May 5, 2000
Dear ProMedCo Stockholder:
I am writing on behalf of ProMedCo Management Company's Board of
Directors to invite you to attend the reconvened special meeting of our
stockholders. The meeting, which was originally scheduled to be held on Monday,
March 27, 2000, was adjourned and has been rescheduled to be held at 8:30 a.m.
local time on Monday, May 15, 2000, at The Petroleum Club, 777 Main Street, Fort
Worth, Texas.
On February 29, 2000, we distributed proxy materials to our
stockholders of record as of February 17, 2000. The materials included a proxy
statement describing the proposed sale of a new issue of the Company's 6%
convertible preferred stock to affiliates of Goldman, Sachs & Co. for $55
million. Press releases dated March 27, April 10, and April 17 announced three
successive adjournments of the original meeting.
The purpose of the first and second adjournments was to allow us to
complete negotiations leading to an increase of our senior debt financing by $65
million, one of the conditions to the sale of the preferred stock to Goldman
Sachs. Because of what we believe are unfavorable market conditions for
financing throughout the healthcare services sector, we obtained commitments for
only $25 million of the additional debt financing contemplated by our agreement
with Goldman Sachs. In light of this circumstance and following a third
adjournment, the parties agreed to modify the terms of Goldman Sach's investment
in the Company. The original terms of the investment are described in detail in
the original proxy statement, and the modified terms are described in the
attached supplemental proxy statement. If you voted using the proxy we sent to
you in February, you need not vote again if, after considering the modified
terms, you do not wish to change your vote.
Under the original terms, Goldman Sachs was to purchase 550,000 shares
of the new convertible preferred stock in exchange for $39 million in cash
together with subordinated notes and 1,250,000 shares of common stock that it
purchased from the Company for $16 million in January 2000. Under the modified
terms, Goldman Sachs will reduce the cash portion of its investment to $26.5
million and will purchase only 425,000 shares of convertible preferred stock. In
addition, the Company will grant Goldman Sachs three-year warrants to purchase
the additional 125,000 shares of convertible preferred stock for $12.5 million.
Until December 31, 2000, we may require Goldman Sachs to purchase these shares
if the Company obtains an additional $25 million of senior debt financing.
<PAGE>
Whereas the preferred stock was initially convertible into common stock
at $3.25 per share under the original terms, under the modified terms the
425,000 shares will be initially convertible at $2.50 per share and the 125,000
shares underlying the warrants will be initially convertible at $4.00 per share.
Accordingly, if the 425,000 shares are all converted, the holders will own
approximately 37.0% of the Company's outstanding common stock assuming full
dilution, which will increase to 41.0% if the 125,000 option shares are
purchased and converted. The remaining terms of the convertible preferred stock
will be substantially the same as those of the original proposal.
Although we are disappointed that circumstances have required a
reduction in the amount of the new investment, we continue to be excited about
the transaction and believe that the $42.5 million equity investment, together
with the increased $25 million of debt financing that is now available, will
provide us with the capital needed for our continued growth through 2001. THE
BOARD HAS UNANIMOUSLY APPROVED THE MODIFIED TRANSACTION AND CONTINUES TO
RECOMMEND THAT YOU VOTE "FOR" THE PROPOSAL. In addition, members of senior
management have agreed to vote their shares in favor of the proposal, and we
sincerely hope you will continue to support it as well.
If you have not already voted or wish to change your vote, please fill
in, sign, date and mail the enclosed proxy card as soon as possible, whether or
not you plan to attend the meeting.
Sincerely,
/s/ H. WAYNE POSEY
H. Wayne Posey
Chairman and Chief Executive Officer
<PAGE>
ProMedCo Management Company
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held May 15, 2000
TO OUR STOCKHOLDERS:
A reconvened special meeting of the stockholders of ProMedCo Management
Company (the "Company") will be held at 8:30 a.m. local time on Monday, May 15,
2000, at The Petroleum Club, 777 Main Street, Fort Worth, Texas 76102 for the
following purposes:
1. to approve the issuance and sale of 425,000 shares of the Company's Series
A Convertible Preferred Stock, par value $0.01 per share ("Series A
Preferred Stock"), to affiliates of Goldman, Sachs & Co. (the "Investors")
for $42.5 million; the issuance to the Investors of warrants to purchase
125,000 shares of the Company's Series B Convertible Preferred Stock, par
value $0.01 per share ("Series B Preferred Stock") for $12.5 million; the
issuance and sale of the Series B Preferred Stock upon exercise of the
warrants; the issuance and sale of the shares of the Company's Common
Stock, par value $0.01 per share, issuable upon conversion of the Series A
Preferred Stock and Series B Preferred Stock; and the adoption of the
Amended Securities Purchase Agreement pursuant to which the issuance and
sale are being made; and
2. to transact such other business as may properly come before the meeting or
any adjournments thereof.
Holders of record of the Company's Common Stock at the close of business
on February 17, 2000 are entitled to vote at the meeting and at any
adjournments thereof.
STOCKHOLDERS WHO VOTED BY USING THE ORIGINAL PROXY CARD DISTRIBUTED BY
THE COMPANY IN FEBRUARY DO NOT NEED TO VOTE AGAIN. Stockholders who have not
already voted or who wish to change their vote before the special meeting is
reconvened on May 15, 2000, should complete, date and sign the enclosed proxy
card and return it promptly in the enclosed envelope provided for your
convenience. Any stockholder present at the meeting may revoke his or her proxy
and vote personally on all matters brought before the meeting.
By Order of the Board of Directors,
Deborah A. Johnson
Secretary
Fort Worth, Texas
May 5, 2000
<PAGE>
ProMedCo Management Company
801 Cherry Street, Suite 1450
Fort Worth, Texas 76102
(817) 335-5035
SUPPLEMENTAL PROXY STATEMENT
FOR THE RECONVENED
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2000
This Supplemental Proxy Statement is furnished to the holders of the
Common Stock of ProMedCo Management Company (the "Company") in connection with
the solicitation on behalf of the Board of Directors of the Company (the
"Board") of proxies to be used in voting at the reconvened special meeting of
stockholders to be held at 8:30 a.m. local time on Monday, May 15, 2000, at The
Petroleum Club, 777 Main Street, Fort Worth, Texas 76102 and any adjournments
thereof.
At this important meeting, you will be asked to approve the issuance
and sale of 425,000 shares of the Company's Series A Convertible Preferred Stock
(the "Series A Preferred Stock") to four affiliates of Goldman, Sachs & Co. (the
"Investors") for $42.5 million, the issuance to the Investors of warrants to
purchase 125,000 shares of the Company's Series B Convertible Preferred Stock
(the "Series B Preferred Stock" and, together with the Series A Preferred Stock,
the "Preferred Stock") for $12.5 million, the issuance and sale of the Company's
Common Stock issuable upon conversion of the Preferred Stock, and the adoption
of the Amended Securities Purchase Agreement (the "Amended Purchase Agreement")
pursuant to which the issuance and sale are being made (the "Modified
Proposal").
The Original Transaction
On January 13, 2000, the Company entered into a Securities Purchase
Agreement (the "Original Purchase Agreement") with the Investors and, pursuant
thereto, issued and sold to the Investors, at the initial closing, $16.0 million
principal amount of the Company's Senior Subordinated Notes due January 13, 2005
(the "Notes") and 1,250,000 shares of Common Stock (the "GS Shares") for
aggregate cash consideration of $16.0 million. Stockholder approval was not
required for that transaction. The Original Purchase Agreement provided that,
subject to the approval of the Company's stockholders and certain other
conditions, the Company would, at a second closing, issue to the Investors, and
the Investors would purchase from the Company, 550,000 shares of Series A
Preferred Stock in exchange for the Notes, the GS Shares and $39.0 million cash,
or aggregate consideration of $55.0 million. One of the conditions was that the
Company obtain $65.0 million of additional senior debt financing under its bank
credit facility or similar debt financing.
As a result of what it believes are unfavorable market conditions for
financing throughout the healthcare services sector, the Company was able to
obtain commitments for only $25.0 million of additional debt financing. In light
of the Company's inability to satisfy this condition, the parties agreed to
modify the terms of the investment by the Investors in the Company.
The Modified Transaction
On May 5, 2000, the Company and the Investors entered into the Amended
Purchase Agreement. The Amended Purchase Agreement modifies the transaction
contemplated by the Original Purchase Agreement in the following material
respects:
o rather than purchasing 550,000 shares of Series A Preferred Stock in
exchange for the Notes, the GS Shares and $39.0 million at the second
closing, the Investors will purchase only 425,000 shares of Series A
Preferred Stock in exchange for the Notes, the GS Shares and $26.5 million,
or aggregate consideration of $42.5 million;
o the initial conversion price of the Series A Preferred Stock will be $2.50
per share rather than $3.25 per share;
o as a condition to the second closing, the Company must obtain $25.0
million, rather than $65.0 million, of additional senior debt financing;
o the Company will grant the Investors warrants, expiring on the third
anniversary of the second closing, to purchase 125,000 shares of Series B
Preferred Stock for $12.5 million;
o the initial conversion price of the Series B Preferred Stock will be $4.00
per share; and
o until December 31, 2000, the Company will, to the extent it is able to
further increase its senior debt financing, have the right, subject to
certain conditions, to require the Investors to purchase $2.5 million of
the Series B Preferred Stock for each $5.0 million of increased debt
financing obtained, or the entire $12.5 million if it further increases its
debt financing by $25.0 million.
Under the original transaction, if all of the Preferred Stock had been
converted (based on the initial conversion price), the Investors would have
owned approximately 36.4% of the Company's outstanding Common Stock, assuming
the exercise or conversion of all options, warrants and other convertible
securities that will be outstanding immediately after the second closing, or
44.4% assuming no exercise or conversion. Under the modified transaction, if all
of the Series A Preferred Stock is converted (based on the initial conversion
price), the Investors will own approximately 37.0% of the outstanding Common
Stock assuming full exercise and conversion, or 45.0% assuming no exercise or
conversion. If all the Series B Preferred Stock is purchased and converted
(based on the initial conversion price), the Investors' ownership will increase
to 41.0% assuming full exercise and conversion, or 49.0% assuming no exercise or
conversion. As with the original proposal, holders of the Preferred Stock will
be entitled to vote, together with the holders of the Common Stock, on all
matters submitted to a vote of stockholders on the same basis as if the
Preferred Stock had been converted into Common Stock.
Voting on the Modified Proposal
In addition to this supplement, there is enclosed another proxy card.
Stockholders who have already voted by using the proxy card included with the
original proxy statement need not vote again. Votes in favor of the Proposal
will be deemed to be in favor of the Modified Proposal. However, stockholders
who have not already voted or who wish to change their vote before the special
meeting is reconvened on May 15 should use the enclosed proxy card. Your Board
unanimously recommends that you vote "FOR" the Modified Proposal at the
reconvened special meeting. Any stockholder who executes a proxy may revoke it
at any time before it is voted by delivering to the Secretary of the Company
either an instrument revoking the proxy or a duly executed proxy bearing a later
date. A proxy also may be revoked by any stockholder present at the meeting who
expresses a desire to vote his or her shares in person.
All shares represented by valid proxies received pursuant to this or
the original solicitation and not revoked before they are exercised will be
voted in the manner specified therein. If no specification is made, the shares
will be voted in favor of the Modified Proposal.
Only holders of Common Stock of record at the close of business on
February 17, 2000 (the "Record Date") are entitled to vote at the meeting. On
the Record Date, there were 22,479,239 shares of Common Stock outstanding, of
which each share is entitled to one vote on any matter to be voted upon at the
meeting or any adjournments thereof. A majority of the outstanding shares must
be represented at the meeting, in person or by proxy, to constitute a quorum for
holding the meeting. Approval of the Modified Proposal requires the affirmative
vote of a majority of the votes cast.
THE BOARD HAS UNANIMOUSLY APPROVED THE TRANSACTION AND RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE MODIFIED PROPOSAL.
The Notice of Special Meeting of Stockholders, this Supplemental Proxy
Statement and the accompanying proxy are being mailed to stockholders on or
about May 5, 2000.
<PAGE>
[card front]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
STOCKHOLDERS WHO HAVE ALREADY SUBMITTED PROXIES AND WHO
DO NOT WISH TO CHANGE THEIR VOTE NEED NOT SUBMIT THIS PROXY
PROMEDCO MANAGEMENT COMPANY -- COMMON STOCK PROXY -- for the Reconvened Special
Meeting of Stockholders at 8:30 a.m. local time on Monday, May 15, 2000, at The
Petroleum Club located at 777 Main Street, Fort Worth, Texas 76102.
The undersigned hereby appoints H. Wayne Posey and Deborah A. Johnson, or
either of them, with full power of substitution, as Proxies to represent and
vote all of the shares of Common Stock of ProMedCo Management Company held of
record by the undersigned at the above-stated Special Meeting, and any
adjournments thereof, upon the matter set forth in the Notice of Special Meeting
of Stockholders and Proxy Statement dated February 24, 2000 and Supplemental
Proxy Statement dated May 5, 2000, as follows:
1. TO APPROVE THE ISSUANCE AND SALE OF 425,000 SHARES OF THE COMPANY'S SERIES
A CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.01 PER SHARE ("SERIES A
PREFERRED STOCK"), TO AFFILIATES OF GOLDMAN, SACHS & CO. (THE "INVESTORS")
FOR $42.5 MILLION; THE ISSUANCE TO THE INVESTORS OF WARRANTS TO PURCHASE
125,000 SHARES OF THE COMPANY'S SERIES B CONVERTIBLE PREFERRED STOCK, PAR
VALUE $0.01 PER SHARE ("SERIES B PREFERRED STOCK") FOR $12.5 MILLION; THE
ISSUANCE AND SALE OF THE SERIES B PREFERRED STOCK UPON EXERCISE OF THE
WARRANTS; THE ISSUANCE AND SALE OF THE SHARES OF THE COMPANY'S COMMON
STOCK, PAR VALUE $0.01 PER SHARE, ISSUABLE UPON CONVERSION OF THE SERIES A
PREFERRED STOCK AND SERIES B PREFERRED STOCK; AND THE ADOPTION OF THE
AMENDED SECURITIES PURCHASE AGREEMENT PURSUANT TO WHICH THE ISSUANCE AND
SALE ARE BEING MADE; AND
___ FOR ___ AGAINST ____ ABSTAIN
2. TO TAKE ANY ACTION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY ADJOURNMENTS THEREOF
The Board of Directors recommends a vote FOR Proposal 1.
This proxy, when properly executed, will be voted as specified. If no
specification is made, it will be voted for Proposal 1, and in the discretion of
the Proxy or Proxies on any other business that may properly come before the
Special Meeting or any adjournments thereof.
[card reverse]
Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on
this proxy. When signing as attorney, trustee, executor, administrator, guardian
or corporate officer, please give your FULL title.
MARK HERE IF YOU PLAN TO ATTEND THE SPECIAL MEETING
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Any proxy heretofore given by the undersigned with respect to such stock is
hereby revoked. Receipt of the Notice of the Reconvened 2000 Special Meeting and
Supplemental Proxy Statement is hereby acknowledged. PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE DATE SIGNATURE DATE
FOR IMMEDIATE RELEASE
Contact: H. Wayne Posey
President and Chief Executive Officer
or
Robert D. Smith
Senior Vice President and Chief Financial Officer
817-335-5035
PROMEDCO MODIFIES TRANSACTION WITH GOLDMAN SACHS[GRAPHIC OMITTED] Company to
Reconvene Special Meeting on May 15, 2000
FORT WORTH, Texas (May 8, 2000) -- ProMedCo Management Company (Nasdaq/NM:PMCO)
today announced that it had reached a revised agreement with affiliates of
Goldman, Sachs & Co. to provide financing for the Company's continuing
expansion. The transaction is subject to shareholder approval at a special
meeting, which was originally convened and adjourned on March 27, 2000, and will
be reconvened on May 15, 2000.
Under the terms of the previously announced transaction, Goldman Sachs
was to purchase $55 million of the Company's 6% convertible preferred stock in
exchange for $39 million in cash, together with $16 million of subordinated
notes and 1.25 million shares of common stock that it acquired from the Company
on January 13. The purchase was conditioned upon the Company's increasing its
senior debt financing by $65 million.
Under the terms of the modified transaction, Goldman Sachs will
purchase $42.5 million of Series A Convertible Preferred Stock in exchange for
the subordinated notes, the shares of common stock and $26.5 million in cash,
conditioned upon the Company's obtaining $25 million of increased debt
financing, for which commitments have already been received. In addition, the
Company will issue three-year warrants entitling Goldman Sachs to purchase $12.5
million of Series B 6% Convertible Preferred Stock. Until December 31, 2000, the
Company may require Goldman Sachs to exercise these warrants if an additional
$25 million of senior debt financing is obtained. The Series A Preferred Stock
and Series B Preferred Stock will be initially convertible into Common Stock at
$2.50 and $4.00 per share, respectively. The preferred stock contemplated by the
previously announced transaction would have been initially convertible at $3.25
per share.
<PAGE>
PMCO Modifies Transaction
Page 2
May 8, 2000
Stockholders who previously submitted proxies for the special meeting
need not submit another proxy card unless they wish to change their original
vote. Stockholders of record as of February 17, 2000, who have not received the
Company's supplemental proxy material describing the modified proposal may
obtain a copy by telephoning Deborah Johnson at (817) 335-5035.
Wayne Posey, ProMedCo's president and chief executive officer, said,
"Although we are disappointed with the reduced amount of this investment, we
continue to believe that the transaction is still very much in the best
interests of shareholders. The opportunities ahead of us are great, and this new
capital is key to our ability to take advantage of such opportunities. The $42.5
million equity investment, together with the increased $25 million of debt
financing, will provide us with the capital needed for this continued growth."
This press release contains "forward-looking statements" which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements are based on current
expectations and may be significantly impacted by certain risks and
uncertainties described herein and in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 1998. There can be no assurance that statements made in this press release
relating to future events will be achieved.
ProMedCo, headquartered in Fort Worth, Texas, is a medical services
company that coordinates and manages the delivery of a wide variety of
healthcare services in non-urban communities. ProMedCo believes that these
non-urban communities, which have fewer healthcare providers and lower HMO
penetration than urban areas, offer an opportunity for the Company to capture a
substantial portion of local healthcare expenditures. To enter these markets,
the Company affiliates with a leading medical group, establishing a platform
from which it can grow its market share by adding ancillary services and
providers.
-END-
