AMERICAN MEDSERVE CORP, SC 14D9, 1997-08-14

AMERICAN MEDSERVE CORP
SC 14D9, 1997-08-14
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

Previous: UTG COMMUNICATIONS INTERNATIONAL INC, 10QSB, 1997-08-14

Next: CHASE PREFERRED CAPITAL CORP, 10-Q, 1997-08-14

<PAGE> 1

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------

AMERICAN MEDSERVE CORPORATION
(NAME OF SUBJECT COMPANY)

AMERICAN MEDSERVE CORPORATION
(NAME OF PERSON FILING STATEMENT)

COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)

------------------------

027448 10 9
(CUSIP NUMBER OF CLASS OF SECURITIES)

------------------------

TIMOTHY L. BURFIELD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMERICAN MEDSERVE CORPORATION
184 SHUMAN BLVD., SUITE 200
NAPERVILLE, ILLINOIS 60563
(630) 717-2904

(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
------------------------

With a copy to:

GLENN W. REED, ESQ.
GARDNER, CARTON & DOUGLAS
321 NORTH CLARK STREET, SUITE 3100
CHICAGO, ILLINOIS 60610
(312) 644-3000
================================================================================
<PAGE> 2

ITEM 1. SECURITY AND SUBJECT COMPANY.

The name of the subject company is American Medserve Corporation, a
Delaware corporation (the "Company"), and the address of the principal executive
offices of the Company is 184 Shuman Blvd., Suite 200, Naperville, Illinois
60563. The title of the class of equity securities to which this statement
relates is common stock, par value $0.01 per share, of the Company (the "Common
Stock").

ITEM 2. TENDER OFFER OF PURCHASER.

This statement relates to a cash tender offer by Omnicare Acquisition
Corp., a Delaware corporation ("Purchaser"), and a wholly owned subsidiary of
Omnicare, Inc., a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated August 14, 1997, to
purchase all of the outstanding shares of Common Stock of the Company (the
"Shares") at a price per Share of $18.00, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 14, 1997 (the "Offer to Purchase") and the related Letter
of Transmittal (which together constitute the "Offer"). The Offer is conditioned
upon, among other things, (i) there having been validly tendered and not
withdrawn prior to the expiration of the Offer, that number of Shares which
represents at least a majority of the Shares outstanding on a fully diluted
basis (the "Minimum Condition") and (ii) any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the regulations thereunder applicable to the purchase of the Shares
pursuant to the Offer having expired or been terminated.

The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 7, 1997 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. A copy of the Merger Agreement is filed as Exhibit (c)(1)
hereto and is incorporated herein by reference in its entirety. Pursuant to the
Merger Agreement, following the consummation of the Offer and the satisfaction
or waiver of certain conditions, the Purchaser will be merged with and into the
Company (the "Merger") and the Company will continue as the surviving
corporation (the "Surviving Corporation"). In the Merger, each outstanding Share
(other than Shares owned by the Company as treasury stock, Shares owned by
Parent, the Purchaser or any wholly owned subsidiary of Parent, and Shares held
by stockholders, if any, who are entitled to and who properly exercise appraisal
rights under Delaware law) will be converted into the right to receive an amount
in cash equal to the price per Share paid pursuant to the Offer, without
interest thereon (the "Merger Consideration"). The Merger Agreement is
summarized in Item 3 of this Statement. The Offer and the Merger and the
transactions contemplated thereby are collectively referred to herein as the
"Transaction."

Based on the information in the Offer to Purchase, the principal executive
offices of Parent and Purchaser are located at 50 East RiverCenter Boulevard,
Covington, Kentucky 41011.

ITEM 3. IDENTITY AND BACKGROUND.

(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.

(b) Except as described or referred to below or incorporated by reference
herein, to the knowledge of the Company, there exists on the date hereof no
material contract, agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and (i) the
Company, its executive officers, directors or affiliates or (ii) the Parent, the
Purchaser or the executive officers, directors or affiliates of the Parent or
the Purchaser.

ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY

Certain contracts, agreements, arrangements or understandings between the
Company and certain of its executive officers, directors and affiliates are
described under the captions "Certain Transactions", "Management Agreements" and
"Compensation Committee Interlocks and Insider Participation" on pages I-5
through I-9 of the Company's Information Statement Pursuant to Section 14(f) of
the Securities Exchange
<PAGE> 3

Act of 1934 (the "Exchange Act") and Rule 14f-1 thereunder (the "Information
Statement"), which is attached hereto as Schedule I.

Indemnification of Officers and Directors. The Company's Amended and
Restated Certificate of Incorporation and Amended and Restated By-laws provide
that the Company shall, subject to certain limitations, indemnify its directors
and officers against expenses (including attorneys' fees, judgments, fines and
certain settlements) actually and reasonably incurred by them in connection with
any suit or proceeding to which they are a party so long as they acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to a criminal action or
proceeding, so long as they had no reasonable cause to believe their conduct to
have been unlawful.

Section 102 of the Delaware General Corporation Law ("DGCL") permits a
Delaware corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to a corporation or its
stockholders for monetary damages for breaches of fiduciary duty. DGCL Section
102 provides, however, that liability for breaches of the duty of loyalty, acts
or omissions not in good faith or involving intentional misconduct, or knowing
violation of the law, and the unlawful purchase or redemption of stock or
payment of unlawful dividends or the receipt of improper personal benefits
cannot be eliminated or limited in this manner. The Company's Amended and
Restated Certificate of Incorporation includes a provision which eliminates, to
the fullest extent permitted, director liability for monetary damages for
breaches of fiduciary duty.

The Merger Agreement provides that for a period of five years after the
effective time of the Merger (the "Effective Time"), the Surviving Corporation
shall indemnify, defend and hold harmless to the full extent required under
applicable Delaware law, the Company's Amended and Restated Certificate of
Incorporation and the Company's Amended and Restated Bylaws, the present and
former officers and directors of the Company and its subsidiaries, determined as
of the Effective Time (the "Indemnified Parties"), against all losses, claims,
damages, liabilities, costs, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (with the consent of Parent or the Surviving
Corporation)) arising out of actions or omissions occurring at or prior to the
Effective Time.

For a period of not less than three years after the Effective Time Parent
or the Surviving Corporation shall maintain the Company's existing officers' and
directors' liability insurance, provided that Parent may substitute therefor
policies of substantially equivalent coverage and amounts containing terms no
less favorable to such former directors or officers, and provided further that
if such existing insurance expires or is terminated or canceled during such
three-year period, Parent or the Surviving Corporation will use all reasonable
efforts to obtain substantially similar insurance, provided that Parent, the
Surviving Corporation or the Company shall not be required to pay aggregate
premiums for such insurance in excess of 150% of the aggregate premiums paid by
the Company in 1996 on an annualized basis for such purpose (the "1996
Premium"), but in such case shall purchase as much coverage as can be obtained
for an annual premium not in excess of 150% of the 1996 Premium.

SUMMARIES OF AGREEMENTS

The following are summaries of certain provisions of the Merger Agreement
and the Severance Agreements (as hereinafter defined). The summaries are
qualified in their entirety by reference to the respective agreements, each of
which is incorporated herein by reference and a copy of each of which has been
filed with the Commission as an exhibit to this Schedule 14D-9.

THE MERGER AGREEMENT

The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions. The Purchaser has agreed that, without
the written consent of the Company, Purchaser shall not amend or waive the
Minimum Condition or decrease the Offer Price or the number of Shares sought in
the Offer or amend any other condition of the Offer in any

2
<PAGE> 4

manner adverse to the stockholders of the Company (the "Stockholders"). If,
immediately prior to the Expiration Date of the Offer, the Shares tendered and
not withdrawn pursuant to the Offer equal less than 90% of the outstanding
Shares but more than 80% of the outstanding Shares, the Purchaser may extend the
Offer for a period not to exceed seven business days, notwithstanding that all
conditions to the Offer are satisfied as of such date.

The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, and if required by applicable law in order to
consummate the Merger, the approval of the Merger Agreement by the Stockholders
of the Company and the satisfaction or waiver of the other conditions to the
Merger, the Purchaser will be merged with and into the Company. The Merger shall
become effective at such time as a certificate of merger is filed with the
Secretary of State of the State of Delaware, or at such later time as is
specified in such certificate of merger. As a result of the Merger, all of the
properties, rights, privileges, immunities, powers and franchises of the Company
and the Purchaser shall vest in the Surviving Corporation and all debts,
liabilities and duties of the Company and the Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.

The Merger Agreement provides that the certificate of incorporation of the
Purchaser at the Effective Time will be the certificate of incorporation of the
Surviving Corporation. The by-laws of the Purchaser at the Effective Time will
be the by-laws of the Surviving Corporation. The Merger Agreement also provides
that the initial directors of the Purchaser at the Effective Time will be the
directors of the Surviving Corporation and the initial officers of the Company
at the Effective Time will be the officers of the Surviving Corporation.

Conversion of Securities. At the Effective Time, (i) each issued and
outstanding Share held in the treasury of the Company, by Parent, the Purchaser
or any other wholly owned subsidiary of Parent shall be cancelled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor; (ii) each share of common stock of the Purchaser then issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation; and (iii) each Share issued and outstanding
immediately prior to the Effective Time shall, except as otherwise provided in
(i) above and except for Shares held by any Stockholder who has not voted in
favor of the Merger or consented thereto in writing and who has demanded
appraisal for such Shares in accordance with Section 262 of the DGCL, be
converted into the right to receive the Offer Price in cash or any higher price
per Share that may be paid pursuant to the Offer, without interest.

Dissenting Shares. Shares that are outstanding immediately prior to the
Effective Time and which are held by Stockholders who shall not have voted in
favor of the Merger or consented thereto in writing and who shall have demanded
properly in writing appraisal for such Shares in accordance with Section 262 of
the DGCL (collectively, the "Dissenting Shares"), shall not be converted into or
represent the right to receive the Merger Consideration. Such Shares instead
will, from and after the Effective Time, represent only the right to receive
payment of the appraised value of such Shares held by them in accordance with
the provisions of such Section 262, except that all Dissenting Shares held by
Stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Shares under such Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender, in the manner
provided in the Merger Agreement, of the certificate or certificates that,
immediately prior to the Effective Time, evidenced such Shares.

Options. The Merger Agreement provides that on the Expiration Date,
immediately prior to the acceptance for payment of Shares pursuant to the Offer,
each outstanding employee stock option to purchase Shares (a "Company Option")
granted under any stock option or compensation plan or arrangement of the
Company or its subsidiaries (collectively, the "Option Plan"), shall be
surrendered to the Company and shall be forthwith canceled and the Company shall
pay to each holder of a Company Option, by check, an amount equal to (i) the
product of the number of the Shares which are issuable upon exercise of such
Company Option, multiplied by the Offer Price, less (ii) the aggregate exercise
price of such Company Option. Except as may be otherwise agreed to by Parent or
the Purchaser and the Company, the Company's Option Plan shall terminate as of
the Effective Time and the provisions in any other plan, program or arrangement
providing for

3
<PAGE> 5

the issuance or grant of any other interest in respect of the capital stock of
the Company or any of its subsidiaries shall be deleted as of the Effective Time
and no holder of Company Options or any participant in the Option Plan or any
other plans, programs or arrangements shall have any rights thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof.

Recommendation. The Board of Directors has unanimously (i) determined that
the terms of the Offer and the Merger are fair, to and in the best interests of,
the Stockholders, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and (iii) resolved to
recommend that the Stockholders accept the Offer, tender their Shares pursuant
to the Offer and approve and adopt the Merger Agreement and the Merger;
provided, that such recommendation may be withdrawn, modified or amended, if, in
the opinion of the Board of Directors, after receipt of advice from outside
legal counsel, failure to withdraw, modify or amend such recommendation would
reasonably be expected to result in the Board of Directors violating its
fiduciary duties to the Company's shareholders under applicable law and the
Company pays the fees and expenses required by the Merger Agreement.

Stockholders' Meeting. The Merger Agreement provides that the Company
shall, if required in accordance with applicable law, in order to consummate the
Merger, duly call, give notice of, convene and hold a special meeting of its
Stockholders as promptly as practicable following consummation of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby. If required by applicable law, the Company
will file with the Securities and Exchange Commission (the "Commission") a proxy
statement including the recommendation of the Board of Directors that the
Stockholders vote in favor of the approval of the Merger Agreement and the
transactions contemplated thereby. The Company agrees to respond promptly to all
Commission comments with respect to the proxy statement and to cause the proxy
statement to be mailed to the Stockholders at the earliest practicable time.

Notwithstanding the preceding paragraph, in the event that Parent, the
Purchaser and any other subsidiaries of Parent shall acquire, in the aggregate,
at least 90% of the outstanding shares of each class of capital stock of the
Company, pursuant to the Offer or otherwise, the Company has agreed, at the
request of Parent, to take all necessary and appropriate action to cause the
Merger to become effective, as soon as practicable after such acquisition,
without a meeting of Stockholders, in accordance with Section 253 of the DGCL.

Representation on the Board of Directors. Promptly upon the purchase of and
payment for any Shares by Parent or any of its subsidiaries which represents at
least a majority of the outstanding Shares, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as is equal to the product of the total number
of directors on such Board (giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage that the number of
Shares so accepted for payment bears to the total number of Shares then
outstanding. In furtherance thereof, the Company shall, upon request of the
Purchaser, promptly increase the size of its Board of Directors or exercise its
best efforts to secure the resignations of such number of directors, or both, as
is necessary to enable Parent's designees to be so elected to the Company's
Board, and shall cause Parent's designees to be so elected. At such time, the
Company shall, if requested by Parent, also cause persons designated by Parent
to constitute at least the same percentage (rounded up to the next whole number)
as is on the Company's Board of Directors of (i) each committee of the Company's
Board of Directors, (ii) each board of directors (or similar body) of each
subsidiary of the Company and (iii) each committee (or similar body) of each
such board. In the event that Parent's designees are elected to the Company's
Board of Directors, until the Effective Time, the Company's Board shall have at
least two directors who are directors on the date of the Merger Agreement (the
"Independent Directors"); provided that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever, any
remaining Independent Directors (or Independent Director, if there be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Independent Directors for purposes of the Merger Agreement
or, if no Independent Director then remains, the other directors shall designate
two persons to fill such vacancies who shall not be stockholders, affiliates or
associates of Parent or the Purchaser and such persons shall be deemed to be
Independent Directors for purposes of the Merger Agreement. In the event that
Parent's designees are elected to the Company's Board, after the acceptance for
payment of Shares pursuant

4
<PAGE> 6

to the Offer and prior to the Effective Time, the affirmative vote of a majority
of the Independent Directors shall be required to (a) amend or terminate the
Merger Agreement by the Company or (b) exercise or waive any of the Company's
rights, benefits or remedies thereunder.

Interim Operations of the Company. Pursuant to the Merger Agreement, the
Company has covenanted and agreed that, except as otherwise expressly provided
in the Merger Agreement or as agreed in writing by the Parent, during the period
from the date of the Merger Agreement until such time as directors of the
Purchaser have been elected to, and shall constitute a majority of, the Board of
Directors of the Company (a) the business of the Company and its subsidiaries
shall be conducted only in the ordinary and usual course of business and
consistent with past practice and, to the extent consistent therewith, each of
the Company and its subsidiaries shall use its reasonable efforts to preserve
its business organizations and business organizations of its subsidiaries intact
and maintain its existing relations with customers, suppliers, employees,
creditors and business partners, (b) the Company will not directly or indirectly
(i) except upon exercise of employee stock options, pursuant to which up to
517,117 Shares may be issued, outstanding on the date of the Merger Agreement,
issue, sell, transfer or pledge or agree to sell, transfer or pledge any
treasury stock of the Company or any capital stock of any of its subsidiaries
beneficially owned by it, (ii) amend its certificate of incorporation or by-laws
or similar organizational documents, or (iii) split, subdivide, combine or
reclassify the outstanding Shares or preferred stock or any outstanding capital
stock of any of the subsidiaries of the Company, (c) neither the Company nor any
of its subsidiaries shall (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than dividends paid by subsidiaries of the Company to the Company or
any of its wholly owned subsidiaries in the ordinary course of business, (ii)
issue, sell, pledge, grant, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class of the Company or its subsidiaries, other than Shares reserved for
issuance on the date hereof pursuant to the exercise of employee stock options
outstanding on the date of the Merger Agreement pursuant to which up to 517,117
shares may be issued, (iii) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any assets other than in the ordinary and usual course
of business and consistent with past practice, or (iv) redeem, purchase or
otherwise acquire directly or indirectly any of its capital stock, (d) neither
the Company nor any of its subsidiaries shall (i) grant any increase in the
compensation payable or to become payable by the Company or any of its
subsidiaries to any of its executive officers or employees, enter into any
contract or other binding commitment in respect of any such increase with any of
its directors, officers or other employees or any director, officer or other
employee of its subsidiaries, and not establish, adopt, enter into, make any new
grants or awards under or amend, any collective bargaining agreement; (ii)(A)
adopt any new, or (B) amend or otherwise increase, or accelerate the payment or
vesting of the amounts payable or to become payable under an existing, bonus,
incentive compensation, deferred compensation, severance, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee benefit
plan, agreement or arrangement, or (iii) enter into any employment or severance
agreement with or, except in accordance with the existing written policies of
the Company, grant any severance or termination pay to any officer, director or
employee of the Company or any of its subsidiaries; provided however, that (i)
prior to consummation of the Offer, the Company may enter into severance
agreements with certain individuals set forth in the Company Disclosure Schedule
(the "Designated Employees") in the form as approved by the Company's Board of
Directors, (ii) the aggregate cost of payments and benefits provided to the
Designated Employees pursuant to the terms of such severance agreements (unless
otherwise amended with the written consent of, or at the written direction of,
Parent or Purchaser) shall not exceed $2,000,000 in the aggregate, and (iii)
with respect to the severance plan described in the Company Disclosure Schedule
that covers individuals other than the Designated Employees (the "Nondesignated
Employees"): (a) the implementation of such plan and the entering into of
agreements with Nondesignated Employees shall be subject to the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld (with
reasonableness to be determined based upon Purchaser's reasonable business
objectives and consistent with Purchaser's past practice), and (b) the aggregate
cost of payments and benefits provided to the Nondesignated Employees pursuant
to the terms of such severance agreements (unless otherwise amended with the
written consent of, or at the written direction of, Parent or Purchaser) shall
not exceed $1,000,000 in the aggregate; (e) neither the Company nor any of its
subsidiaries shall permit

5
<PAGE> 7

any insurance policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated except in the ordinary course of business and consistent
with past practice; (f) neither the Company nor any of its subsidiaries shall
enter into any contract or transaction relating to the purchase of assets that
exceed $1,000,000 in the aggregate; (g) neither the Company nor any of its
subsidiaries shall change any of the accounting methods used by it unless
required by GAAP, neither the Company nor any of its subsidiaries shall make any
material tax election except in the ordinary course of business consistent with
past practice, change any material tax election already made, adopt any material
tax accounting method except in the ordinary course of business consistent with
past practice, change any material tax accounting method unless required by
GAAP, enter into any closing agreement, settle any tax claim or assessment or
consent to any tax claim or assessment or any waiver of the statute of
limitations for any such claim or assessment, (h) neither the Company nor any of
its subsidiaries shall (i) incur or assume any long-term debt, (ii) except in
the ordinary course of business and consistent with past practice and in an
aggregate amount not to exceed $3,000,000, incur or assume any short-term
indebtedness, (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, (iv) make any loans, advances or capital contributions to, or
investment in, any other person (other than to wholly owned subsidiaries of the
Company), (v) enter into any material commitment or transaction (including, but
not limited to, any borrowing, capital expenditure or purchase, sale or lease of
assets), or (vi) modify, amend or terminate any of its material contracts or
waive, release or assign any material rights, (i) neither the Company nor any of
its subsidiaries shall settle or compromise any claim, lawsuit, liability or
obligation, and neither the Company nor any of its subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligation, (x) to
the extent reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
consolidated subsidiaries, (y) incurred in the ordinary course of business and
consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied, (j) neither the Company nor any of its subsidiaries
will take, or agree to commit to take, any action that would make any
representation or warranty of the Company contained in the Merger Agreement
inaccurate in any respect at, or as of any time prior to, the Effective Time,
(k) except as otherwise required by the fiduciary duties of the board to the
Stockholders under applicable law, neither the Company nor any of its
subsidiaries will take any action with the intent of causing any of the
conditions to the Offer not to be satisfied, and (l) except as otherwise
required by the fiduciary duties of the board to the Stockholders under
applicable law, neither the Company nor any of its subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.

Other Agreements of Parent, the Purchaser and the Company. The Merger
Agreement provides that neither the Company nor any of its subsidiaries shall
(and the Company shall use its best efforts to cause its officers, directors,
employees, representatives and agents, including, but not limited to, investment
bankers, attorneys and accountants, not to), directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or provide
any information to, any corporation, partnership, person or other entity or
group (other than Parent and any of its affiliates or representatives)
concerning any proposal or offer to acquire all or a substantial part of the
business and properties of the Company or any of its subsidiaries or any capital
stock of the Company or any of its subsidiaries, whether by merger, tender
offer, exchange offer, sale of assets or similar transactions involving the
Company or any subsidiary, division or operating or principal business unit of
the Company (an "Acquisition Proposal"), except that the Merger Agreement does
not prohibit the Company or the Company's Board from (i) taking and disclosing
to the Company's stockholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act, or (ii) making such disclosure to the Company's stockholders as,
in the good faith judgment of the Board, after receiving advice from outside
counsel, is required under applicable law, provided that the Company may not,
except as described below, withdraw or modify, or propose to withdraw or modify,
its position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend any Acquisition Proposal, or enter into any
agreement with respect to any Acquisition Proposal. The Merger Agreement
provides that the Company will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the

6
<PAGE> 8

foregoing. The Merger Agreement provides that notwithstanding the foregoing,
prior to the acceptance of Shares pursuant to the Offer, the Company may furnish
information concerning the Company and its subsidiaries to any corporation,
partnership, person or other entity or group pursuant to appropriate
confidentiality agreements, and may negotiate and participate in discussions and
negotiations with such entity or group concerning an Acquisition Proposal if (x)
such entity or group has submitted a bona fide written proposal to the Company
relating to any such transaction which the Board determines in good faith, after
consulting with a nationally recognized investment banking firm, represents a
superior transaction to the Offer and the Merger and (y) in the opinion of the
Board of Directors of the Company, only after receipt of advice from outside
legal counsel to the Company, the failure to provide such information or access
or to engage in such discussions or negotiations would reasonably be expected to
cause the Board of Directors to violate its fiduciary duties to the Company's
shareholders under applicable law (an Acquisition Proposal which satisfies
clauses (x) and (y) being referred to herein as a "Superior Proposal"). The
Merger Agreement provides that the Company will immediately notify Parent of the
existence of any proposal or inquiry received by the Company, the identity of
the party making such proposal or inquiry, and the terms (both initial and
modified) of any such proposal or inquiry (and will disclose any written
materials delivered in connection therewith) and the Company will keep Parent
reasonably informed of the status (including amendments or proposed amendments)
of any such proposal or inquiry. The Merger Agreement provides that the Company
will promptly provide to Parent any material non-public information regarding
the Company provided to any other party which was not previously provided to
Parent. The Merger Agreement provides that at any time following notification to
Parent of the Company's intent to do so (which notification shall include the
identity of the bidder and the material terms and conditions of the proposal)
and if the Company has otherwise complied with the terms of the foregoing, the
Board of Directors may withdraw or modify its approval or recommendation of the
Offer and may enter into an agreement with respect to a Superior Proposal,
provided it shall (i) take no such action unless it shall notify Parent promptly
of its intention, and in no event shall such notice be given less than two
business days prior to the earlier of the public announcement of such withdrawal
or modification of its recommendation or the Company's termination of the Merger
Agreement, and (ii) concurrently with entering into such agreement pay or cause
to be paid to Parent the Break-Up Amount (as defined below) plus any amount
payable at the time for reimbursement of expenses pursuant to the Merger
Agreement. If the Company shall have notified Parent of its intent to enter into
an agreement with respect to a Superior Proposal in compliance with the
preceding sentence and has otherwise complied with such sentence, the Company
may enter into an agreement with respect to such Superior Proposal.

From the date of the Merger Agreement, upon reasonable notice, the Company
shall (and shall cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, access, during normal business hours during the period prior to the time
that the directors of the Purchaser have been elected to, and shall constitute a
majority of the Board of Directors of the Company, (the "Appointment Date"), to
all its properties, employees, books, contracts, commitments and records and,
during such period, the Company shall (and shall cause each of its subsidiaries
to) furnish promptly to the Parent (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as Parent may
reasonably request. After the Appointment Date, the Company shall provide Parent
and such persons as Parent shall designate with all such information, at such
time as Parent shall request.

Unless otherwise required by law and until the Appointment Date, Parent
will hold any such information which is nonpublic in confidence in accordance
with the provisions of a letter agreement dated June 4, 1997, between the
Company and the Parent.

Pursuant to the Merger Agreement, for five years after the Effective Time,
the Surviving Corporation (or any successor to the Surviving Corporation) shall
indemnify, defend and hold harmless the present and former officers and
directors of the Company and its subsidiaries, determined as of the Effective
Time (each an "Indemnified Party") against all losses, claims, damages,
liabilities, costs, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected only
upon receipt of the written consent of the

7
<PAGE> 9

Parent or the Surviving Corporation which consent shall not unreasonably be
withheld)) arising out of actions or omissions occurring at or prior to the
Effective Time to the full extent required under applicable Delaware law, the
terms of the Company's certificate of incorporation or by-laws, as in effect at
the date of the Merger Agreement, and the terms of any indemnification agreement
entered into with the Company prior to the date of the Merger Agreement;
provided, that in the event any claim or claims are asserted or made within such
five-year period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims. Parent or
the Surviving Corporation shall maintain the Company's existing officers and
directors' liability insurance ("D&O Insurance") for a period of not less than
three years after the Effective Time; provided, that the Parent may substitute
therefor policies of substantially equivalent coverage and amounts containing
terms no less favorable to such former directors or officers; provided, further,
if the existing D&O Insurance expires, is terminated or canceled during such
period, Parent or the Surviving Corporation will use all reasonable efforts to
obtain substantially similar D&O Insurance; provided, further, however, that in
no event shall Parent, the Surviving Corporation or the Company be required to
pay aggregate premiums for insurance in excess of 150% of the aggregate premiums
paid by the Company in 1996 on an annualized basis for such purpose (the "1996
Premium"); and provided, further, that if the Parent or the Surviving
Corporation is unable to obtain the amount of insurance required by this
sentence for such aggregate premium, Parent or the Surviving Corporation shall
obtain as much insurance as can be obtained for an annual premium not in excess
of 150% of the 1996 Premium.

The Merger Agreement provides that the Company, the Purchaser and Parent
will each use all reasonable efforts to consummate and make effective the
transactions contemplated by the Merger Agreement as soon as practicable.

Representations and Warranties. The Merger Agreement contains various
customary representations and warranties made by the Company to Parent and the
Purchaser including, but not limited to, representations and warranties relating
to the Company's organization and qualification, its capitalization, its
authority to enter into the Merger Agreement and to carry out the related
transactions, the absence of conflicts with applicable laws and existing
obligations of the Company and its subsidiaries, financial statements of the
Company, compliance with applicable law, filings made by the Company with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, undisclosed liabilities, certain changes or events
concerning its businesses, litigation, employee benefits and labor matters, tax
matters, intellectual property, environmental matters, disclosure documents
filed with the Commission in connection with the Offer and the Merger, brokerage
fees and commissions and other fees, certain business practices, insurance and
product warranties.

The Merger Agreement contains various customary representations and
warranties made by Parent and the Purchaser to the Company, including, but not
limited to, representations and warranties relating to Parent's and the
Purchaser's organization and qualification, their authority to enter into the
Merger Agreement and to carry out the related transactions, the absence of
conflicts with applicable laws and existing obligations of Parent and the
Purchaser, certain information provided to the Company by Parent and the
Purchaser for inclusion in disclosure documents filed with the Commission in
connection with the Offer and Merger and the financing of the Offer and Merger.

Conditions to the Merger. The obligations of each of Parent, the Purchaser
and the Company to effect the Merger are subject to the satisfaction of certain
conditions, including that (a) the Merger Agreement shall have been adopted and
the Merger shall have been approved by the requisite vote of the holders of the
Shares, if required by applicable law, in order to consummate the Merger, (b) no
federal or state governmental or regulatory body or court of competent
jurisdiction shall have enacted, issued, promulgated or enforced any statute,
rule, regulation, executive order, decree, judgment, preliminary or permanent
injunction or other order that is in effect and that prohibits, enjoins or
otherwise restrains the consummation of the Merger; provided, however, that the
parties shall use all commercially reasonable efforts to cause any such decree,
judgment, injunction or order to be vacated or lifted, (c) Parent, the Purchaser
or their affiliates shall have purchased Shares pursuant to the Offer, except
that this condition shall not apply if Parent, the Purchaser or their affiliates
shall have failed to purchase Shares pursuant to the Offer in breach of their
obligations under the

8
<PAGE> 10

Merger Agreement, and (d) the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.

The obligation of the Parent and Purchaser and the Company to effect the
Merger is also subject to the satisfaction or waiver of the condition that all
representations and warranties made by the Company or Parent and Purchaser,
respectively, in the Merger Agreement shall be true and correct on and as of the
Effective Time, unless the inaccuracies (without giving effect to any
materiality or material adverse effect qualifications or materiality exceptions
contained therein) under such representations and warranties, taking all the
inaccuracies under all such representations and warranties together in their
entirety, do not, individually or in the aggregate, result in any event, change
or effect that has, or is reasonably likely to have, a material adverse effect
(A) on the condition (financial or otherwise), business, assets, liabilities,
results of operations or cash flows of the Company and its subsidiaries or
Parent and its subsidiaries, respectively, taken as a whole, or (B) on the
ability of the Company or the ability of Parent or the Purchaser to perform its
obligations under the Merger Agreement or to consummate the transactions
contemplated by the Merger Agreement.

Termination. The Merger Agreement may be terminated, (a) by the mutual
written consent of Parent and the Company, (b) by either of the Company or
Parent (i) if the Offer shall have expired without any Shares being purchased
therein; provided, however, that the right to terminate the Merger Agreement
under this clause (b)(i) shall not be available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of Parent or the Purchaser, as the case may be, to
purchase the Shares pursuant to the Offer on or prior to such date, (ii) if any
court, arbitrator, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties to the Merger Agreement shall use their reasonable efforts to
lift), which permanently restrains, enjoins or otherwise prohibits the
consummation of the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable, or (iii) if the Offer has not
been consummated prior to October 5, 1997; provided, that the right to terminate
the Merger Agreement under this clause (b)(iii) shall not be available to any
party whose misrepresentation in the Merger Agreement or whose failure to
perform any of its covenants and agreements or to satisfy any obligation under
the Merger Agreement has been the cause of, or resulted in, the failure of
Parent or the Purchaser, as the case may be, to purchase shares pursuant to the
Offer on or prior to such date, (c) by the Company (i) if Parent, the Purchaser
or any of their affiliates shall have failed to commence the Offer on or prior
to five business days following the date of the initial public announcement of
the Offer; provided, that the Company may not terminate the Merger Agreement
pursuant to this clause (c)(i) if the Company is at such time in breach of its
obligations under the Merger Agreement such as to cause a material adverse
effect on the condition (financial or otherwise), business, assets, liabilities,
results of operations or cash flows of the Company and its subsidiaries, taken
as a whole, or on the ability of the Company to perform its obligations under
the Merger Agreement or to consummate the transactions contemplated by the
Merger Agreement (a "Company Material Adverse Effect"), (ii) in connection with
entering into an agreement with respect to a Superior Proposal, provided it has
complied with all provisions relating thereto contained in the Merger Agreement,
including the notice provisions, and that it makes simultaneous payment of the
Break-Up Amount (as defined below), or (iii) if Parent or the Purchaser shall
have breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which is not cured, in all material respects, within 30 days after the giving of
written notice by the Company to Parent or the Purchaser, as applicable, (d) by
Parent (i) if either Parent or the Purchaser is entitled to terminate the Offer
as a result of (A) the Board of Directors of the Company or any committee
thereof having modified in a manner adverse to Parent or the Purchaser or
withdrawn its approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Acquisition Proposal, (B) the Company
entering into any agreement with respect to any Superior Proposal in accordance
with the terms of the Merger Agreement, or (C) the Board of Directors of the
Company resolving to do any of the foregoing, (ii) if the Offer is not commenced
as a result of actions or inaction by the Company that result in the failure of
a condition to the Offer or the Offer is terminated or expires as a result of
the failure of a condition of the Offer, unless such termination or expiration
has been caused by or resulted from the failure of Parent or Purchaser to
perform any covenants and agreements of Parent or Purchaser contained in the
Merger Agreement, or (iii) if (A) the

9
<PAGE> 11

Company shall have breached in any respect any of its representations or
warranties contained in the Merger Agreement, unless the inaccuracies (without
giving effect to any materiality or material adverse effect qualifications or
materiality exceptions contained therein) under such representations and
warranties taking all the inaccuracies under all such representations and
warranties together in their entirety, do not, individually or in the aggregate,
result in a Company Material Adverse Effect or (B) the Company shall have
breached or failed to perform any obligation or to comply with any agreement or
covenant to be performed or complied with by it under the Merger Agreement,
other than, any breach or failure which would not have, either individually or
in the aggregate, a Company Material Adverse Effect (in each of cases (A) or
(B), which breach or failure has not been cured within thirty (30) days
following receipt of written notice thereof by Parent specifying in reasonable
detail the basis of such alleged breach or failure).

Termination Fee. If (i) the Company terminates the Merger Agreement in
connection with entering into an agreement with respect to a Superior Proposal,
(ii) Parent terminates the Merger Agreement as a result of (A) the Board of
Directors of the Company or any committee thereof having modified in a manner
adverse to Parent or the Purchaser or withdrawn its approval or recommendation
of the Offer, the Merger or the Merger Agreement, or approved or recommended any
Acquisition Proposal, (B) the Company entering into any agreement with respect
to any Superior Proposal in accordance with the terms of the Merger Agreement,
or (C) the Board of Directors of the Company resolving to do any of the
foregoing, or (iii) either the Company or Parent terminates the Merger Agreement
if the Offer shall have expired without any Shares being purchased therein
(provided, however, that such right to terminate is not available to any party
whose failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of Parent or the Purchaser, as the case
may be, to purchase the Shares pursuant to the Offer on or prior to such date)
and (1) prior to such termination there shall have been publicly announced
another Acquisition Proposal or (2) the Company shall have entered into a
definitive agreement relating to an Acquisition Proposal or a business
combination or other transaction contemplated by an Acquisition Proposal shall
have been consummated prior to or within six months following such termination,
then the Company agrees that it will immediately thereafter pay to Parent in
same day funds, an amount (the "Break-Up Amount") equal to $6,700,000.

Pursuant to the Merger Agreement, in the event of the termination of the
Merger Agreement, the Merger Agreement will become null and void and have no
further force or effect, without any liability on the part of any party or its
affiliates, directors, officers, agents or representatives, other than (a)
certain provisions of the Merger Agreement relating to the termination fee,
expenses of the parties and confidentiality of information, publicity and effect
of termination and (b) to the extent that such termination results from the
breach by such party of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement, provided, however, that a party's
damages for any such breach shall be limited to such party's actual damages and
neither party shall be entitled to seek consequential or special damages for any
such breach.

Costs and Expenses. Except as discussed above, the Merger Agreement
provides that all costs and expenses incurred in connection with the Merger
Agreement and the consummation of the transactions contemplated by the Merger
Agreement shall be paid by the party incurring such costs and expenses.

Amendment and Waivers. Subject to applicable law, the Merger Agreement may
be amended, modified and supplemented in any and all respects, whether before or
after any vote of the shareholders of the Company contemplated by the Merger
Agreement, by written agreement of the Parent and Purchaser and the Company, by
action taken by their respective Boards of Directors, at any time prior to the
date of the closing of the Merger with respect to any of the terms contained
therein; provided, however, that after the approval of the Merger Agreement by
the stockholders of the Company, no such amendment, modification or supplement
shall reduce the amount or change the form of the Merger Consideration.

SEVERANCE AGREEMENTS

Pursuant to the several severance agreements, each of which is dated August
7, 1997, between the Company and each of Charles R. Wallace (Vice
President-Finance and Chief Financial Officer of the Company), Michael B.
Freedman (Vice President-Business Development of the Company) and J. Jeffrey

10
<PAGE> 12

Gephart (Vice President-National Sales of the Company) (the "Executive Group")
(the "Severance Agreements"), a member of the Executive Group shall be entitled
to receive a lump-sum severance payment from the Company if (i) there has been a
Change of Control (as defined in the Severance Agreements) (which consummation
of the Offer will constitute), (ii) such member of the Executive Group is an
active employee of the Company at the time of the Change of Control, and (iii)
within 730 calendar days (548 calendar days in the case of Mr. Gephart) of the
Change of Control, the employment of such member of the Executive Group is
involuntarily terminated for any reason (other than for Just Cause (as defined
in the Severance Agreements) or death or retirement after age 65) or voluntarily
terminated following the occurrence of a Constructive Termination Event (as
defined in the Severance Agreements). The amount of the severance payment shall
be equal to two times (1.5 times in the case of Mr. Gephart) one year's
Annualized Compensation (as defined in the Severance Agreements) (the "Maximum
Amount") if the termination of employment occurs within 183 calendar days
following the Change of Control. If the termination of employment occurs
thereafter, the amount of the severance payment shall be equal to (i) the
Maximum Amount less (ii) the Maximum Amount times a fraction having a numerator
equal to the number of calendar days that have elapsed since the six-month
anniversary of the Change of Control and a denominator equal to 548 (365 in the
case of Mr. Gephart). The Severance Agreements also provide that any unvested
stock options for the purchase of Company stock which a member of the Executive
Group is holding on the date he becomes entitled to a severance payment shall
immediately become fully vested. The Severance Agreements also provide for
continuation of life and health insurance coverage for a member of the Executive
Group if he is entitled to a severance payment.

INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION

The Board of Directors of the Company was aware that certain officers and
directors of the Company have certain interests in the Transaction, including
those referred to below, that present actual or potential conflicts of interest
in connection with the Offer and considered such factors along with other
matters described in Item 4 under "Reasons for Recommendation".

As of August 7, 1997, the executive officers and directors of the Company
beneficially owned or may be deemed to have beneficially owned an aggregate of
4,997,560 Shares and held Options to purchase an aggregate of 50,000 Shares
(whether or not exercisable). On such date, the Shares beneficially owned or
which may be deemed to be beneficially owned by executive officers and directors
of the Company and the Options held by such persons (whether or not exercisable)
together constituted 39.6% of the outstanding Shares on a fully diluted basis
(assuming the exercise of all outstanding Options). If the Transaction is
consummated, subject to the consent of the Option holder, each outstanding
Option will be surrendered and cancelled in exchange for a cash payment equal to
the number of Shares subject to such Option, multiplied by the Offer Price, less
the aggregate exercise price of such Option.

The following table sets forth, as of August 7, 1997, the number of Shares
and Options beneficially owned or which may be deemed to be beneficially owned
by, and the aggregate amounts to be received by, each executive officer and
director of the Company who beneficially owns or may be deemed to beneficially
own any Shares or Options, and all executive officers and directors of the
Company as a group, pursuant to the Transaction. Other than the individuals
named below, no executive officer or director of the Company owns any Shares.

11
<PAGE> 13

<TABLE>
<CAPTION>
TOTAL CASH AMOUNT
NAME OF DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY SHARES OPTIONS TO BE RECEIVED
- ------------------------------------------------------ --------- ------- -----------------
<S> <C> <C> <C>
Bryan C. Cressey (1).................................. 4,215,527 0 $75,879,486
Timothy L. Burfield................................... 509,659 0 9,173,862
Michael B. Freedman (2)............................... 84,022 0 1,512,396
J. Jeffrey Gephart.................................... 52,288 0 941,184
Charles R. Wallace (3)................................ 112,228 0 2,020,104
James H.S. Cooper..................................... 11,853 0 213,354
Charles C. Halberg (4)................................ 11,983 50,000 365,694
Lee M. Mitchell (1)................................... 4,215,527 0 75,879,486
All Directors and Executive Officers as a Group (8
Persons)(1)(2)(3)(4)................................ 4,997,560 50,000 90,106,080
</TABLE>

- ------------------------

(1) Bryan C. Cressey and Lee M. Mitchell are principals of Golder, Thoma,
Cressey, Rauner, Inc., which is
the general partner of GTCR IV, L.P., which is the general partner of
Golder, Thomas, Cressey, Rauner Fund IV, L.P., the record owner of such
Shares. Accordingly, Mr. Cressey and Mr. Mitchell may be attributed
beneficial ownership of the Shares owned of record by Golder, Thoma,
Cressey, Rauner Fund IV, L.P. Mr. Cressey and Mr. Mitchell disclaim
beneficial ownership of such Shares.

(2) Includes 3,000 Shares owned by Mr. Freedman's wife, 500 Shares owned jointly
with Mr. Freedman's wife and 20,000 Shares held in trust for the benefit of
his children.

(3) Includes 109,228 Shares held by the Charles R. Wallace Revocable Trust and
3,000 Shares owned by Mr. Wallace's children.

(4) Includes 130 Shares owned by Mr. Halberg's children.

OTHER MATTERS

Appraisal Rights. No appraisal rights are available in connection with the
Offer. If the Merger is consummated, stockholders of the Company would have the
right to dissent and demand appraisal of their Shares under the DGCL. Under the
DGCL, dissenting stockholders who comply with the applicable statutory
procedures will be entitled to receive a judicial determination of the fair
value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of such merger or similar business combination)
and to receive payment of such fair value in cash. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. Any such judicial determination of the fair value of
the Shares could be based upon considerations other than or in addition to the
price paid in the Offer and the market value of the Shares. In Weinberger v.
UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
in an appraisal proceeding. Shareholders should recognize that the value so
determined could be higher or lower or the same as the price per Share paid
pursuant to the Offer or the consideration per Share in the Merger.

ITEM 4. THE SOLICITATION OR RECOMMENDATION

(a) Recommendation of the Board of Directors.

The Board of Directors has unanimously determined that the Offer and the
Merger are fair to, and in the best interests of, the stockholders of the
Company, has approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and recommends that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer.

12
<PAGE> 14

(b) Background.

The Company was formed in November 1993 by Timothy L. Burfield (the
Company's President and Chief Executive Officer) and Golder, Thoma, Cressey,
Rauner Fund IV, L.P. (the "GTCR Fund") to participate in the consolidation of
the long-term care pharmacy industry. The Company completed its first
acquisition of a long-term care pharmacy provider in August 1994, and to date
the Company has completed a total of 30 acquisitions. In November and December
1996, the Company completed its initial public offering of Shares, through which
it generated net proceeds of approximately $83.2 million at an initial public
offering price of $15.00 per Share.

Commencing in May 1997, management and selected members of the Board of
Directors of the Company held a series of discussions concerning the long-term
care pharmacy market generally and the strategic direction of the Company and
its business, in particular, including the possibility of a sale of the Company.
At a special telephonic meeting held May 27, 1997, the Board of Directors
authorized Bryan C. Cressey (the Company's Chairman), James H.S. Cooper (a
Director) and Timothy L. Burfield (the Company's President and Chief Executive
Officer and a Director) to interview selected investment banking firms to assist
the Company in its deliberations. On June 4, 1997 and June 9, 1997, the Company
retained Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and William
Blair & Company, L.L.C. ("Blair"), respectively, to serve as the Company's
financial advisors in connection with various strategic alternatives, including
a possible sale of the Company.

The Board directed DLJ to approach six selected pre-identified potential
strategic buyers to solicit interest in a possible business combination
transaction. In particular, in early June 1997 inquiries to solicit interest in
such a transaction were made by DLJ on behalf of the Company to Parent and five
other potential strategic buyers. During the first two weeks of June and
following execution of confidentiality agreements with all parties,
representatives of the Parent and three other potential buyers met with members
of the Company's senior management (including Mr. Burfield, Charles R. Wallace
and Michael B. Freedman) in separate meetings, at which meetings members of the
Company's management made oral presentations concerning the Company and its
business. Following those due diligence meetings, interested parties were
requested to submit preliminary indications of interest to DLJ on or before June
17, 1997. All prospective acquirors were advised by DLJ that the Company had a
strong preference for an all-cash transaction and that any possible transaction
could not be subject to any significant financing conditions.

On June 17, 1997, one potential buyer ("Potential Buyer A") submitted a
written proposal to acquire the Company at a price range of $17.00 to $19.00 per
Share, payable in cash and/or shares of Potential Buyer A's common stock. On
June 18, 1997, Parent submitted a written proposal to acquire the Company at a
price range of $17.00 to $19.00 per Share, payable in cash, and another
potential buyer ("Potential Buyer B") submitted a written proposal to acquire
for $22.00 per Share in cash all Shares other than those held by the GTCR Fund.

Following further discussions among the Company, DLJ and Blair concerning
the preliminary indications of interest, DLJ was directed to advise Potential
Buyer B that a cash offer to purchase all Shares at $22.00 per Share would be
sufficient to advance Potential Buyer B to the next phase of the process,
provided, however, that Potential Buyer B's majority shareholder expressed its
endorsement and support of such a transaction. While representatives of
Potential Buyer B subsequently indicated verbally that Potential Buyer B would
be willing to pursue a transaction at $22.00 per Share for all outstanding
Shares, the Company failed to receive a written confirmation of such interest
and Potential Buyer B's majority shareholder failed to indicate its willingness
to be supportive of a transaction involving the Company and Potential Buyer B.

On June 26, 1997, DLJ on behalf of the Company invited each of the Parent
and Potential Buyer A to submit final proposals on or before July 9, 1997. DLJ
also submitted to each party an initial draft of a definitive acquisition
agreement prepared by counsel to the Company and requested each party to submit
comments on the draft with its final proposals due on July 9, 1997. During the
period prior to July 9, 1997, representatives of each of Parent and Potential
Buyer A again met with members of the Company's management, and representatives
of Parent and Potential Buyer A undertook a due diligence review of the Company.

13
<PAGE> 15

On July 9, 1997, Potential Buyer A submitted a final written proposal to
acquire all Shares for $16.00 per Share, payable in cash. On July 10, 1997,
Parent submitted its written proposal to acquire all Shares for $17.75 per
Share, payable in cash. In a subsequent conversation with representatives of
Potential Buyer A, DLJ was advised that Potential Buyer A was unwilling to
increase its offer. Following additional conversations with DLJ, Parent
increased its offer to $18.00 per Share, payable in cash, subject to resolution
of certain issues raised by Parent with respect to the Company's relationship
with The Evangelical Lutheran Good Samaritan Foundation (the "Foundation") and
The Evangelical Lutheran Good Samaritan Society (the "Society").

On July 18, 1997, representatives of the Company (including Mr. Burfield,
Mr. Wallace and Mr. Freedman), DLJ, Blair and the Company's counsel, and
representatives of Parent, Credit Suisse First Boston Corporation, Parent's
financial advisor, and Parent's counsel participated in a telephone conference
call, during which Parent sought modification and clarification of certain
matters relating to the Company's relationship with the Foundation (the
Company's co-investor in Good Samaritan Supply Services, Inc. ("Supply")) and
the Society. Following that call, Mr. Burfield met with representatives of the
Society, the Foundation and Supply on July 22 and July 31, 1997 to discuss the
proposed modifications, and on August 4, 1997 the boards of directors of the
Foundation and Society formally approved amendments to the agreements governing
the relationship among the Company, the Foundation, the Society and Supply.

On August 5 and August 6, 1997, representatives of Parent and the Company
and their respective legal advisors continued to negotiate definitive terms of a
merger agreement. On August 6, 1997, the Board of Directors of the Company held
a special meeting in Chicago (Mr. Cressey participating via telephone
conference) to discuss the status and advisability of the transaction. Counsel
to the Company reviewed the fiduciary duties of directors and reviewed in detail
the terms and conditions of the draft Merger Agreement. Representatives of DLJ
reviewed a written summary of its analyses underlying its fairness opinion to be
delivered upon execution of a definitive agreement (the "DLJ Materials"). The
Board meeting was adjourned until the morning of August 7, 1997, pending
resolution of certain issues relating to the Merger Agreement.

On the morning of August 7, 1997, the Board of Directors of the Company
held a special telephonic meeting, with all directors present. The directors
were advised by management and counsel to the Company that certain issues
relating to the Merger Agreement remained unresolved, and the meeting was
adjourned. At the close of business on August 7, 1997, the Board of Directors of
the Company again met by telephone conference call, with all directors present.
The directors were advised by management and counsel to the Company that all
open issues had been resolved to the satisfaction of the Company. DLJ summarized
and reviewed the DLJ Materials and delivered to the Board DLJ's opinion letter,
in which DLJ expressed its opinion that, as of August 7, 1997, the consideration
to be received by the holders of Shares pursuant to the Offer and the Merger was
fair to such holders of Shares from a financial point of view. Counsel to the
Company again summarized the terms of the Offer and the Merger. The Board of
Directors of the Company then discussed the merits of the proposed Offer and
Merger. Following such discussion, the Board of Directors unanimously approved
the Merger Agreement, authorized execution and delivery thereof, determined that
the Offer and the Merger are fair to, and in the best interests of, the holders
of Shares and recommended that stockholders of the Company accept the Offer and
tender their Shares pursuant to the Offer.

Following the Parent's Board's review of the final terms of the Merger
Agreement and the Offer, Parent's Board of Directors unanimously determined to
approve the Merger Agreement. The Merger Agreement was executed on the evening
of August 7, 1997.

Prior to the commencement of trading on August 8, 1997, each of the Company
and Parent issued a press release regarding the execution of the Merger
Agreement.

In making this recommendation, the Board of Directors considered a number
of factors, including, but not limited to, the following:

(i) the terms and provisions of the Offer, the Merger and the Merger
Agreement;

14
<PAGE> 16

(ii) presentations by management of the Company and DLJ (at board
meetings on August 6, August 7 and at previous board meetings) relating to
the financial position, results of operations, business and prospects of
the Company, including the prospects of, and financial and business risk
attendant to, the Company if the Company were to remain independent;

(iii) the results of the process undertaken to identify and solicit
proposals from third parties to enter into a strategic transaction with the
Company;

(iv) the trading price of the Shares since the Company's initial
public offering completed in November and December 1996, and the fact that
the $18.00 price in connection with the Offer and the Merger represents a
premium of approximately 16% over the last sale price of $15.50 for the
Shares on Nasdaq on August 7, 1997, the day prior to the public
announcement of the execution of the Merger Agreement;

(v) the views expressed by management and DLJ that there appeared to
be a limited and identifiable number of parties with which the Company
would be a good strategic fit, and that it was unlikely that any other
party would propose a transaction that was more favorable to the Company's
stockholders;

(vi) the presentations by DLJ at the August 6 and August 7, 1997 board
meetings and the written opinion of DLJ dated August 7, 1997, to the effect
that, as of such date, and based on the assumptions made, matters
considered and limits of review as set forth in such opinion, the
consideration to be received by the Company's stockholders in the Offer and
the Merger pursuant to the Merger Agreement, was fair to such stockholders
from a financial point of view. A copy of the written opinion of DLJ, which
sets forth the assumptions made, matters considered and certain limitations
on the scope of review undertaken by DLJ, is attached as Annex I, is filed
as Exhibit (a)(6) hereto and is hereby incorporated herein by reference.
STOCKHOLDERS ARE URGED TO READ THE OPINION OF DLJ CAREFULLY IN ITS
ENTIRETY;

(vii) the fact that the Offer and the Merger are not conditioned on
the availability of financing; and

(viii) the fact that the Merger Agreement permits the Board, in the
exercise of its fiduciary duties, to terminate the Merger Agreement in
favor of a superior alternative acquisition proposal, although such
termination would trigger the payment by the Company of a break-up fee in
the amount of $6,700,000.

The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current stockholders of the Company of the opportunity to
participate in the future growth prospects of the Company and, therefore, in
reaching its conclusion to approve the Offer and the Merger, determined that the
historical results of the operations and future prospects of the Company are
adequately reflected in the $18.00 price per Share.

Considering these factors, the Board of Directors determined that
acceptance of the Offer and the tender of Shares pursuant to the Offer, and the
approval and adoption of the Merger and the Merger Agreement would be in the
best interests of the Company's stockholders.

In view of the variety of factors considered in connection with its
evaluation of the Transaction, the Board of Directors did not assign relative
weights to the specific factors considered in reaching its decision.

ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

Pursuant to a letter agreement dated June 4, 1997, the Company engaged DLJ
to act as its financial advisor in connection with the possible sale of all or a
portion of the Company. Pursuant to the terms of the letter agreement, the
Company has agreed to pay DLJ (i) a fee of $250,000 at the time DLJ delivers to
the Board of Directors its fairness opinion, and (ii) upon consummation of the
Offer a transaction fee equal to 0.80% of the aggregate consideration to be paid
by Purchaser for all outstanding Shares in the Offer and the Merger (including
Options), plus the amount of any debt assumed, acquired, remaining outstanding,
retired or defeased in connection with the Transaction, minus the fee paid
pursuant to clause (i) above. The Company has agreed to reimburse DLJ for
out-of-pocket expenses (including the reasonable fees and

15
<PAGE> 17

expenses of counsel) and DLJ has agreed to limit its expenses incurred in
connection with its engagement to $25,000, without the prior consent of the
Company. The Company has also agreed to indemnify DLJ against certain
liabilities.

Pursuant to a letter agreement dated June 9, 1997, the Company engaged
Blair to render certain financial advisory and investment banking services in
connection with the possible sale of all or a portion of the Company. Pursuant
to the terms of the letter agreement, the Company has agreed to pay Blair a fee
of $600,000 upon consummation of the Offer and to indemnify Blair against
certain liabilities.

Except as described herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.

ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.

(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.

(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Purchaser pursuant to the Offer.

ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.

(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.

(b) Except as set forth herein, there are no transactions, Board of
Directors resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.

ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.

None.

16
<PAGE> 18

ITEM 9. MATERIAL REQUIRED TO BE FILED AS EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------------
<S> <C>
Exhibit (a)(1) Offer to Purchase, dated August 14, 1997 (filed as Exhibit (a)(1) to the
Schedule 14D-1 of Omnicare Acquisition Corp. and Omnicare, Inc. filed with
the Securities and Exchange Commission (the "Commission") on August 14,
1997 (the "Schedule 14D-1") and incorporated herein by reference).*
Exhibit (a)(2) Form of Letter of Transmittal (filed as Exhibit (a)(2) to the Schedule
14D-1 and incorporated herein by reference).*
Exhibit (a)(3) Letter to Stockholders, dated August 14, 1997. *+
Exhibit (a)(4) Form of summary advertisement, dated August 14, 1997 (filed as Exhibit
(a)(7) to the Schedule 14D-1 and incorporated herein by reference.
Exhibit (a)(5) Text of press release issued by Omnicare, Inc. and American Medserve
Corporation, dated August 8, 1997.**
Exhibit (a)(6) Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated
August 7, 1997 (attached to this Schedule 14D-9 as Annex I). *+
Exhibit (c)(1) Agreement and Plan of Merger, dated as of August 7, 1997, by and among
Omnicare, Inc., Omnicare Acquisition Corp. and American Medserve
Corporation.**
Exhibit (c)(2) Agreement, made as of August 7, 1997, between the Company and Michael B.
Freedman.**
Exhibit (c)(3) Agreement, made as of August 7, 1997, between the Company and Charles R.
Wallace.**
Exhibit (c)(4) Agreement, made as of August 7, 1997, between the Company and J. Jeffrey
Gephart.**
Exhibit (c)(5) Senior Management Agreement, made as of December 3, 1993, between the
Company and Timothy L. Burfield.***
Exhibit (c)(6) Amendment No. 1 to Senior Management Agreement, made as of June 30, 1997,
between the Company and Timothy L. Burfield.**
Exhibit (c)(7) Amended and Restated Senior Management Agreement, made as of November 11,
1996, between the Company and Michael B. Freedman.**
Exhibit (c)(8) Amended and Restated Senior Management Agreement, made as of November 11,
1996, between the Company and Charles R. Wallace.**
Exhibit (c)(9) Amended and Restated Senior Management Agreement, made as of November 11,
1996, between the Company and J. Jeffrey Gephart.**
Exhibit (c)(10) Director Stock Agreement, made as of September 5, 1996, between the Company
and James H.S. Cooper.***
Exhibit (c)(11) Director Stock Agreement, made as of September 5, 1996, between the Company
and Charles C. Halberg.***
Exhibit (c)(12) Amended and Restated Stockholders Agreement, dated as of August 23, 1996,
by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. (the
"GTCR Fund"), Timothy L. Burfield, Michael B. Freedman, Charles R. Wallace,
J. Jeffrey Gephart, James H.S. Cooper, Charles C. Halberg, Mark A. Jerstad,
William J. and Mary Jane Gatti, Nelson L. Showalter, Frank R. Gelafio, Lee
R. Youngberg, Ronald E. Keith, James Pietryga, Bruce Gerlich, Mitch
Overstreet, Sterling Acquisition Partners, Inc., Pharmed, Inc., Pharmed of
Baton Rouge, Inc., Joseph Dellantonio, Thomas C. Loftus and George E.
Pepe.***
</TABLE>

17
<PAGE> 19

<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------------
<S> <C>
Exhibit (c)(13) Registration Agreement, dated as of August 23, 1996, by and among the GTCR
Fund, Timothy L. Burfield, Michael B. Freedman, Charles R. Wallace, J.
Jeffrey Gephart, James H.S. Cooper, Charles C. Halberg, Mark A. Jerstad,
William J. and Mary Jane Gatti, Nelson L. Showalter, Frank R. Gelafio, Lee
R. Youngberg, Ronald E. Keith, James Pietryga, Bruce Gerlich, Mitch
Overstreet, Sterling Acquisition Partners, Inc., Pharmed, Inc., Pharmed of
Baton Rouge, Inc., Joseph Dellantonio, Thomas C. Loftus and George E.
Pepe.***
Exhibit (c)(14) Shareholders Agreement, dated as of April 30, 1996, by and among Good
Samaritan Supply Services, Inc., The Evangelical Lutheran Good Samaritan
Foundation and the Company.***
Exhibit (c)(15) Second Amendment to Shareholders Agreement, dated as of August, 1997, by
and among Good Samaritan Supply Services, Inc., The Evangelical Lutheran
Good Samaritan Foundation and the Company.**
Exhibit (c)(16) Non-Competition and Marketing Assistance Agreement, made as of April 30,
1996, by and among the Company, Good Samaritan Supply Services, Inc., The
Evangelical Lutheran Good Samaritan Foundation and The Evangelical Lutheran
Good Samaritan Society.***
Exhibit (c)(17) First Amendment to Non-Competition and Marketing Assistance Agreement, made
as of August, 1997, by and among the Company, Good Samaritan Supply
Services, Inc., The Evangelical Lutheran Good Samaritan Foundation and The
Evangelical Lutheran Good Samaritan Society.**
</TABLE>

- ---------------
* Included in copies mailed to Shareholders.

+ Filed herewith.

** Document incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997 (File No. 000-21515).

*** Document incorporated by reference from the Company's Registration Statement
on Form S-1 (File No. 333-11667), filed with the Securities and Exchange
Commission on November 12, 1996.

18
<PAGE> 20

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

Dated: August 14, 1997
AMERICAN MEDSERVE CORPORATION

By: /s/ TIMOTHY L. BURFIELD

------------------------------------
Timothy L. Burfield
President and
Chief Executive Officer

19
<PAGE> 21

SCHEDULE I

INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER

GENERAL

This Information Statement is being mailed on or about August 14, 1997 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of American Medserve Corporation, a Delaware corporation (the
"Company"), to the holders of record of shares of common stock, par value $0.01
per share, of the Company (the "Common Stock" or the "Shares"). You are
receiving this Information Statement in connection with the possible election of
persons designated by Omnicare (as defined below) to a majority of the seats on
the Board of Directors of the Company (the "Company Board").

On August 7, 1997, the Company, Omnicare, Inc., a Delaware corporation
("Omnicare") and Omnicare Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Omnicare ("Purchaser"), entered into an Agreement and Plan
of Merger (the "Merger Agreement") pursuant to which (i) Purchaser will commence
a tender offer (the "Offer") for all outstanding Shares at a price of $18.00 per
Share, net to the seller in cash and (ii) the Purchaser will be merged with and
into the Company (the "Merger"). As a result of the Offer and Merger, the
Company will become a wholly-owned subsidiary of Omnicare.

The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, Omnicare shall be
entitled to designate such number of directors (the "Omnicare Designees"),
rounded up to the next whole number, on the Company Board as will give Omnicare
representation proportionate to its ownership interest. The Merger Agreement
requires the Company to take such action as Omnicare may request to cause the
Omnicare Designees to be elected to the Company Board under the circumstances
described therein. This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 thereunder.

You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Schedule 14D-9.

The information contained in this Information Statement concerning Omnicare
and the Purchaser has been furnished to the Company by Omnicare. The Company
assumes no responsibility for the accuracy or completeness of such information.

RIGHT TO DESIGNATE DIRECTORS; THE OMNICARE DESIGNEES

The Merger Agreement provides that, subject to compliance with applicable
law, promptly upon the purchase of and payment by Omnicare for Shares pursuant
to the Offer which represent at least a majority of the outstanding Shares (on a
fully diluted basis), Omnicare will be entitled to designate such number of
Omnicare Designees, rounded up to the next whole number, on the Company Board as
is equal to the product of the total number of directors on the Company Board
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares so
accepted for payment bears to the total number of Shares then outstanding. The
Company will promptly, upon the request of Purchaser, increase the size of the
Company Board or exercise its best efforts to secure the resignations of such
number of directors, or both, as is necessary to enable Omnicare Designees to be
so elected to the Company Board, and shall cause the Omnicare Designees to be so
elected. Notwithstanding the foregoing, until the Effective Time of the Merger,
the Company Board will have at least two directors who are directors on the date
of execution of the Merger Agreement.

Omnicare will choose the Omnicare Designees from among the individuals
listed below:

Joel F. Gemunder, 58. Mr. Gemunder is President of Omnicare and has held
this position since May 1981. From January 1981 until July 1981, he served as
Chief Executive Officer of the partnership organized as

I-1
<PAGE> 22

a predecessor to Omnicare for the purpose of owning and operating certain health
care businesses of Chemed and Daylin, Inc., each then a subsidiary of W.R. Grace
& Co. Mr. Gemunder was an Executive Vice President of Chemed and Group Executive
of its Health Care Group from May 1981 through July 1981 and a Vice President of
Chemed from 1977 until May 1981. Mr. Gemunder is a director of Chemed.

Cheryl D. Hodges, 45. Ms. Hodges is Senior Vice President and Secretary of
Omnicare and has held these positions since February 1994. From August 1986 to
February 1994, she was Vice President and Secretary of Omnicare. From August
1982 to August 1986, she served as Vice President-Corporate and Investor
Relations. Ms. Hodges has also served as a director of Omnicare for four prior
terms: 1984-85; 1986-87; 1988-89 and 1990-91.

David W. Froesel, Jr., 45. Mr. Froesel is Senior Vice President and Chief
Financial Officer of Omnicare. He has held that position since joining Omnicare
in March 1996. Mr. Froesel was Vice President of Finance and Administration at
Mallinckrodt Veterinary, Inc. from May 1993 to February 1996. From July 1989 to
April 1993, he was worldwide corporate controller of Mallinckrodt Medical Inc.

Patrick E. Keefe, 52. Mr. Keefe is Executive Vice President-Operations of
Omnicare and has held this position since February 1997. Previously he was
Senior Vice President-Operations since February 1994. From April 1993 to
February 1994, he was Vice President-Operations of Omnicare. From April 1992 to
April 1993, he served as Vice President-Pharmacy Management Programs of
Diagnostek, Inc., Albuquerque, New Mexico (mail-service pharmacy and health care
services) (hereinafter "Diagnostek"). From September 1990 to April 1992, Mr.
Keefe served as president of HPI, a subsidiary of Diagnostek, which was acquired
from Omnicare in August 1989. From August 1984 to September 1990, he served as
Executive Vice President of HPI.

Bradley S. Abbott, 30. Mr. Abbott is Treasurer of the Purchaser and is
Assistant Corporate Controller of Omnicare, a position he has held since joining
Omnicare in 1996. Prior to that, he worked for eight years at Price Waterhouse
LLP, most recently as a manager.

Janice M. Rice, 36. Ms. Rice is Secretary of the Purchaser and is Vice
President-Risk Management and Employee Benefits of Omnicare, a position she has
held since 1994. Prior to that, she was Assistant Treasurer and Corporate Risk
Manager of Omnicare, a position she had held since 1990.

Jeffrey A. Glancy, 40. Mr. Glancy is Assistant Secretary of the Purchaser
and is Vice President-Taxation of Omnicare, a position he has held since 1994.
Prior to that, he served as Assistant Treasurer and Director of Taxation of
Omnicare, a position he had held since 1985.

DIRECTORS OF THE COMPANY

The following table sets forth certain information with respect to the
current directors of the Company as of August 7, 1997.

Bryan C. Cressey, 47. (Director since 1993). Mr. Cressey has been Chairman
of the Board of the Company since December 1993. In 1993, Mr. Cressey co-founded
and became a principal of Golder, Thoma, Cressey, Rauner, Inc., and for the past
fifteen years he has been a general partner of Golder, Thoma, Cressey, Rauner
L.P. Golder, Thoma, Cressey, Rauner, Inc. and Golder, Thoma, Cressey, Rauner
L.P. are private equity investing firms. Golder, Thoma, Cressey, Rauner, Inc. is
the general partner of GTCR IV, L.P., which is the general partner of the GTCR
Fund. Mr. Cressey serves on various boards of directors, including Cable Design
Technologies Corporation and Paging Network Inc. Mr. Cressey is a graduate of
the University of Washington (B.A.), Harvard Law School (J.D.) and Harvard
Business School (M.B.A.).

Timothy L. Burfield, 49. (Director since 1993). Mr. Burfield is a founder
of the Company and has served as the President and Chief Executive Officer of
the Company since December 1993. Mr. Burfield was the Secretary of the Company
from December 1993 to September 1996. From February 1988 to July 1993, Mr.
Burfield was Chairman, President and Chief Executive Officer of Abbey
Pharmaceutical Services, Inc., a provider of long-term care pharmacy services
and medical equipment. Prior to that time, Mr. Burfield held a variety of
executive positions with Abbey Healthcare Group, Inc., Medical Services Company
of ARA

I-2
<PAGE> 23

Services and American Hospital Supply Corporation. Mr. Burfield had more than 19
years of experience in the health care field prior to forming the Company. Mr.
Burfield is a graduate of Villanova University (B.A.).

James H.S. Cooper, 42. (Director since 1995). Mr. Cooper has been a
Managing Director, Investment Banking for Equitable Securities Corporation in
Nashville, Tennessee since April 1995. Mr. Cooper served as a member of the
United States House of Representatives from January 1983 until January 1995. Mr.
Cooper authored the "Managed Competition Act" as an alternative to President
Clinton's health care reform plan. He is an adjunct professor, Health Policy,
Owen School of Management, Vanderbilt University. Mr. Cooper is a graduate of
the University of North Carolina (B.A.), graduated from Oxford University as a
Rhodes Scholar and is a graduate of Harvard Law School (J.D.).

Charles C. Halberg, 53. (Director since 1996). Mr. Halberg has served as a
Director and as the President and Chief Executive Officer of Good Samaritan
Supply Services, Inc. since November 1992. From June 1991 to December 1995, Mr.
Halberg also served as Senior Vice President, General Counsel and Chief
Financial Officer of The Evangelical Lutheran Good Samaritan Society and was
Chairman of the Society's Board of Directors from 1989-1991. Mr. Halberg was a
partner in the law firm of O'Connor & Hannan from 1980 to 1988. Mr. Halberg
served in the Minnesota State Senate from 1990 through 1992 and the Minnesota
House of Representatives from 1978 to 1986, serving as Speaker in 1985-86. Mr.
Halberg is a graduate of St. Olaf College (B.A.) and William Mitchell College of
Law (J.D.).

Lee M. Mitchell, 53. (Director since 1996). Mr. Mitchell has been a
principal of Golder, Thoma, Cressey, Rauner, Inc. since 1994. Prior to joining
Golder, Thoma, Cressey, Rauner, Inc., Mr. Mitchell was the President and Chief
Executive Officer of The Field Corporation and its predecessor, Field
Enterprises, Inc., private management and holding companies with interests in
publishing, communications, paper manufacturing and commercial real estate. Mr.
Mitchell serves as a member of the Board of Governors of The Chicago Stock
Exchange and as a director of Paging Network, Inc., Washington National
Corporation, ERO Industries, Inc., and a number of private companies. Mr.
Mitchell is a graduate of Wesleyan University (A.B.) and the University of
Chicago Law School (J.D.).

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information with respect to the
current executive officers of the Company as of August 7, 1997.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ----------------------------------------------
<S> <C> <C>
Bryan C. Cressey........................ 47 Chairman of the Board of Directors
Timothy L. Burfield..................... 49 President and Chief Executive Officer
Charles R. Wallace...................... 48 Vice President--Finance, Chief Financial
Officer, Treasurer and Secretary
Michael B. Freedman..................... 30 Vice President--Business Development
J. Jeffrey Gephart...................... 45 Vice President--National Sales
</TABLE>

Bryan C. Cressey has been Chairman of the Board of the Company since
December 1993.

Timothy L. Burfield is a founder of the Company and has served as the
President and Chief Executive Officer and as a director of the Company since
December 1993. Mr. Burfield was the Secretary of the Company from December 1993
to September 1996.

Charles R. Wallace has served as the Vice President--Finance, Chief
Financial Officer and Treasurer of the Company since September 1995 and has
served as the Secretary since September 1996. From December 1993 to February
1995, Mr. Wallace was the Corporate Controller of Household International, Inc.,
a consumer finance and banking organization, and from 1989 to 1993, he was
Executive Vice President and Chief Operating Officer of Hamilton Investments,
Inc., a securities and investment firm. Mr. Wallace is a certified public
accountant and is a graduate of the University of Illinois (B.S.).

Michael B. Freedman is the Vice President--Business Development of the
Company and has served in that capacity since August 1994. From August 1994 to
September 1995, Mr. Freedman also served as the

I-3
<PAGE> 24

Company's acting Chief Financial Officer. From April 1993 to August 1994, Mr.
Freedman was an associate at Golder, Thoma, Cressey, Rauner, Inc. From April
1992 to April 1993, Mr. Freedman was the President of Stadium Promotions, Inc.,
a sports marketing company, and from February 1991 to April 1992, Mr. Freedman
was the Controller of Power Conversion, Inc., a battery manufacturer. Mr.
Freedman is a certified public accountant and is a graduate of Dartmouth College
(B.A.) and the Stern School of Business, New York University (M.B.A.).

J. Jeffrey Gephart is the Vice President--National Sales of the Company and
has served in that capacity since January 1995. From May 1990 until January
1995, Mr. Gephart held various positions at Abbey Pharmaceutical Services, Inc.,
including most recently Vice President--Sales. Mr. Gephart had over 17 years of
sales and marketing experience in the long-term care industry when he joined the
Company, including sales management positions with General Medical Corporation,
Continental Health Affiliates, Nutrition Technology Corporation and Kimberly
Clark Corporation. Mr. Gephart is a licensed nursing home administrator and is a
graduate of Purdue University (B.S.).

EXECUTIVE COMPENSATION

Summary Compensation Table. The table below summarizes the compensation
paid to or earned by the Chief Executive Officer and the other three most highly
compensated executive officers of the Company for the fiscal year ended December
31, 1996 and the previous fiscal year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
SALARY BONUS
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2)
- ------------------------------------------------------------------- ---- --------- -------
<S> <C> <C> <C>
Timothy L. Burfield................................................ 1996 270,250 178,875
President and Chief Executive Officer 1995 263,313 72,450
Charles R. Wallace................................................. 1996 145,000 84,000
Vice President-Finance, Chief 1995 37,917(1) --
Financial Officer, Treasurer and Secretary
Michael B. Freedman................................................ 1996 96,250 54,000
Vice President-Business Development 1995 88,333 42,000
J. Jeffrey Gephart................................................. 1996 96,750 56,774
Vice President-National Sales 1995 91,042 --
</TABLE>

- ---------------
(1) Mr. Wallace became an employee of the Company in September 1995.

(2) These bonuses were paid in recognition of the Company's performance over the
eighteen month period ended December 31, 1996.

NOMINATING ARRANGEMENTS

Pursuant to the terms of the Good Samaritan Shareholders Agreement, as
amended, between the Company, the Evangelical Lutheran Good Samaritan Foundation
(the "Foundation") (the Company's co-investor in Good Samaritan Supply Services,
Inc.) and Good Samaritan Supply Services, Inc. ("Good Samaritan Supply"), Mr.
Halberg became a director of the Company in August 1996, and the Company has
agreed to nominate the individual who may be Chief Executive Officer of The
Evangelical Lutheran Good Samaritan Society and, if and for so long as he shall
be Chief Executive Officer of Good Samaritan Supply, Mr. Halberg, for election
to the Board of Directors in each subsequent election of directors. Pursuant to
this provision, Dr. Mark A. Jerstad, the former Chief Executive Officer of The
Evangelical Lutheran Good Samaritan Society, served as a Director of the Company
during fiscal year 1996. Dr. Jerstad died in March 1997. The provisions of the
Good Samaritan Shareholders Agreement pertaining to designation of directors
terminate upon such date as (i) either the Company owns 10% or less of the
outstanding common stock of

I-4
<PAGE> 25

Good Samaritan Supply, or the Foundation and any Foundation affiliate own 10% or
less of the outstanding common stock of Good Samaritan Supply and (ii) the
Foundation and the Foundation affiliates collectively own 5% or less of the
outstanding Company Common Stock. The Company currently owns a 50.1% interest in
Good Samaritan Supply.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During the 1996 fiscal year, there were four meetings of the Board of
Directors. Each incumbent Director attended at least 75% of the aggregate total
number of the meetings of the Board of Directors and the meetings of the Board
Committees on which he served, in each case, that were held during the period in
which he served as a Director.

The Board of Directors has standing Audit and Compensation Committees,
which deal with certain specific areas of the Board's responsibility.

The Audit Committee, which met three times during the 1996 fiscal year,
recommends the appointment of auditors and oversees the accounting and audit
functions of the Company. The members of the Audit Committee are Mr. Cooper and
Mr. Cressey. Dr. Jerstad served as a member of the Audit Committee until his
death.

The Compensation Committee, which met three times during the 1996 fiscal
year, determines executive officers' salaries, bonuses and other compensation
and administers the Company's 1996 Stock Incentive Plan. The members of the
Compensation Committee are Mr. Cooper and Mr. Cressey. Dr. Jerstad served as a
member of the Compensation Committee until his death.

DIRECTOR COMPENSATION

Directors who are not currently receiving compensation as officers or
employees of the Company or of a subsidiary of the Company, other than Mr.
Cressey and Mr. Mitchell, are entitled to a fee of $1,000 plus reimbursement of
expenses for attending each meeting of the Board of Directors and each meeting
of a committee not held concurrently with a meeting of the Board of Directors.
Mr. Cooper received $5,000 in directors fees during the 1996 fiscal year ($1,000
of which relates to a 1995 fiscal year meeting but was paid in fiscal year 1996)
and Dr. Jerstad received $2,000 in directors fees during the 1996 fiscal year.
In addition, Mr. Halberg is President and Chief Executive Officer of Good
Samaritan Supply, a company in which the Company has a 50.1% equity interest. In
September 1996, the Company sold shares to Mr. Halberg, Mr. Cooper and Dr.
Jerstad for $1.41 per share. See "Management-Company Common Stock Issuances."

The Company's directors are eligible to participate in the Company's 1996
Stock Incentive Plan (the "Incentive Plan"). The Incentive Plan provides for the
grant of stock options, stock awards and stock appreciation rights. The
Incentive Plan is administered by the Compensation Committee. The Incentive Plan
may be terminated by the Board of Directors at any time.

On November 13, 1996, the Company granted Mr. Halberg, pursuant to the 1996
Stock Incentive Plan, non-qualified options to purchase 50,000 Shares with an
exercise price of $15.00 per Share. Mr. Halberg's options vest and become
exercisable on November 13, 2003. The vesting will be accelerated in connection
with the Transaction.

CERTAIN TRANSACTIONS

Good Samaritan Relationship. On April 30, 1996, pursuant to the terms of a
Share Purchase Agreement (the "Purchase Agreement") between the Company and Good
Samaritan Supply (the President and Chief Executive Officer of which is Charles
C. Halberg, a director of the Company), the Company purchased 40% of the
outstanding Good Samaritan Supply common stock on a fully-diluted basis for an
aggregate purchase price of $6.0 million. Upon consummation of the initial
public offering of the Company's Common Stock (the "Offering") in November 1996,
the Company purchased additional shares of Good Samaritan Supply common stock
for an aggregate purchase price of $2.0 million, which, together with the Good
Samaritan Supply common stock already owned by the Company, represented 50.1% of
the outstanding Good Samaritan

I-5
<PAGE> 26

Supply common stock on a fully diluted basis. On May 15, 1997, the Company
purchased preferred shares and warrants to purchase common stock from Good
Samaritan Supply for an aggregate purchase price of $1.5 million.

In connection with the execution of the Purchase Agreement, the Company,
the Foundation and Good Samaritan Supply also entered into a Shareholders
Agreement (the "Good Samaritan Shareholders Agreement"), and the Company, Good
Samaritan Supply, the Foundation and the Society entered into a Non-Competition
and Marketing Assistance Agreement. The Foundation currently holds 49.9% of the
outstanding Good Samaritan Supply common stock.

The Good Samaritan Shareholders Agreement, which was amended in May 1997
and August 1997, contains provisions (i) governing the composition of the Board
of Directors of Good Samaritan Supply, (ii) granting rights of first refusal
with respect to the sale or transfer of Good Samaritan Supply common stock,
(iii) governing the composition of the Board of Directors of the Company, (iv)
granting to the Foundation or any affiliate holding Good Samaritan Supply common
stock an option to convert its Good Samaritan Supply common stock into Shares
(which option terminates upon consummation of the Offer), (v) granting to the
Foundation or any affiliate holding Good Samaritan Supply common stock a right
to put its shares of Good Samaritan Supply common stock to the Company, (vi)
granting to the Company an option to purchase substantially all shares of Good
Samaritan Supply common stock held by other parties to the Good Samaritan
Shareholders Agreement, (vii) granting registration rights to the Foundation
with respect to its Company Common Stock, (viii) granting certain rights to the
Foundation or any affiliate holding Good Samaritan Supply common stock upon
certain changes in the Company's ownership and (ix) granting to the Foundation
or any affiliate holding Good Samaritan Supply common stock, if an AMC Change in
Control (as defined in the Good Samaritan Shareholders Agreement) has occurred
and the AMC Acquisition Option (as defined in the Good Samaritan Shareholders
Agreement) has not been exercised within 180 days following the occurrence of
such AMC Change in Control, the right to put (the "Foundation Put") to the
Company all shares of Good Samaritan Supply common stock and warrants to
purchase Good Samaritan Supply common stock held by them for a purchase price of
$6.0 million. Upon the closing of the AMC Acquirer Option or the Foundation Put,
Good Samaritan Supply is obligated to redeem all Class A Preferred Shares held
by the Foundation or any affiliate.

Company Common Stock Issuances. In September 1996 the Company sold to Mr.
Burfield 23,681 Shares at a purchase price of $1.41 per Share. For financial
reporting purposes, Shares were valued at $9.10 per Share at that time. The
purchase price for such Shares was made by delivery of cash (in the amount of
10% of the purchase price) and a promissory note (in the principal amount of 90%
of the purchase price).

In September 1996 the Company sold 11,853 Shares to each of James H.S.
Cooper and Charles C. Halberg (each a director of the Company) and Mark A.
Jerstad (a former director of the Company) at a purchase price of $1.41 per
Share. For financial reporting purposes, Shares were valued at $9.10 per Share
at that time. All of such Shares were issued subject to the terms of separate
stock purchase agreements, and the purchase price for such Shares was made by
delivery of cash (in the amount of 10% of the purchase price) and a promissory
note (in the principal amount of 90% of the purchase price). All transfer
restrictions on such Shares terminate in connection with the consummation of the
Offer.

In September 1996 the Company sold an aggregate of 237,038 Shares to
certain executive officers of the Company (104,228 Shares, 80,522 Shares and
52,288 Shares to Charles R. Wallace, Michael B. Freedman and J. Jeffrey Gephart,
respectively), at a purchase price of $1.41 per Share. For financial reporting
purposes, Shares were valued at $9.10 per Share at that time. All of such Shares
were issued subject to the terms of separate stock purchase agreements (which
were amended and restated as of November 11, 1996), and the purchase price for
such Shares was made by delivery of cash (in the amount of 10% of the purchase
price) and a promissory note (in the principal amount of 90% of the purchase
price). Mr. Freedman paid off his promissory note on March 31, 1997. All
transfer restrictions on such Shares terminate in connection with the
consummation of the Offer.

Agreement with Director. Charles C. Halberg (a member of the Company's
Board of Directors) and Good Samaritan Supply entered into an Executive
Employment Agreement dated January 1, 1996 (the

I-6
<PAGE> 27

"Halberg Employment Agreement"), pursuant to which Mr. Halberg is employed as
President and Chief Executive Officer of Good Samaritan Supply. The Halberg
Employment Agreement is for a term of four years and shall automatically extend
for an additional one-year term on each January 1, unless Good Samaritan Supply
shall provide Mr. Halberg with 90 days' notice prior to the extension of any
term. Under the terms of the Halberg Employment Agreement, Mr. Halberg is
entitled to receive an annual base salary of $220,000, subject to upward
adjustment by the compensation committee of the board of directors of Good
Samaritan Supply, and other benefits including health, dental, disability and
life insurance. In addition, Mr. Halberg and Good Samaritan Supply entered into
a Change-in-Control Agreement as of April 29, 1996 (the "Change-in-Control
Agreement"). If Mr. Halberg is terminated by Good Samaritan Supply after the
occurrence of a Change-in-Control (which occurred in November 1996 at such time
as the Company owned 50.1% of the outstanding Good Samaritan Supply common
stock) other than for certain reasons, he will be entitled to certain severance
payments.

MANAGEMENT AGREEMENTS

Mr. Burfield and the Company entered into a Senior Management Agreement in
December 1993 (which was amended in June 1997), pursuant to which Mr. Burfield
has been employed as President and Chief Executive Officer of the Company. The
Senior Management Agreement provides for an annual base salary at a rate of
$241,500, subject to such increases, but not decreases, as determined by the
Board. If Mr. Burfield is terminated by the Company other than for cause, Mr.
Burfield is entitled to receive payments at the rate of his annual base salary
for a period of eighteen months. Pursuant to the Senior Management Agreement, in
December 1993 the Company sold 485,978 restricted Shares to Mr. Burfield, which
restrictions have terminated.

Pursuant to the terms of separate Senior Management Agreements between the
Company and each of Mr. Freedman, Mr. Wallace and Mr. Gephart entered into as of
September 5, 1996 and amended and restated as of November 11, 1996, in the event
Mr. Freedman's, Mr. Wallace's or Mr. Gephart's employment is terminated other
than for cause, Mr. Freedman, Mr. Wallace or Mr. Gephart, as the case may be,
shall be entitled to six months' notice or, if the Company determines to
immediately terminate Mr. Freedman's, Mr. Wallace's or Mr. Gephart's employment,
Mr. Freedman, Mr. Wallace or Mr. Gephart, as the case may be, shall be entitled
to his annual base salary for six months. Under the Senior Management
Agreements, each of Mr. Freedman's, Mr. Wallace's or Mr. Gephart's employment
periods will continue until his resignation, disability (as reasonably
determined by the Board of Directors or chief executive officer of the Company)
or death or until the Board of Directors of the Company determines in its good
faith judgment that termination of Mr. Freedman's, Mr. Wallace's or Mr.
Gephart's employment is in the best interest of the Company.

EMPLOYEE BENEFIT PLANS

1996 Stock Incentive Plan. The Company's 1996 Stock Incentive Plan was
adopted in October 1996. The Company has reserved 1,150,000 Shares for issuance
under the 1996 Stock Incentive Plan. The 1996 Stock Incentive Plan is
administered by the Compensation Committee of the Board of Directors. The
Committee has the authority and discretion, subject to the provisions of the
1996 Stock Incentive Plan, to select persons to whom awards will be granted, to
designate the number of Shares to be covered by awards, and to establish all
other terms and conditions of each award.

The 1996 Stock Incentive Plan provides for the grant of stock options,
stock awards and stock appreciation rights to employees of the Company and its
subsidiaries and to non-employee directors and non-employee consultants and
advisors. Options granted under the 1996 Stock Incentive Plan may be qualified
or non-qualified stock options.

Subsidiary Option Plans. In October 1995, four of the Company's operating
subsidiaries (Gatti LTC Services, Inc., Williamson Drug Company, Inc., Nihan &
Martin, Inc. and Dixon Pharmacy, Inc.) adopted Stock Option Plans for Executives
and Key Employees (the "Subsidiary Option Plans"). Each Subsidiary Option Plan
is administered by the Board of Directors, or a committee thereof, of the
respective subsidiary. Each Subsidiary Option Plan provides for the grant of
options to purchase common stock of such subsidiary, at

I-7
<PAGE> 28

an exercise price of not less than fair market value of such stock, to
directors, executives or other key employees of the subsidiary. Pursuant to the
terms of the Subsidiary Option Plans and in connection with the Company's
initial public offering (the "Offering"), the stock options granted pursuant to
the Subsidiary Option Plans were converted to options to purchase Shares. The
Company has reserved 160,790 Shares for issuance under the Subsidiary Option
Plans.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Professional Services Agreement. Pursuant to the terms of a Professional
Services Agreement (the "Services Agreement") dated December 3, 1993 between
GTCR IV, L.P. (an affiliate of the GTCR Fund and two principals of the general
partner of which are Bryan C. Cressey, Chairman of the Board of Directors and a
member of the Compensation Committee of the Company's Board of Directors, and
Lee M. Mitchell, a member of the Company's Board of Directors) ("GTCR") and the
Company, GTCR provided the Company with management and financial consulting
services, for which the Company accrued management fees of $4,167 during 1993,
$50,000 during each of 1994 and 1995, and $58,333 during 1996 through October
31, 1996. In addition, pursuant to the terms of the Services Agreement, GTCR was
entitled to 1% of the dollar amount of capital received by the Company upon the
closing of any issuance of debt or equity securities from parties other than
GTCR, its directors, its officers or its employees or the Company's management.
No amounts have been or will be paid to GTCR pursuant to this provision of the
Services Agreement. The Company and GTCR terminated the Services Agreement
effective upon the consummation of the Offering. Simultaneously with the
consummation of the Offering, the Company paid GTCR $450,000 from the proceeds,
of which $162,500 was in payment of accrued but unpaid fees under the Services
Agreement and $287,500 was in exchange for the termination of the Services
Agreement.

Agreement with GTCR Fund Regarding Class A Common Stock. Prior to the
Offering, the Company had two classes of common stock, Class A Common Stock and
Class B Common Stock. Pursuant to the terms of the Company's Class A Common
Stock, upon the occurrence of the Offering and from the net proceeds thereof,
the GTCR Fund, as the sole holder of the Class A Common Stock, was entitled to a
preferential cash distribution in the amount of the lesser of (a) 25% of the net
proceeds from the Offering (after deducting all discounts and reasonable
expenses) or (b) the amount of all Unpaid Yield (as defined therein) plus
Unreturned Original Cost (as defined therein) ($22.5 million) with respect to
the Class A Common Stock. Accordingly, the Company paid to the GTCR Fund the
amount of $20,772,419 from the proceeds of the Offering. In addition, upon the
occurrence of future public offerings, the holder of Class A Common Stock would
have otherwise been entitled to additional preferential distributions until the
entire Unpaid Yield and Unpaid Original Cost was paid in full. In August 1996,
the Company and the GTCR Fund entered into an agreement contemplating the GTCR
Fund's relinquishment of any future preferences with respect to the Company's
Class A Common Stock. Pursuant to the agreement, on December 31, 1996, the
Company issued to the GTCR Fund an additional 280,289 Shares, which number of
additional Shares was obtained by dividing (a) the then remaining Unpaid Yield
and Unreturned Original Cost (giving effect to the amount thereof paid with the
proceeds of the Offering) by (b) $15.00, the initial public offering price of
Shares. Contemporaneously with the Offering, pursuant to the terms of the
Amended and Restated Certificate of Incorporation, all shares of Class A Common
Stock were converted into Shares.

Registration Rights. The Company and all holders of Common Stock prior to
the Offering have entered into a registration rights agreement (the
"Registration Agreement"), pursuant to which such stockholders have been granted
certain rights with respect to the registration under the Securities Act, for
resale to the public, of their respective Registrable Securities (as defined in
the Registration Agreement). Such stockholders own in the aggregate
approximately 48% of the issued and outstanding Shares. The Registration
Agreement provides, among other things, that the GTCR Fund has the right to
require the Company to effect as many as three "long-form" and five "short-form"
demand registrations under the Securities Act with respect to all or a portion
of the GTCR Fund's Registrable Securities. Other holders of Registrable
Securities are entitled to include in such demand registrations (and in primary
registrations by the Company) all Registrable Securities with respect to which
the Company has received written requests for inclusion therein,

I-8
<PAGE> 29

subject to certain limitations, including priority provisions. The Company has
agreed to bear all reasonable and customary expenses associated with such
registrations (other than underwriters' discounts and commissions).

Stockholders Agreement of the Company. The Company and all holders of
Shares prior to the Offering have entered into an Amended and Restated
Stockholders Agreement, dated as of August 23, 1996 (the "Stockholders
Agreement"), pursuant to which all such holders of Shares (other than the GTCR
Fund) have the right to participate on a pro rata basis in any disposition of
Shares held by the GTCR Fund, other than dispositions to an affiliate or sales
to the public pursuant to an offering registered under the Securities Act or
pursuant to Rule 144 under the Securities Act.

Nominating Agreement. On October 9, 1996, the Company and the GTCR Fund
entered into an agreement pursuant to which, upon the request of the GTCR Fund,
the Company will take all necessary and desirable actions within its control to
expand the size of the Board to seven members and to nominate a representative
of the GTCR Fund for election to the Board. This agreement terminates at such
time as the GTCR Fund owns less than 15% of the Company's voting stock on a
fully-diluted basis.

Financial Advisory Fees. Pursuant to a letter agreement, dated as of
February 23, 1996, as amended (the "Equitable Agreement"), Equitable Securities
Corporation ("Equitable") has provided the Company with certain strategic and
financial advisory services. Mr. James H.S. Cooper, a director of the Company
and a member of the Compensation Committee of the Company's Board of Directors,
is a Managing Director of Equitable. For such strategic and advisory investment
banking services, the Company paid Equitable a retainer fee in the amount of
$25,000. In the event the Company utilizes the services of Equitable in
connection with any acquisition, Equitable will receive a transaction fee in an
amount mutually agreed to in advance of such transaction, based on the size and
complexity of the contemplated acquisition.

The Equitable Agreement (which terminated on December 31, 1996) provided
that Equitable shall receive any amounts due and owing to it in the event that a
transaction with respect to which Equitable has provided advisory services
closes on or before June 30, 1997.

Bridge Loan Guaranty. In August 1996, the GTCR Fund guaranteed repayment by
the Company of its indebtedness under a bridge loan in the amount of $5,000,000
(the "GTCR Guaranty"). Pursuant to a Reimbursement and Conversion Rights
Agreement (the "Reimbursement Agreement") between the Company and the GTCR Fund,
the Company, subject to certain conditions, agreed to reimburse the GTCR Fund
for payments made by the GTCR Fund under the GTCR Guaranty by either (i) paying
cash or other monetary reimbursement to the GTCR Fund or (ii) issuing shares of
the Company's Common Stock to the GTCR Fund, the form of such reimbursement to
be at the election of the GTCR Fund. If the Company was required to reimburse
the GTCR Fund under the Reimbursement Agreement and the GTCR Fund elected to be
reimbursed in shares of the Company's Common Stock, the number of shares which
it would receive would be computed pursuant to a formula set forth in the
Reimbursement Agreement. The Company repaid the bridge loan out of the proceeds
of the Offering and the obligations of the Company under the Reimbursement
Agreement terminated.

Director Stock Issuances. In September 1996, the Company issued to each of
James H.S. Cooper (a director of the Company and member of the Compensation
Committee of the Company's Board of Directors) and Mark A. Jerstad (a former
director of the Company and former member of the Compensation Committee of the
Company's Board of Directors) 11,853 Shares for an aggregate consideration of
$16,756 (or $1.41 per Share), of which $1,676 was paid in cash and $15,080 was
paid by delivery to the Company of a promissory note.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires that the Company's executive
officers and directors, and beneficial owners of 10% or more of the Company's
stock file initial reports of ownership and of changes of ownership with the
Securities and Exchange Commission and the Nasdaq Stock Market. Executive
officers, directors and 10% beneficial owners are required by securities
regulations to furnish the Company with copies of all Section 16(a) forms they
file.

I-9
<PAGE> 30

Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that all filing requirements were met during
fiscal year 1996, except that initial Forms 3 with respect to Timothy L.
Burfield, Charles C. Halberg, Mark Jerstad, James H.S. Cooper, Bryan C. Cressey,
Lee M. Mitchell, Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart,
the GTCR Fund, GTCR IV, L.P., Golder, Thoma, Cressey, Rauner, Inc., Forms 4 with
respect to GTCR IV, L.P. and Golder, Thoma, Cressey, Rauner, Inc. and a Form 5
with respect to Charles C. Halberg, were inadvertently filed after the date on
which such forms were required to be filed with the Securities and Exchange
Commission.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS

The following table sets forth ownership of the Shares as of August 7, 1997
by (i) each person who is known to the Company to own beneficially more than 5%
of the outstanding Shares, (ii) each director, (iii) the Company's named
executive officers identified in the Summary Compensation Table and (iv) all
directors, and executive officers as a group. On August 7, 1997, there were
12,217,936 Shares issued and outstanding.

<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED
- -------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P......................... 4,215,527 34.5%
6100 Sears Tower Chicago, IL 60606
Bryan C. Cressey (2)................................................ 4,215,527 34.5
Timothy L. Burfield................................................. 509,659 4.2
Michael B. Freedman (3)............................................. 84,022 *
J. Jeffrey Gephart.................................................. 52,288 *
Charles R. Wallace (4).............................................. 112,228 *
James H.S. Cooper................................................... 11,853 *
Charles C. Halberg (5).............................................. 11,983 *
Lee M. Mitchell (2)................................................. 4,215,527 34.5
All directors and executive officers as a group (8 persons)
(2)(3)(4)(5)...................................................... 4,997,560 40.9
</TABLE>

- ---------------
* Less than one percent.

(1) Except as indicated in the footnotes to this table, the persons named in
this table have sole voting and investment power with respect to all Shares
shown as beneficially owned by them.

(2) Bryan C. Cressey and Lee M. Mitchell are principals of Golder, Thoma,
Cressey, Rauner, Inc., which is the general partner of GTCR IV, L.P., which
is the general partner of Golder, Thoma, Cressey, Rauner Fund IV, L.P.
Accordingly, Mr. Cressey and Mr. Mitchell may be attributed beneficial
ownership of the Shares owned of record by Golder, Thoma, Cressey, Rauner
Fund IV, L.P. Mr. Cressey and Mr. Mitchell disclaim beneficial ownership of
such Shares.

(3) Includes 3,000 Shares owned by Mr. Freedman's wife, 500 Shares owned jointly
with Mr. Freedman's wife and 20,000 Shares held in trust for the benefit of
his children.

(4) Includes 109,228 Shares held by the Charles R. Wallace Revocable Trust and
3,000 Shares owned by Mr. Wallace's children.

(5) Includes 130 Shares owned by Mr. Halberg's children.

I-10
<PAGE> 31

ANNEX I
[DONALDSON, LUFKIN & JENRETTE LOGO]

August 7, 1997

The Board of Directors
American Medserve Corporation
184 Shuman Boulevard, Suite 200
Naperville, Illinois 60563

Dear Sirs:

You have requested our opinion as to the fairness from a financial point of
view to the stockholders of American Medserve Corporation (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of August 7, 1997 (the "Agreement"), by
and among Omnicare, Inc. ("Omnicare"), Omnicare Acquisition Corp., a wholly
owned subsidiary of Omnicare ("Acquisition Subsidiary") and the Company,
pursuant to which Acquisition Subsidiary will be merged (the "Merger") with and
into the Company.

Pursuant to the Agreement, Omnicare will commence a tender offer (the
"Tender Offer") for all outstanding shares of common stock, par value $.01 per
share, of the Company ("Company Common Stock") at a price of $18.00 per share.
The Tender Offer is to be followed by the Merger in which each share of Company
Common Stock not tendered would be converted into the right to receive $18.00
per share in cash.

In arriving at our opinion, we have reviewed the draft dated August 6, 1997
of the Agreement and the annex thereto. We also have reviewed financial and
other information that was publicly available or furnished to us by the Company
including information provided during discussions with management. Included in
such publicly available information was certain projected financial information
for the period beginning January 1, 1997 and ending December 31, 1998 prepared
by a member of the Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
Equity Research Department. We also discussed with management their views as to
(i) revenue growth and margins for the period beginning January 1, 1999 and
ending December 31, 2001 and (ii) the impact on revenue growth and margins,
among other items, of a no-acquisition scenario for the period beginning January
1, 1998 and ending December 31, 2001. In addition, we have compared certain
financial and securities data of the Company with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of Company Common Stock, reviewed prices and premiums paid
in certain other business combinations and conducted such other financial
studies, analyses and investigations as we deemed appropriate for purposes of
this opinion.

In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections that we reviewed, we have assumed that they reflect the
best current estimates and judgments of the management of the Company as to the
future operating and financial performance of the Company over such period of
time. With respect to the views of management (x) referenced in clause (i)
above, we have assumed that they reflect the best current estimates and
judgments of the management of the Company as to such operating performance over
such period of time and (y) referenced in clause (ii) above, we have assumed
that they reflect the best current estimates and judgments of the management of
the Company as to the impact of a no-acquisition scenario on such operating
performance over such period of time. We have not assumed any responsibility for
making an independent evaluation of the Company's assets or liabilities or for
making any independent verification of any of the information reviewed by us.

Our opinion is necesarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm
<PAGE> 32

The Board of Directors August 7, 1997
American Medserve Corporation

this opinion. Our opinion does not constitue a recommendation to any stockholder
as to whether such stockholder should tender any shares of Company Common Stock
into the Tender Offer or as to how such stockholder should vote in any
stockholder meeting on the proposed Merger.

DLJ, as part of its investment banking services, is regularly engaged in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. DLJ has performed investment banking and other services for the
Company in the past and has been compensated for such services.

Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the stockholders of the
Company pursuant to the Agreement is fair to such stockholders from a financial
point of view.

Very truly yours,

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By: /s/ JOHN W. PATTERSON

--------------------------------------
John W. Patterson
Senior Vice President
<PAGE> 33

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------------- ----------------------------------------------------------------- ------------
<S> <C> <C>
Exhibit (a)(1) Offer to Purchase, dated August 14, 1997 (filed as Exhibit (a)(1)
to the Schedule 14D-1 of Omnicare Acquisition Corp. and Omnicare,
Inc. filed with the Securities and Exchange Commission (the
"Commission") on August 14, 1997 (the "Schedule 14D-1") and
incorporated herein by reference).*
Exhibit (a)(2) Form of Letter of Transmittal (filed as Exhibit (a)(2) to the
Schedule 14D-1 and incorporated herein by reference).*
Exhibit (a)(3) Letter to Stockholders, dated August 14, 1997. *+
Exhibit (a)(4) Form of summary advertisement, dated August 14, 1997 (filed as
Exhibit (a)(7) to the Schedule 14D-1 and incorporated herein by
reference.
Exhibit (a)(5) Text of press release issued by Omnicare, Inc. and American
Medserve Corporation, dated August 8, 1997.**
Exhibit (a)(6) Opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
dated August 7, 1997 (attached to this Schedule 14D-9 as Annex
I). *+
Exhibit (c)(1) Agreement and Plan of Merger, dated as of August 7, 1997, by and
among Omnicare, Inc., Omnicare Acquisition Corp. and American
Medserve Corporation.**
Exhibit (c)(2) Agreement, made as of August 7, 1997, between the Company and
Michael B. Freedman.**
Exhibit (c)(3) Agreement, made as of August 7, 1997, between the Company and
Charles R. Wallace.**
Exhibit (c)(4) Agreement, made as of August 7, 1997, between the Company and J.
Jeffrey Gephart.**
Exhibit (c)(5) Senior Management Agreement, made as of December 3, 1993, between
the Company and Timothy L. Burfield.***
Exhibit (c)(6) Amendment No. 1 to Senior Management Agreement, made as of June
30, 1997, between the Company and Timothy L. Burfield.**
Exhibit (c)(7) Amended and Restated Senior Management Agreement, made as of
November 11, 1996, between the Company and Michael B. Freedman.**
Exhibit (c)(8) Amended and Restated Senior Management Agreement, made as of
November 11, 1996, between the Company and Charles R. Wallace.**
Exhibit (c)(9) Amended and Restated Senior Management Agreement, made as of
November 11, 1996, between the Company and J. Jeffrey Gephart.**
Exhibit (c)(10) Director Stock Agreement, made as of September 5, 1996, between
the Company and James H.S. Cooper.***
Exhibit (c)(11) Director Stock Agreement, made as of September 5, 1996, between
the Company and Charles C. Halberg.***
</TABLE>
<PAGE> 34

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------------- ----------------------------------------------------------------- ------------
<S> <C> <C>
Exhibit (c)(12) Amended and Restated Stockholders Agreement, dated as of August
23, 1996, by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. (the "GTCR Fund"), Timothy L. Burfield,
Michael B. Freedman, Charles R. Wallace, J. Jeffrey Gephart,
James H.S. Cooper, Charles C. Halberg, Mark A. Jerstad, William
J. and Mary Jane Gatti, Nelson L. Showalter, Frank R. Gelafio,
Lee R. Youngberg, Ronald E. Keith, James Pietryga, Bruce Gerlich,
Mitch Overstreet, Sterling Acquisition Partners, Inc., Pharmed,
Inc., Pharmed of Baton Rouge, Inc., Joseph Dellantonio, Thomas C.
Loftus and George E. Pepe.***
Exhibit (c)(13) Registration Agreement, dated as of August 23, 1996, by and among
the GTCR Fund, Timothy L. Burfield, Michael B. Freedman, Charles
R. Wallace, J. Jeffrey Gephart, James H.S. Cooper, Charles C.
Halberg, Mark A. Jerstad, William J. and Mary Jane Gatti, Nelson
L. Showalter, Frank R. Gelafio, Lee R. Youngberg, Ronald E.
Keith, James Pietryga, Bruce Gerlich, Mitch Overstreet, Sterling
Acquisition Partners, Inc., Pharmed, Inc., Pharmed of Baton
Rouge, Inc., Joseph Dellantonio, Thomas C. Loftus and George E.
Pepe.***
Exhibit (c)(14) Shareholders Agreement, dated as of April 30, 1996, by and among
Good Samaritan Supply Services, Inc., The Evangelical Lutheran
Good Samaritan Foundation and the Company.***
Exhibit (c)(15) Second Amendment to Shareholders Agreement, dated as of August,
1997, by and among Good Samaritan Supply Services, Inc., The
Evangelical Lutheran Good Samaritan Foundation and the Company.**
Exhibit (c)(16) Non-Competition and Marketing Assistance Agreement, made as of
April 30, 1996, by and among the Company, Good Samaritan Supply
Services, Inc., The Evangelical Lutheran Good Samaritan
Foundation and The Evangelical Lutheran Good Samaritan
Society.***
Exhibit (c)(17) First Amendment to Non-Competition and Marketing Assistance
Agreement, made as of August, 1997, by and among the Company,
Good Samaritan Supply Services, Inc., The Evangelical Lutheran
Good Samaritan Foundation and The Evangelical Lutheran Good
Samaritan Society.**
</TABLE>

- ---------------
* Included in copies mailed to Shareholders.

+ Filed herewith.

** Document incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997 (File No. 000-21515).

*** Document incorporated by reference from the Company's Registration Statement
on Form S-1 (File No. 333-11667), filed with the Securities and Exchange
Commission on November 12, 1996.

<PAGE> 1

[AMC Logo]

August 14, 1997

To the Stockholders of
American Medserve Corporation:

We are pleased to inform you that on August 7, 1997, American Medserve
Corporation (the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Omnicare, Inc. ("Omnicare") and Omnicare Acquisition
Corp. ("Purchaser"), a wholly owned subsidiary of Omnicare, pursuant to which
Purchaser has today commenced a tender offer (the "Offer") to purchase all of
the outstanding shares of common stock, $0.01 par value per share (the
"Shares"), of the Company for $18.00 per Share in cash. Under the Merger
Agreement, following the Offer, Purchaser will be merged (the "Merger" and,
together with the Offer, the "Transaction") with and into the Company and all
Shares not purchased in the Offer (other than Shares held by Omnicare,
Purchaser, any wholly owned subsidiary of Omnicare or the Company, or Shares
held by dissenting stockholders, if any) will be converted into the right to
receive $18.00 per Share in cash.

Your Board of Directors has unanimously approved the Merger Agreement, the
Offer and the Merger and has determined that the Offer and the Merger are fair
to and in the best interests of the Company's stockholders. The Board
unanimously recommends that the Company's stockholders accept the Offer and
tender their Shares in the Offer.

In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Donaldson, Lufkin & Jenrette
Securities Corporation, the Company's financial advisor, dated August 7, 1997,
to the effect that, as of such date, and based on the assumptions made, matters
considered and limits of review as set forth in such opinion, the consideration
to be received by the holders of Shares in the Offer and the Merger was fair to
such holders from a financial point of view.

In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated August 14, 1997, of Purchaser, together
with related materials, including a Letter of Transmittal to be used for
tendering your Shares. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions as to how to tender your Shares.
We urge you to read the enclosed materials carefully.

Sincerely,

/s/ Timothy L. Burfield
Timothy L. Burfield
President and Chief Executive Officer

[AMC LETTERHEAD]