[FSSCI LETTERHEAD]
October 18, 1996
Dear FSSCI Shareholder:
Notice is hereby given that the meeting (the "Special Meeting") of the
shareholders of Fort Sutter Surgery Center, Inc. ("FSSCI"), at which the FSSCI
shareholders will consider and vote on the proposed merger (the "Merger") of a
wholly-owned subsidiary of HEALTHSOUTH Corporation ("HEALTHSOUTH") with and into
FSSCI, originally scheduled for October 17, 1996, has been rescheduled to
October 30, 1996. The rescheduled Special Meeting will be held on October 30,
1996 at 6:00 p.m. at the offices of Diepenbrock, Wulff, Plant & Hannegan, 300
Capitol Mall, Suite 1600, Sacramento, California. In connection with the
rescheduled Special Meeting and the Merger, please find enclosed:
1. A brief supplement (the "Supplement") to the original meeting notice and
Prospectus- Proxy Statement relating to the Merger previously sent to you on
September 27, 1996;
2. A new Proxy relating to the rescheduled Special Meeting (the "Proxy");
and
3. For your convenience, an additional copy of the original meeting notice
and Prospectus- Proxy Statement.
The Supplement contains certain additional information relating to the
Merger that the Board of Directors of FSSCI (the "Board") has deemed appropriate
to provide to the FSSCI shareholders in connection with the Special Meeting.
THERE HAS BEEN NO CHANGE IN THE ECONOMIC OR OTHER CONTRACTUAL TERMS OF THE
MERGER.
After careful consideration, the Board continues to believe that the Merger
is fair to and in the best interests of the FSSCI shareholders. THE BOARD
CONTINUES TO UNANIMOUSLY RECOMMEND THAT THE FSSCI SHAREHOLDERS VOTE FOR APPROVAL
OF THE MERGER.
You are cordially invited to attend the rescheduled Special Meeting in
person. WHETHER OR NOT YOU INTEND TO ATTEND THE RESCHEDULED SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PRE-PAID ENVELOPE. If you attend the
rescheduled Special Meeting and desire to revoke your Proxy and vote in person,
you may do so. In any event, your Proxy may be revoked at any time before it is
voted.
PLEASE NOTE THAT THE ORIGINAL PROXY CARD PREVIOUSLY DISTRIBUTED TO YOU ON
SEPTEMBER 27, 1996 IS NO LONGER EFFECTIVE. EVEN IF YOU HAVE PREVIOUSLY SIGNED
AND RETURNED THE PRIOR PROXY CARD, YOU ARE REQUIRED TO SIGN THE ENCLOSED REVISED
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE IF YOU DESIRE TO VOTE BY PROXY.
Please feel free to call Cindy at 456-5481 or Dave at 454-6677 if you have
any questions.
DAVID B. COWARD, M.D. CYNTHIA LEATHERS
President Assistant Secretary
<PAGE>
SUPPLEMENT DATED OCTOBER 18, 1996
TO THE
PROSPECTUS OF HEALTHSOUTH CORPORATION DATED SEPTEMBER 27, 1996
AND
MEETING NOTICE/PROXY STATEMENT OF FORT SUTTER SURGERY CENTER, INC.,
EACH DATED SEPTEMBER 27, 1996
This Supplement is being furnished to the holders (the "FSSCI
Shareholders") of the common stock of Fort Sutter Surgery Center, Inc. ("FSSCI")
as of the close of business on October 14, 1996, as a supplement to the meeting
notice and Prospectus-Proxy Statement dated September 27, 1996 (the
"Prospectus-Proxy Statement") previously distributed in connection with the
special meeting of the FSSCI Shareholders (the "Special Meeting") to be held to
consider and vote upon a proposal to approve (i) the Plan and Agreement of
Merger, dated as of August 13, 1996, among FSSCI, HEALTHSOUTH Corporation, a
Delaware corporation ("HEALTHSOUTH"), and FSSCI Acquisition Corporation, a
California corporation (the "Subsidiary") that is wholly owned by HEALTHSOUTH
(as it may be amended, supplemented or otherwise modified from time to time, the
"Plan"), pursuant to which, among other things, the Subsidiary will be merged
with and into FSSCI upon the terms and subject to the conditions contained in
the Plan (the "Merger"), and FSSCI will become a wholly-owned subsidiary of
HEALTHSOUTH, as described in the Prospectus-Proxy Statement and (ii) the related
Merger Agreement to be filed with the California Secretary of State to effect
the Merger (including certain amendments to FSSCI's Amended and Restated
Articles of Incorporation), and to consider and act upon such other matters as
may properly come before the Special meeting, and any adjournments or
postponements thereof.
THIS SUPPLEMENT IS INTENDED TO BE PART OF AND READ TOGETHER WITH THE
PROSPECTUS-PROXY STATEMENT AND, EXCEPT AS EXPRESSLY SUPPLEMENTED OR MODIFIED IN
THIS SUPPLEMENT, THE PROSPECTUS-PROXY STATEMENT CONTINUES TO BE IN FULL FORCE
AND EFFECT. Capitalized terms used in this Supplement and not otherwise defined
shall have the meanings assigned to such terms in the Prospectus-Proxy
Statement.
1. The Special Meeting originally scheduled for October 17, 1996 has been
rescheduled to October 30, 1996. The Board of Directors of FSSCI (the "Board")
has fixed the close of business on October 14, 1996 as the record date (the
"Record Date") for determining the shareholders entitled to receive notice of
and to vote at the rescheduled Special Meeting. For purposes of determining the
number of shares of HEALTHSOUTH Stock to be issued to the FSSCI Shareholders in
the manner described in the Prospectus-Proxy Statement in "THE MERGER - Terms of
the Merger," the last day of the 20-day period referenced therein will be the
last trading day before the new date of the rescheduled Special Meeting.
2. As discussed in the Prospectus-Proxy Statement under "THE MERGER -
Background of the Merger", in October 1995 HEALTHSOUTH acquired the outstanding
stock of SSCI (then held by Sutter Ambulatory Care Corporation and other persons
and entities) in a transaction (the "SSCI Acquisition") pursuant to which SSCI
became a wholly-owned subsidiary of HEALTHSOUTH. In connection with the SSCI
Acquisition, FSSCI began discussions with HEALTHSOUTH concerning a potential
transaction between FSSCI and HEALTHSOUTH, which discussions ultimately resulted
in the execution of the Plan on August 13, 1996.
3. In connection with its initial evaluation of the proposed Plan and
Merger, the Board of Directors of FSSCI (the "Board") considered, among other
things, the fact that the consideration paid in the SSCI Acquisition implied a
value of SSCI equal to a multiple of approximately 8.9 times the "last twelve
months ("LTM")" operating income of SSCI (based solely on publicly-available
<PAGE>
information available to FSSCI's financial advisors), as opposed to an implied
value of the Partnership in the Merger equal to a multiple of approximately 5.9
times the 1995 operating income of the Partnership (and approximately 4.7 times
the LTM operating income of the Partnership). The Board considered, among other
things, that SSCI had a significant equity or contractual interest in 12
different surgery centers, while the Partnership owns and operates only two
surgery centers. The Board determined, and continues to believe, that the Merger
is fair to and in the best interest of the FSSCI Shareholders notwithstanding
the difference in the approximate operating income multiple implied in the SSCI
Acquisition as compared with the approximate multiple implied by the Merger. See
"THE MERGER - Reasons for the Merger; Recommendation of the Board, and - Opinion
of Financial Advisor to FSSCI".
4. In connection with the Merger and following discussions between certain
officers of FSSCI and a shareholder of FSSCI, the Board retained special
litigation counsel to analyze and advise the Board with respect to the viability
of potential claims, if any, that FSSCI might assert against certain parties to
(or involved in) the SSCI Acquisition. At a special meeting of the Board held on
October 14, 1996, special litigation counsel, without making any specific
conclusion regarding the likelihood of success for any such claim or the damages
that might be involved if any such claim were successful, reviewed with the
Board certain issues relating to (i) the general nature and perceived viability
of potential claims and (ii) certain substantive and procedural considerations
in asserting and litigating these claims. Special litigation counsel also
responded to questions from members of the Board. Following this discussion and
further discussion among the Board members, the Board determined that it
remained in the best interests of the FSSCI Shareholders to proceed with the
Merger and not to pursue any such potential claims. The Board considered, among
other things, the perceived burdens and benefits to all of the FSSCI
Shareholders of pursuing potential claims, in light of the potential adverse
substantive and procedural issues involved in such claims, as opposed to
proceeding with the Merger. The Board also considered the possible adverse
substantive, procedural and practical effects on the ability of FSSCI (or the
FSSCI Shareholders on behalf of FSSCI) to pursue any such claims if the Merger
were approved by the FSSCI Shareholders and subsequently consummated. Any FSSCI
Shareholder desiring further information on the effect of the Merger (or such
FSSCI's Shareholder's vote on the Merger) on the rights (if any) of such FSSCI
Shareholder to pursue such claims following the Merger, either in the context of
a dissenters' rights proceeding or otherwise, is advised to consult with his or
her own legal advisor prior to the Special Meeting. For further information
regarding dissenters' rights, see "RIGHTS OF DISSENTING SHAREHOLDERS" in the
Prospectus-Proxy Statement.
5. THE BOARD CONTINUES TO BELIEVE THAT THE PLAN AND THE MERGER, THE TERMS
OF WHICH HAVE NOT CHANGED, ARE FAIR TO AND IN THE BEST INTERESTS OF THE FSSCI
SHAREHOLDERS AND, ACCORDINGLY, THE BOARD CONTINUES TO UNANIMOUSLY RECOMMEND THAT
THE FSSCI SHAREHOLDERS VOTE FOR THE PLAN AND THE MERGER.
--------------------------------------------------------------
Although the terms of the Merger have not changed, the Board determined
that it was appropriate to reschedule the Special Meeting to October 30, 1996 to
allow the FSSCI Shareholders to consider the foregoing information. EVEN IF YOU
HAVE SIGNED AND RETURNED THE ORIGINAL PROXY CARD, YOU ARE REQUIRED TO SIGN THE
ENCLOSED REVISED PROXY AND RETURN IT IN THE ENCLOSED RETURN ENVELOPE IF YOU
DESIRE TO VOTE BY PROXY. The provisions in the Prospectus-Proxy Statement
relating to the voting and revocation of proxies discussed under the heading
"THE SPECIAL MEETING - Voting and Revocation of Proxies" shall continue to apply
to the new form of Proxy attached hereto.
<PAGE>
PROXY
FORT SUTTER SURGERY CENTER, INC.
This Proxy is solicited on behalf of the Board of Directors of Fort Sutter
Surgery Center, Inc. The undersigned hereby appoints David B. Coward or Cynthia
Leathers, and each of them, proxies, each with full powers of substitution, to
vote the shares of Common Stock, without par value of Fort Sutter Surgery
Center, Inc. ("FSSCI") which the undersigned could vote if personally present at
the Special Meeting of Stockholders of FSSCI to be held at Diepenbrock, Wulff,
Plant & Hannegan, LLP, 300 Capitol Mall, Suite 1600, Sacramento, California, on
October 30, 1996 at 6:00 p.m. Pacific Time, and any adjournment or postponement
thereof. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR Item 1. Any stockholder who wishes to withhold the
discretionary authority referred to in Item 2 below should mark a line through
the entire Item.
1. Approval and adoption of (i) a Plan and Agreement of Merger, dated as of
August 13, 1996, attached as Annex A to the Prospectus-Proxy Statement that has
been transmitted in connection with the Special Meeting, pursuant to which FSSCI
Acquisition Corporation, a wholly-owned subsidiary of HEALTHSOUTH Corporation
("HEALTHSOUTH"), will merge (the "Merger") with and into FSSCI, and shareholders
of FSSCI will receive a specified number of shares of HEALTHSOUTH Common Stock
for each share of FSSCI Common Stock surrendered for exchange, all as described
in said Prospectus-Proxy Statement and (ii) the related Agreement of Merger to
be filed to effect the Merger (including the amendments to FSSCI's Amended and
Restated Articles of Incorporation described therein).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. In their discretion to act upon any matters incidental to the foregoing
and such other business as may properly come before the Special Meeting or any
adjournment or postponement thereof.
The undersigned hereby acknowledges receipt of the Notice of the
rescheduled Special Meeting and the related Supplement, each dated October 18,
1996, together with the Prospectus- Proxy Statement dated September 27, 1996,
all of which are furnished herewith.
Dated: ________________________ Signature(s)
___________________________________
___________________________________
(Please sign exactly and as fully
as your name appears on your stock
certificate. If shares are hold
jointly, each stockholder should
sign.)
