<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
COMPDENT CORPORATION
(Name of the Issuer)
TAGTCR ACQUISITION, INC.
TA ASSOCIATES, INC.
TA/ADVENT VIII L.P.
ADVENT ATLANTIC AND PACIFIC III L.P.
TA EXECUTIVES FUND LLC
TA INVESTORS LLC
GOLDER, THOMA, CRESSEY, RAUNER, INC.
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
GTCR ASSOCIATES V
NMS CAPITAL, L.P.
WILLIAM G. JENS, JR.
DAVID R. KLOCK
PHYLLIS A. KLOCK
BRUCE A. MITCHELL
KEITH J. YODER
COMPDENT CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
-------------
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C> <C>
Golder, Thoma, Cressey, Rauner, Inc. TA Associates, Inc. Gerald Rosenfeld
Golder, Thoma, Cressey, TA/Advent VIII L.P. NMS Capital, L.P.
Rauner, Fund V, L.P. Advent Atlantic and Pacific III L.P. c/o Paul Lattanzio
GTCR Associates V TA Executives Fund LLC NationsBank Montgomery
c/o Don Edwards TA Investors LLC Securities LLC
6100 Sears Tower c/o Roger B. Kafker 9 West 57th Street
Chicago, IL 60606 125 High Street, Suite 2500 25th Floor
(312) 382-2200 Boston, MA 02110 New York, NY 10019
(617) 574-6700
CompDent Corporation TAGTCR Acquisition, Inc. William G. Jens, Jr.
c/o David R. Klock c/o Roger B. Kafker David R. Klock
100 Mansell Court East 125 High Street, Suite 2500 Phyllis A. Klock
Suite 400 Boston, MA 02110 Bruce A. Mitchell
Roswell, GA 28226 (617) 574-6700 Keith J. Yoder
(770) 998-8936 100 Mansell Court East
Suite 400
Roswell, GA 28226
(770) 998-8936
</TABLE>
<PAGE> 2
WITH COPIES TO:
<TABLE>
<S> <C> <C>
John J. Kelley III Bruce A. Mitchell Sanford E. Perl
King & Spalding CompDent Corporation Kirkland & Ellis
191 Peachtree Street 100 Mansell Court East, Ste. 400 200 East Randolph Drive
Atlanta, Georgia 30303 Roswell, Georgia 30076 Chicago, Illinois 60601
(404) 572-4600 (770) 998-8936 (312) 861-2000
</TABLE>
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate
box):
a. The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934. [X]
b. The filing of a registration statement under the Securities Act
of 1933. [ ]
c. A tender offer. [ ]
d. None of the above. [ ]
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
==============================================================================
Transaction Value* Amount of Filing Fee
<S> <C>
$185,240,322 $37,048.06
==============================================================================
</TABLE>
* For purposes of calculating the fee only. Assumes purchase of
10,291,129 shares of Common Stock, par value $.01 per share, of
CompDent Corporation at $18.00 per share and the purchase of
underlying options to purchase Common Stock for an aggregate of
$185,240,322.
Check box if any 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. [X]
Amount previously paid: $37,048.06
Form or registration no.: Preliminary Proxy Statement on Schedule 14A
Filing party: CompDent Corporation
Date filed: October 27, 1998
<PAGE> 3
This Rule 13e-3 Transaction Statement (this "Statement") is being
filed in connection with the filing by CompDent Corporation ("CompDent" or the
"Company") with the Securities and Exchange Commission (the "Commission") on
December 18, 1998 of a Preliminary Proxy Statement on Schedule 14A (the "Proxy
Statement") in connection with a special meeting of the stockholders of CompDent
to be held on January 29, 1998. At such meeting, the stockholders of CompDent
will vote upon, among other things, the adoption of an Agreement and Plan of
Merger dated as of July 28, 1998, as amended and restated on January 18, 1999
(the "Merger Agreement") by and among CompDent, TAGTCR Acquisition, Inc., NMS
Capital, L.P., Golder, Thoma, Cressey, Rauner Fund V, L.P., and TA/Advent VIII
L.P. pursuant to which TAGTCR Acquisition, Inc. (the "Acquiror") will be merged
with and into CompDent. TA Advent VIII L.P., Advent Atlantic and Pacific III
L.P., TA Executives Fund LLC, TA Investors LLC, Golder, Thoma, Cressey Rauner
Fund V, L.P., GTCR Associates V and NMS Capital, L.P. are collectively referred
to herein as the "Equity Sponsors." David R. Klock and Phyllis A. Klock are
collectively referred to herein as the "Management Sponsors."
The following cross reference sheet is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items
of this Statement. The information in the Schedule 14A which is attached hereto
as Exhibit (d)(3), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified
in their entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN THE
ITEM IN SCHEDULE 13E-3 PROXY STATEMENT
<S> <C>
Item 1(a) Cover Page and "Summary--The Companies"
Item 1(b) Cover Page, "Summary--Record Date; Voting
Power" and "The Special Meeting--Record
Date and Quorum Requirement"
Item 1(c) - (e) "Summary--Historical Market Information"
Item 1(f) "Purchase of Common Stock by Certain
Persons"
Item 2(a) - (d) and (g) "Summary--The Companies" and "Certain
Information Concerning the Acquiror and the
Investor Group"
Item 2(e) - (f) *
Item 3(a)(1) "Special Factors--Opinion of Financial
Advisor--Analysis of Dental Health Development
Corporation"
Item 3(a)(2) "Special Factors--Background of the Merger,"
"--Conflicts of Interest" and "--Certain Effects
of the Merger"
Item 3(b) "Special Factors--Background of the Merger,"
"--Conflicts of Interest" and "--Certain Effects
of the Merger"
Item 4(a) "Questions and Answers about the Merger,"
"Summary--Terms of the Merger Agreement,"
"--Share Ownership of CompDent following the
Merger," "--Appraisal Rights," "Special
Factors--Certain Effects of the Merger" "The
Special Meeting--Effective Time of the Merger
and Payment for Shares," "The Merger," "Rights
of Dissenting Stockholders" and Appendix A to
the Proxy Statement
</TABLE>
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* Not applicable or answer is negative.
<PAGE> 4
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN THE
ITEM IN SCHEDULE 13E-3 PROXY STATEMENT
<S> <C>
Item 4(b) "Questions and Answers about the Merger,"
"Summary--Share Ownership of CompDent
following the Merger," "--Conflicts of
Interest," "--Appraisal Rights," "Special
Factors--Purpose and Reasons of the Investor
Group for the Merger," "--Conflicts of
Interest," "--Certain Effects of the Merger,"
"The Merger" and "Rights of Dissenting
Stockholders"
Item 5(a) - (b) "Special Factors--Purpose and Reasons of the
Investor Group for the Merger," "--Conflicts
of Interest," "--Certain Effects of the Merger,"
"--Financing of the Merger" and "--Conduct
of CompDent's Business After the Merger"
Item 5(c) "Special Factors--Conflicts of Interest"
"--Conduct of CompDent's Business After the
Merger"
Item 5(d) "Summary--Share Ownership of CompDent
following the Merger," "--Conflicts of
Interest," "--Historical Market Information,"
"Special Factors--Conflicts of Interest,"
"Financing of the Merger," and "The Merger--
Terms of the Merger Agreement--Covenants"
Item 5(e) "Special Factors--Certain Effects of the
Merger," "--Financing of the Merger," and
"--Conduct of CompDent's Business After
the Merger"
Item 5(f) - (g) "Special Factors--Certain Effects of the
Merger"
Item 6(a) "Special Factors--Financing of the Merger."
Item 6(b) "The Merger--Estimated Fees and Expenses
of the Merger"
Item 6(c) "Special Factors--Financing of the Merger."
</TABLE>
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*Not applicable or answer is negative.
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<PAGE> 5
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN THE
ITEM IN SCHEDULE 13E-3 PROXY STATEMENT
<S> <C>
Item 6(d) *
Item 7(a) - (c) "Questions and Answers about the Merger,"
"Summary," "Special Factors--Background of
the Merger," "--The Special Committee's and
the Board's Recommendation," "--Opinion of
Financial Advisor," "--Presentations of
Financial Advisor," "--Purpose and Reasons of
the Investor Group for the Merger" and
"--Conflicts of Interest"
Item 7 (d) "Questions and Answers about the Merger,"
"Summary," "Special Factors--Background of the
Merger," "--Purpose and Reasons of the Investor
Group for the Merger," "--Conflicts of
Interest," "--Certain Effects of the Merger,"
"--Financing of the Merger," "--Conduct of
CompDent's Business After the Merger," "Rights
of Dissenting Stockholders," "Federal Income Tax
Consequences" and "Principal Stockholders and
Stock Ownership of Management and Others"
Item 8(a) - (b) "Questions and Answers about the Merger,"
"Summary--Recommendations," "--Opinion
of Financial Advisor," "--Conflicts of
Interest," "--Appraisal Rights," "Special
Factors--Background of the Merger,"
"--The Special Committee's and the Board's
Recommendation," "--Opinion of Financial
Advisor," "--Presentations of Financial
Advisor," "--Position of the Investor Group as
to Fairness of the Merger," "--Conflicts of
Interest" and "Rights of Dissenting
Shareholders"
Item 8(c) "Questions and Answers about the Merger,"
"Summary--Vote Required,"
"Special Factors--The Special Committee's
and the Board's Recommendation,"
"The Special Meeting--Voting Procedures"
and "The Merger--Conditions of the Merger"
</TABLE>
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*Not applicable or answer is negative.
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<PAGE> 6
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN THE
ITEM IN SCHEDULE 13E-3 PROXY STATEMENT
<S> <C>
Item 8(d) "Questions and Answers about the Merger,"
"Summary--Recommendations,"
"--Opinion of Financial Advisor,"
"Special Factors--Background of the Merger,"
"--The Special Committee's and the Board's
Recommendation" and "--Opinion of
Financial Advisor"
Item 8(e) "Questions and Answers about the Merger,"
"Summary--Recommendations" and
"Special Factors--The Special Committee's
and the Board's Recommendation"
Item 8(f) "Special Factors--Background of the Merger"
Item 9(a) - (c) "Summary--Recommendations," "--Opinion of
Financial Advisor," "Special Factors--
Background of the Merger," "The Special
Committee's and the Board's Recommendation,"
"--Opinion of Financial Advisor,"
"--Presentations of Financial Advisor,"
"--Conflicts of Interest" and Appendix B to the
Proxy Statement
Item 10(a) "Principal Stockholders and Stock Ownership
of Management and Others"
Item 10(b) *
Item 11 "Questions and Answers about the Merger,"
"Summary, " "--Terms of the Merger Agreement,"
"Special Factors--Background of the Merger,"
"--Conflicts of Interest," "--Financing of the
Merger," "The Merger" and Appendix A to the
Proxy Statement
</TABLE>
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*Not applicable or answer is negative.
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<PAGE> 7
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN THE
ITEM IN SCHEDULE 13E-3 PROXY STATEMENT
<S> <C>
Item 12(a) - (b) "Summary--Recommendations," "--Share
Ownership of CompDent following the
Merger," "--Conflicts of Interest," "Special
Factors--The Special Committee's and the
Board's Recommendation," "--Purpose and
Reasons of the Investor Group for the
Merger," "--Financing of the Merger" and
"Current Status of the Financing"
Item 13(a) "Summary--Appraisal Rights,"
"Rights of Dissenting Stockholders" and
Appendix C to the Proxy Statement
Item 13(b) *
Item 13(c) *
Item 14(a) "Summary--Selected Consolidated Financial
Data, "Incorporation of Certain Documents
by Reference" and "Experts"
Item 14(b) "Summary--Selected Unaudited Pro Forma
Consolidated Financial Data"
Item 15(a) - (b) "Special Factors--Conflicts of Interest,"
"The Special Meeting--Proxy Solicitation"
"The Merger"
Item 16 Proxy Statement
Item 17(a) - (f) *
</TABLE>
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*Not applicable or answer is negative.
-5-
<PAGE> 8
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE
TRANSACTION.
(a) The information set forth on the cover page to the Proxy
Statement and in the section entitled "Summary--The Companies" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth on the cover page to the Proxy
Statement and in the sections entitled "Summary--Record Date; Voting Power" and
"The Special Meeting--Record Date and Quorum Requirement" of the Proxy
Statement is incorporated herein by reference.
(c)-(e) The information set forth in the section entitled
"Summary--Historical Market Information" of the Proxy Statement is incorporated
herein by reference.
(f) The information set forth in the section entitled "Purchases
of Common Stock by Certain Persons" of the Proxy Statement is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by CompDent, the Acquiror, the
Equity Investors, the Management Sponsors, TA Associates, Inc. ("TA Associates")
Golder, Thoma, Cressey, Rauner, Inc. ("Golder, Thoma"), William G. Jens, Bruce
A. Mitchell, Keith J. Yoder and Gerald Rosenfeld. The information set forth in
the sections entitled "Summary--The Companies" and "Certain Information
Concerning the Acquiror and the Investor Group" of the Proxy Statement is
incorporated herein by reference.
(e), (f) None of the Company, the Equity Investors, the Acquiror, TA
Associates, Golder, Thoma, any executive officer, director or person controlling
the Acquiror, the Equity Investors, TA Associates or Golder, Thoma, or any
Management Sponsor, William G. Jens, Bruce A. Mitchell, Keith J. Yoder or Gerald
Rosenfeld 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.
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<PAGE> 9
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the section entitled "Special
Factors--Opinion of Financial Advisor--Analysis of Dental Health Development
Corporation" of the Proxy Statement is incorporated herein by reference.
(a)(2) The information set forth in the sections entitled "Special
Factors--Background of the Merger," "--Conflicts of Interest" and "--Certain
Effects of the Merger" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in the sections entitled "Special
Factors--Background of the Merger," "--Conflicts of Interest" and "--Certain
Effects of the Merger" of the Proxy Statement is incorporated herein by
reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary--Terms of the Merger Agreement,"
"--Share Ownership of CompDent following the Merger," "-- Appraisal Rights,"
"Special Factors--Certain Effects of the Merger," "The Special
Meeting--Effective Time of the Merger and Payment for Shares," "The Merger" and
"Rights of Dissenting Stockholders" of the Proxy Statement and Appendix A to
the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary--Share Ownership of CompDent following
the Merger," "--Conflicts of Interest," "--Appraisal Rights," "Special
Factors--Purpose and Reasons of the Investor Group for the Merger,"
"--Conflicts of Interest," "--Certain Effects of the Merger," "The Merger" and
"Rights of Dissenting Stockholders" of the Proxy Statement is incorporated
herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(b) The information set forth in the sections entitled "Special
Factors--Purpose and Reasons of the Investor Group for the Merger," "--Conflicts
of Interest," "--Certain Effects of the Merger," "--Financing of the Merger" and
"--Conduct of CompDent's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
-7-
<PAGE> 10
(c) The information set forth in the sections entitled "Special
Factors--Conflicts of Interest" and "--Conduct of CompDent's Business After the
Merger" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary--Share Ownership of CompDent following the Merger," "--Conflicts of
Interest," "--Historical Market Information," "Special Factors--Conflicts of
Interest," "--Financing of the Merger," and "The Merger--Terms of the Merger
Agreement--Covenants" of the Proxy statement is incorporated herein by
reference.
(e) The information set forth in the sections entitled "Special
Factors--Certain Effects of the Merger," "--Financing of the Merger," and
"--Conduct of CompDent's Business After the Merger" of the Proxy statement is
incorporated herein by reference.
(f)-(g) The information set forth in the section entitled "Special
Factors--Certain Effects of the Merger" and "--Current Status of the Financing"
of the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the section entitled "Special
Factors--Financing of the Merger" of the Proxy Statement is incorporated herein
by reference.
(b) The information set forth in the section entitled "The
Merger--Estimated Fees and Expenses of the Merger" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth in the section entitled "Special
Factors--Financing of the Merger" of the Proxy Statement is incorporated herein
by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary," "Special Factors--Background of the
Merger," "--The Special Committee's and the Board's Recommendation," "--Opinion
of Financial Advisor," "--Presentations of Financial Advisor," "--Purpose and
Reasons of the Investor Group for the Merger" and "--Conflicts of Interest" of
the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary," "Special Factors--Background of the
Merger," "--Purpose and Reasons of the Investor Group for the Merger,"
"--Conflicts of Interest," "--Certain Effects of the Merger," "--Financing of
the Merger," "--Conduct of CompDent's Business After the Merger," "Rights of
Dissenting Stockholders," "Federal Income Tax Consequences" and "Principal
-8-
<PAGE> 11
Stockholders and Stock Ownership of Management and Others" of the Proxy
Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary--Recommendations," "--Opinion of
Financial Advisor," "--Conflicts of Interest," "--Appraisal Rights," "Special
Factors--Background of the Merger," "--The Special Committee's and the Board's
Recommendation," "--Opinion of Financial Advisor," "--Presentations of Financial
Advisor" "--Position of the Investor Group as to Fairness of the Merger,"
"--Conflicts of Interest" and "Rights of Dissenting Shareholders" of the Proxy
Statement are incorporated herein by reference.
(c) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary--Vote Required," "Special Factors--The
Special Committee's and the Board's Recommendation," "The Special
Meeting--Voting Procedures" and "The Merger-- Conditions of the Merger" of the
Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary--Recommendations," "--Opinion of
Financial Advisor," "Special Factors--Background of the Merger," "--The Special
Committee's and the Board's Recommendation" and "--Opinion of Financial
Advisor" of the Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled "Questions
and Answers about the Merger," "Summary--Recommendations" and "Special
Factors--The Special Committee's and the Board's Recommendation" of the Proxy
Statement is incorporated herein by reference.
(f) The information set forth in the section entitled "Special
Factors--Background of the Merger" of the Proxy Statement is incorporated
herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the sections entitled
"Summary--Recommendations," "--Opinion of Financial Advisor," "Special
Factors--Background of the Merger," "The Special Committee's and the Board's
Recommendation," "--Opinion of Financial Advisor" "--Presentations of Financial
Advisors" and "-- Conflicts of Interest" of the Proxy Statement and in
Appendix B to the Proxy Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the section entitled "Principal
Stockholders and Stock Ownership of Management and Others" of the Proxy
Statement is incorporated herein by reference.
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<PAGE> 12
(b) None.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in the sections entitled "Questions and
Answers about the Merger," "Summary," "--Terms of the Merger Agreement,"
"Special Factors--Background of the Merger," "--Conflicts of Interest,"
"--Financing of the Merger," "--Current Rates of the Financing" and "The Merger"
of the Proxy Statement and in Appendix A to the Proxy Statement is incorporated
herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION.
(a)-(b) The information set forth in the sections entitled
"Summary--Recommendations," "-- Share Ownership of CompDent following the
Merger," "--Conflicts of Interest," "Special Factors--The Special Committee's
and the Board's Recommendation," "--Purpose and Reasons of the Investor Group
for the Merger," "--Financing of the Merger" and "--Current Rates of the
Financing" of the Proxy Statement is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled
"Summary--Appraisal Rights" and "Rights of Dissenting Stockholders" of the
Proxy Statement and in Appendix C to the Proxy Statement is incorporated herein
by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The relevant financial information set forth under the
sections entitled "Summary--Selected Consolidated Financial Data of the
Company," "Incorporation of Certain Documents by Reference" and "Experts"
of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the section entitled
"Summary--Selected Unaudited Pro Forma Consolidated Financial Data" of the
Proxy Statement is incorporated herein by reference.
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<PAGE> 13
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) The information set forth in the sections entitled "Special
Factors--Conflicts of Interest," "The Special Meeting--Proxy Solicitation" and
"The Merger"of the Proxy Statement is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Recapitalization Financing Commitment Letter dated July 27,
1997 by and among, TA Advent VIII, L.P.; Golder, Thoma,
Cressey, Rauner Fund V, L.P.; NMS Capital, L.P.; NationsBank,
N.A.; and NationsBanc Montgomery Securities LLC.*
(a)(2) Recapitalization Financing Commitment Letter dated July 27,
1997 by and among, TA Advent VIII, L.P.; Golder, Thoma,
Cressey, Rauner Fund V, L.P.; NMS Capital, L.P.; NationsBank,
N.A.; and NationsBanc Montgomery Securities LLC.*
(a)(3) Recapitalization Financing Commitment Letter dated
January 18, 1999 by and among TA/Advent VIII L.P.; Golder,
Thoma, Cressey, Rauner Fund V, L.P.; NMS Capital, L.P.;
NationsBank, N.A.; and NationsBanc Montgomery Securities LLC.
(a)(4) Recapitalization Financing Commitment Letter dated
January 18, 1999 by and among TA/Advent VIII L.P.; Gold,
Thoma, Cressey, Rauner Fund V, L.P.; NMS Capital, L.P.;
NationsBank, N.A.; and NationsBanc Montgomery Securities LLC.
(b)(1) Opinion of The Robinson-Humphrey Company, LLC dated July 28,
1998 (included as Appendix B to the Preliminary Proxy
Statement, which was filed as Exhibit (d)(3) to Amendment
No.1 to this Schedule 13E-3 filed on December 18, 1998).*
(b)(2) Financial Analysis Presentation materials prepared by The
Robinson-Humphrey Company LLC in connection with its
presentation to the Special Committee on July 21, 1998.*
(b)(3) Financial Analysis Presentation materials prepared by The
Robinson-Humphrey Company, LLC in connection with providing
its opinion to the Special Committee on July 27, 1998.*
(b)(4) Opinion of The Robinson-Humphrey Company, LLC dated
January 18, 1999 (included as Appendix B to the Preliminary
Proxy Statement, which is filed herewith as Exhibit (d)(3)).
(b)(5) Financial Analysis Presentation materials preparation by The
Robinson-Humphrey Company LLC in connection with its
presentation to the Special Committee on January 5, 1999.
(b)(6) Financial Analysis Presentation materials prepared by The
Robinson-Humphrey Company, LLC in connection with providing
its opinion to the Special Committee on January 18, 1999.
(c)(1) Amended and Restated Agreement and Plan of Merger dated as of
January 18, 1999 by and among CompDent Corporation, TAGTCR
Acquisition, Inc., NMS Capital, L.P., TA/Advent VIII, L.P.
and Golder, Thoma, Cressey, Rauner Fund V, L.P. (included as
Appendix A to the Preliminary Proxy Statement, which is filed
herewith as Exhibit (d)(3)).
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<PAGE> 14
(c)(2) Stockholders Agreement.**
(d)(1) Letter to Stockholders (included in the Preliminary Proxy
Statement, which is filed herewith as Exhibit (d)(3)).
(d)(2) Notice of Special Meeting of Stockholders (included in the
Preliminary Proxy Statement, which is filed herewith as
Exhibit (d)(3)).
(d)(3) Preliminary Proxy Statement, dated February 2, 1999.
(d)(4) Form of Proxy (included in the Preliminary Proxy Statement,
which is filed herewith as Exhibit (d)(3)).*
(d)(5) Press Release issued by CompDent Corporation dated as of July
28, 1998 (incorporated by reference to the Current Report on
Form 8-K filed by CompDent on August 12, 1998).*
(e) Text of Section 262 of the Delaware General Corporation Law
(included as Appendix C to the Preliminary Proxy Statement,
which is filed herewith as Exhibit (d)(3)).*
(f) Not applicable.
- -----------------
*Previously filed.
** To be filed by amendment.
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<PAGE> 15
EXHIBIT LIST
(a)(3) Recapitalization Financing Commitment Letter dated
January 18, 1999 by and among TA/Advent VIII L.P.; Golder,
Thoma, Cressey, Rauner Fund V, L.P.; NMS Capital, L.P.;
NationsBank, N.A.; and NationsBanc Montgomery Securities LLC.
(a)(4) Recapitalization Financing Commitment Letter dated
January 18, 1999 by and among TA/Advent VIII L.P.; Gold,
Thoma, Cressey, Rauner Fund V, L.P.; NMS Capital, L.P.;
NationsBank, N.A.; and NationsBanc Montgomery Securities LLC.
(b)(5) Financial Analysis Presentation materials preparation by The
Robinson-Humphrey Company LLC in connection with its
presentation to the Special Committee on January 5, 1999.
(b)(6) Financial Analysis Presentation materials prepared by The
Robinson-Humphrey Company, LLC in connection with providing
its opinion to the Special Committee on January 18, 1999.
-13-
<PAGE> 16
SIGNATURES
After due inquiry and to the best of our knowledge and belief, each of
the undersigned certifies that the information set forth in this Statement is
true, complete and correct.
COMPDENT CORPORATION
By: /s/ David R. Klock
---------------------------------
Name:
Dated: February 2, 1999 Title:
-----------------
TAGTCR ACQUISITION, INC.
By: /s/ Donald J. Edwards
---------------------------------
Name: Donald J. Edwards
Dated: February 2, 1999 Title:
-----------------
GOLDER, THOMA, CRESSEY, RAUNER, INC.
By: /s/ Donald Edwards
---------------------------------
Dated: February 2, 1999 Name: Donald Edwards
----------------- Title:
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
By: GTCR V, L.P.
Sole General Partner
By: GOLDER, THOMA, CRESSEY, RAUNER,
INC.
Sole General Partner
Dated: February 2, 1999 By: /s/ Donald J. Edwards
----------------- ------------------------
Name: Donald J. Edwards
Title:
GTCR ASSOCIATES V
By: GOLDER, THOMA, CRESSEY, RAUNER, INC.
Managing General Partner
Dated: February 2, 1999 By: /s/ Donald J. Edwards
----------------- --------------------------------
Name: Donald J. Edwards
Title:
<PAGE> 17
TA ASSOCIATES
Dated: February 2, 1999 By: /s/ Roger B. Kafker
----------------- -------------------------
Name: Roger B. Kafker
Title:
TA/ADVENT VIII L.P.
By: TA Associates VIII LLC
Sole General Partner
By: TA ASSOCIATES, INC.
Manager
Dated: February 2, 1999 By: /s/ Roger B. Kafker
----------------- ----------------------------
Name: Roger B. Kafker
Title: Managing Director
ADVENT ATLANTIC AND PACIFIC III L.P.
By: TA ASSOCIATES AAP III L.P.
Sole General Partner
By: TA ASSOCIATES, INC.
Sole General Partner
Dated: February 2, 1999 By: /s/ Roger B. Kafker
----------------- ----------------------------
Name: Roger B. Kafker
Title: Managing Director
<PAGE> 18
TA EXECUTIVES FUND LLC
By: TA ASSOCIATES, INC.
Manager
Dated: February 2, 1999 By: /s/ Roger B. Kafker
-------------------- -----------------------------
Name: Roger B. Kafker
Title: Managing Director
TA INVESTORS LLC
By: TA ASSOCIATES, INC.
Manager
Dated: February 2, 1999 By: /s/ Roger B. Kafker
-------------------- -----------------------------
Name: Roger B. Kafker
Title: Managing Director
NMS CAPITAL, L.P.
By: NMS CAPITAL MANAGEMENT LLC
General Partner
Dated: February 2, 1999 By: /s/ Gerald Rosenfeld
-------------------- -----------------------------
Name: Gerald Rosenfeld
Title: Managing Member
<PAGE> 19
GERALD ROSENFELD
Dated: February 2, 1999 /s/ Gerald Rosenfeld
----------------- -------------------------------------
WILLIAM G. JENS, Jr.
Dated: February 2, 1999 /s/ William G. Jens, Jr.
----------------- -------------------------------------
DAVID R. KLOCK
Dated: February 2, 1999 /s/ David R. Klock
----------------- -------------------------------------
PHYLLIS A. KLOCK
Dated: February 2, 1999 /s/ Phyllis A. Klock
----------------- -------------------------------------
BRUCE A. MITCHELL
Dated: February 2, 1999 /s/ Bruce A. Mitchell
----------------- -------------------------------------
KEITH J. YODER
Dated: February 2, 1999 /s/ Keith J. Yoder
----------------- -------------------------------------
<PAGE> 1
EXHIBIT (a)(3)
January 18, 1999
TA/Advent VIII L.P.
c/o TA Associates, Inc.
High Street Tower, Suite 2500
125 High Street
Boston, Massachusetts 02110
Attn.: Mr. Roger Kafker
Golder, Thoma, Cressey, Rauner Fund V, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attn.: Mr. Don Edwards
NMS Capital, L.P.
9 West 57th Street
New York, New York 10019
Attn: Mr. Paul Lattanzio
Re: Recapitalization Financing Commitment Letter
Ladies and Gentlemen:
You have advised us that CompDent Corporation, a Delaware corporation ("HoldCo")
intends to engage in a transaction in which it is proposed that, pursuant to the
Merger Agreement (as defined below), TA/Advent VIII L.P. ("TA"), Golder, Thoma,
Cressey, Rauner Fund V, L.P. ("GTCR") and NMS Capital, L.P. ("NMS Capital", and
together with TA and GTCR, the "Sponsors") and certain affiliates of the
Sponsors and other persons arranged by the Sponsors (collectively with the
Sponsors, the "Investors") will effect the recapitalization (the
"Recapitalization") of HoldCo. We understand that a portion of the financing
with respect to the Recapitalization will include (i) (A) not less than $87.70
million (less any rollover shares in excess of $3.0 million, such that the total
amount of rollover shares shall not exceed $10.0 million) to be provided through
the issuance and sale to the Investors (as set forth in the Merger Agreement) of
equity securities of HoldCo having terms and conditions reasonably acceptable to
the Agent and NMS (each as defined below) and (B) approximately $3.0 million to
be provided through the rollover of common stock of HoldCo; provided, that the
amount of the cash equity investment shall be reduced by the value of any common
stock of HoldCo that is not converted into cash pursuant to the Recapitalization
in excess of $3.0 million; provided, further that such cash equity investment
may not be reduced pursuant to the foregoing proviso by more than $7.0 million
(collectively, the "HoldCo Equity Financing"), (ii) American
<PAGE> 2
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 2
Prepaid Professional Services, Inc., a Delaware corporation and wholly owned
subsidiary of HoldCo consisting of the dental HMO business of HoldCo ("American
Prepaid") receiving aggregate proceeds of approximately $100,000,000 aggregate
principal amount through the issuance of notes (the "Notes") pursuant to either
(A) a public or Rule 144A offering or (B) a privately-placed bridge financing,
(iii) American Prepaid borrowing up to $26,924,000 under a senior secured credit
facility (the "American Prepaid Credit Facility"), and (iv) Dental Health
Management Inc., a Delaware corporation and wholly owned subsidiary of HoldCo
consisting of the dental practice management business of HoldCo (the
"Borrower"), borrowing $20 million under the credit facilities described below.
Further, we understand that in connection with the Recapitalization, (i) all
outstanding indebtedness of HoldCo will be refinanced and such indebtedness will
be terminated, and (ii) after consummation of the Recapitalization, the
Investors will own at least 70% of the voting equity of HoldCo. You have advised
us that $20,000,000 in senior debt financing (the "Credit Facility") will be
required by the Borrower in order to fund a portion of the Recapitalization and
to pay the fees and expenses incurred in connection with the Recapitalization.
You have further advised us that no external financing, other than the Credit
Facility, the American Prepaid Credit Facility, the HoldCo Equity Financing and
the Notes, will be required in connection with the Recapitalization.
You have requested that NationsBank, N.A. ("NationsBank") commit to provide the
full principal amount of the Credit Facility and that NationsBanc Montgomery
Securities LLC ("NMS") commit to arrange the Credit Facility. We are pleased to
advise you of NationsBank's commitment to provide the full principal amount of
the Credit Facility described in the Summary of Principal Terms & Conditions
attached hereto as Annex I (the "Term Sheet"). All capitalized terms used and
not otherwise defined herein shall have the meanings set forth in the Term Sheet
and the Fee Letter (as defined below).
The commitments of NationsBank and NMS hereunder are subject to the satisfaction
of each of the following conditions precedent, each of the other terms and
conditions set forth herein, and each of the terms and conditions set forth in
the Term Sheet in a manner acceptable to NationsBank and NMS:
(a) execution by the Sponsors, HoldCo and the other appropriate
parties of Amended and Restated Agreement and Plan of Merger
dated as of January 18, 1999 among TAGTCR Acquisition, Inc.,
NMS Capital, GTCR, TA and HoldCo relating to the
Recapitalization, substantially similar to a draft thereof
previously delivered to the Agent and NMS, and the other
definitive documentation relating thereto being satisfactory
to NationsBank and NMS, in their reasonable discretion (the
"Merger Agreement");
<PAGE> 3
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 3
(b) execution of a fee letter agreement (the "Fee Letter") among
the Sponsors, NationsBank and NMS prior to or concurrently
with the acceptance by the Sponsors of this commitment letter
agreement (this "Commitment Letter"); and
(c) the negotiation, execution and delivery of definitive
documentation with respect to the Credit Facility consistent
with the Term Sheet, this Commitment Letter and otherwise
reasonably satisfactory to NationsBank and NMS.
NationsBank will act as Agent for the Credit Facility and NMS will act as
Arranger for the Credit Facility. No additional agents will be appointed without
the prior approval of NationsBank and NMS.
As consideration for the agreements of NationsBank and NMS hereunder, including,
without limitation, their respective agreements to underwrite, manage and
structure the Credit Facility and to provide advisory services in connection
therewith, you agree to pay, based upon your pro rata share, as set forth below,
to NationsBank and NMS the fees set forth in the Term Sheet and in the Fee
Letter. You agree that, once paid, such fees shall not be refundable under any
circumstances. All such fees shall be paid in immediately available funds.
It is understood and agreed that no Lender other than NationsBank, if any,
participating in the Credit Facility will receive compensation from you outside
the terms contained herein, in the Term Sheet and in the Fee Letter in order to
obtain its commitment. It is also understood and agreed that the amount and
distribution of the fees among the Lenders other than NationsBank, if any, will
be at the sole discretion of NationsBank and NMS and that any syndication prior
to execution of definitive documentation will reduce the commitment of
NationsBank.
The Commitment of NationsBank and NMS hereunder is based upon the financial and
other information regarding HoldCo and its subsidiaries and their respective
operations previously provided to NationsBank and NMS. If the continuing review
by NationsBank and NMS of HoldCo and its subsidiaries discloses information
relating to conditions or events not previously disclosed to NationsBank and NMS
or relating to new information or additional developments concerning conditions
or events previously disclosed to NationsBank and NMS, which NationsBank and NMS
in their reasonable judgment believe would reasonably be expected to have a
material adverse effect on the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise), results of
operations, cash flows or prospects of the Borrower and its subsidiaries, taken
as a whole since July 27, 1998, NationsBank and NMS may, in their reasonable
judgment, suggest alternative financing amounts or structures or decline to
participate in the proposed financing.
<PAGE> 4
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 4
In connection with the due diligence investigation of HoldCo and the Borrower,
you and your representatives have reviewed and analyzed certain information
furnished or made available by HoldCo and the Borrower, although neither you nor
your representatives have independently verified that all such information is
complete and correct in all material respects or that such information does not
contain material misstatements or that there are no material omissions
therefrom. Based on such information and analysis and subject to the foregoing
qualifications, you hereby represent and warrant, to your knowledge that (a) all
such information, other than Projections (as defined below), which has been or
is hereafter made available to us or the other Lenders by you or any of your
representatives in connection with the transactions contemplated hereby
("Information") has been or will be reviewed and analyzed by you in connection
with your own due diligence investigation and is now and as of the Closing (as
herein defined) as supplemented by you prior to the Closing, will be complete
and correct in all material respects and does not now and as of the Closing (as
supplemented by you prior to the Closing), will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained therein not misleading and (b) all financial projections
that have been or are hereafter made available to us or the other Lenders by you
or any of your representatives in connection with the Recapitalization (the
"Projections") have been or will be prepared in good faith based upon
assumptions believed by you to be reasonable (it being understood that the
Projections are subject to uncertainties and contingencies, many of which are
beyond the control of the Sponsors, HoldCo and the Borrower, and that no
assurance can be given that such Projections will be realized). You agree to
furnish, or cause HoldCo and the Borrower to furnish, us with such Information
and Projections as we may reasonably request and to supplement such Information
and such Projections from time to time until the initial funding of the Credit
Facility (the "Closing") so that the representation and warranty in the
preceding sentence is correct on the date of the Closing. You hereby covenant
that all Information that is hereafter made available to you by HoldCo and the
Borrower or any of their respective representatives in connection with the
Recapitalization and the Credit Facility will be reviewed and analyzed by you in
connection with performing your own due diligence investigation and you will
produce such analysis to NationsBank and NMS upon request. In arranging the
Credit Facility, we will be using and relying on the Information and the
Projections without independent verification thereof. The representations and
warranties contained in this paragraph shall remain effective until definitive
documentation for the Credit Facility is executed, and, thereafter, the
disclosure representations and covenants contained herein shall be superseded by
those contained in such definitive documentation; provided, that in the event
such definitive documentation is not executed, such representations and
warranties will remain in effect after the termination of commitments under this
Commitment Letter.
<PAGE> 5
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 5
By executing this Commitment Letter, each of you agrees, on a several (and not a
joint) basis to reimburse NationsBank and NMS promptly on demand for all
reasonable out-of-pocket costs and expenses incurred in connection with the
Credit Facilities and the preparation of the definitive documentation for the
Credit Facilities and the other transactions contemplated hereby, including, but
not limited to, reasonable travel expenses, the cost (including any "breakage
costs") of providing funds for making available the Credit Facilities on the
proposed closing date (if the Closing does not occur on the date specified by
the Sponsors as the closing date) and the reasonable fees, disbursements and
other charges of Fennebresque, Clark, Swindell & Hay, or its successor, as
counsel to NationsBank and NMS incurred hereunder or under the Commitment Letter
dated July 27, 1998 from NationsBank and NMS to the Sponsors (the "July
Commitment Letter").
Notwithstanding the immediately preceding paragraph, in the event that
NationsBank or NMS becomes involved in any capacity in any action, proceeding or
investigation in connection with any matter contemplated by this Commitment
Letter or the July Commitment Letter, each of you agrees, on a several (and not
a joint) basis, to reimburse NationsBank and NMS for their reasonable legal and
other out-of-pocket expenses (including the reasonable cost of any investigation
and preparation) as they are incurred by NationsBank or NMS. Each of you also
agrees, on a several (and not a joint) basis, to indemnify and hold harmless
NationsBank, NMS and their affiliates and their respective directors, officers,
employees and agents (the "Indemnified Parties") from and against any and all
losses, claims, damages and liabilities as the result of any actions of the
Sponsors, HoldCo, the Borrower and their respective affiliates, or as a result
of the Recapitalization or the Credit Facility, any representation of either of
the Sponsors contained in this Commitment Letter or the July Commitment Letter,
the funding of the Credit Facility or the use of proceeds under the Credit
Facility, unless and only to the extent that it shall be finally judicially
determined that such losses, claims, damages or liabilities resulted from the
gross negligence or willful misconduct of any Indemnified Party.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect until definitive financing documentation shall be executed and
delivered and notwithstanding the termination of this Commitment Letter or the
commitment of NationsBank and NMS hereunder, and each of you shall be deemed
released of your obligations under the immediately preceding two paragraphs upon
the execution of definitive financing documentation for the Credit Facility with
NationsBank pursuant to which the Borrower shall assume the obligations of the
Sponsors hereunder.
As described herein and in the Term Sheet, NMS will act as Arranger for the
Credit Facility. NationsBank reserves the right to allocate, in whole or in
part, to NMS certain fees payable to
<PAGE> 6
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 6
NationsBank in such manner as NationsBank and NMS may determine. Each of you
acknowledges and agrees that NationsBank may share with any of its affiliates
(including specifically NMS) any information relating to the Credit Facility,
the Borrower, the Sponsors, the Investors, and their subsidiaries and
affiliates.
This Commitment Letter may not be assigned by you without the prior written
consent of NationsBank and NMS (and any purported assignment in violation of the
foregoing shall be void).
All obligations of the Sponsors hereunder shall be several and not joint
obligations of each of them and shall be borne 48.235% by TA, 48.235% by GTCR
and 3.530% by NMS Capital; provided that if an Alternate Transaction (as defined
in the Fee Letter) occurs which does not include NMS Capital or any of its
affiliates as an Investor, such obligations shall be borne 50% by TA and 50% by
GTCR.
Except as required by applicable law, this Commitment Letter, the Term Sheet and
the Fee Letter and the contents hereof and thereof shall not be disclosed by you
to any third party, other than to your respective attorneys, financial advisors
and accountants, in each case to the extent necessary in your reasonable
judgment; provided, however, it is understood and agreed that after acceptance
of this Commitment Letter by each of you by execution in the space provided
below and by execution by each of you of the Fee Letter or with our prior
consent you may disclose the terms of this Commitment Letter to HoldCo and the
Borrower and their respective shareholders, attorneys, financial advisors and
accountants in connection with your offer to engage in the Recapitalization.
Without limiting the foregoing, in the event that either of you discloses the
contents of this Commitment Letter in contravention of the preceding sentence,
this Commitment Letter and the commitments set forth herein shall immediately
terminate.
This Commitment Letter may be executed in counterparts which, taken together,
shall constitute an original. Delivery of an executed counterpart of a signature
page of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter,
together with the Term Sheet and the Fee Letter, embodies the entire agreement
and understanding among NationsBank, NMS and each of you with respect to the
specific matters set forth herein and supersedes all prior agreements and
understandings relating to the subject matter hereof. No party has been
authorized by NationsBank or NMS to make any oral or written statements
inconsistent with this Commitment Letter. THIS COMMITMENT LETTER SHALL BE
GOVERNED BY
<PAGE> 7
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 7
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this Commitment Letter no later than 6:00 p.m. on January 18,
1999. This Commitment Letter will become effective upon your delivery to us of
executed counterparts of this Commitment Letter and the Fee Letter and, without
limiting the more specific terms hereof and of the Term Sheet, each of you agree
upon acceptance of this commitment to pay, based upon your pro rata share, as
set forth above, the fees set forth in the Term Sheet and in the Fee Letter.
This Commitment Letter and the commitments set forth herein shall terminate if
not so accepted by you prior to that time. Following acceptance by each of you,
this Commitment Letter and the commitments set forth herein will terminate on
June 30, 1999, unless the Closing has occurred by such date.
We look forward to working with you on this important transaction.
<PAGE> 8
Very truly yours,
NATIONSBANK, N.A.
By:
------------------------------
Title:
---------------------------
NATIONSBANC MONTGOMERY SECURITIES
LLC
By:
------------------------------
Title:
---------------------------
<PAGE> 9
ACCEPTED AND AGREED TO
on this ____ day of January, 1999:
TA/ADVENT VIII L.P.
By:
--------------------------------,
its General Partner
By:
--------------------------------
Title:
-----------------------------
ACCEPTED AND AGREED TO
on this ____ day of January, 1999:
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
By:
--------------------------------
Title:
-----------------------------
ACCEPTED AND AGREED TO
on this ____ day of January, 1999:
NMS CAPITAL, L.P.
By: NMS Capital Management LLC,
its General Partner
By:
--------------------------------
Title:
-----------------------------
<PAGE> 10
ANNEX I
AMERICAN PREPAID PROFESSIONAL SERVICES, INC.
$45,000,000 SENIOR SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS & CONDITIONS
BORROWER: American Prepaid Professional Services, Inc., a
Delaware corporation (the "Borrower"), a wholly owned
subsidiary of HoldCo (as defined below) consisting of
the dental HMO business of HoldCo.
RECAPITALIZATION: CompDent Corporation, a Delaware corporation
("HoldCo") intends to engage in a transaction in
which it is proposed that, pursuant to the Merger
Agreement (as defined below), TA/Advent VIII L.P.
("TA"), Golder, Thoma, Cressey, Rauner Fund V, L.P.
("GTCR") and NMS Capital, L.P. ("NMS Capital", and
together with TA and GTCR, the "Sponsors") and
certain affiliates of the Sponsors and other persons
arranged by the Sponsors (collectively with the
Sponsors, the "Investors") will effect the
recapitalization (the "Recapitalization") of HoldCo.
A portion of the financing with respect to the
Recapitalization will include (i) (A) not less than
$87.70 million (less any rollover shares in excess of
$3.0 million, such that the total amount of rollover
shares shall not exceed $10.0 million) to be provided
through the issuance and sale to the Investors (as
set forth in the Merger Agreement) of equity
securities of HoldCo having terms and conditions
reasonably acceptable to the Agent and NMS (each as
defined below) and (B) approximately $3.0 million to
be provided through the rollover of common stock of
HoldCo; provided, that the amount of the cash equity
investment shall be reduced by the value of any
common stock of HoldCo that is not converted into
cash pursuant to the Recapitalization in excess of
$3.0 million; provided, further that such cash equity
investment may not be reduced pursuant to the
foregoing proviso by more than $7.0 million
(collectively, the "HoldCo Equity Financing"), (ii)
the Borrower receiving aggregate proceeds of
approximately $100,000,000 aggregate principal amount
through the issuance of notes (the "Notes") pursuant
to either (A) a public or Rule 144A offering or (B) a
privately-placed bridge financing, (the "Bridge
Notes") on terms and conditions reasonably
satisfactory to the Agent (it being understood that
the terms and conditions set forth in the Bridge
Commitment Letter dated January 18, 1999 including
the exhibits thereto, are satisfactory to the Agent),
(iii) the Borrower borrowing up to $26,924,000 under
the Credit Facilities described below and (iv) Dental
Health Management, Inc., a wholly owned subsidiary of
HoldCo consisting of the
<PAGE> 11
dental practice management business of HoldCo
("DHMI"), borrowing $20,000,000 under a senior
secured credit facility (the "DHMI Credit Facility").
After consummation of the Recapitalization, the
Investors will own at least 70% of the voting equity
of HoldCo.
The Recapitalization will be consummated pursuant to
the Amended and Restated Agreement and Plan of Merger
dated as of January 18, 1999 among TAGTCR
Acquisition, Inc., NMS Capital, GTCR, TA and HoldCo
and the other the definitive documentation relating
thereto being satisfactory to the Agent and NMS, in
their reasonable discretion, (including all schedules
thereto, exhibits thereto and related documentation,
the "Merger Agreement"). The approximate sources and
uses of the funds necessary to consummate the
Recapitalization are set forth on Addendum I attached
hereto.
GUARANTORS: The Credit Facilities shall be irrevocably and
unconditionally guaranteed by HoldCo and all domestic
subsidiaries of the Borrower existing upon
consummation of the Recapitalization or thereafter
acquired, except to the extent that (i) issuing any
such guarantee by any such subsidiary is subject to
regulatory restriction and approval and (ii) such
subsidiary is not required to guarantee the Bridge
Notes (together, the "Guarantors"). All guarantees
shall be guarantees of payment and not of collection.
AGENT: NationsBank, N.A. (the "Agent" or "NationsBank") will
act as sole and exclusive administrative and
collateral agent. As such, NationsBank will negotiate
with the Borrower, act as the primary contact for the
Borrower and perform all other duties associated with
the role of exclusive administrative agent. No other
agents or co-agents may be appointed without the
prior written consent of NationsBank and NMS.
ARRANGER &
SYNDICATION AGENT: NationsBanc Montgomery Securities LLC ("NMS").
LENDERS: A syndicate of financial institutions (including
NationsBank) arranged by NMS, which institutions
shall be reasonably acceptable to the Borrower
(collectively, the "Lenders").
CREDIT FACILITIES: An aggregate principal amount of up to $45,000,000
will be available under the conditions herein set
forth:
- 2 -
<PAGE> 12
Revolving Credit Facility: $20,000,000 revolving
credit facility, all of which may be utilized for the
issuance of standby and commercial letters of credit
(each a "Letter of Credit"). Letters of Credit will
be issued by NationsBank (in such capacity, the
"Fronting Bank"), and each Lender will purchase an
irrevocable and unconditional participation in each
Letter of Credit.
Term Loan Facility: $25,000,000 term loan facility.
The Term Loan Facility and the Revolving Credit
Facility are referred to herein collectively as the
"Credit Facilities."
PURPOSE: The proceeds of the Credit Facilities shall be used:
(i) to fund a portion of the Recapitalization,
including, but not limited to, the refinancing of
indebtedness of HoldCo outstanding on the Closing;
(ii) to pay a portion of the fees and expenses
incurred in connection with the Recapitalization up
to an amount to be agreed upon; and (iii) to provide
for working capital and general corporate purposes of
the Borrower and its subsidiaries; provided, that
proceeds of the Revolving Credit Facility may be used
to fund acquisitions by the Borrower only if after
giving effect to any such acquisitions and use of
proceeds, the Borrower is in pro forma compliance
with the financial covenants contained in the
definitive documentation with respect to the Credit
Facilities.
INTEREST RATES: The Credit Facilities shall bear interest as set
forth on Addendum II attached hereto.
AVAILABILITY: Revolving Credit Facility: Loans under the Revolving
Credit Facility ("Revolving Loans") may be made, and
Letters of Credit may be issued, at any time prior to
the Revolving Credit Maturity Date, provided that the
outstanding principal amount of the Revolving Loans
and the Letter of Credit Exposure shall not exceed
the total commitments under the Revolving Credit
Facility. Amounts repaid under the Revolving Credit
Facility may be reborrowed.
"Letter of Credit Exposure" means an amount equal to
the sum of (i) the aggregate undrawn amount of all
outstanding Letters of Credit and (ii) the total
amount of any unreimbursed drawings on Letters of
Credit.
Term Loan Facility: Loans under the Term Loan
Facility ("Term Loans", together with the Revolving
Loans, the "Loans") will be
- 3 -
<PAGE> 13
available in a single borrowing at the closing of the
Recapitalization (the "Closing"). Amounts repaid
under the Term Loan Facility may not be reborrowed.
MATURITY/SCHEDULED
AMORTIZATION: Revolving Credit Facility: The Revolving Credit
Facility shall terminate and all amounts outstanding
thereunder shall be due and payable in full five
years from the Closing (the "Revolving Credit
Maturity Date").
Term Loan Facility: The Term Loan Facility will be
subject to quarterly amortization, commencing at the
end of the third quarter after the Closing, of
principal, based upon the annual amounts set forth
below, with the final payment of all amounts
outstanding being due and payable five years from
Closing:
<TABLE>
<CAPTION>
==========================================
LOAN YEAR TERM LOAN A
==========================================
<S> <C>
1 $2,500,000
------------------------------------------
2 3,750,000
------------------------------------------
3 5,000,000
------------------------------------------
4 6,250,000
------------------------------------------
5 7,500,000
==========================================
</TABLE>
SECURITY: Concurrently with the Recapitalization, the Agent (on
behalf of the Lenders) shall receive a first priority
perfected security interest in (i) 100% of the
outstanding common stock of the Borrower and each of
the existing or subsequently acquired or organized
subsidiaries (direct or indirect) of the Borrower
(which pledge, in the case of any foreign subsidiary,
shall be limited to 65% of the capital stock of such
foreign subsidiary to the extent, and for so long as,
the pledge of any greater percentage would have
adverse tax consequences for the Borrower), and (ii)
all present and future intercompany notes evidencing
indebtedness between the Borrower and its
subsidiaries. The foregoing pledges and security
interests will be created on terms, and pursuant to
customary documentation, satisfactory to the Agent,
and none of the foregoing security (the "Collateral")
will be subject to any other lien or encumbrance. The
Collateral will
- 4 -
<PAGE> 14
ratably secure the Credit Facilities and any interest
rate swap or similar agreements with a Lender under
the Credit Facilities.
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the amortization set forth above, the
Credit Facilities will be prepaid by an amount equal
to: (a) 100% of the net cash proceeds, including
insurance and condemnation proceeds, of all
non-ordinary-course asset sales or other dispositions
of property by the Borrower or any subsidiary
(including stock of subsidiaries), subject to limited
exceptions and reinvestment provisions to be agreed
upon and net of selling expenses and taxes to the
extent such taxes are paid; (b) 50% of Excess Cash
Flow (to be defined) pursuant to an annual cash sweep
arrangement; (c) 100% of the net cash proceeds from
the issuance of any debt by the Borrower or any
subsidiary, subject to limited exceptions to be
agreed upon (which exceptions shall include the
indebtedness of the Borrower issued to repay the
Bridge Notes, if any); (d) 50% of the net cash
proceeds from the issuance of equity by the Borrower
or any of its subsidiaries, subject to limited
exceptions to be agreed upon; and (e) if the ratio of
Senior Debt (determined immediately prior to such
repayment) to EBITDA shall exceed an agreed amount,
an amount equal to 100% of any net cash proceeds
pursuant to the sale of DHMI in excess of the amount
required to prepay the DHMI Credit Facility (less
reasonable reserves retained to satisfy liabilities
of DHMI, if any); provided, that, after the Term
Loans have been repaid to less than 50% of their
original principal amount, the prepayments set forth
in clauses (b) and (d) shall not be required.
Mandatory prepayments shall be applied pro rata to
reduce the Term Loans with respect to each remaining
installment of principal. In the event the Term Loan
Facility shall have been completely prepaid, the
mandatory prepayments described in clauses (a) and
(c) above shall be applied first, to prepay the
outstanding principal amount of any Revolving Loans
and second, to cash collateralize any outstanding
Letter of Credit Exposure, and in each case to
permanently reduce the amount available under the
Revolving Credit Facility.
If the outstanding principal amount of the Revolving
Loans and Letter of Credit Exposure at any time
exceeds the total commitments under the Revolving
Credit Facility, the Borrower
- 5 -
<PAGE> 15
shall immediately make a prepayment in the amount of
the excess.
OPTIONAL PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Credit Facilities in
whole or in part at any time without premium or
penalty, subject to reimbursement of the Lenders'
breakage and redeployment costs in the case of
prepayment of LIBOR borrowings.
All optional prepayments of the Term Loan Facility
shall be applied pro rata with respect to each
remaining installment of principal (except for
prepayments in an aggregate amount to be agreed upon,
which may be applied in direct order of maturity).
The Borrower may reduce the unused commitments under
the Revolving Credit Facility in whole or in part at
any time without penalty.
CONDITIONS PRECEDENT
TO CLOSING: The obligations of each Lender to make the initial
funding of each of the Revolving Loans and the Term
Loans will be subject to usual and customary closing
conditions for transactions of this type, including,
without limitation, the following:
(i) The negotiation, execution and delivery of
definitive documentation with respect to the Credit
Facilities satisfactory to NMS, the Agent and the
Lenders.
(ii) The HoldCo Equity Financing and the Notes shall
have been consummated and issued, respectively, on
terms reasonably satisfactory to the Agent and all
conditions precedent to the issuance thereof shall
have been satisfied or, with the prior approval of
the Agent (such approval not to be unreasonably
withheld), waived; and the Recapitalization shall
have been consummated pursuant to the Merger
Agreement, and all conditions precedent to the
consummation of the Recapitalization shall have been
satisfied or, with the prior approval of the Agent
(such approval not to be unreasonably withheld),
waived.
(iii) The corporate, capital and ownership structure
(including articles of incorporation and by-laws),
shareholders' agreements and management of the
Borrower and its subsidiaries (after giving effect to
the Recapitalization) shall be reasonably
satisfactory to the Agent in all respects.
- 6 -
<PAGE> 16
(iv) The Agent shall have received and, in each case,
be reasonably satisfied with all audited, unaudited
and pro forma financial statements of the Borrower
and its subsidiaries and all probable and pending
acquisitions meeting the requirements of Regulation
S-X under the Securities Act of 1933, as amended,
applicable to a Registration Statement under such Act
on Form S-1, which financial statements shall include
the audited financial statements for the Borrower's
most recently completed fiscal year. The Borrower's
financial statement for the most recently completed
twelve month period shall have evidenced to the
Agent's reasonable satisfaction a ratio of total debt
to EBITDA (determined on a pro forma basis after
giving effect to the Recapitalization) not in excess
of 5.5 to 1.
(v) No material adverse change shall have occurred
since December 31, 1997, in the business, assets,
liabilities (actual or contingent), results of
operations, cash flows, operations, condition
(financial or otherwise) or prospects of HoldCo and
its subsidiaries, taken as a whole, or the Borrower
and its subsidiaries, taken as a whole (determined on
a pro forma basis), and there shall exist no
conditions, events or occurrences that, individually
or in the aggregate, would reasonably be expected to
result in such a material adverse change (any of the
foregoing, a "Material Adverse Change").
(vi) The Agent shall have received certification as
to the financial condition and solvency of HoldCo,
the Borrower and their respective subsidiaries (after
giving effect to the Recapitalization) from an
independent firm acceptable to the Agent.
(vii) The Agent shall have received (A) reasonably
satisfactory opinions of counsel to HoldCo, the
Borrower and the Guarantors of the Credit Facilities
(which shall cover, among other things, authority,
legality, validity, binding effect and enforceability
of the documents for the Credit Facilities) and such
corporate resolutions, certificates and other
documents as the Agent shall reasonably require and
(B) satisfactory evidence that the Agent (on behalf
of the Lenders) holds a perfected, first priority
lien in all Collateral for the Credit Facilities,
subject to no other liens except for permitted liens
to be determined.
(viii) HoldCo, the Borrower and their respective
subsidiaries shall have received all governmental,
shareholder and third-party consents (including
Hart-Scott-Rodino clearance) and approvals necessary
in connection with the Recapitalization, the Credit
- 7 -
<PAGE> 17
Facilities and the pledge of the Collateral for the
Credit Facilities and the other transactions
contemplated hereby; all such consents and approvals
shall be in full force and effect; all applicable
waiting periods shall have expired without any action
being taken by any authority that restrains, prevents
or imposes any material adverse conditions on the
Recapitalization or such other transactions or that
could reasonably be expected to seek or threaten any
of the foregoing; and no law or regulation or
condition shall be applicable which in the reasonable
judgment of the Agent could have such effect.
(ix) There shall not exist (A) any order, decree,
judgment, ruling or injunction which restrains the
consummation of the Recapitalization in the manner
contemplated by the Merger Agreement, or the related
financings and (B) any pending or threatened action,
suit, investigation or proceeding which, if adversely
determined, could reasonably be expected to
materially adversely affect the ability of HoldCo,
the Borrower or any Guarantors of the Credit
Facilities to perform any of their respective
obligations under the definitive documentation
relating thereto or the ability of the Lenders to
exercise their rights thereunder.
(x) (A) Receipt of all fees and expenses payable to
the Agent, NMS and/or the Lenders and (B) neither of
the Sponsors shall be in breach or violation of any
of its obligations under the Fee Letter or Commitment
Letter, and each such letter shall be in full force
and effect.
CONDITIONS
PRECEDENT TO
ALL BORROWINGS: Usual and customary for transactions of this type,
including without limitation, delivery of borrowing
certificate, accuracy of representations and
warranties and absence of defaults.
REPRESENTATIONS &
WARRANTIES: Usual and customary for transactions of this type, to
include without limitation: (i) corporate status;
(ii) corporate power and authority/enforceability;
(iii) no violation of law or contracts or
organizational documents; (iv) no material
litigation, proceeding or investigation; (v)
correctness of specified financial statements; (vi)
no Material Adverse Change; (vii) absence of
undisclosed liabilities, whether actual or
contingent; (viii) receipt of all required
governmental or third party approvals; (ix) use of
proceeds/compliance with margin regulations; (x)
status under
- 8 -
<PAGE> 18
Investment Company Act; (xi) ERISA and labor matters;
(xii) environmental matters; (xiii) perfected liens
and security interests; (xiv) payment of taxes; (xv)
status of material agreements, relationships and
commercial arrangements; (xvi) title to assets,
including intellectual property; (xvii) no
infringement of third party intellectual property
rights; (xviii) solvency; (xix) compliance with laws
and regulations and (xx) consummation of the
Recapitalization.
COVENANTS: Usual and customary for transactions of this type, to
include without limitation: (i) delivery of financial
statements and other reports; (ii) delivery of
compliance certificates and other information; (iii)
notices of default, material litigation, material
governmental and environmental proceedings and other
material events; (iv) compliance with laws; (v)
payment of taxes; (vi) maintenance of insurance and
limitations on use of casualty and condemnation
proceeds; (vii) environmental and ERISA covenants;
(viii) limitation on liens; (ix) limitations on
mergers, consolidations and dispositions of assets;
(x) limitation on acquisitions, subject to permitted
acquisition exceptions of $20,000,000 in the
aggregate and $10,000,000 for any single acquisition;
(xi) limitation on incurrence of debt; (xii)
limitations on issuance of equity and equity
equivalents, subject to mandatory prepayment
requirements; (xiii) limitations on dividends,
redemptions or other acquisition of capital stock or
equivalents and the redemption and/or prepayment of
other debt; (xiv) limitation on investments; (xv)
limitations on transactions with and payments to
affiliates; (xvi) limitations on amendments to
material agreements and instruments; (xvii)
limitation on nature of business conducted; and
(xviii) limitation on capital expenditures.
The loan documents shall require the Borrower, within
90 days after the Closing, to enter into interest
rate protection agreements on terms acceptable to the
Agent for a portion of the Credit Facilities to be
agreed upon and to maintain such agreements in effect
for a period to be agreed upon.
Financial covenants to be:
- Maintenance on a rolling four quarter basis of a
Maximum Leverage Ratio (Total Debt/EBITDA);
- Maintenance on a rolling four quarter basis of a
Minimum Fixed Charge Coverage Ratio (EBITDA less
Capital
- 9 -
<PAGE> 19
Expenditures/Interest Expense plus Scheduled
Principal Repayments plus Cash Dividends plus Cash
Taxes);
- Maintenance on a rolling four quarter basis of an
Interest Coverage Ratio (EBITDA/Interest Expense);
and
The defined terms relating to the above-listed
financial covenants are contained in Addendum III
attached hereto. Projected levels and step-down dates
for the above-described financial covenants are set
forth in Addendum IV attached hereto. Such levels are
based upon the financial information available to the
Sponsors, the Agent and NMS on the date hereof and it
is their intention that the definitive documentation
for the Credit Facilities will contain such levels
and step-down dates; provided, however, that such
levels and step-down dates are subject to
modification in the event additional financial
information becomes available to the Sponsors, the
Agent and NMS which in the reasonable business
judgment of such parties may require the modification
thereof, any such modifications to be agreed upon by
the Sponsors, the Agent and NMS.
EVENTS OF DEFAULT: Usual and customary in transactions of this nature,
and to include, without limitation: (i) nonpayment of
principal, interest, fees or other amounts; (ii)
violation of covenants; (iii) inaccuracy of
representations and warranties; (iv) cross-default to
other material indebtedness and agreements; (v)
bankruptcy events; (vi) material judgments; (vii)
ERISA, intellectual property and environmental
events; (viii) actual or asserted invalidity of any
loan documents or security interests; (ix) change in
material agreements, licenses, qualifications or
relationships that, in light of all the then existing
circumstances, could reasonably be expected to have a
material adverse effect on HoldCo, the Borrower and
their respective subsidiaries, taken as a whole; or
(x) Change in Control (to be defined), in each case
subject to appropriate grace periods, dollar
thresholds and/or other exceptions, as applicable.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments in
minimum principal amounts of $5,000,000 to other
financial institutions approved by the Borrower and
the Agent, which approval shall not be unreasonably
withheld. Lenders will be permitted to sell
participations with voting rights limited to
significant matters such as changes in amount, rate
and maturity date.
- 10 -
<PAGE> 20
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the
credit agreement and other definitive credit
documentation will require the approval of Lenders
holding Loans, Letter of Credit Exposure and unused
commitments representing at least a majority of the
aggregate amount of Loans, Letter of Credit Exposure
and unused commitments under the Credit Facilities,
except that (i) the consent of all the Lenders
affected thereby shall be required with respect to
(a) reductions of principal, interest, or fees and
(b) extensions of scheduled maturities or times for
payment, (ii) the consent of all the Lenders shall be
required with respect to (a) increases in commitment
amounts, (b) releases of all or substantially all
collateral and (c) releases of all or substantially
all Guarantors, and (iii) any waiver of the
conditions to funding any Loan or issuance of a
Letter of Credit under the Revolving Credit Facility
shall require the consent of Lenders holding at least
a majority of the outstanding Loans and unused
commitments under the Revolving Credit Facility.
INDEMNIFICATION: HoldCo and the Borrower shall indemnify, jointly and
severally, each Lender from and against all losses,
liabilities, claims, damages or expenses relating to
any matter contemplated by the Commitment Letter or
the Commitment Letter dated July 27, 1998 from the
Sponsors to NationsBank and NMS, its Loans, the
Borrower's use of Loan proceeds or the commitments,
including but not limited to reasonable attorneys'
fees and settlements costs, in each case to the
extent not attributable to such person's gross
negligence or willful misconduct.
CLOSING: On or before June 30, 1999.
GOVERNING LAW: New York.
WAIVER OF
JURY TRIAL: HoldCo, the Borrower, the Agent, NMS and the Lenders
shall waive their right to a trial by jury.
FEES/EXPENSES: As outlined in Addendum II attached hereto.
OTHER: This term sheet is intended as an outline only and
does not purport to summarize all the conditions,
covenants, representations, warranties and other
provisions which would be contained in definitive
legal documentation for the Credit Facilities
contemplated hereby.
- 11 -
<PAGE> 21
ADDENDUM I
COMPDENT CORPORATION RECAPITALIZATION
SOURCES AND USES OF FUNDS
(IN MILLIONS OF DOLLARS)
(ALL FIGURES ARE APPROXIMATE)
<TABLE>
<CAPTION>
Uses of Funds Sources of Funds
- ------------- -----------------
<S> <C> <C> <C>
Purchase of Equity/Management DHMI Credit Facility $ 20.000
Rollover $151.689 Revolving Loan 1.924
Repayment of Net Debt 56.481 Term Loan 25.000
Option Spread 1.128 Notes 100.000
DHDC Liability 15.325 Convertible Preferred Stock
Transaction Expenses 13.000 and/or Common Equity 87.700
Management Equity Rollover 03.000
-------- --------
TOTAL USES $237.624 TOTAL SOURCES $237.624
======== ========
</TABLE>
- i -
<PAGE> 22
ADDENDUM II
INTEREST RATES, FEES AND EXPENSES
INTEREST RATES: The applicable interest rate margins for the
Credit Facilities, for any fiscal quarter, will be
the applicable interest rate per annum and Commitment
Fee set forth in the table below opposite the ratio
of Funded Debt to EBITDA determined as of the last
day of the immediately preceding fiscal quarter on a
rolling four quarter basis:
<TABLE>
<CAPTION>
=========================================================================
Revolving Loans and
Term A Loans
-------------------
Funded Debt Commitment
to EBITDA Fee
Alternate
LIBOR Base Rate
-------------------------------------------------------------------------
<S> <C> <C> <C>
> 5.00 to 1.0 250 bps 150 bps 50 bps
-
-------------------------------------------------------------------------
< 5.00 to 1.0 225 bps 125 bps 50 bps
but
> 4.25 to 1.0
-
------------------------------------------------------------------------
< 4.25 to 1.0 200 bps 100 bps 37.5 bps
but
> 3.5 to 1.0
-
------------------------------------------------------------------------
< 3.50 to 1.0 175 bps 75 bps 37.5 bps
========================================================================
</TABLE>
The Borrower may select interest periods of 1, 2, 3
or 6 months for LIBOR Loans, subject to availability.
Calculation of interest shall be on the basis of
actual number of days elapsed in a year of 360 days
(or 365 or 366 days, as the case may be, in the case
of Alternate Base Rate Loans based on the Prime Rate)
and interest shall be payable at the end of each
interest period and, in any event, at least every 3
months.
"LIBOR" means the London Interbank Offered Rate as
determined by the Agent for the applicable interest
period, at all times including statutory reserves.
"Alternate Base Rate" is the higher of (i) the
Federal Funds Effective Rate plus 0.50% and (ii)
NationsBank's Prime Rate.
A penalty rate shall apply on all Loans in the event
of and during the continuance of an Event of Default
relating to the payment of
- i -
<PAGE> 23
any amount due in respect of the Credit Facilities at
a rate per annum of 2% above the applicable interest
rate.
COMMITMENT FEE: 0.50%, per annum, and after the Closing, pursuant to
the pricing grid set forth above, (calculated on the
basis of actual number of days elapsed in a year of
360 days) on the unused portion of the commitments in
respect of the Credit Facilities, commencing to
accrue on October 25, 1998, payable upon the Closing
and thereafter quarterly in arrears.
COST AND YIELD
PROTECTION: The usual for transactions and facilities of this
type, including, without limitation, in respect of
prepayments, changes in capital adequacy and capital
requirements or their interpretation, illegality,
unavailability and reserves without proration or
offset (subject to the option of the Borrower to
arrange the replacement (at par plus accrued
interest) of a Lender seeking reimbursement for
certain of such costs pursuant to a provision to be
agreed upon). In addition to, and not in limitation
of, the foregoing, if any breakage costs, charges or
fees are incurred with respect to LIBOR Loans during
the 180-day period following the Closing on account
of the syndication of the Credit Facilities, the
Borrower shall immediately reimburse the Agent for
any such costs, charges or fees.
LETTER OF
CREDIT FEES: Letter of Credit fees will be due quarterly in
arrears and will be equal to the interest rate spread
on LIBOR Loans under the Revolving Credit Facility on
a per annum basis. Of such Letter of Credit fees, a
fronting fee of 0.125% per annum will be allocated to
NationsBank, as Fronting Bank, for its own account
and the balance will be shared proportionately by the
Lenders, including NationsBank. Fees for commercial
Letters of Credit will be calculated on the aggregate
stated amount for each such Letter of Credit. Fees
for standby Letters of Credit will be calculated on
the aggregate average daily outstanding stated amount
of all such Letters of Credit for the relevant
period.
EXPENSES: Borrower will pay, or reimburse the Sponsors for
payment of, all reasonable costs and expenses
associated with the preparation, due diligence,
administration, syndication and enforcement of all
documents executed in connection with the Credit
Facilities, including without limitation, the
reasonable legal fees of the Agent's counsel
regardless of whether or not the Credit Facilities
are closed.
- ii -
<PAGE> 24
ADDENDUM III
FINANCIAL DOCUMENTS
DEFINED TERMS
"Capital Lease" shall mean, as applied to any person, any lease of any
Property (whether real, personal or mixed) by that person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of such person.
"Capital Stock" shall mean (a) in the case of a corporation, capital
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (c) in the case of a partnership, partnership interests (whether
general or limited), (d) in the case of a limited liability company, membership
interests, (e) any other interest or participation that confers on a person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing person and (f) all rights to purchase, warrants, options
and other securities exercisable for, exchangeable for or convertible into any
of the foregoing.
"Consolidated Capital Expenditures" shall mean, for any period, the sum
of all amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment and other capital expenditures on a consolidated
statement of cash flows for the Borrower and its Consolidated Subsidiaries
during such period (including the amount of assets leased under any Capital
Lease). Notwithstanding the foregoing, the term "Consolidated Capital
Expenditures" shall not include capital expenditures in respect of the
reinvestment of insurance proceeds and condemnation awards received by the
Borrower and its Subsidiaries to the extent that such reinvestment is permitted
under the Credit Documents.
"Consolidated Cash Dividends" shall mean, for any period, the aggregate
amount of all dividends or distributions paid in cash in respect of Capital
Stock by the Borrower during such period.
"Consolidated Cash Interest Expense" shall mean, for any period, the
gross amount of interest expense of the Borrower and its Consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP, during
such period, including (a) the portion of any payments or accruals with respect
to Capital Leases that are allocable to interest expense in accordance with
GAAP, (b) net costs under Interest Rate Protection Agreements during such
period, (c) all fees, charges, discounts and other costs paid in respect of
Indebtedness during such period; provided that (i) all non-cash interest expense
shall be excluded and (ii) any interest on Indebtedness of another person that
is guaranteed by the Borrower or any of its Consolidated Subsidiaries or secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien on, or payable out of the
proceeds of the sale of or production from, assets of the Borrower or any of its
Consolidated Subsidiaries (whether or not such guarantee or Lien is called upon)
shall be included.
- i -
<PAGE> 25
"Consolidated Cash Taxes" shall mean, for any period, the aggregate
amount of all taxes of the Borrower and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, to the extent the
same are paid in cash by the Borrower or any of its Consolidated Subsidiaries
during such period directly or paid by the Borrower during such period
indirectly through Permitted Tax Dividends.
"Consolidated EBITDA" shall mean, for any period, the sum of (a)
Consolidated Net Income for such period, plus (b) an amount which, in the
determination of Consolidated Net Income for such period, has been deducted for
(i) interest expense, (ii) total federal, state, local and foreign income, value
added and similar taxes, (iii) depreciation and amortization expense and (iv)
other non-cash charges or non-cash losses, minus (c) an amount which, in the
determination of Consolidated Net Income for such period, has been added for (i)
interest income (except for interest earned on funds required to be held on
deposit by regulatory authorities) and (ii) any non-cash income or non-cash
gains, all as determined in accordance with GAAP.
"Consolidated Fixed Charges" shall mean, for any period, the sum of (a)
Consolidated Cash Interest Expense for such period plus (b) Consolidated
Scheduled Debt Payments for such period plus (c) Consolidated Cash Dividends for
such period plus (d) Consolidated Cash Taxes for such period.
"Consolidated Net Income" shall mean, for any period, net income (or
loss) after taxes of the Borrower and its Consolidated Subsidiaries, determined
on a consolidated basis in accordance with GAAP, for such period.
"Consolidated Scheduled Debt Payments" shall mean, for any period, with
respect to the Borrower and its Consolidated Subsidiaries on a consolidated
basis, the sum of all scheduled payments of principal on Funded Indebtedness for
such period (including the principal component of payments due on Capital Leases
during such period, but excluding payments due on Revolving Loans during such
period); provided that Consolidated Scheduled Debt Payments shall not include
voluntary prepayments of Funded Indebtedness, mandatory prepayments required
pursuant to Section 3.3(b) or other mandatory prepayments of Funded
Indebtedness; provided, further, that for purposes of calculating covenants for
measurement periods including any of the first four fiscal quarters of the
Borrower occurring immediately after the Closing, Consolidated Scheduled Debt
Payments for such fiscal quarters shall be deemed to equal $625,000.00.
"Consolidated Subsidiaries" of any person shall mean all subsidiaries
of such person that should be consolidated with such person for financial
reporting purposes in accordance with GAAP.
"Disqualified Stock" of any person shall mean (a) any Capital Stock
(other than Preferred Stock of HoldCo issued in connection with the
Recapitalization) of such person which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
- ii -
<PAGE> 26
mandatorily redeemable or subject to any mandatory repurchase requirement,
pursuant to a sinking fund obligation or otherwise, (ii) is convertible into or
exchangeable or exercisable for Indebtedness or Disqualified Stock or (iii) is
redeemable or subject to any repurchase requirement arising at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Maturity Date and (b) if such person is a Subsidiary of the
Borrower, any Preferred Stock of such person.
"Fixed Charge Coverage Ratio" shall mean, as of any day, the ratio of
(a) Consolidated EBITDA for the period of four consecutive fiscal quarters of
the Borrower ending on, or most recently preceding, such day, minus Consolidated
Capital Expenditures for such period (other than any thereof financed by
Indebtedness) to (b) Consolidated Fixed Charges for such period.
"Funded Indebtedness" shall mean, with respect to any person, without
duplication, (a) all Indebtedness of such person, (b) all Indebtedness of
another person of the type referred to in clause (a) above secured by (or for
which the holder of such Funded Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, Property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (c) all Guaranty Obligations of
such person with respect to Indebtedness of the type referred to in clause (a)
above of another person and (d) Indebtedness of the type referred to in clause
(a) above of any partnership or unincorporated joint venture in which such
person is general partner or for which such person is otherwise legally
obligated or has a reasonable expectation of being liable with respect thereto.
"GAAP" shall mean generally accepted accounting principles in the
United States applied on a consistent basis.
"Guaranty Obligations" shall mean, with respect to any person, without
duplication, any obligations of such person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other person in
any manner, whether direct or indirect, and including any obligation, whether or
not contingent, (a) to purchase any such Indebtedness or any Property
constituting security therefor, (b) to advance or provide funds or other support
for the payment or purchase of any such Indebtedness or to maintain working
capital, solvency or other balance sheet condition of such other person
(including keep well agreements, maintenance agreements, comfort letters or
similar agreements or arrangements) for the benefit of any holder of
Indebtedness of such other person, (c) to lease or purchase Property, securities
or services primarily for the purpose of assuring the holder of such
Indebtedness against loss in respect thereof or (d) to otherwise assure or hold
harmless the holder of such Indebtedness against loss in respect thereof. For
purposes hereof, the amount of any Guaranty Obligation shall (subject to any
limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
- iii -
<PAGE> 27
"Indebtedness" of any person shall mean (a) all obligations of such
person for borrowed money, (b) all obligations of such person evidenced by
bonds, debentures, notes or similar instruments, or upon which interest payments
are customarily made, (c) all obligations of such person under conditional sale
or other title retention agreements relating to Property purchased by such
person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of business), (d)
all obligations of such person issued or assumed as the deferred purchase price
of property or services purchased by such person (other than trade debt incurred
in the ordinary course of business and due within six (6) months of the
incurrence thereof) which would appear as liabilities on a balance sheet of such
person, (e) all obligations of such person under take-or-pay or similar
arrangements or under commodities agreements, (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such person, whether
or not the obligations secured thereby have been assumed, (g) all Guaranty
Obligations of such person, (h) the principal portion of all obligations of such
person under Capital Leases, (i) all obligations of such person under Interest
Rate Protection Agreements or foreign currency exchange agreements, (j) the
maximum amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (k) all Disqualified Stock
of such person, and (l) the Indebtedness of any partnership or unincorporated
joint venture in which such person is a general partner or a joint venturer.
"Interest Coverage Ratio" shall mean, as of any day, the ratio of (a)
Consolidated EBITDA for the period of four consecutive fiscal quarters of the
Borrower ending on, or most recently preceding, such last day to (b)
Consolidated Cash Interest Expense for such period.
"Interest Rate Protection Agreement" shall mean any interest rate swap,
collar, cap or other arrangement requiring payments contingent upon interest
rates.
"Leverage Ratio" shall mean, as of any day, the ratio of (a) Total Debt
as of such day to (b) Consolidated EBITDA for the period of four consecutive
fiscal quarters of the Borrower ending on, or most recently preceding, such day.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
easement, assignment, deposit arrangement, restriction, restrictive covenant,
lease, sublease, option, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the Uniform
Commercial Code as adopted and in effect in the relevant jurisdiction or other
similar recording or notice statute, and any lease in the nature thereof).
"Permitted Tax Dividends" shall mean any distribution made by the
Borrower to HoldCo for purposes of HoldCo paying taxes on a consolidated basis,
the amount of any such distribution to be equal to the tax liability of the
Borrower as a single entity.
- iv -
<PAGE> 28
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Senior Debt" shall mean the aggregate of all Indebtedness of the
Borrower arising under the Credit Facilities.
"Senior Debt Ratio" shall mean, as of any day, the ratio of (a) Senior
Debt to (b) Consolidated EBITDA.
"Subsidiary" shall mean, as to any person, (a) any corporation more
than 50% of whose Capital Stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person directly or
indirectly through Subsidiaries, and (b) any partnership, association, joint
venture, limited liability company or other business entity in which such person
directly or indirectly through Subsidiaries has more than 50% of the equity
interests at any time.
"Total Debt" shall mean, as of any day, the total amount of Funded
Indebtedness of the Borrower and its Consolidated Subsidiaries on a consolidated
basis as of such day.
- v -
<PAGE> 29
ADDENDUM IV
FINANCIAL COVENANT LEVELS
<TABLE>
<CAPTION>
================================================================================
Ratio Approximate Reset Date
------------------------------------------
From and
After
Closing 1/1/00 1/1/01 1/1/02
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Debt to EBITDA 5.75 5.25 4.75 4.5
- --------------------------------------------------------------------------------
Interest Coverage 1.6 1.75 1.9 2.1
- --------------------------------------------------------------------------------
Fixed Charge Coverage 1.0 1.1 1.1 1.1
================================================================================
</TABLE>
- i -
<PAGE> 1
EXHIBIT (a)(4)
January 18, 1999
TA/Advent VIII L.P.
c/o TA Associates, Inc.
High Street Tower, Suite 2500
125 High Street
Boston, Massachusetts 02110
Attn.: Mr. Roger Kafker
Golder, Thoma, Cressey, Rauner Fund V, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attn.: Mr. Don Edwards
NMS Capital, L.P.
9 West 57th Street
New York, New York 10019
Attn.: Mr. Paul Lattanzio
Re: Recapitalization Financing Commitment Letter
Ladies and Gentlemen:
You have advised us that CompDent Corporation, a Delaware corporation ("HoldCo")
intends to engage in a transaction in which it is proposed that, pursuant to the
Merger Agreement (as defined below), TA/Advent VIII L.P. ("TA"), Golder, Thoma,
Cressey, Rauner Fund V, L.P. ("GTCR") and NMS Capital, L.P. ("NMS Capital", and
together with TA and GTCR, the "Sponsors") and certain affiliates of the
Sponsors and other persons arranged by the Sponsors (collectively with the
Sponsors, the "Investors") will effect the recapitalization (the
"Recapitalization") of HoldCo. We understand that a portion of the financing
with respect to the Recapitalization will include (i) (A) not less than $87.70
million (less any rollover shares in excess of $3.0 million, such that the total
amount of rollover shares shall not exceed $10.0 million) to be provided through
the issuance and sale to the Investors (as set forth in the Merger Agreement) of
equity securities of HoldCo having terms and conditions reasonably acceptable to
the Agent and NMS (each as defined below) and (B) approximately $3.0 million to
be provided through the rollover of common stock of HoldCo; provided, that the
amount of the cash equity investment shall be reduced by the value of any common
stock of HoldCo that is not converted into cash pursuant to the Recapitalization
in excess of $3.0 million; provided, further that such cash equity investment
may not be reduced pursuant to the foregoing proviso by more than $7.0 million
(collectively, the "HoldCo Equity Financing"), (ii) American
<PAGE> 2
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 2
Prepaid Professional Services, Inc., a Delaware corporation and wholly owned
subsidiary of HoldCo consisting of the dental HMO business of HoldCo (the
"Borrower"), receiving aggregate proceeds of approximately $100,000,000
aggregate principal amount through the issuance of notes (the "Notes") pursuant
to either (A) a public or Rule 144A offering or (B) a privately-placed bridge
financing, (iii) the Borrower borrowing up to $26,924,000 under the Credit
Facilities described below and (iv) Dental Health Management, Inc., a Delaware
corporation and a wholly owned subsidiary of HoldCo consisting of the dental
practice management business of HoldCo, borrowing $20,000,000 under a senior
secured credit facility (the "DHMI Credit Facility"). Further, we understand
that in connection with the Recapitalization, (i) all outstanding indebtedness
of HoldCo will be refinanced and such indebtedness will be terminated and (ii)
after consummation of the Recapitalization, the Investors will own at least 70%
of the voting equity of HoldCo. You have advised us that $45,000,000 in senior
debt financing (the "Credit Facilities") will be required in order to fund a
portion of the Recapitalization, to pay the fees and expenses incurred in
connection with the Recapitalization and to provide for working capital and
general corporate purposes after completion of the Recapitalization. You have
further advised us that no external financing, other than the Credit Facilities,
the DHMI Credit Facility, the HoldCo Equity Financing and the Notes, will be
required in connection with the Recapitalization.
You have requested that NationsBank, N.A. ("NationsBank") commit to provide the
full principal amount of the Credit Facilities and that NationsBanc Montgomery
Securities LLC ("NMS") commit to arrange the Credit Facilities. We are pleased
to advise you of (a) NationsBank's commitment to provide the full principal
amount of the Credit Facilities described in the Summary of Principal Terms &
Conditions attached hereto as Annex I (the "Term Sheet") and (b) NMS's
commitment to form a syndicate of financial institutions (the "Lenders")
reasonably acceptable to you for the Credit Facilities. All capitalized terms
used and not otherwise defined herein shall have the meanings set forth in the
Term Sheet and the Fee Letter (as defined below).
The commitments of NationsBank and NMS hereunder are subject to the satisfaction
of each of the following conditions precedent, each of the other terms and
conditions set forth herein, and each of the terms and conditions set forth in
the Term Sheet in a manner acceptable to NationsBank and NMS:
(a) execution by the Sponsors, HoldCo and the other appropriate
parties of the Amended and Restated Agreement and Plan of
Merger dated as of January 18, 1999 among TAGTCR Acquisition,
Inc., NMS Capital, GTCR, TA and HoldCo relating to the
Recapitalization, substantially similar to a draft thereof
<PAGE> 3
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 3
previously delivered to the Agent and NMS, and the other
definitive documentation relating thereto being satisfactory
to NationsBank and NMS, in their reasonable discretion (the
"Merger Agreement");
(b) execution of a fee letter agreement (the "Fee Letter") among
the Sponsors, NationsBank and NMS prior to or concurrently
with the acceptance by the Sponsors of this commitment letter
agreement (this "Commitment Letter");
(c) the negotiation, execution and delivery of definitive
documentation with respect to the Credit Facilities consistent
with the Term Sheet, this Commitment Letter and otherwise
reasonably satisfactory to NationsBank and NMS; and
(d) there not having occurred since the date hereof and being
continuing a material adverse change in the market for
syndicated bank credit facilities or a material disruption of,
or a material adverse change in, financial, banking or capital
market conditions that would have a material adverse effect on
such syndication markets, in each case as determined by
NationsBank and NMS, in their sole discretion.
NationsBank will act as Agent for the Credit Facilities and NMS will act as
Arranger and Syndication Agent for the Credit Facilities. No additional agents
will be appointed without the prior approval of NationsBank and NMS.
You agree to cooperate with and actively assist NationsBank and NMS in achieving
a syndication of the Credit Facilities that is satisfactory to NationsBank, NMS
and you. In the event that such syndication cannot be achieved in a manner
satisfactory to NationsBank and NMS under the structure outlined in the Term
Sheet, you agree to cooperate with NationsBank and NMS in developing an
alternative structure satisfactory to you that will permit a satisfactory
syndication of the Credit Facilities, provided that the aggregate principal
amount of the Credit Facilities remains unchanged. Syndication of the Credit
Facilities will be accomplished by a variety of means, including direct contact
during the syndication between senior management and advisors of HoldCo, the
Borrower and the Sponsors, on the one hand, and the proposed Lenders, on the
other hand. To assist NationsBank and NMS in the syndication efforts, you hereby
agree to (a) provide and cause your advisors to provide NationsBank and NMS and
the other Lenders upon request with all information reasonably deemed necessary
by NationsBank and NMS to complete syndication, including but not limited to
information and evaluations prepared by HoldCo, the Borrower, the Sponsors and
their advisors, or on their behalf, relating to the Recapitalization, (b) assist
NationsBank and NMS
<PAGE> 4
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 4
upon their reasonable request in the preparation of an Information Memorandum to
be used in connection with the syndication of the Credit Facilities and (c)
otherwise assist NationsBank and NMS in their syndication efforts, including by
making available officers and advisors of HoldCo, the Borrower and the Sponsors
from time to time to attend and make presentations regarding the business and
prospects of HoldCo, the Borrower and their respective subsidiaries, as
appropriate, at a meeting or meetings of prospective Lenders. You further agree
to refrain, and to cause HoldCo and the Borrower to refrain, from engaging in
any additional financings for HoldCo or the Borrower and its subsidiaries
(except as described in this Commitment Letter and the Term Sheet) during such
syndication process, unless otherwise agreed to by NationsBank and NMS.
As consideration for the agreements of NationsBank and NMS hereunder, including,
without limitation, their respective agreements to underwrite, manage, structure
and syndicate the Credit Facilities and to provide advisory services in
connection with the syndication, you agree to pay, based upon your pro rata
share, as set forth below, to NationsBank and NMS the fees set forth in the Term
Sheet and in the Fee Letter. You agree that, once paid, such fees shall not be
refundable under any circumstances. All such fees shall be paid in immediately
available funds.
It is understood and agreed that NationsBank and NMS, after consultation with
you, will manage and control all aspects of the syndication, including decisions
as to the selection of proposed Lenders and any titles offered to proposed
Lenders, when commitments will be accepted and the final allocations of the
commitments among the Lenders. It is understood and agreed that no Lender
participating in the Credit Facilities will receive compensation from you
outside the terms contained herein, in the Term Sheet and in the Fee Letter in
order to obtain its commitment. It is also understood and agreed that the amount
and distribution of the fees among the Lenders will be at the sole discretion of
NationsBank and NMS and that any syndication prior to execution of definitive
documentation will reduce the commitment of NationsBank.
The Commitment of NationsBank and NMS hereunder is based upon the financial and
other information regarding HoldCo and its subsidiaries and their respective
operations previously provided to NationsBank and NMS. If the continuing review
by NationsBank and NMS of HoldCo and its subsidiaries discloses information
relating to conditions or events not previously disclosed to NationsBank and NMS
or relating to new information or additional developments concerning conditions
or events previously disclosed to NationsBank and NMS, which NationsBank and NMS
in their reasonable judgment believe would reasonably be expected to have a
material adverse effect on the business, assets, liabilities (actual or
<PAGE> 5
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 5
contingent), operations, condition (financial or otherwise), results of
operations, cash flows or prospects of the Borrower and its subsidiaries, taken
as a whole since July 27, 1998, NationsBank and NMS may, in their reasonable
judgment, suggest alternative financing amounts or structures or decline to
participate in the proposed financing.
In connection with the due diligence investigation of HoldCo and the Borrower,
you and your representatives have reviewed and analyzed certain information
furnished or made available by HoldCo and the Borrower, although neither you nor
your representatives have independently verified that all such information is
complete and correct in all material respects or that such information does not
contain material misstatements or that there are no material omissions
therefrom. Based on such information and analysis and subject to the foregoing
qualification, you hereby represent and warrant, to your knowledge that (a) all
such information, other than Projections (as defined below), which has been or
is hereafter made available to us or the other Lenders by you or any of your
representatives in connection with the transactions contemplated hereby
("Information") has been or will be reviewed and analyzed by you in connection
with your own due diligence investigation and is now and as of the Closing (as
herein defined) as supplemented by you prior to the Closing, will be complete
and correct in all material respects and does not now and as of the Closing (as
supplemented by you prior to the Closing), will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained therein not misleading and (b) all financial projections
that have been or are hereafter made available to us or the other Lenders by you
or any of your representatives in connection with the Recapitalization (the
"Projections") have been or will be prepared in good faith based upon
assumptions believed by you to be reasonable (it being understood that the
Projections are subject to uncertainties and contingencies, many of which are
beyond the control of the Sponsors, HoldCo and the Borrower, and that no
assurance can be given that such Projections will be realized). You agree to
furnish, or cause HoldCo and the Borrower to furnish, us with such Information
and Projections as we may reasonably request and to supplement such Information
and such Projections from time to time until the initial funding of the Credit
Facilities (the "Closing") so that the representation and warranty in the
preceding sentence is correct on the date of the Closing. You hereby covenant
that all Information that is hereafter made available to you by HoldCo and the
Borrower or any of their respective representatives in connection with the
Recapitalization and the Credit Facilities will be reviewed and analyzed by you
in connection with performing your own due diligence investigation and you will
produce such analysis to NationsBank and NMS upon request. In arranging and
syndicating the Credit Facilities, we will be using and relying on the
Information and the Projections without independent verification thereof. The
representations and warranties contained in this paragraph shall remain
effective until definitive documentation for the Credit Facilities is executed,
and,
<PAGE> 6
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 6
thereafter, the disclosure representations contained herein shall be superseded
by those contained in such definitive documentation; provided, that in the event
such definitive documentation is not executed, such representations and
warranties will remain effective after the termination of commitments under this
Commitment Letter.
By executing this Commitment Letter, each of you agrees, on a several (and not a
joint) basis to reimburse NationsBank and NMS promptly on demand for all
reasonable out-of-pocket costs and expenses incurred in connection with the
Credit Facilities and the preparation of the definitive documentation for the
Credit Facilities and the other transactions contemplated hereby, including, but
not limited to, reasonable travel expenses, the cost (including any "breakage
costs") of providing funds for making available the Credit Facilities on the
proposed closing date (if the Closing does not occur on the date specified by
the Sponsors as the closing date) and the reasonable fees, disbursements and
other charges of Fennebresque, Clark, Swindell & Hay or its successor, as
counsel to NationsBank and NMS incurred hereunder or under the Commitment Letter
dated July 27, 1998 from NationsBank and NMS to the Sponsors (the "July
Commitment Letter").
Notwithstanding the immediately preceding paragraph, in the event that
NationsBank or NMS becomes involved in any capacity in any action, proceeding or
investigation in connection with any matter contemplated by this Commitment
Letter or the July Commitment Letter, each of you agrees, on a several (and not
a joint) basis, to reimburse NationsBank and NMS for their reasonable legal and
other out-of-pocket expenses (including the reasonable cost of any investigation
and preparation) as they are incurred by NationsBank or NMS. Each of you also
agrees, on a several (and not a joint) basis, to indemnify and hold harmless
NationsBank, NMS and their affiliates and their respective directors, officers,
employees and agents (the "Indemnified Parties") from and against any and all
losses, claims, damages and liabilities, as the result of any actions of the
Sponsors, HoldCo, the Borrower and their respective affiliates, or as a result
of the Recapitalization or the Credit Facilities, any representation of either
of the Sponsors contained in this Commitment Letter or the July Commitment
Letter, the funding of the Credit Facilities or the use of proceeds under the
Credit Facilities, unless and only to the extent that it shall be finally
judicially determined that such losses, claims, damages or liabilities resulted
from the gross negligence or willful misconduct of any Indemnified Party.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect until definitive financing documentation shall be executed and
delivered and notwithstanding the termination of this Commitment Letter or the
commitment of NationsBank and NMS hereunder, and each of you shall be deemed
released of your obligations under the immediately preceding two paragraphs upon
the execution of definitive financing
<PAGE> 7
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 7
documentation for the Credit Facilities with NationsBank pursuant to which the
Borrower shall assume the obligations of the Sponsors hereunder.
As described herein and in the Term Sheet, NMS will act as Arranger and
Syndication Agent for the Credit Facilities. NationsBank reserves the right to
allocate, in whole or in part, to NMS certain fees payable to NationsBank in
such manner as NationsBank and NMS may determine. Each of you acknowledges and
agrees that NationsBank may share with any of its affiliates (including
specifically NMS) any information relating to the Credit Facilities, the
Borrower, the Sponsors, the Investors, and their subsidiaries and affiliates.
This Commitment Letter may not be assigned by you without the prior written
consent of NationsBank and NMS (and any purported assignment in violation of the
foregoing shall be void).
All obligations of the Sponsors hereunder shall be several and not joint
obligations of each of them and shall be borne 48.235% by TA, 48.235% by GTCR
and 3.530% by NMS Capital; provided that if an Alternate Transaction (as defined
in the Fee Letter) occurs which does not include NMS Capital or any of its
affiliates as an Investor, such obligations shall be borne 50% by TA and 50% by
GTCR.
Except as required by applicable law, this Commitment Letter, the Term Sheet and
the Fee Letter and the contents hereof and thereof shall not be disclosed by you
to any third party, other than to your respective attorneys, financial advisors
and accountants, in each case to the extent necessary in your reasonable
judgment; provided, however, it is understood and agreed that after acceptance
of this Commitment Letter by each of you by execution in the space provided
below and by execution by each of you of the Fee Letter or with our prior
consent you may disclose the terms of this Commitment Letter to HoldCo and the
Borrower and their respective shareholders, attorneys, financial advisors and
accountants in connection with your offer to engage in the Recapitalization.
Without limiting the foregoing, in the event that either of you discloses the
contents of this Commitment Letter in contravention of the preceding sentence,
this Commitment Letter and the commitments set forth herein shall immediately
terminate.
This Commitment Letter may be executed in counterparts which, taken together,
shall constitute an original. Delivery of an executed counterpart of a signature
page of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter,
together with the Term Sheet and the Fee Letter, embodies the entire agreement
and understanding among NationsBank, NMS and
<PAGE> 8
TA/Advent VIII L.P.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
NMS Capital, L.P.
January 18, 1999
Page 8
each of you with respect to the specific matters set forth herein and supersedes
all prior agreements and understandings relating to the subject matter hereof.
No party has been authorized by NationsBank or NMS to make any oral or written
statements inconsistent with this Commitment Letter. THIS COMMITMENT LETTER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this Commitment Letter no later than 6:00 p.m. on January 18,
1999. This Commitment Letter will become effective upon your delivery to us of
executed counterparts of this Commitment Letter and the Fee Letter and, without
limiting the more specific terms hereof and of the Term Sheet, each of you agree
upon acceptance of this commitment to pay, based upon your pro rata share, as
set forth above, the fees set forth in the Term Sheet and in the Fee Letter.
This Commitment Letter and the commitments set forth herein shall terminate if
not so accepted by you prior to that time. Following acceptance by each of you,
this Commitment Letter and the commitments set forth herein will terminate on
June 30, 1999, unless the Closing has occurred by such date.
We look forward to working with you on this important transaction.
[Remainder of Page Intentionally Left Blank]
<PAGE> 9
Very truly yours,
NATIONSBANK, N.A.
By:
------------------------------
Title:
---------------------------
NATIONSBANC MONTGOMERY SECURITIES
LLC
By:
------------------------------
Title:
---------------------------
<PAGE> 10
ACCEPTED AND AGREED TO
on this ____ day of January, 1999:
TA/ADVENT VIII L.P.
By: ,
-------------------------------------------------
its General Partner
By:
-------------------------------------------------
Title:
----------------------------------------------
ACCEPTED AND AGREED TO
on this ____ day of January, 1999:
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
By:
-------------------------------------------------
Title:
----------------------------------------------
ACCEPTED AND AGREED TO
on this ____ day of January, 1999:
NMS CAPITAL, L.P.
By: NMS Capital Management LLC,
its General Partner
By:
-------------------------------------------------
Title:
----------------------------------------------
<PAGE> 11
ANNEX I
DENTAL HEALTH MANAGEMENT, INC.
$20,000,000 SENIOR CREDIT FACILITY
SUMMARY OF PRINCIPAL TERMS & CONDITIONS
BORROWER: Dental Health Management, Inc., a Delaware
corporation (the "Borrower"), a wholly owned
subsidiary of HoldCo (as defined below) consisting of
the dental practice management business of HoldCo.
RECAPITALIZATION: CompDent Corporation, a Delaware corporation
("HoldCo") intends to engage in a transaction in
which it is proposed that, pursuant to the Merger
Agreement (as defined below), TA/Advent VIII L.P.
("TA"), Golder, Thoma, Cressey, Rauner Fund V, L.P.
("GTCR") and NMS Capital, L.P. ("NMS Capital", and
together with TA and GTCR, the "Sponsors") and
certain affiliates of the Sponsors and other persons
arranged by the Sponsors (collectively with the
Sponsors, the "Investors") will effect the
recapitalization (the "Recapitalization") of HoldCo.
We understand that a portion of the financing with
respect to the Recapitalization will include (i) (A)
not less than $87.70 million (less any rollover
shares in excess of $3.0 million, such that the total
amount of rollover shares shall not exceed $10.0
million) to be provided through the issuance and sale
to the Investors (as set forth in the Merger
Agreement) of equity securities of HoldCo having
terms and conditions reasonably acceptable to the
Agent and NMS (each as defined below) and (B)
approximately $3.0 million to be provided through the
rollover of common stock of HoldCo; provided, that
the amount of the cash equity investment shall be
reduced by the value of any common stock of HoldCo
that is not converted into cash pursuant to the
Recapitalization in excess of $3.0 million; provided,
further that such cash equity investment may not be
reduced pursuant to the foregoing proviso by more
than $7.0 million (collectively, the "HoldCo Equity
Financing"), (ii) American Prepaid Professional
Services, Inc., a Delaware corporation and wholly
owned subsidiary of HoldCo consisting of the dental
HMO business of HoldCo ("American Prepaid") receiving
aggregate proceeds of approximately $100,000,000
aggregate principal amount through the issuance of
notes (the "Notes") pursuant to either (A) a public
or Rule 144A offering or (B) a privately-placed
bridge financing, on terms and conditions reasonably
satisfactory to the Agent (it being understood that
the terms and conditions set forth in the Bridge
Commitment Letter dated January 18, 1999, including
the exhibits thereto, are satisfactory to the Agent),
(iii) American
<PAGE> 12
Prepaid borrowing up to $26,924,000 under a senior
secured credit facility (the "American Prepaid Credit
Facility"), and (iv) the Borrower borrowing $20
million under the Credit Facility described below.
After the consummation of the Recapitalization, the
Investors will own at least 70% of the voting equity
of HoldCo.
The Recapitalization will be consummated pursuant to
the Amended and Restated Agreement and Plan of Merger
dated as of January 18, 1999 among TAGTCR
Acquisition, Inc., NMS Capital, GTCR, TA and HoldCo
and the other the definitive documentation relating
thereto being satisfactory to the Agent, in its
reasonable discretion (including all schedules
thereto, exhibits thereto and related documentation,
the "Merger Agreement"). The approximate sources and
uses of the funds necessary to consummate the
Recapitalization are set forth on Addendum I attached
hereto.
GUARANTORS: The Credit Facility shall be irrevocably and
unconditionally guaranteed by each of the Sponsors
(together, the "Guarantors"). All guarantees shall be
guarantees of payment and not of collection.
AGENT: NationsBank, N.A. (the "Agent" or "NationsBank") will
act as sole and exclusive administrative agent. As
such, NationsBank will negotiate with the Borrower,
act as the primary contact for the Borrower and
perform all other duties associated with the role of
exclusive administrative agent. No other agents or
co- agents may be appointed without the prior written
consent of NationsBank.
ARRANGER: NationsBank Montgomery Securities LLC ("NMS").
LENDERS: NationsBank, together with its permitted successors
and assigns (collectively, the "Lenders").
CREDIT FACILITY: $20,000,000 term loan facility.
PURPOSE: The proceeds of the Credit Facility shall be used:
(i) to fund a portion of the Recapitalization,
including, but not limited to, the refinancing of
indebtedness of HoldCo outstanding on the Closing;
and (ii) to pay a portion of the fees and expenses
incurred in connection with the Recapitalization up
to an amount to be agreed upon.
- 2 -
<PAGE> 13
INTEREST RATES: The Credit Facility shall bear interest as set forth
on Addendum II attached hereto.
AVAILABILITY: Loans under the Credit Facility (the "Term Loans")
will be available in a single borrowing at the
closing of the Recapitalization (the "Closing").
Amounts repaid under the Credit Facility may not be
reborrowed.
MATURITY/OPTIONAL
PREPAYMENTS: The outstanding principal amount of the Term Loans
shall be due and payable three (3) years from
Closing, provided that the maturity of the Term Loans
may, upon the request of the Borrower no less than 90
days prior to the then scheduled maturity date, be
extended for three (3) additional 1 year periods upon
the prior written consent of NationsBank.
The Borrower may prepay the Credit Facility in whole
or in part at any time without premium or penalty,
subject to reimbursement of the Lenders' breakage and
redeployment costs in the case of prepayment of LIBOR
borrowings.
All optional prepayments of the Credit Facility shall
be applied pro rata with respect to each remaining
installment of principal (except for prepayments in
an aggregate amount to be agreed upon, which may be
applied in direct order of maturity).
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the maturity described above, the
Credit Facility will be prepaid by an amount equal
to: (a) 100% of the net cash proceeds, including
insurance and condemnation proceeds, of all
non-ordinary-course asset sales or other dispositions
of property by the Borrower or any subsidiary
(including stock of subsidiaries), subject to limited
exceptions and reinvestment provisions to be agreed
upon and net of selling expenses and taxes to the
extent such taxes are paid; (b) 100% of Excess Cash
Flow (to be defined) pursuant to an annual cash sweep
arrangement; (c) 100% of the net cash proceeds from
the issuance of any debt by the Borrower or any
subsidiary, subject to limited exceptions to be
agreed upon; and (d) 100% of the net cash proceeds
from the issuance of equity by the Borrower or any of
its subsidiaries, subject to limited exceptions to be
agreed upon.
- 3 -
<PAGE> 14
CONDITIONS PRECEDENT
TO CLOSING: The obligations of each Lender to make the initial
funding of each of the Term Loans will be subject to
usual and customary closing conditions for
transactions of this type, including, without
limitation, the following:
(i) The negotiation, execution and delivery of
definitive documentation with respect to the Credit
Facility satisfactory to the Agent.
(ii) The HoldCo Equity Financing and the Notes shall
have been consummated and issued, respectively, on
terms reasonably satisfactory to the Agent and all
conditions precedent to the issuance thereof shall
have been satisfied or, with the prior approval of
the Agent (such approval not to be unreasonably
withheld), waived; and the Recapitalization shall
have been consummated pursuant to the Merger
Agreement, and all conditions precedent to the
consummation of the Recapitalization shall have been
satisfied or, with the prior approval of the Agent
(such approval not to be unreasonably withheld),
waived.
(iii) The corporate, capital and ownership structure
(including articles of incorporation and by-laws),
shareholders' agreements and management of the
Borrower and its subsidiaries (after giving effect to
the Recapitalization) shall be reasonably
satisfactory to the Agent in all respects.
(iv) The Agent shall have received and, in each case,
be reasonably satisfied with (a) all consolidated and
consolidating audited, unaudited and pro forma
financial statements of HoldCo and its subsidiaries
and all probable and pending acquisitions meeting the
requirements of Regulation S-X under the Securities
Act of 1933, as amended, applicable to a Registration
Statement under such Act on Form S-1, which financial
statements shall include the audited financial
statements for HoldCo's most recently completed
fiscal year and (b) pro forma historical financial
statements of the Borrower and its subsidiaries for
the three fiscal years prior to the Closing, such
historical financial statements to be subject to
review by an independent accounting firm selected by
the Agent.
(v) No material adverse change shall have occurred
since December 31, 1997, in the business, assets,
liabilities (actual or contingent), results of
operations, cash flows, operations, condition
(financial or otherwise) or prospects of HoldCo and
its
- 4 -
<PAGE> 15
subsidiaries, taken as a whole, or the Borrower and
its subsidiaries, taken as a whole (determined on a
pro forma basis), and there shall exist no
conditions, events or occurrences that, individually
or in the aggregate, would reasonably be expected to
result in such a material adverse change (any of the
foregoing, a "Material Adverse Change").
(vi) The Agent shall have received reasonably
satisfactory opinions of counsel to HoldCo, the
Borrower and the Guarantors of the Credit Facility
(which shall cover, among other things, authority,
legality, validity, binding effect and enforceability
of the documents for the Credit Facility) and such
corporate resolutions, certificates and other
documents as the Agent shall reasonably require.
(vii) HoldCo, the Borrower and their respective
subsidiaries shall have received all governmental,
shareholder and third-party consents (including
Hart-Scott-Rodino clearance) and approvals necessary
in connection with the Recapitalization, the Credit
Facility and the other transactions contemplated
hereby; all such consents and approvals shall be in
full force and effect; all applicable waiting periods
shall have expired without any action being taken by
any authority that restrains, prevents or imposes any
material adverse conditions on the Recapitalization
or such other transactions or that could reasonably
be expected to seek or threaten any of the foregoing;
and no law or regulation or condition shall be
applicable which in the reasonable judgment of the
Agent could have such effect.
(viii) There shall not exist (A) any order, decree,
judgment, ruling or injunction which restrains the
consummation of the Recapitalization in the manner
contemplated by the Merger Agreement, or the related
financings and (B) any pending or threatened action,
suit, investigation or proceeding which, if adversely
determined, could reasonably be expected to
materially adversely affect the ability of HoldCo,
the Borrower or any Guarantors of the Credit Facility
to perform any of their respective obligations under
the definitive documentation relating thereto or the
ability of the Lenders to exercise their rights
thereunder.
(ix) (A) Receipt of all fees and expenses payable to
the Agent, NMS and/or the Lenders and (B) neither of
the Sponsors shall be in breach or violation of any
of its obligations under the Fee
- 5 -
<PAGE> 16
Letter or Commitment Letter, and each such letter
shall be in full force and effect.
CONDITIONS
PRECEDENT TO
ALL BORROWINGS: Usual and customary for transactions of this type,
including without limitation, delivery of borrowing
certificate, accuracy of representations and
warranties and absence of defaults.
REPRESENTATIONS &
WARRANTIES: Usual and customary for transactions of this type, to
include without limitation: (i) corporate status;
(ii) corporate power and authority/enforceability;
(iii) no violation of law or contracts or
organizational documents; (iv) no material
litigation, proceeding or investigation; (v)
correctness of specified financial statements; (vi)
no Material Adverse Change; (vii) absence of
undisclosed liabilities, whether actual or
contingent; (viii) receipt of all required
governmental or third party approvals; (ix) use of
proceeds/compliance with margin regulations; (x)
status under Investment Company Act; (xi) ERISA and
labor matters; (xii) environmental matters; (xiii)
payment of taxes; (xiv) status of material
agreements, relationships and commercial
arrangements; (xv) title to assets, including
intellectual property; (xvi) no infringement of third
party intellectual property rights; (xvii) solvency;
(xviii) compliance with laws and regulations and
(xix) consummation of the Recapitalization.
COVENANTS: Usual and customary for transactions of this type, to
include without limitation: (i) delivery of financial
statements and other reports; (ii) delivery of
compliance certificates and other information; (iii)
notices of default, material litigation, material
governmental and environmental proceedings and other
material events; (iv) compliance with laws; (v)
payment of taxes; (vi) maintenance of insurance and
limitations on use of casualty and condemnation
proceeds; (vii) environmental and ERISA covenants;
(viii) limitations on amendments to material
agreements and instruments; (ix) limitation on nature
of business conducted; and (x) incurrence of
indebtedness, subject to baskets to be agreed upon.
- 6 -
<PAGE> 17
The loan documents shall require the Borrower, within
90 days after the Closing, to enter into interest
rate protection agreements on terms acceptable to the
Agent for a portion of the Credit Facility to be
agreed upon and to maintain such agreements in effect
for a period to be agreed upon.
EVENTS OF DEFAULT: Usual and customary in transactions of this nature,
and to include, without limitation: (i) nonpayment of
principal, interest, fees or other amounts; (ii)
violation of covenants of the Borrower or either of
the Guarantors; (iii) inaccuracy of representations
and warranties of the Borrower or either of the
Guarantors; (iv) cross-default to other material
indebtedness and agreements, including, without
limitation, the BenefitCo credit facility; (v)
bankruptcy events; (vi) material judgments; (vii)
ERISA, intellectual property and environmental
events; (viii) actual or asserted invalidity of any
loan documents (including, but not limited to,
agreements executed by the Guarantors); (ix) change
in material agreements, licenses, qualifications or
relationships that, in light of all the then existing
circumstances, could reasonably be expected to have a
material adverse effect on HoldCo, the Borrower and
their respective subsidiaries, taken as a whole; and
(x) Change in Control (to be defined), in each case
subject to appropriate grace periods, dollar
thresholds and/or other exceptions, as applicable.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments in
minimum principal amounts of $5,000,000 to other
financial institutions approved by the Borrower and
the Agent, which approval shall not be unreasonably
withheld. Lenders will be permitted to sell
participations with voting rights limited to
significant matters such as changes in amount, rate
and maturity date.
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the
credit agreement and other definitive credit
documentation will require the approval of Lenders
holding Term Loans representing at least a majority
of the aggregate amount of Term Loans under the
Credit Facility, except that (i) the consent of all
the Lenders affected thereby shall be required with
respect to (a) reductions of principal, interest, or
fees and (b) extensions of scheduled maturities or
times for payment, (ii) the consent of all the
Lenders shall be required with respect to (a)
increases in commitment amounts and (b) releases of
all or substantially all guarantors and (iii) any
amendment that changes the amount of
- 7 -
<PAGE> 18
any prepayment of the Term Loans under the Credit
Facility (or the application of any such prepayment
to the remaining amortization payments under the
Credit Facility) shall require the consent of Lenders
holding at least a majority of the outstanding Term
Loans under the Credit Facility.
INDEMNIFICATION: HoldCo and the Borrower shall indemnify, jointly and
severally, each Lender from and against all losses,
liabilities, claims, damages or expenses relating to
any matter contemplated by the Commitment Letter or
the Commitment Letter dated July 27, 1998 from the
Sponsors to NationsBank and NMS, its Term Loans, the
Borrower's use of Term Loan proceeds or the
commitments, including but not limited to reasonable
attorneys' fees and settlements costs, in each case
to the extent not attributable to such person's gross
negligence or willful misconduct.
CLOSING: On or before June 30, 1999.
GOVERNING LAW: New York.
WAIVER OF
JURY TRIAL: HoldCo, the Borrower, the Agent and the Lenders shall
waive their right to a trial by jury.
FEES/EXPENSES: As outlined in Addendum II attached hereto.
OTHER: This term sheet is intended as an outline only and
does not purport to summarize all the conditions,
covenants, representations, warranties and other
provisions which would be contained in definitive
legal documentation for the Credit Facility
contemplated hereby.
- 8 -
<PAGE> 19
ADDENDUM I
COMPDENT CORPORATION RECAPITALIZATION
SOURCES AND USES OF FUNDS
(IN MILLIONS OF DOLLARS)
(ALL FIGURES ARE APPROXIMATE)
<TABLE>
<CAPTION>
Uses of Funds Sources of Funds
- ------------- -----------------
<S> <C> <C> <C>
Purchase of Equity/ $151.689 American Prepaid Credit Facility $ 26.924
Management Rollover Credit Facility 20.000
Repayment of Net Debt 56.481 Notes 100.000
Option Spread 1.128 Convertible Preferred Stock
DHDC Liability 15.325 and/or Common Equity 87.70
Transaction Expenses 13.000 Management Equity Rollver 3.000
-------- --------
TOTAL USES $237.624 TOTAL SOURCES $237.624
======== ========
</TABLE>
- i -
<PAGE> 20
ADDENDUM II
INTEREST RATES, FEES AND EXPENSES
INTEREST RATES: The interest rates under the Credit Facility will
be, at the option of the Borrower, LIBOR plus
0.75% or the Alternate Base Rate plus 0.25%.
The Borrower may select interest periods of 1, 2, 3
or 6 months for LIBOR Loans, subject to availability.
Calculation of interest shall be on the basis of
actual number of days elapsed in a year of 360 days
(or 365 or 366 days, as the case may be, in the case
of Alternate Base Rate Loans based on the Prime Rate)
and interest shall be payable at the end of each
interest period and, in any event, at least every 3
months.
"LIBOR" means the London Interbank Offered Rate as
determined by the Agent for the applicable interest
period, at all times including statutory reserves.
"Alternate Base Rate" is the higher of (i) the
Federal Funds Effective Rate plus 0.50% and (ii)
NationsBank's Prime Rate.
A penalty rate shall apply on the Credit Facility in
the event of and during the continuance of an Event
of Default relating to the payment of any amount due
in respect of the Credit Facilities at a rate per
annum of 2% above the applicable interest rate.
COST AND YIELD
PROTECTION: The usual for transactions and facilities of this
type, including, without limitation, in respect of
prepayments, changes in capital adequacy and capital
requirements or their interpretation, illegality,
unavailability and reserves without proration or
offset (subject to the option of the Borrower to
arrange the replacement (at par plus accrued
interest) of a Lender seeking reimbursement for
certain of such costs pursuant to a provision to be
agreed upon). In addition to, and not in limitation
of, the foregoing, if any breakage costs, charges or
fees are incurred with respect to LIBOR Loans during
the 180-day period following the Closing on account
of the syndication of the Credit Facility, the
Borrower shall immediately reimburse the Agent for
any such costs, charges or fees.
- i -
<PAGE> 21
EXPENSES: Borrower will pay, or reimburse the Sponsors for
payment of, all reasonable costs and expenses
associated with the preparation, due diligence,
administration, syndication and enforcement of all
documents executed in connection with the Credit
Facility, including without limitation, the
reasonable legal fees of the Agent's counsel
regardless of whether or not the Credit Facility is
closed.
- ii -
<PAGE> 1
EXHIBIT 99(b)(5)
- --------------------------------------------------------------------------------
PROJECT GOLDCAP
UPDATED VALUATION ANALYSIS
DECEMBER 30, 1999
THE ROBINSON-HUMPHREY COMPANY, LLC
ATLANTA FINANCIAL CENTER
333 PEACHTREE ROAD, NE, 10TH FLOOR
ATLANTA, GEORGIA 30326
(404) 266-6000
- --------------------------------------------------------------------------------
<PAGE> 2
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
I. Analysis of Revised Proposed Transactions
II. Valuation Summary
III. Summary Historical Financial Information
IV. Summary Projected Financial Information
V. Stock Price and Volume History
VI. Stock Ownership
VII. Market Comparison Analysis
VIII. Analysis of Recent Merger & Acquisition Transactions
IX. Discounted Cash Flow Analysis
X. Going Private Analysis
- -------------------------------------------------------------------------------
PROJECT GOLDCAP THE ROBINSON-HUMPHREY COMPANY
<PAGE> 3
The Robinson-Humphrey Company
PROJECT GOLDCAP
ANALYSIS OF PROPOSED TRANSACTION
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PURCHASE CURRENT NET VALUE OF TRANSACTION GOLDCAP PRESENT VALUE TOTAL
PRICE PER SHARES EQUITY IN-THE-MONEY EQUITY NET OF DHDC DEFERRED TRANSACTION
SHARE OUTSTANDING [1] VALUE OPTIONS VALUE DEBT [2] LIABILITIES [3] VALUE
- ------------ --------------- -------- ------------ ---------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$15.00 x 10,113 = $151,689 + $699 = $152,388 + $46,501 + $22,376 = $221,265
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TRANSACTION EQUITY VALUE AS A MULTIPLE OF: TOTAL TRANSACTION VALUE AS A MULTIPLE OF:
- ---------------------------------------------------------------------------------------------------------------------
------------------------------------------ ----------------------------------------
CALENDAR CALENDAR
------------------------------------------ ----------------------------------------
LTM [4] 1998(E)[5] 1999(E)[5] LTM [4] 1998(E)[5] 1999(E)[5]
------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INCOME 15.0 x 14.9 x 13.4 x REVENUES 1.29 x 1.28 x 1.22 x
EBITDA [6] 8.2 x 8.2 x 7.6 x
BOOK VALUE [2] 2.24 x EBIT [7] 10.5 x 10.3 x 9.6 x
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE STOCK PRICE FOR LAST IPO ALL-TIME ALL-TIME
STOCK PRICE ------------------------------------- PRICE HIGH CLOSING LOW CLOSING
AS OF 12/28/98 5 DAYS 30 DAYS 60 DAYS 90 DAYS 5/24/95 PRICE (7/2/96) PRICE (1/27/98)
-------------- ------ ------- ------- ------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACTUAL VALUE $10.19 $10.23 $10.99 $11.73 $12.73 $14.50 $51.69 $9.56
PREMIUM AT $15.00 PER SHARE 47.2% 46.7% 36.5% 27.8% 17.8% 3.4% (71.0)% 56.9%
<CAPTION>
STOCK PRICE BEFORE NEW ANNOUNCEMENT
--------------------------------------------------------------------------------
12/28/98 1 WEEK PRIOR 4 WEEKS PRIOR
-------- ------------ -------------
<S> <C> <C> <C>
ACTUAL VALUE $10.19 $10.31 $11.13
PREMIUM AT $15.00 PER SHARE 47.2% 45.5% 34.8%
</TABLE>
- --------------------------
[1] As of October 31, 1998.
[2] Net debt and book value as of September 30, 1998.
[3] Consists of remaining DentLease funding obligation and repurchase of Series
A preferred stock.
[4] LTM as of September 30, 1998. Excludes goodwill impairment charge of $59.0
million and other one-time charges of $9.4 million. Assumed tax rate is
38.0%.
[5] Projections provided by Robinson-Humphrey Research dated October 27, 1998.
[6] Defined as earnings before interest, taxes, depreciation and amortization.
[7] Defined as earnings before interest and taxes.
[8] Assumes announcement on December 29, 1998.
<PAGE> 4
The Robinson-Humphrey Company
PROJECT GOLDCAP
CURRENT VESTED OPTIONS SCHEDULE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Vested Vested Cumulative
Options Exercise Aggregate Options Exercise
Outstanding Price Exercise Price Outstanding Price
- ---------------- ------------- ----------------- ------------ -------------------
<S> <C> <C> <C> <C>
36,000 $ 0.49 $ 17,604.00 36,000 $ 17,604.00
6,750 $ 2.96 $ 19,986.75 42,750 $ 37,590.75
1,000 $ 5.89 $ 5,894.00 43,750 $ 43,484.75
32,500 [1] $12.50 $ 406,250.00 76,250 $ 449,734.75
9,000 $14.50 $ 130,500.00 85,250 $ 580,234.75
80,000 $16.12 $ 1,289,600.00 165,250 $ 1,869,834.75
20,000 $16.34 $ 326,800.00 185,250 $ 2,196,634.75
80,000 $19.35 $ 1,548,000.00 265,250 $ 3,744,634.75
10,000 $20.50 $ 205,000.00 275,250 $ 3,949,634.75
20,000 $23.22 $ 464,400.00 295,250 $ 4,414,034.75
1,250 $26.00 $ 32,500.00 296,500 $ 4,446,534.75
20,000 $27.86 $ 557,200.00 316,500 $ 5,003,734.75
21,000 $29.00 $ 609,000.00 337,500 $ 5,612,734.75
150,750 $29.75 $ 4,484,812.50 488,250 $ 10,097,547.25
12,500 $30.25 $ 378,125.00 500,750 $ 10,475,672.25
57,000 $36.25 $ 2,066,250.00 557,750 $ 12,541,922.25
2,500 $39.50 $ 98,750.00 560,250 $ 12,640,672.25
2,000 $42.75 $ 85,500.00 562,250 $ 12,726,172.25
------- ---------------
562,250 $ 12,726,172.25
<CAPTION>
Cumulative Additional
Deal Exercise In-the-Money Shares Fully Diluted
Price [2] Price Options Outstanding Shares Out [3]
- ------------- -------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
$15.00 $580,235 85,250 46,568 10,159,197
Cumulative Net Value of
Deal In-the-Money Value of Exercise In-the-Money
Price [2] Options Options Price Options
- ------------- -------------- --------------- --------------- ------------------
$15.00 85,250 $1,278,750 $580,235 $698,515
</TABLE>
- -----------------------
[1] Includes 22,500 options scheduled to vest on January 12, 1999.
[2] Assumes 10,112,629 pre-deal shares outstanding.
[3] Uses the treasury stock method.
<PAGE> 5
The Robinson-Humphrey Company
PROJECT GOLDCAP
Analysis of DHDC Deferred Liabilities
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ending December 31,
-------------------------------------------------------
1997 1998 1999 2000
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Remaining DentLease Funding Obligation -- -- -- $ 4,000
Present value [1] $ 3,133
DHDC Series A Preferred Stock $ 10,930 $ 14,318 $ 18,757 $ 24,572
-$10.0 million initial investment
-Accrued dividends at 31%
compounded annually
Present value [1] $ 19,243
---------
Present value of DHDC deferred liabilities $ 22,376
---------
---------
Per share $ 2.21
---------
</TABLE>
- ----------------------
[1] Discounted at 13.0% annually.
[2] Issued September 12, 1997. Matures September 12, 2004. Purchase option
begins February 28, 2001.
<PAGE> 6
The Robinson-Humphrey Company
PROJECT GOLDCAP
VALUATION SUMMARY
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
<TABLE>
<CAPTION>
-------
AVERAGE
-------
<S> <C>
DENTAL MANAGED CARE COMPANIES
Aggregate Equity Value $105,729
Per Share Equity Value $ 10.46
DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT COMPANIES
Aggregate Equity Value $113,274
Per Share Equity Value $ 11.20
MULTI-MARKET HMO COMPANIES
Aggregate Equity Value $168,696
Per Share Equity Value $ 16.68
--------
</TABLE>
<PAGE> 7
The Robinson-Humphrey Company
PROJECT GOLDCAP
VALUATION SUMMARY
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PURCHASE PRICE MULTIPLES ANALYSIS OF SELECTED M&A TRANSACTIONS
- --------------------------------------------------------------
<TABLE>
<CAPTION>
----------
AVERAGE
-------
<S> <C>
DENTAL MANAGED CARE ACQUISITIONS - HISTORICAL MULTPLES
Aggregate Equity Value $182,670
Per Share Equity Value $ 18.06
DENTAL MANAGED CARE ACQUISITIONS - FORWARD MULTIPLES
Aggregate Equity Value $111,229
Per Share Equity Value $ 11.00
UNITED DENTAL CARE ACQUISITIONS - HISTORICAL MULTIPLES
Aggregate Equity Value $167,952
Per Share Equity Value $ 16.61
UNITED DENTAL CARE ACQUISITIONS - FORWARD MULTIPLES
Aggregate Equity Value $169,448
Per Share Equity Value $ 16.76
DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT COMPANIES
Aggregate Equity Value $165,012
Per Share Equity Value $ 16.32
--------
<CAPTION>
-----------
AVERAGE
-------
<S> <C>
HMO ACQUISITIONS - HISTORICAL MULTIPLES
Aggregate Equity Value $245,660
Per Share Equity Value $ 24.29
HMO ACQUISITIONS - FORWARD P/E MULTIPLES
Aggregate Equity Value $205,397
Per Share Equity Value $ 20.31
HMO ACQUISITIONS - PREMIUMS
Aggregate Equity Value $133,433
Per Share Equity Value $ 13.19
MERGERSTAT REVIEW - P/E MULTIPLES
Aggregate Equity Value $238,027
Per Share Equity Value $ 23.54
MERGERSTAT REVIEW - PREMIUMS
Aggregate Equity Value $139,687
Per Share Equity Value $ 13.81
PREMIUMS ANALYSIS
Aggregate Equity Value $141,888
Per Share Equity Value $ 14.03
--------
</TABLE>
<PAGE> 8
The Robinson-Humphrey Company
PROJECT GOLDCAP
VALUATION SUMMARY
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
HIGH LOW AVERAGE
---- --- -------
<S> <C> <C> <C>
EBIT Exit Multiple
Aggregate Equity Value $274,231 $103,985 $165,317
Per Share Equity Value $ 27.12 $ 10.28 $ 16.35
EBITDA EXIT MULTIPLE
Aggregate Equity Value $235,505 $98,727 $153,421
Per Share Equity Value $ 23.29 $ 9.76 $ 15.17
AVERAGE
AGGREGATE EQUITY VALUE $159,369
PER SHARE EQUITY VALUE $ 15.76
</TABLE>
<PAGE> 9
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------- ----------------------------
1995 1996 1997 1997 1998
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 104,898 $ 135,807 $ 143,396 $ 35,636 $ 35,422
Affiliated practice revenue -- -- 7,113 -- 5,292
Other revenue 1,763 5,262 8,217 2,199 1,728
--------- --------- --------- -------- --------
Total revenue 106,661 141,069 158,726 37,835 42,442
Expenses:
Dental care providers' fees and claim costs 62,218 73,431 81,690 [1] 19,544 19,428[1]
Commissions 10,763 12,184 13,272 3,172 3,265
Premium taxes 1,392 1,018 1,047 265 261
DHMI operating expense -- -- -- -- 4,605
General and administrative 19,435 30,394 44,318 [2] 7,860 8,374[2]
Depreciation and amortization 2,717 5,153 5,735 1,321 1,379
Goodwill impairment -- -- 58,953 -- --
--------- --------- --------- -------- --------
Total expenses 96,525 122,180 205,015 32,162 37,312
--------- --------- --------- -------- --------
Operating income (loss) 10,136 18,889 (46,289)[3] 5,673 5,130[3]
Other expense (income):
Interest income (735) (585) (725) (161) (254)
Interest expense 1,970 1,935 3,239 708 1,013
Other, net (68) (219) 2 (45) --
--------- --------- --------- -------- --------
Total other expense 1,167 1,131 2,516 502 759
--------- --------- --------- -------- --------
Income (loss) before provision for income taxes
and extraordinary item 8,969 17,758 (48,805) 5,171 4,371
Income tax provision 3,765 7,866 4,900 2,332 1,878
--------- --------- --------- -------- --------
Income (loss) before extraordinary item 5,204 9,892 (53,705) 2,839 2,493
Extraordinary loss on early extinguishment of debt,
net of income tax benefit 498 -- -- -- --
--------- --------- --------- -------- --------
Net income (loss) $ 4,706 $ 9,892 $ (53,705)[3] $ 2,839 $ 2,493[3]
========= ========= ========= ======== ========
Income (loss) per common share - diluted $ 0.68 $ 0.97 $ (5.32)[3] $ 0.28 $ 0.25[3]
Extraordinary loss 0.07 -- -- -- --
--------- --------- --------- -------- --------
Net income (loss) per common share $ 0.61 $ 0.97 $ (5.32) $ 0.28 $ 0.25
========= ========= ========= ======== ========
Diluted weighted average common shares outstanding 7,352 10,177 10,098 10,167 10,175
========= ========= ========= ======== ========
EBITDA (excluding one-time charges) $ 12,853 $ 24,042 $ 27,799 $ 6,994 $ 6,509
EBITDA per share: $ 1.75 $ 2.36 $ 2.75 $ 0.69 $ 0.64
After-tax EBITDA per share: $ 1.01 $ 1.32 $ 1.56 $ 0.38 $ 0.36
<CAPTION>
SIX MONTHS ENDED JUNE 30, NINE MONTHS ENDED SEPT. 30,
------------------------- ---------------------------
1997 1998 1997 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 71,488 $ 71,404 $ 107,470 $ 106,830
Affiliated practice revenue -- 11,115 3,343 17,207
Other revenue 4,547 3,486 6,356 5,474
-------- -------- --------- ---------
Total revenue 76,035 86,005 117,169 129,511
Expenses:
Dental care providers' fees and claim costs 39,450 38,934 59,299 58,448
Commissions 6,364 6,612 9,916 9,979
Premium taxes 521 455 784 680
DHMI operating expense -- 9,867 2,140 15,516
General and administrative 15,827 16,667 23,918 24,704
Depreciation and amortization 2,676 2,854 4,229 4,214
Goodwill impairment -- 3,486 -- --
-------- -------- --------- ---------
Total expenses 64,838 75,388 100,286 113,541
-------- -------- --------- ---------
Operating income (loss) 11,197 10,617 16,883 15,970
Other expense (income):
Interest income (415) (499) (494) (643)
Interest expense 1,446 2,172 2,229 3,284
Other, net (61) (3) (66) (15)
-------- -------- --------- ---------
Total other expense 970 1,669 1,669 2,626
-------- -------- --------- ---------
Income (loss) before provision for income taxes
and extraordinary item 10,227 8,948 15,214 13,345
Income tax provision 4,504 3,850 6,559 5,751
-------- -------- --------- ---------
Income (loss) before extraordinary item 5,723 5,098 8,655 7,594
Extraordinary loss on early extinguishment of debt,
net of income tax benefit -- -- -- --
-------- -------- --------- ---------
Net income (loss) $ 5,723 $ 5,098 $ 8,655 $ 7,594
======== ======== ========= =========
Income (loss) per common share - diluted $ 0.56 $ 0.50 $ 0.85 $ 0.75
Extraordinary loss -- -- -- --
-------- -------- --------- ---------
Net income (loss) per common share $ 0.56 $ 0.50 $ 0.85 $ 0.75
======== ======== ========= =========
Diluted weighted average common shares outstanding 10,173 10,178 10,200 10,181
======== ======== ========= =========
EBITDA (excluding one-time charges) $ 13,873 $ 13,471 $ 21,112 $ 20,184
EBITDA per share: $ 1.36 $ 1.32 $ 2.07 $ 1.98
After-tax EBITDA per share: $ 0.76 $ 0.75 $ 1.18 $ 1.13
</TABLE>
- -------------------------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported $22.1 million in operating income, $11.1 million in net
income and $1.10 in net income per share.
<PAGE> 10
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------- ----------------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 98.3% 96.3% 90.3% 94.2% 83.5%
Affiliated practice revenue 0.0% 0.0% 4.5% 0.0% 12.5%
Other revenue 1.7% 3.7% 5.2% 5.8% 4.1%
----- ----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 58.3% 52.1% 51.5% [1] 51.7% 45.8%
Commissions 10.1% 8.6% 8.4% 8.4% 7.7%
Premium taxes 1.3% 0.7% 0.7% 0.7% 0.6%
DHMI operating expense 0.0% 0.0% 0.0% 0.0% 10.9%
General and administrative 18.2% 21.5% 27.9% [2] 20.8% 19.7%
Depreciation and amortization 2.5% 3.7% 3.6% 3.5% 3.2%
Goodwill impairment 0.0% 0.0% 37.1% 0.0% 0.0%
----- ----- ----- ----- -----
Total expenses 90.5% 86.6% 129.2% 85.0% 87.9%
----- ----- ----- ----- -----
Operating income (loss) 9.5% 13.4% (29.2)%[3] 15.0% 12.1%
Other expense (income):
Interest income (0.7)% (0.4)% (0.5)% (0.4)% (0.6)%
Interest expense 1.8% 1.4% 2.0% 1.9% 2.4%
Other, net (0.1)% (0.2)% 0.0% (0.1)% 0.0%
----- ----- ----- ----- -----
Total other expense 1.1% 0.8% 1.6% 1.3% 1.8%
----- ----- ----- ----- -----
Income (loss) before provision for income taxes
and extraordinary item 8.4% 12.6% (30.7)% 13.7% 10.3%
Income tax provision 3.5% 5.6% 3.1% 6.2% 4.4%
----- ----- ----- ----- -----
Income (loss) before extraordinary item 4.9% 7.0% (33.8)% 7.5% 5.9%
Extraordinary loss on early extinguishment of debt,
net of income tax benefit 0.5% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Net income (loss) 4.4% 7.0% (33.8)%[3] 7.5% 5.9%
===== ===== ===== ===== =====
EBITDA (excluding one-time charges) 12.1% 17.0% 17.5% 18.5% 15.3%
<CAPTION>
SIX MONTHS ENDED JUNE 30, NINE MONTHS ENDED SEPT. 30,
------------------------- ---------------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums 94.0% 83.0% 91.7% 82.5%
Affiliated practice revenue 0.0% 12.9% 2.9% 13.3%
Other revenue 6.0% 4.1% 5.4% 4.2%
----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 51.9% 45.3% 50.6% 45.1%
Commissions 8.4% 7.7% 8.5% 7.7%
Premium taxes 0.7% 0.5% 0.7% 0.5%
DHMI operating expense 0.0% 11.5% 1.8% 12.0%
General and administrative 20.8% 19.4% 20.4% 19.1%
Depreciation and amortization 3.5% 3.3% 3.6% 3.3%
Goodwill impairment 0.0% 4.1% 0.0% 0.0%
----- ----- ----- -----
Total expenses 85.3% 87.7% 85.6% 87.7%
----- ----- ----- -----
Operating income (loss) 14.7% 12.3% 14.4% 12.3%
Other expense (income):
Interest income (0.5)% (0.6)% (0.4)% (0.5)%
Interest expense 1.9% 2.5% 1.9% 2.5%
Other, net (0.1)% (0.0)% (0.1)% (0.0)%
----- ----- ----- -----
Total other expense 1.3% 1.9% 1.4% 2.0%
----- ----- ----- -----
Income (loss) before provision for income taxes
and extraordinary item 13.5% 10.4% 13.0% 10.3%
Income tax provision 5.9% 4.5% 5.6% 4.4%
----- ----- ----- -----
Income (loss) before extraordinary item 7.5% 5.9% 7.4% 5.9%
Extraordinary loss on early extinguishment of debt,
net of income tax benefit 0.0% 0.0% 0.0% 0.0%
----- ----- ----- -----
Net income (loss) 7.5% 5.9% 7.4% 5.9%
===== ===== ===== =====
EBITDA (excluding one-time charges) 18.2% 15.7% 18.0% 15.6%
</TABLE>
- --------------------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported an operating income margin of 13.9% and a net income margin
of 7.0%.
<PAGE> 11
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL BALANCE SHEET INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
----------------------------------- --------- --------- -------------
1995 1996 1997 1998 1998 1998
-------- -------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,388 $ 26,959 $ 21,963 $ 15,568 $ 9,726 $ 9,980
Accrued interest receivable 84 48 -- -- 15 13
Premiums receivable from subscribers 3,637 3,121 5,554 4,556 4,440 7,541
Patient accounts receivable -- -- 1,668 2,201 2,100 0
Income taxes receivable -- 247 175 -- -- --
Assets held for sale 532 -- -- -- -- --
Deferred income taxes 1,416 3,106 5,081 5,081 2,578 1,438
Other current assets 197 602 2,842 4,067 1,932 1,874
-------- -------- --------- --------- --------- ---------
Total current assets 46,254 34,083 37,283 31,473 20,791 20,847
Restricted funds 1,463 2,070 2,321 2,234 2,320 2,268
Property and equipment, net 1,937 2,977 6,292 8,691 12,265 15,271
Excess of purchase price over net
assets acquired 71,063 135,040 96,296 100,072 100,736 100,208
Noncompetition agreements 1,521 945 325 168 13 8
Investment in DHDC -- -- 1,500 1,500 1,500 --
Unamortized loan fees 172 189 -- -- 23 --
Reinsurance receivable 6,332 5,388 5,417 5,467 5,493 5,547
Cash surrender value of officers'
life insurance 155 140 -- -- 207 208
Deferred income taxes 243 2,026 -- -- -- --
Other assets 256 1,309 1,437 1,849 1,947 3,494
-------- -------- --------- --------- --------- ---------
Total assets $129,396 $184,167 $ 150,871 $ 151,454 $ 145,295 $ 147,849
======== ======== ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue $ 10,300 $ 9,582 $ 9,538 $ 9,231 $ 9,197 $ 8,807
Accounts payable and accrued expenses 7,372 10,956 14,855 13,552 11,502 9,930
Income taxes payable 883 -- -- -- 140 (344)
Accrued interest payable -- 390 109 152 110 161
Life policy and contract claims reserves 37 68 -- -- 63 63
Dental claims reserves 2,437 1,421 1,502 1,839 1,904 1,876
Other current liabilities 12 1,856 63 63 (3,327) (3,037)
-------- -------- --------- --------- --------- ---------
Total current liabilities 21,041 24,273 26,067 24,837 19,589 17,455
Aggregate reserves for life policies
and contracts 5,323 5,338 5,331 5,355 5,372 5,336
Aggregate reserves for dental contracts 172 -- -- -- -- --
Notes payable -- 41,663 56,595 55,102 54,233 56,481
Deferred tax liability -- -- 1,887 1,887 -- --
Deferred compensation expense 384 338 298 287 276 265
Other liabilities 299 372 417 1,217 453 443
-------- -------- --------- --------- --------- ---------
Total liabilities 27,219 71,984 90,595 88,685 79,922 79,980
-------- -------- --------- --------- --------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock -- -- -- -- -- --
Common stock 100 101 101 101 101 101
Additional paid-in capital 95,707 95,820 97,618 97,618 97,618 97,618
Retained earnings 6,370 16,262 (37,443) (34,950) (32,346) (29,850)
-------- -------- --------- --------- --------- ---------
Total stockholders' equity 102,177 112,183 60,276 62,769 65,373 67,869
-------- -------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity $129,396 $184,167 $ 150,871 $ 151,454 $ 145,295 $ 147,849
======== ======== ========= ========= ========= =========
</TABLE>
<PAGE> 12
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL BALANCE SHEET INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
-------------------------------- --------- -------- -------------
1995 1996 1997 1998 1998 1998
------ ------ ------ --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 31.2% 14.6% 14.6% 10.3% 6.7% 6.8%
Accrued interest receivable 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Premiums receivable from subscribers 2.8% 1.7% 3.7% 3.0% 3.1% 5.1%
Patient accounts receivable 0.0% 0.0% 1.1% 1.5% 1.4% 0.0%
Income taxes receivable 0.0% 0.1% 0.1% 0.0% 0.0% 0.0%
Assets held for sale 0.4% 0.0% 0.0% 0.0% 0.0% 0.0%
Deferred income taxes 1.1% 1.7% 3.4% 3.4% 1.8% 1.0%
Other current assets 0.2% 0.3% 1.9% 2.7% 1.3% 1.3%
------ ------ ------ ------ ------ ------
Total current assets 35.7% 18.5% 24.7% 20.8% 14.3% 14.1%
Restricted funds 1.1% 1.1% 1.5% 1.5% 1.6% 1.5%
Property and equipment, net 1.5% 1.6% 4.2% 5.7% 8.4% 10.3%
Excess of purchase price over net
assets acquired 54.9% 73.3% 63.8% 66.1% 69.3% 67.8%
Noncompetition agreements 1.2% 0.5% 0.2% 0.1% 0.0% 0.0%
Investment in DHDC 0.0% 0.0% 1.0% 1.0% 1.0% 0.0%
Unamortized loan fees 0.1% 0.1% 0.0% 0.0% 0.0% 0.0%
Reinsurance receivable 4.9% 2.9% 3.6% 3.6% 3.8% 3.8%
Cash surrender value of officers'
life insurance 0.1% 0.1% 0.0% 0.0% 0.1% 0.1%
Deferred income taxes 0.2% 1.1% 0.0% 0.0% 0.0% 0.0%
Other assets 0.2% 0.7% 1.0% 1.2% 1.3% 2.4%
------ ------ ------ ------ ------ ------
Total assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue 8.0% 5.2% 6.3% 6.1% 6.3% 6.0%
Accounts payable and accrued expenses 5.7% 5.9% 9.8% 8.9% 7.9% 6.7%
Income taxes payable 0.7% 0.0% 0.0% 0.0% 0.1% (0.2)%
Accrued interest payable 0.0% 0.2% 0.1% 0.1% 0.1% 0.1%
Life policy and contract claims reserves 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Dental claims reserves 1.9% 0.8% 1.0% 1.2% 1.3% 1.3%
Other current liabilities 0.0% 1.0% 0.0% 0.0% (2.3)% (2.1)%
------ ------ ------ ------ ------ ------
Total current liabilities 16.3% 13.2% 17.3% 16.4% 13.5% 11.8%
Aggregate reserves for life policies
and contracts 4.1% 2.9% 3.5% 3.5% 3.7% 3.6%
Aggregate reserves for dental contracts 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Notes payable 0.0% 22.6% 37.5% 36.4% 37.3% 38.2%
Deferred tax liability 0.0% 0.0% 1.3% 1.2% 0.0% 0.0%
Deferred compensation expense 0.3% 0.2% 0.2% 0.2% 0.2% 0.2%
Other liabilities 0.2% 0.2% 0.3% 0.8% 0.3% 0.3%
------ ------ ------ ------ ------ ------
Total liabilities 21.0% 39.1% 60.0% 58.6% 55.0% 54.1%
------ ------ ------ ------ ------ ------
Commitments and contingencies
Stockholders' equity:
Preferred stock 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Common stock 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
Additional paid-in capital 74.0% 52.0% 64.7% 64.5% 67.2% 66.0%
Retained earnings 4.9% 8.8% (24.8)% (23.1)% (22.3)% (20.2)%
------ ------ ------ ------ ------ ------
Total stockholders' equity 79.0% 60.9% 40.0% 41.4% 45.0% 45.9%
------ ------ ------ ------ ------ ------
Total liabilities and stockholders' equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
</TABLE>
<PAGE> 13
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL STATEMENT OF CASH FLOWS INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED MARCH 31,
------------------------------ -------------------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,706 $ 9,892 ($53,705) $ 8,655 $ 7,594
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,855 5,248 5,735 4,312 4,214
Goodwill impairment -- -- 58,953 -- --
(Gain) loss on sale of assets held for sale 23 (174) -- -- --
Gain on sale of property and equipment -- (53) (12) (14) --
Loss on sale of property and equipment -- -- 65 -- --
Bad debt expense -- -- 183 -- --
Extraordinary loss on early extinguishment of debt 803 -- -- -- --
Deferred income tax expense (benefit) (255) 1,526 2,136 6,438 1,756
Changes in assets and liabilities:
Premiums receivable from subscribers (203) 1,813 (2,433) (1,548) (477)
Patient receivables -- -- (1,029) -- --
Income taxes receivable 213 (231) 71 (2,310) (169)
Other assets (1,181) (73) (3,487) (4,581) (3,482)
Unearned revenue 1,213 (1,445) (59) (756) (731)
Accounts payable and accrued expenses (424) (3,200) (300) (4,465) (5,075)
Income taxes payable 854 (903) -- -- --
Other liabilities (146) (2,895) (1,781) (1,707) 17
-------- -------- -------- -------- --------
Net cash provided by operating activities 8,458 9,505 4,337 4,024 3,646
-------- -------- -------- -------- --------
Cash flows from investing activities:
Additions to property and equipment (1,076) (2,394) (3,985) (2,686) (10,718)
Proceeds from sale of assets held for sale 1,323 694 -- -- --
Increase in restricted cash (106) (607) (175) (86) 53
Proceeds from sale of property and equipment -- 253 37 24 --
Cash surrender value of life insurance (28) 15 (28) (9) --
Purchases of businesses, net of cash acquired (31,188) (62,462) (20,770) (18,744) (4,850)
-------- -------- -------- -------- --------
Net cash used in investing activities (31,075) (64,501) (24,921) (21,501) (15,515)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Repayment of notes payable (26,600) 57,697 59,456 -- --
Borrowings under credit agreement 25,000 (16,034) (44,525) -- --
Repayments under credit agreement (25,000) (112) -- 14,307 (114)
Loan fees paid (240) -- -- -- --
Repayment of subordinated notes (7,947) -- -- -- --
Retirement of preferred stock (5,377) -- -- -- --
Proceeds from initial public offering, net of issuance cost 51,442 -- -- -- --
Proceeds from secondary public offering, net of issuance cost 42,047 -- -- -- --
Proceeds from exercise of stock options -- 66 21 21 --
Proceeds from employee stock purchase plan -- 48 53 -- --
Tax benefit realized from exercise of nonqualified stock-options -- 583 583 --
Other -- (98) -- -- --
-------- -------- -------- -------- --------
Net cash provided by financing activities 53,325 41,567 15,588 14,911 (114)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash equivalents 30,708 (13,429) (4,996) (2,566) (11,983)
Cash and equivalents, beginning of period 9,680 40,388 26,959 26,959 21,963
-------- -------- -------- -------- --------
Cash and equivalents, end of period $ 40,388 $ 26,959 $ 21,963 $ 24,393 $ 9,980
======== ======== ======== ======== ========
</TABLE>
<PAGE> 14
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------ ------------------ -----------------
MARCH 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums $35,422 $35,982 $35,425 $106,830
Affiliated practice revenue 5,292 5,824 6,092 17,207
Other revenue 1,728 1,757 1,989 5,474
------- ------- ------- --------
Total revenue 42,442 43,563 43,506 129,511
Expenses:
Dental care providers' fees and claim costs 19,428 19,505 19,514 58,448
Commissions 3,265 3,346 3,368 9,979
Premium taxes 261 194 225 680
DHMI operating expenses 4,605 5,262 5,649 15,516
General and administrative 8,374 8,293 8,036 24,704
Goodwill impairment 0 0 0 0
Depreciation and amortization 1,379 1,475 1,360 4,214
------- ------- ------- ---------
Total operating expenses 37,312 38,075 38,152 113,541
------- ------- ------- ---------
Operating income (loss) 5,130 5,487 5,354 15,970
Other (income)/ expense
Interest (income) (254) (245) (144) (643)
Interest expense 1,013 1,159 1,112 3,284
Other, net 0 (3) (12) (15)
------- ------- ------- ---------
Total other (income) expense 759 910 956 2,626
------- ------- ------- ---------
Income before income taxes 4,371 4,577 4,398 13,345
Provision for income taxes 1,878 1,972 1,901 5,751
------- ------- ------- ---------
% rate 43.0% 43.1% 43.2% 43.1%
Net income before extraordinary item $ 2,493 $ 2,605 $ 2,497 $ 7,594
======= ======= ======= =========
Diluted weighted average shares outstanding 10,175 10,181 10,188 10,174
Diluted earnings per share $ 0.25 $ 0.26 $ 0.25 $ 0.75
EBITDA (excluding one-time charges) 6,509 6,962 6,714 20,184
EBITDA per share $ 0.64 $ 0.68 $ 0.66 $ 1.98
After-tax EBITDA per share $ 0.36 $ 0.39 $ 0.37 $ 1.13
</TABLE>
<PAGE> 15
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
-------------------- --------------------
MARCH 31, JUNE 30,
1998 1998
-------------------- --------------------
<S> <C> <C>
Revenues:
Subscriber premiums 83.5% 82.6%
Affiliated practice revenue 12.5% 13.4%
Other revenue 4.1% 4.0%
-------------------- --------------------
Total revenue 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 45.8% 44.8%
Commissions 7.7% 7.7%
Premium taxes 0.6% 0.4%
DHMI operating expenses 10.9% 12.1%
General and administrative 19.7% 19.0%
Goodwill impairment 0.0% 0.0%
Depreciation and amortization 3.2% 3.4%
-------------------- --------------------
Total operating expenses 87.9% 87.4%
-------------------- --------------------
Operating income (loss) 12.1% 12.6%
Other (income)/expense
Interest (income) (0.6)% (0.6)%
Interest expense 2.4% 2.7%
Other, net 0.0% (0.0)%
-------------------- --------------------
Total other (income) expense 1.8% 2.1%
-------------------- --------------------
Income before income taxes 10.3% 10.5%
Provision for income taxes 4.4% 4.5%
-------------------- --------------------
Net income 5.9% 6.0%
==================== ====================
EBITDA (excluding one-time charges) 15.3% 16.0%
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1998
-------------------- --------------------
<S> <C> <C>
Revenues:
Subscriber premiums 81.4% 82.5%
Affiliated practice revenue 14.0% 13.3%
Other revenue 4.6% 4.2%
-------------------- --------------------
Total revenue 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 44.9% 45.1%
Commissions 7.7% 7.7%
Premium taxes 0.5% 0.5%
DHMI operating expenses 13.0% 12.0%
General and administrative 18.5% 19.1%
Goodwill impairment 0.0% 0.0%
Depreciation and amortization 3.1% 3.3%
-------------------- --------------------
Total operating expenses 87.7% 87.7%
-------------------- --------------------
Operating income (loss) 12.3% 12.3%
Other (income)/expense
Interest (income) (0.3)% (0.5)%
Interest expense 2.6)% 2.5%
Other, net (0.0)% (0.0)%
-------------------- --------------------
Total other (income) expense 2.2% 2.0%
-------------------- --------------------
Income before income taxes 10.1% 10.3%
Provision for income taxes 4.4% 4.4%
-------------------- --------------------
Net income 5.7% 5.9%
==================== ====================
EBITDA (excluding one-time charges) 15.4% 15.6%
</TABLE>
<PAGE> 16
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
---------------------------------------------------- ----------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1997 1997 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $35,636 $35,852 $35,982 $ 35,926 $143,396
Affiliated practice revenue 0 0 3,343 3,774 7,113
Other revenue 2,199 2,348 1,809 1,857 8,217
------- ------- ------- -------- --------
Total revenue 37,835 38,200 41,134 41,557 158,726
Expenses:
Dental care providers' fees and claim costs 19,544 19,906 19,849 22,391 [1] 81,690 [1]
Commissions 3,172 3,192 3,552 3,356 13,272
Premium taxes 265 256 263 263 1,047
DHMI operating expenses 0 0 0 0 0
General and administrative 7,860 7,967 10,231 18,260 [2] 44,318 [2]
Goodwill impairment 0 0 0 58,953 58,953
Depreciation and amortization 1,321 1,355 1,553 1,506 5,735
------- ------- ------- -------- --------
Total operating expenses 32,162 32,676 35,448 104,729 205,015
------- ------- ------- -------- --------
Operating income (loss) 5,673 5,524 5,686 (63,172)[3] (46,289)[4]
Other (income)/expense
Interest (income) (161) (254) (79) (231) (725)
Interest expense 708 738 783 1,010 3,239
Other, net (45) (16) (5) 68 2
------- ------- ------- -------- --------
Total other (income) expense 502 468 699 847 2,516
------- ------- ------- -------- --------
Income before income taxes 5,171 5,056 4,987 (64,019) (48,805)
Provision for income taxes 2,332 2,172 2,055 (1,659) 4,900
------- ------- ------- -------- --------
% rate 45.1% 43.0% 41.2% NM 10.0%
Net income before extraordinary item $ 2,839 $ 2,884 $ 2,932 $(62,360)[3] $(53,705)[4]
======= ======= ======= ======== ========
Diluted weighted average shares outstanding 10,167 10,179 10,238 10,110 10,098
Diluted earnings per share $ 0.28 $ 0.28 $ 0.29 $ (6.17)[3] $ (5.32)[4]
EBITDA (excluding one-time charges) 6,994 6,879 7,239 6,687 27,799
EBITDA per share $ 0.69 $ 0.68 $ 0.71 $ 0.66 $ 2.75
After-tax EBITDA per share $ 0.38 $ 0.39 $ 0.42 $ 0.37 $ 1.56
</TABLE>
- -----------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported $5.2 million in operating income, $2.4 million in net income
and $0.24 in net income per share.
[4] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported $22.1 million in operating income, $11.1 million in net
income and $1.10 in net income per share.
<PAGE> 17
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
----------------------------------------------------- ----------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
1997 1997 1997 1997 1997
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 94.2% 93.9% 87.5% 86.4% 90.3%
Affiliated practice revenue 0.0% 0.0% 8.1% 9.1% 4.5%
Other revenue 5.8% 6.1% 4.4% 4.5% 5.2%
------ ------ -------- ------- -------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 51.7% 52.1% 48.3% 53.9% [1] 51.5%[1]
Commissions 8.4% 8.4% 8.6% 8.1% 8.4%
Premium taxes 0.7% 0.7% 0.6% 0.6% 0.7%
DHMI operating expenses 0.0% 0.0% 0.0% 0.0% 0.0%
General and administrative 20.8% 20.9% 24.9% 43.9% [2] 27.9%[2]
Goodwill impairment 0.0% 0.0% 0.0% 141.9% 37.1%
Depreciation and amortization 3.5% 3.5% 3.8% 3.6% 3.6%
------ ------ -------- ------- -------
Total operating expenses 85.0% 85.5% 86.2% 252.0% 129.2%
------ ------ -------- ------- -------
Operating income (loss) 15.0% 14.5% 13.8% (152.0)%[3] (29.2)%[4]
Other (income)/ expense
Interest (income) (0.4)% (0.7)% (0.2)% (0.6)% (0.5)%
Interest expense 1.9% 1.9% 1.9% 2.4% 2.0%
Other, net (0.1)% (0.0)% (0.0)% 0.2% 0.0%
------ ------ -------- ------- -------
Total other (income) expense 1.3% 1.2% 1.7% 2.0% 1.6%
------ ------ -------- ------- -------
Income before income taxes 13.7% 13.2% 12.1% (154.1)% (30.7)%
Provision for income taxes 6.2% 5.7% 5.0% (4.0)% 3.1%
------ ------ -------- ------- -------
Net income 7.5% 7.5% 7.1% (150.1)%[3] (33.8)%[4]
====== ====== ======== ======= =======
EBITDA (excluding one-time charges) 18.5% 18.0% 17.6% 16.1% 17.5%
</TABLE>
- ----------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported an operating income margin of 12.5% and a net income margin
of 5.8%.
[4] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported an operating income margin of 13.9% and a net income margin
of 7.0%.
<PAGE> 18
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
--------------------------------------- ----------- -------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1996 1996 1996
--------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 30,831 $ 33,384 $ 35,443 $ 36,149 $ 135,807
Affiliated practice revenue -- -- -- -- --
Other revenue 554 1,377 1,704 1,627 5,262
-------- -------- -------- -------- ---------
Total revenue 31,385 34,761 37,147 37,776 141,069
Expenses:
Dental care providers' fees and claim costs 16,481 17,967 19,196 19,787 73,431
Commissions 3,013 3,091 2,949 3,131 12,184
Premium taxes 259 264 264 231 1,018
DHMI operating expenses -- -- -- -- --
General and administrative 6,771 7,831 7,964 7,828 30,394
Goodwill impairment -- -- -- -- --
Depreciation and amortization 1,047 1,287 1,389 1,430 5,153
-------- -------- -------- -------- ---------
Total operating expenses 27,571 30,440 31,762 32,407 122,180
-------- -------- -------- -------- ---------
Operating income (loss) 3,814 4,321 5,385 5,369 18,889
Other (income)/ expense
Interest (income) (153) (145) (117) (170) (585)
Interest expense 46 434 697 758 1,935
Other, net (10) (299) 96 (6) (219)
-------- -------- -------- -------- ---------
Total other (income) expense (117) (10) 676 582 1,131
-------- -------- -------- -------- ---------
Income before income taxes 3,931 4,331 4,709 4,787 17,758
Provision for income taxes 1,694 1,924 2,103 2,145 7,866
% rate -------- -------- -------- -------- ---------
43.1% 44.4% 44.7% 44.8% 44.3%
Net income before extraordinary item $ 2,237 $ 2,407 $ 2,606 $ 2,642 $ 9,892
======== ======== ======== ======== =========
Diluted weighted average shares outstanding 10,156 10,185 10,163 10,172 10,177
Diluted earnings per share $ 0.22 $ 0.24 $ 0.26 $ 0.26 $ 0.97
EBITDA (excluding one-time charges) 4,861 5,608 6,774 6,799 24,042
EBITDA per share $ 0.48 $ 0.55 $ 0.67 $ 0.67 $ 2.36
After-tax EBITDA per share $ 0.27 $ 0.31 $ 0.37 $ 0.37 $ 1.32
</TABLE>
<PAGE> 19
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1996 1996 1996
----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 98.2% 96.0% 95.4% 95.7% 96.3%
Affiliated practice revenue 0.0% 0.0% 0.0% 0.0% 0.0%
Other revenue 1.8% 4.0% 4.6% 4.3% 3.7%
----------- ----------- ------------- ------------ ------------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 52.5% 51.7% 51.7% 52.4% 52.1%
Commissions 9.6% 8.9% 7.9% 8.3% 8.6%
Premium taxes 0.8% 0.8% 0.7% 0.6% 0.7%
DHMI operating expenses 0.0% 0.0% 0.0% 0.0% 0.0%
General and administrative 21.6% 22.5% 21.4% 20.7% 21.5%
Goodwill impairment 0.0% 0.0% 0.0% 0.0% 0.0%
Depreciation and amortization 3.3% 3.7% 3.7% 3.8% 3.7%
----------- ----------- ------------- ------------ ------------
Total operating expenses 87.8% 87.6% 85.5% 85.8% 86.6%
----------- ----------- ------------- ------------ ------------
Operating income (loss) 12.2% 12.4% 14.5% 14.2% 13.4%
Other (income)/ expense
Interest (income) (0.5)% (0.4)% (0.3)% (0.5)% (0.4)%
Interest expense 0.1% 1.2% 1.9% 2.0% 1.4%
Other, net (0.0%) (0.9)% 0.3% (0.0)% (0.2)%
----------- ----------- ------------- ------------ ------------
Total other (income) expense (0.4%) (0.0)% 1.8% 1.5% 0.8%
----------- ----------- ------------- ------------ ------------
Income before income taxes 12.5% 12.5% 12.7% 12.7% 12.6%
Provision for income taxes 5.4% 5.5% 5.7% 5.7% 5.6%
----------- -------------- -------------- ------------ ------------
Net income 7.1% 6.9% 7.0% 7.0% 7.0%
=========== ============== ============== ============ ============
EBITDA (excluding one-time charges) 15.5% 16.1% 18.2% 18.0% 17.0%
</TABLE>
<PAGE> 20
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 22,790 $ 23,238 $ 31,463 $ 27,407 $ 104,898
Affiliated practice revenue -- -- -- -- --
Other revenue 240 238 409 875 1,763
------------ ----------- ------------ ------------ ------------
Total revenue 23,031 23,476 31,872 28,282 106,661
Expenses:
Dental care providers' fees and claim costs 13,700 13,832 18,802 15,884 62,218
Commissions 2,592 2,674 3,115 2,382 10,763
Premium taxes 324 353 375 340 1,392
DHMI operating expenses -- -- -- -- --
General and administrative 3,740 3,896 5,721 6,078 19,435
Goodwill impairment -- -- -- -- --
Depreciation and amortization 565 533 818 800 2,717
------------ ----------- ------------ ------------ ------------
Total operating expenses 20,921 21,288 28,831 25,484 96,525
------------ ----------- ------------ ------------ ------------
Operating income (loss) 2,109 2,188 3,041 2,798 10,136
Other (income)/expense
Interest (income) (31) (96) (181) (427) (735)
Interest expense 949 630 352 39 1,970
Other, net 12 (7) (23) (50) (68)
------------ ----------- ------------ ------------ ------------
Total other (income) expense 929 527 148 (438) 1,167
------------ ----------- ------------ ------------ ------------
Income before income taxes 1,180 1,661 2,893 3,236 8,969
Provision for income taxes 523 709 1,246 1,288 3,765
------------ ----------- ------------ ------------ ------------
% rate 44.3% 42.7% 43.1% 39.8% 42.0%
Net income before extraordinary item $ 658 $ 952 $ 1,647 $ 1,948 $ 5,204
============ =========== ============ ============ ============
Diluted weighted average shares outstanding 5,500 6,500 9,041 10,150 7,352
Diluted earnings per share $ 0.12 $ 0.15 $ 0.18 $ 0.19 $ 0.68
EBITDA (excluding one-time charges) 2,674 2,721 3,859 3,598 12,853
EBITDA per share $ 0.49 $ 0.42 $ 0.43 $ 0.36 $ 1.75
After-tax EBITDA per share $ 0.27 $ 0.24 $ 0.24 $ 0.22 $ 1.01
</TABLE>
<PAGE> 21
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------- -------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
---------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 99.0% 99.0% 98.7% 96.9% 98.3%
Affiliated practice revenue 0.0% 0.0% 0.0% 0.0% 0.0%
Other revenue 1.0% 1.0% 1.3% 3.1% 1.7%
---------- ---------- ------------ ------------ -------------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 59.5% 58.9% 59.0% 56.2% 58.3%
Commissions 11.3% 11.4% 9.8% 8.4% 10.1%
Premium taxes 1.4% 1.5% 1.2% 1.2% 1.3%
DHMI operating expenses 0.0% 0.0% 0.0% 0.0% 0.0%
General and administrative 16.2% 16.6% 17.9% 21.5% 18.2%
Goodwill impairment 0.0% 0.0% 0.0% 0.0% 0.0%
Depreciation and amortization 2.5% 2.3% 2.6% 2.8% 2.5%
---------- ---------- ------------ ------------ -------------
Total operating expenses 90.8% 90.7% 90.5% 90.1% 90.5%
---------- ---------- ------------ ------------ -------------
Operating income (loss) 9.2% 9.3% 9.5% 9.9% 9.5%
Other (income)/expense
Interest (income) (0.1)% (0.4)% (0.6)% (1.5)% (0.7)%
Interest expense 4.1% 2.7% 1.1% 0.1% 1.8%
Other, net 0.1% (0.0)% (0.1)% (0.2)% (0.1)%
---------- ---------- ------------ ------------ -------------
Total other (income) expense 4.0% 2.2% 0.5% (1.5%) 1.1%
---------- ---------- ------------ ------------ -------------
Income before income taxes 5.1% 7.1% 9.1% 11.4% 8.4%
Provision for income taxes 2.3% 3.0% 3.9% 4.6% 3.5%
---------- ---------- ------------ ------------ -------------
Net income before extraordinary item 2.9% 4.1% 5.2% 6.9% 4.9%
========== ========== ============ ============ =============
EBITDA (excluding one-time charges) 11.6% 11.6% 12.1% 12.7% 12.1%
</TABLE>
<PAGE> 22
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL EBITDA ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 2,674 $ 2,721 $ 3,859 $ 3,598 $ 12,853
EBITDA margin 11.6% 11.6% 12.1% 12.7% 12.1%
EBITDA per share $ 0.49 $ 0.42 $ 0.43 $ 0.36 $ 1.75
After-tax EBITDA per share $ 0.27 $ 0.24 $ 0.24 $ 0.22 $ 1.01
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1996 1996 1996
--------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 4,861 $ 5,608 $ 6,774 $ 6,799 $ 24,042
EBITDA margin 15.5% 16.1% 18.2% 18.0% 17.0%
EBITDA per share $ 0.48 $ 0.55 $ 0.67 $ 0.67 $ 2.36
After-tax EBITDA per share $ 0.27 $ 0.31 $ 0.37 $ 0.37 $ 1.32
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1997 1997 1997
--------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
EBITDA (excluding one-time charges) $ 6,994 $ 6,879 $ 7,239 $ 6,687 $ 27,799
EBITDA margin 18.5% 18.0% 17.6% 16.1% 17.5%
EBITDA per share $ 0.69 $ 0.68 $ 0.71 $ 0.66 $ 2.75
After-tax EBITDA per share $ 0.38 $ 0.39 $ 0.42 $ 0.37 $ 1.56
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1996
--------- ---------- -------------
<S> <C> <C> <C>
EBITDA $ 6,509 $ 6,962 $ 6,714
EBITDA margin 15.3% 16.0% 15.4%
EBITDA per share $ 0.64 $ 0.68 $ 0.66
After-tax EBITDA per share $ 0.36 $ 0.39 $ 0.37
</TABLE>
<PAGE> 23
The Robinson-Humphrey Company
PROJECT GOLDCAP
CONSOLIDATED PROJECTED INCOME STATEMENT INFORMATION [1]
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
-----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 (A) 1998 (A) 1998 (A) 1998
--------- -------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 35,422 $ 35,982 $ 35,425 $ 35,490
Affiliated practice revenue 5,292 5,824 6,092 6,397
Other revenue 1,728 1,757 1,989 1,764
-------- -------- -------- --------
Total revenue 42,442 43,563 43,506 43,651
Expenses:
Dental care providers' fees and claim costs 19,428 19,505 19,514 19,590
Commissions 3,265 3,346 3,368 3,265
Premium taxes 261 194 225 240
DHMI operating expenses 4,605 5,262 5,649 5,693
General and administrative 8,374 8,293 8,036 7,988
Depreciation and amortization 1,379 1,475 1,360 1,410
-------- -------- -------- --------
Total operating expenses 37,312 38,075 38,152 38,186
-------- -------- -------- --------
Operating income (loss) 5,130 5,488 5,354 5,464
Other (income)/expense
Interest (income) (254) (245) (144) (168)
Interest expense 1,013 1,159 1,112 1,059
Other, net -- (3) (12) --
-------- -------- -------- --------
Total other (income) expense 759 911 956 891
-------- -------- -------- --------
Income before income taxes 4,371 4,577 4,398 4,573
Provision for income taxes 1,878 1,972 1,901 1,971
-------- -------- -------- --------
% rate 43% 43% 43% 43%
Net income $ 2,493 $ 2,605 $ 2,497 $ 2,602
======== ======== ======== ========
Diluted weighted average shares outstanding 10,167 10,113 10,113 10,113
Diluted earnings per share $ 0.25 $ 0.26 $ 0.25 $ 0.26
EBITDA 6,509 6,963 6,714 6,874
EBITDA per share $ 0.64 $ 0.69 $ 0.66 $ 0.68
After-Tax EBITDA per share $ 0.37 $ 0.39 $ 0.38 $ 0.39
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING THREE MONTHS ENDING YEAR ENDING
------------ -------------------------------------------------------- ------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1999 1999 1999 1999 1999
------------ --------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 142,319 $ 35,671 $ 35,972 $ 36,276 $ 36,583 $ 144,502
Affiliated practice revenue 23,605 6,716 7,052 7,405 7,775 28,949
Other revenue 7,238 1,778 1,800 1,835 1,876 7,289
--------- -------- -------- -------- -------- ---------
Total revenue 173,162 44,166 44,824 45,516 46,234 180,740
Expenses:
Dental care providers' fees
and claim costs 78,037 19,762 19,928 20,097 20,340 80,127
Commissions 13,244 3,353 3,381 3,410 3,439 13,583
Premium taxes 920 265 269 273 277 1,084
DHMI operating expenses 21,209 5,910 6,206 6,516 6,842 25,475
General and administrative 32,691 7,729 7,844 7,965 7,975 31,514
Depreciation and amortization 5,624 1,469 1,476 1,426 1,433 5,804
--------- -------- -------- -------- -------- ---------
Total operating expenses 151,725 38,488 39,104 39,687 40,306 157,587
--------- -------- -------- -------- -------- ---------
Operating income (loss) 21,436 5,678 5,719 5,828 5,927 23,152
Other (income)/expense
Interest (income) (811) (230) (246) (278) (310) (1,064)
Interest expense 4,343 1,050 1,050 1,050 1,050 4,200
Other, net (15) -- -- -- -- --
--------- -------- -------- -------- -------- ---------
Total other (income) expense 3,517 820 804 772 740 3,136
--------- -------- -------- -------- -------- ---------
Income before income taxes 17,919 4,858 4,915 5,056 5,188 20,017
Provision for income taxes 7,722 2,089 2,113 2,174 2,231 8,607
--------- -------- -------- -------- -------- ---------
% rate 43% 43% 43% 43% 43% 43%
Net income $ 10,197 $ 2,769 $ 2,801 $ 2,882 $ 2,957 $ 11,410
========= ======== ======== ======== ======== =========
Diluted weighted average shares
outstanding 10,129 10,150 10,150 10,150 10,150 10,150
Diluted earnings per share $ 1.01 $ 0.27 $ 0.28 $ 0.28 $ 0.29 $ 1.12
EBITDA 27,060 7,147 7,195 7,254 7,360 28,956
EBITDA per share $ 2.67 $ 0.70 $ 0.71 $ 0.71 $ 0.73 $ 2.85
After-Tax EBITDA per share $ 1.52 $ 0.40 $ 0.40 $ 0.41 $ 0.41 $ 1.63
</TABLE>
- -----------------------
[1] Projections provided by Robinson-Humphrey research dated October 27, 1998.
<PAGE> 24
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED PROJECTED INCOME STATEMENT INFORMATION [1]
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 (A) 1998 (A) 1998 (A) 1998
-------- ------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums 83.5% 82.6% 81.4% 81.3%
Affiliated practice revenue 12.5% 13.4% 14.0% 14.7%
Other revenue 4.1% 4.0% 4.6% 4.0%
----- ----- ----- ------
Total revenue 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and
claim costs 45.8% 44.8% 44.9% 44.9%
Commissions 7.7% 7.7% 7.7% 7.5%
Premium taxes 0.6% 0.4% 0.5% 0.5%
DHMI operating expenses 10.9% 12.1% 13.0% 13.0%
General and administrative 19.7% 19.0% 18.5% 18.3%
Depreciation and amortization 3.2% 3.4% 3.1% 3.2%
----- ----- ----- ------
Total operating expenses 87.9% 87.4% 87.7% 87.5%
----- ----- ----- ------
Operating income (loss) 12.1% 12.6% 12.3% 12.5%
Other (income)/ expense
Interest (income) 0.6% 0.6% 0.3% 0.4%
Interest expense 2.4% 2.7% 2.6% 2.4%
Other, net 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ------
Total other (income) expense 1.8% 2.1% 2.2% 2.0%
----- ----- ----- ------
Income before income taxes 10.3% 10.5% 10.1% 10.5%
Provision for income taxes 4.4% 4.5% 4.4% 4.5%
----- ----- ----- ------
Net income 5.9% 6.0% 5.7% 6.0%
===== ===== ===== ======
EBITDA 15.3% 16.0% 15.4% 15.7%
<CAPTION>
YEAR ENDING THREE MONTHS ENDING YEAR ENDING
------------ ------------------------------------------------- ------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 (A) 1998 1999 1999 1999 1999
------------ --------- -------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 82.2% 80.8% 80.3% 79.7% 79.1% 80.0%
Affiliated practice revenue 13.6% 15.2% 15.7% 16.3% 16.8% 16.0%
Other revenue 4.2% 4.0% 4.0% 4.0% 4.1% 4.0%
------ ------ ------ ------ ------ ------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and
claim costs 45.1% 44.7% 44.5% 44.2% 44.0% 44.3%
Commissions 7.6% 7.6% 7.5% 7.5% 7.4% 7.5%
Premium taxes 0.5% 0.6% 0.6% 0.6% 0.6% 0.6%
DHMI operating expenses 12.2% 13.4% 13.8% 14.3% 14.8% 14.1%
General and administrative 18.9% 17.5% 17.5% 17.5% 17.2% 17.4%
Depreciation and amortization 3.2% 3.3% 3.3% 3.1% 3.1% 3.2%
------ ------ ------ ------ ------ ------
Total operating expenses 87.6% 87.1% 87.2% 87.2% 87.2% 87.2%
------ ------ ------ ------ ------ ------
Operating income (loss) 12.4% 12.9% 12.8% 12.8% 12.8% 12.8%
Other (income)/ expense
Interest (income) 0.5% 0.5% 0.5% 0.6% 0.7% 0.6%
Interest expense 2.5% 2.4% 2.3% 2.3% 2.3% 2.3%
Other, net 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------ ------
Total other (income) expense 2.0% 1.9% 1.8% 1.7% 1.6% 1.7%
------ ------ ------ ------ ------ ------
Income before income taxes 10.3% 11.0% 11.0% 11.1% 11.2% 11.1%
Provision for income taxes 4.5% 4.7% 4.7% 4.8% 4.8% 4.8%
------ ------ ------ ------ ------ ------
Net income 5.9% 6.3% 6.2% 6.3% 6.4% 6.3%
====== ====== ====== ====== ====== ======
EBITDA 15.6% 16.2% 16.1% 15.9% 15.9% 16.0%
</TABLE>
- -------------------------
[1] Projections provided by Robinson-Humprey research dated October 27, 1998.
<PAGE> 25
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMPARISON OF ROBINSON-HUMPHREY RESEARCH PROJECTIONS
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1998 YEAR ENDING DECEMBER 31, 1999
---------------------------------------------------- --------------------------------------------------
ROBINSON-HUMPHREY ROBINSON-HUMPHREY ROBINSON-HUMPHREY ROBINSON-HUMPHREY
RESEARCH - JULY RESEARCH - OCTOBER VARIANCE RESEARCH - JULY RESEARCH - OCTOBER VARIANCE
------------------- ------------------ ---------- ----------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED GOLDCAP
- --------------------
Revenues $178,357 $173,162 $(5,195) $195,492 $180,740 $14,752
% Growth 12.4% 9.1% (3.0)% 9.6% 4.4% 8.2%
EBITDA $27,413 $27,060 $ 353 $30,309 $28,956 $1,353
% Growth (1.4)% (2.7)% 1.3% 10.6% 7.0% 4.7%
% Margin 15.4% 15.6% 15.5% 16.0%
Operating income $21,518 $21,436 $ 82 $24,056 $23,152 $904
% Growth (2.5)% (2.8)% 0.4% 11.8% 8.0% 3.9%
% Margin 12.1% 12.4% 12.3% 12.8%
Net income $10,767 $10,197 $ 570 $12,431 $11,410 $1,021
% Growth (2.8)% (8.0)% 5.6% 15.5% 11.9% 8.9%
% Margin 6.0% 5.9% 6.4% 6.3%
BENEFITS COMPANY
- ----------------
Revenues $151,315 $149,557 $ 1,758 $157,492 $151,791 $5,701
% Growth (0.2)% (1.4)% 1.2% 4.1% 1.5% 3.8%
EBITDA $23,381 $24,664 $(1,283) $24,229 $25,482 $(1,253)
% Growth NA NA (5.2)% 3.6% 3.3% (4.9)%
% Margin 15.5% 16.5% 15.4% 16.8%
DHMI
- ----
Revenues $27,042 $23,605 $ 3,437 $38,000 $28,949 $9,051
% Growth 280.2% 231.9% 14.6% 40.5% 22.6% 31.3%
EBITDA $4,032 $2,396 $ 1,636 $6,080 $3,474 $2,606
% Growth NA NA 68.3% 50.8% 45.0% 75.0%
% Margin 14.9% 10.2% 16.0% 12.0%
</TABLE>
<PAGE> 26
The Robinson-Humphrey Company
PROJECT GOLDCAP
CONSOLIDATED PROJECTED INCOME STATEMENT INFORMATION [1]
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Benefits revenues $148,231 $153,750 $161,438 $171,124 $183,102 $195,920
DHMI patient revenues 22,975 25,474 28,116 31,032 34,250 37,803
DHDC management fee 2,229 2,344 2,587 2,855 3,152 3,478
Dentlease rental fees NA NA NA NA NA NA
-------- -------- -------- -------- -------- --------
Total revenues 173,435 181,568 192,141 205,011 220,504 237,201
% Growth 9.3% 4.7% 5.8% 6.7% 7.6% 7.6%
Expenses:
Benefits expenses 124,095 128,032 133,660 140,727 149,268 158,368
DHMI expenses 23,094 24,031 26,523 29,274 32,310 35,661
Depreciation and amortization 4,481 4,382 4,723 5,149 5,244 5,355
-------- -------- -------- -------- -------- --------
Total expenses 151,670 156,445 164,906 175,150 186,822 199,384
-------- -------- -------- -------- -------- --------
Operating income 21,765 25,123 27,235 29,861 33,682 37,817
% Growth (1.4)% 15.4% 8.4% 9.6% 12.8% 12.3%
Interest expense 3,690 4,100 4,100 4,100 4,100 4,100
-------- -------- -------- -------- -------- --------
Income before income taxes 18,075 21,023 23,135 25,761 29,582 33,717
Provision for income taxes 7,711 8,896 9,786 10,894 12,514 14,267
-------- -------- -------- -------- -------- --------
Net income $ 10,364 $ 12,127 $ 13,349 $ 14,867 $ 17,067 $ 19,449
======== ======== ======== ======== ======== ========
% Growth -6.5% 17.0% 10.1% 11.4% 14.8% 14.0%
Diluted shares outstanding 10,183 10,400 10,600 10,800 11,000 11,200
Diluted earnings per share $ 1.02 $ 1.17 $ 1.26 $ 1.38 $ 1.55 $ 1.74
EBITDA $ 26,246 $ 29,505 $ 31,958 $ 35,010 $ 38,926 $ 43,172
</TABLE>
- ---------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 27
The Robinson-Humphrey Company
PROJECT GOLDCAP
CONSOLIDATED PROJECTED COMMON-SIZED INCOME STATEMENT INFORMATION [1]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Benefits revenues 85.5% 84.7% 84.0% 83.5% 83.0% 82.6%
DHMI patient revenues 13.2% 14.0% 14.6% 15.1% 15.5% 15.9%
DHDC management fee 1.3% 1.3% 1.3% 1.4% 1.4% 1.5%
Dentlease rental fees NA NA NA NA NA NA
----- ----- ----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Benefits expenses 71.6% 70.5% 69.6% 68.6% 67.7% 66.8%
DHMI expenses 13.3% 13.2% 13.8% 14.3% 14.7% 15.0%
Depreciation and amortization 2.6% 2.4% 2.5% 2.5% 2.4% 2.3%
----- ----- ----- ----- ----- -----
Total expenses 87.5% 86.2% 85.8% 85.4% 84.7% 84.1%
Operating income 12.5% 13.8% 14.2% 14.6% 15.3% 15.9%
Interest expense 2.1% 2.3% 2.1% 2.0% 1.9% 1.7%
----- ----- ----- ----- ----- -----
Income before income taxes 10.4% 11.6% 12.0% 12.6% 13.4% 14.2%
Provision for income taxes 4.4% 4.9% 5.1% 5.3% 5.7% 6.0%
----- ----- ----- ----- ----- -----
Net income 6.0% 6.7% 6.9% 7.3% 7.7% 8.2%
===== ===== ===== ===== ===== =====
EBITDA 15.1% 16.3% 16.6% 17.1% 17.7% 18.2%
</TABLE>
- ---------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 28
The Robinson-Humphrey Company
PROJECT GOLDCAP
BENEFITS COMPANY
PROJECTED INCOME STATEMENTS [1]
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total revenues $148,231 $153,750 $161,438 $171,124 $183,102 $195,920
% Growth (0.7)% 3.7% 5.0% 6.0% 7.0% 7.0%
Expenses
Dental care providers' fees
and claim costs 79,413 81,488 85,562 90,696 97,044 103,837
Commissions 13,235 14,453 15,337 16,257 17,395 18,612
Premium taxes 908 942 989 1,048 1,122 1,200
General and administrative 30,539 31,149 31,772 32,726 33,707 34,719
Depreciation and amortization 3,596 3,471 3,792 4,196 4,267 4,351
-------- -------- -------- -------- -------- --------
Total expenses 127,691 131,503 137,452 144,923 153,535 162,719
-------- -------- -------- -------- -------- --------
Operating income 20,540 22,247 23,986 26,201 29,567 33,201
% Growth NA 8.3% 7.8% 9.2% 12.8% 12.3%
Interest expense 4,500 5,000 5,000 5,000 5,000 5,000
Less interest income 810 900 900 900 900 900
-------- -------- -------- -------- -------- --------
Income before income taxes 16,850 18,147 19,886 22,101 25,467 29,101
Provision for income taxes 7,246 7,803 8,551 9,503 10,951 12,513
-------- -------- -------- -------- -------- --------
Net income $ 9,605 $ 10,344 $ 11,335 $ 12,598 $ 14,516 $ 16,588
======== ======== ======== ======== ======== ========
% Growth NA 7.7% 9.6% 11.1% 15.2% 14.3%
EBITDA $ 24,136 $ 25,718 $ 27,778 $ 30,397 $ 33,834 $ 37,552
- -------------------------------------------------------------------------------------------------------------------------
TAX RATE 43.0% 43.0% 43.0% 43.0% 43.0% 43.0%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 29
The Robinson-Humphrey Company
PROJECT GOLDCAP
BENEFITS COMPANY
PROJECTED COMMON-SIZED INCOME STATEMENTS [1]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses
Dental care providers' fees and claim costs 53.6% 53.0% 53.0% 53.0% 53.0% 53.0%
Commissions 8.9% 9.4% 9.5% 9.5% 9.5% 9.5%
Premium taxes 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
General and administrative 20.6% 20.3% 19.7% 19.1% 18.4% 17.7%
Depreciation and amortization 2.4% 2.3% 2.3% 2.5% 2.3% 2.2%
----- ----- ----- ----- ----- -----
Total expenses 86.1% 85.5% 85.1% 84.7% 83.9% 83.1%
----- ----- ----- ----- ----- -----
Operating income 13.9% 14.5% 14.9% 15.3% 16.1% 16.9%
Interest expense 3.0% 3.3% 3.1% 2.9% 2.7% 2.6%
Less Interest income 0.5% 0.6% 0.6% 0.5% 0.5% 0.5%
----- ----- ----- ----- ----- -----
Income before income taxes 11.4% 11.8% 12.3% 12.9% 13.9% 14.9%
Provision for income taxes 4.9% 5.1% 5.3% 5.6% 6.0% 6.4%
----- ----- ----- ----- ----- -----
Net income 6.5% 6.7% 7.0% 7.4% 7.9% 8.5%
===== ===== ===== ===== ===== =====
EBITDA 16.3% 16.7% 17.2% 17.8% 18.5% 19.2%
</TABLE>
- ------------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 30
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL HEALTH MANAGEMENT, INC.
PROJECTED INCOME STATEMENTS [1]
SEC REPORTING FORMAT
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
----------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Patient revenues $22,975 $25,474 $28,116 $31,032 $34,250 $37,803
DHDC management fee 2,229 2,344 2,587 2,855 3,152 3,478
Dentlease rental fees NA NA NA NA NA NA
------- ------- ------- ------- ------- -------
Total revenues 25,204 27,818 30,703 33,887 37,402 41,281
% Growth -- 10.4% 10.4% 10.4% 10.4% 10.4%
Management fee expense 5 0 0 0 0 0
Operating expense 20,315 21,791 24,051 26,545 29,299 32,337
Unallocated corporate overhead 2,774 2,240 2,472 2,729 3,012 3,324
Depreciation expense 204 192 212 234 258 285
Amortization expense 681 719 719 719 719 719
------- ------- ------- ------- ------- -------
Total expenses 23,979 24,942 27,454 30,227 33,287 36,665
------- ------- ------- ------- ------- -------
Operating income 1,225 2,876 3,249 3,660 4,115 4,616
% Growth -- 134.8% 13.0% 12.7% 12.4% 12.2%
Interest expense (income) -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Income before income taxes 1,225 2,876 3,249 3,660 4,115 4,616
Income tax provision 466 1,093 1,235 1,391 1,564 1,754
------- ------- ------- ------- ------- -------
Net income $ 760 $ 1,783 $ 2,014 $ 2,269 $2,551 $2,862
======= ======= ======= ======= ======= =======
% Growth -- 134.8% 13.0% 12.7% 12.4% 12.2%
EBITDA $ 2,110 $ 3,787 $ 4,180 $ 4,613 $ 5,092 $ 5,620
</TABLE>
- ---------------------------------------------
[1] Projections dated October 13, 1998 provided by management for the years
ending December 31, 1998 and 1999. Projections for December 31, 2000 through
2003 estimated using constant growth rates and margin assumptions.
<PAGE> 31
PROJECT GOLDCAP
DENTAL HEALTH MANAGEMENT, INC.
PROJECTED COMMON-SIZED INCOME STATEMENTS [1]
SEC REPORTING FORMAT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Patient revenues 91.2% 91.6% 91.6% 91.6% 91.6% 91.6%
DHDC management fee 8.8% 8.4% 8.4% 8.4% 8.4% 8.4%
Dentlease rental fees NA NA NA NA NA NA
------ ------ ------ ------ ------ ------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Management fee expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Operating expense 80.6% 78.3% 78.3% 78.3% 78.3% 78.3%
Unallocated corporate overhead 11.0% 8.1% 8.1% 8.1% 8.1% 8.1%
Depreciation expense 0.8% 0.7% 0.7% 0.7% 0.7% 0.7%
Amortization expense 2.7% 2.6% 2.3% 2.1% 1.9% 1.7%
------ ------ ------ ------ ------ ------
Total expenses 95.1% 89.7% 89.4% 89.2% 89.0% 88.8%
------ ------ ------ ------ ------ ------
Operating income 4.9% 10.3% 10.6% 10.8% 11.0% 11.2%
Interest expense (income) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------ ------
Income before income taxes 4.9% 10.3% 10.6% 10.8% 11.0% 11.2%
Income tax provision 1.8% 3.9% 4.0% 4.1% 4.2% 4.2%
------ ------ ------ ------ ------ ------
Net income 3.0% 6.4% 6.6% 6.7% 6.8% 6.9%
====== ====== ====== ====== ====== ======
EBITDA 8.4% 13.6% 13.6% 13.6% 13.6% 13.6%
</TABLE>
- ----------------------------------------
[1]Projections dated October 13, 1998 provided by management for the years
ending December 31, 1998 and 1999. Projections for December 31, 2000 through
2003 estimated using constant growth rates and margin assumptions.
<PAGE> 32
The Robinson-Humphrey Company
<TABLE>
<CAPTION>
PROJECT GOLDCAP
COMPARISON OF GOLDCAP MANAGEMENT PROJECTIONS
- ---------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
YEAR ENDING DECEMBER 31, 1998 YEAR ENDING DECEMBER 31, 1999
-------------------------------------------------- ----------------------------------------------------
GOLDCAP GOLDCAP GOLDCAP GOLDCAP
MANAGEMENT - JUL. MANAGEMENT - OCT. VARIANCE MANAGEMENT - JUL. MANAGEMENT - OCT. VARIANCE
------------------ ----------------- ---------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED GOLDCAP
- --------------------
Revenues $175,026 $173,435 ($1,591) $190,938 $181,568 $(9,370)
% Growth 10.3% 9.3% (0.9)% 9.1% 4.7% (4.9)%
EBITDA $25,699 $26,246 $547 $31,097 $29,505 $(1,592)
% Growth (7.6)% (5.6)% 2.1% 21.0% 12.4% (5.1)%
% Margin 14.7% 15.1% 16.3% 16.3%
Operating income $19,834 $21,765 $1,931 $26,884 $25,123 $(1,761)
% Growth (10.1)% (1.4)% 9.7% 35.5% 15.4% (6.6)%
% Margin 11.3% 12.5% 14.1% 13.8%
Net income $9,541 $10,364 $823 $13,215 $12,127 $(1,088)
% Growth (13.9)% (6.5)% 8.6% 38.5% 17.0% (8.2)%
% Margin 5.5% 6.0% 6.9% 6.7%
Benefits Company
Revenues $150,496 $148,231 ($2,265) $163,785 $153,750 $(10,035)
% Growth (0.7)% (2.2)% (1.5)% 8.8% 3.7% (6.1)%
EBITDA $24,489 $24,136 ($353) $27,449 $25,718 $(1,731)
% Growth NA NA (1.4)% 12.1% 6.6% (6.3)%
% Margin 16.3% 16.3% 16.8% 16.7%
DHMI
Revenues $24,530 $25,204 $674 $27,153 $27,818 $665
% Growth 244.9% 254.3% 2.7% 10.7% 10.4% 2.4%
EBITDA $1,210 $2,110 $900 $3,648 $3,787 $139
% Growth NA NA 74.4% 201.5% 79.5% 3.8%
% Margin 4.9% 8.4% 13.4% 13.6%
</TABLE>
<PAGE> 33
The Robinson-Humphrey Company
PROJECT GOLDCAP
TRADING STATISTICS
JULY 27, 1998 - DECEMBER 28, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
AVERAGE CLOSING PRICE: AVERAGE DAILY VOLUME:
- ---------------------- ---------------------
<S> <C> <C> <C>
SINCE 7/27/98 ANNOUNC. $13.32 SINCE 7/27/98 ANNOUNC. 56,481
90 DAYS $12.73 90 DAYS 49,240
60 DAYS $11.73 60 DAYS 51,288
30 DAYS $10.99 30 DAYS 61,920
5 DAYS $10.23 5 DAYS 58,860
HIGH CLOSE (7/29/98) $16.88 HIGH VOLUME (12/16/98) 773,400
LOW CLOSE (12/24/98) $10.06 LOW VOLUME (12/11/98) 200
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
12/28/98 $10.31 $10.06 $10.19 59,200
12/24/98 10.31 10.06 10.06 6,700
12/23/98 10.31 10.06 10.31 79,100
12/22/98 10.38 10.00 10.31 72,600
12/21/98 10.25 10.00 10.25 76,700
12/18/98 10.38 10.00 10.38 16,200
12/17/98 10.69 10.00 10.50 38,500
12/16/98 11.38 10.00 10.63 773,400
12/15/98 11.69 11.25 11.38 2,800
12/14/98 11.31 11.25 11.31 500
12/11/98 11.75 11.75 11.75 200
12/10/98 11.81 11.25 11.31 3,200
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
12/9/98 11.88 11.25 11.25 800
12/8/98 11.38 11.25 11.25 27,000
12/7/98 11.81 11.31 11.38 61,400
12/4/98 11.50 11.25 11.25 8,900
12/3/98 12.25 11.25 11.38 47,000
12/2/98 11.75 11.00 11.75 152,300
12/1/98 11.13 10.00 11.13 205,200
11/30/98 10.75 9.88 10.44 25,400
11/27/98 10.75 10.75 10.75 2,000
11/25/98 10.88 10.75 10.75 2,500
11/24/98 11.06 10.69 10.75 36,300
11/23/98 11.13 10.81 10.81 46,400
11/20/98 11.19 10.38 11.00 35,900
11/19/98 11.50 11.00 11.06 40,200
11/18/98 11.50 11.25 11.25 2,500
11/17/98 11.63 11.38 11.50 14,800
11/16/98 11.88 11.50 11.63 18,100
11/13/98 12.00 11.75 11.88 1,800
11/12/98 12.00 11.56 11.75 5,000
11/11/98 12.13 11.69 11.75 20,400
11/10/98 11.94 11.88 11.88 14,200
11/9/98 12.25 11.81 11.88 51,800
11/6/98 12.38 12.00 12.00 3,800
11/5/98 12.38 12.00 12.00 11,900
11/4/98 12.25 12.00 12.00 28,800
11/3/98 12.38 12.00 12.00 49,400
11/2/98 12.38 12.00 12.00 108,300
10/30/98 12.38 11.75 11.88 74,400
10/29/98 12.38 12.00 12.06 46,800
10/28/98 12.50 12.13 12.13 119,200
10/27/98 13.50 12.13 12.38 111,800
10/26/98 13.38 13.00 13.19 2,900
10/23/98 12.75 12.75 12.75 2,300
10/22/98 13.63 12.88 13.00 40,100
10/21/98 14.13 13.00 13.00 49,900
10/20/98 13.50 12.63 13.50 4,400
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
10/19/98 13.25 12.50 12.63 21,400
10/16/98 13.13 13.00 13.13 9,100
10/15/98 13.06 12.75 12.88 34,300
10/14/98 13.19 12.63 13.00 11,600
10/13/98 12.81 12.63 12.81 12,500
10/12/98 12.75 12.00 12.50 33,300
10/9/98 12.25 10.63 12.25 83,500
10/8/98 12.13 10.50 10.94 97,600
10/7/98 13.25 11.88 12.25 103,600
10/6/98 14.00 12.50 13.00 54,000
10/5/98 14.00 13.75 14.00 1,800
10/2/98 14.00 13.63 14.00 11,600
10/1/98 13.75 13.00 13.75 60,700
9/30/98 14.13 13.25 13.63 183,600
9/29/98 14.13 14.00 14.13 4,500
9/28/98 14.13 14.00 14.13 20,800
9/25/98 14.25 13.88 13.94 82,000
9/24/98 14.50 14.00 14.00 57,000
9/23/98 15.00 14.25 14.25 37,100
9/22/98 14.88 14.25 14.44 18,100
9/21/98 14.63 14.00 14.25 90,000
9/18/98 15.00 14.25 15.00 15,200
9/17/98 14.63 14.25 14.50 34,000
9/16/98 14.75 14.00 14.69 15,800
9/15/98 14.88 14.25 14.88 6,400
9/14/98 14.75 14.25 14.75 6,900
9/11/98 15.13 14.75 14.75 30,900
9/10/98 15.00 14.38 15.00 9,100
9/09/98 15.63 14.75 15.00 29,400
9/08/98 15.69 15.25 15.56 22,600
9/04/98 15.63 15.25 15.44 18,100
9/03/98 15.13 14.25 15.13 45,700
9/02/98 14.50 14.00 14.38 13,900
9/01/98 14.88 14.00 14.44 41,700
8/31/98 15.13 14.75 14.88 25,000
8/28/98 15.38 14.88 15.00 173,000
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
8/27/98 15.50 14.50 14.50 32,700
8/26/98 15.88 15.31 15.50 228,200
8/25/98 15.50 15.13 15.31 27,500
8/24/98 15.75 15.50 15.50 14,200
8/21/98 15.50 15.00 15.25 3,800
8/20/98 15.75 15.63 15.63 6,400
8/19/98 15.94 15.75 15.78 15,100
8/18/98 16.13 15.88 16.13 26,200
8/17/98 16.25 15.75 16.25 4,700
8/14/98 16.19 16.00 16.06 3,500
8/13/98 16.13 15.75 16.13 26,600
8/12/98 16.38 16.00 16.13 40,200
8/11/98 16.38 15.88 16.00 245,200
8/10/98 16.75 16.38 16.44 134,800
8/07/98 16.75 16.50 16.63 81,400
8/06/98 16.50 16.44 16.50 98,400
8/05/98 16.63 16.25 16.44 112,700
8/04/98 16.75 16.63 16.63 56,300
8/03/98 16.75 16.69 16.75 42,200
7/31/98 16.75 16.69 16.75 51,600
7/30/98 16.88 16.63 16.72 94,600
7/29/98 16.88 16.63 16.88 205,100
7/28/98 17.00 15.75 16.75 299,700
7/27/98 13.50 12.75 13.50 130,100
</TABLE>
- --------------------------------
Source: AT Financial
<PAGE> 37
PROJECT GOLDCAP
DAILY PRICE AND TRADING VOLUME - JULY 27, 1998 THROUGH DECEMBER 28, 1998
- -------------------------------------------------------------------------------
(GRAPH)
[1] Goldcap announces TAGTCR merger.
[2] Goldcap announces third quarter
earnings shortfall.
[3] Goldcap announces possibility that TAGTCR merger
would not take place at $18/share.
<PAGE> 38
GOLDCAP
CLOSE PRICE INDEX COMPARISON
DAILY: 7/27/98 TO 12/28/98
(GRAPH)
<PAGE> 39
GOLDCAP
VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 7/27/98 TO 12/28/98
[GRAPH]
<PAGE> 40
GOLDCAP
CUMULATIVE VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 7/27/98 TO 12/28/98
[GRAPH]
<PAGE> 41
PROJECT GOLDCAP
LAST TWELVE MONTHS DAILY PRICE AND TRADING VOLUME SINCE JANUARY 2, 1998
- -------------------------------------------------------------------------------
(GRAPH)
[1] Goldcap warns of charges related to dental practice management business and
negative impact on earnings.
[2] Goldcap announces that its fourth quarter earnings will fall short of
estimates due to unusual charges.
[3] Goldcap charges weaken fourth quarter earnings; several analysts downgrade
stock.
[4] Goldcap meets first quarter consensus estimates with earnings of $0.25 per
share.
[5] Goldcap announces TAGTCR merger.
[6] Goldcap announces third quarter
earnings shortfall.
[7] Goldcap announces possibility that TAGTCR merger would not take place at
$18/share.
<PAGE> 42
GOLDCAP
CLOSE PRICE INDEX COMPARISON
DAILY: 1/1/98 TO 12/28/98
(GRAPH)
<PAGE> 43
GOLDCAP
VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 1/1/98 TO 12/28/98
[GRAPH]
<PAGE> 44
GOLDCAP
CUMULATIVE VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 1/1/98 TO 12/28/98
[GRAPH]
<PAGE> 45
PROJECT GOLDCAP
WEEKLY PRICE AND TRADING VOLUME - IPO THROUGH DECEMBER 28, 1998
- -------------------------------------------------------------------------------
(GRAPH)
[1] Goldcap IPO; shares rise 29% during the first day of trading.
[2] Goldcap announces record third quarter results with earnings up 300% over
the previous year.
[3] Goldcap reports fourth quarter earnings of $0.19, missing consenseus
estimates.
[4] Goldcap reports record first quarter earnings with a 240%
increase in net income over the previous year.
[5] Phyllis Klock appointed president; several analysts reiterate favorable
ratings.
[6] Goldcap reports record first quarter earnings with a 27% increase in net
income over the previous year.
[7] Goldcap reports third quarter earnings, meeting estimates.
[8] Goldcap warns of charges related to dental practice management business and
negative impact on earnings.
[9] Due to unusual and one-time charges,
Goldcap earnings down; several analysts downgrade stock.
[10] Goldcap announces TAGTCR merger.
[11] Goldcap announces third quarter earnings shortfall.
[12] Goldcap announces possibility that TAGTCR merger would not take place at
$18/share.
<PAGE> 46
GOLDCAP
CLOSE PRICE INDEX COMPARISON
WEEKLY: 5/26/95 TO 12/28/98
(GRAPH)
<PAGE> 47
GOLDCAP
VOLUME DISTRIBUTION BY PRICE RANGE
WEEKLY: 5/26/95 TO 12/28/98
(GRAPH)
<PAGE> 48
GOLDCAP
CUMULATIVE VOLUME DISTRIBUTION BY PRICE RANGE
WEEKLY: 5/26/95 TO 12/28/98
(GRAPH)
<PAGE> 49
The Robinson-Humphrey Company
PROJECT GOLDCAP
SHAREHOLDER OWNERSHIP ANALYSIS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NUMBER OF AS A PERCENT [GRAPH]
SHARES OF TOTAL
---------- ------------
<S> <C> <C>
Total Shares Outstanding as of September 30, 1998: 10,112,629 100.0%
<CAPTION>
Date Institutional Ownership:
- ---- ------------------------
<S> <C> <C> <C>
9/30/98 AID ASSOC FOR LUTHERANS 5,500 0.05%
12/31/97 ANB INVESTMENT MGMT & TR 8,682 0.09%
9/30/98 BANC ONE CORPORATION 10,500 0.10%
9/30/98 BANK OF NEW YORK 6,000 0.06%
9/30/98 BANKERS TRUST N Y CORP 34,400 0.34%
9/30/98 BARCLAYS BANK PLC 133,342 1.32%
9/30/98 BEAR STEARNS & CO 41,200 0.41%
9/30/98 BRANDYWINE ASSET MGMT. 51,700 0.51%
9/30/98 CAPSTONE ASSET MGMT. CO. 1,890 0.02%
9/30/98 COLLEGE RETIRE EQUITIES 47,400 0.47%
9/30/98 COLORADO PUBLIC EMPL RET 13,900 0.14%
9/30/98 DEERE & COMPANY 13,800 0.14%
6/30/98 DIMENSIONAL FUND ADVS. 699,600 6.92%
9/30/98 EATON VANCE MANAGEMENT 97,300 0.96%
9/30/98 EDGEMONT ASSET MGMT CORP 1,158,300 11.45%
9/30/98 EQUITABLE COMPANIES INC 9,500 0.09%
9/30/98 FIDELITY MGMT & RES CORP 1,011,300 10.00%
9/30/98 FIRST QUADRANT LP 11,000 0.11%
9/30/98 FLEET FINL GROUP INC 9,400 0.09%
9/30/98 GENERAL ELECTRIC COMPANY 446,300 4.41%
9/30/98 LASALLE NATIONAL BANK 436,300 4.31%
9/30/98 MASSACHUSETTS FINL SVCS 275,800 2.73%
9/30/98 MELLON BANK CORPORATION 20,113 0.20%
9/30/98 MERRILL LYNCH & CO INC 623 0.01%
9/30/98 NATIONSBANK CORPORATION 127,800 1.26%
9/30/98 NATIONWIDE ADVISORY SVCS 19,000 0.19%
9/30/98 NEUBERGER&BERM INST ASST 87,800 0.87%
9/30/98 NEUBERGER&BERMAN MGMT 227,900 2.25%
9/30/98 NEW YORK ST TEACHERS RET 35,900 0.36%
9/30/98 NOMURA ASSET MGMT CO LTD 4,500 0.04%
9/30/98 NORTHERN TRUST CORP 16,500 0.16%
9/30/98 NORWEST BK MINNESOTA N A 3,600 0.04%
9/30/98 PILGRIM BAXTER VALUE INV 27,000 0.27%
9/30/98 PRUDENTIAL INS CO/AMER 692,400 6.85%
9/30/98 PUTNAM INVESTMENT MGMT 575,700 5.69%
9/30/98 SELIGMAN J W & COMPANY 595,900 5.89%
9/30/98 STRONG CAPITAL MGMT INC 490,600 4.85%
9/30/98 TEXAS TEACHER RETIRM SYS 35,000 0.35%
9/30/98 VANGUARD GROUP INC 5,600 0.06%
9/30/98 WEISS PECK & GREER 280 0.00%
9/30/98 WORLD ASSET MANAGEMENT 9,500 0.09%
---------- -----
Total Institutional Holdings 7,498,830 74.2%
Insider Ownership:
Total Insider Holdings 884,332 [1] 8.7%
Total Retail Holdings 1,729,467 17.1%
</TABLE>
- ---------------------------------------
[1] All Directors and Executive Officers as a group as reported in the Goldcap
proxy dated March 30, 1998.
Source: CDA Spectrum as of 1/13/99.
<PAGE> 50
The Robinson-Humphrey Company
PROJECT GOLDCAP
INSTITUTIONAL OWNERSHIP HISTORY
QUARTERS ENDING SEPTEMBER 1995 THROUGH SEPTEMBER 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
13F INSTITUTION 9/30/98 6/30/98 3/31/98 12/31/97 9/30/97 6/30/97 3/31/97
- ---------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
EDGEMONT ASSET MGMT CORP 1,158,300 1,500,000 1,500,000 1,500,000 1,540,600 2,008,200 845,000
FIDELITY MGMT & RES CORP 1,011,300 718,100 750,400 618,400 463,400 355,900
PRUDENTIAL INS CO/AMER 692,400 707,100 713,100 575,800 497,000 542,500 7,600
SELIGMAN J W & COMPANY 595,900 755,700 755,700 750,900 750,900 747,800 436,500
PUTNAM INVESTMENT MGMT 575,700 575,700 756,910 753,610 774,510 805,410 1,010,185
STRONG CAPITAL MGMT INC 490,600 456,450 214,200 1,200 114,700 7,700 63,700
GENERAL ELECTRIC COMPANY 446,300 446,300 446,300 446,300 295,800 0 11,000
LASALLE NATIONAL BANK 436,300 436,300 436,300 437,400 297,000 10,800
MASSACHUSETTS FINL SVCS 275,800 283,800 288,800 859,195 994,195 994,695 736,795
NEUBERGER&BERMAN MGMT 227,900 252,900 252,900 302,900 302,900
BARCLAYS BANK PLC 133,342 135,029 193,420 209,563 211,934 200,134 170,434
NATIONSBANK CORPORATION 127,800 10,066 11,250
EATON VANCE MANAGEMENT 97,300 97,300 90,400
NEUBERGER&BERM INST ASST 87,800 89,700 84,500 89,800 89,800
BRANDYWINE ASSET MGMT. 51,700 51,700 2,500
COLLEGE RETIRE EQUITIES 47,400 101,400 9,100 15,100 9,100 9,100 6,100
BEAR STEARNS & CO 41,200 23,200 16 49 40 600
NEW YORK ST TEACHERS RET 35,900 35,900 35,900 35,900 35,900
TEXAS TEACHER RETIRM SYS 35,000 35,000 35,000 35,000 35,000 20,000
BANKERS TRUST N Y CORP 34,400 19,100 199,900 214,500 212,100 165,200 164,200
PILGRIM BAXTER VALUE INV 27,000
MELLON BANK CORPORATION 20,113 19,813 48,764 50,600 52,300 47,500 53,302
NATIONWIDE ADVISORY SVCS 19,000 19,000 19,000 19,000 19,000
NORTHERN TRUST CORP 16,500 12,500 10,500
COLORADO PUBLIC EMPL RET 13,900 7,900 0 6,400
DEERE & COMPANY 13,800 10,700 10,700 10,800 10,700 10,100 10,100
FIRST QUADRANT LP 11,000
BANC ONE CORPORATION 10,500 10,500 10,500 0 10,000
EQUITABLE COMPANIES INC 9,500 8,200 2,200 15,900 15,900 16,200 192,600
WORLD ASSET MANAGEMENT 9,500 9,400 9,300 9,800 9,800 11,500 10,800
FLEET FINL GROUP INC 9,400 9,900 9,900 9,900 9,900
BANK OF NEW YORK 6,000 5,700 5,400 2,400 2,400 2,300 2,200
VANGUARD GROUP INC 5,600 5,000 39,600 37,100 37,100 37,100 37,100
AID ASSOC FOR LUTHERANS 5,500 5,300 4,600
NOMURA ASSET MGMT CO LTD 4,500 4,500 4,500 4,500
NORWEST BK MINNESOTA N A 3,600
CAPSTONE ASSET MGMT. CO. 1,890 2,530 386 386 386
MERRILL LYNCH & CO INC 623 0 89 1,400 167
WEISS PECK & GREER 280 280 280 200 200
AMERICAN GENERAL CORP 0 2,500 2,500 2,500 2,500 2,000 2,000
BARON CAPITAL INC 0 20,000 0 30,000 25,000 17,500
QUAKER PARTNERS LLC 0 20,000
AAL CAPITAL MGMT CORP
AELTUS INVESTMENT MGMT
AETNA LIFE INS & ANNUITY
AIM MGMT GROUP INC 0 1,028,500
<CAPTION>
13F INSTITUTION 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95
- ---------------------------- --------- --------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
EDGEMONT ASSET MGMT CORP 845,000 405,000 405,000 405,000 505,000 635,000
FIDELITY MGMT & RES CORP 0 35,000 358,000
PRUDENTIAL INS CO/AMER 7,100
SELIGMAN J W & COMPANY 329,800 282,200 153,900 200,000
PUTNAM INVESTMENT MGMT 1,005,385 1,352,835 1,363,635 1,272,435 408,585 481,885
STRONG CAPITAL MGMT INC 0 44,750 7,725 116,475 30,500 13,700
GENERAL ELECTRIC COMPANY 12,300 12,300 12,300
LASALLE NATIONAL BANK
MASSACHUSETTS FINL SVCS 649,395 248,805 159,300 175,400 199,100 199,100
NEUBERGER&BERMAN MGMT
BARCLAYS BANK PLC 171,214 176,798 178,228
NATIONSBANK CORPORATION 0 16,200
EATON VANCE MANAGEMENT
NEUBERGER&BERM INST ASST
BRANDYWINE ASSET MGMT.
COLLEGE RETIRE EQUITIES 4,600 4,100
BEAR STEARNS & CO
NEW YORK ST TEACHERS RET
TEXAS TEACHER RETIRM SYS
BANKERS TRUST N Y CORP 165,700 167,050 114,050 43,450 360,850 309,250
PILGRIM BAXTER VALUE INV
MELLON BANK CORPORATION 52,300 47,100 34,100 16,600 16,600
NATIONWIDE ADVISORY SVCS
NORTHERN TRUST CORP
COLORADO PUBLIC EMPL RET
DEERE & COMPANY 8,100
FIRST QUADRANT LP
BANC ONE CORPORATION 106,522 106,522
EQUITABLE COMPANIES INC 168,600 134,700 119,400 143,200 93,800 108,300
WORLD ASSET MANAGEMENT 12,200 400 100 100 100
FLEET FINL GROUP INC
BANK OF NEW YORK 2,200
VANGUARD GROUP INC
AID ASSOC FOR LUTHERANS
NOMURA ASSET MGMT CO LTD
NORWEST BK MINNESOTA N A
CAPSTONE ASSET MGMT. CO.
MERRILL LYNCH & CO INC 0 100 2,700
WEISS PECK & GREER
AMERICAN GENERAL CORP 2,000 2,000 1,100
BARON CAPITAL INC
QUAKER PARTNERS LLC
AAL CAPITAL MGMT CORP 0 58,100
AELTUS INVESTMENT MGMT 0 23,500
AETNA LIFE INS & ANNUITY 2,500
AIM MGMT GROUP INC 1,027,100 1,027,100 798,300 670,900 85,400
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
13F INSTITUTION 9/30/98 6/30/98 3/31/98 12/31/97 9/30/97 6/30/97 3/31/97
- ---------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIED IRISH BANKS PLC
AMERICAN CENTURY COS
ANB INVESTMENT MGMT & TR 8,682 9,600 9,800 9,800
APODACA INVT GROUP INC
ARTISAN PARTNERS L P 0 442,000 368,800 245,600
BANK OF TOKYO LTD
BATTERYMARCH FINL MGMT
BENTLEY CAPITAL MGMT INC 0 25,000
BERGER ASSOCIATES INC
BERKELEY CAPITAL MGMT
BZW BARCLAYS GLBL INVTS
CALIF STATE TEACHERS RET 0 32,800 32,800 32,800 32,800 32,700
CHARLES SCHWAB INVT MGMT 0 4,400 4,400 4,400 4,400
COLUMBIA MANAGEMENT CO
COMERICA INC 0 9,700 11,500 10,800
DE GARMO & KELLEHER 0
DIMENSIONAL FUND ADVS. 699,600 699,600 354,900 317,600 280,600
DRIEHAUS CAPITAL MGMT
DUNCAN-HURST CAP MGMT
FIDUCIARY TRUST CO INTL. 0 26,100 87,600 48,300
FIRST INVESTORS MGMT CO 0 19,600
FIRST OF AMER INVT-S C I
FIRSTAR CORPORATION
FRANKLIN RESOURCES INC
FRED ALGER MANAGEMENT 0 346,750
FRONTIER CAPITAL MGMT CO
GARDNER LEWIS ASSET MGMT
GE INVESTMENT CORP
GEEWAX TERKER & COMPANY 0 29,900
GENERAL MOTORS INVT MGMT
GRANAHAN INVT MGMT INC 0 205,000 321,100
GW CAPITAL MGMT INC 0 22,900 48,000 35,000
HANCOCK JOHN ADVISERS
HILLIARD JJB, LYONS WL
HINTZ HOLMAN & HECKSHER
INVESTMENT ADVISERS INC 0 20,000
JACOBS LEVY EQUITY MGMT 0 14,100 14,100
JANUS CAPITAL CORP 0 801,750
JMC CAPITAL MGMT INC 0 25,036 26,945 123,380
LGT ASSET MANAGEMENT INC
LOOMIS SAYLES & COMPANY 0 139,100 358,500 295,400 47,300
LUTHER KING CAPITAL MGMT 0 35,000
MACKAY SHIELDS FINANCIAL 0 40,500 40,500 40,500 40,500
MACKENZIE FINANCIAL CORP 0 90,100 90,100 90,100
MASS MUTUAL LIFE INSUR 0
MENTOR INVT ADVISORS LLC 0 45,370
METROPOLITAN LIFE INSUR 0 5,400 700
MITCHELL HUTCHINS ASSET
MONETTA FINL SVCS INC
MORGAN J P & CO INC
MORGAN STANLEY D WITTER 0 17,000
NEW USA RESEARCH & MGMT
NEW YORK ST COMMON RET.
NICHOLAS CO 0 95,000 75,000
<CAPTION>
13F INSTITUTION 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95
- ---------------------------- --------- --------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ALLIED IRISH BANKS PLC 0 152,700
AMERICAN CENTURY COS 0 250,000 250,000 380,000
APODACA INVT GROUP INC 0 157,400
ANB INVESTMENT MGMT & TR 10,400 1,500
ARTISAN PARTNERS L P
BANK OF TOKYO LTD 0 2,500
BATTERYMARCH FINL MGMT 0 21,000 14,900
BENTLEY CAPITAL MGMT INC
BERGER ASSOCIATES INC 0 100,050 150,050 150,000 195,500 195,500
BERKELEY CAPITAL MGMT 0 153,100 2,700
BZW BARCLAYS GLBL INVTS 173,000 143,600 100,700
CALIF STATE TEACHERS RET 32,700 32,700 0 32,100 21,100
CHARLES SCHWAB INVT MGMT 4,400 4,400 4,100 2,700
COLUMBIA MANAGEMENT CO 0 220,000
COMERICA INC 12,200
DE GARMO & KELLEHER 40,000 40,000 80,000
DIMENSIONAL FUND ADVS.
DRIEHAUS CAPITAL MGMT 0 297,188 301,853
DUNCAN-HURST CAP MGMT 0 341,290 345,490 342,840 223,840
FIDUCIARY TRUST CO INTL. 0 10,000
FIRST INVESTORS MGMT CO
FIRST OF AMER INVT-S C I 0 184,750 185,050 109,150 107,850 102,050
FIRSTAR CORPORATION 0 31,500 0 54,400
FRANKLIN RESOURCES INC 0 12,000
FRED ALGER MANAGEMENT 361,650 367,750 294,200 289,200 235,700 174,000
FRONTIER CAPITAL MGMT CO 0 125,900 120,600
GARDNER LEWIS ASSET MGMT 0
GE INVESTMENT CORP 0 20,300
GEEWAX TERKER & COMPANY
GENERAL MOTORS INVT MGMT 0 47,500 65,500
GRANAHAN INVT MGMT INC
GW CAPITAL MGMT INC
HANCOCK JOHN ADVISERS 0 417,000 413,000 410,000 400,000
HILLIARD JJB, LYONS WL 100 100
HINTZ HOLMAN & HECKSHER 0 10,000
INVESTMENT ADVISERS INC
JACOBS LEVY EQUITY MGMT
JANUS CAPITAL CORP 961,750 671,925 377,425 0
JMC CAPITAL MGMT INC 128,005 130,960 179,660 234,150 260,710
LGT ASSET MANAGEMENT INC 0 15,000 0
LOOMIS SAYLES & COMPANY
LUTHER KING CAPITAL MGMT
MACKAY SHIELDS FINANCIAL 36,000 19,000 19,000 20,000 20,000 20,000
MACKENZIE FINANCIAL CORP 83,100 23,600 23,600 30,000
MASS MUTUAL LIFE INSUR 8,500 190,000 279,700 218,800 194,000 212,700
MENTOR INVT ADVISORS LLC 83,770 76,220 74,220 77,870 133,520 135,470
METROPOLITAN LIFE INSUR
MITCHELL HUTCHINS ASSET 0 137,900
MONETTA FINL SVCS INC 0 39,250 190,485 80,000
MORGAN J P & CO INC 0 185,700
MORGAN STANLEY D WITTER 0
NEW USA RESEARCH & MGMT 0 10,000
NEW YORK ST COMMON RET. 0 7,600
NICHOLAS CO 75,000 50,000 25,000
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
13F INSTITUTION 9/30/98 6/30/98 3/31/98 12/31/97 9/30/97 6/30/97 3/31/97
- ---------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NICHOLAS-APPLEGATE CAP.
NORTHERN TRUST CO/CONN 0 9,000
NORTHWESTERN MUTUAL INVT 0 186,600
NORTHWESTERN MUTUAL LIFE 0 143,100
OBERWEIS ASSET MGMT INC 0 15,000
ONE VALLEY BANK N A
PALISADE CAPITAL MGT LLC 0 69,800 304,800 219,800
PATTERSON J O & CO
PELL RUDMAN TRUST CO NA 0 39,425 37,675 35,050 14,800
PHOENIX HOME LIFE MUTUAL 0 17,500
PILGRIM BAXTER & ASSOCS 0 574,075
PIMCO ADVISORS L P
PORTFOLIO ADVISORY SVCS
PROVIDENT INVT COUNSEL 0 354,243
R S INVESTMENT MGMT INC 0
RENAISSANCE TECHNOLOGIES 0 12,400 0 10,200
REPUBLIC NATL BANK/N.Y.
ROBERT FLEMING(FLEM CAP)
ROBERTSON STEPHNS CO INV 0
ROTHSCHILD/PELL RUDMAN 0 51,775 51,950 53,100 21,800
SAFECO CORPORATION 0 293,500
SCHRODER CAP MGMT INTL. 0 418,940 281,440 249,840 237,000
SCUDDER KEMPER INVTS INC 0 293,900 288,900
SEARS INVESTMENT MGMT 0 15,100 19,000 19,000 13,200
SSI INVESTMENT MGMT INC
STACEY BRAUN ASSOC INC
STANDISH AYER & WOOD INC 0 11,900
STATE STREET CORP 0 37,914 37,614 29,200 27,000 27,400
SUNTRUST BANKS INC 0 160,824 202,302 214,170 217,089
T ROWE PRICE ASSOCIATES 0 21,600 21,600 19,800 19,800
TCW GROUP INC
THOMSON HORSTMANN&BRYANT
TRAVELERS INC 0 19,065 14,119 12,048 18,781 31,605
TURNER INVT PARTNERS INC
UNITED STATES TR/BOSTON
UNIVERSITY OF TEXAS INVT 0 46,600 41,300 28,700
USAA UNITED SVCS AUTO 0 150,000 110,000 110,000 45,000 45,000
VAN KAMPEN AMER CAPITAL
WALL STREET ASSOCIATES
WARBURG DILLON READ LLC 0 50,500
WARBURG PINCUS ASSET MGT
WELLS FARGO BANK N A
WILLIAM BLAIR & CO LLC 0 56,100 65,900
WILMINGTON TRUST COMPANY
WISCONSIN INVESTMT BOARD
ZWEIG-DIMENNA PARTNERS
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL HOLDINGS 6,790,548 7,593,638 8,078,638 9,275,296 9,069,283 8,866,011 9,335,064
TOTAL Number of Owners 42 45 58 58 66 69 60
Shares Outstanding (Millions) 10.11 10.11 10.11 10.11 10.11 10.11 10.06
Price at End of Period $ 13.63 $ 15.63 $ 15.38 $ 20.28 $ 25.00 $ 21.06 $ 28.00
Average Price of Period $ 14.63 $ 15.50 $ 17.83 $ 22.64 $ 23.03 $ 24.53 $ 31.63
Top 15 Holders Percentage 63.4%
<CAPTION>
13F INSTITUTION 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95
- ---------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NICHOLAS-APPLEGATE CAP. 0 239,000
NORTHERN TRUST CO/CONN
NORTHWESTERN MUTUAL INVT
NORTHWESTERN MUTUAL LIFE 350,500 344,100 284,100 323,000 328,900 328,900
OBERWEIS ASSET MGMT INC 15,000 15,000 15,000 15,000 15,000 15,000
ONE VALLEY BANK N A 0 2,100 2,300 2,300 2,900
PALISADE CAPITAL MGT LLC 0
PATTERSON J O & CO 0 46,000 55,000
PELL RUDMAN TRUST CO NA
PHOENIX HOME LIFE MUTUAL
PILGRIM BAXTER & ASSOCS 987,100 1,004,900 998,200 426,900 552,200 772,900
PIMCO ADVISORS L P 0 196,000 127,000
PORTFOLIO ADVISORY SVCS 0 88,290 66,110 58,610 42,030
PROVIDENT INVT COUNSEL 427,900 389,600 353,200 337,500 286,100 261,800
R S INVESTMENT MGMT INC 6,900 6,100 56,700 60,700 64,000
RENAISSANCE TECHNOLOGIES
REPUBLIC NATL BANK/N.Y. 0 6,020
ROBERT FLEMING(FLEM CAP) 0 10,000
ROBERTSON STEPHNS CO INV 22,300
ROTHSCHILD/PELL RUDMAN
SAFECO CORPORATION 0
SCHRODER CAP MGMT INTL. 232,400 6,000 6,000 6,000 6,000 9,000
SCUDDER KEMPER INVTS INC 286,200 259,800 266,600 263,900 227,900 189,000
SEARS INVESTMENT MGMT 12,000
SSI INVESTMENT MGMT INC 0 1,000
STACEY BRAUN ASSOC INC 0 17,700 17,700
STANDISH AYER & WOOD INC
STATE STREET CORP 33,800 11,500 27,100
SUNTRUST BANKS INC 222,280 20,065 148,277 89,794 62,376 62,376
T ROWE PRICE ASSOCIATES 16,500 12,000
TCW GROUP INC 0 50,000 40,000
THOMSON HORSTMANN&BRYANT 0 72,700
TRAVELERS INC 98,739 73,378 80,962 86,414 12,999 13,039
TURNER INVT PARTNERS INC 0 94,750 66,750 50,050 42,110 51,460
UNITED STATES TR/BOSTON 0 1,700
UNIVERSITY OF TEXAS INVT 0 14,500 0 16,400
USAA UNITED SVCS AUTO 45,000 45,000 45,000 45,000 50,000 50,000
VAN KAMPEN AMER CAPITAL 150,350 150,450 151,000 62,700 57,800
WALL STREET ASSOCIATES 0 102,150 95,100 86,500 66,800 100,600
WARBURG DILLON READ LLC 0 20,000
WARBURG PINCUS ASSET MGT 0 36,000
WELLS FARGO BANK N A 0 12,000
WILLIAM BLAIR & CO LLC 25,900
WILMINGTON TRUST COMPANY 0 5,300 5,300
WISCONSIN INVESTMT BOARD 0 175,700
ZWEIG-DIMENNA PARTNERS 0 57,000 32,000 25,000
---------- ---------- ---------- ---------- ---------- ----------
TOTAL HOLDINGS 9,189,510 9,127,228 9,390,312 7,962,873 7,026,438 6,576,153
TOTAL Number of Owners 59 63 64 60 63 52
Shares Outstanding (Millions) 10.06 10.06 10.06 10.06 10.02 10.02
Price at End of Period $ 35.25 $ 37.75 $ 46.50 $ 36.00 $ 41.5 $ 29.25
Average Price of Period $ 36.50 $ 42.13 $ 41.25 $ 38.75 $ 35.38 $ 25.13
</TABLE>
Source: CDA Spectrum as of December 28, 1998.
<PAGE> 53
The Robinson-Humphrey Company
PROJECT GOLDCAP
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
52 WEEK MARKET PRICE
LATEST ------------- PRICE AS %
COMPANY TICKER EXCHANGE FYE QUARTER HIGH LOW 12/28/98 OF HIGH
- ------- ------ -------- --- ------- ---- --- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. FCWI OTC DC 9/98 $ 16.50 $ 9.25 $ 13.00 78.8%
Safeguard Health Enterprises, Inc. SFGD OTC DC 9/98 13.62 3.50 3.50 25.7%
---------------------------------------------------------------------------- --------
AVERAGE 52.2%
MEDIAN 52.2%
---------------------------------------------------------------------------- --------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. FHS NYSE DC 9/98 $ 32.62 $ 5.87 $ 10.81 33.1%
Humana, Inc. HUM NYSE DC 9/98 32.12 12.25 18.31 57.0%
Maxicare Health Plans, Inc. MAXI OTC DC 9/98 13.12 2.62 5.50 41.9%
Mid Atlantic Medical Services, Inc. MME NYSE DC 9/98 14.00 4.43 9.69 69.2%
Oxford Health Plans, Inc. OXHP OTC DC 9/98 21.75 5.81 13.44 61.8%
PacifiCare Health Systems, Inc. PHSYA OTC DC 9/98 88.87 46.75 70.13 78.9%
United HealthCare Corp. UNH NYSE DC 9/98 73.93 29.56 44.50 60.2%
-------------------------------------------------------------------------------------
AVERAGE 57.5%
MEDIAN 60.2%
-------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners [2] ADPI OTC DC 9/98 $ 19.37 $ 7.12 $ 12.00 62.0%
Birner Dental Management Services [3] BDMS OTC DC 9/98 8.37 2.81 4.00 47.8%
Castle Dental Centers, Inc. CASL OTC DC 9/98 13.43 4.00 6.44 47.9%
Coast Dental CDEN OTC DC 9/98 30.87 7.68 10.63 34.4%
Dental Care Alliance, Inc. DENT OTC DC 9/98 15.75 7.87 10.88 69.0%
Gentle Dental Service Corp. GNTL OTC DC 9/98 12.50 5.12 7.25 58.0%
Monarch Dental Corporation MDDS OTC DC 9/98 19.75 3.62 4.03 20.4%
Pentegra Dental Group, Inc. [4] PEN AMEX MR 9/98 9.00 1.75 2.06 22.9%
------------------------------------------------------------------------------------
AVERAGE 45.3%
MEDIAN 47.9%
------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontix, Inc. AOI AMEX DC 9/98 $16.50 2.25 $ 3.38 20.5%
Orthalliance ORAL OTC DC 9/98 17.25 7.00 12.00 69.6%
Orthodontic Centers of America OCA NYSE DC 9/98 24.06 11.75 18.25 75.9%
------------------------------------------------------------------------------------
AVERAGE 55.3%
MEDIAN 69.6%
------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
OVERALL AVERAGE 51.7%
OVERALL MEDIAN 57.5%
-------------------------------------------------------------------------------------
GOLDCAP OTC DC 9/98 $ 20.87 $ 9.00 $ 10.19 48.8%
- ---------------------------
<CAPTION>
EARNINGS PER SHARE [1] PRICE/EARNINGS RATIO
------------------------ 5-YEAR ---------------------- 1999 P/E/
CAL. CAL. GROWTH CAL. CAL. 5-YEAR MARKET MARKET/
COMPANY LTM 1998E 1999E RATE [1] LTM 1998E 1999E GROWTH CAP'N BOOK
- ------- --- ----- ----- -------- --- ----- ----- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. $ 1.00 $ 1.05 $ 1.20 17.0% 13.0 x 12.4 x 10.8 x 0.64 x $ 47.4 1.8 x
Safeguard Health Enterprises, Inc. 0.04 0.66 0.83 38.0% 87.5 * 5.3 * 4.2 * 0.11 16.6 0.5 *
------------------------------------------------------------------------------------------
AVERAGE 27.5% 13.0 x 12.4 x 10.8 x 0.37 x 1.8 x
MEDIAN 27.5% 13.0 x 12.4 x 10.8 x 0.37 x 1.8 x
------------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. $ 0.93 $ 0.95 $ 1.19 15.0% 11.6 x 11.4 x 9.1 x 0.61 x $1,321.2 1.6 x
Humana, Inc. 1.22 1.27 1.47 16.0% 15.0 14.4 12.5 0.78 3,065.2 1.9
Maxicare Health Plans, Inc. (0.69) (0.59) 0.47 10.0% NM NM 11.7 1.17 98.6 1.7
Mid Atlantic Medical Services, Inc. 0.44 0.42 0.66 15.0% 20.0 * 23.1 * 14.7 * 0.98 480.8 2.6
Oxford Health Plans, Inc. (3.54) (4.57) (1.23) 25.0% NM NM NM NM 1,080.3 NM *
PacifiCare Health Systems, Inc. 3.48 4.18 5.03 20.0% 20.2 16.8 13.9 0.70 3,191.7 1.5
United HealthCare Corp. 2.53 2.61 2.94 19.0% 17.6 17.0 15.1 0.80 8,287.4 2.0
------------------------------------------------------------------------------------------
AVERAGE 17.1% 17.3 x 17.8 x 13.6 x 0.84 x 1.9 x
MEDIAN 16.0% 17.6 x 16.9 x 13.9 x 0.79 x 1.8 x
------------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners [2] $ 0.51 $ 0.54 $ 0.82 35.0% 23.5 x 22.2 x 14.6 x 0.42 x $ 89.2 1.9 x
Birner Dental Management Services [3] 0.13 0.25 0.39 33.0% 30.8 * 16.0 10.3 NA * 26.8 1.4
Castle Dental Centers, Inc. 0.47 0.52 0.74 35.0% 13.7 12.4 8.7 0.25 40.5 1.2
Coast Dental 0.67 0.71 0.99 35.0% 15.9 15.0 10.7 0.31 81.0 1.2
Dental Care Alliance, Inc. 0.42 0.52 0.71 40.0% 25.9 20.9 15.3 0.38 76.5 2.8
Gentle Dental Service Corp. (0.08) 0.13 0.49 27.0% NM 55.8 * 14.8 0.55 65.5 1.5
Monarch Dental Corporation 0.49 0.46 0.42 35.0% 8.2 8.8 9.6 0.27 48.1 0.8
Pentegra Dental Group, Inc. [4] NA 0.30 0.56 35.0% NA * 6.9 * 3.7 * 0.11 15.6 1.0
------------------------------------------------------------------------------------------
AVERAGE 34.4% 17.4 x 15.9 x 12.0 x 0.33 x 1.5 x
MEDIAN 35.0% 15.9 x 15.5 x 10.7 x 0.31 x 1.3 x
------------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontix, Inc. $ 0.32 $ 0.32 $ 0.38 17.0% 10.5 x 10.5 x 8.9 x 0.52 x $ 47.1 1.2 x
Orthalliance 0.56 0.58 0.71 26.0% 21.4 20.7 16.9 NA 159.7 2.8
Orthodontic Centers of America 0.65 0.70 0.94 35.0% 28.1 26.1 19.4 0.55 872.2 4.0
------------------------------------------------------------------------------------------
AVERAGE 26.0% 20.0 x 19.1 x 15.1 x 0.54 x 2.6 x
MEDIAN 26.0% 21.4 x 20.7 x 16.9 x 0.54 x 2.8 x
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
OVERALL AVERAGE 26.4% 17.6 x 16.5 x 12.8 x 0.54 x 1.8 x
OVERALL MEDIAN 26.5% 16.7 x 16.0 x 12.5 x 0.55 x 1.6 x
------------------------------------------------------------------------------------------
GOLDCAP $1.00 $1.01 $1.12 17.0% 10.2 x 10.1 x 9.1 x 0.54 x $ 103.0 1.5 x
</TABLE>
- ------------------------------------------------------
* Excluded from average.
NA - Not Available NM - Not Meaningful F - Fiscal Year Estimate
[1] Earnings Estimates are consensus estimates from the First Call Research
Network as of January 13, 1999 except for Orthodontic Centers of America
and Goldcap which are from Robinson-Humphrey Research. Excludes all
nonrecurring charges and gains.
[2] Initial public offering priced on April 15, 1998 at $15.00 per share.
[3] Initial public offering priced on February 11, 1998 at $7.00 per share.
[4] Initial public offering priced on March 24, 1998 at $8.50 per share.
<PAGE> 54
The Robinson-Humphrey Company
PROJECT GOLDCAP
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
<TABLE>
<CAPTION>
DEBT/ LTM
SHARES TOTAL TOTAL TOTAL FIRM -----------------------------
COMPANY OUTSTANDING DEBT CAP. CASH VALUE [1] REVENUES EBIT EBITDA
- ------- ----------- ----- ------ ----- --------- -------- ----- -------
(MM) ($MM) ($MM) ($MM) ($MM) ($MM) ($MM) ($MM)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. 3.646 $ 0.0 0.0% $ 13.4 $ 34.0 $ 62.5 $5.6 $ 6.6
Safeguard Health Enterprises, Inc. 4.747 42.7 55.0% 5.9 53.4 97.4 2.3 4.7
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. 122.191 $1,433.4 62.8% $ 913.7 $1,840.9 $ 8,429.5 $84.3 $204.1
Humana, Inc. 167.381 907.0 35.8% 2,347.0 1,625.2 9,507.0 67.0 197.0
Maxicare Health Plans, Inc. 17.925 0.0 0.0% 60.1 38.5 728.0 (26.2) (25.4)
Mid Atlantic Medical Services, Inc. 49.634 2.5 1.4% 157.9 325.5 1,141.3 17.3 28.6
Oxford Health Plans, Inc. 80.392 656.2 83.4% 1,121.4 615.1 4,635.4 744.6) (676.0)
PacifiCare Health Systems, Inc. 45.514 751.3 25.6% 1,175.9 2,760.7 9,441.7 196.3 [2] 315.7 [2]
United HealthCare Corp. 186.233 522.0 11.3% 1,189.0 7,620.4 15,519.0 417.0 590.0
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners 7.436 $ 12.1 20.5% $ 3.1 $ 98.2 $ 77.4 $5.7 $ 9.5
Birner Dental Management Services 6.696 1.3 6.5% 1.7 26.4 20.3 1.9 3.0
Castle Dental Centers, Inc. 6.292 27.7 44.7% 1.3 66.8 52.8 5.7 9.0
Coast Dental 7.622 6.2 8.7% 33.3 53.9 31.0 5.8 7.5
Dental Care Alliance, Inc. 7.031 3.1 10.2% 7.7 71.9 23.1 3.8 4.6
Gentle Dental Service Corp. 9.028 47.3 52.3% 1.8 110.9 82.4 2.1 5.5
Monarch Dental Corporation 11.932 72.1 53.8% 5.9 114.3 71.1 9.5 14.5
Pentegra Dental Group, Inc. 7.582 0.5 3.0% 0.7 15.4 16.2 (1.1) 0.4
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontics, Inc. 13.945 $ 20.3 33.2% $ 3.6 $ 63.8 $ 46.2 $ 6.8 [3] $ 9.5 [3]
Orthalliance 13.305 8.5 12.8% 4.0 164.1 67.4 12.1 14.0
Orthodontic Centers of America 47.792 23.9 9.8% 0.5 895.6 157.4 49.7 58.0
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
GOLDCAP 10.113 $56.5 45.4% $ 10.0 $ 149.5 $ 171.1 $21.2 $ 26.9
<CAPTION>
3 YEAR CAGR
FIRM VALUE TO: ----------------
EBIT EBITDA ---------------------------- NET
COMPANY MARGIN MARGIN REVENUES EBIT EBITDA REVENUES INCOME
- ------- ------- ------- -------- ---- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. 9.0% 10.6% 0.54 x 6.0 x 5.2 x 30.3% 28.8%
Safeguard Health Enterprises, Inc. 2.3% 4.9% 0.55 23.6 * 11.2 * 25.3% (5.7)%
--------------------------------------------------------------------------------------------------
AVERAGE 5.7% 7.7% 0.55 x 6.0 x 5.2 x 27.8% 11.6%
MEDIAN 5.7% 7.7% 0.55 x 6.0 x 5.2 x 27.8% 11.6%
--------------------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. 1.0% 2.4% 0.22 x 21.8 x 9.0 x 18.8% 15.1%
Humana, Inc. 0.7% 2.1% 0.17 24.3 * 8.2 30.8% (22.4)%
Maxicare Health Plans, Inc. (3.6)% (3.5)% 0.05 * NM NM 17.9% NM
Mid Atlantic Medical Services, Inc. 1.5% 2.5% 0.29 18.8 * 11.4 * 7.8% (68.2)%
Oxford Health Plans, Inc. (16.1)% (14.6)% 0.13 NM NM 54.7% NM
PacifiCare Health Systems, Inc. 2.1% 3.3% 0.29 14.1 8.8 55.8% 10.8%
United HealthCare Corp. 2.7% 3.8% 0.49 18.3 12.9 44.9% 30.1%
--------------------------------------------------------------------------------------------------
AVERAGE (1.7)% -0.6% 0.29 x 19.5 x 10.1 x 33.0% (6.9)%
MEDIAN 1.0% 2.4% 0.29 x 18.8 x 9.0 x 30.8% 10.8%
--------------------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners 7.4% 12.2% 1.27 x 17.2 x 10.4 x NA NA
Birner Dental Management Services 9.2% 14.6% 1.30 14.2 9.0 NA NA
Castle Dental Centers, Inc. 10.8% 17.0% 1.27 11.7 7.4 31.2% NM
Coast Dental 18.7% 24.3% 1.74 9.3 7.1 145.5% 392.7%
Dental Care Alliance, Inc. 16.4% 19.8% 3.11 * 18.9 15.7 * 218.5% NM
Gentle Dental Service Corp. 2.5% 6.7% 1.35 53.4 * 20.1 * NA NA
Monarch Dental Corporation 13.4% 20.4% 1.61 12.0 7.9 126.8% 16.2%
Pentegra Dental Group, Inc. (7.0)% 2.4% 0.95 NM 39.0 * NA NA
--------------------------------------------------------------------------------------------------
AVERAGE 8.9% 14.7% 1.36 x 13.9 x 8.4 x 130.5% 204.4%
MEDIAN 10.0% 15.8% 1.30 x 12.0 x 8.4 x 136.1% 204.4%
--------------------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontics, Inc. 14.8% 20.5% 1.38 x 9.3 x 6.7 x NA NA
Orthalliance 17.9% 20.7% 2.43 13.6 11.7 NA NA
Orthodontic Centers of America 31.6% 36.8% 5.69 * 18.0 15.4 68.0% 58.3%
--------------------------------------------------------------------------------------------------
AVERAGE 21.4% 26.0% 1.91 x 13.7 x 11.3 x 68.0% 58.3%
MEDIAN 17.9% 20.7% 1.91 x 13.6 x 11.7 x 68.0% 58.3%
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
AVERAGE 6.8% 10.4% 0.99 x 15.2 x 9.8 x 62.6% 45.6%
MEDIAN 5.0% 8.6% 1.11 x 14.2 x 9.0 x 38.0% 15.6%
--------------------------------------------------------------------------------------------------
GOLDCAP 12.4% 15.7% 0.87 x 7.1 x 5.6 x 22.0% 46.1%
</TABLE>
- ------------------------------------
* Excluded from average.
NA - Not Available NM - Not Meaningful
[1] Firm value equals market capitalization plus total debt and preferred stock
minus cash and short term investments.
[2] Excludes approximately $173 million in one-time charges.
[3] Excludes approximately $3.7 million in special charges.
<PAGE> 55
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
------------------------------------------------------------------
REVENUES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997 3 YEAR FIRST THREE QUARTERS 1998
---- ---------------- ---------------- ------ -------------------------
$ AMT $ AMT GROWTH $ AMT GROWTH CAGR $ AMT GROWTH
----- ----- ------ ----- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. $ 33.3 $ 44.1 32.4% $ 56.6 28.3% 30.3% $ 47.7 14.1%
Safeguard Health Enterprises, Inc. 60.7 72.7 19.7% 95.4 31.1% 25.3% 72.9 2.8%
United Dental Care, Inc. 78.6 112.7 43.4% 174.0 54.3% 48.8% 86.4 [1] (2.8)%
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. $5,047.1 $6,620.8 31.2% $ 7,120.7 7.5% 18.8% $ 6,556.3 24.9%
Humana, Inc. 4,605.0 6,677.0 45.0% 7,880.0 18.0% 30.8% 7,170.0 29.4%
Maxicare Health Plans, Inc. 477.3 562.8 17.9% 663.8 18.0% 17.9% 553.5 13.1%
Mid Atlantic Medical Services, Inc. 942.9 1,119.4 18.7% 1,096.6 (2.0)% 7.8% 869.9 5.4%
Oxford Health Plans, Inc. 1,746.0 3,032.6 73.7% 4,179.8 37.8% 54.7% 3,525.5 14.8%
PacifiCare Health Systems, Inc. 3,683.0 4,587.5 24.6% 8,935.2 94.8% 55.8% 7,097.2 7.7%
United HealthCare Corp. 5,511.0 9,889.0 79.4% 11,563.0 16.9% 44.9% 12,525.0 46.2%
GOLDCAP $ 106.7 $ 141.1 32.3% $ 158.7 12.5% 22.0% $ 129.5 10.5%
</TABLE>
- -------------------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 56
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL MEMBERSHIP ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
----------------------------------------------------------------------
MEMBERSHIP INFORMATION
(MEMBERS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
---- ------------------- ------------------- 3 YEAR
MEMBERS MEMBERS GROWTH MEMBERS GROWTH CAGR
------- ------- ------ ------- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. 364 458 25.8% 592 29.4% 27.6%
Safeguard Health Enterprises, Inc. 761 983 29.2% 1,165 18.5% 23.7%
United Dental Care, Inc. 937 1,729 84.5% 1,965 13.6% 44.8%
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. 1,900 3,326 75.1% 4,272 28.4% 49.9%
Humana, Inc. 3,800 4,900 28.9% 6,200 26.5% 27.7%
Maxicare Health Plans, Inc. 345 422 22.3% 517 22.5% 22.4%
Mid Atlantic Medical Services, Inc. 1,483 1,679 13.2% 1,687 0.5% 6.7%
Oxford Health Plans, Inc. 1,007 1,535 52.4% 2,008 30.8% 41.2%
PacifiCare Health Systems, Inc. 1,816 2,045 12.6% 3,791 85.4% 44.5%
United HealthCare Corp. 13,610 13,778 1.2% 13,064 (5.2)% (2.0)%
GOLDCAP 1,400 2,400 71.4% 2,185 (9.0)% 24.9%
<CAPTION>
FIRST QUARTER 1998 SECOND QUARTER 1998 THIRD QUARTER 1998
------------------ ------------------- ------------------
MEMBERS GROWTH [1] MEMBERS GROWTH [1] MEMBERS GROWTH [1]
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. 693 16.9% 643 (7.1)% 644 0.1%
Safeguard Health Enterprises, Inc. NA NA NA NA NA NA
United Dental Care, Inc. 1,845 (6.1)% 1,822 (1.2)% NA NA
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. 4,295 0.5% 4,351 1.3% 4,239 (2.6)%
Humana, Inc. 6,200 0.0% 6,200 0.0% 6,200 0.0%
Maxicare Health Plans, Inc. 531 2.6% 530 (0.1)% 492 (7.2)%
Mid Atlantic Medical Services, Inc. 1,741 3.2% 1,775 2.0% 1,789 0.8%
Oxford Health Plans, Inc. 2,096 4.4% 2,005 (4.3)% 1,925 (4.0)%
PacifiCare Health Systems, Inc. 3,688 (2.7)% 3,659 (0.8)% 3,600 (1.6)%
United HealthCare Corp. 13,055 (0.1)% 13,202 1.1% 13,367 1.2%
GOLDCAP 2,152 (1.5)% 2,141 (0.5)% 2,143 0.1%
</TABLE>
- ------------------------------
[1] Represents growth over prior quarter.
<PAGE> 57
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
EBITDA
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ------------------------------ -------------------------------
$ AMT MARGIN $ AMT MARGIN GROWTH $ AMT MARGIN GROWTH
----- ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. $ 3.6 10.7% $ 4.6 10.4% 29.3% $ 6.0 10.6% 29.8%
Safeguard Health Enterprises, Inc. 3.6 5.9% 4.2 5.8% 17.5% 6.8 7.2% 61.3%
United Dental Care, Inc. 7.5 9.5% 13.9 12.3% 86.5% 11.2 6.4% (19.5)%
Multi-Market HMOs
Foundation Health Systems, Inc. $390.0 7.7% $167.0 2.5% (57.2)% $ 354.3 5.0% 112.2%
Humana, Inc. 272.0 5.9% 112.0 1.7% (58.8)% 242.0 3.1% 116.1%
Maxicare Health Plans, Inc. 19.1 4.0% 11.0 2.0% (42.2)% (22.7) (3.4)% NM
Mid Atlantic Medical Services, Inc. 91.4 9.7% (10.8) (1.0) NM 17.1 1.6% NM
Oxford Health Plans, Inc. 98.7 5.7% 176.9 5.8% 79.3% (413.3) (9.9)% NM
PacifiCare Health Systems, Inc. 128.8 3.5% 161.8 3.5% 25.6% 267.9 3.0% 65.5%
United HealthCare Corp. 549.0 10.0% 544.0 5.5% (0.9)% 657.0 5.7% 20.8%
GOLDCAP $ 12.9 12.1% $ 24.0 17.0% 87.1% 27.8 17.5% 15.6%
<CAPTION>
FIRST THREE QUARTERS 1998
3 YEAR --------------------------------
CAGR $ AMT MARGIN GROWTH
---- ----- ------ ------
<S> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. 29.6% $ 5.1 10.6% 14.0%
Safeguard Health Enterprises, Inc. 37.7% 4.6 6.3% (31.2)%
United Dental Care, Inc. 22.5% 8.8 [1] 10.2% 6.5%
Multi-Market HMOs
Foundation Health Systems, Inc. (4.7)% $ 147.8 2.3% (50.4)%
Humana, Inc. (5.7)% 138.0 1.9% (24.6)%
Maxicare Health Plans, Inc. NM (15.5) (2.8)% NM
Mid Atlantic Medical Services, Inc. (56.7)% 22.0 2.5% 110.3%
Oxford Health Plans, Inc. NM (272.2) (7.7)% NM
PacifiCare Health Systems, Inc. 44.2% 273.3 3.9% 21.2%
United HealthCare Corp. 9.4% 417.0 3.3% (13.8)%
GOLDCAP 47.1% $ 20.2 15.6% (4.4)%
</TABLE>
- -------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 58
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
EBIT
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997
----------------- ------------------------------ -------------------------------
$ AMT MARGIN $ AMT MARGIN GROWTH $ AMT MARGIN GROWTH
----- ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. $ 3.1 9.4% $ 4.0 9.0% 25.6% $ 5.1 9.0% 29.3%
Safeguard Health Enterprises, Inc. 2.0 3.3% 1.9 2.6% (5.9)% 4.5 4.8% 141.4%
United Dental Care, Inc. 6.3 8.0% 11.6 10.3% 85.7% 6.1 3.5% (47.3)%
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. $300.6 6.0% $ 54.0 0.8% (82.0)% $255.9 3.6% 373.6%
Humana, Inc. 202.0 4.4% 14.0 0.2% (93.1)% 134.0 1.7% 857.1%
Maxicare Health Plans, Inc. 17.8 3.7% 9.7 1.7% (45.4)% (23.5) (3.5)% NM
Mid Atlantic Medical Services, Inc. 85.3 9.1% (18.6) (1.7)% NM 6.9 0.6% NM
Oxford Health Plans, Inc. 75.7 4.3% 134.0 4.4% 77.1% (474.4) (11.3)% NM
PacifiCare Health Systems, Inc. 100.2 2.7% 129.7 2.8% 29.5% 151.0 1.7% 16.4%
United HealthCare Corp. 455.0 8.3% 411.0 4.2% (9.7)% 511.0 4.4% 24.3%
GOLDCAP $ 10.1 9.5% $ 18.9 13.4% 86.4% $ 22.1 13.9% 16.8%
<CAPTION>
FIRST THREE QUARTERS 1998
3 YEAR ---------------------------------
CAGR $ AMT MARGIN GROWTH
---- ----- ------ ------
<S> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. 27.5% $ 4.3 9.1% 14.1%
Safeguard Health Enterprises, Inc. 50.7% 2.7 3.7% (45.6)%
United Dental Care, Inc. (1.1)% 6.0 [1] 7.0% 3.3%
Multi-Market HMOs
Foundation Health Systems, Inc. (7.7)% $ 52.8 0.8% (76.5)%
Humana, Inc. (18.6)% 41.0 0.6% (62.0)%
Maxicare Health Plans, Inc. NM (16.0) (2.9)% NM
Mid Atlantic Medical Services, Inc. (71.5)% 13.4 1.5% 343.0%
Oxford Health Plans, Inc. NM (322.8) (9.2)% NM
PacifiCare Health Systems, Inc. 22.8% 180.7 2.5% 33.4%
United HealthCare Corp. 6.0% 284.0 2.3% (24.9)%
GOLDCAP 47.5% $ 16.0 12.3% (5.4)%
</TABLE>
- --------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 59
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
1995 1996 1997 FIRST THREE QUARTERS 1998
---- ---------------- ------------------ 3 YEAR -------------------------
$ AMT $ AMT GROWTH $ AMT GROWTH CAGR $ AMT GROWTH
----- ----- ------ ----- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. $0.67 $ 0.76 13.4% $ 0.89 17.1% 15.3% $ 0.77 18.5%
Safeguard Health Enterprises, Inc. 0.45 0.30 (33.3)% 0.38 26.7% (8.1)% 0.16 (66.7)%
United Dental Care, Inc. 0.68 1.00 47.1% 0.64 (36.0)% (3.0)% 0.35 [1] 2.9%
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. $1.54 $ 0.52 (66.2)% $ 1.37 163.5% (5.7)% $ 0.72 (44.6)%
Humana, Inc. 1.16 0.95 (18.1)% 1.05 10.5% (4.9)% 0.93 22.4%
Maxicare Health Plans, Inc. 1.53 1.05 (31.4)% 0.63 (40.0)% (35.8)% (0.65) NM
Mid Atlantic Medical Services, Inc. 1.28 (0.06) NM 0.31 NM (50.8)% 0.31 72.2%
Oxford Health Plans, Inc. 0.71 1.25 76.1% (3.70) NM NM (3.79) NM
PacifiCare Health Systems, Inc. 3.62 4.18 15.5% 2.43 (41.9)% (18.1)% 3.34 53.2%
United HealthCare Corp. 1.57 1.76 12.1% 2.26 28.4% 20.0% 1.95 16.1%
GOLDCAP $0.68 $ 0.97 42.6% $ 1.10 13.4% 27.2% $ 0.75 (11.8)%
</TABLE>
- --------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 60
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC DENTAL MANAGED CARE COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES
-------------------------------------------------------------------------------
Goldcap PRICE / PRICE / PRICE / PRICE /
Valuation Parameter Value LTM EPS CAL. 1998 EPS CAL. 1999 EPS BOOK
- ------------------- ------- ------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
LTM EPS [2] $1.00 [3] 13.0 x
Est. 1998 EPS $1.01 [4] 12.4 x
Est. 1999 EPS $1.12 [4] 10.8 x
Book Value (as of 9/30/98) $67,869 1.8 x
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES LESS
---------------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE / FIRM VALUE / FIRM VALUE / FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT [2] LIABILITIES
- ------------------- ------- ------------- ----------- ------------ -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenue [2] $171,068 0.55 x $ 93,398 $ 46,501 $22,376
LTM Operating Income [2] $ 21,150 [3] 6.0 x $127,192 $ 46,501 $22,376
LTM EBITDA [2] $ 26,870 [3] 5.2 x $138,381 $ 46,501 $22,376
</TABLE>
<TABLE>
<CAPTION>
---------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [1]
----- -------------
<S> <C> <C>
LTM EPS [2] $131,464 $13.00
Est. 1998 EPS $126,456 $12.50
Est. 1999 EPS $122,700 $12.13
Book Value (as of 9/30/98) $122,570 $12.12
LTM Revenue [2] $ 24,521* $ 2.42*
LTM Operating Income [2] $ 58,315 $ 5.77
LTM EBITDA [2] $ 69,505 $ 6.87
-----------------------
- ---------------------------------------------------
MEAN EQUITY VALUE $105,168 $10.40
MEDIAN EQUITY VALUE $122,570 $12.12
- ---------------------------------------------------
</TABLE>
- ----------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Robinson-Humphrey research.
<PAGE> 61
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC DENTAL MANAGED CARE COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES
-----------------------------------------------------------
Goldcap PRICE / PRICE / PRICE / PRICE/
Valuation Parameter Value LTM EPS CAL. 1998 EPS CAL. 1999 EPS BOOK
- ------------------- --------- -------- ------------- ------------- -----
<S> <C> <C> <C> <C> <C>
LTM EPS [2] $ 1.00 [3] 13.0 x
Est. 1998 EPS $ 1.02 [4] 12.4 x
Est. 1999 EPS $ 1.17 [4] 10.8 x
Book Value (as of 9/30/98) $67,869 1.8 x
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES LESS
----------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE/ FIRM VALUE / FIRM VALUE/ FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT [2] LIABILITIES
- ------------------- --------- ------------ ------------- ----------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues [2] $171,068 0.55 x $ 93,398 $46,501 $22,376
LTM Operating Income [2] $ 21,150 [3] 6.0 x $127,192 $46,501 $22,376
LTM EBITDA [2] $ 26,870 [3] 5.2 x $138,381 $46,501 $22,376
</TABLE>
<TABLE>
<CAPTION>
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [1]
------- -------------
<S> <C> <C>
Valuation Parameter
- -------------------
LTM EPS [2] $131,464 $ 13.00
Est. 1998 EPS $127,708 $ 12.63
Est. 1999 EPS $128,178 $ 12.68
Book Value (as of 9/30/98) $122,570 $ 12.12
<CAPTION>
Valuation Parameter
- -------------------
<S> <C> <C> <C>
$ 24,521 * $ 2.42 *
LTM Revenues [2]
$ 58,315 $ 5.77
LTM Operating Income [2]
$ 69,505 $ 6.87
LTM EBITDA [2]
---------------------------------------------
MEAN EQUITY VALUE $106,290 $ 10.51
MEDIAN EQUITY VALUE $122,570 $ 12.12
--------------------------------------------
</TABLE>
- ----------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Goldcap management.
<PAGE> 62
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT
COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BENEFITS COMPANY
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES IMPLIED IMPLIED
---------------------------------------------- EQUITY EQUITY VALUE
Benefits PRICE / PRICE / VALUE PER SHARE [1]
Valuation Parameter Value CAL. 1998 EPS CAL. 1999 EPS ----- -------------
- ------------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Est. 1998 Net Income $ 9,605 [2] 12.4 x $118,919 $11.76
Est. 1999 Net Income $10,344 [2] 10.8 x $112,060 $11.08
<CAPTION>
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES
-----------------------------------------------
LESS
IMPLIED PV OF DHDC IMPLIED IMPLIED
Benefits FIRM VALUE/ FIRM LESS DEFERRED EQUITY EQUITY VALUE
Valuation Parameter Value LTM EBITDA VALUE NET DEBT[2] LIABILITIES VALUE PER SHARE [1]
- ------------------- -------- ----------- ----- ----------- ----------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM EBITDA [3] $25,041 [4] 5.2 x $128,962 $ 46,501 $ 22,376 $ 60,085 $5.94
-------------------------------------------------------
MEAN EQUITY VALUE $ 97,021 $ 9.59
MEDIAN EQUITY VALUE $112,060 $11.08
-------------------------------------------------------
<CAPTION>
DHMI
AVERAGE DENTAL PRACTICE MANAGEMENT COMPANIES MULTIPLES IMPLIED IMPLIED
------------------------------------------------------ EQUITY EQUITY VALUE
DHMI PRICE / PRICE / VALUE PER SHARE [2]
Valuation Parameter Value CAL. 1998 EPS CAL. 1999 EPS ----- -------------
- ------------------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Est. 1998 Net Income $ 760[2] 15.9 x $ 12,064 $ 1.19
Est. 1999 Net Income $1,783[2] 12.0 x $ 21,404 $ 2.12
<CAPTION>
AVERAGE DENTAL PRACTICE MANAGEMENT COMPANIES LESS
MULTIPLES IMPLIED PV OF DHDC IMPLIED IMPLIED
-------------------------------------------- FIRM LESS DEFERRED EQUITY EQUITY VALUE
DHMI Firm Value / VALUE NET DEBT[2] LIABILITIES VALUE PER SHARE [2]
Valuation Parameter Value LTM EBITDA ----- ----------- ----------- ----- -------------
- ------------------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM EBITDA [3] $1,829 [4] 8.4 x $ 15,290 $ 0 $ 0 $ 15,290 $ 1.51
---------------------------------------------------
MEAN EQUITY VALUE $ 16,253 $ 1.61
MEDIAN EQUITY VALUE $ 15,290 $ 1.51
---------------------------------------------------
---------------------------------------------------
SUM OF MEANS $113,274 $11.20
SUM OF MEDIANS $127,350 $12.59
---------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
<PAGE> 63
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC MULTI-MARKET HMO COMPANY MULTIPLES
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES IMPLIED
----------------------------------------------- IMPLIED EQUITY VALUE
Goldcap PRICE/ PRICE / PRICE / PRICE/ EQUITY PER
Valuation Parameter Value [1] LTM EPS CAL. 1998 EPS CAL. 1999 EPS BOOK VALUE SHARE [1]
- ------------------- ----------- ------- ------------- ------------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM EPS [2] $ 1.00 [3] 17.3 x $174,733 $17.28
Est. 1998 EPS $ 1.01 [4] 17.8 x $182,088 $18.01
Est. 1999 EPS $ 1.12 [4] 13.6 x $153,843 $15.21
Book Value (as of 9/30/98) $67,869 1.9 x $126,993 $12.56
- ----------------------------------------------------------------------------------------------------------------
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES LESS
-------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT[2] LIABILITIES
- ------------------- --------- ----------- ---------- ----------- ------- ----------- -----------
LTM Revenues [2] $171,068 0.29 x $ 49,904 $ 46,501 $ 22,376 $ NM $ NM
LTM Operating Income [2] $ 21,150 [3] 19.5 x $411,541 $ 46,501 $ 22,376 $342,664* $33.88*
LTM EBITDA [2] $ 26,870 [3] 10.1 x $270,365 $ 46,501 $ 22,376 $201,489 $19.92
---------------------------------------------------
MEAN EQUITY VALUE $167,829 $16.60
MEDIAN EQUITY VALUE $174,733 $17.28
---------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Goldcap management.
<PAGE> 64
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC MULTI-MARKET HMO COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES
------------------------------------------------------
Goldcap PRICE / PRICE / PRICE / PRICE /
Valuation Parameter Value LTM EPS CAL. 1998 EPS CAL. 1999 EPS BOOK
- ------------------- ------- ------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
LTM EPS [2] $ 1.00 [3] 17.3 x
Est. 1998 EPS $ 1.02 [4] 17.8 x
Est. 1999 EPS $ 1.17 [4] 13.6 x
Book Value (as of 9/30/98) $ 67,869 1.9 x
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES LESS
-------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT [2] LIABILITIES
- ------------------- -------- ------------ -------- ---------- ----- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues [2] $171,068 0.29 x $ 49,904 $46,501 $22,376
LTM Operating Income [2] $ 21,150 [4] 19.5 x $411,541 $46,501 $22,376
LTM EBITDA [2] $ 26,870 [4] 10.1 x $270,365 $46,501 $22,376
<CAPTION>
- -------------------------------------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
Valuation Parameter VALUE PER SHARE [1]
- ------------------- ----- -------------
<S> <C> <C>
LTM EPS [2] $174,733 $17.28
Est. 1998 EPS $183,891 $18.18
Est. 1999 EPS $160,711 $15.89
Book Value (as of 9/30/98) $126,993 $12.56
LTM Revenues [2] NM NM
LTM Operating Income [2] $342,664 * $33.88 *
LTM EBITDA [2] $201,489 $19.92
- -------------------------------------------------------
MEAN EQUITY VALUE $169,563 $16.77
MEDIAN EQUITY VALUE $174,733 $17.28
- -------------------------------------------------------
</TABLE>
- ----------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Goldcap management.
<PAGE> 65
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL MANAGED CARE HISTORICAL ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Purchase Price as a Multiple
----------------------------
Equity LTM Latest
Date Purchase Net Date Book
Acquiror Target Completed Price Income Value
- -------- ------ --------- ----- ------ -----
<S> <C> <C> <C> <C> <C>
CompDent Corporation DentiCare/UniLife 12/94 $ 17.6 NMx 5.9x
CompDent Corporation CompDent 7/5/95 33.0 20.8 7.4
Protective Life Corp. National Health Care 3/21/95 38.3 19.2 NA
United Dental Care Int'l. Dental Health Inc. 9/1/94 14.3 23.0 3.8
United Dental Care U.S. Dental 11/27/95 12.2 19.2 7.5
CompDent Corporation Texas Dental Plans 1/8/96 23.0 15.1 87.5*
United Dental Care Associated Health Plans 2/1/96 15.0 228.2* 19.6*
Protective Life Dental Care of Oklahoma 3/19/96 4.5 17.0 6.9
CompDent Corporation Dental Care Plus 5/9/96 38.0 17.2 71.0*
United Dental Care OraCare DPO 11/21/96 30.5 26.0 NM
United Dental Care Kansas City Dental Care 11/21/96 12.5 60.0* 25.9*
United Dental Care UICI Dental Companies 11/21/96 14.4 29.5 6.1
Safeguard Health Enterprises, Inc. Advantage Dental HealthPlans, Inc. 5/13/97 9.0 NM 7.2
Protective Life Corp. United Dental Care 9/11/98 166.8 28.6 1.3
-----------------------------------
AVERAGE 21.6X 5.8X
MEDIAN 21.9X 7.3X
-----------------------------------
<CAPTION>
Adjusted Purchase Price as a Multiple of
----------------------------------------
Adjusted LTM Op. LTM Op.
Purchase LTM Cash Flow Income
Acquiror Target Price[1] Revenues[2] (EBITDA) (EBIT)
- -------- ------ -------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
CompDent Corporation DentiCare/UniLife $ 15.8 0.57x 7.9x 9.6x
CompDent Corporation CompDent 28.6 0.89 9.6 11.4
Protective Life Corp. National Health Care 32.3 1.45 9.6 10.2
United Dental Care Int'l. Dental Health Inc. 14.3 0.29* 10.8 13.7
United Dental Care U.S. Dental 11.4 0.84 7.8 8.4
CompDent Corporation Texas Dental Plans 22.4 2.52* 8.4 8.9
United Dental Care Associated Health Plans 14.6 1.03 27.9* 42.1*
Protective Life Dental Care of Oklahoma 4.2 1.30 8.4 9.8
CompDent Corporation Dental Care Plus 36.9 1.59 9.0 9.8
United Dental Care OraCare DPO 32.4 2.82* 14.0 14.7
United Dental Care Kansas City Dental Care 11.9 1.33 30.2* 32.3*
United Dental Care UICI Dental Companies 11.6 0.69 15.4 17.7
Safeguard Health Enterprises, Inc. Advantage Dental HealthPlans, Inc. 9.0 1.70 NA 15.3
Protective Life Corp. United Dental Care 160.0 0.93 13.7 25.3*
----------------------------------------------------------------------------------
AVERAGE 1.12X 10.4X 11.8X
MEDIAN 1.17X 9.6X 12.6X
----------------------------------------------------------------------------------
</TABLE>
- ------------------------------
[1] Adjusted purchase price equals equity value plus assumed debt minus
acquired cash.
[2] Excludes investment income.
<PAGE> 66
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE HISTORICAL ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples
---------------------------------------
Price/ IMPLIED IMPLIED
Goldcap LTM Price/ EQUITY EQUITY VALUE
Valuation Parameter Value EPS Book VALUE PER SHARE [1]
- ------------------- -------- --- ---- -------- -------------
<S> <C> <C> <C> <C> <C>
LTM Net Income[2] $10,041[3,4] 21.6x $216,449 $21.40
9/30/98 Book Value $67,869 5.8x $391,600* $38.72*
---------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
----------------------------
Selected Relevant
Transaction Multiples
----------------------------
Less
Firm Firm Firm Implied PV of DHDC
Goldcap Value/ Value/ Value/ Firm Less Net Deferred
Valuation Parameter Value Revenues EBIT EBITDA Value Debt[1] Liabilities
- ------------------- ----- -------- ---- ------ --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues[2] $171,068 1.12x $191,773 $46,501 $22,376 $122,896 $12.15
LTM Operating Income[2] $ 21,150[3] 11.8x $249,030 $46,501 $22,376 $180,153 $17.81
LTM EBITDA[2] $ 26,870[3] 10.4x $280,060 $46,501 $22,376 $211,183 $20.88
----------------------------
--------------------------------------------------------------------
MEAN EQUITY VALUE $182,670 $18.06
MEDIAN EQUITY VALUE $211,183 $20.88
--------------------------------------------------------------------
</TABLE>
- --------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($64.8 million after-tax).
[4] Assumes 38% tax rate on excluded one-time charges.
<PAGE> 67
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL MANAGED CARE FORWARD ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Adjusted Purchase Price as a Multiple of
----------------------------------------
Equity Adjusted Projected
Date Purchase Purchase Projected Projected Op. Income
Acquiror Target Completed Price Price [1] Revenues [2] (EBITDA) (EBIT)
- -------- ------ --------- -------- --------- ------------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
CompDent Corporation DentiCare/UniLife 12/94 $17.6 $15.8 0.49x* 5.8x 6.2x
CompDent Corporation CompDent 7/5/95 33.0 28.6 0.76 8.1 9.7
Protective Life Corp. National Health Care 3/21/95 38.3 32.3 1.22 NA 8.3
Systems of Florida
CompDent Corporation Texas Dental Plans 1/8/96 23.0 22.4 2.01* 7.1 7.4
United Dental Care Kansas City Dental Care 11/21/96 12.5 11.9 1.24 7.0 7.5
------------------------------------------------------------
AVERAGE 1.07X 7.0X 7.8X
MEDIAN 1.23X 7.0X 7.5X
------------------------------------------------------------
</TABLE>
- -----------------------------------------------------
[1] Adjusted purchase price equals equity value plus assumed debt minus
acquired cash.
[2] Excludes investment income.
<PAGE> 68
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE FORWARD ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------
Selected Relevant
Transaction Multiples
----------------------------
Less
Firm Firm Firm Implied PV of DHDC IMPLIED IMPLIED
Goldcap Value/ Value/ Value/ Firm Less Net Deferred EQUITY EQUITY VALUE
Valuation Parameter Value Revenues EBIT EBITDA Value Debt[1] Liabilities VALUE PER SHARE [1]
- ------------------- ------- -------- ---- ------ ------- -------- ----------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proj. 1998 Revenues $173,162[3] 1.07x $185,365 $46,501 $22,376 $116,488 $11.52
Proj. 1998 Operating Income $21,436[3] 7.8x $167,576 $46,501 $22,376 $ 98,699 $ 9.76
Projected 1998 EBITDA $27,060[3] 7.0x $188,786 $46,501 $22,376 $119,909 $11.86
----------------------------
-----------------------------------------------------------------------------
MEAN EQUITY VALUE $111,698 $11.05
MEDIAN EQUITY VALUE $116,488 $11.52
-----------------------------------------------------------------------------
</TABLE>
- --------------------------------------
* - Excluded from mean.
[1] As of September 30, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
[3] Projections provided by Robinson-Humphrey research.
<PAGE> 69
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE FORWARD ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------
Selected Relevant
Transaction Multiples
----------------------------
Less
Firm Firm Firm Implied PV of DHDC IMPLIED IMPLIED
Goldcap Value/ Value/ Value/ Firm Less Net Deferred EQUITY EQUITY VALUE
Valuation Parameter Value Revenues EBIT EBITDA Value Debt[1] Liabilities VALUE PER SHARE [1]
- ------------------- ------- -------- ------ -------- -------- -------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proj. 1998 Revenues $173,435[3] 1.07x $185,657 $46,501 $22,376 $116,780 $11.55
Proj. 1998 Operating Income $ 21,765[3] 7.8x $170,148 $46,501 $22,376 $101,271 $10.01
Projected 1998 EBITDA $ 26,246[3] 7.0x $183,107 $46,501 $22,376 $114,230 $11.30
-------------------------------------------
-----------------------------------------------------------------------------
MEAN EQUITY VALUE $110,760 $10.95
MEDIAN EQUITY VALUE $114,230 $11.30
-----------------------------------------------------------------------------
</TABLE>
- -------------------------------
* - Excluded from mean.
[1] As of September 30, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
[3] Projections provided by Goldcap management.
<PAGE> 70
The Robinson-Humphrey Company
PROJECT GOLDCAP
PROTECTIVE LIFE/ UNITED DENTAL CARE ACQUISITION MULTIPLES [1]
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
FIRM EQUITY
VALUE (MM) VALUE (MM)
----------- -----------
$160.0 $166.8
<S> <C> <C> <C>
EQUITY VALUE/ LTM NET INCOME: 28.6 x FIRM VALUE/ MEMBERS: [2] $88.90
EQUITY VALUE/ PROJECTED 1998 NET INCOME: [3] 22.6 x FIRM VALUE/ 1998 REVENUES: [4] 0.88 x
EQUITY VALUE/ PROJECTED 1999 NET INCOME: [3] 18.9 x FIRM VALUE/ 1998 EBIT: [4] 14.4 x
EQUITY VALUE/ BOOK VALUE: 1.32 x FIRM VALUE/ 1998 EBITDA: [4] 9.5 x
FIRM VALUE/ LTM REVENUES: 0.93 x FIRM VALUE/ 1999 REVENUES: [4] 0.77 x
FIRM VALUE/ LTM EBIT: [5] 25.3 x FIRM VALUE/ 1999 EBIT: [4] 11.7 x
FIRM VALUE/ LTM EBITDA: [5] 13.7 x FIRM VALUE/ 1999 EBITDA: [4] 7.8 x
PREMIUMS: 1 DAY BEFORE ANNOUNCEMENT 20.5%
1 WEEK BEFORE ANNOUNCEMENT 49.2%
4 WEEKS BEFORE ANNOUNCEMENT 57.4%
</TABLE>
- ----------------------------------------------------------
[1] Protective Life paid $9.31 per share in cash and to swap 0.2893 of its
shares for each United Dental share.
[2] 1,800,000 members as of June 30, 1998.
[3] 1998 and 1999 estimates from the First Call Research Network as of July 26,
1998.
[4] Estimates according to BT Alex Brown research as of February 23, 1998.
[5] Excludes $9.6 million in one time charges.
<PAGE> 71
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PROTECTIVE LIFE/ UNITED DENTAL CARE HISTORICAL
ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS AND MEMBERS IN THOUSANDS)
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples
---------------------------------------
Price/
Goldcap LTM Price/
Valuation Parameter Value Net Income Book
- ------------------- ------- ---------- ------
<S> <C> <C> <C>
LTM Net Income [5] $10,041 [3,4] 28.6 x
9/30/98 Book Value $67,869 1.3 x
----------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Selected Relevant Transaction Multiples
---------------------------------------
Less
Implied PV of DHDC
Goldcap Firm Value/ Firm Value/ Firm Value/ Firm Value/ Firm Less Deferred
Valuation Parameter Value Revenues EBIT EBITDA Members Value Net Debt[5] Liabilities
- ------------------- ------- ----------- ----------- ---------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues [2] $171,068 0.93 x $159,632 $ 46,501 $22,376
LTM Operating Income [2] $ 21,150 [3] 25.3 x $534,940 $ 46,501 $22,376
LTM EBITDA [2] $ 26,870 [3] 13.7 x $367,044 $ 46,501 $22,376
Members [5] 2,143 $ 88.90 x $190,521 $ 46,501 $22,376
-------------------------------------------------------
<CAPTION>
TRANSACTION PREMIUMS
------------------------------------------
1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
----------- ------------ -------------
<S> <C> <C> <C> <C>
Goldcap Stock Price 1 day prior to announcement [6] $10.19 20.5%
Goldcap Stock Price 1 week prior to announcement [6] 10.31 49.2%
Goldcap Stock Price 4 weeks prior to announcement [6] 11.13 57.4%
<CAPTION>
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [1]
-------- -------------
<S> <C> <C>
$ 286,827 $ 28.36
$ 89,404 $ 8.84
$ 90,755 $ 8.97
$466,063* $46.09*
$298,167 $29.48
$121,644 $12.03
$124,134 $12.28
$155,576 $15.38
$177,110 $17.51
-------------------------------------------------------
MEAN EQUITY VALUE $167,952 $16.61
MEDIAN EQUITY VALUE $155,576 $15.38
-------------------------------------------------------
</TABLE>
- ---------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
[4] Assumes 38% tax rate on excluded one-time charges.
[5] As of September 30, 1998.
[6] Assumes announcement on December 29, 1998.
<PAGE> 72
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PROTECTIVE LIFE/ UNITED DENTAL CARE FORWARD
ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GOLDCAP CURRENT YEAR FORWARD YEAR
VALUATION PARAMETER VALUE P/E MULTIPLE P/E MULTIPLE
- ---------------------------------------- --------- -------------- ------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.01 [2] 22.6 x
Projected Cal. 1999 Net Income Per Share $1.12 [2] 18.9 x
<CAPTION>
----------------------------------------------------------------------------------------------
SELECTED RELEVANT TRANSACTION MULTIPLES
----------------------------------------------------------------------------------------------
GOLDCAP FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM VALUE/
VALUATION PARAMETER VALUE 1998 REVENUES 1999 REVENUES 1998 EBIT 1999 EBIT 1998 EBITDA 1999 EBITDA
- ------------------------------------ --------- ------------- ------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Projected Cal. 1998 Revenues $ 173,162 [2] 0.88 x
Projected Cal. 1999 Revenues $ 180,739 [2] 0.77 x
Projected Cal. 1998 Operating Income $ 21,436 [2] 14.4 x
Projected Cal. 1999 Operating Income $ 23,152 [2] 11.7 x
Projected Cal. 1998 EBITDA $ 27,060 [2] 9.5 x
Projected Cal. 1999 EBITDA $ 28,956 [2] 7.8 x
----------------------------------------------------------------------------------------------
<CAPTION>
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP --------------------------------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ------------------------------------ ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Stock Price 1 Day Prior [4] $10.19 20.5%
Stock Price 1 Week Prior [4] 10.31 49.2%
Stock Price 4 Weeks Prior [4] 11.13 57.4%
<CAPTION>
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [1]
-------- -------------
<C> <C>
$231,274 $22.87
$214,591 $21.22
LESS
IMPLIED PV OF DHDC
FIRM LESS DEFERRED
VALUE NET DEBT [3] LIABILITIES
-------- ----------- -----------
<S> <C> <C>
$152,176 $ 46,501 $22,376 $ 83,299 $ 8.24
$139,825 $ 46,501 $22,376 $ 70,948 $ 7.02
$308,677 $ 46,501 $22,376 $239,800 $23.71
$270,967 $ 46,501 $22,376 $202,090 $19.98
$258,234 $ 46,501 $22,376 $189,357 $18.72
$226,710 $ 46,501 $22,376 $157,833 $15.61
$124,134 $12.28
$155,576 $15.38
$177,110 $17.51
-------------------------------------------------------------
MEAN EQUITY VALUE $167,819 $16.60
MEDIAN EQUITY VALUE $177,110 $17.51
-------------------------------------------------------------
</TABLE>
- ----------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Robinson-Humphrey Research.
[3] As of September 30, 1998.
[4] Assumes announcement on December 29, 1998.
<PAGE> 73
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PROTECTIVE LIFE/ UNITED DENTAL CARE FORWARD
ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GOLDCAP CURRENT YEAR FORWARD YEAR
VALUATION PARAMETER VALUE P/E MULTIPLE P/E MULTIPLE
- ---------------------------------------- --------- -------------- ------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.02 [2] 22.6 x
Projected Cal. 1999 Net Income Per Share $1.17 [2] 18.9 x
<CAPTION>
---------------------------------------------------------------------------------------------
SELECTED RELEVANT TRANSACTION MULTIPLES
---------------------------------------------------------------------------------------------
GOLDCAP FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM VALUE
VALUATION PARAMETER VALUE 1998 REVENUES 1999 REVENUES 1998 EBIT 1999 EBIT 1998 EBITDA 1999 EBITDA
- ------------------------------------ --------- ------------- ------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Projected Cal. 1998 Revenues $ 173,435 [2] 0.88 x
Projected Cal. 1999 Revenues $ 181,568 [2] 0.77 x
Projected Cal. 1998 Operating Income $ 21,765 [2] 14.4 x
Projected Cal. 1999 Operating Income $ 25,123 [2] 11.7 x
Projected Cal. 1998 EBITDA $ 26,246 [2] 9.5 x
Projected Cal. 1999 EBITDA $ 29,505 [2] 7.8 x
----------------------------------------------------------------------------------------------
<CAPTION> --------------------------------------------------------------
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP --------------------------------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ------------------------------------ ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Stock Price 1 Day Prior [4] $10.19 20.5%
Stock Price 1 Week Prior [4] 10.31 49.2%
Stock Price 4 Weeks Prior [4] 11.13 57.4%
<CAPTION>
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [1]
-------- -------------
<C> <C>
$233,055 $23.05
$223,414 $22.09
LESS
IMPLIED PV OF DHDC
FIRM LESS DEFERRED
VALUE NET DEBT [3] LIABILITIES
-------- ----------- -----------
<S> <C> <C>
$152,416 $ 46,501 $22,376 $ 83,539 $ 8.26
$140,466 $ 46,501 $22,376 $ 71,589 $ 7.08
$313,415 $ 46,501 $22,376 $244,538 $24.18
$294,036 $ 46,501 $22,376 $225,159 $22.27
$250,466 $ 46,501 $22,376 $181,589 $17.96
$231,009 $ 46,501 $22,376 $162,132 $16.03
$124,134 $12.28
$155,576 $15.38
$177,110 $17.51
-------------------------------------------------------------
MEAN EQUITY VALUE $171,076 $16.92
MEDIAN EQUITY VALUE $177,110 $17.51
-------------------------------------------------------------
</TABLE>
- -------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Robinson-Humphrey Research.
[3] As of September 30, 1998.
[4] Assumes announcement on December 29, 1998.
<PAGE> 74
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL PRACTICE MANAGEMENT COMPANY ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of
Equity -------------------------------
Date Purchase LTM Latest Date
Acquiror Target Completed Price Net Income Book Value
- -------- ------ --------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gentle Dental Services Corp. Pinehurst Dental Clinic 7/95 $ 0.6 NMx NMx
Gentle Dental Services Corp. Scott Campbell, DDS, PS 9/95[1] 0.6 NM 23.1
Coast Dental Volusia (Richard J. Shawn, DDS) 4/96 1.8 NM NA
Castle Dental Centers 1st Dental Care 5/96 6.0 39.5 NM
Castle Dental Centers Mid-South Dental Centers 5/96 4.8 NM 36.4*
Birner Dental Management Family Dental Group 6/96 3.3 NM NA
Castle Dental Centers Horizon Dental Centers 8/96 3.2 36.0 NM
Monarch Dental Midwest Dental 8/96 10.9 157.0* 10.7
Coast Dental Seminole 11/96 2.5 NA 8.0
Dentalco, Inc. Nanston, Inc. 1/97 20.8 NM 12.8
Dentalco, Inc. The Dental Center, Inc. 2/97 4.0 NM 132.0*
Dentalco, Inc. Modern Dental 5/97 9.6 29.3 NM
Castle Dental Centers SW Dental 8/97 6.8 18.3 44.8*
Birner Dental Management Gentle Dental & Affiliate 9/97 3.5 14.2 6.3
Gentle Dental Service Corp. Dental Care Alliance Inc. Pending 67.0 35.4 2.6
Monarch Dental Valley Forge Dental 9/98 18.5 NM 11.6*
-------------------------------------
AVERAGE 28.8X 10.6X
MEDIAN 35.4X 12.2X
-------------------------------------
<CAPTION>
Adjusted Purchase Price as a
Multiple of
------------------------------------
Adjusted Adjusted LTM Op. LTM Op.
Purchase LTM Cash Flow Income
Acquiror Target Price[1] Revenues[2] (EBITDA) (EBIT)
- -------- ------ -------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
Gentle Dental Services Corp. Pinehurst Dental Clinic $ 0.7 0.90x 9.0x 15.1x
Gentle Dental Services Corp. Scott Campbell, DDS, PS 0.6 0.90 NM NM
Coast Dental Volusia (Richard J. Shawn, DDS) 1.8 0.62 NM NM
Castle Dental Centers 1st Dental Care 7.1 1.10 10.5 16.1
Castle Dental Centers Mid-South Dental Centers 5.3 0.98 33.4* NM
Birner Dental Management Family Dental Group 3.3 0.69 NM NM
Castle Dental Centers Horizon Dental Centers 4.3 0.79 22.6* 22.8*
Monarch Dental Midwest Dental 12.4 0.81 19.7 74.7*
Coast Dental Seminole 2.3 0.69 5.3 5.3
Dentalco, Inc. Nanston, Inc. 23.9 1.13 28.2* 182.7*
Dentalco, Inc. The Dental Center, Inc. 4.2 0.99 83.4* NM
Dentalco, Inc. Modern Dental 13.4 0.91 12.3 19.7
Castle Dental Centers SW Dental 6.4 1.21 8.6 10.1
Birner Dental Management Gentle Dental & Affiliate 3.3 0.67 6.9 8.3
Gentle Dental Service Corp. Dental Care Alliance Inc. 60.1 3.47* 20.2* 24.4*
Monarch Dental Valley Forge Dental 60.5 1.64 22.1* 50.4*
------------------------------------------------------------------------------------
AVERAGE 0.94X 10.3X 12.4X
MEDIAN 0.91X 19.7X 19.7X
------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------
* - Excluded from average.
[1] Adjusted purchase price equals equity value plus assumed debt minus
acquired cash.
[2] Excludes investment income.
<PAGE> 75
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT
ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
BENEFITS COMPANY
- ----------------
<TABLE>
<CAPTION>
Average Dental Managed
Care Acquisition Multiples
-------------------------- Implied PV of DHDC Implied Implied
Benefits Firm Value/ Firm Value/ Firm Less Deferred Equity Equity Value
Valuation Parameter Value LTM Revenues LTM EBITDA Value Net Debt[1] Liabilities Value Per Share[2]
- ------------------- ----- ------------ ---------- ----- ----------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues[3] $150,087 1.12x $168,252 $46,501 $22,376 $ 99,375 $ 9.83
LTM EBITDA[3] $ 25,041[4] 10.4x $260,997 $46,501 $22,376 $192,120 $19.00
----------------------------------------------------------------
MEAN EQUITY VALUE $145,747 $14.41
MEDIAN EQUITY VALUE $145,747 $14.41
----------------------------------------------------------------
DHMI
- ----
<CAPTION>
Average Dental Practice
Management Acquisition Multiples Less
-------------------------------- Implied PV of DHDC Implied Implied
DHMI Firm Value/ Firm Value/ Firm Less Deferred Equity Equity Value
Valuation Parameter Value LTM Revenues LTM EBITDA Value Net Debt[1] Liabilities Value Per Share[2]
- ------------------- ----- ------------ ---------- ----- ----------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues[3] $20,981 0.94x $19,645 $0 $0 $ 19,645 $ 1.94
LTM EBITDA[3] $ 1,829[4] 10.3x $18,884 $0 $0 $ 18,884 $ 1.87
----------------------------------------------------------------
Mean Equity Value $ 19,265 $ 1.90
Median Equity Value $ 19,265 $ 1.90
----------------------------------------------------------------
----------------------------------------------------------------
Sum of Means $165,012 $16.32
Sum of Medians $165,012 $16.32
----------------------------------------------------------------
</TABLE>
- ----------
* - Excluded from mean.
[1] As of September 30, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
<PAGE> 76
The Robinson-Humphrey Company
PROJECT GOLDCAP
SELECTED MERGER AND ACQUISITION TRANSACTIONS IN THE HMO INDUSTRY
- -------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Equity Value as Multiple of
Equity ---------------------------
Date Purchase LTM Latest Date
Acquiror Target Completed Price Net Income Book Value
- -------- ------ --------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C>
Aetna, Inc. Prudential Healthcare Pending $1,000.0 NA * NA
WellPoint Health Networks, Inc. Cerulean Companies, Inc. Pending 500.0 148.6 * 2.5
United HealthCare Corp. Humana Inc. Pending 5,450.0 70.1 * 3.4
Foundation Health Corp. Physicians Health Services 01/02/98 166.2 NM 1.7
Humana, Inc. Physician Corp. of America 09/09/97 271.8 NM NM
CRA Managed Care Occusystems 09/02/97 683.4 47.0 * 4.8
Humana, Inc. ChoiceCare Pending 250.0 NA NA
CIGNA Corporation Healthsource Inc. 08/01/97 1,392.1 47.5 * 3.6
Foundation Health Corp. Health Systems International, Inc. 04/01/97 2,200.0 21.2 6.3
WellPoint Health Networks, Inc. GBO Operations of John Hancock 03/01/97 86.7 17.7 NM
PacifiCare Health Systems Inc. FHP International Corp. 02/14/97 2,100.0 49.9 * 1.8
Forstmann Little & Co. Community Health Systems Inc. 07/23/96 1,078.2 28.4 4.3
Merck-Medco Managed Care Inc. SysteMed Inc. 07/22/96 67.0 40.4 * 1.8
Aetna Life & Casualty U.S. Healthcare, Inc. 07/19/96 8,900.0 23.4 9.2 *
United HealthCare Corp. HealthWise of America, Inc. 04/12/96 290.0 33.6 8.3
United HealthCare Corp. Physicians Health Plan, Inc. [3] 04/01/96 139.0 19.7 5.3
Foundation Health Corp. Managed Health Network 03/08/96 45.0 NM 9.3 *
Healthsource, Inc. Central Mass. Health Care 02/06/96 46.5 NA NA *
Humana, Inc. Emphesys Financial Group, Inc. 10/13/95 639.9 10.4 1.8
United HealthCare Corp. MetraHealth Companies [4] 10/03/95 1,650.0 NA NA
Coventry Corp. HealthCare USA Inc. 08/01/95 45.2 37.8 14.5 *
Value Health, Inc. Diagnostek, Inc. 07/28/95 450.0 37.0 2.3
Healthsource, Inc. Provident Life & Accident Ins. 06/01/95 231.0 27.7 1.2 *
United HealthCare Corp. Gencare Health systems 01/03/95 515.4 27.1 6.6
Humana, Inc. CareNetwork, Inc. 12/20/94 120.2 NM 8.4 *
Coventry Corp. Southern Health Management [5] 12/01/94 71.6 22.0 6.1
Foundation Health Corp. Intergroup Healthcare 11/01/94 255.7 12.2 2.9
FHP International Corp. TakeCare, Inc. 06/17/94 1,019.8 33.0 4.3
United HealthCare Corp. Complete Health Services, Inc. 05/31/94 242.4 69.0 * 24.2 *
United HealthCare Corp. Ramsay-HMO, Inc. 05/31/94 537.9 33.7 4.1
Value Health, Inc. Preferred Health Care Ltd. 12/14/93 382.2 47.5 * 6.7
Physician Corp. of America Family Health Systems Inc. 12/10/93 44.0 27.5 5.7
TakeCare Inc. Comprecare Inc. 09/09/93 85.7 25.8 5.6
United HealthCare Corp. HMO America Inc. 08/31/93 388.9 31.1 5.7
Healthsource, Inc. Physician Health Systems, Inc. 03/31/93 34.9 9.7 * 3.3
---------------------------------------------
AVERAGE 26.1 x 4.3 x
MEDIAN 31.1 x 4.8 x
---------------------------------------------
<CAPTION>
Firm Value as Multiple of
-----------------------------------
Firm LTM LTM LTM
Acquiror Target Value [1] Revenues EBITDA EBIT
- -------- ------ --------- -------- ------ ----
<S> <C> <C> <C> <C> <C>
Aetna, Inc. Prudential Healthcare $1,000.0 0.14 [2]* NA NA
WellPoint Health Networks, Inc. Cerulean Companies, Inc. 500.0 0.31 * 46.0 * NM
United HealthCare Corp. Humana Inc. 6,300.0 0.75 25.3 * 44.7 *
Foundation Health Corp. Physicians Health Services 166.2 0.30 * NM NM
Humana, Inc. Physician Corp. of America 403.7 0.29 * NM NM
CRA Managed Care Occusystems 782.5 4.17 * 22.8 29.9
Humana, Inc. ChoiceCare 250.0 0.84 NA NA
CIGNA Corporation Healthsource Inc. 1,639.4 0.96 16.4 26.7
Foundation Health Corp. Health Systems International, Inc. 2,565.0 0.82 10.0 12.5
WellPoint Health Networks, Inc. GBO Operations of John Hancock 86.7 0.13 * NA 11.5
PacifiCare Health Systems Inc. FHP International Corp. 2,219.3 0.51 8.4 11.5
Forstmann Little & Co. Community Health Systems Inc. 1,276.3 1.48 11.2 16.3
Merck-Medco Managed Care Inc. SysteMed Inc. 73.3 0.50 14.4 25.0
Aetna Life & Casualty U.S. Healthcare, Inc. 8,900.0 2.37 13.4 14.2
United HealthCare Corp. HealthWise of America, Inc. 256.0 1.23 15.9 17.1
United HealthCare Corp. Physicians Health Plan, Inc. [3] 139.0 0.93 14.6 17.2
Foundation Health Corp. Managed Health Network 46.6 1.79 28.0 * 53.8 *
Healthsource, Inc. Central Mass. Health Care 46.5 NA NA NA
Humana, Inc. Emphesys Financial Group, Inc. 649.0 0.41 * 5.9 6.4
United HealthCare Corp. MetraHealth Companies [4] 1,650.0 0.42 * NA NA
Coventry Corp. HealthCare USA Inc. 37.2 1.38 27.4 * 32.1 *
Value Health, Inc. Diagnostek, Inc. 455.7 0.66 19.3 25.9
Healthsource, Inc. Provident Life & Accident Ins. 225.5 0.95 7.6 17.7
United HealthCare Corp. Gencare Health systems 443.4 1.92 15.7 16.8
Humana, Inc. CareNetwork, Inc. 101.1 0.70 57.1 * NM
Coventry Corp. Southern Health Management [5] 69.6 1.20 12.7 13.6
Foundation Health Corp. Intergroup Healthcare 244.5 0.52 6.4 7.1
FHP International Corp. TakeCare, Inc. 916.3 1.09 13.4 14.8
United HealthCare Corp. Complete Health Services, Inc. 183.8 0.63 19.9 22.8
United HealthCare Corp. Ramsay-HMO, Inc. 438.2 1.26 14.7 17.2
Value Health, Inc. Preferred Health Care Ltd. 374.0 4.76 * 27.5 * 36.3 *
Physician Corp. of America Family Health Systems Inc. 44.0 0.59 14.7 17.2
TakeCare Inc. Comprecare Inc. 101.1 0.41 * 6.8 17.1
United HealthCare Corp. HMO America Inc. 331.4 0.94 16.8 16.8
Healthsource, Inc. Physician Health Systems, Inc. 35.0 1.06 6.5 6.9
--------------------------------------------------
1.04 x 13.1 x 16.6 x
0.83 x 14.7 x 17.1 x
--------------------------------------------------
</TABLE>
- -----------------------------------------
*Excluded from average
NA - Not Available
NM - Not Meaningful
[1] Firm value equals equity value plus debt less cash.
[2] Annualized nine months of 1998 revenues
[3] LTM financials for Physicians Health Plan reflect annualized third quarter
numbers.
[4] Does not include $525 million in potentila earn-put payments.
[5] Data for Conventry/Sothern Helth merger taken from Securities Data Company.
<PAGE> 77
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING HMO HISTORICAL ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples
--------------------------------------- IMPLIED
Price/ IMPLIED EQUITY
Goldcap LTM Price/ EQUITY VALUE PER
Valuation Parameter Value EPS Book VALUE SHARE [1]
- ------------------- ------- ----- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LTM Income [2] $10,041 [3,4] 26.1 x $261,690 $25.88
9/30/98 Book Value $67,869 4.3 x $292,309 $28.91
----------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Selected Relevant Transaction Multiples Less
---------------------------------------- Implied PV of DHDC
Goldcap Firm Value/ Firm Value/ Firm Value/ Firm Less Deferred
Valuation Parameter Value Revenues Op. Income EBITDA Value Net Debt[5] Liabilities
- ------------------- ------ ----------- ----------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues [2] $171,068 1.04 X $178,521 $46,501 $22,376 $109,644 $10.84
LTM Operating Income [2] $ 21,150 [3] 16.6 x $351,445 $46,501 $22,376 $282,568 $27.94
LTM EBITDA [2] $ 26,870 [3] 13.1 X $350,968 $46,501 $22,376 $282,091 $27.89
----------------------------------------
---------------------------------------------------------------------
MEAN EQUITY VALUE $245,660 $24.29
MEDIAN EQUITY VALUE $282,091 $27.89
---------------------------------------------------------------------
</TABLE>
- ---------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
[4] Assumes 38% tax rate on one-time charges.
[5] As of September 30,1998.
<PAGE> 78
The Robinson-Humphrey Company
PROJECT GOLDCAP
SELECTED MERGER AND ACQUISITION FORWARD MULTIPLES AND TRANSACTION PREMIUMS FOR
DEALS IN THE HMO INDUSTRY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE OF PRICE
DATE DATE TRANSACTION PER CURRENT YEAR
ANNOUNCED EFFECTIVE TARGET ACQUIROR ($MM) SHARE P/E RATIO
- --------- --------- ------ -------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
05/28/98 Pending Humana, Inc. United HealthCare Corp. $5,538.6 32.06 30.2 x
06/03/97 09/09/97 Physician Corp. of America Humana, Inc. 405.1 7.00 10.9
08/05/96 02/14/97 FHP International Corp. PacifiCare Health Systems, Inc. 2,000.1 33.27 17.4
06/10/96 07/22/96 SysteMed, Inc. Merck-Medco Managed Care, Inc. 64.8 3.00 21.4
06/11/96 07/23/96 Community Health Systems, Inc. Forstmann Little & Co. 1,080.0 52.00 23.1
02/01/96 04/12/96 HealthWise of America, Inc. United HealthCare Corp. 271.1 40.63 31.7
08/10/95 10/13/95 Emphesys Financial Group, Inc. Humana, Inc. 642.8 37.50 10.7
02/15/94 05/31/94 Ramsay-HMO, Inc. United HealthCare Corp. 564.9 74.66 35.9 *
----------------------------------------------------------------------
SELECT HMO TRANSACTIONS AVERAGE 20.8 X
SELECT HMO TRANSACTIONS MEDIAN 22.3 X
----------------------------------------------------------------------
<CAPTION>
PREMIUM PREMIUM
1 DAY 1 WEEK
PRIOR TO PRIOR TO
DATE DATE FORWARD YEAR ANNOUNCEMENT ANNOUNCEMENT
ANNOUNCED EFFECTIVE TARGET ACQUIROR P/E RATIO DATE DATE
- --------- --------- ------ -------- --------- ---- ----
05/28/98 Pending Humana, Inc. United HealthCare Corp. 24.3 X 22.1 % 22.1 %
06/03/97 09/09/97 Physician Corp. of America Humana, Inc. 8.2 12.0 12.0
08/05/96 02/14/97 FHP International Corp. PacifiCare Health Systems, Inc. 23.3 19.4 27.4
06/10/96 07/22/96 SysteMed, Inc. Merck-Medco Managed Care, Inc. 9.1 (4.0)* 4.3 *
06/11/96 07/23/96 Community Health Systems, Inc. Forstmann Little Co. 19.3 20.2 19.9
02/01/96 04/12/96 HealthWise of America, Inc. United HealthCare Corp.Inc. 26.0 37.5 37.3
08/10/95 10/13/95 Emphesys Financial Group, INc. Humana, Inc. 9.5 33.0 39.0
02/15/94 05/31/94 Ramsay-HMO, Inc. United HealthCare Corp. 29.4 * 62.7 * 62.7 *
----------------------------------------------------------------------
SELECT HMO TRANSACTIONS AVERAGE 17.1 X 24.0 % 26.3 %
SELECT HMO TRANSACTIONS MEDIAN 21.3 X 21.2 % 24.8 %
----------------------------------------------------------------------
<CAPTION>
PREMIUM
4 WEEKS
PRIOR TO
DATE DATE ANNOUNCEMENT
ANNOUNCED EFFECTIVE TARGET ACQUIROR DATE
- --------- --------- ------ -------- ------------
<S> <C> <C> <C> <C>
05/28/98 Pending Humana, Inc. United HealthCare Corp. 18.8 %
06/03/97 09/09/97 Physician Corp. of America Humana, Inc. 23.1
08/05/96 02/14/97 FHP International Corp. PacifiCareaHealth Systems, Inc. 19.1
06/10/96 07/22/96 SysteMed, Inc. Merck-Medco Managed Care, Inc. 9.1 *
06/11/96 07/23/96 Community Health Systems, Inc. Forstmann Little Co. 18.9
02/01/96 04/12/96 HealthWise of America, Inc. United HealthCare Corp.Inc. 34.3
08/10/95 10/13/95 Emphesys Financial Group, INc. Humana, Inc. 37.0
02/15/94 05/31/94 Ramsay-HMO, Inc. United HealthCare Corp. 81.0 *
---------------------------------------------------
SELECT HMO TRANSACTIONS AVERAGE 25.2 %
SELECT HMO TRANSACTIONS MEDIAN 21.1 %
---------------------------------------------------
</TABLE>
* Excluded from average NA - Not Available NM - Not Meaningful
- ------------------------------------
Source: Securities Data Company, Inc.
<PAGE> 79
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING M&A FORWARD MULTIPLES AND TRANSACTION
PREMIUMS IN THE HMO INDUSTRY
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CURRENT YEAR FORWARD YEAR IMPLIED IMPLIED
GOLDCAP P/E MULTIPLE P/E MULTIIPLE EQUITY EQUITY VALUE
VALUATION PARAMETER VALUE ------------- -------------- VALUE PER SHARE [1]
- ---------------------------------------- --------- <C> <C> ------- -------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.01 [2] 20.8 x $212,354 $21.00
Projected Cal. 1999 Net Income Per Share $1.12 [2] 17.1 x $193,641 $19.15
-------- ------
-----------------------------------------------------------
MEAN EQUITY VALUE $202,997 $20.07
MEDIAN EQUITY VALUE $202,997 $20.07
-----------------------------------------------------------
<CAPTION>
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP ----------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ---------------------------------------- --------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior [3] $10.19 24.0% $127,790 $12.64
Stock Price 1 Week Prior [3] 10.31 26.3% $131,687 $13.02
Stock Price 4 Weeks Prior [3] 11.13 25.2% $140,823 $13.93
-----------------------------------------------------------
MEAN EQUITY VALUE $133,433 $13.19
MEDIAN EQUITY VALUE $131,687 $13.02
-----------------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Robinson-Humphrey Research.
[3] Assumes announcement on December 29, 1999.
<PAGE> 80
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING M&A FORWARD MULTIPLES AND TRANSACTION
PREMIUMS IN THE HMO INDUSTRY
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CURRENT YEAR FORWARD YEAR IMPLIED IMPLIED
GOLDCAP P/E MULTIPLE P/E MULTIIPLE EQUITY EQUITY VALUE
VALUATION PARAMETER VALUE ------------- -------------- VALUE PER SHARE [1]
- ---------------------------------------- --------- <C> <C> -------- -------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.02 [2] 20.8 x $213,989 $21.16
Projected Cal. 1999 Net Income Per Share $1.17 [2] 17.1 x $201,602 $19.94
------------------
-----------------------------------------------------------
MEAN EQUITY VALUE $207,796 $20.55
MEDIAN EQUITY VALUE $207,796 $20.55
-----------------------------------------------------------
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP ----------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ---------------------------------------- --------- ----------------------------------------
Stock Price 1 Day Prior [3] $10.19 24.0% $127,790 $12.64
Stock Price 1 Week Prior [3] 10.31 26.3% $131,687 $13.02
Stock Price 4 Weeks Prior [3] 11.13 25.2% $140,823 $13.93
-----------------------------------------------------------
MEAN EQUITY VALUE $133,433 $13.19
MEDIAN EQUITY VALUE $131,687 $13.02
-----------------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] Assumes announcement on December 29, 1999.
<PAGE> 81
The Robinson-Humphrey Company
SUMMARY OF RECENT MERGER AND ACQUISITION ACTIVITY
(Dollars in Millions)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 AVERAGE
------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ALL INDUSTRIES:
Total Number of Net Acquisition Announcements 2,574 2,663 2,997 3,510 5,848 7,800
Total Dollar Value Paid [1] $96,688 $176,400 $226,671 $356,016 $494,962 $657,063
Average Premium Paid Over Market 41.0% 38.7% 41.9% 44.7% 36.6% 35.7% 39.8%
Median Premium Paid Over Market 34.7% 33.0% 35.0% 29.2% 27.3% 27.5% 31.1%
Average Price/Earnings Ratio Paid 22.7 x 24.4 x 24.5 x 23.8 x 26.2 x 27.4 x 24.8 x
Median Price/Earnings Ratio Paid 18.1 x 20.0 x 20.2 x 19.1 x 20.3 x 22.9 x 20.1 x
<CAPTION>
1992 1993 1994 1995 1996 1997 AVERAGE
------ ------- ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
HEALTH SERVICES:
Total Number of Net Acquisition Announcements 205 156 129 179 325 437
Total Dollar Value Paid [1] $1,686 $12,608 $9,288 $7,333 $15,533 $15,047
Average Premium Paid Over Market 37.0% 41.9% 46.5% 32.2% 31.2% 26.5% 35.9%
Average Price/Earnings Ratio Paid 20.4 x 31.5 x 28.7 x 24.7 x 27.1 x 24.7 x 26.2 x
</TABLE>
- ----------------------------------
[1] Includes only transactions with a publicly disclosed purchase price.
Source: Mergerstat Review
<PAGE> 82
The Robinson-Humphrey Company
M&A PREMIUMS AND P/E RATIOS OFFERED BY DEAL SIZE
1992 - 1997
I. MEDIAN PERCENT PREMIUM OFFERED
<TABLE>
<CAPTION>
PURCHASE PRICE: 1992 (BASE) 1993 (BASE) 1994 (BASE) 1995 (BASE) 1996 (BASE) 1997 (BASE)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25.0 million or less 33.3% (35) 32.3% (38) 42.9% (45) 42.9% (53) 32.2% (39) 36.9% (52)
$25.0 through $50.0 million 21.6% (30) 36.7% (28) 33.9% (36) 24.4% (53) 26.4% (56) 22.4% (40)
$50.0 through $100.0 million 32.3% (22) 31.5% (31) 27.8% (53) 35.4% (44) 27.3% (68) 26.6% (63)
$100.0 million or more 39.0% (55) 32.0% (76) 35.8% (126) 29.0% (174) 26.6% (218) 27.6% (332)
Cash Consideration 29.6% (35) 32.5% (46) 36.8% (59) 28.4% (91) 26.7% (115) 25.8% (191)
<CAPTION>
II. MEDIAN P/E RATIO OFFERED
PURCHASE PRICE: 1992 (BASE) 1993 (BASE) 1994 (BASE) 1995 (BASE) 1996 (BASE) 1997 (BASE)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25.0 million or less 15.5 (29) 17.6 (17) 17.5 (23) 17.0 (31) 16.2 (64) 15.9 (99)
$25.0 through $50.0 million 18.4 (22) 20.3 (18) 20.3 (27) 14.8 (33) 20.3 (53) 18.7 (48)
$50.0 through $100.0 million 21.1 (17) 18.1 (26) 17.1 (42) 19.2 (38) 20.5 (54) 22.7 (69)
$100.0 million or more 23.2 (36) 24.2 (66) 21.8 (110) 21.1 (153) 21.3 (186) 25.2 (315)
Cash Consideration 17.4 (27) 19.9 (32) 23.3 (38) 18.0 (68) 21.1 (106) 21.0 (183)
Public Companies 18.1 (89) 19.7 (113) 19.8 (184) 19.4 (239) 21.7 (288) 25.0 (389)
</TABLE>
<PAGE> 83
The Robinson-Humphrey Company
DISTRIBUTION OF M&A PREMIUMS OFFERED
1987 - 1997
<TABLE>
<CAPTION>
OVER 20% OVER 40% OVER 60% OVER 80%
YEAR UNDER 20% THROUGH 40% THROUGH 60% THROUGH 80% THROUGH 100% OVER 100% TOTAL
- ---- ---------- ---------- ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 76 32.1% 79 33.3% 49 20.7% 17 7.2% 8 3.4% 8 3.4% 237 100.0%
1988 131 32.0% 124 30.2% 65 15.9% 48 11.7% 16 3.9% 26 6.3% 410 100.0%
1989 109 36.0% 78 25.7% 63 20.8% 25 8.3% 9 3.0% 19 6.3% 303 100.0%
1990 61 34.9% 44 25.1% 34 19.4% 14 8.0% 7 4.0% 15 8.6% 175 100.0%
1991 50 36.5% 42 30.7% 28 20.4% 7 5.1% 4 2.9% 6 4.4% 137 100.0%
1992 42 29.6% 42 29.6% 21 14.8% 19 13.4% 14 9.9% 4 2.8% 142 100.0%
1993 47 27.2% 63 36.4% 34 19.7% 14 8.1% 9 5.2% 6 3.5% 173 100.0%
1994 66 25.4% 89 34.2% 52 20.0% 28 10.8% 7 2.7% 18 6.9% 260 100.0%
1995 106 32.7% 108 33.3% 55 17.0% 22 6.8% 6 1.9% 27 8.3% 324 100.0%
1996 136 35.7% 117 30.7% 70 18.4% 34 8.9% 10 2.6% 14 3.7% 381 100.0%
1997 171 35.1% 169 34.7% 84 17.2% 35 7.2% 15 3.1% 13 2.7% 487 100.0%
</TABLE>
DISTRIBUTION OF M&A P/E RATIOS OFFERED
1992 - 1997
<TABLE>
<CAPTION>
OVER 8.5x OVER 10.5x OVER 13.0x OVER 17.0x
Year UNDER 8.5x THROUGH 10.5x THROUGH 13.0x THROUGH 17.0x THROUGH 25.0x OVER 25.0x TOTAL
- ---- ---------- ------------- ------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 10 9.6% 2 1.9% 17 16.3% 16 15.4% 26 25.0% 33 31.7% 104 100.0%
1993 5 3.9% 5 3.9% 6 4.7% 27 21.3% 41 32.3% 43 33.9% 127 100.0%
1994 10 5.0% 12 5.9% 16 7.9% 39 19.3% 48 23.8% 77 38.1% 202 100.0%
1995 14 5.5% 14 5.5% 29 11.4% 45 17.6% 68 26.7% 85 33.3% 255 100.0%
1996 29 8.1% 16 4.5% 24 6.7% 60 16.8% 96 26.9% 132 37.0% 357 100.0%
1997 45 8.5% 17 3.2% 29 5.5% 54 10.2% 153 28.8% 233 43.9% 531 100.0%
</TABLE>
<PAGE> 84
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PREMIUMS FROM
M&A TRANSACTIONS IN GENERAL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT SHARE PRICE)
6-YR AVERAGE VALUE
---------------------------------- IMPLIED
PREMIUM 1 IMPLIED EQUITY
GOLDCAP DAY PRIOR PRICE / EARNINGS EQUITY VALUE PER
VALUATION PARAMETER VALUE TO ANNOUNCEMENT RATIO PAID VALUE SHARE [1]
- ------------------------------------------ ------- --------------- ---------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement [2] $ 10.19 39.8 % $143,991 $14.24
LTM Net Income [3] $10,041 [4,5] 24.8 x 249,352 24.66
<CAPTION>
6-YR AVERAGE VALUE
---------------------------------- IMPLIED
PREMIUM 1 IMPLIED EQUITY
GOLDCAP DAY PRIOR PRICE / EARNINGS EQUITY VALUE PER
VALUATION PARAMETER VALUE TO ANNOUNCEMENT RATIO PAID VALUE SHARE [1]
- ------------------------------------------ -------- --------------- ---------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement [2] $10.19 31.1 % $135,080 $13.36
LTM Net Income [3] $10,041 [4,5] 20.1 x 201,824 19.96
</TABLE>
- -------------------------------------------------------------
* Excluded from the unweighted average.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Assumes announcement on December 29, 1998.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in one
time charges.
[5] Assumes 38.0% tax rate on excluded one-time charges.
<PAGE> 85
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PREMIUMS FROM M&A TRANSACTIONS IN
THE HEALTH SERVICES INDUSTRY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT SHARE PRICE)
6-YR AVERAGE VALUE
--------------------------------- IMPLIED
PREMIUM 1 IMPLIED EQUITY
GOLDCAP DAY PRIOR PRICE / EARNINGS EQUITY VALUE PER
VALUATION PARAMETER VALUE TO ANNOUNCEMENT RATIO PAID VALUE SHARE
- ------------------------------------------- ------- --------------- ---------------- ----- -----
<S> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement [1] $ 10.19 35.9 % $139,990 $13.84
LTM Net Income [2] $10,041 [3,4] 26.2 x 262,907 26.00
<C> <C>
AVERAGE PRICE / EARNINGS RATIO PAID $238,027 $23.54
AVERAGE PREMIUM PAID $139,687 $13.81
</TABLE>
- -----------------------------------------------------
* Excluded from the unweighted average.
[1] Assumes announcement on December 29, 1998.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in one
time charges.
[4] Assumes 38.0% tax rate on excluded one-time charges.
<PAGE> 86
The Robinson-Humphrey Company
PROJECT GOLDCAP
PREMIUMS ANALYSIS: MERGERS AND ACQUISITIONS BETWEEN $100 AND $300 MILLION
JULY 24, 1997 THROUGH DECEMBER 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE DATE
EFFECTIVE ANNOUNCED TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
--------- --------- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
11/12/97 10/03/96 Pittencrieff Communications Pvd radiotelephone commun svcs Nextel Communications Inc
08/04/97 11/14/96 Indiana Federal,Valparaiso,IN Commercial bank;holding co Pinnacle Financial Svcs Inc,MI
08/29/97 02/13/97 Portsmouth Bank Shares,NH Bank holding company CFX Corp,Keene,New Hampshire
12/09/97 02/20/97 NHP Inc(Apartment Investment) Own,op apartment buildings Apartment Investment & Mgmt Co
08/01/97 03/07/97 Micro Bio-Medics Inc Whl,mnfr medical equip Henry Schein Inc
08/25/97 03/11/97 First Citizens Financial,MD Bank holding company Provident Bankshares,Maryland
08/29/97 03/24/97 Community Bankshares,NH Bank holding company CFX Corp,Keene,New Hampshire
08/05/97 03/24/97 OnTrak Systems Inc Mnfrs semiconductor cap equip Lam Research Corp
10/13/97 04/29/97 SC Bancorp,Anaheim,California Bank holding co Western Bancorp,California
01/05/98 05/06/97 Physicians Health Services Inc Own and operate HMO's Foundation Health Systems Inc
12/01/97 05/06/97 Virginia First Finl Corp,VA Bank holding co BB&T Corp,Winston-Salem,NC
06/03/98 05/07/97 Reliable Life Insurance Co Insurance company Unitrin Inc
10/16/97 05/12/97 Dynamics Corp of America Mnfr electrical appliances CTS Corp
08/26/97 05/13/97 Aurum Software Inc Dvlp sales, mktg info software Baan Co NV
08/08/97 05/27/97 Alamco Inc Oil & gas exploration, prod Columbia Natural Resources Inc
08/15/97 06/03/97 Alexander Haagen Properties Real estate investment trust Lazard Freres & Co
07/28/97 06/04/97 Maxis Inc Develop educational software Electronic Arts Inc
09/12/97 06/09/97 Amrion Inc Own,op food stores Whole Foods Market Inc
08/29/97 06/16/97 Core Industries Inc Manufacture electronic equip United Dominion Industries Ltd
09/25/97 06/17/97 Hechinger Co Own,op retail home centers Leonard Green & Partners LP
07/24/97 06/17/97 McFarland Energy Inc Oil and gas exploration, prodn Monterey Resources Inc
07/25/97 06/17/97 Seda Specialty Packaging Corp Mnfr specialty packaging prods CCL Industries Inc
08/15/97 06/19/97 Advanced Logic Research Inc Mnfr microcomputer systems Gateway 2000 Inc
03/05/98 06/19/97 American Greetings Corp Mnfr greeting cards American Greetings Corp
10/23/97 06/20/97 Convest Energy Corp Oil and gas exploration,prodn Forcenergy Inc
10/23/97 06/20/97 Edisto Resources Corp Oil and gas exploration,prodn Forcenergy Inc
10/14/97 06/24/97 American Exploration Co Oil and gas exploration, prodn Louis Dreyfus Natural Gas
09/23/97 07/02/97 American Filtrona Corp Mnfr bonded fiber Bunzl PLC
09/26/97 07/03/97 Krystal Co Own,op fast food restaurants Port Royal Holdings Inc
11/06/97 07/07/97 Cairn Energy USA Inc Oil and gas exploration,prodn Meridian Resource Corp
09/30/97 07/08/97 Delchamps Inc Own and operate supermarkets Jitney-Jungle Stores of Amer
09/23/97 07/09/97 Control Data Systems Inc Mnfr computers,peripherals CDSI Holding Corp
10/02/97 07/15/97 DH Technology Inc Mnfr,whl computer printers Axiohm SA
10/28/97 07/15/97 Intl Imaging Materials Mnfr thermal transfer ribbons Paxar Corp
02/01/98 07/16/97 ArgentBank,Thibodaux,Louisiana Commercial bank Hibernia Corp,New Orleans,LA
11/07/97 07/22/97 Elexsys International Inc Manufacture circuit boards Sanmina Corp
12/18/97 07/23/97 Alliance Imaging Inc Pvd diagnostic imaging svcs Newport Investment LLC
10/28/97 07/24/97 Astrotech International Corp Pvd storage tank maintenance ITEQ Inc
12/01/97 07/25/97 Homegate Hospitality Inc Own and operate hotels Prime Hospitality Corp
08/28/97 07/25/97 Imo Industries Inc Mnfr industrial controls,pumps Constellation Capital Partners
09/24/97 07/31/97 Bucyrus International Inc Mnfr surface mining machinery American Industrial Partners
01/27/98 07/31/97 Santa Monica Bank Commercial bank Western Bancorp,California
10/23/97 07/31/97 Sterling House Corp Own,op nursing homes Alternative Living Services
11/12/97 08/07/97 1st United Bancorp,FL Baank holding co Wachovia Corp,Winston-Salem,NC
12/22/97 08/08/97 Titan Holdings Inc Auto,property,casualty ins co USF&G Corp
09/30/97 08/11/97 National Sanitary Supply Co Sanitary maintenance supplies Unisource Worldwide Inc
12/30/97 08/11/97 ProNet Inc Mnfr pagers;pager leasing svcs Metrocall Inc
12/22/97 08/11/97 Vacation Break USA Inc Real estate development firm Fairfield Communities Inc
09/17/97 08/12/97 Isomedix Inc Pvd contract sterilization svc Steris Corp
09/16/97 08/14/97 American Medserve Corp Wholesale pharmaceuticals Omnicare Inc
09/24/97 08/14/97 Talbert Medical Management Own,op medical,dental clinics MedPartners Inc
<CAPTION>
PREMIUM
VALUE OF -----------------------------------------------------------
ACQUIROR SHORT TRANSACTION 1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO
BUSINESS DESCRIPTION ($ MIL) ANNOUNCEMENT DATE ANNOUNCEMENT DATE ANNOUNCEMENT DATE
--------------------------- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Pvd cellular telephone svcs 158.4 9.0 14.4 30.7
Commercial bank;holding co 120.5 22.2 26.9 17.9
Savings and loan 102.2 33.2 38.4 38.4
Real estate investment trust 114.5 28.3 25.2 16.9
Whl med supplies 136.1 12.2 12.2 10.4
Bank holding company 107.8 26.5 42.3 47.3
Savings and loan 101.6 63.3 64.1 54.7
Mnfr equip to mnfr semiconduct 217.9 (0.9) 3.0 13.9
Bank holding co 105.0 20.0 31.0 37.3
Own,op HMO's; holding company 268.2 23.5 27.0 51.7
Bank holding company 145.3 77.3 77.3 74.1
Insurance company 261.1 51.1 51.1 52.1
Mnfr electronic components 244.6 91.3 94.2 112.7
Develop software 259.9 33.0 40.4 55.8
Operate natural gas pipeline 102.8 7.7 11.5 16.7
Investment bank 235.0 (0.4) 11.1 3.4
Develop,wholesale software 127.5 2.3 2.3 40.6
Own,op natural foods stores 152.6 8.1 19.2 47.0
Mnfr structural metal 275.2 26.6 37.9 49.3
Merchant banking firm 127.0 (14.3) (7.7) (11.1)
Oil and gas exploration, prodn 111.2 11.6 41.3 44.8
Mnfr,pvd specialty packaging 182.6 31.8 36.5 52.6
Mnfr personal computers 206.8 29.2 30.5 34.8
Mnfr greeting cards 158.1 0.0 (0.9) 1.8
Oil,gas exploration and prodn 102.0 11.1 11.1 18.9
Oil,gas exploration and prodn 147.7 (6.6) (6.6) (0.4)
Oil and gas exploration,prodn 275.5 13.0 15.0 21.6
Whl,mnfr paper,constn material 183.5 8.8 2.2 3.4
Investment company 145.4 132.0 169.8 176.2
Oil and gas exploration, prodn 233.6 22.3 29.0 26.7
Own and operate grocery stores 213.6 (2.4) (0.8) 6.7
Investment holding company 273.9 29.1 30.6 35.0
Mnfr,whl computer printers 169.5 57.5 56.3 57.5
Mnfr label systems 244.4 67.3 60.2 64.9
Bank holding co 171.2 29.8 31.2 39.0
Mnfr printed circuit boards 219.9 1.5 (8.6) 40.2
Investment company 114.2 7.3 3.5 14.3
Mnfr air purification equip 116.7 45.7 63.4 78.4
Own,operate,franchise hotels 133.2 30.3 33.8 28.6
Investment company 117.3 18.7 20.0 22.6
Pvd fund mgmt & fin adv svcs 193.3 33.3 46.9 71.4
Bank holding co 198.2 14.3 17.6 28.7
Pvd residential care svcs 170.0 30.4 29.5 40.5
Bank holding company 182.2 5.7 16.0 27.5
Insurance holding company 278.1 16.0 19.1 24.9
Wholesale printing paper 155.9 (6.7) 20.0 47.4
Pvd local paging services 239.3 (10.0) (0.7) 27.1
Construct vacation resorts 178.1 41.6 39.1 95.8
Mnfr sterile processing sys 139.8 5.8 15.5 13.9
Whl,retail pharmaceuticals 233.2 2.5 16.1 25.8
Pvd medical services to HMO's 189.0 10.5 18.9 37.0
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
DATE DATE
EFFECTIVE ANNOUNCED TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
--------- --------- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
12/29/97 08/14/97 Tuesday Morning Corp Own, operate giftware stores Madison Dearborn Partners
12/05/97 08/14/97 Uniforce Services Inc Pvd temporary personnel svcs Comforce Corp
03/27/98 08/15/97 Keystone Heritage Group Bank holding company Fulton Finl Corp,Lancaster,PA
04/23/98 08/18/97 CENFED Financial,Pasadena,CA Bank holding company Golden State Bancorp Inc,CA
10/21/97 08/25/97 ACC Consumer Finance Corp Pvd auto financing services Household International Inc
10/03/97 08/25/97 BioWhittaker Inc Mnfr,whl medical testing prods Cambrex Corp
01/23/98 08/25/97 PerSeptive Biosystems Inc Mnfr chromatography equipment Perkin-Elmer Corp
02/25/98 08/28/97 Value Property Trust Real estate investment trust Wellsford Real Properties Inc
10/10/97 08/28/97 Versa Technologies Inc Mnfr rubber components,molds Applied Power Inc
02/24/98 09/03/97 Norwich Financial Corp,CT Savings and loan; holding co Peoples Bk of Bridgeport,CT
01/16/98 09/05/97 Technology Modeling Assoc Inc Dvlp simulation software Avant! Corp
12/31/97 09/08/97 Fuqua Enterprises Inc Manufacture tanned leather Graham-Field Health Products
11/28/97 09/10/97 Data Documents Inc Manufacture tabulating cards Corporate Express Inc
04/01/98 09/11/97 George Mason Bankshares Inc Bank holding company United Bankshares Inc,WV
04/01/98 09/12/97 Coml Bancshares,Parkersburg,WV Bank holding company WesBanco Inc,Wheeling,WV
12/09/97 09/12/97 Unison Software Inc Develop network mgmt software Tivoli Systems Inc(IBM Corp)
01/16/98 09/12/97 WHG Resorts & Casino Inc Own,op resorts and casino Patriot Amer Hosp/Wyndham Intl
12/16/97 09/18/97 Guaranty National Corp Insurance company Orion Capital Corp
01/16/98 09/19/97 Sterling Electronics Corp Whl electronic components Marshall Industries
01/06/98 09/24/97 Vectra Banking Corp,Denver,CO Bank holding company Zions Bancorp,Utah
04/30/98 10/02/97 Kapson Senior Quarters Corp Provide residential care svcs Prometheus Senior Quarters
12/19/97 10/06/97 EndoVascular Technologies Inc Mnfr surgical instruments Guidant Corp
12/23/97 10/09/97 Melamine Chemicals Inc Manufacture melamine crystal Borden Chemical Inc(Borden)
01/22/98 10/13/97 Netcom On-Line Communication Internet service provider ICG Communications Inc
12/19/97 10/14/97 Physician Support Systems Inc Pvd business mgmt services National Data Corp
02/12/98 10/16/97 Omni Insurance Group Inc Insurance company Hartford Financial Services
02/27/98 10/17/97 ATC Group Services Inc Pvd engineering svcs Investor Group
12/29/97 10/17/97 Computational Systems Inc Manufacture measuring devices Emerson Electric Co
02/09/98 10/17/97 Tranzonic Cos Mnfr sanitary paper prod Linsalata Capital Partners II
04/24/98 10/23/97 Poughkeepsie Financial Corp Savings bank;bank holding co Hubco Inc,Mahwah,New Jersey
12/19/97 10/23/97 Premenos Technology Corp Develop EDI software Harbinger Corp
03/12/98 10/31/97 ILC Technology Inc Mnfr high intensity lamps BEC Group Inc
04/01/98 11/03/97 Advantage Bancorp,Kenosha,WI Savings & loan holding company Marshall & Ilsley,Milwaukee,WI
05/22/98 11/03/97 CoBancorp Inc Commercial bank FirstMerit Corp,Akron,OH
01/09/98 11/03/97 Sequana Therapeutics Mnfr diagnostic substances Arris Pharmaceuticals Corp
01/12/98 11/04/97 ComputerVision Corp Mnfr computers,peripherals Parametric Technology Corp
03/25/98 11/13/97 Chartwell Leisure Inc Own,op hotels and motels Investor Group
05/12/98 11/17/97 Century Finl Corp,Rochester,PA Commercial bank Citizens Bancshares Inc,OH
02/26/98 11/17/97 Granite Financial Inc Pvd business credit services Fidelity National Financial
03/02/98 11/17/97 Visigenic Software Inc Dvlp database access software Borland International Inc
01/20/98 11/21/97 New Jersey Steel(Von Roll) Mnfr steel reinforcing bars Co-Steel Inc
02/03/98 11/24/97 Communications Central Inc Pvd telecommunications svcs Davel Communications Group Inc
02/25/98 11/26/97 Universal Hospital Services Pvd med equip rental services Investor Group
07/13/98 11/28/97 RedFed Bancorp Inc,Redlands,CA Savings and loan Golden State Bancorp Inc,CA
02/19/98 12/01/97 Raptor Systems Inc Develop security mgmt software AXENT Technologies Inc
03/31/98 12/11/97 First State Corp,Albany,Ga Bank holding co; coml bank Regions Finl,Birmingham,AL
03/30/98 12/16/97 FFVA Financial Corp,VA Savings and loans One Valley Bancorp Inc,WV
07/02/98 12/16/97 Franklin Bancorp,Washington,DC Bank holding company BB&T Corp,Winston-Salem,NC
07/01/98 12/16/97 Progressive Bank,Pawling,NY Savings and loan holding co Hudson Chartered Bancorp,NY
01/23/98 12/17/97 Suburban Ostomy Supply Co Inc Whl medical and hospital equip InvaCare Corporation
12/18/97 12/18/97 Central Newspapers Inc Publish newspapers Central Newspapers Inc
03/30/98 12/19/97 ASR Investments Corp Real estate investment trust United Dominion Realty Tr Inc
05/01/98 12/19/97 IPC Information Systems Inc Mnfr telecommunications equip Cable Systems International
06/03/98 12/19/97 Eclipse Telecommunications Inc Pvd radiotelecommunication svc IXC Communications Inc
01/27/98 12/19/97 Software Artistry Inc Develop help-desk software Tivoli Systems Inc(IBM Corp)
03/17/98 12/29/97 Heartstream Inc Mnfr defibrillators Hewlett-Packard Co
02/09/98 12/29/97 Holmes Protection Group Inc Provide security systems svcs Tyco International Ltd
05/22/98 12/31/97 Red Lion Inns LP Own,op hotels Boykin Lodging Co
04/01/98 01/06/98 Schult Homes Corp Manufacture mobile homes Oakwood Homes Corp
06/30/98 01/12/98 CBT Corp,Paducah,Kentucky Bank holding co Mercantile Bancorp,St Louis,MO
<CAPTION>
PREMIUM
VALUE OF -----------------------------------------------------------
ACQUIROR SHORT TRANSACTION 1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO
BUSINESS DESCRIPTION ($ MIL) ANNOUNCEMENT DATE ANNOUNCEMENT DATE ANNOUNCEMENT DATE
--------------------------- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investors 298.6 22.7 25.8 11.1
Pvd help supply services 140.7 37.6 37.6 52.6
Bank holding co 210.9 43.8 49.9 65.1
Bank holding company 208.4 1.3 0.5 3.5
Provide financical services 186.9 35.8 34.7 29.6
Mnfr specialty chemicals 130.5 17.8 38.9 47.7
Mnfr analytical instruments 288.1 16.8 24.9 50.4
Real estate investment trust 186.6 25.0 20.9 18.7
Mnfr tools,equip,consumables 141.9 36.8 33.1 31.3
Savings bank 164.0 (0.5) 15.4 30.4
Develop software 144.3 29.5 52.8 43.2
Mnfr medical supply,healthcare 231.0 42.3 52.8 78.8
Retail office supplies 159.4 10.9 14.9 26.1
Bank holding company 207.6 12.1 20.9 20.9
Bank holding company 126.7 47.9 46.8 66.8
Dvlp systems mgmt software 183.0 9.1 25.0 22.4
Real estate investment trust 266.0 35.1 72.3 78.5
Insurance company;holding co 117.2 10.8 23.9 27.7
Whl electronic components 217.6 16.3 30.2 57.0
Bank holding company 162.3 19.2 18.6 47.3
Pvd nursing care services 247.4 (0.9) 9.4 1.8
Mnfr cardiovascular equipment 187.8 22.1 22.1 73.9
Mnfr formaldehyde,resins 119.7 70.8 72.6 70.8
Pvd telecommunications svcs 269.4 49.8 70.9 78.5
Pvd info,transaction svcs 175.2 (1.0) (3.7) 4.8
Provide insurance services 184.7 78.9 75.8 130.9
Investor group 150.0 0.0 (8.1) 10.3
Mnfr appliance components 158.6 45.1 48.3 62.5
Investment firm 104.8 (1.5) (2.9) 4.5
Bank holding company 142.4 1.1 2.9 17.1
Dvle electn commerce software 234.7 55.2 49.1 27.8
Mnfr,whl eyeglass lenses,frame 130.8 108.7 107.6 108.7
Bank holding company 215.8 11.2 12.2 11.2
Commercial bank 157.3 10.6 30.9 52.1
Manufacture synthetic drugs 169.4 44.0 47.3 23.4
Develop,wholesale software 250.3 28.3 69.9 18.6
Investor group 240.8 11.3 4.5 11.3
Commercial bank 137.4 39.8 41.7 61.0
Title insurance company 132.4 89.8 89.8 87.6
Develop software 148.4 92.0 64.0 92.0
Mnfr steel and steel products 173.5 162.9 170.6 166.7
Pvd pay telephone commun svcs 102.4 30.2 25.4 12.0
Investor group 133.0 29.2 29.2 25.3
Bank holding company 159.5 1.8 1.8 7.1
Develop software 253.7 5.4 20.7 16.5
Bank holding company 161.2 18.4 23.9 16.9
Bank holding company 209.4 22.4 27.3 30.0
Bank holding company 160.2 21.4 32.1 54.8
National commercial bank 167.6 14.3 16.3 26.8
Mnfr surgical,medical supplies 130.8 8.0 13.3 13.3
Publish newspapers 100.0 (1.1) 0.6 (0.3)
Real estate investment trust 277.0 4.4 1.1 2.6
Mnfr telecommun equip 201.7 14.3 31.3 14.3
Pvd long distance tele svcs 122.2 18.0 19.9 14.4
Dvlp systems mgmt software 201.9 0.0 62.0 57.4
Mnfr computers, testing equip 130.6 (6.7) 18.2 (8.6)
Mnfr fire protection systems 117.1 (5.6) (5.6) (13.9)
Real estate investment trust 276.0 (6.4) (5.5) (3.4)
Mnfr,ret factory-built homes 101.4 1.1 10.4 19.2
Commercial bank holding co 275.8 3.3 1.8 19.5
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
DATE DATE
EFFECTIVE ANNOUNCED TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
--------- --------- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
05/06/98 01/26/98 TransAmerican Waste Industries Pvd waste management services USA Waste Services Inc
03/03/98 01/27/98 State of the Art Inc Develop financial software Sage Group PLC
02/02/98 02/02/98 Comdisco Inc Whl,lease computers Investor Group
06/09/98 02/04/98 TresCom International Inc Pvd communications svcs Primus Telecommunications
06/30/98 02/09/98 PonceBank Savings and loan Banco Bilbao Vizcaya SA
04/16/98 02/09/98 Summit Care Corp Provide nursing services Fountain View(Heritage)
03/11/98 02/10/98 Liberty Corp Life ins co;own,op TV stn Liberty Corp
06/10/98 02/11/98 MTL Inc Pvd tank truck carrier svcs Sombrero Acquisition Corp
06/02/98 02/19/98 California State Bank Bank holding company First Security Corp,Utah
04/21/98 02/19/98 Mastering Inc Provied computer training svcs PLATINUM Technology Inc
05/04/98 02/24/98 Somatogen Inc Dvlp human blood substitutes Baxter International Inc
04/30/98 03/02/98 First Alert Inc Mnfr fire and burglar alarms Sunbeam Corp
07/02/98 03/13/98 Beverly Bancorp,Tinley Park,IL Bank holding company St. Paul Bancorp,Chicago,IL
07/10/98 03/16/98 International Murex Tech Corp Mnfr in-vitro test systems Abbott Laboratories
05/28/98 03/16/98 Logic Works Inc Develop client/server software PLATINUM Technology Inc
05/27/98 03/17/98 ForeFront Group Inc Develop software CBT Group PLC
04/01/98 03/19/98 Lawter International Inc Mnfr printing ink and resins Lawter International Inc
03/23/98 03/23/98 BET Holdings Inc Own and operate TV stations Investor Group
06/24/98 03/24/98 Walsh International Inc Provide programming svcs Cognizant Corp
06/29/98 03/31/98 IBAH Inc Mnfr pharmaceutical products Omnicare Inc
04/04/98 04/04/98 America Online Inc Internet Service Provider Goldman Sachs & Co
07/10/98 04/06/98 MoneyGram Payment Systems Inc Pvd money wire transfer svcs Viad Corp
05/19/98 04/08/98 Blessings Corp Mnfr plastic film products Huntsman Packaging Corp
05/15/98 04/09/98 Dart Group Corp Own,operate auto part stores Richfood Holdings Inc
06/15/98 05/08/98 Authentic Specialty Foods Inc Whl,mnfr Mexican foods Agrobios(Desc SA de CV)
07/02/98 05/18/98 Graco Inc Mnfr fluid handling equipment Graco Inc
07/07/98 05/28/98 Donnelley Enterprise Solutions Pvd info management services Bowne & Co Inc
05/30/98 05/30/98 Panavision Inc Mnfr camera systems Mafco Holdings Inc
06/19/98 06/19/98 Tremont Corp Mnfr drilling lubricants Valhi Inc
07/01/98 07/01/98 Sotheby's Holdings Inc Provide auctioning, RE svcs Investor Group
12/23/98 07/06/98 Peoples Telephone Co Inc Own,op public pay telephones Davel Communications Group Inc
10/28/98 07/09/98 Eltron International Inc Mnfr computer printers Zebra Technologies Corp
09/02/98 07/17/98 DeCrane Aircraft Holdings Inc Mnfr avionics components DLJ Merchant Banking Inc
10/30/98 07/23/98 IMNET Systems Inc Develop imaging software HBO & Co
10/08/98 07/23/98 Innova Corp Mnfr millimeter wave radios Digital Microwave Corp
09/10/98 07/28/98 CyberMedia Inc Dvlp,whl support software prod Network Associates Inc
10/16/98 08/03/98 Continental Natural Gas Inc Gas utility CMS Energy Corp
11/17/98 08/03/98 Freeport-McMoRan Sulphur Inc Sulphur mining company McMoRan Oil & Gas Co
09/21/98 08/10/98 Molecular Dynamics Inc Mnfr,whl laboratory equipment Amersham Pharmacia Biotech Ltd
08/18/98 08/18/98 Saville Systems PLC Pvd billing svcs Investors
12/01/98 09/02/98 Altron Inc Mnfr,mkt circuit board prods Sanmina Corp
12/10/98 09/02/98 Home Choice Holdings Inc Pvd equip rental svcs Rent-Way Inc
12/18/98 09/09/98 Integrated Systems Consulting Provide consulting services First Consulting Group Inc
09/14/98 09/14/98 Icon CMT Corp Pvd Internet svcs,products Qwest Commun Int Inc
12/17/98 09/23/98 J&L Specialty Steel Inc Mnfr steel,steel products Usinor SA
10/07/98 09/29/98 Newmont Gold Co Gold mining Newmont Mining Corp
11/24/98 10/08/98 Mecklermedia Corp Publishing company Penton Media Inc
12/15/98 10/16/98 BRC Holdings Inc Develop health care software Affiliated Computer Services
12/14/98 10/27/98 Citizens Corp(Hanover Ins Co) Auto,workers comp insurance co Allmerica Financial Corp
12/10/98 11/02/98 AquaPenn Spring Water Co Inc Produce,whl spring water Danone Group
12/22/98 11/09/98 Global Motorsport Group Inc Wholesale motorcycle parts Stonington Partners Inc
12/22/98 11/10/98 Intensiva Healthcare Corp Pvd acute,long-term care svcs Select Medical Corp
12/16/98 11/10/98 Steel of West Virginia Inc Manufacture steel products Roanoke Electric Steel
12/14/98 12/14/98 Qwest Commun Int Inc Pvd telephone commun svcs Microsoft Corp
<CAPTION>
PREMIUM
VALUE OF -----------------------------------------------------------
ACQUIROR SHORT TRANSACTION 1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO
BUSINESS DESCRIPTION ($ MIL) ANNOUNCEMENT DATE ANNOUNCEMENT DATE ANNOUNCEMENT DATE
--------------------------- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Pvd waste disposal services 142.3 51.4 36.6 78.6
Dvlp,whl accounting software 245.2 33.3 35.4 35.4
Investor group 109.0 0.0 6.6 3.8
Pvd telecommunications svcs 134.7 25.2 30.9 51.5
Bank;insurance;holding co 164.5 12.6 14.1 25.8
Own,op healthcare facilities 275.1 14.3 31.3 37.7
Life ins co;own,op TV stn 124.8 11.2 15.2 11.5
Investment company 250.1 37.9 38.5 56.1
Bank holding co 276.9 11.4 14.0 18.8
Develop integrated software 198.7 31.6 25.0 33.3
Mnfr health care products 232.9 35.8 39.8 92.0
Mnfr,whl household appliances 129.2 68.0 90.9 110.0
Bank holding company 161.8 16.5 17.4 19.6
Mnfr pharmaceuticals,med equip 232.7 21.6 38.2 50.7
Develop integrated software 212.9 13.0 36.2 57.1
Dev educational sofatware 147.5 17.3 29.4 48.5
Mnfr printing ink and resins 130.8 0.0 1.7 (2.7)
Investor group 121.7 0.0 0.3 10.2
Pvd information services 176.8 0.0 36.8 53.3
Whl,retail pharmaceuticals 154.3 12.2 61.4 58.6
Investment bank 111.4 66.1 79.3 1.9
Provide food catering services 293.6 11.5 15.7 42.4
Prod printed,laminated films 269.7 18.7 18.3 34.9
Wholesale groceries 193.3 14.3 11.9 19.4
Mnfr,whl foods products 141.9 6.3 13.3 37.4
Mnfr fluid handling equipment 190.9 (6.5) (3.2) (9.1)
Pvd printing svcs 105.2 60.8 61.5 83.6
Mnfr toilet preparations 154.4 1.2 1.4 1.7
Mnfr chemicals and pigments 165.1 6.0 5.2 0.2
Investor group 118.6 0.6 (1.1) 1.1
Pvd pay telephone commun svcs 114.5 87.5 80.3 118.0
Mnfr bar code printing sys 287.7 25.8 34.6 57.4
Merchant banking firm 181.5 30.5 28.7 33.8
Dvlp healthcare software 261.5 55.6 59.3 62.5
Mnfr telecommunications prod 115.7 16.2 36.5 30.0
Develop network software 130.1 25.6 38.2 117.1
Electric and gas utility 154.2 8.8 35.6 46.8
Oil and gas exploration, prodn 124.2 14.9 6.4 4.2
Mnfr,whl biotechnology prods 222.2 36.7 47.7 100.0
Investors 212.9 132.2 106.5 56.0
Mnfr printed circuit boards 195.3 16.6 6.5 7.7
Pvd equipment rental services 294.4 7.2 4.1 7.7
Pvd mgmt consulting services 209.1 125.6 119.6 90.2
Pvd telephone commun svcs 202.9 65.5 60.0 (4.0)
Manufacture,wholesale steel 115.0 100.0 112.5 37.8
Gold,coal mining; oil,gas expl 264.8 (5.2) 20.8 62.4
Publish bus,trade magazines 273.7 43.7 52.6 39.8
Pvd data processing services 165.4 17.1 16.9 15.2
Pvd insurance services 212.4 20.6 17.2 20.9
Produce,whl milk,cookies,jams 110.3 34.2 100.0 160.0
Investment firm 109.0 13.5 33.8 31.1
Own,op acute hospitals 115.2 54.0 60.4 92.5
Mnfr steel bar products 116.8 75.5 100.0 79.2
Dvlp,whl computer software 200.0 3.7 3.7 5.3
</TABLE>
<PAGE> 89
PROJECT GOLDCAP
PREMIUMS ANALYSIS: MERGERS AND ACQUISITIONS BETWEEN $100 AND $300 MILLION
- -------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE PREMIUM AVERAGE PREMIUM AVERAGE PREMIUM IMPLIED IMPLIED
1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO EQUITY EQUITY VALUE
ANNOUNCEMENT DATE [1] ANNOUNCEMENT DATE ANNOUNCEMENT DATE VALUE PER SHARE [2]
--------------------- ----------------- ----------------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Goldcap Stock Price 1 Day
Prior to Announcement Date: $10.19 26.4% $130,236 $12.88
Goldcap Stock Price 1 Week
Prior to Announcement Date: $10.31 32.7% 138,407 13.69
Goldcap Stock Price 4 Weeks
Prior to Announcement Date: $11.13 39.6% 157,020 15.53
-----------------------------------------------------------
AVERAGE $141,888 $14.03
-----------------------------------------------------------
-----------------------------------------------------------
MEDIAN $138,407 $13.69
-----------------------------------------------------------
</TABLE>
- --------------------------------------------------
[1] Assumes announcement on December 29, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
<PAGE> 90
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
PROJECTED CASH FLOWS - CONSOLIDATED COMPANY
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dec. Dec. Dec. Dec. Dec. Dec. Terminal
Projections Used In Valuation: 1998 1999 (1) 2000 (1) 2001 (1) 2002 (1) 2003 (2) Value
- ------------------------------ ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Benefits Company $ 148,231 $ 153,750 $ 161,438 $ 171,124 $ 183,102 $ 195,920 $195,920
DHMI 25,204 27,818 30,703 33,887 37,402 41,281 41,281
--------- -------- --------- --------- --------- --------- --------
Total Revenues 173,435 181,568 192,141 205,011 220,504 237,201 237,201
Expenses:
Dental Care Providers' Fees
and Claim Costs 79,413 81,488 85,562 90,696 97,044 103,837 103,837
Commissions 13,235 14,453 15,337 16,257 17,395 18,612 18,612
Premium Taxes 908 942 989 1,048 1,122 1,200 1,200
General and Administrative 30,539 31,149 31,772 32,726 33,707 34,719 34,719
DHMI Operating Expenses 23,094 24,031 26,523 29,274 32,310 35,661 35,661
Depreciation (2) 1,951 1,814 2,155 2,581 2,676 2,787 2,787
Goodwill Amortization 2,530 2,568 2,568 2,568 2,568 2,568 2,568
--------- -------- --------- --------- --------- --------- --------
Total Expenses 151,670 156,445 164,906 175,150 186,822 199,384 199,384
Operating Expenses 87.5% 86.2% 85.8% 85.4% 84.7% 84.1% 84.1%
Operating Income (EBIT) 21,765 25,123 27,235 29,861 33,682 37,817 37,817
Inc. Taxes 9,285 10,632 11,520 12,631 14,247 16,000 16,000
--------- -------- --------- --------- --------- --------- ---------
After Tax Operating Income $ 12,480 $ 14,491 $ 15,715 $ 17,230 $ 19,435 $ 21,817 $ 21,817
Operating Margin 8.4% 9.4% 9.7% 10.1% 10.6% 11.1% 11.1%
CASH SOURCES
After Tax Operating Income $ 12,480 $ 14,491 $ 15,715 $ 17,230 $ 19,435 $ 21,817 $ 21,817
Depreciation and Amortization 4,481 4,382 4,723 5,149 5,244 5,355 5,355
Other Cash Sources (240) 287 399 502 622 665 665
--------- -------- --------- --------- --------- --------- ---------
TOTAL SOURCES $ 16,721 $ 19,160 $ 20,837 $ 22,881 $ 25,301 $ 27,837 $ 27,837
========= ======== ========= ========= ========= ========= =========
CASH USES
Capital Expenditures $ 2,000 $ 2,500 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Increase in Current Assets
Except Cash (360) 350 674 921 1,367 1,474 1,474
Increase in Current Liabilities
Except Debt (599) 918 1,293 1,634 2,044 2,191 2,191
Increase/(Decrease) in Net Working Capital 239 (568) (619) (713) (677) (717) (717)
Other Cash Uses (263) 302 454 585 766 822 822
--------- -------- --------- --------- --------- --------- --------
TOTAL USES $ 1,976 $ 2,234 $ 2,835 $ 2,872 $ 3,089 $ 3,105 $ 3,105
========= ======== ========= ========= ========= ========= ========
- -------------------------------------------------------------------------------------------------------------------------------
FREE CASH FLOW $ 16,926 $ 18,002 $ 20,009 $ 22,212 $ 24,732 $ 24,732
- -------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Discount Rate (WACC) Present Value of Cash Flows
---------------------------------------------------------------------------------
11.00% $73,798
12.00% $71,854
13.00% $69,990
14.00% $68,200
15.00% $66,482
16.00% $64,831
---------------------------------------------------------------------------------
</TABLE>
(1) Projections provided by the Company as of October 13, 1998.
(2) Depreciation excludes transaction cost amortization.
<PAGE> 91
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
(DOLLARS IN THOUSANDS)
SUMMARY:
<TABLE>
<S> <C>
WACC : 13.00%
Multiple: 8.00
EBIT Terminal Value: $ 37,817
Present Value of Cash Flows: $ 69,990
Present Value of Terminal Value: $164,204
--------
Total Value: $234,194
========
Plus: Cash (1) $ 9,980
Less: Debt (1) $ 78,857
--------
Equity Value $165,317
========
Equity Value per share $ 16.35
</TABLE>
(1) As of September 30, 1998. Includes present value of remaining DentLease
funding obligation and preferred stock purchase obligation.
<TABLE>
<CAPTION>
Weighted Average Cost of Capital (WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $ 73,798 $ 71,854 $ 69,990 $ 68,200 $ 66,482 $ 64,831
- -----------------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0x $134,655 $128,750 $123,153 $117,846 $112,810 $108,031
7.0 $157,098 $150,209 $143,679 $137,487 $131,612 $126,036
Multiple 8.0 $179,540 $171,667 $164,204 $157,128 $150,414 $144,041
9.0 $201,983 $193,125 $184,730 $176,769 $169,216 $162,046
10.0 $224,425 $214,584 $205,256 $196,410 $188,017 $180,052
11.0 $246,868 $236,042 $225,781 $216,051 $206,819 $198,057
12.0 $269,311 $257,501 $246,307 $235,692 $225,621 $216,062
- -----------------------------------------------------------------------------------------------------------------------------------
Total Value:
6.0x $208,453 $200,605 $193,143 $186,046 $179,292 $172,862
7.0 $230,896 $222,063 $213,669 $205,687 $198,094 $190,867
Multiple 8.0 $253,338 $243,521 $234,194 $225,328 $216,896 $208,872
9.0 $275,781 $264,980 $254,720 $244,969 $235,697 $226,877
10.0 $298,223 $286,438 $275,245 $264,610 $254,499 $244,882
11.0 $320,666 $307,897 $295,771 $284,251 $273,301 $262,887
12.0 $343,108 $329,355 $316,296 $303,892 $292,102 $280,893
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0x $139,576 $131,728 $124,266 $117,169 $110,415 $103,985
7.0 $162,019 $153,186 $144,792 $136,810 $129,217 $121,990
Multiple 8.0 $184,461 $174,644 $165,317 $156,451 $148,019 $139,995
9.0 $206,904 $196,103 $185,843 $176,092 $166,820 $158,000
10.0 $229,346 $217,561 $206,368 $195,733 $185,622 $176,005
11.0 $251,789 $239,020 $226,894 $215,374 $204,424 $194,010
12.0 $274,231 $260,478 $247,419 $235,015 $223,225 $212,016
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0x $ 13.80 $ 13.03 $ 12.29 $ 11.59 $ 10.92 $ 10.28
7.0 $ 16.02 $ 15.15 $ 14.32 $ 13.53 $ 12.78 $ 12.06
Multiple 8.0 $ 18.24 $ 17.27 $ 16.35 $ 15.47 $ 14.64 $ 13.84
9.0 $ 20.46 $ 19.39 $ 18.38 $ 17.41 $ 16.50 $ 15.62
10.0 $ 22.68 $ 21.51 $ 20.41 $ 19.36 $ 18.36 $ 19.18
11.0 $ 24.90 $ 23.64 $ 22.44 $ 21.30 $ 20.21 $ 19.18
12.0 $ 27.12 $ 25.76 $ 24.47 $ 23.24 $ 22.07 $ 20.97
- -----------------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Calendar 1998 EBIT Multiple:
6.0x 8.3x 8.0x 7.7x 7.4x 7.1x 6.9x
7.0 9.2 8.8 8.5 8.2 7.9 7.6
Multiple 8.0 10.1 9.7 9.3 9.0 8.6 8.3
9.0 11.1 10.5 10.1 9.8 9.4 9.0
10.0 11.9 11.4 11.0 10.5 10.1 9.7
11.0 12.8 12.3 11.8 11.3 10.9 10.5
12.0 13.7 13.1 12.6 12.1 11.6 11.2
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 92
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
EBITDA MULTIPLE METHODOLOGY
(DOLLARS IN THOUSANDS)
SUMMARY:
<TABLE>
<S> <C>
WACC: 13.00%
Multiple: 6.5
EBITDA Terminal Value: $43,172
Present Value of Cash Flows: $ 69,990
Present Value of Terminal Value: $152,308
--------
Total Value: $222,298
========
Plus: Cash (1) $ 9,980
Less: Debt (1) $ 78,857
--------
Equity Value: $153,421
Equity Value per Share $ 15.17
========
</TABLE>
(1) As of September 30, 1998. Includes present value of
remaining DentLease funding obligation and preferred
stock purchase obligation.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $73,798 $71,854 $69,990 $68,200 $66,482 $64,831
---------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
5.0 x $128,102 $122,485 $117,160 $112,111 $107,321 $102,774
5.5 $140,913 $134,733 $128,876 $123,322 $118,053 $113,051
6.0 $153,723 $146,982 $140,592 $134,533 $128,785 $123,329
Multiple 6.5 $166,533 $159,230 $152,308 $145,744 $139,517 $133,606
7.0 $179,343 $171,479 $164,024 $156,955 $150,249 $143,883
7.5 $192,154 $183,727 $175,740 $168,166 $160,981 $154,161
8.0 $204,964 $195,976 $187,456 $179,377 $171,713 $164,438
8.5 $217,774 $208,224 $199,172 $190,589 $182,445 $174,715
9.0 $230,584 $220,473 $210,888 $201,800 $193,177 $184,993
--------------------------------------------------------------------------------------------------------------------------
Total Value:
5.0 x $201,900 $194,339 $187,150 $180,311 $173,802 $167,604
5.5 $214,710 $206,588 $198,866 $191,522 $184,435 $177,882
6.0 $227,521 $218,836 $210,582 $202,733 $195,266 $188,159
6.5 $240,331 $231,085 $222,298 $213,944 $205,998 $198,436
Multiple 7.0 $253,141 $243,333 $234,014 $225,155 $216,730 $208,714
7.5 $265,951 $255,581 $245,730 $236,367 $227,463 $218,991
8.0 $278,762 $267,830 $257,446 $247,578 $238,195 $229,269
8.5 $291,572 $280,078 $269,162 $258,789 $248,927 $239,546
9.0 $304,382 $292,327 $280,878 $270,000 $259,659 $249,823
--------------------------------------------------------------------------------------------------------------------------
Equity Value:
5.0 x $133,023 $125,462 $118,273 $111,434 $104,925 $98,727
5.5 $145,833 $137,711 $129,989 $122,645 $115,657 $109,005
6.0 $158,644 $149,959 $141,705 $133,856 $126,389 $119,282
6.5 $171,454 $162,208 $153,421 $145,067 $137,121 $129,559
Multiple 7.0 $184,264 $174,456 $165,137 $156,278 $147,853 $139,837
7.5 $197,074 $186,704 $176,853 $167,490 $158,586 $150,114
8.0 $209,885 $198,953 $188,569 $178,701 $169,318 $160,392
8.5 $222,695 $211,201 $200,285 $189,912 $180,050 $170,669
9.0 $235,505 $223,450 $212,001 $201,123 $190,782 $180,946
--------------------------------------------------------------------------------------------------------------------------
Equity Value:
5.0 x $13.15 $12.41 $11.70 $11.02 $10.38 $9.76
5.5 $14.42 $13.62 $12.85 $12.13 $11.44 $10.78
6.0 $15.69 $14.83 $14.01 $13.24 $12.50 $11.80
6.5 $16.95 $16.04 $15.17 $14.35 $13.56 $12.81
Multiple 7.0 $18.22 $17.25 $16.33 $15.45 $14.62 $13.83
7.5 $19.49 $18.46 $17.49 $16.56 $15.68 $14.84
8.0 $20.75 $19.67 $18.65 $17.67 $16.74 $15.86
8.5 $22.02 $20.88 $19.81 $18.78 $17.80 $16.88
9.0 $23.29 $22.10 $20.96 $19.89 $18.87 $17.89
--------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Calendar 1998 EBITDA Multiple:
5.0 x 6.8 x 6.6 x 6.3 X 6.1 x 5.9 x 5.7 x
5.5 7.3 7.0 6.7 6.5 6.3 6.0
6.0 7.7 7.4 7.1 6.9 6.6 6.4
6.5 8.1 7.8 7.5 7.3 7.0 6.7
Multiple 7.0 8.6 8.2 7.9 7.6 7.3 7.1
7.5 9.0 8.7 8.3 8.0 7.7 7.4
8.0 9.4 9.1 8.7 8.4 8.1 7.8
8.5 9.9 9.5 9.1 8.8 8.4 8.1
9.0 10.3 9.9 9.5 9.2 8.8 8.5
=========================================================================================================================
</TABLE>
<PAGE> 93
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
BALANCE SHEET ASSUMPTIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
DEC. DEC. DEC. DEC. DEC. DEC. DEC.
BALANCE SHEET DATA (1) 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets Less Cash and Equivalents
Premiums Receivable $ 6,192 $ 6,334 $ 6,430 $ 6,678 $ 7,035 $ 7,619 $ 8,253
Patient Accounts Receivable 1,668 1,631 1,691 1,776 1,882 2,014 2,155
Income Taxes Receivable 175 222 231 242 257 275 294
Deferred Income Taxes 5,027 4,966 5,151 5,408 5,733 6,134 6,563
Other Current Assets 2,921 2,470 2,470 2,543 2,661 2,893 3,144
------- ------- ------- ------- ------- ------- -------
15,983 15,623 15,973 16,647 17,568 18,935 20,409
Current Liabilities Less Current Debt
Unearned Revenue $ 9,538 $ 8,894 $ 9,225 $ 9,686 $ 10,267 $ 10,986 $ 11,755
Accounts Payable 12,016 11,858 12,300 12,915 13,690 14,648 15,674
Accrued Interest Payable 109 74 77 81 86 92 98
Dental Claims Reserves 1,502 1,482 1,538 1,614 1,711 1,831 1,959
Other Current Liabilities 2,407 2,665 2,751 2,888 3,064 3,305 3,567
------- ------- ------- ------- ------- ------- -------
25,572 24,973 25,891 27,184 28,818 30,862 33,053
Working Capital Less Cash and Equivalents $(9,589) $ (9,350) $(9,918) $(10,537) $(11,250) $(11,927) $(12,644)
and Current Debt
-----------------------------------------------------------------------------------------------------------------------
CHANGE IN NET WORKING CAPITAL $ 239 $ (568) $ (619) $ (713) $ (677) $ (717)
-----------------------------------------------------------------------------------------------------------------------
Restricted Funds $ 2,321 $ 2,223 $ 2,306 $ 2,422 $ 2,567 $ 2,747 $ 2,939
Reinsurance Receivable 5,417 5,559 5,766 6,054 6,417 6,866 7,347
Other Assets 1,792 1,475 1,487 1,537 1,614 1,751 1,900
Aggregate Reserves for Life Policies 5,331 5,188 5,381 5,650 5,989 6,409 6,857
Deferred Tax Liability 1,887 1,838 1,907 2,002 2,122 2,270 2,429
Other Liabilities 715 667 692 727 770 824 882
Assumptions (Percentage of Revenues):
Current Assets Less Cash and Equivalents
Premiums Receivable 3.90% 3.65% 3.54% 3.48% 3.43% 3.46% 3.46%
Patient Accounts Receivable - % of Benefits Revenues 1 10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%
Income Taxes Receivable - % of Benefits Revenues 0.12% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Deferred Income Taxes - % of Benefits Revenues 3.32% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35%
Other Current Assets 1.84% 1.42% 1.36% 1.32% 1.30% 1.31% 1.31%
Current Liabilities Less Current Debt
Unearned Revenue - % of Benefits Revenues 6.29% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Accounts Payable - % of Benefits Revenues 7.93% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Accrued Interest Payable - % of Benefits Revenues 0.07% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Dental Claims Reserves - % of Benefits Revenues 0.99% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Current Liabilities 1.52% 1.54% 1.52% 1.50% 1.49% 1.50% 1.50%
Restricted Funds - % of Benefits Revenues 1.53% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Reinsurance Receivable - % of Benefits Revenues 3.57% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75%
Other Assets 1.12% 0.85% 0.82% 0.80% 0.79% 0.79% 0.79%
Aggregate Reserves for Life Policies - % of Benefits Revenues 3.52% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Deferred Tax Liability - % of Benefits Revenues 1.24% 1.24% 1.24% 1.24% 1.24% 1.24% 1.24%
Other Liabilities - % of Benefits Revenues 047% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
</TABLE>
(1) Projections provided by the Company as of October 13, 1998
<PAGE> 94
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
ASSUMING $152.388 MILLION ($15.00 PER SHARE) PURCHASE PRICE
FOR 100.0% OF THE EQUITY
BENEFITS COMPANY
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
- --------------------------------------- -------
<S> <C>
Sources and Uses of Funds 1
Forecasting Assumptions 2
Income Statement 3
Cash Flow Statement 4
Balance Sheet 5
Balance Sheet - Adjustments 6
Coverage Ratios and Financial Analysis 7
Return Analysis at 7.00x EBITDA 8
Return Analysis at 8.00x EBITDA 9
Return Analysis at 9.00x EBITDA 10
Return Analysis Including Dental Practice Management at 7.00x EBITDA 11
Return Analysis Including Dental Practice Management at 8.00x EBITDA 12
Return Analysis Including Dental Practice Management at 9.00x EBITDA 13
</TABLE>
<PAGE> 95
The Robinson-Humphrey Company Page 1
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
ASSUMING $152.388 MILLION ($15.00 PER SHARE) PURCHASE PRICE FOR
100.0% OF THE EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
SOURCES & USES OF FUNDS
-------------------------------------------------------------------------------------
SOURCES OF ACQUISITION FUNDS: APPLICATIONS OF ACQUISITION FUNDS:
----------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Cash From Balance Sheet $0.0 0.0% Cash to Purchase 100.0%
Revolving Facility 2,197.0 1.0% of Equity $152,388.0
Senior Term Loan 50,000.0 23.2% Paydown of Existing Debt 52,854.0
Subordinated Debt 70,000.0 32.4% Cash Fees and Expenses 10,585.0
Redeemable Preferred Stock 88,547.9 41.0% ----------
Common Stock 4,660.4 2.2%
Management Investment 421.7 0.2%
-----
TOTAL SOURCES $215,827.0 TOTAL APPLICATIONS $215,827.0
========== ==========
<CAPTION>
Projected Years Ending December 31,
-----------------------------------------------------------------------
1999 2000 2001 2002 2003
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT ITEMS:
- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 153,750.0 $ 161,438.0 $ 171,124.0 $183,102.0 $ 195,920.0
EBIT 20,130.5 21,869.0 24,084.0 27,450.0 31,084.0
% of Net Sales 13.09% 13.55% 14.07% 14.99% 15.87%
Pretax Income 9,089.7 11,470.5 15,260.3 19,806.2 24,861.0
% of Net Sales 5.9% 7.1% 8.9% 10.8% 12.7%
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ (4,249.9) $ (3,730.8) $ (2,468.8) $ (858.2) $ 945.6
% OF NET SALES (2.76)% (2.31)% (1.44)% -0.47% 0.48%
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOW ITEMS:
- ---------------
Cash Flow From Operations $ 1,558.9 $ 2,487.6 $ 4,287.1 $ 5,980.8 $ 7,898.8
Cash Flow From Investing (1,890.1) (2,346.2) (2,193.3) (2,313.5) (2,304.2)
Cash Flow From Financing 5,754.8 4,640.3 3,614.3 2,685.7 1,864.3
-------------------------------------------------------------------------
Cash Flow (Deficit) Available to Decrease (Increase)
Revolver or Increase Cash $ 5,423.6 $ 4,781.6 $ 5,708.1 $ 6,353.0 $ 7,459.0
=========================================================================
Pro Forma
BALANCE SHEET ITEMS: 1998
- ------------------- -----
Cash and Equivalents $ 13,000.0 $ 16,226.7 $ 21,008.3 $ 26,716.4 $ 33,069.4 $ 40,528.3
Revolving Facility 2,197.0 0.0 0.0 0.0 0.0 0.0
Senior Term Loan 50,000.0 46,900.0 41,800.0 34,700.0 25,600.0 14,500.0
Subordinated Debt 70,000.0 70,000.0 70,000.0 70,000.0 70,000.0 70,000.0
Preferred Stock 88,547.9 97,402.7 107,143.0 117,857.3 129,643.0 142,607.3
----------------------------------------------------------------------------------------
Total Debt and Preferred Stock 210,744.9 214,302.7 218,943.0 222,557.3 225,243.0 27,107.3
Total Stockholders' Equity (121,064.9) (125,314.8) (129,045.6) (131,514.4) (132,372.5) (131,427.0)
----------------------------------------------------------------------------------------
Total Invested Capital $ 89,680.0 $ 88,987.9 $ 89,897.4 $ 91,042.9 $ 92,870.5 $ 95,680.3
========================================================================================
</TABLE>
<PAGE> 96
The Robinson-Humphrey Company Page 2
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
FORECASTING ASSUMPTIONS
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Proj. --------------------------------------------------
INCOME STATEMENT 1998 1999 2000 2001 2002 2003
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue Growth
Subscriber Premiums 3.37% 3.72% 5.00% 8.00% 6.00% 6.00%
Dental Health Management NM NM NM NM NM NM
Other Revenue -100.00% NM NM NM NM NM
-------------------------------- -------------------------------
Total Revenue Growth -6.61% 3.72% 5.00% 6.00% 7.00% 7.00%
Provider Fees and Claim Costs as a % of Subscriber Premiums 53.57% 53.00% 53.00% 53.00% 53.00% 53.00%
Commissions as a % of Subscriber Premiums 8.93% 9.40% 9.50% 9.50% 9.50% 9.50%
Premium Taxes as a % of Subscriber Premiums 0.61% 0.61% 0.61% 0.61% 0.61% 0.61%
Benefits Co. G&A Expense as a % of Subscriber Premiums 20.60% 20.26% 19.68% 19.12% 18.41% 17.72%
DHMI G&A Expense as a % of DHMI Revenues NA 0.00% 0.00% 0.00% 0.00% 0.00%
EBITDA Margin 16.28% 16.73% 17.21% 17.76% 18.48% 19.17%
Depreciation $ 1,747.0 $1,622.0 $1,943.0 $2,347.0 $2,418.0 $2,502.0
Depreciation as a % of Net Sales 1.18% 1.05% 1.20% 1.37% 1.32% 1.28%
Existing Amortization $ 1,849.0 $1,849.0 $1,849.0 $1,849.0 $1,849.0 $1,849.0
Existing Amortization as a % of Net Sales 1.25% 1.20% 1.15% 1.08% 1.01% 0.94%
EBIT Margin 13.9% 13.1% 13.5% 14.1% 15.0% 15.9%
Interest Expense:
Revolving Facility NM 8.25% 8.25% 8.25% 8.25% 8.25%
Senior Term Loan NM 8.45% 8.45% 8.45% 8.45% 8.45%
Subordinated Debt NM 11.00% 11.00% 11.00% 11.00% 11.00%
Interest Income as % of Average Cash Balance NM 5.00% 5.00% 5.00% 5.00% 5.00%
Other Non-Operating Exp (Inc) as a % of Net Sales 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Income Taxes as a % of Pretax 39.45% 41.00% 41.00% 41.00% 41.00% 41.00%
Total Capital Expenditures $ 1,500.0 $2,000.0 $2,500.0 $2,500.0 $2,500.0 $2,500.0
% Net Sales 1.01% 1.30% 1.55% 1.46% 1.37% 1.28%
Acquisition Expenditures (At Beginning of Year) $13,832.0 $0.0 $0.0 $0.0 $0.0 $0.0
Less Fair Value of Assets Acquired 0.0 0.0 0.0 0.0 0.0 0.0
Plus Liabilities Assumed 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------- -------------------------------
Additional Goodwill $13,832.0 $0.0 $0.0 $0.0 $0.0 $0.0
<CAPTION>
Actual Projected Years Ending December 31,
----------------------------------------------------
BALANCE SHEET 1998 1999 2000 2001 2002 2003
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums Receivable as a % of Revenues 3.73% 3.73% 3.73% 3.73% 3.73% 3.73%
Days in Receivables 13.6 13.6 13.6 13.6 13.6 13.6
Other Current Assets as a % of Revenues 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Restricted Funds as a % of Subscriber Premiums 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Other Assets as a % of Subscriber Premiums 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Transaction Costs, Net $10,585.0 $8,468.0 $6,351.0 $4,234.0 $2,117.0 $0.0
Goodwill, Net 0.0 0.0 0.0 0.0 0.0 0.0
Accts Payable as a % of Revenues 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Days in Payables 29.2 29.2 29.2 29.2 29.2 29.2
Unearned Revenue as a % of Net Sales 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Accrued Interest Payable as a % of Net Sales 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Dental Claims Reserves as a % of Net Sales 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Current Liabilities as % Net Sales 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------------------------------
DEBT AS A PERCENTAGE OF ORIGINAL BALANCE:
REVOLVING FACILITY 100.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SENIOR TERM LOAN 100.00% 93.80% 83.60% 69.40% 51.20% 29.00%
SUBORDINATED DEBT 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
REDEEMABLE PREFERRED STOCK 100.00% 110.00% 121.00% 133.10% 146.41% 161.05%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 97
The Robinson-Humphrey Company Page 3
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
-----------------------------------------------------------
Actual Proj.
INCOME STATEMENT 1997 1998 1999 2000 2001 2002 2003
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales
Subscriber Premiums $143,396.0 $148,231.0 $153,750.0 $161,438.0 $171,124.0 $183,102.0 $195,920.0
Dental Health Management 7,113.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Revenue 8,217.0 0.0 0.0 0.0 0.0 0.0 0.0
----------------------------------------------- ----------------------------------
TOTAL NET SALES 158,726.0 148,231.0 153,750.0 161,438.0 171,124.0 183,102.0 195,920.0
Expenses
Provider Fees and Claim Costs 79,690.0 79,413.0 81,487.5 85,562.0 90,696.0 97,044.0 103,837.0
Commissions 13,272.0 13,235.0 14,453.0 15,337.0 16,257.0 17,395.0 18,612.0
Premium Taxes 1,047.0 908.0 942.0 989.0 1,048.0 1,122.0 1,200.0
Benefits Co. G&A Expense 36,918.0 30,539.0 31,149.0 31,772.0 32,726.0 33,707.0 34,719.0
DHMI G&A Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0
----------------------------------------------- ----------------------------------
Total Expenses 130,927.0 124,095.0 128,031.5 133,660.0 140,727.0 149,268.0 158,368.0
EBITDA 27,799.0 24,136.0 25,718.5 27,778.0 30,397.0 33,834.0 37,552.0
Depreciation 5,735.0 1,747.0 1,622.0 1,943.0 2,347.0 2,418.0 2,502.0
Existing Amortization 0.0 1,849.0 1,849.0 1,849.0 1,849.0 1,849.0 1,849.0
Acquisition-Related Amortization (30 Years) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Goodwill Amortization (40 Years) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of Transaction Costs (5 Years) 0.0 0.0 2,117.0 2,117.0 2,117.0 2,117.0 2,117.0
----------------------------------------------- ----------------------------------
EBIT 22,064.0 20,540.0 20,130.5 21,869.0 24,084.0 27,450.0 31,084.0
Interest Expense:
Revolving Facility 0.0 0.0 90.6 0.0 0.0 0.0 0.0
Senior Term Loan 0.0 0.0 4,094.0 3,747.6 3,232.1 2,547.7 1,694.2
Subordinated Debt 0.0 0.0 7,700.0 7,700.0 7,700.0 7,700.0 7,700.0
Other Interest Expense/(Income) 2,514.0 0.0 (843.9) (1,049.1) (2,108.4) (2,603.9) (3,171.2)
----------------------------------------------- ----------------------------------
Net Cash Interest Expense 2,514.0 0.0 11,040.8 10,398.5 8,823.7 7,643.8 6,223.0
Other Non-Operating Expense (Inc.) 2.0 0.0 0.0 0.0 0.0 0.0 0.0
----------------------------------------------- ----------------------------------
INCOME BEFORE INCOME TAXES 19,548.0 20,540.0 9,089.7 11,470.5 15,260.3 19,806.2 24,861.0
Income Taxes 8,466.0 8,832.0 4,484.9 5,461.0 7,014.8 8,878.6 10,951.1
Extraordinary Loss 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Preferred Dividend - 10% PIK 0.0 0.0 8,854.8 9,740.3 10,714.3 11,785.7 12,964.3
----------------------------------------------- ----------------------------------
NET INCOME AVAIL. TO COMMON $ 11,082.0 $ 11,708.0 $ (4,249.9) $ (3,730.8) $ (2,468.8) $ (858.2) $ 945.6
===================================================================================================================================
INCOME RATIOS & ANALYSIS:
EBITDA as a % of Net Sales 17.51% 16.28% 16.73% 17.21% 17.76% 18.48% 19.17%
EBIT as a % of Net Sales 13.90% 13.86% 13.09% 13.55% 14.07% 14.99% 15.87%
Pretax Profit as a % of Net Sales 12.32% 13.86% 5.91% 7.11% 8.92% 10.82% 12.69%
Net Income as a % of Net Sales 6.98% 7.90% (2.76%) (2.31%) (1.44%) (0.47%) 0.48%
</TABLE>
<PAGE> 98
The Robinson-Humphrey Company Page 4
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
-----------------------------------------------------------
CASH FLOW STATEMENT 1999 2000 2001 2002 2003
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income Available to Common $(4,249.9) $(3,730.8) $(2,468.8) $ (858.2) $ 945.6
Adjustments to Reconcile Net Income to Net Cash Provided
by (Used for) Operating Activities:
Depreciation and Exisitng Amortization 3,471.0 3,792.0 4,196.0 4,267.0 4,351.0
Acquisition-Related Amortization (30 Year Amortization) 0.0 0.0 0.0 0.0 0.0
Transaction Costs (5 Year Amortization) 2,117.0 2,117.0 2,117.0 2,117.0 2,117.0
Goodwill (40 Year Amortization) 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------------
RECONCILIATION SUB TOTAL 5,588.0 5,909.0 6,313.0 6,384.0 6,468.0
Change in Current Assets Except Cash (482.6) (670.1) (846.5) (1,045.4) (1,118.3)
Change in Current Liabilities Except Debt 858.2 1,195.5 1,506.2 1,862.6 1,993.2
------------------------------------------------------------
NET SOURCE (USE) OF CASH PROVIDED BY WORKING CAPITAL 375.6 525.4 659.6 817.2 874.9
------------------------------------------------------------
Change in Deferred Tax Asset 0.0 0.0 0.0 0.0 0.0
Change in Other Assets (248.0) (346.0) (435.0) (539.0) (577.0)
Change in Other Liabilities 93.3 129.9 218.3 176.8 187.4
------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATIONS 1,558.9 2,487.6 4,287.1 5,980.8 7,898.8
============================================================
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment (2,000.0) (2,500.0) (2,500.0) (2,500.0) (2,500.0)
Acquisition of Businesses, Net of Cash Acquired 0.0 0.0 0.0 0.0 0.0
Change in Restricted Funds (83.3) (115.3) (145.3) (179.7) (192.3)
Change in Aggregate Reserves for Life Policies and Contracts 193.2 269.1 452.0 366.1 388.1
------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTMENTS (1,890.1) (2,346.2) (2,193.3) (2,313.5) (2,304.2)
============================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) Under Senior Debt (3,100.0) (5,100.0) (7,100.0) (9,100.0) (11,100.0)
Net Borrowings (Repayments) Under Subordinated Debt 0.0 0.0 0.0 0.0 0.0
Paydown of Assumed Liabilities 0.0 0.0 0.0 0.0 0.0
Payments of Dividends on Preferred Stock 8,854.8 9,740.3 10,714.3 11,785.7 12,964.3
------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING $ 5,754.8 $ 4,640.3 $ 3,614.3 $ 2,685.7 $ 1,864.3
============================================================
AFFECT ON SENIOR REVOLVING FACILITY:
Cash From Balance Sheet (previous year) $13,000.0 $16,226.7 $21,008.3 $26,716.4 $ 33,069.4
Minimum Cash Balance 14,812.5 15,453.2 16,260.3 17,258.5 18,326.7
------------------------------------------------------------
Cash Available (Required) From Balance Sheet (1,812.5) 773.5 4,747.9 9,457.9 14,742.7
Cash Flow (Deficit) Available to (Increase) Decrease Revolver 5,423.6 4,781.6 5,708.1 6,353.0 7,459.0
Total Cash Available (Required) 3,611.1 5,555.1 10,456.1 15,810.9 22,201.7
Beginning Balance of Senior Revolving Facility 2,197.0 0.0 0.0 0.0 0.0
Cash Used to Decrease (Increase) Senior Revolving Facility 2,197.0 0.0 0.0 0.0 0.0
------------------------------------------------------------
Ending Balance of Senior Revolving Facility $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
============================================================
</TABLE>
<PAGE> 99
The Robinson-Humphrey Company Page 5
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Pro Forma ------------------------------------------------------------------
BALANCE SHEET 1998 1999 2000 2001 2002 2003
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash and Equivalents $ 13,000.0 $ 16,226.7 $ 21,008.3 $ 26,716.4 $ 33,069.4 $ 40,528.3
Receivable, Net 5,529.0 5,734.9 6,021.6 6,382.9 6,829.7 7,307.8
Income Tax Receivable 222.0 231.0 242.0 257.0 275.0 294.0
Deferred Tax Asset 4,966.0 5,151.0 5,408.0 5,733.0 6,134.0 6,563.0
Other Current Assets 2,223.0 2,305.8 2,421.1 2,566.3 2,746.0 2,938.2
------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 25,940.0 29,649.3 35,101.0 41,655.6 49,054.0 57,631.3
Restricted Funds 2,223.0 2,306.3 2,421.6 2,566.9 2,746.5 2,938.8
Fixed Assets 4,247.0 6,247.0 8,747.0 11,247.0 13,747.0 16,247.0
Less: Accumulated Depreciation 1,203.0 2,825.0 4,768.0 7,115.0 9,533.0 12,035.0
------------------------------------------------------------------------------
NET FIXED ASSETS 3,044.0 3,422.0 3,979.0 4,132.0 4,214.0 4,212.0
Transaction Costs (5 Year Amortization) 10,585.0 8,468.0 6,351.0 4,234.0 2,117.0 0.0
New Goodwill (40 Year Amortization) 0.0 0.0 0.0 0.0 0.0 0.0
Existing Goodwill (40 Year Amortization) 71,960.0 70,111.0 68,262.0 66,413.0 64,564.0 62,715.0
Acquisition Goodwill (30 Year Amortization) 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Tax Asset 0.0 0.0 0.0 0.0 0.0 0.0
Other Assets 6,671.0 6,919.0 7,265.0 7,700.0 8,239.0 8,816.0
------------------------------------------------------------------------------
TOTAL ASSETS $ 120,423.0 $ 120,875.5 $ 123,379.5 $ 126,701.5 $ 130,934.5 $ 136,313.1
==============================================================================
Accounts Payable and Accrued Expenses $ 11,858.0 $ 12,299.5 $ 12,914.5 $ 13,689.4 $ 14,647.6 $ 15,673.0
Unearned Revenue 8,894.0 9,225.1 9,686.4 10,267.6 10,986.3 11,755.4
Accrued Interest Payable 74.0 76.8 80.6 85.4 91.4 97.8
Dental Claims Reserves 1,482.0 1,537.2 1,614.0 1,710.9 1,830.6 1,958.8
Other Current Liabilities 742.0 769.6 808.1 856.6 916.6 980.7
------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 23,050.0 23,908.2 25,103.7 26,609.9 28,472.5 30,465.7
Aggregate Reserves for Life Policies and Contracts 5,188.0 5,381.2 5,650.2 6,102.3 6,468.4 6,856.5
Long-Term Debt:
Revolving Facility 2,197.0 0.0 0.0 0.0 0.0 0.0
Senior Term Loan 50,000.0 46,900.0 41,800.0 34,700.0 25,600.0 14,500.0
Subordinated Debt 70,000.0 70,000.0 70,000.0 70,000.0 70,000.0 70,000.0
Redeemable Preferred Stock 88,547.9 97,402.7 107,143.0 117,857.3 129,643.0 142,607.3
------------------------------------------------------------------------------
Total Long-Term Debt and Preferred Stock 210,744.9 214,302.7 218,943.0 222,557.3 225,243.0 227,107.3
Other Long-Term Liabilities 2,505.0 2,598.3 2,728.2 2,946.4 3,123.2 3,310.6
Stockholders' Equity:
Common Stock and Paid In Capital (72,561.9) (72,561.9) (72,561.9) (72,561.9) (72,561.9) (72,561.9)
Retained Earnings (48,503.0) (52,752.9) (56,483.7) (58,952.5) (59,810.7) (58,865.1)
------------------------------------------------------------------------------
Total Stockholders' Equity (121,064.9) (125,314.8) (129,045.6) (131,514.4) (132,372.5) (131,427.0)
------------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY $ 120,423.0 $ 120,875.5 $ 123,379.5 $ 126,701.5 $ 130,934.5 $ 136,313.1
==============================================================================
</TABLE>
<PAGE> 100
The Robinson-Humphrey Company Page 6
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Proj. Goodwill Acquisition Pro Forma Valuation Pro Forma
BALANCE SHEET ADJUSTMENTS 1998 Write-Down Adjustments Acquisition Adjustments Close
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash and Equivalents $ 13,000.0 $ 13,000.0 $ 13,000.0
Receivable, Net 5,529.0 5,529.0 5,529.0
Income Tax Receivable 222.0 222.0 222.0
Deferred Tax Asset 4,966.0 4,966.0 4,966.0
Other Current Assets 2,223.0 2,223.0 2,223.0
----------------------------------------------------------------------------
TOTAL CURRENT ASSETS 25,940.0 0.0 0.0 25,940.0 0.0 25,940.0
Restricted Funds 2,223.0 2,223.0 2,223.0
Fixed Assets 4,247.0 4,247.0 4,247.0
Less: Accumulated Depreciation 1,203.0 1,203.0 1,203.0
----------------------------------------------------------------------------
NET FIXED ASSETS 3,044.0 0.0 0.0 3,044.0 0.0 3,044.0
Transaction Costs (5 Year Amortization) 0.0 10,585.0 10,585.0 10,585.0
New Goodwill (40 Year Amortization) 0.0 0.0 0.0
Existing Goodwill (40 Year Amortization) 71,960.0 71,960.0 71,960.0
Deferred Tax Asset 0.0 0.0 0.0
Other Assets 6,671.0 6,671.0 6,671.0
----------------------------------------------------------------------------
TOTAL ASSETS $109,838.0 $0.0 $ 10,585.0 $ 120,423.0 $0.0 $ 120,423.0
============================================================================
Current Maturities of Long-Term Debt $ 0.0 $ 0.0 $ 0.0
Line of Credit 0.0 0.0 0.0
Accounts Payable and Accrued Expenses 11,858.0 11,858.0 11,858.0
Unearned Revenue 8,894.0 8,894.0 8,894.0
Accrued Interest Payable 74.0 74.0 74.0
Dental Claims Reserves 1,482.0 1,482.0 1,482.0
Other Current Liabilities 742.0 742.0 742.0
----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 23,050.0 0.0 0.0 23,050.0 0.0 23,050.0
Aggregate Reserves for Life Policies and Contracts 5,188.0 5,188.0 5,188.0
Long-Term Debt:
Existing Capital Leases and Notes Payable 53,475.0 (53,475.0) 0.0 0.0
Revolving Facility 0.0 2,197.0 2,197.0 2,197.0
Senior Term Loan 0.0 50,000.0 50,000.0 50,000.0
Subordinated Debt 0.0 70,000.0 70,000.0 70,000.0
Redeemable Preferred Stock 0.0 88,547.9 88,547.9 88,547.9
----------------------------------------------------------------------------
Total Long-Term Debt and Preferred Stock 53,475.0 0.0 157,269.9 210,744.9 0.0 210,744.9
Other Long-Term Liabilities 2,505.0 2,505.0 2,505.0
Stockholders' Equity:
Common Stock and Paid In Capital 74,123.0 (146,684.9) (72,561.9) (72,561.9)
Retained Earnings (48,503.0) (48,503.0) (48,503.0)
----------------------------------------------------------------------------
Total Stockholders' Equity 25,620.0 0.0 (146,684.9) (121,064.9) 0.0 (121,064.9)
----------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY $109,838.0 $0.0 $ 10,585.0 $ 120,423.0 $0.0 $ 120,423.0
============================================================================
</TABLE>
<PAGE> 101
The Robinson-Humphrey Company Page 7
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
-------------------------------------------------------
COVERAGE RATIOS & FINANCIAL ANALYSIS 1999 2000 2001 2002
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COVERAGE RATIOS:
SUBORDINATED INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0
Subordinated Interest $ 7,700.0 $ 7,700.0 $ 7,700.0 $ 7,700.0
Subordinated Interest Coverage 3.34 3.61 3.95 4.39
ADJUSTED SUBORDINATED INTEREST COVERAGE
EBITDA less Capital Expenditures $ 23,718.5 $ 25,278.0 $ 27,897.0 $ 31,334.0
Subordinated Interest $ 7,700.0 $ 7,700.0 $ 7,700.0 $ 7,700.0
Adjusted Subordinated Interest Coverage 3.08 3.28 3.62 4.07
TOTAL INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0
Total Net Interest $ 11,040.8 $ 10,398.5 $ 8,823.7 $ 7,643.8
Total Interest Coverage 2.33 2.67 3.44 4.43
TOTAL FINANCING COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0
Total Net Interest + Principal Repayment 14,140.8 15,498.5 15,923.7 16,743.8
Total Interest Coverage 1.82 1.79 1.91 2.02
TOTAL FIXED COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0
Total Net Interest + Principal Repayment + Cap. Ex. $ 16,140.8 $ 17,998.5 $ 18,423.7 $ 19,243.8
Total Fixed Coverage 1.59 1.54 1.65 1.76
MAINTENANCE OF FUNDED DEBT
Total Debt / EBITDA 4.55 4.02 3.44 2.83
Total Debt / EBITDA less Capital Expenditures 4.93 4.42 3.75 3.05
Total Senior Debt / EBITDA 1.82 1.50 1.14 0.76
FINANCIAL ANALYSIS:
INCOME STATEMENT:
EBIT Margin 13.09% 13.55% 14.07% 14.99%
Pretax Margin 5.91% 7.11% 8.92% 10.82%
Net Margin (2.76%) (2.31)% (1.44)% (0.47)%
Asset Turnover 1.27 1.31 1.35 1.40
Return on Average Assets (3.52)% (3.05)% (1.97)% (0.67)%
Return on Average Equity 3.45% 2.93% 1.89% 0.65%
BALANCE SHEET:
Total Debt $ 116,900.0 $ 111,800.0 $ 104,700.0 $ 95,600.0
Total Stockholders' Equity (27,912.1) (21,902.6) (13,657.1) (2,729.5)
Total Capitalization 88,987.9 89,897.4 91,042.9 92,870.5
Tangible Equity (98,023.1) (90,164.6) (80,070.1) (67,293.5)
Total Debt / Total Capitalization 131.37% 124.36% 115.00% 102.94%
Total Debt / Total Stockholders' Equity -418.81% -510.44% -766.63% -3502.43%
Current Ratio (x) 1.24 1.40 1.57 1.72
Accounts Receivable Turns (x) 26.81 26.81 26.81 26.81
Accounts Receivable Days Outstanding 13.61 13.61 13.61 13.61
Accounts Payable Days Outstanding 29.20 29.20 29.20 29.20
<CAPTION>
-----------
2003
-----------
<S> <C>
SUBORDINATED INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 37,552.0
Subordinated Interest $ 7,700.0
Subordinated Interest Coverage 4.88
ADJUSTED SUBORDINATED INTEREST COVERAGE
EBITDA less Capital Expenditures $ 35,052.0
Subordinated Interest $ 7,700.0
Adjusted Subordinated Interest Coverage 4.55
TOTAL INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 37,552.0
Total Net Interest $ 6,223.0
Total Interest Coverage 6.03
TOTAL FINANCING COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 37,552.0
Total Net Interest + Principal Repayment 17,323.0
Total Interest Coverage 2.17
TOTAL FIXED COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $ 37,552.0
Total Net Interest + Principal Repayment + Cap. Ex. $ 19,823.0
Total Fixed Coverage 1.89
MAINTENANCE OF FUNDED DEBT
Total Debt / EBITDA 2.25
Total Debt / EBITDA less Capital Expenditures 2.41
Total Senior Debt / EBITDA 0.39
FINANCIAL ANALYSIS:
INCOME STATEMENT:
EBIT Margin 15.87%
Pretax Margin 12.69%
Net Margin 0.48%
Asset Turnover 1.44
Return on Average Assets 0.71%
Return on Average Equity (0.72)%
BALANCE SHEET:
Total Debt $ 84,500.0
Total Stockholders' Equity 11,180.3
Total Capitalization 95,680.3
Tangible Equity (51,534.7)
Total Debt / Total Capitalization 88.31%
Total Debt / Total Stockholders' Equity 755.79%
Current Ratio (x) 1.89
Accounts Receivable Turns (x) 26.81
Accounts Receivable Days Outstanding 13.61
Accounts Payable Days Outstanding 29.20
</TABLE>
<PAGE> 102
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS--TERMINAL VALUE BASED ON AN EBITDA MULTIPLE OF 7.00x.
<TABLE>
<CAPTION>
% of Current
CAPITAL STRUCTURE Cap'n Return
----- -------
<S> <C> <C> <C>
Revolving Facility $ 2,197.0 1.0% 8.25%
Senior Term Loan 50,000.0 23.2% 8.45% Weighted
Subordinated Debt 70,000.0 32.4% 11.00% Average
Preferred Stock 88,547.9 41.0% 0.00% Initial
Investor Common 4,660.4 2.2% 69.31% Cost of
Management Common 421.7 0.2% 93.51% Capital
- --------------------------------------------------------------------------
TOTAL NEW CAPITAL $215,827.0 100.0% 7.29%
- --------------------------------------------------------------------------
</TABLE>
PURCHASE MULTIPLE ANALYSIS
<TABLE>
<CAPTION>
-------------------------------
Firm Value
Purchase Price Analysis: Year EBITDA Multiple
-------------------------------
<S> <C> <C> <C> <C>
PRO FORMA EQUITY $152,388.0 1998A $24,136.0 7.96 x
+ Pro Forma Debt 52,854.0 1999E 25,718.5 7.47 x
- - Pro Forma Cash (13,000.0) 2000E 27,778.0 6.92 x
---------- -------------------------------
FIRM VALUE PAID $192,242.0
</TABLE>
TERMINAL VALUE CALCULATION
<TABLE>
<CAPTION>
AT END OF:
----------------------------------------------------------
Firm Value Multiple: 7.00 x 1999 2000 2001 2002 2003
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0 $ 37,552.0
Firm Value at a 8.00 Multiple = 180,029.5 194,446.0 212,779.0 236,838.0 262,864.0
- Total Debt and Preferred Stock 214,302.7 218,943.0 222,557.3 225,243.0 227,107.3
+ Excess Cash 16,226.7 21,008.3 26,716.4 33,069.4 40,528.3
----------------------------------------------------------
-------------------------------------------------------------------------------------------
VALUE OF COMMON EQUITY $(18,046.5) $ (3,488.7) $ 16,938.1 $ 44,664.4 $ 76,285.0
MULTIPLE OF NET INCOME NM NM NM NM 80.7
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FIVE YEAR RETURNS
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 IRR
Equity % Cash Out Cash In Cash In Cash In Cash In Cash In %
------------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revolving Facility
Principal $ (2,197.0) $2,197.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Interest 90.6 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $ (2,197.0) $2,287.6 $ 0.0 $ 0.0 $ 0.0 $ 0.0 8.250%
Senior Term Loan
Principal $(50,000.0) $3,100.0 $5,100.0 $ 7,100.0 $ 9,100.0 $ 25,600.0
Interest 4,094.0 3,747.6 3,232.1 2,547.7 1,694.2
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $(50,000.0) $7,194.0 $8,847.6 $10,332.1 $11,647.7 $ 27,294.2 8.450%
Subordinated Debt
Principal $(70,000.0) $0.0 $ 0.0 $ 0.0 $ 0.0 $ 70,000.0
Interest 7,700.0 7,700.0 7,700.0 7,700.0 7,700.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $(70,000.0) $7,700.0 $7,700.0 $ 7,700.0 $ 7,700.0 $ 77,700.0 11.000%
Preferred Stock
Principal $(88,547.9) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $142,607.3
Interest 0.0 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------
TOTAL $(88,547.9) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $142,607.3 10.000%
Investor Common Equity 85.000% $ (4,660.4) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 64,842.3 69.312%
Combined Preferred and Common 85.000% $(93,208.3) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $207,449.6 17.352%
Management Common Equity 15.000% $ (421.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 11,442.8 93.514%
-------
</TABLE>
<PAGE> 103
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS--TERMINAL VALUE BASED ON AN EBITDA MULTIPLE OF 8.00x.
<TABLE>
<CAPTION>
% of Current
CAPITAL STRUCTURE Cap'n Return
----- -------
<S> <C> <C> <C>
Revolving Facility $ 2,197.0 1.0% 8.25%
Senior Term Loan 50,000.0 23.2% 8.45% Weighted
Subordinated Debt 70,000.0 32.4% 11.00% Average
Preferred Stock 88,547.9 41.0% 0.00% Initial
Investor Common 4,660.4 2.2% 83.42% Cost of
Management Common 421.7 0.2% 100.64% Capital
- --------------------------------------------------------------------------
TOTAL NEW CAPITAL $215,827.0 100.0% 7.62%
- --------------------------------------------------------------------------
</TABLE>
PURCHASE MULTIPLE ANALYSIS
<TABLE>
<CAPTION>
-------------------------------
Firm Value
Purchase Price Analysis: Year EBITDA Multiple
-------------------------------
<S> <C> <C> <C> <C>
PRO FORMA EQUITY $152,388.0 1998A $24,136.0 8.50 x
+ Pro Forma Debt 52,854.0 1999E 25,718.5 7.98 x
- - Pro Forma Cash 0.0 2000E 27,778.0 7.39 x
---------- -------------------------------
FIRM VALUE PAID $205,242.0
</TABLE>
TERMINAL VALUE CALCULATION
<TABLE>
<CAPTION>
AT END OF:
----------------------------------------------------------
Firm Value Multiple: 8.00 x 1999 2000 2001 2002 2003
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0 $ 37,552.0
Firm Value at a 8.00 Multiple = 205,748.0 222,224.0 243,176.0 270,672.0 300,416.0
- Total Debt and Preferred Stock 214,302.7 218,943.0 222,557.3 225,243.0 227,107.3
+ Excess Cash 16,226.7 21,008.3 26,716.4 33,069.4 40,528.3
----------------------------------------------------------
-------------------------------------------------------------------------------------------
VALUE OF COMMON EQUITY $ 7,672.0 $ 24,289.3 $ 47,335.1 $ 78,498.4 $113,837.0
MULTIPLE OF NET INCOME NM NM NM NM 120.4
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FIVE YEAR RETURNS
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 IRR
Equity % Cash Out Cash In Cash In Cash In Cash In Cash In %
------------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revolving Facility
Principal $ (2,197.0) $2,197.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Interest 90.6 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $ (2,197.0) $2,287.6 $ 0.0 $ 0.0 $ 0.0 $ 0.0 8.250%
Senior Term Loan
Principal $(50,000.0) $3,100.0 $5,100.0 $ 7,100.0 $ 9,100.0 $ 25,600.0
Interest 4,094.0 3,747.6 3,232.1 2,547.7 1,694.2
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $(50,000.0) $7,194.0 $8,847.6 $10,332.1 $11,647.7 $ 27,294.2 8.450%
Subordinated Debt
Principal $(70,000.0) $0.0 $ 0.0 $ 0.0 $ 0.0 $ 70,000.0
Interest 7,700.0 7,700.0 7,700.0 7,700.0 7,700.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $(70,000.0) $7,700.0 $7,700.0 $ 7,700.0 $ 7,700.0 $ 77,700.0 11.000%
Preferred Stock
Principal $(88,547.9) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $142,607.3
Interest 0.0 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------
TOTAL $(88,547.9) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $142,607.3 10.000%
Outside Investor Common Equity 85.000% $ (4,660.4) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 96,761.5 83.424%
Combined Preferred and Common 85.000% $(93,208.3) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $239,368.8 20.760%
Management Common Equity 15.000% $ (421.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 17,075.6 109.643%
-------
</TABLE>
<PAGE> 104
The Robinson-Humphrey Company Page 10
Project Goldcap
Going Private Analysis - Recapitalization Accounting
(Dollars in Thousands)
RETURN ANALYSIS--Terminal Value Based on an EBITDA Multiple of 9.00x.
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Current
CAPITAL STRUCTURE Cap'n Return
----- -------
<S> <C> <C> <C> <C>
Revolving Facility $ 2,197.0 1.0% 8.25%
Senior Term Loan 50,000.0 23.2% 8.45% Weighted
Subordinated Debt 70,000.0 32.4% 11.00% Average
Preferred Stock 88,547.9 41.0% 0.00% Initial
Investor Common 4,660.4 2.2% 94.19 Cost of
Management Common 421.7 0.2% 121.94 Capital
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL NEW CAPITAL $215,827.0 100.0% 7.88%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PURCHASE MULTIPLE ANALYSIS
<TABLE>
<CAPTION>
--------------------------------------
Firm Value
Purchase Price Analysis: Year EBITDA Multiple
--------------------------------------
<S> <C> <C> <C> <C>
PRO FORMA EQUITY $152,388.0 1998A $24,136.0 8.50 x
+ Pro Forma Debt 52,854.0 1999E 25,718.5 7.98 x
- - Pro Forma Cash 0.0 2000E 27,778.0 7.39 x
----------
FIRM VALUE PAID $205,242.0
</TABLE>
TERMINAL VALUE CALCULATION
<TABLE>
<CAPTION>
AT END OF:
--------------------------------------------------------------------------
Firm Value Multiple: 9.00 x 1999 2000 2001 2002 2003
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0 $ 37,552.0
Firm Value at a 9.00 Multiple = 231,466.5 250,002.0 273,573.0 304,506.0 337,968.0
- Total Debt and Preferred Stock 214,302.7 218,943.0 222,557.3 225,243.0 227,107.3
+ Excess Cash 16,226.7 21,008.3 26,716.4 33,069.4 40,528.3
--------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
VALUE OF COMMON EQUITY $ 33,390.5 $ 52,067.3 $ 77,732.1 $112,332.4 $151,389.0
MULTIPLE OF NET INCOME NM NM NM NM 160.1
--------------------------------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003 IRR
Equity % Cash Out Cash In Cash In Cash In Cash In Cash In %
------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revolving Facility
Principal ($2,197.0) $2,197.0 $ 0.0 $0.0 $0.0 $0.0
Interest 90.6 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------
TOTAL ($2,197.0) $2,287.6 $0.0 $0.0 $0.0 $0.0 8.250%
Senior Term Loan
Principal ($50,000.0) $3,100.0 $5,100.0 $7,100.0 $9,100.0 $25,600.0
Interest 4,094.0 3,747.6 3,232.1 2,547.7 1,694.2
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------
TOTAL ($50,000.0) $7,194.0 $8,847.6 $10,332.1 $11,647.7 $27,294.2 8.450%
Subordinated Debt
Principal ($70,000.0) $0.0 $0.0 $0.0 $0.0 $70,000.0
Interest 7,700.0 7,700.0 7,700.0 7,700.0 7,700.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------
TOTAL ($70,000.0) $7,700.0 $7,700.0 $7,700.0 $7,700.0 $77,700.0 11.000%
Preferred Stock
Principal ($88,547.9) $0.0 $0.0 $0.0 $0.0 $142,607.3
Interest 0.0 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------
TOTAL ($88,547.9) $0.0 $0.0 $0.0 $0.0 $142,607.3 10.000%
Outside Investor Common Equity 85.000% ($4,660.4) $0.0 $0.0 $0.0 $0.0 $128,680.7 94.186%
Combined Preferred and Common 85.000% ($93,208.3) $0.0 $0.0 $0.0 $0.0 $271,288.0 23.821%
Management Common Equity 15.000% ($421.7) $0.0 $0.0 $0.0 $0.0 $ 22,708.4 121.944%
</TABLE>
<PAGE> 105
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS INCLUDING DENTAL PRACTICE MANAGEMENT -- TERMINAL VALUE BASED ON
AN EBITDA MULTIPLE OF 7.00X.
<TABLE>
<CAPTION>
ASSUMED AFTER-TAX PROCEEDS FROM SALE OF DENTAL PRACTICE MANAGEMENT BUSINESS
---------------------------------------------------------------------------
$0.0 $5,000 $10,000 $15,000 $20,000
---------------------------------------------------------------------------
EQUITY %
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
COMBINED PREFERRED AND COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
MANAGEMENT COMMON EQUITY 15.0% $0.0 $ 750 $1,500 $ 2,250 $ 3,000
------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY
CASH OUT $ (4,660.4) $ (4,660.4) $ (4,660.4) $ (4,660.4) $ (4,660.4)
CASH IN $ 64,842.3 $ 64,842.3 $ 64,842.3 $ 64,842.3 $ 64,842.3
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $ 64,842.3 $ 69,092.3 $ 73,342.3 $ 77,592.3 $ 81,842.3
--------------------------------------------------------------------------
IRR 69.312% 71.475% 73.535% 75.501% 77.382%
--------------------------------------------------------------------------
COMBINED PREFERRED AND COMMON EQUITY
CASH OUT $(93,208.3) $(93,208.3) $(93,208.3) $(93,208.3) $(93,208.3)
CASH IN $207,449.6 $207,449.6 $207,449.6 $207,449.6 $207,449.6
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $207,449.6 $211,699.6 $215,949.6 $220,199.6 $224,449.6
--------------------------------------------------------------------------
IRR 17.352% 17.829% 18.299% 18.761% 19.216%
--------------------------------------------------------------------------
MANAGEMENT COMMON EQUITY
CASH OUT $ (421.7) $ (421.7) $ (421.7) $ (421.7) $ (421.7)
CASH IN $ 11,442.8 $ 11,442.8 $ 11,442.8 $ 11,442.8 $ 11,442.8
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 750.0 $ 1,500.0 $ 2,250.0 $ 3,000.0
TOTAL CASH IN $ 11,442.8 $ 12,192.8 $ 12,942.8 $ 13,692.8 $ 14,442.8
--------------------------------------------------------------------------
IRR 93.514% 95.987% 98.341% 100.588% 102.738%
--------------------------------------------------------------------------
</TABLE>
<PAGE> 106
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS INCLUDING DENTAL PRACTICE MANAGEMENT -- TERMINAL VALUE BASED ON
AN EBITDA MULTIPLE OF 8.00X.
<TABLE>
<CAPTION>
ASSUMED AFTER-TAX PROCEEDS FROM SALE OF DENTAL PRACTICE MANAGEMENT BUSINESS
---------------------------------------------------------------------------
$0.0 $5,000 $10,000 $15,000 $20,000
---------------------------------------------------------------------------
EQUITY %
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
COMBINED PREFERRED AND COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
MANAGEMENT COMMON EQUITY 15.0% $0.0 $ 750 $1,500 $ 2,250 $ 3,000
------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY
CASH OUT $ (4,660.4) $ (4,660.4) $ (4,660.4) $ (4,660.4) $ (4,660.4)
CASH IN $ 96,761.5 $ 96,761.5 $ 96,761.5 $ 96,761.5 $ 96,761.5
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $ 96,761.5 $101,011.5 $105,261.5 $109,511.5 $113,761.5
--------------------------------------------------------------------------
IRR 83.424% 21.186% 86.539% 88.021% 89.459%
--------------------------------------------------------------------------
COMBINED PREFERRED AND COMMON EQUITY
CASH OUT $(93,208.3) $(93,208.3) $(93,208.3) $(93,208.3) $(93,208.3)
CASH IN $239,368.8 $239,368.8 $239,368.8 $239,368.8 $239,368.8
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $239,368.8 $243,618.8 $247,868.8 $252,118.8 $256,368.8
--------------------------------------------------------------------------
IRR 20.760% 21.186% 21.606% 22.020% 22.428%
--------------------------------------------------------------------------
MANAGEMENT COMMON EQUITY
CASH OUT $ (421.7) $ (421.7) $ (421.7) $ (421.7) $ (421.7)
CASH IN $ 17,075.6 $ 17,075.6 $ 17,075.6 $ 17,075.6 $ 17,075.6
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 750.0 $ 1,500.0 $ 2,250.0 $ 3,000.0
TOTAL CASH IN $ 17,075.6 $ 17,825.6 $ 18,575.6 $ 19,325.6 $ 20,075.6
--------------------------------------------------------------------------
IRR 109.643% 111.453% 113.204% 114.898% 116.541%
--------------------------------------------------------------------------
</TABLE>
<PAGE> 107
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS INCLUDING DENTAL PRACTICE MANAGEMENT -- TERMINAL VALUE BASED ON
AN EBITDA MULTIPLE OF 9.00X.
<TABLE>
<CAPTION>
ASSUMED AFTER-TAX PROCEEDS FROM SALE OF DENTAL PRACTICE MANAGEMENT BUSINESS
---------------------------------------------------------------------------
$0.0 $5,000 $10,000 $15,000 $20,000
---------------------------------------------------------------------------
EQUITY %
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
COMBINED PREFERRED AND COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
MANAGEMENT COMMON EQUITY 15.0% $0.0 $ 750 $1,500 $ 2,250 $ 3,000
------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY
CASH OUT $ (4,660.4) $ (4,660.4) $ (4,660.4) $ (4,660.4) $ (4,660.4)
CASH IN $128,680.7 $128,680.7 $128,680.7 $128,680.7 $128,680.7
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $128,680.7 $132,930.7 $137,180.7 $141,430.7 $145,680.7
--------------------------------------------------------------------------
IRR 94.186% 95.452% 96.686% 97.890% 99.065%
--------------------------------------------------------------------------
COMBINED PREFERRED AND COMMON EQUITY
CASH OUT $(93,208.3) $(93,208.3) $(93,208.3) $(93,208.3) $(93,208.3)
CASH IN $271,288.0 $271,288.0 $271,288.0 $271,288.0 $271,288.0
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $271,288.0 $275,538.0 $279,788.0 $284.038.0 $288,288.0
--------------------------------------------------------------------------
IRR 23.821% 24.207% 24.588% 24.964% 25.336%
--------------------------------------------------------------------------
MANAGEMENT COMMON EQUITY
CASH OUT $ (421.7) $ (421.7) $ (421.7) $ (421.7) $ (421.7)
CASH IN $ 22,708.4 $ 22,708.4 $ 22,708.4 $ 22,708.4 $ 22,708.4
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 750.0 $ 1,500.0 $ 2,250.0 $ 3,000.0
TOTAL CASH IN $ 22,708.4 $ 23,458.4 $ 24,208.4 $ 24,958.4 $ 25,708.4
--------------------------------------------------------------------------
IRR 121.944% 123.391% 124.802% 126.177% 127.521%
--------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 99(b)(6)
- --------------------------------------------------------------------------------
PROJECT GOLDCAP
UPDATED VALUATION ANALYSIS
JANUARY 15, 1999
THE ROBINSON-HUMPHREY COMPANY, LLC
ATLANTA FINANCIAL CENTER
333 PEACHTREE ROAD, NE, 10TH FLOOR
ATLANTA, GEORGIA 30326
(404) 266-6000
- --------------------------------------------------------------------------------
<PAGE> 2
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
I. Analysis of Revised Proposed Transactions
II. Valuation Summary
III. Summary Historical Financial Information
IV. Summary Projected Financial Information
V. Stock Price and Volume History
VI. Stock Ownership
VII. Market Comparison Analysis
VIII. Analysis of Recent Merger & Acquisition Transactions
IX. Discounted Cash Flow Analysis
X. Going Private Analysis
- -------------------------------------------------------------------------------
PROJECT GOLDCAP THE ROBINSON-HUMPHREY COMPANY
<PAGE> 3
The Robinson-Humphrey Company
PROJECT GOLDCAP
ANALYSIS OF PROPOSED TRANSACTION
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE CURRENT NET VALUE OF TRANSACTION GOLDCAP PRESENT VALUE TOTAL
PRICE PER SHARES EQUITY IN-THE-MONEY EQUITY NET OF DHDC DEFERRED TRANSACTION
SHARE OUTSTANDING [1] VALUE OPTIONS VALUE DEBT [2] LIABILITIES [3] VALUE
- ------------- --------------- ------------- ------------- ------------ ----------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$15.00 x 10,113 = $151,689 + $699 = $152,388 + $46,501 + $22,376 = 221,265
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTION EQUITY VALUE AS A MULTIPLE OF: TOTAL TRANSACTION VALUE AS A MULTIPLE OF:
- -----------------------------------------------------------------------------------------------------------------------------------
CALENDAR CALENDAR
----------------------------------------- ------------------------------------------------
LTM [4] 1998 (E) [5] 1999 (E) [5] LTM [4] 1998 (E) [5] 1999 (E) [5]
------- ------------ ------------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INCOME 15.0 x 14.9 x 13.4 x REVENUES 1.29 x 1.28 x 1.22 x
EBITDA [6] 8.2 x 8.2 x 7.6 x
BOOK VALUE [2] 2.24 x EBIT [7] 10.5 x 10.3 x 9.6 x
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE STOCK PRICE FOR LAST IPO ALL-TIME ALL-TIME
STOCK PRICE --------------------------------------- PRICE HIGH CLOSING LOW CLOSING
AS OF 1/13/99 5 DAYS 30 DAYS 60 DAYS 90 DAYS 5/24/95 PRICE (7/2/96) PRICE (1/27/98)
------------- ------ ------- ------- ------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACTUAL VALUE $10.63 $11.34 $10.86 $11.36 $ 12.20 $ 14.50 $ 51.69 $ 9.56
PREMIUM AT $15.00 PER SHARE 41.2% 32.3% 38.1% 32.1% 22.9% 3.4% (71.0)% 56.9%
<CAPTION>
STOCK PRICE BEFORE NEW ANNOUNCEMENT
---------------------------------------
1/13/98 1 WEEK PRIOR 4 WEEKS PRIOR
------- ------------ -------------
<S> <C> <C> <C>
ACTUAL VALUE $ 10.63 $11.00 $10.31
PREMIUM AT $15.00 PER SHARE 41.2% 36.4% 45.5%
</TABLE>
- --------------------
[1] As of October 31, 1998.
[2] Net debt and book value as of September 30, 1998.
[3] Consists of remaining DentLease funding obligation and repurchase of Series
A preferred stock.
[4] LTM as of September 30, 1998. Excludes goodwill impairment charge of $59.0
million and other one-time charges of $9.4 million. Assumed tax rate is
38.0%.
[5] Projections provided by Robinson-Humphrey Research dated October 27, 1998.
[6] Defined as earnings before interest, taxes, depreciation and amortization.
[7] Defined as earnings before interest and taxes.
[8] Assumes announcement on January 19, 1999.
<PAGE> 4
The Robinson-Humphrey Company
PROJECT GOLDCAP
CURRENT VESTED OPTIONS SCHEDULE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Vested Vested Cumulative
Options Exercise Aggregate Options Exercise
Outstanding Price Exercise Price Outstanding Price
- ------------- -------------- ---------------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
36,000 $0.49 $17,604.00 36,000 $17,604.00
6,750 $2.96 $19,986.75 42,750 $37,590.75
1,000 $5.89 $5,894.00 43,750 $43,484.75
32,500 [1] $12.50 $406,250.00 76,250 $449,734.75
9,000 $14.50 $130,500.00 85,250 $580,234.75
80,000 $16.12 $1,289,600.00 165,250 $1,869,834.75
20,000 $16.34 $326,800.00 185,250 $2,196,634.75
80,000 $19.35 $1,548,000.00 265,250 $3,744,634.75
10,000 $20.50 $205,000.00 275,250 $3,949,634.75
20,000 $23.22 $464,400.00 295,250 $4,414,034.75
1,250 $26.00 $32,500.00 296,500 $4,446,534.75
20,000 $27.86 $557,200.00 316,500 $5,003,734.75
21,000 $29.00 $609,000.00 337,500 $5,612,734.75
150,750 $29.75 $4,484,812.50 488,250 $10,097,547.25
12,500 $30.25 $378,125.00 500,750 $10,475,672.25
57,000 $36.25 $2,066,250.00 557,750 $12,541,922.25
2,500 $39.50 $98,750.00 560,250 $12,640,672.25
2,000 $42.75 $85,500.00 562,250 $12,726,172.25
- ------------- ----------------------
562,250 $12,726,172.25
<CAPTION>
Cumulative Additional
Deal Exercise In-the-Money Shares Fully Diluted
Price [2] Price Options Outstanding Shares Out [3]
- ------------------ --------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
$15.00 $580,235 85,250 46,568 10,159,197
Cumulative Net Value of
Deal In-the-Money Value of Exercise In-the-Money
Price [2] Options Options Price Options
- ------------------ --------------------- ----------------------- ------------------------ ------------------------
$15.00 85,250 $1,278,750 $580,235 $698,515
</TABLE>
- --------------------------
[1] Includes 22,500 options which vested on January 12, 1999.
[2] Assumes 10,112,629 pre-deal shares outstanding.
[3] Uses the treasury stock method.
<PAGE> 5
The Robinson-Humphrey Company
PROJECT GOLDCAP
ANALYSIS OF DHDC DEFERRED LIABILITIES
- -------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ending December 31,
-----------------------------------------------------------------
1997 1998 1999 2000
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Remaining DentLease Funding Obligation -- -- -- $ 4,000
Present value [1] $ 3,133
DHDC Series A Preferred Stock $ 10,930 $14,318 $ 18,757 $ 24,572
-$10.0 million initial investment
-Accrued dividends at 31%
compounded annually
Present value [1] $19,243
------------
Present value of DHDC deferred liabilities $22,376
------------
------------
Per share $2.21
------------
</TABLE>
- -----------------------
[1] Discounted at 13.0% annually.
[2] Issued September 12, 1997. Matures September 12, 2004. Purchase option
begins February 28, 2001.
<PAGE> 6
The Robinson-Humphrey Company
PROJECT GOLDCAP
VALUATION SUMMARY
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
<TABLE>
<CAPTION>
------------------
AVERAGE
-------
<S> <C>
DENTAL MANAGED CARE COMPANIES
Aggregate Equity Value $109,947
Per Share Equity Value $ 10.87
DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT COMPANIES
Aggregate Equity Value $116,044
Per Share Equity Value $ 11.48
MULTI-MARKET HMO COMPANIES
Aggregate Equity Value $160,300
Per Share Equity Value $ 15.85
------------------
</TABLE>
<PAGE> 7
The Robinson-Humphrey Company
PROJECT GOLDCAP
VALUATION SUMMARY
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PURCHASE PRICE MULTIPLES ANALYSIS OF SELECTED M&A TRANSACTIONS
<TABLE>
<CAPTION>
AVERAGE AVERAGE
------- -------
<S> <C> <C> <C>
DENTAL MANAGED CARE ACQUISITIONS - HISTORICAL MULTPLES HMO ACQUISITIONS - HISTORICAL MULTIPLES
Aggregate Equity Value $182,670 Aggregate Equity Value $245,660
Per Share Equity Value $18.06 Per Share Equity Value $24.29
DENTAL MANAGED CARE ACQUISITIONS - FORWARD MULTIPLES HMO ACQUISITIONS - FORWARD P/E MULTIPLES
Aggregate Equity Value $111,229 Aggregate Equity Value $205,397
Per Share Equity Value $11.00 Per Share Equity Value $20.31
UNITED DENTAL CARE ACQUISITIONS - HISTORICAL MULTIPLES HMO ACQUISITIONS - PREMIUMS
Aggregate Equity Value $168,298 Aggregate Equity Value $134,761
Per Share Equity Value $16.64 Per Share Equity Value $13.33
UNITED DENTAL CARE ACQUISITIONS - FORWARD MULTIPLES MERGERSTAT REVIEW - P/E MULTIPLES
Aggregate Equity Value $169,700 Aggregate Equity Value $238,027
Per Share Equity Value $16.78 Per Share Equity Value $23.54
DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT COMPANIES MERGERSTAT REVIEW - PREMIUMS
Aggregate Equity Value $165,012 Aggregate Equity Value $145,686
Per Share Equity Value $16.32 Per Share Equity Value $14.41
PREMIUMS ANALYSIS
Aggregate Equity Value $143,005
Per Share Equity Value $14.14
</TABLE>
<PAGE> 8
The Robinson-Humphrey Company
PROJECT GOLDCAP
VALUATION SUMMARY
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
-------- -------- -----------
HIGH LOW AVERAGE
---- --- -------
<S> <C> <C> <C>
EBIT EXIT MULTIPLE
Aggregate Equity Value $274,231 $103,985 $165,317
Per Share Equity Value $ 27.12 $ 10.28 $ 16.35
EBITDA EXIT MULTIPLE
Aggregate Equity Value $235,505 $ 98,727 $153,421
Per Share Equity Value $ 23.29 $ 9.76 $ 15.17
-------- -------- --------
--------------------------------------------------------------------------------------------
AVERAGE
AGGREGATE EQUITY VALUE $159,369
PER SHARE EQUITY VALUE $ 15.76
--------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------- ----------------------------
1995 1996 1997 1997 1998
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 104,898 $ 135,807 $ 143,396 $ 35,636 $ 35,422
Affiliated practice revenue -- -- 7,113 -- 5,292
Other revenue 1,763 5,262 8,217 2,199 1,728
--------- --------- --------- -------- --------
Total revenue 106,661 141,069 158,726 37,835 42,442
Expenses:
Dental care providers' fees and claim costs 62,218 73,431 81,690 [1] 19,544 19,428 [1]
Commissions 10,763 12,184 13,272 3,172 3,265
Premium taxes 1,392 1,018 1,047 265 261
DHMI operating expense -- -- -- -- 4,605
General and administrative 19,435 30,394 44,318 [2] 7,860 8,374 [2]
Depreciation and amortization 2,717 5,153 5,735 1,321 1,379
Goodwill impairment -- -- 58,953 -- --
--------- --------- --------- -------- --------
Total expenses 96,525 122,180 205,015 32,162 37,312
--------- --------- --------- -------- --------
Operating income (loss) 10,136 18,889 (46,289)[3] 5,673 5,130 [3]
Other expense (income):
Interest income (735) (585) (725) (161) (254)
Interest expense 1,970 1,935 3,239 708 1,013
Other, net (68) (219) 2 (45) --
--------- --------- --------- -------- --------
Total other expense 1,167 1,131 2,516 502 759
--------- --------- --------- -------- --------
Income (loss) before provision for income taxes
and extraordinary item 8,969 17,758 (48,805) 5,171 4,371
Income tax provision 3,765 7,866 4,900 2,332 1,878
--------- --------- --------- -------- --------
Income (loss) before extraordinary item 5,204 9,892 (53,705) 2,839 2,493
Extraordinary loss on early extinguishment of debt,
net of income tax benefit 498 -- -- -- --
--------- --------- --------- -------- --------
Net income (loss) $ 4,706 $ 9,892 $ (53,705)[3] $ 2,839 $ 2,493 [3]
========= ========= ========= ======== ========
Income (loss) per common share - diluted $ 0.68 $ 0.97 $ (5.32)[3] $ 0.28 $ 0.25 [3]
Extraordinary loss 0.07 -- -- -- --
--------- --------- --------- -------- --------
Net income (loss) per common share $ 0.61 $ 0.97 $ (5.32) $ 0.28 $ 0.25
========= ========= ========= ======== ========
Diluted weighted average common shares outstanding 7,352 10,177 10,098 10,167 10,175
========= ========= ========= ======== ========
EBITDA (excluding one-time charges) $ 12,853 $ 24,042 $ 27,799 $ 6,994 $ 6,509
EBITDA per share: $ 1.75 $ 2.36 $ 2.75 $ 0.69 $ 0.64
After-tax EBITDA per share: $ 1.01 $ 1.32 $ 1.56 $ 0.38 $ 0.36
<CAPTION>
SIX MONTHS ENDED JUNE 30, NINE MONTHS ENDED SEPT. 30,
------------------------- ---------------------------
1997 1998 1997 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 71,488 $ 71,404 $ 107,470 $ 106,830
Affiliated practice revenue -- 11,115 3,343 17,207
Other revenue 4,547 3,486 6,356 5,474
-------- -------- --------- ---------
Total revenue 76,035 86,005 117,169 129,511
Expenses:
Dental care providers' fees and claim costs 39,450 38,934 59,299 58,448
Commissions 6,364 6,612 9,916 9,979
Premium taxes 521 455 784 680
DHMI operating expense -- 9,867 2,140 15,516
General and administrative 15,827 16,667 23,918 24,704
Depreciation and amortization 2,676 2,854 4,229 4,214
Goodwill impairment -- 3,486 -- --
-------- -------- --------- ---------
Total expenses 64,838 75,388 100,286 113,541
-------- -------- --------- ---------
Operating income (loss) 11,197 10,617 16,883 15,970
Other expense (income):
Interest income (415) (499) (494) (643)
Interest expense 1,446 2,172 2,229 3,284
Other, net (61) (3) (66) (15)
-------- -------- --------- ---------
Total other expense 970 1,669 1,669 2,626
-------- -------- --------- ---------
Income (loss) before provision for income taxes
and extraordinary item 10,227 8,948 15,214 13,345
Income tax provision 4,504 3,850 6,559 5,751
-------- -------- --------- ---------
Income (loss) before extraordinary item 5,723 5,098 8,655 7,594
Extraordinary loss on early extinguishment of debt,
net of income tax benefit -- -- -- --
-------- -------- --------- ---------
Net income (loss) $ 5,723 $ 5,098 $ 8,655 $ 7,594
======== ======== ========= =========
Income (loss) per common share - diluted $ 0.56 $ 0.50 $ 0.85 $ 0.75
Extraordinary loss -- -- -- --
-------- -------- --------- ---------
Net income (loss) per common share $ 0.56 $ 0.50 $ 0.85 $ 0.75
======== ======== ========= =========
Diluted weighted average common shares outstanding 10,173 10,178 10,200 10,181
======== ======== ========= =========
EBITDA (excluding one-time charges) $ 13,873 $ 13,471 $ 21,112 $ 20,184
EBITDA per share: $ 1.36 $ 1.32 $ 2.07 $ 1.98
After-tax EBITDA per share: $ 0.76 $ 0.75 $ 1.18 $ 1.13
</TABLE>
- -------------------------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported $22.1 million in operating income, $11.1 million in net
income and $1.10 in net income per share.
<PAGE> 10
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------- ----------------------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 98.3% 96.3% 90.3% 94.2% 83.5%
Affiliated practice revenue 0.0% 0.0% 4.5% 0.0% 12.5%
Other revenue 1.7% 3.7% 5.2% 5.8% 4.1%
----- ----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 58.3% 52.1% 51.5% [1] 51.7% 45.8%
Commissions 10.1% 8.6% 8.4% 8.4% 7.7%
Premium taxes 1.3% 0.7% 0.7% 0.7% 0.6%
DHMI operating expense 0.0% 0.0% 0.0% 0.0% 10.9%
General and administrative 18.2% 21.5% 27.9% [2] 20.8% 19.7%
Depreciation and amortization 2.5% 3.7% 3.6% 3.5% 3.2%
Goodwill impairment 0.0% 0.0% 37.1% 0.0% 0.0%
----- ----- ----- ----- -----
Total expenses 90.5% 86.6% 129.2% 85.0% 87.9%
----- ----- ----- ----- -----
Operating income (loss) 9.5% 13.4% (29.2)%[3] 15.0% 12.1%
Other expense (income):
Interest income (0.7)% (0.4)% (0.5)% (0.4)% (0.6)%
Interest expense 1.8% 1.4% 2.0% 1.9% 2.4%
Other, net (0.1)% (0.2)% 0.0% (0.1)% 0.0%
----- ----- ----- ----- -----
Total other expense 1.1% 0.8% 1.6% 1.3% 1.8%
----- ----- ----- ----- -----
Income (loss) before provision for income taxes
and extraordinary item 8.4% 12.6% (30.7)% 13.7% 10.3%
Income tax provision 3.5% 5.6% 3.1% 6.2% 4.4%
----- ----- ----- ----- -----
Income (loss) before extraordinary item 4.9% 7.0% (33.8)% 7.5% 5.9%
Extraordinary loss on early extinguishment of debt,
net of income tax benefit 0.5% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Net income (loss) 4.4% 7.0% (33.8)%[3] 7.5% 5.9%
===== ===== ===== ===== =====
EBITDA (excluding one-time charges) 12.1% 17.0% 17.5% 18.5% 15.3%
<CAPTION>
SIX MONTHS ENDED JUNE 30, NINE MONTHS ENDED SEPT. 30,
------------------------- ---------------------------
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums 94.0% 83.0% 91.7% 82.5%
Affiliated practice revenue 0.0% 12.9% 2.9% 13.3%
Other revenue 6.0% 4.1% 5.4% 4.2%
----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 51.9% 45.3% 50.6% 45.1%
Commissions 8.4% 7.7% 8.5% 7.7%
Premium taxes 0.7% 0.5% 0.7% 0.5%
DHMI operating expense 0.0% 11.5% 1.8% 12.0%
General and administrative 20.8% 19.4% 20.4% 19.1%
Depreciation and amortization 3.5% 3.3% 3.6% 3.3%
Goodwill impairment 0.0% 4.1% 0.0% 0.0%
----- ----- ----- -----
Total expenses 85.3% 87.7% 85.6% 87.7%
----- ----- ----- -----
Operating income (loss) 14.7% 12.3% 14.4% 12.3%
Other expense (income):
Interest income (0.5)% (0.6)% (0.4)% (0.5)%
Interest expense 1.9% 2.5% 1.9% 2.5%
Other, net (0.1)% (0.0)% (0.1)% (0.0)%
----- ----- ----- -----
Total other expense 1.3% 1.9% 1.4% 2.0%
----- ----- ----- -----
Income (loss) before provision for income taxes
and extraordinary item 13.5% 10.4% 13.0% 10.3%
Income tax provision 5.9% 4.5% 5.6% 4.4%
----- ----- ----- -----
Income (loss) before extraordinary item 7.5% 5.9% 7.4% 5.9%
Extraordinary loss on early extinguishment of debt,
net of income tax benefit 0.0% 0.0% 0.0% 0.0%
----- ----- ----- -----
Net income (loss) 7.5% 5.9% 7.4% 5.9%
===== ===== ===== =====
EBITDA (excluding one-time charges) 18.2% 15.7% 18.0% 15.6%
</TABLE>
- -----------------------------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported an operating income margin of 13.9% and a net income margin
of 7.0%.
<PAGE> 11
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL BALANCE SHEET INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
--------------------------------- --------- -------- -------------
1995 1996 1997 1998 1998 1998
-------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,388 $ 26,959 $ 21,963 $ 15,568 $ 9,726 $ 9,980
Accrued interest receivable 84 48 -- -- 15 13
Premiums receivable from subscribers 3,637 3,121 5,554 4,556 4,440 7,541
Patient accounts receivable -- -- 1,668 2,201 2,100 0
Income taxes receivable -- 247 175 -- -- --
Assets held for sale 532 -- -- -- -- --
Deferred income taxes 1,416 3,106 5,081 5,081 2,578 1,438
Other current assets 197 602 2,842 4,067 1,932 1,874
-------- -------- --------- --------- --------- ---------
Total current assets 46,254 34,083 37,283 31,473 20,791 20,847
Restricted funds 1,463 2,070 2,321 2,234 2,320 2,268
Property and equipment, net 1,937 2,977 6,292 8,691 12,265 15,271
Excess of purchase price over net
assets acquired 71,063 135,040 96,296 100,072 100,736 100,208
Noncompetition agreements 1,521 945 325 168 13 8
Investment in DHDC -- -- 1,500 1,500 1,500 --
Unamortized loan fees 172 189 -- -- 23 --
Reinsurance receivable 6,332 5,388 5,417 5,467 5,493 5,547
Cash surrender value of officers'
life insurance 155 140 -- -- 207 208
Deferred income taxes 243 2,026 -- -- -- --
Other assets 256 1,309 1,437 1,849 1,947 3,494
-------- -------- --------- --------- --------- ---------
Total assets $129,396 $184,167 $ 150,871 $ 151,454 $ 145,295 $ 147,849
======== ======== ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue $ 10,300 $ 9,582 $ 9,538 $ 9,231 $ 9,197 $ 8,807
Accounts payable and accrued expenses 7,372 10,956 14,855 13,552 11,502 9,930
Income taxes payable 883 -- -- -- 140 (344)
Accrued interest payable -- 390 109 152 110 161
Life policy and contract claims reserves 37 68 -- -- 63 63
Dental claims reserves 2,437 1,421 1,502 1,839 1,904 1,876
Other current liabilities 12 1,856 63 63 (3,327) (3,037)
-------- -------- --------- --------- --------- ---------
Total current liabilities 21,041 24,273 26,067 24,837 19,589 17,455
Aggregate reserves for life policies
and contracts 5,323 5,338 5,331 5,355 5,372 5,336
Aggregate reserves for dental contracts 172 -- -- -- -- --
Notes payable -- 41,663 56,595 55,102 54,233 56,481
Deferred tax liability -- -- 1,887 1,887 -- --
Deferred compensation expense 384 338 298 287 276 265
Other liabilities 299 372 417 1,217 453 443
-------- -------- --------- --------- --------- ---------
Total liabilities 27,219 71,984 90,595 88,685 79,922 79,980
-------- -------- --------- --------- --------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock -- -- -- -- -- --
Common stock 100 101 101 101 101 101
Additional paid-in capital 95,707 95,820 97,618 97,618 97,618 97,618
Retained earnings 6,370 16,262 (37,443) (34,950) (32,346) (29,850)
-------- -------- --------- --------- --------- ---------
Total stockholders' equity 102,177 112,183 60,276 62,769 65,373 67,869
-------- -------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity $129,396 $184,167 $ 150,871 $ 151,454 $ 145,295 $ 147,849
======== ======== ========= ========= ========= =========
</TABLE>
<PAGE> 12
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL BALANCE SHEET INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
----------------------------- --------- -------- -------------
1995 1996 1997 1998 1998 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 31.2% 14.6% 14.6% 10.3% 6.7% 6.8%
Accrued interest receivable 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Premiums receivable from subscribers 2.8% 1.7% 3.7% 3.0% 3.1% 5.1%
Patient accounts receivable 0.0% 0.0% 1.1% 1.5% 1.4% 0.0%
Income taxes receivable 0.0% 0.1% 0.1% 0.0% 0.0% 0.0%
Assets held for sale 0.4% 0.0% 0.0% 0.0% 0.0% 0.0%
Deferred income taxes 1.1% 1.7% 3.4% 3.4% 1.8% 1.0%
Other current assets 0.2% 0.3% 1.9% 2.7% 1.3% 1.3%
----- ----- ----- ----- ----- -----
Total current assets 35.7% 18.5% 24.7% 20.8% 14.3% 14.1%
Restricted funds 1.1% 1.1% 1.5% 1.5% 1.6% 1.5%
Property and equipment, net 1.5% 1.6% 4.2% 5.7% 8.4% 10.3%
Excess of purchase price over net assets acquired 54.9% 73.3% 63.8% 66.1% 69.3% 67.8%
Noncompetition agreements 1.2% 0.5% 0.2% 0.1% 0.0% 0.0%
Investment in DHDC 0.0% 0.0% 1.0% 1.0% 1.0% 0.0%
Unamortized loan fees 0.1% 0.1% 0.0% 0.0% 0.0% 0.0%
Reinsurance receivable 4.9% 2.9% 3.6% 3.6% 3.8% 3.8%
Cash surrender value of officers' life insurance 0.1% 0.1% 0.0% 0.0% 0.1% 0.1%
Deferred income taxes 0.2% 1.1% 0.0% 0.0% 0.0% 0.0%
Other assets 0.2% 0.7% 1.0% 1.2% 1.3% 2.4%
----- ----- ----- ----- ----- -----
Total assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue 8.0% 5.2% 6.3% 6.1% 6.3% 6.0%
Accounts payable and accrued expenses 5.7% 5.9% 9.8% 8.9% 7.9% 6.7%
Income taxes payable 0.7% 0.0% 0.0% 0.0% 0.1% (0.2)%
Accrued interest payable 0.0% 0.2% 0.1% 0.1% 0.1% 0.1%
Life policy and contract claims reserves 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Dental claims reserves 1.9% 0.8% 1.0% 1.2% 1.3% 1.3%
Other current liabilities 0.0% 1.0% 0.0% 0.0% (2.3%) (2.1)%
----- ----- ----- ----- ----- -----
Total current liabilities 16.3% 13.2% 17.3% 16.4% 13.5% 11.8%
Aggregate reserves for life policies and contracts 4.1% 2.9% 3.5% 3.5% 3.7% 3.6%
Aggregate reserves for dental contracts 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Notes payable 0.0% 22.6% 37.5% 36.4% 37.3% 38.2%
Deferred tax liability 0.0% 0.0% 1.3% 1.2% 0.0% 0.0%
Deferred compensation expense 0.3% 0.2% 0.2% 0.2% 0.2% 0.2%
Other liabilities 0.2% 0.2% 0.3% 0.8% 0.3% 0.3%
----- ----- ----- ----- ----- -----
Total liabilities 21.0% 39.1% 60.0% 58.6% 55.0% 54.1%
----- ----- ----- ----- ----- -----
Commitments and contingencies
Stockholders' equity:
Preferred stock 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Common stock 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
Additional paid-in capital 74.0% 52.0% 64.7% 64.5% 67.2% 66.0%
Retained earnings 4.9% 8.8% (24.8)% (23.1)% (22.3)% (20.2)%
----- ----- ----- ----- ----- -----
Total stockholders' equity 79.0% 60.9% 40.0% 41.4% 45.0% 45.9%
----- ----- ----- ----- ----- -----
Total liabilities and stockholders' equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE> 13
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL STATEMENT OF CASH FLOWS INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,706 $ 9,892 $(53,705) $ 8,655 $ 7,594
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,855 5,248 5,735 4,312 4,214
Goodwill impairment -- -- 58,953 -- --
(Gain) loss on sale of assets held for sale 23 (174) -- -- --
Gain on sale of property and equipment -- (53) (12) (14) --
Loss on sale of property and equipment -- -- 65 -- --
Bad debt expense -- -- 183 -- --
Extraordinary loss on early extinguishment of debt 803 -- -- -- --
Deferred income tax expense (benefit) (255) 1,526 2,136 6,438 1,756
Changes in assets and liabilities:
Premiums receivable from subscribers (203) 1,813 (2,433) (1,548) (477)
Patient receivables -- -- (1,029) -- --
Income taxes receivable 213 (231) 71 (2,310) (169)
Other assets (1,181) (73) (3,487) (4,581) (3,482)
Unearned revenue 1,213 (1,445) (59) (756) (731)
Accounts payable and accrued expenses (424) (3,200) (300) (4,465) (5,075)
Income taxes payable 854 (903) -- -- --
Other liabilities (146) (2,895) (1,781) (1,707) 17
-------- -------- -------- -------- --------
Net cash provided by operating activities 8,458 9,505 4,337 4,024 3,646
-------- -------- -------- -------- --------
Cash flows from investing activities:
Additions to property and equipment (1,076) (2,394) (3,985) (2,686) (10,718)
Proceeds from sale of assets held for sale 1,323 694 -- -- --
Increase in restricted cash (106) (607) (175) (86) 53
Proceeds from sale of property and equipment -- 253 37 24 --
Cash surrender value of life insurance (28) 15 (28) (9) --
Purchases of businesses, net of cash acquired (31,188) (62,462) (20,770) (18,744) (4,850)
-------- -------- -------- -------- --------
Net cash used in investing activities (31,075) (64,501) (24,921) (21,501) (15,515)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Repayment of notes payable (26,600) 57,697 59,456 -- --
Borrowings under credit agreement 25,000 (16,034) (44,525) -- --
Repayments under credit agreement (25,000) (112) -- 14,307 (114)
Loan fees paid (240) -- -- -- --
Repayment of subordinated notes (7,947) -- -- -- --
Retirement of preferred stock (5,377) -- -- -- --
Proceeds from initial public offering, net of
issuance cost 51,442 -- -- -- --
Proceeds from secondary public offering, net of
issuance cost 42,047 -- -- -- --
Proceeds from exercise of stock options -- 66 21 21 --
Proceeds from employee stock purchase plan -- 48 53 -- --
Tax benefit realized from exercise of
nonqualified stock options -- -- 583 583 --
Other -- (98) -- -- --
-------- -------- -------- -------- --------
Net cash provided by financing activities 53,325 41,567 15,588 14,911 (114)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash equivalents 30,708 (13,429) (4,996) (2,566) (11,983)
Cash and equivalents, beginning of period 9,680 40,388 26,959 26,959 21,963
-------- -------- -------- -------- --------
Cash and equivalents, end of period $ 40,388 $ 26,959 $ 21,963 $ 24,393 $ 9,980
======== ======== ======== ======== ========
</TABLE>
<PAGE> 14
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------ ------------------ -----------------
MARCH 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1998 1998
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 35,422 $ 35,982 $ 35,425 $ 106,830
Affiliated practice revenue 5,292 5,824 6,092 17,207
Other revenue 1,728 1,757 1,989 5,474
-------- -------- -------- ---------
Total revenue 42,442 43,563 43,506 129,511
Expenses:
Dental care providers' fees and claim costs 19,428 19,505 19,514 58,448
Commissions 3,265 3,346 3,368 9,979
Premium taxes 261 194 225 680
DHMI operating expenses 4,605 5,262 5,649 15,516
General and administrative 8,374 8,293 8,036 24,704
Goodwill impairment 0 0 0 0
Depreciation and amortization 1,379 1,475 1,360 4,214
-------- -------- -------- ---------
Total operating expenses 37,312 38,075 38,152 113,541
-------- -------- -------- ---------
Operating income (loss) 5,130 5,487 5,354 15,970
Other (income)/ expense
Interest (income) (254) (245) (144) (643)
Interest expense 1,013 1,159 1,112 3,284
Other, net 0 (3) (12) (15)
-------- -------- -------- ---------
Total other (income) expense 759 910 956 2,626
-------- -------- -------- ---------
Income before income taxes 4,371 4,577 4,398 13,345
Provision for income taxes 1,878 1,972 1,901 5,751
-------- -------- -------- ---------
% rate 43.0% 43.1% 43.2% 43.1%
Net income before extraordinary item $ 2,493 $ 2,605 $ 2,497 $ 7,594
======== ======== ======== =========
Diluted weighted average shares outstanding 10,175 10,181 10,188 10,174
Diluted earnings per share $ 0.25 $ 0.26 $ 0.25 $ 0.75
EBITDA (excluding one-time charges) 6,509 6,962 6,714 20,184
EBITDA per share $ 0.64 $ 0.68 $ 0.66 $ 1.98
After-tax EBITDA per share $ 0.36 $ 0.39 $ 0.37 $ 1.13
</TABLE>
<PAGE> 15
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------ ------------------ -----------------
MARCH 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1998 1998
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums 83.5% 82.6% 81.4% 82.5%
Affiliated practice revenue 12.5% 13.4% 14.0% 13.3%
Other revenue 4.1% 4.0% 4.6% 4.2%
----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 45.8% 44.8% 44.9% 45.1%
Commissions 7.7% 7.7% 7.7% 7.7%
Premium taxes 0.6% 0.4% 0.5% 0.5%
DHMI operating expenses 10.9% 12.1% 13.0% 12.0%
General and administrative 19.7% 19.0% 18.5% 19.1%
Goodwill impairment 0.0% 0.0% 0.0% 0.0%
Depreciation and amortization 3.2% 3.4% 3.1% 3.3%
----- ----- ----- -----
Total operating expenses 87.9% 87.4% 87.7% 87.7%
----- ----- ----- -----
Operating income (loss) 12.1% 12.6% 12.3% 12.3%
Other (income)/ expense
Interest (income) (0.6)% (0.6)% (0.3)% (0.5)%
Interest expense 2.4% 2.7% 2.6% 2.5%
Other, net 0.0% (0.0)% (0.0)% (0.0)%
----- ----- ----- -----
Total other (income) expense 1.8% 2.1% 2.2% 2.0%
----- ----- ----- -----
Income before income taxes 10.3% 10.5% 10.1% 10.3%
Provision for income taxes 4.4% 4.5% 4.4% 4.4%
----- ----- ----- -----
Net income 5.9% 6.0% 5.7% 5.9%
===== ===== ===== =====
EBITDA (excluding one-time charges) 15.3% 16.0% 15.4% 15.6%
</TABLE>
<PAGE> 16
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31 DECEMBER 31,
1997 1997 1997 1997 1997
------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 35,636 $ 35,852 $ 35,982 $ 35,926 $ 143,396
Affiliated practice revenue -- -- 3,343 3,774 7,113
Other revenue 2,199 2,348 1,809 1,857 8,217
-------- -------- -------- -------- ---------
Total revenue 37,835 38,200 41,134 41,557 158,726
Expenses:
Dental care providers' fees and claim costs 19,544 19,906 19,849 22,391 [1] 81,690 [1]
Commissions 3,172 3,192 3,552 3,356 13,272
Premium taxes 265 256 263 263 1,047
DHMI operating expenses -- -- -- -- --
General and administrative 7,860 7,967 10,231 18,260 [2] 44,318 [2]
Goodwill impairment -- -- -- 58,953 58,953
Depreciation and amortization 1,321 1,355 1,553 1,506 5,735
-------- -------- -------- -------- ---------
Total operating expenses 32,162 32,676 35,448 104,729 205,015
-------- -------- -------- -------- ---------
Operating income (loss) 5,673 5,524 5,686 (63,172) [3] (46,289) [4]
Other (income)/ expense
Interest (income) (161) (254) (79) (231) (725)
Interest expense 708 738 783 1,010 3,239
Other, net (45) (16) (5) 68 2
-------- -------- -------- -------- ---------
Total other (income) expense 502 468 699 847 2,516
-------- -------- -------- -------- ---------
Income before income taxes 5,171 5,056 4,987 (64,019) (48,805)
Provision for income taxes 2,332 2,172 2,055 (1,659) 4,900
-------- -------- -------- -------- ---------
% rate 45.1% 43.0% 41.2% NM (10.0)%
Net income before extraordinary item $ 2,839 $ 2,884 $ 2,932 $(62,360) [3] $ (53,705) [4]
======== ======== ======== ======== =========
Diluted weighted average shares outstanding 10,167 10,179 10,238 10,110 10,098
Diluted earnings per share $ 0.28 $ 0.28 $ 0.29 $ (6.17) [3] $ (5.32) [4]
EBITDA (excluding one-time charges) 6,994 6,879 7,239 6,687 27,799
EBITDA per share $ 0.69 $ 0.68 $ 0.71 $ 0.66 $ 2.75
After-tax EBITDA per share $ 0.38 $ 0.39 $ 0.42 $ 0.37 $ 1.56
</TABLE>
- -----------------------------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported $5.2 million in operating income, $2.4 million in net
income and $0.24 in net income per share.
[4] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported $22.1 million in operating income, $11.1 million in net
income and $1.10 in net income per share.
<PAGE> 17
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31 DECEMBER 31,
1997 1997 1997 1997 1997
------------------------------------------------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 94.2% 93.9% 87.5% 86.4% 90.3%
Affiliated practice revenue 0.0% 0.0% 8.1% 9.1% 4.5%
Other revenue 5.8% 6.1% 4.4% 4.5% 5.2%
------- -------- -------- -------- -----------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 51.7% 52.1% 48.3% 53.9% [1] 51.5% [1]
Commissions 8.4% 8.4% 8.6% 8.1% 8.4%
Premium taxes 0.7% 0.7% 0.6% 0.6% 0.7%
DHMI operating expenses 0.0% 0.0% 0.0% 0.0% 0.0%
General and administrative 20.8% 20.9% 24.9% 43.9% [2] 27.9% [2]
Goodwill impairment 0.0% 0.0% 0.0% 141.9% 37.1%
Depreciation and amortization 3.5% 3.5% 3.8% 3.6% 3.6%
------- -------- -------- -------- -----------
Total operating expenses 85.0% 85.5% 86.2% 252.0% 129.2%
------- -------- -------- -------- -----------
Operating income (loss) 15.0% 14.5% 13.8% (152.0)%[3] (29.2)%[4]
Other (income)/ expense
Interest (income) (0.4)% (0.7)% (0.2)% (0.6)% (0.5)%
Interest expense 1.9% 1.9% 1.9% 2.4% 2.0%
Other, net (0.1)% (0.0)% (0.0)% 0.2% 0.0%
------- -------- -------- -------- ----------
Total other (income) expense 1.3% 1.2% 1.7% 2.0% 1.6%
------- -------- -------- -------- ----------
Income before income taxes 13.7% 13.2% 12.1% (154.1)% (30.7)%
Provision for income taxes 6.2% 5.7% 5.0% (4.0)% 3.1%
------- -------- -------- -------- ----------
Net income 7.5% 7.5% 7.1% (150.1)%[3] (33.8)%[4]
======= ======== ======== ======== ==========
EBITDA (excluding one-time charges) 18.5% 18.0% 17.6% 16.1% 17.5%
</TABLE>
- -------------------
[1] Includes a $2.0 million one-time charge associated with terminating an
indemnity relationship.
[2] Includes $7.4 million in unusual and one-time charges.
[3] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported an operating income margin of 12.5% and a net income margin
of 5.8%.
[4] Excluding goodwill impairment charge and one-time charges, Goldcap would
have reported an operating income margin of 13.9% and a net income margin
of 7.0%.
<PAGE> 18
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------- -------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31 DECEMBER 31,
1996 1996 1996 1996 1996
------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 30,831 $ 33,384 $ 35,443 $ 36,149 $ 135,807
Affiliated practice revenue -- -- -- -- --
Other revenue 554 1,377 1,704 1,627 5,262
-------- -------- -------- -------- ---------
Total revenue 31,385 34,761 37,147 37,776 141,069
Expenses:
Dental care providers' fees and claim costs 16,481 17,967 19,196 19,787 73,431
Commissions 3,013 3,091 2,949 3,131 12,184
Premium taxes 259 264 264 231 1,018
DHMI operating expenses -- -- -- -- --
General and administrative 6,771 7,831 7,964 7,828 30,394
Goodwill impairment -- -- -- -- --
Depreciation and amortization 1,047 1,287 1,389 1,430 5,153
-------- -------- -------- -------- ---------
Total operating expenses 27,571 30,440 31,762 32,407 122,180
-------- -------- -------- -------- ---------
Operating income (loss) 3,814 4,321 5,385 5,369 18,889
Other (income)/ expense
Interest (income) (153) (145) (117) (170) (585)
Interest expense 46 434 697 758 1,935
Other, net (10) (299) 96 (6) (219)
-------- -------- -------- -------- ---------
Total other (income) expense (117) (10) 676 582 1,131
-------- -------- -------- -------- ---------
Income before income taxes 3,931 4,331 4,709 4,787 17,758
Provision for income taxes 1,694 1,924 2,103 2,145 7,866
% rate -------- -------- -------- -------- ---------
43.1% 44.4% 44.7% 44.8% 44.3%
Net income before extraordinary item $ 2,237 $ 2,407 $ 2,606 $ 2,642 $ 9,892
======== ======== ======== ======== =========
Diluted weighted average shares outstanding 10,156 10,185 10,163 10,172 10,177
Diluted earnings per share $ 0.22 $ 0.24 $ 0.26 $ 0.26 $ 0.97
EBITDA (excluding one-time charges) 4,861 5,608 6,774 6,799 24,042
EBITDA per share $ 0.48 $ 0.55 $ 0.67 $ 0.67 $ 2.36
After-tax EBITDA per share $ 0.27 $ 0.31 $ 0.37 $ 0.37 $ 1.32
</TABLE>
<PAGE> 19
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------- -------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31 DECEMBER 31,
1996 1996 1996 1996 1996
------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 98.2% 96.0% 95.4% 95.7% 96.3%
Affiliated practice revenue 0.0% 0.0% 0.0% 0.0% 0.0%
Other revenue 1.8% 4.0% 4.6% 4.3% 3.7%
------- ------- ------- -------- --------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim costs 52.5% 51.7% 51.7% 52.4% 52.1%
Commissions 9.6% 8.9% 7.9% 8.3% 8.6%
Premium taxes 0.8% 0.8% 0.7% 0.6% 0.7%
DHMI operating expenses 0.0% 0.0% 0.0% 0.0% 0.0%
General and administrative 21.6% 22.5% 21.4% 20.7% 21.5%
Goodwill impairment 0.0% 0.0% 0.0% 0.0% 0.0%
Depreciation and amortization 3.3% 3.7% 3.7% 3.8% 3.7%
------- ------- ------- -------- --------
Total operating expenses 87.8% 87.6% 85.5% 85.8% 86.6%
------- ------- ------- -------- --------
Operating income (loss) 12.2% 12.4% 14.5% 14.2% 13.4%
Other (income)/ expense
Interest (income) (0.5) (0.4) (0.3) (0.5) (0.4)
Interest expense 0.1% 1.2 1.9 2.0 1.4%
Other, net (0.0) (0.9) 0.3 (0.0) (0.2)
------- ------- ------- -------- --------
Total other (income) expense (0.4) (0.0%) 1.8% 1.5% 0.8%
------- ------- ------- -------- --------
Income before income taxes 12.5% 12.5% 12.7% 12.7% 12.6%
Provision for income taxes 5.4% 5.5% 5.7% 5.7% 5.6%
------- ------- ------- -------- --------
Net income 7.1% 6.9% 7.0% 7.0% 7.0%
======= ======= ======= ======== ========
EBITDA (excluding one-time charges) 15.5% 16.1% 18.2% 18.0% 17.0%
</TABLE>
<PAGE> 20
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31 DECEMBER 31,
1995 1995 1995 1995 1995
------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 22,790 $ 23,238 $ 31,463 $ 27,407 $ 104,898
Affiliated practice revenue -- -- -- -- --
Other revenue 240 238 409 875 1,763
-------- -------- -------- -------- --------
Total revenue 23,031 23,476 31,872 28,282 106,661
Expenses:
Dental care providers' fees and claim cost 13,700 13,832 18,802 15,884 62,218
Commissions 2,592 2,674 3,115 2,382 10,763
Premium taxes 324 353 375 340 1,392
DHMI operating expenses -- -- -- -- --
General and administrative 3,740 3,896 5,721 6,078 19,435
Goodwill impairment -- -- -- -- --
Depreciation and amortization 565 533 818 800 2,717
-------- -------- -------- -------- ---------
Total operating expenses 20,921 21,288 28,831 25,484 96,525
-------- -------- -------- -------- ---------
Operating income (loss) 2,109 2,188 3,041 2,798 10,136
Other (income)/ expense
Interest (income) (31) (96) (181) (427) (735)
Interest expense 949 630 352 39 1,970
Other, net 12 (7) (23) (50) (68)
-------- -------- -------- -------- ---------
Total other (income) expense 929 527 148 (438) 1,167
-------- -------- -------- -------- ---------
Income before income taxes 1,180 1,661 2,893 3,236 8,969
Provision for income taxes 523 709 1,246 1,288 3,765
% rate -------- -------- -------- -------- ---------
44.3% 42.7% 43.1% 39.8% 42.0%
Net income before extraordinary item $ 658 $ 952 $ 1,647 $ 1,948 $ 5,204
======== ======== ======== ======== =========
Diluted weighted average shares outstanding 5,500 6,500 9,041 10,150 7,352
Diluted earnings per share $ 0.12 $ 0.15 $ 0.18 $ 0.19 $ 0.68
EBITDA (excluding one-time charges) 2,674 2,721 3,859 3,598 12,853
EBITDA per share $ 0.49 $ 0.42 $ 0.43 $ 0.36 $ 1.75
After-tax EBITDA per share $ 0.27 $ 0.24 $ 0.24 $ 0.22 $ 1.01
</TABLE>
<PAGE> 21
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED HISTORICAL QUARTERLY INCOME STATEMENT INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------ -------------
MARCH 31, JUNE 30, SEPTEMBER 30 DECEMBER 31 DECEMBER 31,
1995 1995 1995 1995 1995
------------------------------------------------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 99.0% 99.0% 98.7% 96.9% 98.3%
Affiliated practice revenue 0.0% 0.0% 0.0% 0.0% 0.0%
Other revenue 1.0% 1.0% 1.3% 3.1% 1.7%
------- ------- ------- ------- ----------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees and claim 59.5% 58.9% 59.0% 56.2% 58.3%
Commissions 11.3% 11.4% 9.8% 8.4% 10.1%
Premium taxes 1.4% 1.5% 1.2% 1.2% 1.3%
DHMI operating expenses 0.0% 0.0% 0.0% 0.0% 0.0%
General and administrative 16.2% 16.6% 17.9% 21.5% 18.2%
Goodwill impairment 0.0% 0.0% 0.0% 0.0% 0.0%
Depreciation and amortization 2.5% 2.3% 2.6% 2.8% 2.5%
------- ------- ------- ------- ----------
Total operating expenses 90.8% 90.7% 90.5% 90.1% 90.5%
------- ------- ------- ------- ----------
Operating income (loss) 9.2% 9.3% 9.5% 9.9% 9.5%
Other (income)/ expense
Interest (income) (0.1)% (0.4)% (0.6)% (1.5)% (0.7)%
Interest expense 4.1% 2.7% 1.1% 0.1% 1.8%
Other, net 0.1% (0.0)% (0.1)% (0.2)% (0.1)%
------- ------- ------- ------- ----------
Total other (income) expense 4.0% 2.2% 0.5% (1.5)% 1.1%
------- ------- ------- ------- ----------
Income before income taxes 5.1% 7.1% 9.1% 11.4% 8.4%
Provision for income taxes 2.3% 3.0% 3.9% 4.6% 3.5%
------- ------- ------- ------- ----------
Net income before extraordinary item 2.9% 4.1% 5.2% 6.9% 4.9%
======= ======= ======= ======= ==========
EBITDA (excluding one-time charges) 11.6% 11.6% 12.1% 12.7% 12.1%
</TABLE>
<PAGE> 22
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL EBITDA ANALYSIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
---------------------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
EBITDA $2,674 $2,721 $3,859 $3,598 $12,853
EBITDA margin 11.6% 11.6% 12.1% 12.7% 12.1%
EBITDA per share $0.49 $0.42 $0.43 $0.36 $1.75
After-tax EBITDA per share $0.27 $0.24 $0.24 $0.22 $1.01
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
---------------------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1996 1996 1996
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
EBITDA $4,861 $5,608 $6,774 $6,799 $24,042
EBITDA margin 15.5% 16.1% 18.2% 18.0% 17.0%
EBITDA per share $0.48 $0.55 $0.67 $0.67 $2.36
After-tax EBITDA per share $0.27 $0.31 $0.37 $0.37 $1.32
THREE MONTHS ENDED YEAR ENDED
---------------------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1997 1997 1997
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
EBITDA (excluding one-time charges) $6,994 $6,879 $7,239 $6,687 $27,799
EBITDA margin 18.5% 18.0% 17.6% 16.1% 17.5%
EBITDA per share $0.69 $0.68 $0.71 $0.66 $2.75
After-tax EBITDA per share $0.38 $0.39 $0.42 $0.37 $1.56
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
EBITDA $6,509 $6,962 $6,714
EBITDA margin 15.3% 16.0% 15.4%
EBITDA per share $0.64 $0.68 $0.66
After-tax EBITDA per share $0.36 $0.39 $0.37
</TABLE>
<PAGE> 23
The Robinson-Humphrey Company
PROJECT GOLDCAP
CONSOLIDATED PROJECTED INCOME STATEMENT INFORMATION [1]
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 (A) 1998 (A) 1998 (A) 1998
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 35,422 $ 35,982 $ 35,425 $ 35,490
Affiliated practice revenue 5,292 5,824 6,092 6,397
Other revenue 1,728 1,757 1,989 1,764
-------- -------- -------- --------
Total revenue 42,442 43,563 43,506 43,651
Expenses:
Dental care providers' fees
and claim costs 19,428 19,505 19,514 19,590
Commissions 3,265 3,346 3,368 3,265
Premium taxes 261 194 225 240
DHMI operating expenses 4,605 5,262 5,649 5,693
General and administrative 8,374 8,293 8,036 7,988
Depreciation and amortization 1,379 1,475 1,360 1,410
-------- -------- -------- --------
Total operating expenses 37,312 38,075 38,152 38,186
-------- -------- -------- --------
Operating income (loss) 5,130 5,488 5,354 5,464
Other (income)/expense
Interest (income) (254) (245) (144) (168)
Interest expense 1,013 1,159 1,112 1,059
Other, net -- (3) (12) --
-------- -------- -------- --------
Total other (income) expense 759 911 956 891
-------- -------- -------- --------
Income before income taxes 4,371 4,577 4,398 4,573
Provision for income taxes 1,878 1,972 1,901 1,971
-------- -------- -------- --------
% rate 43% 43% 43% 43%
Net income $ 2,493 $ 2,605 $ 2,497 $ 2,602
======== ======== ======== ========
Diluted weighted average
shares outstanding 10,167 10,113 10,113 10,113
Diluted earnings per share $ 0.25 $ 0.26 $ 0.25 $ 0.26
EBITDA 6,509 6,963 6,714 6,874
EBITDA per share $ 0.64 $ 0.69 $ 0.66 $ 0.68
After-Tax EBITDA per share $ 0.37 $ 0.39 $ 0.38 $ 0.39
<CAPTION>
YEAR ENDING THREE MONTHS ENDING YEAR ENDING
------------ ---------------------------------------------------------- -------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1999 1999 1999 1999 1999
------------ ---------- --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums $ 142,319 $ 35,671 $ 35,972 $ 36,276 $ 36,583 $ 144,502
Affiliated practice revenue 23,605 6,716 7,052 7,405 7,775 28,949
Other revenue 7,238 1,778 1,800 1,835 1,876 7,289
--------- -------- -------- -------- -------- ---------
Total revenue 173,162 44,166 44,824 45,516 46,234 180,740
Expenses:
Dental care providers' fees
and claim costs 78,037 19,762 19,928 20,097 20,340 80,127
Commissions 13,244 3,353 3,381 3,410 3,439 13,583
Premium taxes 920 265 269 273 277 1,084
DHMI operating expenses 21,209 5,910 6,206 6,516 6,842 25,475
General and administrative 32,691 7,729 7,844 7,965 7,975 31,514
Depreciation and amortization 5,624 1,469 1,476 1,426 1,433 5,804
--------- -------- -------- -------- -------- ---------
Total operating expenses 151,725 38,488 39,104 39,687 40,306 157,587
--------- -------- -------- -------- -------- ---------
Operating income (loss) 21,436 5,678 5,719 5,828 5,927 23,152
Other (income)/expense
Interest (income) (811) (230) (246) (278) (310) (1,064)
Interest expense 4,343 1,050 1,050 1,050 1,050 4,200
Other, net (15) -- -- -- -- --
--------- -------- -------- -------- -------- ---------
Total other (income) expense 3,517 820 804 772 740 3,136
--------- -------- -------- -------- -------- ---------
Income before income taxes 17,919 4,858 4,915 5,056 5,188 20,017
Provision for income taxes 7,722 2,089 2,113 2,174 2,231 8,607
--------- -------- -------- -------- -------- ---------
% rate 43% 43% 43% 43% 43% 43%
Net income $ 10,197 $ 2,769 $ 2,801 $ 2,882 $ 2,957 $ 11,410
========= ======== ======== ======== ======== =========
Diluted weighted average
shares outstanding 10,129 10,150 10,150 10,150 10,150 10,150
Diluted earnings per share $ 1.01 $ 0.27 $ 0.28 $ 0.28 $ 0.29 $ 1.12
EBITDA 27,060 7,147 7,195 7,254 7,360 28,956
EBITDA per share $ 2.67 $ 0.70 $ 0.71 $ 0.71 $ 0.73 $ 2.85
After-Tax EBITDA per share $ 1.52 $ 0.40 $ 0.40 $ 0.41 $ 0.41 $ 1.63
</TABLE>
- -----------------------
[1] Projections provided by Robinson-Humphrey research dated October 27, 1998.
<PAGE> 24
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMMON-SIZED PROJECTED INCOME STATEMENT INFORMATION [1]
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDING YEAR ENDING THREE MONTHS ENDING
---------------------------------------------------- ------------ ---------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, MARCH 31, JUNE 30,
1998 (A) 1998 (A) 1998 (A) 1998 1998 1999 1999
---------- ---------- ------------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Subscriber premiums 83.5% 82.6% 81.4% 81.3% 82.2% 80.8% 80.3%
Affiliated practice revenue 12.5% 13.4% 14.0% 14.7% 13.6% 15.2% 15.7%
Other revenue 4.1% 4.0% 4.6% 4.0% 4.2% 4.0% 4.0%
-------- --------- --------- --------- --------- -------- ---------
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees
and claim costs 45.8% 44.8% 44.9% 44.9% 45.1% 44.7% 44.5%
Commissions 7.7% 7.7% 7.7% 7.5% 7.6% 7.6% 7.5%
Premium taxes 0.6% 0.4% 0.5% 0.5% 0.5% 0.6% 0.6%
DHMI operating expenses 10.9% 12.1% 13.0% 13.0% 12.2% 13.4% 13.8%
General and administrative 19.7% 19.0% 18.5% 18.3% 18.9% 17.5% 17.5%
Depreciation and amortization 3.2% 3.4% 3.1% 3.2% 3.2% 3.3% 3.3%
-------- --------- --------- --------- --------- -------- ---------
Total operating expenses 87.9% 87.4% 87.7% 87.5% 87.6% 87.1% 87.2%
-------- --------- --------- --------- --------- -------- ---------
Operating income (loss) 12.1% 12.6% 12.3% 12.5% 12.4% 12.9% 12.8%
Other (income)/ expense
Interest (income) -0.6% -0.6% -0.3% -0.4% -0.5% -0.5% -0.5%
Interest expense 2.4% 2.7% 2.6% 2.4% 2.5% 2.4% 2.3%
Other, net 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
-------- --------- --------- --------- --------- -------- ---------
Total other (income) expense 1.8% 2.1% 2.2% 2.0% 2.0% 1.9% 1.8%
-------- --------- --------- --------- --------- -------- ---------
Income before income taxes 10.3% 10.5% 10.1% 10.5% 10.3% 11.0% 11.0%
Provision for income taxes 4.4% 4.5% 4.4% 4.5% 4.5% 4.7% 4.7%
-------- --------- --------- --------- --------- -------- ---------
Net income 5.9% 6.0% 5.7% 6.0% 5.9% 6.3% 6.2%
======== ========= ========= ========= ========= ======== =========
EBITDA 15.3% 16.0% 15.4% 15.7% 15.6% 16.2% 16.1%
<CAPTION>
THREE MONTHS ENDING YEAR ENDING
-------------------------- ------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Subscriber premiums 79.7% 79.1% 80.0%
Affiliated practice revenue 16.3% 16.8% 16.0%
Other revenue 4.0% 4.1% 4.0%
---------- --------- ----------
Total revenue 100.0% 100.0% 100.0%
Expenses:
Dental care providers' fees
and claim costs 44.2% 44.0% 44.3%
Commissions 7.5% 7.4% 7.5%
Premium taxes 0.6% 0.6% 0.6%
DHMI operating expenses 14.3% 14.8% 14.1%
General and administrative 17.5% 17.2% 17.4%
Depreciation and amortization 3.1% 3.1% 3.2%
---------- ---------- ----------
Total operating expenses 87.2% 87.2% 87.2%
---------- ---------- ----------
Operating income (loss) 12.8% 12.8% 12.8%
Other (income)/ expense
Interest (income) -0.6% -0.7% -0.6%
Interest expense 2.3% 2.3% 2.3%
Other, net 0.0% 0.0% 0.0%
---------- ---------- ----------
Total other (income) expense 1.7% 1.6% 1.7%
---------- ---------- ----------
Income before income taxes 11.1% 11.2% 11.1%
Provision for income taxes 4.8% 4.8% 4.8%
---------- ---------- ----------
Net income 6.3% 6.4% 6.3%
========== ========== ==========
EBITDA 15.9% 15.9% 16.0%
</TABLE>
- -------------------------
[1] Projections provided by Robinson-Humprey research dated October 27, 1998.
<PAGE> 25
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMPARISON OF ROBINSON-HUMPHREY RESEARCH PROJECTIONS
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1998 YEAR ENDING DECEMBER 31, 1999
----------------------------------------------------- ----------------------------------------------------
ROBINSON-HUMPHREY ROBINSON-HUMPHREY ROBINSON-HUMPHREY ROBINSON-HUMPHREY
RESEARCH - JULY RESEARCH - OCTOBER VARIANCE RESEARCH - JULY RESEARCH - OCTOBER VARIANCE
------------------- --------------------- -------- ----------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED GOLDCAP
- --------------------
Revenues $178,357 $173,162 $(5,195) $195,492 $180,740 $(14,752)
% Growth 12.4% 9.1% (2.9)% 9.6% 4.4% (7.5)%
EBITDA $27,413 $27,060 $(353) $30,309 $28,956 $(1,353)
% Growth (1.4)% (2.7)% (1.3)% 10.6% 7.0% (4.5)%
% Margin 15.4% 15.6% 15.5% 16.0%
Operating income $21,518 $21,436 $(82) $24,056 $23,152 $(904)
% Growth (2.5)% (2.8)% (0.4)% 11.8% 8.0% (3.8)%
% Margin 12.1% 12.4% 12.3% 12.8%
Net income $10,767 $10,197 $(570) $12,431 $11,410 $(1,021)
% Growth (2.8)% (8.0)% (5.3)% 15.5% 11.9% (8.2%)
% Margin 6.0% 5.9% 6.4% 6.3%
BENEFITS COMPANY
- ----------------
Revenues $151,315 $149,557 $(1,758) $157,492 $151,791 $(5,701)
% Growth (0.2)% (1.4)% (1.2)% 4.1% 1.5% (3.6)%
EBITDA $23,381 $24,664 $1,283 $24,229 $25,482 $1,253
% Growth NA NA 5.5% 3.6% 3.3% 5.2%
% Margin 15.5% 16.5% 15.4% 16.8%
DHMI
- ----
Revenues $27,042 $23,605 $(3,437) $38,000 $28,949 $(9,051)
% Growth 280.2% 231.9% (12.7)% 40.5% 22.6% (23.8)%
EBITDA $4,032 $2,396 $(1,636) $6,080 $3,474 $(2,606)
% Growth NA NA (40.6)% 50.8% 45.0% (42.9)%
% Margin 14.9% 10.2% 16.0% 12.0%
</TABLE>
<PAGE> 26
The Robinson-Humphrey Company
PROJECT GOLDCAP
CONSOLIDATED PROJECTED INCOME STATEMENT INFORMATION [1]
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Benefits revenues $148,231 $153,750 $161,438 $171,124 $183,102 $195,920
DHMI patient revenues 22,975 25,474 28,116 31,032 34,250 37,803
DHDC management fee 2,229 2,344 2,587 2,855 3,152 3,478
Dentlease rental fees NA NA NA NA NA NA
-------- -------- -------- -------- -------- --------
Total revenues 173,435 181,568 192,141 205,011 220,504 237,201
% Growth 9.3% 4.7% 5.8% 6.7% 7.6% 7.6%
Expenses:
Benefits expenses 124,095 128,032 133,660 140,727 149,268 158,368
DHMI expenses 23,094 24,031 26,523 29,274 32,310 35,661
Depreciation and amortization 4,481 4,382 4,723 5,149 5,244 5,355
-------- -------- -------- -------- -------- --------
Total expenses 151,670 156,445 164,906 175,150 186,822 199,384
-------- -------- -------- -------- -------- --------
Operating income 21,765 25,123 27,235 29,861 33,682 37,817
% Growth -1.4% 15.4% 8.4% 9.6% 12.8% 12.3%
Interest expense 3,690 4,100 4,100 4,100 4,100 4,100
-------- -------- -------- -------- -------- --------
Income before income taxes 18,075 21,023 23,135 25,761 29,582 33,717
Provision for income taxes 7,711 8,896 9,786 10,894 12,514 14,267
-------- -------- -------- -------- -------- --------
Net income $10,364 $12,127 $13,349 $14,867 $17,067 $19,449
======== ======== ======== ======== ======== ========
% Growth -6.5% 17.0% 10.1% 11.4% 14.8% 14.0%
Diluted shares outstanding 10,183 10,400 10,600 10,800 11,000 11,200
Diluted earnings per share $1.02 $1.17 $1.26 $1.38 $1.55 $1.74
EBITDA $26,246 $29,505 $31,958 $35,010 $38,926 $43,172
</TABLE>
- ------------------------------------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 27
The Robinson-Humphrey Company
PROJECT GOLDCAP
CONSOLIDATED PROJECTED COMMON-SIZED INCOME STATEMENT INFORMATION [1]
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Benefits revenues 85.5% 84.7% 84.0% 83.5% 83.0% 82.6%
DHMI patient revenues 13.2% 14.0% 14.6% 15.1% 15.5% 15.9%
DHDC management fee 1.3% 1.3% 1.3% 1.4% 1.4% 1.5%
Dentlease rental fees NA NA NA NA NA NA
------ ------ ------ ------ ------ ------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Benefits expenses 71.6% 70.5% 69.6% 68.6% 67.7% 66.8%
DHMI expenses 13.3% 13.2% 13.8% 14.3% 14.7% 15.0%
Depreciation and amorization 2.6% 2.4% 2.5% 2.5% 2.4% 2.3%
------ ------ ------ ------ ------ ------
Total expenses 87.5% 86.2% 85.8% 85.4% 84.7% 84.1%
Operating income 12.5% 13.8% 14.2% 14.6% 15.3% 15.9%
Interest expense 2.1% 2.3% 2.1% 2.0% 1.9% 1.7%
------ ------ ------ ------ ------ ------
Income before income taxes 10.4% 11.6% 12.0% 12.6% 13.4% 14.2%
Provision for income taxes 4.4% 4.9% 5.1% 5.3% 5.7% 6.0%
------ ------ ------ ------ ------ ------
Net income 6.0% 6.7% 6.9% 7.3% 7.7% 8.2%
====== ====== ====== ====== ====== ======
EBITDA 15.1% 16.3% 16.6% 17.1% 17.7% 18.2%
</TABLE>
- ---------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 28
The Robinson-Humphrey Company
PROJECT GOLDCAP
BENEFITS COMPANY
PROJECTED INCOME STATEMENTS [1]
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $148,231 $153,750 $161,438 $171,124 $183,102 $195,920
% Growth -0.7% 3.7% 5.0% 6.0% 7.0% 7.0%
Expenses
Dental care providers' fees and claim costs 79,413 81,488 85,562 90,696 97,044 103,837
Commissions 13,235 14,453 15,337 16,257 17,395 18,612
Premium taxes 908 942 989 1,048 1,122 1,200
General and administrative 30,539 31,149 31,772 32,726 33,707 34,719
Depreciation and amortization 3,596 3,471 3,792 4,196 4,267 4,351
-------- -------- -------- -------- -------- --------
Total expenses 127,691 131,503 137,452 144,923 153,535 162,719
-------- -------- -------- -------- -------- --------
Operating income 20,540 22,247 23,986 26,201 29,567 33,201
% Growth NA 8.3% 7.8% 9.2% 12.8% 12.3%
Interest expense 4,500 5,000 5,000 5,000 5,000 5,000
Less interest income 810 900 900 900 900 900
-------- -------- -------- -------- -------- --------
Income before income taxes 16,850 18,147 19,886 22,101 25,467 29,101
Provision for income taxes 7,246 7,803 8,551 9,503 10,951 12,513
-------- -------- -------- -------- -------- --------
Net income $ 9,605 $ 10,344 $ 11,335 $ 12,598 $ 14,516 $ 16,588
======== ======== ======== ======== ======== ========
% Growth NA 7.7% 9.6% 11.1% 15.2% 14.3%
EBITDA $ 24,136 $ 25,718 $ 27,778 $ 30,397 $ 33,834 $ 37,552
- -----------------------------------------------------------------------------------------------------------------------------------
Tax rate 43.0% 43.0% 43.0% 43.0% 43.0% 43.0%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 29
The Robinson-Humphrey Company
PROJECT GOLDCAP
BENEFITS COMPANY
PROJECTED COMMON-SIZED INCOME STATEMENTS [1]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses
Dental care providers' fees and claim costs 53.6% 53.0% 53.0% 53.0% 53.0% 53.0%
Commissions 8.9% 9.4% 9.5% 9.5% 9.5% 9.5%
Premium taxes 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
General and administrative 20.6% 20.3% 19.7% 19.1% 18.4% 17.7%
Depreciation and amortization 2.4% 2.3% 2.3% 2.5% 2.3% 2.2%
------ ------ ------ ------ ------ ------
Total expenses 86.1% 85.5% 85.1% 84.7% 83.9% 83.1%
------ ------ ------ ------ ------ ------
Operating income 13.9% 14.5% 14.9% 15.3% 16.1% 16.9%
Interest expense 3.0% 3.3% 3.1% 2.9% 2.7% 2.6%
Less Interest income 0.5% 0.6% 0.6% 0.5% 0.5% 0.5%
------ ------ ------ ------ ------ ------
Income before income taxes 11.4% 11.8% 12.3% 12.9% 13.9% 14.9%
Provision for income taxes 4.9% 5.1% 5.3% 5.6% 6.0% 6.4%
------ ------ ------ ------ ------ ------
Net income 6.5% 6.7% 7.0% 7.4% 7.9% 8.5%
====== ====== ====== ====== ====== ======
EBITDA 16.3% 16.7% 17.2% 17.8% 18.5% 19.2%
</TABLE>
- ---------------------------------------------------
[1] Projections provided by management dated October 13, 1998.
<PAGE> 30
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL HEALTH MANAGEMENT, INC.
PROJECTED INCOME STATEMENTS [1]
SEC REPORTING FORMAT
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
----------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Patient revenues $22,975 $25,474 $28,116 $31,032 $34,250 $37,803
DHDC management fee 2,229 2,344 2,587 2,855 3,152 3,478
Dentlease rental fees NA NA NA NA NA NA
------- ------- ------- ------- ------- -------
Total revenues 25,204 27,818 30,703 33,887 37,402 41,281
% Growth -- 10.4% 10.4% 10.4% 10.4% 10.4%
Management fee expense 5 0 0 0 0 0
Operating expense 20,315 21,791 24,051 26,545 29,299 32,337
Unallocated corporate overhead 2,774 2,240 2,472 2,729 3,012 3,324
Depreciation expense 204 192 212 234 258 285
Amortization expense 681 719 719 719 719 719
------- ------- ------- ------- ------- -------
Total expenses 23,979 24,942 27,454 30,227 33,287 36,665
------- ------- ------- ------- ------- -------
Operating income 1,225 2,876 3,249 3,660 4,115 4,616
% Growth -- 134.8% 13.0% 12.7% 12.4% 12.2%
Interest expense (income) -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Income before income taxes 1,225 2,876 3,249 3,660 4,115 4,616
Income tax provision 466 1,093 1,235 1,391 1,564 1,754
------- ------- ------- ------- ------- -------
Net income $ 760 $ 1,783 $ 2,014 $ 2,269 $ 2,551 $ 2,862
======= ======= ======= ======= ======= =======
% Growth -- 134.8% 13.0% 12.7% 12.4% 12.2%
EBITDA $ 2,110 $ 3,787 $ 4,180 $ 4,613 $ 5,092 $ 5,620
</TABLE>
- ------------------------------------------------------
[1] Projections dated October 13, 1998 provided by management for the years
ending December 31, 1998 and 1999. Projections for December 31, 2000
through 2003 estimated using constant growth rates and margin assumptions.
<PAGE> 31
PROJECT GOLDCAP
DENTAL HEALTH MANAGEMENT, INC.
PROJECTED COMMON-SIZED INCOME STATEMENTS [1]
SEC REPORTING FORMAT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Patient revenues 91.2% 91.6% 91.6% 91.6% 91.6% 91.6%
DHDC management fee 8.8% 8.4% 8.4% 8.4% 8.4% 8.4%
Dentlease rental fees NA NA NA NA NA NA
----- ----- ----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Management fee expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Operating expense 80.6% 78.3% 78.3% 78.3% 78.3% 78.3%
Unallocated corporate overhead 11.0% 8.1% 8.1% 8.1% 8.1% 8.1%
Depreciation expense 0.8% 0.7% 0.7% 0.7% 0.7% 0.7%
Amortization expense 2.7% 2.6% 2.3% 2.1% 1.9% 1.7%
----- ----- ----- ----- ----- -----
Total expenses 95.1% 89.7% 89.4% 89.2% 89.0% 88.8%
----- ----- ----- ----- ----- -----
Operating income 4.9% 10.3% 10.6% 10.8% 11.0% 11.2%
Interest expense (income) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- ----- -----
Income before income taxes 4.9% 10.3% 10.6% 10.8% 11.0% 11.2%
Income tax provision 1.8% 3.9% 4.0% 4.1% 4.2% 4.2%
----- ----- ----- ----- ----- -----
Net income 3.0% 6.4% 6.6% 6.7% 6.8% 6.9%
===== ===== ===== ===== ===== =====
EBITDA 8.4% 13.6% 13.6% 13.6% 13.6% 13.6%
</TABLE>
- ----------------------------------------
[1] Projections dated October 13, 1998 provided by management for the years
ending December 31, 1998 and 1999. Projections for December 31, 2000
through 2003 estimated using constant growth rates and margin assumptions.
<PAGE> 32
The Robinson-Humphrey Company
PROJECT GOLDCAP
COMPARISON OF GOLDCAP MANAGEMENT PROJECTIONS
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1998 YEAR ENDING DECEMBER 31, 1999
------------------------------------------------------ --------------------------------------------------
GOLDCAP GOLDCAP GOLDCAP GOLDCAP
MANAGEMENT - JUL. MANAGEMENT - OCT. VARIANCE MANAGEMENT - JUL. MANAGEMENT - OCT. VARIANCE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED GOLDCAP
Revenues $175,026 $173,435 $(1,591) $190,938 $181,568 $ (9,370)
% Growth 10.3% 9.3% (0.9)% 9.1% 4.7% (4.9)%
EBITDA $ 25,699 $ 26,246 $ 547 $ 31,097 $ 29,505 $ (1,592)
% Growth (7.6)% (5.6)% 2.1% 21.0% 12.4% (5.1)%
% Margin 14.7% 15.1% 16.3% 16.3%
Operating income $ 19,834 $ 21,765 $ 1,931 $ 26,884 $ 25,123 $ (1,761)
% Growth (10.1)% (1.4)% 9.7% 35.5% 15.4% (6.6)%
% Margin 11.3% 12.5% 14.1% 13.8%
Net income $ 9,541 $ 10,364 $ 823 $ 13,215 $ 12,127 $ (1,088)
% Growth (13.9)% (6.5)% 8.6% 38.5% 17.0% (8.2)%
% Margin 5.5% 6.0% 6.9% 6.7%
BENEFITS COMPANY
Revenues $150,496 $148,231 $(2,265) $163,785 $153,750 $(10,035)
% Growth (0.7)% (2.2)% (1.5)% 8.8% 3.7% (6.1)%
EBITDA $ 24,489 $ 24,136 $ (353) $ 27,449 $ 25,718 $ (1,731)
% Growth NA NA (1.4)% 12.1% 6.6% (6.3)%
% Margin 16.3% 16.3% 16.8% 16.7%
DHMI
Revenues $ 24,530 $ 25,204 $ 674 $ 27,153 $ 27,818 $ 665
% Growth 244.9% 254.3% 2.7% 10.7% 10.4% 2.4%
EBITDA $ 1,210 $ 2,110 $ 900 $ 3,648 $ 3,787 $ 139
% Growth NA NA 74.4% 201.5% 79.5% 3.8%
% Margin 4.9% 8.4% 13.4% 13.6%
</TABLE>
<PAGE> 33
The Robinson-Humphrey Company
PROJECT GOLDCAP
TRADING STATISTICS
JULY 27, 1998 - JANUARY 13, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
AVERAGE CLOSING PRICE: AVERAGE DAILY VOLUME:
- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
SINCE 7/27/98 ANNOUNC. $13.08 SINCE 7/27/98 ANNOUNC. 54,472
90 DAYS $12.20 90 DAYS 49,240
60 DAYS $11.36 60 DAYS 51,288
30 DAYS $10.86 30 DAYS 61,920
5 DAYS $11.34 5 DAYS 58,860
HIGH CLOSE (7/29/98) $16.88 HIGH VOLUME (12/16/98) 773,400
LOW CLOSE (12/24/98) $10.06 LOW VOLUME (12/11/98) 200
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
1/13/99 $11.00 $10.00 $10.63 46,700
1/12/99 12.00 11.00 11.00 20,700
1/11/99 12.38 11.25 12.06 24,000
1/08/99 12.38 10.88 12.19 28,400
1/07/99 10.81 10.25 10.81 32,100
1/06/99 10.50 10.19 10.25 64,800
1/05/99 10.38 10.13 10.13 12,600
1/04/99 10.50 10.13 10.19 13,100
12/31/98 10.63 10.13 10.38 84,700
12/30/98 10.50 10.06 10.19 37,000
12/29/98 10.25 10.06 10.25 18,100
12/28/98 10.31 10.06 10.19 59,200
12/24/98 10.31 10.06 10.06 6,700
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
12/23/98 10.31 10.06 10.31 79,100
12/22/98 10.38 10.00 10.31 72,600
12/21/98 10.25 10.00 10.25 76,700
12/18/98 10.38 10.00 10.38 16,200
12/17/98 10.69 10.00 10.50 38,500
12/16/98 11.38 10.00 10.63 773,400
12/15/98 11.69 11.25 11.38 2,800
12/14/98 11.31 11.25 11.31 500
12/11/98 11.75 11.75 11.75 200
12/10/98 11.81 11.25 11.31 3,200
12/9/98 11.88 11.25 11.25 800
12/8/98 11.38 11.25 11.25 27,000
12/7/98 11.81 11.31 11.38 61,400
12/4/98 11.50 11.25 11.25 8,900
12/3/98 12.25 11.25 11.38 47,000
12/2/98 11.75 11.00 11.75 152,300
12/1/98 11.13 10.00 11.13 205,200
11/30/98 10.75 9.88 10.44 25,400
11/27/98 10.75 10.75 10.75 2,000
11/25/98 10.88 10.75 10.75 2,500
11/24/98 11.06 10.69 10.75 36,300
11/23/98 11.13 10.81 10.81 46,400
11/20/98 11.19 10.38 11.00 35,900
11/19/98 11.50 11.00 11.06 40,200
11/18/98 11.50 11.25 11.25 2,500
11/17/98 11.63 11.38 11.50 14,800
11/16/98 11.88 11.50 11.63 18,100
11/13/98 12.00 11.75 11.88 1,800
11/12/98 12.00 11.56 11.75 5,000
11/11/98 12.13 11.69 11.75 20,400
11/10/98 11.94 11.88 11.88 14,200
11/9/98 12.25 11.81 11.88 51,800
11/6/98 12.38 12.00 12.00 3,800
11/5/98 12.38 12.00 12.00 11,900
11/4/98 12.25 12.00 12.00 28,800
11/3/98 12.38 12.00 12.00 49,400
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
11/2/98 12.38 12.00 12.00 108,300
10/30/98 12.38 11.75 11.88 74,400
10/29/98 12.38 12.00 12.06 46,800
10/28/98 12.50 12.13 12.13 119,200
10/27/98 13.50 12.13 12.38 111,800
10/26/98 13.38 13.00 13.19 2,900
10/23/98 12.75 12.75 12.75 2,300
10/22/98 13.63 12.88 13.00 40,100
10/21/98 14.13 13.00 13.00 49,900
10/20/98 13.50 12.63 13.50 4,400
10/19/98 13.25 12.50 12.63 21,400
10/16/98 13.13 13.00 13.13 9,100
10/15/98 13.06 12.75 12.88 34,300
10/14/98 13.19 12.63 13.00 11,600
10/13/98 12.81 12.63 12.81 12,500
10/12/98 12.75 12.00 12.50 33,300
10/9/98 12.25 10.63 12.25 83,500
10/8/98 12.13 10.50 10.94 97,600
10/7/98 13.25 11.88 12.25 103,600
10/6/98 14.00 12.50 13.00 54,000
10/5/98 14.00 13.75 14.00 1,800
10/2/98 14.00 13.63 14.00 11,600
10/1/98 13.75 13.00 13.75 60,700
9/30/98 14.13 13.25 13.63 183,600
9/29/98 14.13 14.00 14.13 4,500
9/28/98 14.13 14.00 14.13 20,800
9/25/98 14.25 13.88 13.94 82,000
9/24/98 14.50 14.00 14.00 57,000
9/23/98 15.00 14.25 14.25 37,100
9/22/98 14.88 14.25 14.44 18,100
9/21/98 14.63 14.00 14.25 90,000
9/18/98 15.00 14.25 15.00 15,200
9/17/98 14.63 14.25 14.50 34,000
9/16/98 14.75 14.00 14.69 15,800
9/15/98 14.88 14.25 14.88 6,400
9/14/98 14.75 14.25 14.75 6,900
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
DATE HIGH LOW CLOSE VOLUME
---- ---- --- ----- ------
<S> <C> <C> <C> <C>
9/11/98 15.13 14.75 14.75 30,900
9/10/98 15.00 14.38 15.00 9,100
9/09/98 15.63 14.75 15.00 29,400
9/08/98 15.69 15.25 15.56 22,600
9/04/98 15.63 15.25 15.44 18,100
9/03/98 15.13 14.25 15.13 45,700
9/02/98 14.50 14.00 14.38 13,900
9/01/98 14.88 14.00 14.44 41,700
8/31/98 15.13 14.75 14.88 25,000
8/28/98 15.38 14.88 15.00 173,000
8/27/98 15.50 14.50 14.50 32,700
8/26/98 15.88 15.31 15.50 228,200
8/25/98 15.50 15.13 15.31 27,500
8/24/98 15.75 15.50 15.50 14,200
8/21/98 15.50 15.00 15.25 3,800
8/20/98 15.75 15.63 15.63 6,400
8/19/98 15.94 15.75 15.78 15,100
8/18/98 16.13 15.88 16.13 26,200
8/17/98 16.25 15.75 16.25 4,700
8/14/98 16.19 16.00 16.06 3,500
8/13/98 16.13 15.75 16.13 26,600
8/12/98 16.38 16.00 16.13 40,200
8/11/98 16.38 15.88 16.00 245,200
8/10/98 16.75 16.38 16.44 134,800
8/07/98 16.75 16.50 16.63 81,400
8/06/98 16.50 16.44 16.50 98,400
8/05/98 16.63 16.25 16.44 112,700
8/04/98 16.75 16.63 16.63 56,300
8/03/98 16.75 16.69 16.75 42,200
7/31/98 16.75 16.69 16.75 51,600
7/30/98 16.88 16.63 16.72 94,600
7/29/98 16.88 16.63 16.88 205,100
7/28/98 17.00 15.75 16.75 299,700
7/27/98 13.50 12.75 13.50 130,100
</TABLE>
- --------------------------
Source: AT Financial
<PAGE> 37
PROJECT GOLDCAP
DAILY PRICE AND TRADING VOLUME - JULY 27, 1998 THROUGH JANUARY 13, 1999
---------------------------------------------------------------------------
[GRAPH]
[1] Goldcap announces TAGTCR merger.
[2] Goldcap announces third quarter earnings shortfall.
[3] Goldcap announces possibility that TAGTCR merger would not take place at
$18/share.
<PAGE> 38
GOLDCAP
CLOSE PRICE INDEX COMPARISON
DAILY: 7/27/98 TO 1/13/99
[GRAPH]
<PAGE> 39
GOLDCAP
VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 7/27/98 TO 1/13/99
[GRAPH]
<PAGE> 40
GOLDCAP
CUMULATIVE VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 7/27/98 TO 1/13/99
[GRAPH]
<PAGE> 41
PROJECT GOLDCAP
LAST TWELVE MONTHS DAILY PRICE AND TRADING VOLUME SINCE JANUARY 13, 1998
----------------------------------------------------------------------------
[GRAPH]
[1] Goldcap announces that its fourth quarter earnings will fall short of
estimates due to unusual charges.
[2] Goldcap charges weaken fourth quarter earnings; several analysts downgrade
stock.
[3] Goldcap meets first quarter consensus estimates with earnings of $0.25 per
share.
[4] Goldcap announces TAGTCR merger.
[5] Goldcap announces third quarter earnings shortfall.
[6] Goldcap announces possibility that TAGTCR merger would not take place at
$18/share.
<PAGE> 42
GOLDCAP
CLOSE PRICE INDEX COMPARISON
DAILY: 1/13/98 TO 1/13/99
[GRAPH]
<PAGE> 43
GOLDCAP
VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 1/13/98 TO 1/13/99
[GRAPH]
<PAGE> 44
GOLDCAP
CUMULATIVE VOLUME DISTRIBUTION BY PRICE RANGE
DAILY: 1/13/98 TO 1/13/99
[GRAPH]
<PAGE> 45
PROJECT GOLDCAP
WEEKLY PRICE AND TRADING VOLUME - IPO THROUGH JANUARY 13, 1999
- -------------------------------------------------------------------------------
[GRAPH]
[1] Goldcap IPO; shares rise 29% during the first day of trading.
[2] Goldcap announces record third quarter results with earnings up 300% over
the previous year.
[3] Goldcap reports fourth quarter earnings of $0.19, missing consenseus
estimates.
[4] Goldcap reports record first quarter earnings with a 240% increase in net
income over the previous year.
[5] Phyllis Klock appointed president; several analysts reiterate favorable
ratings.
[6] Goldcap reports record first quarter earnings with a 27% increase in net
income over the previous year.
[7] Goldcap reports third quarter earnings, meeting estimates.
[8] Goldcap warns of charges related to dental practice management business and
negative impact on earnings.
[9] Due to unusual and one-time charges, Goldcap earnings down; several
analysts downgrade stock.
[10] Goldcap announces TAGTCR merger.
[11] Goldcap announces third quarter earnings shortfall.
[12] Goldcap announces possibility that TAGTCR merger would not take place at
$18/share.
<PAGE> 46
GOLDCAP
CLOSE PRICE INDEX COMPARISON
WEEKLY: 5/26/95 TO 1/13/99
[GRAPH]
<PAGE> 47
GOLDCAP
VOLUME DISTRIBUTION BY PRICE RANGE
WEEKLY: 5/26/95 TO 1/13/99
[GRAPH]
<PAGE> 48
GOLDCAP
CUMULATIVE VOLUME DISTRIBUTION BY PRICE RANGE
WEEKLY: 5/26/95 TO 1/13/99
[GRAPH]
<PAGE> 49
The Robinson-Humphrey Company
PROJECT GOLDCAP
SHAREHOLDER OWNERSHIP ANALYSIS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF AS A PERCENT
SHARES OF TOTAL
---------- ---------
<S> <C> <C> <C>
Total Shares Outstanding as of
September 30, 1998: 10,112,629 100.0% [GOLDCAP
OWNERSHIP GRAPH]
Date Institutional Ownership:
------- -----------------------
9/30/98 EDGEMONT ASSET MGMT CORP 1,158,300 11.45%
9/30/98 FIDELITY MGMT & RES CORP 1,011,300 10.00%
6/30/98 DIMENSIONAL FUND ADVS. 699,600 6.92%
9/30/98 PRUDENTIAL INS CO/AMER 692,400 6.85%
9/30/98 SELIGMAN J W & COMPANY 595,900 5.89%
9/30/98 PUTNAM INVESTMENT MGMT 575,700 5.69%
9/30/98 STRONG CAPITAL MGMT INC 490,600 4.85%
9/30/98 GENERAL ELECTRIC COMPANY 446,300 4.41%
9/30/98 LASALLE NATIONAL BANK 436,300 4.31%
9/30/98 MASSACHUSETTS FINL SVCS 275,800 2.73%
9/30/98 NEUBERGER&BERMAN MGMT 227,900 2.25%
9/30/98 BARCLAYS BANK PLC 133,342 1.32%
9/30/98 NATIONSBANK CORPORATION 127,800 1.26%
9/30/98 EATON VANCE MANAGEMENT 97,300 0.96%
9/30/98 NEUBERGER&BERM INST ASST 87,800 0.87%
9/30/98 BRANDYWINE ASSET MGMT. 51,700 0.51%
9/30/98 COLLEGE RETIRE EQUITIES 47,400 0.47%
9/30/98 BEAR STEARNS & CO 41,200 0.41%
9/30/98 NEW YORK ST TEACHERS RET 35,900 0.36%
9/30/98 TEXAS TEACHER RETIRM SYS 35,000 0.35%
9/30/98 BANKERS TRUST N Y CORP 34,400 0.34%
9/30/98 PILGRIM BAXTER VALUE INV 27,000 0.27%
9/30/98 MELLON BANK CORPORATION 20,113 0.20%
9/30/98 NATIONWIDE ADVISORY SVCS 19,000 0.19%
9/30/98 NORTHERN TRUST CORP 16,500 0.16%
9/30/98 COLORADO PUBLIC EMPL RET 13,900 0.14%
9/30/98 DEERE & COMPANY 13,800 0.14%
9/30/98 FIRST QUADRANT LP 11,000 0.11%
9/30/98 BANC ONE CORPORATION 10,500 0.10%
9/30/98 EQUITABLE COMPANIES INC 9,500 0.09%
9/30/98 WORLD ASSET MANAGEMENT 9,500 0.09%
9/30/98 FLEET FINL GROUP INC 9,400 0.09%
12/31/97 ANB INVESTMENT MGMT & TR 8,682 0.09%
9/30/98 BANK OF NEW YORK 6,000 0.06%
9/30/98 VANGUARD GROUP INC 5,600 0.06%
9/30/98 AID ASSOC FOR LUTHERANS 5,500 0.05%
9/30/98 NOMURA ASSET MGMT CO LTD 4,500 0.04%
9/30/98 NORWEST BK MINNESOTA N A 3,600 0.04%
9/30/98 CAPSTONE ASSET MGMT. CO. 1,890 0.02%
9/30/98 MERRILL LYNCH & CO INC 623 0.01%
9/30/98 WEISS PECK & GREER 280 0.00%
--------- -------
Total Institutional Holdings 7,498,830 74.2%
Insider Ownership:
-----------------
Total Insider Holdings 884,332 [1] 8.7%
Total Retail Holdings 1,729,467 17.1%
</TABLE>
----------------------------------
[1] All Directors and Executive Officers as a group as reported in the Goldcap
proxy dated March 30, 1998.
Source: CDA Spectrum as of 1/13/99.
<PAGE> 50
The Robinson-Humphrey Company
PROJECT GOLDCAP
INSTITUTIONAL OWNERSHIP HISTORY
QUARTERS ENDING SEPTEMBER 1995 THROUGH SEPTEMBER 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
13F INSTITUTION 9/30/98 6/30/98 3/31/98 12/31/97 9/30/97 6/30/97 3/31/97 12/31/96 9/30/96
- ------------------------------- ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EDGEMONT ASSET MGMT CORP 1,158,300 1,500,000 1,500,000 1,500,000 1,540,600 2,008,200 845,000 845,000 405,000
FIDELITY MGMT & RES CORP 1,011,300 718,100 750,400 618,400 463,400 355,900
DIMENSIONAL FUND ADVS. 699,600 699,600 699,600 354,900 317,600 280,600
PRUDENTIAL INS CO/AMER 692,400 707,100 713,100 575,800 497,000 542,500 7,600 7,100
SELIGMAN J W & COMPANY 595,900 755,700 755,700 750,900 750,900 747,800 436,500 329,800 282,200
PUTNAM INVESTMENT MGMT 575,700 575,700 756,910 753,610 774,510 805,410 1,010,185 1,005,385 1,352,835
STRONG CAPITAL MGMT INC 490,600 456,450 214,200 1,200 114,700 7,700 63,700 0 44,750
GENERAL ELECTRIC COMPANY 446,300 446,300 446,300 446,300 295,800 0 11,000 12,300 12,300
LASALLE NATIONAL BANK 436,300 436,300 436,300 437,400 297,000 10,800
MASSACHUSETTS FINL SVCS 275,800 283,800 288,800 859,195 994,195 994,695 736,795 649,395 248,805
NEUBERGER&BERMAN MGMT 227,900 252,900 252,900 302,900 302,900
BARCLAYS BANK PLC 133,342 135,029 193,420 209,563 211,934 200,134 170,434 171,214 176,798
NATIONSBANK CORPORATION 127,800 10,066 11,250 0
EATON VANCE MANAGEMENT 97,300 97,300 90,400
NEUBERGER&BERM INST ASST 87,800 89,700 84,500 89,800 89,800
BRANDYWINE ASSET MGMT. 51,700 51,700 2,500
COLLEGE RETIRE EQUITIES 47,400 101,400 9,100 15,100 9,100 9,100 6,100 4,600 4,100
BEAR STEARNS & CO 41,200 23,200 16 49 40 600
NEW YORK ST TEACHERS RET 35,900 35,900 35,900 35,900 35,900
TEXAS TEACHER RETIRM SYS 35,000 35,000 35,000 35,000 35,000 20,000
BANKERS TRUST N Y CORP 34,400 19,100 199,900 214,500 212,100 165,200 164,200 165,700 167,050
PILGRIM BAXTER VALUE INV 27,000
MELLON BANK CORPORATION 20,113 19,813 48,764 50,600 52,300 47,500 53,302 52,300 47,100
NATIONWIDE ADVISORY SVCS 19,000 19,000 19,000 19,000 19,000
NORTHERN TRUST CORP 16,500 12,500 10,500
COLORADO PUBLIC EMPL RET 13,900 7,900 0 6,400
DEERE & COMPANY 13,800 10,700 10,700 10,800 10,700 10,100 10,100 8,100
FIRST QUADRANT LP 11,000
BANC ONE CORPORATION 10,500 10,500 10,500 0 10,000 106,522 106,522
EQUITABLE COMPANIES INC 9,500 8,200 2,200 15,900 15,900 16,200 192,600 168,600 134,700
WORLD ASSET MANAGEMENT 9,500 9,400 9,300 9,800 9,800 11,500 10,800 12,200 400
FLEET FINL GROUP INC 9,400 9,900 9,900 9,900 9,900
ANB INVESTMENT MGMT & TR 8,682 8,682 8,682 8,682 9,600 9,800 9,800 10,400 1,500
BANK OF NEW YORK 6,000 5,700 5,400 2,400 2,400 2,300 2,200 2,200
VANGUARD GROUP INC 5,600 5,000 39,600 37,100 37,100 37,100 37,100
AID ASSOC FOR LUTHERANS 5,500 5,300 4,600
NOMURA ASSET MGMT CO LTD 4,500 4,500 4,500 4,500
NORWEST BK MINNESOTA N A 3,600
CAPSTONE ASSET MGMT. CO. 1,890 2,530 386 386 386
MERRILL LYNCH & CO INC 623 0 89 1,400 167 0 100
WEISS PECK & GREER 280 280 280 200 200
AMERICAN GENERAL CORP 0 2,500 2,500 2,500 2,500 2,000 2,000 2,000 2,000
BARON CAPITAL INC 0 20,000 0 30,000 25,000 17,500
QUAKER PARTNERS LLC 0 20,000
AAL CAPITAL MGMT CORP
AELTUS INVESTMENT MGMT 0 23,500
AETNA LIFE INS & ANNUITY
AIM MGMT GROUP INC 0 1,028,500 1,027,100 1,027,100
<CAPTION>
- -----------------------------------------------------------------------------
13F Institution 6/30/96 3/31/96 12/31/95 9/30/95
- ------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
EDGEMONT ASSET MGMT CORP 405,000 405,000 505,000 635,000
FIDELITY MGMT & RES CORP 0 35,000 358,000
DIMENSIONAL FUND ADVS.
PRUDENTIAL INS CO/AMER
SELIGMAN J W & COMPANY 153,900 200,000
PUTNAM INVESTMENT MGMT 1,363,635 1,272,435 408,585 481,885
STRONG CAPITAL MGMT INC 7,725 116,475 30,500 13,700
GENERAL ELECTRIC COMPANY 12,300
LASALLE NATIONAL BANK
MASSACHUSETTS FINL SVCS 159,300 175,400 199,100 199,100
NEUBERGER&BERMAN MGMT
BARCLAYS BANK PLC 178,228
NATIONSBANK CORPORATION 16,200
EATON VANCE MANAGEMENT
NEUBERGER&BERM INST ASST
BRANDYWINE ASSET MGMT.
COLLEGE RETIRE EQUITIES
BEAR STEARNS & CO
NEW YORK ST TEACHERS RET
TEXAS TEACHER RETIRM SYS
BANKERS TRUST N Y CORP 114,050 43,450 360,850 309,250
PILGRIM BAXTER VALUE INV
MELLON BANK CORPORATION 34,100 16,600 16,600
NATIONWIDE ADVISORY SVCS
NORTHERN TRUST CORP
COLORADO PUBLIC EMPL RET
DEERE & COMPANY
FIRST QUADRANT LP
BANC ONE CORPORATION
EQUITABLE COMPANIES INC 119,400 143,200 93,800 108,300
WORLD ASSET MANAGEMENT 100 100 100
FLEET FINL GROUP INC
ANB INVESTMENT MGMT & TR
BANK OF NEW YORK
VANGUARD GROUP INC
AID ASSOC FOR LUTHERANS
NOMURA ASSET MGMT CO LTD
NORWEST BK MINNESOTA N A
CAPSTONE ASSET MGMT. CO.
MERRILL LYNCH & CO INC 2,700
WEISS PECK & GREER
AMERICAN GENERAL CORP 1,100
BARON CAPITAL INC
QUAKER PARTNERS LLC
AAL CAPITAL MGMT CORP 0 58,100
AELTUS INVESTMENT MGMT
AETNA LIFE INS & ANNUITY 2,500
AIM MGMT GROUP INC 798,300 670,900 85,400
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIED IRISH BANKS PLC 0
AMERICAN CENTURY COS 0 250,000
APODACA INVT GROUP INC 0
ARTISAN PARTNERS L P 0 442,000 368,800 245,600
BANK OF TOKYO LTD
BATTERYMARCH FINL MGMT 0 21,000
BENTLEY CAPITAL MGMT INC 0 25,000
BERGER ASSOCIATES INC 0 100,050
BERKELEY CAPITAL MGMT 0
BZW BARCLAYS GLBL INVTS
CALIF STATE TEACHERS RET 0 32,800 32,800 32,800 32,800 32,700 32,700
CHARLES SCHWAB INVT MGMT 0 4,400 4,400 4,400 4,400 4,400 4,400
COLUMBIA MANAGEMENT CO
COMERICA INC 0 9,700 11,500 10,800 12,200
DE GARMO & KELLEHER 0 40,000 40,000
DRIEHAUS CAPITAL MGMT
DUNCAN-HURST CAP MGMT 0
FIDUCIARY TRUST CO INTL. 0 26,100 87,600 48,300
FIRST INVESTORS MGMT CO 0 19,600
FIRST OF AMER INVT-S C I 0 184,750
FIRSTAR CORPORATION 0
FRANKLIN RESOURCES INC
FRED ALGER MANAGEMENT 0 346,750 361,650 367,750
FRONTIER CAPITAL MGMT CO
GARDNER LEWIS ASSET MGMT
GE INVESTMENT CORP
GEEWAX TERKER & COMPANY 0 29,900
GENERAL MOTORS INVT MGMT
GRANAHAN INVT MGMT INC 0 205,000 321,100
GW CAPITAL MGMT INC 0 22,900 48,000 35,000
HANCOCK JOHN ADVISERS 0 417,000
HILLIARD JJB, LYONS WL
HINTZ HOLMAN & HECKSHER
INVESTMENT ADVISERS INC 0 20,000
JACOBS LEVY EQUITY MGMT 0 14,100 14,100
JANUS CAPITAL CORP 0 801,750 961,750 671,925
JMC CAPITAL MGMT INC 0 25,036 26,945 123,380 128,005 130,960
LGT ASSET MANAGEMENT INC
LOOMIS SAYLES & COMPANY 0 139,100 358,500 295,400 47,300
LUTHER KING CAPITAL MGMT 0 35,000
MACKAY SHIELDS FINANCIAL 0 40,500 40,500 40,500 40,500 36,000 19,000
MACKENZIE FINANCIAL CORP 0 90,100 90,100 90,100 83,100 23,600
MASS MUTUAL LIFE INSUR 0 8,500 190,000
MENTOR INVT ADVISORS LLC 0 45,370 83,770 76,220
METROPOLITAN LIFE INSUR 0 5,400 700
MITCHELL HUTCHINS ASSET
MONETTA FINL SVCS INC 0
MORGAN J P & CO INC
MORGAN STANLEY D WITTER 0 17,000 0
NEW USA RESEARCH & MGMT
NEW YORK ST COMMON RET. 0
NICHOLAS CO 0 95,000 75,000 75,000 50,000
NICHOLAS-APPLEGATE CAP.
NORTHERN TRUST CO/CONN 0 9,000
NORTHWESTERN MUTUAL INVT 0 186,600
NORTHWESTERN MUTUAL LIFE 0 143,100 350,500 344,100
OBERWEIS ASSET MGMT INC 0 15,000 15,000 15,000
ONE VALLEY BANK N A 0 2,100
PALISADE CAPITAL MGT LLC 0 69,800 304,800 219,800
ALLIED IRISH BANKS PLC 152,700
AMERICAN CENTURY COS 250,000 380,000
APODACA INVT GROUP INC 157,400
ARTISAN PARTNERS L P
BANK OF TOKYO LTD 0 2,500
BATTERYMARCH FINL MGMT 14,900
BENTLEY CAPITAL MGMT INC
BERGER ASSOCIATES INC 150,050 150,000 195,500 195,500
BERKELEY CAPITAL MGMT 153,100 2,700
BZW BARCLAYS GLBL INVTS 173,000 143,600 100,700
CALIF STATE TEACHERS RET 32,700 0 32,100 21,100
CHARLES SCHWAB INVT MGMT 4,100 2,700
COLUMBIA MANAGEMENT CO 0 220,000
COMERICA INC
DE GARMO & KELLEHER 80,000
DRIEHAUS CAPITAL MGMT 0 297,188 301,853
DUNCAN-HURST CAP MGMT 341,290 345,490 342,840 223,840
FIDUCIARY TRUST CO INTL. 0 10,000
FIRST INVESTORS MGMT CO
FIRST OF AMER INVT-S C I 185,050 109,150 107,850 102,050
FIRSTAR CORPORATION 31,500 0 54,400
FRANKLIN RESOURCES INC 0 12,000
FRED ALGER MANAGEMENT 294,200 289,200 235,700 174,000
FRONTIER CAPITAL MGMT CO 0 125,900 120,600
GARDNER LEWIS ASSET MGMT 0
GE INVESTMENT CORP 0 20,300
GEEWAX TERKER & COMPANY
GENERAL MOTORS INVT MGMT 0 47,500 65,500
GRANAHAN INVT MGMT INC
GW CAPITAL MGMT INC
HANCOCK JOHN ADVISERS 413,000 410,000 400,000
HILLIARD JJB, LYONS WL 100 100
HINTZ HOLMAN & HECKSHER 0 10,000
INVESTMENT ADVISERS INC
JACOBS LEVY EQUITY MGMT
JANUS CAPITAL CORP 377,425 0
JMC CAPITAL MGMT INC 179,660 234,150 260,710
LGT ASSET MANAGEMENT INC 0 15,000 0
LOOMIS SAYLES & COMPANY
LUTHER KING CAPITAL MGMT
MACKAY SHIELDS FINANCIAL 19,000 20,000 20,000 20,000
MACKENZIE FINANCIAL CORP 23,600 30,000
MASS MUTUAL LIFE INSUR 279,700 218,800 194,000 212,700
MENTOR INVT ADVISORS LLC 74,220 77,870 133,520 135,470
METROPOLITAN LIFE INSUR
MITCHELL HUTCHINS ASSET 0 137,900
MONETTA FINL SVCS INC 39,250 190,485 80,000
MORGAN J P & CO INC 0 185,700
MORGAN STANLEY D WITTER
NEW USA RESEARCH & MGMT 0 10,000
NEW YORK ST COMMON RET. 7,600
NICHOLAS CO 25,000
NICHOLAS-APPLEGATE CAP. 0 239,000
NORTHERN TRUST CO/CONN
NORTHWESTERN MUTUAL INVT
NORTHWESTERN MUTUAL LIFE 284,100 323,000 328,900 328,900
OBERWEIS ASSET MGMT INC 15,000 15,000 15,000 15,000
ONE VALLEY BANK N A 2,300 2,300 2,900
PALISADE CAPITAL MGT LLC 0
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PATTERSON J O & CO
PELL RUDMAN TRUST CO NA 0 39,425 37,675 35,050 14,800
PHOENIX HOME LIFE MUTUAL 0 17,500
PILGRIM BAXTER & ASSOCS 0 574,075 987,100 1,004,900
PIMCO ADVISORS L P
PORTFOLIO ADVISORY SVCS 0
PROVIDENT INVT COUNSEL 0 354,243 427,900 389,600
R S INVESTMENT MGMT INC 0 6,900 6,100
RENAISSANCE TECHNOLOGIES 0 12,400 0 10,200
REPUBLIC NATL BANK/N.Y. 0 6,020
ROBERT FLEMING(FLEM CAP)
ROBERTSON STEPHNS CO INV 0 22,300
ROTHSCHILD/PELL RUDMAN 0 51,775 51,950 53,100 21,800
SAFECO CORPORATION 0 293,500
SCHRODER CAP MGMT INTL. 0 418,940 281,440 249,840 237,000 232,400 6,000
SCUDDER KEMPER INVTS INC 0 293,900 288,900 286,200 259,800
SEARS INVESTMENT MGMT 0 15,100 19,000 19,000 13,200 12,000
SSI INVESTMENT MGMT INC 0 1,000
STACEY BRAUN ASSOC INC
STANDISH AYER & WOOD INC 0 11,900
STATE STREET CORP 0 37,914 37,614 29,200 27,000 27,400 33,800 11,500
SUNTRUST BANKS INC 0 160,824 202,302 214,170 217,089 222,280 20,065
T ROWE PRICE ASSOCIATES 0 21,600 21,600 19,800 19,800 16,500 12,000
TCW GROUP INC
THOMSON HORSTMANN&BRYANT
TRAVELERS INC 0 19,065 14,119 12,048 18,781 31,605 98,739 73,378
TURNER INVT PARTNERS INC 0 94,750
UNITED STATES TR/BOSTON 0
UNIVERSITY OF TEXAS INVT 0 46,600 41,300 28,700 0
USAA UNITED SVCS AUTO 0 150,000 110,000 110,000 45,000 45,000 45,000 45,000
VAN KAMPEN AMER CAPITAL 150,350
WALL STREET ASSOCIATES 0 102,150
WARBURG DILLON READ LLC 0 50,500
WARBURG PINCUS ASSET MGT 0
WELLS FARGO BANK N A
WILLIAM BLAIR & CO LLC 0 56,100 65,900 25,900
WILMINGTON TRUST COMPANY
WISCONSIN INVESTMT BOARD
ZWEIG-DIMENNA PARTNERS
---------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL HOLDINGS 7,498,830 7,602,320 8,087,320 9,275,296 9,069,283 8,866,011 9,335,064 9,189,510 9,127,228
TOTAL NUMBER OF OWNERS 42 45 58 58 66 69 60 59 63
SHARES OUTSTANDING (MILLIONS) 10.11 10.11 10.11 10.11 10.11 10.11 10.06 10.06 10.06
PRICE AT END OF PERIOD $13.63 $15.63 $15.38 $20.28 $25.00 $21.06 $28.00 $35.25 $37.75
AVERAGE PRICE OF PERIOD $14.63 $15.50 $17.83 $22.64 $23.03 $24.53 $31.63 $36.50 $42.13
TOP 15 HOLDERS PERCENTAGE 69.8%
<CAPTION>
<S> <C> <C> <C> <C>
PATTERSON J O & CO 0 46,000 55,000
PELL RUDMAN TRUST CO NA
PHOENIX HOME LIFE MUTUAL
PILGRIM BAXTER & ASSOCS 998,200 426,900 552,200 772,900
PIMCO ADVISORS L P 0 196,000 127,000
PORTFOLIO ADVISORY SVCS 88,290 66,110 58,610 42,030
PROVIDENT INVT COUNSEL 353,200 337,500 286,100 261,800
R S INVESTMENT MGMT INC 56,700 60,700 64,000
RENAISSANCE TECHNOLOGIES
REPUBLIC NATL BANK/N.Y.
ROBERT FLEMING(FLEM CAP) 0 10,000
ROBERTSON STEPHNS CO INV
ROTHSCHILD/PELL RUDMAN
SAFECO CORPORATION 0
SCHRODER CAP MGMT INTL. 6,000 6,000 6,000 9,000
SCUDDER KEMPER INVTS INC 266,600 263,900 227,900 189,000
SEARS INVESTMENT MGMT
SSI INVESTMENT MGMT INC
STACEY BRAUN ASSOC INC 0 17,700 17,700
STANDISH AYER & WOOD INC
STATE STREET CORP 27,100
SUNTRUST BANKS INC 148,277 89,794 62,376 62,376
T ROWE PRICE ASSOCIATES
TCW GROUP INC 0 50,000 40,000
THOMSON HORSTMANN&BRYANT 0 72,700
TRAVELERS INC 80,962 86,414 12,999 13,039
TURNER INVT PARTNERS INC 66,750 50,050 42,110 51,460
UNITED STATES TR/BOSTON 1,700
UNIVERSITY OF TEXAS INVT 14,500 0 16,400
USAA UNITED SVCS AUTO 45,000 45,000 50,000 50,000
VAN KAMPEN AMER CAPITAL 150,450 151,000 62,700 57,800
WALL STREET ASSOCIATES 95,100 86,500 66,800 100,600
WARBURG DILLON READ LLC 0 20,000
WARBURG PINCUS ASSET MGT 36,000
WELLS FARGO BANK N A 0 12,000
WILLIAM BLAIR & CO LLC
WILMINGTON TRUST COMPANY 0 5,300 5,300
WISCONSIN INVESTMT BOARD 0 175,700
ZWEIG-DIMENNA PARTNERS 0 57,000 32,000 25,000
--------- --------- --------- ---------
TOTAL Holdings 9,390,312 7,962,873 7,026,438 6,576,153
TOTAL NUMBER OF OWNERS 64 60 63 52
SHARES OUTSTANDING (MILLIONS) 10.06 10.06 10.02 10.02
PRICE AT END OF PERIOD $46.50 $36.00 $41.50 $29.25
AVERAGE PRICE OF PERIOD $41.25 $38.75 $35.38 $25.13
TOP 15 HOLDERS PERCENTAGE
</TABLE>
- -------------------------------
Source: CDA Spectrum as of 1/13/99
<PAGE> 53
The Robinson-Humphrey Company
PROJECT GOLDCAP
Market Comparison of Selected Public Companies
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
52 WEEK MARKET PRICE
LATEST ------------- PRICE AS %
COMPANY TICKER EXCHANGE FYE QUARTER HIGH LOW 1/13/99 OF HIGH
- ------- ------ -------- --- ------- ---- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. FCWI OTC DC 9/98 $16.50 $9.25 $13.38 81.1%
Safeguard Health Enterprises, Inc. SFGD OTC DC 9/98 12.31 3.28 3.88 31.5%
------------------------------------------------------------------------------------
AVERAGE 56.3%
MEDIAN 56.3%
------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. FHS NYSE DC 9/98 $ 32.62 $ 5.87 $ 9.81 30.1%
Humana, Inc. HUM NYSE DC 9/98 32.12 12.25 19.13 59.5%
Maxicare Health Plans, Inc. MAXI OTC DC 9/98 13.12 2.62 5.88 44.8%
Mid Atlantic Medical Services, Inc. MME NYSE DC 9/98 14.00 4.43 12.63 90.2%
Oxford Health Plans, Inc. OXHP OTC DC 9/98 21.75 5.81 18.63 85.6%
PacifiCare Health Systems, Inc. PHSYA OTC DC 9/98 88.87 47.00 68.25 76.8%
United HealthCare Corp. UNH NYSE DC 9/98 73.93 29.56 42.94 58.1%
-------------------------------------------------------------------------------------
AVERAGE 63.6%
MEDIAN 59.5%
-------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners [2] ADPI OTC DC 9/98 $ 19.37 $ 7.12 $ 11.00 56.8%
Birner Dental Management Services [3] BDMS OTC DC 9/98 8.37 2.81 3.63 43.3%
Castle Dental Centers, Inc. CASL OTC DC 9/98 13.43 4.00 6.38 47.5%
Coast Dental CDEN OTC DC 9/98 30.87 7.68 9.00 29.2%
Dental Care Alliance, Inc. DENT OTC DC 9/98 15.75 7.87 11.13 70.6%
Gentle Dental Service Corp. GNTL OTC DC 9/98 12.50 5.12 7.00 56.0%
Monarch Dental Corporation MDDS OTC DC 9/98 19.75 3.53 3.63 18.4%
Pentegra Dental Group, Inc. [4] PEN AMEX MR 9/98 9.00 1.75 2.06 22.9%
-------------------------------------------------------------------------------------
AVERAGE 43.1%
MEDIAN 45.4%
-------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontix, Inc. AOI AMEX DC 9/98 $16.50 2.25 $ 4.38 26.5%
Orthalliance ORAL OTC DC 9/98 17.25 7.00 10.69 62.0%
Orthodontic Centers of America OCA NYSE DC 9/98 24.06 11.75 18.44 76.6%
-------------------------------------------------------------------------------------
AVERAGE 55.5%
MEDIAN 62.0%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
OVERALL AVERAGE 53.4%
OVERALL MEDIAN 56.4%
-------------------------------------------------------------------------------------
GOLDCAP OTC DC 9/98 $17.87 $ 9.00 $ 10.63 59.5%
- ---------------------------
<CAPTION>
EARNINGS PER SHARE [1] PRICE/EARNINGS RATIO
------------------------ 5-YEAR ---------------------- 1999 P/E/
CAL. CAL. GROWTH CAL. CAL. 5-YEAR MARKET MARKET/
COMPANY LTM 1998E 1999E RATE [1] LTM 1998E 1999E GROWTH CAP'N BOOK
- ------- --- ----- ----- -------- --- ----- ----- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. $ 1.00 $ 1.05 $ 1.20 17.0% 13.4 x 12.7 x 11.1 x 0.66 x 48.8 1.9 x
Safeguard Health Enterprises, Inc. 0.04 0.66 0.83 38.0% 96.9 * 5.9 * 4.7 * 0.12 18.4 0.5 *
------------------------------------------------------------------------------------------
AVERAGE 27.5% 13.4 x 12.7 x 11.1 x 0.39 x 1.9 x
MEDIAN 27.5% 13.4 x 12.7 x 11.1 x 0.39 x 1.9 x
------------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. $ 0.93 $ 0.94 $ 1.17 15.0% 10.6 x 10.4 x 8.4 x 0.56 x $1,199.0 1.4 x
Humana, Inc. 1.22 1.27 1.47 16.0% 15.7 15.1 13.0 0.81 3,201.2 2.0
Maxicare Health Plans, Inc. (0.69) (0.59) 0.47 10.0% NM NM 12.5 1.25 105.3 1.8
Mid Atlantic Medical Services, Inc. 0.44 0.42 0.66 15.0% 28.7 * 30.1 * 19.1 * 1.28 626.6 3.4
Oxford Health Plans, Inc. (3.54) (4.58) (1.11) 25.0% NM NM NM NM 1,497.3 NM *
PacifiCare Health Systems, Inc. 3.48 4.18 5.03 20.0% 19.6 16.3 13.6 0.68 3,106.3 1.4
United HealthCare Corp. 2.53 2.61 2.94 19.0% 17.0 16.5 14.6 0.77 7,996.4 2.0
------------------------------------------------------------------------------------------
AVERAGE 17.1% 15.7 x 15.9 x 13.4 x 0.89 x 2.0 x
MEDIAN 16.0% 17.0 x 16.4 x 13.6 x 0.79 x 1.9 x
------------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners [2] $ 0.51 $ 0.54 $ 0.82 35.0% 21.6 x 20.4 x 13.4 x 0.38 x $ 81.8 1.7 x
Birner Dental Management Services [3] 0.13 0.25 0.39 33.0% 27.9 * 14.5 9.3 NA * 24.3 1.3
Castle Dental Centers, Inc. 0.47 0.52 0.74 35.0% 13.6 12.3 8.6 0.25 40.1 1.2
Coast Dental 0.67 0.71 0.99 35.0% 13.4 12.7 9.1 0.26 68.6 1.1
Dental Care Alliance, Inc. 0.42 0.52 0.71 40.0% 26.5 21.4 15.7 0.39 78.2 2.9
Gentle Dental Service Corp. (0.08) 0.14 0.49 27.0% NM 50.0 * 14.3 0.53 63.2 1.5
Monarch Dental Corporation 0.49 0.46 0.45 35.0% 7.4 7.9 8.1 0.23 43.3 0.7
Pentegra Dental Group, Inc. [4] NA 0.30 0.56 35.0% NA * 6.9 * 3.7 * 0.11 15.6 1.0
------------------------------------------------------------------------------------------
AVERAGE 34.4% 16.5 x 14.8 x 11.2 x 0.31 x 1.4 x
MEDIAN 35.0% 13.6 x 13.6 x 9.3 x 0.26 x 1.2 x
------------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontix, Inc. $ 0.32 $ 0.32 $ 0.38 17.0% 13.7 x 13.7 x 11.5 x 0.68 x $ 61.0 1.5 x
Orthalliance 0.56 0.58 0.71 26.0% 19.1 18.4 15.1 NA 142.2 2.5
Orthodontic Centers of America 0.65 0.70 0.94 35.0% 28.4 26.3 19.6 0.56 881.2 4.0
------------------------------------------------------------------------------------------
AVERAGE 26.0% 20.4 x 19.5 x 15.4 x 0.62 x 2.7 x
MEDIAN 26.0% 19.1 x 18.4 x 15.1 x 0.62 x 2.5 x
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
OVERALL AVERAGE 26.4% 16.9 x 15.6 x 12.4 x 0.56 x 1.8 x
OVERALL MEDIAN 26.5% 15.7 x 14.8 x 12.8 x 0.56 x 1.6 x
------------------------------------------------------------------------------------------
GOLDCAP $1.00 $1.01 $1.12 17.0% 10.6 x 10.5 x 9.5 x 0.56 x $ 107.4 1.6 x
</TABLE>
- ------------------------------------------------------
* Excluded from average.
NA - Not Available NM - Not Meaningful F - Fiscal Year Estimate
[1] Earnings Estimates are consensus estimates from the First Call Research
Network as of January 13, 1999 except for Orthodontic Centers of America
and Goldcap which are from Robinson-Humphrey Research. Excludes all
nonrecurring charges and gains.
[2] Initial public offering priced on April 15, 1998 at $15.00 per share.
[3] Initial public offering priced on February 11, 1998 at $7.00 per share.
[4] Initial public offering priced on March 24, 1998 at $8.50 per share.
<PAGE> 54
The Robinson-Humphrey Company
PROJECT GOLDCAP
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
<TABLE>
<CAPTION>
DEBT/ LTM
SHARES TOTAL TOTAL TOTAL FIRM -----------------------------
COMPANY OUTSTANDING DEBT CAP. CASH VALUE [1] REVENUES EBIT EBITDA
- ------- ----------- ----- ------ ----- --------- -------- ----- -------
(MM) ($MM) ($MM) ($MM) ($MM) ($MM) ($MM) ($MM)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. 3.646 $ 0.0 0.0% $ 13.4 $ 35.3 $ 62.5 $5.6 $ 6.6
Safeguard Health Enterprises, Inc. 4.747 42.7 55.0% 5.9 55.2 97.4 2.3 4.7
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. 122.191 $1,433.4 62.8% $ 913.7 $1,718.7 $ 8,429.5 $84.3 $204.1
Humana, Inc. 167.381 907.0 35.8% 2,347.0 1,761.2 9,507.0 67.0 197.0
Maxicare Health Plans, Inc. 17.925 0.0 0.0% 60.1 45.2 728.0 (26.2) (25.4)
Mid Atlantic Medical Services, Inc. 49.634 2.5 1.4% 157.9 471.3 1,141.3 17.3 28.6
Oxford Health Plans, Inc. 80.392 656.2 83.4% 1,121.4 1,032.1 4,635.4 744.6) (676.0)
PacifiCare Health Systems, Inc. 45.514 751.3 25.6% 1,175.9 2,681.7 9,441.7 196.3 [2] 315.7 [2]
United HealthCare Corp. 186.233 522.0 11.3% 1,189.0 7,329.4 15,519.0 417.0 590.0
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners 7.436 $ 12.1 20.5% $ 3.1 $ 90.7 $ 77.4 $5.7 $ 9.5
Birner Dental Management Services 6.696 1.3 6.5% 1.7 23.9 20.3 1.9 3.0
Castle Dental Centers, Inc. 6.292 27.7 44.7% 1.3 66.5 52.8 5.7 9.0
Coast Dental 7.622 6.2 8.7% 33.3 41.5 31.0 5.8 7.5
Dental Care Alliance, Inc. 7.031 3.1 10.2% 7.7 73.7 23.1 3.8 4.6
Gentle Dental Service Corp. 9.028 47.3 52.3% 1.8 108.6 82.4 2.1 5.5
Monarch Dental Corporation 11.932 72.1 53.8% 5.9 109.5 71.1 9.5 14.5
Pentegra Dental Group, Inc. 7.582 0.5 3.0% 0.7 15.4 16.2 (1.1) 0.4
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontics, Inc. 13.945 $ 20.3 33.2% $ 3.6 $ 77.7 $ 46.2 $ 6.8 [3] $ 9.5 [3]
Orthalliance 13.305 8.5 12.8% 4.0 146.7 67.4 12.1 14.0
Orthodontic Centers of America 47.792 23.9 9.8% 0.5 904.6 157.4 49.7 58.0
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
AVERAGE
MEDIAN
-----------------------------------------------------------------------------------------------------------------
GOLDCAP 10.113 $56.5 45.4% $ 10.0 $ 153.9 $ 171.1 $21.2 $ 26.9
<CAPTION>
3 YEAR CAGR
FIRM VALUE TO: ----------------
EBIT EBITDA ---------------------------- NET
COMPANY MARGIN MARGIN REVENUES EBIT EBITDA REVENUES INCOME
- ------- ------- ------- -------- ---- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
- -----------------------------
First Commonwealth, Inc. 9.0% 10.6% 0.57 x 6.3 x 5.4 x 30.3% 28.8%
Safeguard Health Enterprises, Inc. 2.3% 4.9% 0.57 24.4 * 11.6 * 25.3% (5.7)%
--------------------------------------------------------------------------------------------------
AVERAGE 5.7% 7.7% 0.57 x 6.3 x 5.4 x 27.8% 11.6%
MEDIAN 5.7% 7.7% 0.57 x 6.3 x 5.4 x 27.8% 11.6%
--------------------------------------------------------------------------------------------------
Multi-Market HMOs
- -----------------
Foundation Health Systems, Inc. 1.0% 2.4% 0.20 x 20.4 x 8.4 x 18.8% 15.1%
Humana, Inc. 0.7% 2.1% 0.19 26.3 * 8.9 30.8% (22.4)%
Maxicare Health Plans, Inc. (3.6)% (3.5)% 0.06 * NM NM 17.9% NM
Mid Atlantic Medical Services, Inc. 1.5% 2.5% 0.41 27.2 * 16.4 * 7.8% (68.2)%
Oxford Health Plans, Inc. (16.1)% (14.6)% 0.22 NM NM 54.7% NM
PacifiCare Health Systems, Inc. 2.1% 3.3% 0.28 13.7 8.5 55.8% 10.8%
United HealthCare Corp. 2.7% 3.8% 0.47 17.6 12.4 44.9% 30.1%
--------------------------------------------------------------------------------------------------
AVERAGE (1.7)% -0.6% 0.30 x 17.2 x 9.6 x 33.0% (6.9)%
MEDIAN 1.0% 2.4% 0.28 x 20.4 x 8.9 x 30.8% 10.8%
--------------------------------------------------------------------------------------------------
Dental Practice Management Companies
- ------------------------------------
American Dental Partners 7.4% 12.2% 1.17 x 15.9 x 9.6 x NA NA
Birner Dental Management Services 9.2% 14.6% 1.18 12.8 8.1 NA NA
Castle Dental Centers, Inc. 10.8% 17.0% 1.26 11.7 7.4 31.2% NM
Coast Dental 18.7% 24.3% 1.34 7.1 5.5 145.5% 392.7%
Dental Care Alliance, Inc. 16.4% 19.8% 3.19 * 19.4 16.1 * 218.5% NM
Gentle Dental Service Corp. 2.5% 6.7% 1.32 52.4 * 19.7 * NA NA
Monarch Dental Corporation 13.4% 20.4% 1.54 11.5 7.5 126.8% 16.2%
Pentegra Dental Group, Inc. (7.0)% 2.4% 0.95 NM 39.0 * NA NA
--------------------------------------------------------------------------------------------------
AVERAGE 8.9% 14.7% 1.25 x 13.1 x 7.6 x 130.5% 204.4%
MEDIAN 10.0% 15.8% 1.26 x 11.7 x 7.8 x 136.1% 204.4%
--------------------------------------------------------------------------------------------------
Orthodontic Practice Management Companies
- -----------------------------------------
Apple Orthodontics, Inc. 14.8% 20.5% 1.68 x 11.4 x 8.2 x NA NA
Orthalliance 17.9% 20.7% 2.17 12.1 10.5 NA NA
Orthodontic Centers of America 31.6% 36.8% 5.75 * 18.2 15.6 68.0% 58.3%
--------------------------------------------------------------------------------------------------
AVERAGE 21.4% 26.0% 1.93 x 13.9 x 11.4 x 68.0% 58.3%
MEDIAN 17.9% 20.7% 1.93 x 12.1 x 10.5 x 68.0% 58.3%
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
AVERAGE 6.8% 10.4% 0.91 x 13.7 x 8.9 x 62.6% 45.6%
MEDIAN 5.0% 8.6% 0.95 x 12.8 x 8.5 x 38.0% 15.6%
--------------------------------------------------------------------------------------------------
GOLDCAP 12.4% 15.7% 0.90 x 7.3 x 5.7 x 22.0% 46.1%
</TABLE>
- ------------------------------------
* Excluded from average.
NA - Not Available NM - Not Meaningful
[1] Firm value equals market capitalization plus total debt and preferred stock
minus cash and short term investments.
[2] Excludes approximately $173 million in one-time charges.
[3] Excludes approximately $3.7 million in special charges.
<PAGE> 55
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
REVENUES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997 3 YEAR FIRST THREE QUARTERS 1998
---- ---------------- ---------------- ------ -------------------------
$ AMT $ AMT GROWTH $ AMT GROWTH CAGR $ AMT GROWTH
----- ----- ------ ----- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. $ 33.3 $ 44.1 32.4% $ 56.6 28.3% 30.3% $ 47.7 14.1%
Safeguard Health Enterprises, Inc. 60.7 72.7 19.7% 95.4 31.1% 25.3% 72.9 2.8%
United Dental Care, Inc. 78.6 112.7 43.4% 174.0 54.3% 48.8% 86.4 [1] (2.8)%
Multi-Market HMOs
Foundation Health Systems, Inc. $5,047.1 $6,620.8 31.2% $7,120.7 7.5% 18.8% $ 6,556.3 24.9%
Humana, Inc. 4,605.0 6,677.0 45.0% 7,880.0 18.0% 30.8% 7,170.0 29.4%
Maxicare Health Plans, Inc. 477.3 562.8 17.9% 663.8 18.0% 17.9% 553.5 13.1%
Mid Atlantic Medical Services, Inc. 942.9 1,119.4 18.7% 1,096.6 (2.0)% 7.8% 869.9 5.4%
Oxford Health Plans, Inc. 1,746.0 3,032.6 73.7% 4,179.8 37.8% 54.7% 3,525.5 14.8%
PacifiCare Health Systems, Inc. 3,683.0 4,587.5 24.6% 8,935.2 94.8% 55.8% 7,097.2 7.7%
United HealthCare Corp. 5,511.0 9,889.0 79.4% 1,563.0 16.9% 44.9% 12,525.0 46.2%
GOLDCAP $ 106.7 $ 141.1 32.3% $ 158.7 12.5% 22.0% $ 129.5 10.5%
</TABLE>
- ----------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 56
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL MEMBERSHIP ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
MEMBERSHIP INFORMATION
(Members in Thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---- ------------------- ------------------- 3 YEAR
MEMBERS MEMBERS GROWTH MEMBERS GROWTH CAGR
------- ------- ------ ------- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. 364 458 25.8% 592 29.4% 27.6%
Safeguard Health Enterprises, Inc. 761 983 29.2% 1,165 18.5% 23.7%
United Dental Care, Inc. 937 1,729 84.5% 1,965 13.6% 44.8%
Multi-Market HMOs
Foundation Health Systems, Inc. 1,900 3,326 75.1% 4,272 28.4% 49.9%
Humana, Inc. 3,800 4,900 28.9% 6,200 26.5% 27.7%
Maxicare Health Plans, Inc. 345 422 22.3% 517 22.5% 22.4%
Mid Atlantic Medical Services, Inc. 1,483 1,679 13.2% 1,687 0.5% 6.7%
Oxford Health Plans, Inc. 1,007 1,535 52.4% 2,008 30.8% 41.2%
PacifiCare Health Systems, Inc. 1,816 2,045 12.6% 3,791 85.4% 44.5%
United HealthCare Corp. 13,610 13,778 1.2% 13,064 (5.2)% (2.0)%
GOLDCAP 1,400 2,400 71.4% 2,185 (9.0)% 24.9%
<CAPTION>
FIRST QUARTER 1998 SECOND QUARTER 1998 THIRD QUARTER 1998
------------------ ------------------- ------------------
MEMBERS GROWTH [1] MEMBERS GROWTH [1] MEMBERS GROWTH [1]
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. 693 16.9% 643 (7.1)% 644 0.1%
Safeguard Health Enterprises, Inc. NA NA NA NA NA NA
United Dental Care, Inc. 1,845 (6.1)% 1,822 (1.2)% NA NA
Multi-Market HMOs
Foundation Health Systems, Inc. 4,295 0.5% 4,351 1.3% 4,239 (2.6)%
Humana, Inc. 6,200 0.0% 6,200 0.0% 6,200 0.0%
Maxicare Health Plans, Inc. 531 2.6% 530 (0.1)% 492 (7.2)%
Mid Atlantic Medical Services, Inc. 1,741 3.2% 1,775 2.0% 1,789 0.8%
Oxford Health Plans, Inc. 2,096 4.4% 2,005 (4.3)% 1,925 (4.0)%
PacifiCare Health Systems, Inc. 3,688 (2.7)% 3,659 (0.8)% 3,600 (1.6)%
United HealthCare Corp. 13,055 (0.1)% 13,202 1.1% 13,367 1.2%
GOLDCAP 2,152 (1.5)% 2,141 (0.5)% 2,143 0.1%
</TABLE>
- ------------------------------
[1] Represents growth over prior quarter.
<PAGE> 57
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
EBITDA
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ------------------------------ -------------------------------
$ AMT MARGIN $ AMT MARGIN GROWTH $ AMT MARGIN GROWTH
----- ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. $ 3.6 10.7% $ 4.6 10.4% 29.3% $ 6.0 10.6% 29.8%
Safeguard Health Enterprises, Inc. 3.6 5.9% 4.2 5.8% 17.5% 6.8 7.2% 61.3%
United Dental Care, Inc. 7.5 9.5% 13.9 12.3% 86.5% 11.2 6.4% (19.5)%
Multi-Market HMOs
Foundation Health Systems, Inc. $390.0 7.7% $167.0 2.5% (57.2)% $ 354.3 5.0% 112.2%
Humana, Inc. 272.0 5.9% 112.0 1.7% (58.8)% 242.0 3.1% 116.1%
Maxicare Health Plans, Inc. 19.1 4.0% 11.0 2.0% (42.2)% (22.7) (3.4)% NM
Mid Atlantic Medical Services, Inc. 91.4 9.7% (10.8) (1.0) NM 17.1 1.6% NM
Oxford Health Plans, Inc. 98.7 5.7% 176.9 5.8% 79.3% (413.3) (9.9)% NM
PacifiCare Health Systems, Inc. 128.8 3.5% 161.8 3.5% 25.6% 267.9 3.0% 65.5%
United HealthCare Corp. 549.0 10.0% 544.0 5.5% (0.9)% 657.0 5.7% 20.8%
GOLDCAP $ 12.9 12.1% $ 24.0 17.0% 87.1% 27.8 17.5% 15.6%
<CAPTION>
FIRST THREE QUARTERS 1998
3 YEAR --------------------------------
CAGR $ AMT MARGIN GROWTH
---- ----- ------ ------
<S> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. 29.6% $ 5.1 10.6% 14.0%
Safeguard Health Enterprises, Inc. 37.7% 4.6 6.3% (31.2)%
United Dental Care, Inc. 22.5% 8.8 [1] 10.2% 6.5%
Multi-Market HMOs
Foundation Health Systems, Inc. (4.7)% $ 147.8 2.3% (50.4)%
Humana, Inc. (5.7)% 138.0 1.9% (24.6)%
Maxicare Health Plans, Inc. NM (15.5) (2.8)% NM
Mid Atlantic Medical Services, Inc. (56.7)% 22.0 2.5% 110.3%
Oxford Health Plans, Inc. NM (272.2) (7.7)% NM
PacifiCare Health Systems, Inc. 44.2% 273.3 3.9% 21.2%
United HealthCare Corp. 9.4% 417.0 3.3% (13.8)%
GOLDCAP 47.1% $ 20.2 15.6% (4.4)%
</TABLE>
- -------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 58
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
EBIT
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997
----------------- ------------------------------ -------------------------------
$ AMT MARGIN $ AMT MARGIN GROWTH $ AMT MARGIN GROWTH
----- ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. $ 3.1 9.4% $ 4.0 9.0% 25.6% $ 5.1 9.0% 29.3%
Safeguard Health Enterprises, Inc. 2.0 3.3% 1.9 2.6% (5.9)% 4.5 4.8% 141.4%
United Dental Care, Inc. 6.3 8.0% 11.6 10.3% 85.7% 6.1 3.5% (47.3)%
Multi-Market HMOs
Foundation Health Systems, Inc. $300.6 6.0% $ 54.0 0.8% (82.0)% $255.9 3.6% 373.6%
Humana, Inc. 202.0 4.4% 14.0 0.2% (93.1)% 134.0 1.7% 857.1%
Maxicare Health Plans, Inc. 17.8 3.7% 9.7 1.7% (45.4)% (23.5) (3.5)% NM
Mid Atlantic Medical Services, Inc. 85.3 9.1% (18.6) (1.7)% NM 6.9 0.6% NM
Oxford Health Plans, Inc. 75.7 4.3% 134.0 4.4% 77.1% (474.4) (11.3)% NM
PacifiCare Health Systems, Inc. 100.2 2.7% 129.7 2.8% 29.5% 151.0 1.7% 16.4%
United HealthCare Corp. 455.0 8.3% 411.0 4.2% (9.7)% 511.0 4.4% 24.3%
GOLDCAP $ 10.1 9.5% $ 18.9 13.4% 86.4% $ 22.1 13.9% 16.8%
<CAPTION>
FIRST THREE QUARTERS 1998
3 YEAR ---------------------------------
CAGR $ AMT MARGIN GROWTH
---- ----- ------ ------
<S> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. 27.5% $ 4.3 9.1% 14.1%
Safeguard Health Enterprises, Inc. 50.7% 2.7 3.7% (45.6)%
United Dental Care, Inc. (1.1)% 6.0 [1] 7.0% 3.3%
Multi-Market HMOs
Foundation Health Systems, Inc. (7.7)% $ 52.8 0.8% (76.5)%
Humana, Inc. (18.6)% 41.0 0.6% (62.0)%
Maxicare Health Plans, Inc. NM (16.0) (2.9)% NM
Mid Atlantic Medical Services, Inc. (71.5)% 13.4 1.5% 343.0%
Oxford Health Plans, Inc. NM (322.8) (9.2)% NM
PacifiCare Health Systems, Inc. 22.8% 180.7 2.5% 33.4%
United HealthCare Corp. 6.0% 284.0 2.3% (24.9)%
GOLDCAP 47.5% $ 16.0 12.3% (5.4)%
</TABLE>
- --------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 59
The Robinson-Humphrey Company
PROJECT GOLDCAP
HISTORICAL GROWTH ANALYSIS OF SELECTED COMPARABLE PUBLIC COMPANIES
DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
1995 1996 1997 FIRST THREE QUARTERS 1998
---- ---------------- ------------------ 3 YEAR -------------------------
$ AMT $ AMT GROWTH $ AMT GROWTH CAGR $ AMT GROWTH
----- ----- ------ ----- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dental Managed Care Companies
First Commonwealth, Inc. $0.67 $ 0.76 13.4% $ 0.89 17.1% 15.3% $ 0.77 18.5%
Safeguard Health Enterprises, Inc. 0.45 0.30 (33.3)% 0.38 26.7% (8.1)% 0.16 (66.7)%
United Dental Care, Inc. 0.68 1.00 47.1% 0.64 (36.0)% (3.0)% 0.35 [1] 2.9%
Multi-Market HMOs
Foundation Health Systems, Inc. $1.54 $ 0.52 (66.2)% $ 1.37 163.5% (5.7)% $ 0.72 (44.6)%
Humana, Inc. 1.16 0.95 (18.1)% 1.05 10.5% (4.9)% 0.93 22.4%
Maxicare Health Plans, Inc. 1.53 1.05 (31.4)% 0.63 (40.0)% (35.8)% (0.65) NM
Mid Atlantic Medical Services, Inc. 1.28 (0.06) NM 0.31 NM (50.8)% 0.31 72.2%
Oxford Health Plans, Inc. 0.71 1.25 76.1% (3.70) NM NM (3.79) NM
PacifiCare Health Systems, Inc. 3.62 4.18 15.5% 2.43 (41.9)% (18.1)% 3.34 53.2%
United HealthCare Corp. 1.57 1.76 12.1% 2.26 28.4% 20.0% 1.95 16.1%
GOLDCAP $0.68 $ 0.97 42.6% $ 1.10 13.4% 27.2% $ 0.75 (11.8)%
</TABLE>
- --------------------------------
[1] Represents first two quarters of 1998.
<PAGE> 60
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC DENTAL MANAGED CARE COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE DENTAL MANAGED CARE MULTIPLES
-------------------------------------------------------------------------------
Goldcap PRICE / PRICE / PRICE / PRICE /
Valuation Parameter Value LTM EPS CAL. 1998 EPS CAL. 1999 EPS BOOK
- ------------------- ------- ------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
LTM EPS [2] $1.00 [3] 13.4 x
Est. 1998 EPS $1.01 [4] 12.7 x
Est. 1999 EPS $1.12 [4] 11.1 x
Book Value (as of 9/30/98) $67,869 1.9 x
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [1]
----- -------------
<S> <S> <C>
LTM EPS [2] $135,256 $13.38
Est. 1998 EPS $130,104 $12.87
Est. 1999 EPS $126,239 $12.48
Book Value (as of 9/30/98) $126,106 $12.47
LTM Revenue [2] $ 27,956* $ 2.76*
LTM Operating Income [2] $ 63,437 $ 6.27
LTM EBITDA [2] $ 75,077 $ 7.42
-----------------------
- ---------------------------------------------------
MEAN EQUITY VALUE $109,370 $10.82
MEDIAN EQUITY VALUE $126,106 $12.47
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES LESS
---------------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE / FIRM VALUE / FIRM VALUE / FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT [2] LIABILITIES
- ------------------- ------- ------------- ----------- ------------ -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenue [2] $171,068 0.57 x $ 96,833 $ 46,501 $22,376
LTM Operating Income [2] $ 21,150 [3] 6.3 x $132,314 $46,501 $22,376
LTM EBITDA [2] $ 26,870 [3] 5.4 x $143,954 $ 46,501 $22,376
</TABLE>
- ----------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Robinson-Humphrey research.
<PAGE> 61
The Robinson-Humphrey Company
Project Goldcap
Implied Valuation Utilizing Public Dental Managed Care Companies Multiples
(Dollars in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Dental Managed Care Companies Multiples
-----------------------------------------------------------
Goldcap Price / Price / Price / Price/
Valuation Parameter Value LTM EPS Cal. 1998 EPS Cal. 1999 EPS Book
- ------------------- --------- -------- ------------- ------------- -----
<S> <C> <C> <C> <C> <C>
LTM EPS [2] $1.00 [3] 13.4 x
Est. 1998 EPS $1.02 [4] 12.7 x
Est. 1999 EPS $1.17 [4] 11.1 x
Book Value (as of 9/30/98) $67,869 1.9 x
</TABLE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Dental Managed Care Companies Multiples Less
----------------------------------------------- Implied PV od DHDC
Goldcap Firm Value/ Firm Value / Firm Value/ Firm Less Deferred
Valuation Parameter Value LTM Revenues LTM EBIT LTM EBITDA Value Net Debt [2] Liabilities
- ------------------- --------- ------------ ------------- ----------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues [2] $171,068 0.57 x $ 96,833 $46,501 $22,376
LTM Operating Income [2] $ 21,150 [3] 6.3 x $132,314 $46,501 $22,376
LTM EBITDA [2] $ 26,870 [3] 5.4 x $143,954 $46,501 $22,376
<CAPTION>
Implied Implied
Equity Equity Value
Valuation Parameter Value Per Share [1]
- ------------------- ------- -------------
<S> <C> <C>
LTM EPS [2] $135,256 $ 13.38
Est. 1998 EPS $131,392 $ 12.99
Est. 1999 EPS $131,875 $ 13.04
Book Value (as of 9/30/98) $126,106 $ 12.47
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameter
- -------------------
<S> <C> <C> <C>
$ 27,956 * $ $2.76 *
LTM Revenues [2]
$ 63,437 $ $6.27
LTM Operating Income [2]
$ 75,077 $ $7.42
LTM EBITDA [2]
---------------------------------------------
Mean Equity Value $110,524 $ 10.93
Median Equity Value $126,106 $ 12.47
--------------------------------------------
</TABLE>
- ----------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Goldcap management.
<PAGE> 62
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT
COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BENEFITS COMPANY
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES IMPLIED IMPLIED
---------------------------------------------- EQUITY EQUITY VALUE
Benefits PRICE / PRICE / VALUE PER SHARE [1]
Valuation Parameter Value CAL. 1998 EPS CAL. 1999 EPS -------- ------------
- ------------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Est. 1998 Net Income $ 9,605 [2] 12.7 x $122,349 $12.10
Est. 1999 Net Income $10,344 [2] 11.1 x $115,293 $11.40
AVERAGE DENTAL MANAGED CARE COMPANIES MULTIPLES LESS
-----------------------------------------------IMPLIED PV OF DHDC
Benefits FIRM VALUE/ FIRM LESS DEFERRED
Valuation Parameter Value LTM EBITDA VALUE NET DEBT[2] LIABILITIES
- ------------------- --------- ----------- ----- ----------- -----------
LTM EBITDA [3] $25,041 [4] 5.4 x $134,155 $ 46,501 $ 22,376 $ 65,278 $ 6.46
-----------------------------------------------------
MEAN EQUITY VALUE $100,973 $ 9.78
MEDIAN EQUITY VALUE $115,293 $ 11.40
-----------------------------------------------------
DHMI
AVERAGE DENTAL PRACTICE MANAGEMENT COMPANIES MULTIPLES IMPLIED IMPLIED
------------------------------------------------------ EQUITY EQUITY VALUE
DHMI PRICE / PRICE / VALUE PER SHARE [2]
Valuation Parameter Value CAL. 1998 EPS CAL. 1999 EPS ------- -------------
- ------------------- ------- ------------- -------------
Est. 1998 Net Income $ 760[2] 14.8x $ 11,284 $ 1.12
Est. 1999 Net Income $1,783[2] 11.2x $ 19,976 $ 1.98
AVERAGE DENTAL PRACTICE MANAGEMENT COMPANIES Less
MULTIPLES IMPLIED PV OF DHDC
--------------------------------------------- FIRM LESS DEFERRED
DHMI Firm Value / VALUE NET DEBT[2] LIABILITIES
Valuation Parameter Value LTM EBITDA ------- ----------- -----------
- ------------------- ----- ----------
LTM EBITDA [3] $1,829 [4] 7.6 x $ 13,952 $ 0 $ 0 $ 13,952 $ 1.38
-----------------------------------------------------
MEAN EQUITY VALUE $ 15,071 $ 1.49
MEDIAN EQUITY VALUE $ 13,952 $ 1.38
-----------------------------------------------------
-----------------------------------------------------
SUM OF MEANS $116,044 $11.48
SUM OF MEDIANS $129,254 $12.78
-----------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
<PAGE> 63
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC MULTI-MARKET HMO COMPANY MULTIPLES
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES IMPLIED
----------------------------------------------- IMPLIED EQUITY VALUE
Goldcap PRICE/ PRICE / PRICE / PRICE/ EQUITY PER
Valuation Parameter Value [1] LRM CAL. 1999 EPS CAL. 1999 EPS BOOK VALLUE SHARE [1]
- ------------------- ----------- ------- ------------- ------------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM EPS [2] $ 1.00 [3] 15.7 x $158,795 $15.70
Est. 1998 EPS $ 1.01 [4] 15.9 x $162,868 $16.11
Est. 1999 EPS $ 1.12 [4] 13.4 x $152,006 $15.03
Book Value (as of 9/30/98) $67,869 2.0 x $135,376 $13.39
- ----------------------------------------------------------------------------------------------------------------
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES LESS
-------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE/ FIRM VALUE FIRM VALUE FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT[2] LIABILITIES
- ------------------- --------- ----------- ---------- ----------- ------- ----------- -----------
LTM Revenues [2] $171,068 0.30 x $ 50,780 $ 46,501 $ 22,376 $ NM $ NM
LTM Operating Income [2] $ 21,150 [3] 17.2 X $364,023 $ 46,501 $ 22,376 $295,146* $29.19*
LTM EBITDA [2] $ 26,870 [3] 9.6 X $257,129 $ 46.501 $ 22.376 $188,252 $18.62
---------------------------------------------------
MEAN EQUITY VALUE $159,460 $15.77
MEDIAN EQUITY VALUE $158,795 $15.70
---------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges $6.42 per share.
<PAGE> 64
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PUBLIC MULTI-MARKET HMO COMPANIES MULTIPLES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES
------------------------------------------------------
Goldcap PRICE / PRICE / PRICE / PRICE /
Valuation Parameter Value LTM EPS CAL. 1998 EPS CAL. 1999 EPS BOOK
- ------------------- ------- ------- ------------- ------------- ----
<S> <C> <C> <C> <C> <C>
LTM EPS [2] $ 1.00 [3] 15.7 x
Est. 1998 EPS $ 1.02 [4] 15.9 x
Est. 1999 EPS $ 1.17 [4] 13.4 x
Book Value (as of 9/30/98) $ 67,869 2.0 x
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE MULTI-MARKET HMO COMPANIES MULTIPLES LESS
-------------------------------------------- IMPLIED PV OF DHDC
Goldcap FIRM VALUE/ FIRM VALUE/ FIRM VALUE/ FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBIT LTM EBITDA VALUE NET DEBT [2] LIABILITIES
- ------------------- -------- ------------ -------- ---------- ----- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues [2] $171,068 0.30 x $ 50,780 $46,501 $22,376
LTM Operating Income [2] $ 21,150 [4] 17.2 x $364,023 $46,501 $22,376
LTM EBITDA [2] $ 26,870 [4] 9.6 x $257,129 $46,501 $22,376
<CAPTION>
- -------------------------------------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
Valuation Parameter VALUE PER SHARE [1]
- ------------------- ----- -------------
<S> <C> <C>
LTM EPS [2] $158,795 $15.70
Est. 1998 EPS $164,481 $16.26
Est. 1999 EPS $158,792 $15.70
Book Value (as of 9/30/98) $135,376 $13.39
LTM Revenues [2] NM NM
LTM Operating Income [2] $295,146 * $29.19 *
LTM EBITDA [2] $188,252 $18.62
- -------------------------------------------------------
MEAN EQUITY VALUE $161,139 $15.93
MEDIAN EQUITY VALUE $158,795 $15.70
- -------------------------------------------------------
</TABLE>
- ----------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($6.42 per share).
[4] Projections provided by Goldcap management.
<PAGE> 65
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL MANAGED CARE HISTORICAL ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of
Equity -------------------------------
Date Purchase LTM Latest Date
Acquiror Target Completed Price Net Income Book Value
- -------- ------ --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
CompDent Corporation DentiCare/UniLife 12/94 $17.6 NM x 5.9 x
CompDent Corporation CompDent 7/5/95 33.0 20.8 7.4
Protective Life Corp. National Health Care 3/21/95 38.3 19.2 NA
United Dental Care Int'l. Dental Health Inc. 9/1/94 14.3 23.0 3.8
United Dental Care U.S. Dental 11/27/95 12.2 19.2 7.5
CompDent Corporation Texas Dental Plans 1/8/96 23.0 15.1 87.5 *
United Dental Care Associated Health Plans 2/1/96 15.0 228.2 * 19.6 *
Protective Life Dental Care of Oklahoma 3/19/96 4.5 17.0 6.9
CompDent Corporation Dental Care Plus 5/9/96 38.0 17.2 71.0 *
United Dental Care OraCare DPO 11/21/96 30.5 26.0 NM
United Dental Care Kansas City Dental Care 11/21/96 12.5 60.0 * 25.9 *
United Dental Care UICI Dental Companies 11/21/96 14.4 29.5 6.1
Safeguard Health Enterprises, Inc. Advantage Dental HealthPlans, Inc. 5/13/97 9.0 NM 7.2
Protective Life Corp. United Dental Care 9/11/98 166.8 28.6 1.3
<CAPTION>
-------------------------------------------------
<S> <C> <C>
AVERAGE 21.6 x 5.8 x
MEDIAN 21.9 x 7.3 x
-------------------------------------------------
<CAPTION>
Adjusted Purchase Price as a Multiple of
---------------------------------------------
Adjusted LTM LTM
Purchase LTM Op. Cash Flow Op. Income
Acquiror Target Price [1] Revenues [2] (EBITDA) (EBIT)
- -------- ------ --------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
CompDent Corporation DentiCare/UniLife $15.8 0.57 x 7.9 x 9.6 x
CompDent Corporation CompDent 28.6 0.89 9.6 11.4
Protective Life Corp. National Health Care 32.3 1.45 9.6 10.2
United Dental Care Int'l. Dental Health Inc. 14.3 0.29 * 10.8 13.7
United Dental Care U.S. Dental 11.4 0.84 7.8 8.4
CompDent Corporation Texas Dental Plans 22.4 2.52 * 8.4 8.9
United Dental Care Associated Health Plans 14.6 1.03 27.9 * 42.1 *
Protective Life Dental Care of Oklahoma 4.2 1.30 8.4 9.8
CompDent Corporation Dental Care Plus 36.9 1.59 9.0 9.8
United Dental Care OraCare DPO 32.4 2.82 * 14.0 14.7
United Dental Care Kansas City Dental Care 11.9 1.33 30.2 * 32.3 *
United Dental Care UICI Dental Companies 11.6 0.69 15.4 17.7
Safeguard Health Enterprises, Inc. Advantage Dental HealthPlans,Inc. 9.0 1.70 NA 15.3
Protective Life Corp. United Dental Care 160.0 0.93 13.7 25.3 *
<CAPTION>
---------------------------------------------------------------------
<S> <C> <C> <C>
AVERAGE 1.12 x 10.4 x 11.8 x
MEDIAN 1.17 x 9.6 x 12.6 x
---------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------
[1] Adjusted purchase price equals equity value plus assumed debt minus acquired
cash.
[2] Excludes investment income.
<PAGE> 66
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE HISTORICAL ACQUISITION MULTIPLES
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples IMPLIED
Price/ IMPLIED EQUITY
Goldcap LTM Price/ EQUITY VALUE PER
Valuation Parameter Value EPS Book VALUE SHARE [1]
- ------------------- -------- ----- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
LTM Net Income[2] $ 10,041[3,4] 21.6 x $216,449 $21.40
9/30/98 Book Value $ 67,869 5.8 x $391,600* $38.72*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples Less
--------------------------------------- Implied PV of DHDC
Goldcap Firm Value/ Firm Value/ Firm Value/ Firm Less Deferred
Valuation Parameter Value Revenues EBIT EBITDA Value Net Debt[1] Liabilities
- ------------------- -------- ---------- ---------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues[2] $171,068 1.12 x $191,773 $46,501 $22,376 $122,896 $12.15
LTM Operating Income[2] $ 21,150[3] 11.8 x $249,030 $46,501 $22,376 $180,153 $17.81
LTM EBITDA[2] $ 26,870[3] 10.4 x $280,060 $46,501 $22,376 $211,183 $20.88
==================
----------------------------------------------------------------
Mean Equity Value $182,670 $18.06
Median Equity Value $211,183 $20.88
================================================================
</TABLE>
- -------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges ($64.8 million after-tax).
[4] Assumes 38% tax rate on excluded one-time charges.
<PAGE> 67
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL MANAGED CARE FORWARD ACQUISITION MULTIPLES
- ------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Adjusted Purchase Price as a Multiple of
----------------------------------------
Equity Adjusted Projected
Date Purchase Purchase Projected Projected Op. Income
Acquiror Target Completed Price Price [1] Revenues [2] (EBITDA) (EBIT)
- -------- ------ --------- ----- --------- ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
CompDent Corporation DentiCare/UniLife 12/94 $17.6 $15.8 0.49 x* 5.8 x 6.2 x
CompDent Corporation CompDent 7/5/95 33.0 28.6 0.76 8.1 9.7
Protective Life Corp. National Health Care 3/21/95 38.3 32.3 1.22 NA 8.3
Systems of Florida
CompDent Corporation Texas Dental Plans 1/8/96 23.0 22.4 2.01 * 7.1 7.4
United Dental Care Kansas City Dental Care 11/21/96 12.5 11.9 1.24 7.0 7.5
--------------------------------------------------------------
AVERAGE 1.07 X 7.0 X 7.8 X
MEDIAN 1.23 X 7.0 X 7.5 X
--------------------------------------------------------------
</TABLE>
- ---------------------------------------------
[1] Adjusted purchase price equals equity value plus assumed debt minus
acquired cash.
[2] Excludes investment income.
<PAGE> 68
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE FORWARD ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------
Selected Relevant Transaction Multiples Less
------------------------------------------- Implied PV of DHDC
Goldcap Firm Value / Firm Value / Firm Value / Firm Less Deferred
Valuation Parameter Value Revenues EBIT EBITDA Value Net Debt [1] Liabilities
- ------------------- -------- -------- ---- ------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proj. 1998 Revenues $173,162 [3] 1.07 x $185,365 $46,501 $22,376
Proj. 1998 Operating Income $ 21,436 [3] 7.8 x $167,576 $46,501 $22,376
Projected 1998 EBITDA $ 27,060 [3] 7.0 x $188,786 $46,501 $22,376
-------------------------------------------
<CAPTION>
-------------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUE PER SHARE [2]
-------- -------------
<S> <C> <C> <C>
Proj. 1998 Revenues $116,488 $11.52
Proj. 1998 Operating Income $ 98,699 $ 9.76
Projected 1998 EBITDA $119,909 $11.86
-------------------------------
-------------------------------------------------------------
MEAN EQUITY VALUE $111,698 $11.05
MEDIAN EQUITY VALUE $116,488 $11.52
-------------------------------------------------------------
</TABLE>
- ---------------------------------------------------
* - Excluded from mean.
[1] As of September 30, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
[3] Projections provided by Robinson-Humphrey research.
<PAGE> 69
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE FORWARD ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------
Selected Relevant Transaction Multiples Less
------------------------------------------ Implied PV of DHDC
Goldcap Firm Value / Firm Value / Firm Value / Firm Less Deferred
Valuation Parameter Value Revenues EBIT EBITDA Value Net Debt [1] Liabilities
- ------------------- ------ -------- ---- ------ --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Proj. 1998 Revenues $173,435 [3] 1.07 x $185,657 $46,501 $22,376
Proj. 1998 Operating Income $ 21,765 [3] 7.8 x $170,148 $46,501 $22,376
Projected 1998 EBITDA $ 26,246 [3] 7.0 x $183,107 $46,501 $22,376
------------------------------------------
<CAPTION>
------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
Valuation Parameter VALUE PER SHARE [2]
- ------------------- ----- -------------
<S> <C> <C> <C>
Proj. 1998 Revenues $116,780 $11.55
Proj. 1998 Operating Income $101,271 $10.01
Projected 1998 EBITDA $114,230 $11.30
------------------------
-------------------------------------------------
Mean Equity Value $110,760 $10.95
Median Equity Value $114,230 $11.30
-------------------------------------------------
</TABLE>
- ----------------------------------------------
* - Excluded from mean.
[1] As of September 30, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
[3] Projections provided by Goldcap management.
<PAGE> 70
The Robinson-Humphrey Company
PROJECT GOLDCAP
PROTECTIVE LIFE/UNITED DENTAL CARE ACQUISITION MULTIPLES [1]
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
FIRM EQUITY
VALUE (MM) VALUE (MM)
------------- -----------
$160.0 $166.8
<S> <C> <C> <C>
EQUITY VALUE/LTM NET INCOME: 28.6 x FIRM VALUE/MEMBERS:[2] $88.90
EQUITY VALUE/PROJECTED 1998 NET INCOME:[3] 22.6 x FIRM VALUE/1998 REVENUES:[4] 0.88 x
EQUITY VALUE/PROJECTED 1999 NET INCOME:[3] 18.9 x FIRM VALUE/1998 EBIT:[4] 14.4 x
EQUITY VALUE/BOOK VALUE: 1.32 x FIRM VALUE/1998 EBITDA:[4] 9.5 x
FIRM VALUE/LTM REVENUES: 0.93 x FIRM VALUE/1999 REVENUES:[4] 0.77 x
FIRM VALUE/LTM EBIT:[5] 25.3 x FIRM VALUE/1999 EBIT:[4] 11.7 x
FIRM VALUE/LTM EBITDA:[5] 13.7 x FIRM VALUE/1999 EBITDA:[4] 7.8 x
PREMIUMS: 1 DAY BEFORE ANNOUNCEMENT 20.5%
1 WEEK BEFORE ANNOUNCEMENT 49.2%
4 WEEKS BEFORE ANNOUNCEMENT 57.4%
</TABLE>
- ---------------------------------------
[1] Protective Life paid $9.31 per share in cash and to swap 0.2893 of its
shares for each United Dental share.
[2] 1,800,000 members as of June 30, 1998.
[3] 1998 and 1999 estimates from the First Call Research Network as of July 26,
1998.
[4] Estimates according to BT Alex Brown research as of February 23, 1998.
[5] Excludes $9.6 million in one time charges.
<PAGE> 71
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PROTECTIVE LIFE/
UNITED DENTAL CARE HISTORICAL ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS AND MEMBERS IN THOUSANDS)
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples
---------------------------------------
Price/ IMPLIED IMPLIED
Goldcap LTM Price/ EQUITY EQUITY VALUE
Valuation Parameter Value Net Income Book VALUE PER SHARE [1]
- ------------------- ----- ---------- ---- ----- -------------
<S> <C> <C> <C> <C> <C>
LTM Net Income [5] $10,041 [3,4] 28.6x $286,827 $28.36
9/30/98 Book Value $67,869 1.3x $ 89,404 $ 8.84
<CAPTION>
- -------------------------------------------------------------------------------------------------------
---------------------------------------
Selected Relevant Transaction Multiples Less
--------------------------------------- PV of DHDC
Firm Firm Firm Firm Implied Less Deferred
Goldcap Value/ Value/ Value/ Value/ Firm Net Liabil-
Valuation Parameter Value Revenues EBIT EBITDA Members Value Debt[5] ities
- ------------------- ------- -------- ---- ------ ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenues[2] $171,068 0.93x $159,632 $46,501 $22,376 $ 90,755 $ 8.97
LTM Operating Income[2] $21,150[3] 25.3x $534,940 $46,501 $22,376 $466,063* $46.09*
LTM EBITDA[2] $26,870[3] 13.7x $367,044 $46,501 $22,376 $298,167 $29.48
Members[5] 2,143 $88.90x $190,521 $46,501 $22,376 $121,644 $12.03
---------------------------------------
<CAPTION>
TRANSACTION PREMIUMS
----------------------------------------
1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Goldcap Stock Price 1 day prior to announcement[6,7] $10.63 20.5% $129,465 $12.80
Goldcap Stock Price 1 week prior to announcement[6] 11.00 49.2% $165,947 $16.41
Goldcap Stock Price 4 weeks prior to announcement[6] 10.31 57.4% $164,175 $16.23
---------------------------------------------------
MEAN EQUITY VALUE $168,298 $16.64
MEDIAN EQUITY VALUE $164,175 $16.23
---------------------------------------------------
- -------------------------------
</TABLE>
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
[4] Assumes 38% tax rate on excluded one-time charges.
[5] As of September 30, 1998.
[6] Assumes announcement on January 19, 1999.
[7] Stock price as of close on January 13, 1999.
<PAGE> 72
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PROTECTIVE LIFE/
UNITED DENTAL CARE FORWARD ACQUISITION MULTIPLES
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GOLDCAP CURRENT YEAR FORWARD YEAR
VALUATION PARAMETER VALUE P/E MULTIPLE P/E MULTIPLE
- ---------------------------------------- ----- ------------ ------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.01[2] 22.6x
Projected Cal. 1999 Net Income Per Share $1.12[2] 18.9x
<CAPTION>
-------------------------------------------------------
SELECTED RELEVANT TRANSACTION MULTIPLES
------------------------------------------------------- LESS PV
FIRM FIRM FIRM FIRM FIRM FIRM OF DHDC
VALUE/ VALUE/ VALUE/ VALUE/ VALUE/ VALUE/ IMPLIED LESS DEFERRED
GOLDCAP 1998 1999 1998 1999 1998 1999 FIRM NET LIABIL-
VALUATION PARAMETER VALUE REVENUES REVENUES EBIT EBIT EBITDA EBITDA VALUE DEBT[3] ITIES
- ------------------------------------ ----- -------- -------- ---- ---- ------ ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Projected Cal. 1998 Revenues $173,162[2] 0.88x $152,176 $46,501 $22,376
Projected Cal. 1999 Revenues $180,739[2] 0.77x $139,825 $46,501 $22,376
Projected Cal. 1998 Operating Income $ 21,436[2] 14.4x $308,677 $46,501 $22,376
Projected Cal. 1999 Operating Income $ 23,152[2] 11.7x $270,967 $46,501 $22,376
Projected Cal. 1998 EBITDA $ 27,060[2] 9.5x $258,234 $46,501 $22,376
Projected Cal. 1999 EBITDA $ 28,956[2] 7.8 x $226,710 $46,501 $22,376
-------------------------------------------------------
<CAPTION>
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP --------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ---------------------------- ------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Stock Price 1 Day Prior[4,5] $10.63 20.5%
Stock Price 1 Week Prior[4] 11.00 49.2%
Stock Price 4 Weeks Prior[4] 10.31 57.4%
- ----------------------------------------
<CAPTION>
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUATION PARAMETER VALUE PER SHARE [1]
- ---------------------------------------- ----- -------------
<S> <C> <C>
Projected Cal. 1998 Net Income Per Share $231,274 $22.87
Projected Cal. 1999 Net Income Per Share $214,591 $21.22
<CAPTION>
VALUATION PARAMETER
- ------------------------------------
<S> <C> <C>
Projected Cal. 1998 Revenues $ 83,299 $ 8.24
Projected Cal. 1999 Revenues $ 70,948 $ 7.02
Projected Cal. 1998 Operating Income $239,800 $23.71
Projected Cal. 1999 Operating Income $202,090 $19.98
Projected Cal. 1998 EBITDA $189,357 $18.72
Projected Cal. 1999 EBITDA $157,833 $15.61
<CAPTION>
VALUATION PARAMETER
- ----------------------------
<S> <C> <C>
Stock Price 1 Day Prior[4,5] $129,465 $12.80
Stock Price 1 Week Prior[4] $165,947 $16.41
Stock Price 4 Weeks Prior[4] $164,175 $16.23
-----------------------------------------
MEAN EQUITY VALUE $168,071 $16.62
MEDIAN EQUITY VALUE $165,947 $16.41
-----------------------------------------
</TABLE>
- ----------------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Robinson-Humphrey Research.
[3] As of September 30, 1998.
[4] Assumes announcement on January 19, 1999.
[5] Stock price as of close on January 13, 1999.
<PAGE> 73
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING PROTECTIVE LIFE/
UNITED DENTAL CARE FORWARD ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GOLDCAP CURRENT YEAR FORWARD YEAR
VALUATION PARAMETER VALUE P/E MULTIPLE P/E MULTIPLE
- ---------------------------------------- ----- ------------ ------------
<S> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.02[2] 22.6x
Projected Cal. 1999 Net Income Per Share $1.17[2] 18.9x
<CAPTION>
-------------------------------------------------------
SELECTED RELEVANT TRANSACTION MULTIPLES
------------------------------------------------------- LESS PV
FIRM FIRM FIRM FIRM FIRM FIRM OF DHDC
VALUE/ VALUE/ VALUE/ VALUE/ VALUE/ VALUE/ IMPLIED LESS DEFERRED
GOLDCAP 1998 1999 1998 1999 1998 1999 FIRM NET LIABIL-
VALUATION PARAMETER VALUE REVENUES REVENUES EBIT EBIT EBITDA EBITDA VALUE DEBT[3] ITIES
- ------------------------------------ ----- -------- -------- ---- ---- ------ ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Projected Cal. 1998 Revenues $173,435[2] 0.88x $152,416 $46,501 $22,376
Projected Cal. 1999 Revenues $181,568[2] 0.77x $140,466 $46,501 $22,376
Projected Cal. 1998 Operating Income $ 21,765[2] 14.4x $313,415 $46,501 $22,376
Projected Cal. 1999 Operating Income $ 25,123[2] 11.7x $294,039 $46,501 $22,376
Projected Cal. 1998 EBITDA $ 26,246[2] 9.5x $250,466 $46,501 $22,376
Projected Cal. 1999 EBITDA $ 29,505[2] 7.8x $231,011 $46,501 $22,376
-------------------------------------------------------
<CAPTION>
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP --------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ---------------------------- ----- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Stock Price 1 Day Prior[4,5] $10.63 20.5%
Stock Price 1 Week Prior[4] 11.00 49.2%
Stock Price 4 Weeks Prior[4] 10.31 57.4%
<CAPTION>
IMPLIED IMPLIED
EQUITY EQUITY VALUE
VALUATION PARAMETER VALUE PER SHARE [1]
- ---------------------------------------- -------- -------------
<S> <C> <C>
Projected Cal. 1998 Net Income Per Share $233,055 $23.05
Projected Cal. 1999 Net Income Per Share $223,418 $22.09
<CAPTION>
VALUATION PARAMETER
- ------------------------------------
<S> <C> <C>
Projected Cal. 1998 Revenues $ 83,539 $ 8.26
Projected Cal. 1999 Revenues $ 71,589 $ 7.08
Projected Cal. 1998 Operating Income $244,538 $24.18
Projected Cal. 1999 Operating Income $225,162 $22.27
Projected Cal. 1998 EBITDA $181,589 $17.96
Projected Cal. 1999 EBITDA $162,134 $16.03
<CAPTION>
VALUATION PARAMETER
- ----------------------------
<S> <C> <C>
Stock Price 1 Day Prior[4,5] $129,465 $12.80
Stock Price 1 Week Prior[4] $165,947 $16.41
Stock Price 4 Weeks Prior[4] $164,175 $16.23
---------------------------------------------------
MEAN EQUITY VALUE $171,328 $16.94
MEDIAN EQUITY VALUE $165,947 $16.41
---------------------------------------------------
- -------------------------------
</TABLE>
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] As of September 30, 1998.
[4] Assumes announcement on January 19, 1999.
[5] Stock price as of close on January 13, 1999.
<PAGE> 74
The Robinson-Humphrey Company
PROJECT GOLDCAP
DENTAL PRACTICE MANAGEMENT COMPANY ACQUISITION MULTIPLES
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Purchase Price as a Multiple of
Equity -------------------------------
Date Purchase LTM Latest Date
Acquiror Target Completed Price Net income Book Value
- -------- ------ --------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gentle Dental Services Corp. Pinehurst Dental Clinic 7/95 $ 0.6 NMx NMx
Gentle Dental Services Corp. Scott Campbell, DDS, PS 9/95[1] 0.6 NM 23.1
Coast Dental Volusia (Richard J. Shawn, DDS) 4/96 1.8 NM NA
Castle Dental Centers 1st Dental Care 5/96 6.0 39.5 NM
Castle Dental Centers Mid-South Dental Centers 5/96 4.8 NM 36.4*
Birner Dental Management Family Dental Group 6/96 3.3 NM NA
Castle Dental Centers Horizon Dental Centers 8/96 3.2 36.0 NM
Monarch Dental Midwest Dental 8/96 10.9 157.0* 10.7
Coast Dental Seminole 11/96 2.5 NA 8.0
Dentalco, Inc. Nanston, Inc. 1/97 20.8 NM 12.8
Dentalco, Inc. The Dental Center, Inc. 2/97 4.0 NM 132.0*
Dentalco, Inc. Modern Dental 5/97 9.6 29.3 NM
Castle Dental Centers SW Dental 8/97 6.8 18.3 44.8*
Birner Dental Management Gentle Dental & Affiliate 9/97 3.5 14.2 6.3
Gentle Dental Service Corp. Dental Care Alliance Inc. Pending 67.0 35.4 2.6
Monarch Dental Valley Forge Dental 9/98 18.5 NM 11.6*
-------------------------------------------
AVERAGE 28.8X 10.6X
MEDIAN 35.4X 12.2X
-------------------------------------------
<CAPTION>
Adjusted Purchase Price as a Multiple of
--------------------------------------------
Adjusted LTM LTM
Purchase LTM Op. Cash Flow Op. Income
Acquiror Target Price[1] Revenues[2] (EBITDA) (EBIT)
- -------- ------ -------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
Gentle Dental Services Corp. Pinehurst Dental Clinic $ 0.7 0.90x 9.0x 15.1x
Gentle Dental Services Corp. Scott Campbell, DDS, PS 0.6 0.90 NM NM
Coast Dental Volusia (Richard J. Shawn, DDS) 1.8 0.62 NM NM
Castle Dental Centers 1st Dental Care 7.1 1.10 10.5 16.1
Castle Dental Centers Mid-South Dental Centers 5.3 0.98 33.4* NM
Birner Dental Management Family Dental Group 3.3 0.69 NM NM
Castle Dental Centers Horizon Dental Centers 4.3 0.79 22.6* 22.8*
Monarch Dental Midwest Dental 12.4 0.81 19.7 74.7*
Coast Dental Seminole 2.3 0.69 5.3 5.3
Dentalco, Inc. Nanston, Inc. 23.9 1.13 28.2* 182.7*
Dentalco, Inc. The Dental Center, Inc. 4.2 0.99 83.4* NM
Dentalco, Inc. Modern Dental 13.4 0.91 12.3 19.7
Castle Dental Centers SW Dental 6.4 1.21 8.6 10.1
Birner Dental Management Gentle Dental & Affiliate 3.3 0.67 6.9 8.3
Gentle Dental Service Corp. Dental Care Alliance Inc. 60.1 3.47* 20.2* 24.4*
Monarch Dental Valley Forge Dental 60.5 1.64 22.1* 50.4*
-----------------------------------------------------------------------------------------
AVERAGE 0.94X 10.3X 12.4X
MEDIAN 0.91X 19.7X 19.7X
-----------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------
* - Excluded from average.
[1] Adjusted purchase price equals equity value plus assumed debt minus
acquired cash.
[2] Excludes investment income.
<PAGE> 75
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING DENTAL MANAGED CARE AND DENTAL PRACTICE MANAGEMENT
ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
BENEFITS COMPANY
- ----------------
<TABLE>
<CAPTION>
AVERAGE DENTAL MANAGED CARE ACQUISITION MULTIPLES
----------------------------------------------
IMPLIED PV OF DHDC
Benefits FIRM VALUE/ FIRM VALUE/ FIRM LESS NET DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBITDA VALUE DEBT [1] LIABILITIES
- ------------------- ----- ------------ ---------- ----- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
LTM Revenues [3] $150,087 1.12 x $168,252 $46,501 $22,376
LTM EBITDA [3] $25,041[4] 10.4 x $260,997 $46,501 $22,376
AVERAGE DENTAL MANAGED CARE ACQUISITION MULTIPLES
-------------------------------------------------
IMPLIED IMPLIED
EQUITY EQUITY VALUE
Valuation Parameter VALUE PER SHARE[2]
- ------------------- -------- -------------
<S> <C> <C>
LTM Revenues [3] $ 99,375 $ 9.83
LTM EBITDA [3] $192,120 $19.00
----------------------------------------------------------------------------------------
MEAN EQUITY VALUE $145,747 $14.41
MEDIAN EQUITY VALUEE $145,747 $14.41
----------------------------------------------------------------------------------------
DHMI
AVERAGE DENTAL PRACTICE MANAGEMENT ACQUISITION MULTIPLES LESS
-------------------------------------------------------- IMPLIED PV OF DHDC
DHMI FIRM VALUE / FIRM VALUE / FIRM LESS DEFERRED
Valuation Parameter Value LTM REVENUES LTM EBITDA VALUE NET DEBT [1] LIABILITIES
- ------------------- ------------ ------------ ---------- ----- ------------ -----------
LTM Revenues [3] $20,981 0.94 x $19,645 $0 $0
LTM EBITDA [3] $1,829 [4] 10.3 x $18,884 $0 $0
DHMI
LESS
IMPLIED PV OF DHDC IMPLIED IMPLIED
FIRM LESS DEFERRED EQUITY EQUITY VALUE
Valuation Parameter VALUE NET DEBT [1] LIABILITIES VALUE PER SHARE [2]
- ------------------- ----- ------------ ----------- ----- -------------
LTM Revenues [3] $19,645 $0 $0 $19,645 $1.94
LTM EBITDA [3] $18,884 $0 $0 $18,884 $1.87
----------------------------------------------------------------------------------------
MEAN EQUITY VALUE $19,265 $1.90
MEDIAN EQUITY VALUE $19,265 $1.90
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
SUM OF MEANS $165,012 $16.32
SUM OF MEDIANS $165,012 $16.32
----------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------
* - Excluded from mean.
[1] As of September 30, 1998.
[2] Assumes 10,112,629 Goldcap shares outstanding.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
<PAGE> 76
The Robinson-Humphrey Company
PROJECT GOLDCAP
SELECTED MERGER AND ACQUISITION TRANSACTIONS IN THE HMO INDUSTRY
- ------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Equity Value as Multiple of
Equity ---------------------------
Date Purchase LTM Latest Date
Acquiror Target Completed Price Net Income Book Value
- -------- ------ --------- ----- ----------- ----------
<S> <C> <C> <C> <C> <C>
Aetna, Inc. Prudential Healthcare Pending $1,000.0 NA NA
WellPoint Health Networks, Inc. Cerulean Companies, Inc. Pending 500.0 148.6 * 2.5
United HealthCare Corp. Humana Inc. Pending 5,450.0 70.1 * 3.4
Foundation Health Corp. Physicians Health Services 01/02/98 166.2 NM 1.7
Humana, Inc. Physician Corp. of America 09/09/97 271.8 NM NM
CRA Managed Care Occusystems 09/02/97 683.4 47.0 * 4.8
Humana, Inc. ChoiceCare Pending 250.0 NA NA
CIGNA Corporation Healthsource Inc. 08/01/97 1,392.1 47.5 * 3.6
Foundation Health Corp. Health Systems International, Inc. 04/01/97 2,200.0 21.2 6.3
WellPoint Health Networks, Inc. GBO Operations of John Hancock 03/01/97 86.7 17.7 NM
PacifiCare Health Systems Inc. FHP International Corp. 02/14/97 2,100.0 49.9 * 1.8
Forstmann Little & Co. Community Health Systems Inc. 07/23/96 1,078.2 28.4 4.3
Merck-Medco Managed Care Inc. SysteMed Inc. 07/22/96 67.0 40.4 * 1.8
Aetna Life & Casualty U.S. Healthcare, Inc. 07/19/96 8,900.0 23.4 9.2 *
United HealthCare Corp. HealthWise of America, Inc. 04/12/96 290.0 33.6 8.3
United HealthCare Corp. Physicians Health Plan, Inc. [3] 04/01/96 139.0 19.7 5.3
Foundation Health Corp. Managed Health Network 03/08/96 45.0 NM 9.3 *
Healthsource, Inc. Central Mass. Health Care 02/06/96 46.5 NA NA
Humana, Inc. Emphesys Financial Group, Inc. 10/13/95 639.9 10.4 1.8
United HealthCare Corp. MetraHealth Companies [4] 10/03/95 1,650.0 NA NA
Coventry Corp. HealthCare USA Inc. 08/01/95 45.2 37.8 14.5 *
Value Health, Inc. Diagnostek, Inc. 07/28/95 450.0 37.0 2.3
Healthsource, Inc. Provident Life & Accident Ins. 06/01/95 231.0 27.7 1.2 *
United HealthCare Corp. Gencare Health systems 01/03/95 515.4 27.1 6.6
Humana, Inc. CareNetwork, Inc. 12/20/94 120.2 NM 8.4 *
Coventry Corp. Southern Health Management [5] 12/01/94 71.6 22.0 6.1
Foundation Health Corp. Intergroup Healthcare 11/01/94 255.7 12.2 2.9
FHP International Corp. TakeCare, Inc. 06/17/94 1,019.8 33.0 4.3
United HealthCare Corp. Complete Health Services, Inc. 05/31/94 242.4 69.0 * 24.2 *
United HealthCare Corp. Ramsay-HMO, Inc. 05/31/94 537.9 33.7 4.1
Value Health, Inc. Preferred Health Care Ltd. 12/14/93 382.2 47.5 * 6.7
Physician Corp. of America Family Health Systems Inc. 12/10/93 44.0 27.5 5.7
TakeCare Inc. Comprecare Inc. 09/09/93 85.7 25.8 5.6
United HealthCare Corp. HMO America Inc. 08/31/93 388.9 31.1 5.7
Healthsource, Inc. Physician Health Systems, Inc. 03/31/93 34.9 9.7 * 3.3
-----------------------------------------
AVERAGE 26.1 x 4.3 x
MEDIAN 31.1 x 4.8 x
-----------------------------------------
<CAPTION>
Firm Value as Multiple of
--------------------------------
Firm LTM LTM LTM
Acquiror Target Value [1] Revenues EBITDA EBIT
- -------- ------ --------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Aetna, Inc. Prudential Healthcare $1,000.0 0.14 [2]* NA NA
WellPoint Health Networks, Inc. Cerulean Companies, Inc. 500.0 0.31 * 46.0 * NM
United HealthCare Corp. Humana Inc. 6,300.0 0.75 25.3 * 44.7 *
Foundation Health Corp. Physicians Health Services 166.2 0.30 * NM NM
Humana, Inc. Physician Corp. of America 403.7 0.29 * NM NM
CRA Managed Care Occusystems 782.5 4.17 * 22.8 29.9
Humana, Inc. ChoiceCare 250.0 0.84 NA * NA
CIGNA Corporation Healthsource Inc. 1,639.4 0.96 16.4 26.7
Foundation Health Corp. Health Systems International, Inc. 2,565.0 0.82 10.0 12.5
WellPoint Health Networks, Inc. GBO Operations of John Hancock 86.7 0.13 * NA 11.5
PacifiCare Health Systems Inc. FHP International Corp. 2,219.3 0.51 8.4 11.5
Forstmann Little & Co. Community Health Systems Inc. 1,276.3 1.48 11.2 16.3
Merck-Medco Managed Care Inc. SysteMed Inc. 73.3 0.50 14.4 25.0
Aetna Life & Casualty U.S. Healthcare, Inc. 8,900.0 2.37 13.4 14.2
United HealthCare Corp. HealthWise of America, Inc. 256.0 1.23 15.9 17.1
United HealthCare Corp. Physicians Health Plan, Inc. [3] 139.0 0.93 14.6 17.2
Foundation Health Corp. Managed Health Network 46.6 1.79 28.0 * 53.8 *
Healthsource, Inc. Central Mass. Health Care 46.5 NA NA NA
Humana, Inc. Emphesys Financial Group, Inc. 649.0 0.41 * 5.9 6.4
United HealthCare Corp. MetraHealth Companies [4] 1,650.0 0.42 * NA NA
Coventry Corp. HealthCare USA Inc. 37.2 1.38 27.4 * 32.1 *
Value Health, Inc. Diagnostek, Inc. 455.7 0.66 19.3 25.9
Healthsource, Inc. Provident Life & Accident Ins. 225.5 0.95 7.6 17.7
United HealthCare Corp. Gencare Health systems 443.4 1.92 15.7 16.8
Humana, Inc. CareNetwork, Inc. 101.1 0.70 57.1 * NM
Coventry Corp. Southern Health Management [5] 69.6 1.20 12.7 13.6
Foundation Health Corp. Intergroup Healthcare 244.5 0.52 6.4 7.1
FHP International Corp. TakeCare, Inc. 916.3 1.09 13.4 14.8
United HealthCare Corp. Complete Health Services, Inc. 183.8 0.63 19.9 22.8
United HealthCare Corp. Ramsay-HMO, Inc. 438.2 1.26 14.7 17.2
Value Health, Inc. Preferred Health Care Ltd. 374.0 4.76 * 27.5 * 36.3 *
Physician Corp. of America Family Health Systems Inc. 44.0 0.59 14.7 17.2
TakeCare Inc. Comprecare Inc. 101.1 0.41 * 6.8 17.1
United HealthCare Corp. HMO America Inc. 331.4 0.94 16.8 16.8
Healthsource, Inc. Physician Health Systems, Inc. 35.0 1.06 6.5 6.9
-------------------------------------------------
1.04 x 13.1 x 16.6 x
0.83 x 14.7 x 17.1 x
-------------------------------------------------
</TABLE>
- ----------------------------------
* Excluded from average.
NA - Not Available
NM - Not Meaningful
[1] Firm value equals equity value plus debt less cash.
[2] Annualized nine months of 1998 revenues.
[3] LTM financials for Physicians Health Plan reflect annualized third quarter
numbers.
[4] Does not include $525 million in potential earn-out payments.
[5] Data for Coventry/Southern Health merger taken from Securities Data Company.
<PAGE> 77
EXHIBIT 99(b)(4)
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION UTILIZING HMO HISTORICAL ACQUISITION MULTIPLES
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Selected Relevant Transaction Multiples
--------------------------------------
Price/ IMPLIED IMPLIED
Goldcap LTM Price/ EQUITY EQUITY VALUE
Valuation Parameter Value EPS Book VALUE PER SHARE[1]
- ------------------- ------- ----- ----- ------- ------------
<S> <C> <C> <C> <C>
LTM Income [2] $10,041 [3,4] 26.1 x $261,690 $25.88
9/30/98 Book Value $67,869 4.3 x $292,309 $28.91
--------------------------------------
- ----------------------------------------------------------------------------------------------------------------
------------------------------------------
Selected RelevanImpliedaction Multiples Less
------------------------------------------ Implied PV of DHDC
Goldcap Firm Value/ Firm Value / Firm Value/ Firm Less Deferred
Valuation Parameter Value Revenues Op. Income EBITDA Value Net Debt[5] Liabilities
- ------------------- -------- -------- ---------- ----------- ------- ----------- -----------
LTM Revenues [2] $171,068 1.04 x $178,521 $46,501 $22,376 $109,644 $10.84
LTM Operating Income [2] $ 21,150[3] 16.6 x $351,445 $46,501 $22,376 $282,568 $27.94
LTM EBITDA [2] $ 26,870[3] 13.1 x $350,968 $46,501 $22,376 $282,091 $27.89
---------------------------------------------------------------
MEAN EQUITY VALUE $245,660 $24.29
MEDIAN EQUITY VALUE $282,091 $27.89
---------------------------------------------------------------
</TABLE>
- -----------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in
one-time charges.
[4] Assumes 38% tax rate on one-time charges.
[5] As of September 30, 1998.
<PAGE> 78
The Robinson-Humphrey Company
<TABLE>
<CAPTION>
PROJECT GOLDCAP
SELECTED MERGER AND ACQUISITION FORWARD MULTIPLES AND TRANSACTION PREMIUMS FOR DEALS IN THE HMO INDUSTRY
- ---------------------------------------------------------------------------------------------------------------------------------
VALUE OF PRICE
DATE DATE TRANSACTION PER CURRENT YEAR
ANNOUNCED EFFECTIVE TARGET ACQUIROR ($MM) SHARE P/E RATIO
- --------- --------- ------ -------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
05/28/98 Pending Humana, Inc. United HealthCare Corp. $5,538.6 32.06 30.2 x
06/03/97 09/09/97 Physician Corp. of America Humana, Inc. 405.1 7.00 10.9
08/05/96 02/14/97 FHP International Corp. PacifiCareaHealth Systems, Inc. 2,000.1 33.27 17.4
06/10/96 07/22/96 SysteMed, Inc. Merck-Medco Managed Care, Inc. 64.8 3.00 21.4
06/11/96 07/23/96 Community Health Systems, Inc. Forstmann Little Co. 1,080.0 52.00 23.1
02/01/96 04/12/96 HealthWise of America, Inc. United HealthCare Corp.Inc. 271.1 40.63 31.7
08/10/95 10/13/95 Emphesys Financial Group, Inc. Humana, Inc. 642.8 37.50 10.7
02/15/94 05/31/94 Ramsay-HMO, Inc. United HealthCare Corp. 564.9 74.66 35.9 *
----------------------------------------------------------------------
SELECT HMO TRANSACTIONS AVERAGE 20.8 X
SELECT HMO TRANSACTIONS MEDIAN 22.3 X
----------------------------------------------------------------------
<CAPTION>
PREMIUM PREMIUM
1 DAY 1 WEEK
PRIOR TO PRIOR TO
DATE DATE FORWARD YEAR ANNOUNCEMENT ANNOUNCEMENT
ANNOUNCED EFFECTIVE TARGET ACQUIROR P/E RATIO DATE DATE
- --------- --------- ------ -------- --------- ---- ----
05/28/98 Pending Humana, Inc. United HealthCare Corp. 24.3 X 22.1 % 22.1 %
06/03/97 09/09/97 Physician Corp. of America Humana, Inc. 8.2 12.0 12.0
08/05/96 02/14/97 FHP International Corp. PacifiCareaHealth Systems, Inc. 23.3 19.4 27.4
06/10/96 07/22/96 SysteMed, Inc. Merck-Medco Managed Care, Inc. 9.1 (4.0)* 4.3 *
06/11/96 07/23/96 Community Health Systems, Inc. Forstmann Little Co. 19.3 20.2 19.9
02/01/96 04/12/96 HealthWise of America, Inc. United HealthCare Corp.Inc. 26.0 37.5 37.3
08/10/95 10/13/95 Emphesys Financial Group, INc. Humana, Inc. 9.5 33.0 39.0
02/15/94 05/31/94 Ramsay-HMO, Inc. United HealthCare Corp. 29.4 X 62.7 * 62.7 *
----------------------------------------------------------------------
SELECT HMO TRANSACTIONS AVERAGE 17.1 X 24.0 % 26.3 %
SELECT HMO TRANSACTIONS MEDIAN 21.3 X 21.2 % 24.8 %
----------------------------------------------------------------------
<CAPTION>
PREMIUM
4 WEEKS
PRIOR TO
DATE DATE ANNOUNCEMENT
ANNOUNCED EFFECTIVE TARGET ACQUIROR DATE
- --------- --------- ------ -------- ------------
<S> <C> <C> <C> <C>
05/28/98 Pending Humana, Inc. United HealthCare Corp. 18.8 %
06/03/97 09/09/97 Physician Corp. of America Humana, Inc. 23.1
08/05/96 02/14/97 FHP International Corp. PacifiCareaHealth Systems, Inc. 19.1
06/10/96 07/22/96 SysteMed, Inc. Merck-Medco Managed Care, Inc. 9.1 *
06/11/96 07/23/96 Community Health Systems, Inc. Forstmann Little Co. 18.9
02/01/96 04/12/96 HealthWise of America, Inc. United HealthCare Corp.Inc. 34.3
08/10/95 10/13/95 Emphesys Financial Group, INc. Humana, Inc. 37.0
02/15/94 05/31/94 Ramsay-HMO, Inc. United HealthCare Corp. 81.0 *
---------------------------------------------------
SELECT HMO TRANSACTIONS AVERAGE 25.2 %
SELECT HMO TRANSACTIONS MEDIAN 21.1 %
---------------------------------------------------
</TABLE>
* Excluded from average NA - Not Available NM - Not Meaningful
- ------------------------------------
Source: Securities Data Company, Inc.
<PAGE> 79
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING M&A FORWARD MULTIPLES AND TRANSACTION
PREMIUMS IN THE HMO INDUSTRY
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CURRENT YEAR FORWARD YEAR IMPLIED IMPLIED
GOLDCAP P/E MULTIPLE P/E MULTIIPLE EQUITY EQUITY VALUE
VALUATION PARAMETER VALUE ------------- -------------- VALUE PER SHARE [1]
- ---------------------------------------- --------- <C> <C> -------- -------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.01 [2] 20.8 x $212,354 $21.00
Projected Cal. 1999 Net Income Per Share $1.12 [2] 17.1 x $193,641 $19.15
------------------
-----------------------------------------------------------
MEAN EQUITY VALUE $202,997 $20.07
MEDIAN EQUITY VALUE $202,997 $20.07
-----------------------------------------------------------
<CAPTION>
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP ----------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ---------------------------------------- --------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior [3,4] $10.63 24.0% $133,278 $13.18
Stock Price 1 Week Prior [3] 11.00 26.3% $140,466 $13.89
Stock Price 4 Weeks Prior [3] 10.31 25.2% $130,539 $12.91
-----------------------------------------------------------
MEAN EQUITY VALUE $134,761 $13.33
MEDIAN EQUITY VALUE $133,278 $13.18
-----------------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] Assumes announcement on January 19, 1999.
[4] Stock prices as of close on January 13, 1999.
<PAGE> 80
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING M&A FORWARD MULTIPLES AND TRANSACTION
PREMIUMS IN THE HMO INDUSTRY
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FORWARD YEAR FORWARD YEAR IMPLIED IMPLIED
GOLDCAP P/E MULTIPLE P/E MULTIIPLE EQUITY EQUITY VALUE
VALUATION PARAMETER VALUE ------------- -------------- VALUE PER SHARE [1]
- ---------------------------------------- --------- <C> <C> -------- -------------
<S> <C> <C> <C>
Projected Cal. 1998 Net Income Per Share $1.02 [2] 20.8 x $213,989 $21.16
Projected Cal. 1999 Net Income Per Share $1.17 [2] 17.1 x $201,606 $19.94
------------------
-----------------------------------------------------------
MEAN EQUITY VALUE $207,797 $20.55
MEDIAN EQUITY VALUE $207,797 $20.55
-----------------------------------------------------------
PREMIUM PRIOR TO ANNOUNCEMENT DATE
GOLDCAP ----------------------------------------
VALUATION PARAMETER VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR
- ---------------------------------------- --------- ----------------------------------------
Stock Price 1 Day Prior [3,4] $10.63 24.0% $133,278 $13.18
Stock Price 1 Week Prior [3] 11.00 26.3% $140,466 $13.89
Stock Price 4 Weeks Prior [3] 10.31 25.2% $130,539 $12.91
-----------------------------------------------------------
MEAN EQUITY VALUE $134,761 $13.33
MEDIAN EQUITY VALUE $133,278 $13.18
-----------------------------------------------------------
</TABLE>
- ----------------------------------------------------
* - Excluded from mean.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Projections provided by Goldcap management.
[3] Assumes announcement on January 19, 1999.
[4] Stock prices as of close on January 13, 1999.
<PAGE> 81
The Robinson-Humphrey Company
SUMMARY OF RECENT MERGER AND ACQUISITION ACTIVITY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 AVERAGE
------- -------- -------- -------- -------- -------- -------
ALL INDUSTRIES
<S> <C> <C> <C> <C> <C> <C> <C>
Total Number of Net Acquisition Announcements 2,574 2,663 2,997 3,510 5,848 7,800
Total Dollar Value Paid [1] $96,688 $176,400 $226,671 $356,016 $494,962 $657,063
Average Premium Paid Over Market 41.0% 38.7% 41.9% 44.7% 36.6% 35.7% 39.8%
Medium Premium Paid Over Market 34.7% 33.0% 35.0% 29.2% 27.3% 27.5% 31.1%
Average Price/Earnings Ratio Paid 22.7 x 24.4 x 24.5 x 23.8 x 26.2 x 27.4 x 24.8 x
Median Price/Earnings Ratio Paid 18.1 x 20.0 x 20.2 x 19.1 x 20.3 x 22.9 x 20.1 x
<CAPTION>
1992 1993 1994 1995 1996 1997 AVERAGE
------- -------- -------- -------- -------- -------- -------
HEALTH SERVICES
<S> <C> <C> <C> <C> <C> <C> <C>
Total Number of Net Acquisition Announcements 205 156 129 179 325 437
Total Dollar Value Paid [1] $ 1,686 $ 12,608 $ 9,288 $ 7,333 $ 15,333 $ 15,047
Average Premium Paid Over Market 37.0% 41.9% 46.5% 32.2% 31.2% 26.5% 35.9%
Average Price/Earnings Ratio Paid 20.4 x 31.5 x 28.7 x 24.7 x 27.1 x 24.7 x 26.2 x
</TABLE>
- -----------------------------------------
[1] Includes only transactions with a publicly disclosed purchase price.
Source: Mergerstat Review
<PAGE> 82
The Robinson-Humphrey Company
M&A PREMIUMS AND P/E RATIOS OFFERED BY DEAL SIZE
1992-1997
I. MEDIAN PERCENT PREMIUM OFFERED
<TABLE>
<CAPTION>
PURCHASE PRICE: 1992 (BASE) 1993 (BASE) 1994 (BASE) 1995 (BASE) 1996 (BASE) 1997 (BASE)
- --------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$25.0 million or less 33.3% (35) 32.3% (38) 42.9% (45) 42.9% (53) 32.2% (39) 36.9% (52)
$25.0 through $50.0 million 21.6% (30) 36.7% (28) 33.9% (36) 24.4% (53) 26.4% (56) 22.4% (40)
$50.0 through $100.0 million 32.3% (22) 31.5% (31) 27.8% (53) 35.4% (44) 27.3% (68) 26.6% (63)
$100.0 million or more 39.0% (55) 32.0% (76) 35.8% (126) 29.0% (174) 26.6% (218) 27.6% (332)
Cash Consideration 29.6% (35) 32.5% (46) 36.8% (59) 28.4% (91) 26.7% (115) 25.8% (191)
II. MEDIAN P/E RATIO OFFERED
PURCHASE PRICE: 1992 (BASE) 1993 (BASE) 1994 (BASE) 1995 (BASE) 1996 (BASE) 1997 (BASE)
- --------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$25.0 million or less 15.5 (29) 17.6 (17) 17.5 (23) 17.0 (31) 16.2 (64) 15.9 (99)
$25.0 through $50.0 million 18.4 (22) 20.3 (18) 20.3 (27) 14.8 (33) 20.3 (53) 18.7 (48)
$50.0 through $100.0 million 21.1 (17) 18.1 (26) 17.1 (42) 19.2 (38) 20.5 (54) 22.7 (69)
$100.0 million or more 23.2 (36) 24.2 (66) 21.8 (110) 21.1 (153) 21.3 (186) 25.2 (315)
Cash Consideration 17.4 (27) 19.9 (32) 23.3 (38) 18.0 (68) 21.1 (106) 21.0 (183)
Public Companies 18.1 (89) 19.7 (113) 19.8 (184) 19.4 (239) 21.7 (288) 25.0 (389)
</TABLE>
<PAGE> 83
The Robinson-Humphrey Company
DISTRIBUTION OF M&A PREMIUMS OFFERED
1987 - 1997
<TABLE>
<CAPTION>
OVER 20% OVER 40% OVER 60% OVER 80%
YEAR UNDER 20% THROUGH 40% THROUGH 60% THROUGH 80% THROUGH 100% OVER 100% TOTAL
- ---- ----------- ----------- ----------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 76 32.1% 79 33.3% 49 20.7% 17 7.2% 8 3.4% 8 3.4% 237 100.0%
1988 131 32.0% 124 30.2% 65 15.9% 48 11.7% 16 3.9% 26 6.3% 410 100.0%
1989 109 36.0% 78 25.7% 63 20.8% 25 8.3% 9 3.0% 19 6.3% 303 100.0%
1990 61 34.9% 44 25.1% 34 19.4% 14 8.0% 7 4.0% 15 8.6% 175 100.0%
1991 50 36.5% 42 30.7% 28 20.4% 7 5.1% 4 2.9% 6 4.4% 137 100.0%
1992 42 29.6% 42 29.6% 21 14.8% 19 13.4% 14 9.9% 4 2.8% 142 100.0%
1993 47 27.2% 63 36.4% 34 19.7% 14 8.1% 9 5.2% 6 3.5% 173 100.0%
1994 66 25.4% 89 34.2% 52 20.0% 28 10.8% 7 2.7% 18 6.9% 260 100.0%
1995 106 32.7% 108 33.3% 55 17.0% 22 6.8% 6 1.9% 27 8.3% 324 100.0%
1996 136 35.7% 117 30.7% 70 18.4% 34 8.9% 10 2.6% 14 3.7% 381 100.0%
1997 171 35.1% 169 34.7% 84 17.2% 35 7.2% 15 3.1% 13 2.7% 487 100.0%
</TABLE>
DISTRIBUTION OF M&A P/E RATIOS OFFERED
1992 - 1997
<TABLE>
<CAPTION>
OVER 8.5X OVER 10.5X OVER 13.0X OVER 17.0X
YEAR UNDER 8.5X THROUGH 10.5X THROUGH 13.0X THROUGH 17.0X THROUGH 25.0X OVER 25.0X TOTAL
- ---- ----------- ------------- ------------- ------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 10 9.6% 2 1.9% 17 16.3% 16 15.4% 26 25.0% 33 31.7% 104 100.0%
1993 5 3.9% 5 3.9% 6 4.7% 27 21.3% 41 32.3% 43 33.9% 127 100.0%
1994 10 5.0% 12 5.9% 16 7.9% 39 19.3% 48 23.8% 77 38.1% 202 100.0%
1995 14 5.5% 14 5.5% 29 11.4% 45 17.6% 68 26.7% 85 33.3% 255 100.0%
1996 29 8.1% 16 4.5% 24 6.7% 60 16.8% 96 26.9% 132 37.0% 357 100.0%
1997 45 8.5% 17 3.2% 29 5.5% 54 10.2% 153 28.8% 233 43.9% 531 100.0%
</TABLE>
<PAGE> 84
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PREMIUMS FROM M&A TRANSACTIONS IN
GENERAL
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT SHARE PRICE)
<TABLE>
<CAPTION>
6-YR AVERAGE VALUE
------------------------------------- IMPLIED
PREMIUM 1 IMPLIED EQUITY
GOLDCAP DAY PRIOR PRICE / EARNINGS EQUITY VALUE PER
VALUATION PARAMETER VALUE TO ANNOUNCEMENT RATIO PAID VALUE SHARE [1]
- ------------------------------------------- ------- ------------------ ---------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement [2] $ 10.63 39.8 % $150,175 $14.85
LTM Net Income [3] $10,041 [4, 5] 24.8 x 249,352 24.66
</TABLE>
<TABLE>
<CAPTION>
6-YR MEDIAN VALUE
------------------------------------- IMPLIED
PREMIUM 1 IMPLIED EQUITY
GOLDCAP DAY PRIOR PRICE / EARNINGS EQUITY VALUE PER
VALUATION PARAMETER VALUE TO ANNOUNCEMENT RATIO PAID VALUE SHARE [1]
- ------------------------------------------- ------- --------------- ---------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement [2] $ 10.63 31.1 % $140,881 $13.93
LTM Net Income [3] $10,041 [4, 5] 20.1 x 201,824 19.96
</TABLE>
- -------------------------------------------
* Excluded from the unweighted average.
[1] Assumes 10,112,629 Goldcap shares outstanding.
[2] Assumes announcement on January 19, 1999. Stock price as of close on January
13, 1999.
[3] LTM ended September 30, 1998.
[4] Excludes $58.9 million goodwill impairment charge and $9.4 million in one
time charges.
[5] Assumes 38.0% tax rate on excluded one-time charges.
<PAGE> 85
The Robinson-Humphrey Company
PROJECT GOLDCAP
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PREMIUMS FROM M&A TRANSACTIONS IN
THE HEALTH SERVICES INDUSTRY
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT SHARE PRICE)
<TABLE>
<CAPTION>
6-YR AVERAGE VALUE
------------------------------------- IMPLIED
PREMIUM 1 IMPLIED EQUITY
GOLDCAP DAY PRIOR PRICE / EARNINGS EQUITY VALUE PER
VALUATION PARAMETER VALUE TO ANNOUNCEMENT RATIO PAID VALUE SHARE
- ------------------------------------------- ------- --------------- ---------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement [1] $ 10.63 35.9 % $146,002 $14.44
LTM Net Income [2] $10,041 [3, 4] 26.2 x 262,907 26.00
AVERAGE PRICE / EARNINGS RATIO PAID $238,027 $23.54
==================
AVERAGE PREMIUM PAID $145,686 $14.41
==================
</TABLE>
- -------------------------------------------
* Excluded from the unweighted average.
[1] Assumes announcement on January 19, 1999. Stock price as of close on January
13, 1999.
[2] LTM ended September 30, 1998.
[3] Excludes $58.9 million goodwill impairment charge and $9.4 million in one
time charges.
[4] Assumes 38.0% tax rate on excluded one-time charges.
<PAGE> 86
The Robinson-Humphrey Company
PROJECT GOLDCAP
PREMIUMS ANALYSIS: MERGERS AND ACQUISITIONS BETWEEN $100 AND $300 MILLION
JULY 24, 1997 THROUGH JANUARY 13, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DATE DATE
EFFECTIVE ANNOUNCED TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
- ----------- --------- ------------------------------ ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
11/12/97 10/03/96 Pittencrieff Communications Pvd radiotelephone commun svcs Nextel Communications Inc
08/04/97 11/14/96 Indiana Federal,Valparaiso,IN Commercial bank;holding co Pinnacle Financial Svcs Inc,MI
08/29/97 02/13/97 Portsmouth Bank Shares,NH Bank holding company CFX Corp,Keene,New Hampshire
12/09/97 02/20/97 NHP Inc(Apartment Investment) Own,op apartment buildings Apartment Investment & Mgmt Co
08/01/97 03/07/97 Micro Bio-Medics Inc Whl,mnfr medical equip Henry Schein Inc
08/25/97 03/11/97 First Citizens Financial,MD Bank holding company Provident Bankshares,Maryland
08/29/97 03/24/97 Community Bankshares,NH Bank holding company CFX Corp,Keene,New Hampshire
08/05/97 03/24/97 OnTrak Systems Inc Mnfrs semiconductor cap equip Lam Research Corp
10/13/97 04/29/97 SC Bancorp,Anaheim,California Bank holding co Western Bancorp,California
01/05/98 05/06/97 Physicians Health Services Inc Own and operate HMO's Foundation Health Systems Inc
12/01/97 05/06/97 Virginia First Finl Corp,VA Bank holding co BB&T Corp,Winston-Salem,NC
06/03/98 05/07/97 Reliable Life Insurance Co Insurance company Unitrin Inc
10/16/97 05/12/97 Dynamics Corp of America Mnfr electrical appliances CTS Corp
08/26/97 05/13/97 Aurum Software Inc Dvlp sales, mktg info software Baan Co NV
08/08/97 05/27/97 Alamco Inc Oil & gas exploration, prod Columbia Natural Resources Inc
08/15/97 06/03/97 Alexander Haagen Properties Real estate investment trust Lazard Freres & Co
07/28/97 06/04/97 Maxis Inc Develop educational software Electronic Arts Inc
09/12/97 06/09/97 Amrion Inc Own,op food stores Whole Foods Market Inc
08/29/97 06/16/97 Core Industries Inc Manufacture electronic equip United Dominion Industries Ltd
09/25/97 06/17/97 Hechinger Co Own,op retail home centers Leonard Green & Partners LP
07/24/97 06/17/97 McFarland Energy Inc Oil and gas exploration, prodn Monterey Resources Inc
07/25/97 06/17/97 Seda Specialty Packaging Corp Mnfr specialty packaging prods CCL Industries Inc
08/15/97 06/19/97 Advanced Logic Research Inc Mnfr microcomputer systems Gateway 2000 Inc
03/05/98 06/19/97 American Greetings Corp Mnfr greeting cards American Greetings Corp
10/23/97 06/20/97 Convest Energy Corp Oil and gas exploration,prodn Forcenergy Inc
10/23/97 06/20/97 Edisto Resources Corp Oil and gas exploration,prodn Forcenergy Inc
10/14/97 06/24/97 American Exploration Co Oil and gas exploration, prodn Louis Dreyfus Natural Gas
09/23/97 07/02/97 American Filtrona Corp Mnfr bonded fiber Bunzl PLC
09/26/97 07/03/97 Krystal Co Own,op fast food restaurants Port Royal Holdings Inc
11/06/97 07/07/97 Cairn Energy USA Inc Oil and gas exploration,prodn Meridian Resource Corp
09/30/97 07/08/97 Delchamps Inc Own and operate supermarkets Jitney-Jungle Stores of Amer
09/23/97 07/09/97 Control Data Systems Inc Mnfr computers,peripherals CDSI Holding Corp
10/02/97 07/15/97 DH Technology Inc Mnfr,whl computer printers Axiohm SA
10/28/97 07/15/97 Intl Imaging Materials Mnfr thermal transfer ribbons Paxar Corp
02/01/98 07/16/97 ArgentBank,Thibodaux,Louisiana Commercial bank Hibernia Corp,New Orleans,LA
11/07/97 07/22/97 Elexsys International Inc Manufacture circuit boards Sanmina Corp
12/18/97 07/23/97 Alliance Imaging Inc Pvd diagnostic imaging svcs Newport Investment LLC
10/28/97 07/24/97 Astrotech International Corp Pvd storage tank maintenance ITEQ Inc
12/01/97 07/25/97 Homegate Hospitality Inc Own and operate hotels Prime Hospitality Corp
08/28/97 07/25/97 Imo Industries Inc Mnfr industrial controls,pumps Constellation Capital Partners
09/24/97 07/31/97 Bucyrus International Inc Mnfr surface mining machinery American Industrial Partners
01/27/98 07/31/97 Santa Monica Bank Commercial bank Western Bancorp,California
10/23/97 07/31/97 Sterling House Corp Own,op nursing homes Alternative Living Services
11/12/97 08/07/97 1st United Bancorp,FL Baank holding co Wachovia Corp,Winston-Salem,NC
12/22/97 08/08/97 Titan Holdings Inc Auto,property,casualty ins co USF&G Corp
09/30/97 08/11/97 National Sanitary Supply Co Sanitary maintenance supplies Unisource Worldwide Inc
12/30/97 08/11/97 ProNet Inc Mnfr pagers;pager leasing svcs Metrocall Inc
12/22/97 08/11/97 Vacation Break USA Inc Real estate development firm Fairfield Communities Inc
09/17/97 08/12/97 Isomedix Inc Pvd contract sterilization svc Steris Corp
09/16/97 08/14/97 American Medserve Corp Wholesale pharmaceuticals Omnicare Inc
09/24/97 08/14/97 Talbert Medical Management Own,op medical,dental clinics MedPartners Inc
12/29/97 08/14/97 Tuesday Morning Corp Own, operate giftware stores Madison Dearborn Partners
<CAPTION>
- --------------------------------------------------------------------------------------------------
PREMIUM
VALUE OF -------------------------------------------------------
ACQUIROR SHORT TRANSACTION 1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO
BUSINESS DESCRIPTION ($ MIL) ANNOUNCEMENT DATE ANNOUNCEMENT DATE ANNOUNCEMENT DATE
- ----------------------------- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Pvd cellular telephone svcs 158.4 9.0 14.4 30.7
Commercial bank;holding co 120.5 22.2 26.9 17.9
Savings and loan 102.2 33.2 38.4 38.4
Real estate investment trust 114.5 28.3 25.2 16.9
Whl med supplies 136.1 12.2 12.2 10.4
Bank holding company 107.8 26.5 42.3 47.3
Savings and loan 101.6 63.3 64.1 54.7
Mnfr equip to mnfr semiconduct 217.9 (0.9) 3.0 13.9
Bank holding co 105.0 20.0 31.0 37.3
Own,op HMO's; holding company 268.2 23.5 27.0 51.7
Bank holding company 145.3 77.3 77.3 74.1
Insurance company 261.1 51.1 51.1 52.1
Mnfr electronic components 244.6 91.3 94.2 112.7
Develop software 259.9 33.0 40.4 55.8
Operate natural gas pipeline 102.8 7.7 11.5 16.7
Investment bank 235.0 (0.4) 11.1 3.4
Develop,wholesale software 127.5 2.3 2.3 40.6
Own,op natural foods stores 152.6 8.1 19.2 47.0
Mnfr structural metal 275.2 26.6 37.9 49.3
Merchant banking firm 127.0 (14.3) (7.7) (11.1)
Oil and gas exploration, prodn 111.2 11.6 41.3 44.8
Mnfr,pvd specialty packaging 182.6 31.8 36.5 52.6
Mnfr personal computers 206.8 29.2 30.5 34.8
Mnfr greeting cards 158.1 0.0 (0.9) 1.8
Oil,gas exploration and prodn 102.0 11.1 11.1 18.9
Oil,gas exploration and prodn 147.7 (6.6) (6.6) (0.4)
Oil and gas exploration,prodn 275.5 13.0 15.0 21.6
Whl,mnfr paper,constn material 183.5 8.8 2.2 3.4
Investment company 145.4 132.0 169.8 176.2
Oil and gas exploration, prodn 233.6 22.3 29.0 26.7
Own and operate grocery stores 213.6 (2.4) (0.8) 6.7
Investment holding company 273.9 29.1 30.6 35.0
Mnfr,whl computer printers 169.5 57.5 56.3 57.5
Mnfr label systems 244.4 67.3 60.2 64.9
Bank holding co 171.2 29.8 31.2 39.0
Mnfr printed circuit boards 219.9 1.5 (8.6) 40.2
Investment company 114.2 7.3 3.5 14.3
Mnfr air purification equip 116.7 45.7 63.4 78.4
Own,operate,franchise hotels 133.2 30.3 33.8 28.6
Investment company 117.3 18.7 20.0 22.6
Pvd fund mgmt & fin adv svcs 193.3 33.3 46.9 71.4
Bank holding co 198.2 14.3 17.6 28.7
Pvd residential care svcs 170.0 30.4 29.5 40.5
Bank holding company 182.2 5.7 16.0 27.5
Insurance holding company 278.1 16.0 19.1 24.9
Wholesale printing paper 155.9 (6.7) 20.0 47.4
Pvd local paging services 239.3 (10.0) (0.7) 27.1
Construct vacation resorts 178.1 41.6 39.1 95.8
Mnfr sterile processing sys 139.8 5.8 15.5 13.9
Whl,retail pharmaceuticals 233.2 2.5 16.1 25.8
Pvd medical services to HMO's 189.0 10.5 18.9 37.0
Investors 298.6 22.7 25.8 11.1
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
DATE DATE
EFFECTIVE ANNOUNCED TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
- ----------- --------- ------------------------------ ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
12/05/97 08/14/97 Uniforce Services Inc Pvd temporary personnel svcs Comforce Corp
03/27/98 08/15/97 Keystone Heritage Group Bank holding company Fulton Finl Corp,Lancaster,PA
04/23/98 08/18/97 CENFED Financial,Pasadena,CA Bank holding company Golden State Bancorp Inc,CA
10/21/97 08/25/97 ACC Consumer Finance Corp Pvd auto financing services Household International Inc
10/03/97 08/25/97 BioWhittaker Inc Mnfr,whl medical testing prods Cambrex Corp
01/23/98 08/25/97 PerSeptive Biosystems Inc Mnfr chromatography equipment Perkin-Elmer Corp
02/25/98 08/28/97 Value Property Trust Real estate investment trust Wellsford Real Properties Inc
10/10/97 08/28/97 Versa Technologies Inc Mnfr rubber components,molds Applied Power Inc
02/24/98 09/03/97 Norwich Financial Corp,CT Savings and loan; holding co Peoples Bk of Bridgeport,CT
01/16/98 09/05/97 Technology Modeling Assoc Inc Dvlp simulation software Avant! Corp
12/31/97 09/08/97 Fuqua Enterprises Inc Manufacture tanned leather Graham-Field Health Products
11/28/97 09/10/97 Data Documents Inc Manufacture tabulating cards Corporate Express Inc
04/01/98 09/11/97 George Mason Bankshares Inc Bank holding company United Bankshares Inc,WV
04/01/98 09/12/97 Coml Bancshares,Parkersburg,WV Bank holding company WesBanco Inc,Wheeling,WV
12/09/97 09/12/97 Unison Software Inc Develop network mgmt software Tivoli Systems Inc(IBM Corp)
01/16/98 09/12/97 WHG Resorts & Casino Inc Own,op resorts and casino Patriot Amer Hosp/Wyndham Intl
12/16/97 09/18/97 Guaranty National Corp Insurance company Orion Capital Corp
01/16/98 09/19/97 Sterling Electronics Corp Whl electronic components Marshall Industries
01/06/98 09/24/97 Vectra Banking Corp,Denver,CO Bank holding company Zions Bancorp,Utah
04/30/98 10/02/97 Kapson Senior Quarters Corp Provide residential care svcs Prometheus Senior Quarters
12/19/97 10/06/97 EndoVascular Technologies Inc Mnfr surgical instruments Guidant Corp
12/23/97 10/09/97 Melamine Chemicals Inc Manufacture melamine crystal Borden Chemical Inc(Borden)
01/22/98 10/13/97 Netcom On-Line Communication Internet service provider ICG Communications Inc
12/19/97 10/14/97 Physician Support Systems Inc Pvd business mgmt services National Data Corp
02/12/98 10/16/97 Omni Insurance Group Inc Insurance company Hartford Financial Services
02/27/98 10/17/97 ATC Group Services Inc Pvd engineering svcs Investor Group
12/29/97 10/17/97 Computational Systems Inc Manufacture measuring devices Emerson Electric Co
02/09/98 10/17/97 Tranzonic Cos Mnfr sanitary paper prod Linsalata Capital Partners II
04/24/98 10/23/97 Poughkeepsie Financial Corp Savings bank;bank holding co Hubco Inc,Mahwah,New Jersey
12/19/97 10/23/97 Premenos Technology Corp Develop EDI software Harbinger Corp
03/12/98 10/31/97 ILC Technology Inc Mnfr high intensity lamps BEC Group Inc
04/01/98 11/03/97 Advantage Bancorp,Kenosha,WI Savings & loan holding company Marshall & Ilsley,Milwaukee,WI
05/22/98 11/03/97 CoBancorp Inc Commercial bank FirstMerit Corp,Akron,OH
01/09/98 11/03/97 Sequana Therapeutics Mnfr diagnostic substances Arris Pharmaceuticals Corp
01/12/98 11/04/97 ComputerVision Corp Mnfr computers,peripherals Parametric Technology Corp
03/25/98 11/13/97 Chartwell Leisure Inc Own,op hotels and motels Investor Group
05/12/98 11/17/97 Century Finl Corp,Rochester,PA Commercial bank Citizens Bancshares Inc,OH
02/26/98 11/17/97 Granite Financial Inc Pvd business credit services Fidelity National Financial
03/02/98 11/17/97 Visigenic Software Inc Dvlp database access software Borland International Inc
01/20/98 11/21/97 New Jersey Steel(Von Roll) Mnfr steel reinforcing bars Co-Steel Inc
02/03/98 11/24/97 Communications Central Inc Pvd telecommunications svcs Davel Communications Group Inc
02/25/98 11/26/97 Universal Hospital Services Pvd med equip rental services Investor Group
07/13/98 11/28/97 RedFed Bancorp Inc,Redlands,CA Savings and loan Golden State Bancorp Inc,CA
02/19/98 12/01/97 Raptor Systems Inc Develop security mgmt software AXENT Technologies Inc
03/31/98 12/11/97 First State Corp,Albany,Ga Bank holding co; coml bank Regions Finl,Birmingham,AL
03/30/98 12/16/97 FFVA Financial Corp,VA Savings and loans One Valley Bancorp Inc,WV
07/02/98 12/16/97 Franklin Bancorp,Washington,DC Bank holding company BB&T Corp,Winston-Salem,NC
07/01/98 12/16/97 Progressive Bank,Pawling,NY Savings and loan holding co Hudson Chartered Bancorp,NY
01/23/98 12/17/97 Suburban Ostomy Supply Co Inc Whl medical and hospital equip InvaCare Corporation
12/18/97 12/18/97 Central Newspapers Inc Publish newspapers Central Newspapers Inc
03/30/98 12/19/97 ASR Investments Corp Real estate investment trust United Dominion Realty Tr Inc
05/01/98 12/19/97 IPC Information Systems Inc Mnfr telecommunications equip Cable Systems International
06/03/98 12/19/97 Eclipse Telecommunications Inc Pvd radiotelecommunication svc IXC Communications Inc
01/27/98 12/19/97 Software Artistry Inc Develop help-desk software Tivoli Systems Inc(IBM Corp)
03/17/98 12/29/97 Heartstream Inc Mnfr defibrillators Hewlett-Packard Co
02/09/98 12/29/97 Holmes Protection Group Inc Provide security systems svcs Tyco International Ltd
05/22/98 12/31/97 Red Lion Inns LP Own,op hotels Boykin Lodging Co
04/01/98 01/06/98 Schult Homes Corp Manufacture mobile homes Oakwood Homes Corp
06/30/98 01/12/98 CBT Corp,Paducah,Kentucky Bank holding co Mercantile Bancorp,St Louis,MO
05/06/98 01/26/98 TransAmerican Waste Industries Pvd waste management services USA Waste Services Inc
<CAPTION>
PREMIUM
VALUE OF -------------------------------------------------------
ACQUIROR SHORT TRANSACTION 1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO
BUSINESS DESCRIPTION ($ MIL) ANNOUNCEMENT DATE ANNOUNCEMENT DATE ANNOUNCEMENT DATE
- ----------------------------- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Pvd help supply services 140.7 37.6 37.6 52.6
Bank holding co 210.9 43.8 49.9 65.1
Bank holding company 208.4 1.3 0.5 3.5
Provide financial services 186.9 35.8 34.7 29.6
Mnfr specialty chemicals 130.5 17.8 38.9 47.7
Mnfr analytical instruments 288.1 16.8 24.9 50.4
Real estate investment trust 186.6 25.0 20.9 18.7
Mnfr tools,equip,consumables 141.9 36.8 33.1 31.3
Savings bank 164.0 (0.5) 15.4 30.4
Develop software 144.3 29.5 52.8 43.2
Mnfr medical supply,healthcare 231.0 42.3 52.8 78.8
Retail office supplies 159.4 10.9 14.9 26.1
Bank holding company 207.6 12.1 20.9 20.9
Bank holding company 126.7 47.9 46.8 66.8
Dvlp systems mgmt software 183.0 9.1 25.0 22.4
Real estate investment trust 266.0 35.1 72.3 78.5
Insurance company;holding co 117.2 10.8 23.9 27.7
Whl electronic components 217.6 16.3 30.2 57.0
Bank holding company 162.3 19.2 18.6 47.3
Pvd nursing care services 247.4 (0.9) 9.4 1.8
Mnfr cardiovascular equipment 187.8 22.1 22.1 73.9
Mnfr formaldehyde,resins 119.7 70.8 72.6 70.8
Pvd telecommunications svcs 269.4 49.8 70.9 78.5
Pvd info,transaction svcs 175.2 (1.0) (3.7) 4.8
Provide insurance services 184.7 78.9 75.8 130.9
Investor group 150.0 0.0 (8.1) 10.3
Mnfr appliance components 158.6 45.1 48.3 62.5
Investment firm 104.8 (1.5) (2.9) 4.5
Bank holding company 142.4 1.1 2.9 17.1
Dvle electn commerce software 234.7 55.2 49.1 27.8
Mnfr,whl eyeglass lenses,frame 130.8 108.7 107.6 108.7
Bank holding company 215.8 11.2 12.2 11.2
Commercial bank 157.3 10.6 30.9 52.1
Manufacture synthetic drugs 169.4 44.0 47.3 23.4
Develop,wholesale software 250.3 28.3 69.9 18.6
Investor group 240.8 11.3 4.5 11.3
Commercial bank 137.4 39.8 41.7 61.0
Title insurance company 132.4 89.8 89.8 87.6
Develop software 148.4 92.0 64.0 92.0
Mnfr steel and steel products 173.5 162.9 170.6 166.7
Pvd pay telephone commun svcs 102.4 30.2 25.4 12.0
Investor group 133.0 29.2 29.2 25.3
Bank holding company 159.5 1.8 1.8 7.1
Develop software 253.7 5.4 20.7 16.5
Bank holding company 161.2 18.4 23.9 16.9
Bank holding company 209.4 22.4 27.3 30.0
Bank holding company 160.2 21.4 32.1 54.8
National commercial bank 167.6 14.3 16.3 26.8
Mnfr surgical,medical supplies 130.8 8.0 13.3 13.3
Publish newspapers 100.0 (1.1) 0.6 (0.3)
Real estate investment trust 277.0 4.4 1.1 2.6
Mnfr telecommun equip 201.7 14.3 31.3 14.3
Pvd long distance tele svcs 122.2 18.0 19.9 14.4
Dvlp systems mgmt software 201.9 0.0 62.0 57.4
Mnfr computers, testing equip 130.6 (6.7) 18.2 (8.6)
Mnfr fire protection systems 117.1 (5.6) (5.6) (13.9)
Real estate investment trust 276.0 (6.4) (5.5) (3.4)
Mnfr,ret factory-built homes 101.4 1.1 10.4 19.2
Commercial bank holding co 275.8 3.3 1.8 19.5
Pvd waste disposal services 142.3 51.4 36.6 78.6
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
DATE DATE
EFFECTIVE ANNOUNCED TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
- ----------- --------- ------------------------------ ------------------------------- -------------------------------
<S> <C> <C> <C> <C>
03/03/98 01/27/98 State of the Art Inc Develop financial software Sage Group PLC
02/02/98 02/02/98 Comdisco Inc Whl,lease computers Investor Group
06/09/98 02/04/98 TresCom International Inc Pvd communications svcs Primus Telecommunications
06/30/98 02/09/98 PonceBank Savings and loan Banco Bilbao Vizcaya SA
04/16/98 02/09/98 Summit Care Corp Provide nursing services Fountain View(Heritage)
03/11/98 02/10/98 Liberty Corp Life ins co;own,op TV stn Liberty Corp
06/10/98 02/11/98 MTL Inc Pvd tank truck carrier svcs Sombrero Acquisition Corp
06/02/98 02/19/98 California State Bank Bank holding company First Security Corp,Utah
04/21/98 02/19/98 Mastering Inc Provied computer training svcs PLATINUM Technology Inc
05/04/98 02/24/98 Somatogen Inc Dvlp human blood substitutes Baxter International Inc
04/30/98 03/02/98 First Alert Inc Mnfr fire and burglar alarms Sunbeam Corp
07/02/98 03/13/98 Beverly Bancorp,Tinley Park,IL Bank holding company St. Paul Bancorp,Chicago,IL
07/10/98 03/16/98 International Murex Tech Corp Mnfr in-vitro test systems Abbott Laboratories
05/28/98 03/16/98 Logic Works Inc Develop client/server software PLATINUM Technology Inc
05/27/98 03/17/98 ForeFront Group Inc Develop software CBT Group PLC
04/01/98 03/19/98 Lawter International Inc Mnfr printing ink and resins Lawter International Inc
03/23/98 03/23/98 BET Holdings Inc Own and operate TV stations Investor Group
06/24/98 03/24/98 Walsh International Inc Provide programming svcs Cognizant Corp
06/29/98 03/31/98 IBAH Inc Mnfr pharmaceutical products Omnicare Inc
04/04/98 04/04/98 America Online Inc Internet Service Provider Goldman Sachs & Co
07/10/98 04/06/98 MoneyGram Payment Systems Inc Pvd money wire transfer svcs Viad Corp
05/19/98 04/08/98 Blessings Corp Mnfr plastic film products Huntsman Packaging Corp
05/15/98 04/09/98 Dart Group Corp Own,operate auto part stores Richfood Holdings Inc
06/15/98 05/08/98 Authentic Specialty Foods Inc Whl,mnfr Mexican foods Agrobios(Desc SA de CV)
07/02/98 05/18/98 Graco Inc Mnfr fluid handling equipment Graco Inc
07/07/98 05/28/98 Donnelley Enterprise Solutions Pvd info management services Bowne & Co Inc
05/30/98 05/30/98 Panavision Inc Mnfr camera systems Mafco Holdings Inc
06/19/98 06/19/98 Tremont Corp Mnfr drilling lubricants Valhi Inc
07/01/98 07/01/98 Sotheby's Holdings Inc Provide auctioning, RE svcs Investor Group
12/23/98 07/06/98 Peoples Telephone Co Inc Own,op public pay telephones Davel Communications Group Inc
10/28/98 07/09/98 Eltron International Inc Mnfr computer printers Zebra Technologies Corp
09/02/98 07/17/98 DeCrane Aircraft Holdings Inc Mnfr avionics components DLJ Merchant Banking Inc
10/30/98 07/23/98 IMNET Systems Inc Develop imaging software HBO & Co
10/08/98 07/23/98 Innova Corp Mnfr millimeter wave radios Digital Microwave Corp
09/10/98 07/28/98 CyberMedia Inc Dvlp,whl support software prod Network Associates Inc
10/16/98 08/03/98 Continental Natural Gas Inc Gas utility CMS Energy Corp
11/17/98 08/03/98 Freeport-McMoRan Sulphur Inc Sulphur mining company McMoRan Oil & Gas Co
09/21/98 08/10/98 Molecular Dynamics Inc Mnfr,whl laboratory equipment Amersham Pharmacia Biotech Ltd
08/18/98 08/18/98 Saville Systems PLC Pvd billing svcs Investors
12/01/98 09/02/98 Altron Inc Mnfr,mkt circuit board prods Sanmina Corp
12/10/98 09/02/98 Home Choice Holdings Inc Pvd equip rental svcs Rent-Way Inc
12/18/98 09/09/98 Integrated Systems Consulting Provide consulting services First Consulting Group Inc
09/14/98 09/14/98 Icon CMT Corp Pvd Internet svcs,products Qwest Commun Int Inc
12/17/98 09/23/98 J&L Specialty Steel Inc Mnfr steel,steel products Usinor SA
10/07/98 09/29/98 Newmont Gold Co Gold mining Newmont Mining Corp
11/24/98 10/08/98 Mecklermedia Corp Publishing company Penton Media Inc
12/15/98 10/16/98 BRC Holdings Inc Develop health care software Affiliated Computer Services
12/14/98 10/27/98 Citizens Corp(Hanover Ins Co) Auto,workers comp insurance co Allmerica Financial Corp
12/10/98 11/02/98 AquaPenn Spring Water Co Inc Produce,whl spring water Danone Group
12/22/98 11/09/98 Global Motorsport Group Inc Wholesale motorcycle parts Stonington Partners Inc
12/22/98 11/10/98 Intensiva Healthcare Corp Pvd acute,long-term care svcs Select Medical Corp
12/16/98 11/10/98 Steel of West Virginia Inc Manufacture steel products Roanoke Electric Steel
12/14/98 12/14/98 Qwest Commun Int Inc Pvd telephone commun svcs Microsoft Corp
<CAPTION>
PREMIUM
VALUE OF -------------------------------------------------------
ACQUIROR SHORT TRANSACTION 1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO
BUSINESS DESCRIPTION ($ MIL) ANNOUNCEMENT DATE ANNOUNCEMENT DATE ANNOUNCEMENT DATE
----------------------------- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Dvlp,whl accounting software 245.2 33.3 35.4 35.4
Investor group 109.0 0.0 6.6 3.8
Pvd telecommunications svcs 134.7 25.2 30.9 51.5
Bank;insurance;holding co 164.5 12.6 14.1 25.8
Own,op healthcare facilities 275.1 14.3 31.3 37.7
Life ins co;own,op TV stn 124.8 11.2 15.2 11.5
Investment company 250.1 37.9 38.5 56.1
Bank holding co 276.9 11.4 14.0 18.8
Develop integrated software 198.7 31.6 25.0 33.3
Mnfr health care products 232.9 35.8 39.8 92.0
Mnfr,whl household appliances 129.2 68.0 90.9 110.0
Bank holding company 161.8 16.5 17.4 19.6
Mnfr pharmaceuticals,med equip 232.7 21.6 38.2 50.7
Develop integrated software 212.9 13.0 36.2 57.1
Dev educational software 147.5 17.3 29.4 48.5
Mnfr printing ink and resins 130.8 0.0 1.7 (2.7)
Investor group 121.7 0.0 0.3 10.2
Pvd information services 176.8 0.0 36.8 53.3
Whl,retail pharmaceuticals 154.3 12.2 61.4 58.6
Investment bank 111.4 66.1 79.3 1.9
Provide food catering services 293.6 11.5 15.7 42.4
Prod printed,laminated films 269.7 18.7 18.3 34.9
Wholesale groceries 193.3 14.3 11.9 19.4
Mnfr,whl foods products 141.9 6.3 13.3 37.4
Mnfr fluid handling equipment 190.9 (6.5) (3.2) (9.1)
Pvd printing svcs 105.2 60.8 61.5 83.6
Mnfr toilet preparations 154.4 1.2 1.4 1.7
Mnfr chemicals and pigments 165.1 6.0 5.2 0.2
Investor group 118.6 0.6 (1.1) 1.1
Pvd pay telephone commun svcs 114.5 87.5 80.3 118.0
Mnfr bar code printing sys 287.7 25.8 34.6 57.4
Merchant banking firm 181.5 30.5 28.7 33.8
Dvlp healthcare software 261.5 55.6 59.3 62.5
Mnfr telecommunications prod 115.7 16.2 36.5 30.0
Develop network software 130.1 25.6 38.2 117.1
Electric and gas utility 154.2 8.8 35.6 46.8
Oil and gas exploration, prodn 124.2 14.9 6.4 4.2
Mnfr,whl biotechnology prods 222.2 36.7 47.7 100.0
Investors 212.9 132.2 106.5 56.0
Mnfr printed circuit boards 195.3 16.6 6.5 7.7
Pvd equipment rental services 294.4 7.2 4.1 7.7
Pvd mgmt consulting services 209.1 125.6 119.6 90.2
Pvd telephone commun svcs 202.9 65.5 60.0 (4.0)
Manufacture,wholesale steel 115.0 100.0 112.5 37.8
Gold,coal mining; oil,gas expl 264.8 (5.2) 20.8 62.4
Publish bus,trade magazines 273.7 43.7 52.6 39.8
Pvd data processing services 165.4 17.1 16.9 15.2
Pvd insurance services 212.4 20.6 17.2 20.9
Produce,whl milk,cookies,jams 110.3 34.2 100.0 160.0
Investment firm 109.0 13.5 33.8 31.1
Own,op acute hospitals 115.2 54.0 60.4 92.5
Mnfr steel bar products 116.8 75.5 100.0 79.2
Dvlp,whl computer software 200.0 3.7 3.7 5.3
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C>
AVERAGE 26.4% 32.7% 39.6%
MEDIAN 17.8% 27.0% 31.3%
--------------------------------------------------------------
</TABLE>
Source: Securities Data Corporation
<PAGE> 89
The Robinson-Humphrey Company
PROJECT GOLDCAP
PREMIUMS ANALYSIS: MERGERS AND ACQUISITIONS BETWEEN $100 AND $300 MILLION
(DOLLARS IN THOUSANDS)
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE PREMIUM AVERAGE PREMIUM AVERAGE PREMIUM IMPLIED IMPLIED
1 DAY PRIOR TO 1 WEEK PRIOR TO 4 WEEKS PRIOR TO EQUITY EQUITY VALUE
ANNOUNCEMENT DATE [1] ANNOUNCEMENT DATE ANNOUNCEMENT DATE VALUE PER SHARE [2]
--------------------- ----------------- ----------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Goldcap Stock Price 1 Day
Prior to Announcement Date: $10.63 26.4% $135,829 $13.43
Goldcap Stock Price 1 Week
Prior to Announcement Date: $11.00 32.7% 147,634 14.60
Goldcap Stock Price 4 Weeks
Prior to Announcement Date: $10.31 39.6% 145,553 14.39
<CAPTION>
------------------------------------------------
<S> <C> <C>
AVERAGE $143,005 $14.14
MEDIAN $145,553 $14.39
------------------------------------------------
</TABLE>
- --------------------------------
[1] Assumes announcement on January 19, 1999. Stock price one day prior to
announcement date as of close on January 13, 1999.
[2] Assumes 10,112,629 Goldcap shares outstanding.
<PAGE> 90
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
PROJECTED CASH FLOWS - CONSOLIDATED COMPANY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Dec. Dec. Dec. Dec. Dec. Dec. Terminal
Projections Used In Valuation: 1998 1999 (1) 2000 (1) 2001 (1) 2002 (1) 2003 (2) Value
- ------------------------------ ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Benefits Company $ 148,231 153,750 $ 161,438 $ 171,124 $ 183,102 $ 195,920 $ 195,920
DHMI 25,204 27,818 30,703 33,887 37,402 41,281 41,281
--------- -------- --------- --------- --------- --------- ---------
Total Revenues 173,435 181,568 192,141 205,011 220,504 237,201 237,201
Expenses:
Dental Care Providers' Fees
and Claim Costs 79,413 81,488 85,562 90,696 97,044 103,837 103,837
Commisions 13,235 14,453 15,337 16,257 17,395 18,612 18,612
Premium Taxes 908 942 989 1,048 1,122 1,200 1,200
General and Administrative 30,539 31,149 31,772 32,726 33,707 34,719 34,719
DHMI Operating Expenses 23,094 24,031 26,523 29,274 32,310 35,661 35,661
Depreciation (2) 1,951 1,814 2,155 2,581 2,676 2,787 2,787
Goodwill Amortization 2,530 2,568 2,568 2,568 2,568 2,568 2,568
--------- -------- --------- --------- --------- --------- ---------
Total Expenses 151,670 156,445 164,906 175,150 186,822 199,384 199,385
Operating Expenses 87.5% 86.2% 85.8% 85.4% 84.7% 84.1% 84.1%
Operating Income (EBIT) 21,765 25,123 27,235 29,861 33,682 37,817 37,817
Inc. Taxes 9,285 10,632 11,520 12,631 14,247 16,000 16,000
--------- -------- --------- --------- --------- --------- ---------
After Tax Operating Income $ 12,480 $ 14,491 $ 15,715 $ 17,230 $ 19,435 $ 21,817 $ 21,817
Operating Margin 8.4% 9.4% 9.7% 10.1% 10.6% 11.1% 11.1%
CASH SOURCES
After Tax Operating Income $ 12,480 $ 14,491 $ 15,715 $ 17,230 $ 19,435 $ 21,817 $ 21,817
Depreciation and Amortization 4,481 4,382 4,723 5,149 5,244 5,355 5,355
Other Cash Sources (240) 287 399 502 622 665 665
--------- -------- --------- --------- --------- --------- ---------
TOTAL SOURCES $ 16,721 $ 19,160 $ 20,837 $ 22,881 $ 25,301 $ 27,837 $ 27,837
========= ========= ========= ========= ========= ========= =========
CASH USES
Capital Expenditures $ 2,000 $ 2,500 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Increase in Current Assets
Except Cash (360) 350 674 921 1,367 1,474 1,474
Increase in Current Liabilities
Except Debt (599) 918 1,293 1,634 2,044 2,191 2,191
Increase/(Decrease) in Net Working Capital 239 (568) (619) (713) (677) (717) (717)
Other Cash Uses (263) 302 454 585 766 822 822
--------- -------- --------- --------- --------- --------- ---------
TOTAL USES $ 1,976 $ 2,234 $ 2,835 $ 2,872 $ 3,089 $ 3,105 $ 3,105
========= ========= ========= ========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
FREE CASH FLOW $ 16,926 $ 18,002 $ 20,009 $ 22,212 $ 24,732 $ 24,732
- -------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Discount Rate (WACC) Present Value of Cash Flows
---------------------------------------------------------------------------------
11.00% $73,798
12.00% $71,854
13.00% $69,990
14.00% $68,200
15.00% $66,482
16.00% $64,831
---------------------------------------------------------------------------------
</TABLE>
(1) Projections provided by the Company as of October 13, 1998.
(2) Depreciation excludes transaction cost amortization.
<PAGE> 91
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
(DOLLARS IN THOUSANDS)
SUMMARY:
<TABLE>
<S> <C>
WACC : 13.00%
Multiple: 8.00
EBIT Terminal Value: $ 37,817
Present Value of Cash Flows: $ 69,990
Present Value of Terminal Value: $164,204
--------
Total Value: $234,194
========
Plus: Cash (1) $ 9,980
Less: Debt (1) $ 78,857
--------
Equity Value $165,317
========
Equity Value per share $ 16.35
</TABLE>
(1) As of September 30, 1998. Includes present value of remaining DentLease
funding obligation and preferred stock purchase obligation.
<TABLE>
<CAPTION>
Weighted Average Cost of Capital (WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $ 73,798 $ 71,854 $ 69,990 $ 68,200 $ 66,482 $ 64,831
- -----------------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0x $134,655 $128,750 $123,153 $117,846 $112,810 $108,031
7.0 $157,098 $150,209 $143,679 $137,487 $131,612 $126,036
Multiple 8.0 $179,540 $171,667 $164,204 $157,128 $150,414 $144,041
9.0 $201,983 $193,125 $184,730 $176,769 $169,216 $162,046
10.0 $224,425 $214,584 $205,256 $196,410 $188,017 $180,052
11.0 $246,868 $236,042 $225,781 $216,051 $206,819 $198,057
12.0 $269,311 $257,501 $246,307 $235,692 $225,621 $216,062
- -----------------------------------------------------------------------------------------------------------------------------------
Total Value:
6.0x $208,453 $200,605 $193,143 $186,046 $179,292 $172,862
7.0 $230,896 $222,063 $213,669 $205,687 $198,094 $190,867
Multiple 8.0 $253,338 $243,521 $234,194 $225,328 $216,896 $208,872
9.0 $275,781 $264,980 $254,720 $244,969 $235,697 $226,877
10.0 $298,223 $286,438 $275,245 $264,610 $254,499 $244,882
11.0 $320,666 $307,897 $295,771 $284,251 $273,301 $262,887
12.0 $343,108 $329,355 $316,296 $303,892 $292,102 $280,893
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0x $139,576 $131,728 $124,266 $117,169 $110,415 $103,985
7.0 $162,019 $153,186 $144,792 $136,810 $129,217 $121,990
Multiple 8.0 $184,461 $174,644 $165,317 $156,451 $148,019 $139,995
9.0 $206,904 $196,103 $185,843 $176,092 $166,820 $158,000
10.0 $229,346 $217,561 $206,368 $195,733 $185,622 $176,005
11.0 $251,789 $239,020 $226,894 $215,374 $204,424 $194,010
12.0 $274,231 $260,478 $247,419 $235,015 $223,225 $212,016
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0x $ 13.80 $ 13.03 $ 12.29 $ 11.59 $ 10.92 $ 10.28
7.0 $ 16.02 $ 15.15 $ 14.32 $ 13.53 $ 12.78 $ 12.06
Multiple 8.0 $ 18.24 $ 17.27 $ 16.35 $ 15.47 $ 14.64 $ 13.84
9.0 $ 20.46 $ 19.39 $ 18.38 $ 17.41 $ 16.50 $ 15.62
10.0 $ 22.68 $ 21.51 $ 20.41 $ 19.36 $ 18.36 $ 19.18
11.0 $ 24.90 $ 23.64 $ 22.44 $ 21.30 $ 20.21 $ 19.18
12.0 $ 27.12 $ 25.76 $ 24.47 $ 23.24 $ 22.07 $ 20.97
- -----------------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Calendar 1998 EBIT Multiple:
6.0x 8.3x 8.0x 7.7x 7.4x 7.1x 6.9x
7.0 9.2 8.8 8.5 8.2 7.9 7.6
Multiple 8.0 10.1 9.7 9.3 9.0 8.6 8.3
9.0 11.1 10.5 10.1 9.8 9.4 9.0
10.0 11.9 11.4 11.0 10.5 10.1 9.7
11.0 12.8 12.3 11.8 11.3 10.9 10.5
12.0 13.7 13.1 12.6 12.1 11.6 11.2
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 92
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
EBITDA MULTIPLE METHODOLOGY
(DOLLARS IN THOUSANDS)
SUMMARY:
<TABLE>
<S> <C>
WACC: 13.00%
Multiple: 6.5
EBITDA Terminal Value: $43,172
Present Value of Cash Flows: $ 69,990
Present Value of Terminal Value: $152,308
--------
Total Value: $222,299
========
Plus: Cash (1) $ 9,980
Less: Debt (1) $ 78,857
--------
Equity Value: $153,421
Equity Value per Share $ 15.17
========
</TABLE>
(1) As of September 30, 1998. Includes present value of
remaining DentLease funding stock obligation and preferred
stock purchase obligation.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $73,798 $71,854 $69,990 $68,200 $66,482 $64,831
---------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
5.0 x $128,102 $122,485 $117,160 $112,111 $107,321 $102,774
5.5 $140,913 $134,733 $128,876 $123,322 $118,053 $113,051
6.0 $153,723 $146,982 $140,592 $134,533 $128,785 $123,329
Multiple 6.5 $166,533 $159,230 $152,308 $145,744 $139,517 $133,606
7.0 $179,343 $171,479 $164,024 $156,955 $150,249 $143,883
7.5 $192,154 $183,727 $175,740 $168,166 $160,981 $154,161
8.0 $204,964 $195,976 $187,456 $179,377 $171,713 $164,438
8.5 $217,774 $208,224 $199,172 $190,589 $182,445 $174,715
9.0 $230,584 $220,473 $210,888 $201,800 $193,177 $184,993
--------------------------------------------------------------------------------------------------------------------------
Total Value:
5.0 x $201,900 $194,339 $187,150 $180,311 $173,802 $167,604
5.5 $214,710 $206,588 $198,866 $191,522 $184,435 $177,882
6.0 $227,521 $218,836 $210,582 $202,733 $195,266 $188,159
6.5 $240,331 $231,085 $222,298 $213,944 $205,998 $198,436
Multiple 7.0 $253,141 $243,333 $234,014 $225,155 $216,730 $208,714
7.5 $265,951 $255,581 $245,730 $236,367 $227,463 $218,991
8.0 $278,762 $267,830 $257,446 $247,578 $238,195 $229,269
8.5 $291,572 $280,078 $269,162 $258,789 $248,927 $239,546
9.0 $304,382 $292,327 $280,878 $270,000 $259,659 $249,823
--------------------------------------------------------------------------------------------------------------------------
Equity Value:
5.0 x $133,023 $125,462 $118,273 $111,434 $104,925 $98,727
5.5 $145,833 $137,711 $129,989 $122,645 $115,657 $109,005
6.0 $158,644 $149,959 $141,705 $133,856 $126,389 $119,282
6.5 $171,454 $162,208 $153,421 $145,067 $137,121 $129,559
Multiple 7.0 $184,264 $174,456 $165,137 $156,278 $147,853 $139,837
7.5 $197,074 $186,704 $176,853 $167,490 $158,586 $150,114
8.0 $209,885 $198,953 $188,569 $178,701 $169,318 $160,392
8.5 $222,695 $211,201 $200,285 $189,912 $180,050 $170,669
9.0 $235,505 $223,450 $212,001 $201,123 $190,782 $180,946
--------------------------------------------------------------------------------------------------------------------------
Equity Value:
5.0 x $13.15 $12.41 $11.70 $11.02 $10.38 $9.76
5.5 $14.42 $13.62 $12.85 $12.13 $11.44 $10.78
6.0 $15.69 $14.83 $14.01 $13.24 $12.50 $11.80
6.5 $16.95 $16.04 $15.17 $14.35 $13.56 $12.81
Multiple 7.0 $18.22 $17.25 $16.33 $15.45 $14.62 $13.83
7.5 $19.49 $18.46 $17.49 $16.56 $15.68 $14.84
8.0 $20.75 $19.67 $18.65 $17.67 $16.74 $15.86
8.5 $22.02 $20.88 $19.81 $18.78 $17.80 $16.88
9.0 $23.29 $22.10 $20.96 $19.89 $18.87 $17.89
--------------------------------------------------------------------------------------------------------------------------
Implied Total Value / Calendar 1998 EBITDA Multiple:
5.0 x 6.8 x 6.6 x 6.3 X 6.1 x 5.9 x 5.7 x
5.5 7.3 7.0 6.7 6.5 6.3 6.0
6.0 7.7 7.4 7.1 6.9 6.6 6.4
6.5 8.1 7.8 7.5 7.3 7.0 6.7
Multiple 7.0 8.6 8.2 7.9 7.6 7.3 7.1
7.5 9.0 8.7 8.3 8.0 7.7 7.4
8.0 9.4 9.1 8.7 8.4 8.1 7.8
8.5 9.9 9.5 9.1 8.8 8.4 8.1
9.0 10.3 9.9 9.5 9.2 8.8 8.5
=========================================================================================================================
</TABLE>
<PAGE> 93
The Robinson-Humphrey Company, LLC
PROJECT GOLDCAP
BALANCE SHEET ASSUMPTIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
DEC. DEC. DEC. DEC. DEC. DEC. DEC.
BALANCE SHEET DATA [1] 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets Less Cash and Equivalents
Premiums Receivable $ 6,192 $ 6,334 $ 6,430 $ 6,678 $ 7,035 $ 7,619 $ 8,253
Patient Accounts Receivable 1,668 1,631 1,691 1,776 1,882 2,014 2,155
Income Taxes Receivable 175 222 231 242 257 275 294
Deferred Income Taxes 5,027 4,966 5,151 5,408 5,733 6,134 6,563
Other Current Assets 2,921 2,470 2,470 2,543 2,661 2,893 3,144
------- ------- ------- ------- ------- ------- -------
15,983 15,623 15,973 16,647 17,568 18,935 20,409
Current Liabilities Less Current Debt
Unearned Revenue $ 9,538 $ 8,894 $ 9,225 $ 9,686 $ 10,267 $ 10,986 $ 11,755
Accounts Payable 12,016 11,858 12,300 12,915 13,690 14,648 15,674
Accrued Interest Payable 109 74 77 81 86 92 98
Dental Claims Reserves 1,502 1,482 1,538 1,614 1,711 1,831 1,959
Other Current Liabilities 2,407 2,665 2,751 2,888 3,064 3,305 3,567
------- ------- ------- ------- ------- ------- -------
25,572 24,973 25,891 27,184 28,818 30,862 33,053
Working Capital Less Cash and Equivalents $(9,589) $ (9,350) $(9,918) $(10,537) $(11,250) $(11,927) $(12,644)
and Current Debt
-----------------------------------------------------------------------------------------------------------------------
Change in Net Working Capital $ 239 $ (568) $ (619) $ (713) $ (677) $ (717)
-----------------------------------------------------------------------------------------------------------------------
Restricted Funds $ 2,321 $ 2,223 $ 2,306 $ 2,422 $ 2,567 $ 2,747 $ 2,939
Reinsurance Receivable 5,417 5,559 5,766 6,054 6,417 6,866 7,347
Other Assets 1,792 1,475 1,487 1,537 1,614 1,751 1,900
Aggregate Reserves for Life Policies 5,331 5,188 5,381 5,650 5,989 6,409 6,857
Deferred Tax Liability 1,887 1,838 1,907 2,002 2,122 2,270 2,429
Other Liabilities 715 667 692 727 770 824 892
Assumptions (Percentage of Revenues):
Current Assets Less Cash and Equivalents
Premiums Receivable 3.90% 3.65% 3.54% 3.48% 3.43% 3.46% 3.46%
Patient Accounts Receivable - % of Benefits Revenues 1 10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%
Income Taxes Receivable - % of Benefits Revenues 0.12% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Deferred Income Taxes - % of Benefits Revenues 3.32% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35%
Other Current Assets 1.84% 1.42% 1.36% 1.32% 1.30% 1.31% 1.31%
Current Liabilities Less Current Debt
Unearned Revenue - % of Benefits Revenues 6.29% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Accounts Payable - % of Benefits Revenues 7.93% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Accrued Interest Payable - % of Benefits Revenues 0.07% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Dental Claims Reserves - % of Benefits Revenues 0.99% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Current Liabilities 1.52% 1.54% 1.52% 1.50% 1.49% 1.50% 1.50%
Restricted Funds - % of Benefits Revenues 1.53% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Reinsurance Receivable - % of Benefits Revenues 3.57% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75%
Other Assets 1.12% 0.85% 0.82% 0.80% 0.79% 0.79% 0.79%
Aggregate Reserves for Life Policies - % of Benefits Revenues 3.52% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Deferred Tax Liability - % of Benefits Revenues 1.24% 1.24% 1.24% 1.24% 1.24% 1.24% 1.24%
Other Liabilities - % of Benefits Revenues 047% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
</TABLE>
(1) Projections provided by the Company as of October 13, 1998
<PAGE> 94
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
ASSUMING $152.388 MILLION ($15.00 PER SHARE) PURCHASE PRICE FOR 100.0%
OF THE EQUITY BENEFITS COMPANY
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------------
EXHIBIT PAGE
- ------------------------- --------
<S> <C>
Sources and Uses of Funds 1
Forecasting Assumptions 2
Income Statement 3
Cash Flow Statement 4
Balance Sheet 5
Balance Sheet - Adjustments 6
Coverage Ratios and Financial Analysis 7
Return Analysis at 7.00x EBITDA 8
Return Analysis at 8.00x EBITDA 9
Return Analysis at 9.00x EBITDA 10
Return Analysis Including Dental Practice Management at 7.00x EBITDA 11
Return Analysis Including Dental Practice Management at 8.00x EBITDA 12
Return Analysis Including Dental Practice Management at 9.00x EBITDA 13
</TABLE>
<PAGE> 95
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
ASSUMING $152.388 MILLION ($15.00 PER SHARE) PURCHASE PRICE
FOR 100.0% OF THE EQUITY
(DOLLARS IN THOUSANDS)
SOURCES & USES OF FUNDS
<TABLE>
<CAPTION>
SOURCES OF ACQUISITION FUNDS: APPLICATIONS OF ACQUISITION FUNDS:
- ----------------------------- ----------------------------------
<S> <C> <C> <C>
Cash From Balance Sheet $0.0 0.0% Cash to Purchase 100.0%
Revolving Facility 2,310.0 1.1% of Equity $ 152,388.0
Senior Term Loan 25,000.0 11.5% Paydown of Existing Debt 53,475.0
Notes 100,000.0 45.9% Cash Fees and Expenses 12,000.0
-----------
Redeemable Preferred Stock 85,624.7 39.3%
Common Stock 4,506.6 2.1%
Management Investment 421.7 0.2%
---------
TOTAL SOURCES $ 217,863.0 TOTAL APPLICATIONS $217,863.0
=========== ==========
- -------------------------------------------------------------------------------------------------------------------------
Projected Years Ending December 31,
------------------------------------------------------------------------------
1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT ITEMS:
Net Sales $153,750.0 $161,438.0 $171,124.0 $183,102.0 $195,920.0
EBIT 19,847.5 21,586.0 23,801.0 27,167.0 30,801.0
% of Net Sales 12.91% 13.37% 13.91% 14.84% 15.72%
Pretax Income 7,760.9 10,055.9 13,773.0 18,218.4 23,155.5
% of Net Sales 5.0% 6.2% 8.0% 9.9% 11.8%
--------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME $ (4,741.6) $ (4,243.8) $ (2,992.6) $ (1,405.9) $ 367.3
% OF NET SALES (3.08%) (2.63%) (1.75%) -0.77% 0.19%
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOW ITEMS:
Cash Flow From Operations $ 1,350.2 $ 2,257.5 $ 4,046.3 $ 5,716.1 $ 7,603.6
Cash Flow From Investing (1,890.1) (2,346.2) (2,193.3) (2,313.5) (2,304.2)
Cash Flow From Financing 6,062.5 5,668.7 5,360.6 5,146.7 5,036.3
-------------------------------------------------------------------------------
Cash Flow (Deficit) Available to Decrease
Increase)
Revolver or Increase Cash $5,522.6 $ 5,580.0 $ 7,213.6 $ 8,549.2 $10,335.8
===============================================================================
Pro Forma
1998
---------
BALANCE SHEET ITEMS:
Cash and Equivalents $13,000.0 $16,212.6 $21,792.6 $29,006.2 $37,555.4 $47,891.2
Revolving Facility 2,310.0 0.0 0.0 0.0 0.0 0.0
Senior Term Loan 25,000.0 22,500.0 18,750.0 13,750.0 7,500.0 0.0
Notes 100,000.0 100,000.0 100,000.0 100,000.0 100,000.0 100,000.0
Preferred Stock 85,624.7 94,187.2 103,605.9 113,966.5 125,363.2 137,899.5
----------------------------------------------------------------------------------------------
Total Debt and 212,934.7 216,687.2 222,355.9 227,716.5 232,863.2 237,899.5
Preferred Stock
Total Stockholders' Equity (121,839.7) (126,581.4) (130,825.2) (133,817.8) (135,223.6) (134,856.3)
----------------------------------------------------------------------------------------------
Total Invested Capital $91,095.0 $90,105.9 $91,530.7 $93,898.7 $97,639.5 $103,043.2
==============================================================================================
</TABLE>
<PAGE> 96
The Robinson-Humphrey Company Page 2
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
FORECASTING ASSUMPTIONS
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Proj. -----------------------------------------------------
INCOME STATEMENT 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue Growth
Subscriber Premiums 3.37% 3.72% 5.00% 8.00% 6.00% 6.00%
Dental Health Management NM NM NM NM NM NM
Other Revenue -100.00% NM NM NM NM NM
---------------------------------------------------------------
Total Revenue Growth -6.61% 3.72% 5.00% 6.00% 7.00% 7.00%
Provider Fees and Claim Costs as a % of Subscriber Premiums 53.57% 53.00% 53.00% 53.00% 53.00% 53.00%
Commissions as a % of Subscriber Premiums 8.93% 9.40% 9.50% 9.50% 9.50% 9.50%
Premium Taxes as a % of Subscriber Premiums 0.61% 0.61% 0.61% 0.61% 0.61% 0.61%
Benefits Co. G&A Expense as a % of Subscriber Premiums 20.60% 20.26% 19.68% 19.12% 18.41% 17.72%
DHMI G&A Expense as a % of DHMI Revenues NA 0.00% 0.00% 0.00% 0.00% 0.00%
EBITDA Margin 16.28% 16.73% 17.21% 17.76% 18.48% 19.17%
Depreciation $ 1,747.0 $1,622.0 $1,943.0 $2,347.0 $2,418.0 $2,502.0
Depreciation as a % of Net Sales 1.18% 1.05% 1.20% 1.37% 1.32% 1.28%
Existing Amortization $ 1,849.0 $1,849.0 $1,849.0 $1,849.0 $1,849.0 $1,849.0
Existing Amortization as a % of Net Sales 1.25% 1.20% 1.15% 1.08% 1.01% 0.94%
EBIT Margin 13.9% 12.9% 13.4% 13.9% 14.8% 15.7%
Interest Expense:
Revolving Facility NM 7.75% 7.75% 7.75% 7.75% 7.75%
Senior Term Loan NM 7.75% 7.75% 7.75% 7.75% 7.75%
Notes NM 11.00% 11.00% 11.00% 11.00% 11.00%
Interest Income as % of Average Cash Balance NM 5.00% 5.00% 5.00% 5.00% 5.00%
Other Non-Operating Exp (Inc) as a % of Net Sales 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Income Taxes as a % of Pretax 39.45% 41.00% 41.00% 41.00% 41.00% 41.00%
Total Capital Expenditures $ 1,500.0 $2,000.0 $2,500.0 $2,500.0 $2,500.0 $2,500.0
% Net Sales 1.01% 1.30% 1.55% 1.46% 1.37% 1.28%
Acquisition Expenditures (At Beginning of Year) $13,832.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Less Fair Value of Assets Acquired 0.0 0.0 0.0 0.0 0.0 0.0
Plus Liabilities Assumed 0.0 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------
Additional Goodwill $13,832.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
</TABLE>
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Actual ---------------------------------------------------
BALANCE SHEET 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums Receivable as a % of Revenues 3.73% 3.73% 3.73% 3.73% 3.73% 3.73%
Days in Receivables 13.6 13.6 13.6 13.6 13.6 13.6
Other Current Assets as a % of Revenues 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Restricted Funds as a % of Subscriber Premiums 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Other Assets as a % of Subscriber Premiums 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Transaction Costs, Net $12,000.0 $9,600.0 $7,200.0 $4,800.0 $2,400.0 $0.0
Goodwill, Net 0.0 0.0 0.0 0.0 0.0 0.0
Accts Payable as a % of Revenues 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Days in Payables 29.2 29.2 29.2 29.2 29.2 29.2
Unearned Revenue as a % of Net Sales 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Accrued Interest Payable as a % of Net Sales 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Dental Claims Reserves as a % of Net Sales 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Current Liabilities as % Net Sales 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
DEBT AS A PERCENTAGE OF ORIGINAL BALANCE:
REVOLVING FACILITY 100.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SENIOR TERM LOAN 100.00% 90.00% 75.00% 55.00% 30.00% 0.00%
NOTES 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
REDEEMABLE PREFERRED STOCK 100.00% 110.00% 121.00% 133.10% 146.41% 161.05%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 97
The Robinson-Humphrey Company Page 3
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Actual Proj. ---------------------------------------------------------------
INCOME STATEMENT 1997 1998 1999 2000 2001 2002 2003
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales
Subscriber Premiums $143,396.0 $148,231.0 $153,750.0 $161,438.0 $171,124.0 $183,102.0 $195,920.0
Dental Health Management 7,113.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Revenue 8,217.0 0.0 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------------
TOTAL NET SALES 158,726.0 148,231.0 153,750.0 161,438.0 171,124.0 183,102.0 195,920.0
Expenses
Provider Fees and Claim Costs 79,690.0 79,413.0 81,487.5 85,562.0 90,696.0 97,044.0 103,837.0
Commissions 13,272.0 13,235.0 14,453.0 15,337.0 16,257.0 17,395.0 18,612.0
Premium Taxes 1,047.0 908.0 942.0 989.0 1,048.0 1,122.0 1,200.0
Benefits Co. G&A Expense 36,918.0 30,539.0 31,149.0 31,772.0 32,726.0 33,707.0 34,719.0
DHMI G&A Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------------
Total Expenses 130,927.0 124,095.0 128,031.5 133,660.0 140,727.0 149,268.0 158,368.0
EBITDA 27,799.0 24,136.0 25,718.5 27,778.0 30,397.0 33,834.0 37,552.0
Depreciation 5,735.0 1,747.0 1,622.0 1,943.0 2,347.0 2,418.0 2,502.0
Existing Amortization 0.0 1,849.0 1,849.0 1,849.0 1,849.0 1,849.0 1,849.0
Acquisition-Related Amortization (30 Years) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Goodwill Amortization (40 Years) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of Transaction Costs (5 Years) 0.0 0.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0
--------------------------------------------------------------------------------------
EBIT 22,064.0 20,540.0 19,847.5 21,586.0 23,801.0 27,167.0 30,801.0
Interest Expense:
Revolving Facility 0.0 0.0 89.5 0.0 0.0 0.0 0.0
Senior Term Loan 0.0 0.0 1,840.6 1,598.4 1,259.4 823.4 290.6
Notes 0.0 0.0 11,000.0 11,000.0 11,000.0 11,000.0 11,000.0
Other Interest Expense/(Income) 2,514.0 0.0 (843.5) (1,068.3) (2,231.4) (2,874.9) (3,645.1)
--------------------------------------------------------------------------------------
Net Cash Interest Expense 2,514.0 0.0 12,086.6 11,530.1 10,028.0 8,948.6 7,645.5
Other Non-Operating Expense (Inc.) 2.0 0.0 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 19,548.0 20,540.0 7,760.9 10,055.9 13,773.0 18,218.4 23,155.5
Income Taxes 8,466.0 8,832.0 3,940.1 4,881.0 6,405.0 8,227.7 10,251.8
Extraordinary Loss 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Preferred Dividend - 10% PIK 0.0 0.0 8,562.5 9,418.7 10,360.6 11,396.7 12,536.3
--------------------------------------------------------------------------------------
NET INCOME AVAIL. TO COMMON $ 11,082.0 $ 11,708.0 $ (4,741.6) $ (4,243.8) $ (2,992.6) $ (1,405.9) $ 367.3
==================================================================================================================================
INCOME RATIOS & ANALYSIS:
EBITDA as a % of Net Sales 17.51% 16.28% 16.73% 17.21% 17.76% 18.48% 19.17%
EBIT as a % of Net Sales 13.90% 13.86% 12.91% 13.37% 13.91% 14.84% 15.72%
Pretax Profit as a % of Net Sales 12.32% 13.86% 5.05% 6.23% 8.05% 9.95% 11.82%
Net Income as a % of Net Sales 6.98% 7.90% (3.08%) (2.63%) (1.75%) (0.77%) 0.19%
</TABLE>
<PAGE> 98
The Robinson-Humphrey Company Page 4
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
----------------------------------------------------------
CASH FLOW STATEMENT 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income Available to Common $(4,741.6) $(4,243.8) $(2,992.6) $(1,405.9) $ 367.3
Adjustments to Reconcile Net Income to Net Cash Provided
by (Used for) Operating Activities:
Depreciation and Existing Amortization 3,471.0 3,792.0 4,196.0 4,267.0 4,351.0
Acquisition-Related Amortization (30 Year Amortization) 0.0 0.0 0.0 0.0 0.0
Transaction Costs (5 Year Amortization) 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0
Goodwill (40 Year Amortization) 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------
RECONCILIATION SUB TOTAL 5,871.0 6,192.0 6,596.0 6,667.0 6,751.0
Change in Current Assets Except Cash (482.6) (670.1) (846.5) (1,045.4) (1,118.3)
Change in Current Liabilities Except Debt 858.2 1,195.5 1,506.2 1,862.6 1,993.2
----------------------------------------------------------
NET SOURCE (USE) OF CASH PROVIDED BY WORKING CAPITAL 375.6 525.4 659.6 817.2 874.9
----------------------------------------------------------
Change in Deferred Tax Asset 0.0 0.0 0.0 0.0 0.0
Change in Other Assets (248.0) (346.0) (435.0) (539.0) (577.0)
Change in Other Liabilities 93.3 129.9 218.3 176.8 187.4
----------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATIONS 1,350.2 2,257.5 4,046.3 5,716.1 7,603.6
==========================================================
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment (2,000.0) (2,500.0) (2,500.0) (2,500.0) (2,500.0)
Acquisition of Businesses, Net of Cash Acquired 0.0 0.0 0.0 0.0 0.0
Change in Restricted Funds (83.3) (115.3) (145.3) (179.7) (192.3)
Change in Aggregate Reserves for Life Policies and Contracts 193.2 269.1 452.0 366.1 388.1
----------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTMENTS (1,890.1) (2,346.2) (2,193.3) (2,313.5) (2,304.2)
==========================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) Under Senior Debt (2,500.0) (3,750.0) (5,000.0) (6,250.0) (7,500.0)
Net Borrowings (Repayments) Under Notes 0.0 0.0 0.0 0.0 0.0
Paydown of Assumed Liabilities 0.0 0.0 0.0 0.0 0.0
Payments of Dividends on Preferred Stock 8,562.5 9,418.7 10,360.6 11,396.7 12,536.3
----------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING $ 6,062.5 $ 5,668.7 $ 5,360.6 $ 5,146.7 $ 5,036.3
==========================================================
AFFECT ON SENIOR REVOLVING FACILITY:
Cash From Balance Sheet (previous year) $13,000.0 $16,212.6 $21,792.6 $29,006.2 $37,555.4
Minimum Cash Balance 14,812.5 15,453.2 16,260.3 17,258.5 18,326.7
----------------------------------------------------------
Cash Available (Required) From Balance Sheet (1,812.5) 759.5 5,532.3 11,747.7 19,228.8
Cash Flow (Deficit) Available to (Increase) Decrease Revolver 5,522.6 5,580.0 7,213.6 8,549.2 10,335.8
Total Cash Available (Required) 3,710.1 6,339.4 12,745.9 20,296.9 29,564.5
Beginning Balance of Senior Revolving Facility 2,310.0 0.0 0.0 0.0 0.0
Cash Used to Decrease (Increase) Senior Revolving Facility 2,310.0 0.0 0.0 0.0 0.0
----------------------------------------------------------
Ending Balance of Senior Revolving Facility $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
==========================================================
</TABLE>
<PAGE> 99
The Robinson-Humphrey Company Page 5
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Pro Forma -----------------------------------------------------------------------
BALANCE SHEET 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash and Equivalents $ 13,000.0 $ 16,212.6 $ 21,792.6 $ 29,006.2 $ 37,555.4 $ 47,891.2
Receivable, Net 5,529.0 5,734.9 6,021.6 6,382.9 6,829.7 7,307.8
Income Tax Receivable 222.0 231.0 242.0 257.0 275.0 294.0
Deferred Tax Asset 4,966.0 5,151.0 5,408.0 5,733.0 6,134.0 6,563.0
Other Current Assets 2,223.0 2,305.8 2,421.1 2,566.3 2,746.0 2,938.2
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 25,940.0 29,635.2 35,885.3 43,945.5 53,540.1 64,994.2
Restricted Funds 2,223.0 2,306.3 2,421.6 2,566.9 2,746.5 2,938.8
Fixed Assets 4,247.0 6,247.0 8,747.0 11,247.0 13,747.0 16,247.0
Less: Accumulated Depreciation 1,203.0 2,825.0 4,768.0 7,115.0 9,533.0 12,035.0
--------------------------------------------------------------------------------
NET FIXED ASSETS 3,044.0 3,422.0 3,979.0 4,132.0 4,214.0 4,212.0
Transaction Costs (5 Year Amortization) 12,000.0 9,600.0 7,200.0 4,800.0 2,400.0 0.0
New Goodwill (40 Year Amortization) 0.0 0.0 0.0 0.0 0.0 0.0
Existing Goodwill (40 Year Amortization) 71,960.0 70,111.0 68,262.0 66,413.0 64,564.0 62,715.0
Acquisition Goodwill (30 Year Amortization) 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Tax Asset 0.0 0.0 0.0 0.0 0.0 0.0
Other Assets 6,671.0 6,919.0 7,265.0 7,700.0 8,239.0 8,816.0
--------------------------------------------------------------------------------
TOTAL ASSETS $121,838.0 $121,993.5 $125,012.9 $129,557.3 $135,703.6 $143,676.0
================================================================================
Accounts Payable and Accrued Expenses $ 11,858.0 $ 12,299.5 $ 12,914.5 $ 13,689.4 $ 14,647.6 $ 15,673.0
Unearned Revenue 8,894.0 9,225.1 9,686.4 10,267.6 10,986.3 11,755.4
Accrued Interest Payable 74.0 76.8 80.6 85.4 91.4 97.8
Dental Claims Reserves 1,482.0 1,537.2 1,614.0 1,710.9 1,830.6 1,958.8
Other Current Liabilities 742.0 769.6 808.1 856.6 916.6 980.7
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 23,050.0 23,908.2 25,103.7 26,609.9 28,472.5 30,465.7
Aggregate Reserves for Life Policies
and Contracts 5,188.0 5,381.2 5,650.2 6,102.3 6,468.4 6,856.5
Long-Term Debt:
Revolving Facility 2,310.0 0.0 0.0 0.0 0.0 0.0
Senior Term Loan 25,000.0 22,500.0 18,750.0 13,750.0 7,500.0 0.0
Notes 100,000.0 100,000.0 100,000.0 100,000.0 100,000.0 100,000.0
Redeemable Preferred Stock 85,624.7 94,187.2 103,605.9 113,966.5 125,363.2 137,899.5
--------------------------------------------------------------------------------
Total Long-Term Debt and Preferred Stock 212,934.7 216,687.2 222,355.9 227,716.5 232,863.2 237,899.5
Other Long-Term Liabilities 2,505.0 2,598.3 2,728.2 2,946.4 3,123.2 3,310.6
Stockholders' Equity:
Common Stock and Paid In Capital (73,336.7) (73,336.7) (73,336.7) (73,336.7) (73,336.7) (73,336.7)
Retained Earnings (48,503.0) (53,244.6) (57,488.5) (60,481.1) (61,886.9) (61,519.6)
--------------------------------------------------------------------------------
Total Stockholders' Equity (121,839.7) (126,581.4) (130,825.2) (133,817.8) (135,223.6) (134,856.3)
--------------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY $121,838.0 $121,993.5 $125,012.9 $129,557.3 $135,703.6 $143,676.0
================================================================================
</TABLE>
<PAGE> 100
The Robinson-Humphrey Company Page 6
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Proj. Goodwill Acquisition Pro Forma Valuation Pro Forma
BALANCE SHEET ADJUSTMENTS 1998 Write-Down Adjustment Acquisition Adjustments Close
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash and Equivalents $ 13,000.0 $ 13,000.0 $13,000.0
Receivable, Net 5,529.0 5,529.0 5,529.0
Income Tax Receivable 222.0 222.0 222.0
Deferred Tax Asset 4,966.0 4,966.0 4,966.0
Other Current Assets 2,223.0 2,223.0 2,223.0
TOTAL CURRENT ASSETS 25,940.0 0.0 0.0 25,940.0 0.0 25,940.0
Restricted Funds 2,223.0 2,223.0 2,223.0
Fixed Assets 4,247.0 4,247.0 4,247.0
Less: Accumulated Depreciation 1,203.0 1,203.0 1,203.0
-----------------------------------------------------------------------------------
NET FIXED ASSETS 3,044.0 0.0 0.0 3,044.0 0.0 3,044.0
Transaction Costs (5 Year Amortization) 0.0 12,000.0 12,000.0 12,000.0
New Goodwill (40 Year Amortization) 0.0 0.0 0.0
Existing Goodwill (40 Year Amortization) 71,960.0 71,960.0 71,960.0
Deferred Tax Asset 0.0 0.0 0.0
Other Assets 6,671.0 6,671.0 6,671.0
-----------------------------------------------------------------------------------
TOTAL ASSETS $109,838.0 $0.0 $12,000.0 $121,838.0 $0.0 $121,838.0
===================================================================================
Current Maturities of Long-Term Debt $0.0 $0.0 $0.0
Line of Credit 0.0 0.0 0.0
Accounts Payable and Accrued Expenses 11,858.0 11,858.0 11,858.0
Unearned Revenue 8,894.0 8,894.0 8,894.0
Accrued Interest Payable 74.0 74.0 74.0
Dental Claims Reserves 1,482.0 1,482.0 1,482.0
Other Current Liabilities 742.0 742.0 742.0
----------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 23,050.0 0.0 0.0 23,050.0 0.0 23,050.0
Aggregate Reserves for Life Policies and Contra 5,188.0 5,188.0 5,188.0
Long-Term Debt:
Existing Capital Leases and Notes Payable 53,475.0 (53,475.0) 0.0 0.0
Revolving Facility 0.0 2,310.0 2,310.0 2,310.0
Senior Term Loan 0.0 25,000.0 25,000.0 25,000.0
Notes 0.0 100,000.0 100,000.0 100,000.0
Redeemable Preferred Stock 0.0 85,624.7 85,624.7 85,624.7
----------------------------------------------------------------------------------
Total Long-Term Debt and Preferred Stock 53,475.0 0.0 159,459.7 212,934.7 0.0 212,934.7
Other Long-Term Liabilities 2,505.0 2,505.0 2,505.0
Stockholders' Equity:
Common Stock and Paid In Capital 74,123.0 (147,459.7 (73,336.7) (73,336.7)
Retained Earnings (48,503.0) (48,503.0) (48,503.0)
-----------------------------------------------------------------------------------
Total Stockholders' Equity 25,620.0 0.0 (147,459.7 (121,839.7 0.0 (121,839.7)
-----------------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY $109,838.0 $0.0 $12,000.0 $121,838.0 $0.0 $121,838.0
===================================================================================
</TABLE>
<PAGE> 101
The Robinson-Humphrey Company Page 7
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Projected Years Ending December 31,
Pro Forma -----------------------------------
COVERAGE RATIOS & FINANCIAL ANALYSIS 1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COVERAGE RATIOS:
NOTES INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $24,136.0 $25,718.5 $27,778.0
Notes Interest $11,000.0 $11,000.0 $11,000.0
Notes Interest Coverage 2.19 2.34 2.53
ADJUSTED NOTES INTEREST COVERAGE
EBITDA less Capital Expenditures $22,636.0 $23,718.5 $25,278.0
Notes Interest $11,000.0 $11,000.0 $11,000.0
Adjusted Notes Interest Coverage 2.06 2.16 2.30
TOTAL INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $24,136.0 $25,718.5 $27,778.0
Total Net Interest $12,086.6 $12,086.6 $11,530.1
Total Interest Coverage 2.00 2.13 2.41
TOTAL FINANCING COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $24,136.0 $25,718.5 $27,778.0
Total Net Interest + Principal Repayment $14,586.6 $14,586.6 $15,280.1
Total Interest Coverage 1.65 1.76 1.82
TOTAL FIXED COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $24,136.0 $25,718.5 $27,778.0
Total Net Interest + Principal Repayment + Cap. $16,586.6 $16,586.6 $17,780.1
Total Fixed Coverage 1.46 1.55 1.56
MAINTENANCE OF FUNDED DEBT
Total Debt / EBITDA 5.27 4.76 4.27
Total Debt / EBITDA less Capital Expenditures 5.62 5.16 4.70
Total Senior Debt / EBITDA 1.13 0.87 0.67
FINANCIAL ANALYSIS:
INCOME STATEMENT:
EBIT Margin 12.91% 13.37%
Pretax Margin 5.05% 6.23%
Net Margin (3.08)% (2.63)%
Asset Turnover 1.26 1.29
Return on Average Assets (3.89)% (3.44)%
Return on Average Equity 3.82% 3.30%
BALANCE SHEET:
Total Debt $127,310.0 $122,500.0 $118,750.0
Total Stockholders' Equity (36,215.0) (32,394.1) (27,219.3)
Total Capitalization 91,095.0 90,105.9 91,530.7
Tangible Equity (108,175.0) (102,505.1) (95,481.3)
Total Debt / Total Capitalization 139.76% 135.95% 129.74%
Total Debt / Total Stockholders' Equity (351.54)% (378.15)% (436.27)%
Current Ratio (x) 1.13 1.24 1.43
Accounts Receivable Turns (x) 26.81 26.81 26.81
Accounts Receivable Days Outstanding 13.61 13.61 13.61
Accounts Payable Days Outstanding 29.20 29.20 29.20
<CAPTION>
Projected Years Ending December 31,
---------------------------------------------------
COVERAGE RATIOS & FINANCIAL ANALYSIS 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COVERAGE RATIOS:
NOTES INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $30,397.0 $33,834.0 $37,552.0
Notes Interest $11,000.0 $11,000.0 $11,000.0
Notes Interest Coverage 2.76 3.08 3.41
ADJUSTED NOTES INTEREST COVERAGE
EBITDA less Capital Expenditures $27,897.0 $31,334.0 $35,052.0
Notes Interest $11,000.0 $11,000.0 $11,000.0
Adjusted Notes Interest Coverage 2.54 2.85 3.19
TOTAL INTEREST COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $30,397.0 $33,834.0 $37,552.0
Total Net Interest $10,028.0 $8,948.6 $7,645.5
Total Interest Coverage 3.03 3.78 4.91
TOTAL FINANCING COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $30,397.0 $33,834.0 $37,552.0
Total Net Interest + Principal Repayment $15,028.0 $15,198.6 $15,145.5
Total Interest Coverage 2.02 2.23 2.48
TOTAL FIXED COVERAGE
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) $30,397.0 $33,834.0 $37,552.0
Total Net Interest + Principal Repayment + Cap. $17,528.0 $17,698.6 $17,645.5
Total Fixed Coverage 1.73 1.91 2.13
MAINTENANCE OF FUNDED DEBT
Total Debt / EBITDA 3.74 3.18 2.66
Total Debt / EBITDA less Capital Expenditures 4.08 3.43 2.85
Total Senior Debt / EBITDA 0.45 0.22 0.00
FINANCIAL ANALYSIS:
INCOME STATEMENT:
EBIT Margin 13.91% 14.84% 15.72%
Pretax Margin 8.05% 9.95% 11.82%
Net Margin (1.75)% (0.77)% 0.19%
Asset Turnover 1.32 1.35 1.36
Return on Average Assets (2.35)% (1.06)% 0.26%
Return on Average Equity 2.26% 1.05% (0.27)%
BALANCE SHEET:
Total Debt $113,750.0 $107,500.0 $100,000.0
Total Stockholders' Equity (19,851.3) (9,860.5) 3,043.2
Total Capitalization 93,898.7 97,639.5 103,043.2
Tangible Equity (86,264.3) (74,424.5) (59,671.8)
Total Debt / Total Capitalization 121.14% 110.10% 97.05%
Total Debt / Total Stockholders' Equity (573.01)% (1090.21)% 3286.02%
Current Ratio (x) 1.65 1.88 2.13
Accounts Receivable Turns (x) 26.81 26.81 26.81
Accounts Receivable Days Outstanding 13.61 13.61 13.61
Accounts Payable Days Outstanding 29.20 29.20 29.20
</TABLE>
<PAGE> 102
The Robinson-Humphrey Company Page 8
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS--TERMINAL VALUE BASED ON AN EBITDA MULTIPLE OF 7.00X.
<TABLE>
<CAPTION>
% of Current
CAPITAL STRUCTURE Cap'n Return
------ -------
<S> <C> <C> <C> <C>
Revolving Facility $2,310.0 1.1% 7.75%
Senior Term Loan 25,000.0 11.5% 7.75% Weighted
Notes 100,000.0 45.9% 11.00% Average
Preferred Stock 85,624.7 39.3% 0.00% Initial
Investor Common 4,506.6 2.1% 68.89% Cost of
Management Common 421.7 0.2% 91.74% Capital
=================================================================================
TOTAL NEW CAPITAL $217,863.0 100.0% 7.62%
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
PURCHASE MULTIPLE ANALYSIS
------------------------------
Firm Value
Purchase Price Analysis: Year EBITDA Multiple
------------------------------
<S> <C> <C> <C> <C>
PRO FORMA EQUITY $152,388.0 1998A $24,136.0 7.99x
+ Pro Forma Debt 53,475.0 1999E 25,718.5 7.50x
- - Pro Forma Cash (13,000.0) 2000E 27,778.0 6.94x
----------
FIRM VALUE PAID $192,863.0
</TABLE>
<TABLE>
<CAPTION>
TERMINAL VALUE CALCULATION
AT END OF:
--------------------------------------------------------------------------
Firm Value Multiple: 7.00 x 1999 2000 2001 2002 2003
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA $25,718.5 $27,778.0 $30,397.0 $33,834.0 $37,552.0
Firm Value at a 7.00 Multiple = 180,029.5 194,446.0 212,779.0 236,838.0 262,864.0
- Total Debt and Preferred Stock 216,687.2 222,355.9 227,716.5 232,863.2 237,899.5
+ Excess Cash 16,212.6 21,792.6 29,006.2 37,555.4 47,891.2
--------------------------------------------------------------
VALUE OF COMMON EQUITY ($20,445.1) ($6,117.3) $14,068.7 $41,530.3 $72,855.7
MULTIPLE OF NET INCOME NM NM NM NM 198.3
FIVE YEAR RETURNS
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 IRR
Equity% Cash Out Cash In Cash In Cash In Cash In Cash In %
------------------------------------------------------------------------------------------
Revolving Facility
Principal ($2,310.0) $2,310.0 $0.0 $0.0 $0.0 $0.0
Interest 89.5 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
------------------------------------------------------------------------------------------
TOTAL ($2,310.0) $2,399.5 $0.0 $0.0 $0.0 $0.0 7.750%
Senior Term Loan
Principal ($25,000.0) $2,500.0 $3,750.0 $5,000.0 $6,250.0 $7,500.0
Interest 1,840.6 1,598.4 1,259.4 823.4 290.6
Equity Ownership 0.000% 0.0
------------------------------------------------------------------------------------------
TOTAL ($25,000.0) $4,340.6 $5,348.4 $6,259.4 $7,073.4 $7,790.6 7.750%
Notes
Principal ($100,000.0) $0.0 $0.0 $0.0 $0.0 $100,000.0
Interest 11,000.0 11,000.0 11,000.0 11,000.0 11,000.0
Equity Ownership 0.000% 0.0
-----------------------------------------------------------------------------------------
TOTAL ($100,000.0) $11,000.0 $11,000.0 $11,000.0 $11,000.0 $111,000.0 11.000%
Preferred Stock
Principal ($85,624.7) $0.0 $0.0 $0.0 $0.0 $137,899.5
Interest 0.0 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
------------------------------------------------------------------------------------------
TOTAL ($85,624.7) $0.0 $0.0 $0.0 $0.0 $137,899.5 10.000%
Investor Common Equity 85.000% ($4,506.6) $0.0 $0.0 $0.0 $0.0 $61,927.3 68.891%
Combined Preferred and Common 85.000% ($90,131.3) $0.0 $0.0 $0.0 $0.0 $199,826.8 17.262%
Management Common Equity 15.000% ($421.7) $0.0 $0.0 $0.0 $0.0 $10,928.4 91.742%
</TABLE>
<PAGE> 103
The Robinson-Humphrey Company Page 9
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS--TERMINAL VALUE BASED ON AN EBITDA MULTIPLE OF 8.00X.
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Current
CAPITAL STRUCTURE Cap'n Return
----- -------
<S> <C> <C> <C> <C>
Revolving Facility $ 2,310.0 1.1% 7.75%
Senior Term Loan 25,000.0 11.5% 7.75% Weighted
Notes 100,000.0 45.9% 11.00% Average
Preferred Stock 85,624.7 39.3% 0.00% Initial
Investor Common 4,506.6 2.1% 83.53% Cost of
Management Common 421.7 0.2% 108.36% Capital
=======================================================================================
TOTAL NEW CAPITAL $217,863.0 100.0% 7.96%
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
PURCHASE MULTIPLE ANALYSIS
--------------------------------
Firm Value
Purchase Price Analysis: Year EBITDA Multiple
--------------------------------
<S> <C> <C> <C> <C>
PRO FORMA EQUITY $152,388.0 1998A $24,136.0 8.53 x
+ Pro Forma Debt 53,475.0 1999E 25,718.5 8.00 x
- - Pro Forma Cash 0.0 2000E 27,778.0 7.41 x
---------- --------------------------------
FIRM VALUE PAID $205,863.0
</TABLE>
<TABLE>
<CAPTION>
TERMINAL VALUE CALCULATION
AT END OF:
---------------------------------------------------------
Firm Value Multiple: 8.00 x 1999 2000 2001 2002 2003
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0 $ 37,552.0
Firm Value at a 8.00 Multiple = 205,748.0 222,224.0 243,176.0 270,672.0 300,416.0
- Total Debt and Preferred Stock 216,687.2 222,355.9 227,716.5 232,863.2 237,899.5
+ Excess Cash 16,212.6 21,792.6 29,006.2 37,555.4 47,891.2
---------------------------------------------------------
=============================================================================================
VALUE OF COMMON EQUITY $ 5,273.4 $21,660.7 $ 44,465.7 $75,364.3 $110,407.7
MULTIPLE OF NET INCOME NM NM NM NM 300.6
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIVE YEAR RETURNS
==========================================================================================================================
--------
1998 1999 2000 2001 2002 2003 IRR
Equity % Cash Out Cash In Cash In Cash In Cash In Cash In %
------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revolving Facility
Principal $ (2,310.0) $ 2,310.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Interest 89.5 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $ (2,310.0) $ 2,399.5 $ 0.0 $ 0.0 $ 0.0 $ 0.0 7.750%
Senior Term Loan
Principal $ (25,000.0) $ 2,500.0 $ 3,750.0 $ 5,000.0 $ 6,250.0 $ 7,500.0
Interest 1,840.6 1,598.4 1,259.4 823.4 290.6
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $ (25,000.0) $ 4,340.6 $ 5,348.4 $ 6,259.4 $ 7,073.4 $ 7,790.6 7.750%
Notes
Principal $(100,000.0) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $100,000.0
Interest 11,000.0 11,000.0 11,000.0 11,000.0 11,000.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $(100,000.0) $11,000.0 $11,000.0 $11,000.0 $11,000.0 $111,000.0 11.000%
Preferred Stock
Principal $ (85,624.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $137,899.5
Interest 0.0 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
--------------------------------------------------------------------
TOTAL $ (85,624.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $137,899.5 10.000%
Outside Investor Common
Equity 85.000% $ (4,506.6) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 93,846.5 83.533%
Combined Preferred
and Common 85.000% $ (90,131.3) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $231,746.0 20.789%
Management Common Equity 15.000% $ (421.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 16,561.2 108.365%
--------
</TABLE>
<PAGE> 104
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS--TERMINAL VALUE BASED ON AN EBITDA MULTIPLE OF 9.00X.
<TABLE>
<CAPTION>
% of Current
CAPITAL STRUCTURE Cap'n Return
<S> <C> <C> <C> <C>
Revolving Facility $ 2,310.0 1.1% 7.75%
Senior Term Loan 25,000.0 11.5% 7.75% Weighted
Notes 100,000.0 45.9% 11.00% Average
Preferred Stock 85,624.7 39.3% 0.00% Initial
Investor Common 4,506.6 2.1% 94.60% Cost of
Management Common 506.0 0.2% 120.93% Capital
- ---------------------------------------------------------------------------------------------
TOTAL NEW CAPITAL $217,863.0 100.0% 8.21%
- ---------------------------------------------------------------------------------------------
</TABLE>
PURCHASE MULTIPLE ANALYSIS
<TABLE>
<CAPTION>
----------------------------------------------------
Firm Value
Purchase Price Analysis: Year EBITDA Multiple
----------------------------------------------------
<S> <C> <C> <C> <C>
PRO FORMA EQUITY $152,388.0 1998A $24,136.0 8.53 x
+ Pro Forma Debt 53,475.0 1999E 25,718.5 8.00 x
- - Pro Forma Cash 0.0 2000E 27,778.0 7.41 x
----------- ----------------------------------------------------
FIRM VALUE PAID $205,863.0
</TABLE>
TERMINAL VALUE CALCULATION
<TABLE>
<CAPTION>
AT END OF:
--------------------------------------------------------------
Firm Value Multiple: 9.00 x 1999 2000 2001 2002 2003
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EBITDA $ 25,718.5 $ 27,778.0 $ 30,397.0 $ 33,834.0 $ 37,552.0
Firm Value at a 9.00 Multiple = 231,466.5 250,002.0 273,573.0 304,506.0 337,968.0
- Total Debt and Preferred Stock 216,687.2 222,355.9 227,716.5 232,863.2 237,899.5
+ Excess Cash 16,212.6 21,792.6 29,006.2 37,555.4 47,891.2
--------------------------------------------------------------
--------------------------------------------------------------------------------------------------
VALUE OF COMMON EQUITY $ 30,991.9 $ 49,438.7 $ 74,862.7 $ 109,198.3 $ 147,959.7
MULTIPLE OF NET INCOME NM NM NM NM 402.8
--------------------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003 IRR
Equity % Cash Out Cash In Cash In Cash In Cash In Cash In %
------------------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revolving Facility
Principal $ (2,310.0) $ 2,310.0 $0.0 $0.0 $0.0 $0.0
Interest 89.5 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------------
TOTAL $ (2,310.0) $ 2,399.5 $ 0.0 $ 0.0 $ 0.0 $ 0.0 7.750%
Senior Term Loan
Principal $ (25,000.0) $ 2,500.0 $ 3,750.0 $ 5,000.0 $ 6,250.0 $ 7,500.0
Interest 1,840.6 1,598.4 1,259.4 823.4 290.6
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------------
TOTAL $ (25,000.0) $ 4,340.6 $ 5,348.4 $ 6,259.4 $ 7,073.4 $ 7,790.6 7.750%
Notes
Principal $(100,000.0) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $100,000.0
Interest 11,000.0 11,000.0 11,000.0 11,000.0 11,000.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------------
TOTAL $(100,000.0) $11,000.0 $ 11,000.0 $11,000.0 $11,000.0 $111,000.0 11.000%
Preferred Stock
Principal $ (85,624.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $137,899.5
Interest 0.0 0.0 0.0 0.0 0.0
Equity Ownership 0.000% 0.0
-------------------------------------------------------------------------
TOTAL $ (85,624.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $137,899.5 10.000%
Outside Investor Common Equity 85.000% $ (4,506.6) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $125,765.7 94.600%
Combined Preferred and Common 85.000% $ (90,131.3) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $263,665.2 23.947%
Management Common Equity 15.000% $ (421.7) $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 22,194.0 120.929%
-------
</TABLE>
<PAGE> 105
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS INCLUDING DENTAL PRACTICE MANAGEMENT --TERMINAL VALUE BASED ON
AN EBITDA MULTIPLE OF 7.00X.
<TABLE>
<CAPTION>
ASSUMED AFTER-TAX PROCEEDS FROM SALE OF DENTAL PRACTICE MANAGEMENT BUSINESS
---------------------------------------------------------------------------
$0.0 $5,000 $10,000 $15,000 $20,000
---------------------------------------------------------------------------
EQUITY %
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
COMBINED PREFERRED AND COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
MANAGEMENT COMMON EQUITY 15.0% $0.0 $ 750 $1,500 $ 2,250 $ 3,000
--------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY
CASH OUT $ (4,506.6) $ (4,506.6) $ (4,506.6) $ (4,506.6) $ (4,506.6)
CASH IN $ 61,927.3 $ 61,927.3 $ 61,927.3 $ 61,927.3 $ 61,927.3
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $ 61,927.3 $ 66,177.3 $ 70,427.3 $ 74,677.3 $ 78,927.3
------------------------------------------------------------------------------
IRR 68.891% 71.148% 73.292% 75.335% 77.287%
------------------------------------------------------------------------------
COMBINED PREFERRED AND COMMON EQUITY
CASH OUT $(90,131.3) $(90,131.3) $(90,131.3) $(90,131.3) $(90,131.3)
CASH IN $199,826.8 $199,826.8 $199,826.8 $199,826.8 $199,826.8
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $199,826.8 $204,076.8 $208,326.8 $212,576.8 $216,826.8
------------------------------------------------------------------------------
IRR 17.262% 17.756% 18.243% 18.721% 19.192%
------------------------------------------------------------------------------
MANAGEMENT COMMON EQUITY
CASH OUT $ (421.7) $ (421.7) $ (421.7) $ (421.7) $ (421.7)
CASH IN $ 10,928.4 $ 10,928.4 $ 10,928.4 $ 10,928.4 $ 10,928.4
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 750.0 $ 1,500.0 $ 2,250.0 $ 3,000.0
TOTAL CASH IN $ 10,928.4 $ 11,678.4 $ 12,428.4 $ 13,178.4 $ 13,928.4
------------------------------------------------------------------------------
IRR 91.742% 94.304% 96.738% 99.057% 101.273%
------------------------------------------------------------------------------
</TABLE>
<PAGE> 106
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS INCLUDING DENTAL PRACTICE MANAGEMENT -- TERMINAL VALUE BASED ON
AN EBITDA MULTIPLE OF 8.00X.
<TABLE>
<CAPTION>
ASSUMED AFTER-TAX PROCEEDS FROM SALE OF DENTAL PRACTICE MANAGEMENT BUSINESS
---------------------------------------------------------------------------
$0.0 $5,000 $10,000 $15,000 $20,000
---------------------------------------------------------------------------
EQUITY %
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
COMBINED PREFERRED AND COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
MANAGEMENT COMMON EQUITY 15.0% $0.0 $ 750 $1,500 $ 2,250 $ 3,000
------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY
CASH OUT $(4,506.6) $(4,506.6) $(4,506.6) $(4,506.6) $(4,506.6)
CASH IN $93,846.5 $93,846.5 $ 93,846.5 $ 93,846.5 $ 93,846.5
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $93,846.5 $98,096.5 $102,346.5 $106,596.5 $110,846.5
-------------------------------------------------------------------------
IRR 83.533% 85.166% 86.744% 88.269% 89.747%
-------------------------------------------------------------------------
COMBINED PREFERRED AND COMMON EQUITY
CASH OUT $(90,131.3) $(90,131.3) $(90,131.3) $(90,131.3) $(90,131.3)
CASH IN $231,746.0 $231,746.0 $231,746.0 $231,746.0 $231,746.0
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $231,746.0 $235,996.0 $240,246.0 $244,496.0 $248,746.0
-------------------------------------------------------------------------
IRR 20.789% 21.229% 21.662% 22.090% 22.511%
-------------------------------------------------------------------------
MANAGEMENT COMMON EQUITY
CASH OUT $ (421.7) $ (421.7) $ (421.7) $ (421.7) $ (421.7)
CASH IN $16,561.2 $16,561.2 $16,561.2 $16,561.2 $16,561.2
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 750.0 $ 1,500.0 $ 2,250.0 $ 3,000.0
TOTAL CASH IN $16,561.2 $17,311.2 $18,061.2 $18,811.2 $19,561.2
-------------------------------------------------------------------------
IRR 108.365% 110.219% 112.009% 113.742% 115.420%
-------------------------------------------------------------------------
</TABLE>
<PAGE> 107
The Robinson-Humphrey Company
PROJECT GOLDCAP
GOING PRIVATE ANALYSIS - RECAPITALIZATION ACCOUNTING
(DOLLARS IN THOUSANDS)
RETURN ANALYSIS INCLUDING DENTAL PRACTICE MANAGEMENT -- TERMINAL VALUE BASED ON
AN EBITDA MULTIPLE OF 9.00X.
<TABLE>
<CAPTION>
ASSUMED AFTER-TAX PROCEEDS FROM SALE OF DENTAL PRACTICE MANAGEMENT BUSINESS
---------------------------------------------------------------------------
$0.0 $5,000 $10,000 $15,000 $20,000
---------------------------------------------------------------------------
EQUITY %
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
COMBINED PREFERRED AND COMMON EQUITY 85.0% $0.0 $4,250 $8,500 $12,750 $17,000
MANAGEMENT COMMON EQUITY 15.0% $0.0 $ 750 $1,500 $ 2,250 $ 3,000
--------------------------------------------------------------------------------------
</TABLE>
FIVE YEAR RETURNS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTOR COMMON EQUITY
CASH OUT $ (4,506.6) $ (4,506.6) $ (4,506.6) $ (4,506.6) $ (4,506.6)
CASH IN $125,765.7 $125,765.7 $125,765.7 $125,765.7 $125,765.7
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $125,765.7 $130,015.7 $134,265.7 $138,515.7 $142,765.7
-------------------------------------------------------------------------
IRR 94.600% 95.898% 97.162% 98.395% 99.598%
-------------------------------------------------------------------------
COMBINED PREFERRED AND COMMON EQUITY
CASH OUT $(90,131.3) $(90,131.3) $(90,131.3) $(90,131.3) $(90,131.3)
CASH IN $263,665.2 $263,665.2 $263,665.2 $263,665.2 $263,665.2
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 4,250.0 $ 8,500.0 $ 12,750.0 $ 17,000.0
TOTAL CASH IN $263,665.2 $267,915.2 $272,165.2 $276,415.2 $280,665.2
-------------------------------------------------------------------------
IRR 23.947% 23.344% 24.736% 25.123% 25.505%
-------------------------------------------------------------------------
MANAGEMENT COMMON EQUITY
CASH OUT $ (421.7) $ (421.7) $ (421.7) $ (421.7) $ (421.7)
CASH IN $ 22,194.0 $22,194.0 $22,194.0 $ 22,194.0 $22,194.0
CASH IN (DENTAL PRACTICE MANAGEMENT) $ 0.0 $ 750.0 $ 1,500.0 $ 2,250.0 $ 3,000.0
TOTAL CASH IN $ 22,194.0 $22,944.0 $23,694.0 $ 24,444.0 $25,194.0
-------------------------------------------------------------------------
IRR 120.929% 122.403% 123.838% 125.237% 126.603%
-------------------------------------------------------------------------
</TABLE>
<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
COMPDENT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share ("Common Stock"), of CompDent
Corporation.
(2) Aggregate number of securities to which transaction applies:
10,291,129 shares of Common Stock (includes 178,500 underlying options
to purchase shares of Common Stock)
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$18.00 per share in cash-out merger plus the difference between
$18.00 and the exercise price of each share subject to option
(4) Proposed maximum aggregate value of transaction:
$185,240,322
(5) Total fee paid:
$37,048.06 (previously paid on October 27, 1998)
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
February , 1999
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
CompDent Corporation (the "Company") to be held on March , 1999, at 10:00
a.m., local time, at the offices of King & Spalding, located at 191 Peachtree
Street, Atlanta, Georgia. The purpose of the Special Meeting is to consider and
vote upon a merger that, if approved and subsequently consummated, will result
in the public stockholders of CompDent (other than stockholders who have
perfected their appraisal rights and certain members of management and other
investors) receiving $15.00 in cash per share for their shares of CompDent
common stock, $.01 par value ("Common Stock"). The acquiror of CompDent, TAGTCR
Acquisition, Inc., a newly formed Delaware corporation (the "Acquiror"), was
organized at the direction of three private investment partnerships and their
affiliates that have jointly agreed, together with certain members of management
and other investors, to acquire the Common Stock of the CompDent public
stockholders.
A Special Committee of the Board of Directors of CompDent, consisting of
three independent directors, was formed to consider and evaluate the Merger. The
Special Committee has unanimously recommended to CompDent's Board of Directors
that the Merger and related agreements be approved. In connection with its
evaluation of the Merger, the Special Committee engaged The Robinson-Humphrey
Company, LLC to act as its financial advisor. Robinson-Humphrey has rendered its
opinion dated January 18, 1999 that based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the cash merger
consideration of $15.00 per share to be received in the Merger is fair from a
financial point of view to the stockholders of the Company (other than certain
members of management, certain other investors and the Acquiror). The written
opinion of Robinson-Humphrey, dated January 18, 1999, is attached as Appendix B
to the enclosed Proxy Statement and should be read carefully and in its entirety
by the stockholders.
THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS BELIEVE THAT THE TERMS OF
THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND
UNANIMOUSLY RECOMMEND THAT THE STOCKHOLDERS APPROVE THE MERGER.
Approval of the Merger at the Special Meeting will require the affirmative
vote of holders of a majority of the outstanding shares of Common Stock entitled
to vote at the Special Meeting. The accompanying Proxy Statement provides you
with a summary of the proposed Merger and additional information about the
parties involved and their interests. If the Merger is approved by the holders
of the Common Stock, the closing of the Merger will occur as soon after the
Special Meeting as all of the other conditions to closing the Merger are
satisfied.
PLEASE GIVE ALL THIS INFORMATION YOUR CAREFUL ATTENTION. WHETHER OR NOT YOU
PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL
MEETING. A FAILURE TO VOTE WILL COUNT AS A VOTE AGAINST THE MERGER. ACCORDINGLY,
YOU ARE REQUESTED TO PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND. THIS
WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON IF YOU SUBSEQUENTLY
CHOOSE TO ATTEND.
Sincerely,
David R. Klock
Chairman and Chief Executive Officer
<PAGE> 3
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH , 1999
---------------------
Notice is hereby given that a Special Meeting of Stockholders of CompDent
Corporation, a Delaware corporation (the "Company"), will be held on March ,
1999 at 10:00 a.m., local time, at the offices of King & Spalding, located at
191 Peachtree Street, Atlanta, Georgia, for the following purposes:
(1) To consider and vote upon a proposal to approve an Agreement and
Plan of Merger, dated July 28, 1998 (the "Original Merger Agreement"), as
amended and restated on January 18, 1999 (as amended, the "Merger
Agreement"), pursuant to which TAGTCR Acquisition, Inc., a newly formed
Delaware corporation (the "Acquiror"), will be merged with and into the
Company and each stockholder of the Company (other than stockholders who
are entitled to and have perfected their appraisal rights, shares held by
certain members of management, shares held by certain stockholders of
CompDent, and shares held by the Acquiror) will become entitled to receive
$15.00 in cash for each outstanding share of common stock, $.01 par value,
of the Company (the "Common Stock") owned immediately prior to the
effective time of the Merger. A copy of the Merger Agreement is attached as
Appendix A to and is described in the accompanying Proxy Statement.
(2) To consider and act upon such other matters as may properly come
before the Special Meeting or any adjournment or adjournments thereof.
The Board of Directors has determined that only holders of Common Stock of
record at the close of business on February , 1999, will be entitled to notice
of, and to vote at, the Special Meeting or any adjournment or adjournments
thereof. A form of proxy and a Proxy Statement containing more detailed
information with respect to the matters to be considered at the Special Meeting
accompany and form a part of this notice.
By order of the Board of Directors,
BRUCE A. MITCHELL
Executive Vice President, General
Counsel and Secretary
Atlanta, Georgia
February , 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO NOT SEND IN
ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
THE MERGER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THE MERGER NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Any stockholder shall have the right to dissent from the Merger and to
receive payment of the "fair value" of his or her shares upon compliance with
the procedures set forth in Section 262 of the Delaware General Corporation Law.
See "RIGHTS OF DISSENTING STOCKHOLDERS" in the Proxy Statement that accompanies
this notice and the full text of Section 262 of the Delaware General Corporation
Law, which is attached as Appendix C and is described in the accompanying Proxy
Statement.
<PAGE> 4
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
---------------------
PROXY STATEMENT
---------------------
THE PROXY STATEMENT IS DATED FEBRUARY , 1999 AND WAS FIRST MAILED TO
STOCKHOLDERS ON FEBRUARY , 1999.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN IN THE MERGER?
A: Upon consummation of the Merger, the Acquiror will be merged with and into
CompDent with CompDent being the surviving corporation. All stockholders of
CompDent, other than the Acquiror, certain members of management, certain other
investors, and those stockholders who exercise their appraisal rights (the
"Public Stockholders"), will receive a cash payment for their outstanding shares
of Common Stock. After the Merger, CompDent will become a privately held company
owned by the following individuals and entities (the "Investor Group"):
THE ACQUIROR
TAGTCR Acquisition, Inc.
THE EQUITY INVESTORS
Golder, Thoma, Cressey, Rauner, Inc.
Golder, Thoma, Cressey, Rauner Fund V, L.P.
GTCR Associates V, L.P.
TA Associates, Inc.
TA/Advent VIII L.P.
Advent Atlantic and Pacific III L.P.
TA Executives Fund LLC
TA Investors LLC
NMS Capital, L.P.
Gerald Rosenfeld
THE MANAGEMENT SPONSORS
David R. Klock
Phyllis A. Klock
THE OTHER INVESTORS
The Kaufman Fund
Roger B. Kafker
Richard D. Tadler
Jane Broderick
Jonathan Goldstein
OTHER MANAGEMENT INVESTORS
Keith J. Yoder
Bruce Mitchell
William G. Jens, Jr.
Certain other employees of CompDent are also members of the Other Management
Investors Group.
To review the structure of the Merger in greater detail, see pages 61 through
68.
Q: WHY IS COMPDENT BEING ACQUIRED?
A: The Board of Directors and the Investor Group each believes that the
acquisition of CompDent is in the best interests of the Public Stockholders of
CompDent and that as a private company, CompDent will have greater operating
flexibility to focus on enhancing value by emphasizing growth and operating cash
flow. To review the background and reasons for the Merger in greater detail, see
pages 16 through 31.
Q: WHY WAS THE SPECIAL COMMITTEE FORMED?
A: Because certain directors of CompDent will have a financial interest in the
Merger, the CompDent Board of Directors appointed a Special Committee of
disinterested directors to review and evaluate the proposed transaction. The
Special Committee has determined that the Merger is fair and in the best
interests of the Public Stockholders.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive $15.00 in cash, without interest, for each share of CompDent
Common Stock. This is the "Cash Merger Consideration." For example: If you own
100 shares of CompDent Common Stock, upon completion of the Merger you will
receive $1,500 in cash.
i
<PAGE> 5
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the Merger during the second quarter of 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of the Cash Merger Consideration by you will be a taxable
transaction for federal income tax purposes. To review the tax consequences to
you in greater detail, see pages 71 through 72.
YOUR TAX CONSEQUENCES WILL DEPEND ON YOUR PERSONAL SITUATION. YOU SHOULD
CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF
THE MERGER TO YOU.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve and adopt the Merger Agreement, which provides
for the acquisition of CompDent by the Acquiror. After the Merger, CompDent will
become a privately held company and you will no longer own an equity interest in
CompDent.
THE COMPDENT BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AND
RECOMMENDS VOTING FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed envelope as soon as possible, so that your shares will be
represented at the meeting.
Approval of the proposal requires the affirmative vote of a majority of the
outstanding shares of CompDent Common Stock. Therefore, a failure to vote or a
vote to abstain will have the same legal effect as a vote against the Merger.
The Special Meeting will take place on March , 1999 at 10:00 a.m.,
local time, at the offices of King & Spalding, 191 Peachtree Street, Atlanta,
Georgia. You may attend the Special Meeting and vote your shares in person,
rather than voting by proxy. In addition, you may withdraw your proxy up to and
including the day of the Special Meeting and either change your vote or attend
the Special Meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares of Common Stock only if you provide
instructions on how to vote. You should instruct your broker how to vote your
shares, following the directions your broker provides. If you do not provide
instructions to your broker, your shares will not be voted and they will be
counted as votes against the proposal to approve and adopt the Merger Agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Merger is completed, we will send you written instructions for
exchanging your Common Stock certificates for the Cash Merger Consideration.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would like
to ask any additional questions about the Merger, you should contact:
Keith J. Yoder
CompDent Corporation
100 Mansell Court East, Suite 400
Roswell, Georgia 30076
Telephone: 770-998-8936
You should note that Keith Yoder, as well as the other executive officers
of CompDent, are participants in the Merger.
ii
<PAGE> 6
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT AND OTHER STATEMENTS MADE FROM TIME TO TIME BY
COMPDENT, THE ACQUIROR, OR THEIR REPRESENTATIVES CONTAIN CERTAIN FORWARD-LOOKING
STATEMENTS. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF, OR
CURRENT EXPECTATIONS OF COMPDENT AND THE ACQUIROR AND MEMBERS OF THEIR
RESPECTIVE MANAGEMENT TEAMS, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS
ARE BASED. SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT
FACTORS CURRENTLY KNOWN TO MANAGEMENT OF COMPDENT AND THE ACQUIROR THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS DETAILED HEREIN AND: (I)
COMPETITIVE PRESSURES IN THE DENTAL BENEFITS AND MANAGEMENT INDUSTRIES; (II)
MANAGEMENT AND INTEGRATION OF THE OPERATIONS OF ACQUIRED BUSINESSES; (III)
COMPDENT'S BUSINESS AND GROWTH STRATEGIES; AND (IV) GENERAL ECONOMIC CONDITIONS.
COMPDENT AND THE ACQUIROR UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE
FORWARD-LOOKING STATEMENTS TO REFLECT CHANGES IN ASSUMPTIONS, THE OCCURRENCE OF
UNANTICIPATED EVENTS, OR CHANGES IN FUTURE OPERATING RESULTS OVER TIME.
iii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... i
WHO CAN HELP ANSWER YOUR QUESTIONS.......................... ii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... iii
SUMMARY..................................................... 1
Effects of the Merger..................................... 1
The Companies............................................. 1
The Special Meeting....................................... 1
Record Date; Voting Power................................. 1
Vote Required............................................. 2
Recommendations........................................... 2
Opinion of Financial Advisor.............................. 2
Terms of the Merger Agreement............................. 2
Share Ownership of CompDent following the Merger.......... 3
Accounting Treatment...................................... 4
Financing of the Merger................................... 4
Conflicts of Interest..................................... 4
Regulatory Approvals...................................... 5
Appraisal Rights.......................................... 5
Transaction Structure..................................... 6
Historical Market Information............................. 8
Selected Consolidated Financial Data...................... 9
Selected Unaudited Pro Forma Consolidated Financial
Data................................................... 11
Consolidated Ratios of Earnings to Fixed Charges and Book
Value Per Share........................................ 14
Company Projections....................................... 14
SPECIAL FACTORS............................................. 16
Background of the Merger.................................. 16
The Special Committee's and the Board's Recommendation.... 27
Opinion of Financial Advisor.............................. 31
Presentations of Financial Advisor........................ 38
Purpose and Reasons of the Investor Group for the
Merger................................................. 51
Position of the Investor Group as to Fairness of the
Merger................................................. 52
Conflicts of Interest..................................... 52
Certain Effects of the Merger............................. 57
Financing of the Merger................................... 58
Conduct of CompDent's Business After the Merger........... 59
THE SPECIAL MEETING......................................... 60
Date, Time, and Place of the Special Meeting.............. 60
Proxy Solicitation........................................ 60
Record Date and Quorum Requirement........................ 60
Voting Procedures......................................... 60
Voting and Revocation of Proxies.......................... 61
Effective Time of the Merger and Payment for Shares....... 61
Other Matters to Be Considered............................ 61
THE MERGER.................................................. 62
Terms of the Merger Agreement............................. 62
Estimated Fees and Expenses of the Merger................. 69
RIGHTS OF DISSENTING STOCKHOLDERS........................... 69
FEDERAL INCOME TAX CONSEQUENCES............................. 71
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND
OTHERS.................................................... 73
</TABLE>
iv
<PAGE> 8
<TABLE>
<S> <C>
CERTAIN INFORMATION CONCERNING THE ACQUIROR AND THE INVESTOR
GROUP..................................................... 74
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS................ 77
EXPERTS..................................................... 77
WHERE YOU CAN FIND MORE INFORMATION......................... 77
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 78
STOCKHOLDER PROPOSALS....................................... 79
OTHER MATTERS............................................... 79
APPENDIX A -- Amended and Restated Agreement and Plan of
Merger.................................................... A-1
APPENDIX B -- Opinion of The Robinson-Humphrey Company,
LLC....................................................... B-1
APPENDIX C -- Text of Section 262 of the Delaware General
Corporation Law........................................... C-1
</TABLE>
v
<PAGE> 9
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. For a more complete
understanding of the Merger and for a more complete description of the legal
terms of the Merger, you should read this entire document carefully, as well as
the additional documents to which we refer you, including the Merger Agreement.
See "Where You Can Find More Information" (page 76).
EFFECTS OF THE MERGER
Pursuant to the Merger, the Acquiror will be merged with and into CompDent
with CompDent being the surviving corporation (the "Surviving Corporation"). As
a result of the Merger, the entire equity interest in the Company will be owned
by the Investor Group, and CompDent Common Stock will no longer be publicly
traded. The Public Stockholders will no longer be stockholders of CompDent and
they will not participate in CompDent's future earnings and growth or bear the
risk of any decreases in the value of CompDent. Instead, the Public Stockholders
will have the right to receive $15.00 in cash, without interest, for each share
of Common Stock held (other than shares in respect of which appraisal rights
have been perfected under Delaware law). The Investor Group will have the
opportunity to benefit from any future earnings and growth of CompDent and will
bear the risk of any decrease in CompDent's value. In addition, the members of
the Management Group have interests in the Merger as employees and/or directors
which are different from, or in addition to, yours as a CompDent stockholder. To
review these interests, see "-- Conflicts of Interest" and "Special
Factors -- Conflicts of Interest."
THE COMPANIES
COMPDENT CORPORATION
100 Mansell Court East
Suite 400
Roswell, Georgia 30076
(770) 998-8936
CompDent is a fully integrated dental management company, offering a full
line of dental care plan services, including network-based dental care plans,
reduced fee-for-service, and third-party administration services. CompDent
markets its products to employers and other business entities and to
individuals. CompDent's benefit plans also include a reduced fee-for-service
product, a PPO and network dental product, and administrative services for self-
insured dental plans. CompDent also owns Dental Health Management, Inc., which
provides management and administrative services to dental practices.
TAGTCR ACQUISITION, INC.
c/o TA Associates, Inc.
125 High Street, Suite 2500
Boston, Massachusetts 02110
(617) 574-6700
TAGTCR Acquisition, Inc. was organized at the direction of three private
investment partnerships that have jointly agreed, together with certain
affiliated entities, members of management and other entities and individuals,
to acquire the public stock of CompDent. These partnerships and their affiliates
(the "Equity Investors") include (i) Golder, Thoma, Cressey, Rauner Fund V, L.P.
and GTCR Associates V, L.P., each of which is affiliated with Golder, Thoma,
Cressey, Rauner, Inc. (collectively, the "GTCR Partnership"), (ii) TA/Advent
VIII L.P., Advent Atlantic and Pacific III L.P., TA Executives Fund LLC, and TA
Investors LLC, each of which is affiliated with TA Associates, Inc.
(collectively, the "TA Fund"), and (iii) NMS Capital, L.P., an affiliate of
BankAmerica Corporation (the "NMS Partnership").
THE SPECIAL MEETING (PAGE 59)
The Special Meeting will be held on March , 1999, at 10:00 a.m., local
time, at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia.
At the Special Meeting, CompDent stockholders will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement.
RECORD DATE; VOTING POWER (PAGE 59)
Holders of record of CompDent Common Stock at the close of business on
February , 1999 (the "Record Date") are entitled to notice of and to vote at
the Special Meeting. As of such date, there were shares of Common
Stock issued and outstanding held by approximately holders of
record. Holders of record of Common Stock on the Record Date are entitled
<PAGE> 10
to one vote per share on any matter that may properly come before the Special
Meeting.
VOTE REQUIRED (PAGE 59)
Approval by the CompDent stockholders of the proposal to approve and adopt
the Merger Agreement will require the affirmative vote of a majority of the
shares of CompDent Common Stock outstanding on the Record Date. Accordingly, a
failure to vote or a vote to abstain will have the same legal effect as a vote
against the Merger.
A "no" vote on the enclosed proxy card will be a vote against the Merger.
If we do not receive "yes" votes from a majority of the outstanding shares of
Common Stock, the Merger will not be approved and you will continue to own
shares in a publicly traded company.
A stockholder who gives a proxy with respect to voting on the Merger
Agreement may revoke it at anytime before it is voted at the Special Meeting by
(i) filing with the Secretary of CompDent an instrument revoking it, (ii)
submitting a duly executed proxy bearing a later date or (iii) voting in person
at the Special Meeting.
RECOMMENDATIONS (PAGE 31)
Because certain of the CompDent directors will have a financial interest in
the Merger, the CompDent Board of Directors appointed the Special Committee to
review and evaluate the proposed transaction. The Special Committee unanimously
recommended to the CompDent Board that the Merger Agreement be approved and that
it be recommended to the stockholders of the Company. Following the unanimous
recommendation of the Special Committee, the CompDent Board unanimously
determined that the Merger, the Merger Agreement, and the transactions
contemplated thereby were fair and in the best interests of the CompDent
stockholders and recommended that the stockholders approve the Merger Agreement.
The Special Committee and the CompDent Board recommend that the CompDent
stockholders vote "For" the approval of the Merger Agreement. You also should
refer to the reasons that the Special Committee and the CompDent Board
considered in determining whether to approve and adopt the Merger Agreement on
pages 27-31.
OPINION OF FINANCIAL ADVISOR (PAGE 32)
The Robinson-Humphrey Company, LLC, a nationally recognized investment
banking firm which served as financial advisor to the Special Committee, has
rendered an opinion dated January 18, 1999 to the Special Committee that the
Cash Merger Consideration is fair from a financial point of view to the Public
Stockholders of CompDent. A copy of the fairness opinion, setting forth the
information reviewed, assumptions made, and matters considered, is attached to
this Proxy Statement as Appendix B. You should read the fairness opinion of
Robinson-Humphrey in its entirety.
TERMS OF THE MERGER AGREEMENT (PAGE 61)
The Merger Agreement is attached to this Proxy Statement as Appendix A. You
are encouraged to read the Merger Agreement in its entirety. It is the legal
document that governs the Merger.
General. The Merger Agreement provides that the Acquiror will be merged
with and into CompDent, with CompDent being the surviving corporation (the
"Surviving Corporation"). As a result of the Merger, the Public Stockholders of
CompDent will receive $15.00 in cash, without interest, for each share of Common
Stock. In addition, certain members of management will receive cash for the
aggregate unrealized gain on their vested stock options.
Conditions to the Merger. The completion of the Merger depends upon the
satisfaction of a number of conditions, including:
- approval of the Merger Agreement by a majority of the CompDent
stockholders;
- receipt of all necessary orders and consents of governmental authorities
and the expiration of any regulatory waiting periods;
- receipt by the Acquiror of sufficient financing pursuant to its existing
financing commitments to consummate the Merger; and
- absence of a material adverse effect on the business of CompDent.
Each party may, at its option, waive the satisfaction of any condition to
such party's obligations under the Merger Agreement. EVEN IF THE STOCKHOLDERS
APPROVE THE MERGER,
2
<PAGE> 11
THERE CAN BE NO ASSURANCE THAT
THE MERGER WILL BE CONSUMMATED.
Solicitation. Until consummation or abandonment of the Merger, CompDent
and its affiliates are permitted to initiate or solicit any proposal from a
third party with respect to a merger, consolidation, sale, or similar
transaction involving CompDent or any of its subsidiaries (an "Acquisition
Proposal").
Termination. Either CompDent or the Acquiror may terminate the Merger
Agreement under certain circumstances, including if:
- both parties consent in writing;
- the Merger is not completed before June 30, 1999;
- legal restraints or prohibitions prevent the consummation of the Merger;
- the CompDent stockholders do not approve the Merger Agreement; or
- the other party breaches in a material manner any of its representations,
warranties or covenants under the Merger Agreement and such breach is not
cured within 30 days of notice.
In addition, CompDent may terminate the Merger Agreement if it accepts or
recommends acceptance of an Acquisition Proposal with another party, and the
Acquiror may terminate the Merger Agreement if the CompDent Board or the Special
Committee withdraws, or adversely modifies, its approval or recommendation of
the Merger or approves, recommends or causes CompDent to enter into any
agreement with respect to an Acquisition Proposal.
Fees and Expenses. CompDent and the Acquiror will pay their own fees,
costs, and expenses incurred in connection with the Merger Agreement. However,
CompDent will pay the Acquiror a "break up" fee equal to the Acquiror's
out-of-pocket fees and expenses (not to exceed $1.5 million), under certain
circumstances, if CompDent approves, enters into, or consummates a transaction
contemplated by an Acquisition Proposal, or if the Board or the Special
Committee withdraws its recommendation of the Merger. In negotiating the terms
of the amended Merger Agreement, the Special Committee wanted the unconditional
ability to approve, enter into, or consummate a transaction contemplated by an
Acquisition Proposal. The Special Committee believed that this flexibility was
necessary in order to maximize stockholder value in the event that a transaction
more attractive than the Merger became available. The Acquiror was willing to
grant this flexibility to the Special Committee, but only if CompDent was
willing to pay a "break up" fee to the Acquiror, which was originally proposed
by Acquiror to be $9 million. The amount of the "break up" fee and the
circumstances under which it would be paid were negotiated by the Special
Committee and the Acquiror and the amount of the "break-up fee" was reduced in
the Original Agreement to $7 million. Although the payment of the "break up" fee
would increase the cost of completing an Acquisition Proposal, the Special
Committee believes that the amount and the terms of the "break up" fee are
reasonable. CompDent would pay the break up fee, if incurred, either out of
available cash or from the proceeds of its current or a future credit facility.
Each of the Acquiror and CompDent agrees to pay the other party's fees and
expenses (not to exceed $1.5 million in the case of the Acquiror's fees and
expenses and $1.0 million in the case of CompDent's fees and expenses) upon the
termination of the Merger Agreement after a material breach or failure to
perform any representation, warranty or covenant that such party has under the
Merger Agreement. In addition, the Acquiror agrees to pay CompDent a fee equal
to the amount of CompDent's fees and expenses (not to exceed $1.0 million) if
the Merger Agreement is terminated either by mutual consent or because the
closing has not occurred by June 30, 1999, provided that the only unsatisfied
closing condition (other than the delivery of customary closing documents) is
the condition that the necessary financing is available.
SHARE OWNERSHIP OF COMPDENT FOLLOWING THE MERGER (PAGE 52)
- The Management Sponsors. Pursuant to the Merger, David R. Klock,
Chairman and Chief Executive Officer of CompDent, and Phyllis A. Klock,
President and Chief Operating Officer of CompDent (the "Management
Sponsors"), will collectively cause 200,000 shares of Common Stock with
an agreed value of $15.00 per share (a total value of $3.0 million) to be
converted into (i) 627,245 shares of common stock, $.01 par value, of the
Surviving Corporation and (ii) 2,663 shares of Convertible Participating
Preferred Stock, $.01 par value (the "Con-
3
<PAGE> 12
vertible Preferred Stock"), of the Surviving Corporation. The remaining
149,083 shares of Common Stock held by the Management Sponsors, which
will not be converted into common stock and Convertible Preferred Stock
of the surviving Corporation, will be sold immediately prior to the
Merger to the NMS Partnership for $15.00 per share (a total value of
$2,236,245). The Management Sponsors will own an initial aggregate equity
interest in the Surviving Corporation of approximately 3.30%.
- The Equity Investors. The TA Fund will contribute approximately
$40,614,359 in cash to the Acquiror, the GTCR Partnership will contribute
approximately $25,289,153 in cash to the Acquiror, and the NMS
Partnership will contribute approximately $735,537 in cash to the
Acquiror, each in exchange for a combination of shares of common stock
and Convertible Preferred Stock of the Acquiror, which shares will be
converted into identical shares of the Surviving Corporation (i.e.,
CompDent) in the Merger. In addition, the NMS Partnership will cause its
shares of CompDent Common Stock (i.e., the shares purchased from the
Management Sponsors) with an agreed value of $15.00 per share (a total
value of $2,236,245) to be converted into a combination of shares of
common stock and Convertible Preferred Stock of the Surviving
Corporation. Immediately following the Merger, the GTCR Partnership will
transfer its equity interest in Dental Health Development Corporation
("DHDC"), a company in which CompDent has an indirect minority interest,
to a subsidiary of CompDent in exchange for such subsidiary's transfer to
the GTCR Partnership of shares of common stock and Convertible Preferred
Stock of the Surviving Corporation for an agreed value of $15,325,206
(assuming a March 31, 1999 closing date), which is equal to the original
cost of the GTCR Partnership's interest in DHDC plus accrued dividends
thereon and which CompDent believes approximates fair market value. The
transfer of the GTCR Partnership's interest in DHDC will be accounted for
under the purchase method of accounting, and any required assets will be
accounted for as goodwill. The Equity Investors will own an initial
aggregate equity interest in the Surviving Corporation of approximately
92.59%.
- The Other Investors. Certain other investors will convert 233,300 shares
of Common Stock for shares of common stock and Convertible Preferred
Stock of the Surviving Corporation. The Other Investors will own an
initial aggregate equity interest in the Surviving Corporation of
approximately 3.85%.
- The Other Management Investors. Certain members of management will
purchase shares of common stock of the Surviving Corporation representing
an initial aggregate equity interest in the Surviving Corporation of
approximately 0.28%. These shares will be subject to certain vesting
restrictions. In addition, the Surviving Corporation will grant options
to purchase shares of common stock of the Surviving Corporation
representing approximately % of the common stock on a fully
converted basis and will reserve approximately 3% of the common stock of
the Surviving Corporation on a fully converted basis for the grant of
options to management employees on a prospective basis. The "Management
Sponsors" and the "Other Management Investors" are sometimes referred to
hereafter as the "Management Group."
ACCOUNTING TREATMENT
The Acquiror believes that the Merger will be accounted for as a
recapitalization for accounting purposes.
FINANCING OF THE MERGER (PAGE 57)
In order to consummate the Merger, the Acquiror has received financing
letters from NationsBank, N.A. for bank loans in the amount of $45 million and a
financing letter from NationsBridge, L.L.C. for a bridge loan in the amount of
$100 million. These financing letters are subject to the satisfaction of
numerous conditions, including the satisfaction of certain financial tests.
CONFLICTS OF INTEREST (PAGE 52)
- The Management Group. Certain members of the Management Group have
interests in the Merger as employees and/or directors that are different
from, or in addition to, yours as a CompDent stockholder.
4
<PAGE> 13
Members of the Management Group will continue to have an equity interest
in the Surviving Corporation and the ultimate value of this interest
could exceed the $15.00 per share to be received by the Public
Stockholders in the Merger. If the Merger is consummated, the Management
Sponsors will be designated as members of the CompDent Board and members
of the Management Group will remain as senior management of CompDent. In
addition, if the Merger is consummated, options to purchase common stock
of the Surviving Corporation will be made available to the Management
Group and certain members of the Management Group are expected to amend
their existing employment agreements or enter into new employment
agreements with the Surviving Corporation. Also, certain indemnification
arrangements and directors' and officers' liability insurance for
existing directors and officers of CompDent will be continued by CompDent
after the Merger.
- Robinson-Humphrey. Robinson-Humphrey served as financial advisor to the
Special Committee and has had certain relationships with CompDent and its
management that could be perceived as adversely affecting its
independence. Robinson-Humphrey served as a co-manager in CompDent's
public offering of Common Stock in August 1995, as placement agent in
DHDC's private placement of securities in September 1997, and as
financial advisor to CompDent in all of its material acquisitions since
January 1996, each in exchange for customary advisory fees and/or
commission arrangements. In addition, an affiliate of Robinson-Humphrey
purchased approximately $500,000, or 5%, of the Series A Preferred Stock
and Class A Common Stock of DHDC from the GTCR Partnership on October 29,
1997. Dividends on each share of the Series A Preferred Stock accrue at a
compound rate of 31% per annum beginning on September 12, 1997, the date
of the initial investment. Robinson-Humphrey has agreed to resell its
interest to the GTCR Partnership prior to the Merger for approximately
$15,325,206 (assuming a March 31, 1999 closing date), which is equal to
the original cost of this interest plus the accrued dividends thereon and
which CompDent believes approximates fair market value. Robinson-Humphrey
believes that the foregoing arrangements do not affect its ability to
independently and impartially act as financial advisor to the Special
Committee.
- The Special Committee. Upon consummation of the Merger, the members of
the Special Committee will receive $15.00 per share in cash, without
interest, for each share of their Common Stock and will receive cash for
the aggregate unrealized gain on their vested stock options. The members
of the Special Committee believe that the foregoing arrangements do not
affect their independence or impartiality.
REGULATORY APPROVALS (PAGE 62)
CompDent is required to make filings with or obtain approvals from certain
regulatory authorities in connection with the Merger. These consents and
approvals include approval of the Federal Trade Commission, the Department of
Justice, and certain state insurance authorities. An application and notice has
been filed with the Federal Trade Commission and the Department of Justice. All
other necessary applications and notices have also been filed.
We cannot predict whether or when we will obtain all required regulatory
approvals or the timing of these approvals.
APPRAISAL RIGHTS (PAGE 68)
Any stockholder of CompDent who does not vote in favor of the proposal to
approve the Merger Agreement and who complies strictly with the applicable
provisions of Section 262 of the Delaware General Corporation Law has appraisal
rights to be paid cash for the "fair value" for such holder's shares of Common
Stock. To perfect these appraisal rights with respect to the Merger, you must
follow the required procedures precisely. The applicable provisions of Section
262 are attached to this Proxy Statement as Appendix C.
5
<PAGE> 14
TRANSACTION STRUCTURE
The following charts depict the ownership of CompDent at different stages of
the transaction.
I. OWNERSHIP OF COMPDENT PRIOR TO THE MERGER.
(OWNERSHIP OF COMPDENT PRIOR TO MERGER CHART)
II. TRANSACTIONS PRIOR TO THE MERGER. Prior to the Merger, the TA Fund, the GTCR
Partnership and the NMS Partnership form the Acquiror and contribute cash of
approximately $40,614,359, $25,289,153 and $735,537, respectively, to the
Acquiror in exchange for common stock and Convertible Preferred Stock of the
Acquiror. Separately, the NMS Partnership purchases 149,083 shares of CompDent
Common Stock from the Management Sponsors for $15.00 per share (a total value of
$2,236,245).
(Transaction Prior to the Merger Chart)
III. THE MERGER. The Acquiror merges with and into CompDent, with CompDent being
the Surviving Corporation. Pursuant to the Merger:
(i) the Public Stockholders have the right to receive $15.00 in cash,
without interest, for each share of Common Stock held (other than those in
respect of which appraisal rights have been perfected under Delaware law) and
will no longer be stockholders of CompDent;
(ii) the Management Sponsors convert 200,000 shares of Common Stock into
627,245 shares of common stock and 2,663 shares of Convertible Preferred
Stock of the Surviving Corporation;
(iii) the Other Management Investors purchase 510,000 shares of common
stock of the Surviving Corporation;
(iv) the Other Investors convert 233,300 shares of Common Stock into
290,005 shares of common stock and 3,326 shares of Convertible Preferred
Stock of the Surviving Corporation;
(v) the NMS Partnership converts the 149,083 shares of Common Stock it
purchased from the Management Sponsors into shares of common stock and
Convertible Preferred Stock of the Surviving Corporation; and
(vi) the shares of common and Convertible Preferred Stock of the Acquiror
owned by the TA Fund, the GTCR Partnership and the NMS Partnership are
converted into shares of the common stock and Convertible Preferred Stock of
the Surviving Corporation as follows:
<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE PREFERRED STOCK
------------ ---------------------------
<S> <C> <C>
TA Fund.................................................. 3,365,738 38,594
GTCR Partnership......................................... 2,095,728 24,032
NMS Partnership.......................................... 246,274* 2,824*
</TABLE>
* represents the total of the shares of common and Convertible Preferred Stock
the NMS Partnership will receive pursuant to its conversion of shares of
Common Stock in clause (v) and pursuant to the Merger of the Acquiror and
CompDent.
(CompDent Organizational Chart)
6
<PAGE> 15
IV. TRANSFER OF THE GTCR PARTNERSHIP'S OWNERSHIP INTEREST IN DHDC. Following
the Merger, the GTCR Partnership transfers its equity interest in DHDC to a
subsidiary of the Surviving Corporation for an additional 1,270,010 shares of
common stock and 14,563 shares of Convertible Preferred Stock of the Surviving
Corporation.
(Transfer of the GTCR Partnerships Ownership Interest in DHDC Chart)
V. VOTING PERCENTAGE OF SURVIVING CORPORATION FOLLOWING THE MERGER AND
CONVERSION OF THE CONVERTIBLE PREFERRED STOCK (see "Special Factors -- Conflicts
of Interest -- Post-Merger Ownership and Control of the Surviving Corporation").
(Ownership of Surviving Corporation following the Merger and Related
Transactions Chart)
7
<PAGE> 16
HISTORICAL MARKET INFORMATION
The Common Stock is traded on The Nasdaq National Market ("Nasdaq")
(symbol: CPDN). The following table sets forth the high and low sales prices for
each quarterly period for the two most recent fiscal years and for the current
fiscal year to date.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1997:
First quarter............................................... 39 1/4 27 1/2
Second quarter.............................................. 27 3/8 14 1/4
Third quarter............................................... 26 1/8 19 3/8
Fourth quarter.............................................. 27 5/8 18 5/8
1998:
First quarter............................................... 20 1/4 9 1/2
Second quarter.............................................. 17 12
Third quarter............................................... 17 1/2 12 3/4
Fourth quarter.............................................. 14 1/8 9 7/8
1999:
First quarter (through February , 1999)................
</TABLE>
On January 15, 1999, the last trading day prior to the announcement of the
execution of the Merger Agreement, the closing price per share of Common Stock
as reported by Nasdaq was $10 5/8. On February , 1999, the last trading day
prior to printing of this Proxy Statement, the closing price per share of Common
Stock as reported by Nasdaq was $ .
Since January 1, 1996, the Company has not paid any cash dividends on its
Common Stock. Under the Merger Agreement, the Company has agreed not to pay any
dividends on the Common Stock prior to the closing of the Merger. Under the
Company's current senior credit facility, the distribution of dividends would
also require lender consent. In addition, applicable laws generally limit the
ability of the Company's subsidiaries to pay dividends to the extent that
required regulatory capital would be impaired, which in turn further limits the
Company's ability to pay dividends.
In May 1995, CompDent completed an underwritten public offering of
3,420,000 shares of Common Stock. The offering price per share was $14.50, and
the net proceeds received by CompDent were approximately $44.5 million. In
August 1995, CompDent completed an underwritten public offering of 1,935,000
shares of Common Stock. The offering price per share was $23.25, and the net
proceeds received by CompDent were approximately $42.0 million.
8
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Certain selected consolidated historical financial data derived from the
audited financial statements of the Company are set forth below. The selected
financial data should be read in conjunction with the Consolidated Financial
Statements of the Company, related notes, and other financial information
incorporated by reference into this Proxy Statement.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY(1)
-------------
SIX SIX
MONTHS MONTHS NINE MONTHS ENDED
ENDED ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
JUNE 30, DECEMBER 31, ---------------------------------------------- -------------------
1993 1993 1994(2) 1995(3) 1996(4)(5) 1997(6)(7) 1997 1998(8)
------------- ------------ ------- -------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Total revenue.............. $22,004 $24,003 $55,192 $106,661 $141,069 $158,726 $117,169 $129,511
Total expenses............. 21,583 21,619 50,084 96,525 122,180 205,015 100,286 113,541
Operating (loss) income.... 421 2,414 5,108 10,136 18,889 (46,289) 16,883 15,970
Income (loss) before income
taxes and extraordinary
items.................... (718) 1,206 2,721 8,969 17,758 (48,805) 15,214 13,345
Income taxes............... 55 553 1,316 3,765 7,866 4,900 6,559 5,751
Extraordinary items, net of
tax...................... -- -- -- 498 -- -- -- --
Net income (loss).......... (773) 653 1,405 4,706 9,892 (53,705) 8,655 7,594
Net income (loss) per
common share before
extraordinary
items -- basic........... 0.31 0.69 0.98 (5.32) 0.86 0.75
Extraordinary loss per
common share -- basic.... (0.07)
Net income (loss) per
common share -- basic.... 0.31 0.62 0.98 (5.32) 0.86 0.75
Net income (loss) per
common share before
extraordinary
items -- diluted......... 0.30 0.68 0.97 (5.32) 0.85 0.75
Extraordinary loss per
common
share -- diluted......... (0.07)
Net income (loss) per
common
share -- diluted......... 0.30 0.61 0.97 (5.32) 0.85 0.75
Weighted average number of
shares
outstanding -- basic..... 4,149 7,241 10,149 10,098 10,106 10,113
Weighted average number of
shares
outstanding -- diluted... 4,252 7,352 10,177 10,098 10,200 10,181
BALANCE SHEET DATA:
Working capital............ $ 136 $(2,109) $ 25,213 $ 9,810 $ 11,216 $ 14,006 $ 3,417
Total assets............... 37,202 63,342 129,396 184,167 150,871 209,655 151,757
Total assets less excess of
cost of assets acquired
over book value.......... 14,037 25,159 58,333 49,127 54,575 56,699 51,549
Long-term debt............. 26,250 33,450 0 41,663 56,595 55,980 56,481
Stockholders' equity....... 1,900 4,200 102,177 112,183 60,276 122,583 67,869
</TABLE>
- ---------------
(1) Presents consolidated financial data of the Company's predecessor, American
Prepaid Professional Services, Inc., for the period prior to the Company's
acquisition of all of the outstanding stock thereof effective in June 1993.
Because of such transaction, certain aspects of the consolidated results of
operations for the period prior to the period July 1, 1993 are not
comparable with those for subsequent periods. Consequently, net income per
share data are presented only for the years December 31, 1994 and
thereafter.
(2) The DentiCare, Inc. and UniLife Insurance Company acquisitions were
completed on December 28, 1994, and DentiCare and UniLife are, therefore,
included in the consolidated balance sheet of the Company at December 31,
1994 and thereafter, and the consolidated statement of operations (from the
date of acquisition) of the Company for the year ended December 31, 1994 and
thereafter. Net income
9
<PAGE> 18
per common share for the year ended December 31, 1994 has been computed
after deducting $109,000 from net income attributable to preferred stock
dividend accumulation.
(3) The CompDent Corporation acquisition was completed on July 5, 1995, and
CompDent is, therefore, included in the consolidated balance sheet of the
Company at December 31, 1995 and thereafter, and the consolidated statement
of operations of the Company (from the date of acquisition) for the years
ended December 31, 1995 and thereafter. Net income per common share for the
year ended December 31, 1995 has been computed after deducting $218,000 from
net income attributable to preferred stock dividend accumulation.
(4) The Texas Dental Plans, Inc. acquisition was completed on January 8, 1996
and Texas Dental is, therefore, included in the consolidated balance sheet
of the Company at December 31, 1996 and thereafter, and the consolidated
statement of operations of the Company (from the date of acquisition) for
the year ended December 31, 1996 and thereafter.
(5) The Dental Care Plus Management, Corp. acquisition was completed on May 8,
1996, and Dental Care Plus is, therefore, included in the consolidated
balance sheet of the Company at December 31, 1996 and thereafter, and the
consolidated statement of operations of the Company (from the date of
acquisition) for the year ended December 31, 1996 and thereafter.
(6) The American Dental Providers, Inc., and Diamond Dental & Vision, Inc.,
acquisition was completed on March 21, 1997 and is, therefore, included in
the consolidated balance sheet of the Company at December 31, 1997 and
thereafter, and the consolidated statement of operations of the Company
(from the date of acquisition) for the year ended December 31, 1997 and
thereafter.
(7) The Workman Management Group Ltd., and its affiliates, Old Cutler Dental
Associates, P.A., Robert T. Winfree, D.D.S., and the Stratman Management
Group acquisitions were completed on July 1, 1997, July 1, 1997, September
26, 1997, and November 7, 1997, respectively, and these four acquisitions
are included in the consolidated balance sheet of the Company at December
31, 1997 and thereafter, and the consolidated statement of operations of the
Company (from the date of acquisition) for the year ended December 31, 1997
and thereafter.
(8) The Reznik Group and Kendall Roberts, D.D.S., acquisitions were completed in
January 1998 and May 1998, respectively, and these two acquisitions are
included in the consolidated balance sheet and the consolidated statement of
operations of the Company (from the date of acquisition) at June 30, 1998
and thereafter.
10
<PAGE> 19
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
CompDent and the Acquiror have entered into the Merger Agreement, which
provides that the Acquiror will be merged with and into CompDent with CompDent
being the surviving corporation. In connection with the Merger, each stockholder
of CompDent (other than stockholders who are entitled to and have perfected
their appraisal rights, shares held by certain members of management, shares
held by certain stockholders of CompDent, and shares held by the Acquiror) will
be entitled to receive $15.00 in cash for each outstanding share of common
stock.
The following table sets forth certain unaudited pro forma consolidated
financial data for CompDent as and for the fiscal year ended December 31, 1997
and the nine-month period ended September 30, 1998 and reflects the pro forma
effect of the Merger.
The selected income statement data gives pro forma effect to the Merger as
if it had occurred on January 1, 1997. The selected balance sheet data gives pro
forma effect to the Merger as if it had occurred on September 30, 1998. The
selected unaudited pro forma consolidated financial data do not purport to be
indicative of the results of operations or financial position of CompDent that
would have actually been obtained had the Merger been completed as of the
assumed dates and for the periods presented, or which may be obtained in the
future. The selected unaudited pro forma consolidated financial data should be
read in conjunction with the separate historical consolidated financial
statements of CompDent, and the notes thereto, and Management's Discussion and
Analysis of Results of Operations and Financial Condition of the Company which
has been incorporated by reference into this Proxy Statement.
COMPDENT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS YEAR ENDED PRO FORMA ADJUSTMENTS
----------------------- DECEMBER 31, -----------------------
HISTORICAL DHDC TRANSACTION 1997 HISTORICAL DHDC TRANSACTION
---------- --------- ----------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue............. 158,726 41 (1,854)(3) 156,913 129,511 2,487 (1,488)
Operating Expenses...... 140,327 3,757 (1,854)(3) 142,230 109,327 7,063 (1,488)
Depreciation and
amortization.......... 5,735 2,600(1) 8,335 4,214 1,950(1)
Non-recurring item
(goodwill
impairment)........... 58,953 58,953 --
-------- ------ ------- -------- -------- ------ ------
Income from
operations.... (46,289) (3,716) (2,600) (52,605) 15,970 (4,576) (1,950)
Net interest expense and
financing charges..... 2,516 (156) 11,429(2) 13,789 2,625 (269) 7,717(2)
-------- ------ ------- -------- -------- ------ ------
Income (loss) before
income taxes and
extraordinary items... (48,805) (3,560) (14,029) (66,394) 13,345 (4,307) (9,667)
Income taxes............ 4,900 (1,371) (5,401)(4) (1,872) 5,751 (1,658) (3,722)(3)
======== ====== ======= ======== ======== ====== ======
Net income (loss)....... (53,705) (2,189) (8,628) (64,522) 7,594 (2,649) (5,945)
======== ====== ======= ======== ======== ====== ======
Net income (loss) per
share -- basic........ $ (5.32) $ (6.39) $ 0.75
-------- -------- --------
Net income (loss) per
share -- fully
diluted............... $ (5.32) $ (6.39) $ 0.75
-------- -------- --------
Weighted average common
shares outstanding --
basic................. 10,098 10,098 10,113
-------- -------- --------
Weighted average common
shares outstanding --
fully diluted......... 10,098 10,098 10,181
-------- -------- --------
<CAPTION>
PRO FORMA
NINE MONTHS
ENDED
SEPTEMBER 30,
1998
-------------
<S> <C>
Net Revenue............. 130,510
Operating Expenses...... 114,902
Depreciation and
amortization.......... 6,164
Non-recurring item
(goodwill
impairment)........... --
--------
Income from
operations.... 9,444
Net interest expense and
financing charges..... 10,073
--------
Income (loss) before
income taxes and
extraordinary items... (629)
Income taxes............ 371
========
Net income (loss)....... (1,000)
========
Net income (loss) per
share -- basic........ $ (0.10)
--------
Net income (loss) per
share -- fully
diluted............... $ (0.10)
--------
Weighted average common
shares outstanding --
basic................. 10,113
--------
Weighted average common
shares outstanding --
fully diluted......... 10,181
--------
</TABLE>
- ---------------
Pro Forma Adjustments:
(1) Depreciation and amortization -- Amortization of the deferred financing and
transaction fees over a 5-year period. $13,000/5=$2,600 annually
(2) Reflects borrowings of $100.0 million Senior Subordinated Notes, $26.9
million pursuant to the American Prepaid Credit Facility and $20.0 million
term loan to DHMI.
<TABLE>
<CAPTION>
12/31/97 9/30/98
-------- -------
<S> <C> <C>
Elimination of historical interest expense on debt
replaced with new debt............................ (3,239) (3,284)
Interest expense on the $146.9 million in new debt
at an average estimated interest rate of 9.98%.... 14,668 11,001
------- -------
$11,429 $ 7,717
------- -------
</TABLE>
(3) Management fees paid by DHDC to DHMI.
(4) Income taxes are adjusted to reflect tax provision effect of pro forma
adjustments at an estimated effective tax rate of 38.5%.
11
<PAGE> 20
COMPDENT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS COMPDENT
THE ----------------------- PRO
HISTORICAL ACQUIROR DHDC TRANSACTION FORMA
---------- -------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. 9,980 69,675(1) 4,903 (148,517)(2) 17,612
146,924(4)
1,128(3)
(56,481)(4)
(10,000)(5)
Premiums receivable from
subscribers........................ 5,416 5,416
Patient accounts receivable, net of
allowance doubtful accounts of $708
at September 30, 1998.............. 2,125 234 2,359
Income taxes receivable............... 344 344
Deferred income taxes................. 1,464 1,464
Other current assets.................. 4,925 436 5,361
------- ------ ------ -------- -------
Total current assets.......... 24,254 69,675 5,573 (66,946) 32,556
------- ------ ------ -------- -------
Restricted funds........................ 2,268 2,268
Property and equipment, net of
accumulated depreciation.............. 15,271 15,271
Excess of purchase price over net assets
acquired.............................. 100,208 100,208
Non-competition agreements.............. 8 8
Reinsurance receivable.................. 5,547 5,547
Investment in DHDC...................... 1,500 15,325(1) (16,825)(7)
Transaction costs....................... -- 13,000(5) 13,000
Other assets............................ 2,701 56 2,757
------- ------ ------ -------- -------
Total Assets.................. 151,757 85,000 5,629 (70,771) 171,615
======= ====== ====== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue...................... 8,807 8,807
Accounts payable and accrued
expenses........................... 9,930 1,995 3,000(5) 14,925
Accrued interest payable.............. 161 161
Dental claims reserves................ 1,876 1,876
Other current liabilities............. 63 63
Notes payable-current................. -- 2,500(4) 2,500
------- ------ ------ -------- -------
Total current liabilities..... 20,837 -- 1,995 5,500 28,332
------- ------ ------ -------- -------
</TABLE>
12
<PAGE> 21
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS COMPDENT
THE ----------------------- PRO
HISTORICAL ACQUIROR DHDC TRANSACTION FORMA
---------- -------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Aggregate reserves for life policies and
contracts............................. 5,336 5,336
Notes payable........................... 56,481 (56,481)(4) 144,424
20,000(4)
124,424(4)
Deferred compensation expense........... 265 265
Deferred income taxes................... 26 26
Other liabilities....................... 943 943
------- ------ ------ -------- -------
Total liabilities............. 83,888 -- 1,995 93,443 179,326
------- ------ ------ -------- -------
Stockholders' equity
Common stock.......................... 101 1 1(3) 103
Preferred stock....................... 80,750(1) 4,988(6) 85,738
Additional paid-in capital............ 97,618 4,250(1) 11,500 1,127(3) (55,835)
(4,988)(6)
(16,825)(7)
(148,517)(2)
Retained earnings..................... (29,850) (7,867) (37,717)
------- ------ ------ -------- -------
Total stockholders' equity.... 67,869 85,000 3,634 (164,214) (7,711)
------- ------ ------ -------- -------
Total liabilities and
stockholders' equity........ 151,757 85,000 5,629 (70,771) 171,615
======= ====== ====== ======== =======
Pro Forma Adjustments:.................. 0
</TABLE>
- ---------------
(1) Investment of the Acquiror pursuant to the Merger Agreement.
(2) Repurchase of approximate 9.9 million shares of Common Stock at $15 per
share.
(3) Cash received from the exercise of approximately 138,500 option shares of
Common Stock.
(4) New borrowings by CompDent and its subsidiaries to fund share repurchase and
retirement of debt.
(in thousands)
<TABLE>
<S> <C>
Senior Subordinated Notes................................... $100.00
Senior Debt:
Term Loan................................................. $ 25.00
Revolving Credit Facility................................. $ 1.92
Term Loan -- DHMI........................................... $ 20.00
-------
$146.92
-------
</TABLE>
(5) Estimated costs totaling $13.0 million related to merger costs and financing
fees. $10.0 million is expected to be paid upon consummation of the Merger
and the remaining $3.0 million paid subsequent to closing.
(6) Value of the shares held by certain members of management and certain
stockholders of CompDent which will be pari pasui with the Acquiror.
(7) Eliminating entry for CompDent's investment in DHDC.
13
<PAGE> 22
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND BOOK VALUE PER SHARE
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for each of the last two fiscal years and as of
September 30, 1998 and book value per share of Common Stock for the year ended
December 31, 1997 and as of September 30, 1998.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DEC. 31, 1996 DEC. 31, 1997 SEPTEMBER 30, 1998
------------- ------------- ------------------
<S> <C> <C> <C>
Ratio of earnings to fixed charges:(1)............. 6.1:1 --(2) 3.3:1
Book value per share............................... $11.02 $5.97 $6.67
</TABLE>
- ---------------
(1) For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income before
extraordinary items. Fixed charges consist of interest costs, whether
expensed or capitalized, and amortization of debt discounts and issue costs,
whether expensed or capitalized.
(2) The earnings for the year ended December 31, 1997 were a loss of
$53,706,000. Therefore the calculation of this ratio is not applicable.
Accordingly, the Company's earnings would have been insufficient to cover
the Company's fixed charges by $50,406,000.
COMPANY PROJECTIONS(1)
In connection with the Equity Investors' review of the Company and in the
course of the negotiations between the Company and the Equity Investors
described in "SPECIAL FACTORS -- Background to Merger," the Company provided the
Equity Investors with certain non-public business and financial information. The
non-public information provided by the Company included certain projections (the
"Company Projections") of the future operating performance of the "dental
benefits" operations of the Company. The Company Projections do not give effect
to the Merger or the financing thereof.
The Company does not, as a matter of course, publicly disclose projections
as to future revenues or earnings. The Company Projections were not prepared
with a view to public disclosure and are included in the Proxy Statement only
because such information was made available to the Equity Investors in
connection with its due diligence investigation of the Company. Accordingly, it
is expected that there will be differences between actual and projected results,
and actual results may be materially different than those set forth below. The
Company Projections were not prepared with a view to compliance with the
published guidelines of the Commission regarding projections, nor were they
prepared in accordance with the guidelines established by the American Institute
of Certified Public Accountants for preparation and presentation of financial
projections. These forward-looking statements reflect numerous assumptions made
by the Company's management. In addition, factors such as industry performance,
general business, economic, regulatory, and market and financial conditions, all
of which are difficult to predict, may cause the Company Projections or the
underlying assumptions to be inaccurate. Accordingly, there can be no assurance
that the Company Projections will be realized, and actual results may be
materially greater or less than those contained in the Company Projections.
The inclusion of the Company Projections herein should not be regarded as
an indication that the Equity Investors or the Company or their respective
financial advisors considered or consider the Company Projections to be a
reliable prediction of future events, and the Company Projections should not be
relied upon as such. None of the Company, the Equity Investors, or any of their
financial advisors intends to update or otherwise revise the Company 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 Company Projections are shown to be in error.
The Company has provided to the Equity Investors the following Company
Projections: total revenue of $173.4, $181.6, $192.1, $205.0, $220.5 and $237.2
million, and operating income of $21.8, $25.1, $27.2, $29.9, $33.7 and $37.8
million for fiscal years 1998, 1999, 2000, 2001, 2002 and 2003, respectively.
The Equity
14
<PAGE> 23
Investors took this information, together with their own analyses, into account
in determining whether to enter into the Merger Agreement.
(1) PricewaterhouseCoopers LLP has not examined, compiled or applied any
procedures to the Company Projections in accordance with standards
established by the American Institute of Certified Public Accountants and
expresses no opinion or any assurance on their reasonableness or
achievability.
15
<PAGE> 24
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Original Merger Agreement
During the latter part of 1997 and early 1998, changes in the dental
benefits marketplace were adversely affecting the Company's historical growth
rate and profitability. The Company had historically grown in size and
profitability through internal growth and acquisitions. During the latter part
of 1997 and early 1998, management of the Company observed that due to increased
competition and aggressive pricing by competitors, internal growth was becoming
more difficult to achieve. In addition, acquisitions were becoming less
attractive because acquisition prices had increased and the Company's reduced
stock price made acquisitions more expensive and dilutive to earnings.
Management of the Company undertook certain operational initiatives to
strengthen the Company and to position the Company for the future. In the first
quarter of 1997, the Company formed a new dental practice management company,
Dental Health Management, Inc. ("DHMI"), to become a full service dental care
company. In addition, in the third quarter of 1997, the Company acquired an
ownership interest in Dental Health Development Corporation ("DHDC"), a dental
development company specializing in developing start-up dental practices.
In addition to the operational initiatives, management of the Company met
several times with Morgan Stanley & Co. Incorporated during 1997 to discuss
various strategic alternatives available to the Company. These alternatives were
related to potential business combinations with financial buyers and strategic
competitors each of which was rejected for the reasons stated below.
In the early part of November 1997, the Company was contacted by a large
industrial company ("Company No. 1") indicating a level of interest in
considering a possible transaction to acquire the Company. On November 11, 1997,
at a meeting of the Board of Directors, the Board authorized management to
engage in discussions with Company No. 1. On November 24, 1997, the Company
formally engaged Morgan Stanley to act as its financial advisor in connection
with a proposed transaction. On or about November 25, 1997, the Company received
a written indication of interest from Company No. 1 to acquire the Company for
$32.00 per share. On December 10, 1997, the Company was informed that the
potential bidder determined not to proceed with a transaction. Subsequent
conversations with the potential bidder in January 1998 convinced management of
the Company that the potential bidder was not indeed interested in pursuing an
acquisition of the Company despite the initial written offer from Company No. 1.
On multiple occasions in 1997, senior management of the Company was in
contact with a competitor ("Company No. 2") of the Company regarding a possible
strategic transaction. Management reported these contacts to the Board of
Directors and the Board authorized management to meet with Company No. 2 to
discuss a possible strategic transaction and to report the results of that
discussion to the Board. On December 21, 1997, David Klock and Phyllis Klock met
with the Chairman of the Board of Company No. 2 to discuss a possible strategic
transaction. The participants discussed the changing dental benefits industry
and the positions of their respective companies in that industry. No formal
proposal or indication of interest upon which the parties could continue
discussions followed these meetings.
During the fourth quarter of 1997, the Company completed an extensive
review of its operations. During late December 1997 and the week of January 5,
1998, the Company determined, based upon this review of its operations, that
changes had occurred which necessitated a number of unusual and one-time
charges. On Monday, January 12, 1998, the Company issued a press release that
stated the Company expected its financial results for the fourth quarter ended
December 31, 1997 to be below analysts' published consensus estimates. In
addition, the Company announced that it was assessing goodwill recorded in prior
acquisitions and was evaluating whether to record certain one-time charges,
including a charge relating to goodwill impairment. On January 12, following
this announcement, the per share price of the Common Stock dropped from $18.00
to $12.50. The Company ultimately recorded charges amounting to $68.4 million in
the aggregate. These charges were announced together with the Company's fourth
quarter earnings on February 10, 1998.
16
<PAGE> 25
On January 22, 1998, David Klock, Phyllis Klock, and Philip Hertik met with
the senior management of a large regional insurance provider ("Company No. 3")
to discuss a possible transaction. The participants discussed both the dental
benefits and practice management industries in general and their respective
companies in particular, but no formal proposal or indication of interest upon
which the parties could continue discussions was made. In March 1998, Company
No. 3 informed the Company that it was not interested at that time in pursuing a
transaction with the Company.
In addition, on or about January 26, 1998, senior management of the Company
was approached by certain financial buyers interested in discussing a possible
acquisition of the Company, which would include a significant investment by
management. David Klock reported this development to the full Board of Directors
on January 27, 1998. The Board of Directors encouraged Dr. Klock to pursue any
discussions that could lead to a transaction that would provide enhanced value
to the Company's stockholders. The Board of Directors considered the possibility
of an acquisition of the Company which would involve an investment by management
as one of a number of potential types of transactions which might provided
enhanced value to the Company's stockholders. At the time of the January 27,
1998 meeting, senior management was still focused on pursuing a transaction
which would not involve an investment by management. At the January 27, 1998
Board meeting, the directors held a preliminary discussion regarding the
compensation packages of certain executive officers.
During the first quarter of 1998, David Klock, Phyllis Klock, and other
members of senior management met several times with representatives of TA
Associates, Inc. ("TA Associates") and Golder, Thoma, Cressey, Rauner, Inc.
("GTCR"), individually, to discuss the possibility of acquiring the Company.
Concurrently, the management team held discussions with a number of other
potential financial buyers. At that time, senior management was considering an
acquisition in which it would make an investment, as well as other possible
transactions with both strategic and financial buyers, and had made no decision
to pursue any particular transaction.
On February 20, 1998, management of the Company recommended to the
Compensation Committee of the Board of Directors that the Compensation Committee
review the compensation packages of the executive officers of the Company in
light of the significant decline in the Company's stock price. The members of
the Compensation Committee were Joseph A. Ciffolillo, Joseph E. Stephenson and
David F. Scott, Jr. The decline in the Company's stock price had resulted in a
significant reduction in the value of the executives' existing stock options. In
addition, many of the executives' employment contracts did not have "change in
control" provisions, and, therefore, the executives could be terminated without
any significant payment if a third party acquired the Company. David Klock
expressed concern that certain key employees of the Company would seek
alternative career opportunities absent action by the Compensation Committee
providing them with more attractive long-term incentives and protection in the
event of a change in control of the Company.
The Compensation Committee retained the services of King & Spalding as
legal counsel and a compensation consultant to advise it in relation to
management's proposal. After considering the recommendations of the compensation
consultant, the Compensation Committee determined to (i) put in place new
employment agreements for certain management employees that contained
appropriate change in control provisions and (ii) delay taking any action with
respect to the executive officers' existing stock options to allow the
Compensation Committee to fully evaluate the Company's long-term incentives for
executive officers. On May 8, 1998, the Compensation Committee approved
employment agreements for certain management employees of the Company.
Discussions with TA Associates, GTCR and other potential acquirors
continued through the spring and early summer of 1998. Following an initial
meeting at an investment conference, a large multi-regional health care provider
("Company No. 4") visited the Company on March 18, 1998 to receive an overview
of the Company and its position in the dental benefits industry. No follow-up
conversation transpired.
Following an initial meeting with a large national health care provider
("Company No. 5"), Company No. 5 requested a meeting to discuss a possible
transaction. On May 7, 1998, David Klock, Phyllis Klock, Keith Yoder, and Philip
Hertik met with the senior management of Company No. 5 to discuss a possible
17
<PAGE> 26
transaction. Approximately three weeks following the meeting, Company No. 5
indicated that it was not interested at that time in considering a transaction
with the Company.
By July 1998, management had determined, based on its discussions with TA
Associates, GTCR and other potential bidders, that the combined proposal of TA
Associates and GTCR (together with the NMS Partnership, which joined the group
later) would provide the greatest likelihood that a transaction which would
provide enhanced value to the Company's stockholders. Management based this
determination on TA Associates' and GTCR's experience with and ability to close
transactions of this nature, their experience in the industry, their prior
relationships and experience with the Company, their available capital for
investments of this nature, and the fact that the Company's previous investment
in DHDC, an affiliate of GTCR, might make it more advantageous to engage in a
transaction involving GTCR.
A special meeting of the Company's Board of Directors was scheduled for
July 14, 1998, in anticipation of a proposal being made by TA Associates and
GTCR regarding the acquisition of the Company. At the special meeting,
representatives of TA Associates and GTCR made a presentation to the Board of
Directors and submitted a non-binding proposal to acquire the Company for $17.50
per share in cash (the "Initial Proposal"). TA Associates and GTCR told the
Board that David Klock, Phyllis Klock, and possibly other members of senior
management would participate in the proposed acquisition and have a continuing
equity interest in the Company.
After receiving the Initial Proposal, the Board of Directors formed the
Special Committee, consisting of Joseph E. Stephenson, Philip Hertik, and David
F. Scott, Jr., three members of the Board who are not employed by the Company
and who will not own equity interests in or be employed by the Surviving
Corporation, to consider the fairness to the Company's stockholders of the
proposed transaction and to report its determination regarding the fairness of
the Initial Proposal to the full Board of Directors. The Special Committee was
further authorized to establish such procedures, review such information, engage
such financial advisors and legal counsel as it deemed reasonable and necessary
to fully and adequately make such determination, and conduct negotiations with
the TA Fund, the GTCR Partnership, and the NMS Partnership (collectively, the
"Equity Investors") regarding the terms of the proposed transaction.
The Special Committee retained King & Spalding as its legal counsel.
Thereafter, the Special Committee and its legal counsel discussed the procedures
to be followed in analyzing the offer from the Equity Investors to acquire the
Company. As part of this discussion, King & Spalding advised the Special
Committee as to the Special Committee's legal responsibilities and the legal
principles applicable to, and the legal consequences of, actions taken by the
Special Committee with respect to the offer by the Equity Investors.
The Special Committee unanimously selected Robinson-Humphrey to serve as
its financial advisor for the purpose of advising and assisting the Special
Committee in negotiations with the Equity Investors. The Special Committee
instructed Robinson-Humphrey to commence its investigation and analysis of the
value of the Company and the Initial Proposal.
During the period from July 15 to July 20, 1998, Robinson-Humphrey reviewed
certain financial and other information concerning the Company and met with
certain members of the Company's management. On July 21, 1998, Robinson-Humphrey
met with the Special Committee and its legal counsel to discuss the preliminary
results of its analyses and to obtain further direction from the Special
Committee. Representatives of Robinson-Humphrey discussed with the Special
Committee the analyses they had performed to produce a range of implied values
for the Company's Common Stock. The Special Committee also discussed with
Robinson-Humphrey its preliminary findings in connection with
Robinson-Humphrey's investigation of the Company and questioned
Robinson-Humphrey concerning the assumptions made in connection with its
analyses and the facts on which these analyses were based. Robinson-Humphrey
explained to the Special Committee the assumptions, methodologies, and relative
limits of its analyses.
At the July 21 meeting, Robinson-Humphrey provided the Special Committee
with presentation materials outlining its valuation analyses. A copy of the
written materials provided by Robinson-Humphrey and distributed to the Special
Committee at the July 21 meeting has been filed as an exhibit to the Schedule
13E-3 filed with the Securities and Exchange Commission (the "Commission") in
connection with
18
<PAGE> 27
the Merger and is available for inspection and copying at the principal
executive offices of the Company during its regular business hours by any
stockholder or any representative of a stockholder who has been so designated in
writing. A copy of such materials shall be provided to any stockholder or any
representative of a stockholder who has been so designated in writing upon
written request and at the expense of the requesting stockholder or
representative.
Robinson-Humphrey presented its analyses to the Special Committee with
respect to the $17.50 per share cash offer and indicated that further
negotiations with the Equity Investors were possible. The Special Committee then
concluded that it could not recommend to the Board of Directors the original
offer of $17.50 per share in cash. The Special Committee concluded not to
respond with a specific price counteroffer to the Initial Proposal at that time.
Instead, the Special Committee determined that it would be advisable for
Robinson-Humphrey to meet with the Equity Investors to discuss
Robinson-Humphrey's analyses in support of a higher price.
At the July 21, 1998 meeting, the Special Committee also reviewed with King
& Spalding the preliminary draft of the Merger Agreement that had been provided
by legal counsel for the Equity Investors. In addition, the Special Committee
met with members of management to discuss the Company's historical and projected
financial results and opportunities available to the Company to achieve higher
levels of internal growth and improved profitability.
The Special Committee considered the advisability of contacting other
potential acquirors regarding their interest in pursuing a transaction with the
Company. Robinson-Humphrey reported to the Special Committee that they and King
& Spalding had a discussion with Morgan Stanley on July 20, 1998 to review the
contacts the Company had over the prior eight months with potentially interested
third party acquirors. At that time, the Special Committee determined that it
was unlikely that any of these companies would pursue a transaction with the
Company. In addition, the Equity Investors had informed the Board of Directors
that they did not want their proposal to be used to attempt to generate other
bids from third parties. The Special Committee was concerned that if they
contacted other bidders at this time, the Equity Investors would withdraw their
proposal. Accordingly, the Special Committee determined at this time not to
contact other parties, but to attempt to negotiate a higher per share price from
the Equity Investors. In addition, the Special Committee instructed
Robinson-Humphrey to tell the Equity Investors that the Special Committee
required an appropriate "fiduciary out" from the non-solicitation covenant and a
reduced "break-up" fee that would not preclude the Special Committee from
accepting another acquisition proposal.
The Equity Sponsors initially proposed that CompDent agree to a provision
stating that until consummation or abandonment of the Merger, CompDent and its
subsidiaries would not initiate or solicit or have any discussions or
negotiations concerning an Acquisition Proposal (a "Non-solicitation Covenant").
The Equity Sponsors also proposed that CompDent agree to pay the Equity Sponsors
a "break up" fee of $9.0 million if, under certain circumstances, CompDent
approved, entered into, or consummated a transaction contemplated by an
Acquisition Proposal or if the Board or the Special Committee withdrew its
recommendation of the Merger. During negotiations with the Equity Sponsors, the
Special Committee opposed both the "Non-solicitation Covenant" and the "break
up" fee, but the Equity Sponsors indicated that they would not be willing to
enter into the Original Merger Agreement if it did not contain both of these
provisions. The Equity Sponsors did, however, agree to modify the
Non-solicitation Covenant to allow the Special Committee to furnish information
to, enter into discussions or negotiations and otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal if the Special Committee
determines that failing to take such action would be inconsistent with its
fiduciary duties to the CompDent stockholders (the "Fiduciary Duty Exception").
The Equity Sponsors also agreed to reduce the "break up" fee to $7.0 million.
The benefit to the Public Stockholders of the Special Committee agreeing to the
"break up" fee is that the Special Committee was able to successfully enter into
the Original Merger Agreement. Furthermore, by obtaining the Fiduciary Duty
Exception to the Non-solicitation Covenant, the Special Committee preserved the
Company's ability to enter into an Acquisition Proposal whose terms are more
favorable than the terms of the Merger, although the Company would have to pay
the "break up" if it were to enter into such a transaction. Thus, the "break up"
fee does have the effect of increasing the cost of entering into an Acquisition
Proposal. CompDent would pay the break up fee either out of available cash or
with borrowings from a credit facility. The Non-
19
<PAGE> 28
solicitation Covenant and the "break up" fee have been substantially modified in
the Merger Agreement. See "The Merger -- Terms of the Merger Agreement."
On July 22, 1998, Robinson-Humphrey met telephonically with the Equity
Investors to discuss the original offer of $17.50 per share in cash, the amount
of the break-up fee, and certain other matters. The Equity Investors and
Robinson-Humphrey discussed the Special Committee's view that the $17.50 per
share offer was inadequate. The Equity Investors indicated that the terms of
their financing commitments would restrict any increase in their per share offer
price beyond $17.50 per share without the renegotiation of these financing
commitments. The Equity Investors informed Robinson-Humphrey that they would
review their Initial Proposal and respond to Robinson-Humphrey.
On July 22, 1998, King & Spalding provided the Equity Investors and
McDermott Will & Emery, then legal counsel to the Equity Investors, with
comments regarding the terms of the Original Merger Agreement and entered into
negotiations on behalf of the Special Committee with McDermott Will & Emery and
the Equity Investors regarding the terms of the Original Merger Agreement.
On July 23, 1998, the Equity Investors called Robinson-Humphrey and
informed them that they would be prepared to raise their offer to $18.00 per
share in cash. However, the Equity Investors informed Robinson-Humphrey that, to
offer $18.00 per share in cash, the Equity Investors would be required to
renegotiate the terms of their financing commitments. Accordingly, the Equity
Investors wanted confirmation that $18.00 per share in cash was an amount that
the Special Committee thought it would be able to accept prior to the Equity
Investors renegotiating their financing commitments.
On July 24, 1998, the Special Committee, together with representatives of
Robinson-Humphrey and King & Spalding, met to consider the revised $18.00 per
share cash offer by the Equity Investors. Robinson-Humphrey indicated that based
on the discussions with the Equity Investors, it believed that the $18.00 per
share cash offer was the best offer available from the Equity Investors. Because
such price was consistent with and supported by Robinson-Humphrey's valuation
methodologies as a whole, Robinson-Humphrey indicated that it believed it would
be able to deliver an opinion that the $18.00 per share cash price was fair to
the Public Stockholders, from a financial point of view. The Special Committee
discussed the $18.00 per share cash offer in detail. The Special Committee
examined the advantages and disadvantages of continuing to urge the Equity
Investors to make an even higher offer, including the Equity Investors' ability
to decline to proceed with the transaction if the Special Committee insisted on
a higher price, with the result that the Company's stockholders would not
receive a substantial premium for their shares. Similarly, the Special Committee
again discussed the advantages and disadvantages of contacting other potential
acquirors regarding their interest in pursuing a transaction with the Company.
Based on Robinson-Humphrey's discussions with the Equity Investors and the
valuation analyses presented by Robinson-Humphrey to the Special Committee on
July 21, 1998, the Special Committee authorized Robinson-Humphrey to inform the
Equity Investors that the Special Committee would be willing to pursue a
transaction at $18.00 per share in cash. The Special Committee also authorized
King & Spalding to continue to negotiate the terms of the Original Merger
Agreement.
On July 27, 1998, the Special Committee, together with representatives of
Robinson-Humphrey and King & Spalding, met to consider further the $18.00 per
share cash offer by the Equity Investors. Representatives of King & Spalding
reviewed again with the members of the Special Committee their legal duties in
connection with the consideration of the offer. King & Spalding also reviewed
with the Special Committee the terms of the Original Merger Agreement and the
terms of the Equity Investors' commitment letters for the equity and debt
financing for the Merger. At the meeting, Robinson-Humphrey then presented an
analysis of the $18.00 per share cash offer and concluded that it was prepared
to give an opinion that such offer was fair, from a financial point of view, to
the Public Stockholders. The Special Committee discussed the $18.00 per share
cash offer in detail, and questioned Robinson-Humphrey regarding certain aspects
of its valuation methodologies and analyses. Based on the Robinson-Humphrey
opinion and the valuation analyses presented by Robinson-Humphrey to the Special
Committee during the July 27 meeting, the Special Committee's belief that the
$18.00 per share cash price was the best offer available and the other factors
described below in "-- The Special Committee's and the Board's Recommendation,"
the Special Committee
20
<PAGE> 29
unanimously decided to recommend the approval and adoption of the $18.00 per
share cash offer. The Special Committee authorized King & Spalding to continue
to negotiate the terms of the Original Merger Agreement with the Equity
Investors and McDermott Will & Emery. Immediately after the Special Committee
meeting on July 27, 1998, the Board of Directors of the Company met to receive
the report of the Special Committee. At this meeting, Mr. Stephenson, Chairman
of the Special Committee, gave the report of the Special Committee in which the
Special Committee unanimously recommended to the Board of Directors of the
Company that the Board accept the $18.00 per share cash offer and approve and
adopt the Original Merger Agreement. At the Board meeting, Robinson-Humphrey
also summarized its presentation given to the Special Committee on July 27 for
the full Board of Directors of the Company. Following the July 27 Board meeting,
representatives of King & Spalding, representatives of McDermott Will & Emery,
and the Equity Investors held telephone conferences and meetings to resolve the
remaining terms of the Original Merger Agreement, resulting in a merger
agreement mutually satisfactory to the Equity Investors and the Special
Committee.
On July 28, 1998, prior to the opening of trading on Nasdaq, the Special
Committee met to review with King & Spalding the changes made to the Original
Merger Agreement the prior evening. After discussing the changes, the Special
Committee unanimously reaffirmed its recommendation to the Board of Directors to
accept the $18.00 per share cash offer and determined that the Merger, the
Original Merger Agreement, and the transactions contemplated thereby were fair
and in the best interests of the Public Stockholders of the Company. Immediately
after the Special Committee meeting, the Board of Directors met to review the
changes to the Original Merger Agreement. After discussing the changes and
hearing the recommendations of the Special Committee, the Board of Directors
unanimously determined that the Merger, the Original Merger Agreement, and the
transactions contemplated thereby were fair and in the best interests of the
Public Stockholders and approved the Original Merger Agreement.
At the conclusion of the July 28, 1998 meeting, the Company issued a press
release announcing that based on the recommendation of the Special Committee the
Board of Directors had approved the Equity Investors' merger proposal of $18.00
per share in cash.
A copy of the written materials provided by Robinson-Humphrey and
distributed to the Special Committee at the July 27, 1998 meeting has been filed
as an exhibit to the Schedule 13E-3 and is available for inspection and copying
at the principal executive offices of the Company during its regular business
hours by any stockholder or any representative of a stockholder who has been so
designated in writing. A copy of such materials shall be provided to any
stockholder or any representative of a stockholder who has been so designated in
writing upon written request and at the expense of the requesting stockholder or
representative.
The Amended Merger Agreement.
During the first two weeks of October 1998, the Acquiror informed the
Company of certain communications it had received from NationsBank, N.A. and
NationsBridge, L.L.C. (collectively, the "Banks") regarding the credit
facilities and the bridge loan contemplated by the Equity Investors' original
financing letters, dated as of July 28, 1998 (the "July Financing Letters"). The
July Financing Letters contained, among other things, a condition to the Banks'
obligation to fund the credit facilities and the bridge loan that, as of the
date of funding, the Company's total debt (taking into account the financing to
be provided by the Banks) not exceed six times trailing twelve months EBITDA
(the "Total Debt to EBITDA Ratio"). Consequently, the Company's EBITDA for the
twelve months prior to the date of funding had to be at a certain minimum level
(the "Minimum EBITDA") for the Banks to be obligated to provide their applicable
portions of the financing necessary to consummate the Merger. The Banks
indicated to the Acquiror that, based on their most recent review of the
Company's financial results, if requested to fund currently, the Company's
EBITDA was below the Minimum EBITDA and therefore they were under no obligation
to provide their applicable portions of the amount of financing necessary to
consummate the Merger.
On October 15, 1998, the Board of Directors, together with representatives
of King & Spalding and Robinson-Humphrey, met to discuss the Banks' statements
to the Acquiror regarding the July Financing Letters. King & Spalding reviewed
with the Board of Directors that, although the Company, in the opinion of
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the Banks, did not satisfy the Total Debt to EBITDA Ratio at that time, this
condition to fund the credit facilities and the bridge loan pursuant to the July
Financing Letters must only be satisfied on the date that the Banks were
requested to fund. King & Spalding further reviewed with the Board of Directors
the other terms of the July Financing Letters. Representatives of management
then presented the Company's financial results through the third quarter of
1998. The Board of Directors resolved to not take any specific action with
respect to these communications. The Special Committee also met on October 15,
following the meeting of the Board of Directors. The Special Committee, based on
the same information discussed at the meeting of the full Board of Directors,
determined that it would not specifically respond to these communications from
the Banks to the Acquiror and that the Company should proceed with actions
necessary to consummate the Merger.
On October 21, 1998, the Special Committee received a letter from the
Acquiror (the "October Letter") informing it of certain oral statements made by
the Banks to the Acquiror with respect to their obligations to fund the credit
facilities and bridge loan contemplated by the July Financing Letters. The Banks
stated to the Acquiror that they would not waive the condition to their
obligation to fund the credit facilities and the bridge loan that the Total Debt
to EBITDA Ratio be satisfied as of the date of funding. In the October Letter,
the Acquiror reported that the Banks had indicated that, based on their analysis
of the Company's financial information, they projected that the Company's EBITDA
for calendar 1998 would be less than the Minimum EBITDA and consequently the
Banks would not be obligated to fund the full amount of their applicable
portions of the financing necessary to consummate the Merger if requested to
fund pursuant to the July Financing Letters during January 1999. The October
Letter further stated that the Banks would continue to analyze the Company's
financial information and that the Acquiror and management of the Company were
working to satisfy additional information requests from the Banks.
On October 22, 1998, the Special Committee, together with representatives
of King & Spalding and Robinson-Humphrey, met to review the October Letter. The
Special Committee determined that it needed to receive an updated report from
management at the next regular meeting of the Board of Directors regarding the
Company's historical and projected financial results and management's assessment
of the likelihood of the Company being able to satisfy the financial tests and
ratios which were conditions to the Banks' obligation to fund the July Financing
Letters (the "July Financing Tests"), including the Total Debt to EBITDA Ratio.
The Special Committee also determined that the Company should issue a press
release disclosing recent communications from the Banks and the Acquiror
regarding the July Financing Letters and the current status of the financing for
the Merger. Following discussion with the Equity Investors and the Banks, the
Company issued such a press release on October 27, 1998.
On November 17, 1998, the Banks, the Equity Investors and members of the
Company's management met to discuss the Company's financial performance and the
feasibility of completing the financing of the Merger contemplated by the July
Financing Letters. The Banks provided management with information concerning how
they would calculate EBITDA to determine if the Company satisfied the July
Financing Tests.
On November 25, 1998, the Acquiror provided the Company with a copy of a
letter from the Banks to the Acquiror (the "November Letter") in which the Banks
provided the definition of EBITDA they would use to determine whether the July
Financing Tests were satisfied.
On December 4, 1998, the Special Committee, together with representatives
of King & Spalding and Robinson-Humphrey, met to discuss the November Letter.
King & Spalding reported to the Special Committee that management had determined
that the Company's EBITDA, based on the definition in the November Letter, would
be less than the Minimum EBITDA. Management had determined that the amount of
financing that the Banks would be obligated to provide would represent a
shortfall of approximately $7 million in the amount necessary to consummate the
Merger. King & Spalding also informed the Special Committee that the Banks had
indicated to management that they were willing to discuss extending the
termination dates of the July Financing Letters beyond January 31, 1999.
At the December 4, 1998 meeting of the Special Committee, King & Spalding
also reviewed with the Special Committee the Equity Investors' obligation under
the Original Merger Agreement to either obtain
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the full amount of financing contemplated by the July Financing Letters or to
use their reasonable best efforts to obtain alternative financing for any
portion of the financing contemplated by the July Financing Letters which became
unavailable. The Special Committee determined that it should deliver a letter to
the Equity Investors in which it would (i) advise the Equity Investors of its
expectation that they should be arranging alternative financing for the amount
of the projected shortfall, (ii) request that the Equity Investors inform the
Special Committee on the status and results of such efforts to arrange
alternative financing, (iii) request that the Equity Sponsors enter into
discussions with the Banks to extend the termination date of the July Financing
Letters beyond January 31, 1999, and (iv) request that the Equity Sponsors take
other appropriate actions necessary to consummate the Merger and related
transactions. This letter was delivered to the Equity Investors on December 8,
1999.
On December 14, 1998, the Special Committee received a letter from the
Acquiror stating that it had contacted other lending sources about providing
alternative financing for the Merger. Based on those lending institutions'
initial responses, the Acquiror concluded that it was unlikely that financing
would be available in amounts necessary to consummate the Merger at an $18.00
per share price and on terms consistent with those contemplated by the July
Financing Letters due to the serious deterioration in the debt financing markets
from the time the July Financing Letters were issued and the Company's recent
financial performance. The Acquiror stated that it did not expect to receive
complete responses from the lending sources it contacted until January. The
Acquiror also indicated that it would be interested in discussing restructuring
the Merger after it had reviewed the Company's 1999 budget. The Acquiror stated
that it had asked the Banks to extend the termination date of the July Financing
Letters to June 30, 1999 and also responded to the Special Committee's inquiries
regarding its efforts to consummate the Merger.
On December 15, 1998, the Acquiror forwarded a letter to the Special
Committee from the Banks informing the Acquiror that while they were not
currently willing to extend the termination date of the July Financing Letters
to June 30, 1999, they would continue to evaluate the status of the Merger
through January 31, 1999 and would consider extending the July Financing Letters
at that time, although they were under no obligation to do so.
On December 16, 1999, the Special Committee delivered a letter to the
Equity Investors in which it asked for more definitive responses from the Equity
Investors. The Special Committee informed the Equity Investors that it expected
the Equity Investors to continue to discuss with the Banks an extension of the
July Financing Letters and that they should act immediately to arrange
alternative sources of financing and keep the Special Committee informed of all
activities in this regard.
Between December 16 and December 23, 1998, the Equity Investors and
Robinson-Humphrey had informal communications in which the Equity Investors
indicated that they intended to deliver a proposal to the Special Committee to
enter into a restructured transactions in which the cash merger consideration
would be reduced to $14.00 per share. Robinson-Humphrey informed the Equity
Investors that the Special Committee had indicated that it wanted any proposal
from the Equity Investors regarding a reduction in the cash merger consideration
to be their best and final offer. The Equity Investors indicated that they would
take that request into account in making their proposal to the Special
Committee.
On December 21, 1998, the Company issued a press release announcing that
based on the definition of EBITDA which the Banks had indicated they would use,
the Company believed that the amount of available financing would be
approximately $7 to $9 million short of the total financing needed to consummate
the transactions.
On December 23, 1998, the Special Committee received a letter from the
Equity Investors in which they informed the Special Committee that they believed
that it was a near certainty that the Merger would not be consummated at an
$18.00 price per share because of, among other things, the financial performance
of the Company compared to its original 1998 projections, and the increased
volatility of the capital markets since July 1998 resulting in tightening of
credit in general and tightening of credit in the healthcare services
marketplace. In the letter, the Equity Investors proposed to restructure the
Merger to reduce the cash merger consideration from $18.00 per share to $15.00
per share (the "Revised Proposal"). Pursuant to the terms of the Revised
Proposal, the approximately $30.3 million reduction in the purchase price would
be used to
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<PAGE> 32
reduce the amount of the necessary debt financing from the Banks, while the
equity investments and contributions from the members of the Investor Group
would remain unchanged. The Equity Investors also stated that after discussions
with the Banks, they were comfortable that it would be possible to obtain the
necessary financing to close the Merger pursuant to the terms of the Revised
Proposal in the current financial market. The Equity Investors' letter also
stated that as part of the Revised Proposal they would be willing to eliminate
the Non-solicitation Covenant and reduce the "break-up" fee from $7.0 million to
the amount of the expenses the Equity Investors incurred in connection with the
attempted Merger.
On December 28, 1998, the Special Committee, together with representatives
of King & Spalding and Robinson-Humphrey, met to discuss the terms of the
Revised Proposal. The Special Committee considered the advisability of accepting
the Revised Proposal and determined that it needed further information about the
adequacy of the $15.00 per share price and revisions to the Original Merger
Agreement and the July Financing Letters it should consider in connection with
entering into a restructured transaction. Accordingly, the Special Committee
instructed Robinson-Humphrey to update its analysis of the value of the Company
and report on the fairness of the Revised Proposal. The Special Committee also
instructed King & Spalding to review the terms of the Original Merger Agreement
and the July Financing Letters and report on the potential revisions to those
documents that the Special Committee should consider.
On January 5, 1999, the Special Committee, together with representatives of
Robinson-Humphrey and King & Spalding, again met to consider the $15.00 per
share cash offer by the Equity Investors. King & Spalding reviewed with the
members of the Special Committee their legal duties in connection with the
consideration of the offer. Robinson-Humphrey presented the Committee with the
preliminary results of the updated analyses it had performed to produce a range
of implied values for the Common Stock. Robinson-Humphrey indicated orally that
it believed that it would be able to deliver an opinion that the $15.00 per
share cash price was fair to the Public Stockholders, from a financial point of
view. A copy of the written materials provided by Robinson-Humphrey and
distributed to the Special Committee at the January 5, 1999 meeting has been
filed as an exhibit to the Schedule 13E-3 and is available for inspection and
copying at the principal executive offices of the Company during its regular
business hours by any stockholder or any representative of a stockholder who has
been so designated in writing. A copy of such materials shall be provided to any
stockholder or any representative of a stockholder who has so designated in
writing upon written request and at the expense of the requesting stockholder or
representative.
During the January 5 meeting, the Special Committee discussed the $15.00
per share cash offer in detail and determined that it would not be able to
accept $15.00 per share cash offer without the ability to explore possibilities
of entering into an alternative transaction at a higher per share price. The
Special Committee also determined that it should determine if a higher offer
than $15.00 per share in cash could be obtained from the Equity Investors. The
Special Committee instructed Robinson-Humphrey to negotiate with the Equity
Investors regarding increasing their $15.00 per share offer beginning with a
counteroffer of $16.00 per share. The Special Committee discussed the
elimination of the Non-Solicitation Covenant and its ability to determine if
another acquiror was interested in pursuing a transaction with the Company at a
higher price, while still obligating the Investor Group to consummate the Merger
at $15.00 per share if a higher offer was not available. In addition, the
substantial reduction in the "break up" fee proposed by the Equity Investors
would reduce the cost to the Company of terminating the Original Merger
Agreement and entering into a more favorable transaction with another acquiror.
The Special Committee determined that it would not enter into a restructured
transaction with the Equity Investors unless both of these amendments were made
to the Original Merger Agreement.
Between January 5 and January 10, Robinson-Humphrey met telephonically with
the Equity Investors several times to discuss the Equity Investors' offer of
$15.00 per share in cash. Robinson-Humphrey made a counteroffer of $16.00 per
share. Because the Equity Investors had already made their "final and best"
offer as requested by Robinson-Humphrey, the Equity Investors rejected the
counteroffer. The Equity Investors informed Robinson-Humphrey that $15.00 per
share constituted their best and final offer and reiterated the terms of the
Revised Proposal.
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<PAGE> 33
On January 10, 1999, the Special Committee met to discuss the status of the
negotiations with the Equity Investors. Robinson-Humphrey reported to the
Special Committee that the Equity Investors had indicated that their $15.00 per
share cash offer was their best and final offer. Based on the its determination
that $15.00 per share in cash was fair to the Public Stockholders, from a
financial point of view, the Special Committee determined that it would accept a
$15.00 per share cash offer provided the Equity investors would agree to certain
other additional terms which it discussed at its January 5, 1999 meeting. These
terms included the elimination of the Non-solicitation Covenant and a
substantial reduction of the "break up" fee (each of which were part of the
Revised Proposal) and amendments to the Original Merger Agreement or the July
Financing Letters which would improve the likelihood the Merger would be
consummated on the terms of the Revised Proposal. The Special Committee
instructed Robinson-Humphrey to inform the Equity Investors that it would accept
a $15.00 per share cash offer provided the Equity Investors would agree to
certain other additional terms and to negotiate such terms with the Equity
Investors.
Between January 10 and January 13, Robinson-Humphrey met with the Equity
Investors telephonically several times to discuss the additional terms on which
the Special Committee would accept a $15.00 per share cash offer. The Equity
Investors agreed to eliminate the Non-solicitation Covenant and to reduce the
amount of the "break up" fee to the expenses incurred by the Equity Investors,
subject to a limit of $1.5 million. The Equity Investors informed
Robinson-Humphrey that they would not enter into an amended Merger Agreement
which was not subject to a financing contingency. The Equity Investors did
indicate that, under the circumstances, they would agree to reimburse the
Company for expenses which it incurs in connection with the Merger if the Merger
is not consummated and the only unsatisfied closing condition is the financing
contingency (the "Reverse Break Up Fee") provided the Reverse Break Up Fee was
subject to an acceptable maximum limit. Robinson-Humphrey proposed a maximum
amount of $2 million, but the Equity Investors indicated that a $1 million cap
was the maximum that they would accept. During these negotiations, the Equity
Investors informed Robinson-Humphrey that the Banks were in the process of
preparing revised financing letters to replace the July Financing Letters (the
"January Financing Letters"). The Equity Investors also informed
Robinson-Humphrey that the Banks had indicated that they would not be willing to
eliminate any of the conditions to their obligation to fund the credit
facilities and the bridge loan pursuant to the January Financing Letters, and
that the Total Debt to EBITDA Ratio would need to be reduced to five and
one-half times trailing twelve months EBITDA.
On January 13, 1999, Robinson-Humphrey met with the Special Committee and
King & Spalding to present the results of its negotiations with the Equity
Investors. Robinson-Humphrey and King & Spalding also discussed the terms of the
January Financing Letters with the Special Committee. Robinson-Humphrey
discussed with the Special Committee that the Banks were unwilling to remove any
of the conditions on their obligations to fund under the January Financing
Letters. Robinson-Humphrey also discussed with the Special Committee that the
reduced amounts of the funding necessary to consummate the Merger based on the
$15.00 per share offer price resulted in a reduction of the minimum EBITDA
necessary to satisfy the Total Debt to EBITDA Ratio, thereby increasing the
likelihood that the conditions to the Banks' obligations to fund the credit
facilities and the bridge loan would be satisfied. The Special Committee
determined that it would enter into a restructured transactions at a $15.00 per
share offer price with the additional terms negotiated by Robinson-Humphrey,
provided the final terms of the January Financing Letters were also acceptable.
The Special Committee instructed King & Spalding to negotiate the terms of an
amended Merger Agreement.
Between January 13, 1999 and January 18, 1999, King & Spalding negotiated
the terms of the Merger Agreement with the Equity Investors and the terms of the
January Financing Letters with the Banks.
On January 18, 1999, the Special Committee, together with representatives
of Robinson-Humphrey and King & Spalding, met to consider further the $15.00 per
share cash offer by the Equity Investors. King & Spalding reviewed with the
Special Committee the terms of the proposed Merger Agreement and the terms of
the January Financing Letters. Robinson-Humphrey then presented an analysis of
the $15.00 per share cash offer and concluded that it was prepared to give an
opinion that such an offer was fair, from a financial point of view, to the
Public Stockholders. A copy of the written materials provided by
Robinson-Humphrey and distributed to the Special Committee at the January 18,
1999 meeting has been filed as an exhibit to the
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<PAGE> 34
Schedule 13E-3 and is available for inspection and copying at the principal
executive offices of the Company during its regular business hours by any
stockholder or any representative of a stockholder who has been so designated in
writing. A copy of such materials shall be provided to any stockholder or any
representative of a stockholder who has so designated in writing upon written
request and at the expense of the requesting stockholder or representative.
Based on the Robinson-Humphrey opinion and the valuation analyses presented
by Robinson-Humphrey to the Special Committee during the January 18 meeting, the
Special Committee's belief that proposed amendments to the Merger Agreement
would allow the Special Committee to confirm that the $15.00 per share cash was
the best offer available prior to consummating the merger and the other factors
described below in "-- The Special Committee's and the Board's Recommendation,"
the Special Committee unanimously decided to recommend approval and adoption of
the $15.00 per share cash offer and determined that the Merger, the Merger
Agreement and the transactions contemplated thereby were advisable, fair and in
the best interests of the Public Stockholders.
Immediately after the Special Committee meeting on January 18, 1999, the
Board of Directors of the Company met to receive the report of the Special
Committee. At this meeting, the Special Committee unanimously recommended to the
Board of Directors of the Company that the Board accept the $15.00 per share
cash offer and approve and adopt the Merger Agreement. At the Board meeting,
Robinson-Humphrey also summarized its presentation to the Special Committee on
January 18 for the full Board of Directors of the Company. After discussing the
recommendations of the Special Committee, the Board of Directors unanimously
determined that the Merger, the Merger Agreement and the transactions
contemplated thereby were fair and in the best interests of the Public
Stockholders and approved and deemed advisable the amended Merger Agreement.
On January 19, 1999, prior to the opening of trading on Nasdaq, the Company
issued a press release announcing that based on the recommendation of the
Special Committee, the Board of Directors had approved the Equity Investors
revised merger proposal of $15.00 in cash and had entered into an amended Merger
Agreement which removed the Non-solicitation Covenant and reduced the amount of
the "break up" fee.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
Because certain of the CompDent directors will have a financial interest in
the Merger, the full Board formed the Special Committee, comprised of the sole
disinterested directors, to review and evaluate the proposed transaction. The
Special Committee unanimously recommended to the Board that the Merger Agreement
be approved and that it be recommended to the stockholders of the Company.
Following the unanimous recommendation of the Special Committee, the Board
approved the Merger Agreement and recommended that the stockholders of the
Company approve the Merger Agreement. In connection with the foregoing, the
Special Committee and the Board determined that the Merger, the Merger
Agreement, and the transactions contemplated thereby were fair and in the best
interests of the Public Stockholders. In connection with their recommendations,
the Special Committee and the Board each adopted the analyses and findings of
the Special Committee's financial advisor, Robinson-Humphrey. See "SPECIAL
FACTORS -- Opinion of Financial Advisor." The Special Committee and the Board
recommend that the stockholders vote "For" the approval of the Merger Agreement.
The Original Merger Agreement.
The Special Committee and the Board of Directors determined that it was an
appropriate time to enter into the proposed transaction when the Equity Sponsors
made their proposal to the Company based on recent developments in the dental
benefits industry and on contacts which the Company had had with other potential
acquirors during the previous several months. During the latter part of 1997 and
early 1998, changes in the dental benefits industry were adversely affecting the
Company's historical growth rate and profitability. The Company had historically
grown in size and profitability through internal growth and acquisitions. During
this time period, management of the Company reported to the Board of Directors
that due to increased
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competition and aggressive pricing by competitors, internal growth was becoming
more difficult to achieve. In addition, acquisitions were becoming less
attractive because acquisition prices had increased and the Company's reduced
stock price made acquisitions more expensive and dilutive to earnings. In
addition, although the Company had not actively sought to enter into a strategic
transaction, several potential acquirors had approached the Company about
potential transactions. Based on these contacts, the Special Committee and the
Board of Directors were aware of the terms on which those potential acquirors
were willing to enter into transactions with the Company. When the Equity
Investors made their proposal, the Special Committee and the Board of Directors
determined that it was an appropriate time to enter into a transaction on the
proposed terms in light of the foregoing factors and with the knowledge of the
terms on which other acquirors were willing to enter into a transaction at that
time.
The Special Committee met on thirteen occasions between July 14, 1998 and
the date of this Proxy Statement, in person or by telephone conference, to
consider developments relating to a possible sale of the Company. The Special
Committee was assisted in its deliberations by its financial advisor, Robinson-
Humphrey, and its legal counsel, King & Spalding. At a meeting held on July 27,
1998, the Special Committee determined that the Merger, the Original Merger
Agreement, and the transactions contemplated thereby were fair and in the best
interests of the Public Stockholders of the Company and recommended that the
full Board approve the Original Merger Agreement.
The material factors the Special Committee evaluated in connection with the
Merger are described below. Except for paragraph (ix) and as otherwise as noted
below, the Special Committee considered the following factors to be positive
factors supporting its determination that the Merger is fair and in the best
interests of the Public Stockholders. In arriving at its decision, the Special
Committee considered:
(i) The Special Committee's view that the Company has experienced
increased competition and aggressive pricing by competitors. As a result,
internal growth has become more difficult to achieve. In addition,
acquisitions have become less attractive because acquisition prices have
increased and the Company's reduced stock price has made acquisitions more
expensive and dilutive to earnings. These factors resulted in a lower
overall growth rate for the Company which had an adverse effect on the
market price of the Common Stock and on management's ability to execute the
Company's business strategy. In this connection, the Special Committee
considered that the Company may be managed more effectively as a private
company not subject to pressures from the Public Stockholders and market
professionals to grow earnings per share consistently and at the Company's
historical double digit rates. In addition, the Committee was concerned
that given the reduced market price of the Common Stock, any additional
equity incentives which the Company might issue to retain key members of
management would have further adverse effects on the market price of the
Common Stock. The Special Committee believes that, as a private company,
the Company would have greater flexibility to consider business strategies
that have long-term benefits (including acquisitions which are often
dilutive in the short-term), but that would adversely impact earnings per
share and the market price of the Common Stock in the short-term if the
Company were public.
(ii) The belief of the Special Committee that the Merger represents a
more desirable alternative than continuing to operate the Company as a
public company. In this connection, the Special Committee gave
consideration to rejecting the Equity Investors' proposal in favor of
maintaining the Company's independence and enabling the Public Stockholders
to share in the Company's future earnings and growth potential. However,
the Special Committee believes that continuing to operate the Company as an
independent entity would subject the Company and its stockholders to delays
in implementation or the risk of execution of the Company's business
strategy as described above. After evaluating such risk (including the
factors described under item (i) above), the Special Committee concluded
that, while the Company's business strategy could ultimately prove
successful, the risk that the Company will continue to experience
significant operating events adversely impacting the performance of the
Common Stock justifies a sale of the Company. As alternatives to the
Merger, the Special Committee considered continuing to operate the Company
as an independent entity, and the preliminary proposals that are described
above under " -- Background of the Merger." In addition, the Special
Committee considered that other alternatives, such as implementing a stock
repurchase program, had
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<PAGE> 36
seen rejected by the full Board of Directors because such a program would
not sufficiently enhance stockholder value.
(iii) Information with respect to the financial condition, results of
operations, and business of the Company. The Special Committee focused in
particular on projections, which reflected lower revenues and operating
income for future periods than had been anticipated prior to fiscal year
1998.
(iv) The scope of efforts to effect a transaction for the Company,
including the number and identity of potential buyers from which
indications of interest were received. In this connection, the Special
Committee considered that the Company had discussions with the likely
strategic partners for the Company and that none of those discussions led
to a definitive proposal to acquire the Company or reasonable prospects
that a definitive proposal would be forthcoming. The Special Committee
determined that based upon the prior discussions, it was unlikely that
another bidder would make a definitive proposal to acquire the Company, or
that if such a proposal were made, it would result in a transaction that
would provide greater value to the Public Stockholders. In addition, the
Special Committee considered the fact that the Equity Investors would
withdraw their bid if their proposal was used to attempt to generate other
bids from third parties.
(v) Robinson-Humphrey's written opinion delivered to the Special
Committee on July 28, 1998, that the $18.00 per share in cash to be
received by the Public Stockholders was fair to such holders from a
financial point of view. The Special Committee and the Board adopted the
analyses and findings of Robinson-Humphrey in their determination that the
Merger is fair to the Public Stockholders.
(vi) The proposed terms and conditions of the Original Merger Agreement.
In particular, the Special Committee considered the fact that the Original
Merger Agreement does not provide for unreasonable termination fees and
expense reimbursement obligations which would have the effect of
unreasonably discouraging competing bids and that, subject to the
satisfaction of certain conditions, the Board would be able to withdraw or
modify its recommendation to the stockholders regarding the Merger and
enter into an agreement with respect to a more favorable transaction with a
third party, if such a transaction becomes available prior to the
consummation of the Merger.
(vii) The market price of the Common Stock, which as recently as January
27, 1998 had traded at $9.56 per share, and the premium over such prices
(as well as over the $13.50 per share market price on July 27, 1998)
represented by the $18.00 per share in cash to be received by the Public
Stockholders in the Merger. In addition, the Special Committee considered
Robinson-Humphrey's analyses of the premiums paid in comparable merger
transactions which indicated that the average premiums paid over the target
stock prices one trading day prior to the announcement date, one week prior
to the announcement date, and four weeks prior to the announcement date
were 33.3%, 34.6% and 22.0%, respectively.
(viii) The financial ability and willingness of the Equity Investors to
consummate the Merger. The Original Merger Agreement conditions the
Acquiror's obligations to consummate the Merger on the Acquiror's having
obtained financing for the Merger on terms satisfactory to the Acquiror. In
this connection, the Special Committee reviewed commitment letters for
equity financing supplied by the Equity Investors and by certain members of
the Management Group and for debt financing supplied by the Investor
Group's lenders. In addition, the Special Committee, through its financial
and legal advisors, discussed the proposed financing with the Investor
Group and its lenders. Based on the foregoing, the Special Committee did
not view as substantial the risk that the financing condition of the
Original Merger Agreement would not be satisfied.
(ix) Actual or potential conflicts of interest to which certain officers
and directors of the Company and their affiliates are subject in connection
with the Merger, as follows:
- The Special Committee considered that members of the Management
Sponsors will own shares of common stock and/or Convertible Preferred
Stock in the Surviving Corporation, representing approximately 3.93%
of the Company's aggregate equity. The Special Committee considered
that certain members of the Other Management Investors will own shares
of common stock of the
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Surviving Corporation representing an aggregate equity interest in the
Surviving Corporation of approximately 0.28%. The Special Committee
also considered that the Surviving Corporation will grant options to
purchase shares of common stock of the Surviving Corporation
representing approximately % of the common stock on a fully
converted basis and will reserve approximately 3% of the common stock
of the Surviving Corporation on a fully converted basis for the grant
of options to management employees on a prospective basis. The Special
Committee further considered that certain members of the Management
Group will amend their existing employment agreements or will enter
into new employment agreements with the Surviving Corporation
replacing their existing employment agreements with the Company, and
that such new employment agreements will provide for the payment to
them of base salaries, possible annual cash bonuses, and potential
severance benefits.
- The Special Committee considered that the Equity Investors have given
each of the Management Sponsors an opportunity to roll over a
substantial portion of his or her equity investment in the Company
into an investment in the Surviving Corporation. The Special Committee
considered that the rollover of a substantial portion of the
Management Sponsor's current equity investment in the Company would
indicate a level of confidence in the Company's prospects that might
be inconsistent with the Special Committee's assessment of the risks
associated with the Company's future.
- The Special Committee considered the foregoing conflicts of interest
in connection with management's preparation of the Company
projections, which reflect a slower rate of growth for the Company and
support a significantly lower value for the Company than previously
anticipated. While the Special Committee recognized that the conflicts
of interest to which the Management Group were subject might be a
basis for doubting the reasonableness of the projections, the Special
Committee concluded, based on its discussions with the Management
Group and other officers and employees of the Company as described
above, that management's assumptions underlying the projections are
reasonable. The Special Committee considered the Management Group's
conflicts of interest in connection with preparation of the
projections.
The Special Committee did not assign relative weights to the factors it
considered, and it did not consider any relative weighting to be necessary in
reaching its fairness determination.
The Amended Merger Agreement.
At the conclusion of its meeting on January 18, 1999, the Special Committee
adopted, approved and recommended to the stockholders of the Company the
approval of the Merger Agreement pursuant to which the cash price per share to
be paid in the Merger would be $15.00 and certain amendments were made to the
Original Merger Agreement and the January Financing Letters were executed. In
the course of reaching its decision to adopt and approve the amended Merger
Agreement and to recommend approval to the stockholders, the Special Committee
consulted with its legal and financial advisors and considered a number of
factors in addition to those considered at the time of approval of the Original
Merger Agreement on July 28, 1998, including the following principal factors
which were material to the Special Committee's decision:
(i) the Special Committee's belief that it was unlikely that the
Acquiror would be able to complete the Merger pursuant to the terms of the
July Financing Letters and its belief that the Acquiror would be unable to
obtain alternative financing.
(ii) the general decline in the multiples of publicly traded comparable
companies, which reduced the implied valuation of the Company.
(iii) the Special Committee's belief that there were no potential merger
partners who would be able to pay more than the $15.00 per share Cash
Merger Consideration.
(iv) that the $15.00 per share Cash Merger Consideration amount was the
Acquiror's "best and final offer."
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(v) Robinson-Humphrey's written opinion delivered to the Special
Committee on January 18, 1999 that the $15.00 per share in cash to be
received by the Public Stockholders was fair to such holders from a
financial point of view. The full text of the written opinion of
Robinson-Humphrey dated January 18, 1999, which sets forth assumptions
made, matters considered, and limitations on the review undertaken in
connection with its opinion is attached hereto as Appendix B and is
incorporated herein by reference. The Special Committee and the Board
adopted the analyses and findings of Robinson-Humphrey in their
determination that the Merger is fair to the Public Stockholders. The
Company's stockholders are urged to and should read such opinion in its
entirety. See "-- Opinion of Financial Advisor."
(iv) that the Acquiror agreed to eliminate the Non-solicitation Covenant
and to reduce the "break up" fee from $7.0 million to the amount of the
Acquiror's fees and expenses, not to exceed $1.5 million.
(vii) that the January Financing Letters modified certain closing
conditions and covenants which made it more likely that the Merger would be
consummated.
(viii) that the Acquiror agreed to reimburse the Company for its fees
and expenses (up to $1 million) if the Merger is not consummated solely due
to the inability to obtain financing.
In addition, the Special Committee believed that the factors it considered
when it agreed to enter into the Original Merger Agreement were still applicable
and justified a decision to enter into the amended Merger Agreement. The Special
Committee did not assign relative weights to the factors it considered, and it
did not consider any relative weighting to be necessary in reaching its fairness
determination.
The Special Committee noted that approximately 3.4% of the outstanding
shares of Common Stock are held by persons who have expressed their intention to
vote their shares of Common Stock in favor of the Merger, including all of the
members of the Investor Group, the other executive officers of CompDent, and the
members of the Special Committee, although no written agreement has been entered
into in this regard. The Special Committee also considered that the obligation
of the Company to consummate the Merger is not conditioned upon the favorable
vote of a majority of the Public Stockholders. Notwithstanding the absence of
such a voting requirement, the Special Committee believes that the procedure
that was followed in determining the purchase price to be paid to the
stockholders of the Company was fair to the Public Stockholders. As described
above, the seven person Board of Directors of the Company (a majority of whom
are members of the Management Group or are affiliated with the Management Group)
appointed as the only members of the Special Committee the three non-employee
directors who were independent of the Management Group and granted the Special
Committee exclusive authority on behalf of the Board to review, evaluate, and
negotiate the transaction proposed by management. The Merger Agreement
negotiated by the Special Committee contains provisions that would enable the
Board to withdraw or modify its recommendation to the stockholders regarding the
Merger and to enter into an agreement with respect to a more favorable
transaction with a third party, and contains provisions (without which the
Special Committee believes the Equity Investors would not have entered into the
Merger Agreement) imposing upon the Company expense reimbursement obligations
that, in the view of the Special Committee, are reasonable and would not have
the effect of unreasonably discouraging competing bids. Further, the
stockholders of the Company may dissent from the Merger and be paid cash for the
"fair value" of their shares as determined in accordance with Delaware law.
Thus, although the Merger is not structured to require approval of a majority of
the unaffiliated stockholders, the Special Committee nevertheless believes, as
of the date of this Proxy Statement and for the reasons set forth above, the
Merger is procedurally fair to the Public Stockholders.
In considering the fairness of the Merger, the Special Committee and the
Board did not consider such factors as the Company's net book value or
liquidation value, which are not believed to be indicative of the value of the
Company as a going concern. The Company's tangible net book value per share and
net book value per share as of September 30, 1998 were ($3.18) and $6.67>,
respectively, on a fully diluted basis, both substantially below the $15.00
purchase price per share of Common Stock (the "Cash Merger Consideration") to be
paid by the Acquiror in the Merger. The Special Committee further believes the
Company's liquidation value, which takes into account the appreciated value of
the Company's assets, also would be substantially below $15.00 per share.
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Based on the foregoing, the Special Committee unanimously determined that
the Merger, the Merger Agreement, and the transactions contemplated thereby were
fair and in the best interests of the Public Stockholders and recommended to the
Board approval of the Merger Agreement and that it be recommended to the
stockholders of the Company. The Board unanimously approved the Merger on
January 19, 1999, and determined that the Merger is fair and in the best
interests of the Public Stockholders. The Special Committee is unaware of any
development since its January 18, 1999 meeting that would affect its January 18,
1999 determination, and, accordingly, the Special Committee reconfirms, as of
the date of this Proxy Statement, its determination that the Merger, the Merger
Agreement, and the transactions contemplated thereby are fair and in the best
interests of the Public Stockholders of the Company. Based on the foregoing, the
Board also reconfirms, as of the date of this Proxy Statement, its determination
that the Merger, the Merger Agreement, and the transactions contemplated thereby
are fair and in the best interests of the Public Stockholders of the Company.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE MERGER.
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated July 14, 1998, the Special Committee
retained Robinson-Humphrey to act as its financial advisor in connection with
the consideration of the possible acquisition by the Acquiror and to render to
the Special Committee an opinion with respect to the fairness, from a financial
point of view, to the Company's stockholders (other than the Acquiror and shares
held by certain members of the Investor Group (the "Recapitalization Shares"))
of the Cash Merger Consideration to be received in the Merger. Robinson-Humphrey
was selected as the Special Committee's fairness advisor because of its previous
association with the Company, its familiarity with the Company, and its
operations and standing as a nationally-recognized investment banking firm which
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate, and other opinions. Based on
these qualifications, the Special Committee selected Robinson-Humphrey as its
financial advisor and determined that it was unnecessary to interview other
investment banking firms.
Robinson-Humphrey delivered its written opinion to the Special Committee to
the effect that the Cash Merger Consideration to be received in the Proposed
Transaction is fair to the stockholders of the Company (other than the Acquiror
and the holders of Recapitalization Shares).
The full text of Robinson-Humphrey's opinion dated as of January 18, 1999,
which sets forth the assumptions made, matters considered, and limits on the
review undertaken in connection with the opinion is attached hereto as Appendix
B. The Company's stockholders are urged to carefully read such opinion in its
entirety. Robinson-Humphrey's opinion is addressed to the Special Committee, is
directed only to the fairness of the Cash Merger Consideration to be received in
the Merger by the stockholders of the Company (other than the Acquiror and the
holders of the Recapitalization Shares), and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote in relation to the Merger. The summary of the opinion of
Robinson-Humphrey set forth in this Proxy Statement is qualified in its entirety
by reference to the full text of such opinion.
In arriving at its opinion, Robinson-Humphrey reviewed and analyzed: (i)
the Merger Agreement, (ii) publicly available information concerning the Company
which Robinson-Humphrey believed to be relevant to its inquiry, (iii) financial
and operating information with respect to the business, operations, and
prospects of the Company furnished to Robinson-Humphrey by the Company, (iv) the
Dental Health Development Corporation Securities Purchase Agreement dated
September 12, 1997, (v) a trading history of the Company's Common Stock from May
26, 1995 to January 18, 1999, and a comparison of that trading history with
those of other companies which Robinson-Humphrey deemed relevant, (vi) a
comparison of the historical financial results and present financial condition
of the Company with those of other companies which were deemed relevant, (vii) a
comparison of the financial terms of the Merger with the financial terms of
certain other recent transactions which Robinson-Humphrey deemed relevant and
(viii) certain historical data relating to acquisitions of publicly traded
companies, including percentage premiums and price/earnings
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ratios paid in such acquisitions. In addition, Robinson-Humphrey held
discussions with the management of the Company concerning its business,
operations, assets, present condition, and future prospects, and undertook such
other studies, analyses, and investigation as Robinson-Humphrey deemed
appropriate.
Robinson-Humphrey relied upon the accuracy and completeness of the
financial and other information used by Robinson-Humphrey in arriving at its
opinion without independent verification. With respect to the financial
forecasts of the Company, Robinson-Humphrey assumed that such forecasts had been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company. Robinson-Humphrey did not conduct a physical inspection of the
properties and facilities of the Company and did not make or obtain any
evaluations or appraisals of the assets or liabilities of the Company. In
addition, Robinson-Humphrey was not authorized to solicit, and did not solicit,
any indications of interest from any third party with respect to the acquisition
of all or any portion of the Company's business.
Robinson-Humphrey's opinion was necessarily based upon market, economic,
and other conditions as they may have existed and could be evaluated as of
January 18, 1999. In connection with the preparation of its fairness opinion,
Robinson-Humphrey performed certain financial and comparative analyses, the
material portions of which are summarized below. The summary set forth below
includes the financial analyses used by Robinson-Humphrey and deemed to be
material, but does not purport to be a complete description of the analyses
performed by Robinson-Humphrey in arriving at its opinion. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In addition,
Robinson-Humphrey believes that its analyses must be considered as an integrated
whole, and that selecting portions of such analyses and the factors considered
by it, without considering all of such analyses and factors, could create a
misleading or an incomplete view of the process underlying its analyses set
forth in the opinion. In performing its analyses, Robinson-Humphrey made
numerous assumptions with respect to industry and economic conditions and other
matters, many of which are beyond the control of the Company. Any estimates
contained in such analyses are not necessarily indicative of actual past or
future results or values, which may be significantly more or less favorable than
as set forth therein. Estimates of values of companies do not purport to be
appraisals or necessarily to reflect the price at which such companies may
actually be sold, and such estimates are inherently subject to uncertainty. No
public company utilized as a comparison is identical to the Company and no
merger and acquisition transaction involved companies identical to the Company.
An analysis of the results of such comparisons is not mathematical; rather, it
involves complex considerations and judgements concerning differences in
financial and operating characteristics of the comparable companies and
transactions and other factors that could affect the values of companies to
which the Company is being compared.
Certain analyses performed by Robinson-Humphrey utilized financial
forecasts for the Company based upon estimates published by equity research
analysts in the investment community, including Robinson-Humphrey's equity
research analyst.
The following is a summary of the presentation by Robinson-Humphrey to the
Special Committee and Board of Directors on January 18, 1999 in connection with
its January 18, 1999 opinion.
Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which the Common Stock of the Company traded subsequent to the Company's initial
public offering on May 26, 1995 through January 15, 1999. Robinson-Humphrey
observed that the all-time high price for the Common Stock was $51.69 on July 2,
1996, and the all-time low price for the Common Stock was $9.56 on January 27,
1998. During the period from January 13, 1998 through January 13, 1999,
Robinson-Humphrey observed that 13.9% of the total trading in the shares of the
Company were traded in a price range of $10.00 to $11.60 per share, 31.9% of the
shares were traded in a price range of $11.60 to $13.30, 31.7% of the shares
were traded in a price range of $13.30 to $15.00 per share and 22.5% were traded
in a price range of $15.00 to $18.00 per share. During the period from July 27,
1998 to January 13, 1999, Robinson-Humphrey observed that 32.6% of the total
trading in the shares of the Company were traded in a price range of $10.00 to
$11.60 per share, 20.5%
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of the shares were traded in a price range of $11.60 to $13.20 per share, 13.5%
of the shares were traded in a price range of $13.20 to $14.80 per share, 15.2%
of the shares were traded in a price range of $14.80 to $16.40 per share, and
18.1% of the shares were traded in a price range of $16.40 to $18.00 per share.
Based on the Cash Merger Consideration of $15.00 per share for the Company,
Robinson-Humphrey calculated per share premiums of 40.4%, 36.4%, and 45.5% to
the Company's closing stock prices at one trading day, one week, and four weeks
prior to the announcement date of the Merger, respectively.
Comparable Public Company Analysis. Robinson-Humphrey reviewed and
compared certain publicly available financial, operating, and market valuation
data for the Company and three groups of publicly traded companies. The "Dental
Managed Care Companies" included in Robinson-Humphrey's comparable public
company analysis were First Commonwealth, Inc. and Safeguard Health Enterprises,
Inc., and United Dental Care, Inc. The "Dental Practice Management Companies"
included in Robinson-Humphrey's comparable public company analysis were American
Dental Partners, Inc., Birner Dental Management Services, Inc., Castle Dental
Centers, Inc., Coast Dental Services, Inc., Dental Care Alliance, Inc., Gentle
Dental Services Corporation, Monarch Dental Corporation, and Pentegra Dental
Group, Inc. The "Multi-Market HMO Companies" included in Robinson-Humphrey's
comparable public company analysis were Foundation Health Systems, Inc., Humana,
Inc., Maxicare Health Plans, Inc., Mid-Atlantic Medical Services, Inc., Oxford
Health Plans, Inc., Pacificare Health Systems, Inc., and United Healthcare Corp.
Robinson-Humphrey noted that none of the comparable public companies were
identical to the Company and that, accordingly, the analysis of the comparable
public companies necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would affect the market values of
comparable companies. Robinson-Humphrey calculated various financial ratios and
multiples based upon the closing prices of the comparable public companies as of
January 13, 1999, the most recent publicly available information for the various
companies, and information concerning the projected financial results of the
various companies, as promulgated by equity research analysts of nationally
recognized investment banking firms. The following valuation ratios were used in
determining ranges of implied equity values per share of the Company: current
market price to (i) latest twelve months ("LTM") earnings per share, (ii)
current earnings per share estimates of research analysts as provided by First
Call Investor Services, (iii) current earnings per share estimates of the
Company's management and (iv) book value, and firm value (defined as equity
value plus debt and preferred stock minus cash and marketable securities) to (a)
LTM revenues, (b) LTM earnings before interest and taxes ("EBIT"), and (c) LTM
earnings before interest, taxes, depreciation, and amortization ("EBITDA").
Robinson-Humphrey averaged the multiples of the publicly traded comparable
companies in order to apply these multiples to the Company's values. To
accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believed that these outlying values for
certain companies reflect temporary market aberrations that can skew mean
values.
Robinson-Humphrey applied the valuation multiples for the group of Dental
Managed Care Companies to the Company's: (i) LTM earnings per share, (ii)
projected 1998 and 1999 earnings per share as estimated by Robinson-Humphrey's
equity research analyst and other equity research analysts, (iii) projected 1998
and 1999 earnings per share as estimated by the Company's management, (iv) book
value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM EBITDA. Based upon the
average valuation multiples for the group of Dental Managed Care Companies,
Robinson-Humphrey calculated a range of implied equity values from $2.76 per
share to $13.38 per share, with an average implied equity value of $10.87 per
share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the valuation multiples of the group of Dental Managed Care
Companies to the financial results of the Company's dental managed care business
and by applying the valuation multiples of the group of Dental Practice
Management Companies to the financial results for the Company's dental practice
management business. Robinson-Humphrey then added the valuations derived for
each segment of the Company's business
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to derive a range of implied equity values for the Company. Robinson-Humphrey
applied the average valuation multiples for the group of Dental Managed Care
Companies to the Company's (i) projected 1998 and 1999 net income for the dental
managed care business as estimated by the Company's management and (ii) LTM
EBITDA for the dental managed care business, and the average valuation multiples
for the group of Dental Practice Management Companies to the Company's (i)
projected 1998 and 1999 net income for the dental practice management business
as estimated by the Company's management and (ii) LTM EBITDA for the dental
practice management business. Based upon this valuation approach,
Robinson-Humphrey calculated a range of implied equity values from $7.84 per
share to $13.38 per share, with an average implied equity value of $11.48 per
share for the Company.
In addition, Robinson-Humphrey applied the valuation multiples for the
group of Multi-Market HMO Companies to the Company's (i) LTM earnings per share,
(ii) projected 1998 and 1999 earnings per share as estimated by
Robinson-Humphrey's equity research analyst and other equity research analysts,
(iii) projected 1998 and 1999 earnings per share as estimated by the Company's
management, (iv) book value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM
EBITDA. Based upon the average valuation multiples for the group of Multi-Market
HMO Companies, Robinson-Humphrey calculated a range of implied equity values
from $13.39 per share to $29.19 per share, with an average implied equity value
of $15.85 per share for the Company.
Analysis of Selected Merger and Acquisition Transactions. Robinson-Humphrey
reviewed and analyzed 14 completed merger and acquisition transactions involving
dental managed care companies since December 1994. Robinson-Humphrey noted that
none of the selected transactions reviewed was identical to the Merger and that,
accordingly, the analysis of comparable transactions necessarily involves
complex considerations and judgements concerning differences in financial and
operating characteristics of the companies reviewed and other factors that would
effect the acquisition values of comparable transactions. For each acquisition,
Robinson-Humphrey calculated purchase price as a multiple of (i) LTM net income
and (ii) book value, and transaction firm value as a multiple of (i) LTM
revenues, (ii) LTM EBIT and (iii) LTM EBITDA. Robinson-Humphrey averaged the
multiples for the selected merger and acquisition transactions involving dental
managed care companies in order to apply these multiples to the Company's
values. Based upon the average multiples from these selected transactions
involving dental managed care companies, Robinson-Humphrey calculated a range of
implied equity values from $12.15 per share to $38.72 per share, with an average
implied equity value of $18.06 per share for the Company.
For the five merger and acquisition transactions involving dental managed
care companies for which projected financial information at the time of the
transaction was available, Robinson-Humphrey calculated transaction firm value
as a multiple of (i) projected revenues, (ii) projected EBIT and (iii) projected
EBITDA. Robinson-Humphrey averaged the multiples for these selected merger and
acquisition transactions involving dental managed care companies in order to
apply such multiples to the Company's values. Based upon the average multiples
from these selected transactions involving dental managed care companies,
Robinson-Humphrey calculated a range of implied equity values from $9.76 per
share to $11.86 per share, with an average implied equity value of $11.00 per
share for the Company.
Robinson-Humphrey reviewed and analyzed the completed acquisition of United
Dental Care, Inc. ("United Dental Care") by Protective Life Corporation.
Robinson-Humphrey calculated purchase price as a multiple of (i) LTM earnings
per share and (ii) book value, and transaction firm value as a multiple of (i)
LTM revenues, (ii) LTM EBIT, (iii) LTM EBITDA, and (iv) members, and calculated
the transaction premiums one day, one week, and four weeks prior to the
announcement date of the transaction. Based upon the transaction multiples and
premiums paid in the United Dental Care acquisition, Robinson-Humphrey
calculated a range of implied equity values from $8.97 per share to $46.09 per
share, with an average implied equity value of $16.64 per share for the Company.
Robinson-Humphrey also noted that the multiple of firm value to members in the
United Dental Care acquisition implied an equity value of $12.03 per share for
the Company.
For the completed acquisition of United Dental Care, Robinson-Humphrey also
calculated purchase price as a multiple of projected 1998 and 1999 earnings per
share, transaction firm value as a multiple of
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projected 1998 and 1999 revenues, EBIT and EBITDA, and calculated the
transaction premiums one day, one week, and four weeks prior to the announcement
date of the transaction. Based upon these transaction multiples and premiums
paid in the United Dental Care acquisition, Robinson-Humphrey calculated a range
of implied equity values from $7.02 per share to $24.18 per share, with an
average implied equity value of $16.78 per share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the multiples for transactions involving dental managed care
companies to the financial results for the Company's dental managed care
business and by applying the multiples from 16 pending and completed
transactions involving dental practice management companies to the financial
results for the Company's dental practice management business. Robinson-Humphrey
then added the valuations derived for each segment of the Company's business to
derive a range of implied equity values for the Company. Robinson-Humphrey
applied the average transaction multiples for the transactions involving dental
managed care companies to the Company's LTM revenues and LTM EBITDA for the
dental managed care business and the average transaction multiples for the
transactions involving dental practice management companies to the Company's LTM
revenues and LTM EBITDA for the dental practice management business. Based upon
this valuation approach, Robinson-Humphrey calculated a range of implied equity
values from $11.77 per share to $20.87 per share, with an average implied equity
value of $16.32 per share for the Company.
In addition, Robinson-Humphrey reviewed and analyzed 35 pending and
completed mergers and acquisitions involving HMO companies since March 1993. For
each transaction, Robinson-Humphrey calculated purchase price as a multiple of
(i) LTM net income and (ii) book value, and transaction firm value as a multiple
of (i) LTM revenues, (ii) LTM EBIT, and (iii) LTM EBITDA. Robinson-Humphrey
averaged the multiples for these selected merger and acquisition transactions
involving HMO companies in order to apply these multiples to the Company's
values. Based upon the multiples from these selected transactions involving HMO
companies, Robinson-Humphrey calculated a range of implied equity values from
$10.84 per share to $28.91 per share, with an average implied equity value of
$24.29 per share for the Company.
For the eight transactions involving HMO companies that were publicly
traded, Robinson-Humphrey calculated purchase price as a multiple of projected
earnings per share, as promulgated by industry analysts of nationally recognized
investment banking firms as of the date most immediately available prior to the
transaction announcement date, and calculated the implied transaction premiums
one day, one week, and four weeks prior to the announcement date.
Robinson-Humphrey averaged the transaction multiples and premiums paid for these
selected transactions in order to apply these multiples to the Company's values.
Based upon the average transaction multiples paid in these selected transactions
involving publicly traded HMO companies, Robinson-Humphrey calculated a range of
implied equity values from $19.15 per share to $21.16 per share, with an average
implied equity value of $20.31 per share for the Company. Based upon the average
premiums paid in these selected transactions involving publicly traded HMO
companies, Robinson-Humphrey calculated a range of implied equity values from
$12.91 per share to $13.89 per share, with an average implied equity value of
$13.33 per share for the Company.
Further, Robinson-Humphrey reviewed average and median transaction premiums
and price to earnings multiples paid in corporate acquisitions in general
occurring from 1992 through 1997. From the annual averages, Robinson-Humphrey
calculated six-year average transaction premiums and price to earnings multiples
in order to apply these premiums and multiples to the Company's values. Based
upon these average price to earnings multiples, Robinson-Humphrey calculated a
range of implied equity values from $19.96 per share to $26.00 per share, with
an average implied equity value of $23.54 per share for the Company. Based upon
these average transaction premiums, Robinson-Humphrey calculated a range of
implied equity values from $13.93 per share to $14.85 per share, with an average
implied equity value of $14.41 per share for the Company.
Transaction Premiums Analysis. Robinson-Humphrey analyzed the premiums
paid for 165 mergers and acquisitions of publicly traded companies with
transaction values in the range of $100 million to $300 million during the
period from July 24, 1997 to January 13, 1999. The average premiums paid over
the target
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stock prices one trading day prior to the announcement date, one week prior to
the announcement date, and four weeks prior to the announcement date were 26.4%,
32.7%, and 39.6%, respectively. Based upon these transaction premiums,
Robinson-Humphrey calculated a range of implied equity values from $13.43 per
share to $14.60 per share, with an average implied equity value of $14.14 per
share for the Company.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using the Company's financial projections for 1999 through
2003 to estimate the net present equity value per share for the Company.
Robinson-Humphrey calculated a range of net present values of the Company's free
cash flows (defined as projected earnings before interest after taxes plus
depreciation and amortization, less capital expenditures and any increase in net
working capital) for 1999 through 2003 using discount rates ranging from 11% to
16%. Robinson-Humphrey calculated a range of net present values of the Company's
terminal values using the same range of discount rates and multiples ranging
from 6.0x to 12.0x projected 2003 EBIT and also using the same range of discount
rates and multiples ranging from 5.0x to 9.0x projected 2003 EBITDA. The present
values of the free cash flows were then added to the corresponding present
values of the terminal values. After adding the Company's cash and cash
equivalents and deducting the Company's debt as of September 30, 1998,
Robinson-Humphrey calculated a range of net present equity values for the
Company of $10.28 per share to $27.12 per share based upon terminal values of
EBIT multiples and a range of net present equity values for the Company of $9.76
per share to $23.29 per share based upon terminal values of EBITDA multiples.
Using a mid-range discount rate of 13% and terminal value multiples of 8.0x
projected 2003 EBIT and 6.5x projected 2003 EBITDA, Robinson-Humphrey calculated
net present equity values for the Company of $16.35 per share and $15.17 per
share, respectively.
Analysis of Dental Health Development Corporation. On September 12, 1997,
the Company, GTCR, and certain other parties invested in DHDC, a Delaware
corporation which engages in the development of start-up dental facilities.
Robinson-Humphrey analyzed and reviewed certain of the Company's commitments and
options relating to DHDC. The Company has a commitment to provide $10.0 million
of capital equipment funding for DentLease Inc. ("DentLease") over a 42 month
period ending February 28, 2001. As of December 31, 1998, the Company had funded
approximately $6.0 million of the $10.0 million DentLease funding commitment.
The Company also has an option to redeem the outstanding shares of DHDC Series A
Preferred Stock and Class A Common Stock held by GTCR, which would result in the
redemption of certain purchase options that the GTCR Partnership has on 49% of
the Company's 100% equity interest in DHMI and on certain equipment held by
DentLease, which the GTCR Partnership can exercise for nominal consideration
(the "GTCR Option"). In order to redeem the GTCR Option, the Company must redeem
the approximately $10 million of DHDC Series A Preferred Stock and Class A
Common Stock beginning on February 28, 2001, and ending on September 12, 2004,
at a price equal to the principal invested plus all accrued and unpaid
dividends. Dividends on each share of DHDC Series A Preferred Stock accrue at a
compound rate of 31% per annum beginning September 12, 1997, the date of the
initial investment. Robinson-Humphrey estimated the cost to the Company of
extinguishing its capital funding commitment and redeeming the GTCR Option to
range from $0.75 per share to $2.21 per share of Common Stock. Robinson-
Humphrey believed the cost to extinguish its capital funding commitment and
redeeming the GTCR Option should be added to the Cash Merger Consideration in
order to evaluate the total consideration to be received by the Company's
stockholders in the Merger. Therefore, in assessing the fairness, from a
financial point of view, of the Cash Merger Consideration to be received by the
Company's stockholders in the Merger, Robinson-Humphrey considered the cost to
extinguish its capital funding commitment and redeeming the GTCR Option in
addition to the $15.00 per share in cash to be received by the Company's
stockholders in the Merger.
The summary set forth above does not purport to be a complete description
of the analyses conducted or data presented by Robinson-Humphrey. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Robinson-Humphrey
believes that the summary set forth above and their analyses must be considered
as a whole and that selecting only portions thereof, without considering all of
its analyses, could create an incomplete view of the processes underlying its
analyses and opinion. Robinson-Humphrey based its analyses on assumptions that
it deemed reasonable, including assumptions concerning general business and
economic conditions and industry-specific factors. The
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preparation of fairness opinions does not involve a mathematical weighing of the
results of the individual analyses performed, but requires Robinson-Humphrey to
exercise its professional judgement, based on its experience and expertise, in
considering a wide variety of analyses taken as a whole. Each of the analyses
conducted by Robinson-Humphrey was carried out in order to provide a different
perspective on the transaction and to add to the total mix of information
available. Robinson-Humphrey did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to fairness. Rather, in reaching its conclusion, Robinson-Humphrey
considered the results of the analyses in light of each other and ultimately
reached its conclusion based on the results of all analyses taken as a whole.
Under the terms of the Company's engagement letter with Robinson-Humphrey,
the Company has paid Robinson-Humphrey a retainer of $50,000 and a fee of
$500,000 for the preparation and delivery of its fairness opinion. If the Merger
is consummated, an additional transaction fee of approximately $445,000 will be
paid to Robinson-Humphrey. The Company has agreed to reimburse Robinson-Humphrey
for its reasonable out-of-pocket expenses, including attorneys' fees, and to
indemnify Robinson-Humphrey against certain liabilities, including certain
liabilities under the federal securities laws. Robinson-Humphrey initially
proposed that the Company pay a certain retainer fee for the preparation and
delivery of its fairness opinion, and an additional transaction fee if the
Merger was consummated. The Special Committee negotiated with Robinson-Humphrey
regarding the total amount to be paid to Robinson-Humphrey and the percentage of
the fee that would be paid if the Merger is consummated.
Robinson-Humphrey was engaged by the Company (i) as a co-managing
underwriter in the Company's August 1995 public offering of Common Stock for
which Robinson-Humphrey received underwriting commissions of approximately
$587,075, (ii) as placement agent for DHDC's September 1997 private placement of
securities for which Robinson-Humphrey received $450,000 in placement fees, and
(iii) as a financial advisor to the Company in connection with four of the
Company's acquisitions since January 1, 1996, for which Robinson-Humphrey
received approximately $795,000 in fees. In the ordinary course of Robinson-
Humphrey's business, Robinson-Humphrey actively trades in the equity securities
of the Company for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or a short position in such securities.
In addition, RH Capital Partners, L.P., an affiliate of Robinson-Humphrey ("RH
Capital"), purchased $500,042 of the Series A Preferred Stock and Class A Common
Stock of DHDC from the GTCR Partnership on October 29, 1997. This represents 5%
of the total outstanding Series A Preferred Stock and Class A Common Stock of
DHDC. RH Capital's investment is passive in nature and RH Capital does not have
the right to nominate any representatives to the DHDC Board of Directors.
Pursuant to the terms of the Series A Preferred Stock, RH Capital has the
contractual right to receive a cumulative preferred return at the compound
annual return of 31% on its investment in the Series A Preferred Stock. RH
Capital has agreed to resell its investment in DHDC to the GTCR Partnership
prior to the Merger for approximately $ (assuming a March 31, 1999
closing date), which is equal to the original cost of this investment plus the
accrued dividends thereon. Robinson-Humphrey believes that the foregoing
arrangements do not affect its ability to independently and impartially deliver
an opinion to the Special Committee with respect to the fairness of the Merger
from a financial point of view.
PRESENTATIONS OF FINANCIAL ADVISOR
As discussed under " -- Background of the Merger," Robinson-Humphrey made a
presentation to the Special Committee and Board of Directors on July 27, 1998 in
connection with its July 28, 1998 opinion with respect to the Cash Merger
Consideration which the Public Stockholders would have received pursuant to the
Original Merger Agreement. Robinson-Humphrey also provided the Special Committee
with presentation materials outlining its valuation analyses dated July 21, 1998
and December 30, 1998, in connection with the Special Committee's negotiation of
the Original Merger Agreement and the Merger Agreement, respectively. See
" -- Background of the Merger."
Robinson-Humphrey's December 30, 1998 valuation analyses were preliminary
in nature and the Special Committee was advised by Robinson-Humphrey that its
valuation process was ongoing and that further
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analysis would be required to enable Robinson-Humphrey to reach any conclusions
as to the fairness of the $15.00 per share Cash Merger Consideration that might
ultimately be accepted by the Special Committee.
In preparing the presentation materials dated December 30, 1998,
Robinson-Humphrey relied upon the accuracy and completeness of the financial
information provided to it up to December 30, 1998 without independent
verification. With respect to the financial forecasts of the Company,
Robinson-Humphrey assumed that such forecasts had been reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company.
Robinson-Humphrey's presentation materials dated December 30, 1998 outlining its
valuation analyses did not constitute a fairness opinion and Robinson-Humphrey
did not render an opinion, either orally or in writing, to the Special Committee
on January 5, 1999 with respect to the fairness of the $15.00 per share Cash
Merger Consideration to be received in the Merger by stockholders of the
Company.
The following is a summary of the presentation by Robinson-Humphrey of its
valuation analyses dated December 30, 1998 to the Special Committee on January
5, 1999.
Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which the Common Stock of the Company traded subsequent to the Company's initial
public offering on May 26, 1995 through December 28, 1998. Robinson-Humphrey
observed that the all-time high price for the Common Stock was $51.69 on July 2,
1996, and the all-time low price for the Common Stock was $9.56 on January 27,
1998. During the period from January 2, 1998 through December 28, 1998,
Robinson-Humphrey observed that 30.7% of the total trading in the shares of the
Company were traded in a price range of $10.00 to $12.20 per share, 31.0% of the
shares were traded in a price range of $12.20 to $14.40, 32.4% of the shares
were traded in a price range of $14.40 to $16.60 per share and 5.9% were traded
in a price range of $16.60 to $21.00 per share. During the period from July 27,
1998 to December 28, 1998, Robinson-Humphrey observed that 29.2% of the total
trading in the shares of the Company were traded in a price range of $10.00 to
$11.60 per share, 20.9% of the shares were traded in a price range of $11.60 to
$13.20 per share, 14.4% of the shares were traded in a price range of $13.20 to
$14.80 per share, 16.2% of the shares were traded in a price range of $14.80 to
$16.40 per share, and 19.3% of the shares were traded in a price range of $16.40
to $18.00 per share.
Based on the Cash Merger Consideration of $15.00 per share for the Company,
Robinson-Humphrey calculated per share premiums of 47.2%, 45.5%, and 34.8% to
the Company's closing stock prices at one trading day, one week, and four weeks
prior to December 29, 1998, respectively.
Comparable Public Company Analysis. Robinson-Humphrey reviewed and
compared certain publicly available financial, operating, and market valuation
data for the Company and three groups of publicly traded companies. The "Dental
Managed Care Companies" included in Robinson-Humphrey's comparable public
company analysis were First Commonwealth, Inc., and Safeguard Health
Enterprises, Inc. The "Dental Practice Management Companies" included in
Robinson-Humphrey's comparable public company analysis were American Dental
Partners, Inc., Birner Dental Management Services, Inc., Castle Dental Centers,
Inc., Coast Dental Services, Inc., Dental Care Alliance, Inc., Gentle Dental
Services Corporation, Monarch Dental Corporation, and Pentegra Dental Group,
Inc. The "Multi-Market HMO Companies" included in Robinson-Humphrey's comparable
public company analysis were Foundation Health Systems, Inc., Humana, Inc.,
Maxicare Health Plans, Inc., Mid-Atlantic Medical Services, Inc., Oxford Health
Plans, Inc., Pacificare Health Systems, Inc., and United Healthcare Corp.
Robinson-Humphrey noted that none of the comparable public companies were
identical to the Company and that, accordingly, the analysis of the comparable
public companies necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would affect the market values of
comparable companies. Robinson-Humphrey calculated various financial ratios and
multiples based upon the closing prices of the comparable public companies as of
December 28, 1998, the most recent publicly available information for the
various companies, and information concerning the projected financial results of
the various companies, as promulgated by equity research analysts of nationally
recognized investment banking firms. The following valuation ratios were used in
determining ranges of implied equity values per share of the Company: current
market price to (i) latest twelve months ("LTM") earnings per share, (ii)
current earnings per share estimates of research analysts as provided by First
Call
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Investor Services, (iii) current earnings per share estimates of the Company's
management and (iv) book value, and firm value (defined as equity value plus
debt and preferred stock minus cash and marketable securities) to (a) LTM
revenues, (b) LTM earnings before interest and taxes ("EBIT"), and (c) LTM
earnings before interest, taxes, depreciation, and amortization ("EBITDA").
Robinson-Humphrey averaged the multiples of the publicly traded comparable
companies in order to apply these multiples to the Company's values. To
accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believed that these outlying values for
certain companies reflect temporary market aberrations that can skew mean
values.
Robinson-Humphrey applied the valuation multiples for the group of Dental
Managed Care Companies to the Company's: (i) LTM earnings per share, (ii)
projected 1998 and 1999 earnings per share as estimated by Robinson-Humphrey's
equity research analyst and other equity research analysts, (iii) projected 1998
and 1999 earnings per share as estimated by the Company's management, (iv) book
value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM EBITDA. Based upon the
average valuation multiples for the group of Dental Managed Care Companies,
Robinson-Humphrey calculated a range of implied equity values from $2.42 per
share to $13.00 per share, with an average implied equity value of $10.46 per
share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the valuation multiples of the group of Dental Managed Care
Companies to the financial results of the Company's dental managed care business
and by applying the valuation multiples of the group of Dental Practice
Management Companies to the financial results for the Company's dental practice
management business. Robinson-Humphrey then added the valuations derived for
each segment of the Company's business to derive a range of implied equity
values for the Company. Robinson-Humphrey applied the average valuation
multiples for the group of Dental Managed Care Companies to the Company's (i)
projected 1998 and 1999 net income for the dental managed care business as
estimated by the Company's management and (ii) LTM EBITDA for the dental managed
care business, and the average valuation multiples for the group of Dental
Practice Management Companies to the Company's (i) projected 1998 and 1999 net
income for the dental practice management business as estimated by the Company's
management and (ii) LTM EBITDA for the dental practice management business.
Based upon this valuation approach, Robinson-Humphrey calculated a range of
implied equity values from $7.45 per share to $13.20 per share, with an average
implied equity value of $11.20 per share for the Company.
In addition, Robinson-Humphrey applied the valuation multiples for the
group of Multi-Market HMO Companies to the Company's (i) LTM earnings per share,
(ii) projected 1998 and 1999 earnings per share as estimated by
Robinson-Humphrey's equity research analyst and other equity research analysts,
(iii) projected 1998 and 1999 earnings per share as estimated by the Company's
management, (iv) book value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM
EBITDA. Based upon the average valuation multiples for the group of Multi-Market
HMO Companies, Robinson-Humphrey calculated a range of implied equity values
from $12.56 per share to $33.88 per share, with an average implied equity value
of $16.68 per share for the Company.
Analysis of Selected Merger and Acquisition Transactions.
Robinson-Humphrey reviewed and analyzed 14 completed merger and acquisition
transactions involving dental managed care companies since December 1994.
Robinson-Humphrey noted that none of the selected transactions reviewed was
identical to the Merger and that, accordingly, the analysis of comparable
transactions necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would effect the acquisition values of
comparable transactions. For each acquisition, Robinson-Humphrey calculated
purchase price as a multiple of (i) LTM net income and (ii) book value, and
transaction firm value as a multiple of (i) LTM revenues, (ii) LTM EBIT and
(iii) LTM EBITDA. Robinson-Humphrey averaged the multiples for the selected
merger and acquisition transactions involving dental managed care companies in
order to apply these multiples to the Company's values. Based upon the average
multiples from these selected transactions involving dental managed care
companies, Robinson-
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Humphrey calculated a range of implied equity values from $12.15 per share to
$38.72 per share, with an average implied equity value of $18.06 per share for
the Company.
For the five merger and acquisition transactions involving dental managed
care companies for which projected financial information at the time of the
transaction was available, Robinson-Humphrey calculated transaction firm value
as a multiple of (i) projected revenues, (ii) projected EBIT and (iii) projected
EBITDA. Robinson-Humphrey averaged the multiples for these selected merger and
acquisition transactions involving dental managed care companies in order to
apply such multiples to the Company's values. Based upon the average multiples
from these selected transactions involving dental managed care companies,
Robinson-Humphrey calculated a range of implied equity values from $9.76 per
share to $11.86 per share, with an average implied equity value of $11.00 per
share for the Company.
Robinson-Humphrey reviewed and analyzed the completed acquisition of United
Dental Care, Inc. ("United Dental Care") by Protective Life Corporation.
Robinson-Humphrey calculated purchase price as a multiple of (i) LTM earnings
per share and (ii) book value, and transaction firm value as a multiple of (i)
LTM revenues, (ii) LTM EBIT, (iii) LTM EBITDA, and (iv) members, and calculated
the transaction premiums one day, one week, and four weeks prior to the
announcement date of the transaction. Based upon the transaction multiples and
premiums paid in the United Dental Care acquisition, Robinson-Humphrey
calculated a range of implied equity values from $8.97 per share to $46.09 per
share, with an average implied equity value of $16.61 per share for the Company.
Robinson-Humphrey also noted that the multiple of firm value to members in the
United Dental Care acquisition implied an equity value of $12.03 per share for
the Company.
For the completed acquisition of United Dental Care, Robinson-Humphrey also
calculated purchase price as a multiple of projected 1998 and 1999 earnings per
share, transaction firm value as a multiple of projected 1998 and 1999 revenues,
EBIT and EBITDA, and calculated the transaction premiums one day, one week, and
four weeks prior to the announcement date of the transaction. Based upon these
transaction multiples and premiums paid in the United Dental Care acquisition,
Robinson-Humphrey calculated a range of implied equity values from $7.02 per
share to $24.18 per share, with an average implied equity value of $16.76 per
share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the multiples for transactions involving dental managed care
companies to the financial results for the Company's dental managed care
business and by applying the multiples from 16 transactions involving dental
practice management companies to the financial results for the Company's dental
practice management business. Robinson-Humphrey then added the valuations
derived for each segment of the Company's business to derive a range of implied
equity values for the Company. Robinson-Humphrey applied the average transaction
multiples for the transactions involving dental managed care companies to the
Company's LTM revenues and LTM EBITDA for the dental managed care business and
the average transaction multiples for the transactions involving dental practice
management companies to the Company's LTM revenues and LTM EBITDA for the dental
practice management business. Based upon this valuation approach, Robinson-
Humphrey calculated a range of implied equity values from $11.77 per share to
$20.87 per share, with an average implied equity value of $16.32 per share for
the Company.
In addition, Robinson-Humphrey reviewed and analyzed 35 pending and
completed mergers and acquisitions involving HMO companies since March 1993. For
each transaction, Robinson-Humphrey calculated purchase price as a multiple of
(i) LTM net income and (ii) book value, and transaction firm value as a multiple
of (i) LTM revenues, (ii) LTM EBIT, and (iii) LTM EBITDA. Robinson-Humphrey
averaged the multiples for these selected merger and acquisition transactions
involving HMO companies in order to apply these multiples to the Company's
values. Based upon the multiples from these selected transactions involving HMO
companies, Robinson-Humphrey calculated a range of implied equity values from
$10.84 per share to $28.91 per share, with an average implied equity value of
$24.29 per share for the Company.
For the eight transactions involving HMO companies that were publicly
traded, Robinson-Humphrey calculated purchase price as a multiple of projected
earnings per share, as promulgated by industry analysts of
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nationally recognized investment banking firms as of the date most immediately
available prior to the transaction announcement date, and calculated the implied
transaction premiums one day, one week, and four weeks prior to the announcement
date. Robinson-Humphrey averaged the transaction multiples and premiums paid for
these selected transactions in order to apply these multiples to the Company's
values. Based upon the average transaction multiples paid in these selected
transactions involving publicly traded HMO companies, Robinson-Humphrey
calculated a range of implied equity values from $19.15 per share to $21.16 per
share, with an average implied equity value of $20.31 per share for the Company.
Based upon the average premiums paid in these selected transactions involving
publicly traded HMO companies, Robinson-Humphrey calculated a range of implied
equity values from $12.64 per share to $13.93 per share, with an average implied
equity value of $13.19 per share for the Company.
Further, Robinson-Humphrey reviewed average and median transaction premiums
and price to earnings multiples paid in corporate acquisitions in general
occurring from 1992 through 1997. From the annual averages, Robinson-Humphrey
calculated six-year average transaction premiums and price to earnings multiples
in order to apply these premiums and multiples to the Company's values. Based
upon these average price to earnings multiples, Robinson-Humphrey calculated a
range of implied equity values from $19.96 per share to $26.00 per share, with
an average implied equity value of $23.54 per share for the Company. Based upon
these average transaction premiums, Robinson-Humphrey calculated a range of
implied equity values from $13.36 per share to $14.24 per share, with an average
implied equity value of $13.81 per share for the Company.
Transaction Premiums Analysis. Robinson-Humphrey analyzed the premiums
paid for 165 mergers and acquisitions of publicly traded companies with
transaction values in the range of $100 million to $300 million during the
period from July 24, 1997 to December 28, 1998. The average premiums paid over
the target stock prices one trading day prior to the announcement date, one week
prior to the announcement date, and four weeks prior to the announcement date
were 26.4%, 32.7%, and 39.6%, respectively. Based upon these transaction
premiums, Robinson-Humphrey calculated a range of implied equity values from
$12.88 per share to $15.53 per share, with an average implied equity value of
$14.03 per share for the Company.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using the Company's financial projections for 1999 through
2003 to estimate the net present equity value per share for the Company.
Robinson-Humphrey calculated a range of net present values of the Company's free
cash flows (defined as projected earnings before interest after taxes plus
depreciation and amortization, less capital expenditures and any increase in net
working capital) for 1999 through 2003 using discount rates ranging from 11% to
16%. Robinson-Humphrey calculated a range of net present values of the Company's
terminal values using the same range of discount rates and multiples ranging
from 6.0x to 12.0x projected 2003 EBIT and also using the same range of discount
rates and multiples ranging from 5.0x to 9.0x projected 2003 EBITDA. The present
values of the free cash flows were then added to the corresponding present
values of the terminal values. After adding the Company's cash and cash
equivalents and deducting the Company's debt as of September 30, 1998,
Robinson-Humphrey calculated a range of net present equity values for the
Company of $10.28 per share to $27.12 per share based upon terminal values of
EBIT multiples and a range of net present equity values for the Company of $9.76
per share to $23.29 per share based upon terminal values of EBITDA multiples.
Using a mid-range discount rate of 13% and terminal value multiples of 8.0x
projected 2003 EBIT and 6.5x projected 2003 EBITDA, Robinson-Humphrey calculated
net present equity values for the Company of $16.35 per share and $15.17 per
share, respectively.
Analysis of Dental Health Development Corporation. On September 12, 1997,
the Company, GTCR, and certain other parties invested in DHDC, a Delaware
corporation which engages in the development of start-up dental facilities.
Robinson-Humphrey analyzed and reviewed certain of the Company's commitments and
options relating to DHDC. The Company has a commitment to provide $10.0 million
of capital equipment funding for DentLease Inc. ("DentLease") over a 42 month
period ending February 28, 2001. As of September 30, 1998, the Company had
funded approximately $6.0 million of the $10.0 million DentLease funding
commitment. The Company also has an option to redeem the outstanding shares of
DHDC Series A Preferred Stock and Class A Common Stock held by GTCR, which would
result in the redemption of certain purchase options that the GTCR Partnership
has on 49% of the Company's 100% equity interest in
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DHMI and on certain equipment held by DentLease, which the GTCR Partnership can
exercise for nominal consideration (the "GTCR Option"). In order to redeem the
GTCR Option, the Company must redeem the approximately $10 million of DHDC
Series A Preferred Stock and Class A Common Stock beginning on February 28,
2001, and ending on September 12, 2004, at a price equal to the principal
invested plus all accrued and unpaid dividends. Dividends on each share of DHDC
Series A Preferred Stock accrue at a compound rate of 31% per annum beginning
September 12, 1997, the date of the initial investment. Robinson-Humphrey
estimated the cost to the Company of extinguishing its capital funding
commitment and redeeming the GTCR Option to range from $0.75 per share to $2.21
per share of Common Stock. Robinson-Humphrey believed the cost to extinguish its
capital funding commitment and redeeming the GTCR Option should be added to the
Cash Merger Consideration in order to evaluate the total consideration to be
received by the Company's stockholders in the Merger. Therefore, in assessing
the fairness, from a financial point of view, of the Cash Merger Consideration
to be received by the Company's stockholders in the Merger, Robinson-Humphrey
considered the cost to extinguish its capital funding commitment and redeeming
the GTCR Option in addition to the $15.00 per share in cash to be received by
the Company's stockholders in the Merger.
The summary set forth above does not purport to be a complete description
of the analyses conducted or data presented by Robinson-Humphrey.
In arriving at its opinion dated July 28, 1998 Robinson-Humphrey reviewed
and analyzed: (i) the Original Merger Agreement, (ii) publicly available
information concerning the Company which Robinson-Humphrey believed to be
relevant to its inquiry, (iii) financial and operating information with respect
to the business, operations, and prospects of the Company furnished to
Robinson-Humphrey by the Company, (iv) the Dental Health Development Corporation
Securities Purchase Agreement dated September 12, 1997, (v) a trading history of
the Company's Common Stock from May 26, 1995 to July 24, 1998, and a comparison
of that trading history with those of other companies which Robinson-Humphrey
deemed relevant, (vi) a comparison of the historical financial results and
present financial condition of the Company with those of other companies which
were deemed relevant, (vii) a comparison of the financial terms of the Merger
with the financial terms of certain other recent transactions which
Robinson-Humphrey deemed relevant and (viii) certain historical data relating to
acquisitions of publicly traded companies, including percentage premiums and
price/earnings ratios paid in such acquisitions. In addition, Robinson-Humphrey
held discussions with the management of the Company concerning its business,
operations, assets, present condition, and future prospects, and undertook such
other studies, analyses, and investigation as Robinson-Humphrey deemed
appropriate.
Robinson-Humphrey relied upon the accuracy and completeness of the
financial and other information used by Robinson-Humphrey in arriving at its
opinion without independent verification. With respect to the financial
forecasts of the Company, Robinson-Humphrey assumed that such forecasts had been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company. Robinson-Humphrey did not conduct a physical inspection of the
properties and facilities of the Company and did not make or obtain any
evaluations or appraisals of the assets or liabilities of the Company. In
addition, Robinson-Humphrey was not authorized to solicit, and did not solicit,
any indications of interest from any third party with respect to the acquisition
of all or any portion of the Company's business.
Robinson-Humphrey's opinion was necessarily based upon market, economic,
and other conditions as they may have existed and could be evaluated as of July
28, 1999. In connection with the preparation of its fairness opinion,
Robinson-Humphrey performed certain financial and comparative analyses, the
material portions of which are summarized below. The summary set forth below
includes the financial analyses used by Robinson-Humphrey and deemed to be
material, but does not purport to be a complete description of the analyses
performed by Robinson-Humphrey in arriving at its opinion. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In addition,
Robinson-Humphrey believes that its analyses must be considered as an integrated
whole, and that selecting portions of such analyses and the
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<PAGE> 51
factors considered by it, without considering all of such analyses and factors,
could create a misleading or an incomplete view of the process underlying its
analyses set forth in the opinion. In performing its analyses, Robinson-Humphrey
made numerous assumptions with respect to industry and economic conditions and
other matters, many of which are beyond the control of the Company. Any
estimates contained in such analyses are not necessarily indicative of actual
past or future results or values, which may be significantly more or less
favorable than as set forth therein. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the price at which such
companies may actually be sold, and such estimates are inherently subject to
uncertainty. No public company utilized as a comparison is identical to the
Company and no merger and acquisition transaction involved companies identical
to the Company. An analysis of the results of such comparisons is not
mathematical; rather, it involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
comparable companies and transactions and other factors that could affect the
values of companies to which the Company is being compared.
Certain analyses performed by Robinson-Humphrey utilized financial
forecasts for the Company based upon estimates published by equity research
analysts in the investment community, including Robinson-Humphrey's equity
research analyst.
The following is a summary of the presentation by Robinson-Humphrey to the
Special Committee and Board of Directors on July 27, 1998 in connection with its
July 28, 1998 opinion.
Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which the Common Stock of the Company traded subsequent to the Company's initial
public offering on May 26, 1995 through July 24, 1998. Robinson-Humphrey
observed that the all-time high price for the Common Stock was $51.69 on July 2,
1996, and the all-time low price for the Common Stock was $9.56 on January 27,
1998. During the period from July 24, 1997 through July 24, 1998,
Robinson-Humphrey observed that 18.9% of the total trading in the shares of the
Company were traded in a price range of $9.00 to $12.80 per share, 43.5% of the
shares were traded in a price range of $12.80 to $16.60, 7.9% of the shares were
traded in a price range of $16.60 to $20.40 per share and 29.7% were traded in a
price range of $20.40 to $28.00 per share. During the period from January 2,
1998 to July 24, 1998, Robinson-Humphrey observed that 10.0% of the total
trading in the shares of the Company were traded in a price range of $9.00 to
$11.40 per share, 43.8% of the shares were traded in a price range of $11.40 to
$13.80 per share, 42.5% of the shares were traded in a price range of $13.80 to
$16.20 per share, 3.1% of the shares were traded in a price range of $16.20 to
$18.60 per share, and 0.6% of the shares were traded in a price range of $18.60
to $21.00 per share.
Based on the Cash Merger Consideration of $18.00 per share for the Company,
Robinson-Humphrey calculated per share premiums of 33.3%, 34.6%, and 22.0% to
the Company's closing stock prices at one trading day, one week, and four weeks
prior to the announcement date of the Merger, respectively.
Comparable Public Company Analysis. Robinson-Humphrey reviewed and
compared certain publicly available financial, operating, and market valuation
data for the Company and three groups of publicly traded companies. The "Dental
Managed Care Companies" included in Robinson-Humphrey's comparable public
company analysis were First Commonwealth, Inc., Safeguard Health Enterprises,
Inc., and United Dental Care, Inc. The "Dental Practice Management Companies"
included in Robinson-Humphrey's comparable public company analysis were American
Dental Partners, Inc., Birner Dental Management Services, Inc., Castle Dental
Centers, Inc., Coast Dental Services, Inc., Dental Care Alliance, Inc., Gentle
Dental Services Corporation, Monarch Dental Corporation, and Pentegra Dental
Group, Inc. The "Multi-Market HMO Companies" included in Robinson-Humphrey's
comparable public company analysis were Foundation Health Systems, Inc., Humana,
Inc., Maxicare Health Plans, Inc., Mid-Atlantic Medical Services, Inc., Oxford
Health Plans, Inc., Pacificare Health Systems, Inc., and United Healthcare Corp.
Robinson-Humphrey noted that none of the comparable public companies were
identical to the Company and that, accordingly, the analysis of the comparable
public companies necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would affect the market values of
comparable companies. Robinson-Humphrey calculated various financial ratios and
multiples based upon the closing prices of the comparable public companies as of
July 24,
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1998, the most recent publicly available information for the various companies,
and information concerning the projected financial results of the various
companies, as promulgated by equity research analysts of nationally recognized
investment banking firms. The following valuation ratios were used in
determining ranges of implied equity values per share of the Company: current
market price to (i) latest twelve months ("LTM") earnings per share, (ii)
current earnings per share estimates of research analysts as provided by First
Call Investor Services, (iii) current earnings per share estimates of the
Company's management and (iv) book value, and firm value (defined as equity
value plus debt and preferred stock minus cash and marketable securities) to (a)
LTM revenues, (b) LTM earnings before interest and taxes ("EBIT"), and (c) LTM
earnings before interest, taxes, depreciation, and amortization ("EBITDA").
Robinson-Humphrey averaged the multiples of the publicly traded comparable
companies in order to apply these multiples to the Company's values. To
accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believed that these outlying values for
certain companies reflect temporary market aberrations that can skew mean
values.
Robinson-Humphrey applied the valuation multiples for the group of Dental
Managed Care Companies to the Company's: (i) LTM earnings per share, (ii)
projected 1998 and 1999 earnings per share as estimated by Robinson-Humphrey's
equity research analyst and other equity research analysts, (iii) projected 1998
and 1999 earnings per share as estimated by the Company's management, (iv) book
value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM EBITDA. Based upon the
average valuation multiples for the group of Dental Managed Care Companies,
Robinson-Humphrey calculated a range of implied equity values from $5.23 per
share to $20.22 per share, with an average implied equity value of $13.42 per
share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the valuation multiples of the group of Dental Managed Care
Companies to the financial results of the Company's dental managed care business
and by applying the valuation multiples of the group of Dental Practice
Management Companies to the financial results for the Company's dental practice
management business. Robinson-Humphrey then added the valuations derived for
each segment of the Company's business to derive a range of implied equity
values for the Company. Robinson-Humphrey applied the average valuation
multiples for the group of Dental Managed Care Companies to the Company's (i)
projected 1998 and 1999 net income for the dental managed care business as
estimated by the Company's management and (ii) LTM EBITDA for the dental managed
care business, and the average valuation multiples for the group of Dental
Practice Management Companies to the Company's (i) projected 1998 and 1999 net
income for the dental practice management business as estimated by the Company's
management and (ii) LTM EBITDA for the dental practice management business.
Based upon this valuation approach, Robinson-Humphrey calculated a range of
implied equity values from $11.63 per share to $18.83 per share, with an average
implied equity value of $14.84 per share for the Company.
In addition, Robinson-Humphrey applied the valuation multiples for the
group of Multi-Market HMO Companies to the Company's (i) LTM earnings per share,
(ii) projected 1998 and 1999 earnings per share as estimated by
Robinson-Humphrey's equity research analyst and other equity research analysts,
(iii) projected 1998 and 1999 earnings per share as estimated by the Company's
management, (iv) book value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM
EBITDA. Based upon the average valuation multiples for the group of Multi-Market
HMO Companies, Robinson-Humphrey calculated a range of implied equity values
from $1.31 per share to $35.24 per share, with an average implied equity value
of $19.66 per share for the Company.
Analysis of Selected Merger and Acquisition Transactions. Robinson-Humphrey
reviewed and analyzed 14 pending and completed merger and acquisition
transactions involving dental managed care companies since December 1994.
Robinson-Humphrey noted that none of the selected transactions reviewed was
identical to the Merger and that, accordingly, the analysis of comparable
transactions necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would effect the acquisition values of
comparable transactions. For
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each acquisition, Robinson-Humphrey calculated purchase price as a multiple of
(i) LTM net income and (ii) book value, and transaction firm value as a multiple
of (i) LTM revenues, (ii) LTM EBIT and (iii) LTM EBITDA. Robinson-Humphrey
averaged the multiples for the selected merger and acquisition transactions
involving dental managed care companies in order to apply these multiples to the
Company's values. Based upon the average multiples from these selected
transactions involving dental managed care companies, Robinson-Humphrey
calculated a range of implied equity values from $12.42 per share to $37.38 per
share, with an average implied equity value of $18.73 per share for the Company.
For the five merger and acquisition transactions involving dental managed
care companies for which projected financial information at the time of the
transaction was available, Robinson-Humphrey calculated transaction firm value
as a multiple of (i) projected revenues, (ii) projected EBIT and (iii) projected
EBITDA. Robinson-Humphrey averaged the multiples for these selected merger and
acquisition transactions involving dental managed care companies in order to
apply such multiples to the Company's values. Based upon the average multiples
from these selected transactions involving dental managed care companies,
Robinson-Humphrey calculated a range of implied equity values from $8.85 per
share to $12.43 per share, with an average implied equity value of $11.19 per
share for the Company.
Robinson-Humphrey reviewed and analyzed the pending acquisition of United
Dental Care, Inc. ("United Dental Care") by Protective Life Corporation.
Robinson-Humphrey calculated purchase price as a multiple of (i) LTM earnings
per share and (ii) book value, and transaction firm value as a multiple of (i)
LTM revenues, (ii) LTM EBIT, (iii) LTM EBITDA, and (iv) members, and calculated
the transaction premiums one day, one week, and four weeks prior to the
announcement date of the transaction. Based upon the transaction multiples and
premiums paid in the United Dental Care acquisition, Robinson-Humphrey
calculated a range of implied equity values from $9.19 per share to $57.39 per
share, with an average implied equity value of $20.33 per share for the Company.
Robinson-Humphrey also noted that the multiple of firm value to members in the
United Dental Care acquisition implied an equity value of $14.06 per share for
the Company.
For the pending acquisition of United Dental Care, Robinson-Humphrey also
calculated purchase price as a multiple of projected 1998 and 1999 earnings per
share, transaction firm value as a multiple of projected 1998 and 1999 revenues,
EBIT and EBITDA, and calculated the transaction premiums one day, one week, and
four weeks prior to the announcement date of the transaction. Based upon these
transaction multiples and premiums paid in the United Dental Care acquisition,
Robinson-Humphrey calculated a range of implied equity values from $10.35 per
share to $29.37 per share, with an average implied equity value of $20.35 per
share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the multiples for transactions involving dental managed care
companies to the financial results for the Company's dental managed care
business and by applying the multiples from 14 transactions involving dental
practice management companies to the financial results for the Company's dental
practice management business. Robinson-Humphrey then added the valuations
derived for each segment of the Company's business to derive a range of implied
equity values for the Company. Robinson-Humphrey applied the average transaction
multiples for the transactions involving dental managed care companies to the
Company's LTM revenues and LTM EBITDA for the dental managed care business and
the average transaction multiples for the transactions involving dental practice
management companies to the Company's LTM revenues and LTM EBITDA for the dental
practice management business. Based upon this valuation approach, Robinson-
Humphrey calculated a range of implied equity values from $11.97 per share to
$22.39 per share, with an average implied equity value of $17.18 per share for
the Company.
In addition, Robinson-Humphrey reviewed and analyzed 34 pending and
completed mergers and acquisitions involving HMO companies since March 1993. For
each transaction, Robinson-Humphrey calculated purchase price as a multiple of
(i) LTM net income and (ii) book value, and transaction firm value as a multiple
of (i) LTM revenues, (ii) LTM EBIT, and (iii) LTM EBITDA. Robinson-Humphrey
averaged the multiples for these selected merger and acquisition transactions
involving HMO companies in order to apply these multiples to the Company's
values. Based upon the multiples from these selected
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transactions involving HMO companies, Robinson-Humphrey calculated a range of
implied equity values from $10.93 per share to $30.35 per share, with an average
implied equity value of $24.99 per share for the Company.
For the eight transactions involving HMO companies that were publicly
traded, Robinson-Humphrey calculated purchase price as a multiple of projected
earnings per share, as promulgated by industry analysts of nationally recognized
investment banking firms as of the date most immediately available prior to the
transaction announcement date, and calculated the implied transaction premiums
one day, one week, and four weeks prior to the announcement date.
Robinson-Humphrey averaged the transaction multiples and premiums paid for these
selected transactions in order to apply these multiples to the Company's values.
Based upon the average transaction multiples and premiums paid in these selected
transactions involving publicly traded HMO companies, Robinson-Humphrey
calculated a range of implied equity values from $16.44 per share to $22.04 per
share, with an average implied equity value of $18.74 per share for the Company.
Further, Robinson-Humphrey reviewed average and median transaction premiums
and price to earnings multiples paid in corporate acquisitions in general
occurring from 1992 through 1996. From the annual averages, Robinson-Humphrey
calculated five-year average transaction premiums and price to earnings
multiples in order to apply these premiums and multiples to the Company's
values. Based upon these average transaction premiums and price to earnings
multiples, Robinson-Humphrey calculated a range of implied equity values from
$17.47 per share to $27.43 per share, with an average implied equity value of
$21.20 per share for the Company.
Transaction Premiums Analysis. Robinson-Humphrey analyzed the premiums
paid for 141 mergers and acquisitions of publicly traded companies with
transaction values in the range of $100 million to $300 million during the
period from July 24, 1997 to July 24, 1998. The average premiums paid over the
target stock prices one trading day prior to the announcement date, one week
prior to the announcement date, and four weeks prior to the announcement date
were 23.8%, 29.9%, and 37.3%, respectively. Based upon these transaction
premiums, Robinson-Humphrey calculated a range of implied equity values from
$16.40 per share to $20.25 per share, with an average implied equity value of
$18.01 per share for the Company.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using the Company's financial projections for 1999 through
2003 to estimate the net present equity value per share for the Company.
Robinson-Humphrey calculated a range of net present values of the Company's free
cash flows (defined as projected earnings before interest after taxes plus
depreciation and amortization, less capital expenditures and any increase in net
working capital) for 1999 through 2003 using discount rates ranging from 11% to
16%. Robinson-Humphrey calculated a range of net present values of the Company's
terminal values using the same range of discount rates and multiples ranging
from 6.0x to 12.0x projected 2003 EBIT and also using the same range of discount
rates and multiples ranging from 5.0x to 9.0x projected 2003 EBITDA. The present
values of the free cash flows were then added to the corresponding present
values of the terminal values. After adding the Company's cash and cash
equivalents and deducting the Company's debt as of June 30, 1998,
Robinson-Humphrey calculated a range of net present equity values for the
Company of $11.44 per share to $29.22 per share based upon terminal values of
EBIT multiples and a range of net present equity values for the Company of
$10.78 per share to $24.93 per share based upon terminal values of EBITDA
multiples. Using a mid-range discount rate of 13% and terminal value multiples
of 8.0x projected 2003 EBIT and 6.5x projected 2003 EBITDA, Robinson-Humphrey
calculated net present equity values for the Company of $17.84 per share and
$16.44 per share, respectively.
Analysis of Dental Health Development Corporation. On September 12, 1997,
the Company, GTCR, and certain other parties invested in DHDC, a Delaware
corporation which engages in the development of start-up dental facilities.
Robinson-Humphrey analyzed and reviewed certain of the Company's commitments and
options relating to DHDC. The Company has a commitment to provide $10.0 million
of capital equipment funding for DentLease Inc. ("DentLease") over a 42 month
period ending February 28, 2001. As of June 30, 1998, the Company had funded
approximately $6.0 million of the $10.0 million DentLease funding commitment.
The Company also has an option to redeem the outstanding shares of DHDC Series A
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Preferred Stock and Class A Common Stock held by GTCR, which would result in the
redemption of certain purchase options that the GTCR Partnership has on 49% of
the Company's 100% equity interest in DHMI and on certain equipment held by
DentLease, which the GTCR Partnership can exercise for nominal consideration
(the "GTCR Option"). In order to redeem the GTCR Option, the Company must redeem
the approximately $10 million of DHDC Series A Preferred Stock and Class A
Common Stock beginning on February 28, 2001, and ending on September 12, 2004,
at a price equal to the principal invested plus all accrued and unpaid
dividends. Dividends on each share of DHDC Series A Preferred Stock accrue at a
compound rate of 31% per annum beginning September 12, 1997, the date of the
initial investment. Robinson-Humphrey estimated the cost to the Company of
extinguishing its capital funding commitment and redeeming the GTCR Option to
range from $0.75 per share to $2.08 per share of Common Stock. Robinson-
Humphrey believed the cost to extinguish its capital funding commitment and
redeeming the GTCR Option should be added to the Cash Merger Consideration in
order to evaluate the total consideration to be received by the Company's
stockholders in the Merger. Therefore, in assessing the fairness, from a
financial point of view, of the Cash Merger Consideration to be received by the
Company's stockholders in the Merger, Robinson-Humphrey considered the cost to
extinguish its capital funding commitment and redeeming the GTCR Option in
addition to the $18.00 per share in cash to be received by the Company's
stockholders in the Merger.
The summary set forth above does not purport to be a complete description
of the analyses conducted or data presented by Robinson-Humphrey.
As discussed under "-- Background of the Merger", Robinson-Humphrey
provided the Special Committee with presentation materials outlining its
valuation analyses on July 21, 1998. Robinson-Humphrey's July 21, 1998 valuation
analyses were preliminary in nature and the Special Committee was advised by
Robinson-Humphrey that its valuation process was ongoing and that further
analysis would be required to enable Robinson-Humphrey to reach any conclusions
as to the fairness of the price, if any, that might ultimately be acceptable to
the Equity Investors and the Special Committee. Robinson-Humphrey indicated that
further negotiations with the Equity Investors were possible.
In preparing the July 21, 1998 presentation materials, Robinson-Humphrey
relied upon the accuracy and completeness of the financial information provided
to it up to July 21, 1998 without independent verification. With respect to the
financial forecasts of the Company, Robinson-Humphrey assumed that such
forecasts had been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the Company's management as to the future
financial performance of the Company. Robinson-Humphrey's July 21, 1998
presentation materials outlining its valuation analyses did not constitute a
fairness opinion and Robinson-Humphrey did not render an opinion, either orally
or in writing on July 21, 1998 with respect to the fairness of any Cash Merger
Consideration to be received in the Merger by stockholders of the Company.
The following is a summary of the presentation by Robinson-Humphrey to the
Special Committee on July 21, 1998.
Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which the Common Stock of the Company traded subsequent to the Company's initial
public offering on May 26, 1995 through July 17, 1998. Robinson-Humphrey
observed that the all-time high price for the Common Stock was $51.69 on July 2,
1996, and the all-time low price for the Common Stock was $9.56 on January 27,
1998. During the period from July 15, 1997 through July 15, 1998,
Robinson-Humphrey observed that 18.8% of the total trading in the shares of the
Company were traded in a price range of $9.00 to $12.80 per share, 42.4% of the
shares were traded in a price range of $12.80 to $16.60, 8.8% of the shares were
traded in a price range of $16.60 to $20.40 per share and 30.0% were traded in a
price range of $20.40 to $28.00 per share. During the period from January 2,
1998 to July 15, 1998, Robinson-Humphrey observed that 10.1% of the total
trading in the shares of the Company were traded in a price range of $9.00 to
$11.40 per share, 43.3% of the shares were traded in a price range of $11.40 to
$13.80 per share, 42.8% of the shares were traded in a price range of $13.80 to
$16.20 per share, 3.2% of the shares were traded in a price range of $16.20 to
$18.60 per share, and 0.6% of the shares were traded in a price range of $18.60
to $21.00 per share.
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Based on the proposed Cash Merger Consideration of $17.50 per share for the
Company, Robinson-Humphrey calculated per share premiums of 29.6%, 16.7%, and
32.1% to the Company's closing stock prices at one trading day, one week, and
four weeks prior to July 18, 1998, respectively.
Comparable Public Company Analysis. Robinson-Humphrey reviewed and
compared certain publicly available financial, operating, and market valuation
data for the Company and three groups of publicly traded companies. The "Dental
Managed Care Companies" included in Robinson-Humphrey's comparable public
company analysis were First Commonwealth, Inc., Safeguard Health Enterprises,
Inc., and United Dental Care, Inc. The "Dental Practice Management Companies"
included in Robinson-Humphrey's comparable public company analysis were American
Dental Partners, Inc., Birner Dental Management Services, Inc., Castle Dental
Centers, Inc., Coast Dental Services, Inc., Dental Care Alliance, Inc., Gentle
Dental Services Corporation, Monarch Dental Corporation, and Pentegra Dental
Group, Inc. The "Multi-Market HMO Companies" included in Robinson-Humphrey's
comparable public company analysis were Foundation Health Systems, Inc., Humana,
Inc., Maxicare Health Plans, Inc., Mid-Atlantic Medical Services, Inc., Oxford
Health Plans, Inc., Pacificare Health Systems, Inc., and United Healthcare Corp.
Robinson-Humphrey noted that none of the comparable public companies were
identical to the Company and that, accordingly, the analysis of the comparable
public companies necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would affect the market values of
comparable companies. Robinson-Humphrey calculated various financial ratios and
multiples based upon the closing prices of the comparable public companies as of
July 17, 1998, the most recent publicly available information for the various
companies, and information concerning the projected financial results of the
various companies, as promulgated by equity research analysts of nationally
recognized investment banking firms. The following valuation ratios were used in
determining ranges of implied equity values per share of the Company: current
market price to (i) latest twelve months ("LTM") earnings per share, (ii)
current earnings per share estimates of research analysts as provided by First
Call Investor Services, (iii) current earnings per share estimates of the
Company's management and (iv) book value, and firm value (defined as equity
value plus debt and preferred stock minus cash and marketable securities) to (a)
LTM revenues, (b) LTM earnings before interest and taxes ("EBIT"), and (c) LTM
earnings before interest, taxes, depreciation, and amortization ("EBITDA").
Robinson-Humphrey averaged the multiples of the publicly traded comparable
companies in order to apply these multiples to the Company's values. To
accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believed that these outlying values for
certain companies reflect temporary market aberrations that can skew mean
values.
Robinson-Humphrey applied the valuation multiples for the group of Dental
Managed Care Companies to the Company's: (i) LTM earnings per share, (ii)
projected 1998 and 1999 earnings per share as estimated by Robinson-Humphrey's
equity research analyst and other equity research analysts, (iii) projected 1998
and 1999 earnings per share as estimated by the Company's management, (iv) book
value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM EBITDA. Based upon the
average valuation multiples for the group of Dental Managed Care Companies,
Robinson-Humphrey calculated a range of implied equity values from $5.34 per
share to $20.29 per share, with an average implied equity value of $13.46 per
share for the Company.
Robinson-Humphrey also calculated a range of implied equity values for the
Company by applying the valuation multiples of the group of Dental Managed Care
Companies to the financial results of the Company's dental managed care business
and by applying the valuation multiples of the group of Dental Practice
Management Companies to the financial results for the Company's dental practice
management business. Robinson-Humphrey then added the valuations derived for
each segment of the Company's business to derive a range of implied equity
values for the Company. Robinson-Humphrey applied the average valuation
multiples for the group of Dental Managed Care Companies to the Company's (i)
projected 1998 and 1999 net income for the dental managed care business as
estimated by the Company's management and (ii) LTM EBITDA for the dental managed
care business, and the average valuation multiples for the group of Dental
Practice Management Companies to the Company's (i) projected 1998 and 1999 net
income for the
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dental practice management business as estimated by the Company's management and
(ii) LTM EBITDA for the dental practice management business. Based upon this
valuation approach, Robinson-Humphrey calculated a range of implied equity
values from $11.85 per share to $18.98 per share, with an average implied equity
value of $15.07 per share for the Company.
In addition, Robinson-Humphrey applied the valuation multiples for the
group of Multi-Market HMO Companies to the Company's (i) LTM earnings per share,
(ii) projected 1998 and 1999 earnings per share as estimated by
Robinson-Humphrey's equity research analyst and other equity research analysts,
(iii) projected 1998 and 1999 earnings per share as estimated by the Company's
management, (iv) book value, (v) LTM revenues, (vi) LTM EBIT, and (vii) LTM
EBITDA. Based upon the average valuation multiples for the group of Multi-Market
HMO Companies, Robinson-Humphrey calculated a range of implied equity values
from $1.74 per share to $40.23 per share, with an average implied equity value
of $21.83 per share for the Company.
Analysis of Selected Merger and Acquisition Transactions. Robinson-Humphrey
reviewed and analyzed 14 pending and completed merger and acquisition
transactions involving dental managed care companies since December 1994.
Robinson-Humphrey noted that none of the selected transactions reviewed was
identical to the Merger and that, accordingly, the analysis of comparable
transactions necessarily involves complex considerations and judgements
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would effect the acquisition values of
comparable transactions. For each acquisition, Robinson-Humphrey calculated
purchase price as a multiple of (i) LTM net income and (ii) book value, and
transaction firm value as a multiple of (i) LTM revenues, (ii) LTM EBIT and
(iii) LTM EBITDA. Robinson-Humphrey averaged the multiples for the selected
merger and acquisition transactions involving dental managed care companies in
order to apply these multiples to the Company's values. Based upon the average
multiples from these selected transactions involving dental managed care
companies, Robinson-Humphrey calculated a range of implied equity values from
$11.81 per share to $35.89 per share, with an average implied equity value of
$18.70 per share for the Company.
Robinson-Humphrey reviewed and analyzed the pending acquisition of United
Dental Care, Inc. ("United Dental Care") by Protective Life Corporation.
Robinson-Humphrey calculated purchase price as a multiple of (i) LTM earnings
per share and (ii) book value, and transaction firm value as a multiple of (i)
LTM revenues, (ii) LTM EBIT, (iii) LTM EBITDA, and (iv) members, and calculated
the transaction premiums one day, one week, and four weeks prior to the
announcement date of the transaction. Based upon the transaction multiples and
premiums paid in the United Dental Care acquisition, Robinson-Humphrey
calculated a range of implied equity values from $8.83 per share to $57.50 per
share, with an average implied equity value of $18.80 per share for the Company.
Robinson-Humphrey also noted that the multiple of firm value to members in the
United Dental Care acquisition implied an equity value of $14.63 per share for
the Company.
For the pending acquisition of United Dental Care, Robinson-Humphrey also
calculated purchase price as a multiple of projected 1998 and 1999 earnings per
share and calculated the transaction premiums one day, one week, and four weeks
prior to the announcement date of the transaction. Based upon these transaction
multiples and premiums paid in the United Dental Care acquisition,
Robinson-Humphrey calculated a range of implied equity values from $16.27 per
share to $23.40 per share, with an average implied equity value of $20.84 per
share for the Company.
In addition, Robinson-Humphrey reviewed and analyzed 34 pending and
completed mergers and acquisitions involving HMO companies since March 1993. For
each transaction, Robinson-Humphrey calculated purchase price as a multiple of
(i) LTM net income and (ii) book value, and transaction firm value as a multiple
of (i) LTM revenues, (ii) LTM EBIT, and (iii) LTM EBITDA. Robinson-Humphrey
averaged the multiples for these selected merger and acquisition transactions
involving HMO companies in order to apply these multiples to the Company's
values. Based upon the multiples from these selected transactions involving HMO
companies, Robinson-Humphrey calculated a range of implied equity values from
$10.37 per share to $30.23 per share, with an average implied equity value of
$24.78 per share for the Company.
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<PAGE> 58
For the eight transactions involving HMO companies that were publicly
traded, Robinson-Humphrey calculated purchase price as a multiple of projected
earnings per share, as promulgated by industry analysts of nationally recognized
investment banking firms as of the date most immediately available prior to the
transaction announcement date, and calculated the implied transaction premiums
one day, one week, and four weeks prior to the announcement date.
Robinson-Humphrey averaged the transaction multiples and premiums paid for these
selected transactions in order to apply these multiples to the Company's values.
Based upon the average transaction multiples and premiums paid in these selected
transactions involving publicly traded HMO companies, Robinson-Humphrey
calculated a range of implied equity values from $16.59 per share to $22.04 per
share, with an average implied equity value of $18.83 per share for the Company.
Further, Robinson-Humphrey reviewed average and median transaction premiums
and price to earnings multiples paid in corporate acquisitions in general
occurring from 1992 through 1996. From the annual averages, Robinson-Humphrey
calculated five-year average transaction premiums and price to earnings
multiples in order to apply these premiums and multiples to the Company's
values. Based upon these average transaction premiums and price to earnings
multiples, Robinson-Humphrey calculated a range of implied equity values from
$17.80 per share to $28.11 per share, with an average implied equity value of
$21.67 per share for the Company.
Transaction Premiums Analysis. Robinson-Humphrey analyzed the premiums
paid for 143 mergers and acquisitions of publicly traded companies with
transaction values in the range of $100 million to $300 million during the
period from July 15, 1997 to July 15, 1998. The average premiums paid over the
target stock prices one trading day prior to the announcement date, one week
prior to the announcement date, and four weeks prior to the announcement date
were 23.3%, 29.3%, and 36.9%, respectively. Based upon these transaction
premiums, Robinson-Humphrey calculated a range of implied equity values from
$16.65 per share to $19.40 per share, with an average implied equity value of
$18.06 per share for the Company.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using the Company's financial projections for 1999 through
2003 to estimate the net present equity value per share for the Company.
Robinson-Humphrey calculated a range of net present values of the Company's free
cash flows (defined as projected earnings before interest after taxes plus
depreciation and amortization, less capital expenditures and any increase in net
working capital) for 1999 through 2003 using discount rates ranging from 10% to
15%. Robinson-Humphrey calculated a range of net present values of the Company's
terminal values using the same range of discount rates and multiples ranging
from 6.0x to 11.0x projected 2003 EBIT and also using the same range of discount
rates and multiples ranging from 5.0x to 8.0x projected 2003 EBITDA. The present
values of the free cash flows were then added to the corresponding present
values of the terminal values. After adding the Company's cash and cash
equivalents and deducting the Company's debt as of March 31, 1998,
Robinson-Humphrey calculated a range of net present equity values for the
Company of $12.10 per share to $28.28 per share based upon terminal values of
EBIT multiples and a range of net present equity values for the Company of
$11.42 per share to $23.47 per share based upon terminal values of EBITDA
multiples. Using a mid-range discount rate of 12% and terminal value multiples
of 8.0x projected 2003 EBIT and 6.5x projected 2003 EBITDA, Robinson-Humphrey
calculated net present equity values for the Company of $18.81 per share and
$17.34 per share, respectively.
Analysis of Dental Health Development Corporation. On September 12, 1997,
the Company, GTCR, and certain other parties invested in DHDC, a Delaware
corporation which engages in the development of start-up dental facilities.
Robinson-Humphrey analyzed and reviewed certain of the Company's commitments and
options relating to DHDC. The Company has a commitment to provide $10.0 million
of capital equipment funding for DentLease Inc. ("DentLease") over a 42 month
period ending February 28, 2001. The Company also has an option to redeem the
outstanding shares of DHDC Series A Preferred Stock and Class A Common Stock
held by GTCR, which would result in the redemption of certain purchase options
that the GTCR Partnership has on 49% of the Company's 100% equity interest in
DHMI and on certain equipment held by DentLease, which the GTCR Partnership can
exercise for nominal consideration (the "GTCR Option"). In order to redeem the
GTCR Option, the Company must redeem the approximately $10 million of DHDC
Series A Preferred Stock and Class A Common Stock beginning on February 28,
2001,
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<PAGE> 59
and ending on September 12, 2004, at a price equal to the principal invested
plus all accrued and unpaid dividends. Dividends on each share of DHDC Series A
Preferred Stock accrue at a compound rate of 31% per annum beginning September
12, 1997, the date of the initial investment. Robinson-Humphrey estimated the
cost to the Company of extinguishing its capital funding commitment and
redeeming the GTCR Option to range from $0.75 per share to $2.58 per share of
Common Stock. Robinson-Humphrey believed the cost to extinguish its capital
funding commitment and redeeming the GTCR Option should be added to the Cash
Merger Consideration in order to evaluate the total consideration to be received
by the Company's stockholders in the Merger. Therefore, in assessing the
fairness, from a financial point of view, of the Cash Merger Consideration to be
received by the Company's stockholders in the Merger, Robinson-Humphrey
considered the cost to extinguish its capital funding commitment and redeeming
the GTCR Option in addition to the proposed $17.50 per share in cash to be
received by the Company's stockholders in the Merger.
The summary set forth above does not purport to be a complete description
of the analyses conducted or data presented by Robinson-Humphrey.
PURPOSE AND REASONS OF THE INVESTOR GROUP FOR THE MERGER
The purpose of the Investor Group for engaging in the transactions
contemplated by the Merger Agreement is to acquire 100% ownership of the
Company. The Investor Group believes that as a private company CompDent will
have greater operating flexibility to focus on enhancing value by emphasizing
growth (both internally and through acquisitions) and operating cash flow
without the constraint of the public market's emphasis on quarterly earnings.
This assessment by the Investor Group is based upon publicly available
information regarding the Company, the Investor Group's due diligence
investigation of the Company, and the Investor Group's experience in investing
in companies in the dental managed care industry. The Investor Group determined
that it was an appropriate time to make their proposal to the Company to engage
in the transactions contemplated by the Merger Agreement based on recent
developments in the dental benefits industry and the competitive position of the
Company. The Investor Group did not consider any alternatives with respect to
the Company other than an acquisition of 100% of the outstanding shares of the
Company's capital stock. While the Investor Group believes that there will be
significant opportunities associated with its investment in the Company, there
are also substantial risks that such opportunities may not be fully realized.
As a result of the Merger, the TA Fund will acquire, for an investment of
up to approximately $40,614,359, approximately 44.65% of the equity interest in
the Company; the GTCR Partnership will acquire, for an investment of up to
approximately $25,289,153 and a contribution of its equity interest in DHDC with
an agreed upon value of approximately $15,325,206 (assuming a March 31, 1999
closing date), which the Company believes approximates fair market value,
approximately 44.65% of the equity interest in the Company; the NMS Partnership
will acquire, following the exchange of shares of Common Stock with an agreed
total value of $2,236,245 and an investment of up to approximately $733,537,
approximately 3.27% of the equity interest in the Company; the Management
Sponsors will acquire, following the exchange of shares of Common Stock with an
agreed total value of $3.0 million for shares of common stock and Convertible
Preferred Stock of the Surviving Corporation, approximately 3.30% of the equity
interest in the Company, the Other Management Investors will acquire, for an
investment of up to approximately $255,000, approximately 0.28% of the equity
interest in the Company; and the Other Investors will acquire, following the
exchange of shares of Common Stock with an agreed total value of $3,499,500 for
shares of common stock and Convertible Preferred Stock of the Surviving
Corporation, approximately 3.85% of the equity interest in the Company. A
portion of the Investor Group's investment in the Acquiror will result from the
exchange of CompDent Common Stock for securities of the Surviving Corporation so
that the transaction may be accounted for as a recapitalization for accounting
purposes. Certain members of the Management Group and the Other Investors will
also receive the Cash Merger Consideration for the remainder of their investment
in the Company on the same terms as other stockholders and will receive a cash
payment for the aggregate unrealized value of their outstanding stock options.
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<PAGE> 60
POSITION OF THE INVESTOR GROUP AS TO FAIRNESS OF THE MERGER
Each member of the Investor Group has considered the analyses and findings
of the Special Committee and the Board (described in detail in "-- The Special
Committee's and the Board's Recommendation") with respect to the fairness of the
Merger to the Public Stockholders of the Company. As of the date of this Proxy
Statement, each member of the Investor Group adopts the analyses and findings of
the Special Committee and the Board with respect to the fairness of the Merger
and believes that the Merger, the Merger Agreement, and the transactions
contemplated thereby are fair and in the best interests of the Company's Public
Stockholders; provided that no opinion is expressed as to the fairness to any
stockholder making an investment in the Surviving Corporation. No member of the
Investor Group makes any recommendation as to how the Company's stockholders
should vote on the Merger Agreement. The Equity Investors and the Other
Investors have financial interests in the Merger and the members of the
Management Group have financial and employment interests in the Merger. See
" -- Conflicts of Interest."
CONFLICTS OF INTEREST
In considering the recommendations of the Board with respect to the Merger,
stockholders should be aware that certain officers and directors of CompDent, as
well as certain investors in CompDent, have interests in connection with the
Merger which may present them with actual or potential conflicts of interest as
summarized below. The Special Committee and the Board were aware of these
interests and considered them among the other matters described under " -- The
Special Committee's and the Board's Recommendation." The Special Committee
considered the Management Group's conflicts of interest to be a negative factor
in its determination that the Merger is fair and in the best interests of the
Public Stockholders, even though the compensation and benefits payable to
members of the Management Group are intended to provide a substantially
equivalent amount of compensation and benefits as they are currently entitled to
receive from the Company.
Post-Merger Ownership and Control of the Surviving Corporation. It is
anticipated that immediately after the Merger the following individuals and
entities will beneficially own the number of shares of common stock and the
number of shares of Convertible Preferred Stock of the Surviving Corporation
shown in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
NUMBER OF SHARES PERCENTAGE OF CONVERTIBLE CONVERTIBLE
OF COMMON STOCK COMMON STOCK PREFERRED STOCK PREFERRED STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------ ------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Golder, Thoma, Cressey, Rauner
Fund V, L.P................. 3,359,868 39.97 38,528 44.80
GTCR Associates V, L.P........ 5,870 .07 67 .08
TA/Advent VIII L.P............ 2,709,008 32.23 31,064 36.12
Advent Atlantic and Pacific
III......................... 559,204 6.65 6,412 7.46
TA Executives Fund LLC........ 43,344 .52 497 .58
TA Investors LLC.............. 54,182 .64 621 .72
NMS Capital, L.P.............. 246,274 2.93 2,824 3.28
David R. Klock................ 320,812 3.82 1,328 1.54
Phyllis A. Klock.............. 306,433 3.65 1,335 1.55
Bruce A. Mitchell............. 100,000 1.19 -- --
Keith J. Yoder................ 110,000 1.31 -- --
William G. Jens, Jr........... 30,000 .36 -- --
Other members of the Other
Management Investors
Group....................... 270,000 3.22 -- --
The Kaufmann Fund............. 248,612 2.96 2,851 3.32
Roger B. Kafker............... 28,590 .34 328 .38
Richard D. Tadler............. 4,972 .06 57 .07
Jane Broderick................ 373 * 4 *
Jonathan Goldstein............ 7,458 .09 86 .10
</TABLE>
- ---------------
* less than one hundred of one percent
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<PAGE> 61
Following consummation of the Merger, the members of the Management Group
will continue as the executive officers of the Surviving Corporation, and David
Klock and Phyllis Klock will serve on the Board of Directors of the Surviving
Corporation. It is anticipated that the Board of Directors of the Surviving
Corporation will consist of eleven members and will be comprised of David Klock,
Phyllis Klock, Donald Edwards (as one of up to three designees of the GTCR
Partnership), Roger Kafker (as one of up to three designees of the TA Fund), and
up to three outside directors to be determined at a later time.
Upon the occurrence of certain events, the holders of Convertible Preferred
Stock will have the right to convert their shares of Convertible Preferred Stock
into shares of Perpetual Preferred Stock, $.01 par value, of the Surviving
Corporation (the "Perpetual Preferred Stock") and common stock of the Surviving
Corporation. For a description of the Convertible Preferred Stock and the
Perpetual Preferred Stock, see "The Merger -- Terms of the Merger
Agreement -- Description of the Convertible Preferred Stock and the Perpetual
Preferred Stock." It is anticipated that the following individuals and entities
would beneficially own the number of shares of common stock and the number of
shares of Perpetual Preferred Stock of the Surviving Corporation shown in the
following table following a conversion of the Convertible Preferred Stock
(assuming that the table above accurately reflects the beneficial ownership of
common stock and Convertible Preferred Stock of the Surviving Corporation by
such individuals and entities on the date of conversion and, in the case of the
percentages provided below, that no additional shares of common stock or
Perpetual Preferred Stock other than those which will be issued upon
consummation of the Merger and that are described herein have been issued at the
time of conversion):
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
NUMBER OF SHARES PERCENTAGE OF PERPETUAL PERPETUAL
OF COMMON STOCK COMMON STOCK PREFERRED STOCK PREFERRED STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------ ------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Golder, Thoma, Cressey, Rauner
Fund V, L.P................. 4,031,842 40.71 38,528 44.40
GTCR Associates V............. 7,044 .07 67 .08
TA/Advent VIII L.P............ 3,250,810 32.82 31,064 36.12
Advent Atlantic and Pacific
III......................... 671,045 6.77 6,412 7.46
TA Executives Fund LLC........ 52,013 .53 497 .58
TA Investors LLC.............. 65,018 .66 621 .72
NMS Capital, L.P.............. 295,528 2.98 2,824 3.28
David R. Klock................ 343,974 3.47 1,328 1.54
Phyllis A. Klock.............. 329,720 3.33 1,335 1.55
Bruce A. Mitchell............. 100,000 1.01 -- --
Keith J. Yoder................ 110,000 1.11 -- --
William G. Jens, Jr........... 30,000 .30 -- --
Other members of the Other
Management Investors
Group....................... 270,000 2.71 -- --
The Kaufman Fund.............. 298,334 3.01 2,851 3.32
Roger B. Kafker............... 34,308 .35 328 .38
Richard D. Tadler............. 5,967 .06 57 .07
Jane Broderick................ 448 * 4 *
Jonathan Goldstein............ 8,950 .09 86 .10
* less than one hundreth of
one percent.
</TABLE>
The Management Group. It is anticipated that the Other Management
Investors will executed demand promissory notes in favor of the Surviving
Corporation as consideration for the shares of common stock of the Surviving
Corporation which they will receive pursuant to the Merger. After consummation
of the Merger, members of the Management Group will own shares of Convertible
Preferred Stock and/or common stock of the Surviving Corporation and/or options
to purchase shares of common stock of the Surviving Corporation, representing
approximately % of such shares expected to be then issued and outstanding
(assuming exercise of such options). Certain of these Shares will be subject to
vesting restrictions. Shares of Common
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<PAGE> 62
Stock held by the Management Group that are not exchanged will be converted into
the right to receive the same Cash Merger Consideration as shares of Common
Stock held by other stockholders of the Company. The Surviving Corporation will
also reserve for issuance, pursuant to future grants of additional options,
shares of common stock of the Surviving Corporation representing 3% of the
common equity of the Surviving Corporation. It is contemplated that members of
the Management Group will receive a substantial portion of such option grants.
Cash Payments to Management Group and Other Investors. At the closing of
the Merger, all outstanding options to purchase Common Stock which are vested
will be cashed out in accordance with the terms of the Merger Agreement. All
options that are not vested will be canceled in accordance with their terms or
the applicable option plan. See "THE MERGER -- Cash-Out of CompDent Stock
Options." As of February , 1999, there were vested options outstanding to
purchase an aggregate of shares of Common Stock, of which
have an exercise price per share of less than $15.00. The following
table sets forth information as of the date of this Proxy Statement as to the
shares of Common Stock and the options to purchase shares of Common Stock held
by members of the Management Group for which cash payments will be received upon
consummation of the Merger.
<TABLE>
<CAPTION>
AMOUNT OF CASH TO
SHARES NOT BE RECEIVED FOR
INVESTOR GROUP MEMBER EXCHANGED SHARES EXCHANGED
- --------------------- ---------- -----------------
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
SHARES CASH TO BE RECEIVED
UNDERLYING UPON CONSUMMATION
INVESTOR GROUP MEMBER STOCK OPTIONS OF THE MERGER
- --------------------- ------------- -------------------
<S> <C> <C>
</TABLE>
Grant of New Options to the Management Group. The Board of Directors of
the Surviving Corporation will reserve shares of common stock representing 2.5%
of the common equity of the Surviving Corporation on a fully converted basis for
the grant of stock options (the "New Options") to certain employees. The New
Options are currently expected to either vest in equal portions annually over
five years following the date of grant. The New Options are subject to a number
of other conditions.
The New Options will be granted as follows:
- the Management Group will receive between % and % of the New
Options upon consummation of the Merger;
- other key employees of the Company will receive approximately % of
the remaining New Options upon consummation of the Merger; and
- the approximately % of the remaining New Options will remain
available for grant to future employees of CompDent.
No determination has yet been made as to the number of New Options to be
granted to any individual.
"Change in Control" Payments to the Management Group. The consummation of
the Merger will constitute a "change in control" of the Company triggering
certain continuation bonus payment obligations
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<PAGE> 63
pursuant to the terms of the respective employment agreements between the
Company and each of David R. Klock and Phyllis A. Klock. It is proposed that
each such individual waive any rights and forego any continuation bonus payments
that such individual may have under his or her current employment agreement or
that he or she might otherwise be entitled to upon a "change in control" of the
Company in consideration of payments which would be received pursuant to the new
employment agreements described below. If they do not agree to forego such
payments, then David R. Klock and Phyllis A. Klock would be entitled to receive,
among other compensation and benefits, $1,000,000 and $750,000, respectively,
under their current employment agreements upon the occurrence of a "change in
control" if they agree (i) to remain employed by the Company until the first
anniversary of the consummation of the "change in control" and (ii) to be bound
for an extended period of time by certain noncompetition provisions and (iii)
provide certain consulting services to the Company. In addition, certain other
members of the Management Group would be entitled to severance payments pursuant
to the their respective employment agreements with the Company upon an
involuntary termination of employment following a "change in control". Because
the Merger will constitute a "change in control," it is proposed that each of
these members agree to amend their employment agreements to remove their
respective "change in control" provisions. Final negotiation of the terms of the
Management Group's employment following the Merger, including the proposed
waiver of their "change of control" payments, has not occurred as of the mailing
date of this proxy statement.
New Employment Agreements with the Management Sponsors. It has been
proposed that the employment agreements that the Management Sponsors currently
have with the Company be terminated upon consummation of the Merger, at which
time, the Management Sponsors would enter into new employment agreements with
the Surviving Corporation. The principal terms of such proposed new employment
agreements are as follows:
- each agreement would have a term of three years, unless terminated
or not renewed in accordance with the agreement's terms;
- each agreement would provide for compensation consisting of base
salary and a potential annual cash bonus (the eligibility formula
for which is intended to be determined in accordance with any bonus
plan in effect for executives of the Surviving Corporation of
equivalent position and title); and
- each agreement would provide for a severance payment in the event of
termination by the Company without cause or resignation by the
employee for good reason, consisting of (i) payment of base salary
and continuation of normal health and life insurance, retirement,
and other benefits until the later of the third anniversary of the
date of the employment agreement and the first anniversary of the
date of the employee's termination or resignation and (ii) payment
of one year's bonus equal in amount to the average bonus received by
the employee for the three previous fiscal years.
It is proposed that the initial base salaries for David R. Klock and
Phyllis A. Klock pursuant to their new employment agreements with the Surviving
Corporation would be $250,000 and $215,000 respectively. The potential annual
cash bonuses for each of the Management Sponsors pursuant to each of their
employment agreements would be at the discretion of the Compensation Committee
of the Board of Directors.
Interests in Dental Health Development Corporation. Phyllis Klock and
Bruce Mitchell own 700 and 500 shares of Class B Common Stock of DHDC,
respectively. It is expected that these shares will be exchanged for a nominal
number of shares of common stock and/or Convertible Preferred Stock of the
Surviving Corporation following the closing of the Merger.
Stockholders' Agreement. Members of the Investor Group are expected to
enter into a stockholders' agreement that will restrict the ability of each
member to transfer the shares of capital stock of CompDent to be owned by them
and create certain other rights and obligations with respect to such shares.
Indemnification and Insurance. The Merger Agreement requires that CompDent
provide indemnification, to the full extent permitted by applicable law, to its
current and former officers and directors (including members of the Special
Committee) against liabilities (including reasonable attorneys' fees) relating
to
55
<PAGE> 64
actions or omissions arising out of their being a director, officer, employee,
or agent of the Company at or prior to the closing of the Merger (including the
transactions contemplated by the Merger Agreement). In addition, CompDent is
obligated for a period of six years from the closing of the Merger to continue
in effect directors' and officers' liability insurance with respect to matters
occurring prior to the closing of the Merger, which insurance must contain terms
and conditions no less advantageous than are contained in the Company's current
directors' and officers' liability insurance policy, provided that the Company
is not obligated to expend annually more than 125% of the current cost of such
coverage.
The Other Investors. After consummation of the Merger, the Other Investors
may be deemed to beneficially own approximately 3.85% of the shares of common
stock and Convertible Preferred Stock of the Surviving Corporation expected to
be then issued and outstanding.
Robinson-Humphrey. Robinson-Humphrey was engaged by the Company (i) as a
co-managing underwriter in the Company's August 1995 public offering of Common
Stock for which Robinson-Humphrey received underwriting commissions of
approximately $587,075, (ii) as placement agent for DHDC's September 1997
private placement of securities for which Robinson-Humphrey received $450,000 in
placement fees, and (iii) as a financial advisor to the Company in connection
with four of the Company's acquisitions since January 1, 1996, for which
Robinson-Humphrey received approximately $795,000 in fees. In the ordinary
course of Robinson-Humphrey's business, Robinson-Humphrey actively trades in the
equity securities of the Company for its own account and for the accounts of its
customers and accordingly, may at any time hold a long or a short position in
such securities. In addition, RH Capital, an affiliate of Robinson-Humphrey,
purchased $500,042 of the Series A Preferred Stock and Class A Common Stock of
DHDC from the GTCR Partnership on October 29, 1997. This represents 5% of the
total outstanding Series A Preferred Stock and Class A Common Stock of DHDC. RH
Capital's investment is passive in nature and RH Capital does not have the right
to nominate any representatives to the DHDC Board of Directors. Pursuant to the
terms of the Series A Preferred Stock, RH Capital has the contractual right to
receive a cumulative preferred return at the compound annual return of 31% on
its investment in the Series A Preferred Stock. RH Capital has agreed to resell
its investment in DHDC to the GTCR Partnership prior to the Merger for
approximately $15,325,206 (assuming a March 31, 1999 closing date), which is
equal to the original cost of this investment plus the accrued dividends
thereon. Robinson-Humphrey believes that the foregoing arrangements do not
affect its ability to independently and impartially deliver an opinion to the
Special Committee with respect to the fairness of the Merger from a financial
point of view.
Special Committee. The Special Committee, which met thirteen times from
July 1998 through the date of this Proxy Statement, will receive no additional
compensation in connection with these committee meetings. Members of the Special
Committee will be entitled to certain indemnification rights and to directors'
and officers' liability insurance which will be continued by CompDent following
the Merger as provided for by the Merger Agreement for the current and former
officers and directors of the Company. Under the terms of the Merger Agreement,
the options held by the members of the Special Committee will be terminated and
each holder thereof will receive an amount in cash equal to the aggregate
unrealized gain on such options on the same basis as other holders of CompDent
stock options.
Mr. Stephenson owns 1,000 shares of Common Stock, Mr. Hertik owns no shares
of Common Stock, and Dr. Scott owns no shares of Common Stock. Upon consummation
of the Merger, these shares will be canceled in exchange for the Cash Merger
Consideration. In addition, each of the Special Committee members owns options
to purchase shares of Common Stock. Accordingly, upon consummation of the
Merger, the members of the Special Committee will receive the following cash
payments: Mr. Stephenson will receive $ for the aggregate unrealized gain
on his stock options and $15,000 for his shares of Common Stock, for a total
cash payment of $ . Mr. Hertik will receive $ for the aggregate
unrealized gain on his stock options. Dr. Scott will not receive any cash
payment.
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company will
be owned by the Investor Group. The Public Stockholders will no longer have any
interest in, and will not be stockholders of, CompDent, and
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<PAGE> 65
therefore, will not participate in CompDent's future earnings and potential
growth. Instead, the Public Stockholders will have the right to receive $15.00
in cash, without interest, for each share held (other than shares in respect of
which appraisal rights have been perfected). An equity investment in the Company
following the Merger involves substantial risk resulting from the limited
liquidity of any such investment and the leverage resulting from the future
borrowings that will be required to purchase the Common Stock from the Public
Stockholders and to fund the capital expenditures and acquisitions necessary to
execute the Company's business strategy. Nonetheless, if the Company
successfully executes its business strategy, the value of such an equity
investment could be considerably greater than the original cost thereof. See
" -- Conflicts of Interest" and "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION."
In addition, the Common Stock will no longer be traded on Nasdaq and price
quotations with respect to sales of shares in the public market will no longer
be available. The registration of the Common Stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), will terminate; however, American
Prepaid Professional Services, Inc., a wholly owned subsidiary of CompDent,
which will change its name to CompDent Benefit Corporation, Inc. at the closing
of the Merger ("American Prepaid"), may begin to file periodic financial and
other information with the Commission in connection with certain debt securities
which may be issued at the closing of the Merger. See "-- Financing of the
Merger."
FINANCING OF THE MERGER
It is estimated that approximately $237,624,000 will be required to
consummate the Merger and pay related fees and expenses. This sum will be
provided by (i) a cash investment of up to approximately $66,639,049 from
currently available funds by the Equity Investors, (ii) a contribution by the
GTCR Partnership of its equity interest in DHDC for an agreed upon value of
approximately $15,325,206 (assuming a March 31, 1999 closing date) which is
equal to the GTCR's original cost of this investment plus the accrued dividends
thereon which the Company believes approximates fair market value, (iii) an
exchange by the NMS Partnership of approximately $2,236,245 in Common Stock,
(iv) an exchange by the Management Sponsors of approximately $3.0 million in
Common Stock, (v) a cash investment of approximately $255,000 by the Other
Management Investors, (vi) an exchange by the Other Investors of approximately
$3,499,500 in Common Stock, (vii) the sale by American Prepaid of $100 million
of senior subordinated notes (the "Senior Subordinated Notes"), (viii) up to $25
million of a $45 million secured credit facility of American Prepaid with senior
lenders (the "American Prepaid Credit Facility"), including a $20 million
revolving credit facility and a term loan of $25 million, and (ix) a $20 million
credit facility of DHMI with senior lenders (the "DHMI Credit Facility")
consisting solely of a term loan. The Equity Investors have entered into
commitment letters to provide the equity financing to the Acquiror. In addition,
the Equity Investors have received financing letters from NationsBank, N.A.
("NationsBank") to provide the American Prepaid Credit Facility and the DHMI
Credit Facility, which letters are subject to numerous conditions. In addition,
these financing letters will expire on June 30, 1999. These financing letters
are filed as exhibits to the Company's Schedule 13E-3.
The GTCR Partnership's equity interest in DHDC consist of 9,500 shares of
Series A Preferred Stock and 79,800 shares of Class A Common Stock of DHDC.
Pursuant to the terms of the Series A Preferred Stock, GTCR has the contractual
right to receive a cumulative preferred return at the compound annual rate of
31% on its investment on the Series A Preferred Stock. The agreed upon value of
GTRC's contribution of its equity interest in DHDC of approximately 15,325,206
(assuming a March 31, 1999 closing date) is equal to the original cost of this
interest plus the accrued dividends thereon which the Company believes
approximates fair market value.
American Prepaid expects to issue the Senior Subordinated Notes in a
private placement for resale pursuant to Rule 144A under the Securities Act of
1933, as amended. The Senior Subordinated Notes will be unsecured obligations,
will mature on the anniversary of issuance, will bear interest at a fixed
rate to be determined and will be redeemable by American Prepaid commencing in
at a price to be determined. If such notes have not been issued
at the time of the Merger, the Company intends to cause NationsBridge, L.L.C.
("NationsBridge") to make a certain bridge loan (the "Bridge Loan"), and
thereafter
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utilize the proceeds of a future issuance of such senior subordinated notes to
refinance the Bridge Loan. The Equity Investors have received a financing letter
from NationsBridge to provide the Bridge Loan, which letters are subject to
numerous conditions. The financing letter to provide the Bridge Loan will expire
on June 30, 1999. Borrowings under the American Prepaid Credit Facility will be
secured by (i) 100% of the outstanding common stock of American Prepaid and each
of the existing or subsequently acquired or organized subsidiaries of American
Prepaid (except in the case of foreign subsidiaries, where the pledge of such
common stock to be limited to 65%) and (ii) all present and future intercompany
notes evidencing indebtedness between American Prepaid and its subsidiaries. The
American Prepaid Credit Facility will be guaranteed by the Surviving Corporation
and all existing or subsequently acquired or organized domestic subsidiaries of
American Prepaid, except to the extent that (i) issuing any such guarantee by
any such subsidiary is subject to regulatory restriction and approval and (ii)
any such subsidiary is not required to guarantee the Bridge Loan. The DHMI
Credit Facility will be guaranteed by the Equity Investors. The revolving credit
facility under the American Prepaid Credit Facility will terminate five years
after the closing of the Merger, and the term loan under the American Prepaid
Credit Facility will mature on a non pro-rata basis between the first and fifth
year following the closing of the Merger, subject to mandatory amortization
prior to maturity from excess cash flow and certain other sources. The term
loans under the DHMI Credit Facility will mature on the third anniversary of the
closing of the Merger, subject to mandatory amortization prior to maturity from
excess cash flow and certain other sources.
Interest on borrowings under the revolving credit facility and the term
loan under the American Prepaid Credit Facility will, in the event a LIBOR
pricing option is exercised, range from 1.75% to 2.5% over LIBOR, and, in the
event an alternate base rate pricing option is exercised, range from .75% to
1.5% over the alternate base rate. Interest on borrowings under the DHMI Credit
Facility will, in the event a LIBOR pricing option is exercised, be LIBOR plus
.75%, and, in the event an alternate base rate pricing option is exercised, be
the alternate base rate plus .25%. The financing letters from NationsBank and
NationsBridge are subject to certain conditions to funding, including certain
financial tests and ratios and other customary conditions.
CONDUCT OF COMPDENT'S BUSINESS AFTER THE MERGER
The Investor Group is continuing to evaluate CompDent's business,
practices, operations, properties, corporate structure, capitalization,
management, and personnel and will discuss what changes, if any, will be
desirable. Subject to the foregoing, the Investor Group expects that the
day-to-day business and operations of CompDent will be conducted substantially
as they are currently being conducted by CompDent. The Investor Group does not
currently intend to dispose of any assets of CompDent, other than in the
ordinary course of business. Additionally, the Investor Group does not currently
contemplate any material change in the composition of CompDent's current
management or personnel, although after the Merger, the Board will consist of
David Klock, Phyllis Klock, Donald Edwards (as one of up to three designees of
the GTCR Partnership), Roger Kafker (as one of up to three designees of the TA
Fund) and up to three outside directors to be determined at a later time.
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THE SPECIAL MEETING
DATE, TIME, AND PLACE OF THE SPECIAL MEETING
The Special Meeting of CompDent will be held on March , 1999, at 10:00
a.m., local time, at the offices of King & Spalding, located at 191 Peachtree
Street, Atlanta, Georgia.
PROXY SOLICITATION
This Proxy Statement is being solicited by the Company. All expenses
incurred in connection with solicitation of the enclosed proxy will be paid by
the Surviving Corporation. Officers, directors, and regular employees of the
Company, who will receive no additional compensation for their services, may
solicit proxies by telephone or personal call. In addition, the Company has
retained MacKenzie Partners, Inc. to solicit proxies for a fee of $7,500 plus
expenses. The Company has requested brokers and nominees who hold stock in their
names to furnish this proxy material to their customers, and the Company will
reimburse such brokers and nominees for their related out-of-pocket expenses.
This Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about February , 1999.
RECORD DATE AND QUORUM REQUIREMENT
The Common Stock is the only outstanding voting security of the Company.
The Board has fixed the close of business on February , 1999 as the Record
Date for the determination of stockholders entitled to notice of, and to vote
at, the Special Meeting and any adjournment or adjournments thereof. Each holder
of record of Common Stock at the close of business on the Record Date is
entitled to one vote for each share then held on each matter submitted to a vote
of stockholders. At the close of business on the Record Date, there were
shares of Common Stock issued and outstanding held by
holders of record and by approximately persons or
entities holding in nominee name.
The holders of a majority of the outstanding shares entitled to vote at the
Special Meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business.
VOTING PROCEDURES
Approval of the Merger Agreement, which is attached as Appendix A hereto,
will require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting. A
failure to vote or a vote to abstain will have the same legal effect as a vote
cast against approval. Brokers and, in many cases, nominees will not have
discretionary power to vote on the proposal to be presented at the Special
Meeting. Accordingly, beneficial owners of shares should instruct their brokers
or nominees how to vote. A broker non-vote will have the same effect as a vote
against the Merger.
If there are insufficient votes to approve the Merger Agreement at the
Special Meeting, proxies voted in favor of the Merger Agreement and proxies as
to which no voting instructions are given may be voted to adjourn the Special
Meeting in order to solicit additional proxies in favor of approval of the
Merger Agreement. If the Special Meeting is adjourned for any purpose, at any
subsequent reconvening of the Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting (except for any proxies which have been revoked or withdrawn),
notwithstanding that they may have been voted on the same or any other matter at
a previous meeting.
Under Delaware law, holders of Common Stock who do not vote in favor of the
Merger Agreement and who comply with certain notice requirements and other
procedures will have the right to dissent and to be paid cash for the "fair
value" of their shares as finally determined under such procedures, which may be
more or less than the consideration to be received by other stockholders of
CompDent under the terms of the Merger Agreement. Failure to follow such
procedures precisely may result in loss of appraisal rights. See "RIGHTS OF
DISSENTING STOCKHOLDERS."
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VOTING AND REVOCATION OF PROXIES
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by (i) filing with the Secretary of CompDent an instrument
revoking it, (ii) submitting a duly executed proxy bearing a later date or (iii)
voting in person at the Special Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Secretary of
CompDent will be voted in accordance with the instructions indicated thereon,
and if no instructions are indicated, will be voted to approve the Merger and in
such manner as the persons named on the enclosed proxy card in their discretion
determine upon such other business as may properly come before the Special
Meeting or any adjournment thereof.
The shares represented by the accompanying proxy card and entitled to vote
will be voted if the proxy card is properly signed and received by the Secretary
of the Company prior to the Special Meeting.
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The effective time of the Merger, which shall be the date and time of
filing of Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time"), is currently expected to occur as soon as
practicable after the Special Meeting, subject to approval of the Merger
Agreement at the Special Meeting and satisfaction or waiver of the terms and
conditions of the Merger Agreement. Detailed instructions with regard to the
surrender of Common Stock certificates, together with a letter of transmittal,
will be forwarded to stockholders by the Company's paying agent,
(the "Paying Agent"), promptly following the Effective Time. Stockholders should
not submit their certificates to the Paying Agent until they have received such
materials. The Paying Agent will send payment of the Cash Merger Consideration
to stockholders as promptly as practicable following receipt by the Paying Agent
of their certificates and other required documents. No interest will be paid or
accrued on the cash payable upon the surrender of certificates. Stockholders
should not send any certificates at this time. See "THE MERGER -- Conditions."
OTHER MATTERS TO BE CONSIDERED
The Company's Board of Directors is not aware of any other matters which
will be brought before the Special Meeting. If, however, other matters are
presented, proxies will be voted in accordance with the discretion of the
holders of such proxies.
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THE MERGER
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that subject to satisfaction of
certain conditions, the Acquiror will be merged with and into CompDent, and that
following the Merger, the separate existence of the Acquiror will cease and
CompDent will continue as the Surviving Corporation. At the Effective Time, and
subject to the terms and conditions set forth in the Merger Agreement, each
share of issued and outstanding Common Stock (other than shares as to which
appraisal rights are properly perfected and not withdrawn, shares held by the
Acquiror, and shares held by certain other investors and members of the
Management Group (the "Recapitalization Shares")), will, by virtue of the
Merger, be canceled and converted into the right to receive $15.00 in cash,
without interest (the "Cash Merger Consideration"). As a result of the Merger,
the Common Stock will no longer be publicly traded and the equity of the
Surviving Corporation will be 100% owned by the Investor Group.
The terms of and conditions to the Merger are contained in the Merger
Agreement which is included in full as Appendix A to this Proxy Statement and is
incorporated herein by reference. The discussion in this Proxy Statement of the
Merger and the summary description of the principal terms of the Merger
Agreement are subject to and qualified in their entirety by reference to the
more complete information set forth in the Merger Agreement.
Merger Consideration. Upon consummation of the Merger, each share of
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares owned by CompDent or any of its subsidiaries or by the
Acquiror and Recapitalization Shares and dissenting shares) will be converted
into the right to receive the Cash Merger Consideration, upon surrender and
exchange of the certificate or certificates which immediately prior to the
Effective Time evidenced Common Stock (the "Certificate(s)"). All such shares of
Common Stock, when converted (the "Shares"), will no longer be outstanding and
will automatically be canceled and retired and will cease to exist, and each
Certificate previously evidencing such Shares will thereafter represent only the
right to receive the Cash Merger Consideration.
As holders of Recapitalization Shares, the Management Sponsors will in the
aggregate have 200,000 shares of Common Stock converted in the Merger into (i)
627,245 shares of common stock of the Surviving Corporation and (ii) 2,663
shares of Convertible Preferred Stock of the Surviving Corporation. In addition,
certain other stockholders of the Company (other than the Equity Sponsors), as
holders of Recapitalization Shares, will in the aggregate have 233,300 shares of
Common Stock converted in the Merger into (i) 348,007 shares of common stock of
the Surviving Corporation and (ii) 3,326 shares of Convertible Preferred Stock
of the Surviving Corporation.
Payments for Shares. As soon as reasonably practicable after the Effective
Time, the Paying Agent will mail to each holder of record of a Certificate
(other than CompDent or the Acquiror) a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificate in exchange
for payment therefor. Upon surrender of a Certificate for cancellation to the
Paying Agent, together with such duly executed letter of transmittal, and any
additional requested items, the holder of such Certificate will be entitled to
receive in exchange therefor cash in an amount equal to the product of (x) the
number of shares of Common Stock represented by such Certificate and (y) the
Cash Merger Consideration.
Cash-Out of CompDent Stock Options. The Merger Agreement provides that, at
the Effective Time, each holder of an outstanding vested option (the "Vested
Options") to purchase shares of Common Stock under any stock option plans or
arrangements will receive cash equal to the excess of the Cash Merger
Consideration over the per share exercise price of such Vested Option (the
"Option Consideration"). Upon receipt of the Option Consideration, each Vested
Option will be canceled in accordance with its terms or the applicable option
plan. All options that are not Vested Options will be canceled in accordance
with their terms or the applicable option plan. The total number of Vested
Options which will be cashed out is 178,500, and other options totaling 442,250
will be canceled. The Merger Agreement provides that CompDent will also suspend,
terminate, or refrain from renewing CompDent's Employee Stock Purchase Plan
until the termination of the Merger Agreement.
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Transfer of Shares. At the Effective Time, the stock transfer books of
CompDent will be closed and there will be no further registration of transfer of
shares of Common Stock thereafter on the records of CompDent. On or after the
Effective Time, any certificates presented to the Surviving Corporation or the
Paying Agent for any reason will be converted into the Cash Merger
Consideration.
Rights Plan. In August 1996, the CompDent Board adopted the Rights
Agreement by and between CompDent and State Street Bank and Trust Company (the
"Rights Agreement"). The CompDent Board has approved and CompDent has entered
into an amendment to the CompDent Rights Agreement to provide that neither the
Acquiror nor its Affiliates and Associates (as such terms are defined in the
Rights Agreement) are deemed "Acquiring Persons" in connection with the Rights
Agreement. The Rights Agreement will be terminated at the closing of the Merger.
Conditions to the Merger. Each party's respective obligation to effect the
Merger is subject to the satisfaction, prior to the Closing Date, of each of the
following conditions: (i) the approval and adoption of the Merger Agreement and
the Merger by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote thereon if such vote is
required by applicable law; (ii) all licenses, permits, consents,
authorizations, approvals, qualifications, and orders of necessary governmental
entities, including, without limitation, the Form A Statements Regarding the
Acquisition of Control of a Domicile Insurer from the Arizona and Texas
Departments of Insurance and any other necessary insurance regulatory approval,
shall have been obtained except where the failure to obtain such licenses,
permits, consents, authorizations, approvals, qualifications, and orders,
individually and in the aggregate, will not have a Material Adverse Effect (as
defined in the Merger Agreement) on CompDent; and (iii) the waiting period (and
any extension thereof) applicable to the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired or
terminated.
The obligations of the Acquiror and each of the Equity Investors, who have
agreed, subject to certain limitations, to guarantee certain obligations of the
Acquiror under the Merger Agreement, to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by the Acquiror and the
Equity Investors: (i) there shall not have occurred a Material Adverse Effect on
CompDent prior to the Effective Time; (ii) the representations and warranties of
CompDent in the Merger Agreement shall be true in all material respects as of
the date of the Merger Agreement and (except to the extent such representations
and warranties expressly relate to an earlier date) as of the closing of the
Merger (the "Closing Date") as though made on and as of the Closing Date, except
as otherwise contemplated by the Merger Agreement and except that, with respect
to representations and warranties otherwise qualified by Material Adverse
Effect, such representations and warranties shall be true and correct in all
respects; (iii) CompDent shall have performed in all material respects all
obligations contained in the Merger Agreement required to be performed at or
prior to the Closing Date; (iv) CompDent shall have received sufficient
financing pursuant to its existing bank commitments to consummate the
transactions contemplated by the Merger Agreement, including, without
limitation, amounts sufficient (a) to pay the Cash Merger Consideration, (b) to
refinance existing indebtedness of CompDent, and (c) to pay any fees and
expenses in connection with the transactions contemplated by the Merger
Agreement and the financing thereof; and (v) assuming the Acquiror's compliance
with its obligation under Section 5.5 of the Merger Agreement, there shall have
been no order or injunction entered in any action or proceeding before any
governmental entity or other action taken, nor statute, rule, regulation,
legislation, interpretation, judgment, or order enacted, entered, enforced,
promulgated, amended, issued, or deemed applicable to CompDent, its
subsidiaries, the Merger or the Merger Agreement by any governmental entity that
would have the effect of making illegal, materially delaying, or otherwise
directly or indirectly restraining or prohibiting the Merger or the transactions
contemplated thereby.
The obligations of CompDent to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by CompDent: (i) the
representations and warranties of the Acquiror and each of the Equity Investors
contained in the Merger Agreement shall be true in all material respects as of
the date of the Merger Agreement and (except to the extent such representations
and warranties expressly related to an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
the Merger Agreement and except that, with respect to representations and
warranties
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otherwise qualified by Material Adverse Effect, such representations and
warranties shall be true and correct in all respects; (ii) the Acquiror and each
of the Equity Investors have performed in all material respects all obligations
contained in the Merger required to be performed at or prior to the Closing
Date; and (iii) assuming CompDent's compliance with its obligations under
Section 5.5 of the Merger Agreement, no court of competent jurisdiction or
governmental entity shall have enacted, issued, promulgated, enforced, or
entered any statute, rule, regulation, judgment, decree, injunction, or other
order (whether temporary, preliminary, or permanent) which is then in effect and
has the effect of preventing or prohibiting the consummation of the transactions
contemplated by this Agreement or the effective operation of the business of
CompDent and the subsidiaries after the Effective Time. Subject to applicable
law, the Merger Agreement may be amended by written agreement of the parties to
the Merger Agreement, provided however, that, after the Merger Agreement is
approved by the CompDent stockholders, no such amendment or modification shall
reduce the amount or change the form of consideration to be received by the
CompDent stockholders. Consequently, if CompDent waives a condition to its
obligations to perform under the Merger Agreement, unless otherwise required by
applicable law, CompDent will only resolicit stockholder approval of the Merger
Agreement if such waiver reduces the amount or changes the form of consideration
to be received by the CompDent stockholders.
EVEN IF THE STOCKHOLDERS APPROVE THE MERGER, THERE CAN BE NO ASSURANCE THAT
THE MERGER WILL BE CONSUMMATED.
Representations and Warranties. CompDent has made representations and
warranties in the Merger Agreement regarding, among other things, its
organization and good standing, authority to enter into the transaction, its
capitalization, its financial statements, the absence of certain changes in the
business of CompDent since September 30, 1998, the content and submission of
forms and reports required to be filed by CompDent with the Commission,
requisite governmental and other consents and approvals, compliance with all
applicable laws, absence of litigation to which CompDent is a party, brokers and
finders fees, requisite tax filings, absence of defaults under material
contracts, employee benefits, and environmental matters.
The Acquiror has made representations and warranties in the Merger
Agreement regarding, among other things, its organization and good standing,
authority to enter into the transaction, the requisite governmental and other
consents and approvals, and accuracy of information supplied by the Acquiror for
submission on forms and reports required to be filed by CompDent with the
Commission.
The Equity Investors have made representations and warranties in the Merger
Agreement regarding, among other things, their organization and good standing,
authority to enter into the transaction, requisite governmental and other
consents and approvals, accuracy of information supplied by the Equity Investors
for submission on forms and reports required to be filed by CompDent with the
Commission, and certain financing commitments.
The representations, warranties, and agreements (other than Sections 5.4
and 5.6) in the Merger Agreement or in any instrument delivered pursuant to the
Merger Agreement will expire at the Effective Time.
Covenants. In the Merger Agreement, CompDent has agreed that prior to the
Effective Time, unless otherwise agreed to in writing by the Acquiror or as
otherwise expressly contemplated or permitted by the Merger Agreement, CompDent
and each of its subsidiaries will, among other things, conduct business only in
the usual, regular, and ordinary course substantially consistent with past
practice, including, without limitation, not declaring any dividend on its
capital stock or issuing any shares of capital stock.
Solicitation of Acquisition Proposal. The Merger Agreement provides that
on and after January 18, 1999 CompDent, its subsidiaries and DHDC, and any of
their respective officers, directors, employees, agents and representatives
shall be permitted to initiate or solicit, directly or indirectly, any inquiries
or the making of any proposal with respect to a merger, consolidation, sale, or
similar transaction involving CompDent or any of its subsidiaries (an
"Acquisition Proposal") and to engage in any negotiations concerning, and
provide any confidential information or data to, and have any discussions with,
any person relating to any Acquisition Proposal, and otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal.
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CompDent will notify the Acquiror immediately after it receives an indication of
interest, inquiry or proposal from a third party regarding an Acquisition
Proposal and such third party commences a due diligence investigation of
CompDent with respect to such Acquisition Proposal. CompDent will keep the
Acquiror apprised of all material developments relating to any such Acquisition
Proposal.
Indemnification and Insurance. The Merger Agreement provides that the
Company's current and former directors and officers will be indemnified by the
Surviving Corporation, to the fullest extent permitted under the DGCL, against
any costs, expenses, fines, losses, claims, damages, liabilities, or judgments,
or amounts paid in settlement with the approval of the indemnifying party in
connection with any threatened or actual claim, action, suit, proceeding, or
investigation based in whole or in part on, or arising in whole or in part out
of, or pertaining to the fact that such person is or was a director or officer
of CompDent or any of its subsidiaries, whether pertaining to any matter
existing or occurring at or prior to the Effective Time. In addition, the
Surviving Corporation is required to maintain in effect, for a period of six
years after the Effective Time, CompDent's policies of directors' and officers'
liability insurance (provided that the Surviving Corporation may substitute
therefor policies of at least the same amounts and comparable coverage).
However, in no event will the Surviving Corporation be required to pay premiums
for such insurance in excess of 125% of premiums paid by CompDent in the prior
year.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the stockholders of CompDent: (a) by mutual written
consent of CompDent (by action of the Special Committee) and the Acquiror (by
action of its Board); (b) by CompDent if there has been a material breach or
failure to perform any representation, warranty, covenant, or agreement on the
part of the Acquiror, which breach or failure to perform has not been cured
within 30 calendar days following receipt by the Acquiror of notice of such
breach or failure; (c) by the Acquiror if there has been a material breach or
failure to perform any representation, warranty, covenant, or agreement on the
part of CompDent, which breach or failure to perform has not been cured within
30 calendar days following receipt by CompDent of notice of such breach or
failure; (d) by the Acquiror or CompDent if any permanent injunction or other
order of a court or other competent authority preventing the consummation of the
Merger shall have become final and nonappealable; (e) the Acquiror or CompDent
if the Merger shall not have been consummated on or before June 30, 1999; (f) by
the Acquiror in the event the Special Committee or the CompDent Board shall have
(i) withdrawn or adversely modified its approval or recommendation of the Merger
or this Agreement, (ii) failed to duly call, give notice of, convene, or hold
the CompDent Stockholders Meeting, and at the time of such failure, an
Acquisition Proposal by any Person (other than the Acquiror or its affiliates)
shall have been publicly announced or provided to CompDent or the Special
Committee, (iii) recommended, approved, or accepted an Acquisition Proposal by
any Person (other than the Acquiror or its affiliates), or (iv) resolved to do
any of the foregoing (or CompDent has agreed to do any of the foregoing); (g) by
CompDent if the Special Committee or the CompDent Board accepts or recommends to
the holders of the shares of Common Stock approval or acceptance of an
Acquisition Proposal by any Person (other than the Acquiror or its affiliates);
provided, however that CompDent shall not terminate the Merger Agreement in this
manner without providing the Acquiror at least five (5) days prior written
notice, which notice shall include in reasonable detail the terms of the
Acquisition Proposal; or (h) by the Acquiror or CompDent if the Merger and the
Merger Agreement shall have been voted on by the holders of Common Stock, and
the votes shall not have been sufficient to satisfy the condition set forth in
Section 6.1(a) of the Merger Agreement.
Fees and Expenses. Except as otherwise provided in Section 7.3 of the
Merger Agreement and except with respect to claims for damages incurred as a
result of the breach of the Merger Agreement, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses. CompDent agrees to pay the
Acquiror a fee in immediately available funds equal to the amount of all of the
Acquiror's Designated Expenses (as defined below) upon the termination of the
Merger Agreement under Sections 7.1(f) or (g) of the Merger Agreement. In the
event (i) the Merger Agreement shall be terminated pursuant to Section 7.1(h) of
the Merger Agreement, and (ii) either (A) a transaction with any person (other
than the Acquiror or its affiliates) that is contemplated by the term
"Acquisition Proposal," which is based on an Acquisition Proposal made prior to
such termination
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of the Merger Agreement, shall be consummated on or before the first anniversary
of the termination of the Merger Agreement, or (B) CompDent shall enter into an
agreement with any person (other than the Acquiror or its affiliates) on or
before the first anniversary of the termination of the Merger Agreement with
respect to an Acquisition Proposal which is made prior to such termination of
the Merger Agreement, and a transaction contemplated by the term "Acquisition
Proposal" shall thereafter be consummated with such person, then CompDent shall
pay to the Acquiror the amount of all of the Acquiror's Designated Expenses. The
Acquiror agrees to pay CompDent a fee in immediately available funds equal to
the amount of all of CompDent's Designated Expenses upon the termination of the
Merger Agreement under Sections 7.1(a) or (e), provided that the only
unsatisfied closing condition (other than the delivery of customary closing
documents) is the financing condition set forth in Section 6.2(d). The Acquiror
agrees to pay CompDent a fee in immediately available funds equal to the amount
of all CompDent's Designated Expenses upon the termination of the Merger
Agreement under Section 7.1(b). CompDent agrees to pay the Acquiror a fee in
immediately available funds equal to the amount of all the Acquiror's Designated
Expenses upon the termination of the Merger Agreement under Section 7.1(c) of
the Merger Agreement. All Designated Expenses shall be paid on the second
business day following the submission thereof by the applicable party. The term
"Designated Expenses" shall mean, (i) with respect to CompDent, all documented,
reasonable out-of-pocket fees and expenses (not to exceed $1.0 million) incurred
or paid by or on behalf of CompDent and its affiliates to third parties, and
(ii) with respect to the Acquiror, all documented, reasonable out-of-pocket fees
and expenses (not to exceed $1.5 million) incurred or paid by or on behalf of
the Acquiror and its affiliates to third parties, in each case in connection
with the Merger or the consummation of any of the transactions contemplated by
the Merger Agreement, including, without limitation, all printing costs and
reasonable fees and expenses of counsel, investment banking firms, brokers,
accountants, experts and consultants.
Amendment. Subject to applicable law, the Merger Agreement may be amended
by the parties to the Merger Agreement; provided, however, that, after the
Merger Agreement is approved by the CompDent stockholders, no such amendment or
modification shall reduce the amount or change the form of consideration to be
received by the CompDent stockholders. Any amendment to the Merger Agreement
must be in writing and signed by the parties to the Merger Agreement.
Terms of the Convertible Preferred Stock and Perpetual Preferred
Stock. The following description of the Convertible Preferred Stock and the
Perpetual Preferred Stock is qualified in its entirety by reference to the
Amended and Restated Certificate of Incorporation of the Surviving Corporation
which will become effective following the consummation of the Merger and which
is attached as an exhibit to the Merger Agreement (the "Certificate of
Incorporation").
Convertible Preferred Stock.
Voting. Each share of Convertible Preferred Stock will entitle the holder
thereof to the number of votes equal to the number of shares of common stock of
the Surviving Corporation into which such shares of Convertible Preferred Stock
could be converted (as described below) on the record date for a vote of
stockholders. The holders of Convertible Preferred stock will vote together with
holders of common stock of the Surviving Corporation as a single class upon all
matters submitted to a vote of stockholders, except those matters required to be
submitted to a class or series vote pursuant to the Certificate of Incorporation
or by applicable law.
Dividends. The holders of Convertible Preferred Stock will be entitled to
receive dividends out of funds legally available therefor at such times and in
such amounts as the Board of Directors of the Surviving Corporation may
determine in its sole discretion; provided, however, that no such dividend may
be declared or paid on any shares of Convertible Preferred Stock unless at the
same time a dividend is declared or paid on all outstanding shares of common
stock of the Surviving Corporation and vice versa. The holders of Convertible
Preferred Stock and common stock of the Surviving Corporation shall share in any
such dividends as if they constituted a single class of stock with each holder
of shares of Convertible Preferred Stock entitled to receive such dividends
based on the number of shares of common stock of the Surviving Corporation into
which such shares of Convertible Preferred Stock are then convertible.
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Liquidation Preference. Upon any liquidation, dissolution or winding up of
the Surviving Corporation (a "Liquidation Event"), each holder of outstanding
shares of Convertible Preferred Stock shall be entitled to receive out of the
assets of the Surviving Corporation available for distribution to stockholders
and before any amount shall be paid or distributed to the holders of common
stock of the Surviving Corporation or any other stock of the Surviving
Corporation ranking junior to the Convertible Preferred Stock (collectively,
"Junior Stock"), an amount of cash equal to (i) $1,008.72 per share of
Convertible Preferred Stock held by such holder (adjusted appropriately for
stock splits, stock dividends, recapitalizations and similar events with respect
to the Convertible Preferred Stock), (ii) any declared but unpaid dividends to
which such holder of shares of Convertible Preferred Stock is then entitled (the
sum of clauses (i) and (ii) being the "Convertible Preferred Base Liquidation
Amount"), and (iii) any Unredeemed Shares Interest (as defined below) (the sum
of clauses (i), (ii) and (iii) being the "Convertible Preferred Liquidation
Preference Amount"); provided, however, that if, upon any Liquidation Event the
amounts payable with respect to the Convertible Preferred Liquidation Preference
Amount are not paid in full, the holders of the Convertible Preferred Stock
shall share ratably in any distribution of assets in proportion to the full
respective preferential amounts to which they are entitled; provided further,
however, that if upon any Liquidation Event the holders of Convertible Preferred
Stock would receive more than the Convertible Preferred Liquidation Preference
Amount if all of their shares of Convertible Preferred Stock were converted into
shares of Perpetual Preferred Stock and common stock of the Surviving
Corporation upon such Liquidation Event, then each holder of Convertible
Preferred Stock shall receive, in lieu of the Convertible Preferred Liquidation
Preference Amount, an amount equal to such holder's Perpetual Preferred Stock
Liquidation Preference Amount (as defined below) plus any declared but unpaid
dividends and Unredeemed Shares Interest with respect to such holder's
Convertible Preferred Stock before any amount shall be paid or distributed to
the holders of Junior Stock, and thereafter shall share with the holders of
Junior Stock in the assets available for distribution, with such distributions
to be made in cash and as if each share of Convertible Preferred Stock had been
converted into the number of shares of Perpetual Preferred Stock and common
stock of the Surviving Corporation issuable upon the conversion of such holder's
shares of Convertible Preferred Stock immediately prior to any such Liquidation
Event.
Redemption. At any one time on or after the eleventh anniversary of the
consummation of the Merger, upon the election of holders of not less than
two-thirds of the voting power of the Convertible Preferred Stock, the Surviving
Corporation shall redeem all of the outstanding shares of the Convertible
Preferred Stock at the Convertible Preferred Redemption Price (as defined
below). In addition, upon the election of the holders of not less than
two-thirds of the voting power of the Convertible Preferred Stock in connection
with any Extraordinary Transaction (as defined in the Certificate of
Incorporation), unless the holders of the Convertible Preferred Stock otherwise
elect to convert their shares of Convertible Preferred Stock into shares of
Perpetual Preferred Stock and common stock of the Surviving Corporation prior to
the effective date of such Extraordinary Transaction, the Surviving Corporation
shall, on the effective date of such Extraordinary Transaction, unless the
Convertible Preferred Stock is acquired in such Extraordinary Transaction on
terms giving effect to the preferential amount to which the Convertible
Preferred Stock would be entitled in connection with a Liquidation Event and
otherwise as agreed to by the holders of two-thirds of the holders thereof, the
Surviving Corporation shall redeem all of the outstanding shares of Convertible
Preferred Stock for an amount equal to the Convertible Preferred Liquidation
Preference Amount, such amount to be payable in cash or, at the election of the
holders of not less than two-thirds of the voting power of the outstanding
Convertible Preferred Stock, in the same form of consideration as is paid to the
holders of Junior Stock in such Extraordinary Transaction, and no payment shall
be made to the holders of Junior Stock unless such amount is paid in full.
Notwithstanding the foregoing, if upon any Extraordinary Transaction the holders
of the outstanding shares of Convertible Preferred Stock would receive more than
the Convertible Preferred Liquidation Preference Amount in the event their
shares were converted into shares of Perpetual Preferred Stock and common stock
of the Surviving Corporation immediately prior to such Extraordinary
Transaction, then each holder of Convertible Preferred Stock shall receive with
respect to each outstanding share of Convertible Preferred Stock held by such
holder an amount equal to the per share Perpetual Stock Liquidation Preference
Amount plus any declared but unpaid dividends and any Unredeemed Share Interest
with respect to such shares as of the date of such Extraordinary Transaction
before any amount shall be paid
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or distributed to the holders of Junior Stock, payable in cash, and thereafter
shall share with the holders of Junior Stock in the proceeds of such
Extraordinary Transaction or, as applicable, shall receive an amount equal to
the amount per share that would be paid if the shares of common stock of the
Surviving Corporation receivable upon conversion of the Convertible Preferred
Stock were being acquired in the Extraordinary Transaction at the same price per
share as is paid for common stock of the Surviving Corporation, which excess
amount shall be paid in the same form of consideration as is paid to holders of
common stock of the Surviving Corporation, as if each share of Convertible
Preferred Stock had been converted into the number of shares of Perpetual
Preferred Stock and common stock of the Surviving Corporation issuable upon the
conversion of such share of Convertible Preferred Stock immediately prior to
such Extraordinary Transaction. The "Convertible Preferred Redemption Price" is
equal to the Convertible Preferred Liquidation Preference Amount or such greater
per share amount as may be payable pursuant to the previous sentence, plus any
Unredeemed Shares Interest.
If the Surviving Corporation is prohibited under the Delaware General
Corporation Law (the "DGCL") from redeeming all the outstanding shares of
Convertible Preferred Stock on the date on which it is required to redeem the
Convertible Preferred Stock, then it shall redeem such shares on a pro rata
basis among the holders of Convertible Preferred Stock in proportion to the full
respective redemption amounts to which they are entitled to the extent possible
and shall redeem the remaining shares (the "Unredeemed Shares") as soon as the
Surviving Corporation is not prohibited from redeeming some or all of such
shares under the DGCL. Any Unredeemed Shares shall remain outstanding and
entitled to all of the rights and preferences of Convertible Preferred Stock
until they are redeemed. In addition, from the date on which the Surviving
Corporation is first required to redeem the Unredeemed Shares until such shares
are redeemed, the applicable Convertible Preferred Base Liquidation Amount will
bear interest at the lesser of 12% per annum and the maximum permitted rate of
interest under applicable law ("Unredeemed Share Interest"). The holders of
Convertible Preferred Stock will be entitled to certain additional rights with
respect to election of the Board of Directors of the Surviving Corporation if
the Surviving Corporation does not redeem all of the shares of Convertible
Preferred Stock for more than six months after the date on which redemption is
first required. The holders of Unredeemed Stock will continue to be entitled to
receive dividends with respect to the Unredeemed Shares until the date such
shares are redeemed by the Surviving Corporation.
Conversion. The holders of not less than two-thirds of the voting power of
the outstanding shares of the Convertible Preferred Stock may elect to convert
all (but not less than all) of the outstanding shares of the Convertible
Preferred Stock into (i) one share of Perpetual Preferred Stock and (ii) 17.44
shares of common stock of the Surviving Corporation (subject to adjustment)(a)
immediately prior to and subject to the closing of a Liquidation Event or an
Extraordinary Transaction or (b) at any time on or after the sixth anniversary
of the consummation of the Merger. In addition, each share of the Convertible
Preferred Stock will automatically be converted into one share of Perpetual
Preferred Stock and 17.44 shares of common stock of the Surviving Corporation as
of and subject to the closing of a Qualified Public Offering (as defined in the
Certificate of Incorporation). If the holders of shares of Convertible Preferred
Stock elect to convert their shares of Convertible Preferred Stock, or if such
shares are automatically converted, into shares of Perpetual Preferred Stock and
common stock of the Surviving Corporation at a time when there are any declared
but unpaid dividends or other amounts owed on or in respect of such shares, the
Surviving Corporation shall pay such amounts in full in cash in connection with
such conversion.
Perpetual Preferred Stock
Voting. Each share of Perpetual Preferred Stock will entitle the holder to
one vote on all matters submitted to a vote of stockholders. Holders of
Perpetual Preferred stock will vote together with holders of common stock of the
Surviving Corporation as a single class upon all matters submitted to a vote of
stockholders, except as otherwise provided in the Certificate of Incorporation.
Dividends. The holders of shares of Perpetual Preferred Stock will be
entitled to receive, out of any funds legally available therefor, cumulative
annual cash dividends at the rate of 10% per annum, subject to adjustment.
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Liquidation Preference. Upon any Liquidation Event, each holder of
Perpetual Preferred Stock will be entitled to receive, out of the assets of the
Surviving Corporation available for distribution to stockholders and before any
amount shall be paid or distributed to the holders of Junior Stock, an amount of
cash equal to $1,000 per share held by such holder, subject to adjustment, plus
any accumulated but unpaid dividends (the "Perpetual Preferred Stock Liquidation
Amount"). If, upon any Liquidation Event, the amounts payable with respect to
the Perpetual Stock Liquidation Preference Amount are not paid in full, the
holders of the Perpetual Preferred Stock shall share ratably in any distribution
of assets in proportion to the full respective preferential amounts to which
they are entitled.
Conversion. The holders of not less than two-thirds of the voting power of
the outstanding shares of the Perpetual Preferred Stock (or Convertible
Preferred Stock, as applicable, proposing to convert such shares of Convertible
Preferred Stock into shares of Perpetual Preferred Stock in order to effect a
conversion of the Perpetual Preferred Stock received upon such conversion) may
elect to convert all (but not less than all) of the outstanding shares of the
Perpetual Preferred Stock into the number of shares of common stock of the
Surviving Corporation which results from dividing the Perpetual Stock
Liquidation Preference Amount by the fair market value per share of the common
stock of the Surviving Corporation at the time of the conversion immediately
prior to and subject to the closing of a Qualified Public Offering or an
Extraordinary Transaction. In any such case, the holders of shares of common
stock of the Surviving Corporation resulting from such conversion shall be
entitled, upon the election of not less than two-thirds in voting power of such
shares of common stock of the Surviving Corporation, to participate in such
Qualified Public Offering or Extraordinary Transaction on the same basis as the
other holders of common stock of the Surviving Corporation.
ESTIMATED FEES AND EXPENSES OF THE MERGER
Estimated fees and expenses incurred or to be incurred by the Surviving
Corporation are approximately as follows:
<TABLE>
<S> <C>
Advisory fees and expenses(1)............................... $
Lender fees and expenses(2).................................
Legal fees and expenses(3)..................................
Accounting fees and expenses................................
Paying Agent fees and expenses..............................
Proxy solicitation fees and expenses........................
Securities and Exchange Commission filing fee...............
Printing and mailing costs..................................
Miscellaneous expenses......................................
-------
Total............................................. $
</TABLE>
- ---------------
(1) Includes the fees and expenses of The Robinson-Humphrey Company, L.L.C. and
Morgan Stanley & Co. Incorporated.
(2) Includes the fees and expenses of NationsBank, N.A., and NationsBridge,
L.L.C.
(3) Includes the estimated fees and expenses of counsel for the Company, the
Special Committee, and the Investor Group.
RIGHTS OF DISSENTING STOCKHOLDERS
Holders of shares of the Company's Common Stock are entitled to appraisal
rights under Section 262 of the DGCL. Section 262 is reprinted in its entirety
as Appendix C to this Proxy Statement. All references in Section 262 and in this
summary to a "stockholder" are to the record holder of the shares of the
Company's Common Stock as to which appraisal rights are asserted. A person
having a beneficial interest in shares of the Company's Common Stock that are
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to properly follow the steps summarized
below and in a timely manner to perfect whatever appraisal rights the beneficial
owner may have.
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<PAGE> 77
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Appendix C,
however the following discussion does summarize all of the material terms
relating to appraisal rights. THIS DISCUSSION AND APPENDIX C SHOULD BE REVIEWED
CAREFULLY BY ANY HOLDER WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO
WISHES TO PRESERVE THE RIGHT TO DO SO BECAUSE FAILURE TO COMPLY STRICTLY WITH
THE PROCEDURES SET FORTH HEREIN AND THEREIN WILL RESULT IN THE LOSS OF APPRAISAL
RIGHTS.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the Company, before the taking of the vote on the Merger at the
Special Meeting, a written demand for appraisal of his shares of the Company's
Common Stock. The demand must reasonably inform the Company of the identity of
the stockholder and that the stockholder intends thereby to demand the appraisal
of the shares of the Company's Common Stock. This written demand for appraisal
of the shares of the Company's Common Stock must be in addition to and separate
from any proxy or vote against the Merger. Voting against, abstaining from
voting, or failing to vote on the Merger will not constitute a demand for
appraisal within the meaning of Section 262. Any stockholder electing to demand
his appraisal rights will not be granted appraisal rights under Section 262 if
such stockholder has either voted in favor of the Merger or consented thereto in
writing (including by granting the proxy solicited by this Proxy Statement or by
returning a signed proxy without specifying a vote against the Merger or a
direction to abstain from such vote). Additionally, appraisal rights will not be
granted under Section 262 if the stockholder does not continuously hold through
the Effective Time his shares of the Company's Common Stock with respect to
which he demands appraisal.
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the
certificate or certificates representing shares of the Company's Common Stock.
If the shares of the Company's Common Stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian, or custodian, such demand must be
executed by the fiduciary. If the shares of the Company's Common Stock are owned
of record by more than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by all joint owners. An authorized agent, including
an agent for two or more joint owners, may execute the demand for appraisal for
a stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner.
A record owner, such as a broker, who holds shares of the Company's Common
Stock as a nominee for others, may exercise appraisal rights with respect to the
shares of the Company's Common Stock held for all or less than all beneficial
owners of shares of the Company's Common Stock as to which such person is the
record owner. In such case, the written demand must set forth the number of
shares of the Company's Common Stock covered by such demand. Where the number of
shares of the Company's Common Stock is not expressly stated, the demand will be
presumed to cover all shares of the Company's Common Stock outstanding in the
name of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights before the date of the Special Meeting.
A stockholder who elects to exercise appraisal rights must mail or deliver
his or her written demand to the Secretary of the Company at 100 Mansell Court
East, Suite 400, Roswell, Georgia 30076. The written demand for appraisal must
specify the stockholder's name and mailing address, the number of shares of the
Company's Common Stock owned, and that the stockholder is thereby demanding
appraisal of his or her shares. Within ten days after the Effective Time, the
Company must provide notice of the Effective Time to all stockholders who have
complied with Section 262 and have not voted for or consented to adoption of the
Merger Agreement.
Within 120 days after the Effective Time, either the Company or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court of Chancery (the "Delaware Chancery
Court") demanding a determination of the value of the shares of the Company's
Common Stock of the dissenting stockholders. If a petition for an appraisal is
timely filed, after a hearing on such petition, the Delaware Chancery Court will
determine which stockholders are entitled to appraisal rights and will appraise
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the shares of the Company's Common Stock owned by such stockholders, determining
the fair value of such shares of the Company's Common Stock, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. In determining such fair value, the Delaware
Chancery Court is to take into account all relevant factors.
Stockholders considering seeking appraisal should have in mind that the
"fair value" of their shares of the Company's Common Stock determined under
Section 262 could be more than, the same as, or less than the Cash Merger
Consideration to be received by the Company's stockholders in the Merger, and
that the opinion of Robinson-Humphrey as to fairness, from a financial point of
view, is not an opinion as to fair value under Section 262. The cost of the
appraisal proceeding may be determined by the Delaware Chancery Court and taxed
against the parties as the Delaware Chancery Court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the Delaware
Chancery Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of the Company's
Common Stock entitled to appraisal.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, from and after the Effective Time, be entitled to vote for any
purpose the shares of the Company's Common Stock subject to such demand or to
receive payment of dividends or other distributions on such shares of the
Company's Common Stock, except for dividends or distributions payable to
stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any stockholder shall
have the right to withdraw his or her demand for appraisal and to accept the
terms offered in the Merger; after this period, the stockholder may withdraw his
or her demand for appraisal only with the consent of the Company. If no petition
for appraisal is filed with the Delaware Chancery Court within 120 days after
the Effective Time, stockholders' rights to appraisal shall cease, and all
holders of shares of the Company's Common Stock shall be entitled to receive the
Cash Merger Consideration as provided for in the Merger Agreement. Inasmuch as
the Company has no obligation to file such a petition, and has no present
intention to do so, any stockholder who desires such a petition to be filed is
advised to file it on a timely basis. However, no petition timely filed in the
Delaware Chancery Court demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Chancery Court, and such
approval may be conditioned upon such terms as the Delaware Chancery Court deems
just.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are generally applicable to holders
of Common Stock. This discussion is based on currently existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed Treasury Regulations thereunder, and current administrative rulings and
court decisions, all of which are subject to change. Any such change, which may
or may not be retroactive, could alter the tax consequences to the holders of
Common Stock as described herein. Special tax consequences not described below
may be applicable to particular classes of taxpayers, including financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States or who are foreign corporations, foreign partnerships, or foreign
estates or trusts as to the United States, persons who will own stock of
CompDent (actually or constructively, under certain constructive ownership rules
in the Internal Revenue Code) after the Merger, and holders who acquired their
stock through the exercise of an employee stock option or otherwise as
compensation.
The receipt of the Cash Merger Consideration in the Merger by holders of
Common Stock will be a taxable transaction for federal income tax purposes. Each
holder's gain or loss per share of Common Stock will be equal to the difference
between $15.00 and the holder's basis in that particular share of the Common
Stock. Such gain or loss generally will be a capital gain or loss. In the case
of individuals, trusts, and estates,
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<PAGE> 79
such capital gain will be subject to a maximum federal income tax rate of 20%
for shares of Common Stock held for more than 12 months prior to the date of
disposition.
A holder of Common Stock may be subject to backup withholding at the rate
of 31% with respect to Cash Merger Consideration received pursuant to the
Merger, unless the holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (b) provides a
correct taxpayer identification number ("TIN"), certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. To prevent the possibility of
backup federal income tax withholding on payments made with respect to shares of
Common Stock pursuant to the Merger, each holder must provide the Paying Agent
with his correct TIN by completing a Form W-9 or Substitute Form W-9. A holder
of Common Stock who does not provide CompDent with his or her correct TIN may be
subject to penalties imposed by the Internal Revenue Service (the "IRS"), as
well as backup withholding. Any amount withheld under these rules will be
creditable against the holder's federal income tax liability. CompDent (or its
agent) will report to the holders of Common Stock and the IRS the amount of any
"reportable payments," as defined in Section 3406 of the Code, and the amount of
tax, if any, withheld with respect thereto.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS BASED UPON PRESENT LAW. THE FOREGOING DISCUSSION DOES NOT DISCUSS TAX
CONSEQUENCES UNDER THE LAWS OF STATES OR LOCAL GOVERNMENTS OR OF ANY OTHER
JURISDICTION OR TAX CONSEQUENCES TO CATEGORIES OF STOCKHOLDERS THAT MAY BE
SUBJECT TO SPECIAL RULES, SUCH AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, AND DEALERS IN STOCKS AND
SECURITIES. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A STOCKHOLDER WHO
ACQUIRED HIS OR HER SHARES OF THE COMPANY'S COMMON STOCK PURSUANT TO THE
EXERCISE OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION. EACH HOLDER OF COMMON
STOCK SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH HOLDER, INCLUDING THE APPLICATION AND EFFECT
OF FEDERAL, STATE, LOCAL, AND OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES
IN SUCH TAX LAWS.
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<PAGE> 80
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF
MANAGEMENT AND OTHERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of February , 1999 by: (i)
each person known to the Company to beneficially own more than 5% of the Common
Stock, (ii) each director of the Company, (iii) each of the Equity Investors,
(iv) each pension or profit sharing plan of the Company, (v) the Chief Executive
Officer and the three other most highly compensated executive officers, and (vi)
all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE COMMON
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP STOCK
------------------------ ----------------------- -------------
<S> <C> <C>
</TABLE>
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<PAGE> 81
CERTAIN INFORMATION CONCERNING THE ACQUIROR
AND THE INVESTOR GROUP
The Acquiror. The Acquiror is a newly formed Delaware corporation
organized at the direction of the Equity Investors, each of which is a private
investment partnership or an affiliate thereof. It is anticipated that the
Acquiror will not have any significant assets or liabilities prior to the
Effective Time nor engage in any activities other than those involving the
Merger. The principal executive offices of the Acquiror are located at c/o TA
Associates, Inc., 125 High Street, Suite 2500, Boston, Massachusetts 02110.
GTCR Partnership. Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware
limited partnership, and GTCR Associates V, a Delaware general partnership, are
principally engaged in the business of investing in other companies. The sole
general partner of Golder, Thoma, Cressey, Rauner Fund V, L.P., is GTCR V, L.P.,
a Delaware limited partnership. The sole general partner of GTCR V, L.P. and the
managing general partner of GTCR Associates V is Golder, Thoma, Cressey, Rauner,
Inc., a Delaware corporation ("GTCR, Inc.").
Set forth below is the name of each director and executive officer of GTCR,
Inc. and the present principal occupation or employment of each such person and
a brief description of his principal occupation and business experience during
at least the last five years. Each person listed below is a citizen of the
United States.
Carl D. Thoma. Mr. Thoma has served as a Director of GTCR, Inc. since
1993 and as a Principal of GTCR, Inc. or its predecessor since 1980.
Bryan C. Cressey. Mr. Cressey has served as a Director of GTCR, Inc.
since 1993 and as a Principal of GTCR, Inc. or its predecessor since 1980.
Bruce V. Rauner. Mr. Rauner has served as a Director of GTCR, Inc.
since 1993 and as a Principal or Associate of GTCR, Inc. or its predecessor
since 1981.
David A. Donnini. Mr. Donnini has served as a Principal of GTCR, Inc.
since 1993.
Donald J. Edwards. Mr. Edwards has served as a Principal of GTCR,
Inc. since 1994. From 1988 to 1992, Mr. Edwards served as an Associate at
Lazard Freres & Co. LLC, a nationally recognized investment banking firm.
Lee M. Mitchell. Mr. Mitchell has served as a Principal of GTCR, Inc.
since 1994.
Joseph P. Nolan. Mr. Nolan has served as a Principal of GTCR, Inc.
since 1994. Mr. Nolan served as a Vice President of Dean Witter Reynolds, a
nationally recognized investment banking firm, from 1990 to 1994.
Philip A. Canfield. Mr. Canfield has served as either an Associate or
Principal of GTCR, Inc. or its predecessor since 1992.
William C. Kessinger. Mr. Kessinger has served as a Principal of
GTCR, Inc. since 1995. Mr. Kessinger was a Principal of the Parthenon
Group, a strategic consulting firm, from 1990 to 1995.
Stephen I. Ross. Mr. Ross has served as Chief Financial Officer of
GTCR, Inc. since 1997. Mr. Ross previously served as Chief Financial
Officer of Marquette Venture Partners, a venture capital firm, and as
Accounting Manager of Kemper Financial Services, a financial services firm,
from 1986 to 1994.
The principal executive offices of GTCR, Inc. and all related entities and
the business address for the individuals listed above is 6100 Sears Tower,
Chicago, Illinois 60606.
TA Fund. TA/Advent VIII L.P., a Delaware limited partnership, Advent
Atlantic and Pacific III L.P., a Delaware limited partnership, TA Executives
Fund LLC, a Delaware LLC, TA Investors LLC, a Delaware LLC, Advent VII L.P., a
Delaware limited partnership, and Advent New York L.P., a Delaware limited
partnership, are principally engaged in the business of investing in other
companies. The sole general partner of TA/Advent VIII L.P. is TA Associates VIII
LLC, a Delaware LLC. The sole general partner of Advent
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Atlantic and Pacific III L.P. is TA Associates AAP III L.P., a Delaware limited
partnership. The sole general partner of Advent VII L.P. is TA Associates VII
L.P. The sole general partner of Advent New York L.P. is TA Associates VI L.P.
The sole general partner of TA Associates AAP III L.P., Advent VII L.P. and
Advent New York L.P. and the manager of TA Associates VIII LLC, TA Executives
Fund LLC, and TA Investors LLC is TA Associates, Inc., a Delaware corporation.
Set forth below is the name of each director and executive officer of TA
Associates, Inc. and the present principal occupation or employment of each such
person and a brief description of his principal occupation and business
experience during at least the last five years. Each person listed below is a
citizen of the United States.
Roger B. Kafker. Mr. Kafker has been a Managing Director of TA
Associates, Inc. since January 1, 1996 and was a principal of TA
Associates, Inc. from January 1, 1994 through December 31, 1995.
C. Kevin Landry. Mr. Landry has been the President, a Managing
Director and Chairman of the Board of Directors of TA Associates, Inc.
since January 1, 1994.
P. Andrews McLane. Mr. McLane has been the Senior Managing Director
of TA Associates, Inc. since January 1, 1997. From January 1, 1994 to
January 1, 1997, Mr. McLane was a Managing Director of TA Associates, Inc.
Jeffrey T. Chambers. Mr. Chambers has been a Managing Director of TA
Associates, Inc. since January 1, 1994.
Jacqueline C. Morby. Ms. Morby has been a Managing Director of TA
Associates, Inc. since January 1, 1994.
Katherine S. Cromwell. Ms. Cromwell has been a Managing Director and
the Chief Financial Officer, Treasurer and Secretary of TA Associates, Inc.
since January 1, 1994.
The principal executive offices of TA Associates, Inc. and all related
entities and the business address for each of the individuals listed above is
125 High Street, Suite 2500, Boston, Massachusetts 02110.
NMS Partnership. NMS Capital, L.P., a Delaware limited partnership, is
principally engaged in the business of investing in other companies. Its
principal executive offices are located at 9 West 57th Street, 48th Floor, New
York, New York 10019. The sole general partner of NMS Capital, L.P. is NMS
Capital Management LLC, a Delaware limited liability company principally engaged
in the business of investing through partnerships in other companies. The
Managing Member of NMS Capital Management LLC is Gerald Rosenfeld who has held
that position since April 1, 1998. Prior to becoming the Managing Member of NMS
Capital Management LLC, Mr. Rosenfeld was employed by Lazard Freres & Co. LLC,
as a Senior Generalist Merger Advisor from 1992 through 1997 and as the Head of
Investment Banking from 1997 through April 1, 1998. The principal executive
offices of NMS Capital, L.P. and NMS Capital Management LLC and the business
address of Mr. Rosenfeld is 9 West 57th Street, 48th Floor, New York, New York
10019. The sole limited partner of NMS Capital, L.P. is NB Equity Holdings,
Inc., a North Carolina corporation and wholly owned subsidiary of BankAmerica
Corporation.
TA Associates, Inc., GTCR, Inc. and Gerald Rosenfeld will not have direct
equity interests in the Surviving Corporation and are therefore not included in
the references in this proxy statement to the Equity Investors' equity interest
in the Surviving Corporation.
Management Group. The members of the Management Group are the following
executive officers of CompDent:
David R. Klock. Dr. Klock has served as Chairman and Chief Executive
Officer of the Company and all of its subsidiaries, except DHMI and
DentLease, since September 1995. Dr. Klock also served as Chairman of DHMI
and DentLease since January 1997, and as President of DHMI and DentLease
since July 1998. The principal business address of both DHMI and DentLease
is 2630 Elm Hill Pike, Suite 200, Nashville, Tennessee 37214-3108. In
addition, Dr. Klock served as President and as a director
74
<PAGE> 83
of American Prepaid since 1991. American Prepaid's principal business
address is 100 Mansell Court East, Suite 400, Roswell, Georgia 30076.
Phyllis A. Klock. Ms. Klock has served as the President and Chief
Operating Officer of the Company and all of its subsidiaries, except DHMI
and DentLease, since February 1998. Ms. Klock also served as President of
the Company and all of its subsidiaries, except DHMI and DentLease, since
January 1997, and as Executive Vice President and Corporate Secretary from
September 1995 through December 1996. In addition, Ms. Klock served as
Senior Vice President, Chief Administrative Officer and Corporate Secretary
of American Prepaid from 1993 through August 1995.
Bruce A. Mitchell. Mr. Mitchell has served as Executive Vice
President, General Counsel and Corporate Secretary of the Company, and as
Vice President of all of the Company's subsidiaries, except DHMI, since
February 1996. Mr. Mitchell also served as Interim Chief Financial Officer
and Treasurer of the Company and all of its subsidiaries, except DHMI and
DentLease, from August 1997 through December 1997. In addition, Mr.
Mitchell served as a partner in the law firm of Reinman, Harrell, Mitchell
& Wattwood, P.A. ("Reinman, Harrell") from 1985 until January 1996. Reinman
Harrell's principal business address is 1825 S. Riverview Drive, Melbourne,
Florida 32901.
Keith J. Yoder. Mr. Yoder has served as Executive Vice President,
Chief Financial Officer and Treasurer of the Company since January 1998.
From July 1997 to November 1997, Mr. Yoder served as Chief Financial
Officer of GranCare, Inc., ("GranCare") and as Senior Vice President,
Controller and Treasurer of GranCare from July 1995 to June 1997. Prior to
the merger of Evergreen Healthcare, Inc. ("Evergreen") with GranCare in
July 1995, Mr. Yoder served as Vice President and Chief Financial Officer
of Evergreen since January 1992 and as Treasurer of Evergreen since
December 1993. From December 1992 to June 1993, Mr. Yoder served as Vice
President of National Heritage, Inc. ("NHI") and as the Chief Financial
Officer and Secretary of NHI from January 1993 to June 1993.
The business address for each member of the Management Group is the
principal executive offices of CompDent, 100 Mansell Court East, Suite 400,
Roswell, Georgia 30076. Each member of the Management Group is a citizen of the
United States.
Other Management Investors. One of the Other Management Investors is
William G. Jens, Jr., CPA, Ph.D. Dr. Jens has been a director of the Company
since 1998 and served as Senior Vice President of Finance of Company from July
1997 through January 1998. Dr. Jens is currently an Executive Vice President of
the Company and Chief Operating Officer of DHMI. Dr. Jens served as a consultant
to the Company from 1993 through 1997. Dr. Jens served as Chairman of the
accounting department at Stetson University and Director of the M.E. Rinker,
Sr., Institute of Tax and Accountancy. Dr. Jens' business address is the
principal executive offices of DHMI, 2630 Elm Hill Pike, #200, Nashville, TN
37214,. Dr. Jens is a citizen of the United States.
75
<PAGE> 84
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS
The following table sets forth certain information concerning purchases of
Common Stock since January 1, 1997 by the Company and members of the Investor
Group.
<TABLE>
<CAPTION>
NUMBER OF WHERE AND HOW
NAME DATE SHARES PURCHASED PRICE PER SHARE TRANSACTION EFFECTED
- ---- ----------------- ---------------- --------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
EXPERTS
The consolidated balance sheets as of December 31, 1997 and December 31,
1996, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three fiscal years in the period ended December
31, 1997, incorporated by reference in this Proxy Statement, have been audited
by PricewaterhouseCoopers LLP, independent auditors, as stated in their report.
A representative of PricewaterhouseCoopers LLP will be at the Special Meeting to
answer appropriate questions from stockholders and will have the opportunity to
make a statement, if so desired.
WHERE YOU CAN FIND MORE INFORMATION
CompDent files annual, quarterly, and current reports, proxy statements,
and other information with the Commission. You may read and copy any reports,
statements, or other information that CompDent files at the Commission's public
reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. CompDent public filings are also available to the public
from commercial document retrieval services and at the Internet World Wide Web
site maintained by the Commission at http://www.sec.gov. Reports, proxy
statements, and other information concerning CompDent also may be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
The Commission allows CompDent to "incorporate by reference" information
into this document, which means that CompDent can disclose important information
to you by referring you to another document filed separately with the
Commission. The information incorporated by reference is deemed to be a part of
this document, except for any information superseded by information contained
directly in this document. This document incorporates by reference certain
documents that CompDent has previously filed with the Commission. These
documents contain important business information about CompDent and its
financial condition.
CompDent may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through CompDent or the Commission or
the Commission's Internet World Wide Web site described above. Documents
incorporated by reference are available from CompDent without charge, excluding
all exhibits unless specifically incorporated by reference as an exhibit to this
document. Stockhold-
76
<PAGE> 85
ers may obtain documents incorporated by reference in this document by
requesting them in writing or by telephone at the following address:
COMPDENT CORPORATION
100 Mansell Court East, Suite 400
Roswell, Georgia 30076
Telephone: (770) 998-8936
Attention: Keith J. Yoder -- Executive Vice President,
Chief Financial Officer and Treasurer
You should note that Keith Yoder, as well as the other executive officers
of CompDent, are participants in the Merger.
The Company, the Acquiror, the Equity Investors, the Management Sponsors
and certain of the Other Management Investors have filed a Schedule 13E-3 with
the Commission with respect to the Merger. As permitted by the Commission, this
Proxy Statement omits certain information contained in the Schedule 13E-3. The
Schedule 13E-3, including any amendments and exhibits filed or incorporated by
reference as a part thereof, is available for inspection or copying as set forth
above. Statements contained in this Proxy Statement or in any document
incorporated herein by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete and in each
instance reference is made to such contract or other document filed as an
exhibit to the Schedule 13E-3 or such other document, and each such statement
shall be deemed qualified in its entirety by such reference.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM COMPDENT, PLEASE DO SO AT LEAST
FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO RECEIVE
TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the Special Meeting. CompDent
has not authorized anyone to provide you with information that is different from
what is contained in this document. This document is dated February , 1999.
You should not assume that the information contained in this document is
accurate as of any date other than that date, and the mailing of this document
to stockholders does not create any implication to the contrary. This Proxy
Statement does not constitute a solicitation of a proxy in any jurisdiction
where, or to or from any person to whom, it is unlawful to make such proxy
solicitation in such jurisdiction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by CompDent
(SEC File No. 0-26090) are incorporated by reference in this Proxy Statement:
(i) CompDent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(ii) CompDent's Quarterly Report on Form 10-Q for quarter ended March
31, 1998;
(iii) CompDent's Quarterly Report on Form 10-Q for quarter ended June
30, 1998;
(iv) CompDent's Quarterly Report on Form 10-Q for quarter ended
September 30, 1998;
(v) CompDent's Current Report on Form 8-K filed on August 12, 1998;
and
(vi) CompDent's Current Report on Form 8-K filed on January , 1999.
All documents filed by CompDent with the Commission pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act after the date hereof and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and shall be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein or contained in this Proxy Statement shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference
77
<PAGE> 86
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded.
STOCKHOLDER PROPOSALS
If the Merger is not consummated for any reason, proposals of stockholders
intended to be presented at the 1999 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices on or prior to
, 1998 to be eligible for inclusion in the Company's Proxy Statement
and form of proxy relating to that meeting.
OTHER MATTERS
Management knows of no other business to be presented at the Special
Meeting. If other matters do properly come before the meeting, or any
adjournment or adjournments thereof, it is the intention of the persons named in
the proxy to vote on such matters according to their best judgment unless the
authority to do so is withheld in such proxy.
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<PAGE> 87
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
COMPDENT CORPORATION,
TAGTCR ACQUISITION, INC.
AND THE GUARANTORS DESCRIBED HEREIN
DATED AS OF JULY 28, 1998
AMENDED AND RESTATED AS OF JANUARY 18, 1999
<PAGE> 88
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
ARTICLE I THE MERGER...................................................... A-1
1.1 The Merger....................................................... A-1
1.2 Closing.......................................................... A-1
1.3 Effective Time of the Merger..................................... A-1
1.4 Effects of the Merger............................................ A-1
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES......................... A-2
2.1 Effect on Capital Stock.......................................... A-2
(a) Capital Stock of TAGTCR..................................... A-2
(b) Cancellation of Treasury Stock and TAGTCR-Owned Stock....... A-2
2.2 Conversion of Securities......................................... A-2
2.3 Payment for Shares............................................... A-3
(a) Paying Agent................................................ A-3
(b) Payment Procedures.......................................... A-3
(c) Termination of Payment Fund; Interest....................... A-4
(d) No Liability................................................ A-4
(e) Withholding Rights.......................................... A-4
2.4 Stock Transfer Books............................................. A-4
2.5 Stock Options.................................................... A-4
2.6 Dissenting Shares................................................ A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES................................ A-5
3.1 Representations and Warranties of the Company.................... A-5
(a) Organization, Standing and Power............................ A-5
(b) Capital Structure........................................... A-6
(c) Authority; No Violations; Consents and Approvals............ A-7
(d) SEC Documents............................................... A-8
(e) Information Supplied........................................ A-9
(f) Regulated Subsidiaries...................................... A-9
(g) Compliance with Applicable Laws............................. A-9
(h) Litigation.................................................. A-10
(i) Taxes....................................................... A-10
(j) Pension and Benefit Plans; ERISA............................ A-11
(k) Absence of Certain Changes or Events........................ A-12
(l) No Undisclosed Material Liabilities......................... A-12
(m) Vote Required............................................... A-13
(n) Labor Matters............................................... A-13
(o) Intellectual Property....................................... A-13
(p) Environmental Matters....................................... A-14
(q) Insurance................................................... A-15
(r) DHDC Financial Statements................................... A-15
(s) Board of Directors Recommendation........................... A-16
(t) Material Contracts.......................................... A-16
(u) Fairness Opinion............................................ A-16
(v) Regulatory Filings.......................................... A-16
(w) State Takeover Laws......................................... A-16
3.2 Representations and Warranties of TAGTCR......................... A-16
(a) Organization, Standing and Power............................ A-16
(b) Authority; No Violations; Consents and Approvals............ A-17
</TABLE>
(i)
<PAGE> 89
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
(c) Information Supplied........................................ A-17
(d) Board of Directors Recommendation........................... A-18
(e) Delaware Law................................................ A-18
3.3 Representations and Warranties of the Guarantors................. A-18
(a) Organization, Standing and Power............................ A-18
(b) Authority; No Violations; Consents and Approvals............ A-18
(c) Information Supplied........................................ A-19
(d) Bridge Loan and Financing Commitment........................ A-19
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS...................... A-20
4.1 Covenants of the Company......................................... A-20
(a) Ordinary Course............................................. A-20
(b) Dividends; Changes in Stock................................. A-20
(c) Issuance of Securities...................................... A-20
(d) Governing Documents......................................... A-20
(e) Solicitation................................................ A-20
(f) No Acquisitions............................................. A-21
(g) No Dispositions............................................. A-21
(h) Governmental Filings........................................ A-21
(i) No Dissolution, Etc......................................... A-21
(j) Other Actions............................................... A-21
(k) Certain Employee Matters.................................... A-21
(l) Indebtedness; Agreements.................................... A-21
(m) Accounting.................................................. A-22
(n) Capital Expenditures........................................ A-22
(o) Insurance................................................... A-22
(p) Hedging..................................................... A-22
(q) Transfer of Interest in DHDC and DHMI....................... A-22
4.2 Covenants of TAGTCR and the Guarantors........................... A-22
ARTICLE V ADDITIONAL AGREEMENTS........................................... A-23
5.1 Preparation of the Proxy Statement; Company Stockholders
Meeting.......................................................... A-23
5.2 Access to Information............................................ A-24
5.3 Broker and Finders............................................... A-24
5.4 Indemnification; Directors' and Officers' Insurance.............. A-24
5.5 Efforts and Actions.............................................. A-25
5.6 Publicity........................................................ A-25
5.7 Notice of Certain Events......................................... A-26
5.8 State Takeover Laws.............................................. A-26
ARTICLE VI CONDITIONS PRECEDENT........................................... A-26
6.1 Conditions to Each Party's Obligation to Effect the Merger....... A-26
(a) Stockholder Approval........................................ A-26
(b) HSR Act..................................................... A-26
(c) Governmental Consents....................................... A-26
6.2 Conditions of Obligations of TAGTCR and the Guarantors........... A-26
(a) No Material Adverse Effect.................................. A-26
(b) Representations and Warranties.............................. A-26
(c) Performance of Obligations of the Company................... A-26
(d) Financing................................................... A-26
(e) No Injunctions or Restraints................................ A-27
</TABLE>
(ii)
<PAGE> 90
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
6.3 Conditions of Obligations of the Company......................... A-27
(a) Representations and Warranties of TAGTCR.................... A-27
(b) Representations and Warranties of the Guarantors............ A-27
(c) Performance of Obligations of TAGTCR........................ A-27
(d) Performance of Obligations of the Guarantors................ A-27
(e) No Injunctions or Restraints................................ A-27
ARTICLE VII TERMINATION AND AMENDMENT..................................... A-28
7.1 Termination...................................................... A-28
7.2 Effect of Termination............................................ A-28
7.3 Payment of Fees and Expenses..................................... A-29
ARTICLE VIII GENERAL PROVISIONS........................................... A-30
8.1 Nonsurvival of Representations, Warranties and Agreements........ A-30
8.2 Notices.......................................................... A-30
8.3 Interpretation................................................... A-31
8.4 Counterparts..................................................... A-31
8.5 Entire Agreement; Third Party Beneficiaries...................... A-31
8.6 GOVERNING LAW.................................................... A-31
8.7 Assignment....................................................... A-31
8.8 Amendment........................................................ A-32
8.9 Extension; Waiver................................................ A-32
Severability.....................................................
8.10 A-32
Enforcement of Agreement.........................................
8.11 A-32
Guarantors.......................................................
8.12 A-32
Disclosure Letters...............................................
8.13 A-33
</TABLE>
(iii)
<PAGE> 91
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of July
28, 1998 and amended and restated as of January 18, 1999 (this "Agreement"), is
made and entered into by and among TAGTCR Acquisition, Inc., a Delaware
corporation ("TAGTCR"), NMS Capital, L.P. ("NMS"), Golder, Thoma, Cressey,
Rauner Fund V, L.P. ("GTCR"), TA/Advent VIII L.P. ("TA" and together with NMS
and GTCR, herein referred to as the "Guarantors"), and CompDent Corporation, a
Delaware corporation (the "Company"). Unless otherwise indicated, references
herein to the phrases "the date hereof," "the date of this Agreement," and other
phrases of similar import shall be deemed to be references to the date of the
amendment and restatement of this Agreement, rather than the original date of
this Agreement.
WHEREAS, the respective Boards of Directors of TAGTCR and the Company have
approved the merger of TAGTCR with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Merger and this Agreement require the vote of a majority of
the issued and outstanding shares of common stock, par value $.01 per share of
the Company (the "Company Common Stock");
WHEREAS, TAGTCR and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law, as
amended (the "DGCL"), TAGTCR shall be merged with and into the Company at the
Effective Time as set forth in Section 1.3. At the Effective Time, the separate
corporate existence of TAGTCR shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation"), and shall continue under
the name "CompDent Corporation."
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., Central time, on the thirtieth business day after satisfaction and/or
waiver of all of the conditions set forth in Article VI (the "Closing Date"), at
the offices of Kirkland & Ellis, Chicago, Illinois, unless another date, time or
place is agreed to in writing by the parties hereto.
1.3 Effective Time of the Merger. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a duly executed certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, as provided in the DGCL, on the
Closing Date, and the parties shall take such other and further actions as may
be required by law to make the Merger effective. The Merger shall become
effective as of the time of the filing of the Certificate of Merger (the
"Effective Time").
1.4 Effects of the Merger.
(a) The Merger shall have the effects as set forth in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers, and franchises of the Company and TAGTCR shall vest in the Surviving
A-1
<PAGE> 92
Corporation, and all debts, liabilities and duties of the Company and TAGTCR
shall become the debts, liabilities and duties of the Surviving Corporation.
(b) The directors of TAGTCR and the officers of the Company immediately
prior to the Effective Time shall, from and after the Effective Time, be the
initial directors and officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws and the DGCL.
(c) The Certificate of Incorporation of the Company shall be amended and
restated in its entirety as set forth on Exhibit A attached hereto, and, from
and after the Effective Time, such amended and restated Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL.
(d) The Bylaws of the Company shall be amended and restated in their
entirety as set forth on Exhibit B attached hereto, and, from and after the
Effective Time, such amended and restated Bylaws shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by applicable law,
the Certificate of Incorporation or the Bylaws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of TAGTCR:
(a) Capital Stock of TAGTCR. Each share of the common stock of TAGTCR
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation and each
share of Convertible Participating Preferred Stock of TAGTCR issued and
outstanding immediately prior to the Effective Time shall be converted into
and become one share of Convertible Participating Preferred Stock of the
Surviving Corporation with all of the rights and privileges set forth in
the Certificate of Incorporation of Surviving Corporation in accordance
with Section 1.4(c).
(b) Cancellation of Treasury Stock and TAGTCR-Owned Stock. Each share
of Company Common Stock and all other shares of capital stock of the
Company that are owned by the Company or any of its Subsidiaries (as
defined below) and all shares of Company Common Stock and other shares of
capital stock of the Company owned by TAGTCR shall be cancelled and retired
and shall cease to exist and no consideration shall be delivered or
deliverable in exchange therefor.
2.2 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of TAGTCR, the Company or the holders
of any of the shares thereof:
(a) Subject to the other provisions of this Section 2.2, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding shares owned by the Company or any of its
Subsidiaries (as defined below) or by TAGTCR and Recapitalization Shares
(as defined below) and Dissenting Shares (as defined in Section 2.6)) shall
be converted into the right to receive $15.00 per share, net to the seller
in cash, payable to the holder thereof, without any interest thereon (the
"Merger Consideration"), upon surrender and exchange of the Certificate (as
defined in Section 2.3(b)) representing such share of Company Common Stock.
(b) All such shares of Company Common Stock, when converted as
provided in Section 2.2(a) (the "Shares"), no longer shall be outstanding
and shall automatically be cancelled and retired and shall cease to exist,
and each Certificate previously evidencing such Shares shall thereafter
represent
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<PAGE> 93
only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to the
Company Common Stock except as otherwise provided herein or by law and,
upon the surrender of Certificates in accordance with the provisions of
Section 2.3, shall only represent the right to receive for their Shares,
the Merger Consideration, without any interest thereon.
(c) Each share of Company Common Stock identified on Schedule 2.2(c)
(a "2.2(c) Recapitalization Share"), as revised from time to time at least
one (1) business day prior to the mailing of the Proxy Statement by TAGTCR,
shall be converted into 1.243056 fully paid and nonassessable shares of
Common Stock, par value $0.01 per share, of the Surviving Corporation and
0.0142542 fully paid and nonassessable shares of Convertible Participating
Preferred Stock.
(d) Each share of Company Common Stock identified on Schedule 2.2(d)
(a "2.2(d) Recapitalization Share" and together with the 2.2(c)
Recapitalization Shares, the "Recapitalization Shares"), as revised from
time to time at least one (1) business day prior to the mailing of the
Proxy Statement by TAGTCR, shall be converted into 30 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
2.3 Payment for Shares.
(a) Paying Agent. Prior to the Effective Time, TAGTCR shall appoint a bank
or trust company reasonably acceptable to the Company to act as paying agent
(the "Paying Agent") for the payment of the Merger Consideration, and TAGTCR
shall deposit or shall cause to be deposited with the Paying Agent in a separate
fund established for the benefit of the holders of shares of Company Common
Stock, for payment in accordance with this Article II, through the Paying Agent
(the "Payment Fund"), immediately available funds in amounts necessary to make
the payments pursuant to Section 2.2(a) and this Section 2.3 to holders of
shares of Company Common Stock (other than the Company or TAGTCR or holders of
Dissenting Shares). The Paying Agent shall, pursuant to irrevocable
instructions, pay the Merger Consideration out of the Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as TAGTCR
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both Moody's Investors Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted Investments
shall be such as to permit the Paying Agent to make prompt payment to former
holders of Company Common Stock entitled thereto as contemplated by this Section
2.3. The Surviving Corporation shall cause the Payment Fund to be promptly
replenished to the extent of any losses incurred as a result of Permitted
Investments. All earnings on Permitted Investments shall be paid to the
Surviving Corporation. If for any reason (including losses) the Payment Fund is
inadequate to pay the amounts to which holders of shares of Company Common Stock
shall be entitled under this Section 2.3, the Surviving Corporation shall in any
event be liable for payment thereof. The Payment Fund shall not be used for any
purpose except as expressly provided in this Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall instruct the Paying Agent to
mail to each holder of record (other than the Company or TAGTCR) of a
certificate or certificates which, immediately prior to the Effective Time,
evidenced outstanding shares of Company Common Stock (the "Certificates"), (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as the Surviving Corporation reasonably may
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment therefor. Upon surrender of a Certificate
for cancellation to the Paying Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in respect thereof cash in an amount equal to the product of (x) the number of
shares of Company Common Stock represented by such Certificate and (y) the
Merger
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Consideration, and the Certificate so surrendered shall forthwith be cancelled.
No interest shall be paid or accrued on the Merger Consideration payable upon
the surrender of any Certificate. If payment is to be made to a person other
than the person in whose name the surrendered Certificate is registered, it
shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the surrendered
Certificate or established to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.3(b), each Certificate (other than
Certificates representing Shares owned by the Company or TAGTCR or the
Dissenting Shares), shall represent for all purposes only the right to receive
the Merger Consideration. In the event that any Certificate shall have been
lost, stolen or destroyed, the Paying Agent will pay in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in respect
thereof pursuant to this Agreement upon the delivery of a duly executed
affidavit of that fact by the holder claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, reasonable
indemnification against any claim that may be made against the Surviving
Corporation with respect to such Certificate.
(c) Termination of Payment Fund; Interest. Any portion of the Payment Fund
which remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to the Surviving Corporation
upon demand, and any holders of Company Common Stock who have not theretofore
complied with this Article II and the instructions set forth in the letter of
transmittal mailed to such holder after the Effective Time shall thereafter look
only to the Surviving Corporation for payment of the Merger Consideration to
which they are entitled. All interest accrued in respect of the Payment Fund
shall inure to the benefit of and be paid to the Surviving Corporation.
(d) No Liability. Neither the Surviving Corporation nor the Paying Agent
shall be liable to any holder of shares of Company Common Stock for any cash
from the Payment Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold from the corporation otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as the
Surviving Corporation is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such deduction
and withholding was made by the Surviving Corporation.
2.4 Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed and there shall be no further registration of
transfer of shares of Company Common Stock thereafter on the records of the
Company. On or after the Effective Time, any certificates presented to the
Surviving Corporation or the Paying Agent for any reason shall be converted into
the Merger Consideration.
2.5 Stock Options. At the Effective Time, each holder of a then
outstanding option to purchase shares of Company Common Stock under any
outstanding stock option plan or arrangement, including any outstanding stock
option plan or arrangement which immediately prior to the Effective Time is then
exercisable (a "Vested Option"), including the Company's Directors' Stock Option
Plan, 1994 Stock Option and Grant Plan, as amended, 1997 Stock Option Plan
(collectively, the "Option Plans") and those certain stock option agreements
described in the Disclosure Schedule (as defined in Section 3.1, each an
"Option" and collectively, the "Options"), but excluding those certain other
stock option agreements described in the Disclosure Schedule (the "Excluded
Options"), shall, in settlement thereof, receive for each share of Company
Common Stock subject to such Option an amount (subject to any applicable
withholding tax) in cash equal to the excess of the Merger Consideration over
the per share exercise price of such Option to the extent such difference is a
positive number (such amount being hereinafter referred
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to as the "Option Consideration"). Upon receipt of the Option Consideration,
each Option shall be cancelled in accordance with its terms or the terms of the
applicable Option Plan. All Options which are not Vested Options shall be
cancelled in accordance with their terms or the applicable Option Plan. The
surrender of an Option to the Company in exchange for the Option Consideration
shall be deemed a release of any and all rights the holder had or may have had
in respect of such Option. Prior the Effective Time, the Company shall use its
reasonable best efforts to obtain all necessary consents or releases from
holders of Options and take all such other lawful action as may be necessary to
give effect to the transactions contemplated by this Section 2.5. All Option
Plans and option agreements executed pursuant thereto, other than the Excluded
Options (an "Option Agreement"), shall terminate as of the Effective Time and
the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary thereof shall be cancelled as of the Effective Time.
The Company shall use its reasonable best efforts to ensure that following the
Effective Time no participant in or under any Option Agreement, Option Plan or
other plans, programs or arrangements shall have any right thereunder to acquire
equity securities of the Company, the Surviving Corporation or any Subsidiary
thereof and to terminate all such Option Agreements, Option Plans and other
plans, programs and arrangements. Upon the execution and delivery of this
Agreement, the Company will suspend, terminate, or refrain from renewing the
Company's Employee Stock Purchase Plan ("ESPP") until the termination of this
Agreement.
2.6 Dissenting Shares. Notwithstanding any other provisions of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to receive the Merger
Consideration. Such stockholders instead shall be entitled to receive payment of
the appraised value of such shares of Company Common Stock held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such shares of Company
Common Stock under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable, as of the Effective Time, for
the right to receive, without any interest thereon, the Merger Consideration
upon surrender in the manner provided in Section 2.3 of the Certificate or
Certificates that, immediately prior to the Effective Time, evidenced such
shares of Company Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. With such exceptions as
are specifically set forth in a letter (the "Disclosure Schedule") delivered by
the Company to TAGTCR prior to January 18, 1999, the Company represents and
warrants to TAGTCR as follows:
(a) Organization, Standing and Power. Each of the Company, its
Subsidiaries, and Dental Health Development Corporation, a Delaware
corporation ("DHDC"), is a corporation duly organized, validly existing,
and in good standing under the laws of its respective jurisdiction of
incorporation, has all requisite corporate power and authority to own,
lease, and operate its properties and to carry on its business as now being
conducted, and is duly qualified or licensed to do business as a foreign
corporation and in good standing to conduct business in each jurisdiction
in which the conduct of its business, or the operation, ownership or
leasing of its properties, makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to so qualify or become
so licensed will not have, individually or in the aggregate, a Material
Adverse Effect (as described below) on the Company. The Company has
heretofore made available to TAGTCR true and complete copies of its, its
Subsidiaries' and DHDC's respective Certificates of Incorporation and
Bylaws or comparable organizational documents. DHDC and all Subsidiaries of
the Company and
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their respective jurisdictions of incorporation or organization are
identified in Section 3.1(a) of the Disclosure Schedule which is attached
hereto and incorporated herein. As used in this Agreement, the term
"Material Adverse Effect" shall mean, with respect to a specified Person,
the result of one or more events, changes or effects which, individually or
in the aggregate, would have a material adverse effect on the business,
results of operations, assets, liabilities (fixed or contingent), or
financial condition of such Person and its Subsidiaries, taken as a whole.
As used in this Agreement, the word "Subsidiary", with respect to any
party, means any corporation, partnership, joint venture or other
organization, whether incorporated or unincorporated, of which: (i) such
party or any other Subsidiary of such party is a general partner; (ii)
voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation, partnership,
joint venture or other organization is held by such party or by any one or
more of its Subsidiaries, or by such party and any one or more of its
Subsidiaries; or (iii) at least 25% of the equity, other securities or
other interests is, directly or indirectly, owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and any
one or more of its Subsidiaries. As used in this Agreement, "Person" means
any individual, corporation, partnership, joint venture, association, trust
or unincorporated organization.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Company Common Stock
and 2,000,000 shares of preferred stock, $0.01 par value ("Preferred
Stock"). At the close of business on the date of this Agreement: (i)
10,112,629 shares of Company Common Stock were issued and outstanding; (ii)
no shares of Preferred Stock were issued and outstanding; (iii) 2,000,000
shares of Preferred Stock were reserved for issuance under the Shareholder
Rights Agreement between the Company and State Street Bank and Trust
Company (the "Rights Agreement"); (iv) 960,000 shares of Company Common
Stock were reserved for issuance pursuant to the Option Plans of which
694,500 shares of Company Common Stock are subject to outstanding Options;
(v) 438,500 shares of Company Common Stock were reserved for issuance
pursuant to Option Agreements (other than Option Agreements under Option
Plans); (vii) except for the issuance of shares of Company Common Stock
pursuant to the exercise of the Options and agreements relating to the
initial capitalization of DHDC, there are no employment, executive
termination or other agreements providing for the issuance of shares of
Company Common Stock; (vii) no shares of Company Common Stock were held by
the Company; and (ix) no bonds, debentures, notes or other instruments or
evidence of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on
any matters on which the Company's stockholders may vote ("Company Voting
Debt") were issued or outstanding. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid, and nonassessable
and are not subject to preemptive or other similar rights. No shares of
Company Common Stock are owned by DHDC or any Subsidiary of the Company.
All outstanding shares of capital stock of DHDC and the Subsidiaries of the
Company are duly authorized, validly issued, fully paid and nonassessable
and (excluding the capital stock of DHDC) are owned by the Company or a
direct or indirect Subsidiary free and clear of all liens, charges, claims
or encumbrances of any nature ("Liens"). At the close of business on the
date of this Agreement, DHDC had (i) 84,000 shares of Class A Common Stock
outstanding, (ii) 13,000 shares of Class B Common Stock outstanding, (iii)
10,000 shares of Class A Preferred Stock outstanding, and (iv) 150 shares
of Class B Preferred Stock outstanding, of which the Company owns
beneficially and of record 150 shares of Series B Preferred Stock. Except
(i) as set forth in this Section 3.1(b), (ii) for the rights under the
Rights Agreement, (iii) for the issuance of shares of Company Common Stock
under the ESPP with respect to purchase requests made prior to the date
hereof, (iv) for the agreements entered into in connection with the initial
capitalization of DHDC, and (v) for changes resulting from the exercise of
Options or as contemplated by this Agreement, there are outstanding: (A) no
shares of capital stock, Company Voting Debt or other voting securities of
the Company, (B) no securities of the Company, DHDC or any Subsidiary of
the Company convertible into, or exchangeable or exercisable for shares of
capital stock, Company Voting Debt or other voting securities of the
Company, DHDC, or any Subsidiary of the Company, and (C) no options,
warrants,
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calls, subscriptions, or other rights, (including preemptive rights),
commitments or agreements to which the Company, DHDC or any Subsidiary of
the Company is a party or by which it is bound, to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Company Voting Debt or other voting securities of the Company, DHDC or any
Subsidiary of the Company, or obligating the Company, DHDC or any
Subsidiary of the Company to grant, extend, or enter into any such option,
warrant, call, subscription, or other right, commitment or agreement. Set
forth in Section 3.1(b) of the Disclosure Schedule is a true and complete
list of all outstanding options, warrants and rights to purchase shares of
Company Common Stock and the exercise prices relating thereto. There are
not as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts, or other agreements to which the
Company is a party or by which it is bound relating to the voting of any
shares of the capital stock of the Company which will limit in any way the
solicitation of proxies by or on behalf of the Company from, or the casting
of votes by, the stockholders of the Company with respect to the Merger.
The Company is not a party to any agreement that restricts the Company's
voting of the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals. (i) The Company
has all requisite corporate power and authority to enter into this
Agreement and, subject to the approval of this Agreement and the Merger by
the holders of a majority of the outstanding shares of Company Common Stock
(the "Company Stockholder Approval"), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
Company Stockholder Approval). This Agreement has been duly executed and
delivered by the Company and, subject to the Company Stockholder Approval
and (assuming that this Agreement is duly executed and delivered by TAGTCR)
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms except that the enforcement hereof may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity).
(ii) The execution and delivery of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby by the
Company, following the satisfaction or waiver of the conditions set forth
in Article VI, will not: (A) violate any provision of the Certificate of
Incorporation or Bylaws of the Company, any of its Subsidiaries or DHDC,
(B) conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under; give rise to a right of
termination, cancellation or acceleration (including pursuant to any put
right) of any obligation; or result in the creation of a Lien or right of
first refusal with respect to any asset or property (any such conflict,
violation, default, right of termination, cancellation or acceleration,
loss, creation or right of first refusal, a "Violation") pursuant to any
loan or credit agreement, note, mortgage, deed of trust, indenture, lease,
Company Employee Benefit Plan (as defined in Section 3.1(j)), Company
Permit (as defined in Section 3.1(g)), or any other agreement, obligation,
instrument, concession, franchise or license, or (C) any judgment, order,
decree, law, statute, rule or regulation of any public body or authority
applicable to the Company or any of its Subsidiaries, or DHDC, or their
respective properties or assets; provided, however, that no representation
or warranty is made in the foregoing clauses (B) and (C) with respect to
matters that, individually or in the aggregate, will not have a Material
Adverse Effect on the Company or materially delay the ability of such
Person to consummate the transactions contemplated by this Agreement. The
Board of Directors of the Company has taken all actions necessary under the
DGCL, including approving the transactions contemplated by this Agreement,
to ensure that Section 203 of the DGCL does not, and will not, apply to the
transactions contemplated in this Agreement.
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(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to or permit from any
court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign (a "Governmental Entity") is
required by or with respect to the Company or any of its Subsidiaries or
DHDC in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the Merger and the other
transactions contemplated hereby the failure to obtain which will,
individually or in the aggregate, have a Material Adverse Effect on the
Company or materially delay the ability of such Person to consummate the
transactions contemplated by this Agreement, except for: (A) the filing of
a pre-merger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the expiration or termination of the applicable waiting period
thereunder; (B) the filing with the Securities and Exchange Commission (the
"SEC") of (x) a proxy statement in definitive form relating to a meeting of
the holders of Company Common Stock to approve this Agreement and the
Merger (such proxy statement as amended or supplemented from time to time
being hereinafter referred to as the "Proxy Statement"), and (y) such
reports under and such other compliance with the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations
thereunder as may be required in connection with this Agreement and the
transactions contemplated hereby; (C) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware; (D) such
filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws; (E) the filing of a Form A
Statement Regarding the Acquisition of Control of a Domestic Insurer with
the Arizona and Texas Departments of Insurance and the approval thereof by
the Arizona and Texas Directors of Insurance, (F) the approval of this
Agreement and the Merger pursuant to applicable laws governing dental
referral plans, dental service corporations, health insurance
organizations, life, accident, health and/or disability insurance
organizations, limited service health maintenance organizations, prepaid
dental plans, preferred provider administrators, third party
administrators, health maintenance organizations, limited health service
organizations, insurance holding companies and other product, program or
service of the Company and its Subsidiaries (collectively "Dental
Products") that is subject to regulation under the insurance laws of any
state in which the Company or its Subsidiaries do business; (G) approval of
transfer of ownership of any Dental Product of the Company and its
Subsidiaries by the applicable Governmental Entity in any state in which
such approval is required in connection with the performance of this
Agreement; and (H) the filing of any notice of transfer of ownership or
other notice relating to any Dental Product of the Company and its
Subsidiaries, in compliance with the laws of any state in which any such
filing is prepared, in connection with the performance of this Agreement.
(iv) The Board of Directors of the Company has taken such action to
amend the Rights Agreement so that neither TAGTCR nor its Affiliates and
Associates (as such terms are defined in the Rights Agreement) are deemed
"Acquiring Persons" in connection with the Rights Agreement.
(d) SEC Documents. Since May 1, 1995, the Company has filed all
forms, reports, schedules, registration statements, proxy statements and
documents with the SEC required to be filed by it pursuant to the
Securities Act of 1933, as amended (the "Securities Act") and the Exchange
Act and the SEC rules and regulations promulgated thereunder (all such
documents filed through the date hereof collectively, the "Company SEC
Documents"). The Company has made available to TAGTCR the Company SEC
Documents. As of their respective dates, the Company SEC Documents complied
in all material respects with the requirements of the Securities Act, or
the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company SEC Documents, and
none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents complied as
to form in all material respects with the rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or,
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in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in all material respects in
accordance with applicable requirements of GAAP (subject, in the case of
the unaudited statements, to normal, recurring adjustments) the
consolidated financial position of the Company and its consolidated
Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein.
(e) Information Supplied. (i) None of the information supplied or to
be supplied by the Company for inclusion or incorporated by reference in
the Proxy Statement will, on the date it is first mailed to the holders of
the Company Common Stock or at the time of the Company's Stockholders
Meeting (as hereinafter defined) 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 are made, not misleading. The Proxy
Statement, insofar as it relates to the Company or its Subsidiaries or
other information supplied by the Company for inclusion therein will comply
as to form, in all material respects, with the provisions of the Exchange
Act or the rules and regulations thereunder.
(ii) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the Rule 13e-3 Transaction
Statement on Schedule 13E-3 (the "Schedule 13E-3") will on the date filed
with the SEC or at the time of the Company's Stockholders Meeting, 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. The Schedule 13E-3, insofar as it relates to the Company or its
Subsidiaries or other information supplied by the Company for inclusion
therein, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
(f) Regulated Subsidiaries. (i) The Company has previously made
available to TAGTCR true and complete copies of the following statutory
financial statements for each Subsidiary of the Company that is required to
prepare and file statutory financial statements;
(A) the annual statutory statements for each such Subsidiary for
each of the years ended December 31, 1996 and 1997; and
(B) the quarterly statutory statements for each such Subsidiary for
each of the quarters ended March 31, June 30 and September 30, 1998.
Each such statement was prepared in accordance with the accounting
practices required or permitted by the insurance regulatory authority in
the applicable state, consistently applied.
(ii) All Dental Products of the Company and each Subsidiary that are
regulated by insurance or health care laws are, to the extent required by
applicable law, on forms and at rates approved by the regulatory authority
in the jurisdictions where issued (or have been filed with and not objected
to by such regulatory authority within the period provided for objection),
except where the failure be on such forms or at such rates will not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(g) Compliance with Applicable Laws. The Company, its Subsidiaries
and DHDC hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary to enable
them to conduct their respective businesses as they are now being conducted
other than those which the failure to hold does not have a Material Adverse
Effect on the Company (the "Company Permits"); a list of Company Permits is
set forth in Section 3.1(g) of the Disclosure Schedule. The Company, its
Subsidiaries and DHDC are in compliance with the terms of the Company
Permits, except for such noncompliance that will not, individually or in
the aggregate, have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Documents, the Company, its Subsidiaries and
DHDC are in compliance in all material respects with applicable
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laws, except for such noncompliance that will not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(h) Litigation. Except as disclosed in the Company SEC Documents,
there is no suit, claim, investigation, action or proceeding pending or, to
the knowledge of the Company, threatened against the Company, DHDC or any
Subsidiary of the Company or any of their respective assets or properties,
individually or in the aggregate, which will have a Material Adverse Effect
on the Company ("Company Litigation"). There is no judgment, writ, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company, DHDC or any Subsidiary of the Company
which, individually or in the aggregate, will have a Material Adverse
Effect on the Company ("Company Order").
(i) Taxes. (i) All Tax Returns (as defined herein) required to be
filed by or with respect to the Company, each of its Subsidiaries and DHDC
have been duly and timely filed, and all such Tax Returns are true, correct
and complete in all material respects except where the failure to file
would not have a Material Adverse Effect on the Company. The Company, each
of its Subsidiaries and DHDC has duly and timely paid (or there has been
paid on its behalf) all Taxes (as defined herein) that are due, or claimed
or asserted by any taxing authority to be due, from or with respect to it,
except for Taxes the liability for which is being contested in good faith
or the nonpayment of which will not have a Material Adverse Effect on the
Company. With respect to any period for which Taxes are not yet due with
respect to the Company or any Subsidiary, each of the Company and its
Subsidiaries has made due and sufficient current accruals for such Taxes in
accordance with GAAP in the most recent financial statements contained in
the Company SEC Documents. The Company and each of its Subsidiaries has
made (or there has been made on its behalf) all required estimated tax
payments sufficient to avoid any material underpayment penalties. Each of
the Company, its Subsidiaries and DHDC has withheld and paid all Taxes
required by all applicable laws to be withheld or paid in connection with
any material amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(ii) There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitation applicable to any claim for,
or the period for the collection or assessment of, Taxes due from or with
respect to the Company, any of its Subsidiaries or DHDC for any taxable
period. No audit or other proceeding by any court, governmental or
regulatory authority is pending or, to the knowledge of the Company,
threatened in regard to any Taxes due from or with respect to the Company,
any of its Subsidiaries or DHDC or any Tax Return filed by or with respect
to the Company, any Subsidiaries or DHDC. No material assessment of Taxes
is proposed against the Company, any of its Subsidiaries or DHDC or any of
their assets.
(iii) No election under Section 338 of the Internal Revenue Code of
1986, as amended (the "Code") has been made or filed by or with respect to
the Company, any of its Subsidiaries or DHDC. No closing agreement pursuant
to Section 7121 of the Code (or any predecessor provision) or any similar
provision of state, local or foreign law has been entered into by or with
respect to the Company, any of its Subsidiaries or DHDC. No consent to the
application of Section 341(f)(2) of the Code (or any predecessor provision)
has been made or filed by or with respect to the Company, any of its
Subsidiaries or DHDC or any of their assets. None of the Company, any of
its Subsidiaries or DHDC is or has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. None of the Company, any of its Subsidiaries or DHDC has agreed to
make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method,
and there is no application pending with any taxing authority requesting
permission for any changes in any accounting method of the Company, any of
its Subsidiaries or DHDC. The Internal Revenue Service has not proposed any
such adjustment or change in accounting method. None of the assets of the
Company, any of its Subsidiaries or DHDC is or will be required to be
treated as being owned by any Person (other than the Company or its
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Subsidiaries) pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before
the enactment of the Tax Reform Act of 1986.
(iv) None of the Company, any of its Subsidiaries or DHDC is a party
to, is bound by, or has any obligation under, any Tax sharing agreement,
Tax allocation agreement, Tax indemnity agreements or similar contract.
(v) The Company and each of its Subsidiaries are members of the
affiliated group, within the meaning of Section 1504(a) of the Code, of
which the Company is the common parent, and such affiliated group files a
consolidated federal income Tax Return.
(vi) The Company has previously made available to TAGTCR true and
complete copies of each of (a) any written audit reports issued by any
representative of a taxing authority within the last three years relating
to the United States federal, state, local or foreign Taxes due from or
with respect to the Company, its Subsidiaries and DHDC; and (b) the United
States federal, state, local and foreign Tax Returns, for each of the last
three taxable years, filed by or with respect to the Company, its
Subsidiaries and DHDC.
(vii) "Code" shall mean the Internal Revenue Code of 1986, as amended.
"Taxes" shall mean all taxes, charges, fees, levies, or other assessments
or liabilities, including without limitation (a) income, gross receipts, ad
valorem, premium, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll, and franchise taxes, license,
severance, stamp, occupation, windfall profits, environmental, customs
duties, capital stock, unemployment, disability, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind, whether
disputed or not, imposed by the United States of America, or by any state,
local, or foreign government, or any subdivision or agency of the United
States or any such government, and (b) any interest, fines, penalties,
assessments, or additions to taxes resulting from, attributable to, or
incurred in connection with any Tax or any contest, dispute, or refund
thereof, including any obligations under any agreements with respect to any
of the foregoing. "Tax Returns" shall mean any report, return, or statement
required to be supplied to a taxing authority in connection with Taxes.
(j) Pension and Benefit Plans; ERISA.
(i) Section 3.1(j)(i) of the Disclosure Schedule sets forth a true and
complete list of:
(A) all "employee benefit plans," as defined in Section 3(3) of
ERISA, which the Company, any of its Subsidiaries or DHDC has any
obligation or liability, contingent or otherwise ("Benefit Plans"); and
(B) all employment or consulting agreements, bonus or other
incentive compensation, deferred compensation, salary continuation
during any absence from active employment for disability or other
reasons, severance, sick days, stock award, stock option, stock purchase
or other equity-based plan or program, tuition assistance, club
membership, employee discount, employee loan, or vacation pay
agreements, policies or arrangements which the Company, any of its
Subsidiaries or DHDC maintains or has any obligation or liability
(contingent or otherwise) with respect to any current or former officer,
director or employee of the Company, any of its Subsidiaries or DHDC
(the "Employee Arrangements").
(ii) With respect to each Benefit Plan and Employee Arrangement, a
true and complete copy of each of the following documents (if applicable)
has been made available to TAGTCR: (A) the most recent plan and related
trust documents, and all amendments thereto (or, in the case of an
unwritten Employment Arrangement, a description thereof); (B) the most
recent summary plan description, and all related summaries of material
modifications thereto; (C) the most recent Form 5500 (including schedules
and attachments); (D) the most recent Internal Revenue Service
determination letter; (E) the most recent actuarial reports (including for
purposes of Financial Accounting Standards Board report no. 87, 88, 106,
112 and 132) and (F) each written employment, consulting or individual
severance or other compensation agreement, and all amendments thereto.
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(iii) The Company, its Subsidiaries and DHDC have not during the
preceding six years had any obligation or liability (contingent or
otherwise) with respect to a Benefit Plan which is described in Section
3(37); 4(b)(4), 4063 or 4064 of ERISA or which is subject to Section 412 of
the Code or Title IV of ERISA.
(iv) The Benefit Plans and their related trusts intended to qualify
under Section 401 and to be tax-exempt under Section 501(a) of the Code
have received favorable determination letters from the Internal Revenue
Service. The Company is not aware of any event or circumstance that could
result in the failure of such Benefit Plans to be so qualified or tax
exempt. Any voluntary employee benefit association which provides benefits
to current or former employees of the Company and its Subsidiaries, or
their beneficiaries, which is intended to be qualified and is tax-exempt
under Section 501(c)(9) of the Code has received a favorable determination
letter from the Internal Revenue Service.
(v) All contributions or other payments required to have been made by
the Company, its Subsidiaries and DHDC to or under any Benefit Plan or
Employee Arrangements by applicable law or the terms of such Benefit Plan
or Employee Arrangement (or any agreement relating thereto) have been
timely and properly made, except for the failure to make such contribution
or payment as will not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(vi) The Benefit Plans and Employee Arrangements comply in all
material respects with applicable laws and have been maintained and
administered in all material respects in accordance with their terms and
applicable laws.
(vii) There are no pending or, to the knowledge of Company, threatened
actions, claims or proceedings against or relating to any Benefit Plan or
Employee Arrangement other than routine benefit claims by Persons entitled
to benefits thereunder and those actions, claims and proceedings that will
not have a Material Adverse Effect on the Company.
(viii) The Company, its Subsidiaries and DHDC do not maintain or have
an obligation to contribute to retiree life or retiree health plans which
provide for continuing benefits or coverage for current or former officers,
directors or employees of the Company or any of its Subsidiaries except (A)
as may be required under part 6 of Title I of ERISA or applicable state law
(after a termination of employment or service as a director for which
coverage of the participant or the participant's beneficiary is charged at
the maximum possible premium) or (B) a medical expense reimbursement
account plan pursuant to Section 125 of the Code.
(ix) None of the assets of any Benefit Plan is stock of the Company,
any of its affiliates or DHDC, or property leased to or jointly owned by
the Company, any of its affiliates or DHDC.
(x) The Company, its Subsidiaries and DHDC have no liability
(contingent or otherwise) under Section 4069 of ERISA by reason of a
transfer of an underfunded pension plan.
(k) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed after September 30, 1998, since September 30,
1998, the business of the Company and its Subsidiaries has been carried on
only in the ordinary and usual course and in a manner which, if it had been
carried on after execution of this Agreement, would have been in compliance
with Section 4.1 hereof and no event or events has or have occurred that
(either individually or in the aggregate) has had or will have a Material
Adverse Effect on the Company.
(1) No Undisclosed Material Liabilities. There are no liabilities of
the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, unmatured, absolute, determined, determinable or
otherwise, that are required to be reflected on a balance sheet prepared in
accordance with GAAP other than: (i) liabilities reflected on the
Consolidated Balance Sheet of the Company and its Subsidiaries contained in
the Quarterly Report on Form 10-Q or the notes thereto for the quarter
ended September 30, 1998 (the "September 30 Balance Sheet"), (ii)
liabilities under this Agreement, (iii) liabilities with respect to the
Company's investment in DHDC and (iv) liabilities
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incurred in the ordinary course of business and consistent with past
practices, none of which individually or in the aggregate, has had or will
have a Material Adverse Effect on the Company.
(m) Vote Required. The Company Stockholder Approval is the only vote
of the holders of any class or series of the Company's capital stock
necessary to approve the Merger and this Agreement and the transactions
contemplated hereby under any applicable law, rule or regulation or
pursuant to the requirements of the Company's Certificate of Incorporation
and Bylaws.
(n) Labor Matters. (i) Neither the Company, any of its Subsidiaries
nor DHDC is a party to any labor or collective bargaining agreement, and no
employees of Company, any of its Subsidiaries or DHDC are represented by
any labor organization. Within the preceding three years, there have been
no representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the knowledge of the Company,
threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority. Within
the preceding three years, to the knowledge of Company, there have been no
organizing activities involving the Company, its Subsidiaries or DHDC with
respect to any group of employees of the Company, any of its Subsidiaries
or DHDC.
(ii) There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor
disputes pending or, to the Company's knowledge, threatened in writing
against or involving Company, any of its Subsidiaries or DHDC. There are no
unfair labor practice charges, grievances or complaints pending or, to the
knowledge of the Company, threatened in writing by or on behalf of any
employees or group of employees of the Company, any of its Subsidiaries or
DHDC, which have or will have a Material Adverse Effect on the Company.
(iii) There are no complaints, charges or claims against the Company,
any of its Subsidiaries or DHDC pending or, to the knowledge of the
Company, threatened to be brought or filed with any governmental authority,
arbitrator or court based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment of any
individual by the Company, any of its Subsidiaries or DHDC, which have or
will have a Material Adverse Effect on the Company.
(iv) there has been no "mass layoff" or "plant closing" (as defined by
WARN) with respect to the Company, its Subsidiaries or DHDC within the six
months prior to Closing.
(o) Intellectual Property. (i) Section 3.1(o) of the Disclosure
Schedule sets forth a true and complete list of each material trademark,
trade name, patent, service mark, brand mark, brand name, industrial
design, and copyright owned or used by the Company or its Subsidiaries on a
regular basis in connection with the operation of the businesses of each of
the Company, its Subsidiaries and DHDC as well as a true and complete list
of all registrations thereof and pending applications therefor, and each
license or other contract relating thereto (collectively, the "Company
Intellectual Property"). All of the Company Intellectual Property is owned
by the Company, its Subsidiaries or DHDC free and clear of any and all
Liens, except where the failure to so own will not, individually or in the
aggregate, have a Material Adverse Effect on the Company. To the Company's
knowledge, the use of the Company Intellectual Property by the Company, its
Subsidiaries or DHDC does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of
any right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark,
brand mark, brand name, industrial design, copyright or any pending
application therefor of any other Person and neither the Company, any of
its Subsidiaries nor DHDC has received any notice of any claim or otherwise
knows that any of the Company Intellectual Property is invalid or conflicts
with the asserted rights of any other Person except where such invalidity
or conflict will not have a Material Adverse Effect on the Company.
(ii) Each of the Company, its Subsidiaries and DHDC owns or has a
right to use all Company Intellectual Property necessary for the operation
of its respective business, except where the failure to
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so own or have a right to use will not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(iii) Each of the licenses or other contracts pursuant to which the
Company, its Subsidiaries or DHDC has rights to Company Intellectual
property is in full force and effect and is valid and enforceable in
accordance with its terms, and there is no material default under any such
license or contract either by the Company, any of its Subsidiaries or DHDC
or, to the knowledge of the Company, by any other party thereto, except
where such failure or default will not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(p) Environmental Matters. (i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without limitation, fees,
disbursements and expenses of legal counsel, experts, engineers and
consultants and the costs of investigation and feasibility studies and
clean up, remove, treat, or in any other way address any Hazardous
Materials) arising from or under any Environmental Law.
(B) "Environmental Law" means any applicable law regulating or
prohibiting Releases of Hazardous Materials into any part of the natural
environment, or pertaining to the protection of natural resources, the
environment and public and employee health and safety including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") (42 U.S.C. sec.9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. sec.1801 et, seq.), the Resource
Conservation and Recovery Act (42 U.S.C. sec.6901 et, seq.), The Clean
Water Act (33 U.S.C. sec.1251 et, seq.), the Clean Air Act (33 U.S.C.
sec.7401 et, seq.), the Toxic Substances Control Act (15 U.S.C. sec.7401
et, seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. sec.136 et, seq.), and the Occupational Safety and Health Act (29
U.S.C. sec.651 et, seq.) ("OSHA") and the regulations promulgated
pursuant thereto, and any such applicable state or local statutes,
including, without limitation, the Industrial Site Recovery Act
("IRSA"), and the regulations promulgated pursuant thereto, as such laws
have been and may be amended or supplemented through the Closing Date;
(C) "Hazardous Material" means any substance, material or waste
which is regulated by any public or governmental authority in the
jurisdictions in which the applicable party or its Subsidiaries conducts
business, or the United States, including, without limitation, any
material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous waste"
or "restricted hazardous waste," "contaminant," "toxic waste" or "toxic
substance" under any provision of Environmental Law and shall also
include, without limitation, petroleum, petroleum products, asbestos,
polychlorinated biphenyls and radioactive materials;
(D) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, disposal,
leaching, or migration into the environment, including any property
owned by the Company, its Subsidiaries or DHDC or into or out of any
property; and
(E) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity
or required under any Environmental Law by the Company, its Subsidiaries
or DHDC, or voluntarily undertaken by the Company, its Subsidiaries or
DHDC to (I) clean up, remove, treated, or in any other way ameliorate or
address any Hazardous Materials or other substance in the indoor or
outdoor environment, (II) prevent the Release or threatened of Release,
or minimize the further Release of any Hazardous Material so it does not
endanger or threaten to endanger the public health or welfare of the
indoor or outdoor environment, (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release, or (IV) bring the applicable party into
compliance with any Environmental Law.
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(ii) Except as set forth in Company SEC Documents or Section 3.1(q) of
the Disclosure Schedule:
(A) The operations of the Company, its Subsidiaries and DHDC have
been and, as of the Closing Date, will be, in compliance with all
Environmental Laws, except where the failure to be in compliance will
not have a Material Adverse Effect on the Company;
(B) The Company, its Subsidiaries and DHDC have obtained and will,
as of the Closing Date, maintain all permits required under applicable
Environmental Laws for the continued operations of their respective
businesses, except such permits the lack of which would not have a
Material Adverse Effect on the Company;
(C) The Company, its Subsidiaries and DHDC are not subject to any
outstanding written orders from, or written agreements with, any
Governmental Entity or other Person respecting (1) Environmental Laws,
(2) Remedial Action, or (3) any Release or threatened Release of a
Hazardous Material;
(D) The Company, its Subsidiaries and DHDC have not received any
written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which violation
or liability is outstanding;
(E) To the knowledge of the Company, neither the Company, any of
its Subsidiaries or DHDC has any contingent liability in connection with
the Release of any Hazardous Material into the indoor or outdoor
environment (whether on-site or off-site) which will have a Material
Adverse Effect on the Company;
(F) Except for de minimis amounts which are regulated as
conditionally exempt small quantity generators, the operations of the
Company, its Subsidiaries and DHDC do not involve the transportation,
treatment, storage, or disposal of hazardous waste for purposes of the
requirements set forth under, 40 C.F.R. Parts 260-270 or any state
equivalent;
(G) There is not now, nor to the knowledge of the Company has there
been in the past, on or in any property owned by the Company, its
Subsidiaries or DHDC any of the following: (1) any underground storage
tanks or surface impoundments, (2) any asbestos-containing materials, or
(3) any polychlorinated biphenyls;
(H) No judicial or administrative proceedings are pending or, to
the knowledge of the Company, threatened against the Company, its
Subsidiaries or DHDC alleging the violation of or seeking to impose
liability pursuant to any Environmental Law and there are no
investigations pending or, to the knowledge of the Company, threatened
against the Company, any of its Subsidiaries or DHDC under Environmental
Laws, in each case which will have a Material Adverse Effect on the
Company; and
(I) The Company and its Subsidiaries have made available to TAGTCR
true and complete copies of all environmentally related audits,
assessments, studies, reports, analyses, and results of investigations
prepared within the past five years of any real property currently or
formerly owned, operated or leased by the Company, its Subsidiaries or
DHDC that are in the possession, custody or control of the Company, any
of its Subsidiaries or DHDC.
(q) Insurance. Set forth on Section 3.1(q) of the Disclosure Schedule
is a true and complete list and description of insurance policies
(including information on the premiums payable in connection therewith, the
scope and amount of the coverage and deductibles provided thereunder and
all claims against such policies) maintained by the Company, any of its
Subsidiaries and DHDC.
(r) DHDC Financial Statements. The Company has made available to
TAGTCR the operating statement for DHDC for the period commencing January
1, 1998 until September 30, 1998 (the "DHDC Financial Statements"). The
DHDC Financial Statements were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis
during the periods
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involved (except as may be indicated in the notes thereto) and fairly
present in all material respects in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal,
recurring adjustments) the results of operations of DHDC for the periods
presented therein.
(s) Board of Directors Recommendation. The Board of Directors of the
Company, based upon the unanimous recommendation of a Special Committee
consisting of only non-employee directors of the Company, at a meeting duly
called and held, has by the vote of those directors present (i) determined
that this Agreement, the Merger and the transactions contemplated hereby
are fair to and in the best interests of the stockholders of the Company
(other than TAGTCR and the holders of Recapitalization Shares) and has
approved the same, and (ii) resolved to recommend that the holders of the
shares of Company Common Stock approve and adopt this Agreement, the Merger
and the transactions contemplated hereby.
(t) Material Contracts. Except as set forth in the Company SEC
Reports, neither the execution and delivery of this Agreement nor the
consummation of the Merger or the other transactions contemplated hereby
will result in, cause the accelerated vesting or delivery of, or increase
the amount or value of, any payment or benefit to any director, officer or
employee of the Company, and, without limiting the generality of the
foregoing, no amount paid or payable by the Company in connection with the
Merger with the other transactions contemplated hereby will be an "excess
parachute payment" within the meaning of Section 280G of the Code. Each
contract, agreement or other document or instrument ("Material Contract")
to which the Company or any of its Subsidiaries is a party that was
required to be filed as an exhibit to the Company's annual report on Form
10-K for the year ended December 31, 1997 was so filed. None of the Company
or its Subsidiaries is (with or without lapse of time or giving notice, or
both) in material breach or default in any respect under any Material
Contract. Except for the Rights Agreement, the Company is not a party to or
subject to any "poison pill", shareholders rights plan, rights agreement or
similar agreement, instrument or plan.
(u) Fairness Opinion. The Company has received the opinion of The
Robinson-Humphrey Company, LLC, financial advisor to the Company (the
"Financial Advisor"), to the effect that, as of the date hereof, the Merger
Consideration to be received by the stockholders of the Company in the
Merger is fair, from a financial point of view, to the stockholders of the
Company.
(v) Regulatory Filings. The Company has made available for inspection
by TAGTCR complete copies of all material registrations, filings and
submissions made since January 1, 1996 by the Company or any Subsidiary
with any Governmental Entity and any reports of examinations issued since
January 1, 1996 by any such Governmental Entity that relate to the Company
or any Subsidiary. The Company and each Subsidiary has filed all reports,
statements, documents, registrations, filings or submissions required to be
filed by any of them with any Governmental Entity, except where the failure
to file, in the aggregate, will not have a Material Adverse Effect on the
Company; and, to the knowledge of the Company, all such reports,
statements, documents, registrations, filings or submissions were in all
material respects true, and complete and accurate when filed, except where
such incompleteness or inaccuracy individually, or in the aggregate, will
not have a Material Adverse Effect on the Company.
(w) State Takeover Laws. The Company's Board of Directors has taken
such action so that no takeover statute or similar statute or regulation of
the State of Delaware or the State of Georgia (and, to the knowledge of the
Company after due inquiry, of any other state or jurisdiction) applies to
this Agreement, the Merger, or any of the other transactions contemplated
hereby.
3.2 Representations and Warranties of TAGTCR. TAGTCR represents and
warrants to the Company as follows:
(a) Organization, Standing and Power. TAGTCR is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware, has all requisite corporate
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power and authority to own, lease, and operate its properties and to carry
on its business as now being conducted, and is duly qualified or licensed
to do business as a foreign corporation and in good standing to conduct
business in each jurisdiction in which the conduct of its business, or the
operation, ownership or leasing of its properties, makes such qualification
or licensing necessary, other than in such jurisdictions where the failure
to so qualify or to become so licensed does not have or could not
reasonably be expected to have a Material Adverse Effect on TAGTCR.
(b) Authority; No Violations; Consents and Approvals. (i) TAGTCR has
all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of TAGTCR. This Agreement has been duly executed and
delivered by TAGTCR and (assuming this Agreement is duly executed and
delivered by the Company) constitutes a valid and binding obligation of
TAGTCR enforceable in accordance with its terms and conditions except that
the enforcement hereof may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby by TAGTCR,
following the satisfaction or waiver of the conditions set forth in Article
VI, will not: (A) violate any provision of the Certificate of Incorporation
or Bylaws of TAGTCR, (B) conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under; give rise
to a right of termination, cancellation or acceleration (including pursuant
to any put right) of any obligation; or result in the creation of a Lien or
right of first refusal with respect to any asset or property (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss, creation or right of first refusal, a "Violation")
pursuant to any loan or credit agreement, note, mortgage, deed of trust,
indenture, lease or other agreement, obligation, instrument, concession,
franchise or license of TAGTCR or (C) any law applicable to TAGTCR or its
respective property or assets; provided, however, that no representation or
warranty is made in the foregoing clauses (B) and (C) with respect to
matters that, individually or in the aggregate, will not have a Material
Adverse Effect on TAGTCR.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Governmental Entity, is required by or with respect to TAGTCR in connection
with the execution and delivery of this Agreement by TAGTCR or the
consummation by TAGTCR of the transactions contemplated hereby, except for
(A) filings under the HSR Act, (B) the filing with the SEC of such reports
under and such other compliance with the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this
Agreement and the transactions contemplated hereby, (C) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
(D) such filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws, (E) the approval of this Agreement
and the Merger pursuant to applicable laws governing health maintenance
organizations, limited service health organizations, and insurance holding
companies set forth in the Disclosure Schedule, and (F) the filing of a
Form A Statement Regarding the Acquisition of Control of a Domestic Insurer
with the Arizona and Texas Departments of Insurance and the approval
thereof by the Arizona and Texas Directors of Insurance.
(c) Information Supplied. None of the information supplied or to be
supplied by TAGTCR for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, 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 are made, not
misleading. None of the information supplied or to be supplied by TAGTCR
for inclusion or incorporation by reference in the Schedule 13E-3 will, on
the date filed with the SEC or at the
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time of the Company Stockholders Meeting or the Effective Time, contain any
untrue statement of a material fact or admit to state any material facts
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. The Schedule 13E-3, insofar as it relates to TAGTCR or other
information supplied by TAGTCR for inclusion therein, will comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
(d) Board of Directors Recommendation. The Board of Directors of
TAGTCR, at a meeting duly called and held (or by valid written consent in
lieu thereof), has determined that this Agreement, the Merger and the
transactions contemplated hereby are fair to and in the best interests of
TAGTCR and have approved the same. The Board of Directors of TAGTCR has
approved this Agreement and the Merger at a meeting duly called and held
(or by valid written consent in lieu thereof) and no further approval is
required pursuant to the DGCL, the Certificate of Incorporation or the
Bylaws of TAGTCR.
(e) Delaware Law. TAGTCR was not, immediately prior to the execution
of this Agreement, an "interested stockholder" within the meaning of
Section 203 of the DGCL.
3.3 Representations and Warranties of the Guarantors. Each of the
Guarantors represents and warrants severally with respect to themselves to the
Company as follows:
(a) Organization, Standing and Power. Each of the Guarantors is an
entity duly organized, validly existing, and in good standing under the
laws of its formation, has all requisite corporate or partnership power and
authority to own, lease, and operate its properties and to carry on its
business as now being conducted, and is duly qualified or licensed to do
business as a foreign corporation and in good standing to conduct business
in each jurisdiction in which the conduct of its business, or the
operation, ownership or leasing of its properties, makes such qualification
or licensing necessary, other than in such jurisdictions where the failure
to so qualify or to become so licensed does not have or could not
reasonably be expected to have a Material Adverse Effect on each of the
Guarantors.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of the Guarantors has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Guarantors. This Agreement has been
duly executed and delivered by each of the Guarantors and (assuming this
Agreement is duly executed and delivered by the Company) constitutes a
valid and binding obligation of each of the Guarantors enforceable in
accordance with its terms and conditions except that the enforcement hereof
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, or other similar laws now or hereafter
in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby by each of the
Guarantors, following the satisfaction or waiver of the conditions set
forth in Article VI, will not: (A) violate any provision of the formation
documents of each of the Guarantors, (B) conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under; give rise to a right of termination, cancellation or acceleration
(including pursuant to any put right) of any obligation; or result in the
creation of a Lien or right of first refusal with respect to any asset or
property (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss, creation or right of first refusal, a
"Violation") pursuant to any loan or credit agreement, note, mortgage, deed
of trust, indenture, lease or other agreement, obligation, instrument,
concession, franchise or license or (C) any law applicable to each of the
Guarantors or its respective property or assets, which has or could
reasonably be expected to have a Material Adverse Effect on each of the
Guarantors; provided, however, that no representation
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or warranty is made in the foregoing clauses (B) and (C) with respect to
matters that, individually or in the aggregate, will not have a Material
Adverse Effect on each of the Guarantors.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Governmental Entity, is required by or with respect to any Guarantor in
connection with the execution and delivery of this Agreement by such
Guarantor or the consummation by such Guarantor of the transactions
contemplated hereby, except for (A) filings under the HSR Act, (B) the
filing with the SEC of such reports under and such other compliance with
the Exchange Act and the rules and regulations thereunder, as may be
required in connection with this Agreement and the transactions
contemplated hereby, (C) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (D) such filings and approvals
as may be required by any applicable state securities, "blue sky" or
takeover laws, (E) the approval of this Agreement and the Merger pursuant
to applicable laws governing health maintenance organizations, limited
service health organizations, and insurance holding companies set forth in
the Disclosure Schedule, and (F) the filing of a Form A Statement Regarding
the Acquisition of Control of a Domestic Insurer with the Texas and Arizona
Departments of Insurance and the approval thereof by the Texas and Arizona
Directors of Insurance.
(c) Information Supplied. None of the information supplied or to be
supplied by any Guarantor for inclusion or incorporation by reference in
the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, 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 are made, not
misleading. None of the information supplied or to be supplied by any
Guarantor for inclusion or incorporation by reference in the Schedule 13E-3
will, on the date filed with the SEC or at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or
admit to state any material facts 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. The Schedule
13E-3, insofar as it relates to any Guarantor or other information supplied
by any Guarantor for inclusion therein, will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder.
(d) Bridge Loan and Financing Commitment. TAGTCR or the Guarantors
have received (i) a written commitment (each of which is conditioned upon
the conditions set forth therein) from NationsBridge, L.L.C., NationsBank,
N.A. and NationsBanc Montgomery Securities, LLC (collectively, the "Banks")
for the provision of a guaranteed loan in the amount of $20 million and
senior and subordinated debt financing of approximately $145 million in the
aggregate, (ii) written commitments from the Guarantors to subscribe for an
aggregate of at least $87.7 million (including the DHDC Rollover (as
defined below)), and (iii) a written commitment from certain existing
stockholders of the Company to cause 200,000 shares of Company Common Stock
to be treated as Recapitalization Shares (the commitments set forth in (i),
(ii) and (iii) are collectively referred to as the "Commitments"). The DHDC
Rollover shall mean the agreement by GTCR to contribute its DHDC common
stock (including the shares of DHDC common stock which GTCR has agreed to
repurchase from RH Capital Partners, L.P.) directly or indirectly into
Surviving Corporation immediately after the Effective Time, which agreement
shall be valued so as to return $10 million and provide a 31% internal rate
of return on GTCR's $10.0 million investment in DHDC from September 12,
1997. Based upon the representations and warranties set forth in Section
3.1, the aggregate of $255.7 million of financing contemplated by the
Commitments (the "Financing") will be sufficient (i) to consummate the
Merger and pay the Merger Consideration and the Option Consideration, (ii)
to pay all fees and expenses required to be paid by TAGTCR and the Company
in connection with the Merger and the transactions contemplated thereby,
and (iii) to refinance the existing indebtedness of the Company to
financial institutions. True and correct copies of the Commitments have
been provided to the Company prior to the date hereof. The terms and
conditions of the Convertible Participating Preferred Stock to be received
by the holders of Recapitalization
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Shares will be identical to the Convertible Participating Preferred Stock
to be received by the Guarantors. The holders of the Recapitalization
Shares that receive Convertible Participating Preferred Stock will pay a
per share amount equal to that paid by the Guarantors.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees that
(except as expressly contemplated or permitted by this Agreement, or to the
extent that TAGTCR shall otherwise consent in writing):
(a) Ordinary Course. Each of the Company and its Subsidiaries shall
conduct its business and operations in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and shall
use all reasonable efforts to preserve intact its present business
organizations, keep available the services of its current officers and
employees and preserve satisfactory relationships with customers,
suppliers, distributors and others having business dealings with it and
will take no action which would adversely affect its ability to consummate
the Merger or the other transactions contemplated hereby.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it
permit any of its Subsidiaries to: (i) declare, set aside, or pay any
dividends on or make other distributions (whether in cash, stock or
property or any combination thereof) in respect of any of its capital stock
(other than dividends or distributions by any Subsidiary to the Company),
(ii) split, combine, or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or (iii)
repurchase, redeem, or otherwise acquire, or permit any Subsidiary to
purchase or otherwise acquire, any shares of its capital stock, except as
required by the terms of its securities outstanding on the date hereof, as
contemplated by this Agreement or as contemplated by employee benefit and
dividend reinvestment plans as in effect on the date hereof which terms are
set forth on Section 4.1(b) of the Disclosure Schedule.
(c) Issuance of Securities. The Company shall not, nor shall it
permit any of its Subsidiaries to (i) grant any options, warrants or
rights, to purchase shares of Company Common Stock, (ii) amend any Option
or Option Plan, (iii) reprice any Option or Option Plans, or (iv) issue,
deliver or sell, or authorize or propose to issue, deliver or sell, any
shares of its capital stock of any class or series, any Company Voting Debt
or any securities convertible into, or any rights, wan-ants or options to
acquire, any such shares, Company Voting Debt or convertible securities,
other than (A) the issuance of shares of Company Common Stock pursuant to
the terms of the ESPP pursuant to purchase requests made prior to the date
hereof, upon the exercise of Options granted under Option Plans which are
outstanding on the date hereof, or in satisfaction of stock grants or stock
based awards made prior to the date hereof pursuant to Option Plans or
pursuant to any individual agreements such as employment agreements,
executive termination agreements (in each such case, as in effect on the
date hereof); and (B) issuances by a wholly-owned Subsidiary of its capital
stock to its parent.
(d) Governing Documents. The Company shall not amend or propose to
amend its Certificate of Incorporation or Bylaws except to give effect to
the Merger.
(e) Solicitation. On and after January 18, 1999, notwithstanding any
other covenant or agreement contained in this Agreement to the contrary,
the Company, its Subsidiaries and DHDC and any of the respective officers,
directors, employees, agents and representatives of the Company, its
Subsidiaries and DHDC (including, without limitation, any investment
banker, attorney or accountant retained by the Company, any of its
Subsidiaries or DHDC) shall be permitted to, initiate or solicit, directly
or indirectly, any inquiries or the making of any proposal with respect to
a merger, consolidation, recapitalization or similar transaction involving,
or any purchase of all or any significant portion of the assets of, or any
equity interest in, the Company, any Subsidiary or DHDC (an "Acquisition
Proposal") and to engage in any negotiations concerning, and provide any
confidential
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information or data to, and have any discussions with, any person relating
to any Acquisition Proposal, and may otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. The Company will
notify TAGTCR immediately after it receives an indication of interest,
inquiry or proposal from a third party regarding an Acquisition Proposal
and such third party commences a due diligence investigation of the Company
with respect to such Acquisition Proposal. The Company will keep TAGTCR
apprised of all material developments relating to such Acquisition
Proposal.
(f) No Acquisitions. The Company shall not, nor shall permit any of
its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof without the prior consent of TAGTCR.
(g) No Dispositions. Other than dispositions in the ordinary course
of business consistent with past practice which are not material,
individually or in the aggregate, to the Company and its Subsidiaries taken
as a whole, the Company shall not, nor shall it permit any of its
Subsidiaries to, sell, transfer, lease (whether such lease is an operating
or capital lease), encumber, agree to sell, transfer, lease or otherwise
dispose of, any of its assets.
(h) Governmental Filings. The Company shall promptly provide TAGTCR
(or its counsel) with copies of all filings made by the Company with the
SEC or any other state or federal Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
(i) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, the Company shall not, nor shall it permit
any of its Subsidiaries to, authorize, recommend, propose or announce an
intention to adopt or enter into any agreement in principle or an agreement
with respect to, any plan of complete or partial liquidation or dissolution
of the Company or any of its Subsidiaries.
(j) Other Actions. Except as contemplated by this Agreement, the
Company shall not, nor shall it permit any of its Subsidiaries to, take or
agree or commit to take any action that is reasonably likely to result in
any of the Company's representations or warranties hereunder being untrue
in any material respect or in any of the Company's covenants hereunder or
any of the conditions to the Merger not being satisfied in all material
respects.
(k) Certain Employee Matters. The Company shall not, nor shall it
permit any if its Subsidiaries to (i) grant any increase in the base
compensation (excluding bonuses) of any of its directors, officers or key
employees who have base compensation of $100,000 a year or more, (ii) pay
or agree to pay any pension, retirement allowance or other employee benefit
not required or contemplated by any of the existing Company Benefit Plans
or Company Pension Plans as in effect on the date hereof to any such
director, officer or key employee, whether past or present, (iii) enter
into any new, or materially amend any existing, employment or severance or
termination agreement with any such director, officer or key employee, or
(iv) except as may be required to comply with applicable law, become
obligated under any new Company Employee Benefit Plan or Company Pension
Plan, which was not in existence on the date hereof, or amend any such plan
or arrangement in existence on the date hereof if such amendment would have
the effect of materially enhancing any benefits thereunder.
(1) Indebtedness; Agreements.
(i) The Company shall not, nor shall the Company permit any of its
Subsidiaries to, assume or incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any of
its Subsidiaries or guarantee any debt securities of others or create any
Liens on the property of the Company or any of its Subsidiaries in
connection with any indebtedness thereof, or enter into any "keep well" or
other agreement or arrangement to maintain the financial condition of
another Person, other than the incurrence of indebtedness in accordance
with the Company's existing line of credit with First Union National Bank,
providing that the proceeds of such indebtedness are used only in the
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ordinary course of business and consistent with past practice (which
includes funding acquisitions permitted under this Agreement).
(ii) The Company shall not, nor shall the Company permit any of its
Subsidiaries to, (a) make any loans, advances or capital contributions to,
or investments in, any other person or (b) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business and consistent with past
practice; provided, that Dent Lease, Inc. may continue to make capital
expenditures that do not exceed $50,000 during any three month period.
(iii) The Company shall not, nor shall the Company permit any of its
Subsidiaries to, enter into, modify, rescind, terminate, waive, release or
otherwise amend in any material respect any of the terms or provisions of
any Material Contract.
(m) Accounting. The Company shall not change, other than in the
ordinary course of business, consistent with past practice or as required
by the SEC or by law, any of its accounting policies, procedures,
practices, books and records.
(n) Capital Expenditures. The Company shall not, nor shall the
Company permit any of its Subsidiaries to, incur any capital expenditures,
that in the aggregate, are in excess of $500,000; provided, that DentLease,
Inc. may continue to make capital expenditures that do not exceed $50,000
during any three month period.
(o) Insurance. Neither the Company nor any Subsidiary shall permit
any insurance policy naming it as a beneficiary or a loss payee to be
cancelled, terminated or materially altered, except in the ordinary course
of business and consistent with past practice and following written notice
to TAGTCR.
(p) Hedging. Neither the Company nor any Subsidiary shall enter into
any hedging, option, derivative or other similar transaction.
(q) Transfer of Interest in DHDC and DHMI. Prior to the Effective
Time, the Company will cause all equity interests in DHDC and DHMI owned by
it or any of its subsidiaries to be transferred to a newly formed, wholly
owned subsidiary of the Company.
4.2 Covenants of TAGTCR and the Guarantors.
(a) TAGTCR and the Guarantors will use their respective reasonable best
efforts to cause the Financing to be closed on terms consistent with the
Commitments; provided that the Guarantors can reduce the amount of equity they
contribute to the extent of Recapitalization Shares in excess of $3.0 million
such that the aggregate amount of Recapitalization Shares does not exceed $ 10
million. In the event that any portion of the Financing becomes unavailable,
regardless of the reason therefor, TAGTCR and the Guarantors will use their
respective reasonable best efforts to arrange alternative financing on behalf of
the Company from other sources on and subject to substantially the same terms
and conditions as the portion of the Financing that has become unavailable.
TAGTCR and the Guarantors shall use their respective reasonable best efforts to
(i) satisfy on or before the Closing all requirements of the definitive
agreements pursuant to which the Financing will be obtained (the "Financing
Agreements") which are conditions to closing to be satisfied by TAGTCR with
respect to all transactions constituting the Financing and to drawing down the
cash proceeds thereunder; (ii) defend all lawsuits or other legal proceedings
challenging the Financing Agreements or the consummation of the transactions
contemplated thereby; and (iii) lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated thereby. TAGTCR and the Guarantors
shall keep the Company apprised of all material developments relating to the
Financing. Any fees to be paid by the Company or any other obligations to be
incurred by the Company in connection with the Financing shall be subject to the
occurrence of the Closing.
(b) The Guarantors agree that on or prior to the Closing Date they will
purchase or cause to be purchased equity of TAGTCR for a cash purchase price of
at least $87.7 million in the aggregate
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(including the DHDC Rollover), subject to the terms and conditions of, and in
accordance with the standards set forth in, the equity commitment letter of
Guarantors dated the date hereof; provided that, the Guarantors can reduce the
amount of equity they contribute to the extent of Recapitalization Shares in
excess of $3.0 million such that the aggregate amount of Recapitalization Shares
does not exceed $10 million.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement; Company Stockholders Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC the Proxy Statement under the
Exchange Act, and shall use its reasonable best efforts to have the Proxy
Statement cleared by the SEC. TAGTCR shall furnish all information about itself,
its business and operations and its owners and all financial information to the
Company as may be reasonably necessary in connection with the preparation of the
Proxy Statement. TAGTCR agrees promptly to correct any information provided by
it for use in the Proxy Statement if and to the extent that such information
shall have become false or misleading in any material respect. The Company shall
notify TAGTCR of the receipt of any comments of the SEC with respect to the
Proxy Statement and shall use its reasonable best efforts to respond to all SEC
comments with respect to the Proxy Statement and to cause the Proxy Statement to
be mailed to the Company's stockholders at the earliest practicable date. The
Company shall give TAGTCR and its counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give TAGTCR 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. If at any time
prior to the Effective Time, any event with respect to the Company or any of its
Subsidiaries or with respect to other information supplied by the Company or
TAGTCR for inclusion in the Proxy Statement, shall occur which is required to be
described in an amendment or supplement to the Proxy Statement, as the case may
be, such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company.
(b) The Company will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold the Company Stockholders
Meeting for the purpose of approving this Agreement and the transactions
contemplated hereby. Except if the Special Committee of the Board of Directors
has received a bona fide offer of an Acquisition Proposal that would be a
Superior Transaction (as defined below), the Company, through its Board of
Directors, shall recommend to its stockholders approval of this Agreement (which
recommendation shall be contained in the Proxy Statement) and shall use all
commercially reasonable efforts to solicit from its stockholders proxies in
favor of approval and adoption of this Agreement. A "Superior Transaction" is a
transaction that the Special Committee determines in its good faith judgment,
after consultation with its legal and financial advisors, (i) is reasonably
capable of being completed, taking into account, all legal, financial,
regulatory and other aspects of the proposal and the third party making the
proposal, and (ii) provides greater value to the holders of Common Stock
(specifically taking into account the expected value of the consideration to be
received by the holders of Common Stock on the date such consideration is
expected to be received by such holders) than the Merger Consideration contained
in this Agreement.
(c) As soon as practicable following the date of this Agreement, TAGTCR
shall prepare and file with the SEC the Schedule 13E-3. TAGTCR shall use all
reasonable best efforts to have the Schedule 13E-3 cleared by the SEC. The
Company shall furnish all information about itself, its business and operations
and its owners and all financial information to TAGTCR as may be reasonably
necessary in connection with the preparation of Schedule 13E-3. The Company
agrees promptly to correct any information provided by it for use in Schedule
13E-3 if and to the extent that such information shall have become false or
misleading in any material respect. TAGTCR shall notify the Company of the
receipt of any comments of the SEC with respect to Schedule 13E-3. TAGTCR shall
give the Company and its counsel the opportunity to review Schedule 13E-3 prior
to its being filed with the SEC and shall give the
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Company and its counsel the opportunity to review all amendments and supplements
to Schedule 13E-3 and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. If at
any time prior to the Effective Time, any event with respect to TAGTCR or with
respect to other information supplied by TAGTCR or the Company for inclusion in
Schedule 13E-3, shall occur which is required to be described in an amendment or
supplement to Schedule 13E-3, as the case may be, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC.
5.2 Access to Information. Upon reasonable notice, the Company shall, and
shall cause each of its Subsidiaries to, (i) afford to the officers, employees,
accountants, counsel and other representatives of TAGTCR, including financing
sources, access, during normal business hours from the date hereof to the
Effective Time, to all the properties, books, contracts, and commitments, and
(ii) furnish promptly to TAGTCR (a) a copy during such period of all materials
filed pursuant to SEC requirements and (b) all other information concerning its
business, properties and personnel as TAGTCR may reasonably request. The
Confidentiality Agreements between the Company and each of TAGTCR, GTCR
Golder-Rauner, LLC and TA/Advent VIII L.P., dated as of July 14, 1998
(collectively the "Confidentiality Agreement") shall apply with respect to
information furnished thereunder or hereunder and any other activity
contemplated thereby. No investigation pursuant to this Section 5.2 shall affect
any representation or warranty in this Agreement or any party hereto or any
condition to the obligations of the parties hereto.
5.3 Broker and Finders.
(a) The Company represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker, financial advisor or other
firm or Person is or will be entitled to any broker's or finders fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except for The Robinson-Humphrey Company, LLC
and Morgan, Stanley & Co. Incorporated, whose fees and expenses will be paid by
the Company in accordance with the Company's agreements with such firms (copies
of which have been delivered by the Company to TAGTCR prior to the date of this
Agreement).
(b) TAGTCR represents, as to itself and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or Person is or will
be entitled to any broker's or finders fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement.
5.4 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time, the Surviving
Corporation shall, indemnify, defend and hold harmless the present and former
directors, officers, employees and agents of the Company or any of its
Subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including reasonable attorneys' fees and expenses), liabilities
or judgments or amounts that are paid in settlement with the approval of the
indemnifying party of or in connection with any threatened or actual claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of or pertaining to the fact that such person is
or was a director or officer of the Company or any of its Subsidiaries whether
pertaining to any matter existing or at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the
fullest extent a corporation is permitted under the DGCL as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits broader rights such law permitted prior to
such amendment and only to the extent such amendment is not retroactively
applicable) to indemnify its own directors or officers, as the case may be.
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Parties (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and the Surviving Corporation, and the
Company or the Surviving Corporation shall pay all fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are received
and otherwise advance to such Indemnified Party upon request
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reimbursement of documented expenses incurred, in either case to the fullest
extent and in the manner permitted by the DGCL; and (ii) the Company or the
Surviving Corporation will use all reasonable efforts to assist in the vigorous
defense of any such matter, provided that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld). Any
Indemnified Party wishing to claim indemnification under this Section 5.4, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Company (or after the Effective Time, the Surviving Corporation) (but
the failure so to notify shall not relieve a party from any liability which it
may have under this Section 5.4 except to the extent such failure materially
prejudices such party), and shall to the extent required by the DGCL deliver to
the Company (or after the Effective Time, the Surviving Corporation) the
undertaking contemplated by Section 145(c) of the DGCL. The Indemnified Parties
as a group may retain only one law firm to represent them with respect to each
such matter unless there is, under applicable standards of professional conduct,
a conflict on any significant issue between the positions of any two or more
Indemnified Parties. The Company and TAGTCR agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries (provided that TAGTCR may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are no less
advantageous in any material respect to the Indemnified Parties) with respect to
matters arising before the Effective Time; provided, however, that in no event
shall the Surviving Corporation be required to maintain such insurance with
comparable coverage if the cost of such insurance is more than 125% of the cost
of such insurance in the prior year, but in such case, the Surviving Corporation
shall purchase as much coverage as possible for such amount.
5.5 Efforts and Actions. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws to consummate and
make effective the Merger and the other transactions contemplated by this
Agreement, including (a) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from all applicable Governmental Entities and
the making of all necessary registrations and filings, including, without
limitation, filings under the HSR Act and filings with such Governmental
Entities, and the taking of all reasonable steps (including furnishing any
information to any party hereto as such party may reasonably request in
connection with any such filing) as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any such Governmental
Entity, (b) the obtaining of all necessary consents, approvals or waivers from
the third parties, (c) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and (d) the execution
and delivery of any additional instruments reasonably necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of this
Agreement.
5.6 Publicity. The parties will consult with each other and will mutually
agree upon any press release or public announcement pertaining to this
Agreement, the Merger or any transactions contemplated hereby and shall not
issue any such press release or make any such public announcement prior to such
consultation and agreement, except as may be required by applicable law or by
obligations arising under the Company's listing agreement with NASDAQ, in which
case the party proposing to issue such press release or make such public
announcement shall use reasonable efforts to consult in good faith with the
other party before issuing any such press release or making any such public
announcement.
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5.7 Notice of Certain Events. The Company shall give prompt written notice
to TAGTCR, and TAGTCR shall give prompt notice to the Company, of (a) the
occurrence or nonoccurrence of any event that would be reasonably likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect at or prior to the Effective Time and (b) any failure
of the Company or TAGTCR, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.7 shall not serve to cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.8 State Takeover Laws. The Company shall, upon the request of TAGTCR,
take all reasonable steps to assist in any challenge by TAGTCR to the validity
or applicability to the transactions contemplated by this Agreement, including
the Merger, of any state takeover law.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 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 prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon if such vote is required by applicable law.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) Governmental Consents. All licenses, permits, consents,
authorizations, approvals, qualifications and orders of Governmental
Entities set forth in Section 3.1(c)(iii) of this Agreement shall have been
obtained except where the failure to obtain such licenses, permits,
consents, authorizations, approvals, qualifications and orders,
individually and in the aggregate, will not have a material Adverse Effect
on the Company.
6.2 Conditions of Obligations of TAGTCR and the Guarantors. The
obligations of TAGTCR and each of the Guarantors to effect the Merger are
subject to the satisfaction of the following conditions, any or all of which may
be waived in whole or in part by TAGTCR and each Guarantor respectively:
(a) No Material Adverse Effect. There shall not have occurred a
Material Adverse Effect on the Company from January 18, 1999 to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties expressly relate to an earlier
date) as of the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement and except that, with
respect to representations and warranties otherwise qualified by Material
Adverse Effect, for purposes of the satisfaction of this condition, such
representations and warranties shall be true and correct in all respects.
TAGTCR shall have received a certificate signed on behalf of the Company by
the chief executive officer and by the chief financial officer of the
Company to such effect.
(c) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and TAGTCR
shall have received a certificate signed on behalf of the Company by the
chief executive officer and by the chief financial officer of the Company
to such effect.
(d) Financing. The Company shall have received the proceeds of the
Financing or other financings reasonably acceptable to TAGTCR in amounts
sufficient to consummate the transactions
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contemplated by this Agreement, including, without limitation, amounts
sufficient (i) to pay the Merger Consideration, (ii) to refinance existing
indebtedness of the Company, and (iii) to pay any fees and expenses in
connection with the transactions contemplated by this Agreement or the
financing thereof; provided, however, that this condition shall be deemed
to have been satisfied if TAGTCR and the Guarantors shall not have complied
in all material respects with all of their respective covenants under
Section 4.2.
(e) No Injunctions or Restraints. There shall have been no order or
preliminary or permanent injunction entered in any action or proceeding
before any Governmental Entity or other action taken, nor statute, rule,
regulation, legislation, interpretation, judgment or order enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to the
Company or any of its Subsidiaries or the Merger or this Agreement by any
Governmental Entity which shall have remained in effect, which, or any
suit, claim, action or proceeding before any Governmental Entity, which, if
adversely decided, would have the effect of: making illegal, materially
delaying or otherwise directly or indirectly restraining or prohibiting the
Merger, or the consummation of any of the other transactions contemplated
by this Agreement; provided, however, that TAGTCR shall have complied with
its obligations under Section 5.5.
6.3 Conditions of Obligations of the Company. The obligations of the
Company to affect the Merger are subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company.
(a) Representations and Warranties of TAGTCR. The representations and
warranties of TAGTCR set forth in this Agreement shall be true in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties expressly relate to an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement and except that, with respect to representations
and warranties otherwise qualified by Material Adverse Effect, for purposes of
the satisfaction of this condition, such representations and warranties shall be
true and correct in all respects. The Company shall have received a certificate
signed on behalf of TAGTCR by an executive officer of TAGTCR to such effect.
(b) Representations and Warranties of the Guarantors. The representations
and warranties of the Guarantors set forth in this Agreement shall be true in
all material respects as of the date of this Agreement and (except to the extent
such representations and warranties expressly relate to an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement and except that, with respect to
representations and warranties otherwise qualified by Material Adverse Effect,
for purposes of the satisfaction of this condition, such representations and
warranties shall be true and correct in all respects. The Company shall have
received certificates signed on behalf of each Guarantor by an executive officer
of such Guarantor to such effect.
(c) Performance of Obligations of TAGTCR. TAGTCR shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of TAGTCR by an executive officer of TAGTCR to such
effect.
(d) Performance of Obligations of the Guarantors. The Guarantors shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date, and the Company
shall have received certificates signed on behalf of each Guarantor by an
executive officer of such Guarantor to such effect.
(e) No Injunctions or Restraints. No court of competent jurisdiction or
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of preventing or prohibiting the consummation of the transactions
contemplated by this Agreement or the effective operation of the business of the
Company and the Subsidiaries after the
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<PAGE> 118
Effective Time; provided, however, that the Company shall have complied with its
obligations under Section 5.5.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of the Company, by action of the Special
Committee of its Board of Directors, and TAGTCR, by action of its Board of
Directors;
(b) by the Company if there has been a material breach or failure to
perform any representation, warranty, covenant or agreement on the part of
TAGTCR which breach or failure to perform has not been cured within 30
calendar days following receipt by TAGTCR of notice of such breach or
failure;
(c) by TAGTCR if there has been a material breach or failure to
perform any representation, warranty, covenant or agreement on the part of
the Company which breach or failure to perform has not been cured within 30
calendar days following receipt by the Company of notice of such breach or
failure;
(d) by TAGTCR or the Company if any permanent injunction or other
order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable;
(e) by TAGTCR or the Company if the Merger shall not have been
consummated on or before June 30, 1999;
(f) by TAGTCR in the event the Special Committee of the Board of
Directors or the Board of Directors of the Company shall have (i) withdrawn
or adversely modified its approval or recommendation of the Merger or this
Agreement, (ii) failed to duly call, give notice of, convene or hold the
Company Stockholders Meeting, and at the time of such failure an
Acquisition Proposal by any Person (other than TAGTCR or its affiliates)
shall have been publicly announced or provided to the Company or the
Special Committee, (iii) recommended, approved, or accepted an Acquisition
Proposal by any Person (other than TAGTCR or its affiliates), or (iv)
resolved to do any of the foregoing (or the Company has agreed to do any of
the foregoing);
(g) by the Company if the Special Committee of the Board of Directors
or the Board of Directors of the Company accepts or recommends to the
holders of the shares of Company Common Stock approval or acceptance of, an
Acquisition Proposal by any Person (other than TAGTCR or its affiliates);
provided, however that the Company shall not terminate this Agreement
pursuant to this Section 7.1(g) without providing TAGTCR at least five (5)
days prior written notice, which notice shall include in reasonable detail
the terms of the Acquisition Proposal; or
(h) by TAGTCR or the Company if the Merger and this Agreement shall
have been voted on by the holders of Company Common Stock, and the votes
shall not have been sufficient to satisfy the condition set forth in
Section 6.1(a).
7.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or TAGTCR as provided in Section 7. 1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of TAGTCR or the Company or their respective affiliates, officers,
directors, or stockholders, except (i) with respect to this Section 7.2, Section
5.2 and Section 7.3 each of which shall survive such termination, and (ii) for
any breach by a party hereto of any of its representations, warranties,
covenants or agreements contained in this Agreement.
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7.3 Payment of Fees and Expenses.
(a) Except as otherwise provided in this Section 7.3 and except with
respect to claims for damages incurred as a result of the breach of this
Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
(b) The Company agrees to pay TAGTCR a fee in immediately available
funds equal to the amount of all of TAGTCR's Designated Expenses upon the
termination of this Agreement under Sections 7.1(f) or (g). Such Designated
Expenses shall be paid on the second business day following the submission
thereof by TAGTCR.
(c) In the event this Agreement shall be terminated pursuant to
Section 7.1(h), and either (A) a transaction with any person (other than
TAGTCR or its affiliates) that is contemplated by the term "Acquisition
Proposal" and which is based on an Acquisition Proposal made prior to such
termination of this Agreement, shall be consummated on or before the first
anniversary of the termination of this Agreement, or (B) the Company shall
enter into an agreement with any person (other than TAGTCR or its
affiliates), on or before the first anniversary of the termination of this
Agreement, with respect to an Acquisition Proposal which is made prior to
such termination of this Agreement, and a transaction contemplated by the
term "Acquisition Proposal" shall thereafter be consummated with such
person, then the Company shall pay to TAGTCR a fee in immediately available
funds equal to the amount of all of TAGTCR's Designated Expenses. Such
Designated Expenses shall be paid on the second business day following the
submission thereof by TAGTCR.
(d) TAGTCR agrees to pay the Company a fee in immediately available
funds equal to the amount of all of the Company's Designated Expenses upon
the termination of this Agreement under Sections 7.1(a) or (e), provided
that the only unsatisfied closing condition (other than the delivery of
customary closing documents) is the condition set forth in Section 6.2(d).
Such Designated Expenses shall be paid on the second business day following
the submission thereof by the Company. If the Agreement is terminated under
Sections 7.1(a) or (e) and the only unsatisfied closing condition (other
than the delivery of customary closing documents) is the condition set
forth in Section 6.2(d), TAGTCR shall have no liability to the Company
except as set forth in this Section 7.3(d) (it being understood that this
sentence is for emphasis only, and is not meant to imply that but for this
sentence, TAGTCR would otherwise have any liability to the Company in the
event any closing condition is unsatisfied).
(e) TAGTCR agrees to pay the Company a fee in immediately available
funds equal to the amount of all the Company's Designated Expenses upon the
termination of this Agreement under Section 7.1(b). The Company agrees to
pay TAGTCR a fee in immediately available funds equal to the amount of all
of TAGTCR's Designated Expenses upon the termination of this Agreement
under Section 7.1(c). Such Designated Expenses shall be paid on the second
business day following the submission thereof by the applicable party.
(f) For purposes of this Section 7.3, the term "Designated Expenses"
shall mean, (i) with respect to the Company, all documented, reasonable
out-of-pocket fees and expenses (not to exceed $1.0 million) incurred or
paid by or on behalf of the Company and its affiliates to third parties,
and (ii) with respect to TAGTCR, all documented, reasonable out-of-pocket
fees and expenses (not to exceed $1.5 million) incurred or paid by or on
behalf of TAGTCR and its affiliates to third parties, in each case in
connection with the Merger or the consummation of any of the transactions
contemplated by this Agreement, including, without limitation, all printing
costs and reasonable fees and expenses of counsel, investment banking
firms, brokers, accountants, experts and consultants.
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<PAGE> 120
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. None of the
representations or warranties and agreements (other than Sections 5.4 and 5.6)
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time.
8.2 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telecopied or sent by
certified or registered mail, postage prepaid (and shall be deemed to have been
duly given upon receipt), to the following address or telecopy number, or to
such other address or addresses or telecopy numbers as may be subsequently
designated by notice given hereunder:
(a) if to TAGTCR, to:
NMS Capital, L.P.
600 Montgomery Street
San Francisco, CA 94111
Attn: William Bunting
Telephone: 415-627-2426
Telecopy: 415-913-5704
Golder, Thoma, Cressey, Rauner Fund V, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attn: Donald J. Edwards
Telephone: 312-382-2200
Telecopy: 312-382-2201
and
TA/Advent VIII L.P.
High Street Tower
Suite 2500
125 High Street
Boston, Massachusetts 02110
Attn: Roger B. Kafker
Telephone: 617-574-6774
Telecopy: 617-574-6728
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Sanford E. Perl, Esq.
Telephone: 312-861-2291
Telecopy: 312-861-2200
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<PAGE> 121
(b) if to the Company, to:
Special Committee of the Board of Directors
c/o CompDent Corporation
100 Mansell Court East
Suite 400
Roswell, Georgia 30076
Attn: Joseph E. Stephenson, Chairman
Telephone: 770-998-8936
Telecopy: 770-992-4349
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: John J. Kelley III, Esq.
Telephone: 404-572-4600
Telecopy: 404-572-5100
8.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the word "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement (together
with the Confidentiality Agreement and any other documents and instruments
referred to herein) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereto. This Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder,
except that the rights under Section 5.4 shall inure to the benefit of and be
enforceable by the Indemnified Parties.
8.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF TAGTCR, THE COMPANY AND THE
GUARANTORS HEREBY (A) 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, (B) AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO
EXCEPT IN SUCH COURTS, (C) WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION IN THE DELAWARE COURTS, AND (D) AGREES NOT TO PLEAD OR CLAIM IN
ANY DELAWARE COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
8.7 Assignment. 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. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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<PAGE> 122
8.8 Amendment. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of TAGTCR, the Company and
the Guarantors at any time prior to the Effective Time with respect to any of
the terms contained herein; provided, however, that, after this Agreement is
approved by the Company's stockholders, no such amendment or modification shall
reduce the amount or change the form of consideration to be delivered to the
stockholders of the Company.
8.9 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors or Committees thereof, as the case may be, may, to the extent legally
allowed: (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
8.10 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.
8.11 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 and other equitable remedies to prevent breaches of
this Agreement and to enforce specifically the terms and provisions thereof in
any Delaware Court, this being in addition to any other remedy to which they are
entitled at law or in equity. Any requirements for the securing or positing of
any bond with respect to such remedy are hereby waived by each of the parties
hereto.
8.12 Guarantors.
(a) Each Guarantor hereby unconditionally and irrevocably guarantees
severally, but not jointly, to the Company the due and punctual performance of
each of the obligations and the undertakings of TAGTCR under this Agreement when
and to the extent the same are required to be performed and subject to all of
the terms and conditions hereof; provided, however, that neither TA nor GTCR
shall have liability for more than 48.235% of any liability, and NMS shall not
have liability for more than 3.530% of any liability, arising from a breach by
TAGTCR under this Agreement, and provided, further that no Guarantor shall have
any liability whatsoever under this guaranty after the Closing, whether based
upon events occurring prior to or after the Closing. If TAGTCR shall fail to
perform fully and punctually any obligation or undertaking of TAGTCR under this
Agreement when and to the extent the same is required to be performed, subject
to the first sentence of this Section 8.12(a) each Guarantor will upon written
demand from the Company forthwith perform or cause to be performed such
obligation or undertaking, as the case may be. The obligations of each Guarantor
under this guaranty shall constitute an absolute and unconditional present and
continuing guarantee of performance to the extent provided herein, and shall not
be contingent upon any attempt by the Company to enforce performance by TAGTCR.
(b) Subject to 8.12(a), the obligations of each Guarantor under this
guaranty are absolute and unconditional, are not subject to any counterclaim,
set off, deduction, abatement or defense based upon any claim a Guarantor may
have against the Company (except for any defense TAGTCR may have against the
Company under the terms of this Agreement), and shall remain in full force and
effect without regard to (i) any agreement or modification to any of the terms
of this Agreement or any other agreement which may hereafter be made relating
thereto; (ii) any exercise, non-exercise, or waiver by the Company of any right,
power, privilege or remedy under or in respect of this Agreement; (iii) any
insolvency, bankruptcy, dissolution, liquidation, reorganization or the like of
TAGTCR at or prior to the Closing;
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<PAGE> 123
(iv) absence of any notice to, or knowledge by, Guarantor of the existence or
occurrence of any of the matters or events set forth in the foregoing causes (i)
through (iii); (v) any transfer of shares of capital stock of TAGTCR, or any
assignment by TAGTCR of its rights and obligations under this Agreement, to a
wholly-owned subsidiary of TAGTCR or a Guarantor; or (vi) any other
circumstance, whether similar or dissimilar to the foregoing.
(c) Each Guarantor unconditionally waives (i) any and all notice of
default, non-performance or non-payment by TAGTCR under this Agreement, (ii) all
notices which may be required by statute, rule of law or otherwise to preserve
intact any rights of the Company against a Guarantor, including, without
limitation, any demand, presentment or protest, or proof of notice of
non-payment under this Agreement, and (iii) any right to the enforcement,
assertion or exercise by the Company of any right, power, privilege or remedy
conferred in this Agreement or otherwise.
(d) Notwithstanding any provision of this Agreement to the contrary, any
liability arising under this contract or this guaranty shall be limited to $41.0
million, in the case of TA and GTCR, and $3.0 million, in the case of NMS.
8.13 Disclosure Letters. The Disclosure Letter is hereby incorporated into
this Agreement and is hereby made a part hereof as if set out in full in this
Agreement. Certain information set forth in the Disclosure Letter is included
solely for informational purposes and may not be required to be disclosed
pursuant to this Agreement. The disclosure of any information shall not be
deemed to constitute an acknowledgment that such information is required to be
disclosed in connection with the representations and warranties made by the
Company in this Agreement.
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<PAGE> 124
IN WITNESS WHEREOF, the parties hereto have caused this amended and
restated Agreement to be signed by their respective officers thereunto duly
authorized, all as of the amendment and restatement date first written above.
TAGTCR Acquisition, Inc.
By:
------------------------------------
Name:
Title:
CompDent Corporation
By:
------------------------------------
Name:
Title:
TA/Advent VIII L.P.
By: TA Associates, Inc.,
its general partner
By:
------------------------------------
Name:
Title:
Golder, Thoma, Cressey, Rauner Fund V,
L.P.
By: GTCR V, L.P.,
its General Partner
By: Golder, Thoma, Cressey, Rauner,
Inc.
its General Partner
By:
------------------------------------
Name:
Title:
NMS Capital, L.P.
By: NMS Capital Management LLC
its general partner
By:
------------------------------------
Name:
Title:
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<PAGE> 125
SCHEDULE 2.2(C)
<TABLE>
<CAPTION>
C/S P/S
--- ---
<S> <C> <C> <C> <C>
Kaufman Fund -- 200,000 shares
Roger B. Kafker -- 23,000 shares
Richard D. Tadler -- 4,000 shares
Jane Broderick -- 300 shares
Jonathan Goldstein -- 6,000 shares
David Klock -- 93,166.667 115,811.38 1,328
Phyllis Klock -- 93,666.667 116,432.9124 1,335
</TABLE>
<PAGE> 126
SCHEDULE 2.2(D)
<TABLE>
<CAPTION>
C/S
---
<S> <C> <C> <C> <C>
David Klock -- 6,833.333 shares -- 204,999.99
Phyllis Klock -- 6,333.333 shares -- 189,999
</TABLE>
<PAGE> 127
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COMPDENT CORPORATION
This Amended and Restated Certificate of Incorporation has been duly
adopted by CompDent Corporation (the "Corporation") in accordance with Sections
242 and 245 of the General Corporation Law of the State of Delaware.
ARTICLE I
The name of the Corporation is CompDent Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
PART A. AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation has
authority to issue is 11,200,000 shares, consisting of:
(1) 100,000 shares of Convertible Participating Preferred Stock, par
value $.01 per share (the "Convertible Preferred Stock");
(2) 100,000 shares of Perpetual Preferred Stock, par value $.01 per
share (the "Perpetual Preferred Stock"); and
(3) 11,000,000 shares of Common Stock, par value $.0l per share (the
"Common Stock").
The Convertible Preferred Stock and Perpetual Preferred Stock are referred
to collectively as the "Preferred Stock." The Preferred Stock and Common Stock
are referred to collectively as the "Stock." The shares of Stock shall have the
rights, preferences and limitations set forth below. Capitalized terms used but
not otherwise defined in Part A, Part B or Part C of this Article IV are defined
in Part D.
Except as otherwise restricted by this Amended and Restated Certificate of
Incorporation, the Corporation is authorized to issue, from time to time, all or
any portion of the capital stock of the Corporation which may have been
authorized but not issued, to such person or persons and for such lawful
consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid shares of capital stock, and the
holder of such shares shall not be liable for any further call or assessment or
any other payment thereon.
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<PAGE> 128
PART A. CONVERTIBLE PARTICIPATING PREFERRED STOCK
1. Voting. Each share of Convertible Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
such share of Convertible Preferred Stock could be converted pursuant to Section
5 below on the record date for the vote or written consent of stockholders, if
applicable, with fractional votes for fractional shares. The holder of each
share of Convertible Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the by-laws of the Corporation and
shall vote with holders of the Common Stock, voting together as single class,
upon all matters submitted to a vote of stockholders, excluding those matters
required to be submitted to a class or series vote pursuant to the terms hereof
or by law.
2. Dividends. The holders of Convertible Preferred Stock shall be entitled
to receive dividends out of funds legally available therefor at such times and
in such amounts as the Board of Directors may determine in its sole discretion;
provided, however, that no such dividend may be declared or paid on any shares
of Convertible Preferred Stock unless at the same time a dividend is declared or
paid on all outstanding shares of Common Stock and vice versa, with holders of
Convertible Preferred Stock and Common Stock sharing in any such dividends as if
they constituted a single class of stock and with each holder of shares of
Convertible Preferred Stock entitled to receive such dividends based on the
number of shares of Common Stock into which such shares of Convertible Preferred
Stock are then convertible in accordance with Section 5 below. The right to
dividends on shares of Convertible Preferred Stock shall not be cumulative, and
no right shall accrue to holders of Convertible Preferred Stock by reason of the
fact that dividends on said shares are not declared in any prior period.
3. Liquidation.
(a) Liquidation Preference. Upon any Liquidation Event, each holder of
outstanding shares of Convertible Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to stockholders,
whether such assets are capital, surplus or earnings, and before any amount
shall be paid or distributed to the holders of Common Stock or of any other
stock ranking on liquidation junior to the Convertible Preferred Stock, an
amount in cash equal to (i) $1,008.72 per share of Convertible Preferred Stock
held by such holder (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Convertible Preferred Stock),
plus (ii) any declared but unpaid dividends to which such holder of outstanding
shares of Convertible Preferred Stock is then entitled, if any, pursuant to
Sections 2 and 4(f) hereof (the sum of clauses (i) and (ii) being referred to
herein as the "Convertible Preferred Base Liquidation Amount"), plus (iii) any
interest accrued pursuant to Section 4(e) hereof to which such holder of
Convertible Preferred Stock is entitled, if any (the sum of clauses (i), (ii)
and (iii) being referred to herein as the "Convertible Preferred Liquidation
Preference Amount"); provided, however, that if, upon any Liquidation Event, the
amounts payable with respect to the Convertible Preferred Liquidation Preference
Amount are not paid in full, the holders of the Convertible Preferred Stock
shall share ratably in any distribution of assets in proportion to the full
respective preferential amounts to which they are entitled; and provided
further, however, that if upon any Liquidation Event the holders of the
outstanding shares of Convertible Preferred Stock would receive more than the
Convertible Preferred Liquidation Preference Amount in the event all of their
shares were converted into shares of Perpetual Preferred Stock and Common Stock
immediately prior to the record date for distributions in connection with such
Liquidation Event, then each holder of an outstanding share of Convertible
Preferred Stock shall receive, in lieu of the Convertible Preferred Liquidation
Preference Amount, an amount equal to such holder's Perpetual Stock Liquidation
Preference Amount (as defined in Section 3 of Part C below) under Section 3 of
Part C below plus any dividends pursuant to Sections 2 or 4(f) hereof which are
declared but unpaid and any interest due under Section 4(e) below in respect of
such share as of the date of such Liquidation Event before any amount shall be
paid or distributed to the holders of Common Stock or of any other stock ranking
on liquidation junior to the Convertible Preferred Stock, and thereafter shall
share with the holders of Common Stock and any other stock ranking on
liquidation junior to the Convertible Preferred Stock in the assets available
for distribution, with such distributions to be made in cash and as if each
share of Convertible Preferred Stock had been converted into the number of
shares of Perpetual Preferred Stock and Common Stock issuable upon the
conversion
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of such holder's shares of Convertible Preferred Stock immediately prior to any
such Liquidation Event. The provisions of this Section 3 shall not in any way
limit the right of the holders of Convertible Preferred Stock to elect to
convert their shares of Convertible Preferred Stock into shares of Perpetual
Preferred Stock and Common Stock pursuant to Section 5 prior to or in connection
with any Liquidation Event.
(b) Notice. Prior to the occurrence of any Liquidation Event, the
Corporation will furnish each holder of Convertible Preferred Stock notice in
accordance with Section 7, together with a certificate prepared by the chief
financial officer of the Corporation describing in detail the facts of such
Liquidation Event, stating in detail the amount(s) per share of Convertible
Preferred Stock each holder of Convertible Preferred Stock would receive
pursuant to the provisions of Section 3(a) (both with respect to the amount a
holder would receive pursuant to clauses (i) and (ii) of Section 3(a) and the
amount a holder would receive pursuant to the second proviso of Section 3(a))
and stating in detail the facts upon which such amounts were determined.
4. Redemption.
(a) Redemption Events.
(i) Scheduled Redemption. At any one time on or after ,
*, upon the election of the holder or holders of not less than sixty-six
and two-thirds percent (66 2/3%) of the voting power of the outstanding
Convertible Preferred Stock, the Corporation shall redeem all (and not less than
all, other than pursuant to Section 4(e) below) of the outstanding shares of
Convertible Preferred Stock at the Convertible Preferred Redemption Price
specified in Section 4(d). The foregoing election shall be made by such holders
giving the Corporation and each of the other holders of Convertible Preferred
Stock not less than fifteen (15) days prior written notice, which notice shall
set forth the date for such redemption.
(ii) Extraordinary Transactions. Upon the election of the holder or
holders of not less than sixty-six and two-thirds percent (66 2/3%) in voting
power of the outstanding Convertible Preferred Stock in connection with any
Extraordinary Transaction, then, as a part of and as a condition to the
effectiveness of such Extraordinary Transaction, unless the holders of
Convertible Preferred Stock shall have elected to convert their shares of
Convertible Preferred Stock into shares of Perpetual Preferred Stock and Common
Stock in accordance with the voluntary conversion provisions of Section 5 prior
to the effective date of such Extraordinary Transaction, the Corporation shall,
on the effective date of such Extraordinary Transaction, unless the Convertible
Preferred Stock is acquired in such Transaction on terms giving effect to the
preferential amount to which the Convertible Preferred Stock would be entitled
in connection with a Liquidation Event and hereunder and otherwise as agreed to
by sixty-six and two-thirds percent (66 2/3%) of the holders thereof, redeem all
(but not less than all) of the outstanding shares of Convertible Preferred Stock
for an amount equal to the Convertible Preferred Liquidation Preference Amount,
such amount to be payable in cash or, at the election of holders of not less
than sixty-six and two-thirds percent (66 2/3%) in voting power of the
outstanding Convertible Preferred Stock, in the same form of consideration as is
paid to the holders of Common Stock in such Extraordinary Transaction, and no
payment shall be made to the holders of the Common Stock or any other stock
ranking on liquidation junior to the Convertible Preferred Stock unless such
amount is paid in full. Notwithstanding the foregoing, if upon any Extraordinary
Transaction the holders of the outstanding shares of Convertible Preferred Stock
would receive more than the Convertible Preferred Liquidation Preference Amount
in the event their shares were converted into shares of Perpetual Preferred
Stock and Common Stock immediately prior to such Extraordinary Transaction, then
each holder of Convertible Preferred Stock shall receive with respect to each
outstanding share of Convertible Preferred Stock held by such holder an amount
equal to the per share Perpetual Stock Liquidation Preference Amount under
Section 3 of Part C below plus any dividends pursuant to Section 2 or 4(f)
hereof which are declared but unpaid and any interest due under Section 4(e) in
respect of such share as of the date of such Extraordinary Transaction before
any amount shall be paid or distributed to the holders of Common Stock or of any
other stock ranking on liquidation
- ---------------
* This date will be the eleventh anniversary of the date of the filing of this
Restated Certificate of Incorporation.
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junior to the Convertible Preferred Stock, payable in cash, and thereafter shall
share with the holders of the Common Stock and any other stock ranking on
liquidation junior to the Convertible Preferred Stock in the proceeds of such
Extraordinary Transaction or, as applicable, shall receive an amount equal to
the amount per share that would be paid if the shares of Common Stock receivable
upon conversion of the Convertible Preferred Stock were being acquired in the
Extraordinary Transaction at the same price per share as is paid for Common
Stock, which excess amount shall be paid in the same form of consideration as is
paid to holders of Common Stock, as if each share of Convertible Preferred Stock
had been converted into the number of shares of Perpetual Preferred Stock and
Common Stock issuable upon the conversion of such share of Convertible Preferred
Stock in accordance with Section 5 hereof immediately prior to such
Extraordinary Transaction. Notwithstanding the foregoing, in connection with the
acquisition of the Convertible Preferred Stock in an Extraordinary Transaction
which is accounted for by the acquiring entity as a pooling of interests, the
holders of shares of Convertible Preferred Stock shall receive, if so required
for the application of such accounting treatment, and in lieu of cash, the
number of shares of common stock of such entity having a value equal to the
amount otherwise payable to the holders of Convertible Preferred Stock in such
Extraordinary Transaction pursuant to the preceding sentence and having the same
registered status or registration rights as any other shares in such
transaction. The foregoing election shall be made by such holders giving the
Corporation and each other holder of Convertible Preferred Stock not less than
five (5) business days prior written notice, which notice shall set forth the
date for such redemption. The provisions of this Section 4 shall not in any way
limit the right of the holders of Convertible Preferred Stock to elect to
convert their shares into shares of Perpetual Preferred Stock and Common Stock
pursuant to Section 5 prior to or in connection with any Extraordinary
Transaction.
(b) Valuation of Distribution Securities. Any securities or other
consideration to be delivered to the holders of the Convertible Preferred Stock
upon any Extraordinary Transaction in accordance with the terms hereof shall be
valued as follows:
(i) If traded on a nationally recognized securities exchange or
inter-dealer quotation system, the value shall be deemed to be the average
of the closing prices of the securities on such exchange or system over the
30-day period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to be the
average of the closing bid prices over the 30-day period ending three (3)
business days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair
market value thereof, as mutually determined by the Corporation and the
holders of not less than sixty-six and two-thirds percent (66 2/3%) in
voting power of the outstanding shares of Convertible Preferred Stock,
provided that if the Corporation and the holders of sixty-six and
two-thirds percent (66 2/3%) in voting power of the outstanding shares of
Convertible Preferred Stock are unable to reach agreement, then by
independent appraisal by a mutually agreed to investment banker, the fees
of which shall be paid by the Corporation.
(c) Notice by Corporation. Prior to the occurrence of any Extraordinary
Transaction, the Corporation will furnish each holder of Convertible Preferred
Stock notice in accordance with Section 7 hereof, together with a certificate
prepared by the chief financial officer of the Corporation describing in detail
all material terms of such Extraordinary Transaction, including without
limitation the consideration to be delivered in connection with such
Extraordinary Transaction, the valuation of the Corporation at the time of such
Extraordinary Transaction and the identities of the parties to the Extraordinary
Transaction.
(d) Purchase Date and Price. Upon the election of the holders of not less
than sixty-six and two-thirds percent (66 2/3%) of the voting power of the
outstanding Convertible Preferred Stock to cause the Corporation to redeem the
Convertible Preferred Stock or otherwise to participate in an Extraordinary
Transaction pursuant to Section 4(a)(i) or (ii), all holders of Convertible
Preferred Stock shall be deemed to have elected to cause the Convertible
Preferred Stock to be so redeemed or to so participate. Any date upon which a
redemption or other acquisition shall actually occur in accordance with Section
4(a) shall be referred to as a "Convertible Preferred Redemption Date." The
redemption/purchase
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price for each share of Convertible Preferred Stock redeemed or acquired
pursuant to this Section 4 shall be the per share Convertible Preferred
Liquidation Preference Amount or such greater per share amount as may be payable
pursuant to the second sentence of Section 4(a)(ii), if applicable (the
"Convertible Preferred Redemption Price"); provided, however, that if at a
Convertible Preferred Redemption Date shares of Convertible Preferred Stock are
unable to be redeemed (as contemplated by Section 4(e) below), then holders of
Convertible Preferred Stock shall also be entitled to interest and dividends
pursuant to Section 4(e) and (f). The aggregate Convertible Preferred Redemption
Price shall be payable in cash in immediately available funds to the respective
holders of the Convertible Preferred Stock on the Convertible Preferred
Redemption Date (subject to Section 4(e)). Upon any redemption or purchase of
the Convertible Preferred Stock as provided herein, holders of fractional shares
shall receive proportionate amounts in respect thereof. Until the aggregate
Convertible Preferred Redemption Price has been paid for all shares of
Convertible Preferred Stock being redeemed or purchased: (A) no dividend
whatsoever shall be paid or declared, and no distribution shall be made, on any
capital stock of the Corporation; and (B) no shares of capital stock of the
Corporation (other than the Convertible Preferred Stock in accordance with this
Section 4) shall be purchased, redeemed or acquired by the Corporation and no
monies shall be paid into or set aside or made available for a sinking fund for
the purchase, redemption or acquisition thereof; provided that, unless the
holders of not less than sixty-six and two-thirds percent (66 2/3%) of the
voting power of the outstanding Convertible Preferred Stock elect otherwise, the
Corporation may repurchase shares of Common Stock from present or former
employees of the Corporation and its subsidiaries on terms approved by the
Corporation's board of directors.
(e) Redemption Prohibited. If, at a Convertible Preferred Redemption Date,
the Corporation is prohibited under the Delaware General Corporation Law from
redeeming all shares of Convertible Preferred Stock for which redemption is
required hereunder, then it shall redeem such shares on a pro-rata basis among
the holders of Convertible Preferred Stock in proportion to the full respective
redemption amounts to which they are entitled hereunder to the extent possible
and shall redeem the remaining shares to be redeemed as soon as the Corporation
is not prohibited from redeeming some or all of such shares under the Delaware
General Corporation Law, subject to Section 6(g). Any shares of Convertible
Preferred Stock not redeemed shall remain outstanding and entitled to all of the
rights and preferences provided in this Article IV. The Corporation shall take
such action as shall be necessary or appropriate to review and promptly remove
any impediment to its ability to redeem Convertible Preferred Stock or Perpetual
Preferred Stock under the circumstances contemplated by this Section 4(e). In
the event that the Corporation fails for any reason to redeem shares for which
redemption is required pursuant to this Section 4, including without limitation
due to a prohibition of such redemption under the Delaware General Corporation
Law, then during the period from the applicable Convertible Preferred Redemption
Date through the date on which such shares are redeemed, the applicable
Convertible Preferred Base Liquidation Amount of such shares shall bear interest
at the rate of twelve percent (12%) per annum, with such interest to accrue
daily in arrears and to be compounded annually; provided, however, that in no
event shall such interest exceed the maximum permitted rate of interest under
applicable law (the "Maximum Permitted Rate"). In the event that fulfillment of
any provision hereof results in such rate of interest being in excess of the
Maximum Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess; provided, however, that any subsequent
increase in the Maximum Permitted Rate shall be retroactively effective to the
applicable Redemption Date. In the event the Corporation fails to redeem shares
for which redemption is required pursuant to this Section 4 within six (6)
months after the date on which redemption is required, for any reason, and such
failure thereafter continues (the period during which such failure shall
continue being referred to herein as a "Voting Period"), the number of Directors
constituting the Board of Directors shall be automatically increased by a number
equal to the number of Directors then constituting the Board of Directors, plus
one, and the holders of shares of Convertible Preferred Stock then outstanding
shall be entitled, voting as a class on a one-vote-per-share basis (to the
exclusion of the holders of all other securities and classes of capital stock of
the Corporation), to elect such additional Directors. As soon as practicable
after the commencement of the Voting Period, the Corporation shall call a
special meeting of the holders of shares of Convertible Preferred Stock by
mailing a notice of such special meeting to such holders, such meeting to be
held not
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more than ten (10) days after the date of mailing of such notice. If the
Corporation fails to send a notice, the meeting may be called by any such holder
on like notice. The record date for determining the holders entitled to notice
of and to vote at such special meeting shall be the close of business on the
fifth business day preceding the day on which such notice is mailed. At any such
special meeting and at each meeting of holders of shares of Convertible
Preferred Stock held during a Voting Period at which Directors are to be elected
(or with respect to any action by written consent in lieu of a meeting of
stockholders), such holders, voting together as if a single class as
contemplated by Section 1 (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), shall be entitled
to elect the number of Directors prescribed in this Section 4(e), and each share
of Convertible Preferred Stock shall be entitled to one (1) vote (whether voted
in person by the holder thereof or by proxy or pursuant to a stockholders'
consent). The terms of office of all persons who are Directors of the
Corporation at the time of a special meeting of the holders of Convertible
Preferred Stock to elect Directors shall continue, notwithstanding the election
at such meeting of the additional Directors that such holders are entitled to
elect, and the persons so elected by such holders, together with the remaining
incumbent Directors, shall constitute the duly elected Directors of the
Corporation. Simultaneously with the termination of a Voting Period upon the
redemption of all outstanding shares of Convertible Preferred Stock, the terms
of office of the additional Directors elected by the holders of the Convertible
Preferred Stock shall terminate, the remaining Directors shall constitute the
Directors of the Corporation and the voting rights of such holders to elect
additional Directors pursuant to this Section 4(e) shall cease.
(f) Dividend After Convertible Preferred Redemption Date. From and after a
Convertible Preferred Redemption Date, no shares of Convertible Preferred Stock
subject to redemption shall be entitled to dividends, if any, as contemplated by
Section 2; provided, however, that in the event that shares of Convertible
Preferred Stock are unable to be redeemed and continue to be outstanding in
accordance with Section 4(e), such shares shall continue to be entitled to
dividends and interest thereon as provided in Sections 2 and 4(e) until the date
on which such shares are actually redeemed by the Corporation.
(g) Surrender of Certificates. Upon receipt of the applicable Convertible
Preferred Redemption Price by certified check or wire transfer, each holder of
shares of Convertible Preferred Stock to be redeemed shall surrender the
certificate or certificates representing such shares to the Corporation, duly
assigned or endorsed for transfer (or accompanied by duly executed stock powers
relating thereto), or, in the event the certificate or certificates are lost,
stolen or missing, shall deliver an affidavit or agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith (an "Affidavit of Loss") with respect to such certificates
at the principal executive office of the Corporation or the office of the
transfer agent for the Convertible Preferred Stock or such office or offices in
the continental United States of an agent for redemption as may from time to
time be designated by notice to the holders of Convertible Preferred Stock, and
each surrendered certificate shall be canceled and retired; provided, however,
that if the Corporation is prohibited from redeeming all shares of Convertible
Preferred Stock as provided in Section 4(e), the holder shall not be required to
surrender said certificate(s) to the Corporation until said holder has received
a new stock certificate for those shares of Convertible Preferred Stock not so
redeemed.
5. Conversion. The holders of the Convertible Preferred Stock shall have
the following conversion rights:
(a) Conversion Upon Election of Holders. The holders of shares of
Convertible Preferred Stock shall be entitled, upon the written election of
the holder or holders of not less than sixty-six and two-thirds percent
(66 2/3%) in voting power of the outstanding shares of Convertible
Preferred Stock, without the payment of any additional consideration, (i)
immediately prior to and subject to the closing or happening of a
Liquidation Event or an Extraordinary Transaction and (ii) at any time on
or after , **, to cause each (but not less
than all) of the outstanding
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** This date will be the third anniversary of the date of the filing of this
Restated Certificate of Incorporation.
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shares of Convertible Preferred Stock to be automatically converted into
(i) the number of fully paid and nonassessable shares of Common Stock which
results from dividing the per share Conversion Value of the Convertible
Preferred Stock by the Conversion Price per share in effect for the
Convertible Preferred Stock at the time of conversion (collectively, the
"Conversion Shares") and (ii) one (1) fully paid and nonassessable share of
Perpetual Preferred Stock. Upon the filing of this Amended and Restated
Certificate of Incorporation with the office of the Secretary of State of
the State of Delaware, the "Conversion Price" per share of Convertible
Preferred Stock shall be $0.50, and the per share "Conversion Value" of
Convertible Preferred Stock shall be $8.72. The Conversion Price per share
of Convertible Preferred Stock and the Common Stock Conversion Rate (as
defined in this Section 5(a)) shall be subject to adjustment from time to
time as provided in Section 6 hereof. The number of shares of Common Stock
into which a share of a Convertible Preferred Stock is convertible is
hereinafter referred to as the "Common Stock Conversion Rate." The number
of shares of Perpetual Preferred Stock into which a share of Convertible
Preferred Stock is convertible is hereinafter referred to as the "Perpetual
Stock Conversion Rate." If the holders of shares of Convertible Preferred
Stock elect to convert the outstanding shares of Convertible Preferred
Stock at a time when there are any declared but unpaid dividends or other
amounts due on or in respect of such shares, such dividends and other
amounts shall be paid in full in cash by the Corporation in connection with
such conversion. Upon the election to so convert in the manner and on the
basis specified in this Section 5(a) all holders of the Convertible
Preferred Stock shall be deemed to have elected to voluntarily convert all
outstanding shares of Convertible Preferred Stock pursuant to this Section
5(a).
(b) Automatic Conversion Upon Qualified Public Offering. Each share
of Convertible Preferred Stock shall automatically be converted, without
the payment of any additional consideration, into shares of Common Stock
and Perpetual Preferred Stock as of, and in all cases subject to, the
closing of a Qualified Public Offering; provided, that if a closing of a
Qualified Public Offering occurs, all outstanding shares of Convertible
Preferred Stock shall be deemed to have been converted into shares of
Common Stock and Perpetual Preferred Stock immediately prior to such
closing. Any such conversion shall be at the Common Stock Conversion Rate
and Perpetual Stock Conversion Rate in effect upon the closing of a
Qualified Public Offering, as applicable. If the holders of shares of
Convertible Preferred Stock are required to convert the outstanding shares
of Convertible Preferred Stock pursuant to this Section 5(b) at a time when
there are any declared but unpaid dividends or other amounts due on or in
respect of such shares, such dividends and other amounts shall be paid in
full in cash by the Corporation in connection with such conversion.
(c) Procedure for Voluntary Conversion. Upon election to convert
pursuant to Section 5(a), each holder of Convertible Preferred Stock shall
surrender the certificate or certificates representing its Convertible
Preferred Stock, duly assigned or endorsed for transfer to the Corporation
(or accompanied by duly executed stock powers relating thereto), at the
principal executive office of the Corporation or the offices of the
transfer agent for the Convertible Preferred Stock or such office or
offices in the continental United States of an agent for conversion as may
from time to time be designated by notice to the holders of the Convertible
Preferred Stock by the Corporation, or shall deliver an Affidavit of Loss
with respect to such certificates. The issuance by the Corporation of
Common Stock and Perpetual Preferred Stock upon a conversion of Convertible
Preferred Stock pursuant to Section 5(a) hereof shall be effective as of
the surrender of the certificate or certificates for the Convertible
Preferred Stock to be converted, duly assigned or endorsed for transfer to
the Corporation (or accompanied by duly executed stock powers relating
thereto), or as of the delivery of an Affidavit of Loss. Upon surrender of
a certificate representing Convertible Preferred Stock for conversion, or
delivery of an Affidavit of Loss, the Corporation shall issue and send by
hand delivery, by courier or by first class mail (postage prepaid) to the
holder thereof or to such holder's designee, at the address designated by
such holder, certificates for the number of shares of Common Stock and
Perpetual Preferred Stock to which such holder shall be entitled upon
conversion plus a cash payment in the amount of any declared but unpaid
dividends as contemplated by Section 5(a) in respect of the shares of
Convertible Preferred Stock. The issuance of certificates for Common Stock
and Perpetual
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Preferred Stock upon conversion of Convertible Preferred Stock will be made
without charge to the holders of such shares for any issuance tax in
respect thereof or other costs incurred by the Corporation in connection
with such conversion and the related issuance of such stock. If a
conversion of Convertible Preferred Stock upon an Extraordinary Transaction
occurs, all outstanding shares of Convertible Preferred Stock shall be
deemed to have been converted into shares of Common Stock and Perpetual
Preferred Stock immediately prior thereto, provided that the Corporation
shall make appropriate provisions (x) for the Common Stock issued upon such
conversion to be treated on the same basis as all other Common Stock in
such Extraordinary Transaction and (y) if the Perpetual Preferred Stock is
being simultaneously converted into Common Stock in connection with such
Extraordinary Transaction, for the Common Stock issued upon such conversion
to be treated on the same basis as all other Common Stock in such
Extraordinary Transaction. In the event of any public offering constituting
a Qualified Public Offering, the provisions of Section 5(d) shall apply.
(d) Procedure for Automatic Conversion. As of, and in all cases
subject to, the closing of a Qualified Public Offering (the "Automatic
Conversion Date"), all outstanding shares of Convertible Preferred Stock
shall be converted automatically into shares of Common Stock and Perpetual
Preferred Stock at the applicable conversion rates specified in Section
5(a) and without any further action by the holders of such shares and
whether or not the certificates representing such shares of Convertible
Preferred Stock are surrendered to the Corporation or its transfer agent;
provided, however, that all holders of Convertible Preferred Stock shall be
given prior written notice of the occurrence of such Qualified Public
Offering in accordance with Section 7 hereof. On the Automatic Conversion
Date, all rights with respect to the Convertible Preferred Stock so
converted shall terminate, except any of the rights of the holders thereof
upon surrender of their certificate or certificates therefor or delivery of
an Affidavit of Loss thereof to receive certificates for the number of
shares of Common Stock and Perpetual Preferred Stock into which such
Convertible Preferred Stock has been converted. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or
by his, her or its attorney duly authorized in writing. Upon surrender of
such certificates or Affidavit of Loss the Corporation shall issue and
deliver to such holder, promptly (and in any event in such time as is
sufficient to enable such holder to participate in such Qualified Public
Offering) at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number
of shares of Common Stock and Perpetual Preferred Stock into which the
shares of the Convertible Preferred Stock surrendered were convertible on
the Automatic Conversion Date and shall pay all declared but unpaid
dividends as contemplated by Section 5(b) in respect of the shares of
Convertible Preferred Stock which are converted.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock and Perpetual Preferred Stock solely for
the purpose of effecting the conversion of the shares of Convertible
Preferred Stock such number of its shares of Common Stock and Perpetual
Preferred Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Convertible Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock
and Perpetual Preferred Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Convertible Preferred Stock,
the Corporation will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock and Perpetual
Preferred Stock to such number of shares as shall be sufficient for such
purpose.
(f) No Closing of Transfer Books. The Corporation shall not close its
books against the transfer of shares of Convertible Preferred Stock in any
manner which would interfere with the timely conversion of any shares of
Convertible Preferred Stock.
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6. Adjustments. The Conversion Price in effect from time to time shall be
subject to adjustment from and after the date of the filing of this Amended and
Restated Certificate of Incorporation with the office of the Secretary of State
of the State of Delaware and regardless of whether any shares of Convertible
Preferred Stock are then issued and outstanding as follows:
(a) Dividends and Stock Splits. If the number of shares of Common
Stock outstanding at any time after the date hereof is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, on the date such payment is made or such
change is effective, the Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock issuable on conversion of any
shares of Convertible Preferred Stock shall be increased in proportion to
such increase of outstanding shares of Common Stock.
(b) Reverse Stock Splits. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination
or reverse split of the outstanding shares of Common Stock, then, on the
effective date of such combination or reverse split, the Conversion Price
shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of any shares of Convertible Preferred Stock
shall be decreased in proportion to such decrease in outstanding shares of
Common Stock.
(c) Reorganization, etc. If the Common Stock issuable upon the
conversion of the Convertible Preferred Stock shall be changed into the
same or different number of shares of any class or classes of stock,
whether by reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 6), then and in each such event the holders
Convertible Preferred Stock shall have the right thereafter to convert such
shares into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other
change, by holders of the number of shares of Common Stock into which such
shares of Convertible Preferred Stock might have been converted immediately
prior to such reorganization, reclassification or change, all subject to
further adjustment as provided herein.
(d) Mergers and Other Reorganizations. Unless such transaction is an
Extraordinary Transaction in which the holders of the Convertible Preferred
Stock elect redemption (in which case Section 4(a)(ii) shall apply and this
subsection shall not apply), if at any time or from time to time there
shall be a capital reorganization of the Common Stock (other than a
subdivision, combination or reclassification provided for elsewhere in this
Section 6) or a merger or consolidation of the Corporation with or into
another Corporation or the sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as part of
and as a condition to the effectiveness of such reorganization, merger,
consolidation or sale, lawful and adequate provision shall be made so that
the holders of the Convertible Preferred Stock shall thereafter be entitled
to receive upon conversion of the Convertible Preferred Stock the number of
shares of stock or other securities or property of the Corporation or of
the successor Corporation resulting from such merger or consolidation or
sale, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such capital reorganization, merger, consolidation,
or sale. In any such case, appropriate provisions shall be made with
respect to the rights of the holders of the Convertible Preferred Stock
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Section 6 (including, without limitation, provisions for
adjustment of the applicable Conversion Price and the number of shares
purchasable upon conversion of the Convertible Preferred Stock) shall
thereafter be applicable, as nearly as may be, with respect to any shares
of stock, securities or assets to be deliverable thereafter upon the
conversion of the Convertible Preferred Stock.
(e) Calculations. All calculations under this Section 6 shall be made
to the nearest cent or to the nearest one hundredth ( 1/100) of a share of
Common Stock, as the case may be.
(f) Certificate. Upon the occurrence of each adjustment or
readjustment pursuant to this Section 6, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and furnish to each holder of Convertible
Preferred
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Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon written request at any time of any
holder of Convertible Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the applicable Conversion Prices before and after such
adjustment or readjustment, and (iii) the number of shares of Common Stock
and Perpetual Preferred Stock and the amount, if any, of other property
which at the time would be received upon the conversion of such holder's
shares of Convertible Preferred Stock.
(g) Certain Events. The Corporation shall not, by amendment of this
Amended and Restated Certificate of Incorporation or through any
Extraordinary Transaction or other reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, agreement
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but shall at all times in good faith assist in the carrying
out of all the provisions of this Article IV and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
the holders of the Convertible Preferred Stock and the Perpetual Preferred
Stock against impairment. Without limitation of the foregoing, the
Corporation shall take such action as shall be necessary or appropriate, to
the extent reasonably within its control, to remove promptly any
impediments to its ability to redeem Convertible Preferred Stock under the
circumstances contemplated by Section 4(e) of this Part B. Any successor to
the Corporation shall agree, as a condition to such succession, to carry
out and observe the obligations of the Corporation hereunder with respect
to the Convertible Preferred Stock and the Perpetual Preferred Stock.
7. Notice.
(a) Liquidation Events, Extraordinary Transactions, Etc. In the event that
(i) the Corporation establishes a record date to determine the holders of any
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event, Extraordinary Transaction, Qualified Public Offering
or other public offering becomes reasonably likely to occur, the Corporation
shall mail or cause to be mailed by first class mail (postage prepaid) to each
holder of Convertible Preferred Stock (or each holder of Perpetual Preferred
Stock, as applicable) at least twenty (20) days prior to such record date
specified therein or the expected effective date of any such transaction,
whichever is earlier, a notice specifying (A) the date of such record date for
the purpose of such dividend or distribution or meeting or consent and a
description of such dividend or distribution or the action to be taken at such
meeting or by such consent, (B) the date on which any such Liquidation Event,
Extraordinary Transaction, Qualified Public Offering or other public offering is
expected to become effective, and (C) the date on which the books of the
Corporation shall close or a record shall be taken with respect to any such
event.
(b) Waiver of Notice. The holder or holders of not less than sixty-six and
two-thirds percent (66 2/3%) in voting power of the outstanding shares of
Convertible Preferred Stock (or Perpetual Preferred Stock, as applicable) may,
at any time upon written notice to the Corporation, waive any notice provisions
specified herein for the benefit of such holders, and any such waiver shall be
binding upon all holders of such securities.
(c) General. In the event that the Corporation provides any notice, report
or statement to any holder of Common Stock in his, her or its capacity as such,
the Corporation shall at the same time provide a copy of any such notice, report
or statement to each holder of outstanding shares of Convertible Preferred Stock
(or Perpetual Preferred Stock, as applicable).
8. Contractual Rights of Holders. The various provisions set forth herein
for the benefit of the holders of the Convertible Preferred Stock and Perpetual
Preferred Stock shall be deemed contract rights enforceable by them, including
without limitation, one or more actions for specific performance.
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PART B. PERPETUAL PREFERRED STOCK
1. Voting. The holder of each share of Perpetual Preferred Stock shall be
entitled to one vote for each such share as determined on the record date for
the vote or consent of stockholders and shall vote together with the holders of
the Common Stock as a single class upon any items submitted to a vote of
stockholders, except as otherwise provided herein.
2. Dividends. The holders of outstanding shares of Perpetual Preferred
Stock shall be entitled to receive, out of any funds legally available therefor,
cumulative (non-compounding) dividends on the Perpetual Preferred Stock in cash,
at the per share rate per annum of ten percent (10%) of $1,000.00 (adjusted
appropriately for stock splits, stock dividends, recapitalizations and the like
with respect to the Perpetual Preferred Stock) (a "Perpetual Cumulative
Dividend"). Such dividends will accumulate quarterly in arrears commencing as of
the date of issuance of the Perpetual Preferred Stock and be cumulative, to the
extent unpaid, whether or not they have been declared and whether or not there
are profits, surplus or other funds of the Corporation legally available for the
payment of dividends. The date on which the Corporation initially issues any
share of Perpetual Preferred Stock shall be deemed to be its "date of issuance"
regardless of the number of times transfer of such share is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share. Perpetual Cumulative
Dividends shall become due and payable with respect to any share of Perpetual
Preferred Stock as provided in Section 3 and 4. So long as any shares of
Perpetual Preferred Stock are outstanding and the Perpetual Cumulative Dividends
have not been paid in full in cash: (a) no dividend whatsoever shall be paid or
declared, and no distribution shall be made, on any Common Stock or other
capital stock of the Corporation ranking junior to the Perpetual Preferred
Stock; and (b) no shares of capital stock of the Corporation ranking junior to
the Perpetual Preferred Stock shall be purchased, redeemed or acquired by the
Corporation and no monies shall be paid into or set aside or made available for
a sinking fund for the purchase, redemption or acquisition thereof; provided
that, unless the holders of not less than sixty-six and two-thirds percent
(66 2/3%) of the voting power of the outstanding Perpetual Preferred Stock elect
otherwise, the Corporation may repurchase shares of Common Stock from present or
former employees of the Corporation and its subsidiaries on terms approved by
the Corporation's board of directors. All numbers relating to the calculation of
dividends pursuant to this Section 2 shall be subject to equitable adjustment in
the event of any stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the Perpetual
Preferred Stock.
3. Liquidation. Upon any Liquidation Event, each holder of outstanding
shares of Perpetual Preferred Stock shall be entitled to be paid out of the
assets of the Corporation available for distribution to stockholders, whether
such assets are capital, surplus, or earnings, and before any amount shall be
paid or distributed to the holders of Common Stock or of any other stock ranking
on liquidation junior to the Perpetual Preferred Stock, an amount in cash equal
to the sum of (a) $1,000.00 per share of Perpetual Preferred Stock held by such
holder (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Perpetual Preferred Stock),
plus (b) any accumulated but unpaid dividends to which such holder of
outstanding shares of Perpetual Preferred Stock is entitled pursuant to Sections
2 and 4(d) hereof (the sum of clauses (a) and (b) being referred to herein as
the "Perpetual Stock Liquidation Preference Amount"); provided, however, that
if, upon any Liquidation Event, the amounts payable with respect to the
Perpetual Stock Liquidation Preference Amount are not paid in full, the holders
of the Perpetual Preferred Stock shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled.
4. Special Conversion Provisions.
(a) Special Conversion Upon Extraordinary Transactions, etc. The
holders of shares of Perpetual Preferred Stock shall be entitled, upon the
written election of the holder or holders of not less than sixty-six and
two-thirds percent (66 2/3%) in voting power of the outstanding shares of
Perpetual Preferred Stock (or Convertible Preferred Stock, as applicable,
proposing to convert the same in order to effect a conversion of the
Perpetual Preferred Stock received upon such conversion
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hereunder), without the payment of any additional consideration,
immediately prior to and subject to the closing or happening of a Qualified
Public Offering or an Extraordinary Transaction, to cause all (but not less
than all) of the outstanding shares of Perpetual Preferred Stock to be
automatically converted into the number of fully paid and nonassessable
shares of Common Stock which results from dividing the Perpetual Stock
Liquidation Preference Amount at the time of conversion by the Fair Market
Value (as defined below) per share of the Common Stock at, the time of
conversion. In any such case, the holders of shares of Common Stock
resulting from such conversion of Perpetual Preferred Stock shall be
entitled, upon the written election of the holder or holders of not less
than sixty-six and two-thirds percent (66 2/3%) in voting power of the
outstanding shares of Common Stock resulting from such conversion of
Perpetual Preferred Stock (or Convertible Preferred Stock or Perpetual
Preferred Stock, as applicable, proposing to convert the same in order to
effect a conversion into Common Stock hereunder), to participate in such
Qualified Public Offering or Extraordinary Transaction on the same basis as
the other holders of Common Stock. Any date upon which such conversion
shall actually occur in accordance with this Section 4(a) shall be referred
to as the "Perpetual Preferred Special Conversion Date." Upon the election
to so convert in the manner and on the basis specified in this Section
4(a), all holders of the Perpetual Preferred Stock shall be deemed to have
elected to voluntarily convert all outstanding shares of Perpetual
Preferred Stock pursuant to this Section 4(a).
(b) Valuation of Common Stock. For purposes of Section 4(a) above, the
"Fair Market Value" of each share of Common Stock shall be deemed to mean:
(i) If the Common Stock is traded on a nationally recognized
securities exchange or inter-dealer quotation system, its fair market value
shall be deemed to be the average of the closing prices of the Common Stock
on such exchange or system over the 30-day period ending three (3) business
days prior to the date of determination;
(ii) If the Common Stock is traded over-the-counter, its fair market
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the date of
determination; and
(iii) If there is no active public market for the Common Stock, its
fair market value shall be the fair market value thereof (after taking into
account the conversion of the Perpetual Preferred into Common Stock in
connection with such event), as mutually determined by the Corporation and
the holders of not less than sixty-six and two-thirds percent (66 2/3%) in
voting power of the outstanding shares of Perpetual Preferred Stock,
provided that if the Corporation and the holders of sixty-six and
two-thirds percent (66 2/3%) in voting power of the outstanding shares of
Perpetual Preferred Stock are unable to reach agreement, then by
independent appraisal by a mutually agreed to investment banker, the fees
of which shall be paid by the Corporation;
provided that, notwithstanding anything in Section 4(b) to the contrary, in the
event the Perpetual Preferred Stock is converted into Common Stock in connection
with a Qualified Public Offering or a public offering not constituting a
Qualified Public Offering, the Fair Market Value of each share of Common Stock
shall be deemed to be the net proceeds to the Corporation or the seller(s)
thereof (after deduction of applicable discounts and commissions) for each share
of Common Stock issued or sold pursuant to such public offering.
(c) Dividend After Perpetual Preferred Special Conversion Date. From and
after the Perpetual Preferred Special Conversion Date, no shares of Perpetual
Preferred Stock shall be entitled to any further dividends pursuant to Section 2
hereof.
(d) Procedure for Conversion. If a conversion of Perpetual Preferred Stock
occurs in connection with a Qualified Public Offering or an Extraordinary
Transaction, all outstanding shares of Perpetual Preferred Stock shall be deemed
to have been converted into shares of Common Stock immediately prior thereto,
provided that the Corporation shall make appropriate provisions for the Common
Stock issued upon such conversion to be treated on the same basis as all other
Common Stock in such transaction. If
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required by the Corporation, each holder of Perpetual Preferred Stock shall
surrender the certificate or certificates representing its Perpetual Preferred
Stock, duly assigned or endorsed for transfer to the Corporation (or accompanied
by duly executed stock powers relating thereto), at the principal executive
office of the Corporation or the offices of the transfer agent for the Perpetual
Preferred Stock or such office or offices in the continental United States of an
agent for conversion as may from time to time be designated by notice to the
holders of the Perpetual Preferred Stock by the Corporation, or shall deliver an
Affidavit of Loss with respect to such certificates. Upon surrender of a
certificate representing Perpetual Preferred Stock for conversion, or delivery
of an Affidavit of Loss, the Corporation shall issue and send by hand delivery,
by courier or by first class mail (postage prepaid) to the holder thereof or to
such holder's designee, at the address designated by such holder, certificates
for the number of shares of Common Stock to which such holder shall be entitled.
The issuance of certificates for Common Stock upon conversion of Perpetual
Preferred Stock will be made without charge to the holders of such shares for
any issuance tax in respect thereof or other costs incurred by the Corporation
in connection with such conversion and the related issuance of such stock.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Perpetual Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Perpetual Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Perpetual Preferred
Stock, the Corporation will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(f) No Closing of Transfer Books. The Corporation shall not close its
books against the transfer of shares of Perpetual Preferred Stock in any manner
which would interfere with the timely conversion of any shares of Perpetual
Preferred Stock.
5. Notice. In the event that the Corporation provides or is required to
provide notice to any holder of Convertible Preferred Stock and Common Stock in
accordance with the provisions of this Amended and Restated Certificate of
Incorporation and/or the Corporation's by-laws, the Corporation shall at the
same time provide a copy of any such notice to each holder of outstanding shares
of Perpetual Preferred Stock.
PART C. COMMON STOCK
1. Voting. The holder of each share of Common Stock shall be entitled to
one vote for each such share as determined on the record date for the vote or
consent of stockholders and, (i) for so long as any shares of Convertible
Preferred Stock remain outstanding, shall vote together with the holders of the
Convertible Preferred Stock as a single class upon any items submitted to a vote
of stockholders, except as otherwise provided herein and (ii) for so long as any
shares of Perpetual Preferred Stock remain outstanding, shall vote together with
the holders of the Perpetual Preferred Stock as a single class upon any items
submitted to a vote of stockholders, except as otherwise provided herein.
2. Dividends. Subject to the payment in full of all preferential dividends
to which the holders of the Perpetual Preferred Stock are entitled hereunder,
the holders of Common Stock shall be entitled to receive dividends out of funds
legally available therefor at such times and in such amounts as the Board of
Directors may determine in its sole discretion, with holders of Convertible
Preferred Stock and Common Stock sharing pari passu in such dividends as
contemplated by Section 2 of Part B above.
3. Liquidation. Upon any Liquidation Event, after the payment or provision
for payment of all debts and liabilities of the Corporation and all preferential
amounts to which the holders of Convertible Preferred Stock or Perpetual
Preferred Stock, as applicable, are entitled with respect to the distribution of
assets in liquidation, the holders of Common Stock (and to the extent applicable
under Section 3(a) of Part B above, Convertible Preferred Stock) shall be
entitled to share ratably in the remaining assets of the Corporation available
for distribution.
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4. Fractional Shares: Uncertificated Shares. The Corporation may issue
fractional shares of Common Stock and Preferred Stock. Fractional shares shall
be entitled to dividends (on a pro rata basis), and the holders of fractional
shares shall be entitled to all rights as stockholders of the Corporation to the
extent provided herein and under applicable law in respect of such fractional
shares. Shares of Common Stock and Preferred Stock, or fractions thereof, may,
but need not be, represented by share certificates. Such shares, or fractions
thereof, not represented by share certificates ("Uncertificated Shares") shall
be registered in the stock records book of the Corporation. The Corporation at
any time at its sole option may deliver to any registered holder of such shares
share certificates to represent Uncertificated Shares previously issued (or
deemed issued) to such holder.
PART D. CERTAIN DEFINITIONS
"Extraordinary Transaction" means any of the following: (A) a merger or
consolidation of the Corporation with or into another corporation (with respect
to which less than a majority of the outstanding voting power of the surviving
or consolidated corporation is held directly or indirectly by stockholders of
the Corporation immediately prior to such event), (B) the sale or transfer of
all or substantially all of the properties and assets of the Corporation and its
subsidiaries, (C) any purchase by any party (or group of affiliated parties)
other than the Specified Investors, of shares of capital stock of the
Corporation (either through a negotiated stock purchase or a tender for such
shares), the effect of which is that such party (or group of affiliated parties)
that did not beneficially own a majority of the voting power of the outstanding
shares of capital stock of the Corporation immediately prior to such purchase
beneficially owns at least a majority of such voting power immediately after
such purchase, (D) the redemption or repurchase of shares representing a
majority of the voting power of the outstanding shares of capital stock of the
Corporation or (E) a public offering not constituting a Qualified Public
Offering.
"Liquidation Event" means any liquidation, dissolution or winding up of the
Corporation and its subsidiaries, whether voluntary or involuntary.
"Qualified Public Offering" means an underwritten offering to the public
pursuant to an effective registration statement under the Securities Act of
1933, as amended, provided that (i) such registration statement covers the offer
and sale of Common Stock of which the aggregate net proceeds attributable to
sales for the account of the Corporation exceed $25,000,000, (ii) such Common
Stock is listed for trading on either the New York Stock Exchange or The Nasdaq
Stock Market (National Market System) and (iii) either (A) all outstanding
shares of Perpetual Preferred Stock which are outstanding or issuable upon such
automatic conversion are redeemed immediately upon and as of the closing of such
offering or (B) contemporaneously with such offering cash in an amount
sufficient to redeem all outstanding shares of Perpetual Preferred Stock is
segregated and irrevocably held by the Corporation for payment to holders of
Perpetual Preferred Stock.
"Specified Investors" means Golder, Thoma, Cressey, Rauner Fund V, L.P.,
GTCR Associates V, TA/Advent VIII L.P., Advent Atlantic and Pacific III, TA
Executives Fund LLC, TA Investors LLC, David R. Klock, Phyllis A. Klock, or any
of their affiliates.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to make, alter
or repeal the bylaws of the Corporation.
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ARTICLE VII
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the bylaws
of the Corporation. Election of directors need not be by written ballot unless
the bylaws of the Corporation so provide.
ARTICLE VIII
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. If the General
Corporation Law of the State of Delaware is amended after the effective date of
this Amended and Restated Certificate of Incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of each past or present Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended. Any repeal or modification of this
Article VIII shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
ARTICLE IX
The Corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of
this day of , 1999.
COMPDENT CORPORATION
By:
------------------------------------
Name:
Title: President
ATTEST:
- ---------------------------------------------------------
Name:
Title: Secretary
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EXHIBIT B
RESTATED BY-LAWS
OF
COMPDENT CORPORATION, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the corporation's registered
office in the State of Delaware is 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company. The registered office and/or registered agent of the
corporation may be changed from time to time by action of the board of
directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the president of the corporation; provided, that if the president
does not act, the board of directors shall determine the date, time and place of
such meeting. In addition, board shall hold such meetings as specified in that
certain Stockholders Agreement, dated on or about the date on which these
restated by-laws were adopted by the corporation, by and among the corporation
and the stockholders named therein, as amended from time to time (as amended,
the "Stockholders Agreement").
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
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Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the stockholders,
and before any voting commences, all proxies filed at or before the meeting
shall be submitted to and examined by the secretary or a person designated by
the secretary, and no shares may be represented or voted under a proxy that has
been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote
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thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in the state of Delaware, or the corporation's
principal place of business, or an officer or agent of the corporation having
custody of the book or books in which proceedings of meetings of the
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested
provided, however, that no consent or consents delivered by certified or
registered mail shall be deemed delivered until such consent or consents are
actually received at the registered office. All consents properly delivered in
accordance with this section shall be deemed to be recorded when so delivered.
No written consent shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the earliest dated consent delivered
to the corporation as required by this section, written consents signed by the
holders of a sufficient number of shares to take such corporate action are so
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Any action taken pursuant to such written consent
or consents of the stockholders shall have the same force and effect as if taken
by the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. Except as set forth in the Stockholders
Agreement, the business and affairs of the corporation shall be managed by or
under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the initial board shall be four (4). Thereafter, the
number of directors shall be established from time to time in accordance with
the terms and conditions set forth in the Stockholders Agreement. The directors
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting of the stockholders and entitled to vote in
the election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III or in the Stockholders Agreement. Each director elected shall hold
office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided or as provided in
the Stockholders Agreement.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, as set forth in the
Stockholders Agreement. Whenever the holders of any class or series of security
are entitled to elect one or more directors by the provisions of the
corporation's certificate of incorporation, the provisions of this section shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole. Any director
may resign at any time upon written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors shall be filled in
accordance with the provisions of the Stockholders Agreement. Each director so
chosen shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings,other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president or the holders of not less than 30% of the outstanding
shares of common stock on at least twenty-four (24) hours notice to each
director, either personally, by telephone, by mail, or by telegraph.
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Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation, which to the
extent provided in such resolution or these restated by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
board of directors and may consist of a president, any number of vice
presidents, a secretary, a chief financial officer, any number of assistant
secretaries and such other officers and assistant officers as may be deemed
necessary or
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desirable by the board of directors. Any number of offices may be held by the
same person. In its discretion, the board of directors may choose not to fill
any office for any period as it may deem advisable, except that the offices of
president and secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any meeting
of the board of directors. Each officer shall hold office until a successor is
duly elected and qualified or until his or her earlier death, resignation or
removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. President. The president, subject to the powers of the board of
directors, shall have general charge of the business, affairs and property of
the corporation, and control over its officers, agents and employees; and shall
see that all orders and resolutions of the board of directors are carried into
effect. The president shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation. The president shall
have such other powers and perform such other duties as may be prescribed by the
board of directors or as may be provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president. The vice-presidents
shall also perform such other duties and have such other powers as the board of
directors, the president or these by-laws may, from time to time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these
by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his or her signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his or her signature. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined by the
board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors or
president may, from time to time, prescribe.
Section 9. The Chief Financial Officer and Assistant Treasurer. The chief
financial officer shall have the custody of the corporate funds and securities;
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation; shall deposit all monies and other valuable
effects in the name and to the credit of the corporation as may be ordered by
the board of directors; shall cause the funds of the corporation to be disbursed
when such disbursements have been duly authorized, taking
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proper vouchers for such disbursements; and shall render to the president and
the board of directors, at its regular meeting or when the board of directors so
requires, an account of the corporation; shall have such powers and perform such
duties as the board of directors, the president or these by-laws may, from time
to time, prescribe. If required by the board of directors, the chief financial
officer shall give the corporation a bond (which shall be rendered every six
years) in such sums and with such surety or sureties as shall be satisfactory to
the board of directors for the faithful performance of the duties of the office
of chief financial officer and for the restoration to the corporation, in case
of death, resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in the possession or under
the control of the chief financial officer belonging to the corporation. The
assistant treasurer, or if there shall be more than one, the assistant
treasurers in the order determined by the board of directors, shall in the
absence or disability of the chief financial officer, perform the duties and
exercise the powers of the chief financial officer. The assistant treasurers
shall perform such other duties and have such other powers as the board of
directors or the president may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 11. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in Section 2 hereof, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections 2
and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corporation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section I of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole
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or in part, or if payment in full pursuant to such request is not made within
thirty (30) days, the right to indemnification or advances as granted by this
Article V shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such action shall also be indemnified by the corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed, but the burden
of such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, nor an actual determination by the
corporation (including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
I of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in
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the same position under this Article V with respect to the resulting or
surviving corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of stock
of the corporation shall only be transferred on the books of the corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
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Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by statute, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or any other purpose and the directors may
modify or abolish any such reserve in the manner in which it was created.
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Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these restated by-laws
are for convenience of reference only and shall not be given any substantive
effect in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these restated by-laws is or becomes inconsistent with any provision of the
certificate of incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these restated by-laws
shall not be given any effect to the extent of such inconsistency but shall
otherwise be given full force and effect.
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ARTICLE VIII
AMENDMENTS
These restated by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the by-laws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
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APPENDIX B
OPINION OF THE ROBINSON-HUMPHREY COMPANY, LLC
January 18, 1999
Special Committee of the Board of Directors
CompDent Corporation
100 Mansell Court East, Suite 400
Roswell, Georgia 30076
Dear Sirs:
We understand that CompDent Corporation (the "Company") intends to enter
into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement") by and among TAGTCR Acquisition, Inc. ("TAGTCR"), NMS Capital, L.P.,
Golder, Thoma, Cressey, Rauner Fund V, L.P. and TA/Advent VIII L.P. We
understand that under the Merger Agreement (the "Proposed Transaction") TAGTCR
shall be merged with and into the Company and each share of Company common stock
issued and outstanding immediately prior to the effective time of the merger
(excluding shares owned by the Company or any of its subsidiaries or by TAGTCR
and Recapitalization Shares (as defined in the Merger Agreement) and dissenting
shares) shall be converted into the right to receive $15.00 per share in cash
(the "Merger Consideration"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the Merger Agreement dated January
18, 1999.
We have been requested by the Special Committee of the Board of Directors
of the Company to render our opinion with respect to the fairness, from a
financial point of view, to the Company's stockholders (other than TAGTCR and
the holders of Recapitalization Shares) of the Merger Consideration to be
received in the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement dated January 18, 1999, (2) publicly available information concerning
the Company which we believe to be relevant to our inquiry, (3) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (4) the Dental Health Development
Corporation Securities Purchase Agreement dated September 12, 1997, (5) a
trading history of the Company's Common Stock from May 26, 1995 to the present
and a comparison of that trading history with those of other companies which we
deemed relevant, (6) a comparison of the historical financial results and
present financial condition of the Company with those of other companies which
we deemed relevant, (7) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other recent transactions which
we deemed relevant, and (8) certain historical data relating to acquisitions of
publicly traded companies, including percentage premiums and price/earnings
ratios paid in such acquisitions. In addition, we have had discussions with the
management of the Company concerning its business, operations, assets, present
condition and future prospects and undertook such other studies, analyses and
investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections provided by
the Company, we have assumed that such projections have been reasonably prepared
on based reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
In arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made nor obtained any
evaluations or appraisals of the assets or liabilities of the Company. In
addition, you have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the purchase of all
or a part of the Company's business. Our opinion is necessarily based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
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We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with the Proposed Transaction and will
receive a fee for our services which is in part contingent upon the consummation
of the Proposed Transaction. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of the rendering of this opinion. We have
also performed various investment banking services for the Company in the past,
and have received customary fees for such services. In the ordinary course of
our business, we actively trade in the common stock of the Company for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Merger Consideration to be
received in the Proposed Transaction is fair to the stockholders of the Company
(other than TAGTCR and the holders of Recapitalization Shares).
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, LLC
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APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SEC. 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to sec.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
receipt thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated
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therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
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submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PROXY
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
ON _______, _________, 1999 AT 10:00 A.M.
The undesigned hereby appoints Bruce A. Mitchell and Phyllis A. Klock, and each
of them, proxies, with full power of substitution and resubstitution, for and in
the name of the undersigned, to vote all shares of stock common, par value $.01
per share, of CompDent Corporation, held by the undersigned at the close of
business on ___________, 1999, which the undersigned would be entitled to vote
if personally present at the Special Meeting of Stockholders to be held on
___________, _________, 1999 at 10:00 a.m., local time, at the offices of King &
Spalding, 191 Peachtree Street, Atlanta, Georgia 30303-1763, and at any
adjournment thereof, upon the matters described in the accompanying Notice of
Special Meeting of Stockholders and Proxy Statement, receipt of which is hereby
acknowledged, and upon any other business that may properly come before the
meeting or any adjournment thereof. Said proxies are directed to vote on the
matters described in the Notice of Special Meeting of Stockholders and Proxy
Statement as follows, and otherwise in their discretion upon such other business
as may properly come before the meeting or any adjournment thereof.
PROPOSAL OF THE BOARD OF DIRECTORS TO APPROVE THE AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER, DATED AS OF JANUARY 18, 1999, BY AND AMONG COMPDENT
CORPORATION, TAGTCR ACQUISITION, INC., NMS CAPITAL, L.P., GOLDER, THOMA,
CRESSEY, RAUNER FUND V, L.P. AND TA/ADVENT VIII L.P.
[_] FOR [_] AGAINST [_] ABSTAIN
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COMPDENT
CORPORATION.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE PROPOSAL LISTED ABOVE.
Dated: ___________, 1999
____________________________________________
Please sign exactly as your name(s)
appear(s) hereon. Where more than one owner
is shown above, each should sign. When
signing in a fiduciary or representative
capacity, please add your full title as
such. If this proxy is submitted by a
corporation, it should be executed in the
full corporate name by a duly authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU ATTEND
THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY.
