<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
COMMUNITY HEALTH SYSTEMS, INC.
(Name of Subject Company)
FLCH HOLDINGS CORP.
FLCH ACQUISITION CORP.
---------------
(BIDDERS)
COMMON STOCK, $.01 PAR VALUE
(INCLUDING THE ASSOCIATED RIGHTS)
_____________________________
(TITLE OF CLASS OF SECURITIES)
203666 10 2
_______________________________________
(CUSIP NUMBER OF COMMON STOCK)
FLCH ACQUISITION CORP.
C/O FORSTMANN LITTLE & CO.
767 FIFTH AVENUE
NEW YORK, NY 10153
(212) 355-5656
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY:
STEPHEN FRAIDIN, P.C.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
(212) 859-8000
------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$1,078,269,175 $215,653.84
</TABLE>
* For the purpose of calculating the fee only. This amount assumes the
purchase of 19,731,068 shares of Common Stock of Community Health Systems,
Inc. at $52.00 per share. Such number of shares includes all outstanding
shares as of June 11, 1996, and assumes the cancellation of all stock
options to purchase shares of Common Stock outstanding as of such date at a
net cost to the Bidders of $52,253,639.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
</TABLE>
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Page 1 of 6 Pages
The Index to Exhibits begins on Page 6.
<PAGE>
This Statement relates to a tender offer by FLCH Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly owned subsidiary of FLCH
Holdings Corp., a Delaware corporation ("Parent"), to purchase all outstanding
shares of Common Stock, par value $.01 per share (the "Common Stock"), including
the associated preferred share purchase rights (the "Rights" and, together with
the Common Stock, the "Shares"), of Community Health Systems, Inc., a Delaware
corporation (the "Company"), at a purchase price of $52.00 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"), copies
of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which
are incorporated herein by reference. Each of Parent and the Purchaser have been
formed by Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited
partnership ("Forstmann Little"), in connection with the Offer and the
transactions contemplated thereby.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Community Health Systems, Inc. The
address of the principal executive offices of the Company is set forth in
Section 8 ("Certain Information Concerning the Company") of the Offer to
Purchase and is incorporated herein by reference.
(b) The information set forth in the Introduction to the Offer to Purchase
is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g) This Schedule 14D-1 is filed by Parent and the
Purchaser. The information set forth in the Introduction and Section 9 ("Certain
Information Concerning Forstmann Little, Parent and the Purchaser") of the Offer
to Purchase and in Schedules I and II thereto is incorporated herein by
reference.
(e) and (f) None of the Purchaser, Parent, Forstmann Little, FLC
Partnership, L.P., a New York limited partnership, FLC XXIX Partnership, a New
York general partnership, FLC XXX Partnership, a New York general partnership
and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-VI, or, to the best of their knowledge, any of the persons listed in
Schedule I or II of the Offer to Purchase, has during the last five years (i)
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the Introduction and Section 11
("Background of the Offer"), Section 8 ("Certain Information Concerning the
Company") and Section 9 ("Certain Information Concerning Forstmann Little,
Parent and the Purchaser") of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
2
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (g) The information set forth in the Introduction, Section 7
("Effect of the Offer on the Market for Shares, Stock Quotation, Exchange Act
Registration and Margin Securities") and Section 12 ("Purpose of the Offer and
the Merger; Plans for the Company; The Merger Agreement and the Rights
Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) None.
(b) Not applicable.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Forstmann Little, Parent and the Purchaser"), Section 10
("Source and Amount of Funds") and Section 12 ("Purpose of the Offer and the
Merger; Plans for the Company; The Merger Agreement and the Rights Agreement")
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Forstmann Little, Parent and the Purchaser") and Section
12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger
Agreement and the Rights Agreement") of the Offer to Purchase is incorporated
herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Regulatory and
Legal Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for Shares, Stock Quotation, Exchange Act Registration and Margin
Securities") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase, dated June 11, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Letter from Lehman Brothers Inc., as Dealer Manager, to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) Summary Announcement, dated June 11, 1996.
(a)(8) Press Release issued by Parent on June 10, 1996.
(a)(9) Press Release issued by Parent on June 11, 1996.
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
(b) Commitment Letter, dated June 9, 1996 and related Fee Letter, dated as of
June 9, 1996, from Chemical Bank and Chase Securities Inc.
(c) Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the
Purchaser and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: June 11, 1996
FLCH ACQUISITION CORP.
By: /s/ THOMAS H. LISTER
_________________________
Name: Thomas H. Lister
Title: Vice President
FLCH HOLDINGS CORP.
By: /s/ THOMAS H. LISTER
_________________________
Name: Thomas H. Lister
Title: Vice President
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION NO. PAGE NO.
- --------- ---------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
(a)(1) -- Offer to Purchase, dated June 11, 1996.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter from Lehman Brothers Inc., as Dealer Manager, to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(4) -- Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to
Clients.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) -- Summary Announcement, dated June 11, 1996.
(a)(8) -- Press Release issued by Parent on June 10, 1996.
(a)(9) -- Press Release issued by Parent on June 11, 1996.
(b) -- Commitment Letter, dated June 9, 1996 and related Fee Letter, dated as of June 9, 1996,
from Chemical Bank and Chase Securities Inc.
(c) -- Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the Purchaser and
the Company.
(d) -- None.
(e) -- Not applicable.
(f) -- None.
</TABLE>
6
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Rights)
of
COMMUNITY HEALTH SYSTEMS, INC.
at
$52.00 Net Per Share
by
FLCH ACQUISITION CORP.
a corporation formed by
FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF COMMUNITY HEALTH SYSTEMS, INC. (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES
PURSUANT THERETO.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED)
OF THE OFFER THAT NUMBER OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF
THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS. SEE SECTIONS 12 AND 14.
------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S
SHARES AND THE ASSOCIATED RIGHTS (EACH AS HEREINAFTER DEFINED) SHOULD EITHER (I)
COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) IN
ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL AND MAIL OR
DELIVER THE CERTIFICATE(S) REPRESENTING THE TENDERED SHARES, AND ALL OTHER
REQUIRED DOCUMENTS, TO THE DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO THE
PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 OR (II) REQUEST HIS
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE
TRANSACTION FOR HIM. A STOCKHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT
SUCH PERSON IF HE DESIRES TO TENDER SUCH SHARES.
A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
REPRESENTING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS MAY TENDER SUCH SHARES
BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR TO THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE
NUMBERS SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES
OF THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED
DELIVERY AND OTHER RELATED MATERIALS MAY BE OBTAINED FROM THE INFORMATION AGENT
OR FROM BROKERS, DEALERS, COMMERCIAL BANKS AND TRUST COMPANIES.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
June 11, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION
1. Terms of the Offer.............................................. 4
2. Acceptance for Payment and Payment for Shares................... 4
3. Procedure for Tendering Shares.................................. 6
4. Withdrawal Rights............................................... 8
5. Certain Federal Income Tax Consequences......................... 9
6. Price Range of Shares; Dividends................................ 9
7. Effect of the Offer on the Market for Shares, Stock Quotation,
Exchange Act Registration and Margin Securities................ 10
8. Certain Information Concerning the Company...................... 11
9. Certain Information Concerning Forstmann Little, Parent and the
Purchaser...................................................... 13
10. Source and Amount of Funds...................................... 15
11. Background of the Offer......................................... 18
12. Purpose of the Offer and the Merger; Plans for the Company; The
Merger Agreement and the Rights Agreement...................... 28
13. Dividends and Distributions..................................... 28
14. Certain Conditions to the Offer................................. 29
15. Certain Regulatory and Legal Matters............................ 30
16. Fees and Expenses............................................... 32
17. Miscellaneous................................................... 32
</TABLE>
<TABLE>
<S> <C> <C>
Schedule I -- GENERAL PARTNERS OF FORSTMANN LITTLE & CO., FORSTMANN
LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-VI, L.P., FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P., FLC PARTNERSHIP, L.P.,
FLC XXIX PARTNERSHIP AND FLC XXX PARTNERSHIP........ I-1
Schedule II -- DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE
PURCHASER........................................... II-1
</TABLE>
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
COMMUNITY HEALTH SYSTEMS, INC.:
INTRODUCTION
FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of Common Stock,
par value $.01 per share (the "Common Stock"), including the associated
preferred share purchase rights (the "Rights" and, together with the Common
Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation
(the "Company"), at a purchase price of $52.00 per Share, net to the seller in
cash, without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). The Rights were issued pursuant
to a Rights Agreement dated as of September 7, 1995 (the "Rights Agreement"),
between the Company and First Union National Bank of North Carolina, as rights
agent, and are currently evidenced by and trade with certificates evidencing the
Common Stock. See Section 12 for a brief discussion of the Rights Agreement and
its application to the Offer and the Merger (as hereinafter defined).
Parent and the Purchaser are corporations formed by Forstmann Little & Co.
Equity Partnership-V, L.P., a Delaware limited partnership ("Forstmann Little"),
in connection with the Offer and the transactions contemplated thereby. The
general partner of Forstmann Little is FLC XXX Partnership, a New York general
partnership ("FLC XXX"). For information concerning Forstmann Little and FLC
XXX, see Section 9.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Lehman Brothers Inc. ("Lehman
Brothers"), which is acting as Dealer Manager (the "Dealer Manager"), Chase
Mellon Shareholder Services, L.L.C., which is acting as the Depositary (the
"Depositary"), and Georgeson & Company Inc., which is acting as Information
Agent (the "Information Agent"), incurred in connection with the Offer. See
Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS") HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT THERETO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the
Company's financial advisor, has delivered to the Board of Directors its written
opinion dated June 9, 1996 to the effect that, as of such date, the cash
consideration of $52.00 per Share to be received by the holders of the Shares in
the Offer and the Merger is fair to such stockholders from a financial point of
view. Such opinion is set forth in full as an annex to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders of the Company concurrently herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER
OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON
A FULLY DILUTED BASIS (SUCH CONDITION THE "MINIMUM CONDITION", AND SUCH SHARES
THE "MINIMUM SHARES"). SEE SECTIONS 12 AND 14.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 9, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the
Company, pursuant to which, as promptly as practicable following the later of
the consummation of the Offer and the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company. Following
the consummation of the Merger, the Company will be the surviving corporation
(the "Surviving Corporation"). Under the Merger Agreement, with the mutual
agreement of the Parent and the Company, the Merger may be restructured to
1
<PAGE>
be a merger of the Company into the Purchaser, in which case the Purchaser would
be the Surviving Corporation. The Purchaser also has the right to assign its
rights under the Merger Agreement to an affiliate of the Purchaser. In the
Merger, each outstanding Share (other than Shares held by the Company or owned
by Parent or the Purchaser or any other subsidiary of either Parent or the
Purchaser and other than Shares held by stockholders, if any, who perfect their
appraisal rights under Delaware law) will be converted into the right to receive
$52.00, without interest thereon, in cash (the "Merger Consideration") and the
Company will become a wholly owned subsidiary of Parent. See Section 12.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"), the
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, and regardless of whether or not any of the events set forth
in Section 14 hereof shall have occurred or shall have been determined by the
Purchaser to have occurred, (i) to extend the period of time during which the
Offer is open, and thereby delay acceptance for payment of and the payment for
any Shares, by giving oral or written notice of such extension to the Depositary
and (ii) to amend the Offer in any other respect by giving oral or written
notice of such amendment to the Depositary.
If by 12:00 Midnight, New York City time, on Tuesday, July 9, 1996 (or any
other date or time then set as the Expiration Date), any or all conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, to (i) terminate the Offer and not accept for payment any Shares and
return all tendered Shares to tendering stockholders, (ii) waive all the
unsatisfied conditions and, subject to complying with the terms of the Merger
Agreement and the applicable rules and regulations of the Commission, accept for
payment and pay for all Shares validly tendered prior to the Expiration Date and
not theretofore withdrawn, (iii) extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (iv) amend the Offer. The Merger Agreement provides that, so long as
the Merger Agreement is in effect and the Offer conditions have not been
satisfied or waived, at the request of the Company, the Purchaser will, and
Parent will cause the Purchaser to, extend the Offer for an aggregate period of
not more than 20 business days (for all such extensions) beyond the originally
scheduled expiration date of the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by public announcement thereof. In the case
of an extension, Rule 14e-1(d) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires that the announcement be issued no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act, subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change). Without limiting the obligation of the Purchaser under such rules or
the manner in which the Purchaser may choose to make any public announcement,
the Purchaser will not have any obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to the
Dow Jones News Service.
In the Merger Agreement, the Purchaser has agreed that, except as otherwise
required by law, it will not, without the prior consent of the Company, extend
the Offer if all of the Offer conditions are satisfied or waived, except that
the Purchaser may, in its sole discretion, extend the Offer at any time and from
time to time (i) if at the then scheduled expiration date of the Offer any of
the conditions to the Purchaser's obligation to accept for payment and pay for
Shares shall not have been satisfied or waived, (ii) for any period required by
any rule, regulation, interpretation or position of the Commission or its staff
applicable to the Offer, (iii) for any period required by applicable law in
connection with an increase in the consideration to be paid pursuant to the
Offer, and (iv) if all Offer conditions are satisfied or waived but the number
of Shares tendered is 85% or more, but less than 90%, of the then outstanding
number of Shares, for an aggregate period of not more than 5 business days (for
all such extensions under this clause (iv)) beyond the latest expiration date
that would be permitted under clause (i), (ii) or (iii) of this sentence. In
addition, the
2
<PAGE>
Purchaser has agreed that, without the prior written consent of the Company it
will not (i) waive the Minimum Condition, (ii) reduce the number of Shares
subject to the Offer, (iii) reduce the price per Share to be paid pursuant to
the Offer, (iv) change the form of consideration payable in the Offer, or (v)
amend or modify any term or condition of the Offer (including the conditions
described in Section 14) in any manner adverse to the holders of Shares.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of, or payment for, Shares or is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the consent of the Company, the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to stockholders. As used in this Offer to Purchase, "business day"
has the meaning set forth in Rule 14d-1 under the Exchange Act.
Based on the representations and warranties of the Company contained in the
Merger Agreement and information provided by the Company, as of June 6, 1996;
(i) 19,731,068 Shares were outstanding and (ii) 2,017,515 Shares were reserved
for issuance upon the exercise of outstanding employee stock options.
Based on the foregoing, the Minimum Condition will be satisfied if
10,874,292 Shares are validly tendered and not withdrawn prior to the Expiration
Date. The number of Shares required to be validly tendered and not withdrawn in
order to satisfy the Minimum Condition will increase to the extent additional
Shares are deemed to be outstanding on a fully diluted basis under the Merger
Agreement. For purposes of the Merger Agreement, "on a fully diluted basis"
means, as of any date, the number of Shares outstanding, together with Shares
the Company is then required to issue pursuant to obligations outstanding at
that date under employee stock option or other benefit plans or otherwise
(assuming all options and other rights to acquire Shares are fully vested and
exercisable and all Shares issuable at any time have been issued), including
without limitation, pursuant to the Company's stock option plans (the "Stock
Option Plans").
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by the
requisite vote or consent of the stockholders of the Company. Under the General
Corporation Law of the State of Delaware ("Delaware Law") and the Company's
Amended and Restated Certificate of Incorporation, the stockholder vote
necessary to approve the Merger will be the affirmative vote of the holders of
at least a majority of the outstanding Shares, including Shares held by the
Purchaser and its affiliates. Accordingly, if the Purchaser acquires a majority
of the outstanding Shares, the Purchaser will have the voting power required to
approve the Merger without the affirmative vote of any other stockholders of the
Company. Furthermore, if the Purchaser acquires at least 90% of the outstanding
Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect
the Merger pursuant to the "short-form" merger provisions of Section 253 of the
Delaware Law,
3
<PAGE>
without prior notice to, or any action by, any other stockholder of the Company.
In such event, the Purchaser intends to effect the Merger as promptly as
practicable following the purchase of Shares in the Offer. The Merger Agreement
is more fully described in Section 12.
On or about the date of the commencement of the Offer, the Company is
commencing an offer (the "Debenture Offer") to purchase all of its outstanding
10 1/4% Senior Subordinated Debentures due 2003 (the "Debentures") for an amount
in cash equal to 107 3/4% (109 3/4% including payment of an early consent fee
and consent fee) of their principal amount, plus accrued and unpaid interest to,
but not including the Payment Date (as defined in the related offer to purchase
and consent solicitation statement), from any and all registered holders
thereof. In conjunction with the Debenture Offer, the Company is soliciting
consents of the registered holders of the Debentures to certain proposed
amendments to the Indenture, dated as of August 11, 1993 (the "Indenture"),
pursuant to which the Debentures were issued. The consummation of the Debenture
Offer is conditioned on the consummation of the Offer.
In connection with such solicitation, each holder of record of the
Debentures who validly consents to the proposed amendments (i) prior to the
later of the tenth business day after commencement of the Debenture Offer and
the date the requisite consents to amend the Indenture are achieved and a
supplemental indenture executed will receive a consent payment equal to 3/4% of
the principal amount of the Debentures for which consents are granted, and (ii)
prior to the expiration date of the Debenture Offer will receive an additional
consent payment equal to 1 1/4% of the principal amount of the Debentures for
which consents are granted.
The Company has distributed one Right for each outstanding share of Common
Stock pursuant to the Rights Agreement. Based on the information disclosed by
the Company in the Merger Agreement and in the Schedule 14D-9, in connection
with the Company's entering into the Merger Agreement, the Board of Directors
authorized an amendment to the Rights Agreement so that the Rights Agreement
shall not be applicable to the purchase of the Shares pursuant to the Offer or
the Merger or the consummation of the other transactions contemplated by the
Merger Agreement. If the Rights Agreement had not been so amended a distribution
of Rights certificates separate from the Common Stock might have resulted from
the Offer or the Merger Agreement or any of the respective transactions
contemplated thereby.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not withdrawn in accordance with
Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time,
on Tuesday, July 9, 1996, unless and until the Purchaser (subject to the terms
of the Merger Agreement) shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by the Purchaser, shall expire.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition and the other conditions set forth in Section 14. Subject to the terms
and conditions contained in the Merger Agreement, the Purchaser reserves the
right (but shall not be obligated) to waive any or all such conditions.
The Company is providing the Purchaser with its list of stockholders and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares and will be furnished by the Purchaser to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
4
<PAGE>
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date, and not properly withdrawn in
accordance with Section 4, promptly after the Expiration Date. Any determination
concerning the satisfaction or waiver of such terms and conditions will be
within the sole discretion of the Purchaser, and such determination will be
final and binding on all tendering stockholders. See Sections 1 and 14. The
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of, or payment for, Shares in order to comply in whole or
in part with any applicable law. Any such delays will be effected in compliance
with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares or timely confirmation (a "Book-Entry Confirmation") of the
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility" and, collectively, the "Book Entry Transfer
Facilities") pursuant to the procedures set forth in Section 3, (ii) a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as hereinafter
defined) in connection with a book-entry transfer and (iii) any other documents
required by the Letter of Transmittal.
The per Share consideration paid to any stockholder pursuant to the Offer
will be the highest per Share consideration paid to any other stockholder
pursuant to the Offer.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and any such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be returned,
without expense to the tendering stockholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the Depositary's account at
a Book-Entry Transfer Facility pursuant to the procedures set forth in Section
3, such Shares will be credited to an account maintained at the appropriate
Book-Entry Transfer Facility), as promptly as practicable after the expiration
or termination of the Offer.
5
<PAGE>
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to any of its affiliates (including Parent), or the right
to purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer of Shares, and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date. In addition, either (i) certificates for
tendered Shares must be received by the Depositary along with the Letter of
Transmittal at one of such addresses or such Shares must be tendered pursuant to
the procedure for book-entry transfer set forth below (and a Book-Entry
Confirmation received by the Depositary), in each case prior to the Expiration
Date, or (ii) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Shares by causing a Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account at a Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signature guarantees or an Agent's Message in
connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must, in any case, be transmitted to, and
received by, the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure described below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH
BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered holder
of Shares (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities whose name appears on a security
position listing as the owner of the Shares) tendered therewith and such
registered holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (ii) such Shares are tendered for the account of a bank,
broker, dealer, credit union, savings association or other entity that is a
member in good standing of a recognized Medallion Program approved by The
Securities Transfer Association, Inc. (an "Eligible Institution"). In all other
cases, all signatures on the Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If
the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
issued to a person other than the registered holder of the certificates
surrendered, the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed
6
<PAGE>
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
as described above. See Instruction 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below, prior to the Expiration Date;
and
(3) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with any required signature
guarantees and any other documents required by the Letter of Transmittal,
are received by the Depositary within three New York Stock Exchange, Inc.
("NYSE") trading days after the date of execution of such Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a signature guarantee by an Eligible Institution in the form set
forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for the Shares or a Book-Entry
Confirmation with respect to such Shares, (ii) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with any
required signature guarantees or an Agent's Message in connection with a
book-entry delivery of Shares, and (iii) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations are actually received by the Depositary. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
BACKUP WITHHOLDING. Payments in connection with the Offer or the Merger may
be subject to "backup withholding" at a rate of 31%. Backup withholding
generally applies if the stockholder (a) fails to furnish his social security
number, (b) furnishes an incorrect taxpayer identification number ("TIN"), (c)
fails to properly include a reportable interest or dividend payment on his
federal income tax return, or (d) under certain circumstances, fails to provide
a certified statement, signed under penalties of perjury, that the TIN provided
is his correct number and that he is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons
generally are entitled to exemption from backup withholding, including
corporations and financial institutions. Certain penalties apply for failure to
furnish correct information and for failure to include reportable payments in
income. Each stockholder should consult with his own tax advisor as to his
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. Tendering stockholders may be able to prevent backup
withholding by completing the Substitute Form W-9 included in the appropriate
Letter of Transmittal.
All stockholders surrendering Shares pursuant to the Offer should complete
and sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the
7
<PAGE>
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Purchaser and the Depositary). Noncorporate foreign stockholders should complete
and sign the main signature form and a Form W-8, Certificate of Foreign Status,
a copy of which may be obtained from the Depositary, in order to avoid backup
withholding. See Instruction 10 to the Letter of Transmittal.
APPOINTMENT. By executing the Letter of Transmittal, the tendering
stockholder will irrevocably appoint designees of the Purchaser as such
stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after June 11, 1996. All such proxies shall be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts for payment
Shares tendered by such stockholder as provided herein. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent powers of attorney and proxies may be given
(and, if given, will not be deemed effective). The designees of the Purchaser
will thereby be empowered to exercise all voting and other rights with respect
to such Shares or other securities or rights in respect of any annual, special
or adjourned meeting of the Company's stockholders, or otherwise, as they in
their sole discretion deem proper. The Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able to
exercise full voting and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of stockholders then
scheduled.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders determined by it not to be in proper form or
the acceptance for payment of or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right, in its sole discretion, subject to the terms and conditions of the Merger
Agreement, to waive any of the conditions of the Offer or any defect or
irregularity in any tender with respect to any particular Shares, whether or not
similar defects or irregularities are waived in the case of other Shares. No
tender of Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been cured or waived. None of Parent, the
Purchaser, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless accepted for payment and paid for by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after August 9, 1996.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set
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<PAGE>
forth in Section 3, the notice of withdrawal must specify the name and number of
the account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares. Withdrawals of tenders of Shares may not be rescinded, and
any Shares properly withdrawn will thereafter be deemed not validly tendered for
any purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES
OF THE OFFER AND THE MERGER TO HOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO
THE OFFER OR WHOSE SHARES ARE CONVERTED INTO THE RIGHT TO RECEIVE CASH IN THE
MERGER (INCLUDING PURSUANT TO THE EXERCISE OF APPRAISAL RIGHTS). THE DISCUSSION
APPLIES ONLY TO HOLDERS OF SHARES IN WHOSE HANDS SHARES ARE CAPITAL ASSETS, AND
MAY NOT APPLY TO SHARES RECEIVED UPON CONVERSION OF SECURITIES OR EXERCISE OF
WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OR PURSUANT TO THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR TO HOLDERS OF SHARES WHO
ARE IN SPECIAL TAX SITUATIONS (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS OR NON-U.S. PERSONS).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN
TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH
STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (and also may be a taxable transaction under applicable state,
local and other income tax laws). In general, for federal income tax purposes, a
holder of Shares will recognize gain or loss equal to the difference between his
adjusted tax basis in the Shares sold pursuant to the Offer or converted into
the right to receive cash in the Merger and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer or converted to cash in the Merger. Such gain or loss will be
capital gain or loss (other than, with respect to the exercise of appraisal
rights, amounts, if any, which are or are deemed to be interest for federal
income tax purposes, which amounts will be taxed as ordinary income) and will be
long-term gain or loss if, on the date of sale (or, if applicable, the date of
the Merger), the Shares were held for more than one year. In the case of an
individual, net long-term capital gain may be subject to a reduced rate of tax
and net capital losses may be subject to limits on deductibility.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" as discussed in Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Company Form 10-K") and information supplied to
the Purchaser by the Company, the Shares were approved for listing on the NYSE
under the trading symbol "CYH" on October 19, 1994. Prior to such date, the
Shares were traded on the National Association of Securities Dealers Automated
Quotation National Market System ("NASDAQ/NMS"). The Company has never paid or
declared cash dividends on the Shares.
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The following table sets forth, for the periods indicated, the high and low
closing bid prices per Share on the NASDAQ/NMS and the high and low closing sale
prices per Share as reported on the NYSE, as applicable, for the applicable
periods.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1994:
First Quarter.............................................................. $ 26 $ 17 1/2
Second Quarter............................................................. 24 1/4 19 1/4
Third Quarter.............................................................. 27 20 1/4
Fourth Quarter............................................................. 27 3/4 22 1/8
1995:
First Quarter.............................................................. $ 31 5/8 $ 26 1/4
Second Quarter............................................................. 36 30 5/8
Third Quarter.............................................................. 42 3/4 33 3/8
Fourth Quarter............................................................. 40 3/4 29
1996:
First Quarter.............................................................. $ 44 $ 34 1/8
Second Quarter (through June 7, 1996)...................................... $ 44 5/8 $ 40 1/4
</TABLE>
On June 7, 1996, the last full trading day before the public announcement of
the execution of the Merger Agreement, the closing sales price per Share as
reported on the NYSE was $43 3/8. On June 10, 1996, the last full trading day
before the commencement of the Offer, the closing sales price per Share as
reported on the NYSE was $51 7/8 per Share. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; STOCK QUOTATION; EXCHANGE ACT
REGISTRATION AND MARGIN SECURITIES.
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares, if any, held by the public.
The Shares are currently listed and traded on the NYSE, which constitutes
the principal trading market for the Shares. Depending upon the number of Shares
purchased pursuant to the Offer, the Shares may no longer meet the requirements
of the NYSE for continued listing and may, therefore, be delisted from such
exchange. According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of publicly held Shares
(excluding Shares held by officers, directors, their immediate families and
other concentrated holdings of 10% or more) were less than 600,000, there were
fewer than 1,200 holders of at least 100 shares or the aggregate market value of
the publicly held Shares were less than $5 million. The Company has informed the
Purchaser that as of June 6, 1996 there were approximately 829 holders of record
and 19,731,068 Shares were outstanding. If, as a result of the purchase of
Shares pursuant to the Offer, the Shares no longer meet the requirements of the
NYSE for continued listing and the listing of Shares is discontinued, the market
for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and that
price quotations for the Shares would be reported by such exchange or through
the NASDAQ/NMS or other sources. The extent of the public market for the Shares
and availability of such quotations would, however, depend upon such factors as
the number of holders and/or the aggregate market value of the publicly held
Shares at such time, the interest in maintaining a market in the Shares on the
part of securities firms, the possible termination of registration of the Shares
under the Exchange Act and other factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be
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<PAGE>
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the Company,
such as the short-swing profit recovery provisions of Section 16(b) of the
Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings and
the related requirement of furnishing an annual report to stockholders, and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act"), may be impaired or eliminated.
The Purchaser intends to seek delisting of the Shares from the NYSE and to
cause the Company to apply for termination of registration of the Shares under
the Exchange Act as soon after the completion of the Offer as the requirements
for such delisting and termination are met. If registration of the Shares is not
terminated prior to the Merger, then the Shares will cease to be reported on the
NYSE and the registration of the Shares under the Exchange Act will be
terminated following the consummation of the Merger.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that
following the Offer the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities" or be eligible for listing or NASDAQ/NMS
reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The historical information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources. None of Parent, the Purchaser or the Dealer Manager assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information to Parent or the Purchaser.
The Company is a Delaware corporation with its principal place of business
located at 155 Franklin Road, Brentwood, Tennessee, 37027. According to the
Company Form 10-K, the Company owns and operates acute care hospitals that are
the prominent providers of primary health care services in non-urban
communities. As the nucleus of their local healthcare delivery systems, the
Company's hospitals offer a variety of services including a broad range of
inpatient and outpatient surgical services, rehabilitation treatment, home
health care, psychiatric and chemical dependency treatment, and skilled nursing
care. As of March 31, 1996, the Company owned, leased or managed 38 hospitals,
with a total of 3,276 licensed beds in 18 states, primarily in the southeastern
and southwestern regions of the United States. Of the 38 hospitals operated, 28
are owned, six are leased and four are managed.
Set forth below is certain selected historical consolidated financial
information with respect to the Company and its subsidiaries excerpted or
derived from the audited consolidated financial statements included in the
Company Form 10-K and from the unaudited consolidated financial statements
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such reports and
such other documents and all the financial information (including any related
notes) contained therein. The reports and other documents filed with the
Commission should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information".
11
<PAGE>
COMMUNITY HEALTH SYSTEMS, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net operating revenues............................. $ 155,243 $ 142,065 $ 562,745 $ 467,214 $ 421,253
Income before extraordinary items.................. 12,730 12,068 21,585 11,389 18,150
Extraordinary items:
Gain on debt restructuring....................... -- -- -- -- 21,311
Loss from early extinguishment of debt........... -- -- -- (3,521) --
Net income......................................... 12,730 12,068 21,585 7,868 39,461
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income per share before extraordinary
items............................................ 0.63 0.61 1.08 0.73 1.20
Extraordinary items:
Gain on debt restructuring....................... -- -- -- -- 1.41
Loss from early extinguishment of debt........... -- -- -- (0.23) --
Net income per share............................... 0.63 0.61 1.08 0.50 2.61
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1996
----------- DECEMBER 31,
(UNAUDITED) 1995
------------
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Total current assets................................................................ $ 152,409 $ 156,597
Total assets........................................................................ 568,959 567,713
Total current liabilities........................................................... 73,873 76,279
Long-term debt...................................................................... 191,884 207,013
Total stockholders' equity.......................................................... 249,046 232,655
</TABLE>
CERTAIN COMPANY PROJECTIONS.
To the knowledge of Parent and the Purchaser, the Company does not as a
matter of course make public forecasts as to its future financial performance.
However, in connection with the preliminary discussions concerning the
feasibility of the Offer and the Merger, the Company prepared and furnished
Parent with certain financial projections.
The projections presented in the tables below (the "Projections") are
derived or excerpted from information provided by the Company and are based on
numerous assumptions concerning future events. The Projections have not been
adjusted to reflect the effects of the Offer or the Merger or the incurrence of
indebtedness in connection therewith. The Projections should be read together
with the other information contained in this Section 8.
COMMUNITY HEALTH SYSTEMS, INC.
SELECTED PROJECTIONS OF FUTURE OPERATING RESULTS -- WITHOUT ADDITIONAL FUTURE
ACQUISITIONS (1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1996 1997 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Revenue............................................ $ 573.3 $ 617.8 $ 671.5 $ 733.1
Net Income............................................. 45.6 56.2 67.9 81.0
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Assumes capital expenditures of $1 million per hospital per year or a total
of $30 million per year which is depreciable on a weighted average basis
over 10.7 years and physician recruiting investment of $200,000 per hospital
annually or a total of $6 million, which is amortizable over 3 years.
12
<PAGE>
COMMUNITY HEALTH SYSTEMS, INC.
SELECTED PROJECTIONS OF FUTURE OPERATING RESULTS -- WITH ACQUISITIONS(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1996 1997 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Revenue.......................................... $ 594.1 $ 738.0 $ 893.9 $ 1,065.2
Net Income........................................... 46.4 63.2 82.2 104.8
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Assumes hypothetical acquisitions by the Company at an aggregate cost of $70
million for 1996 and at an aggregate cost of $90 million for each of 1997,
1998 and 1999. Inpatient revenues are assumed to grow 6% per year and
outpatient revenues are assumed to grow at 10%. Operating margins are
assumed to achieve a 50 basis point improvement in the first full year after
acquisition and 100 basis points each year thereafter. Capital expenditures
and physician recruiting investment are assumed to total $3 million per year
for each $70 million of acquisitions.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION
WAS PROVIDED TO PARENT AND ITS PROSPECTIVE LENDERS. THESE FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE PROJECTIONS
REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY, WITH
RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND
FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING HYPOTHETICAL ACQUISITION
ASSUMPTIONS AND ASSUMED INTEREST EXPENSE AND EFFECTIVE TAX RATES CONSISTENT WITH
HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY
OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO
APPROVAL BY PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND
ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE
PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS
AN INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE
FINANCIAL ADVISORS CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE
PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS
SUCH. NONE OF PARENT, THE PURCHASER, THE COMPANY AND THEIR RESPECTIVE FINANCIAL
ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY
OR COMPLETENESS OF THE PROJECTIONS. NONE OF PARENT, THE PURCHASER, THE COMPANY
AND ANY OF THEIR FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO
ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF
THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT
CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF
FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING
THE PROJECTIONS ARE SHOWN TO BE IN ERROR.
AVAILABLE INFORMATION.
The Company is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, is required to file reports and other information
with the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, options granted to them, the principal holders
of the Company's securities and any material interests of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies should be obtainable, by mail, upon payment of
the Commission's customary charges, by writing to
13
<PAGE>
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Such information should also be available for inspection at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.
9. CERTAIN INFORMATION CONCERNING FORSTMANN LITTLE, PARENT AND THE PURCHASER.
Forstmann Little is a private investment partnership. The general partner of
Forstmann Little is FLC XXX, the general partners of which are Theodore J.
Forstmann, Nicholas C. Forstmann, Steven B. Klinsky, Sandra J. Horbach and
Winston W. Hutchins. The foregoing individuals are also the general partners of
FLC XXIX Partnership ("FLC XXIX"), a New York general partnership. FLC XXIX is
the general partner of Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership-VI, L.P. ("MBO-VI"), which is a Delaware limited
partnership formed to provide the subordinated debt financing and a portion of
the equity financing required in leveraged buyout acquisitions arranged by
Forstmann Little. Forstmann Little & Co., a New York limited partnership
affiliated with Forstmann Little, is a party to various ancillary agreements
entered into in connection with the Offer and the transactions contemplated
thereby, including the Confidentiality Agreement, the Engagement Letter and the
Dealer Manager Agreement (each as hereinafter defined). The General Partners of
Forstmann Little & Co. are FLC XXIX and FLC Partnership, L.P., a New York
limited partnership ("FLC"). The general partners of FLC are the same as the
general partners of FLC XXIX. Forstmann Little, MBO-VI and Forstmann Little &
Co. are collectively referred to as the "FL & Co. Companies". FLC, FLC XXIX, FLC
XXX and the individuals listed above are collectively herein referred to as the
"General Partners". The offices of each of the foregoing partnerships are
located at 767 Fifth Avenue, New York, New York 10153.
Each of Parent and the Purchaser is a Delaware corporation, newly formed by
Forstmann Little for the purpose of effecting the Offer and the Merger. The
offices of Parent and the Purchaser are located at 767 Fifth Avenue, New York,
New York 10153. Parent owns all the outstanding capital stock of the Purchaser.
It is not anticipated that, prior to the consummation of the Offer and the
Merger, the Purchaser or Parent will have any significant assets or liabilities
or will engage in any activities other than those incident to the Offer and the
Merger and the financing thereof.
After the completion of the sale of the equity interests in Parent, the
outstanding common stock of Parent will be owned by Forstmann Little and MBO-VI.
In each of its prior acquisitions, Forstmann Little has offered equity
ownership opportunities to the key management of the companies it has acquired,
and likewise intends to offer key management of the Company an opportunity to
acquire a portion of the equity interest in Parent. While general discussions
regarding this have been held with certain members of management, and it is
expected that senior executive and operating management will be offered equity
ownership, no decisions have been made at this time, either as to the identity
of the persons who may be offered the opportunity to invest in Parent or as to
the amount or nature of any equity interest any members of management of the
Company may be offered. If and to the extent members of management of the
Company are given the opportunity to, and do, invest in the equity of Parent,
the equity interest of Forstmann Little and MBO-VI would be reduced.
For certain information concerning the General Partners and the directors
and executive officers of the Purchaser, see Schedules I and II, respectively,
to this Offer to Purchase.
Except as set forth in this Offer to Purchase: (i) none of the FL & Co.
Companies, Parent, the Purchaser and the General Partners nor, to the best
knowledge of any of the foregoing, any of the persons listed in Schedule I or II
to this Offer to Purchase or any associate or majority owned subsidiary of any
of the foregoing, beneficially owns or has a right to acquire any Shares or any
other equity securities of the Company; (ii) none of the FL & Co. Companies,
Parent, the Purchaser or the General Partners nor, to the best knowledge of any
of the foregoing, any of the persons or entities referred to in clause (i) above
or any of their executive officers, directors, or subsidiaries has effected any
transaction in the Shares or any other equity securities of the Company during
the past 60 days; (iii) none of the FL & Co. Companies, Parent, the Purchaser
and the General Partners nor, to the best knowledge of any of the foregoing, any
of the persons listed in Schedule I or II to this Offer to Purchase has any
contract, arrangement, understanding or
14
<PAGE>
relationship with any other person with respect to any securities of the
Company, including but not limited to, contracts, arrangements, understandings
or relationships concerning the transfer or voting thereof, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies, consents or authorizations; (iv)
since January 1, 1993, there have been no transactions or business relationships
which would be required to be disclosed under the rules and regulations of the
Commission between any of the FL & Co. Companies, Parent, the Purchaser and the
General Partners or any of their respective subsidiaries or, to the best
knowledge of any of the FL & Co. Companies, Parent, the Purchaser and the
General Partners, any of the persons listed in Schedule I or II to this Offer to
Purchase, on the one hand, and the Company or any of its executive officers,
directors or affiliates, on the other hand; and (v) since January 1, 1993, there
have been no contacts, negotiations or transactions between any of the FL & Co.
Companies, Parent, the Purchaser and the General Partners or any of their
respective subsidiaries or, to the best knowledge of any of the FL & Co.
Companies, Parent, the Purchaser and the General Partners, any of the persons
listed in Schedule I or II to this Offer to Purchase, on the one hand, and the
Company or its subsidiaries or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets of the Company or any of its subsidiaries.
None of the FL & Co. Companies, Parent, the Purchaser and the General
Partners had any relationship with the Company prior to the commencement of the
discussions which led to the execution of the Merger Agreement. See Section 11.
Each of the FL & Co. Companies, Parent, the Purchaser and the General Partners
disclaims that it is an "affiliate" of the Company within the meaning of Rule
13e-3 under the Exchange Act.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all of the
Shares and to cancel all of the Options pursuant to the Offer and the Merger and
to pay related fees and expenses is expected to be approximately $1.2 billion.
In addition, the total amount of funds required by the Company to repurchase or
refinance certain of its existing indebtedness is expected to be approximately
$140 million. The Offer is not conditioned on the obtaining of financing.
The FL & Co. Companies and the Purchaser expect to obtain debit and equity
financing in an aggregate amount of approximately $1.43 billion for the purchase
of Shares by the Purchaser in the Offer and the payment of related fees and
expenses and the repurchase or refinancing by the Company of certain of its
existing indebtedness of which up to $450 million to finance the Offer (the
"Demand Facility") will be obtained from the bank facilities described below, a
minimum of $480 million will be obtained from the sale by the Purchaser of its
common stock to Parent and approximately $500 million will be obtained from the
sale by the Purchaser at par of an aggregate of $500 million principal amount of
its Subordinated Note (the "Purchaser Subordinated Pledged Note") to Parent.
Parent will, in turn, obtain the funds required to purchase the common stock of
the Purchaser and the Purchaser Subordinated Pledged Note from the sale of its
common stock to the FL & Co. Companies and, possibly, management and from the
sale, at par, of an aggregate of $500 million principal amount of its
Subordinated Debentures (the "Parent Subordinated Debentures") to MBO-VI. At the
request of the Purchaser, the Company may be designated as the borrower of a
portion of the Demand Facility in order to repurchase or refinance certain of
the Company's outstanding indebtedness, including, without limitation, its
revolving credit and letter of credit facilities. At the closing of the Merger,
the FL & Co. Companies and the Purchaser expect that the Surviving Corporation
will obtain the funds to refinance the borrowings of the Purchaser (and, if any,
the Company) under the Demand Facility, to finance the payment of the
consideration payable in the Merger to the holders of Shares, to finance the
refinancing of all or such portion of the debt (approximately $198 million
outstanding as of March 31, 1996) of the Company outstanding after the Merger,
to pay the fees and expenses of the Offer and the Merger, to finance the
purchase price of permitted acquisitions and for general corporate purposes of
the Company through bank borrowings by the Surviving Corporation in an aggregate
amount of up to $900 million.
15
<PAGE>
Pursuant to a commitment letter, dated June 9, 1996 (the "Commitment
Letter"), Chase Securities Inc. and Chemical Bank ("Chemical") have committed to
provide a senior credit facility, or, to the extent the Demand Facility is made
available to the Company, an unsecured credit facility, under which Chemical
will make demand loans to the Purchaser (the "Demand Loans") in an aggregate
principal amount up to $450 million.
The Demand Loans will be payable on demand at any time after three months
following the date the Purchaser accepts for payment at least a majority of the
Shares in the Offer (the "Offer Closing Date"), but in no event later than the
earlier of the date of the Merger and six months after the Offer Closing Date
(the date on which the Demand Loans are repayable, the "Maturity Date"). The
Demand Loans will bear interest at the highest of (i) the rate from time to time
publicly announced by Chemical in New York City as its prime rate (the "Prime
Rate"), (ii) the secondary market rate for three-month certificates of deposit
from time to time plus 1% and (iii) the federal funds rate from time to time,
plus 1/2 of 1%, in each case plus 1.50% per annum. Overdue principal, interest,
fees and other amounts owing will bear interest at 2% over the rate otherwise
applicable thereto. The Demand Loans will be available for multiple drawings
during the period commencing on the Offer Closing Date (in no event later than
November 30, 1996) and ending on the Maturity Date, provided that in no event
may the amount of Demand Loans made available to the Purchaser exceed 50% of the
purchase price of the Shares accepted for payment pursuant to the Offer or
otherwise acquired by the Purchaser.
The obligations of the Purchaser under the Demand Facility will be
unconditionally guaranteed by the Parent. The obligations of the Purchaser under
the Demand Facility and the guarantee thereof will be secured by a perfected
first priority security interest in (a) all of the capital stock of the
Purchaser and all Shares owned by the Purchaser or any affiliate or designee
thereof, whether acquired in the Offer or otherwise, and (b) all intercompany
notes.
All or a portion of the outstanding Demand Loans may be prepaid at any time
and the unutilized portion of the Demand Facility may be terminated in whole or
in part at the Purchaser's option. Such prepayments of the Demand Loans may not
be reborrowed.
The Demand Facility is conditioned on certain customary conditions,
including conditions substantially similar to those set forth in the Merger
Agreement, and are expected to contain customary representations and warranties,
covenants and events of default.
Pursuant to the Commitment Letter, Chemical also committed to provide an
aggregate principal amount of $900 million in financing to the Surviving
Corporation (the "Merger Commitment"). The financing under the Merger Commitment
will consist of (i) a 6 1/2 year term loan facility (the "Tranche A Term Loan
Facility") in an aggregate principal amount equal to $50 million, (ii) a 7 1/2
year term loan facility (the "Tranche B Term Loan Facility") in an aggregate
principal amount equal to $132.5 million, (iii) an 8 1/2 year term loan facility
(the "Tranche C Term Loan Facility") in an aggregate principal amount equal to
$132.5 million (collectively, the Tranche A Term Loan Facility, the Tranche B
Term Loan Facility and the Tranche C Term Loan Facility shall be referred to as
the "Term Loan Facilities"), (iv) a revolving credit facility (the "Revolving
Credit Facility") in an aggregate principal amount equal to $200 million, of
which up to $90 million may be used, to the extent available, for standby and
commercial letters of credit (each a "Letter of Credit" and collectively,
"Letters of Credit") and up to $25 million will be made available to the
Surviving Corporation pursuant to a swingline facility and (v) a reducing credit
facility (the "Acquisition Facility," and together with the Term Loan Facilities
and the Revolving Credit Facility, the "Merger Facilities") in an aggregate
principal amount equal to $385 million. At the election of the Purchaser, the
Acquisition Facility will be reduced by $100 million and a 9 1/2 year term loan
facility (the "Tranche D Term Loan Facility") will be established in an
aggregate principal amount equal to $100 million, with a repayment schedule to
be agreed upon between the Purchaser and Chemical.
Loans under the Term Loan Facilities (the "Term Loans") will be made to the
Surviving Corporation in one drawing on or before the date on which initial
Loans (as hereinafter defined) are made and the Merger is consummated (the
"Merger Closing Date"). The loans under the Tranche A Term Loan Facility will be
repayable in consecutive quarterly installments commencing on June 30, 1997:
amortization of $16 million in
16
<PAGE>
years two through three, $29 million in years four through six and $5 million in
year seven. The loans under the Tranche B Term Loan Facility will be repayable
in consecutive quarterly installments commencing on June 30, 1997: amortization
of $10 million in years two through six and $122.5 million in years seven
through eight. The loans under the Tranche C Term Loan Facility will be
repayable in consecutive quarterly installments commencing on June 30, 1997:
amortization of $12 million in years two through seven and $120.5 million in
years eight through nine.
Loans under the Revolving Credit Facility (the "Revolving Credit Loans") may
be made, and Letters of Credit may be issued, at any time during the period
between the Merger Closing Date and the date 6 1/2 years thereafter (the
"Termination Date"). No Letter of Credit will have an expiration date after the
Termination Date. Loans under the Acquisition Facility (the "Acquisition Loans",
and together with the Term Loans, and the Revolving Credit Loans, "Loans") may
be made at any time during the period between the Merger Closing Date and the
Termination Date.
The Acquisition Facility will be automatically reduced and prepaid to the
following levels on each of the following anniversaries of the Merger Closing
Date: third, 95%; fourth, 80%; fifth, 55%; sixth, 20%; and seventh, 0%.
The Surviving Corporation may elect that all or a portion of the Loans bear
interest at a rate per annum equal to (a) the highest of (i) the Prime Rate,
(ii) the secondary market rate for three-month certificates of deposit from time
to time plus 1% and (iii) the federal funds rate from time to time, plus 1/2 of
1% (such higher rate, the "ABR") or (b) the rate (grossed-up for reserve
requirements as described in the Commitment Letter) at which eurodollar deposits
for one, two, three or six months (as selected by the Surviving Corporation) are
offered in the interbank eurodollar market in the approximate amount of the
relevant Loan (the "Eurodollar Rate") in each case plus a margin which will vary
between 1.5% and 4% per annum, which margin will be subject to stepdowns based
on a ratio of total senior debt to consolidated EBITDA.
All or a portion of the outstanding Loans may be prepaid at any time and the
unutilized portion of the Revolving Credit Facility or the Acquisition Facility
may be terminated in whole or in part at the Surviving Corporation's option,
subject to certain conditions. Prepayments of Term Loans and the Acquisition
Loans may not be reborrowed.
The Loans shall be prepaid (and Letters of Credit shall be cash
collateralized or replaced) with the net proceeds (in excess of $20 million and
subject to exceptions to be agreed upon between the Purchaser and Chemical) of
certain permitted asset sales and issuances of debt obligations (other than
certain permitted indebtedness to be agreed upon) of the Surviving Corporation
or any of its subsidiaries following the Merger Closing Date. Such net proceeds
shall be applied, except to the extent the lenders agree otherwise, first to
prepay Term Loans and Acquisition Loans then outstanding, second to reduce the
Acquisition Facility, and then to prepay Revolving Credit Loans (and cash
collateralize or replace outstanding Letters of Credit) and simultaneously
reduce the Revolving Credit Facility.
Optional and mandatory prepayments of Term Loans will be applied among the
Term Loans under the Tranche A Term Loan Facility, the Tranche B Term Loan
Facility, the Tranche C Term Loan Facility and, if applicable, the Tranche D
Term Loan Facility on a pro rata basis. Prepayments applicable to the Term Loans
and the Acquisition Loans shall be applied, subject to the immediately preceding
sentence, first, to the installments (or scheduled reduction of commitments)
scheduled to be paid during the next twelve months after the date of such
prepayment and second, to the remaining installments (or scheduled reduction of
commitments) on a pro rata basis.
The Merger Facilities will be unconditionally guaranteed by the Parent and
all domestic subsidiaries of the Surviving Corporation. The Merger Facilities
and all guarantees thereof will be secured by (a) a perfected first priority
security interest in all of the capital stock of the Surviving Corporation and
all capital stock owned by the Surviving Corporation and its subsidiaries of all
material domestic subsidiaries (including any subsidiary acquired with the
proceeds of the Acquisition Facility) of the Surviving Corporation, and by a
first priority security interest in 65% of the capital stock of all material
first-tier foreign subsidiaries of the Surviving Corporation and (b) all
intercompany notes (including any note payable to the Parent related to
17
<PAGE>
the Offer, the Merger or the capitalization of the Surviving Corporation, if
applicable). In addition, the documentation for the Merger Facilities will
contain a negative pledge on the assets of the Surviving Corporation and its
subsidiaries, subject to exceptions to be agreed upon between the Surviving
Corporation and Chemical.
The Merger Facilities are conditioned on certain customary conditions and
representations and warranties, covenants and events of default.
Forstmann Little & Co. has agreed to pay to Chemical a financing delivery
fee equal to $1 million if (a) Chemical does not provide the Demand Facility or
the Merger Facilities due to Forstmann Little & Co. or one of its affiliates
obtaining financing from another source or (b) the Merger is not consummated and
Forstmann Little & Co. or one of its affiliates receives a termination fee or
other economic return (other than reimbursement of documented expenses), in each
case payable on the earlier of the date of expiration of Chemical's commitment
and the date Forstmann Little & Co. or its affiliates receive such fee or
economic return.
The Commitment Letter also provides for the payment to Chemical fees
customary for commitments of the types described herein, including commitment
fees, underwriting fees and annual administrative agent's fees. All such fees
are non-refundable.
In connection with the Commitment Letter, Forstmann Little has agreed to
indemnify Chemical and the lenders against certain liabilities. The foregoing
summary of the Commitment Letter is qualified in its entirety by reference to
the text of the Commitment Letter, which was filed as an exhibit to the
Purchaser's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") and
is incorporated herein by reference.
The Parent Subordinated Debentures issued to MBO-VI will bear interest at a
rate not in excess of 8.25% per annum and are expected to mature in three equal
annual installments commencing on the eleventh anniversary of issuance. The
Parent Subordinated Debentures will contain agreements, subordination
provisions, events of default, indemnities and certain other provisions which
are usual in institutional financings of this type.
11. BACKGROUND OF THE OFFER.
In late April, 1996, a representative of Merrill Lynch contacted Forstmann
Little to inquire as to Forstmann Little's potential interest in pursuing a
transaction with the Company. Following this contact, Forstmann Little initiated
a review of certain publicly available information concerning the Company.
On May 6, 1996, Forstmann Little & Co. entered into a confidentiality
agreement with the Company, pursuant to which Forstmann Little & Co. agreed to
treat as confidential certain information provided to it by or on behalf of the
Company and agreed for a period of two years not to propose any transaction with
the Company or its stockholders involving the Shares or an acquisition of
control of the Company without the consent of the Company or the Board of
Directors. On May 7, 1996, the Company furnished to Forstmann Little certain
non-public information about the Company. See Section 8. Thereafter,
representatives of Forstmann Little requested additional information concerning
the Company and had a series of telephone conversations and meetings with senior
and operating management of the Company and representatives of Merrill Lynch to
further investigate the business, strategies and prospects of the Company and to
discuss a possible acquisition of the Company by Forstmann Little and the
possible terms of the Merger Agreement. These conversations included preliminary
discussions between E. Thomas Chaney and Richard Ragsdale and representatives of
Forstmann Little regarding their continuing as equity investors in the Company
in the event that a transaction with Forstmann Little were to result from the
process.
On June 3, 1996 representatives of Merrill Lynch advised Forstmann Little
that the Board of Directors had established a special committee of the Board of
Directors in order, among other things, to consider any proposal to acquire the
Company that Forstmann Little might submit. Late on June 3, 1996, Forstmann
Little communicated a proposal to acquire the Company to Merrill Lynch.
Forstmann Little's proposal contemplated acquiring the Company at a price of
$50.50 per share, subject to certain conditions, but
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pursuant to a tender offer that would not be subject to any financing condition.
The proposal contemplated that the Company would grant Forstmann Little an
option to acquire 19.9% of the outstanding Shares, exercisable in certain
circumstances, a $75 million termination fee and reimbursement of Forstmann
Little's expenses, in each case payable if the transaction failed to proceed
under certain circumstances. Forstmann Little further indicated a desire to move
quickly to negotiate a definitive agreement and to announce a proposed
transaction. On June 5, 1996, Forstmann Little indicated to Merrill Lynch its
insistence that the Company work with Forstmann Little exclusively in
negotiating a transaction and that it effectively terminate the process in which
it was engaged with other prospective buyers of the Company. Forstmann Little
further indicated a willingness to increase its proposed purchase price in
exchange for such an exclusive arrangement. Over the next day, the parties
negotiated an understanding in which Forstmann Little increased its purchase
price to $52.00 per Share, withdrew its request for the 19.9% option, and
reduced its requested termination fee to $45 million, including expenses, in
exchange for the exclusive arrangement it desired, an undertaking by the Company
to schedule a meeting of the Board of Directors no later than June 9, 1996, the
Company's acceptance in principle of the form of acquisition agreement proposed
by Forstmann Little and the Company's acceptance in principle that there would
be a termination fee payable if the transaction failed to proceed under certain
circumstances. Thereafter, the representatives of Forstmann Little and the
Company continued negotiations regarding such proposed acquisition which
resulted in Parent, the Purchaser and the Company entering into the Merger
Agreement on June 9, 1996.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT AND THE RIGHTS AGREEMENT.
PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer is to enable Parent to acquire control of, and the
entire equity interest in, the Company. The purpose of the Merger is to acquire
all outstanding Shares not purchased pursuant to the Offer. The purchase of
Shares pursuant to the Offer will increase the likelihood that the Merger will
be effected. Following the completion of the Offer, Parent intends to acquire
any remaining Shares not then owned by it by consummating the Merger. In the
Merger, each outstanding Share (other than Shares held by the Company as
treasury stock, or owned by Parent, the Purchaser or any other subsidiary of
either Parent or the Purchaser and other than Shares held by stockholders who
perfect appraisal rights, if any, under the Delaware Law), will be converted
into the right to receive the Merger Consideration, without interest, and the
Company will become a wholly owned subsidiary of Parent.
The acquisition of the entire interest in the Company is structured as a
cash tender offer followed by a merger in order to expedite the opportunity for
Parent to obtain a controlling interest in the Company. Under the Delaware Law
and the Company's Restated Certificate of Incorporation, the affirmative vote of
the holders of a majority of the outstanding Shares is required to approve the
Merger. If the Minimum Condition is satisfied, Parent would have sufficient
voting power to approve the Merger without the affirmative vote of any other
stockholder of the Company.
PLANS FOR THE COMPANY
If and to the extent that the Purchaser acquires control of the Company,
Parent and the Purchaser intend to conduct a detailed review of the Company and
its assets, corporate structure, capitalization, operations, properties,
policies, management and personnel and consider and determine what, if any,
changes would be desirable in light of the circumstances which then exist. Such
strategies could include, among other things and subject to the terms of the
Merger Agreement, changes in the Company's business, corporate structure,
Amended and Restated Certificate of Incorporation, Bylaws, capitalization,
management or dividend policy.
Except as noted in this Offer to Purchase, the Purchaser and Parent have no
present plans nor proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, or sale or transfer
of a material amount of assets, involving the Company or any subsidiary of the
Company or any other material changes in the Company's capitalization, dividend
policy, corporate structure, business or composition of its management or Board
of Directors.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed with the
Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be
examined, and copies thereof may be obtained, as set forth in Section 8.
THE OFFER. The Merger Agreement provides for the commencement of the Offer,
in connection with which Parent and the Purchaser have expressly reserved the
right to waive certain conditions of the Offer, but without the prior written
consent of the Company, the Purchaser has agreed not to (i) waive the Minimum
Condition, (ii) reduce the number of Shares subject to the Offer, (iii) reduce
the price per Share to be paid pursuant to the Offer, (iv) extend the Offer if
all of the Offer conditions are satisfied or waived, (v) change the form of
consideration payable in the Offer, or (vi) amend or modify any term or
condition of the Offer (including the conditions described in Section 14) in any
manner adverse to the holders of Shares. Notwithstanding the foregoing, the
Purchaser may, in its sole discretion without the consent of the Company, extend
the Offer at any time and from time to time (A) if at the then scheduled
expiration date of the Offer any of the conditions to the Purchaser's obligation
to accept for payment and pay for Shares shall not have been satisfied or
waived; (B) for any period required by any rule, regulation, interpretation or
position of the Commission or its staff applicable to the Offer; (C) for any
period required by applicable law in connection with an increase in the
consideration to be paid pursuant to the Offer; and (D) if all Offer conditions
are satisfied or waived but the number of Shares tendered is 85% or more, but
less than 90%, of the then outstanding number of Shares, for an aggregate period
of not more than 5 business days (for all such extensions under this clause (D))
beyond the latest expiration date that would be permitted under clause (A), (B)
or (C) of this sentence. So long as the Merger Agreement is in effect and the
Offer conditions have not been satisfied or waived, at the request of the
Company, the Purchaser will, and Parent will cause the Purchaser to, extend the
Offer for an aggregate period of not more than 20 business days (for all such
extensions) beyond the originally scheduled expiration date of the Offer.
CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that
upon the terms (but subject to the conditions) set forth in the Merger
Agreement, the Purchaser will be merged with and into the Company and the
separate existence of the Purchaser will cease, and the Company shall be the
Surviving Corporation and shall be a wholly owned subsidiary of the Parent. In
the Merger, each share of common stock, $.01 par value per share, of the
Purchaser outstanding immediately prior to the time of filing of a certificate
of merger relating to the Merger with the Secretary of State of the State of
Delaware, or such later time as is agreed by the parties (the "Effective Time"),
shall be converted into and exchanged for one validly issued, fully paid and
non-assessable share of Common Stock, $.01 par value per share, of the Surviving
Corporation. In the Merger, each Share issued and outstanding immediately prior
to the Effective Time (other than Shares owned by Parent or the Purchaser or
held by the Company, all of which shall be cancelled, and Shares held by
stockholders who perfect appraisal rights under Delaware law) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive the Merger Consideration, without interest.
The Merger Agreement provides that (subject to the provisions of the Merger
Agreement) the closing of the Merger shall occur as soon as practicable
following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of the conditions to the Merger set forth in Article 9 of the
Merger Agreement. The Merger Agreement permits Parent and Purchaser, in their
sole discretion, to defer the closing of the Merger for a period of 135 days
following consummation of the Offer if, in Parent's and Purchaser's sole
judgment, the deferral is necessary to enable the Company to effect a covenant
defeasance under the Indenture.
TREATMENT OF STOCK OPTIONS. The Merger Agreement provides that all options
(individually, an "Option" and collectively, the "Options") outstanding
immediately prior to the Effective Time under any of the Stock Option Plans,
whether or not then exercisable, shall be cancelled and each holder of an Option
will be entitled to receive from the Surviving Corporation, for each Share
subject to an Option, an amount in cash equal to the excess, if any, of the
Merger Consideration over the per share exercise price of such Option, without
interest. The amounts payable pursuant to the Merger Agreement shall be paid (i)
with respect to
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Shares subject to Options held by employees who are ranked for compensation
purposes below the level of corporate vice-president of the Company and by
non-employees of the Company or its subsidiaries who held Options, at the
Effective Time, and (ii) with respect to Shares subject to Options held by
employees who are ranked for compensation purposes at or above such level, at
the time or times the Option or portion of an Option will become exercisable in
accordance with its terms as in effect on the date of the Merger Agreement (or,
to the extent the Option is already exercisable at the Effective Time, payment
shall be made at the Effective Time), provided the holder of the Option
continues in employment with the Company at the time the payment is due, and
provided further that the entire amount shall come due and payable if the holder
of the Option is terminated without cause prior to the first anniversary of the
Effective Time. All amounts payable in respect of Options shall be subject to
all applicable withholding of taxes. The Company has agreed to use its
reasonable best efforts to obtain all necessary consents of the holders of
Options, provided, however, that any failure by the Company to obtain any one or
more of such consents will have no effect on Parent's and Purchaser's
Obligations to consummate the Offer and the Merger.
BOARD REPRESENTATION. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, as will give
Parent representation on the Board of Directors equal to the product of (i) the
number of directors on the Board of Directors and (ii) the percentage that the
number of Shares purchased by the Purchaser or Parent or any affiliate bears to
the number of Shares outstanding, and the Company will, upon request by Parent,
promptly increase the size of the Board of Directors and/or exercise its best
efforts to secure the resignations of such number of directors as is necessary
to enable Parent's designees to be elected to the Board of Directors and will
cause Parent's designees to be so elected. At the request of Parent, the Company
will use its best efforts to cause such individuals designated by Parent to
constitute the same percentage of (i) each committee of the Board of Directors,
(ii) the board of directors of Community Health Investment Corporation and
Hallmark Healthcare Corporation, and (iii) the committees of each such board of
directors. The Company's obligations to appoint designees to the Board of
Directors are subject to Section 14(f) of the Exchange Act. The parties have
agreed to use their respective best efforts to ensure that at least two of the
members of the Board of Directors shall at all times prior to the Effective Time
be Continuing Directors (as defined in the Merger Agreement).
STOCKHOLDER MEETING. The Merger Agreement provides that, if required by
applicable law, the Company, acting through the Board of Directors, shall (i)
call a meeting of its stockholders (the "Stockholder Meeting") for the purpose
of voting on the Merger, (ii) hold the Stockholder Meeting as soon as
practicable after the purchase of Shares pursuant to the Offer and (iii) subject
to its fiduciary duties under applicable law as advised by outside counsel,
recommend to its stockholders the approval of the Merger. At the Stockholder
Meeting, Parent shall cause all the Shares then owned by Parent, the Purchaser
and any of their subsidiaries or affiliates to be voted in favor of the Merger.
The Merger Agreement provides that, notwithstanding the foregoing, if the
Purchaser, or any other direct or indirect subsidiary of Parent, shall acquire
at least 90 percent of the outstanding Shares, the parties thereto shall take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the Delaware Law.
However, the Merger Agreement permits Parent and Purchaser, in their sole
discretion, to defer the closing of the Merger for a period of 135 days
following consummation of the Offer if, in Parent's and Purchaser's sole
judgment, the deferral is necessary to enable the Company to effect a covenant
defeasance under the Indenture.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to (i) the due
incorporation, existence and, subject to certain limitations, the qualification,
good standing, corporate power and authority of the Company and certain
significant subsidiaries; (ii) the due authorization, execution, and delivery of
the Merger Agreement and certain ancillary documents executed in connection
therewith and the consummation of transactions contemplated thereby, and the
validity and enforceability thereof; (iii) subject to certain exceptions and
limitations, the compliance by the Company and its subsidiaries with all
applicable foreign, federal, state or local laws, statutes, ordinances, rules,
regulations, orders, judgments, rulings and decrees ("Laws") of any foreign,
federal, state or local judicial, legislative,
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executive, administrative or regulatory body or authority, or any court,
arbitration, board or tribunal ("Governmental Entity"); (iv) the capitalization
of the Company, including the number of shares of capital stock of the Company
outstanding, the number of shares reserved for issuance on the exercise of
options and similar rights to purchase shares; (v) the identity, ownership
(subject to certain exceptions and limitations) and capitalization of each of
the Company's subsidiaries and ownership by the Company and its subsidiaries of
interests or investments in entities other than subsidiaries of the Company or
its subsidiaries; (vi) subject to certain exceptions and limitations, the
absence of consents and approvals necessary for consummation by the Company of
the Merger and the absence of any violations, breaches or defaults which would
result from compliance by the Company with any provision of the Merger
Agreement; (vii) compliance with the Securities Act and the Exchange Act, in
connection with each registration statement, report, proxy statement or
information statement (as defined under the Exchange Act) prepared by it since
January 1, 1993, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "Company Reports") and the
financial statements included therein filed by the Company with the Commission,
the Schedule 14D-9, the information statement, if any, filed by the Company in
connection with the Offer pursuant to Rule 14f-1 under the Exchange Act; (viii)
subject to certain exceptions and limitations, the absence of pending or (to the
knowledge of the Company through receipt of written notice) threatened claims,
actions, suits, proceedings, arbitrations, investigations or audits
(collectively, "Litigation") or violation of any law by the Company which would
have a material adverse effect on the business, results of operations, assets,
or financial condition of the Company and its subsidiaries taken as a whole
("Material Adverse Effect"); (ix) the absence of certain changes or effects; (x)
certain tax matters; (xi) certain employee benefit and ERISA matters; (xii)
certain labor and employment matters; (xiii) certain fees in connection with the
transactions contemplated by the Merger Agreement; (xiv) subject to certain
exceptions and limitations, the possession by the Company, its subsidiaries and
all of the hospitals and other health care facilities owned, leased or managed
by the Company or any of its subsidiaries (the "Hospitals") of necessary
licenses, permits, certificates of need, approvals and authorizations; (xv) the
Medicare and Medicaid participation and accreditation of each of the Hospitals
and, subject to certain exceptions and limitations, the absence of any notices
or pending or threatened investigations, audits or surveys relating to the
Medicare and Medicaid participation and accreditation of Company or any of its
subsidiaries; (xvi) subject to certain exceptions and limitations,
Medicare/Medicaid compliance; (xvii) certain environmental matters; (xviii)
subject to certain exceptions and limitations, title to assets; (xix) material
contracts of the Company and its subsidiaries; (xx) the required vote of
stockholders of the Company with respect to the transactions contemplated by the
Merger Agreement; and (xxi) the Rights Agreement.
Parent and the Purchaser and have also made certain representations and
warranties, including with respect to (i) the due incorporation, existence, good
standing and, subject to certain limitations, corporate power and authority of
Parent and the Purchaser; (ii) the due authorization, execution and delivery of
the Merger Agreement and certain ancillary documents executed in connection
therewith and the consummation of the transactions contemplated thereby, and the
validity and enforceability thereof; (iii) the accuracy and the adequacy of the
information contained in the Schedule 14D-1 and the documents therein pursuant
to which the Offer is being made, any Schedule required to be filed with the
Commission, and any amendment or supplement to any of the foregoing and the
accuracy of the information provided by Parent and the Purchaser for inclusion
in the Schedule 14D-9; (iv) subject to certain exceptions and limitations, the
absence of consents and approvals necessary for consummation by Parent and the
Purchaser, and the absence of any violations, breaches or defaults which would
result from compliance by Parent and the Purchaser with any provision of the
Merger Agreement; and (v) the sufficiency of funds available to Parent and the
Purchaser for the consummation of the Offer and the Merger.
CONDUCT OF BUSINESS PENDING MERGER. The Company has agreed that from the
date of the Merger Agreement to the Effective Time, with certain exceptions,
unless Parent has consented in writing thereto, the Company will, and will cause
each of its subsidiaries to; (i) conduct its operations according to its usual,
regular and ordinary course of business consistent with past practice; (ii) use
its reasonable best efforts to preserve intact their business organizations and
goodwill, maintain in effect all existing qualifications, licenses, permits,
approvals and other authorizations, keep available the services of their
officers and employees and maintain satisfactory relationships with those
persons having business relationships with
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them; (iii) promptly upon the discovery thereof notify Parent of the existence
of any breach of any representation or warranty contained in the Merger
Agreement (or, in the case of any representation and warranty that makes no
reference to Material Adverse Effect, any breach of such representation and
warranty in any material respect) or the occurrence of any event that would
cause any representation or warranty contained in the Merger Agreement no longer
to be true and correct (or in the case of any representation and warranty that
makes no reference to Material Adverse Effect, to no longer be true and correct
in any material respect); and (iv) promptly deliver to the Purchaser true and
correct copies of any report, statement or schedule filed with the Commission
subsequent to the date of the Merger Agreement, any internal monthly reports
prepared for or delivered to the Board of Directors after the date of the Merger
Agreement and monthly financial statements for the Company and its subsidiaries
for and as of each month end subsequent to the date of the Merger Agreement.
The Company has agreed that from the date of the Merger Agreement to the
Effective Time, with certain exceptions, unless the Parent has consented in
writing thereto, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) amend its Amended and Restated Certificate of Incorporation
or Bylaws or comparable governing instruments; (ii) issue, sell or pledge any
shares of its capital stock or other ownership interest in the Company (other
than issuances of shares of Common Stock in respect of any exercise of Options
outstanding on the date of the Merger Agreement and disclosed to Parent) or any
of the subsidiaries, or any securities convertible into or exchangeable for any
such shares or ownership interest, or any rights, warrants or options to acquire
or with respect to any such shares of capital stock, ownership interest, or
convertible or exchangeable securities; or accelerate any right to convert or
exchange or acquire any securities of the Company or any of its subsidiaries for
any such shares or ownership interest; (iii) effect any stock split or otherwise
change its capitalization as it exists on the date of the Merger Agreement; (iv)
grant, confer or award any option, warrant, convertible security or other right
to acquire any shares of its capital stock or take any action to cause to be
exercisable any otherwise unexercisable option under any existing stock option
plan; (v) declare, set aside or pay any dividend or make any other distribution
or payment with respect to any shares of its capital stock or other ownership
interests (other than such payments by a wholly owned subsidiary); (vi) directly
or indirectly redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of any of its subsidiaries; (vii) sell, lease or
otherwise dispose of any of its assets (including capital stock of
subsidiaries), except in the ordinary course of business, none of which
dispositions individually or in the aggregate will be material; (viii) settle or
compromise any pending or threatened litigation, other than settlements which
involve solely the payment of money (without admission of liability) not to
exceed $500,000 in any one case; (ix) acquire by merger, purchase or any other
manner, any business or entity or otherwise acquire any assets that are
material, individually or in the aggregate, to the Company and its subsidiaries
taken as a whole, except for purchases of inventory, supplies or capital
equipment in the ordinary course of business consistent with past practice; (x)
incur or assume any long-term or short-term debt, except for working capital
purposes in the ordinary course of business under the Company's existing credit
agreement; (xi) assume, guarantee or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person except wholly owned subsidiaries of the Company; (xii) with certain
exceptions, make or forgive any loans, advances or capital continuations to, or
investments in, any other person; (xiii) make any tax election or settle any tax
liability other than settlements involving solely the payment of money which
would be permitted by clause (viii); (xiv) except in certain circumstances,
grant any stock related or performance awards; (xv) enter into any new
employment, severance, consulting or salary continuation agreements with any
officers, directors or employees or grant any increases in compensation or
benefits to employees other than increases permitted under certain
circumstances; (xvi) adopt, amend in any material respect or terminate any
employee benefit plan or arrangement; (xvii) amend, change or waive (or exempt
any person or entity from the effect of) the Rights Agreement, except in
connection with the exercise of its fiduciary duties by the Board of Directors
or as set forth in the Merger Agreement; (xviii) permit any insurance policy
naming the Company or any subsidiary as a beneficiary or a loss payee to be
cancelled or terminated other than in the ordinary course of business, or (xix)
agree in writing or otherwise to take any of the foregoing actions.
CONDITIONS TO THE MERGER. The respective obligations of each party to
effect the Merger are subject to the satisfaction or waiver, where permissible,
prior to the Effective Time, of the following conditions: (i) if
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approval of the Merger Agreement and the Merger by the holders of Shares is
required by applicable law, the Merger Agreement and the Merger shall have been
approved by the requisite vote of such holders; and (ii) there shall not have
been issued any injunction or issued or enacted any Law which prohibits or has
the effect of prohibiting the consummation of the Merger or making such
consummation illegal.
The obligations of Parent and the Purchaser to effect the Merger shall be
further subject to the satisfaction or waiver on or prior to the Effective Time
of the condition that the Purchaser shall have accepted for payment and paid for
Shares tendered pursuant to the Offer, provided the condition will be deemed
satisfied if Purchaser's failure to accept for payment and pay for such shares
is a breach of the Merger Agreement or violates the terms and conditions of the
Offer.
ACCESS TO INFORMATION. Under the Merger Agreement, from the date of the
Merger Agreement to the Merger Closing Date, the Company shall, and shall cause
its subsidiaries to, (i) give the Parent and its authorized representatives and
lender banks full access to all books, records, personnel, offices and other
facilities and properties of the Company and its subsidiaries and their
accountants and accountants' work papers, (ii) permit the Parent to make such
copies and inspections thereof as the Parent may reasonably request and (iii)
furnish the Parent with such financial and operating data and other information
with respect to the business and properties of the Company and its subsidiaries
as the Parent may from time to time reasonably request; provided that no
investigation or information furnished pursuant to the Merger Agreement shall
affect any representations or warranties made by the Company therein or the
conditions to the obligations of the Parent to consummate the transactions
contemplated thereby.
NO SOLICITATION. The Company has agreed in the Merger Agreement that
neither it nor any of its subsidiaries, nor any of their respective officers,
directors, employees, representatives, agents or affiliates, shall, directly or
indirectly, encourage, solicit, initiate or, except as is required in the
exercise of the fiduciary duties of the Company's directors to the Company or
its stockholders after consultation with outside counsel to the Company,
participate in any way in any discussions or negotiations with, or provide any
information to, or afford any access to the properties, books or records of the
Company or any of its subsidiaries to, or otherwise assist, facilitate or
encourage, any corporation, partnership, person or other entity or group (other
than the Parent or any affiliate or associate of Parent) concerning any merger,
consolidation, business combination, liquidation, reorganization, sale of
substantial assets, sale of shares of capital stock or similar transactions
involving the Company or any subsidiary or any division of any thereof (an
"Alternative Proposal"), and shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
theretofore with respect to any of the foregoing; provided, however, that
nothing contained in the Merger Agreement shall prohibit the Company or the
Board of Directors from complying with Rule 14e-2(a) under the Exchange Act or
taking such action promulgated thereunder or from making such disclosure to the
Company's stockholders or taking such action which, in the judgment of the Board
of Directors with the advice of outside counsel, may be required under
applicable law. The Company has agreed promptly to notify Parent if any such
information is requested from it or any such negotiations or discussions are
sought to be initiated with the Company.
FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or
not the Offer or the Merger is consummated, all costs and expenses incurred in
connection with the transactions contemplated by the Merger Agreement shall be
paid by the party incurring such expenses.
The Merger Agreement provides that, under certain circumstances, the Company
will pay to Forstmann Little & Co. and its affiliates, in such manner as is
designated by Forstmann Little & Co., the amount of $45,000,000 (the "Commitment
Amount") as compensation to Forstmann Little & Co. and its affiliates for
incurring the costs and expenses related to the Offer and the Merger and for
their foregoing of the opportunity to invest in the Company. The Company is
obligated to pay the Commitment Amount under the following circumstances: (i)
the Company terminates the Merger Agreement because of an Alternative Proposal
which the Board of Directors in good faith determines is more favorable from a
financial point of view to the stockholders of the Company as compared to the
Offer and the Merger and the Board of Directors determines, after consultation
with Skadden, Arps, Slate, Meagher & Flom, that failure to terminate the Merger
Agreement would be inconsistent with the compliance by the Board of Directors
with
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its fiduciary duties, subject to certain provisos that would render such
termination right unavailable; (ii) Parent terminates the Merger Agreement (x)
because the Board of Directors failed to recommend, or withdraws, modifies or
amends in any material respect, its approval or recommendation of the Offer or
the Merger, or recommended acceptance of any Alternative Proposal, or resolved
to do any of the foregoing (unless the foregoing occurred solely as a result of
the Parent's willful breach in any material respect of its representations,
warranties or obligations under the Merger Agreement) or (y) after October 31,
1996 if Purchaser has not purchased any Shares by that date because of the
Company's willful breach or willful failure to comply in any material respect
with any of its material obligations under the Merger Agreement; (iii) Parent or
the Company terminate the Merger Agreement after October 31, 1996 because of the
failure of any condition to the Offer (which failure was not caused by Parent's
failure to fulfill its obligations under the Merger Agreement) at a time when
the Minimum Condition shall not have been satisfied and (x) during the term of
the Merger Agreement or within 12 months after the termination of the Merger
Agreement, the Board of Directors recommends an Alternative Proposal or the
Company enters into an agreement providing for an Alternative Proposal or a
majority of the outstanding Shares is acquired by a third party (including a
"group" as defined in the Exchange Act) (a "Stock Acquisition") which
Alternative Proposal (or another Alternative Proposal by the same or a related
person or entity) was made prior to the termination of the Merger Agreement or
(y) during the term of the Merger Agreement or within two months after the
termination of the Merger Agreement, the Board of Directors recommends an
Alternative Proposal or the Company enters into an agreement providing for an
Alternative Proposal or a Stock Acquisition occurs.
The Company has agreed that under certain circumstances it will reimburse
Parent and its affiliates for their documented reasonable out-of-pocket
expenses, but not in excess of $15,000,000 in the aggregate, incurred in
connection with the Offer and the Merger (including amounts paid or payable to
banks and investment bankers, fees and expenses of counsel, accountants and
consultants, and printing expenses) regardless of when those expenses are
incurred (collectively, the "Expenses"). The Company will pay the Expenses under
the circumstances described in the foregoing clauses (i), (ii)(x), (iii)(x) and
(iii)(y). The Company will also reimburse the Expenses if the Merger Agreement
terminates after October 31, 1996 because any of the Company's representations
and warranties contained in the Merger Agreement are not true in all material
respects or the Company failed to comply in any material respect with any of its
obligations under the Merger Agreement. The Purchaser will not be entitled to be
reimbursed for its expenses if it is paid the Commitment Amount, and if the
Company has reimbursed Parent and its affiliates for their Expenses and
thereafter pays the Commitment Amount, then the Commitment Amount will be
reduced by the amount of any reimbursed Expenses. The Merger Agreement provides
that if the Company fails to pay the Commitment Amount (other than in the case
where the Commitment Amount is owing because of the event set forth in (iii)(y)
above) or Expenses when due, the Company will pay Parent all costs and expenses
incurred in collecting those amounts, together with interest on those amounts at
Chemical Bank's prime rate.
OTHER AGREEMENTS. The Merger Agreement provides that, subject to the terms
and conditions provided in the Merger Agreement, the Company, Parent, and the
Purchaser shall: (a) use their best efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits, authorizations or waivers are
required to be obtained prior to the Effective Time from, Governmental Entities
or other third parties in connection with the execution and delivery of the
Merger Agreement and certain other ancillary documents and the consummation of
the transactions contemplated thereby and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits, authorizations and
waivers; and (b) use their best efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
the Merger Agreement. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purpose of the Merger
Agreement, the proper officers and directors of Parent and the Surviving
Corporation shall take all such necessary action.
The Merger Agreement requires that, concurrently with the commencement of
the Offer, the Company commence the Debenture Offer and a solicitation as part
of the Debenture Offer (the "Solicitation") of
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consents to amendments to the Indenture from the holders of not less than a
majority in aggregate principal amount of the Debentures outstanding. The Merger
Agreement provides that the Debenture Offer and Solicitation (including the
amendments) be on terms determined by Parent, provided that the Company shall
not be required to purchase the Debentures pursuant to the Debenture Offer, and
the proposed amendments, if approved, shall not become operative, unless (i)
Parent has consummated the Offer and (ii) the Company has received the proceeds
of financing arranged by Purchaser in an amount sufficient to (a) consummate the
Debenture Offer and pay all fees and expenses associated therewith, and (b)
refinance any indebtedness of the Company coming due by reason of the Debenture
Offer and Solicitation and consummation thereof. The Company has agreed that,
promptly following the date the consents of a majority in aggregate principal
amount of the outstanding Debentures are obtained, it will execute a
supplemental indenture containing the proposed amendments that by their terms
shall become operative only upon consummation of the Offer and the Debenture
Offer.
CONDITIONS TO THE MERGER.
The respective obligations of each party to effect the Merger are subject to
the satisfaction or waiver, where permissible, prior to the Effective Time, of
the following conditions: (a) if approval of the Merger Agreement and the Merger
by the holders of Shares is required by applicable law, the Merger Agreement and
the Merger shall have been approved by the requisite vote of such holders; and
(b) there shall not have been issued any injunction or issued or enacted any Law
which prohibits or has the effect of prohibiting the consummation of the Merger
or makes such consummation illegal.
The obligations of Parent and the Purchaser to effect the Merger shall be
further subject to the satisfaction or waiver on or prior to the Effective Time
of the condition that the Purchaser shall have accepted for payment and paid for
Shares tendered pursuant to the Offer.
TERMINATION. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the Board of Directors of Parent and
the Company (which consent will require the approval of a majority of the
Continuing Directors if such termination occurs following the election or
appointment of Parent's designees, if applicable);
(b) by the Parent or the Company:
(i) if the Effective Time shall not have occurred on or before
December 31, 1996 (provided that the right to terminate the Merger
Agreement pursuant to this clause (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 the Effective Time to
occur on or before such date);
(ii) if there shall be any statute, law, rule or regulation that
makes consummation of the Offer or the Merger illegal or prohibited or if
any court of competent jurisdiction in the United States or other
Governmental Entity shall have issued an order, judgment, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment, decree, ruling or other
action shall have become final and non-appealable;
(iii) after October 31, 1996 if, on account of the failure of any
condition specified in Section 14, the Purchaser has not purchased any
Shares thereunder by that date (provided that the right to terminate the
Merger Agreement pursuant to this clause (iii) 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 any such
condition); or
(iv) upon a vote at a duly held meeting or upon any adjournment
thereof, the stockholders of the Company shall have failed to give any
approval required by applicable law;
(c) by the Company if there is an Alternative Proposal which the Board
of Directors in good faith determines is more favorable from a financial
point of view to the stockholders of the Company as
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compared to the Offer and the Merger, and the Board of Directors determines,
after consultation with Skadden, Arps, Slate, Meagher & Flom, that failure
to terminate the Merger Agreement would be inconsistent with the compliance
by the Board of Directors with its fiduciary duties to stockholders imposed
by law; provided, however, that the right to terminate the Merger Agreement
in such event shall not be available (i) if the Company has breached in any
material respect its obligations not to solicit Alternative Proposals, or
(ii) if the Alternative Proposal (x) is subject to a financing condition or
(y) involves consideration that is not entirely cash or does not permit
stockholders to receive the payment of the offered consideration in respect
of all Shares at the same time, unless the Board of Directors has been
furnished with a written opinion of Merrill Lynch or other nationally
recognized investment banking firm to the effect that (in the case of clause
(x)) the Alternative Proposal is readily financeable and (in the case of
clause (y)) that such offer provides a higher value per share than the
consideration per share pursuant to the Offer or the Merger, or (iii) if,
prior to or concurrently with any purported termination pursuant to this
clause (c), the Company shall not have paid the Commitment Fee and the
Expenses, if applicable, or (iv) if the Company has not provided Parent and
the Purchaser with prior written notice of its intent to so terminate the
Merger Agreement and delivered to Parent and the Purchaser a copy of the
written agreement embodying the Alternative Proposal in its then most
definitive form concurrently with the earlier of (x) the public announcement
of, or (y) filing with the Commission of any documents relating to, the
Alternative Proposal; and
(d) by Parent if the Board of Directors shall have failed to recommend,
or shall have withdrawn, modified or amended in any material respect, its
approval or recommendation of the Offer or the Merger or shall have
recommended acceptance of any Alternative Proposal, or shall have resolved
to do any of the foregoing.
INDEMNIFICATION. The Merger Agreement provides that the Parent will cause
the Surviving Corporation to purchase a pre-paid noncancellable directors and
officers insurance policy expiring not earlier than October 7, 1999, covering
the current and all former directors and officers with respect to acts or
failures to act prior to the Effective Time, in a single aggregate amount over
such period equal to the policy limit for the Company's current directors and
officers insurance policy (the "Current Policy"). If such insurance is not
obtainable at a cost not in excess of the annual premium paid by the Company for
the Current Policy (the "Cap") times 3.25, then Parent will cause the Surviving
Corporation to purchase policies providing at least the same coverage as the
Current Policy and containing terms and conditions no less advantageous to the
current and former directors and officers of the Company than the Current Policy
with respect to acts or failures to act prior to the Effective Time; provided,
however, that Parent and the Surviving Corporation shall not be required to
obtain policies providing such coverage except to the extent that such coverage
can be provided at an annual cost of no greater than the Cap; and if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap, the Purchaser or the Surviving Corporation shall be
required to obtain only as much coverage as can be obtained by paying an annual
premium equal to the Cap.
The Purchaser has also agreed to cause the Surviving Corporation to keep in
effect in its By-Laws a provision for a period of not less than three years from
the Effective Time (or, in the case of matters occurring prior to the Effective
Time which have not been resolved prior to the third anniversary of the
Effective Time, until such matters are finally resolved) which provides for
indemnification of the past and present officers and directors of the Company to
the fullest extent permitted by the Delaware Law.
The Merger Agreement provides that from and after the Effective Time, Parent
shall indemnify and hold harmless, to the fullest extent permitted under
applicable law, each person who is, or has been at any time prior to the date of
the Merger Agreement or who becomes prior to the Effective Time, an officer or
director of the Company or any subsidiary against all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement (collectively, "Losses") in connection
with any Litigation arising out of or pertaining to acts or omissions, or
alleged acts or omissions, by them in their capacities as such, which acts or
omissions existed or occurred prior to the Effective Time, whether commenced,
asserted or claimed before or after the Effective Time, including, without
limitation, liabilities arising under the Securities Act, the Exchange Act and
state corporation laws in
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connection with the transactions contemplated hereby. The Company and, after the
Effective Time, the Parent shall periodically advance expenses as incurred with
respect to the foregoing to the fullest extent permitted under applicable law
provided that the person to whom the expenses are advanced provides an
undertaking to repay such advance if it is ultimately determined that such
person is not entitled to indemnification.
If the Merger is consummated, the Surviving Corporation shall, to the
fullest extent permitted under applicable law, indemnify and hold harmless
Parent and any person or entity who was a stockholder, officer, director or
affiliate of Parent prior to the Effective Time against any losses in connection
with any Litigation arising out of or pertaining to any of the transactions
contemplated by the Merger Agreement or certain ancillary documents relating
thereto. Parent is required to periodically advance expenses as incurred with
respect to the foregoing to the fullest extent permitted under applicable law
provided that the person to whom the expenses are advanced provides an
undertaking to repay such advance if it is ultimately determined that such
person is not entitled to indemnification.
The Surviving Corporation will control the defense, through its counsel, of
any action brought against any person seeking indemnification pursuant to the
preceding two paragraphs (an "Indemnified Party"). Counsel for the Indemnified
Party shall be selected by the Indemnified Party and will be permitted to
participate in the defense of such action at the Surviving Corporation's
expense.
CERTAIN EMPLOYEE MATTERS. The Merger Agreement provides that, from and
after the Effective Time, the Surviving Corporation will honor and assume, and
Parent will cause the Surviving Corporation to honor and assume, in accordance
with their terms all existing employment and severance agreements between the
Company or any of its subsidiaries and any officer, director, or employee of the
Company or any of its subsidiaries and all benefits or other amounts earned or
accrued to the extent vested or which becomes vested in the ordinary course,
through the Effective Time under all employee benefit plans of the Company and
any of its subsidiaries. The Parent confirms in the Merger Agreement that it is
the Purchaser's intention that, until the first anniversary of the Effective
Time, the Surviving Corporation and its subsidiaries will provide benefits to
their employees (excluding any employees covered by collective bargaining
agreements) which will, in the aggregate, be substantially equivalent to those
currently provided by the Company and its subsidiaries to such employees (other
than pursuant to stock option, stock purchase or other stock based plans). The
Parent intends that, after the first anniversary of the Effective Time, the
Surviving Corporation and its subsidiaries will provide benefits to their
employees (excluding employees covered by collective bargaining agreements, if
any) which benefits are appropriate in the judgment of the Surviving
Corporation.
AMENDMENT. To the extent permitted by applicable law, the Merger Agreement
may be amended by action taken by or on behalf of the Board of Directors of the
Company (by action of a majority of the Continuing Directors if such amendment
occurs following the election or appointment of Parent's designees, if
applicable) and the Purchaser at any time before or after adoption of the Merger
Agreement by the stockholders of the Company but, after any such stockholder
approval, no amendment shall be made which decreases the Merger Consideration or
which adversely affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. The Merger Agreement may not be
amended except by an instrument in writing signed on behalf of all of the
parties.
TIMING. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by the Purchaser pursuant to the Offer. Although Parent has agreed to
cause the Merger to be consummated on the terms contained in the Merger
Agreement, there can be no assurance as to the timing of the Merger.
OTHER MATTERS
SECTION 203 OF THE DELAWARE LAW. Section 203 of the Delaware Law limits the
ability of a Delaware corporation to engage in business combinations with
"interested stockholders" (defined as any beneficial owner of 15% or more of the
outstanding voting stock of the corporation) unless, among other things, the
corporation's board of directors has given its prior approval to either the
business combination or the
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transaction which resulted in the stockholder's becoming an "interested
stockholder". On June 9, 1996, the Board of Directors approved the Offer and the
Merger for purposes of Section 203, and, therefore, Section 203 is inapplicable
to the Merger.
APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Section 262 of the Delaware Law to dissent
and demand appraisal of, and payment in cash for the fair value of, their
Shares. Such rights, if the statutory procedures are complied with, could lead
to a judicial determination of the fair value (excluding any element of value
arising from accomplishment or expectation of the Merger) required to be paid in
cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than in addition to the Offer Price and the market value of the Shares,
including asset values and the investment value of the Shares. The value so
determined could be more or less than the Offer Price or the Merger
Consideration.
If any holder of Shares who demands appraisal under Section 262 of the
Delaware Law fails to perfect, or effectively withdraws or losses his right to
appraisal, as provided in the Delaware Law, the shares of such holder will be
converted into the Merger Consideration in accordance with the Merger Agreement.
A stockholder may withdraw his demand for appraisal by delivery to Parent of a
written withdrawal of his demand for appraisal and acceptance of the Merger.
Failure to follow the steps required by Section 262 of the Delaware Law for
perfecting appraisal rights may result in the loss of such rights.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
("Rule 13e-3"), which is applicable to certain "going private" transactions.
Rule 13e-3 requires, among other things, that certain financial information
concerning the company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to consummation of the transaction.
Parent believes that Rule 13e-3 will not be applicable to the Merger because
of the exemption afforded by Rule 13e-3(g)(1), among other reasons. However,
under certain circumstances, Rule 13e-3 could be applicable to the Merger or
other business combination in which Parent seeks to acquire the remaining Shares
it does not beneficially own following the purchase of Shares pursuant to the
Offer. For example, if the Merger as consummated is not substantially similar to
the Merger as described in this Offer to Purchase and the Merger Agreement, Rule
13e-3 could apply. However, the terms and conditions of the Merger are governed
by the Merger Agreement, and any amendment to the Merger Agreement must be
approved by each party thereto. If Parent has exercised its right to appoint
directors to the Board of Directors following its purchase of Shares pursuant to
the Offer, any such amendment must be approved on behalf of the Company by a
majority of the directors of the Company then in office who have not been
designated by Parent.
There can be no assurance that the Merger will take place, even though each
party has agreed in the Merger Agreement to use its best efforts to cause the
Merger to occur, because the Merger is subject to certain conditions, some of
which are beyond the control of either the Purchaser or the Company. Since the
Purchaser's ultimate objective is to acquire ownership of all the Shares, if the
Merger does not take place, the Purchaser would consider the acquisition,
whether directly or through an affiliate of Shares through private or open
market purchases, or subsequent tender offers or a different type of merger or
other combination of the Company with the Purchaser or an affiliate or
subsidiary thereof, or by any other permissible means deemed advisable by it.
Except as described in the section captioned "The Merger Agreement", any of
these possible transactions might be on terms the same as, or more or less
favorable than, those of the Offer or the Merger.
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13. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two following paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
If on or after the date of the Merger Agreement the Company should (a)
split, combine or otherwise change the Shares or its capitalization, (b) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares or (c) issue or sell additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire, any
of the foregoing, other than Shares issued pursuant to the exercise of
outstanding employee stock options, then subject to the provisions of Section 14
below, the Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Offer Price and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If on or after the date of the Merger Agreement the Company should declare
or pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire, any
of the foregoing, payable or distributable to stockholders of record on a date
prior to the transfer of the Shares purchased pursuant to the Offer to the
Purchaser or its nominee or transferee on the Company's stock transfer records,
then, subject to the provisions of Section 14 below, (a) the Offer Price may, in
the sole discretion of the Purchaser, be reduced by the amount of any such cash
dividend or cash distribution and (b) the whole of any such noncash dividend,
distribution or issuance to be received by the tendering stockholders will (i)
be received and held by the tendering stockholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
14. CERTAIN CONDITIONS TO THE OFFER.
Notwithstanding any other term of the Offer, the Purchaser shall not be
required to accept for payment or pay for, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) of the Exchange Act, any
Shares not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Shares unless there shall have been validly tendered
and not withdrawn prior to the expiration of the Offer that number of Shares
which would represent at least a majority of the outstanding Shares on a fully
diluted basis. Furthermore, notwithstanding any other term of the Offer or the
Merger Agreement, the Purchaser shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for payment
or paid for, and may terminate or amend the Offer if at any time on or after the
date of the Merger Agreement and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions exist or shall
occur and remain in effect:
(a) there shall have been instituted or pending any litigation by the
Government of the United States of America or any agency or instrumentality
thereof (i) which seeks to challenge the acquisition by Parent or the
Purchaser (or any of its affiliates) of Shares pursuant to the Offer or
restrain, prohibit or delay the making or consummation of the Offer or the
Merger, (ii) which seeks to make the purchase of or payment for some or all
of the Shares pursuant to the Offer or the Merger illegal, (iii) which seeks
to impose limitations on the ability of Parent or the Purchaser (or any of
their affiliates) effectively to acquire or hold, or to require Parent, the
Purchaser or the Company or any of their respective affiliates or
subsidiaries to dispose of or hold separate, any material portion of their
assets or business, (iv) which seeks to impose limitations on the ability of
Parent, the Purchaser or their affiliates to exercise full rights
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of ownership of the Shares purchased by it, including, without limitation,
the right to vote the Shares purchased by it on all matters properly
presented to the stockholders of the Company, or (v) which seeks to limit or
prohibit any future business activity by Parent, the Purchaser or any of
their affiliates, including, without limitation, requiring the prior consent
of any person or entity (including the Government of the United States of
America or any agency or instrumentality thereof) to future transactions by
Parent, the Purchaser or any of their affiliates; or
(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any Governmental Entity,
any Law or there shall have been issued any injunction that results in any
of the consequences referred to in subsection (a) above; or
(c) the Merger Agreement shall have been terminated in accordance with
its terms; or
(d) (i) any of the representations and warranties made by the Company in
the Merger Agreement shall not have been true and correct in all material
respects when made, or shall thereafter have ceased to be true and correct
in all material respects as if made as of such later date (other than
representations and warranties made as of a specified date) or (ii) the
Company shall have breached or failed to comply in any material respect with
any of its obligations under the Merger Agreement; or
(e) any corporation, entity, "group" or "person" (as defined in the
Exchange Act), other than Parent or the Purchaser, shall have acquired
beneficial ownership of more than 49% of the outstanding Shares; or
(f) except as set forth in the Company Reports thereto or the schedules
to the Merger Agreement, any change shall have occurred or be threatened
which individually or in the aggregate has had or is continuing to have a
material adverse effect on the prospects of the Company and its Subsidiaries
taken as a whole; or
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over the counter market in the United States, (ii) a
declaration of any banking moratorium by federal or state authorities or any
suspension of payments in respect of banks or any limitation (whether or not
mandatory) imposed by federal or state authorities on the extension of
credit by lending institutions in the United States, (iii) a commencement of
a war, armed hostilities or any other international or national calamity
directly or indirectly involving the United States, other than any war,
armed hostilities or other international calamity involving the former
Yugoslavia, (iv) any mandatory limitation by the federal government on the
extension of credit by banks or other financial institutions generally, (v)
any increase of 500 or more basis points in the prime rate as announced by
Chemical Bank, measured from the date of the Merger Agreement, or (vi) in
the case of the foregoing clause (iii), if existing at the time of the
commencement of the Offer, in the reasonable judgment of Parent, a material
acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances (including any action or inaction by Parent or the Company) giving
rise to any such condition and may be waived by Parent or the Purchaser, in
whole or in part, at any time and from time to time, in the sole discretion of
Parent. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights will not be deemed a waiver of any right, the waiver of
such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the depositary to the tendering stockholders.
15. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, as well as certain representations
made to the Purchaser and Parent in the Merger Agreement by the Company,
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neither the Purchaser nor Parent is aware of any license or regulatory permit
that appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the Purchaser's
acquisition of Shares as contemplated herein or of any approval or other action
by any Governmental Entity that would be required for the acquisition or
ownership of Shares by the Purchaser as contemplated herein. Should any such
approval or other action be required, the Purchaser and Parent currently
contemplate that such approval or other action will be sought, except as
described below under "State Takeover Laws". While, except as otherwise
expressly described in this Section 15, the Purchaser does not presently intend
to delay the acceptance for payment of, or payment for, Shares tendered pursuant
to the Offer, pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business, or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, the Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 for certain conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
The Company is incorporated under the laws of Delaware. Section 203 of the
Delaware Law prevents an "Interested Stockholder" (defined generally as a person
with 15% or more of the corporation's outstanding voting stock) from engaging in
a "Business Combination" (defined to include a variety of transactions,
including mergers) with a Delaware corporation for three years following the
date such person becomes an Interested Stockholder, unless (i) before such
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder or approved the Business Combination, or (ii) upon
consummation of the transaction which resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by certain employee stock ownership plans), or (iii)
following the transaction in which such person became an Interested Stockholder,
the Business Combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the Interested Stockholder. The Board of Directors has unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer, for purposes of Section 203 of the Delaware Law, and the
restrictions of such Section 203 are, accordingly, not applicable to Parent, the
Purchaser or affiliates or associates of the Purchaser as a result of the
consummation of the transactions contemplated by this Offer to Purchase.
Neither the Purchaser nor Parent has currently complied with any state
takeover statute or regulation. The Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, the Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and the Purchaser might be
32
<PAGE>
unable to accept for payment or pay for Shares tendered pursuant to the Offer or
be delayed in consummating the Offer or the Merger. In such case, the Purchaser
may not be obliged to accept for payment or pay for any Shares tendered pursuant
to the Offer.
ANTITRUST. The Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice frequently scrutinize the
legality under the antitrust laws of transactions such as the Purchaser's
proposed acquisition of the Company. At any time before or after the Purchaser's
purchase of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Purchaser or the divestiture of
substantial assets of Parent or its subsidiaries, or the Company or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such a challenge is made,
of the results thereof.
OTHER REGULATORY APPROVAL. A change in ownership of the Company would
require various regulatory notifications and approvals at the federal, state and
local government levels. For instance, at the federal level, Medicare and
Medicaid providers are required to notify their fiscal intermediaries and the
Health Care Financing Administration regional office no later than 15 days after
the change of ownership has occurred. At the state and local levels, there are
licensing and certification requirements for hospitals and related health
services. States and municipalities may require notification of a change in
ownership for such facilities, or new licenses or certifications, prior to
consummation of any change of control transaction. The Company will seek to
obtain all necessary licenses or certifications as expeditiously as possible.
16. FEES AND EXPENSES.
Lehman Brothers is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services to Purchaser in connection with
the Offer and the Merger pursuant to an engagement letter dated June 7, 1996
(the "Engagement Letter") and a Dealer Manager Agreement dated as of June 11,
1996 (the "Dealer Manager Agreement"). Pursuant to the Engagement Letter,
Forstmann Little & Co. has agreed to pay Lehman Brothers a fee equal to 0.3% of
the consideration to be paid in the Offer and the Merger. Pursuant to the Dealer
Manager Agreement, the Purchaser and Forstmann Little & Co. have agreed to pay
Lehman Brothers $500,000 for its services as Dealer Manager, which fee will be
credited against fees payable under the Engagement Letter. In addition, the
Purchaser and Forstmann Little & Co. have agreed to reimburse the Dealer Manager
for its out-of-pocket expenses, including the reasonable fees and expenses of
its counsel, in connection with the Offer. Fees payable under the Engagement
Letter and the Dealer Manager Agreements together with the reimbursement of
expenses, will not exceed $4 million in the aggregate. The Purchaser and
Forstmann Little & Co. have agreed to indemnify the Dealer Manager and certain
related persons against certain liabilities and expenses, including certain
liabilities under the federal securities laws.
Lehman Brothers is also acting as dealer manager for the Debt Tender Offer,
for which it will be paid a fee of $500,000. Fees payable therefor will be
credited against fees payable under the Engagement Letter.
Lehman Brothers has from time to time provided investment banking, financial
advisory and other services to the Company and Forstmann Little and its
affiliates. In the ordinary course of its business, Lehman Brothers trades debt
and equity securities of the Company for its own account and accounts of its
customers, and accordingly, it may at any time have a net long or short position
in such securities.
The Purchaser has retained Georgeson & Company Inc. to act as the
Information Agent and Chase Mellon Shareholders Services, L.L.C. to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
Except as described herein, neither the Purchaser nor Parent will pay any
fees or commissions to any broker or dealer or other person (other than the
Dealer Manager) in connection with the solicitation of
33
<PAGE>
tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust
companies will be reimbursed by the Purchaser upon request for customary mailing
and handling expenses incurred by them in forwarding material to their
customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in
which the making of the Offer or the tender of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction. If the Purchaser
or Parent becomes aware of any state law prohibiting the making of the Offer or
the acceptance of Shares pursuant thereto in such state, the Purchaser will make
a good faith effort to comply with any such state statute or seek to have such
state statute declared inapplicable to the Offer. If, after such good faith
effort, the Purchaser cannot comply with any such state statute, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such jurisdiction. In any jurisdiction the securities, blue sky or
other laws of which require the Offer to be made by a licensed broker or dealer,
the Offer is being made on behalf of the Purchaser by the Dealer Manager or one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE
DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF PARENT, THE PURCHASER OR THE COMPANY SINCE THE DATE AS OF WHICH
INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE.
The Purchaser or Parent has filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act,
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Sections 8 and 9 (except that they will not be available at the regional offices
of the Commission).
FLCH ACQUISITION CORP.
June 11, 1996
34
<PAGE>
SCHEDULE I
CERTAIN INFORMATION CONCERNING THE GENERAL PARTNERS OF
FORSTMANN LITTLE & CO., FORSTMANN LITTLE & CO., SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P., FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P., FLC PARTNERSHIP, L.P.,
FLC XXIX PARTNERSHIP AND FLC XXX PARTNERSHIP
Set forth below is the name, age, present principal occupation or employment
and five-year employment history of each general partner of: FLC Partnership,
L.P., a general partner of Forstmann Little & Co.; FLC XXIX, the other general
partner of Forstmann Little & Co. and the general partner of MBO-VI; and FLC
XXX, the general partner of Forstmann Little. Each person listed below has been
employed with Forstmann Little & Co. affiliated partnerships for the last five
years, is a citizen of the United States of America, and each such person's
business address is 767 Fifth Avenue, New York, New York 10153.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY AGE
- -------------------------- ------------------------------------------------------------------------------- -----
<S> <C> <C>
Theodore J. Forstmann General Partner of Forstmann Little & Co. affiliated partnerships. Mr. T. 56
Forstmann has been a General Partner of Forstmann Little & Co. affiliated
partnerships since 1978.
Nicholas C. Forstmann General Partner of Forstmann Little & Co. affiliated partnerships. Mr. N. 49
Forstmann has been a General Partner of Forstmann Little & Co. affiliated
partnerships since 1978.
Steven B. Klinsky General Partner of Forstmann Little & Co. affiliated partnerships. Mr. Klinsky 40
has been a General Partner of Forstmann Little & Co. affiliated partnerships
since December 1986, and has been associated with such partnerships since
December 1984.
Sandra J. Horbach General Partner of Forstmann Little & Co. affiliated partnerships. Ms. Horbach 35
has been a General Partner of Forstmann Little & Co. affiliated partnerships
since January 1993, and has been associated with such partnerships since
August 1987.
Winston W. Hutchins General Partner of Forstmann Little & Co. affiliated partnerships. Mr. Hutchins 37
has been a General Partner of Forstmann Little & Co. affiliated partnerships
since January 1990, and has been associated with such partnerships since July
1983.
</TABLE>
I-1
<PAGE>
SCHEDULE II
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name,
age, present principal occupation or employment and five-year employment history
of each director and executive officer of Parent. All persons listed below are
citizens of the United States of America, and each such person's business
address is 767 Fifth Avenue, New York, New York 10153.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME OFFICE HELD IN PARENT FIVE-YEAR EMPLOYMENT HISTORY AGE
- ------------------------ --------------------- ---------------------------------------------------------- -----
<S> <C> <C> <C>
Sandra J. Horbach Director and General Partner of Forstmann Little & Co. affiliated 35
President partnerships. Ms. Horbach has been a General Partner of
Forstmann Little & Co. affiliated partnerships since
January 1993, and has been associated with such
partnerships since August 1987.
Thomas H. Lister Vice President and Associated with Forstmann Little & Co. affiliated 32
Secretary partnerships since March 1993. Formerly associated with
Morgan Stanley & Co. from June 1986 to July 1989 and from
June 1991 to February 1993.
Jamie C. Nicholls Vice President and Associated with Forstmann Little & Co. affiliated 29
Treasurer partnerships since January 1995. Formerly with Goldman,
Sachs & Co. from July 1988 to July 1990 and from August
1993 to January 1995 and with McKinsey & Co. from October
1992 to August 1993.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER. Unless
otherwise indicated below, all information concerning each person listed below
is the same as shown above.
<TABLE>
<CAPTION>
NAME OFFICE HELD IN PURCHASER
- ------------------------ --------------------------------
<S> <C>
Sandra J. Horbach Director and President
Thomas H. Lister Vice President and Secretary
Jamie C. Nicholls Vice President and Treasurer
</TABLE>
II-1
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at one
of the addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
---------------
<TABLE>
<CAPTION>
BY MAIL: BY HAND/OVERNIGHT
<S> <C>
Chase Mellon Shareholder Services, L.L.C. Chase Mellon Shareholder Services, L.L.C.
P.O. Box 798 120 Broadway, 13th Floor
Midtown Station New York, New York 10271
New York, New York 10018 Attn: Reorg. Dept.
Attn: Reorg. Dept.
</TABLE>
FOR INFORMATION:
1 (800) 223-2064
BY FACSIMILE TRANSMISSION:
(201) 329-8936
(FOR ELIGIBLE INSTITUTIONS ONLY)
CONFIRM BY TELEPHONE:
(201) 296-4983
------------------------
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
ABCDEF
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
CALL TOLL-FREE (800) 223-2064
BANKERS AND BROKERS, PLEASE CALL COLLECT (212) 440-9800
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-3025 OR (212) 526-4601 (CALL COLLECT)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
COMMUNITY HEALTH SYSTEMS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 11, 1996
BY
FLCH ACQUISITION CORP.
A CORPORATION FORMED BY
FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT:
Chase Mellon Shareholder Services, L.L.C. Chase Mellon Shareholder Services, L.L.C.
P.O. Box 798 120 Broadway, 13th Floor
Midtown Station New York, New York 10271
New York, New York 10018 Attn: Reorg. Depart.
Attn: Reorg. Depart.
FOR INFORMATION:
(800) 223-2064
</TABLE>
BY FACSIMILE TRANSMISSION:
(201) 329-8936
(FOR ELIGIBLE INSTITUTIONS ONLY)
CONFIRM BY TELEPHONE:
(201) 296-4983
--------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THAT SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) (the "Tendering Stockholders") if certificates evidencing Shares
("Certificates") are to be forwarded herewith or, unless an Agent's Message (as
defined in the Offer to Purchase) is used, if delivery of Shares is to be made
by book-entry transfer to an account maintained by Chase Mellon Shareholder
Services, L.L.C. (the "Depositary") at The Depository Trust Company ("DTC") or
the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase (as defined below).
Tendering Stockholders whose Certificates for Shares are not immediately
available or who cannot deliver their Certificates for, or a Book-Entry
Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to,
their Shares and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) may tender
their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2 hereof. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<PAGE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
TOTAL NUMBER
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE OF SHARES
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE REPRESENTED BY NUMBER OF
APPEAR(S) ON THE CERTIFICATE(S)) NUMBER(S)(1) CERTIFICATE(S)(1) SHARES TENDERED(2)
<S> <C> <C> <C>
TOTAL SHARES
(1) Need not be completed by holders of Shares delivering Shares by Book-Entry Transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares represented by Certificates delivered to the Depositary
are being tendered. See Instruction 4.
</TABLE>
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE
DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:
Check Box of Book-Entry Transfer Facility:
/ / DTC / / PDTC
Account Number: Transaction Code Number:
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
If delivery is by book-entry transfer, check box of Applicable Book-Entry Transfer Facility:
/ / DTC / / PDTC
Account Number: Transaction Code Number:
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to FLCH Acquisition Corp. ("Purchaser"), a
Delaware corporation and a wholly owned subsidiary of FLCH Holdings Corp., a
Delaware corporation ("Parent"), the above-described shares of Common Stock, par
value $.01 per share (the "Common Stock"), including the associated preferred
share purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Community Health Systems, Inc., a Delaware corporation
("Company"), at a purchase price of $52.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase"), receipt
of which is hereby acknowledged, and in this Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively, constitute
the "Offer"). Each of Parent and the Purchaser have been formed by Forstmann
Little & Co. Equity Partnership-V, L.P., a New York limited partnership, in
connection with the Offer and the transactions contemplated thereby. The Offer
is being made in connection with the Agreement and Plan of Merger dated as of
June 9, 1996, among Parent, the Purchaser and the Company. The undersigned
understands that the Purchaser reserves the right to transfer or assign, in
whole or from time to time in part, to one or more of its or Parent's
affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
Tendering Stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Purchaser all right,
title and interest in and to all of the Shares that are being tendered hereby
and any and all other Shares or other securities issued or issuable in respect
of such Shares on or after June 9, 1996 (a "Distribution") and irrevocably
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to (i) deliver
Certificates evidencing such Shares (and Distributions), or transfer ownership
of such Shares (and any Distributions) on the account books maintained by a
Book-Entry Transfer Facility together, in any such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Purchaser,
upon receipt by the Depositary as the undersigned's agent, of the purchase price
with respect to such Shares, (ii) present such Shares (and all Distributions)
for transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
Distributions), all in accordance with the terms and subject to the conditions
of the Offer.
The undersigned hereby irrevocably appoints each of Sandra J. Horbach,
Thomas H. Lister and Jamie C. Nicholls (each a "Purchaser Designee") as the
attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to all
Shares tendered hereby and accepted for payment and paid for by the Purchaser
(and any Distributions), including, without limitation, the right to vote such
Shares (and any Distributions) in such manner as each such attorney and proxy or
his substitute shall, in his sole discretion, deem proper. All such powers of
attorney and proxies, being deemed to be irrevocable, shall be considered
coupled with an interest in the Shares tendered herewith. Such appointment will
be effective
<PAGE>
when, and only to the extent that, the Purchaser accepts such Shares for
payment. Upon such acceptance for payment, all prior powers of attorney and
proxies given by the undersigned with respect to such Shares (and any
Distributions) will be revoked, without further action, and no subsequent powers
of attorney and proxies may be given with respect thereto (and, if given, will
be deemed ineffective). The Purchaser Designees will, with respect to the Shares
(and any Distributions), for which such appointment is effective, be empowered
to exercise all voting and other rights of the undersigned with respect to such
Shares (and any Distributions) as they in their sole discretion may deem proper.
The Purchaser reserves the absolute right to require that, in order for Shares
to be deemed validly tendered, immediately upon the acceptance for payment of
such Shares, the Purchaser or the Purchaser Designees are able to exercise full
voting rights and all other rights which inure to a record and beneficial holder
with respect to such Shares (and any Distributions), including voting at any
meeting of stockholders then scheduled.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustee in bankruptcy, personal and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable, provided that the Shares tendered pursuant to the Offer
may be withdrawn prior to their acceptance for payment.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that, when the same are accepted for payment
and paid for by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and that the Shares tendered hereby (and any Distributions)
will not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the account
of the Purchaser any and all Distributions issued to the undersigned on or after
June 9, 1996 in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and, pending such remittance and transfer
or appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of any such Distributions and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof, as
determined by the Purchaser in its sole discretion.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser with respect to such Shares upon the terms and subject to the
conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the Shares tendered hereby or may accept for payment fewer than all of
the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue a check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment in the names(s) of
the registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Shares Tendered." In the event that both the
"Special Payment Instructions" and the "Special Delivery Instructions" are
completed, please issue the check for the purchase price and /or return any such
Certificates evidencing Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) in the name(s) of, and deliver such
check and/or return such Certificates (and accompanying documents, as
appropriate) to, the person(s) so indicated. Unless otherwise indicated herein
under "Special Payment Instructions," in the case of a book-entry delivery of
Shares, please credit the account maintained at the Book-Entry Transfer Facility
indicated above with respect to any Shares not accepted for payment. The
undersigned recognizes that the Purchaser has no obligations pursuant to the
"Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares tendered hereby.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Certificates for To be completed ONLY if Certificates for
Shares not tendered or not accepted for Shares not tendered or not accepted for
payment and/or the check for the purchase payment and/or the check for the purchase
price of Shares accepted for payment are to be price of Shares accepted for payment are to be
issued in the name of someone other than the sent to someone other than the undersigned or
undersigned, or if Shares delivered by to the undersigned at an address other than
book-entry transfer that are not accepted for that shown above.
payment are to be returned by credit to an Mail (check appropriate box(es)):
account maintained at a Book-Entry Transfer / / Check to:
Facility, other than to the account indicated / / Certificate(s) to:
above. Name
Issue (check appropriate Address
box(es)): ----------------------------------------------
/ / Check to: (INCLUDE ZIP CODE)
/ / Certificate(s) to: ----------------------------------------------
Name (TAX IDENTIFICATION OR
Address SOCIAL SECURITY NO.)
- ---------------------------------------------- (SEE SUBSTITUTE FORM W-9)
(INCLUDE ZIP
CODE)
- ----------------------------------------------
(TAX IDENTIFICATION
OR
SOCIAL SECURITY
NO.)
(SEE SUBSTITUTE FORM
W-9)
/ / Credit unpurchased Shares tendered by
book-entry transfer to the account set
forth below:
/ / DTC / /PDTC
(check one)
- ----------------------------------------------
(DTC/PDTC Account Number)
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below,
signatures on this Letter of Transmittal must be guaranteed by a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of a recognized Medallion Program approved by The Securities
Transfer Association, Inc. (an "Eligible Institution"), unless the Shares
tendered hereby are tendered (i) by the registered holder (which term, for
purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of Shares) of such Shares who has completed neither the box labeled "Special
Payment Instructions" nor the box labeled "Special Delivery Instructions" herein
or (ii) for the account of an Eligible Institution. See Instruction 5. If the
Certificates are registered in the name of a person other than the signer of
this Letter of Transmittal, or if payment is to be made or delivered to, or
Certificates evidencing unpurchased Shares are to be issued or returned to, a
person other than the registered owner, then the tendered Certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
Certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by Tendering Stockholders if Certificates evidencing Shares are to be forwarded
herewith or if delivery of Shares is to be made pursuant to the procedures for
book-entry transfer set forth in Section 3 of the Offer to Purchase. For a
Tendering Stockholder to validly tender Shares pursuant to the Offer, either (a)
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantees or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
delivery of Shares, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein on or prior to the Expiration Date or (ii) Shares must be delivered
pursuant to the procedures for book-entry transfer set forth in Section 3 of the
Offer to Purchase and a Book-Entry Confirmation must be received by the
Depositary on or prior to the Expiration Date or (b) the Tendering Stockholder
must comply with the guaranteed delivery procedures set forth below and in
Section 3 of the Offer to Purchase.
Tendering Stockholders whose Certificates are not immediately available or
who cannot deliver their Certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer on or prior to the
Expiration Date may tender their Shares by properly completing and duly
executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution,
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser, must be received by
the Depositary prior to the Expiration Date, and (iii) the Certificates
representing all tendered Shares in proper form for transfer, or a Book-Entry
Confirmation with respect to all tendered Shares, together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantees or an Agent's Message
in connection with a book-entry delivery of Shares, and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three NYSE trading days after the date of such Notice of Guaranteed
Delivery. If Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Stockholders, by execution of
this Letter of Transmittal (or a facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
information required under "Description of Shares Tendered" should be listed on
a separate signed schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all the Shares represented by any
Certificates delivered to the Depositary herewith are to be tendered hereby,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, a new Certificate for the remainder
of the Shares that were evidenced by your old certificate(s) will be sent,
without expense, to the person(s) signing this Letter of Transmittal, unless
otherwise provided in the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" or this Letter of Transmittal, as soon
as practicable after the Expiration Date. All Shares represented by
Certificate(s) delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond with
the name(s) as written on the face of the Certificates without alteration,
enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority to so act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on such Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on the Certificate(s). Signatures
on any such Certificates or instruments of transfer must be guaranteed by an
Eligible Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or (in the
circumstances permitted hereby) if Certificates for Shares not tendered or not
purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any transfer taxes (whether imposed on the registered holder(s) or
such persons) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter of
Transmittal.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
Certificates for unpurchased Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be sent
and/or such Certificates are to be returned to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal must be completed. If any
tendered Shares are not purchased for any reason and such Shares are delivered
by Book-Entry Transfer Facility, such Shares will be credited to an account
maintained at the appropriate Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses or telephone numbers set forth below and requests for
additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent or
brokers, dealers, commercial banks and trust companies and such materials will
be furnished at the Purchaser's expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time or from time to time, in the
Purchaser's sole discretion.
10. BACKUP WITHHOLDING. Each Tendering Stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided under "Important Tax Information" below
and to certify that the stockholder is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
Tendering Stockholder to 31% federal income tax backup withholding on the
payment of the purchase price for the Shares. The Tendering Stockholder should
indicate in the box in Part III of the Substitute Form W-9 if the Tendering
Stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the Tendering Stockholder has indicated
in the box in Part III that a TIN has been applied for and the Depositary is not
provided with a TIN by the time of payment, the Depositary will withhold 31% of
all payments of the purchase price, if any, made thereafter pursuant to the
Offer until a TIN is provided by the Depositary.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate representing
Shares has been lost or destroyed, the holder(s) should promptly notify the
Company's transfer agent and registrar, First Union National Bank of North
Carolina. The holders will then be instructed as to the procedure to be followed
in order to replace such Certificate. This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Tendering Stockholder whose tendered Shares
are accepted for payment is required to provide the Depositary (as payor) with
such Tendering Stockholder's correct TIN on Substitute Form W-9 below. If such
Tendering Stockholder is an individual, the TIN is his social security number.
If the Tendering Stockholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, such Tendering
Stockholder should so indicate on the Substitute Form W-9. If the Depositary is
not provided with the correct TIN, the Tendering Stockholder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such Tendering Stockholders with respect to Shares purchased
pursuant to the Offer may be subject to backup federal income tax withholding.
Certain Tendering Stockholders (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Tendering Stockholder must submit a statement, signed
under penalties of perjury, attesting to that individual's exempt status. Forms
for such statements may be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the Tendering Stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments of the purchase
price for Shares purchased pursuant to the Offer, a Tendering Stockholder must
provide the Depositary with his or her correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such Tendering Stockholder is awaiting a TIN) and that (1) such
Tendering Stockholder has not been notified by the Internal Revenue Service that
he or she is subject to backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue Service has notified the
Tendering Stockholder that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Tendering Stockholder is required to give the Depositary the social
security number or employer identification number of the record owner of the
Shares tendered hereby. If the Shares are registered in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidelines on which number to report. If the Tendering Stockholder
has not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for in the TIN in Part III, and sign and date the Substitute Form W-9.
If "Applied For" is written in Part III and the Depositary is not provided with
a TIN within 60 days, the Depositary will withhold 31% on all payments of the
purchase price made thereafter until a TIN is provided to the Depositary.
<PAGE>
IMPORTANT
TENDERING SHAREHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
X
SIGNATURE(S) OF TENDERING STOCKHOLDERS(S))
Dated: , 1996
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
Certificate(s) or on a security position listing or by the person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5).
Name(s):
(PLEASE PRINT)
- ------------------------------------------------------------------------
Capacity (full title):
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(SEE INSTRUCTION 5)
Address:
- ----------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
(HOME)
- ------------------------------------------------------------------------
(BUSINESS)
Tax Identification No. or Social Security No.:
(COMPLETE SUBSTITUTE W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY
FINANCIAL INSTITUTIONS:
PLACE MEDALLION GUARANTEE IN SPACE BELOW
<PAGE>
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHASE MELLON SHAREHOLDER SERVICES, INC.
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE PART III--Social Security Number or
FORM W-9 BOX AT THE RIGHT AND CERTIFY BY SIGNING Employer Identification Number
DEPARTMENT OF THE TREASURY AND DATING BELOW.
INTERNAL REVENUE SERVICE (If awaiting TIN write "Applied For")
PAYER'S REQUEST FOR PART II--For Payees exempt from backup withholding, see the enclosed Guidelines
TAXPAYER IDENTIFICATION for Certification of Taxpayer Identification Number on Substitute Form W-9 and
NUMBER ("TIN") complete as instructed therein.
Certification -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct TIN (or I am waiting for a number
to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out Item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines).
NAME:
(Please Print)
SIGNATURE: DATE:
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me,
and either (1) I have mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Office or (2) I intend
to mail or deliver an application in the near future. I understand that if I do
not provide a TIN by the time of payment, 31% of all payments pursuant to the
Offer made to me thereafter will be withheld until I provide a number.
SIGNATURE ______________________________________ DATE __________________________
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
[GEORGESON LOGO]
Wall Street Plaza
New York, New York 10005
Call Toll-Free (800) 223-2064
Bankers and Brokers, please call collect
(212) 440-9800
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
3 World Financial Center
New York, New York 10285
(212) 526-3025 or (212) 526-4601
(Call collect)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
COMMUNITY HEALTH SYSTEMS, INC.
AT
$52.00 NET PER SHARE
BY
FLCH ACQUISITION CORP.
A CORPORATION FORMED BY
FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
TO BROKERS, DEALERS, COMMERCIAL BANKS, June 11, 1996
TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by FLCH Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a
Delaware corporation ("Parent"), to act as Dealer Manager in connection with the
Purchaser's offer to purchase all outstanding shares of Common Stock, par value
$.01 per share (the "Common Stock"), including the associated preferred share
purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Community Health Systems, Inc., a Delaware corporation
("Company"), at a purchase price of $52.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer") enclosed herewith.
Each of Parent and the Purchaser have been formed by Forstmann Little & Co.
Equity Partnership-V, L.P., a New York limited partnership ("Forstmann Little"),
in connection with the Offer and the transactions contemplated thereby. The
Offer is being made in connection with the Agreement and Plan of Merger dated as
of June 9, 1996, among Parent, the Purchaser and the Company (the "Merger
Agreement"). Holders of Shares whose certificates for such Shares (the
"Certificates") are not immediately available or who cannot deliver their
Certificates and all other required documents to the Depositary or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated June 11, 1996.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares.
3. A letter to stockholders of the Company from Richard E. Ragsdale,
Chairman of the Board, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by
the Company and mailed to the stockholders of the Company.
<PAGE>
4. The Notice of Guaranteed Delivery for Tender of Shares to be used to
accept the Offer if following the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
7. A return envelope addressed to Chase Mellon Shareholder Services, L.L.C.
(the "Depositary").
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS
THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $52.00 per Share, net to the seller in cash, without
interest.
2. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in
the Offer to Purchase) of the Offer that number of Shares which would represent
at least a majority of the outstanding Shares on a fully diluted basis.
3. The Offer is being made for all of the outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer. However, federal income tax backup withholding at a rate of 31% may be
required, unless an exemption is available or unless the required taxpayer
identification information is provided. See Instruction 10 of the Letter of
Transmittal.
5. The Board of Directors of the Company has unanimously approved the Offer
and the Merger (as defined in the Offer to Purchase) and determined that
the terms of the Offer and the Merger are fair to, and in the best interests of,
the stockholders of the Company, and recommends that the stockholders of the
Company accept the Offer and tender all of their Shares pursuant thereto.
6. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Certificates pursuant to the
procedures set forth in Section 3 of the Offer to Purchase or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to
such Shares, (b) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof) with any required signature guarantees
or an Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares, and (c) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when Certificates for Shares or Book-Entry
Confirmations (as defined in the Offer to Purchase) are actually received by the
Depositary.
In order to take advantage of the Offer, (i) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with any
required signature guarantees or an Agent's Message in connection with a
book-entry delivery of Shares, and any other documents required by the Letter of
Transmittal should be sent to the Depositary and (ii) Certificates representing
the tendered Shares or a timely Book-Entry Confirmation should be delivered to
the Depositary in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
2
<PAGE>
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures specified in Section 3
of the Offer to Purchase.
None of the Purchaser, Parent or Forstmann Little, or any officer, director,
stockholder, agent or other representative of the Purchaser, Parent or Forstmann
Little, will pay any fees or commissions to any broker, dealer or other person
(other than the Dealer Manager, the Depositary and the Information Agent as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant to
the Offer. The Purchaser will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Purchaser will pay or cause to be paid
any transfer taxes payable on the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson & Company Inc., the Information Agent for the Offer, at Wall Street
Plaza, New York, New York 10005, (800) 223-2064 or Lehman Brothers Inc., the
Dealer Manager, at 3 World Financial Center, New York, New York 10285, (212)
526-3025 or (212) 526-4601 (call collect).
Requests for copies of the enclosed materials may be directed to the
Information Agent at its address and telephone number above.
Very truly yours,
LEHMAN BROTHERS INC.
NEW YORK, NEW YORK
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, THE PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
COMMUNITY HEALTH SYSTEMS, INC.
AT
$52.00 NET PER SHARE
BY
FLCH ACQUISITION CORP.
A CORPORATION FORMED BY
FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS
EXTENDED.
TO OUR CLIENTS:
Enclosed for your consideration are the Offer to Purchase, dated June 11,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to an offer by FLCH Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of FLCH Holdings Corp., a
Delaware corporation ("Parent"), to purchase all outstanding shares of Common
Stock, par value $.01 per share (the "Common Stock"), including the associated
preferred share purchase rights (the "Rights" and, together with the Common
Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation
(the "Company"), at a purchase price of $52.00 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer. The Offer is being made in connection with the Agreement and Plan
of Merger dated as of June 9, 1996, among Parent, the Purchaser and the Company
(the "Merger Agreement"). Each of Parent and the Purchaser have been formed by
Forstmann Little & Co. Equity Partnership-V, L.P., a New York limited
partnership, in connection with the Offer and the transactions contemplated
thereby. This material is being forwarded to you as the beneficial owner of
Shares carried by us in your account but not registered in your name.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender any or all of the Shares held by us for your account pursuant to the
terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $52.00 per Share, net to the seller in cash,
without interest.
2. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as
defined in the Offer to Purchase) of the Offer that number of Shares which
would represent at least a majority of the outstanding Shares on a fully
diluted basis.
3. The Offer is being made for all of the outstanding Shares.
<PAGE>
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer. However, federal income tax backup withholding at a rate of 31% may
be required, unless an exemption is available or unless the required
taxpayer identification information is provided. See Instruction 10 of the
Letter of Transmittal.
5. The Board of Directors of the Company has unanimously approved the
Offer and the Merger (as defined in the Offer to Purchase) and
determined that the terms of the Offer and the Merger are fair to, and in
the best interests of, the stockholders of the Company, and recommends that
the stockholders of the Company accept the Offer and tender all of their
Shares pursuant thereto.
6. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made
only after timely receipt by the Depositary of (a) Certificates pursuant to
the procedures set forth in Section 3 of the Offer to Purchase or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase) with respect
to such Shares, (b) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required
signature guarantees or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares, and (c) any
other documents required by the Letter of Transmittal. Accordingly,
tendering stockholders may be paid at different times depending upon when
Certificates for Shares or Book-Entry Confirmations are actually received by
the Depositary.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise indicated in such
instruction form. An envelope to return your instruction to us is enclosed.
PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE
TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making of
the Offer or acceptance thereof would not be in compliance with the securities
laws of such jurisdiction. However, the Purchaser may, in its discretion, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky, or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by Lehman Brothers Inc. or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
COMMUNITY HEALTH SYSTEMS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated June 11, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer") in connection with the offer by
FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of FLCH Holdings Corp., a Delaware corporation ("Parent"), to
purchase all outstanding shares of Common Stock, par value $.01 per share (the
"Common Stock"), including the associated preferred share purchase rights (the
"Rights" and, together with the Common Stock, the "Shares"), of Community Health
Systems, Inc., a Delaware corporation (the "Company"), at a purchase price of
$52.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer. Each of Parent and the
Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P.,
a New York limited partnership, in connection with the Offer and the
transactions contemplated thereby. The Offer is being made in connection with
the Agreement and Plan of Merger dated as of June 9, 1996, among Parent, the
Purchaser and the Company (the "Merger Agreement").
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
SIGN HERE
Number of Shares to be Tendered:* ______
<TABLE>
<S> <C>
--------------------------------------------
--------------------------------------------
Signature(s)
--------------------------------------------
--------------------------------------------
(Print Name(s))
--------------------------------------------
(Area Code and Telephone Number(s))
--------------------------------------------
(Taxpayer Identification or
Social Security Number(s))
Dated:, 1996
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
COMMUNITY HEALTH SYSTEMS, INC.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of Common Stock, par
value $.01 per share (the "Common Stock"), including the associated preferred
share purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Community Health Systems, Inc., a Delaware corporation (the
"Company"), are not immediately available or the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Depositary prior to the Expiration Date (as
defined in the Offer to Purchase). This Notice of Guaranteed Delivery may be
delivered by hand or facsimile transmission or mailed to the Depositary. See
Section 3 of the Offer to Purchase, dated June 11, 1996 (the "Offer to
Purchase").
THE DEPOSITARY FOR THE OFFER IS:
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT:
Chase Mellon Shareholder Services, L.L.C. Chase Mellon Shareholder Services, L.L.C.
P.O. Box 798 120 Broadway, 13th Floor
Midtown Station New York, New York 10271
New York, New York 10018 Attn: Reorg. Depart.
Attn: Reorg. Depart.
</TABLE>
FOR INFORMATION:
(800) 223-2064
BY FACSIMILE TRANSMISSION:
(201) 329-8936
(FOR ELIGIBLE INSTITUTIONS ONLY)
CONFIRM BY TELEPHONE:
(201) 296-4983
------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in the Offer to Purchase) and certificates for
Shares to the Depositary within the time period shown herein. Failure to do so
could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to FLCH Acquisition Corp. (the "Purchaser"),
a Delaware corporation and a wholly owned subsidiary of FLCH Holdings Corp.
("Parent"), a Delaware corporation, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), receipt of each of which is hereby acknowledged, the
number of Shares indicated below, pursuant to the guaranteed delivery procedure
set forth in Section 3 of the Offer to Purchase. Each of Parent and the
Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V, L.P.,
a New York limited partnership, in connection with the Offer and the
transactions contemplated thereby.
<TABLE>
<S> <C>
Number of Shares: SIGN HERE
Certificate No(s). (if available): Name(s) of Record Holder(s):
- ------------------------------------------- -------------------------------------------
- ------------------------------------------- -------------------------------------------
If Shares will be tendered by book-entry (Please Print)
transfer: Addresses:
Name of Tendering Institutions (Zip Code)
- ------------------------------------------- Area Code and Telephone No.:
Account No.: at -------------------------------------------
/ / The Depository Trust Company Signature(s):
/ / Philadelphia Depository Trust Company Dated: , 1996
</TABLE>
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, as Eligible Institution (as such term is defined in Section
3 of the Offer to Purchase), hereby guarantees to deliver to the Depositary the
certificates representing the Shares tendered hereby, in proper form for
transfer, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to
Purchase) with respect to transfer of such Shares into the Depositary's account
at The Depository Trust Company or the Philadelphia Depositary Trust Company, in
each case, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase) in the
case of a book-entry delivery of Shares, and any other documents required by the
Letter of Transmittal, all within three New York Stock Exchange trading days
after the date hereof.
<TABLE>
<S> <C>
Name of Firm: (Authorized Signature)
Address: Name:
Title:
Zip Code
Area Code and Tel. No.: Date:
</TABLE>
DO NOT SEND CERTIFICATES FOR SHARES AND/OR RIGHTS WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES SHOULD BE SENT TOGETHER WITH A LETTER OF TRANSMITTAL.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- ----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
</TABLE>
- ----------------------------------------------------------
<TABLE>
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
</TABLE>
- ----------------------------------------------------------
- ----------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
</TABLE>
- ----------------------------------------------------------
<TABLE>
<C> <S> <C>
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
- ----------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE
FORM.
Certain payments, other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE, DATED JUNE
11, 1996, AND THE RELATED LETTER OF TRANSMITTAL AND IS NOT BEING MADE TO, NOR
WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. IN THOSE JURISDICTIONS WHERE
SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED
BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE
PURCHASER BY LEHMAN BROTHERS INC. OR ONE OR MORE REGISTERED BROKERS OR DEALERS
LICENSED UNDER THE LAWS OF SUCH JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
COMMUNITY HEALTH SYSTEMS, INC.
AT
$52.00 NET PER SHARE
BY
FLCH ACQUISITION CORP.
A CORPORATION FORMED BY
FORSTMANN LITTLE & CO.
EQUITY PARTNERSHIP-V, L.P.
FLCH Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of FLCH Holdings Corp., a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of Common Stock,
par value $.01 per share (the "Common Stock"), including the associated
preferred share purchase rights (the "Rights" and, together with the Common
Stock, the "Shares"), of Community Health Systems, Inc., a Delaware corporation
(the "Company"), at a purchase price of $52.00 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase") and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Each of Parent and
the Purchaser have been formed by Forstmann Little & Co. Equity Partnership-V,
L.P., a New York limited partnership, in connection with the Offer and the
transactions contemplated thereby. The Rights were issued pursuant to a Rights
Agreement, dated as of September 7, 1995, between the Company and First Union
National Bank of North Carolina, as Rights Agent.
---------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
---------------------------------------------------------------------------
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 9, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the
Company, pursuant to which, as promptly as practicable following the later of
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"). Following the consummation of the Merger, the Company will be the
surviving corporation (the "Surviving Corporation"). In the Merger, each
outstanding Share (other than Shares held by the Company as treasury stock or by
any subsidiary of the Company, or owned by Parent, the Purchaser or any
subsidiary of either Parent or the Purchaser and other than Shares held by
stockholders, if any, who perfect their appraisal rights under Delaware law)
will be converted into the right to receive $52.00, or any higher price per
Share paid pursuant to the Offer, without interest thereon, in cash.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL
OF THEIR SHARES PURSUANT THERETO.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as hereinafter defined)
of the Offer that number of Shares which would represent at least a majority of
the outstanding Shares on a fully diluted basis.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
Chase Mellon Shareholder Services, L.L.C. (the "Depositary") of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering stockholders.
Payment for Shares accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates for such Shares
or timely confirmation of the book-entry transfer of such Shares into the
Depositary's account at a Book-Entry Transfer Facility (as defined in the Offer
to Purchase) pursuant to the procedures set forth in the Offer to Purchase, (ii)
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantees or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
delivery of shares, and (iii) any other documents required by the Letter of
Transmittal.
If by 12:00 Midnight, New York City time, on Tuesday, July 9, 1996 (or
any other date or time then set as the Expiration Date), any or all
conditions to the Offer have not been satisfied or waived, the Purchaser
reserves the right (but shall not be obligated), subject to the terms and
conditions contained in the Merger Agreement and to the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"), to
(i) terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders, (ii) waive all the unsatisfied
conditions and, subject to complying with the terms of the Merger Agreement
and the applicable rules and regulations of the Commission, accept for
payment and pay for all Shares validly tendered prior to the Expiration Date
and not theretofore withdrawn, (iii) extend the Offer and, subject to the
right of stockholders to withdraw Shares until the Expiration Date, retain
the Shares that have been tendered during the period or periods for which the
Offer is extended or (iv) amend the Offer. The Merger Agreement provides that
so long as the Merger Agreement is in effect and the Offer conditions have
not been satisfied or waived, at the request of the Company, the Purchaser
will, and Parent will cause the Purchaser to, extend the Offer for an
aggregate period of not more than 20 business days (for all such extensions)
beyond the originally scheduled expiration date of the Offer. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, July
9, 1996, unless and until the Purchaser (subject to the terms of the Merger
Agreement) shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by the Purchaser, shall expire.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the conditions set forth in the Offer to Purchase shall
have been satisfied or shall have been determined by the Purchaser to have
been satisfied, (i) to extend the period of time during which the Offer is
open, and thereby delay acceptance for payment of and the payment for any
Shares, by giving oral or written notice of such extension to the Depositary,
and (ii) to amend the Offer in any other respect by giving oral or written
notice of such amendment to the Depositary. The Purchaser shall not have any
obligation to pay interest on the purchase price for tendered Shares whether
or not the Purchaser exercises such rights.
Except as otherwise provided in the Offer to Purchase, tenders of Shares
are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant
to the procedures set forth below at any time prior to the Expiration Date and,
unless accepted for payment and paid for by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after Friday, August 9, 1996. For a withdrawal
to be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase and must specify the name of
the person having tendered the Shares to be withdrawn, the number of Shares to
be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in the Offer to Purchase, the notice of withdrawal must specify the name
and number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for any purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in the Offer to
Purchase at any time prior to the Expiration Date. All questions as to the form
and validity (including time of receipt) of notices of withdrawal will be
determined by the Purchaser in its sole discretion, which determination will be
final and binding. None of the Purchaser, Parent, the Depositary, the
Information Agent, the Dealer Manager or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
The information required to be disclosed by Paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided the Purchaser its list of stockholders and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed by the Purchaser to record holders of Shares
and will be furnished by the Purchaser to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase and the related Letter of
Transmittal and other tender offer material may be directed to the Information
Agent or the Dealer Manager as set forth below, and copies will be furnished
promptly at the Purchaser's expense. No fees or commissions will be payable to
brokers, dealers or other persons other than the Information Agent, the Dealer
Manager, and the Depositary for soliciting tenders of Shares pursuant to the
Offer.
The Information Agent for the Offer is:
[Georgeson Logo]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
Toll-Free (800) 223-2064
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center, 17th Floor
New York, New York 10285
(212) 526-3025 or (212) 526-4601
(Call Collect)
June 11, 1996
<PAGE>
SARD VERBINNEN & CO NEWS
FOR IMMEDIATE RELEASE
CONTACT FOR COMMUNITY HEALTH SYSTEMS: CONTACT FOR FORSTMANN LITTLE:
Merilyn Herbert George Sard/Anna Cordasco
Director of Investor Relations Sard Verbinnen & Co
615/373-9600 212/687-8080
FORSTMANN LITTLE TO ACQUIRE COMMUNITY HEALTH SYSTEMS, LEADING PROVIDER OF
HEALTHCARE SERVICES IN NON-URBAN AREAS, FOR $1.37 BILLION
----------------------------------------------------------------
NEW YORK AND NASHVILLE, TN, JUNE 10, 1996 -- Forstmann Little & Co. and
Community Health Systems, Inc. (NYSE: CYH), a leading provider of healthcare
services in non-urban areas, today announced they have signed a definitive
agreement for Forstmann Little to acquire all of the outstanding shares of
Community Health Systems for $52 per share in cash. The total value of the
transaction is approximately $1.37 billion, including assumed and refinanced
debt.
Forstmann Little will invest $1 billion of its own capital and Chase
Manhattan Corp. has agreed to provide $900 million of bank financing. After all
shares are purchased and debt refinanced, this conservative capital structure
will provide over $500 million to Community Health Systems to fund internal
growth and the acquisition of additional hospitals. The Company now owns or
operates 38 hospitals in 18 states, primarily in the Southeast and Southwest.
The transaction, which is not subject to financing or antitrust clearance, is
expected to be completed in mid-July.
A Forstmann Little entity will commence tomorrow a tender offer for all
shares of Community Health Systems. Community Health Systems will simultaneously
commence a tender offer for its $100 million of outstanding 10 1/4% senior
subordinated debentures due November 30, 2003.
Community Health Systems will continue to be run by its current
management team, headed by Chairman Richard E. Ragsdale and President and
Chief Executive Officer E. Thomas Chancy. No changes in operations are
expected.
"Community Health Systems has all the characteristics we look for in an
acquisition -- leading market position, significant growth potential and a great
management team," said senior partner Theodore J. Forstmann. "Dick Ragsdale and
Tom Chaney founded the company in 1985 with a wise business model. Virtually all
of their hospitals are located in communities where the company operates the
only hospital in town, or one of two. They have built a superb company that
provides high-quality healthcare services to their chosen communities and
improves people's lives. We look forward to being partners with these
outstanding entrepreneurs and helping them accelerate the company's already
outstanding growth."
Sard Verbinnen & Co., Inc. 630 Third Avenue New York, NY 10017
Tel 212 687 8080 Fax 212 687 8344
<PAGE>
-2-
"Forstmann Little has an exceptional track record of enabling companies to
achieve their growth potential," said Ragsdale. "They share our commitment to
developing high-quality healthcare delivery systems centered around non-urban
hospitals. We are extremely fortunate to be joining them as partners."
"Forstmann Little and its unique capital structure will be invaluable to
us as we pursue our strategy of selective hospital acquisitions coupled with
market share expansion in our existing communities," said Chaney. "Our solid
base of loyal physicians has been a cornerstone of our company, and we expect to
be able to enhance that base. Furthermore, we will now have even more ability to
be the provider of choice in our markets, improve physical facilities and expand
delivery of a full range of inpatient services as well as state-of-the-art
outpatient, diagnostic and home health services."
The transaction was approved unanimously yesterday by the Board of
Directors of Community Health Systems, based on the recommendation of a Special
Committee of independent directors. Merrill Lynch served as financial adviser
and provided a fairness opinion to the Special Committee.
Community Health Systems, Inc. owns and operates full-service, acute care
hospitals in non-urban communities. The hospitals serve as the nucleus for
healthcare delivery in their communities by offering easy access to a full range
of medical services, excellent care and competitive pricing. Community Health
Systems employs over 7,900 healthcare professionals and support personnel. The
Company currently has approximately 19.7 million shares of common stock
outstanding.
Founded in 1978, Forstmann Little is a private investment firm that has
invested over $12 billion in 20 acquisitions, including General Instrument,
Ziff-Davis Publishing and Gulfstream Aerospace. The firm currently has
approximately $2.3 billion in committed capital for future investments.
###
<PAGE>
EXHIBIT (a)(9)
AFFILIATE OF FORSTMANN LITTLE COMMENCES TENDER OFFER FOR
COMMUNITY HEALTH SYSTEMS
NEW YORK AND NASHVILLE, TN, JUNE 11, 1996 -- Forstmann
Little & Co. and Community Health Systems, Inc. (NYSE:CYH) today
announced that in accordance with their previously announced Merger
Agreement, a corporation formed by a Forstmann Little affiliate today
commenced a tender offer for all of the outstanding shares of common stock of
Community Health Systems, Inc. at a purchase price of $52.00 net per share.
The offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Tuesday, July 9, 1996, unless the offer is extended.
The offer is subject to certain conditions which are described in an Offer to
Purchase being mailed to all shareholders of Community Health Systems. Chase
Mellon Shareholder Services, L.L.C. will act as depositary for the tender
offer, Georgeson & Company Inc. will act as information agent for
the tender offer and Lehman Brothers Inc. will act as dealer-manager for the
tender offer.
Community Health Systems, Inc. owns and operates full-service, acute
care hospitals in non-urban communities. The hospitals serve as the nucleus
for healthcare delivery in their communities by offering easy access to a
full range of medical services, excellent care and competitive pricing.
Community Health Systems employs over 7,900 healthcare professionals and
support personnel. The Company currently has approximately 19.7 million
shares of common stock outstanding.
Founded in 1978, Forstmann Little is a private investment firm that has
invested over $12 billion in 20 acquisitions, including General
Instrument, Ziff-Davis Publishing and Gulfstream Aerospace. The firm
currently has approximately $2.3 billion in committed capital for future
investments.
<PAGE>
[LOGO]
CHEMICAL BANK
270 Park Avenue
New York, New York 10017
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
June 9, 1996
Commitment Letter
-----------------
Forstmann Little & Co.
767 Fifth Avenue
New York, New York 10153
Dear Sirs:
You have advised us, Chase Securities Inc. ("CSI") and Chemical Bank
("CHEMICAL"), that a Delaware corporation ("HOLDING") will be organized by you
for the purpose of acquiring Community Health Systems, Inc., a Delaware
corporation ("TWISTER"). We understand that such acquisition will be
accomplished, with Twister's concurrence, through a tender offer (the "TENDER
OFFER") by a Delaware corporation that will be a wholly owned subsidiary of
Holding ("ACQUISITION CO."), for all of the issued and outstanding shares of
common stock, par value $.01 per share, of Twister (the "SHARES"), followed by
the Merger described below. The Tender Offer will be contingent upon the
purchase by Acquisition Co. pursuant thereto of not less than a majority of the
Shares (the "MINIMUM SHARES"), determined on a fully diluted basis after giving
effect to the exercise of any warrants, rights, options, conversion privileges
or similar rights.
You have also advised us that prior to commencement of the Tender
Offer, Acquisition Co. and Twister will have entered into a merger agreement in
substantially the form previously delivered to you (the "MERGER AGREEMENT")
providing for the merger (the "MERGER") of Acquisition Co. or its wholly owned
subsidiary with Twister as soon as practicable after completion of the Tender
Offer, for cash consideration equal to $52.00 per Share. The Merger Agreement
will, among other things, provide that each shareholder of Twister (other than
Acquisition Co. and other than shareholders who have perfected appraisal
<PAGE>
Forstmann Little & Co. -2- June 9, 1996
rights) who has not participated in the Tender Offer will, upon consummation of
the Merger, receive a cash merger price per Share equal to $52.00 per Share.
We understand that (i) in order to finance the Tender Offer and
certain related expenses, Acquisition Co. will require a senior credit facility
of $450,000,000 (the "DEMAND FACILITY") (a portion of which may be borrowed by
Twister in order to repurchase or refinance certain of its indebtedness) and
(ii) in order to finance the Merger and certain related expenses, to refinance
certain indebtedness of Twister, to repay amounts owing under the Demand
Facility, to provide financing for future acquisitions in the same line of
business and for other general corporate purposes, the surviving corporation of
the Merger ("NEW TWISTER") will require senior credit facilities of $900,000,000
(the "MERGER FACILITIES").
Attached as Exhibits A and B to this Commitment Letter are statements
of terms and conditions (the "TERM SHEETS") setting forth the principal terms
and conditions on and subject to which (a) CSI is willing to act as advisor and
arranger for the Demand Facility and the Merger Facilities (collectively, the
"FACILITIES") and (b) Chemical is willing to provide the entire $450,000,000 of
the Demand Facility and the entire $900,000,000 of the Merger Facilities.
The definitive credit documentation will contain such customary
representations and warranties, covenants, conditions precedent, events of
default and other terms and provisions not inconsistent with the Terms Sheets as
may be requested by, and will otherwise be in form and substance reasonably
satisfactory to, the Administrative Agent and Acquisition Co. As you know, CSI
and Chemical have arranged and agented numerous bank financings for your and
your sponsored companies, and in developing the final terms and conditions for
the Facilities, we will draw upon our experience in such bank financings.
It is agreed that CSI will act as the sole arranger for the
syndication of the Facilities. It is further agreed that Chemical will act as
the sole administrative and collateral agent for the Facilities and will perform
all of the duties and functions customarily associated with such roles. The
appointment of any co-arrangers and co-agents for the Facilities would be
subject to the written approval of CSI, Chemical and you. The co-agent title
and other titles awarded to any Lender would be in name only, and no such Lender
would have any role with respect to the matters referred to in this paragraph.
You agree that Chemical's commitments for the Demand Facility and the Merger
Facilities will be reduced by the respective amounts of any commitments of other
Lenders approved by you (such approval not to be unreasonably withheld) received
prior to the execution of definitive financing documentation for the Demand
Facility and the Merger Facilities, respectively.
You agree to assist CSI and Chemical in forming the syndicate and to
provide each of them and the other Lenders, promptly upon request, with all
information reasonably deemed necessary by CSI and Chemical to complete
successfully the syndication, including, but not limited to, an information
package for delivery to potential syndicate members and participants and certain
financial models and projections for New Twister following the Merger. You
further agree to make appropriate officers and representatives of Holding and
Acquisition Co. and, to the extent practicable, Twister available to participate
in information
<PAGE>
Forstmann Little & Co. -3- June 9, 1996
meetings for potential syndicate members and participants at such times and
places as CSI and Chemical may reasonably request.
You represent, warrant and covenant that:
(x) except as provided in paragraph (y) below, all information
which has been or is hereafter made available by you or any of your
representatives for inclusion in the information package prepared for
delivery to potential syndicate members is and will be complete and
correct in all material respects and does not and will not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such
statements are made; and
(y) all financial models and projections that have been or are
hereafter made available by you or any of your representatives for
inclusion in the information package prepared for delivery to
potential syndicate members have been or will be prepared in good
faith based upon reasonable assumptions.
You agree to supplement the information and financial models referred to in
clauses (x) and (y) above from time to time until completion of the syndication
so that the representations and warranties in the preceding sentence remain
correct in all material respects. In arranging and syndicating the Facilities,
CSI and Chemical will use and rely on such information and financial models
without independent verification thereof.
In connection with the syndication of the Facilities, CSI and Chemical
may, in their discretion, allocate to other Lenders portions of any fees payable
to them in connection with the Facilities. You agree that no Lender will
receive any compensation of any kind for its participation in the Facilities,
except as expressly provided for in this Commitment Letter, in the Fee Letter
referred to below or as may be agreed to by CSI and Chemical.
The reasonable costs and expenses (including the reasonable fees and
expenses of counsel to CSI and Chemical, any necessary local counsel and other
counsel (including, without limitation, any special healthcare law counsel), and
each of our syndication and other reasonable out-of-pocket expenses) arising in
connection with the preparation, execution and delivery of this letter and the
definitive financing agreements shall be for your account. You further agree to
indemnify and hold harmless each Lender (including Chemical), CSI and each
director, officer, employee, affiliate and agent thereof (each, an "INDEMNIFIED
PERSON") against, and to reimburse each indemnified person, upon its demand,
for, any losses, claims, damages, liabilities or other expenses ("LOSSES") to
which such indemnified person may become subject insofar as such Losses arise
out of or in any way relate to or result from this Commitment Letter or the
financing contemplated hereby, including, without limitation, Losses consisting
of legal or other expenses incurred in connection with investigating, defending
or participating in any legal proceeding relating to any of the foregoing
(whether or not such indemnified person is a party thereto); PROVIDED that the
foregoing will not apply to any Losses to the extent they result from the gross
negligence or willful misconduct of such indemnified person.
<PAGE>
Forstmann Little & Co. -4- June 9, 1996
Your obligations under this paragraph shall remain effective whether or not
definitive financing documentation is executed and notwithstanding any
termination of this Commitment Letter. Neither CSI nor Chemical nor any other
indemnified person shall be responsible or liable to any other person for
consequential damages which may be alleged as a result of this Commitment Letter
or the financing contemplated hereby.
It is agreed that the provisions of this Commitment Letter and the Fee
Letter shall supplement and restate the commitment letter dated June 5, 1996
between us and you in connection with the Facilities. The provisions of this
Commitment Letter are supplemented as set forth in a separate fee letter dated
the date hereof from us to you (the "FEE LETTER") and are subject to the terms
of such Fee Letter. By executing this Commitment Letter, you acknowledge that
this Commitment Letter and the Fee Letter are the only agreements among you, CSI
and Chemical with respect to the Facilities and set forth the entire
understanding of the parties with respect thereto. Neither this Commitment
Letter nor the Fee Letter shall be assignable by you without the prior written
consent of CSI and Chemical, and neither this Letter nor the Fee Letter may be
changed except pursuant to a writing signed by each of the parties hereto. This
Commitment Letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that
prior to its acceptance by you, neither this letter, the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except to your employees, agents and advisers who are directly
involved in the consideration of this matter or as disclosure may be compelled
pursuant to a judicial or administrative proceeding or as otherwise required by
law.
If you are in agreement with the foregoing, please sign and return to
us one of the enclosed copies of each of this Commitment Letter and the Fee
Letter no later than 7:00 p.m., New York time, on June 9, 1996. This offer
shall terminate at such time unless prior thereto we shall have received signed
copies of such letters.
<PAGE>
Forstmann Little & Co. -5- June 9, 1996
We look forward to working with you on this transaction.
Very truly yours,
CHASE SECURITIES INC.
By: /s/ Allison Conway
------------------------
Name: Allison Conway
Title: Managing Director
CHEMICAL BANK
By: /s/ Douglas Traver
------------------------
Title: Vice President
Accepted and agreed to as of the date first above
written:
FORSTMANN LITTLE & CO.
By: /s/ Sandra J. Horbach
---------------------
Title: Partner
<PAGE>
EXHIBIT A
[LOGO]
DEMAND FACILITY
STATEMENT OF TERMS AND CONDITIONS
JUNE 9, 1996
BORROWERS: The borrower will be a Delaware corporation to be
organized in the future ("ACQUISITION CO.") and
will be a direct wholly-owned subsidiary of
another Delaware corporation to be organized in
the future ("HOLDING"), which in turn will be an
affiliate of Forstmann Little & Co. ("FL&CO").
Acquisition Co. proposes to make a tender offer
(the "TENDER OFFER") for all of the issued and
outstanding shares of common stock, par value $.01
per share (the "SHARES"), of Community Health
Systems, Inc., a Delaware corporation ("TWISTER"),
pursuant to the Merger Agreement providing for the
Merger as soon as is practicable after completion
of the Tender Offer, subject to any necessary
approval of the Merger by the shareholders of
Twister (the survivor of the Merger, "NEW
TWISTER").
In addition, at the option of Acquisition Co.,
Twister may be designated as a borrower of a
portion of the facility in order to repurchase or
refinance certain of its outstanding indebtedness
(including certain letters of credit). In such
case, references herein to Acquisition Co. in its
capacity as borrower shall, to the extent
applicable, be deemed to be references to both
Acquisition Co. and Twister in their separate and
several capacities as borrowers. It is intended
that in connection with its first use of the
facility, Twister will replace its existing
secured credit facilities. Acquisition Co. and
Chemical will agree on a statement of terms and
conditions consistent herewith with respect to the
portion of the facility made available to Twister.
<PAGE>
2
ADMINISTRATIVE AGENT: Chemical Bank ("CHEMICAL") will act as a sole
administrative, syndication, documentation and
collateral agent (the "ADMINISTRATIVE AGENT") for
a syndicate of financial institutions (the
"LENDERS").
ADVISOR AND ARRANGER: Chase Securities Inc. ("CSI" or the "ARRANGER").
LENDERS: The financial institutions (including Chemical)
included in the syndicate formed by the Arranger
(the "LENDERS").
DEMAND FACILITY: An aggregate principal amount of $450,000,000 will
be available to Acquisition Co. under a demand
senior secured (or, to the extent the Demand
Facility is made available to Twister, unsecured)
credit facility, (the "DEMAND FACILITY"). The
loans (the "DEMAND LOANS") made under the Demand
Facility will be repayable at any time after three
months following the Closing Date upon demand but
in no event later than the earlier of the date of
the Merger and six months after the Closing Date
(as defined below) (the date on which the Demand
Loans are repayable, the "MATURITY DATE").
AVAILABILITY: The Demand Loans will be available for multiple
drawings during the period commencing on the date
(in no event later than November 30, 1996) on
which Acquisition Co. accepts for payment at least
a majority of the Shares (the "MINIMUM SHARES") in
the Tender Offer (the "CLOSING DATE") and ending
on the Maturity Date; PROVIDED that in no event
may the amount of the Demand Loans made available
to Acquisition Co. (and excluding loans made to
Twister) exceed 50% of the purchase price of
Shares accepted for payment pursuant to the Tender
Offer or otherwise acquired by Acquisition Co.
INTEREST RESERVE: A portion of the Demand Facility equal to an
amount sufficient to fund interest payments (at an
assumed rate of 9.75%), and estimated fees and
expenses that become due between the Closing Date
and the date six months thereafter shall be set
aside and may be drawn upon by Acquisition Co.
only to pay such interest payments, fees and other
expenses as they become due.
USE OF PROCEEDS: After application of the funds received by
Acquisition Co. from Holding as equity
contributions and intercompany advances, the
proceeds of the Demand Loans will be used to
finance in part (a) the acquisition
<PAGE>
3
by Acquisition Co. of not less than the Minimum
Shares pursuant to the Tender Offer, (b) the
payment of interest, fees and other expenses
incurred in connection with the Tender Offer and
Merger and (c) if and to the extent Twister is a
borrower, the repurchase or refinancing of certain
indebtedness of Twister (including, without
limitation, Twister's revolving credit and letter
of credit facilities).
GUARANTEES: The obligations of Acquisition Co. (but not
Twister) under the Demand Facility will be
unconditionally guaranteed by Holding.
COLLATERAL: The obligations of Acquisition Co. (but not
Twister) under the Demand Facility and the
guarantee thereof will be secured by a perfected
first priority security interest in (a) all of the
capital stock of Acquisition Co. and all Shares
owned by Acquisition Co. or any affiliate or
designee thereof, whether acquired in the Tender
Offer or otherwise, and (b) all intercompany notes
(including any note payable to Holding related to
the capitalization of Acquisition Co.). The
portion of the Demand Facility made available to
Twister shall be unsecured.
INTEREST RATES: The higher of (i) the rate from time to time
publicly announced by Chemical in New York City as
its prime rate (the "PRIME RATE"), (ii) the
secondary market rate for three-month certificates
of deposit from time to time plus 1% and (iii) the
federal funds rate from time to time, plus 1/2 of
1% (such higher rate, the "ABR"; this rate is not
intended to be the lowest rate charged by Chemical
to its borrowers), in each case plus 1.50% per
annum.
Interest will be calculated on the basis of the
actual number of days elapsed over a 365/366-day
year for borrowings based on the Prime Rate, and
over a 360-day year for all other borrowings.
OVERDUE RATE:
Overdue principal, interest, fees and other
amounts owing will bear interest at 2% over the
rate otherwise applicable thereto.
COMMITMENT FEES: As provided in Fee Letter.
INTEREST PAYMENT DATES: Quarterly in arrears and on the Maturity Date.
<PAGE>
4
OPTIONAL PREPAYMENTS AND
COMMITMENT REDUCTIONS: All or a portion of the outstanding Demand Loans
may be prepaid at any time and the unutilized
portion of the Demand Facility may be terminated
in whole or in part (in minimum amounts to be
agreed upon) at Acquisition Co.'s option. Such
prepayments of Demand Loans (other than
refinancings of Twister's revolving credit and
letter of credit facilities) may not be
reborrowed.
INITIAL CONDITIONS PRECEDENT: The availability of the Demand Facility will be
conditioned upon, among other things, satisfaction
of the following conditions precedent:
(a) Execution and delivery of definitive
financing agreements and related
documentation for the Demand Facility,
reflecting the terms and conditions set
forth herein and such other terms and
conditions not inconsistent herewith as
are reasonably satisfactory to the
Lenders.
(b) Receipt by Acquisition Co. of not less
than $960,000,000 in proceeds from (i)
the sale by Holding of not less than
$460,000,000 of its common stock and
(ii) the sale by Holding of not less
than $500,000,000 of subordinated debt
(the "SUBORDINATED DEBT") having a
maximum interest rate of 8.25% per annum
and providing for no scheduled payments
of principal prior to the eleventh
anniversary of the Closing Date (the
proceeds of such equity and such
subordinated debt being either loaned to
Acquisition Co. by Holding pursuant to a
subordinated intercompany note (the
"SUBORDINATED INTERCOMPANY NOTE") or
contributed by Holding to the equity of
Acquisition Co.), in each case on such
terms and subject to such conditions
consistent with the other bank
financings sponsored by affiliates of
Acquisition Co. (the "SPONSORED
FINANCINGS") and such other terms as are
reasonably satisfactory to the
Administrative Agent. The Subordinated
Intercompany Note issued by Acquisition
Co. and the Subordinated Debt
<PAGE>
5
issued by Holding will each include
provision for payment, within 30 days
after the closing of the Demand Loan by
each obligor on such indebtedness, of
supplemental interest in an aggregate
amount not to exceed $12 million
("SUPPLEMENTAL SUBORDINATED DEBT
INTEREST").
(c) The Tender Offer shall have been, or
shall be concurrently, consummated
pursuant to the merger agreement in
substantially the form previously
delivered to the Administrative Agent
(the "Merger Agreement"), and no
material provision of the Merger
Agreement (including paragraph (g) of
Exhibit A thereto) shall have been
amended, supplemented, waived or
otherwise modified without the prior
written consent of the Administrative
Agent.
(d) Acquisition Co. shall have acquired,
concurrently with the making of the
first Demand Loans, not fewer than the
Minimum Shares, and there not having
been any material change in the
approximately 19,731,068 Shares
outstanding on June 6, 1996 (after
giving effect to any dilution), other
than the issuance of options to acquire
approximately 2,017,515 Shares under
Twister's stock option plans as of June
6, 1996.
(e) The documents and materials filed
publicly by Holding, Acquisition Co. and
Twister in connection with the Tender
Offer and the Merger shall have been
furnished to the Administrative Agent in
reasonably satisfactory form.
(f) Receipt by the Lenders of a pro forma
balance sheet of each of (i) Acquisition
Co. as of March 31, 1996 adjusted to
give effect to the purchase in the
Tender Offer
<PAGE>
6
of 90% of the outstanding Shares on a
fully diluted basis and the financings
contemplated hereby and (ii) New Twister
as of March 31, 1996 adjusted to give
effect to the Merger and the financings
contemplated hereby and by Exhibit B to
the Commitment Letter to which this
Exhibit A is attached, in each case as
if such transactions had been
consummated on such date.
(g) Receipt by Chemical of a detailed
business plan and analysis of the
business and prospects of New Twister
and its subsidiaries for fiscal years
1996 and 1997, and of financial
projections of New Twister and its
subsidiaries for the term of the Merger
Facilities, which have been previously
provided.
(h) Except as disclosed in the Merger
Agreement, there shall not exist any
litigation or any other matters required
to be disclosed under Section 6.8 of the
Merger Agreement and there shall not
have been instituted or pending any
litigation of the type described in
clause (a) of Exhibit A to the Merger
Agreement.
(i) Since December 31, 1995, except as
disclosed in the Merger Agreement, no
event shall have occurred which would
have a Material Adverse Effect on, or
which has had or is continuing to have a
material adverse effect on the prospects
of, Acquisition Co. or Twister and its
subsidiaries taken as a whole (either
before or after giving effect to the
Tender Offer) or on the transactions
contemplated hereby.
<PAGE>
7
(j) Receipt of all necessary or required
governmental and third party consents
and approvals in connection with the
Tender Offer and the Merger, the
financings contemplated hereby and the
continuing operations of Acquisition Co.
and Twister and its subsidiaries
following the Tender Offer and of New
Twister and its subsidiaries following
the Merger (other than shareholder
approval of Twister, if required), the
lack of which would have a Material
Adverse Effect, and all applicable
waiting periods shall have elapsed.
(k) No default or event of default shall
have occurred and be continuing under
any capital stock or debt of Holding,
Acquisition Co. or Twister or its
subsidiaries (either before or after
giving effect to the Tender Offer and
the Merger), or would result from the
transactions contemplated hereby, except
any such defaults or breaches (i) which
have not previously been waived or the
obligation with respect to which default
or breach has not been or will not be
refinanced or (ii) which would not
otherwise have a Material Adverse Effect
on Acquisition Co., Twister or New
Twister and its subsidiaries, taken as a
whole (either before or after giving
effect to the Tender Offer and the
Merger), or on the transactions
contemplated hereby.
(l) Holding, Acquisition Co. and Twister and
its subsidiaries after giving effect to
the Tender Offer and the Merger as
contemplated hereby, will have no
material indebtedness other than (i)
intercompany indebtedness, (ii) $75
million of taxable and tax-exempt bonds,
capital leases and other debt and (iii)
all or any portion of Twister's $100
million principal amount 10-1/4% Senior
Subordinated Debentures due 2003 (the
"DEBENTURES"), provided the Indenture
under which the Debentures were issued
shall have been amended in the
<PAGE>
8
form previously provided (collectively,
the "EXISTING PERMITTED DEBT").
(m) Receipt by the Lenders of any and all
legal opinions, in a manner, and to a
substantive effect, reasonably
satisfactory to the Administrative
Agent.
(n) The corporate and capital structure of
Holding, Acquisition Co. and New Twister
and its subsidiaries shall be consistent
with the terms hereof. All corporate
and legal matters in connection with the
Tender Offer, the Merger and the
transactions contemplated by the
financing agreements shall be reasonably
satisfactory in form and substance to
the Administrative Agent.
(o) Payment of required fees and expenses to
the Administrative Agent and the
Lenders.
(p) The Lenders shall have received
satisfactory evidence that the fees and
expenses (excluding interest, including
the Supplemental Subordinated Debt
Interest) to be incurred in connection
with the Tender Offer and the Merger and
the financing thereof will not exceed
$80,000,000 the aggregate.
ON-GOING
CONDITIONS PRECEDENT: The making of each Demand Loan will be conditioned
upon (a) all representations and warranties in all
credit and security documents (including, without
limitation, the material adverse change and
litigation representations, which will be
consistent with the conditions set forth in
clauses (h) and (i) under "Initial Conditions
Precedent" above, and compliance with law and
regulatory requirements representations) being
true and correct in all material respects, except
to the extent that the failure of any such
representation and warranty as to Twister to be
true and correct in all material respects is not
also a condition to the obligation of Acquisition
Co. to consummate the Tender Offer pursuant to the
Merger Agreement, (b) there being no default or
event of default in existence at the time of, or
after giving effect to the
<PAGE>
9
making of, such Demand Loan and (c) except as
disclosed in the Merger Agreement, no governmental
inquiries, injunctions or restraining orders
instituted or pending of the type described in
clause (a) of Exhibit A to the Merger Agreement or
any statute or rule enacted, promulgated, entered
or enforced which would have the consequences set
forth in clause (a) of Exhibit A to the Merger
Agreement.
OTHER MATTERS: The definitive credit documentation will contain
such customary representations and warranties
consistent with those obtained by Acquisition Co.
pursuant to the Merger Agreement, covenants,
conditions precedent, events of default and other
terms and provisions not inconsistent with the
terms hereof as may be requested by, and will
otherwise be in form and in substance reasonably
satisfactory to, the Administrative Agent and
Acquisition Co. Without limiting the foregoing,
Holding and Acquisition Co. will be prohibited
from engaging in any business activity other than
related to the Tender Offer and the Merger.
TAXES AND YIELD PROTECTION: The usual for facilities of this type and
consistent with the recent Sponsored Financings,
including but not limited to compensation in
respect of taxes and decreased profitability
resulting from changes subsequent to the Closing
Date in U.S. or foreign capital adequacy
requirements, guidelines or policies or their
interpretation or application, providing customary
protection for U.S. and non-U.S. Lenders.
TRANSFER PROVISIONS: The Lenders may at any time grant participations
in or sell, assign or otherwise transfer (in a
minimum amount so that the assignor and assignee
Lenders shall each retain an amount equal to $10
million in commitments or, in the case of the
assigning Lender, if less than such amount, zero)
all or any part of, their Demand Loans,
commitments and other rights and duties to one or
more other financial institutions without the
consent of Acquisition Co., provided that any such
sale, assignment or other transfer other than to a
Lender shall be subject to the consent of
Acquisition Co. (not to be unreasonably withheld
in the case of domestic lenders and foreign
lenders which deliver Form 1001 or Form 4224).
Each assignment will be subject to the payment of
a service
<PAGE>
10
fee to the Administrative Agent by the parties to
such assignment. Pledges of Demand Loans in
accordance with applicable law shall be permitted
without restriction; provided that any transfer
upon enforcement of any such pledge shall be
subject to the consent of Acquisition Co., not to
be unreasonably withheld. Promissory notes shall
be issued under the Demand Facility only upon
request.
EXPENSES AND INDEMNIFICATION: Acquisition Co. will pay all reasonable
out-of-pocket expenses of the Administrative Agent
(and the Lenders relating to enforcement costs and
documentary taxes) in connection with (a) the
syndication of the Demand Facility (including
expenses of Chemical's due diligence
investigation) and (b) the preparation, execution,
delivery, administration and enforcement of the
definitive credit agreement and the other
financing and security documentation contemplated
hereby (including the reasonable fees, charges and
disbursements of counsel).
Acquisition Co. will indemnify the Administrative
Agent and the Lenders (and their respective
directors, officers, employees and agents) and
hold each of them harmless from and against all
losses, costs, expenses (including reasonable
fees, charges and disbursements of counsel) and
liabilities, including those resulting from any
litigation or other proceedings (regardless of
whether the Administrative Agent or any Lender is
a party thereto or whether any such litigation or
other proceeding is brought by Acquisition Co. or
any other person), related to or arising out of
the transactions contemplated hereby; PROVIDED
that neither the Administrative Agent nor any
Lender (nor any of its respective directors,
officers, employees and agents) will be
indemnified for the gross negligence or willful
misconduct of the Administrative Agent or such
Lender, as the case may be, or of any of its
respective directors, officers, employees and
agents.
COMMITMENT TERMINATION DATE: Definitive financing documentation for the Demand
Facility must be entered into, and the Tender
Offer must be consummated, in each case on or
before November 30, 1996.
GOVERNING LAW: New York.
REQUIRED LENDERS: 51%
<PAGE>
EXHIBIT B
[Logo]
MERGER FACILITIES
STATEMENT OF TERMS AND CONDITIONS
JUNE 9, 1996
BORROWER: Community Health Systems, Inc., a Delaware corporation
("TWISTER"), as the surviving corporation (as such,
"NEW TWISTER") of a merger (the "MERGER") of
Acquisition Corp., a Delaware corporation to be
organized in the future ("ACQUISITION CO."), with and
into it pursuant to a merger agreement initially
providing for a tender offer (the "TENDER OFFER") by
Acquisition Co. for all of the issued and outstanding
shares of common stock, par value $.01 per share (the
"SHARES"), of Twister. Acquisition Co. is, and New
Twister will be, a direct wholly-owned subsidiary of a
another Delaware corporation to be organized in the
future ("HOLDING"), which in turn is an affiliate of
Forstmann Little & Co. ("FL&CO").
ADMINISTRATIVE AGENT: Chemical Bank ("CHEMICAL") will act as a sole
administrative, syndication, documentation and
collateral agent (the "ADMINISTRATIVE AGENT") for a
syndicate of financial institutions (the "LENDERS").
ADVISOR AND ARRANGER: Chase Securities Inc. ("CSI" or the "ARRANGER").
LENDERS: The financial institutions (including Chemical)
included in the syndicate formed by the Arranger (the
"LENDERS").
MERGER FACILITIES: An aggregate principal amount of $900,000,000 will be
available to New Twister under the following senior
secured credit facilities:
TRANCHE A TERM LOAN FACILITY: A 6-1/2 year term loan
facility (the "TRANCHE A TERM LOAN FACILITY") in an
aggregate principal amount equal to $50,000,000. The
loans under the Tranche A Term Loan Facility will be
repayable in consecutive quarterly installments
commencing one year following the Closing Date (as
<PAGE>
2
defined below). The aggregate principal amount
repayable in each annual period of repayment (to be
divided into equal quarterly installments) is set forth
below opposite the date on which such annual period
ends:
Period Ending Amount
------------- ------
6/30/97 $ 0
6/30/98 8,000,000
6/30/99 8,000,000
6/30/00 9,000,000
6/30/01 10,000,000
6/30/02 10,000,000
6/30/03 5,000,000
TRANCHE B TERM LOAN FACILITY: A 7-1/2 year term loan
facility (the "TRANCHE B TERM LOAN FACILITY") in an
aggregate principal amount equal to $132,500,000. The
loans under the Tranche B Term Loan Facility will be
repayable in consecutive quarterly installments
commencing one year following the Closing Date. The
aggregate principal amount repayable in each annual
period of repayment (to be divided into equal quarterly
installments) is set forth below opposite the date on
which such annual period ends:
Period Ending Amount
------------- ------
6/30/97 $ 0
6/30/98 2,000,000
6/30/99 2,000,000
6/30/00 2,000,000
6/30/01 2,000,000
6/30/02 2,000,000
6/30/03 57,500,000
6/30/04 65,000,000
TRANCHE C TERM LOAN FACILITY: An 8-1/2 year term loan
facility (the "TRANCHE C TERM LOAN FACILITY") in an
aggregate principal amount equal to $132,500,000. The
loans under the Tranche C Term Loan Facility will be
repayable in consecutive quarterly installments
commencing one year following the Closing Date. The
aggregate principal amount repayable in each annual
period of repayment (to be divided into equal quarterly
<PAGE>
3
installments) is set forth below opposite the date on
which such annual period ends:
Period Ending Amount
------------- ------
6/30/97 $ 0
6/30/98 2,000,000
6/30/99 2,000,000
6/30/00 2,000,000
6/30/01 2,000,000
6/30/02 2,000,000
6/30/03 2,000,000
6/30/04 55,500,000
6/30/05 65,000,000
Collectively, the Tranche A Term Loan Facility, the
Tranche B Term Loan Facility, the Tranche C Term Loan
Facility and, if applicable, the Tranche D Term Loan
Facility (as defined below) shall be referred to as the
"TERM LOAN FACILITIES". The Arranger will be entitled,
with the consent of Acquisition Co., to allocate a
portion of the commitments under any Term Loan Facility
to any other Term Loan Facility.
REVOLVING CREDIT FACILITY: A revolving credit facility
(the "REVOLVING CREDIT FACILITY") in an aggregate
principal equal to $200,000,000. To the extent that
any Debentures are outstanding at any time, a portion
of the Revolving Credit Facility or the Acquisition
Facility (as defined below), at the option of Twister,
equal to the aggregate principal amount of such
outstanding Debentures shall be reserved for the
redemption payment or repurchase thereof.
A portion of the Revolving Credit Facility, in an
amount not to exceed $90,000,000, may be used (to the
extent available) for standby and commercial letters of
credit (each such letter of credit a "LETTER OF
CREDIT"). Letters of Credit will be issued by Chemical
or an affiliate thereof or any other Lender designated
by New Twister (in such capacity, the "ISSUING BANK")
for the account of New Twister and its subsidiaries,
and each other Lender will take an irrevocable and
unconditional pro rata participation in each Letter of
Credit.
<PAGE>
4
Up to $25,000,000 of the Revolving Credit Facility will
be made available to New Twister pursuant to a
swingline facility (loans thereunder, "SWINGLINE
LOANS").
ACQUISITION FACILITY: A reducing revolving credit
facility (the "ACQUISITION FACILITY"; together with the
Term Loan Facilities and the Revolving Credit Facility,
the "MERGER FACILITIES") in an aggregate principal
equal to $385,000,000. At the election of Acquisition
Co. made as soon as practicable but in any event prior
to the launch of the syndication of the Merger
Facilities, the Acquisition Facility shall be reduced
by $100,000,000 and a 9-1/2 year term loan facility
(the "TRANCHE D TERM LOAN FACILITY") in an aggregate
principal amount equal to $100,000,000 shall be
established, with a repayment schedule to be agreed
between Acquisition Co. and Chemical.
The Acquisition Facility will be automatically reduced
on each of the anniversaries of the Closing Date set
forth below to the level set forth below opposite such
anniversary. Acquisition Loans shall be prepaid on any
such date to the extent they exceed such reduced level
on such date.
Anniversary Level
----------- -----
3 95%
4 80%
5 55%
6 20%
6-1/2 0%
AVAILABILITY: TERM LOAN FACILITIES: Loans under the Term Loan
Facilities, including the Tranche D Term Loan Facility,
if any (the "TERM LOANS"), will be made to New Twister
in one drawing on the Closing Date.
REVOLVING CREDIT FACILITY: Loans under the Revolving
Credit Facility ("REVOLVING CREDIT LOANS") may be made,
and Letters of Credit may be issued, at any time during
the period between the Closing Date and the date 6-1/2
years thereafter (the "TERMINATION DATE"), PROVIDED
that no Letter of Credit shall have an expiration date
after the Termination Date. No standby Letter of
Credit shall have an expiry date more than 365 days
after its date of issuance, and no commercial Letter of
Credit shall have
<PAGE>
5
expiry date more than 180 days after its date of
issuance. Revolving Credit Loans may be borrowed
and/or repaid (i) in the case of Loans based on the ABR
(as defined below), on one business day's notice and in
a minimum amount of $5,000,000 (or such lesser amount
if reasonably practicable) or a multiple of $1,000,000
in excess thereof and (ii) in the case of Loans based
on the Eurodollar Rate (as defined below), on three
business days' notice and in a minimum amount of
$5,000,000 (or such lesser amount if reasonably
practicable) or a multiple of $1,000,000 in excess
thereof.
ACQUISITION FACILITY: Loans under the Acquisition
Facility ("ACQUISITION LOANS"; together with the Term
Loans, and the Revolving Credit Loans, "LOANS") may be
made at any time during the period between the Closing
Date and the Termination Date. Acquisition Loans may
be borrowed and/or repaid (i) in the case of Loans
based on the ABR (as defined below), on one business
day's notice and in a minimum amount of $5,000,000 (or
such lesser amount if reasonably practicable) or a
multiple of $1,000,000 in excess thereof and (ii) in
the case of Loans based on the Eurodollar Rate (as
defined below), on three business days' notice and in a
minimum amount of $5,000,000 (or such lesser amount if
reasonably practicable) or a multiple of $1,000,000 in
excess thereof.
USE OF PROCEEDS: The proceeds of the Term Loans will be used (i) to
refinance the borrowings of Acquisition Co. under the
Demand Facility described in Exhibit A to the
Commitment Letter to which this Exhibit B is attached,
(ii) to finance the payment of the consideration
payable in the Merger to holders of Shares (other than
Acquisition Co.), (iii) to finance the refinancing by
New Twister of all or such portion of the debt
(approximately $198 million outstanding as of March 31,
1996) of Twister outstanding after the Merger, as New
Twister shall determine (the "REFINANCING") and (iv)
the payment of the fees and expenses of the Merger and
the Tender Offer and the transactions contemplated
thereby, including the tender for the Debentures.
The Revolving Credit Facility will be used for the
purposes for which Term Loans may be used and for
working capital and other general corporate purposes
<PAGE>
6
including acquisitions (including the payment of up to
$80,000,000 of the fees and expenses of the Tender
Offer and the Merger and the transactions contemplated
thereby, including the tender for the Debentures) of
New Twister and its subsidiaries following the Merger,
including for the issuance of letters of credit for
such purposes.
The Acquisition Facility will be used to finance the
purchase price of Permitted Acquisitions and to pay
related fees and expenses.
CLOSING DATE: On or before the date on which initial Loans are made
and the Merger is consummated (the "CLOSING DATE").
GUARANTEES: The Merger Facilities will be unconditionally
guaranteed by Holding and all material domestic
subsidiaries of New Twister.
COLLATERAL: The Merger Facilities and all guarantees thereof will
be secured by (a) a perfected first priority security
interest in all of the capital stock of New Twister and
all capital stock owned by New Twister and its
subsidiaries of all material domestic subsidiaries
(including any subsidiary acquired with the proceeds of
the Acquisition Facility) of New Twister, and by a
first priority security interest in 65% of the capital
stock of all material first-tier foreign subsidiaries
of New Twister, and (b) all intercompany notes
(including any note payable to Holding related to the
Tender Offer, the Merger or the capitalization of New
Twister, if applicable). In addition, the
documentation for the Merger Facilities will contain a
negative pledge on the assets of New Twister and its
subsidiaries, subject to exceptions to be agreed
between New Twister and Chemical.
INTEREST RATES: New Twister may elect that all or a portion of the
Loans bear interest at a rate per annum equal to:
(a) The higher of (i) the rate from time to time
publicly announced by Chemical in New York City as
its prime rate (the "PRIME RATE"), (ii) the
secondary market rate for three-month certificates
of deposit from time to time plus 1% and (iii) the
federal funds rate from time to time, plus 1/2 of
1% (such higher rate, the "ABR"; this rate is not
<PAGE>
7
intended to be the lowest rate charged by Chemical
to its borrowers), in each case plus the
Applicable Margin set forth below; or
(b) The rate (grossed-up for reserve requirements as
described herein) at which eurodollar deposits for
one, two, three or six months (as selected by New
Twister) are offered in the interbank eurodollar
market in the approximate amount of the relevant
Loan (the "EURODOLLAR RATE") plus the Applicable
Margin set forth below; not available for
Swingline Loans.
The applicable margins ("APPLICABLE MARGINS") for the
Loans shall be as follows:
REVOLVING CREDIT LOANS, ACQUISITION LOANS AND TRANCHE A
TERM LOANS:
Eurodollar Loans: 2.50% per annum
ABR Loans: 1.50% per annum
TRANCHE B TERM LOANS:
Eurodollar Loans: 3.00% per annum
ABR Loans: 2.00% per annum
TRANCHE C TERM LOANS:
Eurodollar Loans: 3.50% per annum
ABR Loans: 2.50% per annum
TRANCHE D TERM LOANS (IF APPLICABLE):
Eurodollar Loans: 4.00% per annum
ABR Loans: 3.00% per annum
The Applicable Margins for the Revolving Credit
Facility, the Acquisition Facility and the Tranche A
Term Loan Facility will be subject to stepdowns based
on the Applicable Margin set forth below opposite the
ratio of Total Senior Debt to Consolidated EBITDA:
Eurodollar
Ratio Loans ABR Loans
----- ---------- ---------
>= 3.25 to 1.00 2.50% 1.50%
< 3.25 and >= 3.0 to 1.00 2.25% 1.25%
< 3.00 and >= 2.5 to 1.00 2.00% 1.00%
< 2.50 and >= 2.0 to 1.00 1.75% 0.75%
< 2.0 to 1.00 1.50% 0.50%
<PAGE>
8
Interest will be calculated on the basis of the actual
number of days elapsed over a 365/366-day year for ABR
borrowings based on the Prime Rate, and over a 360-day
year for all other borrowings.
OVERDUE RATE:
Overdue principal, interest, fees and other amounts
owing will bear interest at 2% over the rate otherwise
applicable thereto.
COMMITMENT FEES: Calculated for the period from the Closing Date to the
Termination Date on the basis of a 365/366 day year at
a rate of 1/2 of 1% per annum on the average daily
unused portion of each of the Revolving Credit Facility
and the Acquisition Facility, payable in arrears at the
end of each quarter and upon any termination thereof.
The Commitment Fees will be subject to stepdowns based
on the Commitment Fee set forth below opposite the
ratio of Total Senior Debt to Consolidated EBITDA:
Commitment
Ratio Fee
----- ----------
>= 3.25 to 1.00 0.50%
< 3.25 and >= 3.0 to 1.00 0.50%
< 3.00 and >= 2.5 to 1.00 0.375%
< 2.50 and >= 2.0 to 1.00 0.375%
< 2.0 to 1.00 0.375%
LETTER OF CREDIT FEES: Letter of credit fees will be payable quarterly in
arrears on the average outstanding amount available to
be drawn on all standby Letters of Credit, and on the
aggregate face amount of each commercial Letter of
Credit upon issuance of each such Letter of Credit, at
a rate per annum equal to the Applicable Margin for
Revolving Credit Loans which are Eurodollar Loans in
effect at such time, plus an issuing fee equal to 1/2
of 1% per annum payable to the Issuing Bank for its own
account.
INTEREST PAYMENT DATES: In the case of Loans bearing interest based upon the
ABR, quarterly in arrears and, in the case of the Term
Loans, on each date principal is due as well. In the
case of Loans bearing interest based upon the
Eurodollar Rate, on the last day of each relevant
interest period and, in the case of any interest period
longer than three months, on each successive date three
months after the first day of such interest period.
<PAGE>
9
OPTIONAL PREPAYMENTS AND
COMMITMENT REDUCTIONS: All or a portion of the outstanding Loans may be
prepaid at any time and the unutilized portion of the
Revolving Credit Facility or the Acquisition Facility
may be terminated in whole or in part (in minimum
amounts to be agreed upon) at New Twister's option,
subject to reimbursement of redeployment costs in the
case of Eurodollar Loans if prepayment occurs other
than at the end of an applicable interest period. Such
prepayments of Term Loans may not be reborrowed.
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Loans shall be prepaid (and Letters of Credit shall
be cash collateralized or replaced) with the net
proceeds (in excess of $20 million and subject to
exceptions to be agreed upon between Acquisition Co.
and Chemical) of certain permitted asset sales and
issuances of debt obligations (other than certain
permitted indebtedness to be agreed) of New Twister or
any of its subsidiaries following the Closing Date.
Such net proceeds shall be applied, except to the
extent the Required Lenders agree otherwise, first to
prepay Term Loans and Acquisition Loans (and such
prepayments of Acquisition Loans shall equivalently
reduce the Acquisition Facility) and then to prepay
Revolving Credit Loans (and cash collateralize or
replace outstanding Letters of Credit) and
simultaneously reduce the Revolving Credit Facility.
Any prepayment of Term Loans and Acquisition Loans
shall be ratable among the outstanding loans thereof.
In addition, the Acquisition Facility shall be reduced,
and the Acquisition Loans shall be prepaid, as set
forth under "Merger Facilities--Acquisition Facility"
above. If any such mandatory prepayment shall be
required to be made with respect to outstanding
Eurodollar Loans on a day other than the last day of
the interest period with respect to such Eurodollar
Loans, New Twister will be permitted to cash
collateralize such Eurodollar Loans in lieu of
incurring breakage costs thereon.
APPLICATION OF
PREPAYMENTS: Optional and mandatory prepayments of Term Loans will
be applied among the Term Loans under the Tranche A
Term Loan Facility, the Tranche B Term Loan Facility,
the Tranche C Term Loan Facility and, if applicable,
the Tranche D Term Loan Facility on a pro rata basis.
Prepayments applicable to the Term Loans and the
Acquisition Loans shall be applied, subject to the
<PAGE>
10
immediately preceding sentence, FIRST, to the
installments (or scheduled reduction of commitments)
scheduled to be paid during the next twelve months
after the date of such prepayment and SECOND, to the
remaining installments (or scheduled reduction of
commitments) on a pro rata basis.
Any holder of a Tranche B Term Loan or Tranche C Term
Loan may elect not to have optional prepayments applied
to such Term Loan, in which case such prepayments shall
be applied first to the Tranche A Term Loans and the
Acquisition Loans ratably (and such prepayments of
Acquisition Loans shall equivalently reduce the
Acquisition Facility) and second to the Tranche B Term
Loans and Tranche C Term Loans, pro rata.
INITIAL CONDITIONS
PRECEDENT: The availability of the Merger Facilities will be
conditioned upon, among other things, satisfaction of
the following conditions precedent:
(a) Execution and delivery of definitive financing
agreements and related documentation for the
Merger Facilities, reflecting the terms and
conditions set forth herein and such other terms
and conditions as are satisfactory to the Lenders.
(b) Receipt by Acquisition Co. prior to the
consummation of the Tender Offer of not less than
$960,000,000 in proceeds from (i) the sale by
Holding of not less than $460,000,000 of common
stock and (ii) the sale by Holding of not less
than $500,000,000 of subordinated debt (the
"SUBORDINATED DEBT") having a maximum interest
rate of 8.25% per annum and providing for no
scheduled payments of principal prior to the
eleventh anniversary of the date of the
consummation of the Tender Offer (the "TENDER
OFFER DATE") (the proceeds of such equity and such
subordinated debt being either loaned to
Acquisition Co. by Holding pursuant to a
subordinated intercompany note (the "SUBORDINATED
INTERCOMPANY NOTE") or contributed by Holding to
the equity of Acquisition Co.), in each case on
such terms and subject to such conditions
consistent with Exhibit A to the letter to which
this Exhibit B is attached and the other
<PAGE>
11
bank financings sponsored by affiliates of
Acquisition Co. (the "SPONSORED FINANCINGS") and
such other terms as are reasonably satisfactory to
the Administrative Agent. The Subordinated
Intercompany Note issued by Acquisition Co. and
the Subordinated Debt issued by Holding will each
include provision for payment, within 30 days
after the closing of the Demand Loans, by each
obligor on such indebtedness of supplemental
interest in an aggregate amount not to exceed $12
million ("SUPPLEMENTAL SUBORDINATED DEBT
INTEREST").
(c) The Merger shall have been, or shall be
concurrently, consummated pursuant to the Merger
Agreement, all required stockholder approval to
effect the Merger shall have been obtained and no
material provision of the Merger Agreement shall
have been amended, supplemented, waived without
the prior written consent of the Administrative
Agent.
(d) The Tender Offer shall have been consummated; all
conditions to drawing by Acquisition Co. under the
Demand Facility shall have been satisfied and
there shall be no event of default under the
Demand Facility.
(e) The documents and materials filed publicly by
Holding, Acquisition Co. and Twister after the
closing of the Demand Loans in connection with the
Tender Offer and the Merger shall have been
furnished to the Administrative Agent in
reasonably satisfactory form.
(f) Receipt by the Lenders of any and all legal
opinions, in a manner, and to a substantive
effect, reasonably satisfactory to the
Administrative Agent.
(g) All necessary or advisable filings shall have been
duly made to create a perfected first priority
lien on and security interest in all collateral,
and all collateral shall be free and clear of all
liens, except permitted liens to be negotiated.
<PAGE>
12
(h) Payment of required fees and expenses to the
Administrative Agent and the Lenders.
CONDITIONS TO
ACQUISITION LOANS: The obligation of the Lenders providing the Acquisition
Facility to make any Acquisition Loan shall be
conditioned upon:
(a) The receipt by the Administrative Agent of such
pledge agreements as are contemplated by this Term
Sheet to be delivered with respect to the assets
being acquired.
(b) The receipt by the Administrative Agent of such
legal opinions, officers' certificates and similar
documents as the Administrative Agent reasonably
shall request with respect to the relevant
Acquisition Loan and the acquisition financed
thereby.
(c) The acquisition to be funded, in whole or in part,
with the proceeds of such Acquisition Loan will be
of an entity in a similar line of business.
ON-GOING
CONDITIONS PRECEDENT: The making of each extension of credit will be
conditioned upon (a) all representations and warranties
in all credit and security documents (including,
without limitation, the material adverse change,
litigation and compliance with law and regulatory
requirements representations) being true and correct in
all material respects and (b) there being no default or
event of default in existence at the time of, or after
giving effect to the making of, such extension of
credit.
<PAGE>
13
FINANCIAL COVENANTS: To include but not be limited to the following
covenants (the covenant levels in clauses 1, 2 and 3
below in 1996 and in each four quarter period following
an acquisition (with respect to the business acquired
and the indebtedness incurred in connection therewith)
will be calculated on an annualized basis for periods
since the Closing Date or the date of acquisition, as
the case may be):
1. TOTAL SENIOR DEBT TO CONSOLIDATED EBITDA. The
ratio of Total Senior Debt to Consolidated EBITDA
for each period of four consecutive fiscal
quarters ended during each fiscal year listed
below shall not be more than the ratio set forth
opposite such year below:
Year Ratio
---- -----
1996 4.75 to 1
1997 4.50 to 1
1998 4.25 to 1
1999 3.50 to 1
2000 3.00 to 1
2001 3.00 to 1
2002 2.50 to 1
2003 2.50 to 1
2004 2.50 to 1
2005 2.50 to 1
2. CONSOLIDATED EBITDA MINUS CAPITAL EXPENDITURES TO
SENIOR INTEREST EXPENSE. The ratio of
Consolidated EBITDA minus Capital Expenditures to
Senior Interest Expense for each period of four
consecutive fiscal quarters ended during each
fiscal year listed below shall not be less than
the ratio set forth opposite such year below:
Year Ratio
---- -----
1996 1.50 to 1
1997 2.00 to 1
1998 2.25 to 1
1999 2.50 to 1
2000 3.00 to 1
2001 3.50 to 1
2002 3.50 to 1
<PAGE>
14
2003 3.50 to 1
2004 3.50 to 1
2005 3.50 to 1
3. FIXED CHARGE COVERAGE RATIO. The ratio of
Consolidated EBITDA minus Principal Debt Payments
minus Capital Expenditures to Total Consolidated
Cash Interest Expense (the "FIXED CHARGE COVERAGE
RATIO") for each period of four consecutive fiscal
quarters that ends during the fiscal years set
forth below shall not be less than the ratio set
forth opposite such fiscal year:
Fiscal Coverage
Year Ratio
------ --------
1997 1.00 to 1.00
1998 1.00 to 1.00
1999 1.00 to 1.00
2000 1.10 to 1.00
2001 1.10 to 1.00
2002 1.10 to 1.00
2003 1.10 to 1.00
2004 1.10 to 1.00
2005 1.10 to 1.00
4. ADDITIONAL INDEBTEDNESS. Additional indebtedness
will be prohibited except for (a) from and after
the Termination Date, pursuant to any revolving
credit financings replacing the Revolving Credit
Facility, in an aggregate amount not to exceed
$200,000,000, which may rank pari passu with the
Facilities and may be secured, on a pari passu
basis with the Lenders, by the Collateral, (b) the
Existing Permitted Debt and refinancings thereof
and (c) certain further baskets (which will
include separate baskets for indebtedness of
Holding, and of New Twister and its subsidiaries)
to be mutually agreed upon.
5. CAPITAL EXPENDITURES. Capital Expenditures (which
shall not include Permitted Acquisitions, as
defined below) in any fiscal year shall not exceed
(i) $60 million during each of the fiscal years
from and including 1996 to and including 1999, and
(ii) $75 million during any fiscal year
<PAGE>
15
thereafter, PROVIDED that, in addition to the
foregoing, permitted Capital Expenditures may be
increased in any year by an aggregate amount not
to exceed 4% of the revenues in the year of
acquisition for any business acquired during such
year or any prior year, with up to $3 million in
permitted Capital Expenditures unused in any such
year permitted to be carried over to the
immediately succeeding year.
The applicable definitions, including "Consolidated
Senior Debt", "Consolidated EBITDA", "Senior Interest
Expense", "Total Consolidated Cash Interest Expense",
"Principal Debt Payments", "Indebtedness" and "Capital
Expenditures", will be agreed upon by Acquisition Co.
and Chemical. For these purposes, Supplemental
Subordinated Debt Interest will be excluded from
interest expense.
NEGATIVE COVENANTS: To include, without limitation, limitations on
indebtedness; liens; dividends and other restricted
payments (in any event, to permit dividends or
distributions up to amounts mutually agreed upon on the
stock of certain subsidiaries referred to below in
which minority interests are held by health care
professionals); guarantee obligations; mergers,
consolidations, asset sales and dispositions (in any
event to permit asset sales and dispositions of up to
$75 million); acquisitions, loans, advances and
investments (in any event to permit investments to
acquire at least 80% of the capital stock of
subsidiaries in which minority interests are held by
health care professionals); optional payments and
modifications of subordinated and other debt
instruments (including the Subordinated Intercompany
Note); transactions with affiliates; sale and leaseback
transactions; negative pledge clauses; and changes in
business conducted. The limitations on acquisitions
will, among other things, (i) prohibit acquisitions
other than of entities in similar lines of business and
(ii) prohibit acquisitions with an aggregate value in
excess of $500,000,000 (other than the Merger) (the
acquisitions permitted under this clause (iii), the
"PERMITTED ACQUISITIONS"). Certain asset-exchange
transactions with third parties will be permitted,
subject to limitations to be agreed.
<PAGE>
16
AFFIRMATIVE COVENANTS: To include, without limitation, delivery of financial
statements, reports, accountants' statements and
letters, projections, officers' certificates and other
information reasonably requested by the Lenders;
payment of taxes and other obligations; continuation of
business and maintenance of existence, rights and
privileges; compliance with contractual obligations and
laws (including environmental laws); maintenance of
property and insurance; maintenance of books and
records; notices of material defaults, material
litigation and material events; and agreement to grant
security interests in after-acquired property.
REPRESENTATIONS
AND WARRANTIES: Customary for financings of this type and others deemed
appropriate by the Lenders.
EVENTS OF DEFAULT: To include, without limitation, nonpayment of
principal, interest, fees or other amounts, violation
of covenants, inaccuracy of representation and
warranties, cross-default, bankruptcy, material
judgments, ERISA, invalidity of any loan documents or
security interest, or a change of control.
COST AND YIELD
PROTECTION: The usual for facilities of this type, and consistent
with the Sponsored Financings, including but not
limited to compensation in respect of redeployment
costs, reserve requirements, taxes and decreased
profitability resulting from changes subsequent to the
Closing Date in U.S. or foreign capital adequacy
requirements, guidelines or policies or their
interpretation or application, and any other customary
yield and increased cost protection deemed reasonably
necessary by the Lenders, providing customary
protection for U.S. and non-U.S. Lenders.
TRANSFER PROVISIONS: The Lenders may at any time grant participations in or
sell, assign or otherwise transfer (in a minimum amount
so that the assignor and assignee Lenders shall each
retain an amount equal to $10 million in commitments
or, in the case of the assigning Lender, if less than
such amount, zero) all or any part of, their Loans,
Letters of Credit, commitments and other rights and
duties to one or more other financial institutions
without the consent of New Twister, PROVIDED that any
such sale, assignment or other transfer other than to a
Lender shall be subject to the consent of New Twister
(not to be unreasonably withheld in the case of
domestic lenders and foreign
<PAGE>
17
lenders which deliver Form 1001 or Form 4224). Non-pro
rata assignments will be permitted. Each assignment
will be subject to the payment of a service fee to the
Administrative Agent by the parties to such assignment.
Pledges of Loans in accordance with applicable law
shall be permitted without restriction, provided that
any transfer upon enforcement of any such pledge will
be subject to the consent of Acquisition Co., not to be
unreasonably withheld. Promissory notes shall be
issued under the Merger Facilities only upon request.
EXPENSES AND
INDEMNIFICATION: New Twister will pay all reasonable out-of-pocket
expenses of the Administrative Agent (and the Lenders
relating to enforcement costs and documentary taxes) in
connection with (a) the syndication of the Merger
Facilities (including expenses of Chemical's due
diligence investigation) and (b) the preparation,
execution, delivery, administration and enforcement of
the definitive credit agreement and the other financing
and security documentation contemplated hereby
(including the reasonable fees, charges and
disbursements of counsel).
New Twister will indemnify the Administrative Agent and
the Lenders (and their respective directors, officers,
employees and agents) and hold each of them harmless
from and against all losses, costs, expenses (including
reasonable fees, charges and disbursements of counsel)
and liabilities, including those resulting from any
litigation or other proceedings (regardless of whether
the Administrative Agent or any Lender is a party
thereto or whether any such litigation or other
proceeding is brought by New Twister or any other
person), related to or arising out of the transactions
contemplated hereby; PROVIDED that neither the
Administrative Agent nor any Lender (nor any of its
respective directors, officers, employees and agents)
will be indemnified for the gross negligence or willful
misconduct of the Administrative Agent or such Lender,
as the case may be, or of any of its respective
directors, officers, employees and agents.
REQUIRED LENDERS: 51%, PROVIDED that amendments to the order of
application of prepayments and releases of substantial
portions of the Collateral shall be subject to the
approval of 51% of the Lenders with commitments or
loans under the Revolving Credit Facility and the
Tranche A Term Loan Facility, and of 51% of the Lenders
with loans
<PAGE>
18
under the Tranche B Term Loan Facility, the Tranche C
Term Loan Facility and, if applicable, the Tranche D
Term Loan Facility.
COMMITMENT
TERMINATION DATE: Definitive financing documentation for the Merger
Facilities must be entered into, and the Merger must be
consummated, in each case on or before November 30,
1996.
GOVERNING LAW: New York
<PAGE>
[LOGO]
CHEMICAL BANK
270 Park Avenue
New York, New York 10017
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
As of June 9, 1996
Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Dear Sirs:
Reference is made to the letter agreement, dated the date hereof (the
"COMMITMENT LETTER"), addressed by us to you with respect to the proposed
acquisition of a company identified therein as "Twister." This is the Fee
Letter referred to therein. Capitalized terms which are used herein and defined
in the Commitment Letter are used herein as therein defined.
You hereby agree to pay:
(i) to Chemical, for allocation by it in its
discretion to itself, CSI and the Lenders, a financing delivery
fee equal to $1,000,000 if (a) Chemical does not provide the
Demand Facility or the Merger Facilities due to you (or one of
your affiliates) obtaining financing from another source or (b)
the Merger is not consummated and you (or one of your affiliates)
receive a termination fee or other economic return (other than
reimbursement of your documented expenses), in each case payable
on the earlier of the date of expiration of Chemical's commitment
and the date you or your affiliates receive such fee or economic
return.
(ii) to Chemical, for allocation by it in its
discretion to itself, CSI and the Lenders, an underwriting fee
equal to $11,250,000 (1-1/4% of $900,000,000), 50% of which shall
be payable upon the Closing Date of the Demand Facility and 50%
of which shall be payable on the Closing Date of the Merger
Facilities.
<PAGE>
Forstmann Little & Co. As of June 9, 1996
(iii) to Chemical, for allocation by it in its
discretion to itself and CSI, a structuring fee equal to
$11,250,000, 50% of which shall be payable upon the Closing Date
of the Demand Facility and 50% of which shall be payable on the
Closing Date of the Merger Facilities.
(iv) to Chemical, for its own account, an annual
administrative agent's fee of $600,000 for the first year after
the Closing Date of the Demand Facility and $500,000 for each
year thereafter, payable quarterly in advance, commencing on
the Closing Date of the Demand Facility.
(v) to Chemical, for allocation by it in its discretion
to itself, CSI and the Lenders, a commitment fee equal to 1/2 of
1% per annum on the excess of its commitment for the Merger
Facilities under the Commitment Letter over the Demand Loans
(including, without limitation, the Letters of Credit)
outstanding from time to time under the Demand Facility for the
period from June 5, 1996 to the Closing Date of the Merger
Facilities or, if earlier, the date of termination of the Merger
Facilities, payable on the Closing Date of the Demand Facility
and on the Closing Date of the Merger Facilities or such earlier
date of termination of the Merger Facilities. The commitment
fees provided for in this paragraph shall be in addition to the
commitment fees provided for in the Term Sheets.
All such fees shall be nonrefundable. This letter supercedes and
replaces the fee letter dated June 9, 1996, between us and you.
<PAGE>
--------------------------------------------------
--------------------------------------------------
AGREEMENT AND PLAN OF MERGER
between
FLCH HOLDINGS CORP.\
FLCH ACQUISITION CORP.
and
COMMUNITY HEALTH SYSTEMS, INC.
Dated as of June 9, 1996
--------------------------------------------------
--------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. The Offer. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Actions by Purchaser and Merger Sub. . . . . . . . . . . 2
1.3. Actions by the Company . . . . . . . . . . . . . . . . . 3
1.4. Directors. . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . 6
2.2. The Closing. . . . . . . . . . . . . . . . . . . . . . . 6
2.3. Effective Time . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Certificate of Incorporation and Bylaws of the Surviving
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1. Certificate of Incorporation . . . . . . . . . . . . . . 7
3.2. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Directors and Officers of the Surviving Corporation. . . . . . 7
4.1. Directors. . . . . . . . . . . . . . . . . . . . . . . . 7
4.2. Officers . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Effect of the Merger on Securities of Merger Sub and
the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1. Merger Sub Stock.. . . . . . . . . . . . . . . . . . . . 8
5.2. Company Securities.. . . . . . . . . . . . . . . . . . . 9
5.3. Exchange of Certificates Representing Common Stock.. . . 10
5.4. Adjustment of Merger Consideration . . . . . . . . . . . 11
5.5. Dissenting Company Stockholders. . . . . . . . . . . . . 11
5.6. Merger Without Meeting of Stockholders . . . . . . . . . 12
ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Representations and Warranties of Company. . . . . . . . . . . 12
6.1. Existence; Good Standing; Corporate Authority. . . . . . 12
6.2. Authorization, Validity and Effect of Agreements . . . . 13
6.3. Compliance with Laws . . . . . . . . . . . . . . . . . . 13
i
<PAGE>
6.4. Capitalization . . . . . . . . . . . . . . . . . . . . . 13
6.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 14
6.6. No Violation . . . . . . . . . . . . . . . . . . . . . . 15
6.7. Company Reports; Offer Documents . . . . . . . . . . . . 15
6.8. Litigation . . . . . . . . . . . . . . . . . . . . . . . 17
6.9. Absence of Certain Changes . . . . . . . . . . . . . . . 17
6.10. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11. Employee Benefit Plans . . . . . . . . . . . . . . . . . 18
6.12. Labor and Employment Matters . . . . . . . . . . . . . . 20
6.13. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.14. Licenses and Permits . . . . . . . . . . . . . . . . . . 20
6.15. Medicare Participation/Accreditation . . . . . . . . . . 21
6.16. Medicare/Medicaid Compliance . . . . . . . . . . . . . . 21
6.17. Environmental Compliance and Disclosure. . . . . . . . . 22
6.18. Title to Assets. . . . . . . . . . . . . . . . . . . . . 22
6.19. Material Contracts . . . . . . . . . . . . . . . . . . . 23
6.20. Required Vote of Company Stockholders. . . . . . . . . . 23
6.21. Rights Agreement . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Representations and Warranties of Purchaser and Merger Sub.. . 24
7.1. Existence; Good Standing; Corporate Authority. . . . . . 24
7.2. Authorization, Validity and Effect of Agreements . . . . 24
7.3. Offer Documents. . . . . . . . . . . . . . . . . . . . . 24
7.4. No Violation . . . . . . . . . . . . . . . . . . . . . . 25
7.5. Financing. . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1. No Solicitation. . . . . . . . . . . . . . . . . . . . . 26
8.2. Interim Operations . . . . . . . . . . . . . . . . . . . 27
8.3. Company Stockholder Approval; Proxy Statement. . . . . . 28
8.4. Filings; Other Action. . . . . . . . . . . . . . . . . . 30
8.5. Access to Information. . . . . . . . . . . . . . . . . . 31
8.6. Publicity. . . . . . . . . . . . . . . . . . . . . . . . 31
8.7. Further Action . . . . . . . . . . . . . . . . . . . . . 32
8.8. Insurance; Indemnity.. . . . . . . . . . . . . . . . . . 32
8.9. Restructuring of Merger. . . . . . . . . . . . . . . . . 34
8.10. Employee Benefit Plans . . . . . . . . . . . . . . . . . 34
8.11. No Liability for Failure to Obtain Consent of Lenders. . 34
ii
<PAGE>
ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9. Conditions.. . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.1. Conditions to Each Party's Obligation to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . 35
9.2. Conditions to Obligation of Purchaser and Merger Sub to
Effect the Merger . . . . . . . . . . . . . . . . . . . 35
ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10. Termination; Amendment; Waiver.. . . . . . . . . . . . . . . . 36
10.1. Termination . . . . . . . . . . . . . . . . . . . . . . 36
10.2. Effect of Termination . . . . . . . . . . . . . . . . . 37
10.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . 37
10.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . 38
ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11. General Provisions. . . . . . . . . . . . . . . . . . . . . . 38
11.1. Nonsurvival of Representations and Warranties . . . . . 38
11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . 38
11.3. Assignment; Binding Effect. . . . . . . . . . . . . . . 39
11.4. Entire Agreement. . . . . . . . . . . . . . . . . . . . 39
11.5. Fees and Expenses . . . . . . . . . . . . . . . . . . . 39
11.6. Governing Law . . . . . . . . . . . . . . . . . . . . . 41
11.7. Headings. . . . . . . . . . . . . . . . . . . . . . . . 42
11.8. Interpretation. . . . . . . . . . . . . . . . . . . . . 42
11.9. Investigations. . . . . . . . . . . . . . . . . . . . . 42
11.10. Severability. . . . . . . . . . . . . . . . . . . . . . 42
11.11. Enforcement of Agreement. . . . . . . . . . . . . . . . 42
11.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . 43
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of June 9,
1996, between FLCH Holdings Corp., a Delaware corporation ("PURCHASER"), FLCH
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Purchaser ("MERGER SUB"), and Community Health Systems, Inc., a Delaware
corporation (the "COMPANY").
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each
have determined that it is in the best interests of their respective companies
and stockholders for Purchaser to acquire the Company upon the terms and subject
to the conditions set forth herein.
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection herewith.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER.
(a) Subject to the provisions of this Agreement and this Agreement not
having been terminated, as promptly as practicable but in no event later than
June 14, 1996, Merger Sub shall, and Purchaser shall cause Merger Sub to,
commence, within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"EXCHANGE ACT"), an offer to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the "COMMON STOCK") of the Company together
with the associated Rights (as hereinafter defined), at a price of $52.00
(fifty-two dollars) per share of Common Stock net to the seller in cash (the
"OFFER"). Except where the context otherwise requires, all references herein to
the shares of Common Stock shall include the associated Rights. The obligation
of Merger Sub to, and of Purchaser to cause Merger Sub to, commence the Offer
and accept for payment, and pay for, any shares of Common Stock tendered
pursuant to the Offer shall be subject to the conditions set forth in EXHIBIT A
and to the terms and conditions of this Agreement. Subject to the provisions of
this Agreement, the Offer shall expire 20 business days after the date of its
commencement, unless this Agreement is terminated in accordance with ARTICLE 10,
in which case the Offer
<PAGE>
(whether or not previously extended in accordance with the terms hereof) shall
expire on such date of termination.
(b) Without the prior written consent of the Company, Merger Sub shall not
(i) waive the Minimum Condition (as defined in EXHIBIT A), (ii) reduce the
number of shares of Common Stock subject to the Offer, (iii) reduce the price
per share of Common Stock to be paid pursuant to the Offer, (iv) extend the
Offer if all of the Offer conditions are satisfied or waived, (v) change the
form of consideration payable in the Offer, or (vi) amend or modify any term or
condition of the Offer (including the conditions set forth on EXHIBIT A) in any
manner adverse to the holders of Common Stock. Notwithstanding anything herein
to the contrary, Merger Sub may, in its sole discretion without the consent of
the Company, extend the Offer at any time and from time to time (i) if at the
then scheduled expiration date of the Offer any of the conditions to Merger
Sub's obligation to accept for payment and pay for shares of Common Stock shall
not have been satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or its staff applicable to the Offer; (iii) for any period required
by applicable law in connection with an increase in the consideration to be paid
pursuant to the Offer; and (iv) if all Offer conditions are satisfied or waived
but the number of shares of Common Stock tendered is 85% or more, but less than
90%, of the then outstanding number of shares of Common Stock, for an aggregate
period of not more than 5 business days (for all such extensions under this
clause (iv)) beyond the latest expiration date that would be permitted under
clause (i), (ii) or (iii) of this sentence. So long as this Agreement is in
effect and the Offer conditions have not been satisfied or waived, at the
request of the Company, Merger Sub shall, and Purchaser shall cause Merger Sub
to, extend the Offer for an aggregate period of not more than 20 business days
(for all such extensions) beyond the originally scheduled expiration date of the
Offer. Subject to the terms and conditions of the Offer and this Agreement (but
subject to the right of termination in accordance with ARTICLE 10), Merger Sub
shall, and Purchaser shall cause Merger Sub to, accept for payment, in
accordance with the terms of the Offer, all shares of Common Stock validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the expiration of the Offer.
1.2. ACTIONS BY PURCHASER AND MERGER SUB.
(a) As soon as reasonably practicable following execution of this
Agreement, but in no event later than five business days from the date hereof,
Purchaser and Merger Sub shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and any other ancillary documents
pursuant to which the Offer shall be made (such Schedule 14D-1 and the documents
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, the "OFFER DOCUMENTS"). The Company and its counsel
shall
2
<PAGE>
be given an opportunity to review and comment upon the Offer Documents prior to
the filing thereof with the SEC. The Offer Documents shall comply as to form in
all material respects with the requirements of the Exchange Act, and on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Purchaser or Merger Sub with respect to information
supplied by the Company for inclusion in the Offer Documents. Each of
Purchaser, Merger Sub and the Company agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
each of Purchaser, Merger Sub and the Company further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of shares of Common Stock, in each case as and
to the extent required by applicable federal securities laws. Purchaser and
Merger Sub agree to provide the Company and its counsel in writing with any
comments Purchaser, Merger Sub or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after receipt of such
comments and with copies of any written responses and telephonic notification of
any verbal responses by Purchaser, Merger Sub or their counsel.
(b) Purchaser shall provide or cause to be provided to Merger Sub all of
the funds necessary to purchase any shares of Common Stock that Merger Sub
becomes obligated to purchase pursuant to the Offer.
1.3. ACTIONS BY THE COMPANY.
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Board of Directors of the Company (the "BOARD
OF DIRECTORS" or the "BOARD") at a meeting duly called and held has duly
adopted, by unanimous vote, resolutions (i) approving this Agreement, the Offer
and the Merger (as hereinafter defined), determining that the Merger is
advisable and that the terms of the Offer and Merger are fair to, and in the
best interests of, the Company's stockholders and recommending that the
Company's stockholders accept the Offer and approve the Merger and this
Agreement, and (ii) taking all action necessary to render (x) Section 203 of the
Delaware General Corporation Law (the "DGCL"), (y) Article IX of the Company's
Certificate of Incorporation, and (z) the Company's Rights Agreement, dated as
of September 7, 1995, between the Company and First Union Bank of North
Carolina, as trustee (the "RIGHTS AGREEMENT") inapplicable to the Offer, the
Merger and this Agreement or any of the transactions contemplated hereby or
thereby. The Company further represents and warrants that the Board of
Directors has received the written opinion of Merrill Lynch & Co. (the
"FINANCIAL ADVISOR") that the proposed consideration to be received by the
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holders of shares of Common Stock pursuant to the Offer and the Merger is fair
to such holders from a financial point of view (the "FAIRNESS OPINION"). The
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Board of Directors described in the first sentence of this
SECTION 1.3(A). The Company hereby represents and warrants that it has been
authorized by the Financial Advisor to permit the inclusion of the Fairness
Opinion and references thereto, subject to prior review and consent by the
Financial Advisor (such consent not to be unreasonably withheld) in the Offer
Documents, the Schedule 14D-9 (as hereinafter defined) and the Proxy Statement
(as hereinafter defined).
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-
9 with respect to the Offer (such Schedule 14D-9, as amended from time to time,
the "SCHEDULE 14D-9") containing the recommendations described in paragraph (a)
above and shall mail the Schedule 14D-9 to the stockholders of the Company. To
the extent practicable, the Company shall cooperate with Purchaser in mailing or
otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents
to the Company's stockholders. Purchaser and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 prior to the filing
thereof with the SEC. The Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Purchaser or Merger
Sub for inclusion in the Schedule 14D-9. Each of the Company, Purchaser and
Merger Sub agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and to be disseminated to the holders of shares of Common Stock, in
each case as and to the extent required by applicable federal securities laws.
The Company agrees to provide Purchaser and Merger Sub and their counsel in
writing with any comments the Company or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments and with copies of any written responses and telephonic notification of
any verbal responses by the Company or its counsel.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Merger Sub with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies of
all lists of stockholders, security position listings and computer files and all
other
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information in the Company's possession or control regarding the beneficial
owners of Common Stock, and shall furnish to Merger Sub such information and
assistance (including updated lists of stockholders, security position listings
and computer files) as Merger Sub may reasonably request in communicating the
Offer to the Company's stockholders. Subject to the requirements of law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Offer and the Merger, Purchaser
and Merger Sub and each of their affiliates and associates shall hold in
confidence the information contained in any of such labels, lists and files,
shall use such information only in connection with the Offer and the Merger,
and, if this Agreement is terminated, shall promptly deliver to the Company all
copies of such information then in their possession.
(d) Subject to the terms and conditions of this Agreement, if there shall
occur a change in law or in a binding judicial interpretation of existing law
which would, in the absence of action by the Company or the Board, prevent the
Merger Sub, were it to acquire a specified percentage of the shares of Common
Stock then outstanding, from approving and adopting this Agreement by its
affirmative vote as the holder of a majority of shares of Common Stock and
without the affirmative vote of any other stockholder, the Company will use its
best efforts to promptly take or cause such action to be taken.
1.4. DIRECTORS.
(a) Promptly upon the purchase of shares of Common Stock pursuant to the
Offer, Purchaser shall be entitled to designate such number of directors,
rounded up to the next whole number, as will give Purchaser representation on
the Board of Directors equal to the product of (i) the number of directors on
the Board of Directors and (ii) the percentage that the number of shares of
Common Stock purchased by Merger Sub or Purchaser or any affiliate bears to the
number of shares of Common Stock outstanding (the "PERCENTAGE"), and the Company
shall, upon request by Purchaser, promptly increase the size of the Board of
Directors and/or exercise its best efforts to secure the resignations of such
number of directors as is necessary to enable Purchaser's designees to be
elected to the Board of Directors and shall cause the Purchaser's designees to
be so elected. At the request of Purchaser, the Company will use its best
efforts to cause such individuals designated by Purchaser to constitute the same
Percentage of (i) each committee of the Board, (ii) the board of directors of
Community Health Investment Corporation and Hallmark Healthcare Corporation and
(iii) the committees of each such board of directors. The Company's obligations
to appoint designees to the Board of Directors shall be subject to Section 14(f)
of the Exchange Act. The Company shall take, at its expense, all action
necessary to effect any such election, and shall include in the Schedule 14D-9
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Purchaser will supply to Company in writing and be
solely responsible
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for any information with respect to itself and its nominees, directors and
affiliates required by Section 14(f) and Rule 14f-1. Notwithstanding the
foregoing, the parties hereto shall use their respective best efforts to ensure
that at least two of the members of the Board of Directors shall at all times
prior to the Effective Time (as hereinafter defined) be Continuing Directors (as
hereinafter defined).
(b) Following the election or appointment of Purchaser's designees
pursuant to this SECTION 1.4 and prior to the Effective Time, the approval of a
majority of the directors of the Company then in office who are not designated
by Purchaser (the "CONTINUING DIRECTORS") shall be required to authorize (and
such authorization shall constitute the authorization of the Board of Directors
and no other action on the part of the Company, including any action by any
other director of the Company, shall be required to authorize) any termination
of this Agreement by the Company, any amendment of this Agreement requiring
action by the Board of Directors, any extension of time for the performance of
any of the obligations or other acts of Purchaser or Merger Sub, and any waiver
of compliance with any of the agreements or conditions contained herein for the
benefit of the Company.
ARTICLE 2
THE MERGER
2.1. THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in SECTION 2.3), Merger Sub shall be merged with
and into the Company in accordance with this Agreement and the applicable
provisions of the DGCL, and the separate corporate existence of Merger Sub shall
thereupon cease (the "MERGER"). The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "SURVIVING
CORPORATION"). The Merger shall have the effects specified in the DGCL.
2.2. THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "CLOSING") shall take place at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York, at 10:00 a.m., local time, as soon as practicable following the
satisfaction (or waiver if permissible) of the conditions set forth in ARTICLE
9. The date on which the Closing occurs is hereinafter referred to as the
"CLOSING DATE."
2.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in
ARTICLE 9 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in ARTICLE 10, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time which the parties
hereto shall have
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agreed upon and designated in such filing as the effective time of the Merger
(the "EFFECTIVE TIME").
ARTICLE 3
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
3.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Surviving Corporation shall be in the form attached hereto as EXHIBIT B,
until duly amended in accordance with applicable law.
3.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation, until
duly amended in accordance with applicable law.
ARTICLE 4
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
4.1. DIRECTORS. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
4.2. OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
ARTICLE 5
EFFECT OF THE MERGER ON SECURITIES
OF MERGER SUB AND THE COMPANY
5.1. MERGER SUB STOCK. At the Effective Time, each share of common
stock, $.01 Par value per share, of Merger Sub outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $.01 Par value per share,
of the Surviving Corporation.
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5.2. COMPANY SECURITIES.
(a) At the Effective Time, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of Common
Stock owned by Purchaser or Merger Sub or held by the Company, all of which
shall be cancelled, and other than shares of Dissenting Common Stock (as
hereinafter defined)) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive the per
share consideration in the Offer, without interest (the "MERGER CONSIDERATION").
(b) As a result of the Merger and without any action on the part of
the holder thereof, at the Effective Time all shares of Common Stock shall cease
to be outstanding and shall be cancelled and retired and shall cease to exist,
and each holder of shares of Common Stock (other than Merger Sub, Purchaser and
the Company) shall thereafter cease to have any rights with respect to such
shares of Common Stock, except the right to receive, without interest, the
Merger Consideration in accordance with SECTION 5.3 upon the surrender of a
certificate or certificates (a "CERTIFICATE") representing such shares of Common
Stock.
(c) Each share of Common Stock issued and held in the Company's
treasury at the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(d) All options (individually, an "OPTION" and collectively, the
"OPTIONS") outstanding immediately prior to the Effective Time under any Company
stock option plan (the "STOCK OPTION PLANS"), whether or not then exercisable,
shall be cancelled and each holder of an Option will be entitled to receive from
the Surviving Corporation, for each share of Common Stock subject to an Option,
an amount in cash equal to the excess, if any, of the Merger Consideration over
the per share exercise price of such Option, without interest. The amounts
payable pursuant to this SECTION 5.2(d) shall be paid (i) with respect to shares
of Common Stock subject to Options held by employees who are ranked for
compensation purposes below the level of corporate vice-president of the Company
and by non-employees of the Company or its Subsidiaries who hold Options, at the
Effective Time and (ii) with respect to shares of Common Stock subject to
Options held by employees who are ranked for compensation purposes at or above
such level, at the time or times the Option or portion of an Option will become
exercisable in accordance with its terms as in effect on the date hereof (or, to
the extent the Option is already exercisable at the Effective Time, payment
shall be made at the Effective Time), provided the holder of the Option
continues in employment with the Company at the time the payment is due and
provided further that the entire amount shall come due and payable if the holder
of the Option shall be terminated without cause prior to the first anniversary
of the Effective Time. All amounts payable pursuant to this SECTION 5.2(d)
shall be subject to all applicable withholding
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of taxes. The Company shall use its reasonable best efforts to obtain all
necessary consents of the holders of Options, provided, however, that the
failure of the Company to obtain any one or more of such consents shall have no
effect on the Purchaser's and Merger Sub's obligation to consummate the Offer
and the Merger and shall not afford any basis for them to assert the condition
set forth in clause (ii) of paragraph (d) of Exhibit A.
5.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK.
(a) Prior to the Effective Time, Purchaser shall appoint a
commercial bank or trust company having net capital of not less than $20
million, or such other party reasonably satisfactory to the Company, to act as
paying agent hereunder for payment of the Merger Consideration upon surrender of
Certificates (the "PAYING AGENT"). Purchaser shall cause the Surviving
Corporation to provide the Paying Agent with cash in amounts necessary to pay
for all the shares of Common Stock pursuant to SECTION 5.2(a) and, in
connection with the Options, pursuant to SECTION 5.2(d), as and when such
amounts are needed by the Paying Agent. Such amounts shall hereinafter be
referred to as the "EXCHANGE FUND."
(b) Promptly after the Effective Time, Purchaser shall cause the
Paying Agent to mail to each holder of record of shares of Common Stock (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to such Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent and which letter shall be in such form and
have such other provisions as Purchaser may reasonably specify and (ii)
instructions for effecting the surrender of such Certificates in exchange for
the Merger Consideration. Upon surrender of a Certificate to the Paying Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate shall
promptly receive in exchange therefor the amount of cash into which shares of
Common Stock theretofore represented by such Certificate shall have been
converted pursuant to SECTION 5.2, and the shares represented by the Certificate
so surrendered shall forthwith be cancelled. No interest will be paid or will
accrue on the cash payable upon surrender of any Certificate. In the event of a
transfer of ownership of Common Stock which is not registered in the transfer
records of the Company, payment may be made with respect to such Common Stock to
such a transferee if the Certificate representing such shares of Common Stock is
presented to the Paying Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable stock transfer
taxes have been paid.
(c) At or after the Effective Time, there shall be no transfers on
the stock transfer books of the company of the shares of Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time,
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Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged as provided in this ARTICLE 5.
(d) Any portion of the Exchange Fund (including the proceeds of any
interest and other income received by the Paying Agent in respect of all such
funds) that remains unclaimed by the former stockholders of the Company six
months after the Effective Time shall be delivered to the Surviving Corporation.
Any former stockholders of the Company who have not theretofore complied with
this ARTICLE 5 shall thereafter look only to the Surviving Corporation for
payment of any Merger Consideration that may be payable in respect of each share
of Common Stock such stockholder holds as determined pursuant to this Agreement,
without any interest thereon.
(e) None of Purchaser, the Company, the Surviving Corporation, the
Paying Agent or any other person shall be liable to any former holder of shares
of Common Stock for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(F) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
payable in respect thereof pursuant to this Agreement.
5.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date
of this Agreement but prior to the Effective Time, the outstanding shares of
Common Stock shall have been changed into a different number of shares or a
different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, split, combination, exchange,
recapitalization or other similar transaction, the Merger Consideration shall be
appropriately adjusted.
5.5. DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision
of this Agreement to the contrary, if required by the DGCL but only to the
extent required thereby, shares of Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by holders of such
shares of Common Stock who have properly exercised appraisal rights with respect
thereto in accordance with Section 262 of the DGCL (the "DISSENTING COMMON
STOCK") will not be exchangeable for the right to receive the Merger
Consideration, and holders of such shares of Dissenting Common Stock will be
entitled to receive payment of the appraised value of such shares of Common
Stock in accordance with the provisions of such Section 262 unless and until
such holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the
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DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such shares of Common Stock will
thereupon be treated as if they had been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give Purchaser
prompt notice of any demands received by the Company for appraisals of shares of
Common Stock. The Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to any demands for appraisal or offer
to settle or settle any such demands.
5.6. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the
foregoing but subject to the provisions of Section 8.3(f), if Merger Sub, or any
other direct or indirect subsidiary of Purchaser, shall acquire at least 90
percent of the outstanding shares of Common Stock, the parties hereto shall take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and Merger Sub
as follows:
6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of the
Company and its Significant Subsidiaries (as hereinafter defined) is (i) a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and (ii) is duly licensed or qualified
to do business as a foreign corporation and is in good standing under the laws
of any other state of the United States in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing, individually or in the aggregate, would not have a Material
Adverse Effect (as hereinafter defined). Each of the Company and its
Significant Subsidiaries has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted,
except where the failure to have such power and authority, individually or in
the aggregate, would not have a Material Adverse Effect. The Company has no
reason to believe that the representations and warranties contained in the
preceding two sentences are not also true of its Subsidiaries. The Company has
heretofore delivered to Purchaser true and correct copies of the Company's
Certificate of Incorporation and Bylaws as currently in effect.
6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company
has the requisite corporate power and authority to execute and deliver
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this Agreement and all agreements and documents contemplated hereby or executed
in connection herewith (the "ANCILLARY DOCUMENTS") and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Ancillary Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby have been
duly and validly authorized by the Board of Directors, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the Ancillary Documents or to consummate the transactions contemplated
hereby and thereby (other than the approval of this Agreement by the holders of
a majority of the shares of Common Stock if required by applicable law). This
Agreement has been, and any Ancillary Document at the time of execution will
have been, duly and validly executed and delivered by the Company, and (assuming
this Agreement and such Ancillary Documents each constitutes a valid and binding
obligation of the Purchaser and Merger Sub) constitutes and will constitute the
valid and binding obligations of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity.
6.3. COMPLIANCE WITH LAWS. Except as set forth in the Company Reports
(as hereinafter defined), each of the Company and its Subsidiaries is in
compliance with all applicable foreign, federal, state or local laws, statutes,
ordinances, rules, regulations, orders, judgments, rulings and decrees ("LAWS")
of any foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority or any court, arbitration, board
or tribunal ("GOVERNMENTAL ENTITY"), except where the failure to be in
compliance, individually or in the aggregate, would not have a Material Adverse
Effect.
6.4. CAPITALIZATION. The authorized capital stock of the Company
consists of 45,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock, $.01 par value, of which 830,000 shares have been designated as Series A
Junior Participating Preferred Stock ("PREFERRED STOCK"). As of June 6, 1996,
(a) 19,731,068 shares of Common Stock were issued and outstanding, (b) 830,000
shares of Preferred Stock were subject to Preferred Stock Purchase Rights
("RIGHTS") issued pursuant to the Company's Rights Agreement and no other shares
of Preferred Stock are issued and outstanding, (c) Options to purchase an
aggregate of 2,017,515 shares of Common Stock were outstanding, 2,017,515 shares
of Common Stock were reserved for issuance upon the exercise of outstanding
Options and 42,666 shares were reserved for future grants under the Stock Option
Plans, and there are no stock appreciation rights or limited stock appreciation
rights outstanding other than those attached to such Options, (d) no shares of
Common Stock were held by the Company in its treasury, and (e) no shares of
capital stock of the Company were held by the Company's Subsidiaries. Except
for the Rights, the Company has no outstanding bonds, debentures, notes or other
obligations entitling the holders thereof to vote (or which are convertible into
or exercisable for securities having the right to vote) with the stockholders of
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the Company on any matter. Since June 6, 1996, the Company (i) has not issued
any shares of Common Stock other than upon the exercise of Options, (ii) has
granted no Options to purchase shares of Common Stock under the Stock Option
Plans, and (iii) has not split, combined or reclassified any of its shares of
capital stock. All issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except for the Rights and except as set forth in this SECTION 6.4 or in
SCHEDULE 6.4, there are no other shares of capital stock or voting securities of
the Company, and no existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate the Company or any of its Subsidiaries to issue, transfer or sell any
shares of capital stock of, or equity interests in, the Company or any of its
Subsidiaries. There are no outstanding obligations of the Company or any
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company and there are no performance awards outstanding under the
Stock Option Plan or any other outstanding stock related awards. After the
Effective Time, the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of capital stock of the Company or the Surviving
Corporation pursuant to any Company Benefit Plan (as defined in SECTION 6.11).
There are no voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party with respect to the voting of
capital stock of the Company or any of its Subsidiaries.
6.5. SUBSIDIARIES. Except as set forth in SCHEDULE 6.5, (i) the
Company owns, directly or indirectly through a Subsidiary, all of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect directors or others performing
similar functions with respect to such Subsidiary) of each of the Company's
Subsidiaries, and (ii) each of the outstanding shares of capital stock of each
of the Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by the Company free and
clear of all liens, pledges, security interests, claims or other encumbrances
("ENCUMBRANCES") except (in the case of Subsidiaries which are not Significant
Subsidiaries for Encumbrances which individually or in the aggregate would not
have a Material Adverse Effect. SCHEDULE 6.5 sets forth for each Subsidiary of
the Company: (i) its name and jurisdiction of incorporation or organization;
(ii) its authorized capital stock or share capital; (iii) the number of issued
and outstanding shares of capital stock or share capital; (iv) the holder or
holders of such shares; and (v) whether such Subsidiary is a Significant
Subsidiary. Except for interests in the Company's Subsidiaries or as set forth
in SCHEDULE 6.5, neither the Company nor any of its Subsidiaries owns directly
or indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or other entity.
6.6. NO VIOLATION. Except as set forth in SCHEDULE 6.6, neither the
execution and delivery by the Company of this Agreement or any of the Ancillary
Documents nor the consummation by the Company of the transactions
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contemplated hereby or thereby will: (i) violate, conflict with or result in a
breach of any provisions of the Certificate of Incorporation or Bylaws of the
Company; (ii) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination or in a right of
termination of, accelerate the performance required by or benefit obtainable
under, result in the triggering of any payment or other obligations pursuant to,
result in the creation of any Encumbrance upon any of the properties of the
Company or its Subsidiaries under, or result in there being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound (each, a "CONTRACT" and collectively, "CONTRACTS"), except
for any of the foregoing matters which individually or in the aggregate would
not have a Material Adverse Effect; (iii) other than the filings provided for in
SECTION 2.3 and the filings required under the Exchange Act and the Securities
Act of 1933, as amended (the "SECURITIES ACT"), require any consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Entity, the lack of which individually or in the aggregate would have a Material
Adverse Effect or by Law prevent the consummation of the transactions
contemplated hereby; and (iv) violate any Laws applicable to the Company, any of
its Subsidiaries or any of their respective assets, except for violations which
individually or in the aggregate would not have a Material Adverse Effect or
materially adversely affect the ability of the Company to consummate the
transactions contemplated hereby.
6.7. COMPANY REPORTS; OFFER DOCUMENTS.
(a) The Company has delivered to Purchaser each registration
statement, report, proxy statement or information statement (as defined under
the Exchange Act) prepared by it since January 1, 1993, each in the form
(including exhibits and any amendments thereto) filed with the SEC
(collectively, the "COMPANY REPORTS"). As of their respective dates, (i) the
Company Reports filed since December 31, 1994 complied as to form in all
material respects with the applicable requirements of the Securities Act, the
Exchange Act, and the rules and regulations thereunder and (ii) the Company
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets of the Company
included in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly presents the consolidated financial position
of the Company and its Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows of the Company included
in or incorporated by
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reference into the Company Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. Except as set forth in SCHEDULE 6.7, neither the Company nor any
of its Subsidiaries has any liabilities or obligations, contingent or otherwise,
except (i) liabilities and obligations in the respective amounts reflected or
reserved against in the Company's consolidated balance sheet as of March 31,
1996 included in the Company Reports or (ii) liabilities and obligations
incurred in the ordinary course of business since April 1, 1996 which
individually or in the aggregate would not have a Material Adverse Effect.
(b) None of the Schedule 14D-9, the information statement, if any,
filed by the Company in connection with the Offer pursuant to Rule 14f-1 under
the Exchange Act (the "INFORMATION STATEMENT"), any schedule required to be
filed by the Company with the SEC or any amendment or supplement thereto, at the
respective times such documents are filed with the SEC or first published, sent
or given to the Company's stockholders, will contain any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading except that no
representation is made by the Company with respect to information supplied by
the Purchaser or Merger Sub specifically for inclusion in the Schedule 14D-9 or
Information Statement or any amendment or supplement. None of the information
supplied or to be supplied by the Company in writing specifically for inclusion
or incorporation by reference in the Offer Documents will, at the date of filing
with the SEC, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time the Company
shall obtain knowledge of any facts with respect to itself, any of its officers
and directors or any of its Subsidiaries that would require the supplement or
amendment to any of the foregoing documents in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or to comply with applicable Laws, such amendment or supplement
shall be promptly filed with the SEC and, as required by Law, disseminated to
the stockholders of the Company, and in the event Purchaser shall advise the
Company as to its obtaining knowledge of any facts that would make it necessary
to supplement or amend any of the foregoing documents, the Company shall
promptly amend or supplement such document as required and distribute the same
to its stockholders.
6.8. LITIGATION. Except as set forth in SCHEDULE 6.8 or in the
Company Reports, (i) there are no claims, actions, suits, proceedings,
arbitrations, investigations or audits (collectively, "LITIGATION") by a
Governmental Entity pending
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or, to the knowledge of the Company through receipt of written notice,
threatened against the Company or any of its Subsidiaries, at law or in equity,
other than those in the ordinary course of business which individually or in the
aggregate would not have a Material Adverse Effect, and (ii) there are no
claims, actions, suits, proceedings, or arbitrations by a non-Governmental
Entity third party pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, at law or at equity, other than
those in the ordinary course of business which individually or in the aggregate
would not have a Material Adverse Effect. Except as set forth in the Company
Reports, no Governmental Entity has indicated in writing an intention to conduct
any audit, investigation or other review with respect to the Company or any of
its Subsidiaries which investigation or review, if adversely determined,
individually or in the aggregate would have a Material Adverse Effect.
6.9. ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE
6.9 or in the Company Reports, since December 31, 1995, the Company and its
Subsidiaries have conducted their business only in the ordinary course of such
business consistent with past practices, and there has not been (i) any events
or states of fact which individually or in the aggregate would have a Material
Adverse Effect; (ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to its capital stock; (iii) (during the
period following May 31, 1996) any repurchase, redemption or any other
acquisition by the Company or its Subsidiaries of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company or its Subsidiaries; (iv) any material change in accounting principles,
practices or methods; (v) any entry into any employment agreement with, or any
increase in the rate or terms (including, without limitation, any acceleration
of the right to receive payment) of compensation payable or to become payable by
the Company or any of its Subsidiaries to, their respective directors, officers
or employees, except increases occurring, and employment agreements entered
into, which are substantially consistent with the revised 1996 budget of the
Company taken as a whole previously provided to the Purchaser (the " REVISED
1996 BUDGET") (it being understood that the acquisition of employees as part of
the acquisition of hospitals or other healthcare facilities is not covered by
this clause (v) or clause (vi) below); or (vi) any increase in the rate or terms
(including, without limitation, any acceleration of the right to receive
payment) of any bonus, insurance, pension or other employee benefit plan or
arrangement covering any such directors, officers or employees, except increases
which are consistent with the Revised 1996 Budget.
6.10. TAXES. Except as set forth in SCHEDULE 6.10, the Company and
each of its Subsidiaries have timely filed all material Tax Returns required to
be filed by any of them. All such Tax Returns are true, correct and complete,
except for such instances which individually or in the aggregate would not have
a Material Adverse Effect. All Taxes of the Company and its Subsidiaries which
are (i) shown as due on such Returns, (ii) otherwise due and payable or (iii)
claimed or asserted
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by any taxing authority to be due, have been paid, except for those Taxes being
contested in good faith and for which adequate reserves have been established in
the financial statements included in the Company Reports in accordance with
generally accepted accounting principles. The Company does not know of any
proposed or threatened Tax claims or assessments which, if upheld, would
individually or in the aggregate have a Material Adverse Effect. Except as set
forth in SCHEDULE 6.10, the Company and each Subsidiary has withheld and paid
over to the relevant taxing authority all Taxes required to have been withheld
and paid in connection with payments to employees, independent contractors,
creditors, stockholders or other third parties, except for such Taxes which
individually or in the aggregate would not have a Material Adverse Effect. For
purposes of this Agreement, (a) "TAX" (and, with correlative meaning, "TAXES")
means any federal, state, local or foreign income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, premium,
withholding, alternative or added minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed by
any Governmental Entity, and (b) "TAX RETURN" means any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
6.11. EMPLOYEE BENEFIT PLANS. All employee benefit plans,
compensation arrangements and other benefit arrangements covering employees of
the Company or any of its Subsidiaries (the "COMPANY BENEFIT PLANS") and all
employee agreements providing compensation, severance or other benefits to any
employee or former employee of the Company or any of its Subsidiaries which are
not disclosed in the Company Reports and which exceed $100,000 per annum are set
forth in SCHEDULE 6.11. True and complete copies of the Company Benefit Plans
have been made available to Purchaser. To the extent applicable, the Company
Benefit Plans comply with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of
1986, as amended (the "CODE"), and any Company Benefit Plan intended to be
qualified under Section 401(a) of the Code has received a determination letter
and, to the knowledge of the Company continues to satisfy the requirements for
such qualification. Neither the Company nor any of its Subsidiaries nor any
ERISA Affiliate of the Company maintains, contributes to or has maintained or
contributed in the past six years to any benefit plan which is covered by Title
IV of ERISA or Section 412 of the Code. No Company Benefit Plan nor the Company
nor any Subsidiary has incurred any liability or penalty under Section 4975 of
the Code or Section 502(i) of ERISA or, to the knowledge of the Company, engaged
in any transaction that is reasonably likely to result in any such liability or
penalty. Except as set forth on SCHEDULE 6.11, each Company Benefit Plan has
been maintained and administered in compliance with its terms and with ERISA and
the Code to the extent applicable thereto, except for such non-compliance which
individually or in
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the aggregate would not have a Material Adverse Effect. There is no pending or,
to the knowledge of the Company, anticipated Litigation against or otherwise
involving any of the Company Benefit Plans and no Litigation (excluding claims
for benefits incurred in the ordinary course of Company Benefit Plan activities)
has been brought against or with respect to any such Company Benefit Plan,
except for any of the foregoing which individually or in the aggregate would not
have a Material Adverse Effect. All contributions required to be made as of the
date hereof to the Company Benefit Plans have been made or provided for. Except
as described in the Company Reports or as required by Law, neither the Company
nor any of its Subsidiaries maintains or contributes to any plan or arrangement
which provides or has any liability to provide life insurance or medical or
other employee welfare benefits to any employee or former employee upon his
retirement or termination of employment, and neither the Company nor any of its
Subsidiaries has ever represented, promised or contracted (whether in oral or
written form) to any employee or former employee that such benefits would be
provided. Except as set forth in SCHEDULE 6.11, the execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event under any benefit plan, policy, arrangement or agreement or any trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee. Except as set forth in Schedule 6.11, no payment or benefit which
will or may be made by the Company, any of its Subsidiaries, any ERISA Affiliate
or Purchaser or Merger Sub with respect to any employee will constitute an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.
For purposes of this Agreement "ERISA AFFILIATE" means any business or
entity which is a member of the same "controlled group of corporations," under
"common control" or an "affiliated service group" with an entity within the
meanings of Sections 414(b), (c) or (m) of the Code, or required to be
aggregated with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing Sections.
6.12. LABOR AND EMPLOYMENT MATTERS. Except as set forth in
SCHEDULE 6.12, neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement or other Contracts or
understanding with a labor union or labor organization. Except for such matters
which, individually or in the aggregate, would not have a Material Adverse
Effect, there is no (i) unfair labor practice, labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or its Subsidiaries
relating to their business, (ii) to the knowledge of the Company, activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company or any of its
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Subsidiaries, or (iii) lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to such employees.
6.13. BROKERS. Except for the Financial Advisor, Merrill Lynch &
Co., no broker, finder or financial advisor is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company and (ii) the Company's fee arrangements with the Financial Advisor
have been disclosed to the Purchaser.
6.14. LICENSES AND PERMITS. Except as set forth in SCHEDULE 6.14,
the Company, its Subsidiaries and all of the hospitals and other healthcare
facilities owned, leased or managed by the Company or any of its Subsidiaries
(collectively, "HOSPITALS") have all necessary licenses, permits, certificates
of need, approvals and authorizations (collectively, "PERMITS") required to
lawfully conduct their respective businesses as presently conducted, except for
those Permits the lack of which individually or in the aggregate would not have
a Material Adverse Effect, and (a) no Permit is subject to revocation or
forfeiture by virtue of any existing circumstances, (b) there is no Litigation
pending or, to the knowledge of the Company, threatened to modify or revoke any
Permit, and (c) no Permit is subject to any outstanding order, decree, judgment,
stipulation, or, to the knowledge of the Company, investigation that would be
likely to affect such Permit, where the effect of the foregoing individually or
in the aggregate would have a Material Adverse Effect. Except as set forth in
SCHEDULE 6.14, all of the Hospitals are accredited by the Joint Commission on
Accreditation of Healthcare Organizations or the American Osteopathic
Association, as indicated on such schedule.
6.15. MEDICARE PARTICIPATION/ACCREDITATION. All of the Hospitals are
certified for participation or enrollment in the Medicare and Medicaid programs,
have a current and valid provider contract with the Medicare and Medicaid
programs, are in compliance with the conditions of participation of such
programs and have received all approvals or qualifications necessary for capital
reimbursement of the Company's assets, except where the failure to be in
compliance individually or in the aggregate would not have a Material Adverse
Effect. Except as set forth in SCHEDULE 6.15, neither the Company nor any of
its Subsidiaries has received notice from any Governmental Entities or other
regulatory authorities which enforce the statutory or regulatory provisions in
respect of either the Medicare or the Medicaid program of any pending or
threatened investigations, audits or surveys, and neither the Company nor any of
its Subsidiaries has any reason to believe that any such investigations, audits
or surveys are pending, threatened or imminent which, individually or in the
aggregate, may have a Material Adverse Effect.
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6.16. MEDICARE/MEDICAID COMPLIANCE.
(a) Except as set forth in SCHEDULE 6.16, (a) neither the Company
nor any of its Subsidiaries has filed any required terminating Medicare cost
report on any facility which the Company or any of its Subsidiaries has sold or
no longer operates, for which it has not received a Notice of Program
Reimbursement, and (b) neither the Company nor any of its Subsidiaries has
received any Notice of Program Reimbursement (or similar document for Medicaid)
with respect to any such facility's cost reports, including cost reports for
those facilities it has sold or no longer operates, which requires a refund to
the Governmental Entity responsible for the Medicare or Medicaid program, except
for such refunds which (i) have been paid, (ii) have been reflected as a
liability in the consolidated balance sheet of the Company and its Subsidiaries
at December 31, 1995 included in the Company Reports (the "1995 BALANCE SHEET")
or (iii) individually or in the aggregate would not have a Material Adverse
Effect.
(b) The Company and each of its Subsidiaries have filed all other
reports required to be filed in connection with all state and federal Medicare
and Medicaid programs, which reports are complete and correct in all material
respects. Except as set forth in SCHEDULE 6.16, there is no Litigation pending
or threatened before any Governmental Entity, with respect to any Medicare or
Medicaid claims filed by the Company or any of its Subsidiaries on or before the
date hereof which individually or in the aggregate would have a Material Adverse
Effect, and no validation review or program integrity review related to the
Company or any of its Subsidiaries or any Hospitals has been conducted by any
Governmental Entity in connection with the Medicare or Medicaid program, and to
the knowledge of the Company, no such reviews are scheduled, pending or
threatened against or affecting the Company or any of its Subsidiaries or any
Hospitals.
6.17. ENVIRONMENTAL COMPLIANCE AND DISCLOSURE. (a) Except as set
forth on SCHEDULE 6.17 or except for any matters which individually or in the
aggregate would not have a Material Adverse Effect, (i) the Company and each of
its Subsidiaries is in full compliance with all applicable Laws relating to
Environmental Matters (as defined below); (ii) the Company and each of its
Subsidiaries has obtained, and is in full compliance with, all Permits required
by applicable Laws for the use, storage, treatment, transportation, release,
emission and disposal of raw materials, by-products, wastes and other substances
used or produced by or otherwise relating to the operations of any of them;
(iii) to the Company's knowledge, there are no past or present events,
conditions, activities or practices that would prevent compliance or continued
compliance with any Law or give rise to any Environmental Liability (as defined
below).
(b) As used in this Agreement, the term "ENVIRONMENTAL MATTERS" means
any matter arising out of or relating to pollution or protection of the
environment, human safety or health, or sanitation, including matters relating
to
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emissions, discharges, releases, exposures, or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes including
petroleum and its fractions, radiation, biohazards and all toxic agents of
whatever type or nature into ambient air, surface water, ground water, or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants
or hazardous or toxic materials or wastes including petroleum and its fractions,
radiation, biohazards and all toxic agents of whatever type or nature.
"ENVIRONMENTAL LIABILITY" shall mean any liability or obligation arising under
any Law or under any other current theory of law or equity (including, without
limitation, any liability for personal injury, property damage or remediation)
that results from, or is based upon or related to, the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release, exposures or threatened release into the
environment, of any pollutant, contaminant, chemical, or industrial, toxic or
hazardous substance or waste.
6.18. TITLE TO ASSETS. (a) Except as set forth in the 1995
Balance Sheet, the Company and each of its Subsidiaries have good and marketable
title to all of their real and personal properties and assets reflected on the
1995 Balance Sheet (other than assets disposed of since December 31, 1995 in the
ordinary course of business consistent with past practice) or acquired since
December 31, 1995, in each case free and clear of all Encumbrances except for
(i) Encumbrances which secure indebtedness which is properly reflected in the
1995 Balance Sheet; (ii) liens for Taxes accrued but not yet payable;
(iii) liens arising as a matter of law in the ordinary course of business with
respect to obligations incurred after the date of the 1995 Balance Sheet,
provided that the obligations secured by such liens are not delinquent; and
(iv) such imperfections of title and Encumbrances, if any, as individually or in
the aggregate would not have a Material Adverse Effect. Except as set forth in
SCHEDULE 6.18, the Company and each of its Subsidiaries either own, or have
valid leasehold interests in, all properties and assets used by them in the
conduct of their business except where the absence of such ownership or
leasehold interest would not individually or in the aggregate have a Material
Adverse Effect.
(b) Except as set forth in SCHEDULE 6.18, neither the Company nor any
of its Subsidiaries has any legal obligation, absolute or contingent, to any
other person to sell or otherwise dispose of any interest in any of the
Hospitals, or to sell or dispose of any of its other assets with an individual
value of $1,000,000 or an aggregate value in excess of $5,000,000.
6.19. MATERIAL CONTRACTS. SCHEDULE 6.19 sets forth a list of all
(i) Contracts for borrowed money or guarantees thereof involving a currently
outstanding principal amount in excess of $1,000,000, (ii) Contracts to acquire
or dispose of Hospitals, (iii) Contracts containing non-compete covenants by the
Company or any Subsidiary and (iv) other Contracts (other than national supply
and national purchasing Contracts for the purchase of supplies in the ordinary
course of
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business) which involve the payment or receipt of $1 million or more per year.
All Contracts to which the Company or any of its Subsidiaries is a party or by
which any of their respective assets is bound are valid and binding, in full
force and effect and enforceable against the Company or any of its Subsidiaries,
as the case may be, and to the knowledge of the Company, the other parties
thereto in accordance with their respective terms, subject to applicable
bankruptcy, insolvency or other similar laws relating to creditors' rights and
general principles of equity, except where the failure to be so valid and
binding, in full force and effect or enforceable would not individually or in
the aggregate have a Material Adverse Effect.
6.20. REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger may
be consummated in accordance with Section 253 of the DGCL, the only vote of the
stockholders of the Company required to adopt this Agreement and approve the
Merger is the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock.
6.21. RIGHTS AGREEMENT. The Company has amended the Rights
Agreement so that the Rights Agreement will not be applicable to this Agreement,
the Offer, the announcement of the Offer, the purchase of shares of Common Stock
by Parent or Merger Sub pursuant to the Offer, the Merger, or any other action
contemplated hereby.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub hereby represent and warrant to the Company as
follows:
7.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Purchaser
and Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted, except where the failure to have
such power and authority individually or in the aggregate would not materially
adversely affect the Purchaser and Merger Sub, taken as a whole.
7.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of
Purchaser and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Documents and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Ancillary Documents and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby and thereby have been duly
and validly authorized by the respective Boards of Directors of
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Purchaser and Merger Sub and by Purchaser as the sole stockholder of Merger Sub
and no other corporate proceedings on the part of Purchaser or Merger Sub are
necessary to authorize this Agreement and the Ancillary Documents or to
consummate the transactions contemplated hereby and thereby. This Agreement has
been, and any Ancillary Documents at the time of execution will have been, duly
and validly executed and delivered by Purchaser and Merger Sub, and (assuming
this Agreement and such Ancillary Documents each constitutes a valid and binding
obligation of the Company) constitutes and will constitute the valid and binding
obligations of each of Purchaser and Merger Sub, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity.
7.3. OFFER DOCUMENTS. None of the Offer Documents, any schedule
required to be filed by Purchaser or Merger Sub with the SEC or any amendment or
supplement will contain, on the date of filing with the SEC, any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Purchaser or Merger Sub with respect to
information supplied by the Company specifically for inclusion in the Offer
Documents, any schedule required to be filed with the SEC or any amendment or
supplement. None of the information supplied by the Purchaser or Merger Sub in
writing specifically for inclusion or incorporation by reference in the
Schedule 14D-9 will, at the date of filing with the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If at any time
prior to the Effective Time either the Purchaser or Merger Sub shall obtain
knowledge of any facts with respect to itself, any of its officers and directors
or any of its Subsidiaries that would require the supplement or amendment to any
of the foregoing documents in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or to comply
with applicable Laws, such amendment or supplement shall be promptly filed with
the SEC and, as required by Law, disseminated to the stockholders of the
Company, and in the event the Company shall advise the Purchaser or Merger Sub
as to its obtaining knowledge of any facts that would make it necessary to
supplement or amend any of the foregoing documents, the Purchaser or Merger Sub
shall promptly amend or supplement such document as required and distribute the
same to the stockholders of the Company.
7.4. NO VIOLATION. Neither the execution and delivery of this
Agreement or any of the Ancillary Documents by the Purchaser and Merger Sub nor
the consummation by them of the transactions contemplated hereby or thereby will
(i) violate, conflict with or result in any breach of any provision of the
respective Certificates of Incorporation or By-Laws of the Purchaser or Merger
Sub; (ii) other
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than the filings provided for in SECTION 2.3 and the filings required under the
Exchange Act and the Securities Act, require any consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Entity, the lack of which individually or in the aggregate would have a material
adverse effect on the ability of the Purchaser or Merger Sub to consummate the
transactions contemplated hereby, (iii) violate any Laws applicable to the
Purchaser or the Merger Sub or any of their respective assets, except for
violations which individually or in the aggregate would not have a material
adverse effect on the ability of the Purchaser or Merger Sub to consummate the
transactions contemplated hereby, and (iv) violate, conflict with or result in a
breach of any provision of, constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, result in the
termination or in a right of termination of, accelerate the performance required
by or benefit obtainable under, result in the creation of any Encumbrance upon
any of the properties of the Purchaser or Merger Sub under, or result in there
being declared void, voidable, or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Purchaser or Merger Sub is
bound, except for any of the foregoing matters which would not individually or
in the aggregate have a material adverse effect on the Purchaser and Merger Sub,
taken as a whole.
7.5. FINANCING. At the consummation of the Offer and at the Effective
Time, the Purchaser will cause the Merger Sub to have funds available to it
sufficient to consummate the Offer and the Merger on the terms contemplated
hereby. Affiliates of the Purchaser have, in the aggregate, committed capital
of approximately $1.0 billion and the Purchaser intends to use a portion of
those funds together with bank borrowings (together, the "FINANCING") in order
to consummate the Offer and the Merger. The Purchaser has received from
Chemical Bank and Chase Securities Inc. a commitment letter (the "COMMITMENT
LETTER") confirming their commitments, subject to the terms and conditions
thereof, to lend $900 million in senior debt financing. True and complete
copies of the Commitment Letter have been delivered to the Company. To the
extent that such bank borrowings are unavailable, the Purchaser will arrange for
alternate financing for the transactions contemplated hereby.
ARTICLE 8
COVENANTS
8.1. NO SOLICITATION. Neither the Company nor any of its Subsidiaries,
nor any of their respective officers, directors, employees, representatives,
agents or affiliates, shall, directly or indirectly, encourage, solicit,
initiate or, except as is required in the exercise of the fiduciary duties of
the Company's directors to the Company or its stockholders after consultation
with
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outside counsel (as hereinafter defined) to the Company, participate in any way
in any discussions or negotiations with, or provide any information to, or
afford any access to the properties, books or records of the Company or any of
its Subsidiaries to, or otherwise assist, facilitate or encourage, any
corporation, partnership, person or other entity or group (other than the
Purchaser or any affiliate or associate of the Purchaser) concerning any merger,
consolidation, business combination, liquidation, reorganization, sale of
substantial assets, sale of shares of capital stock or similar transactions
involving the Company or any Subsidiary or any division of any thereof (an
"ALTERNATIVE PROPOSAL"), and shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing; provided, however, that nothing
contained in this SECTION 8.1 shall prohibit the Company or its Board of
Directors from complying with Rule 14e-2(a) promulgated under the Exchange Act
or from making such disclosure to the Company's stockholders or from taking such
action which, in the judgment of the Board of Directors with the advice of
outside counsel, may be required under applicable law. The Company will
promptly notify the Purchaser if any such information is requested from it or
any such negotiations or discussions are sought to be initiated with the
Company.
8.2. INTERIM OPERATIONS.
(a) From the date of this Agreement to the Effective Time, except as
set forth in SCHEDULE 8.2(a), unless Purchaser has consented in writing thereto,
the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its
operations according to its usual, regular and ordinary course of business
consistent with past practice; (ii) use its reasonable best efforts to preserve
intact their business organizations and goodwill, maintain in effect all
existing qualifications, licenses, permits, approvals and other authorizations
referred to in SECTIONS 6.1 and 6.14, keep available the services of their
officers and employees and maintain satisfactory relationships with those
persons having business relationships with them; (iii) promptly upon the
discovery thereof notify Purchaser of the existence of any breach of any
representation or warranty contained herein (or, in the case of any
representation or warranty that makes no reference to Material Adverse Effect,
any breach of such representation or warranty in any material respect) or the
occurrence of any event that would cause any representation or warranty
contained herein no longer to be true and correct (or, in the case of any
representation or warranty that makes no reference to Material Adverse Effect,
to no longer be true and correct in any material respect); and (iv) promptly
deliver to Purchaser true and correct copies of any report, statement or
schedule filed with the SEC subsequent to the date of this Agreement, any
internal monthly reports prepared for or delivered to the Board of Directors
after the date hereof and monthly financial statements for the Company and its
Subsidiaries for and as of each month end subsequent to the date of this
Agreement.
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(b) From and after the date of this Agreement to the Effective Time,
except as set forth on SCHEDULE 8.2(b), unless Purchaser has consented in
writing thereto, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) amend its Certificate of Incorporation or Bylaws or
comparable governing instruments; (ii) issue, sell or pledge any shares of its
capital stock or other ownership interest in the Company (other than issuances
of Common Stock in respect of any exercise of Options outstanding on the date
hereof and disclosed in SCHEDULE 6.4) or any of the Subsidiaries, or any
securities convertible into or exchangeable for any such shares or ownership
interest, or any rights, warrants or options to acquire or with respect to any
such shares of capital stock, ownership interest, or convertible or exchangeable
securities; or accelerate any right to convert or exchange or acquire any
securities of the Company or any of its Subsidiaries for any such shares or
ownership interest; (iii) effect any stock split or otherwise change its
capitalization as it exists on the date hereof; (iv) grant, confer or award any
option, warrant, convertible security or other right to acquire any shares of
its capital stock or take any action to cause to be exercisable any otherwise
unexercisable option under any existing stock option plan; (v) declare, set
aside or pay any dividend or make any other distribution or payment with respect
to any shares of its capital stock or other ownership interests (other than such
payments by a wholly-owned Subsidiary); (vi) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital stock
of any of its Subsidiaries; (vii) sell, lease or otherwise dispose of any of its
assets (including capital stock of Subsidiaries), except in the ordinary course
of business, none of which dispositions individually or in the aggregate will be
material; (viii) settle or compromise any pending or threatened Litigation,
other than settlements which involve solely the payment of money (without
admission of liability) not to exceed $500,000 in any one case; (ix) acquire by
merger, purchase or any other manner, any business or entity or otherwise
acquire any assets that are material, individually or in the aggregate, to the
Company and its Subsidiaries taken as a whole, except for purchases of
inventory, supplies or capital equipment in the ordinary course of business
consistent with past practice; (x) incur or assume any long-term or short-term
debt, except for working capital purposes in the ordinary course of business
under the Company's existing credit agreement set forth in SCHEDULE 6.19;
(xi) assume, guarantee or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except wholly owned Subsidiaries of the Company; (xii) make or forgive any
loans, advances or capital continuations to, or investments in, any other person
other than loans and advances to employees in the ordinary course of business
which do not exceed $500,000 in the aggregate at any one time outstanding;
(xiii) make any Tax election or settle any Tax liability other than settlements
involving solely the payment of money, which settlement would be permitted by
clause (viii); (xiv) grant any stock related or performance awards except for
grants which are substantially consistent with the Revised 1996 Budget;
(xv) enter into any new employment, severance, consulting or salary continuation
agreements with any officers, directors or employees or grant any increases in
compensation or benefits to employees
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other than increases which are substantially consistent with the Revised 1996
Budget (it being understood that the acquisition of employees as part of the
acquisition of hospitals or other healthcare facilities is not covered by this
clause (xv)); (xvi) adopt, amend in any material respect or terminate any
employee benefit plan or arrangement; (xvii) amend, change or waive (or exempt
any person or entity from the effect of) the Rights Agreement, except in
connection with the exercise of its fiduciary duties by the Board of Directors
as set forth in SECTION 8.1 of this Agreement or as contemplated by SECTION
6.23; (xviii) permit any insurance policy naming the Company or any Subsidiary
as a beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; and (xix) agree in writing or otherwise to take any
of the foregoing actions.
8.3. COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT.
(a) If approval or action in respect of the Merger by the stockholders
of the Company is required by applicable law, the Company, acting through the
Board of Directors, shall (i) call a meeting of its stockholders (the
"STOCKHOLDERS MEETING") for the purpose of voting upon the Merger, (ii) hold the
Stockholder Meeting as soon as practicable following the purchase of shares of
Common Stock pursuant to the Offer, and (iii) subject to its fiduciary duties
under applicable law as advised by outside counsel, recommend to its
stockholders the approval of the Merger. The record date for the Stockholders
Meeting shall be a date subsequent to the date Purchaser or Merger Sub becomes a
record holder of Common Stock purchased pursuant to the Offer.
(b) If required by applicable law, the Company will, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement (such proxy statement, and any amendments or
supplements thereto, the "PROXY STATEMENT") or, if applicable, an Information
Statement with the SEC with respect to the Stockholders Meeting and will use its
best efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be cleared by the SEC. The Company will notify Purchaser of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Purchaser with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. The Company shall give Purchaser and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Purchaser and its counsel the opportunity to review all
amendments and supplements to the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Company and Purchaser agrees to use its
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement has been cleared by the SEC, the Company
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shall mail the Proxy Statement to the stockholders of the Company. If at any
time prior to the approval of this Agreement by the Company's stockholders there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company will prepare and mail to its stockholders such
an amendment or supplement.
(c) The Company represents and warrants that the Proxy Statement will
comply as to form in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by Purchaser or Merger Sub. The Purchaser represents and warrants that
none of the information supplied by Purchaser or Merger Sub for inclusion in the
Proxy Statement will, at the respective times filed with the SEC and distributed
to stockholders of the Company, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The Company shall use its best efforts to obtain the necessary
approvals by its stockholders of the Merger, this Agreement and the transactions
contemplated hereby.
(e) Purchaser agrees, subject to applicable law, to cause all shares
of Common Stock purchased by Merger Sub pursuant to the Offer and all other
shares of Common Stock owned by Purchaser, Merger Sub or any other subsidiary or
affiliate of Purchaser to be voted in favor of the approval of the Merger.
(f) Notwithstanding anything in this Agreement to the contrary,
Purchaser and Merger Sub, in their sole discretion, shall have the right to
defer the closing of the Merger for a period of 135 days following the
consummation of the Offer if, in Purchaser's and Merger Sub's sole judgment,
such deferral is necessary in order to enable the Company to effect a
covenant defeasance under the indenture (the "INDENTURE") related to the
Company's 10 1/4% Senior Subordinated Debentures due 2003 (the "DEBENTURES").
8.4. FILINGS; OTHER ACTION.
(a) Subject to the terms and conditions herein provided, the Company,
Purchaser, and Merger Sub shall: (a) use their best efforts to cooperate with
one another in (i) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits, authorizations
or
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waivers are required to be obtained prior to the Effective Time from,
Governmental Entities or other third parties in connection with the execution
and delivery of this Agreement and any other Ancillary Documents and the
consummation of the transactions contemplated hereby and thereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits, authorizations and waivers; and (b) use their best efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of Purchaser and
the Surviving Corporation shall take all such necessary action.
(b) Concurrently with the commencement of the Offer, the Company shall
commence (i) an offer (the "DEBENTURE OFFER") to purchase all of the outstanding
Debentures, and (ii) a solicitation as part of the Debenture Offer (the
"SOLICITATION") of consents to amendments to the Indenture from the holders of
not less than a majority in aggregate principal amount of the Debentures
outstanding (the consents from such holders, the "REQUISITE CONSENTS"). The
Debenture Offer and Solicitation (including the amendments) shall be on terms
determined by Purchaser, provided that the Company shall not be required to
purchase the Debentures pursuant to the Debenture Offer, and the proposed
amendments, if approved, shall not become operative, unless (i) Purchaser has
consummated the Offer and (ii) the Company has received the proceeds of
financing arranged by Purchaser in an amount sufficient to (a) consummate the
Debenture Offer and pay all fees and expenses associated therewith, and (b)
refinance any indebtedness of the Company coming due by reason of the Debenture
Offer and Solicitation and consummation thereof. The Company agrees that
promptly following the date the Requisite Consents are obtained it will execute
a supplemental indenture containing the proposed amendments that by their terms
shall become operative only upon consummation of the Offer and the Debenture
Offer.
8.5. ACCESS TO INFORMATION.
(a) From the date of this Agreement to the Closing, the Company shall,
and shall cause its Subsidiaries to, (i) give Purchaser and its authorized
representatives and lender banks full access to all books, records, personnel,
offices and other facilities and properties of the Company and its Subsidiaries
and their accountants and accountants' work papers, (ii) permit Purchaser to
make such copies and inspections thereof as Purchaser may reasonably request and
(iii) furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Company and its
Subsidiaries as Purchaser may from time to time reasonably request; provided
that no investigation or information furnished pursuant to this SECTION 8.5
shall affect any representations or warranties made by the Company herein or the
conditions to the obligations of the Purchaser to consummate the transactions
contemplated hereby.
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(b) All such information and access shall be subject to the provisions
of the letter agreement between an affiliate of Purchaser and the Company (the
"CONFIDENTIALITY AGREEMENT") relating to the confidential treatment of
"Proprietary Information" (as defined therein).
8.6. PUBLICITY. The initial press release relating to this Agreement
shall be a joint press release and thereafter the Company and Purchaser shall,
subject to their respective legal obligations, consult with each other before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any Governmental Entity or with any national securities exchange with respect
thereto.
8.7. FURTHER ACTION. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
8.8. INSURANCE; INDEMNITY.
(a) The Purchaser will cause the Surviving Corporation to purchase a
three-year pre-paid noncancellable directors and officers insurance policy
expiring not earlier than October 7, 1999, covering the current and all former
directors and officers with respect to acts or failures to act prior to the
Effective Time, in a single aggregate amount over the period expiring not
earlier than October 7, 1999 equal to the policy limit for the Company's current
directors and officers insurance policy (the "CURRENT POLICY"). If such
insurance is not obtainable at a cost not in excess of the annual premium paid
by the Company for the Current Policy (the "CAP") times 3.25, then the Purchaser
will cause the Surviving Corporation to purchase policies providing at least the
same coverage as the Current Policy and containing terms and conditions no less
advantageous to the current and former directors and officers of the Company
than the Current Policy with respect to acts or failures to act prior to the
Effective Time; provided, however, that the Purchaser and the Surviving
Corporation shall not be required to obtain policies providing such coverage
except to the extent that such coverage can be provided at an annual cost of no
greater than the Cap; and if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of the Cap, the Purchaser or
the Surviving Corporation shall only be required to obtain as much coverage as
can be obtained by paying an annual premium equal to the Cap.
(b) The Purchaser shall cause the Surviving Corporation to keep in
effect in its By-Laws a provision for a period of not less than three years from
the Effective Time (or, in the case of matters occurring prior to the Effective
Time which have not been resolved prior to the third anniversary of the
Effective Time,
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until such matters are finally resolved) which provides for indemnification of
the past and present officers and directors of the Company to the fullest extent
permitted by the DGCL.
(c) From and after the Effective Time, the Purchaser shall indemnify
and hold harmless, to the fullest extent permitted under applicable law, each
person who is, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer or director of the Company or any
Subsidiary against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement (collectively, "LOSSES") in connection with any Litigation arising
out of or pertaining to acts or omissions, or alleged acts or omissions, by them
in their capacities as such, which acts or omissions existed or occurred at or
prior to the Effective Time, whether commenced, asserted or claimed before or
after the Effective Time, including, without limitation, liabilities arising
under the Securities Act, the Exchange Act and state corporation laws in
connection with the transactions contemplated hereby. Without limiting the
foregoing, the Company and after the Effective Time the Purchaser shall
periodically advance expenses as incurred with respect to the foregoing to the
fullest extent permitted under applicable law provided that the person to whom
the expenses are advanced provides an undertaking to repay such advance if it is
ultimately determined that such person is not entitled to indemnification.
(d) If the Merger shall have been consummated, the Surviving
Corporation shall, to the fullest extent permitted under applicable law,
indemnify and hold harmless the Purchaser and any person or entity who was a
stockholder, officer, director or affiliate of Purchaser prior to the Effective
Time against any Losses in connection with any Litigation arising out of or
pertaining to any of the transactions contemplated by this Agreement or the
Ancillary Documents. The Purchaser shall periodically advance expenses as
incurred with respect to the foregoing to the fullest extent permitted under
applicable law provided that the person to whom the expenses are advanced
provides an undertaking to repay such advance if it is ultimately determined
that such person is not entitled to indemnification.
(e) If any Litigation described in paragraph (c) or (d) of this
SECTION 8.8 (each, an "ACTION") arises or occurs, the Surviving Corporation
shall control the defense of such Action through its counsel, but counsel for
the party seeking indemnification pursuant to paragraph (c) or (d) of this
SECTION 8.8 (each, an "INDEMNIFIED PARTY") shall be selected by the
Indemnified Party, which counsel shall be reasonably acceptable to the
Surviving Corporation, and the Indemnified Parties shall be permitted to
participate in the defense of such Action through such counsel at the
Corporation's expense. If there is any conflict between the Surviving
Corporation and any Indemnified Parties or there are additional defenses
available to any Indemnified Parties, the Indemnified Parties shall be
permitted to
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participate in the defense of such Action with counsel selected by the
Indemnified Parties, which counsel shall be reasonably acceptable to the
Surviving Corporation; provided that the Surviving Corporation shall not be
obligated to pay the reasonable fees and expenses of more than one counsel for
all Indemnified Parties in any single Action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such Action. The Surviving
Corporation shall not be liable for any settlement effected without its written
consent, which consent shall not unreasonably be withheld. The Purchaser shall
cause the Surviving Corporation to cooperate in the defense of any Action.
(f) This Section 8.8 is intended to benefit each of the persons
referred to herein and shall be binding on all successors and assigns of the
Company and the Purchaser.
8.9. RESTRUCTURING OF MERGER. Upon the mutual agreement of Purchaser
and the Company, the Merger shall be restructured in the form of a forward
subsidiary merger of the Company into Merger Sub, with Merger Sub being the
surviving corporation, or as a merger of the Company into Purchaser, with
Purchaser being the surviving corporation. In such event, this Agreement shall
be deemed appropriately modified to reflect such form of merger.
8.10. EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, the Surviving Corporation and
their respective subsidiaries will honor and assume, and Purchaser will cause
the Surviving Corporation to honor and assume, in accordance with their terms,
all existing employment and severance agreements between the Company or any of
its Subsidiaries and any officer, director, or employee of the Company or any of
its Subsidiaries and all benefits or other amounts earned or accrued to the
extent vested or which becomes vested in the ordinary course, through the
Effective Time under all employee benefit plans of the Company and any of its
Subsidiaries.
(b) The Purchaser confirms that it is the Purchaser's intention that,
until the first anniversary of the Effective Time, the Surviving Corporation and
its Subsidiaries will provide benefits to their employees (excluding employees
covered by collective bargaining agreements, if any) which benefits will, in the
aggregate, be substantially equivalent to those currently provided by the
Company and its Subsidiaries to such employees (other than pursuant to stock
option, stock purchase or other stock based plans). The Purchaser intends that,
after the first anniversary of the Effective Time, the Surviving Corporation and
its Subsidiaries will provide benefits to their employees (excluding employees
covered by collective bargaining agreements, if any) which benefits are
appropriate in the judgment of the Surviving Corporation, taking into account
all relevant factors, including, without
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limitation, the businesses in which the Surviving Corporation and its
Subsidiaries are engaged.
8.11. NO LIABILITY FOR FAILURE TO OBTAIN CONSENT OF LENDERS. The
Purchaser and Merger Sub hereby agree that neither the Company nor any of its
Affiliates (as defined below) will incur any liability to Purchaser or Merger
Sub if the transactions contemplated hereby are not consummated because of the
failure or inability to obtain any consent, approval or waiver under the terms
of the Amended and Restated Credit Agreements, dated as of May 12, 1995, by and
among the Company, certain Subsidiaries, the lenders named therein, NationsBank
of Tennessee, N.A., as Administrative Agent, and First Union National Bank of
North Carolina, as Co-Agent and Issuing Bank. As used in this Section 8.11, the
term "Affiliates" shall mean any person directly or indirectly controlling the
Company (including all directors, officers and employees), directly or
indirectly controlled by or under direct or indirect common control with the
Company.
ARTICLE 9
CONDITIONS
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver, where permissible, prior to the Effective Time, of the
following conditions:
(a) If approval of this Agreement and the Merger by the holders of
Common Stock is required by applicable law, this Agreement and the Merger shall
have been approved by the requisite vote of such holders.
(b) There shall not have been issued any injunction or issued or
enacted any Law which prohibits or has the effect of prohibiting the
consummation of the Merger or makes such consummation illegal.
9.2. CONDITIONS TO OBLIGATION OF PURCHASER AND MERGER SUB TO EFFECT THE
MERGER. The obligations of Purchaser and Merger Sub to effect the Merger shall
be further subject to the satisfaction or waiver on or prior to the Effective
Time of the condition that Purchaser shall have accepted for payment and paid
for shares of Common Stock tendered pursuant to the Offer; provided that this
condition shall be deemed satisfied if the Purchaser's failure to accept for
payment and pay for such shares breaches this Agreement or violates the terms
and conditions of the Offer.
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ARTICLE 10
TERMINATION; AMENDMENT; WAIVER
10.1. TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the Board of Directors of the Company
(subject to SECTION 1.4) and the Purchaser;
(b) by the Purchaser or the Company:
(i) if the Effective Time shall not have occurred on or before
December 31, 1996 (provided that the right to terminate this Agreement
pursuant to this clause (i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Effective Time to occur on
or before such date);
(ii) if there shall be any statute, law, rule or regulation that
makes consummation of the Offer or the Merger illegal or prohibited or
if any court of competent jurisdiction in the United States or other
Governmental Entity shall have issued an order, judgment, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment, decree, ruling or
other action shall have become final and non-appealable;
(iii) after October 31, 1996 if, on account of the failure of
any condition specified in EXHIBIT A, the Merger Sub has not purchased
any shares of Common Stock in the Offer by that date (provided that the
right to terminate this Agreement pursuant to this clause (iii) shall
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of any such condition); or
(iv) upon a vote at a duly held meeting or upon any adjournment
thereof, the stockholders of the Company shall have failed to give any
approval required by applicable law;
(c) by the Company if there is an Alternative Proposal which the Board
of Directors in good faith determines is more favorable from a financial point
of view to the stockholders of the Company as compared to the Offer and the
Merger, and the Board of Directors determines, after consultation with Skadden,
Arps, Slate, Meagher & Flom ("OUTSIDE COUNSEL"), that failure to terminate this
Agreement would be inconsistent with the compliance by the Board of Directors
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with its fiduciary duties to stockholders imposed by law; provided, however,
that the right to terminate this Agreement pursuant to this SECTION 10.1(c)
shall not be available (i) if the Company has breached in any material respect
its obligations under SECTION 8.1, or (ii) if the Alternative Proposal (x) is
subject to a financing condition or (y) involves consideration that is not
entirely cash or does not permit stockholders to receive the payment of the
offered consideration in respect of all shares at the same time, unless the
Board of Directors has been furnished with a written opinion of the Financial
Advisor or other nationally recognized investment banking firm to the effect
that (in the case of clause (x)) the Alternative Proposal is readily financeable
and (in the case of clause (y)) that such offer provides a higher value per
share than the consideration per share pursuant to the Offer or the Merger, or
(iii) if, prior to or concurrently with any purported termination pursuant to
this SECTION 10.1(c), the Company shall not have paid the fees and expenses
contemplated by SECTION 11.5, or (iv) if the Company has not provided Purchaser
and Merger Sub with prior written notice of its intent to so terminate this
Agreement and delivered to the Purchaser and Merger Sub a copy of the written
agreement embodying the Alternative Proposal in its then most definitive form
concurrently with the earlier of (x) the public announcement of, or (y) filing
with the SEC of any documents relating to, the Alternative Proposal; and
(d) by the Purchaser if the Board of Directors shall have failed to
recommend, or shall have withdrawn, modified or amended in any material respect,
its approval or recommendation of the Offer or the Merger, or shall have
recommended acceptance of any Alternative Proposal, or shall have resolved to do
any of the foregoing.
10.2. EFFECT OF TERMINATION. If this Agreement is terminated and
the Merger is abandoned pursuant to SECTION 10.1 hereof, this Agreement, except
for the provisions of SECTIONS 1.3(c), 8.5(b), 8.6 and ARTICLE 11, shall
terminate, without any liability on the part of any party or its directors,
officers or stockholders. Nothing herein shall relieve any party to this
Agreement of liability for breach of this Agreement or prejudice the ability of
the non-breaching party to seek damages from any other party for any breach of
this Agreement, including without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity.
10.3. AMENDMENT. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Board of
Directors of the Company (subject to SECTION 1.4) and the Purchaser at any time
before or after adoption of this Agreement by the stockholders of the Company
but, after any such stockholder approval, no amendment shall be made which
decreases the Merger Consideration or which adversely affects the rights of the
Company's stockholders hereunder without the approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties.
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10.4. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken by or on behalf of the Board of Directors of
the Company (subject to SECTION 1.4) and the Purchaser, may (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 11
GENERAL PROVISIONS
11.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
11.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to Purchaser or Merger Sub: If to the Company:
FLCH Holdings Corp. Community Health Systems, Inc.
FLCH Acquisition Corp. 155 Franklin Road
c/o Forstmann Little & Co. Suite 400
767 Fifth Avenue Brentwood, TN 37027-4600
New York, NY 10153 Attn: Chairman of the Board and
Attn: Ms. Sandra Horbach Chairman of the Special
Facsimile: (212) 759-9059 Committee
Facsimile: (615) 377-1172
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With a copy to: With a copy to:
Stephen Fraidin, P.C. J. Michael Schell, Esq.
Fried, Frank, Harris, Skadden, Arps, Slate, Meagher
Shriver & Jacobson & Flom
One New York Plaza 919 Third Avenue
New York, New York 10004 New York, New York 10022
Facsimile: (212) 859-4000 Facsimile: (212) 735-2000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
11.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that either Purchaser
or Merger Sub (or both) may assign its rights hereunder (including without
limitation the right to make the Offer and/or to purchase shares of Common Stock
in the Offer) to an affiliate but nothing shall relieve the assignor from its
obligations hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, except for the provisions of SECTION 8.8, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
11.4. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement,
the Schedules, the Exhibits, the Ancillary Documents and any other documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto.
11.5. FEES AND EXPENSES.
(a) Except as provided in SECTION 11.5(b), whether or not the Offer or the
Merger is consummated, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
(b)(1) To compensate Forstmann Little & Co. and its affiliates for
incurring the costs and expenses related to the transactions contemplated hereby
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and the forgoing by Forstmann Little & Co. or its affiliates of the opportunity
with respect to their investment in Purchaser in connection herewith, the
Company agrees that it shall pay to Forstmann Little & Co. and its affiliates,
in such manner as is designated by Forstmann Little & Co., an aggregate amount
equal to $45,000,000 (the "COMMITMENT AMOUNT") if this Agreement is terminated
(i) by the Company pursuant to SECTION 10.1(c); (ii) by the Purchaser (x)
pursuant to SECTION 10.1(d) (unless the event described therein occurs solely as
a result of the Purchaser's willful breach in any material respect of its
representations, warranties or obligations contained herein) or (y) pursuant to
SECTION 10.1(b)(iii) because of the failure of the condition set forth in
paragraph (d) of EXHIBIT A as a result of the Company's willful breach or
willful failure to comply in any material respect with any of its material
obligations under this Agreement; or (iii) pursuant to SECTION 10.1(b)(iii) at a
time when the Minimum Condition shall not have been satisfied and, either
(x) during the term of this Agreement or within 12 months after the termination
of this Agreement, the Board of Directors recommends an Alternative Proposal or
the Company enters into an agreement providing for an Alternative Proposal or a
majority of the outstanding shares of Common Stock is acquired by a third party
(including a "group" as defined in the Exchange Act) (a "STOCK ACQUISITION")
which Alternative Proposal (or another Alternative Proposal by the same or a
related person or entity) was made prior to the termination of this Agreement,
or (y) during the term of this Agreement or within two months after the
termination of this Agreement, the Board of Directors recommends an Alternative
Proposal or the Company enters into an agreement providing for an Alternative
Proposal or a Stock Acquisition occurs.
The Commitment Amount shall be payable (x) at the time of termination if
such Amount becomes payable pursuant to clause (i) above, (y) on the next
business day following termination if such Amount becomes payable pursuant to
clause (ii) above, and (z) on the next business day following the earliest of
the recommendation of an Alternative Proposal, the entering into of an agreement
providing for an Alternative Proposal or the occurrence of an Alternative
Proposal, if such Amount becomes payable pursuant to clause (iii) above.
(2) The Company shall reimburse the Purchaser and its affiliates for the
documented reasonable out-of-pocket expenses of the Purchaser and its
affiliates, but not in excess of $15,000,000 in the aggregate, incurred in
connection with or arising out of the Offer, the Merger, this Agreement and the
Ancillary Documents and the transactions contemplated hereby (including, without
limitation, amounts paid or payable to banks and investment bankers, fees and
expenses of counsel, accountants and consultants, and printing expenses),
regardless of when those expenses are incurred, if this Agreement is terminated
(i) by the Company pursuant to SECTION 10.1(c); (ii) by the Purchaser (x)
pursuant to SECTION 10.1(d) (unless the event described therein occurs solely as
a result of the Purchaser's willful breach in any material respect of its
representations, warranties or obligations contained herein) or (y) pursuant to
SECTION 10.1(b)(iii)
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because of the failure of the condition set forth in paragraph (d) of EXHIBIT A,
or (iii) pursuant to SECTION 10.1(b)(iii) at a time when the Minimum Condition
shall not have been satisfied and, either (x) during the term of this Agreement
or within 12 months after the termination of this Agreement, the Board of
Directors recommends an Alternative Proposal or the Company enters into an
agreement providing for an Alternative Proposal or a Stock Acquisition occurs
which Alternative Proposal (or another Alternative Proposal by the same or a
related person or entity) was made prior to the termination of this Agreement,
or (y) during the term of this Agreement or within two months after the
termination of this Agreement, the Board of Directors recommends an Alternative
Proposal or the Company enters into an agreement providing for an Alternative
Proposal or a Stock Acquisition occurs. No amounts in reimbursement of expenses
shall be payable pursuant to this paragraph (2) if the Commitment Amount has
been paid. If the Company shall have reimbursed the Purchaser for expenses
incurred by the Purchaser and its affiliates pursuant to this paragraph (2) and
thereafter the Commitment Amount shall become payable pursuant to paragraph (1)
of this Section 11.5(b), then the Commitment Amount shall be reduced by the
amount of any reimbursed expenses.
(3) The Company acknowledges that the agreements contained in this
SECTION 11.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Purchaser would not enter
into this Agreement. Accordingly, if the Company fails to promptly pay any
amounts owing pursuant to this SECTION 11.5(b) when due, the Company shall in
addition thereto pay to the Purchaser and its affiliates all costs and expenses
(including fees and disbursements of counsel) incurred in collecting such
amounts, together with interest on such amounts (or any unpaid portion thereof)
from the date such payment was required to be made until the date such payment
is received by the Purchaser at the prime rate of Chemical Bank as in effect
from time to time during such period; provided, however, that no costs,
expenses, or interest shall be paid in respect of any payment owing under clause
(y) of SECTION 11.5(b)(1)(ii). If the Company shall fail to pay the Commitment
Amount when due, and the Purchaser shall notify the Company of such failure to
pay, the Purchaser agrees that it will include in its notice to the Company a
statement as to which clause of Section 11.5(b)(1) the Purchaser believes
entitles it to payment.
11.6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws. Each of the Company, Purchaser and Merger Sub hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "DELAWARE COURTS") for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the
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Delaware Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
11.7. HEADINGS. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
11.8. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, "Subsidiary" shall mean, when used with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly owns
or controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization. "Significant Subsidiaries" shall refer to Subsidiaries (as
defined above) which constitute "significant subsidiaries" under Rule 12b-2
under the Exchange Act. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
shall mean a material adverse effect on the business, results of operations,
assets or financial condition of the Company and its Subsidiaries taken as a
whole.
11.9. INVESTIGATIONS. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
11.10. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.11. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce
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specifically the terms and provisions hereof in any Delaware Court, this being
in addition to any other remedy to which they are entitled at law or in equity.
11.12. COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
COMMUNITY HEALTH SYSTEMS, INC.
By:
--------------------------------------
Name:
Title:
FLCH HOLDINGS CORP.
By:
--------------------------------------
Name:
Title:
FLCH ACQUISITION CORP.
By:
--------------------------------------
Name:
Title:
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EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer, Merger Sub shall not be
required to accept for payment or pay for, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) of the Exchange Act, any shares
of Common Stock not theretofore accepted for payment or paid for and may
terminate or amend the Offer as to such shares of Common Stock unless there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of shares of Common Stock which would represent at least a
majority of the outstanding shares of Common Stock on a fully diluted basis (the
"MINIMUM CONDITION"). Furthermore, notwithstanding any other term of the Offer
or this Agreement, Merger Sub shall not be required to accept for payment or,
subject as aforesaid, to pay for any shares of Common Stock not theretofore
accepted for payment or paid for, and may terminate or amend the Offer if at any
time on or after the date of this Agreement and before the acceptance of such
shares of Common Stock for payment or the payment therefor, any of the following
conditions exist or shall occur and remain in effect:
(a) there shall have been instituted or pending any litigation by
the Government of the United States of America or any agency or
instrumentality thereof (i) which seeks to challenge the acquisition by
Purchaser or Merger Sub (or any of its affiliates) of shares of Common
Stock pursuant to the Offer or restrain, prohibit or delay the making or
consummation of the Offer or the Merger, (ii) which seeks to make the
purchase of or payment for some or all of the shares of Common Stock
pursuant to the Offer or the Merger illegal, (iii) which seeks to impose
limitations on the ability of Purchaser or Merger Sub (or any of their
affiliates) effectively to acquire or hold, or to require the Purchaser,
Merger Sub or the Company or any of their respective affiliates or
subsidiaries to dispose of or hold separate, any material portion of their
assets or business, (iv) which seeks to impose limitations on the ability
of Purchaser, Merger Sub or their affiliates to exercise full rights of
ownership of the shares of Common Stock purchased by it, including, without
limitation, the right to vote the shares purchased by it on all matters
properly presented to the stockholders of the Company, or (v) which seeks
to limit or prohibit any future business activity by Purchaser, Merger Sub
or any of their affiliates, including, without limitation, requiring the
prior consent of any person or entity (including the Government of the
United States of America or any agency or instrumentality thereof) to
future transactions by Purchaser, Merger Sub or any of their affiliates; or
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(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any Governmental Entity,
any Law or there shall have been issued any injunction that results in any
of the consequences referred to in subsection (a) above; or
(c) this Agreement shall have been terminated in accordance with its
terms; or
(d) (i) any of the representations and warranties made by the Company
in this Agreement shall not have been true and correct in all material
respects when made, or shall thereafter have ceased to be true and correct
in all material respects as if made as of such later date (other than
representations and warranties made as of a specified date) or (ii) the
Company shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement; or
(e) any corporation, entity, "group" or "person" (as defined in the
Exchange Act), other than Purchaser or Merger Sub, shall have acquired
beneficial ownership of more than 49% of the outstanding shares of Common
Stock; or
(f) except as set forth in the Company Reports or the Schedules to
the Agreement, any change shall have occurred or be threatened which
individually or in the aggregate has had or is continuing to have a
material adverse effect on the prospects of the Company and its
Subsidiaries, taken as a whole; or
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over the counter market in the United States, (ii) a
declaration of any banking moratorium by federal or state authorities or
any suspension of payments in respect of banks or any limitation (whether
or not mandatory) imposed by federal or state authorities on the extension
of credit by lending institutions in the United States, (iii) a
commencement of a war, armed hostilities or any other international or
national calamity directly or indirectly involving the United States, other
than any war, armed hostilities or other international calamity involving
the former Yugoslavia, (iv) any mandatory limitation by the federal
government on the extension of credit by banks or other financial
institutions generally, (v) any increase of 500 or more basis points in the
prime rate as announced by Chemical Bank, measured from the date of this
Agreement, or (vi) in the case of the foregoing clause (iii), if existing
at the time of the commencement of the Offer, in the reasonable judgment of
the Purchaser, a material acceleration or worsening thereof.
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The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by the Purchaser or the Company)
giving rise to any such condition and may be waived by Purchaser or Merger Sub,
in whole or in part, at any time and from time to time, in the sole discretion
of Purchaser. The failure by Purchaser or Merger Sub at any time to exercise
any of the foregoing rights will not be deemed a waiver of any right, the waiver
of such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of Common Stock not theretofore accepted for payment shall
forthwith be returned by the depositary to the tendering stockholders.
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