any material
respect which is not cured within ten days after receipt of notice of
the breach from LHS (other than failures which result primarily from
LHS breaching any representation, warranty or covenant contained in
the Merger Agreement),
then the Company shall pay to LHS a termination fee of $350,000, and will
reimburse LHS for any and all expenses incurred by LHS, including
attorneys' fees, relating to or arising out of the Merger Agreement and the
transactions contemplated by the Merger Agreement.
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Historical Trading Data - CCSE
[GRAPHIC OMITTED]
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Price & Volume Chart - YTD
[GRAPHIC OMITTED]
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Analysis of Premiums Paid in Merger Transactions
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The analysis presented below compares the imputed premium being offered for the
Common Stock as compared to premiums paid in recent merger and acquisition
transactions.
<TABLE>
<CAPTION>
Premium of Offer Price to Target Company's Stock Price for
All U.S. Announced Transactions from January 1, 1997 through June 2, 1999
Number of
Type of Transaction Transactions Mean Median Maximum Minimum
- -----------------------------------------------------------------------------------------------------------------------------
ONE (1) DAY PRIOR TO ANNOUNCEMENT
<S> <C> <C> <C> <C> <C>
[] All transactions 1,349 28.2% 23.2% 250.3% -93.5%
[] Transactions with target company stock prices of less 395 35.4% 30.4% 223.7% -93.5%
than $10.00 per share
[] Transactions valued less than $25 million 123 22.0% 23.4% 190.9% -93.5%
FOUR (4) WEEKS PRIOR TO ANNOUNCEMENT
[] All transactions 1,352 40.5% 33.8% 456.2% -92.5%
[] Transactions with target company 394 50.4% 42.8% 456.2% -92.5%
stock prices of less than $10.00 per share
[] Transactions valued less than $25 million 126 31.9% 29.0% 253.3% -92.5%
</TABLE>
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ANALYSIS OF PREMIUMS PAID IN MERGER TRANSACTIONS
Imputed Offer Price Per Share for the Common Stock Based Upon
the Premium of Offer Price to Target Company's Stock Price for
All U.S. Announced Transactions from January 1, 1997 through June 2, 1999
Based Upon Announcement of Letter of Intent on April 7, 1999
------------------------------------------------------------
Type of Transaction Mean Median
- ---------------------------------------------- -------- ----------
One (1) Day Prior to Announcement
[] All transactions $0.64 $0.62
[] Transactions with target company
stock prices of less than $10.00 per share $0.68 $0.65
[] Transactions valued less than $25 million $0.61 $0.62
Four (4) Weeks Prior to Announcement
[] All transactions $1.41 $1.34
[] Transactions with target company stock
prices of less than $10.00 per share $1.50 $1.43
[] Transactions valued less than $25 million $1.32 $1.29
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ANALYSIS OF PREMIUMS PAID IN MERGER TRANSACTIONS
Imputed Offer Price Per Share for the Common
Stock Based Upon the Premium of Offer Price to Target
Company's Stock Price for All U.S. Announced Transactions
from January 1, 1997 through June 2, 1999 Based Upon the Board
Meeting on June 7, 1999 During Which the Merger was Approved
------------------------------------------------------------
TYPE OF TRANSACTION MEAN MEDIAN
- ------------------------------------------------ ---------- ----------
ONE (1) DAY PRIOR TO ANNOUNCEMENT
[] All transactions $0.88 $0.85
[] Transactions with target company stock
prices of less than $10.00 per share $0.93 $0.90
[] Transactions valued less than $25 million $0.84 $0.85
FOUR (4) WEEKS PRIOR TO ANNOUNCEMENT
[] All transactions $1.05 $1.00
[] Transactions with target company stock
prices of less than $10.00 per share $1.13 $1.07
[] Transactions valued less than $25 million $0.99 $0.97
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ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES
SUMMARY BUSINESS DESCRIPTIONS
ACCUHEALTH, INC (AHLT, OTC BB) is an integrated provider of home health services
in the New York, New Jersey, and Connecticut area. Together with its wholly
owned subsidiaries, the company provides comprehensive home healthcare services,
including administration of a wide array of infusion therapies, sales of oral
medications, and sales and rentals of DME and related supplies, as well as home
nursing.
AMEDISYS, INC (AMED, OTC BB) is a multi-regional provider of alternate-site
healthcare services including home heathcare nursing, home infusion therapy and
ambulatory surgery centers. The company operates 71 offices within a network of
subsidiaries in the southern and southeastern Untied States.
AMERICAN HOMEPATIENT, INC. (AHOM, NASDAQ) provides home healthcare services and
products consisting primarily of respiratory and infusion therapies, and the
rental and sale of home medical equipment and home health care supplies. As of
December 31, 1998, the company provided these services to patients primarily in
the home through 313 centers in 38 states. From its inception through 1997, the
company experienced substantial growth primarily as a result of its strategy of
acquiring and operating home healthcare businesses. Beginning in 1998, the
company's strategy shifted from acquiring new businesses to focus more on
internal growth, the integration of its acquired operations and achieving
operating efficiencies.
APRIA HEALTHCARE GROUP, INC. (AHG, NYSE) provides comprehensive home healthcare
services including infusion therapy, respiratory therapy, and medical equipment.
The largest home healthcare company in the U.S., the company resulted from the
1995 merger of Homedco Group and Abbey Healthcare Group. Apria Healthcare Group,
Inc. currently has approximately 320 branch locations which serve patients in
all 50 states.
CARETENDERS HEALTH CORP. (CTND, NASDAQ Small Caps) provides integrated adult day
health services and home healthcare services for seniors and others with chronic
and post-acute medical conditions who wish to remain in their homes and
communities. The company's home healthcare services include in-home infusion
therapy, physical therapy, and custodial companion care. Its adult day care
centers provide seniors with transportation to and from the centers, meals, and
medical attention. The Company provides its services in nine states, primarily
in Kentucky, Ohio, and Maryland.
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ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES
SUMMARY BUSINESS DESCRIPTIONS (CONT.)
CORAM HEALTHCARE CORPORATION (CRH, NYSE) is engaged in three principal lines of
business: alternate site (outside the hospital) infusion therapy and related
services, ancillary network management services, and pharmacy benefit management
and specialty mail-order pharmacy services. Other services offered by Coram
include centralized management, administrative and clinical support for clinical
research trials, medical informatics and non-intravenous home health products
such as DME and respiratory therapy services. Coram delivers its alternate site
infusion therapy services through approximately 90 branch offices located in 44
states and Ontario, Canada.
HEALTHCOR HOLDINGS, INC. (HCOR, OTC BB) currently derives the majority of its
revenues from the provision of home respiratory therapy, home medical equipment
and infusion therapy services. The company provides its services through 51
offices in eight states. The company changed its focus through the addition and
growth of respiratory therapy/home medical equipment and infusion therapy
services and the closure of substantially all of its Medicare nursing offices.
The company expects that it will continue to shift its business mix towards
respiratory therapy/home medical equipment and infusion therapy. The company is
also developing a proprietary medical information system network, Medisyn, which
it believes will enable it to achieve additional cost savings, increase
productivity and capture outcomes data that will provide advantages in obtaining
managed care business and adapting to regulatory and reimbursement changes.
HELP AT HOME, INC. (HAHI, NASDAQ Small Caps) provides homemaker, custodial and
personal home healthcare services to elderly and disabled persons within their
homes. Such services consist of nutritional planning and assistance, household
management, personal care, skilled nursing interventions, rehabilitative
therapy, and medical social work services. The company derives a significant
portion of its revenues from 20 regional contracts with the Illinois Department
on Aging. The company operates 28 locations in Illinois, Indiana, Missouri,
Alabama, Mississippi and Arkansas.
IN HOME HEALTH, INC. (IHHI, NASDAQ) specializes in providing comprehensive
healthcare services to clients of all ages in their homes. The company's
services include nursing, infusion therapy, hospice, rehabilitation, personal
care and homemaking. The company currently provides services from 34 offices and
two pharmacies in 19 geographic markets located in 14 states.
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ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES
SUMMARY BUSINESS DESCRIPTIONS (CONT.)
LINCARE HOLDINGS, INC. (LNCR, NASDAQ), is one of the nation's largest providers
of oxygen and other respiratory therapy services to patients in the home. The
company's customers typically suffer from chronic obstructive pulmonary disease,
such as emphysema, chronic bronchitis or asthma, and require supplemental oxygen
or other respiratory therapy services in order to alleviate the symptoms and
discomfort of respiratory dysfunction. Lincare currently serves over 180,000
customers in 42 states through 378 operating centers.
MATRIA HEALTHCARE, INC. (MATR, NASDAQ) is engaged principally in the business of
providing women's health services, cardiovascular and respiratory disease
management services, infertility practice management, and diabetes supplies and
services. The company was formed in 1996 through the merger of Tokos Medical
Corporation and Healthdyne, Inc.
NATIONAL HOME HEALTH CARE CORP. (NHHC, NASDAQ), provides home healthcare
services throughout the New York City metropolitan area, including Westchester
County, and Long Island in New York and Fairfield and New Haven Counties in
Connecticut.
NEW YORK HEALTH CARE, INC. (NYHC, NASDAQ Small Caps) is a licensed home
healthcare agency engaged primarily in supplying the services of
paraprofessionals who provide a broad range of healthcare support services to
patients in their homes. The company operates in all five boroughs of New York
City and the counties of Nassau, Westchester, Rockland, Orange, Dutchess,
Ulster, Putnam and Sullivan in the State of New York. The company's services are
supplied principally pursuant to contracts with healthcare institutions and
agencies such as various county departments of social services, Beth Abraham
Health Services in the Bronx and Westchester County, Kingsbridge Medical Center,
Mt Sinai Medical Center, Coram Network, Aetna US Healthcare, Prudential
Tri-State, Olsten and New York Methodist Hospital.
NuMED HOME HEALTH CARE, INC. (NUMD, OTC BB) is a holding company that conducts
operations through eight subsidiaries, seven of which offer home healthcare
services and temporary nursing staffing in selected markets in Florida, Ohio and
Pennsylvania. In addition, the company provides contract staffing of physical
and occupational therapists and speech/language pathologists in certain markets
of Ohio, Pennsylvania, Indiana and Kentucky.
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ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES
SUMMARY BUSINESS DESCRIPTIONS (CONT.)
OPTION CARE, INC. (OPTN, NASDAQ) provides infusion therapy and other ancillary
home healthcare services through its owned locations and through its supporting
franchise network. In addition, the company operates a wholly-owned subsidiary
that supplies state of the art data management products and services to the home
and alternate site healthcare industry. As of December 31, 1998, 145 Option Care
infusion therapy locations, including satellite locations, were operating in 35
states. Existing locations included 121 locations owned and operated by
franchise owners and 24 locations owned and operated by the company. Certain of
the company-owned locations also operate other ancillary healthcare businesses
which provide nursing, respiratory therapy and DME.
PEDIATRIC SERVICES OF AMERICA, INC. (PSAI, NASDAQ Small Caps) provides
children's healthcare services through 113 branch offices located in 27 states
and the District of Columbia, and medical testing services through over 200
locations nationwide. The company provides a broad range of pediatric healthcare
services, including nursing, respiratory therapy and other medical equipment,
and pharmacy and infusion therapy. In addition, the company provides pediatric
rehabilitation services, day treatment centers for medically fragile children,
pediatric wellcare services and special needs educational services for pediatric
patients. The company also provides case management services in order to assist
the family and patient by coordinating the provision of services between the
insurer or other payor, the physician, the hospital and other healthcare
providers.
STAFF BUILDERS, INC. (SBLI, OTC BB) is an international provider of homehealth
care services with over 130 locations in 27 states and the District of Columbia,
as well as master franchises in Japan, Spain and Brazil. Staff Builders also
provides supplemental staffing personnel under contractual arrangements to
hospitals, nursing homes, clinics and other healthcare facilities through 55
locations in 26 states.
STAR MULTI CARE SERVICES, INC. (SMCS, NASDAQ) provides professional and
para-professional home healthcare personnel services to elderly, ill and
physically challenged individuals in their homes, and to a lesser extent the
company provides healthcare facility staffing services for hospitals and nursing
homes. The company maintains 15 licensed offices within the five States in which
it operates, including New York, New Jersey, Pennsylvania, Ohio and Florida.
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ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES
SUMMARY BUSINESS DESCRIPTIONS (CONT.)
TRANSWORLD HEALTHCARE, INC. (TWH, AMEX) is a regional provider of a broad range
of alternate site healthcare services and products. The company also operates a
specialized mail-order pharmacy and provides medical supplies to patients
nationwide. The company's United Kingdom-based subsidiary provides respiratory
therapy, medical supplies and nursing services through 79 locations throughout
the United Kingdom.
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DISCOUNTED CASH FLOW ANALYSIS
The discounted cash flow analysis provides an estimate as to the value creation
potential of a business based upon a projected stream of cash flows. The general
purpose of this analysis is to:
[] Evaluate the projected cash flows of the Company (incorporating
appropriate growth assumptions) on a discounted basis to determine a
range of Equity Values. The Equity Values will also incorporate a
terminal
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value for the Company that is based upon a projected Enterprise Value
calculated using various revenue multiples.
0 Equity Value refers to the valuation of 100% of the Common Stock.
0 Enterprise Value refers to Equity Value plus total debt (based
upon book value), minority interest and preferred stock less cash
and cash equivalents.
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DISCOUNTED CASH FLOW ANALYSIS
In determining a range of values for the Company using the Discounted Cash Flow
approach, Pinnacle Partners:
[] Determined a required equity rate of return (cost of equity) using the
Capital Asset Pricing Model (CAPM)
[] Calculated a range of weighted average costs of capital (WACCs) using
various:
O Required equity rates of return; and
O Capital structures
[] Discounted the Company's projected free cash flows (which were based
upon the Fiscal 2000 through 2003 forecasts prepared by management)
using the WACCs
[] Derived a range of Equity Values incorporating in the analysis a range
of:
O Required rates of return; and
O Perpetual growth rate assumptions
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